nok_q1 '11 quarterly letter

Nokomis Capital

2305 Cedar Springs Road, Suite 420, Dallas, TX 75201 Tel: (972) 590-4100 Fax: (972) 590-4109

May 3, 2011

Dear Partner,

Nokomis Capital Master Fund, LP was down 1.64% net for the first quarter. The long side generated 7.7 points of

positive gross attribution while the short side contributed 8.6 points of negative gross attribution. From a sector

standpoint, the best and worst sectors were somewhat of a reversal from the full year 2010. For the quarter,

Telecom & Media was the best performing sector, generating approximately 2.0 points of positive gross

attribution. Energy/Natural Resources was the worst performing sector, generating 1.3 points of negative gross

attribution. Despite being net short the entire quarter, the Consumer sector managed to generate 32 b.p. of

positive attribution, which is all it took to be the second best sector in an overall disappointing quarter. As always,

the tables and charts at the back of this letter provide detail as to attribution and exposure by sector on the long

and short sides as well as our attribution and daily exposure since inception.

Performance Summary – 3/31/2011

QTD YTD ITD

Nokomis Capital Mater Fund, LP -1.64% -1.64% 65.51%

S&P 500* 5.92% 5.92% 6.77%

Russell 2000* 7.94% 7.94% 28.50%

*Adjusted for reinvestment of dividends and the inception date of the fund, 3/1/08

“A Good Walk Spoiled” Outside of Telecom & Media

Unfortunately, our performance in the first quarter reminds me of my golf game: frustrating and generally bad.

The difference is that my golf game is frustrating specifically because it is fundamentally bad. Whereas, our return

in Q1 was bad, but I think our fundamentals of research and attention to detail/risk in the portfolio were, for the

most part, right where they need to be. The really frustrating part for us is reporting our poor returns to

investors. The golf analogy is apt because when I golf I usually have 95+ strokes that are somewhere between

decent and horrible, but I also have two to four great shots where I can admire the ball’s flight path and

remember why I continue to play such an otherwise frustrating game. Please note: we have not gone soft, and I

still only golf about once a year. In this analogy, two of our Telecom & Media longs represent those great shots


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that—at a time when the market does not see many things the way we do—remind us why we take the approach

to research and investing that we do. As you know, on the long side, we look for special situations where even

just our base case of forecasted results for the given company provides a solid risk-reward ratio over the next 12

to 24 months. In addition, our favorite longs have one or two areas of optionality that, while still uncertain, are

far from recognized by the rest of the Street (often involving hard-to-value assets), providing the potential for

very significant returns. In other words, we are constantly trying to put ourselves in a position to get “lucky” in a

prudent, risk-adjusted, well-researched way. Similarly, we are most often entering a position when it has some

“hair on it”, in other words some issue that takes a lot of man hours to get one’s arms around and, therefore,

keeps many other investors from buying. In typical situations, we theorize—based on our research—that the

company is in the process of a transformation that will, over time, minimize this hair. Usually, in these cases, the

company has cash/limited leverage, assets it can sell and/or we are modeling strong future discretionary free cash

flow that can be used to fund these transformations. When these situations work out, there is probably nothing

that is more satisfying to us, other than having one of our shorts completely bite the dust. In Q2, thanks to Kenny

Miller’s research, we managed to “keep our left elbow straight and come through the ball” on the following

Telecom & Media longs: Echostar (SATS) was up 52% during Q1 and contributed 1.73 points of gross attribution.

ICO Global Communications (ICOG) was up 78% during the quarter and contributed 1.77 points of gross

attribution. Moreover, at one point in January, ICOG pulled back under $1.40 (despite building evidence

elsewhere that wireless spectrum was becoming a hot commodity), allowing us to purchase more shares before

ending the quarter up over 90% from those purchase prices.

Echostar (SATS, $34.99, 2.87% of NAV)

Despite the fact that many on the Street still do not realize it, SATS is no longer the owner of satellite TV provider

Dish Network, as the two companies were separated in a spin-off with Dish Network (DISH) owning the TV

network and SATS getting the remaining assets, namely a satellite services business, a set-top box business

(supplying DISH and an increasing amount of others), the Sling Box intellectual property, the real estate of the

companies’ headquarters, part ownership of the Dish Mexico Joint Venture and a large cash balance. Both DISH

and SATS continue to be controlled by CEO and Founder Charlie Ergen who still owns a majority interest in both

companies. (We like that fact Ergen is unlike other media moguls in that his equity is dear to him and he has not

resorted to reckless shareholder dilution.) We started buying SATS late last year between $20.00 and $21.00, as

our conservative sum-of-the-parts model was generating a value of $40 per share for the company and we felt

that, looking longer-term, Ergen was going to successfully execute on his strategy for SATS (which was not fully

articulated to the Street at the time) and eventually get the street to value these assets as more than a random

hodgepodge of leftovers from DISH. We theorize that many on the Street had not read the fine print and believed

that SATS was going to be on the hook for a huge liability if DISH lost its intellectual property litigation with Tivo

(TIVO). However, as was spelled out within the companies’ SEC filings, at the time of the spin-off, DISH agreed to

indemnify SATS against the vast majority of any TIVO liability. (While this letter was in final editing, SATS, DISH

and TIVO agreed to settle their dispute and while TIVO will receive a total of $500MM, SATS will be paying only

$20MM, $10MM upfront and $10MM spread over six years.) In terms of additional hair on the company, we

should note that most of the set-top box business revenue is currently from DISH, so there was an obvious

potential conflict of interest, not to mention a customer-concentration issue. However, Ergen still owns plenty of


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equity in SATS so we were comfortable that SATS would be fairly represented. Also, part of the reason for the

spin-off was so that SATS could more effectively sell to DISH’s competitors. We felt that SATS’s Sling Box

technology—allowing TV subscribers to view content from their DVR on their PC, smartphone or tablet—would

give these other subscription TV providers a real reason to go to the trouble of switching to SATS’ set-tops.

Further, we felt like we had conservatively accounted for these issues as our $40 per share sum-of-the-parts only

assumed a 4.0x EBITDA valuation on the set-top business. Moreover, much of our base value was represented by

SATS’ cash and investments. We obviously valued the cash at 100 cents on the dollar and we valued the

investments at the company’s cost basis.

The optionality was that Ergen had been using some of SATS’ cash to buy up debt in TerreStar at a significant

discount to par, becoming the largest creditor and putting SATS in a position to acquire TerreStar out of

bankruptcy. Kenny had been researching potential changes to allowable uses for wireless spectrum as part of his

research on ICOG (see below) and realized that this spectrum could be worth much more to SATS or another

acquirer of TerreStar as compared to the cost basis SATS had on the TerreStar debt. We figured that if this

“spectrum value uplift” scenario came to fruition, our sum-of-the-parts value would increase to about $50 per

share. To make a long story short, during Q1 SATS received push back from other creditors in its effort to acquire

the company so Ergen decided to move on in an effort to avoid overpaying, but it now looks like the company is

going to receive par value plus a high rate of interest on the TerreStar debt, which definitely helped the stock

price.

The transformation piece that Ergen had only partially articulated became clearer in February when SATS agreed

to acquire satellite network and services company Hughes Communications (HUGH) in a transaction of cash and

assumed debt valued at approximately $2 billion. Interestingly, SATS is apparently going to finance this deal

largely with the cash currently on his balance sheet (over $1.1 billion of cash and current marketable securities as

of March 31) and the cash it will be receiving back from the company’s TerreStar debt. Besides significantly

diversifying SATS’ pro forma revenue base away from its concentration with DISH, we think that HUGH’s assets

are worth some increment more as part of SATS and apparently the Street is starting to agree as the stock

continued to move up after the HUGH deal was announced. Moreover, HUGH brings in another significant layer

of optionality (and admittedly some risk) in that it will be launching a Ku band satellite in 2012 in order to provide

faster satellite broadband services. Fortunately, we have some experience modeling future cash flows from yet-

to-be-launched Ku band satellites—part art and part science—from our former position in ViaSat (VSAT), which is

launching its Ku band satellite later this year. We applied the same metrics from our VSAT model to the HUGH’s

launch and it appears that, as owners of SATS, we own the future base-case cash flows and upside optionality at a

fair price that compensates us both for the time value we put on our capital. That said, there is a lot that can

happen—including things that can go wrong with the satellite—between now and then and the stock has

increased significantly so we have lightened up materially into recent strength. Speaking of scaling out of stocks

due to evolving risk-rewards, we have not provided an official update on VSAT since we featured it in our Q4 ’09

letter. Basically, we sold the last of our VSAT shares around $36 last July when we felt that the price had gotten

ahead of our time-adjusted and risk-adjusted target leading up to the 2011 launch, as we knew there was a

chance that the satellite could crash or more likely be delayed, which it was.


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ICO Global Communication (ICOG, $2.67, 4.12% of NAV)

I do not want to minimize the base case research that we did on ICOG, but I will cover it quickly to leave some

room to cover the optionality that kicked in and caused the move in the stock price. Our base case generated a

probability-weighted price target of approximately $2.40 per share. The main component of this $2.40 per share

in value was a lawsuit the company has against Boeing (BA) as BA was contracted to build eight satellites for ICOG

several years ago and failed to deliver them on time and on budget and put the production of ICOG’s satellites to

the back of the line, behind production of satellites for one of BA’s own subsidiaries, which was an ICOG

competitor all while sitting on payments received from ICOG. ICOG has already won in a lower court and

assuming the verdict is fully upheld at its current appeal, ICOG is due to receive $769MM ($371MM in

compensatory damages, $236MM in punitive damages and $162MM in interest) and the appeal was originally

scheduled for summer of 2011. We believe that ICOG has a pretty airtight case on appeal, but do acknowledge a

decent chance that the punitive damages are reduced, which is why we have chosen to use a probability-

weighted approach to valuing ICOG’s equity. After having an attorney with relevant experience review the case

we became increasingly enthusiastic about the risk-reward ratio on ICOG shares heading into this appeal and

started purchasing shares between $1.25 and $1.50 in April 2010 when the entire market cap of the company was

around $350MM.

While it was a very small part of our initial probability-weighted price objective, we felt that an ICOG subsidiary

might hopefully hold some value above and beyond the very low weighting we were officially using in our

valuation spreadsheet. The subsidiary was a company called DBSD, which had accumulated a large amount of

spectrum, only to come to the same fate as TerreStar: filing for bankruptcy before it could harness the potential

value of its spectrum. Fortunately for us, Kenny identified the potential for this spectrum to have an uplift in

value as companies that need spectrum (or others that are arbitraging) recognize the significant value this

spectrum will have when and if the federal government relaxes the rules on its usage. While we thought it was a

long-shot, we felt there was a chance that the spectrum value would be high enough to cover debt and still have

some potentially significant (relative to the then enterprise value) value left over for DBSD’s equity owner, ICOG.

Ironically, after not being successful in his bid to acquire TerreStar out of bankruptcy under the SATS umbrella,

Charlie Ergen used his other company, DISH to win the auction for DBSD and its spectrum. DISH agreed to pay off

all creditors in full while paying ICOG an additional $324.5MM of equity value upon approval from the bankruptcy

court. ICOG shares popped quickly on this announcement, as the company has approximately 257MM shares

outstanding and NOL tax carryforwards that should shield most if not all of this gain. Again, we had almost no

value in our probability-weighted valuation, so this added over $1.00 per share to our probability-weighted price

target, which now stands at $3.57. We are increasingly thinking that the appeal in the BA litigation could be

moderately delayed, but we feel that the difference between the current price and $3.57 appropriately

compensates us for the time value of our capital even after the share price has doubled from our original

purchase prices one year ago.

No Help from the Black Gold in Q1

Energy/Natural Resources had a tough first quarter after providing outsized returns in 2010. While the results

and, we would argue the outlook for the energy companies we are short have been less than stellar, the Street


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evidently believes that rising oil prices will cover over all of these companies’ faults. And the thing about the

energy business is that, with one or two exceptions, if oil rises far enough and can hold that elevated price, the

Street is right, in that higher oil can cure a lot of these companies’ problems. We understand that, and therefore

have always tried to pick our stocks and our entry points very carefully on the short side of energy. Even superb

stock selection in this sector cannot be the be-all-end-all answer if commodity prices are moving against you on

either the long or the short side. Therefore, we normally count on longs to carry the day in a rising energy price

environment and our shorts to carry the day in a declining price environment. And that brings me to what was

most curious and frustrating this quarter, as our Energy/Natural Resources longs only provided 19 b.p. of positive

attribution despite the significant unrest in North Africa and the Middle East and the associated rise in oil prices.

Specifically, our two largest E&P longs (HUSA and VQ) were actually down in Q1. Fortunately, those two stocks

and our Energy/Natural Resources sector in general are providing very solid attribution as we begin Q2. On that

note, couple of partners have asked why our E&P longs are up so much very recently and I have explained that we

have some theories, but are not exactly sure, which fits because we did not fully understand why they were down

so much in March. We continue to believe they represent exceptionally solid risk-reward over the intermediate

and long terms.

While it no longer sounds like I am going out a limb as much because of the aforementioned turnaround the last

few weeks, I will say that, even though this sector was our worst for Q1, we think it still has a shot at being our

best performing sector for the year as a whole. The reason is that, similar to our Technology sector, Energy has

number of larger core longs that are, “spring-loaded” when we compare the performance of the enterprise itself

and potential upcoming catalysts to the recent lackluster performance of the stock price. Additionally, while we

could make this argument for our short book general, we believe that a number of our Energy and Technology

shorts have been bid up in the first few months of the year despite serious fundamental issues that we expect to

come home to roost before the year is over.

The Still Sometimes Lonely Life of a Short Seller

This is the third quarterly letter in a row without many highlights on the short side. However, there were a few

highlights. We have been short a number of U.S.-listed Chinese reverse-merger stocks for over a year now and

this group of stocks has been an increasingly bright spot in our short book. We believe that all the Chinese

reverse-merger stocks that we are short are fraudulently cooking their books and are only listed in the United

States so as to prey on dumb American money while avoiding the nuisance of a true accounting audit. Moreover,

while accounting fraud committed in China is potentially punishable by death, there is little recourse for fraud

that is committed (technically) in the U.S. against the U.S. investors and under the supposed watch of U.S.

regulators, exchanges and investment bankers. Taken as a whole these shorts produced approximately 73 b.p. of

positive attribution in Q1.

Further, we believe that they would have produced slightly more in profit from these particular shorts if one of

them, China Media Express (CCME) had not had trading halted for several weeks in a row. In addition, shortly

after the quarter ended Puda Coal (PUDA) declined 50% and then also had its shares halted. Both CCME and

PUDA have had serious accounting fraud allegations leveled against them and both companies have vowed to


6

look into the allegations, but have yet to come up with any viable defense. To that end, both stocks remain halted

until they address their respective issues. PUDA’s Chairman Ming Zhao has since said he would be interested in

acquiring the company for “up to” $12 per share, but we think that is just another smokescreen that is part of his

very egregious series of actions. Among other things, he has been accused of transferring ownership of the

company’s main subsidiary in China away from the company without telling his American shareholders. Since the

stock was halted, Zhao’s own board of directors has initiated an investigation and even put out a press release on

April 11 stating that “evidence supports the allegation that there were transfers by Mr. Zhao in subsidiary

ownership that were inconsistent with the disclosure made by the Company its public securities filings.”

Translation: It looks like Zhao successfully duped American investors and lied in his SEC filings, but there is

probably very little that shareholders or the SEC can do to him in Taiyuan, China.

Earthlink…Yes, the Earthlink from the First Dot-Com Bubble (ELNK, $8.29, 4.85% of NAV):

As for new investments, we recently established a core long- term position in EarthLink (ELNK). You probably

remember ELNK as the bubble-era dial-up Internet service provider. ELNK was a classic dot com story, achieving a

multi billion dollar market capitalization in 1999 followed by the crash in 2000-2001 and an essentially a flat stock

price since then. Throughout the 2000s ELNK’s management team attempted to diversify away from the declining

core ISP business through initiatives such as establishing mobile service provider Helios and constructing

municipal Wi-Fi networks. None of these new business lines were particularly successful, and in retrospect simply

amounted to wasting the free cash flow generated by the ISP. EarthLink’s CEO Garry Betty tragically died in early

2007, leading the board to search for a new candidate and reconsider the direction of the company.

The board eventually settled on Rolla Huff, a veteran telecom executive who was brought on in June 2007. He was

previously Chairman and CEO of Mpower Holding Corporation, a business telecommunications company that was

sold to U.S. TelePacific Holdings Corp. after emerging from bankruptcy in 2002. He also served in operating, M&A

and financial roles at Frontier Corporation and AT&T. Since joining EarthLink, Mr. Huff has done the right thing for

investors. He cancelled or sold EarthLink’s money losing projects and rebuilt the company into a free cash flow

generating machine by rationalizing the cost structure and refocusing the company on intelligently managing its

declining ISP business. In 2006, the last full year before Mr. Huff’ arrival, EarthLink generated $115M of operating

cash flow but spent $187M on capital expenditures, subscriber base purchases, investments, joint ventures and

other initiatives. By 2008, operating cash flow had doubled to $231M despite a reduction in revenue while capital

and other spending declined to a mere $7M. Through the third quarter of 2010, ELNK’s free cash flow built up, the

rate of revenue decline attenuated and the company’s core ISP customer base became increasingly concentrated

in long-tenured broadband subscribers.

Kenny Miller has been following ELNK since Mr. Huff joined the company, studying it in detail at his prior firm and

revisiting upon joining Nokomis. At each juncture the conclusion was that while ELNK holders would probably

enjoy a mid-teens IRR as the ISP business was run off, the prospective returns were not quite high enough to

justify an investment. However, over the past in six months there have been significant developments that have

enhanced the return profile enough to for Nokomis to finally make an investment.


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In the fourth quarter of 2010, EarthLink announced the acquisitions of two competitive local exchange carriers

(“CLECs” in telecom parlance), ITC^Deltacom (“Deltacom”) and One Communications (“OneComm”). Both were

struggling to some extent, and OneComm in particular was overly levered. Including expected merger-related cost

reductions, ELNK bought Deltacom at 4.7x EBITDA and OneComm at 3.7x EBITDA, near the very low end of

historical telecom industry acquisition multiples. In both cases it later surfaced that EarthLink was not the highest

bidder at either auction, rather that its bids were selected because the company’s cash offered a high certainty of

closing. The total combined purchase price of around $900M compared to the total network build-out and

customer acquisition spend for Deltacom and OneComm of over $4B. Earthlink is also now the owner of about

7,000 metro fiber route miles, putting it in the top 10 independent owners of these increasingly valuable assets.

The legacy CLEC business of providing voice and T-1 data lines to small businesses is shrinking. EarthLink

management plans on applying the same discipline it used upon arriving at EarthLink to optimize profitability in

declining revenue streams and is confident the acquisitions can more than pay for themselves with free cash flow.

More importantly, EarthLink management thinks it has a plan to grow the companies in combination with some

assets it already owns. More on this below.

We believe ELNK offers the prospect of attractive returns with potential appreciation of 100-200% over the next

three years and little risk of significant loss. EarthLink should generate returns for Nokomis in four ways:

1. First and most simply, Nokomis will benefit from the substantial free cash flow of the core ISP

business. Although it has been declining, we estimate that the core ISP business will generate about

$170M in free cash flow in 2011, an attenuated decline of about 13% from 2010. Pro forma for the

transactions, ELNK’s enterprise value is approximately $1.2B, resulting in a FCF yield of 14% from the

ISP business alone. Keep in mind that Earthlink’s enterprise value is now primarily composed of the

$900M paid for ITC Deltacom and Onecomm. While these cash flows are diminishing, they are doing

so at an slower rate, while the enterprise value is shrinking as the cash builds up on the balance sheet.

2. Second, ELNK is now a radically transformed company and its valuation should benefit as Wall Street

research coverage and investor perception changes from looking at ELNK as a dying ISP to a telecom

company with a stable future. By the third quarter of this year, 2/3 of ELNK’s revenue will be from its

CLEC acquisitions and other telecom services. Simply applying 5x EBITDA (the low end of the current

telecom services valuation range) to ELNK’s 2012 EBITDA and accounting for the cash generated over

the next seven quarters gets you to over $13.00 per share. With only moderate multiple expansion,

we feel the stock can exceed $16.50 per share. On that note, we believe that ELNK may get multiple

positive research initiations by telecom analysts after closing the OneComm acquisition in early April

and issuing consolidated guidance at the next earnings call. Currently, ELNK is generally covered by

Internet analysts who care far more about Amazon and Google and only cover ELNK because it used

to be considered an Internet company.

3. Third, while our investment case does not depend on this, there is a clear opportunity to engage in

financial engineering. Across the telecom space, companies are generally levered at least two times

EBITDA and in some cases as much as eight times EBITDA. Although some telecom businesses have

gotten into trouble over-levering, given the recurring revenue and fixed asset profile some leverage

makes sense. We estimate that ELNK is trading at an enterprise value of less than 4x 2012 (the first


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full year the telecom acquisitions will be consolidated) EBITDA with less than 1x net leverage.

Considering that many telecom companies have more than 4x EBITDA in debt alone, it is not hard to

imagine how ELNK could enhance returns for shareholders by adding moderate leverage. At one end

of the scale ELNK could simply use its free cash flow to buy back shares over time, and at the other

extreme the company could potentially issue $500-$1B in debt to buy back shares or issue a one-time

special dividend. The company could also use its cash and debt assumption capacity to buy other

network assets and expand its telecom business.

4. Fourth, our conversations with the company indicate their purchases of ITC Deltacom and OneComm

were not simple trades of cash for assets. EarthLink already owns New Edge Networks, a provider of

multi-location communications services to enterprises. New Edge is currently not a great business for

EarthLink due to its low gross margins as it depends on leasing other carriers’ networks for fulfillment.

However, with the addition of the owned Deltacom and OneComm networks, New Edge will be able

to fulfill many of its customers internally, opening up new sales opportunities and improving gross

margins while increasing capacity utilization at Deltacomm and OneComm. Both companies

previously had to concentrate on serving small single location customers. EarthLink is working on

several new cloud-based network services to offer multi-location customers. While our investment

case is also not dependent on success with these initiatives, if effective they will revitalize growth and

potentially result in an even higher valuation multiple.

Obviously, integrating two telecom companies carries some risks. About the only way we can see Nokomis

experiencing substantial losses with our EarthLink investment is if the integration goes poorly enough to affect the

ongoing operations and value of the CLEC businesses. While we can never totally discount the risks, Mr. Huff’s

background in telecom M&A gives us some comfort that the proper procedures are being followed. Conversations

with the company reveal that they have retained and re-hired key IT architects from both acquired companies and

have a conservative timeline for integrating key functions such as customer billing and provisioning.

Overall, we like investing in businesses that should make us money as long as they don’t screw up horribly. In the

current speculative environment, investing with a margin of safety is more important than ever. Right now

owning a lot of small capitalization stocks means counting on either substantial growth ad infinitum or selling to a

greater fool, but we think ELNK has an exceptionally attractive risk/reward profile. ELNK can redeem its $260M in

convertible bonds for cash November 15th of this year. The conversion price will be around $8.00 as it adjusts

down with each dividend ELNK pays. ELNK has the option to pay the debt holders the difference between the

conversion price and the stock price so as to avoid dilution, so the company will probably not be overly aggressive

with shareholder value enhancing activities until after this debt matures. (That said, while this letter was in its

final editing, ELNK reported its Q1 results and revealed that it did continue to repurchase a moderate amount of

shares in the quarter. In addition, free cash flow generation was in line with our model.) In the meantime, it’s

anyone’s guess how long Mr. Market will let this opportunity hang around. Beyond that, we think a significant

value-enhancing step such as a large buyback, special dividend or leveraged recap could take place within a year.


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Closing Thoughts:

It is definitely tougher to write these quarterly letters after reporting a loss. We hate reporting losses to you our

partners, even for periods as short as a quarter. That said, our mission is to generate solid absolute and relative

returns in the intermediate and long terms and we firmly believe that our research process and investing

approach will allow us to continue to do that. While we are not necessarily smarter than most of the funds out

there, we do work harder. So as long as our golf game remains on the shelf and we continue to find special

situations requiring significant man hours to cut through the hair—and there seems to be an unending supply—

our methodology should give us the advantage we need. I say this every letter but it certainly bears repeating: we

are ever grateful to you for your investment of capital and confidence in Nokomis. Please feel free to contact us

with any questions or comments and stop by and see us when you are in Dallas.

Best Regards,

Brett Hendrickson


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Gross Attribution by Sector (Q1 2011)

Long Short Gross

Broad Market Indices 0.00% -0.56% -0.56%

Business Services 0.00% -0.37% -0.37%

Consumer 1.00% -0.67% 0.32%

Cyclical 0.74% -0.72% 0.02%

Energy/Natural Resources 0.19% -1.49% -1.30%

Financial Services 0.43% -0.15% 0.28%

Healthcare -0.08% 0.11% 0.03%

Technology 1.72% -2.92% -1.20%

Telecom & Media 3.76% -1.79% 1.97%

Interest/Dividends/Other -0.46%

Total 7.75% -8.56% -1.26%

Sector Exposure (Dollar) – 3/31/2011

Long Short Net

Broad Market Indices 0.0% -8.4% -8.4%

Business Services 0.0% -4.4% -4.4%

Consumer 10.3% -13.6% -3.3%

Cyclical 4.2% -9.1% -4.9%

Energy/Natural Resources 25.3% -11.2% 14.1%

Financial Services 6.6% -2.1% 4.5%

Healthcare 4.2% 0.0% 4.2%

Technology 31.3% -19.1% 12.2%

Telecom & Media 21.7% -11.1% 10.6%

Total 103.7% -79.0% 24.6%


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Attribution and Daily Exposure Since Inception

-50.00%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

110.00%

Feb

-08

Mar

-08

Ap

r-08

May

-08

Jun

-08

Jul-

08

Au

g-0

8

Sep

-08

Oct

-08

No

v-08

Dec

-08

Jan

-09

Feb

-09

Mar

-09

Ap

r-09

May

-09

Jun

-09

Jul-

09

Au

g-0

9

Sep

-09

Oct

-09

No

v-09

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-10

May

-10

Jun

-10

Jul-

10

Au

g-1

0

Sep

-10

Oct

-10

No

v-10

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Nokomis Longs* Nokomis Shorts* Nokomis Net Returns S&P 500 Returns*Reflects the monthly attribution, compounded since inception. Note this is not the same as ROI for individual long and short sides of the portfolio, as the

denominator in these attribution calculations is the NAV of the entire Fund and not the gross capital exposed to either the long or short side of the portfolio.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

110.00%

120.00%

3/3

/08

4/3

/08

5/3

/08

6/3

/08

7/3

/08

8/3

/08

9/3

/08

10

/3/0

8

11

/3/0

8

12

/3/0

8

1/3

/09

2/3

/09

3/3

/09

4/3

/09

5/3

/09

6/3

/09

7/3

/09

8/3

/09

9/3

/09

10

/3/0

9

11

/3/0

9

12

/3/0

9

1/3

/10

2/3

/10

3/3

/10

4/3

/10

5/3

/10

6/3

/10

7/3

/10

8/3

/10

9/3

/10

10

/3/1

0

11

/3/1

0

12

/3/1

0

1/3

/11

2/3

/11

3/3

/11

Long Exposure Short Exposure Net Exposure

nok_q1 '11 quarterly letter

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