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 Investment Idea Lists

Top 10… best of the best companies with hidden assets superinvestor ideas tax-selling bargains stocks you’ve never heard of bargains in financial sector heavily shorted stocks Renaissance Technologies ideas foreign companies listed in U.S. or Canada branded businesses explosive stocks

Top 10 ideas for… activist value investors deep value investors cash flow investors GARP investors special situation investors nano cap investors micro cap investors small cap investors

mid cap investors large cap investors

Portfolios With “Signal Value”

Top ideas of top investors… Ackman Berkowitz Buffett Cumming & Steinberg Einhorn Greenberg Hawkins Icahn Klarman Lichtenstein Loeb Mandel Pabrai Pzena

Lampert Hohn Watsa Whitman

Proprietary Stock Screens

Searching for equities with asymmetrical risk-reward profiles… “shunned by the market, but not by insiders”

“biggest losers” “biggest losers (deleveraged)” “biggest losers (deleveraged, likely profitable)” “lots of revenue, but little enterprise value” “neglected gross profiteers” “companies with strong, liquid balance sheets” “underperformers” “sale, liquidation or recap opportunities” “good businesses at good prices”… based on LTM EBIT… this FY EPS estimates… next FY EPS estimates… 2012 EPS estimates

Industry Browsers

Snapshots of sectors including… basic materials capital goods consumer cyclical consumer non-cyclical energy financial healthcare services technology transportation utilities

Beyond the MOI…

Best free ideas and opinion on the Internet

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© 2008 by BeyondProxy LLC. All rights reserved. www.manualofideas.com PHOTOCOPYING & FAXING WITHOUT PERMISSION IS PROHIBITED.

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EDITORS’ COMMENTARY Dislocations Galore

deas are the lifeblood of the investment business. To be sure, many investors have failed despite good ideas, but few have succeeded without them. Our goal

is to put you in the best possible position by consistently delivering high-quality analysis and winning ideas.

It’s a good time to be in the ideas business. The dislocations over the past few months have been truly extraordinary. The deleveraging wave sweeping markets and the blowup of specific pools of capital have left an unprecedented number of securities trading with little regard for intrinsic value.

We’ve uncovered some compelling opportunities among the 100 “magic formula” companies analyzed in this issue. While our Top 10 picks are most noteworthy, you are likely to find many more companies deserving of further investigation. So, make yourself comfortable and get ready for a rewarding journey into idea land.

Our Top 10 magic formula selections are high-ROIC businesses misunderstood by investors and, therefore, mispriced. American Eagle (AEO), the youth fashion brand, has been shunned despite one of the best business models in retail, featuring strong brand loyalty, efficient sourcing and excellent store economics.

Garmin (GRMN), the leading provider of personal navigation devices, has lost the momentum that had attracted speculators; yet, the company continues to enjoy a large market opportunity and trades at 6x 2009E EPS.

KHD Humboldt Wedag (KHD), a global cement plant engineering firm, is run by an unusually adept CEO and has massive under-appreciated non-core assets, including cash, preferred stock and an iron ore interest.

MEMC Electronic Materials (WFR), a wafer maker for semiconductor and solar applications, is valued as a commodity semi cap equipment firm, ignoring the company’s leadership in the growing solar industry.

Microsoft (MSFT) has finally said “no” to Yahoo and embarked on a $40 billion accretive stock buyback, yet it continues to trade at a major discount to the sum-of-the-parts value of its business units.

Net 1 (UEPS), a provider of payment cards to the unbanked in South Africa and elsewhere, continues to grow and has recently removed major uncertainty, yet it trades at 5x forward earnings.

Premier Exhibitions (PRXI), a developer of 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

collection of Titanic artifacts. 16% shareholder Mark Sellers launched a push to fire the CEO earlier this month.

Syneron (ELOS), an aesthetic medical products company, has substantial earning power yet trades below net cash and investments. Baupost is a major shareholder.

Tempur-Pedic (TPX), the non-innerspring mattress leader, has been heavily shorted due to its discretionary, high-ticket product, input cost pressures and financial leverage. The short thesis grossly underestimates the company’s highly variable cost structure and ability to service the debt, potentially setting up a short squeeze.

Travelzoo (TZOO), an online distributor of travel deals, has been dismissed as a casualty of weak consumer spending. However, the company’s solid U.S. profitability is masked by startup losses related to global expansion. With large insider ownership and insider buying, the market appears to have hugely misjudged intrinsic value.

Barely missing our Top 10 selections are fellow magic formula stocks Barrett (BBSI), Dell (DELL), New Frontier (NOOF), and Versant (VSNT).

THIS IS CURIOUS…

Volkswagen (VOW.DE) briefly became the most highly valued stock in the world, hitting 1,000 euros per share even as intrinsic value remained well below 100.

Playboy (PLA) trades at an adjusted enterprise value of $90 million, despite ownership of the Playboy Mansion (on the books for $1 million but worth well north of $50 million) and annualized EBIT of more than $25 million from the growing brand licensing segment alone.

Tree.com (TREE), an InterActiveCorp spinoff, has a market value of $21 million, despite more than $40 million of net cash, recent buying by the CEO and CFO, and a takeout value five years ago of $700+ million.

Cresud (CRESY), a leading Argentinian agricultural company, trades at $6 per share, below the value of its public company holdings and the net cash raised in a Leucadia-backed $16 per-share rights offering in March. The market ascribes no value to Cresud’s ownership of more than one million acres of productive land.

Enjoy — and be sure to keep the good ideas coming

by subscribing today (see subscription form on last page). Do also let us know how we can make the MOI more valuable to you. Email us at [email protected].

—The Manual of Ideas Editorial Team

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Magic Formula 100 Greenblatt’s Approach – Why It Works Our Top 10 Magic Formula Selections

Profiles of Magic Formula 100

agic Formula investing is based on a simple yet powerful way of searching for undervalued stocks. According to Joel

Greenblatt’s The Little Book That Beats The Market, portfolios of stocks selected quantitatively based on MFI criteria have handily outperformed the S&P 500 over the past couple of decades.

Magic Formula Performance vs. S&P 500, 1988-2004

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MF (all companies) MF (largest 1000 companies) S&P 500

CAGR, 1988-2004 Magic Formula (all companies) 31% Magic Formula (largest 1000 companies) 23% S&P 500 12%

Source: Joel Greenblatt, The Little Book That Beats the Market.

WHY WE LIKE MAGIC FORMULA INVESTING*

Advocated by “super investor” Joel Greenblatt. Greenblatt invented MFI as a do-it-yourself version of the approach he has espoused while amassing one of the most impressive investment track records of all time. While reliable data on Greenblatt’s complete track record is not available, some estimates put his annualized returns over the past couple of decades at well north of 20%. From 1985-1994, Greenblatt managed the Gotham Partners hedge fund, reporting annualized returns of 50% (after expenses, before performance fees). Gotham returned all outside capital in January 1995.

Simple. The MFI screen ranks companies based on only two variables: “cheapness” (pre-tax unlevered earnings yield) and “goodness” (return on capital * (besides the fact that it makes money)

employed). The two rankings are given equal weight in the final compilation of the MFI Top 100. This simple process stands in stark contrast to most quantitative screening methods, which rely on multiple variables and are difficult to replicate.

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 companies that are available at good prices. The result is a list of businesses that offer both a high earnings yield and a relatively high probability that capital reinvested in the business will generate high returns. It makes intuitive sense that such stocks should outperform.

WHY MAGIC FORMULA WILL CONTINUE TO WORK

“Institutional imperative” makes adherence to MFI difficult. Institutional managers care not only about investment risk but, perhaps more acutely, about career risk. Many managers cannot afford to follow a winning strategy if it involves enduring long stretches of relative underperformance. It is much safer from a career standpoint to be “wrong” when everyone else is losing money than to be “wrong” when everyone is making money. During the 1988-2004 period studied by Greenblatt, MFI handily outperformed the S&P 500, yet the strategy experienced two non-overlapping three-year periods of underperformance. While most fund managers may be able to endure a quarter or a year of underperformance, they may be left with few investors after a two- or three-year period of subpar results. It is therefore extremely difficult to stick with MFI when the going gets tough.

Investors have a hard time turning off their emotional biases. Even a quick peek at the list of candidates generated by the MFI screen – available at www.magicformulainvesting.com – is likely to make an investor’s stomach churn. Many companies on the list are either in out-of-favor industries or have major company-specific issues, such as regulatory scrutiny, accounting problems, executive turnover, or deteriorating operating momentum. While many investors may agree conceptually that buying good companies when they are out of favor is a path to long-term outperformance, a much smaller number would actually be willing to follow such a strategy. As a quantitative method, the MFI screen is perfectly sanguine about picking a headhunting firm during a recession or a laser eye surgery provider when the media is calling into question the safety of laser eye surgery. Professional investors legitimately want to use the MFI list as a starting point from which to do further research and ultimately make a subjective judgment

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regarding an investment opportunity. Unfortunately, the subjective judgment is frequently tainted by emotional bias. As a result, the investor may dismiss the headhunting firm by thinking, “Of course it’s cheap, we’re in a recession!” Similarly, the investor may dismiss the laser eye surgery company by thinking, “Of course it’s cheap, they might go out of business!”

MFI never runs out of investment candidates. Several value investment strategies have become de facto obsolete over time. For example, whereas Ben Graham successfully searched for so-called “net nets” more than a half-century ago, such companies have become virtually extinct today. The few companies whose current assets exceed the sum of their equity market value and total liabilities are typically either depleting those current assets at a rapid pace or there are other reasons why theoretical liquidation values might not be realized. As a result, today’s professional investors cannot build their businesses around “net nets.” By contrast, MFI simply ranks public companies relative to each other. There is no absolute cheapness requirement, whether it be “net net” or that book value exceed market value. As a result, MFI will always provide investors with an investable list of relatively attractive public companies.

Investors tend to remain skeptical of winning strategies even after long periods of outperformance. Investors have been taught – you might say “brainwashed” – that markets are efficient and there is no free lunch. As a result, they struggle with the notion that a simple quantitative strategy can systematically outperform the best efforts of large numbers of securities analysts and portfolio managers. For example, stocks that trade at a low multiple of price to book value have outperformed the broader market in a statistically significant way for a long period of time. Economists Eugene Fama and Kenneth French have studied this phenomenon extensively (latest data is available at www.kennethfrench.com). Ironically, even after having observed this contradiction of the efficient markets hypothesis (EMH) for many years, Fama, in true professorial fashion, tried to explain it away by invoking the EMH adherents’ favorite axiom: If a strategy outperforms, it must be riskier! Unfortunately for Fama, the strategy of buying stocks with low price-to-book multiples also exhibited relatively low volatility. Volatility, of course, is the EMH adherents’ favorite definition of risk. Undeterred, Fama concluded that low price-to-book stocks must be riskier in other ways… The continuing lack of disappearance of the low price-to-book “anomaly” suggests that investors may not flock to MFI even after many years of demonstrated outperformance.

OUR PROPRIETARY TOP 10 SELECTION PROCESS

The Manual of Ideas has developed a process that seeks to improve upon the already impressive performance of the magic formula screen. The MF 100 is an unranked list of the 100 most attractive companies based on earnings yield and return on capital employed. We highly recommend Joel Greenblatt’s MFI website, www.magicformulainvesting.com.

MOI’s methodology recognizes that not every equity investment should be approached with the same set of questions. Security analysis should be tailored to the type of opportunity examined. For example, an investor analyzing a company that trades at a large discount to net cash and tangible book value might inquire whether the company can be liquidated without major asset impairments, not whether the company’s long-term competitive position is favorable. On the other hand, an investor analyzing a company that trades well above book value and at a high multiple of earnings must examine prospects for sustained rapid earnings growth.

The performance of the MFI screen can be improved if one asks questions that take into account the nature of magic formula selections. Of particular concern is the fact that MFI favors firms exhibiting high returns on capital employed. Such companies are generally not cheap based on the liquidation value of their assets. Instead, they might be cheap based on current and prospective earning power. As a result, a crucial determination when evaluating MF selections is whether they exhibit above-average returns on capital for transitory reasons or for reasons that have some permanence. Warren Buffett calls this moat; others may know it as sustainable competitive advantage. It is also crucial whether a business operates in a growing industry that allows the company to reinvest a portion of free cash flow at high rates of return.

The MOI seeks out companies whose earnings yield is likely to increase over time if the stock price remains unchanged. Such companies not only sustain high returns on capital, but also grow earnings by reinvesting cash in the business. As they generate high returns, such companies need to reinvest only a portion of FCF in order to achieve respectable growth. As a result, they generally have cash available for dividends and stock repurchases. Buybacks executed at “good” prices accelerate EPS growth and value creation.

In order to narrow down the list of 100 MF companies to the ten most promising investments, we use a scoring methodology to rank the companies. We then consider the scoring results and a number of increasingly subjective criteria to narrow down the list to

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ten investments. In addition to “positive” criteria, such as sustainability of competitive advantage, management quality and industry growth, our selection methodology takes into account the following negative criteria, among others (as Charlie Munger might say, “Invert!”):

• Pro forma adjustments: We eliminate companies that would not be on the MF list if their financial statements were adjusted to reflect true operating performance (may include companies recently engaged in large M&A).

• Capital reinvestment: We avoid companies with virtually no opportunity for high-return reinvestment of capital (typically companies in industries in long-term decline).

• Threats to key revenue source: We avoid companies dependent on a specific customer or contract, if loss of latter has become a real possibility (circumstances may include acquisition of major customer, ongoing re-bid process for large contract, or loss of patent protection).

• Cyclicality: We avoid capital-intensive businesses that generate high ROIC only during cyclical upswings in their respective industries.

• Faddishness: We avoid companies providing a 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

occurred at prices roughly equal to or below the current market price.

• Alignment of interests: We avoid companies with major CEO conflicts of interest or corporate governance abuses.

• Value proposition: We avoid companies that offer a questionable value proposition to their end customers.

• M&A rollups: We avoid companies that have meaningful integration risks due to major reliance on acquisition-driven growth.

MAGIC FORMULA TOP 10 — MOI SELECTIONS (in alphabetical order)

• American Eagle Outfitters (AEO) • Garmin (GRMN) • KHD Humboldt Wedag (KHD) • MEMC Electronic Materials (WFR) • Microsoft (MSFT) • Net 1 UEPS (UEPS) • Premier Exhibitions (PRXI) • Syneron (ELOS) • Tempur-Pedic International (TPX) • Travelzoo (TZOO)

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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 Net cash: 752 814 620 305 ST assets: 1,077 1,189 1,021 859 ST liabilities: 352 465 376 386 Intangibles: 10 10 12 11 Book value: 1,156 1,417 1,341 1,405 Total assets: 1,606 1,980 1,868 1,945 ROIC: >100% >100% >100% 65%

Business: American Eagle Outfitters sells its own brand of laidback, current clothing targeting 15-25 year-olds, providing quality merchandise at affordable prices. The collection includes standards like jeans and graphic Ts as well as accessories, outerwear, and footwear. AEO operates ~875 stores in the U.S. and ~75 in Canada. AEO also markets a girls’ underwear collection, aerie, available in 81 standalone and AE stores. Martin + Osa targets 28-40 year-olds and offers Refined Casual clothing and accessories in 22 stores.

Thesis: American Eagle is a well-managed specialty retailer with a strong, proprietary 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 enough credit for continuing to deliver strong returns on capital invested in AE stores. At the recent trading price, 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 (detailed analysis herein).

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

Price: $19.04 ($18.00-$112.68) P/E FYE 12/29/07: 4.9x Year ended 12/31/05 12/30/06 12/29/07 9/27/08 Market value: $3.9 billion P/E FYE 12/31/08: 5.1x Revenue: 1,028 1,774 3,180 3,663 Enterprise value: $3.3 billion P/E FYE 12/31/09: 5.7x GP: 535 882 1,463 1,632 Shares out: 202.5 million P/E FYE 12/31/10: 5.8x EBIT: 338 555 907 939 Institutional ownership: 31% EV / LTM revenue: 0.9x Net income: 311 514 855 882 Insider ownership: 46% EV / LTM EBIT: 3.5x Diluted EPS: 1.43 2.35 3.89 4.08 Insider buys/sales: 6/0 P / tangible book: 2.0x Capex: 27 93 157 143

FCF: 220 269 525 496 Net cash: 367 410 745 540 ST assets: 801 1,169 2,333 2,037 ST liabilities: 196 338 802 697 Intangibles: 36 68 196 214 Book value: 1,157 1,558 2,351 2,140 Total assets: 1,362 1,897 3,292 3,015 ROIC: 92% >100% 99% 88%

Business: Garmin provides GPS-enabled navigation, communication and information devices and applications. Garmin’s products serve automotive, mobile, wireless, outdoor recreation, marine, aviation, and OEM applications. Large dealers and distributors include Best Buy and Wal-Mart, but no customer accounts for 10% or more of revenue.

Thesis: Garmin shares are unjustifiably cheap. The company is the worldwide leader in personal navigation devices, ahead of Dutch 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 personal navigation devices continues to benefit from increasing consumer adoption. Profits have stagnated due to rapid ASP erosion. However, price declines appear likely to moderate, enabling the company to continue reasonably strong operating performance even in a weak economic environment. The stock has been “orphaned” as momentum investors have exited. We value Garmin at $35-65 per share, based on a range of 10x estimated 2009 earnings to 10x estimated normalized earnings (detailed analysis herein).

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

Price: $9.10 ($7.26-$35.79) P/E FYE 12/31/07: 6.4x Year ended 12/31/05 12/31/06 12/31/07 9/30/08 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 Shares out: 30.5 million P/E FYE 12/31/10: 7.7x EBIT: 31 43 53 86 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 Insider buys/sales: 0/0 P / tangible book: 0.8x Capex: 3 3 4 3

FCF: 65 40 127 111 Net cash: 102 221 356 395 ST assets: 462 513 634 709 ST liabilities: 249 316 396 412 Intangibles: 0 0 0 0 Book value: 285 319 307 352 Total assets: 610 748 789 848 ROIC: 52% >100% n/m n/m

Business: KHD Humboldt Wedag operates in two segments: Industrial plant engineering and equipment supply provides technologies, equipment, and engineering services for cement, coal, and minerals processing. The segment also builds plants that produce clinker, cement, clean coal, and minerals. The resource property segment consists of a mining sublease on which the Wabush iron ore mine is situated that commenced in 1956 and expires in 2055.

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 demand. Chairman Michael Smith has a proven track record of efficient capital allocation at several public companies. 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 (detailed analysis herein).

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MEMC Electronic Materials (NYSE: WFR) Wafers for Semiconductor and Solar Applications (www.memc.com)

Price: $15.34 ($13.79-$96.08) P/E FYE 12/31/07: 4.3x Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $3.4 billion P/E FYE 12/31/08: 4.3x Revenue: 1,107 1,541 1,922 2,115 Enterprise value: $2.4 billion P/E FYE 12/31/09: 3.7x GP: 367 689 1,001 1,105 Shares out: 224.5 million P/E FYE 12/31/10: 3.3x EBIT: 257 558 850 943 Institutional ownership: 89% EV / LTM revenue: 1.1x Net income: 249 369 826 694 Insider ownership: 1% EV / LTM EBIT: 2.5x Diluted EPS: 1.10 1.61 3.56 3.00 Insider buys/sales: 1/0 P / tangible book: 1.7x Capex: 163 148 276 346

FCF: 158 379 641 410 Net cash: 101 551 1,286 1,089 ST assets: 436 900 1,590 1,429 ST liabilities: 225 258 444 523 Intangibles: 0 0 0 0 Book value: 711 1,167 2,035 2,080 Total assets: 1,148 1,766 2,887 2,985 ROIC: 46% 90% >100% >100%

Business: MEMC provides silicon wafers for semiconductor and solar applications. It has global R&D and manufacturing facilities. Customers include semi device and solar cell makers. MEMC sells wafers from 100-300mm and intermediate products such as polysilicon and silane gas. The company has 200+ U.S. and 450+ foreign patents. Samsung and Yingli Green Energy each accounted for 10%+ of revenue in 2007.

Thesis: 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, which 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 (detailed analysis herein).

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Microsoft (Nasdaq: MSFT) Operating Systems, Business Software, Games & Online Services (www.microsoft.com)

Price: $20.06 ($18.74-$36.72) P/E FYE 6/30/08: 10.7x Year ended 6/30/06 6/30/07 6/30/08 9/30/08 Market value: $178.4 billion P/E FYE 6/30/09: 9.9x Revenue: 44,282 51,122 60,420 61,719 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 ownership: 13% EV / LTM EBIT: 7.2x Diluted EPS: 1.20 1.42 1.87 1.90 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 Net cash: 34,161 23,411 23,662 18,747 ST assets: 49,010 40,168 43,242 37,202 ST liabilities: 22,442 23,754 29,886 24,383 Intangibles: 4,405 5,638 14,081 14,190 Book value: 40,104 31,097 36,286 33,594 Total assets: 69,597 63,171 72,793 65,117 ROIC: n/m n/m n/m n/m

Business: Microsoft, founded in 1975, is the world’s largest software firm. It operates in five segments: Client (Windows OS), Server and Tools (Windows & SQL Server), Online Services (MSN), Business (Office, Project, Visio, Exchange, Live Meeting), and Entertainment and Devices (Xbox, Zune, Windows Mobile, Windows Embedded).

Thesis: 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 that the company’s balance sheet remains 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 presented herein. Our estimate ascribes no value to the company’s recently announced $40 billion stock repurchase plan, which should be highly accretive to EPS.

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

Price: $10.97 ($9.88-$33.28) P/E FYE 6/30/08: 7.3x Year ended 6/30/06 6/30/07 6/30/08 9/30/08 Market value: $641 million P/E FYE 6/30/09: 5.8x Revenue: 196 224 254 262 Enterprise value: $509 million P/E FYE 6/30/10: 5.1x GP: 146 170 187 190 Shares out: 58.4 million P/E FYE 6/30/11: 4.8x EBIT: 90 97 110 112 Institutional ownership: 67% EV / LTM revenue: 1.9x Net income: 59 64 87 95 Insider ownership: 16% EV / LTM EBIT: 4.6x Diluted EPS: 1.03 1.11 1.50 1.65 Insider buys/sales: 0/2 P / tangible book: 4.2x Capex: 2 4 4 6

FCF: 74 62 115 39 Net cash: 190 168 269 131 ST assets: 241 248 346 370 ST liabilities: 43 55 77 185 Intangibles: 20 118 99 207 Book value: 209 281 340 358 Total assets: 270 376 454 588 ROIC: >100% >100% >100% >100%

Business: Net 1 provides a proprietary universal electronic payment system (UEPS) to the underbanked in developing economies. It operates in four segments, primarily in South Africa: The transaction-based activities segment earns fee income from a state welfare distribution service. The smart card segment derives revenue from the provision of smart card accounts. The financial services segment provides short-term loans on a principal basis and life insurance on an agency basis. The hardware, software and technology segment derives 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 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 macroeconomic weakness. We value the company at $20-30 per share, based on a range of 10x trailing EBIT to 15x forward EPS (detailed analysis herein).

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

Price: $0.78 ($0.74-$12.08) P/E FYE 2/29/08: 2.1x Year ended 2/28/06 2/28/07 2/29/08 8/31/08 Market value: $23 million P/E FYE 2/28/09: 19.5x Revenue: 13 30 62 64 Enterprise value: $14 million P/E FYE 2/28/10: 4.3x GP: 10 22 41 35 Shares out: 29.2 million P/E FYE 2/28/11: n/a EBIT: 3 12 18 5 Institutional ownership: 34% EV / LTM revenue: 0.2x Net income: 5 7 12 4 Insider ownership: 13% EV / LTM EBIT: 3.0x Diluted EPS: 0.19 0.24 0.37 0.10 Insider buys/sales: 4/0 P / tangible book: 0.7x Capex: 2 2 5 11

FCF: 0 9 12 (4) Net cash: 3 17 18 9 ST assets: 10 25 28 24 ST liabilities: 3 2 4 6 Intangibles: 4 3 10 12 Book value: 20 33 47 46 Total assets: 22 35 51 53 ROIC: 83% >100% >100% 29%

Business: Premier develops touring, museum-quality exhibitions. The exhibitions, including Bodies and Titanic, have attracted 20 million visitors. Since 1994, Premier subsidiary RMS Titanic has been salvor-in-possession of the wreck of the Titanic, as ordered by a federal district court. RMS has conducted multiple expeditions, recovering 5,500 artifacts. Revenue sources include exhibition ticket sales, merchandise sales, licensing activities, and sponsorship agreements.

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 involvement by 16% shareholder 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 high earnings uncertainty. At the low end, we ascribe zero value to the company’s ongoing business, zero value to the net cash position of $9 million, and $46 million to the Titanic assets (detailed analysis herein).

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

Price: $7.74 ($7.71-$18.04) P/E FYE 12/31/07: 6.9x Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $215 million P/E FYE 12/31/08: 8.7x Revenue: 87 117 141 139 Enterprise value: $95 million P/E FYE 12/31/09: 10.8x GP: 76 99 114 108 Shares out: 27.7 million P/E FYE 12/31/10: 6.1x EBIT: 39 35 25 24 Institutional ownership: 65% EV / LTM revenue: 0.7x Net income: 41 40 31 26 Insider ownership: 10% EV / LTM EBIT: 3.9x Diluted EPS: 1.48 1.44 1.12 0.94 Insider buys/sales: 0/0 P / tangible book: 0.9x Capex: 1 1 2 2

FCF: 30 36 46 41 Net cash: 133 103 168 120 ST assets: 166 153 222 179 ST liabilities: 21 26 33 30 Intangibles: 0 1 5 5 Book value: 145 194 231 254 Total assets: 170 225 269 290 ROIC: >100% >100% 98% 70%

Business: Syneron provides aesthetic medical products based on proprietary Electro-Optical Synergy (Elos) technology, which uses electrical and optical energy to provide effective and safe aesthetic treatments. The products are primarily sold to physicians and target non-invasive procedures, including hair removal, wrinkle reduction, treatment of superficial vascular and pigmented lesions, and treatment of leg veins. The company has an installed base of 10,000 products.

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 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 (detailed analysis herein).

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

Price: $6.72 ($6.04-$33.08) P/E FYE 12/31/07: 3.9x Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $503 million P/E FYE 12/31/08: 7.2x Revenue: 837 945 1,107 1,028 Enterprise value: $934 million P/E FYE 12/31/09: 7.6x GP: 424 461 535 461 Shares out: 74.8 million P/E FYE 12/31/10: 6.5x EBIT: 186 199 244 176 Institutional ownership: n/a EV / LTM revenue: 0.9x Net income: 99 112 142 98 Insider ownership: 9% EV / LTM EBIT: 5.3x Diluted EPS: 0.97 1.28 1.74 1.29 Insider buys/sales: 0/0 P / tangible book: n/m Capex: 87 38 17 17

FCF: 15 128 109 149 Net cash: (327) (345) (569) (431) ST assets: 228 238 327 320 ST liabilities: 121 132 127 146 Intangibles: 274 269 267 267 Book value: 226 213 48 84 Total assets: 702 726 806 782 ROIC: 68% 62% 70% 59%

Business: Tempur-Pedic provides premium, branded, non-innerspring mattresses and pillows. The company operates in two segments: Domestic consists of two U.S. factories and a distribution subsidiary. International consists of a factory in Denmark and distribution subs.

Thesis: Tempur-Pedic enjoys a wide competitive moat, fortified by 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 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.

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

Price: $4.48 ($4.11-$17.20) P/E FYE 12/31/07: 7.9x Year ended 12/31/05 12/31/06 12/31/07 9/30/08 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 Shares out: 14.3 million P/E FYE 12/31/10: n/a EBIT: 15 30 21 5 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) Insider buys/sales: 129/0 P / tangible book: 2.9x Capex: 0 0 1 3

FCF: 8 17 9 (6) Net cash: 44 34 23 16 ST assets: 55 43 36 30 ST liabilities: 7 7 10 12 Intangibles: 0 0 0 0 Book value: 49 37 26 22 Total assets: 56 44 37 35 ROIC: >100% >100% >100% >100%

Business: Travelzoo’s free Internet media properties reach 12 million 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 travel search engine. Travelzoo publishes offers from 900 advertisers, with deal experts reviewing offers to find the best travel deals.

Thesis: 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 could 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 (detailed analysis herein).

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In-depth profiles of the Magic Formula Top 10 are included in alphabetical order among the 100 companies profiles in this issue.

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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.

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The “Magic Formula” 100 — Overview of Companies Analyzed (in alphabetical order) (continued)

Recent Market Enterprise LTM LTM Date of FY Price Value Value EBIT / EBIT / Latest End Company / Ticker ($) ($mn) ($mn) EV* Capital Quarter Date 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.

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The “Magic Formula” 100 — Overview of Companies Analyzed (sorted by market value)

Recent Market Enterprise LTM LTM Date of FY Price Value Value EBIT / EBIT / Latest End Company / Ticker ($) ($mn) ($mn) EV Capital Quarter Date 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


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Thanksgiving 2008


The “Magic Formula” 100 — Overview of Companies Analyzed (sorted by market value) (continued)

Recent Market Enterprise LTM LTM Date of FY Price Value Value EBIT / EBIT / Latest End Company / Ticker ($) ($mn) ($mn) EV Capital Quarter Date 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


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Thanksgiving 2008


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%


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Thanksgiving 2008


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


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Thanksgiving 2008


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


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Thanksgiving 2008


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


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Thanksgiving 2008


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


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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


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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%


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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


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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%


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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


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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


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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


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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% -


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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% -


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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


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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% - -


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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

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Thanksgiving 2008


BUSINESS OVERVIEW Accenture is a global management consulting, IT services and outsourcing company. It has 186,000 employees in 49 countries and operates in five segments: communications and high tech, financial services, government, products, and resources. Outsourcing contracts (40% of revenue) typically have longer terms than consulting contracts (60% of revenue) and generally have lower gross margins than consulting. SELECTED OPERATING DATA

FYE August 31 2006 2007 2008 2009E1 % of net revenue by type of work: Consulting 59% 60% 60% -- Outsourcing 41% 40% 40% -- % of net revenue by operating group: Communications & tech 25% 23% 23% -- Financial services 21% 22% 21% -- Products 24% 25% 26% -- Public service 13% 13% 12% -- Resources 16% 16% 17% -- Net revenue growth by operating group (constant currency basis): Communications & tech 6% 5% 10% -- Financial services 7% 16% 6% -- Products 15% 18% 17% -- Public service 4% 12% 7% -- Resources 12% 17% 14% -- ∆ net revenue 9% 13% 11% 9-12% % of net revenue by geography: Americas 47% 43% 42% -- EMEA 46% 48% 49% -- Asia Pacific 8% 9% 9% -- EBIT margin by operating group: Communications & tech 15.1% 12.6% 12.1% -- Financial services 10.9% 11.3% 13.2% -- Products 10.0% 13.6% 14.2% -- 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% Other financial data: New bookings ($bn) 20.4 22.0 26.8 26.0-28.0 Net revenue ($bn) 16.6 19.7 23.4 -- FCF ($bn) 2.4 2.3 2.5 2.6-2.8 Effective tax rate 26% 34% 29% 30-32% Diluted EPS growth 2% 24% 35% 8-11% Other operating metrics: Utilization na 85% 84% -- Attrition 18% 18% 16% --

1 Reflects management guidance provided on September 25, 2008. INVESTMENT HIGHLIGHTS

• Top global technology-focused consulting firm. Accenture has one of the broadest service offerings in the industry. Competitors include IBM Global Services, EDS (HP), and Computer Sciences Corp.

• Management expressed “continued confidence” in the business following strong FQ4 results. While CEO Green noted “uncertainty in the economic environment,” he expressed confidence that revenue and income would increase in FY09.

• Guiding for revenue growth of 9-12% (constant currency) and EPS growth of 8-11% in FY09. The company expects new bookings of $26-29 billion in FY09, compared to $26.8 in FY08. EBIT margin is expected to expand by 10-40 bps in FY09, and management forecasts FCF of $2.6-2.8 billion.

• Strong balance sheet; share buybacks. Accenture had $3.6 billion of net cash as of August 31, having repurchased 61 million shares for $2.3 billion in FY08 (another $2.5 billion remains authorized). The company paid an annual dividend of $0.50 per share in November, up from $0.42 per share a year earlier.

• Share price implies 12% trailing FCF yield, 11x trailing P/E and 10x forward P/E.

INVESTMENT RISKS & CONCERNS

• Dependent on technology and related services spending by enterprises, with 21% of FY08 revenue from the financial services sector. The company is vulnerable to a global recession, as EMEA and Asia Pacific contribute 58% of revenue.

• Majority of revenue derived on project-by-project basis, with many consulting engagements less than 12 months in duration. Backlog is typically a small portion of expected annual revenue.

• People business with fairly low barriers to entry. While Accenture has scale advantages, particularly in outsourcing, IT and management consulting is subject to constant entry by new competitors. The company had a 16% attrition rate in FY08.

COMPARABLE PUBLIC COMPANY ANALYSIS

($mn) MV EV EV/Rev P/TB 08 P/E

09 P/E

BE 13 703 .2x n/m n/m n/m CSC 4,322 7,354 .4x 7.7x 7x 6x DTPI 101 54 .3x 1.4x 57x 33x IBM 107,920 132,577 1.3x 19.2x 9x 9x ACN 20,919 17,304 .7x 12.3x 10x 9x

MAJOR HOLDERS Insiders <1% │ Barclays 8% │ Wellington 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Acme Packet, Inc. (Nasdaq: APKT) Burlington, MA, 781-328-4400 Technology: Communications Equipment http://www.acmepacket.com


Price: $3.69 (as of 11/14/08) Month # of P/E FYE 12/31/07 12.3x 52-week range: $3.30 - $13.30 Latest Ago Ests P/E FYE 12/31/08 15.4x 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 Shares out: 55.3 million FYE 12/31/08 0.24 0.23 8 EV / LTM revenue 0.7x

Ownership Data FYE 12/31/09 0.26 0.28 9 EV / LTM EBITDA n/a Insider ownership: 52% FYE 12/31/10 0.31 n/a 1 EV / LTM EBIT 4.4x Insider buys (last six months): 0 LT EPS growth 16.0% 16.5% 2 P / tangible book 1.4x Insider sales (last six months): 9 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 47% Date Actual Estimate LTM EBIT yield 22% # of institutional owners: 202 11/6/08 $0.05 $0.05 LTM pre-tax ROC 80%


($ millions, except Fiscal Years Ended LTME FQE FQE 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


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BUSINESS OVERVIEW Acme Packet provides session border controllers (SBCs), which enable service providers and enterprises to deliver secure interactive communications—voice, video and other real-time multimedia sessions—across defined border points where Internet Protocol (IP) networks connect, known as network borders. Service providers include wireline, wireless, cable and Internet telephony service providers. Acme has 540 customers in 85 countries, including 29 of the world’s top 30 communications service providers. Direct sales accounted for 39% of revenue in 2007. Product and service revenue accounted for 84% and 16% of revenue, respectively, in 2007. Acme was founded in 2000 and completed an IPO at $9.50 per share in October 2006. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 YTD

9/30/08 % of revenue by geography: North America 59% 57% 48% 50% Rest of the world 41% 43% 52% 50% Revenue growth by geography: North America 165% 125% 12% 8% Rest of the world 86% 145% 64% 2% Total revenue growth 126% 133% 34% 5%

INVESTMENT HIGHLIGHTS

• Explosive revenue growth from 2004-07, but sharp slowdown this year. Growth has been driven by demand for session border controllers (SBCs) in next-generation networks being deployed by service providers. The global market for SBCs in service provider networks is expected to increase from $215 million in 2007 to $1.1 billion by 2012.1

• Leader in session border controllers (SBCs). The company has roughly 50% market share in SBCs, twice as much as the next largest competitor.

• Experienced, entrepreneurial management. Co-founder and CEO Andrew Ory (41) was previously co-founder and CEO of Priority Call Management, a company with a similar customer base to that of Acme. Ory sold Priority for $162 million in 1999.

• International represented 52% of revenue in 2007, up from 43% in 2006 and 41% in 2005.

• Manufacturing outsourced to third parties (Jabil, Benchmark Electronics, and TTM Technologies).

• Expanded stock repurchase program from $20 million to $55 million in August. The company has repurchased $36 million of stock so far this year.

1 Source: Company, Dell’Oro Group.

• Strong balance sheet, with $127 million of cash and no debt as of September 30.

• Stock price implies 12% trailing FCF yield, 18x trailing P/E and 14x forward P/E.


• Lowered 2008 revenue guidance from $142-$147 million to $116-$118 million and non-GAAP EPS from $0.38-$0.42 to $0.23-$0.25. In July, Acme blamed Q2 weakness on order pushouts and late shipments, suggesting than no deals had been lost. The subsequent guidance revision is not consistent with the explanation of the Q2 shortfall.

• Dependent on technological edge in SBCs. Acme’s key competitive advantage is the leading-edge family of Net-Net session border controllers. A loss of technology leadership, or a change in service providers’ need for SBCs, might threaten the firm.

• Competition from startups and large players, including NexTone, Newport, DiTech, Juniper, AudioCodes, Sonus, and Ericsson. Cisco recently launched a new product for the SBC market.

• Customer concentration. Alcatel Lucent, Nokia Siemens Networks, Sprint, and Ericsson accounted for 17%, 15%, 13% and 11% of 2007 revenue, respectively. Acme acknowledges that its key customers “have substantial negotiating leverage.”


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ALU 5,241 6,063 .3x n/m n/m 9x CSCO 97,853 77,961 1.9x 4.8x 12x 11x JNPR 7,935 5,914 1.7x 3.8x 13x 11x APKT 204 77 .7x 1.4x 15x 14x

MAJOR HOLDERS CEO Andrew Ory 8% │ Other insiders 46% (includes Menlo Ventures 22% and Advanced Technology Ventures 6%) RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Aladdin Knowledge Systems Ltd. (Nasdaq: ALDN) Petach Tikva, Israel, 212-564-5678 Technology: Software & Programming http://www.aladdin.com


Price: $9.44 (as of 11/14/08) Month # of P/E FYE 12/31/07 9.3x 52-week range: $8.29 - $26.94 Latest Ago Ests P/E FYE 12/31/08 118.0x 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 Shares out: 13.9 million FYE 12/31/08 0.08 0.00 7 EV / LTM revenue 1.0x

Ownership Data FYE 12/31/09 0.40 0.38 7 EV / LTM EBITDA n/a Insider ownership: 19% FYE 12/31/10 0.70 0.87 2 EV / LTM EBIT 37.5x Insider buys (last six months): 0 LT EPS growth 16.5% 18.0% 2 P / tangible book 1.1x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 43% Date Actual Estimate LTM EBIT yield 3% # of institutional owners: 68 10/16/08 -$0.02 -$0.21 LTM pre-tax ROC 18%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Intangible assets 8 8 8 10 10 12 9 0 0 0 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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


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BUSINESS OVERVIEW Aladdin is an information security company specializing in authentication, software digital rights management (DRM) and content security. It operates in two segments: Software Security DRM provides software and hardware that helps software publishers manage licensing and distribution of their software to prevent theft and piracy. Enterprise Security provides USB-based hardware and one-time-password devices for user authentication and content security solutions that protect computers against intrusion. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: Software security (DRM) 69% 68% 62% 58% Enterprise security1 31% 32% 38% 42% Revenue growth by segment: Software security (DRM) 12% 7% 9% 4% Enterprise security 36% 13% 40% 32% Total revenue growth 18% 9% 19% 14% Gross profit margin by segment: Software security (DRM) 83% 85% 82% n/a Enterprise security 72% 62% 61% n/a Total gross margin 79% 78% 74% 74% EBIT margin by segment: Software security (DRM) 36% 40% 38% n/a Enterprise security -32% -38% -28% n/a Total EBIT margin 15% 15% 13% 3% % of revenue by product line: HASP tokens 68% 68% 62% n/a eSafe 14% 14% 14% n/a eToken 17% 18% 24% n/a % of revenue by geography: U.S. 33% 26% 23% n/a Europe ex. Germany 26% 30% 32% n/a Germany 21% 22% 23% n/a Asia incl. Japan 13% 15% 15% n/a Israel and others 7% 7% 7% n/a

1 Enterprise security revenue in 2007 includes 2% from educational products. INVESTMENT HIGHLIGHTS

• Leading software rights management products, used by software publishers to protect their IP and reduce piracy losses. Software DRM is a ~$200 million market globally, growing in the low teens.1

• eToken is leader in USB authentication, a $150 million market growing at 30%+. Aladdin also competes in the one-time-password authentication, a $450 million market growing at roughly 20%.1

• eSafe secure Web gateway competes in $650 million market growing at 20%+.1 eSafe provides advanced protection against Web-based threats.

• CEO Jacob Margalit (45) founded company in 1985. CFO Shemer (38) joined Aladdin in 2007.

1 Source: Frost & Sullivan, Company, The Manual of Ideas.

• Active M&A strategy, including 39% investment in Athena Smartcard, €10 million purchase of Eutronsec, and $65 million acquisition of SafeWord product line from Secure Computing (SCUR). SafeWord offers one-time-password authentication.

• Guiding for revenue growth of 15-25% and EPS decline from $1.02 in 2007 to $0.04-0.10 in 2008; non-GAAP EPS to decline from $1.20 in 2007 to $0.74-0.84 in 2008. The guidance includes the SafeWord acquisition. A slowdown in revenue growth, M&A expenses and the strengthening of the Israeli shekel are behind the likely decline in EPS.

• Received $14.50 per share acquisition proposal from Vector Capital in October, following rejection of $13 per share Vector proposal in August. The company also rejected a proposal by Vector to buy Aladdin’s DRM business for $125-135 million. Vector owns 14% of Aladdin shares.



• M&A strategy with “focus on market share.” Second criterion is “technology,” with value creation apparently in third place.

• Competitors include SafeNet, Macrovision and Wibu in software DRM; RSA in authentication; Trend Micro in content security for gateways; as well as McAfee, Symantec, Blue Coat, Secure Computing, IronPort, Websense, and SurfControl.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E MFE 4,350 3,570 2.3x 6.3x 14x 13x MVSN 1,169 1,768 6.7x n/m 17x 10x SYMC 10,208 10,003 1.6x n/m 9x 8x ALDN 131 120 1.0x 1.1x 118x 24x

MAJOR HOLDERS CEO Margalit 13% │ Other insiders 7% │ Vector 14% │ Galleon 12% │ Manning & Napier 10% │ RenTech 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


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 Insider ownership: 2% FYE 12/31/10 5.02 5.77 5 EV / LTM EBIT 2.5x Insider buys (last six months): 3 LT EPS growth 15.0% 15.0% 2 P / tangible book 0.9x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 81% Date Actual Estimate LTM EBIT yield 41% # of institutional owners: 768 10/22/08 $1.45 $1.38 LTM pre-tax ROC 39%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 34 59 80 251 363 502 623 273 664 273 Total current assets 926 796 743 1,160 1,484 1,988 2,249 2,141 2,348 2,141 Intangible assets 188 194 198 205 200 207 210 204 210 204 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 Total current liabilities 333 342 395 493 561 643 704 798 704 798 Long-term debt 573 509 504 553 547 530 507 495 513 495 Total liabilities 1,699 1,644 1,729 1,890 1,932 1,778 1,872 1,947 1,844 1,947 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Allegheny is a diversified specialty metals producer. Target markets include aerospace and defense, oil and gas, electrical energy, medical, auto, food equipment, machine tools, and construction. The company operates in three segments: High Performance Metals provides titanium-, nickel- and cobalt-based alloys and superalloys, and exotic alloys such as zirconium, hafnium and niobium, primarily in long product forms such as ingot, billet, bar, rod, wire, and seamless tube. Flat-Rolled Products provides stainless steel, nickel-based alloys and titanium alloys in a variety of forms, including plate, sheet, engineered strip, and precision-rolled strip. Engineered Products produces tungsten powder, heavy alloys and carbide materials, and carbide cutting tools. SELECTED OPERATING DATA


9/30/08 % of revenue by segment: High performance metals 35% 37% 38% 36% Flat-rolled products 54% 55% 54% 56% Engineered products 11% 9% 8% 8% Revenue growth by segment: High performance metals 57% 45% 14% -4% Flat-rolled products 16% 42% 9% 2% Engineered products 33% 10% 0% 9% ∆ revenue 30% 39% 10% 0% ∆ backlog (period end) 75% 23% -17% EBIT margin by segment: High performance metals 27% 36% 35% 28% Flat-rolled products 8% 13% 17% 13% Engineered products 12% 13% 7% 6% Corporate and other -2% -2% -2% -1% Total EBIT margin 13% 20% 22% 17% D&A as % of revenue 2% 2% 2% 2% Capex as % of revenue 3% 5% 8% 9% Revenue by geography: U.S. 59% 61% 54% n/a International1 41% 39% 46% n/a

1 Includes sales from U.S. operations to international customers. INVESTMENT HIGHLIGHTS

• Transformed business through renewed profit focus, implementing $590 million of gross cost reductions from 2005-07. The company has formed market sector teams to target more effectively verticals such as aerospace, defense and oil and gas.

• Poised to benefit from interest in nuclear energy. The company is forming a market sector team to target this opportunity. Specialty metals that address this market include zirconium and hafnium for fuel bundles, titanium and corrosion-resistant alloys for condenser units, and condenser tubing.

• “Steady” demand from aerospace and “growing” demand from global industrial markets is partly offsetting weakness in U.S. auto and housing.

• Chairman and CEO Patrick Hassey (62) joined in 2003. He previously served in various roles at Alcoa, including as group president of Industrial Components. Richard Harshman (51) has served as CFO since 2000, having joined from Teledyne.

• Repurchased 5.4 million shares for $303 million under $500 million program authorized in late 2007.

• Stock price implies negative trailing FCF yield, 4x trailing P/E and 5x forward P/E.


• Guiding for earnings decline of 23-24% in 2008, with estimated EPS of $5.51-5.61. Q3 saw “more competitive pricing” for most products and lower demand for standard stainless sheet and plate.

• Specialty metals customers operate in cyclical industries, including aerospace and defense, oil and gas, electrical energy, and infrastructure.

• Annual capex to range from $500-600 million over four years, following decision to invest $1.2 billion in flat-rolled products segment. The company intends to build a specialty metals hot rolling and processing facility and consolidate a grain-oriented electrical steel melt into the Brackenridge, PA melt shop. Management’s estimate of a 20% ROI by 2014 may prove wrong.

• Retirement benefits liability of $465 million related to the company’s U.S. defined-benefit pension plan. The plan appears to be well funded.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E CRS 704 632 .2x 1.0x 5x 4x NUE 10,276 11,878 .5x 1.9x 5x 6x RTI 253 206 .3x 0.5x 4x 5x TIE 1,389 1,369 1.2x 1.2x 9x 9x X 3,459 5,891 .2x 0.8x 2x 3x ATI 2,041 2,285 .4x 0.9x 4x 5x

MAJOR HOLDERS CEO Hassey <1% │ Other insiders 2% │ TCW 7% │ Singleton 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Ambassadors Group, Inc. (Nasdaq: EPAX) Spokane, WA, 509-568-7800 Services: Personal Services http://www.ambassadorsgroup.com


Price: $8.40 (as of 11/14/08) Month # of P/E FYE 12/31/07 5.4x 52-week range: $7.42 - $20.80 Latest Ago Ests P/E FYE 12/31/08 8.6x Market value: $160 million This quarter -$0.34 -$0.37 2 P/E FYE 12/31/09 9.8x Enterprise value: $98 million Next quarter n/a -0.31 0 P/E FYE 12/31/10 n/a Shares out: 19.0 million FYE 12/31/08 0.98 1.04 2 EV / LTM revenue 1.0x

Ownership Data FYE 12/31/09 0.86 1.14 2 EV / LTM EBITDA n/a Insider ownership: 5% FYE 12/31/10 n/a 1.11 0 EV / LTM EBIT 4.3x Insider buys (last six months): 5 LT EPS growth 15.0% 15.0% 2 P / tangible book 2.3x Insider sales (last six months): 3 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 89% Date Actual Estimate LTM EBIT yield 23% # of institutional owners: 203 10/28/08 $0.70 $0.79 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 40 51 68 88 117 133 85 62 86 62 Total current assets 42 55 75 93 119 140 93 73 96 73 Intangible assets 0 0 0 0 0 0 0 9 0 9 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 Total current liabilities 21 31 38 48 58 70 49 36 39 36 Long-term debt 0 0 1 1 0 0 0 0 0 0 Total liabilities 21 31 39 48 59 70 49 36 39 36 Preferred stock 0 0 0 0 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


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BUSINESS OVERVIEW Ambassadors Group is an educational travel company focused on international travel for students. The company’s programs, including “Student Ambassador Programs” and “Student Leader Programs,” help grade and high school students learn about the history and culture of other places. The majority of travel is scheduled in June and July. The company has the exclusive right from People to People, a non-profit organization founded by President Eisenhower and originally administered by the U.S. State Department, to develop and conduct student programs through 2020. Eight U.S. presidents have served as honorary chairman of People to People, including President George W. Bush. Since 1963, the company has organized programs for 400,000+ students, adults and athletes. In 2007, 50,000+ “delegates” traveled to 44 countries. The company acquired education website BookRags for $18 million in May 2008. SELECTED OPERATING DATA


9/30/08 Traveling delegates 37,800 43,075 52,661 38,930 Change (y-y) 22% 14% 22% -22% % of revenue by travel destination: Europe 46% 43% 50% 54% South Pacific1 30% 26% 21% 15% Asia2 11% 13% 12% 12% U.S. 12% 13% 15% 16% Other 1% 5% 2% 3%

1 Primarily Australia and New Zealand. 2 Primarily China. INVESTMENT HIGHLIGHTS

• Competitive edge due to association with People to People, 41 years of travel experience, and academic credit granted for the programs by high schools and colleges. The company also benefits from the perception that its programs improve students’ chance of admission to top colleges.

• Academically accredited since 2004 through Northwest Association of Accredited Schools. The company’s Washington School of World Studies has granted close to 140,000 academic and service-learning credits to students since inception.

• Marketing under People to People name, with heavy emphasis on White House connections. Ambassadors operates the travel programs in the background, benefiting from the unique credibility bestowed on the programs by People to People.

• Strong reputation. While results have faltered recently, Ambassadors remains the envy of its peers, with little direct competition. Lower-end competitors include EF Tours and World Stride.

• Enrolled revenue of $173 million (up 10% y-y) as of October 26 for 2009 travel relating to 29,580 net enrolled participants (down 4% y-y).

• Chairman John Ueberroth and CEO Jeffrey Thomas assumed their current roles in 2001. Both executives have extensive travel industry experience and own 4-5% of the company each. Ueberroth is a business leader honored on the cover of Time for his role in the 1984 L.A. Olympics.

• Repurchased $24 million of stock in past twelve months, with another $20 million authorized.



• Hurt by weak dollar and high fuel prices, as travel abroad has become less affordable. The company has “seen enrollments begin to slow.”

• Dependent on agreements with People to People, which expire in 2010 but may be extended through 2020 at the company’s option. Ambassadors has the exclusive right to conduct programs for K-12 students using the People to People name, and the non-exclusive right to conduct programs for professionals, college students, and athletes.

• EBIT margins of 40%+ may not be sustainable. The margins are significantly higher than those of most other travel-related firms. The company’s margin profile depends on its ability to market the student programs as highly reputable and selective.

• Marketing practices might be construed as misleading. Direct mail materials may give prospective participants the impression that the company is a non-profit affiliated with the U.S. government. Participation in the programs may be less selective than assumed by some students.

MAJOR HOLDERS Chairman Ueberroth 4% │ CEO Thomas 5% │ Other insiders <1% │ Punch Card 12% │ Morgan Stanley 10% │ Schroder 7% │ Eaton Vance 6% │ Timucuan 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


American Eagle Outfitters (NYSE: AEO) Pittsburgh, PA, 412-432-3300 Services: Retail (Apparel), Member of S&P MidCap 400 http://www.ae.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 226 242 338 590 752 814 620 380 617 380 Total current assets 377 427 531 865 1,077 1,189 1,021 859 1,074 859 Intangible assets 24 24 10 10 10 10 12 11 10 11 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 Total current liabilities 151 142 209 283 352 465 376 386 313 386 Long-term debt 19 16 14 0 0 0 0 0 0 0 Total liabilities 172 164 295 365 450 562 527 540 462 540 Preferred stock 0 0 0 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



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BUSINESS OVERVIEW American Eagle Outfitters (AEO) sells its own brand of laidback clothing for 15-25 year-olds, providing quality merchandise at affordable prices. The collection includes jeans and graphic Ts as well as accessories, outerwear, and footwear. AEO operates 875 stores in the U.S. and 76 in Canada. AEO also markets a girls’ underwear collection, aerie, available in 81 standalone and AE stores. Martin + Osa, a concept targeting 28-40 year-olds, offers Refined Casual clothing and accessories in 22 Martin + Osa stores. SELECTED OPERATING DATA

FYE February 1 2006 2007 2008 1H093 Same store sales growth +16% +12% +1% -7% Stores (period end)1 869 911 987 1,054 Net sales per gross sq. ft. $471 $524 $517 n/a Net sales per selling sq. ft. $577 $642 $638 n/a Gross sq. ft. (period end) (mn) 4.8 5.2 5.7 6.1 Square footage growth 5% 8% 10% 14% Internet sales2 ($mn) $127 $188 $243 n/a Internet sales growth 72% 48% 29% n/a % of sales by merchandise group: Men’s 35% 35% 37% n/a Women’s (incl. intimates) 60% 60% 59% n/a Footwear 5% 5% 4% n/a % of sales by geography: U.S. 92% 92% 91% n/a Foreign 8% 8% 9% n/a

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). 3 The company has released the following data for the first three quarters of FY09, i.e., through October 30, 2008: sales up 1%, SSS down 7%. INVESTMENT HIGHLIGHTS

• Ranked top two clothing brand by teenagers. Top competitors include Abercrombie (higher price points), Aéropostale (lower price points) and Gap.

• Strong new store economics. Based on AEO data, a new AE store requires investment of $630K and generates first-year four-wall profit of $661K (27% of sales), a pre-tax ROI of 105%. New store size is 6,000 sq. ft., with $410 sales per sq. ft. in year one.

• Strong remodeling economics, with payback period of 16 months. Data on 57 remodeled stores shows sales and profit increases of 30-40%.

• Expects to grow square footage 12% in 2008. Net new store targets: 40 AE, 76 aerie, 9 Martin + Osa.

• Expects to have 115 aerie stores at yearend 2008, up from 39 at yearend 2007. The concept has shown “strong initial productivity” and is profitable.

• Website sales grew 29% to $243 million in 2007. The company is targeting $500 million by 2010.

• Launched children’s brand at 77kids.com, with stores planned for 2010. The new brand, 77kids, offers on-trend, high-quality clothing for ages 2-10.

• Strong management. Chairman Jay Schottenstein (53; owns 7% of AEO) has been with AEO and predecessors since 1980. CEO James O’Donnell (67; owns 1.5% of AEO) joined the company in 2000. The team has grown the business profitably.

• Repurchased no shares YTD, $438 million in FY08, $154 million in FY07 and $172 million in FY06. Chairman Schottenstein bought one million shares at $23-24 last year.



• Missed fashion cycle in women’s jeans (~15% of sales), causing women’s comp store sales to decline 16% in 2Q09 while men’s comps rose 2%. 3Q09 SSS declined 7% (vs. 3% drop in 3Q08), with EPS guidance revised from $0.31-0.36 to $0.30. Chief merchandising officer McGalla resigned in August.

• Challenging retail environment. The company targets 15-25 year-olds, a demographic whose discretionary spending may decrease significantly in the current downturn. AEO has a conservative inventory position and expense controls in place to mitigate the negative impact of lower spending.

• aerie success uncertain; Martin + Osa may shut down. Management may opt to close Martin + Osa in Q1 CY09 if sales per sq. ft. do not improve.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ANF 1,548 1,350 .4x 0.9x 5x 6x ARO 1,070 999 .6x 4.4x 7x 7x GPS 8,217 6,725 .4x 1.9x 9x 8x JCG 701 687 .5x 3.3x 8x 7x PSUN 80 89 .1x 0.2x 41x 9x AEO 1,828 1,523 .5x 1.3x 7x 7x

MAJOR HOLDERS Chairman Schottenstein 7% │ CEO O’Donnell 1% │ Other insiders 5% │ Wellington 6% │ Lone Pine 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into AEO: WHAT ARE THE SHARES WORTH?

• We value AEO at $17-27 per share, based on the valuation analysis summarized below. We note that the company has roughly $400-500 million in excess marketable assets; however, the vast majority of value resides in the capitalized earnings of the core American Eagle retail business.

American Eagle — Valuation Summary

($ in millions, except per share data)

Low Value

High Value

Value of excess marketable assets:1 Cash and equivalents $353 $353 Short-term investments 27 27 Long-term investments 309 309 Notes payable (75) (75) Net cash and investments $614 $614 Cash needed to run business2 (200) (100) Total $414 $514 Value of startup concepts:3 aerie, Martin + Osa, 77kids $0 $206 Value of AE core business: Estimated LTM EBIT ex. startup concepts 500 Fair value multiple of LTM EBIT 6x Estimated EBIT power in 2-3 years 600 Fair value multiple of EBIT power 8x Total $3,000 $4,800 Estimated fair value of AEO $3,414 $5,520 per share $17 $27

1 Based on balance sheet values as of August 2, 2008. 2 Represents MOI estimate. 3 Represents MOI estimate. On the low end, the concepts are conservatively 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. Source: Company filings, The Manual of Ideas estimates and analysis. WHY THE SHARES MAY BE MISPRICED

• Indiscriminate selling of retailers. With consumer spending hurt by the real estate downturn, lower credit availability and rising unemployment, it is impossible to predict how weak consumer spending may get and when it may rebound. As a result, many investors prefer to stay on the sidelines or to sell short U.S. retailer stocks. However, American Eagle stands out due to its strong market position, strong management, excellent returns on capital, and a rock-solid financial position. While near-term results are likely to continue to be affected by macro weakness, we have little doubt that the company’s earning power will be restored — and will grow — once consumer spending turns the corner.

• Core AE store profitability modestly higher than suggested by overall EPS, as new concepts are still losing money. As a result, the market is valuing core AE earnings at a slightly lower multiple than may be apparent.

REVENUE, PRODUCTIVITY AND PROFIT MARGINS

AEO – Revenue, Gross Profit and EBIT, FY 1994-2008 The company has moved from microcap to near-midcap status over the past fifteen years as the American Eagle brand has gained in polularity, with revenue growing nearly twenty-fold from $169 million in FY93 to $3 billion in FY08. Gross profit and operating income have increased even more dramatically during the same period.

$0mn$500mn

$1,000mn$1,500mn$2,000mn$2,500mn$3,000mn$3,500mn

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Revenue Gross Profit EBIT

Source: Company, The Manual of Ideas. AEO – Y-Y Revenue Growth, FY 1994-YTD 2008 The company has posted remarkably strong growth for more than a decade, driven by an ability to reinvest capital at high rates of return. Even so, growth has not been smooth, with multi-year cycles of relatively stagnant results, followed by years of rapid growth.

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50%94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Source: Company, The Manual of Ideas. AEO – Sales per Average Gross Square Foot, FY 2000-08 Sales productivity has roughly doubled since 1995, albeit along an uneven path. Sales per square foot declined in the early part of this decade, only to rebound strongly since 2005. Perhaps the most significant risk to the bullish thesis on AEO is the possibility of sales productivity falling sharply once again in coming years.

$200$250$300$350$400$450$500$550

95 96 97 98 99 00 01 02 03 04 05 06 07 08

Source: Company, The Manual of Ideas.

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AEO – Gross and Operating Margins, FY 1995-2008 The company has achieved record margins in recent years, reflecting the operating leverage inherent in same-store sales growth. Profit margins remained quite strong even in years, such as 2003-04, in which revenue growth ground to a halt.

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Source: Company, The Manual of Ideas. AEO CORE STORE METRICS A new American Eagle store generates a “four-wall” return on invested capital of 91% in year one, based on our calculations and data provided by the company. Company data is based on 40 stores opened since early 2006. We note that four-wall returns for new stores opened in the current economic environment are likely significantly lower than the return shown here. Nonetheless, we believe the company can sustain reasonable returns on capital in a difficult economy, with returns like to rebound substantially when consumer spending trends improve. New American Eagle Stores – First-Year Economics

New AE store size 6,000 square feet Investment to open new store1 $730,000 Sales per square foot $410 Sales $2,460,000 Four-wall profit margin 27% Four-wall profit $664,200 Pre-tax return on investment 91%

1 Includes opening inventory of ~$100K but excludes tennant allowances. Source: The Manual of Ideas, American Eagle. MANAGEMENT’S VIEW OF BUSINESS CEO O’Donnell and CFO Hilson provided the following commentary on the 2Q09 earnings call on August 26:

• Operating environment: “store traffic and consumer demand have been down compared to prior years;” “traffic… has been relatively choppy”

• Promotional front: “we do expect… third quarter markdowns to be higher than last year”

• Management focus: “managing the business conservatively, with tight inventories, and we continue to pursue expense opportunities”

• AE brand: “strong, well positioned, and top of mind with our 15 to 25-year-old customers”

• Women’s business: “has been very challenging;” “denim business has been the one category that has hurt us;” “changes that we’ve made in fashion have definitely started to resonate with the customer;” “we have not held our position of strength… in denim, and the whole denim assortment is not a catastrophe. We just have a few styles, and they did not resonate very well with the customer and there were a couple of misses, to be honest with you. We have addressed those, and we expect to be in a very strong denim position, trend-wise for holiday this year;” “very encouraged by spring ’09;” “not… writing off holiday ‘08”

• Men’s business: “has been good” • Accessories business: “have struggled with

accessories for some time now, and although we’ve had periodic improvements, …the category is not where we want it to be”

• Direct business (aeo.com, etc.): “continues to demonstrate strength;” “increase in conversion as well as an increase in unique site visits;” “direct to consumer processing costs per unit declined by over 25% [in FQ3];” “ship to 62 countries;” “continuing to see the global appetite for our brand grow”aerie: “performing well;” “stores are ramping up ahead of our plan;” “really been turning on over the last quarter… very pleased with the performance;” “undies have taken off… strong bra performance;” “AUR is somewhat lower than the AE brand”

• Martin + Osa: “continue to see an improvement;” “our targets for the brand to reach an annual run rate of $375 per square foot, and a four wall break even in the fourth quarter of this year, are the parameters for keeping the business ongoing”

• New stores: “profitable in their very first year;” “running out of new store locations, so I expect over the next handful of years, two to three years, to see our new store opening cadence probably get 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 35 and 45 stores [come up for lease renewal] a year”

• Share repurchases: “…as auction rates loosen up, we will continue to evaluate share repurchase. We still have our authorization out there. So it’s really dependent on the auction rate market.”

• Chief merchandising officer replacement: “very pleased at the caliber of individuals we’re speaking with;” “I would think that we would have someone identified, and hopefully announced by year’s end”

RECOMMENDED READING

• Value Investors Club write-ups dated November 2, 2007 and July 7, 2008.

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Thanksgiving 2008


AmerisourceBergen Corp. (NYSE: ABC) Chesterbrook, PA, 610-727-7000 Health Care: Biotechnology & Drugs, Member of S&P 500 http://www.amerisourcebergen.com



Ownership Data FYE 9/30/10 3.51 3.60 13 EV / LTM EBITDA 5.4x Insider ownership: 1% FYE 9/30/11 3.86 4.01 5 EV / LTM EBIT 6.1x Insider buys (last six months): 0 LT EPS growth 12.0% 13.3% 4 P / tangible book 1.8x Insider sales (last six months): 1 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 16% # of institutional owners: 903 10/30/08 $0.73 $0.71 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Total current assets 8,350 8,859 8,295 7,988 9,210 8,938 8,605 8,605 8,938 8,605 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 Total current liabilities 6,100 6,256 6,104 6,052 7,459 7,864 8,103 8,103 7,864 8,103 Long-term debt 1,757 1,723 1,157 952 1,094 1,227 1,187 1,187 1,227 1,187 Total liabilities 7,897 8,035 7,315 7,101 8,643 9,210 9,443 9,443 9,210 9,443 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW AmerisourceBergen is a large drug wholesaler. Services range from pharmacy automation and pharmaceutical packaging to reimbursement and pharmaceutical consulting. All continuing operations are reported in the Pharmaceutical Distribution segment, which includes AmerisourceBergen Drug Corporation (ABDC), AmerisourceBergen Specialty Group (ABSG) and the AmerisourceBergen Packaging Group (ABPG). The company spun off the PharMerica Long-Term Care business in July 2007, combining it with Kindred HealthCare’s institutional pharmacy to create PharMerica Corp. (NYSE: PMC). AmerisourceBergen’s top ten customers account for one-third of operating revenue. SELECTED OPERATING DATA

FYE September 30 2006 2007 2008 Pharmaceutical distribution data:1 Revenue growth 13% 17% 7% EBIT growth 21% 13% 15% EBIT margin 1.15% 1.12% 1.19%

1 Pharmaceutical distribution accounts for 99% of revenue. INVESTMENT HIGHLIGHTS

• Industry expected to grow in mid single digits in the U.S. in coming years, despite likely slower growth in FY09. Growth drivers include an aging population, new drugs, increased use of generics, and increased use of drug therapies.

• Achieved respectable performance in FY08, due to slight share gains, “excellent contribution” from the PRxO Generics program, a diverse mix, and cost control. The company reported growth in operating revenue of 7% and growth in diluted EPS from continuing operations of 14% in FY08. EBIT margin expanded by 7 bps. FCF was $600 million, while share repurchases amounted to $680 million.

• Sold underperforming workers’ comp business. The company sold PMSI in the June quarter, recording a $222 million non-cash charge.

• Guiding for revenue growth of 1-3% and EPS growth of 7-12% in FY09 against a backdrop of low single digit market growth. Management will focus on expense management, EBIT margin expansion, and FCF generation ($460-535 million).

• Authorized $500 million buyback in November; to spend $350 million in next twelve months.


INVESTMENT RISKS & CONCERNS • Low-margin business. The company achieves

pharmaceutical distribution operating margins of less than 1.5%, leaving it with little maneuvering room should the cost of doing business rise quickly. Gross margin has eroded due to competitive pressure, from 5.42% in FY01 to 3.38% in FY08.

• Integration of acquisitions. AmerisourceBergen has spent close to $700 million on the purchase of several businesses in the past three years, including Trent, Asenda, Rep-Pharm, Health Advocates, Bellco Health, NMCR, IgG America, AMD, Xcenda, and Brecon. While these purchases have improved AmerisourceBergen’s market position, they also raise execution and integration risks.

• Goal of 15% long-term EPS growth aggressive. AmerisourceBergen targets revenue growth at market rates while aiming for faster EPS growth, driven by margin expansion and share repurchases (30%+ of FCF to be returned to shareholders). Few companies achieve 15% EPS growth over the long term, and we are skeptical that AmerisourceBergen can deliver on this goal. However, the company does not need to grow EPS anywhere close to its goal in order to justify the current valuation.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E CAH 12,978 16,070 .2x 7.9x 9x 8x MCK 9,643 10,315 .1x 5.1x 9x 8x OMI 1,622 1,805 .3x 4.2x 17x 15x PSSI 1,040 1,248 .6x 5.4x 18x 15x ABC 4,751 5,062 .1x 1.8x 10x 9x

MAJOR HOLDERS CEO Yost 1% │ Other insiders 2% │ AXA 12% │ Goldman Sachs 10% │ State Street 6% │ Pzena 6% │ Vanguard 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Bare Escentuals, Inc. (Nasdaq: BARE) San Francisco, CA, 415-489-5000 Services: Retail (Specialty Non-Apparel) http://www.bareescentuals.com



Ownership Data FYE 12/31/09 1.07 1.27 11 EV / LTM EBITDA 3.3x Insider ownership: 14% FYE 12/31/10 1.22 1.51 7 EV / LTM EBIT 3.5x Insider buys (last six months): 1 LT EPS growth 13.9% 18.3% 9 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 93% Date Actual Estimate LTM EBIT yield 29% # of institutional owners: 386 10/30/08 $0.25 $0.26 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments n/a 4 19 21 32 23 26 23 Total current assets n/a 52 77 126 152 182 146 182 Intangible assets n/a 6 6 6 25 23 27 23 Total assets n/a 64 95 156 224 273 214 273 Short-term debt n/a 9 13 18 18 17 15 17 Total current liabilities n/a 30 42 59 68 57 70 57 Long-term debt n/a 81 377 322 247 227 265 227 Total liabilities n/a 113 422 384 328 297 346 297 Preferred stock n/a 0 0 0 0 0 0 0 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


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BUSINESS OVERVIEW Bare Escentuals is a prestige beauty brand and a leader in mineral-based cosmetics. It makes branded cosmetics, skin care and body care and professional skin care. Distribution consists of infomercials, home shopping TV, specialty beauty retailers, Bare boutiques, spas and salons, and online. SELECTED OPERATING DATA


9/30/08 % of revenue by distribution channel and segment: Retail – infomercial 37% 33% 25% 19% Retail – boutiques 14% 14% 17% 20% Total retail 51% 47% 41% 39% Wholesale – premium 19% 28% 32% 32% Wholesale – shopping TV 15% 13% 12% 12% Wholesale – spas and salons 9% 8% 11% 12% Wholesale – international 6% 4% 3% 4% Total wholesale 49% 53% 59% 61% Revenue growth by distribution channel and segment: Retail – infomercial 77% 33% -2% -18% Retail – boutiques 51% 58% 53% 39% 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% Wholesale – international 71% 11% 7% 29% Total wholesale growth 84% 65% 43% 17% Total revenue growth 83% 52% 30% 12% Gross margin by distribution channel: Retail 77% 80% 80% 80% Wholesale 65% 64% 65% 67% Total gross margin 71% 72% 71% 72% EBIT margin by distribution channel and corporate overhead: Retail 31% 36% 35% 33% Wholesale 57% 60% 59% 61% Corporate -14% -13% -16% -18% Total EBIT margin 30% 35% 33% 32% % of revenue by geography: U.S. 94% 96% 92% 88% International 6% 4% 8% 12% Revenue concentration by major customer:1 Customer A 15% 13% 12% 12% Customer B <10% 13% 13% 12% Customer C <10% 14% 16% 15%

1 Top three customers are QVC, Sephora, Ulta. INVESTMENT HIGHLIGHTS

• 74% of target consumers are aware of mineral makeup, but only 23% of those have tried it. 45% of consumers say they are likely to try mineral makeup in the next year, according to Bare.

• bareMinerals core foundation products offer healthy, lightweight alternative to conventional liquid- or cream-based cosmetics while providing light to maximum coverage for all skin types.

• 12% share of $3.6 billion U.S. facial makeup market. Bare continues to gain share.

• Large opportunity in “extension” markets, with only 2% share of $4.9 billion U.S. color market and 1% share of $7.8 billion U.S. skin care market.

• To grow distribution to 786 U.S. doors by yearend 2008, up from 559 in 2007 (potential of 2,300).

• International only 8% of revenue, but Bare is pursuing growth in Europe, Japan, and Canada.

• Bare Escentuals was the top-selling cosmetics brand at specialty retailers Sephora and Ulta in 2005, 2006 and 2007. The company has strong brand awareness and consumer loyalty.

• No-celebrity marketing lowers cost. Bare spends 7-8% of sales on ads and promotion, while L’Oreal and Estee Lauder spend ~30% and ~25% each.

• Guidance for 10% revenue and EPS growth in 2008, with guidance lowered from 20-25% to 15-20% in July and to 10% in late October.



• Are mineral-based cosmetics a fad? Bare’s explosive growth in an emerging category suggests that the company has benefited from the “in” factor.

• Aggressive long-term growth targets. Even if Bare performs well, it may not meet its long-term targets of 20-25% sales and 25% EPS growth.

• Management turnover in several high-level positions may heighten growth and execution risks.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AVP 9,605 11,048 1.0x 13.8x 11x 11x EL 5,884 6,987 .9x 3.4x 13x 12x RDEN 390 816 .7x 3.4x 9x 8x REV 424 1,691 1.2x n/m 10x 8x BARE 407 629 1.1x n/m 4x 4x

MAJOR HOLDERS CEO Leslie Blodget 6% │ Other insiders 7% │ Berkshire P. 20% │ Capital World 10% │ Artisan 5% │ Thornburg 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Biovail Corporation (USA) (NYSE: BVF) Mississauga, ON, Canada, 905-286-3000 Health Care: Biotechnology & Drugs http://www.biovail.com


Price: $8.57 (as of 11/14/08) Month # of P/E FYE 12/31/07 7.0x 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 Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 59% Date Actual Estimate LTM EBIT yield 6% # of institutional owners: 255 n/a n/a n/a LTM pre-tax ROC 35%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 435 56 133 39 446 835 438 227 417 227 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 Total current liabilities 149 345 263 190 274 410 368 188 228 188 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Biovail is a specialty pharma company. Its core competency lies in developing and manufacturing products incorporating oral drug-delivery technologies. Therapeutic areas include central nervous system disorders, pain management, and cardiovascular disease. Branded products include Wellbutrin for the treatment of depression, Ultram/ Ralivia for moderate to moderately severe chronic pain, Zovirax for herpes, and Cardizem/ Tiazac for hypertension and angina. SELECTED OPERATING DATA


9/30/08 Revenue growth 7% 14% -21% -10% % of revenue by therapeutic area: Cardiovascular1 41% 33% 35% n/a Central nervous system2 44% 47% 32% n/a Antiviral3 10% 11% 17% n/a Pain4 0% 5% 10% n/a Total product sales 95% 96% 95% 94% R&D revenue 3% 2% 3% 3% Royalty and other 2% 2% 2% 2% % of product revenue by drug: Wellbutrin XL 40% 44% 27% 19% Ultram ER 0% 5% 11% 12% Zovirax 11% 11% 18% 20% Cardizem 7% 6% 9% 6% Legacy 15% 14% 17% 21% Generic 15% 14% 11% 11% Biovail Canada, other 12% 7% 8% 10% % of revenue by customer: GSK 38% 42% 25% n/a McKesson 14% 12% 20% n/a Teva 15% 12% 11% n/a OMI 0% 5% 10% n/a Cardinal Health 6% 6% 10% n/a Other customers 27% 23% 24% n/a % of revenue by geography: Canada 12% 8% 9% n/a U.S. 87% 90% 90% n/a Other countries 1% 1% 1% n/a

1 Cardiovascular includes Cardizem, Tiazac, Vasotec, Vaseretic, Isordil, Glumetza; bioequivalent versions of Cardizem CD, Procardia XL, Adalat CC. 2 Central nervous system products consist of Wellbutrin, Zyban, and Ativan. 3 Antiviral products consist of Zovirax. 4 Pain management products consist of Ultram and Ralivia. INVESTMENT HIGHLIGHTS

• New strategic focus targets specialty central nervous system (CNS) disorders, includes M&A pursuit. The shift, announced in May, was needed given changes in the global pharma market, including “heightened cost-containment pressures and intellectual-property regulations, and shorter product lifecycles.” Biovail is reviewing in-licensing and acquisition deals, including “a number of private and public pharmaceutical companies active in the specialty CNS market.” Biovail plans to spend $600 million on CNS R&D through 2012.

• In process of closing Puerto Rico manufacturing facilities. The closures are expected to be completed within two years and are intended to reduce the cost structure. Biovail also plans to close its R&D facility in Dublin, Ireland. The closure of these the facilities “will result in a reduction of headcount of about 300 employees – representing approximately 20% of Biovail’s total headcount – without any anticipated impact to the … existing revenue base.”

• Recently hired new CFO, VP of medical and scientific affairs, VP of neurologic and psychiatric development, and chief scientific officer.

• Stock price implies 10% trailing FCF yield and 29x trailing P/E.


• Generic competition to 300mg Wellbutrin XL since December 2006. With financials negatively impacted, Biovail reduced its cost structure by restructuring U.S. operations, among other actions.

• Sales to fall for “several quarters,” due to generic competition to 150mg Wellbutrin XL (since June 1).

• On-going business challenges include intellectual property protection, increasing competition for Biovail’s marketed and pipeline products, and greater scrutiny of clinical trials by drug regulators.

• “Additional charges to earnings” likely over next several quarters due to strategic repositioning.

• “Does not anticipate meaningful revenue” from development pipeline until 2010-11.

• Covenants restrict buyback to $50 million a year. COMPARABLE PUBLIC COMPANY ANALYSIS

($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E LLY 36,451 34,944 1.7x 3.2x 8x 7x TEVA 35,015 36,420 3.4x 7.8x 15x 14x WPI 2,470 2,946 1.2x 3.9x 12x 11x BVF 1,360 1,134 1.5x 4.3x n/a n/a

MAJOR HOLDERS Insiders <1% │ Eugene Melnick 12% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Boeing Company (NYSE: BA) Chicago, IL, 312-544-2000 Capital Goods: Aerospace and Defense, Member of S&P 500 http://www.boeing.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Total current assets 16,845 16,855 19,291 17,361 21,906 22,983 27,280 24,341 26,628 24,341 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 Total current liabilities 20,566 19,810 18,399 23,096 28,126 29,701 31,538 29,362 30,867 29,362 Long-term debt 10,866 12,589 13,299 10,879 9,538 8,157 7,455 7,217 7,555 7,217 Total liabilities 38,153 44,646 44,847 44,938 48,937 47,055 49,982 47,805 48,381 47,805 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Boeing is the leading aerospace company and a manufacturer of commercial jets and military aircraft. Boeing also makes rotorcraft, electronic and defense systems, missiles, satellites, launch vehicles and advanced info and communication systems. Boeing also operates NASA’s Space Shuttle and International Space Station. The company is one of the largest U.S. exporters in terms of sales and employs more than 160,000 people. Boeing was founded in 1916. Boeing has acquired or merged with a number of aerospace pioneers, including McDonnell Douglas, Hughes Space & Communications, and Rockwell’s space/defense business. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: Commercial Airplanes 40% 46% 50% 49% Integrated Defense Systems 58% 53% 48% 50% Boeing Capital & Other 2% 1% 1% 1% EBIT margin by segment: Commercial Airplanes 7% 10% 11% 9% Integrated Defense Systems 13% 9% 11% 10% Overall EBIT margin1 5% 6% 9% 9% Contractual backlog ($bn): Commercial Airplanes $124 $174 $255 $276 Integrated Defense Systems $37 $42 $42 $73 Total backlog $161 $217 $297 $349 ∆ backlog 53% 35% 37% 18% % of revenue by geography: U.S. 71% 63% 59% n/a Canada & Latin America 3% 3% 5% n/a Asia & Oceania 18% 20% 23% n/a EMEA 9% 14% 13% n/a

1 Includes Boeing Capital & Other and unallocated corporate expenses. Does not include $571 million expense related to DoJ settlement in 2006. INVESTMENT HIGHLIGHTS

• Largest aerospace/defense company, competing in near-duopolistic commercial aircraft market against Europe’s Airbus. Key defense competitors include Lockheed Martin, Northrop and Raytheon.

• Backlog amounts to 5+ years of revenue. Backlog stood at a record $349 billion on September 30, reflecting strong near-term demand and a strike-related delivery pushout. Commercial deliveries of 325 aircraft decreased 1% YTD versus the same period a year ago due to the machinists’ strike.

• First flight of 787 in 2009, with deliveries likely in 2010 (pushed back from 4Q08 and 3Q09), with net orders for 895 airplanes from 58 customers.

• Repurchased 35 million shares for $2.6 billion YTD; pays annual dividends of $1.60 per share.


INVESTMENT RISKS & CONCERNS • Machinists’ strike and supplier issues on galleys

for wide-body planes reduced commercial airplane deliveries by 35 units and EPS by $0.60 in Q3, causing Q3 EPS to decline to $0.94 from $1.43 y-y.

• Suspended guidance due to strike. Management had previously guided for revenue of $67-68 billion in 2008 and $72-73 billion in 2009; and EPS of $5.70-5.85 in 2008 and $6.80-4.70 in 2009. Cash from operations is expected to be more than $2.5 billion in 2008 and more than $6 billion in 2009.

• Engineers and technical workers may strike. Boeing is engaged in contentious contract negotiations with unions representing both groups.

• Expects defense spending growth to moderate, remains focused on keeping individual programs operationally healthy and relevant.

• “May need to finance some deliveries in 2009,” reversing policy of not providing manufacturer financing from 2006-08. The company has made backstop commitments for 3% of the commercial backlog associated with deliveries through 2019.

• High oil prices may reduce demand for commercial airplanes. A mitigating factor is the fact that 70% of airplane sales (by value) go to customers outside of the U.S., and global demand for commercial aviation remains strong.

• May be exposed to deferral or cancellation of scheduled new deliveries.

COMPARABLE PUBLIC COMPANY ANALYSIS1

($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ERJ 2,591 2,626 .4x 1.2x 5x 4x LMT 28,948 30,219 .7x n/m 9x 9x NOC 13,189 16,117 .5x n/m 8x 7x RTN 19,838 19,350 .8x 19.1x 12x 10x BA 30,076 32,906 .5x 10.1x 9x 6x

1 Boeing’s primary direct competitor is Europe’s privately-held Airbus. MAJOR HOLDERS Insiders <1% │ BofA 8% │ State Street 4% │ Cap Re 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Barrett Business Services, Inc (Nasdaq: BBSI) Vancouver, WA, 360-828-0700 Services: Business Services http://www.barrettbusiness.com



Ownership Data FYE 12/31/09 1.11 1.15 4 EV / LTM EBITDA 4.9x Insider ownership: 21% FYE 12/31/10 1.18 n/a 2 EV / LTM EBIT 5.7x Insider buys (last six months): 1 LT EPS growth 15.0% 16.7% 3 P / tangible book 1.7x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 54% Date Actual Estimate LTM EBIT yield 18% # of institutional owners: 118 10/28/08 $0.38 $0.33 LTM pre-tax ROC 80%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 1 0 8 17 65 73 65 51 60 51 Total current assets 19 17 30 46 100 111 107 103 112 103 Intangible assets 19 19 19 23 23 28 42 47 40 47 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 Total current liabilities 16 14 21 29 44 47 48 57 53 57 Long-term debt 1 1 0 1 1 0 0 0 0 0 Total liabilities 22 19 28 41 58 59 60 69 63 69 Preferred stock 0 0 0 0 0 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


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BUSINESS OVERVIEW BBSI provides human resource (HR) management solutions to small and medium-sized businesses primarily in the Western U.S. BBSI derives 85% of revenue from professional employer organization (PEO) contracts and 15% of revenue from temporary/ supplemental staffing, with 50% gross margins in each segment. The HR industry ($170 billion size) breaks down into 35% PEO, 52% temporary/ supplemental, and 13% search and placement. BBSI target clients in the PEO segment are businesses with 20 to 200 employees; in the staffing segment, the company targets large employers with seasonal fluctuations. BBSI operates out of 45 branch offices in ten states. BBSI PEO SERVICES (85% of revenue)—VALUE PROPOSITION HR responsibilities without BBSI:1

Report HoursCompute W/H

DeductionsGarnishmentsIssue ChecksDirect Payroll

DepositFederal, multi-state P/R tax compliance

Account Reconciliation

ReportsVacation Pay

Sick PayCheck DeliveryCost Accounting

W-2sNew Hire Reporting

AdvertisingRecruitingScreeningReferences

HiringJob Descriptions

ReviewsI-9W-4ADAFMLADOLINS

Employee ManualsWritten

WarningsWorkplace Conduct

TerminationsUnemployment

ClaimsSupplemental

Staffing

401(k)Cafeteria PlanCredit Unions

Health InsuranceCOBRAClaims

ManagementRate

Negotiation Regulatory Compliance

Supplemental Life

DisabilityDentalVisionEAP

ERISAHIPAA

OSHAFederal & State

ComplianceEnvironmental Regs

Safety TrainingSafety ManualsSafety Walk-

ThroughsJob-site Visits

Supervisor TrainingSafety MeetingsHazard Training

Accident Investigation

InsuranceFraudulent Claims

Large PremiumDeposits

Costly PremiumsClaims

ManagementLoss Runs

Human Resources

Payroll Admin

Employee Benefits

Safety Services

Workers’Comp

Report HoursCompute W/H

DeductionsGarnishmentsIssue ChecksDirect Payroll

DepositFederal, multi-state P/R tax compliance

Account Reconciliation

ReportsVacation Pay

Sick PayCheck DeliveryCost Accounting

W-2sNew Hire Reporting

AdvertisingRecruitingScreeningReferences

HiringJob Descriptions

ReviewsI-9W-4ADAFMLADOLINS

Employee ManualsWritten

WarningsWorkplace Conduct

TerminationsUnemployment

ClaimsSupplemental

Staffing

401(k)Cafeteria PlanCredit Unions

Health InsuranceCOBRAClaims

ManagementRate

Negotiation Regulatory Compliance

Supplemental Life

DisabilityDentalVisionEAP

ERISAHIPAA

OSHAFederal & State

ComplianceEnvironmental Regs

Safety TrainingSafety ManualsSafety Walk-

ThroughsJob-site Visits

Supervisor TrainingSafety MeetingsHazard Training

Accident Investigation

InsuranceFraudulent Claims

Large PremiumDeposits

Costly PremiumsClaims

ManagementLoss Runs

Human Resources

Payroll Admin

Employee Benefits

Safety Services

Workers’Comp

HR responsibilities with BBSI:1

Report Hours New Employee ReportingReviewsWritten

WarningsDisciplinary

Notices

Safety MeetingsOSHA

Human Resources

Payroll Admin

Employee Benefits

Safety Services

Workers’Comp

Report Incidents to

BBSI

Report Hours New Employee ReportingReviewsWritten

WarningsDisciplinary

Notices

Safety MeetingsOSHA

Human Resources

Payroll Admin

Employee Benefits

Safety Services

Workers’Comp

Report Incidents to

BBSI


• Outsourcing HR function allows clients to reduce the liability of being an employer, focus on the core business, develop a “just-in-time” workforce, and improve efficiencies. BBSI addresses workplace safety, lowers workers’ comp premiums, recruits and screens employees, manages turnover, handles employee claims, implements benefit programs, and complies with regulatory filing requirements.

• Recurring revenue stream. PEO contracts are annual with automatic renewals (30-day cancellation). BBSI has a 90% client retention rate.

1 Source: BBSI.

• HR function becoming more critical, complex. Employment regulations have grown 60% over the past couple of decades, and small businesses spend up to 25% of time on HR paperwork. Homeland security concerns have also increased HR burdens.

• Organic and acquired growth. BBSI intends to expand the geographic footprint by following the expansion pattern of key clients. Recent staffing acquisitons also contribute to growth.

• Hands-on client approach. BBSI serves each client from a nearby branch office. Offices provide both HR and risk management professionals.

• Experienced management. Each top executive has at least a dozen years industry experience, with CEO Bill Sherertz in the industry for 37 years.

• Strong balance sheet, with $51 million of cash and investments and no debt as of September 30.

• Shares trade at 16% trailing FCF yield, 14x trailing P/E and 9x forward P/E.


• Operates in cyclical business, the recurring revenue nature of PEO contracts notwithstanding.

• BBSI’s workers’ comp loss reserves may be inadequate to cover claims. The company may suffer from adverse developments related to medical and administrative costs, inflation, and legislation.

• M&A integration. BBSI has acquired three firms with combined sales of $60 million since mid-2007 (5 offices in Utah, 2 in Colorado, 2 in Arizona).


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ASF 410 221 .1x 2.0x 9x 9x KELYA 432 433 .1x 0.7x 15x 24x MAN 2,166 2,506 .1x 1.9x 6x 9x BBSI 108 57 .2x 1.7x 10x 9x

MAJOR HOLDERS CEO Sherertz 26% │ Other insiders 2% │ Royce 13% │ Manulife 8% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Broadridge Financial Solutions (NYSE: BR) LAKE SUCCESS, NY, 516-472-5400 Services: Business Services, Member of S&P MidCap 400 http://www.broadridge.com


Price: $11.10 (as of 11/14/08) Month # of P/E FYE 6/30/08 8.2x 52-week range: $9.95 - $24.21 Latest Ago Ests P/E FYE 6/30/09 7.5x Market value: $1.6 billion This quarter $0.18 $0.20 3 P/E FYE 6/30/10 7.2x Enterprise value: $1.6 billion Next quarter 0.26 0.28 3 P/E FYE 6/30/11 n/a Shares out: 141.4 million FYE 6/30/09 1.48 1.48 3 EV / LTM revenue 0.7x

Ownership Data FYE 6/30/10 1.55 1.59 3 EV / LTM EBITDA n/a Insider ownership: 0% FYE 6/30/11 n/a n/a 0 EV / LTM EBIT 4.7x Insider buys (last six months): 0 LT EPS growth 10.0% 10.0% 1 P / tangible book 6.3x Insider sales (last six months): 3 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 75% Date Actual Estimate LTM EBIT yield 21% # of institutional owners: 599 11/6/08 $0.25 $0.20 LTM pre-tax ROC 85%


($ millions, except Fiscal Years Ended LTME FQE FQE 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


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BUSINESS OVERVIEW Broadridge provides technology outsourcing to the financial services industry and operates in three segments: Investor Communication Solutions processes and distributes proxy materials to equity and mutual fund investors and facilitates related vote processing. Securities Processing Solutions offers real-time transaction processing that automates the securities transaction lifecycle, including order capture and execution, trade confirmation, settlement, and accounting. Clearing and Outsourcing Solutions provides securities clearing, operations outsourcing, and margin lending. Seasonality is strongest in FQ4 (June), when the company processes and distributes the most proxy materials. FQ4 typically accounts for roughly one-half of annual EPS. With operations dating back to 1962, the company is the former brokerage services division of ADP. Broadridge was spun off in an IPO in March 2007. SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1Q09 % of revenue by segment:1 Investor communication 71% 72% 72% 67% Securities processing 25% 24% 24% 28% Clearing & outsourcing 4% 4% 4% 5% Revenue growth by segment: Investor communication 15% 11% 1% 5% Securities processing 6% 4% 1% 7% Clearing & outsourcing 31% 16% 2% -6% Total revenue growth2 13% 11% 3% 5% Pre-tax margin by segment: Investor communication 15% 15% 16% 7% Securities processing 28% 29% 27% 28% Clearing & outsourcing -31% -13% -5% -13% Other & currency -1% -2% -3% 0% Total pre-tax margin 16% 15% 15% 12% Total EBIT margin 16% 16% 16% 11% % of revenue by geography: U.S. 89% 89% 88% n/a Canada, U.K., other 11% 11% 12% n/a

1 Excludes "other" and foreign exchange. 2 FY08 revenue grew faster than segment revenue due to currency and other. INVESTMENT HIGHLIGHTS

• Large-scale operations. In FY08, Broadridge processed 74% of the outstanding shares in the U.S. in the performance of its proxy services; distributed over one billion investor communications in paper or electronic form; and processed $3 trillion daily in fixed income trades for large banks.

• Investor communication business (72% of FY08 revenue) leads industry in proxy solutions such as “notice and access.” FY09 product opportunities include “investor mailbox” and “investor network.” The company expects this segment to grow 2-4% in FY09, with fee-only revenue growth of 5-9%.

• Highly recurring revenue, as illustrated by fact that FY08 revenue was $2.2 billion while closed sales were “only” $149 million (up 19% y-y).

• CEO Richard Daly (55) has led Broadridge for 12+ years, including a decade during which the company was ADP’s Brokerage Services Group.

• Guiding for 0-3% revenue growth and non-GAAP EPS of $1.45-1.55 in FY09 vs. $1.42 in FY08, representing earnings growth of 2-9%. The guidance assumes EBIT margin of 15.9-16.8%, versus 16.2% in FY08, and 143 million shares out.

• Boosted quarterly dividend from $0.06 to $0.07 per share in August, and authorized repurchase of two million shares, albeit in order to “offset any share dilution” related to stock compensation.

• Anticipates to become “more acquisitive” and to look for acquisitions with “an international focus.”



• Weakness in customer base. Broadridge derives the vast majority of revenue from financial services clients, including brokerage firms and banks.

• FY09E EPS weighted to second half. “As a result of the timing of expense buildups” in FY08, the company expects EPS to decline in 1H09 and increase in 2H09, “with a strong exit rate.”

• Financial services consolidation could result in clients moving more operations in-house. The company’s top five clients comprised 22% of revenue in FY08 (largest client was 5-6% of sales).


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E DST 1,748 2,927 1.3x 6.6x 9x 8x FIS 3,011 5,392 1.4x n/m 10x 9x BR 1,570 1,639 .7x 6.3x 8x 7x

MAJOR HOLDERS CEO Daly <1% │ Other insiders 2% │ Barclays 6% │ Blue Ridge 5% │ Ziff 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.”

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Thanksgiving 2008


BSQUARE Corporation (Nasdaq: BSQR) Bellevue, WA, 425-519-5900 Technology: Software & Programming http://www.bsquare.com


Price: $2.93 (as of 11/14/08) Month # of P/E FYE 12/31/07 10.9x 52-week range: $2.30 - $6.91 Latest Ago Ests P/E FYE 1/0/00 n/a 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 Shares out: 10.1 million FYE 1/0/00 n/a n/a n/a EV / LTM revenue 0.3x

Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA 5.5x Insider ownership: 2% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 5.5x Insider buys (last six months): 2 LT EPS growth n/a n/a n/a P / tangible book 1.5x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 43% Date Actual Estimate LTM EBIT yield 18% # of institutional owners: 42 n/a n/a n/a LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 70 29 14 12 10 10 14 10 12 10 Total current assets 89 44 27 17 17 18 23 21 22 21 Intangible assets 18 1 0 0 0 0 0 0 0 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 Total current liabilities 14 16 11 6 8 7 8 8 8 8 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 17 21 11 6 8 8 8 9 9 9 Preferred stock 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



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BUSINESS OVERVIEW BSQUARE provides engineering services and production-ready software to the smart device market. Its software enables manufacturers of personal navigation devices, point-of-sale terminals, handheld data terminals and smart phones to get to market more quickly and cost effectively. SELECTED OPERATING DATA


9/30/08 % of revenue by type: Third-party software1 67% 61% 58% 55% Proprietary software 6% 5% 7% 5% Service 27% 34% 35% 40% Revenue growth by type: Third-party software1 11% 6% 13% 6% Proprietary software -2% -1% 62% -18% Service 11% 44% 24% 25% Total revenue growth 10% 16% 19% 11% % of revenue by geography: North America 95% 95% 94% 91% Asia and other 5% 5% 6% 9% Gross margin by type: Software 21% 21% 25% 22% Service 29% 31% 29% 33% Total gross margin 23% 24% 27% 26%

1 The resale of Microsoft Embedded operating systems and related products accounts for substantially all third-party software revenue. INVESTMENT HIGHLIGHTS

• Focuses on smart devices that run on Microsoft Windows operating systems, i.e., Windows CE, Windows XP Embedded and Windows Mobile.

• Acquisition of rights to Adobe Flash technology from NEC enables the company to support customers who are using Flash in non-Windows operating systems such as Linux or Symbian.

• Software and engineering services address device life cycle, including design, development, customization, quality assurance, and deployment. Customers include OEMs, ODMs, silicon vendors, peripheral vendors, and enterprises that develop, market and distribute smart devices.

• Itends to grow proprietary software revenue through product development and royalty-bearing service contracts. Proprietary software enjoys gross margins of close to 90%, while third-party software is associated with gross margins in the mid teens.

• Positive business trend due to new service deals, including a large non-Microsoft deal. The company has also scored several SDIO (secure digital input output) design wins, with royalties tied to customer shipments. In addition, customer interest in OMAP technology should result in incremental revenue. Services backlog and pipeline remain strong.

• Brian Crowley (47) became CEO in 2003 after serving as VP of product development for a year. He was previously VP of engineering and VP of marketing at DataChannel, and served in various roles at other technology companies.

• Posted solid Q3 and guided for 5-10% sequential revenue growth in Q4. Service revenue rose 60% y-y in Q3, driven in part by 70-person incremental staffing on a project with Ford. Excluding Ford, the company did see “some softness in demand.”

• NOL of $65+ million, with entire $30 million deferred tax asset off the balance sheet.

• Stock price implies 9% trailing FCF yield and 8x trailing P/E (no EPS estimates available).


• Dependent on Microsoft’s success in operating systems for smart devices. The vast majority of BSQUARE’s business is tied to adoption of the Windows operating system by device makers. If Windows’ market share declines, BSQUARE would be negatively affected. The company must also maintain its OEM distribution deal with Microsoft.

• Windows-based embedded software market is competitive. Participants include engineering service firms such as Intrinsyc, Vanteon, Teleca, and Wipro; ODMs, particularly in Taiwan; contract manufacturers; and Microsoft Embedded operating system distributors such as Arrow and Avnet.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ARW 1,737 2,752 .2x 1.0x 5x 7x AVT 2,263 3,095 .2x 1.1x 6x 6x WIT 10,345 10,211 2.2x 6.7x 13x 11x BSQR 30 20 .3x 1.5x n/a n/a

MAJOR HOLDERS CEO Crowley 3% │ Other insiders 8% │ S Squared 10% │ Bjurman Barry 10% │ H Partners 9% │ RenTech 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


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


Price: $3.93 (as of 11/14/08) Month # of P/E FYE 12/29/07 3.9x 52-week range: $2.42 - $17.74 Latest Ago Ests P/E FYE 12/31/08 393.0x 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 Shares out: 260.3 million FYE 12/31/08 0.01 0.04 8 EV / LTM revenue 0.6x



($ millions, except Fiscal Years Ended LTME FQE FQE 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 Total current assets 635 759 842 1,070 1,276 1,312 1,530 1,328 1,520 1,328 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 Total current liabilities 472 504 482 549 606 548 786 725 469 725 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Cadence provides electronic design automation (EDA) software and services to assist in the design, verification, and preparation of semiconductors for manufacturing. Solutions include digital design (convert high-level IC specification into physical blueprint); custom design for ICs designed at the transistor level; system interconnect; functional verification (ensures correctness of high-level logical design specification); and design for manufacturing (ensures that ICs will be manufacturable with high yields). SELECTED OPERATING DATA


9/30/081 % of revenue by type: Products 64% 66% 68% n/a Maintenance 26% 25% 24% n/a Services 9% 9% 8% n/a Revenue growth by type: Products 17% 15% 12% n/a Maintenance 157% 4% 5% n/a Services -62% 7% -7% n/a ∆ revenue 11% 12% 9% n/a ∆ backlog (period end) 6% 6% 5% n/a % of revenue by product group: Functional verification 21% 24% 24% n/a Digital IC design 28% 24% 27% n/a Custom IC design 25% 27% 27% n/a System interconnect design 8% 9% 8% n/a Design for manufacturing 9% 7% 6% n/a Services and other 9% 9% 8% n/a % of revenue by geography: Americas 48% 54% 48% n/a EMEA 18% 19% 18% n/a Japan and Asia 34% 27% 34% n/a EBIT margin 9% 15% 20% n/a D&A as % of revenue 14% 10% 8% n/a Capex as % of revenue 6% 5% 5% n/a

1 The 10-Q for Q3 was not filed on time due to an accounting restatement. INVESTMENT HIGHLIGHTS

• A leading provider of EDA solutions in major horizontals, including systems, semiconductors, and silicon (ASIC vendors, foundries, FPGA firms).

• Cadence solutions help semiconductor makers address two key trends: increasing silicon capacity (Moore’s Law) and the convergence of multiple applications in a wide range of digital devices.

• Target verticals are computers, communications and consumer electronics. These industries globally account for 75% of electronics equipment revenue and 90% of semiconductor revenue.

• Projecting cash from operations of $175 million in 2008 and $250 million in 2009. Cash flow metrics are particularly relevant in the short term, as Cadence is moving to a higher ratable license mix, which is affecting GAAP-basis comparisons.

• 12% workforce and opex cuts to save $150+ million (2H08 expected charge of $65-70 million).

• Net stock repurchases of $455 million from 2005-07, with $900 million authorized as of mid-August.

• CEO Mike Fister (53) joined in 2004 from Intel, where he had served from 1987, most recently as GM of enterprise platforms. William Porter (53) joined Cadence in 1994 and became CFO in 1999.



• Q3 results postponed due to premature revenue recognition in 1H08 (will require restatement).

• Guiding for non-GAAP EPS of $0.01-0.05 and GAAP loss of $0.50-0.54 per share on revenue of $1.1 billion (down 30% y-y) in 2008. Driving the decline in operating performance are a challenging business environment and a shift to ratable licenses.

• Transition to 90% ratable license mix will hurt near-term revenue, due to revenue recognition over time rather than up front (as is the case with perpetual licenses). Ratable licenses will result in more predictable revenue and earnings over time.

• Offered $1.6 billion for Mentor in June; quit pursuit in August. Cadence cited the ability to offer a broader portfolio as rationale for the $16 per share cash offer. Cadence withdrew the bid after being rebuffed and upped its buyback plan by $500 million. (Mentor recently traded at $5 per share.)


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E 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 CDNS 1,023 864 .6x 2.0x 393x 66x

MAJOR HOLDERS CEO Fister 2% │ Other insiders 2% │ Franklin 10% │ Wellington 9% │ Barclays 7% │ Lord Abbett 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


CF Industries Holdings, Inc. (NYSE: CF) Deerfield, IL, 847-405-2400 Basic Materials: Chemical Manufacturing, Member of S&P 500 http://www.cfindustries.com



Ownership Data FYE 12/31/09 15.06 21.96 9 EV / LTM EBITDA n/a Insider ownership: 1% FYE 12/31/10 12.25 18.93 3 EV / LTM EBIT 1.9x Insider buys (last six months): 5 LT EPS growth 3.5% n/a 1 P / tangible book 1.8x Insider sales (last six months): 17 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 90% Date Actual Estimate LTM EBIT yield 52% # of institutional owners: 982 10/27/08 $0.82 $3.57 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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


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BUSINESS OVERVIEW CF provides nitrogen/phosphate fertilizers and operates the largest nitrogen fertilizer complex in North America. It also conducts phosphate mining and manufacturing in Central Florida. It distributes fertilizer products through terminals and warehouses in the Midwest. 100% of nitrogen and 75%-80% of phosphate fertilizer output is sold in the U.S. SELECTED OPERATING DATA


9/30/08 % of revenue by segment: Nitrogen 77% 75% 74% 66% Phosphate 23% 25% 26% 34% Revenue growth by segment: Nitrogen 15% 1% 34% 34% Phosphate 16% 11% 40% 95% Total revenue growth 17% 3% 36% 50% % of revenue by product type: Ammonia 22% 22% 20% 13% Urea 32% 32% 32% 32% UAN1 22% 21% 21% 21% DAP2 18% 20% 21% 29% MAP3 5% 5% 5% 5% Gross margin by segment: Nitrogen 11% 6% 22% 26% Phosphate 8% 10% 31% 39% Total gross margin 11% 7% 24% 30% DD&A as % of revenue 5% 5% 3% 3% Capex as % of revenue 4% 3% 4% 4% % of revenue by geography: U.S. 83% 82% 84% n/a Canada 10% 10% 10% n/a Export 7% 8% 6% n/a % of revenue by customer: CHS 29% 26% 24% n/a Growmark 13% 12% 10% n/a ConAgra 8% 11% 9% n/a Others 50% 51% 57% n/a

1 Urea ammonium nitrate. 2 Diammonium phosphate. 3 Monoammonium ph. INVESTMENT HIGHLIGHTS

• Fertilizer demand driven by Ethanol production and grain demand. CF’s nitrogen fertilizer ASP rose 65% and phosphate fertilizer ASP rose 138% in Q3. A likely increase in spring 2009 corn acreage bodes well for near-term (nitrogen fertilizer) prices.

• Extensive U.S. Corn Belt distribution system, with 26% market share of nitrogen and 19% share of phosphate fertilizers. CF is self-sufficient in phosphate rock, with 24 years of proven reserves.

• Planned capex: (1) gasification at Donaldsonville would reduce natural gas dependence by utilizing low-cost petcoke/coal ($1+ billion cost); (2) early-stage development of nitrogen complex in Peru ($1+ billion); (3) extract uranium from phosphate fertilizer production at Plant City ($200+ million)

• Repurchased $500 million of stock in Q4 (8.5 million at $59 per share), reducing shares by 15%.

• Net cash of $1.3 billion as of September 30. The company has generated LTM FCF of $503 million.



• At cyclical peak? CF is a commodity producer dependent on the gap between fertilizer prices and input costs. Selling prices have benefited from transitory factors, including a Chinese export tax, Ethanol demand, and a lack of capacity. In Q3, nitrogen volumes fell 5% and phosphate fell 8%.

• Future of Ethanol may depend mostly on political winds, a risky prospect for the fertilizer industry. Ethanol has driven recent corn demand.

• Input price risk. While CF sells forward 70%+ of nitrogen fertilizer production and hedges natural gas costs, hedging is a temporary reprieve. Sulfur costs have jumped, putting phosphate margins at risk.

• U.S. comparative advantage hardly in fertilizers. Countries with unskilled labor and stranded natural gas resources ought to produce nitrogen fertilizers.

• Explosive stock price fed hubris. An investor asserted, “maybe the first time in a long time you are going to be able to make money through the cycle…” CF CEO: “I wish I was as confident as you are that we will be profitable through the cycle.”


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AGU 5,157 7,534 .8x 2.9x n/a n/a MON 40,603 40,806 3.6x 8.6x 16x 14x MOS 14,425 13,725 1.1x 2.5x 3x 3x POT 21,064 23,575 2.6x 4.1x n/a n/a TRA 1,665 1,535 .6x 1.8x 3x 4x CF 3,126 1,978 .5x 1.8x 4x 4x

MAJOR HOLDERS CEO Wilson 2% │ Other insiders <1% │ Goldman Sachs 9% │ Wellington 6% │ D.E. Shaw 5% │ Barclays 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Coach, Inc. (NYSE: COH) New York, NY, 212-594-1850 Consumer Cyclical: Apparel/Accessories, Member of S&P 500 http://www.coach.com



Ownership Data FYE 6/30/10 2.34 2.44 17 EV / LTM EBITDA n/a Insider ownership: 1% FYE 6/30/11 2.79 2.89 6 EV / LTM EBIT 4.3x Insider buys (last six months): 5 LT EPS growth 14.3% 14.9% 7 P / tangible book 4.9x Insider sales (last six months): 1 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 94% Date Actual Estimate LTM EBIT yield 23% # of institutional owners: 1357 10/21/08 $0.44 $0.43 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Intangible assets 22 22 23 249 238 224 259 263 0 263 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 Total current liabilities 159 162 170 266 342 408 451 461 402 461 Long-term debt 4 4 3 3 3 3 3 2 3 2 Total liabilities 180 191 262 314 438 539 758 760 672 760 Preferred stock 0 0 0 0 0 0 0 0 0 0 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


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BUSINESS OVERVIEW Coach is a leading American marketer of handbags (62% of FY08 sales), women’s and men’s accessories (29%), and related products (9%). Coach is sold through company-owned stores (80% of sales) and department stores (20%). U.S. and Japan account for 75% and 19% of global sales, respectively. The business model features 74% gross margin and 34% operating margin (based on FY09 guidance). The compay operates on a June fiscal year end, with strongest seasonality in FQ2. Coach was founded in 1941. SELECTED OPERATING METRICS

FYE June 30 2006 2007 2008 2009E1 Revenue growth 23% 28% 22% 10% Recurring EPS growth 38% 42% 22% 10% North America metrics: Retail stores2 218 259 297 +40 Change (y-y) 13% 19% 15% 13% Factory stores3 86 93 102 +6 Change (y-y) 5% 8% 10% 6% Same-store sales growth 22% 10% 3-4% Japan metrics: Locations4 118 137 149 +10-15 Change (y-y) 15% 16% 9% -3% Sales growth5 19% 14% 5-10% Sales growth by channel: Direct to consumer6 23% 30% 21% n/a Indirect7 23% 20% 25% n/a

1 Based on company guidance provided on October 21. 2 Avg. square footage of North American retail stores was 2,678 in FY08. 3 Avg. square footage of North American factory stores was 4,053 in FY08. 4 Avg. square footage of Japanese locations was 1,745 in FY08. 5 Based on constant-currency sales results. 6 Direct includes retail and factory stores in N.A./Japan (80% of FY sales). 7 Indirect includes U.S. and international wholesale (20% of FY sales). INVESTMENT HIGHLIGHTS

• Leading U.S. fine accessories brand. Coach has grown quickly by combining luxury and relative affordability in handbags and other accessories.

• Gaining market share in all geographies. Coach enjoys #1 position in U.S., with bag sales recently growing 15% vs. 5% for the category. Coach is #2 in Japan with 13% share (up 200 bps y-y).

• Attractive store economics. New retail and factory stores have payback periods of less than two years and less than one year, respectively.

• Growing aggressively in Greater China. Coach expects to open 50 new locations over the next five years, aiming to boost sales from $30 million (3% market share) to $250 million (10% share) by FY13. Strategy will be dilutive by $0.03-$0.04 in FY09.

• Flexible sourcing model. Production is outsourced, with no vendor providing more than 13% of units. New designs can be sourced quickly: 68% of FY08 sales came from same-year product introductions.

• One of the best managements in retail. CEO Lew Frankfort (61) has been with Coach for 25+ years and has built an impressive track record.

• Repurchased 40 million shares for $1.3 billion (average price of $34 per share) in FY08, and another 11 million shares at $29 per share in 1Q09.



• Slowdown. FY09 guidance calls for revenue of $3.5 billion (+10% y-y) and EPS of $2.25 (+10% y-y), sharp deceleration from 20% constant-currency revenue growth and 17% EPS growth in FY08.

• “Very difficult” environment. Management has noted “weak traffic trends” in retail and department stores. The company may experience a reversal of the trend of higher-end consumers buying more handbags per year than in the past. While pricing actions may prevent a reversal, they will hurt gross margin. Rising input costs are another concern.

• Fashion risk. The company is exposed to changing fashion trends. Inventory levels appear adequate.

• Highly relevant today, but does it have Tiffany-like staying power? A high-end jewelry brand may have a longer “shelf life” than a similar brand in handbags. Coach’s growth also raises the concern of brand overexposure (management believes North American can “easily support” 500 stores).


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ANN 363 256 .1x 0.7x 8x 10x KCP 152 79 .2x 0.8x n/m 37x RL 4,160 4,090 .8x 3.4x 10x 10x TIF 2,519 3,006 1.0x 1.4x 7x 7x COH 5,296 4,889 1.5x 4.9x 7x 7x

MAJOR HOLDERS CEO 3% │ Other insiders 1% │ Barclays 5% │ Jennison 2% │ Glenview 1% │ Gardner Lewis 1% │ Highside 1% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


COMSYS IT Partners, Inc. (Nasdaq: CITP) Houston, TX, 713-386-1400 Services: Business Services http://www.comsys.com


Price: $4.14 (as of 11/14/08) Month # of P/E FYE 12/30/07 2.5x 52-week range: $3.76 - $17.57 Latest Ago Ests P/E FYE 12/31/08 4.1x Market value: $84 million This quarter $0.15 $0.17 2 P/E FYE 12/31/09 10.1x Enterprise value: $153 million Next quarter 0.09 0.14 2 P/E FYE 12/31/10 n/a Shares out: 20.4 million FYE 12/31/08 1.00 0.91 2 EV / LTM revenue 0.2x

Ownership Data FYE 12/31/09 0.41 0.69 2 EV / LTM EBITDA 3.5x Insider ownership: 9% FYE 12/31/10 n/a n/a 0 EV / LTM EBIT 4.3x Insider buys (last six months): 0 LT EPS growth 15.0% 15.0% 1 P / tangible book n/m Insider sales (last six months): 2 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 75% Date Actual Estimate LTM EBIT yield 23% # of institutional owners: 219 11/5/08 $0.30 $0.20 LTM pre-tax ROC 85%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 18 23 0 1 3 2 2 2 2 2 Total current assets 135 128 66 139 177 195 197 247 201 247 Intangible assets 478 104 81 161 168 164 184 188 163 188 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 Total current liabilities 62 111 116 122 153 183 189 219 178 219 Long-term debt 234 180 423 156 137 94 67 69 68 69 Total liabilities 336 300 541 287 296 280 258 292 249 292 Preferred stock 0 0 0 0 0 0 0 0 0 0 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


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BUSINESS OVERVIEW Comsys is the 6th-largest IT staffing company in the U.S. with 52 offices. Service offerings include contingent and direct hire placement of IT professionals (76% of revenue) as well as a wide range of technical services and solutions addressing requirements across the enterprise (19% of revenue). Tapfin Process Solutions (5% of revenue) delivers critical management solutions across the resource spectrum from contingent workers to outsourced services. Comsys was formed via the merger of Comsys Holding and Venturi Partners in 2004. CEO Larry Enterline (55) was formely CEO of Venturi Partners. The company has 5,000 consultants and a proprietary database of 650,000 candidates. SELECTED OPERATING METRICS


9/30/08 ∆ revenue 51% 11% 1% -2% ∆ consultants (period end) 2% 0% 0% -5% Selected items as % of revenue: EBIT 3.4% 4.7% 5.8% 4.6% D&A 1.4% 1.2% 0.9% 1.1% Capex 1.1% 0.4% 0.4% 0.9%


• $23 billion IT staffing industry has experienced high single-digit growth in recent years. The industry remains fragmented, with top ten players holding 44% share. Comsys is #6, behind TEKsystems (Allegis Group), Volt Services, Ajilon (Adecco), Sapphire (Vedior), and MPS; and ahead of Kforce, Sapient, Robert Half, and Spherion.

• Favorable long-term prospects of IT staffing. Drivers include need for productivity improvement, fast pace of technological change, transitional nature of assignments, strong value proposition of “expertise on demand,” and changing industries.

• Diverse capabilities in staffing (76% of revenue), including project management, business analysis, network infrastructure services, application development, and quality assurance and testing.

• Branch office-driven structure, with localized P&L accountability, sales and recruiting teams.

• Managed solutions (19% of revenue) complement staffing and serve to entrench Comsys with clients. Solutions provided through six specialized practices, including ERP and business intelligence.

• Process solutions (5% of revenue) enable clients to outsource business processes related to resource fulfillment. Comsys is a leading provider of recruitment process outsourcing (RPO) in the Northeastern U.S., and the fifth-largest provider of vendor management services (VMS) in the U.S.

• Organic growth complements M&A, with new offices opened in San Antonio, San Diego, North L.A., Cincinnati, and San Juan in recent years.

• NOL of roughly $200 million should shield company from income taxes for many years.



• In the eye of the storm? Comsys’ IT staffing services are highly cyclical and may suffer major demand erosion in the current downcycle.

• Revenue likely down 3% and EPS down 39-42% in 2008, with guided revenue of $719-724 million and EPS of $0.96-1.01 ($0.12-0.17 in Q4).

• 30% of revenue from financial services, making Comsys vulnerable to declines in IT spending.

• Acquired six businesses since Venturi merger in 2004; appears likely to continue pursuing accretive deals (SVP David Kerr was an M&A partner at KPMG). While Comsys focuses on tuck-in deals, integration is a risk in staffing. In 2005, gross profit was impacted by integration-related disruptions.

• Moderate returns associated with M&A. Prices paid imply moderate ROIC from acquisitions.

• No tangible book, with equity of $165 million and intangibles of $188 million as of September 30, implying limited downside protection.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E CDI 199 123 .1x 0.8x 8x 11x KFRC 262 278 .3x 3.4x 10x 14x MAN 2,166 2,506 .1x 1.9x 6x 9x MPS 578 523 .2x 2.3x 8x 15x RHI 2,762 2,392 .5x 3.3x 11x 25x SFN 140 211 .1x 0.5x 9x 12x CITP 84 153 .2x n/m 4x 10x

MAJOR HOLDERS CEO Enterline 2% │ Other insiders 8% │ Amalgamated Gadget 20% │ Wachovia 18% │ Barclays 6% │ Links 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


CTC Media, Inc. (Nasdaq: CTCM) Moscow, Russia, 7-495-785-6333 Services: Broadcasting & Cable TV http://www.ctcmedia.ru


Price: $4.45 (as of 11/14/08) Month # of P/E FYE 12/31/07 5.2x 52-week range: $3.47 - $31.75 Latest Ago Ests P/E FYE 12/31/08 3.7x Market value: $677 million This quarter $0.35 $0.57 1 P/E FYE 12/31/09 3.5x Enterprise value: $747 million Next quarter 0.16 n/a 1 P/E FYE 12/31/10 2.8x Shares out: 152.2 million FYE 12/31/08 1.19 1.24 8 EV / LTM revenue 1.2x



($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments n/a 30 15 177 307 54 249 54 Total current assets n/a 120 92 279 438 243 371 243 Intangible assets n/a 143 138 156 201 793 198 793 Total assets n/a 293 274 485 695 1,112 624 1,112 Short-term debt n/a 40 4 0 0 68 0 68 Total current liabilities n/a 83 45 46 58 182 70 182 Long-term debt n/a 20 37 0 0 57 0 57 Total liabilities n/a 118 95 64 83 389 94 389 Preferred stock n/a 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW CTC Media is a TV broadcaster in Russia. It owns the CTC TV network, whose signal is carried by 350 affiliate stations, including 21 owned stations; the Domashny TV network, whose signal is carried by 230 affiliate stations, including 13 owned stations; and the smaller DTV television network. The company also owns two production firms and operates Channel 31 in Kazakhstan and a TV company in Uzbekistan. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment:1 CTC network 71% 71% 68% 67% CTC station group 22% 20% 20% 15% Domashny network 4% 6% 8% 10% Domashny station group 3% 3% 4% 3% Revenue growth by segment: CTC network 46% 57% 21% 39% CTC station group 37% 44% 29% 17% Domashny network nm 121% 89% 78% Domashny station group 163% 49% 51% 6% Total revenue growth 53% 56% 27% 46% EBIT margin by segment: CTC network 50% 53% 52% 48% CTC station group 54% 64% 59% 58% Domashny network -78% -22% 14% 24% Domashny station group -83% -82% -46% 7% Production and other -3% -5% -6% -5% Total EBIT margin 38% 42% 41% 38% Selected items as % of revenue: Capex 3% 1% 1% 1% D&A 6% 5% 6% 2% Acquisitions of media rights 41% 36% 37% 46% Amortization of media rights 33% 34% 35% 38%

1 YTD revenue breakdown does not show contribution from Channel 31 (acquired in February), DTV (April), and production companies Costafilm and Soho Media (April), which combined accounted for 6% of YTD revenue. INVESTMENT HIGHLIGHTS

• $9 billion Russian advertising market (6th-largest in Europe), up from $1 billion in 2000 (20th). Ad spending is expected to grow 26% (in dollars) in 2008, with TV ads growing 32%.2 Ad spending is 0.8% of Russian GDP, compared to 0.9% in the EU. Russian TV CPM is $2, versus $9 in Germany.

• Strong six-year track record, having grown from a single free-to-air channel to a public company with five channels in three countries and production assets (25% of fall ‘08 programming produced in-house). The company continues to grow at or above the growth rate of the Russian advertising market.

• Anton Kudryashov (40) became CEO in August, replacing Alexander Rodnyansky who remains president. Kudryashov was one of the founding partners of Moscow-based Renaissance Capital.

2 Source: Russian Assoc. of Comm. Agencies, Video Int’l, Company.

• CTC is fourth most-watched channel in Russia, with 9% audience share, behind Channel One (21%), Rossiya (18%) and NTV (13%).3 The company’s Channel 31 is the second most-watched channel in Kazakhstan, behind Channel One.3

• Revenue up 46% YTD, driven by (1) higher ad rates, due to a decrease in broadcast ads permitted in Russia effective January; (2) acquisitions, including DTV in April and regional stations in 2H07; and (3) appreciation of the ruble, which has added 760 bps to growth YTD. Organic revenue is up 36% YTD.

• Guiding for revenue growth of 33-40% to $630-660 million in 2008. Adjusted EBITDA margin is expected to range from 40-44%. Previous guidance called for revenue growth of 38-48% to $650-500 million and adjusted EBITDA margin of 42-46%.



• Reduction in 2008 guidance on October 30 reflects “unfavorable macroeconomic outlook in Russia.”

• Political risk related to Russia, including fragile state of media independence. It is conceivable the government could drastically reshape the Russian media landscape in the future, hurting shareholders.

• Strategic shareholder control. Top holders include Modern Times Group (40%), Alfa Group (26%) and Access Industries (6%), leaving a float of 28%. U.S. minority shareholders may have little recourse in the case of potential abuses by majority holders.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E CETV 689 1,559 1.5x n/m n/a n/a EVC 61 416 1.9x n/m n/m 10x TV 8,480 8,490 2.4x 3.5x 11x 10x CTCM 677 747 1.2x n/m 4x 4x

MAJOR HOLDERS Insiders 67% (including MTG Russia 39% and Alfa CTC 26%) │ Access Industries 6% │ FMR 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


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



Ownership Data FYE 12/31/09 0.68 0.98 6 EV / LTM EBITDA 2.3x Insider ownership: 4% FYE 12/31/10 0.86 n/a 1 EV / LTM EBIT 2.7x Insider buys (last six months): 0 LT EPS growth n/a n/a 0 P / tangible book 2.3x Insider sales (last six months): 17 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 94% Date Actual Estimate LTM EBIT yield 37% # of institutional owners: 516 11/6/08 $0.28 $0.29 LTM pre-tax ROC 83%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 4 16 25 37 36 5 16 43 6 43 Total current assets 42 56 72 81 83 75 115 157 103 157 Intangible assets 32 28 24 20 17 106 101 111 102 111 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 Total current liabilities 159 43 41 41 43 57 81 82 74 82 Long-term debt 0 69 57 50 45 78 38 35 50 35 Total liabilities 169 127 119 116 117 170 150 141 156 141 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Darling provides rendering, recycling and recovery services to the food industry. It operates in two segments: Rendering collects and processes animal by-products from butchers, grocery stores, food service, and meat processors, converting these by-products into oils and proteins used by the agricultural, leather and oleo-chemical industries. Restaurant Services collects used cooking oil from food service establishments and recycles it into products such as high-energy animal feed and industrial oil. The segmet also provides grease trap servicing and includes the NSC subsidiary. NSC schedules services such as fat and bone and used cooking oil collection as well as trap cleaning. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: Rendering 64% 70% 73% 73% Restaurant services 36% 30% 27% 27% Revenue growth by segment: Rendering na 46% 64% 41% Restaurant services na 8% 42% 41% Total revenue growth -4% 32% 59% 40% EBIT margin by segment: Rendering 10% 11% 17% 20% Restaurant services 13% 11% 19% 18% Corporate -8% -9% -11% -11% Total EBIT margin 4% 3% 8% 11% D&A as % of revenue 5.1% 5.1% 3.6% 2.6% Capex as % of revenue 6.9% 2.9% 2.4% 3.2% % of revenue by geography: Domestic 75% 72% 73% n/a International 25% 28% 27% n/a


• By-product recycling is critical to food supply chain. Meat packers, poultry processors and retail stores generate 50 billion pounds annually of inedible by-products, which need to be disposed of in an environmentally sound way. Macro factors include finished product prices, energy costs and raw material supply (number of cattle slaughtered grows at a low- to mid-single digit annual rate).

• Food industry by-products have wide range of uses. Tallow (animal fat) can be recycled into soap, bio-fuels, pet food, and animal feed; meat and bones into hog food, poulty feed and pet food; grease into animal feed and bio-fuels; and hides into leather.

• Largest U.S. provider of rendering, recycling and recovery, with network of 39 processing facilities and 38 reload/transfer stations nationwide. Darling operates a fleet of 1,000 trucks to collect raw materials from 115,000 supplier locations.

• Pays for roughy 55% of raw material volume based on published finished product prices. Remaining volume is either fixed price, free of cost to Darling, or generates revenue to the company. Darling sells finished products worldwide.

• Demand for protein meal and oil remain strong, continuing a favorable outlook for Darling.

• Well positioned to capitalize on biofuel adoption. Darling supplies 13% of U.S. fats and greases, a lower-cost feedstock than vegetable oils.

• Randy Stuewe (45) joined as chairman and CEO in 2003, after serving as ConAgra EVP for six years and in various roles with Cargill for twelve years.



• Dependent on finished product prices, which rose more than 50% in 2007 and are up substantially in 2008. The finished product commodities include meat and bone meal (MBM), bleachable fancy tallow (BFT) and yellow grease (YG); their prices are quoted daily on the Jacobsen index.

• Vulnerable to increases in natural gas and diesel fuel prices. The company consumes natural gas to operate boilers to generate steam to heat raw materials. It also consumes diesel fuel to operate tractors and trucks used to collect raw materials.

• CEO Stuewe sold one-quarter of holdings in May at ~$14.50 per share, representing his first sale of stock in more than five years.

COMPARABLE PUBLIC COMPANY ANALYSIS Darling does not have direct public comps. Private comps in rendering and restaurant services are Baker Commodities in the West and Griffin Industries in Texas and the Southeast. Restaurant Technologies competes in restaurant services. MAJOR HOLDERS CEO Stuewe 1% │ Other insiders 3% │ Goldman Sachs 7% │ Fidelity 7% │ Barclays 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


DepoMed, Inc. (Nasdaq: DEPO) Menlo Park, CA, 650-462-5900 Health Care: Biotechnology & Drugs http://www.depomedinc.com


Price: $1.64 (as of 11/14/08) Month # of P/E FYE 12/31/07 1.6x 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 Insider buys (last six months): 0 LT EPS growth n/a n/a 0 P / tangible book 2.7x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 55% Date Actual Estimate LTM EBIT yield 96% # of institutional owners: 142 10/30/08 -$0.12 -$0.15 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 5 20 44 18 59 32 54 85 30 85 Total current assets 6 21 45 19 63 48 63 96 38 96 Intangible assets 0 0 0 0 0 0 0 0 0 0 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 Total current liabilities 5 9 4 4 8 22 14 16 15 16 Long-term debt 6 9 10 10 0 0 0 7 0 7 Total liabilities 10 18 13 15 60 80 35 54 37 54 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



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BUSINESS OVERVIEW Depomed is a specialty pharma company with two approved products on the market and other product candidates in the pipeline. GLUMETZA is approved for use in adults with type 2 diabetes and promoted by Santarus in the U.S. ProQuin XR is approved in the U.S. for the once-daily treatment of uncomplicated urinary tract infections and is being marketed by Watson Pharma. Product candidate Gabapentin GR is currently in clinical development for the treatment of neuropathic pain and menopausal hot flashes. DRUG PIPELINE OVERVIEW

Preclinical Ph. 1 Ph. 2 Ph. 3 Marketed GLUMETZA1 U.S. / Canada Proquin XR2 U.S. Gabapentin GR3 Phase 3 ongoing Gabapentin GR4 Phase 3 ongoing Omeprazole GR5 Levodopa6 Proof of concept Undisclosed7 1 For Type 2 diabetes. Canadian rights held by Biovail. 2 For uncomplicated urinary tract infections. Sold in U.S. and Europe. 3 For postherpetic neuralgia. 4 For menopausal hot flashes. 6 For Parkinson’s disease. 5 For nighttime acid breakthrough. 7 Two undisclosed compounds.


• Differentiated drug delivery technology. The company utilizes proprietary AcuForm delivery technology to improve existing oral medications, allowing for extended, controlled release of medications to the upper gastrointestinal tract. Benefits include convenience of once-daily administration, improved treatment tolerability and enhanced compliance and efficacy.

• Litigation-tested IP. DepoMed’s AcuForm patents expire in 2016-21, with numerous applications pending. The company has won two separate settlements amounting to a total of $28 million.

• Superior development model. AcuForm provides new chemical entity (NCE)-like differentiation to existing pharmaceuticals (KCEs). Development timeframes and costs range from 4-6 years and $20-$40 million vs. 8+ years and $1+ billion for NCEs.

• GLUMETZA targets large market. Metformin for diabetes is 5th most prescribed U.S. drug with 49 million transcriptions. Depomed has so far targeted only 13K out of 73K metforming prescribers.

• Strong cash position. Depomed had net cash of $76 million as of September 30, 2008, providing ample liquidity to pursue pipeline development.

• Stock price implies 36% trailing FCF yield and 4x trailing P/E (forward loss projected).

INVESTMENT RISKS & CONCERNS • Losing money in recurring operations. Depomed

has appeared as cheap on an earnings basis due to non-recurring gains. The company expects to continue to post adjusted operating losses in the foreseeable future.

• Failed Phase 3 trial for Gabapentin GR. Depomed announced in July 2007 that the drug candidate failed to meet the primary efficacy endpoint in a trial for postherpetic neuralgia (PHN).

• New GLUMETZA partner yet to be identified. A promotion agreement with King Pharmaceuticals was terminated in October 2007, following a strategic shift by King. Depomed has yet to identify a new marketing partner for GLUMETZA.

• Limited in-house sales and marketing resources. The company has engaged a contract sales organization to promote GLUMETZA on a temporary basis, as Depomed has no sales force and limited marketing and sales staff.

• Dependent on Watson Pharma for ProQuin XR. Depomed depends on Watson to successfully promote the drug. The company’s prior marketing partner for ProQuin XR, Esprit Pharma, was unable to successfully commercialize the drug.

• Should not be on “Magic Formula” list. Depomed became an MF selection due to one-time items. It has recorded $42 million of termination fees and litigation settlement proceeds over the past year.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BMY 38,651 37,475 1.8x 5.6x 12x 10x TEVA 35,015 36,420 3.4x 7.8x 15x 14x DEPO 84 19 .6x 2.7x n/m n/m

MAJOR HOLDERS CEO Smith <1% │ Other insiders 5% │ Third Point 15% │ Tang 10% │ JP Morgan 10% │ Biovail 10% │ Polygon 6% RATINGS VALUE Intrinsic value materially higher than market value? N/A MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Dell Inc. (Nasdaq: DELL) Round Rock, TX, 512-338-4400 Technology: Computer Hardware, Member of S&P 500 http://www.dell.com


Price: $10.89 (as of 11/14/08) Month # of P/E FYE 2/1/08 8.3x 52-week range: $8.85 - $28.40 Latest Ago Ests P/E FYE 1/31/09 8.0x Market value: $21.3 billion This quarter $0.32 $0.34 24 P/E FYE 1/31/10 7.6x Enterprise value: $14.3 billion Next quarter 0.34 0.37 22 P/E FYE 1/31/11 8.0x Shares out: 1,958.4 million FYE 1/31/09 1.36 1.41 15 EV / LTM revenue 0.2x



($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 3,914 4,638 5,152 9,807 9,070 10,298 7,972 9,033 11,862 9,033 Total current assets 7,877 8,924 10,633 16,897 17,794 19,939 19,880 21,776 22,214 21,776 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 Total current liabilities 7,519 8,933 10,896 14,136 16,173 17,791 18,526 18,187 17,248 18,187 Long-term debt 520 506 505 505 625 569 362 1,840 378 1,840 Total liabilities 8,841 10,597 13,031 16,730 19,205 21,196 23,732 25,501 22,010 25,501 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Dell is the #1 supplier of PCs in the U.S. and the #2 supplier globally, behind HP. Product categories include desktop PCs, servers, networking, software, mobility, peripherals, and storage. The company was founded in 1984 by Michael Dell. SELECTED OPERATING DATA

FYE February 1 2006 2007 2008

YTD8/1/08

% of revenue by product group: Desktop PCs 39% 35% 32% 30% Mobility 26% 27% 29% 30% Software and peripherals 15% 16% 16% 17% Servers and networking 10% 10% 11% 10% Enhanced services 8% 9% 9% 9% Storage 3% 4% 4% 4% Revenue growth by product group: Desktop PCs 2% -8% -1% -3% Mobility 20% 8% 13% 24% Software and peripherals 26% 8% 10% 17% Servers and networking 12% 7% 12% 4% Enhanced services 35% 20% 5% 13% Storage 38% 21% 8% 13% Total revenue growth 14% 3% 6% 10% % of revenue by segment: Americas — Business 51% 51% 51% n/a Americas — Consumer 14% 12% 10% n/a EMEA 23% 24% 25% n/a Asia Pacific and Japan 12% 13% 14% n/a EBIT margin by segment: Americas — Business 10.4% 8.1% 8.2% n/a Americas — Consumer 5.7% 1.9% -0.9% n/a EMEA 6.8% 4.3% 6.6% n/a Asia Pacific and Japan 8.0% 4.5% 5.5% n/a Total EBIT margin 7.9% 5.3% 5.6% 5.3%


• Continues to gain market share. Dell grew unit volumes in the high teens in 1H09, roughly 1.5x the industry growth rate. While growth slowed in 3Q09, management expects continued market share gains.

• Turnaround progressing; more work remains. In Q3, the company attained its goal of reducing headcount by 8,900. COGS are still too high, with management focused on reducing product costs as more efficiently produced products come to market.

• Pursuing five key growth initatives: enterprise, notebook, consumer, SMB, and emerging countries. Dell’s growth is outpacing the industry in each area.

• Focused on growing higher-margin services (~10% of revenue), both organically and through digestable acquisitions; a large combination, such as HP/EPS, appears unlikely. Dell uses the client business as an “achor tenant,” allowing it to win incremental services business over time.

• Maintains strong cash cycle dynamics (-29 days), though retail presence has increased inventory.

• Michael Dell returned as CEO in January 2007. • Strong balance sheet, with $7 billion of net cash. • Bought $2.5 billion of stock in 1H09. Michael Dell

has purchased ~$200 million in recent months. • Stock price implies 13% trailing FCF yield, 8x

trailing P/E and 8x forward P/E. INVESTMENT RISKS & CONCERNS

• Weakness in U.K., southern Europe, select Asian countries, U.S. (SMB, government). Enterprise, servers, storage remain resilient while “client” has weakened. Dell is a year into a three-year, $3 billion cost reduction program, with most reductions tied to new products (7 introduced so far, 17 remaining).

• Consumer EBIT margin less than 1%, vs. 5-6% at HP (might include some printing). Dell believes it can achieve “reasonable” profitability. Retail is not yet profitable, with Dell present in 15,000 stores. The company likely needs more scale in retail.

• Direct model is evolving as Dell enters storefronts and as notebooks gain share versus desktops (customers may want to “touch” notebooks before purchasing). Warranty is a high-margin business in which Dell’s “attach rate” is below average.

• European margins have not met expectations, but margins may bounce back in next two quarters.

• EMC partnership may be impacted by Dell’s purchase of EqualLogic, though Dell management remains “committed” to both offerings.

• CTO Kevin Kettler is leaving in January after 13 years with Dell; a marketing VP left in November.



09 P/E

CAJ 37,390 29,926 .7x 1.2x 10x 10x HPQ 74,600 69,972 .6x 6.3x 8x 8x IBM 107,920 132,577 1.3x 19.2x 9x 9x SNE 21,193 20,396 .2x 0.7x 12x 9x DELL 21,327 14,263 .2x 57.3x 8x 8x

MAJOR HOLDERS Michael Dell 11% │ Other insiders <1% │ Southeastern 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Deluxe Corporation (NYSE: DLX) Shoreview, MN, 651-483-7111 Consumer Non-Cyclical: Office Supplies, Member of S&P MidCap 400 http://www.deluxe.com


Price: $10.89 (as of 11/14/08) Month # of P/E FYE 12/31/07 3.9x 52-week range: $7.55 - $33.62 Latest Ago Ests P/E FYE 12/31/08 4.4x Market value: $557 million This quarter $0.69 $0.78 5 P/E FYE 12/31/09 4.3x Enterprise value: $1.4 billion Next quarter 0.51 0.56 2 P/E FYE 12/31/10 3.8x Shares out: 51.1 million FYE 12/31/08 2.48 2.46 4 EV / LTM revenue 0.9x

Ownership Data FYE 12/31/09 2.52 2.71 5 EV / LTM EBITDA 6.5x Insider ownership: 1% FYE 12/31/10 2.84 n/a 1 EV / LTM EBIT 6.5x Insider buys (last six months): 9 LT EPS growth 4.5% 4.5% 2 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 15% # of institutional owners: 517 10/23/08 $0.65 $0.55 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 10 125 3 16 7 12 22 18 245 18 Total current assets 84 200 79 240 214 202 192 181 419 181 Intangible assets 197 188 160 878 839 769 734 815 738 815 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 Total current liabilities 367 215 388 571 491 665 298 331 555 331 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Deluxe operates in three segments: Small Business Services sells business checks, printed forms, promotional products, and marketing materials to small businesses. Financial Services sells personal and business checks and stored value gift cards to financial institutions. Direct Checks sells personal and business checks directly to consumers. Checks and related services were two-thirds of revenue in 2007. SELECTED OPERATING DATA


9/30/08 % of revenue by segment: Small business services 54% 59% 58% 58% Financial services 31% 28% 28% 29% Direct checks 14% 13% 13% 13% Revenue growth by segment: Small business services 51% 4% -3% -6% Financial services -19% -15% 0% -5% Direct checks -14% -14% -1% -10% Total revenue growth 10% -4% -2% -6% EBIT margin by segment:1 Small business services 11% 9% 14% 13% Financial services 22% 10% 16% 17% Direct checks 32% 31% 30% 29% Total EBIT margin 18% 12% 17% 16% D&A as % of revenue 6% 5% 4% 4% Capex as % of revenue 3% 3% 2% 2% % of revenue by product type: Checks and related services 65% 64% 65% n/a Other printed products 22% 23% 24% n/a Accessories and promotional 8% 8% 8% n/a Packaging supplies and other 5% 5% 3% n/a % of revenue by geography: U.S. 97% 96% 96% n/a Canada 3% 4% 4% n/a

1 Excludes YTD restructuring and impairment charges of $33 million. INVESTMENT HIGHLIGHTS

• Leading provider of paper checks. With 33 billion checks written annually (including checks converted to ACH), they still account for 35% of non-cash payments in the U.S., down from 45% in 2004. Check volume is declining at a mid-single digit rate.

• Recent tuck-in acquisitions include PartnerUp, Hostopia, Logo Mojo, and Johnson Group. Deluxe is attempting to shift from traditionally mature, print-related markets to business services markets. Despite the decline in checks, management remains committed to “sustainable top and bottom line growth for Deluxe in the medium term.”

• C$124 million Hostopia deal, announced in June, adds web services offerings and a web-enabled platform to launch additional business services.

• Price increase in Financial Services will go into effect in Q4. The company is also cutting costs.

• CEO Lee Schram (46) joined Deluxe in 2006 from NCR, where he had served as SVP of the retail solutions division. CFO Richard Greene (43) joined Deluxe in 2006 from Tyco, where he had been CFO of the plastics and adhesives segment.



• Guiding for revenue decline of 6-7% and EPS decline of 21-25% for full-year 2008, significantly worse than previous EPS guidance. Management expects 2008 revenue of $1.5 billion and EPS of $2.07-2.17. In January, management had provided EPS guidance of $3.00-3.20. The company has blamed economic softness for the weak outlook.

• Paper checks headed for obsolescence. Adoption of payment cards and online bill-payment is slowly but surely obsoleting checks, both at the point of sale and as a means of bill payment. Two-thirds of Deluxe revenue comes from checks, with another one-quarter also related to various printed products. Deluxe’s two primary check printing competitors merged in 2007 and now operate as Harland Clarke.

• Potential for bad capital allocation as “cash cow” business declines and management attempts to reignite growth. Deluxe faces a dilemma: maximize FCF and pay it out, or invest in growth capex and acquisitions that may offset the decline in checks. The company currently pays a $1 annual dividend while pursuing acquisitions. Management has stressed the importance of “transformational efforts.” Capex is estimated at $30 million in 2008.

MAJOR HOLDERS CEO Schram 1% │ Other insiders 1% │ Barclays 12% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Diamond Mgt. & Technology (Nasdaq: DTPI) Chicago, IL, 312-255-5000 Services: Business Services http://www.diamondconsultants.com



Ownership Data FYE 3/31/10 0.12 0.13 5 EV / LTM EBITDA 8.4x Insider ownership: 15% FYE 3/31/11 n/a n/a 0 EV / LTM EBIT 8.4x Insider buys (last six months): 7 LT EPS growth 10.5% 10.5% 2 P / tangible book 1.4x Insider sales (last six months): 5 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 68% Date Actual Estimate LTM EBIT yield 12% # of institutional owners: 131 11/6/08 $0.02 $0.01 LTM pre-tax ROC 47%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 97 75 81 98 70 84 53 47 67 47 Total current assets 130 97 116 136 108 103 71 69 95 69 Intangible assets 235 0 0 0 0 0 0 0 0 0 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 Total current liabilities 26 30 36 32 31 21 16 14 16 14 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 26 37 42 36 36 25 18 16 22 16 Preferred stock 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



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BUSINESS OVERVIEW Diamond is a management and technology consulting firm whose teams work across functional boundaries to help clients leverage IT. The company serves clients in six verticals: financial services, insurance, healthcare, telecom, public sector, and enterprise. The enterprise practice includes the manufacturing, retail, distribution, travel, and packaged goods industries. Diamond generated 91% of revenue in North America in FY08. Diamond was founded in 1994. In 2006, the company sold operations in Barcelona, Dubai, Madrid, Munich, Paris, and Sao Paulo, while retaining consulting practices in North America, the U.K., and India. SELECTED OPERATING DATA

FYE March 31 2006 2007 2008 1H09 Consultants (avg) 428 474 509 503 Fees per consultant $339K $356K $358K $316K Utilization rate 63% 63% 62% 63% Voluntary attrition1 17% 18% 16% 17% Total attrition1 23% 22% 22% 34% ∆ net revenue 0% 16% 8% -15% ∆ gross profit -21% 9% 13% -33% Gross margin 32% 30% 31% 24% % of revenue by client type: New clients2 24% 12% 14% 6% Existing clients 76% 88% 86% 94% Top 5 clients / revenue 39% 39% 37% n/a % of revenue by industry or major client: Goldman Sachs 13% 13% 12% Other financial services 24% 19% 18% } 29% Insurance 22% 26% 23% 23% Healthcare 15% 19% 21% 19% Enterprise 13% 13% 17% 22% Telecommunications 9% 6% 6% 4% Public sector 4% 4% 3% 3% % of new client revenue by industry:2 Financial services 32% 37% 20% 26% Insurance 22% 7% 12% 19% Healthcare 17% 22% 19% 5% Enterprise 22% 12% 44% 39% Telecommunications 5% 10% 2% 4% Public sector 2% 12% 3% 7% ∆ 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 period but were absent from the prior period. INVESTMENT HIGHLIGHTS

• Serves c-level executives of large companies. Fees are sourced from clients’ operating and IT budgets. A senior partner is assigned revenue and profit responsibility for each vertical.

• Long-tenured management. Adam Gutstein (45) joined Diamond in 1994 and became CEO in 2006. He was previously with Andersen (now Accenture). Karl Bupp (46) joined Diamond in 1994 and became CFO in 1998. He was previously with MCI.

• Repurchased $11 million of stock in 1H09, $52 million in FY08, $36 million in FY07, and $34 million in FY06.



• Results down sharply in 1H09, driven by more cautious client spending. The company is guiding for FQ3 revenue of $39-41 million (down 12-17% y-y), EPS of $0.01-0.02 and FCF of $4-6 million.

• Absence of long-term contracts. Clients may typically cancel use of Diamond without penalty and, “in some circumstances,” with little notice.

• 22% annualized attrition. Diamond’s voluntary and involuntary attrition of consulting staff was 16% and 6%, respectively, in FY08. This implies a total staff turnover every 4-5 years, on average.

• Top competitors generally have scale advantages. Technology-oriented professional services firms include Accenture, CSC, EDS, and IBM. Diamond also competes against management consulting firms such as A. T. Kearney, Bain, BCG, and Booz.

• Typical professional services risks. Diamond’s key assets “walk out the door” every evening. In addition, the firm must maintain a certain utilization rate of consulting staff in order to remain profitable.



09 P/E

BE 13 703 .2x n/m n/m n/m ACN 20,919 17,304 .7x 12.3x 10x 9x CSC 4,322 7,354 .4x 7.7x 7x 6x IBM 107,920 132,577 1.3x 19.2x 9x 9x ICFI 266 353 .5x n/m 10x 13x DTPI 101 54 .3x 1.4x 57x 33x

MAJOR HOLDERS CEO Gutstein 2% │ Other insiders 15% │ Fidelity 16% │ Artisan 13% │ BlackRock 10% │ Luther King 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


DISH Network Corp. (Nasdaq: DISH) Englewood, CO, 303-723-1000 Services: Broadcasting & Cable TV http://www.dishnetwork.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 2,828 2,687 3,973 1,156 1,181 3,033 2,788 1,433 2,802 1,433 Total current assets 3,512 3,214 4,573 2,113 2,397 4,600 4,245 2,857 4,270 2,857 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 Total current liabilities 1,488 1,990 2,972 2,072 2,150 3,592 4,225 4,175 2,725 4,175 Long-term debt 5,707 5,359 5,499 5,758 5,899 5,929 4,575 4,973 6,086 4,973 Total liabilities 7,298 7,437 8,618 8,108 8,277 9,988 9,447 9,307 9,286 9,307 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW DISH Network provides satellite television in the U.S., offering hundreds of channels, digital video recording and HDTV. The company began subscription TV services in 1996 and had 14 million subscribers at yearend 2007. DISH utilizes a satellite fleet that enables it to offer 2,700 video and audio channels, including local programming. On January 1, 2008, DISH spun off technology and certain infrastructure assets into EchoStar Corporation (SATS). SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Selected growth rates: Subscriber revenue 19% 17% 13% 8% ARPU 6% 8% 5% 6% Subscribers (average) 13% 10% 7% 3% Subscribers (period end) 10% 9% 5% 1% Subscriber acq. cost (SAC) 13% -1% -4% 10% Selected items as % of subscriber revenue: Subscriber gross profit 49% 49% 49% 49% SAC 19% 17% 15% 14% EBIT 15% 13% 15% 18% D&A 10% 12% 12% 9% Capex 19% 15% 14% 10% FCF 3% 9% 11% 11% DISH Network subscriber data (mn, except if stated otherwise): Subscribers (period end) 12.0 13.1 13.8 13.8 Subscribers (average) 11.5 12.6 13.4 13.8 Gross additions 3.4 3.5 3.4 2.3 Net additions 1.1 1.1 0.7 0.0 Monthly churn 1.65% 1.64% 1.70% 1.86% Monthly ARPU ($) 58 63 66 69 SAC ($) 693 686 656 715 SAC / ARPU (months) 11.9 10.9 10.0 10.4


• Positioned as low-cost provider of multi-channel pay TV services, competitive on price and programming versus cable television providers and DirecTV. Subscriber growth is driven by equipment subsidies and promotional pricing on programming.

• Utilizes twelve satellites in geostationary orbit 22,300 miles above the equator, five of which are owned by DISH, six are leased from EchoStar and one is leased from a third party.

• Purchased 700 MHz spectrum for $712 million in an FCC auction in March. The acquired spectrum covers 76% of the U.S. population.

• Chairman and CEO Charlie Ergen (54) is a well-respected satellite entrepreneur who has led DISH since co-founding it with James DeFranco in 1980. DeFranco (55) serves as EVP of marketing and sales. CFO Bernard Han (43) joined in 2006 from Northwest Airlines, where he had served as CFO.


INVESTMENT RISKS & CONCERNS • Lost 10,000 subscribers in Q3 due to “weak

economic conditions, aggressive promotional offerings by our competition, our relative discipline in the amount of discounted programming or equipment we currently offer, the heavy marketing of HD service by our competition, the growth of fiber-based pay TV providers, signal theft and other forms of fraud, and operational inefficiencies.”

• Opex grew faster than revenue in Q3, as SAC and retention costs rose. Increased upgrades are likely to continue at least through 1H09.

• AT&T deal to terminate on January 31. AT&T accounted for 17% of gross subscriber additions YTD. The one million subscribers acquired through AT&T may churn faster than others.

• Competition from DirecTV and cable. • Net debt of $4.3 billion, purchase obligations of

$1.5 billion, satellite obligations of $924 million. LIQUIDITY SNAPSHOT1

Balance sheet items ($mn) 12/31/07 9/30/08 Cash and ST investments ST $2,788 $1,537 LT cash and investments LT 173 176 Capital leases, mortgages, notes ST (50) (12) 3% convertible note due 2010/11 ST (525) (25) 5 3/4% senior notes due 20081 ST (1,000) (972) 6 3/8% senior notes due 2011 LT (1,000) (1,000) 6 5/8% senior notes due 2014 LT (1,000) (1,000) 7 1/8% senior notes due 2016 LT (1,500) (1,500) 7% senior notes due 2013 LT (500) (500) 7 3/4% senior notes due 2015 LT (0) (750) Capital leases, mortgages, notes LT (550) (223) Net cash and investments ($3,165) ($4,268)

1 Redeemed $972 million of notes on October 1. COMPARABLE PUBLIC COMPANY ANALYSIS

($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E DTV 21,678 24,540 1.3x 25.1x 15x 12x DISH 4,918 9,466 .8x n/m 5x 5x

MAJOR HOLDERS Class A common shares (209 million out): CEO Ergen 50% │ Other insiders 8% │ Fairholme 10% │ Barclays 8% │ Dodge & Cox 6%; Class B common shares (238 million out): CEO Ergen 87% │ Other insiders 11% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Double-Take Software, Inc. (Nasdaq: DBTK) Southborough, MA, 877-335-5674 Technology: Software & Programming http://www.doubletake.com



Ownership Data FYE 12/31/09 0.66 0.75 11 EV / LTM EBITDA 4.2x Insider ownership: 21% FYE 12/31/10 0.74 n/a 1 EV / LTM EBIT 4.9x Insider buys (last six months): 0 LT EPS growth 21.0% 21.0% 7 P / tangible book 2.6x Insider sales (last six months): 1 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 74% Date Actual Estimate LTM EBIT yield 20% # of institutional owners: 206 10/28/08 $0.16 $0.14 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments n/a 6 8 55 65 68 67 68 Total current assets n/a 12 17 70 91 93 89 93 Intangible assets n/a 0 0 4 17 26 6 26 Total assets n/a 13 19 77 115 124 99 124 Short-term debt n/a 0 0 0 0 0 0 0 Total current liabilities n/a 11 19 27 34 34 27 34 Long-term debt n/a 43 51 0 0 0 0 0 Total liabilities n/a 56 73 32 39 39 32 39 Preferred stock n/a 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Double-Take provides data protection software and is the leading supplier of replication software for Microsoft server environments. It has 15,000 customers and generates roughly 70% of revenue from resellers such as Dell. SELECTED OPERATING DATA


9/30/08 % of revenue by type: Software 64% 63% 59% 54% Maintenance and services 36% 37% 41% 46% Revenue growth by type: Software 31% 47% 28% 11% Maintenance and services 46% 55% 50% 34% ∆ revenue 36% 49% 36% 20% ∆ deferred revenue1 51% 54% 38% 19% % of revenue by geography: North America 77% 71% 65% 63% EMEA 18% 26% 32% 31% Asia Pacific 6% 3% 3% 5% Revenue growth by geography: North America 45% 38% 25% 23% EMEA 11% 121% 69% 15% Asia Pacific 30% -14% 24% 24% % of revenue by customer: Dell 19% 20% 18% n/a Sunbelt Software Distribution 13% 13% 12% 12% Next three largest customers 31% 14% 15% n/a Other indirect customers 30% 47% 48% n/a Direct sales 7% 6% 7% 11%

1 At period end. INVESTMENT HIGHLIGHTS

• Leader in $700 million Windows replication software market, expected to grow to $1.2 billion in 2011, a 21% CAGR.1 Replication software is expected to reach $4.3 billion in 2011, while the broader storage software market is $10 billion.

• Sells primarily to SMB market. Growth in data creation and collection, new regulations and the threat of disruption from disasters have increased data protection requirements for many businesses.

• Double-Take software continuously replicates changes made to application data on a primary server to a duplicate server located on- or off-site. The company’s software was first released in 1995.

• $8 million TimeSpring acquisition (December 2007) enables data recovery from almost any point in time from a repository located on- or off-site.

• $10 million emBoost acquisition (July 2008) enables assignment and re-assignment of workloads to any Windows or Linux physical servers or desktops or a virtual machine in their environment.

1 Source: Company, IDC.

• Guiding for revenue growth of 16-18%, non-GAAP EBIT growth of 7-11% and non-GAAP EPS decline of 36-38% in 2008 (down from prior guidance for revenue growth of 23-25%, EBIT growth of 14-16% and EPS decline of 32-34%).

• Software industry veteran Dean Goodermote (54) became CEO in 2005. VP of Engineering Robert Beeler (42) has been with the company since the initial release of Double-Take software in 1995. CFO Craig Huke (46) joined the company in 2003 after serving in CFO roles at two technology firms.



• Missed Q3 revenue guidance by 7% due to license push-outs. The miss was most pronounced in the U.S. Management expects weak IT spending to persist, noting that “investors should not expect the growth rate that they have seen from us in the past.”

• ~70% of revenue from resellers such as Dell and another 15-20% of revenue from distributors/OEMs.

• Strategic bet on Microsoft technology may make it difficult to expand into large enterprises, many of which still rely heavily on Unix-based systems.

• Primary competitors include EMC (Legato), Neverfail, Symantec (Veritas) and CA (XOsoft).


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BMC 4,691 4,077 2.2x n/m 11x 10x CA 8,821 8,660 2.0x n/m 11x 10x EMC 20,367 17,950 1.2x 3.9x 13x 12x FALC 126 79 .9x 2.0x 17x 12x SYMC 10,208 10,003 1.6x n/m 9x 8x DBTK 156 88 .9x 2.6x 12x 11x

MAJOR HOLDERS CEO Goodermote 3% │ Other insiders 17% │ ABS Capital 15% │ Copper Rock 7% │ Oberweis 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Dynacq Healthcare, Inc. (Nasdaq: DYII) Houston, TX, 713-378-2000 Health Care: Healthcare Facilities http://www.dynacq.com



Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA 1.3x Insider ownership: 57% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 1.4x Insider buys (last six months): 1 LT EPS growth n/a n/a n/a P / tangible book 0.8x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 5% Date Actual Estimate LTM EBIT yield 69% # of institutional owners: 26 n/a n/a n/a LTM pre-tax ROC 59%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 5 8 4 6 3 3 5 32 6 32 Total current assets 25 25 32 32 19 19 26 56 21 56 Intangible assets 1 1 1 1 0 0 0 0 0 0 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 Total current liabilities 5 4 20 17 12 16 18 14 18 14 Long-term debt 1 0 0 0 0 0 1 0 1 0 Total liabilities 8 7 23 20 14 17 20 15 19 15 Preferred stock 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Dynacq manages acute care hospitals that provide bariatric, orthopedic, neuro-spine, and other specialized surgeries. The hospitals include operating rooms, pre- and post-op space, ICUs, nursing units, and diagnostic facilities, as well as adjacent buildings that lease space to physicians. Dynacq owns a hospital in Pasadena, TX (near Houston) and another in Garland, TX (near Dallas). Most surgeries are covered by workers’ comp or out-of-network commercial insurance. The company participates minimally in managed care contracts. Dynacq sold a hospital in Baton Rouge, LA in FY08 and a surgery center in West Houston, TX in FY07. SELECTED OPERATING DATA

FYE August 31 2005 2006 2007

YTD5/31/08

Calculation of net revenue: Gross billed charges $100 $87 $96 $100 Contractual allowance 58 51 53 51 Net revenue $42 $36 $43 $49 Net revenue growth 6% -14% 19% 54% Allowance percentage 58% 59% 55% 51% % of net patient revenue by facility: Pasadena facility 72% 57% 38% n/a Garland facility 27% 43% 62% n/a


• Contractual allowance declined from FY05-FY07, boosting revenue and returning Dynacq to profitability. The allowance fell from 58% in FY05 to 51% in the first nine months of FY08, though it rose to 61% in the quarter ended May 31.

• Strong balance sheet, with $34 million of net cash and $4 million of net assets held for sale on May 31.

• Repurchased 280,000 shares at average cost of $5.60 per share from March through July.



• Moved corporate domicile from Delaware to Nevada in August 2007. It is unclear why the company chose to reincorporate in Nevada. The company indemnifies directors against damages for breach of their fiduciary duty and advance expenses “to the full extent permitted by Nevada law.”

• Uncertainty regarding recoveries on accounts receivable in Medical Dispute Resolution (MDR) process. The company has attempted to collect on MDR accounts receivable and has recorded a total of $20 million in settlements for service dates ranging from 2001-2005. It is impossible to predict the level of future MDR process recoveries.

• Difference between gross billed charges and net revenue. The company had gross billed charges of $100 million in the nine months ended May 31, yet it recorded net revenue of only $49 million. The delta represents a “contractual allowance,” which Dynacq estimates based on subjective and hard-to-follow criteria. The allowance as a percentage of gross billings has a large impact on profitability and has exhibited large volatility. For example, the allowance was 51% for the nine months ended May 31, yet it rose to 61% for the quarter ended May 31.

• Low visibility into capital dealings. The company formed Dynacq Huai Bei Healthcare (DHBH) as a Chinese corporation. The company recently capitalized DHBH with $10 million, making it potentially difficult for shareholders to “follow the money” now that it is at the Chinese subsidiary level. In July, the company sold its interest in a property owned by a Chinese joint venture company (DeAn) for $4.6 million. It is unclear whether the company obtained fair market value in the sale. The JV management contract was to be transferred to DHBH. We cannot ascertain the rationale for these dealings and find them murky.

• COO Alan Beauchamp resigned in July. He was not immediately replaced.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AMSG 685 854 1.4x n/m 14x 13x CYH 1,721 10,287 1.0x n/m 8x 7x HMA 439 3,558 .8x n/m 4x 4x LPNT 1,233 2,695 1.0x n/m 9x 9x MDTH 151 207 .3x 0.5x 8x 6x RHB 262 302 .4x 3.9x 15x 12x UHS 1,977 2,913 .6x 2.4x 10x 10x THC 931 5,150 .6x n/m n/m 98x DYII 53 22 .4x 0.8x n/a n/a

MAJOR HOLDERS CEO Chan 54% │ Other insiders 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


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 52-week range: $6.12 - $10.16 Latest Ago Ests P/E FYE 12/31/08 3.5x Market value: $689 million This quarter $0.37 $0.36 6 P/E FYE 12/31/09 4.5x Enterprise value: $501 million Next quarter 0.37 n/a 1 P/E FYE 12/31/10 9.0x Shares out: 108.4 million FYE 12/31/08 1.83 1.78 5 EV / LTM revenue 0.5x

Ownership Data FYE 12/31/09 1.40 1.28 6 EV / LTM EBITDA 2.2x Insider ownership: 8% FYE 12/31/10 0.71 0.78 1 EV / LTM EBIT 2.4x Insider buys (last six months): 0 LT EPS growth n/a n/a 0 P / tangible book 3.6x Insider sales (last six months): 32 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 42% # of institutional owners: 461 10/28/08 $0.50 $0.40 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 555 491 439 473 381 373 267 447 304 447 Total current assets 640 584 501 530 445 457 337 498 383 498 Intangible assets 264 239 157 125 117 262 249 223 256 223 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 Total current liabilities 329 318 267 247 212 231 188 132 236 132 Long-term debt 2 1 0 0 0 259 259 259 259 259 Total liabilities 332 331 283 258 227 509 474 411 518 411 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 851 692 544 548 522 459 262 412 325 412 EBIT/capital employed n/m n/m n/m n/m n/m n/m n/m n/m n/m n/m



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BUSINESS OVERVIEW EarthLink is a U.S. Internet service provider (ISP) operating in two segments: Consumer Services provides Internet access and value-added services to individuals. Business Services provides Internet access and value-added services to businesses and communications carriers. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by type of service: Access 94% 91% 89% 89% Value-added services 6% 9% 11% 11% % of revenue by segment: Consumer services 95% 88% 84% 82% Business services 5% 12% 16% 18% Revenue growth by segment: Consumer services n/a -7% -10% -23% Business services n/a 130% 18% -6% Total revenue growth -7% 1% -7% -21% EBIT margin by segment: Consumer services 15% 14% 19% 40% Business services 68% 14% 7% 14% Corporate and other -5% -6% -13% -9% Total EBIT margin 13% 7% 4% 26% Subscriber growth (period end): Dial-up consumers -8% -8% -20% -33% Broadband consumers 17% 14% -42% -14% Businesses 10% 39% -13% -15% Total subscriber growth -1% 0% -27% -27% Consumer subscribers1 (mn) 5.2 5.1 4.3 3.3 Consumer monthly ARPU ($) 20 19 20 21 Consumer net churn2 4.6% 4.6% 5.2% 4.6% Business subscribers1 (mn) 0.2 0.2 0.2 0.2 Business monthly ARPU ($) 38 64 77 81 Business net churn2 2.6% 2.8% 2.6% 2.8%

1 Represents period-average subscribers. 2 Churn rate for 2007 excludes impact of loss of Embarq-related subscribers. INVESTMENT HIGHLIGHTS

• Reduced back-office costs and new subscriber marketing due to declining sales and changes in the Internet access industry. EarthLink now focuses on maximizing income from more tenured subscribers.

• Aims to retain subscribers and grow business services through New Edge, a CLEC that provides secure managed data networks and dedicated Internet access. EarthLink acquired New Edge for $109 million and 1.7 million shares in 2006.

• Raised guidance in July and again in October, driven by better-than-expected passive subscriber additions, lower churn and reduced opex. Management is guiding for adjusted EBITDA of $290-300 million, FCF of $270-290 million and income from continuing operations of $200-210 million in 2008. Preliminary 2009 guidance calls for adjusted EBITDA of $210-225 million, FCF of $180-205 million, and income from continuing operations of $135-155 million.

• Founder Sky Dayton retired from Board in October. Rolla Huff (51) joined EarthLink as CEO in June 2007. He was previously CEO of Mpower.

• Gain “flexibility to pursue strategic alternatives” by terminating convert hedge in September.

• Solid balance sheet, with $226 million of net cash. • Large NOL, with $678 million of federal and $291

million of state loss carryforwards at yearend 2007. • Repurchased 3.8 million shares for $32 million

YTD. $169 million remained authorized at Q3-end. • Stock price implies 28% trailing FCF yield, 4x


• Business in runoff? Revenue has declined, and management appears focused on maximizing cash flow from existing subscribers while keeping reinvestment modest. The company has returned cash to shareholders through large buybacks.

• Internet access a commodity. While EarthLink provides value-added services, commoditized dial-up and broadband Internet access account for close to 90% of revenue. Declining consumer access pricing reflects the commodity nature of the service.

• Stopped investing in Helio in 2007, after capital contributions of $210 million. Helio, a JV with SK Telecom, is a U.S. mobile virtual network operator. EarthLink owned 31% of Helio at yearend 2007.



09 P/E

LVLT 1,402 7,578 1.7x n/m n/m n/m MSFT 178,445 159,698 2.6x 9.2x 10x 9x Q 4,936 18,405 1.4x 14.3x 7x 7x S 6,571 25,095 .7x n/m 29x n/m T 162,942 238,122 1.9x n/m 10x 9x VZ 85,215 128,316 1.3x n/m 12x 11x YHOO 14,994 11,780 1.6x 2.1x 26x 23x ELNK 689 501 .5x 3.6x 3x 5x

MAJOR HOLDERS CEO Huff 1% │ Other insiders 2% │ Steel Partners 11% │ Sterling 10% │ Coghill 9% │ Artisan 6% │ Barclays 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


eBay Inc. (Nasdaq: EBAY) San Jose, CA, 408-376-7400 Services: Retail (Specialty Non-Apparel), Member of S&P 500 http://www.ebay.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 724 1,199 1,722 2,012 2,088 3,205 4,898 3,644 3,989 3,644 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW eBay enables person-to-person ecommerce and provides technology-driven services. It operates in three segments: Marketplaces facilitates commerce through eBay.com and other online platforms, including classifieds sites, Half.com, Rent.com, Shopping.com, and StubHub. Payments consists of payment platform PayPal. Communications consists of VoIP service provider Skype. Seasonality is strongest in Q4. SELECTED OPERATING DATA


9/30/08 % of revenue by segment: Marketplaces 77% 73% 70% 66% Payments 23% 24% 25% 27% Communications 1% 3% 5% 6% Revenue growth by segment: Marketplaces 36% 24% 24% 12% Payments 47% 40% 34% 31% Communications nm 686% 96% 52% Total revenue growth 39% 31% 29% 18% EBIT margin by segment: Marketplaces 43% 42% 44% 43% Payments 29% 23% 20% 20% Communications -4% -14% 12% 20% Corporate and other1 -8% -12% -10% -11% Total EBIT margin1 32% 24% 26% 25% % of revenue by geography: U.S. 54% 52% 49% 47% Germany 16% 15% 13% U.K. 13% 13% 14% Rest of world 17% 20% 24%

} 53%

Marketplaces segment — growth of selected metrics: Active users 28% 14% 2% 3% Number of listings 33% 26% -1% 18% Gross merchandise volume 30% 18% 13% 7% Payments segment — growth of selected metrics: Active registered accounts 39% 20% 16% 19% Net total payment volume 45% 37% 33% 32% Communications segment — growth of selected metric: Registered users nm 129% 61% 51%

1 Excludes $1.4 billion goodwill impairment in 2007. INVESTMENT HIGHLIGHTS

• Online auctions leader; operates market-leading eBay website, with 14% share of global ecommerce and 85 million active users. The company enjoys high barriers to entry due to network effects.

• PayPal payment volume and revenue up 28% and 27%, respectively, in Q3. Recently launched merchant services deals include Walmart.com, American Eagle and OfficeMax. PayPal accounts for more than 8% of global ecommerce payments.

• 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%.

• Acqusitions of Bill Me Later and two classifieds websites in Denmark for $1.3 billion in October suggest continued M&A appetite, despite perception that the company may have overpaid in the $2.6 billion acquisition of Skype in 2005. Other acquisitions included Shopping.com for $634 million in 2005 and PayPal for $1.5 billion in 2002.

• Guiding for revenue growth of 11-13% and non-GAAP EPS growth of 10-12% in 2008, with expected revenue of $8.53-8.68 billion, GAAP EPS of $1.32-1.34 and non-GAAP EPS of $1.69-1.71.

• John Donahoe succeeded long-time CEO Meg Whitman in March. Donahoe previously served as president of eBay Marketplaces for three years. Prior to eBay, he was a managing director at Bain.

• Repurchased $5.3 billion of stock since program inception in 3Q06, including $2.2 billion in 2008.



• Core eBay.com marketplace may have reached steady-state growth phase, with Marketplaces revenue up only 4% to $1.4 billion in Q3 on a 1% decline in gross merchandise volume to $14 billion. Interestingly, revenue equals 10% of gross volume, not an insignificant “toll” levied on eBay users.

• Sensitive to consumer spending, as most items bought and sold on eBay are discretionary items. In addition, PayPal’s performance correlates with ecommerce spending at online merchants.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AMZN 17,904 16,015 .9x 8.4x 29x 26x 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

MAJOR HOLDERS CEO Donahoe <1% │ Other insiders 16% │ Barclays 5% │ Legg Mason 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


EMCOR Group, Inc. (NYSE: EME) Norwalk, CT, 203-849-7800 Capital Goods: Construction Services, Member of S&P SmallCap 600 http://www.emcorgroup.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 190 93 78 70 104 274 252 341 223 341 Total current assets 1,217 1,335 1,389 1,426 1,390 1,662 1,936 2,076 1,922 2,076 Intangible assets 56 304 300 298 300 326 816 845 799 845 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW EMCOR provides mechanical and electrical construction, energy infrastructure and facilities services to commercial, industrial, utility and institutional customers. The company’s systems create facility environments. Domestic electrical and mechanical construction accounted for 64% of revenue in 2007, of which 68% was related to new construction and 32% to renovation and retrofit. EMCOR has 30,000 employees and 170 locations in the U.S., Canada and U.K. SELECTED OPERATING DATA


9/30/08 % of revenue by geographic segment: U.S. electrical services 27% 26% 24% 25% U.S. mechanical services 36% 37% 40% 36% U.S. facilities services 15% 17% 18% 22% Canada services 7% 6% 6% 6% U.K. services 15% 14% 12% 10% Revenue growth by geographic segment: U.S. electrical services -1% 5% 12% 27% U.S. mechanical services -6% 9% 29% 10% U.S. facilities services 8% 22% 26% 59% Canada services 22% -13% 28% 28% U.K. services -1% 0% 7% 4% ∆ revenue 0% 7% 21% 23% ∆ organic revenue 15% 12% EBIT margin by geographic segment: U.S. electrical services 6.5% 3.7% 6.2% 5.9% U.S. mechanical services 1.2% 4.5% 5.8% 4.0% U.S. facilities services 3.0% 4.0% 4.2% 7.4% Canada services -2.3% 0.1% 1.8% 2.6% U.K. services 1.1% 1.0% -1.8% 2.0% Corporate and other -1.0% -1.2% -1.0% -1.0% Total EBIT margin 1.6% 2.3% 3.4% 3.9% D&A as % of revenue 0.4% 0.3% 0.3% 0.4% Capex as % of revenue 0.3% 0.4% 0.4% 0.5%


• Complexity of electrical and mechanical systems drives industry growth. U.S. non-residential construction spending, a proxy for EMCOR’s markets, rose 16% to $630 billion in 2007.1

• Leader in core businesses: electrical, mechanical, and int’l construction; strong in growth businesses: top three in commercial and top ten in government facilities services, #1 non-OEM mechanical/ mobile services provider, #2 non-OEM fire protection provider, #1 in industrial heat exchangers.

• Benefits from increased energy services demand, including utility generation, distributed generation, refinery/ oil & gas, and energy efficiency.

• Guiding for revenue growth of 15-18% and EPS growth of 31-36% in 2008, with estimated revenue of $6.8-7.0 billion and EPS of $2.48-2.58.

1 Source: EMCOR, United States Census Bureau.

• Facilities services mitigate cyclicality, as margins are less volatile and inversely related to construction margins. Demand for facilities services rose in Q3.

• $455 million Ohmstede deal should be accretive in 2008. Ohmstede provides maintenance, repair and manufacturing to Gulf Coast refineries and petrochemical firms (2008E revenue: $300 million).

• Service work 35% of revenue in 2008E vs. 25% in 2003. Facilities services represent higher-margin recurring revenue not entirely reflected in backlog.



• Q3-end backlog of $4.4 billion fell 1% y-y and down 5% from the record level at the end of Q2.

• Cyclical construction business: “customers may delay or cancel new projects…, especially with respect to more profitable private sector work…”

• Input prices. EMCOR uses copper and steel in construction and facilities services. Gas prices affect its fleet of 7,500 vehicles. Most contracts “do not allow [EMCOR] to adjust our prices… increases in material or fuel costs could reduce… profitability.”

• Fixed-price contracts account for a “significant” portion of revenue, exposing the company to inaccurate cost assessments and cost overruns.

• 73% of workforce unionized. COMPARABLE PUBLIC COMPANY ANALYSIS

($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E FIX 280 193 .1x 1.6x 6x 7x IESC 105 73 .1x 0.7x n/a n/a JCI 9,124 12,684 .3x 4.4x 8x 7x LII 1,271 1,531 .4x 3.6x 9x 9x PWR 2,786 2,932 .8x 3.3x 16x 11x EME 904 763 .1x 5.4x 5x 5x

MAJOR HOLDERS CEO MacInnis 3% │ Other insiders 5% │ Bank of New York 6% │ Freiss 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Emulex Corporation (NYSE: ELX) Costa Mesa, CA, 714-662-5600 Technology: Semiconductors http://www.emulex.com


Price: $7.22 (as of 11/14/08) Month # of P/E FYE 6/29/08 n/m 52-week range: $6.89 - $17.90 Latest Ago Ests P/E FYE 6/30/09 8.7x Market value: $593 million This quarter $0.21 $0.23 12 P/E FYE 6/30/10 8.4x Enterprise value: $299 million Next quarter 0.19 0.21 12 P/E FYE 6/30/11 n/a Shares out: 82.1 million FYE 6/30/09 0.83 0.86 13 EV / LTM revenue 0.6x



($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 511 376 412 467 591 271 350 294 275 294 Total current assets 598 498 541 585 708 399 457 400 393 400 Intangible assets 430 424 123 96 78 171 155 148 166 148 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 Total current liabilities 39 75 55 77 303 71 88 54 50 54 Long-term debt 345 209 525 233 0 0 0 0 0 0 Total liabilities 384 288 580 324 303 78 123 91 74 91 Preferred stock 0 0 0 0 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



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BUSINESS OVERVIEW Emulex provides storage networking products, based on proprietary ASICs, in two primary categories: Host server products (HSPs) include host bus adapters (HBAs) based on fibre channel technology, and converged network adapters (CNAs) based on fibre channel over ethernet (FCoE) technology. HBAs enable servers to efficiently connect to storage area networks (SANs) by offloading data processing tasks from the server. CNAs efficiently move data between ethernet-based local area networks (LANs) and fibre channel-based SANs. Embedded storage products (ESPs) include storage switches, bridges, routers, and input/output controllers (IOCs) deployed inside arrays, tape libraries, and other storage. Emulex typically experiences modest seasonality, with lower sequential revenue growth in FQ1 and FQ3. SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1Q09 % of revenue by segment: Host server products 85% 76% 72% 73% Embedded storage products 15% 23% 28% 27% Revenue growth by segment: Host server products 6% 5% -1% -9% Embedded storage products 21% 82% 25% 8% Total revenue growth 7% 17% 4% -5% % of revenue by geography: U.S. 55% 47% 40% 36% Pacific Rim 13% 17% 26% 29% Europe and ROW 32% 36% 34% 35% Revenue by customer: IBM 29% 25% 28% 29% EMC 23% 18% 18% 13% HP 10% 13% 15% 16% Info X 21% 17% 14% <10% Others 17% 27% 25% >32%


• Number-two provider of fibre channel HBAs, ranking behind Qlogic in quasi-duopolistic market (Brocade’s mid-2007 market entry may adversely affect competitive dynamics). The market for host server products has grown along with the adoption of storage area networks as a means of accessing enterprise data. HBA market growth is also heavily influenced by server shipments, which have slowed.

• Strong proprietary technology. Emulex’s fibre channel development efforts began in 1992. The company has 500 engineers and owns significant IP.

• James McCluney (57) joined Emulex as COO and became CEO in 2006. He was previously CEO of Vixel, which Emulex acquired in 2003. Former Emulex CEO Folino remains executive chairman.

• Strong balance sheet, with $294 million of cash and short-term investments and no debt.

• M&A: CEO McCluney wants to “take advantage of our opportunities to grow through diversification.”

• $140 million repurchase authorized in August. • Stock price implies 10% trailing FCF yield and

9x forward P/E (trailing GAAP EPS loss reported). INVESTMENT RISKS & CONCERNS

• Guiding for 2Q09 revenue decline of 11-15% and non-GAAP EPS decline of 32-41%, following revenue drop of 5% and EPS drop of 19% in 1Q09.

• Growing competition, including the mid-2007 HBA market entry by Brocade and the increasing prominence of iSCSI HBA vendors, such as Broadcom, Intel, and Mellanox. Emulex’s ESPs compete against LSI, Maxim, and PMC-Sierra.

• Large customer concentration, with investors heavily focused on OEM share gains and losses.

• Marketing head Michael Smith left Emulex in July. He was not immediately replaced.

• Technology evolution. Storage has evolved, driven by the decline of SCSI technology, the rise of fibre channel, and the market entry of Cisco, which has pushed iSCSI as a fibre channel alternative. Emulex benefited from the decline of SCSI but stands to lose if fibre channel declines. We are reminded of Adaptec, whose HBA fortunes fell along with SCSI.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BRCD 1,417 912 .6x 1.8x 6x 6x BRCM 7,852 5,605 1.2x 3.0x 9x 11x CSCO 97,853 77,961 1.9x 4.8x 12x 11x QLGC 1,387 1,006 1.5x 2.5x 9x 9x LSI 2,013 1,554 .6x 2.9x 7x 8x ELX 593 299 .6x 1.5x 9x 8x

MAJOR HOLDERS CEO McCluney 1% │ Other insiders 7% │ Wellington 9% │ Primecap 8% │ Invesco 6% │ Vanguard 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Energen Corporation (NYSE: EGN) Birmingham, 205-326-2700 Utilities: Natural Gas Utilities, Member of S&P MidCap 400 http://www.energen.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 7 5 2 5 9 10 9 12 3 12 Total current assets 201 234 287 350 479 490 449 421 325 421 Intangible assets 0 0 0 0 0 0 0 0 0 0 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 Total current liabilities 215 393 328 499 688 561 606 406 439 406 Long-term debt 544 513 553 613 683 583 562 562 563 562 Total liabilities 766 1,060 1,079 1,378 1,726 1,635 1,701 1,620 1,500 1,620 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Energen develops domestic, onshore reserves of natural gas, oil and natural gas liquids (NGL), with 3P reserves of 3.6 Tcfe. It is also the top distributor of natural gas in Alabama. SELECTED OPERATING DATA


9/30/08 % of revenue by segment: Oil and gas operations 47% 52% 58% 59% Natural gas distribution 53% 48% 42% 41% Revenue growth by segment: Oil and gas operations 29% 38% 13% 16% Natural gas distribution 14% 11% -8% 2% Total revenue growth 20% 24% 3% 10% EBIT margin by segment: Oil and gas operations 46% 55% 55% 54% Natural gas distribution 12% 11% 12% 14% Total EBIT margin 28% 34% 36% 37% Capex to D&A (or DD&A) by segment: Oil and gas operations1 4.0x 2.7x 3.3x 3.0x Natural gas distribution2 1.7x 1.7x 1.2x 1.2x Oil and gas operations — % of revenue by type: Natural gas 69% 60% 60% 58% Oil 22% 25% 30% 31% NGL 7% 7% 8% 8% Other 1% 8% 1% 2% Oil and gas operations — growth of production volumes:3 Natural gas (MMcf) 7% 3% 2% 5% Oil (MBbl) -3% 10% 6% 4% NGL (MMgal) 3% 8% 1% -9% Oil and gas operations — growth of proved reserves:4 Natural gas (MMcf) 6% 2% 2% n/a Oil (MBbl) 38% 0% 0% n/a NGL (MBbl) -8% -8% 7% n/a Oil and gas operations — revenue per unit of production: Natural gas (per Mcf) $7.81 $6.53 $6.45 $8.22 Oil (per barrel) $51.61 $59.88 $67.17 $73.69 NGL (per gallon) $0.74 $0.80 $0.98 $1.06 Natural gas distribution — % of revenue by customer type: Residential 64% 64% 64% 62% Commercial, industrial 28% 27% 27% 27% Transportation, other 8% 8% 9% 11% Natural gas distribution — growth of delivery volumes (MMcf): Residential -3% -9% -7% 0% Commercial, industrial 1% -10% -6% 0% 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. 3 2007 production included 64,300 MMcf of natural gas and 3,879 MBbl of oil. 4 2007 reserves included 1.1mn MMcf of natural gas and 74,625 MBbl of oil. INVESTMENT HIGHLIGHTS

• Oil and gas operations performing well, driven by higher sales prices and volumes. Production in the San Juan Basin has benefited from new drilling and continued development of Fruitland Coal properties.

• Exploring Alabama shales with Chesapeake, with three test wells drilled and gas encountered in each well. The companies are working on “completion techniques” to determine if the gas from Alabama shale formations can be produced economically.

• Cohesive management team. Each executive officer has been with the company for at least five years. Chairman and CEO James McManus II (49) has been with the company since 1986.

• Guiding for 2008 EPS of $4.35-$4.55, up 2-6% from 2007 EPS of $4.28. Management has guided for 2009 EPS of $3.70-$4.10 (down 6-19%). 2009 guidance assumes hedge position covering 62% of production, prices for unhedged natural gas, oil and NGL of $7 per Mcf, $70 per barrel and $0.91 per gallon, respectively, among other assumptions.1

• Hedges cover 73% of Q4 and 62% of 2009 oil and gas production, mitigating the near-term impact of recent declines in oil and gas prices.

• Paying dividends at annual rate of $0.48 per share. • Stock price implies 6% trailing FCF yield, 6x


• Utility revenue and EBIT up despite reduced customer usage. The latter “remains a concern” and could cause segment results to deteriorate.

• 59% of YTD revenue from cyclical oil and gas operations. While the company has benefited from prices materially exceeding operating costs in recent years, there is no reason to believe the company can sustain superior returns on capital in this segment.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E DUK 19,789 32,652 2.5x 1.2x 13x 12x PXD 2,621 5,350 2.2x 0.8x 5x 5x SO 27,273 45,741 2.7x 2.0x 15x 14x EGN 2,037 2,609 1.7x 1.2x 7x 7x

MAJOR HOLDERS CEO McManus II <1% │ Other insiders 1% │ Vanguard 5% │ JP Morgan 5% │ Barclays 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 1 Guidance does not include potential property acquisitions, Alabama shales exploration or stock repurchases, nor does it include a potential impairment of capitalized unproved leasehold related to Alabama shales ($41 million).

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.

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Thanksgiving 2008


First Advantage Corporation (Nasdaq: FADV) St. Petersburg, FL, 727-214-3411 Services: Business Services http://www.fadv.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 1 7 6 8 28 32 77 46 34 46 Total current assets 10 22 34 53 153 204 265 210 215 210 Intangible assets 44 130 230 355 727 762 796 840 795 840 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 Total current liabilities 6 13 30 55 132 137 189 106 130 106 Long-term debt 1 1 14 86 182 180 14 40 152 40 Total liabilities 9 18 45 143 403 415 348 275 396 275 Preferred stock 0 0 0 0 0 0 0 0 0 0 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


Oct 08Oct 07Oct 06Oct 05Oct 04Oct 03Jan 00Jan 00Jan 00Jan 00

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BUSINESS OVERVIEW First Advantage provides risk mitigation in six segments: Lender Services offers mortgage-related credit reporting. Data Services includes transportation credit reporting, supply chain theft mitigation, and criminal records reselling. Dealer Services serves auto dealers with consumer credit reports, credit automation software and lead generation. Employer Services offers background screening, tax incentive services, occupational health, and hiring solutions. Multifamily Services provides resident screening and software, including background and eviction searches. Investigative and Litigation Support Services includes surveillance, field interviews, and computer forensics. SELECTED OPERATING DATA


9/30/08 % of service revenue by segment:1 Lender services 29% 24% 19% 19% Data services 13% 17% 15% 16% Dealer services 17% 16% 14% 13% Employer services 25% 26% 30% 30% Multifamily services 11% 9% 9% 11% Investigative services 6% 8% 13% 12% Service revenue growth by segment: Lender services 25% 5% -14% -18% Data services 22% 68% -6% -8% Dealer services 41% 23% -6% -11% Employer services 25% 36% 19% -5% Multifamily services 17% 9% 5% 2% Investigative services 34% 71% 67% 20% Total revenue growth 27% 28% 6% -6% EBIT margin by segment: Lender services 29% 31% 22% 18% Data services 37% 31% 28% 20% Dealer services 14% 13% 13% 15% Employer services 9% 10% 12% 8% Multifamily services 25% 22% 26% 31% Investigative services 6% 19% 35% 37% Corporate and other -4% -5% -6% -5% Total EBIT margin 17% 16% 15% 13% % of revenue by geography: Domestic 98% 97% 89% 88% International 2% 3% 11% 12%

1 Service revenue excludes reimbursables. INVESTMENT HIGHLIGHTS

• Top three in core segments, with 4,800 employees and 90,000 customers. In credit screening, the company has high market share in small global markets with low growth, focusing on scale and cash generation. In employment screening, the company seeks to grow its share of a large global market with manifold growth opportunities.

• Proprietary engine draws on many data sources, including external data and customers’ internal data, utilizing technology to standardize and present data.

• Divestitures “almost over.” In Q2, the company sold First Advantage Investigative Services and Credit Management Solutions. In 4Q07, it sold US SEARCH.com (previously in data services). Also in 4Q07, the company sold a portion of its shares in DealerTrack, realizing a gain of $97 million.

• Guiding for EPS decline of 44-48% in 2008, with estimated EPS of $1.10-1.18 versus $2.10 in 2007.

• Anand Nallathambi (46) became CEO in 1Q07 upon the resignation of John Long. Nallathambi has been president since 2005. His previous experience includes a position as group president at First American Corp., the company’s parent.



• Mortgage industry and labor market weakness have negatively affected the lender services, employer services and data services segments. The company is pursuing “aggressive cost reduction.”

• Controlled by First American, which owns 80% of the economics and 98% of the voting power via ownership of the Class B common stock.

• M&A strategy, with 13 acquisitions since 2006. While each deal has been fairly small, the large number of deals heightens integration risk.

• Efforts to protect consumer privacy due to rising identity theft could hurt the company by limiting access to data and the ability to distribute data.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ADP 17,837 1,561 .1x 3.7x 15x 13x EFX 2,972 4,211 2.1x n/m 10x 9x FIC 650 1,034 1.4x n/m 8x 7x FADV 715 720 .9x 10.8x 13x 13x

MAJOR HOLDERS Class A Common (12 million shares out): First American 82% │ CEO Nallathambi 1% │ Other insiders 1% │ Experian 6% │ Pequot 4% │ Maverick 2%; Class B Common (48 million shares out): First American 100% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Forest Laboratories, Inc. (NYSE: FRX) New York, NY, 212-421-7850 Health Care: Biotechnology & Drugs, Member of S&P 500 http://www.frx.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 612 1,442 1,793 1,619 1,027 1,353 1,777 1,890 1,575 1,890 Total current assets 1,195 2,255 2,916 2,708 2,207 2,423 2,908 3,059 2,703 3,059 Intangible assets 280 294 290 278 227 172 543 506 151 506 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 Total current liabilities 325 564 605 564 421 628 611 611 578 611 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 327 566 607 573 422 629 810 833 755 833 Preferred stock 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



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BUSINESS OVERVIEW Forest Labs provides branded and generic prescription and non-prescription drugs. The company’s central nervous system (CNS) franchise accounted for 90% of revenue in FY08. The company markets products through an in-house salesforce numbering 2,700 people (52% of workforce). SELECTED OPERATING DATA

FYE March 31 2006 2007 2008 1H09 % of revenue by therapeutic class: CNS1 86% 88% 90% 90% Cardiovascular, other 14% 12% 10% 10% Revenue growth by therapeutic class: CNS1 -8% 16% 12% 9% Cardiovascular, other -14% -1% -6% -3% Total revenue growth -8% 14% 10% 8% % of revenue by major line item: Lexapro 67% 66% 65% 64% Namenda 18% 21% 24% 26% Contract revenue 4% 6% 6% 6% All other 11% 8% 5% 5% % of revenue by customer:2 McKesson 35% 37% 38% n/a Cardinal Health 26% 27% 30% n/a AmeriSource Bergen 20% 13% 15% n/a Other 19% 23% 17% n/a % of revenue by geography: U.S. 98% 98% 98% n/a U.K. and Ireland 2% 2% 2% n/a

1 Central nervous system franchise; includes Lexapro, Celexa, and Namenda. 2 The named major customers act as wholesale distributors. INVESTMENT HIGHLIGHTS

• Key products: Lexapro (65% of revenue), a selective serotonin reuptake inhibitor for major depression and generalized anxiety disorder; Namenda (24% of revenue), an N-methyl-D-aspartate antagonist for moderate to severe Alzheimer’s disease; and Bystolic (since January 2008), a novel beta-blocker for hypertension.

• Bystolic received FDA approval in December 2007 and is being marketed for the treatment of hypertension. Bystolic is a novel beta-1 selective beta-blocker. It has received five years of marketing exclusivity under Hatch-Waxman.

• Late-stage pipeline has two compounds under FDA review: milnacipran for the treatment of fibromyalgia and Lexapro for the additional indication in the treatment of adolescent depression. The company has also reported positive clinical results for three other late-stage pipeline products.

• Guiding for FY09 adjusted EPS of $3.30-3.40 (excluding charge related to termination of AZOR co-promotion), compared to FY08 adjusted EPS of $3.55. The company expects to spend $100 million in development milestones in FY09.

• Chairman and CEO Howard Solomon (80) has been a director since 1964 and CEO since 1977. President and COO Lawrence Olanoff (56) has been with the company for more than a dozen years.

• Share repurchases. The company bought back 8.9 million shares for $356 million in FY08, and 10.1 million shares for $332 million so far in FY09.



• Dependent Lexapro and Namenda (66% and 24% of FY08 revenue, respectively). A Lexapro-related patent was upheld in 2007 by a Court of Appeals, and the company is pursuing an infringement suit against a generic maker seeking FDA approval of a generic alternative to Lexapro. Forest Labs is also suing multiple manufacturers who are seeking FDA approval to market generic versions of Namenda.

• Dependent on in-licensing and acquisition of new products. The company concedes that its pipeline “is currently dependent on the licensing and acquisition of new product opportunities.”

• FDA approval of milnacipran delayed. Contrary to management expectations, the FDA has not yet acted on the NDA for milnacipran. The company still expects favorable action “in the near future.”



09 P/E

GSK 94,416 106,982 3.1x 80.2x 10x 10x LLY 36,451 34,944 1.7x 3.2x 8x 7x MRK 57,781 57,872 2.4x 3.3x 8x 8x NVO 36,226 35,046 4.7x 6.9x 18x 18x NVS 110,839 113,506 2.7x 3.8x 13x 12x SNY 82,566 89,716 2.5x n/m 8x 7x PFE 109,775 99,330 2.0x 4.1x 7x 7x FRX 6,923 5,033 1.3x 2.1x 7x 6x

MAJOR HOLDERS CEO Solomon 2% │ Other insiders <1% │ Wellington 14% │ Capital Group International 11% │ Clearbridge 10% │ Barclays 10% │ Vanguard 10% │ Fairholme 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Foster Wheeler Ltd. (Nasdaq: FWLT) Clinton, NJ, 908-730-4000 Capital Goods: Construction Services http://www.fwc.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Intangible assets 275 123 123 122 115 114 115 127 114 127 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 Total liabilities 3,374 3,623 3,379 2,703 2,236 2,502 2,675 2,682 2,594 2,682 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Foster Wheeler is an engineering and construction contractor and power equipment supplier that operates in two segments: The Engineering & Construction (E&C) Group builds processing facilities for the oil and gas, power and other industries. Services include front-end design; engineering, procurement, construction; and project management. The Power Group provides steam generating and auxiliary equipment for power stations and industrial facilities. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: E&C 67% 63% 72% 75% Power 33% 37% 28% 25% Revenue growth by segment: E&C -12% 51% 66% 50% Power -26% 75% 12% 27% ∆ revenue -17% 59% 46% 43% ∆ new orders 71% 18% 82% -19%4 ∆ revenue ex. flow-through1 na 56% 27% 17% ∆ backlog ex. flow-through2 37% 17% 30% 6% EBITDA margin by segment (GAAP basis):3 E&C 11% 15% 14% 11% Power 15% 7% 10% 15% Corporate and other -12% -1% -1% -1% Total EBITDA margin 0% 11% 12% 11% % of revenue by industry: Power generation 42% 38% 28% 24% Oil refining 20% 20% 28% 23% Oil and gas 15% 19% 18% 27% Chemical / petrochemical 10% 11% 20% 23% Other 13% 11% 7% 4% % of E&C revenue by geography: North America 4% 6% 7% n/a South America 2% 3% 2% n/a Europe 46% 28% 23% n/a Asia 11% 14% 22% n/a Middle East 19% 21% 27% n/a Other 18% 28% 19% n/a % of Power revenue by geography: North America 51% 58% 49% n/a South America 2% 4% 5% n/a Europe 26% 30% 34% n/a Asia 19% 7% 11% n/a Middle East 2% 0% 0% n/a Other 0% 0% 0% n/a

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 Backlog ex. flow-through costs was $3.2 billion (+6% y-y) at September 30. 3 EBITDA margins are materally higher on a “Foster Wheeler scope” basis. 4 New orders on a “Foster Wheeler scope” basis are up 1% YTD. INVESTMENT HIGHLIGHTS

• 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.

• Strategy: grow organically and via “bolt on” M&A; leverage strong position in refining, delayed coking, LNG and circulating fluidized-bed boilers; pursue “clean coal” and renewable technologies.

• E&C outlook: Key markets “very robust”; expects strong 2H08 orders; Q3-end backlog up 7% y-y.

• Power outlook: Global demand may offset delays in N.A. prospects; Q3-end backlog up 5% y-y.

• Authorized $750 million buyback in September, with $338 million used to buy 10.5 million shares.



• Power group profit may be pressured. According to the company, “EBITDA growth in 2009 will depend on how the N.A. market develops and on our continued success booking jobs outside N.A.”

• Dependent on demand from oil and gas, refining, chemical and power industries, all of which exhibit cyclicality in their spending on large-scale engineering and construction projects.

• Fixed-price deals account for ~20% of revenue, exposing the company to the risk of cost overruns.

• Long-term liabilities include $254 million pension liability and $334 million asbestos liability.

• Present value of asbestos liability is difficult to estimate. The company has recorded a GAAP liability based on forcasted claims through 2022.

• CEO Ray Milchovich to retire in 2009. COMPARABLE PUBLIC COMPANY ANALYSIS

($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ABB 24,883 20,057 .6x 2.9x 6x 6x JEC 3,796 3,299 .3x 2.8x 8x 8x FLR 6,485 4,418 .2x 2.4x 10x 9x MDR 1,778 952 .1x 1.3x 3x 4x FWLT 2,667 1,581 .2x 3.2x 5x 5x

MAJOR HOLDERS Insiders <1% │ T Rowe 9% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? n/a1 FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 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.

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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 Insider buys (last six months): 3 LT EPS growth 3.0% 3.0% 2 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria 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%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 141 90 67 136 163 94 77 123 91 123 Total current assets 1,178 1,133 1,223 1,392 1,462 1,532 1,343 1,346 1,481 1,346 Intangible assets 8,684 8,921 9,711 10,117 10,131 10,897 10,770 9,032 10,882 9,032 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 Total liabilities 7,360 6,821 6,283 7,257 8,173 7,842 6,871 6,813 7,081 6,813 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Gannett is the top U.S. newspaper publisher, with 85 daily papers (paid circulation of 6.9 million, including USA Today of 2.3 million) and 900 non-daily publications. Newsquest is the second-largest regional newspaper publisher in the U.K., with 17 paid daily and 300 non-daily publications. Gannett also operates 23 TV stations reaching 20 million U.S. households. The Captivate subsidiary delivers news and ads on elevator video screens. Gannett websites attract ~26 million unique visitors monthly, reaching 16% of the U.S. Internet audience. The company was founded in 1906. SELECTED OPERATING DATA


9/30/08 % of revenue by type: Advertising 68% 67% 66% 65% Circulation 17% 16% 17% 18% Broadcasting1 10% 11% 11% 11% All other 5% 6% 6% 5% Growth of revenue by type: Advertising 7% 4% -6% -12% Circulation 4% 3% -2% -3% Broadcasting1 -10% 16% -8% -3% All other 13% 10% 5% -8% Total revenue growth 5% 6% -5% -9% % of revenue by segment: Publishing 90% 89% 89% 89% Broadcasting1 10% 11% 11% 11% EBIT margin by segment: Publishing2 26% 23% 21% 17% Broadcasting1 42% 44% 40% 39% Corporate -1% -1% -1% -1% Total EBIT margin 27% 24% 22% 19% D&A as % of revenue2 4% 4% 4% 4% Capex as % of revenue 4% 3% 2% 2% % of revenue by geography: U.S. 84% 85% 84% n/a Foreign 16% 15% 16% n/a

1 Includes Captivate. 2 Excludes asset impairment charges. INVESTMENT HIGHLIGHTS

• Aggressive digital strategy, including PointRoll, a 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, Gannett and Tribune created a 50/50 JV, Metromix, an online entertainment model for local properties that will be networked for national ad opportunities. Gannett also acquired HighSchoolSports.net, a digital content site serving high school audiences.

• Recently acquired Tribune and McClatchy’s minority interests in ShopLocal, the top marketing and database services company for most major U.S. retailers. Gannett intends to pursue synergies between ShopLocal and PointRoll in order to create an end-to-end solution for retailers.

• Recent brightspots include higher political advertising in broadcasting segment, positive results from Captivate, and growth in online revenue.

• Part-owner with Hearst, NY Times and Tribune of quadrantOne, a national digital ad network that reaches 70 million unique visitors and covers 29 of top 30 designated market areas (DMAs).

• Dividends and buybacks have returned $6.2 billion to holders since 2000. Gannett pays dividends at an annual rate of $1.60 per share. The company repurchased 4.6 million shares for $215 million in 2007 and 2.1 million shares for $73 million YTD.

• Stock price implies 58% trailing FCF yield and 3x forward P/E (trailing GAAP EPS loss reported).


• “Difficult and volatile” economy hurting results. Gannett pre-announced lower Q2 earnings in July and wrote off nearly $3 billion of intangibles and newspaper PP&E. Q3 revenue fell 9% despite Olympics and political advertising, as publishing has seen lower demand for real estate classifieds in the U.S. and U.K. The company is also facing “significantly” higher newsprint prices.

• Secular decline of newspaper industry. Gannett is dealing with the same adverse trends that its traditional competitors are also forced to address. While most newspaper companies have responded to the industry’s secular decline by acquiring digital assets, it is not at all clear that such acquisitions will result in competitive advantage and add value.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E MNI 135 2,198 1.1x n/m 2x 3x NWS.A 19,419 27,408 .8x n/m 7x 6x NYT 1,055 2,136 .7x 17.6x 10x 12x GCI 1,859 5,645 .8x n/m 2x 3x

MAJOR HOLDERS CEO Dubow <1% │ Other insiders 1% │ Brandes 11% │ AXA 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Garmin Ltd. (Nasdaq: GRMN) Camana Bay, Cayman Islands, 345-640-9050 Technology: Scientific & Technical Instruments http://www.garmin.com



Ownership Data FYE 12/31/09 3.36 3.90 20 EV / LTM EBITDA n/a Insider ownership: 46% FYE 12/31/10 3.29 4.06 2 EV / LTM EBIT 3.5x Insider buys (last six months): 6 LT EPS growth 13.4% 14.0% 9 P / tangible book 2.0x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 31% Date Actual Estimate LTM EBIT yield 28% # of institutional owners: 479 10/29/08 $0.87 $0.84 LTM pre-tax ROC 88%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 234 330 327 314 367 410 745 540 762 540 Total current assets 360 473 540 637 801 1,169 2,333 2,037 1,858 2,037 Intangible assets 17 25 42 50 36 68 196 214 164 214 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 Total current liabilities 56 81 104 176 196 338 802 697 568 697 Long-term debt 28 20 0 0 0 0 0 0 1 0 Total liabilities 85 103 107 182 205 339 941 876 660 876 Preferred stock 0 0 0 0 0 0 0 0 0 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


Oct 08Oct 07Oct 06Oct 05Oct 04Oct 03Oct 02Oct 01Jan 00Jan 00

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BUSINESS OVERVIEW Garmin provides navigation devices and applications enabled by GPS technology. Products serve auto, mobile, wireless, outdoor recreation, marine, aviation, and OEM applications. No customer accounts for 10% or more of revenue. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Revenue by segment: Auto / mobile 39% 61% 74% 70% Outdoor / fitness 23% 16% 11% 13% Aviation 22% 13% 9% 10% Marine 15% 9% 6% 7% Revenue by geography: North America 64% 62% 65% 64% Europe 31% 33% 30% 31% Asia 5% 5% 5% 4% Units shipped (mn) 3.0 5.4 12.3 10.6

Change (y-y) 31% 78% 128% 55% Revenue per unit ($) 339 329 259 231

Change (y-y) 3% -3% -21% -20% INVESTMENT HIGHLIGHTS

• Leader in personal navigation devices (PNDs), with 55% market share in North America and 20% share in Europe (#2 behind TomTom). Industry shipments have slowed sharply after growing 100% in the U.S. and 40% in Europe earlier this year.

• Deals with auto makers and car rental firms have boosted Garmin’s market presence. The company has deals with Ford, Honda, and Volvo, as well as National Car Rental and Alamo Car Rental.

• Acquisitions of European distributors have doubled Garmin’s European share since early 2007.

• Planned nüvifone launch in 2009. The nüvifone is a mobile device that seeks to integrate the navigation and communication experience.

• Leading-edge proprietary technology, protected by more than 330 U.S. patents and 190 U.S. patent applications pending; and more than 40 foreign patents and 32 foreign patent applications pending.

• Units, revenue, and EBIT up 55%, 25% and 5%, respectively, YTD. Growth continues to be driven primarily by the auto/mobile and outdoor/fitness segments, while the marine segment has lagged.

• Guiding for 2008 revenue of $3.6 billion (+13%), down from prior guidance of $3.9 billion (+23%), with EPS of $3.78 (excluding forex translation).

• Repurchased $625 million of stock YTD. • Stock price implies 13% trailing FCF yield, 5x

trailing P/E and 6x forward P/E.

INVESTMENT RISKS & CONCERNS • ASP declines have approximated 25% recently

and are expected to do so through yearend 2008. Offsetting the declines are unit volume increases, component cost reductions, and greater efficiency. Inflation could make lower costs tough to sustain.

• Marine and aviation segments have slowed due to higher fuel prices and economic weakness.

• $8 billion Nokia acquisition of Navteq, which supplies digital map data for vehicle navigation and location-based services to Garmin under a deal that runs through 2019. Garmin renewed the Navteq deal in late 2007 and abandoned a proposal to buy Navteq competitor Tele Atlas. Nokia competes with Garmin, calling into question the long-term viability of Garmin’s Navteq partnership.

• €3 billion TomTom acquisition of Tele Atlas. Top Garmin competitor TomTom took control of Tele Atlas in June 2008. This deal puts both major providers of digital map data—Navteq and Tele Atlas—into the hands of Garmin competitors.

• Dependence on Global Positioning System (GPS). GPS is a satellite-based navigation and positioning system consisting of a constellation of orbiting satellites operated by the U.S. Department of Defense. The DoD does not currently charge for access to the satellite signals, but it is conceivable the government could decide to do so in the future.



09 P/E

MOT 9,247 6,288 .2x 1.0x 68x 29x NOK 47,854 44,007 .6x 10.3x 6x 7x RIMM 22,620 21,052 2.5x 5.7x n/a n/a TOM2.AS 762 2343 1.2x n/m 3x 4x GRMN 3,856 3,317 .9x 2.0x 5x 6x

1 TomTom and privately-held Magellan, Mio, Navigon are closest comps. MAJOR HOLDERS CEO Min Kao 20% │ Other insiders 26% │ Cap Re 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into GRMN: WHAT ARE THE SHARES WORTH?

• We value Garmin at $35-65 per share, based on the valuation analysis summarized below. The wide range of fair value reflects (1) the difficulty of balancing the potential earnings impact of the current slowdown and the continued positive long-term growth outlook for personal navigation devices; and (2) the virtually impossible task of predicting the multiple of earnings Garmin will deserve in the future. We reflect this dual challenge in fairly conservative assumptions.

Garmin — Valuation Summary


Low Value

High Value

Value of excess marketable assets:1 Cash and equivalents $522 $522 Marketable securities 18 18 Long-term marketable securities 309 309 Net cash and investments $849 $849 Cash needed to run business2 (200) (100) Total $649 $749 Value of core business: 2009 estimated EPS ex. interest income 3.15 Fair value multiple of 2009E adjusted EPS 10x Estimated EBIT power in 2-3 years 1,600 Fair value multiple of EBIT power 8x Total $6,552 $12,800 Estimated fair value of GRMN $7,201 $13,549 per share $35 $65

1 Based on balance sheet values as of September 27, 2008. 2 Represents MOI estimate. Source: Company filings, The Manual of Ideas estimates and analysis. WHY THE SHARES MAY BE MISPRICED

• Turnover in “style” of shareholder base. While only a year ago Garmin was a favorite “momentum stock,” it now attracts investors who are both comfortable with a projected earnings decline and willing to own a business experiencing rapid technological change. In other words, the shares may not have found a natural “home” yet, but we believe they are now moving into the sweetspot of “magic formula” and low P/E investors.

GARMIN VERSUS TOMTOM – PND UNIT SHIPMENTS 2004 2005 2006 2007 PND unit sales (mn): Garmin 2.3 3.0 5.4 12.3 TomTom 0.2 1.7 4.7 9.6 Relative market shares: Garmin 90% 64% 54% 56% TomTom 10% 36% 46% 44%

Source: Garmin, TomTom, The Manual of Ideas. TOP COMPETITOR TOMTOM – SNAPSHOT

• TomTom is #1 PND supplier in Europe (45% market share) and #2 globally. It derives more than three-quarters of revenue from Europe, with the rest primarily from North Amrica. TomTom was founded in 1991, went public in 2005 (Amsterdam: TOM2.AS), and has ~3,500 employees today.

• Explosive growth from 2002-07, with revenue up from €8 million to €1.7 billion and net income up from €1 million to €317 million over the period.

• Q3 pro forma revenue down 12% sequentially and down 10% y-y. Favorable sequential but unfavorable y-y ASP trends are evident from the fact that TomTom shipped 2.5 million PND units in Q3, down 18% sequentially and up 17% y-y.

• Guiding for 2008 PND market size of 18 million units in Europe and 18 million units in North America, down from TomTom previous market guidance for 20 million units in each market. TomTom expects to comprise 12-13 million of the estimated 36 million units sold globally, resuling in estimated revenue of €1.6-1.7 billion to TomTom, with 40% gross and 20% operating margins.

• Acquired digital mapping provider Tele Atlas for €3 billion in August, creating a strategic challenge for Garmin, which relies on mapping data provided by Navteq, which Nokia acquired for $8 billion.

• Weak balance sheet, with negative tangible book, $263 million of cash and $1.6 billion of debt.

TomTom Stock Performance Since IPO

€ 0€ 10€ 20€ 30€ 40€ 50€ 60€ 70€ 80

May-05 May-06 May-07 May-08

Source: TomTom, The Manual of Ideas.

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SHIPMENT VOLUME AND ASP TRENDS • Unit shipments grew 128% in 2007 on a 21%

decline in ASPs. Unit growth slowed to 55% in the first nine months of 2008, while ASPs eroded 20%.

Garmin—Unit Shipments and ASPs, 2000-08 YTD

0mn units2mn units4mn units6mn units8mn units

10mn units12mn units14mn units

00 01 02 03 04 05 06 07 ytd$0 per unit

$100 per unit

$200 per unit

$300 per unit

$400 per unit

Unit Shipments Revenue per Unit

Note: YTD data is for the nine months ended September 30, 2008. Source: Company, The Manual of Ideas. Garmin—Unit Growth and ASP Changes, 2001-08 YTD

0%20%40%60%80%

100%120%140%

01 02 03 04 05 06 07 ytd-30%

-20%-10%

0%

10%20%

30%

Unit Grow th (left axis) ASP Change (right axis)

Note: YTD data is for the nine months ended September 30, 2008. Source: Company, The Manual of Ideas. MANAGEMENT’S VIEW OF BUSINESS Notes from 3Q08 earnings call on October 29:

• Business environment: “the reason we had to drop our numbers from our earlier guidance was October; we definitely saw a slowdown;” in PND market, Europe has slowed “more dramatically” than U.S.; PND remains “hot category— it will still be one of the pushes for the holiday season when you look at shelf space and number of SKUs;” “very strong promotional emphasis for PNDs for the holidays”

• Q3 review: 19% revenue growth on 43% shipment growth and 17% ASP decline; “solid” growth in automotive and outdoor fitness; gross margin eroded 260 bps y-y, but “exceeded our earlier expectations as ASP declines moderated and price reductions were largely offset by lower product cost;” gross margin eroded 150 bps sequentially but would have been “nearly flat” excluding currency; EPS down 2% assuming constant currency rates

• Q3 review—automotive and mobile: 21% revenue growth, driven by “strong” unit growth and “moderating” price declines; Garmin has top three PNDs and seven of top ten PNDs in the U.S.

• Q3 review—outdoor fitness: 35% revenue growth, helped by market share gains

• Q3 review—aviation: +9%, “as shipments to OEM offset weakness in portable and retrofit markets”

• Q3 review—marine: 8% revenue decline, as higher fuel prices have weakened marine industry; gaining share in OEM and dealer-installed markets

• Q3 review—by geography: 29% North American revenue growth, 9% European revenue growth, 21% Asian revenue decline; Asia down due to “timing of several sales programs… we do continue to expect healthy double-digit growth in our APAC markets”

• 2008 guidance: revised down – “some markets are slowing,” “weaker international currencies add additional pressure on our revenues and margins;” expect revenue of $3.6 billion (+13%), 24% EBIT margin and EPS of $3.78 (flat y-y) including gain on TeleAtlas shares (based on 19% tax rate)

• 2009 outlook: market will be “different, with higher penetration rates as we go into the year, but still unit growth and less ASP decline;” ASP may erode less due to (1) already low prices and (2) already thin margins realized by competitors, leaving limited room for price cuts; U.S. PND unit growth: “not prepared to give 2009 guidance, but… do not see any reason why we shouldn’t see at least 20% unit growth;” PND margin may see “slight reduction… should still see [PND] margins of about 30%”

• ASP dynamics: -17% in Q3; ASP stable or up y-y in outdoor fitness, aviation and marine; PND ASP decline continues “in line with our earlier forecast”

• Inventory: to fall $150 million in Q4; at Q3-end, inventory was “more lean as retailers look to reduce their… exposure and delay cash expenditures”

• nüvifone: on track for 1H09 launch; signed deals “with some key carriers” (including carrier subsidies); breadth and depth of LBS capabilities are “superior to any other device on the market;” expects to be competitive versus Apple and RIM in features and pricing; gross margin should be 30-35%; one million units shipped in first twelve months after release would be “acceptable”

• PND market size and growth: U.S. and Europe are 20 million units each, with 60% growth in North America and 20% in Europe; while growth is down, “the PND market is still growing at a healthy pace in comparison to other categories;” at Q3-end, North American penetration is in mid teens while Europe is above 20%; mix of new to replacement sales is 80%/20% (replacement sales expected to increase as market matures); average life of PND device is 3-5 years (likely to come down with price)

• Garmin PND market share: grew to 54% in North America and >20% in Europe in Q3

• Share repurchases: bought back 14.7 million shares for $624 million YTD; authorized additional $300 million on October 29

• Miscellaneous: employs 1,700+ engineers globally

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Thanksgiving 2008


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





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 0 1 1 21 74 137 76 271 256 271 Total current assets 19 21 27 60 140 275 270 477 461 477 Intangible assets 17 17 18 18 19 21 24 26 24 26 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 Total current liabilities 6 6 10 19 33 63 83 88 98 88 Long-term debt 6 4 0 0 0 0 0 0 0 0 Total liabilities 13 12 13 23 38 83 122 126 138 126 Preferred stock 0 0 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



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BUSINESS OVERVIEW Hansen markets and distributes “alternative” non-alcoholic beverages. The company has two segments, Direct Store Delivery (DSD), whose principal products comprise energy drinks (~90% of revenue), and Warehouse, whose principal products comprise juice-based and soda beverages. DSD sells through exclusive distributors whereas Warehouse products directly to retailers. The company outsources manufacturing to third-party bottlers and contract packers. Seasonality is strongest in Q2 and Q3.

Hansen dates back to the 1930s when Hubert Hansen started selling fresh juices in L.A. California still accounts for close to 30% of sales, which the U.S. accounts for roughly 95%. SELECTED OPERATING DATA


9/30/08 Revenue by type of customer: Grocery, specialty, wholesale 19% 12% 8% 9% Club, drug, mass merchandise 11% 14% 14% 15% Full service distributors 65% 69% 73% 72% Health food distributors 3% 2% 2% 2% Other 2% 3% 3% 2% Revenue by customer: Dr Pepper Snapple Group 18% 19% 16% 16% Wal-Mart (incl. Sam’s Club) <10% 12% 12% 11%


• $26 billion alternative beverage market up 11% in 2007, outpacing beverage industry growth.

• Continued strong performance of Monster brand despite weakness in ready-to-drink beverage category. Hansen continues to gain share, driven by Monster Energy and Java Monster drinks.

• Continuous innovation. Hansen frequently brings new and improved products to market. While some of those new introductions flop, others generate high returns on capital (e.g., Java Monster).

• Anheuser-Busch, PepsiCo distribution deals. Hansen has transitioned most of its full-service distributors to the the AB system, while PepsiCo has become the exclusive distributor for Canada.

• Entrepreneurial management. CEO Rodney Sacks (58) and CFO Hilton Schlosberg (55) engineered the 1992 purchase of Hansen and have grown it in impressive fashion since then.

• Repurchased 1.7 million shares for $50 million ($29 per share) in the first nine months of 2008.

• Solid balance sheet, with $271 million in cash and short-term investments, $110 million in auction-rate securities, and no debt as of September 30.



• Consumer spending weakness in “convenience store cold drink channels, where the vast majority of energy drinks are sold.” Hansen has also noted a “decline in store traffic primarily in the convenience and gas sector especially in Southern California.”

• Margin impact of higher raw materials costs. The company has absorbed significant increases in the cost of PET plastic bottles, aluminum cans, glucose, high fructose corn syrup, milk, cream and juice concentrates over the past couple of years. This inflation has negatively affected gross margins.

• Highly competitive beverage industry, with several large and many small companies competing for shelf space and consumer mindshare: Red Bull, Sobe, Snapple Elements, Arizona, Fuse, Coca-Cola, PepsiCo, Cadbury Schweppes, Tree Top, Ocean Spray, Jones Soda, Clearly Canadian, Crystal Geyser, Kern’s, V8, Mott’s, and others.

• Tough Q4 comp. Hansen raised prices on January 1, 2008. 7-8% of 4Q07 sales were attributable to stocking up in advance of the increases. As a result, sales growth may be challenged in 4Q08.



09 P/E

DPS 4,455 7,838 1.4x n/m 9x 9x JSDA 13 -2 -.1x 0.6x n/m n/m KFT 40,313 60,169 1.4x n/m 14x 14x KO 104,156 107,596 3.3x 9.5x 14x 14x PEP 83,123 89,004 2.1x 9.7x 15x 14x HANS 2,344 2,074 2.0x 4.8x 14x 12x

MAJOR HOLDERS CEO Sacks, CFO Schlosberg 19% (combined) │ Other insiders 3% │ Brandon LP 9% │ Hilrod Holdings 6% │ Artisan 7% │ Franklin 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Heidrick & Struggles (Nasdaq: HSII) Chicago, IL, 312-496-1200 Services: Business Services, Member of S&P SmallCap 600 http://www.heidrick.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 109 110 119 223 204 221 283 183 218 183 Total current assets 240 203 179 290 282 335 403 335 381 335 Intangible assets 64 61 56 56 53 94 100 113 93 113 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 Total current liabilities 147 119 114 140 122 199 254 196 217 196 Long-term debt 2 0 0 0 0 0 0 0 0 0 Total liabilities 182 168 178 205 173 250 307 258 276 258 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 230 200 126 216 238 264 310 302 311 302 EBIT/capital employed -177% -192% n/m n/m n/m n/m n/m n/m n/m n/m



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BUSINESS OVERVIEW Heidrick & Struggles is a global executive search firm. It has 400 consultants and provides search services on a retained basis, recruiting senior executives whose first-year base salary and bonus averaged $345K in 2007. Clients include Fortune 1000 and major non-U.S. companies, middle market and emerging growth firms, governmental, educational and non-profit organizations. H&S dates back to 1953. H&S charges executive search fees equal to one-third of a placement’s first-year cash compensation (includes salary and bonus). The company compensates its consultants in cash, with a 15%-20% three-year deferred bonus. Comp is based on revenue generation and firm-building behaviors. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007

YTD 9/30/08

% of net revenue by segment: Americas 58% 55% 54% 51% Europe 33% 34% 33% 32% Asia Pacific 10% 10% 13% 16% Net revenue growth by segment:1 Americas 11% 11% 26% -3% Europe 4% 22% 27% 2% Asia Pacific 25% 25% 59% 33% Total net revenue growth1 10% 16% 30% 3% EBIT margin by segment: Americas 21% 20% 20% 16% Europe 6% 9% 15% 13% Asia Pacific 26% 27% 20% 19% Corporate -6% -7% -6% -5% Total EBIT margin2 11% 11% 13% 10% 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. 2 Excludes restructuring costs of $0.4 million in 2006 and $22.5 million in 2005. INVESTMENT HIGHLIGHTS

• $10 billion executive search industry is fragmented and consists of several thousand firms. Top firms include Korn/Ferry, H&S, Spencer Stuart, Russell Reynolds, and Egon Zehnder.

• Favorable secular trends include globalization, shorter executive tenures, stricter corporate governance requirements, and demand for ancillary services such as Board and leadership assessment.

• Competitive advantage due to brand reputation and focus on top-level search. H&S has been in executive search for more than five decades and has built a strong reputation. The company’s focus on top-level services gives it access to key decision makers, increased potential for recurring engagements, higher fees per search, enhanced brand visibility, and a global footprint. The high-end focus also allows H&S to hire and retain talent.

• Kevin Kelly (42) became CEO in 2006 after serving in various roles at H&S since 1997, including as president of EMEA and Asia. Eileen Kamerick (49) joined the company as CFO in 2004.

• Strong balance sheet, with $183 million of cash and no debt as of September 30.

• Share repurchases. The company spent $37 million on buybacks in 2005, $52 million in 2006, $69 million in 2007, and $47 million YTD.



• Executive search remains sensitive to economic conditions. Revenue growth has slowed to 3% YTD, with revenue down 3% in Q3. While Asian revenue continues strong growth, it accounted for only 16% of overall revenue YTD. Meanwhile, economic weakness in the U.S. and Europe translated into flat U.S. revenue in Q3 and a 17% constant-currency revenue decline in Europe.

• Financial services practice generated 33% of revenue in 2007. Other industries contributed to revenue as follows: 21% industrial, 18% consumer, 10% technology, 9% health care, and 11% other.

• Financial services revenue down YTD, with U.S. and European weakness offsetting strength in Asia. The company has also seen revenue in the U.S. consumer sector under pressure.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E HHGP 111 67 .1x 0.8x 24x 108x KFY 553 344 .4x 1.6x 10x 10x MPS 578 523 .2x 2.3x 8x 15x RHI 2,762 2,392 .5x 3.3x 11x 25x HSII 347 164 .2x 1.8x 9x 14x

MAJOR HOLDERS CEO Kelly <1% │ Other insiders 3% │ Royce 11% │ W. Blair 10% │ Kornitzer 9% │ Barclays 8% │ NFJ 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Herbalife Ltd. (NYSE: HLF) Grand Cayman, Cayman Islands, 310-410-

9600 Consumer Non-Cyclical: Personal & Household Products http://www.herbalife.com



Ownership Data FYE 12/31/09 3.25 4.26 10 EV / LTM EBITDA n/a Insider ownership: 2% FYE 12/31/10 3.58 4.83 1 EV / LTM EBIT 3.6x Insider buys (last six months): 5 LT EPS growth 14.3% 14.3% 3 P / tangible book n/m Insider sales (last six months): 5 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 28% # of institutional owners: 604 11/3/08 $0.89 $0.86 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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



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BUSINESS OVERVIEW Herbalife is a network marketing company that sells weight-management, nutritional supplements and personal care products intended to support a healthy lifestyle. Products are sold in 66 countries through 1.8 million distributors. Global retail sales were $3.5 billion in 2007, consisting of distributor allowances of $1.4 billion and net sales of $2.1 billion. Variable expenses were 73% of net sales (36% royalties, 21% product costs, 16% distributor-facing costs); “fixed” costs amounted to 18% of net sales (12% overhead, 5% tax, 1% interest), resulting in a 9% net income margin. SELECTED OPERATING DATA


9/30/08 Growth in “sales leaders” 10% 29% 9% 12% Retention1 40% 42% 43% 41% % of revenue by geography: U.S. 18% 18% 20% 20% Mexico 14% 20% 17% 16% Others 68% 62% 63% 64% Revenue growth by geography: U.S. 13% 19% 24% 19% Mexico 114% 70% -1% 4% Others 11% 10% 16% 21% Total revenue growth 20% 20% 14% 18% EBIT margin by geography: U.S. 42% 42% 38% 42% Mexico 44% 44% 41% 43% Others 45% 45% 47% 49% Corporate -30% -30% -30% -32% Total EBIT margin 14% 14% 15% 15% % of revenue by product line: Weight management 63% 63% 63% 63% Targeted nutrition 19% 19% 20% 21% Energy and fitness 4% 4% 4% 4% Outer nutrition 10% 8% 7% 6% Literature and other 5% 5% 6% 6% % of revenue by geographic region: North America 19% 19% 20% 21% Mexico & Central America 14% 20% 18% 17% South America 10% 12% 14% 15% EMEA 35% 29% 26% 25% Asia Pacific 22% 20% 21% 23%

1 Measured annually after January re-qualification. INVESTMENT HIGHLIGHTS

• 80% of revenue outside of North America due to worldwide distribution network.

• Key strategies: (1) Move from monthly supply model to “Daily Method of Operation” (DMO) in order to improve stickiness and drive volume. (2) Develop unique science-based products using safe ingredients. (3) Make distributors more productive through training and infrastructure support. (4) Drive growth from under-penetrated markets. (5) Build awareness of and affinity for Herbalife brand.

• Healthy distributor organization. Enrollment of new sales leaders, and subsequent progression of those new recruits up the “organizational” ladder continues to grow at double-digit rates. Earnings potential for top performers is strong, with more than 1,000 distributors likely earning $1+ million.3

• Management experienced in consumer branding. CEO Michael Johnson (53) joined Herbalife in 2003 after 17 years at Walt Disney, mostly recently as President of Walt Disney International.

• Repurchased $94 million of stock YTD and $366 million in 2007. The annual dividend is $0.80/share.



• Multi-level marketing, built on a network of 1.8 million independent distributors, of which roughly 400K are “sales leaders” who have made it their business to sell Herbalife products. The company retains ~40% of sales leaders each year, with new recruitment crucial to network growth. If recruiting falters or retention declines, business would suffer.

• Competitors include direct selling firms NuSkin, Nature’s Sunshine, Alticor/Amway, Melaleuca, Avon, Oriflame and Mary Kay, as well as retail establishments Weight Watchers, Jenny Craig, General Nutrition, Wal-Mart, and retail pharmacies.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AVP 9,605 11,048 1.0x 13.8x 11x 11x MTEX 89 55 .2x 1.3x n/a n/a NUS 682 767 .6x 6.1x 10x 8x USNA 541 558 1.3x 14.4x 16x 14x HLF 1,121 1,298 .5x n/m 5x 5x

MAJOR HOLDERS CEO Johnson 3% │ Other insiders 2% │ Bank of New York 6% │ Times Square 5% │ GS Investment Strategies 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 3 Manual of Ideas estimate, based on company disclosure that supervisors on “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.

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Thanksgiving 2008


Herman Miller, Inc. (Nasdaq: MLHR) Zeeland, MI, 616-654-3000 Consumer Cyclical: Furniture & Fixtures, Member of S&P MidCap 400 http://www.hermanmiller.com



Ownership Data FYE 5/31/10 2.01 2.49 5 EV / LTM EBITDA n/a Insider ownership: 2% FYE 5/31/11 2.11 2.84 2 EV / LTM EBIT 4.0x Insider buys (last six months): 0 LT EPS growth 2.0% 5.0% 1 P / tangible book n/m Insider sales (last six months): 1 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 25% # of institutional owners: 518 9/17/08 $0.60 $0.55 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 135 197 200 168 122 92 171 164 81 164 Total current assets 386 414 431 437 390 385 493 489 383 489 Intangible assets 48 45 45 46 45 49 58 58 48 58 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 Total current liabilities 211 237 237 287 299 285 311 275 298 275 Long-term debt 222 209 193 181 176 173 376 376 174 376 Total liabilities 525 566 520 537 530 511 760 725 537 725 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Herman Miller operates in two segments: North American Furniture provides furniture for office and healthcare environments. The segment also includes owned contract furniture dealers. Non-North American Furniture provides furniture for work-related settings outside of North America. 70% of sales are made through the company’s dealer distribution network, with the remainder made directly to end users (governments account for 20-25% of sales). SELECTED OPERATING DATA

FYE May 31 2006 2007 2008 1Q09 % of revenue by segment: Furniture – N.A. 83% 81% 81% 83% Furniture – ROW 12% 15% 16% 15% Other1 4% 4% 3% 3% Revenue growth by segment: Furniture – N.A. 15% 8% 5% -3% Furniture – ROW 13% 28% 16% -4% Other1 18% 6% -32% 8% ∆ revenue2 15% 10% 5% -3% ∆ orders3 15% 11% 2% 11% ∆ backlog4 4% 21% -1% 19% EBIT margin by segment: Furniture – N.A. 10% 10% 12% 12% Furniture – ROW 7% 10% 15% 9% Other1 5% 10% 7% 14% Total EBIT margin 9% 10% 12% 12% % of revenue by product type: Office furniture systems 31% 29% 29% n/a Seating 24% 25% 24% n/a Freestanding & storage 16% 15% 15% n/a International5 19% 21% 24% n/a Other6 10% 9% 8% n/a Revenue growth by product type: Office furniture systems 8% 7% 3% n/a Seating 21% 14% 2% n/a Freestanding & storage 16% 4% 3% n/a International5 23% 22% 18% n/a Other6 4% 2% -5% n/a

1 Consists of residential furniture business and Convia, and unallocated items. 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 OEM deal expiration that contributed $20 million in FY07 and zero in FY08. 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. 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. INVESTMENT HIGHLIGHTS

• Third-largest player in U.S. office furniture industry with 12% share, behind Steelcase (17%) and HNI (16%), and ahead of Haworth (8%) and Knoll (7%). In 1986, HMI had 7% share, Steelcase 21%, HNI 7%, Haworth 4%, and Knoll 2%.

• Targets furniture segments with $13 billion in size and $7 billion in growth potential, driven by new channels, geographies, and products. The Convia offering adds another $8 billion opportunity.

• Design innovator with 200+ patents; partners with designers and pays them royalties. Past successes, such as the Stumpf-designed Aeron chair, may be repeatable, though timing of “hits” is unpredictable.

• Distribution: 250 independent, 50 certified dealers. • Targeting 13% EBIT margin (12.3% in FY08). It

has eliminated 150 positions and may cut more. • Most executives tenured for at least a decade.

Emblematic of the culture, CEO Brian Walker (46) calls staff “employee-owners.”

• Repurchased $250+ million in FY08 and ~$60 million YTD. Shares are down ~25% since FY03.



• Orders weakened in September and October to $34 million per week vs. $41 million in FQ1. The company plans to cut costs by $60 million per year, with related charges of $10 million in FQ3.

• U.S. industry orders and shipments expected to decline 6.5% and 9.7%, respectively, in CY08, according to trade association BIFMA. In CY09, it expects both orders and shipments to drop 6.3%.

• Beginning to feel effects of commodity price inflation. The company implemented a price increase in August in order to defend margins. The extent of the effect of input cost pressures is likely to become evident over the next few quarters.

• Office furniture demand sensitive to general corporate profitability, white-collar employment, new office construction rates, and vacancy rates.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E HNI 532 862 .3x 5.7x 9x 10x SCS 827 956 .3x 1.4x 7x 8x MLHR 784 1,002 .5x n/m 7x 7x

MAJOR HOLDERS CEO Walker 1% │ Other insiders 3% │ Columbia Wanger 11% │ Ariel 10% │ Barclays 8% │ Morgan Stanley 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


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 Insider ownership: 10% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 2.0x Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 1.0x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 65% Date Actual Estimate LTM EBIT yield 49% # of institutional owners: 213 n/a n/a n/a LTM pre-tax ROC 68%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 4 4 5 8 18 30 40 33 39 33 Total current assets 50 42 42 57 74 103 139 154 131 154 Intangible assets 3 2 2 3 4 6 6 6 6 6 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 Total current liabilities 18 21 20 30 31 44 63 63 61 63 Long-term debt 12 8 9 4 4 4 0 0 0 0 Total liabilities 31 29 29 35 35 50 66 66 62 66 Preferred stock 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Hurco an industrial technology firm that provides computerized machine tools to companies in the metal working industry. It also provides computer control systems and software products, which are integrated into the company’s machine tools. Hurco was founded in 1968. SELECTED OPERATING DATA1

FYE October 31 2005 2006 2007

YTD7/31/08

% of revenue by type: Machine tools 86% 87% 88% 89% Service and other 14% 13% 12% 11% Revenue growth by type: Machine tools 28% 20% 29% 30% Service and other 14% 8% 14% 16% Revenue growth 26% 18% 27% 28% Order growth2 19% 26% 29% 20% % of revenue by geography: Americas 34% 33% 27% 20% Europe 59% 59% 66% 74% Asia and other 7% 9% 7% 6% Revenue growth by geography: Americas 40% 13% 3% -7% Europe 23% 18% 43% 40% Asia and other 0% 49% 7% 52%

1 Hurco typically converts backlog into revenue within 60 days. As a result, backlog is not a useful indicator of future performance. 2 FY07 orders benefited by $12 million, or 7.5%, due to currency changes. INVESTMENT HIGHLIGHTS

• Leader in interactive computer control systems for manufacturing automation in metal parts industry. Hurco pioneered conversational software 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 quickly create a program for machining a part from a blueprint or computer-aided design file.

• Continued strong demand in European markets, “particularly in Germany and the United Kingdom.” The company is also benefiting from continued expansion into Eastern European markets. European revenue grew 30% in the July quarter (FQ3).

• Strong growth in Asia due to robust demand, FQ3 Asian revenue up 49% y-y.

• Weaker dollar benefited FQ3 sales growth by fourteen percentage points in Europea and Asia.

• Introduced 14 new machines in September, representing Hurco’s largest product introduction to date. A marketing focus has been the company software technology. Hurco’s 5-axis technology is critical to mature markets such as North America.

• New manufacturing facility in China produces castings and components, but can be expanded to include sub-assembly operations.

• May consider “opportunistic” M&A, “consistent with our strategic focus on expanding our product line and entering new markets.”

• Two-thirds of revenue outside U.S. The overseas exposure has benefited revenue growth, but may hurt reported results when the dollar strengthens.

• Michael Doar (52) became chairman and CEO in 2001 after spending more than a decade as a senior executive at Ingersoll Milling Machine Company. James Fabris (56) became president and COO of Hurco at the same time as Doar became CEO.

• Stock price implies 4x trailing P/E (no EPS estimates available).


• Will North America sales rebound (down 19% in FQ3)? “In spite of adverse economic conditions [in the U.S.], I believe we may see increased activity in the near future due to our new product introductions and the timing of our industry’s largest trade show.” North America accounted for 18% of FQ3 revenue.

• Raw materials price inflation has “significantly affected” the machine tool industry, according to Hurco. FQ3 gross margin fell to 36% from 38% a year earlier due to rising input costs.

• Highly cyclical machine tool industry. Demand trends can change abruptly across geographies.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ATU 933 1,385 .8x n/m 7x 7x HDNG 66 80 .2x 0.3x 13x 12x KMT 1,288 1,700 .6x 1.9x 7x 7x HURC 110 77 .3x 1.0x n/a n/a

MAJOR HOLDERS CEO Doar <1% │ Other insiders 5% │ Systematic 7% │ Royce 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


iBasis, Inc. (Nasdaq: IBAS) Burlington, MA, 781-505-7500 Services: Communications Services http://www.ibasis.net


Price: $2.15 (as of 11/14/08) Month # of P/E FYE 12/31/07 6.5x 52-week range: $1.40 - $5.93 Latest Ago Ests P/E FYE 12/31/08 43.0x Market value: $153 million This quarter $0.01 $0.09 1 P/E FYE 12/31/09 30.7x Enterprise value: $122 million Next quarter n/a n/a 0 P/E FYE 12/31/10 30.7x Shares out: 71.2 million FYE 12/31/08 0.05 0.16 1 EV / LTM revenue 0.1x

Ownership Data FYE 12/31/09 0.07 0.37 1 EV / LTM EBITDA 3.0x Insider ownership: 57% FYE 12/31/10 0.07 0.38 1 EV / LTM EBIT 9.6x Insider buys (last six months): 1 LT EPS growth n/a n/a 0 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 26% Date Actual Estimate LTM EBIT yield 10% # of institutional owners: 127 10/21/08 $0.05 $0.08 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 101 32 17 39 44 22 66 63 59 63 Total current assets 226 59 44 75 94 221 275 281 129 281 Intangible assets 0 0 0 0 0 0 343 340 0 340 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 Total current liabilities 71 37 41 45 64 208 296 304 104 304 Long-term debt 171 94 66 66 2 0 25 31 0 31 Total liabilities 242 133 110 112 67 209 325 337 105 337 Preferred stock 0 0 0 0 0 0 0 0 0 0 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


Oct 08Oct 07Oct 06Oct 05Oct 04Sep 03Sep 02Sep 01Sep 00Jan 00

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BUSINESS OVERVIEW iBasis is a wholesale carrier of international long distance (24 billion minutes last year) and a provider of retail prepaid calling and enhanced services for mobile operators. Customers include KPN, Verizon, Vodafone, China Mobile, Skype, Telecom Italia, and Telefonica. In October 2007, iBasis “acquired” KPN Global Carrier Services to create the #3 carrier of international voice traffic, and KPN became a 51% owner of iBasis. In April 2008, iBasis acquired TDC’s international voice business. iBasis was founded in 1996. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007

YTD9/30/08

% of revenue by segment: Wholesale trading1 81% 82% 97% 93% Retail 19% 18% 3% 7% Revenue growth by segment: Wholesale trading 39% 33% 119% n/a Retail 90% 30% -73% n/a Total revenue growth 46% 33% 84% 74% Gross margin by segment: Wholesale trading 12% 12% 10% 10% Retail 17% 15% 14% 13% Total gross margin 13% 12% 10% 10%

1 Includes outsourcing revenue. INVESTMENT HIGHLIGHTS

• Cost leader. iBasis is the wholesale long distance market share leader in multiple countries and operates one of the largest VoIP networks. Scale allows iBasis to offer cost-attractive routes.

• Transformative KPN deal in October 2007. iBasis’ combination with KPN Global Carrier Services has increased minutes by 70%, revenue by 100%+, and EPS by ~200%. iBasis has gained a strong footprint in Europe and expects to achieve $20 million of annual cost synergies by Q2 2009.

• KPN has raised iBasis’ stature, affording it new opportunities, such as marketing services to mobile operators in Asia and Latin America.

• $10 million acquisition of TDC Wholesale (April 2008) adds $80 million in incremental revenue. TDC outsources non-Nordic voice traffic to iBasis. iBasis believes that other international wholesale carriers may also decide to outsource traffic to the company due to low margins and capital needs.

• 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.

Previously, he served as CEO of a predecessor to Acuity Imaging, an industrial automation company.



• Challenging conditions in wholesale (due to calling card market decline) and retail. The company has guided for capex of $15-16 million in 2008 and “modest” revenue growth in 2009.

• Pro forma revenue down 8% in Q3. iBasis grew revenue, adjusted for the KPN deal, in the low single digits in 1H08 but saw it fall 8% in Q3. Pro forma minutes were down 6% in Q3.

• KPN integration and control risks. iBasis plans to spend $12 million in 2008 and $5 million in 2009 to achieve $20 million of annualized synergies. The net impact will be FCF-negative in 2008 and FCF-positive in 2009, with the first full year of benefits in 2010. In addition to integration risks, investors need to weigh KPN’s majority ownership of iBasis. Obviously, KPN’s interests are not perfectly aligned with those of minority shareholders.

• Low-margin, “commodity” business. International wholesale voice is a behind-the-scenes business in which cost is a key driver. iBasis may enjoy some scale advantages, but it also suffers from a lack of true differentiation (low-teens gross margin).

• ROIC may not be sustained. iBasis operates in a niche in which returns are likely to erode over time.



09 P/E

LVLT 1,402 7,578 1.7x n/m n/m n/m S 6,571 25,095 .7x n/m 29x n/m T 162,942 238,122 1.9x n/m 10x 9x VZ 85,215 128,316 1.3x n/m 12x 11x IBAS 153 122 .1x n/m 43x 31x

MAJOR HOLDERS CEO Gneezy 2% │ Other insiders 2% │ KPN 53% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? 1 FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 1 Two starts due to KPN control and low insider ownership.

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.

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Thanksgiving 2008


ICF International, Inc. (Nasdaq: ICFI) Fairfax, VA, 703-934-3000 Services: Business Services http://www.icfi.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments n/a 1 1 3 3 3 2 3 Total current assets n/a 33 57 119 203 171 168 171 Intangible assets n/a 56 85 87 177 219 124 219 Total assets n/a 94 151 216 393 410 303 410 Short-term debt n/a 4 7 0 0 0 0 0 Total current liabilities n/a 27 39 96 165 110 141 110 Long-term debt n/a 17 54 0 47 90 0 90 Total liabilities n/a 46 98 102 228 215 150 215 Preferred stock n/a 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW ICF International provides consulting and IT services, addressing the program life cycle, from analysis and design through implementation and improvement. ICFI was bought by current management and private equity in 1999. The company made two acquisitions in 2005 and went public in 2006. ICFI was founded in 1969 and has 3,000 employees. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007

YTD9/30/08

% of revenue by market: Energy and climate change 20% 12% 8% 10% Environment, infrastructure 35% 17% 9% 24% Health and human services 17% 53% 75% 57% Homeland security, defense 28% 18% 8% 9% Revenue growth by market: Energy and climate change 21% 12% 46% 24% Environment, infrastructure 1% -9% 16% 197% Health and human services 35% 483% 211% -26% Homeland security, defense 87% 20% -2% 11% ∆ revenue 27% 87% 119% -1% ∆ backlog (period end) 69% 328% -15% 3% % of revenue by client: U.S. federal government 72% 49% 27% 35% U.S. state and local gov’t 9% 40% 65% 48% Domestic commercial 14% 7% 6% 12% International 5% 4% 2% 5% % of revenue by contract type: Time and materials 42% 46% 55% 68% Fixed price 24% 34% 36% 21% Cost based 34% 20% 9% 11% % of revenue by contract role: Prime contractor 86% 89% 94% n/a Subcontractor 14% 11% 6% n/a


• Strategy: win more end-to-end assignments; layer higher-margin commercial engagements onto stable government contracts; maintain tight cost structure; and continue strategic acquisition program.

• Long-standing client relationships. ICFI has served government agencies, including the DoD, EPA, HHS, and DOT, for 10-30 years or longer.

• Won three-year, $900 million Louisiana Road Home contract in 2006, the largest reconstruction program in U.S. history. (See Risks for more info.)

• Strong energy practice, with 20+ years of experience in power, fuels, climate policy, and energy efficiency. Clients include utilities, E&P and independent power firms, and government agencies.

• 42% of consultants have post-graduate degrees. 320 employees hold a federal security clearance. Turnover is 11%. Senior staff tenure is ~12 years.


INVESTMENT RISKS & CONCERNS • High dependence on government. While ICFI

aims to grow commercial revenue, government clients accounted for 92% of revenue in 2007. If the Road Home contract is excluded, government clients accounted for three-quarters of revenue.

• Louisiana contract accounted for 63% of revenue in 2007; declined to 34% in 3Q08. ICFI won the Road Home deal in 2006 and manages a program to help homeowners and landlords of small rental properties affected by Hurricane Katrina by providing compensation for property repair. The contract has a stated term of three years, but ICFI has earned revenue faster than projected. Only $30-60 million of revenue appears likely in 2009.

• Louisiana deal “one-time” boost; total revenue expected to decline ~20% in 2009 even as non-Road Home revenue may rise 15%. While Road Home is accounted for as a continuing operation, the unusually large deal size means that the revenue lost when the deal ends will not be fully replaced.

• Highly competitive market. Competitors include Abt Associates, BearingPoint, Booz Allen, CRA, Lockheed Martin, L-3, Navigant, Northrop Grumman, PA Consulting, SAIC, SRA, and Westat.

• Numerous acquisitions raise question about organic growth prospects. ICFI has bought a number of professional services organizations in recent years, including Synergy, Caliber, Z-Tech, SH&E, Jones & Stokes, and others.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ACN 20,919 17,304 .7x 12.3x 10x 9x NCI 832 1,101 1.3x n/m 20x 16x SAI 3,607 4,035 .4x 8.0x 17x 15x ICFI 266 353 .5x n/m 10x 13x

MAJOR HOLDERS CEO Kesavan 2% │ Other insiders 51% (includes CM Equity Partners 49%) RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


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


Price: $8.72 (as of 11/14/08) Month # of P/E FYE 12/31/07 8.4x 52-week range: $6.56 - $23.55 Latest Ago Ests P/E FYE 12/31/08 7.6x Market value: $508 million This quarter $0.28 $0.32 7 P/E FYE 12/31/09 7.1x Enterprise value: $1.1 billion Next quarter 0.31 0.33 3 P/E FYE 12/31/10 n/a Shares out: 58.3 million FYE 12/31/08 1.15 1.17 7 EV / LTM revenue 5.2x

Ownership Data FYE 12/31/09 1.23 1.31 7 EV / LTM EBITDA n/a Insider ownership: 7% FYE 12/31/10 n/a n/a 0 EV / LTM EBIT 7.5x Insider buys (last six months): 4 LT EPS growth 17.0% 18.7% 3 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria 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%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 1 2 3 1 12 74 48 83 265 83 Total current assets 23 52 26 10 22 100 96 149 334 149 Intangible assets 20 43 42 42 172 561 1,167 1,167 847 1,167 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 Total current liabilities 27 46 30 16 27 36 76 83 44 83 Long-term debt 1 29 25 20 85 141 650 610 616 610 Total liabilities 27 74 56 36 116 231 808 786 730 786 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Iconix owns a portfolio of 17 consumer brands, which it licenses directly to retailers, wholesalers and suppliers for apparel, accessories, footwear, beauty, and home products. Iconix supports the brands with marketing. Licensees pay minimum guaranteed royalties. Target, Kohl’s and Kmart were 14%, 8% and 6% of revenue, respectively, in 2007. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Revenue growth1 186% 168% 98% 44% % of revenue by category: Direct-to-retail license 43% 43% 34% 25% Wholesale license 50% 54% 65% 72% Other (commissions)2 7% 3% 2% 3% % of revenue by geography: U.S. 98% 96% 94% 92% Other 2% 4% 6% 8%

1 The 2005 number reflects growth in licensing and commission revenue only. GAAP revenue fell 56% in 2005, as Iconix transitioned to a licensing model. 2 Includes Bright Star, which earns commissions for arranging footwear production for mass market and discount retailers. Inconix holds no inventory. BRAND ACQUISITIONS SINCE 2004

Year Brand 2004 Badgley Mischka 2005 Joe Boxer; Rampage 20061 Mudd; London Fog; Mossimo; Ocean Pacific/OP 20072 Danskin and Rocawear; Official-Pillowtex brands; Starter3 2008 Waverly4

1 In 2006, the company acquired ~$60 million in annual royalty streams. 2 In 2007, the company acquired ~$115 million in annual royalty streams. 3 Iconix acquired Starter for $60 million (2008E royalties of $18 million). 4 Acquired in October for $26 million. INVESTMENT HIGHLIGHTS

• Brand ownership and licensing model with low capital intensity and no inventory risk. Iconix enjoys high ROC, although incremental capital is invested at lower returns due to acquisitions. Minimum royalties and low overhead help Iconix to maintain EBIT profitability in a difficult economy.

• Direct-to-retail model provides retailers with proprietary brands, resulting in premium shelf space. DTR deals include Walmart (OP, Starter, Danskin), Target (Mossimo, Fieldcrest), Sears/Kmart (Cannon, Joe Boxer), Kohls (Candie’s), and Bed Bath & Beyond (Royal Velvet).

• Acquisitions key to growth, with brand strength and future royalties among the key M&A criteria.

• Organic growth opportunities in 2009 include the 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).

• Non-U.S. (licensing) revenue growing quickly, but accounted for only 6% of revenue in 2007. Iconix recently formed a JV to target China.

• To meet “low end” of guidance for 2008 growth of 34-37% in revenue and 11-15% in EPS, i.e., revenue of $215-220 million (>70% guaranteed minimums), EPS of $1.15-1.20 and FCF of $120+ million in 2008 (see Risks below regarding FCF).

• Guiding for 2009 revenue of $225-235 million, EPS of $1.20-1.30 and FCF of $114-118 million.



• Net debt limits strategic flexibility and may depress earnings in weak economy. The company had $673 million of debt and $110 million of cash as of September 30, raising the risk of distress.

• Guidance lowered. In May, Iconix provided 2008 revenue guidance of $250-260 million. In June, it lowered guidance due to the absence of M&A and, apparently, due to a weak retail outlook.

• FCF, as calculated by company, may overstate “owner earnings.” Iconix expects 2008 FCF of $120+ million, with $5 million of capex and $50 million of non-cash items. Iconix does not include M&A in capex, but inclusion may be appropriate. Management’s FCF calculation may overstate the cash that can be paid out without hurting prospects.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E CHKE 138 122 3.1x 7.8x 9x 9x GPS 8,217 6,725 .4x 1.9x 9x 8x JNY 527 1,110 .3x 1.2x 7x 7x ICON 508 1,098 5.2x n/m 8x 7x

MAJOR HOLDERS CEO Cole 6% │ Other insiders 2% │ Fred Alger 9% │ Baron 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


infoGROUP Inc (Nasdaq: IUSA) Omaha, NE, 402-593-4500 Services: Printing & Publishing http://www.infogroup.com


Price: $3.38 (as of 11/14/08) Month # of P/E FYE 12/31/07 4.6x 52-week range: $2.94 - $9.97 Latest Ago Ests P/E FYE 12/31/08 12.1x Market value: $192 million This quarter $0.16 $0.17 1 P/E FYE 12/31/09 4.6x Enterprise value: $494 million Next quarter n/a n/a 0 P/E FYE 12/31/10 n/a Shares out: 56.9 million FYE 12/31/08 0.28 0.53 1 EV / LTM revenue 0.7x

Ownership Data FYE 12/31/09 0.73 0.78 1 EV / LTM EBITDA 5.3x Insider ownership: 41% FYE 12/31/10 n/a n/a 0 EV / LTM EBIT 12.0x Insider buys (last six months): 0 LT EPS growth n/a n/a 0 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 53% Date Actual Estimate LTM EBIT yield 8% # of institutional owners: 233 10/27/08 -$0.07 $0.16 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 5 7 6 13 3 7 12 12 10 12 Total current assets 78 70 72 94 119 187 200 224 189 224 Intangible assets 285 273 248 365 365 490 533 537 533 537 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 Total current liabilities 81 83 85 151 182 223 229 244 220 244 Long-term debt 206 164 123 162 142 255 278 310 296 310 Total liabilities 323 275 220 338 346 515 544 587 554 587 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW infoGROUP (formerly infoUSA) provides business and consumer databases for sales leads and mailing lists, database marketing services, data processing services and sales solutions. The company was founded in 1972 and operates in three segments: The Data Group consists of National Accounts, OneSource, Database License, and the Small and Medium Sized Business Group. The segment bears the compilation and verification costs of the company’s proprietary databases. The Services Group provides customer data management and brokerage services, e-mail marketing, and catalog marketing. The Marketing Research Group provides customer surveys, opinion polling, and other market research for business (Opinion Research division) and government (Macro Int’l division). The segment also includes Guideline, NWC, and Northwest, which are research companies acquired in 2007. SEGMENT BREAKDOWN

FYE December 31 2005 2006 2007

YTD 9/30/08

% of revenue by segment: Data Group 76% 69% 48% 42% Services Group 24% 28% 20% 22% Marketing Research Group1 0% 3% 32% 36% Revenue growth by segment:2 Data Group n/a 3% 10% -4% Services Group n/a 32% 13% 22% Marketing Research Group1 n/a n/m n/m 30% Total revenue growth 11% 13% 58% 11% EBIT margin by segment: Data Group 21% 22% 27% 22% Services Group 23% 24% 25% 18% Marketing Research Group n/a 3% 5% 5% Corporate -7% -7% -6% -12% Total EBIT margin 15% 15% 13% 3%

1 Established in 2006 with acquisition of Opinion Research Corp. 2 2005 segment growth unavailable due to redefinition of segments. INVESTMENT HIGHLIGHTS

• Data Group owns 12 proprietary marketing databases, including information on tens of millions of businesses and executives, and 200+ million consumers. Its Internet-based services, including Salesgenie.com and Credit.net, tap into these databases, which are compiled by 800 people.

• Services Group helps direct marketing firms enhance the value of their own data with services such as list management and list brokerage, data processing, and Yesmail email marketing services.

• Marketing Research Group leverages a global data collection network to perform surveys and other research services for clients.

• Founder Vinod Gupta ousted in August. Gupta had been chairman and CEO since founding the company in 1972. The resignation followed on the heels of shareholder litigation, an SEC investigation (outcome still pending) and a Board review. The latter “determined that various related party transactions, expense reimbursements, and corporate expenditures were excessive.” Gupta agreed to return $9 million. Board members Bill Fairfield and Bernard Reznicek assumed the CEO and chairman roles, respectively. IUSA shares rose 19% on the day of Gupta’s resignation.



• Management turnover. Major governance deficiencies cascaded into major management changes this year, affecting the chairman, CEO and CFO roles. Ultimately, however, the changes may have alleviated a major investor concern.

• Direct marketing faces a number of headwinds that require infoGROUP to adapt. The industry has come under scrutiny by consumer groups and regulators. Internet-based services have made data more widely available and more easily accessible.

• Risks relating to M&A strategy. The company has made 35+ acquisitions since 1996 and intends to continue looking for strategic opportunities.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ACXM 529 1,028 .8x n/m 10x 9x DNB 3,921 4,555 2.7x n/m 14x 12x HHS 317 591 .5x n/m 5x 6x VCI 53 1,158 .5x n/m 2x 2x IUSA 192 494 .7x n/m 12x 5x

MAJOR HOLDERS Founder and former CEO Vinod Gupta 40% │ Other insiders 3% │ Cardinal 6% │ Burgundy 5% │ Columbia Wanger 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Jackson Hewitt Tax Service Inc (NYSE: JTX) Parsippany, NJ, 973-630-1040 Services: Personal Services http://www.jacksonhewitt.com


Price: $11.76 (as of 11/14/08) Month # of P/E FYE 4/30/08 10.8x 52-week range: $10.56 - $34.48 Latest Ago Ests P/E FYE 4/30/09 7.8x Market value: $339 million This quarter -$0.73 -$0.73 6 P/E FYE 4/30/10 6.9x Enterprise value: $620 million Next quarter 0.73 0.73 6 P/E FYE 4/30/11 5.7x Shares out: 28.9 million FYE 4/30/09 1.51 1.52 6 EV / LTM revenue 2.2x

Ownership Data FYE 4/30/10 1.71 1.73 5 EV / LTM EBITDA 7.9x Insider ownership: 1% FYE 4/30/11 2.05 2.07 2 EV / LTM EBIT 9.5x Insider buys (last six months): 3 LT EPS growth 9.0% 9.0% 2 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 10% # of institutional owners: 250 9/4/08 -$0.69 -$0.69 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments n/a 2 5 113 15 2 5 0 1 0 Total current assets n/a 32 48 143 54 38 42 27 24 27 Intangible assets n/a 482 482 480 479 478 501 503 477 503 Total assets n/a 662 726 675 588 574 600 583 558 583 Short-term debt n/a 0 0 0 0 0 0 0 0 0 Total current liabilities n/a 21 32 57 101 100 92 50 61 50 Long-term debt n/a 0 0 175 50 127 231 281 210 281 Total liabilities n/a 50 71 279 200 270 364 370 312 370 Preferred stock n/a 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Jackson Hewitt is the second-largest paid tax return preparer in the U.S., behind H&R Block. The company has a branded network of 5,763 franchised and 1,000 company-owned offices. The network provides income tax return preparation, electronic filing services, and refund anticipation loans. Filers earning less than $30,000 accounted for 67% of unit volume in FY08 (compared to 50% nationwide). Jackson Hewitt was spun off from Cendant in an IPO in 2004. SELECTED OPERATING DATA1

FYE April 30 2006 2007 2008 % of revenue by segment: Franchise operations 74% 73% 69% Company-owned offices 26% 27% 31% Revenue growth by segment: Franchise operations 20% 4% -10% Company-owned offices 14% 12% 8% Total revenue growth 18% 6% -5% EBIT margin by segment: Franchise operations 62% 61% 53% Company-owned offices 17% 19% 6% Corporate and other -12% -10% -15% Total EBIT margin 38% 39% 24% % of franchise revenue by type: Royalty 37% 39% 40% Marketing 17% 17% 18% RALs2 37% 38% 37% Other 9% 6% 5% Frachised offices (period end) 5,379 5,778 5,763 Company offices (period end) 643 723 1,000 Total tax returns prepared (mn) 3.66 3.65 3.39 Avg revenue per tax return ($) $178 $192 $192

1 Q1 FY09 data not shown, as it is not meaningful due to seasonality. 2 Includes revenue from refund anticipation loans and other financial products. INVESTMENT HIGHLIGHTS

• Prepared 3.4 million tax returns in FY08, or 4% of returns prepared by a paid preparer. The paid preparer market is fragmented and stagnantes due to competition from software alternatives. Jackson Hewitt may grow by taking share from CPAs.

• Franchisees pay marketing fees of 6% of revenue and royalties of 15% of revenue (12% for territories sold before mid-year 2000). Franchisees also pay a $2 fee to Jackson Hewitt for each tax return filed electronically. 20% of franchisees earned revenue of more than $1 million in FY08.

• 35% of 5,100 total territories remain available for sale (~60,000 people per territory). 78% of new territories were sold to existing franchisees in FY08.

• Existing territories under-penetrated. In FY08, 31% of territories reached a target of 3+ offices per territory. The company had 2.1 offices per territory.

• 28% of offices have been in existence for three years or less. As offices mature to 7+ years, their number of tax returns prepared more than doubles.

• Bought 3.5 million shares for $99 million in FY08 and 4.4 million shares for $142 million in FY07.



• Weak FY08 tax season, with returns prepared by Jackson Hewitt down 7%, driven by the lack of an early-season product, brand damage from DOJ lawsuitss, and greater compliance requirements.

• Brand damage from settled DOJ lawsuits against a franchisee for fraudulent tax return preparation.

• Terminated CEO Lister on heels of IRS and DOJ settlements in 2007, promoting Michael Yerington from COO to CEO and Mark Heimbouch from CFO to COO. Daniel O’Brien joined as CFO in January 2008, while Heimbouch resigned in October.

• Refund anticipation loans (RALs) are short-term loans with a high implied interest rate. In January 2008, the IRS issued an advance notice of proposed rulemaking (ANPRM) regarding the use of tax return information for the marketing of RALs.

• Franchise renewals coming up in 2009-10. 93% of franchisees opted to renew their ten-year deals in the last renewal cycle in 1999-2000. One-third of franchise deals will be up for renewal in the next two years (no renewals prior to April 15, 2009).

• Competition from H&R Block, Liberty Tax and alternatives, including Intuit’s TurboTax software and the Free File Alliance, an IRS consortium.

• Highly seasonal business presents hiring and space utilization challenges. There were 7,700 seasonal hires in company-owned offices in FY08, compared to a year-round base of 430 employees.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E HRB 5,801 6,588 1.5x n/m 11x 9x JTX 339 620 2.2x n/m 8x 7x

MAJOR HOLDERS CEO Yerington <1% │ Other insiders 2% │ Invesco 15% │ Shamrock 9% │ Cap Re 8% │ Cardinal 6% │ Ziff 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


KBR, Inc. (NYSE: KBR) Houston, TX, 713-753-3011 Capital Goods: Construction Services, Member of S&P MidCap 400 http://www.kbr.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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



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BUSINESS OVERVIEW KBR is an engineering, construction and services company supporting the energy, petrochemicals, government, and civil infrastructure sectors. It operates in four segments, with few projects typically accounting for a large portion of revenue. Government and Infrastructure (G&I) supports the military mission cycle. In civil infrastructure, it operates in waste and water treatment, transportation, and facilities maintenance, providing program management and other services. Upstream constructs energy and petrochemical projects, including technically complex projects in remote locations. Expertise includes LNG and GTL gas monetization facilities, refineries, oil and gas production facilities, and pipelines. Services provides construction and industrial services. Other includes Downstream, Technology, and Ventures. Halliburton (NYSE: HAL) sold stock in KBR for $17 per share in an IPO in November 2006, and divested its entire stake in April 2007. KBR sold its 51% interest in European naval dockyard DML for $345 million in June 2007. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Revenue growth -17% -5% -1% 29% % of revenue by segment: G&I1 79% 74% 70% 63% Upstream 12% 19% 22% 23% Services 3% 4% 4% 9% Other 6% 3% 5% 5% EBIT margin by segment: G&I1 4% 5% 5% 5% Upstream 9% 2% 10% 11% Services 14% 14% 17% 7% Other 22% -12% 4% 12% Unallocated -3% -3% -2% -2% Total EBIT margin 3% 2% 4% 5% % of revenue by geography: U.S. 14% 15% 11% n/a Iraq and Kuwait 59% 52% 50% n/a Other 28% 33% 39% n/a % of G&I revenue by sub-segment: U.S. Gov’t – Middle East 81% 81% 78% 79% U.S. Gov’t – Americas 14% 13% 12% 9% International operations 5% 6% 10% 12% % of upstream revenue by sub-segment: Gas monetization 34% 60% 74% 78% Offshore 47% 23% 18% 18% Other 19% 18% 8% 4%

1 Government and infrastructure. INVESTMENT HIGHLIGHTS

• “Go to” contractor for U.S. government, other large buyers of engineering and construction services. KBR has proven expertise in executing large-scale projects in far-flung places.

• Q3-end backlog of $15 billion, up 27% y-y, provides several quarters of visibility.

• $550 million BE&K acquisition grows Services. The July deal re-establishes KBR as a domestic contractor and maintenance services provider. The integration is “going extremely well,” with “strong contributions” in new awards and financial results.

• Management has expressed optimism in KBR’s ability to execute and deliver positive results.

• CEO Bill Utt (51) joined KBR in 2006 after six years as CEO of SUEZ Energy N.A. CFO Kevin DeNicola joined KBR in June 2008 from Lyondell Chemical, where spent six years as CFO.



• 50% of revenue from Iraq and Kuwait in 2007. The rate of spending in those regions has decreased already, partly due to a new competitively bid, multiple service provider LogCAP IV contract, which replaced the previous LogCAP III contract.

• U.S. government was 62% of revenue in 2007, exposing KBR to a drop in revenue if U.S. agencies materially alter their contract award criteria, or if KBR is suspended or debarred from contracting with U.S. agencies due to potential consequences of ongoing investigations into the company’s conduct.

• Dependent on capex by oil and gas companies in Upstream, Services, and Other business units.

• Formal SEC investigation and DOJ criminal investigation into “improper payments” that may have been made to government officials in Nigeria.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E FLR 6,485 4,418 .2x 2.4x 10x 9x JEC 3,796 3,299 .3x 2.8x 8x 8x SAI 3,607 4,035 .4x 8.0x 17x 15x URS 2,292 3,234 .4x n/m 10x 9x KBR 2,118 1,008 .1x 1.4x 8x 7x

MAJOR HOLDERS CEO Utt <1% │ Other insiders <1% │ Cap Re 12% │ Tontine 11% │ Fidelity 9% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Kenexa Corporation (Nasdaq: KNXA) Wayne, PA, 610-971-9171 Services: Business Services http://www.kenexa.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Short-term debt n/a 2 0 0 20 0 0 0 0 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 Preferred stock n/a 9 10 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Kenexa provides web-enabled human capital management services, including applicant tracking, onboarding, recruitment process outsourcing, employment branding, skills and behavioral assessments, structured interviews, performance management, multi-rater feedback surveys, employee engagement surveys, and HR analytics. Kenexa started as a provider of recruiting services in 1987. It offered its first automated talent management system in 1993. The company has acquired 28 businesses since 1994. SELECTED OPERATING DATA


9/30/08 % of revenue by type: Subscription 78% 81% 82% 79% Other 22% 19% 18% 21% Revenue growth by type: Subscription 40% 77% 64% 14% Other 47% 48% 54% 35% ∆ revenue 42% 71% 62% 18% ∆ deferred revenue1 89% 148% 12% 11% % of revenue by geography: U.S. 90% 90% 85% 75% International 10% 10% 15% 25%

1 Reflects changes in period-end deferred revenue. INVESTMENT HIGHLIGHTS

• Positioned in Gartner’s leaders quadrant in a recent research report on e-recruitment software.

• Focuses on talent acquisition and employee performance management, unlike vendors that provide broad suites of human capital management software. The company has developed vertical-specific software for financial services, hospitality, retail, manufacturing, pharma, and other industries.

• Targeting large- and medium-sized organizations with complex needs in talent acquisition and employee performance management. Kenexa uses a direct sales force comprised of inside sales, telesales and field sales personnel (150 total sales reps).

• Subscriptions provide recurring revenue stream, with clients typically entering into multi-year deals. Renewal rates for on-demand talent acquisition and performance management solution contracts have been running at more than 90%. Subscriptions accounted for 82% of revenue in 2007.

• Offers core software on demand, reducing the cost 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.

• Rudy Karsan (50) co-founded Kenexa’s predecessor in 1987. He has served as CEO of the company since 1991 and as chairman since 1997.

• Repurchased $30 million of stock YTD and $25 million in 2007.



• Lowered 2008 guidance in November to revenue growth of 12-13% (down from 24-26%) and non-GAAP EPS growth of 11-14% (vs 31-34%). Kenexa expects revenue of $204-206 million (high-70s percentage from subscriptions), non-GAAP EBIT of $37 million and non-GAAP EPS of $1.29-1.32.

• M&A integration. The company has completed 27 acquisitions since 1994. More recently, Kenexa acquired BrassRing for $118 million, Gantz Wiley for $7 million, Knowledge Workers for $3 million, Psychometrics for $8 million and Webhire for $34 million in 2006; HRC Human Resources Consulting for $4 million and StraightSource for $12 million in 2007; and Quorum for $20 million in 2008.

• Competitors include point solution providers Authoria, iCIMS, Integrated Performance Systems, InScope, PeopleClick, Kronos, Pilat HR, Previsor, Vurv, SHL Group, SuccessFactors, and Taleo; ERP software vendors Oracle (PeopleSoft), SAP, Siebel, and Lawson; and, to a lesser extent, employment process outsourcing service providers Accolo, Gallup, Hyrian, and Recruitment Enhancement.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E LWSN 642 529 .6x n/m 11x 9x ORCL 87,110 85,326 3.7x n/m 11x 10x SAP 41,890 39,852 2.8x 119x 14x 13x KNXA 126 100 .5x 1.8x 4x 5x

MAJOR HOLDERS CEO Karsan 5% │ Other insiders 2% │ Columbia Wanger 12% │ Artisan 7% │ Gund Gordon 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


KHD Humboldt Wedag (NYSE: KHD) Hong Kong SAR, China, 60-4-683-8286 Capital Goods: Construction & Agricultural Machinery http://www.khdhumboldt.com


Price: $9.10 (as of 11/14/08) Month # of P/E FYE 12/31/07 6.4x 52-week range: $7.26 - $35.79 Latest Ago Ests P/E FYE 12/31/08 4.3x Market value: $278 million This quarter $0.38 $0.53 2 P/E FYE 12/31/09 5.1x 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

Ownership Data FYE 12/31/09 1.77 2.50 2 EV / LTM EBITDA n/a Insider ownership: 22% FYE 12/31/10 1.18 n/a 1 EV / LTM EBIT -1.4x Insider buys (last six months): 0 LT EPS growth 32.8% 32.8% 1 P / tangible book 0.8x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 44% Date Actual Estimate LTM EBIT yield -73% # of institutional owners: 153 11/12/08 $0.80 $0.55 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 159 178 165 263 113 243 370 408 285 408 Total current assets 336 422 235 471 462 513 634 709 558 709 Intangible assets 28 16 16 20 0 0 0 0 0 0 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 Total current liabilities 42 87 154 253 249 316 396 412 348 412 Long-term debt 98 69 27 14 6 16 14 13 12 13 Total liabilities 149 161 186 334 325 430 482 496 424 496 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW KHD operates in two segments: Industrial Plant Engineering and Equipment Supply provides technologies, equipment, and engineering for cement, coal, and minerals processing. The segment also builds plants that produce clinker, cement, clean coal, and minerals. Resource Property consists of a mining sublease on which the Wabush iron ore mine is situated that commenced in 1956 and expires in 2055. The company spun off Mass Financial, representing KHD’s former financial services and merchant banking business, in January 2006. KHD completed several other strategic actions subsequent to the Mass Financial spin-off. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

∆ revenue 120% 28% 44% 14% ∆ order intake n/a 55% 19% 28% ∆ order backlog (period end) n/a 70% 38% 39% % of revenue by segment: Industrial plant engineering1 100% 100% 100% 100% Iron ore mine royalty2 0% 0% 0% 0% % of pre-tax income by segment: Industrial plant engineering1 84% 95% 93% 85% Iron ore mine royalty2 14% 12% 25% 27% Corporate and other 2% -7% -18% -13% % of industrial plant engineering revenue by customer group: Cement 90% 84% 89% 86% Coal and minerals 10% 16% 11% 14% % of industrial plant engineering revenue by geography: Americas 7% 19% 20% n/a Asia 21% 26% 34% n/a Europe and Russia 23% 18% 21% n/a Middle East 42% 34% 21% n/a Africa and other 6% 4% 4% n/a

1 Includes industrial plant engineering and equipment supply. 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 Canada. KHD does not report any revenue related to this JV. INVESTMENT HIGHLIGHTS

• Third-largest player with 20% global market share, based on new contracted cement kiln capacity, behind Danish firm FL Smidth (29%) and Chinese firm Sinoma (28%), and ahead of German firm Polysius (part of ThyssenKrupp). Unlike cement manufacturers, KHD is a service provider operating under an asset-light business model.

• Low exposure to U.S., which represented 6% of KHD backlog going into 2008. The Middle East, where cement consumption is growing 10-15%, was 33% of backlog. Asia, where consumption is growing 10%+, accounted for 29% of backlog. Russia and Eastern Europe, where consumption is growing 10-15%, represented 29% of backlog.

• Backlog amounts to 2.3 years of LTM revenue, providing several quarters of visibility.

• Holds 471 patents, including innovations in kiln design, pyro processing, calciners, coolers, grinding technologies, and separators and roller presses.

• Chairman Michael Smith (59) has a history of shareholder value creation. Smith’s M&A, corporate finance and global taxation background have benefited investors, as he has created value through various entities over the years, including MFC Bancorp, Mass Financial, Sasamat Capital, Cathay Merchant Group, and Blue Earth Refineries.

• KHD owns non-core assets, including an ore mine royalty interest (LTM income of $27 million); preferred shares of Mass Financial of $86 million; and (3) net cash and equivalents of $395 million.



• Q3 orders down 65% y-y due to “delays in project awards by customers revisiting their financing alternatives in light of credit market dynamics.”

• Downturn expected to persist. According to KHD, “Many of our customers are facing liquidity problems. Some have approached us to discuss renegotiating contracts… we should expect some projects to be delayed, others cancelled and a decrease in the number of project opportunities.”

• Outlook scrapped: “…we are not in a position at this time to confirm our guidance on earnings and order intake for 2008 which we gave [on April 2]”

• Tax rate likely to increase over time. Smart tax planning and NOLs have historically kept KHD’s tax rate in a range of 5-10%. Management expects the rate to increase to about 20% going forward.

MAJOR HOLDERS Chairman Smith <1% (may own more through various vehicles) │ CEO Busche <1% │ Peter Kellogg 21% (long-time association with Smith) │ Fidelity 6% │ Apis 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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…additional insight into KHD: WHAT ARE THE SHARES WORTH?

• We value KHD at $25-37 per share, based on the sum-of-the-parts valuation summarized below.

• In addition to strong upside potential, we note significant downside protection, with estimated excess cash and investments of $331-381 million. Our calculation of excess assets conservatively excludes $100-150 million, which we estimate is needed to run the core cement engineering business.

KHD — Sum-of-the-Parts Valuation Summary


Low Value

High Value

Value of excess net assets:1 Cash and equivalents $373 $373 Short-term cash deposits 27 27 Securities 9 9 Restricted cash 31 31 Preferred shares of Mass Financial 86 86 Long-term debt (13) (13) Pension liability (32) (32) Net cash and investments $481 $481 Cash needed to run business2 (150) (100) Total $331 $381 Value of iron ore interest: LTM earnings to KHD $27 Fair value multiple of LTM earnings 5x Annualized Q3 earnings to KHD $35 Fair value multiple of ann. Q3 earnings 5x Total $133 $175 Value of cement engineering business: LTM pre-tax segment income 85 LTM corporate/other expenses (12) LTM net interest income3 (13) Fair value multiple of LTM pre-tax income 5x Annualized Q3 pre-tax segment income 145 Annualized Q3 corporate/other expenses (11) Annualized Q3 net interest income3 (16) Fair value multiple of ann. Q3 income 5x Total $296 $593 Estimated fair value of KHD $759 $1,148 per share $25 $37

1 Based on balance sheet values as of September 30, 2008. 2 MOI estimate of cash needed to run engineering business; reflects deferred revenue liability, which could become cash-draining amid order slowdown. 3 A portion of net interest income is subtracted from segment income to reflect the separate consideration of excess assets in our valuation analysis. Source: Company filings, The Manual of Ideas estimates and analysis. WHY THE SHARES MAY BE MISPRICED

• Investors not looking beyond current slowdown in cement engineering business. KHD’s earnings report on November 12 spooked investors due to a 65% y-y drop in Q3 order intake and concerns about potential order cancellations. While the Q3 result represents a sharp reversal from earlier strength in orders, investors are myopically focusing on the 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.

OVERVIEW OF SELECTED OPERATING DATA

KHD – Engineering Revenue and Backlog, 2005-YTD’08 The company has grown cement plant engineering revenue rapidly in recent years, with backlog reaching $1.1 billion as of September 30. While the large backlog bodes well for near-term revenue, KHD saw a sharp decline in Q3 order intake, and management expects that some customers will seek to delay or cancel projects.

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Engineering Revenue (left axis)Backlog (right axis)

Notes: Engineering revenue equals total revenue, as iron ore income is accounted for below the revenue line. Backlog represents period-end backlog. YTD represents period from January 1 through September 30. Source: Company, The Manual of Ideas. KHD – Engineering Income and Margin, 2005-YTD’08 Engineering pre-tax margin has expanded since 2005, causing income growth to outstrip revenue growth over the same time period. Margins may get squeezed going forward, as the company attempts to keep customers from postponing or cancelling projects.

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Notes: Income and margin represent pre-tax segment income and margin; corporate and other expenses are excluded from segment income. YTD represents period from January 1 through September 30. Source: Company, The Manual of Ideas. KHD – Iron Ore Royalty Income, 2005-YTD’08 The company’s income from an interest in the Wabush iron ore mine has grown as iron ore prices have risen, with YTD income reaching $22 million and Q3 income reaching $9 million.

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MANAGEMENT’S VIEW OF BUSINESS Notes from 3Q08 earnings call on November 12:

• Operating environment: “rapidly changing;” expects credit shortage to negatively impact global construction and infrastructure markets; past trend of robust demand growth to “moderate;” customers facing “unprecedented” challenges; some customers have approached KHD to renegotiate contracts; customer capex spending likely to decline; KHD “should expect some projects to be delayed, some projects to be cancelled, and a general decrease in the number of project opportunities”

• Management response to weak environment: changing focus from “business growth” to “sustaining equity” during uncertainty; expects to develop plan to cut costs by yearend (will present plan to shareholders); a key objective is to preserve cash by operating in cash flow-neutral way (“excluding working capital movements”)

• Q3 review: order intake down 65% due to project award delays (55% of orders from Middle East, 23% from Russia and Eastern Europe) – intake weakened progressively throughout Q3; backlog of $1.1 billion at Q3-end (39% from Russia and Eastern Europe, 27% from Asia, 26% from Middle East) – initial assessment is that backlog solidity is “reasonable” (but also “dynamic” and “changing”)

• Outlook: “not in position to confirm” prior guidance for earnings and order intake; “don’t have a feel” for how quickly business may pick up again

• Balance sheet: majority of cash is held in Austrian banks with strong credit ratings (government has announced intention to support banks if necessary); largest portion of cash is denominated in euros; $100 million set aside in dollars for business growth

• M&A strategy: “hesitant” to spend cash • Iron ore: income up due to price increases; mine

output has been relatively consistent in recent years • Investment in Mass Financial preferred shares:

negotiating with Mass to distribute to KHD shareholders a portion or all of KHD’s interest in Mass by way of newly created common shares in Mass; mechanism will likely be conversion of a portion of KHD shares held into shares of Mass

ROYALTY INTEREST IN WABUSH IRON ORE MINE (0% of 2007 revenue, 25% of pre-tax income)

• KHD’s income from Wabush mine correlates closely with iron ore prices. As prices have risen, KHD’s income from its interest in Wabush has increased, from $4 million in 2005 to $6 million in 2006 and $17 million in 2007. For an excellent primer on iron ore supply, demand and pricing drivers, see the April 2008 letter by the chairman and president of Leucadia National (NYSE: LUK): http://tinyurl.com/moi14 (pages 2-4).

• KHD participates in royalty interest in Wabush iron ore mine sublease, which expires in 2055.

• Description of Wabush mine, adopted from Cleveland Cliffs (CLF) 10-K dated February 29: “The mine and concentrator are located in Wabush, Labrador, Canada, and the pellet plant is located in Pointe Noire, Quebec. The Wabush mine has been in operation since 1965. Over the past five years, the mine has produced 3.8-5.2 million tons of iron ore pellets annually. CLF own 27% of Wabush, ArcelorMittal subsidiary Dofasco owns 29% and U.S. Steel Canada owns 45%.” In March, Dofasco sued U.S. Steel Canada and CLF to compel them to complete the sale of their interests to Dofasco.

• Holder of royalty interest receives royalties from an unincorporated JV that operates the mine. The JV pays a royalty that was set in 1987 at a base rate of C$1.685 per ton, with escalations as defined by agreement. In 2005, KHD sued the JV participants for alledged underpayment of royalties.

• Demand for iron ore is driven by raw material requirements of integrated steel producers. Demand for blast furnace steel is cyclical and influenced by macroeconomic factors.

Wabush Iron Ore Mine

2005 2006 2007 Iron ore shipments (mn tons) 4.9 4.1 4.8 Pre-tax income to KHD ($mn) 4.3 6.4 16.6

Major Iron Ore Producers

URL

1Q08 Production (mn tons)

Market Share1

Vale do Rio vale.com 83 42% Rio Tinto riotinto.com 37 19% BHP Billiton bhpbilliton.com 28 14% Kumba kumba.co.za 8 4% LKAB lkab.com 6 3% Others2 -- 36 18%

Source: EconStats, The Manual of Ideas. 1 Represents approximate share of ocean trade in iron ore. 2 Represents estimates.

Iron Ore Prices, 1976-20081 ($ per ton)

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$100$120$140

1976 1984 1992 2000 2008

Source: EconStats, CVRD, Wall Street Journal, steel producers. 1 Represents Brazil-to-Europe prices. Contracts are generally made in the spring/early summer between iron ore and steel producers. Prices shown 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.

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King Pharmaceuticals, Inc. (NYSE: KG) Bristol, TN, 423-989-8000 Health Care: Biotechnology & Drugs, Member of S&P 500 http://www.kingpharm.com



Ownership Data FYE 12/31/09 0.83 0.85 7 EV / LTM EBITDA 2.8x Insider ownership: 1% FYE 12/31/10 0.75 0.82 5 EV / LTM EBIT 4.2x Insider buys (last six months): 0 LT EPS growth -13.0% n/a 2 P / tangible book 1.2x Insider sales (last six months): 1 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 24% # of institutional owners: 791 11/6/08 $0.33 $0.26 LTM pre-tax ROC 99%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Total current liabilities 151 370 728 689 972 618 453 318 453 318 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW King is a vertically integrated branded pharma company. It develops novel prescription pharma products and technologies that complement its focus in specialty-driven markets, particularly neuroscience, hospital and acute care. The company’s leading brands include Avinza CII, a once-daily morphine treatment for chronic pain; Skelaxin, for relief from discomfort associated with acute musculoskeletal conditions; Thrombin-JMI, which aids in controlling bleeding during surgery; Altace, an ACE inhibitor; Sonata CIV, one of three approved non-benzodiazepine treatments for insomnia; and Levoxyl, for the treatment of thyroid disorders. The Meridian Auto-Injector segment consists of EpiPen—a prefilled, pen-like device that allows a patient or caregiver to automatically inject a precise drug dosage—and nerve gas antidotes King provides to the U.S. Military. SELECTED OPERATING DATA


9/30/08 Revenue by segment: Branded pharma 87% 87% 87% 81% Meridian Auto-Injector 7% 8% 9% 14% Royalty revenue 4% 4% 4% 5% Contract and other 1% 1% 1% 0% Branded pharma revenue by therapeutic area: Neuroscience 28% 29% 34% 44% Hospital 16% 16% 16% 20% Acute care 5% 4% 4% 0% Cardiovascular 49% 48% 44% 21% Other 3% 3% 3% 15% Branded pharma revenue by drug: Skelaxin 22% 24% 24% 34% Avinza 0% 0% 6% 10% Thrombin-JMI 14% 14% 14% 20% Levoxyl 9% 6% 5% 5% Altace 36% 38% 35% 16% Other branded pharma 18% 17% 16% 15%


• Recent positives include Q3 prescription growth of 8% for Avinza (10% of YTD branded pharma revenue, up from 5% a year ago). Thrombin-JMI has also performed well YTD, growing to 20% of branded pharma revenue, up from 14%. Merdian Auto-Injector revenue has increased 17% YTD.

• May submit three New Drug Applications by the end of this year. King partner Pain Therapeutics submitted an NDA for Remoxy (long-acting oral oxycodone) to the FDA in June. An FDA advisory committee reviewed the NDA on November 13. King and partner Acura Pharma plan to submit an NDA for Acurox (oxycodone HCl/niacin) this year (positive top-line data from the pivotal Phase III clinical trial reported in June). King also expects to file an NDA for Corvue soon.

• CEO and CFO with company since ‘04 and ‘05, respectively. Prior to joining King, CEO Brian Markison (48) spent 22 years at Bristol-Myers Squibb (most recently as president of the oncology business). CFO Joseph Squicciarino (51) was previously North America CFO at Revlon.

• Cash of $1.3 billion, student loans of $344 million (at fair value), and debt of $400 million.

• Launched $1.4 billion Alpharma (ALO) tender in September ($37 per share, >50% premium) and signed confidentiality agreement in October. Alpharma’s Board has called the offer inadequate.

• Stock price implies 9x trailing P/E and 12x forward P/E.


• Revenue down 24% and adjusted EBIT down 32% YTD, primarily due to earlier-than-expected generic competition for Altace. Following the Circuit Court’s decision in September 2007 invalidating King’s Altace patent, generic competition entered the market in December 2007. In response, King eliminated 20% of its workforce.

• New branded competition. King’s bovine thrombin product, Thrombin-JMI, faces new competition in 2008 from Omrix and Zymogenetics.

• Sales concentration. 75% of gross sales were attributable to McKesson (35%), Cardinal/ Bindley (27%), and AmerisourceBergen (13%) in 2007.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BAX 37,210 38,439 3.1x 7.5x 18x 16x ELN 3,186 4,452 4.7x n/m n/m n/m HSP 4,791 6,665 1.8x 19.7x 12x 11x PFE 109,775 99,330 2.0x 4.1x 7x 7x WYE 45,457 42,795 1.8x 3.0x 10x 9x KG 2,376 1,472 .8x 1.2x 8x 12x

MAJOR HOLDERS CEO Markison <1% │ Other insiders 1% │ Lord Abbett 9% │ Barclays 7% │ Vanguard 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? 1 FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 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.

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Thanksgiving 2008


Korn/Ferry International (NYSE: KFY) Los Angeles, CA, 310-552-1834 Services: Business Services, Member of S&P MidCap 400 http://www.kornferry.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 66 83 108 207 278 324 369 209 245 209 Total current assets 172 162 186 305 395 465 526 387 410 387 Intangible assets 86 95 99 107 110 142 158 158 147 158 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 Total current liabilities 146 89 97 158 176 230 273 173 153 173 Long-term debt 2 51 55 56 56 0 0 0 0 0 Total liabilities 198 203 217 281 312 329 384 290 260 290 Preferred stock 0 0 0 0 0 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



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BUSINESS OVERVIEW Korn/Ferry is a global executive search firm. Clients include many of the world’s largest companies, governments and nonprofits. Three-quarters of recruitment assignments are on behalf of clients who have used Korn/Ferry in the past three years. In FY08, assignments by industry were as follows: 27% industrial, 20% financial services, 17% consumer, 16% technology, and 20% other. 61% of FY08 assignments were to fill a Board level, CEO, CFO or other senior executive position. In 1998, the company expanded into middle management with the launch of Futurestep, an outsourced recruiting subsidiary. Korn/Ferry was founded in 1969. SELECTED OPERATING DATA

FYE April 30 2006 2007 2008 1Q09 Consultants (period end) 507 601 684 n/a % of revenue by type: Executive recruitment fees 82% 82% 81% 80% Futurestep fees 13% 12% 13% 14% Reimbursements 5% 5% 5% 5% Revenue growth by type: Executive recruitment fees 14% 25% 20% 9% Futurestep fees 30% 23% 29% 22% Total fee revenue 16% 25% 21% 11% % of executive recruitment fees by geography: North America 57% 58% 55% 54% EMEA 26% 26% 27% 30% Asia Pacific 13% 13% 14% 12% South America 4% 3% 4% 4% EBIT margin by type: Executive recruitment 22% 20% 18% 18% Futurestep 5% 9% 8% 9% Corporate -5% -6% -5% -5% Total EBIT 14% 12% 11% 11%


• Top-notch reputation. Korn/Ferry leads the executive search industry and focuses on positions with comp of $150K+. Strong reputational capital allows it to operate as a retained rather than a contingency firm. Retained firms typically earn a one-time fee equal to one-third of annual cash comp without regard to whether a positon has been filled.

• Futurestep’s focus on mid-level recruitment adds a scalable, technology-driven business model to Korn/Ferry. Futurestep fees grew 29% in FY08.

• Building “talent management solutions” firm. While search fees still dominate, Korn/Ferry also helps clients “develop, retain and reward their talent,” thereby providing value beyond recruitment.

• Experienced management. Chairman Paul Reilly (54) was previously CEO of KPMG Int’l, while CEO Gary Burnison (47) held high-level positions at Guidance, Jefferies, and KPMG Peat Marwick.

• Beneficiary of globalization. Korn/Ferry generates an increasing portion of business internationally, with fees outside of North America amounting to 45% of total executive recruitment fees in FY08. The company is not a newcomer to global markets, having established offices in Europe, Asia and Latin America in 1972, 1973 and 1974, respectively.

• $377 million of cash, investments and similar assets and no debt as of July 31.

• Repurchased $64 million of stock in FY08 and another $2 million in 1Q09.



• Highly sensitive to employment trends. The company’s revenue and profitability would suffer materially in a global downturn.

• Modest barriers to entry. While the company’s strong reputation gives it an edge executive recruitment at the highest levels is a relationship-driven rather than a brand-driven business.

• “People business,” ie, limited scalability. While Futurestep makes the company’s model more scalable, Korn/Ferry still largely depends on the “production” of its consultants. Qualified people are not easy to hire and retain, and they may demand an increasing share of profits in good times.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E HHGP 111 67 .1x 0.8x 24x 108x HSII 347 164 .2x 1.8x 9x 14x MPS 578 523 .2x 2.3x 8x 15x RHI 2,762 2,392 .5x 3.3x 11x 25x KFY 553 344 .4x 1.6x 10x 10x

1 Non-public comps include Egon Zehnder, Russell Reynolds, Spencer Stuart. MAJOR HOLDERS Chairman Reilly 1% │ CEO Burnison <1% │ Other insiders 2% │ Royce 11% │ T Rowe 10% │ Fiduciary 6% │ Kornitzer 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Lam Research Corporation (Nasdaq: LRCX) Fremont, CA, 510-572-0200 Technology: Semiconductors, Member of S&P MidCap 400 http://www.lamrc.com


Price: $17.99 (as of 11/14/08) Month # of P/E FYE 6/29/08 5.2x 52-week range: $16.68 - $48.00 Latest Ago Ests P/E FYE 6/30/09 138.4x 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 Shares out: 124.9 million FYE 6/30/09 0.13 1.20 17 EV / LTM revenue 0.7x



($ millions, except Fiscal Years Ended LTME FQE FQE 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 Intangible assets 0 0 0 0 15 131 403 375 130 375 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 Total current liabilities 598 217 377 379 568 673 638 534 574 534 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Lam Research supplies wafer fabrication equipment to the semiconductor industry. The company’s etch systems shape the microscopic conductive and dielectric layers into circuits that define a chip’s final use and function. Lam also offers single-wafer clean technologies which allow customers to implement customized yield-enhancing solutions. Founded in 1980, Lam acquired SEZ in March 2008. SEZ supplies single-wafer wet clean technology. SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1Q09 ∆ revenue 9% 56% -4% -36% ∆ backlog (period end)1 48% 23% -36% n/a % of revenue by geography: U.S. 14% 16% 17% 15% Europe 13% 9% 10% 10% Taiwan 17% 22% 20% 14% Korea 22% 21% 22% 27% Japan 22% 14% 18% 17% Other Asia 12% 18% 12% 17% % of revenue by customer: Samsung Electronics 15% 14% 19% n/a Toshiba 12% <10% 13% n/a Hynix Semiconductor <10% 14% <10% n/a

1 Backlog of $410 million as of June 30, 2008, one-sixth of trailing revenue. INVESTMENT HIGHLIGHTS

• Market share leader in plasma etch. Lam has held #1 share for six years and now has a larger piece of the market than the next two competitors combined. Lam also offers an expanded product portfolio beyond etch integrated processing solutions.

• SEZ acquisition targets single-wafer clean market. SEZ’s proprietary Spin-Processor technology forms part of Lam’s equipment portfolio for wafer cleaning. As half of the wafer cleaning steps in a fab immediately follow an etch process, management views SEZ as highly complementary.

• Stephen Newberry (54) became CEO in 2005 after serving as COO for seven years. Prior to joining Lam, Newberry spent 17 years at Applied Materials, serving most recently as Group VP of Global Operations. Executive chairman James Bagley (69) previously served as Lam’s CEO. Prior to joining Lam, Bagley was CEO of OnTrack Systems, which Lam acquired in 1997. Bagley had also spent 15 years at Applied Materials, serving in roles including COO and vice chairman. CFO Martin Anstice (41) joined Lam in 2001, following 13-year tenure as a finance executive at Raychem.

• Strong balance sheet, with $1.1 billion of cash and short-term investments and $300 million of debt.

• $250 million share repurchase authorized. • Stock price implies 15% trailing FCF yield, 8x


• Weak wafer fab equipment spending, with 1Q09 revenue down 36% . A prolonged supply/demand imbalance in memory continues, with spending down 35-40% y-y. The company sees limited near-term capacity expansion in memory or foundry segments. According to Lam, while lower capital intensity benefits the industry in the long term, “significant December quarter uptick in shipments for Lam appears less likely.”1 The company is responding by restructuring the Clean Product Group, with targeted annual savings of up to $40 million, and by pursuing other cost savings.

• Competition. An investor presentation by CFO Martin Anstice in September listed “continued Etch market share defense” as a near-term focus, suggesting that management may be concerned about threats to Lam’s share. Primary competitors in the etch market are Tokyo Electron and Applied Materials. The primary competitor in the single-wafer wet clean market is Dainippon Screen Mfg.

• Revenue primarily from high-priced systems ranging in price up to $6 million per unit. This may increase cyclicality and volatility of results.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AMAT 13,725 11,827 1.5x 2.3x 13x 9x KLAC 3,067 2,505 1.1x 1.7x 36x 14x VECO 148 176 .4x 1.3x 9x 16x LRCX 2,248 1,488 .7x 1.6x 138x 15x

MAJOR HOLDERS CEO Newberry <1% │ Other insiders 1% │ Fidelity 14% │ Wellington 11% │ AllianceBernstein 7% │ Cap Re 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 1 The outlook presented in this paragraph was adopted from an investor 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.

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Thanksgiving 2008


LCA-Vision Inc. (Nasdaq: LCAV) Cincinnati, OH, 513-792-9292 Health Care: Healthcare Facilities, Member of S&P SmallCap 600 http://www.lasikplus.com


Price: $3.91 (as of 11/14/08) Month # of P/E FYE 12/31/07 2.4x 52-week range: $2.16 - $21.34 Latest Ago Ests P/E FYE 12/31/08 n/m Market value: $73 million This quarter -$0.23 -$0.03 6 P/E FYE 12/31/09 n/m Enterprise value: $32 million Next quarter 0.19 0.20 2 P/E FYE 12/31/10 10.6x 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 Insider ownership: 1% FYE 12/31/10 0.37 0.95 3 EV / LTM EBIT 4.5x Insider buys (last six months): 0 LT EPS growth 13.7% 13.7% 3 P / tangible book 0.8x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 22% # of institutional owners: 219 10/28/08 -$0.25 -$0.07 LTM pre-tax ROC 16%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 17 18 65 87 111 95 60 63 76 63 Total current assets 19 21 70 105 142 136 95 89 115 89 Intangible assets 0 0 0 0 0 0 0 0 0 0 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 Total current liabilities 5 8 9 13 29 41 47 38 42 38 Long-term debt 0 0 0 0 1 2 2 15 3 15 Total liabilities 5 8 11 18 55 81 86 82 85 82 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW LCA-Vision provides laser vision correction under the LasikPlus brand in 77 fixed-site vision correction centers, primarily in the U.S. The centers employ laser technologies to correct nearsightedness, farsightedness and astigmatism, with independent, board-certified ophthalmologists performing procedures. Most patients receive the LASIK procedure, which was first performed in 1997. The company has performed one million procedures since 1991. SELECTED OPERATING DATA


9/30/08 Laser procedures (‘000) 142 185 192 96 Revenue per procedure ($) 1,246 1,290 1,523 1,787 Revenue ($mn) 177 239 293 171 Deferred revenue1 ($mn) 32 50 42 27 ∆ procedures 48% 30% 4% -37% ∆ revenue per procedure -1% 4% 18% 22% ∆ revenue 47% 35% 22% -23% ∆ deferred revenue1 nm 57% -16% -36% Vision correction centers na na 72 77 Centers with IntraLase na na 45 “most”

1 At period end. INVESTMENT HIGHLIGHTS

• 170 million Americans require eyeglasses or contact lenses to correct vision problems. More than six million laser vision correction procedures have been performed in the U.S. since FDA 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 two market leaders compete in a fragmented market, with more than 50% still served by local providers.

• Offers two procedures: PRK (old) and LASIK (new). PRK/surface ablation involves removing cells covering the cornea. LASIK, which accounts for most of LCA’s procedures, involves creating a corneal flap that remains hinged to the eye. Recovery from LASIK is more rapid than from PRK; the latter can take several days or longer. Each procedure takes about 30 minutes to complete.

• Rolled out new LASIK technology, IntraLase, to vast majority of vision centers. 74% of procedures performed in 3Q08 utilized IntraLase.

• Steven Straus (51) became CEO in 2006. He had 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.

• Unlevered balance sheet, with $67 million of cash and short-term investments and $23 million of debt.

• Repurchased 1.6 million shares for $45 million in 2007, but has put buybacks on hold in 2008.

• Stock price implies -5% trailing FCF yield and 13x trailing P/E (forward loss projected).


• Procedure volume down 52% in Q3, due to fewer pre-op appointments booked by prospective patients and weak show rates, though the latter improved modestly from Q2. Average price per procedure declined ~$100 from Q2 to Q3 due to aggressive discounting. Many patients view laser vision correction as a discretionary procedure, making volume dependent on the state of the economy.

• Suffered operating losses in past six months due to lower procedure volume. The company laid off 25% of staff in Q3, following major layoff earlier in the year; changed the workforce mix toward part-time staff; cut advertising expenses nearly in half; and put new center openings on hold.

• Recent management turnover, including abrupt departures of CFO in June and CMO in July. Each position continues to lack a permanent replacement.

• FDA Ophthalmic Devices Panel in April 2008 and negative media coverage of laser vision correction have hurt procedure growth.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AMSG 685 854 1.4x n/m 14x 13x NOVA 84 180 1.3x n/m 10x 9x TLCV 13 106 .4x n/m n/a n/a LCAV 73 32 .1x 0.8x n/m n/m

MAJOR HOLDERS CEO Straus <1% │ Other insiders 2% │ Lord Abbett 13% │ Royce 11% │ Tremblant 8% │ HWP 7% │ Barclays 6% │ Michael Roth 6% │ Morgan Stanley 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Lear Corporation (NYSE: LEA) Southfield, MI, 248-447-1500 Consumer Cyclical: Auto & Truck Parts, Member of S&P MidCap 400 http://www.lear.com


Price: $1.40 (as of 11/14/08) Month # of P/E FYE 12/31/07 0.5x 52-week range: $1.18 - $34.57 Latest Ago Ests P/E FYE 12/31/08 1.3x Market value: $108 million This quarter -$0.61 $0.17 9 P/E FYE 12/31/09 n/m Enterprise value: $1.9 billion Next quarter -0.03 0.45 4 P/E FYE 12/31/10 1.0x Shares out: 77.1 million FYE 12/31/08 1.08 2.35 11 EV / LTM revenue 0.1x

Ownership Data FYE 12/31/09 -0.39 1.86 11 EV / LTM EBITDA 6.1x Insider ownership: 0% FYE 12/31/10 1.47 2.57 6 EV / LTM EBIT 6.1x Insider buys (last six months): 1 LT EPS growth 9.0% 9.0% 2 P / tangible book n/m Insider sales (last six months): 3 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 16% # of institutional owners: 531 10/30/08 -$0.75 -$0.04 LTM pre-tax ROC 30%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 88 92 169 585 197 503 601 523 602 523 Total current assets 2,367 2,508 3,375 4,372 3,846 3,890 3,718 3,643 4,006 3,643 Intangible assets 3,140 2,860 2,940 3,090 1,983 2,039 2,093 2,052 2,039 2,052 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 Total current liabilities 3,183 3,045 3,582 4,648 4,107 3,887 3,604 3,469 3,837 3,469 Long-term debt 2,294 2,133 2,057 1,867 2,243 2,435 2,345 2,297 2,352 2,297 Total liabilities 6,020 5,821 6,314 7,214 7,177 7,249 6,710 6,524 7,012 6,524 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Lear supplies automotive parts in two segments: Seating includes seat systems and components. Electrical and electronic includes electrical distribution systems and electronic products, primarily wire harnesses; junction boxes terminals and connectors, electronic control modules, and in-vehicle audio and entertainment systems. Lear has 91,000 employees at 215 facilities in 35 countries. In 2006/07, Lear divested its interior segment. Lear also contributed its European and North American interior businesses to joint ventures with WL Ross and Franklin Mutual in exchange for minority equity stakes. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: Seating 65% 65% 76% 79% Electrical and electronic 17% 17% 19% 21% Interior1 18% 18% 4% 0% Revenue growth by selected segment: Seating -2% 5% 5% -5% Electrical and electronic 10% 1% 3% 0% Total revenue growth 1% 4% -10% -10% EBIT margin by segment: Seating 3% 5% 6% 4% Electrical and electronic 6% 3% 1% 3% Interior1 -6% -6% 1% n/a Total EBIT margin2 1% 2% 4% -1% % of revenue by geography: U.S. 37% 37% 28% n/a Canada 8% 8% 7% n/a Germany 12% 11% 15% n/a Mexico 9% 10% 10% n/a Other countries 34% 34% 40% n/a

1 Divested European and North American interior businesses in October 2006 and March 2007, respectively, in transactions involving WL Ross and Franklin. 2 Includes unallocated corporate expenses. INVESTMENT HIGHLIGHTS

• #2 globally in seating systems, generating sales of more than $12 billion (~80% of revenue) in a $50 billion market. Lear is #2 in North America and #3 in Europe, and is a leader in China and India.

• Electrical distribution systems revenue of more than $2 billion. The company is #3 in North America and #4 in Europe in wire harnesses.

• Electronic products revenue of $900 million. Lear is a leader in junction box technology and a niche player in electronic modules, wireless products, premium audio/video and tire pressure monitoring.

• New operating structure aligns Lear with global strategies of major customers and allows it to access lowest-cost manufacturing and sourcing options.

• Stock price implies 5x trailing P/E.

INVESTMENT RISKS & CONCERNS • Q3-end net debt of $1.8 billion, making Lear

dependent on the continued confidence of lenders. • Conditions “extremely challenging,” with 2008

industry production at the lowest level in more than a decade. In North America, production was down 17% in Q3, with Lear’s top fifteen platforms down 33%. European industry production was down 3%, with Lear’s top five customers down 8%. Buying patterns are shifting away from SUVs. Financial distress is rising within the supply chain.

• 49% of revenue from GM and Ford, with “classic” Ford and GM accounting for 42% of revenue, and Saab, Volvo, Jaguar and Land Rover generating 7% of revenue. In addition to the usual risks of customer concentration, Lear also faces risks relating to GM and Ford’s financial distress.

• Weak electrical and electronic business (~20% of revenue). Non-GAAP segment margin declined from 7.4% in 2005 to 3.6% in 2007, driven by “fierce” global competition. Lear is restructuring this segment, with the goal of achieving a low-cost global footprint, capitalizing on new technologies, and developing system integration capabilities.

• Prices of key raw materials, including hot-rolled steel, copper, crude oil, and foam chemicals, are still high. (Lear lowered exposure to resins and supplier issues with the divestiture of the interior business.)


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E DAN 105 1,256 .1x 0.1x n/m 2x JCI 9,124 12,684 .3x 4.4x 8x 7x MGA 2,925 1,213 .0x 0.4x n/a n/a VC 61 1,493 .1x n/m n/m n/m LEA 108 1,925 .1x n/m 1x n/m

MAJOR HOLDERS CEO Rossiter <1% │ Other insiders 1% │ Icahn 16% (apparently sold out recently) │ Barclays 10% │ Pzena 9% │ Vanguard 8% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Lincare Holdings Inc. (Nasdaq: LNCR) Clearwater, FL, 727-530-7700 Health Care: Healthcare Facilities, Member of S&P MidCap 400 http://www.lincare.com



Ownership Data FYE 12/31/09 2.26 2.27 14 EV / LTM EBITDA 4.7x Insider ownership: 0% FYE 12/31/10 2.76 2.71 6 EV / LTM EBIT 6.1x Insider buys (last six months): 0 LT EPS growth 16.5% 17.0% 5 P / tangible book n/m Insider sales (last six months): 6 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 16% # of institutional owners: 607 10/20/08 $0.76 $0.72 LTM pre-tax ROC 100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 0 2 10 226 47 25 150 33 36 33 Total current assets 161 154 187 378 213 242 366 269 255 269 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 Total current liabilities 162 111 147 132 94 190 439 246 566 246 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Lincare is a leading provider of oxygen and other respiratory therapy services to home patients in the U.S. Customers suffer from chronic obstructive pulmonary disease (COPD), such as emphysema, chronic bronchitis or asthma. Lincare serves 700,000 customers through 1,000 operating centers. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

∆ operating centers 10% 11% 4% 4% ∆ customers 18% 7% 4% n/a ∆ revenue 0% 11% 13% 5% % of revenue by product category: Oxygen and other therapy 91% 92% 92% 92% Home medical equipment 9% 8% 8% 8% Revenue by payor: Medicare and Medicaid 67% 67% 64% n/a Private insurance 26% 26% 29% n/a Direct payment 7% 7% 7% n/a % of revenue by type: Rental 71% 70% 67% n/a Sale 29% 30% 33% n/a


• $6 billion home respiratory market growing 6%. The market size estimate includes home oxygen equipment and respiratory therapy services. Growth drivers include an increasing number of COPD patients and a trend toward home treatment due to lower cost than acute care. 16 million Americans have been disgnosed with COPD.

• Lincare’s share of fragmented home respiratory services market has grown from 11% in 1997 to 25% in 2007. The market includes 2,000 regional and local providers. Local competitors’ share declined from 61% to 45%, and national competitors’ share rose from 28% to 30% during the same period. The industry is consolidating, with local players disadvantaged by regulatory changes.

• Growth strategy includes organic and acquired growth, supported by proprietary, integrated IT systems and scale-advantaged, efficient operations. The company made 67 acquisitions from 2003-07 for $459 million, or 1.4x acquired revenue. Lincare’s customers have grown from 400K in 2002 to 700K in 2007, while operating centers have grown from 642 in 2002 to 1,019 in 2007.

• Experienced management. Lincare executive team members have an average of 18 years of experience. 95% of Lincare’s 140 area managers have managed local Lincare sales efforts. 95% of the company’s 34 billing managers have been promoted within.

• Repurchased 18 million shares for $673 million in 2007 and has bought back $35 million YTD.



• Medicare price reductions have negatively affected growth. Lincare has reported 5% GAAP revenue growth and 10% “internal” growth YTD, with the difference due to Medicare pricing.

• Reimbursement pressure. Lincare depends heavily on Medicare reimbursement, with Medicare Part B providing coverage for durable medical equipment (DME). Two-thirds of Lincare’s customers have primary coverage under Medicare Part B. Recent legislation, including the SCHIP Extension Act of 2007, the Deficit Reduction Act (DRA) of 2005 and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, contain provisions that directly impact reimbursement for the primary respiratory and other DME products provided by Lincare. SCHIP reduced Medicare reimbursement amounts for covered Part B drugs as of April 1, 2008. DRA provisions will impact reimbursement for oxygen equipment beginning in 2009.

• Regulatory pressure on Medicare-covered oxygen equipment rentals. DRA changes reimbursement from monthly payment for as long as the equipment is in use by a beneficiary to a capped rental contract whereby payment for oxygen equipment may not extend for more than 36 months.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AMED 1,365 1,719 1.7x n/m 16x 13x GTIV 686 885 .7x n/m 16x 15x NHC 545 614 1.0x 1.7x n/a n/a LNCR 1,862 2,452 1.5x n/m 8x 11x

MAJOR HOLDERS CEO Byrnes 4% │ Other insiders 3% │ Fidelity 15% │ Barclays 7% │ JP Morgan 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Lorillard Inc. (NYSE: LO) Greensboro, NC, 877-703-0386 Consumer Non-Cyclical: Tobacco, Member of S&P 500 http://www.lorillard.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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


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BUSINESS OVERVIEW Lorillard is the third-largest cigarette maker and the oldest continuously operating tobacco firm in the U.S. Lorillard’s flagship brand, Newport, is a menthol-flavored premium cigarette brand and the top selling menthol and second largest selling cigarette in the U.S. Lorillard manufactures all of its products at its Greensboro, NC facility. Lorillard was founded in 1760 and separated from Loews in June 2008. SELECTED OPERATING METRICS

FYE December 31

2005

2006

2007

YTD 9/30/08

Unit volume (bn) 35.2 36.1 35.8 +1.4% Market share… …of total U.S. market 9.2% 9.6% 10.0% 11.0% …of premium segment 12.3% 12.7% 13.0% n/a …of menthol segment 31.5% 32.2% 32.9% 34.6%


• Strong U.S. market position. Newport (94% of Lorillard’s volume and sales) is the #1 menthol and #2 overall brand cigarette in the $50 billion U.S. market (behind Philip Morris and RAI). The “Newport pleasure” theme has existed for 35 years.

• Gaining share in mature, competitive industry. Newport has grown to 33% of menthol cigarettes in the U.S., while menthol’s share of cigarettes shipped has grown from 26% to 28% over five years. In addition, the premium segment has grown from 68% to 73% of cigarettes, while Lorillard has captured a larger portion of the premium segment.

• Modest growth despite declining industry trend. Lorillard projects annual revenue growth of 3-4% in 2009-12, despite 3-4% industry unit declines.

• Industry-leading profitability. Lorillard generates more than $36 of operating income per 1,000 units shipped, better than any of its U.S. competitors.

• Still under-represented in Western U.S. Newport has 17% share of the menthol segment in 23 Western states, trailing Marlboro Menthol (23%), Kool/ Salem (21%) and Discount Menthol (24%).

• High-margin business; strong FCF generation, with LTM FCF of $850 million. The company expects to maintain operating margins in the 32-33% range over the next few years.

• Repurchased 5.9 million shares for $400 million ($68 per share) from July through October.

• Seasoned management team. Lorillard executives have been with the company for a long time and appear focused on long-term shareholder value.


INVESTMENT RISKS & CONCERNS • Significant and uncertain legal liabilities.

Lorillard is a defendant in thousands of lawsuits. Provisions have been recorded in cases with estimable liability only, with large contingent exposures. Lorillard already pays $1+ billion per year in settlement costs that reduce gross profit.

• Stated long-term goals may prove unrealistic. Management aims for long-term revenue growth of 3-4%, EPS growth of 5-7%, and a dividend yield of ~5%, resulting in a targeted annual equity return of 10-12%. This assumes continuing market share gains and accretive stock repurchases.

• No international exposure. Lorillard sold the international rights to its brands in 1977.

• Possibility of regulatory action on menthol. Some public health agencies have expressed concerns that mentholated cigarettes may pose greater health risks than other cigarettes, as smokers tend to inhale more deeply. A menthol ban appears unlikely, however.

• Move to greater taxation may curtail demand. Federal and state excise taxes have trended higher over the years. In April 2008, New York State almost doubled the excise tax per pack to $2.75.

• Lack of reinvestment opportunities. The U.S. tobacco industry faces a declining long-term trend, and Lorillard is unlikely to find ways to reinvest capital at high rates. The company is returning most free cash flow via share repurchases and dividends.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BTI 49,894 60,945 3.6x n/m 12x 11x ITYBY 23,500 30,971 1.7x n/m 10x 9x PM 77,705 86,049 1.4x n/m 12x 11x RAI 12,530 14,620 1.6x n/m 9x 9x LO 10,215 9,007 2.2x 14.1x 12x 11x

MAJOR HOLDERS Insiders <1% │ BofA 5% │ Ameriprise 4% │ NWQ 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Manitowoc Company, Inc. (NYSE: MTW) Manitowoc, WI, 920-684-4410 Capital Goods: Construction & Agricultural Machinery, Member of S&P 500 http://www.manitowoc.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 26 30 47 179 232 176 366 382 106 382 Total current assets 331 647 646 846 953 1,143 1,576 1,973 1,374 1,973 Intangible assets 508 508 531 606 570 622 719 693 716 693 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 Total liabilities 817 1,282 1,304 1,409 1,419 1,445 1,519 1,815 1,532 1,815 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 264 295 298 519 543 775 1,350 1,561 1,059 1,561 EBIT/capital employed 49% 31% 14% 24% 29% 69% 91% 70% n/m n/m



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BUSINESS OVERVIEW Manitowoc, founded in 1902, operates in two segments: The crane group (88% of revenue) provides lifting equipment for the global construction industry. The foodservice group (12% of revenue) makes ice/beverage dispensers, ice-cube and commercial refrigeration machines. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007

YTD9/30/08

% of revenue by segment: Crane 72% 76% 81% 89% Foodservice 18% 14% 11% 11% Marine1 10% 10% 8% 0% Revenue growth by segment: Crane 30% 37% 45% 28% Foodservice 6% 4% 6% 3% Total revenue growth 22% 30% 37% 25% EBIT margin by segment: Crane 7% 13% 14% 15% Foodservice 14% 14% 14% 15% Corporate and other -1% -2% -1% -1% Total EBIT margin 6% 10% 13% 14% % of revenue by geography: Americas 56% 57% 53% n/a EMEA 37% 35% 37% n/a Asia and Oceania 8% 8% 10% n/a

1 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 gain). The marine group is treated as a discontinued operation in 2008. INVESTMENT HIGHLIGHTS

• World-leading industrial brands. Crane: Manitowoc: high-capacity, lattice-boom crawler cranes; Potain: top-slewing and self-erecting tower cranes; Grove: mobile telescopic cranes; National Crame: boom trucks. Foodservice: Manitowoc: #1 ice-cube machines in U.S., #1 ice-machines in China; Servend: #1 ice/beverage dispenser in U.S.; Kolpak: #1 walk-in refrigerator/freezer in U.S.

• 56% of Crane revenue from Europe and Asia. Global construction market is expected to grow from $6 trillion in 2008 to $13 trillion in 2016, with international outpacing U.S. growth by 2-to-1.1

• U.S. construction exposure lower than appears. While residential and commercial construction accounts for one-third of Crane revenue, the U.S. accounts for only one-fifth of that one-third.

• Crane backlog up 26% y-y to $3.3 billion as of September 30, down slightly from June 30.

• Crane revenue up 28% YTD, driven by global infrastructure and energy development. EBIT margin has been in the mid teens.


1 Source: Company, Global Insights.

• 80% of Foodservice revenue from renovation and replacement, with 20% from new locations.

• $2.7 billion cash acquisition of Enodis, completed in October, positions Manitowoc in hot foodservice and food retail equipment. Post-Enodis, Foodservice accounts for ~37% of revenue, up from 12%. The deal is expected to be accretive to EPS in 2009, with $80 million of annual synergies by 2011.

• Expects EPS to grow 18-21% to $3.15-3.25 in 2008, down from previous guidance of $3.30-$3.40.


• Enodis more than triples Foodservice Group, raising integration risks. The deal also leverages the balance sheet at a time when end markets may be slowing. The company won Enodis in an auction vs. Illinois Tool Works and may have overpaid.

• 91% of Crane revenue from new cranes, with 9% from parts and service, making the company vulnerable to a slowdown in capital spending.

• Soft residential and commercial construction, as well as “challenges” in customer and project financing affecting Crane group. Management also noted “slower demand” for lower capacity tower cranes in Western Europe, even as demand for mobile telescopic and other cranes remains “brisk.”

• Rising materials costs. Manitowoc faces rising steel, copper and other materials prices, and higher transportation and energy costs. Margins have so far not been materially affected by these cost increases.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E CAT 22,296 54,322 1.1x 3.2x 6x 7x DE 14,429 34,173 1.3x 2.4x 7x 6x HIT 15,445 36,368 .3x 0.9x n/a n/a TEX 1,150 2,231 .2x 0.9x 2x 3x MTW 902 974 .2x 1.0x 2x 2x

MAJOR HOLDERS CEO Tellock <1% │ Other insiders 3% │ Fidelity 6% │ Vanguard 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? 1 MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 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.

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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



Ownership Data FYE 12/31/09 2.65 2.96 7 EV / LTM EBITDA 5.4x Insider ownership: 2% FYE 12/31/10 3.00 3.22 3 EV / LTM EBIT 6.0x Insider buys (last six months): 0 LT EPS growth n/a n/a 0 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 80% Date Actual Estimate LTM EBIT yield 17% # of institutional owners: 1123 10/28/08 $1.28 $1.22 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 54 58 696 681 749 354 396 485 453 485 Total current assets 1,813 1,674 2,256 2,426 2,591 2,258 2,333 2,585 2,692 2,585 Intangible assets 1,818 1,806 1,674 1,954 2,352 2,325 2,336 2,325 2,351 2,325 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 Total current liabilities 1,876 1,775 1,994 1,947 2,225 2,468 2,657 2,818 3,915 2,818 Long-term debt 834 459 0 1 0 0 1,197 1,198 0 1,198 Total liabilities 3,307 2,866 2,808 2,857 3,283 3,363 4,751 4,900 4,795 4,900 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW McGraw-Hill, founded in 1888, provides info services in the financial, education and business data markets. Brands include Standard & Poor’s, McGraw-Hill Education, BusinessWeek, and J.D. Power and Associates. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Revenue growth by segment: McGraw-Hill Education 12% -6% 7% -1% Financial Services 17% 14% 11% -12% Information & Media 16% 6% 4% 5% Total revenue growth 14% 4% 8% -5% % of revenue by segment: McGraw-Hill Education 45% 40% 40% 43% Financial Services 40% 44% 45% 41% Information & Media 16% 16% 15% 16% EBIT margin by segment: McGraw-Hill Education 15% 13% 15% 16% Financial Services 42% 44% 45% 41% Information & Media 7% 5% 6% 8% Total EBIT margin1 23% 23% 25% 23% % of revenue by geography: U.S. 78% 76% 74% n/a Europe 13% 14% 15% n/a Asia 6% 6% 6% n/a Rest of world 4% 4% 5% n/a

1 Includes adjustments for unallocated and other expenses. INVESTMENT HIGHLIGHTS

• Leading brands: Standard & Poor’s, McGraw-Hill, Newsweek, JD Power and Associates. The branded franchises have wide-moat characteristics. S&P credit ratings are—next to ratings provided by Moody’s and Fitch—a key input into investors’ credit analysis processes, enabling the company to extract high-margin revenue from issuers seeking to access the capital markets. JD Power and Associates enjoys a strong reputation with consumers. McGraw-Hill Education and Newsweek are highly respected franchises in their respective markets.

• Financial Services bright spots mitigate sharp decline in credit ratings business. Investment Services (roughly 30% of Financial Services revenue) posted top-line growth of 3% YTD and 14% in Q3, driven by “solid gains” in index services and Capital IQ (subscriber base is growing ~20% and now approaches 2,500 clients). AUM in ETFs that track S&P indices rose 7% y-y to $224 billion as of September 30 (S&P receives AUM-based payments). The company also receives a royalty each time an exchange-traded derivative based on an S&P index is traded. Such trading volume grew 27% y-y to 3.7 million contracts in Q3.

• Education segment benefits from “robust” state new adoption market in 2008, with McGraw-Hill’s elementary to high school business expected to capture one-third of this year’s state spend of $900-$950 million (up 10-16% y-y).

• Guiding for non-GAAP EPS of $2.63-$2.65 in 2008 (down 11-12%), driven by weakness in Financial Services, slowing growth in Education, and slightly better growth in Information & Media.



• Revenue and EBIT down due to weakness in Financial Services: segment revenue is down 15% YTD, accompanied by EBIT margin contraction of 606 bps. S&P Credit Market Services transaction revenue has dropped 54% YTD.

• S&P ratings business: Temporary setback or permanent impairment of franchise value? S&P’s ratings business has struggled due to the downturn in credit markets. S&P’s structured credit ratings are perceived to have failed investors, and the rating methodology and business model have 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 move to force S&P to fundamentally change its business model, such a change could have a significant negative impact on franchise value.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E MCO 4,635 5,588 3.0x n/m 11x 11x PSO 7,105 9,804 1.5x n/m 9x 9x MHP 7,347 8,366 1.3x n/m 9x 9x

MAJOR HOLDERS CEO McGraw III 2% │ Other insiders 1% │ T Rowe 10% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? 1 EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 1 The company’s moat may have narrowed a bit recently as a result of the company’s failure to accurately rate structured credit risks.

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.

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Medicis Pharmaceutical (NYSE: MRX) Scottsdale, AZ, 602-808-8800 Health Care: Biotechnology & Drugs, Member of S&P MidCap 400 http://www.medicis.com



Ownership Data FYE 12/31/09 1.48 1.49 15 EV / LTM EBITDA 5.2x Insider ownership: 1% FYE 12/31/10 1.80 1.80 7 EV / LTM EBIT 7.4x Insider buys (last six months): 1 LT EPS growth 19.0% 19.0% 8 P / tangible book 2.3x Insider sales (last six months): 2 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 14% # of institutional owners: 539 8/5/08 $0.40 $0.35 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 578 499 634 604 743 554 795 307 766 307 Total current assets 659 646 734 699 833 686 874 447 846 447 Intangible assets 185 274 331 324 303 232 236 324 244 324 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 Total current liabilities 47 69 67 99 141 363 451 179 111 179 Long-term debt 400 400 453 453 453 284 169 169 453 169 Total liabilities 447 472 523 557 603 647 630 364 575 364 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Medicis operates in two specialty pharma segments: The dermatological segment targets acne and non-acne treatment. Acne products include Dynacin, Plexion, Solodyn, Triaz, and Ziana. Non-acne products include Loprox, Omnicef, Perlane, Restylane, and Vanos. Seasonality: Acne revenue bumps up in Q3 due to back-to-school sales. The non-dermatological segment includes products for the treatment of urea cycle disorder, and contract revenue. Product lines include Ammonul and Buphenyl. The segment also includes contract revenue associated with licensing agreements and authorized generics. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by product type: Acne dermatological 32% 41% 53% 61% Non-acne dermatological 49% 51% 38% 30% Non-dermatological1 19% 9% 9% 10% Revenue growth by product type: Acne dermatological products n/a 40% 52% 46% Non-acne dermatological n/a 16% -13% -14% Non-dermatological1 n/a -49% 22% 37% Total revenue growth n/a 11% 16% 20%

1 Includes contract revenue. INVESTMENT HIGHLIGHTS

• $6 billion market for dermatological pharma in the U.S. Nearly 12 million cosmetic procedures were performed in the U.S. in 2007, including nearly 10 million non-surgical procedures.

• Growth strategy: promote brands, develop new products and extensions, enter into collaborations, and acquire products. Medicis recently entered the international aesthetic market with LipoSonix. It will introduce Reloxin in 1Q09, pending approval.

• Medicis has obtained or licensed U.S. patents covering Triaz and Restylane (expire in 2015), a patent covering Solodyn Tablets (2018), two patents covering Ziana Gel (2015, 2020), and three patents covering Vanos Cream (2021).

• Strong growth of acne revenue, from $98 million in 2005 to $246 million in 2007, driven by Solodyn (approved in 2Q06) and Ziana (approved in 4Q06). Acne revenue amounted to $230 million in the first nine months of 2008, up 46%, driven by Solodyn.

• Guiding for revenue growth of 11-12% in 2008, with revenue of $506-511 million and non-GAAP EPS of $1.36-$1.39. The company had $307 million of cash and $170 million of debt at the end of Q3.


INVESTMENT RISKS & CONCERNS • Solodyn patent suit, generic competition from

Impax. In January 2008, Impax filed an Abbreviated New Drug Application (ANDA) seeking FDA approval for a generic version of Solodyn. Impax also filed suit seeking a declaration that Medicis’s Solodyn patent is invalid.

• Competitors for prescription dermatological products include Allergan, Galderma, J&J, Sanofi-Aventis, Stiefel Labs and Warner Chilcott. The primary facial aesthetics competitor is Allergan. The FDA approved Allergan’s Juvéderm in mid-2006 (marketed since early 2007).

• High dependence on wholesalers. McKesson accounted for 52% and Cardinal accounted for 17% of revenue in 2007. McKesson is the sole distributor of Restylane and Perlane.

• FDA approval risks. Medicis has developed and licensed potential pharmaceutical compounds and agents, which must go through the FDA approval process. In January 2008, the FDA stated that, upon a preliminary review of Medicis’s BLA for the botulinum toxin type A, Reloxin, in aesthetics, the FDA had determined not to accept the BLA for filing because it was not sufficiently complete.

• 11.7 million stock options outstanding at average exercise price of $28 (as of yearend 2007). While almost all of the options are underwater, they equal 21% of basic shares outstanding.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ACL 25,386 23,666 3.8x 6.9x 14x 13x AGN 10,837 11,423 2.6x 23.2x 14x 13x ELN 3,186 4,452 4.7x n/m n/m n/m SNY 82,566 89,716 2.5x n/m 8x 7x MRX 638 500 1.0x 2.3x 9x 8x

MAJOR HOLDERS CEO Shacknai 5% │ Other insiders 3% │ BlackRock 11% │ Cap Re 9% │ Vissium 8% │ Fidelity 8% │ Morgan Stanley 8% │ T Rowe 6% │ Merrill Lynch 6% │ Susquehanna 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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MEMC Electronic Materials (NYSE: WFR) St. Peters, MO, 636-474-5000 Technology: Semiconductors, Member of S&P 500 http://www.memc.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Intangible assets 4 4 0 0 0 0 0 0 0 0 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 Total current liabilities 222 286 244 254 225 258 444 523 416 523 Long-term debt 149 161 59 116 35 29 26 25 28 25 Total liabilities 574 656 533 585 437 599 852 905 835 905 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW MEMC provides silicon wafers for semiconductor and solar applications. It has global R&D and manufacturing facilities. Customers include semi device and solar cell makers. MEMC sells wafers from 100-300mm and intermediate products such as polysilicon and silane gas. The company has 200+ U.S. and 450+ foreign patents. Samsung and Yingli Green Energy each accounted for 10%+ of revenue in 2007. Texas Pacific Group acquired the company from E.ON in 2001 and sold its stake in several transactions through 2007. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Change in wafer ASPs -3% 10% -41% -41% % of revenue by product type: Wafers 90% 81% 78% n/a Excess polysilicon raw material 10% 19% 22% n/a % of revenue by geography: U.S. 31% 34% 24% n/a China 3% 14% 21% n/a Korea 17% 12% 16% n/a Taiwan 20% 18% 17% n/a Other 29% 22% 22% n/a


• 18% CAGR in silicon wafer shipments from 1990-2007, driven by growth in semiconductor units and solar megawatts. The wafer market is expected to grow from $10 billion (80/20 semi/solar split) in 2005 to $32 billion (45/55) in 2010. Semi devices and solar cells are made from wafers.

• Capital-intensive yet high-ROIC business. MEMC operates several production facilities with 8,000MT of targeted annual polysilicon capacity. Net PP&E was $976 million as of September 30. Capex was $276 million in 2007 and $242 YTD.

• $15-18 billion of contracts in place. In July, MEMC amended a ten-year solar wafer deal with Conergy, reducing volume from $7-8 billion to $4 billion. MEMC also announced a $3-3.5 billion ten-year “take-or-pay” solar wafer deal with Tainergy. Customers make deposits in advance of deliveries.

• Wafer volume drives revenue growth, with volume increases driven by new wafers and higher shipments of existing wafers. Prices declined 41% in 2007 due to a mix shift, with new 156mm wafers depressing the average price, while existing wafers and intermediate products realized higher prices.

• Strong balance sheet, with $1.3 billion of net cash and investments as of September 30.

• Repurchased four million shares for $270 million since May 2007 on total authorization of $1 billion.



• Expects Q4 revenue to drop 2-11% to $475-525 million, down from prior guidance for growth of 1-12%. The company expects gross margin of 48% and opex of $27 million (lower than previous estimate of $41 million due to forfeiture of options).

• Weak semiconductor application demand due to customers reducing inventory. Solar demand has been “healthy,” although management stated on November 17 that macro weakness is increasingly having a “negative effect” on solar as well.

• Nabeel Gareeb resigned as CEO on October 30 after six years with MEMC. Director Marshall Turner has stepped in until a new CEO is hired.

• Unanticipated events can affect production. In Q2, a premature failure of a heat-exchanger at the Merano, Italy facility reduced polysilicon output by 5%, causing Q2 results to miss guidance. The number of adverse events has increased as MEMC has expanded and ramped up production capacity.

• Dependent on demand in semiconductor device and solar industries. Weak end-market demand puts pressure on MEMC to cut prices and capacity.

• Competitors include Shin-Etsu Handotai, SUMCO, Siltronic, BP Solar, Evergreen Solar, Kyocera, REC Group, Sanyo, Sharp, and SolarWorld.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BRCM 7,852 5,605 1.2x 3.0x 9x 11x FSLR 9,470 8,913 8.8x 7.0x 30x 16x MRVL 3,550 2,983 .9x 2.7x 7x 8x SPWRA 2,193 2,322 1.8x 2.9x 11x 8x STP 1,660 2,548 1.5x 2.0x 7x 5x WFR 3,443 2,354 1.1x 1.7x 4x 4x

MAJOR HOLDERS Insiders <1% │ AXA 6% │ Cap Re 4% │ Barclays 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into WFR: WHAT ARE THE SHARES WORTH?

• We value MEMC at $30-36 per share, based on the valuation analysis summarized below. The company has $1.3-1.4 billion in excess investments, providing meaningful downside protection and an opportunity to increase intrinsic value per share through stock repurchases. While earnings from the company’s business are difficult to predict, MEMC should remain profitable even in a weaker macro environment. Shares appear grossly undervalued, even at multiples that do not reflect the company’s long-term growth prospects.

MEMC Electronic Materials — Valuation Summary


Low Value

High Value

Value of excess marketable assets:1 Cash and equivalents $932 $932 Short-term investments 187 187 Long-term investments 318 318 Long-term debt 30 30 Net cash and investments $1,468 $1,468 Cash needed to run business2 (200) (100) Total $1,268 $1,368 Value of core business: LTM EBIT 943 Fair value multiple of LTM EBIT 6x 2009 estimated EPS ex. interest income 3.00 Fair value multiple of 2009E adjusted EPS 10x Total $5,659 $6,840 Estimated fair value of WFR $6,927 $8,208 per share $30 $36


• Investors may overestimate cyclicality. While MEMC remains a cyclical business, investors may not be giving the company enough credit for its strong market position in solar applications. The solar market appears likely to continue strong secular growth, mitigating the negative impact of the traditional semiconductor downcycle.

• Departure of momentum investors over the past year, as the notion that MEMC can continue strong growth unaffected by traditional semiconductor cyclicality has been exposed as a myth. The shares have until recently remained too expensive for value investors. The latter may also be uncomfortable owning a company with a moat that depends to a large degree on continued technology leadership.

• Unexpected hit from hurricane Ike. The company lost fifteen days of production at its Pasadena factory, forcing a downward revision to Q3 estimates. While this is obviously a short-term issue, it seems that it affected some investors’ willingness to own the shares during Q3.

REVENUE AND MARGIN ANALYSIS

WFR – Revenue, Gross Profit and EBIT, 1996-07 MEMC results have exhibited significant historical volatility, reflecting the cyclical nature of the semiconductor capital equipment industry. However, as MEMC’s sales into the solar market have grown, MEMC has added a strong secular growth component to its operating profile.

-$500mn

$0mn

$500mn

$1,000mn

$1,500mn

$2,000mn

96 97 98 99 00 01 02 03 04 05 06 07


Source: Company, The Manual of Ideas. WFR – Y-Y Revenue Growth, 1997-YTD’08 MEMC’s highly volatile growth profile reflects the cyclicality of the semiconductor capital equipment industry. However, even as many cap equipment makers are posting revenue declines in 2008, MEMC has managed to continue growing. While the company is still exposed to cyclicality, it should also continue to benefit from secular growth in the solar industry.

-30%-20%-10%

0%10%20%30%40%

97 98 99 00 01 02 03 04 05 06 07

YTD

Source: Company, The Manual of Ideas. WFR – Gross and EBIT Margin, 1996-YTD’08 MEMC’s profit margins have risen in recent years to levels that are unlikely to be sustained through the downcycle in the semiconductor capital equipment industry. However, the company may be in a position to maintain respectable margins due to continued strength in solar applications.

-60%-40%-20%

0%20%40%60%

96 97 98 99 00 01 02 03 04 05 06 07

YTD

EBIT Margin Gross Margin


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MANAGEMENT’S VIEW OF BUSINESS Notes from 3Q08 earnings call with CEO Gareeb and CFO Hannah on October 23:

• Operating environment: solar application demand continues to be “healthy;” semiconductor application demand is “weak, mostly due to customer inventory reduction efforts in light of uncertain macro economic conditions” (result: “significant sequential reduction in semiconductor wafer demand”); “while it takes quite a bit more polysilicon to make up the equivalent revenue by producing wafers for solar applications, our increased polysilicon production capability demonstrated in [Q3] and our market positioning should allow us to show continued sequential growth in [Q4] while improving our margin profile”

• 1H08: polysilicon production was negatively impacted due to technical issues related to Pasadena expansion in Q1 and equipment failures in Q2

• Q3: Revenue of $546 million came in above post-hurricane guidance of $530 million ± $10 million, due to “rapid ramp following the hurricane;” quarter included four weeks of impacted production; Pasadena factory did incur “any significant physical or structural damage;” delivered “significant” quantity of short-term wafers (spot production)

• Q4 outlook: operations have returned to pre-hurricane levels; expect revenue of $540-600 million (sequential growth of up to 10%), gross margin “over 50% in spite of reduced utilization of our manufacturing facilities and price reductions,” and opex of $41 million; semiconductor wafer demand expected to decline 20-30% sequentially, with pricing down mid to high single digits; revenue growth expectation noteworthy because the company needs to sell twice as much poly for solar application as it does for semiconductor application in order to generate equivalent revenue (revenue guidance would have been $590-650 million assuming constant mix between semiconductor and solar); revenue guidance includes 2-3 weeks of production “buffer”

• 2008: Revenue related to solar application expected to exceed $1 billion for the first time; capex expected to be 15% of less of revenue

• Production capacity: key driver of revenue; first step is adding capacity in manufacturing facilities, 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)

• Pricing: spot poly prices “stayed pretty healthy” in Q3; no clear indications on Q4 pricing yet (spot poly sales occur in last month of the quarter); majority of contracts will come up for price renegotiation in December (pricing likely to depend on customer consumption expectations for February and March

• Potential customer issue (Gintech) [raised in Q&A]: $3-4 billion deal with Gintech, which may have difficulty funding capacity expansion, but has so far paid MEMC “on time;” this is a potential revenue risk rather than receivables risk, as Gintech has deposited cash with MEMC; if customers such as Gintech are unable to pay the company, MEMC would keep deposits (triple digit millions in the case of largest customers—included in liability section of balance sheet, plus off-balance-sheet letters of credit), look to sell poly in spot market and enter into new long-term deals (current prices are “way higher” than prices specified in certain long-term arrangements)

• Competitive position: industry-leading asset turnover; “continued growth in spite of the sharp inventory corrections in the semiconductor application market in [1H08] highlights the benefits of MEMC’s unique positioning as a vertically integrated wafer supplier to multiple markets, especially as we achieved a significant milestone of having revenue generated by solar applications exceeding $1 billion in 2008, in spite of our spot polysilicon sales declining as a percentage of sales;” [analyst question:] competitors such as GCL have difficulty raising capital—is potential effect of this factored into guidance? [answer:] no

• Share repurchases: bought back 2.5 million shares in Q3; more than $500 million remains on $1 billion total repurchase authorization

• Potential acquisitions: some competitors getting weaker; “keeping our eyes wide open;” “want to stay in our core competency of making wafers”

• Wafer gross margin profile (from highest to lowest gross margin): (1) short-term spot poly, (2) short-term 156 millimeter wafer, (3) longer term 156 millimeter wafers and 300 millimeter wafers, (4) 200 millimeter and smaller diameter wafers

• Miscellaneous: pension obligation was fully funded as of September 30

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Meredith Corporation (NYSE: MDP) Des Moines, IA, 515-284-3000 Services: Printing & Publishing, Member of S&P 500 http://www.meredith.com



Ownership Data FYE 6/30/10 2.53 2.67 6 EV / LTM EBITDA 4.4x Insider ownership: 11% FYE 6/30/11 3.05 3.17 2 EV / LTM EBIT 5.3x Insider buys (last six months): 3 LT EPS growth n/a n/a 0 P / tangible book n/m Insider sales (last six months): 2 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 87% Date Actual Estimate LTM EBIT yield 19% # of institutional owners: 581 10/29/08 $0.41 $0.41 LTM pre-tax ROC 99%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 28 22 59 30 31 39 38 29 26 29 Total current assets 272 268 314 305 432 453 403 404 467 404 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 Total current liabilities 307 297 371 439 464 487 443 522 530 522 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Meredith is the leading media and marketing company serving American women. Meredith has a broad media footprint: National brands, including Better Homes and Gardens, Parents, Ladies’ Home Journal, Family Circle, American Baby, Fitness and More, generate of $1 billion and reach 75 million unduplicated women each month. Local brands, including 12 TV stations that reach 10% of U.S. households, generate revenue of $350 million. Online and diversified businesses, including 40+ websites, broadband video, integrated marketing and brand licensing, generate $250 million in high-margin revenue. Advertising revenue comprises 60% of total company revenue. SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1Q09 % of revenue by segment: Publishing1 80% 78% 80% 81% Broadcasting2 20% 22% 20% 19% Publishing segment data: Revenue growth3 37% 2% 0% -9% EBIT growth4 22% 3% -2% -40% EBIT margin4 17% 17% 17% 11% Broadcasting segment data: Revenue growth5 2% 10% -8% -7% EBIT growth6 3% 20% -26% -21% EBIT margin6 28% 31% 25% 16% Unallocated overhead -2% -2% -2% -2%

1 Advertising comprised 51% of publishing revenue in FY08. 2 Advertising comprised 97% of broadcasting revenue in FY08. 3 Includes growth from acquisitions related to Meredith Integrated Marketing. 4 Excludes $25 million FY08 charge related to book publishing business. 5 FY08 revenue growth was 0% if political ad revenue is excluded. 6 Political ad revenue declined from $33 million in FY07 to $5 million in FY08. INVESTMENT HIGHLIGHTS

• Profitable media assets, with stable of brands targeting American women. While most assets are in slow-growing magazine publishing and local TV, the company continues to generate strong EBIT.

• Growing online and video portfolio. Meredith’s 40+ websites attract 20 million unique visitors and deliver 170 million page views per month, driving ad revenue and boosting magazine subscriptions.

• High-margin brand licensing opportunities. The company has signed recent licensing deals with Wal-Mart, Realogy and Universal Furniture.

• Fast-growing custom marketing business. Meredith Integrated Marketing (MIM) has been transformed via five acquisitions from a custom publisher to a full-service interactive marketing firm. This non-ad revenue stream has grown at a five-year CAGR of 25% to $150 million in FY08.


INVESTMENT RISKS & CONCERNS • Short- and long-term headwinds. Meredith is

being impacted by weakness in ad spending (60% of revenue; declining 18% y-y) and higher paper costs (+20% y-y). Longer term, the company faces challenging print magazine subscription trends.

• M&A strategy may not deliver value. Meredith’s acquisitions have aimed to generate growth outside magazines and TV. However, the company’s acquisitions of interactive marketing agencies may ultimately not deliver as much value as expected. Interactive agencies typically thrive due to the efforts of key employees. Leading-edge creativity may be difficult to maintain in a large company.

• Limited reinvestment opportunities. Meredith has spent $1.2 billion on M&A, $600 million on share repurchases and $200 million on dividends over the past decade. The spending exceeds FCF of $1.1 billion, implying some leveraging of the balance sheet. The M&A activity, buybacks and dividends suggest that the company has limited high-ROIC reinvestment opportunities in the core business. This lowers Meredith’s appeal as an MF selection.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E DM 107 277 1.6x n/m 6x 4x MSO 215 165 .5x 4.1x 65x 13x PRM 61 287 1.0x n/m 2x 2x RUK 8,626 8,626 2.8x 11.0x 11x 10x MDP 727 1,163 .7x n/m 7x 6x

MAJOR HOLDERS Meredith has 37.0 million common shares and 9.2 million Class B shares outstanding. Holders of the common shares and the Class B shares are entitled to one and ten votes per share, respectively. The common shares trade publicly, while the Class B shares are controlled by the Meredith family. Economic ownership: Insiders 15% │ Select Equity Group 7% │ Eminence Capital 5% │ T. Rowe 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? * FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? * 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.

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Mesabi Trust (NYSE: MSB) New York, NY, 615-835-2749 Financial: Misc. Financial Services



Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA n/a Insider ownership: 1% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 3.2x Insider buys (last six months): 3 LT EPS growth n/a n/a n/a P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 38% Date Actual Estimate LTM EBIT yield 32% # of institutional owners: 63 n/a n/a n/a LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 1 3 0 4 6 4 7 14 4 14 Total current assets 0 0 0 0 0 0 0 0 0 0 Intangible assets 0 0 0 0 0 0 0 0 0 0 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 Total current liabilities 0 0 0 0 0 0 0 0 0 0 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 2 4 5 8 11 5 9 20 7 20 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 0 0 0 0 0 0 0 0 0 0 EBIT/capital employed n/m n/m n/m n/m n/m n/m n/m n/m n/m n/m



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BUSINESS OVERVIEW Mesabi, formed in 1961, derives leasehold royalty income from outsourced iron ore mining. The trust has interests in leases and the Mesabi Land Trust. Trustee activities are limited to collecting income, paying expenses, distributing income to unitholders, and protecting the assets held. The trust has no employees but engages consultants to monitor the amount and sale price of iron ore products shipped from Silver Bay, Minnesota, based on information provided by CCI/Northshore (NYSE: CLF), the lessee/ operator of the Mesabi lands. Royalties payable to the trust by CCI are based on the amount and price of iron ore shipped. The trust is organized as a pass-through vehicle for income tax purposes. The trust is likely to terminate in several decades based on a formula specified in the trust agreement. SELECTED OPERATING DATA

FYE January 31 2006 2007 2008 1H09 Selected growth rates: Revenue 59% -17% 5% 232% Net income per unit 60% -17% 6% 244% Distributions per unit 99% 5% -16% 215% % of revenue by type: Royalties – amended leases 98% 97% 97% n/a Royalties – Peters Lease 2% 2% 3% n/a Trust expenses as % of revenue 4% 4% 3% 2% Net income as % of revenue 96% 96% 97% 98% Distributions as % of net income 97% 122% 97% 73%


• Royalty income and distributions to unitholders driven by (1) shipment volume of iron ore pellets, (2) pricing of iron ore sales, and (3) the percentage of iron ore pellet shipments from Mesabi Trust lands rather than from other Northshore lands.

• Shipment volume of iron ore pellets varies based on customer delivery schedules, iron ore industry conditions, and weather on the Great Lakes.

• Prices under contracts between CCI and its customers are subject to adjustment based on multiple price and inflation index factors.

• Majority of income derived from base overriding royalties, which roughly range from 2.5% of gross proceeds for the first one million tons of iron ore shipped annually, to 6% of gross proceeds for shipments in excess of 4 million tons.

• Other income sources are royalty bonuses, fee royalties, and minimum advance royalties. Bonuses are earned when iron ore is sold at prices above a threshold price. Fee royalties are relatively minor and relate to the so-called Peters Lease. Minimum advance royalties specify a minimum royalty amount that is payable regardless of volume.

• Mesabi has no officers or directors and is overseen by four trustees, including an SVP of corporate trust services at U.S. Bank, a retired mining geologist, a partner in the law firm of Oppenheimer Wolff, and a private investor.

• Distributes income to shareholders on quarterly basis, driven by iron ore royalties received.



• Results highly correlated with volatile iron ore prices, which have recently reached historic highs.1

• Does not operate iron ore mines and has little control over CCI’s activities. Northshore has power to decide capex and production levels. The trust relies on data provided by CCI in order to determine royalties in any given period.

• CCI decides portion of operations on Mesabi lands versus government or other lands. If CCI opted to produce more on lands other than Mesabi lands, royalties would likely decrease. In CY07, 88% of CCI’s Northshore production was on Mesabi lands, down from 91% in CY06.

• CCI derives 80%+ of North American iron ore revenue from five customers. In some cases, CCI is the sole supplier of iron ore pellets to its customers. As sales volume depends on customer requirements, it can fluctuate wildly.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BHP 90,825 97,229 1.6x 2.4x 5x 5x CLF 2,301 2,336 .7x 1.5x 3x 2x RIO 60,543 74,198 1.9x 1.6x 4x 5x RTP 54,488 96,684 2.2x 6.6x 5x 7x MSB 117 103 3.1x n/m n/a n/a

MAJOR HOLDERS Insiders <1% │ RenTech 8% │ Tontine 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? n/a FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 1 For iron ore price trends, see analysis of KHD in this issue of the MOI.

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.

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Microsoft (Nasdaq: MSFT) Redmond, WA, 425-882-8080 Technology: Software & Programming, Member of S&P 500 http://www.microsoft.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 38,652 49,048 60,592 37,751 34,161 23,411 23,662 20,722 21,574 20,722 Total current assets 48,576 58,973 70,566 48,737 49,010 40,168 43,242 37,202 35,853 37,202 Intangible assets 1,669 3,512 3,684 3,808 4,405 5,638 14,081 14,190 11,869 14,190 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 Total current liabilities 12,744 13,974 14,969 16,877 22,442 23,754 29,886 24,383 22,744 24,383 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 15,466 16,820 19,543 22,700 29,493 32,074 36,507 31,523 33,510 31,523 Preferred stock 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 EBIT/capital employed n/m n/m n/m n/m n/m n/m n/m n/m n/m n/m



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BUSINESS OVERVIEW Microsoft, founded in 1975, is the world’s largest software firm. It operates in five segments: Client (Windows OS), Server and Tools (Windows & SQL Server), Online Services (MSN), Microsoft Business (Office, Project, Visio, Exchange, Live Meeting), and Entertainment and Devices (Xbox, Zune, Windows Mobile, Windows Embedded). SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1Q09 % of revenue by segment: Client 30% 29% 29% 28% Server & Tools 21% 22% 22% 23% Online Services Business 6% 5% 5% 5% Microsoft Business Division 33% 33% 32% 33% Entertainment and Devices 9% 11% 12% 12% Revenue growth by segment: Client 10% 15% 13% 2% Server & Tools 16% 15% 18% 17% Online Services Business -2% 6% 32% 15% Microsoft Business Division 9% 13% 15% 20% Entertainment and Devices 38% 26% 34% -6% ∆ revenue 11% 15% 18% 9% ∆ deferred revenue1 19% 16% 21% 16% EBIT margin by segment: Client 79% 77% 77% 73% Server & Tools 33% 33% 35% 32% Online Services Business 5% -25% -38% -68% Microsoft Business Division 67% 66% 65% 66% Entertainment and Devices -27% -32% 5% 7% Total EBIT margin 37% 36% 37% -7% % of revenue by geography: U.S. 63% 61% 59% n/a Other countries 37% 39% 41% n/a Revenue growth by geography: U.S. 10% 12% 15% n/a Other countries 14% 21% 24% n/a

1 Represents y-y change in period-end deferred (unearned) revenue. Deferred revenue was $13.5 billion at 1Q09-end, equal to one-fifth of annual revenue. INVESTMENT HIGHLIGHTS

• Parlayed ownership of PC operating systems into leadership in enterprise software, Internet services, and gaming. The company now generates almost as much EBIT from business software as it does from Windows OS. While MSN online services and Xbox are not yet contributing to profitability, they have the potential to become major profit drivers.

• Sales, EBIT, EPS up 18%, 21%, 32% in FY08. Performance drivers included Windows Vista, Office 2007, server software, and Xbox 360.

• Authorized $40 billion repurchase in September; has returned $115 billion to shareholders through buybacks and dividends in the last five years.

• FY09 (June) guidance for double-digit growth: Revenue of $65-66 billion (up 7-10% y-y), EBIT of $24-26 billion (up 8-13%), and EPS of $2-2.10 (up 7-12%). Revenue growth by segment is expected to be 2-6% in Client, 15-17% in Server & Tools, 10-13% in Online Services, 12-13% in the Business Division, and -3%-flat in Entertainment.

• Cheaper than EBIT-to-EV yield suggests. As MSN and Xbox are still roughly breaking even, their value is not reflected in the EBIT-to-EV yield metric. As a result, investors should value MSN and Xbox based on metrics other than trailing earnings.



• Competitive threats from Google, open source software, SaaS, etc. Microsoft is aggressively trying to win business away from Google and appears to be the front runner on a competitive deal to supply search and advertising on Verizon mobile phones.

• Lower-than-expected demand for Vista, Office or Xbox 360 could significantly slow top-line growth.

• Pursuit of Yahoo may reflect limited high-ROC reinvestment opportunities and concerns regarding Google. Microsoft does not plan to rebid for Yahoo.



09 P/E

GOOG 97,580 83,168 4.0x 4.5x 16x 14x ORCL 87,110 85,326 3.7x n/m 11x 10x YHOO 14,994 11,780 1.6x 2.1x 26x 23x MSFT 178,445 159,698 2.6x 9.2x 10x 9x

MAJOR HOLDERS Bill Gates 9% │ Steve Ballmer 4% │ Other insiders <1% │ Barclays 4% │ State Street 3% │ Cap Re 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into MSFT: WHAT ARE THE SHARES WORTH?

• We value Microsoft at $41-54 per share, based on the sum-of-the-parts valuation analysis summarized below. Upside to our value estimate could come from share repurchases and better-than-expected performance of the Xbox and MSN.com businesses.

• Deserves premium valuation due to defensible moat and stability of earnings and free cash flow.

Microsoft — Sum-of-the-Parts Valuation Summary1


Low Value

High Value

Value of excess marketable assets:2 Cash and equivalents $9,004 $9,004 Short-term investments 11,718 11,718 Long-term investments 4,381 4,381 Short-term debt 1,975 1,975 Net cash and investments $27,078 $27,078 Cash needed to run business3 (2,000) (1,000) Total $25,078 $26,078

Value of Client: LTM EBIT 12,856 12,856 Fair value multiple of LTM EBIT4 9x 12x Total $115,704 $154,272

Value of Business Division: LTM EBIT 12,904 12,904 Fair value multiple of LTM EBIT5 8x 10x Total $103,232 $129,040

Value of Server and Tools: LTM EBIT 22,642 22,642 Fair value multiple of LTM EBIT6 8x 10x Total $181,136 $226,420

Value of Entertainment and Devices: LTM revenue 8,025 8,025 Fair value multiple of LTM EBIT7 1x 3x Total $8,025 $24,075

Value of Online Services Business: LTM revenue 3,313 3,313 Fair value multiple of LTM EBIT8 2x 5x Total $6,626 $16,565

Value Offset of Corporate Overhead: LTM operating loss (6,847) (6,847) Fair value multiple of LTM loss 8x 10x Total ($54,776) ($68,470) Estimated fair value of MSFT $385,025 $507,980 per share $41 $54

1 Does not include incremental value of $40 billion buyback plan. 2 Based on balance sheet values as of September 30, 2008. 3 Represents MOI estimate. 4 Multiples reflect near-monopoly status and 14% FY08 EBIT growth. 5 Multiples reflect very strong margin profile and 15% FY08 EBIT growth. 6 Multiples reflect strong margin profile and 26% FY08 EBIT growth. 7 Multiples reflect strong Xbox market position and 34% FY08 revenue growth. 8 Multiples reflect large online opportunity and 32% FY08 revenue growth. Source: Company filings, The Manual of Ideas estimates and analysis. WHY THE SHARES MAY BE MISPRICED

• Viewed as unexciting by many technology investors, despite 18% revenue growth in FY08.

• Headline earnings ignore value of Xbox and MSN businesses, making a sum-of-the-parts valuation analysis necessary to judge fair value.

POTENTIAL EPS ACCRETION FROM SHARE REPURCHASES • We estimate EPS accretion of $0.11-$0.13 over

the next twelve months (NTM), assuming $40 billion spent on incremental share repurchases and an average price paid of $26-30 per share.

• Microsoft treasurer George Zinn: “…strong credit quality coupled with investors’ current appetite for high quality paper provides a unique opportunity for the company to establish its first-ever commercial paper program and enhance its capital structure.” (September 22, 2008)

• The following analysis shows EPS accretion sensitivity to various assumptions of repurchase amount and purchase price per share.

NTM Shares Repurchased ($ and shares in millions, except per share data)

NTM Repurchase Amount Price paid per share $20,000 $40,000 $60,000

$20.00 1,000 2,000 3,000 $22.00 909 1,818 2,727 $24.00 833 1,667 2,500 $26.00 769 1,538 2,308 $28.00 714 1,429 2,143 $30.00 667 1,333 2,000 $32.00 625 1,250 1,875 $34.00 588 1,176 1,765

NTM Weighted-Average Shares Outstanding1,2 ($ in millions, except per share data)


$20.00 8,880 8,380 7,880 $22.00 8,925 8,471 8,016 $24.00 8,963 8,547 8,130 $26.00 8,995 8,611 8,226 $28.00 9,023 8,666 8,309 $30.00 9,047 8,713 8,380 $32.00 9,068 8,755 8,443 $34.00 9,086 8,792 8,498

1 Based on 9.4 billion diluted shares outstanding currently. 2 Assumes weighted average repurchase date six months from today.

NTM EPS Accretion From Incremental Buybacks3,4 ($ in millions, except per share data)


$20.00 $0.09 $0.20 $0.31 $22.00 $0.08 $0.17 $0.27 $24.00 $0.07 $0.15 $0.24 $26.00 $0.06 $0.13 $0.21 $28.00 $0.06 $0.12 $0.19 $30.00 $0.05 $0.11 $0.17 $32.00 $0.05 $0.10 $0.15 $34.00 $0.04 $0.09 $0.14

3 Assumes 2.0% interest rate and 40% effective tax rate. 4 Assumes NTM net income of $20.0 billion (prior to lost interest income).

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MANAGEMENT’S VIEW OF BUSINESS Notes from 1Q09 call with CFO Liddell on October 23:

• Macroeconomic environment… “clearly weakened throughout the quarter;” deterioration in spending “has continued into October”

• Management focus: (1) maintain total-ownership-cost leadership of software; (2) improve operating efficiency, including opex reduction of $400-500 million (lower headcount, lower marketing, lower capex); invest in “strategic opportunities,” including expansion in emerging markets

• Market share: “continue to forecast outgrowing the market regardless of the economic conditions”

• FY09 guidance—revenue: $64.9-66.4 billion, up 7-10%; “still foresee an increase in demand for our products and the potential to drive revenue and [EPS] growth from high single to low double-digits for this financial year;” at top end, guidance assumes “mild recession” and “relatively modest growth rate for all IT-based products;” at bottom end, assumes “deeper recession” and “end-season lower growth for IT;” revenue growth guidance by segment: Client up 2-6% (assumes PC unit growth of 8-12%, with 6-12% in 2H09), Server & Tools up 15-17% (driven by Server platform), Business Division up 12-13% (driven by Office, SharePoint, Dynamics and Unified Communications), Online up 10-13% (assumes online ad growth of 15%), Entertainment Devices down 3% or flat (due to Xbox 360 pricing cuts, offset by unit volume growth); unearned revenue at end of FY09 expected to be up 2-5% y-y

• FY09 guidance—EBIT: $24.4-25.5 billion • FY09 guidance—EPS: $2-2.10; assumes effective

tax rate of 26.5% (150 bps lower than previous expectations)

• 1Q09 review: revenue, EBIT and EPS met or exceeded high end of guidance despite a “very challenging environment;” unearned revenue at quarter end was up 16% y-y

• 1Q09 review—Client: revenue up 2%, 400 bps below guidance; drivers: PC unit growth was 10-12%, but growth of traditional PCs was several percentage points below expectations, offset by growth in low-end netbook segment (traditional PC growth in mature markets was flat to low single digit, while emerging markets showed double-digit growth across all segments); OEM revenue was down 1% even as licenses grew 8%; commercial and retail licensing grew 20%

• 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)

• 1Q09 review—Business Division: revenue up 20%, 400 bps above guidance; business revenue grew 16%, driven by “strong sales of enterprise agreements and Client access license suites”

• 1Q09 review—Entertainment & Devices: revenue down 6%, exceeded high end of guidance; difficult comp due to year-ago launch of Halo 3 was mitigated by stronger Xbox 360 console sales (units of 2.2 million grew 20% y-y and outperformed PS3 sales by 100,000+ units); Xbox Live membership of 14+ million has roughly doubled in each of past two years; segment EBIT margin expanded by 100+ bps

• Impact of netbooks on Windows licenses: “too early to determine the extent to which the new netbooks segment is cannibalizing the traditional consumer PC market sales or simply capturing a new market opportunity, so we believe that there are likely aspects of both;” revenue realization from netbooks is “lower than we traditionally get from the consumer segment… it does impact our overall revenue per license”

• Change in ability to forecast Client segment results due to greater segmentation of PC market: “you have quite different dynamics in the business market, the consumer, non-netbooks market, the consumer netbooks market and the emerging country version of all of those as well; quite different growth rates, quite different realizations and quite different dynamics driving that; so it becomes, if you like more complicated from a forecasting point of view but a more interesting marketplace”

• Share repurchases and dividends: Authorized new $40 billion program; repurchased 223 million shares for $6 billion in 1Q09; accretion from buybacks will be partially offset by lower investment income (not only as a result of cash spent on repurchases but also as a result of a lower yield on the investment portfolio)

• Currency impact on revenue: 1/3 of revenue is in dollars in North America; 1/3 is in dollars but sold internationally (mainly OEM sales); 1/3 is sold in local currency internationally; FY09 revenue should not be impacted materially by currency swings as company is “pretty much fully hedged”

• M&A strategy: “continue to be a net acquirer of businesses,” with focus on small and medium-sized companies (did not discuss Yahoo)

• Miscellaneous: issued commercial paper at interest cost of less than 1%

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REVENUE, PRODUCTIVITY AND PROFIT MARGINS

MSFT – Revenue and EBIT, FY 2000-2008 Microsoft has posted steady revenue growth even as operating income has experienced some volatility, particularly in the years following the bursting of the Internet bubble.

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Source: Company, The Manual of Ideas. MSFT – Y-Y Revenue Growth, FY 2001-2009E The company has posted steady though unspectacular growth this decade, helped by emerging businesses such as Xbox and MSN. Management is guiding for 7-10% revenue growth in FY09.

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MSFT – EBIT Margin, FY 2000-Q1 2009 After fluctuating significantly during and after the Internet bubble, Microsoft’s operating margins have stabilized in the 35-40% range in recent years. Competitive and economic pressures are exerting downward pressure on margins, while margin expansion in the Xbox and MSN businesses could lead to overall margin expansion.

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Source: Company, The Manual of Ideas. MSFT – Revenue by Geography, FY 2002-2008 International revenue has grown steadily, both in absolute terms and as a percentage of overall revenue. International revenue grew from $8 billion in FY02 to $24 billion in FY08, a 20% CAGR.

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SEGMENT #1: CLIENT (29% of FY08 revenue, 77% EBIT margin)

• Comprises Windows OS, including Vista, XP, Media Center, and Tablet PC Edition. The segment leads the ongoing development of Windows and manages relationships with PC makers.

• Key revenue driver is worldwide PC shipments, with OEMs accounting for 80% of revenue.

• Competitors include Unix and Apple’s operating system. Linux is available for free under a general public license, with variants sold by HP, IBM and Sun. Apple has gained share, particularly in the U.S. consumer segment where it has benefited from the enormous success of the iPod and iPhone.

• Released Windows Vista in FY07, with advances in security, digital media, and user interfaces.

SEGMENT #2: SERVER AND TOOLS (22% of FY08 revenue, 35% EBIT margin)

• Includes Windows Server operating system, Microsoft SQL Server, Microsoft Enterprise Services, Visual Studio, System Center products, Forefront security products, and Biz Talk Server.

• Revenue from multi-year licensing deals (45% of revenue), fully packaged product and transactional volume licensing programs (25%), OEM licenses (10%), and services (20%).

• Competitors in server operating systems include (1) vertically integrated computer makers such as HP, IBM, Sun, which sell versions of Unix along with hardware; (2) companies such as Novell and Red Hat, which provide versions of Linux; and (3) server virtualization providers such as VMware.

• Competitors in enterprise-wide computing include (1) companies that provide J2EE-compliant solutions, including IBM and Sun; (2) server application providers such as CA, IBM and Oracle; (3) open source software, including Linux, Apache, MySQL, and PHP; and (4) Java middleware, including JBoss, Geronimo and Spring Framework.

• Other competitors include (1) System Center competitors HP, BMC, CA, and IBM; (2) Forefront competitors McAfee, Symantec and Trend Micro; (3) Adobe, BEA, Borland, IBM, Oracle, Sun, and the Eclipse open source project, which compete against Microsoft products for software developers.

• Released new versions of Windows Server and Visual Studio in FY08; plans to release new version of SQL Server in FY09. Windows Server includes virtualization technologies that compete with VMware’s software offerings.

SEGMENT #3: ONLINE SERVICES BUSINESS (5% of FY08 revenue, -38% EBIT margin)

• Consists of MSN online portals, Live Search, an online advertising platform for web publishers and advertisers, Hotmail email, instant messaging, and AvenueA Razorfish media agency services.

• Revenue primarily from online ads and secondarily from subscriptions and transactions related to paid services, as well as ancillary services.

• Competitors include AOL, Google and Yahoo, whose Internet search and media properties connect users and advertisers. Google leads in online ad revenue related to search and syndication.

• Launched new releases of Windows Live and adCenter in FY08. It also acquired aQuantive, a next-generation advertiser and publisher solution.

SEGMENT #4: BUSINESS (32% of FY08 revenue, 65% EBIT margin)

• Includes Microsoft Office, Project, Visio, SharePoint Server, Exchange Server, Live Meeting, Tellme, and other business software.

• 90%+ of revenue from Office system offerings, with growth driven by new Office features and new offerings in areas such as content management, collaboration, and unified communications.

• 80% of revenue from businesses, 20% from consumers. Businesses buy Office through volume licensing, with revenue driven by the number of workers using Office (not highly correlated with PC shipments). Consumers buy products through OEMs in connection with new PC shipments.

• Competitors to Office system products include Apple, Corel (WordPerfect), Google (Apps), IBM (Smartsuite, Notes, Workplace), Novell, Oracle, Red Hat, and Sun. OpenOffice.org provides a free cross-platform application. Web-based offerings such as AjaxWrite, gOffice, iNetOffice, SimDesk, ThinkFree, and wikiCalc also compete with Office. However, the alternatives generally lack rich functionality and are marketed with low-priced PCs.

• Competitors to business management products (Microsoft Dynamics) include Intuit and Sage in the SMB market, and Oracle and SAP in the enterprise market. These competitors have much greater market share and stronger product offerings than do competitors in the Office market segments.

SEGMENT #5: ENTERTAINMENT AND DEVICES (12% of FY08 revenue, 5% EBIT margin)

• Includes Xbox 360 console and games, Zune, Mediaroom, mice and keyboards, Windows Mobile software, and Windows Embedded device OS.

• Competitors to Xbox video game consoles include Sony’s PlayStation and Nintendo’s Wii. Zune competes with Apple’s iPod. Windows Mobile software Apple, Nokia, Openwave, Palm, Qualcomm, RIM, and Symbian.

• Released Xbox 360 in 2005, while Nintendo and Sony released new versions of their consoles in 2006. The console life cycle averages 5-7 years.

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Monster Worldwide, Inc. (NYSE: MWW) New York, NY, 212-351-7000 Services: Business Services, Member of S&P 500 http://www.monster.com



Ownership Data FYE 12/31/09 1.07 1.37 19 EV / LTM EBITDA 5.1x Insider ownership: 5% FYE 12/31/10 1.32 1.54 4 EV / LTM EBIT 5.4x Insider buys (last six months): 4 LT EPS growth 19.8% 19.8% 11 P / tangible book 4.3x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 19% # of institutional owners: 748 10/30/08 $0.40 $0.33 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 341 166 142 198 320 597 578 639 629 639 Total current assets 1,006 809 567 704 773 1,124 1,185 1,109 1,133 1,109 Intangible assets 940 387 443 665 577 628 651 744 651 744 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 Total current liabilities 930 799 640 740 706 826 829 987 734 987 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Monster is the leading global job search website. It connects employers with job seekers, and has a local presence in key markets in North America, Europe and Asia. SELECTED OPERATING DATA


9/30/08 % of revenue by segment: Careers – North America 64% 59% 52% 48% Careers – International 23% 27% 36% 43% Internet advertising, fees 13% 14% 12% 9% Revenue growth by segment: Careers – North America 29% 26% 7% -6% Careers – International 69% 64% 59% 31% Internet advertising, fees 41% 39% 2% 0% Total revenue growth 38% 36% 21% 8% EBIT margin by segment: Careers – North America 33% 35% 32% 28% Careers – International -4% 6% 11% 16% Internet advertising, fees 31% 30% 8% 8% Corporate -7% -5% -6% -9% Total EBIT margin 17% 21% 16% 12% % of revenue by geography: U.S. 76% 71% 62% 55% International 24% 29% 38% 45% Revenue growth by geography: U.S. 30% 27% 6% -6% International 70% 66% 58% 31%


• Monster is the leader in online job search, having defined the industry for much of the past decade. The Monster brand enjoys strong global awareness.

• Revenue up 8% and deferred revenue down 5%, driven by strong international growth (helped by foreign currency gains), offset by U.S. weakness.

• International accounted for 48% of Q3 careers revenue, up from 26% in CY05. The company has become less dependent on U.S. revenue, enabling it to grow despite domestic economic weakness, and to benefit from foreign currency appreciation. Monster owns 44.5% of ChinaHR, China’s second-largest online career marketplace. Monster holds the #1 or #2 position in several other overseas markets, including the U.K., South Korea, and India.

• $73 million Trovix acquisition in July added intelligent search technology, aiming to provide targeted matches to employers and job seekers.

• Chairman and CEO Salvatore Iannuzzi (54) joined Monster in 2007. Previously, he spent three months at Motorola and three years at Symbol Technologies, where he rose to CEO. CFO Timothy Yates (60) also joined Monster in 2007. Iannuzzi and Yates have prior experience working together.

• Strong balance sheet, with $392 million of net cash and short-term investments and $94 million of illiquid auction rate securities as of September 30.

• Strong ability to throw off cash as it grows, due to negative working capital position. Monster had deferred revenue of $412 million at the end of Q3.

• Repurchased $128 million of stock YTD, following $252 million buyback in 2007.



• North America careers revenue down 6% YTD and 11% in Q3. While the company grew North America careers revenue 7% in 2007, economic weakness has had a more pronounced impact YTD. Internet advertising and fees have been flat.

• Global slowdown could have material negative impact on results. Despite declining U.S. revenue, Monster has posted respectable performance YTD due to double-digit overseas growth. If the global economy enters recession, Monster would suffer.

• Highly competitive, evolving market. Monster competes against a wide range of online and offline providers of job search services. Online competitors include Yahoo, Craigslist, Careerbuilder, among others. Future competition could come from best-in-class technology firms such as Google.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E KFRC 262 278 .3x 3.4x 10x 14x MPS 578 523 .2x 2.3x 8x 15x RHI 2,762 2,392 .5x 3.3x 11x 25x YHOO 14,994 11,780 1.6x 2.1x 26x 23x MWW 1,432 1,040 .7x 4.3x 8x 11x

MAJOR HOLDERS Common (118 million shares out): CEO Iannuzzi <1% │ Other insiders 1% │ T Rowe 15% │ Morgan Stanley 7% │ Cap Re 6% │ Fidelity 6% │ Andrew McKelvey 4%; Class B Common (5 million shares out): Andrew McKelvey 100% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Mosaic Company (NYSE: MOS) Plymouth, MN, 800-918-8270 Basic Materials: Chemical Manufacturing http://www.mosaicco.com



Ownership Data FYE 5/31/10 11.37 13.30 8 EV / LTM EBITDA n/a Insider ownership: 65% FYE 5/31/11 9.91 12.34 3 EV / LTM EBIT 3.5x Insider buys (last six months): 4 LT EPS growth n/a n/a 0 P / tangible book 2.5x Insider sales (last six months): 2 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 28% Date Actual Estimate LTM EBIT yield 28% # of institutional owners: 1056 10/1/08 $2.65 $2.94 LTM pre-tax ROC 71%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Short-term debt n/a 10 205 222 542 176 179 604 179 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 Preferred stock n/a 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Mosaic provides fertilizers and operates in three segmets. The phosphates segment produces phosphate fertilizer and phosphate-based animal feed ingredients. The potash segment produces potash sold principally as fertilizer but also for use in non-agricultural applications. The offshore segment provides phosphate-, potash- and nitrogen-based crop nutrients and animal feed ingredients. Mosaic was formed in 2004 through the merger of IMC and the fertilizer business of Cargill (owns 64% of Mosaic). SELECTED OPERATING DATA

FYE May 31 2006 2007 2008 1Q09 % of revenue by segment:1 Phosphates 56% 53% 56% 56% Potash 21% 24% 22% 21% Offshore 23% 22% 22% 23% Revenue growth by segment: Phosphates 45% 3% 78% 119% Potash 35% 28% 52% 137% Offshore 2% 9% 64% 111% Total revenue growth 21% 9% 70% 116% Gross margin by segment: Phosphates 8% 13% 36% 39% Potash 30% 28% 38% 52% Offshore 4% 6% 12% 17% Total gross margin 12% 16% 32% 38% EBIT margin by segment:2 Phosphates 5% 10% 34% 37% Potash 27% 25% 35% 49% Offshore -2% 0% 8% 15% Total EBIT margin 7% 11% 29% 36% Capex as % of revenue 8% 5% 4% 4% D&A as % of revenue 6% 6% 4% 2% % of revenue by geography: U.S. 30% 33% 33% 27% Brazil 14% 15% 17% 18% India 13% 10% 14% 24% Other 43% 42% 35% 32% % of revenue by product: Phosphate fertilizer 52% 48% 51% n/a Potash fertilizer 18% 22% 21% n/a Blends 13% 15% 17% n/a Other 16% 15% 12% n/a Change in sales volume: Phosphates 15% -12% 2% -7% Potash 19% 22% 8% -9% Change in average selling price: DAP3 10% 8% 94% 149% MOP4 na 3% 24% 198% K-Mag5 na 0% 57% 138% Change in average price paid for key raw materials: Ammonia 13% -3% 22% 75% 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). 3 Represents diammonium phosphate fertilizer (FOB plant/mine). 4 Represents muriate of potash (FOB plant/mine). 5 Represents double sulfate of potash magnesia (FOB plant/mine).

INVESTMENT HIGHLIGHTS • World’s largest producer of phosphate fertilizer

and largest U.S. producer of phosphate animal feed ingredients, with 15% of global production and 59% of U.S. production of phosphate fertilizer in FY08.

• World’s third-largest producer of potash, accounting for 14% of global production and 38% of North American production, with mines in Saskatchewan, Canada, New Mexico and Michigan.

• Large producer and distributor of blended fertilizers in Brazil, with operations and strategic investments in this key agricultural market.

• CEO Jim Prolopanko (55) joined Mosaic as COO in 2006. He had been at Cargill since 1978.



• Impact of capacity increases on selling prices question of “when” rather than “if.” With prices for phosphate and potash fertilizers exploding in CY07-08, producers have announced capacity expansion plans. Phosphate rock producers, who sell to non-integrated fertilizer firms, may also boost capacity. Finally, Chinese exports of phosphate fertilizers have risen, though recent government action has sought to keep more fertilizer in China. While it may take a couple of years for capacity to catch up with demand, it appears likely that selling prices will decline materially at some point.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AGU 5,157 7,534 .8x 2.9x n/a n/a CF 3,126 1,978 .5x 1.8x 4x 4x MON 40,603 40,806 3.6x 8.6x 16x 14x POT 21,064 23,575 2.6x 4.1x n/a n/a TRA 1,665 1,535 .6x 1.8x 3x 4x MOS 14,425 13,725 1.1x 2.5x 3x 3x

MAJOR HOLDERS Insiders <1% │ Cargill 64% │ Fidelity 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Net 1 Ueps Technologies (Nasdaq: UEPS) Johannesburg, South Africa, 27-11-343-2000 Technology: Computer Services http://www.net1ueps.co.za





($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments n/a 54 80 108 190 172 273 246 216 246 Total current assets n/a 79 117 151 241 248 346 370 289 370 Intangible assets n/a 12 26 23 20 118 99 207 118 207 Total assets n/a 98 153 182 270 376 454 588 417 588 Short-term debt n/a 0 0 0 0 0 0 110 0 110 Total current liabilities n/a 20 48 34 43 55 77 185 69 185 Long-term debt n/a 0 0 0 0 4 4 5 4 5 Total liabilities n/a 28 57 45 61 95 114 231 112 231 Preferred stock n/a 0 0 0 0 0 0 0 0 0 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


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BUSINESS OVERVIEW Net 1 provides a proprietary universal electronic payment system (UEPS) to the underbanked in developing economies. It operates in four segments, primarily in South Africa: The transaction-based activities segment earns fee income from a state welfare distribution service in South Africa, and transaction processing for retailers, utilities and banks. The smart card accounts segment derives revenue from a fixed monthly fee for the provision of smart card accounts. The financial services segment provides short-term loans on a principal basis and life insurance on an agency basis. It generates interest income and initiation and services fees. The hardware, software and technology segment derives revenue from sales of hardware, SIM cards, cryptography, SIM card licenses, and hardware rentals to merchants. SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1Q09 % of revenue by segment: Transaction processing 60% 62% 60% 59% Smart card accounts 18% 15% 14% 13% Financial services 8% 5% 3% 3% Technology sales 14% 17% 22% 25% Revenue growth by segment: Transaction processing 13% 19% 10% 6% Smart card accounts 4% -5% 4% -6% Financial services -20% -30% -27% -18% Technology sales 52% 47% 44% 60% Total revenue growth 11% 14% 13% 13% EBIT margin by segment: Transaction processing 52% 57% 55% 54% Smart card accounts 45% 45% 45% 45% Financial services 43% 30% 23% 18% Technology sales 63% 16% 21% 24% Corporate -6% -3% -2% -4% Total EBIT margin 46% 43% 43% 40% Total net income margin1 30% 28% 34% 39%

1 Includes foreign exchange gains and losses and other transitory items. INVESTMENT HIGHLIGHTS

• UEPS could enable four billion people with limited bank access to transact electronically. Four million out of 18 million unbanked South Africans receive welfare on Net 1 smart cards.

• UEPS uses smart cards that operate in real-time 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 Kotze (38) have been with the company or predecessors since 1989 and 2000, respectively.

• Selected by Central Bank of Ghana as country’s common electronic payment platform. Net 1 also provides a customized banking and payment system to a government-affiliated consortium in Iraq.

• Expanding into Namibia and Botswana through JVs that operate smart card-based systems; and into Colombia and Vietnam to operate virtual top-up solutions for mobile prepaid airtime vending.

• BGS acquisition accelerates entry into Russia. Net 1 acquired 80% of BGS for €72 million and 40K shares in August. BGS’ largest customer and 20%-owner is Sberbank, the largest bank in Russia.

• Authorized $50 million buyback two weeks ago. • Guiding for 15% adjusted EPS growth in FY09. • Stock price implies 6% trailing FCF yield, 6x


• Two-thirds of revenue affected by South African tender. The South African Social Security Agency recently conducted a tender for the distribution of welfare grants. Net 1 filed proposals in May 2007. In November 2008, SASSA terminated the tender process without any awards. As a result, Net 1 retained contracts with five provincial governments through March 31, 2009 – and probably beyond. However, the long-term outcome remains unclear.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E DFS 4,545 -4,076 -1.6x 0.8x 6x 8x GPN 2,948 2,871 2.1x 37.5x 15x 14x MA 18,569 15,833 3.3x 16.1x 16x 14x TSS 2,393 2,348 1.2x 4.9x 9x 9x V 45,825 42,105 6.7x 38.8x 20x 17x UEPS 641 509 1.9x 4.2x 6x 5x

MAJOR HOLDERS CEO Belamant 4% │ Other insiders 1% │ Brait S.A. 16% │ General Atlantic 11% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into UEPS: WHAT ARE THE SHARES WORTH?

• We value Net 1 at $20-30 per share, based on the valuation analysis summarized below. We believe a mid teens multiple of after-tax income is justified in the case of Net 1 due to the recurring revenue nature of the company’s business, high returns on capital and continued growth in revenue and profits.

Net 1 UEPS — Valuation Summary


Low Value

High Value

Value of excess marketable assets:1 Cash and equivalents $246 $246 Short-term loan facility ($110) ($110) Net cash and equivalents $136 $136 Cash needed to run business2 ($100) ($50) Total $36 $86 Value of core business: LTM EBIT $112 Fair value multiple of LTM EBIT 10x Estimated NTM EPS ex. interest income $1.90 Fair value multiple of NTM adjusted EPS 15x Total $1,118 $1,682 Estimated fair value of UEPS $1,154 $1,767 per share $20 $30


• Stigma against financial services-related companies targeting low-income consumers. At first glance, Net 1 appears to be exposed to a highly undesirable consumer demographic in South Africa and other countries. However, Net 1’s main clients are South African governmental entities, and the company is not exposed to the credit risk of consumers using Net 1-processed payment cards. Net 1 is not a lender but a pure-play payment processor with an attractive recurring revenue model. We believe the market may be missing this important feature of the company’s model.

• Undue fear of potential loss of South African contracts. We believe much of the uncertainty related to the company’s contracts for the distribution of welfare grants was lifted on November 6 when the company announced that the government has decided to terminate the related competitive tender process. The market may not yet have appropriately digested this positive news.


UEPS – Revenue, Gross Profit and EBIT, FY 2000-08 Net 1 has performed well over the past six years, as its proprietary payment system has enjoyed greater acceptance in South Africa and, more recently, in Ghana and Iraq. Net 1 derived two-thirds of revenue from contracts with South African provincial governments in 2007.

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Source: Company, The Manual of Ideas. UEPS – Y-Y Revenue Growth, FY 2001-1Q09 Net 1 has reported revenue growth in the low to mid teens since FY06, as its relationships with South African provincial governments have matured while transaction volumes have continued to increase. The company’s recent expansion beyond South Africa, including the acquisition of BGS in Russia in August 2008, may accelerate growth.

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Source: Company, The Manual of Ideas. UEPS – Gross and EBIT Margin, FY 2000-1Q09 Net 1 has enjoyed strong gross and operating margins throughout this decade. EBIT margin has surpassed 40% in recent years, a level that will be difficult to maintain over a long period of time. However, any margin erosion appears likely to occur slowly and to be more than offset by increases in revenue.

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UPDATE ON SOUTH AFRICAN CONTRACTS FOR DISTRIBUTION OF WELFARE GRANTS (two-thirds of revenue)

• Contracted with five provincial governments covering total of four million beneficiaries. In 1998, Net 1 acquired four of the contracts, which were originally awarded from 1992-97. Net 1 was awarded an additional contract in 2002. It implemented smart cards from 2000-04 and rolled out merchant acquiring capability in 2004-05.

• 45% share of distribution of welfare grants in South Africa. Main competitors are the South African Post Office and the formal banking sector.

• South African tender concluded without new awards in November 2008. The South African Social Security Agency (SASSA) recently conducted a competitive tender that could have displaced Net 1 from one or more of its five contracts. However, Net 1 announced on November 3 that SASSA had decided to make no awards, to terminate the procurement process, and to defer a decision about commencing a fresh tender process.

• All five contracts expire in March 2009. Net 1 stated the following in a press release on November 6: “We believe that SASSA’s statement to defer a decision about commencing a fresh tender process will necessitate a further extension of our current contracts. The terms and conditions of our current service level agreements will probably remain unchanged during any extension period.”

MANAGEMENT’S VIEW OF BUSINESS Notes from 1Q09 earnings release dated November 6:

• Operating environment: Net 1 performing well despite “disruptions in the financial markets and concerns about a weakening global economy;” “do not share the prevailing negative global sentiment towards emerging markets as our technology is focused on these territories and remains in demand, especially when the weaknesses of traditional banking systems have become patently clear”

• 1Q09 review: “very pleased” with results • FY09 guidance: maintain 15% fundamental EPS

growth outlook on constant currency basis; GAAP EPS growth to “exceed 25% on a constant currency basis as a result of the change in tax rates and the foreign exchange gains on a short-term investment”

• Strategy: “…focused on the globalization of our technology by following a disciplined approach to new markets, through careful evaluation of new opportunities. Where we believe it makes sense, we will use partnerships or make acquisitions to accelerate our entry into new markets.

• South Africa tender cancellation: “SASSA may decide to extend our current contracts on a short term renewal basis. We have the capacity to operate this business without compromising our high service levels regardless of the period, or frequency, of any extension periods granted.”

• South Africa welfare payment business: “anticipate beneficiary growth of approximately 6% per annum” (growth is “fairly lumpy”)

• BGS: “core business consists of developing and integrating smart card-based offline and online financial transaction systems;” “customers in Russia, Ukraine, Uzbekistan, India and Oman;” “emphasis on significantly expanding the application of our technology in the Russian Federation and the CIS Republics”

• Wage payment system in partnership with Grindrod Bank: “target markets for the wage payment system are the un-banked and under-banked wage earners in South Africa, estimated at five million people;” in 1Q09, signed deal with largest security and guarding services provider in South Africa, with 20,000 employees (expects to complete enrollment of all employees 3Q09-end)

• Ghana: continued delivery of POS devices and smart cards under Bank of Ghana deal in 1Q09

• Iraq: first transaction in August; project is pilot with 100K beneficiaries (40K issued payment cards so far); to earn “ongoing transaction and license fees, as well as payments for the provision of outsourcing services and the sale of hardware”

• VTU technology and business model: VTU (virtual top up) technology “enables prepaid cell users to purchase additional airtime simply, securely and conveniently through the distribution of airtime value from a vendor’s cellular handset to that of the customer;” “derive revenue from the sale of VTU licenses to mobile operators and we have recently established VTU businesses in Colombia and Vietnam, where we are minority shareholders”

• Sales process: sales cycles are “unpredictable and often stretch over a period of years. It is therefore particularly difficult to provide clear short term visibility on our international prospects and the specific product, application or business model that will ultimately be implemented in a specific country…;” sales and marketing teams focus on specific regions of Africa, the Middle East and Central and Eastern Europe; “plan to introduce dedicated teams for South America and Asia…”

• New patents: “application… will allow any mobile phone user to effect payments that are generally referred to as “card not present” payments completely securely, through the utilization of a once off, disposable, virtual credit or debit card”

• Proposed abolishment of secondary taxation on companies in South Africa: secondary taxation may be phased out in 2010; “expect the proposed replacement of STC with a dividend tax to reduce our current fully distributed rate of 34.55% to 28%. Under US GAAP, we apply the fully distributed tax rate of 34.55% to our deferred taxation assets and liabilities; not yet determined if Net 1 would qualify for treaty relief available to foreign shareholders

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New Frontier Media, Inc. (Nasdaq: NOOF) Boulder, CO, 303-444-0900 Services: Broadcasting & Cable TV http://www.noof.com



Ownership Data FYE 3/31/10 0.33 0.34 3 EV / LTM EBITDA 2.2x Insider ownership: 2% FYE 3/31/11 n/a n/a 0 EV / LTM EBIT 2.2x Insider buys (last six months): 8 LT EPS growth 10.0% 10.0% 1 P / tangible book 1.3x Insider sales (last six months): 4 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 65% Date Actual Estimate LTM EBIT yield 46% # of institutional owners: 72 11/5/08 $0.06 $0.06 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 6 4 17 28 21 26 19 15 16 15 Total current assets 15 11 24 37 38 43 36 28 32 28 Intangible assets 18 16 16 14 30 31 32 33 31 33 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 Total current liabilities 13 8 7 6 9 13 16 13 9 13 Long-term debt 1 1 0 0 1 0 0 0 0 0 Total liabilities 14 9 8 7 16 17 18 15 12 15 Preferred stock 0 4 0 0 0 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



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BUSINESS OVERVIEW New Frontier Media (NOOF) produces and distributes adult programming in three segments: Transactional TV delivers nine adult-themed pay-per-view (PPV) networks via cable and satellite in the U.S., reaching 175 million network homes. NOOF also provides video-on-demand (VOD) content on cable and satellite, reaching 33 million homes. It is the exclusive distributor of Penthouse television in the U.S. It owns thousands of hours of digital content and has license deals with 130 movie studios. The segment earns a contractual percentage of the retail price. Film Production makes adult movies distributed on premium channels such as Cinemax and Showtime, and erotic event programming distributed on cable and satellite. NOOF’s Lightning Entertainment Group represents independent mainstream film producers. The Film Production segment was formed in 2006 when NOOF acquired MRG. The segment licenses owned content under arrangements that provide either for a one-time fee or a revenue split. Direct-to-Consumer provides content through NOOF’s websites, which charge users a monthly membership fee. SELECTED OPERATING DATA

FYE March 31 2006 2007 2008 1H09 % of revenue by segment: PPV -- Cable / DBS 49% 42% 37% 38% VOD 35% 28% 34% 41% C-Band and Other1 8% 4% 2% 2% Transactional TV (total) 92% 75% 73% 81% Film Production2 3% 22% 23% 16% Direct-to-Consumer 5% 4% 3% 3% Revenue growth by segment: PPV -- Cable / DBS -4% 15% -22% -2% VOD 4% 10% 6% 16% C-Band and Other -3% -26% -54% -56% Transactional TV (total) -1% 10% -13% 4% Film Production n/a >100% -4% 2% Direct-to-Consumer -7% -8% -22% 0% Total revenue growth 1% 35% -12% 4% EBIT margin by segment: Transactional TV 53% 59% 52% 52% Film Production -17% 16% 17% 0% Direct-to-Consumer 16% -30% 0% -133% Corporate -15% -16% -19% -21% Total EBIT margin 34% 31% 23% 16% % of revenue by customer: Comcast 12% 14% 18% 22% DISH 35% 21% 14% 14% Time Warner 14% 12% 14% 14% DirecTV 0% 13% 13% 15%

2 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. INVESTMENT HIGHLIGHTS

• Outperforming Playboy, which has suffered from poor execution under CEO Christie Hefner.

• Broad cable and satellite TV distribution. NOOF has agreements with nine of the ten largest U.S. cable MSOs, DISH Network, and DirecTV, enabling it to reach 175 million households.

• Testing Direct-to-Consumer IPTV set-top box in U.K. Beta customers are online and test marketing has begun. Results are expected by the end of FY09.

• Entrepreneurial management. Chairman and CEO Michael Weiner (65) co-founded NOOF in 1995 and has turned it into one of the most profitable producers of adult movie programming.

• Repurchased 2.6 million shares (11%) from Steel Partners on November 13 at $1.55 per share in EPS-accretive transaction. NOOF had bought back $4 million in 1H09 and $6 million in FY07-08.



• DirecTV (15% of revenue) – termination or renegotiation? The deal was to auto-renew for one year to mid-October 2009 on existing terms for three channels, if they achieved predetermined revenue targets by October 2008. The targets were not met, giving DirecTV an opening to renegotiate or remove one or more NOOF channels.

• Concentrated third-party distribution. The company generated 59% of FY08 revenue from Comcast, DISH, DirecTV, and Time Warner. These operators have the right to terminate deals with NOOF on relatively short notice without penalty.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E PLA 55 142 .5x n/m n/m 12x PRVT 83 88 3.3x 1.8x n/a n/a NOOF 41 26 .5x 1.3x 7x 5x

MAJOR HOLDERS CEO Weiner 2% │ Other insiders 5% │ Fidelity 16% │ Royce 11% │ RenTech 8% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


NutriSystem Inc. (Nasdaq: NTRI) Horsham, PA, 215-706-5300 Services: Personal Services, Member of S&P SmallCap 600 http://www.nutrisystem.com



Ownership Data FYE 12/31/09 1.82 2.21 8 EV / LTM EBITDA 3.2x Insider ownership: 7% FYE 12/31/10 2.07 2.60 1 EV / LTM EBIT 3.4x Insider buys (last six months): 0 LT EPS growth 16.7% 17.5% 3 P / tangible book 3.2x Insider sales (last six months): 17 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: n/a Date Actual Estimate LTM EBIT yield 29% # of institutional owners: n/a 10/22/08 $0.45 $0.48 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 1 3 3 4 46 80 43 58 118 58 Total current assets 5 7 10 11 94 186 159 130 183 130 Intangible assets 0 0 0 2 2 0 0 6 0 6 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 Total current liabilities 3 3 4 5 28 52 56 44 49 44 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 3 3 4 6 28 53 57 46 50 46 Preferred stock 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


Oct 08Oct 07Oct 06Oct 05Oct 04Sep 03Sep 02Sep 01Sep 00Jan 00

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BUSINESS OVERVIEW NutriSystem provides weight management products. It offers an auto-delivery weight loss program based on portion-controlled, lower Glycemic Index prepared meals (~$300 per 28-day supply). The meals are shelf stable at room temperature. There is no membership fee. Q1 and Q4 are the seasonally strongest and weakest quarters, respectively. SELECTED OPERATING DATA


9/30/08 % of revenue by channel: Direct 90% 93% 94% 93% QVC and other 10% 7% 6% 7% Revenue growth by channel: Direct 515% 178% 38% -10% QVC and other 194% 88% 25% -9% ∆ revenue 454% 169% 37% -10% ∆ new customers 571% 130% 20% n/a ∆ revenue / customer1 18% 4% 3% n/a Direct channel metrics: New customers ('000) 347 798 954 n/a Marketing ($mn) 47 116 175 148 Marketing / new customer ($) 136 146 184 n/a Revenue / customer1 ($) 605 632 648 n/a

1 Based on nine-month trailing revenue (as tracked by the company). INVESTMENT HIGHLIGHTS

• $60 billion U.S. diet market, with 58% of people overweight or obese and 99 million dieting in 2007. NutriSystem’s database still only includes five million current and past customers. 20% of revenue comes from customer reactivation and 30% from male dieters (seniors are also a growth segment). Global sales are a longer-term opportunity.

• High-ROIC, direct-to-consumer model. The company has no locations and generates 94% of revenue from the direct channel. Having outsourced meal production and fulfillment, NutriSystem has become a capital-lite branding and marketing firm.

• NutriSystem brand has benefited from hundreds of millions spent on marketing and advertising over the years. The company has perfected a model of efficient marketing across multiple channels, with each marketing dollar generating $4-$5 in sales.

• Low working capital has kept FCF roughly in line with net income despite explosive growth in recent years. NutriSystem has generated FCF of $88 million YTD, supporting stock repurchases ($60 million YTD) and an annualized dividend of $0.70.


INVESTMENT RISKS & CONCERNS • Guiding for revenue drop of 10-11% in 2008, due

to “weaker than anticipated demand.” The company expects adjusted EBITDA of $105-110 million.

• Value proposition debatable. While NutriSystem is not expensive at $10 per day, consumers may be able to purchase higher-quality food for the same price from a source that incurs lower customer-acquisition and shipping costs (local grocery store).

• Risky 1Q09 frozen food launch, as higher shipping costs may amplify value proposition concerns. The launch also gives some credence to claims that NutriSystem’s shelf-stable meals lack taste.

• New customers cancel after about ten paid weeks (only two shipping cycles). Product returns are not negligible. There is also the industry issue that successful customers no longer need the company, while failures have little motivation to stick with it.

• NutriSystem may be more discretionary than typical diet spending, due to shipping costs.

• Gross margin impacted by rising input costs. While management claims some pricing power, elasticity of demand might be high in a recession.

• Near-term initiatives pressure margins. The company is implementing a supply chain optimization effort that requires up-front expense. The frozen food rollout is also likely to elevate cost.

• CEO/CFO turnover in past year raises execution risks, particularly in current macro environment.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E WTW 2,048 3,632 2.4x n/m 10x 9x DIET 68 73 2.5x n/m n/m n/m NTRI 391 333 .5x 3.2x 7x 7x

MAJOR HOLDERS Insiders 9% │ Legg Mason 10% │ Fidelity 8% │ Mazama 6% │ Citigroup 7% │ Bridger 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


NVIDIA Corporation (Nasdaq: NVDA) Santa Clara, CA, 408-486-2000 Technology: Semiconductors, Member of S&P 500 http://www.nvidia.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 current assets 1,234 1,352 1,053 1,307 1,550 2,032 2,889 2,480 2,756 2,480 Intangible assets 81 77 149 136 161 347 461 522 371 522 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW NVIDIA, founded in 1993, is a leader in graphics chips and operates in four segments: The Graphic Processing Unit (GPU) Business serves the entertainment and consumer market with GeForce products for desktops and notebooks; also includes memory products. The Professional Solutions Business (PSB) serves the design and visualization market with Quadro products, and the high-performance computing market with Tesla products. The Media and Communications Processor (MCP) Business includes nForce core logic and motherboard GPU products. The Consumer Products Business (CPB) is comprised of GoForce and APX products that support handheld devices, including PMPs, PDAs, and cellular phones. CPB also includes license, royalty, other revenue related to video game consoles and other digital consumer electronics devices. SELECTED OPERATING DATA

FYE January 31 2006 2007 2008

YTD7/31/08

% of revenue by segment: GPU 59% 56% 61% 59% PSB 16% 15% 14% 19% MCP 15% 22% 17% 18% CPB 10% 8% 6% 4% Revenue growth by segment: GPU 5% 21% 47% 13% PSB 114% 21% 29% 43% MCP 666% 88% 7% 17% CPB -12% 1% 8% -40% Total revenue growth 18% 29% 34% 15% EBIT margin by segment: GPU 15% 22% 29% 11% PSB 47% 47% 52% 51% MCP 9% 12% 8% -29% CPB 19% 18% 11% -13% All Other -5% -9% -7% -8% Total EBIT margin 14% 15% 20% 2% % of revenue by geography: Taiwan 48% 36% 32% 32% China 17% 21% 31% 31% Other Asia Pacific 11% 18% 16% 17% U.S. and Americas 16% 14% 11% 9% Europe 9% 10% 11% 10%


• NVIDIA, Intel each claim top spot in graphics chips, based on diverging definitions of the market. According to Intel, Intel and NVIDIA had 42% and 33% of the PC graphics market in 4Q07, up from 31% and 23% in 4Q05 (losers were AMD and Via). Meanwhile, NVIDIA points to total GPU shipments of 366 million, of which NVIDIA GPUs account for 59% and Intel IGPs account for 41%. NVIDIA also claims to be preferred by gamers, with 62% market share, versus 31% for AMD and 3% for Intel.

• Entrepreneurial management. Jen-Hsun Huang (44) co-founded NVIDIA in 1993 and has served as CEO since inception. He holds a Stanford M.S.E.E.

• Repurchased $124 million of stock in 1H09; $1.5 billion remains authorized.



• Significant deterioration in Q3, with revenue down 20% y-y. On a YTD basis, notebook GPU, MCP and PSB have performed reasonably well, offset by weakness in the desktop GPU business.

• Constant threat of new technologies. NVIDIA is the largest supplier of AMD 64 chipsets with 60% share in 4Q07. A decline in demand for those chipsets as a result of competition could have a large impact on results. In addition, Intel is working on a multi-core architecture code-named Larrabee.

• Competition from “platform solutions.” AMD has announced a platform solution, and Intel has achieved success with the Centrino platform. If Intel and AMD integrate a CPU and GPU on the same chip (e.g., AMD’s Fusion processor project), NVIDIA may be unable to compete. NVIDIA claims, however, that platform solutions are unlikely to meet users’ performance needs.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AMD 1,479 5,372 .8x 8.7x n/m n/m BRCM 7,852 5,605 1.2x 3.0x 9x 11x INTC 74,086 64,238 1.6x 2.2x 12x 13x MRVL 3,550 2,983 .9x 2.7x 7x 8x QCOM 54,531 48,120 4.3x 4.1x 16x 13x STM 6,626 7,582 .7x 1.0x 12x 11x TXN 20,885 18,892 1.4x 2.3x 10x 12x NVDA 3,991 2,686 .6x 2.0x 9x 11x

MAJOR HOLDERS CEO Huang 5% │ Other insiders 2% │ AXA 9% │ Barclays 6% │ Primecap 5% │ Jennison 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Pacer International, Inc. (Nasdaq: PACR) Concord, CA, 877-917-2237 Transportation: Misc. Transportation http://www.pacer-international.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 0 0 1 0 9 0 7 10 0 10 Total current assets 225 221 220 246 243 228 231 259 225 259 Intangible assets 282 288 288 288 288 288 288 288 288 288 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 Total current liabilities 205 184 161 185 188 164 197 215 192 215 Long-term debt 396 250 214 154 90 59 64 44 74 44 Total liabilities 630 438 378 341 284 228 271 274 272 274 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Pacer is an asset-light transportation firm. Two segments: Intermodal (80% of revenue) facilitates the movement of freight by trailer or container using two or more modes of transportation. It consists of the Stacktrain, Cartage and Rail Brokerage operations, and provides services to transportation intermediaries, beneficial cargo owners and international shipping companies who utilize intermodal transportation. Logistics (20% of revenue) provides truck brokerage, truck transport, supply chain services, freight forwarding, ocean shipping and warehousing, and distribution services. Big Lots, C.H. Robinson, GE, Sony, Union Pacific, Toyota and Conagra accounted for 19% of revenue in 2007. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007

YTD 9/30/08

% of revenue by segment: Intermodal 75% 79% 80% 78% Logistics 25% 21% 20% 22% Revenue growth by segment: Intermodal 5% 6% 5% 10% Logistics -2% -13% 1% 15% Total revenue growth 3% 1% 4% 11% % of revenue by geography: Domestic 89% 89% 88% 90% Foreign1 11% 11% 12% 10% Revenue growth by geography: Domestic 2% 1% 3% 12% Foreign 11% 7% 12% 5% EBIT margin by segment: Intermodal 8% 9% 7% 8% Logistics 1% 0% 1% 0% Corporate and other -1% -1% -1% -1% Total EBIT margin 5% 6% 5% 5%

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. INVESTMENT HIGHLIGHTS

• Good business in capital-intensive industry. Pacer’s non-asset-based strategy limits capex and reduces working capital through deals with carriers and equipment providers. The strategy gives Pacer access to freight terminals and facilities and control over transportation-related equipment.

• Competitive advantages: ability to pass volume ratet savings to customers; cross-selling; flexibility to tailor services in changing freight market.

• Recently reorganized intermodal segment to reflect our strategy of placing additional emphasis on retail customers and door-to-door services.

• Long-term deal with APL improves Pacer’s bargaining power with railroads, as APL freight moves from the West Coast to the Midwest, while domestic freight typically moves the other way.



• Management sees “tough economic period” in Q4 and “well into 2009.”

• Logistics segment posted slight loss YTD due to excess capacity, declining prices and higher fuel costs. The truck services sub-segment incurred higher claims and bad debts due to bankruptcies.

• Cyclical shipping volumes in transportation and logistics industries. Pacer’s asset-light model does not insulate it from factors affecting pricing and expenses. Pacer claims it retains volumes in downcycles and benefits from increased use of Stacktrain at the expense of long-haul trucking.

• Dependent on rail, truck, ocean transportation services and equipment provided by third parties. Pacer has experienced shortages in the past, mostly in the October/November peak season. Pacer has contracts with Union Pacific (thru 2011), CSX (thru 2014), and KCSM in Mexico (thru 2012).

• Competitors include Union Pacific, CSX, J.B. Hunt and Hub Group, C.H. Robinson, Exel, Alliance Shippers, Burlington Northern, and the supply chain solutions divisions of Ryder and Menlo Worldwide.

• $400+ million in lease commitments, the majority of which relate to railcars, containers and chassis. An undisclosed portion can be terminated each year.

• Management owns only 1% of the company. COMPARABLE PUBLIC COMPANY ANALYSIS

($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E EXPD 6,506 5,809 1.0x 4.9x 22x 20x HUBG 1,002 938 .5x 15.9x 16x 15x JBHT 3,114 3,803 1.0x 6.4x 15x 14x UNP 29,160 36,765 2.1x 1.9x 13x 11x PACR 359 395 .2x 6.9x 6x 6x

MAJOR HOLDERS CEO Uremovich <1% │ Other insiders 1% │ Royce 9% │ Barclays 8% │ Invesco 6% │ Cardinal 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Perini Corporation (NYSE: PCR) Framingham, MA, 508-628-2000 Capital Goods: Construction Services http://www.perini.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 57 47 68 136 140 226 468 409 370 409 Total current assets 486 382 526 608 806 1,078 1,526 2,002 1,447 2,002 Intangible assets 1 1 15 13 33 32 30 994 26 994 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Perini, dating back to 1894, is a construction firm offering diversified general contracting, construction management and design-build services. It operates in three segments: The building segment focuses on large, complex projects in the hospitality and gaming, entertainment, educational, transportation, corrections, healthcare, and tech markets. The civil segment focuses on public works construction in the northeastern and mid-Atlantic U.S., including the repair, replacement and reconstruction of the public infrastructure. The management services segment provides construction, design-build and maintenance to the military and government agencies as well as surety companies and large corporations. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: Building 68% 83% 92% 93% Civil 16% 9% 5% 5% Management services 16% 8% 3% 3% Revenue growth by segment: Building -9% 113% 69% 22% Civil 100% 2% -16% 5% Management services -32% -11% -41% -5% ∆ revenue -6% 76% 52% 20% ∆ new business awarded >500% -58% 4% 76% ∆ backlog (period end) >500% 7% -10% 7% EBIT margin by segment: Building 2.5% 2.4% 3.0% 3.0% Civil -9.8% 0.6% -5.5% 7.0% Management services 6.9% 13.9% 34.1% 22.1% Corporate -0.8% -0.8% -0.5% -0.4% Total EBIT margin 0.5% 2.3% 3.0% 3.3% % of revenue by geography: U.S. 89% 95% 97% n/a Foreign 11% 5% 3% n/a % of EBIT by geography: U.S. 14% 69% 70% n/a Foreign 86% 31% 30% n/a % of revenue by client source:1 Private owners 69% 82% 86% n/a State, local governments 19% 13% 11% n/a Federal governmental 12% 5% 3% n/a % of building segment revenue by end market (excludes “other”): Hospitality and gaming 65% 55% 67% n/a Education facilities 9% 6% 7% n/a Healthcare facilities 10% 20% 14% n/a Office/industrial buildings 4% 9% 9% n/a

1 Revenue related to MGM Mirage projects in Las Vegas, primarily the CityCenter project, accounted for 32% of Perini revenue in 2007. INVESTMENT HIGHLIGHTS

• 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.

• #1 builder in hotel, motel and convention center market, and 7th-largest contractor in U.S. general building market, based on 2007 revenue, according to industry publication Engineering News-Record.

• $8 billion backlog provides near-term visibility. Three-quarters of the backlog are cost-plus projects.

• Authorized $100 million buyback in November. • Stock price implies 10% trailing FCF yield, 4x


• Major CEO conflicts of interest. Chairman and CEO Ronald Tutor (67) is also CEO and primary owner of construction firm Tutor-Saliba. The firms participate in JVs and have a management deal under which Perini pays Tutor-Saliba $1 million per year. In January, the Tutor-Saliba acquired a firm that has $64 million in subcontracts with Perini.

• Merger with Tutor-Saliba may benefit CEO at expense of Perini. The companies closed the deal in September after successfully fighting a suit by shareholders. The deal gives T-S 45% of the combined firm (it appears T-S accounted for less than 20% of combined backlog at yearend 2007).

• 3% of revenue generated 35% of EBIT in 2007—contribution may not be sustainable, as it represents very high-margin projects outside the U.S., including in Afghanistan and Iraq.

• Las Vegas exposure. Hospitality and gaming were 67% of building segment revenue in 2007.

• Building services competitors: Balfour Beatty, Gilbane, Huntcor, James B. Pirtle, Marnell-Carrao, McCarthy Suffolk, Skanska, Taylor, and Turner.

COMPARABLE PUBLIC COMPANY ANALYSIS All of the competitors listed above are privately held firms, except Balfour Beatty, which is listed on the London Stock Exchange. More info is available at www.balfourbeatty.com MAJOR HOLDERS CEO Tutor 43% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.”

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Thanksgiving 2008


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





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 20 25 32 27 41 54 38 36 42 36 Total current assets 44 50 57 58 74 88 76 76 80 76 Intangible assets 0 0 0 0 0 0 0 0 0 0 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 Total current liabilities 39 47 68 77 77 71 79 81 73 81 Long-term debt 0 9 26 29 25 75 56 43 61 43 Total liabilities 44 62 101 115 114 158 150 138 147 138 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW PPD’s plans (“memberships”) provide legal services in a manner similar to medical plans. Benefits include preventive services, motor vehicle legal defense, trial defense and IRS audit services for an average monthly membership fee of $21. In 2007, provider law firms received 2.2 million calls from members needing legal services. 25% of memberships are employee group memberships, provided by companies as part of their fringe benefits. PPD dates back to 1969 when founder and current CEO Harland Stonecipher was involved in a collision that resulted in large uncovered legal fees. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by type: Membership fees 92% 93% 94% 94% Associate services and other 8% 7% 6% 6% Revenue growth by type: Membership fees 10% 6% 4% 3% Associate services and other 12% -7% -7% -3% ∆ revenue 10% 5% 3% 3% ∆ memberships (period end) 6% 0% 2% 0% ∆ annual membership fee 5% 2% 2% 1% ∆ new members recruited 12% -13% 0% -9% Persistency1 72% 71% 73% n/a ∆ sales associates recruited 125% -29% -14% -20%

1 Persistency measures the number of memberships in force at the end of a year as a percentage of the total of (i) memberships in force at the beginning of such year, plus (ii) new memberships sold during such year. INVESTMENT HIGHLIGHTS

• Legal “insurance” still developing. While legal service plans are a $4 billion industry in Europe, the plans are not widely accepted in the U.S. PPD’s 1.6 million members represent 1.5% of the addressable market of 110 million “middle” market households.

• Identity Theft Shield (IDT) taps into growing consumer anxiety. The company began offering IDT in 3Q03 for $9.95 per month if added to a legal membership, or separately for $12.95 per month. Benefits include a credit report and score, related instructional guides, and credit report monitoring. Active stand-alone IDT memberships grew 28% in 2007 to 83K. IDT services are provided by Kroll.

• Low working capital, as membership fees are received in advance (“deferred revenue and fees”).

• Improved terms with business partners. Over the past eighteen months, PPD has negotiated better terms with Kroll, lower bank service fees, and reduced interest rates on Wells Fargo financing.

• $34 million company-owned office complex in Ada, Oklahoma was constructed in 2004.

• Repurchased $400 million of shares since 1999, reducing shares out from 25 million to 12 million.



• Relatively high membership base turnover. PPD has 1.5% share of addressable households, while another 6% have previously purchased but no longer own memberships (roughly 10 million households are former members). It is difficult to assess whether the turnover has been due to a weak value proposition. PPD markets to former members and typically reinstates 75K-85K of them each year.

• Value proposition? PPD allows members to access a network of provider law firms under contract with PPD. Providers are paid a monthly fixed fee on a capitated basis to render services to local members. As the payments do not vary based on the type of benefits utilized, the deals help PPD manage claims risk. However, the arrangement also disincentivized providers from prioritizing member claims.

• PPD’s multi-level marketing scheme encourages individuals to sell memberships and recruit their own sales teams. 75% of members have been recruited by the multi-level salesforce (25% are employee group memberships). The utilization of multi-level marketing may limit scalability, as many potential members may not want to buy through such a channel. PPD may also encounter difficulty recruiting salespeople. The number of “vested” sales associates declined from 468K in 2005 to 442K in 2007, with new associate recruitments down from 242K in 2005 to 149K in 2007.

• Competitors include Hyatt Legal Plans (MetLife), ARAG North America, National Legal Plan, and Legal Services Plan of America (GE Financial).

MAJOR HOLDERS Chairman Stonecipher 7% │ Thomas Smith 27% │ Other insiders 1% │ RenTech 8% │ GSAM 7% │ Barclays 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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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





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash from ops 310 251 143 357 231 866 914 n/a 194 n/a 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 Cash & investments 38 29 80 154 60 150 221 414 201 414 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 Total liabilities 1,613 1,406 2,041 1,845 1,609 2,423 2,005 2,070 2,494 2,070 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 952 1,062 1,715 1,780 2,141 2,836 4,045 4,351 3,109 4,351 EBIT/capital employed 20% 26% 20% 34% 47% 63% 76% 78% n/m n/m



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BUSINESS OVERVIEW Precision Castparts operates in three segments: Investment Cast Products manufactures investment castings for aircraft engines, IGT engines, airframes, armaments, medical prostheses, and other industrial applications. Forged Products consists of the forging operations of Wyman-Gordon and the nickel-based alloys and superalloy production of SMC, acquired in Q1 FY07. Fastener Products produces fasteners, fastener systems and components for critical applications in the aerospace, automotive and industrial machinery markets. SELECTED OPERATING DATA

FYE March 31 2006 2007 2008 1H09 % of revenue by segment: Investment cast products 45% 33% 32% 33% Forged products 26% 44% 46% 44% Fastener products 29% 23% 22% 23% Revenue growth by segment: Investment cast products na 11% 24% 16% Forged products na 163% 35% 1% Fastener products na 20% 25% 14% ∆ revenue 22% 53% 29% 8% ∆ backlog (period end) 32% 54% 26% EBIT margin by segment: Investment cast products 20% 22% 24% 25% Forged products 13% 17% 22% 21% Fastener products 17% 21% 25% 28% Corporate -1% -2% -1% -1% Total EBIT margin 16% 18% 22% 23% D&A as % of revenue 2.7% 2.1% 1.9% 2.0% Capex as % of revenue 2.7% 4.1% 3.3% 2.9% % of revenue by market area: Aerospace 59% 53% 55% n/a Power generation 18% 21% 24% n/a Industrial and automotive 23% 26% 21% n/a % of revenue by geography: U.S. 85% 80% 80% n/a U.K. 10% 14% 13% n/a Other 4% 6% 7% n/a % of revenue by 10%+ customer: GE1 17% 12% 12% n/a

1 Other key customers include United Technologies and Rolls Royce. INVESTMENT HIGHLIGHTS

• Cast products performing well, driven by “robust” aerospace demand, OEM and aftermarket shipments and industrial gas turbine (IGT) growth. Product lines are well-positioned on aerospace production programs; IGT volume is near all-time highs. There is “continued [margin] upside going forward.”

• 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 by strong sales of critical aerospace fasteners, partially offset by lower automotive fastener sales.

• Contractual pass-through of raw material price increases helps offset rising costs. The company has escalation clauses for nickel and other metals in “certain long-term contracts,” and employs price-in-effect metal pricing to lock-in alloy production cost.

• Acquisitions have contributed to growth, and the company continues to pursue deals.

• Chairman and CEO Mark Donegan (51) has been with the company for more than 15 years.



• Four-fifths of revenue from cyclical aerospace and power generation markets. Commercial aerospace depends on new aircraft demand. Military aerospace depends on government funding. Power generation demand depends on economic strength.

• Hurt by Boeing strike, with orders pushed out. • Dependent on Boeing 787 and Airbus A380

programs as major component supplier. The 787 is expected to move into production later in 2009.

• Management turnover, including departure of forged products president Ayers in July and the retirement of CFO Larsson at the end of CY08.

• Competitors include Alcoa and Ladish in cast products. Forged product comps inlude Ladish, Fortech and Thyssen in aerospace turbines; Alcoa and Schultz in structural products; Vallourec/ Mannesmann and Sumitomo in energy; and Allegheny, Carpenter and Haynes in nickel alloys. Fastener comps include Alcoa, LISI, McKecknie.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E AA 8,675 18,028 .6x 0.9x 7x 11x ATI 2,041 2,285 .4x 0.9x 4x 5x 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

MAJOR HOLDERS CEO Donegan <1% │ Other insiders 1% │ Cap Re 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Premier Exhibitions (Nasdaq: PRXI) Atlanta, GA, 404-842-2600 Services: Recreational Activities http://www.prxi.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 0 2 1 1 5 17 18 9 26 9 Total current assets 4 3 1 4 10 25 28 24 37 24 Intangible assets 0 0 0 1 4 3 10 12 5 12 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 Total current liabilities 2 2 1 3 3 2 4 6 5 6 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 2 2 1 3 3 2 4 6 5 6 Preferred stock 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



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BUSINESS OVERVIEW Premier develops touring, museum-quality exhibitions presented in museums, exhibition centers, and other venues. The exhibitions, including Bodies…The Exhibition and Titanic: The Artifact Exhibition, have attracted 20 million visitors. Since 1994, Premier subsidiary RMS Titanic has been Salvor-in-Possession of the wreck of the Titanic, as ordered by a federal district court. RMS has conducted multiple expeditions, recovering 5,500 artifacts. Revenue sources include exhibition ticket sales, merchandise sales, licensing activities, and sponsorship agreements. SELECTED OPERATING DATA

FYE February 28 2006 2007 2008 1H09 % of revenue by theme: Bodies 37% 72% 81% 67% Titanic 63% 28% 19% <33%1 % of revenue by type: Exhibition 94% 96% 96% 85% Merchandise and other 6% 4% 4% 15% % of revenue by geography: U.S. 80% 96% 79% n/a International 20% 4% 21% n/a

1 Titanic accounted for the vast majority of non-Bodies revenue in 1H09. INVESTMENT HIGHLIGHTS

• Bodies attended by more than five million visitors since FY05, including in New York, Las Vegas, San Diego, Prague, and Sao Paulo. In FY08, Premier presented 15 separate human anatomy exhibitions at 28 venues. The exhibitions include displays of dissected human bodies kept from decaying through a process known as plastination. The 2005 acquisition of Exhibitions International gave Premier multi-year licenses and exhibition rights to multiple human anatomy exhibitions.

• Exclusive right to recover objects from the Titanic due to Salvor-in-Possession status. Public interest in the Titanic story remains strong 96 years after she set sail, and Premier’s Titanic exhibitions have attracted audiences in 60+ venues worldwide. In 1993, Premier acquired Titanic Ventures, which started exploring the Titanic wreck site in 1987.

• New exhibitions include Dialog in the Dark (“world without sight”) and Sports Immortals (memorabilia). The exhibitions will be conducted under long-term licensing deals and are expected to open in late FY09. Sports Immortals will present sports memorabilia consisting of one million artifacts from great athletes. Dialog in the Dark will “provide insight and experience to the paradox of learning to ‘see’ without the use of sight.”

• 16% holder Mark Sellers demands firing of CEO Arnie Geller due largely to poor performance.

• Repurchased $7 million of stock in FY08. • Stock price implies negative trailing FCF yield,

8x trailing P/E and 4x forward P/E. INVESTMENT RISKS & CONCERNS

• Performing “well below” expectations, with sharp declines in per-venue gross margin, sharp rise in opex and weak international results from Bodies.

• Resignations of CEO Eskowitz and legal counsel Wainger in August. Arnie Geller (66), who served as CEO prior to Eskowitz, was reappointed CEO. The changes followed a demand for two Board seats by 16% shareholder Mark Sellers. (Premier appointed a new CFO, Bud Ingalls, in February.)

• May not retain Titanic Salvor-in-Possession rights indefinitely. While the U.S. Court of Appeals for the Fourth Circuit in 2006 recognized Premier’s exclusive right to recover objects from the Titanic site, the same court left Premier with non-exclusive rights to photograph and film the wreck site. In order for Premier to maintain Salvor-in-Possession status, it “must maintain a presence over the wreck site as interpreted by the courts.” In addition, an international treaty that does not recognize Premier’s Salvor-in-Possession rights was signed by the U.K. in 2003 and the U.S. in 2004. The treaty has yet to take effect, however, as the U.S. has not enacted implementing legislation.

• Bodies comprised 81% of revenue in FY08. The exhibitions have several competitors. In addition, in May, Premier settled an NYAG inquiry into the sourcing of specimens, allowing the company to operate the exhibition without interruption.

MAJOR HOLDERS CEO Geller 10% │ Other insiders 3% │ Mark Sellers 16% │ GSAM 8% │ W. & J. Gasparrini 8% │ Morgan Stanley 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into PRXI: “Our existing exhibitions continue to attract strong attendance and our new exhibitions have the potential to achieve blockbuster results in the coming years. We are keenly focused on improving our core businesses, streamlining our overhead cost structure and increasing shareholder value.”

—Arnie Geller, Chairman and CEO WHAT ARE THE SHARES WORTH?

• We estimate value at $1.50-7.50 per share. • On 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 (equal to appraised value of 2,000 artifacts owned by Premier; includes neither >$100 million appraised value of additional artifacts nor the value of potential future recoveries).

• On the high end, we estimate fair value at 15x normalized earning power of $0.50 per share. While our estimate of earning power is highly subjective, we believe it is reasonably conservative considering the significant unrealized potential of the company’s new exhibitions, including Dialog, Sports Immortals and Star Trek. We note that the company achieved EPS of $0.17 in 2Q08 (quarter ended August 31, 2007) before earnings declined sharply due to poor execution. 2Q08 results were achieved based solely on the Bodies and Titanic exhibitions. With other exhibitions in the pipeline, it is conceivable the company could surpass $0.17 per quarter in the next 1-3 years (assuming strong management execution). As a result, our estimate of normalized EPS may ultimately prove conservative.

• Premier shares are difficult to value given the significant disparity between current earnings and likely earning power. With earnings highly sensitive not only to opex discipline but also to the ramp-up and execution of new exhibitions, it is impossible to project income with any certainty. However, with activist shareholder involvement and asset protection in the form of Titanic artifacts, the downside appears to be reasonably protected. As a result, we find the shares less speculative than might be assumed given the difficulty of projecting EPS.


Premier – Revenue, Gross Profit and EBIT, 1Q04-2Q09 Premier scaled up dramatically from “startup mode” in FY04, as the Titanic and Bodies exhibitions came to market. The company lost its cost discipline in 2H08, with gross and operating profits declining dramatically even as revenue remained fairly stable. In a November 2008 letter to the board, major shareholder Mark Sellers decried the bloated cost structure and large payouts to executives.

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Source: Company, The Manual of Ideas. Premier – Y-Y Revenue Growth, 1Q05-2Q09 Premier showed explosive revenue growth without the need for significant capital investment from FY05-08. Revenue has stagnated recently, as some exhibitions have concluded while new ones have yet to ramp up. However, with Dialog, Sports Immortals and Star Trek in the pipeline — and the possibility of improved international execution of Bodies — Premier has a clear path to restoring growth.

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Source: Company, The Manual of Ideas. Premier – Gross and EBIT margin, 1Q04-2Q09 Gross margins have declined in recent quarters, as the company has shifted to operating more self-run venues (six in FQ2 versus three in the year-ago period). Even so, gross margin has declined below the company’s target for well north of 50%. EBIT margins have deteriorated even more dramatically in recent quarters, reflecting a bloated cost structure, including extremely generous executive pay.

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WHY THE SHARES MAY BE MISPRICED • Value of Titanic assets not reflected on balance

sheet. The company’s ownership of 2,000 Titanic artifacts is reflected in a $3 million balance sheet asset even as the collection has been appraised at $46 million. In addition, the company has not reflected any value for additional artifacts that are the subject of litigation (appraised at >$100 million), nor for the potential value of future recoveries from the Titanic shipwreck site. As we approach the 100-year anniversary of the sinking of the Titanic in 2012, these assets may become even more highly prized.

• Loss of investor confidence, due to history of disappointing investor expectations and lavishing excessive pay on senior executives. Investors appear to have “written off” Premier, as the company has repeatedly ratcheted down expectations and failed to execute in line with its potential.

• Market’s misjudgment of Mark Sellers’ intentions and staying power. Sellers owns 16% of Premier and has come into the spotlight due to a Wall Street Journal article highlighting his hedge fund’s recent rocky performance (despite solid performance since inception). Some market participants may have mistakenly assumed that Sellers may be forced to exit his 16% position in 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.

EXHIBITIONS OVERVIEW

Exhibition Timeline Comments Titanic (6 current exhibitions)

Named salvor-in-possession in 1994

2,000 artifacts carried at $3 million but appraised at $46 million; seeking salvage award on 3,500 additional artifacts, appraised at >$100 million; additional value in potential future recoveries

Bodies (11 current exhibitions)

Signed deal for first exhibition in 2004

Accounted for 81% of revenue in FY08

Star Trek (1 current exhibition)

Opened in June in San Diego; looking for second venue

Exclusive rights to present exhibition worldwide; no capital investment required with 50/50 split of profits

Dialog in the Dark (1 current exhibition)

Announced in February; opened August 30 in Atlanta; second location under review

Sold out events in >20 countries in Europe, Asia, South America

Sports Immortals

Signed long-term licensing deal in March 2008; goal is to open at least one new exhibition by the end of FY09

>1 million artifacts from worlds of baseball, football, basketball, hockey, tennis, golf, Olympics


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MANAGEMENT’S VIEW OF BUSINESS Notes from FQ2 earnings call on October 8:

• State of company: “these are very troubled times, but if any company should know about navigating in treacherous waters, it should be this company, and I can assure you that we’ve got a firm hand on the rudder and we’re proceeding very carefully”

• FQ2 review: 6% revenue decline on 15% attendance drop for Bodies and Titanic (despite increase in Bodies exhibitions from 11 to 19; “venue days of operation” were up 48%); average daily attendance per venue was down 40% to 704 attendees; several international exhibitions lost money; “while we are disappointed with our financial results for Q2 and the YTD results, we are pleased by the progress we are achieving and have achieved over the past several months toward both expansion and diversification of the company’s revenue and the right sizing of the company’s organizational structure”

• Outlook: does not provide specific guidance; FY09 “will be year of transition, but hopefully continued growth;” “suspect that we will see… the Bodies exhibitions begin to do well, and as our new product proves its capabilities, we’ll see our revenues and our profits move where they should be”

• Pricing: “may” lower ticket prices • Key initiatives: (1) stringent cost controls – will see

unspecified benefit of headcount reductions in FQ3 and beyond; (2) Star Trek exhibition: licensing relationship, opened on June 21, “off to a promising start;” (3) Dialog in the Dark: opened at end of August, “attendance has been slow to ramp up,” remains “very optimistic about the opportunity”

• Bodies: 62% of revenue in FQ2, down from 68% last year; “Bodies is certainly our biggest disappointment… over this past immediate period” – “reason for the disappointment for the most part is the international activity,” where it works with local partners; “Bodies exhibitions… are as important and as successful in their appeal to the general public throughout the world now as they were when we first introduced them, and two excellent examples of that are two exhibitions that just recently closed, one in Kansas City where our Bodies exhibition achieved attendance of approximately 250,000 people, and at the same time, Cincinnati was doing an excellent job at Union Station where we sold over 300,000 tickets;” opportunity to develop “large” market for corporate training programs

• Titanic: continue to do “well;” opening exhibition in Milwaukee – Titanic has never been to Milwaukee but company expects several hundred thousand in ticket sales due to popularity of venue; 100-year anniversary coming up in 2012, with opportunities in exhibitions, expeditions and merchandising from 2011 through 2013

• Legal issue with regard to ownership of Titanic: “we have the unfettered right to… ownership [of 1,800 objects]”; Norfolk federal district court “is now dealing with us on a salvage award for the other two-thirds of 5,500 objects that have not been awarded yet;” “the court will either have to award us money or the artifacts” (“no matter what happens or how that award is ultimately determined, it will not effect the 1,800 objects that we all ready own”)

• Star Trek: “sales team has been communicating with museums who have reacted very positively to wanting a Star Trek exhibition” – “over a dozen have expressed high interest” in U.S.

• Dialog in the Dark: “receiving the best reactions;” “will be around for many years in [five] permanent locations” in major U.S. markets; to benefit strongly from “word of mouth;” attendance could reach “7.5” on a scale on which Bodies reaches “10” – potential less than Bodies due to less efficient space utilization (Bodies can handle up to 20,000 people per day in a space that would handle only 2,000 people per day for Dialog, as latter requires people to move through sequentially in groups of ten)

• Sports Immortals: still being developed; “holding back from moving into the Luxor [in Las Vegas]… until we prove that we have [a] hit;” could eventually generate as much traffic as Bodies

• Geller on CEO role: “I didn’t come back to the company just to spend a couple of months and try to patch this company together; I’ve come back with the major commitment of being here and staying here;” “bringing this company back today to where it was is not a daunting task; it’s not a difficult task; all of our product is excellent product”

• Self-run venues: FY08 shift to operating more self-run venues (six in FQ2 versus three a year ago) impacts cost of sales and gross margin – self-run venues require more revenue than do partnered venues to break even; targeting margins of 50%+

• Balance sheet: cash down to $9.2 million due to EBIT decline, MGR purchase and initiation of capital projects, including Luxor, Dialog and Sports

• Capex: $3.5 million in FQ2 (versus $700K a year ago) – $1.8 million at Luxor, $900K at Dialog in the Dark, and $400K at Sports and Mortals; expects higher capex in 2H09 – $10 million at Luxor, $2-4 million at Dialog, $2-4 million at Sports and Mortals, and $1-2 million of maintenance capex

• Liquidity: $10 million line of credit with Bank of America was fully available at FQ2-end, with option to increase to $25 million (BofA must consent); may draw on line toward the end of FQ4 to meet growth capex requirements outlined above

• Business model comment: “investment costs for new exhibitions are all based upon trial and success before rollout; so when we open up a second, third or fourth exhibition, that’s because we know that we’ve already proven its ability for success”

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PRIMEDIA Inc. (NYSE: PRM) Norcross, GA, 678-421-3000 Services: Printing & Publishing http://www.primedia.com


Price: $1.37 (as of 11/14/08) Month # of P/E FYE 12/31/07 n/m 52-week range: $0.80 - $10.10 Latest Ago Ests P/E FYE 12/31/08 2.1x Market value: $61 million This quarter $0.24 $0.24 1 P/E FYE 12/31/09 1.7x Enterprise value: $287 million Next quarter n/a n/a 0 P/E FYE 12/31/10 n/a Shares out: 44.2 million FYE 12/31/08 0.64 0.64 1 EV / LTM revenue 1.0x

Ownership Data FYE 12/31/09 0.80 0.80 1 EV / LTM EBITDA 4.4x Insider ownership: 1% FYE 12/31/10 n/a n/a 0 EV / LTM EBIT 5.7x Insider buys (last six months): 12 LT EPS growth n/a n/a 0 P / tangible book n/m Insider sales (last six months): 2 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 18% # of institutional owners: 156 11/6/08 $0.20 $0.18 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 34 19 9 13 7 6 15 23 47 23 Total current assets 407 305 288 284 302 323 73 64 94 64 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 Total current liabilities 628 553 465 437 324 295 73 67 88 67 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



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BUSINESS OVERVIEW PRIMEDIA publishes and distributes ad-supported print and online consumer guides for the apartment leasing and new home sale segments of residential real estate. The guides are provided for free to end users. In 2007, it distributed 38 million guides to 60,000 locations through DistribuTech, which also distributes 2,000 third-party publications. PRIMEDIA owns websites associated with its print guides, as well as Rentals.com, the leading paid listings website for residential real estate rentals. The company monetizes visits to the sites through ad formats such as cost per lead, cost per impression, cost per click, cost per action, and flat fees. SELECTED OPERATING DATA


9/30/08 % of revenue by type:1 Advertising – apartments2 71% 67% 66% 68% Advertising – new homes3 11% 15% 16% 14% Distribution4 18% 18% 18% 18% Revenue growth by type:1 Advertising – apartments2 n/a -5% 0% 2% Advertising – new homes3 n/a 36% 10% -18% Distribution4 n/a 0% 3% -4% Total revenue growth 7% 0% 2% -2%

1 Revenue reclassified to exclude Enthusiast Media and Auto Guides. 2 Consists of Apartment Guide, ApartmentGuide.com and Rentals.com. 3 Consists of New Home Guide and NewHomeGuide.com businesses. 4 Consists of PRIMEDIA's distribution arm, DistribuTech. GEOGRAPHIC SCOPE OF PRIMEDIA PRINT PRODUCTS

North-east1

South-east2

Mid-west3

West4 Totals

Apartments 23 21 14 19 77 New homes 6 17 6 5 34 DistribuTech5 6,646 3,956 4,007 5,285 19,894

1 Major markets include Washington, D.C., Philadelphia, Baltimore, Chicago. 2 Major markets include Atlanta, Tampa, Orlando, Miami, Charlotte. 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. INVESTMENT HIGHLIGHTS

• Completed major divestitures, reduced debt and refocused on Consumer Guides for real estate. The company sold Enthusiast Media to Source Interlink for $1.2 billion in 2007. In July 2008, it discontinued Auto Guides. It now focuses on print and online guides for U.S. residential real estate.

• Apartment Guide business (68% of revenue) continues to grow revenue and customer count. Management sees new growth possibilities in this segment, particularly online. According to CEO Stubbs, “there is a meaningful opportunity … [to] expand our portfolio of product offerings…”

• EBIT of $31 million YTD, up from $18 million in year-ago period, driven by move of HQ from NYC to Atlanta, opex reductions, improved distribution, and exit from two Auto Guide markets.

• New CEO Charles Stubbs (35) joined PRIMEDIA in April 2008 from Yellowpages.com, which he had built into a cohesive brand and Top 30 Internet site.

• Reduced corporate overhead to $12 million run rate, down from $29 million in 2007. The company has moved headquarters from New York to Atlanta.

• Stock price implies negative trailing FCF yield, 3x trailing P/E and 2x forward P/E.


• New Homes (16% of revenue) and DistribuTech (18% of revenue) continue to face pressure from the depression in real estate. New Homes revenue is down 18% YTD, while DistribuTech revenue has declined 4%. The company is “aggressively pursuing operating efficiencies.”

• Weak, albeit improved balance sheet. PRIMEDIA had net debt of $226 million at September 30, down from net debt of $1.2 billion at June 30, 2007. Debt has been reduced by proceeds from the divestiture of Enthusiast Media. PRIMEDIA continues to pay a quarterly dividend of ~$3 million ($0.07 per share).


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E LEDR 58 -4 n/m 0.8x n/m n/m MOVE 155 211 .8x 2.7x n/m 8x TREE 21 -5 n/m 0.3x n/m n/m PRM 61 287 1.0x n/m 2x 2x

MAJOR HOLDERS Insiders 3% │ KKR 40% │ Glenview 8% │ Marathon 8% │ Amber 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Questcor Pharmaceuticals, Inc. (Nasdaq: QCOR) Union City, CA, 510-400-0700 Health Care: Biotechnology & Drugs http://www.questcor.com



Ownership Data FYE 12/31/09 0.52 0.51 2 EV / LTM EBITDA 8.1x Insider ownership: 7% FYE 12/31/10 0.61 0.60 1 EV / LTM EBIT 8.2x Insider buys (last six months): 0 LT EPS growth 18.0% n/a 1 P / tangible book 12.5x Insider sales (last six months): 15 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 53% Date Actual Estimate LTM EBIT yield 12% # of institutional owners: 179 10/30/08 $0.13 $0.11 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 11 8 3 9 27 18 30 41 11 41 Total current assets 12 11 7 14 30 24 72 64 28 64 Intangible assets 2 1 14 13 0 4 4 4 4 4 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 Total current liabilities 9 3 3 9 14 7 15 22 6 22 Long-term debt 0 3 3 2 0 0 0 0 0 0 Total liabilities 10 7 7 12 15 8 17 23 8 23 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



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BUSINESS OVERVIEW Questcor is a specialty pharma company that markets Acthar, an injectable drug approved for the treatment of certain disorders with an inflammatory component, including exacerbations associated with MS. Acthar’s primary but not indicated-for use is treating patients with infantile spasms (IS), a rare form of refractory childhood epilepsy. Questcor expects to resubmit an Acthar supplemental New Drug Application (sNDA) for IS to the FDA during 2008. The company is also developing QSC-001, a unique orally disintegrating tablet formulation for the treatment of pain. Seasonality of Acthar for IS: Q1: 15% below annual average; Q3: 12% above average; Q2 & Q4: slightly above average. SELECTED OPERATING DATA


9/30/08 % of revenue by therapeutic area: Neurology 59% 100% 100% 100% Gastroenterology, other1 41% 0% 0% 0% Neurology revenue growth 3% 52% 289% 201% Revenue by customer: CuraScript 0% 0% 80% n/a Wholesaler A 35% 36% 7% n/a Wholesaler B 29% 28% 6% n/a Wholesaler C 23% 27% 3% n/a Others 13% 9% 4% n/a

1 Questcor divested related product lines in October 2005. INVESTMENT HIGHLIGHTS

• New Acthar strategy has been huge success. The strategy, launched in August 2007, has boosted insurance coverage of Acthar for IS to 95%. Acthar sales have grown to $68 million YTD, up 210% from $22 million in the first nine months of 2007.

• Acthar is well-regarded for IS. While no drug is approved in the U.S. for treatment of IS, Acthar has 40% market share and is considered by many child neurologists as the standard-of-care in IS.

• Expects to resubmit Acthar IS to the FDA by yearend. Having already received orphan designation for IS, FDA approval may give Acthar for IS 7-year exclusivity. Approval would also allow Questcor to advertise Acthar for IS.

• Acthar may develop other therapeutic uses, including among a subset of MS patients who do not respond to or tolerate IV corticosteroids.

• QSC-001 addresses large market with 120 million prescriptions annually. This orally disintegrating tablet for patients who have difficulty swallowing will begin pivotal trials in 2Q09.

• Don Bailey (62) became CEO in late 2007. He negotiated a change-of-control provision in June. Questcor is still formulating a long-term strategy.

• YTD FCF of $54 million, with $46 million spent to repurchase common and preferred stock.



• Off-label: Acthar not indicated for primary use. The FDA has approved Acthar, but not for IS, the disease for which the drug is primarily prescribed. Questcor is prohibited from promoting the use of Acthar in IS. It is unclear when/whether FDA approval of Acthar for IS might be forthcoming.

• Lack of patent protection. Acthar, which Questcor acquired from Aventis in 2001, dates back to 1952 and has no patent protection. Questcor claims that Acthar would be “very difficult” to reproduce.

• Looming competitive threats. Vigabatrin is already approved in Canada and under FDA review for treatment of IS. Other potentially competitive drugs include Synacthen and Ganaxolone.

• Net revenue about 30% below gross revenue, due to Medicaid rebates and government-related chargebacks. It is unclear how this may evolve.



09 P/E

ENZN 172 311 1.6x n/m n/m n/m NVS 110,839 113,506 2.7x 3.8x 13x 12x SNY 82,566 89,716 2.5x n/m 8x 7x TRMS 49 12 .4x 1.3x 6x 6x VPHM 921 502 2.2x 2.0x 12x 22x QCOR 529 489 5.1x 12.5x 18x 16x

MAJOR HOLDERS CEO Bailey 1% │ Other insiders 10% │ P. Cavazza 11% │ Tang 9% │ Black Horse 7% │ Visium 5% │ Broadwood 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


RadioShack Corporation (NYSE: RSH) Fort Worth, TX, 817-415-3011 Services: Retail (Technology), Member of S&P 500 http://www.radioshackcorporation.co…





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 401 447 635 438 224 472 510 824 417 824 Total current assets 1,714 1,707 1,667 1,775 1,627 1,600 1,567 1,814 1,439 1,814 Intangible assets 11 3 3 47 40 8 5 0 0 0 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 Total current liabilities 826 828 858 957 986 984 748 636 695 636 Long-term debt 565 591 541 507 495 346 348 726 344 726 Total liabilities 1,467 1,500 1,475 1,595 1,616 1,416 1,220 1,461 1,172 1,461 Preferred stock 65 0 0 0 0 0 0 0 0 0 Common equity 714 728 769 922 589 654 770 785 702 785 EBIT/capital employed 33% 48% 60% 61% 35% 19% 54% 56% n/m n/m



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BUSINESS OVERVIEW RadioShack is a consumer electronics retailer operating from neighborhood and mall locations. It has 6,000 company-operated stores and dealer outlets in the U.S. and 700 non-RadioShack branded wireless phone kiosks. Stores are located in major malls and strip centers, as well as individual storefronts. Each location carries both private label and third-party branded electronics products, including mobile phones, flat panel TVs, wireline phones, DVD players, computers, digital cameras, etc. Company-operated kiosks are primarily inside Sam’s Club locations, and stand-alone Sprint Nextel kiosks in malls. Seasonality is strongest during the Q4 holiday shopping season, accompanied by a pre-seasonal inventory buildup. The company was founded in 1967. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Comparable sales growth +0.9% -5.6% -8.2% +3.4% % of revenue by segment: Company-operated stores 88% 85% 86% 86% Kiosks 5% 7% 7% 7% Other 7% 7% 7% 7% Revenue growth by segment: Company-operated stores 0% -9% -11% 4% Kiosks 370% 30% -13% -5% Other 8% 6% -11% -2% Total revenue growth 5% -6% -11% 3% Number of locations at period end: Company-operated stores1 4,972 4,467 4,447 4,435 Dealer/franchise outlets 1,711 1,596 1,484 1,407 Kiosks2 777 772 739 685 EBIT margin by segment: Company-operated stores 20% 17% 21% 19% Kiosks -5% -7% 5% 2% Other 10% 0% 17% 15% Unallocated -11% -11% -10% -10% Total EBIT margin 7% 3% 9% 7% % of revenue by product category: Wireless 34% 35% 33% 33%3 Accessories 20% 23% 24% 28%3 Personal electronics 15% 16% 15% 14%3 Modern home 13% 13% 13% 11%3 Other 17% 14% 14% 13%3

1 Average store size: 2,527 sq. ft. 2 Average store size: 99 sq. ft. 3 Represents MOI estimate. INVESTMENT HIGHLIGHTS

• Comparable sales grew 7% in Q2 and 8% in Q3, driven by digital-to-analog TV converters, GPS devices, video gaming, prepaid wireless phones and AT&T post-paid business, partially offset by weak Sprint post-paid business. Comps would have been up 4% in Q3 excluding Sprint and converter sales.

• Repurchased 8.7 million shares for $24 per share in 2007 and virtually no shares YTD.

• Fresh management, with ties to Kmart. Prior to joining RadioShack as chairman and CEO in 2006, Julian Day (55) served as COO of Kmart, CFO and COO of Sears, and a director of Sears Holdings. Bryan Bevin (45), EVP of Store Operations, joined in January 2008 from Blockbuster. James Gooch (40), who joined as CFO in 2006, has prior experience as controller of Kmart. Peter Whitsett (42), joined as Chief Merchandising Officer in late 2007, having served in a similar role at Kmart.



• Sales trends slowed in September, following strength in July and August. Management expects the “challenging” retail environment to continue.

• Results have benefited from digital-to-analog TV converter sales. The transition of broadcast signals to digital only is scheduled to take place in 1Q09.

• Competition from other electronics retailers and discounters, including Walmart and Best Buy, which have gained share against RadioShack. The company’s wireless phone kiosks compete against providers such as AT&T and Sprint Nextel.

• Commoditization due to Internet-based price discovery. While some consumers may value the service of RadioShack, many turn to the Internet to save money on big-ticket items. Some may come to a store to get educated but ultimately buy online.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BBY 9,096 11,242 .3x 4.5x 8x 9x CONN 188 141 .2x 0.6x 5x 5x GME 3,811 3,817 .5x 6.2x 9x 8x HGG 159 276 .2x 1.8x 6x 6x RSC 69 58 .2x 0.3x n/a n/a RSH 1,207 1,145 .3x 1.5x 6x 6x

MAJOR HOLDERS CEO Day 1% │ Other insiders 1% │ Invesco 11% │ Barclays 11% │ BlackRock 9% │ GSAM 7% │ Janus 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


R.G. Barry Corp. (Nasdaq: DFZ) Pickerington, OH, 614-864-6400 Consumer Cyclical: Footwear http://www.rgbarry.com



Ownership Data FYE 6/30/10 0.90 0.90 1 EV / LTM EBITDA n/a Insider ownership: 9% FYE 6/30/11 n/a n/a 0 EV / LTM EBIT 4.9x Insider buys (last six months): 2 LT EPS growth n/a n/a 0 P / tangible book 1.2x Insider sales (last six months): 7 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 33% Date Actual Estimate LTM EBIT yield 21% # of institutional owners: 38 11/3/08 $0.10 $0.24 LTM pre-tax ROC 24%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 7 2 1 4 1 18 26 10 1 10 Total current assets 61 44 33 36 35 50 56 62 50 62 Intangible assets 2 0 0 0 0 0 0 0 0 0 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 Total current liabilities 20 19 18 15 19 16 10 16 13 16 Long-term debt 6 2 1 1 0 0 0 0 0 0 Total liabilities 40 36 34 31 31 27 22 28 25 28 Preferred stock 0 0 0 0 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



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BUSINESS OVERVIEW R.G. Barry provides accessory footwear (mostly wholesale), including slippers, sandals, fashion items, and slipper socks. The company sold its European operations in July 2007 and now focuses on North America. Manufacturing is outsourced to China and Vietnam. Roughly 70% of sales are recorded in the second half of each calendar year. SELECTED OPERATING DATA

FYE June 28 2006 2007 2008 1Q09 Revenue growth n/a 8% 4% -20% Backlog growth1 n/a 51% 10% n/a Revenue by customer: Wal-Mart 35% 33% 37% n/a J.C. Penney 11% 11% 11% n/a Revenue by type: Owned brands 94% 85% 89% n/a Licensed brands 4% 3% 1% n/a Private label programs 2% 12% 10% n/a

1 Based on backlog as of September 1st of each year. INVESTMENT HIGHLIGHTS

• Transitioned business model in FY04, from manufacturer of footwear to distributor of goods purchased from third-party manufacturers.

• Flagship slipper brand, Dearfoams, dominates multiple retail channels. The slippers retail for $5-30 per pair and are often purchased as gifts during the holiday shopping season.

• Terrasoles and Superga brands received “good reception” at consumer level in FY08. R.G. Barry expects Terrasoles eco-friendly hybrid footwear and licensed Superga canvas/active fashion footwear to show “healthy” growth in FY09. Terrasoles upper materials include recycled micro fleece and mesh, as well as organic materials such as bamboo. They retail for $49-59 and are sold mainly in specialty chain stores, independent shoe stores, and department stores. Superga products retail for $80-180 and are sold in mid-range and premier department stores and better footwear stores.

• FY09 Nautica and My College Footwear brand launches may balance out seasonal and demographic aspects of business. The company foresees “modest” first-year performance from licensed Nautica slippers and accessories and NCAA-licensed My College Footwear. Nautica products (launched in the September quarter) retail for $36-48 and are sold through upper-tier department and specialty stores.

• Looking for “category-appropriate” acquisitions that will add revenue, be accretive to earnings, and continue to mitigate the seaonality of the business.

• CEO Greg Tunney (47) joined R.G. Barry in 2006 from Phoenix Footwear, where he served as COO for seven years. Tunney also spent six years as national sales manager of Brown Shoe.



• Management expects “approximately flat” sales in FY09, despite 20% FQ1 revenue decline (should be recovered in FQ2, based on shipments to retailers since the end of FQ1, open orders and retail sell-through). Gross margin erosion is likely in FY09.

• Retailers are delaying or reducing orders; retail space is being downsized, partly due to bankruptcies among mid-tier department stores.

• Cost of materials, labor and energy is pressuring margins, as company has little pricing power. Management believes the pressure to be temporary and gross margin to return to 40% in FY10.

• Globalization and retail consolidation have hurt accessory footwear makers. These factors have increased competition in the marketplace and put significant pressure on industry margins. For example, the merger of Sears and Kmart negatively affected the long-term prospects of Footstar.

• $12 million pension obligation exceeds $7 million of net cash and investments as of September 30.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E BWS 316 402 .2x 0.9x 9x 8x DECK 793 725 1.3x 2.7x 9x 7x PXG 3 13 .2x 0.2x n/m n/m TBL 593 528 .4x 1.2x 13x 14x WWW 926 933 .8x 2.2x 10x 9x DFZ 56 49 .5x 1.2x 8x 6x

MAJOR HOLDERS CEO Tunney <1% │ Other insiders 12% │ Ergates 11% │ Nicusa 6% │ Zeff 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Robert Half International Inc. (NYSE: RHI) Menlo Park, CA, 650-234-6000 Services: Business Services, Member of S&P 500 http://www.rhi.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 347 317 377 437 458 448 310 374 329 374 Total current assets 686 646 699 916 1,017 1,112 1,060 1,132 1,100 1,132 Intangible assets 161 162 163 168 166 179 195 192 196 192 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 Total current liabilities 177 187 186 279 337 403 448 468 489 468 Long-term debt 3 2 2 2 3 4 4 4 4 4 Total liabilities 189 193 197 287 348 416 466 485 504 485 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Robert Half is a staffing firm and owns Protiviti, a consulting and internal audit firm. Staffing divisions provide temporary (Accountemps), full-time and project personnel in finance and accounting, temporary admin support (OfficeTeam), and professionals in IT, legal, advertising, marketing and web design (Creative Group). The company has 400 locations and 15,300 employees, including 3,300 in Protiviti. RHI placed 257,000 temporary employees with clients in 2007. RHI was founded in 1948. Prior to 1986, the company franchised offices providing finance personnel. Current management subsequently acquired the franchised locations. In 2002, RHI hired 700 professionals from the internal audit and risk consulting practice of Arthur Andersen. These professionals formed the base of the Protiviti subsidiary. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: Temporary staffing 79% 78% 79% 79% Permanent staffing 7% 8% 10% 10% Risk consulting 14% 14% 12% 12% Revenue growth by segment: Temporary staffing 21% 19% 16% 5% Permanent staffing 61% 53% 32% 8% Risk consulting 36% 13% 2% 5% Total revenue growth 25% 20% 16% 5% EBIT margin by segment: Temporary staffing 9% 10% 10% 10% Permanent staffing 21% 22% 19% 16% Risk consulting 18% 11% 4% 1% Total EBIT margin 11% 11% 10% 10% D&A as % of revenue 2% 2% 2% 2% Capex as % of revenue 2% 2% 2% 2%


• Staffing remains stable, helped by continued growth in international operations. International, which accounts for 30% of staffing revenue, grew 15% in Q3. Staffing revenue remains at near-record levels, with permanent placement fairly stable and technology staffing still growing modestly.

• Sarbanes-Oxley has boosted demand for skilled professionals in accounting and finance. Since these industry segments are a large part of RHI’s business, the company benefits from the trend toward better corporate governance and internal 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.

• Astute management. We believe current leadership deserves significant credit for smart strategic decisions such as the acquisition of franchisees post 1986 and the hiring of 700 former Andersen staff.



• Sensitive to economic conditions. Clients’ staffing needs are cyclical, with non-farm payrolls and the unemployment rate key indicators of demand. In Q3, clients “became increasingly cautious with their hiring actions as the quarter progressed.”

• Revenue down 2%, EPS down 6% in Q3 after years of consistent growth.

• Low barriers to entry. Competition for both clients and candidates is stiff in the staffing services business, and reputation of the service provider is only one factor driving engagement wins.

• Reliance on short-term contracts. Long-term deals are not a significant part of RHI’s staffing business, making operating results less predictable.

• Limited reinvestment opportunities? RHI has spent more than $1 billion on buybacks and more than $150 million on dividends in three years.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E KELYA 432 433 .1x 0.7x 15x 24x MAN 2,166 2,506 .1x 1.9x 6x 9x SFN 140 211 .1x 0.5x 9x 12x RHI 2,762 2,392 .5x 3.3x 11x 25x

MAJOR HOLDERS CEO Messmer, Jr. 3% │ Other insiders 7% │ Barclays 13% │ Fidelity 10% │ Cap Re 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Rockwell Automation (NYSE: ROK) Milwaukee, WI, 414-382-2000 Technology: Electronic Instruments & Controls, Member of S&P 500 http://www.rockwellautomation.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 289 226 474 464 408 624 582 582 624 582 Total current assets 1,757 1,692 2,026 2,187 2,188 2,382 2,118 2,118 2,382 2,118 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 Total liabilities 2,397 2,353 2,352 2,876 2,817 2,803 2,905 2,905 2,803 2,905 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 1,609 1,587 1,861 1,649 1,918 1,743 1,689 1,689 1,743 1,689 EBIT/capital employed 14% 18% 28% 41% 54% 71% 60% 65% n/m n/m



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BUSINESS OVERVIEW Rockwell Automation provides industrial automation power, control and information solutions to manufacturers. Its industrial automation brands include Allen-Bradley controls and services and Rockwell Software factory management software. The company operates in two segments: Architecture & Software contains the control and information architecture capable of connecting customers’ entire manufacturing enterprise. Control Products & Solutions provides intelligent motor control and industrial control products and services. Rockwell employs 20,000 people. As of September 30, 2007, Rockwell operated 53 plants, mainly in North America. It had 267 sales and administrative offices and 26 warehouses and other facilities. Floor space was 10.2 million square feet (24% owned, 76% leased). Rockwell has divested a number of businesses over the years: sold aerospace and defense businesses to Boeing in 1996; sold FirstPoint in 2004; sold ElectroCraft in 2006; sold 50% stake in Rockwell Scientific Company in 2006; sold Power Systems to Baldor for $1.8 billion in January 2007. In order to gauge the health of Rockwell’s U.S. served markets, investors may track Industrial Equipment Spending (BEA), Capacity Utilization (Fed), and Manufacturing Purchasing Managers’ Index (Institute for Supply Mgmt). SELECTED OPERATING DATA

FYE September 30 2006 2007 2008 Revenue growth 11% 10% 14% Organic revenue growth 10% 6% 5% Capex as % of D&A 127% 139% 111% % of revenue by segment: Architecture & Software 45% 44% 42% Control Products & Solutions 55% 56% 58% % of revenue by geography: U.S. 57% 54% 50% Canada 7% 7% 7% EMEA 18% 21% 23% Asia Pacific 11% 12% 13% Latin America 6% 7% 7% EBIT margin by segment: Architecture & Software 26% 26% 24% Control Products & Solutions 14% 14% 13% Corporate and D&A -2% -2% -2% Total EBIT margin 17% 18% 16%


• Demand for Rockwell’s products and services has benefited from customer investments in manufacturing capacity, needs for greater productivity, and global industrial production.

• Transforming itself from “U.S.-based hardware company to global technology-driven enterprise.” The FY07 sale of Power Systems fits into this shift.

• Delivered 9% local currency revenue growth, 11% non-GAAP EPS growth and 24% ROIC in FY08, with non-U.S. revenue reaching 50% of total revenue. Rockwell achieved greater penetration in process industries and strong growth in solutions businesses, continuing to diversify the revenue base.

• Seasoned management team. Keith Nosbusch (56) has been with the company for a decade and has served as CEO since 2004.

• Repurchased $359 million of stock and paid $170 million in dividends in FY08, following $1.5 billion repurchase and $185 dividend payments in FY07.



• Softness in U.S. and Europe; customers operate largely in cyclical industries. According to management, “macro-economic conditions in Europe and the U.S. are weakening.” The company has “begun to see a change in buying behavior by some of our customers in consumer related industries, including project delays and curtailed capital spending.”

• Legal contingencies. The company’s activities expose it to a variety of legal claims. Ongoing legal proceedings are detailed in Rockwell’s 10-K.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ABB 24,883 20,057 .6x 2.9x 6x 6x EMR 25,917 28,658 1.2x 10.2x 11x 11x SI 47,003 52,151 .6x 3.1x 9x 7x ROK 3,797 4,219 .7x 7.3x 7x 7x

MAJOR HOLDERS CEO Nosbusch 1% │ Other insiders 1% │ Neuberger 9% │ Cap Re 5% │ Vanguard 4% │ Barclays 4% │ MFS 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Seagate Technology (Nasdaq: STX) Grand Cayman, Cayman Islands, 831-438-6550 Technology: Computer Storage Devices http://www.seagate.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 843 1,194 1,183 1,836 1,733 1,144 1,141 1,153 1,498 1,153 Total current assets 1,962 2,282 2,461 3,502 4,333 3,801 4,272 4,366 4,349 4,366 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 Total current liabilities 1,603 1,363 1,248 1,780 3,337 2,649 3,287 3,587 2,863 3,587 Long-term debt 749 745 739 736 640 1,733 1,670 1,370 1,734 1,370 Total liabilities 2,454 2,201 2,087 2,703 4,332 4,735 5,534 5,523 5,185 5,523 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Seagate provides hard disc drives for applications including enterprise, desktop, mobile computing, and electronics. Seagate also provides online backup to through EVault (acquired in FY07). Seasonality is weakest in FQ4 (June). SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1Q09 Unit shipments (mn) 119 159 183 48 Change (y-y) 21% 34% 15% 2% Avg sales price per unit $78 $71 $68 $62 Change (y-y) 1% -9% -4% -10% Programs / gross sales1 7% 9% 9% 12% Unit shipments by segment (mn): Enterprise2,3 14 17 20 5 Mobile2,4 12 19 27 10 Desktop2,5 74 98 111 28 Consumer2,6 18 25 25 5 Unit shipment growth by segment: Enterprise2,3 6% 17% 22% 13% Mobile2,4 118% 56% 38% 24% Desktop2,5 19% 33% 13% -3% Consumer2,6 8% 40% -3% -16% % of revenue by channel: OEM7 72% 64% 67% 66% Distributors 25% 30% 26% 27% Retail 3% 6% 7% 7% % of revenue by country: U.S. 31% 29% 31% n/a8 Netherlands 23% 23% 29% n/a8 Singapore 38% 38% 39% n/a8 Other 8% 10% 2% n/a8

1 Sales programs are recorded as contra revenue. 2 Denotes unit shipments. 3 FY08 unit growth driven by server virtualization; STX gained share; unit growth and improved product mix were partially offset by price erosion. 4 FY08 growth driven by notebook sales; STX lost share (industry grew 45%); Unit gains, favorable mix were offset by “particularly pronounced” price erosion. 5 FY08 growth driven by proliferation of digital content; STX maintained share; 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. 7 HP and Dell accounted for 16% and 11% of FY08 revenue, respectively. 8 1Q09 revenue by geography: North America: 27%, Europe: 29%, Asia 44%. INVESTMENT HIGHLIGHTS

• Growing demand for data storage, driven by applications such as digital photos, video and music.

• Growing demand for disc drives, driven by a proliferation of enterprise data, mobile computing, and consumer electronics. Desktop demand has moderated due to a shift toward mobile computing.

• Scale leader status gives Seagate a manufacturing and R&D advantage in the disc drive business. It has ~5,000 patents issued and ~2,000 pending.

• Disc drive industry consolidation, driven by high 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.

• Experienced management. CEO William Watkins (55), COO David Wickersham (52), CFO Charles Pope (53), Chief Sales & Marketing Officer Brian Dexheimer (45), and CTO Robert Whitmore (46) have each been at Seagate for more than a decade.

• Repurchased 65 million shares for $1.5 billion in FY08, and 62 million shares for $1.5 billion in FY07. No shares were bought back in 1Q09.



• Guiding for revenue decline of 11-17% and non-GAAP EPS decline of 70-75% in Q4 CY08, due to “challenging macro-economic environment.”

• Unit prices fell 9% and 4% in FY07 and FY08 (price per unit of storage capacity fell even more); manufacturers routinely discount to gain share. Inventory obsolescence is also a major risk.

• Derives two-thirds of revenue from OEMs, including HP, Dell, Sony, EMC, and IBM. Deals typically have 12-36 month terms and do not have minimum purchase requirements.

• Competition from disc drive makers Western Digital and GS Magicstor, and captive producers such as Fujitsu, Samsung, Hitachi, and Toshiba. Flash memory products also compete with Seagate.

• Raw materials price inflation. Seagate’s new perpendicular recording technology utilizes ruthenium, a precious metal the price of which has increased significantly in the past couple of years.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E EMC 20,367 17,950 1.2x 3.9x 13x 12x QTM 36 413 .4x n/m 2x 1x TDK 4,304 3,727 .4x 0.7x 17x 13x WDC 2,980 2,272 .3x 1.1x 4x 4x STX 2,378 3,255 .3x 1.1x 5x 3x

MAJOR HOLDERS CEO Watkins 1% │ Other insiders 3% │ Franklin 12% │ Capital International 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Sierra Wireless, Inc. (Nasdaq: SWIR) Richmond, BC, Canada, 604-231-1100 Technology: Communications Equipment http://www.sierrawireless.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 44 35 85 132 90 87 177 202 98 202 Total current assets 82 56 110 171 117 170 297 332 200 332 Intangible assets 10 7 34 33 30 28 50 49 52 49 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 Total current liabilities 19 19 30 40 34 58 86 104 68 104 Long-term debt 1 0 0 0 0 1 1 0 0 0 Total liabilities 21 22 32 42 36 59 90 107 74 107 Preferred stock 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Sierra Wireless provides modems and software to connect to mobile broadband networks. The company targets enterprise, consumer, OEM, vertical industry, and machine-to-machine (M2M) markets. It provides professional services in wireless design, integration and carrier certification. Revenue breaks down into PC adapter products (AirCard and USB solutions), embedded module solutions, and mobile and M2M. The margin profile reflects gross margin of ~28% and EBIT margin of ~9%. Sierra is dual-listed on Nasdaq and the TSE. SELECTED OPERATING DATA


9/30/08 % of revenue by product: AirCards 70% 71% 71% 71% Embedded modules 13% 24% 21% 23% Mobile and M2M 13% 3% 6% 5% Other 4% 2% 2% 1% Revenue growth by product: AirCards -40% 109% 99% 41% Embedded modules -80% 281% 74% 56% Mobile and M2M 32% -52% 298% 43% Total revenue growth -49% 107% 99% 43% % of revenue by geography: Americas 69% 64% 69% 69% EMEA 12% 17% 12% 9% Asia Pacific 19% 19% 19% 22% % of revenue by distribution channel: Wireless carriers 47% 49% 60% 60% PC OEM 6% 13% 12% 14% Other OEM 8% 12% 8% 8% Resellers 38% 25% 20% 18%


• Positive operating trend. Revenue and EBIT are up 43% and 41%, respectively, YTD. The AirLink acquisition (closed in May 2007) and an expansion of distribution and OEM channels have driven growth in PC cards and embedded modules.

• Leader in wireless for mobile and M2M. The company’s core competencies are in airlink innovation, software, integration and certification.

• Focused on fast-growing market segments. Sierra’s target markets—PC adapters and embedded solutions for mobile computing, and machine-to-machine communications—are projected to grow at a CAGR of more than 30% over the next several years to more than $20 billion.1

• New products and upgrades. PC adapters: AirCard (2H08), Compass USB modems (3Q08); embedded modules: new modules slated for 2H08.

1 Source: Sierra Wireless, ABI Research.

• Growing across geographies. YTD revenue is up 39% in the Americas, 7% in Europe, 85% in Asia.

• Authorized plan to repurchase 5% of stock. The company may purchase 1.6 million shares over the next year in accordance with Canadian laws.



• “Short term view is cautious.” Management has pointed to erosion in sales of embedded modules to PC OEMs, and economic uncertainty as factors impacting the business. Q3 results fell short of expectations due to a missed product launch with a large wireless operator.

• Concentration of distribution channels. AT&T and Sprint accounted for a combined 44% of revenue in 2007. Other wireless carriers represented 16% of revenue, and OEMs comprised 20%.

• Acquisitive. Sierra bought AirLink for $12 million and 1.3 million shares in 2007, and announced but terminated a purchase of CradlePoint in April 2008 (consideration would have been $22 million and 463K shares). Sierra sold 3.8 million shares for $22 per share in October 2007, generating $80+ million for “future acquisitions” and other uses.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ADCT 708 705 .5x 1.4x 6x 8x ADTN 837 739 1.5x 2.3x 11x 11x NVTL 138 12 .0x 0.7x 24x 12x PWAV 79 371 .4x n/m 6x 15x SWIR 244 42 .1x 0.9x n/a n/a

MAJOR HOLDERS CEO Cohenour <1% │ Other insiders <1% │ Acuity Investment 13% │ Philippe Laffont 10% │ Manulife 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Sigma Designs (Nasdaq: SIGM) Milpitas, CA, 408-262-9003 Technology: Computer Peripherals http://www.sigmadesigns.com



Ownership Data FYE 1/31/10 1.84 1.93 8 EV / LTM EBITDA n/a Insider ownership: 4% FYE 1/31/11 n/a n/a 0 EV / LTM EBIT 1.8x Insider buys (last six months): 2 LT EPS growth 17.4% 17.4% 5 P / tangible book 0.9x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 59% Date Actual Estimate LTM EBIT yield 56% # of institutional owners: 263 8/28/08 $0.47 $0.40 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 6 1 19 19 26 33 219 121 43 121 Total current assets 25 20 27 30 37 62 296 217 82 217 Intangible assets 0 0 0 0 0 11 9 20 10 20 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 Total current liabilities 15 15 4 6 9 23 33 26 22 26 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 15 16 4 6 10 23 34 28 22 28 Preferred stock 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



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BUSINESS OVERVIEW Sigma Designs is a fabless provider of highly integrated SoC solutions used to deliver multimedia entertainment in the home. The SoCs are a component of consumer applications such as IPTV and HD-DVD. The SoCs are used in leading IPTV set-top box makers, including Cisco/SFA, Motorola, Netgem, and UTStarcom. Set-top boxes utilizing the company’s SoCs are deployed by AT&T, BT, Deutsche Telekom, Freebox, and other global carriers. The company’s products are also used by consumer electronics providers, such as D-Link, Netgear, Panasonic, Pioneer, Sharp, Sony, and Toshiba in applications such as HD-DVD players. SELECTED OPERATING DATA

FYE January 31 2006 2007 2008 1H09 % of revenue by type: SoCs 85% 95% 98% 99% Other 15% 5% 2% 1% % of revenue by target market: IPTV 58% 67% 74% 80% HD-DVD and similar 34% 27% 22% 14% HDTV 2% 2% 2% 0% Other 6% 4% 2% 6% Revenue growth by target market: IPTV 6% 221% 167% 64% HD-DVD and similar 8% 120% 99% -12% HDTV 120% 108% 119% -80% Other -19% 58% 28% 371% Total revenue growth 6% 174% 143% 46% % of revenue by geography: Asia 82% 53% 69% 53% Europe 6% 36% 26% 41% North America, other 12% 11% 5% 6% % of revenue by customer: MTC Singapore <10% <10% 23% 22% Cisco Systems <10% <10% <10% 23% Uniquest 26% 17% 19% <10% Macnica <10% <10% 12% <10% Freebox <10% 20% <10% <10%


• Leader in digital media processor SoCs for set-top boxes in fast-growing IPTV market (Microsoft Mediaroom and Linux platforms), and one of the leaders in SoCs for HD-DVD players.

• Six-month revenue of $115 million (up 46% y-y), non-GAAP EPS of $0.93 (up 16% y-y), and GAAP EPS of $0.57 (up 9% y-y), driven primarily by strong growth in the IPTV market. The company excludes stock comp, in-process R&D and other items from the calculation of non-GAAP EPS.

• Growth initiatives: (1) working on Blu-ray designs and “gaining ground” with Asian manufacturers; (2) completing new chipsets; and (3) pursuing revenue streams in HDTV, Ultra-wideband connectivity and cable-based IPTV set-top boxes, and growing the company’s presence in VXP video processors.

• Founder and CEO Thinh Tran (54) has been with Sigma since 1982. CFO Thomas Gay (59) joined the company in 2007 after spending ten years as CFO of Catalyst Semiconductor. Head of sales Silvio Perich (60) has served in this role since 1985.

• Liquid balance sheet, with $121 million of cash and short-term securities, $59 million of long-term marketable securities, and no debt as of August 2.

• Repurchased 4.2 million shares for $86 million ($20.50 per share) under current authorization.



• FQ3 revenue to fall 20% sequentially, with FQ4 revenue to be flat to down 10% from FQ3. States management: “The slowing of the world-wide economy has significantly impacted our customer’s business strategy, particularly in the IPTV market.”

• Emerging threats from Broadcom and ST Micro in core IPTV market. While Sigma has a large installed base in IPTV SoCs, Broadcom and ST are now targeting IPTV. They are expected to ship little volume in 2008 but pose a threat for 2009.

• High customer concentration. MTC Singapore, Uniquest, and Macnica accounted for 23%, 19% and 12%, respectively, of revenue in FY08. Sigma has experienced turnover among top customers.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ADI 5,603 4,321 1.7x 2.7x 11x 12x BRCM 7,852 5,605 1.2x 3.0x 9x 11x IFX 2,077 2,596 .4x 0.8x 55x n/m STM 6,626 7,582 .7x 1.0x 12x 11x TXN 20,885 18,892 1.4x 2.3x 10x 12x SIGM 232 111 .4x 0.9x 5x 5x

MAJOR HOLDERS CEO Tran 4% │ Other insiders 2% │ Royce 9% │ Coatue 8% │ Steelhead 6% │ Vanguard 4% │ Barclays 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


Spark Networks (AMEX: LOV) Beverly Hills, CA, 323-658-3000 Services: Personal Services http://www.spark.net



Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA 5.8x Insider ownership: 0% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 6.3x Insider buys (last six months): 3 LT EPS growth n/a n/a n/a P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 27% Date Actual Estimate LTM EBIT yield 16% # of institutional owners: 31 n/a n/a n/a LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 8 8 6 8 17 21 9 7 8 7 Total current assets 9 9 8 10 21 26 16 10 13 10 Intangible assets 3 3 3 9 22 24 24 24 23 24 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 Total current liabilities 2 4 12 16 21 12 11 16 10 16 Long-term debt 0 0 0 1 1 0 0 0 0 0 Total liabilities 2 4 12 17 23 14 13 18 12 18 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 15 14 5 11 25 38 31 24 25 24 EBIT/capital employed -440% -113% n/m n/m n/m n/m n/m n/m n/m n/m



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BUSINESS OVERVIEW Spark provides online personals services. The company’s websites, including JDate.com and AmericanSingles.com, enable adults to meet online. Members pay a monthly fee to communicate with each other (company’s primary source of revenue). Subscription programs auto-renew monthly until canceled. More than 90% of revenue comes from the U.S. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Growth of average paying subscribers:1 Jewish networks na 11% 0% -2% General market networks na -17% -39% -46% Other affinity networks na 200% 26% 3% Total subscriber growth -5% 10% -9% -13% % of revenue by segment: Jewish networks 45% 47% 52% 58% General market networks 48% 37% 24% 15% Other affinity networks 4% 14% 20% 23% Offline and other businesses 2% 2% 4% 4% Revenue growth by segment: Jewish networks na 9% 4% 3% General market networks na -20% -38% -49% Other affinity networks na 252% 37% 4% Offline and other businesses na -4% 75% -2% Total revenue growth 1% 5% -5% -10% Contribution margin by segment: Jewish networks 87% 86% 90% 93% General market networks 44% 46% 46% 54% Other affinity networks 51% 49% 41% 43% Offline and other businesses 12% 7% 41% 48% Unallocated -64% -55% -62% -56% EBIT margin -1% 10% 6% 18%

1 The company has close to 200,000 paying subscribers. INVESTMENT HIGHLIGHTS

• 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 such as BlackSingles, international sites such as JDate.co.il, and the generic site AmericanSingles.

• JDate is leading personals site for Jewish singles 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 audience. JDate has strong brand recognition, with 80% of traffic “organic” (direct to site). JDate also has desirable demographics and strong user metrics.

• Management aims to grow value by growing Other Affinity Networks, maximizing “yield” from Jewish Networks, optimizing marketing spend, adding ad revenue streams, and reducing overhead.

• Adam Berger (44) has been chairman and CEO since 2007. Previously, he spent seven years as CEO of WeddingChannel.com, growing the site and ultimately selling it to The Knot for ~$80 million.

MARKET SEGMENTATION—PERSONALS WEBSITES1 U.S. general

market Growth verticals Dominant

vertical Spark sites2 AmericanSingles BlackSingles JDate Competitors2 Match, eHarmony BlackDatingNetwork eHarmony Growth rate Flat High potential Slow and

steady Operational mode

Significant spending to keep

subscribers

Spending into growth while generating acceptable profit

Dominance = high

margins Win back customers

Low Medium High

Contribution margin

45-50% 40-45% 90-92%

1 Source: Company, The Manual of Ideas. 2 Selected sites only.

• Strong FCF, with recurring subscription revenue and negative working capital. An NOL of ~$40 million shields the company from income taxes.

• Repurchased 10 million shares, i.e., close to one-third of shares outstanding, since July 2007.



• AmericanSingles.com a lost cause? General Market Networks revenue fell from $32 million in 2005 to $16 million in 2007 and $6 million YTD.

• Could generic sites such as Match.com threaten JDate over time? While JDate has strong brand recognition among Jewish singles, Match has more tech resources, a larger ad budget, and more users. Similarly, social networking sites such as MySpace and Facebook could become future competitors.

• Potential threat from free personals sites, such as OkCupid, DateHookup, ChristianDatingForFree.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E IACI 2,235 867 .3x 1.2x 53x 16x YHOO 14,994 11,780 1.6x 2.1x 26x 23x LOV 65 61 1.0x n/m n/a n/a

MAJOR HOLDERS CEO Berger 2% │ Other insiders 2% │ Great Hill 36% │ Cap Re 10% │ Alon Carmel 10% │ Moab 7% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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SPSS (Nasdaq: SPSS) Chicago, IL, 312-651-3000 Technology: Software & Programming, Member of S&P SmallCap 600 http://www.spss.com



Ownership Data FYE 12/31/09 1.96 2.11 7 EV / LTM EBITDA n/a Insider ownership: 1% FYE 12/31/10 1.92 2.13 2 EV / LTM EBIT 5.4x Insider buys (last six months): 0 LT EPS growth 11.9% 11.9% 5 P / tangible book 3.4x Insider sales (last six months): 7 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: n/a Date Actual Estimate LTM EBIT yield 18% # of institutional owners: n/a 11/4/08 $0.55 $0.44 LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 31 15 36 37 84 140 307 307 297 307 Total current assets 119 89 113 116 144 207 376 361 358 361 Intangible assets 92 67 73 74 73 77 80 83 80 83 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 Total current liabilities 93 99 96 102 106 114 139 122 119 122 Long-term debt 0 6 6 3 1 0 150 150 150 150 Total liabilities 119 112 109 107 108 116 292 275 270 275 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW SPSS provides analytics software, with “predictive analytics” technology improving processes by providing “forward visibility” for business decisions. SPSS was founded in 1968. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by type: License 46% 48% 49% 47% Maintenance 43% 42% 41% 43% Services 11% 10% 10% 10% Revenue growth by type: License 12% 16% 15% 5% Maintenance 5% 7% 8% 13% Services -14% 4% 5% 6% Total revenue growth 5% 11% 11% 8% Selected items as % of revenue: EBIT 12% 13% 17% 16% D&A 7% 6% 6% 7% Capex -3% -2% -2% -2% Capitalized software -4% -5% -5% -5% % of revenue by geography: U.S. 44% 42% 41% 40% Europe 42% 43% 44% 44% Pacific Rim 15% 15% 15% 16%


• $3 billion market growing in low teens. SPSS targets advanced analytics ($1.5 billion, growing at 10%) and CRM analytic applications ($1.5 billion, growing at 13%). SPSS has less than 10% share.

• Predictive Analytics software improves processes by providing visibility for key decision makers and automating decisions to meet business goals. SCSS claims that Predictive Analytics ads significantly more value than business intelligence software.

• Customer list includes 95% of Fortune 1000, all major countries, all U.S. State governments, every branch of the U.S. Military, all top U.S. universities and 75% of top European universities.

• Steady margin improvement from 2004-07. SPSS achieved EBIT margins of 3% in 2004, 12% in 2005, 13% in 2006, and 17% in 2007.

• Repurchased $28 million of stock YTD and $72 million in 2007.

• 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.

• Investors may under-appreciate underlying growth, as revenue has grown more slowly than license revenue. Consistent double-digit license growth reflects strong adoption of SCSS software.



• “Very challenging economic times” and dollar appreciation have hurt YTD results. License sales in Europe and Japan have not met expectations. Sales in northern Europe have been affected by a lack of sales capacity, an issue the company is addressing.

• Primary worldwide competitor in each target market is the well-respected and larger SAS Institute (>$2 billion revenue). SPSS also competes against NCR, Fair Isaac and Oracle.

• Recently updated poison pill. The company has a shareholder rights plan in place that discourages the acquisition of more than 15% of SPSS shares without the company’s approval.



09 P/E

FIC 650 1,034 1.4x n/m 8x 7x MSFT 178,445 159,698 2.6x 9.2x 10x 9x MSTR 422 295 .8x 3.7x 10x 10x ORCL 87,110 85,326 3.7x n/m 11x 10x SAP 41,890 39,852 2.8x 119.0x 14x 13x SPSS 441 284 .9x 3.4x 13x 12x

MAJOR HOLDERS CEO Noonan 3% │ Other insiders 2% │ T Rowe 11% │ Barclays 7% │ AXA 6% │ State Street 6% │ Brown 6% │ Ellington 6% │ Daruma 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Syneron Medical (Nasdaq: ELOS) Yokneam Illit, Israel, 972-4-909-6200 Health Care: Medical Equipment & Supplies http://www.syneron.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments n/a 4 18 94 133 103 168 120 135 120 Total current assets n/a 8 25 107 166 153 222 179 196 179 Intangible assets n/a 0 0 0 0 1 5 5 0 5 Total assets n/a 9 27 110 170 225 269 290 266 290 Short-term debt n/a 0 0 0 0 0 0 0 0 0 Total current liabilities n/a 3 10 12 21 26 33 30 27 30 Long-term debt n/a 0 0 0 0 0 0 0 0 0 Total liabilities n/a 4 14 15 25 31 39 36 33 36 Preferred stock 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



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BUSINESS OVERVIEW Syneron provides aesthetic medical products based on proprietary Electro-Optical Synergy (Elos) technology, which uses electrical and optical energy. The products are sold to physicians and target non-invasive procedures, including hair removal, wrinkle reduction, treatment of superficial vascular and pigmented lesions, and treatment of leg veins. Syneron has an installed base of 10,000 products. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by geography:2 North America 62% 57% 57% 52% Other 38% 43% 43% 48% Revenue growth by geography: North America 67% 22% 21% -7% Europe 30% 53% 20% 4% Total revenue growth 51% 34% 21% -2% % of revenue by type: Product 93% 94% 91% n/a Service1 7% 6% 9% n/a

1 Service revenue should increase over time as the installed base grows. 2 In 2007, 57% of revenue came from North America, 23% from Europe, 16% from Asia Pacific, and 4% from Israel and other countries. INVESTMENT HIGHLIGHTS

• 20% global share in aesthetic medical products, a market with favorable long-term trends. Syneron focuses on the growth segments of aesthetic medicine of body shaping and skin rejuvenation.

• Innovative Elos technology. Approaches that rely solely on optical energy limit the safety and efficacy of many procedures due to limited skin penetration and unwanted epidermal absorption. Elos makes it easier to target the tissue to be treated, and boosts safety through tracking of skin temperature.

• Positive acceptance of minimally invasive LipoLite laser-assisted lipolysis product, which was launched in February. Syneron delivered the first units in Q2, with volume shipments in Q3.

• Adding recurring revenue stream to equipment sales business model. The LipoLite Energy Access Program (LEAP) charges physicians a subscription fee for laser-assisted lipolysis treatment, foregoing up-front revenue for a more attractive stream over time. The company has also introduced a disposable element to Matrix RF (FDA approval pending).

• Doron Gerstel (48) and Fabian Tenenbaum (34) became CEO and CFO, respectively, in 2007. Gerstel was previously president of Syneron N.A. and Operations VP at Lumenis (formerly ESC Medical, founded by Syneron chairman Eckhouse).

• $219 million of net cash and liquid investments.

• Signed development and supply deal with P&G in early 2007, with goal of commercializing home-use devices and topical compositions for better skin appearance. P&G will buy the devices exclusively from Syneron and sell them on a co-branded basis.

• Repurchased 590,000 shares for $9.1 million under $50 program authorized in November 2007.



• Slowdown: “Doctors are postponing decisions to make new capital equipment purchases and credit terms have tightened significantly.”

• Gross margin in high 70s, roughly 20 points above industry average, may not be sustained. Competitors include public companies Candela, Cutera, Cynosure, Thermage, and Palomar Medical, and private companies Lumenis Sciton, Reliant Technologies, UltraShape, and Alma Lasers.

• Subject to FDA regulation. Before a new Syneron device can be marketed in the U.S., it generally must receive 510(k) clearance, which usually lasts 3-12 months. Syneron must also comply with the FDA’s Quality System Regulation, which covers various aspects of bringing products to market.

• CEO Gerstel, CFO Tenenbaum own <1% of Syneron, while chairman Eckhouse owns 9%.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E CLZR 9 -18 n/m 0.1x n/m n/m CUTR 111 13 .1x 1.0x n/m 44x CYNO 107 35 .2x 0.8x 5x 5x PMTI 186 58 .6x 1.3x 102x 28x THRM 50 4 .1x 0.9x n/m 14x ELOS 215 -4 n/m 0.9x 9x 11x

MAJOR HOLDERS Chairman Eckhouse 9% │ CEO, CFO and other insiders <1% │ Baupost 11% │ Brandywine 6% │ RenTech 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into ELOS: WHAT ARE THE SHARES WORTH?

• We value Syneron at $14-18 per share, based on the sum-of-the-parts analysis presented below.

• Upside may come from share repurchases and higher earning power than estimated. Earnings upside could come from the LipoLite Energy Access Program and the partnership with P&G.

• Downside appears protected due to $8 per share in net cash and liquid investments. While markets can be irrational, a profitable, high-ROIC business should not trade at a negative enterprise value.

Syneron — Sum-of-the-Parts Valuation Overview


Low Value

High Value

Value of excess liquid assets:1 Cash and equivalents $21 $21 Short-term marketable securities 99 99 Long-term marketable securities 98 98 Net cash and investments $219 $219 Cash needed to run business2 (20) (10) Total $199 $209 Value of aesthetic products business: LTM EBIT 24 Fair value multiple of LTM pre-tax income 8x Estimate of normalized EBIT 35 Fair value multiple of normalized EBIT 8x Total $194 $280 Estimated fair value of ELOS $393 $489 per share $14 $18


• Near-term business momentum has been negative, giving investors little to get excited about. While most investors may agree that Syneron is undervalued at a market value roughly equal to net cash and investments, few investors consider a strong balance sheet sufficient reason to invest. Syneron shares may remain undervalued until the company gives investors reason to like the business again. Catalyst could include adoption of the LipoLite Energy Access Program or positive news related to the partnership with P&G.

• Low-conviction selling? Some value funds may have followed highly respected Baupost Group into Syneron without developing a level of conviction that would help them stick with the company through a period of weak fundamentals.

• Adopted “poison pill” on November 11, a move that both signals the Board’s concern about a potential hostile takeover bid and antagonizes shareholders who may want the company to operate under threat of a takeover, thereby putting more pressure on the incumbent Board to perform.


ELOS – Revenue, Gross Profit and EBIT, 2001-07 Syneron posted explosive growth until recently, with revenue increasing from virtually zero in 2001 to more than $140 million in 2007, driven by rapid adoption of proprietary Elos aesthetic medical products. The company showed strong operating leverage in the first half of the decade, but EBIT has eroded since 2006.

$0mn

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$150mn

01 02 03 04 05 06 07


Source: Company, The Manual of Ideas. ELOS – Y-Y Revenue Growth, 2002-YTD’08 The company grew revenue more than twenty-fold in 2002 and 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 increasingly postponing capital equipment purchases.

-10%

10%

30%

50%

70%

90%02 03 04 05 06 07

YTD

Source: Company, The Manual of Ideas. ELOS – Gross and EBIT Margin, 2001-YTD’08 The value of Syneron’s proprietary technology is evident in the high gross margins the company has posted since ramping up sales in 2001. While gross margin declined to 77% YTD and 75% in Q3, it remains at a level that allows the company to maintain bottom-line profitability despite a sharp slowdown in sales.

0%

20%

40%

60%

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100%

01 02 03 04 05 06 07

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MANAGEMENT’S VIEW OF BUSINESS Notes from Q3 earnings call dated November 11:

• Operating environment: “facing major macroeconomic and industry challenges;” lower consumer confidence has negatively affected doctors’ decisions to purchase capital equipment; credit tightening has made financing for equipment “more difficult;” industry consolidation is “more relevant” than in the past (will “definitely” happen in 2009) – some competitors have “real challenges, and it has to do with the amount of cash they have;” most weakness in U.S. and Western Europe

• Q3 review: revenue down 14%; diversified globally, with 53% of revenue from North America and 47% from various international markets; 75% 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

• Inlight acquisition (announced November 4): small U.S.-based laser technology company; innovative design will provide “cutting-edge clinical results at significantly lower cost than existing fractional laser technology;” Syneron made “relatively small [undisclosed] investment” – provides Syneron complementary technology that will allow company to launch new product platform with “minimal” lead time, i.e., in 1Q09, and generate incremental source of revenue

• Procter & Gamble partnership: “going accotrding to plan;” “feel very strongly about the relationship and how it is moving forward”

• Other activities: pursuing joint ventures, including in China and South America

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Thanksgiving 2008


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


Price: $10.76 (as of 11/14/08) Month # of P/E FYE 10/31/07 n/m 52-week range: $10.03 - $27.95 Latest Ago Ests P/E FYE 10/31/08 5.1x Market value: $835 million This quarter $0.06 $0.06 13 P/E FYE 10/31/09 7.9x Enterprise value: $496 million Next quarter 0.25 0.26 6 P/E FYE 10/31/10 5.9x Shares out: 77.6 million FYE 10/31/08 2.12 2.12 13 EV / LTM revenue 0.3x



($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 12 108 184 155 107 133 78 339 62 339 Total current assets 227 328 513 715 613 545 499 715 436 715 Intangible assets 100 127 163 187 261 262 271 326 260 326 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 Total current liabilities 135 132 165 307 247 264 312 392 241 392 Long-term debt 0 0 0 0 0 0 18 0 11 0 Total liabilities 139 136 174 310 249 318 360 427 306 427 Preferred stock 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Take-Two provides interactive gaming software. The company develops software for leading consoles, including Sony’s PlayStation, Microsoft’s Xbox, Nintendo’s Wii, and for the PC. Flagship titles include Grand Theft Auto and Sid Meier’s Civilization. The company distributes proprietary and third-party products to retailers in North America. Wal-Mart, GameStop and Best Buy accounted for 15%, 13% and 12% of revenue, respectively, in FY07 (top five were 51%). SELECTED OPERATING DATA

FYE October 31 2005 2006 2007

YTD7/31/08

% of revenue by segment: Publishing 71% 73% 71% 81% Distribution 29% 27% 29% 19% Gross margin by segment: Publishing 45% 25% 32% 44% Distribution 9% 9% 9% 9% Total GM 35% 20% 25% 37% Revenue growth by segment: Publishing 11% -12% -8% 109% Distribution -3% -19% 2% 5% Revenue growth 7% -14% -5% 76% % of publishing segment revenue by product platform: Xbox 360 0% 23% 30% 42% PlayStation 3 0% 0% 10% 33% Wii 0% 0% 5% 8% PlayStation / PS 2 59% 30% 26% 8% PSP 6% 18% 10% 4% PC 11% 17% 14% 3% Xbox and other 23% 12% 6% 2% % of distribution segment revenue by type: Hardware 25% 40% 43% 42% Software 75% 60% 57% 58% % of revenue by geography: North America 68% 69% 75% 59% International 32% 31% 25% 41%


• $9 billion video game software market growing at 10-15%, with significant volatility in the annual growth rate caused by new console introductions. For example, the company Xbox-related revenue declined from $163 million in FY05 to $13 million in FY07, while Xbox 360-related revenue grew from zero in FY05 to $206 million in FY07. More than half of all Americans claim to play games.

• FY08 revenue growth driven by Grand Theft Auto IV. The game, released in April, set an industry sales record, with six million units sold through in the first week at a retail value of $500+ million (>10 million units have sold through YTD).

• Raised FY08 guidance, lowered FQ4 guidance, after strong FQ3. Management expects FQ4 revenue of $285-335 million and non-GAAP EPS of $0.01-$0.05, implying FY08 revenue of $1.50-$1.55 billion and non-GAAP EPS of $2.08-2.12.

• Strong balance sheet, with $339 million cash and no debt as of July 31.



• Turnover, restructurings. The incumbent Board was defeated in March 2007, resulting in removal of the CEO and subsequent resignation of the CFO. In 2Q07, Take-Two hired ZelnickMedia to provide management services. The company has incurred various charges, with more expected in FQ4.

• Electronic Arts (ERTS) dropped hostile tender in September, with TTWO shares falling 24% to $17. The companies had signed a confidentiality deal, but Take-Two had called EA’s $26 per share offer inadequate. Take-Two remains “actively engaged in discussions with other parties in the context of our formal process to consider strategic alternatives.”

• Cyclical, hit-driven business. The video game software industry, while growing in the long term, has exhibited strong cyclicality due to major hardware transitions. Demand for prior-generation software declined in 2007 due to the adoption of next-generation platforms such as Xbox 360. In addition, Take-Two is highly dependent on “hit” titles, such as Grand Theft Auto IV or Civilization.

• Litigation. The Grand Theft Auto franchise has come under fire from consumer groups and government officials as too violent. At this time, litigation does not appear to pose a material threat.



09 P/E

ATVI 13,989 11,053 6.9x 5.4x 18x 15x ERTS 6,559 4,094 .9x 2.5x 17x 11x KNM 2,942 2,759 .9x 2.2x 10x 11x SNE 21,193 20,396 .2x 0.7x 12x 9x TTWO 835 496 .3x 2.5x 5x 8x

MAJOR HOLDERS CEO Feder <1% │ Other insiders 1% │ Oppenheimer 23% │ Fidelity 14% │ UniCredito 11% │ Legg Mason 10% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Tempur-Pedic International (NYSE: TPX) Lexington, KY, 800-878-8889 Consumer Cyclical: Furniture & Fixtures http://www.tempurpedic.com



Ownership Data FYE 12/31/09 0.89 1.19 12 EV / LTM EBITDA n/a Insider ownership: 9% FYE 12/31/10 1.03 1.48 5 EV / LTM EBIT 5.3x Insider buys (last six months): 0 LT EPS growth 12.6% 10.5% 5 P / tangible book n/m Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: n/a Date Actual Estimate LTM EBIT yield 19% # of institutional owners: n/a 10/16/08 $0.32 $0.32 LTM pre-tax ROC 59%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 8 13 14 28 18 16 33 88 24 88 Total current assets 73 101 145 214 228 238 327 320 294 320 Intangible assets 19 250 289 277 274 269 267 267 268 267 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 Total current liabilities 51 70 91 99 121 132 127 146 155 146 Long-term debt 95 182 366 281 314 342 602 519 556 519 Total liabilities 148 297 498 426 476 512 758 698 746 698 Preferred stock 12 148 0 0 0 0 0 0 0 0 Common equity 17 3 123 214 226 213 48 84 28 84 EBIT/capital employed 29% 35% 58% 73% 68% 62% 70% 59% n/m n/m



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BUSINESS OVERVIEW Tempur-Pedic provides premium branded mattresses and pillows in two segments: Domestic consists of two U.S. factories and a distribution subsidiary. International consists of a factory in Denmark and distribution subs. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by geography: Domestic 64% 66% 66% 63% International 36% 34% 34% 37% Revenue growth by geography: Domestic 25% 16% 17% -15% International 18% 8% 18% 2% Total revenue growth 22% 13% 17% -10% EBIT margin by geography: Domestic 18% 19% 19% 9% International 32% 29% 29% 23% Total EBIT margin 23% 22% 22% 15% Revenue growth by channel:1,2 Retail 31% 19% 21% -8% Direct 4% -17% -7% -38% Healthcare -2% -2% 12% 3% Third party -1% 12% 3% 2% Revenue growth by product:3 Mattresses 31% 15% 18% -11% Pillows -9% 0% 12% -9% Other 27% 16% 18% -3% U.S. door count4 n/a 6,050 6,350 6,800 International door count5 n/a 4,450 4,990 5,100

1 Products are sold through four distribution channels in each geographic segment: retail (furniture, specialty, and department stores), direct (direct 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% from direct, 5% from healthcare, and 5% from third-party distribution. 3 In 2007, the company derived 69% of revenue from mattresses, 13% from pillows, and 18% from other products (foundations, adjustable beds, etc.). 4 The company plans to increase door count to 7,000-8,000 "over time"; the total available market is estimated at 10,000 stores. 5 The company has identified 7,000 international stores as appropriate targets. INVESTMENT HIGHLIGHTS

• $13 billion global mattress market, with 22 million mattress unit sold in the U.S., and a similar number of mattresses sold outside the U.S., in 2007.1 In addition, domestic pillow sales were $1.1 billion, with roughly equivalent international sales.

• Leader in growing specialty mattress category, which comprises non-innerspring mattresses, including foam mattresses, airbeds, and waterbeds.

• Comfort and health advantages over standard bedding products. The company uses temperature-sensitive material that has a high density and conforms to the body to reduce neck and back pain. The company holds 70 U.S. and foreign patents.

1 Source: Tempur-Pedic, International Sleep Products Association (ISPA).

• Thomas Bryant (60) became CEO in 2006 after five years with Tempur-Pedic. He was previously CEO of Stairmaster. Other senior executives joined the company in the past two to five years.

• Commencing “most extensive new product launch” in company history, with new and upgraded products slated for launch globally.



• Guiding for revenue and EPS decline of 14-16% and 43-48%, respectively, in 2008, with estimated revenue of $930-950 million and EPS of $0.90-1.00, reflecting “the most challenging… environment in memory.” Management reduced guidance when it reported Q3 results in October. Retail partners have reported store traffic “down sharply” in 2008, average selling prices have trended lower, and trends have weakened in several European markets.

• Net debt of $431 million at Q3-end. The company has eliminated dividends and is reducing expenses and working capital. The goal is to “operate without risk of breaching our credit facility covenants even if the market continues to deteriorate.”

• Inflationary cost environment. The company has experienced margin compression due in part to the rising cost of chemicals and proprietary additives.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ETH 438 561 .6x 1.6x 12x 9x ZZ 212 961 .6x n/m 5x 5x SCSS 23 77 .1x 1.5x n/m n/m TPX 503 934 .9x n/m 7x 8x

MAJOR HOLDERS CEO Bryant 1% │ Other insiders 2% │ Invesco 25% │ Amvescap 15% │ TA Associates 7% │ State Street 6% │ Friedman Fleischer 6% │ Munder 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into TPX: WHAT ARE THE SHARES WORTH?

• We value Tempur-Pedic at $11-18 per share, based on the valuation analysis summarized below.

• Our estimate is supported by an analysis of free cash flow. FCF per share should exceed EPS by up to $0.25 due to D&A significantly exceeding capex. FCF may be ~$1.15 per share in 2009, implying an FCF yield of 6-11% based on our valuation range.

Tempur-Pedic — Valuation Summary


Low Value

High Value

Negative value of net debt:1 Cash and equivalents $88 $88 Long-term debt (519) (519) Total ($431) ($431) Value of core business: LTM EBIT $176 Fair value multiple of LTM EBIT 7x Estimated normalized EPS power $2.00 Fair value multiple of EPS power 12x Total $1,234 $1,800 Estimated fair value of TPX $802 $1,369 per share $11 $18


• Fundamental underappreciation of company’s superior operating model. Tempur-Pedic is the lowest-cost producer in the mattress industry, with efficient production, low inventory requirements, and low overall capital intensity. This, coupled with strong brand recognition and preference by higher-end consumers, should enable the company to sustain superior returns on capital.

• Large short interest; sellers may underestimate company’s ability to remain profitable. Tempu-Pedic fits the typical target profile of many short sellers: the company sells big-ticket consumer items dependent on discretionary spending. With pricing squeezed both on the input and output sides, management lowering guidance, and net debt of $431 million, momentum appears to be favoring the short sellers’ thesis. 19 million of 75 million outstanding shares were sold short as of October 28 (stock was until recently on NYSE list of Reg SHO threshold securities). The short sellers’ aggressive stance against Tempur-Pedic has not only depressed the shares, but also opened the door to a massive short squeeze if/when their thesis is proven wrong.

• Debt covenant worries. Investors may be overly concerned about the potential for Tempur-Pedic to bust debt-related covenants. The company took on debt to recapitalize the balance sheet, spending more than $500 million on share repurchases from 2005-07. Tempur-Pedic reduced debt by $38 million in Q3 and is repatriating cash from overseas. The company must maintain a ratio of funded debt to trailing EBITDA of not more than 3x. The ratio stood at 2.45x at the end of Q3. Trailing EBITDA and funded debt are likely to decline going forward. With debt expected to be cut materially in the near term, the company appears highly likely to stay within the boundary of 3x debt to EBITDA.


TPX – Revenue, Gross Profit and EBIT, 2000-07 Tempur-Pedic posted strong growth through 2007, benefiting from a virtuous cycle of a differentiated product, high-return marketing expenditures, increasing brand recognition, market share gains, high-margin revenue, low working capital and capex requirements, and increasing cash flow available for sales and marketing.

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Source: Company, The Manual of Ideas. TPX – Y-Y Revenue Growth, 2000-YTD’08 The company posted annual growth rates of 30-60% in the first half of the decade, with growth slowing from 2005-07 due to greater scale and market penetration. The YTD sales decline of 10% has primarily been caused by weak consumer spending. We do not believe the YTD result signals a departure from the company’s long-term growth trend and expect Tempur-Pedic to resume growth when the macroeconomic outlook improves.

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TPX – Gross and EBIT margin, 2000-YTD’08 Tempur-Pedic has maintained operating margin well above 10% throughout this decade. While EBIT margin is down this year from 2007, it remains above 10% despite the YTD decline in sales. We believe this attests to the company’s variable cost structure and superior operating model. The company appears poised to maintain profitability even if sales continue to decline in a weak economic environment. We estimate long-term EBIT margin at roughly 20%.

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Source: Company, The Manual of Ideas. MANAGEMENT’S VIEW OF BUSINESS CEO Sarvary and CFO Williams provided the following commentary on the 3Q08 earnings call on October 16:

• Q3 performance: “sales and earnings in line with our expectations”

• Q4 outlook: “Given the extraordinary events of recent weeks, the company now believes fourth quarter sales and earnings will fall below prior expectations;” projecting Q4 sales decline of 30%; “Christmas has always been a little bit seasonally slower for the mattress business… we’re not expecting any dramatic change, certainly not for the upside, this quarter”

• Operating environment: “most challenging economic environment in memory… no reason to 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”

• Tempur-Pedic brand: “spent over $600 million building the brand during the last six years;” “trend toward the Tempur material is a very long-running trend;” “the fundamental, long-term demand is as strong as it ever was”

• Long-term initiatives: (1) “Historically we were a direct response company. Today we predominantly sell through retail. …program currently underway to streamline our distribution network.” (2) “broaden and strengthen our [mattress] product line… meet the needs of premium consumers that we don’t currently address.” (3) improve gross margin.

• Input price inflation: raw material costs were “up substantially” y-y… “coping with cost increases in the vicinity of the mid-20%;” chemical cost 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 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? “while I will never say never, at the moment we see no need for that;” “we are a premium product”

• Market share: based on Q2 ISPA data, the company gained share (Q3 data not yet available)European business: “…we saw some weakness in certain countries and we saw it spreading as the year progressed. In the third quarter we saw it spread even further. So basically now the entire European continent is suffering to some degree in terms of the economic weakness.”

• Asian business: “continues to perform very well” • Marketing budget: “our anticipation is to maintain

this 9% to 10% range, in a normal period, but we may move it from period to period, especially in environments like this”

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TheStreet.com (Nasdaq: TSCM) New York, NY, 212-321-5000 Technology: Computer Services http://www.thestreet.com


Price: $3.17 (as of 11/14/08) Month # of P/E FYE 12/31/07 3.2x 52-week range: $3.08 - $16.74 Latest Ago Ests P/E FYE 12/31/08 28.8x Market value: $97 million This quarter $0.00 $0.08 7 P/E FYE 12/31/09 52.8x Enterprise value: $19 million Next quarter -0.02 0.07 4 P/E FYE 12/31/10 16.7x Shares out: 30.5 million FYE 12/31/08 0.11 0.27 7 EV / LTM revenue 0.3x

Ownership Data FYE 12/31/09 0.06 0.32 7 EV / LTM EBITDA 1.5x Insider ownership: 31% FYE 12/31/10 0.19 0.45 4 EV / LTM EBIT 2.8x Insider buys (last six months): 0 LT EPS growth 18.0% 20.0% 2 P / tangible book 1.0x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 78% Date Actual Estimate LTM EBIT yield 36% # of institutional owners: 186 10/29/08 -$0.04 $0.06 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 30 26 26 30 33 46 79 78 38 78 Total current assets 34 30 30 34 38 54 99 99 56 99 Intangible assets 3 3 3 3 3 7 59 57 31 57 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 Total current liabilities 10 10 11 14 16 20 24 23 19 23 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 10 10 11 15 16 20 24 23 19 23 Preferred stock 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



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BUSINESS OVERVIEW TheStreet.com is a web-centric financial media company offering free and subscription content. The company has expanded its network of media properties through organic growth and acquisitions. Properties include TheStreet.com, RealMoney.com, Stockpickr.com, BankingMyWay.com, MainStreet.com, Rate-Watch.com, and Promotions.com. TheStreet.com, launched in 1996 by Jim Cramer, pioneered investment-related subscription content on the Internet. SELECTED OPERATING DATA


9/30/08 Unique monthly visitors (mn) 3.0 4.4 5.8 7.2 % of revenue by type: Paid services — subscription 68% 66% 52% 42% Paid services — syndication 3% 4% 7% 15% Advertising — financial 23% 22% 19% 19% Advertising — non-financial 6% 8% 15% 13% Interactive marketing1 -- -- 8% 11% Revenue growth by type: Paid services — subscription 3% 45% 2% -10% Paid services — syndication -9% 67% 123% 243% Advertising — financial n/a 48% 9% 15% Advertising — non-financial n/a 119% 132% 20% ∆ revenue 10% 51% 29% 22% ∆ pro forma revenue2 n/a 37% 9% -2% ∆ unique visitors per month n/a 47% 32% 29% ∆ deferred rev. (period end) 36% 28% 28% 19% % of ad revenue from top 5 33% 34% 28% 26%

1 Attributable to Promotions.com (acquired in August 2007). 2 Assumes that all companies acquired in recent years have been part of TheStreet.com throughout the period shown. INVESTMENT HIGHLIGHTS

• Refocused on consumer market in 2005, with goal of becoming destination for “all things money.” Ad revenue from non-financial firms has grown rapidly since then. The company anticipates the revenue mix to continue shifting toward marketing services, including ad revenue and interactive marketing revenue. The latter is generated by Promotions.com, which creates promotional ad campaigns.

• Redesigned TheStreet.com website in early 2008 and launched MainStreet.com in February. The latter is a free site that features general news articles with a tie to various personal finance topics.

• 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.

• YouTube content licensing creates ad-supported channel, which generates no material revenue but will be monetized through Google’s ad programs.

• CEO Thomas Clarke (51) joined in 1999. He previously led a Knight-Ridder sub. Co-founder Jim Cramer (58) became chairman in October.

• Strong balance sheet, with $80 million of net cash. The company has not repurchased shares recently.



• Dependent on consumer interest in stock market, which in turn depends heavily on the performance of major market indices. A protracted bear market may lessen consumer interest in financial content, adversely affecting subscription and ad revenue.

• Financial sector accounts for one-half of ad revenue, or roughly one-fifth of total revenue. Financial firms’ advertising budgets are likely to decline materially due to industry weakness.

• Jim Cramer is significant driver of subscription revenue. The company and Cramer extended his contract in July. Under the amended deal, Cramer may terminate his contract in January 2010.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E EDGR 25 25 1.3x n/m n/m n/m JRJC 176 90 2.1x 2.5x 10x 6x MORN 1,414 1,104 2.2x 5.5x 16x 15x RATE 558 517 3.4x 8.7x 19x 16x YHOO 14,994 11,780 1.6x 2.1x 26x 23x TSCM 97 19 .3x 1.0x 29x 53x

MAJOR HOLDERS CEO Clarke 3% │ Chairman Cramer 12% │ Other insiders 5% │ Technology Crossover 14% │ Columbia Wanger 10% │ Independence Investments 7% │ Guardian Life 6% │ UBS 5% │ North Pointe 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thomas & Betts Corporation (NYSE: TNB) Memphis, TN, 901-252-8000 Technology: Electronic Instruments & Controls, Member of S&P MidCap 400 http://www.tnb.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 242 244 389 338 509 371 150 203 105 203 Total current assets 770 705 812 779 950 868 906 979 733 979 Intangible assets 475 437 455 463 463 507 1,178 1,238 793 1,238 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 Total current liabilities 356 297 365 238 404 249 469 548 446 548 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Thomas & Betts designs and manufactures industrial products. The company operates in three segments: Electrical provides electrical connectors and components for electrical, utility and communications applications. The segment experiences modest seasonality, with sales strongest during the construction season in Q2 and Q3. Steel Structures provides highly engineered tubular steel transmission and distribution poles. HVAC provides heating and ventilation products for commercial and industrial buildings. SELECTED OPERATING DATA


9/30/08 % of revenue by segment: Electrical 81% 81% 83% 86% Steel structures 11% 12% 11% 9% HVAC 8% 7% 7% 5% Revenue growth by segment: Electrical 10% 10% 17% 29% Steel structures 33% 19% 3% -2% HVAC 8% 3% 6% 2% Total revenue growth 12% 10% 14% 24% EBIT margin by segment: Electrical 15% 16% 17% 20% Steel structures 18% 16% 17% 18% HVAC 14% 15% 17% 17% Corporate -3% -3% -3% -5% Total EBIT margin 12% 13% 14% 14% D&A as % of revenue 3% 3% 3% 3% Capex as % of revenue 2% 2% 2% 2% % of revenue by geography: U.S. 67% 66% 60% n/a Canada 19% 19% 20% n/a Europe 12% 11% 14% n/a Other 3% 4% 6% n/a


• Market-leading products in electrical segment, including fittings, fastenings, connectors, switch and outlet boxes, and metal framing. Target markets include industrial MRO, commercial, utility and residential construction; project construction; industrial OEMs; and communication companies.

• Expanded electrical capabilities with five acquisitions totaling $830 million in 2007-08, including Lamson & Sessions ($450 million), Joslyn and Power Solutions ($282 million), Homac ($75 million), and Drilling Technical ($23 million).

• Industrial demand and commodity- and energy-related price increases are offsetting lower sales volumes in markets affected by the slowdown in residential construction, such as retail, utility distribution and light commercial construction. The electrical segment “performed very well” in Q3, “offsetting higher commodity and energy costs.”

• Guiding for GAAP EPS of $5.35-5.45 in 2008, including $1.50 gain on the $300 million Leviton sale in June, and $0.13 legal settlement gain.

• Dominic Pileggi (56) became CEO in 2004 and chairman in 2006. He has been with the company for most of the past thirty years. CFO Kenneth Fluke joined the company in 2000 from Goodyear.

• Repurchased $333 million of stock in 2006-07, but has not bought back any shares in 2008, despite a declining stock price and a remaining authorization on 2.8 million shares.



• Headline growth overstates underlying results. While the company achieved 24% revenue growth YTD, revenue before acquisitions and currency gains grew in the low single digits.

• Cyclical business, electrical product demand driven by the construction market, industrial production levels and spending by utilities for replacements, expansion and efficiency improvements.

• May not be able to pass through price increases of energy and raw materials (steel, aluminum, copper, zinc, resins and rubber compounds).

• Recent acquisitions may prove to have been ill-timed, and integration may present challenges.

• Net debt of $453 million could prove burdensome if the business environment deteriorates sharply.



09 P/E

ABB 24,883 20,057 .6x 2.9x 6x 6x BDK 2,373 3,658 .6x 9.3x 8x 9x CBE 5,498 6,443 1.0x 18.8x 7x 8x GE 168,144 700,506 3.8x 12.3x 8x 9x SI 47,003 52,151 .6x 3.1x 9x 7x TNB 1,168 1,630 .7x 8.8x 6x 6x

MAJOR HOLDERS CEO Pileggi <1% │ Other insiders 1% │ Wachovia 7% │ GAMCO 7% │ Vanguard 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Total System Services, Inc. (NYSE: TSS) Columbus, GA, 706-649-2310 Technology: Computer Services, Member of S&P 500 http://www.tsys.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 59 109 123 232 238 389 211 309 593 309 Total current assets 203 263 273 448 512 745 587 695 963 695 Intangible assets 265 328 417 476 558 539 513 497 508 497 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 Total current liabilities 104 114 147 272 277 296 274 306 252 306 Long-term debt 0 0 30 5 4 4 257 189 74 189 Total liabilities 149 177 269 417 398 417 635 605 437 605 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW TSYS provides payment processing services to card issuers and merchant acquirers. It operates in three segments: Domestic-based Support Services includes payment processing and other services provided from within the U.S. Clients include banks and other card-issuing organizations. International-based Support Services includes payment processing and other services from outside the U.S. Clients include banks and other card-issuing organizations. Merchant Acquiring Services includes the operations of Vital, which began as a 50/50 JV with Visa in 1996. TSYS bought out Visa for $96 million in 2005. Clients include financial institutions and other merchant acquirers. Seasonality is strongest during the holiday season in Q4. TSYS began in 1959 as part of Columbus Bank & Trust. SELECTED OPERATING DATA


9/30/08 % of revenue before reimbursables by type: Payment processing 67% 69% 67% 66% Merchant acquiring 18% 18% 18% 17% Other services 14% 13% 15% 17% Revenue growth before reimbursables by type: Payment processing 15% 14% -3% 3% Merchant acquiring 807% 10% -2% 1% Other services 6% 1% 18% 18% ∆ revenue 35% 11% 0% 5% ∆ AOF1,2 (average) 32% 4% -3% -10% ∆ AOF1,2 (period end) 22% -5% -10% 0% Top 3 clients as % of revenue3 36% 39% 32% n/a % of revenue by geography (domicile of customer): North America 91% 89% 85% 83% Europe 8% 9% 12% 14% Japan and other 1% 2% 3% 3% % of revenue before reimbursables by segment: Card issuer services – N.A. 73% 72% 67% 64% Card issuer services – Global 10% 11% 17% 21% Merchant acquiring 17% 17% 16% 15% EBIT margin by segment:4 Card issuer services – N.A. 27% 29% 27% 28% Card issuer services – Global 3% 7% 17% 19% Merchant acquiring 23% 31% 29% 26% Total EBIT margin 22% 25% 26% 26%

1 Accounts on file. Represents payment card accounts owned by card-issuing clients, for which transaction processing services are provided by TSYS. 2 AOF refer to card issuer processing services only (not merchant processing). 3 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. INVESTMENT HIGHLIGHTS

• #2 provider of processing services to card issuers. While First Data remains the largest provider, TSYS’ card issuer processing technology has allowed it to gain market share. At yearend 2007, TSYS had U.S. processing market share of 42% in consumer credit cards, 87% in Visa and MasterCard commercial cards and 10% in retail cards.

• #2 provider of payment processing to merchants, behind First Data but ahead of Global Payments. TSYS has 20% market share of card-accepting merchant locations in the U.S. The company relies heavily on bank relationships in merchant acquiring.

• No longer controlled by Synovus. While TSYS has been public for many years, Synovus finally gave up control in a spinoff at yearend 2007.

• Guiding for 5-7% net income growth in 2008, despite an expectation of a “slow” holiday season.

• Strong, steady management, led by chairman and CEO Phil Tomlinson, who has been with TSYS since 1982. CFO Jim Lipham and COO Troy Woods have been with TSYS for 20+ years each.



• Risk of in-sourcing by large card issuers, heightened by consolidation in banking industry. Large banks have at times opted to build processing operations in-house. TSYS’ strong technology has allowed it to make a strong outsourcing argument, but the case may become tougher as the largest card issuers gain additional scale and can better amortize the large cost of internal technology development.

• Payment card saturation. While credit, debit and stored-value cards continue to gain share versus cash and checks, U.S. consumers already hold multiple cards per person, on average. As a result, growth may have to come from international clients.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ADS 2,913 4,544 2.1x n/m 10x 9x GPN 2,948 2,871 2.1x 37.5x 15x 14x HPY 561 667 .4x 130.5x 13x 11x TSS 2,393 2,348 1.2x 4.9x 9x 9x

1 The company’s closest comp, First Data, was acquired by KKR in 2007. MAJOR HOLDERS CEO Tomlinson 1% │ Other insiders 5% │ Synovus 13% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Travelzoo (Nasdaq: TZOO) New York, NY, 212-484-4900 Technology: Computer Services http://www.travelzoo.com


Price: $4.48 (as of 11/14/08) Month # of P/E FYE 12/31/07 7.9x 52-week range: $4.11 - $17.20 Latest Ago Ests P/E FYE 12/31/08 n/m Market value: $64 million This quarter -$0.12 -$0.09 2 P/E FYE 12/31/09 n/m 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 Insider ownership: 45% FYE 12/31/10 n/a n/a 0 EV / LTM EBIT 9.4x Insider buys (last six months): 129 LT EPS growth n/a n/a 0 P / tangible book 2.9x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 29% Date Actual Estimate LTM EBIT yield 11% # of institutional owners: 81 10/27/08 -$0.13 -$0.09 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 1 1 4 37 44 34 23 16 24 16 Total current assets 2 3 6 43 55 43 36 30 36 30 Intangible assets 0 0 0 0 0 0 0 0 0 0 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 Total current liabilities 1 1 3 3 7 7 10 12 9 12 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 1 1 3 3 7 7 11 13 11 13 Preferred stock 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



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BUSINESS OVERVIEW Travelzoo’s free Internet media properties reach 12 million 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 travel search engine. Travelzoo publishes offers from 900 advertisers, with Travelzoo deal experts reviewing offers to find the best travel deals. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

Unpaid subscribers by geography (mn) (period end): North America 9.4 10.2 11.0 11.1 Europe 0.3 0.7 1.4 2.1 Asia Pacific -- -- 0.2 1.1 Unpaid subscriber growth by geography (mn) (period end): North America 15% 9% 8% 2% Europe n/m 120% 111% 69% Asia Pacific n/m n/m n/m >999% ∆ total subscribers 19% 12% 16% 17% ∆ total revenue 51% 37% 14% 3% Average subscriber acquisition cost ($): North America 2.66 2.10 3.16 4.03 Europe 1.86 2.17 4.04 4.44 Asia Pacific n/a n/a 2.88 2.98 % of revenue by geography: North America 99% 95% 93% 88% Europe 1% 5% 7% 12% Asia Pacific 0% 0% 0% 1% EBIT margin by geography: North America 32% 47% 40% 32% Europe -148% -49% -89% -91% Asia Pacific n/a n/a n/m n/m Total EBIT margin 29% 43% 26% 4% % of revenue by customer: Travelport 12% 16% 15% 15% Expedia <10% 14% 11% 11% Sabre 15% <10% <10% <10%


• $1.3 billion in newspaper advertising by travel companies is moving to Internet. Travelzoo is well-positioned to benefit from this transition. The company’s revenue increased from $18 million in 2003 to $79 million in 2007, a 34% CAGR.

• Profitable, non-capital-intensive U.S. business. Travelzoo generated EBIT of $17 million in North America YTD, while employing minimal capital.

• Large global opportunity. Travelzoo is attempting to replicate worldwide the success it has had in the U.S. Travelzoo entered the U.K. in 2005; Canada, Germany and Spain in 2006; Australia, China, France, Hong Kong, Japan, and Taiwan in 2007.

• Founded and managed by Bartel brothers. Chairman Ralph Bartel (42) founded Travelzoo in 1998 and served as CEO until September 2008 when Holger Bartel (41) assumed the role. Previously, Holger oversaw Travelzoo’s operations in North America and worked at McKinsey.

• Repurchased 1 million shares for $20 million in 2007, and 1 million shares for $29 million in 2006.

• Material insider buying above current price. INVESTMENT RISKS & CONCERNS

• Global expansion may not work. Travelzoo is losing money overseas as it attempts to scale. The company’s model may not succeed abroad.

• North America EBIT margin has declined from 47% in 2006 to 40% in 2007 and 32% YTD.

• Dependent on ad revenue. Travelzoo may suffer if travel declines due to economic weakness, high oil prices, terrorist threats or other factors.

• High ROIC has attracted new entrants, while Google AdWords has lowered barriers to entry. Sherman’s Travel is the #2 travel deals email distribution company, with four million subscribers.



09 P/E

EXPE 2,238 2,723 .9x n/m 6x 6x GOOG 97,580 83,168 4.0x 4.5x 16x 14x MSFT 178,445 159,698 2.6x 9.2x 10x 9x OWW 250 767 .9x n/m n/m n/m PCLN 2,184 2,199 1.2x 13.5x 9x 9x YHOO 14,994 11,780 1.6x 2.1x 26x 23x TZOO 64 48 .6x 2.9x n/m n/m

MAJOR HOLDERS Ralph Bartel 60% │ Holger Bartel 1% │ Other insiders <1% │ JP Morgan 10% │ Coatue 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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…additional insight into TZOO: WHAT ARE THE SHARES WORTH?

• 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.

• Normalized EBIT for North America and rest of the world (ROW) are key valuation drivers. As Travelzoo generates strong EBIT in North America while investing heavily in global expansion, we 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 depends on profit generation. While Travelzoo’s 12 million-strong subscriber base and brand name may have strategic value to an acquirer, we have not used M&A transaction multiples in our analysis, as such a valuation might be too speculative.

• In North America, our most likely scenario (50% probability) has Travelzoo roughly maintaining normalized EBIT at approximately $25 million per year. We assign a fair value multiple of 10x in such a scenario. If EBIT declines, we anticipate multiple contraction due to likely business model concerns. If EBIT increases, we anticipate multiple expansion due to likely renewed optimism regarding growth. Our analysis conservatively assumes that EBIT deterioration is more likely than EBIT growth.

• In the rest of the world, our most likely scenario (40% probability) has Travelzoo earning normalized EBIT of $10 million, less than half the current North American EBIT run rate. This may be a fairly conservative assumption, as we see little reason why 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 internationally. The company is highly likely to take decisive action to eliminate the operating loss even if international growth does not materialize, as the Bartel brothers own ~60% of Travelzoo shares.

WHY THE SHARES MAY BE MISPRICED

• Steady-state EBIT materially understated. Startup losses in Europe and Asia mask continued strong U.S. profitability.

• High taxes lower net income yield. As U.S. income is fully taxed and foreign losses generate no current tax benefit, effective tax rate is temporarily elevated, lowering the after-tax earnings yield.

Estimated Enterprise Value (based on various scenarios of normalized EBIT) ($ in millions)

North America EBIT ROW EV/EBIT $10 $20 $25 $30 $40 EBIT Multiple 5x 8x 10x 12x 15x -$20 5x -$50 $60 $150 $260 $500 -$10 5x $0 $110 $200 $310 $550

$0 n/m $50 $160 $250 $360 $600 $10 12x $170 $280 $370 $480 $720 $20 15x $350 $460 $550 $660 $900

Probability-Weighted Enterprise Value (sum of probability-weighted contributions of scenarios) ($ in millions)

North America EBIT ROW $10 $20 $25 $30 $40 EBIT Probability 6% 25% 50% 15% 4% -$20 5% $0 $1 $4 $2 $1 -$10 10% $0 $3 $10 $5 $2

$0 25% $1 $10 $31 $14 $6 $10 40% $4 $28 $74 $29 $12 $20 20% $4 $23 $55 $20 $7

Probability-weighted enterprise value: $344 million

Estimated Equity Value per Share ($ and shares in millions, except per share data)

Probability-weighted enterprise value $344 Net cash $21 Estimated equity value $365 Shares outstanding 14.3 Estimated equity value per share $25.52

COMMENTS ON BUSINESS MODEL

• Travelzoo employs virtually no capital in running the business. The company has no inventory cost, as its services are entirely web-based. No elaborate infrastructure is required to create the services, resulting in minimal PP&E investment. The only major input is the time and effort of Travelzoo employees, yet the company does not depend on specific employees to maintain current operations (we do believe that the services of the Bartel brothers are crucial to growing value over time). Enterprise value is embedded primarily in the Travelzoo consumer brand, an online 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.

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• Per-employee performance metrics are quite impressive, as the following table shows. Per-employee results have declined primarily due to the startup of international operations. The company could boost per-employee performance substantially if it opted to maintain rather than grow operations. However, we believe investment in new country-specific Travelzoo websites will earn favorable risk-adjusted returns for shareholders.

($’000) 2005 2006 2007 YTD

9/30/08 Revenue per employee 853 915 660 338 N.A. EBIT per employee 269 412 242 96 EBIT per employee 250 391 173 14

• Advertiser-supported model, while highly

profitable, creates perceived and real conflicts of interest. Travelzoo makes money not from the consumers who rely on its media properties, but from travel companies who pay for inclusion in the company’s Top 20 list and other properties. While Travelzoo claims that Top 20 deals are selected exclusively based on merit, there is a perceived and real risk that editorial decisions may be influenced by advertising revenue prospects. Most consumers appear to be unaware that Travelzoo relies heavily on payments for deals included in the Top 20. However, it is conceivable that existing competitors or new entrants could expose this fact over time, perhaps lessening the consumer appeal of Travelzoo’s media properties.

• Top 20 list may be less scalable than it appears. The Travelzoo model appears almost infinitely scalable: once the Top 20 list is created, there is no marginal cost of emailing the list to incremental subscribers (leaving aside the cost of subscriber acquisition). However, the model contains a limit to scalability: Consumers must be able to book the deals presented on the Top 20 list; if too many consumers subscribe, too few may be able to benefit from the deals presented. This may force the company to forgo deals with low capacity in favor of large-scale but potentially less-favorable deals. For example, as the Top 20 list has grown to more than 10 million subscribers in the U.S., the company has been forced to limit small deals on the list. As the deals get bigger in terms of capacity, however, they may become less appealing. This dynamic puts a natural limit on the size of the Top 20 subscriber base in each country. An interesting way in which the company appears to be trying to address this is by customizing the Top 20 list for different types of subscribers (e.g., by residence location or travel preference). This customization happens largely behind the scenes, with users not explicitly asked to state their preferences. Of course, the (potential) existence of customized Top 20 lists means that an aggregate of more than 20 deals are selected each week, which may in turn dilute the quality of deals.

• A corollary of the previous point is that Travelzoo is in a strong position to grow new-country Top 20 lists from a low base. As the company launches new Top 20 lists, it has the luxury of including deals without much regard for capacity. As a result, the quality of the deals in startup countries may be higher than the quality of deals presented in the U.S. This quality advantage may make it easier for Travelzoo to grow by word of mouth in new countries, potentially helping to keep subscriber acquisition costs low. As a result, investors may overestimate the difficulty Travelzoo will encounter in scaling up new markets.

MANAGEMENT’S VIEW OF BUSINESS Notes from 3Q08 earnings call on October 27:

• Operating environment: economy “definitely a challenging one” for advertisers; search volume and traffic to travel websites have been decreasing since September (even on seasonally adjusted basis); however, Travelzoo hotel business is doing “really, really well… seeing increased business there”

• Response to weak environment: Plans to cut costs in North America and “reduce the speed of our investments in Asia Pacific and Europe;” strategy of developing global brand remains “unchanged”

• Q3 review: “unsatisfactory results” in North America, “impacted more negatively than expected by a weak economy;” European revenue up 62% (September best month ever: hotels and cruises strong; number of search queries down); Asia revenue of ~$200K; net loss widened due to European and Asian losses – not tax deductible, resulting in high effective tax rate; used $3.4 million of cash in operations; 207 employees at Q3-end (104 in North America, 52 in Europe, 51 in Asia), up from 191 sequentially and up from 128 y-y

• Q4 outlook: does not provide guidance; acknowledged travel weakness but argued that Travelzoo provides even more value to advertisers when it is difficult to move investory

• International growth strategy: dates back to 2005; management still believes exansion will increase shareholder value in the long term; international presence improves competitive position due to ability to (1) sell ad inclusions across different geographies and (2) perform local due diligence on quality and availability of travel deals (currently has producers and sales staff in 11 countries)

• Competitive landscape: no news; has faced new competitors in North America during past few years; none of them have Travelzoo’s reach

• Travelzoo’s strengths: “push media,” such as Top 20 weekly email, create demand that is incremental to “pull” demand, i.e., potential travelers proactively searching for travel deals online; SuperSearch product leverages more than 2.8 million ratings from Travelzoo users

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USA Mobility, Inc. (Nasdaq: USMO) Alexandria, VA, 866-662-3049 Services: Communications Services http://www.usamobility.com


Price: $9.55 (as of 11/14/08) Month # of P/E FYE 12/31/07 n/m 52-week range: $6.43 - $15.55 Latest Ago Ests P/E FYE 12/31/08 6.7x Market value: $260 million This quarter $0.32 $0.25 1 P/E FYE 12/31/09 8.6x Enterprise value: $156 million Next quarter n/a n/a 0 P/E FYE 12/31/10 12.7x Shares out: 27.2 million FYE 12/31/08 1.42 1.32 1 EV / LTM revenue 0.4x

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 Insider buys (last six months): 0 LT EPS growth n/a n/a 0 P / tangible book 1.5x Insider sales (last six months): 1 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 87% Date Actual Estimate LTM EBIT yield -79% # of institutional owners: 275 10/29/08 $0.35 $0.32 LTM pre-tax ROC -252%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 75 42 41 47 39 68 66 104 64 104 Total current assets 245 115 111 128 105 124 110 142 113 142 Intangible assets 1 16 0 222 190 186 205 10 208 10 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 Total current liabilities 197 157 116 162 87 83 67 62 67 62 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW USA Mobility was formed in 2004 by the merger of Arch (formerly Nasdaq: AWIN) and Metrocall (formerly Nasdaq: MTOH), the two leading independent domestic paging firms. USA Mobility focuses on the business-to-business market and supplies wireless connectivity to Fortune 1000 firms. The company operates nationwide networks for one-way paging and two-way messaging services. SELECTED OPERATING DATA


9/30/08 % of revenue by type: Paging services (one-way) 75% 74% 73% 73% Paging services (two-way) 19% 19% 19% 18% Non-paging services 2% 2% 3% 3% Products 4% 4% 5% 6% Revenue growth by type: Paging services (one-way) 22% -20% -16% -15% Paging services (two-way) 32% -20% -17% -18% Non-paging services 318% -3% 8% -13% Products 33% -17% 3% -6% ∆ revenue 26% -20% -15% -15% ∆ blended ARPU -3% -3% -1% 0% ∆ one-way units1 -22% -16% -15% -17% ∆ two-way units1 -15% -17% -14% -13% % of paging units in service (period end) ('000): One-way 91% 91% 91% 91% Two-way 9% 9% 9% 9%

1 Represents y-y change in paging units at period end. INVESTMENT HIGHLIGHTS

• Expense reductions ahead of revenue erosion. The company’s top line is eroding in the mid teens due to a secular decline in the paging market. However, operating expenses have been reduced by 200-300 bps faster, resulting in margin expansion.

• Healthcare represents 40% of customer base and has experienced lower net unit loss rates than other vertical segments. As the contribution of healthcare grows, subscriber losses may slow somewhat from current annualized rates in the mid teens.

• Stated objective to maximize cash flow and return (most of) it to holders. The company generated $64 million of trailing EBIT and $89 million of FCF.

• Guiding for revenue of $355-$360 million and cash opex of $245-$250 million, with maintenance capex of $18-$20 million in 2008.

• $104 million of cash and no debt as of September 30. The company pays a dividend.

• Repurchased $35 million of stock at below-market price in private transaction in November.

• Large NOL. USA Mobility has tax assets, both on and off the balance sheet, available to offset future income taxes. As a result, the shares are even cheaper than the EBIT-to-EV yield may suggest.

• Stock price implies 34% trailing FCF yield and 9x forward P/E (trailing GAAP EPS loss reported).


• Revenue erosion due to decline of paging. The low cost of devices such as email-ready mobile phones and PDAs continues to impact paging. The company has experienced revenue erosion in the mid teens, and declines are likely to continue. While ARPU has remained relatively steady, units in service have declined to three million.

• Tenuous sustainability of EBITDA margin, which has risen to 33% YTD (up 200+ bps y-y), driven by large opex reductions. At some point, the subscriber base may be insufficient to cover the fixed cost of a nationwide paging network.

• Implications of FCC’s Back-Up Power Order. This Order, if and when effective, would “entail significant capital and operating costs” that would negatively affect FCF. USA Mobility is appealing the Order and believes it is likely to prevail.

• Potential for adverse change to Universal Service Fund contribution requirement. The FCC is considering imposing a $1+ fee per assigned phone number instead of the current revenue-based methodology. Such a change would significantly increase the company’s contribution costs.

• Lack of reinvestment opportunities. The company is returning cash via dividends (structured as return of capital) and a $50 million buyback program initiated in August. Distributions have amounted to $1.50 per share in 2005, $3.65 per share in 2006, $3.60 per share in 2007, and $1.15 per share YTD.

MAJOR HOLDERS Insiders <1% │ David Abrams 15% │ Pamet 13% │ Contrarian 9% │ Barclays 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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VAALCO Energy, Inc. (NYSE: EGY) Houston, TX, 713-623-0801 Energy: Oil & Gas Operations http://www.vaalco.com



Ownership Data FYE 12/31/09 0.54 0.78 2 EV / LTM EBITDA 1.1x Insider ownership: 4% FYE 12/31/10 n/a n/a 0 EV / LTM EBIT 1.3x Insider buys (last six months): 1 LT EPS growth 8.0% 8.0% 1 P / tangible book 1.5x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 61% Date Actual Estimate LTM EBIT yield 79% # of institutional owners: 289 11/10/08 $0.38 $0.32 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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) Cash & investments 10 8 23 28 44 61 77 104 70 104 Total current assets 11 25 28 40 58 84 110 137 101 137 Intangible assets 0 0 0 0 0 0 0 0 0 0 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 Total current liabilities 6 14 14 14 9 27 24 28 16 28 Long-term debt 0 15 3 2 2 5 5 5 5 5 Total liabilities 9 33 22 21 20 46 44 51 35 51 Preferred stock 0 0 0 0 0 0 0 0 0 0 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


Oct 08Oct 07Oct 06Oct 05Oct 04Jun 03Jun 02Jun 01Jun 00Jun 99

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BUSINESS OVERVIEW Vaalco Energy is an independent oil and gas exploration and production company. Vaalco seeks to increase reserves and production, primarily in West Africa (Gabon and Angola) and, more recently, in the North Sea. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007

YTD 9/30/08

Revenue by segment ($mn): Gabon 85 98 125 153 Angola 0 0 0 0 North Sea 0 0 0 0 Total revenue 85 98 125 153 Growth 50% 16% 27% 74% EBIT by segment ($mn) Gabon 67 81 90 121 Angola 0 -1 -5 -1 North Sea 0 0 -8 -6 Corporate -4 -6 -9 -7 Total EBIT 64 74 69 107 Total EBIT growth 58% 17% -7% 108% EBIT margin by segment: Gabon 79% 82% 72% 79% Total EBIT margin 75% 76% 55% 70% Acreage leased (net) ('000) 501 1,015 1,069 n/a Production (net) (BOPD) 4,488 4,258 4,819 n/a Sales price, BOE ($/unit) 52 63 71 107 Production cost, BOE ($/unit) 6 8 9 10 Proved developed reserves: Oil (MBbls) 6,620 4,691 4,506 n/a Gas (MMcf) 21 17 61 n/a Std meas., proved res. ($mn) 161 134 192 n/a


• All six producing wells located offshore Gabon (four in the Etame field, two in Avouma/Tchibala).

• Seven development and exploration wells expose Vaalco to 50+ million net barrels, eight times more than Vaalco’s 6.2 million barrels of proved reserves. These seven wells include a development well in Ebouri field (oil production expected in December at initial rate of 4,000-6,000 bpd); three exploratory wells in Etame block (reserve potential of 15+ million net barrels); two exploratory wells onshore Gabon in the Mutamba concession (drilling in first well expected in December 2008; reserve potential of 30+ million net barrels); and one exploratory well in Angola (drilling expected in 1H09; reserve potential of 60+ million net barrels).

• 25% stake in gas prospect in British North Sea. Vaalco is participating with Century Exploration on the well, which has reserve potential of 60 Bcf.

• Strong balance sheet, with net cash of $93 million. • Repurchased $9 million of stock YTD and $2

million in 2007.

• Chairman and CEO Robert Gerry III (70) has served in those roles for more than ten years. In October, Russell Scheirman (52) trasitioned into the role of COO, having served as CFO for more than fifteen years. He was replaced by long-time Shell finance executive Greg Hullinger (55).



• Operations almost entirely offshore Gabon. The Gabon fields constituted almost 100% of production in 2007, with nearly 100% of net proved reserves attributable to those fields. Vaalco’s results would suffer materially if mechanical problems, storms or other events affected its Gabon properties. The company has operated in Gabon since 1995 and believes it has good relations with the government.

• Spending heavily to replace reserves. Vaalco had capex of $15 million and dry hole costs of $8 million in 2007. The company has had capex of $16 and dry hole costs of $6 million YTD.

• Exploration risks. In March, shareholder Nanes Delorme asked the company in a letter put itself up for sale and to “[c]ease attempting to diversify away from the Company’s core geographical area in West Africa. The Company has been unwisely spending cash on acquiring and drilling minor North Sea interests that have been total exploration failures.”1



09 P/E

HES 18,107 20,659 .5x 1.6x 6x 9x HNR 219 101 9.0x 0.8x 18x 9x PXD 2,621 5,350 2.2x 0.8x 5x 5x XOM 374,784 346,614 .7x 3.0x 8x 10x EGY 256 157 .8x 1.5x 5x 8x

MAJOR HOLDERS CEO Gerry III 5% │ CFO Scheirman <1% │ Other insiders 1% │ Barclays 5% │ RenTech 5% │ Columbia Wanger 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Value Line, Inc. (Nasdaq: VALU) New York, 212-907-1500 Financial: Investment Services http://www.valueline.com



Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA n/a Insider ownership: 87% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 6.2x Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 3.8x Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 8% Date Actual Estimate LTM EBIT yield 16% # of institutional owners: 102 n/a n/a n/a LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 121 13 244 82 104 113 126 124 118 124 Total current assets 127 20 257 89 111 122 132 131 126 131 Intangible assets 4 4 4 4 3 2 1 1 2 1 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 Total current liabilities 32 13 220 44 47 47 44 43 47 43 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 73 51 232 55 57 53 50 49 54 49 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 196 195 35 44 62 76 88 88 79 88 EBIT/capital employed n/m n/m n/m n/m n/m n/m n/m n/m n/m n/m



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BUSINESS OVERVIEW Value Line dates back to 1931 and operates in two segments: Investment Periodicals, Publishing & Licensing produces investment-related periodicals (retail and institutional) and includes licensing fees for Value Line’s proprietary ranking system and trademarks. Investment Management advises the Value Line Funds and separate accounts. The company owns a registered broker-dealer, Value Line Securities, which distributes the Value Line Funds, a family of no-load funds that charge rule 12b-1 marketing fees. SELECTED OPERATING DATA

FYE April 30 2006 2007 2008 1Q09 % of revenue by segment: Print 43% 41% 37% 35% Electronic1 13% 14% 15% 16% Total publishing 56% 55% 52% 51% Licensing 6% 8% 9% 8% Investment mgmt 38% 37% 40% 41% Revenue growth by segment: Print -6% -7% -10% -10% Electronic1 0% 5% 5% 7% Total publishing -5% -4% -6% -6% Licensing 97% 37% 3% 2% Investment mgmt 2% -4% 5% 0% ∆ revenue 1% -2% -1% -3% ∆ deferred revenue2 -6% -9% -6% -10% EBIT margin by segment: Publishing & licensing 38% 38% 37% 39% Investment mgmt 47% 51% 49% 33% Total EBIT margin 41% 43% 42% 37% AUM, Value Line Funds $3.8bn $3.8bn $3.8bn $3.7bn AUM, licensing clients $6.3bn $6.4bn $6.3bn $5.5bn % of AUM, Value Line Funds by asset class (period end): Equity funds 87% 87% 87% 87% Fixed income 8% 8% 7% 7% Money market 4% 5% 6% 6%

1 Value Line derives 47% of electronic revenue from institutional accounts and 53% from retail subscribers. Institutional electronic revenue increased 23%, while retail revenue declined 7% in FY08. 2 Represents y-y change in period-end deferred revenue (includes short-term and long-term deferred revenue liability). INVESTMENT HIGHLIGHTS

• Value Line Investment Survey is premier service, published weekly and covering 1,700 stocks.

• Serves as investment adviser to 14 mutual funds with AUM of $3.7 billion as of July 31. The largest distribution channel for the Value Line Funds are fund supermarket platforms run by Charles Schwab, TD Ameritrade, and National City Bank.

• Earns high-margin fees from licensing trademarks and proprietary information for use in products such unit investment trusts, annuity trusts, managed accounts, and ETFs. AUM of parties participating in licensing programs was $5.5 billion as of July 31.

• Liquid balance sheet, with $15 million in cash and $109 million in short-term investments on July 31. $30 million of the liquid assets may be considered “float” from up-front subscription payments.



• Publishing revenue in steady decline. Subscription revenue fell 4% in FY07 and 6% in FY08, with print revenue down 7% in FY07 and 10% in FY08 (electronic revenue grew 5% in each year). Circulation continues to decline, driven by competition from free and lower-cost Internet-based research and no-cost brokerage firm research.

• AUM may decline. AUM in Value Line Funds and products managed by licensing customers may decline amid weak stock market performance.

• Investment profits may decline. Value Line earns income from securities transactions involving $17 million in trading securities and $92 million in securities available for sale as of July 31. Such income may decline in a weak market environment.

• Low float and control by chairman and CEO Jean Buttner (73). Buttner owns all of the voting stock of Arnold Bernhard & Co., which owns 8.6 million, or 87% of Value Line’s shares outstanding. The company and Arnold Bernhard have also engaged in certain related-party transactions.



09 P/E

MHP 7,347 8,366 1.3x n/m 9x 9x MORN 1,414 1,104 2.2x 5.5x 16x 15x TRIN 14,881 22,186 2.0x n/m 10x 9x TSCM 97 19 .3x 1.0x 29x 53x VALU 328 204 2.5x 3.8x n/a n/a

MAJOR HOLDERS CEO Buttner 87% (via Arnold Bernhard & Co.) │ Other insiders <1% │ RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


ValueClick, Inc. (Nasdaq: VCLK) Westlake Village, CA, 818-575-4500 Services: Advertising, Member of S&P MidCap 400 http://www.valueclick.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 163 233 220 243 241 282 254 89 251 89 Total current assets 175 250 246 282 327 403 399 219 376 219 Intangible assets 8 3 65 78 376 370 553 527 458 527 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 Total current liabilities 13 16 32 41 67 87 219 105 92 105 Long-term debt 1 1 0 0 0 0 0 0 0 0 Total liabilities 25 32 49 56 102 150 301 178 169 178 Preferred stock 0 0 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



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BUSINESS OVERVIEW ValueClick is an online marketing services firm that sells targeted online ad campaigns to advertisers, generating leads, online sales and brand recognition. The company was founded in 1998 and operates in four segments: The Media segment’s ValueClick Media brand provides online display advertising and lead generation. Affiliate Marketing’s Commission Junction brand allows advertisers to pay their own salesforce of online publishers. Comparison Shopping operates PriceRunner in Europe and Smarter.com and CouponMountain.com in the U.S. Technology’s Mediaplex provides ad serving and tracking for advertisers seeking to understand their online ad spending. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: Media 54% 70% 60% 48% Affiliate marketing 31% 21% 21% 18% Comparison shopping 6% 5% 14% 28% Technology 9% 5% 5% 6% Revenue growth by segment: Media 157% 132% 1% -20% Affiliate marketing 30% 17% 22% 9% Comparison shopping 204% 52% 251% 123% Technology 6% -5% 27% 21% Total revenue growth 80% 79% 18% 7% EBIT margin by segment: Media 23% 25% 22% 22% Affiliate marketing 47% 52% 50% 48% Comparison shopping 12% 12% 19% 24% Technology 34% 30% 39% 41% Corporate and other -10% -11% -12% -19% Total EBIT margin 21% 19% 17% 9% % of revenue by geography: U.S. 84% 87% 85% 83% International 16% 13% 15% 17% EBIT margin by geography: U.S. 23% 20% 18% 11% International 10% 9% 9% 2%


• Leadership positions in core businesses that benefit from long-term growth in online ads and 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 consumers more deeply than more narrowly-focused alternatives. Each ValueClick technology feeds into a common data platform and leverages anonymous consumer data for enhanced targeting.

• Growth strategy based on acquisition-driven and organic growth. While the company has indicated an interest in exploring M&A opportunities, it is also focused on new and upgraded products.

• $119 million in cash and securities and no debt. • Repurchased 12 million shares for $150 million

YTD, 2.3 million shares for $44 million in 2007, and 33 million shares for $179 million before 2007. Despite the buybacks, average diluted shares grew from 91 million in 2005 to 101 million in 2007.



• Seeing weaker revenue trends than anticipated, with consumers taking less action on online shopping sites, and advertisers holding sites to stricter performance objectives. The company has responded with spending and headcount reductions.

• Guiding for revenue decline of 1%-2% to $633-638 million in 2008. Management anticipates 2008 “adjusted” EBITDA of $161-164 million (25-26% margin) and GAAP EPS of $0.55-0.56, lower than previous guidance for EPS of $0.69-$0.71.

• M&A rollup strategy. ValueClick has completed numerous acquisitions in recent years, including MeziMedia, Shopping.net, Fastclick, Webclients, E-Babylon, Pricerunner, Commission Junction, etc.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E DRIV 865 565 1.4x 3.1x 13x 12x GOOG 97,580 83,168 4.0x 4.5x 16x 14x MWW 1,432 1,040 .7x 4.3x 8x 11x VCLK 495 406 .6x 5.2x 10x 9x

MAJOR HOLDERS CEO Vadnais <1% │ Other insiders 1% │ Fidelity 15% │ Barclays 9% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Varian Semiconductor (Nasdaq: VSEA) Gloucester, MA, 978-282-2000 Technology: Semiconductors, Member of S&P SmallCap 600 http://www.vsea.com


Price: $17.47 (as of 11/14/08) Month # of P/E FYE 10/3/08 13.2x 52-week range: $16.59 - $43.47 Latest Ago Ests P/E FYE 9/30/09 249.6x Market value: $1.3 billion This quarter -$0.03 $0.11 11 P/E FYE 9/30/10 21.6x Enterprise value: $1.1 billion Next quarter -0.02 0.18 11 P/E FYE 9/30/11 15.2x Shares out: 72.6 million FYE 9/30/09 0.07 0.93 11 EV / LTM revenue 1.3x



($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash from ops 153 11 37 31 73 141 108 n/a 25 n/a 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 Cash & investments 308 351 393 474 414 198 209 209 198 209 Total current assets 527 521 682 789 723 612 549 549 612 549 Intangible assets 12 12 12 12 12 12 0 0 12 0 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 Total current liabilities 145 92 154 148 159 173 115 115 173 115 Long-term debt 0 5 4 4 3 3 2 2 3 2 Total liabilities 153 110 173 174 183 233 185 185 233 185 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 436 474 576 689 755 566 515 515 566 515 EBIT/capital employed 2% 10% 53% 41% 47% 97% 50% 50% n/m n/m



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BUSINESS OVERVIEW Varian is a semiconductor capital equipment maker and the leading producer of ion implantation equipment. SELECTED OPERATING DATA

FYE September 30 2006 2007 2008 % of revenue by geography: North America 22% 22% 22% Asia Pacific 67% 71% 70% Europe 11% 7% 8% Revenue growth by geography: North America 20% 45% -21% Asia Pacific 20% 53% -22% Europe 39% -10% -12% ∆ revenue 22% 44% -21% ∆ unit shipments of tools 33% 51% n/a ∆ deferred revenue (period end) 6% 10% -41% % of revenue by type: Product 88% 91% 90% Service 11% 8% 10% Royalty 1% 1% 0% % of shipments by market: Memory 51% 70% n/a Logic 19% 14% n/a Foundry 30% 16% n/a % of shipments by wafer size: 300 mm 75% 91% n/a 200 mm 25% 9% n/a Top 10 customers (% of revenue) 63% 72% n/a

VARIAN’S SHARE OF GLOBAL IMPLANTER MARKET1

Market Size Varian Market Share ($ in millions) CY06 CY07 CY06 CY07 Medium current $414 $454 53% 57% High current 720 672 46% 78% High energy 230 147 17% 13% Ultra high dose na 64 na 100% Overall $1,364 $1,337 43% 65%

1 Source: Garter Dataquest, VLSI Research, Company. INVESTMENT HIGHLIGHTS

• #1 in $1 billion implantation equipment market, with share up from 43% in CY06 to 65% in CY07. Varian has grown share—and is likely to continue to do so—in the largest segments while maintaining 100% of the fast-growing, ultra high-dose market.

• Gained high-current share due to industry shift from batch ion to single wafer implanters. Varian began developing the technology in 1994, giving it 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 technical expertise. Implanters weigh 20+ tonnes and sell for roughly $4 million each. The industry has seen no credible new entrants in decades.

• PLAD plasma tool expands addressable market through creation of ultra high-dose segment, with sales potentially surpassing $100 million in FY09.

• Little risk of commoditization, due to advances in implanter technology and changes in wafer and chip size. Implantation has become a higher-value step in semi production, giving Varian more pricing power.

• Gary Dickerson (50) joined Varian as CEO in 2004, having served for ten years in roles at KLA-Tencor, including as Group VP, EVP, and COO.

• $209 million of net cash and short-term securities. • Repurchased $179 million of stock in FY08, $427

million in FY07 and $109 million in FY06. • Stock price implies 0% trailing FCF yield, 13x

trailing P/E (forward EPS estimate is $0.07). INVESTMENT RISKS & CONCERNS

• Sharp drop-off in business, driven by drop in capital spending, particularly by manufacturers of DRAM devices. Revenue fell 37% and 52% y-y in the June and September quarter, respectively. The company expects to post a small loss in 1Q09.

• Cyclical business, dependent on semi makers’ capacity investments, which exhibit large volatility (particularly in the case of memory manufacturers).

• Axcelis may become strong competitor if bought. Sumitomo Heavy Industries made a hostile bid for Axcelis in February, but shelved its proposal after Axcelis rejected a sweetened $616 million offer.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ACLS 64 97 .3x 0.2x n/m n/m AMAT 13,725 11,827 1.5x 2.3x 13x 9x KLAC 3,067 2,505 1.1x 1.7x 36x 14x LRCX 2,248 1,488 .7x 1.6x 138x 15x VSEA 1,269 1,063 1.3x 2.5x 250x 22x

MAJOR HOLDERS CEO Dickerson <1% │ Other insiders 2% │ Fidelity 15% │ Wellington 9% │ Oppenheimer Funds 9% │ Turner 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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Thanksgiving 2008


Verigy Ltd. (Nasdaq: VRGY) Singapore, Singapore, 65--675-2033 Technology: Semiconductors http://www.verigy.com/portal/page/p…





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments n/a 0 0 300 375 385 391 385 Total current assets n/a 197 199 551 604 607 592 607 Intangible assets n/a 18 17 18 18 18 18 18 Total assets n/a 265 260 674 771 831 714 831 Short-term debt n/a 0 0 0 0 0 0 0 Total current liabilities n/a 128 158 253 226 212 204 212 Long-term debt n/a 0 0 0 0 0 0 0 Total liabilities n/a 146 173 287 273 270 235 270 Preferred stock n/a 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Verigy provides advanced test systems for the semiconductor industry. The company offers a single platform for each of the two categories of devices being tested: the 93K platform is designed to test System-on-a-Chip (SoC), System-in-a-Package (SiP) and high-speed memory devices, while the Versatest V5000 platform is designed to test memory devices, including flash memory and multi-chip packages containing a mix of memory devices. Verigy has so far sold 1,650 93K systems and 2,500 Versatest systems. Customers include integrated device manufacturers (IDMs), test subcontractors, and fabless design companies. Verigy maintains a direct salesforce. It uses Flextronics and other contract manufacturers to produce the company’s systems. Verigy separated from Agilent (A) and went public in 2006. It has 1,600 employees. SELECTED OPERATING DATA

FYE October 31

2005

2006

2007

YTD 7/31/08

% of revenue by type: Products: SoC etc.1 59% 57% 44% 68% Products: Memory 19% 26% 37% 11% Services 22% 17% 19% 22% Revenue growth by type: Products: SoC etc.1 -28% 66% -25% 74% Products: Memory -33% 132% 38% -76% Services -5% 31% 11% 8% Total growth -25% 71% -2% -2% % of revenue by geography: U.S. 26% 31% 28% 15% Singapore 39% 48% 56% 67% Japan 21% 10% 7% 9% Rest of the world 14% 10% 9% 9% Growth in period-end backlog:2 Product backlog3 n/a 52% -15% n/a Services backlog4 n/a 29% -2% n/a Total backlog n/a 42% -10% n/a

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. 3 Product backlog: systems under POs, to be delivered within six months. 4 Services backlog outstanding orders for product support and services. INVESTMENT HIGHLIGHTS

• Test equipment companies have ridden long-term growth curve of semiconductor industry. By detecting and sometimes repairing defects, test equipment enables semi firms to improve yield.

• 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.

• Chairman and CEO Keith Barnes (56) joined Verigy in 2006. He had previously been CEO of Electroglas and Integrated Measurement Systems.

• Repurchased 637K shares for $15 million in FQ3 under six million-share program authorized in April.



• Memory market has turned down, producing “very challenging” environment, partially offset by “strong demand” for consumer mixed signal and Port Scale RF products.

• Sharp revenue and profit drop expected in FQ4. Verigy has provided guidance for the quarter ended October 31st of $155-165 million in revenue (down 21-26% y-y) and $7-10 million in net income (down 69-78% y-y) (EPS of $0.12-$0.17). FQ4 net income includes ~$4.5 million of stock comp expense.

• Cyclicality, inventory risk, and pricing pressure in industry with solid long-term growth. The semiconductor industy continues to benefit from increased use of ICs in computing, electronics, and other markets. Nonetheless, the industry has at times been plagued by excess capacity resulting in steep price declines and inventory writedowns.

• Three customers comprised 44% of revenue in FQ3. Two customers were 32% of FY07 revenue.

• Competitors include Advantest, Credence, LTX, Nextest, Teradyne, and Yokogawa. Verigy also competes with internal development by customers.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ATE 2,377 830 .7x 0.9x n/a n/a TER 686 378 .3x 0.8x 16x n/m VRGY 646 261 .3x 1.2x 9x 22x

MAJOR HOLDERS CEO Barnes <1% │ Other insiders <1% │ Iridian 7% │ TCW 5% │ Clearbridge 5% │ Citadel 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Versant Corporation (Nasdaq: VSNT) Fremont, CA, 510-789-1500 Technology: Software & Programming http://www.versant.com



Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA 2.8x Insider ownership: 9% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 2.8x Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 2.2x Insider sales (last six months): 3 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 42% Date Actual Estimate LTM EBIT yield 36% # of institutional owners: 57 n/a n/a n/a LTM pre-tax ROC n/m


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 4 4 3 3 4 8 19 27 15 27 Total current assets 12 10 8 10 7 12 22 32 19 32 Intangible assets 0 0 1 22 8 8 8 7 8 7 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 Total current liabilities 8 7 7 8 6 6 7 7 7 7 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 9 8 8 10 7 7 7 8 7 8 Preferred stock 5 5 8 0 0 0 0 0 0 0 Common equity 2 (1) (5) 23 9 14 23 33 20 33 EBIT/capital employed -219% -232% n/m n/m n/m n/m n/m n/m n/m n/m



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BUSINESS OVERVIEW Versant, founded in 1988, provides object-oriented data management software that companies use to solve complex data management and integration problems. The software is used in strategic distributed applications, including network modeling and management, fault diagnosis, fraud prevention, service activation and assurance, and customer billing and scheduling. Management is based in the U.S. and Germany, while R&D activities are conducted in Germany and India. The company targets the telecom, technology, defense, financial, transportation, and health care industries. It sells two types of perpetual licenses: Development licenses, sold on a per seat basis, authorize a customer to develop an application that uses Versant software. Deployment licenses permit a customer to deploy an application it has developed under a development license. End-users typically buy deployment licenses based on the number of CPUs. VARs and distributors purchase development licenses on a per seat basis. In exchange for royalties, VARs are authorized to sublicense deployment copies of Versant software. SELECTED OPERATING DATA

FYE October 31 2005 2006 2007

YTD 7/31/08

% of revenue by type: License 56% 51% 60% 64% Maintenance 40% 40% 39% 35% Prof. services 4% 9% 1% 1% Revenue growth by type: License -9% -4% 50% 32% Maintenance -7% 7% 22% 12% Prof. services -50% 153% -84% 7% Total growth -11% 6% 26% 24% Gross margin by type:1 License 97% 96% 99% 98% Maintenance 77% 79% 82% 84% Prof. services -42% 34% 54% 65% Total GM 83% 83% 92% 93% % of revenue by geography: North America 34% 37% 46% 32% Europe 64% 61% 50% 54% Asia 2% 3% 4% 14% ∆ in shares out2 14% 1% 3% 2%

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. INVESTMENT HIGHLIGHTS

• Object-oriented database management software has advantages over relational databases in meeting the data requirements of companies who use very large, changing bodies of complex data.

• Versant Object Database (VOD) cuts customers’ hardware costs and speeds development. VOD sales account for almost all license revenue. Versant also sells FastObjects software, added in 2004 via a merger with CEO Witte’s former company.

• Large recurring revenue stream, high switching costs. We estimate that two-thirds of revenue is of a recurring nature. Versant is deeply embedded into customer applications, making it difficult to switch.

• Highly capable Jochen Witte (47) became CEO in 2005. Previously, he headed Versant’s European operations and co-founded a firm that merged with Versant in 2004. Since taking the helm, Witte has cut costs and focused on the database business. Financial results have improved dramatically.

• Strong balance sheet; large NOLs. Versant had $27 million of net cash as of July 31. It had federal, state, and German NOLs of $80 million, $16 million, and $41 million as of October 31, 2007.



• Impact of weak economy, dollar appreciation. According to CEO Witte, “achieving our future goals will become more challenging.”

• Competition from relational database companies including Oracle, CA, Sybase, IBM, and Microsoft. Versant also competes against object database firms such as Progress Software and Objectivity.

• Small but growing object-oriented database market. The $70 million market size limits the explosiveness of Versant’s growth potential.

• Low insider ownership—particularly noteworthy given Versant’s small market capitalization.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E CA 8,821 8,660 2.0x n/m 11x 10x BMC 4,691 4,077 2.2x n/m 11x 10x ORCL 87,110 85,326 3.7x n/m 11x 10x PRGS 829 599 1.2x 3.0x 11x 10x SY 2,025 1,924 1.7x 116.4x 12x 12x VSNT 54 27 1.1x 2.2x n/a n/a

MAJOR HOLDERS CEO Jochen Witte 2% │ Other insiders 2% │ RenTech 9% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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).

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Viacom, Inc. (NYSE: VIA.B) New York, NY, 212-258-6000 Services: Broadcasting & Cable TV, Member of S&P 500 http://www.viacom.com





($ millions, except Fiscal Years Ended LTME FQE FQE 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 Short-term debt n/a 39 53 56 64 187 133 125 133 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 Preferred stock n/a 0 0 0 0 0 0 0 0 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


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BUSINESS OVERVIEW Viacom is a leading global entertainment content company. It operates through two reporting segments: Media Networks, which includes MTV Networks and BET Networks; and Filmed Entertainment. Viacom engages audiences on TV, motion picture and digital platforms through well-known brands, including MTV, VH1, CMT, Nickelodeon, Comedy Central, Spike TV, BET, Paramount Pictures, and DreamWorks Pictures. Viacom’s reach includes 160 channels and 340 online properties in 160 countries. MTV Networks reaches 520 million households worldwide, while BET reaches 88 million U.S. households. Paramount dates back to 1912, has a library of 3,500 motion pictures, and ranked #1 in domestic box office revenue in 2007. Viacom became a standalone company via a separation from the former Viacom (now known as CBS Corp.) at yearend 2005. SELECTED OPERATING DATA

FYE December 31

2005

2006

2007

YTD 9/30/08

% of revenue by segment: Media Networks 70% 63% 60% 60% Filmed Entertainment 30% 37% 40% 40% EBIT margin by segment: Media Networks 39% 40% 38% 35% Filmed Entertainment 2% 3% 2% 0% % of revenue by component: Advertising 42% 38% 34% 32% Feature film 30% 36% 39% 39% Affiliate fees 19% 18% 17% 19% Ancillary 8% 9% 10% 11% % of revenue by geography: U.S. 78% 76% 73% n/a Europe 13% 15% 17% n/a Other 9% 9% 10% n/a


• Business continues to perform. Viacom’s new franchise, the top-selling Rock Band music video game, has had 18 million songs downloaded since launch. Rock Band 2 should aid EPS growth in 2009. Paramount generated $1 billion in box office receipts in record time in 2008, driven by Indiana Jones, Kung Fu Panda, and Iron Man.

• Low double-digit EPS growth from 2008-10. Management expects to deliver low double-digit annual growth in diluted EPS from continuing operations (2007 base year EPS was $2.36).

• Seasoned management. Founder Sumner Redstone (84) remains executive chairman, with CEO Philippe Dauman (54) at the helm since 2006. Dauman has been with Viacom for two decades.

• Debt-financed buybacks optimize cap structure. Viacom has $8.4 billion of net debt and has repurchased $1.1 billion of stock so far this year.

• D&A exceeds capex. Viacom recorded D&A of $1 billion from 2005-07, with capex of $639 million.



• Challenging ad revenue environment. While Viacom has diverse revenue streams including affiliate, ancillary and motion picture revenue, advertising accounts for one-third of revenue. This stream has weakened due to economic conditions.

• TV may face newspaper-like risks in long term. Video content is becoming increasingly popular online due to the proliferation of broadband and sites such as YouTube that allow anyone to share content. Consumers increasingly spend time online, threatening TV’s still-strong market share position.

• Hit-dependent motion picture business. While Paramount is a leading franchise, results fluctuate based on the timing of “hit” movie releases.

• Filmed Entertainment contributes little EBIT despite meaningful revenue. While this implies margin upside, it also raises the question whether continued investment in the segment is justified or whether alternatives should be explored.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E DIS 38,427 50,065 1.3x 16.4x 10x 9x DISCA 3,915 7,777 2.9x n/m 14x 13x NWS.A 19,419 27,408 .8x n/m 7x 6x TWX 32,825 66,762 1.4x n/m 8x 8x VIA.B 10,295 18,722 1.3x n/m 7x 7x

MAJOR HOLDERS Viacom has 57 million Class A common shares (one vote per share) and 556 million Class B shares (non-voting) outstanding. Both classes of stock trade publicly, with the Class A shares controlled by Sumner Redstone. Economic ownership: Sumner Redstone 12%│ Insiders other than Redstone <1% │ Franklin 7% │ Morgan Stanley 6% │ Wellington 6% │ NWQ 5% │ Barclays 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? 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.

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ViroPharma (Nasdaq: VPHM) Exton, PA, 610-458-7300 Health Care: Biotechnology & Drugs, Member of S&P SmallCap 600 http://www.viropharma.com



Ownership Data FYE 12/31/09 0.54 0.43 12 EV / LTM EBITDA 4.7x Insider ownership: 1% FYE 12/31/10 0.10 -0.01 12 EV / LTM EBIT 5.0x Insider buys (last six months): 1 LT EPS growth 24.5% 30.4% 2 P / tangible book 2.0x Insider sales (last six months): 3 Latest Quarterly EPS Surprise Greenblatt Criteria Institutional ownership: 80% Date Actual Estimate LTM EBIT yield 20% # of institutional owners: 435 10/29/08 $0.33 $0.23 LTM pre-tax ROC >100%


($ millions, except Fiscal Years Ended LTME FQE FQE 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 Cash & investments 240 158 121 35 233 255 584 668 552 668 Total current assets 252 162 124 56 275 284 623 699 595 699 Intangible assets 0 0 0 116 122 123 123 124 124 124 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 Total current liabilities 31 9 11 13 108 18 28 27 22 27 Long-term debt 180 135 128 190 0 0 250 250 250 250 Total liabilities 227 146 141 205 109 18 280 280 273 280 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW ViroPharma develops products that address serious diseases treated by physician specialists. The company commercializes Vancocin, approved for oral administration for treatment of antibiotic-associated pseudomembranous colitis. ViroPharma focuses drug development activities in infectious diseases including cytomegalovirus (CMV) and non-toxigenic C. difficile (NTCD). DRUG PIPELINE OVERVIEW

Preclinical Ph. 1 Ph. 2 Ph. 3 Marketed ViroPharma Vancocin1 Camvia2 I I Camvia3 I NTCD4 Antiviral5 Lev Pharmaceuticals — acquisition pending Cinryze6

1 Approved for oral administration for treatment of antibiotic-associated pseudomembranous colitis caused by Clostridium difficile and enterocolitis caused by Staphylococcus aureus, including methicillin-resistant strains. 2 Cambia (maribavir) targets CMV disease in Stem Cell Transplant (SCT). 3 Cambia (maribavir) targets CMV disease in Solid Organ Transplant (SOT). 4 Non-toxigenic C. difficile (NTCD) to prevent recurrence of CD infection. 5 Discovery of antiviral compounds targeting hepatitis C virus (partner: Wyeth). 6 Replacement therapy for patients with HAE (hereditary angioedema). INVESTMENT HIGHLIGHTS

• Approved Vancocin drives current business. ViroPharma generates substantially all sales from Vancocin for treatment of enterocolitis caused by S. aureus and antibiotic associated pseudomembranous colitis caused by C. difficile. ViroPharma acquired U.S. rights to Vancocin from Eli Lilly for $116 million plus royalties in 2004. Vancocin grew to $182 million in the past nine months, up 17% y-y.

• Large acquisition of Lev Pharma (OTC: LEVP), completed in October, adds Cinryze C1 esterase inhibitor (human), a late-stage product targeting life-threatening hereditary angioedema (HAE) disease with limited treatment options (~10,000 U.S. patient population; multi-hundred million dollar market opportunity in acute and prophylaxis). Lev met its primary endpoints in Phase III clinical trials for both the acute and prophylactic treatment of HAE and expects to begin marketing Cinryze in December. The FDA has granted seven years of marketing exclusivity to Cinryze for HAE routine prophylaxis pursuant to the Orphan Drug Act. In the acquisition, ViroPharma is paying $443 million up front (82% cash, 18% stock), with contingent consideration of another $175 million.

• Strong FCF from Vancocin sales, with related gross margin in excess of 95%.



• One-drug company. ViroPharma depends on Vancocin for all of its current revenue. The last core patent protecting Vancocin expired in 1996.

• Lev acquisition changes risk profile. ViroPharma spent a large portion of its enterprise value on the purchase of money-losing Lev.

• EBIT decline due to increases in R&D and G&A. R&D spending is up 94% to $45 million while G&A expenses have risen 77% to $43 million YTD. The company attributes the increases to costs associated with phase three of Camvia (maribavir), compensation costs related to European and Vancocin salesforce headcount, and marketing efforts. The opex jump reduced EBIT to $82 million in the first nine months of 2008, down 15% y-y.

• Management changes, including appointment of Charles Rowland as CFO in October. He was previously CFO of Endo Pharma. A new head of medical affairs also joined ViroPharma in October.

• Likely to drop off magic formula list due to Lev acquisition, as the deal redeploys a large amount of cash into an EBIT-negative business (ViroPharma had net cash of $418 million as of September 30).


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E ABII 2,424 1,780 5.2x 3.6x n/a n/a BRL 7,074 8,418 3.0x 16.7x 22x 17x CBST 1,404 1,358 3.5x 11.1x 19x 14x TEVA 35,015 36,420 3.4x 7.8x 15x 14x WPI 2,470 2,946 1.2x 3.9x 12x 11x VPHM 921 502 2.2x 2.0x 12x 22x

MAJOR HOLDERS CEO Milano <1% │ Other insiders 3% │ Baker Brothers 10% │ Barclays 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

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.

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Thanksgiving 2008


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





($ millions, except Fiscal Years Ended LTME FQE FQE 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 current assets 529 744 857 1,181 1,505 2,029 2,731 2,948 2,447 2,948 Intangible assets 0 0 26 11 0 4 197 194 187 194 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 Preferred stock 0 0 0 0 0 0 0 0 0 0 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



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BUSINESS OVERVIEW Western Digital produces hard disc drives, which it markets to systems manufacturers, resellers, and retailers. The products are used in PCs, notebooks, and enterprise applications such as servers, workstations, network-attached storage, and video surveillance equipment. The top ten customers accounted for 47% of revenue in FY08 (no customer was 10%+ of revenue). Western was founded in 1970; it acquired competitor Komag for $1 billion in 2007. SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1Q09 Unit shipments (mn) 1 73 97 133 39 Change (y-y) 20% 32% 38% 34% Net revenue ($mn) 4,341 5,468 8,074 2,109 Change (y-y) 19% 26% 48% 19% ASP per unit ($)2 59 57 59 53 Change (y-y) 0% -3% 4% -10% % of revenue by product – hard drives for… …non-desktop sources 29% 43% 56% 61% …desktop computers 71% 57% 44% 39% % of revenue by channel: OEM3 54% 48% 51% 56% Distributors 39% 36% 31% 26% Retailers (ie, branded) 7% 16% 18% 18% % of revenue by geography: U.S. 32% 33% 24% n/a4 Asia 36% 34% 41% n/a4 EMEA 28% 29% 29% n/a4 Other 4% 5% 5% n/a4

1 FY08 growth driven by demand for hard drives and Western’s diversification into non-desktop markets, including mobile, electronics, enterprise, and branded. Western shipped 37 million 2.5 inch drives to the mobile and branded markets in FY08, up from 12 million units in FY07. The company shipped 15 million units to the DVR market in FY08, up from 10 million units in FY07. 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. 4 1Q09 revenue by geography: Americas 23%, EMEA 29%, Asia 48%. INVESTMENT HIGHLIGHTS

• Growing demand for data storage, driven by applications such as digital photos, video and music.

• Growing demand for disc drives, driven by a proliferation of enterprise data, mobile computing, and consumer electronics. Desktop demand has moderated due to a shift toward mobile computing.

• $1 billion Komag acquisition strengthens Western’s competitive position against Seagate, which remains the hard disc drive industry leader. Komag improves Western’s market share, production efficiencies, and technology position.

• Disc drive industry consolidation, driven by high 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.

• Long-tenured management. CEO John Coyne (58) has served in various roles at Western for 25 years. CFO Timothy Leyden (56) returned to Western in 2007 and has been with the company for 20 years.

• Strong balance sheet, with $1.2 billion of cash and $500 million of debt as of September 30.

• Repurchased 18 million shares for $284 million since 2005, including $36 million in 1Q09.



• Declining average selling prices. ASP declines are a “fact of life” in the disc drive industry, and prices per unit of storage capacity are likely to continue to decline. ASP declines are driven by factors such as production cost decreases, excess capacity, excess inventories, and attempts to gain market share.

• Meaningful degree of commoditization: “Hard drives manufactured by different competitors are highly substitutable due to the industry mandate of technical form, fit and function standards.”1

• Intense competition from ExcelStor, Fujitsu, Hitachi, Samsung, Seagate, and Toshiba.


($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E EMC 20,367 17,950 1.2x 3.9x 13x 12x QTM 36 413 .4x n/m 2x 1x STX 2,378 3,255 .3x 1.1x 5x 3x TDK 4,304 3,727 .4x 0.7x 17x 13x WDC 2,980 2,272 .3x 1.1x 4x 4x

MAJOR HOLDERS CEO Coyne <1% │ Other insiders <1% │ AXA 12% │ Fidelity 6% │ LSV 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 1 Source: Western Digital 10-K for the fiscal year ended June 27, 2008.

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.

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MOI Top Ten Lists Top Ideas, Sorted by Category

Top 10 Companies With Hidden Assets Companies with assets that are unknown to or underappreciated by investors

Avistar, Cresud, KHD Humboldt Wedag, IDT, Playboy, Premier Exhibitions, Sonae, Steinway

Musical, Maui Land & Pineapple, Natuzzi

Top 10 Heavily Shorted Stocks Companies with large reported short interests

Chipotle, Fairfax Financial, Jefferies, Pzena Investment, Tempur-Pedic, CompuCredit, Greenlight Capital Re, Netflix, Sears Holdings, Sierra Wireless

Top 10 Super Investor Ideas

Companies owned by top investment managers

American Express, AmeriCredit, Austrian Post, Cresud, Fairfax Financial, Forest City Enterprises, Microsoft, Pfizer, SFK Pulp Fund, Steak n Shake

Top 10 Bargains In Financial Sector Financial services companies, broadly defined

American Express, AmeriCredit, Cowen, Jefferies, Legg Mason, Fairfax, Greenlight Capital Re, Nicholas Financial, Tree.com, Wells Fargo

Top 10 Stocks You’ve Never Heard Of

Companies that are unknown to most institutional investors

Charles & Colvard, Belzberg Technology, Caldwell Partners, Cimatron, Gravity, IDT, ITEX, McRae Industries, Optimal Group, Strathmore Minerals

Top 10 Foreign Companies Listed In U.S. or Canada Companies generating more than 50% of revenue outside the U.S.

Belzberg Technologies, Brazil Fast Foods, Cresud, Cryptologic, Gravity, Indosat, Nippon Telephone,

Retail Holdings, SFK Pulp Fund, Sony

Top 10 End-Of-The-Year Tax Selling Bargains

Companies that may be under selling pressure for tax-planning reasons

Ambassadors International, Boyd Gaming, Gravity, IDT, Jamba, Pinnacle Airlines, Playboy, Premier

Exhibitions, Select Comfort, Travelzoo

Top 10 Branded Businesses Companies that own widely recognized brands

American Eagle, American Express, Boeing, Microsoft, New York Times, Playboy, Princeton

Review, Sony, Sotheby’s, Steinway Musical

Top 10 Leveraged Speculations

Indebted companies with favorable risk-reward tradeoffs but also distinct possibility of permanent loss of capital

AmeriCredit, Boyd Gaming, Forest City Enterprises, Lear, Magna Entertainment, Office Depot, Select

Comfort, Sears Holdings, Servidyne, Sprint Nextel

Top 10 Renaissance Technologies Ideas Companies owned in size by the world’s top quantitative investment fund; number of shares held must have increased sequentially in order to qualify

DISH Network, EarthLink, Forest Labs, Netflix, RadioShack, Stamps.com, Syneron Medical, Walter

Industries, WellCare Health Plans, Wet Seal

Top 10 Explosive Stocks

De-leveraged companies with a 5% probability of 5x price gain in a year

Avistar, Gravity, IDT, Jamba, Mace Security, Premier Exhibitions, Select Comfort, Travelzoo,

Tree.com, UTStarcom

“Risk comes from not knowing what you’re doing.”

—Warren Buffett

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Top 10 Ideas For Activist Value Investors

Companies typically meeting criteria favored by activists, including lack of insider control, discount to intrinsic value, and recent underperformance

Adaptec, InfoSpace, Ingram Micro, Premier Exhibitions, Sierra Wireless, Target, Tech Data,

USA Mobility, Versant, Yahoo

Top 10 Ideas For Nano Cap Investors Companies with market value of less than $100 million

BSQUARE, Cimatron, IDT, ITEX, New Frontier Media, Playboy, Premier Exhibitions, Servidyne,

Travelzoo, Tree.com

Top 10 Ideas For Deep Value Investors

Companies meeting criteria favored by deep value investors, such as low price-to-book, price-to-earnings and enterprise value-to-revenue multiples

AmeriCredit, Cresud, EchoStar, KHD, IDT, Natuzzi, Office Depot, Sears Holdings, Syneron, UTStarcom

Top 10 Ideas For Micro Cap Investors Companies with market value of $100 million to $500 million

Boyd Gaming, Cresud, Diamond Management, Greenlight Re, Harvest Natural Resources, KHD,

Lear, Natuzzi, Syneron, UTStarcom

Top 10 Ideas For Cash Flow Investors

Companies trading at low multiples of trailing and/or forward free cash flow, or as Berkowitz might say, “cash gushers”

Contango Oil & Gas, DISH Network, EchoStar, ITEX, Microsoft

Top 10 Ideas For Small Cap Investors Companies with market value of $500 million to $2 billion

American Eagle, AmeriCredit, Contango Oil & Gas, Deckers Outdoor, EchoStar, Net 1 UEPS, Seagate,

Sotheby’s, Tempur-Pedic, Walter Industries

Top 10 Ideas For GARP Investors

Companies meeting criteria favored by Growth-At-a-Reasonable-Price (GARP) investors, including good long-term growth prospects and high earnings yield

American Eagle, Cadence Design, Garmin, MEMC Electronic Materials, Microsoft, Monster, Net 1

UEPS, NVIDIA, Seagate, Varian

Top 10 Ideas For Mid Cap Investors Companies with market value of $2 billion to $15 billion

DISH Network, Forest Labs, Leap Wireless, Linear Technology, McGraw-Hill, MetroPCS, Sears Holdings, Sprint Nextel, TDK, Toll Brothers

Top 10 Ideas For Special Situation Investors

Companies undergoing corporate change, with expected price performance driven by corporate events such as acquisitions, recaps or divestitures

Ascent Media, Axcelis, Brink’s, Digimarc, Discovery, John Bean Technologies, KHD, Porsche stub (ex.

Volkswagen), Tree.com, Yahoo

Top 10 Ideas For Large Cap Investors Companies with market value of more than $15 billion

American Express, Berkshire-Hathaway, Dell, Microsoft, Nippon Telephone, Pfizer, Sony, Target,

Wal-Mart, Wells Fargo

“Show me a guy who’s afraid to look bad, and I’ll show you a guy you can beat every time.”

—Lou Brock

“Never attribute to malice that which can be adequately explained by stupidity.”

—Unknown

Summary investment theses for selected Top 10 companies are included on the following pages.

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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) Institutional ownership: 15% EV / LTM revenue: 1.2x Net income: 1 1 1 (1) Insider ownership: 25% EV / LTM EBIT: n/m Diluted EPS: (0.11) (0.31) (0.31) (0.62) Insider buys/sales: 5/0 P / tangible book: 0.7x Capex: 1 0 1 1

FCF: (3) (1) (2) (5) Net cash: (13) (14) (12) (12) ST assets: 13 10 18 14 ST liabilities: 5 5 4 3 Intangibles: 9 9 9 10 Book value: 21 22 23 22 Total assets: 52 57 52 50 ROIC: -10% -15% -10% -10%

Business: Servidyne operates in two segments: Building Performance Efficiency and Real Estate. BPE provides energy efficiency solutions and sustainability programs to companies that own and operate buildings. Real Estate has engaged in real estate activities since 1960, including the acquisition, development, leasing, and sale of shopping centers, office buildings and land in the Southeast and Midwest. The company uses third-party property managers and leasing agents.

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 another $8-12 per share, based on 2-3x trailing revenue. BPE revenue grew 11% to $14 million in FY08. Comparable companies in the energy demand management and demand reduction space trade as high as five times revenue. Servidyne may have been overlooked by investors due to its small size, illiquidity, family control, and the fact that the company has posted losses on a GAAP basis.

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Ambassadors International (Nasdaq: AMIE) River & Ocean Cruising, Marina Construction (www.ambassadors.com)

Price: $1.25 ($0.23-$15.99) P/E FYE 12/31/07: n/m Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $14 million P/E FYE 12/31/08: n/a Revenue: 27 144 287 299 Enterprise value: $129 million P/E FYE 12/31/09: n/a GP: 0 91 152 176 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) Insider buys/sales: 0/0 P / tangible book: 0.2x Capex: 0 3 23 13

FCF: 4 (4) (18) (25) Net cash: 95 (30) (143) (115) ST assets: 119 121 132 105 ST liabilities: 26 68 125 102 Intangibles: 10 13 20 21 Book value: 109 116 88 84 Total assets: 135 256 377 309 ROIC: n/m 2% -12% -5%

Business: Ambassadors International operates four businesses: 1) Windstar Cruises, an international luxury cruise line with ~600 passenger berths; 2) Majestic America, a North American river cruising company with ~1,500 berths; 3) a global marina construction business; and 4) a small travel and event services (T&E) business.

Thesis: Ambassadors has put money-losing Majestic on the block. A sale would likely eliminate the company’s debt and leave it with up to $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 in 2007 and $5 million YTD. The marina construction business generated EBIT of $8 million in 2007 and $3 million YTD. T&E earned 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 EBIT), and T&E at $10 million (7x 2007 EBIT). Adding a pro forma net cash position of $40 million yields total equity value of $120 million, or $11 per share. The key risk is that the company is unsuccessful in selling Majestic, resulting in severe financial distress.

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Thanksgiving 2008


Nicholas Financial (Nasdaq: NICK) Subprime Auto Loans (www.nicholasfinancial.com)

Price: $2.60 ($2.01-$8.10) P/E FYE 3/31/08: 2.8x Year ended 3/31/06 3/31/07 3/31/08 9/30/08 Market value: $27 million P/E FYE 3/31/09: n/a Revenue: 43 47 50 52 Enterprise value: $132 million P/E FYE 3/31/10: n/a GP: 43 47 50 52 Shares out: 10.3 million P/E FYE 3/31/11: n/a EBIT: 17 19 16 17 Institutional ownership: 33% EV / LTM revenue: 2.5x Net income: 11 12 10 7 Insider ownership: 16% EV / LTM EBIT: 8.0x Diluted EPS: 1.01 1.13 0.94 0.64 Insider buys/sales: 1/0 P / tangible book: 0.3x Capex: 1 1 0 0


Business: Nicholas Financial is a subprime consumer finance company engaged in acquiring and servicing contracts for the purchase of new and used automobiles and light trucks. The company operates through 47 retail locations in twelve states, including Florida, Ohio, Georgia, and North Carolina. It also maintains close relationships with 1,500 dealers of new and used vehicles.

Thesis: Nicholas Financial has remained profitable throughout the 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 15-20% ROEs. Nicholas reported EPS of $0.94 in the fiscal year ended March 31, 2008, an extremely difficult year for subprime auto finance. We expect Nicholas to resume 10-20% EPS growth off the FY08 base when the business environment improves. The company has a relatively underleveraged balance sheet and solid management, with insiders and the Mahan family owning roughly one-fourth of the stock. 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.

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Jamba (Nasdaq: JMBA) Fruit Smoothie Retailing (www.jambajuice.com)

Price: $0.54 ($0.42-$5.67) P/E FYE 12/31/07: n/m Year ended 12/31/05 1/9/07 1/1/08 7/15/08 Market value: $28 million P/E FYE 12/31/08: n/m Revenue: 0 23 317 338 Enterprise value: $20 million P/E FYE 12/31/09: n/m GP: 0 17 233 250 Shares out: 52.6 million P/E FYE 12/31/10: n/a EBIT: (0) (8) (228) (327) 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) Insider buys/sales: 1/23 P / tangible book: 0.3x Capex: 0 5 52 49

FCF: 1 (6) (40) (40) Net cash: 1 87 23 9 ST assets: 1 105 57 27 ST liabilities: 14 117 72 57 Intangibles: 0 272 88 4 Book value: 115 286 184 90 Total assets: 129 468 276 165 ROIC: n/m n/m -600% -576%

Business: Founded in 1990, Jamba is the leading retailer of freshly blended fruit smoothies. It has 520 company-operated stores and 229 franchised stores in the U.S. Jamba introduced ready-to-drink beverages to grocery stores in partnership with Nestle in May 2008. It announced a management shakeup in August 2008, with both the CEO and CFO leaving. Former Safeway SVP James White agreed to become CEO on November 17.

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 enterprise value of roughly $27,000 per store, Jamba shares offer an interesting risk-reward tradeoff. The Jamba brand has strong name recognition and is associated with a healthy lifestyle. The company’s store base offers ample opportunity for rationalization, and we believe the company could be solidly profitable at a modestly lower store count. While Jamba has posted a large GAAP loss YTD, the vast majority of the loss has been due to special charges. With a new CEO in place, Jamba may be able to improve execution.

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Thanksgiving 2008


Select Comfort (Nasdaq: SCSS) Mattresses (www.selectcomfort.com)

Price: $0.51 ($0.44-$11.25) P/E FYE 12/29/07: 0.9x Year ended 12/31/05 12/30/06 12/29/07 9/27/08 Market value: $23 million P/E FYE 12/31/08: n/m Revenue: 690 806 799 668 Enterprise value: $77 million P/E FYE 12/31/09: n/m GP: 406 491 486 397 Shares out: 45.1 million P/E FYE 12/31/10: 2.0x EBIT: 69 73 44 (16) Institutional ownership: 71% EV / LTM revenue: 0.1x Net income: 44 47 28 (11) Insider ownership: 3% EV / LTM EBIT: n/m Diluted EPS: 0.76 0.85 0.57 (0.24) Insider buys/sales: 1/0 P / tangible book: 1.5x Capex: 26 31 44 41

FCF: 62 28 1 (41) Net cash: 68 47 (31) (54) ST assets: 116 103 79 60 ST liabilities: 106 98 149 145 Intangibles: 0 0 0 0 Book value: 121 116 24 15 Total assets: 240 229 191 180 ROIC: >100% >100% >100% -42%

Business: Founded in 1987, Select Comfort provides the Sleep Number bed, a line of adjustable-firmness mattresses featuring air-chamber technology, as well as foundations and accessories. Products are sold in 470 company-owned stores in the U.S.

Thesis: Select Comfort shares are down more than 95% in the past two years due to same-store sales contraction and operating losses. The company has felt the twin effects of lower consumer spending and 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. Nonetheless, Select Comfort offers exceptional value on a “normalized” earnings basis. The company generated combined EBIT of ~$275 million from 2003-07, or $55 million per year. It also generated strong cash from operations in that period, despite rapid growth. Unfortunately for the company, but perhaps fortunately for prospective investors, Select Comfort spent $132 million on repurchases in 2007, weakening the balance sheet just before demand imploded. They key question is whether the company can service $54 million of net debt.

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Mace Security International (Nasdaq: MACE) Personal and Enterprise Security Products (www.mace.com)

Price: $0.93 ($0.65-$2.08) P/E FYE 12/31/07: n/m Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $15 million P/E FYE 12/31/08: n/a Revenue: 46 43 47 51 Enterprise value: $7 million P/E FYE 12/31/00: n/a GP: 12 10 11 15 Shares out: 16.5 million P/E FYE 12/31/10: n/a EBIT: (3) (8) (10) (11) Institutional ownership: 8% EV / LTM revenue: 0.1x Net income: (5) (7) (7) 1 Insider ownership: 0% EV / LTM EBIT: n/m Diluted EPS: (0.37) (0.53) (0.59) (0.59) Insider buys/sales: 0/0 P / tangible book: 0.4x Capex: 1 1 1 1

FCF: 1 (4) (10) (10) Net cash: (15) (7) 3 8 ST assets: 25 45 33 34 ST liabilities: 10 18 15 12 Intangibles: 6 5 14 12 Book value: 62 57 54 52 Total assets: 96 88 75 66 ROIC: -5% -13% -21% -29%

Business: Mace operates in three segments: security, digital media marketing and car washes. The security segment provides surveillance products and Mace defense sprays. Digital media marketing was acquired in 2007 under the former CEO. New management may sell or discontinue the segment over time, as it has little synergy with the security business. The car wash segment is in the process of being liquidated, and most of the associated real estate has been sold.

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 cash position of $13 million gives investors the security and digital 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 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 result of value destruction by former CEO Lou Paolino. However, with Paolino’s firing in May 2008, Mace appears poised to unlock value.

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Thanksgiving 2008


Avistar Communications (Nasdaq: AVSR) Patent Licensing & Videoconferencing (www.avistar.com)

Price: $0.90 ($0.22-$1.70) P/E FYE 12/31/07: n/m Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $31 million P/E FYE 12/31/08: n/a Revenue: 7 13 12 8 Enterprise value: $41 million P/E FYE 12/31/00: n/a GP: 3 8 7 3 Shares out: 34.6 million P/E FYE 12/31/10: n/a EBIT: (6) (9) (3) (10) Institutional ownership: 14% EV / LTM revenue: 5.4x Net income: (5) (8) (3) (10) Insider ownership: 63% EV / LTM EBIT: n/m Diluted EPS: (0.15) (0.24) (0.09) (0.29) Insider buys/sales: 12/0 P / tangible book: n/m Capex: 0 0 1 0

FCF: (10) (8) (6) (13) Net cash: 11 5 (0) (10) ST assets: 15 12 8 10 ST liabilities: 9 14 16 19 Intangibles: 0 0 0 0 Book value: (4) (10) (10) (15) Total assets: 20 15 11 11 ROIC: n/m n/m n/m n/m

Business: Avistar is a company with intellectual property in the field of unified communications, a growth segment of the technology industry. The company sells desktop videoconferencing solutions and licenses a portfolio of 80 patents for inventions in video and network technology. Licensees are videoconferencing, rich media, and public networking companies, including Sony, Polycom, Tandberg, and Radvision.

Thesis: Avistar’s valuable patent portfolio may have gone unnoticed 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 appears focused on cutting costs and pursuing an aggressive patent licensing strategy. Avistar’s patent portfolio has apparently been appraised at several hundred million dollars by a patent valuation firm. While investors should not rely on this appraisal, it does suggest that a closer analysis of the patent portfolio may be warranted. We note that Leucadia has purchased a stake in Avistar, providing some validation of intrinsic value (we do note that Leucadia obtained a lien on the patent portfolio, protection that is unavailable to public investors).

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Steinway Musical Instruments (NYSE: LVB) Musical Instruments (www.steinwaymusical.com)

Price: $17.46 ($16.60-$30.58) P/E FYE 12/31/07: 9.8x Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $149 million P/E FYE 12/31/08: 8.1x Revenue: 387 385 406 415 Enterprise value: $298 million P/E FYE 12/31/09: 7.0x GP: 112 107 124 126 Shares out: 8.5 million P/E FYE 12/31/10: n/a EBIT: 34 9 35 28 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 Insider buys/sales: 0/0 P / tangible book: 1.2x Capex: 5 6 5 5


Business: Steinway is the largest domestic manufacturer of musical instruments. Its brands include Steinway & Sons in the high-end piano segment; Boston and Essex in the mid-priced piano segment; and Bach, Selmer, C.G. Conn, Leblanc, and others in band instruments.

Thesis: Steinway has real estate assets worth $200-300 million. The company owns a prime office building on W 57th Street in Manhattan—on the books for ~$25 million, estimated by management to be worth $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 York City is clearly inefficient, and the company already utilizes some Asian production. While management has shown no urgency in selling either piece of real estate, one or both assets may be monetized over time. The operating business has generated fairly steady adjusted EBITDA of ~$50 million per year. If we value this stream at 6x, we arrive at a combined fair enterprise value of $500-600 million. Subtracting ~$150 million of net debt leaves an equity value of $350-450 million, or $41-53 per share.

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Thanksgiving 2008


Pinnacle Airlines (Nasdaq: PNCL) Regional Airline (www.pncl.com)

Price: $3.45 ($1.88-$17.02) P/E FYE 12/31/07: 2.3x Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $62 million P/E FYE 12/31/08: 2.8x Revenue: 842 825 787 848 Enterprise value: $698 million P/E FYE 12/31/09: 1.8x GP: 284 286 367 409 Shares out: 18.1 million P/E FYE 12/31/10: n/a EBIT: 27 128 52 43 Institutional ownership: 81% EV / LTM revenue: 0.8x Net income: 26 78 35 6 Insider ownership: 2% EV / LTM EBIT: 16.3x Diluted EPS: 1.17 3.54 1.50 0.26 Insider buys/sales: 4/11 P / tangible book: 3.1x Capex: 13 4 24 37

FCF: 14 17 251 (25) Net cash: (62) (48) (66) (636) ST assets: 126 197 295 177 ST liabilities: 80 74 244 259 Intangibles: 33 32 45 33 Book value: 19 97 58 53 Total assets: 229 301 709 1,086 ROIC: 82% >100% 39% 12%

Business: Pinnacle operates 134 regional jet aircraft as Northwest Airlink and Delta Connection. The Colgan Air subsidiary, acquired for $20 million in 2007, operates 60 turboprop regional aircraft as Continental Connection, United 3 Express, and US Airways Express.

Thesis: Pinnacle’s normalized EPS may be $1-2. The stock has declined due to (1) airlines rationalizing their regional fleets as a result of high oil prices; (2) losses by Colgan due to Colgan’s assumption of 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 prices or load factors (Delta tried to cancel its long-term deal with Pinnacle but relented after minor concessions); (2) Colgan is transitioning to a fixed-margin model; and (3) the current environment improves Pinnacle’s negotiating leverage with pilots. The balance sheet includes a $193 million deferred revenue liability related to Northwest’s former bankruptcy. The liability flows into income at a 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).

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ITEX (OTC: ITEX) Barter Exchange for Small Businesses (www.itex.com)

Price: $0.44 ($0.37-$1.05) P/E FYE 7/31/08: 8.8x Year ended 7/31/06 7/31/07 7/31/08 7/31/08 Market value: $8 million P/E FYE 7/31/09: 3.1x Revenue: 15 14 16 16 Enterprise value: $7 million P/E FYE 7/31/10: n/a GP: 4 5 6 6 Shares out: 17.7 million P/E FYE 7/31/11: n/a EBIT: 1 2 2 2 Institutional ownership: n/a EV / LTM revenue: 0.5x Net income: 3 5 1 1 Insider ownership: 11% EV / LTM EBIT: 4.9x Diluted EPS: 0.18 0.25 0.05 0.05 Insider buys/sales: 0/0 P / tangible book: 1.0x Capex: 0 0 3 2

FCF: 2 2 (0) 0 Net cash: (0) 2 1 1 ST assets: 3 4 4 4 ST liabilities: 2 2 3 3 Intangibles: 3 3 5 5 Book value: 8 12 13 13 Total assets: 11 14 16 16 ROIC: >100% >100% >100% >100%

Business: ITEX is the largest barter exchange in North America, with 24,000 members and $250 million in transaction volume. ITEX helps small businesses conserve cash and generate incremental sales.

Thesis: ITEX may be worth $24 million, or $1.35 per share, based on 12x estimated forward FCF of $2 million. ITEX is a high-ROIC business with strong management and attractive organic growth and acquisition opportunities. Barriers to entry are high for a company its size, owing to 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 improved the value proposition, making membership attractive to most small businesses. With 24,000 members out of more than 25 million small businesses, the company has a long runway of growth. In December 2007, activist investor Sardar Biglari’s Western Sizzlin (Nasdaq: WEST) made an unsolicited offer of $1.02 in stock. ITEX remained independent, as most holders did not tender their shares.

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Thanksgiving 2008


Cowen Group (Nasdaq: COWN) Investment Banking (www.cowen.com)

Price: $5.50 ($4.60-$11.31) P/E FYE 12/31/07: n/m Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $78 million P/E FYE 12/31/08: n/m Revenue: 294 345 262 235 Enterprise value: -$23 million P/E FYE 12/31/09: 137.5x GP: 245 292 217 191 Shares out: 14.2 million P/E FYE 12/31/10: n/a EBIT: 12 17 (20) (73) Institutional ownership: 59% EV / LTM revenue: n/m Net income: 12 38 (11) (72) Insider ownership: 3% EV / LTM EBIT: n/m Diluted EPS: 0.94 2.92 (0.88) (6.34) Insider buys/sales: 10/0 P / tangible book: 0.5x Capex: 1 12 2 2

FCF: 44 377 (30) 23 Net cash: (142) (68) 113 102 ST assets: 0 0 0 0 ST liabilities: 0 0 0 0 Intangibles: 50 50 50 3 Book value: 374 218 209 149 Total assets: 785 684 349 228 ROIC: 9% 15% n/m n/m

Business: Founded in 1918, Cowen is a 500-person investment bank with franchises in health care, technology, media, telecom, consumer, defense, and alternative energy. Cowen is a top three healthcare investment bank in the U.S. The company was acquired by Societe Generale for $500+ million in 1998 and spun off in an IPO in 2006.

Thesis: Cowen has adjusted net cash of $135 million, or $9.50 per share, with investors being “paid” to own the investment bank. The 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” environment, and we believe the company should achieve a net margin of at least 5% in the next upcycle, resulting in net income of at least $12-15 million. If we value the company at 5x normalized earnings, we arrive at a total equity value of $195-210 million, or $14-15 per share. Long-time Cowen CEO Kim Fennebresque retired in March 2008 and resigned from the Board in June 2008. Given Cowen’s strong balance sheet, we would not be surprised to see former or current members of management propose a going-private transaction.

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Steak n Shake (NYSE: SNS) Restaurants (www.steaknshake.com)

Price: $3.91 ($3.72-$13.12) P/E FYE 9/24/08: n/m Year ended 9/27/06 9/26/07 9/24/08 9/24/08 Market value: $112 million P/E FYE 9/30/08: n/m Revenue: 639 654 610 610 Enterprise value: $275 million P/E FYE 9/30/09: n/m GP: 176 167 121 121 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) Insider ownership: 4% EV / LTM EBIT: n/m Diluted EPS: 1.00 0.42 (0.81) (0.81) Insider buys/sales: 29/7 P / tangible book: 0.4x Capex: 81 69 31 32

FCF: (11) (25) (7) (7) Net cash: (175) (188) (163) (163) ST assets: 31 48 61 61 ST liabilities: 83 95 76 76 Intangibles: 17 17 16 16 Book value: 287 304 284 284 Total assets: 543 565 520 520 ROIC: 10% 3% -8% -5%

Business: Steak n Shake is a full-service restauranteur known for “steakburgers.” The restaurants feature full-service dining areas, counter service, and drive-thru windows. The company has 436 company-owned and 69 franchised units operating in 21 states.

Thesis: Activist investor Sardar Biglari became CEO in August after prevailing in a proxy fight. Old management had been plagued by conflicts of interest and poor execution. Biglari’s success in taking 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 estate associated with restaurants. New management appears intent on cutting overhead and refranchising. The strategy promises to free up capital and turn the company into an asset-light franchisor of a brand that has gained acceptance over seven decades, primarily in the Midwest and Southeast. Potential proceeds from real estate sales could be used to repurchase stock or pay (special) dividends.

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Tree.com (Nasdaq: TREE) Online Real Estate Services and Lending Marketplace (www.lendingtree.com)

Price: $2.19 ($1.96-$11.10) P/E FYE 12/31/07: n/m Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $21 million P/E FYE 12/31/08: n/m Revenue: 421 477 346 231 Enterprise value: -$5 million P/E FYE 12/31/09: n/m GP: 355 403 273 167 Shares out: 9.4 million P/E FYE 12/31/10: n/a EBIT: 19 14 (540) (717) Institutional ownership: 11% EV / LTM revenue: n/m Net income: 6 9 (550) (727) Insider ownership: 1% EV / LTM EBIT: n/m Diluted EPS: 0.63 0.93 (59.01) (78.49) Insider buys/sales: 10/0 P / tangible book: 0.3x Capex: 18 13 9 5

FCF: (100) 62 224 21 Net cash: 0 (270) (54) 26 ST assets: 0 505 173 187 ST liabilities: 0 426 189 113 Intangibles: 0 725 249 75 Book value: 0 774 215 142 Total assets: 0 1,261 444 280 ROIC: n/m 8% -258% -2157%

Business: Tree.com operates two businesses: The lending business consists of LendingTree.com, GetSmart.com, and call centers, which match consumers with lenders and loan brokers. The segment also originates and funds home loans. The real estate business consists of a residential real estate brokerage that operates a website and offices in 14 markets under the brand RealEstate.com, REALTORS.

Thesis: Tree may be worth $200 million, or $21 per share, based on 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 assets, LendingTree.com and RealEstate.com, operate non capital-intensive businesses with attractive long-term prospects and name recognition. Tree was spun off from IAC/InterActiveCorp in August as part of a series of transactions involving several entities. Tree, due to its small size and participation in real estate and consumer lending, may have seen selling pressure from IAC/InterActiveCorp holders, while finding few incremental buyers. Among the buyers, however, have been Tree CEO Doug Lebda and CFO Matthew Packey.

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Magna Entertainment (Nasdaq: MECA) Horse Racing Venues (www.magnaent.com)

Price: $1.69 ($1.01-$35.20) P/E FYE 12/31/07: n/m Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $10 million P/E FYE 1/0/00: n/a Revenue: 527 574 626 596 Enterprise value: $416 million P/E FYE 12/30/00: n/a GP: 38 57 88 85 Shares out: 5.9 million P/E FYE 12/30/01: n/a EBIT: (94) (87) (111) (59) Institutional ownership: n/a EV / LTM revenue: 0.7x Net income: (105) (87) (114) (159) Insider ownership: 66% EV / LTM EBIT: n/m Diluted EPS: (17.35) (14.82) (19.75) (21.93) Insider buys/sales: 0/0 P / tangible book: 0.1x Capex: 123 80 74 47

FCF: (189) (141) (139) (114) Net cash: (484) (507) (417) (406) ST assets: 197 151 226 225 ST liabilities: 324 245 389 420 Intangibles: 110 112 110 110 Book value: 460 401 363 273 Total assets: 1,415 1,247 1,243 1,164 ROIC: -11% -11% -15% -9%

Business: Magna Entertainment is a large land owner and North America’s largest operator of horse racetracks. The company also operates off-track betting facilities and casinos in conjunction with some racetracks. It owns AmTote, a provider of totalisator services to the pari-mutuel industry, and XpressBet, an online wagering system. Magna has a 50% interest in HorseRacing TV, a 24-hour TV network, and TrackNet, a distributor of racing content.

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 net debt of ~$600 million. It is working to reduce debt by selling off real estate. We believe Magna deserves a closer look, as it is controlled by chairman and CEO Frank Stronach by virtue of his control of MI Developments (MIM). Stronach is also founder of Magna International (MGA), the large Canadian auto parts maker. Stronach appears committed to seeing Magna stay out of bankruptcy, creating a meaningful probability that shareholders will not be wiped out.

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Harvest Natural Resources (NYSE: HNR) Oil & Gas Operations (www.harvestnr.com)

Price: $6.66 ($5.81-$13.43) P/E FYE 12/31/07: 4.4x Year ended 12/31/05 12/31/06 12/31/07 9/30/08 Market value: $219 million P/E FYE 12/31/08: 17.5x Revenue: 237 60 11 11 Enterprise value: $101 million P/E FYE 12/31/09: 9.1x GP: 197 50 0 0 Shares out: 32.9 million P/E FYE 12/31/10: n/a EBIT: 105 1 (20) (27) 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 Insider buys/sales: 8/0 P / tangible book: 0.8x Capex: 16 2 1 18

FCF: 99 (26) (21) 21 Net cash: 158 43 112 118 ST assets: 240 200 154 134 ST liabilities: 62 82 43 16 Intangibles: 0 0 0 0 Book value: 298 281 314 286 Total assets: 401 468 414 363 ROIC: 55% 1% -278% -233%

Business: Harvest operates oil and natural gas properties in Venezuela and owns exploration properties worldwide.

Thesis: Harvest remains an orphaned stock due to investors’ fear of owning assets in Chavez-ruled Venezuela. While the political risk is real, much of it has played out. Venezuela has nationalized the oil and gas industry, forcing foreign companies to enter into JVs majority-owned by state oil company PDVSA. As such, Harvest is essentially a 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 per barrel of proved reserves and less than $1 per barrel of 3P reserves (assumes zero value for global exploration projects). Despite 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 accelerate as Harvest boosts production. The company has repurchased $29 million of stock YTD. We value the business, exploration assets and net cash at $800 million or $24 per share.

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Gravity (Nasdaq: GRVY) Software & Programming (www.gravity.co.kr)

Price: $0.67 ($0.36-$3.80) P/E FYE 12/31/07: n/m Year ended 12/31/05 12/31/06 12/31/07 6/30/08 Market value: $19 million P/E FYE 1/0/00: n/a Revenue: 43 33 32 33 Enterprise value: -$25 million P/E FYE 12/30/00: n/a GP: 30 19 17 15 Shares out: 27.9 million P/E FYE 12/30/01: n/a EBIT: (2) (14) (18) (15) Institutional ownership: 20% EV / LTM revenue: n/m Net income: (2) (18) (19) (17) Insider ownership: 50% EV / LTM EBIT: n/m Diluted EPS: (0.09) (0.67) (0.67) (0.54) Insider buys/sales: 0/0 P / tangible book: 0.4x Capex: 12 2 8 (2)

FCF: 3 (3) (16) (26) Net cash: 75 65 50 44 ST assets: 88 71 58 54 ST liabilities: 16 13 8 7 Intangibles: 11 10 11 11 Book value: 97 79 60 60 Total assets: 116 98 78 76 ROIC: -16% -481% -683% -267%

Business: Gravity is a leading Asian developer of Internet-based games commonly referred to as MMORPGs (massively multiplayer online role-playing games). Gravity’s flagship game Ragnarok Online (RO) is one of the most popular Asian MMORPGs of all time.

Thesis: Gravity may be worth $160 million, or $5.70 per ADR, based 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 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 funds have been engaged in a battle over Gravity’s corporate governance practices (Gravity is majority-owned by a Japanese public company with ties to Softbank). While Gravity’s market value reflects investor despondency regarding poor execution and poor treatment of shareholders, the market value ignores the fact that RO2 is in open beta testing and appears likely to come to market within a few months. In addition, the company turned profitable in Q3 due to efficiency improvement measures implemented by new management.

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Portfolios With Signal Value Revealing the Top Ideas of Top Investors

“Signal value” as opposed to “noise.” We present the

holdings of some of the world’s top investors. We look for

investors who have amassed impressive track records over

long periods of time. We choose these investors carefully

to avoid the noise inherent in most 13F-HR filings.

Top investors included in this section:

• William Ackman, Pershing Square

• Bruce Berkowitz, Fairholme

• Warren Buffett, Berkshire Hathaway

• Ian Cumming & Joe Steinberg, Leucadia

• David Einhorn, Greenlight

• Glenn Greenberg, Chieftain

• Mason Hawkins, Southeastern

• Chris Hohn, Children’s Investment Fund

• Carl Icahn, Icahn

• Seth Klarman, Baupost

• Eddie Lampert, ESL

• Warren Lichtenstein, Steel Partners

• Dan Loeb, Third Point

• Steve Mandel, Lone Pine

• Mohnish Pabrai, Pabrai Funds

• Rich Pzena, Pzena Investment

• Prem Watsa, Fairfax

• Marty Whitman, Third Avenue

Missing your favorite Super Investor? Let us know at [email protected].

MOI Signal Rank answers the question, “What are this

investor’s top ten ideas right now?” Rather than simply

presenting each investor’s largest holdings as of the recently

filed quarter end, the MOI’s proprietary methodology ranks

the companies in each investor’s portfolio based on the

investor’s current level of conviction in each holding, as

judged by the MOI.

Our proprietary methodology takes into account

a number of variables, including the size of a position in an

investor’s portfolio, the size of a position relative to the

market value of the corresponding company, the most recent

quarterly change in the number of shares owned, and the

change in the stock price of a position since the most recent

quarterly filing date.

For example, an investor might have the most

conviction in a position that is only the tenth-largest

position in such investor’s portfolio. This might be the case

if an investor invests in a small company, resulting in a

holding that is simply too small to rank highly based on size

alone. On the other hand, such a holding might represent

19.9% of the shares outstanding of the subject company,

suggesting a high level of conviction. Our estimate of the

conviction level would rise further if the subject company

has a 20% poison-pill threshold, thereby suggesting that the

investor has bought as much of the subject company as is

practically feasible.

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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)

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 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%

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Portfolio with Signal Value: David Einhorn (Greenlight) MOI Market Price ($) Shares Owned Holdings


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 ($) Shares Owned Holdings Signal Value Latest Filing ∆ Since Latest ∆ Since as % of Rank Company Ticker ($mn) Date Date Filing Filing 6/30/08 Co. Fund

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%

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Portfolio with Signal Value: Carl Icahn MOI Market Price ($) Shares Owned Holdings


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%

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Portfolio with Signal Value: Dan Loeb (Third Point) MOI Market Price ($) Shares Owned Holdings


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%

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Portfolio with Signal Value: Prem Watsa (Fairfax) MOI Market Price ($) Shares Owned Holdings


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%

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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

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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]

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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 │ Sorted by: Largest price decline since yearend 2006 1

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.

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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 $100 million │ Sorted by: Largest price decline since yearend 2006 1


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 5 XL Capital Ltd. / XL 6.14 2,031 (389) -88% -91% -91% -93% .3x 2x 6 Chico's FAS, Inc. / CHS 1.99 351 74 -78% -90% -95% -70% .4x 20x 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 All price performance numbers exclude dividends.

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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 EPS and next year’s EPS ► Market value more than $100 million │ Sorted by: Largest price decline since yearend 2006 1


1 XL Capital Ltd. / XL 6.14 2,031 (389) -88% -91% -91% -93% .3x 2x 2 Chico's FAS, Inc. / CHS 1.99 351 74 -78% -90% -95% -70% .4x 20x 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 All price performance numbers exclude dividends.

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Thanksgiving 2008


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]

of 401

Thanksgiving 2008


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]

of 401

Thanksgiving 2008


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]

of 401

Thanksgiving 2008


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]

of 401

Thanksgiving 2008


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]

of 401

Thanksgiving 2008


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]

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Thanksgiving 2008


Greenblatt’s “Magic Formula” #2: Good Businesses at Good Prices (Based on This FY Ests) Screening criteria: ► Market value more than $100 million ► ADRs and banks excluded │ Sorted by: Equal-weighted average of two 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% - -

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Thanksgiving 2008


Greenblatt’s “Magic Formula” #3: Good Businesses at Good Prices (Based on Next FY Ests) Screening criteria: ► Market value more than $100 million ► ADRs and banks excluded │ Sorted by: Equal-weighted average of two 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 # # Company Ticker ($) High ($mn) ($mn) Share Buys Sells 1 Finisar Corporation FNSR 0.48 323% 227 349 560% 33% - - 2 Technitrol, Inc. TNL 4.64 557% 190 505 364% 34% 5 - 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 - 5 Innophos Holdings, Inc. IPHS 16.71 148% 351 611 158% 43% 1 23 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 8 ON Semiconductor Corp. ONNN 3.50 210% 1,438 2,241 744% 25% - 7 9 Chart Industries, Inc. GTLS 9.81 468% 279 373 33228% 24% - 15

10 Vanguard Natural Resources, VNR 8.01 131% 101 199 192% 28% 5 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% - - 13 Steel Dynamics, Inc. STLD 8.12 404% 1,475 4,329 148% 33% 7 - 14 ION Geophysical Corporation IO 3.91 367% 389 740 297% 24% 2 11 15 Coventry Health Care, Inc. CVH 12.59 407% 1,876 2,247 662% 23% 10 1 16 General Steel Holdings, Inc. GSI 3.97 320% 143 465 95% 34% - - 17 Advance America, Cash Advanc AEA 1.88 469% 115 307 92% 34% - 50 18 Mosaic Company, The MOS 32.47 403% 14,425 13,725 86% 35% 4 2 19 Cliffs Natural Resources Inc CLF 20.27 502% 2,301 2,336 75% 51% - - 20 ArvinMeritor, Inc. ARM 3.80 377% 280 1,140 81% 36% - 1 21 Quiksilver, Inc. ZQK 1.62 637% 207 1,162 71% 47% 3 1 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 24 BE Aerospace, Inc. BEAV 8.29 552% 825 1,834 112% 23% 13 1 25 Owens-Illinois, Inc. OI 20.16 201% 3,367 6,380 295% 20% 3 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 28 China Security & Surveillanc CSR 7.70 203% 353 445 70% 28% 17 - 29 CIGNA Corporation CI 12.95 340% 3,519 4,846 63% 32% 1 20 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 - 34 GrafTech International Ltd. GTI 4.79 484% 570 702 50% 44% - 5 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 40 Superior Energy Services, In SPN 16.75 245% 1,299 1,882 56% 25% 3 2 41 Embarq Corporation EQ 30.16 73% 4,287 10,044 1723% 16% - - 42 Flextronics International Lt FLEX 3.06 305% 2,477 4,219 46% 34% - 6 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 49 EMCOR Group, Inc. EME 13.80 161% 904 763 100% 18% - 10 50 China Sky One Medical, Inc. CSKI 10.09 69% 165 114 51% 24% - -

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Thanksgiving 2008


Greenblatt’s “Magic Formula” #4: Good Businesses at Good Prices (Based on 2112 EPS Ests) Screening criteria: ► Market value more than $100 million ► ADRs and banks excluded │ Sorted by: Equal-weighted average of two 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 # # Company Ticker ($) High ($mn) ($mn) Share Buys Sells 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 - 6 Chart Industries, Inc. GTLS 9.81 468% 279 373 52809% 38% - 15 7 Massey Energy Company MEE 16.20 491% 1,379 1,986 192% 148% 4 13 8 ON Semiconductor Corp. ONNN 3.50 210% 1,438 2,241 1082% 37% - 7 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% - - 13 Innophos Holdings, Inc. IPHS 16.71 148% 351 611 183% 50% 1 23 14 China Security & Surveillanc CSR 7.70 203% 353 445 149% 60% 17 - 15 Coventry Health Care, Inc. CVH 12.59 407% 1,876 2,247 923% 32% 10 1 16 BE Aerospace, Inc. BEAV 8.29 552% 825 1,834 199% 41% 13 1 17 Technitrol, Inc. TNL 4.64 557% 190 505 364% 34% 5 - 18 Advance America, Cash Advanc AEA 1.88 469% 115 307 139% 52% - 50 19 Steel Dynamics, Inc. STLD 8.12 404% 1,475 4,329 172% 39% 7 - 20 Sohu.com Inc. SOHU 43.32 111% 1,669 1,390 209% 36% - 4 21 Owens-Illinois, Inc. OI 20.16 201% 3,367 6,380 457% 31% 3 2 22 Quiksilver, Inc. ZQK 1.62 637% 207 1,162 106% 70% 3 1 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% - - 26 ArvinMeritor, Inc. ARM 3.80 377% 280 1,140 114% 50% - 1 27 MercadoLibre, Inc. MELI 10.27 690% 455 443 694% 28% - 10 28 Vanguard Natural Resources, VNR 8.01 131% 101 199 216% 32% 5 1 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 35 Flextronics International Lt FLEX 3.06 305% 2,477 4,219 81% 59% - 6 36 Superior Energy Services, In SPN 16.75 245% 1,299 1,882 93% 41% 3 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 41 CIGNA Corporation CI 12.95 340% 3,519 4,846 87% 44% 1 20 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 47 GrafTech International Ltd. GTI 4.79 484% 570 702 70% 61% - 5 48 Cliffs Natural Resources Inc CLF 20.27 502% 2,301 2,336 75% 51% - - 49 EMCOR Group, Inc. EME 13.80 161% 904 763 152% 28% - 10 50 Transocean Inc. RIG 70.89 130% 22,626 36,188 98% 34% - 3

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Thanksgiving 2008


Industry Browsers: Overview of Trading Multiples and EPS Growth Estimates 4,5

P/E EPS Growth Ests

#

Cos

Total MV

($bn)

TopCo.

($bn)

P/Tang.Book

EV/LTMRev.

EV/LTMEBIT

LastFY

Act.

This FY

Est.

Next FY

Est.

ThisFY

Est.

NextFY

Est. 5-YrEst.

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.

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Industry Browsers: Overview of Trading Multiples and EPS Growth Estimates (continued)

P/E EPS Growth Ests

#

Cos

Total MV

($bn)

TopCo.

($bn)

P/Tang.Book

EV/LTMRev.

EV/LTMEBIT

LastFY

Act.

This FY

Est.

Next FY

Est.

ThisFY

Est.

NextFY

Est. 5-YrEst.

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%

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Thanksgiving 2008


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]

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Thanksgiving 2008


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]

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Thanksgiving 2008


Basic Materials: Chemicals (Plastics and Rubbers) – 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 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 Average (market value-weighted) 1.0x 11x 12x 11x 12x 15.4x Median 1.0x 11x 10x 9x 9x 1.4x

Basic Materials: Chemicals (Plastics and Rubbers) – 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 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

(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 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 (equal-weighted) .4x 9x 12x 12x 10x 8.9x Average (market value-weighted) .4x 6x 9x 10x 10x 3.6x Median .4x 9x 6x 12x 9x 1.5x

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Thanksgiving 2008


Basic Materials: Fabricated Plastic & Rubber – 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 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

(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 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 Average (equal-weighted) 3.6x 29x 19x 15x 10x 1.5x Average (market value-weighted) 2.1x 15x 7x 8x 7x 1.3x Median 2.7x 27x 7x 11x 8x 1.3x

Basic Materials: Gold & Silver – 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 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

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Thanksgiving 2008


Basic Materials: Metal Mining – 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 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 Average (equal-weighted) 1.0x 5x 5x 5x 10x 1.6x Average (market value-weighted) 1.7x 5x 6x 5x 6x 3.0x Median .7x 4x 4x 6x 7x 1.2x

Basic Materials: Metal Mining – 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 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

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Thanksgiving 2008


Basic Materials: Containers and Packaging – 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 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 Average (equal-weighted) 1.0x 11x 14x 11x 10x 4.1x Average (market value-weighted) .9x 10x 14x 11x 10x 2.8x Median .8x 9x 11x 11x 10x 2.6x

Basic Materials: Containers and Packaging – 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 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

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Thanksgiving 2008


Basic Materials: Forestry & Wood Products – 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 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 Average (equal-weighted) 1.1x 39x 16x 37x 28x 1.1x Average (market value-weighted) 1.4x 6x 4x 6x 6x 1.4x Median .7x 39x 16x 37x 28x 1.0x

Basic Materials: Forestry & Wood Products – 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 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

(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 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 Average (equal-weighted) .9x 6x 9x 9x 9x 6.1x Average (market value-weighted) 2.0x 10x 9x 9x 8x 7.5x Median .5x 5x 8x 7x 7x 1.6x

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Thanksgiving 2008


Basic Materials: Misc. Fabricated Products – 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 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

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Thanksgiving 2008


Basic Materials: Iron & Steel – 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 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 Average (equal-weighted) .5x 4x 5x 4x 5x 1.3x Average (market value-weighted) .6x 4x 5x 4x 5x 1.0x Median .4x 3x 5x 4x 4x 1.0x

Basic Materials: Iron & Steel – 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 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

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Thanksgiving 2008


Basic Materials: Paper & Paper Products – 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 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 Average (equal-weighted) .8x 12x 13x 30x 9x 2.0x Average (market value-weighted) 1.3x 11x 12x 14x 11x 7.7x Median .7x 11x 9x 8x 8x 1.0x

Basic Materials: Paper & Paper Products – 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 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

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Thanksgiving 2008


Capital Goods: Aerospace and Defense – 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 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 Average (equal-weighted) 1.0x 40x 13x 10x 10x 5.4x Average (market value-weighted) .8x 8x 10x 9x 8x 4.7x Median .7x 6x 10x 8x 7x 3.4x

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Thanksgiving 2008


Capital Goods: Aerospace and Defense – 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 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

(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 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 Average (equal-weighted) 1.2x 12x 9x 15x 16x 2.4x Average (market value-weighted) 1.3x 8x 7x 12x 13x 2.6x Median 1.0x 10x 9x 17x 16x 1.6x

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Thanksgiving 2008


Capital Goods: Construction (Raw Materials) – 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 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

(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 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 Average (equal-weighted) .8x 9x 12x 28x 12x 2.6x Average (market value-weighted) 1.7x 8x 10x 15x 11x 3.0x Median .5x 7x 8x 8x 9x 1.3x

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Thanksgiving 2008


Capital Goods: Construction (Supplies and Fixtures) – 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 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

(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 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 Average (equal-weighted) .7x 6x 9x 7x 6x 2.2x Average (market value-weighted) 1.0x 8x 8x 6x 7x 2.8x Median .8x 7x 9x 7x 6x 1.8x

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Thanksgiving 2008


Capital Goods: Construction and Agricultural Machinery – 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 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

(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 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 Average (equal-weighted) .4x 14x 31x 44x 24x 1.6x Average (market value-weighted) .3x 7x 18x 24x 20x 1.7x Median .3x 14x 29x 44x 17x 1.7x

Capital Goods: Mobile Homes and RVs – 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 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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Thanksgiving 2008


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Thanksgiving 2008


Capital Goods: Construction Services – 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 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 Average (equal-weighted) .6x 8x 17x 11x 9x 1.6x Average (market value-weighted) .8x 6x 12x 9x 9x 1.7x Median .5x 5x 11x 8x 7x 1.4x

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Thanksgiving 2008


Capital Goods: Construction Services – 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 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

of 401

Thanksgiving 2008


Capital Goods: Miscellaneous Capital Goods – 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 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 Average (equal-weighted) .9x 7x 11x 10x 9x 3.0x Average (market value-weighted) .9x 8x 9x 8x 8x 2.6x Median .7x 7x 9x 9x 9x 2.5x

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Thanksgiving 2008


Capital Goods: Miscellaneous Capital Goods – 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 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

of 401

Thanksgiving 2008


Conglomerates – 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 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 Average (equal-weighted) 1.1x 9x 9x 15x 10x 8.2x Average (market value-weighted) 2.2x 16x 10x 9x 9x 12.2x Median .9x 8x 9x 9x 10x 5.2x

Conglomerates – 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 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

of 401

Thanksgiving 2008


Consumer Cyclical: Apparel and Accessories – 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 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 Average (equal-weighted) 1.0x 10x 10x 8x 7x 3.0x Average (market value-weighted) 1.1x 7x 10x 9x 8x 3.3x Median .7x 7x 9x 7x 7x 2.2x

Consumer Cyclical: Apparel and Accessories – 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 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

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Thanksgiving 2008


Consumer Cyclical: Appliances and Tools – 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 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 Average (equal-weighted) .8x 22x 13x 20x 11x 4.8x Average (market value-weighted) .7x 10x 10x 10x 9x 4.1x Median .8x 9x 10x 8x 9x 4.2x

Consumer Cyclical: Appliances and Tools – 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 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

(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 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 (equal-weighted) .8x 8x 11x 14x 12x 1.2x Average (market value-weighted) .3x 6x 9x 12x 10x .9x Median .3x 7x 10x 12x 11x 1.0x

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Consumer Cyclical: Audio and Video Equipment – 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 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

(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 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 Average (equal-weighted) .5x 8x 6x 7x 8x 1.3x Average (market value-weighted) .7x 10x 5x 13x 13x .8x Median .4x 8x 5x 5x 7x .9x

Consumer Cyclical: Auto and Truck Manufacturers – 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 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

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Consumer Cyclical: Auto Parts – Valuation

Price 52-Wk MV EV LTM LTM FY FY FY Tang. Company / Ticker ($) Low High ($mn) ($mn) Rev. EBIT Act. Est. Est. Book 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 Average (equal-weighted) .5x 7x 14x 8x 11x 4.6x Average (market value-weighted) .6x 7x 12x 9x 10x 5.5x Median .4x 7x 8x 8x 9x 1.2x

Consumer Cyclical: Auto Parts – 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 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

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Consumer Cyclical: Footwear – 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 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 Average (equal-weighted) .5x 12x 11x 87x 13x 1.6x Average (market value-weighted) 1.0x 9x 12x 22x 10x 3.0x Median .4x 7x 11x 10x 9x 1.2x

Consumer Cyclical: Footwear – 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 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

(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 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 Average (equal-weighted) .6x 8x 11x 21x 18x 2.1x Average (market value-weighted) .7x 11x 17x 15x 14x 1.6x Median .5x 7x 7x 11x 10x 1.4x

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Consumer Cyclical: Furniture and Fixtures – 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 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

(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 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 Average (equal-weighted) 1.0x 11x 10x 14x 12x 3.8x Average (market value-weighted) 1.3x 7x 10x 10x 10x 4.8x Median .6x 8x 10x 10x 9x 1.6x

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Consumer Cyclical: Recreational Products – 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 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

(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 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 Average (equal-weighted) 2.4x 16x 17x 14x 13x 6.5x Average (market value-weighted) 3.3x 16x 18x 17x 16x 8.0x Median 2.0x 16x 16x 14x 12x 3.7x

Consumer Non-Cyclical: Alcoholic Beverages – 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 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

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Thanksgiving 2008


Consumer Non-Cyclical: Non-Alcoholic Beverages – 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 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 Average (equal-weighted) 1.4x 11x 29x 12x 11x 6.2x Average (market value-weighted) 1.7x 8x 17x 14x 13x 8.2x Median 1.2x 8x 14x 11x 10x 4.4x

Consumer Non-Cyclical: Non-Alcoholic Beverages – 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 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

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Thanksgiving 2008


Consumer Non-Cyclical: Crops – 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 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 Average (equal-weighted) 1.2x 9x 12x 9x 8x 1.8x Average (market value-weighted) 1.6x 10x 14x 9x 9x 3.7x Median .5x 10x 11x 8x 7x 1.2x

Consumer Non-Cyclical: Crops – 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 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

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Thanksgiving 2008


Consumer Non-Cyclical: Food Processing – 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 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 Average (equal-weighted) 1.1x 14x 18x 18x 15x 5.8x Average (market value-weighted) 1.4x 11x 15x 13x 14x 1.1x Median .9x 13x 16x 14x 13x 2.6x

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Thanksgiving 2008


Consumer Non-Cyclical: Food Processing – 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 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

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Thanksgiving 2008


Consumer Non-Cyclical: Personal and Household Products – 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 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 Average (equal-weighted) 1.2x 11x 16x 12x 11x 8.6x Average (market value-weighted) 2.4x 12x 17x 15x 15x 1.8x Median 1.0x 10x 17x 12x 12x 4.6x

Consumer Non-Cyclical: Personal and Household Products – 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 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

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Thanksgiving 2008


Consumer Non-Cyclical: Tobacco – 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 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 Average (equal-weighted) 2.6x 9x 14x 13x 12x 22.9x Average (market value-weighted) 2.3x 9x 14x 12x 11x 6.2x Median 1.9x 8x 13x 12x 11x 22.9x

Consumer Non-Cyclical: Tobacco – 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 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

(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 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 Average (equal-weighted) 1.3x 12x 17x 16x 4x 2.1x Average (market value-weighted) 1.4x 9x 17x 10x 4x 2.2x Median 1.0x 9x 14x 8x 4x 2.5x

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Thanksgiving 2008


Energy: Coal – 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 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

(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 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 Average (equal-weighted) 2.1x 5x 8x 8x 6x 1.6x Average (market value-weighted) .6x 4x 8x 6x 7x 1.9x Median .6x 4x 7x 5x 6x 1.2x

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Thanksgiving 2008


Energy: Oil and Gas (Integrated) – 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 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

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Thanksgiving 2008


Energy: Oil and Gas Operations (I of II) – 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 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 Average (equal-weighted) 3.0x 8x 23x 9x 10x 1.6x Average (market value-weighted) 2.2x 6x 16x 8x 10x 1.5x Median 2.2x 7x 12x 8x 8x 1.4x

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Thanksgiving 2008


Energy: Oil and Gas Operations (II of II) – 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 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 Average (equal-weighted) 5.1x 11x 15x 13x 9x 3.1x Average (market value-weighted) 3.1x 8x 12x 12x 10x 3.7x Median 2.0x 6x 12x 7x 7x 1.0x

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Thanksgiving 2008


Energy: Oil Well Services and Equipment – 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 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 Average (equal-weighted) 1.5x 6x 16x 7x 7x 1.9x Average (market value-weighted) 1.7x 6x 15x 8x 7x 3.0x Median 1.1x 5x 7x 7x 6x 1.5x

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Thanksgiving 2008


Financial: Consumer Financial Services – Valuation

(Sorted by market value) P/E 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

(Sorted by market value) P/E Move to Last This Next P/ Price 52-Wk MV FY FY FY Tang. Company / Ticker ($) Low High ($mn) Act. Est. Est. Book 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 Average (equal-weighted) 15x 14x 12x 4.5x Average (market value-weighted) 14x 12x 10x 3.1x Median 15x 15x 12x 1.6x

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Thanksgiving 2008


Financial: Insurance (Accident and Health) – Valuation

(Sorted by market value) P/E Move to Last This Next P/ Price 52-Wk MV FY FY FY Tang. Company / Ticker ($) Low High ($mn) Act. Est. Est. Book 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 Average (equal-weighted) 8x 7x 6x 4.1x Average (market value-weighted) 8x 7x 7x 2.3x Median 6x 7x 6x 1.4x

Financial: Insurance (Life) – Valuation

(Sorted by market value) P/E Move to Last This Next P/ Price 52-Wk MV FY FY FY Tang. Company / Ticker ($) Low High ($mn) Act. Est. Est. Book 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 Average (equal-weighted) 6x 7x 6x 1.0x Average (market value-weighted) 8x 13x 10x 1.9x Median 5x 5x 4x .7x

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Thanksgiving 2008


Financial: Insurance (Property and Casualty) – Valuation

(Sorted by market value) P/E Move to Last This Next P/ Price 52-Wk MV FY FY FY Tang. Company / Ticker ($) Low High ($mn) Act. Est. Est. Book 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 (equal-weighted) 7x 10x 8x 1.1x Average MV-weighted) 8x 12x 11x 1.4x Median 6x 9x 8x 1.0x

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Thanksgiving 2008


Financial: Investment Services – Valuation

(Sorted by market value) P/E Move to Last This Next P/ Price 52-Wk MV FY FY FY Tang. Company / Ticker ($) Low High ($mn) Act. Est. Est. Book 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 (equal-weighted) 22x 12x 11x 4.9x Average (MV-weighted) 9x 7x 9x 5.7x Median 10x 10x 9x 1.7x

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Thanksgiving 2008


Financial: Miscellaneous Financial Services – 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 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 Average (equal-weighted) 12.4x 16x 31x 6x 11x 5.2x Average (market value-weighted) 7.8x 10x 14x 7x 9x 9.9x Median 4.5x 9x 10x 6x 6x .7x

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Thanksgiving 2008


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 Average (equal-weighted) 11x 15x 11x 2.1x Average (market value-weighted) 8x 11x 9x 2.9x Median 8x 9x 8x 1.8x

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Thanksgiving 2008


Financial: Regional Banks (I of III) – 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 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 Average (equal-weighted) 15x 17x 35x 2.0x Average (MV-weighted) 12x 12x 17x 1.3x Median 11x 13x 13x 1.9x

of 401

Thanksgiving 2008


Financial: Regional Banks (II of III) – 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 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 Average (equal-weighted) 17x 17x 16x 1.9x Average (MV-weighted) 17x 15x 15x 2.0x Median 14x 15x 15x 1.9x

of 401

Thanksgiving 2008


Financial: Regional Banks (III of III) – 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 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 Average (equal-weighted) 13x 39x 16x 1.5x Average (MV-weighted) 12x 27x 15x 1.5x Median 11x 14x 13x 1.5x

of 401

Thanksgiving 2008


Financial: S&Ls and Savings 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 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 - - Average (equal-weighted) 37x 28x 26x 1.7x Average (MV-weighted) 31x 26x 22x 2.0x Median 29x 19x 17x 1.7x

of 401

Thanksgiving 2008


Healthcare: Biotechnology and Drugs – 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 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 Average (equal-weighted) 4.1x 37x 34x 26x 16x 10.0x Average (market value-weighted) 4.8x 18x 28x 19x 15x 7.4x Median 2.8x 16x 22x 15x 13x 6.9x

of 401

Thanksgiving 2008


Healthcare: Healthcare Facilities – 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 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 (equal-weighted) 1.2x 11x 21x 15x 15x 3.7x Average (market value-weighted) 1.5x 10x 18x 14x 14x .5x Median 1.2x 9x 16x 15x 13x 2.4x

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Thanksgiving 2008


Healthcare: Major Drugs – 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 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 Average (equal-weighted) 2.4x 11x 16x 11x 10x 14.9x Average (market value-weighted) 2.5x 10x 16x 11x 11x 15.6x Median 2.3x 11x 16x 10x 9x 4.8x

Healthcare: Major Drugs – 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 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

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Thanksgiving 2008


Healthcare: Medical Equipment and Supplies – 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 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 Average (equal-weighted) 2.6x 18x 58x 78x 22x 7.8x Average (market value-weighted) 2.8x 15x 22x 25x 15x 10.4x Median 2.1x 13x 21x 16x 14x 5.5x

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Thanksgiving 2008


Healthcare: Medical Equipment and Supplies – 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 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

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Thanksgiving 2008


Services: Advertising – 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 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 Average (equal-weighted) 1.3x 7x 15x 19x 7x 3.7x Average (market value-weighted) 1.0x 7x 11x 16x 7x .6x Median .8x 7x 8x 9x 7x 1.9x

Services: Broadcasting and Cable TV – 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 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 Average (equal-weighted) 2.0x 20x 34x 15x 28x 7.5x Average (market value-weighted) 1.8x 13x 14x 13x 14x 5.5x Median 1.8x 12x 11x 11x 9x 1.9x

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Thanksgiving 2008


Services: Business Services (I of II) – 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 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 Average (equal-weighted) 1.4x 11x 15x 16x 30x 9.6x Average (market value-weighted) 1.4x 8x 13x 13x 13x 12.8x Median 1.3x 9x 14x 12x 11x 3.7x

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Thanksgiving 2008


Services: Business Services (II of II) – 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 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 Average (equal-weighted) .8x 8x 13x 13x 18x 4.4x Average (market value-weighted) .8x 8x 13x 12x 16x 3.0x Median .5x 7x 10x 10x 11x 2.0x

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Thanksgiving 2008


Services: Casinos and Gaming – 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 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 Average (equal-weighted) 1.5x 15x 11x 16x 34x 2.9x Average (market value-weighted) 2.0x 13x 12x 17x 37x 1.7x Median 1.5x 9x 9x 11x 11x 1.3x

Services: Casinos and Gaming – 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 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

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Thanksgiving 2008


Services: Communications Services (I of II) – 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 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 Average (equal-weighted) 2.3x 15x 19x 14x 40x 7.6x Average (market value-weighted) 2.1x 10x 13x 10x 15x 3.7x Median 1.6x 8x 9x 9x 9x 2.5x

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Thanksgiving 2008


Services: Communications Services (II of II) – 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 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 Average (equal-weighted) 2.0x 19x 25x 27x 20x 2.0x Average (market value-weighted) 2.6x 18x 13x 17x 12x 1.0x Median 1.7x 13x 17x 19x 14x 1.6x

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Thanksgiving 2008


Services: Hotels and Motels – 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 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 Average (equal-weighted) 1.7x 14x 13x 10x 14x 1.4x Average (market value-weighted) 1.3x 10x 10x 9x 11x .2x Median 1.8x 12x 7x 8x 11x .6x

Services: Hotels and Motels – 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 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

(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 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 Average (equal-weighted) 1.6x 11x 15x 17x 13x 2.4x Average (market value-weighted) 1.9x 11x 10x 14x 13x 1.1x Median 1.3x 11x 14x 14x 13x 2.4x

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Thanksgiving 2008


Services: Personal Services – 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 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 Average (equal-weighted) 1.7x 9x 12x 10x 9x 3.7x Average (market value-weighted) 1.8x 9x 12x 10x 9x 1.9x Median 1.4x 8x 9x 9x 9x 3.5x

Services: Publishing – 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 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 Average (equal-weighted) .9x 9x 9x 11x 8x 5.5x Average (market value-weighted) 1.0x 6x 9x 9x 8x 1.8x Median .8x 9x 9x 9x 7x 2.9x

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Thanksgiving 2008


Services: Real Estate Operations (I of II) – 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 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 Average (equal-weighted) 8.2x 30x 34x 19x 28x 1.7x Average (market value-weighted) 8.8x 29x 33x 17x 28x 1.8x Median 8.1x 23x 19x 15x 20x 1.3x

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Thanksgiving 2008


Services: Real Estate Operations (II of II) – 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 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 Average (market value-weighted) 7.4x 53x 30x 19x 24x .9x Median 6.1x 21x 12x 13x 10x .7x

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Thanksgiving 2008


Services: Recreational Activities – 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 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 Average (equal-weighted) 1.3x 9x 12x 10x 9x 2.0x Average (market value-weighted) 1.6x 9x 8x 8x 8x 1.3x Median 1.3x 9x 12x 8x 9x 1.6x

Services: Recreational Activities – 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 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

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Thanksgiving 2008


Services: Rental and Leasing – 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 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 Average (equal-weighted) 2.3x 11x 13x 8x 9x 1.1x Average (market value-weighted) 1.6x 10x 11x 9x 10x 1.0x Median 1.6x 8x 9x 6x 6x 1.1x

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Thanksgiving 2008


Services: Restaurants – 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 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 Average (equal-weighted) .9x 11x 15x 12x 17x 2.7x Average (market value-weighted) 2.3x 12x 24x 14x 13x 4.3x Median .6x 10x 13x 11x 9x 2.1x

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Thanksgiving 2008


Services: Restaurants – 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 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

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Thanksgiving 2008


Services: Retail (Apparel) – 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 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 Average (equal-weighted) .4x 5x 11x 9x 9x 1.5x Average (market value-weighted) .5x 5x 11x 9x 9x 2.3x Median .3x 4x 8x 9x 9x 1.3x

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Thanksgiving 2008


Services: Retail (Apparel) – 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 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

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Thanksgiving 2008


Services: Retail (Online) – 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 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 Average (equal-weighted) .6x 9x 12x 18x 11x 2.4x Average (market value-weighted) .7x 4x 7x 32x 13x 1.7x Median .3x 7x 11x 15x 13x 1.6x

Services: Retail (Department and Discount) – 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 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 Average (equal-weighted) .5x 10x 10x 11x 13x 1.7x Average (market value-weighted) .6x 10x 15x 14x 14x 3.6x Median .5x 8x 9x 10x 10x 1.2x

Services: Retail (Department and Discount) – 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 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

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Thanksgiving 2008


Services: Retail (Drugs) – 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 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 Average (equal-weighted) .6x 12x 19x 15x 16x 2.8x Average (market value-weighted) .6x 10x 18x 14x 12x .5x Median .4x 12x 21x 15x 15x 2.0x

Services: Retail (Drugs) – 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 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

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Thanksgiving 2008


Services: Retail (Grocery) – 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 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 Average (equal-weighted) .3x 12x 17x 18x 15x 3.7x Average (market value-weighted) .4x 10x 15x 14x 12x 4.6x Median .3x 10x 15x 15x 12x 2.2x

Services: Retail (Grocery) – 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 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

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Thanksgiving 2008


Services: Retail (Home Improvement) – 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 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 Average (equal-weighted) .6x 8x 14x 13x 12x 8.6x Average (market value-weighted) .6x 8x 10x 12x 13x 4.9x Median .6x 8x 12x 13x 12x 2.1x

Services: Retail (Home Improvement) – 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 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

(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 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 Average (equal-weighted) .3x 4x 8x 7x 7x 3.2x Average (market value-weighted) .3x 5x 9x 8x 8x 4.6x Median .3x 4x 6x 7x 7x 3.0x

Services: Retail (Technology) – 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 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

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Thanksgiving 2008


Services: Retail (Specialty Non-Apparel) – Valuation

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 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 Average (equal-weighted) .6x 25x 24x 13x 16x 3.2x Average (market value-weighted) .8x 11x 24x 15x 14x 6.0x Median .4x 9x 11x 11x 10x 1.7x

of 401

Thanksgiving 2008


Services: Retail (Specialty Non-Apparel) – 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 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

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Thanksgiving 2008


Services: Schools – 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 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 Average (equal-weighted) 3.2x 21x 30x 34x 20x 10.5x Average (market value-weighted) 3.9x 19x 30x 26x 20x 15.6x Median 2.2x 21x 27x 25x 20x 6.7x

Services: Schools – 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 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

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Thanksgiving 2008


Services: Security – 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 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 Average (equal-weighted) .8x 5x 7x 11x 8x 2.3x Average (market value-weighted) .6x 4x 6x 8x 7x 1.9x Median .9x 5x 7x 9x 7x 2.5x

Services: Security – 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 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

(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 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 Average (equal-weighted) 1.9x 14x 21x 26x 17x 14.0x Average (market value-weighted) 2.3x 12x 20x 18x 16x 26.7x Median 1.7x 11x 17x 21x 15x 4.2x

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Thanksgiving 2008


Technology: Communications Equipment – 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 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 Average (equal-weighted) .9x 24x 16x 14x 13x 2.6x Average (market value-weighted) 1.8x 10x 31x 14x 12x 3.6x Median .6x 8x 12x 12x 10x 1.4x

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Thanksgiving 2008


Technology: Communications Equipment – 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 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

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Thanksgiving 2008


Technology: Computer Hardware – 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 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 Average (equal-weighted) .7x 9x 20x 14x 13x 7.3x Average (market value-weighted) 1.0x 7x 13x 12x 11x 11.0x Median .5x 7x 11x 10x 12x 1.9x

Technology: Computer Hardware – 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 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

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Thanksgiving 2008


Technology: Computer Networks – 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 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 Average (equal-weighted) 1.0x 35x 16x 12x 14x 5.5x Average (market value-weighted) 1.3x 17x 16x 12x 13x 4.7x Median .9x 12x 15x 11x 11x 3.3x

Technology: Computer Networks – 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 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

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Thanksgiving 2008


Technology: Computer Services – 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 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 Average (equal-weighted) 2.2x 14x 28x 15x 13x 7.2x Average (market value-weighted) 3.4x 13x 22x 15x 13x 4.8x Median 2.0x 10x 17x 13x 11x 4.3x

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Thanksgiving 2008


Technology: Computer Services – 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 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

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Thanksgiving 2008


Technology: Data Storage – 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 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 Average (equal-weighted) .9x 35x 8x 26x 24x 1.5x Average (market value-weighted) 1.0x 13x 10x 13x 12x 2.9x Median .6x 8x 5x 6x 6x 1.0x

Technology: Data Storage – 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 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

(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 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 Average (equal-weighted) 2.0x 7x 9x 10x 11x 2.0x Average (market value-weighted) 1.6x 7x 11x 11x 11x 3.7x Median .7x 6x 8x 10x 10x 1.7x

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Thanksgiving 2008


Technology: Peripherals – 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 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

(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 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 Average (equal-weighted) 1.0x 15x 22x 8x 8x 2.2x Average (market value-weighted) 1.0x 15x 15x 7x 7x 1.1x Median .9x 15x 14x 9x 7x 2.2x

Technology: Office Equipment – 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 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

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Thanksgiving 2008


Technology: Electronic Instruments – 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 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 Average (equal-weighted) 22.2x 8x 18x 10x 11x 4.0x Average (market value-weighted) 7.7x 7x 12x 8x 8x 3.7x Median .6x 7x 10x 9x 9x 1.6x

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Thanksgiving 2008


Technology: Electronic Instruments – 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 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

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Thanksgiving 2008


Technology: Scientific and Technical Instruments – 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 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 Average (equal-weighted) 1.9x 18x 20x 15x 13x 4.6x Average (market value-weighted) 1.9x 19x 17x 14x 12x 2.7x Median 1.4x 11x 15x 14x 12x 2.9x

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Thanksgiving 2008


Technology: Scientific and Technical Instruments – 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 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

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Thanksgiving 2008


Technology: Semiconductors (I of II) – 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 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 Average (equal-weighted) 1.6x 17x 22x 27x 22x 3.4x Average (market value-weighted) 1.9x 10x 16x 17x 15x 2.7x Median 1.2x 9x 13x 12x 12x 2.3x

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Thanksgiving 2008


Technology: Semiconductors (II of II) – 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 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 Average (equal-weighted) 1.0x 11x 30x 11x 13x 1.3x Average (market value-weighted) 1.1x 7x 20x 9x 11x 1.3x Median .6x 7x 9x 9x 11x 1.0x

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Thanksgiving 2008


Technology: Software (I of II) – 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 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 Average (equal-weighted) 2.3x 27x 64x 23x 14x 7.1x Average (market value-weighted) 2.8x 14x 21x 13x 11x 5.8x Median 2.0x 10x 17x 12x 11x 4.0x

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Thanksgiving 2008


Technology: Software (II of II) – 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 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 Average (equal-weighted) 1.4x 41x 40x 18x 15x 3.9x Average (market value-weighted) 1.6x 33x 26x 17x 15x 2.9x Median 1.3x 11x 17x 13x 11x 2.8x

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Thanksgiving 2008


Transportation: Air Couriers – 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 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. 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 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

(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 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 Average (equal-weighted) .8x 26x 12x 20x 7x 2.1x Average (market value-weighted) .9x 21x 12x 25x 10x 1.6x Median .5x 11x 6x 10x 6x 1.3x

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Thanksgiving 2008


Transportation: Airlines – 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 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

(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 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 Average (equal-weighted) 1.8x 24x 15x 10x 10x 5.2x Average (market value-weighted) 1.2x 13x 22x 18x 17x 7.2x Median 1.0x 10x 10x 8x 9x 2.2x

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Thanksgiving 2008


Transportation: Railroads – 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 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 Average (equal-weighted) 1.5x 9x 13x 12x 11x 2.5x Average (market value-weighted) 2.1x 9x 15x 12x 11x 2.1x Median 2.0x 9x 14x 12x 11x 1.9x

Transportation: Railroads – 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 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

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Thanksgiving 2008


Transportation: Trucking – 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 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 Average (equal-weighted) .7x 11x 112x 17x 15x 2.7x Average (market value-weighted) .9x 10x 32x 16x 15x 3.9x Median .5x 10x 16x 15x 14x 1.7x

Transportation: Trucking – 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 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

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Thanksgiving 2008


Transportation: Shipping – 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 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 Average (market value-weighted) 3.5x 9x 6x 6x 6x 1.2x Median 3.1x 7x 5x 4x 5x .8x

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Thanksgiving 2008


Transportation: Shipping – 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 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

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Thanksgiving 2008


Utilities: Electric – 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 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 Average (equal-weighted) 2.1x 13x 13x 12x 13x 2.3x Average (market value-weighted) 2.3x 12x 13x 12x 13x 2.9x Median 1.9x 12x 11x 12x 11x 1.6x

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Thanksgiving 2008


Utilities: Electric – 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 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

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Thanksgiving 2008


Utilities: Natural Gas – 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 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 Average (equal-weighted) 1.8x 11x 16x 13x 12x 1.8x Average (market value-weighted) 1.8x 10x 11x 12x 12x 2.0x Median 1.4x 11x 12x 11x 11x 1.6x

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Thanksgiving 2008


Utilities: Natural Gas – 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 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

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Thanksgiving 2008


Utilities: Water – 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 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 Average (equal-weighted) 3.5x 15x 20x 19x 15x 1.7x Average (market value-weighted) 2.3x 10x 11x 13x 11x .8x Median 3.3x 15x 20x 20x 17x 1.8x

Utilities: Water – Valuation

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 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

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Thanksgiving 2008


Favorite Third-Party Resources Tracking Down the Best Ideas and Opinion on the Internet

Note the syntax of the Internet links shown below: http://tinyurl.com/moi### For example, the full URL of link 01 is http://tinyurl.com/moi01

The links below are not clickable – you must type the complete URL (as noted above) in your web browser.

TIMELY IDEAS AND OPINION

ALL-TIME FAVORITE IDEAS AND INVESTMENT PHILOSOPHY

Leaders on current financial crisis: • Bill Ackman: Charlie Rose, 11/11/08, 100; Q3

letter to Pershing Square investors, 103 • Jack Bogle: Morningstar, 9/23/08, 05 • Warren Buffett: Charlie Rose, 10/1/08, 04 • Jeremy Grantham: October letter, 17 • Jim Rogers: Bloomberg, 10/10/08, 11 • George Soros: Fareed Zakaria, 10/14/08, 01;

Bill Moyers, 10/10/08, 02 Articles:

• “Fuld Sought Buffett Offer He Refused as Lehman Sank,” Bloomberg, 11/10/08, 101

• Michael Lewis, “The End,” 11/11/08, 102

Investors: • Claire Barnes: 40 • Warren Buffett: 22 • Marc Faber: 41 • Ben Graham: 43, 44 • Jeremy Grantham: 42 • Ace Greenberg: 24, 30 • Bill Gross: 35 • Charlie Munger: 46, 52, 53, 55 • Mohnish Pabrai: 57, 59, 62 • Bob Rodriguez: 64 • Jim Rogers: 66, 13, 70, 73, 74 • Walter Schloss: 19 • George Soros: 89, 91, 96, 97, 79, 76

Business Leaders:

• Bill Gates and Steve Jobs: 33 • Steve Wynn: 23, 36

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Glossary Terms, Acronyms and Abbreviations Commonly Used In Financial Publications 10-K. A company’s annual report, as filed with the SEC according to the requirements of SEC Form 10-K. Public companies are required to file a 10-K each year. 10-Q. A company’s quarterly report, as filed with the SEC according to the requirements of SEC Form 10-Q. Public companies are required to file a 10-Q each quarter. ADR. American Depository Receipt. ADS. American Depository Share. Functionally equivalent to an ADR. ASPs. Average selling prices. AUM. Assets under management. bps. Basis points. 100 basis points equal 1%. capex. Capital expenditure. Typically represents investment in equipment or facilities; creates long-term asset that is depreciated over time. EBIT. Earnings before interest and taxes; also known as “operating income.” ETF. Exchange-traded fund. GAAP. Generally accepted accounting principles. Guidance. Forward-looking financial estimates provided by company management. NOL or NOLs. Net Operating Losses. Operating loss carryforwards available to offset future income taxes, subject to certain change-of-ownership restrictions. NOLs may or may not be capitalized on a company’s balance sheet as deferred tax assets. Unprofitable companies are likely to have few or no deferred tax assets, but may nonetheless have large NOLs. The amount of NOLs is disclosed in the footnotes to a company’s financial statements, as presented in 10-K filings with the SEC. SPAC. Special-purpose acquisition company. A publicly traded cash shell with the stated goal of acquiring another company, typically in a previously disclosed industry. PO. Purchase order. y-y. Year over year. Terms, Acronyms and Abbreviations Used By Companies In Specific Industries Energy Bbl. Barrel. Standard measure of crude oil volume; equals 42 gallons or 159 liters. Bboe. See BOE. bcf. Billions cubic feet. BOE. Barrel of oil equivalent. Used by energy companies when combining information on oil and gas reserves and

production. One barrel of crude oil contains the energy 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 production. Same as bpd. bpd. Barrels per say. Same as BOPD. DD&A. Depreciation, depletion and amortization. MBbls. One million barrels. A measure of crude oil volume. Mcf. 100 cubic feet. A measure of natural gas volume. MCFD. Million cubic feet per day. A measure of natural gas production. MMcf. One million cubic feet. A measure of natural gas volume. NGL. Natural gas liquids. Insurance Frequency business. Consists of (re)insurance contracts containing a potentially large number of smaller losses emanating from multiple events. Frequency business is typically less volatile line than severity business. Severity business. Typically consists of contracts with the potential for significant losses emanating from one event or multiple events. Severity business is more lumpy and typically more profitable than frequency business. Acquisition cost ratio. Typically calculated by dividing acquisition expenses by net premiums earned. Combined ratio. Sum of loss ratio, acquisition cost ratio, and internal expense ratio. Composite ratio. Sum of loss ratio and acquisition cost ratio. Internal expense ratio. Typically calculated by dividing G&A expenses by net premiums earned. Loss ratio. Typically calculated by dividing underwriting losses incurred and loss adjustment expenses by premiums earned. Media & Technology API. Application program interface. A software interface that enables other software programs to use and access the functionality of the API-connected software platform. ASIC. Application-specific integrated circuit. A semiconductor designed to support a specific application, such as computer-aided design. CPU. Central processing unit. CTO. Chief Technology Officer. DBS. Direct broadcast satellite. Commercial satellite TV providers, such as DirecTV and Dish Network. DRAM. Dynamic random access memory. DTH. Direct to home.

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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.

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About the MOI © 2008 by BeyondProxy LLC. All rights reserved. All content is protected by U.S. and international copyright laws and is the property of BeyondProxy and any third-party providers of such content. The U.S. Copyright Act imposes liability of up to $150,000 for each act of willful infringement of a copyright. The Manual of Ideas is published quarterly by BeyondProxy. Subscribers may download content to their computer and store and print materials for their individual use only. Any other reproduction, transmission, display or editing of the content by any means, mechanical or electronic, without the prior written permission of BeyondProxy is strictly prohibited. Terms of use: Use of this newsletter and its content is governed by the Terms of Use described in detail at www.manualofideas.com. See a summary of key terms below. Contact information: For all customer service, subscription or other inquiries, please visit www.manualofideas.com, or contact us at BeyondProxy, P.O. Box 1375, New York, NY 10150; telephone: 212-308-1989. Editor-in-chief: John Mihaljevic. Annual subscription price: $999. General Publication Information and Terms of Use The Manual of Ideas is published by BeyondProxy. Use of this newsletter and its content is governed by the Terms of Use described in detail at www.manualofideas.com/terms. For your convenience, a summary of certain key policies, disclosures and disclaimers is reproduced below. This summary is meant in no way to limit or otherwise circumscribe the full scope and effect of the complete Terms of Use. No Investment Advice This newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. This newsletter is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. It does not constitute a general or personal recommendation or take into account the particular investment objectives, financial situations,

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