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To: Joan Osland Graffius who wrote (140175)	12/23/2001 6:11:22 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 436258

Joan - ...The company purchases shares in the open market when they are selling at a discount to the value of the company. (I use Warren Buffett’s definition of a discount) BTW, if you look at the recent quarter balance sheet you will note the shares outstanding are decreasing. For example, they were buying shares at $8 and $9 during September of 2000. During the year 2001 they distributed some of these shares to the stockholders. The stockholder can now hold these shares and sell in the future with a long term capital gain tax instead of the 38% tax on ordinary dividends. If they had sent me a cash dividend of say $42.50 per hundred shares (which would have been their cost) my tax cost would be $24.40 in Minnesota. I can hold these shares for a long term capital gains and my tax cost is $8.50 in Minnesota. As a sharehold I can control when I sell these shares and can maximize my returns. All this assumes the company stays in business and the companies value is constant. Looks like a good deal to me. Thanks. The way I interpret this in a simplified manner is that the company buys two shares of stock at a bargain price. All to the good. It retires one share to boost the eps and distributes the other. Is it really an advantage to not retire the second share as well rather than distribute it? I suppose if your holding is not in an IRA, it gives a greater mix of tax lots to choose from, but you still always can sell a part of your holdings, and you may already have losses to sell, so even the capital gain may not be an issue. Even the cash dividend only makes sense if the company has no adequate investment opportunities or management can't be trusted and you want to pull the cash out of their control. Regards, Don