Operating Earnings (OEY) Using price to earnings ratio to value has proven to be one of the most successful selection tools. By inverting the ratio to look at earnings to price, also termed earnings yield, users can evaluate companies with either positive or negative earnings. In April, 1997 Ford tested the performance of earnings yields based on various measures including normal, current, Ford’s adjusted operating, and estimated earnings for the current fiscal year and the next fiscal year. The best performance came from the operating earnings for the last 3 quarters and the current quarter estimate. Operating Earnings Yield is like yield in that a higher value is considered better and a lower figure indicates an overvalued stock. Negative earnings companies have negative Operating Earnings Yields.

Ford Operating Earnings Yield Model (OEY) Decile Excess Returns & Std. Dev. (%) vs. Ford Universe 12/08 to 12/13

25.0

20.0

15.0

10.0 Universe Annualized Return = 27.8%

Universe Annualized Standard Deviation 5.0 = 21.5

0.0

-5.0 Excess Returns & Std. Dev. (%) Dev. &Std. Returns Excess -10.0

-15.0 Decile Decile Decile Decile Decile Decile Decile Decile Decile Decile 1 2 3 4 5 6 7 8 9 10 Excess Return 14.0 1.8 -2.6 -4.5 -6.8 -9.0 -4.9 -2.8 -0.2 10.8 Excess Risk 7.5 -0.6 -2.6 -4.0 -4.6 -3.6 -2.3 0.0 4.8 18.7

Top Decile/Group Ford Stock Selection Models 12/08 to 12/13

50 PRICE /VALUE PRICE 45 OEY Excess Return EARNINGS TREND OPERATING EARNINGS YIELD 40 Top Decile vs. VALUE MOMENTUM Ford Universe (%) EARNINGS MOMENTUM RELATIVE EARNINGS TREND 35 SALES MOMENTUM

2009 50.3 30 FORD UNIVERSE SHARE BUYBACK 2010 8.8 25

2011 3.8 EARNINGS VARIABILITY

ANNUALRETURN 20 2012 13.3 QUALITY RATING 15 2013 6.4 S&P 500 10 9 14 19 24 29 34 39 44 ANNUAL STANDARD DEVIATION

Performance is based on ranking the Ford Universe from best to worst for the model shown and dividing it into 10 equal-sized groups each month. The group returns represent equal–dollar investments in each stock each month, with monthly total returns linked to create annual and annualized results. Total returns, which sum month-end percentage price changes and 1/12 of companies’ indicated annual , exclude transaction costs and management fees. The Ford Universe had 4098 companies at the end of 2013.

Quantitative model results can be affected by market environment and are based on historical financial data. Certain material information for a company may not be reflected in models presented. The performance shown is based on large portfolios and may not be effective on every security. There is no assurance that future results will duplicate past results. OEY Decile Performance on Capitalization Sectors

Average Annual Returns (%) 12/08-12/13

Deciles 1 2 3 4 5 6 7 8 9 10 Cap Univ. Large Cap 25.1 22.2 21.6 22.5 21.4 19.3 18.4 17.4 18.0 26.0 21.3 Standard Deviation 24.3 21.0 18.3 17.0 15.7 15.5 16.2 17.1 17.9 23.4 18.1

Mid Cap 32.1 31.8 26.5 22.1 21.1 17.0 18.0 23.3 23.1 28.6 24.6 Standard Deviation 31.4 23.6 21.7 20.4 19.6 18.9 19.4 20.3 22.6 31.0 22.1

Small Cap 39.6 29.8 24.1 26.1 19.4 24.4 23.9 20.7 21.1 22.8 25.5 Standard Deviation 35.1 26.3 22.8 21.8 19.8 22.5 23.8 24.0 27.6 37.2 25.1

Large, Mid and Small Cap constituents include the top 1000, second 1000, and third 1000 companies in the Ford universe of stocks when ranked by .

OEY Top Decile Annual Excess Return by Industry Group 12/08 - 12/13

30

25

20

15

10

5

0

-5

Correlation Coefficients 12/08 - 12/13 Ford Proprietary Models

PVA OEY EMO PRM VMO SHB QTY SMO SED SDR EDV Price/Value (PVA) 1.000 0.650 0.183 0.541 -0.258 -0.630 -0.705 -0.298 0.752 0.644 -0.853 Operating Earnings Yield (OEY) 0.650 1.000 -0.069 0.324 0.029 -0.253 -0.305 -0.318 0.186 0.128 -0.517 Earnings Momentum (EMO) 0.183 -0.069 1.000 0.004 -0.037 -0.308 -0.258 0.173 0.582 0.574 -0.278 Price Momentum (PRM) 0.541 0.324 0.004 1.000 0.376 -0.537 -0.540 0.098 0.363 0.217 -0.572 Value/ Momentum (VMO) -0.258 0.029 -0.037 0.376 1.000 -0.004 0.159 0.336 -0.292 -0.250 0.231 Share Buyback (SHB) -0.630 -0.253 -0.308 -0.537 -0.004 1.000 0.787 -0.226 -0.701 -0.530 0.797 Quality Rating (QTY) -0.705 -0.305 -0.258 -0.540 0.159 0.787 1.000 -0.068 -0.670 -0.488 0.867 Sales Momentun (SMO) -0.298 -0.318 0.173 0.098 0.336 -0.226 -0.068 1.000 -0.077 -0.080 -0.013 Earnings Trend (SED) 0.752 0.186 0.582 0.363 -0.292 -0.701 -0.670 -0.077 1.000 0.887 -0.743 Relative Earnings Trend (SDR) 0.644 0.128 0.574 0.217 -0.250 -0.530 -0.488 -0.080 0.887 1.000 -0.583 Earnings Variability (EDV) -0.853 -0.517 -0.278 -0.572 0.231 0.797 0.867 -0.013 -0.743 -0.583 1.000