Research Affiliates Fundamental Index®: Performance

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Our original research found that a Fundamental Index® portfolio outperformed a comparable capitalization-weighted portfolio of U.S. large company equities by approximately 2% annually over the 43 years tested. Subsequent research discovered the Fundamental Index methodology advantage extended to U.S. small companies, international equities, emerging markets, U.S. corporate debt, and REITs.

FTSE RAFI® Equity Index Series*

Total Return as of 12/31/11	Bloomberg Ticker	YTD	12 Month	Annualized 3 Year	Annualized 5 Year	Annualized 10 Year	Annualized 10 Year Volatility
FTSE RAFI® All World 3000¹	TFRAW3	-9.06%	-9.06%	14.89%	0.05%	8.73%	19.17%
MSCI All Country World²	GDUEACWF	-6.86%	-6.86%	12.60%	-1.41%	4.76%	17.47%
FTSE RAFI® Developed Ex US 1000³	FRX1XTR	-14.35%	-14.35%	9.88%	-3.15%	7.25%	20.51%
MSCI World ex US Large Cap⁴	MLCUWXUG	-11.46%	-11.46%	8.50%	-3.60%	5.07%	18.67%
FTSE RAFI® Developed ex US Mid Small⁵	TFRDXUSU	-12.15%	-12.15%	18.13%	0.79%	13.54%	18.95%
MSCI World ex US Small Cap⁶	GCUDWXUS	-15.50%	-15.50%	16.91%	-2.86%	9.82%	20.48%
FTSE RAFI® Emerging Markets⁷	TFREMU	-17.88%	-17.88%	20.88%	5.38%	20.79%	24.75%
MSCI Emerging Markets⁸	GDUEEGF	-18.17%	-18.17%	20.42%	2.70%	14.20%	24.28%
FTSE RAFI® 1000⁹	FR10XTR	0.07%	0.07%	19.46%	1.06%	5.40%	18.29%
Russell 1000¹⁰	RU10INTR	1.50%	1.50%	14.81%	-0.02%	3.34%	16.14%
S&P 500¹¹	SPTR	2.11%	2.11%	14.11%	-0.25%	2.92%	15.93%
FTSE RAFI® US 1500¹²	FR15USTR	-5.94%	-5.94%	23.75%	3.05%	9.67%	22.82%
Russell 2000¹³	RU20INTR	-4.18%	-4.18%	15.63%	0.15%	5.62%	21.09%
FTSE RAFI® Europe¹⁴	TFREUE	-12.39%	-12.39%	11.03%	-4.71%	2.66%	19.21%
MSCI Europe¹⁵	GDDLE15	-8.78%	-8.78%	8.04%	-3.75%	1.77%	16.90%
FTSE RAFI® Australia¹⁶	FRAUSTR	-8.70%	-8.70%	8.25%	-1.19%	6.85%	13.17%
S&P/ASX 200¹⁷	ASA51	-10.54%	-10.54%	7.58%	-2.31%	6.15%	13.37%
FTSE RAFI® Canada¹⁸	FRCANTR	-7.88%	-7.88%	15.24%	2.68%	8.18%	14.25%
S&P/TSX 60¹⁹	TX60AR	-9.08%	-9.08%	10.95%	0.88%	6.81%	14.51%
FTSE RAFI® Japan²⁰	FRJPNTR	-19.30%	-19.30%	-2.47%	-12.63%	0.21%	18.51%
MSCI Japan²¹	GDDLJN	-18.59%	-18.59%	-3.60%	-14.27%	-2.23%	18.13%
FTSE RAFI® UK²²	FRGBRTR	-2.65%	-2.65%	12.35%	0.53%	4.93%	17.11%
MSCI UK²³	GDDLUK	-1.79%	-1.79%	12.05%	1.41%	4.12%	15.14%

*Click here to see the complete series.

Russell Fundamental Index® Series*

Total Return as of 12/31/11	Bloomberg Ticker	YTD	12 Month	Annualized 3 Year	Annualized 5 Year	Annualized 10 Year	Annualized 10 Year Volatility
Russell Fundamental Global Index Large Company²⁴	RUFGLTU	-5.90%	-5.90%	14.25%	0.85%	8.89%	17.84%
MSCI All Country World Large Cap²⁵	MLCUAWOG	-6.39%	-6.39%	11.88%	-1.46%	4.17%	17.15%
Russell Fundamental Developed ex US Index Large Company²⁶	RUFDXLTU	-12.75%	-12.75%	8.76%	-1.95%	8.92%	18.92%
MSCI World ex US Large Cap²⁷	MLCUWXUG	-11.46%	-11.46%	8.50%	-3.60%	5.07%	18.67%
Russell Fundamental Developed ex US Index Small Company²⁸	RUFDXSTU	-11.36%	-11.36%	15.82%	-0.10%	12.48%	18.55%
MSCI World ex US Small Cap⁶	GCUDWXUS	-15.50%	-15.50%	16.91%	-2.86%	9.82%	20.48%
Russell Fundamental Emerging Markets²⁹	RUFGETRU	-16.46%	-16.46%	22.65%	6.68%	20.40%	24.54%
MSCI Emerging Markets⁸	GDUEEGF	-18.17%	-18.17%	20.42%	2.70%	14.20%	24.28%
Russell Fundamental US Index Large Company³⁰	RUFUSLTU	2.91%	2.91%	17.31%	1.77%	6.23%	16.77%
Russell 1000¹⁰	RU10INTR	1.50%	1.50%	14.81%	-0.02%	3.34%	16.14%
S&P 500¹¹	SPTR	2.11%	2.11%	14.11%	-0.25%	2.92%	15.93%
Russell Fundamental US Index Small Company³¹	RUFUSSTU	-3.61%	-3.61%	24.02%	4.38%	10.55%	21.50%
Russell 2000¹³	RU20INTR	-4.18%	-4.18%	15.63%	0.15%	5.62%	21.09%
Russell Fundamental Europe³²	RUFEUTE	-10.55%	-10.55%	12.81%	-2.52%	5.46%	18.09%
MSCI Europe¹⁵	GDDLE15	-8.78%	-8.78%	8.04%	-3.75%	1.77%	16.90%

*Click here to see the complete series.

Fixed Income/Alternatives

Total Return as of 12/31/11	Bloomberg Ticker	YTD	12 Month	Annualized 3 Year	Annualized 5 Year	Annualized 10 Year	Annualized 10 Year Volatility
RAFI® Bonds Investment Grade Master³³		8.98%	8.98%	11.51%	7.70%	6.67%	6.06%
ML Corporate Master³⁴	C0A0	7.51%	7.51%	12.14%	6.58%	6.29%	6.24%
RAFI® Bonds High Yield Master³⁵		7.47%	7.47%	24.98%	9.67%	9.32%	10.95%
ML Corporate Master II High Yield BB-B³⁶	H0A4	5.43%	5.43%	20.83%	6.68%	7.75%	9.85%
RAFI US Equity Long/Short³⁷		-5.26%	-5.26%	12.91%	1.58%	5.09%	11.74%
1-Month T-Bill³⁸	GB1M	0.05%	0.05%	0.09%	1.22%	1.76%	0.49%
FTSE RAFI® Global ex US Real Estate³⁹	FRXR	-22.53%	-22.53%	10.75%	-9.85%	7.94%	23.22%
FTSE EPRA/NAREIT Global ex US⁴⁰	EGXU	-18.69%	-18.69%	7.79%	-11.16%	5.47%	20.87%
FTSE RAFI® US 100 Real Estate⁴¹	FRUR	-2.39%	-2.39%	22.45%	-7.75%	4.33%	27.74%
FTSE EPRA/NAREIT United States⁴²	UNUS	3.86%	3.86%	16.08%	-6.37%	4.77%	26.07%

Research Affiliates brings the innovative Fundamental Index concept to the marketplace through strategic affiliations with some of the world’s leading financial institutions. FTSE is the licensor of the FTSE RAFI Index Series. Research Affiliates is the licensor of the RAFI US Corporate Bond Series Index.

See our Publications for more information on the Fundamental Index® concept.

†The material contained in this document is for general information purposes only. It relates only to a hypothetical model of past performance of the Fundamental Index® strategy itself, and not to any asset management products based on this index. No allowance has been made for trading costs or management fees which would reduce investment performance. Actual results may differ. This material is not intended as an offer or a solicitation for the purchase and/or sale of any security or financial instrument, nor is it advice or a recommendation to enter into any transaction. This material is based on information that is considered to be reliable, but Research Affiliates and its related entities (collectively RA) make this information available on an “as is” basis and make no warranties, express or implied regarding the accuracy of the information contained herein, for any particular purpose. RA is not responsible for any errors or omissions or for results obtained from the use of this information. Nothing contained in this material is intended to constitute legal, tax, securities, financial or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this material should not be acted upon without obtaining specific legal, tax or investment advice from a licensed professional. Indexes are not managed investment products, and, as such cannot be invested in directly. Returns represent simulated performance based on rules used in the creation of the index, are not a guarantee of future performance and are not indicative of any specific investment.

The RAFI® US Equity Long/Short Index is calculated by Dow Jones Indexes, the marketing name and a licensed trademark of CME Group Index Services LLC (“CME Indexes”). “Dow Jones Indexes” is a service mark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The RAFI® US Investment Grade Bond Index and RAFI® US High Yield Bond Index is calculated by ALM Research Solutions, LLC. in conjunction with Research Affiliates, LLC. All rights and interests in the RAFI® US Investment Grade Bond Index and the RAFI® US High Yield Bond Index vest in Research Affiliates, LLC. All rights in and to the Research Affiliates, LLC Fundamental Index® concept used in the calculation of the RAFI® US Investment Grade Bond Index and the RAFI® US High Yield Bond Index vest in Research Affiliates, LLC. The above RAFI® indexes are not sponsored or promoted by CME Indexes, ALM Research Solutions, LLC or their respective affiliates.

Neither CME Indexes, ALM Solutions, nor Research Affiliates, LLC make any warranties, express or implied, to any of their customers nor anyone else regarding the accuracy or completeness of any data related to the RAFI® US Equity Long/Short Index, RAFI® US Investment Grade Bond Index, or the RAFI® US High Yield Bond Index. All information is provided for information purposes only. Neither CME Indexes, ALM Solutions, LLC, nor Research Affiliates, LLC accept any liability for any errors or any loss arising from the use of information in this publication.

Russell Investments is the source and owner of the Russell Index data contained or reflected in this material and copyrights related thereto. Russell Investments and Research Affiliates, LLC have entered into a strategic alliance with respect to the Russell Fundamental Indexes. Subject to Research Affiliates, LLC’s intellectual property rights in certain content, Russell Investments is the owner of all copyrights related to the Russell Fundamental Indexes. Russell Investments and Research Affiliates, LLC jointly own all trademark and service mark rights in and to the Russell Fundamental Indexes. Research Affiliates, LLC is the owner of the trademarks, service marks, patents and copyrights related to the Fundamental Index and the Fundamental Index methodology. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination, or redistribution is strictly prohibited. This is a presentation of Research Affiliates, LLC. Russell Investments is not responsible for the formatting or configuration of this material or for any inaccuracy in Research Affiliates’ presentation thereof.

The trade names Fundamental Index®, RAFI®, the RAFI logo, and the Research Affiliates® corporate name and logo are registered trademarks and are the exclusive intellectual property of RA. Any use of these trade names and logos without the prior written permission of RA is expressly prohibited. RA reserves the right to take any and all necessary action to preserve all of its rights, title and interest in and to these marks. Fundamental Index® concept, the non-capitalization method for creating and weighting of an index of securities, is patented and patent-pending proprietary intellectual property of RA. (US Patent No. 7,620,577; 7,747,502; 7,792,719; 7,778,905; 8,005,740; Patent Pending Publ. Nos. US-2007-0055598-A1, US-2008-0288416-A1, US-2010-0191628, US-2010-0262563, WO 2005/076812, WO 2007/078399 A2, WO 2008/118372,EPN 1733352, and HK1099110). Research Affiliates, LLC is an investment adviser registered under the Investment Advisors Act of 1940 with the U.S. Securities and Exchange Commission (SEC).

Definition of Indices:

(1) The FTSE RAFI® All World 3000 Index is a measure of the largest 3,000 companies, selected and weighted using fundamental factors; (sales, cash flow, dividends, book value), across both developed and emerging markets.
(2) The MSCI All Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
(3) The FTSE RAFI® Developed ex US 1000 Index is a measure of the largest 1000 non U.S. listed, developed market companies, selected and weighted using fundamental factors; (sales, cash flow, dividends, book value).
(4) The MSCI World ex US Large Cap Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States.
(5) The FTSE RAFI® Developed ex US Mid Small Index tracks the performance of small and mid-cap companies domiciled in developed international markets (excluding the United States), selected and weighted based on the following
four fundamental measures of firm size: sales, cash flow, dividends and book value.
(6) The MSCI World ex US Small Cap Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of small cap developed markets, excluding the United States.
(7) The FTSE RAFI® Emerging Markets Index comprises the largest 350 Emerging Market companies selected and weighted using fundamental factors (sales, cash flow, dividends, book value).
(8) The MSCI Emerging Markets Index is an unmanaged, free-float-adjusted cap-weighted index designed to measure equity market performance of emerging markets.
(9) The FTSE RAFI® 1000 Index is a measure of the largest 1,000 U.S. listed companies, selected and weighted using fundamental factors; (sales, cash flow, dividends, book value).
(10) The Russell 1000 Index is a market-capitalization-weighted benchmark index made up of the 1,000 highest-ranking U.S. stocks in the Russell 3000.
(11) The S&P 500 Index is an unmanaged market index that focuses on the large-cap segment of the U.S. equities market.
(12) The FTSE RAFI® US 1500 Index is a measure of the 1,001st to 2,500th largest U.S. listed companies, selected and weighted using fundamental factors; (sales, cash flow, dividends, book value).
(13) The Russell 2000 is a market-capitalization weighted benchmark index made up of the 2,000 smallest U.S. companies in the Russell 3000.
(14) The FTSE RAFI® Europe Index is comprised of all European companies listed in the FTSE RAFI® Developed ex U.S. 1000 Index, which in turn is comprised of the largest 1,000 non U.S. listed developed market companies, selected and
weighted using fundamental factors; (sales, cash flow, dividends, book value).
(15) The MSCI Europe Index is a free-float adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe.
(16) The FTSE RAFI® Australia Index is comprised of all Australian companies listed in the FTSE RAFI® Developed ex U.S. 1000 Index, which in turn is comprised of the largest 1,000 non U.S. listed developed market companies, selected and
weighted using fundamental factors; (sales, cash flow, dividends, book value).
(17) The S&P/ASX 200 Index, representing approximately 78% of the Australian equity market, is a free-float-adjusted, cap-weighted index.
(18) The FTSE RAFI® Canada Index is comprised of all Canadian companies listed in the FTSE RAFI® Developed ex U.S. 1000 Index, which in turn is comprised of the largest 1,000 non U.S. listed developed market companies, selected and
weighted using fundamental factors; (sales, cash flow, dividends, book value).
(19) The S&P/Toronto Stock Exchange (TSX) 60 is a cap-weighted index consisting of 60 of the largest and most liquid (heavily traded) stocks listed on the TSX, usually domestic or multinational industry leaders.
(20) The FTSE RAFI® Japan Index is comprised of all Japanese companies listed in the FTSE RAFI® Developed ex U.S. 1000 Index, which in turn is comprised of the largest 1,000 non U.S. listed developed market companies, selected and
weighted using fundamental factors; (sales, cash flow, dividends, book value).
(21) The MSCI Japan Index is an unmanaged, free-float-adjusted cap-weighted index that aims to capture 85% of the publicly available total market capitalization of the Japanese equity market.
(22) The FTSE RAFI® UK Index is comprised of all UK companies listed in the FTSE RAFI® Developed ex U.S. 1000 Index, which in turn is comprised of the largest 1,000 non U.S. listed developed market companies, selected and weighted
using fundamental factors; (sales, cash flow, dividends, book value).
(23) The MSCI UK Index is an unmanaged, free-float-adjusted cap-weighted index that aims to capture 85% of the publicly available total market capitalization of the British equity market.
(24) The Russell Fundamental Global Index Large Company is a measure of the largest companies, selected and weighted using fundamental factors; (adjusted sales, retained cash flow, dividends + buybacks), across both developed and
emerging markets.
(25) The MSCI All Country World Large Cap Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
(26) The Russell Fundamental Developed ex US Large Company is a subset of the Russell Fundamental Developed ex US Index, and is a measure of the largest non-U.S. listed developed country companies, selected and weighted using
fundamental factors; (adjusted sales, retained cash flow, dividends + buybacks).
(27) The MSCI World ex US Large Cap Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of large cap-developed markets, excluding the United States.
(28) The Russell Fundamental Developed ex US Index Small Company is a subset of the Russell Fundamental Developed ex US Index, and is a measure of small non-U.S. listed developed country companies, selected and weighted using
fundamental factors; (adjusted sales, retained cash flow, dividends + buybacks).
(29) The Russell Fundamental Emerging Markets Index is a measure of Emerging Market companies, selected and weighted using fundamental factors; (adjusted sales, retained cash flow, dividends + buybacks).
(30) The Russell Fundamental U.S. Index Large Company is a subset of the Russell Fundamental US Index, and is a measure of the largest U.S. listed companies, selected and weighted using fundamental measures; (adjusted sales,
retained cash flow, dividends + buybacks).
(31) The Russell Fundamental US Index Small Company is a subset of the Russell Fundamental US Index, and is a measure of U.S. listed small companies, selected and weighted using fundamental measures; (adjusted sales, retained cash
flow, dividends + buybacks).
(32) The Russell Fundamental Europe Index is a measure of European companies, selected and weighted using fundamental factors; (adjusted sales, retained cash flow, dividends + buybacks).
(33) The RAFI® Bonds Investment Grade Master Index is a U.S. investment-grade corporate bond index comprised of non-zero fixed coupon debt with maturities ranging from 1 to 30 years issued by publicly traded companies. The issuers
held in the index are weighted by a combination of four measures of their fundamental size—sales, cash flow, dividends, and book value of assets.
(34) The Merrill Lynch U.S. Corporate Master Index is representative of the entire U.S. corporate bond market. The index includes dollar-denominated investment-grade corporate public debt issued in the U.S. bond market.
(35) The RAFI® Bonds High Yield Master is a U.S. high-yield corporate bond index comprised of non-zero fixed coupon debt with maturities ranging from 1 to 30 years issued by publicly traded companies. The issuers held in the index are
weighted by a combination of four measures of their fundamental size—sales, cash flow, dividends, and book value of assets.
(36) The Merrill Lynch Corporate Master II High Yield BB-B Index is representative of the U.S. high yield bond market. The index includes domestic high-yield bonds, including deferred interest bonds and payment-in-kind securities. Issues
included in the index have maturities of one year or more and have a credit rating lower than BBB-/Baa3, but are not in default.
(37) The RAFI® US Equity Long/Short Index utilizes the Research Affiliates Fundamental Index® (RAFI®) methodology to identify opportunities that are implemented through long and short securities positions for a selection of U.S.
domiciled publicly traded companies listed on major exchanges. Returns for the index are collateralized and represent the return of the strategy plus the return of a cash collateral yield.
(38) The 1-Month T-bill return is calculated using the Bloomberg Generic 1-month T-bill. The index is interpolated based off of the currently active U.S. 1 Month T-bill and the cash management bill closest to maturing 30 days from today.
(39) The FTSE RAFI® Global ex US Real Estate Index comprises 150 companies with the largest RAFI fundamental values selected from the constituents of the FTSE Global All Cap ex U.S. Index that are classified by the Industry Classification
Benchmark (ICB) as Real Estate.
(40) The FTSE EPRA/NAREIT Global ex US Index is a free float-adjusted index, and is designed to represent general trends in eligible listed real estate stocks worldwide, excluding the United State. Relevant real estate activities are defined
as the ownership, trading and development of income-producing real estate.
(41) The FTSE RAFI® US 100 Real Estate Index comprises of the 100 U.S. companies with the largest RAFI fundamental values selected from the constituents of the FTSE USA All Cap Index that are classified by the Industry Classification
Benchmark (ICB) as Real Estate.
(42) The FTSE EPRA/NAREIT United States Index is a free float-adjusted index, is a subset of the EPRA/NARIET Global Index and the EPRA/NAREIT North America Index and contains publicly quoted real estate companies that meet the EPRA
Ground Rules. EPRA/NARIET Index series is seen as the representative benchmark for the real estate sector.

Source: All index returns are calculated using total return data from Bloomberg, except for the real estate indices and benchmarks, which use price return data. Returns for all single country strategies and Europe regional strategies are in local currency. All other returns are in USD.

Note - It is not possible to invest directly in any of the indexes above.

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