Initial Valuation

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P R E L I M I N A R Y V A L U A T I O N

[XYZ Company]

January 2010

New York - London - São Paulo - Madrid

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INDEX

Page

1. Report Purpose and Executive Summary 4

2. Financial Hypothesis 6

3. Valuation Methodology 13

4. Trading Valuation 15

5. DCF Valuation 18

6. Conclusion: Valuation Range 21

Enclosures

I. e-Valuation Presentation 25

II. Financial Forecasts 27

III. Information Provided by XYZ COMPANY 29

IV. Difference between Value and Price 31

V. Glossary 33

VI. e-Valuation References 36

VII. Contact Details 40

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XYZ COMPANY– PRELIMINARY VALUATIONJANUARY 2010

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2. Financial Hypothesis

XYZ is a company founded in 1984 and specialized in sale of toys of all kinds, bicycles, childcare

articles, sporting articles, trophies, jewellery, gift items, tales and children’s books, electronic

games, and youthful and sports wear.

The XYZ’s business model fits within the sector of retail. From the standpoint of XYZ, this is a sector

with low entry barriers that have had a slightly positive trend in the last years.

The client believes that XYZ has got a very high brand recognition in its market segment and that

the company is not very sensitive to economic cycles.

Introduction – Company Description

Note: Information provided by XYZ COMPANY.

XYZ

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2. Financial Hypothesis

The operating margin before amortizations, interest and taxes (EBITDA) is one of the more

significant operating magnitudes. It is defined as the result obtained when resting the sum of

direct costs and indirect costs (excluding amortizations, financial and extraordinary expenses and

taxes) to sales.

XYZ’s EBITDA goes under a decrease principally due to a slightly increase in the operating

expenses as it has been explained before.

For the forecast of fixed assets’ amortization it has been calculated, according to the analysis

carried out by e-Valora and the information provided by the client, an amortization average period

of 25 years for the historical fixed assets and of 10 years for the rest of the fixed assets on the

balance sheet at December 31st 2008. For the new fixed assets, not real estate, it has been fixed

an amortization average period of 10 years.

The operating margin before interest and taxes (EBIT) of XYZ goes through a similar trend to the

one of the EBITDA in the estimated period. After a decrease of the amortizations in the past years,

the new fixed asset investment makes the amortizations increase and because of that, there is a

lower operating profit.

As a result of the balance between sale and costs increases, the impact on EBIT is quite more

significant that in EBITDA (-2.9% vs -7.2% TACC 2009-2013 respectively).

175,886 181,992 188,131200,780194,387

264,480

0

50,000

100,000

150,000

200,000

250,000

300,000

2008 2009 2010 2011 2012 2013

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%

Amortization % Sales

Main EBITDA and EBIT1 Hypothesis

Note 1: EBITDA refers to operating profit before amortizations; and EBIT refers to operating profit (earnings before interest and taxes).

Amortization Trend

EBITDA and EBIT Trend

EBITDA & EBIT

TACC (2009 – 2013)

EBITDA

-2.9%

EBIT

-7.2%

0

100,000

200,000

300,000

400,000

500,000

600,000

2008 2009 2010 2011 2012 2013

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

EBITDA EBIT EBITDA Margin EBIT Margin

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XYZ COMPANY– PRELIMINARY VALUATIONJANUARY 2010

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3. Valuation Methodology

In order to carry out the valuation of XYZ, e-Valuation has used contrasted valuation methodologies

and generally accepted by market analysts. The application of each of these methodologies,

Discounted Cash Flow (DCF) and Trading Comparable Companies, results in a specific valuation

range estimated for XYZ. To arrive at this valuation range for the company, a specific valuation

range is primarily calculated for each methodology, and each valuation is subsequently weighted

under e-Valuation’s criteria. We believe that the use of these methods improves the reliability of the

valuation obtained, since they are complementary methods, and allows us contrasting the results

of each one (including basic assumptions used).

In the case of the DCF, the baseline information for the realization of the forecasts is principally

based on e-Valuation estimates. This information has enabled the elaboration of a qualitative and

quantitative analysis of the current situation and expected future development of XYZ.

If the strategy followed by the Company in the future varies from the one that has been submitted,

or if the information provided to e-Valuation has got discrepancies with reality, our view about the

value of XYZ would vary accordingly. Each of the methodologies previously named uses the

information of XYZ in different ways, providing complementary views of the business value.

Introduction

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6. Conclusion: Valuation Range

Conclusion: Final Valuation Range

Taking into account the results obtained according to the methodologies described, and considering that our reference methodology is the DCF (with a weight of 80%, compared to 20% of Tradings), we obtain an average value, to which we apply a reliability range of +/- 10%.

Trading comparable method has been weighted with only 20% because companies with a high level of comparability to XYZ have not been found, since they are also manufacturers and/or sell in bulk amounts and have got a much larger size, and their geographical markets of action are not confined to Spain.

With these parameters, we conclude that the final range that falls within the enterprise value of XYZ is the following: between 2,233,805 and 2,730,206 euros (between 3.9 x and 4.8 x times EBITDA recorded by the Company in 2008 ).

Market Value of the Equity Value

To calculate the market value of XYZ’s shares (Equity Value), the company’s net debt (financial debt minus cash) at the moment of the valuation has to be subtracted to the enterprise value previously analyzed.

Based on historical data provided by the company, and taking the amount of net debt of December 2008 (221.190 euros) as reference, the valuation range of the Equity Value of the company would be between 2,012,615 and 2,509,016 euros.

2,133

2,636

2,607

3,221

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

DFC Comparables

FINAL RANGE

2.334 - 2.730

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Enclosure I. e-Valora Presentation

e-Vauation offers merger and acquisition advisory services, as well as company’s valuation and financial and strategic consulting services.

Founded in November 2000 by a professional team coming from Banesto and UBS, e-Valuation has valued more than 700 companies. From companies with an invoicing lower than 1 million euros up to enterprises that invoiced more than 500 million euros, from start-ups to companies with an experience of 80 years in the market, including services as well as industrial companies.

e-Valuation has got a professional team with a wide experience un investment banking, coming from entities such as Bank of America or Rothschild, that have worked in corporate transactions (companies’ purchase, sale and merger) from all economic services for an aggregated value higher than 2,000 million of euros.

e-Valuation works with absolutely independence to banks, investment funds and public entities, which allows offering independent financial advisory services and without being influenced by outside interests.

e-Valuation has got ISO 9001 Certification in Corporate Finances Advisory and Companies’ Valuation Services, as well as Chamber Trust - Seal, the trust mark granted by Madrid Chamber of Commerce.

It has got offices in:

e-Valuation Financial Services North America 14 Wall Street, 20th Floor New York City, New York 10005 United States

e-Valuation Financial Services Sourth America Brickell Avenue , 11t th Floor Miami ,3313 United States

e-Valuation Financial Services Northern Europe One Canada Square, 29th Floor, Canary Wharf London E14 5DY United Kingdom

e-Valuation Financial Services Southern Europe c/ José Ortega y Gasset, 42 Madrid, Madrid 28006 Spain

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Enclosure III. Information Provided by XYZ Company

Information Provided to e-Valora by XYZ

2004 2005 2006 2007 2008

Revenues 5.533.640,00 5.489.120,00 5.592.840,00 6.351.050,00 6.195.920,00

Sales unadjusted 5.533.640,00 5.489.120,00 5.592.840,00 6.351.050,00 6.195.920,00Estimated growth -0,8% 1,9% 13,6% -2,4%

Direct Costs -3.922.360,00 -3.649.170,00 -3.674.530,00 -4.229.160,00 -3.959.120,00Supplies -4.073.560,00 -3.614.950,00 -3.471.630,00 -4.253.290,00 -3.887.060,00

Estimated growth -11,3% -4,0% 22,5% -8,6%% of sales 73,6% 65,9% 62,1% 67,0% 62,7%

Stock change 151.200,00 -34.220,00 -202.900,00 24.130,00 -72.060,00

GROSS MARGIN 1.611.280,00 1.839.950,00 1.918.310,00 2.121.890,00 2.236.800,00% Gross Margin 29,1% 33,5% 34,3% 33,4% 36,1%

Expenses -1.251.040,00 -1.276.620,00 -1.443.500,00 -1.577.120,00 -1.666.580,00

Employee expense unadjusted -708.640,00 -717.680,00 -783.560,00 -906.830,00 -947.610,00Estimated growth 1,3% 9,2% 15,7% 4,5%% of sales 12,8% 13,1% 14,0% 14,3% 15,3%

Social charges -171.110,00 -174.270,00 -185.510,00 -188.620,00 -221.970,00% of social charges over wages and salaries 31,8% 32,1% 31,0% 26,3% 30,6%

Average number of employees level 1 31 32 49 46 46Estimated growth 3,2% 53,1% -6,5% 0,4%

Average accounting salary 17.339,68 16.981,56 12.205,10 15.674,60 15.774,78Estimated growth -2,1% -28,1% 28,4% 0,6%

Productivity ratio estimated by the client 178.504,52 171.535,00 114.139,59 138.608,69 134.693,91

Other accounting operating expenses -542.400,00 -558.940,00 -659.940,00 -670.290,00 -718.970,00Estimated growth 3,0% 18,1% 1,6% 7,3%% of sales 9,8% 10,2% 11,8% 10,6% 11,6%

Unadjusted leasing and canon -243.000,00 -250.220,00 -295.430,00 -300.060,00 -321.860,00Estimated growth 3,0% 18,1% 1,6% 7,3%% of sales 4,4% 4,6% 5,3% 4,7% 5,2%

Unadjusted marketing expense unadjusted -54.000,00 -56.000,00 -66.000,00 -67.000,00 -72.000,00Estimated growth 3,7% 17,9% 1,5% 7,5%% of sales 1,0% 1,0% 1,2% 1,1% 1,2%

Other unadjusted expenses -245.400,00 -252.720,00 -298.510,00 -303.230,00 -325.110,00Estimated growth 3,0% 18,1% 1,6% 7,2%% of sales 4,4% 4,6% 5,3% 4,8% 5,2%

EBITDA 360.240,00 563.330,00 474.810,00 544.770,00 570.220,00EBITDA Margin 6,5% 10,3% 8,5% 8,6% 9,2%Amortization -109.980,00 -180.330,00 -203.670,00 -239.780,00 -264.480,00

Estimated growth 64,0% 12,9% 17,7% 10,3%Traffic provisions change 0,00 -44.710,00 -10.670,00 36.530,00 0,00

Estimated growth - -76,1% -442,4% -100,0%EBIT 250.260,00 338.290,00 260.470,00 341.520,00 305.740,00

EBIT Margin 4,5% 6,2% 4,7% 5,4% 4,9%Net interest income/(loss) -22.220,00 -17.820,00 -12.220,00 -7.570,00 -8.400,00

Estimated growth -19,8% -31,4% -38,1% 11,0%% of sales 0,4% 0,3% 0,2% 0,1% 0,1%Financial expenses -25.740,00 -20.990,00 -24.640,00 -41.200,00 -44.230,00Financial revenues 3.520 3.170 12.420 33.630 35.830

EARNINGS FROM ORDINARY ACTIVITY 228.040,00 320.470,00 248.250,00 333.950,00 297.340,00Extraordinary revenues/ (expenses) 11.790,00 7.640,00 30.370,00 28.880,00 44.850,00

Extraordinary revenues 11.830,00 7.640,00 35.310,00 30.890,00 44.850,00Extraordinary expenses -40,00 0,00 -4.940,00 -2.010,00 0,00

NORMALIZED EARNINGS BEFORE TAXES 239.830,00 328.110,00 278.620,00 362.830,00 342.190,00Tax rate 33% 33% 33% 28% 28%Taxes -79.440,00 -108.830,00 -91.510,00 -102.750,00 -96.480,00

NORMALIZED EXERCISE INCOME 160.390,00 219.280,00 187.110,00 260.080,00 245.710,00Net Margin 2,9% 4,0% 3,3% 4,1% 4,0%

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Enclosure V. Glossary

Intangible Assets or Intangible Fixed Asset: Non-physical assets such as franchises, trademarks, patents, copyrights, goodwill, shares, securities and contracts (as distinguished from physical assets) that grant rights and privileges.

Tangible Assets or Tangible Fixed Asset: Physical assets (such as machinery, property, etc).

Amortization: Accounting procedure that gradually reduces the cost of value of an asset, tangible or intangible, (e.g. investments in research & development), through periodic charges to the profit and loss account in order to fix the costs during its estimated profitable life.

Trading Comparable Companies: Business value obtained through methods that compare the company to be valued to similar enterprises, dividing the market value of the last ones by a financial magnitude of the companies’ profit and loss account (such as net income, net sales, etc). When multiplying by the same enterprise’s magnitude of the company to be valued, we will obtain its approximate value.

EBIT: Earnings Before Interest and Taxes.

Balance Sheet: Statement of a company’s financial position at a given point in time. Lists the assets of a company and how they have been financed. Total assets is liabilities plus shareholders’ equity.

Cost of Supplies: Cost related to the production, supply, transport and storage of raw materials and the materials used in the production process. In this section can also be included the cost of outsourcing services to provide the customer.

Profit and Loss Account: Financial statement that shows the expenses and revenues generated during a period of time.

Weighted Average Cost of Capital: Calculated as the cost of equity * (equity value / firm value) + cost of debt * (net debt / firm value) * (1- corporate tax). It is a discount rate typically used to discount future free cash flows to the moment of valuation.

Discounted Cash Flows (DCF): Company’s valuation method based on the idea the value of a company is related to what it is able to generate in the future. It is calculated as the future cash flows of a company, discounted back to present value using an appropriate discount rate

Net Debt: Total debt of the company minus any cash or liquid funds that the company has but does not require for its operating activity.

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Enclosure VI. e-Valuation´s References

2008 - 2009

NOTE: For confidentiality reasons the name of customers is not mentioned.

Logistics

Media

Metallurgy

Quality Consulting

New Techonlogies

Other Building

Specilialists

Outsourcing Services

Production and

Distribution

Public Administration

Rail

Recreation

Advertising

Automotive

Aviation

Biotechnology

Brokerage and Financial

Services

Building Materials

Manufacturer

Business Services

Construction and Contracts

Construction and Materials

Construction Related

Services

Consulting, Audit and

Advisory

Ecological and Recycling

Editorial

Education and Training

Electronics

Engineering and Machinery

Entertainment and Leisure

Forestry

Healthcare

Insurance

Internet

Local TV

Renewable Energies

Restaurant

Retail

Software and Data Security

Sports

Steel

Technology

Telecommunicaciones

Textiles

Transportation and Logistics

Quemical Industry

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Enclosure VII. Contact Details

www.evalora.com

e-Valuation Financial Services North America e-Valuation Financial Services Northern Europe

14 Wall Street, 20th Floor One Canada Square, 29th Floor, Canary WharfNew York City, New York 10005 London E14 5DYUnited States United Kingdom

e-Valuation Financial Services Latin America e-Valuation Financial Services Southern Europe

Bickell Avenue ,11º Floor Miami 33131 c/ José Ortega y Gasset, 42 United States Madrid, Madrid 28006

Spain