Inside this Issue - First Eagle Funds

ValueInvestor
June 30, 2009
The Leading Authority on Value Investing
INSIGHT
Even Temperament
The accent may be different, but the value-investing message of Matthew
McLennan, Jean-Marie Eveillard’s successor, remains very much the same.
Matthew McLennan is quick to
argue that he is not replacing
retired investing superstar Jean-
Marie Eveillard at First Eagle Funds –
which is in fact what he did three months
ago. “I’d rather say we as a team are standing
on his shoulders,” McLennan says.
And broad those shoulders have been. In
30 years in charge of the First Eagle Global
Fund, Eveillard earned a 14.2% annualized
return, a full five percentage points per year
over the MSCI World index.
McLennan and fellow manager Abhay
Deshpande plan to stick close to Eveillard’s
playbook in managing what is currently
$27 billion in investor assets. Among areas
in which they see value today: robotics,
pharmaceuticals, gold, uniform rental and
investment holding companies. See page 2
INVESTOR INSIGHT
Reprint provided courtesy of:
First Eagle Funds
Abhay Deshpande, Matthew McLennan
Investment Focus: Seek competitively
advantaged businesses trading at low multiples
of cyclically weak operating results
that they don't over time expect to persist.
For additional information, please contact First Eagle Funds
at 800.747.2008 or visit us at www.firsteaglefunds.com.
www.valueinvestorinsight.com
Inside this Issue
FEATURES
Investor Insight: Matthew McLennan
Counting on “humility, flexibility and
patience” to produce solid returns in
such companies as Cintas, Fanuc,
Astellas and Pargesa. PAGE 1 »
Investor Insight: Martin Whitman
Explaining the risks and opportunities
of investing in troubled companies,
and why he’s so high on Hong
Kong holding companies. PAGE 1 »
Strategy: Activism
Spotlight Capital founder describes
his style of activist investing and why
he sees untapped value in HRPT
Properties and Convergys. PAGE 17 »
A Fresh Look: Market Turmoil
How Carlo Cannell managed the
short idea he offered up a year ago
and where he sees a similar opportunity
for downside today. PAGE 22 »
Editors’ Letter
Feel free to bash efficient markets theory
... but don’t overdo it. PAGE 24 »
INVESTMENT HIGHLIGHTS
INVESTMENT SNAPSHOTS PAGE
Astellas 6
Cintas 8
Convergys 20
Fanuc 5
Gold Fields 9
HRPT Properties Trust 19
Pargesa Holding 7
Stratasys 23
Zoltek 22
Other companies in this issue:
Bic, Cheung Kong Holdings, Chico's, Deltic,
Essilor, Forest City, GMAC, Groupe
Bruxelles Lambert, Henderson Land,
Lafarge, MBIA, Neopost, Nestlé, Plum
Creek, Rayonier, Sanofi-Aventis, Sealy,
Shimano, Total, Wharf Holdings, Wheelock

Investor Insight: First Eagle
June 30, 2009 www.valueinvestorinsight.com
INVESTOR INSIGHT: First Eagle
First Eagle Funds' Matthew McLennan and Abhay Deshpande describe why “humility, flexibility and patience” drive
their investing strategy, why increased short-term trading should work to their advantage, why they're relative value
investors when it comes to gold, and why they think Cintas, Fanuc, Astellas, Pargesa and Gold Fields are mispriced.
Matthew, we’re assuming one appeal to
joining First Eagle was a good match
between its investment approach and
yours. Describe the most important elements
of that.
Matthew McLennan: What I think most
differentiates the approach here is temperament.
Starting with the first recorded
and reliable history that we can find – a
history of the Peloponnesian war by a
Greek author named Thucydides – and
following through a broad array of key
historical global crises, you see recurring
aspects of human nature that have gotten
people into trouble: hubris, dogma and
haste. The keys to the investing approach
at First Eagle are the symmetrical opposite
of that: humility, flexibility and
patience.
On the humility side, one of the
things that Jean-Marie Eveillard firmly
ingrained in the culture here is that the
future is uncertain. That results in investing
with not only a price margin of safety,
but in conservative balance sheets and
alongside prudent and proven management
teams. If you acknowledge your
crystal ball is at best foggy, you follow
the advice of Ben Graham and invest to
avoid the landmines.
In terms of flexibility, we’ve been willing
to be out of the biggest sectors of the
market, whether it was Japan in the late
1980s, technology in the late 1990s or
financials the late 2000s. That wasn’t necessarily
because of any particular gift of
foresight, but reflected a recognition that
each of those areas embodied very widely
accepted and high expectations. It’s
painful and not socially acceptable to be
out of the most revered sectors of the
market, but those types of acts of omission
have been a key contributor to the
strong performance.
In a similar vein, even though the fund
has gotten so big, we don’t feel com-
pelled to own companies that happen to
be big in the global index. What we are
invested in is a series of eclectic companies
that almost define their industries.
That can be a company like Essilor
[EI:FP], a world leader in eyeglass lenses,
or Bic [BB:FP], a cigarette-lighter and disposable-razor
company, or Shimano
[7309:JP], which makes bicycle gears and
brakes, or Neopost [NEO:FP], which
sells mailing and shipping systems. These
certainly aren’t the biggest or most wellknown
companies, but each is competitively
strong and financially sound and
the market has presented us with an
interesting investment opportunity to
take advantage of.
In addition to humility and flexibility,
the third thing in terms of temperament
we think we value more than most
other investors is patience. We have a
five-year average holding period.
Particularly in a volatile market like
today’s, people are trying to zig and zag
ahead of every market turn that they’re
hoping they can forecast with scientific
precision. We like to plant seeds and
then watch the trees grow, and our portfolio
is often kind of a portrait of inactivity.
That’s kept us from making sharp
and sometimes emotional moves that we
eventually come to regret.
Abhay Deshpande: People’s eyes kind of
glaze over in bull markets when we go on
about how we spend more time thinking
about how much money we can lose on
any particular idea than on what we
expect to make. If you’re exposed to
equities, anyone will make money in a
bull market. For us, the key to success
over time is giving less money back when
markets are difficult. That’s a message
people are very receptive to now, but
we’ve been saying it for a very long time,
no matter which way the market winds
are blowing.
Abhay Deshpande, Matthew McLennan
Life Adventure
Having spent the first six years of his life in
Papua New Guinea, where his father was
working as a surveyor for the Australian
government, Matthew McLennan developed
early on a thirst for new experiences.
“My family was always quite big on 'life
adventures,'” he says.
After earning a degree in commerce at
Australia's University of Queensland,
McLennan's adventure as an investor
began with a stint at a local pension fund
prior to joining Goldman Sachs, where he
spent 14 years in a variety of research and
portfolio management positions in Sydney,
New York and London. Last September he
joined First Eagle Funds to succeed Jean-
Marie Eveillard as the head of the firm's
Global Value Team. There he shares portfolio
management responsibility with
Abhay Deshpande, a First Eagle veteran
who joined the firm in 2000.
The New Guinea town where McLennan
lived was in large part destroyed by a volcano
in 1994. “That’s just one example of
how, as Jean-Marie is fond of saying, ‘The
future is uncertain,’” says McLennan.
“Many things people take for granted
won’t be that way forever – keeping that in
mind is central to the way we invest.”
Value Investor Insight 2

Is it harder – or even ill-advised – to be
patient when an ever increasing amount
of automated trading is pushing share
prices around?
MM: The compression of time horizons
and the increased trading done by algorithm
creates more liquidity for us to take
long-term positions. That lowers the cost,
at the margin, of our entering or exiting a
long-term position. More generally, the
more compressed the time horizon of the
market is, the less the market is willing to
pay for a business’ “muddle-through”
value, which we base on looking at peak
and trough margins and normal business
cycles. We look at earnings power three,
four and five years out – the less we have
to pay for that, the more our patience
pays off.
Where the prevalence of short-term
trading can be hurtful is when there’s a
feedback loop between intrinsic value and
the perception of value, which happens
particularly in highly leveraged situations.
When a company is in trouble and
there’s a lot of negative momentum trading
as a result, that can feed on itself as
the company has to recapitalize at progressively
lower prices, diluting value.
That’s a key reason we avoid highly leveraged
situations as a rule.
Marty Whitman, in an interview for this
issue, says those types of negative feedback
loops have led him to completely
avoid companies reliant on continuous
access to capital markets.
MM: People tend to lose sight of the fact
that what you own in an equity is only a
residual claim on a business. At the heart
of value investing is the notion of mean
reversion, that by paying a low multiple
on a conservative margin you can win
with the passage of time as the valuation
of the business and the margins normalize.
What can break that and cause mean
aversion, though, are things like fading
business models, expeditionary management
deploying capital in a dilutive way
and – what Marty Whitman is talking
about – adverse capital-structure contingencies.
We make every effort to invest
only in the universe of companies where
those risks of breakage are as limited as
possible.
Describe what you mean by a business’
muddle-through value?
AD: Intrinsic value to us means the price
that a knowledgeable buyer would pay
for a business in its entirety in cash today.
Any knowledgeable buyer will recognize
and take into consideration whether current
earnings are too high or too low,
ON UPSIDE:
If we pay a low multiple and
perhaps get a discount to
asset replacement value, we
kind of get the future for free.
based on the cyclicality of the business
and where it is in the cycle. Similarly, we
don’t want to capitalize earnings streams
that are too high or too low, but focus in
valuation on what the cash flow of the
business is somewhere between the
extremes. Because the future is uncertain,
we don’t exaggerate the precision of the
values we come up with. That said, over
time our intrinsic value estimates – based
on actual transactions – have proven to
be quite accurate. We tend if anything to
be too pessimistic, which is fine.
MM: If we can pay a low multiple at an
enterprise level on muddle-through cash
flows, and perhaps also get a discount to
the asset replacement value of the business,
we in a way get the future for free.
We start out trying not to lose money, but
if we’re disciplined in the way we go
about that, we get a shot at a decent
amount of upside over time.
How has the composition of your portfolio
changed in the past year, reflecting
where you’re seeing opportunity and risk?
MM: The biggest change is that we’re
more fully invested, with our cash posi-
June 30, 2009 www.valueinvestorinsight.com
INVESTOR INSIGHT: First Eagle
tion in the First Eagle Global Fund down
from about 20% to less than 10% today.
We always like to retain deferred purchasing
power, so the sum of our cash,
short-dated government bonds and our
gold positions is still about 20% of the
portfolio. That’s lower than it has been
historically, which is a reflection of the
fact that we’re finding a higher proportion
of decent businesses at decent valuations
today.
Reflecting some of the balance-sheet
concerns we continue to have in many
parts of the world, we’ve also seen the
portfolio gravitate somewhat more
toward Japan. It’s where the excesses
were not in the last cycle, and most of the
companies we own there have resilient,
global franchises and no debt. The capital
markets could close for a decade and
they’d still be fine.
Has your exposure to gold gone up or
down?
AD: It has gone up, not because we’ve
added to the position, but because the
values of bullion and gold stocks have
held up much better than our typical
equity holding. We've always considered
gold to be a valuable potential hedge
against all the bad things that could hurt
our equity holdings, and that certainly
remains true today. It may be some time
off, but we worry a lot about the potential
for inflation and for currency debasement
– currencies declining in value relative
to real assets – as a result of unprecedented
fiscal and monetary stimulus.
Were the more negative scenarios to play
out, real assets like gold should prove
quite valuable.
Are other commodities interesting to you
as well?
AD: We have some long-held positions in
timber companies, including Rayonier
[RYN], Plum Creek [PCL] and Deltic
[DEL], which have proven to be an effective
hedge against dollar devaluation
over time. We think they will prove to be
an effective hedge against currency
debasement as well.
Value Investor Insight 3

We’re also looking more closely at
agricultural commodities. Historically,
large global demand shocks for such commodities
have resulted in permanent
structural increases in prices, where old
highs become new lows in the pricing
cycle. We believe we’re going through
such a demand shock now, driven by 500
million people in China and India alone
seeing the type of increase in purchasing
power over the last ten years that directly
impacts the quality of food they eat.
Because we don’t believe global supply
will be able to keep up with the increased
demand, the chances of that resulting in a
structural price increase are high. It’s
early yet to know how best to take advantage
of all this, but it is an area we’re
interested in.
MM: We don’t expect commodities to
just zoom off from here. We’re in a world
in which there’s still a very large output
gap, but in the past few months many
commodity prices rallied 50% off their
lows. We feel no need to chase that.
You mention India and China, but don’t
appear to have invested much in either
place. Why?
MM: One of the great challenges for
value investors is to link the macro to the
micro. We acknowledge that there’s a
long-term pent-up consumption opportunity
in those markets, but the share prices
of individual, prudently run businesses
would indicate that the path between
today and tomorrow is more linear and
more quickly fertile than we believe will
be the case.
AD: We do have indirect exposure to
India and China through many of our
companies, whether it’s a giant company
like Nestlé or a smaller one like Essilor,
the glass-lens company. That’s a much
lower-risk and cheaper way to go.
Chinese stocks, on average, trade at 40x
earnings!
Fixed income has always been part of
what you do. How would you characterize
the opportunities you see there today?
June 30, 2009
AD: We don’t play in the most speculative
parts of the high-yield market – where
many people have been finding opportunity
over the past six to nine months – so
we’ve actually seen our fixed-income
exposure decline. As stocks sold off and
we could buy things like 3M [MMM] at
a 5% dividend yield, we weren’t devoting
much capital to high-yield bonds. If stock
prices continue to run up and the highyield
market stays around today’s level,
that of course would change.
ON BONDS:
If we’re certain the equity value
is positive, the bonds should
be money good and we might
want to take a look at them.
Can you give an example of the type of
debt opportunity you’re finding today?
AD: Sometimes when we look at the
equity of a company, we’re fairly certain
the intrinsic value is more than zero, but
there’s so much debt that we can’t narrow
the value range down enough to
invest. But if we’ve concluded the equity
value is positive, that means the bonds
should be money good and we should
take a look at them as well.
That process led us to invest earlier
this year in the subordinated debt of
Sealy, the mattress maker. We own the
8.25% subordinated debt maturing in
2014, which after a recent recapitalization
has the earliest maturity among their
debt issues.
The housing-market collapse has been
terrible news for bed manufacturers – we
estimate roughly 10% of industry capacity
has gone away through various business
failures and cutbacks. The #2 in the
industry, Simmons, is in serious trouble
and is working to restructure its debt to
keep operating. As the market leader,
though, Sealy still generated around $50
million in free cash flow over the past 12
months, after paying $60 million in debt
interest.
www.valueinvestorinsight.com
INVESTOR INSIGHT: First Eagle
The bottom line is that we believe
Sealy’s business is viable and will continue
to earn more than enough free cash
flow to support our debt payments. We
also take comfort in having a roughly
$180 million equity market cap cushion
beneath us. So with what we think is
almost no risk of default, we’re getting a
nearly 13% yield to maturity at today’s
price. We consider that a more than
acceptable risk/return.
Your global portfolio has always been
highly diversified, with 200 or so positions.
Is there any reason to expect that to
change?
MM: In broad strokes, we have 20% of
our assets in cash or gold, our top 35
positions make up another 50%, and the
rest is a diversified portfolio of “seed”
positions that we increase or decrease
based on share prices relative to the business
fundamentals. It’s a formula that has
worked well over time and I don’t see
much reason to change it.
Turning to specific ideas, describe one of
your top Japanese holdings, Fanuc
[6954:JP].
MM: Fanuc is a Warren Buffett-type
high-quality company, a global leader in
factory automation software and equipment.
Roughly 60% of its revenues come
from selling computer numeric control
[CNC] systems that are central to multiaxis
machining, a market in which they
have around 60% global market share.
The other 40% of revenues comes from
robotics, where they’re also the global
market leader. The two businesses work
hand-in-hand for almost any precisionengineering
application.
As Japan grew as an industrial power,
you saw a massive shift on the factory
floor away from basic machinery to higher-end
capital-goods machinery. That
same shift is in the early stages in developing
markets like China and India, creating
a tremendous opportunity for
Fanuc, which owns important intellectual
property required for the next-generation
factory floor.
Value Investor Insight 4

Is patience a key with this investment?
MM: As a capital-goods provider in the
worst recession in the post-war period,
the company is not going to have anything
impressive in the way of earnings
power over the next 12 months. But if
you take a longer-term perspective,
through previous cycles Fanuc has generated
mid-30% EBIT margins, which
given the strength of its market positions
we fully expect to return. We don’t have
to get the timing of the recovery
absolutely right because there are no
financial contingencies – approximately
one-third of the company’s market cap is
in net cash.
How cheap are the shares, trading now at
just under ¥7,800?
INVESTMENT SNAPSHOT
Fanuc
(Tokyo: 6954:JP)
Business: Global manufacturer of factory
automation systems and equipment, including
computerized numerically controlled
equipment, servo motors and robotics.
Share Information
(@6/30/09, Exchange Rate: $1 = ¥95.915):
Price ¥7,760
52-Week Range ¥4,800 – ¥10,800
Dividend Yield 1.8%
Market Cap ¥1.86 trillion
FANUC HISTORY
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June 30, 2009
MM: Stripping out the cash, you’re paying
around ¥5,000 per share for the operating
business, which has generated in the
best times more than ¥600 in earnings per
share. If you normalize that to ¥450-500
per share, you’re only paying 10-11x EPS.
On normalized EBIT, the multiple is
around 7x.
That’s a very conservative price to pay
for a business with dominant market
share and excellent growth prospects,
which in more normal times could be
expected to trade at closer to 15x EBIT.
There’s a need for this technology over
time, evidenced by the fact that each successive
peak in Fanuc’s earnings power
over the last few cycles has been substantially
higher than the prior one. There’s
no reason this business can’t earn ¥1,000
per share at some point.
THE BOTTOM LINE
The market’s short-term focus is undervaluing the company’s potential to translate leading
market positions and key intellectual property into strong profit growth as the global
economy mends, says Matt McLennan. At a reasonable multiple of 15x his estimate of
the company’s normalized EBIT, the shares would be worth twice their current value.
Sources: Company reports, other publicly available information
Financials (FY2008)
Revenue ¥468.40 billion
Operating Profit Margin 40.5%
Net Profit Margin 27.1%
Valuation Metrics
(Current Price vs. TTM):
FANUC S&P 500
P/E 16.6 35.4
2007 2008 2009
www.valueinvestorinsight.com
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INVESTOR INSIGHT: First Eagle
If we were growth investors, we’d be
out there looking at the penetration of
CNC systems in China ten years out and
then trying to figure out how much
Fanuc would benefit from that. We don’t
have to make those types of precise forecasts
– the stock is currently cheap based
on what they’ve already demonstrated
they can do.
How would you characterize management’s
concern for shareholders?
MM: On the surface, Fanuc seems like
the prototypical company that people
rightly complain about: too much cash
on the balance sheet, no external directors,
not much interaction with the
Street. On the other hand, though, you
have an extremely experienced management
team that has built a very strong
culture and that takes a generational
view in how they do things. The mission
is for the company to live forever, but at
the same time they’ve shown a clear ability
to produce high cash flow through the
cycle. If we can buy into a company like
that at the right price, that’s very appealing
to us.
Staying in Japan, explain your interest in
pharmaceutical company Astellas
[4503:JP].
MM: Astellas isn’t one of the betterknown
global pharmaceutical companies
– it is the product of a merger five years
ago between Yamanouchi Pharmaceutical
and Fujisawa Healthcare – but it generates
nearly ¥1 trillion in annual revenue
[approximately $10 billion] from a portfolio
of 18 drugs, with particular strength
in immunology and urology. It has the
largest salesforce in Japan, distributing
drugs there for others, including Lipitor
for Pfizer.
The company also has a large newproduct
pipeline, with 18 molecules that
are in either Phase 2 or Phase 3 testing.
Roughly half of the pipeline drugs are
focused on areas in which the company
already has a large presence, but the rest
target new areas like diabetes and cardiovascular
treatment.
Value Investor Insight 5

The big issue for Astellas is that its
two biggest global drugs, Prograf (for
protecting against immune-system reactions
to organ transplants) and Harnal
(for treating enlarged prostates) are
going off-patent. The market has been
very focused on the potential earnings
impact from that, which has resulted in
what we believe is an extraordinarily low
valuation for Astellas stock.
How low is low?
MM: At today’s market price [of ¥3,420
per share], after subtracting about
¥1,000 per share in net cash and investments,
you’re paying around ¥2,400 per
share for the company’s ongoing business.
We estimate that the annual EBIT-
DA of that existing business plus
INVESTMENT SNAPSHOT
Astellas
(Tokyo: 4503:JP)
Business: Manufacture, sale and distribution
of pharmaceuticals, with special expertise
in immunology and urology. Leading
global brands include Prograf and Harnal.
Share Information
(@6/30/09, Exchange Rate: $1 = ¥95.915):
Price ¥3,420
52-Week Range ¥2,820 – ¥5,040
Dividend Yield 3.5%
Market Cap ¥1.63 trillion
ASTELLAS HISTORY
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research-and-development spending –
basically cash earnings if they weren’t
investing a dime into the business – will
over the next few years trend toward
¥600 per share. That means we’re getting
our money back within four years,
so we are effectively paying nothing for
whatever cash flow the current portfolio
of 18 drugs produces from that point on,
and we’re effectively paying nothing for
whatever cash flow the 18 drugs in
Phase 2 or Phase 3 trials might produce.
We don’t have to have detailed forecasts
of those prospective cash flows to see a
lot of upside in the share price from
today’s level.
Is there any overhang in the share price
from concern over U.S. regulatory
changes?
THE BOTTOM LINE
Market concerns over the impact of two of the company’s global drugs going offpatent
have been overdone, says Matt McLennan. “Run-off” cash flow would pay
back today’s share price within four years, he says, leaving any incremental earnings
beyond that from a broad portfolio of existing and new products as pure upside.
Sources: Company reports, other publicly available information
Financials (FY2008)
Revenue ¥965.70 billion
Operating Profit Margin 25.9%
Net Profit Margin 17.7%
Valuation Metrics
(Current Price vs. TTM):
Astellas S&P 500
P/E 9.6 35.4
2007 2008 2009
June 30, 2009 www.valueinvestorinsight.com
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INVESTOR INSIGHT: First Eagle
MM: The company’s most-global drugs
are the ones going off-patent, so expectations
for those are already diminished. In
Japan, the regulatory risk is quite low.
The country is known for being one of
the toughest pricing environments in the
world for pharmaceutical products.
When drugs go off-patent in Japan, the
falloff from generic competition is usually
quite low because the price differences
between branded and generic products
aren’t that big.
AD: That points up one big appeal of a
company like Astellas over, say, Pfizer.
Astellas has a distribution system and
cost base focused on Japan, where you
don’t see the kind of patent cliffs that
some big U.S.-focused pharma companies
have. The negative operating leverage facing
a company like Pfizer with big products
going off patent is much more severe
than what Astellas would ever face.
Any corporate governance complaints
with Astellas?
MM: Not really. They’ve been buying
back some stock and the shares currently
pay a 4% dividend yield, so they aren’t
averse to using excess cash for shareholders’
benefit.
Is your interest in Astellas representative
of a broader interest in pharmaceutical
companies?
AD: I wouldn’t say that. We have some
exposure, but in what we think are somewhat
special situations. We own Sanofi-
Aventis [SAN:FP], for example, which has
a new management team, generates a lot
of free cash flow, pays a high dividend,
and we believe owns a hidden gem in its
vaccine franchise. We believe the vaccine
business could be worth one-fifth of
Sanofi’s total market cap, which leaves
the rest of the business trading at a very
low valuation.
One large position that has badly lagged
the market is Swiss holding company
Pargesa [PARG:SW]. Does that make the
investment case more compelling today?
Value Investor Insight 6

AD: We have had a lot of success over
the years with holding companies like
this, but there are clearly cycles in how
they are valued, with bear markets frequently
widening the discounts to the
underlying assets.
There are essentially three layers to
look at with Pargesa. The holding company
itself owns a direct stake in Imerys
[NK:FP], a French company that processes
minerals and sells building materials
worldwide. Pargesa also owns a 50%
stake in Groupe Bruxelles Lambert
[GBLB:BB], which is itself a holding company
run by one of the wealthiest and
most successful investors in Europe,
Albert Frere. The third layer is then the
direct holdings of GBL, which include
stakes in oil giant Total [FP:FP], cement
maker Lafarge [LG:FP], natural gas com-
INVESTMENT SNAPSHOT
Pargesa Holding
(Switzerland: PARG:SW)
Business: Investment holding company with
large positions that it actively manages in
such companies as Imerys, Total, GDF Suez,
Lafarge and Pernod Ricard.
Share Information
(@6/29/09, Exchange Rate: $1 = CHF 0.925):
Price CHF 67.55
52-Week Range CHF 52.10 – CHF 116.40
Dividend Yield 3.9%
Market Cap CHF 5.74 billion
PARGESA HISTORY
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pany GDF Suez [GSZ:FP], water and
waste management firm Suez
Environnement [SEV:FP] and liquor company
Pernod Ricard [RI:FP].
We see three layers of discount here:
Pargesa trades at a discount to the market
value of its holding in GBL; GBL trades at
a discount to the market values of its
holdings; and GBL’s holdings themselves
are undervalued relative to our estimates
of their intrinsic values.
Put some numbers on that, relative to
Pargesa’s current share price of 67.55
Swiss francs.
AD: If you just look through to the end
holdings valued at current market prices,
the net asset value to Pargesa is around
112 Swiss francs per share. If we mark
THE BOTTOM LINE
Bear markets often cause the discount to widen between investment holding company
market values and the net asset value of their underlying holdings, says Abhay
Deshpande. In the case of Pargesa, he says, the discount today is 40% using the current
market value of its holdings, and nearly 50% using estimated intrinsic values.
Sources: Company reports, First Eagle Funds, other publicly available information
Financials (2008, attributable to PARG)
Revenue CHF 10.74 billion
Net Profit Margin 9.8%
Valuation Metrics
(@ 6/29/09, based on market prices):
PARG
NAV per share CHF 112.00
Discount to NAV 39.7%
2007 2008 2009
June 30, 2009 www.valueinvestorinsight.com
150
120
90
60
30
INVESTOR INSIGHT: First Eagle
the end holdings to our estimates of
intrinsic value – the primary adjustments
being our putting 50-euro share prices
each on Total and Lafarge – the Pargesa
net asset value is closer to 130 Swiss
francs.
Are there risks associated with these types
of cascading holding companies that
would help explain such wide discounts?
AD: One typical risk is that minority
holders like us get the short end of the
straw through the shuffling of assets
among various related entities by the
holding-company principals. To avoid
that, we make sure to invest at the same
level of the principals. Pargesa is controlled
by a private entity called
Parjointco, which represents the interests
of Albert Frere and Paul Desmarais, one
of the most highly respected investors in
Canada. Their investment partnership
has been one of the most successful we’ve
ever seen, this side of Buffett and Munger.
Given the structure, whatever moves
Frere and Desmarais make to benefit
themselves should also directly benefit us
as Pargesa shareholders as well.
At the portfolio-company level, where are
the biggest challenges?
AD: The biggest uncertainty is probably
Lafarge. Like most big cement companies,
the company gorged itself on acquisitions
in recent years and, while they
acquired some excellent assets, they tended
to pay very high prices. The result is
that the company is heavily laden with
debt, which clearly concerns the market
as the cyclical business has turned down.
Longer-term we’re positive on the cement
business, which is characterized for the
most part by local monopolies, and we
believe Lafarge’s underlying earnings
power will prove to be quite attractive –
particularly in relation to its current
stock price.
MM: With respect to Total, the company’s
market value has fallen over the past
year along with oil prices, but we believe
the market has overreacted and that its
Value Investor Insight 7

extremely large reserve base and extensive
refining capacity are being significantly
undervalued. The company has
generated average annual EBITDA of €25
billion, so even with a low multiple on
that of six to seven times, the stock has
50% upside. We’ve been buyers of Total
directly as well.
You described Cintas [CTAS] recently as
a quintessential First Eagle idea. Why?
AD: It’s a company that’s very easy to
understand, with clear, basic competitive
strengths and a cheap stock price. Its primary
business is designing, manufacturing
and servicing employee uniforms, and
over time it has expanded the product line
to include things like linens, fire extinguishers
and janitorial supplies. It also
has a document-management business,
not unlike Iron Mountain’s.
The key to Cintas’ business is the route
density around centralized laundry and
warehouse facilities. The more clients
serviced within the radius of the facility,
the higher the incremental margin earned
on each additional client. Drivers are
much more than just delivery people, they
are customer-service contacts and are at
least partly responsible for cross-selling
additional services.
The Cintas growth story was built
around successfully driving the consolidation
of a very fragmented industry. As
the market leader in a business with significant
scale economies, they’ve been
able to translate their size into higher
margins than their competitors, and have
also made it difficult to compete with
them on price.
For a high-quality business, the share
price hasn’t painted a happy picture for a
long time.
AD: As the business matured, the Street
consistently marked down Cintas’ valuation.
The share-price damage only accelerated
as the economy went south in the
latter half of last year. The company has
responded by quickly reducing headcount
and capital spending, but earnings have
still been hit.
We know what we’re getting here,
which is a high-quality franchise, growing
in the mid to low single-digits on the top
line, that is trading at a low valuation
based on muddle-through earnings
power. That may be rather mundane, but
we’ve historically done very well with
these types of situations.
Others have characterized the documentmanagement
business as an interesting
growth area. Do you agree?
AD: There is potential for them to apply
the same model to document management
that they’ve used successfully in the
INVESTMENT SNAPSHOT
Cintas
(Nasdaq: CTAS)
Business: Provider of corporate-identity
uniforms and ancillary products, as well as
document storage, document disposal and
on-site safety-related services.
Share Information
(@6/29/09):
Price 22.93
52-Week Range 18.09 – 33.73
Dividend Yield 2.1%
Market Cap $3.50 billion
Financials (TTM):
Revenue $3.90 billion
Operating Profit Margin 13.8%
Net Profit Margin 8.0%
CTAS PRICE HISTORY
50
June 30, 2009 www.valueinvestorinsight.com
40
30
20
10
INVESTOR INSIGHT: First Eagle
2007 2008 2009
uniform business. But the document business
is more competitive and we’d actually
prefer they not overspend on it.
With the stock trading at just under $23
per share, what kind of potential upside
do you see?
MM: Based on our normalized estimates,
we’re currently paying multiples of just
over 10x earnings and 6x EBITDA, and
we’re getting a better than 10% free cash
flow yield. If you apply a 16% EBIT margin
to roughly $25 per share in revenue,
put a low double-digit multiple on the
result and strip out net debt, we come to
THE BOTTOM LINE
This is a “quintessential First Eagle idea,” says Abhay Deshpande: a company that is
easy to understand, with clear competitive strengths and a cheap stock price. By
applying a low double-digit multiple to his estimate of normalized EBIT, he believes
the private-market intrinsic value of the shares, after net debt, is around $40.
Sources: Company reports, other publicly available information
Valuation Metrics
(@6/29/09):
CTAS Nasdaq
Trailing P/E 11.3 34.3
Forward P/E Est. 12.9 19.3
Largest Institutional Owners
(@3/31/09):
Company % Owned
Arnhold & S. Bleichroder 7.9%
Fidelity Mgmt & Research 4.4%
Vanguard Group 3.9%
Fiduciary Mgmt 3.8%
Barclays Global Inv
Short Interest (as of 6/10/09):
3.3%
Shares Short/Float 3.0%
50
40
30
20
10
Value Investor Insight 8

a private-market intrinsic value of around
$40 per share.
Are the biggest risks here cyclical?
AD: The health of the business is closely
tied to employment, so continued rising
unemployment would likely not be a positive
for the share price. That could be
partly offset – or exacerbated – by the
direction of fuel prices, which are a big
cost component.
A more structural risk is that attempts
to unionize the Cintas workforce gain
steam with the advent of new labor laws
and regulations proposed by the current
administration. The company today has
34,000 employees, of which around 400
are unionized, so any significant shift
toward a more unionized employee base
could have a highly negative impact on
margins. They’ve been successful in
avoiding unionization so far, but it’s
clearly an issue we have to keep a close
eye on.
You’ve spoken about the general merits
today of exposure to gold. Describe the
specific merits of your holding in South
Africa’s Gold Fields [GFI].
MM: In addition to owning gold in a
vault, we are also more than willing to
own it in the dirt if we get the right
price. In buying shares in a company like
Gold Fields, we believe we’re effectively
buying the metal at a discount to its
market price.
The company is one of the largest global
gold miners, producing around four
million ounces per year from mines in
South Africa, Peru, Ghana and Australia.
Our valuation of gold producers basically
consists of going mine by mine and looking
at the reserves in the ground and the
costs to extract them, taking into account
things like labor cost escalations and tax
leakage. In Gold Fields’ case, it has close
to 85 million ounces of proven reserves
overall, and its cash costs of extraction
average around $500 per ounce.
One thing we may do a bit differently
in our analysis is that we don’t significantly
mark down the value of long-
June 30, 2009
lived reserves, which is effectively what
people do when they discount the estimated
cash flows from future reserves
back to today. Over long periods of
time, the price of gold has gone up in
nominal terms at CPI plus a little, so
we’d argue that the real value of reserves
ten or twenty years out is not that different
from the value today.
As a buyer of Gold Fields’ stock [at a
recent price of $12.40], you’re paying
$500 per ounce in extraction costs, plus a
premium that is the market cap of the
company. As we calculate it, then, you’re
able to buy the gold in the ground here at
a price in the high-$700s per ounce. That
INVESTMENT SNAPSHOT
Gold Fields
(NYSE ADR: GFI)
Business: Exploration, mining and processing
of gold from mines in South Africa,
Ghana, Australia and Peru. Proven ore
reserves are nearly 85 million ounces.
Share Information
(@6/29/09):
Price 12.39
52-Week Range 4.64 – 13.99
Dividend Yield 0.5%
Market Cap $8.73 billion
Financials (TTM):
Revenue $3.52 billion
Operating Profit Margin 22.1%
Net Profit Margin 9.6%
GFI PRICE HISTORY
25
20
15
10
5
0
www.valueinvestorinsight.com
INVESTOR INSIGHT: First Eagle
2007 2008 2009
compares with paying $900-1,000 on the
spot market.
Are you making any explicit assumption
about the price of gold in your analysis?
AD: No. We believe exposure to gold
adds value to the portfolio as a potential
hedge. With gold, we’re relative rather
than absolute value investors – our buying
bullion versus buying gold stocks is a
function purely of what’s offering us the
best price at the time.
How do changes in the price of gold and
changes in the prices of gold stocks correlate?
THE BOTTOM LINE
Relative value investors when it comes to gold, Matthew McLennan and Abhay
Deshpande buy gold stocks when they’re priced to offer the underlying reserves at a
discount. With Gold Fields, they estimate they’re buying the company’s gold reserves
at a price in the high-$700s per ounce, some 15% less than the spot-market price.
Sources: Company reports, other publicly available information
Valuation Metrics
(@6/29/09):
GFI S&P 500
Trailing P/E 24.3 35.4
Forward P/E Est. 12.8 15.6
Largest Institutional Owners
(@3/31/09):
Company % Owned
Arnhold & S. Bleichroder 5.5%
Tradewinds Global Inv 4.5%
Van Eck Assoc 2.9%
Paulson & Co 2.8%
Deutsche Bank
Short Interest (as of 6/10/09):
2.0%
Shares Short/Float n/a
25
20
15
10
Value Investor Insight 9
5
0

MM: Gold equities are levered to the
price of gold, generally at a ratio of two
or three to one. With a given cost of
extraction, earnings of gold producers are
going to be leveraged on the upside and
downside to gold-price changes. In the
short term that plays out, but in the long
term it’s not as neat, because the only reason
long-term gold prices would change
dramatically would be if gold again
becomes a monetary medium or if the
cost of producing it changes dramatically.
As you extend the time horizon, the relationship
between gold’s price and the
share prices of gold producers gets much
closer to 1:1.
Are there any balance sheet risks with
Gold Fields?
MM: Not really. Its debt is less than 10%
of its intrinsic value, so there isn’t a great
deal of financial leverage.
June 30, 2009
Jean-Marie Eveillard is still as advisor to
the fund. What advice has he given lately?
MM: At a time when you see many
money managers kind of casting about
ON SOCIAL ACCEPTANCE:
It’s important to keep in mind
that our balance and equanimity
should not be based
on external perceptions.
for what they might be doing differently,
Jean-Marie has been very supportive of
our sailing a very steady course and
maintaining a long-term perspective.
Having a voice of experience and reason
like that at a time like this has been quite
valuable.
www.valueinvestorinsight.com
INVESTOR INSIGHT: First Eagle
Matthew, any trepidation attached to following
in the footsteps of as accomplished
an investor as Monsieur
Eveillard?
MM: Jean-Marie often talked about how
he was a custodian of the approach
espoused by Ben Graham and Warren
Buffett, and we see ourselves as custodians
as well. Neither Abhay nor I have a
monopoly on what’s right, and there is a
team here following a well-established
approach with what we think is the temperament
necessary to succeed. If we have
that, I’d like to think we have a shot at
continuing to preserve and grow capital
for our clients.
As value investors, we’re quite used to
being short on social acceptance at different
periods of time. It’s always important
to keep in mind that our own balance
and equanimity should not be based on
external perceptions. VII
Value Investor Insight 10

Disclosure
Average Annual Returns as of 03/31/2010 Year to 1 Year 5 Years 10 Years Expense
Date
Ratio
First Eagle Global Fund - Class A (w/o sales charge)(SGENX)
First Eagle Global Fund - Class A(w/sales charge)(SGENX)
4.23%
-0.98
39.66%
32.68
8.45%
7.34
12.64%
12.21
1.19%
The performance data quoted herein represents past performance and does not guarantee future results. Market
volatility can dramatically impact the fund’s short-term performance. Current performance may be lower or higher
than figures shown. The investment return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Past performance data through the most recent
month end is available at firsteaglefunds.com or by calling 800.334.2143. The average annual returns for Class A
Shares "with sales charge" of First Eagle Global Fund give effect to the deduction of the maximum sales charge of
3.75% for periods prior to March 1, 2000 and of 5.00% thereafter.
There are risks associated with investing in funds that invest in securities of foreign countries, such as erratic market
conditions, economic and political instability and fluctuations in currency exchange rates. Investment in gold and gold
related investment presents certain risks, and returns on gold related investments have traditionally been more volatile
than investments in broader equity or debt markets.
The holdings mentioned herein represent the following percentage of the total net assets of the First Eagle Global Fund as of March 31,
2010: Cintas Corp. 1.71%, Fanuc Ltd. 2.00%, Astellas Pharma Inc. 1.52%, Pargesa Holding S.A. 1.50%, Gold Fields Ltd. ADS 1.33%, Essilor
International S.A. 0.50%, Societe BIC 0.50%, Shimano Inc. 1.47%, Neopost 0.95%, Rayonier Inc. REIT 1.12%, Plum Creek Timber
Company Inc. 0.72%, Deltic Timber Corp. 0.26%, Nestle S.A. 1.30%, 3M Co. 1.42%, Sealy Corp. 0.00%, Simmons Co. 0.00%, Pfizer Inc.
0.00%, Sanofi-Aventis S.A. 1.65%, Imerys S.A. 0.00%, Groupe Bruxelles Lambert S.A. 0.42%, Total S.A. 0.64%, Lafarge S.A 0.00%,
Suez Environnement S.A. 0.00%, Pernod Ricard S.A. 0.00%, Gold bullion 6.38%. The portfolio is actively managed and holdings can
change at any time. Current and future portfolio holdings are subject to risk.
The commentary represents the opinion of the Global Value Team Portfolio Managers as of June 2009 and is subject to change based on
market and other conditions. The opinions expressed are not necessarily those of the firm. First Eagle Investment Management, LLC
(FEIM) became investment adviser to the Funds commencing January 1, 2000. These materials are provided for informational
purpose only. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. Any
statistics contained here have been obtained from sources believed to be reliable, but the accuracy of this information cannot be
guaranteed. The views expressed herein may change at any time subsequent to the date of issue hereof. The information provided
is not to be construed as a recommendation or an offer to buy or sell or the solicitation of an offer to buy or sell any fund or security.
The First Eagle Funds are offered by FEF Distributors, LLC, 1345 Avenue of the Americas, New York, New York 10105. This
collateral is not authorized for distribution unless accompanied or preceded by a prospectus. Investors should
consider investment objectives, risks, charges and expenses carefully, which are detailed in our prospectus and
summary prospectus and may be obtained by asking your financial adviser, visiting our website at
firsteaglefunds.com or calling us at 800.334.2143. Please read our prospectus carefully before investing. For further
information about the First Eagle Funds please call 800.334.2143. Investments are not FDIC insured or bank
guaranteed, and may lose value.

First Eagle Funds
1345 Avenue of the Americas | New York, NY | 10105-4300
800.747.2008 | firsteaglefunds.com

Average Annual Returns as of 06/30/2010: Year to Date 1 Year 5 Years 10 Years Expense Ratio
First Eagle Global Fund – Class A (w/o sales charge) (SGENX) -1.43% 15.39% 7.25% 11.94%
First Eagle Global Fund – Class A (w/sales charge) (SGENX) -6.35 9.62 6.16 11.36
The performance data quoted herein represents past performance and does not guarantee future results. Market volatility can dramatically impact the
fund’s short-term performance. Current performance may be lower or higher than figures shown. The investment return and principal value will fluctuate
so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Past performance data through the most recent month
end is available at firsteaglefunds.com or by calling 800.334.2143. The average annual returns for Class A Shares “with sales charge” of First Eagle Global
Fund give effect to the deduction of the maximum sales charge of 5.00%.
There are risks associated with investing in funds that invest in securities of foreign countries, such as erratic market conditions, economic and political instability and
fluctuations in currency exchange rates. Investment in gold and gold related investment presents certain risks, and returns on gold related investments have traditionally
been more volatile than investments in broader equity or debt markets. The holdings mentioned herein represent the following percentage of the total net assets of
the First Eagle Global Fund as of June 30, 2010: Cintas Corp. 1.51%, Fanuc Ltd. 1.89%, Astellas Pharma Inc. 1.45%, Pargesa Holding S.A. 1.20%, Gold Fields Ltd.
ADS 1.45%, Essilor International S.A. 0.45%, Societe BIC 0.42%, Shimano Inc. 1.46%, Neopost 0.83%, Rayonier Inc. REIT 1.12%, Plum Creek Timber Company
Inc. 0.66%, Deltic Timber Corp. 0.25%, Nestle S.A. 1.26%, 3M Co. 1.39%, Sealy Corp. 0.00%, Simmons Co. 0.00%, Pfizer Inc. 0.00%, Sanofi-Aventis S.A.
1.38%, Imerys S.A. 0.00%, Groupe Bruxelles Lambert S.A. 0.72%, Total S.A. 0.51%, Lafarge S.A 0.00%, Suez Environnement S.A. 0.00%, Pernod Ricard S.A.
0.00%, Gold bullion 7.11%. The portfolio is actively managed and holdings can change at any time. Current and future portfolio holdings are subject to risk.
The commentary represents the opinion of the Global Value Team Portfolio Managers as of June 2009 and is subject to change based on market and other
conditions. The opinions expressed are not necessarily those of the firm. First Eagle Investment Management, LLC (FEIM) became investment adviser to
the Funds commencing January 1, 2000. These materials are provided for informational purpose only. These opinions are not intended to be a forecast of
future events, a guarantee of future results, or investment advice. Any statistics contained herein have been obtained from sources believed to be reliable,
but the accuracy of this information cannot be guaranteed. The views expressed herein may change at any time subsequent to the date of issue hereof. The
information provided is not to be construed as a recommendation or an offer to buy or sell or the solicitation of an offer to buy or sell any fund or security.
The First Eagle Funds are offered by FEF Distributors, LLC, 1345 Avenue of the Americas, New York, New York 10105. This collateral is not authorized for
distribution unless accompanied or preceded by a prospectus. Investors should consider investment objectives, risks, charges and expenses carefully,
which are detailed in our prospectus and summary prospectus and may be obtained by asking your financial adviser, visiting our website at firsteaglefunds.
com or calling us at 800.334.2143. Please read our prospectus carefully before investing. For further information about the First Eagle Funds, please call
800.334.2143. Investments are not FDIC insured
or bank guaranteed, and may lose value.
First Eagle Funds
1345 Avenue of the Americas | New York, NY | 10105-4300
800.334.2143 | firsteaglefunds.com
1.19%
FE VII 06/09 2Q ’10