IQS Commentary for July 2010

IQS
• The IQS model was down 1.57% for the 4 weeks ending July 31, while the sector-
neutral model was down 1.01%. Year-to-Date, the IQS model is down 2.74%.
IQS top decile of stocks has returned +3.6% YTD, while (according to the WSJ)
the DJIA has returned +0.4% YTD, S&P 500 has returned -1.2% YTD, and The
Total Stock Market has returned -.04% YTD.
• Factor categories that added to performance were led by Value and Sentiment.
Momentum and Improving Financials underperformed.
• Weekly returns were volatile – up one week, down the next.

IQS 1000
• The IQS 1000 model was down 6.03% for the 4 weeks ending July 31, and down
6.09% YTD. IQS 1000 top decile of stocks has returned -.8% YTD.

Random Insights
• Volatility has come down, but it is summer time so this is no surprise (usually the
market takes a holiday as the temperature heats up).
• Stock market has quietly climbed back up since falling in July. Market is still
relatively flat for the year, and we expect it end the year more or less around this
level.
• We continue to see Value over Growth and Large over Small.

Factor Weights
The IQS Weighting Scheme:
• Overall momentum/value weight for August remained about the same. More
weight on Balance Sheet with less reliance on true value (P/E).

Note: Results are specific to the IQS analysis. Real time results will vary depending on
universe, frequency of trading, and other manager specific strategies.
Summary of IQS Results for 4 Weeks Ending 7/31/2010

All returns are equal-weighted

The results below are from paper portfolios, and are not based on actual trading.
No transaction costs are included.

Weekly Top and Bottom Decile Returns for IQS Composite Model

IQS Universe
Week Ending Top Decile Bottom Decile Net
10-Jul 4.02% 6.08% -2.06%
17-Jul -1.60% -3.23% 1.63%
24-Jul 4.66% 5.70% -1.04%
31-Jul 0.27% 0.44% -0.17%
MTD 7.41% 8.98% -1.57%
YTD 3.62% 6.36% -2.74%

Weekly Top and Bottom Decile Returns for IQS Composite Model, Sector Neutral

Sector Neutral
Week Ending Top Decile Bottom Decile Net
10-Jul 4.40% 5.88% -1.48%
17-Jul -1.47% -2.83% 1.36%
24-Jul 4.59% 5.61% -1.02%
31-Jul 0.43% 0.37% 0.06%
MTD 8.05% 9.06% -1.01%
YTD 3.04% 5.08% -2.04%

Weekly IC for IQS Composite Model and Components

Week Ending IQS BAL VAL MOM IMP SEN

10-Jul -0.076 -0.045 0.108 -0.076 -0.100 -0.066
17-Jul 0.139 0.103 0.101 0.007 0.128 0.024
24-Jul -0.051 0.019 0.004 -0.040 -0.086 0.043
31-Jul -0.051 -0.073 0.029 -0.009 -0.080 -0.005
MTD -0.010 0.001 0.061 -0.030 -0.035 -0.001
YTD 0.000 -0.001 0.027 -0.016 0.000 -0.002

Weekly Top and Bottom Decile Returns for IQS Component Models

BALANCE SHEET VALUE

Week Ending Top Decile Bottom Decile Net Top Decile Bottom Decile Net
10-Jul 3.87% 4.80% -0.93% 5.32% 4.83% 0.49%
17-Jul -1.25% -3.31% 2.06% -1.92% -3.40% 1.48%
24-Jul 4.71% 5.25% -0.54% 4.92% 6.20% -1.28%
31-Jul -0.17% 0.66% -0.83% 1.08% 0.26% 0.82%
MTD 7.22% 7.35% -0.13% 9.55% 7.82% 1.73%
YTD 2.65% 4.98% -2.33% 5.78% -0.76% 6.54%

MOMENTUM IMPROVING FINANCIALS

Week Ending Top Decile Bottom Decile Net Top Decile Bottom Decile Net
10-Jul 4.32% 5.98% -1.66% 4.13% 6.07% -1.94%
17-Jul -2.07% -2.17% 0.10% -1.42% -3.31% 1.89%
24-Jul 4.77% 5.72% -0.95% 3.97% 5.44% -1.47%
31-Jul 0.32% 0.01% 0.31% -0.31% 1.11% -1.42%
MTD 7.38% 9.62% -2.25% 6.40% 9.34% -2.94%
YTD 0.24% 10.08% -9.85% 6.60% 4.10% 2.49%

SENTIMENT
Week Ending Top Decile Bottom Decile Net
10-Jul 5.14% 5.88% -0.74%
17-Jul -1.83% -2.14% 0.31%
24-Jul 5.78% 4.44% 1.34%
31-Jul -0.19% 0.05% -0.24%
MTD 8.97% 8.27% 0.71%
YTD 6.96% 5.64% 1.32%

Notes:
IQS represents the IQS composite model.
IC or Information Coeffficient is calculated as the Spearman rank correlation between the forecasted returns and actual returns.
IQS Universe includes approximately the largest 4000 stocks by market capitalization
Sector definition is determined by Zacks Information Research
Summary of IQS Results (Top 1000 Stocks) for 4 Weeks Ending 7/31/2010

All returns are equal-weighted

The results below are from paper portfolios, and are not based on actual trading.
No transaction costs are included.

Weekly Top and Bottom Decile Returns for IQS Composite Model

IQS Universe
Week Ending Top Decile Bottom Decile Net
10-Jul 4.23% 8.10% -3.87%
17-Jul -0.97% -2.30% 1.33%
24-Jul 3.38% 5.11% -1.73%
31-Jul -0.79% 0.80% -1.59%
MTD 5.86% 11.90% -6.03%
YTD -0.75% 5.33% -6.09%

Weekly IC for IQS Composite Model

Week Ending IQS

10-Jul -0.251
17-Jul 0.187
24-Jul -0.142
31-Jul -0.134
MTD -0.085
YTD -0.004

Notes:
IQS represents the IQS composite model.
IC or Information Coeffficient is calculated as the Spearman rank correlation between the forecasted returns and actual returns.
IQS Universe includes approximately the largest 1000 stocks by market capitalization
Sector definition is determined by Zacks Information Research
 Time Series of Excess Cumulative Return
IQS Composite DFM Model
IQS Universe - Decile 1 vs 10
Year-to-Date 2010

25.0%

20.0%

15.0%

10.0%

5.0%
Return

0.0% Decile 1
Decile 10
-5.0%

-10.0%

-15.0%

-20.0%

-25.0%
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 Time Series of Excess Cumulative Return
IQS Composite - Sector Neutral DFM Model
IQS Universe - Decile 1 vs 10
Year-to-Date 2010

25.0%

20.0%

15.0%

10.0%

5.0%
Return

0.0%
Decile 1
Decile 10
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-25.0%
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 Time Series of Excess Cumulative Return
IQS Component - Balance Sheet
IQS Universe - Decile 1 vs 10
Year-to-Date 2010
25.0%

20.0%

15.0%

10.0%

5.0%
Return

0.0% Decile 1
Decile 10
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-10.0%

-15.0%

-20.0%

-25.0%
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Time Series of Excess Cumulative Return

IQS Component - Value
IQS Universe - Decile 1 vs 10
Year-to-Date 2010
25.0%

20.0%

15.0%

10.0%

5.0%
Return

0.0% Decile 1
Decile 10
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-10.0%

-15.0%

-20.0%

-25.0%
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 Time Series of Excess Cumulative Return
IQS Component - Momentum
IQS Universe - Decile 1 vs 10
Year-to-Date 2010
40.0%

35.0%

30.0%

25.0%

20.0%

15.0%
Return

10.0%
Decile 1
5.0%
Decile 10
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-5.0%

-10.0%

-15.0%

-20.0%

-25.0%
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Time Series of Excess Cumulative Return

IQS Component - Improving Financials
IQS Universe - Decile 1 vs 10
Year-to-Date 2010
25.0%

20.0%

15.0%

10.0%

5.0%
Return

0.0% Decile 1
Decile 10
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-15.0%

-20.0%

-25.0%
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 Time Series of Excess Cumulative Return
IQS Component - Sentiment
IQS Universe - Decile 1 vs 10
Year-to-Date 2010
25.0%

20.0%

15.0%

10.0%

5.0%
Return

0.0%
Decile 1
-5.0% Decile 10

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-20.0%

-25.0%
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