The FRS Select U.S. Large Growth Stock Active Fund was developed for the FRS Investment Plan and may use multiple institutional investment managers that serve in a fiduciary capacity. Each manager has a target share, which may be periodically changed based on funding levels and other considerations. Index managers are expected to be used as the primary liquidity vehicle to facilitate initial funding, daily transfers and rebalancing.

The historical performance and fee data for the FRS Select Funds was derived using the following approach. The FRS received historical monthly gross of fees return data for the individual investment managers or bundled provider products (for the FRS Select Balanced Funds). Historical monthly gross returns for the individual managers were adjusted for the fees applicable to the FRS.

The fees used to calculate net returns were based on the highest fee tier, representing the fees charged against the first dollar invested in the Fund. The "worst case" fee scenario was also used in other fee presentations (e.g. Fund Profile, Investment Funds Summary, etc.). For the FRS Select Active Funds (i.e with multiple investment managers), the FRS calculated a weighted average of the underlying managers' historical net returns according to the target manager allocations identified in the Detailed Fund Operations below.


Details for Investment Manager #1
Investment Manager

Jennison Associates LLC.

466 Lexington Avenue
New York, New York 10017
Targeted Share of Fund

75% (actual share will vary)

Asset Class and Objective

Specialty U.S. stock fund

Fund Benchmark

Russell 1000 Growth Index

Management Type

Actively Managed

Marketing Company

None
Restrictions on Transfers Investment funds in the FRS Investment Plan are subject to excessive trading restrictions as detailed in the FRS Investment Plan Summary Plan Description and FRS Excessive Fund Trading Policy.
Fees and Expenses

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.
Investment Philosophy

Jennison believes that they can generate attractive returns by investing in companies with above average growth in units, revenues, earnings and cash flows. They seek to capture the inflection points in a company's growth rate.
Research Process

Jennison's research analysts are the primary source of investment ideas and information. Analysts build an in-depth understanding of a company and its industry by assessing customers, suppliers and competitors where necessary. Careful scrutiny of a company's financial statements provides the foundation to build a fundamental outlook and an earnings model for a company. Jennison's interactive process is structured to facilitate the analysis and distribution of information among portfolio managers and analysts.

Security Selection

Ideas are generated from one of Jennison's Equity Analysts and Portfolio Managers. They are evaluated for their long-term growth characteristics, management and financial quality, and relative valuation before being eligible for inclusion in a portfolio.

Portfolio Construction

Portfolio construction process encompasses five important components: internal research; bottom-up selection; rigorous group discussion, interactive decision making; and portfolio managers assuming responsibility for buy-sell decisions. Security weights are determined by portfolio managers' convictions. Annual turnover averages 75%. The portfolio position limits are generally 5% per individual holding, or no more than 10% of the company's outstanding stock. Industry weights are limited to 25% and sector weights cap out at 40%.

Sell Discipline

Jennison's sell decisions are arrived at through their investment process and interactive discussion of portfolio managers and analysts, especially with respect to a change in the company's fundamentals and/or valuation. A negative change in fundamentals or a decline in the value of a stock will be assessed to determine if there is a temporary setback or a true change that alters the initial investment thesis.

Portfolio Manager(s)
Name Investment Experience Experience Last 5 Years
Blair Boyer 19 years Ex. VP, Large Cap Growth Equity Portfolio Manager
Michael Del Balso 37 years Large Cap Growth Equity Portfolio Manager
Dennis Kass 24 years Chief Executive Officer
Kathleen McCarragher 27 years Ex. VP, Head of Growth Equity


Details for Investment Manager #2
Investment Manager

BlackRock

466 Lexington Avenue
New York, New York 10017
Targeted Share of Fund

25% (actual share will vary)

Asset Class and Objective

Specialty U.S. stock fund

Fund Benchmark

Russell 1000 Growth Index

Management Type

Passively Managed

Marketing Company

None
Restrictions on Transfers Investment funds in the FRS Investment Plan are subject to excessive trading restrictions as detailed in the FRS Investment Plan Summary Plan Description and FRS Excessive Fund Trading Policy.
Fees and Expenses

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.
Investment Philosophy

BlackRock' (BTC) objective in managing the fund is to deliver a high quality and cost-effective index-based portfolio to institutional investors.

Research Process

See Security Selection and Portfolio Construction

Security Selection

Full replication is used to invest in all of the index securities to minimize tracking error.
Portfolio Construction

The fund shall be invested and reinvested in a portfolio of equity securities with the objective of approximating as closely as practicable the capitalization weighted total rate of return of the segment of the United States market for publicly traded equity securities represented by the 1000 largest capitalized companies. The criterion for the selection of investments shall be the Russell 1000 Index.

Futures and Options:BTC does not use futures to add value; futures are used only to decrease tracking error. Futures contracts are employed within the collective funds to "equitize" cash flows. These flows are generated from dividends and other cash flows associated with securities in the portfolio. Futures contracts are purchased to provide immediate market exposure proportionate to the size of both cash flows and residual cash within the portfolio. The goal is to reduce the overall portfolio tracking error that would be incurred should cash remain unvested in the portfolio. Cash in excess of 0.15% would be equitized using futures contracts.

Securities Lending: BlackRock' philosophy on borrower selection is to concentrate their lending to highest credit quality borrowers of those who meet stringent capital, financial and risk requirements and who are able to meet their obligations within the terms of the lending contract. Their risk management controls include:

  • Rigorous credit screening of borrowers to determine capital adequacy, liquidity and operations efficiency.
  • Collateral requirements that govern receipt and monitoring of collateral received in lieu of securities borrowed. BTC accepts only cash, obligations of the US Government and irrevocable letters of credit.
  • A minimum of 102% and 105% of the market value for domestic and international loans is required at the outset, respectively.
  • A daily mark-to-market procedure.
  • Investment policy controls applied to the investment of cash received as collateral.
  • Record-keeping guidelines, written agreements and regulatory reporting managed in compliance with all applicable regulatory controls of the securities lending programs of financial institutions.

As a result of their risk controls, neither BTC nor their clients have ever experienced a loss due to collateral reinvestment, operational negligence or broker default.

Sell Discipline

Not applicable

Portfolio Manager(s)
Name Investment Experience Experience Last 5 Years
Amy Schioldager 19 years Head, U.S. Indexing, GIMG, at BTC since 1989
Ed Corallo 19 years Head, Institutional Indexing, at BTC since 1997
Jennifer Hsui 9 years Senior Portfolio Manager, at BI since 2006
IMPORTANT NOTE: The information on investment philosophy, research process, security selection, portfolio construction, sell discipline and personnel was provided to the FRS by product marketing companies or investment managers. The FRS has taken this information as given for the purposes of this document.