Capital Research & Management Company

Core foreign stock fund focusing on developed markets

MSCI All Country World ex US Index

Actively Managed

VALIC Retirement

Fees and expenses are only one of several factors that should be considered when making investment decisions. More information on fees and expenses can be found in the FAQs on the MyFRS.com website.

On an annual basis, marketing companies estimate the fees that FRS Investment Plan participants will pay as a percentage of their mutual fund account assets; e.g., 0.50% per year. These figures reflect any rebates or reductions negotiated by the State Board of Administration and are published in the Fund Profiles and other plan materials.

However, the actual fees you would pay as an investor in a mutual fund are not guaranteed and will vary over time when expressed as a percent of asset values. Mutual fund boards of directors can change fees without the FRS's permission. Changes occur throughout the year in the day-to-day expenditures made by mutual funds to cover their operating expenses and these changes are passed through to shareholders. The amount of assets under management changes from period to period and so fees expressed as a ratio of assets will vary, even if the actual dollar expenditures do not. Also, some mutual funds have fees that can rise or fall depending on performance compared to a benchmark.

The actual expenses paid for mutual funds included in the FRS Investment Plan are detailed in their annual or semi-annual reports for previous periods. These reports are available free of charge by calling the MyFRS Financial Guidance Line (1-866-446-9377). Please note that these reports will not reflect any rebates or reductions negotiated by the State Board of Administration.

CRMC's research professionals gather information, working out of offices in Los Angeles, San Francisco, Washington, D.C., New York, London, Geneva, Hong Kong, Singapore and Tokyo. They collect research on companies and industries, in addition to economic, regulatory and political trends. Ultimately, research analysts try to identify the difference between the underlying value of a company and the market price of its securities. They talk with corporate executives, competitors, suppliers and large customers, and often observe production methods. They meet regularly with economists, government officials, consultants and industry specialists. In addition, the research staff sifts through company reports, financial statements and trade publications. It is the analysts' responsibility to determine how much to pay to acquire shares by focusing on, among other things, P/E, yield, ROE, EPS growth, and a strong balance sheet.

They share this information with the portfolio counselors who invest as though they were buying whole companies rather than single shares. As these investment professionals see it, an asset is worth no more than the present discounted value of its future earning power. Each commitment of capital must offer a return-on-investment that appears superior to both present and future alternatives.

Additionally, fixed-income analysts work closely with the organization's equity analysts to determine underlying financial strength.

Each portfolio counselor has sole responsibility for selecting securities for his/her portion of the portfolio. Regarding individual security selection, once the future prospects for individual companies are well understood on a fundamental level, value is identified in a number of ways. The relationship of a stock's current price to earnings, cash flow, and future income must be reasonable. They often invest in asset-rich companies with strong balance sheets that can meet capital needs from internal sources and maintain reasonable dividend payments. They think the relationship of price to book value is important. They seek to invest in stocks whose prices are not excessive relative to book value or in companies where asset values are understated.

CRMC divides each mutual fund portfolio into a series of smaller sub-portfolios and makes an individual portfolio counselor responsible for each of these sub-portfolios. The portfolio counselor develops and follows his or her own strategy. Within a fund's guidelines, as set forth in the fund's prospectus and as established by the Investment Committee, he or she decides how his or her sub-portfolio is to be diversified as to industry, what percentage of the portfolio is to be in cash, what individual stocks are to be in the portfolio and in what quantities, and when these stocks are to be bought or sold. Research analysts also manage a portion of each fund portfolio. Supervised by the Director of Research, the individual industry analysts put together a portfolio and act as a single portfolio counselor for a segment of each fund.

CRMC's sell discipline is not defined under rigid standards, such as selling when a stock has increased or decreased a predetermined percentage. Instead, a stock or bond is sold simply when superior value, opportunity, or yields exist in other issues.