Ascendere Associates LLC

Relative Valuation Note: December 9, 2010

GrafTech International Ltd. (GTI)

Looking Good but Not Great

From a purely quantitative perspective GTI looks good, but not good enough to make it into our model portfolios. As
experienced investors know, there are plenty of exceptions to any quantitative rule. Our models tend to work well on
average over time from the standpoint of systematically managing an overall portfolio. From the standpoint of
individual stock picking, our models work better as a useful starting point for deeper fundamental research.

We have optimized our systematic portfolio management approach based on backtests to 12/31/2004, using monthly
updates to fundamental data and daily updates to stock price data. The backtest includes 18 months of data collected in
real time and is constantly undergoing small refinements. We recently began managing portfolios based in part on our
models and have licensed our trade data for a high-turnover, long-only strategy to Covestor, Ltd. for use in its
investment advisory service.

We rank stocks on scores of fundamental data points, which can be summarized into four key factors, with a score of 5
being the best and 1 the worst:
1) Relative Value.
2) Operating Momentum.
3) Analyst Revision Momentum.
4) Fundamental Quality.

Cash and debt in this particular table do not reflect the Nov 30 acquisitions of Seadrift Coke L.P and C/G Electrodes LLC,
or any estimated impact of its 4m shelf registration on Nov 30 related to its equity incentive program.

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GrafTech has good relative value and ranks highly for quality (working capital management, asset turnover, margin
expansion and other data points), but scores weakly for operating momentum and analyst revision momentum. This
indicates that on a relative basis and by our measures, there are other stocks in the Industrial sector that have stronger
fundamentals than GTI at the current moment.

As you can see in the table above, there are six other Industrial stocks that look particularly stronger in our rankings. We
own five of these stocks in our portfolios. During our holding period Avery Dennison Corp (AVY) has performed well
and United Airlines (UAL) poorly. One could argue about whether these stocks are fundamentally comparable or not or
even belong in the same sector, but as far as we are concerned as it relates to our systematic approach to portfolio
management and long-term idea generation it is an irrelevant discussion.

Incidentally, United Airlines (UAL) was named as a long Research Tactical Idea at Morgan Stanley today -- more than 5
weeks after we mentioned it as a buy in our newsletter and we purchased it for ourselves. This is the fifth occasion this
month in which our model portfolio ideas have presaged major ratings actions by major sell side institutions, and
compares to more than 16 sell side actions we presaged in November (see our report, "Getting in Before Sell Side
Institutions Follow").

Take a look at the next two pages, which provides some fundamental details about GrafTech and our best performing
Industrial holding, Avery Dennison. We have adjusted the GrafTech's forecasts in the table below to take into account
lower cash, higher debt and higher operating assets following the November 30 close of two acquisitions.

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Potential Integration Issues, ROIC Stagnation and Selling Pressure May Hold GTI Back in the Short-term
On the preceding two tables, notice that the historical sequential improvement in margin expansion and ROIC for
GrafTech is better than Avery Dennison, but the forecast margin and ROIC expansion is better for Avery Dennison. This
is because margin expansion may flatten and ROIC is likely to fall off in the near term as GTI integrates its recently closed
Seadrift Coke and C/G Electrodes acquisitions.

On November 30, 2010, GrafTech completed the acquisition of its remaining 81.1% stake in Seadrift Coke L.P. and 100%
stake in C/G Electrodes LLC by issuing 24m shares, $86m cash, drawing $165m from its revolving credit facility and
issuing $200m in non-interest bearing five-year Senior Subordinated Notes (current discounted fair market value of $144
million). Also on November 30, GrafTech filed to sell 30m shares in three separate shelf registrations, including 26m
shares from existing shareholders and 4m shares related to its equity incentive program. There are only 2m shares
remaining in its existing share repurchase program. Our data source has current shares outstanding at 121m.

The recent acquisitions will raise operating assets and operating capital, with risk of a disproportional rise in cash flow.
In addition, share dilution will be minimal at about 4m, but likely pressure from selling shareholders of the 26m shares
may hold the stock down in the near term. Analysts will likely be cautious in raising estimates for GTI until the company
has convincingly shown it has integrated the acquisitions. The forecasts for GTI in the above table could prove to be
optimistic if it has any trouble integrating the acquisitions.

On the positive side, GTI currently has net cash on its balance sheet, having finished paying down an enormous amount
of debt over the last few years. It will probably use its free cash flow to do the same going forward as quickly as
possible. A dividend issue would be a nice addition as well because that would attract a new group of investors while it
took the time to integrate its acquisitions, but that seems unlikely to occur for at least the next 12 months or so.

Conclusion
In summary, GTI has solid relative value relative to its fundamentals and relative to other stocks in the Industrial sector.
However, operating momentum and analyst revision momentum has stalled. For investors that rebalance their
portfolios on a monthly basis, it makes sense to sell GTI and purchase an alternative and revisit the story again in one
or two quarters. Long-term investors should probably hold the stock because of its proven management team and its
strong strategic position in the graphite electrode industry, made stronger by these recent acquisitions.

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About this report
This company report is a supplement to a monthly report dated November 30, 2010 that details the model portfolio strategies of
Ascendere Associates LLC ("Ascendere").

For more information, please see our list of frequently asked questions, suggested tips on using our newsletter or an interview with
us on Covestor Live, and our disclosures and disclaimers

See also our long-only model based on actual trade data.

J. Stephen Castellano Ascendere Associates LLC

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

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

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

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

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

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4) Ascendere has not received compensation from the Companies.

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

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

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

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DISCLAIMERS
This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or
sell any securities or related financial instruments. The report is not intended to be in furtherance of the specific
investment objectives, financial situation, or particular needs of any individual recipient. The information contained
herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are
subject to change at any time without notice and without obligation or notification. The officers, affiliates or family
members of Ascendere Associates may hold positions in the securities of the Companies. No warranty is made as to the
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