Prefiled Direct Testimony of Robert B. Hevert on Behalf of ...

Department <strong>of</strong> Public Service Regulation 

Montana Public Service Commission 

Docket No. 2012.9.94 

Natural Gas General Filing 

NorthWestern Energy 

PREFILED DIRECT TESTIMONY 

OF 

ROBERT B. HEVERT 

ON BEHALF OF 

NORTHWESTERN ENERGY

TABLE OF CONTENTS 

EXECUTIVE SUMMARY OF ROBERT B. REVERT ...........................................•... ES-l 

I. INTRODUCTION ........................................................................................................ 1 

ll. PURPOSE AND OVERVIEW OF TESTIMONY .....•.............................................. 2 

III. SUMMARY OF CONCLUSIONS ..•.......................................................................... 5 

IV. REGULATORY GUIDELINES AND FINANCIAL CONSIDERATIONS .......... 7 

V. PROXY GROUP SELECTION .................................................................................. 8 

VI. COST OF EQUITY ESTIMATION ........................................................................ 12 

Quarterly Growth DCF Model ...•.............................•................................................. 14 

Dividend Yield and Growth Rates for the Quarterly DCF Model.. ........................... 16 

Results for the Quarterly Growth DCF Model .......................................................... 21 

Constant Growth DCF ModeL ...•................................................................................ 22 

Dividend Yield and Growth Ratesfor the Constant Growth DCF Model ................ 22 

Results for Constant Growth DCF ModeL. ................................................................ 23 

Multi-Stage DCF Model .............•............................................•.................................. 24 

Discounted Cash Flow Model Results ........................................................................ 29 

CAPM Analysis ........................................................................................................... 32 

Bond Yield Plus Risk Premium Approach .................................................................42 

VIT. BUSINESS RISKS ..................................................................................•.................. 45 

Small Size Premium ..................................................•................................................. 45 

Revenue Stabilization Mechanisms ............................................................................ 48 

Flotation Costs ...•........................................................................................................ 49 

VIII. CAPITAL MARKET ENVIRONMENT ................................................................. 51 

Incremental Credit Spreads ........................................................................................ 52 

Yield Spreads ............................................................................................................... 55 

Equity Market Volatility and Return Correlations .................................................... 57 

IX. CONCLUSIONS AND RECOMMENDATION ..................................................... 62 

<strong>Direct</strong> <strong>Testimony</strong> <strong>of</strong> <strong>Robert</strong> B. <strong>Hevert</strong> 

NorthWestern Energy

EXHIBITS 

Exhibit 

Exhibit No. RBH-l 

Exhibit No. RBH-2 








Exhibit No. RBH-IO 

Exhibit No. RBH-ll 

Description 

Quarterly Growth DCF Results 

Constant Growth DCF Results 

Retention Growth Estimate 

Multi-Stage DCF Results 

Market Risk Premium Calculations 

Beta Coefficients 

CAPM Results 

Bond Yield Plus Risk Premium Analysis 

Small Size Premium 

Review <strong>of</strong> Proxy Group Revenue Stabilization Mechanisms 

Flotation Costs 


NorthWestern Energy

ES-l 

1 EXECUTIVE SUMMARY OF ROBERT B. HEVERT 

2 My direct testimony establishes that, for NorthWestern Corporation, which does business 

3 as NorthWestern Energy ("NorthWestern" or the "Company"), a Return on Equity 

4 ("ROE") <strong>of</strong> lO.50 percent is reasonable. My recommended 10.50 percent ROE considers 

5 a variety <strong>of</strong> factors that affect the required return to equity investors in the Company. My 

6 testimony: 

7 • Discusses the multiple analytical approaches that were evaluated to develop the 

8 ROE; 

9 • Explains how the analysis to determine an appropriate ROE is affected by the 

10 various business and operating risks faced by the Company; and 

11 • Describes the current capital markets and economic conditions, and the degree to 

12 which those conditions affect NorthWestern's ROE. 

13 Together with the exhibits attached to my testimony, this evidence demonstrates that a 

14 10.50 percent ROE should be approved for NorthWestern in order to provide the 

15 Company with an opportunity to create earnings sufficient to provide an appropriate 

16 return to its equity investors. 


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DIRECT TESTIMONY OF ROBERT B. HEVERT 

I. INTRODUCTION 

PLEASE STATE YOUR NAME, AFFILIATION AND 

ADDRESS. 

BUSINESS 

5 A. 

My name is <strong>Robert</strong> B. <strong>Hevert</strong>. 

I am Managing Partner <strong>of</strong> Sussex Economic 

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Advisors, LLC ("Sussex"). My business address is 161 Worcester Road, Suite 

503, Framingham, MA 01701. 

ON WHOSE BEHALF ARE YOU SUBMITTING THIS TESTIMONY? 

I am submitting this direct testimony ("<strong>Direct</strong> <strong>Testimony</strong>") before the Montana 

Public Service Commission ("Commission") on behalf <strong>of</strong> NorthWestern 

Corporation, which does business as NorthWestern Energy ("NorthWestern" or the 

"Company"). 

PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND. 

I hold a Bachelor's degree in Business and Economics from the University <strong>of</strong> 

Delaware, and an MBA with a concentration in Finance from the University <strong>of</strong> 

Massachusetts. I also hold the Chartered Financial Analyst designation. 

PLEASE DESCRIBE YOUR EXPERIENCE IN THE ENERGY AND 

UTILITY INDUSTRIES. 

I have worked in regulated industries for over twenty five years, having served as 

an executive and manager with consulting firms, a financial <strong>of</strong>ficer <strong>of</strong> a publiclytraded 

natural gas utility (at the time, Bay State Gas Company), and an analyst at 

a telecommunications utility. In my role as a consultant, I have advised numerous 

energy and utility clients on a wide range <strong>of</strong> financial and economic issues 


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including corporate and asset-based transactions, asset and enterprise valuation, 

transaction due diligence, and strategic matters. As an expert witness, I have 

provided testimony in over 80 proceedings regarding various financial and 

regulatory matters before numerous state utility regulatory agencies and the 

Federal Energy Regulatory Commission. A summary <strong>of</strong> my pr<strong>of</strong>essional and 

educational background, including a list <strong>of</strong> my testimony in prior proceedings, is 

included in Exhibit A to my <strong>Direct</strong> <strong>Testimony</strong>. 

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II. 

PURPOSE AND OVERVIEW OF TESTIMONY 

9 Q. 

10 A. 

WHAT IS THE PURPOSE OF YOUR TESTIMONY? 

The purpose <strong>of</strong> my <strong>Direct</strong> <strong>Testimony</strong> is to present evidence and provide a 

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recommendation regarding the Company's return on equity ("ROE").' 

My 

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17 A. 

analysis and conclusions are supported by the data presented in Exhibit No. RBB- 

1 through Exhibit No. RBB-11, which have been prepared by me or under my 

direction. 

WHAT ARE YOUR CONCLUSIONS REGARDING THE APPROPRIATE 

COST OF EQUITY? 

My analyses indicate that the Company's Cost <strong>of</strong> Equity currently is in the range 

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<strong>of</strong> 10.00 percent to 10.75 percent. 

Based on the quantitative and qualitative 

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analyses discussed throughout my <strong>Direct</strong> <strong>Testimony</strong>, I conclude that an ROE <strong>of</strong> 

10.50 percent is reasonable and appropriate. 

Throughout my testimony, I interchangeably use the terms "ROE" and "Cost <strong>of</strong> Equity". 


NorthWestern Energy


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PLEASE PROVIDE A BRIEF OVERVIEW OF THE ANALYSES THAT 

LED TO YOUR ROE RECOMMENDATION. 

As discussed in more detail in Section VI, in light <strong>of</strong> recent market conditions, 

and given the fact that equity analysts and investors tend to use multiple 

methodologies in developing their return requirements, it is important to consider 

the results <strong>of</strong> several analytical approaches in determining the Company's ROE. 

In order to develop my ROE recommendation, I therefore applied the Quarterly 

Growth, Constant Growth, and Multi-Stage forms <strong>of</strong> the Discounted Cash Flow 

("DCF") model, the Capital Asset Pricing Model ("CAPM"), and the Risk 

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Premium approach. 

As discussed later in my testimony, it is important to 

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consider a range <strong>of</strong> factors, both quantitative and qualitative, in arriving at an 

ROE determination. 

In addition to the methodologies noted above, my recommendation also 

takes into consideration the regulatory and capital environment in which the 

Company operates. In particular, I note that credit spreads between A -rated utility 

bonds and Baa-rated utility bonds have increased, which suggests that debt 

investors have increased their marginal return requirements. During the same 

period in which credit spreads increased, the correlation between those spreads 

and the 30-year Treasury bond was negative, indicating that required risk 

premiums increased as long-tenn Treasury yields decreased. I also note that the 

relationship between the 30-year Treasury yield and the proxy group average 

dividend yield has become inverted relative to its long-run norm. Finally, natural 

gas stocks have been somewhat more volatile than their historical average, and 


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their returns have become more correlated with the broader market than they 

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historically had been. 

As discussed in greater detail in Section VIII, the 

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continuing instability in the capital markets indicates that the current historically 

low level <strong>of</strong> the 3D-year Treasury does not necessarily indicate that the Cost <strong>of</strong> 

Equity is at a commensurately low level. 

Since estimating the ROE is a market-based exercise, it is important to 

understand the risks faced by the Company relative to its peers. As such, I also 

took into consideration business risks and costs which affect the Company, such 

as: (1) its relatively small size compared to the proxy group; (2) the lack <strong>of</strong> 

revenue stabilization mechanisms employed by the Company relative to the proxy 

group; and (3) flotation costs. While I did not make any explicit adjustments to 

my ROE estimates for those factors, I did take them into consideration in 

determining the appropriate estimate <strong>of</strong> the Company's Cost <strong>of</strong> Equity within the 

10.00 percent to 10.75 percent range. 

HOW DID YOU DETERMINE THE APPROPRIATE RANGE OF 

REASONABLENESS FOR THE COMPANY'S COST OF EQUITY? 

In order to develop the reasonable range for NorthWestern's Cost <strong>of</strong> Equity, I 

reviewed the results <strong>of</strong> the three DCF models, as well as the results <strong>of</strong> the CAPM 

analyses, and Bond Yield Plus Risk Premium approach. 

Consistent with my prior practice, I did not apply specific weights to those 

analyses. As discussed further in Section VI, in my review <strong>of</strong> the DCF models I 

disregarded the mean low results, because the results are not a reasonable 

estimation <strong>of</strong> any company's ROE. As noted above, I also considered the effects 


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<strong>of</strong> current capital market environment, as well as the effect <strong>of</strong> specific business 

risks faced by the Company in determining my ROE range and estimate. 

In light <strong>of</strong> the factors noted above, I have set the low end <strong>of</strong> my range by 

reference to the average <strong>of</strong> the mean, and mean high results <strong>of</strong> my DCF models. 

The high end <strong>of</strong> the range generally is estimated by the average mean high results 

<strong>of</strong> my DCF models. That approach suggests a range <strong>of</strong> 9.96 percent to 10.73 

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percent. 

As discussed in Section VI, the CAPM and Bond Yield Plus Risk 

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Premium analyses corroborate the reasonableness <strong>of</strong> that range. 

As such, I 

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believe an ROE within the range <strong>of</strong> 10.00 to 10.75 is reasonable. In light <strong>of</strong> the 

considerations discussed throughout the balance <strong>of</strong> my <strong>Direct</strong> <strong>Testimony</strong> 

regarding the Company's relative business risks, it is my opinion that within that 

range, an ROE <strong>of</strong> 10.50 percent is reasonable and appropriate. 

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III. 

SUMMARY OF CONCLUSIONS 

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WHAT ARE THE KEY FACTORS CONSIDERED IN YOUR ANALYSES 

AND UPON WHICH YOU BASE YOUR RECOMMENDED ROE? 

My analyses and recommendations considered the following: 

• The Hope and Bluefield decisions 2 that established the standards for 

determining a fair and reasonable allowed return on equity including; 

consistency <strong>of</strong> the allowed return with other businesses having similar 

risk; adequacy <strong>of</strong> the return to provide access to capital and support credit 

quality; and that the end result must lead to just and reasonable rates. 

2 

Bluefield Waterworks & Improvement Co., v. Public Service Commission <strong>of</strong> West Virginia, 262 U.S. 

679 (1923); Federal Power Commission v. Hope Natural Gas Co .• 320 U.S. 591 (1944). 


NorthWestern Energy


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• The effect <strong>of</strong> the current capital market conditions on investors' return 

requirements, and in particular, the Company's continuing need to access 

the capital markets. 

• The Company's business risks relative to the proxy group <strong>of</strong> comparable 

companies and the implications <strong>of</strong> those risks in arriving at the appropriate 

ROE. 

WHAT ARE THE RESULTS OF YOUR ANALYSES? 

Based on the analytical results presented throughout my <strong>Direct</strong> <strong>Testimony</strong>, and in 

light <strong>of</strong> the considerations discussed throughout the balance <strong>of</strong> my <strong>Direct</strong> 

<strong>Testimony</strong>, it is my view that a reasonable range <strong>of</strong> estimates is from 10.00 

percent to 10.75 percent, and within that range, an ROE <strong>of</strong> 10.50 percent is 

reasonable and appropriate. 

13 Q. 

HOW IS 

THE REMAINDER OF YOUR DIRECT TESTIMONY 

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15 A. 

ORGANIZED? 

The balance <strong>of</strong> my <strong>Direct</strong> <strong>Testimony</strong> is organized as follows: 

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Section IV - 

Discusses the regulatory guidelines and financial considerations 

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pertinent to the development <strong>of</strong> the cost <strong>of</strong> capital; 

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Section V - 

Explains my selection <strong>of</strong> the proxy group <strong>of</strong> natural gas 

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distribution utilities used to develop my analytical results; 

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Section VI - 

Explains my analyses and the analytical bases for my ROE 

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recommendation; 

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Section VII - 

Provides a discussion <strong>of</strong> specific business risks that have a direct 

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bearing on the Company's Cost <strong>of</strong> Equity; 


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4 IV. 

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Section VIII - Discusses current capital market conditions and the effect <strong>of</strong> those 

conditions on the Company's Cost <strong>of</strong> Equity; and 

Section IX - Summarizes my conclusions and recommendations. 

REGULATORY GUIDELINES AND FINANCIAL CONSIDERATIONS 

PLEASE DESCRIBE THE GUIDING PRINCIPLES TO BE CONSIDERED 

IN ESTABLISHING THE COST OF CAPITAL FOR A REGULATED 

UTILITY. 

The United States Supreme Court's precedent-setting Hope and Bluefield cases 

established the standards for determining the fairness or reasonableness <strong>of</strong> a 

utility's allowed ROE. Among the standards established by the Court in those 

cases are: (I) consistency with other businesses having similar or comparable 

risks; (2) adequacy <strong>of</strong> the return to support credit quality and access to capital; 

and (3) the principle that the specific means <strong>of</strong> arriving at a fair return are not 

important, only that the end result leads to just and reasonable rates. 

WHY IS IT IMPORTANT FOR A UTILITY TO BE ALLOWED THE 

OPPORTUNITY TO EARN A RETURN ADEQUATE TO ATTRACT 

EQUITY CAPITAL AT REASONABLE TERMS? 

A return that is adequate to attract capital at reasonable terms enables the utility to 

provide service while maintaining its financial integrity. In keeping with the 

Hope and Bluefield standards, that return should be commensurate with the 

returns expected elsewhere in the market for investments <strong>of</strong> equivalent risk. 

Based on those standards, the Commission's decision in this case should provide 

the Company with the opportunity to earn an ROE that is: (I) adequate to attract 


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capital at reasonable terms, thereby enabling it to continue to provide safe and 

reliable natural gas service; (2) sufficient to ensure its financial integrity; and (3) 

commensurate with returns on investments in enterprises having corresponding 

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risks. 

The allowed ROE should enable the Company to finance capital 

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expenditures at reasonable cost rates and maintain its financial flexibility over the 

period during which rates are expected to remain in effect. While the "capital 

attraction" and "financial integrity" standards are important principles in normal 

economic conditions, the practical implications <strong>of</strong> those standards are even more 

pronounced during periods <strong>of</strong> capital market instability. As discussed in more 

detail in Section VIII, for example, sustained increases in the incremental spread 

on utility debt (i.e., the difference in debt yields <strong>of</strong> utilities varying credit ratings) 

have intensified the importance <strong>of</strong> maintaining a strong financial pr<strong>of</strong>ile. 

V. PROXY GROUP SELECTION 

AS A PRELIMINARY MATTER, WHY IS IT NECESSARY TO SELECT 

A GROUP OF PROXY COMPANIES TO DETERMINE THE COST OF 

EQUITY FOR NORTHWESTERN? 

First, it is important to bear in mind that the Cost <strong>of</strong> Equity for a given enterprise 

depends on the risks attendant to the business in which the company is engaged. 

According to financial theory, the value <strong>of</strong> a given company is equal to the 

aggregate market value <strong>of</strong> its constituent business units. The value <strong>of</strong> the 

individual business units reflects the risks and opportunities inherent in the 

business sectors in which those units operate. In this proceeding, we are focused 

on estimating the Cost <strong>of</strong> Equity for the Company's gas distribution operations in 

<strong>Direct</strong> <strong>Testimony</strong> <strong>of</strong> <strong>Robert</strong> B. Revert 

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Montana. Since the ROE is a market-based concept, and given the fact that the 

NorthWestern's Montana jurisdictional gas operations do not make up the entirety 

<strong>of</strong> the publicly traded entity, it is necessary to establish a group <strong>of</strong> companies that 

are both publicly traded and comparable to NorthWestern to serve as its "proxy" 

for purposes <strong>of</strong> the ROE estimation process. 

Even if NorthWestern's assets did constitute the entirety <strong>of</strong> the Company's 

operations, it is possible that transitory events could bias its market value in one 

way or another over a given period <strong>of</strong> time. A significant benefit <strong>of</strong> using a proxy 

group, therefore, is to moderate the effects <strong>of</strong> anomalous, temporary events that 

may be associated with anyone company. 

DOES THE SELECTION OF A PROXY GROUP SUGGEST THAT 

ANALYTICAL RESULTS WILL BE TIGHTLY CLUSTERED AROUND 

AVERAGE (LE., MEAN) RESULTS? 

Not necessarily. Notwithstanding the care taken to ensure risk comparability, 

market expectations with respect to future risks and growth opportunities will 

vary from company to company. Therefore, even within a group <strong>of</strong> similarly 

situated companies, it is common for analytical results to reflect a seemingly wide 

range. 

PLEASE NOW PROVIDE A SUMMARY PROFILE OF 

NORTHWESTERN. 

NorthWestern distributes natural gas to approximately 182,000 customers in 

Montana. The Company also serves an additional 31,000 customers through 


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contracts with other distributors. 3 

NorthWestern currently has long-term issuer 

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Q. 

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credit ratings <strong>of</strong> BBB from Standard & Poor's and Fitch Ratings, and senior 

unsecured ratings <strong>of</strong> Baal, BBB and BBB+ from Moody's Investors Service, 

Standard & Poor's, and Fitch Ratings, respectively.4 

HOW DID YOU SELECT THE COMPANIES INCLUDED IN YOUR 

PROXY GROUP? 

I began with the universe <strong>of</strong> companies that Value Line classifies as Electric or 

Natural Gas Utilities, which includes a group <strong>of</strong> 59 domestic U.S. utilities, and 

applied the following screening criteria: 

• I excluded companies that do not consistently pay quarterly cash 

dividends; 

• I excluded companies not covered by at least two utility industry equity 

analysts; 

• All <strong>of</strong> the companies in my proxy group have investment grade senior 

bond and/or corporate credit ratings from Standard and Poor's; 

• To ensure that my proxy group represents natural gas distribution 

operations, I included companies with at least 60.00 percent <strong>of</strong> 

consolidated net operating income derived from regulated natural gas 

utility operations; and 

• I eliminated companies that are currently known to be party to a merger, 

or other significant transaction. 

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NorthWestern Corporation, SEC Form 10-K for the fiscal year ended December 31,2011, at II. 

Sonrce: SNL Financial. 


NorthWestern Energy


1 Q. DID YOU INCLUDE NORTHWESTERN IN YOUR ANALYSIS? 

2 A. No, in order to avoid the circular logic that otherwise would occur, it has been my 

3 consistent practice to exclude the subject company from the proxy group. In any 

4 event, the percentage <strong>of</strong> operating income derived from NorthWestern's regulated 

5 gas operations relative to the combined entity would not have met my 60.00 

6 percent threshold. 

7 Q. WHAT COMPANIES MET THOSE SCREENING CRITERIA? 

8 A. The criteria discussed above resulted in a proxy group <strong>of</strong> the following nine 

9 companies: 

10 Table 1: Proxy Group Screening Results 

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Company 

AGL Resources 

Atmos Energy 

Laclede Group 

New Jersey Resources 

Northwest Natural Gas 

Piedmont Natural Gas 

South Jersey Industries 

Southwest Gas 

Washington Gas Light 

Ticker 

GAS 

ATO 

LG 

NJR 

NWN 

PNY 

SIT 

SWX 

WGL 

12 Q. DO YOU BELIEVE THAT A PROXY GROUP OF NINE COMPANIES IS 

13 SUFFICIENTLY LARGE? 

14 A. Yes, I do. The analyses performed in estimating the ROE are more likely to be 

15 representative <strong>of</strong> the subject utility's Cost <strong>of</strong> Equity to the extent that the chosen 

16 proxy companies are fundamentally comparable to the subject utility. Because all 

17 analysts use some form <strong>of</strong> screening process to arrive at a proxy group, the group, 


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by definition, is not randomly drawn from a larger population. Consequently, 

there is no reason to place more reliance on the quantitative results <strong>of</strong> a larger 

proxy group simply by virtue <strong>of</strong> the resulting larger number <strong>of</strong> observations. 

Moreover, because I am using market-based data, my analytical results 

will not necessarily be tightly clustered around a central point. Results that may 

be somewhat dispersed, however, do not suggest that the screening approach is 

inappropriate or the results less meaningful. In my view, including companies 

whose fundamental comparability is tenuous at best simply for the purpose <strong>of</strong> 

expanding the number <strong>of</strong> observations does not add relevant information to the 

analysis. 

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VI. 

COST OF EOUITY ESTIMATION 

12 Q. 

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14 A. 

PLEASE BRIEFLY DISCUSS THE ROE IN THE CONTEXT OF THE 

REGULATED RATE OF RETURN. 

Regulated utilities primarily use common stock and long-term debt to finance 

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their permanent property, plant, and equipment. 

The overall rate <strong>of</strong> return 

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("ROR") for a regulated utility is based on its weighted average cost <strong>of</strong> capital, in 

which the cost rates <strong>of</strong> the individual sources <strong>of</strong> capital are weighted by their 

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respective book values. 

While the costs <strong>of</strong> debt and preferred stock can be 

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directly observed, the Cost <strong>of</strong> Equity is market-based and, therefore, must be 

estimated based on observable market information. 

HOW IS THE REQUIRED ROE DETERMINED? 

The required ROE is estimated by using one or more analytical techniques that 

rely on market -based data to quantify investor expectations regarding required 


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equity returns, adjusted for certain incremental costs and risks. By their very 

nature, quantitative models produce a range <strong>of</strong> results from which the market 

required ROE must be selected. As discussed throughout my <strong>Direct</strong> <strong>Testimony</strong>, 

that selection must be based on a comprehensive review <strong>of</strong> relevant data and 

information, and does not necessarily lend itself to a strict mathematical solution. 

Consequently, the key consideration in detennining the Cost <strong>of</strong> Equity is to 

ensure that the methodologies employed reasonably reflect investors' view <strong>of</strong> the 

financial markets in general, and the subject company (in the context <strong>of</strong> the proxy 

group) in particular. 

Although we cannot directly observe the Cost <strong>of</strong> Equity, we can observe 

the methods frequently used by analysts to arrive at their return requirements and 

expectations. While investors and analysts tend to use multiple approaches in 

developing their estimate <strong>of</strong> return requirements, each methodology requires 

certain judgment with respect to the reasonableness <strong>of</strong> assumptions and the 

validity <strong>of</strong> proxies in its application. In essence, analysts and academics 

understand that ROE models are tools to be used in the ROE estimation process 

and that strict adherence to any single approach, or the specific results <strong>of</strong> any 

single approach, can lead to flawed and irrelevant conclusions. That position is 

consistent with the Hope and Bluefield finding that it is the analytical result, as 

opposed to the methodology, that is controlling in arriving at ROE 

determinations. A reasonable ROE estimate therefore considers alternative 

methodologies, observable market data, and the reasonableness <strong>of</strong> their individual 

and collective results. 


NorthWestern Energy


1 In my view, therefore, it is both prudent and appropriate to use multiple 

2 methodologies in order to mitigate the effects <strong>of</strong> assumptions and inputs 

3 associated with relying exclusively on any single approach. Such use, however, 

4 must be tempered with due caution as to the results generated by each individual 

5 approach. As such, I have considered the results <strong>of</strong> the Constant Growth and 

6 Multi-Stage forms <strong>of</strong> the DCF model, the Capital Asset Pricing Model, and the 

7 Risk Premium approach. 

8 Quarterly Growth DCF Model 

9 Q. 

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11 A. 

ARE DCF MODELS WIDELY USED IN REGULATORY 

PROCEEDINGS? 

Yes, in my experience the DCF model is widely recognized in regulatory 

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proceedings. 

Nonetheless, neither the DCF nor any other model should be 

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applied without considerable judgment in the selection <strong>of</strong> data and the 

interpretation <strong>of</strong> results 

PLEASE DESCRIBE THE DCF APPROACH. 

The DCF approach is based on the theory that a stock's current price represents 

the present value <strong>of</strong> all expected future cash flows. In its simplest form, the DCF 

model expresses the Cost <strong>of</strong> Equity as the sum <strong>of</strong> the expected dividend yield and 

long-term growth rate, and is expressed as follows: 

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p = ~+~+ ... + D", 

(1+k) (1+k)2 (1+k)'" 

Equation [1] 

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Where P represents the current stock price, Dl ... D", represent expected 

future dividends, and k is the discount rate, or required ROE. Equation [1] is a 


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standard present value calculation, which can be simplified and rearranged into 

the familiar form: 

k -_ Do (Hg) + 9 Equati'on [2] 

p 

Equation [2] <strong>of</strong>ten is referred to as the "Constant Growth DCF" model, in 

which the first term is the expected dividend yield and the second term is the 

expected long-term growth rate. 

In its simplest form, the DCF model expresses the Cost <strong>of</strong> Equity as the 

sum <strong>of</strong> the expected dividend yield and long-term growth rate. However, most 

dividend or distribution-paying companies, including utilities, pay dividends on a 

quarterly, (as opposed to an annual basis). The yield component <strong>of</strong> the Quarterly 

Growth DCF model, therefore, accounts for the quarterly payment <strong>of</strong> dividends. 

Thus, the Quarterly Growth DCF model incorporates investors' expectation <strong>of</strong> the 

quarterly payment <strong>of</strong> dividends, and the associated quarterly compounding <strong>of</strong> 

those dividends as they are reinvested at investors' required ROE. As noted by 

Dr. Roger Morin: 

Clearly, given that dividends are paid quarterly and that the 

observed stock price reflects the quarterly nature <strong>of</strong> dividend 

payments, the market-required return must recognize quarterly 

compounding, for the investor receives dividend checks and 

reinvests the proceeds on a quarterly schedule ... The annual DCF 

model inherently understates the investors' true return because it 

assumes all cash flows received by investors are paid annually. 5 

23 

5 

Roger A. Morin, New Regulatory Finance, Public Utility Reports, Inc., 2006 at 344. 


NorthWestern Energy


1 Q. HOW IS THE DIVIDEND YIELD COMPONENT OF THE QUARTERLY 

2 GROWTH DCF MODEL CALCULATED? 

3 A. The dividend yield is calculated such that it incorporates the time value <strong>of</strong> money 

4 associated with quarterly compounding. To do so, D component <strong>of</strong> the Constant 

5 Growth DCF model is replaced with the following equation: 

6 Equation [3] 

7 where: 

8 db d 2 , d 3 , d 4 = expected quarterly dividends over the coming year 

9 k = the required return on equity 

10 Due to the fact that the required ROE (Ie) is a variable in the dividend calculation, 

11 the Quarterly Growth DCF model is solved in an iterative fashion. 

12 Dividend Yield and Growth Rates/or the Quarterly DCF Model 

13 Q. 

14 

15 A. 

16 

17 

18 

19 

20 

WHAT MARKET DATA DID YOU USE TO CALCULATE THE 

DIVIDEND YIELD IN YOUR QUARTERLY GROWTH DCF MODEL? 

To calculate the expected dividends over the coming year for the proxy group 

companies (i.e., db d20 d 3 , and d 4 ), I obtained the last four paid quarterly dividends 

for each company, and multiplied them by one plus the growth rate (i.e., 1 +g). 

For the Po component <strong>of</strong> the dividends yield, I obtained the closing stock prices 

over the 30,90, and 180-trading days ended August 31, 2012 for each company in 

the proxy group. 

<strong>Direct</strong> <strong>Testimony</strong> <strong>of</strong> <strong>Robert</strong> B. Bevert 

NortbWestern Energy


1 Q. WHY DID YOU USE THREE AVERAGING PERIODS TO CALCULATE 

2 THE AVERAGE STOCK PRICE? 

3 A. I did so to ensure that the model's results are not skewed by anomalous events 

4 that may affect stock prices on any given trading day. At the same time, the 

5 averaging period should be reasonably representative <strong>of</strong> expected capital market 

6 conditions over the long term. In my view, the use <strong>of</strong> the 30-, 90- and 180-day 

7 averaging periods reasonably balances those concerns. 

8 Q. IS IT IMPORTANT TO SELECT APPROPRIATE MEASURES OF 

9 LONG-TERM GROWTH IN APPLYING THE DCF MODEL? 

10 A. Yes. In its Constant Growth form, the DCF model (i.e., as presented in Equation 

11 [2J above) assumes a single growth estimate in perpetuity. This same assumption 

12 is made in the Quarterly Growth DCF model. Accordingly, in order to reduce the 

13 long-term growth rate to a single measure, one must assume a constant payout 

14 ratio, and that earnings per share, dividends per share and book value per share all 

15 grow at the same constant rate. Over the long term, however, dividend growth 

16 can only be sustained by earnings growth. Consequently, it is important to 

17 incorporate a variety <strong>of</strong> measures <strong>of</strong> long-term earnings growth into the Constant 

18 Growth DCF model. That can be accomplished by averaging those measures <strong>of</strong> 

19 long-term growth that tend to be least influenced by capital allocation decisions 

20 that companies may make in response to near-term changes in the business 

21 environment. Since such decisions may directly affect near-term dividend payout 

22 ratios, estimates <strong>of</strong> earnings growth are more indicative <strong>of</strong> long-term investor 

23 expectations than are dividend growth estimates. Therefore, for the purposes <strong>of</strong> 


NorthWestern Energy


1 

2 

3 Q. 

4 

5 

6 A. 

the Quarterly Growth DCF model, growth in earmngs per share ("EPS") 

represents the appropriate measure <strong>of</strong>long-term growth. 

PLEASE SUMMARIZE THE FINDINGS OF ACADEMIC RESEARCH 

ON THE APPROPRIATE MEASURE FOR ESTIMATING EQUITY 

RETURNS USING THE DCF MODEL. 

The relationship between various growth rates and stock valuation metrics has 

7 

8 

been the subject <strong>of</strong> much academic research. 6 

Charles Phillips in The Economics <strong>of</strong> Regulation: 

As noted over 40 years ago by 

9 

10 

11 

12 

13 

14 

15 

16 

For many years, it was thought that investors bought utility stocks 

largely on the basis <strong>of</strong> dividends. More recently, however, studies 

indicate that the market is valuing utility stocks with reference to 

total per share earnings, so that the earnings-price ratio has 

assumed increased emphasis in rate cases. 7 

Philips' conclusion continues to hold true. Subsequent academic research 

has clearly and consistently indicated that measures <strong>of</strong> earnings and cash flow are 

strongly related to returns, and that analysts' forecasts <strong>of</strong> growth are superior to 

17 

other measures <strong>of</strong> growth in predicting stock prices. 8 

For example, Vander 

18 

19 

Weide and Carleton state that, "[our] results ... are consistent with the hypothesis 

that investors use analysts' forecasts, rather than historically oriented growth 

20 

calculations, in making stock buy-and-sell decisions.,,9 

Other research 

21 

specifically notes the importance <strong>of</strong> analysts' growth estimates in determining the 

6 

7 

9 

See, for example, Harris, <strong>Robert</strong>, Using Analysts' Growth Forecasts to Estimate Shareholder Required 

Rate <strong>of</strong> Return, Financial Management, Spring 1986. 

Charles F. Phillips, Jr., The Economics <strong>of</strong> Regulation, Revised Edition, 1969, Richard D. Irwin, Inc., at 

285. 

See, for example, Christ<strong>of</strong>i, Christ<strong>of</strong>i, Lori and Moliver, Evaluating Common Stocks Using Value 

Line's Projected Cash Flows and Implied Growth Rate, Journal <strong>of</strong> Investing (Spring 1999); Harris and 

Marston, Estimating Shareholder Risk Premia Using Analysts' Growth Forecasts, Financial 

Management. 21 (Snmmer 1992); and Vander Weide and Carleton, Investor Growth Expectations: 

Analysts vs. History, The Journal <strong>of</strong> Portfolio Management, Spring 1988. 

Vander Weide and Carleton, Investor Growth Expectations: Analysts vs. History, The Journal <strong>of</strong> 

Portfolio Management, Spring 1988. 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

Cost <strong>of</strong> Equity, and in the valuation <strong>of</strong> equity securities. Dr. <strong>Robert</strong> Harris noted 

that "a growing body <strong>of</strong> knowledge shows that analysts' earnings forecast are 

indeed reflected in stock prices." Citing Cragg and Malkiel, Dr. Harris notes that 

those authors "found that the evaluations <strong>of</strong> companies that analysts make are the 

sorts <strong>of</strong> ones on which market valuation is based. ,,10 Similarly, Brigham, Shome 

and Vinson noted that "evidence in the current literature indicates that (i) 

analysts' forecasts are superior to forecasts based solely on time series data; and 

(ii) investors do rely on analysts' forecasts."ll 

To that point, the research <strong>of</strong> Carleton and Vander Weide demonstrates 

that earnings growth projections have a statistically significant relationship to 

11 

stock valuation levels, while dividend growth projections do not. 12 

Those 

12 

13 

14 

15 

16 

17 

18 

19 

20 

findings suggest that investors form their investment decisions based on 

expectations <strong>of</strong> growth in earnings, not dividends. Consequently, earnings growth 

not dividend growth is the appropriate estimate for the purpose <strong>of</strong> the Constant 

Growth DCF model. 

Q. PLEASE DESCRIBE THE RETENTION GROWTH ESTIMATE AS 

APPLIED IN YOUR QUARTERLY GROWTH DCF MODEL. 

A. The Retention Growth model, which is a generally recognized and widely taught 

method <strong>of</strong> estimating long-term growth, is an alternative approach to the use <strong>of</strong> 

analysts' earnings growth estimates. In essence, the model is premised on the 

10 <strong>Robert</strong> S. Harris, Using Analysts' Growth Forecasts to Estimate Shareholder Required Rate <strong>of</strong> Return, 

Financial Management, Spring 1986. 

II Eugene F. Brigham, Dilip K. Shome, and Steve R. Vinson, The Risk Premium Approach to Measuring 

a Utility's Cost <strong>of</strong> Equity, Financial Management, Spring 1985. 

12 

Vander Weide and Carleton, Investor Growth Expectations: Analysts vs. History, The Journal <strong>of</strong> 

Portfolio Management, Spring 1988. 


NorthWestern Energy


1 proposition that a firm's growth is a function <strong>of</strong> its expected earnings, and the 

2 extent to which it retains earnings to invest in the enterprise. In its simplest form, 

3 the model represents long-term growth as the product <strong>of</strong> the retention ratio (i.e., 

4 the percentage <strong>of</strong> earnings not paid out as dividends, referred to below as (''b'') 

5 and the expected return on book equity (referred to below as "r"). Thus, the 

6 simple ''b x r" form <strong>of</strong> the model projects growth as a function <strong>of</strong> internally 

7 generated funds. That form <strong>of</strong> the model is limiting, however, in that it does not 

8 provide for growth funded from external equity. 

9 The "br + sv" form <strong>of</strong> the Retention Growth estimate used in my DCF 

10 analysis is meant to reflect growth from both internally generated funds (i.e., the 

11 "br" term) and from issuances <strong>of</strong> equity (i.e., the "sv" term). The first term, which 

12 is the product <strong>of</strong> the retention ratio (i.e., "b", or the portion <strong>of</strong> net income not paid 

13 in dividends) and the expected return on equity (i.e., "r") represents the portion <strong>of</strong> 

14 net income that is "plowed back" into the Company as a means <strong>of</strong> funding 

15 growth. The "sv" term is represented as: 

16 

17 

18 

19 

20 

21 

(: - 1) x Growth rate in Common Shares Equation [4] 

where : is the Market-to-Book ratio. 

In this form, the "sv" term reflects an element <strong>of</strong> growth as the product <strong>of</strong> 

(a) the growth in shares outstanding, and (b) that portion <strong>of</strong> the market-to-book 

ratio that exceeds unity. As shown in Exhibit No. RBH-3, all <strong>of</strong> the components 

<strong>of</strong> the Retention Growth Model can be derived from data provided by Value Line. 


NorthWestern Energy


1 Q. HOW DID YOU CALCULATE THE mGH AND LOW DCF RESULTS? 

2 A. I calculated the proxy group mean high DCF result using the maximum EPS 

3 growth rate as reported by Value Line, Zack's, First Call and the retention growth 

4 estimate for each proxy group company in combination with the dividend yield 

5 for each <strong>of</strong> the proxy group companies. The average mean high result then 

6 reflects the average maximum DCF result for the proxy group as a whole. I used 

7 a similar approach to calculate the proxy group mean low results, using instead 

8 the minimum growth rate as reported by Value Line, Zack's, First Call and the 

9 retention growth estimate for each proxy group company. 

10 Results for the Quarterly Growth DCF Model 

11 Q. WHAT ARE THE RESULTS OF YOUR QUARTERLY GROWTH DCF 

12 ANALYSIS? 

13 A. As shown in Table 2 (below) (see also Exhibit No. RBH-l), the mean Quarterly 

14 Growth DCF results for my proxy group are 9.00 percent, 9.11 percent, and 9.09 

15 percent for the 30, 90, and l80-trading day periods, respectively. The mean high 

16 DCF result for the 30, 90, and 180-day averaging periods are 11.00 percent, 11.11 

17 percent, and 11.09 percent, respectively. 

18 Table 2: Quarterly Growth DCF Results 

30-Day Average 



Mean Low 

Mean 

7.34% 9.00% 

7.44% 9.11% 

7.42% 9.09% 

Mean Hiah 

11.00% 

11.11% 

11.09% 


NorthWestern Energy


1 Constant Growth DCF Model 

2 Q. WHAT ASSUMPTIONS ARE REQUIRED FOR THE CONSTANT 

3 GROWTH DCF MODEL? 

4 A. The Constant Growth DCF model requires the following assumptions: (1) a 

5 constant average growth rate for earnings and dividends; (2) a stable dividend 

6 payout ratio; (3) a constant price-to-earnings multiple; and (4) a discount rate 

7 greater than the expected growth rate. 

8 Dividend Yield and Growth Rates for the Constant Growth DCF Model 

9 Q. 

10 

11 A. 

12 

13 

14 Q. 

15 

16 A. 

17 

WHAT MARKET DATA DID YOU USE TO CALCULATE THE 

DIVIDEND YIELD COMPONENT OF YOUR DCF MODEL? 

The dividend yield is based on the proxy companies' current annualized dividend, 

and average closing stock prices over the 30, 90, and 180-trading days as <strong>of</strong> 

August 31,2012. 

DID YOU MAKE ANY ADJUSTMENTS TO THE DIVIDEND YIELD TO 

ACCOUNT FOR PERIODIC GROWTH IN DIVIDENDS? 

Yes, I did. Since utility companies tend to increase their quarterly dividends at 

different times throughout the year, it is reasonable to assume that dividend 

18 

increases will be evenly distributed over calendar quarters. 

Given that 

19 

assumption, it is appropriate to calculate the expected dividend yield by applying 

20 

one-half <strong>of</strong> the long-term growth rate to the current dividend yield. 13 

That 

21 

adjustment ensures that the expected dividend yield is, on average, representative 

13 See Exhibit No. RBH-2. 


NorthWestern Energy


1 <strong>of</strong> the coming twelve-month period, and does not overstate the dividends to be 

2 paid during that time. 

3 Q. WHAT GROWTH RATES DID YOU USE IN YOUR CONSTANT 

4 GROWTH DCF MODEL ANALYSIS? 

5 A. I used the same projected EPS growth rates as well as the retention growth 

6 estimate applied in my Quarterly Growth DCF model analysis. 

7 Results for Constant Growth DCF Model 

8 Q. 

9 

10 A. 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 Q. 

23 

24 A. 

25 

PLEASE SUMMARIZE YOUR INPUTS TO THE CONSTANT GROWTH 

DCFMODEL. 

I applied the DCF model to the proxy group companies using the following inputs 

for the price and dividend terms: 

terms: 

1. The average daily closing prices for the 30-trading days, 90-trading 

days, and 180-trading days ended August 31, 2012 for the term Po; and 

2. The annualized dividend per share as <strong>of</strong> August 31, 2012 for the term 

Do. 

r then calculated the DCF results using each <strong>of</strong> the following growth 

1. The Zacks consensus long-term earnings growth estimates; 

2. The First Call consensus long-term earnings growth estimates; 

3. The Value Line long-term earnings growth estimates; and 

4. An estimate <strong>of</strong> Retention Growth. 

WHAT ARE THE RESULTS OF YOUR CONSTANT GROWTH DCF 

ANALYSIS? 

As shown in Table 3 (below) (see also Exhibit No. RBH-2), the mean Constant 

Growth DCF results for my proxy group are 8.82 percent, 8.92 percent, and 8.90 


NorthWestern Energy


1 percent for the 30, 90, and ISO-trading day periods, respectively. The mean high 

2 DCF result for the 30,90, and ISO-day averaging periods are 10.75 percent, 10.S6 

3 percent, and 1 0.S4 percent, respectively. 

4 Table 3: Constant Growth DCF Results 

Mean Low Mean Mean High 

30-Day Average 7.20% 8.82% 10.75% 

90-Day Average 7.31% 8.92% 10.86% 

180-Day Average 7.28% 8.90% 10.84% 

5 Multi-Stage DCF Model 

6 Q. 

7 A. 

S 

9 

10 

11 

12 

13 

14 

15 

16 Q. 

17 

18 A. 

19 

20 

WHAT OTHER FORMS OF THE DCF MODEL HAVE YOU USED? 

In order to address certain limiting assumptions underlying the Constant Growth 

fonn <strong>of</strong> the DCF model, I also considered the results <strong>of</strong> the Multi-Stage (threestage) 

Discounted Cash Flow Model. The Multi-Stage model, which is an 

extension <strong>of</strong> the Constant Growth fonn, enables the analyst to specify growth 

rates over three distinct stages. As with the Constant Growth fonn <strong>of</strong> the DCF 

model, the Multi-Stage fonn defines the Cost <strong>of</strong> Equity as the discount rate that 

sets the current price equal to the discounted value <strong>of</strong> future cash flows. Unlike 

the Constant Growth fonn, however, the Multi-Stage model must be solved in an 

iterative fashion. 

PLEASE GENERALLY DESCRIBE THE STRUCTURE OF YOUR 

MULTI-STAGE MODEL. 

As noted above, the model sets the subject company's stock price equal to the 

present value <strong>of</strong> future cash flows received over three "stages". In the first two 

stages, "cash flows" are defined as projected dividends. In the third stage, "cash 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

flows" equal both dividends and the expected price at which the stock will be sold 

at the end <strong>of</strong> the period (i.e., the "terminal price"). I calculated the terminal price 

based on the Gordon model, which defines the price as the expected dividend 

divided by the difference between the Cost <strong>of</strong> Equity (i.e., the discount rate) and 

the long-term expected growth rate. In essence, the terminal price is defined by 

the present value <strong>of</strong> the remaining "cash flows" in perpetuity. In each <strong>of</strong> the three 

stages, the dividend is the product <strong>of</strong> the projected earnings per share and the 

expected dividend payout ratio. A summary description <strong>of</strong> the model is provided 

in Table 4 (below). 

Table 4: Multi-Stage DCF Structure 

Sta~e 0 1 2 3 

Cash Flow Initial Stock Expected Expected Expected 

Component Price Dividend Dividend Dividend + 

Terminal 

Value 

Inputs Stock Price Expected EPS Expected EPS Expected EPS 

Earnings Per Expected DPS Expected DPS Expected DPS 

Share (EPS) 

Terminal 

Dividends Per 

Value 

Share (DPS) 

Assumptions 30, 90, and EPS Growth Growth Rate Long-term 

ISO-day Rate Change Growth Rate 

average stock Payout Ratio Payout Ratio Long-term 

price Change Payout Ratio 

11 

12 Q. 

l3 

14 A. 

15 

16 

WHAT ARE THE ANALYTICAL BENEFITS OF YOUR THREE-STAGE 

MODEL? 

The primary benefits relate to the flexibility provided by the model's formulation. 

Since the models provide the ability to specify near, intermediate, and long-term 

growth rates, for example, it avoids the sometimes limiting assumption that the 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

subject company will grow at the same, constant rate in perpetuity. In addition, 

by calculating the dividend as the product <strong>of</strong> earnings and the payout ratio, the 

model enables analysts to reflect assumptions regarding the timing and extent- <strong>of</strong> 

changes in the payout ratio to reflect, for example, increases or decreases in 

expected capital spending, or transition from current payout levels to long-term 

expected levels. In that regard, because the model relies on multiple sources <strong>of</strong> 

earnings growth rate assumptions, it is not limited to a single source, such as 

Value Line, for all inputs, and mitigates the potential bias associated with relying 

on a single source <strong>of</strong> growth estimates. 14 

The model also enables the analyst to assess the reasonableness <strong>of</strong> the 

inputs and results by reference to certain market-based metrics. For example, the 

stock price estimate can be divided by the expected earnings per share in the final 

year to calculate an average PIE ratio. Similarly, the terminal PIE ratio can be 

divided by the terminal growth rate to develop a Price to Earnings Growth 

("PEG") ratio. To the extent that either the projected PIE or PEG ratios are 

inconsistent with either historical or expected levels, it may indicate incorrect or 

inconsistent assumptions within the balance <strong>of</strong> the model. 

Q. PLEASE SUMMARIZE YOUR INPUTS TO THE MULTI-STAGE DCF 

MODEL. 

A. I applied the Multi-Stage model to the proxy group described earlier in my <strong>Direct</strong> 

21 

<strong>Testimony</strong>. 

My assumptions with respect to the various model inputs are 

22 

described in Table 5 (below). 

14 See, for example, Harris and Marston, Estimating Shareholder Risk Premia Using Analysts' Growth 

Forecasts, Financial Management, 21 (Summer 1992). 


NorthWestern Energy


1 Table 5: Multi-Stage DCF Model Assumptions 

Stage Initial First Transition Terminal 

2 

Stock Price 30, 90, and 

180-day 

average stock 

price as <strong>of</strong> 

August 31, 

2012 

Earnings 2011 actual EPS growth as Transition to Long-term 

Growth EPS escalated average <strong>of</strong> (1) Long-term GDP growth 

by Period I Value Line; (2) GDP growth 

growth rate Zacks; (3) First 

Call; (4) 

Retention 

Growth rates 

Payout Ratio Value Line Transition to Long-term 

company- long-term expected 

specific industry payout payout ratio 

ratio 

Terminal Value 

Expected 

dividend in 

fmal year 

divided by 

solved Cost <strong>of</strong> 

Equity less 

long-term 

growth rate 

3 Q. HOW DID YOU CALCULATE THE LONG-TERM GDP GROWTH 

4 RATE? 

5 A. The long-tenn growth rate <strong>of</strong> 5.61 percent is based on the real Gross Domestic 

6 Product (GDP) growth rate <strong>of</strong> 3.24 percent from 1929 through 2011,15 and an 

7 inflation rate <strong>of</strong> 2.30 percent. The GDP growth rate is calculated as the 

8 compound growth rate in the chain-weighted GDP for the period from 1929 

9 through 2011. The rate <strong>of</strong> inflation <strong>of</strong>2.30 percent is a compound annual forward 

10 rate starting in ten years (i.e., 2022, which is the beginning <strong>of</strong> the tennina~ period) 

15 Bureau <strong>of</strong> Eeonornie Analysis, August 29, 2012 update. 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

and is based on the 30-day average projected inflation based on the spread 

between yields on long-tenn nominal Treasury Securities and long-tenn Treasury 

Inflation Protected Securities, known as the "TIPS spread". 

In essence, my real GDP growth rate projection is based on the 

assumption that absent specific knowledge to the contrary, it is reasonable to 

assume that over time, real GDP growth will revert to its long-tenn mean. 

Furthennore, since estimating the Cost <strong>of</strong> Equity is a market-based exercise, it is 

important to reflect the sentiments and expectations <strong>of</strong> investors to the extent 

possible. In that important respect, the TIPS spread represents the collective 

views <strong>of</strong> investors regarding long-tenn inflation expectations. Equally important, 

by using forward yields, we are able to infer the level <strong>of</strong> long-tenn inflation 

expected by investors as <strong>of</strong> the terminal period <strong>of</strong> the Multi-Stage model (that is, 

ten years in the future). 

Q. WHAT WERE YOUR SPECIFIC ASSUMPTIONS WITH RESPECT TO 

THE PAYOUT RATIO? 

A. As noted in Table 5, for the first two periods I relied on the first year and longtenn 

projected payout ratios reported by Value Line l6 for each <strong>of</strong> the proxy group 

companies. I then assumed that by the end <strong>of</strong> the second period (i.e., the end <strong>of</strong> 

year 10), the payout ratio will converge to the industry expected ratio <strong>of</strong> 65.00 

percent. 17 

I6 As reported in the Value Line Investment Survey as "All Div'ds to Net Pr<strong>of</strong>." 

17 Source: Value Line Investment Survey 


NorthWestern Energy


1 Discounted Cash Flow Model Results 

2 Q. HAVE YOU CONSIDERED THE MEAN LOW RESULTS OF YOUR DCF 

3 MODELS IN DETERMINING YOUR RECOMMENDED ROE RANGE? 

4 A. No. The mean low results <strong>of</strong> my DCF models are far below any reasonable 

5 estimation <strong>of</strong> tbe Company's ROE. In fact, <strong>of</strong> tbe 945 rate cases in which an 

6 autborized ROE has been disclosed since 1980, there has been only one instance 

7 in which the autborized ROE was below 9.00 percent for a natural gas utility in 

8 any jurisdiction. 18 That authorized ROE, 8.83 percent, is still approximately 125 

9 to 150 basis points higher than the mean low results <strong>of</strong> my Quarterly Growth DCF 

10 and Constant Growtb DCF models. In fact, from January 2011 (i. e. the 

11 beginning <strong>of</strong> tbe test period) through August 2012 tbe median authorized ROE 

12 was 10.00 percent. Chart 1, below, shows tbat tbe most frequently authorized 

13 ROE over that period was between 10.25 percent and 10.50 percent. 

18 Source: SNL Financial 


NorthWestern Energy


1 

2 

Chart 1: Frequency <strong>of</strong> Natural Gas Authorized ROEs 

(January 2011- August 2012) 

8T-----·------------------------------------------ 

7+----------------------------------- 

6 +--.-----------.. ---.. ----------... ----------- 

5 +------------ 

4 +-.--------.------.-- 

3 +--.. ---. ----. --.. ---. -------.----.. --. 

2 +---------- 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

O+---~ 

" 8.76%- 9.01%- 9.26%- 9.51%- 9.76%-1U.01%-10.26%-10.51%- > 

8.75% 9.00% 9.25% 9.50% 9.75% 10.00% 10.25% 10.50% 10.75% 10.75% 

Moreover, there have been no events suggesting that the Company's Cost 

<strong>of</strong> Equity has fallen by as much as 133 to 299 basis points since the Order on 

Remand in the Company's most recent rate case was issued on June 30, 2011. 19 

In that regard, Baird Equity Research has also noted that, "Investors view a 10.0% 

authorized ROE as an acceptable floor. Authorized ROEs materially below that 

level are typically viewed negatively by investors.,,20 As such, I did not consider 

the mean low results from the three DCF models when determining the 

appropriate ROE for NorthWestern. 

19 

20 

Montana Public Service Commission, Docket No. D2009.9.129, Order on Remand Dated June 30, 

2011 at para. 93. NorthWestern current authorized ROE is 10.25 percent. The average <strong>of</strong> the low end 

results for the Multi-Stage DCF model is approximately 8.92 percent, or 133 basis points below the 

current authorized ROE, and the average <strong>of</strong> the mean low results for the Constant Growth DCF model 

is 7.26 percent, or 299 basis points below the current authorized ROE. 

Baird Equity Research, Utilities: Initial Publication <strong>of</strong> Baird's RegulatOlY Toolkit, September 20, 

2011, at 3. 


NorthWestern Energy


1 Q. 

2 

3 

4 A. 

S 

6 

7 

8 Q. 

9 A. 

10 

11 

IF YOU DO NOT BELIEVE THE MEAN LOW RESULTS OF YOUR DCF 

MODELS ARE REASONABLE, WHY HAVE YOU PROVIDED THEM 

THROUGHOUT YOUR TESTIMONY? 

While I do not believe any weight should be given to the mean low DCF results, I 

believe it is important to provide transparency in the presentation <strong>of</strong> analyses. As 

such, I have presented the mean low results, which reflect the converse 

calculation <strong>of</strong> the mean high results. 

PLEASE SUMMARIZE THE RESULTS OF YOUR DCF ANALYSES. 

Table 6 (below), (see also Exhibit No. RBH-l, Exhibit No. RBH-2 and Exhibit 

No. RBH-4), presents the results <strong>of</strong> the Quarterly Growth, Constant Growth and 

Multi-Stage DCF analyses. Setting aside the low results, the Quarterly Growth 

12 

DCF produces a range <strong>of</strong> results from 9.00 percent to 11.11 percent. 21 

The 

13 

14 

15 

Constant Growth DCF model produces a range <strong>of</strong> results from 8.82 percent to 

10.86. percent. The Multi-Stage DCF analysis produces a range <strong>of</strong> results from 

9.53 percent to 10.36 percent. 

21 

Excludes mean low results. 


NorthWestern Energy


Table 6: Summary <strong>of</strong> Discounted Cash Flow Model Results 

Mean 

Mean 

Low Mean High 

Quarterly Growth DCF Results 

30-Day Average 7.34% 9.00% 11.00% 

90-Day Average 7.44% 9.11% 11.11% 

180-Day Average 7.42% 9.09% 11.09% 

Constant Growth DCF Results 

30-Day Average 7.20% 8.82% 10.75% 

90-Day Average 7.31% 8.92% 10.86% 

180-Day Average 7.28% 8.90% 10.84% 

Multi-Stage DCF Results 

Low Mean High 

30-Day Average 8.91% 9.53% 10.24% 

90-Day Average 8.95% 9.64% 10.36% 

180-Day Average 8.89% 9.62% 10.32% 

1 CAPM Analysis 

2 Q. DID YOU UNDERTAKE ANY ADDITIONAL ANALYSES IN ADDITION 

3 TO YOUR DCF MODEL RESULTS? 

4 A. Yes. As noted earlier, I also applied the CAPM in estimating the Company's Cost 

5 <strong>of</strong> Equity. 

6 Q. PLEASE BRIEFLY DESCRIBE THE GENERAL FORM OF THE CAPM 

7 ANALYSIS. 

8 A. The CAPM is a risk premium model that estimates the Cost <strong>of</strong> Equity as a 

9 function <strong>of</strong> a risk-free return plus a risk premium (to compensate investors for the 

10 non-diversifiable or "systematic" risk <strong>of</strong> that security). As shown in Equation [5], 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

IS 

the CAPM is defined by four components, each <strong>of</strong> which theoretically is a 

forward-looking estimate: 


where: 

k= the required market ROE; 

~ = Beta coefficient <strong>of</strong> an individual security; 

rf= the risk free rate <strong>of</strong>return; and 

r m = the required return on the market as a whole. 

In Equation [5], the term (rm - rf) represents the Market Risk Premium. 

According to the theory underlying the CAPM (and as discussed in Section V), 

since unsystematic risk can be diversified away by adding securities to their 

investment portfolio, investors should be concerned only with systematic or nondiversifiable 

risk. 

which is defined as: 

Non-diversifiable risk is measured by the Beta coefficient, 


16 

17 

18 

19 

20 

21 

where (Jj is the standard deviation <strong>of</strong> returns for company ''j''; (Jm is the standard 

deviation <strong>of</strong> returns for the broad market (as measured, for example, by the S&P 

500 Index), and Pj,m is the correlation <strong>of</strong> returns in between company j and the 

broad market. Thus, the Beta coefficient represents both relative volatility (i.e., 

the standard deviation) <strong>of</strong> returns, and the correlation in returns between the 

subject company and the overall market. 


NorthWestern Energy


1 Q. 

2 

3 A. 

HAS THE CAPM BEEN AFFECTED BY RECENT ECONOMIC 

CONDITIONS? 

Yes, it has. First, as noted above, the risk free rate, "r/', in the CAPM formula is 

4 

represented by the interest rate on long-term U.S. Treasury securities. 

As 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

discussed in Section VIII (below), during periods <strong>of</strong> increased equity market 

volatility investors tend to seek the relative safety low-risk securities such as 

Treasury bonds. In addition, since the 2008 Lehman Brothers bankruptcy filing, 

Federal policy has focused on maintaining low long-term interest rates. As a 

result, the first term in the model (i.e., the risk-free rate) is lower than it would 

have been absent such events. As also discussed in Section VIII, the persistently 

high level <strong>of</strong> correlations between natural gas utility stocks and the broad market 

has put upward pressure on Beta coefficients. 

Finally, as a result <strong>of</strong> the extraordinary loss in equity values during 2008, 

the Market Risk Premium, when measured on a historical basis, actually 

decreased from the prior year, even though other measures <strong>of</strong> risk sentiment, in 

particular market volatility, indicated extremely high levels <strong>of</strong> risk aversion. That 

result is, <strong>of</strong> course, counter-intnitive. While the subsequent market rally resulted 

in a somewhat higher historical average Market Risk Premium, it still remains 

below its pre-financial crisis level. 22 

22 

See, Risk Premia Over Time Report, 2012 Ibbotson SBBI Morningstar, Inc., at 9. 


NorthWestern Energy

Page350f63 

1 Q. 

2 

3 A. 

4 

5 

6 

7 Q. 

8 

9 A. 

10 

WITH THOSE OBSERVATIONS IN MIND, WHAT ASSUMPTIONS DID 

YOU INCLUDE IN YOUR CAPM ANALYSIS? 

Since utility assets represent long-term investments, I used two different 

specifications <strong>of</strong> the risk-free rate as my estimate <strong>of</strong> the risk-free rate: (1) the 

current 3D-day average yield on 3D-year Treasury bonds (i.e., 2.71 percent), and 

(2) the projected 3D-year Treasury yield (i.e., 3.00 percent).23 

WHY HAVE YOU RELIED UPON THE 30-YEAR TREASURY YIELD 

FOR YOUR CAPM ANALYSIS? 

In determining the security most relevant to the application <strong>of</strong> the CAPM, it is 

important to select the term (or maturity) that best matches the life <strong>of</strong> the 

11 

underlying investment. 

Natural gas utilities typically are long-duration 

12 

13 

14 Q. 

15 

16 A. 

17 

18 Q. 

19 

20 A. 

21 

22 

investments and as such, the 3D-year Treasury yield is more suitable for the 

purpose <strong>of</strong> calculating the Cost <strong>of</strong> Equity. 

WHAT MARKET RISK PREMIUM DID YOU USE IN YOUR CAPM 

MODEL? 

For the reasons discussed above, I did not use a historical average; rather, I 

developed two forward-looking (ex-ante) estimates <strong>of</strong> the Market Risk Premium. 

PLEASE DESCRIBE YOUR FIRST EX-ANTE APPROACH TO 

ESTIMATING THE MARKET RISK PREMIUM. 

The first approach is based on the market required return, less the current 3D-year 

Treasury bond yield. To estimate the market required return, I calculated the 

market capitalization weighted average ROE based on the Constant Growth DCF 

23 

Blue Chip Financial Forecast, Vol. 31, No.8, August I, 2012, at 2. 


NorthWestern Energy


1 

2 

3 

4 

model. To do so, I relied on data from two sources: (1) Bloomberg; and (2) 

Capital IQ. With respect to Bloomberg-derived growth estimates, I calculated the 

expected dividend yield (using the same one-half growth rate assumption 

described earlier), and combined that amount with the projected earnings growth 

5 

rate to arrive at the market capitalization weighted average DCF result. 

I 

6 

7 

8 

9 

10 

11 

12 

13 Q. 

14 A. 

15 

16 

17 

performed that calculation for each <strong>of</strong> the companies for which Bloomberg 

provided both dividend yields and consensus growth rates. I then subtracted the 

current 30-year Treasury yield from that amount to arrive at the second market 

DCF-derived ex-ante MRP estimate. In the case <strong>of</strong> Capital IQ, I performed the 

same calculation, again using all companies for which five-year earnings growth 

rates were available. The results <strong>of</strong> those calculations are provided in Exhibit No. 

REB-5. 

PLEASE NOW DESCRIBE THE SECOND EX-ANTE APPROACH. 

The second approach assumes a constant Sharpe Ratio, which is the ratio <strong>of</strong> the 

risk premium relative to the risk, or standard deviation <strong>of</strong> a given security or 

index <strong>of</strong> securities. The Sharpe Ratio is relied upon by financial pr<strong>of</strong>essionals to 

assess the incremental return received for holding a risky (i. e., more volatile) asset 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

rather than a risk-free (i.e., less volatile) asset?4 The formula for calculating the 

Sharpe Ratio is expressed as follows: 

where: 

-'.(R..:x,--_R.!..f) ... 

Sx = - Equation [7] 

Sx = Sharpe Ratio for security "x"; 

Rx = the average return <strong>of</strong> security "x"; 

Rf= the rate <strong>of</strong> return <strong>of</strong> a risk free security; and 

CJx = the standard deviation <strong>of</strong> Rx. 

As shown in Exhibit No. RBH-5, the constant Sharpe Ratio is the ratio <strong>of</strong> 

the historical market risk premium <strong>of</strong> 6.60 percent (the numerator <strong>of</strong> Equation [7] 

above) and the historical market volatility <strong>of</strong> 20.30 percent (the denominator <strong>of</strong> 

12 

Equation [7]).25 

The expected market risk premium is then calculated as the 

13 

14 

15 

product <strong>of</strong> the Sharpe Ratio and the expected market volatility. For the purpose 

<strong>of</strong> that calculation, I used the thirty-day average <strong>of</strong> the CBOE's three-month 

volatility index (i. e., the VXV) and the average <strong>of</strong> settlement prices over the same 

24 

Substantial research has been conducted by both the academic community and government agencies 

which supports the presence <strong>of</strong> a relationship between the market risk premium and volatility. (See, 

e.g., French, Kenneth R., et aI., Expected Stock Returns and Volatility: Pricing the Short-Run and 

Long-Run, Journal <strong>of</strong> Financial Economics, Vol. 19, 1987, at 3-29; Campbell, John Y. and Taksler, 

Glen B., Equity Volatility and CO/porate Bond Yields, The Journal <strong>of</strong> Finance, Vol. 58, No.6, 

December 2003, at 2321-2349; Li, Qi, et aI., The relationship between stock returns and volatility in 

international stock markets, Journal <strong>of</strong> Empirical Finance, Vol. 12, September 2005, at 650-665; 

Adrian, Tobias and Rosenberg, Joshua, Pricing the Short-Run and Long-Run Components <strong>of</strong> Market 

Risk, Federal Reserve Bank <strong>of</strong> New York Staff Reports, No. 254, July 2006; revised February 2008; 

and Chen, Long, et aI., Equity Market Volatility and Expected Risk Premium, Federal Reserve Bank <strong>of</strong> 

St. Louis, January 2006). 

25 See Risk Premia Over Time Report, 2012 Ibbotson SBBI Morningstar, Inc., at 9. I recognize that the 

VIX forward settlement prices are liquid for approximately six to eight months; nonetheless, that data 

represents a market-based measure <strong>of</strong> expected volatility that should be considered in estimating the 

ex-ante Market Risk Premium. 


NorthWestern Energy


1 

2 

3 Q. 

4 

5 A. 

6 

7 

8 Q. 

9 A. 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 Q. 

20 

21 A. 

22 

23 

thirty-day period <strong>of</strong> futures on the CBOE's one-month volatility index (i.e., the 

VIX) for February, 2013 tmough April, 2013. 

HOW DID YOU APPLY YOUR EXPECTED MARKET RISK PREMIUM 

AND RISK FREE RATE ESTIMATES? 

I relied on each <strong>of</strong> the ex-ante Market Risk Premia discussed above, together with 

the current and near-term projected 30-year Treasury bond yields as inputs to my 

CAPM analyses. 

WHAT BETA COEFFICIENT DID YOU USE IN YOUR CAPM MODEL? 

With respect to the Beta coefficient, I considered two methods <strong>of</strong> calculation. My 

first approach simply employs the average reported Beta coefficient from 

Bloomberg and Value Line for each <strong>of</strong> the proxy group companies. While both <strong>of</strong> 

those services adjust their calculated (or "raw") Beta coefficients to reflect the 

tendency <strong>of</strong> the Beta coefficient to regress to the market mean <strong>of</strong> 1.00, Value Line 

calculates the Beta coefficient over a five-year period, while Bloomberg'S 

calculation is based on two years <strong>of</strong> data. I also calculated Beta coefficients over 

a more recent time period to provide a more current view as to investors' 

perspectives with respect to the systematic risk represented by the proxy group 

companies. 

PLEASE DESCRIBE HOW YOU CALCULATED THE MEAN ADJUSTED 

BETA COEFFICIENT FOR YOUR PROXY GROUP. 

As shown in Equation [6], the Beta coefficient is calculated as the ratio <strong>of</strong> the 

standard deviation <strong>of</strong> returns for the subject company and the market, 

respectively, multiplied by the correlation <strong>of</strong>returns between the two. I therefore 


NorthWestern Energy


1 

2 

3 

4 

calculated the "raw" Beta coefficient for each member <strong>of</strong> the proxy group, based 

on Equation [6], and adjusted those raw Beta coefficients to address the tendency 

to regress toward the market Beta coefficient <strong>of</strong> unity. For the purpose <strong>of</strong> that 

calculation, I used weekly returns, and calculated the standard deviation and 

5 

6 

correlations over the twelve month period ended August 31, 20 12. 

those results produces an adjusted Beta coefficient <strong>of</strong> 0.732. 

Averaging 

7 Q, 

8 A. 

9 

10 

11 

12 

13 Q. 

14 

15 

16 A. 

17 

18 

19 

20 

21 

22 

HOW AND WHY DID YOU ADJUST THE RAW BETA COEFFICIENT? 

I adjusted my raw Beta coefficient consistent with the methodology used by 

Bloomberg, which multiplies the raw Beta coefficient by 0.67, and adds 0.33 to 

that product. The purpose <strong>of</strong> that adjustment is to reflect the results <strong>of</strong> substantial 

academic research indicating that, over time, raw Beta coefficients tend to regress 

to the market mean <strong>of</strong> 1.00. 26 

PLEASE EXPLAIN WHY YOU RELIED ON A TWELVE-MONTH 

ESTIMATE OF THE PROXY GROUP MEAN ADJUSTED BETA 

COEFFICIENT. 

As discussed further in Section VIII (below), while volatility in the broad market 

and the utility sector recently have begun to moderate, the correlation in returns 

remains at historically elevated levels. And, as discussed above, the Market Risk 

Premium tends to change over time. In my view, the use <strong>of</strong> Beta Coefficients 

calculated over shorter periods is consistent with the notion that market 

conditions, and the risk premium required by investors in response to those 

conditions, also may change over shorter periods. In any case, by relying on both 

26 

The regression tendency <strong>of</strong> Beta coefficients to converge to 1.0 over time is well known and widely 

discussed in financial literature. (See, e.g., Blume, Marshall E., On the Assessment <strong>of</strong> Risk, The 

Journal <strong>of</strong> Finance, Vol. 26, No.1, March 1971, at 1-10). 


NorthWestern Energy


1 

2 

3 Q. 

4 

5 

6 A. 

7 

8 

9 

10 

11 Q. 

12 A. 

13 

Value Line and Bloomberg, my CAPM analysis reflects Beta Coefficients 

calculated over longer periods, as well. 

IS YOUR CALCULATED BETA COEFFICIENT REASONABLE 

RELATIVE TO THOSE CALCULATED BY VALUE LINE AND 

BLOOMBERG? 

Yes, it is. As shown in Exhibit No. RBH-6, the proxy group average Value Line, 

Bloomberg, and Calculated Beta Coefficients are 0.67, 0.73, and 0.73, 

respectively. In light <strong>of</strong> the market dynamics noted earlier, the calculated Beta 

Coefficient reasonably reflects current conditions, although it is not materially 

different than those provided by Value Line and Bloomberg. 

WHAT ARE THE RESULTS OF YOUR CAPM ANALYSES? 

As shown in Table 7, (see Exhibit No. RBH-7), the CAPM analyses suggest an 

ROE range <strong>of</strong> 8.19 percent to 10.80 percent. 27 

27 

Based on average results for respective Market Risk Premium approaches. 


NorthWestern Energy


1 Table 7: Summary <strong>of</strong> CAPM Results 

2 

Bloomberg CapitalIQ 

Sharpe Ratio Derived Derived 

Derived Market Market Risk Market Risk 

Risk Premium Premium Premium 

Average Calculated Beta Coefficient 

Current 30-Year Treasury (2.71 %) 8.72% 10.50% 10.33% 

Near Term Projected 30-Year 

Treasury (3.00%) 

9.01% 10.78% 10.62% 

Average Bloomberg Beta Coefficient 



9.03% 10.80% 10.64% 


Average Value Line Beta Coefficient 




8.48% 10.09% 9.94% 

3 Q. HOW DID YOU INCORPORATE THE CAPM RESULTS IN YOUR ROE 

4 RECOMMENDATION? 

5 A. As noted earlier in my testimony, current market conditions, which are directly 

6 

7 

8 

9 

10 

11 

12 

13 

reflected in the Beta, Risk Premium, and Risk Free rate terms <strong>of</strong> the model 

indicate that the Cost <strong>of</strong> Equity is higher than the levels suggested by other 

approaches, in particular, the Constant Growth DCF model. While I realize that 

certain <strong>of</strong> the factors that influence the CAPM results, such as the elevated 

degree <strong>of</strong> return correlations, are symptomatic <strong>of</strong> current market conditions, it 

would be inappropriate not to recognize the effect <strong>of</strong> those conditions in 

determining the Company's Cost <strong>of</strong> Equity. Consequently, I have considered the 

CAPM results in arriving at my ROE recommendation. 


NorthWestern Energy


1 Bond Yield Plus Risk Premium Approach 

2 Q. 

3 

4 A. 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 Q. 

17 

18 A. 

19 

20 

21 

22 

23 

PLEASE GENERALLY DESCRIBE THE BOND YIELD PLUS RISK 

PREMIUM APPROACH. 

In general terms, this approach is based on the fundamental principle that equity 

investors bear the residual risk associated with ownership and therefore require a 

premium over the return they would have earned as a bondholder. That is, since 

returns to equity holders are more risky than returns to bondholders, equity 

investors must be compensated for bearing that risk. Risk premium approaches, 

therefore, estimate the Cost <strong>of</strong> Equity as the sum <strong>of</strong> the equity risk premium and 

the yield on a particular class <strong>of</strong> bonds. As noted in my discussion <strong>of</strong> the CAPM, 

since the equity risk premium is not directly observable, it typically is estimated 

using a variety <strong>of</strong> approaches, some <strong>of</strong> which incorporate ex-ante, or forwardlooking 

estimates <strong>of</strong> the Cost <strong>of</strong> Equity, and others that consider historical, or expost, 

estimates. An alternative approach is to use actual authorized returns for 

natural gas utilities to estimate the Equity Risk Premium. 

PLEASE NOW EXPLAIN HOW YOU PERFORMED YOUR BOND 

YIELD PLUS RISK PREMIUM ANALYSIS. 

As suggested above, I first defined the Risk Premium as the difference between 

the authorized ROE and the then-prevailing level <strong>of</strong> long-term (i.e., 30-year) 

Treasury yield. I then gathered data for 945 natural gas rate proceedings between 

January, 1980 and August 31, 2012. In addition to the authorized ROE, I also 

calculated the average period between the filing <strong>of</strong> the case and the date <strong>of</strong> the 

final order (the "lag period"). In order to reflect the prevailing level <strong>of</strong> interest 


NortbWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 Q. 

9 

10 A. 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

28 

29 

rates during the pendency <strong>of</strong> the proceedings, I calculated the average 30-year 

Treasury yield over the average lag period (approximately 188 days). 

Because the data cover a number <strong>of</strong> economic cycles,28 the analysis also 

may be used to assess the stability <strong>of</strong> the Equity Risk Premium. Prior research, 

for example, has shown that the Equity Risk Premium is inversely related to the 

level <strong>of</strong> interest rates. 29 

historically low level <strong>of</strong> current Treasury yields. 

That analysis is particularly relevant given the 

HOW DID YOU MODEL THE RELATIONSIDP BETWEEN INTEREST 

RATES AND THE EQUITY RISK PREMIUM? 

The basic method used was regression analysis, in which the observed Equity 

Risk Premium is the dependent variable, and the average 30-year Treasury yield 

is the independent variable. Because the analytical period includes interest rates 

and authorized ROEs that during one period (i.e., the 1980's) are quite high and 

another (the post-Lehman bankruptcy period) that are quite low relative to the 

long-term historical average, I used the semi-log regression, in which the Equity 

Risk Premium is expresses as a function <strong>of</strong> the natural log <strong>of</strong> the 30-year Treasury 

yield: 

RP = a + P(LN(T 30 )) Equation [8] 

As shown on Chart 2 (below), the semi-log form is useful when measuring 

an absolute change in the dependent variable (in this case, the Risk Premium) 

National Bureau <strong>of</strong> Economic Research, U.S. Business Cycle Expansion and Contractions. 

See, for example, <strong>Robert</strong> S. Harris and Felicia C. Marston, Estimating Shareholder Risk Premia Using 

Analysts' Growth Forecasts, Financial Management, Summer 1992, at 63-70; Eugene F. Brigham, 

Dilip K. Shome, and Steve R. Vinson, The Risk Premium Approach to Measuring a Utility's Cost <strong>of</strong> 

Equity, Financial Management, Spring 1985, at 33-45; and Farris M. Maddox, Donna T. Pippert, and 

Rodney N. Sullivan, An Empirical Study <strong>of</strong> Ex Ante Risk Premiums for the Electric Utility Industry, 

Financial Management, Autumn 1995, at 89-95. 


NorthWestern Energy


1 

2 

relative to a proportional change III the independent variable (the 30-year 

Treasury yield). 

Chart 2: Equity Risk Premium 

10.UG% 

B.OO% 

5 

'1: 6.00% 

.. 

~ 

... "" 

4.00% 

IE 

:e- 

:0 

~ 2.00% 

y= -0.0295In(x)-


1 Table 8: Summary <strong>of</strong> Bond Yield Plus Risk Premium Results 

2 

Current 30-Year Treasury (2.71 %) 10.13% 

Near Tenn Projected 30-Year Treasury (3.00%) 10.12% 

Long Tenn Projected 30-Year Treasury (5.30%) 10.74% 

3 VII. BUSINESS RISKS 

4 Q. WITH REGARD TO THE DCF AND CAPM MODELS, DO THE MEAN 

5 RESULTS FOR THE PROXY GROUP PROVIDE AN APPROPRIATE 

6 ESTIMATE OF THE COST OF EQUITY FOR THE COMPANY? 

7 A. Not necessarily. In my view, there are additional factors that must be considered 

8 when determining where the Company's Cost <strong>of</strong> Equity falls within the range <strong>of</strong> 

9 results, in particular the relatively small size <strong>of</strong> the Company, the lack <strong>of</strong> revenue 

10 stabilization mechanisms employed by the Company relative to the proxy group, 

11 and flotation costs. 

12 Small Size Premium 

13 Q. 

14 A. 

15 

16 

17 

18 

19 

20 

30 

PLEASE EXPLAIN THE RISK ASSOCIATED WITH SMALL SIZE. 

Both the financial and academic communities have long accepted the proposition 

that the Cost <strong>of</strong> Equity for small firms is subject to a "size effect.,,30 While 

empirical evidence <strong>of</strong> the size effect <strong>of</strong>ten is based on studies <strong>of</strong> industries beyond 

regulated utilities, utility analysts also have noted the risks associated with small 

market capitalizations. Specifically, Ibbotson Associates noted: "For small 

utilities, investors face additional obstacles, such as a smaller customer base, 

limited financial resources, and a lack <strong>of</strong> diversification across customers, energy 

See Mario Levis, The record on smal! companies: A review <strong>of</strong> the evidence, Journal <strong>of</strong> Asset 

Management, March 2002, at 368-397, for a review <strong>of</strong>iiterature relating to the size effect. 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

Q. 

A. 

sources, and geography. These obstacles imply a higher investor return.,,3! Small 

size, therefore, leads to two categories <strong>of</strong> increased risk for investors: (1) 

liquidity risk (i.e., the risk <strong>of</strong> not being able to sell one's shares in a timely 

manner due to the relatively thin market for the securities); and (2) fundamental 

business risks. 

HOW DOES NORTHWESTERN COMPARE IN SIZE TO THE PROXY 

COMPANIES? 

NorthWestern's Montana gas utility operations are significantly smaller than the 

average for the proxy group companies both in terms <strong>of</strong> number <strong>of</strong> customers and 

annual revenues. Exhibit No. RBH-9 estimates the implied market capitalization 

for NorthWestern (i.e., the implied market capitalization <strong>of</strong> NorthWestern's 

12 

Montana jurisdictional gas operations). 

That is, because NorthWestern's 

13 

14 

15 

16 

17 

18 

19 

20 

Montana jurisdictional gas operations do not comprise the entirety <strong>of</strong> the 

Company, an estimated stand-alone market capitalization for NorthWestern's 

Montana jurisdictional gas operations must be calculated. The implied market 

capitalization <strong>of</strong> NorthWestern is calculated by applying the median market-tobook 

ratio for the proxy group <strong>of</strong> 1.57 to the Company's implied total common 

equity <strong>of</strong> $147 million. 32 The implied market capitalization based on that 

calculation is $231 million, which is only 11.71 percent <strong>of</strong> the proxy group 

median <strong>of</strong> $1.97 billion. 

3! Michael Annin, Equity and the Small-Stock Effect, Public Utilities Fortnightly. October 15,1995. 

32 Equity value <strong>of</strong> NorthWestern is estimated from proposed rate base and recommended capital structure. 


NorthWestern Energy


1 Q. 

2 

3 

4 A. 

5 

6 

7 

8 

9 

10 Q. 

11 

12 

HOW DOES THE COMPARATIVELY SMALL SIZE OF 

NORTHWESTERN AFFECT ITS BUSINESS RISKS RELATIVE TO THE 

PROXY GROUP OF COMPANIES? 

In general, smaller companies are less able to withstand adverse events that affect 

their revenues and expenses. Capital expenditures for non-revenue producing 

investments such as system maintenance and replacements will put 

proportionately greater pressure on customer costs, potentially leading to 

customer attrition or demand reduction. These risks affect the return required by 

investors for smaller companies. 

HAVE YOU CONSIDERED THE COMPARATIVELY SMALL SIZE OF 

NORTHWESTERN IN YOUR ESTIMATED RETURN ON COMMON 

EQUITY? 

13 A. 

Yes. 

While I have quantified the small size effect, rather than proposing a 

14 

15 

16 

17 

18 

19 Q. 

20 

21 A. 

22 

specific premium, I have considered the small size <strong>of</strong> NorthWestern in my 

assessment <strong>of</strong> business risks in order to determine where, within a reasonable 

range <strong>of</strong> returns, NorthWestern's required ROE appropriately falls. In that regard, 

NorthWestern's comparatively small size further supports my conclusion that an 

ROE above the proxy group mean is reasonable. 

HOW DID YOU ESTIMATE THE SIZE PREMIUM FOR 

NORTHWESTERN? 

In its Risk Premia Over Time Report: 2012, Morningstar Inc. ("Morningstar") 

presents its calculation <strong>of</strong> the size premium for deciles <strong>of</strong> market capitalizations 

23 

relative to the S&P 500 Index. 

An additional estimate <strong>of</strong> the size premium 


NorthWestern Energy


1 associated with NorthWestern, therefore, is the difference in the Morningstar size 

2 risk premiums for the proxy group median market capitalization relative to the 

3 implied market capitalization for NorthWestern. 

4 As shown on Exhibit No. RBH-9, based on recent market data, the median 

5 market capitalization <strong>of</strong> the proxy group was approximately $1.97 billion, which 

6 corresponds to the fifth decile <strong>of</strong> Morningstar's market capitalization data. Based 

7 on the Morningstar analysis, that decile has a size premium <strong>of</strong> 1.74 percent (or 

8 174 basis points). The implied market capitalization for NorthWestern is 

9 approximately $231 million, which falls within the ninth decile and corresponds 

10 to a size premium <strong>of</strong> 2.80 percent (or 280 basis points). The difference between 

11 those size premiums is 106 basis points (2.80 percent - 1.74 percent). 

12 Revenue Stabilization Mechanisms 

13 Q. HAVE YOU CONSIDERED THE COMPANY'S CURRENT TARIFF 

14 MECHANISMS IN YOUR ASSESSMENT OF THE APPROPRIATE ROE? 

15 A. Yes, I have. As shown in Exhibit No. RBH-I0, each <strong>of</strong> the companies in my 

16 proxy group employs a fuel adjustment mechanism similar to that which the 

17 Company employs, indicating that the Company is comparable to the proxy group 

18 in that regard. In addition, NorthWestern utilizes a Lost Revenue Adjustment 

19 Mechanism ("LRAM") that allows for the recovery <strong>of</strong> lost revenue associated 

20 with natural gas energy conservation programs. Again, all <strong>of</strong> the proxy 

21 

22 

23 

companies employ some form <strong>of</strong> revenue stabilization mechanism in at least one 

<strong>of</strong> their operating jurisdictions; only one <strong>of</strong> the proxy companies does not employ 

a decoupling mechanism in at least one <strong>of</strong> its operating jurisdictions. Because the 


NorthWestern Energy


1 Company does not have such a structure (beyond the LRAM) in place, nor has it 

2 proposed any such mechanism, my recommended ROE reflects the Company's 

3 higher risk relative to the proxy group. 

4 Flotation Costs 

5 Q. 

6 A. 

WHAT ARE FLOTATION COSTS? 

Flotation costs are the costs associated with the sale <strong>of</strong> new issues <strong>of</strong> common 

7 

stock. 

Such costs include out-<strong>of</strong>-pocket expenditures for preparation, filing, 

8 

9 Q. 

10 

11 A. 

12 

13 

14 

15 

16 Q. 

17 

18 A. 

19 

20 

21 

22 

23 

underwriting and other issuance costs <strong>of</strong> common stock. 

WHY IS IT IMPORTANT TO RECOGNIZE FLOTATION COSTS IN 

THE ALLOWED ROE? 

In order to attract and retain new investors, a regulated utility must have the 

opportunity to earn a return that is both competitive and compensatory. To the 

extent that a company is denied the opportunity to recover prudently incurred 

flotation costs, actual returns will fall short <strong>of</strong> expected (or required) returns, 

thereby diminishing its ability to attract adequate capital on reasonable terms. 

ARE FLOTATION COSTS PART OF THE UTILITY'S INVESTED 

COSTS OR PART OF THE UTILITY'S EXPENSES? 

Flotation costs are part <strong>of</strong> the invested costs <strong>of</strong> the utility, which are properly 

reflected on the balance sheet under "paid in capital." They are not current 

expenses, and therefore are not reflected on the income statement. Rather, like 

investments in rate base or the issuance costs <strong>of</strong>long-term debt, flotation costs are 

incurred over time. As a result, the great majority <strong>of</strong> a utility's flotation cost is 

incurred prior to the test year, but remains part <strong>of</strong> the cost structure that exists 


NorthWestern Energy


1 

2 

3 

4 

5 

6 Q. 

7 

8 

10 

11 

12 

13 

14 

9 A. 

15 Q. 

16 

17 A. 

18 

19 

20 

21 

22 

23 

24 

25 

26 

during the test year and beyond, and as such, should be recognized for ratemaking 

purposes. Therefore, recovery <strong>of</strong> flotation costs is appropriate even if no new 

Issuances are planned in the near future because failure to allow such cost 

recovery may deny NorthWestern the opportunity to earn its required rate <strong>of</strong> 

return in the future. 

DO THE DCF AND CAPM MODELS ALREADY INCORPORATE 

INVESTOR EXPECTATIONS OF A RETURN IN ORDER TO 

COMPENSATE FOR FLOTATION COSTS? 

No. The models used to estimate the appropriate ROE assume no "friction" or 

transaction costs, as these costs are not reflected in the market price (in the case <strong>of</strong> 

the DCF model) or risk premium (in the case <strong>of</strong> the CAPM and the Bond Yield 

Plus Risk Premium model). Therefore, it is appropriate to consider flotation costs 

when determining where within the range <strong>of</strong> reasonable results NorthWestern's 

return should fall. 

IS THE NEED TO CONSIDER FLOTATION COSTS RECOGNIZED BY 

THE ACADEMIC AND FINANCIAL COMMUNITIES? 

Yes. The need to reimburse investors for equity issuance costs is justified by the 

academic and financial communities in the same spirit that investors are 

reimbursed for the costs <strong>of</strong> issuing debt. This treatment is consistent with the 

philosophy <strong>of</strong> a fair rate <strong>of</strong> return. As explained by Dr. Shannon Pratt: 

Flotation costs occur when a company issues new stock. The 

business usually incurs several kinds <strong>of</strong> flotation or transaction 

costs, which reduce the actual proceeds received by the business. 

Some <strong>of</strong> these are direct out-<strong>of</strong>-pocket outlays, such as fees paid to 

underwriters, legal expenses, and prospectus preparation costs. 

Because <strong>of</strong> this reduction in proceeds, the business's required 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 Q. 

8 

9 A. 

returns must be greater to compensate for the additional costs. 

Flotation costs can be accounted for either by amortizing the cost, 

thus reducing the net cash flow to discount, or by incorporating the 

cost into the cost <strong>of</strong> equity capital. Since flotation costs typically 

are not applied to operating cash flow, they must be incorporated 

into the cost <strong>of</strong> equity capital. 33 

HAVE YOU CALCULATED THE EFFECT OF FLOTATION COSTS ON 

THE RETURN ON EQUITY? 

Yes, I have. I modified the DCF calculation to derive the dividend yield that 

10 

would reimburse investors for direct issuance costs. 

Based on the weighted 

11 

12 

13 

14 Q. 

15 

16 A. 

17 

18 

19 Q. 

20 

21 

22 A. 

23 

24 

average issuance costs shown in Exhibit No. RBH-ll, a reasonable estimate <strong>of</strong> 

flotation costs is approximately 0.15 percent (15 basis points). 

VIII. CAPITAL MARKET ENVIRONMENT 

DO ECONOMIC CONDITIONS INFLUENCE THE REQUIRED COST OF 

CAPITAL AND REQUIRED RETURN ON COMMON EQUITY? 

Yes. As discussed in Section VI, the models used to estimate the Cost <strong>of</strong> Equity 

are meant to reflect, and therefore are influenced by, current and expected capital 

market conditions. 

HAVE YOU REVIEWED ANY SPECIFIC INDICES TO ASSESS THE 

RELATIONSHIP BETWEEN CURRENT MARKET CONDITIONS AND 

INVESTOR RETURN REQUIREMENTS? 

Yes, I considered several measures <strong>of</strong> capital market risk, including: (1) 

incremental credit spreads on investment grade utility debt; (2) the relationship 

between natural gas utility dividend yields and long-term Treasury yields; and (3) 

25 

equity market volatility and correlations. 

As discussed below, each <strong>of</strong> those 

33 

Shannon P. Pratt, Roger J. Grabowski, Cost <strong>of</strong> Capital: Applications and Examples, 4th ed. (John 

Wiley & Sons, Inc., 2010), at 586. 


NorthWestern Energy


1 measures provide information that is relevant to the implementation <strong>of</strong> models 

2 used to estimate the Cost <strong>of</strong> Equity, and in the interpretation <strong>of</strong> the model results. 

3 Incremental Credit Spreads 

4 Q. 

5 

6 A. 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

HOW HAVE CREDIT SPREADS BEEN AFFECTED BY CURRENT 

MARKET CONDITIONS? 

The "credit spread" is the return required by debt investors to take on the default 

risk associated with securities <strong>of</strong> differing credit quality. For a given credit rating, 

the credit spread is measured by reference to a Treasury security <strong>of</strong> similar tenure. 

That is, the credit spread on A -rated utility bonds may be measured by reference 

to the 30-year Treasury bond yield;34 the same would be true <strong>of</strong> Baa-rated 

securities. Because lower credit ratings reflect higher levels <strong>of</strong> risk, credit spreads 

typically are higher for lower-rated securities. In that regard, the incremental 

credit spread (e.g., the difference between the credit spreads associated with A 

and Baa-rated securities, respectively) is an indication <strong>of</strong> incremental return 

required by investors to take on additional levels <strong>of</strong> risk. As Chart 3 

demonstrates, since the beginning <strong>of</strong> 20 I 0, the Moody's Utility Bond Index 

Baa! A credit spread has steadily increased, indicating that debt investors have 

increased their marginal return requirements. 

34 

The minimum maturity for the bonds in this index is 20 years, with an average <strong>of</strong> 30 years. Moody's 

Long-Term Corporate Bond Yield Averages are derived from pricing data on a regularly replenished 

population <strong>of</strong> nearly 100 seasoned corporate bonds in the U.S. market, each with current outstandings 

over $100 million. The bonds have maturities as close as possible to 30 years, they are dropped from 

the list if their remaining life falls below 20 years, if they are susceptible to redemption, or if their 

ratings change. All yields are yield-to- maturity calculated on a semi-annual basis. Each observation is 

an unweighted average, with Average Corporate yields representing the unweighted average <strong>of</strong> the 

corresponding Average Industrial and Average Public Utility observations. See Bloomberg.com 


NorthWestern Energy


1 

Chart 3: Moody's Utility Bond Index Baa-A Credit Spread 

1.00% 

0.90% 

0.80% "~~ ...' ........ "iII 

O.7{)% 

0.60% .•... 

0.50% 

0.40% 1\i:~/'w:(.:jiJI'~.-............... - ...... ' 

0.30% 

020% 

0.10% 

O.OO%+--~-~--~-~-~-~--~-~-~-~~ 

Jan~·IO Apr~10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 oct-11 Jan-12 Apr-12 Jul-12 

2 

3 

4 

5 

6 

7 

--BaaJA Spread - - - - - Linear (BaarA Spread) 

It also is interesting to note that the incremental credit spread has 

increased as long-term Treasury yields have decreased. In fact, as Chart 4 

demonstrates, even since January 2010, changes in the incremental spread are 

negatively correlated with changes in the 30-year Treasury yield. 

Chart 4: Incremental Credit Spread and 30-Year Treasury Yield 

1.00% ,~.__.... ~.~ .... ~ ......... - ..- .... ~.-..... ~~~ •..... ~ ..•. ~ ............. 

0.90% 

::;::~:':"J.\ 

0.60% 

0.50% 

6.00% 

5.00% 

4.00% 

3.00% 

OAO% 

0.30% 

2.00% 

020% 

1.00% 

0.10% 

0.00% 0.00% 

J.n-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 

8 

--BaaiASpread 

----- 30 Year' Bond 


NorthWestern Energy


1 Q. 

2 

WHAT ARE THE IMPLICATIONS OF THOSE FINDINGS IN 

ASSESSING THE COMPANY'S COST OF EQUITY? 

3 A. 

The implications are tw<strong>of</strong>old. 

First, the recent decline in long-term Treasury 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

yields has been accompanied by an increase in the premium required by investors 

to accept incremental levels <strong>of</strong> credit risk. That is, the incremental credit spread 

has increased as the level <strong>of</strong> Treasury yields have decreased. While that inverse 

relationship applies to the cost <strong>of</strong> debt, as noted earlier, prior academic research 

has demonstrated that the equity risk premium likewise is inversely related to 

interest rates. Consequently, neither the Cost <strong>of</strong> Equity nor the cost <strong>of</strong> debt has 

decreased in lock step with Treasury yields. 

Those results also demonstrate the importance <strong>of</strong> maintaining a financial 

and credit pr<strong>of</strong>ile that supports the Company's current BBB (Standard & Poor's) 

rating. Because incremental credit spreads have steadily increased, the benefit <strong>of</strong> 

maintaining a BBB rating is greater in the current market than it has been, even 

over the past two years. That conclusion is consistent with recent findings by 

FitchRatings ("Fitch"), which noted that: 

While it appears that the credit spread differential between the 

rating categories has a relatively small impact during times <strong>of</strong> 

economic stability, during recent periods <strong>of</strong> economic stress, a 

higher credit rating produces a meaningful difference in credit 

spreads ... and provides more assured access to capital. 35 

22 

35 

FitchRatings, Fitch's Review <strong>of</strong> Utility ROE Trends, March 22, 2010, at 3. 


NorthWestern Energy


1 Yield Spreads 

2 

3 

4 

5 

6 

7 

Q. 

A. 

PLEASE BRIEFLY DEFINE THE TERM "YIELD SPREAD", AND 

EXPLAIN ITS MEANING IN ASSESSING CAPITAL MARKET 

CONDITIONS. 

In general, the "yield spread" is the difference between the yields on two different 

securities. As used in the analyses discussed below, the yield spread represents 

the difference in yields on long-term Treasury securities on the one hand, and 

8 

dividend yields on the other. 

Investors <strong>of</strong>ten consider yield spreads in their 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

Q. 

A. 

assessment <strong>of</strong> security valuation and capital market conditions. 

HAVE YOU REVIEWED THE CURRENT AND HISTORICAL YIELD 

SPREAD FOR NATURAL GAS UTILITY COMPANIES? 

Yes, I have. As shown in Chart 5, for much <strong>of</strong> the period from January 1, 2000 

through August 31, 2012, the 30-year Treasury yield has exceeded the proxy 

group average dividend yield. In fact, over that time, the yield spread averaged 

approximately 48 basis pOints. 36 That period, however, includes the 2002 - 2003 

credit contraction, during which the Treasury yields and utility dividend yields 

were essentially equal, and the post-Lelnnan Brothers bankruptcy period, during 

which the yields inverted, such that the proxy company average dividend yield 

exceeded the 30-year Treasury yield. Excluding those two periods, the average 

yield spread was 87 basis points (that is, on average, the 30-year Treasury yield 

exceeded the dividend yield by 87 basis pOints).37 

36 

That is to say that on average, the 3D-year Treasury yield exceeded the proxy gronp average dividend 

yield by 48 basis points. 

37 Calculation excludes yield spreads from July 2002 to June 2003, and after September 15,2008. 


NorthWestern Energy


1 

Chart 5: TreasurylDividend Yield Spread 38 

8.00% .- ...._._.._._.__...._ ... - ......_._ .. _-_...-... 

2002 -200S Credn Contraction Post-Lehman Bankruptc), 

7.00% 

6.00% 

5.00% 

4.00% 

3.00% 1-----1 

2.00% _ ..................................................................................................................... . 

1.00% +-__ -~.L..-~L,_-,-~-_-~-1~-_-_-_- 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 

2 

3 

--Prol


1 Q. HOW DOES SUCH DATA ENTER INTO YOUR ASSESSMENT OF THE 

2 COMPANY'S COST OF EQUITY? 

3 A. First, as noted above, investors <strong>of</strong>ten look to the relationships among financial 

4 metrics to assess current and expected levels <strong>of</strong> market stability. As also noted 

5 above, to the extent that current relationships among such indices materially 

6 deviate from long-term norms, it may be an indication <strong>of</strong> continuing or expected 

7 market instability. Moreover, such data provide market-based methods by which 

8 to assess the implications <strong>of</strong> the currently low Treasury yields for the Company's 

9 Cost <strong>of</strong> Equity. If, for example, the currently low level Treasury yields indicated 

10 a correspondingly low Cost <strong>of</strong> Equity, the average dividend yield would be 

11 approximately 2.23 percent, or lower. 4o As shown on Exhibit No. RBH-2, 

12 however, the current (proxy group) 30-day average dividend yield is 3.66 percent. 

13 Again, low Treasury yields are not necessarily indicative <strong>of</strong> correspondingly low 

14 equity return requirements. 

15 Equity Market Volatility and Return Correlations 

16 Q. 

17 

18 

19 A. 

20 

21 

22 

PLEASE BRIEFLY DEFINE THE TERM "VOLATILITY" AND 

EXPLAIN ITS RELEVANCE TO DETERMINING THE COST OF 

EQUITY. 

In finance, volatility is a statistical measure <strong>of</strong> the dispersion <strong>of</strong> returns for a given 

security or market index. Securities for which returns are more broadly dispersed 

(that is, they have a higher degree <strong>of</strong> deviation from the mean) are thought to be 

less certain and, therefore, more risky than securities whose returns historically 

40 

2.23 percent equals 2.71 percent, less the long-term average yield spread <strong>of</strong> 48 basis points. 


NorthWestern Energy


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

have been less dispersed. The most common measure <strong>of</strong> such dispersion is the 

standard deviation,41 which (as discussed in Section VI) is an important variable 

in certain Cost <strong>of</strong> Equity estimation models. 

Q. PLEASE NOW DEFINE THE TERM "CORRELATION" AND EXPLAIN 

ITS RELEVANCE TO DETERMINING THE COST OF EQUITY. 

A. Correlation is a measure <strong>of</strong> the extent to which two variables tend to move in 

relation to each other. By definition, correlation (as measured by correlation 

coefficients) range from -1.00 to 1.00; a negative correlation indicates that the 

returns on two securities move in opposite directions, while a positive correlation 

suggests that they move together. The closer the correlation coefficient is to -1.00 

or 1.00, the stronger that relationship. Because securities with low or negative 

correlations are less likely to move in tandem, investors consider such 

investments to <strong>of</strong>fer certain diversification benefits; highly correlated securities 

14 

do not. 

As discussed in Section VI, under portfolio-based Cost <strong>of</strong> Equity 

15 

16 

17 

techniques such as the Capital Asset Pricing Model, stocks with high correlations 

to the broad market tend to represent greater risk (and therefore require higher 

returns) than stocks with lower market correlations. 42 

41 , See, for example, Ross, Westerfield, Jaffe and Jordon, Comorate Finance: Core Principals & 

Applications, 2"d Ed., McGraw-Hill Irwin, 2009, at 313. 

42 

As discussed in Section VI, the Beta coefficient factor <strong>of</strong> the Capital Asset Pricing Model reflects both 

the degree <strong>of</strong> correlation between the subj ect company and the overall market, and measures <strong>of</strong> 

volatility. 


NorthWestern Energy


1 Q. HAVE YOU REVIEWED THE RECENT AND HISTORICAL DEGREES 

2 OF VOLATILITY AND CORRELATION FOR NATURAL GAS UTILITY 

3 STOCKS? 

4 A. Yes, I have. For the purpose <strong>of</strong> my review, I calculated the standard deviation <strong>of</strong> 

5 

6 

7 

8 

9 

10 

11 

12 

daily returns for the S&P 500, and the proxy group average, respectively, for the 

period January 1, 2000 through August 31,2012 (see Chart 6, below). As Chart 6 

demonstrates, the volatility <strong>of</strong> returns (for both indices) increased significantly 

during the 2002 - 2003 credit contraction, the 2008 - 2009 recent financial crisis 

and, most recently, during the latter part <strong>of</strong> 2011. Although volatility recently has 

begun to decrease, market estimates <strong>of</strong> future volatility still remain somewhat 

above the long-term average. 43 

Chart 6: Daily Return Volatility 44 

0.045 , .................................................._...................._ ..- ...._...................................... 

0.040 + ............ .. 

0.035 

0.030 + 

...............-..............- ............................................. ..\ ..........................- 

I 

0.025 +-... ----...-~..- ....---.. ~.-... -.---......--...-.--.--.~-. ------....-..... 

0.020 + .......---.....- .."',.-----...--..- ..--.....----.....-I.. ................ .. ... 

0.015 

I 

0.000 -i-i -~-~-~-~-~-~-~-~-~~~~-__....- 

2000 2001 2002 2003 2004 2005 2000 2007 2008 2009 2010 2011 2012 

- - -NWE PraxyGroup --S&P 500 

43 See Exhibit No. RBH·5, at 1. 

44 

Represents standard deviation <strong>of</strong> daily returns over 90-day period. Source: SNL Finaocial. 


NorthWestern Energy


1 

2 Q. 

3 

4 

5 A. 

6 

7 

8 

9 

TURNING NOW TO RETURN CORRELATIONS, HOW HAVE THE 

PROXY GROUP COMPANY RETURNS MOVED RELATIVE TO THE 

S&P500? 

Since 2000, correlations between proxy group returns and the S&P 500 returns 

have been trending upward, as shown by the linear trend in Chart 7, below. 

Despite correlations moderating in the near term, the prevailing long-term trend 

remains toward increased correlation between the two indices. 

Chart 7: Daily Return Correlations 45 

1.00 

0.90 +~ ........................ ~-.-........ -~ ....... ~~ ... ~.~-.~.~-~~ ... ~.;-.~-~-~ .. -.. -- .••.. ~ .(''\_ ... . 

0.80 

0.70 

0.60 

0.50 

0.40 

0.:10 

0.20 

0.10 

0.00 +--~~-~-~-~-_-~-_~-_-_-~- 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 

--SPlOPr0lo/ - - - - - Unesr (SPXlFroxy) 

10 

11 Q. 

12 

13 A. 

14 

HAS THE INCREASED CORRELATION OF RETURNS BEEN NOTED 

BY THE FINANCIAL COMMUNITY? 

Yes, it has. A January 4, 2012 article in The Wall Street Journal, for example, 

noted that "[a J fact <strong>of</strong> life for investors in recent years, especially in the stock 

45 

Represents the rolling 90-day average <strong>of</strong> the standard deviation <strong>of</strong> daily returns. 

Financial. 


NorthWestern Energy 

Sonrce: SNL


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

Q. 

A. 

market, has been the dramatic rise in correlations. One surprise <strong>of</strong> 2011 was the 

degree to which correlations within and across financial markets returned with a 

vengeance.,,46 Citing a study by BCA Research, the article concluded by noting 

that: 

.. .in order for correlations to decline dramatically to pre-Lehman 

levels, investors will likely need some sense that the headwinds 

facing the U.S. economy have largely dissipated, and that the 

expansion has successfully transitioned to a sustainable, selfreinforcing 

phase (i.e. the recovery will not fall apart in the 

absence <strong>of</strong> continual shots <strong>of</strong> monetary or fiscal stimulus). It may 

be years before such a realization occurs, suggesting that the "high 

vollhiqh correlation" world is likely to persist, even if we have 

seen the worst for this cycle. 47 

My findings, that natural gas utility stocks remain somewhat more volatile 

than their historical average, but are far more correlated with the broad market 

than they historically have been, are consistent with the observations noted by 

The Wall Street Journal. 

WHAT CONCLUSIONS DO YOU DRAW FROM THOSE ANALYSES? 

First, it is important to recognize the relationships among financial measures 

relied upon by investors, and to reflect those relationships in Cost <strong>of</strong> Equity 

estimates. Simply observing, for example, that long-tenn Treasury rates are at 

historically low levels is not a sufficient level <strong>of</strong> analysis to conclude that the Cost 

<strong>of</strong> Equity is at a commensurately low level. As noted above, for example, if 

investors believed that the current level <strong>of</strong> long-tenn Treasury yields is indicative 

<strong>of</strong> the Cost <strong>of</strong> Equity, natural gas utility dividend yields would be about 143 basis 

points below their current level. Similarly, both sector and market-wide volatility 

46 

High Stock Correlations Could Be Here to Stay, The Wall Street Journal, January 4, 2012. 

47 Ibid. 


NorthWestern Energy


1 

2 

3 

should not be viewed in isolation; rather, they should be considered together with 

the correlation <strong>of</strong> returns. Doing so provides a more complete perspective, and 

enables a more reasoned determination <strong>of</strong>the Cost <strong>of</strong> Equity. 

4 

IX. 

CONCLUSIONS AND RECOMMENDATION 

5 Q. 

6 

7 A. 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

WHAT IS YOUR CONCLUSION REGARDING THE COMPANY'S COST 

OF EQUITY? 

As discussed in Section II, the low end <strong>of</strong> the range <strong>of</strong> reasonableness is 

calculated by averaging the mean and mean high results <strong>of</strong> my DCF models; the 

high end <strong>of</strong> the range is calculated by averaging the mean high results <strong>of</strong> my DCF 

models. Those results suggest a range <strong>of</strong> 9.96 percent to 10.73 percent. That 

range is corroborated by the results <strong>of</strong> my CAPM and Bond Yield Plus Risk 

Premium analyses. As shown in Table 7, a majority <strong>of</strong> the results <strong>of</strong> the CAPM 

model fall within or just outside <strong>of</strong> that range. In addition, as shown in Table 8, 

all <strong>of</strong> the Bond Yield Plus Risk Premium results fall within that range. As such, I 

believe that a rate <strong>of</strong> return on common equity in the range <strong>of</strong> 10.00 percent to 

10.75 percent represents the range <strong>of</strong> equity investors' required rate <strong>of</strong> return for 

investment in natural gas utilities <strong>of</strong> comparable risk to NorthWestern. 

The Company faces business risks associated with: (1) its relatively small 

sIze compared to the proxy group; (2) the lack <strong>of</strong> revenue stabilization 

mechanisms employed by it relative to the proxy group; and (3) flotation costs. 

Based on those factors, as well as taking into consideration the current state <strong>of</strong> the 

capital markets, I recommend an ROE <strong>of</strong> 10.50 percent, which is somewhat above 

the midpoint <strong>of</strong> my range. 


NorthWestern Energy


1 Q. 

2 A. 

DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? 

Yes, it does. 


N ortb Western Energy


Page 1 <strong>of</strong> 3 

Quarterly Discounted Cash Flow Model 

30 Day Average Siock Price 

(11 121 [3[ [4J 15J 16J [7] 18] 191 [10J [11J 112J [131 [141 

[151 

[161 [171 

ComEan:,: 

Ticker 

Exp!;l;led Expected Expected Expected 

Dividend Dividend Dividend Dividend Dividend Dividend Dividend Dividend 

1 2 3 4 1 2 3 4 

Zacks First Call Value line Sustainable Average 

Earnings Earnings Earnings Growth Earnings 

Stock Price Growth Growth Growth Rate Growth 

Low 

ROE 

Mean 

ROE 

High 

ROE 

AGl Resources Inc. 

Almos Energy Corporation 

laclede Group. Inc. (The) 

New Jersey Resources Corporation 

Northwest Natural Gas Company 

Piedmont Natural Gas Company, Inc. 

South Jersey Industries, Inc. 

Southwest Gas Corporation 

WGl Holdings. Inc. 

GAS 

ATO 

LG 

NJR 

NWN 

PNY 

SJI 

SWX 

WGL 

$0.45 $0.48 $0.46 $0.46 $0.47 $0.48 $0.48 $0.48 

$0.35 $0.35 $0.35 $0.35 $0.36 $0.36 $0.36 $0.36 

$0.42 $0.42 $0.42 $0.42 $0.43 $0.43 $0.43 $0.43 

$0.38 $0.38 $0.38 $0.38 $0.40 $0.40 $0.40 $0.40 

$0.45 $0.45 $0.45 $0.45 $0.47 $0.47 $0.47 $0.47 

$0.29 $0.29 $0.30 $0.30 $0.30 $0.30 $0.31 $0.31 

$0.40 $0.40 $0.40 $0.40 $0.44 $0.44 $0.44 $0.44 

$0.27 $0.27 $0.30 $0.30 $0.28 $0.28 $0.31 $0.31 

SO.39 SO.39 $0.40 $0.40 $0.40 $0.40 $0.42 $0.42 

$40.10 4.28% NA 5.50% 5.96% 5.25% 

$35.97 5.83% 5.500/0 4.00% 4.01% 4.84% 

$42.07 3.00% 5.30% 2.00% 5.57% 3.97% 

$45.53 3.35% 1.85% 5.50% 7.20% 4.47% 

$49.03 4.17% 4.50% 4.00% 7.34% 5.00% 

$31.63 4.70% 4.70% 2.50% 2.19% 3.52% 

$51.95 6.00% 6.00% 9.00% 11.58% 8.15% 

$43.74 4.37% 4.05% 9.00% 6.60% 6.01% 

$40.29 5.37% 5.60% 3.00% 3.78% 4.44% 

9.20% 

8.11% 

6.12% 

5.32% 

7.69% 

8.09% 

9.40% 

6.78% 

7.13% 

10.23% 10.98% 

6.99% 10.04% 

8.19% 9.89% 

8.07% 10.92% 

8.94% 11.40% 

7.49% 8.73% 

11.64% 15.23% 

8.81% 11.91% 

8.65% 9.88% 

Mean 

4.56% 4.69% 4.94% 6.02% 5.07% 

7.34% 

9.00% 11.00% 

Notes: 

[lJ Soun:;e: Bloomberg PrOfessional Service 

[2J Soun:;e: Bloomberg Pr<strong>of</strong>essional Service 

[3] Source: Bloomberg Pr<strong>of</strong>essional Service 


[5] Equals Col. [1] x (1 + Col. [14]) 

[6] Equals Col. [2] x (1 + Col. (14]) 

[7] Equals Col. [3] x (1 + Cot [14]) 

[6] Equals Col. [4] x (1 + Col. (14]) 

[9] Source: Bloomberg Pr<strong>of</strong>essional Service, equals indicated number <strong>of</strong> Irading day average as <strong>of</strong> August 31, 2012 

[10] Source: Zacks 

[11] Source: Yahool Finance 

[12] Source: Value Une 

[13] Exhibit No. RBH-3 

[14] Equals Average (Cols. [10], (11J. [12J. [13]) 

[15] Implied low DCF 

[16] Implied Mean DCF 

[17] Implied High DCF




90 Day Average Stock Price 

[1] [2] [3] [4] [5] [6] [7] [8] [9] {10] [11] 112] [13] [14] 

[151 

(161 [17] 

ComE!an:r: 

Ticker 

Expe




180 Day Average Siock Price 

[11 [2] [3] [4] [5] [6] m [8] [9] [10] [111 [12] [131 [141 

[15) 

(16) [17] 

ComE!an:t 

Ticker 

Expected Expected Expected Expected 

Dividend Dividend Dividend Dividend Dividend Dividend Dividend Dividend 

1 , 3 4 1 , 3 4 

Zacks First Call Value Une Sustainable Average 

Eamings Earnings Eamings Grnwth Earnings 

Stock Price Growth Growth Growth Rate Growth 

L~ 

ROE 

Mean 

ROE 

High 

ROE 

AGL Resources Inc. 

Atmos Energy Corporallon 

Laclede Group. Inc. (The) 



Piedmont Natural Gas Company. Inc. 

South Jersey Industries. Inc. 


WGL Holdings. Inc. 

GAS 

ATO 

LG 

NJR 

NWN 

PNY 

SJI 

SWX 

WGL 

$0.45 $0.46 $0.46 $0.46 $0.47 $0.45 $0.48 $0.48 

SO.35 $0.35 $0.35 $0.35 $0.36 $0.36 $0.36 $0.36 

$0.42 $0.42 $0.42 $0.42 $0.43 $0.43 $0.43 $0.43 

$0.38 $0.38 $0.38 $0.38 $0.40 $0.40 $0.40 $0.40 

$0.45 SO.45 $0.45 $0.45 $0.47 $0.47 $0.47 $0.47 

$0.29 SO.29 $0.30 SO.30 $0.30 $0.30 $0.31 $0.31 

$0.40 $0.40 $0.40 $0.40 $0.44 $0.44 $0.44 $0.44 

$0.27 $0.27 SO.30 SO.30 $0.28 $0.28 SO.31 $0.31 

$0.39 $0.39 $0.40 $0.40 $0.40 $0.40 $0.42 $0.42 

S39.62 4.28% NA 5.50% 5.96% 5.25% 

$33.26 5.53% 5.50% 4.00% 4.01% 4.84% 

$40.29 3.00% 5.30% 2.00% 5.57% 3.97% 

$45.32 3.35% 1.85% 5.50% 7.20% 4.47% 

$47.09 4.17% 4.50% 4.00% 7.34% 5.00% 

$31.81 4.70% 4.70% 2.50% 219% 3.52% 

$51.74 8.00% 6.00% 9.00% 11.55% 8.15% 

$42.81 4.37% 4.05% 9.00% 6.60% 6.01% 

$40.76 5.37% 5.60% 3.00% 3.78% 4.44% 

9.26% 

8.45% 

6.30% 

5.33% 

8.05% 

6.07% 

9.41% 

6.84% 

7.08% 

10.29% 11,05% 

9.33% 10,39% 

8.38% 10.08% 

8.08% 10.93% 

9.10% 11.57% 

7.47% 6.71% 

11.65% 15.25% 

8.87% 11.97% 

8.60% 9.83% 

Mean 

4.56% 4.69% 4.94% 6.02% 5.07% 

7.42% 

9.09% 11.09% 

Noles: 






[6] Equals Col. [2] x (1 + Col. 114]) 


[5] Equals Col. [4] x (1 + Col. 114]) 

[9] Source: Bloomberg Pr<strong>of</strong>essIonal Service, equals indicated number <strong>of</strong> trading day average es <strong>of</strong> August 31. 2012 





[14] Equals Average (Cols. [10], [11]. [12]. [13]) 

[15]lmpned Low DCF 

[15]lmpned Mean DCF 

[17] Impned High DCF



Constant Growth Discounted Cash Flow Model 


11) [2) [3) 14) IS) 

Average Expected Zacks 

Annualized Stock Dividend Dividend Earnings 

Company Ticker Dividend Price Yield Yield Growth 

16) 

First Call 

Earnings 

Growth 

EI 18) 19) 

Value Line Sustainable Average 

Earnings Growth Earnings 

Growth Estimate Growth 

{10) 

Low 

ROE 

111) 112) 

Mean 

ROE 

High 

ROE 

AGL Resources Inc. GAS $1.84 $40.10 4.59% 4.71% 4.28% 

Atmas Energy Corporation ATO $1.38 $35.97 3.84% 3.93% 5.83% 

Laclede Group, Inc. LG $1.66 $42.07 3.95% 4.02% 3,00% 

New Jersey Resources Corporation NJR $1.52 $45.53 3.34% 3.41% 3.35% 

NorthlNest Natural Gas Company NWN $1.78 $49.03 3.63% 3.72% 4.17% 

Piedmont Natural Gas Company, Inc. PNY $1.20 $31.63 3.79% 3.86% 4.70% 

South Jersey Industries, Inc. SJI $1.61 $51.95 3.10% 3.23% 6.00% 

Southwest Gas Corporation SWX $1.18 $43.74 2.70% 2.78% 4.37% 

WGL Holdings, Inc. WGL $1.60 $40.29 3.97% 4.06% 5.37% 

NA 

5.50% 

5.30% 

1.85% 

4.50% 

4.70% 

6.00% 

4.05% 

5.60% 

5.50% 5.96% 5.25% 

4.00% 4.01% 4.84% 

2.00% 5.57% 3.97% 

5.50% 7.20% 4.47% 

4.00% 7.34% 5.00% 

2.50% 2.19% 3.52% 

9.00% 11.58% 8.15% 

9.00% 6.60% 6.01% 

3.00% 3.78% 4.44% 

8.97% 

7.91% 

5.99% 

5.22% 

7.70% 

6.03% 

9.19% 

6.80% 

7.03% 

9.95% 10.68% 

8.77% 9.78% 

7.99% 9.62% 

7.89% 10.65% 

8.72% 11.10% 

7.38% 8.58% 

11.37% 14.86% 

8.78% 11.82% 

8.50% 9.68% 

Mean 3.66% 3.75% 4.56% 

4.69% 

4.94% 6.02% 5.07% 

7.20% 

8.82% 10.75% 

Notes: 


[2] Source: Bloomberg Pr<strong>of</strong>essional Service, equals indicated number <strong>of</strong> trading day average as <strong>of</strong> August 31, 2012 

[3J Equals [1J f [2J 

[4J Equals [3J x [1 + 0.5 x [9]) 



[7] Source: Value Line 


[9J Equals Average([5]. [6J. [7J. [8]) 

[10J Equals [3J x (1 + 0.5 x Minimum([5J. [6J. [7J. [8])) + Minimum([5J. [6J. [7J. [8]) 

[11 J Equals [4J + [9J 

[12J Equals [3J x (1 + 0.5 x Maximum([5]. [6]. [7]. [8])) + Maximum([5J, [6J, [7J, [8])





[1] [2] [3] [4] [51 


Annualized Stock Dividend Dividend Earnings 

Company Ticker Dividend Price Yield Yield Growth 

[6] 

First Call 

Earnings 

Growth 

F] [81 [9] 

Average 

Earnings Growth Earnings 


Value Line Sustainable 

[10] 

Low 

ROE 

[11] [12] 

Mean 

ROE 

High 

ROE 



Laclede Group, Inc. LG $1.66 $40.12 4.14% 4.22% 3.00% 


Northwest Natural Gas Company NWN $1.78 $47.53 3.75% 3.84% 4.17% 


South Jersey Industries, Inc. SJI $1.61 $50.56 3.18% 3.31% 6.00% 

South~st Gas Corporation SWX $1.18 $43.43 2.72% 2.80% 4.37% 

WGL Holdings, Inc. WGL $1.60 $39.82 4.02% 4.11% 5.37% 

NA 

5.50% 

5.30% 

1.85% 

4.50% 

4.70% 

6.00% 

4.05% 

5.60% 

5.50% 5.96% 5.25% 

4.00% 4.01% 4.84% 

2.00% 5.57% 3.97% 

5,50010 7.20% 4.47% 

4.00% 7.34% 5.00% 

2.50% 2.19% 3.52% 

9.00% 11.58% 8.15% 

9.00% 6.60% 6.01% 

3.00% 3.78% 4.44% 

9.11% 

8.06% 

6.18% 

5,32% 

7.82% 

6.07% 

9.28% 

6.82% 

7.08% 

10.10% 10.82% 

8.92% 9,93% 

8.19% 9.82% 

7.99% 10.76% 

8.84% 11.22% 

7.43% 8.63% 

11.46% 14.95% 

8.80% 11.84% 

8.54% 9.73% 

Mean 3.75% 3.85% 4.56% 

4.69% 

4.94% 6.02% 5.07% 

7.31% 

8.92% 10.86% 

Notes: 

[1J Source: Bloomberg Pr<strong>of</strong>essional Service 


[3[ Equals [1J I [2[ 

[4] Equals [3] x (1 + 0.5 x [9]) 

(51 Source: Zacks 


[7J Source: Value Line 

(8J Exhibil No. RBH-3 

[9[ Equals Average([5J, [6[, [7[. [8]) 

(10[ Equals [3J x (1 + 0.5 x Minimum([5[. [6J. [7J, [8])) + Minimum[(5J. [6J. [7J, (8]) 

[11[ Equals [4J + [9[ 

[12[ Equals [3J x (1 + 0.5 x Maximum([5J, [6J, [7[. [8])) + Maximum([5[. [6J. [7[. [81)





11] [2] 13] 141 [5] 


Annualized Stock Dividend Djvidend Earnings 

Com!?:anx Ticker Dividend Price Yield Yield Growth 

IB] 

First Call 

Earnings 

Grov.1h 

17] [8] [9] 

Value Line Sustainable Average 

Earnings Growtl1 Earnings 


[10[ 

Low 

ROE 

[11[ [12) 

Mean 

ROE 

High 

ROE 



laclede Group, Inc. LG $l.BB $40.29 4.12% 4.20% 3.00% 


Northwest Natural Gas Company NWN $1.78 $47.09 3.78% 3.87% 4.17% 


South Jersey Industries, Inc. SJI $1.Bl $51.74 3.11% 3.24% 6.00% 

Southv.oest Gas Corporation SWX $1.1B $42.81 2.76% 2.84% 4.37% 

WGL Holdings, Inc. WGL $1.BO $40.7B 3.93% 4.01% 5.37% 

NA 

5.50% 

5.30% 

1.85% 

4.50% 

4.70% 

6.00% 

4.05% 

5.60% 

5.50% 5.96% 5.25% 

4.00% 4.01% 4.84% 

2.00% 5.57% 3.97% 

5.50% 7.20% 4.47% 

4.00% 7.34% 5.00% 

2.50% 2.19% 3.52% 

9.00% 11.58% 8.15% 

9.00% 6.60% 6.01% 

3.00% 3.78% 4.44% 

9.02% 

8.23% 

6.16% 

5.23% 

7.86% 

6.00% 

9.20% 

6.86% 

6.98% 

10.01% 10.74% 

9.09% 10.10% 

8.17% 9.80% 

7.90% 10.67% 

8.88% 11.26% 

7.36% 8.56% 

11.38% 14.87% 

8.84% 11.88"/" 

8.45% 9.64% 

Mean 3.73% 3.83% 4.56% 

4.69% 

4.94% 6.02% 5.07% 

7.28% 

8.90% 10.84% 

Notes: 



[3) Equals [1) 1[2) 

[4J Equals [3J x (1 + 0.5 x [9)) 


[6] Source: Yahoo! Finance 



[9) Equals Average([5), [B), [7), [8)) 

[10) Equals [3) x (1 + 0.5 x Minimum([5). [B). [7), [8))) + Minimum([5), [B), [7), [8)) 

[11) Equals [4) + [9) 

[12) Equals [3) x (1 + 0.5 x Maximum([5), [B), [7).[8))) + Maximum([5). [B). [7). [8))



Company Name 

AGl Resources Inc. 

Atmos Energy Corporallon 

Laclede Group, Inc. 

New JOl'5ey Resources Corporation 

Northwost Natural Gas Company 


South Jel'5ey Industries, Inc. 


WGL Holdings. Inc. 

Ticker 

GAS 

ATO 

LG 

NJR 

NWN 

PNY 

SJI 

SWX 

WGL 

Projected 

Earnings 

per share 

2015-17 

4.10 

2.70 

3.00 

>AS 

3.40 

1.85 

4.50 

3.75 

2." 

Retention Gl(lwth Estimate 

[t] [2] [3] [41 lSI 161 J7J [8] [91 1101 [II] 1121 [13\ [14\ 1151 [161 [17] 1181 

Projected Projected Projected 

Oivldend Projected Common Common 

Oeclared Book Value Return on Shares Shares 

per share Retention per Share 

2015-17 Re~o (8) 21)15-17 

2.01) 51.22% 36.35 

1.48 45.19% 34.65 

1.81 39.67% 27.00 

1.68 51.30% 24.60 

1.94 42.94% 29.10 

1.35 27.03% 14.65 

225 50.00% 28.55 

1.60 57.33% 37.25 

1.75 37.50% 28.65 

BookValue 

(R) 

11.28% 

7.79% 

11.11% 

14.02% 

11.68% 

12.63% 

15.76% 

10.07% 

9.77% 

B,R 

5.78% 

3.52% 

4.41% 

7.20% 

5.02% 

3.41% 

7.88% 

5.77% 

3.66% 

Outstanding Outstanding 

2013 2015-17 

119.00 121.00 

91.00 103.00 

23.50 25.00 

40.00 40.00 

28.00 31.00 

70.00 68.00 

32.00 35.00 

48.00 51.00 

51.75 52.00 

Common 

Shares 

Gmwth 

Rete 

0.55% 

4.17% 

2.06% 

0.00'10 

3.42% 

.0.95% 

3.00% 

2.02% 

0.16% 

21112 High 2012 Low 2012 price 

Price Price midpoint 

", 36.6 $ 39.75 

33.9 30.4 $ 32.15 

43.0 37.8 $ 40.40 

50.3 41.5 $ 45.90 

49.5 43.9 $ 48.70 

"., 28.9 $ 31.75 

58.0 46.5 $ 52.25 

43.6 40.5 $ 42.05 

45.0 37.9 $ 41.45 

Projected 

BookValue 

per Share 

2012 

30.05 

28.75 

25.85 

18.20 

27.80 

13.90 

23.40 

29.80 

24.50 

Markell 

Book RaUo 'S' ..,. S,V BR+SV 

1.32 0.73% 24.40% 0.18% 5.96% 

1.12 4.67% 10.58% 0.49% 4.01% 

1.56 3.22% 36.01% 1.16% 5.57% 

2.52 0.00% 60.35'10 0.00% 7.20'10 

1.'" 5.74% 40.47% 2.32% 7.34% 

2.28 ·2.17% 56.22% ·1.22% 2.19% 

2.23 6.70% 55.22% 3.70% 11.58% 

1.41 2.85% 29.13% 0.83% 6.60% 

1.69 0.27% 40.89% 0.11% 3.78% 

Notes: 

[I] Source: Value Une 

[21 Source: Value Une 

[3] Equals 1. (21 I [I] 

[4] Source: Value line 

[5] Equals [1]1 [4] 

[61 Equals [31 x [51 

[7] SOurCll: Value lIno 

[8] Source: Value line 

[91 Equals ([81 I [7J) h 0.33·1 


[11J Source:Value Une 

[12] Equals Average ([10), Ill/) 

[131 Source:Value LIne 

[14J Equals [12)1[13] 

[15] Equals [9J x [14J 

[16J Equals I • (11 [14]) 

[171 Equals (15) x 11Sj 

[181 Equals 161 + 1171



InpUts [I! BI 

" "' 

Multistage Growth Dtscount9d Cash Flow Model 

30 Dey AWl/age stock Pli::& 

[5) ~ 

!~ 

[10] rIll [11] [131 [14] 

.~, 

EPS Growt~ Rate EsIlmatas Long-Term Ps)'Ot/lRatio tteratr;B Solution Term"",[ Terminal 

SUstainable 

Company TICker Price Fi'sI Can Val .... LIM 

""~ 

,- A\'6f8Si!& ,.." 

2616 ,=, 

PIE RBlio PEG Ratio 

AGL Resoorces 

G" 

$40.113 426% 5.60% 5.96% 5.25% 5.61% 49.00% "" 49.00% 65.DO% "" '" 

~. 9.25% 17.85 3.18 

AImosEnergy Am 535.91 5.63% 5.50% "' 4.60% 4.61% 4.84% 5.61% 69.00% 54.00% 65.00% ~. 9.97% 14.91 2.66 

Laclede Group $42.67 3.00% 5.3Dr. 5.57% 3.97% 5.61% 65.00% 613.00% 

'G '" "00' (SO,OQI 16.12% 14.41 2.57 

New Jersey Resources ."." 3.35% 1.85% 

""' 

"'" 7.20% 4.47% 5.61% 53.00% "'00% "00% (SO.DOI ,.m; 17.49 3.12 

Ncrttmesl Net Gas "w" $49.133 4.17% 

Piedmont Natura' Gas 

6.91% 19.71 3.52 

'''"' '00% 7.34% 5.00% 5.61% 71.00% ".00% 65.00% $0.00 9.135% 19.88 3.37 

$31.63 4.10% 4.70% 

'" 

Z""' Z'". 3.52% 5.61% 77.00% nOO% ~.OO 

"'0% 

South Jersey 1000s. $51.95 

." 0.0'" 0.0'" 

9.00% 11.58% 8.15% 5,81% 54.00% 51.00% 65.00% ($0.00) 10.24% 14.03 2.50 

Scutlme51 Gas Corp. 'WX $43.74 4.37% 4.05% '.00% 6.60% 6.01% 5,81% 43.00% 'Z"", ($0.00) 9.53% 16.58 

"",. ,." 

WGL Hok!~s I"". WO, 5.37% 5.60"':' 

"'20 ,""' m% 4.44% 5.61% 54.00% 6200% 65.00% '"00 ",. 17.02 3.03 

M8V< 

''''' 

Projected Anrual 

Eamlms ~ Shara [15] [16] [In [lS] [1~ ~O] ~1] 

'" 

'" 

"'" 10.24% 

MW &91% 

[23] ~4] [25] [26] [2n ~8] ~9] @O] [31] 

"" 

2015 2016 2017 201S 2019 2020 2021 

2024 2025 

"" 

"" "" 

'I'" 

"" .,." $223 $247 

'Z" .ZOO $274 m' $3.04 .a." .,,' 53.57 S3.n 53.98 m .... M .... 

...'" "" 0; 

"" .,,'" $3.16 

53.69 

$4.12 

'''' "" '"''' 

" 

$4.59 " 

"" 

''"' 

$3.78 $4.17 ...... ...... .... 00 $.5.17 

,0.0, 

""' 

""' 

"" $5,n "-" 

52.70 $3.07 $3.21 

'Z" '''' 

.,," 53.70 ,,,. $4.11 

''"' 

"'"' "" ..... .,,' 

$.5.11 $5.39 

$3.74 

$4.17 $4.41 

"" 

...." $4.91 $5.19 

$1.57 51.63 $1.88 $1.74 $1.80 $1.87 $1.94 S211 

'" 

"-"' .Z" 52.33 .,... $275 .ZOO $3.07 

""'" 

""'" 

$3.13 

'"' '20' .,,' .,,' .,,' $4.28 $4.61 ...... $5.28 $5.62 55.00 sa .. $1.02 51.41 $7.83 sa27 

Coml!!!~ n:kar 2011 2012 2013 

AGL Resoorcos 

Almos Energy Am .,." 'Z,., .Z"'" .,.oo .zn 

Lecleda Groop 

'0 .Z" 'Z"' .,,' $3.21 .,,' $3.47 


Norttwa51 Nal Gas "W" .,." 

$251 'Z.. .m $29t $3.05 $3.21 ",., 


''"' 

South Jersey Ind5- 

Scuttme51 Gas Corp. 'WX .Z", 5273 

'Z" .,." 

$3.07 ,a., .,., 

"" "'" ..... "'" 

$4.31 $4.81 

..." ".M ",., $5.67 

""' 

WGL Holdi!l!sl.-.::. woe .Z" 'Z$ 'Z" 'ZOO .Z"' .,," .Z"' .,,' "" .,,' .,,' $3.51 S3.n $4.21 ".M $4.69 ...." 

Projected AMJaI 

Oivaend P8~ Ratio 

"" 

[33] ~ Ill' Il!I P:!! Il!I 

!40j (411 (42) (43) IMI 

(46) 

"" 

Coml!!!!!l n:ke, 2013 2014 2015 

2019 

'1m 

2025 

"''' "" "" "" '"" "''' 'I'" 

AGL Rescuces 

49.00% "00% 49.00% 49.00% 49.00% 51.67% 54.33% 57.00% 59.67% 6233% 65.00% 65.00% "00% "" 65.00% 65.00% 'I'" 

A!mcs Energy AW '''' 

69.00% 65.25% 61.60% 57.75% ".00% 55.83% 57.67% 59.50% 61.33% 63.17% 65,00% 65,00% O£OO% 65.00% 55.00% 

Lacleda Gr5.97) 50.00 50,55 51,67 $1.60 $1.58 $1.55 $1.68 $1,82 $1.98 $215 

"'"' 

'ZOO 'z"' ,a, 

"'" 579.52 

Laclede Groop CG ($4207) $0.00 $0.65 $1.97 $201 .Z'" 52.08 

"-'" .Z"' S248 

53.18 

""' "''' 'M' '"'' .,,' $91.52 


'"' .Z,," .,." .Z" ($45.53) $0.00 $0.48 $1.46 $1.49 $1.51 $1.54 51.71 $1.89 'Z" 'ZOO 53.14 53.32 5103.14 

NorttTNast Nal Gas "W" ($49.03) $0.00 .... 51.83 $l.n $1.76 $1,14 51.67 $201 5217 .Z", "'$2 $271 53.02 $3,19 $108.84 

'Z"" 

Piedmont Nawral Gas 

(531.63) 50.00 $M2 51.27 $1.30 $1.32 $1.34 $1.37 $1.41 51.45 $1.49 $1.54 $1.60 51.69 $1.79 51.89 $65.81 

South Jersey Ind5- '" ($51.95) $0.00 50.56 $1.75 $1.92 

'"' 

.Z'" $218 $2.46 $2.75 

$3.39 53.74 .... W $4.32 

"'" 

...." ...." $121.09 

Scutlme51 Gas Corp. 'WX ($43.74) $0.00 $1.14 $1.23 $1.30 51.37 51.58 $1.81 $207 

..." .,." 'Z", 'Z", $3.13 

$3.49 $102.91 

WGL Holdi~&lnc woe ($40.29) $0.00 

$1,54 $1.61 $1.67 $1.73 51.83 $1.93 'ZM $217 

"'" 

6130122 .,''''' ""'" """" """. 

"'" 

"'" 'Z" 

$259 5273 $289 587,36



Multistage Growth Diseount&d Cash Flow Model 

90 Day Average SIoc;k Pres 

[1] ~l !~ 

'""" 

I!!J I!J IS] ~ ( 

"' '" 1 °1 1111 [12] [13[ [14] 

,~< EPS GI'OVIIIh Rate EsllITIIIle. 

SU'Sii,mblil 

Lo ...... Term PayoutRati> Itflfllwa Solution Terminal TlII'minlll 

Cam~ny Ticker Pres z..~ Frs! carr Value Line Gro'lVth Average 

AGL Resources 0" $36.92 4.28% 

5.25% ~.50% 

0_ 

5.51% 

2012 

49.00% 49.00% '''' 

2023 

65.00% 

~oo, 

so,oo 

'RR 

9.36% 

PIE R.!tio 

17.34 

PEG Ratio 

aoo 

Almos Enargy Am 534.65 5.83% 5,50% "' 4.00% '''' 4.01% 4.84% 5.61% 69.00% ".00% 65.00% '"00 10.13% ,." ,." 

Laclede Group LO $40.12 3.00% ,.". 2.00% 

'''' 3.97% 5.61% 65,00% 60.00% 65.00% (SO,OO) 10.34% "" ,." 

NewJarseyR~$S "R $44.15 a35% 1.85% 5.50% 7'- 4.47% 5.61% 53.00% "00% 65.00% [s'.DO) 9.44% ,." a" 

Norttwest Nat Gas 

"w" 

$47.53 4.17% ,.". '.00% 1.34% 

"''' ,." ,." 

5.61% 71.00% 57.00% 65.00% ISo,OO) 9.16% 

Piedmont NsllJral GSS 

'"' $31.27 4.70% 4.70% 2.60% "" 3.52% 5.61% 77.00% 72.00% 65.00% 6,95% 

•• ,." 3.41 

South Jersey IOOs. 

$50.56 '.00% 0.0" 9.00% 11.58% B.15% 5.61% 54.00% 5UO% 65.00% ($D.DD) 10.36% 

'" 

"" ,.'" 

Souttwesl Gas eorp. 'WX $43.43 4.37% 4.05% '.00% '00% 6.01% 5.61% 43.00% 42.00% 85.00% (SO.DD) 9.55% 16.47 '.M 

WGLHoIdI'9slnc. woe $39.82 5.37",(, 5.60% 3.00% 

,,'" 

4.44% 5.61% 64.00% ~OO% 65.00% 9.47% 16.61 

•• 

'.00 

M8W 9.64% 

MAX 10.36% 

MW 6.~% 

Projecled AMJaI 

Eflmirgs per Sham 115) 116) 1171 118) (19) [2QJ [21J 

!231 !241 

[261 !!?J [281 [291 89J !311 

"" 

Comf!!~ TO::ker 2011 2012 2013 2014 2015 2016 2017 

2019 2020 

2026 

AGLRe~s G" $2.12 $2.23 

"" "" '''' 

"''' 

"" "" "" 

$2.47 

"" ,,"' $2.74 >a", 

"" "M $3.67 ,an 

'''' "." "" $4.68 Almos EnefgY ATD $2.37 

'27' .," $2.60 

"''' '''' "" 

"00 $3.16 

$3.50 $3.69 

"~ 

'aoo $4.12 

"" ... W "" $.5.12 

lBclede Grcup LO .,,' 52.87 .,,' $3.21 sa" '''7 

"" ." $3.97 $4.17 $4.39 .... .... so "n ,..., 

$5.17 $5.40 

New Jersey Resources "R $2.70 

"" .,,' $3.07 $3.21 $3.70 ,a" $4.11 $.5.11 $.5.39 $.5.70 

... 

"" 

" " .. NorttrNGstNatGas "W" .,,' $2.51 

"" ,m S2.81 53.05 $3.21 ,a" 53.74 $4.17 $4.41 

"" '''' 

...." $4.91 $.5.19 


$1.57 SI.63 51.68 $1.74 $1.80 51.67 $1.114 

'"' 

"" 

"" 

$2.11 

"" "" '''' "SO .,,' $7.00 $3.07 $3.24 

South Jersey lnels. 

'" .aM 53.13 "" sa", $4.28 $4.61 .... S< $5.28 55.62 '''' sa" ,



Multistage Growth Discouried Cash Flow Model 

160 Day AWlra(lEt Stock Prlca 

In~ [I] ~l [5] !!!] 

[8] ~l [10] 1111 [12] [13] [14] 

"' '" 

SUStI!,nallla 

Company Ti::ker Price 

'"'" Frs! CaB Value Lire G_ Avera!!! Gro .. 2012 ~oo, 

"''' 

AGL Resources GA' $39.62 4.28% NA 5,50% '.00% 5.25% 5.61% 49,00% 49.00% 61>.00% '"" "00 9.29% '" 17.64 3.15 

Almas Energy Am $33.26 ,."" 5,50% 4.00% 4.01% 4.84% 5.61% 69.00% 54,00% 

"'."" "00 10.32% 13.78 

Laclede Group CG $40,29 3.00% 5.30% 5.57% 3.97% 5.61% 65.00% 80.00% 

" "'.00% $0,00 10.32% 

'"" 

'" ,." 

New Jersey Reso~ N~' $45.32 3.35% 1.85% '",.. ,- 

,.'" 4.47% 5.61% 53.00% 48.00% "'.00% 

.". 

($0.00) 17.41 3.11 

Neil_Natali. NWN $47.09 4.17% 4.50% 4.00% 7.34% S.Bl% 11.00% 57.00% 

''"'''' •• 9.19% 18.12 Piedmont Natural Gas eN' $31.81 4.70% 4.70% 

"" •• ..... 2.19",4 3.52"", 5.61% n.OO% 72.00% 65.00% 19.83 ,." 

South Jersey Inds. $51.74 6.00% 6.00% 9.00% 11.58% 6.15% 5,61% 

." 

".00% 51.00% 65.00% ($0.00) 10.26% 13.97 2.49 

Souttmest Gas Corp ,,"X $4281 4.37% 4.05% 9.00% 6.60% 6.01% 5.61% 43.00% 4200% 65.00% ($0.00) 9.61% 16.25 '.00 

62.00% 65.00% .• 11.22 3.01 

''''' 

'" 

&oc' EPS Growth Rete Estimates Long-Term Pa~Rato;l lteratNeSolutioll Termnal Term .... 1 

WGL HoIdI!3i!s loc. WGC $40.16 5.37% , .... .0" 3.18% 4.44% 5.61% 

"."" . 

"eAN 9.62% 

MAX 10.:32% 

"'N 8.89% 

PIE Ratio PEG Ratio 

Projected Anrual 

EIImi!!!sl!!!,Shllre [15[ [16] [111 [18] [19] ~[ @1[ ~] @3] ~41 @5] [26] @1I @8] @9] ~[ [31] 

Comoan~ 

n:ker 

2013 2016 

"''' '''' "''' "''' 

AGLResouro:es GAO $212 

,,~ 

.,,' $247 

$274 

2017 

"''' 

2019 2020 

"" "" "" "" '"'" "" 

"'" "" "'~ '"'" ."', $3.57 $3.n .", $4.20 $4.43 '"'." 

'"'-.. 

,,~ 

AtmosEnergy 

"0 "'" "" ".. "" "" .,," ,"00 $3.16 $3.69 $3.90 $4.12 54.59 $5.12 

Laclede Group 

CO 

"''' 

"." "." ..'" $2.97 $3.21 $3.47 

.." ,a;, 

53.78 53.97 $4.17 $4.39 ".00 55.17 ,,~ 55.n 

"." '7% 62.50% S3.33% 64.17% 65.00% ",00' ",00% S5.00% 

New Jersey Resouroes N" 'aOO% 51.15% 50.50% 49.25% 49.00% 50.83% 

""" "''''' 

56.50% 59.33% 6217% 65.00% "'00% 65.00% "'00' 65.00% 

NortnNeslNBl GBS NWN 71.00% 67.50% 64.00% 60.50% ".00% 58.33% 59.67% 61.00% 6233% 63.67% 65.00% ;;'00% 65.00% 65.00% "'.00% 

Projecled Anrual 

Cash Flows (48) (49) 150) (51) 152) (53) 

[551 156) (Sri {581 (59) 

1 

." '''' 

.'" 61 1 (621 

Terminal 

ComE!:!!~ Ticker 2012 2013 2014 2015 

2017 

2019 2020 

,~, 

"''' "''' 

,= Velue 

AGLReSOl.ttes GAO $1.09 $1.15 51.21 $1.27 51.34 $1.49 51.65 $1.63 $202 

,,~ 

.", "'" "" "'" "'" 

$Z7' $87.26 

"" 

"'~ 

AtrnosEnergy ATO 51.63 51.62 $1.60 51.58 $1.55 51.68 51.82 51.98 $215 

.,,, .,,' "" .,,' .", $3.15 $70.58 

Laclede GrClUp CO $1.93 51.97 $201 52.05 

"" "'" '''' 52.48 "" .,,' $3.01 53.16 $3.38 ..., 53.75 $63.98 

New Jersey Resourtes W, $1.43 51.48 51.49 51.51 51.54 51.71 51.89 

$231 

"'" "" "" .,,' $3.14 53.51 $99.20 

NOrlhNest Nat Gas NWN $1.78 51.78 51.n 51.76 51.14 51.87 $2.01 52.17 

"" .,,' 52.11 

'''' 53.02 53.19 '"'' 599.32 

Piedmont Nntuml Ga. PN' $1.25 51.27 51.30 51.32 $1.34 $1.37 $1.41 51.45 $1.49 $1.54 $1.60 51.89 $1.79 $1.89 51.99 564.19 

South Jersey Irds. 

n69 51.80 51.92 

'" 

"'" "" "" 5275 53.06 ".w 55.09 $115.57 

SoLJthw9s1 Gas Corp. 'WX 51.11 $1.17 $1.23 51.30 51.37 51.58 $1.81 52.07 '''' "" "." $3.13 

"" '2" .". ."" "'" "" 53.49 ,a;. $97.23 

S2.59 $273 $289 585.30 

'" 

WGLHotdl!!lslo::: woe 51.50 51.56 $1.61 51.67 51.13 51.83 51.93 $2.04 S2.17 

."" "" .. 

Projected Anr

Multi-Stage DCF Notes: 

[1] Source: Bloomberg; based on 30, 90, and 180-dayhistorical average 




[5] Source: Exhibit No. RBH-3 

[6] Equals average [2], [3], [4], [5] 

[7J Source: Federal Reserve, Bureau <strong>of</strong> Economic Analysis 




[11] Equals Column [1] + Column [63] 

[12] Equals result <strong>of</strong> Excel Solver function; goal: Column [11J equals $0.00 

[13] Equals Column [62]/ Column [31] 

[14] Equals Column [13]/ (Column [7] x 100) 


[16] Equals Column [15] x (1 + Column [6]) 





[21] Equals (1 + (Column [61 + «(Column 171- Column 16]) / (2021 - 2016 + 1» x (2017 - 2016»» x Column [201 

[22] Equals (1 + (Column [6] + «(Column [7]- Column 16]) / (2021 - 2016 + 1» x (2018 - 2016)))) x Column [21] 

(23] Equals (1 + (Column [6] + ({(Column [71- Column 16]) / (2021 - 2016 + 1» x (2019 - 2016»))) x Column [221 

[24] Equals (1 + (Column [6] + «(Column [71- Column 16]) / (2021 - 2016 + 1» x (2020 - 2016»))) x Column [23J 

[25] Equals (1 + (Column [6] + «(Column [71- Column (6]) / (2021 - 2016 + 1» x (2021 - 2016»))) x Column [24] 


[27] Equals Column [26J x (1 + Column [7}) 


[29] Equals Column [28] x (1 + Column [7J) 

[30] Equals Column [29] x (1 + Column [7J) 


[321 Equals Column [8] 

[331 Equals Column 1321 + «Column [36]- Column [32]) /4) 

[34] Equals Column (33J + «Column [36]- Column [32]) /4) 

[35] Equals Column [34J + «Column 136]- Column [321) /4) 

[36] Equals Column (9) 

[37] Equals Column [36J + «Column (42)- Column [36]) /6) 

[38] Equals Column (37) + «Column (42J - Column [36]) /6) 

[39] Equals Column [38) + «Column (42J - Column [36]) /6) 

[40] Equals Column [39) + «Column [42J - Column [36]) /6) 

[41] Equals Column [40) + «Column [42J - Column (36]) /6) 

[42J Equals Column [10] 


[44] Equals Column [10] 



[47] Equals Column [16] x Column [32] 

[48J Equals Column [17] x Column [33] 

[49J Equals Column [18] x Column [34] 





[54) Equals Column [23] x Column [39] 



[57] Equals Column [26) x Column [42] 



[60] Equals Column 129] x Column [45] 


[62] Equals (Column (61] x (1 + Column [7])) I (Column 112)- Column 171) 

[63] Equals negative net present value; discount rate equals Column [12], cash flows equal Column [64] through Column [79] 

(64) Equals $0.00 

[65) Equals (12131/2012 - 813112012)x Column [47] 

(661 Equals [47] x (1 + (0.5 x (6]» 







(73) Equals Column [55] 

(74) Equals Column [56] 



[77] Equals Column [591 

(78) Equals Column [601 

[79) Equals Column [61] + [621 


Page 4 <strong>of</strong>4



Sharpe Ratio Derived Ex-Ante Market Risk Premium 

[1] [2] [3] [4] [5] 

Historical 

Sharpe 

RP h Vol h VOL, Ratio RP, 

6.60% 20.30% 25.26% 32.52% 8.21% 

[6] m [8] [9] 

Feb 13 VIX Mar 13 VIX Apr 13 VIX 

Date VXV Futures Futures Futures 

8/31/2012 20.62 26.65 27.65 28.25 

8/30/2012 20.92 27.05 28.05 28.65 

8/29/2012 20.46 26.95 27.95 28.50 

8/28/2012 19.82 26.80 27.80 28.35 

8/27/2012 19.92 26.75 27.75 28.35 

8/24/2012 19.24 27.05 27.90 28.40 

8/23/2012 20.09 27.10 27.90 28.40 

8/22/2012 19.42 26.90 27.65 28.10 

8/21/2012 18.80 26.90 27.55 27.90 

8/20/2012 18.59 26.45 27.10 27.50 

8/17/2012 18.35 26.05 26.70 27.15 

8/16/2012 18.55 26.10 26.75 27.20 

8/15/2012 18.86 26.15 26.80 27.30 

8/14/2012 18.51 26.20 26.85 27.40 

8/13/2012 18.07 25.80 26.45 26.95 

8/10/2012 18.14 25.85 26.45 26.95 

8/9/2012 18.23 26.05 26.65 27.10 

8/8/2012 18.58 26.05 26.65 27.40 

81712012 18.81 26.35 26.95 27.40 

8/6/2012 18.74 26.10 26.65 27.05 

8/3/2012 18.68 26.25 26.70 27.35 

8/2/2012 20.23 26.95 27.40 27.80 

8/1/2012 20.67 27.00 27.35 27.80 

7/31/2012 20.78 26.80 27.25 27.70 

7/30/2012 20.13 26.50 27.00 27.50 

7/27/2012 19.66 26.25 26.70 27.15 

7/26/2012 20.24 26.15 26.70 27.30 

7/25/2012 21.88 27.15 27.65 28.10 

7/24/2012 22.26 27.40 27.85 28.25 

7/23/2012 21.18 27.10 27.55 26.10 

Average: 25.26 

Notes: 

[1] Source: Morningstar, Inc. 

RP h :;;; historical arithmetic average Risk Premium 

[2] Source: Morningstar, Inc. 

Vol h :;;; historical market volatility 

[3J Vol, = expected market volatility (average <strong>of</strong> Cols. [6J to [9]) 

[4J Equals [1J 1 [2J 

[5J RP, = expected Risk Premium ([3J x [4]) 

[6J Source: Bloomberg Pr<strong>of</strong>essional 

[n Source: Bloomberg Pr<strong>of</strong>essional 

[81 Source: Bloomberg Pr<strong>of</strong>essional 

[9} Source: Bloomberg Pr<strong>of</strong>essional



Ex·Ante Market Risk Premium 

Market DCF Method Based - Bloomberg 

(1) 

S&P500 

Est. Required 

Market Return 

13.35% 

(2J 

Current 30·Year 

Treasury (30-day 

average) 

2.71% 

[3J 

Implied Market 

Risk Premium 

10.64% 

Company 

TIcker 

(4) (5) 

Market 

Capitalization Weight in Index 

(a) 

Estimated 

Dividend Yield 

m 

Long.Term Growth 

Est. 

(8) 

DCF Result 

(9) 

Weighted 

DCF Result 

AGILENT TECHNOLOGIES INC 

ALCOA INC 

APPLE INC 

AMERISOURCEBERGEN CORP 

ABBOTT LABORATORIES 

ACE LTD 

ACCENTURE PLC·CL A 

ADOBE SYSTEMS INC 

ANALOG DEVICES INC 

ARCHER·DANIELS·MIDLAND CO 

AUTOMATIC DATA PROCESSING 

AUTODESK INC 

AMEREN CORPORATION 

AMERICAN ELECTRIC POWER 

AES CORP 

AETNA INC 

AFLACINC 

ALLERGAN INC 

AMERICAN INTERNATIONAL GROUP 

APARTMENT INVT & MGMT CO-A 

ASSURANT INC 

AKAMAI TECHNOLOGIES INC 

ALLSTATE CORP 

ALTERACORP 

ALEXION PHARMACEUTICALS INC 

APPLIED MATERIALS INC 

ADVANCED MICRO DEVICES 

AMGENINC 

AMERIPRISE FINANCIAL INC 

AMERICAN TOWER CORP 

AMAZON.COM INC 

AUTONATION INC 

ABERCROMBIE & FITCH CO-CL A 

ALPHA NATURAL RESOURCES INC 

AON PLC 

APACHE CORP 

ANADARKD PETROLEUM CORP 

AIR PRODUCTS & CHEMICALS INC 

AMPHENOL CORP-CL A 

APOLLO GROUP INC-CL A 

AIRGAS INC 

ALLEGHENY TECHNOLOGIES INC 

AVALONBAY COMMUNITIES INC 

AVON PRODUCTS INC 

AVERY DENNISON CORP 

AMERICAN EXPRESS CO 

AUTOZONE INC 

BOEING COfTHE 

BANK OF AMERICA CORP 

BAXTER INTERNATIONAL INC 

BED BATH & BEYOND INC 

BB&TCORP 

BEST BUY CO INC 

CR BARD INC 

BECTON DICKINSON AND CO 

BEAM INC 

FRANKLIN RESOURCES INC 

BROWN-FORMAN CORP-CLASS B 

BAKER HUGHES INC 

BIG LOTS INC 

BIOGEN IDEC INC 

BANK OF NEW YORK MELLON CORP 

BLACK ROCK INC 

BALL CORP 

BMC SOFTWARE INC 

BEMIS COMPANY 

BRISTOL-MYERS SQUIBB CO 

BROADCOM CORP-CL A 

A 

AA 

AAPL 

ABC 

ABT 

ACE 

ACN 

ADBE 

ADI 

ADM 

AOP 

ADSK 

AEE 

AEP 

AES 

AET 

AFL 

AGN 

AIG 

AIV 

AIZ 

AKAM 

ALL 

ALTR 

ALXN 

AMAT 

AMO 

AMGN 

AMP 

AMT 

AMZN 

AN 

ANF 

ANR 

AON 

APA 

APC 

APO 

APH 

APOL 

ARG 

ATI 

AVB 

AVP 

AVY 

AXP 

AZO 

BA 

BAC 

BAX 

BBBY 

BBT 

BBY 

BCR 

BOX 

BEAM 

BEN 

SF/B 

BHI 

BIG 

SIIB 

BK 

BLK 

BLL 

BMC 

BMS 

BMY 

SRCM 

12,874.g1 0.10% 

8,983.23 0.07% 

632,346.00 4.91% 

9,758.48 0,08% 

102,728.59 0,80% 

25,292.90 0.20% 

42,583.25 0.33% 

15,456.10 0.12% 

11,764.92 0.09% 

17,703.56 0.14% 

28,406.06 0.22% 

7,218.02 0.06% 

7,939.01 0.06% 

20,918.70 0.16% 

8,444.88 0.07% 

12,749.73 0.10% 

21,774.63 0.17% 

25,997.61 0.20% 

56,336.91 0.44% 

3,884.57 0.03% 

2,859.04 0.02% 

6,679.14 0.05% 

18,136.25 0.14% 

11,853.03 0.09% 

20,927.65 0.16% 

14,528.19 0.11% 

2,575.50 0.02% 

64,998.94 0.50% 

11,507.89 0.09% 

27,969.28 0.22% 

112,057.94 0.87% 

4,967.92 0.04% 

2,885.23 0.02% 

1,218.56 0.01% 

16,694.21 0.13% 

33,006.84 0.26% 

34,542.81 0.27% 

17,251.96 0.13% 

9,878.16 0.08% 

3,121.21 0.02% 

6,336.72 0.05% 

3,080.18 0.02% 

13,813.51 0.11% 

6,563.11 0.05% 

3,003.33 0.02% 

66,443.16 0.52% 

13,411.80 0.10% 

53,279.90 0.41 % 

86,215.60 0.67% 

32,231.92 0.25% 

15,549.63 0.12% 

22,176.35 0.17% 

6,125.06 0.05% 

8,221.13 0.06% 

15,281.92 0.12% 

9,365.91 0.07% 

24,999.98 0.19% 

13,637.25 0.11% 

19,630.66 0.15% 

1,947.44 0.02% 

34,759.55 0.27% 

26,638.27 0.21 % 

30,581.30 0.24% 

6,464.65 0.05% 

6,697.49 0.05% 

3,114.94 0.02% 

55,642.79 0.43% 

19,755.06 0.15% 

0.74% 10.87% 

1.43% 10.00% 

0.39% 21.75% 

1.28% 12.00% 

3.12% 9.96% 

2.46% 7.56% 

2.11% 13.25% 

0.00% 11,17% 

2.93% 12.33% 

2.65% 10.00% 

2.83% 10.20% 

0.00% 15.40% 

4.88% -4.00% 

4.40% 4.33% 

0.68% 8.50% 

1.80% 10.60% 

2.86% 13.33% 

0.23% 14.50% 

0.00% 12.33% 

2.87% 9.26% 

2.30% 10.33% 

0.00% 14.25% 

2,35% 9.00% 

0.91% 12.29% 

0.00% 40.38% 

2.84% 8.67% 

0.00% 8.75% 

1.78% 10.26% 

2.37% 10.55% 

1.25% 20.86% 

0.00% 29.34% 

0.00% 20.66% 

2.02% 18.29% 

0.00% 5.00% 

1.20% 8.33% 

0.81% 7.83% 

0.53% 9.92% 

3.07% 9.99% 

0.65% 15.00% 

0.00% 9.78% 

1.81% 12.89% 

2.51 % 15.00% 

2.73% 10.14% 

5.98% .().06% 

3.63% 7.00% 

1.35% 10.23% 

0.00% 16.57% 

2.47% 11.83% 

0.53% 13.45% 

2.38% 8.80% 

0.00% 14.67% 

2.47% 10.56% 

3.27% 7.72% 

0.81% 9.75% 

2.30% 8.00% 

1.38% 12.81% 

2.62% 9.00% 

1.44% 13.00% 

1.34% 23.00% 

0.00% 11.63% 

0.00% 14.70% 

2.31% 17.63% 

3.39% 12.50% 

0.96% 10.00% 

0.00% 10.20% 

3.37% 6.00% 

4.13% 7.57% 

1.13% 15.00% 

11.65% 

11.50% 

22.19% 

13.36% 

13.24% 

10.12% 

15.50% 

11.17% 

15.44% 

12.78% 

13.17% 

15.40% 

0.79% 

8.83% 

9.21% 

12.49% 

16.38% 

14.75% 

12.33% 

12.26% 

12.75% 

14.25% 

11.46% 

13.25% 

40.38% 

11.63% 

8.75% 

12.13% 

13.04% 

22.24% 

29.34% 

20.66% 

20.50% 

5.00% 

9.59% 

8.67% 

10.47% 

13.21% 

15.70% 

9.78% 

14.82% 

17.69% 

13.01% 

5.92% 

10.76% 

11.65% 

16.57% 

14.45% 

14.01% 

11.29% 

14.67% 

13.15% 

11.12% 

10.59% 

10.39% 

14.28% 

11.74% 

14.53% 

24.50% 

11.63% 

14.70% 

20.15% 

16.10% 

11.00% 

10.20% 

9.47% 

11.85% 

16.22% 

0.0116% 

0.0080% 

1.0894% 

0.0101% 

0.1056% 

0.0199% 

0.0512% 

0.0134% 

0.0141% 

0.0176% 

0.0291% 

0.0086% 

0.0005% 

0.0143% 

0.0060% 

0.0124% 

0.0277% 

0.0298% 

0.0540% 

0.0037% 

0.0028% 

0.0074% 

0.0161% 

0.0122% 

0.0656% 

0.0131% 

0.0017% 

0.0612% 

0.0117% 

0.0483% 

0.2553% 

0.0080% 

0.0046% 

0.0005% 

0.0124% 

0.0222% 

0.0281% 

0.0177% 

0.0120% 

0.0024% 

0.0073% 

0.0042% 

0.0139% 

0.0030% 

0.0025% 

0.0601% 

0.0173% 

0.0598% 

0.0938% 

0.0282% 

0.0177% 

0.0226% 

0.0053% 

0.0068% 

0.0123% 

0.0104% 

0.0228% 

0.0154% 

0.0373% 

0.0018% 

0.0397% 

0.0417% 

0.0382% 

0.0055% 

0.0053% 

0.0023% 

0.0512% 

0.0249%



Company 

Ticker 

[41 

Market 

Capitalizatlon 

[5] 

Weight In Index 

[61 

Estimated 


m 

Long-Term Growth 

Est. 

[81 

DCF Result 

(9) 

Weighted 

DCF Result 

BERKSHIRE HATHAWAY INC-CL B 

BOSTON SCIENTIFIC CORP 

PEABODY ENERGY CORP 

BORGWARNER INC 

BOSTON PROPERTIES INC 

CITIGROUP INC 

CAINC 

CONAGRA FOODS INC 

CARDINAL HEALTH INC 

CAMERON INTERNATIONAL CORP 

CATERPILLAR INC 

CHUBB CORP 

COOPER INDUSTRIES PLC 

CBRE GROUP INC - A 

CBS CORP-CLASS B NON VOTING 

COCA-COLA ENTERPRISES 

CROWN CASTLE INTL CORP 

CARNIVAL CORP 

CELGENE CORP 

CERNERCORP 

CF INDUSTRIES HOLDINGS INC 

CARE FUSION CORP 

CHESAPEAKE ENERGY CORP 

C.H. ROBINSON WORLDWIDE INC 

CIGNACORP 

CINCINNATI FINANCIAL CORP 

COLGATE-PALMOLIVE CO 

CLIFFS NATURAL RESOURCES INC 

CLDRDX COMPANY 

COMERICA INC 

COMCAST CORP-CLASS A 

CME GROUP INC 

CHIPOTLE MEXICAN GRILL INC 

CUMMINS INC 

CMS ENERGY CORP 

CENTERPOINT ENERGY INC 

CONSOL ENERGY INC 

CAPITAL ONE FINANCIAL CORP 

CABOT OIL & GAS CORP 

COACH INC 

ROCKWELL COLLINS INC 

CONOCOPHILUPS 

COSTCD WHOLESALE CORP 

COVIDIEN PLC 

CAMPBELL SOUP CO 

SALESFORCE.COM INC 

COMPUTER SCIENCES CORP 

CISCO SYSTEMS INC 

CSX CORP 

CINTAS CORP 

CENTURYLINK INC 

COGNIZANT TECH SOLUTIONS-A 

CITRIX SYSTEMS INC 

CABLEVISION SYSTEMS-NY GRP·A 

COVENTRY HEALTH CARE INC 

CVS CARE MARK CORP 

CHEVRON CORP 

DOMINION RESOURCES INCNA 

DU PONT (E.!.) DE NEMOURS 

DEERE & CO 

DELL INC 

DEAN FOODS CO 

DISCOVER FINANCIAL SERVICES 

QUEST DIAGNOSTICS INC 

DR HORTON INC 

DANAHER CORP 

WALT DISNEY COfTHE 

DISCOVERY COMMUNICATIONS·A 

DOLLAR TREE INC 

DUN & BRADSTREET CORP 

DENBURY RESOURCES INC 

DIAMOND OFFSHORE DRILLING 

DOVER CORP 

DOW CHEMICAL COfTHE 

DR PEPPER SNAPPLE GROUP INC 

DARDEN RESTAURANTS INC 

DTE ENERGY COMPANY 

DIRECTV 

DUKE ENERGY CORP 

BRKlB 

BSX 

BTU 

BWA 

BXP 

C 

CA 

CAG 

CAH 

CAM 

CAT 

CB 

CBE 

CBG 

CBS 

CCE 

CCI 

CCl 

CELG 

CERN 

CF 

CFN 

CHK 

CHRW 

CI 

CINF 

Cl 

ClF 

CLX 

CMA 

CMCSA 

CME 

CMG 

CMI 

CMS 

CNP 

CNX 

COF 

COG 

COH 

COL 

COP 

COST 

COY 

CPB 

CRM 

CSC 

CSCO 

CSX 

CTAS 

CTl 

CTSH 

CTXS 

CVC 

CVH 

CVS 

CVX 

o 

DO 

DE 

DELL 

OF 

DFS 

DGX 

DHI 

OHR 

DIS 

DlSCA 

DLTR 

ONS 

DNR 

DO 

DOV 

DOW 

DPS 

DRI 

DTE 

DTV 

DUK 

208,695.30 

7,676.69 

5.608.15 

7,700.74 

17,000.03 

87,094.76 

12,256.03 

10.457.09 

13,537.62 

13,500.94 

53,999.19 

19,686.12 

11,577.81 

5,651.94 

23,015.68 

8,947.04 

18,522.90 

28,006.29 

31,092.73 

12,581.58 

13,439.36 

5,865.24 

12,769.13 

9,144.30 

13,120.54 

6,307.46 

50,840.47 

4,799.15 

9,460.50 

5,944.18 

90,128.85 

18,380.36 

9,061.11 

18,144.18 

6,160.94 

8,816.98 

6,562.54 

32,812.27 

8,714.53 

16,389.64 

6,917.10 

68,269.82 

42,438.97 

27,010.24 

11,114.48 

20,092.42 

4,960.25 

101,834.27 

22,580.90 

5,095.36 

26,605.82 

19,167.88 

14,583.30 

4,014.99 

5,545.76 

58,433.79 

218,229.22 

30,106.73 

45,430.12 

29,030.37 

18,300.07 

3,094.22 

20,033.75 

9,652.06 

6,223.07 

36,777.35 

89,103.68 

20,158.91 

11,099.38 

3,644.45 

6,028.34 

9,237.14 

10,569.89 

34,313.79 

9,460.23 

6,678.44 

10,205.67 

32,836.74 

45,622.03 

N/A 

0.06% 

0.04% 

0.06% 

0.13% 

0.68% 

0.10% 

0.08% 

0.11% 

0.10% 

0.42% 

0.15% 

0.09% 

0.04% 

0.18% 

0.07% 

0.14% 

0.22% 

0.24% 

0.10% 

0.10% 

0.05% 

0.10% 

0.07% 

0.10% 

0.05% 

0.39% 

0.04% 

0.07% 

0.05% 

0.70% 

0.14% 

0.07% 

0.14% 

0.05% 

0.07% 

0.05% 

0.25% 

N/A 

0.13% 

0.05% 

N/A 

0.33% 

0.21% 

0.09% 

0.16% 

0.04% 

0.79% 

0.18% 

0.04% 

0.21% 

0.15% 

0.11% 

0.03% 

0.04% 

0.45% 

1.69% 

0.23% 

0.35% 

0.23% 

0.14% 

0.02% 

0.16% 

0.07% 

0.05% 

0.29% 

0.69% 

0.16% 

0.09% 

0.03% 

N/A 

0.07% 

0.08% 

0.27% 

0.07% 

0.05% 

0.08% 

0.25% 

0.35% 

0.00% 

0.00% 

1.63% 

0.13% 

1.96% 

0.16% 

3.87% 

3.90% 

2.03% 

0.00% 

2.34% 

2.24% 

1.69% 

0.00% 

1.21% 

2.15% 

0.00% 

2.87% 

0.00% 

0.00% 

0.78% 

0.00% 

1.43% 

2.36% 

0.07% 

4.17% 

2.27% 

6.57% 

3.59% 

1.81% 

1.85% 

4.53% 

0.00% 

1.78% 

4.10% 

3.92% 

1.74% 

0.35% 

0.21% 

2.01% 

2.19% 

4.76% 

1.04% 

1.54% 

3.55% 

0.00% 

2.50% 

2.80% 

2.49% 

1.47% 

6.79% 

0.00% 

0.00% 

4.06% 

1.01% 

1.39% 

3.15% 

3.99% 

3.44% 

2.33% 

1.52% 

0.00% 

1.08% 

1.07% 

0.70% 

0.19% 

1.20% 

0.00% 

0.00% 

1.87% 

0.00% 

5.35% 

2.24% 

4.18% 

3.01% 

3.86% 

4.11% 

0.00% 

4.70% 

N/A 

9.25% 

12.00% 

20.05% 

5.41% 

8.33% 

10.00% 

6.50% 

10.50% 

17.00% 

13.33% 

7.44% 

12.40% 

13.33% 

10.96% 

6.12% 

38.93% 

16.77% 

23.89% 

19.14% 

6.54% 

10.42% 

8.89% 

14.80% 

10.56% 

5.00% 

8.64% 

11.00% 

8.42% 

12.20% 

16.81% 

12.67% 

22.00% 

12.25% 

6.00% 

5.67% 

12.00% 

10.15% 

N/A 

13.57% 

8.64% 

N/A 

13.49% 

10.80% 

6.33% 

26.08% 

8.00% 

9.56% 

15.00% 

11.17% 

3.14% 

18.67% 

15.66% 

6.80% 

12.33% 

13.50% 

-1.11% 

4.85% 

7.10% 

14.67% 

7.33% 

5.75% 

10.67% 

11.38% 

4.00% 

15.00% 

11.94% 

20.75% 

17.54% 

10.00% 

N/A 

17.33% 

14.33% 

5.33% 

7.30% 

12.74% 

5.00% 

18.19% 

4.25% 

N/A 

9.25% 

13.72% 

20.19% 

7.42% 

8.50% 

14.06% 

10.53% 

12.64% 

17.00% 

15.83% 

9.77% 

14.20% 

13.33% 

12.24% 

8.33% 

38.93% 

19.89% 

23.89% 

19.14% 

7.35% 

10.42% 

10.38% 

17.33% 

10.64% 

9.27% 

11.01% 

17.94% 

12.16% 

14.12% 

18.82% 

17.48% 

22.00% 

14.14% 

10.22% 

9.70% 

13.84% 

10.52% 

N/A 

15.71% 

10.92% 

N/A 

14.59% 

12.43% 

10.00% 

26.08% 

10.60% 

12.49% 

17.68% 

12.72% 

10.03% 

18.67% 

15.66% 

11.00% 

13.41% 

14.99% 

2.02% 

8.93% 

10.67% 

17.17% 

8.91% 

5.75% 

11.80% 

12.51% 

4.71% 

15.20% 

13.21% 

20.75% 

17.54% 

11.97% 

N/A 

23.15% 

16.73% 

9.62% 

10.42% 

16.84% 

9.21% 

18.19% 

9.05% 

N/A 

0.0055% 

0.0060% 

0.0121% 

0.0098% 

0.0575% 

0.0134% 

0.0085% 

0.0133% 

0.0178% 

0.0664% 

0.0149% 

0.0128% 

0.0059% 

0.0219% 

0.0058% 

0.0560% 

0.0433% 

0.0577% 

0.0187% 

0.0077% 

0.0047% 

0.0103% 

0.0123% 

0.0108% 

0.0045% 

0.0434% 

0.0067% 

0.0089% 

0.0065% 

0.1317% 

0.0249% 

0.0155% 

0.0199% 

0.0049% 

0.0066% 

0.0071% 

0.0268% 

NlA 

0.0200% 

0.0059% 

N/A 

0.0481% 

0.0261% 

0.0086% 

0.0407% 

0.0041% 

0.0988% 

0.0310% 

0.0050% 

0.0207% 

0.0278% 

0.0177% 

0.0034% 

0.0058% 

0.0680% 

0.0343% 

0.0209% 

0.0376% 

0.0387% 

0.0127% 

0.0014% 

0.Q184% 

0.0094% 

0.0023% 

0.0434% 

0.0914% 

0.0325% 

0.0151% 

0.0034% 

N/A 

0.Q166% 

0.0137% 

0.0256% 

0.0077% 

0.0087% 

0.0073% 

0.0464% 

0.0321%



Company 

Ticker 

[4J 

Market 

Capitalization 

(5J 

Weight in Index 

[6) 

Estimated 


rn 


Est. 

[8J 

DCF Result 

[9] 

Weighted 

DCF Result 

DEVRYINC 

DAVITAINC 

DEVON ENERGY CORPORATION 

ELECTRONIC ARTS INC 

EBAY INC 

ECOLAB INC 

CONSOLIDATED EDISON INC 

EQUIFAX INC 

EDISON INTERNATIONAL 

ESTEE LAUDER COMPANIES-CL A 

EMCCORP/MA 

EASTMAN CHEMICAL CO 

EMERSON ELECTRIC CO 

EOG RESOURCES INC 

EQUITY RESIDENTIAL 

EaT CORP 

EXPRESS SCRIPTS HOLDING CO 

ENSCO PLC-CL A 

E"TRADE FINANCIAL CORP 

EATON CORP 

ENTERGY CORP 

EDWARDS lIFESCIENCES CORP 

EXELON CORP 

EXPEDITORS INTL WASH INC 

EXPEDIA INC 

FORD MOTOR CO 

FASTENAL CO 

FREEPORT-MCMORAN COPPER 

FAMILY DOLLAR STORES 

FEDEXCORP 

FIRSTENERGY CORP 

F5 NETWORKS INC 

FIRST HORIZON NATIONAL CORP 

FEDERATED INVESTORS INC-CL B 

FIDELITY NATIONAL INFORMATIO 

FISERV INC 

FIFTH THIRD BANCORP 

FliR SYSTEMS INC 

FLUOR CORP 

FLOWSERVE CORP 

FMC CORP 

FOSSIL INC 

FOREST LABORATORIES INC 

FIRST SOLAR INC 

FMC TECHNOLOGIES INC 

FRONTIER COMMUNICATIONS CORP 

AGL RESOURCES INC 

GANNETT CO 

GENERAL DYNAMICS CORP 

GENERAL ELECTRIC CO 

GILEAD SCIENCES INC 

GENERAL MILLS INC 

CORNING INC 

GAMESTOP CORP-CLASS A 

GENWORTH FINANCIAL INC-CL A 

GOOGLE INC-Cl A 

GENUINE PARTS CO 

GAP INCfTHE 

GOLDMAN SACHS GROUP INC 

GOODYEAR TIRE & RUBBER CO 

WW GRAINGER INC 

HALLIBURTON CO 

HARMAN INTERNATIONAL 

HASBROINC 

HUNTINGTON BANCSHARES INC 

HUDSON CITY BANCORP INC 

HEALTH CARE REIT INC 

HCP INC 

HOME DEPOT INC 

HESS CORP 

HARTFORD FINANCIAL SVCS GRP 

HJ HEINZ CO 

HARLEY-DAVIDSON INC 

HONEYWELL INTERNATIONAL INC 

STARWOOD HOTELS & RESORTS 

HELMERICH & PAYNE 

HEWLETT-PACKARD CO 

H&R BLOCK INC 

HaRMEL FOODS CORP 

DV 

DVA 

DVN 

EA 

EBAY 

ECl 

ED 

EFX 

EIX 

El 

EMC 

EMN 

EMR 

EOG 

EaR 

EaT 

ESRX 

ESV 

ETFC 

ETN 

ETR 

EW 

EXC 

EXPD 

EXPE 

F 

FAST 

FCX 

FDO 

FDX 

FE 

FFIV 

FHN 

FII 

FIS 

FISV 

FITS 

FLIR 

FlR 

FlS 

FMC 

FOSL 

FRX 

FSLR 

FTI 

FTR 

GAS 

GCI 

GD 

GE 

GILD 

GIS 

GlW 

GME 

GNW 

GOOG 

GPC 

GPS 

GS 

GT 

GWW 

HAL 

HAR 

HAS 

HBAN 

HCBK 

HCN 

HCP 

HD 

HES 

HIG 

HNZ 

HOG 

HON 

HOT 

HP 

HPO 

HRB 

HRl 

1,231.17 

9,236.74 

23,238.53 

4,148.67 

61,005.64 

18,565.76 

17,831.29 

5.534.12 

14,325.92 

23,249.55 

55,301.27 

7,539.19 

36,249.82 

29,518.97 

18,241.49 

7,976.38 

51,109.68 

13,267.55 

2,454.51 

14,880.03 

12,167.65 

12,062.00 

30,822.53 

7,678.49 

7,057.17 

35,889.61 

12,844.20 

33,812.21 

7,361.12 

27,715.14 

18,188.23 

7,465.73 

2,236.80 

2,205.28 

9,303.82 

9,696.31 

13,838.83 

2,990.82 

8,665.66 

6,514.96 

7,373.97 

5,113.73 

9,315.23 

1,645.47 

11,235.06 

4.643.14 

4,745.30 

3.631.00 

22,807.12 

217,309.84 

43,873.41 

25,508.97 

17,734.21 

2,541.04 

2,581.06 

223,393.59 

9,613.15 

17,222.29 

52,654.40 

2,966.11 

14,583.32 

29,827.17 

3,053.96 

4,844.53 

5,631.11 

3,823.68 

13,478.67 

19,886.94 

85,607.62 

16,956.09 

7,713.92 

17,920.26 

9,498.88 

44,818.47 

10,821.56 

4,679.02 

33,501.43 

4,527.74 

7,616.31 

0.01% 

0.07% 

0.18% 

0.03% 

0.47% 

0.14% 

0.14% 

0.04% 

0.11% 

0.18% 

0.43% 

0.06% 

0.28% 

0.23% 

0.14% 

0.06% 

0.40% 

0.10% 

0.02% 

0.12% 

0.09% 

0.09% 

0.24% 

0.06% 

0.05% 

0.28% 

0.10% 

NfA 

0.06% 

0.22% 

0.14% 

0.06% 

0.02% 

0.02% 

0.07% 

0.08% 

0.11% 

0.02% 

0.07% 

NfA 

0.06% 

0.04% 

0.07% 

0.01% 

0.09% 

0.04% 

0.04% 

0.03% 

0.18% 

1.69% 

0.34% 

0.20% 

0.14% 

0.02% 

0.02% 

1.73% 

0.07% 

0.13% 

0.41% 

0.02% 

0.11% 

0.23% 

0.02% 

0.04% 

0.04% 

0.03% 

0.10% 

0.15% 

0.66% 

0.13% 

0.06% 

0.14% 

0.07% 

0.35% 

0.08% 

0.04% 

0.26% 

0.04% 

0.06% 

1.64% 

0.00% 

1.36% 

0.00% 

0.00% 

1.26% 

3.98% 

1.52% 

2.97% 

1.21% 

0.00% 

1.88% 

3.21% 

0.62% 

2.90% 

1.65% 

0.00% 

2.66% 

0.00% 

3.44% 

4.86% 

0.00% 

5.82% 

1.52% 

0.79% 

2.13% 

1.62% 

3.46% 

1.29% 

0.64% 

5.06% 

0.00% 

0.58% 

4.62% 

1.90% 

0.00% 

2.36% 

1.41% 

1.07% 

1.12% 

0.74% 

0.00% 

0.00% 

0.00% 

0.00% 

8.60% 

4.53% 

4.72% 

3.08% 

3.29% 

0.00% 

3.34% 

2.52% 

1.98% 

0.00% 

0.00% 

3.19% 

1.35% 

1.64% 

0.10% 

1.47% 

1.13% 

1.10% 

3.78% 

2.45% 

4.42% 

5.03% 

4.33% 

2.15% 

0.82% 

2.31% 

3.69% 

1.49% 

2.63% 

1.03% 

0.63% 

2.98% 

4.81% 

2.31% 

9.48% 

12.57% 

6.20% 

16.55% 

13.11% 

13.60% 

3.26% 

11.00% 

-0.37% 

14.07% 

15.00% 

7.50% 

12.33% 

10.55% 

7.78% 

30.00% 

16.88% 

16.67% 

26.00% 

10.00% 

3.50% 

20.17% 

-1.85% 

9.33% 

12.01% 

8.62% 

19.10% 

NfA 

13.90% 

13.14% 

0.33% 

18.67% 

8.33% 

8.00% 

12.40% 

12.43% 

5.00% 

10.00% 

13.30% 

NfA 

10.45% 

18.45% 

10.64% 

-1.00% 

13.00% 

-9.05% 

4.00% 

6.00% 

6.60% 

11.50% 

17.59% 

7.50% 

9.50% 

8.45% 

5.00% 

16.23% 

8.23% 

11.26% 

11.03% 

46.30% 

14.03% 

20.50% 

20.00% 

9.00% 

5.33% 

0.50% 

6.09% 

5.23% 

15.75% 

5.13% 

9.50% 

7.33% 

13.00% 

15.00% 

20.34% 

8.00% 

10.00% 

11.00% 

8.50% 

11.19% 

12.57% 

7.60% 

16.55% 

13.11% 

14.95% 

7.30% 

12.61% 

2.60% 

15.37% 

15.00% 

9.45% 

15.74% 

11.20% 

10.79% 

31.90% 

16.88% 

19.55% 

26.00% 

13.62% 

8.45% 

20.17% 

3.91% 

10.93% 

12.86% 

10.84% 

20.88% 

NfA 

15.28% 

13.82% 

5.40% 

18.67% 

8.94% 

12.81% 

14.42% 

12.43% 

7.42% 

11.48% 

14.44% 

NfA 

11.22% 

18.45% 

10.64% 

-1.00% 

13.00% 

-0.84% 

8.62% 

10.86% 

9.79% 

14.98% 

17.59% 

10.96% 

12.14% 

10.52% 

5.00% 

16.23% 

11.55% 

12.69% 

12.76% 

46.42% 

15.59% 

21.75% 

21.21% 

12.96% 

7.85% 

4.93% 

11.28% 

9.67% 

18.07% 

5.97% 

11.91% 

11.16% 

14.58% 

17.82% 

21.48% 

8.66% 

13.13% 

16.07% 

10.91% 

0.0011% 

0.0090% 

0.0137% 

0.0053% 

0.0621% 

0.0215% 

0.0101% 

0.0054% 

0.0029% 

0.0277% 

0.0644% 

0.0055% 

0.0443% 

0.0257% 

0.0153% 

0.0198% 

0.0670% 

0.0201% 

0.0050% 

0.0157% 

0.0080% 

0.0189% 

0.0094% 

0.0065% 

0.0070% 

0.0302% 

0.0208% 

NfA 

0.0087% 

0.0297% 

0.0076% 

0.D108% 

0.0016% 

0.0022% 

0.0104% 

0.0094% 

0.0080% 

0.0027% 

0.0097% 

NfA 

0.0064% 

0.0073% 

0.0077% 

-0.0001% 

0.0113% 

-0.0003% 

0.0032% 

0.0031% 

0.0173% 

0.2528% 

0.0599% 

0.0217% 

0.0167% 

0.0021% 

0.0010% 

0.2815% 

0.0086% 

0.0170% 

0.0522% 

0.0107% 

0.0177% 

0.0504% 

0.0050% 

0.0049% 

0.0034% 

0.0015% 

0.0118% 

0.0149% 

0.1201% 

0.0079% 

0.0071% 

0.0155% 

0.0108% 

0.0620% 

0.0181% 

0.0031% 

0.0341% 

0.0056% 

0.0065%



Company 

Ticker 

[4) [5) 

Market 


[6) m 

Estimated Long-Term Growth 


Est. 

[8) 

DCF Result 

[91 

Weighted 

DCF Result 

HARRIS CORP 

HOSPIRA INC 

HOST HOTELS & RESORTS INC 

HERSHEY COfTHE 

HUMANA INC 

INTL BUSINESS MACHINES CORP 

INTERCONTINENTALEXCHANGE INC 

INTL FLAVORS & FRAGRANCES 

INTL GAME TECHNOLOGY 

INTEL CORP 

INTUIT INC 

INTERNATIONAL PAPER CO 

INTERPUBLIC GROUP OF COS INC 

INGERSOLL-RAND PLC 

IRON MOUNTAIN INC 

INTUITIVE SURGICAL INC 

ILLINOIS TOOL WORKS 

INVESCO LTD 

JABIL CIRCUIT INC 

JOHNSON CONTROLS INC 

J.C. PENNEY CO INC 

JDS UNIPHASE CORP 

JACOBS ENGINEERING GROUP INC 

JOHNSON & JOHNSON 

JUNIPER NElWORKS INC 

JOY GLOBAL INC 

JPMORGAN CHASE & CO 

NORDSTROM INC 

KELLOGG CO 

KEYCORP 

KRAFT FOODS INC-CLASS A 

KIMCO REALTY CORP 

KLA-TENCOR CORPORATION 

KIMBERLY-CLARK CORP 

KINDER MORGAN INC 

CARMAXINC 

COCA-COLA COrrHE 

KROGER CO 

KOHLS CORP 

LOEWSCORP 

LEGGETT & PLATT INC 

LENNAR CORP-A 

LABORATORY CRP OF AMER HLDGS 

LIFE TECHNOLOGIES CORP 

L-3 COMMUNICATIONS HOLDINGS 

LINEAR TECHNOLOGY CORP 

ELI LILLY & CO 

LEGG MASON INC 

LOCKHEED MARTIN CORP 

LINCOLN NATIONAL CORP 

LORILLARD INC 

LOWE'S COS INC 

LAM RESEARCH CORP 

LSI CORP 

LIMITED BRANDS INC 

LEUCADIA NATIONAL CORP 

SOUTHWEST AIRLINES CO 

LEXMARK INTERNATIONAL INC-A 

MACY'S INC 

MASTERCARD INC-CLASS A 

MARRIOTT INTERNATIONAL-CLA 

MASCOCORP 

MATTEL INC 

MCDONALD'S CORP 

MICROCHIP TECHNOLOGY INC 

MCKESSON CORP 

MOODY'S CORP 

MEDTRONIC INC 

METLIFE INC 

MCGRAW-HILL COMPANIES INC 

MEAD JOHNSON NUTRITION CO 

MCCORMICK & CO-NON VTG SHRS 

MARSH & MCLENNAN COS 

3MCO 

MONSTER BEVERAGE CORP 

AL TRIA GROUP INC 

MOLEX INC 

MONSANTO CO 

MOSAIC COfTHE 

HRS 

HSP 

HST 

HSV 

HUM 

IBM 

ICE 

IFF 

IGT 

INTC 

INTU 

IP 

IPG 

IR 

IRM 

ISRG 

ITW 

IVZ 

JBL 

JCI 

JCP 

JDSU 

JEC 

JNJ 

JNPR 

JOV 

JPM 

JWN 

K 

KEV 

KFT 

KIM 

KLAC 

KMB 

KMI 

KMX 

KO 

KR 

KSS 

L 

LEG 

LEN 

LH 

LIFE 

LLL 

LLTC 

LLV 

LM 

LMT 

LNC 

LO 

LOW 

LRCX 

LSI 

LTD 

LUK 

LUV 

LXK 

M 

MA 

MAR 

MAS 

MAT 

MCD 

MCHP 

MCK 

MCO 

MDT 

MET 

MHP 

MJN 

MKC 

MMC 

MMM 

MNST 

MO 

MOLX 

MON 

MOS 

5,299.62 0.04% 

5,612.17 0.04% 

11,026.65 0.09% 

16,414.29 0.13% 

11,274.59 0.09% 

222,315.36 1.73% 

9,937.80 0.08% 

4,890.20 0.04% 

3,237.25 0.03% 

122,023.16 0.95% 

17,194.32 0.13% 

14,948.08 0.12% 

4,681.63 0.04% 

14,133.37 0.11% 

5,588.57 0.04% 

19,611.25 0.15% 

27,622.74 0.21% 

10,676.61 0.08% 

4,409.64 0.03% 

18,362.96 0.14% 

5,677.52 0.04% 

2,639.08 0.02% 

5,122.18 0.04% 

185,438.59 1.44% 

9,315.34 0.07% 

5,466.84 0.04% 

140,591.86 1.09% 

11,591.45 0.09% 

18,119.29 0.14% 

7,925.09 0.06% 

74,251.30 0.58% 

8,338.50 0.06% 

8,724.47 0.07% 

33,064.23 0.26% 

40,417.46 0.31% 

6,998.93 0.05% 

167,831.70 1.30% 

12,168.16 0.09% 

12,192.05 0.09% 

16,136.38 N/A 

3,372.87 0.03% 

6,003.42 0.05% 

8,464.13 0.07% 

8,450.99 0.07% 

6,668.02 0.05% 

7,529.82 0.06% 

52,555.67 0.41% 

3,342.66 0.03% 

29,369.40 0.23% 

6,507.54 0.05% 

16,533.15 0.13% 

32,751.36 0.25% 

6,130.96 0.05% 

4,332.26 0.03% 

14,107.61 0.11% 

5,163.14 N/A 

6,576.17 0.05% 

1,503.80 0.01 % 

16,260.95 0.13% 

52,961.91 0.41% 

12,145.89 0.09% 

5,017.25 0.04% 

11,922.29 0.09% 

89,800.81 0.70% 

6,668.83 0.05% 

20,579.97 0.16% 

8,829.76 0.07% 

42,242.09 0.33% 

36,116.52 0.28% 

14,311.44 0.11% 

14.995.04 0.12% 

8,268.57 0.06% 

18,562.51 0.14% 

63,380.17 0.49% 

10,091.74 0.08% 

69,998.63 0.54% 

4,321.64 0.03% 

46,164.14 0.36% 

24,146.00 0.19% 

2.93% 4.00% 

0.00% 3.35% 

1.74% 13.30% 

2.06% 7.86% 

1.47% 9.80% 

1.67% 9.67% 

0.00% 14.00% 

2.14% 3.00% 

1.98% 13.00% 

3.55% 10.76% 

0.69% 14.50% 

3.07% 5.00% 

2.32% 9.33% 

1.36% 11.00% 

3.30% 13.67% 

0.00% 21.17% 

2.50% 7.65% 

2.85% 12.00% 

1.46% 12.00% 

2.54% 16.95% 

1.51 % 21.93% 

0.00% 14.00% 

0.00% 13.23% 

3.54% 6.37% 

0.00% 15.00% 

1.36% 16.80% 

3.22% 7.33% 

1.77% 12.59% 

3.43% 7.97% 

2.15% 7.01% 

2.79% 7.50% 

3.72% 15.15% 

2.89% 9.67% 

3.52% 8.44% 

3.93% 7.00% 

0.00% 13.16% 

2.94% 7.71% 

2.16% 8.60% 

2.46% 13.00% 

0.61% N/A 

4.67% 15.00% 

0.48% 4.50% 

0.00% 12.25% 

0.00% 8.73% 

2.82% 1.67% 

3.11% 10.00% 

4.33% -1.23% 

1.81% 11.00% 

4.53% 6.88% 

1.41% 5.40% 

4.81% 9.14% 

2.19% 16.60% 

0.00% 10.00% 

0.00% 15.25% 

4.14% 12.54% 

0.00% N/A 

0.25% 18.12% 

5.44% -9.00% 

1.99% 10.27% 

0.23% 19.16% 

1.18% 19.01% 

2.14% 10.00% 

3.55% 9.00% 

3.21% 9.96% 

4.10% 10.00% 

0.74% 14.33% 

1.63% 12.00% 

2.53% 6.51% 

3.05% 9.50% 

1.94% 9.50% 

1.63% 11.40% 

1.98% 8.00% 

2.64% 8.08% 

2.38% 12.00% 

0.00% 17.50% 

4.96% 7.64% 

3.30% 11.67% 

1.42% 9.65% 

1.76% 5.51% 

6.99% 

3.35% 

15.15% 

10.00% 

11.34% 

11.42% 

14.00% 

5.17% 

15.11% 

14.50% 

15.24% 

8.15% 

11.76% 

12.44% 

17.19% 

21.17% 

10.25% 

15.02% 

13.55% 

19.71% 

23.61% 

14.00% 

13.23% 

10.02% 

15.00% 

18.27% 

10.67% 

14.46% 

11.53% 

9.24% 

10.40% 

19.16% 

12.69% 

12.11% 

11.07% 

13.16% 

10.76% 

10.85% 

15.62% 

N/A 

20.02% 

4.99% 

12.25% 

8.73% 

4.52% 

13.27% 

3.07% 

12.91% 

11.56% 

6.85% 

14.17% 

18.98% 

10.00% 

15.25% 

16.94% 

N/A 

18.39% 

-3.80% 

12.36% 

19.40% 

20.30% 

12.25% 

12.71% 

13.33% 

14.30% 

15.13% 

13.73% 

9.12% 

12.69% 

11.53% 

13.12% 

10.06% 

10.82% 

14.53% 

17.50% 

12.79% 

15.16% 

11.14% 

7.32% 

0.0029% 

0.0015% 

0.0130% 

0.0127% 

0.0099% 

0.1972% 

0.0108% 

0.0020% 

0.0038% 

0.1374% 

0.0203% 

0.0095% 

0.0043% 

0.0136% 

0.0075% 

0.0322% 

0.0220% 

0.0125% 

0.0046% 

0.0281% 

0.0104% 

0.0029% 

0.0053% 

0.1443% 

0.0108% 

0.0078% 

0.1164% 

0.0130% 

0.0162% 

0.0057% 

0.0600% 

0.0124% 

0.0086% 

0.0311% 

0.0348% 

0.0071% 

0.1403% 

0.0103% 

0.0148% 

N/A 

0.0052% 

0.0023% 

0.0081% 

0.0057% 

0.0023% 

0.0078% 

0.0125% 

0.0033% 

0.0264% 

0.0035% 

0.0182% 

0.0483% 

0.0048% 

0.0051% 

0.0186% 

N/A 

0.0094% 

-0.0004% 

0.0156% 

0.0798% 

0.0191% 

0.0048% 

0.0118% 

0.0929% 

0.0074% 

0.0242% 

0.0094% 

0.0299% 

0.0356% 

0.0128% 

0.0153% 

0.0065% 

0.0156% 

0.0715% 

0.0137% 

0.0695% 

0.0051% 

0.0399% 

0.0137%



Company 

Ticker 

[4J 

Market 


[5J 


[6J 

Estimated 


[7] 


Est. 

{8] 

DCF Result 

[9J 

Weighted 

DCF Result 

MARATHON PETROLEUM CORP 

MERCK & CO. INC. 

MARATHON OIL CORP 

MORGAN STANLEY 

MICROSOFT CORP 

MOTOROLA SOLUTIONS INC 

M & T BANK CORP 

MICRON TECHNOLOGY INC 

MURPHY OIL CORP 

MEADWESTVACO CORP 

MYLAN INC 

NOBLE ENERGY INC 

NABORS INDUSTRIES LTD 

NASDAQ OMX GROUPfTHE 

NOBLE CORP 

NEXTERA ENERGY INC 

NEWMONT MINING CORP 

NETFLIX INC 

NEWFIELD EXPLORATION CO 

NISOURCE INC 

NIKE INC -CL B 

NORTHROP GRUMMAN CORP 

NATIONAL OILWELL VARCO INC 

NRG ENERGY INC 

NORFOLK SOUTHERN CORP 

NETAPP INC 

NORTHERN TRUST CORP 

NORTHEAST UTILITIES 

NUCOR CORP 

NVIDIA CORP 

NEWELL RUBBERMAID INC 

NEWS CORP-CL A 

NYSE EURONEXT 

OWENS-ILLINOIS INC 

ONEOK INC 

OMNICOM GROUP 

ORACLE CORP 

O'REILLY AUTOMOTIVE INC 

OCCIDENTAL PETROLEUM CORP 

PAYCHEXINC 

PEOPLE'S UNITED FINANCIAL 

PITNEY BOWES INC 

PACCARINC 

PG&ECORP 

PLUM CREEK TIMBER CO 

PRICELlNE.COM INC 

PRECISION CASTPARTS CORP 

METROPCS COMMUNICATIONS INC 

PATTERSON COS INC 

PUBLIC SERVICE ENTERPRISE GP 

PEPSICO INC 

PFIZER INC 

PRINCIPAL FINANCIAL GROUP 

PROCTER & GAMBLE COfTHE 

PROGRESSIVE CORP 

PARKER HANNIFIN CORP 

PUL TEGROUP INC 

PERKINELMER INC 

PROLOGIS INC 

PALL CORP 

PHILIP MORRIS INTERNATIONAL 

PNC FINANCIAL SERVICES GROUP 

PINNACLE WEST CAPITAL 

PEPCO HOLDINGS INC 

PPG INDUSTRIES INC 

PPL CORPORATION 

PERRIGO CO 

PRUDENTIAL FINANCIAL INC 

PUBLIC STORAGE 

PHILLIPS 66 

QUANTA SERVICES INC 

PRAXAIR INC 

PIONEER NATURAL RESOURCES CO 

QUALCOMM INC 

QEP RESOURCES INC 

RYDER SYSTEM INC 

REYNOLDS AMERICAN INC 

ROWAN COMPANIES PLC-A 

REGIONS FINANCIAL CORP 

MPC 

MRK 

MRO 

MS 

MSFT 

MSI 

MTB 

MU 

MUR 

MWV 

MYl 

NBl 

NBR 

NOAa 

NE 

NEE 

NEM 

NFLX 

NFX 

NI 

NKE 

NOC 

NOV 

NRG 

NSC 

NTAP 

NTRS 

NU 

NUE 

NVDA 

NWl 

NWSA 

NYX 

01 

OKE 

OMC 

ORCL 

ORLY 

OXY 

PAYX 

PBCT 

PBI 

PCAR 

PCG 

PCl 

PCLN 

PCP 

PCS 

PDCO 

PEG 

PEP 

PFE 

PFG 

PG 

PGR 

PH 

PHM 

PKI 

Pla 

Pll 

PM 

PNC 

PNW 

paM 

PPG 

PPl 

PRGO 

PRU 

PSA 

PSX 

PWR 

PX 

pxa 

QCOM 

QEP 

R 

RAI 

ROC 

RF 

17,182.11 

131,723.59 

19,364.12 

30,640.12 

254,603.77 

13,633.91 

11,077.49 

6,196.78 

9,951.77 

4,984.36 

9,591.12 

15,423.00 

4,233.83 

3,878.55 

9,417.08 

28,405.10 

24,628.59 

3,106.03 

4,453.10 

7,037.17 

44,580.87 

16,501.29 

33,290.79 

4,905.51 

22,704.86 

12,581.60 

11.244.17 

11,927.71 

11.780.88 

8,223.55 

5.182.55 

55,823.22 

6,258.24 

2,817.74 

9,227.53 

13,713.86 

154.165.13 

9.917.76 

67,314.73 

12,141.54 

4,201.07 

2,646.42 

13.839.73 

18,525.54 

6,638.60 

29,740.27 

23.321.11 

3,590.63 

3,737.44 

16,028.03 

112,798.79 

177.624.33 

8,068.57 

185,845.70 

11,823.77 

11,956.99 

5,276.63 

3,143.80 

15,874.96 

6,478.29 

151,091.28 

33.003.14 

5,718.19 

4,449.54 

16,516.27 

17,195.60 

10.350.03 

25,457.58 

26,386.72 

26,587.79 

5,046.21 

31,078.42 

11.966.46 

103.580.66 

5,098.42 

2.045.44 

26,270.76 

4,360.52 

9,907.54 

0.13% 

1.02% 

0.15% 

0.24% 

1.98% 

NJA 

0.09% 

0.05% 

0.08% 

0.04% 

0.07% 

0.12% 

0.03% 

0.03% 

0.07% 

0.22% 

0.19% 

0.02% 

0.03% 

NIA 

0.35% 

0.13% 

0.26% 

0.04% 

0.18% 

0.10% 

0.09% 

0.09% 

0.09% 

0.06% 

0.04% 

0.43% 

0.05% 

0.02% 

0.07% 

0.11% 

1.20% 

0.08% 

0.52% 

0.09% 

0.03% 

NJA 

0.11% 

0.14% 

0.05% 

0.23% 

0.18% 

0.03% 

0.03% 

0.12% 

0.88% 

1.38% 

0.06% 

1.44% 

0.09% 

0.09% 

0.04% 

0.02% 

0.12% 

0.05% 

1.17% 

0.26% 

0.04% 

0.03% 

0.13% 

0.13% 

0.08% 

0.20% 

0.20% 

0.21% 

0.04% 

0.24% 

NIA 

0.80% 

0.04% 

0.02% 

0.20% 

0.03% 

0.08% 

2.45% 

3.86% 

2.47% 

1.29% 

2.75% 

2.20% 

3.20% 

0.00% 

2.29% 

3.48% 

0.00% 

1.00% 

0.00% 

1.79% 

1.54% 

3.55% 

3.04% 

0.00% 

0.00% 

3.82% 

1.57% 

3.19% 

0.59% 

0.59% 

2.69% 

0.00% 

2.63% 

3.44% 

3.93% 

0.00% 

2.07% 

0.80% 

4.72% 

0.00% 

2.88% 

2.31% 

0.74% 

0.00% 

2.53% 

3.86% 

5.34% 

11.32% 

3.58% 

4.20% 

4.09% 

0.00% 

0.08% 

0.000/0 

1.25% 

4.48% 

2.93% 

3.65% 

2.74% 

3.40% 

1.69% 

2.12% 

0.00% 

1.02% 

3.38% 

1.38% 

3.63% 

2.49% 

4.08% 

5.56% 

2.15% 

4.85% 

0.26% 

3.01% 

3.00% 

0.94% 

0.00% 

2.11% 

0.10% 

1.49% 

0.26% 

3.14% 

5.02% 

0.00% 

0.57% 

11.00% 

4.50% 

-0.42% 

11.00% 

9.96% 

NJA 

15.58% 

11.28% 

10.00% 

10.00% 

10.05% 

7.00% 

8.00% 

9.00% 

13.00% 

5.13% 

-3.00% 

10.44% 

11.50% 

NIA 

13.83% 

3.75% 

18.00% 

-6.84% 

14.67% 

14.25% 

8.74% 

6.79% 

8.50% 

14.33% 

9.01% 

16.43% 

8.50% 

8.67% 

16.00% 

8.00% 

13.31% 

18.25% 

-1.92% 

10.33% 

7.67% 

NJA 

10.75% 

2.85% 

5.00% 

20.96% 

12.63% 

14.76% 

12.33% 

0.30% 

8.81% 

3.48% 

11.50% 

7.52% 

7.75% 

6.00% 

5.00% 

10.96% 

3.08% 

12.05% 

10.33% 

3.86% 

5.00% 

5.33% 

7.00% 

..a.00% 

11.63% 

11.00% 

5.25% 

10.00% 

16.83% 

11.66% 

NJA 

15.50% 

15.00% 

8.93% 

7.68% 

18.33% 

8.00% 

13.58% 

8.44% 

2.04% 

12.36% 

12.84% 

NJA 

19.03% 

11.28% 

12.41% 

13.66% 

10.05% 

8.04% 

8.00% 

10.87% 

14.64% 

8.77% 

0.00% 

10.44% 

11.50% 

NJA 

15.51% 

7.00% 

18.64% 

-6.27% 

17.55% 

14.25% 

11.49% 

10.34% 

12.60% 

14.33% 

11.18% 

17.30% 

13.42% 

8.67% 

19.12% 

10.41% 

14.10% 

18.25% 

0.58% 

14.40% 

13.21% 

NJA 

14.52% 

7.11% 

9.19% 

20.96% 

12.71% 

14.76% 

13.66% 

4.79% 

11.88% 

7.20% 

14.39% 

11.04% 

9.51% 

8.18% 

5.00% 

12.03% 

6.51% 

13.52% 

14.15% 

6.40% 

9.19% 

11.04% 

9.23% 

-3.34% 

11.90% 

14.17% 

8.33% 

10.99% 

16.83% 

13.89% 

NIA 

17.11% 

15.28% 

12.21% 

12.88% 

18.33% 

8.59% 

0.0181% 

0.0864% 

0.0031% 

0.0294% 

0.2539% 

NJA 

0.0164% 

0.0054% 

0.0096% 

0.0053% 

0.0075% 

0.0096% 

0.0026% 

0.0033% 

0.0107% 

0.0194% 

0.0000% 

0.0025% 

0.0040% 

NJA 

0.0537% 

0.0090% 

0.0482% 

-0.0024% 

0.0309% 

0.0139% 

0.0100% 

0.0096% 

0.0115% 

0.0092% 

0.0045% 

0.0750% 

0.0065% 

0.0019% 

0.0137% 

0.0111% 

0.1688% 

0.0141% 

0.0030% 

0.Q136% 

0.0043% 

NJA 

0.0156% 

0.0102% 

0.0047% 

0.0484% 

0.0230% 

0.0041% 

0.0040% 

0.0060% 

0.1040% 

0.0993% 

0.0090% 

0.1594% 

0.0087% 

0.0076% 

0.0020% 

0.0029% 

0.0080% 

0.0068% 

0.1660% 

0.0164% 

0.0041% 

0.0038% 

0.0118% 

-0.0045% 

0.0096% 

0.0280% 

0.0171% 

0.0227% 

0.0066% 

0.0335% 

NJA 

0.1376% 

0.0061% 

0.0019% 

0.0263% 

0.0062% 

0.0066%



Company 

Ticker 

(4J 

Market 


[51 


[61 

Estimated 


m 

Long.Term Growth 

Est. 

[8) 

DCF Result 

[9] 

Weighted 

DCF Result 

ROBERT HALF INTL INC 

RED HAT INC 

RALPH LAUREN CORP 

ROCKWELL AUTOMATJON INC 

ROPER INDUSTRIES INC 

ROSS STORES INC 

RANGE RESOURCES CORP 

RR DONN ELLEY & SONS CO 

REPUBLIC SERVICES INC 

RAYTHEON COMPANY 

SPRINT NEXTEL CORP 

SAIC INC 

STARBUCKS CORP 

SCANACORP 

SCHWAB (CHARLES) CORP 

SPECTRA ENERGY CORP 

SEALED AIR CORP 

SEARS HOLDINGS CORP 

SHERWIN·WILLIAMS COfTHE 

SIGMA·ALDRICH 

JM SMUCKER COfTHE 

SCHLUMBERGER LTD 

SLM CORP 

SNAP-ON INC 

SANDISK CORP 

SCRIPPS NETWORKS INTER·CL A 

SOUTHERN COfTHE 

SIMON PROPERTY GROUP INC 

STAPLES INC 

STERICYCLE INC 

SEMPRA ENERGY 

SUNTRUST BANKS INC 

ST JUDE MEDICAL INC 

STATE STREET CORP 

SEAGATE TECHNOLOGY 

CONSTELLATION BRANDS INC·A 

SUNOCOINC 

STANLEY BLACK & DECKER INC 

SOUTHWESTERN ENERGY CO 

SAFEWAYINC 

STRYKER CORP 

SYMANTEC CORP 

SYSCO CORP 

AT&T INC 

MOLSON COORS BREWING CO ·B 

TERADATA CORP 

TECO ENERGY INC 

INTEGRYS ENERGY GROUP INC 

TE CONNECTIVITY LTD 

TERADYNEINC 

TARGET CORP 

TENET HEAL THCARE CORP 

TITANIUM METALS CORP 

TIFFANY & CO 

T JX COMPANIES INC 

TORCH MARK CORP 

THERMO FISHER SCIENTIFIC INC 

TRIPADVISOR INC 

T ROWE PRICE GROUP INC 

TRAVELERS COS INCfTHE 

TYSON FOODS INC-CL A 

TESORO CORP 

TOTAL SYSTEM SERVICES INC 

TIME WARNER CABLE 

TIME WARNER INC 

TEXAS INSTRUMENTS INC 

TEXTRON INC 

lyCO INTERNATIONAL LTD 

UNITEDHEALTH GROUP INC 

UNUM GROUP 

UNION PACIFIC CORP 

UNITED PARCEL SERVICE·CL 8 

URBAN OUTFITTERS INC 

US BANCORP 

UNITED TECHNOLOGIES CORP 

VISA INC-CLASS A SHARES 

VARIAN MEDICAL SYSTEMS INC 

VF CORP 

VJACOM INC·CLASS B 

RHI 

RHT 

RL 

ROK 

Rap 

ROST 

RRC 

RRD 

RSG 

RTN 

S 

SAl 

SBUX 

SCG 

SCHW 

SE 

SEE 

SHLD 

SHW 

SIAL 

SJM 

SLB 

SLM 

SNA 

SNDK 

SNI 

so 

SPG 

SPLS 

SRCL 

SRE 

STI 

STJ 

sn 

STX 

STZ 

SUN 

SWK 

SWN 

SWY 

SYK 

SYMC 

SYY 

T 

TAP 

TOC 

TE 

TEG 

TEL 

TER 

TGT 

THC 

TIE 

TIF 

TJX 

TMK 

TMO 

TRIP 

TROW 

TRV 

TSN 

TSO 

TSS 

TWC 

TWX 

TXN 

TXT 

TYC 

UNH 

UNM 

UNP 

UPS 

URBN 

USB 

UTX 

V 

VAR 

VFC 

VIAB 

3,682.63 

11,008.29 

14,312.97 

10,099.16 

10,024.43 

15,670.91 

10,628.17 

1,990.51 

10,041.46 

18.742.47 

14,401.82 

4,136.16 

37,627.60 

6,289.24 

16,983.84 

18,587.22 

2,741.54 

5,657.01 

14,690.79 

8,512.41 

9,502.03 

94,776.35 

7,411.86 

4,072.39 

9,876.76 

8.990.22 

39,777.02 

48,751.55 

7,410.59 

7,837.99 

15,983.59 

13,790.58 

12,062.73 

19,988.28 

12,871.49 

5,882.97 

4,999.97 

11,086.60 

10,910.14 

3,788.89 

20,475.51 

12,568.75 

17,768.26 

212,356.89 

8,060.90 

13,053.01 

3,788.04 

4,254.17 

14,973.33 

2,922.69 

41,807.88 

2,212.90 

2,098.99 

7,660.31 

33,978.40 

4,913.99 

20,949.79 

4,931.81 

15.740.17 

24,909.55 

5.751.22 

5,495.36 

4.385.78 

27,107.21 

39,238.00 

32,744.67 

7,419.66 

25,789.80 

56.344.43 

5,460.00 

57,903.28 

70,924.76 

5,517.23 

62,772.30 

71,438.53 

86,063.70 

6,607.49 

16,623.25 

25,431.26 

0.03% 

0.09% 

0.11% 

0.08% 

0.08% 

0.12% 

0.08% 

0.02% 

0.08% 

0.15% 

0.11% 

0.03% 

0.29% 

0.05% 

0.13% 

0.14% 

0.02% 

N/A 

0.11% 

0.07% 

0.07% 

0.74% 

N/A 

0.03% 

0.08% 

0.07% 

0.31% 

0.38% 

0.06% 

0.06% 

0.12% 

0.11% 

0.09% 

0.16% 

0.10% 

0.05% 

0.04% 

0.09% 

N/A 

0.03% 

0.16% 

0.10% 

0.14% 

1.65% 

0.06% 

0.10% 

0.03% 

0.03% 

0.12% 

0.02% 

0.32% 

0.02% 

0.02% 

0.06% 

0.26% 

0.04% 

0.16% 

0.04% 

0.12% 

0.19% 

0.04% 

0.04% 

0.03% 

0.21% 

0.30% 

0.25% 

0.06% 

0.20% 

0.44% 

0.04% 

0.45% 

0.55% 

0.04% 

0.49% 

0.55% 

0.67% 

0.05% 

0.13% 

0.20% 

2.29% 

0.00% 

0.83% 

2.42% 

0.51% 

0.80% 

0.25% 

9.42% 

3.27% 

3.48% 

0.00% 

3.51% 

1.40% 

4.13% 

1.78% 

4.00% 

3.61% 

0.00% 

1.08% 

1.13% 

2.37% 

1.51% 

3.17% 

0.00% 

0.00% 

0.78% 

4.29% 

2.60% 

3.96% 

0.00% 

3.36% 

0.80% 

2.27% 

2.22% 

3.72% 

0.00% 

1.65% 

2.72% 

0.00% 

4.10% 

1.29% 

0.00% 

3.72% 

4.81% 

3.06% 

0.00% 

5.03% 

5.01% 

2.23% 

0.00% 

1.98% 

0.00% 

2.21% 

2.06% 

0.98% 

1.11% 

0.79% 

0.00% 

2.19% 

2.81% 

1.04% 

0.65% 

1.67% 

2.53% 

2.50% 

2.36% 

0.30% 

1.85% 

1.38% 

2.37% 

1.99% 

3.08% 

0.00% 

2.34% 

2.55% 

0.68% 

0.00% 

1.93% 

2.11% 

12.67% 

17.00% 

12.33% 

15.00% 

14.00% 

13.29% 

10.00% 

5.00% 

6.60% 

7.75% 

5.00% 

3.87% 

18.08% 

4.34% 

16.00% 

5.00% 

7.00% 

N/A 

18.97% 

6.78% 

7.33% 

18.00% 

N/A 

10.00% 

13.43% 

15.64% 

5.50% 

5.23% 

8.23% 

16.00% 

7.00% 

7.67% 

10.00% 

7.40% 

7.77% 

10.82% 

-2.09% 

13.00% 

N/A 

8.75% 

10.33% 

7.67% 

10.00% 

6.71% 

3.34% 

14.40% 

3.67% 

4.30% 

15.00% 

11.40% 

12.58% 

11,20% 

15.00% 

13.73% 

11.89% 

9.00% 

10.84% 

16.80% 

13.33% 

7.75% 

7.33% 

29.10% 

9.71% 

11.61% 

13.35% 

9.50% 

31.29% 

13.00% 

11.00% 

9.50% 

13.00% 

9.10% 

18.31% 

14.14% 

1D.88% 

18.71% 

12.67% 

13.00% 

14.75% 

15.10% 

17.00% 

13.21% 

17.60% 

14.55% 

14.13% 

10.26% 

14.66% 

9.98% 

11.37% 

5.00% 

7.45% 

19.60% 

8.56% 

17.92% 

9.10% 

10.74% 

N/A 

20.15% 

7.95% 

9.79% 

19.65% 

N/A 

10.00% 

13.43% 

16.48% 

9.91% 

7.90% 

12.36% 

16.00% 

10.48% 

8.50% 

12.39% 

9.70% 

11.64% 

10.82% 

-0.46% 

15.90% 

N/A 

13.03% 

11.69% 

7.67% 

13.91% 

11.68% 

6.45% 

14.40% 

8.79% 

9.41% 

17.39% 

11.40% 

14.68% 

11.20% 

17.38% 

15.93% 

12.93% 

10.16% 

11.66% 

16.80% 

15.67% 

10.67% 

8.42% 

29.84% 

11.46% 

14.28% 

16.02% 

11.97% 

31.64% 

14.97% 

12.46% 

11.98% 

15.12% 

12.32% 

18.31% 

16.65% 

13.57% 

19.46% 

12.67% 

15.06% 

17.01% 

0.0043% 

0.0145% 

0.0147% 

0.0138% 

0.0113% 

0.0172% 

0.0085% 

0.0023% 

0.0078% 

0.0165% 

0.0056% 

0.0024% 

0.0573% 

0.0042% 

0.0236% 

0.0131% 

0.0023% 

N/A 

0.0230% 

0.0053% 

0.0072% 

0.1446% 

N/A 

0.0032% 

0.0103% 

0.0115% 

0.0306% 

0.0299% 

0.0071% 

0.0097% 

0.0130% 

0.0091% 

0.0116% 

0.0151% 

0.0116% 

0.0049% 

-0.0002% 

0.0137% 

N/A 

0.0038% 

0.0186% 

0.0075% 

0.0192% 

0.1925% 

0.0040% 

0.0146% 

0.0026% 

0.0031% 

0.0202% 

0.0026% 

0.0477% 

0.0019% 

0.0028% 

0.0095% 

0.0341% 

0.0039% 

0.0190% 

0.0064% 

0.0192% 

0.0206% 

0.0038% 

0.0127% 

0.0039% 

0.0301% 

0.0488% 

0.0304% 

0.0182% 

0.0300% 

0.0545% 

0.0051% 

0.0680% 

0.0679% 

0.0078% 

0.0811% 

0.0753% 

0.1300% 

0.0065% 

0.0194% 

0.0336%



(4] [5] [6] m [8] [9] 

Markel Estimated Long-Term Growth Weighted 

Comeanl Ticker Caeitalization Welsh! in Index Dividend Yield Est. DCF Result DCF Result 

VALERO ENERGY CORP VLO 17,110.82 0.13% 2.04% 6.13% 8.23% 0.0109% 

VULCAN MATERIALS CO VMe 4,877.98 0.04% 0.11% 9.67% 9.78% 0.0037% 

VORNADO REALlY TRUST VNO 15,116.03 0.12% 3.43% -3.44% -0.07% -0.0001% 

VERISIGN INC VRSN 7,522.57 0.06% 0.00% 14.17% 14.17% 0.0083% 

VENTAS INC VTR 19,592.23 0.15% 3.74% 5.21% 9.05% 0.0138% 

VERIZON COMMUNICATIONS INC VZ 124,501.30 0.97% 4.62% 6.35% 11.12% 0.1075% 

WALGREEN CO WAG 33,624.32 0.26% 2.59% 13.20% 15.96% 0.0417% 

WATERS CORP WAT 7,002.85 0.05% 0.00% 10.02% 10.02% 0.0054% 

WESTERN DIGITAL CORP WDe 10,464.13 0.08% 0.00% 2.72% 2.72% 0.0022% 

WISCONSIN ENERGY CORP WEe 8,844.86 0.07% 3.13% 4.75% 7.95% 0.0055% 

WELLS FARGO & CO WFe 178,537.88 1.39% 2.51% 25.38% 28.21% 0.3911% 

WHOLE FOODS MARKET INC WFM 17.844.41 0.14% 0.58% 19.08% 19.71% 0.0273% 

WHIRLPOOL CORP WHR 5,896.56 NfA 2.63% NfA NfA NfA 

WINDSTREAM CORP WIN 5,862.31 0.05% 10.03% -3.21% 6.66% 0.0030% 

WELLPOINT INC WLP 19.312.83 0.15% 1.91% 10.80% 12.82% 0.0192% 

WASTE MANAGEMENT INC WM 16,113.27 0.13% 4.09% 4.00% 8.17% 0.0102% 

WILLIAMS COS INC WMB 20,278.75 0.16% 3.81% 12.00% 16.04% 0.0253% 

WAL-MART STORES INC WMT 248,724.09 1.93% 2.19% 9.78% 12.08% 0.2333% 

WATSON PHARMACEUTICALS INC WPI 10,602.23 0.08% 0.00% 11.40% 11.40% 0.0094% 

WASHINGTON POST-CLASS B WPO 2,645.43 NfA 0.00% NfA NfA NfA 

WPX ENERGY INC WPX 3,154.73 NfA 0.00% NfA NfA NfA 

WESTERN UNJON CO WU 10,638.25 0.08% 2.27% 11.10% 13.49% 0.0111% 

WEYERHAEUSER CO WY 13,471.08 0.10% 2.39% 5.00% 7.45% 0.0078% 

WYNDHAM WORLDWIDE CORP WYN 7,315.56 0.06% 1.79% 20.00% 21.97% 0.0125% 

WYNN RESORTS LTD WYNN 10,124.59 0.08% 1.97% 9.00% 11.05% 0.0087% 

UNITED STATES STEEL CORP X 2,709.55 0.02% 1.06% 6.50% 7.60% 0.0016% 

XCEL ENERGY INC XEL 13,690.51 0.11% 3.80% 4.65% 8.54% 0.0091% 

XL GROUP PLC XL 7,104.60 0.06% 1.93% 8.33% 10.35% 0.0057% 

XllINX INC XLNX 8,858.72 0.07% 2.60% 14.00% 16.78% 0.0115% 

EXXON MOBIL CORP XOM 402,140.66 3.12% 2.49% 3.44% 5.97% 0.1865% 

DENTSPL Y INTERNATIONAL INC XRAY 5,152.47 0.04% 0.58% 11.50% 12.11% 0.0048% 

XEROX CORP XRX 9,490.29 NfA 2.34% NfA NfA NfA 

XYLEM INC XVL 4,454.25 0.03% 1.69% 15.00% 16.81% 0.0058% 

YAHOO! INC YHOO 17,638.96 0.14% 0.00% 11.14% 11.14% 0.0153% 

YUMI BRANDS INC YUM 28,709.44 0.22% 1.89% 11.50% 13.49% 0.0301% 

ZIONS BANCORPORATJON ZION 3,559.58 0.03% 0.21% 7.75% 7.97% 0.0022% 

ZIMMER HOLDINGS INC ZMH 11,005.77 0.09% 0.44% 10.25% 10.71% 0.0092% 

Total Market Capitalization: 12,878,362.57 13.35% 

Notes: 

[1] Equals sum <strong>of</strong> Col. [9] 

[2] Source: Bloomberg Pr<strong>of</strong>essional 

[3] Equals [1]- [2] 


[5] Equals weight In S&P 500 based on market capitalization 

[6] Source: Bloomberg Pr<strong>of</strong>essIonal 

(7) Source: Bloomberg Pr<strong>of</strong>essional 

[8] Equals {[6] x (1 + (0.5 x (7)))) + [7] 

[9] Equals Col. [5] x Col. [81



Ex-Ante Market Risk Premium 

Market DCF Method Based - CapitallQ 

[lJ 

S&P500 

Est. Required 

Market Return 

13.13% 

[2J 

Current 30-Year 

Treasury (30-day 

average) 

2.71% 

[3] 

Implied Market 

Risk Premium 

10.42% 

Company mcker) 

[4) 

Market 


[5) 


[6) 

Estimated 


m 

Long-Term 

Growth Est. 

[8) 

DCF Result 

[91 

Weighted 

DCF Result 

3M Co. (NYSE:MMM) 

Abbott laboratories (NYSE:ABT) 

Abercrombie & Fitch Co. (NYSE:ANF) 

Accenture pic (NYSE:ACN) 

ACE limited (NYSE:ACE) 

Adobe Systems Inc. (NasdaqGS:ADBE) 

Advanced Micro Devices, Inc. (NYSE:AMD) 

Aetna Inc. (NYSE:AET) 

AFLAC Inc. (NYSE:AFl) 

Agilent Technologies Inc. (NYSE:A) 

AGL Resources Inc. (NYSE:GAS) 

Air Products & Chemicals Inc. (NYSE:APD) 

Airgas. Inc. (NYSE:ARG) 

Akamai Technologies, Inc. (NasdaqGS:AKAM) 

Alcoa, Inc. (NYSE:AA) 

Alexion Pharmaceuticals. Inc. (NasdaqGS:ALXN) 

Allegheny Technologies Inc. (NYSE:ATI) 

AIIergan Inc. (NYSE:AGN) 

Alpha Natural Resources, Inc. (NYSE:ANR) 

Altera Corp. (NasdaqGS:AL TR) 

Allria Group Inc. (NYSE:MO) 

Amazon.com Inc. (NasdaqGS:AMZN) 

Ameren Corporation (NYSE:AEE) 

American Electric Power Co., Inc. (NYSE:AEP) 

American Express Company (NYSE:AXP) 

American International Group, Inc. (NYSE:AIG) 

American Tower Corporation (NYSE:AMT) 

Ameriprise Financial Inc. (NYSE:AMP) 

AmerisourceBergen Corporation (NYSE:ABC) 

Amgen Inc. (NasdaqGS:AMGN) 

Amphenol Corporation (NYSE:APH) 

Anadarko Petroleum Corporation (NYSE:APC) 

Analog Devices, Inc. (NasdaqGS:ADI) 

Aon Corporation (NYSE:AON) 

Apache Corp. (NYSE:APA) 

Apartment Investment & Management Co. (NYSE:AIV) 

Apollo Group Inc. (NasdaqGS:APOL) 

Apple Inc. (NasdaqGS:AAPl) 

Applied Materials Inc. (NasdaqGS:AMAT) 

Archer Daniels Midland Company (NYSE:ADM) 

Assurant Inc. (NYSE:AIZ) 

AT&T, Inc. (NYSE:T) 

Autodesk, Inc. (NasdaqGS:ADSK) 

Automatic Data Processing, Inc. (NasdaqGS:ADP) 

AutoNation Inc. (NYSE:AN) 

AutoZone Inc. (NYSE:AZO) 

Avalonbay Communities Inc. (NYSE:AVB) 

Avery Dennison Corporation (NYSE:AVY) 

Avon Products Inc. (NYSE:AVP) 

Baker Hughes Incorporated (NYSE:BHI) 

Ball Corporation (NYSE:BLLj 

Bank <strong>of</strong> America Corporation (NYSE:BAC) 

Baxter International Inc. (NYSE:BAX) 

BB&T Corporation (NYSE:BBT) 

Beam, Inc. (NYSE:BEAM) 

Becton, Dickinson and Company (NYSE:BDX) 

Bed Bath & Beyond Inc. (NasdaqGS:BBBY) 

Bemis Company, Inc. (NYSE:BMS) 

BerkshIre Hathaway Inc. (NYSE:BRK.A) 

Best Buy Co. Inc. (NYSE:BBY) 

Big Lots Inc. (NYSE:BIG) 

Biogen Idec Inc. (NasdaqGS:BIIB) 

BlackRock, Inc. (NYSE:BlK) 

BMC S<strong>of</strong>tware Inc. (NasdaqGS:BMC) 

BorgWarner Inc. (NYSE:BWA) 

Boston Properties Inc. (NYSE:BXP) 

Boston Scientific Corporation (NYSE:BSX) 

Bristol-Myers Squibb Company (NYSE:BMY) 

63.380.10 

102,728.60 

2,885.70 

38,760.90 

25,292.90 

15,458.60 

2,575.50 

12,752.50 

21,774.60 

12,874.90 

4.745.30 

17,252.00 

6,336.70 

6,679.10 

8.983.20 

20,927.60 

3.080.20 

26,564.90 

1.212.50 

11,854.60 

70,038.70 

112,057.90 

7,939.00 

20,918.70 

66,443.20 

56,336.90 

27,969.30 

11,507.90 

9,758.50 

64,998.90 

9,878.20 

34,542.80 

11,764.90 

16,694.20 

33,006.80 

3,884.60 

3,121.20 

632,720.90 

14,528.20 

17,703.60 

2,859.00 

212,356.90 

7,120.60 

28,149.70 

4.967.90 

13,411.90 

13,813.60 

3,003.30 

6,563.10 

19,630.70 

6,464.70 

86,215.60 

32,231.90 

22,176.30 

9,365.90 

15.281.90 

15,270.30 

3,115.00 

208,695.30 

6,125.10 

1,947.40 

34,759.60 

30,591.40 

6.697.50 

7,700.70 

17,000.00 

7.676.70 

55,642.80 

0.48% 

0.77% 

0.02% 

0.29% 

0.19% 

0.12% 

0.02% 

0.10% 

0.16% 

0.10% 

0.04% 

0.13% 

0.05% 

0.05% 

0.07% 

0.16% 

0.02% 

0.20% 

0.01% 

0.09% 

0.53% 

0.84% 

0.06% 

0.16% 

0.50% 

0.42% 

0.21% 

0.09% 

0.07% 

0.49% 

0.07% 

0.26% 

0.09% 

0.13% 

0.25% 

0.03% 

0.02% 

4.76% 

0.11% 

0.13% 

0.02% 

1.60% 

0.05% 

0.21% 

0.04% 

0.10% 

0.10% 

0.02% 

0.05% 

0.15% 

0.05% 

0.65% 

0.24% 

0.17% 

0.07% 

0.12% 

0.11% 

0.02% 

1.57% 

0.05% 

0.01% 

0.26% 

0.23% 

0.05% 

0.06% 

0.13% 

0.06% 

0.42% 

2.55% 

3.11% 

1.94% 

2.19% 

2.66% 

0.00% 

0.00% 

1.82% 

2.86% 

1.08% 

4.64% 

3.10% 

1.93% 

0.00% 

1.40% 

0.00% 

2.43% 

0.23% 

0.00% 

1.07% 

4.83% 

0.00% 

4.89% 

4.37% 

1.37% 

0.00% 

1.25% 

2.55% 

1.35% 

1.72% 

0.69% 

0.52% 

3.02% 

1.21% 

0.79% 

3.02% 

0.00% 

1.59% 

3.08% 

2.62% 

2.38% 

4.80% 

0.00% 

2.72% 

0.00% 

0.00% 

2.74% 

3.46% 

5.95% 

1.32% 

0.95% 

0.50% 

3.07% 

2.54% 

1.41% 

2.37% 

0.00% 

3.30% 

0.00% 

3.61% 

0.00% 

0.00% 

3.40% 

0.00% 

0.00% 

1.96% 

0.00% 

4.12% 

10.90% 

8.73% 

18.70% 

11.60% 

7.54% 

10.00% 

10.60% 

11.10% 

9.92% 

12.10% 

4.37% 

10.60% 

14.00% 

14.20% 

7.10% 

31.90% 

15.00% 

13.00% 

5.00% 

14.70% 

8.03% 

37.50% 

-4.05% 

3.11% 

11.80% 

18.50% 

18.70% 

13.40% 

11.80% 

10.40% 

14.30% 

3.03% 

13.00% 

9.18% 

3.79% 

7.72% 

12.80% 

23.40% 

8.67% 

10.00% 

8.50% 

6.80% 

15.30% 

9.74% 

16.50% 

15.80% 

11.60% 

9.25% 

-5.10% 

20.90% 

11.40% 

7.50% 

8.69% 

10.50% 

12.60% 

8.53% 

14.20% 

7.15% 

8.60% 

7.47% 

11.20% 

15.20% 

12.40% 

9.53% 

19.70% 

6.74% 

7.07% 

4.63% 

13.59% 

11.98% 

20.82% 

13.92% 

10.30% 

10.00% 

10.60% 

13.02% 

12.92% 

13.25% 

9.11% 

13.86% 

16.07% 

14.20% 

8.55% 

31.90% 

17.61% 

13.25% 

5.00% 

15.85% 

13.05% 

37.50% 

0.74% 

7.55% 

13.25% 

18.50% 

20.07% 

16.12% 

13.23% 

12.21% 

15.04% 

3.56% 

16.22% 

10.45% 

4.60% 

10.86% 

12.80% 

25.18% 

11.88% 

12.75% 

10.98% 

11.76% 

15.30% 

12.59% 

16.50% 

15.80% 

14.50% 

12.87% 

0.70% 

22.36% 

12.40% 

8.02% 

11.89% 

13.17% 

14.10% 

11.00% 

14.20% 

10.57% 

8.60% 

11.21% 

11.20% 

15.20% 

16.01% 

9.53% 

19.70% 

8.77% 

7.07% 

8.85% 

0.06% 

0.09% 

0.00% 

0.04% 

0.02% 

0.01% 

0.00% 

0.01% 

0.02% 

0.01% 

0.00% 

0.02% 

0.01% 

0.01% 

0.01% 

0.05% 

0.00% 

0.03% 

0.00% 

0.01% 

0.07% 

0.32% 

0.00% 

0.01% 

0.07% 

0.08% 

0.04% 

0.01% 

0.01% 

0.06% 

0.01% 

0.01% 

0.01% 

0.01% 

0.01% 

0.00% 

0.00% 

1.20% 

0.01% 

0.02% 

0.00% 

0.19% 

0.01% 

0.03% 

0.01% 

0.02% 

0.02% 

0.00% 

0.00% 

0.03% 

0.01% 

0.05% 

0.03% 

0.02% 

0.01% 

0.01% 

0.02% 

0.00% 

0.14% 

0.01% 

0.00% 

0.04% 

0.04% 

0.00% 

0.01% 

0.01% 

0.00% 

0.04%



Company (TIcker) 

[4] 

Market 


[5] 


f61 

Estimated 


[?] 

long-Term 

Growth Est. 

(8) 

DCF Result 

(9) 

Weighted 

DCF Result 

Broadcom Corp. (NasdaqGS:BRCM) 

Brown-Forman Corporation (NYSE:BF.B) 

CA Technologies (NasdaqGS:CA) 

Cablevision Systems Corporation (NYSE:CVCj 

Cabot Oil & Gas Corporation (NYSE:COG) 

Cameron IntemaUonal Corporation (NYSE:CAM) 

Campbell Soup Co. (NYSE:CPB) 

Capital One Financial Corp. (NYSE:COF) 

Cardinal Health, Inc. (NYSE:CAH) 

Care Fusion Corporation (NYSE:CFNj 

CarMax Inc. (NYSE:KMX) 

Carnival Corporation (NYSE:CCL) 

Caterpillar Inc. (NYSE:CAT) 

CBRE Group, Inc (NYSE:CBG) 

CBS Corporation (NYSE:CBS) 

Celgene Corporation (NasdaqGS:CELG) 

CenterPoint Energy, Inc. (NYSE:CNP) 

CenturyLink, Inc. (NYSE:CTL) 

Cerner Corporation (NasdaqGS:CERN) 

CF Industries Holdings, Inc. (NYSE:CF) 

CH Robinson Worldwide Inc. (NasdaqGS:CHRW) 

Chesapeake Energy Corporation (NYSE:CHK) 

Chevron Corporation (NYSE:CVX) 

ChlpoUe Mexican GriU, Inc. (NYSE:CMG) 

Cigna Corp. (NYSE:CI) 

Cincinnati Financial Corp. (NasdaqGS:CINF) 

Cintas Corporation (NasdaqGS:CTAS) 

Cisco Systems, Inc. (NasdaqGS:CSCO) 

Cltlgroup, Inc. (NYSE:C) 

Citrix Systems, Inc. (NasdaqGS:CTXS) 

Cliffs Natural Resources Inc. (NYSE:ClF) 

CME Group Inc. (NasdaqGS:CME) 

CMS Energy Corp. (NYSE:CMS) 

Coach, Inc. (NYSE:COH) 

Coca-Cola Enterprises Inc. (NYSE:CCE) 

Cognizant Technology Solutions Corporation (NasdaqGS:CTSH) 

Colgate-Palmolive Co. (NYSE:CL) 

Com cast Corporation (NasdaqGS:CMCS.A) 

Comerica Incorporated (NYSE:CMA) 

Computer Sciences Corporation (NYSE:CSC) 

ConAgra Foods, Inc. (NYSE:CAG) 

ConocoPhillips (NYSE:COP) 

CONSOl Energy Inc. (NYSE:CNX) 

Consolidated Edison Inc. (NYSE:ED) 

Constellation Brands Inc. (NYSE:STZ) 

Cooper Industries pic (NYSE:CBE) 

Coming Inc. (NYSE:GlW) 

Costce Wholesale Corporation (NasdaqGS:COST) 

Coventry Health Care Inc. (NYSE:CVH) 

Covidien pic (NYSE:COV) 

CR Bard Inc. (NYSE:BCR) 

Crown Castle International Corp. (NYSE:CCI) 

CSX Corp. (NYSE:CSX) 

Cummins Inc. (NYSE:CMI) 

CVS Caremark Corporation (NYSE:CVS) 

Danaher Corp. (NYSE;DHR) 

Darden Restaurants, Inc. (NYSE:DRI) 

DaVila Inc. (NYSE:DVA) 

Dean Foods Company {NYSE:DF} 

Deere & Company (NYSE:DE) 

Dell Inc. (NasdaqGS:DEll) 

Denbury Resources Inc. (NYSE:DNR) 

DENTSPlY International Inc. (NasdaqGS:XRAY) 

Devon Energy Corporation (NYSE:DVN) 

DeVry, Inc. (NYSE:DV) 

Diamond Offshore Drilling, Inc. (NYSE:DO) 

DlRECTV (NasdaqGS:DTV) 

Discover Financial Services (NYSE:DFS) 

Discovery CommunIcations, Inc. (NasdaqGS:DlSCA) 

Dollar Tree, Inc. (NasdaqGS:Ol TR) 

Dominion Resources, Inc. (NYSE:D) 

Dover Corporation (NYSE:DOV) 

DR Horton Inc. (NYSE:DHI) 

Dr Pepper Snapple Group, Inc. (NYSE:DPS) 

DTE Energy Co. (NYSE:DTE) 

Duke Energy Corporation (NYSE:DUK) 

Dun & Bradstreet Corp. (NYSE:DNB) 

E"TRADE Financial Corporation (NasdaqGS:ETFC) 

E. I. du Pont de Nemours and Company (NYSE:DD) 

19,755.10 

13,637.30 

12,256.00 

3,945.40 

8,714.50 

13,501.00 

11,097.90 

25,713.40 

13,537.60 

5,865.20 

6,998.90 

27,086.10 

53,999.20 

5,647.10 

23,015.70 

31,092.70 

8,817.00 

26,605.80 

12,581.60 

12,837.20 

9,144.30 

12,324.30 

218,229.20 

9,061.10 

13,120.50 

6,302.60 

5,095.40 

101,753.90 

87,094.70 

14,583.30 

4,799.20 

18,391.40 

6,130.80 

16,389.60 

8,782.00 

19,175.30 

50,840.50 

89,296.20 

5,944.20 

4,964.40 

10,415.70 

68.269.80 

6,562.50 

17,831.30 

5,883.40 

11,629.20 

17,734.20 

42,434.70 

5.545.40 

27,010.30 

8.221.10 

18,373.40 

22,599.00 

18,144.20 

58,433.80 

36,777.30 

6,637.10 

9.236.70 

3,094.20 

29,030.40 

18,317.40 

5,945.90 

5,152.50 

23,238.50 

1.231.20 

9,237.20 

33,043.90 

19,952.80 

20,415.80 

11,099.40 

30,106.70 

10,569.90 

6,223.10 

9,460.20 

10,205.70 

45,634.30 

3,644.40 

2,450.80 

45,430.10 

0.15% 

0.10% 

0.09% 

0.03% 

0.07% 

0.10% 

0.08% 

0.19% 

0.10% 

0.04% 

0.05% 

0.20% 

0.41% 

0.04% 

0.17% 

0.23% 

0.07% 

0.20% 

0.09% 

0.10% 

0.07% 

0.09% 

1.64% 

0.07% 

0.10% 

0.05% 

0.04% 

0.77% 

0.66% 

0.11% 

0.04% 

0.14% 

0.05% 

0.12% 

0.07% 

0.14% 

0.38% 

0.67% 

0.04% 

0.04% 

0.08% 

0.51% 

0.05% 

0.13% 

0.04% 

0.09% 

0.13% 

0.32% 

0.04% 

0.20% 

0.06% 

0.14% 

0.17% 

0.14% 

0.44% 

0.28% 

0.05% 

0.07% 

0.02% 

0.22% 

0.14% 

0.04% 

0.04% 

0.17% 

0.01% 

0.07% 

0.25% 

0.15% 

0.15% 

0.08% 

0.23% 

0.08% 

0.05% 

0.07% 

0.08% 

0.34% 

0.03% 

0.02% 

0.34% 

1.13% 

0.97% 

3.84% 

4.01% 

0.19% 

0.00% 

3.30% 

0.35% 

2.40% 

0.00% 

0.00% 

2.88% 

2.44% 

0.00% 

1.10% 

0.00% 

3.97% 

6.86% 

0.00% 

0.77% 

2.33% 

1.81% 

3.21% 

0.00% 

0.09% 

4.16% 

1.34% 

1.68% 

0.14% 

0.00% 

6.98% 

3.25% 

4.16% 

2.06% 

2.17% 

0.00% 

2.33% 

1.94% 

1.95% 

2.48% 

3.82% 

4.65% 

1.66% 

3.99% 

0.00% 

1.70% 

2.50% 

1.12% 

1.20% 

1.61% 

0.82% 

0.00% 

2.49% 

2.06% 

1.43% 

0.19% 

3.85% 

0.00% 

0.00% 

2.45% 

0.00% 

0.00% 

0.61% 

1.38% 

1.55% 

5.22% 

0.00% 

1.03% 

0.00% 

0.00% 

4.02% 

2.18% 

0.79% 

3.04% 

4.25% 

4.72% 

1.88% 

0.00% 

3.46% 

15.10% 

12.70% 

9.67% 

11.90% 

35.00% 

18.60% 

4.20% 

9.95% 

10.90% 

10.60% 

13.30% 

12.50% 

16.30% 

13.20% 

12.80% 

22.20% 

5.42% 

5.21% 

19.20% 

12.30% 

14.60% 

3.02% 

-5.80% 

22.20% 

10.40% 

7.50% 

10.70% 

10.10% 

8.64% 

17.60% 

8.33% 

10.00% 

6.02% 

14.70% 

8.00% 

19.00% 

8.56% 

15.60% 

9.60% 

0.18% 

7.00% 

-5.49% 

12.00% 

3.29% 

10.30% 

13.00% 

7.88% 

12.80% 

9.88% 

9.74% 

9.03% 

31.30% 

13.30% 

13.00% 

12.00% 

15.10% 

12.30% 

12.20% 

17.90% 

10.70% 

8.00% 

30.30% 

12.80% 

-1.63% 

12.00% 

13.50% 

18.30% 

6.13% 

20.10% 

17.80% 

5.18% 

13.60% 

38.60% 

8.58% 

4.93% 

4.00% 

9.95% 

16.60% 

8.00% 

16.32% 

13.73% 

13.70% 

16.15% 

35.23% 

18.60% 

7.57% 

10.32% 

13.43% 

10.60% 

13.30% 

15.56% 

18.94% 

13.20% 

13.97% 

22.20% 

9.50% 

12.25% 

19.20% 

13.12% 

17.10% 

4.86% 

-2.68% 

22.20% 

10.49% 

11.82% 

12.11% 

11.86% 

8.78% 

17.60% 

15.60% 

13.41% 

10.31% 

16.91% 

10.26% 

19.00% 

10.99% 

17.69% 

11.64% 

2.66% 

10.95% 

-0.97% 

13.76% 

7.35% 

10.30% 

14.81% 

10.48% 

13.99% 

11.14% 

11.43% 

9.88% 

31.30% 

15.96% 

15.19% 

13.52% 

15.30% 

16.39% 

12.20% 

17.90% 

13.28% 

8.00% 

30.30% 

13.45% 

..0.26% 

13.64% 

19.07% 

18.30% 

7.19% 

20.10% 

17.80% 

9.30% 

15.93% 

39.54% 

11.75% 

9.28% 

8.81% 

11.92% 

16.60% 

11.60% 

0.02% 

0.01% 

0.01% 

0.00% 

0.02% 

0.02% 

0.01% 

0.02% 

0.01% 

0.00% 

0.01% 

0.03% 

0.08% 

0.01% 

0.02% 

0.05% 

0.01% 

0.02% 

0.02% 

0.01% 

0.01% 

0.00% 

-0.04% 

0.02% 

0.01% 

0.01% 

0.00% 

0.09% 

0.06% 

0.02% 

0.01% 

0.Q2% 

0.00% 

0.02% 

0.01% 

0.03% 

0.04% 

0.12% 

0.01% 

0.00% 

0.01% 

0.00% 

0.01% 

0.01% 

0.00% 

0.01% 

0.01% 

0.04% 

0.00% 

0.02% 

0.01% 

0.04% 

0.03% 

0.02% 

0.06% 

0.04% 

0.01% 

0.01% 

0.00% 

0.03% 

0.01% 

0.01% 

0.01% 

0.00% 

0.00% 

0.01% 

0.05% 

0.01% 

0.03% 

0.01% 

0.02% 

0.01% 

0.02% 

0.01% 

0.01% 

0.03% 

0.00% 

0.00% 

0.04%




[41 

Market 


[51 


[61 

Estimated 


m [81 


Growth Est. DCF Result 

[91 

Weighted 

DCF Result 

Eastman Chemical Co. (NYSE:EMN) 

Eaton Corporation (NYSE:ETN) 

eBay Inc. (NasdaqGS:EBAY) 

Ecolab Inc. (NYSE:ECL) 

Edison International (NYSE:EIX) 

Edwards Ufesciences Corp. (NYSE:EW) 

Electronic Arts Inc. (NasdaqGS:EA) 

Ell Lilly & Co. (NYSE:LLY) 

EMC Corporation (NYSE:EMC) 

Emerson Electric Co. (NYSE:EMR) 

Ensco pic (NYSE:ESV) 

Entergy Corporation (NYSE:ETR) 

EOG Resources, Inc. (NYSE:EOG) 

EQT Corporation (NYSE:EQT) 

Equlfax Inc. (NYSE:EFX) 

Equity Residential (NYSE:EQR) 

Exelon Corporation (NYSE:EXC) 

Expedia Inc. (NasdaqGS:EXPE) 

Expeditors International <strong>of</strong> Washington Inc. (NasdaqGS:EXPD) 

Express Scripts Holding Company (NasdaqGS:ESRX) 

Exxon Mobil Corporation (NYSE:XOM) 

F5 Networks, Inc. (NasdaqGS:FFIV) 

Family Dollar Stores Inc. (NYSE:FDO) 

Fastenal Company (NasdaqGS:FAST) 

Federated Investors, Inc. (NYSE:FIl) 

FedEx Corporation (NYSE:FDX) 

Fidelity National Information Services, Inc. (NYSE:FIS) 

Fifth Third Bancorp (NasdaqGS:FITB) 

First Horizon National Corporation (NYSE:FHN) 

First Solar, Inc. (NasdaqGS:FSLR) 

FirstEnergy Corp. (NYSE:FE) 

Fiserv, Inc. (NasdaqGS:FISV) 

FUR Systems, Inc. (NasdaqGS:FLlR) 

Flowserve Corp. (NYSE:FLS) 

Fluor Corporation (NYSE:FLR) 

FMC Corp. (NYSE:FMC) 

FMC Technologies, Inc. (NYSE:FTI) 

Ford Motor Co. (NYSE:F) 

Forest Laboratories Inc. (NYSE:FRX) 

Fossil, Inc. (NasdaqGS:FOSL) 

Franklin Resources Inc. (NYSE:BEN) 

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) 

Frontier Communications Corporation (NasdaqGS:FTR) 

GameStop Corp. (NYSE:GME) 

Gannett Co., Inc. (NYSE:GCI) 

Gap Inc. (NYSE:GPS) 

General Dynamics Corp. (NYSE:GD) 

Genera! Electric Company (NYSE:GE) 

General Mills, Inc. (NYSE:GIS) 

Genuine Parts Company (NYSE:GPCj 

Genworth Financial Inc. (NYSE:GNW) 

Gilead Sciences Inc. (NasdaqGS:GILD) 

Goodyear Tire & Rubber Co. (NYSE:GT) 

Google Inc. (NasdaqGS:GOOG) 

H&R Block, Inc. (NYSE:HRB) 

H. J. Heinz Company (NYSE:HNZ) 

Halliburton Company (NYSE:HAL) 

Harley-Davidson, Inc. (NYSE:HOG) 

Harman International Industries, Incorporated (NYSE:HAR) 

Harris Corp. (NYSE:HRS) 

Hasbro Inc. (NasdaqGS:HAS) 

HCP, Inc. (NYSE:HCP) 

Health Care REIT, Inc. (NYSE:HCN) 

Helmerich & Payne Inc. (NYSE:HP) 

Hess Corporation (NYSE:HES) 

Hewlett-Packard Company {NYSE:HPQ} 

Honeywell International Inc. (NYSE:HON) 

Hormel Foods Corp. (NYSE:HRL) 

Hospira Inc. (NYSE:HSP) 

Host Hotels & Resorts Inc. (NYSE:HST) 

Hudson City Bancorp, Inc. (NasdaqGS:HCBK) 

Humana Inc. (NYSE:HUM) 

Huntington Bancshares Incorporated (NasdaqGS:HBAN) 

illinois Tool Works Inc. (NYSE:ITW) 

Ingersoll-Rand Pic (NYSE:IR) 

Integrys Energy Group, Inc. (NYSE:TEG) 

Intel Corporation (NasdaqGS:INTC) 

Intercontinenta!Exchange, Inc. (NYSE:ICE) 

International Business Machines Corporation (NYSE:IBM) 

8,340.10 

14,928.70 

61,025.00 

18,565.70 

14,325.90 

12,062.00 

4,148.70 

50,171.90 

55,301.30 

36,249.80 

13,270.40 

12,167.60 

29,519.00 

7,976.40 

5,534.10 

18,241.50 

30,822.50 

7,057.20 

7,678.50 

51,121.80 

402,140.60 

7,465.80 

7,361.10 

12,844.20 

2,205.30 

27,491.80 

9,303.80 

13,829.60 

2,236.80 

1,645.50 

18,188.20 

9,696.30 

2,990.80 

6,515.00 

8,665.60 

7,374.00 

11,235.10 

35,889.60 

9,315.20 

5,113.80 

25,000.00 

33,812.20 

4,653.10 

2,541.00 

3,631.00 

17,222.30 

22,807.10 

216,561.90 

25,497.00 

9,613.20 

2,581.10 

43,888.60 

2,966.10 

222,722.80 

4,472.90 

17,920.20 

29,827.20 

9,526.30 

3,053.90 

5,299.60 

4,844.50 

19,887.00 

13,372.50 

4,679.00 

16,758.30 

33,501.40 

44,898.30 

7,616.30 

5,612.20 

11,026.60 

3,599.90 

11,274.60 

5,635.40 

27,622.80 

14,134.40 

4,233.70 

122,148.20 

9,937.80 

222,315.40 

0.06% 

0.11% 

0.46% 

0.14% 

0.11% 

0.09% 

0.03% 

0.38% 

0.42% 

0.27% 

0.10% 

0.09% 

0.22% 

0.06% 

0.04% 

0.14% 

0.23% 

0.05% 

0.06% 

0.38% 

3.03% 

0.06% 

0.06% 

0.10% 

0.02% 

0.21% 

0.07% 

0.10% 

0.02% 

0.01% 

0.14% 

0.07% 

0.02% 

0.05% 

0.07% 

0.06% 

0.08% 

0.27% 

0.07% 

0.04% 

0.19% 

0.25% 

0.04% 

0.02% 

0.03% 

0.13% 

0.17% 

1.63% 

0.19% 

0.07% 

0.02% 

0.33% 

0.02% 

1.68% 

0.03% 

0.13% 

0.22% 

0.07% 

0.02% 

0.04% 

0.04% 

0.15% 

0.10% 

0.04% 

0.13% 

0.25% 

0.34% 

0.06% 

0.04% 

0.08% 

0.03% 

0.08% 

0.04% 

0.21% 

0.11% 

0.03% 

0.92% 

0.07% 

1.67% 

1.88% 

3.40% 

0.00% 

1.25% 

2.97% 

0.00% 

0.00% 

4.36% 

0.00% 

3.15% 

2.61% 

4.88% 

0.63% 

1.63% 

1.57% 

2.24% 

5.76% 

1.01% 

1.53% 

0.00% 

2.61% 

0.00% 

1.32% 

1.76% 

4.52% 

0.64% 

2.54% 

2.11% 

0.45% 

0.00% 

5.03% 

0.00% 

1.41% 

1.13% 

1.24% 

0.66% 

0.00% 

2.14% 

0.00% 

0.00% 

0.92% 

3.46% 

8.66% 

5.24% 

5.24% 

1.40% 

3.11% 

3.28% 

3.36% 

3.13% 

0.00% 

0.00% 

0.00% 

0.00% 

4.83% 

3.70% 

1.10% 

1.48% 

1.30% 

2.81% 

3.84% 

4.36% 

5.07% 

0.61% 

0.79% 

3.13% 

2.55% 

2.09% 

0.00% 

1.83% 

4.45% 

1.48% 

2.43% 

2.43% 

1.37% 

5.04% 

3.62% 

0.00% 

1.74% 

7.67% 9.62% 

12.70% 16.32% 

14.00% 14.00% 

15.20% 16.55% 

1.73% 4.73% 

22.40% 22.40% 

16.90% 16.90% 

-6.33% -2.11 % 

15.40% 15.40% 

12.20% 15.54% 

14.30% 17.10% 

4.50% 9.49% 

16.00% 16.68% 

19.70% 21.49% 

11.60% 13.26% 

8.61% 10.95% 

1.72% 7.53% 

13.30% 14.38% 

11.30% 12.92% 

17.40% 17.40% 

4.41% 7.08% 

20.80% 20.80% 

14.40% 15.82% 

16.60% 18.51% 

8.07% 12.77% 

13.50% 14.18% 

11.60% 14.29% 

7.24% 9.43% 

11.60% 12.07% 

-3.00% -3.00% 

0.78% 5.83% 

11.80% 11.80% 

9.44% 10.92% 

10.30% 11.49% 

15.30% 16.63% 

10.70% 11.40% 

20,60% 20.60% 

5.84% 8.04% 

8.94% 8.94% 

20.30% 20.30% 

10.70% 11.67% 

3.85% 7.38% 

4.45% 13.30% 

9.40% 14.89% 

7.23% 12.66% 

10.80% 12.28% 

6.72% 9.93% 

12.70% 16.19% 

7.22% 10.70% 

8.23% 11.49% 

5.00% 5.00% 

18.40% 18.40% 

46.30% 46.30% 

16.80% 16.80% 

10.40% 15.48% 

7.15% 10.98% 

20.40% 21.61 % 

13.50% 15.08% 

20.00% 21.43% 

3.30% 6.16% 

8.87% 12.88% 

5.49% 9.97% 

6.40% 11.63% 

10.40% 11.04% 

4.21% 5.02% 

2.38% 5.55% 

12.90% 15.61% 

11.00% 13.20% 

8.71% 8.71% 

14.50% 16.46% 

-2.43% 1.97% 

9.61% 11.16% 

6.08% 8.58% 

9.72% 12.27% 

12.40% 13.85% 

4.67% 9.83% 

10.10% 13.90% 

12.20% 12.20% 

11.10% 12.94% 

0.01% 

0.02% 

0.06% 

0.02% 

0.01% 

0.02% 

0.01% 

-0.01% 

0.06% 

0.04% 

0.02% 

0.01% 

0.04% 

0.01% 

0.01% 

0.02% 

0.02% 

0.01% 

0.01% 

0.07% 

0.21% 

0.01% 

0.01% 

0.02% 

0.00% 

0.03% 

0.01% 

0.01% 

0.00% 

0.00% 

0.01% 

0.01% 

0.00% 

0.01% 

0.01% 

0.01% 

0.02% 

0.02% 

0.01% 

0.01% 

0.02% 

0.02% 

0.00% 

0.00% 

0.00% 

0.02% 

0.02% 

0.26% 

0.02% 

0.01% 

0.00% 

0.06% 

0.01% 

0.28% 

0.01% 

0.01% 

0.05% 

0.01% 

0.00% 

0.00% 

0.00% 

0.01% 

0.01% 

0.00% 

0.01% 

0.01% 

0.05% 

0.01% 

0.00% 

0.01% 

0.00% 

0.01% 

0.00% 

0.03% 

0.01% 

0.00% 

0.13% 

0.01% 

0.22%



Company (Ticker) 

(4) 

Market 


(5) 


(6) 

Estimated 


rn (8) 

Long.Term 

Growth Est. DCF Resu!t 

(9) 

Weighted 

DCF Result 

International Flavors & Fragrances Inc. (NYSE:IFF) 

International Game Technology {NYSE:IGTJ 

International Paper Company (NYSE:IP) 

Intuit Inc. {NasdaqGS:INTUJ 

Intuitive Surgical, Inc. (NasdaqGS:ISRG) 

Invesco Ltd. (NYSE:IVZ) 

Iron Mountain Inc. (NYSE:IRM) 

J. C. Penney Company, Inc. (NYSE:JCP) 

Jabil Circuillnc. (NYSE:JBL) 

Jacobs Engineering Group Inc. (NYSE:JEC) 

JDS Uniphase Corporation (NasdaqGS:JDSU) 

Johnson & Johnson (NYSE:JNJ) 

Johnson Controls Inc. (NYSE:JCI) 

Joy Global, Inc. (NYSE:JOY) 

JPMorgan Chase & Co. (NYSE:JPM) 

Juniper Networks, Inc. (NYSE:JNPR) 

Kellogg Company (NYSE:K) 

KeyCorp (NYSE:KEY) 

Kimberly·Clark Corporation (NYSE:KMB) 

Kimco Realty Corporation (NYSE:KIM) 

Kinder Morgan, Inc. (NYSE:KMI) 

KLA·Tencor Corporation (NasdaqGS:KLAC) 

Kohl's Corp. (NYSE:KSS) 

Kraft Foods Inc. (NasdaqGS:KFT) 

L·3 Communications Holdings Inc. (NYSE:LLL) 

Laboratory Corp. <strong>of</strong> America Holdings (NYSE:LH) 

Lam Research Corporation (NasdaqGS:LRCX) 

Legg Mason Inc. (NYSE:LM) 

Leggett & Platt, Incorporated (NYSE:LEG) 

Lennar Corp. (NYSE:LEN) 

Leucadia National Corp. (NYSE:LUK) 

Lexmark International Inc. (NYSE:LXK) 

Ufe Technologies Corporation (NasdaqGS:LIFE) 

Limited Brands,lnc. (NYSE:LTD) 

Lincoln National Corporation (NYSE:LNC) 

Linear Technology Corp. (NasdaqGS:LL TC) 

Lockheed Martin Corporation (NYSE:LMT) 

Loews Corporation (NYSE:L) 

Lorillard, Inc. (NYSE:LO) 

Lowe's Companies Inc. (NYSE:LOW) 

LSI Corporation (NYSE:LSI) 

M&T Bank Corporation (NYSE:MTB) 

Macy's, Inc. (NYSE:M) 

Marathon Oil Corporation (NYSE:MRO) 

Marathon Petroleum Corporation (NYSE:MPC) 

Marriott International, Inc. (NYSE:MAR) 

Marsh & McLennan Companies, Inc. (NYSE:MMC) 

Masco Corporation (NYSE:MAS) 

Mastercard Incorporated (NYSE:MA) 

Mattei, Inc. (NasdaqGS:MAT) 

McCormick & Company, Incorporated (NYSE:MKC) 

McDonald's Corp. (NYSE:MCD) 

McKesson Corporation (NYSE:MCK) 

Mead Johnson Nutrition Company (NYSE:MJN) 

MeadWestvaco Corporation (NYSE:MWV) 

Medtronic, Inc. (NYSE:MDT) 

Merck & Co. Inc. (NYSE:MRK) 

MetUfe, Inc. (NYSE:MET) 

MetroPCS Communications, Inc. (NYSE:PCS) 

Microchip Technology Inc. (NasdaqGS:MCHP) 

Micron Technology Inc. (NasdaqGS:MU) 

Micros<strong>of</strong>t Corporation (NasdaqGS:MSFT) 

Molex Incorporated (NasdaqGS:MOLX) 

Molson Coors Brewing Company (NYSE:TAP) 

Monsanto Co. (NYSE:MON) 

Monster Beverage Corporation (NasdaqGS:MNST) 

Moody's Corp. (NYSE:MCO) 

Morgan Stanley (NYSE:MS) 

Motorola Solutions, Inc. (NYSE:MSI) 

Murphy Oil Corporation (NYSE:MUR) 

Mylan, Inc. (NasdaqGS:MYL) 

Nabors Industries Ltd. (NYSE:NBR) 

Nasdaq OMX Group Inc. (NasdaqGS:NDAQ) 

National Oilwell Varco, Inc. (NYSE:NOV) 

NetApp, Inc. (NasdaqGS:NTAP) 

Netflix, Inc. (NasdaqGS:NFLX) 

Newell Rubbermaid Inc. (NYSE:NWL) 

Newfield Exploration Co. (NYSE:NFX) 

Newmont Mining Corp. (NYSE:NEM) 

4,890.20 

3,237.30 

14,948.10 

17,194.30 

19,611.20 

10,605.30 

5,588.60 

5,674.50 

4,409.60 

5,122.20 

2,595.00 

185,438.60 

18,363.00 

5,468.60 

140,591.90 

9,315.30 

18,119.30 

7,925.10 

33,064.20 

8,338.50 

36,995.80 

8,678.80 

12,192.10 

74,242.40 

6,668.00 

8,464.10 

6,131.00 

3,342.70 

3,372.90 

6,003.40 

5,163.10 

1,450.70 

8,451.00 

13,928.10 

6,507.50 

7,529.80 

29,188.30 

16,136.40 

16,533.10 

33,454.20 

4,332.30 

11,077.50 

16,616.90 

19,352.30 

17,182.10 

12,145.90 

18,562.50 

5,017.30 

52,961.90 

11,922.30 

8,264.00 

89,800.80 

20,580.00 

14,995.00 

4,984.30 

42,241.90 

131,723.60 

36,116.50 

3.590.60 

6,666.90 

6,196.80 

254,729.50 

4,321.80 

8,053.80 

46,164.10 

10,100.60 

8,829.80 

30,640.10 

13,633.90 

9,951.80 

9,595.20 

4,233.80 

3,880.20 

33,290.80 

12,578.00 

3,106.00 

5,189.70 

4,363.80 

24,545.20 

0.04% 

0.02% 

0.11% 

0.13% 

0.15% 

0.08% 

0.04% 

0.04% 

0.03% 

0.04% 

0.02% 

1.40% 

0.14% 

0.04% 

1.06% 

0.07% 

0.14% 

0.06% 

0.25% 

0.06% 

0.28% 

0.07% 

0.09% 

0.56% 

0.05% 

0.06% 

0.05% 

0.03% 

0.03% 

0.05% 

0.04% 

0.01% 

0.06% 

0.10% 

0.05% 

0.06% 

0.22% 

0.12% 

0.12% 

0.25% 

0.03% 

0.08% 

0.13% 

0.15% 

0.13% 

0.09% 

0.14% 

0.04% 

0.40% 

0.09% 

0.06% 

0.68% 

0.15% 

0.11% 

0.04% 

0.32% 

0.99% 

0.27% 

0.03% 

0.05% 

0.05% 

1.92% 

0.03% 

0.06% 

0.35% 

0.08% 

0.07% 

0.23% 

0.10% 

0.07% 

0.07% 

0.03% 

0.03% 

0.25% 

0.09% 

0.02% 

0.04% 

0.03% 

0.18% 

2.25% 

1.95% 

3.04% 

1.16% 

0.00% 

2.91% 

3.29% 

0.00% 

1.40% 

0.00% 

0.00% 

3.62% 

2.65% 

1.31% 

3.23% 

0.00% 

3.47% 

2.37% 

3.54% 

3.74% 

3.91% 

3.12% 

2.45% 

2.79% 

2.85% 

0.00% 

0.00% 

1.79% 

4.72% 

0.49% 

1.17% 

5.53% 

0.00% 

8.23% 

1.38% 

3.03% 

4.39% 

0.62% 

4.94% 

2.25% 

0.00% 

3.22% 

1.98% 

2.44% 

2.71% 

1.38% 

2.69% 

2.12% 

0.28% 

3.53% 

2.02% 

3.13% 

0.92% 

1.64% 

3.48% 

2.56% 

3.90% 

2.17% 

0.00% 

4.04% 

0.00% 

2.60% 

3.31% 

2.87% 

1.38% 

0.00% 

1.62% 

1.33% 

2.18% 

2.44% 

0.00% 

0.00% 

2.27% 

0.61% 

0.00% 

0.00% 

2.23% 

0.00% 

2.76% 

7.33% 9.66% 

12.10% 14.17% 

6.00% 9.13% 

13.60% 14.84% 

20.40% 20.40% 

10.70% 13.77% 

14.20% 17.72% 

31.40% 31.40% 

13.50% 14.99% 

14.70% 14.70% 

12.00% 12.00% 

6.71% 10.45% 

16.50% 19.37% 

15.20% 16.61% 

5.70% 9.02% 

16.10% 16.10% 

7.45% 11.05% 

5.49% 7.93% 

8.44% 12.13% 

4.00% 7.81% 

15.60% 19.81% 

10.00% 13.28% 

13.40% 16.01% 

9.30% 12.22% 

1.88% 4.76% 

11.80% 11.80% 

10.00% 10.00% 

14.70% 16.62% 

15.00% 20.07% 

8.00% 8.51% 

0.00% 1.17% 

-9.45% 4.18% 

9.44% 9.44% 

12.40% 21.14% 

8.55% 9.99% 

11.00% 14.20% 

5.90% 10.42% 

0.00% 0.62% 

8.59% 13.74% 

15.00% 17.42% 

16.00% 16.00% 

10.20% 13.58% 

12.50% 14.60% 

-3.61% -1.21% 

12.30% 15.18% 

19.40% 20.91% 

11.10% 13.94% 

10.00% 12.23% 

18.30% 18.61% 

8.60% 12.28% 

9.08% 11.19% 

9.74% 13.02% 

13.60% 14.58% 

11.70% 13.44% 

10.00% 13.65% 

6.32% 8.96% 

4.66% 8.65% 

12.60% 14.91% 

12.60% 12.60% 

9.00% 13.22% 

11.70% 11.70% 

9.13% 11.85% 

11.50% 15.00% 

3.34% 6.26% 

15.10% 16.58% 

19.70% 19.70% 

14.40% 16.14% 

12.10% 13.51% 

18.90% 21.29% 

8.20% 10.74% 

10.90% 10.90% 

11.30% 11.30% 

8.86% 11.23% 

18.60% 19.27% 

13.00% 13.00% 

19.40% 19.40% 

8.16% 10.48% 

6.35% 6.35% 

-3.00% -0.28% 

0.00% 

0.00% 

0.01% 

0.02% 

0.03% 

0.01% 

0.01% 

0.01% 

0.00% 

0.01% 

0.00% 

0.15% 

0.03% 

0.01% 

0.10% 

0.01% 

0.02% 

0.00% 

0.03% 

0.00% 

0.06% 

0.01% 

0.01% 

0.07% 

0.00% 

0.01% 

0.00% 

0.00% 

0.01% 

0.00% 

0.00% 

0.00% 

0.01% 

0.02% 

0.00% 

0.01% 

0.02% 

0.00% 

0.02% 

0.04% 

0.01% 

0.01% 

0.02% 

0.00% 

0.02% 

0.02% 

0.02% 

0.00% 

0.07% 

0.01% 

0.01% 

0.09% 

0.02% 

0.02% 

0.01% 

0.03% 

0.09% 

0.04% 

0.00% 

0.01% 

0.01% 

0.23% 

0.00% 

0.00% 

0.06% 

0.01% 

0.01% 

0.03% 

0.02% 

0.01% 

0.01% 

0.00% 

0.00% 

0.05% 

0.01% 

0.00% 

0.00% 

0.00% 

0.00%


Page 130115 


[4) 

Market 


[5) 


[5} 

Estimated 


m 


Growth Est. 

[8J 

DCF Result 

[91 

Weighted 

DCF Result 

News Corp. (NasdaqGS:NWSA) 

NextEra Energy, Inc. (NYSE:NEE) 

Nike Inc. (NYSE:NKE) 

NiSource Inc. (NYSE:NI) 

Noble Corp. (NYSE:NE) 

Noble Energy, Inc. (NYSE:NBLj 

Nordstrom Inc. (NYSE:JWN) 

Norfolk Southem Corp. (NYSE:NSC) 

Northeast Utilities (NYSE:NU) 

Northern Trust Corporation (NasdaqGS:NTRS) 

Northrop Grumman Corporation (NYSE:NOC) 

NRG Energy, Inc. (NYSE:NRG) 

Nucor Corporation (NYSE:NUE) 

NVIDIA Corporation (NasdaqGS:NVDA) 

NYSE Euronext, Inc. (NYSE:NYX) 

O'Reilly Automotive Inc. (NasdaqGS:ORL y) 

Occidental Petroleum Corporation (NYSE:OXY) 

Omnicom Group Inc. (NYSE:OMC) 

ONEOK Inc. (NYSE:OKE) 

Oracle Corporation (NasdaqGS:ORCL) 

Owens-Illinois, Inc. (NYSE:OI) 

PACCAR Inc. (NasdaqGS:PCAR) 

Pall Corp. (NYSE:PLL) 

Parker Hannifin Corporation (NYSE:PH) 

Patterson Companies, Inc. (NasdaqGS:PDCO) 

Paychex, Inc. (NasdaqGS:PAYX) 

Peabody Energy Corp. (NYSE:BTU) 

People's United Rnanciallnc. (NasdaqGS:PBCT) 

Pepco Holdings, Inc. (NYSE:POM) 

Pepsico, Inc. (NYSE:PEP) 

PerklnElmer Inc. (NYSE:PKI) 

Perrigo Co. (NasdaqGS:PRGO) 

Pfizer Inc. (NYSE:PFE) 

PG&E Corp. (NYSE:PCG) 

Philip Morris International, Inc. (NYSE:PM) 

Phillips 66 (NYSE:PSX) 

Pinnacle West Capital Corporation (NYSE:PNW) 

Pioneer Natural Resources Co. (NYSE:PXD) 

Pitney Bowes Inc. (NYSE:PBI) 

Plum Creek Timber Co. Inc. (NYSE:PCL) 

PNC Financial Services Group Inc. (NYSE:PNC) 

PPG Industries Inc. (NYSE:PPG) 

PPL Corporation (NYSE:PPL) 

Praxair Inc. (NYSE:PX) 

Precision Castparts Corp. (NYSE:PCP) 

priceline.com Incorporated (NasdaqGS:PCLN) 

Principal Financial Group Inc. (NYSE:PFG) 

Procter & Gamble Co. (NYSE:PG) 

Progressive Corp. (NYSE:PGR) 

Prolog is, Inc. (NYSE:PLD) 

Prudential Financial, Inc. (NYSE:PRU) 

Public Service Enterprise Group Inc. (NYSE:PEG) 

Public Storage (NYSE:PSA) 

PulteGroup, Inc. (NYSE:PHM) 

OEP Resources, Inc. (NYSE:OEP) 

QUALCOMM Incorporated (NasdaqGS:OCOM) 

Quanta Services, Inc. (NYSE:PWR) 

Quest Diagnostics Inc. (NYSE:DGX) 

R.R. Donnelley & Sons Company (NasdaqGS:RRD) 

Ralph Lauren Corporation (NYSE:RLj 

Range Resources Corporation (NYSE:RRC) 

Raytheon Co. (NYSE:RTN) 

Red Hat, Inc. (NYSE:RHT) 

Regions Financial Corp. (NYSE:RF) 

Republic Services, Inc. (NYSE:RSG) 

Reynolds American Inc. (NYSE:RAI) 

<strong>Robert</strong> Half International Inc. (NYSE:RHI) 

Rockwell Automation Inc. (NYSE:ROK) 

Rockwell Collins Inc. (NYSE:COLj 

Roper Industries Inc. (NYSE:ROP) 

Ross Stores Inc. (NasdaqGS:ROST) 

Rowan Companies pic (NYSE:RDC) 

Ryder System, Inc. (NYSE:R) 

Safeway Inc. (NYSE:SWY) 

SAIC, Inc. (NYSE:SAI) 

salesforce.com, Inc (NYSE:CRM) 

SanDisk Corp. (NasdaqGS:SNDK) 

SCANA Corp. (NYSE:SCG) 

Schtumberger Limited (NYSE:SLB) 

55,688.00 

28,405.10 

44,143.90 

7,037.20 

9,417.10 

15,346.10 

11,591.40 

22,704.90 

11,927.70 

11,244.20 

16,501.30 

4,905.50 

11,780.90 

8,223.50 

6,258.20 

9,917.70 

67,314.70 

13,713.90 

9,227.50 

154,140.70 

2,817.70 

13,839.70 

6,478.30 

11,957.00 

3,688.20 

12,137.90 

5,608.20 

4,072.00 

4,449.50 

112,798.80 

3,143.80 

10,345.40 

177,587.00 

17,901.50 

151,091.30 

26,587.80 

5,718.20 

11,966.50 

2,646.40 

6,638.60 

33,003.20 

16,516.30 

17,195.60 

31,078.50 

23,321.10 

29,740.00 

8,068.60 

185,845.70 

11,823.80 

15,875.00 

25,457.60 

16,026.80 

25,158.30 

5,276.60 

5,098.40 

103,580.70 

5,129.90 

9,652.10 

1,990.10 

14,313.00 

10,380.70 

18,742.50 

11,008.30 

9,907.50 

10,041.50 

26,270.80 

3,682.60 

10,099.20 

6,917.10 

10,024.40 

15,670.90 

4,360.50 

2,045.40 

3,788.90 

4,136.20 

20,132.80 

9,876.80 

6,289.20 

94,776.30 

0.42% 

0.21% 

0.33% 

0.05% 

0.07% 

0.12% 

0.09% 

0.17% 

0.09% 

0.08% 

0.12% 

0.04% 

0.09% 

0.06% 

0.05% 

0.07% 

0.51% 

0.10% 

0.07% 

1.16% 

0.02% 

0.10% 

0.05% 

0.09% 

0.03% 

0.09% 

0.04% 

0.03% 

0.03% 

0.85% 

0.02% 

0.08% 

1.34% 

0.13% 

1.14% 

0.20% 

0.04% 

0.09% 

0.02% 

0.05% 

0.25% 

0.12% 

0.13% 

0.23% 

0.18% 

0.22% 

0.06% 

1.40% 

0.09% 

0.12% 

0.19% 

0.12% 

0.19% 

0.04% 

0.04% 

0.78% 

0.04% 

0.07% 

0.01% 

0.11% 

0.08% 

0.14% 

0.08% 

0.07% 

0.08% 

0.20% 

0.03% 

0.08% 

0.05% 

0.08% 

0.12% 

0.03% 

0.02% 

0.03% 

0.03% 

0.15% 

0.07% 

0.05% 

0.71% 

0.73% 

3.57% 

1.48% 

3.94% 

1.43% 

1.00% 

1.87% 

2.76% 

3.64% 

2.58% 

3.29% 

1.69% 

3.88% 

0.00% 

4.79% 

0.00% 

2.54% 

2.34% 

2.96% 

0.76% 

0.00% 

3.76% 

1.51% 

2.05% 

1.65% 

3.85% 

1.57% 

5.35% 

5.59% 

2.97% 

1.03% 

0.29% 

3.69% 

4.19% 

3.45% 

1.90% 

4.09% 

0.08% 

11.20% 

4.10% 

2.57% 

2.15% 

4.91% 

2.09% 

0.07% 

0.00% 

3.06% 

3.35% 

2.08% 

3.28% 

2.66% 

4.49% 

3.02% 

0.00% 

0.28% 

1.63% 

0.00% 

1.12% 

9.47% 

1.01% 

0.25% 

3.54% 

0.00% 

0.58% 

3.40% 

5.12% 

2.28% 

2.61% 

2.46% 

0.54% 

0.81% 

0.00% 

3.10% 

4.47% 

3.93% 

0.00% 

0.00% 

4.18% 

1.52% 

17.00% 

5.65% 

13.60% 

8.00% 

10.10% 

7.70% 

12.20% 

14.10% 

6.08% 

12.70% 

1.25% 

20.60% 

6.35% 

12.60% 

7.83% 

16.60% 

-5.76% 

9.97% 

14.40% 

12.50% 

10.30% 

16.90% 

12.50% 

5.00% 

10.60% 

10.10% 

11.50% 

10.30% 

5.30% 

5.43% 

11.80% 

12.70% 

2.79% 

6.68% 

10.50% 

7.85% 

6.35% 

17.30% 

0.00% 

5.00% 

5.40% 

8.16% 

-0.34% 

11.50% 

14.20% 

20.70% 

14.10% 

6.93% 

6.74% 

9.26% 

12.00% 

2.24% 

6.07% 

28.40% 

19.50% 

13.80% 

15.20% 

11.20% 

5.20% 

14.00% 

-2.45% 

7.42% 

19.00% 

7.60% 

8.40% 

7.34% 

17.40% 

13.00% 

8.82% 

14.00% 

13.70% 

19.90% 

11.20% 

9.67% 

6.00% 

26.50% 

12.50% 

4.48% 

20.50% 

17.79% 

9.32% 

15.18% 

12.10% 

11.60% 

8.74% 

14.18% 

17.05% 

9.83% 

15.44% 

4.56% 

22.46% 

10.35% 

12.60% 

12.81% 

16.60% 

-3.29% 

12.43% 

17.57% 

13.31% 

10.30% 

20.98% 

14.10% 

7.10% 

12.34% 

14.14% 

13.16% 

15.93% 

11.04% 

8.48% 

12.89% 

13.01% 

6.53% 

11.01% 

14.13% 

9.82% 

10.57% 

17.39% 

11.20% 

9.20% 

8.04% 

10.40% 

4.56% 

13.71% 

14.28% 

20.70% 

17.38% 

10.40% 

8.89% 

12.69% 

14.82% 

6.78% 

9.18% 

28.40% 

19.81% 

15.54% 

15.20% 

12.38% 

14.92% 

15.08% 

-2.21% 

11.09% 

19.00% 

8.20% 

11.94% 

12.65% 

19.88% 

15.78% 

11.39% 

14.57% 

14.56% 

19.90% 

14.47% 

14.36% 

10.05% 

26.50% 

12.50% 

8.75% 

22.18% 

0.07% 

0.02% 

0.05% 

0.01% 

0.01% 

0.01% 

0.01% 

0.03% 

0.01% 

0.01% 

0.01% 

0.01% 

0.01% 

0.01% 

0.01% 

0.01% 

-0.02% 

0.01% 

0.01% 

0.15% 

0.00% 

0.02% 

0.01% 

0.01% 

0.00% 

0.01% 

0.01% 

0.00% 

0.00% 

0.07% 

0.00% 

0.01% 

0.09% 

0.01% 

0.16% 

0.02% 

0.00% 

0.02% 

0.00% 

0.00% 

0.02% 

0.01% 

0.01% 

0.03% 

0.03% 

0.05% 

0.01% 

0.15% 

0.01% 

0.02% 

0.03% 

0.01% 

0.02% 

0.01% 

0.01% 

0.12% 

0.01% 

0.Q1% 

0.00% 

0.02% 

0.00% 

0.02% 

0.02% 

0.01% 

0.01% 

0.03% 

0.01% 

0.01% 

0.01% 

0.01% 

0.02% 

0.01% 

0.00% 

0.00% 

0.00% 

0.04% 

0.01% 

0.00% 

0.16%




[4) 

Market 


(5) 


(6] 

Estimated 


m 


Growth Est. 

[8] 

DCF Result 

[9] 

Weighted 

DCF Result 

Scripps Networks Interactive, Inc. (NYSE:SNI) 

Seagate Technology Publlc limited Company (NasdaqGS:STX) 

Sealed Air Corporation (NYSE:SEE) 

Sears Holdings Corporation (NasdaqGS:SHLD) 

Sempra Energy (NYSE:SRE) 

Sigma-AldriCh Corporation (NasdaqGS:SIAL) 

Simon Property Group Inc. (NYSE:SPG) 

SLM Corporation (NasdaqGS:SLM) 

Snap-on Inc. (NYSE:SNA) 

Southern Company (NYSE:SO) 

Southwest Airlines Co. (NYSE:LUV) 

Southwestern Energy Co. (NYSE:SWN) 

Spectra Energy Corp. (NYSE:SE) 

Sprint NeJdel Corp. (NYSE:S) 

SI. Jude Medical Inc. (NYSE:STJ) 

Stanley Black & Decker, Inc. (NYSE:SWK) 

Staples, Inc. (NasdaqGS:SPLS) 

Starbucks Corporation (NasdaqGS:SBUX) 

Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT) 

State Street Corporation (NYSE:STT) 

Stericycle, Inc. (NasdaqGS:SRCL) 

Stryker Corporation (NYSE:SYK) 

Sunoco, Inc. (NYSE:SUN) 

SunTrust Banks, Inc. (NYSE:STI) 

Symantec Corporation (NasdaqGS:SYMC) 

Sysco Corp. (NYSE:SYV) 

T. Rowe Price Group, Inc. (NasdaqGS:TROW) 

Target Corp. (NYSE:TGT) 

TE Connectivity Ltd. (NYSE:TEL) 

TECO Energy, Jnc. (NYSE:TE) 

Tenet Healthcare Corp. (NYSE:THC) 

Teradata Corporation (NYSE:TDC) 

Teradyne Inc. (NYSE:TER) 

Tesoro Corporation (NYSE:TSO) 

Texas Instruments Inc. (NasdaqGS:TXN) 

Textron inc. (NYSE:TXT) 

The AES Corporation (NYSE:AES) 

The Allstate Corporation (NYSE:ALL) 

The Bank <strong>of</strong> New York Mellon Corporation (NYSE:BK) 

The Boeing Company (NYSE:BA) 

The Charles Schwab Corporation (NYSE:SCHW) 

The Chubb Corporation (NYSE:CB) 

The Clorox Company (NYSE:CLX) 

The Coca-Cola Company (NYSE:KO) 

The Dow Chemical Company (NYSE:DOW) 

The Estee Lauder Companies Inc. (NYSE:EL) 

The Goldman Sachs Group, Inc. (NYSE:GS) 

The Hartford Financial Services Group, Inc. (NYSE:HIG) 

The Hershey Company (NYSE:HSY) 

The Home Depot, Inc. (NYSE:HD) 

The Interpublic Group <strong>of</strong> Companies. Inc. (NYSE:IPG) 

The J. M. Smucker Company (NYSE:SJM) 

The Kroger Co. (NYSE:KR) 

The McGraw-HIli Companies, Inc. (NYSE:MHP) 

The Mosaic Company (NYSE:MOS) 

The Sherwin-Williams Company (NYSE:SHW) 

The T JX Companies, Inc. (NYSE:T JX) 

The Travelers Companies, Inc. (NYSE:TRV) 

The Washington Post Company (NYSE:WPO) 

The Western Union Company (NYSE:WUj 

Thermo Fisher Scientific, Inc. (NYSE:TMO) 

Tiffany & Co. (NYSE:TJF) 

Time Warner Cable Inc. (NYSE:TWC) 

Time Warner Inc. (NYSE:lWX) 

Titanium Metals Corporation (NYSE:TIE) 

Torchmark Corp. (NYSE:TMK) 

Total System Services, Inc. (NYSE:TSS) 

TripAdvisor Inc. (NasdaqGS:TRIPj 

Tyco International Ltd. (NYSE:TYC) 

Tyson Foods Inc. (NYSE:TSN) 

U.S. Bancorp (NYSE:USBj 

Union Pacific Corporation (NYSE:UNP) 

United Parcel Service, Inc. (NYSE:UPSj 

United States Steel Corp. (NYSE:X) 

United Technologies Corp. (NYSE:UTX) 

Unitedhealth Group, Inc. (NYSE:UNH) 

Unum Group (NYSE:UNM) 

Urban Outfitters Inc. (NasdaqGS:URBN) 

V.F. Corporation (NYSE:VFC) 

8,990.20 

12,871.50 

2,741.50 

NIA 

15,865.30 

8,512040 

48,153.60 

7,423.60 

4,072.40 

39,777.00 

6,576.20 

10,880.40 

18,587.20 

14,401.80 

12,062.70 

11,086.60 

7,410.60 

37,627.60 

10,821.60 

19,988.30 

7,838.00 

20,475.50 

5,000040 

13,633040 

12,550.80 

17,768.30 

15,736.40 

41,807.90 

14,973.40 

3,788.00 

2,212.90 

13,053.00 

2,922.70 

5,464.60 

32,750.40 

7,419.70 

8,444.90 

18,136.30 

26,638.30 

53,279.90 

16,983.80 

19,686.10 

9,460.50 

167,831.70 

34,313.80 

23,146.90 

52,821.90 

7,713.90 

16,414.30 

85,607.60 

4,681.60 

9,502.00 

12,168.20 

14,424.70 

24,146.00 

14,690.70 

33,978.40 

24,909.50 

2,641.90 

10,638.20 

20,949.80 

7,660.30 

27,107.20 

39,238.00 

2,099.00 

4,914.00 

4,385.80 

4,931.80 

25,789.80 

5,751.20 

62,772.30 

57,903.30 

70,637.10 

2,709.50 

71,438.50 

56,344040 

5,462.70 

5,519.50 

16,623.30 

0.07% 

0.10% 

0.02% 

NIA 

0.12% 

0.06% 

0.36% 

0.06% 

0.03% 

0.30% 

0.05% 

0.08% 

0.14% 

0.11% 

0.09% 

0.08% 

0.06% 

0.28% 

0.08% 

0.15% 

0.06% 

0.15% 

0.04% 

0.10% 

0.09% 

0.13% 

0.12% 

0.31% 

0.11% 

0.03% 

0.02% 

0.10% 

0.02% 

0.04% 

0.25% 

0.06% 

0.06% 

0.14% 

0.20% 

0.40% 

0.13% 

0.15% 

0.07% 

1.26% 

0.26% 

0.17% 

0.40% 

0.06% 

0.12% 

0.64% 

0.04% 

0.07% 

0.09% 

0.11% 

0.18% 

0.11% 

0.26% 

0.19% 

0.02% 

0.08% 

0.16% 

0.06% 

0.20% 

0.30% 

0.02% 

0.04% 

0.03% 

0.04% 

0.19% 

0.04% 

0.47% 

0.44% 

0.53% 

0.02% 

0.54% 

0.42% 

0.04% 

0.04% 

0.13% 

0.81% 

4.00% 

3.64% 

0.00% 

3.63% 

1.13% 

2.65% 

3.17% 

1.96% 

4.32% 

0.45% 

0.00% 

3.96% 

0.00% 

2.44% 

2.98% 

4.03% 

1.37% 

0.91% 

2.31% 

0.00% 

1.60% 

1.70% 

0.80% 

0.00% 

3.56% 

2.21% 

2.25% 

2.39% 

5.07% 

0.00% 

0.00% 

0.00% 

1.21% 

2.34% 

0.30% 

1040% 

2.36% 

2.31% 

2.46% 

1.78% 

2.22% 

3.52% 

2.73% 

4.37% 

0.88% 

1.74% 

2.23% 

2.12% 

2.04% 

2.26% 

2.45% 

2.06% 

1.99% 

1.73% 

1.09% 

1.00% 

2.84% 

2.78% 

2.27% 

0.91% 

2.07% 

2.52% 

2.50% 

2045% 

1.17% 

1.73% 

0.00% 

0.89% 

1.02% 

2.33% 

1.98% 

3.09% 

1.03% 

2.68% 

1.57% 

2.67% 

0.00% 

1.89% 

13.20% 

21.20% 

8043% 

0.00% 

5.20% 

8.21% 

7.29% 

5.30% 

10.00% 

5.52% 

38.60% 

-3.07% 

5.20% 

-98.70% 

9.55% 

9.95% 

7.65% 

18.60% 

20.80% 

10.70% 

16.60% 

10.40% 

-2.09% 

16.50% 

8.51% 

8.63% 

13.00% 

12.40% 

13.00% 

2.96% 

11.20% 

15.80% 

11.90% 

20.70% 

9.66% 

29.90% 

8.20% 

9.17% 

9.70% 

10.20% 

11.60% 

9.07% 

7.29% 

8.86% 

8.88% 

14.70% 

18.90% 

13.50% 

9.38% 

15.10% 

16.40% 

8.14% 

8.38% 

11.30% 

11.60% 

11.80% 

12.80% 

10.60% 

0.00% 

11.00% 

11.80% 

14.40% 

17.20% 

12.30% 

15.00% 

9.40% 

10.50% 

15.90% 

16.70% 

7.33% 

8.67% 

15.60% 

11.30% 

5.33% 

10.90% 

12.50% 

9040% 

17.90% 

12.50% 

14.07% 

25.62% 

12.22% 

0.00% 

8.92% 

9.39% 

10.04% 

8.55% 

12.06% 

9.96% 

39.13% 

-3.07% 

9.26% 

-98.70% 

12.11% 

13.08% 

11.83% 

20.10% 

21.80% 

13.13% 

16.60% 

12.08% 

-0.41% 

17.36% 

8.51% 

12.34% 

15.35% 

14.79% 

15.55% 

8.11% 

11.20% 

15.80% 

11.90% 

22.04% 

12.11% 

30.24% 

9.66% 

11.64% 

12.12% 

12.79% 

13.48% 

11.39% 

10.94% 

11.71% 

13.44% 

15.64% 

20.80% 

15.88% 

11.60% 

17.29% 

18.85% 

10.69% 

10.53% 

13.40% 

13.43% 

12.95% 

13.86% 

13.59% 

2.78% 

13.39% 

12.76% 

16.62% 

19.94"10 

14.95% 

17.63% 

10.62% 

12.32% 

15.90% 

17.66% 

8.39% 

11.10% 

17.73% 

14.56% 

6.39% 

13.73% 

14.17% 

12.20% 

17.90% 

14.51% 

0.01% 

0.02% 

0.00% 

NIA 

0.01% 

0.01% 

0.04% 

0.00% 

0.00% 

0.03% 

0.02% 

0.00% 

0.01% 

..Q.11% 

0.01% 

0.01% 

0.01% 

0.06% 

0.02% 

0.02% 

0.01% 

0.02% 

0.00% 

0.02% 

0.01% 

0.02% 

0.02% 

0.05% 

0.02% 

0.00% 

0.00% 

0.02% 

0.00% 

0.01% 

0.03% 

0.02% 

0.01% 

0.02% 

0.02% 

0.05% 

0.02% 

0.02% 

0.01% 

0.15% 

0.03% 

0.03% 

0.08% 

0.01% 

0.01% 

0.11% 

0.01% 

0.01% 

0.01% 

0.01% 

0.02% 

0.01% 

0.04% 

0.03% 

0.00% 

0.01% 

0.02% 

0.01% 

0.04% 

0.04% 

0.00% 

0.00% 

0.00% 

0.01% 

0.03% 

0.00% 

0.05% 

0.08% 

0.08% 

0.00% 

0.07% 

0.06% 

0.01% 

0.01% 

0.02%


Valero Energy Corporation (NYSE:VLO) 

Varian Medical Systems Inc. (NYSE:VAR) 

Ventas, Inc. (NYSE:VTR) 

VeriSign, Inc. (NasdaqGS:VRSN) 

Verizon Communications Inc. (NYSE:VZ) 

Viacom, Inc. (NasdaqGS:VIAB) 

Visa, Inc. (NYSE:V) 

Vomado Realty Trust (NYSE:VNO) 

Vulcan Materials Company (NYSE:VMC) 

W.W. Grainger. Inc. (NYSE:GWW) 

Wal-Mart Stores Inc. (NYSE:WMT) 

Walgreen Co. (NYSE:WAG) 

Walt Disney Co. (NYSE:DIS) 

Waste Management, Inc. (NYSE:WM) 

Waters Corp. (NYSE:WAT) 

Watson Pharmaceuticals, Inc. (NYSE:WPI) 

Well Point Inc. (NYSE:WLP) 

Wells Fargo & Company (NYSE:WFC) 

Western Digital Corporation (NasdaqGS:WDC) 

Weyerhaeuser Co. (NYSE:WY) 

Whirlpool Corp. (NYSE:WHR) 

Whole Foods Market. Inc. (NasdaqGS:WFM) 

Wmiams Companies. Inc. (NYSE:WMB) 

Windstream Corporation (NasdaqGS:WIN) 

Wisconsin Energy Corp. (NYSE:WEC) 

WPX Energy, Inc. (NYSE:WPX) 

Wyndham Worldwide Corporation (NYSE:WYN) 

Wynn Resorts Ltd. (NasdaqGS:WYNN) 

Xcel Energy Inc. (NYSE:XEL) 

Xerox Corp. (NYSE:XRX) 

Xilinx Inc. (NasdaqGS:XLNX) 

XL Group ptc (NYSE:XL) 

Xylem Inc. (NYSE:XYL) 

Yahool Inc. (NasdaqGS:YHOO) 

Yuml Brands, Inc. (NYSE:YUM) 

Zimmer Holdings, Inc. (NYSE:ZMH) 

Zions Bancom. (NasdagGS:ZION) 

Notes: 

[1] Equals sum <strong>of</strong> Col. [9] 


[3] Equals [1]- [2] 

[4] Source: Capital 10 

[5] Equals weight In S&P 500 based on market capitalization 

[6] Source: Capital 10 

[7) Source: Capital IQ 

[8] Equals {[6] x {1 + (0.5 x [7)))) + [7) 

[9] Equals Col. [5] x Col. [8] 

[4) [5) 

Market 


17,110.80 0.13% 

6,607.50 0.05% 

19,592.20 0.15% 

7,522.60 0.06% 

124,495.90 0.94% 

25,431.30 0.19% 

85,969.00 0.65% 

15,116.10 0.11% 

4,878.10 0.04% 

14,583.30 0.11% 

248,724.10 1.87% 

33,624.30 0.25% 

89,103.70 0.67% 

16,113.30 0.12% 

7.002.80 0.05% 

10,602.20 0.08% 

19,312.90 0.15% 

178,537.90 1.34% 

10,464.10 0.08% 

13.393.90 0.10% 

5,896.60 0.04% 

17.844.40 0.13% 

20,278.70 0.15% 

5,865.30 0.04% 

8,844.60 0.07% 

NfA 

NfA 

7,315.60 0.06% 

12,518.10 0.09% 

13,690.50 0.10% 

9,413.30 0.07% 

8,858.70 0.07% 

7,104.60 0.05% 

4,454.30 0.03% 

17,639.00 0.13% 

28,709.40 0.22% 

11,005.80 0.08% 

3.559.60 0.03% 

13,281.501.60 



[6) m (8) [91 

Estimated Long-Term Weighted 

Dividend Yield Growth Est. DCF Result DCF Result 

2.24% 7.56% 9.88% 0.01% 

0.00% 12.10% 12.10% 0.01% 

3.79% 5.48% 9.37% 0.01% 

5.77% 15.00% 21.20% 0.01% 

4.66% 8.15% 13.00% 0.12% 

2.20% 15.50% 17.87% 0.03% 

0.69% 19.00% 19.75% 0.13% 

3.40% -4-.85% -1.53% 0.00% 

0.10% 9.75% 9.86% 0.00% 

1.55% 14.40% 16.06% 0.02% 

2.19% 9.52% 11.81% 0.22% 

3.08% 11.70% 14.96% 0.04% 

1.21% 12.40% 13.69% 0.09% 

4.11% 5.95% 10.18% 0.01% 

0.00% 9.99% 9.99% 0.01% 

0.00% 13.60% 13.60% 0.01% 

1.92% 10.00% 12.02% 0.02% 

2.88% 10.40% 13.43% 0.18% 

0.00% 5.03% 5.03% 0.00% 

2.41% 5.00% 7.47% 0.01% 

2.65% 0.00% 2.65% 0.00% 

0.58% 20.10% 20.74% 0.03% 

3.72% 13.00% 16.96% 0.03% 

10.10% -1.46% 8.57% 0.00% 

3.16% 5.44% 8.69% 0.01% 

0.00% 0.00% 0.00% NfA 

1.76% 20.20% 22.14% 0.01% 

6.78% 25.10% 32.73% 0.03% 

3.87% 5.31% 9.28% 0.01% 

2.31% 5.40% 7.77% 0.01% 

2.60% 12.70% 15.47% 0.01% 

1.90% 8.75% 10.73% 0.01% 

1.67% 11.00% 12.76% 0.00% 

0.00% 13.80% 13.80% 0.02% 

1.79% 13.00% 14.91% 0.03% 

1.17% 9.61% 10.84% 0.01% 

0.21% 7.33% 7.55% 0.00% 

13.13%



Company 

Bloomberg, Value Line, and Calculated Beta Coefficients 

[1) [2) 

Ticker Bloomberg Value Line 

[3) 

Calculated 


Atmos Energy Corporation 

Laclede Group, Inc. (The) 






WGL Holdings, Inc. 

Mean 

GAS 0.750 0.75 

ATO 0.694 0.70 

LG 0.661 0.55 

NJR 0.725 0.65 

NWN 0.661 0.60 

PNY 0.792 0.70 

SJI 0.783 0.65 

SWX 0.780 0.75 

WGL 0.757 0.65 

0.734 0.67 

0.752 

0.710 

0.655 

0.795 

0.594 

0.761 

0.787 

0.730 

0.798 

0.732 

Notes: 

[1J Source: Bloomberg Pr<strong>of</strong>essional Service 

[2J Source: Value Line 

[3J Source: Bloomberg Pr<strong>of</strong>essional Service; Beta coefficients calculated over 12-months based on weekly returns



Capital Asset Pricing Model Results 

Sharpe Ratio, Bloomberg, and CapitallQ Derived Market Risk Premium 

Natural Gas Proxy Group 

r11 

Risk-Free 

Rate 

[21 

Average 

Beta 

Coefficient 

[31 [41 [51 


Bloomberg 

Market DCF 

Derived 

Sharpe 

Ratio 

Derived 

Capital [0 

Market DCF 

Derived 

[61 m [81 

CAPMResult 

Sharpe Bloomberg CapitallQ 

Ratio Market DCF Market DCF 

Derived Derived Derived 

PROXY GROUP 12-MONTH BETA COEFFICIENT 

Current 30-Year Treasury (30-day average) [9] 

Near-Term Pro'ected 30-Year TreasulV [101 - 

Mean 

2.71% 

3.00% 

0.732 

0.732 

8.21% 

8.21% 

10.64% 

10.64% 

10.42% 

10.42% 

8.72% 

9.01% 

8.87% 

10.50% 

10.78% 

10.64% 

10.33% 

10.62% 

10.48% 

Risk-Free 

Rate 

Average 

Beta 

Coefficient 


Sharpe Bloomberg CapitallQ 

Ratio Market DCF Market DCF 

Derived Derived Derived 

Sharpe 

Ratio 

Derived 

CAPMResult 

Bloomberg CapitallQ 

Market DCF Market DCF 

Derived Derived 

PROXY GROUP BLOOMBERG BETA COEFFICIENT 

Current 30-YearTreasury (30-day average) [9] 2.71% 

Near-Term Pro·ected 30-Year Treasurv f"10·1· 3.00% 

Mean 

0.734 

0.734 

8.21% 10.64% 10.42% 

8.21% 10.64% 10.42% 

8.74% 

9.03% 

8.88% 

10.52% 

10.80% 

10.66% 

10.36% 

10.64% 

10.50% 

Risk-Free 

Average 

Beta 

Sharpe 

Ratio 

Bloomberg 

Market DCF 

PROXY GROUP VALUE LINE AVERAGE BETA COEFFICIENT 

Current 30-YearTreasury (30-day average) [9] 2.71% 0.667 

8.21% 10.64% 10.42% 

8.19% 

9.81% 

9.66% 

Notes: 

[1] See Notes [9] and [10} 





[6] Equals Col. [1] + (Col. [2] x Col. [3]) 

[7] Equals Col. [1] + (Col. [21 x Col. [4]) 

[8] Equals Col. [1] + (Col. [2] x Col. [5]) 

[9) Source: Bloomberg Pr<strong>of</strong>essional 

[10] Source: Blue Chip Financial Forecasts, Vol. 31, No.8, August 1, 2012, at2



Bond Yield Plus Risk Premium 

[1] [2] f3] 

3O-Year 

Treasury 

Constant Sio e Yield 

-3.24% -2.95% 

Current 2.71% 

Near Term Projected 3.00% 

Long Term Pro!ected 5.30% 

[4] 

Risk 

Premium 

7.41% 

7.12% 

5.44% 

[5] 

Retumon 

E ui 

10.13% 

10.12% 

10.74% 

Notes: 

[1] Constant <strong>of</strong> regression equation 

[2] Slope <strong>of</strong> regression equation 

[3] Source: Current = Bloomberg Pr<strong>of</strong>essional, 

Near Term Projected = Blue Chip Financial Forecasts, Vol. 31, No.8, August 1, 2012, at 2, 

Long Term Projected = Blue Chip Financial Forecasts, Vol. 31, No.6, June 1, 2012, at 14 

[4) Equals (1) + In([3]) x [2] 

[5] Equals [3] + (4) 

[6] Source: SNL Financial 


[8] Source: Bloomberg Pr<strong>of</strong>essional, equals 188-trading day average (Le. lag period) as <strong>of</strong> August 31, 2012 

[9) Equals [7] - [8] 

10.00% 

'.00% 

• Y = ·o.o295In(lt)· 0.0324 

R'mO.7185 

E 

~ 6.00% 

, 

., • 

" 

• 4.00% 

. ~ 

~ 2.00% 

4.00% '.00% '.00% 16.00% 

-2.00% 

3(1.YeBr Tre""ury Ylald •



[6] [~ [8] [9] 

Date <strong>of</strong> 

3O-Year 

Natural Gas Retumon Treasury 

Rate Case E9uit~ Yield 

""k 

Premium 

1/311980 12.55% 9.39% 3.16% 

1/4/1980 13.75% 9.40% 4.35% 

1114/1980 13.20% 9.44% 3.76% 

111811980 14.00% 9.47% 4.53% 

113111980 12.61% 9.56% 3.05% 

2/811980 14.50% 9.63% 4.87% 

211411980 13.00% 9.67% 3.33% 

211511980 13.00% 9.69% 3.31% 

2129/1980 14.00% 9.85% 4.15% 

315/1980 14.00% 9.90% 4.10% 

317/1980 13.50% 9.94% 3.56% 

3/14/1980 14.00% 10.03% 3.97% 

3/27/1980 12.69% 10.19% 2.50% 

4/1/1980 14.75% 10.25% 4.50% 

4f29/1980 12.50% 10.50% 2.00% 

517/1980 14.27% 10.55% 3.72% 

5/811980 13.75% 10.55% 3.20% 

5/19/1980 15.50% 10.61% 4.89% 

5127/1980 14.60% 10.64% 3.96% 

5129/1980 16.00% 10.66% 5.34% 

6/10/1980 13.78% 10.70% 3.08% 

6/25/1980 14.25% 10.73% 3.52% 

7/911980 14.51% 10.77% 3.74% 

7117/1980 12.90% 10.78% 2.12% 

7/18/1980 13.80% 10.79% 3.01% 

712211980 14.10% 10.79% 3.31% 

7/23/1980 14.19% 10.79% 3.40% 

811/1980 12.50% 10.80% 1.70% 

8111/1980 14.85% 10.81% 4.04% 

8/2111980 13.03% 10.84% 2.19% 

8/28/1980 13.61% 10.87% 2.74% 

8/28/1980 14.00% 10.87% 3.13% 

9/4/1980 14.00% 10.89% 3.11% 

9/24/1980 15.00% 10.98% 4.02% 

10/9/1980 14.50% 11.05% 3.45% 

10/9/1980 14.50% 11.05% 3.45% 

10/24/1980 14.00% 11.09% 2.91% 

10/27/1980 15.20% 11.10% 4.10% 

10/27/1980 15.20% 11.10% 4.10% 

10/28/1980 12.00% 11.10% 0.90% 

10/2811980 13.00% 11.10% 1.90% 

10/31/1980 14.50% 11.12% 3.38% 

11/411980 15.00% 11.13% 3.87% 

11/6/1980 14.35% 11.13% 3.22% 

11/10/1980 13.25% 11.14% 2.11% 

11/17/1980 15.50% 11.15% 4.35% 

11/19/1980 13.50% 11.15% 2.35"10 

121511980 14.60% 11.14% 3.46% 

121811980 16.40% 11.14% 5.26% 

1211211980 15.45% 11.15% 4.30% 

1211711980 14.20% 11.16% 3.04% 

1211711980 14.40% 11.16% 3.24% 

1211811980 14.00% 11.17% 2.83% 

1212211980 13.45% 11.16% 2.29% 

12126/1980 14.00% 11.15% 2.85% 

12130/1980 14.50% 11.15% 3.35% 

12131/1980 14.56% 11.15% 3.41% 

in/1981 14.30% 11.14% 3.16% 

1/1211981 14.95% 11.14% 3.81% 

1/2611981 15.25% 11.20% 4.05% 

1/30/1981 13.25% 11.23% 2.02% 

2111/1981 14.50% 11.33% 3.17% 

2120/1981 14.50% 11.39% 3.11% 

3/1211981 15.65% 11.59% 4.06% 

3/2511981 15.30% 11.73% 3.57% 

4/1/1981 15.30% 11.81% 3.49% 

4/9/1981 15.00% 11.90% 3.10% 

4/29/1981 13.50% 12.11% 1.39% 

4/29/1981 14.25% 12.11% 2.14% 

4130/1981 13.60% 12.13% 1.47% 

4/30/1981 15.00% 12.13% 2.87% 

5/21/1981 14.00% 12.37% 1.63% 

613/1981 14.67% 12.45% 2.22% 

6/2211981 16.00% 12.57% 3.43% 

6/2511981 14.75% 12.59% 2.16% 

7/211981 14.00% 12.64% 1.36% 

711011981 16.00% 12.68% 3.32% 

7/14/1981 16.90% 12.71% 4.19% 

7/21/1981 15.78% 12.77% 3.01% 

7/27/1981 13.77% 12.82% 0.95% 

7/27/1981 15.50% 12.82% 2.68%




3D-Year 

Natural Gas Return on Treasury Risk 

Rate Case Eguit}! Yield Premium 

7/31/1981 13.50% 12.86% 0.64% 

7/31/1981 14.20% 12.86% 1.34% 

8/12/1981 13.72% 12.93% 0.79% 

8/1211981 13.72% 12.93% 0.79% 

8/12/1981 14.41% 12.93% 1.48% 

8/2511981 15.45% 13.01% 2.44% 

812711981 14.43% 13.04% 1.39% 

8/2811981 15.00% 13.05% 1.95% 

9/23/1981 14.34% 13.23% 1.11% 

9/24/1981 16.25% 13.25% 3.00% 

9/29/1981 14.50% 13.30% 1.20% 

9/30/1981 15.94% 13.32% 2.62% 

10{211981 14.80% 13.35% 1.45% 

10/1211981 16.25% 13.42% iS3% 

10/20/1981 15.25% 13.49% 1.76% 

10/20/1981 16.50% 13.49% 3.01% 

10/2011981 17.00% 13.49% 3.51% 

10/2311981 15.50% 13.53% 1.97% 

10126f1981 13.50% 13.55% -0.05% 

10129f1981 16.50% 13.59% 2.91% 

1114J1981 15.33% 13.62% 1.71% 

111611981 15.17% 13.63% 1.54% 

1111211981 15.00% 13.64% 1.36% 

11/2511981 15.25% 13.66% 1.59% 

11/2511981 16.10% 13.66% 2.44% 

11/2511981 16.10% 13.66% 2.44% 

11/30/1981 16.75% 13.65% 3.10% 

1211/1981 15.70% 13.65% 2.05% 

1211/1981 16.00% 13.65% 2.35% 

1211511981 15.81% 13.68% 2.13% 

12/17/1981 14.75% 13.70% 1.05% 

1212211981 15.70% 13.71% 1.99% 

12/2211981 16.00% 13.71% 2.29% 

12130/1981 16.00% 13.74% 2.26% 

12130/1981 16.25% 13.74% 2.51% 

1/4/1982 15.50% 13.74% 1.76% 

1/14/1982 11.95% 13.80% -1.85% 

1/25/1982 16.25% 13.64% 2.41% 

1/27/1982 16.84% 13.85% 2.99% 

1/31/1982 14.00% 13.85% 0.15% . 

21211982 16.24% 13.86% 2.38% 

21811982 15.50% 13.87% 1.63% 

219f1982 14.95% 13.88% 1.07% 

219/1982 15.75% 13.88% 1.87% 

2f11/1982 16.00% 13.89% 2.11% 

311/1982 15.96% 13.91% 2.05% 

3{811982 17.10% 13.91% 3.19% 

3/26/1982 16.00% 13.96% 2.04% 

3131/1982 16.25% 13.97% 2.28% 

41111982 16.50% 13.98% 2.52% 

4/6/1982 15.00% 13.98% 1.02% 

4/9/1982 16.50% 13.99% 2.51% 

4/1211982 15.10% 13.98% 1.12% 

4J12f1982 16.70% 13.98% 2.72% 

4/18/1982 14.70% 13.98% 0.72% 

4/27/1982 15.00% 13.97% 1.03% 

5/10/1982 14.57% 13.94% 0.63% 

5/14/1982 15.80% 13.92% 1.88% 

5/20/1982 15.82% 13.91% 1.91% 

5121/1982 15.50% 13.90% 1.60% 

5/2511982 16.25% 13.90% 2.35% 

6f2f1982 14.50% 13.87% 0.63% 

61711982 16.00% 13.86% 2.14% 

612311982 15.50% 13.81% 1.69% 

612511982 16.50% 13.81% 2.69% 

7/1/1982 15.55% 13.80% 1.75% 

711/1982 16.00% 13.80% 2.20% 

7/2f1982 15.10% 13.79% 1.31% 

7/1311982 16.80% 13.76% 3.04% 

7/2211982 14.50% 13.72% 0.78% 

7/2811982 16.10% 13.69% 2.41% 

7/30/1982 14.82% 13.67% 1.15% 

8/4/1982 15.58% 13.65% 1.93% 

81611982 16.50% 13.63% 2.87% 

8/11/1982 17.11% 13.62% 3.49% 

812511982 16.00% 13.58% 2.42% 

8130/1982 16.25% 13.58% 2.67% 

913/1982 15.50% 13.56% 1.94% 

9/9/1982 16.04% 13.55% 2.49% 

9/1511982 16.04% 13.52% 2.52% 

9117/1982 15.25% 13.51% 1.74% 

9129/1982 14.50% 13.43% 1.07%




3D-Year 

Natural Gas Retum on Treasury Risk 

Rate case Egui~ Yield PremIum 

9/30/1982 14.74% 13.42% 1.32% 

9/30/1982 15.50% 13.42% 2.08% 

9130/1982 16.50% 13.42% 3.08% 

913011982 16.70% 13.42% 3.28% 

10/1/1982 16.50% 13.41% 3.09% 

10/811982 15.00% 13.34% 1.66% 

10/15/1982 15.90% 13.26% 2.64% 

10119/1982 15.90% 13.23% 2.67% 

10/27/1982 17.00% 13.13% 3.87% 

10/28/1982 14.75% 13.11% 1.64% 

11/211982 16.25% 13.08% 3.17% 

11/4/1982 15.75% 13.04% 2.71% 

11/511982 14.73% 13.02% 1.71% 

11/1711982 16.00% 12.87% 3.13% 

11/2311982 15.50% 12.79% 2.71% 

11/2411982 14.50% 12.78% 1.72% 

11/2411982 16.02% 12.78% 3.24% 

1113011982 12.98% 12.73% 0.25% 

1113011982 15.50% 12.73% 2.77% 

1113Of1982 15.50% 12.73% 2.77% 

11/30f1982 15.65% 12.73% 2.92% 

11/30f1982 16.00% 12.73% 3.27% 

11/30f1982 16.10% 12.73% 3.37% 

12f3f1982 15.33% 12.68% 2.65% 

1218f1982 15.75% 12.64% 3.11% 

1211311982 16.00% 12.59% 3.41% 

12114f1982 16.40% 12.57% 3.83% 

12f17f1982 16.25% 12.53% 3.72% 

12120f1982 15.00% 12.51% 2.49% 

12121/1982 15.70% 12.S0% 3.20% 

1212811982 15.2S% 12.43% 2.82% 

1212811982 15.25% 12.43% 2.82% 

1212911982 16.25% 12.41% 3.84% 

1212911982 16.25% 12.41% 3.84% 

1/11/1983 15.90% 12.26% 3.64% 

1/1211983 15.50% 12.25% 3.25% 

1/18/1983 15.00% 12.19% 2.81% 

1/24/1983 15.50% 12.14% 3.36% 

1/24/1983 16.00% 12.14% 3.86% 

1/28/1983 14.90% 12.09% 2.81% 

1/31/1983 15.00% 12.07% 2.93% 

211011983 15.00% 11.98% 3.02% 

2125/1983 15.70% 11.85% 3.85% 

3f2/1983 15.25% 11.80% 3.45% 

3/16f1983 16.00% 11.64% 4.36% 

3121f1983 14.96% 11.58% 3.38% 

312311983 15.40% 11.54% 3.86% 

312311983 16.10% 11.54% 4.56% 

312411983 1S.00% 11.S3% 3.47% 

4/1211983 13.25% 11.31% 1.94% 

4/29'1983 15.05% 11.11% 3.94% 

5/311983 15.40% 11.08% 4.32% 

5/911983 15.50% 11.01% 4.49% 

5/19'1983 14.85% 10.90% 3.95% 

5/31/1983 14.00% 10.85% 3.15% 

6f2l1983 14.S0% 10.83% 3.67% 

6f7f1983 14.50% 10.81% 3.69% 

61911983 14.85% 10.80% 4.05% 

6/2011983 14.15% 10.74% 3.41% 

6/20/1983 16.50% 10.74% 5.76'% 

6127/1983 14.50% 10.72% 3.78% 

6/30/1983 14.80% 10.71% 4.09% 

6/30/1983 15.90% 10.71% 5.19% 

7/1/1983 14.80% 10.70% 4.10% 

7/S/1983 15.00% 10.70% 4.30% 

7/8/1983 15.50% 10.69% 4.81% 

7/19/1983 15.00% 10.71% 4.29% 

7/19/1983 15.10% 10.71% 4.39% 

8'1811983 15.30% 10.81% 4.49% 

8'1911983 15.79% 10.82% 4.97% 

812911983 16.00% 10.85% 5.15% 

8/3111983 14.7S% 10.86% 3.89% 

8/31/1983 15.25% 10.86% 4.39% 

SlBf1983 14.75% 10.89% 3.86% 

9/16'1983 15.51% 10.93% 4.58% 

9/2611983 14.50% 10.96% 3.54% 

9/2811983 14.25% 10.97% 3.28% 

9/30/1983 16.15% 10.98% 5.17% 

9/3011983 16.25% 10.98% 5.27% 

10'111983 16.25% 10.98% 5.27% 

10/13/1983 15.52% 11.02% 4.50% 

10/19/1983 15.20% 11.04% 4.16%




3O·Year 


RaleCase Eguit}!: Yield Premium 

10/26{1983 14.75% 11.06% 3.69% 

10/27/1983 14.88% 11.07% 3.81% 

10/27/1983 15.33% 11.07% 4.26% 

11/911983 14.82% 11.10% 3.72% 

11{9/1983 16.51% 11.10% 5.41% 

111911983 16.51% 11.10% 5.41% 

12/1/1983 14.50% 11.17% 3.33% 

12/811983 15.90% 11.20% 4.70% 

12/9/1983 15.30% 11.21% 4.09% 

12/12/1983 14.50% 11.21% 3.29% 

12/12/1983 15.50% 11.21% 4.29% 

12120/1983 15.40% 11.26% 4.14% 

12}20/1983 16.00% 11.26% 4.74% 

1212211983 15.75% 11.27% 4.48% 

12/29/1983 15.00% 11.29% 3.71% 

12130/1983 15.00% 11.30% 3.70% 

1/10/1984 15.90% 11.34% 4.56% 

111311984 15.50% 11.36% 4.14% 

1/1811984 15.53% 11.38% 4.15% 

1/2611984 15.90% 11.41% 4.49% 

211411984 14.25% 11.50% 2.75% 

2128/1984 14.50% 11.58% 2.92% 

3/20/1984 16.00% 11.69% 4.31% 

3/23/1984 15.50% 11.72% 3.78% 

419/1984 15.20% 11.81% 3.39% 

4/18{1984 16.20% 11.85% 4.35% 

4/27/1984 15.85% 11.90% 3.95% 

511511984 13.35% 11.99% 1.36% 

5116/1984 15.00% 12.00% 3.00% 

512211984 14.40% 12.03% 2.37% 

6/1311984 15.50% 12.18% 3.32% 

7/10/1984 16.00% 12.36% 3.64% 

81711984 16.69% 12.50% 4.19% 

8/9/1984 15.33% 12.51% 2.82% 

8117/1984 14.82% 12.53% 2.29% 

8/21/1984 14.64% 12.54% 2.10% 

8/27/1984 14.52% 12.56% 1.96% 

8/28/1984 14.75% 12.56% 2.19% 

8/30/1984 15.60% 12.57% 3.03% 

9/1211984 15.60% 12.60% 3.00% 

9/1211984 15.90% 12.60% 3.30% 

9/2511984 16.25% 12.61% 3.64% 

10f211984 14.80% 12.62% 2.18% 

10/911984 14.75% 12.63% 2.12% 

10/1011984 15.50% 12.63% 2.87% 

10/18/1984 15.00% 12.64% 2.36% 

10/24{1984 15.50% 12.64% 2.86% 

11/7/1984 15.00% 12.64% 2.36% 

11/20/1984 15.92% 12.62% 3.30% 

11/30/1984 15.50% 12.60% 2.90% 

1211811984 15.00% 12.55% 2.45% 

12120/1984 15.00% 12.53% 2.47% 

12128/1984 15.75% 12.51% 3.24% 

1212811984 16.25% 12.51% 3.74% 

1/211985 16.00% 12.50% 3.50% 

1/31/1985 14.75% 12.37% 2.38% 

217/1985 14.85% 12.33% 2.52% 

211511985 15.00% 12.28% 2.72% 

2120/1985 14.50% 12.26% 2.24% 

212211985 14.86% 12.26% 2.60% 

311411985 15.50% 12.17% 3.33% 

312811985 14.80% 12.09% 2.71% 

4/9/1985 15.50% 12.03% 3.47% 

4/1611985 15.70% 11.97% 3.73% 

6/10/1985 15.75% 11.59% 4.16% 

6/2611985 14.82% 11.47% 3.35% 

7f9/1985 15.00% 11.39% 3.61% 

7/2611985 14.50% 11.27% 3.23% 

8129/1985 14.50% 11.12% 3.38% 

8/3011985 14.38% 11.11% 3.27% 

9/1211985 15.25% 11.07% 4.18% 

9/2311985 15.30% 11.04% 4.26% 

9/2511985 14.50% 11.03% 3.47% 

9/26/1985 13.80% 11.02% 2.78% 

9/2611985 14.50% 11.02% 3.48% 

10/2511985 15.25% 10.92% 4.33% 

11/8/1985 12.94% 10.86% 2.08% 

11/20/1985 14.90% 10.81% 4.09% 

11/2511985 13.30% 10.79% 2.51% 

1216/1985 12.00% 10.72% 1.28% 

12111/1985 14.90% 10.69% 4.21% 

12/20/1985 14.88% 10.60% 4.28%




3O-Year 

Natural Gas Retumon Treasury Risk 

Rate Case Eguity Yield Premium 

12120/1985 15.00% 10.60% 4.40% 

12120/1985 15.00% 10.60% 4.40% 

12130/1985 15.75% 10.53% 5.22% 

12/31/1985 14.00% 10.52% 3.48% 

12/31/1985 14.50% 10.52% 3.98% 

1/17/1986 14.50% 10.38% 4.12% 

2/11/1986 12.50% 10.21% 2.29% 

2/12/1986 15.20% 10.20% 5.00% 

3/11/1986 14.00% 9.98% 4.02% 

4/211986 12.90% 9.77% 3.13% 

4/28/1986 13.01% 9.47% 3.54% 

5/21/1986 13.25% 9.19% 4.06% 

5/28/1986 14.00% 9.12% 4.88% 

5/2911986 13.90% 9.11% 4.79% 

61211986 13.00% 9.08% 3.92% 

6{11{1986 14.00% 8.98% 5.02% 

6f1311986 13.55% 8.95% 4.60% 

S127/19BS 11.88% 8.78% 3.10% 

7/14f1986 12.60% 8.60% 4.00% 

7J30f1986 13.30% 8.39% 4.91% 

8(14/1986 13.50% 8.23% 5.27% 

9/5/1986 13.30% 8.03% 5.27% 

9123/1986 12.75% 7.91% 4.84% 

10{30/1986 13.00% 7.68% 5.32% 

10/31/1986 13.75% 7.67% 6.08% 

11/10/1986 14.00% 7.62% 6.38% 

11/1911986 13.75% 7.57% 6.18% 

11/2511986 13.15% 7.54% 5.61% 

1212211986 13.80% 7.48% 6.32% 

12130/1986 13.90% 7.47% 6.43% 

1/20/1987 12.75% 7.47% 5.28% 

1/2311987 13.55% 7.47% 6.08% 

1/27/1987 12.16% 7.47% 4.69% 

211311987 12.60% 7.47% 5.13% 

212411987 12.00% 7.47% 4.53% 

3130/1987 12.20% 7.46% 4.74% 

3131/1987 13.00% 7.46% 5.54% 

5/511987 12.85% 7.60% 5.25% 

5/28/1987 13.50% 7.72% 5.78% 

6/15/1987 13.20% 7.80% 5.40% 

6/30/1987 12.60% 7.85% 4.75% 

7/10/1987 12.90% 7.88% 5.02% 

7/27/1987 13.50% 7.93% 5.57% 

8125/1987 11.40% 8.08% 3.32% 

9/18/1987 13.00% 8.27% 4.73% 

10/20/1987 12.60% 8.54% 4.06% 

10/20/1987 12.98% 8.54% 4.44% 

11/1211987 12.75% 8.67% 4.08% 

11113/1987 12.75% 8.68% 4.07% 

11124/1987 12.50% 8.73% 3.77% 

121811987 12.50% 8.81% 3.69% 

1212211987 12.00% 8.90% 3.10% 

12131/1987 12.85% 8.93% 3.92% 

12131/1987 13.25% 8.93% 4.32% 

1/15/1988 13.15% 8.98% 4.17% 

1/20/1988 12.75% 8.99% 3.76% 

1/29/1988 13.20% 8.99% 4.21% 

214/1988 12.60% 8.99% 3.61% 

3/23/1988 13.00% 8.94% 4.06% 

5f27/1988 13.18% 9.02% 4.16% 

611411988 13.50% 9.00% 4.50% 

6/17/1988 11.72% 8.99% 2.73% 

6124{1988 11.50% 8.97% 2.53% 

7/1/1988 12.75% 8.95% 3.80% 

718t1988 12.00% 8.94% 3.06% 

7/18f1988 12.00% 8.91% 3.09% 

7/2011988 13.40% 8.90% 4.50% 

8f8t1988 12.74% 8.90% 3.84% 

9/2011988 12.90% 8.93% 3.97% 

9/26/1988 12.40% 8.93% 3.47% 

9/27/1988 13.65% 8.93% 4.72% 

9/3011988 13.25% 8.94% 4.31% 

10/1311988 13.10% 8.93% 4.17% 

10/21/1988 12.80% 8.93% 3.87% 

10/25/1988 13.25% 8.94% 4.31% 

10/26/1988 13.50% 8.94% 4.56% 

10/27/1988 12.95% 8.94% 4.01% 

10/28/1988 13.00% 8.94% 4.06% 

11/15/1988 12.00% 8.97% 3.03% 

11/29/1988 12.75% 9.01% 3.74% 

1211911988 13.00% 9.05% 3.95% 

12121/1988 12.90% 9.05% 3.85%



Dale <strong>of</strong> 

30·Year 


Rate Case E!3ujt~ Yield Premium 

1212211988 13.50% 9.05% 4.45% 

1/26/1989 12.60% 9.06% 3.54% 

1/27/1989 13.00% 9.06% 3.94% 

218/1989 13.37% 9.05% 4.32% 

3I8f1989 13.00% 9.04% 3.96% 

5/4f1989 13.00% 9.04% 3.96% 

61811989 13.50% 8.96% 4.54% 

7/19f1989 11.80% 8.84% 2.96% 

7/2511989 12.80% 8.82% 3.98% 

7/31/1989 13.00% 8.80% 4.20% 

8/14/1989 12.50% 8.76% 3.74% 

8/2211989 12.80% 8.73% 4.07% 

8/23/1989 12.90% 8.73% 4.17% 

9/21/1989 12.10% 8.63% 3.47% 

10/611989 13.00% 8.58% 4.42% 

10/1711989 12.41% 8.54% 3.87% 

10/18/1989 13.25% 8.54% 4.71% 

10/2011989 12.90% 8.53% 4.37% 

10/31/1989 13.60% 8.50% 5.10% 

11/3/1989 12.93% 8.48% 4.45% 

11/511989 13.20% 8.48% 4.72% 

ll/S/1SSS 12.60% 8.46% 4.14% 

11/9/1989 13.00% 8.46% 4.54% 

11/28f1989 12.75% 8.37% 4.38% 

1217/1989 13.25% 8.33% 4.92% 

1211511989 13.00% 8.28% 4.72% 

1212011989 12.90% 8.26% 4.64% 

12/21/1989 12.80% 8.26% 4.54% 

12121/1989 12.90% 8.26% 4.64% 

12127/1989 12.50% 8.24% 4.26% 

119/1990 13.00% 8.19% 4.81% 

1/18/1990 12.50% 8.17% 4.33% 

1/26/1990 12.10% 8.15% 3.95% 

3121/1990 12.80% 8.15% 4.65% 

3128/1990 13.00% 8.16% 4.84% 

4/5/1990 12.20% 8.17



Datecf 

3O-Year 


RaleGase Eguit~ Yield Premium 

1019/1991 11.70% 8.21% 3.49% 

10{1511991 13.40% 8.20% 5.20% 

11/1/1991 12.90% 8.20% 4.70% 

1118/1991 12.75% 8.20% 4.55% 

11/2611991 11.60% 8.18% 3.42% 

11/26/1991 12.00% 8.18% 3.82% 

11/27/1991 12.70% 8.18% 4.52% 

1216/1991 12.70% 8.16% 4.54% 

1211011991 11.75% 8.16% 3.59% 

12119/1991 12.60% 8.14% 4.46% 

1211911991 12.80% 8.14% 4.66% 

1213Of1991 12.10% 8.11% 3.99% 

1/2211992 12.84% 8.05% 4.79% 

1/31/1992 12.00% 8.03% 3.97% 

2/20/1992 13.00% 8.00% 5.00% 

2/2711992 11.75% 7.99% 3.76% 

3118/1992 12.50% 7.95% 4.55% 

511511992 12.75% 7.87% 4.88% 

6124/1992 12.20% 7.85% 4.35% 

6f29/1992 11.00% 7.85% 3.15% 

7/14/1992 12.00% 7.83% 4.17% 

7/2211992 11.20% 7.82% 3.38% 

8{10/1992 12.10% 7.79% 4.31% 

8f26{1992 12.43% 7.75% 4.68% 

9/30{1992 11.60% 7.72% 3.88% 

10{6{1992 12.25% 7.72% 4.53% 

10{1311992 12.75% 7.71% 5.04% 

10/2311992 11.65% 7.71% 3.94% 

10{28{1992 12.25% 7.71% 4.54% 

10{29f1992 12.75% 7.71% 5.04% 

10{30f1992 11.40% 7.70% 3.70% 

11{9/1992 10.60% 7.70% 2.90% 

11/25/1992 11.00% 7.68% 3.32% 

11/2511992 12.00% 7.68% 4.32% 

121311992 11.85% 7.67% 4.18% 

12116/1992 11.90% 7.64% 4.26% 

12/2211992 12.30% 7.63% 4.67% 

1212211992 12.40% 7.63% 4.77% 

12130/1992 12.00% 7.61% 4.39% 

12131/1992 12.00% 7.61% 4.39% 

1/1211993 12.00% 7.59% 4.41% 

1/1211993 12.00% 7.59% 4.41% 

21211993 11.40% 7.53% 3.87% 

212211993 11.60% 7.48% 4.12% 

412311993 11.75% 7.27% 4.48% 

513/1993 11.50% 7.25% 4.25% 

513/1993 11.75% 7.25% 4.50% 

S/3/1993 12.00% 7.20% 4.80% 

Snl1993 11.50% 7.20% 4.30% 

6f2211993 11.75% 7.16% 4.59% 

7/21/1993 11.78% 7.07% 4.71% 

7/21/1993 11.90% 7.07% 4.83% 

7/2311993 11.50% 7.06% 4.44% 

7/29/1993 11.50% 7.03% 4.47% 

8{1211993 10.75% 6.98% 3.77% 

8124/1993 11.50% 6.92% 4.58% 

8/31/1993 11.90% 6.88% 5.02% 

9/1/1993 11.25% 6.88% 4.37% 

9/1/1993 11.47% 6.88% 4.59% 

9/27/1993 10.50% 6.74% 3.76% 

9/29/1993 11.00% S.73% 4.27% 

9/30/1993 11.60% 6.72% 4.88% 

10/8/1993 11.50% 6.68% 4.82% 

10/14/1993 11.20% 6.65% 4.55% 

10/1511993 11.75% 6.65% 5.10% 

10/2511993 11.55% 6.60% 4.95% 

10/2811993 11.50% 6.58% 4.92% 

10/29/1993 10.10% 6.58% 3.52% 

10/29/1993 10.20% 6.58% 3.62% 

10/29/1993 11.25% 6.58% 4.67% 

11/211993 10.80% 6.56% 4.24% 

11/1211993 11.80% 6.53% 5.27% 

11/2311993 12.50% 6.51% 5.99% 

11/26/1993 11.00% 6.50% 4.50% 

1211/1993 11.45% 6.49% 4.96% 

1211611993 10.60% 6.46% 4.14% 

12116/1993 11.20% 6.46% 4.74% 

12/21/1993 11.30% 6.45% 4.85% 

12/2211993 11.00% 6.44% 4.56% 

12/2311993 10.10% 6.44% 3.66% 

1/5/1994 11.50% 6.41% 5.09% 

1110/1994 11.00% 6.40% 4.60%




30-Year 


Rate Gase Eguit~ Yield Premium 

1/2511994 12.00% 6.37% 5.63% 

2/211994 10.40% 6.35% 4.05% 

219/1994 10.70% 6.34% 4.36% 

4/6/1994 11.24% 6.35% 4.89% 

412511994 11.00% 6.39% 4.61% 

6f16/1994 10.50% 6.63% 3.87% 

6f2311994 10.60% 6.67% 3.93% 

7/19/1994 10.70% 6.83% 3.87% 

9/29/1994 10.90% 7.20% 3.70% 

9/2911994 11.00% 7.20% 3.80% 

10f711994 11.87% 7.25% 4.62% 

10{,8/1994 11.50% 7.31% 4.19% 

10/18/1994 11.50% 7.31% 4.19% 

10/2411994 11.00% 7.35% 3.65% 

11/2211994 12.12% 7.52% 4.60% 

11/2911994 11.30% 7.55% 3.75% 

1211/1994 11.00% 7.56% 3.44% 

1218/1994 11.50% 7.59% 3.91% 

12/8{1994 11.70% 7.59% 4.11% 

12/1211994 11.82% 7.60% 4.22% 

12/14{1994 11.50% 7.61% 3.89% 

12{19f1994 11.50% 7.62% 3.88% 

4/19/1995 11.00% 7.71% 3.29% 

9/11/1995 11.30% 7.16% 4.14% 

9/15/1995 10.40% 7.13% 3.27% 

9/29/1995 11.50% 7.06% 4.44% 

10/13/1995 10.76% 6.99% 3.77% 

111711995 12.50% 6.87% 5.63% 

11/811995 11.10% 6.86% 4.24% 

11/8/1995 11.30% 6.86% 4.44% 

1111711995 10.90% 6.81% 4.09% 

1112011995 11.40% 6.80% 4.60% 

11127/1995 13.60% 6.77% 6.83% 

12114/1995 11.30% 6.68% 4.62% 

12120/1995 11.60% 6.65% 4.95% 

1/31/1996 11.30% 6.46% 4.84% 

3/11/1996 11.60% 6.40% 5.20% 

4/311996 11.13% 6.41% 4.72% 

4/1511996 10.50% 6.41% 4.09% 

4117/1996 10.77% 6.41% 4.36% 

4126/1996 10.60% 6.40% 4.20% 

5/10/1996 11.00% 6.41% 4.59% 

5113/1996 11.25% 6.41% 4.84% 

713f1996 11.25% 6.49% 4.76% 

7/2211996 11.25% 6.54% 4.71% 

1013/1996 10.00% 6.77% 3.23% 

10f29/1996 11.30% 6.84% 4.46% 

11/26/1996 11.30% 6.86% 4.44% 

11/27/1996 11.30% 6.86% 4.44% 

11/29f1996 11.00% 6.85% 4.15% 

1211211996 11.96% 6.85% 5.11% 

12117/1996 11.50% 6.85% 4.65% 

1/2211997 11.30% 6.83% 4.47% 

1/27/1997 11.25% 6.83% 4.42% 

1/31/1997 11.25% 6.83% 4.42% 

2113/1997 11.00% 6.82% 4.18% 

2113/1997 11.80% 6.82% 4.98% 

2120/1997 11.80% 6.81% 4.99% 

3/27/1997 10.75% 6.79% 3.96% 

4129/1997 11.70% 6.80% 4.90% 

7f17l1997 12.00% 6.77% 5.23% 

10/29/1997 10.75% 6.70% 4.05% 

10/3111997 11.25% 6.70% 4.55% 

12124/1997 10.75% 6.53% 4.22% 

4f28/1998 10.90% 6.11% 4.79% 

4/30/1998 12.20% 6.10% 6.10% 

6f30f1998 11.00% 5.94% 5.06% 

8f26/1998 10.93% 5.82% 5.11% 

9f3f1998 11.40% 5.80% 5.60% 

9/15/1998 11.90% 5.77% 6.13% 

101711998 11.06% 5.70% 5.36% 

10/30/1998 11.40% 5.63% 5.77% 

12110/1998 12.20% 5.52% 6.68% 

12117/1998 12.10% 5.49% 6.61% 

2119/1999 11.15% 5.32% 5.83% 

3/1/1999 10.65% 5.31% 5.34% 

3/1/1999 10.65% 5.31% 5.34% 

6/8/1999 11.25% 5.35% 5.90% 

11/1211999 10.25% 5.92% 4.33% 

12114/1999 10.50% 5.99% 4.51% 

1/28/2000 10.71% 6.16% 4.55% 

2117/2000 10.60% 6.20% 4.40%




3D-Year 


Rate Gase Egui~ Yield Premium 

5125/2000 10.80% 6.19% 4.61% 

611912000 11.05% 6.18% 4.87% 

612212000 11.25% 6.18% 5.07% 

7117/2000 11.06% 6.15% 4.91% 

7120/2000 12.20% 6.14% 6.06% 

8f1112000 11.00% 6.11% 4.89% 

912712000 11.25% 6.01% 5.24% 

9129f2000 11.16% 6.00% 5.16% 

101512000 11.30% 5.98% 5.32% 

11/28/2000 12.90% 5.87% 7.03% 

11/30/2000 12.10% 5.87% 6.23% 

2/512001 11.50% 5.7,6% 5.74% 

311512001 11.25% 5.67% 5.58% 

5/8/2001 10.75% 5.61% 5.14% 

10/2412001 10.30% 5.54% 4.76% 

10/2412001 11.00% 5.54% 5.46% 

119{2002 10.00% 5.50% 4.50% 

1/30f2002 11.00% 5.47% 5.53% 

1/3112002 11.00% 5.47% 5.53% 

4/17/2002 11.50% 5.44% 6.06% 

4129f2002 11.00% 5.45% 5.55% 

6111/2002 11.77% 5.48% 6.29% 

6/20/2002 12.30% 5.47% 6.83% 

8/2812002 11.00% 5.49% 5.51% 

9/11/2002 11.20% 5.45% 5.75% 

9/12/2002 12.30% 5.45% 6.85% 

10/28/2002 11.30% 5.35% 5.95% 

10/30/2002 10.60% 5.34% 5.26% 

111112002 12.60% 5.34% 7.26% 

111712002 11.40% 5.33% 6.07% 

111812002 10.75% 5.33% 5.42% 

11120f2002 10.00% 5.30% 4.70% 

11120f2002 10.50% 5.30% 5.20% 

1214/2002 10.75% 5.27% 5.48% 

12f3012002 11.20% 5.19% 6.01% 

1/6/2003 11.25"10 5.17% 6.08% 

212812003 12.30% 5.01% 7.29% 

317/2003 9.96% 4.99% 4.97% 

311212003 11.40% 4.97% 6.43% 

312012003 12.00% 4.95% 7.05% 

41312003 12.00% 4.93% 7.07% 

512/2003 11.40% 4.88% 6.52% 

511512003 11.05% 4.87% 6.18% 

612612003 11.00% 4.80% 6.20% 

71112003 11.00% 4.80% 6.20% 

7/29f2003 11.71% 4.78% 6.93% 

8122/2003 10.20% 4.82% 5.38% 

9117/2003 9.90% 4.84% 5.06% 

9/2512003 10.25% 4.85% 5.40% 

1011712003 10.54% 4.87% 5.67% 

1012212003 10.46% 4.87% 5.59% 

10/22/2003 10.71% 4.87% 5.84% 

10/3012003 11.00% 4.88% 6.12% 

10/31/2003 10.20% 4.88% 5.32% 

10131/2003 10.75% 4.88% 5.87% 

11/10/2003 10.60% 4.89% 5.71% 

1219/2003 10.50% 4.93% 5.57% 

1211812003 10.50% 4.94% 5.56% 

12119/2003 12.00% 4.94% 7.06% 

12119/2003 12.00% 4.94% 7.06% 

111312004 10.25% 4.95% 5.30% 

1/1312004 12.00% 4.95% 7.05% 

219/2004 11.25% 4.98% 6.27% 

3116/2004 10.90% 5.05% 5.85% 

3116/2004 10.90% 5.05% 5.85% 

512512004 10.00% 5.06% 4.94% 

£/212004 11.22% 5.07% 6.15% 

6/30/2004 10.50% 5.10% 5.40% 

7/8/2004 10.00% 5.10% 4.90% 

7/22/2004 10.25% 5.10% 5.15% 

812612004 10.50% 5.10% 5.40% 

812612004 10.50% 5.10% 5.40% 

9/912004 10.40% 5.10% 5.30% 

9/21/2004 10.50% 5.09% 5.41% 

9/27/2004 10.30% 5.09% 5.21% 

9/27/2004 10.50% 5.09% 5.41% 

10/20/2004 10.20% 5.08% 5.12% 

11/30/2004 10.60% 5.08% 5.52% 

1218/2004 9.90% 5.09% 4.81% 

12/21/2004 11.50% 5.09% 6.41% 

12/22/2004 11.50% 5.09% 6.41% 

12/28/2004 10.25% 5.09% 5.16%




30-Year 

Natural Gas Retum on Treasury 

I 

Risk 

3/2912005 11.00% 4.86% 6.14% 

4/1312005 10.60% 4.84% 5.76% 

4/2812005 11.00% 4.80% 6.20% 

511712005 10.00% 4.77% 5.23% 

6/8/2005 10.18% 4.71% 5.47% 

6/10/2005 10.90% 4.71% 6.19% 

7/612005 10.50% 4.65% 5.85% 

7/19/2005 11.50% 4.63% 6.87% 

8{11/2005 10.40% 4.60% 5.80% 

911912005 9.45% 4.53% 4.92% 

9/3012005 10.51% 4.52% 5.99% 

10(4/2005 9.90% 4.52% 5.38% 

10/4/2005 10.75% 4.52% 6.23% 

10/1412005 10.40% 4.52% 5.88% 

10/31/2005 10.25% 4.53% 5.72% 

11/212005 9.70% 4.53% 5.17% 

11/3012005 10.00% 4.54% 5.46% 

121912005 9.70% 4.53% 5.17% 

12/12/2005 11.00% 4.53% 6.47% 

12/2012005 10.13% 4.53% 5.60% 

12/21/2005 10.40% 4.53% 5.87% 

12/21/2005 11.00% 4.53% 6.47% 

12/22/2005 10.20% 4.53% 5.67% 

12/2212005 11.00% 4.53% 6.47% 

12/28/2005 10.00% 4.52% 5.48% 

1/5/2006 11.00% 4.52% 6.48% 

1/2512006 11.20% 4.52% 6.6S% 

1/2512006 11.20% 4.52% 6.6S% 

213/2006 10.50% 4.52% 5.9S% 

211512006 9.50% 4.53% 4.97% 

4126/2006 10.60% 4.65% 5.95% 

712412006 9.60% 4.86% 4.74% 

712412006 10.00% 4.86% 5.14% 

9/20/2006 11.00% 4.93% 6.07% 

9/26/2006 10.75% 4.93% 5.82% 

10/20/2006 9.S0% 4.96% 4.S4% 

111212006 9.71% 4.96% 4.75% 

11/9/2006 10.00% 4.97% 5.03% 

11/2112006 11.00% 4.98% 6.02% 

121512006 10.20% 4.97% 5.23% 

1/5/2007 10.40% 4.95% 5.45% 

1/9/2007 11.00% 4.94% 6.06% 

1/11/2007 10.90% 4.94% 5.96% 

1/19/2007 10.80% 4.93% 5.S7% 

1126/2007 10.00% 4.92% 5.08% 

218/2007 10.40% 4.91% 5.49% 

3114/2007 10.10% 4.86% 524% 

3120/2007 10.25% 4.85% 5.40% 

3121/2007 11.35% 4.84% 6.51% 

312212007 10.50% 4.84% 5.66% 

3129/2007 10.00% 4.83% 5.17% 

6/1312007 10.75% 4.81% 5.94% 

6/29/2007 9.53% 4.S4% 4.69% 

6/29/2007 10.10% 4.S4% 5.26% 

71312007 10.25% 4.S5% 5.40% 

7/1312007 9.50% 4.S6% 4.64% 

7/24/2007 10.40% 4.S7% 5.53% 

811/2007 10.15% 4.S8% 5.27% 

8/29/2007 10.50% 4.91% 5.59% 

9/10/2007 9.71% 4.91% 4.80% 

9/19/2007 10.00% 4.91% 5.09% 

912512007 9.70% 4.91% 4.79% 

10/S/2007 10.48% 4.92% 5.56% 

10/1912007 10.50% 4.91% 5.59% 

10/2512007 9.65% 4.91% 4.74% 

11/1512007 10.00% 4.89% 5.11% 

11/20/2007 9.90% 4.89% 5.01% 

11/27/2007 10.00% 4.SS% 5.12% 

11/29/2007 10.90% 4.88% 6.02% 

12114/2007 10.80% 4.87% 5.93% 

12118/2007 10.40% 4.86% 5.54% 

12/19/2007 9.S0% 4.S6% 4.94% 

12/19/2007 9.S0% 4.S6% 4.94% 

12/19/2007 10.20% 4.S6% 5.34% 

12/21/2007 9.10% 4.S6% 4.24% 

1/S/2008 10.75% 4.S3% 5.92% 

1/1712008 10.75% 4.S1% 5.94% 

1/1712008 10.75% 4.S1% 5.94% 

2/5/2008 9.99% 4.7S% 5.21% 

215/2008 10.19% 4.7S% 5.41% 

2113/2008 10.20% 4.76% 5.44%



Datecf 

3O-Year 


Rate case Eguil:i Yield Premium 

3131/2008 10.00% 4.63% 5.37% 

5/2812008 10.50% 4.53% 5.97% 

6/24/2008 10.00% 4.52% 5.48% 

6/27/2008 10.00% 4.52% 5.48% 

7/31/2008 10.70% 4.50% 6.20% 

7/31/2008 10.82% 4.50% 6.32% 

8/27/2008 10.25% 4.50% 5.75% 

9f212Q08 10.25% 4.50% 5.75% 

9/19f2008 10.70% 4.48% 6.22% 

9/24/2008 10.68% 4.48% 6.20% 

9/24/2008 10.68% 4.48% 6.20% 

9/24/2008 10.68% 4.48% 6.20% 

9/30/2008 10.20% 4.48% 5.72% 

10/312008 10.30% 4.47% 5.83% 

101812008 10.15% 4.47% 5.68% 

10120/2008 10.06% 4.47% 5.59% 

10/24/2008 10.60% 4.46% 6.14% 

10/24/2008 10.BO% 4.46% 6.14% 

1112112008 10.50% 4.42% 6.08% 

11/2112008 10.50% 4.42% 6.08% 

1112112008 10.50% 4.42% 6.08% 

11/2412008 10.50% 4.42% 6.08% 

121312008 10.39% 4.37% 6.02% 

1212412008 10.00% 4.26% 5.74% 

12126/2008 10.10% 4.24% 5.86% 

12129/2008 10.20% 4.23% 5.97% 

1/1312009 10.45% 4.14% 6.31% 

21212009 10.05% 4.04% 6.01% 

319/2009 10.30% 3.90% 6.40% 

3/25/2009 10.17% 3.84% 6.33% 

41212009 10.75% 3.81% 6.94% 

5/5/2009 10.75% 3.71% 7.04% 

5/15/2009 10.20% 3.70% 6.50% 

5129/2009 9.54% 3.70% 5.84% 

6/3/2009 10.10% 3.71% 6.39% 

6/2212009 10.00"k 3.73% 6.27% 

6/29/2009 10.21% 3.74% 6.47% 

6/30/2009 9.31% 3.74% 5.57% 

7/17/2009 9.26% 3.75% 5.51% 

7/17/2009 10.50% 3.75% 6.75% 

10/1612009 10.40% 4.09% 6.31% 

10/26/2009 10.10% 4.11% 5.99% 

10/2812009 10.15% 4.11% 6.04% 

10/2812009 10.15% 4.11% 6.04% 

10/3012009 9.95% 4.12% 5.83% 

11/2012009 9.45% 4.18% 5.27% 

12114/2009 10.50% 4.24% 6.26% 

12116/2009 10.75% 4.25% 6.50% 

1211712009 10.30% 4.25% 6.05% 

12/1812009 10.40% 4.26% 6.14% 

12/18/2009 10.40% 4.26% 6.14% 

12118/2009 10.50% 4.26% 6.24% 

1212212009 10.20% 4.27% 5.93% 

1212212009 10.40% 4.27% 6.13% 

12128/2009 10.85% 4.29% 6.56% 

12129/2009 10.38% 4.29% 6.09% 

1/11/2010 10.24% 4.34% 5.90% 

1/21/2010 10.23% 4.37% 5.86% 

1/21/2010 10.33% 4.37% 5.96% 

1/26/2010 10040% 4.37% 6.03% 

2110/2010 10.00% 4.39% 5.61% 

212312010 10.50% 4.40% 6.10% 

319/2010 9.60% 4.40% 5.20% 

3/24/2010 10.13% 4.42% 5.71% 

3/31/2010 10.70% 4.43% 6.27% 

4/1/2010 9.50% 4.43% 5.07% 

41212010 10.10% 4.44% 5.66% 

4/8/2010 10.35% 4.44% 5.91% 

4/29/2010 9.19% 4.46% 4.73% 

4/29/2010 9.40% 4.46% 4.94% 

4/29/2010 9.40% 4.46% 4.94% 

5/17/2010 10.55% 4.46% 6.09% 

5124/2010 10.05% 4.46% 5.59% 

613/2010 11.00% 4.46% 6.54% 

6/16/2010 10.00% 4.45% 5.55% 

6/18/2010 10.30% 4.45% 5.85% 

819/2010 12.55% 4.41% 8.14% 

8117/2010 10.10% 4.40% 5.70% 

9/16/2010 9.60% 4.31% 5.29% 

911612010 10.00% 4.31% 5.69% 

9/1612010 10.00% 4.31% 5.69% 

9/1612010 10.30% 4.31% 5.99%




3D-Year 


Rate Case Eguit}! Yield Premium 

10{2l/20l0 10.40% 4.20% 6.20% 

11/212010 9.75% 4.18% 5.57% 

11/2J2010 9.75% 4.18% 5.57% 

11/3/2010 10.75% 4.17% 6.58% 

11/19/2010 10.20% 4.15% 6.05% 

12/112010 10.00% 4.13% 5.87% 

1216/2010 9.56% 4.12% 5.44% 

12/612010 10.09% 4.12% 5.97% 

12/9f2010 10.25% 4.12% 6.13% 

12/14/2010 10.33% 4.12% 6.21% 

12/17/2010 10.10% 4.11% 5.99% 

12/20/2010 10.10% 4.11% 5.99% 

12123/2010 9.92% 4.11% 5.81% 

1/6/2011 10.35% 4.09% 6.26% 

1/12/2011 10.30% 4.09% 6.21% 

111312011 10.30% 4.09% 6.21% 

3/10/2011 10.10% 4.16% 5.94% 

313112011 9.45% 4.20% 5.25% 

4118{2Q11 10.05% 4.23% 5.82% 

4/21/2011 10.00% 4.24% 5.76% 

5/13/2011 11.35% 4.28% 7.07% 

512612011 10.50% 4.31% 6.19% 

6/21/2011 10.00% 4.36% 5.64% 

6/29/2011 8.83% 4.37% 4.46% 

8/1/2011 9.20% 4.41% 4.79% 

9/1/2011 10.10% 4.33% 5.77% 

11/14/2011 9.60% 3.93% 5.67% 

1211312011 9.50% 3.76% 5.74% 

12120/2011 10.00% 3.72% 6.28% 

1212212011 10.40% 3.70% 6.70% 

1/10/2012 9.06% 3.60% 5.46% 

1/10/2012 9.45% 3.60% 5.85% 

1110/2012 9.45% 3.60% 5.85% 

1/2312012 10.20% 3.53% 6.67% 

1/3112012 10.00% 3.49% 6.51% 

4/24/2012 9.50% 3.16% 6.34% 

4/24/2012 9.75% 3.16% 6.59% 

517/2012 9.80% 3.13% 6.67% 

512212012 9.60% 3.10% 6.50% 

5124/2012 9.70% 3.09% 6.61% 

6f712012 10.30% 3.06% 7.22% 

6/1512012 10.40% 3.05% 7.32% 

6/18/2012 9.60% 3.05% 6.52% 

71212012 9.75% 3.04% 6.67% 

Average 4.34% 

Count 945



Small Size Premium 

[1[ [2] 

NorthWestern Energy Equity 

Median Market to Book for Camp Group 

NorthWestern Energy Implied Market Cap 

Customers (Mil) ($BiI) 

0.182 $ 0.147 

1.57 

$ 0.231 

Company Name 


Atmas Energy Corporation 

Laclede Group, Inc. 






WGL Holdings, Inc. 

Median 

Mean 

[3] [4] 

Market Cap 

Ticker Customers (Mil) ($BiI) 

GAS 2.5 $ 4.66 

ATO 3.2 $ 3.15 

LG 0.6 $ 0.95 

NJR 0.5 $ 1.86 

NWN 0.7 $ 1.32 

PNY 1.0 $ 2.24 

SJI 0.3 $ 1.53 

SWX 1.8 $ 1.97 

WGL 1.1 $ 2.01 

1.0 $ 1.97 

1.3 $ 2.19 

[5] 

Market to 

Book Ratio 

1.37 

1.34 

1.56 

2.23 

1.79 

2.11 

2.29 

1.54 

1.57 

1.57 

1.75 

Market Capitalization ($Mil) 

Decile Low High 

2 $ 6,927.557 $ 15,408.314 

3 $ 3,596.535 $ 6,896.389 

4 $ 2,366.464 $ 3,577.774 

5 $ 1,621.096 $ 2,362.532 

6 $ 1,090.652 $ 1,620.860 

7 $ 683.059 $ 1,090.515 

8 $ 422.999 $ 682.750 

9 $ 206.802 $ 422.811 

10 $ 1.028 $ 206.795 

[6) 

Size Premium 

0.78% 

0.94% 

1.17% 

1.74% 

1.75% 

1.77% 

2.51% 

2.80% 

6.10% 

Proxy Group Median $ 1,971 

9th Decile Size Premium 

Difference from Proxy Group Median 

1.74% 

2.80% 

1.06% 1[7] 

Notes: 

[1]2011 SEC Fonn 10-K 

[2] Data provided by Company 


[4] Source: SNL Financial as <strong>of</strong> 8/31/2012 

[5] Source: SNL Financial as <strong>of</strong> 8/31/2012 

[6] Source: Ibbotson Associates, 2012 Valuation Yearbook, "Key Variables in Estimating Cost <strong>of</strong> Capital. n 

[7] Equals 2.80% ~ 1.74%



Revenue Stabilization Mechanisms 

Company Ticker Infrastructure Oecoupling 

AGL Resources GAS v v 

Atlanta Gas Light Co. ./ [1], [2J 

Northern Illinois Gas Co. 

Virginia Natural Gas ./ [1], (2) 

Elizabethtown Gas ./ [1], [2] ./ [1], [2] 

Florida City Gas 

Chattanooga Gas ./ [1], [2] 

Atmos Energy ATO v v 

Atmos Energy (Colorado) 

Atmos Energy (Georgia) ./ [2J ./ [1], [2J 

Atmos Energy (Iowa) 

Almas Energy (Illinois) 

Atmos Energy (Kansas) ./ (1J. [2] ./ [1], [2] 

Atmos Energy (Kentucky) 

./ (1], (2] ./ [1], (2] 

Atmos Energy (Louisiana) 

./ [1], [2] 

Atmos Energy (Mississippi) 

./ [1]. [2] 

Atmos Energy (Missouri) 

./ [1), [2] 

Atmos Energy (Tennessee) 

./ [1), [2] 

Atmos Energy (Texas) 

./ [1J, [2] ./ [1), [2J 

Atmos Energy (Virginia) ./ [2] 

Laclede Group LG v 

Laclede Gas Co. 

./ (1J. [2] 

New Jersey Resources NJR v v 

New Jersey Natural Gas 

./ [1], [2] ./ 11], [2] 

Northwest Natural Gas NWN v v 

Northwest Natural Gas (Oregon) ./ [1], (2J ./ [1]. [2] 

Northwest Natural Gas (Washington) 

Piedmont Natural Gas PNY v 

Piedmont Natural Gas (North Carolina) 

./ [1J, [2] 

Piedmont Natural Gas (South Carolina) ./ [1], [2J 

Piedmont Natural Gas (Tennessee) ./ [1], (2J 

South Jersey Industries 5JI v v 

SJG 

./ [1J. [2J ./ [1], [2J 

Southwest Gas Corporation 5WX v 

Southwest Gas Corporation (Arizona) 

./ [1J, [2) 

Southwest Gas Corporation (California) ./ [1J, [2J 

Southwest Gas Corporation (Nevada) ./ [1J, (2) 

Washington Gas Light WGL v v 

Washington Gas - DC 

Washington Gas - MD ./ [1]. [2] 

Washington Gas - VA V l'l.l-' -/' 

[1] RRAAdJustment Clauses and Rate Riders, March 21, 20120 

[2] Innovative Rates, Non-Volumetric Rates, and Tracking Mechanisms: Current List, March 2012 

[3]2011 SEC Form 10-K 

Expense 

v 

./ [1] 

./ [11, [2] 

./ [1], [2] 

./ [1] 

./ (1], [2] 

v 

./ [2] 

./ [2] 

./ [1],[2] 

./ [2J 

./ [2] 

./ [2J 

./ 11J. [2J 

./ [2J 

./ [2] 

v 

./ [lJ,(2) 

v 

./ [2J 

./ [2] 

./ [2] 

v 

./ [3J 

v 

./ [1J, [2J 

v 

./ [2J 

./ [2J 

-/ l'l

Exhibit No, RBH-10 


Revenue StabilizatiO!1 Mechanisms 

,II 

t 

are recovered from customers. Costs are primarily recovered through deferred 

dollar-for-dollar re



Revenue Stabilization /lAechanlsms 

" 

Com 

South Jersey Industries 

Ticker 

SJI 

Disclosed in SEC Form 1().K Filin 

SJG was pennitted to recover regulatory assets contained In its petition and defer certain federally mandated pipeline 

Integrity management program costs for recovery in its next base rate case. In addition, annual depreciation expense will be 

reduced by SI.2 million as a resull<strong>of</strong>the amortization <strong>of</strong> excess cost <strong>of</strong> removal recoveries. The BPU also authorized a 

Phase II <strong>of</strong> the base rate proceeding to review the costs <strong>of</strong>CIRT projects not rolled into rate base In the September2010 

seWement (pg 119) 

The BGSS price structure was approved by the BPU in January 2003, and allows SJG to recover all prudently Incurred gas 

costs. BGSS cha es 10 customers can be either monthlvor enodic annuall. too 1191 

Conservation Incentive Program (CIP) - The primary purpose <strong>of</strong> the CIP is 10 promote conservation effons, without negatiVely 

Impacting financial stability and to base SJG's pr<strong>of</strong>it margin on the number <strong>of</strong> customers rather than the amount <strong>of</strong> natural 

gas distributed to customers. In October20D6, the BPU approved SJG's CIP as a three year pilot program. In January2010, 

the BPU approved an extension <strong>of</strong> this program through September 2013. Each CIP year begins October 1 and ends 

September 30 <strong>of</strong> the subsequent year. On a monthly basis during the CIP year, SJG records adjustments to earnings based 

on weather and customer usage factors, as incurred. Subsequent to each year, SJG will make filings with the BPU to review 

and app~(:~~funts recorded under the CIP. BPU approved cash Inflows or outflows generally will not begin until the next 

CIPyear. 66 

CapJtallnvestment RecoveryTracker (CIRD -In January 2009, SJG made a filing with the BPU requesting approval for an 

accelerated Infrastructure Investment program. The purpose <strong>of</strong> the CIRTwas to accelerate $103.0 million <strong>of</strong> capital 

expenditures from five years to \'M:I years. The petition requested that the Company be allowed to earn a return <strong>of</strong>, and a 

return on, its investment Under the CIRT, 2009 spending was projected to be $70.5 mlllion and 2010 spending was 

projected to be $32.5 million. On a monthly basis during the CIRTyear, SJG records adjUstments to earnings based on 

actual CIRT program expenditures, as incurred. Annually, SJG makes a filing to the BPU for review and approval <strong>of</strong> 

exoenditures recorded under the CIRT. (00 661 

Energy EfficlencyTracker (EET) -In January 2009, SJG filed a petitlOri with the BPU requestirlg approval <strong>of</strong> an energy 

efficlency program for residential, commercial and Industrial customers. Under this program, SJG can lnvest$17.0 mill10n 

overtwo years In energy efficiency measures to be Installed In customer homes and businesses. SJG can recover 

incremental operating and maintenance expenses and earn a return <strong>of</strong>, and return on, program Investments. (pg 67) 

Societal Benefits Clause (SBC) - The SSC allows SJG to recover costs related to several BPU-mandated programs. Within 

the SSC are a Remediation Adjustment Clause (RAG), a New Jersey Clean Energy Program (NJCEP). a UnIversal Service 

Fund USF ram and a Consumer Education Pram CEP I. (~ 68 

Remediation Adjustment Clause (RAC) - The RAC recovers environmental remediation costs <strong>of</strong> 12 former gas manufacturing 

plants (See Note 15). The BPU allows SJG to recover such costs over seven year amortization periods. The net between the 

amounts actually spent and amounts recovered from customers Is recorded as a regulatory asset. Environmental 

Remediation Cost Expended - Net Note that RAC activity affects revenue and cash flows but does not directly affect 

earnings because <strong>of</strong> the cost recovery over seven year amortization periods. As <strong>of</strong> December 31,2011 and 2010, SJG 

reflected the unamortized remediation costs <strong>of</strong>$45.8 millIon and $39.1 million, respectively, on the consolIdated balance 

sheets under Regulatory Assets {See N.O/~\I~\Slnce implementing the RAC In 1992, SJG has recovered $58.6 million 

throuah rates as <strong>of</strong> December 31. 2011. 68 

New JerseyClean Energy Program (NJCEP) - This mechaniSm recovers costs associated with SJG's energy efficiency and 

renewable energy programs. In August2008, the BPU approved the statewide funding <strong>of</strong> the NJCEP <strong>of</strong>$l.2 billion forthe 

years 2009 through 2012. Of this amount SJG will be responsible for approximately $41.5 million over the four-year period. 

NJCEP adjustments affect revenue and cash ;~~:I~\t do notdirecUy affect earnings as related costs are deferred and 

recovered throuoh rates on an on-ooino basis. 68 

Universal Service Fund (USF)· The USF Is a statewide program through which funds for the USF and Lifeline Credit and 

Tenants Assistance Programs are collected from customers <strong>of</strong> all New Jersey electric and gas utilities. USF adjustments 

affect cash flows but do not directly affect revenue oreamings as related costs are deferred and recovered through rates on 

an on-oolno basis. (00 66) 

Unbundling - Effective January 10, 2000, the BPU approved full unbundling <strong>of</strong>SJG's s~tem. This allows all natural gas 

consumers 10 select their natural gas commodity supplier. As <strong>of</strong> December 31, 2011, 35,880 <strong>of</strong>SJG's residential customers 

were purchasing Ihelrgas commodity from someone other than SJG. Customers choosing 10 purchase natural gas from 

providers other than the utility are charged forthe cost <strong>of</strong> gas by the marketer. The resulting decrease In utility revenues Is 

<strong>of</strong>fset by a corresponding decrease In gas costs. While customer choice can reduce utility revenues, itdoes not negatively 

affectSJG's net income or financial condition. The BPU continues to allow for full recovery <strong>of</strong> prudenUy incurred natural gas 

costs through the BGSS.;~:ul~:;ing did not change the fact that SJG still recovers cost <strong>of</strong> service, including certain deferred 

costs through base rates. 69 

Pipeline Integrity- In October 2005, SJG filed a petition with the BPU to Implement a Pipeline Integrity Management Tracker 

(Tracker). The purpose <strong>of</strong>ttlis Trackerwas to recover incremental costs to be Incurred by SJG as a result <strong>of</strong> newfederal 

regulaUons, whIch are aimed at enhanCing public safety and reliability. The regulations require that utilities use a 

comprehensive anal~is to assess, evaluate, repair and validate the integrity <strong>of</strong> certain transmission lines In the event <strong>of</strong> a 

leak or failure. As part <strong>of</strong> SJG's September 201 0 base rate Increase, SJG was pennitled to recover previously deferred 

plpel1ne Integrity costs Incurred through September 2010. In addition, SJG is authorized to defer future program costs, and 

related carrying costs, for recovery in the next base rate proceeding, subject to review by the BPU. Accordingly, SJG 

withdrew its petition for the Pipeline Integrity ManagementTracker. As <strong>of</strong> December 31, 2011 and 2010, deferred pipeline 

integrity costs totaled $1.2 million and $1.7 million, respectiVely, and are Included in other regulatory assets. (pg 69) 

Southwest Gas Corp. 

SWX 

Rate design is the primary mechanism avaJlable to Southwest to mitigate weather risk. As <strong>of</strong> January 2012, all <strong>of</strong> Southwesfs 

service territories have decoupled rate structures whIch mitigate weather risk. 1(1 California, CPUC regulations allow 

Southwest to decouple operating margin from usage and <strong>of</strong>fset weather risk. In Nevada, a decoupled rate structure applies to 

most customer classes providing stablITty In annual operating margIn by insulating the Company from the effects <strong>of</strong> lower 

usage (including volumes associated with unusual weather). In Arizona, the ACC recenUy approved a fully decoupled rate 

structure with a monthly weather normalization provision effective January 2012. (pg (2) 

There are approximately 100,000 customers in Arizona whose natural gas meters are set-<strong>of</strong>f away from the customer's home 

(e.g., near a backyard property line), as opposed to a more traditional configuration In which the meter is adjacent to the 

home. To address the cost nonnally bome by the customer to repair or replace the COYL, the Company received approval 

to Implement a new program (as part <strong>of</strong> its recent Arizona rate case decision) under which the Company will replace the 

customer's facllifies at no Immedfate direct costto the customer, and relocate the customer's meter adjacent to the home. In 

addition, the program provides for the Company to endeavor to leak survey all such COYLs over a 3-year period; anticipated 

costs for the survey are reflected in current rates. The costs <strong>of</strong> the replacement portion <strong>of</strong> thiS program Will be capitalized by 

the Company. SubJect to an annual reporting requirement, a surcharge will be added to all bills to recover an amount 

approximately equal to the amount that the Company would have earned If the additional pipe replacement costs had been 

included in the rate base amount filed in the recenUy concluded Arizona rate case. Recovery <strong>of</strong> the surcharge will cease as <strong>of</strong> 

the next Arizona general rate case (as the expenditures will then be Included In rate base). (pg 27)



Revenue Stabilization Mechanisms 

Com an Ticker Disclosed In SEC Form 10-K Filin 

Washington Gas Light WOL 

[Regarding the recovery <strong>of</strong> HHC related costs, the 2009 Stipulation 'Nith the DC OPC] provides for the cost<strong>of</strong>the program to 

be fetovered throu9h an annual sl.lrcharge based on actl.lal expenditures for coupling replacement and encapsula~on that 

'Nill become effective at the end <strong>of</strong> the existing base ratefreeze (October 1,2011). The cost v.illinciude both a return <strong>of</strong> and 

return o~ :: ~~t <strong>of</strong> coupling replacement and encapsulation, computed In accordance v.ith the terms <strong>of</strong> the rates currenUy 

In effect. 76 

[In the April 2011 new rate base request] Washington Gas has also included a request for approval <strong>of</strong> a rate adjustment 

me

Flotation Cost Adjuslment 



Two most recent open market common stock Issuances per company, if available 

N,I 

Shares Offering Underwriting Offering Proceeds Per Total Flotation Gross Equity Issue Flotation Cost 

Company Date Issued Price Discount _Expense Share ____ Costs Before Cos!~_ Net Proceeds Percentage 

NorthWestern Corp. 101212002 11,500,000 $8.75 $0.4375 51,025,000 $8.22 $6,056,250 $100,625,000 594,568,750 6.019% 

NorthWestern Corp. 10/1612001 3.680,000 521.25 $0.8500 $100,000 520.37 $3,228,000 578,200,000 574,972,000 4.128% 

AGL Resources Inc. 1111912004 11,040,000 531,01 50.9300 $400,000 $30.04 510,667,200 5342,350.400 $331,683,200 3,116% 

AGL Resources Inc. 2/1112003 6,440,000 $22.00 $0.7700 $250,000 $21,19 $5,208,800 $141,680,000 $136,471,200 3.676% 

Almos Energy Corporation 121712006 6,325,000 531.50 $1.1025 $400,000 530.33 $7,373,313 5199.237,500 $191,864,188 3.701% 

Almos Energy Corporation 1012112004 16.100,000 $24.75 $0.9900 $400.000 $23.74 516,339,000 $398,475,000 5382,136,000 4.100% 

Laclede Group, Inc. 512512004 1,725,000 526.80 $0.8710 $100,000 525.87 $1,602,475 $46,230,000 $44,627,525 3.466% 

Northwest Natura! Gas Company 3/3012004 1,290,000 $31.00 $1.0100 $175,000 $29.85 $1,477,900 $39,990,000 $38,512,100 3.696% 

P"ledmont Natural Gas Company, Inc. 112012004 4.887,500 $42.50 $1.4900 $350.000 $40.94 $7,632,375 $207,718,750 5200,086,375 3.674"A> 

WGL Holdings, Inc. 612012001 2,058,500 526.73 $0.8950 $56,218 $25.81 $1,898,576 $55,023,705 553,125,130 3,450"A> 

Mean $6,148,389 5160.953,036 

WEIGHTED AVERAGE FLOTATION COSTS: 3.820% 

Constant Growth Discounted Cash Flow Model Adjusted for Flotation Costs· 30 Day Average Stock Price 

[11 [2] [3] r4] 15] (6) [71 r8) [9] (10) [11] [12] 

Average Expected t;>ividend Yjeld Zacks First Call Value Line Average Flotation 

Annualized Stock DIvidend Adjusted for Earnings Earnings Earnings Sustainable Earnings Adjusted 

Company Ticker Dividend Price Yield Current Flol Costs Growth Growth Growth Growth Growth OCF k(e) DCF k(e) 

AGL Resources Inc, GAS $1.84 $40,10 4,59% 4.71% 4.90% 4.28% 

Atmos Energy Corporation ATO 51.38 $35,97 3.84% 3.93% 4.09% 5.83% 

Laclede Group, Inc. LG 51.66 $42.07 3.95% 4.02% 4,18% 3.00% 

New Jersey Resources Corporation NJR $1.52 545,53 3,34% 3,41% 3.55% 3.35% 

Northwest Natural Gas Company NWN $1.78 549.03 3.63% 3.72% 3,87% 4.17% 

Piedmont Natural Gas Company. Inc. PNV $1.20 $31.63 3,79% 3.86% 4.01% 4.70% 

South Jersey industries, Inc. SJI $1.61 $51,95 3,10% 3.23% 3,35% 6.00% 

Southwest Gas Corporation SWX $1.18 $43,74 2.70% 2.78% 2.89% 4,37% 

WGL Holdings, Inc. WGL 51.60 $40.29 3.97% 4.06% 4.22% 5.37% 

PROXY GROUP MEAN 

Notes: 

The proxy group DCI'" resui! is adjusted for flotation costs by dividing each company's expected dividend yield by (1 - flotation cost). The 

flotation cost adjustment is derived as the difference between the unadjusted DCF result and the DCF result adjusted for flotation costs, 

]1] Source: Bloomberg Pr<strong>of</strong>essional 

]2J Source: Bloomberg Pr<strong>of</strong>essional 

]3) Equals [1J 1 [2J 

{4J Equals [3J x (1 + 0.5x [10]) 

I5J Equals [4J I (1 -0.0381) 

16] Source: Zacks 


18] Source: Value Line 

[9} Source: Exhibit No. RBH-3 

[10J Equals Average([6J, [7]. [8], [9]) 

[11J Equals [4} + [10] 

[12] Equals [51 + [10] 

{131 Equals average 112]- average [11] 

NA 5.50% 5.96% 5,25% 9.95% 10.14% 

5.50% 4.00% 4.01% 4.84% 8.77% 8.92% 

5.30% 2.00% 5.57% 3.97% 7.99% 8.15% 

1.85% 5.50% 7.20% 4,47% 7.89% 8.02% 

4.50% 4.00% 7.34% 5.00% 8.72% 8.87% 

4.70% 2,50% 2.19% 3.52% 7.38% 7.54% 

6,00% 9.00% 11.58% 8,15% 11.37% 11.50% 

4.05% 9,00% 6.60% 6.01% 8.78% 8.90% 

5.60% 3.00% 3.78% 4.44% 8,50% 8.66% 

8.82% 8.97% 

DCF Result Adjusted For Flotation Costs: 8.97% 

DCF Result Unadjusted For Flotation Costs: 8.82% 

Difference (Flotation Cost Adjustment):1 0.15%1[13]

Prefiled Direct Testimony of Robert B. Hevert on Behalf of ...

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