Returns to Style using Style Research’s Markets Analyzer Asia Pacific x Japan x China End February 2011

International Experience Style Investing works Value and Small Cap works long term Best Value Markets – China, Japan and Korea Most markets have small cap premium High beta stocks do not generally perform well

Overview Value works long term – like in other markets – Sales to Price best over 10 years – 4.1% pa xs return Small cap performs better than large cap – Like other markets High Beta does not work – like other markets Nothing works consistently – Top 10 inconsistent over different time periods

Approach Benchmark = market – All stocks with market cap of USD 100 million Analysis after country & sector adjustment – Factor screen within countries and sectors – Eliminates country and sector bias Rebalanced every 6 months – Repriced every month – Includes dividends

Value works

Book Value

Dividend Yield

Earnings per Share

Cashflow per Share

Sales per Share

EBITDA to Price

Growth works sometimes

Return on Equity

Growth in Earnings per Share

Income to Sales

Sales Growth

IBES 12 Month Forward Growth in Earnings per Share

IBES FY1 Earnings Revisions 3M Sample

Other

Market Cap

Beta

Momentum 6 months

Momentum 12 months

Quality

Low Accruals

Debt to Equity

Stability of Earnings Growth

Sustainable Growth Rate

Stability of Sales Growth

Stability of IBES 12 mth Growth Forcast

Returns to Style – last 10 years Quality and Value works! SA, annualised

10 year XS returns

Weight: Market Cap, Rebal 6 mths 4.1% pa

Weight: Market Cap, Rebal 3 mths 4.4% pa

Weight: Earnings, Rebal 6 mths 7.9% pa

overview Value works long term – like in other markets – Sales to Price works best over 10 years Small cap works better than large cap – Like other markets High Beta does not work – like other markets Nothing works consistently – Top 10 inconsistent over different time periods – Rebalance and weighting schemes make a difference