SYNCHRONY ASSET MANAGEMENT MANAGEMENT OF SWISS SMALL AND MID CAPS WITH A TRIPLE BOTTOM LINE ANALYSIS Responsible Performances By Pierre Weiss, director

Specifications of Swiss Smaller Equities They only represent a small market niche Market cap. SPI: CHF 1’259 billions (100%) Market cap. SMI: CHF 1’090 billions ( 84%) Market cap. SPI Extra: CHF 169 billions ( 16%) but the fit for fundamental analysis and active asset management SPI: 225 companies (100%) SMI: 0 20 companies ( 9%) SPI Extra: 205 companies ( 91%)

They only represent a small market niche

Market cap. SPI: CHF 1’259 billions (100%)

Market cap. SMI: CHF 1’090 billions ( 84%)

Market cap. SPI Extra: CHF 169 billions ( 16%)

but the fit for fundamental analysis and active asset management

SPI: 225 companies (100%)

SMI: 0 20 companies ( 9%)

SPI Extra: 205 companies ( 91%)

Smaller companies: higher returns, higher risks? We have identified four kinds of risks attached to Swiss smaller companies Pure market liquidity risk Underperforming periods Disappointing results Image risks How to deal with them? Avoid illiquid stocks as far as possible Adapt your strategy accordingly Do nothing if your are not an insider Concentrate on them! How? By integrating SRI criteria into your financial analysis Distinctive nature of the method: the integration of financial and qualitative (social and environmental) criteria in a single and integrated analysis

We have identified four kinds of risks attached to Swiss smaller companies

Pure market liquidity risk

Underperforming periods

Disappointing results

Image risks

How to deal with them?

Avoid illiquid stocks as far as possible

Adapt your strategy accordingly

Do nothing if your are not an insider

Concentrate on them!

How?

By integrating SRI criteria into your financial analysis

Distinctive nature of the method: the integration of financial and qualitative (social and environmental) criteria in a single and integrated analysis

Analysis and selection of companies Initial Universe SPI Extra – >200 comp . Investment universe About 65 comp. Elimination of companies presenting important liquidity risks In depth analysis: 3 questionnaires, allowing to rank companies and value a fair equilibrium in the satisfaction of different stakeholders. Investment in the 20 to 25 « best companies » 1st filter 2nd filter Portfolio Financial criteria x 2 = 174 Socio-economic criteria x 1 = 81 Environmental criteria x 1 = 94 Average (total / 4) = 87.2 0 100 87.2%

3 questionnaires with more than 130 questions Financial Questionnaire – Factor 2 Strategy and objectives of the company Products and market share Recent financial results (5 years) Expected results (3 years) Equities and liquidity Socio-economic questionnaire – Factor 1 Shareholders Clients and subcontractors Employees State and community Innovation and job creation Environmental questionnaire (in broader sense) – Factor 1 Sensitive activities and behaviour Commitments Integration and participation Environment Other aspects of sustainable development

Financial Questionnaire – Factor 2

Strategy and objectives of the company

Products and market share

Recent financial results (5 years)

Expected results (3 years)

Equities and liquidity

Socio-economic questionnaire – Factor 1

Shareholders

Clients and subcontractors

Employees

State and community

Innovation and job creation

Environmental questionnaire (in broader sense) – Factor 1

Sensitive activities and behaviour

Commitments

Integration and participation

Environment

Other aspects of sustainable development

A Set of Qualities that contribute to a better risk control Exogenous Qualities Market liquidity (average monthly volumes > CHF 5 millions) Free-float (> 33%) Market capitalisation (> CHF100 million) Significant activities in Switzerland Financial Qualities Strong position of the company on its markets Stability and coherence of strategy and management Strength of recent financial developments Greater growth potential than industry’s average Solid and sustainable margins Modern capital structure Extra Financial Qualities Management convictions, incentives and values «Stakeholders» philosophy and corporate culture Management of risks of image Innovation Deliberate action to the stakes and requirements of sustainable development

Exogenous Qualities

Market liquidity (average monthly volumes > CHF 5 millions)

Free-float (> 33%)

Market capitalisation (> CHF100 million)

Significant activities in Switzerland

Financial Qualities

Strong position of the company on its markets

Stability and coherence of strategy and management

Strength of recent financial developments

Greater growth potential than industry’s average

Solid and sustainable margins

Modern capital structure

Extra Financial Qualities

Management convictions, incentives and values

«Stakeholders» philosophy and corporate culture

Management of risks of image

Innovation

Deliberate action to the stakes and requirements of sustainable development

Portfolio Management Method Principles: Investment in the 20 to 25 « best » companies, pure active and « long only » style, through long term oriented philosophy (cf. determined only by the diamond shape), weak fluctuation rate (<20% p.a.), and optimisation of the structure (risk control software) Portfolio construction: Minimum/maximum are defined according to the global percentage of points Optimisation of the structure: Optimised volatility thanks to APT – obj. : volatility close to that of the index Verification ex-ante of tracking error – obj. : tracking error of no more than 4 The specific risk is reduced thanks to the detailed analysis The systematic risk is reduced thanks to optimisation

Principles:

Investment in the 20 to 25 « best » companies, pure active and « long only » style, through long term oriented philosophy (cf. determined only by the diamond shape), weak fluctuation rate (<20% p.a.), and optimisation of the structure (risk control software)

Portfolio construction:

Minimum/maximum are defined according

to the global percentage of points

Optimisation of the structure:

Optimised volatility thanks to APT – obj. : volatility close to that of the index

Verification ex-ante of tracking error – obj. : tracking error of no more than 4

The specific risk is reduced thanks to the detailed analysis

The systematic risk is reduced thanks to optimisation

Fund Performance (VNI) since Inception (until Aug. 31st, 2007)

Analysts’- Managers’ CVs Pierre Weiss, Director HEI and CFPI graduate, Mr. Weiss has been active in the analysis of the Swiss shares since 1986, mainly at Credit Suisse, then at Mirabaud & Cie. From 1995, he progressively oriented his career towards institutional management by rejoining the Scandinavian Bank in Switzerland. He implemented the management method used by the funds, whose first reflections date back to in 1994. He was given managerial authority according to this method in 1997, mainly at Fiduciary Trust, then at Synchrony Asset Management from 2003. [email_address] Anick Baud, Portfolio Manager HEI graduate, Mrs. Baud started her professional career in private management at the Banque SCS Alliance in 1999 before specialising in institutional management, first of all at Fiduciary Trust and then at Synchrony Asset Management from 2003. She has managed the Swiss small caps according to the same method since 2001. [email_address] Laurent Brossy, ISR Analyst Political Science graduate, Mr. Brossy specialised in the study of non-financial aspects in the company stock. He started his professional career at Synchrony Asset Management in January 2005. [email_address]

Pierre Weiss, Director

HEI and CFPI graduate, Mr. Weiss has been active in the analysis of the Swiss shares since 1986, mainly at Credit Suisse, then at Mirabaud & Cie. From 1995, he progressively oriented his career towards institutional management by rejoining the Scandinavian Bank in Switzerland. He implemented the management method used by the funds, whose first reflections date back to in 1994. He was given managerial authority according to this method in 1997, mainly at Fiduciary Trust, then at Synchrony Asset Management from 2003. [email_address]

Anick Baud, Portfolio Manager

HEI graduate, Mrs. Baud started her professional career in private management at the Banque SCS Alliance in 1999 before specialising in institutional management, first of all at Fiduciary Trust and then at Synchrony Asset Management from 2003. She has managed the Swiss small caps according to the same method since 2001.

[email_address]

Laurent Brossy, ISR Analyst

Political Science graduate, Mr. Brossy specialised in the study of non-financial aspects in the company stock. He started his professional career at Synchrony Asset Management in January 2005. [email_address]