##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to
 Commission File Number: 0-51937
 Compass Diversified Trust
 (Exact name of registrant as specified in its charter)
 Delaware(Jurisdiction of incorporation or organization)
    
    57-6218917(I.R.S. Employer Identification No.)
 Commission File Number: 0-51938
 Compass Group Diversified Holdings LLC
 (Exact name of registrant as specified in its charter)
 Delaware(Jurisdiction of incorporation or organization)
    
    20-3812051(I.R.S. Employer Identification No.)
 Sixty One Wilton Road 
Second Floor 
Westport, CT(Address of principal executive offices)
    
    06880(Zip Code)
 (203) 221-1703  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredShares
representing
beneficial interests
in Compass Diversified
Trust LLC (trust
shares)
    
    NASDAQ Global Select Market
 Securities registered pursuant to Section 12 (g) of the Act: None
 o þ
 o þ
  þ o
 þ
  o o þ
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Table of Contents
 PagePART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    34Item 1B.
    
    Unresolved Staff Comments
    
    
    49Item 2.
    
    Properties
    
    
    50Item 3.
    
    Legal Proceedings
    
    
    51Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    52PART IIItem 5.
    
    Market for Registrants Common Equity and Related Stockholder Matters
    
    
    53Item 6
    
    Selected Financial Data
    
    
    56Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    57Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    76Item 8.
    
    Financial Statements and Supplementary Data
    
    
    77Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    78Item 9A.
    
    Controls and Procedures
    
    
    79Item 9B.
    
    Other Information
    
    
    80PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    81Item 11.
    
    Executive Compensation
    
    
    84Item 12.
    
    Security ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters
    
    
    88Item 13.
    
    Certain Relationships and Related Transactions
    
    
    89Item 14.
    
    Principal Accounting Fees and Services
    
    
    93PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    94
 NOTE TO READER
  
    
    the Trust refers to Compass Diversified Trust;
    
    businesses refers to, collectively, the businesses controlled by the Company;
    
    the Company refers to Compass Group Diversified Holdings LLC;
    
    the Manager refers to Compass Group Management LLC (CGM);
    
    the initial businesses refers to, collectively, CBS Personnel Holdings, Inc.,
Crosman Acquisition Corporation, Compass AC Holdings, Inc. and Silvue Technologies, Group,
Inc.;
    
    the Trust Agreement refers to the amended and restated trust agreement of the
Trust dated as of April 25, 2006;
    
    the LLC Agreement refers to the second amended and restated operating
agreement of the Company dated as of January 9; 2007 and
    
    we, us and our refer to the Trust, the Company and the businesses
together.
 1




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Statement Regarding Forward-Looking Disclosure
  
    
    our ability to successfully operate our businesses on a combined basis, and to effectively integrate and improve
any future acquisitions;
    
    our ability to remove our Manager and our Managers right to resign;
    
    our trust and organizational structure, which may limit our ability to meet our dividend and distribution policy;
    
    our ability to service and comply with the terms of our indebtedness;
    
    our cash flow available for distribution and our ability to make distributions in the future to our shareholders;
    
    our ability to pay the management fee, profit allocation and put price if and when due;
    
    our ability to make and finance future acquisitions;
    
    our ability to implement our acquisition and management strategies;
    
    the regulatory environment in which our businesses operate;
    
    trends in the industries in which our businesses operate;
    
    changes in general economic or business conditions or economic or demographic trends in the United States and
other countries in which we have a presence, including changes in interest rates, foreign currency and
inflation;
    
    environmental risks affecting the business or operations of our businesses;
    
    our and our Managers ability to retain or replace qualified employees of our businesses and the Manager;
    
    costs and effects of legal and administrative proceedings, settlements, investigations and claims; and
    
    extraordinary or force majeure events affecting the business or operations of our businesses.
   2




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PART I
 ITEM 1. BUSINESS
    Overview
    
    
    provide ongoing strategic and financial support for their businesses;
    
    maintain a long-term outlook as to the ownership of those businesses
where such an outlook is required for maximization of our
shareholders return on investment; and
    
    consummate transactions efficiently without being dependent on
third-party financing on a transaction-by-transaction basis.
  3




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##### 



Advanced Circuits
  Anodyne
  CBS Personnel
  Crosman
 Crosman TM
 Silvue.
  4




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##### 



Recent Developments
 Disposition of Crosman
  Acquisition of Aeroglide Corporation
  Acquisition of Halo Branded Solutions, Inc.
  Tax Reporting Developments
   WHERE YOU CAN FIND ADDITIONAL INFORMATION
  5




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Our Current Organizational Structure
 
 (1)
    
    CGI is the beneficial owner of 35.9% of the Trust shares, and is our single largest
holder. Mr. Massoud is not a director, officer or member of CGI.(2)
    
    Owned by members of our Manager, including Mr. Massoud as managing member.(3)
    
    Mr. Massoud is the managing member.(4)
    
    The allocation interests, which carry the right to receive a profit allocation, represents
less than 0.1% equity interest in the Company.(5)
    
    Mr. Day is a non-managing member.
 6




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Our Manager
     Market Opportunity
  
    
    there are fewer potential acquirers for these businesses;
    
    third-party financing generally is less available for these acquisitions;
    
    sellers of these businesses frequently consider non-economic factors, such as continuing
board membership or the effect of the sale on their employees; and
    
    these businesses are less frequently sold pursuant to an auction process.
  7




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##### 



Our Strategy
  Management Strategy
  
    
    recruiting and retaining talented managers to operate our businesses by using structured
incentive compensation programs, including minority equity ownership, tailored to each
business;
    
    regularly monitoring financial and operational performance, instilling consistent
financial discipline, and supporting management in the development and implementation of
information systems to effectively achieve these goals;
    
    assisting management in their analysis and pursuit of prudent organic growth strategies;
    
    identifying and working with management to execute attractive external growth and acquisition opportunities; and
    
    forming strong subsidiary level boards of directors to supplement management in their
development and implementation of strategic goals and objectives.
  
    
    making selective capital investments to expand geographic reach, increase capacity, or
reduce manufacturing costs of our businesses;
    
    investing in product research and development for new products, processes or services for customers;
    
    improving and expanding existing sales and marketing programs;
    
    pursuing reductions in operating costs through improved operational efficiency or
outsourcing of certain processes and products; and
    
    consolidating or improving management of certain overhead functions.
  
    
    leverage manufacturing and distribution operations;
    
    leverage branding and marketing programs, as well as customer relationships;
    
    add experienced management or management expertise;
    
    increase market share and penetrate new markets; and
    
    realize cost synergies by allocating the corporate overhead expenses of our businesses
across a larger number of businesses and by implementing and coordinating improved
management practices.
 8




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##### 



Acquisition and Disposition Strategy
   
    
    is an established North American based company;
    
    maintains a significant market share in defensible industry niche (i.e., has a reason to exist);
    
    has a solid and proven management team with meaningful incentives;
    
    has low technological and/or product obsolescence risk; and
    
    maintains a diversified customer and supplier base.
  
    
    engages in a substantial level of internal and third-party due diligence;
    
    critically evaluates the management team;
    
    identifies and assesses any financial and operational strengths and weaknesses of the target business;
    
    analyzes comparable businesses to assess financial and operational performances relative to industry competitors;
    
    actively researches and evaluates information on the relevant industry; and
    
    thoroughly negotiates appropriate terms and conditions of any acquisition.
   9




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##### 



Strategic Advantages
    Valuation and Due Diligence
  
    
    discounted cash flow analyses;
    
    evaluation of trading values of comparable companies;
    
    expected value matrices; and
    
    examination of recent transactions.
   10




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##### 



Financing
      Our Businesses
 Advanced Circuits
 Overview
   11




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##### 



History of Advanced Circuits
   Industry
    
    
    Prototype PCBs These PCBs are manufactured typically for customers in research and
development departments of original equipment manufacturers, or OEMs, and academic
institutions. Prototype PCBs are manufactured to the specifications of the customer, within
certain manufacturing guidelines designed to increase speed and reduce production costs.
Prototyping is a critical stage in the research and development of new products. These
prototypes are used in the design and launch of new electronic equipment and are typically
ordered in volumes of 1 to 50 PCBs. Because the prototype is used primarily in the research
and development phase of a new electronic product, the life cycle is relatively short and
requires accelerated delivery time frames of usually less than five days and very high,
error-free quality. Order, production and delivery time, as well as responsiveness with
respect to each, are key factors for customers as PCBs are indispensable to their research
and development activities.
    
    Quick-Turn Production PCBs These PCBs are used for intermediate stages of testing for
new products prior to full scale production. After a new product has successfully completed
the prototype phase, customers undergo test marketing and other technical testing. This
stage requires production of larger quantities of PCBs in a short period of time, generally
10 days or less, while it does not yet require high production volumes. This transition
stage between low-volume prototype production and volume production is known as quick-turn
production. Manufacturing specifications conform strictly to end product requirements and
order quantities are typically in volumes of 10 to 500. Similar to prototype PCBs, response
time remains crucial as the delivery of quick-turn PCBs can be a gating item in the
development of electronic products. Orders for quick-turn production PCBs conform
specifically to the customers exact end product requirements.
 12




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
    
    Volume Production PCBs These PCBs are used in the full scale production of electronic
equipment and specifications conform strictly to end product requirements. Production PCBs
are ordered in large quantities, usually over 100 units, and response time is less
important, ranging between 15 days to 10 weeks or more.
   
    
    Increasing Customer Demand for Quick-Turn Production Services Rapid advances in
technology are significantly shortening product life-cycles and placing increased pressure
on OEMs to develop new products in shorter periods of time. In response to these pressures,
OEMs invest heavily on research and development, which results in a demand for PCB companies
that can offer engineering support and quick-turn production services to minimize the
product development process.
    
    Increasing Complexity of Electronic Equipment OEMs are continually designing more
complex and higher performance electronic equipment, requiring sophisticated PCBs. To
satisfy the demand for more advanced electronic products PCBs are produced using exotic
materials and increasingly have higher layer counts and greater component densities.
Maintaining the production infrastructure necessary to manufacture PCBs of increasing
complexity often requires significant capital expenditures and has acted to reduce the
competitiveness of local and regional PCB manufacturers lacking the scale to make such
investments.
    
    Shifting of High Volume Production to Asia Asian based manufacturers of PCBs are
capitalizing on their lower labor costs and are increasing their market share of volume
production of PCBs used, for example, in high-volume consumer electronics applications, such
as personal computers and cell phones. Asian based manufacturers have been generally unable
to meet the lead time requirements for prototype or quick-turn PCB production or the volume
production of the most complex PCBs. This offshoring of high-volume production orders has
placed increased pricing pressure and margin compression on many small domestic
manufacturers that are no longer operating at full capacity. Many of these small producers
are choosing to cease operations, rather than operate at a loss, as their scale, plant
design and customer relationships do not allow them to focus profitably on the prototype and
quick-turn sectors of the market.
 Products and Services
   TM
 13




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##### 



Gross Sales by Products and Services (1)
 December 31, 2006
    
    
    December31, 2005Prototype Production
    
    
    33.4
    %
    
    
    34.0
    %Quick-Turn Production
    
    
    32.1
    %
    
    
    32.0
    %Volume Production
    
    
    20.4
    %
    
    
    20.1
    %Third Party
    
    
    14.1
    %
    
    
    13.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    As a percentage of gross sales, exclusive of sale discounts.
 Competitive Strengths
  
    
    Numerous Unique Orders Per Day For the year ended December 31, 2006, Advanced Circuits
received an average of over 290 customer orders per day. Due to the large quantity of
orders received, Advanced Circuits is able to combine multiple orders in a single panel
design prior to production. Through this process, Advanced Circuits is able to reduce the
number of costly, labor intensive equipment set-ups required to complete several
manufacturing orders. As labor represents the single largest cost of production, management
believes this capability gives Advanced Circuits a unique advantage over other industry
participants. Advanced Circuits maintains proprietary software to maximize the number of
units placed on any one panel design. A single panel set-up typically accommodates 1 to 12
orders. Further, as a critical mass of like orders are required to maximize the
efficiency of this process, management believes Advanced Circuits is uniquely positioned as
a low cost manufacturer of prototype and quick-turn PCBs.
    
    Diverse Customer Base Advanced Circuits possesses a customer base with little industry
or customer concentration exposure. During fiscal year ended December 31, 2006, Advanced
Circuits did business with over 8,000 customers and added approximately 225 new customers
per month. Advanced Circuits website receives thousands of hits per day and, each month
during 2005, it received approximately 600 requests to establish new web accounts. For the
year ended December 31, 2006, no customer represented over 2% of net sales.
    
    Highly Responsive Culture and Organization A key strength of Advanced Circuits is its
ability to quickly respond to customer orders and complete the production process. In
contrast to many competitors that require a day or more to offer price quotes on prototype
or quick-turn production, Advanced Circuits offers its customers quotes within seconds and
the ability to place or track orders any time of day. In addition, Advanced Circuits
production facility operates three shifts per day and is able to ship a customers product
within 24 hours of receiving its order.
    
    Proprietary FreeDFM.com Software Advanced Circuits offers its customers unique design
verification services through its online FreeDFM.com tool. This tool, which was launched in
2002, enables customers to receive a free manufacturability assessment report, within
minutes, resolving design problems before customers place their orders. The service is
relied upon by many of Advanced Circuits customers to reduce design errors and minimize
production costs. Beyond improved customer service, FreeDFM.com has the added benefit of
improving the efficiency of Advanced Circuits engineers, as many routine design problems,
which typically require an engineers time and attention to identify, are identified and
sent back to customers automatically.
 14




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##### 




    
    Established Partner Network Advanced Circuits has established third party production
relationships with PCB manufacturers in North America and Asia. Through these
relationships, Advanced Circuits is able to offer its customers a full suite of products
including those outside of its core production capabilities. Additionally, these
relationships allow Advanced Circuits to outsource orders for volume production and focus
internal capacity on higher margin, short lead time, production and quick-turn
manufacturing.
 Business Strategies
  
    
    Increase Portion of Revenue from Prototype and Quick-Turn Production Advanced
Circuits management believes it can grow revenues and cash flow by continuing to leverage
its core prototype and quick-turn capabilities. Over its history, Advanced Circuits has
developed a suite of capabilities that management believes allow it to offer a combination
of price and customer service unequaled in the market. Advanced Circuits intends to
leverage this factor, as well as its core skill set, to increase net sales derived from
higher margin prototype and quick-turn production PCBs. In this respect, marketing and
advertising efforts focus on attracting and acquiring customers that are likely to require
these premium services. And while production composition may shift, growth in these
products and services is not expected to come at the cost of declining sales in volume
production PCBs as Advanced Circuits intends to leverage its extensive network of
third-party manufacturing partners to continue to meet customers demand for these services.
    
    Acquire Customers from Local and Regional Competitors Advanced Circuits management
believes the majority of its competition for prototype and quick-turn PCB orders comes from
smaller scale local and regional PCB manufacturers. As an early mover in the prototype and
quick-turn sector of the PCB market, Advanced Circuits has been able to grow faster and
achieve greater production efficiencies than many industry participants. Management
believes Advanced Circuits can continue to use these advantages to gain market share.
Further, Advanced Circuits has begun to enter into prototype and quick-turn manufacturing
relationships with several subscale local and regional PCB manufacturers. According to
Fabfile online, in 2006 there were over 400 small PCB manufacturers with annual sales of
under $10 million. Management believes that while many of these manufacturers maintain
strong, longstanding customer relationships, they are unable to produce PCBs with short
turn-around times at competitive prices. As a result, Advanced Circuits is beginning to
seize upon an opportunity for growth by providing production support to these manufacturers
or direct support to the customers of these manufacturers, whereby the manufacturers act
more as a broker for the relationship.
    
    Remain Committed to Customers and Employees Over its history, Advanced Circuits has
remained focused on providing the highest quality product and service to its customers.
Management believes this focus has allowed Advanced Circuits to achieve its outstanding
delivery and quality record. Advanced Circuits management believes this reputation is a
key competitive differentiator and is focused on maintaining and building upon it.
Similarly, management believes its committed base of employees is a key differentiating
factor. Advanced Circuits currently has a profit sharing program and tri-annual bonuses for
all of its employees. Management also occasionally sets additional performance targets for
individuals and departments and establishes rewards, such as lunch celebrations or paid
vacations, if these goals are met. Management believes that Advanced Circuits emphasis on
sharing rewards and creating a positive work environment has led to increased loyalty. As a
result, Advanced Circuits plans on continuing to focus on similar programs to maintain this
competitive advantage.
 Research and Development
  15




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Customers
  2006 CustomerIndustry Sector
    
    DistributionElectrical Equipment and Components
    
    
    40
    %Measuring Instruments
    
    
    15
    %Electronics Manufacturing Services
    
    
    11
    %Engineer Services
    
    
    5
    %Industrial and Commercial Machinery
    
    
    5
    %Business Services
    
    
    5
    %Wholesale Trade-Durable Goods
    
    
    3
    %Educational Institutions
    
    
    2
    %Transportation Equipment
    
    
    5
    %All Other Sectors Combined
    
    
    9
    %Total
    
    
    100
    %
  Sales and Marketing
   Competition
   16




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Suppliers
   Intellectual Property
 FreeDFM.com TM
 FreeDFM.com TM 4pcb.com TM 4PCB.com TM 33each.com TM barebonespcb.com TM Advanced Circuits TM
 Regulatory Environment
  Employees
  17




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##### 



Anodyne
 Overview
   History
   Industry
     18




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##### 



Products and Services
  Alternating pressure mattress replacements:
 Low air loss mattress replacements:
 Static mattress replacement systems:
 Mattress overlays and positioning devices:
 Competition
  19




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##### 



Business Strategies
  
    
    Offer customers high quality, consistent product, on a national basis Products produced
by Anodyne and its competitors are typically bulky in nature and may not be conducive to
shipping. Management believes that many of its competitors do not have the scale or
resources required to produce support surfaces for national distributors and believes that
customers value manufacturers with the scale and sophistication required to meet these needs.
    
    Leverage scale to provide industry leading research and development Medical support
surfaces are becoming increasingly advanced in nature. Anodynes management believes that
many smaller competitors to do not have the resources required to effectively meet the
changing needs of their customers and believes that increased scale acquired though
acquisitions will allow it to better serve its customers through industry leading research
and development.
    
    Pursue cost savings through scale purchasing and operational improvements As many of the
products used to manufacture medical support surfaces are standard in nature management
believes that increased scale achieved through acquisitions will allow it to benefit from
lower cost of materials and therefore lower cost of sales. In addition, management believes
that there are opportunities to improve the operations of smaller acquired entities and in
turn benefit from production efficiencies.
 Research and Development
  Customers
  Suppliers
  Intellectual Property
  Regulatory Environment
  20




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##### 



Legal Proceedings
  Employees
  CBS Personnel
 Overview
     History of CBS Personnel
    21




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##### 



Industry
    Services
  
    
    providing excellent service to existing clients in a consistent and efficient manner;
    
    attempting to sell additional service offerings to existing clients to increase revenue per client;
    
    marketing services to prospective clients to expand the client base; and
    
    providing incentives to employees through well-balanced incentive and bonus plans to
encourage increased sales per client and the establishment of new client relationships.
  
    
    temporary staffing services in categories such as light industrial, clerical, healthcare,
construction, transportation, professional and technical staffing;
    
    employee leasing and related administrative services; and
    
    temporary-to-permanent and permanent placement services.
 Temporary Staffing Services
  22




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##### 




    
    Light Industrial A substantial portion of CBS Personnels temporary staffing revenues
are derived from the placement of low-to mid-skilled temporary workers in the light
industrial category, which comprises primarily the distribution (pick-and-pack) and light
manufacturing (such as assembly-line work in factories) sectors of the economy.
Approximately 50% of CBS Personnels temporary staffing revenues were derived from light
industrial for the fiscal year ended December 31, 2006.
    
    Clerical CBS Personnel provides clerical workers that have been screened,
reference-checked and tested for computer ability, typing speed, word processing and data
entry capabilities. Clerical workers are often employed at client call centers and corporate
offices. Approximately 37% of CBS Personnels temporary staffing revenues were derived from
clerical for the fiscal year ended December 31, 2006.
    
    Technical CBS Personnel provides placement candidates in a variety of skilled
technical capacities, including plant managers, engineering management, operations managers,
designers, draftsmen, engineers, materials management, line supervisors, electronic
assemblers, laboratory assistants and quality control personnel. Approximately 4% of CBS
Personnels temporary staffing revenues were derived from technical for the fiscal year
ended December 31, 2006.
    
    Healthcare Through its expert placement agents in its Columbia Healthcare division,
CBS Personnel provides trained candidates in the following healthcare categories: medical
office personnel, medical technicians, rehabilitation professionals, management and
administrative personnel and radiology technicians, among others. Approximately 2% of CBS
Personnels temporary staffing revenues were derived from healthcare for the fiscal year
ended December 31, 2006.
    
    Niche/Other In addition to the light industrial, clerical, healthcare and technical
categories, CBS Personnel also provides certain niche staffing services, placing candidates
in the skilled industrial, construction and transportation sectors, among others. CBS
Personnels wide array of niche service offerings allows it to meet a broad range of client
needs. Moreover, these niche services typically generate higher margins for CBS Personnel.
Approximately 7% of CBS Personnels temporary staffing revenues were derived from
niche/other for the fiscal year ended December 31, 2006.
  Employee Leasing Services
  Temporary-to-Permanent and Permanent Staffing Services
  Competitive Strengths
  23




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##### 




    
    Large Employee Database/Customer List Over the course of its history, CBS Personnels
management believes CBS Personnel has built a significant presence in most of its markets in
terms of both clients and employees. CBS Personnel is successful in recruiting additional
employees because of its reputation as having numerous job openings with a wide variety of
clients. CBS Personnel attracts clients through its reputation as having a large database
of reliable employees with a wide ranging skill set. CBS Personnels employee database and
client list have been built over a number of years in each of its markets and serve as a
major competitive strength in most of its markets.
    
    Higher Operating Margins By establishing multiple offices in the majority of the
markets in which it operates, CBS Personnel is able to better leverage its selling, general
and administrative expenses at the regional and field level and create higher operating
income margins than its less dense competitors.
    
    Scalable Business Model By having multiple office locations in each of its markets,
CBS Personnel is able to quickly scale its business model in both good and bad economic
environments. For example, in 2001 and 2002 during the economic downturn, CBS Personnel was
able to close offices and reduce overhead expenses while shifting business to adjacent
offices. For competitors with only one office per market, closing an office requires
abandoning the clients and employees in that market. During 2001 and 2002, CBS Personnel
was able to reduce its overhead costs by approximately 13% while maintaining its presence in
each of its markets and retaining its clients and employees.
    
    Marketing Synergies By having a number of offices in the majority of its markets, CBS
Personnel allocates additional resources to marketing and selling and amortizes those costs
over a larger office network. For example, while many of its competitors use selling branch
managers who split time between operations and sales, CBS Personnel uses outside sales reps
that are exclusively focused on bringing in new sales.
 Business Strategies
  
    
    Invest in its Existing Markets In many of its existing markets, CBS Personnel has
multiple branch locations. CBS Personnel plans on continuing to invest in these existing
markets through the opening of additional branch locations and the hiring of additional
sales and operations employees. In addition, CBS personnel is offering complimentary human
resource services to its existing clients such as full time recruiting, consulting, and
administrative outsourcing. CBS Personnel has implemented an incentive plan that highly
rewards its employees for selling services beyond its traditional temporary staffing
services.
    
    Build a Presence in Contiguous Markets CBS Personnel plans on opening new branch
locations in markets contiguous to those in which it operates. CBS Personnel believes that
the cost and time required to establish profitable branch locations is minimized through
expansion into contiguous markets as costs associated with advertising and administrative
overhead are reduced due to proximity.
    
    Pursue Selective Acquisitions CBS Personnel views acquisitions, such as the SES
acquisition in November 2006, as an attractive means to enter into a new geographical
market. In some cases CBS Personnel will consider making acquisitions within its existing
markets to increase its market share.
 Clients
  Sales, Marketing and Recruiting Efforts
  24




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##### 



Competition
   
    
    multiple offices in its core markets;
    
    long-standing relationships with its clients;
    
    a large database of qualified temporary workers which enables CBS Personnel to fill orders rapidly;
    
    well-recognized brands and leadership positions in its core markets; and
    
    a reputation for treating employees well and offering competitive benefits.
   Tradenames
 CBS Personnel TM , CBS
Personnel Services TM , Columbia Staffing TM Columbia
Healthcare Services TM, Venturi Staffing Partners .
 25




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##### 



Facilities
  Number of
    
    Employee HoursState
    
    Branch Offices
    
    Billed(in thousands)Ohio
    
    
    26
    
    
    
    10,053California
    
    
    20
    
    
    
    3,917Kentucky
    
    
    14
    
    
    
    4,352Texas
    
    
    14
    
    
    
    5,207Illinois
    
    
    11
    
    
    
    1,144South Carolina
    
    
    10
    
    
    
    2,166North Carolina
    
    
    8
    
    
    
    2,050Indiana
    
    
    7
    
    
    
    1,781Maryland
    
    
    7
    
    
    
    105Pennsylvania
    
    
    7
    
    
    
    926Massachusetts
    
    
    5
    
    
    
    328Georgia
    
    
    4
    
    
    
    383Virginia
    
    
    3
    
    
    
    1,307Alabama
    
    
    2
    
    
    
    541New Jersey
    
    
    2
    
    
    
    96New York
    
    
    2
    
    
    
    589Tennessee
    
    
    1
    
    
    
    18Washington
    
    
    1
    
    
    
    72
  Regulatory Environment
   Workers Compensation Program
  26




---



##### 



Employees
    Silvue
 Overview
  SDC Technologies TM Silvue ® CrystalCoat ® Statux TM Resinrelease TM high
performance chemistry TM
  27




---



##### 



History of Silvue
    Industry
     Products
  28




---



##### 




    
    Silvueand CrystalCoat these products are either non-tintable or tintable and impart
index matching and anti-fogging properties;
    
    Statux this product imparts anti-static properties; and
    
    Resinrelease this product imparts non-stick or surface release properties.
   
    
    Automotive CrystalCoat coatings are used on a variety of automotive and transit
applications, including instrument panel windows, bus shelters, rail car windows, and bus
windows. These coatings are used primarily to impart long-term durability, chemical
resistance and scratch and abrasion resistance properties.
    
    Electronics CrystalCoat coatings are used for electronic application surfaces, from
liquid crystal displays to cell phone windows. These coatings are used primarily to impart
scratch and abrasion resistance properties.
    
    Optical CrystalCoat coatings are used for vision corrective lenses and other optical
applications. These coatings are used primarily to impart high scratch and abrasion
resistance properties and UV protection while matching the optical properties of the
underlying material to reduce interference. Silvue produces both tintable and non-tintable
coatings.
    
    Safety CrystalCoat coatings are used for safety applications. These coatings are used
primarily to impart anti-fog characteristics. Silvue offers a high performance water
sheeting anti-fog coating that is specifically designed to meet a customers specific
standards and testing requirements.
    
    Sunglasses and Sports Eyewear CrystalCoat coatings are used for sunglasses and sports
eyewear. These coatings are used primarily to impart scratch and abrasion resistance
properties, UV protection and anti-fog characteristics. CrystalCoat coatings can be used on
tinted or clear materials.
 Research and Development and Technical Services
  
    
    improving existing products and processes to lower costs, improving product quality, and
reducing potential environmental impact;
    
    developing new product platforms and processes; and
    
    developing new product lines and markets through applications research.
  29




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##### 




    
    application engineering and process support;
    
    equipment and process design;
    
    product and formulation development and customization;
    
    test protocols and coating qualifications;
    
    rapid response for customer technical support;
    
    analytical testing and competitive product assessment;
    
    quality assurance testing and reporting; and
    
    manufacturing support.
  Competitive Strengths
  
    
    Extensive Patent Portfolio Silvue owns nine patents relating to its coating systems,
including six patents relating to its core Ultra-Coat platform systems. Beyond its existing
patents, Silvue has three patents pending and two provisional patents. Products related to
patents represent approximately 66% of Silvues net sales and are relied upon by eyewear
manufacturers worldwide. Silvue aggressively defends these patents and management believes
they represent a barrier to entry for new products and that they reduce the threat of
similar coating products gaining market share.
    
    Superior Technical Skills and Expertise Silvue has invested in a team of experts who
are ready to support its customers specific application needs from new product uses to the
optimization of part design for coating application.
    
    Reputation for Quality and Service Silvues on-going commitment to producing quality
coatings and its ability to meet the rigorous requirements of its most valued customers has
earned it a reputation as one of the principal providers of coatings for premium eyewear.
    
    Global Presence Silvue works with its customers from three offices in North America,
Asia and Europe. Many of Silvues customers have numerous manufacturing operations globally
and management believes its ability to offer its coating systems and related customer
service on a global basis is a competitive advantage.
    
    ISO 9002 Certified Silvues Anaheim, California, and Chiba, Japan manufacturing
facilities are ISO 9002 certified, which is a universally accepted quality assurance
designation indicating the highest quality manufacturing standards.
    
    Experienced Management Team Silvues senior management has extensive experience in all
aspects of the coating industry. The senior management team, collectively, has
approximately 80 years of experience in the global hardcoatings and closely related
industries.
 Business Strategies
  30




---



##### 




    
    Develop New Products and Expand into New Markets Silvues management believes that
Silvue is one of the principal developers of proprietary high performance coating systems
for polycarbonate plastic, glass, acrylic, metals and other materials, and is focused on
growth through continued product innovation to provide greater functionality or better value
to its customers. Driven by input from customers and the demands of the marketplace,
Silvues technology development programs are designed to provide an expanding choice of
coating systems to protect and enhance existing materials and materials developed in the
future. As an example of Silvues commitment to product innovation, in 2002, Silvue created
a new group with primary focus on the discovery of new technologies and sciences, and the
innovation of those findings into useful applications and beneficial results. This group,
which is known as the Discovery and Innovation Group, is charged with exploring new
coatings and coating applications while advancing the state-of-the-art in functional surface
coating technologies, nanotechnologies and materials science.
    
    Pursue Opportunities for Business Development and Global Diversification Silvue
recently had in place and continues to pursue opportunities for joint ventures, equity
investments and other alliances. These strategic initiatives are expected to diversify and
strengthen Silvues business by providing access to new markets and high-growth areas as
well as providing an efficient means of ensuring that Silvue is involved in technological
innovation in or related to the coating systems industry. Silvue is committed to pursuing
these initiatives in order to capitalize on new business development and global
diversification opportunities.
 Customers
    2006 CustomerIndustry
    
    DistributionPerformance eyewear and sunglasses
    
    
    88
    %Automotive
    
    
    11
    %Other
    
    
    1
    %Total
    
    
    100
    %
 Sales and Marketing
    31




---



##### 



Competition
    Suppliers
  Intellectual Property
   SDC Technologies TM Silvue ® CrystalCoat ® Statux TM Resinrelease TM high
performance chemistry TM
 Regulatory Environment
  32




---



##### 



Employees
  33




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##### 



ITEM 1A  RISK FACTORS
 Risks Related to Our Business and Structure
 We are a Company with limited history and may not be able to continue to successfully manage
our businesses on a combined basis.
  Our consolidated financial statements will not include meaningful comparisons to prior years.
  Our future success is dependent on the employees of our Manager and the management teams of our
businesses, the loss of any of whom could materially adversely affect our financial condition,
business and results of operations.
   We face risks with respect to the evaluation and management of future platform or add-on
acquisitions..
  We may not be able to successfully fund future acquisitions of new businesses due to the
unavailability of debt or equity financing at the Company level on acceptable terms, which could
impede the implementation of our acquisition strategy and materially adversely impact our financial
condition, business and results of operations.
  34




---



##### 



While we intend to make regular cash distributions to our shareholders, the Companys board of
directors has full authority and discretion over the distributions of the Company, other than the
profit allocation, and it may decide to reduce or eliminate distributions at any time, which may
materially adversely affect the market price for our shares.
  We will rely entirely on distributions from our businesses to make distributions to our
shareholders.
  pro rata
 The Companys board of directors will have the power to change the terms of our shares in its
sole discretion in ways with which you may disagree.
  35




---



##### 



Certain provisions of the LLC agreement of the Company and the trust agreement make it difficult
for third parties to acquire control of the Trust and the Company and could deprive you of the
opportunity to obtain a takeover premium for your shares.
  
    
    restrictions on the Companys ability to enter into certain transactions with our major shareholders, with the
exception of our Manager, modeled on the limitation contained in Section 203 of the Delaware General Corporation Law,
or DGCL;
    
    allowing the chairman of the Companys board of directors to fill vacancies on the Companys board of directors until
the second annual meeting of shareholders following the closing of our initial public offering;
    
    allowing only the Companys board of directors to fill newly created directorships, for those directors who are
elected by our shareholders, and allowing only our Manager, as holder of the allocation interests, to fill vacancies
with respect to the class of directors appointed by our Manager;
    
    requiring that directors elected by our shareholders be removed, with or without cause, only by a vote of 85% of our
shareholders;
    
    requiring advance notice for nominations of candidates for election to the Companys board of directors or for
proposing matters that can be acted upon by our shareholders at a shareholders meeting;
    
    having a substantial number of additional authorized but unissued shares that may be issued without shareholder action;
    
    providing the Companys board of directors with certain authority to amend the LLC agreement and the trust agreement,
subject to certain voting and consent rights of the holders of trust interests and allocation interests;
    
    providing for a staggered board of directors of the Company, the effect of which could be to deter a proxy contest for
control of the Companys board of directors or a hostile takeover; and
    
    limitations regarding calling special meetings and written consents of our shareholders.
  We may have conflicts of interest with the minority shareholders of our businesses.
  36




---



##### 



Our third party credit facility exposes us to additional risks associated with leverage and
inhibits our operating flexibility and reduces cash flow available for distributions to our
shareholders.
  
    
    Maintain a minimum level of cash flow;
    
    leverage new businesses we acquire to a minimum specified level at the time of acquisition;
    
    keep our total debt to cash flow at or below a ratio of three to one; and
    
    make acquisitions that satisfy certain specified minimum criteria.
  Changes in interest rates could materially adversely affect us.
  We may engage in a business transaction with one or more target businesses that have
relationships with our officers, our directors, our Manager or CGI, which may create potential
conflicts of interest.
  CGI may exercise significant influence over the Company.
  If, in the future, we cease to control and operate our businesses, we may be deemed to be an
investment company under the Investment Company Act of 1940, as amended.
  37




---



##### 



Risks Relating to Our Manager
 Our Chief Executive Officer, directors, Manager and management team may allocate some of their
time to other businesses, thereby causing conflicts of interest in their determination as to how
much time to devote to our affairs, which may materially adversely affect our operations.
  Our Manager and its affiliates, including members of our management team, may engage in
activities that compete with us or our businesses.
  Our Manager need not present an acquisition or disposition opportunity to us if our Manager
determines on its own that such acquisition or disposition opportunity does not meet the Companys
acquisition or disposition criteria.
  We cannot remove our Manager solely for poor performance, which could limit our ability to improve
our performance and could materially adversely affect the market price of our shares.
  We may have difficulty severing ties with our Chief Executive Officer, Mr. Massoud.
  38




---



##### 



If the management services agreement is terminated, our Manager, as holder of the allocation
interests in the Company, has the right to cause the Company to purchase such allocation interests,
which may materially adversely affect our liquidity and ability to grow.
  Our Manager can resign on 90 days notice and we may not be able to find a suitable
replacement within that time, resulting in a disruption in our operations that could materially
adversely affect our financial condition, business and results of operations as well as the market
price of our shares.
  The liability associated with the supplemental put agreement is difficult to estimate and may
be subject to substantial period-to-period changes, thereby significantly impacting our future
results of operations.
  We must pay our Manager the management fee regardless of our performance.
  We cannot determine the amount of the management fee that will be paid over time with any
certainty.
  We cannot determine the amount of profit allocation that will be paid over time with any
certainty.
  39




---



##### 



The fees to be paid to our Manager pursuant to the management services agreement, the
offsetting management services agreements and transaction services agreements and the profit
allocation to be paid to our Manager, as holder of the allocation interests, pursuant to the LLC
agreement may significantly reduce the amount of cash available for distribution to our
shareholders.
  Our Managers influence on conducting our operations, including on our conducting of
transactions, gives it the ability to increase its fees and compensation to our Chief Executive
Officer, which may reduce the amount of cash flow available for distribution to our shareholders.
  Fees paid by the Company and our businesses pursuant to transaction services agreements do not
offset fees payable under the management services agreement and will be in addition to the
management fee payable by the Company under the management services agreement.
   Our Managers profit allocation may induce it to make suboptimal decisions regarding our
operations.
  40




---



##### 



The obligations to pay the management fee and profit allocation, including the put price, may
cause the Company to liquidate assets or incur debt.
  Risks Related to Taxation
 Our shareholders will be subject to tax on their share of the Companys taxable income, which
taxes or taxable income could exceed the cash distributions they receive from the Trust.
  All of the Companys income could be subject to an entity-level tax in the United States,
which could result in a material reduction in cash flow available for distribution to holders of
shares of the Trust and thus could result in a substantial reduction in the value of the shares.
   If the Trust is determined to be a tax partnership for 2006 and, nonetheless, we decide not to
treat the Trust as a tax partnership for such period, we may be subject to penalties for incorrect
tax reporting and may have missed the opportunity to make an effective election under Code Section
754.
  41




---



##### 



A shareholder may recognize a greater taxable gain (or a smaller tax loss) on a disposition of
shares than expected because of the treatment of debt under the partnership tax accounting rules.
  Our structure involves complex provisions of U.S. federal income tax law for which no clear
precedent or authority may be available. Our structure also is subject to potential legislative,
judicial or administrative change and differing interpretations, possibly on a retroactive basis.
  Risks Relating Generally to Our Businesses
 Our businesses are or may be vulnerable to economic fluctuations as demand for their products
and services tends to decrease as economic activity slows.
  42




---



##### 



Our businesses rely and may rely on their intellectual property and licenses to use others
intellectual property, for competitive advantage. If our businesses are unable to protect their
intellectual property, are unable to obtain or retain licenses to use others intellectual
property, or if they infringe upon or are alleged to have infringed upon others intellectual
property, it could have a material adverse affect on their financial condition, business and
results of operations.
   The operations and research and development of some of our businesses services and technology
depend on the collective experience of their technical employees. If these employees were to leave
our businesses and take this knowledge, our businesses operations and their ability to compete
effectively could be materially adversely impacted.
  If our businesses are unable to continue the technological innovation and successful commercial
introduction of new products and services, their financial condition, business and results of
operations could be materially adversely affected.
   43




---



##### 



Our businesses could experience fluctuations in the costs of raw materials as a result of
inflation and other economic conditions, which fluctuations could have a material adverse effect on
their financial condition, business and results of operations.
  Our businesses do not have and may not have long-term contracts with their customers and
clients and the loss of customers and clients could materially adversely affect their financial
condition, business and results of operations.
  Our businesses are and may be subject to federal, state and foreign environmental laws and
regulations that expose them to potential financial liability. Complying with applicable
environmental laws requires significant resources, and if our businesses fail to comply, they could
be subject to substantial liability.
  Defects in the products provided by our companies could result in financial or other damages to
those customers, which could result in reduced demand for our companies products and/or liability
claims against our companies.
  Some of our businesses are subject to certain risks associated with the movement of businesses
offshore.
  Loss of key customers of some of our businesses could negatively impact financial condition.
  44




---



##### 



Our businesses are subject to certain risks associated with their foreign operations or
business they conduct in foreign jurisdictions.
  Our businesses have recorded a significant amount of goodwill and other identifiable
intangible assets, which may never be fully realized.
  The internal controls of our businesses have not yet been integrated and we have only recently
begun to examine the internal controls that are in place for each business. As a result, we may
fail to comply with Section 404 of the Sarbanes-Oxley Act or our auditors may report a material
weakness in the effectiveness of our internal control over financial reporting.
    45




---



##### 



Risks Related to Advanced Circuits
 Unless Advanced Circuits is able to respond to technological change at least as quickly as its
competitors, its services could be rendered obsolete, which could materially adversely affect its
financial condition, business and results of operations.
  Advanced Circuits customers operate in industries that experience rapid technological change
resulting in short product life cycles and as a result, if the product life cycles of its customers
slow materially, and research and development expenditures are reduced, its financial condition,
business and results of operations will be materially adversely affected.
  Electronics manufacturing services corporations are increasingly acting as intermediaries,
positioning themselves between PCB manufacturers and OEMS, which could reduce operating margins.
  Risks Related to Aeroglide
 Aeroglide requires additional capacity to maintain its current level of growth; failure to add
capacity or broaden its outsourcing relationships could adversely affect Aeroglides financial
condition, business and results of operations.
  Risks Related to Anodyne
 Anodynes business could be materially impacted by fluctuations in raw material costs, such as
foam, vinyl or fabric.
  46




---



##### 



Certain of Anodynes products are subject to regulation by the FDA.
  A change in Medicare Reimbursement Guidelines may reduce demand for Anodynes products.
  Risks Related to CBS Personnel
 CBS Personnels business depends on its ability to attract and retain qualified staffing
personnel that possess the skills demanded by its clients.
  Customer relocation of positions filled by CBS Personnel may materially adversely affect CBS
Personnels financial condition, business and results of operations.
  CBS Personnel assumes the obligation to make wage, tax and regulatory payments for its
employees, and as a result, it is exposed to client credit risks.
  CBS Personnel is exposed to employment-related claims and costs and periodic litigation that
could materially adversely affect its financial condition, business and results of operations.
  47




---



##### 



CBS Personnels workers compensation loss reserves may be inadequate to cover its ultimate
liability for workers compensation costs.
   Risks Related to Halo
 Increases in the portion of end customers buying directly from manufacturers could have a material
adverse affect on the business of Halo.
  The loss of a significant number of account executives could adversely affect the business of Halo.
  Halo relies on suppliers for the timely delivery of products to end customers. Delays in the
delivery of promotional products to customers could adversely affect Halos results of operations.
  Risks Related to Silvue
 Silvue derives a significant portion of its revenue from the eyewear industry. Any economic
downturn in this market or increased regulations by the Food and Drug Administration, would
materially adversely affect its operating results and financial condition.
  48




---



##### 



Silvues technology is compatible with certain substrates and processes and competes with a number
of products currently sold on the market. A change in the substrate, process or competitive
landscape could have a material adverse affect on its financial condition, business and results of
operations.
  ITEM 1B. UNRESOLVED STAFF COMMENTS
  49




---



##### 



ITEM 2.  PROPERTIES
   
    
    13,500 square foot storage facility in Raleigh, N.C.;
    
    2,650 square foot sales facility in Trevose, Pennsylvania;
    
    950 square foot sales/service facility in Stamford, England;
    
    1,383 square foot sales facility in Kuala Lumper, Malaysia; and
    
    1,400 square foot sales/service facility in Shanghai, China
     
    
    23,000 square foot facility in Anaheim, California, which houses its executive
offices and research and development laboratories.
    
    8,000 square foot facility in Carditt, Wales, which houses its distribution
operations in Europe.
    
    12,000 square foot facility in Chiba, Japan, which houses administrative
offices, manufacturing operations and research and development laboratories.
   50




---



##### 



ITEM 3.  LEGAL PROCEEDINGS
  51




---



##### 



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  52




---



##### 



Part II
 Item 5.  Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Market Information
  Quarter Ended
    
    High
    
    LowJune 30, 2006
    
    $
    15.10
    
    
    $
    14.27September 30, 2006
    
    $
    15.36
    
    
    $
    13.45December 31, 2006
    
    $
    17.67
    
    
    $
    15.70
 COMPARATIVE PERFORMANCE OF SHARES OF TRUST STOCK
  
 Data
    
    June 30, 2006
    
    September 30, 2006
    
    December 31, 2006Compass Diversified Trust
    
    $
    94.88
    
    
    $
    102.61
    
    
    $
    116.66NASDAQ Stock Market Index
    
    $
    97.44
    
    
    $
    101.31
    
    
    $
    108.35NASDAQ Other Finance Index
    
    $
    94.03
    
    
    $
    104.02
    
    
    $
    107.59
 53




---



##### 



Shareholders
  Dividends
  Quarter Ended
    
    Declaration Date
    
    Payment Date
    
    Distribution Per ShareJune 30, 2006
    
    June 27, 2006
    
    July 18, 2006
    
    $
    0.1327September 30, 2006
    
    September 27, 2006
    
    October 19, 2006
    
    $
    0.2625December 31, 2006
    
    January 5, 2007
    
    January 24, 2007
    
    $
    0.30
   Securities
Authorized for Issuance under Equity Compensation Plans
  Sales of Unregistered Securities
   54




---



##### 



Use of Proceeds from Initial Public Offering
   Sources of Funds($ in millions)Net proceeds from initial public offering
    
    $
    188.3Investment of Pharos
    
    
    4.0Investment of CGI
    
    
    86.0Net proceeds from initial borrowing under third party credit facility
    
    
    43.9Total Sources
    
    $
    322.2Purchase of Equity:CBS Personnel
    
    $
    54.6Crosman
    
    
    26.1Advanced Circuits
    
    
    35.4Silvue
    
    
    23.2Loans to businesses:CBS Personnel
    
    
    74.3Crosman
    
    
    46.4Advanced Circuits
    
    
    45.6Silvue
    
    
    14.3General corporate purposes
    
    
    2.3Total Uses
    
    $
    322.2
  55




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##### 



ITEM 6.  SELECTED FINANCIAL DATA
    Fiscal Year Ended December 31,2006
    
    
    2005($ in thousands)Statements of Operations Data:Net sales
    
    $
    410,873
    
    
    $
    Cost of sales
    
    
    311,641
    
    
    
    Gross profit
    
    
    99,232
    
    
    
    Operating expenses:Staffing
    
    
    34,345
    
    
    
    Selling, general and administrative
    
    
    36,732
    
    
    
    1Management fee
    
    
    4,376
    
    
    
    Supplemental put expense
    
    
    22,456
    
    
    
    Research and development expense
    
    
    1,806
    
    
    
    Amortization expense
    
    
    6,774
    
    
    
    Operating loss
    
    $
    (7,257
    )
    
    $
    (1
    )Loss from continuing operations
    
    $
    (27,636
    )
    
    $
    (1
    )Net loss
    
    $
    (19,249
    )
    
    $
    (1
    )Cash Flow Data:Cash provided by operating activities
    
    $
    20,563
    
    
    $
    Cash (used in) investing activities
    
    
    (362,286
    )
    
    
    Cash provided by financing activities
    
    
    351,073
    
    
    
    (100
    )Net increase in cash
    
    $
    9,350
    
    
    $
    100Per Share Data:Basic and fully diluted loss from continuing operations per share
    
    $
    (2.18
    )
    
    $
    Basic and fully diluted loss per share
    
    $
    (1.52
    )
    
    $
    
 At December 31,2006
    
    2005($ in thousands)Balance Sheet Data:Total current assets
    
    $
    140,356
    
    
    $
    3,408Total assets
    
    
    525,597
    
    
    
    3,408Current liabilities
    
    
    162,872
    
    
    
    3,309Long-term debt
    
    
    
    
    
    
    Total liabilities
    
    
    242,755
    
    
    
    3,309Minority interests
    
    
    27,131
    
    
    
    100Shareholders equity (deficit)
    
    
    255,711
    
    
    
    (1
    )
 56




---



##### 



ITEM 7.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 This item 7 contains forward-looking statements. Forward-looking statements in this Annual
Report on Form 10-K are subject to a number of risks and uncertainties, some of which are beyond
our control. Our actual results, performance, prospects or opportunities could differ materially
from those expressed in or implied by the forward-looking statements. Additional risks of which we
are not currently aware or which we currently deem immaterial could also cause our actual results
to differ, including those discussed in the sections entitled Forward-Looking Statements and
Risk Factors included elsewhere in this Annual Report.
 Overview
    
    
    North American based of operations;
    
    stable and growing earnings and cash flow;
    
    maintains a significant market share in defensible industry niche (i.e., has a reason to exist);
    
    solid and proven management team with meaningful incentives;
    
    low technological and/or product obsolescence risk; and
    
    a diversified customer and supplier base.
  
    
    utilizing structured incentive compensation programs tailored to each business to
attract, recruit and retain talented managers to operate our businesses;
    
    regularly monitoring financial and operational performance, instilling consistent
financial discipline, and supporting management in the development and implementation of
information systems to effectively achieve these goals;
    
    assisting management in their analysis and pursuit of prudent organic cash flow growth
strategies (both revenue and cost related);
    
    identifying and working with management to execute attractive external growth and
acquisition opportunities; and
    
    forming strong subsidiary level boards of directors to supplement management in their
development and implementation of strategic goals and objectives.
 57




---



##### 



Initial public offering and company formation
    
    
    a controlling interest in CBS Personnel was purchased for approximately $54.6
million, representing at the time of purchase approximately 97.6% of the outstanding
stock of CBS Personnel on a primary basis and approximately 94.4% on a fully diluted
basis, after giving effect to the exercise of vested and in the money options and vested
non-contingent warrants;
    
    a controlling interest in Crosman was purchased for approximately $26.1
million representing approximately 75.4% of the outstanding stock of Crosman on a
primary basis and 73.8% on a fully diluted basis;
    
    a controlling interest in Advanced Circuits was purchased for approximately
$35.4 million, representing approximately 70.2% of the outstanding stock of Advanced
Circuits on a primary and fully diluted basis; and
    
    a controlling interest in Silvue was purchased for approximately $23.2
million, representing approximately 73.0% of the outstanding stock of Silvue on a primary
and fully diluted basis.
   
    
    First, to meet capital expenditure requirements, management fees and corporate overhead expenses
    
    Second, to fund distributions from the businesses to the Company; and
    
    Third, to be distributed by the Trust to shareholders.
 58




---



##### 



Anodyne Acquisition
    Recent Developments
    Net sales
    
    $
    72,316Costs and expenses
    
    
    59,039Income from discontinued operations
    
    
    13,277Other income, net
    
    
    182Income from discontinued operations before taxes
    
    
    13,459Provision for taxes
    
    
    3,367Minority interests
    
    
    1,705Net income from discontinued operations(1)
    
    $
    8,387
 
 (1)
    
    This amount does not include intercompany interest expense
incurred totaling approximately $3.2 million.
   59




---



##### 



Results of Operations
  Consolidated Results of Operations  Compass Diversified Trust and Compass Group Diversified
holdings LLC
 Years Ended December 31,2006
    
    
    2005Net sales
    
    $
    410,873
    
    
    $
    Cost of sales
    
    
    311,641
    
    
    
    Gross profit
    
    
    99,232
    
    
    
    Selling, general and administrative expense
    
    
    71,077
    
    
    
    1Fees to manager
    
    
    4,376
    
    
    
    Supplemental put cost
    
    
    22,456
    
    
    
    Amortization of intangibles
    
    
    6,774
    
    
    
    Research and development expense
    
    
    1,806
    
    
    
    Operating loss
    
    $
    (7,257
    )
    
    $
    (1
    )
    60




---



##### 



Advanced Circuits
 Overview
      Results of Operations
 Fiscal Year Ended December 31, 2006 Compared to Fiscal Year Ended December 31, 2005
  Fiscal Year EndedDecember 31,2006
    
    
    2005($ in thousands)Net sales
    
    $
    48,139
    
    
    $
    41,969Cost of sales
    
    
    18,888
    
    
    
    18,102Gross profit
    
    
    29,251
    
    
    
    23,867Selling, general and administrative expenses
    
    
    14,934
    
    
    
    8,283Amortization of Intangibles
    
    
    2,731
    
    
    
    717Income from operations
    
    $
    11,586
    
    
    $
    14,867
 61




---



##### 



Net sales
  Cost of sales
   Selling, general and administrative expenses
  Amortization of intangible
  Income from operations
  CBS Personnel
 Overview
   62




---



##### 



Fiscal Year Ended December 31, 2006 as Compared to Fiscal Year Ended December 31, 2005
  Fiscal Year Ended December 31,2006
    
    
    2005($ in thousands)Revenues
    
    $
    551,080
    
    
    $
    543,012Direct cost of revenues
    
    
    446,820
    
    
    
    441,685Gross profit
    
    
    104,260
    
    
    
    101,327Staffing expense
    
    
    54,847
    
    
    
    54,249Selling, general and administrative expenses
    
    
    25,666
    
    
    
    26,723Amortization expense
    
    
    2,687
    
    
    
    1,902Income from operations
    
    $
    21,060
    
    
    $
    18,453
 Revenues
  Direct cost of revenues
  Staffing expense
  63




---



##### 



Selling, general and administrative expenses
  Amortization expense
  Income from operations
  Silvue
 Overview
      64




---



##### 



Results of Operations
 Fiscal Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
  Fiscal Year EndedDecember 31,2006
    
    
    2005($ in thousands)Net sales
    
    $
    24,068
    
    
    $
    21,491Cost of sales
    
    
    7,098
    
    
    
    7,497Gross profit
    
    
    16,970
    
    
    
    13,994Selling, general and administrative expenses
    
    
    8,426
    
    
    
    7,552Research and development costs
    
    
    1,129
    
    
    
    1,226Amortization of intangibles
    
    
    745
    
    
    
    709Operating income
    
    
    6,670
    
    
    
    4,507
 Net sales
  Cost of sales
  Selling, general and administrative expense
  Research and development costs
  Amortization of intangibles
  65




---



##### 



Operating income
  Results of Operations for Anodyne
 Overview
       66




---



##### 



Results of Operations
  Fiscal2006Net sales
    
    $
    23,367Cost of sales
    
    
    17,505Gross profit
    
    
    5,862Selling, general and administrative expenses
    
    
    4,901Amortization expense
    
    
    709Income from operations
    
    $
    252
   Liquidity and Capital Resources
      
    
    CBS Personnel  approximately $63.5 million;
    
    Advanced Circuits  approximately $37.3 million;
    
    Silvue  approximately $17.0 million; and
    
    Anodyne  approximately $21.2 million.
  67




---



##### 



Assets:Cash
    
    $
    2,706Accounts receivable, net
    
    
    23,550Inventory
    
    
    16,211Other current assets
    
    
    4,169Current assets of discontinued operations
    
    
    46,636Property, plant and equipment, net
    
    
    12,567Goodwill and other intangible assets, net
    
    
    49,165Other assets
    
    
    3,526Non-current assets of discontinued operations
    
    
    65,258Total assets of discontinued operations
    
    $
    111,894Liabilities:Accounts payable
    
    $
    7,472Other current liabilities
    
    
    6,547Current liabilities of discontinued operations
    
    $
    14,019Non-current liabilities of discontinue operations
    
    $
    6,634Total liabilities of discontinued operations
    
    $
    20,653
      68




---



##### 



69




---



##### 



Year Ended(in thousands)
    
    December 31, 2006Net loss
    
    $
    (19,249
    )Adjustment to reconcile net loss to cash provided by operating activitiesDepreciation and amortization
    
    
    10,290Supplemental put expense
    
    
    22,456Silvues in-process R&D expensed at acquisition date
    
    
    1,120Advanced Circuits loan forgiveness accrual
    
    
    2,760Minority interest
    
    
    2,950Deferred taxes
    
    
    (2,281
    )Loss on Ableco debt retirement
    
    
    8,275Other
    
    
    (450
    )Changes in operating assets and liabilities
    
    
    (5,308
    )Net cash provided by operating activities
    
    
    20,563Plus:Unused fee on credit facilities(1)
    
    
    1,291Changes in operating assets and liabilities
    
    
    5,308Less:Maintenance capital expenditures(2)CBS Personnel
    
    
    209Crosman (3)
    
    
    1,926Advanced Circuits
    
    
    392Silvue
    
    
    304Anodyne
    
    
    636Estimated cash flow available for distribution
    
    $
    23,695Distribution paid July 2006
    
    $
    (2,587
    )Distribution paid September 2006
    
    
    (5,368
    )Distribution declared January 2007
    
    
    (6,135
    )Total distributions
    
    $
    (14,090
    )
 
 (1)
    
    Represents the commitment fee on the unused portion of our third-party loans.(2)
    
    Represents maintenance capital expenditures that were funded from operating cash flow and
excludes
approximately $2.3 million of growth capital expenditures for the period ended December 31, 2006.(3)
    
    Crosman was sold on January 5, 2007 (see Note D to the consolidated financial statements).  Related Party Transactions
  
    
    Management Services Agreement
    
    LLC Agreement
    
    Supplemental Put Agreement
 Management
Services Agreement
 70




---



##### 



LLC
Agreement
 Supplemental Put Agreement
 Anodyne Acquisition
   Advanced Circuits Acquisition
    71




---



##### 



Contractual Obligations and Off-Balance Sheet Arrangements
    Less than
    
    
    13
    
    
    35
    
    
    More than(in thousands)
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsOperating Lease Obligations (a)
    
    $
    28,012
    
    
    $
    7,080
    
    
    $
    11,002
    
    
    $
    4,639
    
    
    $
    5,291Purchase Obligations (b)
    
    
    83,584
    
    
    
    39,227
    
    
    
    24,136
    
    
    
    20,221
    
    
    
    Supplemental Put Obligation (c)
    
    
    14,702
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    126,298
    
    
    $
    46,307
    
    
    $
    35,138
    
    
    $
    24,860
    
    
    $
    5,291
 
 (a)
    
    Reflects various operating leases for office space, manufacturing facilities and equipment
from third parties with various lease terms running from one to fourteen years.(b)
    
    Reflects non-cancelable commitments as of December 31, 2006, including: (i) shareholder
distributions of $24.5 million, (ii) management fees of $9.6 million per year over the next
five years and; (iii) other obligations, including amounts due under employment agreements.(c)
    
    The supplemental put obligation represents the long-term portion of an estimated liability
accrued as if our management services agreement with CGM had been terminated. This agreement
has not been terminated and there is no basis upon which to determine a date in the future, if
any, that this amount will be paid.  Critical Accounting Estimates
   Supplemental Put Agreement
  72




---



##### 



Revenue Recognition
  Reporting Revenue Gross
as a Principal versus Net as an Agent.
 Business Combinations
  Goodwill, Intangible Assets and Property and Equipment
      73




---



##### 



Allowance for Doubtful Accounts
  Workers Compensation Liability
  Deferred Tax Assets
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes, Accounting for Income Taxes.
 , Fair Value Measurements"
 74




---



##### 



Employers Accounting for Defined Benefit Pension and Other Postretirement Plans an amendment of
FASB Statements No. 87, 88, 106, and 132(R)
  .
 75




---



##### 



ITEM
7A.  Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Sensitivity
   Exchange Rate Sensitivity
  76




---



##### 



ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  77




---



##### 



ITEM 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 NONE
 78




---



##### 



ITEM 9A(T)  CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  Section 404 Compliance Project
  Inherent Limitation of the Effectiveness of Internal Control
  79




---



##### 



ITEM 9B.  OTHER INFORMATION
  80




---



##### 



PART III
 ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Board of Directors and Executive Officers
    Serving as OfficerDirector
    
    Age
    
    or Director Since
    
    PositionC. Sean Day
    
    57
    
    2006
    
    Chairman/DirectorHarold S. Edwards
    
    41
    
    2006
    
    DirectorD. Eugene Ewing
    
    58
    
    2006
    
    DirectorMark H. Lazarus
    
    43
    
    2006
    
    DirectorTed Waitman
    
    57
    
    2006
    
    DirectorI. Joseph Massoud
    
    38
    
    2005
    
    Director, Chief Executive OfficerJames J. Bottiglieri
    
    51
    
    2005
    
    Director, Chief Financial Officer
  Harold S. Edwards
 Mark H. Lazarus
 C. Sean Day .
 81




---



##### 



I. Joseph Massoud .
 James J. Bottiglieri .
 D. Eugene Ewing .
 Ted Waitman
 82




---



##### 



Compensation Committee Interlocks and Insider Participation
  AUDIT COMMITTEE REPORT
 www.compassdiversifiedtrust.com.
      Members of the Audit Committee
 The information contained in the report above shall not be deemed to be soliciting material or to
be filed with the SEC, nor shall such information be incorporated by reference into any future
filing under the Exchange Act or the Securities Act of 1933, as amended, except to the extent that
we specifically incorporate it by reference in such filing.
 83




---



##### 



ITEM 11.   EXECUTIVE COMPENSATION
 EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
 Overview of our Executive Compensation
     Elements of Our Executive Compensation and How Each Relates to Our Overall Compensation Objectives
  Objectives of Our Executive Compensation and What it is Designed to Reward
  How We Determine the Amount of Each Element
   84




---



##### 



Summary Compensation Table
  Change InNon-Equity
    
    Pension Value AndStock
    
    Option
    
    Incentive Plan
    
    Non-Qualified Deferred
    
    AllSalary
    
    Bonus
    
    Awards
    
    Awards
    
    Compensation
    
    Compensation Earnings
    
    Other Compensation
    
    TotalName
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)James J. Bottiglieri
Chief Financial Officer
(1)
    
    
    2006
    
    
    
    218,750
    
    
    
    75,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,004
    (3)
    
    
    334,754
 
 (1)
    
    Mr. Bottiglieri began employment with our Manager on May 16, 2006. Mr. Bottiglieris
annual rate of salary for 2006 was $350,000.(2)
    
    The named executive did not participate in any stock award, stock option, non equity
incentive or non qualified deferred stock compensation plans.(3)
    
    Includes the following payments we paid on behalf of the executive:
 HealthcareContributions
    
    Insurance Premiums
    
    401-K Contributions
    
    TotalName
    
    ($)
    
    ($)
    
    ($)
    
    ($)James J. Bottiglieri
    
    $
    9,711
    
    
    $
    68
    
    
    $
    30,625
    
    
    $
    41,004
 Grants of Plan Based Awards
  Employment Agreements
 Employment Agreement with James J. Bottiglieri.
  85




---



##### 



Outstanding Equity Awards at Fiscal Year-End; Option Exercises and Stock Vested
  Pension Benefits
  Nonqualified Deferred Compensation
  Potential Payments upon Termination or Change in Control
  Employment Agreement with James J. Bottiglieri
 Supplemental Put Agreement.
 Compensation of Directors
   86




---



##### 




    
    for attending a committee meeting in person (if any): $2,000 for each meeting
of the audit committee; $2,000 for each meeting of the nominating and corporate governance
committee; and $2,000 for each meeting of the compensation committee; and
    
    for attending a telephonic committee meeting (if any): $1,000 for each meeting
of the audit committee; $1,000 for each meeting of the nominating and corporate governance
committee; and $1,000 for each meeting of the compensation committee
  st
   Change in Pension Valueand Non-QualifiedFees Earned
    
    
    
    
    
    
    Option
    
    
    Non-Equity Incentive
    
    
    Deferred Compensation
    
    
    All otheror Paid in Cash
    
    
    Stock Awards
    
    
    Awards
    
    
    Plan Compensation
    
    
    Earnings
    
    
    CompensationName
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    TotalC. Sean Day
    
    $
    41,045
    
    
    $
    30,000
    (1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    71,045Harold S. Edwards
    
    
    42,783
    
    
    
    20,000
    (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,783D. Eugene Ewing
    
    
    45,204
    
    
    
    20,000
    (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,204Mark H. Lazarus
    
    
    31,363
    
    
    
    20,000
    (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,363Ted Waitman
    
    
    40,783
    
    
    
    20,000
    (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,783Totals
    
    $
    201,178
    
    
    $
    110,000
    
    
    $
    (2)
    
    
    $
    (2)
    
    
    $
    (2)
    
    
    $
    
    
    
    $
    311,178
 
 (1)
    
    Represents 1,683 fully vested shares for C. Sean Day and 1,122 fully vested shares for each
other director issued pursuant to the
annual award described above. These shares were received by the directors on January 3, 2007.(2)
    
    The Company does not have any stock option, non-equity incentive or deferred compensation
arrangements for any of its directors. 87




---



##### 



ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT RELATED STOCKHOLDER
MATTERS
 PRINCIPAL SHAREHOLDERS/SECURITY OWNERSHIP OF DIRECTORS
AND EXECUTIVE OFFICERS
    Shares of TrustStock Representing
    
    Percent ofSole Voting and/or
    
    SharesName and Address of Beneficial Owner
    
    Investment Power
    
    Outstanding5% Beneficial OwnersCompass Group International (1)
    
    
    7,350,000
    
    
    
    35.9
    %Prides Capital Partners, L.L.C. (2)
    
    
    1,308,653
    
    
    
    6.4
    %Chilton Investment Company, L.L.C. (3)
    
    
    1,105,045
    
    
    
    5.4
    %Directors and Executive Officers:C. Sean Day
    
    
    323,350
    
    
    
    1.6
    %I. Joseph Massoud (4)
    
    
    266,667
    
    
    
    1.3
    %James J. Bottiglieri
    
    
    6,667
    
    
    
    *Harold S. Edwards
    
    
    3,830
    
    
    
    *D. Eugene Ewing
    
    
    9,455
    
    
    
    *Mark H. Lazarus
    
    
    1,122
    
    
    
    *Ted Waitman
    
    
    14,455
    
    
    
    *All Directors and Named Executive Officers as a Group
    
    
    625,546
    
    
    
    3.1
    %
 
 *
    
    Less than 1%.(1)
    
    These shares are owned by CGI Diversified Holdings LP, a wholly owned subsidiary of Compass Group International.
See the section entitled Certain Relationships and Related Party Transactions for more information about the
relationship of Compass Group International and its affiliates.(2)
    
    Number of shares presented is based solely on the information provided in a filing by such person with the SEC on
Schedule 13D. The address for Prides Capital Partners, L.L.C. is 200 High Street, Suite 700, Boston, Mass. 02110(3)
    
    The address for Chilton Investment Company, L.L.C. is 300 Park Avenue, 19th floor, New York, N.Y. 10022.(4)
    
    Our Chief Executive Officer, Mr. Massoud, as managing member of Pharos I, LLC exercises sole voting and investment
power with respect to the shares owned by Pharos. Amounts with respect to Mr. Massoud reflect his beneficial
ownership of shares through his interest in and control of Pharos. 88




---



##### 



ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Relationships with Related Parties
 CGI
     Our Manager
  
    
    the management services agreement relating to the management services our Manager performs for us
and the businesses we own and the management and transaction fees to be paid to our Manager in respect thereof;
    
    the Companys LLC agreement setting forth our Managers rights with respect to the allocation interests
our Manager owns, including the right to receive profit allocations from the Company; and
    
    the supplemental put agreement relating to our Managers right to cause the Company to purchase the
allocation interests owned by our Manager.
   89




---



##### 



Mr. C. Sean Day
  Pharos I LLC
  Contractual Arrangements with Related Parties
  Stock Purchase Agreement with Sellers, including CGI and its Subsidiaries
  Loan Agreements with each of our Subsidiaries
  Management Services Agreement
  Offsetting Management Services Agreements
  90




---



##### 



LLC Agreement
   
    
    such business contribution-based profit, which generally will be equal to such business
aggregate contribution to the Companys profit during the period such business is owned by the Company; and
    
    the Companys cumulative gains and losses to date.
 Supplemental Put Agreement
 Supplemental Put Agreement
  Registration Rights Agreements
  Policy for Approval of Related Person Transactions
  
    
    our Chief Executive Officer and Chief Financial Officer;
 
    
    our directors; and
 
    
    other members of the management team involved in the oversight of the day-to-day
operations of the Company and its subsidiaries.
 91




---



##### 



Director Independence
  92




---



##### 



ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Fees
  2006
    
    
    2005Audit Fees (1)
    
    $
    1,256,556
    
    
    $
    84,524Audit-Related Fees (2)
    
    
    515,294
    
    
    
    900,906Tax Fees
    
    
    8,000
    
    
    
    All Other Fees (3)
    
    
    100,221
    
    
    
    Total
    
    $
    1,880,071
    
    
    $
    985,430
 
 (1)
    
    Audit Fees are fees paid to Grant Thornton LLP for professional
services for the audit of our consolidated financial statements
included in our annual reports on Form 10-K and review of
financial statements included in our quarterly reports on Form
10-Q, or for services that are normally provided by the auditors
in connection with statutory and regulatory filings or
engagements.(2)
    
    Audit-Related Fees are fees billed by Grant Thornton LLP for
assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements,
which were rendered in connection with our initial public
offering.(3)
    
    Other Fees are fees billed by Grant Thornton LLP for the
performance of due diligence services related to the acquisition
by our subsidiary, CBS Personnel Holdings, Inc. of PMC Staffing
Solutions, Inc. completed in November 2006. Pre-Approval Policies and Procedures
  93




---



##### 



PART IV
 ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 1.
    
    Financial Statements 
See Index to Consolidated Financial Statements and Supplemental Data set forth on page
F-1.2.
    
    Financial Statement schedule
See Index to Consolidated Financial Statements and Supplemental Data set forth on page
F-1.3.
    
    Exhibits
See Index to Exhibits set forth on page 95.
 94




---



##### 



INDEX TO EXHIBITS
 Exhibit Number
    
    Description2.1
    
    Stock and Note Purchase Agreement dated as of July 31, 2006, among Compass Group Diversified Holdings LLC, Compass
Group Investments, Inc. and Compass Medical Mattress Partners, LP(5)3.1
    
    Certificate of Trust of Compass Diversified Trust(1)3.2
    
    Certificate of Formation of Compass Group Diversified Holdings LLC(1)3.3
    
    Amended and Restated Trust Agreement of Compass Diversified Trust(3)3.4
    
    Second Amended and Restated Operating Agreement of Compass Group Diversified Holdings, LLC dated January 9,
2007(7)4.1
    
    Specimen Certificate evidencing a share of trust of Compass Diversified Trust (included in Exhibit 3.3)(2)4.2
    
    Specimen Certificate evidencing an interest of Compass Group Diversified Holdings LLC (included in Exhibit
3.2)(3)10.1
    
    Form of Registration Rights Agreement(3)10.2
    
    Form of Registration Rights Agreement(4)10.3
    
    Form of Supplemental Put Agreement by and between Compass Group Management LLC and Compass Group Diversified
Holdings LLC(3)10.4
    
    Employment Agreement by and between Compass Group Management LLC and James Bottiglieri dated as of September 28,
2005(2)10.5
    
    Form of Share Purchase Agreement by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust
and CGI Diversified Holdings, LP(4)10.6
    
    Form of Share Purchase Agreement by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust
and Pharos I LLC(4)10.7
    
    Form of Credit Agreement by and between Compass Group Diversified Holdings LLC and each of the initial
businesses(3)10.8
    
    Shareholders Agreement for holders of CBS Personnel Holdings, Inc. Class C common stock(2)10.9
    
    Stockholders Agreement for holders of Crosman Acquisition Corp. common stock(2)10.10
    
    Stockholders Agreement for holders of Compass AC Holdings, Inc. common stock(2)10.11
    
    Stockholders Agreement for holders of Silvue Technologies Group, Inc. common stock(2)10.12
    
    Amended and restated Management Services Agreement with CGM dated November 8, 2006(8)10.13
    
    Form of Supplemental Put Agreement by and between Compass Group Management LLC and Compass Group Diversified
Holdings LLC(3)10.14
    
    Credit Agreement among Compass Group Diversified Holdings LLC, the financial institutions party thereto and Madison
Capital Funding LLC, dated as of November 21, 2006(6)21.1
    
    List of Subsidiaries(9)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant(9)31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant(9)32.1
    
    Section 1350 Certification of Chief Executive Officer of Registrant(9)32.2
    
    Section 1350 Certification of Chief Financial Officer of Registrant(9)99.1
    
    Note Purchase and Sale Agreement dated as of July 31, 2006 among Compass Group Diversified Holdings LLC, Compass
Group Investments, Inc. and Compass Medical Mattress Partners, LP (5)99.2
    
    Stock Purchase Agreement and disclosure schedule, dated as of February 28, 2007, among Aeroglide Corporation, the
shareholders of Aeroglide Corporation and Aeroglide Holdings, Inc.(8)99.3
    
    Stock Purchase Agreement and disclosure schedule, dated as of February 28, 2007, by and between HA-LO Holdings, LLC
and Halo Holding Corporation(8)
 
 (1)
    
    Previously filed in connection with Compass Diversified Trusts and Compass Diversified Holdings LLC registration statement on Form S-1 (File No.
333-130326, 333-130326-01) filed on December 14, 2005.(2)
    
    Previously filed in connection with Amendment No. 3 to Compass Diversified Trusts and Compass Diversified Holdings LLCs registration statement
on Form S-1 (File No. 333-130326, 333-130326-01) filed on April 13, 2006.(3)
    
    Previously filed in connection with Amendment No. 4 to Compass Diversified Trusts and Compass Group Diversified Holdings LLCs registration
statement on Form S-1 (File No. 333-130326-01) filed on April 26, 2006.(4)
    
    Previously filed in connection with Amendment No. 6 to Compass Diversified Trusts and Compass Group Diversified Holdings LLCs registration
statement on Form S-1 (File No. 333-130326-01) filed on May 5, 2006.(5)
    
    Filed with Registrants 8-K on August 1, 2006.(6)
    
    Filed with Registrants 8-K on November 22, 2006.(7)
    
    Filed with Registrants 8-K on January 10, 2007.(8)
    
    Filed with Registrants 8-K on March 1, 2007.(9)
    
    Filed herein. 95




---



##### 



SIGNATURE
  COMPASS GROUP DIVERSIFIED HOLDINGS LLCDate: March 13, 2007
    By:
    /s/ I. Joseph MassoudI. Joseph MassoudChief Executive Officer  Signature
    
    Title
    
    Date/s/ I. Joseph Massoud

I. Joseph Massoud
    
    Chief Executive Officer
(Principal Executive Officer)
and Director
    
    March 13, 2007/s/ James J. Bottiglieri

James J. Bottiglieri
    
    Chief Financial Officer
(Principal Financial and
Accounting Officer)
and Director
    
    March 13, 2007/s/ C. Sean Day

C. Sean Day
    
    Director
    
    March 13, 2007/s/ D. Eugene Ewing

D. Eugene Ewing
    
    Director
    
    March 13, 2007/s/ Ted Waitman

Ted Waitman
    
    Director
    
    March 13, 2007/s/ Harold S. Edwards

Harold S. Edwards
    
    Director
    
    March 13, 2007/s/ Mark H. Lazarus

Mark H. Lazarus
    
    Director
    
    March 13, 2007
 96




---



##### 



SIGNATURE
  COMPASS DIVERSIFIED TRUSTDate: March 13, 2007
    By:
    /s/ James J. BottiglieriJames J. BottiglieriRegular Trustee 97




---



##### 



Compass Diversified Trust
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTAL DATA
 PageNumbersHistorical Financial Statements:Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2005 and December 31, 2006
    
    F-3Consolidated Statements of Operations for the Period November 18, 2005
(date of inception) through December 31, 2005 and for the Year Ended
December 31, 2006
    
    F-4Consolidated Statement of Stockholders Equity for the Period November
18, 2005 (date of inception) through December 31, 2005 and for the Year
Ended December 31, 2006
    
    F-5Consolidated Statements of Cash Flows for the Period November 18, 2005
(date of inception) through December 31, 2005 and for the Year Ended
December 31, 2006
    
    F-6Notes to Consolidated Financial Statements
    
    F-7Supplemental Financial Data:The following supplementary financial data of the registrant and its
subsidiaries required to be included in Item 15(a) (2) of Form 10-K are
listed below:Schedule II  Valuation and Qualifying Accounts
    
    F-25All other schedules not listed above have been omitted as not applicable
or because the required information is included in the Consolidated
Financial Statements or in the notes thereto.
 F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 Shareholders of Compass Diversified Trust
      
 F-2




---



##### 



Compass Diversified Trust
 Consolidated Balance Sheets
 December 31,(in thousands)
    
    2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    7,006
    
    
    $
    100Accounts receivable, less allowances of $3,327 at December 31, 2006
    
    
    74,899
    
    
    
    Inventories
    
    
    4,756
    
    
    
    Prepaid expenses and other current assets
    
    
    7,059
    
    
    
    3,308Current assets of discontinued operations
    
    
    46,636
    
    
    
    Total current assets
    
    
    140,356
    
    
    
    3,408Property, plant and equipment, net
    
    
    10,858
    
    
    
    Goodwill
    
    
    159,151
    
    
    
    Intangible assets, net
    
    
    128,890
    
    
    
    Deferred debt issuance costs, less accumulated amortization of $114
at December 31, 2006
    
    
    5,190
    
    
    
    Other non-current assets
    
    
    15,894
    
    
    
    Assets of discontinued operations
    
    
    65,258
    
    
    
    Total assets
    
    $
    525,597
    
    
    $
    3,408Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable
    
    $
    14,314
    
    
    $
    Accrued expenses
    
    
    38,586
    
    
    
    1Due to related party
    
    
    469
    
    
    
    3,308Revolving credit facility
    
    
    87,604
    
    
    
    Current portion of supplemental put obligation
    
    
    7,880
    
    
    
    Current liabilities of discontinued operations
    
    
    14,019
    
    
    
    Total current liabilities
    
    
    162,872
    
    
    
    3,309Supplemental put obligation
    
    
    14,576
    
    
    
    Deferred income taxes
    
    
    41,337
    
    
    
    Other non-current liabilities
    
    
    17,336
    
    
    
    Non-current liabilities of discontinued operations
    
    
    6,634
    
    
    
    Total liabilities
    
    
    242,755
    
    
    
    3,309Minority interests
    
    
    27,131
    
    
    
    100Stockholders equity (deficit)Trust shares, no par value, 500,000 authorized; 20,450 shares issued and outstanding
    
    
    274,961
    
    
    
    Accumulated earnings (deficit)
    
    
    (19,250
    )
    
    
    (1
    )Total stockholders equity (deficit)
    
    
    255,711
    
    
    
    (1
    )Total liabilities and stockholders equity (deficit)
    
    $
    525,597
    
    
    $
    3,408
  F-3




---



##### 



Compass Diversified Trust
 Consolidated Statements of Operations
 Year Ended December 31,(in thousands, except per share data)
    
    2006
    
    
    2005Net sales
    
    $
    410,873
    
    
    $
    Cost of sales
    
    
    311,641
    
    
    
    Gross profit
    
    
    99,232
    
    
    
    Operating expenses:Staffing expense
    
    
    34,345
    
    
    
    Selling, general and administrative expenses
    
    
    36,732
    
    
    
    1Supplemental put expense
    
    
    22,456
    
    
    
    Fees to Manager
    
    
    4,376
    
    
    
    Research and development expense
    
    
    1,806
    
    
    
    Amortization expense
    
    
    6,774
    
    
    
    Operating loss
    
    
    (7,257
    )
    
    
    (1
    )Other income (expense):Interest income
    
    
    807
    
    
    
    Interest expense
    
    
    (6,130
    )
    
    
    Amortization of debt issuance costs
    
    
    (779
    )
    
    
    Loss on debt extinguishment
    
    
    (8,275
    )
    
    
    Other income, net
    
    
    541
    
    
    
    Loss from continuing operations before income taxes and minority interests
    
    
    (21,093
    )
    
    
    (1
    )Provision for income taxes
    
    
    5,298
    
    
    
    Minority interest
    
    
    1,245
    
    
    
    Loss from continuing operations
    
    
    (27,636
    )
    
    
    (1
    )Income from discontinued operations, net of income tax
    
    
    8,387
    
    
    
    Net loss
    
    $
    (19,249
    )
    
    $
    (1
    )Basic and fully diluted net loss per share from continuing operations
    
    $
    (2.18
    )
    
    $
    Basic and fully diluted income per share from discontinued operations
    
    
    0.66
    
    
    
    Basic and fully diluted net loss per share
    
    $
    (1.52
    )
    
    $
    Weighted average number of shares of Trust stock outstanding  basic and fully
diluted
    
    
    12,686
    
    
    
    1Cash dividends paid per share
    
    $
    0.3952
    
    
    $
    
  F-4




---



##### 



Compass Diversified Trust
 Condensed Consolidated Statement of Stockholders Equity
 TotalNumber of
    
    
    
    
    
    
    Accumulated
    
    
    Stockholders(in thousands)
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    EquityBalance  December 31, 2005
    
    
    
    
    
    $
    
    
    
    $
    (1
    )
    
    $
    (1
    )Issuance of Trust shares, net of offering costs
    
    
    19,500
    
    
    
    269,816
    
    
    
    
    
    
    
    269,816Issuance of Trust shares Anodyne acquisition
    
    
    950
    
    
    
    13,100
    
    
    
    
    
    
    
    13,100Dividends paid
    
    
    
    
    
    
    (7,955
    )
    
    
    
    
    
    
    (7,955
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (19,249
    )
    
    
    (19,249
    )Balance  December 31, 2006
    
    
    20,450
    
    
    $
    274,961
    
    
    $
    (19,250
    )
    
    $
    255,711
  F-5




---



##### 



Compass Diversified Trust
 Condensed Consolidated Statements of Cash Flows
 Year Ended December 31,(in thousands)
    
    2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (19,249
    )
    
    $
    (1
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation of property and equipment
    
    
    2,494
    
    
    
    Amortization expense
    
    
    7,796
    
    
    
    Supplemental put expense
    
    
    22,456
    
    
    
    Loss on debt extinguishment
    
    
    8,275
    
    
    
    Minority interests
    
    
    2,950
    
    
    
    Loan forgiveness accrual
    
    
    2,760
    
    
    
    Deferred taxes
    
    
    (2,281
    )
    
    
    In-process research and development expense
    
    
    1,120
    
    
    
    Other
    
    
    (450
    )
    
    
    Changes in operating assets and liabilities, net of acquisitions:Increase in accounts receivable
    
    
    (7,867
    )
    
    
    Increase in inventories
    
    
    (6,314
    )
    
    
    Increase in prepaid expenses and other current assets
    
    
    (72
    )
    
    
    Increase in accounts payable and accrued expenses
    
    
    8,555
    
    
    
    1Decrease in due to related party
    
    
    (1,308
    )
    
    
    Increase in other liabilities
    
    
    2,251
    
    
    
    Other
    
    
    (553
    )
    
    
    Net cash provided by operating activities
    
    
    20,563
    
    
    
    Cash flows from investing activities:Acquisition of businesses, net of cash acquired
    
    
    (356,464
    )
    
    
    Purchases of property and equipment
    
    
    (5,822
    )
    
    
    Net cash used in investing activities
    
    
    (362,286
    )
    
    
    Cash flows from financing activities:Proceeds from the issuance of debt
    
    
    85,004
    
    
    
    Proceeds from the issuance of Trust shares, net
    
    
    284,969
    
    
    
    100Debt issuance costs
    
    
    (11,560
    )
    
    
    Distributions paid
    
    
    (7,955
    )
    
    
    Other
    
    
    615
    
    
    
    Net cash provided by financing activities
    
    
    351,073
    
    
    
    100Net increase in cash and cash equivalents
    
    
    9,350
    
    
    
    100Foreign currency adjustment
    
    
    260
    
    
    
    Cash and cash equivalents beginning of period
    
    
    100
    
    
    
    Cash and cash equivalents end of period
    
    $
    9,710
    
    
    $
    100Cash reflected in discontinued operations at December 31, 2006
    
    $
    2,704
    
    
    $
    
  F-6




---



##### 



Compass Diversified Trust
 Notes to Condensed Consolidated Financial Statements
December 31, 2006
 Note A  Organization and Business Operations
      
    
    a controlling interest in CBS Personnel Holdings, Inc (CBS Personnel) was purchased
for approximately $54.6 million, representing at the time of purchase approximately 97.6%
of the outstanding stock of CBS Personnel on a primary basis and approximately 94.4% on a
fully diluted basis, after giving effect to the exercise of vested and in the money
options and vested non-contingent warrants;
    
    a controlling interest in Crosman Acquisition Corporation (Crosman) was purchased
for approximately $26.1 million representing approximately 75.4% of the outstanding stock
of Crosman on a primary basis and 73.8% on a fully diluted basis (See Note O Subsequent
Events);
    
    a controlling interest in Compass AC Holdings, Inc.(Advanced Circuits or ACI) was
purchased for approximately $35.4 million, representing approximately 70.2% of the
outstanding stock of Advanced Circuits on a primary and fully diluted basis; and
    
    a controlling interest in Silvue Technologies Group, Inc. (Silvue)was purchased for
approximately $23.2 million, representing approximately 73.0% of the outstanding stock of
Silvue on a primary and fully diluted basis.
  F-7




---



##### 



Discontinued Operations
  Note B  Summary of Significant Accounting Policies
 Basis of Presentation
  Principles of Consolidation
   Use of estimates
  Revenue recognition
 Revenue Recognition
 F-8




---



##### 



CBS Personnel
  Advanced Circuits
  Silvue
   Anodyne
  Cash and cash equivalents
  Allowance for Doubtful Accounts
  Inventories
  Property, plant and equipment
    Machinery and Equipment
    
    3 to 5 yearsOffice Furniture and Equipment
    
    3 to 7 yearsBuildings and Building Improvements
    
    2 to 15 yearsVehicles
    
    2 to 3 yearsLeasehold Improvements
    
    Shorter of useful life or lease term
  F-9




---



##### 



Goodwill and intangible assets
  Deferred charges
  Insurance reserves
  Supplemental Put
  Income taxes
   Earnings per share
  Minority Interest
  Advertising costs
  F-10




---



##### 



Research and development
  Loss on debt extinguishment
  Employee retirement plans
  Foreign Currency Translation
 Foreign Currency
Translation
 Recent accounting pronouncements
 Accounting for Uncertainty in Income Taxes, Accounting for Income Taxes.
    .
 F-11




---



##### 



Note C  Acquisition of Businesses
   Allocation of Purchase Price
    (in thousands)
    
    CBS Personnel
    
    
    Crosman(2)
    
    
    ACI
    
    
    Silvue
    
    
    TotalAssets:Current assets (1)
    
    $
    65,033
    
    
    $
    34,793
    
    
    $
    5,737
    
    
    $
    6,597
    
    
    $
    112,160Property, plant and equipment
    
    
    2,617
    
    
    
    9,983
    
    
    
    3,158
    
    
    
    2,137
    
    
    
    17,895Intangible assets
    
    
    71,200
    
    
    
    19,150
    
    
    
    20,700
    
    
    
    26,920
    
    
    
    137,970Goodwill
    
    
    60,073
    
    
    
    28,783
    
    
    
    59,563
    
    
    
    18,034
    
    
    
    166,453Other assets
    
    
    1,927
    
    
    
    3,500
    
    
    
    592
    
    
    
    517
    
    
    
    6,536Total assets
    
    
    200,850
    
    
    
    96,209
    
    
    
    89,750
    
    
    
    54,205
    
    
    
    441,014Liabilities:Current liabilities
    
    
    34,741
    
    
    
    15,442
    
    
    
    5,669
    
    
    
    6,668
    
    
    
    62,520Other liabilities
    
    
    108,149
    
    
    
    48,944
    
    
    
    46,396
    
    
    
    21,891
    
    
    
    225,380Minority interests
    
    
    3,401
    
    
    
    5,703
    
    
    
    2,259
    
    
    
    2,427
    
    
    
    13,790Total liabilities and minority interests
    
    
    146,291
    
    
    
    70,089
    
    
    
    54,324
    
    
    
    30,986
    
    
    
    301,690Costs of net assets acquired
    
    
    54,559
    
    
    
    26,120
    
    
    
    35,426
    
    
    
    23,219
    
    
    
    139,324Loans to businesses
    
    
    73,228
    
    
    
    46,477
    
    
    
    45,606
    
    
    
    14,294
    
    
    
    179,605$
    127,787
    
    
    $
    72,597
    
    
    $
    81,032
    
    
    $
    37,513
    
    
    $
    318,929
 
 (1)
    
    Includes approximately $8.2 million in cash.(2)
    
    See Footnote D Discontinued Operations. F-12




---



##### 



(in thousands)
    
    AnodyneAssets:Current assets
    
    $
    6,347Property, plant and equipment
    
    
    1,909Intangible assets
    
    
    10,890Goodwill
    
    
    21,507Other assets
    
    
    581Total assets
    
    
    41,234Liabilities:Current liabilities
    
    
    2,991Other liabilities
    
    
    12,636Minority interests
    
    
    10,593Total liabilities and minority interests
    
    
    26,220Cost of net assets acquired
    
    
    15,014Note purchase
    
    
    5,286Loans to Anodyne
    
    
    10,750$
    31,050
 Unaudited Pro Forma Information
  Year ended December 31, 2005
 (in thousands, except per share data)
    
    TotalNet sales
    
    $
    602,074Income from continuing operations before income taxes and minority interests
    
    $
    16,691Net income
    
    $
    8,912Basic and fully diluted income per share
    
    $
    .44
 Year ended December 31, 2006
 (in thousands, except per share data)
    
    TotalNet sales
    
    $
    645,680Loss from continuing operations before income taxes and minority interests
    
    $
    (13,233
    )Net loss
    
    $
    (16,639
    )Basic and fully diluted loss per share
    
    $
    (0.81
    )
 F-13




---



##### 



Note D  Discontinued Operations
  (in thousands)
 Net sales
    
    $
    72,316Costs and expenses
    
    
    59,039Income from discontinued operations
    
    
    13,277Other income , net
    
    
    182Income from discontinued operations before taxes
    
    
    13,459Provision for taxes
    
    
    3,367Minority interests
    
    
    1,705Net income from discontinued operations (1)
    
    $
    8,387
 
 (1)
    
    This amount does not include intercompany interest expense incurred totaling
approximately $3.2 million. (in thousands)
 December 31, 2006Assets:Cash
    
    $
    2,706Accounts receivable, net
    
    
    23,550Inventory
    
    
    16,211Other current assets
    
    
    4,169Current assets of discontinued operations
    
    
    46,636Property, plant and equipment, net
    
    
    12,567Investment in joint venture
    
    
    3,526Goodwill and other intangible assets, net
    
    
    49,165Non-current assets of discontinued operations
    
    
    65,258Total assets of discontinued operations
    
    $
    111,894Liabilities:Accounts payable
    
    $
    7,472Other current liabilities
    
    
    6,547Current liabilities of discontinued operations
    
    $
    14,019Non-current liabilities of discontinued operations
    
    $
    6,634
 F-14




---



##### 



Note E  Business Segment Data
   
    
    CBS Personnel, a human resources outsourcing firm, is a provider of temporary
staffing services in the United States. CBS Personnel serves over 4,000 corporate and
small business clients. CBS Personnel also offers employee leasing services, permanent
staffing and temporary-to-permanent placement services.
    
    ACI, an electronic components manufacturing company, is a provider of prototype
and quick-turn printed circuit boards. ACI manufactures and delivers custom printed
circuit boards to over 8,000 customers in the United States.
    
    Silvue, a global hard-coatings company, is a developer and producer of
proprietary, high performance liquid coating system used in the eye-ware, aerospace,
automotive and industrial markets. Silvue has sales and distribution operations in the
United States, Europe and Asia as well as manufacturing operations in the United States and
Asia.
    
    Anodyne, a medical support surfaces company, is a manufacturer of medical
support services and patient positioning devices primarily used for the prevention and
treatment of pressure wounds experienced by patients with limited or no mobility. Anodyne
is headquartered in California and its product is sold primarily in North America.
   (in thousands)
 Net sales of business segments
 Year endedDecember 31, 2006CBS Personnel
    
    $
    352,421ACI
    
    
    30,581Silvue
    
    
    15,700Anodyne
    
    
    12,171Total
    
    
    410,873Reconciliation of segment revenues to consolidated net sales:Corporate and other
    
    
    Total consolidated net sales
    
    $
    410,873
 F-15




---



##### 



Profit of business segments (1)
 Year endedDecember 31, 2006CBS Personnel
    
    $
    17,079ACI
    
    
    7,483Silvue
    
    
    4,694Anodyne
    
    
    (557
    )Total
    
    
    28,699Reconciliation of segment profit to consolidated income from continuing
operations before income taxes and minority interests:Interest expense, net
    
    
    (5,323
    )Loss on debt extinguishment
    
    
    (8,275
    )Other income
    
    
    541Corporate and other (2)
    
    
    (36,735
    )Total consolidated loss from continuing operations before
income taxes and minority interests
    
    $
    (21,093
    )
 
 (1)
    
    Segment profit represents operating income(2)
    
    Corporate and other consists of charges at the corporate level and purchase accounting
adjustments AccountsReceivable
    
    
    AllowancesDecember 31, 2006
    
    
    December 31, 2006CBS Personnel
    
    $
    68,133
    
    
    $
    (3,026
    )ACI
    
    
    3,054
    
    
    
    (219
    )Silvue
    
    
    2,710
    
    
    
    (19
    )Anodyne
    
    
    4,329
    
    
    
    (63
    )Total
    
    
    78,226
    
    
    
    (3,327
    )Reconciliation of segments to consolidated amount:Corporate and other
    
    
    
    
    
    
    Total
    
    
    78,226
    
    
    $
    (3,327
    )Allowance for doubtful accounts and other
    
    
    (3,327
    )Total consolidated net accounts receivable
    
    $
    74,899
 Goodwill and identifiable assets of business segments
 Depreciation andAmortization ExpenseGoodwill
    
    
    Identifiable Assets
    
    
    For the Year endedDecember 31, 2006
    
    
    December 31, 2006(3)
    
    
    December 31, 2006CBS Personnel
    
    $
    60,569
    
    
    $
    23,395
    
    
    $
    1,372ACI
    
    
    50,659
    
    
    
    24,438
    
    
    
    2,040Silvue
    
    
    11,255
    
    
    
    15,269
    
    
    
    690Anodyne
    
    
    18,418
    
    
    
    21,990
    
    
    
    763Total
    
    
    140,901
    
    
    
    85,092
    
    
    
    4,865Reconciliation of segments to consolidated amount:
    
    
    Corporate and other identifiable assets
    
    
    
    
    
    
    206,455
    
    
    
    4,379Goodwill carried at Corporate level
    
    
    18,250
    
    
    
    
    
    
    
    Total
    
    $
    159,151
    
    
    $
    291,547
    
    
    $
    9,244
 
 (3)
    
    Not including accounts receivable scheduled above F-16




---



##### 



Note F  Inventories
  December 31, 2006Raw materials and supplies
    
    $
    3,663Finished goods
    
    
    1,135Less: obsolescence reserve
    
    
    (42
    )$
    4,756
 Note G  Property, plant and equipment
  December 31, 2006Machinery and equipment
    
    $
    4,489Office furniture and equipment
    
    
    5,190Buildings and building improvements
    
    
    886Leasehold improvements
    
    
    1,87312,438Less: Accumulated depreciation
    
    
    (1,580
    )$
    10,858
  Note H  Commitments and Contingencies
 Leases
  (in thousands)2007
    
    $
    7,0802008
    
    
    6,1662009
    
    
    4,8372010
    
    
    2,8712011
    
    
    1,769Thereafter
    
    
    5,289$
    28,012
   F-17




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##### 



Note I  Goodwill and other intangible assets
 (in thousands
 Balance at beginning of year
    
    $
    Acquisition of initial businesses and SES
    
    
    136,459Anodyne and Anatomic Concepts, Inc. acquisition
    
    
    22,692Balance at December 31, 2006
    
    $
    159,151
  (in thousands):
 Weighted AverageLifeCustomer and distributor relations
    
    $
    110,876
    
    
    
    12Technology
    
    
    9,660
    
    
    
    11Licensing agreements and anti-piracy covenants
    
    
    1,157
    
    
    
    5121,693Accumulated amortization customer and distributor relations
    
    
    (5,913
    )Accumulated amortization technology
    
    
    (694
    )Accumulated amortization licensing and anti-piracy covenants
    
    
    (166
    )114,920Trade names, not subject to amortization
    
    
    13,970Balance at December 31, 2006
    
    $
    128,890
 (in thousands):
 2007
    
    $
    11,2612008
    
    
    11,2612009
    
    
    11,1362010
    
    
    10,6552011
    
    
    10,409$
    54,722
  F-18




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##### 



Note J  Debt
      
    
    to maintain a minimum fixed charge coverage ratio of at least 1.5 to 1.0;
    
    to maintain a minimum interest coverage ratio of less than 3.0 to 1.0; and
    
    to maintain a total debt to EBITDA ratio not to exceed 3.0: 1.0.
     F-19




---



##### 



Note K  Income taxes
   
 Year ended(in thousands)
    
    December 31, 2006Current taxes:Federal
    
    $
    5,752State
    
    
    855Foreign
    
    
    665Total current taxes
    
    
    7,272Deferred taxes:Federal
    
    
    (1,673
    )State
    
    
    (267
    )Foreign
    
    
    (34
    )Total deferred taxes
    
    
    (1,974
    )Total tax expense
    
    $
    5,298
  (in thousands)Deferred tax assets:Tax credits
    
    $
    1,728Accounts receivable and allowances
    
    
    929Workers compensation
    
    
    6,547Accrued expenses
    
    
    2,134Loan forgiveness
    
    
    993Other
    
    
    1,116Total deferred tax assets
    
    
    13,447Less:Valuation allowance
    
    
    (1,728
    )Net deferred tax asset
    
    $
    11,719Deferred tax liabilities:Intangible assets
    
    $
    (41,328
    )Property and equipment
    
    
    (346
    )Prepaid and other expenses
    
    
    (550
    )Total deferred tax liabilities
    
    $
    (42,224
    )Total net deferred tax liability
    
    $
    (30,505
    )
 F-20




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##### 



(in thousands)
    
    2006United States Federal Statutory Rate
    
    
    (34.0
    )%Foreign and state income taxes (net of Federal benefits)
    
    
    4.7Expenses of Compass Group Diversified Holdings, LLC
representing a pass through to shareholders
    
    
    53.7Loss on foreign debt refinancing not deductible
    
    
    1.5Credits and other
    
    
    (0.8
    )Effective income tax rate
    
    
    25.1
    %
 Note L  Stockholders equity
     Note M  Unaudited Quarterly Financial Data
 2006 Quarter Ended(in thousands)
    
    Mar. 31
    
    Jun. 30
    
    Sep. 30
    
    Dec. 31
    
    TotalNet sales
    
    $
    
    
    
    $
    80,194
    
    
    $
    159,073
    
    
    $
    171,606
    
    
    $
    410,873Gross profit
    
    
    
    
    
    $
    18,898
    
    
    $
    38,158
    
    
    $
    42,176
    
    
    $
    99,232Operating income (loss)
    
    
    
    
    
    $
    2,101
    
    
    $
    (954
    )
    
    $
    (8,404
    )
    
    $
    (7,257
    )Income (loss) from continuing operations
    
    
    
    
    
    $
    210
    
    
    $
    (7,288
    )
    
    $
    (20,558
    )
    
    $
    (27,636
    )Income from discontinued operations,
net of taxes
    
    
    
    
    
    $
    1,902
    
    
    $
    3,404
    
    
    $
    3,081
    
    
    $
    8,387Net income (loss)
    
    
    
    
    
    $
    2,112
    
    
    $
    (3,884
    )
    
    $
    (17,477
    )
    
    $
    (19,249
    )Basic and diluted net income (loss) per
share from continuing operations
    
    
    
    
    
    $
    0.02
    
    
    $
    (0.36
    )
    
    $
    (1.00
    )
    
    $
    (2.18
    )Basic and diluted net income per share
from discontinued operations
    
    
    
    
    
    $
    0.19
    
    
    $
    0.17
    
    
    $
    0.15
    
    
    $
    0.66Basic and diluted net income (loss) per
share
    
    
    
    
    
    $
    0.21
    
    
    $
    (0.19
    )
    
    $
    (0.85
    )
    
    $
    (1.52
    )
 F-21




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##### 



Note N  Supplemental Data`
 Supplemental Balance Sheet Data (in thousands):
 Summary of accrued expenses:
    
    December 31, 2006Accrued payroll and fringes
    
    $
    21,419Current portion of workers compensation liability
    
    
    7,664Income taxes payable
    
    
    1,680Accrued interest
    
    
    941Other accrued expenses
    
    
    6,882$
    38,586
 Summary of other non-current liabilities:
    
    December 31, 2006Workers compensation
    
    $
    13,198Liabilities associated with stock purchase agreements at Advanced Circuits
    
    
    3,961Other non-current liabilities
    
    
    177$
    17,336
 Supplemental Cash Flow Statement Data (in thousands):
 Other cash flow data:
    
    December 31, 2006Interest paid
    
    $
    4,686Taxes paid
    
    
    7,821
 Note O  Related party transactions
  
    
    Management Services Agreement
    
    LLC Agreement
    
    Supplemental Put Agreement
 Management Services Agreement
 Year ended(in thousands)
    
    December 31, 2006CBS Personnel
    
    $
    674ACI
    
    
    315Silvue
    
    
    218Anodyne
    
    
    145Corporate
    
    
    3,024Total
    
    $
    4,376
  F-22




---



##### 



LLC
Agreement
 Supplemental Put Agreement
  Anodyne Acquisition
   Advanced Circuits
     F-23




---



##### 



Cost Reimbursement
  Note P  Subsequent Events
       F-24




---



##### 



SCHEDULE II Valuation and Qualifying Accounts
 AdditionsBalance at
    
    Charge to Costs and
    
    Other
    
    
    
    
    
    Balance at end of(in thousands)
    
    May 16, 2006
    
    Expense
    
    Charges
    
    Deductions
    
    YearAllowance for doubtful accounts
    
    $
    3,136
    
    
    $
    1,087
    
    
    $
    
    
    
    $
    896
    (1)
    
    $
    3,327Valuation allowance for deferred tax assets
    
    $
    1,589
    
    
    $
    139
    
    
    $
    
    
    
    $
    
    
    
    $
    1,728
 
 (1)
    
    Represent write-offs and rebate payments.  F-25




---



##### 



EXHIBIT INDEX
 Exhibit Number
    
    Description2.1
    
    Stock and Note Purchase Agreement dated as of July 31, 2006, among Compass Group Diversified Holdings LLC, Compass
Group Investments, Inc. and Compass Medical Mattress Partners, LP(5)3.1
    
    Certificate of Trust of Compass Diversified Trust(1)3.2
    
    Certificate of Formation of Compass Group Diversified Holdings LLC(1)3.3
    
    Amended and Restated Trust Agreement of Compass Diversified Trust(3)3.4
    
    Second Amended and Restated Operating Agreement of Compass Group Diversified Holdings, LLC dated January 9,
2007(7)4.1
    
    Specimen Certificate evidencing a share of trust of Compass Diversified Trust (included in Exhibit 3.3)(2)4.2
    
    Specimen Certificate evidencing an interest of Compass Group Diversified Holdings LLC (included in Exhibit
3.2)(3)10.1
    
    Form of Registration Rights Agreement(3)10.2
    
    Form of Registration Rights Agreement(4)10.3
    
    Form of Supplemental Put Agreement by and between Compass Group Management LLC and Compass Group Diversified
Holdings LLC(3)10.4
    
    Employment Agreement by and between Compass Group Management LLC and James Bottiglieri dated as of September 28,
2005(2)10.5
    
    Form of Share Purchase Agreement by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust
and CGI Diversified Holdings, LP(4)10.6
    
    Form of Share Purchase Agreement by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust
and Pharos I LLC(4)10.7
    
    Form of Credit Agreement by and between Compass Group Diversified Holdings LLC and each of the initial
businesses(3)10.8
    
    Shareholders Agreement for holders of CBS Personnel Holdings, Inc. Class C common stock(2)10.9
    
    Stockholders Agreement for holders of Crosman Acquisition Corp. common stock(2)10.10
    
    Stockholders Agreement for holders of Compass AC Holdings, Inc. common stock(2)10.11
    
    Stockholders Agreement for holders of Silvue Technologies Group, Inc. common stock(2)10.12
    
    Amended and restated Management Services Agreement with CGM dated November 8, 2006(8)10.13
    
    Form of Supplemental Put Agreement by and between Compass Group Management LLC and Compass Group Diversified
Holdings LLC(3)10.14
    
    Credit Agreement among Compass Group Diversified Holdings LLC, the financial institutions party thereto and Madison
Capital Funding LLC, dated as of November 21, 2006(6)21.1
    
    List of Subsidiaries(9)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant(9)31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant(9)32.1
    
    Section 1350 Certification of Chief Executive Officer of Registrant(9)32.2
    
    Section 1350 Certification of Chief Financial Officer of Registrant(9)99.1
    
    Note Purchase and Sale Agreement dated as of July 31, 2006 among Compass Group Diversified Holdings LLC, Compass
Group Investments, Inc. and Compass Medical Mattress Partners, LP (5)99.2
    
    Stock Purchase Agreement and disclosure schedule, dated as of February 28, 2007, among Aeroglide Corporation, the
shareholders of Aeroglide Corporation and Aeroglide Holdings, Inc.(8)99.3
    
    Stock Purchase Agreement and disclosure schedule, dated as of February 28, 2007, by and between HA-LO Holdings, LLC and Halo Holding Corporation(8)
 
 (1)
    
    Previously filed in connection with Compass Diversified Trusts and Compass Diversified Holdings LLC registration statement on Form S-1 (File No.
333-130326, 333-130326-01) filed on December 14, 2005.(2)
    
    Previously filed in connection with Amendment No. 3 to Compass Diversified Trusts and Compass Diversified Holdings LLCs registration statement
on Form S-1 (File No. 333-130326, 333-130326-01) filed on April 13, 2006.(3)
    
    Previously filed in connection with Amendment No. 4 to Compass Diversified Trusts and Compass Group Diversified Holdings LLCs registration
statement on Form S-1 (File No. 333-130326-01) filed on April 26, 2006.(4)
    
    Previously filed in connection with Amendment No. 6 to Compass Diversified Trusts and Compass Group Diversified Holdings LLCs registration
statement on Form S-1 (File No. 333-130326-01) filed on May 5, 2006.(5)
    
    Filed with Registrants 8-K on August 1, 2006.(6)
    
    Filed with Registrants 8-K on November 22, 2006.(7)
    
    Filed with Registrants 8-K on January 10, 2007.(8)
    
    Filed with Registrants 8-K on March 1, 2007.(9)
    
    Filed herein.