Investment Analytics BP Complete

Business Plan
2005 – 2008
- May 2005 -
Investment Analytics
Company Description:
Investment Analytics is a quantitative

investment research firm providing
consulting services and investment
research products to the international
investment management industry.
Postal Address:
Investment Analytics(Bermuda) Ltd.

Canon's Court
22 Victoria Street
Hamilton HM12, Bermuda
Contact Details:
Telephone: 1-888-736-6650
Fax: 1-212-208-2492
Email: Info@investment-analytics.com
Web Site: www.investment-analytics.com
© 2005 Investment Analytics - Business Plan 2

Copyright & Disclaimer
This business plan is presented here to benefit and promote the services of
Investment Analytics (Bermuda) Ltd. The information and ideas herein are the
confidential, proprietary, sole, and exclusive property of Investment
Analytics(Bermuda) Ltd.

Non-Disclosure Agreement
You are being furnished with confidential information that has been prepared by
Investment Analytics (Bermuda) Ltd. (The "Company"), and you may be furnished
with additional information by the Company or by its representatives or agents in
connection with evaluating a possible transaction with the Company. By your
acceptance and as a condition hereof, you agree to treat all information concerning the
Company which is furnished to you by or on behalf of the Company, whether furnished
before or after the date of this letter and regardless of the manner in which it is
furnished, together with analyses, studies or other documents or records prepared by
you or any of your employees or agents (collectively, "Representatives") to the extent
that such analyses, studies or documents contain or otherwise reflect or are generated
from such information (hereinafter collectively referred to as the "Evaluation
Material"), in accordance with the provisions of this agreement.
You hereby agree that the Evaluation Material will be used solely for purposes in
connection with a possible transaction with the Company, and that such information
will be kept permanently confidential by you and your Representatives and you will not
distribute this Evaluation Material or any part hereof to others at any time without the
prior written consent of the Company. You agree to restrain your Representatives from
prohibited or unauthorized disclosure or use of the Evaluation Material and shall be
responsible for any such breach hereof. This Evaluation Material is being delivered for
informational purposes and upon the express understanding that it will be used only
for the purposes set forth above. In the event that the possible transaction which is
the subject of this agreement is not completed or at the Company's request, you shall
promptly return to the Company all written material containing or reflecting any
information contained in the Evaluation Material and will not retain any copies,
extracts or other reproductions in whole or in part of such written material.
It is understood and agreed that money damages would not be a sufficient remedy for
any breach of this agreement and that Company shall be entitled to specific
performance and injunctive or other equitable relief as a remedy for any such breach.
In the event of litigation relating to this agreement, the prevailing party shall be
entitled to receive reasonable legal fees and costs incurred in connection with such
litigation. New York State law will govern the terms and conditions of this agreement.
Your retention of the Evaluation Material shall constitute acceptance of the terms and
conditions hereof. If you do not agree to the terms hereof, please do not read the
Evaluation Material and immediately return such to the Company. We would
nonetheless appreciate your kindly signing and returning one copy of this agreement,
which will constitute our agreement with respect to the subject matter hereof.
Dated : _____________
(Signature) _________________________________
(Print Name) ____________________________________

TABLE OF CONTENTS
PAGE
DISCLAIMER 3
CONFIDENTIALITY AGREEMENT 4
EXECUTIVE SUMMARY 6
BUSINESS CONCEPT 7
Business Overview 7
Company’s Mission 8
Opportunity/Value Proposition 8
Services Provided 9
Income Streams 12
The Economics of the Business 13
Business Objectives 15
MARKET RESEARCH & ANALYSIS 17
Industry Analysis 17
Independent Investment Research 18
Regulations 19
Market Overview 19
Market Size & Characteristics 20
Market Trends and Growth 24
Market Needs 27
Target Market 28
SWOT Analysis 29
Competitive Environment 30
MARKETING 31
Marketing Strategy & Tactics 31
OPERATIONS 33
MANAGEMENT TEAM 34
OVERALL SCHEDULE 36
RISKS 37
FUNDING AND USE OF PROCEEDS 38
FINANCIAL SUMMARY 39
EXIT STRATEGY 40
APPENDICES 41

EXECUTIVE SUMMARY
Market: Alternative Investment Management Industry SERVICE FEATURES
Overview: In a field as competitive as investment research,

Our products and services are based on advanced quantitative
genuinely innovative ideas are hard to come by. In many cases,
financial models developed over many years of research effort.
investment research remains locked into traditional methods of
These include:
analysis that have evolved very little over the last 50 years,
irrespective of the enormous advances that have taken place in
The Volatility Arbitrage Investment Program: Identifies buying
investment theory. Consequently, as competing firms strive for
and selling opportunities in equity options markets using advanced
research excellence using much of the same methodology, it is
mathematical models researched and developed by its team of
difficult to provide a distinctive client service that offers any
quantitative analysts.
significant competitive advantage.
Strategy Development: We
Investment Analytics provides independent research focusing on
assist clients in developing
applications of sophisticated mathematical and financial modeling
new in-house strategies, or
techniques to problems of strategy development and repair,
evaluating third party
performance analysis and risk management for clients in the
strategies, and assess their
investment management industry in Europe and North America.
suitability to meet the clients'
investment objectives.
Investment Analytics has developed a highly successful
proprietary investment program based on sophisticated econometric
Strategy Repair: We assist
models that are used to forecast asset volatility and identify option
clients in diagnosing performance-related problems with existing
arbitrage opportunities.
strategies and in developing repair solutions to restore or enhance
strategy performance.
CURRENT STATE
Performance Evaluation: We assist clients in evaluating the
Market Status: As the majority of hedge funds performed poorly in
performance characteristics of their own or third party strategies and
2004, most of the players in the alternative investment industry are
examine a wide range of performance criteria to determinate the
looking for ways to recalibrate their strategies.
degree to which investment performance is the result of manager
skill.
Need For New Ideas: Funds are facing enormous pressure to find
new and improved strategies – an issue that continues to be more
BENEFITS TO THE CUSTOMERS
critical, especially as funds seek to distinguish themselves.
Competition: The alternative investment industry is rapidly INNOVATION $ 140.00
becoming mainstream. However, requisite experience and

distinguished track records provide significant barriers to entry. SCALABILITY $ 120.00
Consulting & Other
$ 100.00 Vol. Arb. Prog. -Perf.

Vol. Arb. Prog. -Mgt.
Market Trend: Perhaps the most notable trend in the investment LOW CORRELATION $ 80.00
community recently has been the explosion of capital within the WITH EXISTING $ 60.00
alternative fund space. With this increased profile, especially given HEDGING STRATEGIES
the participation of pension funds, the need for in-depth risk analysis $ 40.00
and support becomes increasingly relevant. FINANCIAL SUMMARY $ 20.00
$-
THE SOLUTION Funding requirement: 2005 2006 2007 2008 2009
$ 2,000,000 USD
Investment Analytics recognizes the crucial need for innovative
and improved research techniques in the international investment
management industry and has developed a business model to profit 2005 2006 2007 2008 2009
from their unique, proprietary offering. Total Income $ 3.60 22.26 29.87 63.04 120.16
EBITDA $ (1.51) 10.85 14.17 38.41 82.24

Our key success factors are:
Values in M illion US$
Competitive Advantage in Research
Innovative Methodology Management Team
Proprietary Research Products Mr. Jonathan Kinlay - Founder and Chief Executive Officer
Consulting Expertise Mr. Chris Rosevear - Founder and Managing Partner
OUR MISSION INFORMATION

Corporate Office:
Our mission is to enable clients to significantly improve investment Investment Analytics(Bermuda) Ltd.
returns and reduce investment risks by providing specific strategic Canon's Court, 22 Victoria Street
recommendations rather than macro-level frameworks. Our Hamilton HM12, Bermuda
consulting work is centered on enabling clients to correctly evaluate
performance, diagnose strategy malfunction and to develop, test Inquiries:
and implement new strategies capable of meeting investment Telephone: 1-888-736-6650
performance criteria. Our success is based on delivering superior Fax: 1-212-208-2492
service to the investment management community at a competitive Email: Info@investment-analytics.com
rate. Web Site: www.investment-analytics.com
CONFIDENTIAL
This material has been produced in conjunction with The WorldGate Group and contains information which is protected by copyright
and other intellectual property law and is subject to the terms and conditions in the governing client contract.
BUSINESS CONCEPT
BUSINESS OVERVIEW
In a field as competitive as investment research, genuinely innovative ideas are hard

to come by. In many cases, investment research remains locked into traditional
methods of analysis that have evolved very little over the last 50 years, irrespective of
the enormous advances that have taken place in investment theory. Consequently, as
competing firms strive for research excellence using much of the same methodology, it
is difficult to provide a distinctive client service that offers any significant competitive
advantage.
Investment Analytics recognizes the crucial need for innovative and improved
research techniques in the international investment management industry and has
developed a business model to profit from their unique, proprietary offering.
Investment Analytics was introduced in 1998 as a provider of independent research

and consulting services focusing on applications of sophisticated mathematical and
financial modeling techniques to problems of investment strategy for both buy- and
sell-side firms, in Europe and North America. Investment Analytics applies
innovative research techniques in developing distinctive research products, thereby
offering fresh investment insights for identifying and evaluating new investment
opportunities.
We develop custom research products for our clients based on our quantitative
research and developed specifically to complementing their existing strategies and
core holdings.
Our approach to consulting is typically highly quantitative and involves the application
of sophisticated mathematical and statistical models to simulate key features of
market behavior and strategy performance.
Our consultants are PhD mathematicians and investment managers with extensive
experience consulting to all genres of money management organizations.

Our key success factors are:
Competitive Advantage in Research

Innovative Methodology
Proprietary Research Products
Consulting Expertise
OUR MISSION
Our mission is to enable clients to significantly improve investment returns or reduce

investment risks by providing specific strategic recommendations rather than macro-
level frameworks.
Our consulting work is centered on enabling clients to correctly evaluate performance,

diagnose strategy malfunction and to develop, test and implement new strategies
capable of meeting investment performance criteria.
Our success is based on delivering the best service to the investment management
community at a competitive rate.
OPPORTUNITY / VALUE PROPOSITION
Our methodology represents a radical departure from traditional methods of research.

It is based instead on advanced techniques of quantitative finance that have proved
highly successful in tackling complex problems encountered in financial engineering
and investment analysis. Investment Analytics has applied these effective and
incisive techniques to the field of equity analysis, bringing fresh insights and an
entirely new approach to investment research.
Not only is our research methodology unique, so too is our approach. We work with
our clients’ research teams to create a research product that is distinctive, innovative
and more informative than any other available today.

We use progressive financial engineering techniques to diagnose existing strategies
and advanced mathematical models to build, test and implement strategic
enhancements that will restore or enhance investment performance. Our team also
evaluates and develops new strategies consistent with our clients’ investment
objectives.
Our core value is in providing preeminent investment strategy services in an efficient

manner to investment management clients across Europe and North America.
PRODUCTS & SERVICES PROVIDED
Our products and services are based on advanced quantitative financial models
developed over many years of research effort.
Volatility Arbitrage Investment Program
The Investment Analytics Volatility Arbitrage Investment Program identifies

buying and selling opportunities in equity options markets using advanced
mathematical models researched and developed by its team of quantitative analysts.
Our proprietary volatility index and stochastic volatility models measure underlying
volatility and model its behavior more accurately and efficiently than traditional
methods. Using these models we are able to correctly anticipate the future direction
of volatility an average of 75% of the time in the universe of stocks and equity
indices we analyze, and identify regimes of unsustainably high or low levels of
volatility with a high degree of accuracy. Our stochastic option pricing models apply
these factors to detect options that are trading rich or cheap relative to fair value.
Together, these techniques enable us to select investment opportunities that offer
the greatest risk-reward trade-off, generating specific buy or sell recommendations
in selected stock and index options that are consistently profitable.
Our proprietary asset allocation methodology combines the volatility analytics with
elements of portfolio optimization and risk management theory to create optimal
portfolios capable of generating consistent, high returns, with minimal draw down,

even at times of high market stress and regardless of the direction of the overall
market.
Advantages of the Program

Unique approach to statistical arbitrage with proven
track record of success within a $170M hedge fund.
Strategies based on the program produced returns of
between 15% and 1600% in 2003.
Stable, low-risk alpha generator, uncorrelated to cash
and derivative markets.
Rapid scalability, with capacity in the $Billions.
Adaptable to a broad range of strategies, markets and
asset classes.
Non-discretionary, systematic approach that is
independent of trader capability and other
idiosyncratic factors.
Independent, dual delivery platforms guarantee fail-
safe automatic delivery and backup.
In addition to our Volatility Arbitrage Investment Program, Investment Analytics

offers the following Consulting Services to investment management firms:
Strategy Development: We assist clients in developing new in-house strategies,

or evaluating third party strategies, and assess their suitability to meet the
clients' investment objectives.
Strategy Repair: We assist clients in diagnosing performance-related problems

with existing strategies and in developing repair solutions to restore or enhance
strategy performance.
Performance Evaluation: We assist clients in evaluating the performance

characteristics of their own or third party strategies and examine a wide range
of performance criteria to determinate the degree to which investment
performance is the result of manager skill.

Risk Management: Our reviews of clients´ risk management system will
typically focus on critical elements of the risk management process and can
result in catastrophic exposures under extreme market conditions and includes
an assessment of model, liquidity and volatility risk, as well as extreme market
analysis.
Training: The principals of Investment Analytics have extensive experience

of teaching advanced level finance program as leading academic and financial
institutions on the USA and Europe. Subjects covered in recent courses include
financial engineering, risk management, derivative strategies, forecasting, fixed
income analytics and portfolio management.

INCOME STREAMS
Investment Analytics will build income and profits from its products and services.
Our main product is the Volatility Arbitrage Program.
The Volatility Arbitrage Program represents our main source of income, and
revenues are built from a Management Fee and a Performance Fee. Financial
projections are created using a Monte-Carlo simulation model in which strategy returns
follow random processes with expected average levels and standard deviations of
return as set out in the table below. The table also shows the management and
performance fees for each strategy. There are five strategies in the Volatility Arbitrage
Program.
The growth in Assets Under Management (AUM) is computed from a baseline scenario
as shown in the table below.
An additional source of income derives from our consulting services. In order to make
a projection we assumed a 10% from the Volatility Arbitrage Program to this stream.

THE ECONOMICS OF THE BUSINESS
Income Forecast
Management expects that as a result $ 140.00
of the implementation of this plan $ 120.00

Consulting & Other
there will be a steady buildup of $ 100.00 Vol. Arb. Prog. -Perf.

Vol. Arb. Prog. -Mgt.
revenues from the different income $ 80.00
streams. $ 60.00
Income will grow with the increase of $ 40.00
AUM (Assets Under Management.) $ 20.00
for the Volatility Arbitrage Program. $-

2005 2006 2007 2008 2009
(See Table 3 below). See Appendix

1, for a detailed description of our income projection in projected Income Statement.
Table 3. Income Forecast Projection
2005 2006 2007 2008 2009
Vol. Arb. Prog. -Mgt. $ 1.00 3.11 7.76 13.80 23.16
Vol. Arb. Prog. -Perf. $ 2.27 17.13 19.39 43.51 86.08
Consulting & Other $ 0.33 2.02 2.72 5.73 10.92
Total Income $ 3.60 22.26 29.87 63.04 120.16

Values in Million US$
Income Statement
Net Earnings - Annual
We expect to make EBITDA of US$ $ 70.00
82.24 Millions in 2009. (See Appendix $ 60.00
1 and Table 4 below). By the second

$ 50.00
$ 40.00
year of operations we anticipate
$ 30.00
achieving positive net earnings. Our $ 20.00
cost of sales will be minimal on any $ 10.00
services we provide to our clients, $-

2005 2006 2007 2008 2009
$ (10.00)
approximately 17% (Marketing, Sales

incentives and Miscellaneous). With this minimal cost of income, we anticipate a
consistent gross profit margin of 83% or better.
Table 4. Profits in Years One to Five

Year 2005 2006 2007 2008 2009
Total Income $ 3.60 22.26 29.87 63.04 120.16
Less Variable Costs $ 0.65 4.05 5.43 11.46 21.85
Less Fixed Costs $ 4.46 7.37 10.27 13.17 16.08
EBITDA $ (1.51) 10.85 14.17 38.41 82.24

Break-even Analysis
Break-even Analysis Break-even Income
The following chart and the table Total Income

$ 140.00
below (See Table 5) summarize the
$ 120.00
break-even analysis. $ 100.00
The Operational Break-even point $ 80.00
was estimated based on total $ 60.00
income. The analysis shows that

$ 40.00
$ 20.00
break even is achieved and
$-
sustained in the second year of 2005 2006 2007 2008 2009
operations.
Table 5. Break Even Analysis
2005 2006 2007 2008 2009
Total Income $ 3.60 22.26 29.87 63.04 120.16
Variable Costs $ 0.65 4.05 5.43 11.46 21.85
Fixed Costs $ 4.46 7.37 10.27 13.17 16.08
Break-even Income $ 5.45 9.00 12.55 16.10 19.65

BUSINESS OBJECTIVES & GROWTH STRATEGY
Our business objectives and goals are based, in this first stage of expansion on
targeting the list of Financial Services companies detailed in Appendix 5. Our goal for
our first year is to sell two licenses for the Volatility Arbitrage Program.
US European Asian Our growth strategy will

Market Market Market
initially be focused on selling
two licenses during the first
Equities
STAGE 1 STAGE 2 STAGE 2 year of operations within the
2 Licenses 2 Licenses 2 Licenses
US Equity Volatility market
(Stage 1).
STAGE 3 STAGE 3 STAGE 3

Currencies From there, the company
plans to transfer and apply its

technology to the same
STAGE 4 STAGE 4 STAGE 4 European and Asian markets
Commodities
(Stage 2).
Once the expansion to the stated foreign markets has been achieved, Investment
Analytics will begin incorporating other asset areas into its horizon of products and
services. These additional asset categories will include currencies (Stage 3),
commodities (Stage 4), and fixed income products (Future Growth Stages).
This process will involve two to three months of research and development on the new
markets, and between six to nine months in the case of research and development of
new products. In both cases, there is a timeframe close to nine months for adapting
and modifying the business model to integrate effectively with the new markets and
product categories. The target penetration for each market segment would again be
two licenses.

Research & Technology
Implementation
Development Transfer
New Market 2 to 3 months 3 to 4 months 4 to 5 months
New Product 6 to 9 months 3 to 4 months 4 to 5 months
After three to four years of operations, we reasonably estimate having 18 licenses.
Year
Year 2005
2005 2006
2006 2007
2007 2008
2008
Quarter
Quarter Q3
Q3 Q4
Q4 Q1
Q1 Q2
Q2 Q3
Q3 Q4
Q4 Q1
Q1 Q2
Q2 Q3
Q3 Q4
Q4 Q1
Q1 Q2
Q2 Q3
Q3 Q4
Q4
STAGE
STAGE11 -- US
US Equity
Equity Volatility
Volatility Market
Market
Research & Development
Research & Development
Equities
Equities--US
USMarket
Market
Technology
Technology Transfer
Transfer
Equities
Equities--US
USMarket
Market
22Licenses
Licenses
Implementation
Implementation
Equities
Equities--US
USMarket
Market
STAGE
STAGE22 --Expansion
Expansion to
to European
European and
and Asian
Asian Markets
Markets
Research
Research &&Development
Development
Equities
Equities--Europoean
EuropoeanMarket
Market
Equities
Equities--Asian
AsianMarket
Market
Technology
Technology Transfer
Transfer
Equities
Equities--Europoean
EuropoeanMarket
Market
Equities
Equities--Asian
AsianMarket
Market
44Licenses
Licenses
Implementation
Implementation
Equities
Equities--Europoean
EuropoeanMarket
Market
Equities
Equities--Asian
AsianMarket
Market
STAGE
STAGE33 --Expansion
Expansion to
to New
New Products
Products(( Currencies
Currencies)) in
in 33 Markets
Markets
Research
Development
Currencies
Currencies--US
USMarket
Market
Currencies
Currencies--European/
European/Asian
AsianMarkets
Markets
Technology
Technology Transfer
Transfer
Currencies
Currencies--US
USMarket
Market
Currencies
European/Asian
AsianMarkets
Markets 66Licenses
Licenses
Implementation
Implementation
Currencies
Currencies--US
USMarket
Market
Currencies
European/Asian
AsianMarkets
Markets
STAGE
STAGE44 --Expansion
Expansion to
to New
New Products
Products(( Commodities
Commodities)) in
in 33 Markets
Markets
Research
Development
Commodities
Commodities--US
USMarket
Market
Commodities
Commodities--European/
European/Asian
AsianMarkets
Markets
Technology
Technology Transfer
Transfer
Commodities
Commodities--US
USMarket
Market
Commodities
European/Asian
AsianMarkets
Markets 66Licenses
Licenses
Implementation
Implementation
Commodities
Commodities--US
USMarket
Market
Commodities
European/Asian
AsianMarkets
Markets

MARKET RESEARCH AND ANALYSIS
INDUSTRY OVERVIEW
The past decade has witnessed a dramatic increase in institutional investment in both
domestic and international investable assets. While most of this investment remains
dedicated to traditional stock and bond assets, an increasing portion has been invested
in various forms of alternative investment vehicles.
For many institutional investors, alternative investments are viewed primarily as

private, illiquid, alternative investments including venture capital, leveraged buyout,
distressed securities, private equity, private debt, oil and gas programs, and timber or
farmland. However, other alternative investment vehicles, such as hedge funds and
managed futures, have also witnessed a dramatic increase in investment and often
provide access to investment not easily available from traditional stock and bond
investment or from traditional alternative investment vehicles such as private equity or
private debt. Unfortunately, the very fact that hedge funds and managed futures have
only recently come into prominence has meant that they have only recently been
considered as substitutes for, or as additions to, other traditional alternative
investment forms.
Over the past few weeks and mostly for geopolitical reasons, stock markets have
continued to decline and in the broad financial markets (especially in stocks and
commodities) volatility has remained extremely high. Fundamental economic
indicators provide an ambiguous picture. The (already lowered) corporate earnings
expectations in both the U.S. and Europe have mostly been met, but the quality of
earnings varies markedly.
Investor confidence has recently been shaken further by more cases of balance sheet
manipulation and the first signs of underfunding of corporate pension funds.
Fundamental company analysis has, therefore, become and will continue to be of
increased importance to investment performance. This is further supported by the
continuing weakness of the global economy. Aside from declining business investment,

consumer spending in the U.S. and Europe has also started to show early signs of
weakness. All this points to the diminished economic outlook to continue.
Credit spreads are persisting at very high levels, another indicator of the high degree
of global market uncertainty. At the same time, interest rates have continued to fall,
and the bond rally has not yet come to an end. Moreover, there is a growing fear that
the next “bond correction” is just a matter of time. One reason these bearish investors
are citing is that governments on both sides of the Atlantic need to finance a rising
budget deficit which will lead to a surplus of government bonds. Furthermore, the
central banks have pumped huge amounts of liquidity into the financial system, adding
to the increased in likelihood of inflation. Persistently high commodity prices are also
pushing up the rate of inflation. As long as uncertainty persists in the financial
markets, precious metals will be seen as an attractive investment alternative. Another
cause for concern is the strong and rapid depreciation of the US dollar. It appears that
the Europeans and Asians have become less willing to continue financing the U.S.
deficit. The dollar therefore looks to be headed for continued weakness.
INDEPENDENT INVESTMENT RESEARCH
Market analysts believe that a convergence of market forces, regulatory changes, and
an economic resurgence is creating a tremendous opportunity for independent
research services. Wall Street’s admission of conflicts of interest in traditional research
has already established the need and demand for credible independent research.
Pending regulatory changes that will effect how institutional investors buy and pay for
research will also create major operating changes in the independent research market.
Provided the slow recovering stock market, the demand for proprietary research ideas
being delivered in a timely manner will only increase.
The opportunity inherent in the independent research market is substantial. Mutual

funds and hedge funds spend over $4.5 billion dollars on research services every year.
For both competitive and regulatory reasons, the percentage of that amount being
spent on independent research services is increasing rapidly.
An explosion of new firms has jumped on the independent research bandwagon. They
see an opportunity in a large market to write and market research reports on

companies that have no research coverage. Of about 9,200 public companies,
approximately 5,500 do not have Wall Street analyst research coverage.
REGULATIONS
Hedge funds are currently not required to register with the SEC, or as investment
companies under US federal securities laws, because they generally only accept
financially sophisticated investors like professional fund mangers.
MARKET OVERVIEW
Alternative Investments
o Alternative Investments span the spectrum of financial instruments not covered

by equities, bonds, deposits and the traditional range of collective investment
vehicles such as mutual funds.
o Alternative Investments encompass a diverse set of asset classes and
investment strategies with varying risk/return characteristics.
o Hedge Funds target an absolute return, unlike traditional vehicles, which
manage to a relative benchmark.
o Hedge Funds primarily invest in publicly-traded securities:
Stocks/Bonds/Commodities/Currencies, etc.
Enhancing tools such as leverage and derivatives
o Hedge Funds managers seek flexibility
o A manager’s ability to generate alpha is based on its investment strategy.
These strategies will often utilize: Leverage, Short-selling, Use of derivatives,
Investment in illiquid securities
o Regulations limit the extent to which investment companies can engage in
those activities, therefore hedge funds seek to avoid registration
o In addition to investment flexibility, exemption provides reduced reporting
burden and reduced costs

Hedge Funds
o The hedge fund market is becoming more institutionalized.

o There are three main classes of hedge funds that can be identified:
o macro funds, which take large directional (unhedged) positions in
national markets based on top-down analysis of macroeconomic and
financial conditions, including the current account, the inflation rate, and
the real exchange rate.
o global funds, which also take positions worldwide, but employ bottom-up
analysis, picking stocks on the basis of individual companies' prospects.
o relative value funds, which take bets on the relative prices of closely
related securities (treasury bills and bonds, for example).
o The global fund of hedge funds (FOHFs) market is over $100 billion.
o FOHFs allocate about one-fifth of assets managed by hedge funds.
o FOHF growth is likely to remain strong. The market has grown at an annualized
rate of more than 40 percent over the last fourteen years and more than 30
percent since 1999. Despite a larger base and lower expected market
appreciation, strong growth is still likely, at least for the next few years.
o Sustained growth requires an advanced business model. Through the 1990s,
FOHFs have gained market share during bullish periods but their share has
fallen disproportionately during two downturns. To prevent such losses in the
future, FOHFs must deliver value in addition to simply being a conduit for hedge
fund investing. More advanced FOHFs must also excel at risk management,
portfolio construction, and client service.
MARKET SIZE & CHARACTERISTICS
o In a strong year for the broad markets, 2004 Annual Hennessee Hedge Fund
Manager Survey results indicate that the hedge fund industry grew 34% from
$592 billion to $795 billion.
o Growth was due to manager performance (20%) and new capital inflows
(14%).
o In addition, the number of hedge funds grew 23% from 5,700 to 7,000 funds.

o According to the survey, 85% of hedge funds have never exceeded Reg T
leverage.
o Furthermore, hedge funds represent less than 2% of the world financial
markets.
o Individuals and family offices continue to represent the largest source of capital
for hedge funds, comprising 44% of total industry assets.
o Fund of funds continue to be the fastest growing source of capital for hedge
funds, increasing 810% since January 1997 (from $21 billion to $191 billion).
o While fund of funds remain the fastest growing source of capital, pensions
investing directly in hedge funds have grown 453% since January 1997 (from
$13 billion to $72 billion).
o Hedge funds are reporting that have the capacity to grow assets by 197% on
average from current levels.
o On average, hedge funds have the highest short exposure (-50%) since 1999,
when it was -55%, expressing concerns over the market’s explosive liquidity-
driven performance in 2004.
o In 2004, the average hedge fund’s gross exposure (longs plus shorts) was
141%, further dispelling the notion that hedge funds are a highly levered asset
class.
o On average, hedge funds turned their portfolio over 3 times per year.
o 58% of Hedge Funds are registered with a regulatory agency (NASD, SEC,
CFTC).
o 48% of hedge funds are registered as RIAs (Registered Investment Advisers),
however, 39% are RIAs only and 9% are RIAs and registered with at least one
other regulatory agency.
Annual (Annual Std. Deviation)

1992 - 2004 Return / Risk
Return Risk
Hedge Funds 13.8% 6.9% 2.0
Bond Market 8.4% 8.6% 1.0
Stock Market 10.7% 14.6% 0.8
Current Hedge Fund Investing Model

Number of
Percent of Total Institutional
Investment Model Institutional
Capital in Hedge Funds
Investors
Direct Only 40% 40%
Fund of Funds Only 35% 30%
Dual 25% 30%

Primary Impediments to Hedge Fund Investing
Impediment % Respondents
Headline risk 34%
Returns will come down (and correlation up) 31%
as more money enters the market
(capacity)
Lack of investment process transparency 14%
Can’t get comfortable with the fees 12%
Too large to put enough capital to work to 9%
get the benefits of diversification
Hedge Fund AUM have grown substantially
Growth in Hedge Fund AUM

$600
$500
Assets (in $billions)
$400
$300
$200
$100
$0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Sep-02
Source: Hedge Fund Research (HFR), “Industry Report Q3 2002”. See Appendix for a
description of the HFR database.
The number of funds has also increased significantly
5000 Growth in Number of Hedge Funds

(excludes FoHFs)
4000
Number of Funds
3000
2000
1000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Sep-
02
Source: Hedge Fund Research (HFR), “Industry Report Q3 2002”. See Appendix for a
description of the HFR database.

Differences between Hedge Funds and traditional investments
Hedge Funds Traditional Investments
Absolute performance objective Relative performance objective
Performance driven primarily by Performance driven primarily by

advisor skill asset class allocations and market
returns
Low correlations with market
indices Highly correlated with market
indices
Private investment vehicles
Registered investment vehicles
Opportunistic, flexible investment
approach Investment decisions may be
constrained by benchmark
Long and short
Long only
May use leverage
Generally no leverage
Generally not tax efficient for
taxable US investors Opportunity for Tax Efficiency
ideal for IRAs and other tax-
exempt investment vehicles
Hedge Funds offer diverse risk/ reward benefits
d
nte
e -orie
nc
rma
erfo
Global Macro
P
Managed
Futures
ted
-o rien Long/Short
tion Equity
ifica
i vers
D Multi-Strategy
Arbitrage
Equity Market
Neutral
RETURN
RISK

MARKET TRENDS & GROWTH
Last year in the US a SEC roundtable identified some of the likely trends in the hedge
fund industry:
o The number of hedge funds, the size of their assets and the range of customers
will all increase, and the entrepreneurial management style will continue.
o Retailization through registered funds of hedge funds will increase. This will
increase the availability of hedge fund strategies to the public as investment
thresholds fall.
o Further work will be done by regulatory authorities regarding the type and level
of information made available by hedge funds to funds of hedge funds.
Projections of the current growth of investment in the hedge fund industry have
suggested some $2 trillion under management by 2010.
‘Rapid growth’ is, of course, a relative concept but among those who have put their
heads above the parapet to quantify this development is, Putnam Lovell. They
forecasted last year that cash under management by hedge fund managers would
grow by some 200% from mid-2003 to 2010 and that by 2010, total funds would have
risen to exceed two trillion dollars – a compound annual growth rate of some 17.5%.
Hedge funds have provided above average risk-adjusted returns compared to other
asset classes and investment styles
Investment Style Risk / Return (January 1999 – June 2004)

Growth in Alternative Investments
1995 - 2001 2001 - 2005
1995 – 2005 ($B) CAGR CAGR (E)
Total 28% 17%
4,126
Credit Structures Credit Structures 24% 14%
Hedge Funds*
Hedge Funds* 19% 25%
Private Equity
Real Estate Equity 2,232
Private Equity 32% 16%
1,143
504
Real Estate 35% 11%
1995 1998 2001 2005(E)
Sources: Venture Economics, TASS hedge fund database, Rosen Consulting Group, Lend Lease Real Estate
Investments; Boston Consulting Group; CAI analysis
CAGR (E) is Compound Annual Growth Rate (Estimated)
* Includes Managed Futures
Growth in Alternative Investing is being driven by multiple factors:
o Alternative investment assets are expected to almost double over the next four
years
o Increasing Allocations: certain high net-worth clients, institutions and
endowments are increasing their allocations to Alternative Investments to as
much as 20–40% of assets under management
o Portfolio Diversification / Risk-Adjusted Returns:
seeks to achieve strong absolute and risk-adjusted performance
returns typically with low correlation to traditional asset classes
or to each other
o Access to Talented Investment Management:
many top managers of traditional investments migrating to AI
funds of funds provide access to previously unavailable top AI
managers
o Access to Products: greater access facilitated by development in product
structures, such as:
Increased transparency
Increased liquidity
Lower investment minimums
Customized portfolios
Risk management and due diligence in funds of funds

Growth of U.S. Institutional Hedge Fund Capital
Institutional Share of Total Hedge Fund Capital Flows
Global Net Capital Flows to Hedge Funds

MARKET NEEDS
The following are the results of a recent survey in which investment consultants and
institutional investment managers participated:
o Institutions have an average net-of-fee return expectation from hedge funds of

about 8 percent.
o Nearly three quarters have expectations between 6.5 and 9.5 percent.
o Many of the newer entrants to hedge fund investing (especially defined benefit
plans) prefer to do so through a lower volatility aggregate hedge fund portfolio
than was typical among earlier adopters.
o Many institutions are setting target returns on a risk-free-rate-plus basis,
rather than as a static absolute number; therefore, expectations have come
down with rates.
o Most institutions are placing a higher premium on hedge fund strategies’ ability
to diversify their portfolio—outsized returns are no longer the primary
justification for making a hedge fund allocation.
o Many institutions are anticipating a decline in returns as more capital pours into
hedge fund strategies.
o Market conditions over the past three years have exposed a widening gap
between investors’ expectations and investment managers’ ability to meet
objectives.
o Many individual and institutional investors were let down by managers that
were unable to deliver on expectations.
o The biggest disappointments were with managers that lost sight of risk in
pursuit of outsized returns.
o Investors of all types are now reevaluating their investment managers with a
particular focus on quality and dependability.
o With investors demanding greater levels of investment dependability, financial
planners and investment consultants are reexamining what makes a good
manager; and they are committing significant resources, time, and energy to
identifying Investment Quality. Investment Quality is defined as a manager’s
ability to consistently meet stated objectives.

TARGET MARKET
We segmented different financial institutions according to the following table, in order

to define our target market.
A list of these target institutions can be found in Appendix 5.
1 Asset Management
1.a Hedge Fund Management Yes
1.b Institutional Asset Management Yes
1.c Mutual Fund Management Unlikely
2 Investment Banking
2.a Large-Market Investment Banking Yes
2.b Middle-Market Investment Banking Yes
2.c Small-Market Investment Banking No
3 Investment Firms
3.a Shareholder Services No
3.b Venture Capital No
4 Investment Funds Possibly
5 Outsourced Financial Products & Services Marketing No

SWOT ANALYSIS
The following SWOT analysis captures the key strengths and weaknesses within the
company, and describes the opportunities and threats facing Investment Analytics.
S - Strengths W – Weaknesses
Technologically advanced offering that Difficulty in achieving notoriety and in

utilizes proprietary knowledge and establishing a reputation through
techniques to deliver superior capabilities. consistent performance.
Unique research insights provide distinctive Rapidly evolving technology requires

client services, offering any significant substantial investment capital in order to
competitive advantage. remain cutting edge.
Combination of skills: Management Team The challenge to continuously improve

with experience in risk management techniques and put forth new ideas while
business and alternative investment maintaining the level of quality that is
industry. central to the company’s reputation.
Solid reputation and credibility amongst

industry peers through partners’
involvement with other successful industry
ventures.
Robust and effective equity analysis

techniques that have demonstrated
success and scalability.
Requisite experience and distinguished track

records provide significant barriers to
entry.
O – Opportunities T - Threats
As the majority of hedge funds performed A slump in the economy will constrict the
poorly in 2004, most of the players in the flow of money to enhancement services
alternative investment industry are looking like Investment Analytics’.
for ways to recalibrate their strategies.
The entrance of other risk management
The need for new and improved strategies service providers into this expanding
continues to be more critical, especially as market could increase competition.
funds seek to distinguish themselves.
The appearance of governmental status
The alternative investment industry is and regulations adverse to our business.
rapidly becoming mainstream.
With the participation of pension funds,

the need for in-depth risk analysis and
support becomes more relevant.

COMPETITIVE ENVIRONMENT
In order to systematically diagnose the chief competitive pressures in our business

landscape, we applied Michael Porter’s Five Forces Model.
Although we face a moderate pressure from existing competitors, we feel there is a

high threat of potential new entrants as well as of substitute services.
In the case of new entrants, we feel that with the increase of investment capital to the
industry there will be a correlating increase of businesses trying to serve the
community. While the entry barriers to conducting world-class research and services
remain low, there is nonetheless a sizeable pool of newcomers that can be expect to
compete for the attractive profits. In fact, we anticipate the emergence of new
competitors within two years after our service is established.
In the case of substitute products, we feel a high threat because the market might be
attracted by substitutes that have comparable or better features and buyers switching
costs might be low. We anticipate the emergence of substitute products within 2 years
after our service is established.
Porter’s Five Forces Model
Threat of New Entrants

HIGH
We anticipate the emergence of new
competitors within 2 years after our
service is established
Bargaining Power of Rivalry Among Bargaining Power of

Suppliers Existing Competitors Buyers
NONE MODERATE MODERATE

We do not have Suppliers Financial Institutions
Threat of Substitute Services

HIGH
We anticipate the emergence
of substitute products within 2
years after our service is
established

MARKETING
MARKETING STRATEGY
Key Message
The key message to describe our business is:
Investment Analytics is a quantitative investment research firm providing

consulting services and investment research products to the international
investment management industry.
Marketing Pillars
The three pillars that support our marketing approach are:
1. Innovation
2. Scalability
3. Low Correlation with existing hedging strategies
As funds look to develop and recalibrate their strategies, conduct performance analysis
and assess and navigate risk exposure, it is imperative that they utilize the leading
tools, technology and expertise available. Investment Analytics is in the business of
providing precisely these solutions.
Marketing Tactics
Our marketing and sales tactics are based on referrals, industry networking and word
of mouth. We will conduct selected interviews with investment managers from our
target market (See Appendix 5). After several demonstrations we expect to sell two
licenses to our prospects in our first year of operations, and from there, expand to new
markets and products.

OPERATIONS
Operations for the company will be based initially in the US, followed by an additional
location in London that will coincide with expansion to the European market.
The company’s capabilities will be centered on three main activities:
· Research & Development – The majority of hedge funds performed poorly in

2004, most of the players in the alternative investment industry are looking to
recalibrate their strategies. As the need for new and improved strategies becomes
more critical, Investment Analytics will focus on bringing playing a leading role in
supplying superior tactics to the marketplace.
· Management Support – Within the alternative investment industry, there

exists a low correlation of existing strategies to that of the mainstream community.
Provided the abundance of hedge funds that are largely trying to do the same thing, it
is essential for funds to identify themselves by applying strategies that (1) have the
capacity to generate substantial returns, and (2) can establish consistently strong
performances. As issues of scalability can often thwart potentially successful ideas,
Investment Analytics will look to support investment managers through lending the
confidence and keen perception to take the winners forward.
· Marketing – To reach these investment managers who are this elite

community, Investment Analytics will center its marketing efforts on targeting funds
of significant profile. Leveraging the well-recognized and applauded experience of the
partners, the company will seek to harness industry presence and awareness in
penetrating the top tier fund management community.

MANAGEMENT TEAM
JONATHAN KINLAY, FOUNDER AND CHIEF EXECUTIVE OFFICER
Mr. Kinlay has consulted with leading investment funds and financial
institutions in Europe and North America for over 20 years in the areas of
financial engineering, investment strategy, quantitative analysis and risk
management, initially with NatWest and Chase Manhattan banks and
subsequently as the head of quantitative analytics and proprietary trading
in a European hedge fund, where he traded US and European equities,
fixed income and OTC & exchange traded derivatives.
Mr. Kinlay was the founding partner of the hedge fund Caissa Capital and pioneered the
use of advanced econometric models in volatility arbitrage strategies. The models,
which provide the basis for the highly successful investment strategies used by Caissa
Capital, are made available by Investment Analytics under license. He is the
General Partner of the Proteom Fund, which offers sophisticated quantitative strategies
using proprietary, state-of-the-art bioengineering technologies developed by the
research partnership with Daytrends Inc. and Investment Analytics.
Mr. Kinlay has lectured to postgraduate audiences at a number of leading universities

including, Carnegie Mellon University in New York, and Oxford, Cambridge and Reading
Universities in the UK. He continues to teach advanced courses in trading and
investment strategy and financial engineering in the US and Europe. Mr. Kinlay has
postgraduate qualifications in economics, statistics and business administration from
the universities of Bristol, Sheffield and London Business School.

CHRIS ROSEVEAR, FOUNDER AND MANAGING PARTNER
Chris Rosevear began his professional career as a corporate finance

analyst at AG Becker in New York before moving to Natwest in London.
He worked in treasury management at Citibank from 1983-1986 before
going on to establish his own consulting firm, Finance Technique 2000
Ltd.
Mr. Rosevear has a Doctorate in Economics from the University of Vienna.
Jonathan Kinlay and Chris Rosevear initially worked together from 1983 to 1985 at
NatWest and subsequently on various consulting projects over the last 20 years.
MANAGEMENT COMPENSATION AND OWNERSHIP
The founders intend to hold 51% of the company. The remaining 49% will be available
to potential investors in exchange for investments.

OVERALL SCHEDULE
PROJECT MANAGEMENT SYSTEM
For controlling the overall schedule of the project, we will use MS Office Product, in
order to project tasks, estimate budgets, and keep track of the project.
MAIN MILESTONES
From our detailed schedule, the main milestones before launching are shown in the
following table.
Milestone Date
Fund Raising Starts June 15th, 2005
Money Available August 31st, 2005
First Licensee US September 23rd, 2006
First Licensee Europe October 1st, 2007
First Licensee Asia October 1st, 2007
Exit via sale March 31st, 2015

RISKS
We recognize and understand some risks associated with launching this new company
with regards to growth and operations.
RISKS ASSOCIATED WITH LAUNCHING INVESTMENT ANALYTICS
Limited operating history

Limited resources
Market uncertainties
Competitive threats
RISKS ASSOCIATED WITH GROWTH
Losing touch with customers

Loss of clientele to other providers
Quality of services diminished
New competitors
By maintaining our focus on superior product knowledge and outstanding customer

service, we will be able to uphold our position in the industry, thereby retaining
current clients and attracting new clients.

FUNDING AND USE OF PROCEEDS
START-UP COSTS
Start-up costs are primarily required to purchase the equipment needed to start
developing the operations, as well as cash back-up funds to support operations until
the company begins to cover its cost structure.
FUNDING REQUIREMENTS
The table below summarizes the funding requirements as well as the estimated use of
these funds.
Sources
Sourcesof ofFunds
Funds Uses
Usesof ofFunds
Funds
Founder's
Founder's invested
invested capital
capital 500,000
500,000 Operations
Operations && Service
Serviceproviders
providers 00
Start-up
Start-up Funding
Funding Equity
Equity 2,000,000
2,000,000 Equipment
Equipment ((Hard
Hard && Software
Software&& Data)
Data) 1,113,999
1,113,999
Loans
Loans 00 Salaries
Salaries 00
Marketing
Marketing promotion
promotion 00
Emergency
Emergencyback-up
back-up funds/cash
funds/cash 1,386,001
1,386,001
Total
Total Sources
Sources of
ofFunds
Funds $$ 2,500,000
2,500,000 Total
Total Uses
Uses of
of Funds
Funds $$ 2,500,000
2,500,000

FINANCIAL SUMMARY
PROJECTED CASH FLOW ANALYSIS
The Projected Income Statement Free Cash-Flow

$120.00
shows Investment Analytics’
expected performance for the $100.00
first five years, with a break- $80.00
even in the early months of our $60.00
second year. This is evident in

$40.00
the cash flow statement, which

$20.00
indicates an annually increasing
$-
positive cash position. Table 6 2005 2006 2007 2008 2009
below shows a summary of the Years
projected Cash Flow Statement. Appendices 1 to 4 show pro forma financial

statements.
Table 6. Free Cash Flow Summary
Cashflow from 2005 2006 2007 2008 2009
Operations $ (1.07) 7.99 10.34 27.33 58.03
Investing $ (1.11) (0.06) (0.06) (0.06) (0.07)
Financing $ 2.50 - - - -
Initial Cash $ - 0.32 8.25 18.52 45.79
Year End Cash Flow $ 0.32 8.25 18.52 45.79 103.75

We have performed several financial simulations to support this model. We use Monte
Carlo simulations applied to the different strategies available in our Arbitrage Program.

EXIT STRATEGY
The company anticipates either going public or being acquired by an industry player.
Should the exit strategy take the form of a strategic sale/ IPO in primary markets, the
time frame for market exit is approximately 6 years given the current market
conditions. We anticipate that Investment Analytics will be positioned for a liquidity
event in the year 2011.
It is more likely that existing risk management companies would pursue Investment
Analytics for its capabilities. Many firms who stand to benefit from the efficiencies
gained through Investment Analytics’ services would be equally interested in
intercepting this valuable offering from going into the hands of competitors. Moreover,
by combining Investment Analytics’ extensive market expertise, state-of-the-art
technology and risk management capabilities, firms could circumvent proprietary
investments in developing these capabilities.

APPENDICES
Appendix 1: Pro forma Income Statement
Appendix 2: Pro Forma Cash Flow Statement
Appendix 3: Pro Forma Balance Sheet
Appendix 4: 2003- Target Market Survey –
Appendix 5: Target Market – Selected Profiles
Appendix 6: Target Market – List of Funds & Financial Institutions
Appendix 7: Volatility Arbitrage Program – Financial Projections
Appendix 8: Volatility Arbitrage Program – Modeling System and Investment Strategy

APPENDIX 1 – PRO FORMA INCOME STATEMENT
2005 2006 2007 2008 2009

REVENUE
Volatility Arbitrage Program
Managment Fees( $ M )
E1000 $ - 0.25 0.81 2.53 4.38
F500 $ 0.35 0.50 1.32 1.74 2.92
F1000 $ - 0.00 0.00 0.00 0.00
G000 $ 0.65 2.11 5.50 9.31 15.54
H500 $ - 0.25 0.13 0.22 0.32
Total Mgt Fees $ 1.00 3.11 7.76 13.80 23.16
Performance Fees ($M)
E1000 $ - 1.56 7.23 10.38 18.91
F500 $ 0.70 5.75 3.91 13.73 36.11
F1000 $ - 4.35 0.00 2.53 4.82
G000 $ 1.57 5.47 8.18 16.76 25.87
H500 $ - 0.00 0.07 0.11 0.37
Total Perf Fees $ 2.27 17.13 19.39 43.51 86.08
Consulting and other Services
Total C & S $ 0.33 2.02 2.72 5.73 10.92
Total Revenue $ 3.60 22.26 29.87 63.04 120.16
VARIABLE COSTS
Marketing $ 0.65 $ 4.05 $ 5.43 $ 11.46 $ 21.85
Total Variable Costs $ 0.65 4.05 5.43 11.46 21.85
Gross Margin $ 2.95 18.21 24.44 51.58 98.31
FIXED COSTS
Staff $ 2.73 4.20 5.68 7.15 8.63
Marketing $ 0.16 0.27 0.38 0.50 0.61
Service Providers $ 0.48 0.77 1.06 1.35 1.63
Operations $ 1.10 2.12 3.15 4.18 5.21
Total Fixed Costs $ 4.46 7.37 10.27 13.17 16.08
EBITDA $ (1.51) 10.85 14.17 38.41 82.24
Depreciations $ (0.22) $ (0.24) $ (0.25) $ (0.26) $ (0.27)
EBIT $ (1.29) 11.08 14.41 38.67 82.51
Interest $ - $ - $ - $ - $ -
EBT $ (1.29) 11.08 14.41 38.67 82.51
30% Taxes $ - 3.33 4.32 11.60 24.75
NET EARNINGS $ (1.29) 7.76 10.09 27.07 57.76

APPENDIX 2 – PRO FORMA CASH FLOWS STATEMENT
2005 2006 2007 2008 2009

OPERATIONS
Net Income $ (1.29) 7.76 10.09 27.07 57.76
Prepayments $ -
Depreciation and others $ 0.22 0.24 0.25 0.26 0.27
Cashflow from Operations $ (1.07) 7.99 10.34 27.33 58.03
INVESTING
Non-Current Assets
Property & Equipment $ (1.11) (0.06) (0.06) (0.06) (0.07)
Start Up Costs $ - 0.00 0.00 0.00 0.00
Cashflow from Investing $ (1.11) (0.06) (0.06) (0.06) (0.07)
FINANCING
New Financing
Increase in Short-term Bank Borrowing $ - 0.00 0.00 0.00 0.00
Increase in Long-term Borrowing $ - 0.00 0.00 0.00 0.00
Founder's invested capital $ 0.50 0.00 0.00 0.00 0.00
Sale of Common Stock: $ 2.00 0.00 0.00 0.00 0.00
Reduction in Financing
Repayment of ST Borrowing $ - 0.00 0.00 0.00 0.00
Repayment of LT Debt $ - 0.00 0.00 0.00 0.00
Dividends $ - 0.00 0.00 0.00 0.00
Other Financing Transactions $ - 0.00 0.00 0.00 0.00
Cash Flow from Financing $ 2.50 0.00 0.00 0.00 0.00
Net Change in Cash $ 0.32 7.93 10.27 27.27 57.97
Cash, Beginning of Year $ - 0.32 8.25 18.52 45.79
Cash, End of Year $ 0.32 8.25 18.52 45.79 103.75

APPENDIX 3 – PRO FORMA BALANCE SHEET
2005 2006 2007 2008 2009

ASSETS
Current Assets
Cash $ 0.32 8.25 18.52 45.79 103.75
Pre-payments $ - 0.00 0.00 0.00 0.00
Total Current Assets $ 0.32 8.25 18.52 45.79 103.75
Long-Term Assets
Long Term Credit
Equipment + Amort. Start Ups $ 1.11 1.18 1.24 1.31 1.37
Less depreciations $ (0.22) (0.46) (0.71) (0.97) (1.24)
Total Long Term Assets $ 0.89 0.72 0.54 0.34 0.13
Total Assets $ 1.21 8.97 19.06 46.13 103.88
LIABILIES & SHAREHOLDER'S EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ - 0.00 0.00 0.00 0.00
Bank Loans Payable $ - 0.00 0.00 0.00 0.00
Long Term Debt
Long Term Debt $ - 0.00 0.00 0.00 0.00
Total Liabilities $ - 0.00 0.00 0.00 0.00
SHAREHOLDER'S EQUITY
Founder's invested capital $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50
Additional paid-in capital $ 2.00 2.00 2.00 2.00 2.00
Net Earnings Current $ (1.29) 7.76 10.09 27.07 57.76

Retained Earnings (Prev) $ - (1.29) 6.47 16.56 43.63
Less Dividends paid $ - 0.00 0.00 0.00 0.00
Retained Earnings (Curr) $ (1.29) 6.47 16.56 43.63 101.38
Total Shareholder's Equity $ 1.21 8.97 19.06 46.13 103.88
Total Liabilities and Shareholder's Equity $ 1.21 8.97 19.06 46.13 103.88

APPENDIX 4 – 2003- SURVEY – PLAN SPONSORS, INVESTMENT CONSULTANTS,
INDIVIDUAL FINANCIAL ADVISORS, INVESTMENT MANAGERS
Return Expectations
The following are the results of a 2003 survey in which participated 250 plan sponsors, investment
consultants, individual financial advisors, and investment managers:
Participant Organization Type
Institutional and Individual Consultant Respondent Assets Under Advisement
© 2005 Investment Analytics - Business Plan Appendix 4

Investment Manager Respondent Assets Under Advisement

APPENDIX 5 – TARGET MARKET – SELECTED PROFILES
Financial Services
1. Asset Management
a. Hedge Fund Management
AIG Global Investment Group
70 Pine Street New York, New York

aiggig-northamerica@aig.com
Free: +1.800.706.6661
www.aiggig.com
o AIGGIG’s multi-manager strategy strives to generate consistently positive returns with

lower volatility and low correlation to traditional equity and bond markets while
preserving capital through rigorous risk management.
o Their Hedge Fund Strategies Group provides advice and asset allocation related to
hedge fund managers and separate account investments.
o They are currently invested with approximately 60 hedge fund and other managers and
manage approximately US $5.8 billion assets, of which 55% are AIG Companies’
assets.
Andor Capital Management, L.L.C.

153 East 53rd St. 58th Floor New York, NY 10022
Katherine Bailon
Tel: 212-224-5848
www.andorcap.com
o Andor Capital Management has been recognized as 2003 Hedge Fund Leader of the
Year not only for its stellar performance but also for being out in front of a growing
trend to institutionalize its business structure.
o The long/short equity specialist, with roughly $9.6 billion under management, has
taken steps to tie its managers and operations officials tighter to the firm.
o Last year it launched sector and non-tech hedge funds that served the dual purpose of
diversifying its lineup beyond its technology focus and offering some of its analysts the
chance to become portfolio managers.

Asset Alliance Corporation
800 Third Avenue
New York, NY 10022 United States
Tel: 212.207.8786
Fax: 212.207.8785
info@assetalliance.com
www.assetalliance.com
o Asset Alliance is a multi-faceted investment management firm, specializing in

alternative investment management - specifically hedge funds and hedge fund
products.
o Asset Alliance and its affiliate managers have approximately $4.0 billion of assets under
management and sub-advise approximately $12 billion of assets.
The Bank of Bermuda Limited

6 Front St. Hamilton HM 11,
Bermuda
Tel: 441-295-4000
Fax: 441-295-7093
www.bankofbermuda.bm
o Bank of Bermuda has net assets of $10.4 billion and $80 billion in assets under
administration.
o Bank of Bermuda has a family of mutual funds and over $4 billion under management
covering the equity, bond, alternative and cash asset classes.
o Bank of Bermuda’s top performing flagship investment vehicle, All Points Multi-Manager
plc ("APMM"), has surpassed the $1 billion funds under management milestone.
Bear Stearns Asset Management Inc.

383 Madison Ave.
New York, NY 10179
Tel: (212) 272-2000
www.bearstearns.com
o Bear Stearns Asset Management (BSAM), a subsidiary of Bear Stearns, provides equity
and fixed-income investment management services, as well as hedge funds.
o Its private equity funds focus on biotechnology and digital media companies. BSAM also
administers The Bear Stearns Funds, a family of about a dozen mutual funds.
o The firm has more than $30 billion of assets under management, most of it on behalf of
corporate clients.

The Bessemer Group, Incorporated
630 Fifth Avenue New York,
New York 10111-0333
Steven Brandfield
Brandfield@bessemer.com
Tel: (212) 708-9118
www.bessemer.com
o The Bessemer Group manages more than $40 billion in assets for wealthy individuals
and families.
o Main subsidiary Bessemer Trust administers portfolios with holdings in domestic and
international equities and bonds, as well as such alternative assets as hedge funds, real
estate, and private equity funds of funds
BlackRock, Inc.
40 East 52nd Street New York,
New York 10022-5911
Tel: 212.810.5560
Fax: 212 935 1370
www.blackrock.com
o BlackRock® is a premier provider of global investment management, risk

management, and advisory services.
o As of December 31, 2004, BlackRock's assets under management total $342 billion
across various investment strategies, including fixed income, liquidity/cash
management, equity, and alternatives.
o Their risk management and consulting/advisory services combine BlackRock's capital
markets expertise with their proprietarily-developed systems and technology.
Brascan Financial Corporation

One Liberty Plaza New York,
NY 10006 USA
Tel: 212- 417-7195
Fax: 212-417-7000
www.trilon.ca
o Brascan Asset Management is a leading North American asset manager focused

primarily on alternative investments. They invest in industry sectors in which they are
able to realize superior risk-adjusted returns by leveraging the industry and operational
expertise of Brascan and capitalizing on the synergies across their various funds.
o With $7 billion of assets under management, their clients include pension funds, life
insurance companies, financial institutions, corporations and high net-worth individuals.

CI Fund Management Inc.
151 Yonge Street, 11th Floor
Toronto, ON M5C 2W7
Tel: 416-364-1145
Free: 1-800-268-9374
Fax: 416-364-6299
www.cifunds.com
o CI Fund Management Inc. ("CI") reported that at January 31 2005, had fee-earning
assets of $68.1 billion
o Total fee-earning assets consisted of managed assets of $47.2 billion and
administered/other assets of $20.9 billion. Managed assets included investment fund
assets at CI Mutual Funds Inc. and Assante Wealth Management of $45.9 billion,
labour-sponsored funds of $175 million and structured products and closed-end funds
of $1.1 billion.
o Administered/other assets included institutional assets of $4.5 billion at BPI Global
Asset Management LLP and $15.7 billion in assets at Assante and IQON Financial
Management Inc. net of assets under management at Assante.
Citadel Investment Group, L.L.C.

131 S. Dearborn St.
Chicago, IL 60603
Tel: 312-395-2100
Fax: 312-977-0270
www.citadelgroup.com
o Citadel, which has some $10 billion in assets under management, has expanded its
derivatives operations. It recently announced plans to make markets in equity options
on the Pacific Exchange (PCX).
o Citadel also makes markets on the International Securities Exchange, the Boston
Options Exchange and the Chicago Board Options Exchange.
Clinton Group, Inc.

9 West 57 St., 26th Floor
New York, NY 10019
Tel: 212.825.0400
Fax. 212.825.0079
info@clinton.com
www.clinton.com
o Clinton Group, which has $5.3 billion of assets under management in its hedge funds
and $4.1 billion in collateralized bond obligations, is the world's No. 14 hedge fund
group, according to rankings by Institutional Investor magazine.

Coast Asset Management, L.P.
2450 Colorado Avenue, Suite 100 East Tower
Santa Monica, CA 90404
Tel: (310) 576-3500
Fax: (310) 576-3512
info@coastasset.com
www.coastasset.com
o Coast Asset Management, one of the top hedge fund administrators in the US, uses
market-neutral investment strategies to try to make money for institutional clients and
wealthy individuals (and itself) in any economic climate.
o The company focuses on fixed-income investments, such as sovereign debt of G-7
nations and collateralized debt obligations, employing fixed-income arbitrage, multi-
manager portfolio management, and credit-spread strategies in administering its funds.
o Coast Asset Management has over $3.1 billion in assets under management
Credit Suisse Asset Management

466 Lexington Ave.
New York, NY, 10017, USA
Tel: +1 212 875 3500
Free: 877 272 6872
Fax: +1 646 658 0728
www.csam.com
o Credit Suisse Asset Management (CSAM) is a leading global asset manager focusing on
institutional, mutual fund and private client investors, providing investment products
and portfolio advice in three regions (Americas, Asia Pacific and Europe) around the
world.
o Credit Suisse Asset Management has global assets under management of USD 341
billion and employs 1,885 people worldwide.
o Credit Suisse Asset Management is part of Credit Suisse First Boston (CSFB), a leading
global investment bank serving institutional, corporate, government and individual
clients.
o CSAM has investment capabilities in all major asset classes, including equities, fixed
income, balanced products and alternative investments.
Elliott Management Corporation

712 Fifth Ave.
New York, NY 10019
Tel: 212-974-6000
Fax: 212-586-9431
www.elliottmgmt.com
o Elliott Management Corporation is a leading multi-strategy hedge fund based in New

York City, with nearly $4 billion in assets under management

Hanseatic Group, Inc.
5600 Wyoming Blvd. NE, Ste.
220 Albuquerque, NM 87109
Tel: 505-828-2824
Fax: 505-828-2825
www.hanseaticgroup.com
o Hanseatic Group employs an investment philosophy based on nonlinear systems, using

algorithms similar to those applied to ecology and quantum mechanics to detect
patterns in market activity.
o Hanseatic Group also invests in domestic and international equities, trades managed
futures, and oversees investment portfolios for institutional clients and high-net worth
individuals.
o It has some $250 million of assets under management.
Henderson Global Investors Limited

Olympia Centre 737
North Michigan Avenue Suite 1950
Chicago IL60611 USA
Tel: +1 312 397 1122
Fax: + 1 312 397 1494
www.henderson.com
o Henderson has been managing property assets for more than four decades and has
over £6.5 billion (€9.7 billion)* of property assets under management globally in the
form of segregated mandates, pooled funds, both balanced and sector specialist, for
direct property as well as property securities funds.
Highland Capital Management, L.P.

245 Park Avenue 39th Floor
New York, NY 10167
Phone: 212 792 4382
Fax: 212 792 4322
info@hcmlp.com
www.hcmlp.com
o Founded in 1993, Highland is a market leading Registered Investment Advisor,

specializing in credit and alternative investment investing.
o Over $11 billion in assets under management.
o Over $9 billion in leveraged loans
o Over $1 billion in high yield bonds
o Highland is one of the largest managers of leveraged loans and collateralized loan
obligations in the world.
o Over $200MM of firm capital invested in its funds.

Integrated Asset Management Corp.
Stephen Johnson
Chief Financial Officer
Tel: (416) 933-8278
sjohnson@iamgroup.ca
www.iamgroup.ca
o Integrated Asset Management Corp. is a leading Canadian alternative asset

management company headquartered in Toronto
o The firm has assets under management of over $2.6 billion.
Julius Baer Holding Ltd.

Bahnhofstrasse 36
CH-8010 Zurich, Switzerland
Tel: 41-1-58-888-1111
Fax: +41-1-58-888-5517
www.juliusbaer.com
o J. Baer, with some $115 billion in assets under management, operates in many of the
world's financial centers.
Man Group plc MCAP Inc.

123 North Wacker Drive Suite 2800
Chicago IL 60606 USA
Tel: +1 312 881 6800
Fax: +1 312 881 6700
www.maninvestments.com
o Man Group plc is a leading global provider of alternative investment products and
solutions as well as one of the world’s largest futures brokers
o Man Group has funds under management of $41 billion
Mellon Financial Corporation

1 Mellon Center Pittsburgh, PA 15258-0001 (Map)
Phone: 412-234-5000
Fax: 412-234-9495
Mike Dunn - Manager, Media Relations
212 922-7859
www.mellon.com
o Mellon Financial Corporation (NYSE: MEL) has $500 billion in assets under management
o Mellon is one of the world's leading providers of asset management, trust, custody and
benefits consulting services

Merrill Lynch Investment Managers
P.O. Box 9011
Princeton,
NJ 08543-9011
Tel: 1-800-MERRILL
mlim_feedback@ml.com
www.mlim.ml.com
o Merrill Lynch Investment Managers is a leader in the financial services field

o It has $496 billion in assets under management, making them one of the world's
largest active money managers.
Mesirow Financial Holdings, Inc.

350 North Clark Street
Chicago, IL 60610
Phone: 312-595-6000
Tel: 312-595-4246
Toll Free: 1-800-453-0600
www.mesirowfinancial.com
o Mesirow Financial is a diversified financial services firm headquartered in Chicago.

o The firm is well-capitalized with over $136 million in capital, $20 billion in advisory or
managed assets, and $267 million in revenue.
Nuveen Investments, Inc.

333 West Wacker Drive
Chicago, IL 60606
Peggy Wilson, 312-917-6801
www.nuveen.com
o Nuveen Investments has more than $109 billion in assets under management
o It has $3 billion in alternative investments
Pequot Capital Management, Inc.

153 East 53rd St. 35th Floor
New York, NY 10022
Tel: 212.702.4400
www.pequotcap.com
o Pequot Capital Management, Inc., is a private investment firm with approximately $7

billion of assets under management

RAB Capital PLC
Michael Alen-Buckley
207 389 7001
www.rabcap.com
o RAB Capital plc has approximately $1,75 billion in assets under management
Schonfeld Securities, LLC

Lance Donenberg, 312.499.2973
ldonenberg@BAM-US.com
www.schonfeldsecurities.com
o Schonfeld Capital Group holds a diversified portfolio of investments in a variety of

hedge funds employing a wide range of trading strategies.
o Investments range from $500,000 direct investments to multimillion dollar managed
accounts
Schroders plc
31 Gresham Street
London EC2V 7QA
Tel: +44 (0) 207 658 6000
www.schroders.com
o Schroders is one of the world’s leading independent investment managers with assets
under management of approximately £100 billion including an active investment trust
business in the UK
Soros Fund Management LLC

888 Seventh Ave., 33rd Fl.
New York, NY 10106
Tel: 212 262 6300
Fax 212 245 5154
o Soros Fund Management LLC has approximately $15 billion in assets under
management
Tremont Capital Management, Inc.

555 Theodore Fremd Avenue Suite C-300
Rye, NY 10580
Telephone
(914) 925-1140
(914) 921-3499
Inquiries@tremont.com
www.tremontadvisers.com
o Tremont Capital Management, Inc. is one of the leading global alternative investment
management firms, whose business lines include research and investment

management services, sale and distribution of its proprietary investment products, and
database sales and information services.
o Tremont advises on approximately $9 billion in alternative investment assets, including
more than $1billion in its proprietary funds.
b. Institutional Asset Management
American Express Financial Corporation

50606 AXP Financial Center, H27/52
Minneapolis, MN 55474
Phone: 612-671-2711
Toll Free: 800-386-2042
www.americanexpress.com
o American Express' mutual funds, hold nearly half of the $232 billon in assets under
management at the company
Citigroup Inc.
399 Park Ave.
New York, NY 10043
Tel: 212-559-1000
Fax 212-793-3946
Toll Free: 800-285-3000
www.citigroup.com
William Comfort, Citigroup Venture Capital
o Citigroup Inc has $7.9 trillion in assets under custody and trust.
o Citigroup’s new product line, Fund Services, was recognized as best in class for Mutual
Fund Administration and Hedge Fund Administration in Bermuda, one of the world’s key
hubs for offshore hedge funds.
Countrywide Financial Corporation

4500 Park Granada
Calabasas, CA 91302-1613
Tel: 818-225-3000
Fax 818-225-4051
www.countrywide.com
o Countrywide Financial Corporation is a member of the S&P 500 and Fortune 500
o Countrywide Financial Group has $120.2 billion in assets under management and
serves some 13 million customers

FMR Corp.
82 Devonshire St.
Boston, MA 02109
Phone: 617-563-7000
Fax: 617-476-6150
www.fidelity.com
o Together Fidelity Management and Research Company and Fidelity International

Limited. have grown into one of the largest and most successful fund management
organizations in the world, managing US$1.2 trillion in assets.
J.P. Morgan Chase & Co.

270 Park Ave.
New York, NY 10017
Phone: 212-270-6000
Fax: 212-270-2613
800-576-6209
www.jpmorganchase.com
o J.P. Morgan Chase (the #2 bank in the US) is one of the largest private banks in the
world, with more than $270 billion in client assets under management.
o J.P. Morgan Private Bank's offerings include asset management, lines of credit, private
equity investment, hedge funds, and custody and transaction services, as well as
advice on tax and estate planning and philanthropy.
Merrill Lynch & Co., Inc.

4 World Financial Center
New York, NY 10080
Tel: 212-449-1000
Fax 212-449-7357
Toll Free: 800-637-7455
www.merrilllynch.com
o Merrill Lynch is one of the world’s leading financial management and advisory
companies, with offices in 36 countries and total client assets of approximately $1.6
trillion
MetLife, Inc.
200 Park Ave.
New York, NY 10166
Tel: 212-578-2211
Fax 212-578-3320
Toll Free: 800-638-5433
www.metlife.com
o MetLife is one of the US’s largest insurers.

o Besides its insurance products the company also provides institutional investment
management products (retirement plans, mutual funds, and more) through its Asset
Management segment.

Morgan Stanley Investment Management
1585 Broadway
New York, NY 10036
Tel: 212-761-4000
Fax 212-762-0575
www.morganstanley.com
o With over 17 years of experience in managing alternative investments, the Morgan

Stanley Alternative Investments team manages portfolios which offer institutional
investors access to the alternatives marketplace through two primary approaches: fund
of hedge funds portfolios and fund of private equity funds portfolios
o Manages $424 billion in assets for our clients globally
o Offers over 50 globally-diversified investment products
Wells Fargo & Company

420 Montgomery St.
San Francisco, CA 94163
Phone: 800-869-3557
Fax: 415-677-9075
Toll Free: 800-333-0343
www.wellsfargo.com
o Wells Fargo has $428 billion in assets
Western & Southern Financial Group

400 East Fourth Street
Cincinnati, OH 45202
Phone: 800.936.1212
Fax: 513.629.1220
www.westernsouthern.com
o Western & Southern Financial Group is a FORTUNE 500 company ranked eighth among
mutual life and health insurance companies in the country.
o It has in excess of $32 billion in assets owned and under management

2. Investment Banking
a. Large-Market Investment Banking
AmSouth Bancorporation
PO Box 628327
Orlando, FL 32862-8327
1-800-581-7998
www.amsouthfunds.com
o AmSouth Asset Management, Inc. ("AAMI"), a wholly owned subsidiary of AmSouth

Bank, serves as investment advisor to the AmSouth Funds and is paid a fee for their
services.
o AmSouth Bancorporation has $20 billion in assets under management
Bank of America Securities LLC

100 North Tryon Street
Mail Code NC1-007-18-01
Charlotte, NC 28255
Jeff Hershberger, Financial Institutions Finance
1.212.847.6160
jeff.hershberger@bankofamerica.com
www.bankofamerica.com
o Bank of America Capital Management, with more than $275 billion in assets under
management, provides individuals, small businesses and commercial, corporate and
institutional clients around the world new and better ways to manage their financial
lives.
Credit Suisse First Boston LLC

Eleven Madison Avenue
Tel: 1 212 325 2000
www.csfb.com
o With more than $19 billion of private equity assets, $8.5 billion in fund of hedge funds,
and approximately $6 billion in leveraged investments and CDOs, as well as other
alternative investments, the Group manages over $34 billion in assets

Deutsche Bank Alex. Brown Incorporated
1 South Street
Baltimore, Md. 21202
Phone: (410) 727-1700
Fax: 410-895-5151
www.alexbrown.db.com
o Deutsche Bank Alex. Brown is the U.S. Private Client Services division of Deutsche
Bank Securities Inc., the investment banking and securities arm of Deutsche Bank AG
in the United States.
o It has more than €849 billion in assets under management.
The Goldman Sachs Group, Inc.

85 Broad Street
New York, NY 10004 USA
Melina Higgins
1-212-902-1254
www.gs.com
o Goldman Sachs is a leading global investment banking, securities and investment

management firm.
o It has more than $400 billion in assets under management
Lehman Brothers Inc.

745 Seventh Ave.
New York, NY 10019
212-526-7000
www.lehman.com
o Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed
income sales, trading and research, investment banking, private investment
management, asset management and private equity.
Nomura Holdings, Inc.

2 World Financial Center, Building B
New York, NY 10281-1198
Phone: (212) 667-9300
Fax: (212) 667-1001
Michael H. Lowry, Managing Director
(212) 667-9557
mlowry@us.nomura.com
www.nomura.com
o The Nomura Group, one of the largest global investment banking and securities firms,
is represented in The Americas by Nomura Holding America Inc. (NHA),
o Nomura Securities International has more than $7.7 billion in assets under
management

Société Générale
SG House, 41 Tower Hill
London EC3N 4SG, United Kingdom
Tel: +44 20 7597 3000
Fax: +44 20 7597 3056
london@sghambros.com
www.sghambros.com
o Société Générale is one of the largest financial services groups in the euro-zone
U.S. Bancorp
U.S. Bancorp Center,
800 Nicollet Mall
Minneapolis, MN 55402
Phone: 612-303-3381
Toll Free: 800-754-7221
am.usbancorp.com
o U.S. Bancorp, with assets under management of $195 billion, is the 6th largest
financial services holding company in the United States.
b. Middle-Market Investment Banking
Adams Harkness, Inc.

99 High St.
Boston, MA 02110
Phone: 617-371-3900
Fax: 617-371-3793
800-225-6201
www.adamsharkness.com
o Winslow, a division of Adams Harkness Asset Management, is a growth-oriented asset

manager seeking above-average performance and capital appreciation for its investors
through environmentally responsible investing.
o It has $210 million in assets under management
CIBC World Markets Inc.

300 Madison Avenue
New York, New York
USA 10017
Tel: 212-856-4000
www.cibcwm.com
o CIBC World Markets is the wholesale banking arm of CIBC, providing a range of
integrated credit and capital markets products, investment banking, and merchant
banking to clients in key financial markets in North America and around the world.
o The firm has $63 billion in assets under management.

Harris Bankcorp, Inc.
111 W. Monroe St.
Chicago, IL 60603
Phone: 312-461-2000
Fax: 312-461-7869
www.harrisbank.com
o Harris is an integrated financial service organization providing more than 1.5 million
personal, business, corporate and institutional clients with banking, lending, investing
and financial management solutions
o Harrisdirect provides direct investors with an award-winning trading platform, a broad
range of investment options, high-powered planning tools and access to eight leading
sources of research.
o The firm has $32 billion in assets under management
Jefferies Group, Inc.

520 Madison Ave., 12th Fl.
New York, NY 10022
Phone: 212-284-2300
Fax: 203-708-5922
www.jefco.com
o Jefferies, a global investment bank and institutional securities firm, has served middle-
market and growth companies and their investors for over 40 years.
o The company has $3 billion in assets under management
Lazard LLC
121 Boulevard Haussmann
75382 Paris Cedex 08, France
Tel: +33-1-4413-01-11
Fax +33-1-4413-01-00
www.lazard.com
o Lazard is a pre-eminent global investment bank committed to helping its clients -

corporations, partnerships, institutions, governments and individuals - achieve their
strategic and financial goals.
o The firm has $82 billion in assets under management.
Raymond James Financial, Inc.

880 Carillon Pkwy.
St. Petersburg, FL 33716
Phone: 727-567-1000
Toll Free: 800-248-8863
www.rjf.com
o Founded in 1962, Raymond James Financial, Inc. is now one of the largest financial
services firms in the United States, with 2,200 locations worldwide.
o The firm has $22 billion in assets under management

RBC Dain Rauscher Inc.
Dain Rauscher Plaza, 60 S. 6th St.
Minneapolis, MN 55402-4422
Phone: 612-371-2711
Fax: 612-371-7619
Toll Free: 800-678-3246
www.rbcdain.com
o RBC Dain Rauscher Inc., a wholly owned subsidiary of Royal Bank of Canada (RY: TSX,
NYSE), is one of Canada’s largest full-service securities firms
o It has $117 billion in assets under management
UBS Financial Services Inc.

1285 Avenue of the Americas
New York, NY 10019
Phone: 212-713-2000
Fax: 212-713-9818
financialservicesinc.ubs.com
o UBS AG is a leading global financial services firm serving a diverse client base that
includes affluent individuals, corporations, institutions and governments.
o It has approximately $434 billion in assets under management worldwide
Veronis Suhler Stevenson Partners LLC

350 Park Avenue
New York, NY 10022
212-935-4990 telephone
212-381-8168 fax
James P. Rutherfurd
RutherfurdJ@vss.com
www.vss.com
o Since 1987, Veronis Suhler Stevenson's private equity affiliate, VSS Fund Management
LLC, has managed four equity funds exclusively dedicated to investments in the media,
communications and information industries.
Webster Financial Corporation

Webster Plaza
Waterbury, CT 06702
Phone: 203-578-2476
Fax: 203-573-8688
Toll Free: 800-325-2424
www.websterbank.com
o Webster Financial Corporation is the holding company for Webster Bank and Webster
Insurance
o The firm has 12 billion in assets under management

APPENDIX 6 – TARGET MARKET – FUNDS & FINANCIAL INSTITUTIONS
Financial Services
1. Asset Management
a. Hedge Fund Management

Alexander Securities Group L.L.C.
Allianz Global Investors of America L.P.
Altin AG
Andor Capital Management, L.L.C.
Ardsley Partners
Avenue Financial Corporation
The Bank of Bermuda Limited
BlackRock, Inc.
Bowman Capital Management, LLC
Cargill, Incorporated
Citadel Investment Group, L.L.C.
Clinton Group, Inc.
Coast Asset Management, L.P.
Elliott Management Corporation
Greenlight Capital, Inc.
Integrated Asset Management Corp.
International Assets Holding Corporation
J.P. Morgan Private Bank
Julius Baer Holding Ltd.
JWM Partners, LLC
Knightsbridge Advisers Incorporated
Liberty Group Limited
Man Group plc MCAP Inc.
Pequot Capital Management, Inc.
RAB Capital PLC
Schonfeld Securities, LLC
Schroders plc
Soros Fund Management LLC
UBS Investment Bank
Verus Investment Management, LLC
b. Institutional Asset Management
A&W Revenue Royalties Income Fund

AEGON USA Investment Management LLC
Affiliated Managers Group, Inc.
A I M Management Group Inc.
Alliance Capital Management L.P.
Allianz Global Investors of America L.P.
American Century Companies, Inc.
American Express Financial Corporation
Amerindo Investment Advisors Inc.
AmeriServ Financial, Inc.
AMVESCAP PLC
Arnhold and S. Bleichroeder Advisers, Inc.
Atalanta Sosnoff Capital, LLC
AXA Rosenberg Group LLC
The Bank of New York Company, Inc.
Barclays Global Investors, N.A.
BKF Capital Group, Inc.
Blaylock & Partners, L.P.
BOK Financial Corporation
Brewin Dolphin Holdings PLC
Calamos Asset Management, Inc.
Caywood-Scholl Capital Management LLC
Chandler Asset Management, Inc.
Citigroup Inc.
Clinton Group, Inc.
Close Brothers Group plc
CoBiz Inc.
Cohen & Steers, Inc.
Columbia Management Group, Inc.
Comerica Incorporated

Conning Corporation
Countrywide Financial Corporation
Credit Suisse Group
Davis Selected Advisors, L.P.
Detwiler, Mitchell & Co.
Diamond Hill Investment Group, Inc.
Dimensional Fund Advisors, Inc.
Duncan-Hurst Capital Management Inc.
Dundee Bancorp Inc.
Dundee Wealth Management Inc.
E. Öhman J:or Fondkommission AB
Eaton Vance Corp.
EnTrust Capital Inc.
Evergreen Investment Management Company, LLC
The Evolution Group Plc
Federated Investors, Inc.
First Quadrant L.P.
FMR Corp.
Frank Russell Company
Fred Alger Management, Inc.
Froley, Revy Investment Company, Inc.
Gerrard Limited
Gleacher Partners LLC
Hirtle, Callaghan & Co., Inc.
Hokanson Capital Management, Inc.
ING Americas
Integrated Asset Management plc
International Assets Holding Corporation
Intrepid Capital Corporation
John Hancock Financial Services, Inc.
Jones Lang LaSalle Incorporated
J.P. Morgan Fleming Asset Management
Kayne Anderson Rudnick Investment Management, LLC
KBC Peel Hunt Ltd.
Keefe, Bruyette & Woods, Inc.
Kirlin Holding Corp.
Legg Mason, Inc.
Liontrust Asset Management PLC
LM Capital Group, LLC
Man Group plc
Martin Capital Advisors, LLP
Massachusetts Financial Services Company
MCF Corporation
Mellon Capital Management Corporation
Messner & Smith Investment Management, Ltd.
MetLife, Inc.
Metropolitan West Asset Management, LLC
Minnesota Mutual Companies, Inc.
Montanaro Investment Managers Limited
Morgan Stanley
Morgan Stanley Investment Management
New York Community Bancorp, Inc.
Newton Investment Management Ltd.
NFJ Investment Group
Nicholas-Applegate Capital Management
Northern Trust Corporation
NWQ Investment Management Company, LLC
Oak Associates, ltd.
Old Mutual plc
Old Mutual (US) Holdings, Inc.
Pacific Mutual Holding Company
Phoenix Investment Partners, Ltd.
Pioneer Investment Management USA Inc.
Progress Investment Management Company
Provident Investment Counsel, Inc.
Prudential Investment Management, LLC
PSEG Energy Holdings L.L.C.
PSEG Resources Inc.
Rice Hall James & Associates LLC
Roxbury Capital Management, LLC
RS Investment Management, Inc.
Sage Advisory Services, Ltd. Co.
St.George Bank Limited
The Sanlam Group
Schroders plc
Seneca Capital Management, LLC
Silicon Valley Bancshares
Singer & Friedlander Group PLC
Sinopia Asset Management
Southwest Bancorporation of Texas, Inc.
Standard Chartered PLC
State Street Corporation
The Sumitomo Trust and Banking Company, Limited
The TCW Group, Inc.
Teachers Insurance and Annuity Association - College Retirement Equities
Fund
Trainer Wortham & Company, Inc.
UBS AG
UBS Investment Bank
UnionBanCal Corporation
U.S. Bancorp
U.S. Bancorp Asset Management, Inc.
U.S. Trust Corporation
Waddell & Reed Financial, Inc.
Wellington Management Company, LLP
Wells Capital Management
Wells Fargo & Company
Western & Southern Financial Group
Westwood Holdings Group, Inc.
W.P. Stewart & Co. Ltd.
2. Investment Banking
a. Large-Market Investment Banking
Banc of America Securities LLC
The Bear Stearns Companies Inc.
Citigroup Global Markets Europe Limited
Citigroup Global Markets Holdings Inc.
Citigroup Inc.
Credit Suisse First Boston (USA), Inc.
Deutsche Bank Alex. Brown Incorporated
Deutsche Bank Securities Inc.
Goldman Sachs Group Holdings (U.K.)
The Goldman Sachs Group, Inc.
J.P. Morgan Securities Inc.
Lehman Brothers Holdings Inc.
Lehman Brothers Inc.
Lehman Brothers U.K. Holdings Ltd.
Merrill Lynch Europe PLC
Morgan Stanley
Nomura Holdings, Inc.
Nomura International PLC
UBS Investment Bank
U.S. Bancorp
b. Middle-Market Investment Banking
Adams Harkness, Inc.

AdMedia Partners, Inc.
Advanced Equities Financial Corp.
The Advest Group, Inc.
Allen & Company, Inc.
Arbuthnot Securities Limited
Arnhold and S. Bleichroeder Advisers, Inc.
Banc of America Investment Services, Inc.
BankAtlantic Bancorp, Inc.
Barclays Capital Inc.
Bayview Capital Group
Benefit Capital Companies
Berkery, Noyes & Co.
British Linen Advisers Limited
Broadview International
Brown, Gibbons, Lang & Company, L.P.
Burrill & Company
Calyon Securities (USA) Inc.
Cantor Fitzgerald, L.P.
The CapStreet Group, LLC
Cazenove Group plc
C.E. Unterberg, Towbin
Charles Stanley Group plc
CIBC World Markets Inc.
Citigroup Geneva Capital Strategies Inc.
Cohen & Steers, Inc.
Crown Financial Group, Inc.
Daiwa Securities Group Inc.
DeSilva & Phillips, LLC
Detwiler, Mitchell & Co.
DN Partners
Dresdner Kleinwort Wasserstein
Durlacher Corporation PLC
EarlyBirdCapital Inc.
E. J. De La Rosa & Co., Inc.
The Evolution Group Plc
Evolution Securities Ltd.
Ferris, Baker Watts Incorporated
Firebrand Financial Group, Inc.
First Albany Companies Inc.
Fox-Pitt, Kelton Inc.
Friedman, Billings, Ramsey Group, Inc.
Galen Capital Group, LLC
Gleacher Partners LLC
Granite Financial Group, Inc.

Green Manning & Bunch, Ltd.
Greenhill & Co, Inc.
Gruppo, Levey & Co.
Gulf Capital Partners, Inc.
Harris Williams & Co.
Hill Street Capital LLC
Houlihan Lokey Howard & Zukin
Janney Montgomery Scott LLC
Jefferies Group, Inc.
The Jones Financial Companies, L.L.L.P.
The Jordan, Edmiston Group, Inc.
Katalyst LLC
Keefe, Bruyette & Woods, Inc.
Kinsman Capital, LLC
Kirlin Holding Corp.
Ladenburg Thalmann Financial Services Inc.
Lazard LLC
Leerink Swann & Company, Inc.
Lightyear Capital Inc.
Lincoln Partners
McDonald Investments, Inc.
MCF Corporation
MEDIOBANCA - Banca di Credito Finanziario S.p.A.
MFC Bancorp Ltd.
MHT Partners, LP
Monitor Company Group, LP
Morgan Joseph & Co. Inc.
Moss Adams LLP
MTS Health Partners, L.P.
N M Rothschild & Sons Limited
Nomura Securities International, Inc.
Numis Corporation Plc
Odyssey Investment Partners, LLC
Oppenheimer Holdings Inc.
Parker/Hunter Incorporated
Paulson Capital Corp.
Piper Jaffray Companies
Pointe Financial Corporation
Putnam Lovell NBF Group Inc.
Raymond James Financial, Inc.
RBC Dain Rauscher Inc.
RBC Dominion Securities Inc.
Robert W. Baird & Co. Incorporated
Rodman & Renshaw Inc.
Roth Capital Partners, LLC
Ryan Beck & Co., Inc.
Sandler O'Neill & Partners, L.P.
Sands Brothers & Co., Ltd.
Sanford C. Bernstein & Co., LLC
Scott & Stringfellow, Inc.
Secured Capital LLC
SG Cowen & Co., LLC
Shore Capital Group plc
Sonnenblick-Goldman Company
Stephens Group, Inc.
Stephens Inc.
Sterling Financial Investment Group, Inc.
Stonebridge Associates, LLC
SVB Alliant
SWS Group, Inc.
TD Securities Inc.
Teather & Greenwood Holdings PLC
THCG, Inc.
Thomas Weisel Partners LLC
Trenwith Group, LLC
Veronis Suhler Stevenson Partners LLC
Vontobel Holding AG
Walker, Crips, Weddle, Beck plc
Waterous & Co.
Wedbush Morgan Securities
Westchester Associates, LLC
William Blair & Company, L.L.C.
WR Hambrecht + Co.
The Ziegler Companies, Inc.

3. Investment Funds
5Banc Split Inc.
A&W Revenue Royalties Income Fund
Aberforth Partners
The Adams Express Company
Agility Capital, LLC
AIC Diversified Canada Split Corp.
Allied Solutions, LLC
Argosy Investment Partners LP
Asset Value Investors Ltd.
Augen Capital Corp.
Bank Hapoalim B.M.
Bonavista Energy Trust
CLX Investment Company, Inc.
Coastal Income Corp.
Collective Assets Trust plc
Diamond Hill Investment Group, Inc.
DIAMONDS Trust, Series 1
EarlyBirdCapital Inc.
Ecclesiastical Insurance Group
Fidelity Capital Investors
Finance Wales plc
First Reserve Corporation
HHG PLC
Home Equity Income Trust
ING Canada Inc.
Innergex Power Income Fund
Kohlberg Kravis Roberts & Co.
Liontrust Investment Funds Ltd.
Littlejohn & Co. LLC
M&G Securities Ltd.
Morgan Stanley UK Group
Nasdaq-100 Trust, Series 1
Newcastle Building Society Limited
Noble Fund Managers Limited
Noble Group Limited
Odyssey Investment Partners, LLC
Overlord Financial Inc.
Pacific Retail Group Limited
Petroleum & Resources Corporation
Phoenix Equity Partners Holdings LLP
Sarasin Investment Management Ltd.
Shorenstein Company LLC

Skylon Capital Yield Trust
SPDR Trust, Series 1
Sterling Capital Corporation
SVG Capital plc
TD Waterhouse Group, Inc.
Thomas Weisel Partners LLC
Versacold Income Fund

INVESTMENT ANALYTICS (BERMUDA) LTD
VO L AT I L I T Y
A R B I T R AG E P RO G R A M
F I N A N C I A L P RO J E C T I O N S
FEBRUARY 2005
CONTENTS
Management Summary.......................................3
Assumptions ........................................................4
Returns Processes ........................................................................... 4
Asset Growth ................................................................................ 4
Discount Rates and Terminal Multiples ........................................ 5
Strategy Returns ............................................................................ 5
Management Fees and Performance Allocations ............................. 5
Expenses....................................................................................... 5
Present Value Computations ......................................................... 6
Simulation Scenarios...........................................7
Results ...................................................................8
Conclusion............................................................8
Equity Investment Terms ..................................9
Results for Scenario 6 ...................................... 10
2
FINANCIAL PROJECTIONS
M A NA G E M E N T S U M M A RY
Investment Analytics is an investment research and consulting firm established by its Chief
Executive Jonathan Kinlay in 1998. Investment Analytics provides independent research focusing
on applications of sophisticated mathematical and financial modeling techniques to problems of
strategy development and repair, performance analysis and risk management for clients in the
investment management industry in Europe, North America and Asia. Full details about the firm, its
personnel and products and services is given on the web site:www.investment-analytics.com.
In 1999-2001 Investment Analytics developed a new framework for modeling and forecasting
asset volatility using advanced econometric models based on extensive theoretical and empirical
research. These models provided the basis for a volatility arbitrage program which was made
available under license to the hedge fund Caissa Capital in 2002. The arbitrage strategies proved
highly successful, producing double- and triple-digit uncorrelated alphas, and enabling the fund to
raise over $300M in assets from institutional investors in the US, Europe and Asia. Since expiration
of the Caissa license in 2004, Investment Analytics has issued a new license for use of its volatility
arbitrage program to the Proteom Fund, of which Mr. Kinlay is also a principal, in order to provide
the basis for a range of volatility arbitrage products. The Proteom Fund is expected to open in 2005
with Assets Under Management of $100M. Full details of the Fund including strategy presentations,
strategy analyses, performance statistics, due diligence information and offering documents, can be
found on the web site: www.proteomcapital.com
This document sets out financial projections for Investment Analytics, for the five years from
inception of the Proteom Fund. A variety of scenarios are considered in which different
combinations of products are launched in the first two years. The analysis suggests that the optimal
strategy would be to launch three already-developed products in year 1. Projections under this
scenario show Assets Under Management rising to over $1.7 Bn by year 5 and indicate a fair
valuation of Investment Analytics to be $61M.
Investment Analytics proposes to sell 49% of the equity for the sum of $58.6M.
3
ASSUMPTIONS
RETURNS PROCESSES
Financial projections are created using a Monte-Carlo simulation model in which strategy returns
follow random processes with expected average levels and standard deviations of return as set out in
the Table 1 below. The table also shows the management and performance fees for each strategy.
Strategy Mean SD Mgt. Fee Perf. Fee

E1000 24.00% 15.00% 2.00% 35.00%
F500 40.00% 25.00% 2.00% 35.00%
F1000 65.00% 40.00% 0.00% 50.00%
G000 12.90% 6.92% 2.00% 25.00%
H500 6.68% 13.97% 2.00% 25.00%
Table 1: Strategy Performance Characteristics and Fees.
ASSET GROWTH
The growth in Assets Under Management (AUM) is computed from a baseline scenario as
shown in Table 2. The growth rate in any year is then adjusted for each strategy’s performance
during that year according to the formula:
rij
g ij = b j × i = 1K ,5; j = 1,K ,5
ei
Where
gij is the growth rate for strategy i in year j
bj is the baseline growth rate in year j
rij is the return from strategy i in year j (by simulation)
ei is the expected return for strategy i
The baseline growth rate beyond year five is 4% per annum. Strategies such as the F500, F100
and G000, are likely to be close to capacity at this stage are assumed to grow at this rate. Other
strategies with greater capacity are assumed to have long term growth rates of 6% to 8%.
Asset Growth 2 3 4 5 5+
Baseline 150.00% 100.00% 75.00% 60.00% 4.00%
Table 2: Baseline Growth rates in Assets Under Management
4
DISCOUNT RATES AND TERMINAL MULTIPLES
For strategies with established track records in prior funds we apply a discount rate to cash flows
of 50%. Strategies in this group are the F500, F1000 and G000 volatility strategy series. Cash flows
from the H500 strategy which is new, but based on a methodology similar to other existing strategies
with established track records, are discounted at 55%. A higher discount rate of 60% is used for the
E1000 strategy, which is entirely new. A weighted average discount rate (WADR) is computed from
individual strategy discount rates by weighting each rate by the proportion of total Assets Under
Management invested in each strategy. The WADR is used to compute a weighted average terminal
multiple (WATM), which is used to value cash flows beyond year 5.
Terminal multiples are calculated in the standard way:
M = 1 / (D – G)
Where M is the terminal multiple;
D is the discount rate; and
G is the long term growth rate.
STRATEGY RETURNS
These are assumed to follow a Normal distribution with means and standard deviations as shown
in Table 1. Strategy returns for each year are generated by sampling repeatedly (1,000 times) from
each of these distributions.
MANAGEMENT FEES AND PERFORMANCE ALLOCATIONS
Fees are computed using the standard terms as set out in Table 1. License fees received by
Investment Analytics are computed at a standard rate of 50% of total management and performance
fees.
Although it is likely that discounts will be offered to large and early-stage investors, these are not
factored into the computations for fees. Instead a marketing allowance of 20% is made in the
expense calculations (see below).
EXPENSES
As previously mentioned, a marketing allocation of 20% of total fees (management fees and
performance allocation) is expensed against revenues.
Details of overhead computations are given in the workbook. The breakdown by expense
category for the first two years is summarized in Table 3. Beyond year 2, overhead is assumed to
grow at 50% of the rate of growth in assets. Under scenarios in which fewer than nine strategies are
launched, overhead is scaled down pro-rata by the number of strategies launched:
Ok = Om x Nk / 5
Where Om is the overhead applicable when all nine strategies are launched, and Nk is the number
of strategies launched in the current scenario k.
5
Overhead Expenses Year 1 Year 2
Hardware $365,499 $365,499
Software $446,000 $446,000
Data $302,500 $367,500
Staff $2,725,000 $4,200,000
Marketing $156,400 $270,000
Service Providers $484,000 $771,000
Operations $1,096,000 $2,124,400
$5,575,399 $8,544,399
Table 3: Overhead Expenses
PRESENT VALUE COMPUTATIONS
Net cash flows in year i, CFi, are discounted using the weighted average discount rate using the
formula:
CFi
PVi =
(1 + WADR ) i
6
S I M U L A T I O N S C E NA R I O S
We consider a number of different launch scenarios for simulation purposes. In Scenarios 1 and
2 two products are launched in year 1 only. In Scenarios 3-5 we consider the launch of two strategies
in year 1, with a third strategy in year 2. In Scenarios 6-8 we assume that three products are launched
in year 1, and one new product in year 2. In the final scenario, we evaluate the outcome of launching
all five products (three in year 1 and two in year 2).
All scenarios consider a mix of medium and high performance strategies. The performance
characteristics of each product portfolio varies according to the simulated performance
characteristics of the products it includes. Product portfolios range in their performance
characteristics from “conservative” to “aggressive”. An example of the former is the portfolio in
Scenario 1, which include two strategies with existing track records of intermediate performance
(F500 and G000). An example of the latter is the portfolio in Scenario 8, which includes two high
risk/return volatility strategies. The range of scenarios considered is presented in Table 4.
SCENARIOS Year 1 Year 2

SCENARIO 1 F500 G000 NONE
SCENARIO 2 F1000 G000 NONE
SCENARIO 3 F1000 G000 E1000
SCENARIO 4 F1000 G000 H500
SCENARIO 5 F500 G000 E1000
SCENARIO 6 F500 F1000 G000 NONE
SCENARIO 7 F500 F1000 G000 H500
SCENARIO 8 F500 F1000 G000 E1000
SCENARIO 9 F500 F1000 G000 H500 E1000

Table 4: Product Launch Scenarios
7
R E S U LT S
Table 5 summarizes the simulation results for each of the scenarios. The results break down into
two groups, the first comprising Scenarios 1-4, the second comprising Scenarios 5-9.
In the first group we assume that at most two products are launched in year 1, with at most one
new product being introduced in year 2. Assets Under Management are expected to rise to around
$1.3Bn - $1.5Bn by year 5, and the cash flow NPV’s range from $30M to $40M.
The second group features scenarios in which three products are launched in year 1, with up to
two products introduced in year 2 (Scenario 5 is an exception, with only two product launches in year
1). For this group Assets Under Management are forecast to be considerably higher than for the
first group: in the range $1.7Bn to $2.3Bn. Cash flow NPV’s in this group range from $55M -
$61M.
One means of making a “like for like” comparison of the results for the different scenarios is to
consider the ratio of cash flow NPV to projected Assets Under Management. This ratio suggest that
the scenario with the best risk/reward characteristics is Scenario 6, in which the F500, F1000 and
G00 products are all launched in year 1.
SCENARIOS Year 1 Year 2 NPV AUM NPV/AUM

SCENARIO 1 F500 G000 NONE 29.54 1,426.36 2.07%
SCENARIO 2 F1000 G000 NONE 39.40 1,260.17 3.13%
SCENARIO 3 F1000 G000 E1000 39.90 1,459.29 2.73%
SCENARIO 4 F1000 G000 H500 36.33 1,544.89 2.35%
SCENARIO 5 F500 G000 E1000 54.62 2,297.89 2.38%
SCENARIO 6 F500 F1000 G000 NONE 60.71 1,722.16 3.53%
SCENARIO 7 F500 F1000 G000 H500 54.62 2,105.67 2.59%
SCENARIO 8 F500 F1000 G000 E1000 59.38 1,976.41 3.00%
SCENARIO 9 F500 F1000 G000 H500 E1000 56.10 2,318.09 2.42%
Table 5: Scenario Results
CONCLUSION
Based on the financial projections in this analysis Investment Analytics should aim to license its
technology to facilitate the launch of three products during the first year of operations: the F500
Volatility Opportunity Fund (5x), the F1000 Volatility Opportunity Fund (10x) and the G000
Strategic Volatility Fund. This product portfolio should be capable of supporting Assets Under
8
Management of around $1.7Bn by year 5, generating licensing fees with an NPV estimated to be
$61M.
EQUITY INVESTMENT TERMS
We propose to offer investors a total of up to 49% of the economics in Investment Analytics

(Bermuda) Ltd (either in the form of equity or equivalent). The value of this equity share is $58.6M
($58.6M / ($61M + $58.6M) = $58.6M / $119.6M = 49%). The proposed terms are as follows:
9
R E S U LT S F O R S C E NA R I O 6
Expected AUM ($M) 1 2 3 4 5 Expected Cash Flows ($M) 1 2 3 4 5 5+ TOTAL

125.00 313.13 623.04 1,084.17 1,722.16 Revenues 8.63 21.86 44.05 76.82 123.12
Expenses 5.12 9.51 16.17 25.39 37.25
Assetsunder
Assets underManagement
Management ($M)
($M) Net Cash Flow 3.51 12.36 27.88 51.43 85.87
NPV 2.44 5.65 7.96 10.09 11.12 24.18 60.71
6,000
6,000
Overhead 3.35 5.13 7.86 12.29 17.36
Min
5,000 NPV of Cash Flows
Max
Mean
4,000 9.0%
($M)
3,000
8.0%
2,000
7.0%
1,000
6.0%
0
1 2 Year 3 4 5
5.0%
Annual NPV's ($M)

4.0%
120
100 Min
3.0%
Max
80 Mean
2.0%
60
($M)
40
1.0%
20
0.0%
0
0
10
20
30
40
50
60
70
80
90
0
1 2 3 4 5 6
10
11
12
13
14
15
16
17
18
19
20
Year
-20
Total NPV ($M)
VO L AT I L I T Y
A R B I T R AG E P RO G R A M
DESCRIPTION OF MODELING SYSTEM AND
INVESTMENT PROGRAM
AND
DUE DILIGENCE QUESTIONNAIRE
PRIVATE AND CONFIDENTIAL
Prepared for:
Copy #
NOTICE:
This document is intended only for the use of the individual or entity to which it is addressed,
and contains private and confidential information. If the reader of this document is not the
intended recipient you are hereby notified that any review, retransmission, dissemination,
distribution, copying or other use of this document is strictly prohibited. All material
contained herein is copyright © 2004 Investment Analytics (Bermuda) Ltd.
I N V E S T M E N T A N A L Y T I C S ( B E R M U DA ) LT D.
AUGUST 2004
INVESTMENT ANALYTICS VOLATILITY ARBITRAGE PROGRAM PAGE - 2 -
Arbitrage Program
OV E RV I E W
The Investment Analytics proprietary arbitrage program comprises econometric models that produce
forecasts of future volatility of exceptional accuracy. One measure of the ability of the models,
direction prediction accuracy, shows that, on average, the models enable the correct timing of the
volatility market approximately 75% of the time. This extraordinary level of forecasting performance
accounts for the exceptional trading results achieved by the Caissa Capital Fund, which licensed the
investment program from Investment Analytics in 2002. The models are based on advanced
econometric research into the properties of asset volatility conducted by Mr Kinlay and other leading
academic researchers, dating from around 1996, most of which has yet to be released into the public
domain.
The system uses a variety of sophisticated analytical tools to identify option arbitrage opportunities
and construct long/short volatility portfolios that have the desired risk/return characteristics.
Specific trading recommendations are issued in the form of a daily trading sheet, which is emailed
automatically to traders and risk mangers before the start of the trading session. The system is run
concurrently on two independent servers, one based in New York, the other In the UK, to ensure
failsafe delivery and backup.
Hedge fund arbitrage strategies using the Investment Analytics program produced returns of
between 15% and 1600% in 2003 and have remained very profitable during 2004.
DA TA M A NA G E M E N T S Y S T E M
The data management system is an automated system that handles the process of downloading and
validating stock and option data for the stocks in the investment universe. Currently around 100,000
data items for an investment universe comprising 150 stocks in the S&P500 are downloaded at the
end of each trading day, including market closing prices for each stock and options with varying
strikes and maturities. The data are subjected to a number of integrity checks prior to being added to
the databases. These are then manipulated by the Model Management System to update the
individual forecasting models.
The data management system is highly robust and operates on two independent servers to ensure
redundancy.
THE MODELING SYSTEM
The Investment Analytics proprietary arbitrage program comprises econometric models that produce
forecasts of future volatility of exceptional accuracy. One measure of the ability of the models,
direction prediction accuracy, shows that, on average, the models enable the correct timing of the
volatility market approximately 75% of the time. This extraordinary level of forecasting performance
accounts for the exceptional trading results achieved by the Caissa Capital Fund, which licensed the
investment program from Investment Analytics in 2002.
The modelling system analyses stock and option data at the end of each trading day, updates volatility
forecasts, and identifies new arbitrage opportunities. Using complex portfolio construction
algorithms, the system produces a trading sheet which contains specific recommendations specifying
the quantities of each option be bought or sold, the theoretical edge of the trade and the hedging
requirement. The trading sheet is emailed automatically to traders and risk managers before the start
of each trading session.
FORECASTING MODELS
The system operates on a ground-up approach with several different individual models for every
asset in the investment universe. Each model emphasises different aspects of volatility behavior and
will perform best under different market conditions. The types of model include:
i. Long memory models that model the important long term serial autocorrelation effects
which are pervasive in asset volatility processes. These models perform best when the
behaviour of the process is dominated by reinforcing trends, such as applied in the
period from 1995–1999 and from 2003–mid 2004 in US equity volatility markets.
ii. Short term models that capture transient mean-reverting behaviour, another important
characteristic of volatility. These models typically give rise to contrarian trading
recommendations.
iii. Models that follow the interaction and feedback between the asset returns and volatility
processes, which give rise to skewness and kurtosis in the returns process.
iv. Asymmetry models that take account of the tendency of volatility to spike more during
market sell-off than during periods when the market is strong.
v. Multifactor models that model the interaction of long memory and transient volatility
processes.
vi. Markov models that identify different volatility regimes and associated state transition
probabilities.
M O D E L M A NA G E M E N T S Y S T E M
The models are maintained by a Model Management System (“MMS”) that analyses the data
processed by the data management system, updates each of the models, produces current forecasts
and evaluates the performance of each of the models. The MMS rates each model on approximately
30 different criteria and compares the current performance of each model with its historical
performance, with the performance of other models of the same process and with the performance
of models for other asset processes. The MMS then selects the best models whose aggregate results
lie in the upper quartile of performance. In this way the system automatically biases volatility
forecasts to favour models best suited to current market conditions, while filtering out models which
are currently performing with lower levels of accuracy.
O P T I O N A NA LY S I S
The next stage of the process is for the system to identify risk arbitrage opportunities amongst the
universe of equity options under consideration. The system selects the stocks for which the
forecasting models are performing at the highest levels and evaluates the options using the volatility
forecasts and proprietary option pricing models. The system then “cherry picks” the best
opportunities where the differential between market and theoretical value exceeds a minimum
threshold level., which can be set by the model user.
C O I N T E G R A T I O N A NA LY S I S A N D P O RT F O L I O C O N S T RU C T I O N
During the portfolio construction stage the modelling system decides the amounts of capital to
allocate to the available arbitrage opportunities. The system examines the multivariate behaviour of
the volatility processes and identifies cointegrated baskets, comprising long and short volatility
positions that typically have more stable risk-returns characteristics than the individual underlying
processes. The procedure is comparable to the mean-variance optimization procedure due to
Markovitz, but is significantly more sophisticated. The resulting baskets, or portfolios, tend to have
more stable and robust performance characteristics than portfolios constructed in the traditional way
using correlations, as the latter are notoriously unreliable, especially during market crashes.
The cointegrated baskets identified by the system are tested by a simulation processes to ensure that
their performance characteristics meet the minimum criteria and behave robustly under varying
market conditions. A genetic algorithm is employed to select the most appropriate baskets for
trading.
MODEL OUTPUT
The final stage of the process entails the creation and distribution a trading sheet containing the
detailed trading recommendations. The sheet gives the current volatility forecast for every stock in
the investment universe, but highlights only those option trades which meet the pricing differential
criterion. Options that have been selected for purchase (sale) are highlighted in blue (red), and the
sheet gives the market bid and offer prices and the theoretical price based on the latest volatility
forecasts. In addition, the output shows the quantity of options to be bought or sold, the % price
differential and the option delta, so that trades can readily be executed on a market-neutral basis.
Trading sheets are contained in an Excel workbook, which is emailed by an automated email server
to a specified list of email recipients, usually members of the trading and risk management teams.
Option Values 03-Dec-03 Expiry: 16-Jan % Cutoff 30% $ Cutoff 0.1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FCST Spreads Code Jan-04 OTM PUT Code Jan-04 ATM PUT Code Jan-04 ATM CALL Code Jan-04 OTM CALL
Stock Price Vol Model Total B/S Strike Bid Ask Theory B/S Strike Bid Ask Theory B/S Strike Bid Ask Theory B/S Strike Bid Ask Theory
HDI 46.50 19% ** HDIMV 42.5 0.40 0.50 0.12 HDIMW 47.5 2.05 2.20 1.77 HDIAW 47.5 1.10 1.20 0.89 HDIAK 55 0.10 0.01
1.65 S 30% 222% -0.08 -906 27% 16% -0.60 -896 23% 24% 0.40 -1,179 25% -100% 0.01 27,986
HON 29.64 23% ** HONMY 27.5 0.20 0.35 0.21 HONMF 30 1.10 1.20 1.11 HONAF 30 0.70 0.80 0.82 HONAZ 32.5 0.10 0.20 0.17
1.7 27% -03% -0.16 39,080 26% -0.53 20% -03% 0.47 11,718 22% 20% 0.14 -7,656
HPQ 22.41 32% *** HHYMD 20 0.15 0.20 0.18 HHYMX 22.5 0.85 0.90 1.01 HHYAX 22.5 0.75 0.80 0.98 HPQAE 25 0.10 0.15 0.23
1.81 33% -16% -0.14 9,387 29% -11% -0.48 2,416 24% -18% 0.52 1,513 25% -36% 0.18 3,155
IACI 30.96 37% ** QTHMY 27.5 0.45 0.55 0.36 QTHMF 30 1.15 1.25 1.11 QTHAF 30 2.30 2.40 2.14 QTHAZ 32.5 1.00 1.20 1.01
1.74 43% 27% -0.16 -2,650 41% 04% -0.37 -6,069 41% 07% 0.63 -1,589 38% 19% 0.39 -1,308
IBM 90.30 15% *** IBMMO 75 0.05 0.10 0.00 IBMMR 90 2.15 2.20 1.60 IBMAR 90 2.70 2.70 2.13 IBMAA 105 0.05 0.10 0.00
1.91 28% 36167% 0.00 -5,816 S 21% 34% -0.45 -532 18% 27% 0.55 -505 22% 1586% 0.00 -6,166
ICOS 44.80 50% * IIQMG 35 0.30 0.40 0.24 IIQMI 45.00 2.75 2.95 3.16 IIQAI 45.00 2.50 2.70 3.07 IIQAK 55.00 0.20 0.35 0.52
1.3 56% 27% -0.06 -3,960 47% -07% -0.47 1,174 41% -12% 0.53 669 B 42% -33% 0.14 1,438
IMCL 41.49 52% *** QCIMF 30 0.35 0.50 0.09 QCIMH 40 2.90 3.20 2.24 QCIAH 40 4.40 4.70 3.83 QCIAJ 50 1.25 1.30 0.68
1.96 S 74% 269% -0.03 -1,186 69% 30% -0.38 -457 64% 15% 0.62 -527 S 66% 83% 0.18 -533
Fig. 1 Model Output in Excel File Format

Due Diligence Questionnaire

F I R M B A C KG RO U N D
Please attach bio for the principals of the Firm.

Jonathan Kinlay
Jonathan Kinlay is the chief executive of the investment consultancy Investment Analytics, which he founded in 1998, and a
general partner of the Proteom Fund, founded in 2004. In 2002 Mr. Kinlay founded Caissa Capital LP, a quantitative
derivatives hedge fund that uses the Investment Analytics volatility arbitrage program as the basis for its investment strategies.
Mr. Kinlay has consulted with leading investment funds and financial institutions in Europe and North America for over 20
years in the areas of financial engineering, investment strategy, quantitative analysis and risk management, initially with NatWest
and Chase Manhattan banks and subsequently as the head of quantitative analytics and proprietary trading in a European hedge
fund, where he traded US and European equities, fixed income and OTC & exchange traded derivatives. Mr. Kinlay has
lectured at postgraduate level at a number of leading universities including, Carnegie Mellon University in New York, and
Oxford, Cambridge and Reading Universities in the UK. His first degree is in Mathematics and Statistics from University of
Bristol. He also graduated with an MSc in Statistics from University of Sheffield and an MBA from the London Business
School and Stern School of Business, New York University.
Please provide referees for the principals of the Firm.
Mr. Niall Lawlor

Head of Municipal Bond Sales/Trading
Morgan Stanley
1585 Broadway
New York
NY 10036
Tel: (212) 762-8139
Email: niall.lawlor@morganstanley.com
Prof. Haftan Eckholdt

CEO, Daytrends Inc
10 Jay Street
Brooklyn,
New York 11201
Tel: (718) 522-3170
Email: Haftan@daytrends.com
Mr. Paul Dietrich

CEO, Nye Parnell & Emerson Capital Management, Inc.
1630 Duke Street, Suite 200
Alexandria, VA 22314
800-416-2053 toll-free
703-683-8575 main
703-683-9083 fax
Email: dietrich@etoncourt.com
Describe the advisory firm’s history:

Investment Analytics (Bermuda) Ltd is an investment strategy consulting firm formed by Mr Jonathan Kinlay in 2003,
which succeeded a partnership of the same name that existed since 1998. Investment Analytics provides independent
research focusing on applications of sophisticated mathematical and financial modeling techniques to problems of strategy
development and repair, performance analysis and risk management for clients in the investment management industry in
Europe and North America. Further details of the firm and its services is to be found on the web site: www.investment-
analytics.com.
Beginning in 1998 Mr Kinlay researched and developed a number of sophisticated econometric models used for measuring
and forecasting the volatility of financial processes such as asset returns. In 2002 Mr Kinlay formed a hedge fund, Caissa
Capital LP, and invited two associates to join him in that venture as partners. The models were licensed to Caissa Capital to
provide the basis for the firm’s volatility arbitrage strategies. The strategies proved very profitable and assets under
management quickly grew to over $160M. Having established the underlying concept within Caissa Capital, Mr Kinlay has
decided to focus on his work in Investment Analytics and to start a new hedge fund, the Proteom Fund.
Describe the advisory firm and its structure:

Investment Analytics (Bermuda) Ltd. is a Bermudan based limited company. The firm’s Directors are Jonathan Kinlay and James
Keyes. The firm was established in 2003, although a partnership of the same name existed from 1998.
Who were the founders?

Mr. Jonathan Kinlay.
Are there any new principals or owners since founding? If Yes, who? No.
Who owns the firm? Are any owners not active in the firm’s management?
Mr. Jonathan Kinlay is the owner of the firm and he is active in the firm’s management.
Does the Firm have any branch offices/locations/operations? What activities are conducted at them? The firm is located in
Bermuda. It conducts research activities there and in other locations in the USA and Europe.
Do the principals engage in any business activities outside of the firm?
Jonathan Kinlay is the General Partner of the Proteom Fund, a quantitative equity hedge fund. based in New York and Bermuda.
Who is primarily responsible for managing research analysts? How many analysts are there?
At present, Mr. Jonathan Kinlay is responsible for the ongoing research effort.. Consultants are employed to assist in the development of
new technologies.
Who is primarily responsible for managing operations? How many operations people are there? Mr. Kinlay is responsible
for operations. Dr Christopher Rosevear is also employed in operations.
What is the total number of firm employees? How many are dedicated full time to the Strategy?
At present Mr. Jonathan Kinlay is the only employees. All bookkeeping, accounting and administrative work has been outsourced.
How are employees and principals compensated? What percentage of principals’ compensation is salary vs. bonus?
Investment Analytics earns consulting and licensing fees. There is a direct correlation between compensation and authority.
Are any legal or disciplinary actions being taken against the Firm, its affiliates, or its principals? Have any been taken? What
were the outcomes?
There are no pending legal or disciplinary actions being taken against the firm or any of its affiliates or principals. There have been no legal
or disciplinary actions taken against the firm in the past.
MODELING SYSTEM
Who developed the models? When were they developed?

Jonathan Kinlay developed the theory and all of the models in the system in the period from 1998 to 2004.
Who owns the intellectual property?

The entire program, including the modeling system, is the property of Investment Analytics (Bermuda) Ltd, which owns all
of the copyright. The program is in the process of being patented.
Describe the underlying theory behind the modeling system.

The program includes a number of proprietary theoretical concepts developed by Jonathan Kinlay. These include:
• New volatility metric, which is up to three times more efficient than standard estimators.
• Multifactor models of long memory and short term transient volatility processes and their interaction.
• New theoretical framework for modeling skewness and kurtosis in the returns distribution.
• Applications of multivariate factional cointegration to portfolio construction.
• New methodology for model performance assessment.
• Proprietary methodology for regime shift detection.
In addition, the system applies a wide variety of known econometric theory, some of which is described in the paper “Long
Memory and Regime Shifts in Asset Volatility”, published in Wilmott magazine in 2003.
What programming languages are used in the development of the models?

The models were developed in a variety of programming languages, including C, C++, Visual Basic and Ox.
What computer systems are used to run the models?

The modeling system runs on two independent machines each with very fast math processors and large amounts of RAM.
The output is passed to two independent servers, one in the USA and the other in Europe, which mail the trading sheet as
an Excel workbook to a specified recipient list.
Describe the types of forecasting models used in the system.

The system operates on a ground-up approach with several different individual models for every asset in the investment
universe. Each model emphasises different aspects of volatility behavior and will perform best under different market
conditions. The types of model include:
vii. Long memory models that model the important long term serial autocorrelation effects which are pervasive
in asset volatility processes. These models perform best when the behaviour of the process is dominated by
reinforcing trends, such as applied in the period from 1995–1999 and from 2003–mid 2004 in US equity
volatility markets.
viii. Short term models that capture transient mean-reverting behaviour, another important characteristic of
volatility. These models typically give rise to contrarian trading recommendations.
ix. Models that follow the interaction and feedback between the asset returns and volatility processes, which
give rise to skewness and kurtosis in the returns process.
x. Asymmetry models that take account of the tendency of volatility to spike more during market sell-off than
during periods when the market is strong.
xi. Multifactor models that model the interaction of long memory and transient volatility processes.
xii. Markov models that identify different volatility regimes and associated state transition probabilities.
How many models are there in the system?

There are between 4 -6 models for each stock. With 150 stocks in the investment universe, there are in excess of 600
models in total.
What data does the system use? Does the system use fundamental data?
Fundamental data is used only to help in defining and selecting the investment universe. The models themselves use
historical prices to construct asset returns, volatility and correlation series.
Describe the data management system.

The data management system is an automated system that handles the process of downloading and validating stock and
option data for the stocks in the investment universe. Currently around 100,000 data items for an investment universe
comprising 150 stocks in the S&P500 are downloaded at the end of each trading day, including market closing prices for
each stock and options with varying strikes and maturities. The data are subjected to a number of integrity checks prior to
being added to the databases. These are then manipulated by the Model Management System to update the individual
forecasting models.
The data management system is highly robust and operates on two independent servers to ensure redundancy.
Which asset classes have the models been tested on?

The models have been tested on US and European equities, Pacific Rim equity markets, and approximately eleven emerging
markets. Limited tests have been performed in currency and commodities markets. The models performed well in all tests.
Which asset classes could the program be applied to?

The capabilities of the system have been clearly demonstrated in equity markets. It is likely that the system would perform
equally well in currency and commodity markets, but further research and development is required.
What is the role of the Model Management System?

The models are maintained by a Model Management System (“MMS”) that analyses the data processed by the data
management system, updates each of the models, produces current forecasts and evaluations the performance of each of
the models. The MMS rates each model on the basis of approximately 30 different criteria and compares the current
performance of each model with its historical performance, with the performance of other models of the same process and
with the performance of models for other asset processes. The MMS then selects the best models, whose aggregate results
lie in the upper quartile of performance. In this way the system automatically biases volatility forecasts to favour models
best suited to current market conditions, while filtering out models which are currently performing with lower accuracy.
Describe some of the performance criteria used to assess model performance.

There are approximately 30 different criteria used to asses the performance of each model. The Model Management
System uses an adaptive weighting system to evaluate these criteria and judge their relative importance. An overall
performance “score” is produced which is used to compare the performance of each model against its historical
performance and against its peers.
The criteria break down into two broad categories: measures of forecasting performance and measures of statistical
goodness of fit. Both sets of criteria are important, but greater weight is assigned to forecasting performance in assessing
the overall model performance. The single most important model criterion is direction prediction accuracy, as this closely
correlates with strategy performance. The direction prediction criterion measures the ability of the model to forecast the
direction of the underlying process one period ahead. A random predictor would expect to achieve a DP score of 50%.
The Investment Analytics models achieve a DP accuracy level of close to 75%, across all assets and time periods. This
means that, on average, the models correctly predict the future direction of volatility three periods out of four.
The forecasting performance measures include the following:

• Mean Square Error
• Mean Absolute Deviation
• Mean Absolute Percentage Error
• Theil’s U
• Direction prediction
Statistical measures include:

• Likelihood
• Adjusted Coefficient of Determination
• Akaike Information Criterion
• Bayes Information Criterion
• Error skewness
• Error Kurtosis
• Jarque-Bera Normality test
• Box-Pierce portmanteau test
• ARCH-LM test
• Sign Bias test
• Durbin-Watson statistic
What is cointegration?
The concept of cointegration was due to Nobel prize winning economist Clive Granger in the 1990’s. It is best illustrated
by means of an example. Consider the prices series of a spot and futures contract on a commodity such as gold. Both
series are non-stationary – the prices of gold can vary anywhere between $200 and $800 an ounce (or higher). If fact the
series are integrated order 1, meaning that the first difference of each series (i.e. the returns process) is a stationary white
noise process. Non-stationery series are, understandably, very difficult to trade profitably.
Now consider a series consisting of the differential between the spot and futures prices, i.e. the Basis. This too is a
stochastic process, but unlike the price series it is stationary – it fluctuates inside a range. The reason for this behavior is of
course that cash and carry arbitrage obliges the basis to remain within bounds. In this example, we would say that the spot
and future price series are cointegrated order 1. There are two important points to note. The first is that cointegrated
“baskets” such as the Basis in the above example, are inherently more stable, and hence easier to trade, than the underlying
non-stationery price processes. The second point is that cointegration relationships tend to be more reliable than
correlation relationships because they relate to some underlying economic factor (cash and carry arbitrage, in the example).
Hence portfolios constructed using the principles of cointegration will tend to have more reliable risk/return characteristics
than portfolios constructed using classical portfolio theory, which is based on (unstable) correlations.
How is cointegration used in the modeling system?

During the portfolio construction stage the modelling system decides on the amounts of capital to the available arbitrage
opportunities. The system examines the multivariate behaviour of the volatility processes and identifies cointegrated
baskets, comprising long and short volatility positions that typically have more stable risk-returns characteristics than the
individual underlying processes. The procedure is comparable to the mean-variance optimization procedure due to
Markovitz, but is significantly more sophisticated. The resulting baskets or portfolios tend to have more stable and robust
performance characteristics that portfolios constructed in the traditional way using correlations, as the latter are notoriously
unstable, especially during market crashes.
The cointegrated baskets identified by the system as tested by a simulation processes to ensure that their performance
characteristics meet the minimum criteria and behave robustly under varying market conditions. A genetic algorithm is
employed to select the most appropriate baskets for trading.
Describe how volatility forecasts are used to produce trading recommendations.

The system selects the stocks for which the forecasting models are performing at the highest levels and evaluates the
options using the volatility forecasts and proprietary option pricing models. The system then “cherry picks” the best
opportunities where the differential between market and theoretical value exceeds a minimum threshold level., which can be
set by the model user.
Describe the option pricing models are used to evaluate arbitrage opportunities.
The modelling system uses proprietary Monte-Carlo option pricing models which price options based on the forecast asset
volatility over the life of the option. The option models are two factor models (one factor for the returns process, the
second for the volatility process) that take account of volatility skews, kurtosis in the underlying returns distributions as well
as important asymmetry effects in the volatility process itself.
Describe the model output.

The final stage of the modelling process entails the creation and distribution a trading sheet containing the detailed trading
recommendations. The sheet gives the current volatility forecast for every stock in the investment universe, but highlights
only those option trades which meet the pricing differential criterion. . Options that have been selected for purchase (sale)
are highlighted in blue (red), and the sheet gives the market bid and offer prices and the theoretical price based on the
systems volatility forecasts. In addition, the output shows the quantity of options to be bought or sold, the % price
differential and the option delta, so that trades can readily be executed on a market-neutral basis.
Trading sheets are contained in an Excel workbook, which is emailed by an automated email server to a specified list of
email recipients, usually members of the trading and risk management team.
Option Values 03-Dec-03 Expiry: 16-Jan % Cutoff 30% $ Cutoff 0.1

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FCST Spreads Code Jan-04 OTM PUT Code Jan-04 ATM PUT Code Jan-04 ATM CALL Code Jan-04 OTM CALL
Stock Price Vol Model Total B/S Strike Bid Ask Theory B/S Strike Bid Ask Theory B/S Strike Bid Ask Theory B/S Strike Bid Ask Theory
HDI 46.50 19% ** HDIMV 42.5 0.40 0.50 0.12 HDIMW 47.5 2.05 2.20 1.77 HDIAW 47.5 1.10 1.20 0.89 HDIAK 55 0.10 0.01
1.65 S 30% 222% -0.08 -906 27% 16% -0.60 -896 23% 24% 0.40 -1,179 25% -100% 0.01 27,986
HON 29.64 23% ** HONMY 27.5 0.20 0.35 0.21 HONMF 30 1.10 1.20 1.11 HONAF 30 0.70 0.80 0.82 HONAZ 32.5 0.10 0.20 0.17
1.7 27% -03% -0.16 39,080 26% -0.53 20% -03% 0.47 11,718 22% 20% 0.14 -7,656
HPQ 22.41 32% *** HHYMD 20 0.15 0.20 0.18 HHYMX 22.5 0.85 0.90 1.01 HHYAX 22.5 0.75 0.80 0.98 HPQAE 25 0.10 0.15 0.23
1.81 33% -16% -0.14 9,387 29% -11% -0.48 2,416 24% -18% 0.52 1,513 25% -36% 0.18 3,155
IACI 30.96 37% ** QTHMY 27.5 0.45 0.55 0.36 QTHMF 30 1.15 1.25 1.11 QTHAF 30 2.30 2.40 2.14 QTHAZ 32.5 1.00 1.20 1.01
1.74 43% 27% -0.16 -2,650 41% 04% -0.37 -6,069 41% 07% 0.63 -1,589 38% 19% 0.39 -1,308
IBM 90.30 15% *** IBMMO 75 0.05 0.10 0.00 IBMMR 90 2.15 2.20 1.60 IBMAR 90 2.70 2.70 2.13 IBMAA 105 0.05 0.10 0.00
1.91 28% 36167% 0.00 -5,816 S 21% 34% -0.45 -532 18% 27% 0.55 -505 22% 1586% 0.00 -6,166
ICOS 44.80 50% * IIQMG 35 0.30 0.40 0.24 IIQMI 45.00 2.75 2.95 3.16 IIQAI 45.00 2.50 2.70 3.07 IIQAK 55.00 0.20 0.35 0.52
1.3 56% 27% -0.06 -3,960 47% -07% -0.47 1,174 41% -12% 0.53 669 B 42% -33% 0.14 1,438
IMCL 41.49 52% *** QCIMF 30 0.35 0.50 0.09 QCIMH 40 2.90 3.20 2.24 QCIAH 40 4.40 4.70 3.83 QCIAJ 50 1.25 1.30 0.68
1.96 S 74% 269% -0.03 -1,186 69% 30% -0.38 -457 64% 15% 0.62 -527 S 66% 83% 0.18 -533
INVESTMENT STRATEGY
Characterize strategy’s investment style:

Classical economic theory has experienced considerable success over the last fifty years in advancing our understanding of the general
behavior of financial markets. The products of that research, which include CAPM and the Black-Scholes model, have played a central
role in the progress achieved in investment theory during that time. Empirical research over the last fifteen years, however, has brought more
clearly to focus some of the major deficiencies of classical theory. In particular we now know that:
• Asset returns are not normally distributed. Gaussian theory will tend to underestimate the probability of very small, or very
large, movements in the market.
• Asset correlations are highly unstable, especially at times of market stress, when they become increasingly correlated.
Consequently risk management tools such as Value-at-Risk tend to break down during extreme market conditions.
• Volatility is not constant, as envisaged in the Black-Scholes world, but varies over time. There is clear evidence of strong
autocorrelations and long memory effects in asset volatility.
Investment Analytics has developed research tools to enable us to identify opportunities to trade asset volatility at times of favorable
market conditions. Our proprietary asset allocation methodology combines elements of portfolio optimization and risk management theory
that enable us to create portfolios capable of generating consistent, high returns, with minimal drawdown, even at times of high market
stress and regardless of the direction of the overall market.
In summary our investment approach is:
1. Asset Class: Equity Options
2. Strategy: Volatility Arbitrage
3. Methodology: Econometric Modeling
4. Style: Market Neutral
The Strategic Volatility Strategy exploits short-term arbitrage opportunities in equity options to deliver very high rates of return. The
strategy employs a statistical arbitrage style of trading and is a classical long and short hedge fund portfolio. The difference is that it is
long and short volatility instead of equities.
The investment universe comprises options on around 150 leading equities that are members of the S&P 500 Index. These includes many
household names such as BAC, BMY, C, DOW, GE, GM, IBM, JNJ, MMM, MRK, PG and WMT. Investment Analytics has
constructed sophisticated, proprietary volatility models for each of these stocks that enable us to identify short-term opportunities to
buy or sell options that are trading at uneconomic prices. A trade may be executed using any one of a number of possible option
combinations, including verticals, calendars or butterflies, and typically will be initiated with 5 – 50 days to expiration. Some of these
trades are designed to exploit a mismatch between the forecast level of volatility and that priced into the options (the implied volatility). In
other cases the chief intention is to trade the volatility skew. In the majority of cases the trades will be initiated close to delta-neutral and
the strategy seeks to maintain a non-directional, delta-neutral position by selling or buying SPDRs at the close of each trading day.
The strategy also employs sophisticated risk controls to ensure that at all times the account is operating within acceptable Value-at-Risk
limits and that its exposure to extreme market or volatility moves is managed within pre -defined limits.
Briefly describe the strategy conceptually:

The Strategic Volatility Strategy is a volatility statistical arbitrage strategy designed to produce annual returns of 15% - 20%% with a
volatility of 6%-9%.
The pricing of most exchange-traded options is based on variants of the vanilla Black-Scholes model and its extensions. Among the
model’s main shortcomings are the assumptions of Gaussian distributed returns and constant volatility in the underlying. Empirical
studies have demonstrated consistently that returns follow a distribution that is skewed and leptokurtic: markets are more likely to remain
where they are or make a large move than a Normal distribution would suggest. It is evident, too, that volatility is not constant, but
stochastic, and may fluctuate in a wide range depending on general market conditions and firm-specific events. There are several
extensions to Black -Scholes which enable non-Normal returns, stochastic volatility and long memory effects to be incorporated into the
model. Although option prices are typically adjusted to account for the effects of stochastic volatility and non-Gaussian returns, this is
not always the case. According to our analysis, at certain times both put and call options are under- or over-priced by as much as 30%.
Part of what we are seeking to do in our investment strategies is to capture these mis -pricing opportunities.
An important element in the investment strategy is the prediction of future volatility. We know from empirical research that, in addition to
being stochastic, volatility is typically both very volatile and highly persistent. We use these additional characteristics of volatility to improve
investment performance and enhance the risk-reward profile of the basic strategy.
Investment Analytics has developed a proprietary volatility index that measures underlying volatility more accurately and efficiently than
traditional methods. Using proprietary econometric models we are able to correctly anticipate the future direction of volatility an
average of 72%-75% of the time in the universe of stocks and equity indices we analyze, and identify regimes of unsustainably high or low
levels of volatility with a high degree of accuracy. These additional techniques enable us to select investment opportunities that offer the
greatest risk-reward trade-off.
The Strategy seeks to achieve its target returns by trading volatility portfolios comprising long and short positions in options on major
listed equities and indices, primarily the DOW 30 and the 150 largest cap SP500 index stocks. The strategy resembles a traditional
long/short equity hedge fund strategy, with the attendant benefits of risk reduction through diversification. We supplement this with
hedging mechanisms that are specifically designed to protect the portfolio in the event of a market crash. The result is a portfolio
producing high risk-adjusted rate of return with very stable performance characteristics.
The Strategic Volatility Strategy is based on certain statistical properties of volatility processes that render them more amenable to econometric
modeling than asset returns processes. Specifically, volatility processes exhibit 'long memory' behavior in which events affecting the series
today continue to affect it for many months into the future. In principle, this makes volatility more easily forecastable. Our quantitative
methodology identifies volatility processes that are co -integrated (i.e. that tend to vary together in a stable pattern) and applies sophisticated
econometric models to produce volatility forecasts that are then fed into our option pricing models. Sophisticated genetic algorithms are
then used to construct volatility portfolios that have appropriate risk-return characteristics. The final step in portfolio construction is to
overlay an optimal hedge that protects the portfolio against extreme market moves. The hedge is constructed using CrashMetrics®, a
proprietary risk management technology.
The investment universe comprises options on around 150 leading equities that are members of the S&P 500 Index. These include many
household names such as BAC, BMY, C, DOW, GE, GM, IBM, JNJ, MMM, MRK, PG and WMT. Investment Analytics has
constructed sophisticated, proprietary volatility models for each of these stocks that enable us to identify short-term opportunities to
buy or sell options that are trading at uneconomic prices. A trade may be executed using any one of a number of possible option
combinations, including verticals, calendars or butterflies, and typically will be initiated with 5 – 50 days to expiration. Some of these trades
are designed to exploit a mismatch between the forecast level of volatility and that priced into the options (the implied volatility). In other
cases the chief intention is to trade the volatility skew. In the majority of cases the trades will be initiated close to delta -neutral and the
strategy seeks to maintain a non-directional, delta-neutral position by selling or buying SPYDRs at the close of each trading day.
The strategy also employs sophisticated risk controls to ensure that at all times the account is operating within acceptable Value-at-Risk
limits and that its exposure to extreme market or volatility moves is managed within pre -defined limits.
Discuss the investment process/strategy.

The trading universe consists of options in the nearest two months in approximately 150 stocks of the S&P500 index, together with the
S&P500 and QQQ indices.
Data comprising closing market prices and risk parameters are downloaded overnight and analyzed by the modeling systems. A
number of forecasting models are applied to each stock or index in the investment universe, which vary both in terms of forecast
frequency and in the emphasis given to individual aspects of volatility behavior such as long-term memory or short-term memory,
volatility correlation, volatility asymmetry and the volatility of volatility (kurtosis). A model management system continuously evaluates
each model on approximately 20-30 performance criteria and weights the forecasts according to current performance.
Using these volatility forecasts, the modeling systems then seek to identify risk arbitrage opportunities comprising options which are
substantially under-priced or over-priced, on the basis of proprietary option pricing models. These arbitrage opportunities are
identified in an electronic trading sheet which is routed to the trading system for review by the trading team prior to execution.
Typically 50-60 arbitrage opportunities are identified in each daily trading sheet. These arbitrage opportunities are used to construct the
volatility portfolios incrementally each day. Volatility portfolios are consequently widely diversified, not only with regard to the number
of stock in which positions are held, but also with regard to option expiration, strike and entry point. This serves to mitigate the stock-
specific volatility risk in the portfolio of each of the Funds. As a consequence, the number of positions in a given portfolio, as well as
its average tenor, will vary over the course of time as existing positions expire and new positions are added.
Since the profitability of the strategies is dependent upon the differential between the strategies’ view of volatility and that held by the
market (as expressed by option implied volatility), it is important that the majority of the positions in the portfolio are held until option
expiration. Consequently, we are attentive to the issue of hedging the portfolio risk over the expiration cycle, and in particular to
maintaining market neutrality. At the end of each day, the inventory of current positions is loaded automatically into the risk
management system for analysis. A daily risk analysis is produced several hours before the start of each trading day which seeks to
identify the Value-at-Risk (VaR) in the existing volatility portfolio of each Series Fund and each of its constituent elements. Positions
which may be contributing significantly to the total VaR, or which have low or negative expected return, are marked for individual
hedging using underlying stocks, or may be liquidated prior to expiration. The risk management system also seeks to identify an excess
or deficit in the overall portfolio deltas, which are then hedged at the start of the trading session using a combination of underlying
stocks and SPYDRS (as a market proxy). The risk system also evaluates the Gamma, Theta and Vega risk of the portfolio, and
performs stress tests to assess the exposure to crashes either in the overall market or in market volatility, or both.
What opportunities are being exploited? The Strategy takes arbitrage positions in options on our universes of 150 SP500 stocks
which, based on our valuation models, are mis-priced by minimum of 30% (average 55%). These opportunities typically arise from
the hedging and speculation activities of market participants for whom derivatives are of secondary concern, including equity portfolio
managers, market timing strategists, and those pursuing yield enhancement strategies such as covered call writing.
Which market environment does this strategy perform well/poorly? For the Strategy to perform it we requires either (a) a wide
divergence of views as to the level of future volatility in universe of stocks we trade or (b) a consistent, but incorrect, view of future
volatility. The first of these situations is the normal state of volatility markets. The second arises from time to time and can be highly
profitable for our strategy (for example in Feb 02).
The strategy would perform poorly in a situation where the market held a consistent, correct view about future volatility in a large
proportion of stocks in our investment universe. Such a situation has arisen in the past in currency markets during Euro convergence,
but is highly unlikely to arise in equity markets.
Describe the idea generation process: The process of identifying arbitrage opportunities is entirely automated and model-driven. The models
identify 50-60 potential investment opportunities each day in options which are under- or over-priced by 30% or more. Co-integration analysis is
used to identify how these potential trades should be combined to create volatility baskets with stable risk-return characteristics which meet our
investment objectives. Our overall portfolio is constructed using these volatility baskets.
Discuss the main drivers of performance and risk of the strategy:

The main drivers of performance are:
• Divergences of views on future volatility
• The volatility of volatility (kurtosis)
• Price insensitivity of market participants who use options for hedging and speculation.
• Note that neither the level of the market nor the level of market volatility is a driver of performance.
The main drivers of risk are:
• Gamma
• Liquidity
• Event risk
Describe why the strategy should be expected to generate excess returns over time:
In recent years many important discoveries have been made in the study of volatility. Only in the past year has “Volatility” become a
media buzzword. As a niche area of the marketplace, it has been slow to attract the attention and resources of the powerhouse firms on
Wall Street. This represents both uncharted territory and opportunity for those with the tools to exploit them.
The research team at Investment Analytics believes this creates the opportunity for generating alpha for a number of years to come.
However, it will be important to keep a vigilant eye on theoretical discoveries in the area of volatility. In order to maintain the Investment
Analytics advantage, it will be incumbent upon the research team to incorporate worthwhile discoveries into existing models and
strategies. Practical considerations are keeping pace with constantly improving execution platforms and technologies as well as the
structural changes in the US options markets. As with any financial strategy, success will encourage others to devote talent and resources.
Over time, the existing marketplace will either:
a. have to expand to accommodate the new entrants
b. have narrowing spreads (edge)
c. squeeze out less talented entrants
Investment Analytics management foresees this process as taking a minimum of three to five years. The most likely scenario by that
time is a recovering stock market, leading to expanding marketplace [there are already signs of increased public participation (retail)
returning to the options market. In addition, a rising market tends to lead people away from statistical based strategies and back to the realm
of directional and momentum strategies. Therefore it is quite possible the Investment Analytics volatility arbitrage program will be very
viable over the medium to long term.
Describe the investment objectives of the strategy (return, risk, correlation, other):
The Strategic Volatility Strategy is a volatility statistical arbitrage strategy designed to produce annual returns of 15% - 20%% with a
volatility of 6%-9%%. The strategy seeks to achieve its target returns by trading volatility portfolios comprising long and short positions
in options on major listed equities and indices, primarily the DOW 30 and the 150 largest cap SP500 index stocks. The strategy resembles a
traditional long/short equity hedge fund strategy, with the attendant benefits of risk reduction through diversification. We supplement
this with hedging mechanisms that are specifically designed to protect the portfolio in the event of a market crash. The result is a
portfolio producing high risk-adjusted rate of return with very stable performance characteristics.
The Strategic Volatility Strategy is based on certain statistical properties of volatility processes that render them more amenable to
econometric modeling than asset returns processes. Specifically, volatility processes exhibit 'long memory' behavior in which events
affecting the series today continue to affect it for many months into the future. In principle, this makes volatility more easily forecastable.
Our quantitative methodology identifies volatility processes that are co -integrated (i.e. that tend to vary together in a stable pattern) and
applies sophisticated econometric models to produce volatility forecasts that are then fed into our option pricing models. Sophisticated
genetic algorithms are then used to construct volatility portfolios that have appropriate risk-return characteristics.
What are the strengths and weaknesses of your investment strategy?

Much of the theory that Investment Analytics employs has only been developed since 1996. Many earlier important works were either
ignored, or not fully appreciated. Investment Analytics has developed proprietary models that embrace and combine these
technologies with their own ideas, to develop a unique approach in a niche market.
Investment Analytics also enjoys the advantage of being able to correctly predict the direction of volatility in the underlying assets, 72%-
75% of the time. This is combined with portfolio optimization, stringent risk management and low cost execution.
What is the universe of securities considered for trading?

The portfolio comprises exchange-traded options on major indices and on large-cap stocks with liquid options markets, defined as assets
on which there is sufficient liquidity to trade at least 1,000 options. The majority of stocks whose options traded are DOW and
S&P500 index constituents. Our investment universe includes the leading companies from virtually every industrial sector, from capital
goods to pharmaceuticals. Some assets we trade only from the short or long side, but the majority we take either long or short positions
depending on market conditions and our model projections, which may vary from month to month. In general the fund will have short
positions in around 400-600 stock or index options and an equal number of longs. All investments are executed as long or short
positions in at-the- money straddles or butterflies, typically with 30 – 60 days to expiration.
How many investments are used on the portfolio’s long side and short side?
A typical portfolio at present contains 400-600 positions. The Strategy does not have a long volatility or short volatility mandate. In any
given period of time, the portfolio can lean as high as 70% to 30% in either direction. Historically the portfolio has shown an
approximate 60% short volatility bias.
What is the range of market capitalization of positions and the liquidity of investment positions?
The underlying equities are household names (i.e. IBM,GE,GM, MRK etc) that are either in the S&P top 200, or are number 1, 2 , or 3
in their industry sector. The universe of securities that is traded is very liquid.
What is the maximum allowed single position size by percent of NAV? Typically no
more than 4% of available capital is allocated to a single entity.
What is your target long/short/cash position as a percentage of NAV?

Investment Analytics does not have a long volatility or short volatility mandate. In any given period of time, the portfolio can lean as
high as 70% to 30% in either direction. Historically the portfolio has shown an approximate 60% short volatility bias.
What is your average holding period for longs and shorts? Does it differ for winning or losing positions?
The average holding period for both longs and shorts is 32 days.
What are your criteria for entering new trades?

All new trades are generated by proprietary mathematical quantitative models on a daily basis. The models generate volatility forecasts and
produce optimized portfolios. Capital is allocated by using a portfolio optimization model that studies correlations between the
different volatilities. Monte Carlo simulations with risk parameters and capital allocation guidelines are run to determine which portfolio
offers the highest risk adjusted rate of return. No more than 4% of any portfolio is allowed to one individual position. Each portfolio is
reviewed
by the investment committee prior to implementation. These portfolios are then executed efficiently and at the lowest possible cost in
the US listed options market.
What are your criteria for exiting trades?
The criteria are:
1. The positions have become a negative contributor to Value-at-Risk.
2. The expected value of the position has been fully extracted.
3. News event in the horizon related to the position provides an undue reason to believe there will be a problem.
What is your edge versus other advisors using similar strategies?

Investment Analytics enjoys the advantage of being able to correctly predict the direction of volatility in the underlying assets, 72%-
75% of the time. This is combined with portfolio optimization, stringent risk management and low cost execution. Investment
Analytics also enjoys the combination of superior proprietary mathematical option pricing models, and risk management systems,
developed by leading reseeachers in the field and successful money management and trading professionals with proven track records.
How does the fund differentiate itself from others in its strategy?
Much of the theory that Investment Analytics employs has only been developed since 1996. Many earlier important works were either
ignored, or not fully appreciated. The partners have developed proprietary models that embrace and combine state-of-the-art
technologies with their own ideas, to develop a unique approach in a niche market. These proprietary models combined with over 20 years
of money management experience afford Investment Analytics the advantage over its peers.
What benchmark do you feel is most appropriate against which to measure performance? Why?
There is no benchmark that is appropriate for this strategy. The strategy has high turnover, high leverage and is aggressive.
In which type of markets or situations does your strategy perform best/worst?
The best market environment for Investment Analytics is market in which participants expressed a wide divergence of views on future
volatility. These conditions, which typically apply, give rise to a continuous flow of opportunities where implied volatilities are mis-
priced relative to the actual volatility in the marketplace.
The most challenging market in an absolute sense would be a completely static market where the world was in total agreement across
the board on how much range the underlying stocks should have (actual volatility) and accurately priced the options (implied volatility)
accordingly. Such a market would be efficient and therefore lack the pricing discrepancies that create our opportunities and
consequently our returns.
STRATEGY PERFORMANCE
Strategic Volatility Strategy - Summary Performance

As of most recent calendar month end: (Figures reported below are as of 1st July, 2004)
Year-to-Date Return (gross): 12.52% Since Inception Return (gross): 19.47%
Total Months Since Inception: 21 ITD Annualized Daily Std Deviation: 6.98%
% Positive Months Since Inception: 66% ITD Sharpe Ratio: 1.32
Annualized alpha vs. S&P: 10.43% Correlation to S&P: -0.04
AUM (this strategy): $126.2MM Firm-Wide AUM: $159.5MM
Volatility Opportunity Strategy- Summary Performance

As of most recent calendar month end: (Figures reported below are as of 1st July, 2004)
Year-to-Date Return (gross): 8.99% Since Inception Return (gross): 1,853.39%
Total Months Since Inception: 21 ITD Annualized Daily Std Deviation: 70.94%
% Positive Months Since Inception: 81% ITD Sharpe Ratio: 6.27
Annualized alpha vs. S&P: 166.429% Correlation to S&P: 0.04
AUM (this strategy): $13.3M Firm-Wide AUM: $159.5M
Do you expect the strategy’s performance going forward to differ from prior performance? Why? “
In recent years many important discoveries have been made in the study of volatility. Only in the past year has “Volatility” become a media
buzzword. As a niche area of the marketplace, it has been slow to attract the attention and resources of the powerhouse firms on Wall
Street. This represents both uncharted territory and opportunity for those with the tools to exploit them. The management team at
Investment Analytics believes this creates the opportunity for generating alpha for a number of years to come. However, it will be
important to keep a vigilant eye on theoretical discoveries in the area of volatility. In order to maintain the Investment Analytics advantage,
it will be incumbent upon the management team to incorporate worthwhile discoveries into existing models and strategies. Practical
considerations are keeping pace with constantly improving execution platforms and technologies as well as the structural changes in the US
options markets. As with any financial strategy, success will encourage others to devote talent and resources. Over time, the existing
marketplace will either a) have to expand to accommodate the new entrants, b) Spreads (edge) in the marketplace will narrow, or c) The less
talented entrants will be squeezed out and move on to other areas. Investment Analytics management foresees this process as taking a
minimum of three to five years. The most likely scenario by that time is a recovering stock market, leading to expanding marketplace [there
are already signs of increased public participation (retail) returning to the options market]. In addition, a rising market tends to lead people
away from statistical based strategies and back to the realm of directional and momentum strategies. Therefore it is quite possible the
Investment Analytics volatility arbitrage strategy will be quite viable for the foreseeable future.
What drives the volatility of your strategy?

The volatility of the strategy is a direct derivative of the difference between the model generated volatility and the actual volatility.
What steps do you take to reduce volatility? N/A
What is the correlation of your strategy with managers implementing a similar strategy? We believe this to be a
unique strategy.
How many days per month on average do you generate a positive return? On average the
portfolio generates positive return about 65% of the month.
What is the highest number of days in a month you would expect to show negative returns? We expect the highest
number of negative return days in a month to be 6 out of 20.
How long did it take you to recover from the largest peaks to valley drawdowns?
Draw down ______ Start ___________ Bottom _________ Full Recovery______________ Reason
-5.09% Dec-03 Feb-04 3 months See details below
How volatile is the strategy relative to its peers?

The volatility of the fund will be commensurate with its return.
Do you expect to turn a profit in all positions?

While the investment advisor expects to turn a profit in all positions, it has been less than perfect. The Strategy definitely does not turn
a profit on every issue. Several issues in any given portfolio may act as nothing more than a hedge for other higher profit potential
aspects of the given portfolio. The losses and gains in the Investment Analytics portfolio are spread over a broad range of issues.
How often do a few positions account for most of the returns of the strategy on any given day? Some issues seem to have
ongoing success, while other issues may perform without distinction for a period and then produce favorable results.
What is the average number of investments in the portfolio? What is the breakdown in terms of long and short?
The average number of positions in a portfolio is 400-600, spread over 100-150 symbols. Investment Analytics does not have a long
volatility or short volatility mandate. In any given period of time, the portfolio can lean as high as 70% to 30% in either direction.
Historically the portfolio has shown an approximate 60% short volatility bias.
Is the fund's investment process easily repeatable or did an isolated incident cause the fund to report good performance?
We have no difficulty producing consistently high returns in every month since Feb 2003. We expect returns to remain consistent
under most market conditions
Provide monthly returns for the strategies which use the Investment Analytics Investment Program.
Caissa Capital Strategic Volatility Fund

Inception: October 2002
Month Gross Gross Cumulative

Year Monthly Since
Returns Oct-02
Oct-02 -1.14% -1.14%
Nov-02
-0.08% -1.21%
Dec-02 1.14%
2.39% 1.14%
Jan-03 2.55% 3.72%
Feb-03
10.53% 14.64%
Mar-03
0.49% 15.21%
Apr-03
-0.71% 14.40%
May-03
-1.44% 12.75%
Jun-03
-0.60% 12.08%
Jul-03
0.37% 12.50%
Aug-03
2.19% 14.96%
Sep-03
-0.18% 14.75%
Oct-03
1.37% 16.33%
Nov-03
2.03% 18.68%
Dec-03
15.22% -1.81% 16.54%
Jan-04
-1.80% 14.44%
Feb-04
1.62% 16.29%
Mar-04
1.82% 18.41%
Apr-04
-0.37% 17.97%
May-04
0.90% 18.87%
Jun-04
2.52% 0.37% 19.47%
Caissa Capital Volatility Opportunity Fund

Inception: October 2002
Month Gross Gross Cumulative

Year Monthly Since
Returns Oct-02
Oct-02 -0.93% -0.93%
Nov-02 0.29% -0.64%
Dec-02 8.52% 9.22% 8.52%
Jan-03 -6.93% 1.00%
Feb-03 151.74% 154.26%
Mar-03 28.28% 226.17%
Apr-03 17.26% 282.48%
May-03 16.23% 344.56%
Jun-03 47.75% 556.82%
Jul-03 19.89% 687.48%
Aug-03 52.04% 1097.28%
Sep-03 11.23% 1231.71%
Oct-03 26.31% 1582.07%
Nov-03 17.55% 1877.28%
Dec-03 -9.35% 1692.35%
1551.58%
Jan-04 -3.84% 1623.61%
Feb-04 8.43% 1768.93%
Mar-04 3.51% 1834.52%
Apr-04 0.30% 1838.33%
May-04 0.61% 1838.94%
Jun-04 0.06% 1839.00%
8.99%
Strategies undertaken by the fund are not intended to track any index. The fund may employ leverage. Past
performance is not necessarily an indicator of future results. Nothing here should be construed as a solicitation of
clients, or as an offer to sell or a solicitation of an offer to invest in the fund. Such activities may be made only
pursuant to a private placement memorandum. As a matter of practice, Investment Analytics (Bermuda) Ltd does
not solicit investments on behalf of any fund. NO REPRESENTATION IS MADE THAT ANY INVESTOR IN
THE PARTNERSHIP WILL OR IS LIKELY TO ACHIEVE RESULTS COMPRABLE TO THOSE SHOWN
OR WILL MAKE ANY PROFIT AT ALL OR WILL BE ABLE TO AVOID INCURING SUBSTANTIAL
LOSSES. While every effort has been made to provide data from sources considered to be reliable, no guarantee
of accuracy is given.

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Business Plan

Investment Analytics is a quantitative

Investment Analytics(Bermuda) Ltd.

© 2005 Investment Analytics - Business Plan 2

© 2005 Investment Analytics - Business Plan 3

(Print Name) ____________________________________

© 2005 Investment Analytics - Business Plan 4

© 2005 Investment Analytics - Business Plan 5

Market: Alternative Investment Management Industry SERVICE FEATURES

Overview: In a field as competitive as investment research,

Competition: The alternative investment industry is rapidly INNOVATION $ 140.00

becoming mainstream. However, requisite experience and

$ 100.00 Vol. Arb. Prog. -Perf.

and support becomes increasingly relevant. FINANCIAL SUMMARY $ 20.00

EBITDA $ (1.51) 10.85 14.17 38.41 82.24

OUR MISSION INFORMATION

In a field as competitive as investment research, genuinely innovative ideas are hard

Investment Analytics was introduced in 1998 as a provider of independent research

© 2005 Investment Analytics - Business Plan 7

Competitive Advantage in Research

Our mission is to enable clients to significantly improve investment returns or reduce

Our consulting work is centered on enabling clients to correctly evaluate performance,

OPPORTUNITY / VALUE PROPOSITION

Our methodology represents a radical departure from traditional methods of research.

© 2005 Investment Analytics - Business Plan 8

Our core value is in providing preeminent investment strategy services in an efficient

PRODUCTS & SERVICES PROVIDED

Volatility Arbitrage Investment Program

The Investment Analytics Volatility Arbitrage Investment Program identifies

© 2005 Investment Analytics - Business Plan 9

Advantages of the Program

In addition to our Volatility Arbitrage Investment Program, Investment Analytics

Strategy Development: We assist clients in developing new in-house strategies,

Strategy Repair: We assist clients in diagnosing performance-related problems

Performance Evaluation: We assist clients in evaluating the performance

© 2005 Investment Analytics - Business Plan 10

Training: The principals of Investment Analytics have extensive experience

© 2005 Investment Analytics - Business Plan 11

© 2005 Investment Analytics - Business Plan 12

Management expects that as a result $ 140.00

of the implementation of this plan $ 120.00

there will be a steady buildup of $ 100.00 Vol. Arb. Prog. -Perf.

revenues from the different income $ 80.00

Income will grow with the increase of $ 40.00

AUM (Assets Under Management.) $ 20.00

for the Volatility Arbitrage Program. $-

(See Table 3 below). See Appendix

Table 3. Income Forecast Projection

2005 2006 2007 2008 2009

Vol. Arb. Prog. -Mgt. $ 1.00 3.11 7.76 13.80 23.16

Vol. Arb. Prog. -Perf. $ 2.27 17.13 19.39 43.51 86.08

Consulting & Other $ 0.33 2.02 2.72 5.73 10.92

Total Income $ 3.60 22.26 29.87 63.04 120.16

Net Earnings - Annual

We expect to make EBITDA of US$ $ 70.00

82.24 Millions in 2009. (See Appendix $ 60.00

1 and Table 4 below). By the second

achieving positive net earnings. Our $ 20.00

cost of sales will be minimal on any $ 10.00

services we provide to our clients, $-

© 2005 Investment Analytics - Business Plan 13

Table 4. Profits in Years One to Five

Total Income $ 3.60 22.26 29.87 63.04 120.16