First Quadrant L.P.

(Essential Beta)

Fund Investment Objectives

The ESSENTIAL BETA strategy seeks risk diversification by balancing the risk along three dimensions: 1) Across asset classes - equal weighting of risk among equities, bonds, and real assets 2) Within asset classes - equal weighting of countries and market segments, 3) Throughout time - asset class allocations are dynamically shifted in accordance with current market volatility. By establishing risk parity on these three dimensions, Essential Beta is able to better minimize the risk of underfunding. The strategy utilizes three beta asset classes: 1) Global equities for participation in economic growth, 2) Global Bonds to diversify equity risk and hedge deflation and 3) Real assets to hedge inflation. . The FQ investment management asset-based fee schedule for this strategy, which is negotiable, is as follows: $0-$100, 0.40%; $100-$350, 0.35%; and more than $350, 0.20%. Asset-based fees are charged incrementally. For example, a $200 million dollar portfolio will be charged 0.40% for the first $100 million, and 0.35% for the next $100 million.