Quantitative Process Investing™ is Ativo's application of its DCFROI model and requires:

• Proper identification of cash flows
• Identification of the fundamental discount rate.

Ativo's decades of securities analysis has identified the data transformations that must be applied to GAAP financial statements to convert these statements to cash based statements suitable for application of discounted cash flow analysis. Ativo also identifies the fundamental discount rate applicable to a security based on the company's size, leverage, risk, industry and other factors.

The role of the Chief Investment Officer is to select the rules and then permit the rules to select the stocks. Once data has been standardized, Ativo applies decision rules for portfolio investment. This disciplined approach affirms that there is a fundamental theory to investment that can be quantitatively analyzed so as to avoid decision errors and behavioral biases. This discipline means that Ativo:

• Won't buy overvalued stocks
• Won't fall in love with companies
• Won't override the model

There is only one exception to the last premise. Prior to actual purchase the Chief Investment Officer will review the security selected to ensure that nothing negative has occurred that is not reflected in the reported data. If there is negative information, the CIO can exclude a security from purchase, but may never add a security that has not been model selected.

The process incorporates feedback loops for process analysis and improvement and does not use backtesting. Ativo's methodology is premised on the use of sound financial theory to develop rules rather than using computational power to tease out models to fit data.

This "total-system" approach results in the selection of undervalued, growing firms.