Ascendere Associates LLC Methodology, Disclosures and Disclaimers

METHODOLOGY

Ascendere Associates LLC quantitative research is based on several factors, including: 1) operating momentum 2) fundamental quality 3) analyst revision momentum; and 4) relative value. A number of these factors are overweighted on what we consider proxies for cash flow growth and return on invested capital. In our opinion these factors provide a good reflection of a company’s value relative to other companies in its sector. Daily return data of our backtests are available to paying subscribers upon request.

In our opinion, cash flow growth and return on invested capital are the key drivers of any stock’s valuation. By focusing on various proxies for these data points and other factors such as relative value, we have been able to generate some terrific investment ideas and avoid some significant value traps over our career in sell side and buy side equity research.

For those interested in learning more about determining a company’s value as it relates to ROIC, we recommend reading McKinsey & Company’s ”Valuation: Measuring and Managing the Value of Companies“ or “The Value Sphere: The Corporate Executives Handbook for Creating and Retaining Shareholder Wealth.” We also find the newsletters produced by Michael Mauboussin, the Chief Investment Strategist at Legg Mason Capital

Management, an excellent source of information as it relates to determining the value of companies.

DISCLOSURES

Ascendere is in the business of providing equity research and related consulting services to investors and their advisors. The equity research it provides includes basic quantitative model portfolios and more detailed fundamental research with respect to individual stocks. In addition, the firm manages stock portfolios for itself and clients.

Ascendere does not rate stocks on any scale, but does offer individual stock commentary and valuation opinions. With regard to Ascendere’s portfolio strategies, “long” or “high-quality” baskets should generally be considered buys, unless otherwise noted. Stocks in our “short” or “low-quality” baskets should generally be considered sells, unless otherwise noted. While exceptions may occasionally occur, typically stocks in the high-quality basket are expected to outperform the S&P 500 over a month’s time and stocks in the low-quality basket are expected to underperform. A more relevant benchmark would comprise of all stocks and ADRs that trade on major U.S. stock exchanges with a market cap above $2 billion.

Ascendere adheres to professional standards and abides by codes of ethics that put the interests of clients ahead of its own. The following are specific disclosures made by Ascendere:

1) Ascendere may have a financial interest in the companies referred to in this report (“the Companies”). The research analyst covering the Companies and members of the analyst’s immediate family have a financial interest in one or more of the Companies.

2) Ascendere generates revenue from research subscription revenue and portfolio management fees. At any given time it may be long or short any of the Companies.

3) Ascendere does not make a market in the securities of any of the Companies.

4) Ascendere has not received compensation from the Companies.

5) Ascendere has not managed or co-managed a public offering for any of the Companies.

6) Neither Ascendere nor any of its officers or any family member of the covering analyst serve as an officer, director or advisory board member of any of the Companies.

7) Neither Ascendere nor any of its officers or any family member of the covering analyst beneficially own 1% or more of any class of securities of any of the Companies.

8 ) The covering analyst certifies that this report accurately reflects such analyst’s personal views.

DISCLAIMERS

This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial instruments. The report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual recipient. The information contained herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of Ascendere Associates may hold positions in the securities of the Companies. No warranty is made as to the accuracy of the information contained herein. This information is intended for the sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. There are limitations inherent in our backtested theoretical model results, particularly with the fact that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing client money. Investing in stocks includes a high degree of risk, including the risk of total loss.