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osam.

com

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W h a t Wo r k s O n Wa l l S t r e e t . c o m WWOWS.com

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March 16, 2009

osam.com

91%
20.27% InflationAdjusted CAGR Since 3/16/09
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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1871 to Present:

50 Worst Rolling 10-Year Equity Market Returns


10-Year Real Average Annl Return

Subsequent Real Avg. Annual Return Over the Next: 1-Year 3-Years 5-Years 10-Years

Average of the 50 Worst

-4.6%
Positive: Negative:

20.5%
42 8

14.7%
48 0

15.8%
39 0

14.5%
39 0

176 Total Observations


Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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1300%

1200%
1100% 1000% 900% 800%

The worst 20-year period ever went from 1929 to 1949 5.91% (total real return)
Great Depression

Two stock market crashes


33-percent decline in GDP World War with 60 million casualties

700%
600% 500% 400% 300%

200%
100%

0%

1964

1971

1997

1946

1949

1953

1957

1960

1968

1975

1979

1982

1986

1990

1993

2001

2004

2008

2012

2015

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

2019

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1300%

1200%
1100% 1000% 900% 800%

From 2000 to April 2012, the S&P 500 has lost 11% of its value (real)

700%
600% 500% 400% 300%

200%
100%

0%

1964

1971

1997

1946

1949

1953

1957

1960

1968

1975

1979

1982

1986

1990

1993

2001

2004

2008

2012

2015

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

2019

osam.com S&P 500 (Inflation-Adjusted)


10%

2000

2012

5% 2019
0% -5%

-11%

-10% -15% -20% -25%

-30% -35%
-40% -45%

1997

2001

2004

2008

2012

2015

2019

-50% -55%

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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The Great Depression (the worst 20-year cycle To tie the worst 20-year cycle ever: ever)

60%

40%

20%

2000

2012

5.91%
0%

+19%

-20% 2019

-40%

-60%

-80%

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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Stock performance coming out of...


negative GDP growth:
Average Future Real Returns (19462010)

Forward 1-Year

Forward 3-Year

Forward 5-Year

When current GDP growth < 0% Average for the entire period

21.4% 8.7%

12.2% 7.7%

12.1% 7.6%

periods of high vs. low Consumer Confidence:


(19522010)

Consumer Confidence Percentile:

Average Forward 5-Year Real Return

High Confidence

Most Confident (90100%) 2nd Least Confident (1020%)

-2.4% 11.3%
We are here.

Low Confidence

Least Confident (010%)

11.5%

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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11.0%

Quality
Value

All U.S. Stocks


(19632011)

Yield
11

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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11.0%
All U.S. Stocks

Quality
5.9%

Value

Worst Decile Earnings Quality


(19632011)

Yield
12

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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100

Price

80

60

40

20

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

13

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100

80

Earnings Quality

60

40

20

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

14

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11.0%
All U.S. Stocks

Quality
5.9%

in 2007

Value

Worst Decile Financial Strength


(19632011)

Yield

3-year Base Rates:

14%
15

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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11.0%

Quality
Value

All U.S. Stocks


(19632011)

Yield
16

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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17.4%

11.0%
All U.S. Stocks

Quality
Value

Cheapest Decile
(19632011)

Yield
17

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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11.0%
All U.S. Stocks

Quality
Value
1.3%

Most Expensive
(19632011)

Yield
18

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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Shareholder Yield
Quality
Annualized Excess Return:

Value

3-year Base Rates:

4.0%

Yield

82%
19

U.S. Large Stocks Universe (1/1/1963 through 12/31/2011): 9.7% Base Rates: Top decile Shareholder Yield vs. U.S. Large Stocks Universe
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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Your Call
For the 20 years ending 12/31/10

S&P 500 9.14%

Average Mutual U.S. Fund T-Bills Investor

Average Annual Return

3.45%

3.27%
20

Source: Dalbar and Morningstar EnCorr Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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Random Walk

1896

2009
21

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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Not-So-Random Walk...

1896

2009
22

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.

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Behavioral Economics Disclosure:

Risk-averse for gains,


yet risk-seeking for losses

Overconfident Hindsight bias Biased against investing


outside of their home country
23

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We find that a long list of investment biases (e.g., the reluctance to realize losses, performance chasing, and the home bias) are human, in the sense that we are born with them. Genetic factors explain up to 50% of the variation in these biases across individuals. We find no evidence that education is a significant moderator of genetic investment behavior.
Why Do Individuals Exhibit Investment Biases? Henrik Cronqvist and Stephan Siegel
24

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a good strategy discipline


(willpower)

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Inflation is a tax.
Ben Bernanke, Chairman of the Federal Reserve July 16, 2008 in testimony to Congress
Average Real Returns Sorted by Inflation Regime
(19262010)
Dimson-Marsh-Staunton U.S. All Stocks (best decile)

U.S. Bonds
-12.5%
-3.1% 4.4%

U.S. Equity
-6.7%
1.9% 12.4%

Shareholder Yield
-4.9%
7.7% 17.9%

Severe
High Fed Target Moderate

Low Deflation

5.5%
10.0%

7.1%
13.9%

8.2%
14.5%

Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation. 26

General Legal Disclosure/Disclaimer and Backtested Results


It should not be assumed that your account holdings correspond directly to any comparative indices. Individual accounts may experience greater dispersion than the composite level dispersion (which is an asset weighted standard deviation of the accounts in the composite for the full measurement period). This is due a variety of factors, including but not limited to, the investment approach that OSAM employs and the fact that each account has its own customized rebalance frequency. Over time, dispersion should stabilize and track more closely to the composite level dispersion. Gross of fee performance computations are reflected prior to OSAMs investment advisory fee (as described in OSAMs written disclosure statement), the application of which will have the effect of decreasing the composite performance results (for example: an advisory fee of 1% compounded over a 10-year period would reduce a 10% return to an 8.9% annual return). Portfolios are managed to a target weight of 3% cash. Account information has been compiled by OSAM derived from information provided by the portfolio account systems maintained by the account custodian(s), and has not been independently verified. In calculating historical asset class performance, OSAM has relied upon information provided by the account custodian or other sources which OSAM believes to be reliable. OSAM maintains information supporting the performance results in accordance with regulatory requirements. Please remember that different types of investments involve varying degrees of risk, that past performance is no guarantee of future results, and there can be no assurance that any specific investment or investment strategy (including the investments purchased and/or investment strategies devised and/or implemented by OSAM) will be either suitable or profitable for a prospective clients portfolio. OSAM is a registered investment adviser with the SEC and a copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request. The dividend yield is a gross indicated yield. There is no guarantee that the rate of dividend payment will continue and the income derived is subject to taxes and expenses which will impact the actual yield experience of each investor. The risk-free rate used in the calculation of Sortino, Sharpe, and Treynor ratios is 5%, consistently applied across time. The universe of All Stocks consists of all securities in the Chicago Research in Security Prices (CRSP) dataset or S&P Compustat Database (as noted) with inflation-adjusted market capitalization greater than $200 million as of most recent year-end. The stocks are equally weighted and generally rebalanced annually.

Hypothetical performance results shown on the preceding pages are backtested and do not represent the performance of any account managed by OSAM, but were achieved by means of the retroactive application of each of the previously referenced models, certain aspects of which may have been designed with the benefit of hindsight.
The hypothetical backtested performance does not represent the results of actual trading using client assets nor decision-making during the period and does not and is not intended to indicate the past performance or future performance of any account or investment strategy managed by OSAM. If actual accounts had been managed throughout the period, ongoing research might have resulted in changes to the strategy which might have altered returns. The performance of any account or investment strategy managed by OSAM will differ from the hypothetical backtested performance results for each factor shown herein for a number of reasons, including without limitation the following:

Although OSAM may consider from time to time one or more of the factors noted herein in managing any account, it may not consider all or any of such factors. OSAM may (and will) from time to time consider factors in addition to those noted herein in managing any account. OSAM may rebalance an account more frequently or less frequently than annually and at times other than presented herein. OSAM may from time to time manage an account by using non-quantitative, subjective investment management methodologies in conjunction with the application of factors. The hypothetical backtested performance results assume full investment, whereas an account managed by OSAM may have a positive cash position upon rebalance. Had the hypothetical backtested performance results included a positive cash position, the results would have been different and generally would have been lower. The hypothetical backtested performance results for each factor do not reflect any transaction costs of buying and selling securities, investment management fees (including without limitation management fees and performance fees), custody and other costs, or taxes all of which would be incurred by an investor in any account managed by OSAM. If such costs and fees were reflected, the hypothetical backtested performance results would be lower.

The hypothetical performance does not reflect the reinvestment of dividends and distributions therefrom, interest, capital gains and withholding taxes.
Accounts managed by OSAM are subject to additions and redemptions of assets under management, which may positively or negatively affect performance depending generally upon the timing of such events in relation to the markets direction. Simulated returns may be dependent on the market and economic conditions that existed during the period. Future market or economic conditions can adversely affect the returns.

OSAM Contact Information

Six Suburban Avenue Stamford, CT 06901 203.975.3333 Tel


info@osam.com
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