This document discusses the performance of different stock market indices from 1961 to 2005. It compares the Russell 1000 and 2000 indices to alternative indices that use fundamental weighting based on book value, sales, dividends, and cash flow. The fundamentally weighted indices outperformed the traditional market cap weighted indices over the period analyzed.

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4. 4Source: Research Affiliates, LLC

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Source: Research Affiliates, LLC, Top 10 U.S. stocks based on data from 12/31/2005. The fundamental weighting is equally based on
book value, sales, dividends and cash flow, with dividends excluded from the weighting for non-dividend paying stocks.

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Source: Research Affiliates, LLC

11. 11Source: Research Affiliates, LLC

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* Weighting is based on fundamental factors such as sales, cash flow, dividends or book value.

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Source: Research Affiliates, LLC
CAP 1000 is the largest 1000 stocks by market cap. The Fundamental Composite is equally weighted based on book
value, sales, dividends and cash flow, with dividends excluded from the weighting for non-dividend paying stocks. It
does not include trading costs. Returns are from 12/31/1961 to 12/31/2005.

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Source: Research Affiliates

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Source: Research Affiliates

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Source: Research Affiliates

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Source: Research Affiliates

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Source: Yahoo! Finance
RUI: Russell 1000 Index PRF: PowerShares FTSE RAFI US 1000

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Source: Yahoo! Finance
RUT: Russell 2000 Index PRFZ: PowerShares FTSE RAFI US 1500

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Source: Research Affiliates

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Source: Research Affiliates, LLC study of 1962-2005 returns.

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