History of ValuEngine Founded in 1995 by Professors

History of ValuEngine Founded in 1995 by Professors

History of ValuEngine Founded in 1995 by Professors Zhiwu Chen and Chiayu Chang. Development of Models Takes a Team of a Dozen PhDs 4 Years and @ 4 Million Dollars. Chen and Changs Company becomes ValuEngine in 1999. Company Restructured in early 2001 under Leadership of Current CEO Paul Henneman. 11:15am, Restate My Assumptions One: Mathematics is the Language of Nature. Two: Everything around us can be Represented and Understood through Numbers. Three: If you Graph the Numbers of any System, Patterns Emerge. Therefore, there are Patterns Everywhere in Nature. So, what about the Stock Market? Maximillian Cohen, Pi, 1998

The Fair Valuation Model The Fair Valuation Model Provides a Complex Price Calculation for a Given Stock, Sector, Industry, or Market in a Perfectly Efficient Market. It is Derived from Fundamental Data but is Calculated with a Quant-Based Approach The overall structure is based on a Dividend Discount Model in which certain variables are replaced with highly complex and proprietary stochastic calculus calculations. Firm-specific variables: Long-run EPS growth rate Duration of Business-growth-cycle Volatility of EPS growth rate Systematic or beta risk of the firm Correlation between the firm's EPS and the interest rate environment EPS growth volatility Dividend payout ratio Buffer earnings

Interest rate related criteria: Interest rate (30 year yield) long-run level Duration of interest rate cycle Interest rate volatility The VE Fair Market Valuation uses 12-month historic and forecasted EPS values and the current 30-year treasury yield as primary determinants. When calculating risk/return values such as the Sharpe ratio, the historic periods used are five years. Currently, VE Provides Valuation Data on @4500 Stocks in Real Time with an additional 5000 or so Companies under Coverage. The Forecast Model The Forecast Model is Based on the Fair Valuation Model with additional Variable Calculations in an effort to Predict at what Price a Stock will actually Trade. ValuEngine uses a distinct forecasting model for 6 time horizons and each of the 11 sectors that ValuEngine covers. Additional Variables Utilized by the VE Forecast Model:

Short-term price reversals. Intermediate-term momentum continuation. Long-term price reversals. Short and long-term historic factors in the VE valuation model's calculation include past-valuation levels of the stock and its recent price-momentum factor relative to other stocks. These considerations, applied with the firmspecific variables, allow the model to differentiate a stock across sectors and within the company's own business-growth stages. Implementation of the VE Research Program ValuEngine Provides a Variety of Products and Services that Implement Models Independent Research Provider for Major Banks and Research Distributors Clients include Deustche Bank, Thomson Financial, Bank of New York, UBS ValuEngine.com Retail Website for Individual Investors Streamlined Model Implementation, Portfolio Creation and Tracking Services Daily and Weekly Newsletters for Investors ValuEngine View Newsletter PortfolioManaged by Eric Stokes Basic and Detailed VE Reports for Individual Companies and Industry Groupings

ValuEngine Institutional Research Services (VEIRS) for Institutional Clients VEI Software Package Provides Total Access to VE Stock Universe and Models Custom Hedgefund Strategy Development Ongoing R&D has Successfully Ported VE Models to Tokyo Markets Europe is Next Major Project with Goal of Total EU Market Coverage VE Standard MNS Strategy Performance VE Standard 100 -- Market Neutral Strategy (MNS) portfolio consists of long holdings with 100 stocks and short holdings with 100 stocks. This strategy has NEVER posted a negative annual return. VE Forecast MNS Strategy Performance VE Forecast 100 -- Market Neutral Strategy (MNS) portfolio consists of long holdings with 100 stocks and short holdings with 100 stocks. This strategy has NEVER posted a negative annual return. How Did VE Perform During Volatile Markets of 2007? 2007 ValuEngine Sector and Universe Overvaluation % vs. S&P 500 Index

%S&P 500 VE Sectors Overvalued 13 70 11 65 9 7 60 55 50 5 45 3 1 40 35 -1

30 -3 25 VE Total Market Overvaluation % S&P Gain % and VE Sector Valuation VE M kt Overvaluation Sell Warning VE Sector Valuation and Sell Signals 2006 NoteSwitch to Monthly Data Lowers Resolution of Chart 2006 Sector Valuations and VE Sell Signals S&P 500 % Gain VE Sector Valuation 12 80 10

70 8 60 50 6 40 4 30 2 20 0 -2 Jan-06 Mar-06 May-06 Jul-06

Sep-06 Nov-06 10 0 VE Mkt Overvaluation % S&P % Gain and VE Sector Overvaluation VE Sell Signal Five Years of Monthly Data VE Buy/Sell Signals vs S&P 500 Gain % SELL Warning Buy Signal S&P 500 Gain % 90 80 80

S&P 500 %Gain 60 60 50 40 50 30 40 20 10 30 0 -10 Jan03 Jun03 Nov03 Apr04

Sep04 Feb05 Jul05 Dec05 May06 Oct06 Mar07 Aug07 20 VE Mkt Over/Undervaluation % 70 70

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