Leapfrog Enterprises Inc. November 14, 2013 Yi Liu, Ye Liang, Charalampos Ntantanis, Caleb Pierson

Agenda Company Background Current Position Macroeconomic Outlook Industry Overview Financial Analysis Valuation Recommendation

Current Position RCMP recommended for purchase 2000 market (8.20) which resulted in buying 2000 $8.19 on April 5, 2013 Current Stock price is $8.13 This is an unrealized loss of 0.73%

Macroeconomic Outlook World (and U.S.) population is growing across the toy consumer age range Dollars spent on toys increased 7.68% from 2007 to 2012 Youth electronics decreased slightly from 2011 to 2012 Nostalgic/Retro toys are making a big push this year The Consumer Sentiment Index is at the lowest point since 2011 Bloomberg News and Toy Industry Association Inc.

Industry Overview The U.S. Toy market was worth $22 billion in 2012 Industry products include dolls/action figures, models, construction kits, scooters, board games, game consoles Small companies are able to compete alongside larger businesses by focusing on niche products and by reacting more quickly to new trends Source: Hoovers

5 Forces for Toys and Games Source: Marketline

5 Forces Analysis Buyer Power Supplier Power Threat of New Entrants Threat of Substitutes Degree of Rivalry Moderate High Individuals have relatively little impact Few large manufacture s Patents help protect ideas Knock off goods Many companies offer products Cost of switching is low Suppliers are unlikely to forward integrate Easy to self produce and market Cost of switching is low Short lived popularity

Company Overview Leapfrog trades on the NYSE with ticker symbol LF Company was founded in 1995 by Michael Wood and Robert Lally and headquartered in Emeryville, California USA Focus: Educational Entertainment for Children Employees: 552 people on a full- time basis Source: Company Website and k

Business Segments and Operations United States: 73%, 75%, 80% in 2012, 2011and 2010 Three large retailers: Wal-Mart Stores, Inc. Toys “R” Us, Inc. and Target Corporation International United Kingdom, France, Canada, Mexico, Australia, South Africa and Spain. Source: k

Product Portfolio Source: Company Website

Product Portfolio Currently sell 2 versions of LeapPad, 2 hand held computers (GS and the Explorer), 2 sets of eBooks (Tag and the Tag junior), learning toys, and iPhone and iPad apps LeapPads -- $120 GS and Explorer -- $70 eBooks -- $25 to $170 bundles Toys -- $10 to $25 Apps -- $0.99 Source: Company Website

Risk Factors Highly seasonal – Approximately 75% of total sales to retailers to occur during the third and fourth quarters. Growing strategic focus on online products and services – Depends on consumer acceptance Rely on a limited number of manufactures Liquidity maybe insufficient to meet the long-term or periodic needs

Seasonality Source: k

SWOT analysis StrengthWeaknesses Portfolio of patents Strong operating record Strong growth in LeapFrog school house Highly dependent on few manufacturers Pending litigation Client concentration OpportunitiesThreats Strong cash reserves facilitate new product development Growing ESOL (English to Speakers of Other Languages) population in US Leverage strategic relationships Competition Seasonal fluctuations Absence of long-term agreements with retailers

Management Outlook A number of changes to executive management team during 2012 and 2011 Anticipate continued business growth at a pace ahead of the market with net sales expected to increase at high single –digit percentage growth rate Plan to make long-term investments in content, international expansion, online communities, systems and new platforms

Major Shareholders Top Institutional Investors (over 5%) Wellington Management Company, LLP 6,363, ,612,717Jun 30, 2013 Wells Fargo & Company 4,539, ,668,827Jun 30, 2013 Franklin Resources, Inc 4,285, ,173,944Jun 30, 2013 Vanguard Group, Inc. (The) 3,811, ,900,835Sep 30, 2013 Source: Yahoo finance

Major Shareholders Top Mutual Fund Holders Franklin Templeton- Templeton Global Smaller Companies Fund 2,663, ,089,039Sep 30, 2013 Templeton Global Smaller Companies Fund, Inc. (USA) 2,663, ,621,715Aug 31, 2013 Oppenheimer Global Opportunities Fund 2,500, ,600,000Jun 30, 2013 Wells Fargo Advantage Discovery Fd 2,254, ,691,176Aug 31, 20 Well known financial institutions Source: Yahoo finance

Key People Mr. John Barbour, Chief Executive Officer, Director and Member of Non-executive Officer Stock Award Committee Raymond L. Arthur, Chief Financial Officer Gregory B. Ahearn, Chief Marketing Officer and Executive Vice President Source: Businessweek

Recent Financial Information Source: Capital IQ

Recent Financial Information Source: Capital IQ

Financial Analysis

Recent Stock Performance Source: Capital IQ, Yahoo Finance MetricValue Current Price$8.13 Trailing P/E7.03 Forward P/E20.64 Market Cap ($mil)$560.32

Valuation — WACC Source: Yahoo Finance, Bloomberg

Valuation — DCF

Valuation — Comps. Source: Capital IQ

Comps. Stock Chart Source: Yahoo Finance

Decision Drivers Strengths Climbing Revenues Strong Cash Position Highly specialized DCF ($8.57) Concerns Raising competition from big players Seasonal fluctuations

Recommendation Hold

Questions?