Returns to Styleusing Style Research’s

Markets Analyzer

South Korea

End February 2011

International Experience

• Style Investing works• Value and Small Cap works long term• Best Value Markets – Japan & 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 last 10 years – 5.0% pa xs return

• Mid cap performs better than large cap– Unlike 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 sector adjustment– Factor screen within sectors– Eliminates sector bias

• Rebalanced every 6 months– Repriced every month– Includes dividends

Value

Book Value per Share

Dividend Yield

Earnings per Share to Price

Cashflow per Share to Price

Sales per Share to Price

EBITDA to Price

Growth

From September 2002 From September 2002

Return on Equity

Growth in Earnings per Share

Income to Sales

Sales Growth

IBES 12 month Forward Growth in Earnings per Share

From September 2002

IBES FY1 Earnings Revisions

From September 2002

Other

Market Cap

Beta

Momentum 6 months

Momentum 12 month

Quality

From September 2002

Low Accruals

Debt to Equity

Stability of Earnings Growth

Sustainable Growth Rate

Stability of Sales Growth

Stability of IBES 12 mth Growth Forecast

From September 2002

Returns to Style – last 10 yearsQuality and Value works!

SA, annualised

10 year XS returns

Weight: Market Cap, Rebal 6 mths

5.0% pa

Weight: Market Cap, Rebal 3 mths

6.7% pa

Weight: Earnings, Rebal 6 mths

11.7% pa

Comparison

Overview

• Value works long term– like in other markets– Sales to Price best last 10 years – 5.0% pa xs return

• Mid cap performs better than large cap– Unlike 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