InsiderScore Findings and Overview How to take advantage of insider data using InsiderScore to impro

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InsiderScore Findings and OverviewHow to take
advantage of insider data using InsiderScore to
improve your research flow and investment process
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Unlock the value of insider data
withInsiderScores proprietary service

• Insider buys are clearly informative and have
  better return predictability than analyst
  recommendations. Consistent with existing
  studies, we find insider buys to provide valuable
  informational signals.
• - Academic Whitepaper, How Informative are
  Analyst Recommendations and Insider Trades?
  (April 12, 2005)
• Insiders might sell their shares for any number
  of reasons, but they buy them for only one they
  think the price will rise."
• - Peter Lynch
• Combining firm-specific insider-trading signals
  with the aggregate signals leads to better
  forecasting of future stock returns.
• - Nejat Seyhun, Investment Intelligence from
  Insider Trading
• Higher scored buy transactions returned nearly
  three times more than lower scored transactions.
  Possibly more important is the risk associated
  with a higher scored transaction was
  significantly lower.
• - InsiderScore Finding (September 30, 2005) see
  Appendix
• Buying is generally a positive indicator, with
  all market cap groups showing gains the size of
  the gain generally increases as the market cap
  decreases.
• - InsiderScore Finding (September 30, 2005) see
  Appendix
• InsiderScores proprietary algorithms take
  advantage of this valuable information flow
  unlike ever before
• Generate actionable long and short investment and
  research ideas
• Gain a leading indicator look into insider
  sentiment for over 200 industry and index groups

Featured in the June 27 and October 3, 2005
editions

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InsiderScore allows you to focus on the activity
that is notable and most relevant to you

Focus on the transactions and ideas that are most
relevant and important to my methodology and
companies on my radar
Provide snapshots and features to highlight other
notable and interesting company and industry
activity
Watchlist (pushed to you via email)
InsiderScore Weekly Report (via email)
Create a Watchlist of hundreds of companies and
specific insiders/institutions and receive easy
to scan, noise-free daily emails with notable
Form 4 and 13 filing updates. Gain unique
perspectives on the companies with the most
buying and selling inflection points within your
Watchlist universe.
This report provides a weekly snapshot of the
most notable company and industry activity. If
you dont have time to visit the web site, this
report covers the most important information.
Best and Worst Stocks
Our proprietary algorithm looks at changes in
insider sentiment in order to identify key
inflection points, organized by market cap size.
Screener (pushed to you via email)
Focus on the insider transactions and ideas that
are most important to you. Screen over twelve
criteria (including by market cap and industry
group) and have the results emailed to you.
Screen over BOTH individual transactions and
aggregate company activity.
Highlighted Transactions (via email)
InsiderScores research team provides brief
write-ups of the most notable transactions and
company activity each day.
Company Scorecard
Quickly scan a companys insider activity to do
further due diligence and spot potential trends.
Top Transactions
View a near real time list of the days most
notable buy and sell transactions ranked in order
using our proprietary scoring system.
Industry Drill Down
Examine activity in an industry group with the
ability to drill down to sub-industries and to
the company-specific level.

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InsiderScore uses software and editors to focus
on meaningful insider transactions
Using a series of rules, logic and human
analysis, we process meaningful transactions
while ignoring others

Database of accepted filings
Company files Form 4 or Form 13 with the SEC
Each transaction is scored using our proprietary
algorithm
See next slide

• Accepted filing types
• Open-market buys
• Open-market exercises
• Three types of sells are distinctly labeled
• Open-market sell
• Exercise and sell
• 10b5-1 sell

Real-time feed to IS servers
Rules and logic are applied to filing
Certain transactions are flagged and reviewed by
data integrity specialist
Weve built an intelligent foundation that can be
analyzed by company and industry

• Examples
• Individual transactions from the same filing are
  grouped together
• Footnotes are reviewed
• The type of transaction is noted
• Identify mislabeled filings

• Examples
• Duplicate transactions
• Potential mislabeled filings
• IPO and secondary transactions
• Other potential filing errors

Database of rejected filings
These filings are accessible internally, but not
displayed on the web site

• Rejected filing examples
• Employee stock purchase plan buys
• Director compensation
• Price and volume inconsistencies
• Option grants

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Scored transactions become the buildingblocks
that allow us to rate companies and industries

Each insider transaction is scored using our
internal algorithm, looking at a number of
criteria. Examples include - Position of the
insider, size of the transaction, type of
transaction, and more We then calculate the
companys score The sum of the transaction
scores over the past six months multiplied by a
consensus factor where we look at the number of
insiders making buys and sells. The percentile
rank of the companys score is displayed. While
the company score is a good gauge of the
temperature, or level of insider sentiment in a
company, were more interested in the change in
temperature, i.e. is it getting hotter or colder.
Example
A company score calculated and displayed to the
right of each symbol
Each transaction is individually scored the
range is 4 to -4
Scoring context key
Notable buy
0.6 to 1.4
1.4
Very notable buy
Notable sell
Green and red arrows denote companies at
potential insider inflection points
Quickly identify notable transactions, companies,
industries and inflection point changes in
sentiment

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Create screens to focus on relevant activity
Use our screener to focus on the insider
transactions and ideas that are most important to
you. You can also select to have the results
emailed to you on a weekly or daily basis. Choose
among 12 different parameters (including industry
and market cap groupings) when creating your
screen. You can also screen for activist
investors.

Continue to edit and refine your screen to
optimize results
Export your screen results directly to Excel for
further analysis
Leverage our present screens to find interesting
ideas copy a preset screen to customize for your
methodology
Sort the results by any column
Screen based on percent change before the
transaction to isolate buying on strength and
selling on weakness
Analyze the percent change after the transaction
to optimize your screen
The InsiderScore screener was a favorite of
Barrons in its October 3, 2005 edition

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Create aggregate company screens
Use our screener to find aggregate company
insider activity over any specific timeframe. For
example, you could choose to display all
companies that have greater than 500K worth of
buying by CEOs and CFOs over the past six months.
Screen over the same parameters as a transaction
screen.

Continue to edit and refine your screen to
optimize results
Export your screen results directly to Excel for
further analysis
Sort the results by any column
Total number of transactions
Breakout of the insiders making the transactions
Determine the insider overall sentiment
Total number of shares and total value allows us
to calculate the average price and the subsequent
change based on yesterdays price

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Track activity at hundreds of companiesand
insiders/institutions

Create a watchlist of hundreds of companies or
insiders/institutions (or have one of our
associates assist you). You will be notified on
the web site (in near real-time) and in the email
updates when Form 4 and Form 13 filings are filed
with the SEC. Our filtering and labeling
mechanism ensures you are shown the most
important filings while others such as option
grants and ESOPs - are filtered.
Choose to only review results related to
companies or results
Add companies, insiders/institutions or
industries in an easy to use interface
View different timeframes or choose to only view
a specific type
Important transaction information is displayed
directly on the Watchlist page. You can sort by
any column or export to Excel

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Easily identify buying and selling inflection
points within your Watchlist universe

Our proprietary views allow you to quickly see
insider trends within your coverage universe.
View the companies that have seen the most buying
and selling over the past month and the companies
that have seen the largest buying and selling
inflection points.
Select from different five different views
The results contain recent activity and show you
changes from the average purchase or sale price.
Sort by any column for deeper analysis

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The most relevant content is pushed to you
Receive daily or weekly updates that include the
latest matches to your screens sorted by screen.
Receive daily updates of the filings related to
the companies on your Watchlist. Weve taken
great care to push an easy-to-scan email
containing the most relevant transactions to your
investment style to you each day.

Only new results are displayed, conveniently
broken out by screen
Receive easy-to-scan Form 4 and Form alerts for
all companies on your Watchlist, with easy
one-click access to complete more due diligence

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InsiderScore Weekly PDF Report
Sent every Wednesday, InsiderScores Weekly
Report covers the most notable company and
industry activity. If you dont have time to
visit the web site, its the perfect way to stay
on top of the most notable activity.

• Other pages of interest include
• Analytical commentary on positive industries
• Analytical commentary on negative industries
• New companies to the Best stocks list
• Companies seeing the largest amount of buying
• New companies to the Worst stocks list
• Companies seeing the largest amount of selling
• The most positive and negative industries
• A complete listing of our highlighted
  transactions

Includes graph and statistics on insider activity
across the entire market
Example of a page that lists company information

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Best and Worst Stocks
Example of scoring methodology at work This
section displays companies that are experiencing
the most notable changes in buying and selling
versus past buying and selling trends. Use the
Best and Worst feature to identify companies that
are at buying and selling inflection points.

Throughout InsiderScore, companies at a
inflection points are depicted with green
(positive) and red (negative) triangles
Tabs allow for quick views of the best and worst
by market cap grouping
Companies new to the list within seven days
Quickly see the stock price performance based on
an insiders average purchase or sale price
Company ranking is determined by comparing the
companys score over the past month versus the
previous five months
The company score is the temperature Were more
interested in the change in temperature is it
getting hotter or colder?

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Industry Drill Down
Using our hierarchy of industries, you can
conveniently navigate through a macro industry
(like Technology) to see how sub-industries (like
Computer Software or Computer Hardware) are
trending, all the way down to the specific
companies that comprise the industry. This
perspective allows you to easily identify the
specific pockets of a sector that are
experiencing the most buying and selling
activity. On top of that, you can click on a
sub-industry listing to see the detailed chart
and historical statistics of that industry as
well.

View the most recent insider transactions in any
industry think of it as an Industry Watchlist
View the largest buying and selling inflection
points for companies within any industry
Technologys sub-industries

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Company Scorecard
Quickly view the insider activity at any company.
The company scorecard contains a detailed
listing of each open market buy, sell and
exercise transaction and Form 13 filing. It also
contains aggregated information for the top
insiders for the company and for different
timeframes of insider activity.

Sort the information by any column. Export the
results to an Excel file
Listing of the top five most active insiders and
the net value of their transactions
Breakdown of all insider activity by timeframe to
easily note trends
Exclude 10b5-1 sells from appearing
Quickly see if any transactions have been
highlighted by our research team and easily read
the commentary
Key information is pulled from the filing
allowing for easy scanning
Each transaction is distinctly labeled including
separate labels for Exercise and Sell and 10b5-1
Planned Selling

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Insider Scorecard
InsiderScores Insider Scorecard provides a
complete view of all companies at which the
person is an insider. It also consolidates the
persons trading over the past eighteen months so
you can quickly gauge how their investments have
performed. We plan to add a Smartlist of
insiders based on insider performance.

Aggregated summary quickly allows you to see how
well their investments have performed
Click the complete history link to view all of
their transactions for that company

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Top Transactions

This section displays companies all Form 4 and
Form 13 transactions that were filed on a
particular day. New transactions are updated in
real-time. Transactions are ranked in order of
most notable to least notable using our
proprietary transaction scoring algorithm
allowing you to quickly focus on the most
important transactions. The top twenty-five
buy and sell transactions are included in email
updates.
An archive is also included so you can review
transactions from previous days
Transactions are listed by score but can be
sorted by any column

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Appendix - does insider activity matter?
YES, our comprehensive analysis of insider
activity resulted in the following
conclusions1 Finding 1 Higher transaction
scores lead to more positive returns (read
InsiderScore's scoring does matter)

As you can see from the results, on average,
higher scored buys transactions returned over
three times more than lower scored transactions.
Possibly more important is the "risk" associated
with a higher scored transaction was
significantly lower. The average loss for the
bottom 150 results was over six times larger for
buy transactions scored greater than 1.4. The
number of "losers" resulting from buy
transactions over 1.4 was 24, over one-third
less than the 36 resulting from buys scored 0.1
to 0.6.
Finding 2 Notable buying is generally a
positive indicator for all market cap groups,
and strongest for smaller cap names
We used two different data sets to confirm our
hypothesis. The first set of results includes the
top 150 percentage gainers over the past twelve
months resulting from buy transactions of greater
than 0.6 separated by market cap group. The
second set of results includes the most recent
buy transactions of greater than 0.6
irrespective of the stock's change, i.e. they
include gains and losses. Weve included the
first set below
Finding 3 Selling is generally not as strong an
indicator but can provide profitable short ideas
Intuitively, selling should not be as strong an
indicator as buying for a simple reason - people
buy stock to make money, they sell for many
reasons. That said, a bias towards losses was
apparent - with 37 of the companies resulting in
an average loss of -21.5 when we looked at all
sell transactions with a score of less than -2.7
for companies with market caps of greater than
100M over the past twelve months. As we look
deeper into the data, we see many names that have
been favorites of short-sellers over the past
year Blockbuster (BBI), Audbile.com (ADBL), DHB
Industries (DHB), Smith Micro Software (SMSI),
Krispy Kreme Doughnuts (KKD), Abercrombie Fitch
(ANF) and Tempur Pedic (TPX).
1 Please note, the methodology used to derive the
conclusions are accurate to the best of our
knowledge, but we cannot guarantee accuracy. Past
performance does not guarantee future results.

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Appendix (continued)

Finding 4 Insider activity can be analyzed
across the market or industry groupings to
generate buy signals
High levels of insider buying near-perfectly
correlated with market bottoms over the past two
years for the overall market and for healthcare
industry. We have backtested data for over twenty
industries and are working to develop proprietary
buy and sell indicators.

• Bullish Indicator 1 August 11, 2004 - Wilshire
  5000 _at_ 10,389 (16.2)
• Bullish Indicator 2 April 27, 2005 - Wilshire
  5000 _at_ 11,365 (6.2)
• Wilshire 5000 closed at 12,072 on September 21,
  2005

Finding 5 Insider buying often coincides with
underlying fundamental company developments
As evidenced by the strong results above in
Findings 1 and 2, you can be sure we've found a
number of specific company examples where there
were notable fundamental developments. We
included the following handful of examples in our
InsiderScore Findings document Natco (NTG),
Viropharma (VPHM), Tempur Pedix (TPX) selling,
Franklin Covey (FC), Compuware (CPWR) Bottom
line We are extremely confident InsiderScore
will put actionable ideas on your radar related
to companies that are seeing fundamental changes
in their businesses.
See the InsiderScore Findings PDF report for a
comprehensive review of all findings