sample report: ben-graham style deep value candidates

PORTFOLIO MANAGER’S REVIEW

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A Monthly Publication of BeyondProxy LLC www.manualofideas.com [email protected] April 21, 2010

When asked how he became so successful, Buffett answered: “we read hundreds and hundreds of annual reports every year.”

Edited by the

Manual of Ideas Research Team

“If our efforts can further the goals of our members by giving them a discernible edge over other market participants, we have succeeded.”

Top Five Ideas In This Report

Gravity Co. (Nasdaq: GRVY) ……………… p. 20 I.D. Systems (Nasdaq: IDSY) ……………….. p. 24 LookSmart (Nasdaq: LOOK) ………………. p. 28 Market Leader (Nasdaq: LEDR) ………………. p. 32 Maxygen (Nasdaq: MAXY) ……………… p. 36

Also Inside

Editor’s Commentary …………….. p. 4 Superinvestor holdings update ….. p. 6 Interview with Allan Mecham …… p. 8 Interview with Toby Carlisle …… p. 14 Ben Graham-style investing …… p. 18 98 Deep Value Stocks …………. p. 100

About Portfolio Manager’s Review

Our goal is to bring you investment ideas that are compelling on the basis of value versus price. In our quest for value, we analyze the top holdings of top fund managers. We also use a proprietary methodology to identify stocks that are not widely followed by institutional investors. Our managing editor John Mihaljevic is a member of Value Investors Club, an exclusive community of money managers, and has won the Club’s prize for best investment idea. John is a trained capital allocator, having studied under Yale chief investment officer David Swensen and served as research assistant to Nobel laureate James Tobin. John holds a BA in Economics, summa cum laude, from Yale and is a CFA charterholder.

BEN GRAHAM-STYLE INVESTING:

THE DEEP VALUE REPORT

► Snapshot of 98 deep value investment candidates ► 20 companies profiled by MOI research team

► Proprietary selection of Top 5 candidates for investment ► Plus: Exclusive interview with Allan Mecham ► Plus: Exclusive interview with Toby Carlisle

► Plus: Superinvestor holdings update

Companies mentioned in this issue include A. H. Belo, A.C. Moore Arts, Acorn International, Actions Semiconductor,

Adaptec, Agria, Albany Molecular, American Railcar, Ascent Media, Ascent Solar, Audiovox, Avatar Holdings, Axcelis Technologies,

Breakwater Resources, BRT Realty Trust, Callaway Golf, Cardero Resources, Cascade Microtech, Century Casinos, China Techfaith,

Comverse Technology, CONN'S, Conrad Industries, Creative Technology, Crexus Investment, dELiA*s, Denison Mines, Deswell Industries,

Duckwall-ALCO Stores, EchoStar, ePlus, ExpressJet, Five Star Quality, Flexsteel Industries, Formula Systems, Frozen Food Express,

Gencor Industries, Global Industries, Gravity, GTSI, Gushan Environmental, Hardinge, Harvest Natural Resources, Heelys, HQ Sustainable Maritime,

Hurco, I.D. Systems, Imation, Imperial Sugar, Industrias Bachoco, Ingram Micro, Insmed, Integrated Electrical, Kaiser Aluminum,

Kimball, L.S. Starrett, Lakes Entertainment, Linktone, LJ International, LookSmart, Luby's, Market Leader, Maxygen, MEMSIC, Miller Petroleum,

Movado Group, Myriad Pharma, Nam Tai Electronics, Natuzzi, Ninetowns Internet, Novatel Wireless, Nu Horizons, Opnext, ORBCOMM,

PC Connection, PennyMac Mortgage, Planar Systems, Providence Worcester, Qiao Xing Mobile, Qiao Xing Universal, QLT,

Rewards Network, Seahawk Drilling, Silicon Image, Spectrum Group, Sycamore Networks, Synalloy, Synthesis Energy, TAT Technologies,

Tecumseh Products, The9 Limited, TomoTherapy, Trans World Entertainment, TravelCenters of America, Two Harbors Investments, Volt Information,

Webzen, Xinyuan Real Estate, and more.

(profiled companies are underlined)

© 2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com April 21, 2010 – of 120

Table of Contents

EDITOR’S COMMENTARY .............................................................................4

SUPERINVESTOR HOLDINGS UPDATE ......................................................6 EXCLUSIVE INTERVIEW WITH ALLAN MECHAM .......................................8

EXCLUSIVE INTERVIEW WITH TOBY CARLISLE .................................... 14

BEN GRAHAM-STYLE INVESTING ............................................................ 18 THE PARABLE OF MR. MARKET ............................................................................................... 18 VALUE HAS OUTPERFORMED ................................................................................................. 19 WHAT WE MEAN BY “BEN GRAHAM-STYLE” VALUE .................................................................. 19

TOP FIVE GRAHAM-STYLE VALUE IDEAS .............................................. 20 GRAVITY (GRVY) – OWNED BY MOON, BLACK HORSE ............................................................. 20 I.D. SYSTEMS (IDSY) – OWNED BY ARTIS, DIKER .................................................................... 24 LOOKSMART (LOOK) – OWNED BY KENNEDY, RENTECH, S SQUARED ...................................... 28 MARKET LEADER (LEDR) – OWNED BY SPRINGHOUSE, LMM, RENTECH ................................... 32 MAXYGEN (MAXY) – OWNED BY CONUS, RENTECH, LONESTAR, ROYCE ................................... 36

OTHER STOCKS THAT MEET GRAHAM-STYLE VALUE CRITERIA ...... 40 ACTIONS SEMICONDUCTOR (ACTS) – OWNED BY RENTECH, T. ROWE ...................................... 40 ADAPTEC (ADPT) – OWNED BY STEEL PARTNERS, RENTECH, PZENA ....................................... 44 ASCENT MEDIA (ASCMA) – OWNED BY LIBERTY MEDIA, GABELLI ............................................. 48 AUDIOVOX (VOXX) – OWNED BY BAUPOST, AEGIS, SMITH, KAHN ............................................. 52 AXCELIS TECHNOLOGIES (ACLS) – OWNED BY SCHNEIDER, STERLING, SMITH .......................... 56 CALLAWAY GOLF (ELY) – OWNED BY ROYCE, CLEARBRIDGE ................................................... 60 HURCO COMPANIES (HURC) – OWNED BY ROYCE, PIER, KENNEDY .......................................... 64 IMATION (IMN) – OWNED BY ARTISAN, PRIVATE, LSV, THIRD AVENUE....................................... 68 INSMED (INSM) – OWNED BY ACADIAN, BLACKROCK ............................................................... 72 LINKTONE (LTON) – OWNED BY MNC, MERRY ASIA ................................................................ 76 NOVATEL WIRELESS (NVTL) – OWNED BY ROYCE, KESTREL .................................................... 80 REWARDS NETWORK (DINE) – OWNED BY ELKHORN, WC, RENTECH ....................................... 84 SILICON IMAGE (SIMG) – OWNED BY TOCQUEVILLE, RENTECH, HARVEY ................................... 88 THE9 LIMITED (NCTY) – OWNED BY QVT, RENTECH, SANSAR ................................................. 92 TRAVELCENTERS OF AMERICA (TA) – OWNED BY LEUCADIA, RENTECH .................................... 96

SNAPSHOT OF 98 DEEP VALUE STOCKS ............................................. 100 IN ALPHABETICAL ORDER ..................................................................................................... 100 BY MARKET VALUE .............................................................................................................. 102 BY SECTOR ......................................................................................................................... 104 STOCK PRICE PERFORMANCE .............................................................................................. 106 FREE CASH FLOW ............................................................................................................... 108 P/E MULTIPLES ................................................................................................................... 110 NET CURRENT ASSET VALUE ............................................................................................... 112 PERCENTILE RANK WITHIN INDUSTRY .................................................................................... 114 INSIDER BUYING AND OWNERSHIP ........................................................................................ 116

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Editor’s Commentary Researching a report on Ben Graham-style investing following the kind of run-

up the stock market indices have enjoyed since the lows of March 2009 has not been easy. Nonetheless, we were able to identify a reasonable number of companies that meet all or most of Graham’s value criteria. In this report, we profile 20 “deep value” stocks and highlight five companies as particularly interesting opportunities. Not all of these companies are “net current asset value” bargains based on the requirement that current assets less total liabilities exceed equity market value. However, all of the companies profiled in this report have significant value resident on their balance sheets. Such asset value protects the downside, while upside generally depends on recovery in business performance or asset sales and associated cash distributions.

Here are five companies that deserve closer investigation (advance apologies to those among you who will find the following companies too small to consider—we’ll be back with “bigger” ideas next month):

Gravity (GRVY) ($58 million market value), a Korean developer and marketer of online games, remains one of the cheapest asset-rich stocks we have come across in a long time. Despite improved management execution, including the achievement of profitability over the past year, the stock continues to trade at a discount to net cash (most of the cash is held in Korean won). Our analysis of the earning power of Gravity’s Internet-based game franchises suggests that the operating business may be worth several times the recent market value. As a result, investors enjoy an enviable combination: strong downside protection due to the net cash balance and large upside potential due to the high-return, scalable nature of the operating business. We note that majority shareholder GungHo, a Japanese gaming company run by the son of the founder of technology giant Softbank, could stand in the way of value realization by minority shareholders. However, this risk appears more relevant in the context of liquidation value rather than going-concern value. A potential catalyst for Gravity shares is the upcoming launch of the long-delayed sequel to the flagship game Ragnarok Online. The game should be released within the next twelve months, perhaps even by the end of this year, as stated by management in March. We believe there is pent-up demand for Ragnarok Online 2, and it is difficult to conceive a scenario in which RO 2 is launched yet Gravity’s revenue and profitability do not increase substantially.

I.D. Systems (IDSY) ($34 million market value) is a best-in-class player in the growing market for wireless solutions for managing and securing enterprise assets, including industrial vehicles, such as forklifts and airport ground support equipment, and rental vehicles. IDSY equity traded at a valuation of more than $200 million only a few years ago, reflecting the company’s patented technology leadership and rapid growth. However, customer concentration produced rapid revenue declines in the recent recession, with a spending freeze at the U.S. Postal Service accounting for more than one-half the revenue drop in 2009. I.D. Systems shares recently traded at close to the company’s net cash balance, pro forma for the $16 million acquisition of GE’s Asset Intelligence unit in January. Asset Intelligence, which provides trailer and container tracking solutions, should aid I.D.’s effort to reach profitability in 2011. While it is impossible to forecast I.D. Systems’ eventual “normalized” earning power, the size and growth profile of the target market suggest that long-term profitability could compare favorably to recent market value. Insiders own 19% of the shares and have been recent buyers of the stock.



LookSmart (LOOK) ($19 million market value), founded in 1996, was an early innovator in the online advertising industry, implementing a paid placement model for Internet search results. The company’s model never quite reached the “tipping point” of mass-market acceptance and was eventually overtaken by Google’s widely adopted AdWords technology. Nonetheless, LookSmart’s AdCenter search platform continues to be used by online advertisers and publishers. While equity investors ascribe negative value to LookSmart’s enterprise—as implied by net cash amounting to 130% of recent market value—LookSmart should be able to reach profitability on a lower cost base. Moreover, the company likely retains value to a strategic buyer. Respected quant fund Renaissance Technologies owns more than 6% of LookSmart.

Market Leader (LEDR) ($51 million market value) provides online marketing and technology software and services to real estate professionals, helping them generate and convert leads. Investors appear to have shunned Market Leader, as it derives revenue from the battered real estate industry. However, at an enterprise value of roughly zero, and with “net net” current assets exceeding recent market value, Mr. Market appears to have overreacted. Market Leader operates a business that is not capital-intensive and should generate respectable cash flow in “normal” times. The company has recently lost money, but investors may be missing an important shift in Market Leader’s business model toward software-as-a-service (SaaS), which generates recurring revenue. SaaS revenue doubled in Q4 and now accounts for more than 50% of total revenue. As the move toward SaaS progresses, it appears likely that Market Leader will grow overall revenue in 2010. The company has multiple profitability levers—whether or not Market Leader turns profitable this year will depend more on management priorities than the ability of the underlying business to turn a profit.

Maxygen (MAXY) ($218 million market value) develops improved versions of protein drugs by utilizing its proprietary MolecularBreeding directed evolution technology platform. Maxygen recently reorganized, leaving it with a substantial cash balance and various operating assets. Maxygen’s net cash and the assumed market value of the company’s 21% stake in biofuel maker Codexis (scheduled to IPO this week) approximate the recent market value of the entire company. Other assets include an 83% stake in joint venture Perseid, a patent-protected technology platform, licensing deals, and a potential $30 million milestone payment from Bayer. Maxygen shares look attractive on a sum-of-the-parts basis.

Finally, we are pleased to feature two exclusive interviews in this report. We recently had the pleasure of gaining insights from Allan Mecham of Arlington Value and Toby Carlisle of Eyquem Value. It’s impossible to read what Allan and Toby have to say on value investing without coming away a bit better prepared for the challenges of investment management.

Sincerely,

John Mihaljevic, CFA and The Manual of Ideas research team



Superinvestor Holdings Update In the February issue of Portfolio Manager’s Review, we profiled the top holdings of more than twenty top investors, based on then-available Schedule 13F-HR filings with the SEC. On this page, we provide an update on purchase and sale activity since yearend 2009 by the same set of investment managers. This information is based on Schedule 13G or 13D filings and Form 3 or 4 filings made by investors when changes in holdings require disclosure with the SEC.

Increases in Superinvestor Holdings Market Price ($) Shares Owned Holdings

Filing Filing Value Latest Filing ∆ Since Latest ∆ Since as % of Date Type Investor Company / Ticker ($mn) Date Date Filing (mn) 12/31/09 Co. Fund 4/13 4 ESL AutoNation / AN 3,254 19.08 19.15 0% 78.0 1% 46% 13% 4/12 13D Riley WPCS International / WPCS 22 3.17 3.14 1% 0.7 new 10% 6% 4/1 4 Icahn Take-Two Interactive / TTWO 886 10.65 10.05 6% 2.4 8% 3% 1% 3/31 13G Fairholme AIG / AIG 5,283 39.15 34.14 15% 15.0 new 11% 6% 3/31 13D Icahn Icahn Enterprises / IEP 3,598 44.53 39.95 11% 77.3 3% 96% 77% 3/31 13G Baupost Viasat / VSAT 1,256 34.58 31.78 9% 8.7 77% 24% 19% 3/31 13G Baupost Theravance / THRX 1,007 15.68 13.07 20% 13.0 29% 20% 13% 3/22 13G Lone Pine Live Nation / LYV 2,596 15.39 13.67 13% 9.6 new 6% 1% 3/19 13G Bares Hallmark Financial / HALL 206 10.23 7.96 29% 2.0 47% 10% 9% 3/9 13D Pershing General Growth / GGP 5,315 16.75 11.56 45% 24.0 3% 8% 28% 3/3 13D Riley DDi / DDIC 107 5.38 4.89 10% 2.0 9% 10% 30% 3/2 4 ESL AutoNation / AN 3,165 18.56 19.15 -3% 77.1 <1% 45% 13% 2/16 13D Icahn Lions Gate / LGF 711 6.03 5.81 4% 4.4 4% 4% 1% 2/11 4 Fairholme AmeriCredit / ACF 3,142 23.47 19.04 23% 34.8 10% 26% 8% 2/5 13G Greenlight CIT Group / CIT 7,629 38.14 27.61 38% 10.6 68% 5% 13% 1/21 3 Berkshire Symetra Financial / SYA* 1,547 13.11 12.00 9% 17.4 new 15% 0%

* Owned by Berkshire Hathaway subsidiary General Re.

Decreases in Superinvestor Holdings Market Price ($) Shares Owned Holdings

Date of Filing Value Latest Filing ∆ Since Latest ∆ Since as % of Filing Type Investor Company / Ticker ($mn) Date Date Filing (mn) 12/31/09 Co. Fund 4/13 13D Third Point Nabi Biopharma / NABI 276 5.64 4.90 15% 5.2 -24% 11% 3% 4/8 13D Baupost Facet Biotech / FACT 677 26.99 17.55 54% 1.5 -57% 6% 3% 4/7 13D Icahn Blockbuster / BBI 49 0.40 0.67 -40% 1.0 -61% 1% 0% 4/1 13D Icahn Blockbuster / BBI.B 27 0.37 0.59 -37% 0.8 -27% 1% 0% 3/31 13G Southeastern Wash. Post / WPO 4,343 535.70 439.60 22% 0.4 -13% 5% 1% 3/26 4 Berkshire Moody’s / MCO 6,482 27.41 26.80 2% 30.8 -3% 13% 1% 3/16 13G Southeastern Dillard’s / DDS 1,595 22.84 18.45 24% 9.2 >-1% 13% 1% 3/16 13D Baupost Facet Biotech / FACT 678 27.01 17.55 54% 2.0 -43% 8% 3% 2/26 13D Third Point Phoenix / PNX 293 2.53 2.78 -9% 5.0 -22% 4% 1% 2/24 13G Bares Stratasys / SSYS 543 26.80 20.25 32% 1.0 -33% <5% 11% 2/17 4 Fairholme TAL International / TAL 562 18.29 13.23 38% 2.1 -7% 7% 0% 1/31 13G Fairholme United Rentals / URI 479 7.96 9.81 -19% 1.0 -78% 2% 0% 1/31 13G Southeastern Marriott / MAR 10,419 29.06 27.25 7% 17.4 -18% 5% 2%

Portfolio Manager’s Review follows the portfolio moves of the following investment managers: Bill Ackman of Pershing Square, Zeke Ashton of Centaur, Brian Bares of Bares Capital, Bruce Berkowitz of Fairholme, Warren Buffett of Berkshire Hathaway, Ian Cumming and Joe Steinberg of Leucadia National, David Einhorn of Greenlight, Glenn Greenberg of Chieftain, Brian Gaines of Springhouse, Tom Gayner of Markel Gayner, Mason Hawkins of Southeastern, Chris Hohn of Children’s Investment Fund, Carl Icahn of Icahn Partners, Seth Klarman of Baupost, Eddie Lampert of ESL Investments, Dan Loeb of Third Point, Steve Mandel of Lone Pine, Mohnish Pabrai of Pabrai Funds, Bryant Riley of Riley Investment Management, Ken Shubin Stein of Spencer Capital, Prem Watsa of Fairfax Financial, and Wally Weitz of Weitz Funds.



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Exclusive Interview with Allan Mecham

We recently had the pleasure of interviewing Allan Mecham who heads Arlington Value Management. The firm has established an impressive ten-year record, including a positive return in 2008 despite no reliance on short selling. We are pleased to bring you this interview exclusively in Portfolio Manager’s Review.

The Manual of Ideas: Over the ten years ended December 31st, 2009, the S&P 500 delivered an underwhelming return of negative 9.1%, equaling a 1.0% annual loss. Bruce Berkowitz’s Fairholme Fund achieved a net annualized return of 13.2% during the same period, while your fund returned 15.5% annually net of fees. Berkowitz’s record has made him somewhat of a “rock star” in the investment business. How come you are still flying below the radar?

Allan Mecham: Ha! Good question… I’m eagerly awaiting The Little Book on Becoming a Hedge Fund Rock-Star. In all seriousness, it’s likely a combination of factors (Salt Lake City-based LLC, only $10+ million under management for the first five years with no serious marketing), but certainly my limitations marketing Arlington are partly to blame. Additionally, and probably the biggest reason for our obscurity, stems from our fanaticism about accepting the “right” capital. Maintaining a culture that’s conducive to rational thinking and investment success has been the top priority since inception. We have turned down significant sums of money on many occasions because of this stubborn commitment. As I said in my most recent letter, we get far more satisfaction from producing top returns than from the size of our paycheck… though we’re hopeful this distinction won’t need to be highlighted for much longer!

Many potential investors require monthly transparency into the portfolio and are overly focused on short-term results. Accepting “hot” money would endanger the culture and my ability to perform. My partner Ben [Raybould] considers it his most critical job to cultivate and maintain a culture that minimizes emotional noise and short-term performance pressures, to which I must say he has done a fantastic job. We believe patience and discipline are critically important to investment success. Taking emotion out of the equation, or at least minimizing it as much as possible, is vitally important and difficult to do if you have investors peering over your shoulder in real time, questioning ideas. That’s like telling someone what’s wrong with their golf game in the middle of their backswing — it’s the last thing you need when you’re trying to concentrate and execute a shot.

MOI: We could conduct this entire interview simply by revisiting quotes from your past letters, which are a tour de force. You recently didn’t hold back on your view of certain types of institutional investors: “Many times these gate-keepers of capital have expressed admiration for our results. Yet for them to invest we would need to not only continue to find undervalued stocks, we’d

Allan Mecham Arlington Value

“Taking emotion out of the equation, or at least

minimizing it as much as possible, is vitally important and difficult to do if you have investors peering over your

shoulder in real time, questioning ideas.”



need to find more of them; additionally, we would need to identify overvalued stocks – and short them – as well as find ideas across the globe in both large and obscure markets. Such comments are flattering, yet we see nothing but wild-eyed hubris attempting to outsmart people, more often, in more ways, and in more markets, as opposed to sticking with what produced top-tier results in the first place.” Clearly, the proliferation of investment vehicles whose partners’ interests are at odds with those of the ultimate owners of capital has resulted in misallocation of capital. Do you see owners waking up to this inherent conflict and demanding a more sensible approach to investment? Is it feasible for a fund like yours to bypass the agents and go directly to the owners of capital?

Mecham: I think it’s possible to gain traction but I’m not optimistic about change on a large scale as there are multiple factors at play. Bypassing the agents is a laborious process that’s difficult for a two-man shop like ours. The fees throughout the financial system are crazy and make no sense when thinking about the industry as a whole. A lot of financial intermediaries and hedge funds operate using a form of the “Veblen” principle — where status is attached to the high cost and exclusivity of the product. The financial middlemen satisfy the clients’ emotional needs more than the financial needs. The comfort of crowds is strongly at play throughout the system. At the end of the day I think managers are giving clients what they want — peace of mind and smoother returns, albeit at the expense of long-term results.

MOI: Short-term thinking seems to be alive and well in the investment industry despite overwhelming evidence that a longer-term perspective yields better results. You have alluded to the fact that good ol’ career risk may be the culprit: “Non-activity in the face of short-term underperformance is simply not tolerated, even though realistic assumptions (you can’t outsmart other smart people all the time) and basic math (lower frictional costs) confirm its worth. Most fund managers’ capital would not stick around long enough so they simply comply with more standard methods of operation in the spirit of keeping their jobs.” Incentives are one of the most powerful forces driving behavior, so it’s little surprise investment managers have adjusted to the prevailing industry incentives. What could be done to better align career risk with investment risk?

Mecham: I am a strong believer in the power of incentives. That being said, I’m not sure I have a silver bullet on how to solve the problem. You need investors to think and act like owners, rather than short-term renters, and to judge performance over longer time frames. I remember reading a talk that Mark Sellers gave at Harvard a few years back. He basically said good investors have the right temperament by age 15, and there’s not much one can do to improve later in life. So I don’t think arguing the merits of one’s philosophy is going to gain a lot of traction — it seems people either get it or they don’t. If you could somehow get investors to accept annual reporting (which is arguably too often), or some type of soft or hard lock-up, that may help, but again, it’s a hard problem to solve as you’re dealing with human nature to a large degree.

We are fanatical about partnering with compatible investors — those who “get it” — and we still have soft lock-ups at Arlington Value Capital. The sophisticated family offices (and others) often ask, “What’s your edge?” I firmly believe it is our investor base — they act and think like owners rather than traders, which enables us to wait for exceptional opportunities. Such an investor base really adds value when you go through periods of distress and

“The financial middlemen satisfy the clients’ emotional needs more than the financial needs. The comfort of crowds is strongly at play throughout the system. At the end of the

day I think managers are giving clients what they want

— peace of mind and smoother returns, albeit at the expense of long-term

results.”



underperformance; precisely the time when you need confidence and stability is apt to be the time when investors are rushing for the exits and questioning the approach. Our investor base is unique: despite above-average volatility we’ve had minuscule withdrawals over the years. Part of the genius in the structure of the Buffett partnerships (which has largely been maintained at Berkshire), is the culture and environment Buffett created and insisted upon; Buffett wouldn’t disclose positions and reported just once a year — he created an environment where nobody was questioning how or when he swung the investment bat.

MOI: Let’s switch gears and discuss the investment philosophy behind your track record. Help us understand the kind of investor you are, perhaps by highlighting a couple of examples of companies you have invested in or decided to pass up. What are the key criteria you employ when making an investment decision?

Mecham: It’s really quite simple. I need to understand the business like an owner. The firm needs to have staying power; I want to be confident about the general nature of the business and industry landscape on a longer term basis. I’m big on track records, and generally stay away from unproven companies with short operating histories. I also believe a heavy dose of humility and intellectual honesty is important when looking at potential ideas.

There’s a strong undercurrent constantly percolating to buy something — it’s fun, exciting and feels like that’s what you’re getting paid for. This makes it easy to trick yourself into thinking you understand something well enough when you don’t, especially if you are in the investment derby of producing quarterly and yearly returns! When looking at ideas, I have a Richard Feynman quote tattooed in the back of my brain: “Don’t fool yourself, and remember you are the easiest person to fool.”

Ultimately, what tends to cover all the bases is the mentality of buying the business outright and retaining management. Critical to implementing this approach is, again, having a compatible investor base. “Whose bread I eat his song I sing”… An owner’s mentality forces you to think hard about the important variables and makes you think long term, as opposed to in quarterly increments. In fact, I think very little about quarterly earnings and more about the barriers to entry, competitive landscape/threats, the ongoing capital needs and overall economics, and most importantly, the durability of the business. Over the years I’ve come to realize the importance of management, so we look hard at the people running the business as well. And, obviously, the price needs to make sense.

The criteria bar is set high; we really try to avoid mediocre situations where restlessness causes you to relax investment standards in one area or another. We also stress test the business under various economic scenarios and look to a normalized earnings power. We passed up many seemingly attractive ideas over the years as we would ask, “What happens under 7-10% unemployment (when unemployment was in the 4-5% range) and 6-8% interest rates?” And we would ask, “Is the business overly reliant on loose credit extension and frivolous spending?” Many names didn’t hold up under these stress test scenarios, so we passed. We bought AutoZone [AZO] a few years back as it held up under various adverse macro scenarios, and in fact performed exceptionally well throughout the Great Recession. I constantly try and guard against investing in

“When looking at ideas, I have a Richard Feynman

quote tattooed in the back of my brain: ‘Don’t fool

yourself, and remember you are the easiest person to

fool.’”



situations where the intrinsic value of the business is seriously impaired under adverse macro conditions. We prefer cockroach-like businesses — very hardy and almost impossible to kill!

MOI: You have said that “analysts tend to overweight what can be measured in numerical form, even when the key variable(s) cannot easily be expressed in neat, crisp numbers.” Can you give us an example of how this tendency occasionally creates an attractive investment opportunity for the rest of us?

Mecham: Sure. In a generic form, I think there are many instances where a company hits a speed bump and reports ugly “numbers,” yet the long-term earnings power and franchise value remain intact. Oftentimes a key cog of value is in a form that’s difficult to measure — brands, mindshare/loyal customers, exclusive distribution rights, locations, management, etc. Sometimes it’s the location of assets that can be hugely valuable. Waste Management [WM] and USG [USG] both have assets that are uniquely located and almost impossible to duplicate, which provides a low-cost advantage in certain geographies.

Reputation is valuable in business, though hard to measure in numerical form. Reputation throughout the value chain can be a strong source of value and competitive advantage. I think Berkshire Hathaway’s reputation is very valuable in a variety of areas, most obviously in acquiring other companies.

The various cogs of value differ between companies, but many times the key variable(s) are difficult to capture in a spreadsheet model and/or are not given the weight they deserve.

MOI: You wrote recently that your “appetite is paltry for risky investments, almost regardless of potential reward. Theoretically this stance is illogical as ‘pot odds’ can dictate taking a ‘flyer’ — where the potential payoff compensates for the chance of loss — however these situations are difficult to handicap, and can entice one to skew probabilities and payoffs.” You put your finger on an interesting phenomenon: Many investors systematically overestimate the probability and magnitude of favorable outcomes. We recall the countless times we have read investment write-ups that peg the expected return at 50-100%, yet virtually no investor manages to achieve even 20+% performance over any meaningful period of time. What kinds of situations do you consider too risky or, more appropriately, too susceptible to the skewing of probabilities and payoffs?

Mecham: I’m not sure I can categorize the situations… Any time you are paying a price today that’s dependent on heroics tomorrow — fantastic growth far into the future, favorable macro environment, R&D breakthroughs, patent approval, synergies/restructurings, dramatic margin improvements, large payoff from capex, etc. — you run the risk of inviting pesky over-optimism (psychologists have shown overconfidence tends to infect most of us), which can result in skewed probabilities and payoffs. We want to see a return today and not base our thesis on optimistic projections about the future. Many early-stage companies with short track records fall into the “too risky” category for us. Investments based on projections that are disconnected from any historical record make us leery. Investments dependent upon a continued frothy macro environment (housing, loose credit) are prone to over-optimism as well — how many housing-related/consumer credit companies were trading at 6x multiples growing 15%+ inviting IV estimates 5x the current quote?

“Oftentimes a key cog of value is in a form that’s difficult to measure…

Sometimes it’s the location of assets that can be hugely

valuable. Waste Management and USG both have assets

that are uniquely located and almost impossible to

duplicate, which provides a low-cost advantage in certain

geographies.”



Many times I think it can be a situation where you just don’t understand the business well enough and the bullish thesis is the nudge that sedates the lingering risks you don’t fully grasp. It’s important to keep the litany of subconscious biases in mind when investing. Charlie Munger talks about using a two-track analysis when looking at ideas. I think that’s an extremely valuable concept to implement when looking at investment opportunities. You have to understand the nature and facts governing the business/idea and, equally important, you need to understand the subconscious biases driving your decision making — you need to understand the business, but you also need to understand yourself!

MOI: How do you generate investment ideas?

Mecham: Mainly by reading a lot. I don’t have a scientific model to generate ideas. I’m weary of most screens. The one screen I’ve done in the past was by market cap, then I started alphabetically. Companies and industries that are out of favor tend to attract my interest. Over the past 13+ years, I’ve built up a base of companies that I understand well and would like to own at the right price. We tend to stay within this small circle of companies, owning the same names multiple times. It’s rare for us to buy a company we haven’t researched and followed for a number of years — we like to stick to what we know.

That’s the beauty of the public markets: If you can be patient, there’s a good chance the volatility of the marketplace will give you the chance to own companies on your watch list. The average stock price fluctuates by roughly 80% annually (when comparing 52-week high to 52-week low). Certainly, the underlying value of a business doesn’t fluctuate that much on an annual basis, so the public markets are a fantastic arena to buy businesses if you can sit still without growing tired of sitting still.

MOI: You have stated that your “old fashioned style embraces humble skepticism and is wary of most modern risk management tools and ideas.” Give us a glimpse into how you construct and manage your portfolio — and how you protect it from the kind of upheaval the markets experienced in late 2008 and early 2009.

Mecham: There’s no substitute for diligence and critical thinking. It’s ingrained in my DNA to think about the downside before any potential upside. We try and stick with companies we understand, where we have a high degree of confidence in the staying power of the firm. We spend considerable effort thinking critically about competitive threats (Porter’s five forces, etc). We really stress long-term staying power and management teams with proven track records that are focused on building long-term value. Then we always “stress test” the thesis against difficult economic environments. As I said earlier, we try and guard against investing in businesses reliant on some type of macro tailwind.

If you have the above, combined with the freedom to take the long view, managing the portfolio is based more on intellectual honesty and common sense rather than any sophisticated “tools,” “models,” or “formulas.” If the financial crisis taught nothing else, it showed how elegant financial models that calculate risk to decimal point precision act like a sedative towards critical thinking and even common sense — “risk models” were like the bell that told the brain it was time for recess! I also think risk management by groups can have similar effects.

“The average stock price fluctuates by roughly 80% annually (when comparing 52-week high to 52-week

low). Certainly, the underlying value of a

business doesn’t fluctuate that much on an annual

basis, so the public markets are a fantastic arena to buy businesses if you can sit still

without growing tired of sitting still.”



Being diligent, humble and thinking independently are key ingredients to solid risk management.

MOI: What is the single biggest mistake that keeps investors from reaching their goals?

Mecham: Patience, discipline and intellectual honesty are the main factors in my opinion. Most investors are their own worst enemies — buying and selling too often, ignoring the boundaries of their mental horsepower. I think if investors adopted an ethos of not fooling themselves, and focused on reducing unforced errors as opposed to hitting the next home run, returns would improve dramatically. This is where the individual investor has a huge advantage over the professional; most fund managers don’t have the leeway to patiently wait for the exceptional opportunity.

MOI: What books have you read in recent years that have stood out as valuable additions to your investment library?

Mecham: I enjoy all the behavior psychology stuff and would recommend Predictably Irrational [by Dan Ariely], Nudge [by Richard Thaler], How We Decide [by Jonah Lehrer], and Think Twice [by Michael Mauboussin].

The Big Short [by Michael Lewis] is a good book and a very entertaining read. Roger Lowenstein’s new book, The End of Wall Street, is very good as well. I’d also recommend The Relentless Revolution [by Oldham Appleby]. I like reading history of all sorts and think it’s beneficial to investing.

MOI: Allan, thank you very much for your time.

“Most investors are their own worst enemies — buying and selling too often, ignoring the

boundaries of their mental horsepower.”


http://www.amazon.com/gp/product/0061854549?ie=UTF8&tag=bluecroatia-20&linkCode=xm2&camp=1789&creativeASIN=0061854549�

http://www.amazon.com/gp/product/014311526X?ie=UTF8&tag=bluecroatia-20&linkCode=xm2&camp=1789&creativeASIN=014311526X�








Exclusive Interview with Toby Carlisle

We recently interviewed Toby Carlisle, author of the widely followed Greenbackd value investing blog and founder of the newly launched Eyquem Global Value fund. The name Eyquem derives from Michel Eyquem de Montaigne (1533-1592), “one of the most influential writers of the French Renaissance, known for popularizing the essay as a literary genre. He became famous for his effortless ability to merge serious intellectual speculation with casual anecdotes…”1

The Manual of Ideas: Tell us a little about your background—what drew you to deep value-style investing?

Toby Carlisle: I’m a recovering corporate advisory and securities lawyer. I’ve practiced in Australia and San Francisco, California. I became interested in value investing and the stock market generally at the end of my undergraduate studies when a friend introduced me to Warren Buffett’s Berkshire Hathaway shareholder letters. I read Roger Lowenstein’s book Buffett: The Making of an American Capitalist, reverse engineered Buffett’s investment methodology, read the 1951 edition of Security Analysis in a desultory fashion and then started investing in a similarly desultory fashion. I had predictably poor results. I say “predictably” because I wasn’t doing nearly enough work, and wasn’t nearly patient enough. Regardless, at the time I figured it was because there was something wrong with my methodology. That dissatisfaction with my results and my methodology meant that I was open to something else.

I started down the deep value road when I began working as a lawyer in 2002. One of my first big matters was a defense against two reasonably well-known greenmailers from the ‘80s. They had acquired a blocking stake in a going-private management buy-out and were trying to squeeze out an extra $1 from the bidders. Around the same time I noticed a number of investors taking positions in busted dot coms and making money raiding the cash. None of these investments were comprehensible in the context of the investment methodology discernable from Buffett’s letters, where he regularly pooh-poohs these stocks as cigar butts. I revisited Security Analysis, this time the 1934 edition, studied it properly, found the chapter on liquidations, and I’ve been doing that ever since.

I started working in a deep value sometimes activist fund manager in 2008. I’ve now launched my own firm, Eyquem Fund Management. I’ve raised some modest seed capital from outside investors for the maiden fund, Eyquem Global Value. The fund’s focus is similar to Greenbackd, which is to say deep-value-with-a-catalyst, including sub-liquidation value stocks, and activist and private equity targets. It’s a pretty prosaic strategy. I’m not trying to reinvent the wheel. I’m just looking for overwhelming value and a good chance I’ll get my money back in the foreseeable future.

1 Source: Wikipedia, http://en.wikipedia.org/wiki/Michel_de_Montaigne

Toby Carlisle Eyquem Global Value

“I’m not trying to reinvent the wheel. I’m just looking for

overwhelming value and a good chance I’ll get my

money back in the foreseeable future.”


http://en.wikipedia.org/wiki/Michel_de_Montaigne�


MOI: You have studied extensively the historical performance of Ben Graham’s “net net” investment strategy. Tell us what you’ve found.

Carlisle: It’s a testament to Ben Graham’s genius that his net current asset value strategy should be so robust, by which I mean that it should continue to work in different markets, both temporally and geographically, 76 years after it was first published. The strategy has been the subject of numerous papers. Two notable papers are Professor Henry Oppenheimer’s Ben Graham’s Net Current Asset Values: A Performance Update and James Montier’s Graham’s Net-Nets: Outdated or Outstanding? Professor Oppenheimer studied net current asset value stocks in the U.S. between 1970 and 1983, finding a mean return of 29.4% per year against an index return of 11.5%. Montier looked at the performance of net current asset value stocks globally between 1985 and 2007, finding a mean return of 35% per year against an index return of 17% per year.

MOI: Returns of 29-35% certainly sound mouthwatering. Have you looked at the robustness of the underlying data, for example in terms of the number of companies that could have been bought and the amount of capital that could have been deployed. It seems that especially during the period from 1985 through 2007, the bull market significantly narrowed the field of available “net nets.” Do we know what the geographic distribution of net current asset value stocks looked like during that time period?

Carlisle: That’s an excellent question, and it really gets to the heart of why the net current asset value opportunity persists despite the fact that the strategy is very well known. There is a natural limit to the amount of capital that can be invested in net current asset value stocks because they are so few, small and illiquid. The natural limit is quite low. I would suggest that it is so low that most professional fund managers wouldn’t even consider it worthy of study. I have read a comment from Joel Greenblatt that professional net current asset value investors eventually outgrow the strategy, by which he means that sooner or later their capital exceeds that low natural limit, and they get bored with it. I have fairly modest aspirations for my fund, and it’s only one of the strategies that I pursue, so I don’t foresee that being a concern for me.

One solution to the problem is to expand the markets under consideration to those outside the U.S. Montier’s research suggests that by investing outside the U.S. you increased your net current asset universe threefold. Approximately 30% of all net current asset value opportunities were in the U.S., more than 50% were in Japan, and the remainder were in South-East Asia and Europe.

MOI: Conceptually, buying stocks for less than liquidation value makes sense because there is a legal mechanism to recovering more cash than needs to be invested to set this mechanism in motion. However, in some countries, let’s say Japan, the legal mechanism may be non-existent or not enforceable. Is a strategy of investing in net current asset value stocks still appropriate in such countries?

Carlisle: That’s the million dollar question. The prima facie answer would have to be “no” because the entire basis for the strategy as described by Graham is the shareholder’s ultimate right to wind up the company and retrieve her or his capital. This is, almost by definition, capitalism at work. Seth Klarman has written in his book Margin of Safety:

“There is a natural limit to the amount of capital that

can be invested in net current asset value stocks because they are so few, small and

illiquid… I have read a comment from Joel

Greenblatt that professional net current asset value

investors eventually outgrow the strategy, by which he

means that sooner or later their capital exceeds that low

natural limit…”



“A liquidation is, in a sense, one of the few interfaces where the essence of the stock market is revealed. Are stocks pieces of paper to be endlessly traded back and forth, or are they proportional interests in underlying businesses? A liquidation settles this debate, distributing to owners of pieces of paper the actual cash proceeds resulting from the sale of corporate assets to the highest bidder. A liquidation thereby acts as a tether to reality for the stock market, forcing either undervalued or overvalued share prices to move into line with actual underlying value.”

Without a culture that elevates the rights of shareholders to their own capital over other “stakeholders’” rights, however, there’s a strong argument that Grahamite liquidation value investing won’t work.

The caveat to the prima facie position is threefold. First, as Seth Klarman points out, a liquidation analysis is a theoretical exercise in valuation, but not usually an actual approach to value realization. The assets of a company are typically worth more as part of a going concern than in liquidation, so liquidation value is generally a worst-case outcome. In my experience, most “net net” companies have been turned around, rather than liquidated. Although he wasn’t considering this point for this reason, I think Montier’s research suggests that “net nets” are liquidated in only around one-in-twenty cases (Montier actually says that “net net” stocks suffer a permanent loss of capital – defined as a stock price that drops 90% or more in a year – in around 5% of cases. Although I’m not sure how he constructed his data, it’s possible that these losses are in fact stock prices dropping following a liquidating distribution. It’s also possible that these losses indicate nothing more than a permanent loss of capital, as Montier suggests.) Together, this might suggest that a culture accepting liquidation as a natural part of a company’s lifecycle is not necessary for acceptable returns to sub-liquidation value stocks.

Second, the data seem to suggest that net current asset value is predictive of investment returns in Japan, and in the same order of magnitude as it is in the U.S. and other western countries. I hesitate to raise that data in support of an investment in Japan because I believe that, as a general rule, the data should follow the logic, rather than the other way around. That said, I believe the fact that the returns are in the same order of magnitude as the U.S. and other western countries is significant. It lends some credence to the theory that net current asset values are predictive of returns in countries like Japan, where shareholders are considered to be but one of many stakeholders interested in the company.

Finally, activist investors – predominantly foreign, although there are some local activists – seem to be making some headway in Japan. It’s possible that the Japanese market is opening up to change. I think this is the weakest of the arguments for a “net net” investment strategy in Japan, but nonetheless worth considering as a possibility. There are many counterpoints to suggest that the market is as hostile to external capitalists as it has always been.

“…as Seth Klarman points out, a liquidation analysis is

a theoretical exercise in valuation, but not usually an

actual approach to value realization… In my

experience, most ‘net net’ companies have been turned

around, rather than liquidated.”



MOI: It would seem that the strategy of buying “net nets” and embracing an activist approach to investing go hand-in-hand. What is your view of activism and do you intend to pursue it?

Carlisle: Activist investors are absolutely essential to the operation of a healthy market. They’ve worn some brickbats for their more extreme tactics, and a few dusted a lot of investor money in the crash, but I believe they’ve provided a net benefit to the market. Like short sellers, activists identify and police the more egregious examples of management waste and self-dealing. They also foment catalysts in otherwise neglected stocks. Both of these roles are important in the universe of small to micro companies outside the glare of analysts and the media, which is the universe inhabited by “net net” investors.

I will always support an activist where it makes sense to do so, but I think it’s highly unlikely that I will enter a position with the intention of being the lead activist. That’s a personal choice for me. I don’t have the personality for activism. I am prepared to be the lead activist where the activist strategy is used as a shield, but I would need another activist to take the lead, not to mention a very compelling value proposition with a clear path to unlocking the value, to consider using it as a sword. That latter strategy – riding the coattails of activist investors – is essentially the one I pursued with Greenbackd, and, with some refinements, it’s one I’ll be pursuing in the fund.

MOI: The strategy of investing in net current asset value stocks seems almost ideally suited for a purely quantitative approach. Most “net nets” are companies that have a lot of “hair” and uncertainty, making it tough for emotional investors to set aside their cognitive biases. How does judgment help you improve upon the results that might be achieved by an algorithm-driven approach?

Carlisle: My view is that it doesn’t help much, and might even hurt the results. That view is based upon the numerous studies identified in James Montier’s excellent article, Painting by Numbers: An Ode to Quant. Montier’s thesis is that simple statistical or quantitative models consistently outperform expert judgments. This phenomenon persists even when the experts are provided with the models’ predictions. Montier argues that the models outperform because humans are overconfident, suffer from “inertia,” which is an unwillingness to change, and, as you have identified, struggle to put aside cognitive biases. The theoretical conclusion to be drawn from this research is that the model’s output should be favored over expert judgment, meaning discretion should be limited. In practice this is an exceptionally difficult thing to do. I think the proper place for judgment is in refining the model, rather than in waving off any of the model’s predictions.

MOI: Toby, thank you very much for your time. To butcher the Chinese proverb, May you live in “net net”-laden times!

“Activist investors are absolutely essential to the

operation of a healthy market. They’ve worn some

brickbats for their more extreme tactics, and a few

dusted a lot of investor money in the crash, but I

believe they’ve provided a net benefit to the market.”



Ben Graham-Style Investing

Former Columbia professor Benjamin Graham once said, “Price is what you pay; value is what you get.” Many investors agree with this statement – though only outside the investment arena. Few of us would refuse to buy an item in a department store just because it is on sale, yet many do just that when it comes to the stock market. The fear associated with buying a depressed stock, obviously, is that the price decline signifies a fundamental problem. Yet even if the decline has been caused by a decline in intrinsic value, the question is whether the price has declined more than the value erosion warrants. Disciplined investors try to estimate the intrinsic value of companies within their circle of competence and buy them when the price drops far below estimated value.

The Parable of Mr. Market Graham’s 1949 classic The Intelligent Investor describes something akin to a free option contract available to every investor: At any time, you can choose to buy or sell a share of a business in the market at the prevailing bid price. If you believe the price is sufficiently below or above intrinsic value, you may exercise your option to buy or sell (short) the stock. Writes Graham,

“Imagine that you own a small share of a private company that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.”

If you are a prudent investor or a sensible businessman, you may be happy to sell out to Mr. Market when he quotes you a high price for your $1,000 interest in the business, and equally happy to buy from him when his price is low. But the rest of the time it may be wiser to form your own ideas of the value of your holdings, based on independent research and analysis.

Contrary to what is taught in most finance curricula, “Mr. Market,” at least in the short term, is not an infallible appraiser of businesses (a “weighing machine”) but rather the sum product of the opinions of a herd-like group of investors susceptible to subjective influences and cognitive biases (a “voting machine”).

Ben Graham “Father of Security Analysis” Author, The Intelligent Investor



Value Has Outperformed Economists Eugene Fama and Ken French have extensively studied the relationship between stock performance and book-to-market ratios. Their seminal paper covered the period from 1963-1990 and included nearly all stocks on the NYSE, Amex and Nasdaq stock markets. The stocks were divided into ten groups (deciles) based on book-to-market and were re-ranked annually. The highest book-to-market stocks outperformed the lowest book-to-market stocks by 21% to 8%, on average, with each descending decile performing worse than the previous. Fama and French also examined the beta of each decile and found that value stocks had lower risk, while growth stocks had the highest risk. The study had a profound impact in part because Fama was a long-time champion of the capital asset pricing model. Relative Annual Performance of Value versus Growth Stocks, 1928-2009

Source: Kenneth R. French data library, http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

What We Mean By “Ben Graham-Style” Value The parable of Mr. Market states that investors should participate in the market based on an understanding of intrinsic value, but the parable does not address the issue of how one goes about assessing value. While there are many approaches to selecting winning investments, Ben Graham’s favorite approach to valuation was to emphasize the values evident on a company’s balance sheet.

Unlike values derived from income statement and cash flow analysis, balance sheet values were deemed “safer” because they depended less on the value of a business as a going concern. If Graham could buy companies for less than the carrying value of their current assets net of all liabilities, he reasoned that he was might be a good deal.

Graham’s so-called “net nets” have outperformed the market over long periods of time, but quantitative screens searching for such companies inevitably turn up many near-worthless businesses. In this report, we look at companies whose prices Ben Graham might have liked, but that also meet other, more subjective criteria of value.

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1927 1937 1947 1957 1967 1977 1987 1997 2007


http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html�


Top Five Graham-Style Value Ideas

Gravity (GRVY) – Owned by Moon, Black Horse Seoul, South Korea, 82-2-201-6000

Technology: Software & Programming www.gravity.co.kr/eng

Trading Data Consensus EPS Estimates Valuation Price: $2.10 (as of 4/16/10) Month # of P/E FYE 12/31/08 n/m 52-week range: $0.81 - $2.63 Latest Ago Ests P/E FYE 1/0/00 n/a Market value: $58 million This quarter n/a n/a n/a P/E FYE 12/30/00 n/a Enterprise value: -$7 million Next quarter n/a n/a n/a P/E FYE 12/30/01 n/a Shares out: 27.8 million FYE 1/0/00 n/a n/a n/a EV/ LTM revenue n/m

Ownership Data FYE 12/30/00 n/a n/a n/a EV/ LTM EBIT n/m Insider ownership: 60% FYE 12/30/01 n/a n/a n/a P / tangible book 0.9x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield -165% Institutional ownership: 8% n/a n/a n/a LTM pre-tax ROC >100%

Operating Performance and Financial Position ($ 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 12/31/08 9/30/09 9/30/08 9/30/09 Revenue 9 44 57 48 37 36 47 54 11 12 Gross profit 8 38 48 33 21 19 23 33 5 8 Operating income 2 26 34 (2) (15) (20) (0) 11 0 1 Net income (0) 17 25 (3) (20) (21) (3) 8 1 0 Diluted EPS (0.02) 0.83 1.13 (0.10) (0.74) (0.74) (0.09) 0.29 0.03 0.00 Shares out (avg) 13 21 22 27 28 28 28 28 28 28 Cash from operations (4) 14 29 16 (1) (10) 6 (23) 7 16 Capex 3 4 11 13 3 9 5 (6) 0 (3) Free cash flow (6) 10 18 3 (3) (18) 1 (17) 7 19 Cash & investments 1 6 23 84 72 56 54 65 50 65 Total current assets 7 16 42 97 79 65 65 76 59 76 Intangible assets 0 0 1 13 11 12 11 11 11 11 Total assets 10 32 61 129 109 86 85 94 86 94 Short-term debt 3 2 1 0 0 0 0 0 0 0 Total current liabilities 7 9 11 17 14 9 8 9 7 9 Long-term debt 3 1 0 0 0 0 0 0 0 0 Total liabilities 10 12 16 22 22 19 17 20 17 20 Common equity (0) 20 45 108 87 67 68 75 69 75 EBIT/capital employed 56% >100% >100% -16% -461% -673% -3% >100% n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

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Mar 10Mar 09Mar 08Mar 07Mar 06Mar 05



BUSINESS OVERVIEW Gravity, based in Korea, develops and publishes online games via three wholly-owned subsidiaries in the U.S., France and Russia, as well as 15 global licensees. Gravity raised $71 million ($13.50/share) in its IPO in 2005. INVESTMENT HIGHLIGHTS

• Owns flagship Internet game Ragnarok Online, a massively multiplayer online role-playing game (MMORPG) that has been commercialized since 2002. In addition, Gravity offers three other MMORPGs and one “casual” online game.

• Japanese users contributed 51% of 2008 revenue with users in Korea and U.S./Canada 26% and 7%. Ragnarok Online is most popular in Japan and Korea, but is played in an additional 30+ countries.

• Improved execution after CEO change in 2008, with further changes in 2009, including a co-CEO structure between Yoon Kang (42) and Toshiro Ohno (49), who was appointed co-CEO and chairman in April 2009 to support Kang.

• Reported trailing EBIT of $11 million, including $2.5 million EBIT in 3Q09 (before a $1.4 million litigation accrual), after years of losses. Mobile game revenue has grown to $8 million annualized.

• Global MMOG market size is $4.2 billion, based on DFC Intelligence estimates for 2009, and is projected to grow at a 30% CAGR from $0.3 billion in 2001 to $5.9 billion by 2012. It is part of a larger “online gaming” market worth ~$11 billion in 2009.

• Potential takeover by majority owner? Softbank-controlled Japanese game publisher GungHo (Osaka: 3765), Gravity’s largest licensee, increased its stake to 59% in 2008. Gravity’s below-cash valuation may entice GungHo to make an offer.

• $62 million of cash and no debt as of September, 30, 2009. Gravity’s financials are audited by a Korean member firm of PricewaterhouseCoopers.

• Net-net current assets approximate market cap. INVESTMENT RISKS & CONCERNS

• GungHo became majority owner in 2008 by acquiring 52% of shares from a related firm that had paid ~$25 per share to buy the stake from Gravity’s founder in 2005. GungHo is also an online game developer, which presents conflicts of interest.

• 70+% of revenue from Ragnarok Online. Delays to the sequel may cause users to abandon the game. Gravity now intends to launch RO2 in 4Q10.

SELECTED OPERATING DATA – CONSOLIDATED 1

FYE December 31 2005 2006 2007 2008 YTD

9/30/09 Δ revenue 2 -17% -23% -2% 32% 17% Revenue (KRW, bn) 53.4 41.0 40.2 53.2 44.4 % of revenue by type: Online games – royalties 70% 64% 61% 57% 60% Online games – subscriptions 21% 21% 23% 24% 22% Mobile games 3% 9% 10% 13% 13% Character merchandising 6% 6% 5% 7% 5% Revenue growth by type: Online games – royalties -17% -30% -5% 22% 28% Online games – subscriptions -31% -25% 12% 34% 1% Mobile games 343% 131% 6% 69% 16% Character merchandising 15% -17% -20% 75% -13% Selected items as % of revenue: Gross profit 70% 57% 52% 48% 63% SG&A expense 58% 67% 72% 44% 38% R&D expense 17% 23% 14% 4% 3% Adjusted EBIT -5% -33% -35% 0% 22% Interest income, net 1% 7% 7% 5% 4% D&A and impairments 13% 23% 21% 16% n/a Capex 3 16% -16% 7% 3% n/a Capitalized software 11% 0% 13% 7% n/a Δ shares out (period end) 0% 0% 0% 0% 0%

1 Based on U.S. GAAP and local currency results (Korean Won=KRW). 2009 consolidated results have not been made available as of April 15, 2010. 2 Recent revenue growth is partly driven by strengthening of Yen versus KRW. 3 Capex was negative in 2006 due to gain on disposal of PP&E. SELECTED OPERATING DATA – NON-CONSOLIDATED 1

FYE December 31 2005 2006 2007 2008 2009 Non-consolidated revenue… … % of consolidated revenue 92% 85% 84% 79% n/a … Growth (y-y) -16% -30% -3% 25% 5% Selected items as % of revenue: Gross profit 71% 65% 59% 62% 69% Adjusted EBIT -4% -29% -30% 18% 27% Interest income, net 6% 9% 9% 6% 5%

1 Based on Korean GAAP and local currency results (Korean Won). 2009 consolidated results have not been made available as of April 15, 2010.

• Competitive, hit-driven online gaming industry. Larger rivals include NCsoft, Shanda and Neowiz.

• Transaction costs, as Gravity is a low-priced ADS. MAJOR HOLDERS Insiders <1% | Japanese public company GungHo 59% | Moon 5% | Black Horse 2% | RenTech 1% | Sprott 1% RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Gravity is one of the cheapest stocks we have come across in a long time. Despite better management execution, including achievement of profitability over the last year, the stock continues to trade at a discount to the net cash balance (majority of cash is held in Korean won). If minority shareholders get to participate in future shareholder value creation, Gravity appears poised to deliver multiples on investors’ investment. While majority shareholder GungHo could stand in the way of potential value creation, we find the risk-reward at the current share price compelling. A potential catalyst is the Korean launch of the long-delayed sequel to the flagship game Ragnarok Online by the end of 2010, according to a management update in March.



GRAVITY – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08 12/31/07

Assets Cash 57 54 51 47 47 46 45 48 Short-term investments 8 8 8 7 3 2 5 8 Accounts receivable 7 6 5 6 5 7 4 4 Inventory - - - - - - - - Other current assets 4 4 5 5 5 5 5 5 Total current assets 76 72 70 65 59 60 59 65 PP&E 3 4 4 5 6 6 7 6 Goodwill and other intangibles 11 11 11 11 11 12 12 12 Long-term investments 2 2 2 2 6 3 4 - Other long-term assets 3 3 3 3 3 3 3 4

Total assets 94 92 90 85 86 84 85 86

Liabilities and Shareholders' Equity Accounts payable 5 2 3 3 3 3 3 4 Short-term debt - - - - - - - - Other current liabilities 5 5 4 5 5 5 5 5 Total current liabilities 9 7 7 8 7 8 8 9 Long-term debt - - - - - - - - Other long-term liabilities 10 10 10 10 10 10 10 10

Total liabilities 20 17 17 17 17 18 18 19 Preferred stock - - - - - - - - Shareholders' equity 75 75 73 68 69 67 67 67 Shares out (avg) (mn) 28 28 28 28 28 28 28 28 Selected Values and Ratios Cash and investments 67 64 62 56 56 52 54 56 Debt - - - - - - - - Net cash and investments 67 64 62 56 56 52 54 56 Current assets 76 72 70 65 59 60 59 65 Current liabilities 9 7 7 8 7 8 8 9 Current ratio 8x 11x 10x 9x 8x 8x 8x 7x Acid-test ratio 8x 10x 10x 8x 8x 7x 7x 7x Current assets 76 72 70 65 59 60 59 65 Total liabilities and preferred 20 17 17 17 17 18 18 19 NET NET current assets 56 55 53 47 42 42 42 46 Shareholders' equity 75 75 73 68 69 67 67 67 Goodwill and other intangibles 11 11 11 11 11 12 12 12 Tangible book value 63 64 62 57 57 55 55 56 Tangible book to tangible assets 76% 79% 79% 77% 77% 76% 76% 74% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 4 7 7 8 8 10 8 7 Balance Sheet Trends (sequential) ∆ total assets 3% 2% 6% 0% 1% 0% -2% n/a ∆ shareholders' equity 0% 2% 7% -1% 3% 0% 0% n/a ∆ tangible shareholders' equity 0% 2% 9% -1% 4% -1% 0% n/a ∆ tangible book per share 0% 2% 9% -1% 4% -1% 0% n/a ∆ net cash and investments 4% 4% 10% 0% 8% -3% -3% n/a ∆ net net current assets 1% 4% 12% 12% 1% 1% -9% n/a ∆ accounts receivable 16% 8% -10% 16% -25% 60% -2% n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable 100% -15% -4% 12% -24% 10% -27% n/a ∆ capital employed -35% -10% -10% -2% -15% 13% 29% n/a



…additional insight into Gravity: SLIDES FROM COMPANY PRESENTATION, AUGUST 2009



I.D. Systems (IDSY) – Owned by Artis, Diker Hackensack, NJ, 201-996-9000

Services: Communications Services www.id-systems.com

Trading Data Consensus EPS Estimates Valuation

Price: $3.04 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $2.75 - $4.20 Latest Ago Ests P/E FYE 12/31/10 n/m Market value: $34 million This quarter -$0.31 -$0.31 2 P/E FYE 12/31/11 20x Enterprise value: -$8 million Next quarter -0.20 -0.20 2 P/E FYE 12/30/12 n/a Shares out: 11.3 million FYE 12/31/10 -0.51 -0.51 2 EV/ LTM revenue n/m

Ownership Data FYE 12/31/11 0.15 0.15 1 EV/ LTM EBIT n/m Insider ownership: 12% FYE 12/30/12 n/a n/a n/a P / tangible book 0.6x Insider buys (last six months): 4 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 1 EPS Surprise Actual Estimate LTM EBIT yield 189% Institutional ownership: 45% 3/10/10 -$0.21 -$0.19 LTM pre-tax ROC -164%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 8 14 19 25 17 27 10 10 8 3 Gross profit 4 7 9 11 8 14 5 5 4 1 Operating income (1) 0 1 (5) (11) (6) (14) (14) (1) (5) Net income (1) 0 1 (2) (7) (4) (13) (13) (1) (5) Diluted EPS (0.17) 0.05 0.09 (0.15) (0.66) (0.38) (1.20) (1.20) (0.11) (0.43) Shares out (avg) 7 7 8 11 11 11 11 11 11 11 Cash from operations (0) 2 (4) (1) 1 (5) (7) (7) 1 (3) Capex 0 0 1 1 1 0 0 0 0 0 Free cash flow (1) 1 (5) (2) 0 (5) (7) (7) 1 (3) Cash & investments 7 12 8 70 27 21 53 53 21 53 Total current assets 10 16 18 83 35 34 62 62 34 62 Intangible assets 0 0 0 0 0 0 1 1 0 1 Total assets 14 17 20 85 75 70 71 71 70 71 Short-term debt 0 0 0 0 0 0 12 12 0 12 Total current liabilities 2 3 4 3 3 3 14 14 3 14 Long-term debt 1 0 0 0 0 0 0 0 0 0 Total liabilities 3 4 5 4 3 3 15 15 3 15 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 11 14 15 81 72 67 56 56 67 56 EBIT/capital employed -54% 4% 10% -48% -117% -69% -164% -164% n/m n/m


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BUSINESS OVERVIEW I.D. Systems provides wireless technology for the real-time tracking and management of vehicles, containers, etc. The company acquired the Asset Intelligence (AI) business unit of GE for $16 million in cash in January. The business provides trailer and container tracking products and services. INVESTMENT HIGHLIGHTS

• Specializes in fleet management applications. , For example, I.D.’s products allow rental car firms to increase revenue by more accurately tracking vehicle data such as fuel consumption, and improve customer service by speeding up vehicle returns.

• Products offer advantages over traditional inventory and logistics tracking systems. These include 1) ability to function with only periodic radio frequency (RF) connectivity, 2) tracking of assets indoors, and 3) no recurring service costs.

• Expects to “achieve profitability in 2011” on AI revenue and cost synergies. I.D. expects $12-15 million of revenue from AI in 2010. Combined gross margin should remain “consistent with our historical gross margins.” Combined operating costs are to be cut by ~$8 million to $22 million annually.

• Owns nine U.S. patents and has 19 pending U.S. patent applications. The majority of patents, which primarily cover wireless asset management and RF identification systems, do not expire until 2020-27.

• Outsources hardware production to contract manufacturers such as Flextronics. This enables I.D. to operate a capital-light business focused on product innovation and customer service.

• Net cash of $32 million, pro-forma for $16 million to acquire AI (including M&A-related costs but excluding $2 million of contingent payment).

• Pro-forma net cash approximates market value. “Net net” current assets (including $7 million of long-term investments) are 120+% of market value.

COMPARABLE PUBLIC COMPANY ANALYSIS

P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E ZBRA 1,780 1,630 2.0x 3.5x 22x 18x IN 830 590 .9x 1.7x 32x 19x IDSY 30 -10 n/m .5x n/m 20x

MAJOR HOLDERS * CEO Jagid 5% | Other insiders 8% | Artis 20% | Diker 10% | DFA 4% | Thomson, Horstmann 4% | BlackRock 3% * Holdings of insiders exclude 1.7 million of vested stock options as of December 31, 2009. The average option exercise price is $9.51 per share.

SELECTED OPERATING DATA 1 FYE December 31 2005 2006 2007 2008 2009 ∆ revenue 38% 30% -31% 58% -62% ∆ employees 2 n/a 46% 11% 0% 16% Revenue ($mn) 19 25 17 27 10 % of revenue by type: Products 78% 66% 65% 74% 63% Services 22% 34% 35% 26% 37% Revenue growth by type: Products 39% 9% -32% 82% -68% Services 34% 108% -29% 15% -45% Gross margin by type: Products 48% 49% 47% 50% 40% Services 54% 36% 49% 50% 57% Total gross margin 49% 45% 48% 50% 46% Selected items as % of revenue: R&D 9% 11% 17% 11% 25% EBIT 3% -18% -62% -22% -139% Net income 4% -7% -43% -15% -128% D&A 2% 2% 3% 2% 5% Capex 3% 3% 3% 1% 3% Employees 2 61 89 99 99 115 Free cash flow ($mn) -5 -2 0 -5 -7 Tangible equity to assets 78% 92% 96% 96% 87% ∆ shares out (avg) 4% 35% 7% -3% 1%

1 Financials are not pro-forma for Asset Intelligence purchase in January 2010. 2 Based on staff at 1/31/06, 3/1/07, 3/3/08, 2/24/09 and 3/30/10, respectively. INVESTMENT RISKS & CONCERNS

• Will Asset Intelligence acquisition add value? I.D. used $16 million of cash to buy a business that had a $14 million net loss on $27 million of revenue in 2009. The deal created $10 million of intangibles.

• Lost $14 million on an EBIT basis in 2009, representing the fourth consecutive year of losses. Assuming no recovery in existing business, it could be difficult to achieve profitability, even with AI.

• Competitors include much larger companies such as Motorola (including its Symbol Technologies subsidiary), Intermec, Zebra Technologies, Savi Technology (owned by Lockheed Martin), and Crown Equipment, as well as start-ups such as ShockWatch (Media Recovery) and Access Control.

• Exposed to rapid technological change including risks related to frequent new product launches.

• Customer concentration. The U.S. Postal Service, Wal-Mart, NACCO and Ford made up 20%, 15%, 15%, and 14%, respectively, of 2009 revenue.

RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE The acquisition of Asset Intelligence should enable I.D. Systems to achieve profitability in 2011, based on management. As recent market capitalization implies an enterprise value of roughly zero, investors may want to take notice. Although the company remains small in terms of revenue, its patented products are used by some of the world’s most efficient companies including Wal-Mart and Procter & Gamble. With incentivized insiders focused on value creation, risk/reward is attractive.



I.D. SYSTEMS – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 20 15 18 19 13 7 13 17 Short-term investments 34 40 12 7 9 9 9 12 Accounts receivable 3 2 3 6 9 11 7 5 Inventory 5 6 6 5 3 3 3 4 Other current assets 1 1 0 0 1 0 0 0 Total current assets 62 63 40 37 34 29 32 37 PP&E 1 1 1 1 1 1 1 1 Goodwill and other intangibles 1 0 0 0 0 0 0 - Long-term investments 7 10 36 41 35 38 35 30 Other long-term assets - - 0 0 0 0 0 0

Total assets 71 74 77 79 70 69 69 69

Liabilities and Shareholders' Equity Accounts payable 2 1 1 1 2 2 2 1 Short-term debt 12 13 13 13 - - - - Other current liabilities 1 0 0 1 0 1 1 0 Total current liabilities 14 14 14 14 3 3 3 1 Long-term debt - - - - - - - - Other long-term liabilities 1 1 0 0 0 0 0 0

Total liabilities 15 14 15 15 3 3 3 2 Preferred stock - - - - - - - - Shareholders' equity 56 60 63 65 67 66 66 67 Shares out (avg) (mn) 11 11 11 11 11 11 11 11 Selected Values and Ratios Cash and investments 60 64 67 67 56 54 56 58 Debt 12 13 13 13 - - - - Net cash and investments 49 52 54 54 56 54 56 58 Current assets 62 63 40 37 34 29 32 37 Current liabilities 14 14 14 14 3 3 3 1 Current ratio 4x 5x 3x 3x 13x 10x 12x 29x Acid-test ratio 4x 4x 2x 2x 11x 9x 11x 26x Current assets 62 63 40 37 34 29 32 37 Total liabilities and preferred 15 14 15 15 3 3 3 2 NET NET current assets 47 49 25 22 31 26 30 36 Shareholders' equity 56 60 63 65 67 66 66 67 Goodwill and other intangibles 1 0 0 0 0 0 0 - Tangible book value 55 60 62 64 67 65 66 67 Tangible book to tangible assets 79% 81% 81% 81% 96% 95% 96% 98% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 7 9 8 10 11 12 10 9 Balance Sheet Trends (sequential) ∆ total assets -5% -4% -3% 13% 1% 0% 1% n/a ∆ shareholders' equity -7% -4% -3% -4% 2% 0% -1% n/a ∆ tangible shareholders' equity -8% -4% -3% -4% 2% 0% -2% n/a ∆ tangible book per share -8% -5% -3% -4% 2% -1% -2% n/a ∆ net cash and investments -6% -5% 0% -3% 4% -5% -3% n/a ∆ net net current assets -3% 96% 14% -28% 17% -12% -17% n/a ∆ accounts receivable 38% -20% -49% -31% -21% 47% 40% n/a ∆ inventory -20% 2% 22% 36% 32% -24% -8% n/a ∆ accounts payable 250% -50% 50% -64% -4% 28% 80% n/a ∆ capital employed -21% 2% -17% -6% -9% 25% 3% n/a



…additional insight into I.D. Systems: FINANCIAL INFORMATION RELATED TO THE ACQUISITION OF ASSET INTELLIGENCE (AI) ON JANUARY 8, 2010

The preliminary allocation of the AI purchase price consists of the following ($ millions):

Current assets $4.8 Inventory 7.0 Other assets 0.9 Current liabilities (6.4) Intangibles 3.2 Goodwill and other intangibles 6.6

Less: Contingent consideration (1.2) Fair value of assets acquired $15.0

Combined pro forma balance sheet as of December 31, 2009 ($ millions): Pro Forma Historical Combined

Cash and cash equivalents $19.5 $4.5 Investments – short term 33.9 33.9 Accounts receivable - net 3.3 8.1 Inventory - net 4.5 11.5 Other current assets 0.8 0.8 Total current assets $61.9 $58.8 Total other assets 8.7 19.4 Total assets $70.6 $78.2 Total current liabilities $14.2 $21.8 Total long term liabilities 0.5 0.5 Total liabilities $14.7 $22.3 Total stockholders’ equity 55.9 55.9 Total liabilities and stockholders’ equity $70.6 $78.2

Combined pro forma revenue and earnings for 2009 ($ millions, except per share data): Pro Forma Historical Combined

Revenue $10.3 $37.6 Net loss (13.2) (27.2) Net loss per share – basic and diluted (1.2) (2.5) Source: I.D. Systems' 2009 10-K.



LookSmart (LOOK) – Owned by Kennedy, RenTech, S Squared San Francisco, CA, 415-348-7000

Technology: Computer Services www.looksmart.com


Price: $1.10 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $0.88 - $1.56 Latest Ago Ests P/E FYE 12/31/10 n/m Market value: $19 million This quarter -$0.08 -$0.08 1 P/E FYE 12/31/11 n/m Enterprise value: -$6 million Next quarter -0.05 n/a 1 P/E FYE 12/30/12 n/a Shares out: 17.2 million FYE 12/31/10 -0.24 n/a 1 EV/ LTM revenue n/m

Ownership Data FYE 12/31/11 -0.19 n/a 1 EV/ LTM EBIT n/m Insider ownership: 9% FYE 12/30/12 n/a n/a n/a P / tangible book 0.7x Insider buys (last six months): 0 LT growth 20.0% 20.0% 1 Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield 117% Institutional ownership: 35% 3/18/10 n/a n/a LTM pre-tax ROC n/m

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 135 77 41 49 52 65 52 52 15 13 Gross profit 65 32 14 18 22 26 18 18 5 4 Operating income 9 (12) (20) (16) (11) (14) (7) (7) (12) (1) Net income 6 (10) (18) (14) 4 (15) (6) (6) (13) (1) Diluted EPS 0.34 (0.50) (0.79) (0.60) (0.36) (0.74) (0.39) (0.39) (0.67) (0.06) Shares out (avg) 21 22 23 23 23 18 17 17 17 17 Cash from operations 19 (7) (8) (6) (2) (2) (3) (3) 3 1 Capex 6 3 4 4 2 2 1 1 0 0 Free cash flow 13 (10) (11) (10) (4) (4) (4) (4) 3 1 Cash & investments 70 53 51 40 56 33 28 28 33 28 Total current assets 95 59 55 46 64 41 33 33 41 33 Intangible assets 17 22 20 18 11 0 0 0 0 0 Total assets 126 101 83 73 80 47 38 38 47 38 Short-term debt 0 1 2 1 2 2 1 1 2 1 Total current liabilities 36 10 10 12 15 15 11 11 15 11 Long-term debt 0 0 0 0 1 1 2 2 1 2 Total liabilities 40 15 15 15 17 16 12 12 16 12 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 86 86 69 58 63 30 26 26 30 26 EBIT/capital employed n/m -1573% -905% n/m n/m n/m n/m n/m n/m n/m


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BUSINESS OVERVIEW LookSmart operates in the online search advertising market by serving ads that target user queries on Internet sites. INVESTMENT HIGHLIGHTS

• One of the largest independent pay-per-click Internet ad platforms* with 243 million paid clicks in 4Q09 (up 21% y-y). LookSmart acts as a broker matching advertisers with online search queries.

• Generates revenue mainly from “per-click fees” charged to advertising customers. Advertisers bid for keywords on the company’s AdCenter platform and pay if an ad is clicked by potential customers.

• Private-label licensing of AdCenter technology platform represents another revenue source. Online content publishers who want to create their own ad networks can license AdCenter.

• Net cash represents ~ 130% of market cap. Cash and short-term investments were $28 million at yearend 2009, offset by $3 million of capital leases.

• Free cash flow positive in 4Q09. Net cash from operations was positive $1.2 million versus capex of $0.7 million, including capitalization of software.

• “Committed to evaluating strategic alternatives on an opportunistic basis” based on CEO comment during 4Q09 earnings call in March.

• $175 million of federal NOLs at yearend 2009. • “Net net” current assets are $1.17 per share.

INVESTMENT RISKS & CONCERNS

• Competes against Google, Yahoo! and Microsoft. LookSmart is a niche provider that may find it challenging to retain distribution network partners and advertising customers on economic terms.

• Average revenue-per-click (RPC) decreased 29% from $0.079 in 2008 to $0.056 in 2009. RPC has more than halved since 2006, while traffic acquisition costs as a percentage of ad network revenue are up from 61% in 2006 to 67% in 2009.

• Cumulative free cash flow is negative $34 million in 2005-09, including negative $4 million in 2009.

• CEO West resigned in December 2009. West was replaced on an interim basis by executive chairman Dexmier (57) “until a replacement is named.”

• IAC Search and Media (IACI) accounted for 16% of 2009 revenue including 81% of publisher segment revenue. The publisher contract with IACI ends on June 30, 2010 and is on a monthly notice.

* For information on online advertising trends, including search advertising, see the IAB/PwC report released in April 2010 at http://bit.ly/cF5Tcq

SELECTED OPERATING DATA 1 FYE December 31 2005 2006 2007 2008 2009 ∆ total paid clicks -37% 46% 11% 72% 21% ∆ avg revenue per click 14% -31% 9% -44% -27% ∆ revenue -46% 18% 15% 16% -20% ∆ employees, period-end -12% -6% -23% -3% -28% Revenue ($mn) 41 49 56 65 52 % of revenue by segment: Advertiser networks 2 89% 79% 82% 91% 92% Publisher solutions 3 4% 12% 10% 9% 8% Consumer sites 7% 9% 8% 0% 0% Revenue growth by segment: Advertiser networks n/a 4% 20% 28% -19% Publisher solutions n/a 296% -8% 9% -34% Selected items as % of revenue: Gross profit 33% 37% 43% 40% 36% R&D 4 44% 33% 27% 17% 19% EBIT -48% -32% 2% -22% -13% Net income -43% -28% 5% -20% -13% D&A 19% 13% 9% 5% 6% Capex 5 9% 8% 3% 3% 2% Selected operating metrics (as of 4Q for each period): Total paid clicks (mn) 72 105 117 201 243 Avg revenue per click ($) 0.16 0.11 0.12 0.07 0.05 Traffic acquisition costs 6 62% 61% 63% 67% 67% Employees, period-end 127 120 93 90 65 ∆ shares out (avg) 2% 0% 0% -22% -4%

1 2008 and 2009 figures reflect continuing operations (exclude results of consumer products activities, which were discontinued in 2008). As of December 31, 2009, the company continues to own the Wisenut search engine technology, intellectual property rights in such technology and related assets. 2 Revenue derives from “per-click fees” charged to advertising customers. 3 Revenue derives mainly from private-label licensing of AdCenter platform. 4 “Product development and technical operations” costs reported by LookSmart. 5 Includes capitalized software development and purchase of intangible assets. 6 Expressed as a percentage of advertiser network revenue. COMPARABLE PUBLIC COMPANY ANALYSIS

P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E GOOG 174,930 148,420 6.0x 5.4x 20x 18x YHOO 25,440 22,230 3.4x 3.0x 38x 30x LOOK 20 0 n/m .8x n/m n/m

MAJOR HOLDERS CEO Dexmier <1% | Other insiders 4% | Mercury 10% | Kennedy 8% | RenTech 6% | DFA 6% | S Squared 5% RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Since its founding in 1996, LookSmart has been a pioneer in the fast-growing Internet advertising industry. While the company faces much stronger rivals in Google and Yahoo!, its AdCenter search platform remains used by online advertisers and publishers. The market, however, ascribes a negative enterprise value to the company. While this may be justified by a lack of historical free cash flow generation, LookSmart has considerable option value. With net cash representing about 130% of market value, and potential for a strategic event including a sale of the company, we find the risk-reward appealing.


http://bit.ly/cF5Tcq�


LOOKSMART – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 23 15 24 26 22 12 13 12 Short-term investments 5 12 6 5 10 17 21 21 Accounts receivable 4 6 5 5 7 10 6 8 Inventory - - - - - - - - Other current assets 1 1 1 1 2 1 2 3 Total current assets 33 34 36 37 41 40 42 43 PP&E 4 3 3 3 3 3 3 3 Goodwill and other intangibles - 0 0 0 0 10 10 10 Long-term investments - - - - - 1 - - Other long-term assets 2 2 2 2 2 3 3 3

Total assets 38 39 41 43 47 58 58 60

Liabilities and Shareholders' Equity Accounts payable 3 4 3 3 4 4 4 4 Short-term debt 1 2 2 2 2 2 2 2 Other current liabilities 7 6 6 7 8 8 7 9 Total current liabilities 11 11 11 12 15 14 13 15 Long-term debt 2 2 2 2 1 1 - - Other long-term liabilities - - - - - 1 2 2

Total liabilities 12 13 13 14 16 16 15 17 Preferred stock - - - - - - - - Shareholders' equity 26 27 28 29 30 42 43 43 Shares out (avg) (mn) 17 17 17 17 17 17 17 20 Selected Values and Ratios Cash and investments 28 27 30 31 33 30 34 33 Debt 3 3 4 4 4 3 2 2 Net cash and investments 25 24 26 27 29 27 33 31 Current assets 33 34 36 37 41 40 42 43 Current liabilities 11 11 11 12 15 14 13 15 Current ratio 3x 3x 3x 3x 3x 3x 3x 3x Acid-test ratio 3x 3x 3x 3x 3x 3x 3x 3x Current assets 33 34 36 37 41 40 42 43 Total liabilities and preferred 12 13 13 14 16 16 15 17 NET NET current assets 20 21 23 23 25 25 27 26 Shareholders' equity 26 27 28 29 30 42 43 43 Goodwill and other intangibles - 0 0 0 0 10 10 10 Tangible book value 26 27 28 29 30 32 33 33 Tangible book to tangible assets 68% 68% 69% 67% 65% 67% 69% 66% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed (1) 1 (0) (0) (1) 3 (1) 0 Balance Sheet Trends (sequential) ∆ total assets -2% -4% -4% -9% -19% -1% -2% n/a ∆ shareholders' equity -3% -6% -2% -5% -28% -3% 1% n/a ∆ tangible shareholders' equity -2% -6% -2% -5% -6% -3% 2% n/a ∆ tangible book per share -2% -6% -2% -5% -6% -4% 22% n/a ∆ net cash and investments 4% -9% -2% -8% 9% -19% 5% n/a ∆ net net current assets -6% -7% -1% -7% 1% -9% 3% n/a ∆ accounts receivable -32% 20% -6% -26% -29% 62% -19% n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable -17% 9% -3% -25% 13% -9% 10% n/a ∆ capital employed -250% -300% 50% -67% -121% -380% -433% n/a



…additional insight into LookSmart: SELECTED CHARTS FROM IAB INTERNET ADVERTISING REVENUE REPORT, APRIL 2010 Access the full report at http://www.iab.net/AdRevenueReport U.S. Internet Advertising Revenue, 1999-2009 ($ in millions)

Industry Concentration: Percentage Share of U.S. Internet Advertising Revenue, 2001-2009

U.S. Internet Advertising Revenue by Ad Format, 2009


http://www.iab.net/AdRevenueReport�


Market Leader (LEDR) – Owned by Springhouse, LMM, RenTech Kirkland, WA, 425-952-5500

Services: Real Estate Operations www.marketleader.com


Price: $2.09 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $1.51 - $2.48 Latest Ago Ests P/E FYE 1/0/00 n/a Market value: $51 million This quarter n/a n/a n/a P/E FYE 12/30/00 n/a Enterprise value: $0 million Next quarter n/a n/a n/a P/E FYE 12/30/01 n/a Shares out: 24.6 million FYE 1/0/00 n/a n/a n/a EV/ LTM revenue n/m

Ownership Data FYE 12/30/00 n/a n/a n/a EV/ LTM EBIT n/m Insider ownership: 13% FYE 12/30/01 n/a n/a n/a P / tangible book 0.9x Insider buys (last six months): 3 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield n/m Institutional ownership: 59% n/a n/a n/a LTM pre-tax ROC -294%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 25 48 79 86 60 38 24 24 8 6 Gross profit 0 0 0 0 0 0 0 0 0 0 Operating income 6 11 20 1 (13) (12) (12) (12) (8) (3) Net income 2 5 15 (3) (12) (13) (7) (13) (9) 1 Diluted EPS 0.18 0.34 0.53 0.13 (0.51) (0.54) (0.30) (0.31) (0.37) 0.06 Shares out (avg) 11 12 25 25 25 24 24 24 24 24 Cash from operations 6 14 24 11 0 2 (4) (4) 0 (2) Capex 1 3 8 8 3 3 3 3 0 0 Free cash flow 6 11 16 3 (3) (1) (7) (7) 0 (2) Cash & investments 7 75 85 78 63 59 51 51 59 51 Total current assets 8 78 89 84 66 60 57 57 60 57 Intangible assets 1 2 11 4 10 4 2 2 4 2 Total assets 11 85 112 101 85 69 64 64 69 64 Short-term debt 0 0 0 0 2 0 0 0 0 0 Total current liabilities 3 9 14 13 8 4 4 4 4 4 Long-term debt 0 0 2 2 0 0 0 0 0 0 Total liabilities 3 10 18 16 9 5 5 5 5 5 Preferred stock 4 0 0 0 0 0 0 0 0 0 Common equity 4 75 94 86 76 65 60 60 65 60 EBIT/capital employed n/m n/m n/m 30% -353% -523% -294% -294% n/m n/m


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BUSINESS OVERVIEW Market Leader provides business development software and related services to U.S. residential real estate brokers. It also offers free online real estate information to individuals. INVESTMENT HIGHLIGHTS

• Pioneered Internet-based marketing services for real estate professionals through lead generation websites housevalues.com and justlisted.com which were launched in 1999 and 2004, respectively.

• Shifted from lead generation to software-as-a-service (SaaS) with purchase of RealtyGenerator in 2007. The company offers real estate agents and brokers a personalized website and customer relationship management tools.

• SaaS revenue doubled in Q4 and accounted for 52% of revenue. The recurring nature of SaaS results in higher retention rates than those of lead generation products. Revenue/client rose 4% in ‘09.

• Revenue growth from SaaS to “offset traditional product revenue declines in 2010.” As a result, the company expects that 4Q09 “marked the end of the sequential quarterly revenue declines.”

• Ex-Microsoft leadership. CEO Morris (41) helped launch MSN HomeAdvisor in 1997. Chairman Higgins (52) was a member of Microsoft’s Office of the President reporting to Bill Gates.

• $2.11 per share of cash/investments and no debt. $1.07 per share of investments consists mainly of U.S. Treasury bills and short-term CDs.

• “Net-net” current assets exceed market value.

INVESTMENT RISKS & CONCERNS • Continuing operating losses. The adjusted

EBITDA loss was $1.8 million in 4Q09, compared to losses of $1.2 million in 3Q09 and $0.5 million in 4Q08. FCF was negative for three consecutive years, including a $6.9 million outflow in 2009.

• Evolving business model. Market Leader’s SaaS products were launched recently, and their acceptance is not yet clear. Revenue growth may not result in profit for a while given high overhead.

• Continued pressure on real estate commissions suggests brokers may remain cautious on making new marketing expenditures.

• Competes for brokers’ marketing dollars against traditional and online companies as well as larger brokerage firms who offer similar services. Internet-based competition ranges from Google to focused rivals such as Move, Tree.com and Zillow.

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 2009 Δ revenue 66% 9% -30% -36% -38% Revenue ($mn) 79 86 60 38 24 Selected items as % of revenue: Sales & marketing 51% 65% 66% 65% 81% R&D 9% 13% 15% 17% 21% General & administrative 12% 14% 20% 24% 29% EBIT 1 25% 1% -12% -21% -51% Net income 19% 4% -21% -34% -31% D&A 2 3% 7% 11% 16% 20% Capex 9% 9% 5% 7% 11% Customers, period-end 3 14,971 14,596 10,465 7,245 5,360 Δ customers 36% -3% -28% -31% -26% Avg churn rate 4 7% 9% 9% 8% 6% Avg revenue/customer 5 $473 $406 $363 $330 $344 Δ avg rev./customer 8% -14% -11% -9% 4% Avg employees 387 525 384 193 153 Δ avg employees n/a 36% -27% -50% -21% Revenue/head in 000s $204 $163 $156 $199 $157 Δ revenue/head n/a -20% -5% 28% -21% Selected industry data: Exist. home sales (mn) 6.8 6.5 5.7 4.9 5.2 RE commissions ($bn) 67.1 59.4 49.8 44.5 41.4 Free cash flow in $mn 16.5 3.4 -2.8 -0.9 -6.9 Δ shares out (avg) 2% 4% -7% -1% 0%

1 Excludes special items such as gain/loss fixed asset sales and impairments. 2 Includes amortization of acquired intangible assets. 3 Consists of real estate agents subscribing to HouseValues or other products, and brokers subscribing to RealtyGenerator product. Customers are included when their service is active and are paying monthly service or advertising fees. 4 Refers to monthly average based on last quarter in the respective period. It is calculated by dividing the number of customers who canceled during the quarter by the average customers in the quarter, divided by three. 5 Refers to monthly average based on last quarter in the respective period. It is calculated as real estate professional revenue for the quarter divided by the average number of customers in the quarter, divided by three. Real estate professional revenue represents more than 99% of total company revenue. MAJOR HOLDERS CEO Morris 6% | Other insiders 13% | Legg Mason 19% | MS 7% | Continental 7% | F&I Mgmt 5% | Springhouse 5% COMPARABLE PUBLIC COMPANY ANALYSIS

P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E MOVE 340 410 1.9x 6.3x 44x 24x PRM 160 380 1.5x n/m n/a n/a TREE 100 90 .4x 2.0x n/m 23x LEDR 50 0 n/m .9x n/a n/a


THE BOTTOM LINE Market Leader is a Graham-style “net net,” as current assets less total liabilities exceed market value. While the company lost money again in 2009, including in the fourth quarter, the strategy of focusing on software-as-a service appears to be paying off in lower customer churn. A doubling in SaaS revenue in 4Q09 has been obscured by ongoing declines in the company’s legacy products. As SaaS products now represent a majority of revenue, the company is likely to grow the top-line in 2010. Given that net cash exceeds recent market value, the market may be too pessimistic regarding the company’s prospects.



MARKET LEADER – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 25 32 34 31 48 62 63 63 Short-term investments 26 21 21 26 11 - - - Accounts receivable - - 0 - 0 0 0 0 Inventory - - - - - - - - Other current assets 6 1 1 1 2 3 3 3 Total current assets 57 54 57 58 60 65 66 66 PP&E 5 5 5 4 5 5 5 5 Goodwill and other intangibles 2 3 3 4 4 9 10 10 Long-term investments 0 0 0 1 1 2 2 2 Other long-term assets - - - - - - - -

Total assets 64 62 65 67 69 81 82 83

Liabilities and Shareholders' Equity Accounts payable 1 0 1 1 1 1 1 1 Short-term debt - - - - - 2 2 2 Other current liabilities 3 3 3 3 4 3 4 4 Total current liabilities 4 3 4 3 4 6 7 7 Long-term debt - - - - - - - - Other long-term liabilities 1 1 1 0 0 1 1 1

Total liabilities 5 4 4 4 5 7 7 8 Preferred stock - - - - - - - - Shareholders' equity 60 58 60 63 65 74 75 76 Shares out (avg) (mn) 24 24 24 24 24 24 24 25 Selected Values and Ratios Cash and investments 52 54 56 58 59 64 65 65 Debt - - - - - 2 2 2 Net cash and investments 52 54 56 58 59 62 63 64 Current assets 57 54 57 58 60 65 66 66 Current liabilities 4 3 4 3 4 6 7 7 Current ratio 15x 16x 16x 17x 14x 10x 10x 9x Acid-test ratio 14x 16x 15x 17x 14x 10x 9x 9x Current assets 57 54 57 58 60 65 66 66 Total liabilities and preferred 5 4 4 4 5 7 7 8 NET NET current assets 53 50 52 54 56 58 58 58 Shareholders' equity 60 58 60 63 65 74 75 76 Goodwill and other intangibles 2 3 3 4 4 9 10 10 Tangible book value 58 55 57 59 61 65 65 66 Tangible book to tangible assets 93% 93% 93% 94% 93% 90% 90% 89% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 7 2 2 2 2 3 3 3 Balance Sheet Trends (sequential) ∆ total assets 4% -4% -3% -4% -14% -2% -1% n/a ∆ shareholders' equity 3% -4% -4% -3% -12% -1% -1% n/a ∆ tangible shareholders' equity 4% -4% -3% -3% -6% -1% -1% n/a ∆ tangible book per share 3% -3% -3% -2% -5% -1% 0% n/a ∆ net cash and investments -4% -3% -3% -3% -4% -2% -1% n/a ∆ net net current assets 5% -4% -4% -3% -4% -1% 1% n/a ∆ accounts receivable n/m n/m n/m n/m n/m n/m n/m n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable 800% -86% 0% 0% -30% 0% 0% n/a ∆ capital employed 214% -5% 29% 0% -45% 15% 0% n/a



…additional insight into Market Leader: SELECTED HOUSING MARKET DATA, by THE NATIONAL ASSOCIATION OF REALTORS Existing Home Sales

Source: National Association of REALTORS. Sales Price of Existing Homes

Source: National Association of REALTORS.



Maxygen (MAXY) – Owned by Conus, RenTech, Lonestar, Royce Redwood City, CA, 650-298-5300

Health Care: Biotechnology & Drugs www.maxygen.com


Price: $6.72 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $4.78 - $8.30 Latest Ago Ests P/E FYE 1/0/00 n/a Market value: $218 million This quarter n/a n/a n/a P/E FYE 12/30/00 n/a Enterprise value: $58 million Next quarter n/a n/a n/a P/E FYE 12/30/01 n/a Shares out: 32.4 million FYE 1/0/00 n/a n/a n/a EV/ LTM revenue 1.6x

Ownership Data FYE 12/30/00 n/a n/a n/a EV/ LTM EBIT n/m Insider ownership: 12% FYE 12/30/01 n/a n/a n/a P / tangible book 1.4x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 6 EPS Surprise Actual Estimate LTM EBIT yield -58% Institutional ownership: 61% n/a n/a n/a LTM pre-tax ROC n/m

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 23 16 15 25 23 101 36 36 6 13 Gross profit 0 0 0 0 0 0 0 0 0 0 Operating income (36) (52) (41) (42) (57) 25 (34) (34) (9) (4) Net income (34) 8 (19) (16) (49) 30 (32) (34) (8) (4) Diluted EPS (0.93) (1.42) (0.98) (0.95) (1.34) 0.81 (0.85) (0.85) (0.21) (0.09) Shares out (avg) 35 35 36 36 37 37 38 38 37 39 Cash from operations (23) (32) (32) (22) (41) 59 (20) (20) (8) (4) Capex 3 3 2 2 2 1 1 1 0 0 Free cash flow (26) (34) (34) (24) (43) 59 (21) (21) (8) (4) Cash & investments 113 219 154 180 146 207 160 160 207 160 Total current assets 130 228 164 187 157 211 176 176 211 176 Intangible assets 12 12 12 12 12 0 0 0 0 0 Total assets 234 263 215 206 173 214 177 177 214 177 Short-term debt 0 1 0 0 0 0 0 0 0 0 Total current liabilities 14 16 12 12 19 16 21 21 16 21 Long-term debt 0 2 0 0 0 0 0 0 0 0 Total liabilities 36 52 17 16 19 19 26 26 19 26 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 198 211 197 190 154 195 152 152 195 152 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 Maxygen is a biopharmaceutical company focused on developing protein drugs through DNA shuffling technology. INVESTMENT HIGHLIGHTS

• Completed strategic restructuring in 2009, leaving the company with four main sources of value: 1) cash; 2) an 83% equity stake in Perseid; 3) a 21% stake in Codexis; and 4) various other assets.

• $160 million of cash and short-term investments and no debt at year-end 2009. In March, Maxygen paid $8 million of cash to acquire $1.4 million of its own shares held by GlaxoSmithKline. Pro-forma net cash of $152 million includes $20 million held by Perseid (only to be used for Perseid operations).

• Created Perseid joint venture with Japanese pharma company Astellas in September 2009. Perseid, to which Maxygen contributed substantially all of its protein assets plus $10 million, develops protein drugs to treat autoimmune disorders such as rheumatoid arthritis and transplant rejection.

• Astellas has an option to acquire Maxygen’s 83% JV stake at prices that increase each quarter from currently $57 million to $123 million over the term of the option, which expires in September 2012.

• Codexis stake may be worth $78-90 million based on Maxygen’s 6.0 million shares and Codexis’ IPO pricing range of $13-15 per share. Maxygen also receives revenue from a biofuels license to Codexis.

• Other assets: 1) MAXY-G34 protein therapeutic for acute radiation syndrome, and licensing deal with Cangene; 2) MolecularBreeding platform with 130+ patents; and 3) $30 million possible milestone payment from Bayer dependent on phase II trial of hematology asset MAXY-VII (sold to Bayer in ’08).

• Director James Sulat (59) assumed CEO and CFO roles in October 2009. Sulat, a director since 2003, served in executive roles at various firms including CFO of Chiron from 1998 to 2003.

• Aims to “maximize return to its stockholders.” Maxygen completed a 7.3 million share repurchase through a “Dutch auction” for $39 million in 2009.

• Reported roughly breakeven EBIT in 4Q09, excluding $4 million restructuring cost. In the first full quarter under new structure, Maxygen had $13 million of revenue ($12 million at Perseid) offset by $11 million of R&D and $3 million of G&A costs.

• Net cash and “net net” current assets represent 73% and 68% of recent market cap, respectively. Both are based on yearend 2009 balance sheet, adjusted for $8 million Glaxo share repurchase.

SELECTED OPERATING DATA 1 FYE December 31 2005 2006 2007 2008 2009 Selected financial data ($ millions): Revenue 2 15 25 23 101 36 R&D 42 49 60 46 37 EBIT -41 -42 -57 25 -34 Net income -19 -16 -49 30 -32 D&A 4 2 2 1 1 Capex 2 1 1 1 0 Free cash flow -32 -24 -43 59 -20 % of revenue by type: Collaborative R&D 80% 82% 38% 0% 0% Technology and license 0% 0% 7% 90% 0% Related party 3 0% 0% 36% 5% 87% Grant 20% 18% 20% 5% 12% % of revenue by geography: U.S. 95% 100% 99% 96% 25% Japan 0% 0% 0% 4% 75% Other 5% 0% 1% 0% 0% ∆ shares out (avg) 2% 1% 2% 1% 3%

1 Historical data is not fully representative of current company structure. 2 2008 revenue includes $91 million received from Bayer related to the sale of Maxygen’s hematology assets and licensing of MolecularBreeding platform. 3 Related party revenue for 2009 includes $27 million from Astellas, which is received under Perseid’s collaboration agreements with Astellas. INVESTMENT RISKS & CONCERNS

• Poor visibility on future cash generation with profitability largely dependent on the success of drug development. Restructuring appears largely complete, however. As of February 28, Maxygen has 64 employees, 46 of whom are at Perseid.

• “May be required to fund the operations of Perseid” if Astellas does not buy Maxygen’s stake. While Perseid operations are “expected to be funded almost entirely by Astellas,” funding depends on Perseid achieving drug development milestones.

• Existing cash may be used for M&A. While management appears to be on a path of asset sales and return of capital to shareholders, the risk remains that existing cash is used for acquisitions.

• Potential dilution. At yearend 2009, Maxygen had options and awards outstanding over 9.5 million shares at an average exercise price of $9.73/share.

MAJOR HOLDERS CEO Sulat 2% | Other insiders 6% | Conus 10% | R. Howard 7% | DFA 6% | RenTech 5% | Lonestar 5% | Royce 4% RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Protein drug developer Maxygen recently completed a reorganization leaving it with a substantial cash balance and various operational assets. Existing cash and a 21% stake in IPO-candidate Codexis approximate recent market value. Other assets include an 83% stake in joint venture Perseid, a patent-protected technology platform, licensing deals, and a potential $30 million milestone payment from Bayer. While these sources of potential upside require closer scrutiny, shares look cheap.



MAXYGEN – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 126 153 154 146 155 172 80 78 Short-term investments 34 50 49 55 52 41 42 55 Accounts receivable 14 10 4 9 4 2 0 1 Inventory - - - - - - - - Other current assets 2 2 1 1 1 1 2 2 Total current assets 176 214 207 211 211 216 124 137 PP&E 2 2 2 2 2 3 3 3 Goodwill and other intangibles - - - - - - - 12 Long-term investments - - - - - - 0 0 Other long-term assets - - - - - - - -

Total assets 177 216 210 213 214 218 127 152

Liabilities and Shareholders' Equity Accounts payable 1 6 1 2 1 2 3 4 Short-term debt - - - - - - - - Other current liabilities 20 16 14 11 15 14 8 6 Total current liabilities 21 21 15 13 16 16 11 10 Long-term debt - - - - - - - - Other long-term liabilities 4 5 2 3 3 4 - -

Total liabilities 26 26 17 16 19 20 11 10 Preferred stock - - - - - - - - Shareholders' equity 152 190 193 198 195 198 116 142 Shares out (avg) (mn) 39 38 38 38 37 37 37 37 Selected Values and Ratios Cash and investments 160 203 202 201 207 213 123 134 Debt - - - - - - - - Net cash and investments 160 203 202 201 207 213 123 134 Current assets 176 214 207 211 211 216 124 137 Current liabilities 21 21 15 13 16 16 11 10 Current ratio 8x 10x 14x 16x 13x 13x 11x 13x Acid-test ratio 8x 10x 14x 16x 13x 13x 11x 13x Current assets 176 214 207 211 211 216 124 137 Total liabilities and preferred 26 26 17 16 19 20 11 10 NET NET current assets 150 188 191 196 192 195 113 127 Shareholders' equity 152 190 193 198 195 198 116 142 Goodwill and other intangibles - - - - - - - 12 Tangible book value 152 190 193 198 195 198 116 130 Tangible book to tangible assets 86% 88% 92% 93% 91% 91% 91% 93% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed (3) (8) (8) (0) (9) (11) (6) (4) Balance Sheet Trends (sequential) ∆ total assets -18% 3% -2% 0% -2% 72% -16% n/a ∆ shareholders' equity -20% -1% -3% 2% -2% 71% -18% n/a ∆ tangible shareholders' equity -20% -1% -3% 2% -2% 71% -10% n/a ∆ tangible book per share -21% -2% -3% 0% -2% 70% -10% n/a ∆ net cash and investments -21% 0% 1% -3% -3% 74% -8% n/a ∆ net net current assets -20% -1% -3% 2% -2% 72% -11% n/a ∆ accounts receivable 48% 121% -53% 163% 94% 350% -64% n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable -79% 427% -39% 29% -36% -33% -18% n/a ∆ capital employed -58% 8% 1775% -96% -17% 70% 64% n/a



…additional insight into Maxygen: SELECTED TRADING AND VALUATION DATA

Recent stock price $6.72 Net cash / market value 2 73% Diluted shares out 1 31.0 million Net net current assets / market value 2 68% Market value $208 million Tangible book value / market value 2 69% Plus: Debt $0 Codexis shares owned by Maxygen 6.0 million Plus: Post-retirement $0 Codexis share price (assumed) 3 $14.00 Plus: Non-controlling interest $4 million Assumed market value of Codexis shares $84 million Minus: Cash $152 million Unrestricted cash $131 million Enterprise value $61 million Cash + assumed market value of Codexis stake $215 million

... as % of recent Maxygen market value 103% 1 After repurchase of 1.4 million shares held by GlaxoSmithKline in a private transaction for a purchase price of $8.0 million in March 2010. 2 Adjusted for $8 million payment to GlaxoSmithKline in March 2010. 3 Codexis was schedule to go public at a range of $13-15 per share during the week of April 19, 2010. CASH FLOWS, 2007-2009

($ in thousands) Years Ended December 31,

2007 2008 2009 Operating activities

Net income (loss) ($49,315) $30,325 ($32,157) Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 1,671 1,447 1,048 Goodwill impairment — 12,192 — Non-cash stock compensation 6,644 8,598 8,251 Non-cash restructuring charges — — 11,426 Common stock issued and stock options granted to consultants 560 44 3

Changes in operating assets and liabilities: Related party receivable (7,493) 4,790 (10,905) Accounts receivable and other receivables 2,716 560 350 Prepaid expenses and other current assets 450 1,482 (648) Deposits and other assets — 85 — Accounts payable 436 (1,433) (199) Accrued compensation 2,172 (4,301) (928) Accrued restructuring charges 4,413 (3,299) 3,270 Accrued project costs 2,380 (352) 1,359 Other accrued liabilities (301) (29) 67 Taxes payable (140) — — Related party deferred revenue — — (1,324) Deferred revenue (5,593) 9,244 436

Net cash provided by (used in) operating activities ($41,400) $59,353 ($19,951)

Investing activities

Purchases of available-for-sale securities ($179,619) ($81,948) ($55,230) Maturities of available-for-sale securities 247,590 99,055 73,000 Acquisition of property and equipment (1,469) (734) (478)

Net cash provided by investing activities $66,502 $16,373 $17,292

Financing activities

Proceeds from issuance of common stock $5,142 $2,027 $2,866 Sale of subsidiary shares to non-controlling interest — — 10,000 Purchase of treasury stock — — (39,171)

Net cash provided by financing activities $5,142 $2,027 ($26,305)

Effect of exchange rate changes on cash and cash equivalents 382 — —

Net increase (decrease) in cash and cash equivalents 30,626 77,753 (28,964) Cash and cash equivalents at beginning of period 46,504 77,130 154,883

Cash and cash equivalents at end of period 77,130 154,883 125,919

Supplemental Cash Flow Information Cash paid during the period for income taxes 140 — —



Other Stocks That Meet Graham-Style Value Criteria

Actions Semiconductor (ACTS) – Owned by RenTech, T. Rowe Zhuhai, GN, China, 86-76-339-2353

Technology: Semiconductors www.actions-semi.com

Trading Data Consensus EPS Estimates Valuation Price: $2.38 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $1.65 - $2.90 Latest Ago Ests P/E FYE 12/31/10 n/m Market value: $205 million This quarter n/a n/a n/a P/E FYE 12/31/11 n/m Enterprise value: -$24 million Next quarter n/a n/a n/a P/E FYE 12/30/12 n/m Shares out: 86.0 million FYE 12/31/10 -0.04 -0.04 1 EV/ LTM revenue n/m

Ownership Data FYE 12/31/11 -0.02 -0.02 1 EV/ LTM EBIT n/m Insider ownership: 0% FYE 12/30/12 -0.07 -0.07 1 P / tangible book 0.7x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield 58% Institutional ownership: 6% 2/3/10 n/a n/a LTM pre-tax ROC -129%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 6 57 150 170 117 95 44 44 16 8 Gross profit 2 30 89 94 60 48 14 14 7 3 Operating income 0 27 72 76 35 17 (14) (14) (1) (4) Net income 0 27 74 75 52 26 (4) (4) 1 (1) Diluted EPS 0.00 0.33 0.91 0.87 0.60 0.31 (0.05) (0.05) 0.01 (0.01) Shares out (avg) 80 80 81 86 86 84 77 77 82 76 Cash from operations (0) 30 77 77 47 10 28 28 (19) 2 Capex 0 1 3 8 7 4 10 11 1 2 Free cash flow (1) 29 74 69 40 6 18 16 (20) (0) Cash & investments 2 32 132 204 240 266 228 228 267 228 Total current assets 4 44 154 226 264 281 237 237 281 237 Intangible assets 0 0 2 5 7 6 5 5 6 5 Total assets 5 45 159 238 285 306 292 292 306 292 Short-term debt 0 0 2 0 2 2 0 0 2 0 Total current liabilities 1 14 27 28 25 15 10 10 15 10 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 1 14 28 29 26 17 12 12 17 12 Common equity 4 31 131 209 259 289 280 280 289 280 EBIT/capital employed 14% >100% n/m n/m >100% >100% -119% -129% n/m n/m


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BUSINESS OVERVIEW Actions is a China-based fabless semiconductor company that provides mixed-signal and multimedia system-on-a-chip (SoC) products for portable consumer electronics. INVESTMENT HIGHLIGHTS

• 60%+ share of color and mono display segments of non-Apple market shipments of MP3 SoCs. These segments had estimated market shipments of more than 50 million units in 2009. This is down from nearly 100 million units in 2008.

• Seeks to grow in MP4 and gift/automotive SoCs for non-Apple portable media player (PMP) applications, which had estimated total shipments of ~80 million units in 2009. Actions has partnered with Disney’s Digital Blue in the U.S. gift market.

• Generated $200+ million of cumulative free cash flow from 2005 to 2009. While FCF was negative $1 million in 2009, this is a resilient performance given the challenging operating environment.

• Repurchased 10.9 million ADS equivalent shares for $26 million in 2009. The company has another 11 million ADS equivalent shares remaining in its share repurchase program (~15% of existing ADS).

• Expects revenue to be up 10-20% y-y in 2010, based on CEO comment on February earnings call. While traditional MP3-based revenue is to “slightly decrease” due to price erosion, this should be offset by revenue growth in MP4 and other products.

• $251 million of cash/marketable securities and no debt at yearend 2009. ~80% of cash is invested in liquid RMB-principal-guaranteed products with state-owned banks in China. Financials are audited by Deloitte Touche Tohmatsu of Hong Kong.

• “Net net” current assets are 130%+ of market value. Cash and securities are 96% of current assets.


• Declining unit shipments and price erosion in core market segments of color and mono display SoCs for non-Apple portable media player applications. The company may not be able to expand into other market segments quickly enough to offset the rapid decline in core revenue.

• Guiding for 1Q10 revenue down 39-47% y-y despite full-year 2010 guidance of higher revenue. The company expects 1Q10 revenue of $6.5-7.5 million, a ~35% gross margin (1Q09: 33.6%), and operating costs “slightly higher” sequentially (includes share-based comp of $0.9-1.0 million).

• Treated as a PFIC for U.S. income tax purposes.

SELECTED OPERATING DATA 1 FYE December 31 2005 2006 2007 2008 2009 Δ revenue 161% 14% -31% -18% -54% Δ selling price of SoCs -32% -26% -29% -16% n/a Δ SoC units shipped 300% 56% -3% -3% n/a Δ employees, period-end 29% 64% 32% 18% n/a Revenue ($mn) 2 150 170 117 95 44 Selected items as % of revenue: Gross profit 60% 55% 51% 50% 32% R&D 5% 6% 11% 20% 44% EBIT 48% 45% 30% 18% -29% Net income 49% 44% 44% 27% -9% D&A 3 0% 1% 3% 6% 11% Capex 4 2% 5% 6% 4% 22% Selected operating metrics: Selling price per SoC ($) 3.00 2.22 1.58 1.34 n/a SoC units shipped (mn) 49 76 74 71 n/a Employees, period-end 258 423 560 658 n/a Top 5 customers as % of revenue 76% 64% 59% 69% n/a Free cash flow ($mn) 5 74 69 40 26 -1 Return on tangible equity 92% 45% 23% 10% -1% Tangible equity to assets 79% 85% 89% 93% 95% ∆ shares out (avg) 1% 7% 0% -2% -8%

1 Certain 2009 data is unavailable as the company has yet to file its 2009 20-F. 2 Includes related party revenue. 3 Includes amortization of bought intangibles. 4 Includes purchases of intangibles. 5 Net cash from operations less capex. Net cash from operations excludes purchases and proceeds from disposal of trading securities, which are reported within net cash from operations in the company’s financial statements.

• Long-time CEO Yeh resigned in 2009 to “pursue personal interests.” New CEO Niccolo Chen joined in 2007 and had served as chief strategy officer.

• Exposed to cyclical semiconductor industry and consumer electronics end-markets.


P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E TXN 33,010 30,090 2.9x 3.9x 13x 12x BRCM 17,420 15,490 3.4x 7.2x 18x 17x STM 9,000 8,870 1.0x 1.7x 21x 13x SIMO 170 110 1.2x 1.6x n/m 75x ACTS 200 -30 n/m .7x n/m n/m

MAJOR HOLDERS Insiders 3% | RenTech 3% | T. Rowe 2% | RBF Capital 1% RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Actions’ core business in MP3 SoCs for the color and mono display segments of non-Apple portable media players appears to be of little value due to rapidly declining industry shipments and price erosion (apparently brought on by technology obsolescence). However, the company remains cash flow breakeven and is buying back stock substantially below liquidation value. As a result, the downside appears low. Upside could come from buybacks, new products or synergistic M&A.



ACTIONS SEMI – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 88 46 77 45 47 53 127 122 Short-term investments 140 159 159 194 221 205 140 131 Accounts receivable 2 3 3 3 3 9 6 5 Inventory 5 5 6 7 9 8 7 10 Other current assets 2 2 4 3 3 10 4 3 Total current assets 237 214 250 252 281 286 285 271 PP&E 14 12 9 7 7 7 7 7 Goodwill and other intangibles 5 5 6 5 6 6 7 7 Long-term investments 35 65 35 35 11 6 7 7 Other long-term assets 0 0 2 2 1 11 0 0

Total assets 292 296 301 302 306 316 306 292

Liabilities and Shareholders' Equity Accounts payable 2 5 6 5 4 7 8 7 Short-term debt - - 2 4 2 2 2 2 Other current liabilities 7 7 8 7 9 14 8 6 Total current liabilities 10 11 15 17 15 23 18 15 Long-term debt - - - - - - - - Other long-term liabilities 2 3 3 2 2 2 2 1

Total liabilities 12 14 18 19 17 25 20 16 Preferred stock - - - - - - - - Shareholders' equity 280 283 283 283 289 292 286 276 Shares out (avg) (mn) 76 76 77 78 82 84 84 85 Selected Values and Ratios Cash and investments 263 269 271 275 279 265 274 260 Debt - - 2 4 2 2 2 2 Net cash and investments 263 269 270 270 277 263 273 259 Current assets 237 214 250 252 281 286 285 271 Current liabilities 10 11 15 17 15 23 18 15 Current ratio 25x 19x 17x 15x 19x 13x 16x 19x Acid-test ratio 24x 19x 16x 15x 18x 12x 15x 18x Current assets 237 214 250 252 281 286 285 271 Total liabilities and preferred 12 14 18 19 17 25 20 16 NET NET current assets 225 200 232 234 264 261 265 255 Shareholders' equity 280 283 283 283 289 292 286 276 Goodwill and other intangibles 5 5 6 5 6 6 7 7 Tangible book value 275 277 278 278 283 285 279 269 Tangible book to tangible assets 96% 95% 94% 94% 94% 92% 93% 94% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 14 10 9 7 8 14 8 11 Balance Sheet Trends (sequential) ∆ total assets -2% -2% 0% -2% -3% 3% 5% n/a ∆ shareholders' equity -1% 0% 0% -2% -1% 2% 4% n/a ∆ tangible shareholders' equity -1% 0% 0% -2% -1% 2% 4% n/a ∆ tangible book per share 0% 1% 1% 3% 1% 3% 4% n/a ∆ net cash and investments -2% 0% 0% -3% 5% -3% 5% n/a ∆ net net current assets 12% -14% -1% -12% 1% -1% 4% n/a ∆ accounts receivable -17% -15% 31% 4% -73% 54% 31% n/a ∆ inventory -4% -25% -6% -23% 9% 8% -25% n/a ∆ accounts payable -47% -22% 14% 24% -44% -12% 20% n/a ∆ capital employed 32% 13% 25% -5% -44% 69% -27% n/a



…additional insight into Actions Semiconductor: CASH FLOWS, 2008-2009

($ in thousands)

Three Months Ended

12/31/09

Year Ended

12/31/09

Year Ended

12/31/08

Operating activities: Net (loss) income (1,105) (4,265) 25,957

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 516 2,107 2,085 Allowance for doubtful accounts receivable - (56) 496 Amortization of acquired intangible assets 475 2,833 3,232 Utilization of subsidy from local authorities of Zhuhai, China - (226) (602) Write down of inventories 20 (16) 901 (Gain) loss on disposal of property, plant and equipment 2 (5) 70 Gain on disposal of other investment - - (6) Equity in net loss of an equity method investee 302 826 576 Share-based compensation 941 4,006 2,295 Fair value change in trading securities - (40) (92) Deferred taxes (178) 484 2,083 Gain on disposal of a subsidiary - (1,736) - Other-than-temporary impairment loss on investments - 1,010 -

Changes in operating assets and liabilities: Proceeds from disposal of trading securities - 30,649 17,111 Purchase of trading securities - (11,310) (36,318) Accounts receivable 907 (1,305) 2,169 Amount due from a related party 2,421 967 (554) Notes receivable 83 74 315 Inventories 224 3,462 3,611 Amount due from an equity method investee (492) (492) 52 Prepaid expenses and other current assets 67 (526) 1,601 Accounts payable (2,189) (301) (8,999) Accrued expenses and other current liabilities (206) 1,664 (5,522) Income tax payable (33) (93) (576) Rental deposit paid 22 (7) 45

Net cash provided by operating activities 1,777 27,704 9,930 Investing activities:

Increase in investment in affiliate - (1,500) (3,000) Proceeds from the disposal of other investments - 44 - Purchases of other investments - - (2,215) Decrease (Increase) in marketable securities 48,022 37,233 (25,575) Proceeds from disposal of property, plant and equipment 3 30 18 Increase in deposit paid for acquisition of property, plant and equipment - (1,733) (368) Purchase of property, plant and equipment (1,695) (6,613) (2,429) Purchase of intangible assets (453) (3,140) (1,194) Decrease in restricted cash 40 439 1,389 Decrease in time deposits - 7 2,691 Cash outflow from disposal of subsidiary, net of cash equivalent disposed - (2,707) -

Net cash used in investing activities 45,917 22,060 (30,683) Financing activities:

Repayment of short-term bank loan - (2) (1,580) Advance subsidy from local authorities of Zhuhai and Shenzhen (215) 750 1,025 Proceeds from loan from minority shareholders - - 1,500 Repurchase of ordinary shares (2,777) (10,130) (9,368) Proceeds on issue of shares of subsidiary - 1,885 -

Net cash used in financing activities (2,992) (7,497) (8,423) Net increase (decrease) in cash and cash equivalents 44,702 42,267 (29,176) Cash and cash equivalents at the beginning of the period 43,001 45,435 72,054 Effect of exchange rate changes on cash 3 4 2,557 Cash and cash equivalents at the end of the period 87,706 87,706 45,435



Adaptec (ADPT) – Owned by Steel Partners, RenTech, Pzena Milpitas, CA, 408-945-8600

Technology: Computer Storage Devices, Member of S&P SmallCap 600 www.adaptec.com


Price: $3.27 (as of 4/16/10) Month # of P/E FYE 3/31/09 n/m 52-week range: $2.25 - $3.56 Latest Ago Ests P/E FYE 3/31/10 n/m Market value: $394 million This quarter -$0.02 -$0.03 2 P/E FYE 3/31/11 n/m Enterprise value: $14 million Next quarter -0.02 n/a 1 P/E FYE 3/30/12 n/m Shares out: 120.4 million FYE 3/31/10 -0.07 -0.11 2 EV/ LTM revenue 0.2x

Ownership Data FYE 3/31/11 -0.09 n/a 1 EV/ LTM EBIT n/m Insider ownership: 0% FYE 3/30/12 0.00 n/a 1 P / tangible book 1.0x Insider buys (last six months): 35 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 8 EPS Surprise Actual Estimate LTM EBIT yield -337% Institutional ownership: 81% 1/29/10 -$0.01 -$0.04 LTM pre-tax ROC -212%

Operating Performance and Financial Position ($ millions, except Fiscal Years Ended LTME FQE FQE per share data) 3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 3/31/09 1/1/10 12/26/08 1/1/10 Revenue 408 396 403 344 227 146 115 81 28 17 Gross profit 205 186 162 114 76 57 49 38 11 8 Operating income (35) (10) (82) (149) (39) (33) (35) (46) (7) (11) Net income (15) 63 (145) (148) 31 (10) (10) (28) (1) (7) Diluted EPS (0.14) 0.61 (1.17) (1.20) 0.33 (0.05) (0.12) (0.24) 0.00 (0.06) Shares out (avg) 107 109 111 113 117 119 120 120 120 119 Cash from operations 60 95 (10) (7) 15 23 14 11 (4) (3) Capex 8 8 11 7 4 2 1 2 0 1 Free cash flow 52 88 (21) (14) 11 21 13 10 (4) (4) Cash & investments 742 664 527 557 572 626 377 380 371 380 Total current assets 893 858 685 661 681 681 410 405 417 405 Intangible assets 101 117 171 33 7 0 20 17 38 17 Total assets 1,103 1,051 964 737 715 700 450 437 476 437 Short-term debt 82 0 0 11 0 225 1 0 2 0 Total current liabilities 248 142 178 139 65 257 24 21 32 21 Long-term debt 250 260 260 225 225 0 0 0 0 0 Total liabilities 500 406 453 368 293 276 39 32 48 32 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 603 645 510 369 422 424 411 405 429 405 EBIT/capital employed -54% -11% -112% -684% -117% -68% -120% -212% n/m n/m


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BUSINESS OVERVIEW Adaptec provides storage products that protect digital data. Following the disposition of the Snap Server NAS in 2008, Adaptec operates in one segment. It provides application specific integrated circuits (ASICs), and input/output (I/O) and redundant array of independent disks (RAID) controllers. Adaptec sells mainly to OEMs and systems integrators, who build server/storage products based on Adaptec technologies. INVESTMENT HIGHLIGHTS

• Offers broad range of RAID controllers and add-in cards, providing companies with a range of price and performance options to connect their storage. Options range from low-cost host bus adapters (HBAs) to high-performance RAID controller cards. Adaptec owns more than 400 technology patents.

• New products target fast-growing iSCSI segment of the external storage technology market. Industry-wide unit shipments in the iSCSI segment are expected to grow at a 37% CAGR from 2009-2013.*

• Activist Steel Partners ousted CEO Sundaresh (52) in January and installed own representative Quicke (60) as interim CEO. Quicke, who has been a director since 2007, is a Steel operating partner.

• Hired Blackstone Advisory Partners to sell the company’s operating assets in December 2009.

• Solid balance sheet, with net cash of $380 million. • Significant NOLs. At 3/09, federal and state NOLs

were $143 million and $168 million, respectively. Most NOL’s are not recognized on balance sheet.

• Net-net current assets approximate market cap. INVESTMENT RISKS & CONCERNS

• Operating business continues to lose money. Non-GAAP net loss was $1 million in fiscal 3Q of 2010. Trailing free cash flow is +$9 million.

• Technology obsolescence affecting core SCSI**

products. Ongoing revenue declines are largely due to falling sales of parallel products. Meanwhile, the company faces challenges in obtaining design wins from OEMs for next-generation serial products.

• Bought Aristos Logic from position of weakness for $41 million in 2008. Aristos makes a RAID storage processor and has blade server technology.

MAJOR HOLDERS Insiders <1%* | Steel Partners 20%* | DFA 8% | BlackRock 8% | RenTech 7% | Vanguard 4% | Wells Fargo 3% * Adaptec’s chairman and CEO are both Steel Partners employees

SELECTED OPERATING DATA 1

FYE March 31 2006 2007 2008 2009 YTD

1/1/10 ∆ revenue -15% -26% -34% -31% -38% Δ employees -26% -47% -35% -41% n/a Revenue ($mn) 344 255 167 115 57 % of revenue by segment: DPS 2 82% 84% 87% 100% 100% SSG 3 10% 11% 13% 0% 0% Other 8% 5% 0% 0% 0% EBIT margin by major segment: DPS 22% 17% 18% n/a n/a SSG -15% -25% -28% n/a n/a Corporate -26% -28% -35% n/a n/a Total EBIT margin -10% -17% -22% -32% -40% Selected items as % of revenue: Gross profit 33% 32% 37% 43% 45% R&D 20% 22% 24% 23% 38% Net income -43% 12% -6% -12% -20% D&A 8% 7% 5% 7% 13% Capex 2% 1% 1% 1% 3% % of revenue by geography: North America 41% 44% 42% 35% 39% Europe 29% 27% 29% 32% 32% Pacific Rim 30% 29% 29% 33% 29% % of revenue by major customer: IBM 28% 34% 34% 36% 21% Ingram Micro <10% <10% 11% <10% 15% Dell 15% 13% <10% <10% <10% Return on tangible equity -44% 8% -2% -3% -3% Tangible equity to assets 45% 53% 60% 72% 91% ∆ shares out (avg) 2% 3% 2% 1% 0%

1 Fiscal 2009 and YTD figures are for continuing operations. In June 2008, Adaptec sold the snap server network attached storage business, which represented the majority of the SSG segment. The remaining portion, which is comprised of block-based Internet Small Computer System Interface (iSCSI) storage products, was retained. However, the reporting structure was collapsed such that all operations are grouped together now. 2 Data Protection Storage. 3 Storage Solutions Group. COMPARABLE PUBLIC COMPANY ANALYSIS

P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E LSI 4,250 3,640 1.6x 8.0x 14x 11x ELX 1,040 770 2.2x 2.4x 22x 16x AMCC 670 470 2.5x 2.6x 78x 25x HILL 80 20 .1x 1.3x n/m n/a ADPT 390 10 .1x 1.0x n/m n/m

RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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? * IDC, 2008, Adaptec, March 2009 ** Small Computer System Interface

THE BOTTOM LINE Adaptec has been a laggard in the storage technology industry for years due to the rapid obsolescence of parallel SCSI, which has historically been Adaptec’s core technology. While the company has developed products based on newer technologies such as iSCSI and SATA/SAS, those products have not gained sufficient acceptance to offset declining sales of legacy products. As a result, we view Adaptec mainly as a pile of cash without much intrinsic business value. Prospective investors may ultimately be buying into an acquisition vehicle controlled by Steel Partners rather than a soon-to-be-sold company.



ADAPTEC – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 1/1/10 10/2/09 7/3/09 3/31/09 12/26/08 9/26/08 6/30/08 3/31/08

Assets Cash 86 90 102 112 90 147 236 240 Short-term investments 295 295 281 265 281 310 396 386 Accounts receivable 7 8 11 12 17 18 20 23 Inventory 2 3 4 4 7 7 6 10 Other current assets 15 13 14 17 22 23 23 22 Total current assets 405 410 411 410 417 505 681 681 PP&E 11 11 11 12 12 13 13 13 Goodwill and other intangibles 17 19 19 20 38 40 - - Long-term investments - - - - - - - - Other long-term assets 3 7 10 9 9 7 7 5

Total assets 437 446 450 450 476 564 700 700

Liabilities and Shareholders' Equity Accounts payable 9 8 10 11 12 17 15 12 Short-term debt 0 0 0 1 2 87 225 225 Other current liabilities 11 14 12 13 19 18 15 19 Total current liabilities 21 23 22 24 32 122 256 257 Long-term debt - - - - - - - - Other long-term liabilities 11 13 14 15 15 18 18 19

Total liabilities 32 36 35 39 48 140 273 276 Preferred stock - - - - - - - - Shareholders' equity 405 410 415 411 429 424 426 424 Shares out (avg) (mn) 119 119 119 120 120 120 119 119 Selected Values and Ratios Cash and investments 380 386 383 377 371 457 632 626 Debt 0 0 0 1 2 87 225 225 Net cash and investments 380 385 382 376 369 370 406 401 Current assets 405 410 411 410 417 505 681 681 Current liabilities 21 23 22 24 32 122 256 257 Current ratio 20x 18x 19x 17x 13x 4x 3x 3x Acid-test ratio 19x 17x 18x 16x 12x 4x 3x 3x Current assets 405 410 411 410 417 505 681 681 Total liabilities and preferred 32 36 35 39 48 140 273 276 NET NET current assets 373 374 376 370 370 365 407 405 Shareholders' equity 405 410 415 411 429 424 426 424 Goodwill and other intangibles 17 19 19 20 38 40 - - Tangible book value 387 392 396 391 391 385 426 424 Tangible book to tangible assets 92% 92% 92% 91% 89% 73% 61% 61% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 16 12 18 21 28 26 32 37 Balance Sheet Trends (sequential) ∆ total assets -2% -1% 0% -6% -16% -19% 0% n/a ∆ shareholders' equity -1% -1% 1% -4% 1% -1% 1% n/a ∆ tangible shareholders' equity -1% -1% 1% 0% 2% -10% 1% n/a ∆ tangible book per share -1% -1% 2% 0% 1% -10% 1% n/a ∆ net cash and investments -1% 1% 2% 2% 0% -9% 1% n/a ∆ net net current assets 0% 0% 1% 0% 1% -10% 0% n/a ∆ accounts receivable -6% -29% -8% -30% -9% -7% -16% n/a ∆ inventory -24% -19% -12% -41% 8% 7% -38% n/a ∆ accounts payable 12% -13% -10% -13% -29% 16% 20% n/a ∆ capital employed 25% -33% -12% -25% 9% -19% -15% n/a



…additional insight into Adaptec: SLIDES FROM COMPANY PRESENTATION, AUGUST 2009



Ascent Media (ASCMA) – Owned by Liberty Media, Gabelli Englewood, CO, 720-875-5622

Services: Broadcasting & Cable TV www.ascentmediacorporation.com



Ownership Data FYE 12/30/00 n/a n/a n/a EV/ LTM EBIT n/m Insider ownership: 6% FYE 12/30/01 n/a n/a n/a P / tangible book 0.7x Insider buys (last six months): 1 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield -33% Institutional ownership: 79% n/a n/a n/a LTM pre-tax ROC -17%

Operating Performance and Financial Position ($ millions, except Fiscal Years Ended LTME FQE FQE per share data) 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 613 571 571 582 454 454 124 117 Gross profit 216 180 163 146 125 125 35 33 Operating income 6 (113) (176) (123) (43) (43) (106) (7) Net income 9 (83) (132) (65) (53) (73) (98) (33) Diluted EPS 0.64 (6.25) (10.75) (8.21) (4.19) (4.19) (7.18) (2.46) Shares out (avg) 14 14 14 14 14 14 14 14 Cash from operations 88 80 61 21 36 36 (7) 17 Capex 88 72 39 37 30 30 8 8 Free cash flow 0 8 22 (16) 6 6 (16) 10 Cash & investments 155 202 342 293 293 342 293 Total current assets 317 363 490 417 417 490 417 Intangible assets 292 95 2 6 2 0 2 Total assets 953 831 745 683 683 745 683 Short-term debt 0 0 0 0 0 0 0 Total current liabilities 114 120 91 71 71 91 71 Long-term debt 0 0 0 0 0 0 0 Total liabilities 138 144 120 100 100 120 100 Preferred stock 0 0 0 0 0 0 0 Common equity 815 687 625 583 583 625 583 EBIT/capital employed -35% -56% -43% -17% -17% n/m n/m


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BUSINESS OVERVIEW Ascent provides content and creative services to media and entertainment industries. It operates in two segments: Content Services enables content owners such as motion picture studios to manage their media assets for global distribution. It also supports cable and broadcast networks in the assembly and distribution of their programming. Creative Services provides post-production and visual effects for feature films and TV content including commercials. Ascent was spun off from Discovery Holding in 2008. INVESTMENT HIGHLIGHTS

• “Rollup” of businesses acquired from 2000-‘04, including the systems integration business of Sony Electronics. The acquisitions give Ascent scale and enable it to provide integrated outsourcing services.

• Company losses mask profitable creative services business which grew revenue 15% y-y in 4Q09. The business, which generated adjusted EBIT of $21 million in 2007 (2009: $6 million), may benefit from an advertising recovery as it processes 35% of U.S. and 70%+ of U.K. television commercials.*

• Received $35 million of cash in February from the sale of a U.K.-based content services business to Discovery Communications. Ascent expects to recognize a pre-tax gain on sale of $26 million.

• Appointed John Malone as a board director in January. The appointment may indicate Malone is taking a more active role in company strategy and value creation. Chairman and CEO Fitzgerald (53) and other executives have worked at Liberty Media.

• Owns 270,000 square feet of properties. 210,000 is in Southern California, 45,000 in New Jersey, New York and Minnesota, and 15,000 in London.

• $384 million of cash and no debt. Cash includes $56 million of non-current securities and $35 million received in February. “Net net” current assets are $401 million, adjusted for the above.

• Net cash and securities approximate market cap. INVESTMENT RISKS & CONCERNS

• Lost $37 million on adjusted EBIT basis in 2009, continuing years of losses. Free cash flow from continuing operations was negative $2 million in 2009 and negative $17 million in total since 2007.

• Content services commitments are down 28% to $196 million at 2/26/10 versus yearend 2008. The segment has not been profitable since 2006.

* Source: Company website.

SELECTED OPERATING DATA 1 FYE December 31 2006 2007 2008 2009 ∆ revenue -3% 3% 2% -22% Revenue ($mn) 571 571 582 454 % of revenue by segment: Content services 68% 68% 70% 62% Creative services 32% 32% 30% 38% Revenue growth by segment: Content services n/a 4% 6% -31% Creative services n/a 1% -7% 0% Adjusted EBITDA margin by segment: 2 Content services 10% 9% 9% 9% Creative services 22% 19% 13% 11% Corporate -5% -4% -5% -6% Total adjusted EBITDA margin 9% 9% 5% 4% Content services – items as % of segment revenue: Adjusted EBIT 1% 0% 0% -4% D&A 9% 10% 9% 14% Capex 14% 7% 6% 6% Creative services – items as % of segment revenue: Adjusted EBIT 11% 11% 6% 4% D&A 11% 8% 7% 7% Capex 7% 5% 6% 4% % of revenue by major geography: U.S. 73% 78% 78% 80% U.K. 23% 18% 18% 15% Selected items as % of revenue: Gross profit 31% 29% 25% 28% Adjusted EBIT -2% -2% -4% -8% Net income -15% -23% -11% -12% D&A 11% 10% 10% 13% Capex 13% 7% 6% 7%

1 2007-09 figures reflect continuing operations (exclude results of the Chiswick Park content services business in the U.K., which was sold in February 2010. 2 The company refers to adjusted EBITDA as “adjusted OIBDA,” i.e., adjusted operating income before D&A (excluding stock-based and long-term incentive compensation and accretion expense on asset retirement obligations).

• Competitors include Technicolor, Laser-Pacific (bought by H.I.G. Capital from Kodak in April), Deluxe, DG FastChannel, and Lucasfilm ILM.

MAJOR HOLDERS Shares outstanding: 13.4 million class A shares (ASCMA; one vote per share) and 0.7 million class B shares (ASCMB; ten votes per share). Chairman Malone owns 84% of class B shares and 1% of class A shares, giving him 30% of the vote. Economic ownership: Chairman Malone 5% | Other insiders 1% | BlackRock 8% | Gabelli 8% | T. Rowe 6% | FMR 6% RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Ascent Media is a spinoff that remains largely unnoticed by investors. Shares trade barely above cash or “net net” current assets, including non-current securities and $35 million of cash received from a business sale in February. This gives investors a business with $450 million of revenue and $125 million of gross profit nearly for “free.” Shares offer downside protection as well as meaningful upside if the underperforming content services business can be turned around.



ASCENT MEDIA – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08

Assets Cash 293 296 309 337 342 356 225 Short-term investments - - - - - - - Accounts receivable 109 123 123 121 122 137 165 Inventory - - - - - - - Other current assets 15 23 23 23 27 33 28 Total current assets 417 442 455 482 490 526 418 PP&E 188 207 216 215 212 235 252 Goodwill and other intangibles 2 - - - - 95 127 Long-term investments 56 42 32 - - - - Other long-term assets 20 33 33 31 44 29 48

Total assets 683 724 736 727 745 885 845

Liabilities and Shareholders' Equity Accounts payable 19 21 21 21 22 30 42 Short-term debt - - - - - - - Other current liabilities 52 57 64 59 69 94 101 Total current liabilities 71 78 86 80 91 124 142 Long-term debt - - - - - - - Other long-term liabilities 29 31 31 28 29 24 21

Total liabilities 100 109 117 109 120 148 163 Preferred stock - - - - - - - Shareholders' equity 583 615 619 618 625 738 682 Shares out (avg) (mn) 14 14 14 14 14 14 14 Selected Values and Ratios Cash and investments 349 338 341 337 342 356 225 Debt - - - - - - - Net cash and investments 349 338 341 337 342 356 225 Current assets 417 442 455 482 490 526 418 Current liabilities 71 78 86 80 91 124 142 Current ratio 6x 6x 5x 6x 5x 4x 3x Acid-test ratio 6x 5x 5x 6x 5x 4x 3x Current assets 417 442 455 482 490 526 418 Total liabilities and preferred 100 109 117 109 120 148 163 NET NET current assets 317 334 338 373 370 378 255 Shareholders' equity 583 615 619 618 625 738 682 Goodwill and other intangibles 2 - - - - 95 127 Tangible book value 581 615 619 618 625 642 554 Tangible book to tangible assets 85% 85% 84% 85% 84% 81% 77% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% Capital employed 241 275 276 279 269 281 303 Balance Sheet Trends (sequential) ∆ total assets -6% -2% 1% -2% -16% 5% n/a ∆ shareholders' equity -5% -1% 0% -1% -15% 8% n/a ∆ tangible shareholders' equity -6% -1% 0% -1% -3% 16% n/a ∆ tangible book per share -6% -1% 0% -1% -3% 16% n/a ∆ net cash and investments 3% -1% 1% -1% -4% 58% n/a ∆ net net current assets -5% -1% -9% 1% -2% 48% n/a ∆ accounts receivable -11% 0% 1% 0% -11% -17% n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable -11% -2% 1% -6% -25% -29% n/a ∆ capital employed -13% 0% -1% 4% -4% -7% n/a



…additional insight into Ascent Media: Reconciliation for Total Segment Adjusted OIBDA 1

1 “Segment adjusted OIBDA” is a non-GAAP financial measure for each of Ascent Media Group (AMG)’s two operating segments, and on a combined basis for both the Content Services segment and the Creative Services segment. Ascent Media defines “segment adjusted OIBDA” as revenue less cost of services and selling, general and administrative expense (excluding stock-based and long-term incentive compensation and accretion expense on asset retirement obligations), determined in each case on a separate basis for the indicated operating segment only. The operating segments do not include corporate level general and administrative expenses, which amounted to $25.5 million in 2009, compared to a $28.4 million in corporate level general and administrative expenses in 2008. Segment adjusted OIBDA excludes depreciation and amortization, stock-based and long-term incentive compensation, accretion expense on asset retirement obligations, restructuring and impairment charges, gains/losses on the sale of operating assets and other income and expenses that are included in the measurement of loss from continuing operations before income taxes pursuant to GAAP.



Audiovox (VOXX) – Owned by Baupost, Aegis, Smith, Kahn Hauppauge, NY, 631-231-7750

Technology: Communications Equipment, Member of S&P SmallCap 600 www.audiovox.com


Price: $7.94 (as of 4/16/10) Month # of P/E FYE 2/28/09 n/m 52-week range: $4.48 - $8.45 Latest Ago Ests P/E FYE 2/28/10 50x Market value: $182 million This quarter $0.00 $0.00 1 P/E FYE 2/28/11 23x Enterprise value: $142 million Next quarter n/a n/a n/a P/E FYE 2/28/12 n/a Shares out: 22.9 million FYE 2/28/10 0.16 0.16 1 EV/ LTM revenue 0.3x

Ownership Data FYE 2/28/11 0.35 0.35 1 EV/ LTM EBIT n/m Insider ownership: 19% FYE 2/28/12 n/a n/a n/a P / tangible book 0.7x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield -34% Institutional ownership: 66% 1/11/10 $0.11 $0.26 LTM pre-tax ROC -20%

Operating Performance and Financial Position ($ millions, except Fiscal Years Ended LTME FQE FQE per share data) 11/30/03 11/30/04 11/30/05 2/28/06 2/28/07 2/29/08 2/28/09 11/30/09 11/30/08 11/30/09 Revenue 511 564 540 103 457 591 603 516 196 156 Gross profit 85 90 61 16 79 111 100 91 39 30 Operating income 14 (1) (28) (3) (5) 5 (53) (49) 12 3 Net income 11 77 (10) 0 3 8 (71) (54) 7 13 Diluted EPS 0.36 0.00 (0.30) 0.02 0.16 0.29 (3.11) (2.37) 0.29 0.55 Shares out (avg) 22 22 22 23 22 23 23 23 23 23 Cash from operations 28 87 (42) 55 43 (65) 30 53 (34) (11) Capex 5 5 3 1 3 7 5 4 1 1 Free cash flow 23 82 (45) 55 40 (72) 25 49 (34) (11) Cash & investments 5 168 123 177 156 39 70 55 14 55 Total current assets 521 482 407 390 379 358 330 352 363 352 Intangible assets 16 15 27 27 75 124 89 87 123 87 Total assets 583 543 486 466 499 533 461 488 532 488 Short-term debt 43 10 6 7 4 3 3 4 3 4 Total current liabilities 216 120 66 47 73 82 89 98 94 98 Long-term debt 16 14 12 12 11 7 11 12 12 12 Total liabilities 258 139 85 65 95 110 121 127 118 127 Preferred stock 3 3 3 3 0 0 0 0 0 0 Common equity 323 402 399 398 404 424 341 361 415 361 EBIT/capital employed 4% 0% -12% -1% -3% 2% -23% -20% n/m n/m


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BUSINESS OVERVIEW Audiovox provides mobile and consumer electronics as well as accessories in two product categories: Electronics: Includes car entertainment and security systems, LCD televisions, camcorders, music and DVD players, clock radios, voice recorders, picture frames and other products. Accessories: Includes HDTV/WiFi antennas, TV remotes, headphones, cordless phones, rechargeable battery backups, connectivity products, iPod-related and other accessories. INVESTMENT HIGHLIGHTS

• Brands include Audiovox, RCA, Jensen, Acoustic Research, Energizer, Advent, Code Alarm, Terk, Prestige and Surface. Some of the brands are licensed, including RCA and Energizer.

• #1 share in “mobile video and multimedia” products including car entertainment systems, based on company data. The company is also #1 in remote controls, antenna and TV reception products.

• Outsourced manufacturing leads to capital-light business model focused on product design and engineering. Most products are imported from Asia-based suppliers under short-term purchase orders.

• $39 million of net cash. In addition, Audiovox has $16 million of long-term investment securities and $11 million of equity investments at 11/30/09.

• $37 million of U.S. federal NOLs, as of February 2009. NOL’s expire between 2027 and 2029.

• Net-net current assets are 120%+ of market cap. • Shares trade at trailing EV-to-revenue of 0.3x

and trailing EV-to-gross profit of 1.6x. INVESTMENT RISKS & CONCERNS

• Audiovox products compete primarily on price. This may explain the razor-thin profit margins and lack of sustainable free cash flow generation.

• Competition includes well-known electronics brands such as Sony, Panasonic, Philips, Pioneer, and JVC, as well as niche providers such as Alpine, Directed Electronics and Monster Cable. Car-based systems compete with car OEM-supplied products.

• ~ 50% of tangible book is inventory, which is a depreciating asset at risk of rapid obsolescence.


P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E PC 30,670 34,730 .5x 2.3x n/m 19x PHG 30,440 30,280 1.0x 7.3x 28x 21x VOXX 180 140 .3x .7x 50x 23x

SELECTED OPERATING DATA 1

FYE February 28 2007 2008 2009 YTD

11/30/09 ∆ revenue 2 n/a 29% 2% -18% Revenue ($mn) 457 591 603 400 % of revenue by product category: Electronics 3 95% 74% 75% 67% Accessories 5% 26% 25% 33% Revenue growth by product category: Electronics n/a 1% 3% -29% Accessories n/a 550% 0% 20% % of revenue by geography: North America 86% 85% 84% n/a Latin America 2% 2% 5% n/a Germany 10% 10% 9% n/a Other 2% 2% 2% n/a Selected items as % of revenue: Gross profit 17% 19% 17% 19% R&D 4 2% 2% 2% 2% EBIT -1% 1% -9% 1% Net income 1% 1% -12% 4% D&A 1% 1% 1% 1% Capex 1% 1% 1% 1% Return on tangible equity 1% 2% -26% 6% Tangible equity to assets 83% 77% 71% 70% ∆ shares out (avg) n/a 2% 0% 0%

1 Figures reflects continuing operations. Y-Y comparisons for fiscal 2007 are not available given fiscal year and segment reporting changes in 2006/07. 2 Fiscal 2008 revenue growth is mainly due to 2007 acquisitions of Thomson’s audio/video and accessory businesses, as well as rights to RCA brand for the audio/video and accessories fields. The company also acquired Technuity in 2007, giving it the exclusive license to the Energizer brand in North America. 3 Includes both mobile and consumer electronics products. 4 Represents engineering and technical support expenses.

• “We have a number of banks out, looking for particular companies and channels that we would like to enter,” based on CEO comment in January. The company has been acquisitive in the past, but has not demonstrated it can create value with M&A.

• Top five customers were 36% of FY09 revenue. MAJOR HOLDERS Shares outstanding: 20.6 million class A shares (VOXX; one vote per share) and 2.3 million class B shares (not listed; ten votes per share). Chairman Shalam controls the company by owning 100% of class B shares and 9% of class A shares. Economic stake: Chairman Shalam 18% | Other insiders 6% | Smith & Co. 9% | Kahn Brothers 8% | Baupost 8% | DFA 8% RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Audiovox’s acquisition-led growth strategy has built up a portfolio of consumer electronics brands across various product groups. The hard part continues to be creating shareholder value given commoditized products and technological change. Downside may not be protected as well as the below-book valuation suggests, given that “perishable” inventory is a large part of the asset base. Voting control by chairman Shalam makes Audiovox a less attractive takeover candidate.



AUDIOVOX – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 11/30/09 8/31/09 5/31/09 2/28/09 11/30/08 8/31/08 5/31/08 2/29/08

Assets Cash 55 71 62 70 14 49 70 39 Short-term investments - - - - - - - - Accounts receivable 144 109 132 117 180 125 124 142 Inventory 125 121 119 125 149 163 147 156 Other current assets 28 18 17 18 20 19 20 21 Total current assets 352 318 330 330 363 357 360 358 PP&E 20 20 20 20 21 22 22 22 Goodwill and other intangibles 87 87 88 89 123 127 124 124 Long-term investments 27 27 22 21 22 25 27 28 Other long-term assets 2 2 2 2 4 2 1 1

Total assets 488 454 462 461 532 533 534 533

Liabilities and Shareholders' Equity Accounts payable 41 34 40 42 43 40 34 24 Short-term debt 4 3 4 3 3 3 4 3 Other current liabilities 52 43 43 45 48 45 46 55 Total current liabilities 98 80 86 89 94 88 84 82 Long-term debt 12 12 12 11 12 13 14 7 Other long-term liabilities 17 17 20 20 12 19 20 20

Total liabilities 127 108 118 121 118 119 117 110 Preferred stock - - - - - - - - Shareholders' equity 361 346 344 341 415 414 417 424 Shares out (avg) (mn) 23 23 23 23 23 23 23 23 Selected Values and Ratios Cash and investments 82 97 84 90 36 75 97 68 Debt 16 15 15 14 15 16 17 10 Net cash and investments 67 82 69 76 21 58 79 57 Current assets 352 318 330 330 363 357 360 358 Current liabilities 98 80 86 89 94 88 84 82 Current ratio 4x 4x 4x 4x 4x 4x 4x 4x Acid-test ratio 2x 2x 2x 2x 2x 2x 2x 2x Current assets 352 318 330 330 363 357 360 358 Total liabilities and preferred 127 108 118 121 118 119 117 110 NET NET current assets 225 210 212 209 246 237 243 249 Shareholders' equity 361 346 344 341 415 414 417 424 Goodwill and other intangibles 87 87 88 89 123 127 124 124 Tangible book value 275 259 256 252 292 286 293 299 Tangible book to tangible assets 68% 71% 68% 68% 71% 71% 71% 73% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 223 191 205 194 279 245 232 261 Balance Sheet Trends (sequential) ∆ total assets 7% -2% 0% -13% 0% 0% 0% n/a ∆ shareholders' equity 4% 1% 1% -18% 0% -1% -2% n/a ∆ tangible shareholders' equity 6% 1% 2% -14% 2% -2% -2% n/a ∆ tangible book per share 6% 1% 2% -14% 2% -2% -2% n/a ∆ net cash and investments -19% 19% -9% 269% -64% -27% 39% n/a ∆ net net current assets 7% -1% 1% -15% 3% -2% -2% n/a ∆ accounts receivable 33% -18% 13% -35% 44% 1% -13% n/a ∆ inventory 3% 2% -5% -16% -9% 11% -6% n/a ∆ accounts payable 21% -15% -4% -3% 9% 16% 40% n/a ∆ capital employed 17% -7% 6% -30% 14% 6% -11% n/a



…additional insight into Audiovox: SLIDES FROM COMPANY PRESENTATION, SEPTEMBER 2009



Axcelis Technologies (ACLS) – Owned by Schneider, Sterling, Smith Beverly, MA, 978-787-4000

Technology: Semiconductors www.axcelis.com



Ownership Data FYE 12/30/00 n/a n/a n/a EV/ LTM EBIT n/m Insider ownership: 1% FYE 12/30/01 n/a n/a n/a P / tangible book 1.1x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield -37% Institutional ownership: 57% n/a n/a n/a LTM pre-tax ROC -38%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 328 508 373 462 405 250 133 133 42 39 Gross profit 110 212 154 192 153 63 28 28 (11) 11 Operating income (47) 51 (16) 24 (21) (187) (70) (69) (137) (10) Net income (114) 74 (4) 41 (11) (197) (78) (129) (141) (10) Diluted EPS (1.16) 0.73 (0.04) 0.40 (0.11) (1.91) (0.75) (0.75) (1.37) (0.10) Shares out (avg) 99 100 100 101 102 103 104 104 103 104 Cash from operations (54) (57) 72 (12) 19 (31) (49) n/a (15) n/a Capex 12 5 6 8 7 10 3 n/a 0 n/a Free cash flow (66) (62) 66 (20) 12 (42) (52) n/a (15) n/a Cash & investments 108 187 165 204 84 38 45 45 38 45 Total current assets 330 406 395 475 379 241 194 194 241 194 Intangible assets 67 64 63 60 53 0 0 0 0 0 Total assets 585 689 661 754 670 455 251 251 455 251 Short-term debt 0 0 0 74 0 83 0 0 83 0 Total current liabilities 98 107 94 190 94 130 30 30 130 30 Long-term debt 125 125 125 77 80 0 0 0 0 0 Total liabilities 232 245 235 276 184 136 34 34 136 34 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 353 444 426 478 486 319 216 216 319 216 EBIT/capital employed -23% 26% -8% 11% -8% -80% -39% -38% n/m n/m


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BUSINESS OVERVIEW Axcelis provides semiconductor capital equipment. INVESTMENT HIGHLIGHTS

• “Market leader in high-energy ion implanters” based on Axcelis 2009 10-K. Implanters are machines which cost $2-3 million, and are used by chip makers to embed transistors into silicon wafers.

• ~4,000 Axcelis products are in use in 50 countries worldwide. This installed base is a source of aftermarket sales, which represented 74% of 2009 revenue (reflects low new product sales in 2009).

• Received $122 million cash from sale of 50% SEN stake in 2009. Axcelis retains a cross-license with SEN, which produces ion implantation equipment in Japan. The company used majority of proceeds to repay $83 million of convertible debt.

• “Believe we will be cash flow positive in 2010” Axcelis generated $4 million of FCF in 4Q09. Free cash flow generation benefits from low capex needs.

• “Experiencing a significant increase in recent order flow” and “forecasting sales to be up across all product lines and service programs” in 2010, based on CEO comments in February.

• Owns 417,000 sq ft HQ in Beverly, MA. The site, which also houses manufacturing operations, is carried at ~$35 million but may be worth more.

• $168 million of federal and state NOLs and $16 million of foreign NOLs expire from 2018 to 2029, as of yearend 2009. These are fully reserved against.

• $45 million of non-restricted cash and no debt. • Shares trade at 1.1x tangible book.


• Cyclical business, dependent on semi makers’ capacity investments, which exhibit large volatility (particularly in the case of memory manufacturers).

• Systems backlog is only $17 million at yearend 2009 (down 20% y-y), including deferred systems revenue. This represents less than 15% of 2009 revenue, which makes new order wins essential.

• Playing catch-up in high-current 300 millimeter ion implant market, which is a “substantial portion of the total market opportunity” for Axcelis. The company was late to market with a single wafer high-current product in 2006 and lost market share.

MAJOR HOLDERS CEO Puma 1% | Other insiders 2% | FMR 14% | Smith & Co. 10% | Schneider 9% | Sterling 9% | DFA 3% | Ingalls 2%

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 2009 ∆ revenue -27% 24% -12% -38% -47% Revenue ($mn) 373 462 405 250 133 % of revenue by segment: Ion implantation systems 1 80% 74% 75% 82% 83% Other products 2 20% 26% 25% 18% 17% Revenue growth by segment: Ion implantation systems -28% 15% -11% -33% -46% Other products -21% 58% -16% -55% -51% “Aftermarket” as % of revenue 3 42% 38% 42% 57% 74% % of revenue by type: Product 82% 86% 85% 78% 74% Service 16% 12% 14% 21% 25% Royalties 4 2% 2% 1% 2% 0% Revenue growth by major type: Product n/a 31% -14% -43% -49% Service n/a -9% 2% -6% -35% Gross margin by major type: Product 40% 48% 42% 16% 13% Service 36% 15% 20% 56% 60% Total gross margin 41% 41% 38% 25% 21% % of revenue by geography: U.S. 78% 80% 78% 70% 63% Europe 9% 8% 9% 12% 17% Asia Pacific 13% 12% 13% 18% 20% Selected items as % of revenue: R&D 19% 16% 18% 25% 25% EBIT -4% 5% -5% -75% -52% Net income -1% 9% -3% -79% -58% D&A 5 6% 4% 5% 9% 6% Capex 2% 1% 3% 1% 0% Return on tangible equity -1% 10% -3% -52% -29% Tangible equity to assets 61% 60% 65% 70% 76% ∆ shares out (avg) 1% 1% 1% 1% 1%

1 Includes high current, medium current and high energy implanters. 2 Includes dry strip equipment, curing, and thermal processing systems. 3 Aftermarket refers to sales of spare parts and product upgrades, combined with the sale of maintenance labor and service contracts. Some revenue in the reportable segment “Product” is therefore included in “Aftermarket” revenue. 4 Majority of royalties was derived from the SEN joint venture, with Axcelis selling its 50% stake to JV partner Sumitomo Heavy Industries in March 2009. 5 Includes amortization of intangible assets. COMPARABLE PUBLIC COMPANY ANALYSIS

P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E VSEA 2,610 2,340 5.9x 4.9x 23x 15x MTSN 250 190 4.4x 2.7x n/m n/m ACLS 230 190 1.4x 1.1x n/a n/a


THE BOTTOM LINE Axcelis avoided bankruptcy in early 2009 as it was able to pay off maturing debt with proceeds from the sale of its 50% stake in Japanese chip equipment producer SEN. Shares are up about tenfold since then as the market has re-rated Axcelis as a going concern. While risk-reward has risen, shares still trade near tangible book. Operations have turned free cash flow positive and business should continue to improve in 2010. Axcelis retains potential take-out upside in the context of a prior bid by Sumitomo Heavy Industries and Texas Pacific Group, which offered $6.00 per share for the company in March 2008.



AXCELIS TECHNOLOGIES – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 45 41 50 71 38 50 60 68 Short-term investments - - - - - - - - Accounts receivable 19 27 23 21 28 37 51 55 Inventory 115 124 133 141 150 177 179 186 Other current assets 15 18 18 24 26 32 32 42 Total current assets 194 210 224 256 241 295 322 351 PP&E 41 42 43 44 44 64 66 67 Goodwill and other intangibles - - - - - 51 52 52 Long-term investments - - - - 157 136 140 149 Other long-term assets 16 11 11 12 13 33 35 36

Total assets 251 263 278 312 455 580 616 655

Liabilities and Shareholders' Equity Accounts payable 10 6 7 11 8 13 16 24 Short-term debt - - - - 83 82 82 81 Other current liabilities 20 26 30 39 39 39 42 47 Total current liabilities 30 32 36 51 130 134 139 151 Long-term debt - - - - - - - - Other long-term liabilities 4 5 5 5 6 8 9 10

Total liabilities 34 37 41 56 136 142 148 161 Preferred stock - - - - - - - - Shareholders' equity 216 226 237 256 319 437 468 494 Shares out (avg) (mn) 104 103 103 103 103 103 102 102 Selected Values and Ratios Cash and investments 45 41 50 71 194 186 200 217 Debt - - - - 83 82 82 81 Net cash and investments 45 41 50 71 111 103 118 136 Current assets 194 210 224 256 241 295 322 351 Current liabilities 30 32 36 51 130 134 139 151 Current ratio 6x 7x 6x 5x 2x 2x 2x 2x Acid-test ratio 2x 2x 2x 2x 1x 1x 1x 1x Current assets 194 210 224 256 241 295 322 351 Total liabilities and preferred 34 37 41 56 136 142 148 161 NET NET current assets 159 173 183 200 105 153 174 190 Shareholders' equity 216 226 237 256 319 437 468 494 Goodwill and other intangibles - - - - - 51 52 52 Tangible book value 216 226 237 256 319 386 416 442 Tangible book to tangible assets 86% 86% 85% 82% 70% 73% 74% 73% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 160 178 181 178 201 258 271 280 Balance Sheet Trends (sequential) ∆ total assets -5% -6% -11% -31% -21% -6% -6% n/a ∆ shareholders' equity -4% -5% -7% -20% -27% -6% -5% n/a ∆ tangible shareholders' equity -4% -5% -7% -20% -17% -7% -6% n/a ∆ tangible book per share -5% -5% -7% -20% -17% -8% -6% n/a ∆ net cash and investments 9% -17% -30% -36% 8% -13% -13% n/a ∆ net net current assets -8% -5% -9% 90% -31% -12% -8% n/a ∆ accounts receivable -28% 14% 11% -24% -25% -29% -7% n/a ∆ inventory -7% -7% -5% -6% -15% -1% -4% n/a ∆ accounts payable 52% -6% -39% 38% -36% -19% -34% n/a ∆ capital employed -10% -1% 1% -11% -22% -5% -3% n/a



…additional insight into Axcelis: CASH FLOWS, 2007-2009



Callaway Golf (ELY) – Owned by Royce, Clearbridge Carlsbad, CA, 760-931-1771

Consumer Cyclical: Recreational Products, Member of S&P SmallCap 600 www.callawaygolfpreowned.com


Price: $9.74 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $4.66 - $10.19 Latest Ago Ests P/E FYE 12/31/10 34x Market value: $627 million This quarter $0.25 $0.26 12 P/E FYE 12/31/11 16x Enterprise value: $549 million Next quarter 0.32 0.33 12 P/E FYE 12/30/12 n/a Shares out: 64.4 million FYE 12/31/10 0.29 0.29 13 EV/ LTM revenue 0.6x

Ownership Data FYE 12/31/11 0.62 0.63 11 EV/ LTM EBIT n/m Insider ownership: 1% FYE 12/30/12 n/a n/a n/a P / tangible book 1.2x Insider buys (last six months): 0 LT growth 11.0% 11.0% 3 Greenblatt Criteria Insider sales (last six months): 3 EPS Surprise Actual Estimate LTM EBIT yield -6% Institutional ownership: 95% 1/26/10 -$0.27 -$0.28 LTM pre-tax ROC -7%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 814 935 998 1,018 1,125 1,117 951 951 171 186 Gross profit 369 359 414 398 493 487 344 344 60 58 Operating income 66 (25) 17 37 90 84 (31) (31) (29) (29) Net income 46 (10) 13 23 55 66 (21) (21) (3) (18) Diluted EPS 0.68 (0.15) 0.19 0.34 0.81 1.04 (0.33) (0.34) (0.05) (0.29) Shares out (avg) 66 68 69 68 66 63 63 63 63 63 Cash from operations 119 9 70 17 152 42 43 43 (19) (15) Capex 8 26 34 33 33 51 39 39 18 9 Free cash flow 111 (18) 36 (16) 119 (9) 4 4 (36) (24) Cash & investments 47 32 50 46 50 38 78 78 38 78 Total current assets 384 394 439 493 497 490 513 513 490 513 Intangible assets 170 180 175 175 173 177 174 174 177 174 Total assets 749 736 765 846 838 855 876 876 855 876 Short-term debt 0 13 0 80 37 90 0 0 90 0 Total current liabilities 130 121 140 224 224 253 152 152 253 152 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 159 149 169 269 270 277 169 169 277 169 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 589 586 596 577 568 578 707 707 578 707 EBIT/capital employed 18% -6% 4% 9% 22% 21% -7% -7% n/m n/m


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BUSINESS OVERVIEW Callaway Golf manufactures golf clubs and golf balls, as well as related accessories such as bags and apparel. INVESTMENT HIGHLIGHTS

• Owns golf brands including Callaway, Odyssey, Top-Flite, Ben Hogan and uPro. According to the company, “it is the leader, or one of the leaders, in every golf club market in which it competes.” In golf balls, it was #2 in U.S. revenue share in 2009.

• Designs products for golfers of all skill levels, amateur and professional. Professional use of the company’s products, including the #2 position on the PGA Tour in 2009, contributes to retail sales.

• Margin improvement potential. Margins may be improved through outsourcing and transfer of production to lower cost countries as nearly half of production remains in the U.S. The golf balls segment, in particular, has turnaround potential.

• Reduced inventory to “lowest yearend levels for the past five years.” Yearend 2009 inventory represents 23% of trailing revenue. The percentage is stable y-y despite a 15% decline in 2009 revenue. In addition, retail inventories are “conservative.”

• 1Q10 revenue increased 6% y-y on a currency-neutral basis according to preliminary results released on April 15. This indicates demand may be starting to recover following declines in 2009.

• Guiding for EPS of $0.25-0.35 in 2010 (2009: loss of $0.27), including a $0.16 per share reduction related to preferred stock and excluding a $0.10 per share restructuring charge. Revenue is expected at $990-1,050 million, up 4-10% y-y on improved market conditions and favorable currency impact.

• Shares trade at 1.6x tangible book. Recent share price implies EV-to-2009 revenue of 0.8x.

• $78 million of cash and no debt. INVESTMENT RISKS & CONCERNS

• Competition includes Fortune Brands-owned Acushnet, which owns Titleist and FootJoy brands and has 50%+ share of the U.S. golf ball market. Other rivals are Adidas-owned TaylorMade, Nike, Sumitomo-owned SRI Sports (Cleveland, Dunlop Srixon), Puma, Bridgestone, Ping and Yamaha.

• Dilution. The company sold $140 million of 7.5% convertible preferred stock in 2009. Proceeds were used to eliminate debt. The preferred is convertible at any time at a price of $7.05 per common share. If converted, shares outstanding would rise by 31%.

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 2009 ∆ revenue 1 7% 2% 10% -1% -15% Revenue ($mn) 998 1,018 1,125 1,117 951 % of revenue by segment: Golf clubs 2 78% 79% 81% 80% 81% Golf balls 22% 21% 19% 20% 19% Revenue growth by segment: Golf clubs 11% 3% 13% -2% -14% Golf balls -7% 0% -1% 5% -19% Pre-tax income margin by segment: Golf clubs 9% 13% 17% 15% 5% Golf balls -2% -3% 0% 3% -8% Corporate -5% -6% -6% -4% -6% Total pre-tax income margin 1% 3% 8% 9% -3% % of revenue by geography: U.S. 56% 56% 53% 50% 50% Europe 17% 16% 17% 17% 14% Japan 10% 10% 11% 15% 17% Other 17% 18% 19% 18% 19% Revenue growth by geography: U.S. 3% 1% 5% -7% -14% Europe -2% -4% 21% -1% -30% Japan 47% 2% 14% 39% -2% Selected items as % of revenue: Gross profit 42% 39% 44% 44% 36% R&D 3% 3% 3% 3% 3% EBIT 2% 4% 8% 8% -3% Net income 1% 2% 5% 6% -2% D&A 4% 3% 3% 3% 4% Capex 3% 3% 3% 5% 4% Return on tangible equity 3% 6% 14% 17% -4% Tangible equity to assets 72% 66% 60% 59% 68% ∆ shares out (avg) 1% -1% -2% -5% 0%

1 2009 revenue declined 12% y-y on a currency neutral basis. 2 Includes accessories, which represented 23% of company revenue in 2009.

• Low growth in mature markets. While the recent entry into new markets such as India offers growth potential, competition may erode profitability.

• Lost patent case against Acushnet in March. Callaway argued that the Fortune Brands subsidiary infringed its golf ball patents. The ruling may make it harder to turn around the golf ball business.

MAJOR HOLDERS * CEO Fellows 2% | Other insiders 2% | FMR 10% | BlackRock 8% | Royce 6% | Fisher 6% | Axa 6% * Assumes outstanding preferred stock is not converted into common shares. RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Callaway’s brands have over the years proven their staying power in the golf business. This is despite competition from much larger companies including Nike, Adidas, and Fortune Brands. However, given exposure to mature markets, and expensive marketing required to enter new, higher-growth markets, we are skeptical the company’s go-it-alone strategy will deliver adequate returns on capital. Having said that, Callaway may be an attractive target for a trade buyer (EV-to-revenue is 0.8x). In March, Puma bought the Cobra golf brand from Fortune Brands to complement its golf footwear and apparel business.



CALLAWAY GOLF – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 78 105 51 20 38 51 55 39 Short-term investments - - - - - - - - Accounts receivable 160 155 263 241 136 153 287 301 Inventory 219 199 228 262 257 220 236 264 Other current assets 56 60 57 60 59 67 75 76 Total current assets 513 518 599 582 490 490 653 680 PP&E 143 148 145 141 142 135 135 132 Goodwill and other intangibles 174 175 176 175 177 170 172 173 Long-term investments - - - - - - - - Other long-term assets 46 54 49 48 47 72 68 59

Total assets 876 894 968 946 855 867 1,028 1,043

Liabilities and Shareholders' Equity Accounts payable 118 110 170 159 126 116 138 159 Short-term debt - - - 147 90 40 135 156 Other current liabilities 33 36 41 34 37 48 65 54 Total current liabilities 152 146 211 340 253 203 338 368 Long-term debt - - - - - - - - Other long-term liabilities 17 23 60 24 24 68 67 65

Total liabilities 169 170 271 364 277 271 405 434 Preferred stock - - - - - - - - Shareholders' equity 707 725 697 582 578 596 623 610 Shares out (avg) (mn) 63 63 63 63 63 62 63 64 Selected Values and Ratios Cash and investments 78 105 51 20 38 51 55 39 Debt - - - 147 90 40 135 156 Net cash and investments 78 105 51 (128) (52) 11 (80) (116) Current assets 513 518 599 582 490 490 653 680 Current liabilities 152 146 211 340 253 203 338 368 Current ratio 3x 4x 3x 2x 2x 2x 2x 2x Acid-test ratio 2x 2x 1x 1x 1x 1x 1x 1x Current assets 513 518 599 582 490 490 653 680 Total liabilities and preferred 169 170 271 364 277 271 405 434 NET NET current assets 344 349 328 218 213 219 248 247 Shareholders' equity 707 725 697 582 578 596 623 610 Goodwill and other intangibles 174 175 176 175 177 170 172 173 Tangible book value 533 550 522 407 402 427 451 437 Tangible book to tangible assets 76% 76% 66% 53% 59% 61% 53% 50% Net debt to tangible equity <0% <0% <0% 0 0 <0% 0 0 Capital employed 427 415 482 510 430 412 529 560 Balance Sheet Trends (sequential) ∆ total assets -2% -8% 2% 11% -1% -16% -1% n/a ∆ shareholders' equity -2% 4% 20% 1% -3% -4% 2% n/a ∆ tangible shareholders' equity -3% 5% 28% 1% -6% -5% 3% n/a ∆ tangible book per share -3% 5% 28% 1% -6% -4% 4% n/a ∆ net cash and investments -25% 107% -140% 147% -588% -113% -31% n/a ∆ net net current assets -1% 6% 50% 3% -3% -11% 0% n/a ∆ accounts receivable 3% -41% 9% 78% -11% -47% -4% n/a ∆ inventory 10% -13% -13% 2% 17% -7% -11% n/a ∆ accounts payable 8% -35% 7% 26% 9% -16% -13% n/a ∆ capital employed 3% -14% -6% 19% 5% -22% -5% n/a



…additional insight into Callaway Golf: EXCERPTS from LETTER TO SHAREHOLDERS by PRESIDENT AND CEO GEORGE FELLOWS, MARCH 22, 2010

• In 2009, Callaway Golf confronted conditions unlike any in our 27-year history. Testing the competitive spirit that has propelled us to the top of our industry, we faced challenges that included the worst economic downturn since the Great Depression, contracting consumer purchases and retail inventories and an unfavorable foreign currency environment. As a result of these factors, the Company reported net sales of $951 million, which represented a 15 percent decrease from the previous year, with a net loss of $0.33 per share. While these results were very disappointing, the decline in revenue was less severe in comparison to the declines that beset the overall golf and consumer markets.

• To spur consumer spending, Callaway took a leadership position as the first mover in the market with consumer promotions that helped mitigate the impact of a depressed marketplace. While these actions had an adverse effect on the Company’s gross margins, they helped stimulate retail sales and reinforced Callaway as the proactive leader in the marketplace.

• To ensure we had sufficient liquidity to weather these challenging conditions, we raised $140 million through a convertible preferred stock offering. The ability to raise that much capital in such a tough economic climate reflected strong investor confidence in Callaway Golf’s long-term business prospects.

• The Company committed early in the year to tight management of expenses and working capital. As a result, operating expenses were reduced by 7 percent to $374 million and we captured continued savings from our Gross Margin Initiatives, totaling $70 million over the past three years.

• Looking to the future, it was equally important that we balanced these expense reductions with targeted investment spending to position ourselves to take full advantage of an economic recovery as it develops. Those investments included funding of key gross margin improvement initiatives, global expansion in China and India, further investment in our uPro GPS device business, and our steadfast dedication to R&D in order to develop the most innovative products in the game.

• This balanced approach, while costly to short-term profitability, allowed us to accomplish a great deal in 2009 and set a positive base going into what we believe will be a solid recovery year in 2010. We outperformed most of our competitors in the consumer arena. In the major golf club categories, our woods, irons and putters saw an increase in market share, illustrating the strength of our product line. In fact, Callaway finished as the #1 Irons in Golf for the 13th straight year, Odyssey continued its strong position as the #1 Putter in Golf, our woods gained momentum and we grew our leadership position in Asia with our Legacy brand of products.

• Our uPro business, a late 2008 acquisition, was fully integrated into the Callaway family and saw immediate acceptance as golfers discovered just how impressive and helpful this unique GPS distance measurement device was to their games.

• Spearheading our strategic initiatives, we recently opened a new subsidiary, Callaway Golf India. India is a country that has a rich history in the game. In fact, the Royal Calcutta Golf Club was established in 1829, making it the oldest golf club in the world outside of Great Britain. To raise Callaway’s profile in India, we added Jeev Milkha Singh, the country’s top-ranked golfer, as one of our newest staff players and he will serve as our brand ambassador for Callaway Golf India.

• We remain cautiously optimistic that 2010 will be a year of recovery. Global economic conditions have started to stabilize and look to be on the upswing. A continuation of these trends, together with foreign currency rate improvement, will set the stage for a much improved financial performance in the coming year. The difficult steps undertaken in 2009 have positioned us to take full advantage of the economic recovery as it unfolds.

• There’s no doubt that Callaway Golf faced an unprecedented series of obstacles in 2009, but we have emerged a leaner, more resilient Company better able to deal with adversity.

• Legendary author and humorist Mark Twain once said, “The miracle, or the power, that elevates the few is to be found in their industry, application, and perseverance under the prompting of a brave, determined spirit.” The determined spirit that was instilled when our Company was founded runs as deep as ever. And we’re just as committed to helping make every golfer a better golfer today as Ely Callaway was 27 years ago.

To access the complete letter, visit http://bit.ly/99mxsY


http://bit.ly/99mxsY�


Hurco Companies (HURC) – Owned by Royce, Pier, Kennedy Indianapolis, IN, 317-293-5309

Technology: Scientific & Technical Instruments www.hurco.com


Price: $18.30 (as of 4/16/10) Month # of P/E FYE 10/31/09 n/m 52-week range: $12.01 - $20.45 Latest Ago Ests P/E FYE 10/31/10 n/m Market value: $118 million This quarter -$0.18 -$0.07 1 P/E FYE 10/31/11 21x Enterprise value: $85 million Next quarter -0.02 0.00 1 P/E FYE 10/30/12 n/a Shares out: 6.4 million FYE 10/31/10 -0.28 0.14 1 EV/ LTM revenue 1.0x

Ownership Data FYE 10/31/11 0.88 1.11 1 EV/ LTM EBIT n/m Insider ownership: 5% FYE 10/30/12 n/a n/a n/a P / tangible book 1.1x Insider buys (last six months): 2 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield -10% Institutional ownership: 63% 3/11/10 -$0.29 -$0.04 LTM pre-tax ROC -11%

Operating Performance and Financial Position ($ 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 10/31/08 10/31/09 1/31/10 1/31/09 1/31/10 Revenue 76 100 126 149 188 224 91 83 28 21 Gross profit 21 30 43 53 71 83 26 21 9 4 Operating income 2 9 17 23 31 36 (5) (8) 1 (3) Net income 1 6 16 16 21 23 (2) (5) 0 (2) Diluted EPS 0.08 1.04 2.60 2.42 3.24 3.49 (0.36) (0.70) 0.05 (0.29) Shares out (avg) 6 6 6 6 6 6 6 6 6 6 Cash from operations 2 7 12 14 14 0 (2) 5 (2) 5 Capex 1 2 3 3 5 6 4 3 1 1 Free cash flow 1 5 9 11 10 (5) (5) 2 (3) 4 Cash & investments 5 8 18 30 40 46 29 34 39 34 Total current assets 42 57 74 103 139 151 118 114 129 114 Intangible assets 2 3 4 6 6 6 7 7 6 7 Total assets 58 73 94 126 164 177 145 140 156 140 Short-term debt 1 0 0 0 4 3 1 1 3 1 Total current liabilities 20 30 31 44 63 51 21 18 30 18 Long-term debt 9 4 4 4 0 0 0 0 0 0 Total liabilities 29 35 35 50 66 54 24 22 33 22 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 29 39 59 75 98 124 120 118 123 118 EBIT/capital employed 8% 32% 54% 62% 69% 59% -7% -11% n/m n/m


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BUSINESS OVERVIEW Hurco provides computerized machine tools, computer control systems and software to the metal-working industry. INVESTMENT HIGHLIGHTS

• Helps automate metal parts manufacturing. Hurco pioneered conversational software for use on machine tools. Hurco’s control systems enable tool operators on production floors to create a program for machining a part from a blueprint or CAD file.

• Core products include vertical machining (mills) and turning centers (lathes), which are integrated with proprietary software and computer controls. Machine prices range from $40,000 to $350,000.

• Demand drivers: advances in industrial technology and related demand for process improvements; need to improve productivity and shorten cycle time; replacement of aging machine tool installed base; industrial development in Asia and Eastern Europe; and the declining supply of skilled machinists.

• End-markets are mainly independent job shops and short-run manufacturing operations of large companies in industries such as aerospace, defense, medical equipment, energy, and transportation.

• Low-cost manufacturing operations are based in Taiwan and China. In 2009, Hurco expanded the China facility to produce machines specifically for the Chinese market. Asia Pacific revenue roughly quadrupled to $2.5 million in fiscal 1Q of 2010.

• Michael Doar (54) has been chairman and CEO since 2001 after spending over a decade as a senior executive at Ingersoll Milling Machine Company.

• Remains cash flow generative despite revenue and profitability pressures. Trailing FCF is $2 million.

• $32 million of cash and no debt. • Shares trade at 1.1x tangible book. EV-to-trailing

twelve months’ revenue is 1.0x. INVESTMENT RISKS & CONCERNS

• “We continue to be significantly impacted by the ongoing global recession” based on CEO comment in March. New orders declined 16% y-y in fiscal 1Q of 2010, with 33% and 23% falls in North America and Europe partly offset by a rise in Asia Pacific.

• Cyclical and competitive machine tool industry. Hurco is highly exposed to changes in demand for capital goods. “Competitive pricing pressures on a global basis” may exacerbate gross margin pressure.

• Products are based on industry-standard computer components. Despite “proprietary” products, Hurco appears vulnerable to competition.

SELECTED OPERATING DATA

FYE October 31 2005 2006 2007 2008 2009 YTD

1/31/10 ∆ revenue 26% 18% 27% 19% -59% -27% ∆ orders 1 19% 26% 29% 7% -62% -16% Revenue ($mn) 126 149 188 224 91 21 % of revenue by type: Machine tools 86% 87% 88% 89% 83% 82% Service fees and other 14% 13% 12% 11% 17% 18% Revenue growth by type: Machine tools 28% 20% 29% 20% -62% -29% Service fees and other 14% 8% 14% 11% -36% -15% % of revenue by geography: Europe 60% 59% 67% 73% 66% 58% North America 34% 34% 28% 22% 28% 30% Asia Pacific 6% 7% 6% 5% 6% 12% Revenue growth by geography: Europe 25% 17% 43% 31% -63% -33% North America 33% 17% 3% -7% -47% -37% Asia Pacific 5% 44% 2% 13% -56% 309% Selected items as % of revenue: Gross profit 34% 36% 38% 37% 28% 19% EBIT 13% 15% 16% 16% -6% -12% Net income 13% 10% 11% 10% -3% -9% D&A 1% 1% 1% 1% 4% 4% Capex 2 2% 2% 2% 2% 4% 2% Return on tangible equity 36% 25% 26% 22% -2% -2% Tangible equity to assets 56% 59% 58% 64% 75% 81% ∆ shares out (avg) 7% 2% 1% 1% 0% 0%

1 We do not list backlog as Hurco typically converts backlog to revenue within 60 days. Backlog is therefore not a useful indicator of future performance. 2 Includes capitalized software development costs.

• Dependent on recovery in Europe, the key market for Hurco’s high-margin vertical machining centers.

• Currency/commodity risks. Strong USD vs. Euro/ Pound and firming iron/steel prices may hurt profit.


P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E KMT 2,630 2,870 1.5x 3.7x 44x 19x ATU 1,510 1,890 1.6x n/m 23x 18x HDNG 110 90 .4x .7x n/m 48x HURC 120 90 1.1x 1.1x n/m 21x

MAJOR HOLDERS CEO Doar <1% | Other insiders 4% | Royce 12% | FMR 10% DFA 7% | Thomson Horstmann 5% | Pier 3% | Kennedy 2%


THE BOTTOM LINE Hurco delivered 20%+ returns on tangible equity from 2005 to 2008, a period of booming industrial production globally. While revenue has fallen off a cliff in the economic crisis, the company has turned free cash flow positive over the last twelve months. Assuming global industrial production recovers from historically low levels, shares are cheap trading near tangible book and EV-to-peak EBIT of 2x (based on FY08 EBIT). With no debt, Hurco should survive even a prolonged downturn.



HURCO – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 1/31/10 10/31/09 7/31/09 4/30/09 1/31/09 10/31/08 7/31/08 4/30/08

Assets Cash 32 29 27 28 30 26 31 26 Short-term investments 1 0 0 1 9 19 2 4 Accounts receivable 12 14 13 16 19 32 30 36 Inventory 54 60 65 65 63 66 75 69 Other current assets 14 15 13 10 8 8 17 15 Total current assets 114 118 118 121 129 151 154 149 PP&E 13 13 14 14 14 14 14 13 Goodwill and other intangibles 7 7 6 6 6 6 6 6 Long-term investments - - - - - - 5 5 Other long-term assets 7 7 7 7 7 7 7 7

Total assets 140 145 145 148 156 177 185 179

Liabilities and Shareholders' Equity Accounts payable 8 8 7 11 15 28 37 37 Short-term debt 1 2 4 2 3 3 - - Other current liabilities 9 10 10 11 12 20 26 27 Total current liabilities 18 21 21 23 30 51 63 63 Long-term debt - - - - - - - - Other long-term liabilities 4 4 3 3 3 3 3 3

Total liabilities 22 24 24 26 33 54 66 66 Preferred stock - - - - - - - - Shareholders' equity 118 120 121 122 123 124 119 113 Shares out (avg) (mn) 6 6 6 6 6 6 6 6 Selected Values and Ratios Cash and investments 34 29 27 29 39 46 38 34 Debt 1 2 4 2 3 3 - - Net cash and investments 33 27 23 28 36 43 38 34 Current assets 114 118 118 121 129 151 154 149 Current liabilities 18 21 21 23 30 51 63 63 Current ratio 6x 6x 6x 5x 4x 3x 2x 2x Acid-test ratio 3x 2x 2x 2x 2x 2x 1x 1x Current assets 114 118 118 121 129 151 154 149 Total liabilities and preferred 22 24 24 26 33 54 66 66 NET NET current assets 92 94 94 95 96 97 88 82 Shareholders' equity 118 120 121 122 123 124 119 113 Goodwill and other intangibles 7 7 6 6 6 6 6 6 Tangible book value 112 114 115 116 117 118 113 107 Tangible book to tangible assets 84% 82% 83% 82% 78% 69% 63% 62% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 76 84 87 83 77 71 71 69 Balance Sheet Trends (sequential) ∆ total assets -4% 0% -2% -5% -12% -4% 3% n/a ∆ shareholders' equity -2% -1% 0% -1% 0% 4% 6% n/a ∆ tangible shareholders' equity -2% -1% -1% -1% -1% 4% 6% n/a ∆ tangible book per share -2% -1% -1% -1% -1% 4% 6% n/a ∆ net cash and investments 22% 15% -16% -22% -16% 14% 11% n/a ∆ net net current assets -2% 0% 0% -2% -1% 11% 7% n/a ∆ accounts receivable -11% 7% -18% -15% -42% 8% -17% n/a ∆ inventory -11% -8% 1% 3% -5% -11% 8% n/a ∆ accounts payable -4% 14% -32% -27% -48% -23% 0% n/a ∆ capital employed -10% -4% 5% 8% 9% -1% 4% n/a



…additional insight into Hurco: EXCERPTS from 2009 LETTER TO SHAREHOLDERS by CHAIRMAN, PRESIDENT AND CEO MICHAEL DOAR

• We achieved record profitability in fiscal 2005, 2006, 2007, and 2008, but all financial metrics for 2009 declined due to the severe global recession. Despite a net loss of $2 million for fiscal 2009 compared to net income of $22.5 million for fiscal 2008, I continue to believe in Hurco’s promising future. I am more convinced than ever in the value of preparation and strategic planning.

• Our strong balance sheet, a cash position of $28.7 million, no outstanding debt, and the ability to borrow, has been advantageous in helping us weather this storm, and positions us to be able to seize future growth opportunities. Our financial position has enabled us to continue with scheduled product releases, technology innovation, and carefully targeted expansion in emerging markets. While this crisis has forced some competitors to adjust product plans and cut R&D, our ability to stay focused on our core competencies means Hurco stands ready to fully participate in the recovery as it occurs.

• As with any crisis, past decisions are tested. In addition to a culture of fiscal conservatism, I am encouraged by the agility of the organization. We were able to quickly implement processes and procedures to minimize the impact of this economic event. We instituted management and employee cost control measures for staffing, salaries and benefits, intensified inventory control, and managed spending where possible in areas of sales and marketing and administration. Much like our target customer, we continually must do more with less. I believe we successfully navigated that requirement during 2009 without sacrificing investment in the company’s future.

• We added four new models to our product lineup this year, including our largest machining center to date, the DCX32; a high performance turning center; and two 5-axis machining centers.

• During the last three years, we have made substantial investment in our 5-axis product lines because these products yield maximum productivity opportunities for our customers. We devoted much of 2009 to the development of numerous productivity features that warrant a new release of our WinMax control software.

• While our customers throughout the world have had to make difficult decisions in 2009, the resiliency and fortitude of the entrepreneur is astounding. While many customers have been hurt by slowing orders, others are busier than ever. Many of the customers who are thriving had the foresight to expand the capabilities of their business by investing in technology, which means they have been able to acquire new customers and gain more business from existing customers…

• Our core competencies include software and product innovation, efficient manufacturing, and targeted expansion in emerging markets. We continue to cultivate relationships in emerging markets, such as South Korea, Indonesia, Vietnam, and South Africa, and I am pleased with the progress we have made in India.

• Our competency in software development has resulted in a number of WinMax features that expand the capabilities of our customers around the world.

• …during the current recession, customers who might have wanted to purchase capital goods found it difficult to obtain financing due to disruptions in the credit markets. Annual sales and service fees for fiscal 2009 were $91.0 million, a decrease of $132.9 million, or 59.4% from fiscal 2008. During fiscal 2009, these conditions had the greatest impact on our European sales region, the primary market for our more expensive, higher performance machines. The European sales region accounted for 66% of sales in fiscal 2009 and 73% in fiscal 2008.

• Even though the company experienced a severe decline in revenue, we were able to minimize losses so we could keep technology development plans on track. I am confident we have done everything we can to prepare for the future—to seize the opportunities and to meet the challenges.

• We will introduce new products and technology at the September International Manufacturing Technology Show that is held every two years in Chicago. We will continue to monitor expenses and work diligently to develop new markets and develop new products that will strengthen our position and expand our customers’ capabilities.

To access the complete letter, visit http://bit.ly/a3zSni


http://bit.ly/a3zSni�


Imation (IMN) – Owned by Artisan, Private, LSV, Third Avenue Oakdale, MN, 651-704-4000

Consumer Cyclical: Audio & Video Equipment www.imation.com


Price: $11.70 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $7.34 - $12.02 Latest Ago Ests P/E FYE 12/31/10 29x Market value: $446 million This quarter $0.12 $0.12 1 P/E FYE 12/31/11 42x Enterprise value: $283 million Next quarter 0.09 0.09 1 P/E FYE 12/30/12 n/a Shares out: 38.2 million FYE 12/31/10 0.40 0.40 1 EV/ LTM revenue 0.2x

Ownership Data FYE 12/31/11 0.28 0.28 1 EV/ LTM EBIT n/m Insider ownership: 2% FYE 12/30/12 n/a n/a n/a P / tangible book 0.8x Insider buys (last six months): 8 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield -22% Institutional ownership: 68% 1/21/10 $0.22 $0.15 LTM pre-tax ROC -13%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 1,111 1,174 1,258 1,585 1,896 1,981 1,650 1,650 514 452 Gross profit 321 288 302 344 346 339 264 264 73 69 Operating income 109 45 103 108 (39) (34) (62) (62) (50) 5 Net income 82 30 88 76 (50) (33) (42) (42) (46) 7 Diluted EPS 2.06 1.03 2.36 2.14 (1.52) (1.01) (1.17) (1.18) (1.24) 0.19 Shares out (avg) 36 35 34 35 37 38 38 38 37 38 Cash from operations 81 128 88 98 88 85 68 68 (2) 43 Capex 96 36 22 16 15 14 11 11 4 2 Free cash flow (15) 92 66 82 73 71 57 57 (6) 41 Cash & investments 411 415 508 253 136 97 163 163 97 163 Total current assets 838 786 888 877 1,119 994 878 878 994 878 Intangible assets 30 35 20 298 427 381 361 361 381 361 Total assets 1,173 1,111 1,146 1,383 1,751 1,540 1,394 1,394 1,540 1,394 Short-term debt 0 0 0 0 10 0 0 0 0 0 Total current liabilities 297 275 245 392 631 509 372 372 509 372 Long-term debt 0 0 0 0 21 0 0 0 0 0 Total liabilities 353 324 291 437 697 595 467 467 595 467 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 820 787 855 946 1,054 945 927 927 945 927 EBIT/capital employed 30% 13% 32% 29% -8% -6% -13% -13% n/m n/m


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BUSINESS OVERVIEW Imation provides removable data storage and other electronic products through owned brands Imation, Memorex and XtremeMac, as well as licensed brand TDK Life on Record. INVESTMENT HIGHLIGHTS

• ~25% market share in optical/magnetic storage. According to Imation, global data storage is a $100+ billion market, of which removable storage is ~$20 billion. Imation is #1 in optical storage and magnetic tape, which represent roughly 25% of the removable storage market (flash storage is 50%+).

• Distributors and retailers are main distribution channels with 51% and 43% of 2009 revenue, respectively. The company’s products are primarily aimed at consumers and small businesses.

• Made $14 million of EBIT in 2009, excluding special items. Imation generated free cash flow of $57 million in 2009 despite lower revenue. 2007-09 FCF of $201 million is nearly 50% of market value.

• Settled all legal disputes with Philips in 2009. Imation paid $20 million to Philips in 2009 and will pay an additional $33 million through 2012.

• Strong balance sheet with cash of $163 million, no debt, and “net net” current assets of $412 million.

• Shares trade at about 80% of tangible book. INVESTMENT RISKS & CONCERNS

• Revenue declined 12% y-y in 4Q09. Although business and consumer spending is recovering, ongoing revenue pressure indicates structural challenges of legacy magnetic and optical business.

• Competitive industry characterized by elastic demand and technological change. Competitors include SanDisk, Fuji, Hitachi, and Sony. Changes in technology (e.g. “cloud computing”) may lead to more competition and product obsolescence.

• M&A strategy may not succeed in transforming Imation into “brand and product management company.” Imation acquired Memorex for $332 million in 2006, and spent another $80 million to buy three more businesses in 2007 and 2008. The enlarged electronic products business lost $7 million of EBIT in 2009 and another $13 million in 2008.

• CEO Russomanno (61) to retire in May. COO and CEO-to-be Mark Lucas (55) wants to “continue this transformation journey,” i.e., cash may be spent on additional value-destroying acquisitions.

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 2009 ∆ revenue 1 7% 26% 38% 4% -17% Δ headcount -18% -1% 9% -30% -23% Revenue ($bn) 1.1 1.4 1.9 2.0 1.6 % of revenue by type: Optical 26% 34% 42% 43% 45% Magnetic 64% 48% 37% 33% 29% Flash 5% 11% 8% 5% 5% Electronic Products 5% 7% 13% 19% 21% Revenue growth by type: Optical n/a 66% 68% 8% -13% Magnetic n/a -6% 7% -8% -26% Flash n/a 154% 7% -37% -9% Electronic Products n/a 98% 154% 56% -10% % of revenue by geography: Americas 2 50% 58% 55% 51% 51% Europe 29% 26% 27% 27% 25% Asia Pacific 21% 16% 17% 22% 24% Selected items as % of revenue: Gross profit 26% 24% 18% 17% 16% R&D 5% 4% 2% 1% 1% EBIT (adjusted) 3 8% 8% 5% 1% 1% D&A 4% 3% 2% 2% 3% Capex 2% 1% 1% 1% 1% Selected operating metrics: Days sales outstanding 46 56 64 63 60 Days of inventory supply 66 90 94 112 75 Headcount 2,100 2,070 2,250 1,570 1,210 Return on tangible equity 11% 10% -8% -6% -7% Tangible equity to assets 72% 67% 53% 48% 52% ∆ shares out (avg) -3% 2% 7% 1% 0%

1 2006 and 2007 revenue growth is primarily due to acquisition of Memorex. 2 Includes all of Electronic Products revenue. 3 Excludes restructuring, litigation, impairment and other special items. MAJOR HOLDERS CEO Russomanno <1% | Other insiders 3% | TDK 20% | Wells Fargo 11% | DFA 8% | Wellington 7% | Artisan 5%

COMPARABLE PUBLIC COMPANY ANALYSIS P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E SNE 35,690 33,260 .4x 1.5x n/m 25x HIT 18,180 39,480 .4x 2.0x n/a n/a SNDK 8,630 7,720 2.2x 2.2x 14x 13x IMN 450 290 .2x .8x 29x 42x


THE BOTTOM LINE Imation has historically held strong market share in magnetic and optical storage. Facing falling revenue in these core areas, management attempted to transform Imation into a “brand and product management company.” This has led to a series of questionable acquisitions, including the 2006 purchase of Memorex for $332 million. On a more positive note, management has returned more than $200 million to shareholders since 2006 and cut costs aggressively (headcount is down nearly 50% since year-end 2007). While the strong balance sheet, brand recognition and large installed base may make it an acquisition target, Imation has a staggered board. The change of CEO in May looks unlikely to bring a change in strategy. With “net net” current assets approximating market value, shares are too cheap to ignore, especially given recently improved profitability.



IMATION – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 163 111 89 103 97 113 118 106 Short-term investments - - - - - - - - Accounts receivable 315 296 324 307 378 355 395 417 Inventory 236 320 333 324 363 365 346 370 Other current assets 164 170 162 143 156 141 112 119 Total current assets 878 898 909 877 994 974 971 1,011 PP&E 110 115 119 121 122 138 163 167 Goodwill and other intangibles 361 365 369 374 381 419 427 423 Long-term investments - - - - - - 20 - Other long-term assets 45 39 50 39 43 37 16 37

Total assets 1,394 1,417 1,446 1,411 1,540 1,567 1,597 1,638


Total liabilities 467 499 542 482 595 548 545 584 Preferred stock - - - - - - - - Shareholders' equity 927 918 905 929 945 1,019 1,052 1,054 Shares out (avg) (mn) 38 38 38 37 37 37 37 38 Selected Values and Ratios Cash and investments 163 111 89 103 97 113 138 106 Debt - - - - - - - - Net cash and investments 163 111 89 103 97 113 138 106 Current assets 878 898 909 877 994 974 971 1,011 Current liabilities 372 415 443 409 509 492 500 539 Current ratio 2x 2x 2x 2x 2x 2x 2x 2x Acid-test ratio 1x 1x 1x 1x 1x 1x 1x 1x Current assets 878 898 909 877 994 974 971 1,011 Total liabilities and preferred 467 499 542 482 595 548 545 584 NET NET current assets 412 399 367 395 399 425 426 428 Shareholders' equity 927 918 905 929 945 1,019 1,052 1,054 Goodwill and other intangibles 361 365 369 374 381 419 427 423 Tangible book value 566 553 535 555 564 600 625 632 Tangible book to tangible assets 55% 53% 50% 54% 49% 52% 53% 52% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 453 487 495 486 511 507 516 534 Balance Sheet Trends (sequential) ∆ total assets -2% -2% 3% -8% -2% -2% -2% n/a ∆ shareholders' equity 1% 1% -3% -2% -7% -3% 0% n/a ∆ tangible shareholders' equity 2% 3% -4% -2% -6% -4% -1% n/a ∆ tangible book per share 2% 3% -4% -2% -6% -4% 0% n/a ∆ net cash and investments 47% 24% -13% 7% -14% -18% 31% n/a ∆ net net current assets 3% 9% -7% -1% -6% 0% -1% n/a ∆ accounts receivable 6% -9% 6% -19% 7% -10% -5% n/a ∆ inventory -26% -4% 3% -11% 0% 5% -6% n/a ∆ accounts payable -8% -7% 2% -22% 0% 3% 0% n/a ∆ capital employed -7% -1% 2% -5% 1% -2% -3% n/a



…additional insight into Imation: EXCERPTS from Q4 2009 EARNINGS CONFERENCE CALL, JANUARY 21, 2010

• We finished the year very strong on a number of fronts. We began to see encouraging signs in terms of revenue, where our rate of decline in our core tape and optical storage businesses moderated from recent quarters. In addition, we saw growth in several important other storage categories, including external and removable hard disk, flash products, as well as Blu-Ray optical media.

• We generated significant earnings improvement from a difficult fourth quarter last year, and though we still have some room to go in terms of our margins, we're encouraged by the stabilization in our business model. Finally, and very importantly, we had a very strong quarter in terms of cash generation, with cash up $50 million in the quarter, as we made significant progress on our working capital initiatives, especially in inventory.

• Our revenues from optical products declined 7% to $194.1 million. Our rate of decline in this business has steadily improved since Q4 2008. We are continuing to benefit from our consolidation strategy, where we've seen momentum with our retail customers. In addition, Blu-Ray revenues were up nicely year-over-year.

• Magnetic product revenues declined 12% to $127.8 million in fourth quarter. This was encouraging after having seen decline rates of about 30% in each of the last four quarters. We saw improvement in demand patterns across the broad spectrum of tape products, from the datacenter to entry level.

• We saw indications of budgets freeing up in the quarter. We are currently assessing to what degree this was a function of longer-term changes in demand patterns versus being impacted by motivations to use up year-end budgets that had been cautiously managed during the year. We believe both factors were present.

• Our flash revenues were up 30%, coming from our international markets, our main area of focus in this category. Europe was particularly strong.

• In our remaining products, our revenues were down 26%, driven by Electronic Products, where we've intentionally lowered our exposure to the higher risk LCD TV category, which was at its peak in the fourth quarter a year ago. Partially offsetting this, we delivered very strong 40% growth in our external and removable hard disk products. Though yet on a relatively small base, we were pleased with these results.

• From a regional segment standpoint, our Americas segment, which excludes Electronic Products, performed well, especially in optical products, which were actually up slightly in Q4. Revenues were also solid in Asia, led by Japan, as well as South Asia. Our revenues were up in all major product categories, aided by positive currency translation. Europe remained our weakest region with 20-plus percent declines in both tape and optical revenues. These declines were somewhat offset by strength in flash products. When you look at our overall 12% decline in revenues, [they] came from about a 7 point impact from lower volumes; a 9.5 point impact from price erosion, offset partially by a 4.5 point positive impact from currency translation.

• Our worldwide employee count ended the quarter at approximately 1,210. That's down about 2% from last quarter, but down over 20% from the prior year. These reductions were driven by both manufacturing restructuring actions and our OpEx restructuring program. In terms of restructuring, our total charges were $3.8 million in the quarter, and were a continuation of our structure realignment we announced at the end of 2008.

• In summary, and as we've stated in previous quarters, we remain fully committed to our corporate transformation. We are encouraged by the response to our new storage consumer electronics and accessory products, while we continue to optimize our existing storage portfolio. With a strong foundation of brands, including Imation, Memorex, TDK Life on Record, and XtremeMac, we continue to execute on our brand and product strategy. As we look back on 2009, we believe we have made very real progress in our transformation. Our focus on operational excellence and financial strength over the past several quarters has established a solid platform as we enter 2010. We are cautiously optimistic for the new year.

To access the complete letter, visit http://bit.ly/cq6W1M


http://bit.ly/cq6W1M�


Insmed (INSM) – Owned by Acadian, BlackRock Richmond, VA, 804-565-3000

Health Care: Biotechnology & Drugs www.insmed.com


Price: $1.15 (as of 4/16/10) Month # of P/E FYE 12/31/09 1x 52-week range: $0.70 - $2.57 Latest Ago Ests P/E FYE 1/0/00 n/a Market value: $150 million This quarter n/a n/a n/a P/E FYE 12/30/00 n/a Enterprise value: $28 million Next quarter n/a n/a n/a P/E FYE 12/30/01 n/a Shares out: 130.2 million FYE 1/0/00 n/a n/a n/a EV/ LTM revenue 2.7x

Ownership Data FYE 12/30/00 n/a n/a n/a EV/ LTM EBIT n/m Insider ownership: 4% FYE 12/30/01 n/a n/a n/a P / tangible book 1.2x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield -31% Institutional ownership: 19% n/a n/a n/a LTM pre-tax ROC n/m

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 0 0 0 1 8 12 10 10 3 3 Gross profit 0 0 0 (1) 7 0 0 0 0 0 Operating income (11) (27) (28) (54) (20) (14) (9) (9) (3) 0 Net income (10) (27) (41) (56) (20) (16) 118 236 (4) 2 Diluted EPS (0.29) (0.69) (0.84) (0.59) (0.17) (0.13) 0.93 0.96 (0.03) 0.02 Shares out (avg) 36 39 49 95 115 122 127 127 122 129 Cash from operations (11) (25) (28) (42) (25) (12) (11) (11) (3) 1 Capex 0 0 0 5 0 0 0 0 0 0 Free cash flow (11) (25) (28) (47) (25) (12) (11) (11) (3) 1 Cash & investments 30 9 19 24 17 2 122 122 2 122 Total current assets 30 10 19 25 17 3 125 125 3 125 Intangible assets 0 0 0 0 0 0 0 0 0 0 Total assets 30 13 23 28 20 5 127 127 5 127 Short-term debt 0 0 0 0 1 2 0 0 2 0 Total current liabilities 3 5 5 10 4 5 3 3 5 3 Long-term debt 0 0 6 3 2 1 0 0 1 0 Total liabilities 4 6 12 14 8 8 3 3 8 3 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 26 7 11 14 12 (3) 124 124 (3) 124 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 Insmed is a biopharmaceutical company undergoing a strategic review process. INVESTMENT HIGHLIGHTS

• Engaged RBC Capital Markets for strategic review in April 2009, following receipt of $127 million of net cash proceeds from the sale of its “follow-on biologics” platform to Merck.

• Considering share repurchases or distribution to shareholders of cash “if we do not find attractive acquisition, licensing or merger opportunities.”

• “Remain committed to protecting our capital for the full duration of the strategic review” based on chairman’s comment in March. Insmed had EBIT of $0.3 million in 4Q09 (benefited from one-time grant revenue of $0.5 million). 15 employees remain at its Richmond, VA, headquarters, which is leased at a $0.4 million annual cash cost through 2016.

• $172 million of NOLs at yearend 2009. NOLs, which are reserved against, expire starting in 2010.

• Net cash is ~85% of market value. Insmed had cash/investments of $124 million and virtually no debt at yearend ‘09. Total liabilities are <$3 million.


• Value-destructive use of cash. Given their limited stock ownership, insiders may feel compelled to do even a bad deal as long as it enables the company to continue operating and lets executives draw salaries.

• Hired a chief scientific officer in March. As this is a newly-created position, it may indicate the company is progressing down the path of making an acquisition or entering into licensing deals.

• Chairman, CEO and president Allan resigned in June 2009 “due to a health condition.” Allan held these roles since Insmed was founded in 1999. Mel Sharoky, M.D., (58), who has been a director since 2001, became chairman. A new CEO is not to be hired “pending completion of the strategic review.”

• IPLEX product is only source of revenue. The proprietary IPLEX protein platform is being developed for a number of conditions, including Amyotrophic Lateral Sclerosis, also known as Lou Gehrig’s disease, and Retinopathy of Prematurity.

• IPLEX product inventory should run out by mid-2011. As the company does not have its own manufacturing (and outsourcing would only lead to production in “at least 12 to 18 months”), Insmed decided to conserve IPLEX for treatment of existing patients only and does “not intend to initiate further clinical trials” pending the strategic review result.

SELECTED ANNUAL OPERATING DATA 1 FYE December 31 2005 2006 2007 2008 2009 ∆ revenue -4% 682% 640% 54% -11% ∆ employees, period-end 55% 85% -40% 3% -85% Selected income statement data ($mn): Revenue 0 1 8 12 10 Gross profit 0 -0 7 12 10 R&D 22 21 19 21 9 SG&A 6 26 8 5 10 EBIT -27 -47 -20 -14 -9 Net income 2 -41 -56 -20 -16 118 Employees, period-end 85 157 94 97 15 ∆ shares out (avg) 24% 96% 20% 6% 4%

1 Historical data is not representative of the company’s current business. Please refer to table below for recent quarterly financials. 2 2009 net income includes $127 million gain on sale of the “follow-on biologics” platform to Merck that closed on March 31, 2009. SELECTED QUARTERLY OPERATING DATA 1

FYE December 31 2Q09 3Q09 4Q09 Selected financials ($mn): Revenue 2 3.0 2.5 2.5 Gross profit 3.0 2.5 2.5 R&D 1.5 1.1 0.7 SG&A 2.9 2.1 1.4 EBIT -1.3 -0.8 0.3 Net income -1.6 -0.2 2.3 D&A 0.4 0.1 0.0 Capex 0.0 0.0 0.0 Selected items as % of revenue: Gross profit 100% 100% 100% R&D 48% 46% 29% SG&A 95% 85% 57% EBIT -43% -31% 14% Net income -53% -6% 93% D&A 13% 2% 2% Capex 0% 0% 0%

1 Quarterly data starting in April 2009 are more representative of the company’s current business as they exclude contribution from “follow-on biologics” business sold to Merck with the completion date of March 31, 2009. 2 More than 99% of 3Q09 revenue is cost recovery charges related to the IPLEX expanded access program. 4Q09 revenue includes $0.5 million of IPLEX grant revenue for the previously completed Phase II Myotonic Muscular Dystrophy trial (and therefore should not repeat going forward).

• Potential dilution from warrants, options and other securities which can convert into over six million shares as of February 2010 (5% of existing shares).

MAJOR HOLDERS Chairman Sharoky <1% | Ex-CEO Allan 2% | Other insiders 2% | Blackrock 5% | Acadian 3% | Vanguard 2% RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Biotech company Insmed has been in a year-long strategic review process. While it is difficult to assess intrinsic value of the company’s technology platform, it will cease to deliver revenue by mid-2011. This is because Insmed will run out of product inventory and has no manufacturing capability. With shares trading at a premium to net cash, risk-reward is not enticing.



INSMED – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 13 27 36 128 2 2 1 5 Short-term investments 109 95 87 - 0 4 8 7 Accounts receivable 2 0 0 0 0 0 0 0 Inventory - - - - - - - - Other current assets 0 0 0 - 0 0 0 0 Total current assets 125 123 123 128 3 6 10 13 PP&E - - - - - - - - Goodwill and other intangibles - - - - - - - - Long-term investments 2 2 2 2 - - 0 0 Other long-term assets - - - 0 2 2 2 2

Total assets 127 125 125 130 5 8 12 15

Liabilities and Shareholders' Equity Accounts payable 0 1 1 3 1 1 1 1 Short-term debt 0 0 1 2 2 2 1 1 Other current liabilities 2 3 3 9 2 2 3 2 Total current liabilities 3 4 5 13 5 4 6 4 Long-term debt - - - - 1 1 1 2 Other long-term liabilities - - - - 2 2 2 2

Total liabilities 3 4 5 13 8 7 9 8 Preferred stock - - - - - - - - Shareholders' equity 124 121 121 116 (3) 1 3 7 Shares out (avg) (mn) 129 129 123 123 122 122 122 122 Selected Values and Ratios Cash and investments 124 124 125 130 2 6 10 12 Debt 0 0 1 2 2 2 3 3 Net cash and investments 124 124 124 128 0 3 7 9 Current assets 125 123 123 128 3 6 10 13 Current liabilities 3 4 5 13 5 4 6 4 Current ratio 45x 34x 27x 10x 1x 1x 2x 3x Acid-test ratio 44x 34x 27x 10x 1x 1x 2x 3x Current assets 125 123 123 128 3 6 10 13 Total liabilities and preferred 3 4 5 13 8 7 9 8 NET NET current assets 122 119 119 114 (5) (1) 0 5 Shareholders' equity 124 121 121 116 (3) 1 3 7 Goodwill and other intangibles - - - - - - - - Tangible book value 124 121 121 116 (3) 1 3 7 Tangible book to tangible assets 98% 97% 96% 90% -58% 9% 23% 47% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed (0) (3) (4) (12) (3) (3) (4) (2) Balance Sheet Trends (sequential) ∆ total assets 2% -1% -3% 2604% -41% -33% -19% n/a ∆ shareholders' equity 2% 0% 4% -4257% -500% -74% -61% n/a ∆ tangible shareholders' equity 2% 0% 4% -4257% -500% -74% -61% n/a ∆ tangible book per share 3% -5% 4% -4248% -500% -74% -61% n/a ∆ net cash and investments 0% -1% -3% 42533% -91% -51% -24% n/a ∆ net net current assets 2% 0% 4% -2386% 257% -450% -91% n/a ∆ accounts receivable 667% 50% 100% 0% 0% 0% -67% n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable -50% -14% -74% 108% 18% 0% 38% n/a ∆ capital employed -96% -30% -68% 271% 19% -37% 95% n/a



…additional insight into Insmed: CASH FLOWS, 2007-2009

($ in thousands) Years Ended December 31, 2009 2008 2007 Operating activities Net income (loss) $118,350 ($15,667) ($19,962) Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 707 1,043 406 Stock based compensation expense 2,542 850 521 Gain on sale of asset, net (127,474) - - Stock options issued for services - 143 38 Realized loss on investments - 500 -

Changes in operating assets and liabilities: Income tax receivable (2,023) - - Accounts receivable (123) 128 (9) Inventory - - 576 Prepaid expenses (85) 170 (157) Accounts payable (965) 373 (6,282) Accrued project costs & other 214 433 (612) Payroll liabilities 127 (178) (671) Deferred rent (36) 53 61 Deferred revenue 96 57 245 Restricted stock unit liability (113) 113 - Asset retirement obligation (2,217) - 591 Interest payable (12) (10) -

Net cash used in operating activities ($11,012) ($11,992) ($25,255) Investing activities

Cash received from asset sale $127,474 - - Change in certificate of deposits 10 - - Decreases in short-term investments - 12,673 9,066 Purchases of short-term investments (108,744) - (500)

Net cash provided by investing activities $18,740 $12,673 $8,566 Financing activities

Proceeds from issuance of common stock $580 - $16,964 Repayment of convertible notes (1,246) (2,211) - Warrants converted into shares 3,491 - - Other 42 121 1,158

Net cash provided by (used in) financing activities $2,867 ($2,090) $18,122

Increase (decrease) in cash and cash equivalents $10,595 ($1,409) $1,433 Cash and cash equivalents at beginning of period 2,145 3,554 2,121

Cash and cash equivalents at end of period 12,740 2,145 3,554

Supplemental information Cash paid for interest 82 234 279 Cash paid for taxes 2,795 - -



Linktone (LTON) – Owned by MNC, Merry Asia Shanghai, BE, China, 86-10-510-8234

Technology: Computer Services www.linktone.com


Price: $1.69 (as of 4/16/10) Month # of P/E FYE 12/31/08 14x 52-week range: $1.40 - $3.21 Latest Ago Ests P/E FYE 1/0/00 n/a Market value: $71 million This quarter n/a n/a n/a P/E FYE 12/30/00 n/a Enterprise value: -$26 million Next quarter n/a n/a n/a P/E FYE 12/30/01 n/a Shares out: 42.1 million FYE 1/0/00 n/a n/a n/a EV/ LTM revenue n/m

Ownership Data FYE 12/30/00 n/a n/a n/a EV/ LTM EBIT n/m Insider ownership: 63% FYE 12/30/01 n/a n/a n/a P / tangible book 0.6x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield 1% Institutional ownership: 6% n/a n/a n/a LTM pre-tax ROC -2%

Operating Performance and Financial Position ($ 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 12/31/08 9/30/09 9/30/08 9/30/09 Revenue 4 16 48 71 76 48 65 64 16 13 Gross profit 3 10 33 44 48 28 31 24 9 5 Operating income (1) 4 11 11 6 (9) 3 (0) 1 (0) Net income (1) 2 10 12 7 (16) (17) 3 (2) 1 Diluted EPS (0.07) 0.16 0.41 0.45 0.27 (0.31) 0.12 0.05 0.03 0.01 Shares out (avg) 10 10 22 26 25 24 37 39 42 42 Cash from operations (0) 3 10 10 14 (10) (3) n/a n/a n/a Capex 0 0 2 2 6 0 0 n/a n/a n/a Free cash flow (0) 3 7 7 8 (10) (3) n/a n/a n/a Cash & investments 3 6 78 78 53 42 96 97 104 97 Total current assets 4 9 95 102 70 67 127 126 127 126 Intangible assets 0 0 0 12 19 16 15 15 15 15 Total assets 4 10 98 119 98 90 143 142 143 142 Short-term debt 0 0 0 0 0 0 0 0 0 0 Total current liabilities 1 2 10 19 9 14 15 11 17 11 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 1 2 11 19 9 14 15 11 17 11 Preferred stock 7 7 0 0 0 0 0 0 0 0 Common equity (4) 1 88 100 89 77 128 130 127 130 EBIT/capital employed n/m >100% >100% >100% 56% -67% 20% -2% n/m n/m


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BUSINESS OVERVIEW Linktone provides entertainment-oriented telecom value-added services to mobile phone users in China. INVESTMENT HIGHLIGHTS

• Business model is based on revenue-sharing with China's telecommunications operators, including China Mobile. Mobile phone users are charged fees for Linktone services such as short-messaging, ring-back and games. Operators collect fees and remit Linktone’s revenue share on a monthly basis.

• Seeks to profit from growing demand for mobile data services in China by offering a range of content and applications. Linktone partners with content owners such as Sony and Time Warner to differentiate its services from competitors.

• Reported non-GAAP net income of $2.4 million in 2009 after divestment of loss-making advertising business in 2008. The non-GAAP figure excludes stock-based compensation and impairments.

• $99 million of cash/investments and no debt at yearend 2009, based on unaudited financials. Pro-forma cash is down by estimated $13 million since, based on acquisitions of Chinese game developer Letang and Singapore-based InnoForm in 2010.

• Net cash represents ~120% of recent market value after adjusting for M&A-related cash outflow.


• Gross margin declined from 48% in 2008 to 35% in 2009 due to, among others, “stricter policies by the Chinese telecommunication network operators related to imbedding services into mobile phones.”

• Stagnant multi-year revenue trend despite apparent growth opportunities. For 1Q10, gross revenue guidance is $14-15 million, compared to $14.8 million in 1Q09 and $15.4 million in 4Q09.

• Operators are developing their own telecom value-added services. For example, China Mobile introduced its own integrated music service platform in 2006, by working directly with music companies to provide downloads of various songs.

• Derives 70%+ of revenue from China Mobile. Contracts are typically 1-2 years and non-exclusive.

• Controlled by Indonesian media conglomerate MNC, which owns 57%. Chairman and CEO Tanoesoedibjo (44) is also CEO of MNC. Conflicts of interest may put other shareholders at risk.

• Legal risks due to corporate structure include contracts with affiliated Chinese entities, which may prevent operational control and carry tax risks.

SELECTED OPERATING DATA 1 FYE December 31 2005 2006 2007 2008 2009 ∆ revenue 47% 8% -37% 34% -7% ∆ employees, period-end 59% -24% -39% -21% n/a Revenue ($mn) 2 70 76 48 65 60 % of revenue by segment: Value-added services 98% 98% 97% 97% n/a Casual games 2% 2% 3% 3% n/a Gross margin by segment: Value-added services 62% 62% 56% 46% n/a Casual games 87% 84% 95% 96% n/a Total gross margin 62% 62% 58% 48% 35% % of gross revenue by major service category: Audio-related services 3 23% 27% 45% 42% n/a 2G services 4 63% 56% 40% 41% n/a 2.5G services 5 11% 15% 12% 9% n/a Revenue growth by major service category: Audio-related services 364% 27% 5% 25% n/a 2G services 16% -4% -56% 40% n/a 2.5G services 29% 41% -49% 3% n/a Selected items as % of revenue: R&D 9% 10% 11% 5% 6% EBIT 16% 8% -18% 7% -3% Net income 18% 9% -16% 7% -1% D&A 3% 5% 6% 3% n/a Capex 3% 1% 0% 0% n/a Employees, period-end 825 624 380 299 n/a ∆ shares out (avg) 14% -1% -6% 56% 12%

1 Based on continuing operations and U.S. GAAP. Certain 2009 data is not available as the company had not filed form 20-F as of April 19, 2010. 2 Represents net revenue (stated after sales tax). 3 Includes interactive voice response services and ring-back tones. 4 Includes ringtones, icons and screen savers, SMS messaging for TV programs, games, horoscopes, news updates and other services. 5 Includes multimedia services such as animated cartoons and screensavers, comic strips, and WAP-based ringtones, screensavers, games and dating services, as well as advanced Java games. COMPARABLE PUBLIC COMPANY ANALYSIS

P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E NTES 4,540 3,510 6.4x 4.3x 13x 11x SNDA 3,030 1,120 1.5x 2.1x 14x 12x SINA 2,280 1,560 4.4x 2.0x 27x 20x KONG 280 140 1.1x 1.9x 20x 11x LTON 70 -30 n/m .6x n/a n/a

MAJOR HOLDERS Insiders <1% | MNC International 57%* | Merry Asia 5% * MNC International is part of Indonesian-listed media company MNC. RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Indonesian media conglomerate MNC had ambitious plans for Linktone when it acquired a majority stake in 2008. Instead of growing services in China and building on Linktone’s advertising business, revenue at the former has stagnated while the ad business had to be divested because of losses. Despite these setbacks, Linktone turned profitable in 2009 and the company has a strong balance sheet, with net cash exceeding market value. Shares are cheap, but value creation is in MNC hands.



LINKTONE – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08 12/31/07

Assets Cash 79 86 87 82 92 101 38 39 Short-term investments 18 14 15 14 13 5 2 2 Accounts receivable 27 27 23 30 21 22 28 24 Inventory - - - - - - - - Other current assets 1 1 2 2 1 2 2 2 Total current assets 126 128 125 127 127 128 69 67 PP&E 1 1 1 1 1 1 2 2 Goodwill and other intangibles 15 15 15 15 15 16 16 16 Long-term investments - - - - - - - - Other long-term assets 1 1 1 1 1 1 5 5

Total assets 142 144 141 143 143 146 92 90

Liabilities and Shareholders' Equity Accounts payable 7 10 9 11 12 13 12 9 Short-term debt - - - - - - - - Other current liabilities 4 5 4 4 5 5 6 4 Total current liabilities 11 15 13 15 17 18 18 14 Long-term debt - - - - - - - - Other long-term liabilities - - - - - 0 0 0

Total liabilities 11 15 13 15 17 18 18 14 Preferred stock - - - - - - - - Shareholders' equity 130 130 129 128 127 128 74 77 Shares out (avg) (mn) 42 42 42 42 42 41 24 24 Selected Values and Ratios Cash and investments 97 100 101 96 104 105 40 42 Debt - - - - - - - - Net cash and investments 97 100 101 96 104 105 40 42 Current assets 126 128 125 127 127 128 69 67 Current liabilities 11 15 13 15 17 18 18 14 Current ratio 11x 9x 10x 8x 8x 7x 4x 5x Acid-test ratio 11x 9x 10x 8x 8x 7x 4x 5x Current assets 126 128 125 127 127 128 69 67 Total liabilities and preferred 11 15 13 15 17 18 18 14 NET NET current assets 114 114 113 112 110 111 51 53 Shareholders' equity 130 130 129 128 127 128 74 77 Goodwill and other intangibles 15 15 15 15 15 16 16 16 Tangible book value 116 115 114 113 112 113 58 60 Tangible book to tangible assets 91% 89% 90% 88% 87% 86% 77% 82% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 18 15 12 17 7 7 14 14 Balance Sheet Trends (sequential) ∆ total assets -2% 2% -1% 0% -2% 59% 2% n/a ∆ shareholders' equity 1% 1% 0% 1% -1% 73% -3% n/a ∆ tangible shareholders' equity 1% 1% 0% 1% -1% 93% -3% n/a ∆ tangible book per share 1% 1% 0% 1% -2% 12% -4% n/a ∆ net cash and investments -3% -1% 5% -8% -1% 165% -5% n/a ∆ net net current assets 1% 1% 1% 2% 0% 115% -3% n/a ∆ accounts receivable -1% 20% -23% 38% -1% -22% 17% n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable -24% 14% -20% -8% -10% 7% 30% n/a ∆ capital employed 21% 18% -26% 143% 6% -53% -1% n/a



…additional insight into Linktone: INCOME STATEMENT SUMMARY, 2008-2009

Three Months Ended Twelve Months Ended

($ in thousands) Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,

2008 2009 2009 2008 2009 Gross revenues 19,402 13,829 15,358 67,026 62,217 Sales tax (769) (493) (622) (2,520) (2,303) Net revenues 18,633 13,336 14,736 64,506 59,913 Cost of services (9,927) (8,186) (9,490) (33,838) (38,941) Gross profit 8,706 5,150 5,246 30,668 20,972 Operating expenses: Product development (910) (932) (786) (3,177) (3,317) Selling and marketing (3,876) (3,151) (1,947) (13,131) (9,318) Other general and administrative (2,574) (1,553) (2,204) (9,901) (8,221) Reversal of provision for impairment/(Provision for impairment) - 395 (2,463) - (2,068) Total operating expenses (7,360) (5,240) (7,401) (26,209) (22,924) Income/(Loss) from operations 1,346 (90) (2,155) 4,459 (1,952) Interest income 737 691 446 1,729 1,615 Other income / (loss) (39) 19 78 385 431 Other-than-temporary impairment loss on investments (1,477) - - (1,477) - Income/(loss) before tax 567 621 (1,631) 5,095 94 Income tax benefit/(expense) 514 (27) (250) (786) (579) Net income/(loss) from continuing operations 1,081 594 (1,881) 4,309 (486) Net income/(loss) from discontinued operations (466) 140 4 (20,807) 597 Net income/(loss) 616 734 (1,878) (16,498) 111 Other comprehensive income/(loss): 162 (79) 442 2,646 291 Comprehensive income/(loss) 778 655 (1,436) (13,852) 402

Diluted income/(loss) per ADS: Continuing operations 0.02 0.02 (0.04) 0.12 (0.01) Discontinued operations (0.01) 0.00 0.00 (0.56) 0.01 Total net income/(loss) 0.01 0.02 (0.04) (0.44) 0.00 Weighted average ordinary shares: Basic 420,636 420,681 420,756 374,286 420,678 Diluted 420,712 421,543 420,756 374,847 420,678 Weighted average ADSs: Basic 42,064 42,068 42,076 37,429 42,068 Diluted 42,071 42,154 42,076 37,485 42,068

NON-GAAP RECONCILIATION, 2008-2009

Three Months Ended Twelve Months Ended

($ in thousands) Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,

2008 2009 2009 2008 2009 Net income/(loss) 616 734 (1,878) (16,498) 111 Stock based compensation expense 176 52 62 728 267 Provision /(Reversal of provision) for impairment - (395) 2,463 6,588 2,068 Other-than-temporary impairment loss on investments 1,477 - - 1,477 - Non-GAAP net income/(loss) 2,268 391 648 (7,705) 2,446

Non-GAAP diluted income/(loss) per ADS 0.05 0.01 0.02 (0.21) 0.06 Number of ADSs used in diluted per-share calculation 42,071 42,154 42,076 37,485 42,068



Novatel Wireless (NVTL) – Owned by Royce, Kestrel San Diego, CA, 858-320-8800

Technology: Computer Services, Member of S&P SmallCap 600 www.novatelwireless.com


Price: $6.77 (as of 4/16/10) Month # of P/E FYE 12/31/09 52x 52-week range: $6.37 - $13.70 Latest Ago Ests P/E FYE 12/31/10 n/m Market value: $211 million This quarter -$0.12 -$0.12 8 P/E FYE 12/31/11 75x Enterprise value: $84 million Next quarter -0.07 -0.08 7 P/E FYE 12/30/12 n/a Shares out: 31.2 million FYE 12/31/10 -0.19 -0.20 9 EV/ LTM revenue 0.2x

Ownership Data FYE 12/31/11 0.09 0.09 8 EV/ LTM EBIT 30x Insider ownership: 2% FYE 12/30/12 n/a n/a n/a P / tangible book 1.0x Insider buys (last six months): 0 LT growth 16.0% 16.0% 2 Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield 3% Institutional ownership: 86% 2/25/10 $0.03 $0.07 LTM pre-tax ROC 6%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 34 104 162 218 430 321 337 337 65 89 Gross profit 6 34 46 55 131 69 88 88 8 23 Operating income (8) 13 11 (7) 53 (6) 3 3 (6) 1 Net income (17) 14 11 0 39 (1) 4 4 (3) 1 Diluted EPS (2.14) 0.48 0.37 0.01 1.21 (0.04) 0.13 0.12 (0.10) 0.03 Shares out (avg) 8 24 29 30 31 31 31 31 30 31 Cash from operations (0) 6 13 9 50 26 37 37 3 3 Capex 1 4 7 9 16 10 7 7 3 2 Free cash flow (1) 1 5 0 34 16 30 30 0 0 Cash & investments 4 53 84 83 153 136 128 128 136 128 Total current assets 18 79 150 165 264 217 200 200 217 200 Intangible assets 5 5 4 2 2 2 2 2 2 2 Total assets 24 116 176 192 297 261 283 283 261 283 Short-term debt 0 1 9 0 0 0 0 0 0 0 Total current liabilities 15 16 55 56 63 44 51 51 44 51 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 15 16 55 57 79 63 71 71 63 71 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 9 100 121 134 218 198 211 211 198 211 EBIT/capital employed n/m >100% 42% -17% 95% -9% 6% 6% n/m n/m


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BUSINESS OVERVIEW Novatel Wireless provides mobile broadband access products primarily to wireless network operators and OEMs. INVESTMENT HIGHLIGHTS

• Core products include modems providing mobile subscribers with high-speed access to the Internet and enterprise networks. Core products, including mini cards, represented 68% of 4Q09 revenue.

• New “MiFi” mobile hotspot product accounted for 32% of 4Q09 revenue. MiFi, which enables mobile connectivity for five users simultaneously from devices such as computers, gaming consoles, music players and cameras, was launched in 2009.

• Completed “first data transmissions by any company” on 4G technology including LTE and WiMax. Current products work on third generation (3G) networks such as Evolution-Data Optimized (EV-DO) and High Speed Packet Access (HSPA).

• Owns 34 U.S. patents and has 60 patent applications pending. However, existing patents expire “at various times between 2010 and 2016.”

• Outsources manufacturing to LG Innotek and Inventec Appliances. Novatel operates a capital-light business model (53% of staff work in R&D).

• Grew revenue 36% y-y in 4Q09 driven by demand for core USB modems and MiFi products, which have launched with 17 network operators globally.

• $5.56 per share of cash/investments and no debt. • Recent share price implies EV-to-2009 revenue

of 0.12x and EV-to-2009 gross profit of 0.48x. INVESTMENT RISKS & CONCERNS

• Changes in wireless data technology. Novatel derived 86% of 2009 revenue from products based on EV-DO technology. HSPA-based revenue declined 67% y-y due to “competitive pressure.”

• Competition includes wireless modem providers (Huawei, ZTE, Option, Sierra Wireless, Kyocera, Pantech, UTStarcom), handset/infrastructure makers (Motorola, Nokia, Siemens and Sony-Ericsson) and chipset providers (Qualcomm and Ericsson).

• Guiding for revenue of $70 million in 1Q10 (flat y-y, down 21% q-q) due to “lower average selling prices” on core products and “lower seasonal sales volumes.” Based on 24% gross margin, GAAP and non-GAAP loss per share guidance is $0.13/$0.08.

MAJOR HOLDERS CEO Leparulo 2% | Other insiders 2% | Wellington 9% | BlackRock 8% | Royce 7% | Vanguard 5% | Kestrel 4%

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 2009 ∆ revenue 56% 35% 97% -25% 5% ∆ employees, period-end 54% 37% 28% 2% 15% Revenue ($mn) 162 218 430 321 337 Selected items as % of revenue: Gross profit 29% 25% 30% 21% 26% R&D 13% 14% 9% 11% 13% EBIT 7% -3% 12% -2% 1% Net income 7% 0% 9% 0% 1% D&A 3% 4% 3% 4% 4% Capex 4% 4% 4% 3% 2% % of revenue by underlying product technology: HSPA 1 60% 34% 27% 42% 13% EV-DO 2 39% 66% 72% 57% 86% Other 1% 0% 0% 0% 1% Revenue growth by underlying product technology: HSPA 20% -25% 60% 15% -67% EV-DO 256% 128% 116% -41% 58% % of revenue by geography: U.S. 42% 63% 75% 79% 82% Other 58% 37% 25% 21% 18% Revenue growth by geography: U.S. 173% 102% 135% -21% 9% Other 19% -14% 33% -37% -11% Employees, period-end 172 235 301 307 352 Free cash flow ($mn) 3 5 -0 34 16 30 Return on tangible equity 10% 0% 22% -1% 2% Tangible equity to assets 75% 69% 72% 74% 75% ∆ shares out (avg) 22% 2% 6% -1% -2%

1 High Speed Packet Access. Includes Universal Mobile Telecommunications System (UMTS) technology prior to transition to HSPA during 2006. 2 Evolution-Data Optimized. EV-DO products are primarily sold in the North American market. Historical EV-DO figures include CDMA technology. 3 Defined as net cash from operations less capital expenditure.

• Concentration. Verizon Wireless, Hon Hai, Sprint PCS accounted for 38%, 21%, 11% of ’09 revenue.

• Filed shelf registration last September. The company may sell $125 million of securities. Novatel recently announced its entry into the market for machine-to-machine (M2M) applications.


P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E SWIR 270 140 .3x 2.0x n/a n/a PWAV 210 420 .7x >9.9x 17x 11x NVTL 210 80 .2x 1.0x n/m 75x


THE BOTTOM LINE Novatel Wireless shares appear cheap despite questions regarding the sustainability of its wireless technology advantage and some concern regarding high-ROIC reinvestment opportunities. High-growth wireless broadband markets provide a tailwind that can support revenue increases for many years. Profitability and free cash flow generation has been volatile and likely to remain so. However, with cash and investments representing 80% of recent market capitalization, valuation is undemanding.



NOVATEL WIRELESS – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 100 106 88 52 78 79 83 99 Short-term investments 28 26 38 67 59 58 44 42 Accounts receivable 36 49 59 57 40 44 67 69 Inventory 25 26 19 27 23 30 35 32 Other current assets 11 11 14 17 17 19 17 14 Total current assets 200 219 217 220 217 230 245 256 PP&E 15 17 18 19 20 22 22 22 Goodwill and other intangibles 2 1 2 1 2 2 1 1 Long-term investments 48 43 20 15 7 7 9 5 Other long-term assets 18 15 15 14 15 10 10 10

Total assets 283 294 271 270 261 271 287 295

Liabilities and Shareholders' Equity Accounts payable 28 45 29 34 23 28 38 38 Short-term debt - - - - - - - - Other current liabilities 23 25 24 20 21 24 26 23 Total current liabilities 51 69 53 54 44 52 64 61 Long-term debt 0 0 0 0 0 0 0 0 Other long-term liabilities 21 17 19 19 19 19 19 19

Total liabilities 71 87 73 73 63 72 83 80 Preferred stock - - - - - - - - Shareholders' equity 211 208 198 196 198 199 204 215 Shares out (avg) (mn) 31 31 31 30 30 30 31 33 Selected Values and Ratios Cash and investments 176 175 146 133 143 143 135 146 Debt 0 0 0 0 0 0 0 0 Net cash and investments 176 175 146 133 143 143 135 146 Current assets 200 219 217 220 217 230 245 256 Current liabilities 51 69 53 54 44 52 64 61 Current ratio 4x 3x 4x 4x 5x 4x 4x 4x Acid-test ratio 3x 3x 3x 3x 4x 3x 3x 3x Current assets 200 219 217 220 217 230 245 256 Total liabilities and preferred 71 87 73 73 63 72 83 80 NET NET current assets 129 132 144 147 154 159 162 176 Shareholders' equity 211 208 198 196 198 199 204 215 Goodwill and other intangibles 2 1 2 1 2 2 1 1 Tangible book value 210 206 197 195 196 198 202 213 Tangible book to tangible assets 75% 70% 73% 73% 76% 73% 71% 73% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 37 34 56 67 57 64 77 77 Balance Sheet Trends (sequential) ∆ total assets -4% 9% 1% 3% -4% -6% -3% n/a ∆ shareholders' equity 2% 5% 1% -1% -1% -2% -5% n/a ∆ tangible shareholders' equity 2% 5% 1% -1% -1% -2% -5% n/a ∆ tangible book per share 1% 4% 0% -1% -1% 1% -2% n/a ∆ net cash and investments 1% 20% 10% -7% 0% 6% -7% n/a ∆ net net current assets -2% -8% -2% -5% -3% -2% -8% n/a ∆ accounts receivable -25% -17% 3% 43% -9% -34% -3% n/a ∆ inventory -5% 39% -31% 17% -24% -14% 9% n/a ∆ accounts payable -38% 52% -14% 47% -18% -26% 0% n/a ∆ capital employed 8% -39% -17% 17% -10% -17% 0% n/a



…additional insight into Novatel Wireless: SLIDES FROM COMPANY PRESENTATION, MARCH 2010



Rewards Network (DINE) – Owned by Elkhorn, WC, RenTech Chicago, IL, 312-521-6767

Services: Advertising, Member of S&P SmallCap 600 www.rewardsnetwork.com


Price: $14.33 (as of 4/16/10) Month # of P/E FYE 12/31/09 24x 52-week range: $8.01 - $15.53 Latest Ago Ests P/E FYE 12/31/10 14x Market value: $125 million This quarter $0.22 n/a 1 P/E FYE 12/31/11 13x Enterprise value: $112 million Next quarter 0.24 n/a 1 P/E FYE 12/30/12 n/a Shares out: 8.7 million FYE 12/31/10 0.99 n/a 1 EV/ LTM revenue 0.5x

Ownership Data FYE 12/31/11 1.13 n/a 1 EV/ LTM EBIT 12x Insider ownership: 5% FYE 12/30/12 n/a n/a n/a P / tangible book 1.6x Insider buys (last six months): 0 LT growth 15.0% 15.0% 1 Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield 9% Institutional ownership: 41% 3/11/10 n/a n/a LTM pre-tax ROC 13%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 354 352 290 255 227 246 214 214 58 52 Gross profit 93 93 77 84 66 76 70 70 18 19 Operating income 29 25 3 (23) 11 9 10 10 1 4 Net income 16 15 (1) (15) 7 5 5 5 0 2 Diluted EPS 1.82 1.50 (0.07) (1.70) 0.77 0.53 0.59 0.60 0.03 0.25 Shares out (avg) 8 8 9 9 9 9 9 9 9 9 Cash from operations 13 (12) 17 57 (28) 32 29 29 6 4 Capex 6 5 3 5 8 4 3 3 1 1 Free cash flow 7 (17) 15 52 (36) 28 26 26 5 4 Cash & investments 20 15 32 85 36 9 13 13 9 13 Total current assets 156 179 172 182 155 104 86 86 104 86 Intangible assets 10 10 8 8 8 8 8 8 8 8 Total assets 187 201 191 207 177 124 103 103 124 103 Short-term debt 0 0 0 0 55 0 0 0 0 0 Total current liabilities 41 36 25 37 81 25 18 18 25 18 Long-term debt 70 70 70 70 0 0 0 0 0 0 Total liabilities 114 108 97 122 84 25 18 18 25 18 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 74 92 94 85 93 99 85 85 99 85 EBIT/capital employed 27% 21% 2% -23% 12% 9% 13% 13% n/m n/m


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BUSINESS OVERVIEW Rewards Network provides financing and marketing services to restaurants in North America. It operates in two segments: Marketing credits: Restaurants sell to the company dining credits for cash at a discount to menu prices. The company earns revenue only if members dine at restaurants by redeeming offers received from the company and paying by a credit or debit card registered with the company. Marketing services: The company acts only as a “broker” by marketing restaurants to its members. In return, it receives a share of the member spend at participating restaurants. INVESTMENT HIGHLIGHTS

• Provides 3.3 million members with incentives to dine at 10,000+ participating restaurants. Members benefit from offers such as airline miles and cash back for every dollar they spend on meals. Restaurants get incremental customers, upfront cash for future dining credits and marketing support.

• Benefits from network effect. Network size is a competitive advantage which grows as additional members and restaurants join. Majority of signed restaurants are in New York City, Dallas, Chicago, Atlanta, South Florida and San Francisco Bay area.

• Generated $85 million free cash flow in 2005-09, representing nearly 70% of recent market value.

• Returned $22 million of cash to shareholders in 2009 by paying a $17 million special cash dividend and repurchasing $5 million worth of shares.

• $13 million of cash and no debt at yearend 2009. • Shares trade at 1.6x tangible book. Tangible book

includes $57 million of net dining credits. INVESTMENT RISKS & CONCERNS

• Stagnant network with deteriorating economics? Members and restaurants are flat with 2005 levels. Revenue as a percentage of member dining dollars is down from 29% in 2005 to 23% in 2009.

• Restaurant financing leads to “credit risk.” The marketing credits segment is exposed to risk from restaurant failures and members not redeeming offers at restaurants. Business growth absorbs cash.

• 59% of 2009 revenue derived from members enrolled through airline frequent flyer programs. 1.9 million member accounts depend on contracts with seven major airlines. The company is subject to minimum rewards currency purchase obligations.

MAJOR HOLDERS CEO Blake 3% | Other insiders 4% | Sam Zell 26% | Elkhorn 7% | DFA 6% | BlackRock 6% | Bernard Osher 6%

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 2009 ∆ restaurants, period-end -5% -13% 11% 4% 4% ∆ member accounts, period-end -9% -4% -9% 5% 5% ∆ qualified transactions -8% -5% -11% 12% 8% ∆ avg transaction amount -3% 0% 0% -5% 0% ∆ qualified transaction amount 1 -11% -5% -11% 6% 7% ∆ revenue -22% -12% -9% 2% -8% ∆ employees, period-end -7% 7% -7% -1% 1% Revenue ($mn) 2 144 127 115 118 109 % of revenue by type: Marketing credits 84% 81% 78% 79% 68% Marketing services 14% 17% 21% 20% 31% Membership fees 2% 2% 1% 1% 1% Revenue growth by type: Marketing credits -21% -15% -13% 4% -21% Marketing services -25% 6% 9% -1% 42% Selected items as % of revenue: Gross profit 3 54% 66% 57% 64% 65% EBIT 2% -18% 9% 7% 9% Net income 0% -12% 6% 4% 5% D&A 3% 3% 4% 5% 5% Capex 2% 4% 7% 4% 3% Period-end restaurants: Marketing credits 7,955 6,079 6,488 6,293 4,961 Marketing services 2,002 2,548 3,054 3,595 5,279 Active member accounts (mn) 3.4 3.3 3.0 3.1 3.3 Qualified transaction amount ($mn): Marketing credits 380 330 272 290 241 Marketing services 105 131 139 147 229 Rewards Network share of qualified trans. amount (=gross amounts billed, $mn): Marketing credits 266 231 201 221 180 Marketing services 21 22 24 24 34 Redemption of dining credits ($mn): 4 Marketing credits 146 129 112 128 106 Marketing services 0 0 0 0 0 Rewards Network revenue ($mn): Marketing credits 120 103 90 93 74 Marketing services 21 22 24 24 34 Rewards Network revenue as a % of qualified transaction amount: Marketing credits 32% 31% 33% 32% 31% Marketing services 20% 17% 17% 16% 15% Ending gross dining credits ($mn) 142 89 116 96 69 % loss allowance, period-end 15% 14% 18% 21% 17% Period loss provision 5 8% 2% 5% 5% 5% ∆ shares out (avg) 5% 2% 1% 1% -2%

1 Represents dollar value of member dining at participating restaurants when a benefit is offered (=qualified transactions x average dollar transaction amount). 2 Stated net of the redemption of dining credits. 3 Stated after member benefits, provision for losses, and processing fees. 4 Dining credits, at cost, redeemed by members at restaurants when a benefit is offered. No credits are bought by the company in marketing services business. 5 Stated as a percentage of gross amounts billed in marketing credits segment. RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Rewards Network has built a community of members and participating restaurants that represent one of the largest dining rewards programs in North America. Positives include high barriers to entry, cash flow generative operations and a debt-free balance sheet. Our main concern is that the network’s growth has stagnated while its economics have suffered, especially in the marketing services business. As we don’t see how this will change, we do not find the valuation sufficiently compelling.



REWARDS NETWORK – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 13 27 21 16 9 19 46 33 Short-term investments - - - - - - - - Accounts receivable 66 65 66 71 83 89 98 107 Inventory - - - - - - - - Other current assets 7 8 9 10 12 12 12 12 Total current assets 86 99 96 97 104 119 156 152 PP&E 8 9 9 10 11 11 11 12 Goodwill and other intangibles 8 8 8 8 8 8 8 8 Long-term investments - - - - - - - - Other long-term assets 1 0 0 1 1 1 1 0

Total assets 103 116 114 115 124 139 176 172

Liabilities and Shareholders' Equity Accounts payable 12 11 12 11 14 15 13 11 Short-term debt - - - - - 15 53 53 Other current liabilities 6 5 5 5 11 11 13 13 Total current liabilities 18 16 16 16 25 40 79 77 Long-term debt - - - - - - - - Other long-term liabilities - 0 0 - - - - -

Total liabilities 18 17 16 16 25 40 79 77 Preferred stock - - - - - - - - Shareholders' equity 85 100 97 100 99 99 97 95 Shares out (avg) (mn) 9 9 9 9 9 9 9 9 Selected Values and Ratios Cash and investments 13 27 21 16 9 19 46 33 Debt - - - - - 15 53 53 Net cash and investments 13 27 21 16 9 4 (7) (20) Current assets 86 99 96 97 104 119 156 152 Current liabilities 18 16 16 16 25 40 79 77 Current ratio 5x 6x 6x 6x 4x 3x 2x 2x Acid-test ratio 4x 6x 5x 6x 4x 3x 2x 2x Current assets 86 99 96 97 104 119 156 152 Total liabilities and preferred 18 17 16 16 25 40 79 77 NET NET current assets 68 83 80 82 79 79 77 75 Shareholders' equity 85 100 97 100 99 99 97 95 Goodwill and other intangibles 8 8 8 8 8 8 8 8 Tangible book value 77 92 89 92 91 91 89 87 Tangible book to tangible assets 81% 85% 84% 85% 79% 69% 53% 53% Net debt to tangible equity <0% <0% <0% <0% <0% <0% 0 0 Capital employed 63 65 68 75 81 86 96 106 Balance Sheet Trends (sequential) ∆ total assets -12% 2% -1% -7% -11% -21% 2% n/a ∆ shareholders' equity -15% 3% -2% 0% 1% 2% 3% n/a ∆ tangible shareholders' equity -16% 3% -3% 0% 1% 2% 3% n/a ∆ tangible book per share -16% 5% 0% 0% 0% 2% 3% n/a ∆ net cash and investments -53% 28% 30% 80% 143% -150% -63% n/a ∆ net net current assets -18% 4% -2% 3% 1% 2% 3% n/a ∆ accounts receivable 2% -2% -7% -15% -6% -10% -8% n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable 5% -4% 8% -22% -8% 16% 14% n/a ∆ capital employed -2% -5% -9% -8% -6% -10% -10% n/a



…additional insight into Rewards Network: SELECTED MARKETING PROGRAM DATA, 2007-2009

2009 2008 2007

Marketing Marketing Member Total Marketing Marketing Member Total Marketing Marketing Member Total

Credits Services Fees Credits Services Fees Credits Services Fees Program Program Program Program Program Program

Restaurant count as of December 31, 2009 and 2008, respectively

4,961 5,279 10,240 6,293 3,595 9,888 6,488 3,054 9,542

Number of qualified transactions (1)

5,440 4,905 10,345 6,419 3,178 9,597 5,704 2,900 8,604

Average transaction amount (1)

$44 $47 $45 $45 $46 $46 $48 $48 $48

Qualified transaction amount (1)

$240,967 $228,919 $469,886 $289,979 $147,192 $437,171 $271,879 $139,172 $411,051

Rewards Network percentage share of qualified transaction amount (1)(2)

74.5% 14.7% 45.4% 76.3% 16.1% 56.0% 74.0% 17.2% 54.8%

Rewards Network share of qualified transaction amount and membership fees (1)

$179,571 $33,713 $1,092 $214,376 $221,155 $23,758 $1,271 $246,184 $201,133 $23,974 $1,712 $226,819

Redemption of dining credits (1) 105,824 — — 105,824 128,271 — — 128,271 111,617 — — 111,617

Total revenue $73,747 $33,713 $1,092 $108,552 $92,884 $23,758 $1,271 $117,913 $89,516 $23,974 $1,712 $115,202

Revenue as a percentage of qualified transaction amount (1) (2)

30.6% 14.7% 22.9% 3200.0% 1610.0% 2670.0% 32.9% 17.2% 27.6%

Member benefits $11,131 $9,742 — $20,873 $14,538 $6,228 — $20,766 $18,589 $9,297 — $27,886 Bonus rewards $1,869 $1,839 — $3,708 $3,256 $1,662 — $4,918 $2,347 $1,206 — $3,553 Partner commissions $2,395 $2,068 — $4,463 $2,663 $1,313 — $3,976 $3,759 $1,671 — $5,430

Total member benefits

$15,395 $13,649 — $29,044 $20,457 $9,203 — $29,660 $24,695 $12,174 — $36,869

Provision for losses $8,066 — — $8,066 $11,614 — — $11,614 $10,896 — — $10,896 Processing fees $537 $509 — $1,046 $750 $409 — $1,159 $794 $418 — $1,212

Gross profit $49,749 $19,555 $1,092 $70,396 $60,063 $14,146 $1,271 $75,480 $53,131 $11,382 $1,712 $66,225

(1) Supplemental operating and statistical data. (2) Total percentages exclude membership fees. Source: Company data.



Silicon Image (SIMG) – Owned by Tocqueville, RenTech, Harvey Sunnyvale, CA, 408-616-4000

Technology: Semiconductors www.siliconimage.com


Price: $3.56 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $2.06 - $3.74 Latest Ago Ests P/E FYE 12/31/10 n/m Market value: $269 million This quarter -$0.07 -$0.07 2 P/E FYE 12/31/11 71x Enterprise value: $118 million Next quarter -0.03 -0.03 2 P/E FYE 12/30/12 n/a Shares out: 75.4 million FYE 12/31/10 -0.07 -0.07 2 EV/ LTM revenue 0.8x

Ownership Data FYE 12/31/11 0.05 0.05 1 EV/ LTM EBIT n/m Insider ownership: 1% FYE 12/30/12 n/a n/a n/a P / tangible book 1.6x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield -99% Institutional ownership: 60% 2/4/10 -$0.07 -$0.06 LTM pre-tax ROC -492%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 104 173 212 295 321 274 151 151 59 36 Gross profit 56 105 129 174 180 161 81 81 35 19 Operating income (13) (1) 52 47 28 (8) (117) (117) (8) (51) Net income (13) (0) 50 43 19 10 (129) (129) 5 (67) Diluted EPS (0.18) 0.00 0.59 0.49 0.22 0.13 (1.72) (1.72) 0.07 (0.89) Shares out (avg) 69 75 79 83 86 76 75 75 74 75 Cash from operations (3) 36 56 46 67 26 (30) (30) (2) (1) Capex 5 6 6 14 32 7 4 4 1 1 Free cash flow (8) 30 49 33 35 19 (34) (34) (3) (3) Cash & investments 37 94 152 251 250 185 151 151 185 151 Total current assets 63 130 202 337 309 226 208 208 226 208 Intangible assets 16 15 14 13 59 52 0 0 52 0 Total assets 88 155 233 380 413 327 225 225 327 225 Short-term debt 2 1 0 0 0 0 0 0 0 0 Total current liabilities 25 33 50 75 85 40 44 44 40 44 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 25 33 57 75 99 48 54 54 48 54 Preferred stock 0 0 0 0 0 0 0 0 0 0 Common equity 62 122 177 305 314 279 172 172 279 172 EBIT/capital employed -136% -8% >100% >100% >100% -87% -491% -492% n/m n/m


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BUSINESS OVERVIEW Silicon Image provides semiconductors and licenses technology for high-definition (HD) digital content delivery. INVESTMENT HIGHLIGHTS

• Fabless chip company focused on HD content delivery applications. Products include integrated circuits based on technology standards such as Digital Visual Interface (DVI) and HD Multimedia Interface (HDMI) which the company helped create.

• High-margin licensing business contributed $28 million of revenue in 2009. HDMI is a key licensing technology with 898 manufacturing licensees as of yearend 2009. The company has 140+ U.S. patents (expire in 2025 or later).

• Spent $340 million on R&D over last five years, representing nearly 3x enterprise value. Areas of expertise are high-speed interconnect, storage, and audio-visual architecture, as well as circuit design, flat panel displays, and logic design/verification.

• $151 million of cash/investments and no debt. • EV-to-2009 revenue is about 0.85x.


• Technological change. For example, rival standard DisplayPort is challenging DVI as the default standard for digital video interconnect technology.

• Competes against much larger companies including Intel, Analog Devices and National Semiconductor. In-house semiconductor operations of large consumer electronics OEMs such as Sony, Panasonic and Toshiba also represent competition.

• To remain loss-making in first quarter of 2010. Management is guiding for 1Q10 revenue of $30-32 million (down 26-21% y-y) and a gross margin of 54-55%. Operating cost guidance is ~$26 million on a GAAP and $23 million on a non-GAAP basis.

• Turnover. Since 2007, resignations have included the CEO, CFO, COO and the VPs of sales and marketing. Camillo Martino (47), ex-National Semi, Zoran, Cornice and SAI, became CEO in January.

• Top five customers, including distributors, were 44%, 55%, 58% of revenue in 2009, 2008 and 2007.


P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E TXN 33,010 30,090 2.9x 3.9x 13x 12x BRCM 17,420 15,490 3.4x 7.2x 18x 17x ADI 9,100 7,300 3.4x 3.6x 15x 14x SIMG 270 120 .8x 1.6x n/m 71x

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 2009 ∆ revenue 23% 39% 9% -14% -45% ∆ employees, period-end 14% 15% 44% -4% -14% Revenue ($mn) 212 295 321 274 151 % of revenue by type: Product 91% 86% 85% 85% 81% Licensing 1 9% 14% 15% 15% 19% Revenue growth by type: Product 27% 30% 9% -14% -47% Licensing -11% 131% 8% -14% -32% Gross margin by type: Product n/a 52% 50% 52% 44% Licensing n/a 97% 89% 97% 96% Total gross margin 61% 59% 56% 59% 54% % of revenue by end-market: Consumer electronics 56% 66% 77% 73% 86% PCs 24% 20% 13% 16% 6% Storage products 20% 14% 10% 11% 8% Revenue growth by end-market: Consumer electronics 40% 64% 27% -19% -35% PCs 21% 16% -31% 9% -80% Storage products -8% -4% -22% -6% -59% % of revenue by geography: 2 Japan 22% 35% 35% 24% 27% Taiwan 25% 20% 17% 20% 25% U.S. 26% 21% 20% 17% 21% Europe 6% 6% 8% 12% 12% Other 22% 17% 20% 28% 15% Revenue growth by geography: Japan 33% 123% 10% -42% -38% Taiwan 25% 12% -10% 2% -30% U.S. 13% 16% 2% -30% -32% Europe n/m 51% 40% 27% -45% Selected items as % of revenue: R&D 21% 22% 24% 31% 45% EBIT 3 24% 16% 9% -1% -31% Net income 23% 14% 6% 4% -86% D&A 3% 3% 4% 6% 9% Capex 4 3% 5% 10% 3% 3% Employees, period-end 5 384 442 635 610 526 Return on tangible equity 37% 19% 7% 4% -65% Tangible equity to assets 75% 78% 76% 77% 80% ∆ shares out (avg) 6% 4% 3% -12% -1%

1 Licensing revenue is primarily derived from the consumer electronics market. 2 Based on bill to location. The majority of PP&E is located in the U.S. 3 Excludes restructuring charges and impairment of goodwill/intangible assets. 4 Includes payments for intellectual property. 5 As part of restructuring, 121 employees will be terminated in first half of 2010. MAJOR HOLDERS CEO Martino 1% | Other insiders 3% | FMR 9% | Tocqueville 7% | RenTech 6% | BlackRock 5% | GS 3% RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE As a supplier of integrated circuits and technology for high-definition content delivery, Silicon Image has benefited from the adoption of digital television and proliferation of mobile devices. While recent demand weakness should prove temporary in the cyclical consumer electronics industry, technological change represents an ongoing risk. Positives include a history of cash-generation, a strong balance sheet and a sizable licensing business. Shares appear undervalued against these positives.



SILICON IMAGE – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 30 28 19 21 95 72 107 126 Short-term investments 121 125 144 148 90 128 79 69 Accounts receivable 22 25 19 18 6 24 29 27 Inventory 8 13 9 12 13 17 18 14 Other current assets 28 24 26 28 22 15 17 16 Total current assets 208 214 217 227 226 255 249 252 PP&E 14 15 17 18 19 22 24 25 Goodwill and other intangibles 0 29 30 31 52 54 55 57 Long-term investments - - - - - - - - Other long-term assets 3 23 22 21 29 26 24 22

Total assets 225 281 285 296 327 356 351 355


Total liabilities 54 48 44 46 48 88 94 99 Preferred stock - - - - - - - - Shareholders' equity 172 233 241 250 279 268 258 257 Shares out (avg) (mn) 75 75 75 74 74 74 73 81 Selected Values and Ratios Cash and investments 151 153 163 169 185 201 185 194 Debt - - - - - - - - Net cash and investments 151 153 163 169 185 201 185 194 Current assets 208 214 217 227 226 255 249 252 Current liabilities 44 39 36 38 40 77 83 88 Current ratio 5x 6x 6x 6x 6x 3x 3x 3x Acid-test ratio 4x 5x 5x 5x 5x 3x 3x 3x Current assets 208 214 217 227 226 255 249 252 Total liabilities and preferred 54 48 44 46 48 88 94 99 NET NET current assets 154 167 172 180 178 167 155 153 Shareholders' equity 172 233 241 250 279 268 258 257 Goodwill and other intangibles 0 29 30 31 52 54 55 57 Tangible book value 171 205 211 219 227 215 202 200 Tangible book to tangible assets 76% 81% 83% 83% 83% 71% 68% 67% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 27 38 35 37 21 (1) 4 (6) Balance Sheet Trends (sequential) ∆ total assets -20% -1% -4% -9% -8% 1% -1% n/a ∆ shareholders' equity -27% -3% -4% -10% 4% 4% 0% n/a ∆ tangible shareholders' equity -16% -3% -4% -4% 6% 6% 1% n/a ∆ tangible book per share -17% -3% -4% -4% 5% 5% 12% n/a ∆ net cash and investments -2% -6% -4% -9% -8% 8% -5% n/a ∆ net net current assets -8% -3% -4% 1% 6% 8% 1% n/a ∆ accounts receivable -11% 28% 9% 197% -75% -17% 6% n/a ∆ inventory -38% 36% -25% -5% -22% -7% 26% n/a ∆ accounts payable -26% 31% -3% 47% -77% 48% 18% n/a ∆ capital employed -28% 8% -6% 81% -2378% -121% -173% n/a



…additional insight into Silicon Image: SLIDES FROM COMPANY PRESENTATION, MARCH 2010



The9 Limited (NCTY) – Owned by QVT, RenTech, Sansar Shanghai, China, 86-21-321-4567

Technology: Software & Programming www.the9.com/en


Price: $6.95 (as of 4/16/10) Month # of P/E FYE 12/31/08 11x 52-week range: $6.28 - $12.04 Latest Ago Ests P/E FYE 12/31/09 n/m Market value: $175 million This quarter -$0.53 -$0.53 6 P/E FYE 12/31/10 n/m Enterprise value: -$85 million Next quarter -0.45 -0.47 2 P/E FYE 12/31/11 77x Shares out: 25.1 million FYE 12/31/09 -1.57 -1.57 7 EV/ LTM revenue n/m

Ownership Data FYE 12/31/10 -1.48 -1.47 3 EV/ LTM EBIT n/m Insider ownership: 55% FYE 12/31/11 0.09 0.09 2 P / tangible book 0.6x Insider buys (last six months): 0 LT growth -76.8% -76.8% 1 Greenblatt Criteria Insider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield 66% Institutional ownership: 13% 11/23/09 -$0.43 -$0.46 LTM pre-tax ROC n/m

Operating Performance and Financial Position ($ 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 12/31/08 9/30/09 9/30/08 9/30/09 Revenue 1 2 5 68 144 188 251 168 60 4 Gross profit 0 1 4 33 68 85 105 42 24 (1) Operating income (3) (1) (1) 9 40 35 20 (56) 9 (17) Net income (4) 5 2 11 46 35 14 (52) 12 (11) Diluted EPS (0.43) 0.28 0.13 0.43 1.99 1.28 0.65 (1.80) 0.43 (0.36) Shares out (avg) 10 10 10 24 24 27 28 27 28 25 Cash from operations 1 9 5 27 88 90 102 96 2 11 Capex 0 0 8 37 18 72 18 10 4 (54) Free cash flow 0 8 (3) (10) 69 19 84 87 (2) 65 Cash & investments 1 9 116 72 137 325 325 259 328 259 Total current assets 2 14 125 90 159 354 365 278 364 278 Intangible assets 0 0 5 47 40 57 36 29 50 29 Total assets 3 23 150 178 238 476 478 369 518 369 Short-term debt 2 3 0 0 0 0 0 0 0 0 Total current liabilities 7 20 22 40 42 65 80 46 82 46 Long-term debt 0 0 0 0 0 0 0 0 0 0 Total liabilities 7 20 24 40 42 64 80 46 82 46 Preferred stock 5 5 0 0 0 0 0 0 0 0 Common equity (9) (2) 127 138 196 411 398 323 436 323 EBIT/capital employed n/m n/m n/m >100% >100% >100% >100% n/m n/m n/m


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BUSINESS OVERVIEW The9 develops and operates online games in China. The company lost the vast majority of revenue in June 2009, when its four-year license to operate World of Warcraft (WoW) was not renewed by Activision Blizzard (ATVI). INVESTMENT HIGHLIGHTS

• Operates six games. The9 owns World of Fighter (MMORPG* launched in 1/10) and JiuZhouZhanJi (Web game; 4/09). Licensed games: MMORPG’s SUN (5/07), GE (11/07) and Atlantica (6/09), and casual game EA Sports FIFA Online 2 (5/09).

• Pipeline includes three owned games (one casual game and two MMORPGs; all in development stage) and three licensed games (all in beta testing).

• Owns valuable Pass9 distribution system in China. Pass9 is a proprietary online membership management and payment system. It may be of value to gaming companies seeking market entry. ATVI-rival Electronic Arts (ERTS) owns 13%.

• Owns 3.0 million preferred shares of Korean game developer G10. This represents under 20% of the equity on an as-converted basis. The9 carries the stake at cost of $40 million as of yearend 2009.

• Chairman and CEO Zhu (43) co-founded the company in 1999 and is the largest holder at 28%.

• $245 million of cash and no debt as of yearend 2009. Financials are audited by a Shanghai-based member of Deloitte Touche Tohmatsu. Pro-forma cash is down by ~$20 million based on purchase of U.S. game developer Red5 in January.

• Net cash is ~130% of market value after adjusting for Red5-related cash outflow. The9 had only $46 million of total liabilities at yearend 2009, including $30 million of game refunds and deferred revenue.


• Negative $25 million of EBIT in 4Q09 on $3 million of revenue.** The loss of WoW revenue has turned The9 into an expensive “R&D lab” with lots of overhead but very little income generation.

• Wants to “devote substantial resources” to own R&D to “develop our proprietary games.” This strategy is high-risk for investors as management is intent on growing into its costly infrastructure by betting cash on hit-or-miss new game development.

• Cash balance could quickly evaporate based on current cash burn and potential for more M&A following the acquisition of Red5 in January.

* Massively multiplayer online role-playing game. ** EBIT excludes $7 million of impairments.

SELECTED OPERATING DATA 1 FYE December 31 2005 2006 2007 2008 2009 ∆ revenue 1239% 112% 30% 34% -56% ∆ employees, period-end 50% 13% 41% 19% -38% Revenue (RMB, bn) 2 0.5 1.0 1.3 1.7 0.8 Selected items as % of revenue: Gross profit 48% 47% 45% 42% 6% R&D 9% 3% 3% 4% 15% EBIT 13% 27% 18% 8% -63% Net income 16% 32% 19% 6% -53% D&A 3 16% 17% 17% 17% 23% Capex 4 55% 13% 38% 7% 6% % of gross revenue by segment: Online game services 95% 99% 99% 100% 99% Other 5% 1% 1% 0% 1% Employees, period-end 854 964 1,361 1,626 1,010 ∆ shares out (avg) 135% 1% 12% 1% -8%

1 Figures reflect contribution from World of Warcraft licensing agreement from June 2005 to June 2009. This agreement, which represented 91% and 88% of revenue in 2008 and 2009, respectively, expired on June 7, 2009. 2 Represents net revenue (after sales taxes). The RMB/U.S. dollar exchange rate is approximately RMB6.83 to US$1.00 as of April 20, 2010. 3 Includes amortization of land use rights and intangible assets. 4 Includes purchase of land use rights and intangible assets

• Competitive, hit-driven online gaming industry.

There are currently over 100 online game operators in China based on The9 data. Entry barriers are low.

• Potential for further growth challenges as SUN and GE license deals expire in May and November.

• Treated as a PFIC for U.S. tax purposes. COMPARABLE PUBLIC COMPANY ANALYSIS

P / This Next MV EV EV / Tang. FY FY ($mn) ($mn) Rev. Book P/E P/E NTES 4,540 3,510 6.4x 4.3x 13x 11x SNDA 3,030 1,120 1.5x 2.1x 14x 12x GA 1,800 1,080 5.7x 2.1x 14x 12x PWRD 1,710 1,480 4.7x 5.4x 9x 8x CYOU 1,700 1,470 5.5x 7.8x 10x 8x NCTY 170 -90 n/m .6x n/m n/m

MAJOR HOLDERS CEO Zhu 28%* | Other insiders 1% | Dunn/Bosma 18%* | Electronic Arts 13% | QVT 6% | Currie 6% | RenTech 2% * CEO Zhu and Dunn/Bosma have a voting agreement. RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE Following loss of the World of Warcraft license in mid-2009, The9 is trying to grow into legacy (and costly) overheads by monetizing own games and by pursuing M&A. This is a high-risk strategy as the company is burning cash and the success of new games is dependent on changing consumer preferences in the hit-driven and competitive gaming industry. While shares trade at a discount to net cash, cash is dwindling (~$15 million per quarter). Reward potential appears speculative.



THE9 LIMITED – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08 12/31/07

Assets Cash 259 275 302 315 271 209 261 325 Short-term investments - - 1 10 57 94 48 - Accounts receivable 0 0 1 1 4 4 3 4 Inventory - - - - - - - - Other current assets 18 19 20 39 33 30 37 25 Total current assets 278 295 324 365 364 337 349 354 PP&E 15 16 22 29 45 47 50 51 Goodwill and other intangibles 29 28 33 36 50 53 54 57 Long-term investments 47 48 47 47 51 51 10 7 Other long-term assets - - - - 9 8 7 7

Total assets 369 387 426 478 518 495 470 476

Liabilities and Shareholders' Equity Accounts payable 12 21 13 15 16 15 12 14 Short-term debt - - - - - - - - Other current liabilities 34 34 66 65 66 61 58 50 Total current liabilities 46 55 79 80 82 76 70 65 Long-term debt - - - - - - - - Other long-term liabilities 0 - 0 - - - - -

Total liabilities 46 55 79 80 82 76 70 65 Preferred stock - - - - - - - - Shareholders' equity 323 332 346 398 436 420 401 411 Shares out (avg) (mn) 25 25 26 27 28 28 28 29 Selected Values and Ratios Cash and investments 307 323 350 372 379 354 319 332 Debt - - - - - - - - Net cash and investments 307 323 350 372 379 354 319 332 Current assets 278 295 324 365 364 337 349 354 Current liabilities 46 55 79 80 82 76 70 65 Current ratio 6x 5x 4x 5x 4x 4x 5x 5x Acid-test ratio 6x 5x 4x 4x 4x 4x 4x 5x Current assets 278 295 324 365 364 337 349 354 Total liabilities and preferred 46 55 79 80 82 76 70 65 NET NET current assets 232 240 244 286 282 262 280 289 Shareholders' equity 323 332 346 398 436 420 401 411 Goodwill and other intangibles 29 28 33 36 50 53 54 57 Tangible book value 294 304 313 362 386 367 347 354 Tangible book to tangible assets 87% 85% 80% 82% 82% 83% 83% 85% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed (12) (20) (37) (10) (1) 5 21 15 Balance Sheet Trends (sequential) ∆ total assets -5% -9% -11% -8% 5% 5% -1% n/a ∆ shareholders' equity -3% -4% -13% -9% 4% 5% -2% n/a ∆ tangible shareholders' equity -3% -3% -14% -6% 5% 6% -2% n/a ∆ tangible book per share -3% 1% -10% -6% 5% 7% 3% n/a ∆ net cash and investments -5% -8% -6% -2% 7% 11% -4% n/a ∆ net net current assets -3% -2% -15% 1% 8% -7% -3% n/a ∆ accounts receivable 0% -50% -54% -65% 6% 21% -26% n/a ∆ inventory n/m n/m n/m n/m n/m n/m n/m n/a ∆ accounts payable -42% 60% -11% -7% 6% 26% -18% n/a ∆ capital employed -38% -47% 256% 1056% -118% -76% 35% n/a



…additional insight into The9 Limited: OWNED OR LICENSED GAMES IN CHINA

Game Developer/Licensor Description Status SUN Webzen (WZEN) 3D MMORPG Commercially launched in China in May 2007 GE Hanbitsoft and IMC Games 3D MMORPG Commercially launched in China in November 2007 JiuZhouZhanJi The9 Web game Commercially launched in China in April 2009 EA Sports™ FIFA Online 2 EA Swiss Sàrl Casual soccer game Commercially launched in China in May 2009 Atlantica Ndoors Corporation 3D MMORPG Commercially launched in China in June 2009 World of Fighter The9 2D MMORPG Commercially launched in China in January 2010 Audition 2 G10 Entertainment Casual dancing game Preparing for beta testing Kingdom Heroes 2 Online USERJOY Technology 3D MMORPG In closed beta testing ShenXianZhuan Hangzhou Fire Rain 2.5D MMORPG Preparing for beta testing Miracles: Ultimate X The9 3D MMORPG In development Tiny Tribe The9 Casual game In development Monster of War The9 Casual game In development

OPERATING CASH FLOWS, 2007-2009

(RMB or $ in millions) 2007 2008 2009 2009

RMB RMB RMB $ Cash flows from operating activities: Net income (loss) 240.9 96.2 (409.9) (60.1) Adjustments for:

Deferred taxes (29.1) 34.5 (7.4) (1.1) Gain on disposal of property, equipment and software (0.0) (0.0) (0.5) (0.1) Impairment of intangible assets 18.7 73.2 27.5 4.0 Impairment of goodwill — — 30.2 4.4 Impairment loss on investments 0.6 25.9 22.4 3.3 Impairment on equipment — 8.9 21.2 3.1 Depreciation and amortization 122.7 207.8 123.0 18.0 Amortization of land use right 1.4 1.9 1.9 0.3 Amortization of intangible assets 87.9 88.9 49.5 7.2 Share of loss in equity investments, net of taxes 5.7 2.2 2.6 0.4 Allowance for doubtful accounts — 20.7 0.9 0.1 Provision for prepaid royalties and deferred costs — 3.9 160.1 23.5 Provision for advances to suppliers and prepayments — 55.2 — — Provision for prepayments and other current assets — 8.1 — — Exchange loss(gain) 51.0 31.7 (1.4) (0.2) Stock based compensation expense 46.7 52.0 71.2 10.4 Recognition of noncontrolling interest — 0.7 3.1 0.5 Change in accounts receivable (12.0) (7.0) 6.5 1.0 Change in due from related party — (0.6) (0.5) (0.1) Change in advances to suppliers 0.9 (1.2) (42.7) (6.3) Change in prepayments and other current assets (14.8) (38.8) 32.1 4.7 Change in prepaid royalties (44.4) (70.8) 17.2 2.5 Change in deferred costs (14.4) (8.0) 15.8 2.3 Change in long-term deposits (0.5) 0.5 (0.6) (0.1) Change in accounts payable 39.0 (14.4) 5.5 0.8 Change in due to related parties (0.3) (0.1) — — Change in income tax payable 2.3 (2.3) (0.0) (0.0) Change in other taxes payable 31.6 44.2 (93.1) (13.6) Change in advances from customers 30.1 25.3 (104.6) (15.3) Change in deferred revenue 55.6 34.7 (41.1) (6.0) Change in other payables and accruals (3.2) 19.4 5.1 0.7

Net cash provided by (used in) operating activities 616.6 692.6 (106.1) (15.5)



TravelCenters of America (TA) – Owned by Leucadia, RenTech Westlake, OH, 440-808-9100

Services: Retail (Specialty Non-Apparel) www.tatravelcenters.com


Price: $4.81 (as of 4/16/10) Month # of P/E FYE 12/31/09 n/m 52-week range: $1.80 - $8.75 Latest Ago Ests P/E FYE 12/31/10 n/m Market value: $83 million This quarter -$1.25 -$1.25 1 P/E FYE 12/31/11 n/a Enterprise value: $29 million Next quarter -0.73 -0.73 1 P/E FYE 12/30/12 n/a Shares out: 17.3 million FYE 12/31/10 -4.25 -4.25 1 EV/ LTM revenue 0.0x

Ownership Data FYE 12/31/11 n/a n/a n/a EV/ LTM EBIT n/m Insider ownership: 16% FYE 12/30/12 n/a n/a n/a P / tangible book 0.3x Insider buys (last six months): 0 LT growth n/a n/a n/a Greenblatt Criteria Insider sales (last six months): 1 EPS Surprise Actual Estimate LTM EBIT yield -268% Institutional ownership: 18% 2/24/10 -$2.65 -$1.70 LTM pre-tax ROC -16%

Operating Performance and Financial Position ($ 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 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09 Revenue 2,176 2,678 4,075 4,784 6,166 7,658 4,700 4,700 1,315 1,323 Gross profit 501 531 625 660 812 980 878 878 249 202 Operating income 60 69 47 96 (165) (35) (77) (77) 3 (41) Net income 9 15 (2) 31 (123) (40) (90) (90) 1 (45) Diluted EPS 1.26 2.04 (0.30) 4.09 (10.57) (2.65) (5.38) (5.37) 0.08 (2.65) Shares out (avg) 7 7 7 7 12 15 17 17 16 17 Cash from operations 77 97 81 108 (75) 80 53 53 21 (15) Capex 44 123 85 93 145 83 38 38 12 14 Free cash flow 33 (26) (4) 15 (220) (4) 15 15 9 (30) Cash & investments 46 48 55 420 146 156 156 146 156 Total current assets 199 230 267 746 409 411 411 409 411 Intangible assets 49 52 52 40 35 29 29 35 29 Total assets 898 940 996 1,263 890 885 885 890 885 Short-term debt 0 7 7 263 0 0 0 0 0 Total current liabilities 151 194 200 568 201 220 220 201 220 Long-term debt 683 676 669 106 104 101 101 104 101 Total liabilities 858 892 906 824 488 571 571 488 571 Preferred stock 0 0 0 0 0 0 0 0 0 Common equity 40 47 89 439 402 315 315 402 315 EBIT/capital employed 11% 8% 15% -30% -8% -16% -16% n/m n/m


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BUSINESS OVERVIEW TravelCenters operates and franchises truck stops primarily along the U.S. interstate highway system. The TA- and Petro-branded truck stops offer diesel and gasoline fuel, restaurants, truck repair facilities, stores and other services. The company was spun off from Hospitality Properties Trust (HPT) in a 2007 IPO. It acquired competitor Petro in 2007. INVESTMENT HIGHLIGHTS

• #3 truck stop chain in the U.S. with 188 company-operated and 45 franchised sites at yearend 2009. Privately-held Pilot and Flying J are the #1 and #2 companies in the 6,000+ U.S. truck stop industry with over 300 and 270 locations, respectively.

• Capital-light business model. The company owns only 9 locations and makes money on retailing and franchising activities. Fuel inventories are typically less than three days of sales and are sold at prices that are indexed daily. Restaurant, truck repair and other facilities are staffed by company personnel.

• Geared to U.S. economic recovery. The company had $910 million of mostly fixed site-level, SG&A and rental costs versus gross profit of $878 million in 2009. Rents were 27% of gross profit.

• Supportive landlord. HPT, which owns 79% of locations, agreed to allow rent deferral of $5 million a month from July 2008 to December 2010. While terms included issue of 1.54 million shares to HPT, HPT appears interested in TravelCenters’ survival.

• $156 million of cash offset by $101 million of capitalized leases and $90 million of deferred rent at yearend 2009. Liquidity sources include a $100 million credit facility (expires 2012) and real estate.

• Shares trade on 0.3x tangible book. INVESTMENT RISKS & CONCERNS

• HPT rent “slave” as a result of $2+ billion of total operating leases through 2022/24. This may prove crippling if U.S. trucking activity fails to materially recover. EBITDAR was $32 million compared to rent expense of $59 million during 4Q09.

• Increased competition due to Pilot acquisition of Flying J. The #1 truck stop operator should acquire Flying J out of bankruptcy by the end of April, creating a rival more than twice the company’s size.

• Conflicts of interest with HPT and Reit Management & Research (RMR), which provides management services to HPT and the company. The company’s CEO and CFO are also employees of RMR. While conflicts are mitigated by insider stock ownership, risks to other shareholders remain.

SELECTED OPERATING DATA 1 FYE December 31 2005 2006 2007 2008 2009 ∆ revenue 52% 17% 29% 24% -39% ∆ fuel gallons sold 16% 4% 18% -5% -7% ∆ TA-operated centers 1% 1% 35% -1% 0% ∆ franchisee-operated centers -5% 10% 104% -4% 0% ∆ total centers 0% 2% 45% -1% 0% Revenue ($bn) 4.1 4.8 6.2 7.7 4.7 % of revenue by type: Fuel 79% 82% 82% 84% 76% Nonfuel 20% 18% 18% 16% 23% Rent and royalties 0.2% 0.2% 0.2% 0.2% 0.3% Revenue growth by type: Fuel 65% 21% 30% 27% -44% Nonfuel 18% 4% 26% 9% -8% Rent and royalties -7% 1% 29% 12% -4% Gross margin by type: Fuel 4% 4% 3% 4% 6% Nonfuel 58% 58% 58% 58% 58% Rent and royalties 100% 100% 100% 100% 100% Total gross margin 15% 14% 13% 13% 19% Selected items as % of revenue: EBIT 2% 2% -2% 0% -2% Net income 0% 1% -2% -1% -2% D&A 2% 1% 1% 1% 1% Capex 2% 2% 2% 1% 1% Travel centers operated by: TA 139 140 189 188 188 Franchisees 21 23 47 45 45 Total travel centers 160 163 236 233 233 % of travel centers operated by: TA 87% 86% 80% 81% 81% Franchisees 13% 14% 20% 19% 19% % of travel centers by brand affiliation: TA 100% 100% 71% 71% 71% Petro 0% 0% 29% 29% 29% Travel center growth by brand affiliation: TA 0% 2% 2% -1% 0% Petro n/m n/m n/m -3% 0% Total fuel sold (mn gallons) 2 1,771 1,850 2,180 2,078 1,933 Return on tangible equity n/m 186% -56% -10% -27% Tangible equity to assets 0% 2% 20% 37% 38% ∆ shares out (avg) 0% 0% 68% 30% 10%

1 2007 growth reflects the acquisition of Petro Stopping Centers in May 2007. 2 Includes all fuel sold by the company, both at its retail travel centers sites and also on a wholesale basis including to franchisees, but excludes fuel sold at travel centers operated by franchisees. Fuel comprises mainly diesel fuel. MAJOR HOLDERS CEO O'Brien 4% | Other insiders 3%* | HPT 9% | BlackRock 6% | RenTech 6% | Whippoorwill 2% | GS 2% | Leucadia 2% * Excludes holdings of director Portnoy who is affiliated with HPT. RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? 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?

THE BOTTOM LINE TravelCenters offers plenty of “hair” to investors. Issues range from ongoing losses and high operating leverage to potentially rising competition and conflicts of interest with its major landlord and insiders. While these risks explain the share price, they may not justify it. Bankruptcy may not be inevitable given that landlord HPT is deferring rent and profitability is highly geared to a U.S. economic recovery. Trading at 30% of tangible book, shares could deliver multiples on investors’ money.



TRAVELCENTERS – BALANCE SHEET ANALYSIS ($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

Assets Cash 156 185 182 168 146 144 106 121 Short-term investments - - - - - - - - Accounts receivable 79 89 90 81 76 122 183 169 Inventory 129 123 124 121 129 149 155 156 Other current assets 47 49 52 54 58 60 55 35 Total current assets 411 447 448 424 409 475 500 480 PP&E 418 417 413 415 419 419 421 425 Goodwill and other intangibles 29 32 33 34 35 37 38 39 Long-term investments - - - - - - - - Other long-term assets 28 30 31 27 28 31 27 75

Total assets 885 926 925 900 890 962 985 1,018

Liabilities and Shareholders' Equity Accounts payable 98 111 118 102 82 160 213 218 Short-term debt - - - - - - - - Other current liabilities 122 119 116 109 119 132 139 158 Total current liabilities 220 230 234 211 201 292 351 376 Long-term debt 101 102 103 103 104 104 105 105 Other long-term liabilities 250 235 218 201 183 164 147 146

Total liabilities 571 567 555 515 488 560 603 627 Preferred stock - - - - - - - - Shareholders' equity 315 359 370 384 402 402 382 391 Shares out (avg) (mn) 17 17 17 17 16 15 14 14 Selected Values and Ratios Cash and investments 156 185 182 168 146 144 106 121 Debt 101 102 103 103 104 104 105 105 Net cash and investments 54 83 80 65 42 40 2 16 Current assets 411 447 448 424 409 475 500 480 Current liabilities 220 230 234 211 201 292 351 376 Current ratio 2x 2x 2x 2x 2x 2x 1x 1x Acid-test ratio 1x 1x 1x 1x 1x 1x 1x 1x Current assets 411 447 448 424 409 475 500 480 Total liabilities and preferred 571 567 555 515 488 560 603 627 NET NET current assets (160) (120) (107) (91) (79) (85) (104) (147) Shareholders' equity 315 359 370 384 402 402 382 391 Goodwill and other intangibles 29 32 33 34 35 37 38 39 Tangible book value 286 327 337 351 368 365 344 352 Tangible book to tangible assets 33% 37% 38% 40% 43% 39% 36% 36% Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0% Capital employed 453 448 445 460 481 458 463 408 Balance Sheet Trends (sequential) ∆ total assets -4% 0% 3% 1% -7% -2% -3% n/a ∆ shareholders' equity -12% -3% -4% -4% 0% 5% -2% n/a ∆ tangible shareholders' equity -12% -3% -4% -5% 1% 6% -2% n/a ∆ tangible book per share -13% -3% -4% -7% -5% 0% -2% n/a ∆ net cash and investments -35% 5% 23% 55% 5% 2553% -90% n/a ∆ net net current assets 33% 13% 18% 16% -8% -18% -29% n/a ∆ accounts receivable -12% -1% 10% 7% -37% -33% 8% n/a ∆ inventory 5% 0% 2% -6% -13% -4% 0% n/a ∆ accounts payable -12% -6% 15% 24% -49% -25% -2% n/a ∆ capital employed 1% 1% -3% -4% 5% -1% 13% n/a



FRANCHISED LOCATIONS, as of December 31, 2009

Brand Affiliation of Sites (1) Ownership of Sites By (1)

TA Petro Total Hospitality Trust Franchisee or Others Alabama 1 1 2 1 1 Florida 2 — 2 2 — Georgia (2) 2 1 3 2 1 Illinois — 2 2 — 2 Indiana 1 3 4 1 3 Iowa 1 — 1 — 1 Kansas 2 2 4 — 4 Maryland (2) — 1 1 — 1 Minnesota 1 1 2 — 2 Missouri 2 2 4 — 4 North Carolina 1 — 1 — 1 North Dakota — 1 1 — 1 Ohio 2 1 3 — 3 Oregon 1 — 1 — 1 Pennsylvania 1 2 3 — 3 South Carolina (2) — 1 1 — 1 Tennessee 3 — 3 2 1 Texas 2 — 2 2 — Virginia (2) — 2 2 — 2 Wisconsin 1 2 3 — 3 Total 23 22 45 10 35

COMPANY-OPERATED LOCATIONS, as of December 31, 2009

Brand Affiliation of Sites (1) Ownership of Sites by (1)

TA Petro Total TA HPT Joint Venture Others (2) Alabama 2 2 4 1 3 — — Arizona 4 2 6 — 6 — — Arkansas 2 2 4 — 4 — — California 10 3 13 2 9 2 — Colorado 3 — 3 — 3 — — Connecticut 3 — 3 — 3 — — Florida 4 1 5 — 5 — — Georgia 5 2 7 — 7 — — Idaho 1 — 1 — 1 — — Illinois 7 1 8 1 7 — — Indiana 5 1 6 — 6 — — Iowa 1 — 1 — 1 — — Kentucky 2 2 4 1 3 — — Louisiana 4 3 7 1 6 — — Maryland 3 — 3 — 3 — — Michigan 4 — 4 — 4 — — Minnesota 1 — 1 — 1 — — Mississippi 1 1 2 — 1 — 1 Missouri 4 1 5 — 5 — — Nebraska 2 1 3 — 3 — — Nevada 3 2 5 — 5 — — New

1 — 1 — 1 — —

New Jersey 3 1 4 — 4 — — New Mexico 5 1 6 — 6 — — New York 5 1 6 — 6 — — North Carolina 2 1 3 — 3 — — Ohio 10 4 14 — 14 — — Oklahoma 3 1 4 — 4 — — Oregon 2 1 3 — 3 — — Pennsylvania 8 1 9 — 9 — — South Carolina 3 — 3 — 2 — 1 Tennessee 4 2 6 — 6 — — Texas 11 6 17 2 15 — — Utah 2 — 2 — 2 — — Virginia 4 — 4 — 4 — — Washington 1 1 2 — 2 — — West Virginia 2 — 2 — 2 — — Wisconsin 2 — 2 — 2 — — Wyoming 3 1 4 — 4 — — Ontario,

1 — 1 1 — — —

Total 143 45 188 9 175 2 2



Snapshot of 98 Deep Value Stocks In Alphabetical Order

Recent YTD Market Enter. Price Price Value Value Company / Ticker Industry ($) ∆ ($mn) ($mn) Notable Shareholders Website A. H. Belo / AHC Printing & Publishing 8.37 45% 172 148 Lonestar, Prescott www.ahbelo.com

A.C. Moore Arts / ACMR Retail (specialty) 3.92 33% 97 70 Glenhill, Royce, Adage www.acmoore.com

Acorn International / ATV Appliances & Tools 4.89 3% 145 -14 RenTech, Northern Trust www.chinadrtv.com

Actions Semi / ACTS Semiconductors 2.38 -1% 205 -24 RenTech, T.Rowe www.actions-semi.com

Adaptec / ADPT Computer Storage 3.27 -2% 394 14 Steel, RenTech, Pzena www.adaptec.com

Agria / GRO Crops 2.17 -31% 137 -35 Heartland, TPG www.agriacorp.com

Albany Molecular / AMRI Biotechnology & Drugs 8.40 -7% 266 168 Advisory, DFA, Royce www.amriglobal.com

American Railcar / ARII Railroads 18.80 71% 401 324 Icahn, Advisory, DFA www.americanrailcar.com

Ascent Media / ASCMA Broadcasting & Cable 29.75 17% 422 129 Liberty Media, Gabelli ascentmediacorporation.com

Ascent Solar / ASTI Semiconductors 4.04 -24% 108 55 Wells Fargo, Invesco www.ascentsolar.com

Audiovox / VOXX Comms Equipment 7.94 12% 182 142 Baupost, Kahn, Aegis www.audiovox.com

Avatar Holdings / AVTR Real Estate Operations 21.47 26% 244 146 Cannell, Tweedy www.avatarhomes.com

Axcelis Tech / ACLS Semiconductors 2.22 57% 231 186 Schneider, Sterling www.axcelis.com

Breakwater Res. / BWLRF Gold & Silver 0.38 -5% 261 175 Dundee Corp. www.breakwater.ca

BRT Realty Trust / BRT Real Estate Operations 6.57 29% 92 84 Aegis, Michael Price www.brtrealty.com

Callaway Golf / ELY Recreational Products 9.74 29% 627 549 Royce, Clearbridge www.callawaygolf.com

Cardero Resources / CDY Gold & Silver 1.34 -1% 79 -15 Luxor Capital www.cardero.com

Cascade Microtech / CSCD Technical Instruments 4.70 3% 67 34 RGM, Crosslink, Royce www.cmicro.com

Century Casinos / CNTY Casinos & Gaming 2.51 -7% 60 39 Beach, Perritt www.cnty.com

China Techfaith / CNTF Comms Equipment 2.60 -15% 113 2 RenTech, FMR, HSBC www.techfaithwireless.com

Comverse Tech / CMVT Software & Programming 8.95 -5% 1,808 na RS, Westfield, Perry www.cmvt.com

CONN'S / CONN Retail (technology) 7.97 36% 179 273 F&C, Lombardia, Royce www.conns.com

Conrad Industries / CNRD Water Transportation 7.80 3% 50 38 Keane Capital www.conradindustries.com

Creative Tech / CREAF Computer Peripherals 3.73 -17% 257 14 Raffles Nominees (Pte) uk.europe.creative.com

Crexus Investment / CXS Investment Services 13.66 -2% 248 -36 Jennison, Ruffer crexusinvestment.com

dELiA*s / DLIA Retail (apparel) 1.77 -5% 55 14 T2, North Run, Steadfast www.deliasinc.com

Denison Mines / DNN Metal Mining 1.49 17% 506 488 Korea Electric Power www.denisonmines.com

Deswell Industries / DSWL Chemicals - Plastics 5.08 26% 82 40 Royce, RenTech www.deswell.com

Duckwall-ALCO / DUCK Retail (dep't & discount) 14.60 -5% 55 104 Heartland, Aegis, Price www.duckwall.com

EchoStar / SATS Broadcasting & Cable 19.72 -2% 1,673 1,290 MSD, Blue Ridge, Blum www.echostar.com

ePlus / PLUS Software & Programming 17.46 6% 144 121 Hovde, Heartland www.eplus.com

ExpressJet / XJT Airline 3.88 -20% 66 25 Stelliam, RenTech www.expressjet.com

Five Star Quality / FVE Healthcare Facilities 3.05 -12% 109 76 F&C, RenTech fivestarqualitycare.com

Flexsteel Industries / FLXS Furniture & Fixtures 15.30 50% 101 93 Perritt, Towle, Royce www.flexsteel.com

Formula Systems / FORTY Software & Programming 12.60 14% 166 85 Emblaze, Clal Insurance www.formulasystems.com

Frozen Food / FFEX Trucking 4.70 42% 81 77 Hawkshaw, Royce www.ffex.net

Gencor Industries / GENC Construction Machinery 7.62 2% 73 8 FMR, PNC, RBF www.gencor.com

Global Industries / GLBL Oil Well Services 6.36 -11% 724 647 Security, Alleghany www.globalind.com

Gravity / GRVY Software & Programming 2.10 29% 58 -7 Moon, Black Horse www.gravity.co.kr

GTSI / GTSI Computer Hardware 5.62 13% 54 47 Netols, Athena, Raffles www.gtsi.com

Gushan Environmental / GU Oil & Gas - Integrated 1.15 -13% 97 13 RenTech, KBC, Tiger www.chinagushan.com

Hardinge / HDNG Misc. Capital Goods 9.55 74% 111 91 Royce, Aegis, Portola www.hardinge.com

Harvest Natural / HNR Oil & Gas Operations 8.54 61% 284 252 Pabrai, Cumberland www.harvestnr.com

Heelys / HLYS Footwear 2.53 16% 70 10 Capital S/W, RenTech www.heelys.com

HQS Maritime / HQS Fish/Livestock 6.05 -14% 89 52 River Road, Hound www.hqfish.com

Hurco / HURC Technical Instruments 18.30 24% 118 85 Royce, Thomson, Pier www.hurco.com

I.D. Systems / IDSY Comms Equipment 3.04 -5% 34 -8 Artis, Diker, Thomson www.id-systems.com

Imation / IMN Computer Services 11.70 34% 446 283 Artisan, Private, LSV www.imation.com

Imperial Sugar / IPSU Food Processing 16.34 -6% 199 192 Royce, Passport www.imperialsugar.com


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In Alphabetical Order (continued)

Recent YTD Market Enter. Price Price Value Value Company / Ticker Industry ($) ∆ ($mn) ($mn) Notable Shareholders Website Industrias Bachoco / IBA Fish/Livestock 21.44 -7% 1,072 974 Royce, River Road www.bachoco.com.mx

Ingram Micro / IM Computer Hardware 18.36 5% 3,024 2,492 Artisan, GS, Cambiar www.ingrammicro.com

Insmed / INSM Biotechnology & Drugs 1.15 49% 150 28 Acadian, BlackRock www.insmed.com

Integr. Electrical / IESC Construction Services 5.51 -6% 80 53 Gendell, Royce, Keeley www.ies-co.com

Kaiser Aluminum / KALU Metal Mining 39.93 -4% 810 786 Advisory, GS, Third Ave www.kaiseraluminum.com

Kimball / KBALB Furniture & Fixtures 7.92 -7% 297 236 Barclays, DFA www.kimball.com

L.S. Starrett / SCX Misc. Capital Goods 11.08 26% 74 67 Royce, Gabelli www.starrett.com

Lakes Entertainment / LACO Casinos & Gaming 2.04 -19% 54 42 Key Colony, Par lakesentertainment.com

Linktone / LTON Computer Services 1.69 -1% 71 -26 MNC, Merry Asia www.linktone.com

LJ International / JADE Jewelry & Silverware 2.83 16% 67 82 CEDE & Co. www.ljintl.com

LookSmart / LOOK Computer Services 1.10 8% 19 -6 Kennedy, RenTech www.looksmart.com

Luby's / LUB Restaurants 3.93 7% 110 109 Bandera, Hodges www.lubys.com

Market Leader / LEDR Real Estate Operations 2.09 -1% 51 0 LMM, Springhouse www.marketleader.com

Maxygen / MAXY Biotechnology & Drugs 6.72 10% 218 58 Conus, Lonestar, Royce www.maxygen.com

MEMSIC / MEMS Semiconductors 3.30 1% 79 12 Still River, IDG-Accel www.memsic.com

Miller Petroleum / MILL Oil & Gas Operations 5.10 76% 153 151 Prospect Energy www.millerpetroleum.com

Movado Group / MOV Jewelry & Silverware 13.15 35% 324 263 Royce, Southpoint www.movadogroupinc.com

Myriad Pharma / MYRX Biotechnology & Drugs 5.09 1% 125 -19 First Eagle, Perry www.myriadpharma.com

Nam Tai Electronics / NTE Electronic Instruments 4.84 -7% 217 22 Royce, Kahn, Acadian www.namtai.com

Natuzzi / NTZ Furniture & Fixtures 4.61 43% 253 178 Royce, Brandes www.natuzzi.com

Ninetowns Internet / NINE Software & Programming 1.78 2% 64 -30 Tech Pioneer, RenTech www.ninetowns.com

Novatel Wireless / NVTL Comms Equipment 6.77 -15% 211 84 Royce, Kestrel www.novatelwireless.com

Nu Horizons / NUHC Electronic Instruments 3.54 -14% 66 89 Donald Smith, Lapides www.nuhorizons.com

Opnext / OPXT Semiconductors 2.33 23% 207 111 Penn, Crosslink, Royce www.opnext.com

ORBCOMM / ORBC Comms Services 2.19 -19% 93 3 Stephens, Jennison www.orbcomm.com

PC Connection / PCCC Retail (online) 6.75 0% 183 141 DFA, AXA, FMR www.pcconnection.com

PennyMac Mortgage / PMT Investment Services 17.45 2% 292 -32 Blue Ridge, Highbridge click here

Planar Systems / PLNR Electronic Instruments 3.50 25% 70 36 Royce, RenTech, DFA www.planar.com

Providence Worcester / PWX Railroads 12.35 15% 60 59 Keeley, Steinberg www.pwrr.com

Qiao Xing Mobile / QXM Comms Services 2.90 -21% 138 -126 Shah, Sansar, Pope www.qxmc.com

Qiao Xing Universal / XING Comms Services 1.83 -16% 134 -47 Shah, DKR www.cosun-xing.com

QLT / QLTI Biotechnology & Drugs 5.76 16% 310 122 Axial, Black Horse www.qltinc.com

Rewards Network / DINE Business Services 14.33 13% 125 112 Elkhorn, WC, RenTech www.rewardsnetwork.com

Seahawk Drilling / HAWK Oil Well Services 17.76 -21% 210 132 Chilton, MHR, Pennant seahawkdrilling.com

Silicon Image / SIMG Semiconductors 3.56 38% 269 118 Tocqueville, RenTech www.siliconimage.com

Spectrum Group / SPGZ Misc. Financial Services 1.78 -5% 57 83 Afinsa Bienes Tangibles www.spectrumgi.com

Sycamore Networks / SCMR Comms Equipment 20.03 -4% 570 126 Third Ave, Donald Smith www.sycamorenet.com

Synalloy Corp. / SYNL Construction Supplies 9.28 -1% 58 44 Royce, Gendell www.synalloy.com

Synthesis Energy / SYMX Oil & Gas Operations 1.05 13% 51 10 Columbia Wanger www.synthesisenergy.com

TAT Technologies / TATT Misc. Capital Goods 7.88 -5% 70 50 TAT Industries www.tat.co.il

Tecumseh Products / TECUA Misc. Capital Goods 14.40 23% 266 206 Tricap, Aegis, Roumell www.tecumseh.com

The9 Limited / NCTY Business Services 6.95 -4% 175 -85 Martin Currie, QVT www.the9.com

TomoTherapy / TOMO Medical Equipment 3.56 -9% 193 38 Soundpost, Essex www.tomotherapy.com

Trans World / TWMC Business Services 1.80 19% 57 -6 Lloyd Miller, Riley www.twec.com

TravelCenters / TA Retail (specialty) 4.81 9% 83 29 RenTech, Leucadia, GS www.tatravelcenters.com

Two Harbors Invest. / TWO Investment Services 9.20 -6% 123 122 QVT, Taconic, Fortress twoharborsinvestment.com

Volt Information / VOL Business Services 11.61 16% 242 214 River Road, Royce www.volt.com

Webzen / WZEN Computer Services 3.03 5% 120 -24 NHN Games www.webzen.com

Xinyuan Real Estate / XIN Construction Services 3.93 -12% 298 367 Blue Ridge, Equity Int'l www.xyre.com


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By Market Value Recent YTD Market Enter. Tang. NCAV/ EV / Price Price Value Value Book/ Market LTM Company / Ticker ($) ∆ ($mn) ($mn) MV Value Sales Industry Notable Shareholders Ingram Micro / IM 18.36 5% 3,024 2,492 100% 85% .1x Computer Hardware Artisan, GS, Cambiar Comverse Tech / CMVT 8.95 -5% 1,808 na 107% 91% na Software & Programming RS, Westfield, Perry EchoStar / SATS 19.72 -2% 1,673 1,290 150% 34% .7x Broadcasting & Cable MSD, Blue Ridge, Blum Industrias Bachoco / IBA 21.44 -7% 1,072 974 111% 24% .6x Fish/Livestock Royce, River Road Kaiser Aluminum / KALU 39.93 -4% 810 786 111% 14% .8x Metal Mining Advisory, GS, Third Ave Global Industries / GLBL 6.36 -11% 724 647 115% 4% .7x Oil Well Services Security, Alleghany Callaway Golf / ELY 9.74 29% 627 549 85% 55% .6x Recreational Products Royce, Clearbridge Sycamore Networks / SCMR 20.03 -4% 570 126 113% 79% 1.9x Comms Equipment Third Ave, Donald Smith Denison Mines / DNN 1.49 17% 506 488 133% -10% 6.2x Metal Mining Korea Electric Power Imation / IMN 11.70 34% 446 283 127% 92% .2x Computer Services Artisan, Private, LSV Ascent Media / ASCMA 29.75 17% 422 129 138% 75% .3x Broadcasting & Cable Liberty Media, Gabelli American Railcar / ARII 18.80 71% 401 324 82% 21% .8x Railroads Icahn, Advisory, DFA Adaptec / ADPT 3.27 -2% 394 14 98% 95% .1x Computer Storage Steel, RenTech, Pzena Movado Group / MOV 13.15 35% 324 263 114% 87% .7x Jewelry & Silverware Royce, Southpoint QLT / QLTI 5.76 16% 310 122 131% 83% 2.9x Biotechnology & Drugs Axial, Black Horse Xinyuan Real Estate / XIN 3.93 -12% 298 367 150% 139% .8x Construction Services Blue Ridge, Equity Int'l Kimball / KBALB 7.92 -7% 297 236 126% 50% .2x Furniture & Fixtures Barclays, DFA PennyMac Mortgage / PMT 17.45 2% 292 -32 107% 107% nm Investment Services Blue Ridge, Highbridge Harvest Natural / HNR 8.54 61% 284 252 97% -8% >9.9x Oil & Gas Operations Pabrai, Cumberland Silicon Image / SIMG 3.56 38% 269 118 64% 57% .8x Semiconductors Tocqueville, RenTech Tecumseh Products / TECUA 14.40 23% 266 206 174% 21% .3x Misc. Capital Goods Tricap, Aegis, Roumell Albany Molecular / AMRI 8.40 -7% 266 168 111% 46% .9x Biotechnology & Drugs Advisory, DFA, Royce Breakwater Res. / BWLRF 0.38 -5% 261 175 148% -1% .5x Gold & Silver Dundee Corp. Creative Tech / CREAF 3.73 -17% 257 14 121% 84% .0x Computer Peripherals Raffles Nominees (Pte) Natuzzi / NTZ 4.61 43% 253 178 175% 63% .2x Furniture & Fixtures Royce, Brandes Crexus Investment / CXS 13.66 -2% 248 -36 103% 103% nm Investment Services Jennison, Ruffer Avatar Holdings / AVTR 21.47 26% 244 146 182% -62% 2.0x Real Estate Operations Cannell, Tweedy Volt Information / VOL 11.61 16% 242 214 116% 82% .1x Business Services River Road, Royce Axcelis Tech / ACLS 2.22 57% 231 186 94% 69% 1.4x Semiconductors Schneider, Sterling Maxygen / MAXY 6.72 10% 218 58 70% 69% 1.6x Biotechnology & Drugs Conus, Lonestar, Royce Nam Tai Electronics / NTE 4.84 -7% 217 22 143% 91% .1x Electronic Instruments Royce, Kahn, Acadian Novatel Wireless / NVTL 6.77 -15% 211 84 99% 61% .2x Comms Equipment Royce, Kestrel Seahawk Drilling / HAWK 17.76 -21% 210 132 216% -7% .5x Oil Well Services Chilton, MHR, Pennant Opnext / OPXT 2.33 23% 207 111 118% 88% .3x Semiconductors Penn, Crosslink, Royce Actions Semi / ACTS 2.38 -1% 205 -24 134% 110% nm Semiconductors RenTech, T.Rowe Imperial Sugar / IPSU 16.34 -6% 199 192 133% -14% .4x Food Processing Royce, Passport TomoTherapy / TOMO 3.56 -9% 193 38 95% 79% .2x Medical Equipment Soundpost, Essex PC Connection / PCCC 6.75 0% 183 141 102% 94% .1x Retail (online) DFA, AXA, FMR Audiovox / VOXX 7.94 12% 182 142 151% 124% .2x Comms Equipment Baupost, Kahn, Aegis CONN'S / CONN 7.97 36% 179 273 192% 113% .3x Retail (technology) F&C, Lombardia, Royce The9 Limited / NCTY 6.95 -4% 175 -85 169% 133% nm Business Services Martin Currie, QVT A. H. Belo / AHC 8.37 45% 172 148 147% 13% .3x Printing & Publishing Lonestar, Prescott Formula Systems / FORTY 12.60 14% 166 85 178% 25% .2x Software & Programming Emblaze, Clal Insurance Miller Petroleum / MILL 5.10 76% 153 151 190% -130% >9.9x Oil & Gas Operations Prospect Energy Insmed / INSM 1.15 49% 150 28 83% 81% 2.7x Biotechnology & Drugs Acadian, BlackRock



By Market Value (continued)

Recent YTD Market Enter. Tang. NCAV/ EV / Price Price Value Value Book/ Market LTM Company / Ticker ($) ∆ ($mn) ($mn) MV Value Sales Industry Notable Shareholders Acorn International / ATV 4.89 3% 145 -14 133% 110% nm Appliances & Tools RenTech, Northern Trust ePlus / PLUS 17.46 6% 144 121 116% -134% .2x Software & Programming Hovde, Heartland Qiao Xing Mobile / QXM 2.90 -21% 138 -126 277% 259% nm Comms Services Shah, Sansar, Pope Agria / GRO 2.17 -31% 137 -35 175% 126% nm Crops Heartland, TPG Qiao Xing Universal / XING 1.83 -16% 134 -47 248% 202% nm Comms Services Shah, DKR Myriad Pharma / MYRX 5.09 1% 125 -19 134% 109% nm Biotechnology & Drugs First Eagle, Perry Rewards Network / DINE 14.33 13% 125 112 62% 54% .5x Business Services Elkhorn, WC, RenTech Two Harbors Invest. / TWO 9.20 -6% 123 122 148% -63% nm Investment Services QVT, Taconic, Fortress Webzen / WZEN 3.03 5% 120 -24 146% 121% nm Computer Services NHN Games Hurco / HURC 18.30 24% 118 85 95% 78% .9x Technical Instruments Royce, Thomson, Pier China Techfaith / CNTF 2.60 -15% 113 2 178% 138% .0x Comms Equipment RenTech, FMR, HSBC Hardinge / HDNG 9.55 74% 111 91 136% 84% .4x Misc. Capital Goods Royce, Aegis, Portola Luby's / LUB 3.93 7% 110 109 145% -17% .4x Restaurants Bandera, Hodges Five Star Quality / FVE 3.05 -12% 109 76 113% -83% .1x Healthcare Facilities F&C, RenTech Ascent Solar / ASTI 4.04 -24% 108 55 143% 40% >9.9x Semiconductors Wells Fargo, Invesco Flexsteel Industries / FLXS 15.30 50% 101 93 110% 74% .3x Furniture & Fixtures Perritt, Towle, Royce A.C. Moore Arts / ACMR 3.92 33% 97 70 165% 78% .1x Retail (specialty) Glenhill, Royce, Adage Gushan Environmental / GU 1.15 -13% 97 13 305% 54% .1x Oil & Gas - Integrated RenTech, KBC, Tiger ORBCOMM / ORBC 2.19 -19% 93 3 168% 82% .1x Comms Services Stephens, Jennison BRT Realty Trust / BRT 6.57 29% 92 84 140% -62% 5.8x Real Estate Operations Aegis, Michael Price HQS Maritime / HQS 6.05 -14% 89 52 125% 102% .7x Fish/Livestock River Road, Hound TravelCenters / TA 4.81 9% 83 29 344% -193% .0x Retail (specialty) RenTech, Leucadia, GS Deswell Industries / DSWL 5.08 26% 82 40 150% 74% .3x Chemicals - Plastics Royce, RenTech Frozen Food / FFEX 4.70 42% 81 77 111% 12% .2x Trucking Hawkshaw, Royce Integr. Electrical / IESC 5.51 -6% 80 53 159% 108% .1x Construction Services Gendell, Royce, Keeley Cardero Resources / CDY 1.34 -1% 79 -15 144% 79% nm Gold & Silver Luxor Capital MEMSIC / MEMS 3.30 1% 79 12 118% 93% .4x Semiconductors Still River, IDG-Accel L.S. Starrett / SCX 11.08 26% 74 67 191% 81% .3x Misc. Capital Goods Royce, Gabelli Gencor Industries / GENC 7.62 2% 73 8 131% 120% .1x Construction Machinery FMR, PNC, RBF Linktone / LTON 1.69 -1% 71 -26 163% 161% nm Computer Services MNC, Merry Asia Planar Systems / PLNR 3.50 25% 70 36 90% 77% .2x Electronic Instruments Royce, RenTech, DFA Heelys / HLYS 2.53 16% 70 10 113% 102% .2x Footwear Capital S/W, RenTech TAT Technologies / TATT 7.88 -5% 70 50 125% 87% .6x Misc. Capital Goods TAT Industries LJ International / JADE 2.83 16% 67 82 117% 107% .6x Jewelry & Silverware CEDE & Co. Cascade Microtech / CSCD 4.70 3% 67 34 101% 81% .6x Technical Instruments RGM, Crosslink, Royce ExpressJet / XJT 3.88 -20% 66 25 298% 7% .0x Airline Stelliam, RenTech Nu Horizons / NUHC 3.54 -14% 66 89 208% 197% .1x Electronic Instruments Donald Smith, Lapides Ninetowns Internet / NINE 1.78 2% 64 -30 212% 146% nm Software & Programming Tech Pioneer, RenTech Century Casinos / CNTY 2.51 -7% 60 39 173% 21% .8x Casinos & Gaming Beach, Perritt Providence Worcester / PWX 12.35 15% 60 59 123% -34% 2.4x Railroads Keeley, Steinberg Gravity / GRVY 2.10 29% 58 -7 108% 95% nm Software & Programming Moon, Black Horse Synalloy Corp. / SYNL 9.28 -1% 58 44 104% 71% .4x Construction Supplies Royce, Gendell Spectrum Group / SPGZ 1.78 -5% 57 83 135% 118% .0x Misc. Financial Services Afinsa Bienes Tangibles Trans World / TWMC 1.80 19% 57 -6 342% 269% nm Business Services Lloyd Miller, Riley dELiA*s / DLIA 1.77 -5% 55 14 165% 51% .1x Retail (apparel) T2, North Run, Steadfast Duckwall-ALCO / DUCK 14.60 -5% 55 104 188% 124% .2x Retail (dep't & discount) Heartland, Aegis, Price GTSI / GTSI 5.62 13% 54 47 179% 83% .1x Computer Hardware Netols, Athena, Raffles Lakes Entertainment / LACO 2.04 -19% 54 42 146% -22% 1.6x Casinos & Gaming Key Colony, Par Market Leader / LEDR 2.09 -1% 51 0 112% 103% nm Real Estate Operations LMM, Springhouse Synthesis Energy / SYMX 1.05 13% 51 10 217% 73% 4.7x Oil & Gas Operations Columbia Wanger Conrad Industries / CNRD 7.80 3% 50 38 139% 63% .3x Water Transportation Keane Capital I.D. Systems / IDSY 3.04 -5% 34 -8 161% 138% nm Comms Equipment Artis, Diker, Thomson LookSmart / LOOK 1.10 8% 19 -6 137% 107% nm Computer Services Kennedy, RenTech



By Sector

Recent Market Enter. Tang. NCAV/ EV / Price Value Value Book/ Market LTM Sector Industry Company / Ticker ($) ($mn) ($mn) MV Value Sales Notable Shareholders Basic Materials Chemicals - Plastics Deswell Industries / DSWL 5.08 82 40 150% 74% .3x Royce, RenTech Basic Materials Gold & Silver Breakwater Res. / BWLRF 0.38 261 175 148% -1% .5x Dundee Corp. Basic Materials Gold & Silver Cardero Resources / CDY 1.34 79 -15 144% 79% nm Luxor Capital Basic Materials Metal Mining Denison Mines / DNN 1.49 506 488 133% -10% 6.2x Korea Electric Power Basic Materials Metal Mining Kaiser Aluminum / KALU 39.93 810 786 111% 14% .8x Advisory, GS, Third Ave Capital Goods Construction Machinery Gencor Industries / GENC 7.62 73 8 131% 120% .1x FMR, PNC, RBF Capital Goods Construction Services Integr. Electrical / IESC 5.51 80 53 159% 108% .1x Gendell, Royce, Keeley Capital Goods Construction Services Xinyuan Real Estate / XIN 3.93 298 367 150% 139% .8x Blue Ridge, Equity Int'l Capital Goods Construction Supplies Synalloy Corp. / SYNL 9.28 58 44 104% 71% .4x Royce, Gendell Capital Goods Misc. Capital Goods Hardinge / HDNG 9.55 111 91 136% 84% .4x Royce, Aegis, Portola Capital Goods Misc. Capital Goods L.S. Starrett / SCX 11.08 74 67 191% 81% .3x Royce, Gabelli Capital Goods Misc. Capital Goods TAT Technologies / TATT 7.88 70 50 125% 87% .6x TAT Industries Capital Goods Misc. Capital Goods Tecumseh Products / TECUA 14.40 266 206 174% 21% .3x Tricap, Aegis, Roumell Consumer Appliances & Tools Acorn International / ATV 4.89 145 -14 133% 110% nm RenTech, Northern Trust Consumer Crops Agria / GRO 2.17 137 -35 175% 126% nm Heartland, TPG Consumer Fish/Livestock HQS Maritime / HQS 6.05 89 52 125% 102% .7x River Road, Hound Consumer Fish/Livestock Industrias Bachoco / IBA 21.44 1,072 974 111% 24% .6x Royce, River Road Consumer Food Processing Imperial Sugar / IPSU 16.34 199 192 133% -14% .4x Royce, Passport Consumer Footwear Heelys / HLYS 2.53 70 10 113% 102% .2x Capital S/W, RenTech Consumer Furniture & Fixtures Flexsteel Industries / FLXS 15.30 101 93 110% 74% .3x Perritt, Towle, Royce Consumer Furniture & Fixtures Kimball / KBALB 7.92 297 236 126% 50% .2x Barclays, DFA Consumer Furniture & Fixtures Natuzzi / NTZ 4.61 253 178 175% 63% .2x Royce, Brandes Consumer Jewelry & Silverware LJ International / JADE 2.83 67 82 117% 107% .6x CEDE & Co. Consumer Jewelry & Silverware Movado Group / MOV 13.15 324 263 114% 87% .7x Royce, Southpoint Consumer Recreational Products Callaway Golf / ELY 9.74 627 549 85% 55% .6x Royce, Clearbridge Energy Oil & Gas - Integrated Gushan Environmental / GU 1.15 97 13 305% 54% .1x RenTech, KBC, Tiger Energy Oil & Gas Operations Harvest Natural / HNR 8.54 284 252 97% -8% >9.9x Pabrai, Cumberland Energy Oil & Gas Operations Miller Petroleum / MILL 5.10 153 151 190% -130% >9.9x Prospect Energy Energy Oil & Gas Operations Synthesis Energy / SYMX 1.05 51 10 217% 73% 4.7x Columbia Wanger Energy Oil Well Services Global Industries / GLBL 6.36 724 647 115% 4% .7x Security, Alleghany Energy Oil Well Services Seahawk Drilling / HAWK 17.76 210 132 216% -7% .5x Chilton, MHR, Pennant Financial Investment Services Crexus Investment / CXS 13.66 248 -36 103% 103% nm Jennison, Ruffer Financial Investment Services PennyMac Mortgage / PMT 17.45 292 -32 107% 107% nm Blue Ridge, Highbridge Financial Investment Services Two Harbors Invest. / TWO 9.20 123 122 148% -63% nm QVT, Taconic, Fortress Financial Misc. Financial Services Spectrum Group / SPGZ 1.78 57 83 135% 118% .0x Afinsa Bienes Tangibles Health Care Biotechnology & Drugs Albany Molecular / AMRI 8.40 266 168 111% 46% .9x Advisory, DFA, Royce Health Care Biotechnology & Drugs Insmed / INSM 1.15 150 28 83% 81% 2.7x Acadian, BlackRock Health Care Biotechnology & Drugs Maxygen / MAXY 6.72 218 58 70% 69% 1.6x Conus, Lonestar, Royce Health Care Biotechnology & Drugs Myriad Pharma / MYRX 5.09 125 -19 134% 109% nm First Eagle, Perry Health Care Biotechnology & Drugs QLT / QLTI 5.76 310 122 131% 83% 2.9x Axial, Black Horse Health Care Healthcare Facilities Five Star Quality / FVE 3.05 109 76 113% -83% .1x F&C, RenTech Health Care Medical Equipment TomoTherapy / TOMO 3.56 193 38 95% 79% .2x Soundpost, Essex Services Broadcasting & Cable Ascent Media / ASCMA 29.75 422 129 138% 75% .3x Liberty Media, Gabelli Services Broadcasting & Cable EchoStar / SATS 19.72 1,673 1,290 150% 34% .7x MSD, Blue Ridge, Blum Services Business Services Rewards Network / DINE 14.33 125 112 62% 54% .5x Elkhorn, WC, RenTech



By Sector (continued)

Recent Market Enter. Tang. NCAV/ EV / Price Value Value Book/ Market LTM Sector Industry Company / Ticker ($) ($mn) ($mn) MV Value Sales Notable Shareholders Services Business Services The9 Limited / NCTY 6.95 175 -85 169% 133% nm Martin Currie, QVT Services Business Services Trans World / TWMC 1.80 57 -6 342% 269% nm Lloyd Miller, Riley Services Business Services Volt Information / VOL 11.61 242 214 116% 82% .1x River Road, Royce Services Casinos & Gaming Century Casinos / CNTY 2.51 60 39 173% 21% .8x Beach, Perritt Services Casinos & Gaming Lakes Entertainment / LACO 2.04 54 42 146% -22% 1.6x Key Colony, Par Services Comms Services ORBCOMM / ORBC 2.19 93 3 168% 82% .1x Stephens, Jennison Services Comms Services Qiao Xing Mobile / QXM 2.90 138 -126 277% 259% nm Shah, Sansar, Pope Services Comms Services Qiao Xing Universal / XING 1.83 134 -47 248% 202% nm Shah, DKR Services Printing & Publishing A. H. Belo / AHC 8.37 172 148 147% 13% .3x Lonestar, Prescott Services Real Estate Operations Avatar Holdings / AVTR 21.47 244 146 182% -62% 2.0x Cannell, Tweedy Services Real Estate Operations BRT Realty Trust / BRT 6.57 92 84 140% -62% 5.8x Aegis, Michael Price Services Real Estate Operations Market Leader / LEDR 2.09 51 0 112% 103% nm LMM, Springhouse Services Restaurants Luby's / LUB 3.93 110 109 145% -17% .4x Bandera, Hodges Services Retail (apparel) dELiA*s / DLIA 1.77 55 14 165% 51% .1x T2, North Run, Steadfast Services Retail (dep't & discount) Duckwall-ALCO / DUCK 14.60 55 104 188% 124% .2x Heartland, Aegis, Price Services Retail (online) PC Connection / PCCC 6.75 183 141 102% 94% .1x DFA, AXA, FMR Services Retail (specialty) A.C. Moore Arts / ACMR 3.92 97 70 165% 78% .1x Glenhill, Royce, Adage Services Retail (specialty) TravelCenters / TA 4.81 83 29 344% -193% .0x RenTech, Leucadia, GS Services Retail (technology) CONN'S / CONN 7.97 179 273 192% 113% .3x F&C, Lombardia, Royce Technology Comms Equipment Audiovox / VOXX 7.94 182 142 151% 124% .2x Baupost, Kahn, Aegis Technology Comms Equipment China Techfaith / CNTF 2.60 113 2 178% 138% .0x RenTech, FMR, HSBC Technology Comms Equipment I.D. Systems / IDSY 3.04 34 -8 161% 138% nm Artis, Diker, Thomson Technology Comms Equipment Novatel Wireless / NVTL 6.77 211 84 99% 61% .2x Royce, Kestrel Technology Comms Equipment Sycamore Networks / SCMR 20.03 570 126 113% 79% 1.9x Third Ave, Donald Smith Technology Computer Hardware GTSI / GTSI 5.62 54 47 179% 83% .1x Netols, Athena, Raffles Technology Computer Hardware Ingram Micro / IM 18.36 3,024 2,492 100% 85% .1x Artisan, GS, Cambiar Technology Computer Peripherals Creative Tech / CREAF 3.73 257 14 121% 84% .0x Raffles Nominees (Pte) Technology Computer Services Imation / IMN 11.70 446 283 127% 92% .2x Artisan, Private, LSV Technology Computer Services Linktone / LTON 1.69 71 -26 163% 161% nm MNC, Merry Asia Technology Computer Services LookSmart / LOOK 1.10 19 -6 137% 107% nm Kennedy, RenTech Technology Computer Services Webzen / WZEN 3.03 120 -24 146% 121% nm NHN Games Technology Computer Storage Adaptec / ADPT 3.27 394 14 98% 95% .1x Steel, RenTech, Pzena Technology Electronic Instruments Nam Tai Electronics / NTE 4.84 217 22 143% 91% .1x Royce, Kahn, Acadian Technology Electronic Instruments Nu Horizons / NUHC 3.54 66 89 208% 197% .1x Donald Smith, Lapides Technology Electronic Instruments Planar Systems / PLNR 3.50 70 36 90% 77% .2x Royce, RenTech, DFA Technology Semiconductors Actions Semi / ACTS 2.38 205 -24 134% 110% nm RenTech, T.Rowe Technology Semiconductors Ascent Solar / ASTI 4.04 108 55 143% 40% >9.9x Wells Fargo, Invesco Technology Semiconductors Axcelis Tech / ACLS 2.22 231 186 94% 69% 1.4x Schneider, Sterling Technology Semiconductors MEMSIC / MEMS 3.30 79 12 118% 93% .4x Still River, IDG-Accel Technology Semiconductors Opnext / OPXT 2.33 207 111 118% 88% .3x Penn, Crosslink, Royce Technology Semiconductors Silicon Image / SIMG 3.56 269 118 64% 57% .8x Tocqueville, RenTech Technology Software & Programming Comverse Tech / CMVT 8.95 1,808 na 107% 91% na RS, Westfield, Perry Technology Software & Programming ePlus / PLUS 17.46 144 121 116% -134% .2x Hovde, Heartland Technology Software & Programming Formula Systems / FORTY 12.60 166 85 178% 25% .2x Emblaze, Clal Insurance Technology Software & Programming Gravity / GRVY 2.10 58 -7 108% 95% nm Moon, Black Horse Technology Software & Programming Ninetowns Internet / NINE 1.78 64 -30 212% 146% nm Tech Pioneer, RenTech Technology Technical Instruments Cascade Microtech / CSCD 4.70 67 34 101% 81% .6x RGM, Crosslink, Royce Technology Technical Instruments Hurco / HURC 18.30 118 85 95% 78% .9x Royce, Thomson, Pier Transportation Airline ExpressJet / XJT 3.88 66 25 298% 7% .0x Stelliam, RenTech Transportation Railroads American Railcar / ARII 18.80 401 324 82% 21% .8x Icahn, Advisory, DFA Transportation Railroads Providence Worcester / PWX 12.35 60 59 123% -34% 2.4x Keeley, Steinberg Transportation Trucking Frozen Food / FFEX 4.70 81 77 111% 12% .2x Hawkshaw, Royce Transportation Water Transportation Conrad Industries / CNRD 7.80 50 38 139% 63% .3x Keane Capital



Stock Price Performance (sorted by price decline since December 31, 2007)

Recent YTD Market Enter. Price Performance Tang. NCAV/ EV / Price Price Value Value Since December 31, Book/ Market LTM Div. Company / Ticker ($) ∆ ($mn) ($mn) 2009 2007 2005 MV Value Sales Yield Notable Shareholders Synthesis Energy / SYMX 1.05 13% 51 10 13% -91% -86% 217% 73% 4.7x - Columbia Wanger Gushan Environmental / GU 1.15 -13% 97 13 -13% -88% na 305% 54% .1x 4% RenTech, KBC, Tiger ExpressJet / XJT 3.88 -20% 66 25 -20% -84% -95% 298% 7% .0x - Stelliam, RenTech Ascent Solar / ASTI 4.04 -24% 108 55 -24% -84% na 143% 40% >9.9x - Wells Fargo, Invesco Denison Mines / DNN 1.49 17% 506 488 17% -83% -88% 133% -10% 6.2x - Korea Electric Power TomoTherapy / TOMO 3.56 -9% 193 38 -9% -82% na 95% 79% .2x - Soundpost, Essex Agria / GRO 2.17 -31% 137 -35 -31% -79% na 175% 126% nm - Heartland, TPG Breakwater Res. / BWLRF 0.38 -5% 261 175 -5% -78% -36% 148% -1% .5x - Dundee Corp. Qiao Xing Universal / XING 1.83 -16% 134 -47 -16% -78% -75% 248% 202% nm - Shah, DKR I.D. Systems / IDSY 3.04 -5% 34 -8 -5% -76% -87% 161% 138% nm - Artis, Diker, Thomson Opnext / OPXT 2.33 23% 207 111 23% -74% na 118% 88% .3x - Penn, Crosslink, Royce Xinyuan Real Estate / XIN 3.93 -12% 298 367 -12% -72% na 150% 139% .8x - Blue Ridge, Equity Int'l A.C. Moore Arts / ACMR 3.92 33% 97 70 33% -71% -73% 165% 78% .1x - Glenhill, Royce, Adage Integr. Electrical / IESC 5.51 -6% 80 53 -6% -71% na 159% 108% .1x - Gendell, Royce, Keeley Global Industries / GLBL 6.36 -11% 724 647 -11% -70% -44% 115% 4% .7x - Security, Alleghany Lakes Entertainment / LACO 2.04 -19% 54 42 -19% -69% -68% 146% -22% 1.6x - Key Colony, Par MEMSIC / MEMS 3.30 1% 79 12 1% -67% na 118% 93% .4x - Still River, IDG-Accel The9 Limited / NCTY 6.95 -4% 175 -85 -4% -67% -55% 169% 133% nm - Martin Currie, QVT Qiao Xing Mobile / QXM 2.90 -21% 138 -126 -21% -66% na 277% 259% nm - Shah, Sansar, Pope LookSmart / LOOK 1.10 8% 19 -6 8% -66% -71% 137% 107% nm - Kennedy, RenTech ORBCOMM / ORBC 2.19 -19% 93 3 -19% -65% na 168% 82% .1x - Stephens, Jennison Heelys / HLYS 2.53 16% 70 10 16% -64% na 113% 102% .2x - Capital S/W, RenTech Trans World / TWMC 1.80 19% 57 -6 19% -63% -68% 342% 269% nm - Lloyd Miller, Riley Five Star Quality / FVE 3.05 -12% 109 76 -12% -63% -61% 113% -83% .1x - F&C, RenTech TravelCenters / TA 4.81 9% 83 29 9% -62% na 344% -193% .0x - RenTech, Leucadia, GS Luby's / LUB 3.93 7% 110 109 7% -61% -70% 145% -17% .4x - Bandera, Hodges Century Casinos / CNTY 2.51 -7% 60 39 -7% -61% -71% 173% 21% .8x - Beach, Perritt Novatel Wireless / NVTL 6.77 -15% 211 84 -15% -58% -44% 99% 61% .2x - Royce, Kestrel Hurco / HURC 18.30 24% 118 85 24% -58% -41% 95% 78% .9x - Royce, Thomson, Pier Nam Tai Electronics / NTE 4.84 -7% 217 22 -7% -57% -78% 143% 91% .1x - Royce, Kahn, Acadian Duckwall-ALCO / DUCK 14.60 -5% 55 104 -5% -55% -36% 188% 124% .2x - Heartland, Aegis, Price China Techfaith / CNTF 2.60 -15% 113 2 -15% -55% -81% 178% 138% .0x - RenTech, FMR, HSBC Cascade Microtech / CSCD 4.70 3% 67 34 3% -54% -63% 101% 81% .6x - RGM, Crosslink, Royce CONN'S / CONN 7.97 36% 179 273 36% -53% -78% 192% 113% .3x - F&C, Lombardia, Royce Axcelis Tech / ACLS 2.22 57% 231 186 57% -52% -53% 94% 69% 1.4x - Schneider, Sterling LJ International / JADE 2.83 16% 67 82 16% -51% -17% 117% 107% .6x - CEDE & Co. Kaiser Aluminum / KALU 39.93 -4% 810 786 -4% -50% na 111% 14% .8x 2% Advisory, GS, Third Ave Nu Horizons / NUHC 3.54 -14% 66 89 -14% -49% -65% 208% 197% .1x - Donald Smith, Lapides Avatar Holdings / AVTR 21.47 26% 244 146 26% -49% -61% 182% -62% 2.0x - Cannell, Tweedy Comverse Tech / CMVT 8.95 -5% 1,808 na -5% -48% -66% 107% 91% na - RS, Westfield, Perry BRT Realty Trust / BRT 6.57 29% 92 84 29% -48% -67% 140% -62% 5.8x - Aegis, Michael Price Movado Group / MOV 13.15 35% 324 263 35% -48% -28% 114% 87% .7x - Royce, Southpoint Conrad Industries / CNRD 7.80 3% 50 38 3% -48% 333% 139% 63% .3x - Keane Capital Sycamore Networks / SCMR 20.03 -4% 570 126 -4% -48% -54% 113% 79% 1.9x - Third Ave, Donald Smith Acorn International / ATV 4.89 3% 145 -14 3% -48% na 133% 110% nm - RenTech, Northern Trust



Stock Price Performance (sorted by price decline since December 31, 2007) (continued)

Recent YTD Market Enter. Price Performance Tang. NCAV/ EV / Price Price Value Value Since December 31, Book/ Market LTM Div. Company / Ticker ($) ∆ ($mn) ($mn) 2009 2007 2005 MV Value Sales Yield Notable Shareholders Synalloy Corp. / SYNL 9.28 -1% 58 44 -1% -46% -11% 104% 71% .4x 3% Royce, Gendell Planar Systems / PLNR 3.50 25% 70 36 25% -45% -58% 90% 77% .2x - Royce, RenTech, DFA Linktone / LTON 1.69 -1% 71 -26 -1% -45% -84% 163% 161% nm - MNC, Merry Asia Imation / IMN 11.70 34% 446 283 34% -44% -75% 127% 92% .2x - Artisan, Private, LSV Ninetowns Internet / NINE 1.78 2% 64 -30 2% -44% -69% 212% 146% nm - Tech Pioneer, RenTech Callaway Golf / ELY 9.74 29% 627 549 29% -44% -30% 85% 55% .6x 0% Royce, Clearbridge Hardinge / HDNG 9.55 74% 111 91 74% -43% -45% 136% 84% .4x 0% Royce, Aegis, Portola GTSI / GTSI 5.62 13% 54 47 13% -43% -20% 179% 83% .1x - Netols, Athena, Raffles Kimball / KBALB 7.92 -7% 297 236 -7% -42% -25% 126% 50% .2x 3% Barclays, DFA Actions Semi / ACTS 2.38 -1% 205 -24 -1% -42% -70% 134% 110% nm - RenTech, T.Rowe Albany Molecular / AMRI 8.40 -7% 266 168 -7% -42% -31% 111% 46% .9x - Advisory, DFA, Royce PC Connection / PCCC 6.75 0% 183 141 0% -41% 25% 102% 94% .1x - DFA, AXA, FMR TAT Technologies / TATT 7.88 -5% 70 50 -5% -40% 19% 125% 87% .6x 11% TAT Industries Tecumseh Products / TECUA 14.40 23% 266 206 23% -38% -37% 174% 21% .3x - Tricap, Aegis, Roumell HQS Maritime / HQS 6.05 -14% 89 52 -14% -38% -7% 125% 102% .7x - River Road, Hound Volt Information / VOL 11.61 16% 242 214 16% -36% -8% 116% 82% .1x - River Road, Royce Audiovox / VOXX 7.94 12% 182 142 12% -36% -43% 151% 124% .2x - Baupost, Kahn, Aegis dELiA*s / DLIA 1.77 -5% 55 14 -5% -35% -79% 165% 51% .1x - T2, North Run, Steadfast L.S. Starrett / SCX 11.08 26% 74 67 26% -34% -29% 191% 81% .3x 2% Royce, Gabelli Industrias Bachoco / IBA 21.44 -7% 1,072 974 -7% -33% 10% 111% 24% .6x 3% Royce, River Road Market Leader / LEDR 2.09 -1% 51 0 -1% -33% -84% 112% 103% nm - LMM, Springhouse Gravity / GRVY 2.10 29% 58 -7 29% -32% -71% 108% 95% nm - Moon, Black Horse Harvest Natural / HNR 8.54 61% 284 252 61% -32% -4% 97% -8% >9.9x - Pabrai, Cumberland Providence Worcester / PWX 12.35 15% 60 59 15% -26% -17% 123% -34% 2.4x 1% Keeley, Steinberg Gencor Industries / GENC 7.62 2% 73 8 2% -26% -8% 131% 120% .1x - FMR, PNC, RBF Cardero Resources / CDY 1.34 -1% 79 -15 -1% -23% -70% 144% 79% nm - Luxor Capital Silicon Image / SIMG 3.56 38% 269 118 38% -21% -61% 64% 57% .8x - Tocqueville, RenTech Frozen Food / FFEX 4.70 42% 81 77 42% -20% -57% 111% 12% .2x - Hawkshaw, Royce Webzen / WZEN 3.03 5% 120 -24 5% -20% -64% 146% 121% nm - NHN Games Maxygen / MAXY 6.72 10% 218 58 10% -16% -11% 70% 69% 1.6x - Conus, Lonestar, Royce Deswell Industries / DSWL 5.08 26% 82 40 26% -16% -53% 150% 74% .3x 8% Royce, RenTech Spectrum Group / SPGZ 1.78 -5% 57 83 -5% -15% -91% 135% 118% .0x - Afinsa Bienes Tangibles Imperial Sugar / IPSU 16.34 -6% 199 192 -6% -13% 20% 133% -14% .4x 0% Royce, Passport Creative Tech / CREAF 3.73 -17% 257 14 -17% -12% -56% 121% 84% .0x - Raffles Nominees (Pte) Rewards Network / DINE 14.33 13% 125 112 13% -4% -25% 62% 54% .5x - Elkhorn, WC, RenTech Adaptec / ADPT 3.27 -2% 394 14 -2% -3% -44% 98% 95% .1x - Steel, RenTech, Pzena American Railcar / ARII 18.80 71% 401 324 71% -2% na 82% 21% .8x 1% Icahn, Advisory, DFA Natuzzi / NTZ 4.61 43% 253 178 43% 0% -34% 175% 63% .2x - Royce, Brandes Ingram Micro / IM 18.36 5% 3,024 2,492 5% 2% -8% 100% 85% .1x - Artisan, GS, Cambiar Formula Systems / FORTY 12.60 14% 166 85 14% 2% 22% 178% 25% .2x 12% Emblaze, Clal Insurance EchoStar / SATS 19.72 -2% 1,673 1,290 -2% 5% na 150% 34% .7x - MSD, Blue Ridge, Blum Flexsteel Industries / FLXS 15.30 50% 101 93 50% 28% 9% 110% 74% .3x 1% Perritt, Towle, Royce QLT / QLTI 5.76 16% 310 122 16% 30% -9% 131% 83% 2.9x - Axial, Black Horse Insmed / INSM 1.15 49% 150 28 49% 39% -42% 83% 81% 2.7x - Acadian, BlackRock ePlus / PLUS 17.46 6% 144 121 6% 81% 27% 116% -134% .2x - Hovde, Heartland PennyMac Mortgage / PMT 17.45 2% 292 -32 2% 166% 173% 107% 107% nm - Blue Ridge, Highbridge Miller Petroleum / MILL 5.10 76% 153 151 76% >999% 311% 190% -130% >9.9x - Prospect Energy Seahawk Drilling / HAWK 17.76 -21% 210 132 -21% na na 216% -7% .5x - Chilton, MHR, Pennant Two Harbors Invest. / TWO 9.20 -6% 123 122 -6% na na 148% -63% nm - QVT, Taconic, Fortress Crexus Investment / CXS 13.66 -2% 248 -36 -2% na na 103% 103% nm 2% Jennison, Ruffer Myriad Pharma / MYRX 5.09 1% 125 -19 1% na na 134% 109% nm - First Eagle, Perry Ascent Media / ASCMA 29.75 17% 422 129 17% na na 138% 75% .3x - Liberty Media, Gabelli A. H. Belo / AHC 8.37 45% 172 148 45% na na 147% 13% .3x - Lonestar, Prescott



Free Cash Flow (sorted by LTM free cash flow yield)

LTM Recent Market Enter. Tang. NCAV/ EV / FCF Price ∆ to 52-Wk Value Value Book/ Market LTM Div. Insider Company / Ticker Yield ($) Low High ($mn) ($mn) MV Value Sales Yield Own. Notable Shareholders Trans World / TWMC 80% 1.80 -70% 11% 57 -6 342% 269% nm - 69% Lloyd Miller, Riley Nu Horizons / NUHC 51% 3.54 -29% 32% 66 89 208% 197% .1x - 5% Donald Smith, Lapides The9 Limited / NCTY 50% 6.95 -10% 73% 175 -85 169% 133% nm - 55% Martin Currie, QVT Ninetowns Internet / NINE 32% 1.78 -43% 24% 64 -30 212% 146% nm - 39% Tech Pioneer, RenTech Synalloy Corp. / SYNL 31% 9.28 -43% 13% 58 44 104% 71% .4x 3% 18% Royce, Gendell Audiovox / VOXX 27% 7.94 -44% 6% 182 142 151% 124% .2x - 19% Baupost, Kahn, Aegis Hardinge / HDNG 27% 9.55 -60% 2% 111 91 136% 84% .4x 0% 3% Royce, Aegis, Portola Deswell Industries / DSWL 26% 5.08 -57% 5% 82 40 150% 74% .3x 8% 16% Royce, RenTech Flexsteel Industries / FLXS 24% 15.30 -61% 8% 101 93 110% 74% .3x 1% 13% Perritt, Towle, Royce Lakes Entertainment / LACO 22% 2.04 -1% 114% 54 42 146% -22% 1.6x - 27% Key Colony, Par Rewards Network / DINE 21% 14.33 -44% 8% 125 112 62% 54% .5x - 5% Elkhorn, WC, RenTech Planar Systems / PLNR 19% 3.50 -79% 7% 70 36 90% 77% .2x - 4% Royce, RenTech, DFA TravelCenters / TA 18% 4.81 -63% 82% 83 29 344% -193% .0x - 16% RenTech, Leucadia, GS QLT / QLTI 18% 5.76 -66% 1% 310 122 131% 83% 2.9x - 14% Axial, Black Horse American Railcar / ARII 17% 18.80 -63% 0% 401 324 82% 21% .8x 1% 1% Icahn, Advisory, DFA Novatel Wireless / NVTL 14% 6.77 -6% 102% 211 84 99% 61% .2x - 2% Royce, Kestrel Imation / IMN 13% 11.70 -37% 3% 446 283 127% 92% .2x - 2% Artisan, Private, LSV Century Casinos / CNTY 11% 2.51 -42% 33% 60 39 173% 21% .8x - 12% Beach, Perritt L.S. Starrett / SCX 10% 11.08 -41% 6% 74 67 191% 81% .3x 2% 19% Royce, Gabelli Movado Group / MOV 9% 13.15 -49% 18% 324 263 114% 87% .7x - 31% Royce, Southpoint Seahawk Drilling / HAWK 9% 17.76 -1% 101% 210 132 216% -7% .5x - 9% Chilton, MHR, Pennant Kimball / KBALB 9% 7.92 -37% 21% 297 236 126% 50% .2x 3% 20% Barclays, DFA Albany Molecular / AMRI 9% 8.40 -9% 25% 266 168 111% 46% .9x - 33% Advisory, DFA, Royce Integr. Electrical / IESC 9% 5.51 -17% 103% 80 53 159% 108% .1x - 2% Gendell, Royce, Keeley Kaiser Aluminum / KALU 8% 39.93 -35% 11% 810 786 111% 14% .8x 2% 0% Advisory, GS, Third Ave Duckwall-ALCO / DUCK 8% 14.60 -35% 31% 55 104 188% 124% .2x - 16% Heartland, Aegis, Price Gencor Industries / GENC 8% 7.62 -21% 14% 73 8 131% 120% .1x - 52% FMR, PNC, RBF Actions Semi / ACTS 8% 2.38 -31% 22% 205 -24 134% 110% nm - 0% RenTech, T.Rowe Breakwater Res. / BWLRF 6% 0.38 -76% 32% 261 175 148% -1% .5x - 25% Dundee Corp. Agria / GRO 6% 2.17 -27% 109% 137 -35 175% 126% nm - 3% Heartland, TPG Ingram Micro / IM 6% 18.36 -30% 3% 3,024 2,492 100% 85% .1x - 4% Artisan, GS, Cambiar Avatar Holdings / AVTR 5% 21.47 -31% 7% 244 146 182% -62% 2.0x - 28% Cannell, Tweedy Natuzzi / NTZ 5% 4.61 -76% 29% 253 178 175% 63% .2x - 54% Royce, Brandes Nam Tai Electronics / NTE 4% 4.84 -21% 29% 217 22 143% 91% .1x - 25% Royce, Kahn, Acadian Comverse Tech / CMVT 3% 8.95 -27% 11% 1,808 na 107% 91% na - 0% RS, Westfield, Perry Formula Systems / FORTY 3% 12.60 -63% 29% 166 85 178% 25% .2x 12% 69% Emblaze, Clal Insurance Adaptec / ADPT 2% 3.27 -31% 9% 394 14 98% 95% .1x - 0% Steel, RenTech, Pzena Conrad Industries / CNRD 2% 7.80 -38% 28% 50 38 139% 63% .3x - 35% Keane Capital Hurco / HURC 2% 18.30 -34% 12% 118 85 95% 78% .9x - 5% Royce, Thomson, Pier Ascent Media / ASCMA 1% 29.75 -26% 1% 422 129 138% 75% .3x - 6% Liberty Media, Gabelli MEMSIC / MEMS 1% 3.30 -35% 44% 79 12 118% 93% .4x - 11% Still River, IDG-Accel Callaway Golf / ELY 1% 9.74 -52% 5% 627 549 85% 55% .6x 0% 1% Royce, Clearbridge Qiao Xing Universal / XING 0% 1.83 -13% 57% 134 -47 248% 202% nm - 64% Shah, DKR Crexus Investment / CXS 0% 13.66 -4% 8% 248 -36 103% 103% nm 2% 25% Jennison, Ruffer PC Connection / PCCC 0% 6.75 -34% 11% 183 141 102% 94% .1x - 35% DFA, AXA, FMR



Free Cash Flow (sorted by LTM free cash flow yield) (continued)

LTM Recent Market Enter. Tang. NCAV/ EV / FCF Price ∆ to 52-Wk Value Value Book/ Market LTM Div. Insider Company / Ticker Yield ($) Low High ($mn) ($mn) MV Value Sales Yield Own. Notable Shareholders Providence Worcester / PWX -1% 12.35 -22% 5% 60 59 123% -34% 2.4x 1% 23% Keeley, Steinberg Industrias Bachoco / IBA -1% 21.44 -41% 14% 1,072 974 111% 24% .6x 3% 66% Royce, River Road EchoStar / SATS -1% 19.72 -27% 12% 1,673 1,290 150% 34% .7x - 56% MSD, Blue Ridge, Blum Two Harbors Invest. / TWO -1% 9.20 -13% 11% 123 122 148% -63% nm - 24% QVT, Taconic, Fortress Heelys / HLYS -2% 2.53 -36% 15% 70 10 113% 102% .2x - 63% Capital S/W, RenTech Tecumseh Products / TECUA -2% 14.40 -53% 3% 266 206 174% 21% .3x - 1% Tricap, Aegis, Roumell Sycamore Networks / SCMR -3% 20.03 -6% 87% 570 126 113% 79% 1.9x - 29% Third Ave, Donald Smith Miller Petroleum / MILL -3% 5.10 -97% 35% 153 151 190% -130% >9.9x - 43% Prospect Energy Cascade Microtech / CSCD -4% 4.70 -44% 19% 67 34 101% 81% .6x - 38% RGM, Crosslink, Royce TomoTherapy / TOMO -4% 3.56 -42% 31% 193 38 95% 79% .2x - 9% Soundpost, Essex Luby's / LUB -4% 3.93 -17% 48% 110 109 145% -17% .4x - 28% Bandera, Hodges GTSI / GTSI -6% 5.62 -30% 46% 54 47 179% 83% .1x - 28% Netols, Athena, Raffles Webzen / WZEN -6% 3.03 -21% 54% 120 -24 146% 121% nm - 38% NHN Games Insmed / INSM -7% 1.15 -39% 123% 150 28 83% 81% 2.7x - 4% Acadian, BlackRock Global Industries / GLBL -8% 6.36 -22% 69% 724 647 115% 4% .7x - 15% Security, Alleghany Cardero Resources / CDY -9% 1.34 -40% 24% 79 -15 144% 79% nm - 10% Luxor Capital Maxygen / MAXY -9% 6.72 -29% 24% 218 58 70% 69% 1.6x - 12% Conus, Lonestar, Royce Frozen Food / FFEX -10% 4.70 -45% 4% 81 77 111% 12% .2x - 26% Hawkshaw, Royce Creative Tech / CREAF -11% 3.73 -45% 34% 257 14 121% 84% .0x - 39% Raffles Nominees (Pte) BRT Realty Trust / BRT -11% 6.57 -58% 4% 92 84 140% -62% 5.8x - 17% Aegis, Michael Price Silicon Image / SIMG -13% 3.56 -42% 5% 269 118 64% 57% .8x - 1% Tocqueville, RenTech Market Leader / LEDR -13% 2.09 -28% 19% 51 0 112% 103% nm - 13% LMM, Springhouse Opnext / OPXT -15% 2.33 -28% 42% 207 111 118% 88% .3x - 40% Penn, Crosslink, Royce LJ International / JADE -15% 2.83 -65% 41% 67 82 117% 107% .6x - 10% CEDE & Co. Denison Mines / DNN -16% 1.49 -28% 85% 506 488 133% -10% 6.2x - 18% Korea Electric Power Spectrum Group / SPGZ -17% 1.78 -6% 97% 57 83 135% 118% .0x - 65% Afinsa Bienes Tangibles Ascent Solar / ASTI -20% 4.04 -21% 119% 108 55 143% 40% >9.9x - 40% Wells Fargo, Invesco I.D. Systems / IDSY -21% 3.04 -10% 38% 34 -8 161% 138% nm - 12% Artis, Diker, Thomson ePlus / PLUS -22% 17.46 -33% 3% 144 121 116% -134% .2x - 40% Hovde, Heartland Harvest Natural / HNR -22% 8.54 -63% 2% 284 252 97% -8% >9.9x - 5% Pabrai, Cumberland LookSmart / LOOK -23% 1.10 -20% 42% 19 -6 137% 107% nm - 9% Kennedy, RenTech CONN'S / CONN -24% 7.97 -45% 108% 179 273 192% 113% .3x - 31% F&C, Lombardia, Royce China Techfaith / CNTF -26% 2.60 -49% 51% 113 2 178% 138% .0x - 0% RenTech, FMR, HSBC ExpressJet / XJT -26% 3.88 -70% 35% 66 25 298% 7% .0x - 10% Stelliam, RenTech A.C. Moore Arts / ACMR -29% 3.92 -52% 44% 97 70 165% 78% .1x - 2% Glenhill, Royce, Adage Gravity / GRVY -29% 2.10 -61% 25% 58 -7 108% 95% nm - 60% Moon, Black Horse ORBCOMM / ORBC -32% 2.19 -43% 47% 93 3 168% 82% .1x - 2% Stephens, Jennison HQS Maritime / HQS -32% 6.05 -2% 70% 89 52 125% 102% .7x - 23% River Road, Hound Five Star Quality / FVE -32% 3.05 -58% 35% 109 76 113% -83% .1x - 12% F&C, RenTech Volt Information / VOL -38% 11.61 -50% 17% 242 214 116% 82% .1x - 43% River Road, Royce Synthesis Energy / SYMX -38% 1.05 -49% 61% 51 10 217% 73% 4.7x - 30% Columbia Wanger Gushan Environmental / GU -55% 1.15 -15% 183% 97 13 305% 54% .1x 4% 1% RenTech, KBC, Tiger Xinyuan Real Estate / XIN -59% 3.93 -16% 95% 298 367 150% 139% .8x - 0% Blue Ridge, Equity Int'l Myriad Pharma / MYRX -65% 5.09 -29% 47% 125 -19 134% 109% nm - 0% First Eagle, Perry Imperial Sugar / IPSU -84% 16.34 -61% 13% 199 192 133% -14% .4x 0% 4% Royce, Passport dELiA*s / DLIA -88% 1.77 -11% 63% 55 14 165% 51% .1x - 1% T2, North Run, Steadfast A. H. Belo / AHC na 8.37 -89% 0% 172 148 147% 13% .3x - 17% Lonestar, Prescott Acorn International / ATV na 4.89 -37% 49% 145 -14 133% 110% nm - 0% RenTech, Northern Trust Axcelis Tech / ACLS na 2.22 -86% 6% 231 186 94% 69% 1.4x - 1% Schneider, Sterling Linktone / LTON na 1.69 -17% 90% 71 -26 163% 161% nm - 63% MNC, Merry Asia PennyMac Mortgage / PMT na 17.45 -9% 15% 292 -32 107% 107% nm - 1% Blue Ridge, Highbridge Qiao Xing Mobile / QXM na 2.90 -29% 81% 138 -126 277% 259% nm - 62% Shah, Sansar, Pope TAT Technologies / TATT na 7.88 -36% 27% 70 50 125% 87% .6x 11% 1% TAT Industries



P/E Multiples (sorted initially by P/E based on estimated EPS for next fiscal year)

Recent YTD Market Enter. EV / P/E P/E (Estimated) FY Tang. NCAV/ Price Price Value Value LTM Last This Next In End Book/ Market Insider Div. Company / Ticker ($) ∆ ($mn) ($mn) Sales FY FY FY 2 Yrs Date MV Value Own. Yield Xinyuan Real Estate / XIN 3.93 -12% 298 367 .8x 7x 5x 4x na 12/31/10 150% 139% 0% - Two Harbors Invest. / TWO 9.20 -6% 123 122 nm 11x 6x 5x 4x 12/31/09 148% -63% 24% - HQS Maritime / HQS 6.05 -14% 89 52 .7x 10x 9x 6x na 12/31/10 125% 102% 23% - PennyMac Mortgage / PMT 17.45 2% 292 -32 nm nm 12x 7x 6x 12/31/10 107% 107% 1% - Global Industries / GLBL 6.36 -11% 724 647 .7x 10x 16x 9x 6x 12/31/10 115% 4% 15% - Crexus Investment / CXS 13.66 -2% 248 -36 nm nm 13x 9x na 12/31/10 103% 103% 25% 2% Ingram Micro / IM 18.36 5% 3,024 2,492 .1x 15x 11x 9x 9x 12/31/10 100% 85% 4% - CONN'S / CONN 7.97 36% 179 273 .3x 23x 13x 10x na 1/31/11 192% 113% 31% - Five Star Quality / FVE 3.05 -12% 109 76 .1x 3x 13x 10x 7x 12/31/10 113% -83% 12% - Industrias Bachoco / IBA 21.44 -7% 1,072 974 .6x nm 16x 10x 8x 12/31/10 111% 24% 66% 3% Acorn International / ATV 4.89 3% 145 -14 nm nm 12x 12x na 12/31/10 133% 110% 0% - Comverse Tech / CMVT 8.95 -5% 1,808 na na 32x 15x 12x 14x 1/31/06 107% 91% 0% - Flexsteel Industries / FLXS 15.30 50% 101 93 .3x nm 15x 13x 14x 6/30/10 110% 74% 13% 1% Rewards Network / DINE 14.33 13% 125 112 .5x 24x 14x 13x na 12/31/10 62% 54% 5% - Gushan Environmental / GU 1.15 -13% 97 13 .1x nm nm 13x na 12/31/10 305% 54% 1% 4% Synalloy Corp. / SYNL 9.28 -1% 58 44 .4x >99x 19x 15x 24x 12/31/10 104% 71% 18% 3% PC Connection / PCCC 6.75 0% 183 141 .1x nm 20x 15x na 12/31/10 102% 94% 35% - Callaway Golf / ELY 9.74 29% 627 549 .6x nm 34x 16x na 12/31/10 85% 55% 1% 0% L.S. Starrett / SCX 11.08 26% 74 67 .3x nm nm 17x 15x 6/30/10 191% 81% 19% 2% Kaiser Aluminum / KALU 39.93 -4% 810 786 .8x 11x 24x 17x 17x 12/31/10 111% 14% 0% 2% Cascade Microtech / CSCD 4.70 3% 67 34 .6x nm nm 17x 14x 12/31/10 101% 81% 38% - I.D. Systems / IDSY 3.04 -5% 34 -8 nm nm nm 20x na 12/31/10 161% 138% 12% - Hurco / HURC 18.30 24% 118 85 .9x nm nm 21x na 10/31/10 95% 78% 5% - Century Casinos / CNTY 2.51 -7% 60 39 .8x nm 50x 21x na 12/31/10 173% 21% 12% - Imperial Sugar / IPSU 16.34 -6% 199 192 .4x nm 1x 22x na 9/30/10 133% -14% 4% 0% Audiovox / VOXX 7.94 12% 182 142 .2x nm 50x 23x na 2/28/10 151% 124% 19% - Imation / IMN 11.70 34% 446 283 .2x nm 29x 42x na 12/31/10 127% 92% 2% - ORBCOMM / ORBC 2.19 -19% 93 3 .1x nm nm 44x na 12/31/10 168% 82% 2% - Hardinge / HDNG 9.55 74% 111 91 .4x nm nm 48x 40x 12/31/10 136% 84% 3% 0% MEMSIC / MEMS 3.30 1% 79 12 .4x nm nm 66x na 12/31/10 118% 93% 11% - Nam Tai Electronics / NTE 4.84 -7% 217 22 .1x >99x >99x 69x na 12/31/10 143% 91% 25% - Silicon Image / SIMG 3.56 38% 269 118 .8x nm nm 71x na 12/31/10 64% 57% 1% - Novatel Wireless / NVTL 6.77 -15% 211 84 .2x 52x nm 75x na 12/31/10 99% 61% 2% - Albany Molecular / AMRI 8.40 -7% 266 168 .9x nm >99x 76x na 12/31/10 111% 46% 33% - American Railcar / ARII 18.80 71% 401 324 .8x 26x nm 94x 31x 12/31/10 82% 21% 1% 1% Movado Group / MOV 13.15 35% 324 263 .7x nm nm >99x na 1/31/11 114% 87% 31% - EchoStar / SATS 19.72 -2% 1,673 1,290 .7x 5x >99x >99x >99x 12/31/10 150% 34% 56% - A.C. Moore Arts / ACMR 3.92 33% 97 70 .1x nm nm nm 13x 12/31/10 165% 78% 2% - Ascent Solar / ASTI 4.04 -24% 108 55 >9.9x nm nm nm 27x 12/31/10 143% 40% 40% - The9 Limited / NCTY 6.95 -4% 175 -85 nm 11x nm nm 77x 12/31/09 169% 133% 55% - Integr. Electrical / IESC 5.51 -6% 80 53 .1x nm nm nm 79x 9/30/10 159% 108% 2% - Lakes Entertainment / LACO 2.04 -19% 54 42 1.6x 15x 13x na na 12/31/10 146% -22% 27% - Nu Horizons / NUHC 3.54 -14% 66 89 .1x nm 35x nm na 2/28/10 208% 197% 5% - Natuzzi / NTZ 4.61 43% 253 178 .2x nm 77x na na 12/31/10 175% 63% 54% -



P/E Multiples (sorted initially by P/E based on estimated EPS for next fiscal year) (continued)

Recent YTD Market Enter. EV / P/E P/E (Estimated) FY Tang. NCAV/ Price Price Value Value LTM Last This Next In End Book/ Market Insider Div. Company / Ticker ($) ∆ ($mn) ($mn) Sales FY FY FY 2 Yrs Date MV Value Own. Yield Breakwater Res. / BWLRF 0.38 -5% 261 175 .5x 1x na na na 12/31/10 148% -1% 25% - Insmed / INSM 1.15 49% 150 28 2.7x 1x na na na 12/31/10 83% 81% 4% - Qiao Xing Mobile / QXM 2.90 -21% 138 -126 nm 3x na na na 12/31/10 277% 259% 62% - Conrad Industries / CNRD 7.80 3% 50 38 .3x 4x na na na 12/31/10 139% 63% 35% - Spectrum Group / SPGZ 1.78 -5% 57 83 .0x 8x na na na 6/30/10 135% 118% 65% - Miller Petroleum / MILL 5.10 76% 153 151 >9.9x 9x na na na 4/30/10 190% -130% 43% - GTSI / GTSI 5.62 13% 54 47 .1x 10x na na na 12/31/10 179% 83% 28% - ePlus / PLUS 17.46 6% 144 121 .2x 11x na na na 12/31/10 116% -134% 40% - Formula Systems / FORTY 12.60 14% 166 85 .2x 12x na na na 12/31/10 178% 25% 69% 12% Linktone / LTON 1.69 -1% 71 -26 nm 14x na na na 12/31/10 163% 161% 63% - China Techfaith / CNTF 2.60 -15% 113 2 .0x 14x na na na 12/31/10 178% 138% 0% - Kimball / KBALB 7.92 -7% 297 236 .2x 17x na na na 12/31/10 126% 50% 20% 3% LJ International / JADE 2.83 16% 67 82 .6x 26x na na na 12/31/10 117% 107% 10% - TAT Technologies / TATT 7.88 -5% 70 50 .6x 36x na na na 12/31/10 125% 87% 1% 11% Cardero Resources / CDY 1.34 -1% 79 -15 nm 45x na na na 10/31/10 144% 79% 10% - Deswell Industries / DSWL 5.08 26% 82 40 .3x 64x na na na 3/31/10 150% 74% 16% 8% TravelCenters / TA 4.81 9% 83 29 .0x nm nm na na 12/31/10 344% -193% 16% - Creative Tech / CREAF 3.73 -17% 257 14 .0x nm na na na 6/30/10 121% 84% 39% - ExpressJet / XJT 3.88 -20% 66 25 .0x nm nm na na 12/31/10 298% 7% 10% - dELiA*s / DLIA 1.77 -5% 55 14 .1x nm nm nm na 1/31/11 165% 51% 1% - Volt Information / VOL 11.61 16% 242 214 .1x nm na na na 10/30/10 116% 82% 43% - Adaptec / ADPT 3.27 -2% 394 14 .1x nm nm nm nm 3/31/10 98% 95% 0% - Gencor Industries / GENC 7.62 2% 73 8 .1x nm na na na 12/31/10 131% 120% 52% - Planar Systems / PLNR 3.50 25% 70 36 .2x nm nm nm na 9/30/10 90% 77% 4% - Frozen Food / FFEX 4.70 42% 81 77 .2x nm nm nm nm 12/31/10 111% 12% 26% - Duckwall-ALCO / DUCK 14.60 -5% 55 104 .2x nm na na na 11/1/10 188% 124% 16% - Heelys / HLYS 2.53 16% 70 10 .2x nm na na na 12/31/10 113% 102% 63% - TomoTherapy / TOMO 3.56 -9% 193 38 .2x nm nm nm na 12/31/10 95% 79% 9% - Tecumseh Products / TECUA 14.40 23% 266 206 .3x nm na na na 12/31/10 174% 21% 1% - Ascent Media / ASCMA 29.75 17% 422 129 .3x nm na na na 6/30/10 138% 75% 6% - A. H. Belo / AHC 8.37 45% 172 148 .3x nm na na na 9/30/10 147% 13% 17% - Opnext / OPXT 2.33 23% 207 111 .3x nm nm nm na 3/31/10 118% 88% 40% - Luby's / LUB 3.93 7% 110 109 .4x nm na na na 2/10/11 145% -17% 28% - Seahawk Drilling / HAWK 17.76 -21% 210 132 .5x nm nm nm nm 12/31/10 216% -7% 9% - Axcelis Tech / ACLS 2.22 57% 231 186 1.4x nm na na na 12/31/10 94% 69% 1% - Maxygen / MAXY 6.72 10% 218 58 1.6x nm na na na 12/31/10 70% 69% 12% - Sycamore Networks / SCMR 20.03 -4% 570 126 1.9x nm nm nm nm 7/31/10 113% 79% 29% - Avatar Holdings / AVTR 21.47 26% 244 146 2.0x nm nm nm nm 12/31/10 182% -62% 28% - Providence Worcester / PWX 12.35 15% 60 59 2.4x nm nm nm nm 12/31/09 123% -34% 23% 1% QLT / QLTI 5.76 16% 310 122 2.9x nm na na na 12/31/10 131% 83% 14% - Synthesis Energy / SYMX 1.05 13% 51 10 4.7x nm nm nm na 6/30/10 217% 73% 30% - BRT Realty Trust / BRT 6.57 29% 92 84 5.8x nm nm nm nm 9/30/10 140% -62% 17% - Denison Mines / DNN 1.49 17% 506 488 6.2x nm na na na 12/31/10 133% -10% 18% - Harvest Natural / HNR 8.54 61% 284 252 >9.9x nm nm na na 12/31/10 97% -8% 5% - Trans World / TWMC 1.80 19% 57 -6 nm nm na na na 1/31/10 342% 269% 69% - Qiao Xing Universal / XING 1.83 -16% 134 -47 nm nm na na na 12/31/10 248% 202% 64% - Ninetowns Internet / NINE 1.78 2% 64 -30 nm nm nm nm nm 12/31/09 212% 146% 39% - Agria / GRO 2.17 -31% 137 -35 nm nm na na na 12/31/10 175% 126% 3% - Webzen / WZEN 3.03 5% 120 -24 nm nm na na na 12/31/10 146% 121% 38% - LookSmart / LOOK 1.10 8% 19 -6 nm nm nm nm na 12/31/10 137% 107% 9% - Actions Semi / ACTS 2.38 -1% 205 -24 nm nm nm nm nm 12/31/10 134% 110% 0% - Myriad Pharma / MYRX 5.09 1% 125 -19 nm nm nm nm nm 6/30/09 134% 109% 0% - Market Leader / LEDR 2.09 -1% 51 0 nm nm na na na 12/31/10 112% 103% 13% -



Net Current Asset Value (equals current assets minus total liabilities) (sorted by NCAV to market value)

Recent Tang. NCAV/ Market Enter. EV / Revenue Growth Price Book/ Market Value Value LTM 5-Year Last FY LTM Insider Div. Company / Ticker ($) MV Value ($mn) ($mn) Sales CAGR Own. Yield Notable Shareholders Trans World / TWMC 1.80 342% 269% 57 -6 nm -10% -18% -18% 69% - Lloyd Miller, Riley Qiao Xing Mobile / QXM 2.90 277% 259% 138 -126 nm 6% -31% -14% 62% - Shah, Sansar, Pope Qiao Xing Universal / XING 1.83 248% 202% 134 -47 nm 8% -33% -25% 64% - Shah, DKR Nu Horizons / NUHC 3.54 208% 197% 66 89 .1x 17% 1% -20% 5% - Donald Smith, Lapides Linktone / LTON 1.69 163% 161% 71 -26 nm 33% 34% 4% 63% - MNC, Merry Asia Ninetowns Internet / NINE 1.78 212% 146% 64 -30 nm -4% 3% -10% 39% - Tech Pioneer, RenTech Xinyuan Real Estate / XIN 3.93 150% 139% 298 367 .8x 66% 26% -21% 0% - Blue Ridge, Equity Int'l I.D. Systems / IDSY 3.04 161% 138% 34 -8 nm -6% -62% -62% 12% - Artis, Diker, Thomson China Techfaith / CNTF 2.60 178% 138% 113 2 .0x 85% 46% 0% 0% - RenTech, FMR, HSBC The9 Limited / NCTY 6.95 169% 133% 175 -85 nm >99% 34% -34% 55% - Martin Currie, QVT Agria / GRO 2.17 175% 126% 137 -35 nm nm -30% -30% 3% - Heartland, TPG Duckwall-ALCO / DUCK 14.60 188% 124% 55 104 .2x 4% 2% -1% 16% - Heartland, Aegis, Price Audiovox / VOXX 7.94 151% 124% 182 142 .2x 1% 2% -17% 19% - Baupost, Kahn, Aegis Webzen / WZEN 3.03 146% 121% 120 -24 nm -10% 13% -8% 38% - NHN Games Gencor Industries / GENC 7.62 131% 120% 73 8 .1x 1% -36% -46% 52% - FMR, PNC, RBF Spectrum Group / SPGZ 1.78 135% 118% 57 83 .0x >99% 50% 36% 65% - Afinsa Bienes Tangibles CONN'S / CONN 7.97 192% 113% 179 273 .3x 8% -6% -6% 31% - F&C, Lombardia, Royce Acorn International / ATV 4.89 133% 110% 145 -14 nm 25% 23% -3% 0% - RenTech, Northern Trust Actions Semi / ACTS 2.38 134% 110% 205 -24 nm -5% -54% -54% 0% - RenTech, T.Rowe Myriad Pharma / MYRX 5.09 134% 109% 125 -19 nm nm -95% -66% 0% - First Eagle, Perry Integr. Electrical / IESC 5.51 159% 108% 80 53 .1x -4% -19% -23% 2% - Gendell, Royce, Keeley PennyMac Mortgage / PMT 17.45 107% 107% 292 -32 nm nm na 0% 1% - Blue Ridge, Highbridge LJ International / JADE 2.83 117% 107% 67 82 .6x 19% -10% -20% 10% - CEDE & Co. LookSmart / LOOK 1.10 137% 107% 19 -6 nm -8% -20% -20% 9% - Kennedy, RenTech Crexus Investment / CXS 13.66 103% 103% 248 -36 nm nm na 0% 25% 2% Jennison, Ruffer Market Leader / LEDR 2.09 112% 103% 51 0 nm -13% -38% -38% 13% - LMM, Springhouse HQS Maritime / HQS 6.05 125% 102% 89 52 .7x 28% 7% 7% 23% - River Road, Hound Heelys / HLYS 2.53 113% 102% 70 10 .2x 16% -38% -38% 63% - Capital S/W, RenTech Gravity / GRVY 2.10 108% 95% 58 -7 nm 1% 32% 23% 60% - Moon, Black Horse Adaptec / ADPT 3.27 98% 95% 394 14 .1x -22% -21% -37% 0% - Steel, RenTech, Pzena PC Connection / PCCC 6.75 102% 94% 183 141 .1x 3% -10% -11% 35% - DFA, AXA, FMR MEMSIC / MEMS 3.30 118% 93% 79 12 .4x 33% 41% 41% 11% - Still River, IDG-Accel Imation / IMN 11.70 127% 92% 446 283 .2x 7% -17% -17% 2% - Artisan, Private, LSV Comverse Tech / CMVT 8.95 107% 91% 1,808 na na 1% 25% 24% 0% - RS, Westfield, Perry Nam Tai Electronics / NTE 4.84 143% 91% 217 22 .1x -5% -34% -35% 25% - Royce, Kahn, Acadian Opnext / OPXT 2.33 118% 88% 207 111 .3x 32% 12% 6% 40% - Penn, Crosslink, Royce TAT Technologies / TATT 7.88 125% 87% 70 50 .6x 20% -20% -20% 1% 11% TAT Industries Movado Group / MOV 13.15 114% 87% 324 263 .7x -2% -18% -18% 31% - Royce, Southpoint Ingram Micro / IM 18.36 100% 85% 3,024 2,492 .1x 3% -14% -14% 4% - Artisan, GS, Cambiar Hardinge / HDNG 9.55 136% 84% 111 91 .4x -2% -38% -38% 3% 0% Royce, Aegis, Portola Creative Tech / CREAF 3.73 121% 84% 257 14 .0x -11% -37% -69% 39% - Raffles Nominees (Pte) GTSI / GTSI 5.62 179% 83% 54 47 .1x -7% -7% -7% 28% - Netols, Athena, Raffles QLT / QLTI 5.76 131% 83% 310 122 2.9x -26% -13% -13% 14% - Axial, Black Horse Volt Information / VOL 11.61 116% 82% 242 214 .1x 9% 6% -8% 43% - River Road, Royce ORBCOMM / ORBC 2.19 168% 82% 93 3 .1x 20% 1% 1% 2% - Stephens, Jennison



Net Current Asset Value (equals current assets minus total liabilities) (sorted by NCAV to market value) (continued)

Recent Tang. NCAV/ Market Enter. EV / Revenue Growth Price Book/ Market Value Value LTM 5-Year Last FY LTM Insider Div. Company / Ticker ($) MV Value ($mn) ($mn) Sales CAGR Own. Yield Notable Shareholders Insmed / INSM 1.15 83% 81% 150 28 2.7x >99% -11% -11% 4% - Acadian, BlackRock L.S. Starrett / SCX 11.08 191% 81% 74 67 .3x 3% -16% -29% 19% 2% Royce, Gabelli Cascade Microtech / CSCD 4.70 101% 81% 67 34 .6x -4% -30% -30% 38% - RGM, Crosslink, Royce Cardero Resources / CDY 1.34 144% 79% 79 -15 nm nm na 0% 10% - Luxor Capital TomoTherapy / TOMO 3.56 95% 79% 193 38 .2x 29% -20% -20% 9% - Soundpost, Essex Sycamore / SCMR 20.03 113% 79% 570 126 1.9x 9% -42% 14% 29% - Third Ave, Don. Smith Hurco / HURC 18.30 95% 78% 118 85 .9x -2% -59% -57% 5% - Royce, Thomson, Pier A.C. Moore Arts / ACMR 3.92 165% 78% 97 70 .1x -1% -12% -12% 2% - Glenhill, Royce, Adage Planar Systems / PLNR 3.50 90% 77% 70 36 .2x -7% -33% -29% 4% - Royce, RenTech, DFA Ascent Media / ASCMA 29.75 138% 75% 422 129 .3x nm -22% -22% 6% - Liberty Media, Gabelli Flexsteel Industries / FLXS 15.30 110% 74% 101 93 .3x -4% -20% -18% 13% 1% Perritt, Towle, Royce Deswell Industries / DSWL 5.08 150% 74% 82 40 .3x 6% -8% -32% 16% 8% Royce, RenTech Synthesis Energy / SYMX 1.05 217% 73% 51 10 4.7x nm >99% >99% 30% - Columbia Wanger Synalloy Corp. / SYNL 9.28 104% 71% 58 44 .4x 1% -38% -38% 18% 3% Royce, Gendell Axcelis Tech / ACLS 2.22 94% 69% 231 186 1.4x -24% -47% -47% 1% - Schneider, Sterling Maxygen / MAXY 6.72 70% 69% 218 58 1.6x 17% -64% -64% 12% - Conus, Lonestar, Royce Conrad Industries / CNRD 7.80 139% 63% 50 38 .3x 31% -25% -25% 35% - Keane Capital Natuzzi / NTZ 4.61 175% 63% 253 178 .2x -3% 5% -18% 54% - Royce, Brandes Novatel Wireless / NVTL 6.77 99% 61% 211 84 .2x 27% 5% 5% 2% - Royce, Kestrel Silicon Image / SIMG 3.56 64% 57% 269 118 .8x -3% -45% -45% 1% - Tocqueville, RenTech Callaway Golf / ELY 9.74 85% 55% 627 549 .6x 0% -15% -15% 1% 0% Royce, Clearbridge Rewards Network / DINE 14.33 62% 54% 125 112 .5x -9% -13% -13% 5% - Elkhorn, WC, RenTech Gushan Environmental / GU 1.15 305% 54% 97 13 .1x 30% -58% -58% 1% 4% RenTech, KBC, Tiger dELiA*s / DLIA 1.77 165% 51% 55 14 .1x 7% 4% 4% 1% - T2, Steadfast Kimball / KBALB 7.92 126% 50% 297 236 .2x 3% -11% -19% 20% 3% Barclays, DFA Albany Molecular / AMRI 8.40 111% 46% 266 168 .9x 3% -14% -14% 33% - Advisory, DFA, Royce Ascent Solar / ASTI 4.04 143% 40% 108 55 >9.9x nm 0% 0% 40% - Wells Fargo, Invesco EchoStar / SATS 19.72 150% 34% 1,673 1,290 .7x 2% -11% -12% 56% - MSD, Blue Ridge, Blum Formula Systems / FORTY 12.60 178% 25% 166 85 .2x 7% -7% -27% 69% 12% Emblaze, Clal Insur. Industrias Bachoco / IBA 21.44 111% 24% 1,072 974 .6x 12% 10% 23% 66% 3% Royce, River Road Tecumseh / TECUA 14.40 174% 21% 266 206 .3x -4% -26% -24% 1% - Tricap, Aegis, Roumell Century Casinos / CNTY 2.51 173% 21% 60 39 .8x 7% -6% -6% 12% - Beach, Perritt American Railcar / ARII 18.80 82% 21% 401 324 .8x 4% -48% -48% 1% 1% Icahn, Advisory, DFA Kaiser Aluminum / KALU 39.93 111% 14% 810 786 .8x 1% -35% -35% 0% 2% Advisory, GS, Third Ave A. H. Belo / AHC 8.37 147% 13% 172 148 .3x -8% -19% -19% 17% - Lonestar, Prescott Frozen Food / FFEX 4.70 111% 12% 81 77 .2x -4% -24% -24% 26% - Hawkshaw, Royce ExpressJet / XJT 3.88 298% 7% 66 25 .0x -15% -48% -48% 10% - Stelliam, RenTech Global Industries / GLBL 6.36 115% 4% 724 647 .7x 15% -15% -15% 15% - Security, Alleghany Breakwater Res. / BWLRF 0.38 148% -1% 261 175 .5x 15% 56% 23% 25% - Dundee Corp. Seahawk Drilling / HAWK 17.76 216% -7% 210 132 .5x nm -57% 0% 9% - Chilton, MHR, Pennant Harvest Natural / HNR 8.54 97% -8% 284 252 >9.9x -75% na 0% 5% - Pabrai, Cumberland Denison Mines / DNN 1.49 133% -10% 506 488 6.2x >99% -36% -36% 18% - Korea Electric Power Imperial Sugar / IPSU 16.34 133% -14% 199 192 .4x -8% -12% 21% 4% 0% Royce, Passport Luby's / LUB 3.93 145% -17% 110 109 .4x 0% -8% -12% 28% - Bandera, Hodges Lakes Entertain. / LACO 2.04 146% -22% 54 42 1.6x 8% 8% 8% 27% - Key Colony, Par Providence Wor’ster / PWX 12.35 123% -34% 60 59 2.4x -1% -19% -19% 23% 1% Keeley, Steinberg Avatar Holdings / AVTR 21.47 182% -62% 244 146 2.0x -26% -33% -33% 28% - Cannell, Tweedy BRT Realty Trust / BRT 6.57 140% -62% 92 84 5.8x -4% -35% -42% 17% - Aegis, Michael Price Two Harbors Invest. / TWO 9.20 148% -63% 123 122 nm nm na 0% 24% - QVT, Taconic, Fortress Five Star Quality / FVE 3.05 113% -83% 109 76 .1x 15% 9% 9% 12% - F&C, RenTech Miller Petroleum / MILL 5.10 190% -130% 153 151 >9.9x -4% >99% 53% 43% - Prospect Energy ePlus / PLUS 17.46 116% -134% 144 121 .2x 16% -18% -15% 40% - Hovde, Heartland TravelCenters / TA 4.81 344% -193% 83 29 .0x 12% -39% -39% 16% - RenTech, Leucadia, GS



Percentile Rank within Industry (sorted by LTM EBIT margin rank)

Percentile Rank within Industry Tang. NCAV/ Rev. Growth EPS Growth LTM EBIT Book/ Market Insider Company / Ticker Industry 5-Yr LTM LTM Est. Margin MV Value Own. Notable Shareholders Breakwater Res. / BWLRF Gold & Silver 67 83 44 na 90 148% -1% 25% Dundee Corp. Imperial Sugar / IPSU Food Processing 10 82 99 na 89 133% -14% 4% Royce, Passport Gravity / GRVY Software & Programming 27 83 95 na 81 108% 95% 60% Moon, Black Horse Qiao Xing Mobile / QXM Comms Services 44 36 17 na 74 277% 259% 62% Shah, Sansar, Pope Conrad Industries / CNRD Water Transportation 85 23 33 na 74 139% 63% 35% Keane Capital Xinyuan Real Estate / XIN Construction Services 95 26 80 97 73 150% 139% 0% Blue Ridge, Equity Int'l Kaiser Aluminum / KALU Metal Mining 26 14 96 na 72 111% 14% 0% Advisory, GS, Third Ave Webzen / WZEN Computer Services 8 47 29 na 70 146% 121% 38% NHN Games Comverse Tech / CMVT Software & Programming 26 83 95 73 66 107% 91% 0% RS, Westfield, Perry Industrias Bachoco / IBA Fish/Livestock 62 83 14 na 64 111% 24% 66% Royce, River Road China Techfaith / CNTF Comms Equipment 97 62 27 na 62 178% 138% 0% RenTech, FMR, HSBC American Railcar / ARII Railroads 35 7 30 64 61 82% 21% 1% Icahn, Advisory, DFA Rewards Network / DINE Business Services 9 38 59 64 60 62% 54% 5% Elkhorn, WC, RenTech ePlus / PLUS Software & Programming 70 35 35 na 56 116% -134% 40% Hovde, Heartland CONN'S / CONN Retail (technology) 51 50 25 43 55 192% 113% 31% F&C, Lombardia, Royce Flexsteel Industries / FLXS Furniture & Fixtures 15 31 98 na 55 110% 74% 13% Perritt, Towle, Royce Qiao Xing Universal / XING Comms Services 50 23 17 na 54 248% 202% 64% Shah, DKR TAT Technologies / TATT Misc. Capital Goods 76 28 25 na 54 125% 87% 1% TAT Industries Duckwall-ALCO / DUCK Retail (dep't & discount) 38 59 92 na 53 188% 124% 16% Heartland, Aegis, Price Ingram Micro / IM Computer Hardware 33 36 93 47 53 100% 85% 4% Artisan, GS, Cambiar Novatel Wireless / NVTL Comms Equipment 82 69 98 71 53 99% 61% 2% Royce, Kestrel Nam Tai Electronics / NTE Electronic Instruments 13 14 21 na 52 143% 91% 25% Royce, Kahn, Acadian GTSI / GTSI Computer Hardware 11 48 37 na 52 179% 83% 28% Netols, Athena, Raffles Kimball / KBALB Furniture & Fixtures 32 30 na na 52 126% 50% 20% Barclays, DFA EchoStar / SATS Broadcasting & Cable 29 40 93 12 52 150% 34% 56% MSD, Blue Ridge, Blum PC Connection / PCCC Retail (online) 33 42 19 na 51 102% 94% 35% DFA, AXA, FMR Integr. Electrical / IESC Construction Services 14 25 na na 50 159% 108% 2% Gendell, Royce, Keeley Nu Horizons / NUHC Electronic Instruments 71 28 2 82 49 208% 197% 5% Donald Smith, Lapides Deswell Industries / DSWL Chemicals - Plastics 45 16 83 na 49 150% 74% 16% Royce, RenTech TravelCenters / TA Retail (specialty) 61 12 22 na 49 344% -193% 16% RenTech, Leucadia, GS Volt Information / VOL Business Services 52 46 93 na 48 116% 82% 43% River Road, Royce MEMSIC / MEMS Semiconductors 86 89 86 na 47 118% 93% 11% Still River, IDG-Accel Callaway Golf / ELY Recreational Products 24 35 16 43 47 85% 55% 1% Royce, Clearbridge Imation / IMN Computer Services 47 33 38 na 46 127% 92% 2% Artisan, Private, LSV Natuzzi / NTZ Furniture & Fixtures 17 31 73 78 46 175% 63% 54% Royce, Brandes Lakes Entertainment / LACO Casinos & Gaming 51 73 89 64 46 146% -22% 27% Key Colony, Par Providence Worcester / PWX Railroads 20 29 2 na 44 123% -34% 23% Keeley, Steinberg Trans World / TWMC Business Services 9 31 67 na 43 342% 269% 69% Lloyd Miller, Riley A.C. Moore Arts / ACMR Retail (specialty) 20 39 58 na 43 165% 78% 2% Glenhill, Royce, Adage Planar Systems / PLNR Electronic Instruments 11 18 84 na 43 90% 77% 4% Royce, RenTech, DFA Frozen Food / FFEX Trucking 15 24 na na 43 111% 12% 26% Hawkshaw, Royce dELiA*s / DLIA Retail (apparel) 48 68 14 na 42 165% 51% 1% T2, North Run, Steadfast Audiovox / VOXX Comms Equipment 27 33 na na 41 151% 124% 19% Baupost, Kahn, Aegis ORBCOMM / ORBC Comms Services 76 64 57 na 41 168% 82% 2% Stephens, Jennison L.S. Starrett / SCX Misc. Capital Goods 31 19 10 na 41 191% 81% 19% Royce, Gabelli



Percentile Rank within Industry (sorted by LTM EBIT margin rank) (continued)

Percentile Rank within Industry Tang. NCAV/ Rev. Growth EPS Growth LTM EBIT Book/ Market Insider Company / Ticker Industry 5-Yr LTM LTM Est. Margin MV Value Own. Notable Shareholders Hurco / HURC Technical Instruments 19 4 16 na 40 95% 78% 5% Royce, Thomson, Pier Albany Molecular / AMRI Biotechnology & Drugs 33 36 12 34 39 111% 46% 33% Advisory, DFA, Royce LookSmart / LOOK Computer Services 11 27 74 82 38 137% 107% 9% Kennedy, RenTech Luby's / LUB Restaurants 23 40 3 na 38 145% -17% 28% Bandera, Hodges Hardinge / HDNG Misc. Capital Goods 20 12 55 na 37 136% 84% 3% Royce, Aegis, Portola Gencor Industries / GENC Construction Machinery 26 8 9 na 36 131% 120% 52% FMR, PNC, RBF Heelys / HLYS Footwear 69 12 57 na 36 113% 102% 63% Capital S/W, RenTech Global Industries / GLBL Oil Well Services 67 35 95 na 36 115% 4% 15% Security, Alleghany LJ International / JADE Jewelry & Silverware 74 28 91 na 35 117% 107% 10% CEDE & Co. Five Star Quality / FVE Healthcare Facilities 67 74 na 2 34 113% -83% 12% F&C, RenTech Spectrum Group / SPGZ Misc. Financial Services 98 88 23 na 33 135% 118% 65% Afinsa Bienes Tangibles Cascade Microtech / CSCD Technical Instruments 15 17 80 na 33 101% 81% 38% RGM, Crosslink, Royce Linktone / LTON Computer Services 86 68 90 na 31 163% 161% 63% MNC, Merry Asia Creative Tech / CREAF Computer Peripherals 8 2 8 na 31 121% 84% 39% Raffles Nominees (Pte) A. H. Belo / AHC Printing & Publishing 10 30 24 na 31 147% 13% 17% Lonestar, Prescott Seahawk Drilling / HAWK Oil Well Services na na na na 31 216% -7% 9% Chilton, MHR, Pennant TomoTherapy / TOMO Medical Equipment 84 28 42 90 29 95% 79% 9% Soundpost, Essex Acorn International / ATV Appliances & Tools 81 56 95 na 28 133% 110% 0% RenTech, Northern Trust Actions Semi / ACTS Semiconductors 13 5 18 na 28 134% 110% 0% RenTech, T.Rowe Movado Group / MOV Jewelry & Silverware 19 31 na na 28 114% 87% 31% Royce, Southpoint The9 Limited / NCTY Business Services 99 15 10 0 27 169% 133% 55% Martin Currie, QVT Synalloy Corp. / SYNL Construction Supplies 26 12 21 na 27 104% 71% 18% Royce, Gendell Century Casinos / CNTY Casinos & Gaming 47 50 96 90 24 173% 21% 12% Beach, Perritt Gushan Environmental / GU Oil & Gas - Integrated 84 4 11 na 23 305% 54% 1% RenTech, KBC, Tiger HQS Maritime / HQS Fish/Livestock 83 72 69 90 21 125% 102% 23% River Road, Hound Adaptec / ADPT Computer Storage 4 13 4 na 20 98% 95% 0% Steel, RenTech, Pzena Opnext / OPXT Semiconductors 85 70 na 60 20 118% 88% 40% Penn, Crosslink, Royce Formula Systems / FORTY Software & Programming 48 21 86 na 18 178% 25% 69% Emblaze, Clal Insurance PennyMac Mortgage / PMT Investment Services na na na 24 16 107% 107% 1% Blue Ridge, Highbridge Silicon Image / SIMG Semiconductors 17 8 na na 16 64% 57% 1% Tocqueville, RenTech Sycamore Networks / SCMR Comms Equipment 53 78 30 na 15 113% 79% 29% Third Ave, Donald Smith ExpressJet / XJT Airline 6 7 84 na 15 298% 7% 10% Stelliam, RenTech Avatar Holdings / AVTR Real Estate Operations 2 15 79 na 15 182% -62% 28% Cannell, Tweedy Ascent Media / ASCMA Broadcasting & Cable na 25 54 na 14 138% 75% 6% Liberty Media, Gabelli Tecumseh Products / TECUA Misc. Capital Goods 15 23 11 na 14 174% 21% 1% Tricap, Aegis, Roumell Maxygen / MAXY Biotechnology & Drugs 72 3 7 na 12 70% 69% 12% Conus, Lonestar, Royce Market Leader / LEDR Real Estate Operations 7 12 45 na 11 112% 103% 13% LMM, Springhouse Axcelis Tech / ACLS Semiconductors 3 8 66 na 11 94% 69% 1% Schneider, Sterling I.D. Systems / IDSY Comms Equipment 13 3 10 na 10 161% 138% 12% Artis, Diker, Thomson Agria / GRO Crops na 18 3 na 8 175% 126% 3% Heartland, TPG QLT / QLTI Biotechnology & Drugs 3 38 57 na 8 131% 83% 14% Axial, Black Horse Insmed / INSM Biotechnology & Drugs 99 41 na na 8 83% 81% 4% Acadian, BlackRock Denison Mines / DNN Metal Mining 100 14 44 na 7 133% -10% 18% Korea Electric Power Miller Petroleum / MILL Oil & Gas Operations 14 91 na na 5 190% -130% 43% Prospect Energy Crexus Investment / CXS Investment Services na na na 22 4 103% 103% 25% Jennison, Ruffer BRT Realty Trust / BRT Real Estate Operations 15 10 0 na 4 140% -62% 17% Aegis, Michael Price Synthesis Energy / SYMX Oil & Gas Operations na 100 73 na 3 217% 73% 30% Columbia Wanger Ninetowns Internet / NINE Software & Programming 15 43 na na 2 212% 146% 39% Tech Pioneer, RenTech Ascent Solar / ASTI Semiconductors na 60 39 na na 143% 40% 40% Wells Fargo, Invesco Cardero Resources / CDY Gold & Silver na na 99 na na 144% 79% 10% Luxor Capital Harvest Natural / HNR Oil & Gas Operations 0 na 81 na na 97% -8% 5% Pabrai, Cumberland Myriad Pharma / MYRX Biotechnology & Drugs na 3 22 na na 134% 109% 0% First Eagle, Perry Two Harbors Invest. / TWO Investment Services na na na na na 148% -63% 24% QVT, Taconic, Fortress



Insider Buying and Ownership (sorted by number of buys minus sells in past six months, then by insider ownership)

Recent Last Six Months Market Enter. Tang. NCAV/ EV / Price Insider Insider Insider Value Value Book/ Market Div. LTM Company / Ticker ($) Buys Sales Own. ($mn) ($mn) MV Value Yield Sales Notable Shareholders Adaptec / ADPT 3.27 35 8 0% 394 14 98% 95% - .1x Steel, RenTech, Pzena Trans World / TWMC 1.80 20 4 69% 57 -6 342% 269% - nm Lloyd Miller, Riley Crexus Investment / CXS 13.66 8 - 25% 248 -36 103% 103% 2% nm Jennison, Ruffer Imation / IMN 11.70 8 - 2% 446 283 127% 92% - .2x Artisan, Private, LSV Luby's / LUB 3.93 6 - 28% 110 109 145% -17% - .4x Bandera, Hodges QLT / QLTI 5.76 8 2 14% 310 122 131% 83% - 2.9x Axial, Black Horse Synthesis Energy / SYMX 1.05 4 - 30% 51 10 217% 73% - 4.7x Columbia Wanger PennyMac Mortgage / PMT 17.45 4 - 1% 292 -32 107% 107% - nm Blue Ridge, Highbridge CONN'S / CONN 7.97 3 - 31% 179 273 192% 113% - .3x F&C, Lombardia, Royce Market Leader / LEDR 2.09 3 - 13% 51 0 112% 103% - nm LMM, Springhouse I.D. Systems / IDSY 3.04 4 1 12% 34 -8 161% 138% - nm Artis, Diker, Thomson Tecumseh Products / TECUA 14.40 3 - 1% 266 206 174% 21% - .3x Tricap, Aegis, Roumell Spectrum Group / SPGZ 1.78 2 - 65% 57 83 135% 118% - .0x Afinsa Bienes Tangibles Hurco / HURC 18.30 2 - 5% 118 85 95% 78% - .9x Royce, Thomson, Pier GTSI / GTSI 5.62 1 - 28% 54 47 179% 83% - .1x Netols, Athena, Raffles Two Harbors Invest. / TWO 9.20 1 - 24% 123 122 148% -63% - nm QVT, Taconic, Fortress Ascent Media / ASCMA 29.75 1 - 6% 422 129 138% 75% - .3x Liberty Media, Gabelli Myriad Pharma / MYRX 5.09 1 - 0% 125 -19 134% 109% - nm First Eagle, Perry Formula Systems / FORTY 12.60 - - 69% 166 85 178% 25% 12% .2x Emblaze, Clal Insurance Industrias Bachoco / IBA 21.44 - - 66% 1,072 974 111% 24% 3% .6x Royce, River Road Qiao Xing Universal / XING 1.83 - - 64% 134 -47 248% 202% - nm Shah, DKR Linktone / LTON 1.69 - - 63% 71 -26 163% 161% - nm MNC, Merry Asia Qiao Xing Mobile / QXM 2.90 - - 62% 138 -126 277% 259% - nm Shah, Sansar, Pope Gravity / GRVY 2.10 - - 60% 58 -7 108% 95% - nm Moon, Black Horse EchoStar / SATS 19.72 - - 56% 1,673 1,290 150% 34% - .7x MSD, Blue Ridge, Blum The9 Limited / NCTY 6.95 - - 55% 175 -85 169% 133% - nm Martin Currie, QVT Natuzzi / NTZ 4.61 - - 54% 253 178 175% 63% - .2x Royce, Brandes Gencor Industries / GENC 7.62 - - 52% 73 8 131% 120% - .1x FMR, PNC, RBF Volt Information / VOL 11.61 - - 43% 242 214 116% 82% - .1x River Road, Royce Miller Petroleum / MILL 5.10 - - 43% 153 151 190% -130% - >9.9x Prospect Energy Opnext / OPXT 2.33 - - 40% 207 111 118% 88% - .3x Penn, Crosslink, Royce Creative Tech / CREAF 3.73 - - 39% 257 14 121% 84% - .0x Raffles Nominees (Pte) Ninetowns Internet / NINE 1.78 - - 39% 64 -30 212% 146% - nm Tech Pioneer, RenTech Webzen / WZEN 3.03 - - 38% 120 -24 146% 121% - nm NHN Games Conrad Industries / CNRD 7.80 - - 35% 50 38 139% 63% - .3x Keane Capital Movado Group / MOV 13.15 - - 31% 324 263 114% 87% - .7x Royce, Southpoint Sycamore Networks / SCMR 20.03 - - 29% 570 126 113% 79% - 1.9x Third Ave, Donald Smith Breakwater Res. / BWLRF 0.38 - - 25% 261 175 148% -1% - .5x Dundee Corp. Nam Tai Electronics / NTE 4.84 - - 25% 217 22 143% 91% - .1x Royce, Kahn, Acadian Providence Worcester / PWX 12.35 - - 23% 60 59 123% -34% 1% 2.4x Keeley, Steinberg HQS Maritime / HQS 6.05 - - 23% 89 52 125% 102% - .7x River Road, Hound Kimball / KBALB 7.92 - - 20% 297 236 126% 50% 3% .2x Barclays, DFA Audiovox / VOXX 7.94 - - 19% 182 142 151% 124% - .2x Baupost, Kahn, Aegis L.S. Starrett / SCX 11.08 - - 19% 74 67 191% 81% 2% .3x Royce, Gabelli Denison Mines / DNN 1.49 - - 18% 506 488 133% -10% - 6.2x Korea Electric Power



Insider Buying and Ownership (sorted by number of buys minus number of sells in past six months) (continued)

Recent Last Six Months Market Enter. Tang. NCAV/ EV / Price Insider Insider Insider Value Value Book/ Market Div. LTM Company / Ticker ($) Buys Sales Own. ($mn) ($mn) MV Value Yield Sales Notable Shareholders Synalloy Corp. / SYNL 9.28 - - 18% 58 44 104% 71% 3% .4x Royce, Gendell BRT Realty Trust / BRT 6.57 - - 17% 92 84 140% -62% - 5.8x Aegis, Michael Price Deswell Industries / DSWL 5.08 - - 16% 82 40 150% 74% 8% .3x Royce, RenTech Duckwall-ALCO / DUCK 14.60 - - 16% 55 104 188% 124% - .2x Heartland, Aegis, Price Five Star Quality / FVE 3.05 - - 12% 109 76 113% -83% - .1x F&C, RenTech Century Casinos / CNTY 2.51 - - 12% 60 39 173% 21% - .8x Beach, Perritt MEMSIC / MEMS 3.30 - - 11% 79 12 118% 93% - .4x Still River, IDG-Accel Cardero Resources / CDY 1.34 - - 10% 79 -15 144% 79% - nm Luxor Capital LJ International / JADE 2.83 - - 10% 67 82 117% 107% - .6x CEDE & Co. LookSmart / LOOK 1.10 - - 9% 19 -6 137% 107% - nm Kennedy, RenTech Rewards Network / DINE 14.33 - - 5% 125 112 62% 54% - .5x Elkhorn, WC, RenTech Nu Horizons / NUHC 3.54 - - 5% 66 89 208% 197% - .1x Donald Smith, Lapides Insmed / INSM 1.15 - - 4% 150 28 83% 81% - 2.7x Acadian, BlackRock Hardinge / HDNG 9.55 - - 3% 111 91 136% 84% 0% .4x Royce, Aegis, Portola Agria / GRO 2.17 - - 3% 137 -35 175% 126% - nm Heartland, TPG Novatel Wireless / NVTL 6.77 - - 2% 211 84 99% 61% - .2x Royce, Kestrel ORBCOMM / ORBC 2.19 - - 2% 93 3 168% 82% - .1x Stephens, Jennison A.C. Moore Arts / ACMR 3.92 - - 2% 97 70 165% 78% - .1x Glenhill, Royce, Adage Integr. Electrical / IESC 5.51 - - 2% 80 53 159% 108% - .1x Gendell, Royce, Keeley dELiA*s / DLIA 1.77 - - 1% 55 14 165% 51% - .1x T2, North Run, Steadfast Gushan Environmental / GU 1.15 - - 1% 97 13 305% 54% 4% .1x RenTech, KBC, Tiger American Railcar / ARII 18.80 - - 1% 401 324 82% 21% 1% .8x Icahn, Advisory, DFA TAT Technologies / TATT 7.88 - - 1% 70 50 125% 87% 11% .6x TAT Industries Silicon Image / SIMG 3.56 - - 1% 269 118 64% 57% - .8x Tocqueville, RenTech Axcelis Tech / ACLS 2.22 - - 1% 231 186 94% 69% - 1.4x Schneider, Sterling Acorn International / ATV 4.89 - - 0% 145 -14 133% 110% - nm RenTech, Northern Trust Comverse Tech / CMVT 8.95 - - 0% 1,808 na 107% 91% - na RS, Westfield, Perry Xinyuan Real Estate / XIN 3.93 - - 0% 298 367 150% 139% - .8x Blue Ridge, Equity Int'l China Techfaith / CNTF 2.60 - - 0% 113 2 178% 138% - .0x RenTech, FMR, HSBC Actions Semi / ACTS 2.38 - - 0% 205 -24 134% 110% - nm RenTech, T.Rowe ePlus / PLUS 17.46 1 2 40% 144 121 116% -134% - .2x Hovde, Heartland Cascade Microtech / CSCD 4.70 1 2 38% 67 34 101% 81% - .6x RGM, Crosslink, Royce Lakes Entertainment / LACO 2.04 - 1 27% 54 42 146% -22% - 1.6x Key Colony, Par TravelCenters / TA 4.81 - 1 16% 83 29 344% -193% - .0x RenTech, Leucadia, GS Flexsteel Industries / FLXS 15.30 - 1 13% 101 93 110% 74% 1% .3x Perritt, Towle, Royce Imperial Sugar / IPSU 16.34 - 1 4% 199 192 133% -14% 0% .4x Royce, Passport Planar Systems / PLNR 3.50 - 1 4% 70 36 90% 77% - .2x Royce, RenTech, DFA PC Connection / PCCC 6.75 - 2 35% 183 141 102% 94% - .1x DFA, AXA, FMR Frozen Food / FFEX 4.70 - 2 26% 81 77 111% 12% - .2x Hawkshaw, Royce Albany Molecular / AMRI 8.40 - 3 33% 266 168 111% 46% - .9x Advisory, DFA, Royce A. H. Belo / AHC 8.37 1 4 17% 172 148 147% 13% - .3x Lonestar, Prescott Callaway Golf / ELY 9.74 - 3 1% 627 549 85% 55% 0% .6x Royce, Clearbridge Avatar Holdings / AVTR 21.47 - 4 28% 244 146 182% -62% - 2.0x Cannell, Tweedy Global Industries / GLBL 6.36 - 4 15% 724 647 115% 4% - .7x Security, Alleghany TomoTherapy / TOMO 3.56 - 4 9% 193 38 95% 79% - .2x Soundpost, Essex ExpressJet / XJT 3.88 - 5 10% 66 25 298% 7% - .0x Stelliam, RenTech Maxygen / MAXY 6.72 - 6 12% 218 58 70% 69% - 1.6x Conus, Lonestar, Royce Ascent Solar / ASTI 4.04 - 13 40% 108 55 143% 40% - >9.9x Wells Fargo, Invesco Seahawk Drilling / HAWK 17.76 - 13 9% 210 132 216% -7% - .5x Chilton, MHR, Pennant Kaiser Aluminum / KALU 39.93 - 14 0% 810 786 111% 14% 2% .8x Advisory, GS, Third Ave Ingram Micro / IM 18.36 - 29 4% 3,024 2,492 100% 85% - .1x Artisan, GS, Cambiar Heelys / HLYS 2.53 2 33 63% 70 10 113% 102% - .2x Capital S/W, RenTech Harvest Natural / HNR 8.54 - 54 5% 284 252 97% -8% - >9.9x Pabrai, Cumberland



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