Quantitative Management Associates LLC.

100%

Specialty broad U.S. stock fund, focusing on the mid capitalization sector

S&P 400 Mid Cap Index

Actively Managed

Prudential Retirement Services

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.

Securities are selected on the basis of quantitative algorithms that focus on specific criteria for different types of stocks. Valuation criteria, such as price/earnings and price/book ratios, are the most important for slow-growing companies. Indicators of future growth such as, estimate revisions are the most important for rapidly growing firms. An expected alpha is calculated for each stock that they identify as having a biased price. Minimal fundamental research is used in their process.

The selection process begins by segregating companies based upon their growth rates. From there, different algorithms are used to assign expected alphas to different stock types, depending on their growth rate. A portfolio optimization procedure is used to control sector, industry, liquidity and size exposures versus the benchmark, which is the S&P 400 Index. Tracking error relative to the benchmark is expected to be about 3%.

Portfolios hold from 300 to 450 stocks. Turnover averages 75% annually.

Portfolios sales are dictated through the optimization process. The optimizer, of course, disfavors and is generally expecte to sell stocks with negative returns. However, they may continue to be held for risk control purposes.