Returns to Styleusing Style Research’s

Markets Analyzer

Asia x Japan x China A

End March 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

• Use Style Research’s Market Analyzer• 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

Book to Price

Dividend Yield

Earnings Yield

Cashflow Yield

Sales to Price

EBITDA to Price

Growth

Return on Equity

Growth in Earnings per Share

Income to Sales

Sales Growth

Forecast Earnings

Forecast Earnings Revisions

Other

Market Cap

Beta

Price Momentum – 6 months

Price Momentum – 12 months

Quality

Low Accrual

Debt to Equity

Stability of Earnings Growth

Sustainable Growth Rate

Stability of Sales Growth

Stability of Forecast Earnings

Returns to Style – last 10 yearsValue and Quality works!

SA, annualised

10 year XS returns

Weight: Market Cap, Rebal 6 mths

Xs Return 4.1% pa

T/over 35% pa

Weight: Market Cap, Rebal 3 mths

Xs Return 4.4% pa

T/over 52% pa

Weight: Earnings, Rebal 6 mths

Xs Return 8.7% pa

T/over 74% pa

Comparison

XS Monthly Return

XS 3 Monthly Return

Sales to Price XS Return 12 month Forecast

overview

• Value works long term– like in other markets– Sales to Price 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