5. . Annual Presentation by Zeno Consulting Group - Trading Cost Analysis Provider

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Los Angeles Water & Power Employees’ Retirement Plan July 13, 2016

Transaction Cost Analysis and

Annual Review

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Table of Contents

Tab A - Who Is Zeno? Tab B - Transaction Cost Analysis Tab C – Market Review Tab D – Annual Review Tab E – Appendix - Biographies

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Who is Zeno?

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Meaningful Trade Cost Analysis Three Reasons Why Funds Come to Zeno • Satisfies legal obligation, as fiduciaries, to monitor your managers’ (and

their brokers’) Equity, FX and Fixed Income trading processes for Best Execution

• Provides critical transparency, substantive due diligence, and insight into how your managers are handling Fund assets (“What you don’t know, can hurt you!”)

• Helps control excessive trade costs (often the single largest expense of the Fund!)

Why is Trade Cost Analysis Important for Asset Owners?

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Zeno Consulting Group is a consulting firm, not a broker, that specializes in helping large institutional clients proactively monitor, and manage, their asset managers’ trading processes.

All analytical thought is a function of math, logic, and ethics – but math and logic must be subordinate to ethics.

Zeno of Citium c.335-c.263 B.C. (paraphrased)

As prudent fiduciaries, more than ever before, asset owners should understand their managers’ trading process, what they pay to execute trades, whether they obtained best execution, and its impact on performance.

The easiest route to the top quartile of performance

is to be in the bottom quartile of expenses. Jack Bogle

Who is Zeno Consulting Group?

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Long Track Record Providing Meaningful TCA

• Established in 1986 as “Plexus Group.” Operated as a privately-owned trade cost measurement, analysis, and consulting firm. Two lines of business - selling TCA services to Plan Sponsors and buy-side, respectively. • Developed reputation as thought-leader in trade cost analysis, including being named “Consultant of the Year” by PLANSPONSOR magazine and authoring the PBGC Standards on transition management. • Acquired by JPMorgan Chase in 2002 as part of initiative to develop in-house TCA capabilities. • Acquired by ITG (a specialized agency brokerage and technology firm) in 2006, who integrated the manager TCA services into existing ITG services, and established the plan sponsor TCA services as a wholly-owned subsidiary called “Plexus Plan Sponsor Group, Inc.” • In January 2010, Plexus Plan Sponsor Group, Inc. was re-established as an independent employee-owned consulting firm called: Zeno Consulting Group, LLC.

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• Independent trade cost consultant, and Registered Investment Advisor, acting solely in asset owner’s interest.

• Methodology for calculating and benchmarking costs. • Web-based drill down facility, peer group universes, and comprehensive

end-to-end analytics that calculate the true loss of asset value and its impact on performance.

• Specialist in constructing meaningful oversight programs that systematically identify trading outliers and flag key issues with actionable recommendations.

• Zeno consultants act as extension of your staff in reviewing reports and conducting manager follow-up.

Unique Consultative Differentiators

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Current Offerings Utilized By Our clients:

SPONSOR/FUND REVIEW – Equity Assists asset owners and general consultants in meeting legal and fiduciary obligations to ensure managers receive Best Execution and pay reasonable commission rates.

SPONSOR/FUND MONITOR – Equity

Goes beyond basic due diligence and provides asset owners greater transparency into their managers’ internal trading processes, enables constructive dialogue with managers, and provides consultative follow-up to reduce excessive transaction costs.

FX MONITOR Provides Fund fiduciaries with an accurate assessment of their managers’ foreign currency transactions , and consulting to help conduct follow-up on cost outliers and address potential trading abuses.

FIXED INCOME MONITOR Provides Fund fiduciaries with an accurate quantitative assessment of their managers’ fixed income transactions, and consulting to help conduct follow-up on cost outliers and address potential trading abuses.

DIRECTED BROKERAGE AND COMMISSION RECAPTURE AUDIT Offers asset owners an independent assessment of their underlying managers’ and funds’ execution efficiency, with particular emphasis on whether directed trades achieved Best Execution or incurred unnecessary hidden costs.

TRANSITION SERVICES Assists asset owners in navigating the complex marketplace known as Transition Management. As a Registered Investment Advisor, we offer several levels of service that range from pre-trade and post-trade analytics to strategic planning and transition manager selection.

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Trade Cost Analysis

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Transaction Costs: A Common Sense Definition

How to Measure Transaction Costs Value before the transaction $X Value after the transaction $Y Cost to complete the trade $X - $Y

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The loss of asset value associated with Buying and Selling securities in your portfolio.

Nothing tricky here. Simple arithmetic.

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Monitoring Commission Recapture Program 1. A three-step approach to aid in satisfying a fiduciary obligation;

a) Measure Implementation shortfall costs and compare with difficulty adjusted benchmark.

Assess comparative efficacy of commission recapture and non-recapture trades. b) Measure Total Costs and Benchmark Adjusted costs against peer strategies for both

recapture and non-recapture trades. c) Measure commission rates in the context of total costs paid. Assess net and gross

commission rates and usage of brokers.

2. Once the relative efficacy of manager’s trade implementation processes are established through Zeno’s analysis, any follow-up issues or recommendations are identified.

3. Clarification: net commission rates are the actual rates paid to execute a trade: • Any commission savings accruing to the Fund, and achieved from commission

recapture programs, are extracted from the total commission expenditure. Remaining commissions can be expressed in cents and/or basis points.

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Market Review

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• The convergence of data and analytics as seen by the pending mergers of data heavyweight Interactive Data Corporation with Intercontinental Exchange and quantitative analytics provider Markit with IHS.

• MiFID II delayed until January 2018 given the complex nature of the rules. The most contentious rule is the new rule on payment for research.

• Institutional investors are now going deeper into venue analysis according to a recent study by Greenwich Associates showing that 78% of equity traders use TCA as part of the firm’s trading performance measurement along with 48% using TCA for venue analysis.

• Brad Katsuyama’s IEX approved by the SEC to become a stock exchange.

It’s All About the Data and Use of Analytics

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• Total Median Costs improved since peaking in 1Q12. • Costs relative stable since 3Q14. • Slight uptick in costs in 4Q15 with higher market volatility. • Expect higher transaction costs for the remainder of 2016 due to Brexit. Quarterly costs are reflective of a rolling 4-quarters worth of data.

Total Implementation Shortfall Costs (Costs in basis points per share)

-53 -51 -48 -44 -46 -44 -45 -46 -46 -43 -40 -41 -39 -40 -40 -43

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0

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

5-Perc 25-Perc 50-Perc 75-Perc 95-Perc

bps

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Client Commission Trends in Domestic Markets (Commissions in cents per share)

• US equity daily trading volume averaged $6.9 billion in 2015, the highest since 2011 of $7.8 billion.

• Median US commission rates have remained stable over the last 3 years. Source: Bloomberg Quarterly costs are reflective of a rolling 4-quarters worth of data.

-2.4 -2.4 -2.3 -2.4 -2.3 -2.3 -2.3 -2.3 -2.3 -2.3 -2.3 -2.3 -2.3 -2.2 -2.2 -2.2

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1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

cps

5th Perc 25th Perc 50th Perc 75th Perc 95th Perc

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Annual Review

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Trading Review of External Equity Portfolios Trading volume for the aggregate fund was essentially flat over the prior year. Gross commissions were

also essentially flat.

Managers with greater levels of trading turnover have a greater effect on transaction costs for the overall fund.

Total costs for WPERP as a fund in aggregate deteriorated when compared to the prior year period. In general, individual portfolios were traded efficiently and comparably with peer strategies. Fred

Alger displayed brokerage costs that were greater than average. Earnest Partners, Emerald Advisors, and T Rowe Price LCG, saw poor relative performance of recaptured trades.

Comingled portfolios BlackRock and LA Capital were efficient.

Costs for trades which participated in the commission recapture program were better than non-recapture trades. In general we find that the commission recapture program did not materially affect manager’s trade execution processes. In total, 16% of all commission dollars were sent to the recapture program run by Russell

Investments. This was a decrease from the prior year of 19%. The majority of commission recapture trading activity (80%) was executed by Russell Investments.

Twelve other correspondent brokers were used to facilitate the remaining (20%) commission recapture trades. When compared to last year ConvergEx executed (56%) of recaptured trades.

Fred Alger (73%) provided the greatest revenues/credits from the program, followed by Pyramis (14%), and T Rowe Price LCV (4%).

The commission recapture program further reduced US gross directed commissions to 1.0 cps.

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Trading Volumes (MM) and Participation Rates 2Q15-1Q16

• Trading volumes and directed volumes were driven by Fred Alger. First time participation by Pyramis, Vontobel, and MFS International. Low directed volumes by Earnest Partners, Emerald Advisors, and MFS International.

• Directed participation volume dipped slightly to 16% from the prior year of 19%. • Commission dollars credited was $323,490. • Comingled managers Los Angeles Capital and BlackRock did not participated in any directed

trades. • Manager’s have discretion for their participation rates.

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Participation Rate Non-Directed Directed 2016 2015

Earnest Partners 27 1 4% 21% Emerald Advisors 19 2 9% 0% Fred Alger 2,494 524 17% 26% MFS 117 30 20% 14% MFS International 189 2 1% 0% Pyramis 546 112 17% 0% T Rowe Price LCG 508 14 3% 3% T Rowe Price LCV 532 17 3% 3% Vontobel 152 6 4% 0% Total 4,757 888 16% 19%

Comingled: Los Angeles Capital and BlackRock

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Executions vs Zeno Difficulty Adj. Benchmark 2Q15-1Q16

• The Fund as a whole performed inline driven by Fred Alger. • Earnest Partners (9 trades), Emerald Advisors (only 2 quarters of data), and T Rowe Price LCG

had poor relative directed performance, but at low volumes. • Vontobel had strong relative performance of directed trades. • First time directed participation by international managers MFS International, Pyramis, and

Vontobel. • Comingled managers BlackRock and LA Capital did not participate in directed trades.

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Aggregate EarnestPartners

EmeraldAdvisors

Fred Alger MFS MFS Intl Pyramis T RoweLCG

T RoweLCV

Vontobel BlackRock LA Capital

Directed

Non-Directed

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US Manager Commission Rates in cps 2Q15-1Q16

• Net commissions (after rebates) were efficient except for Earnest Partners and Emerald Advisors (only 2 quarters of data).

• Directed trades marginally improved overall portfolio commission rates for US managers. • US directed trades were executed at a net of 1.0 cps, this was an improvement of 0.5 cps. • Managers BlackRock and LA Capital did not direct any trades. • International commission rates (after rebates) were inline: MFS Intl (-10 bp),

. Pyramis (-9 bp), and Vontobel (-12 bp)

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0.0

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Earnest Partners Emerald Advisors Fred Alger MFS T Rowe Price LCG T Rowe Price LCV

Gross

Net

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Trading Review of External Equity Portfolios Portfolio Strategy Metric Observations

Earnest Partners

Small Cap Value

Total Costs Costs improved over the prior year.

Execution Efficiency

Average, when compared with peer portfolios. Poor relative performance of recaptured trades.

Commission Recapture Low participation rate (4%). Only 9 trades.

Commission Rates

Gross rates (3.4 cps, 4th qtile). Net of commission (recapture) savings, commission rates (3.4 cps. 4th qtile). Used ConvergEx for recapture exclusively.

Emerald Advisors

Large Cap

Growth

Total Costs Only 2 quarters of data.

Execution Efficiency Only 2 quarters of data.

Commission Recapture Participation rate (9%).

Commission Rates

Gross rates (3.5 cps) . Net of commission (recapture) savings, commission rates (3.4 cps). Top 3 recapture brokers used Bloomberg Tradebook (35%), KeyBanc Capital Markets (10%), JP Morgan (6%).

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Trading Review of External Equity Portfolios

Portfolio Strategy Metric Observations

Fred Alger

Large Cap

Growth

Total Costs Costs were poorer over the prior year.

Execution Efficiency Average when compared with peer portfolios. Brokerage efficiency high.

Commission Recapture

Biggest participant in program (59%). Participation rate (17%). Largest revenues from any manager in WPERP’s commission recapture program.

Commission Rates

Gross rates (3.3 cps, 4th qtile) have been poorer than peer averages. Net of commission (recapture) savings, commission rates (2.8 cps. 3rd qtile) are average. Used Frank Russell (96%) and ConvergEX (4%) for all recapture trades.

MFS Large Cap Value

Total Costs Costs deteriorated over the prior year.

Execution Efficiency Average when compared with peer portfolios.

Commission Recapture Participation rate of 20%.

Commission Rates

Gross commission rates (2.4 cps, 3rd qtile) have been poorer than peer averages. Estimated net of commission (recapture) savings, commission rates of (2.0 cps, 3rd qtile). Frank Russell (100%) was the only recapture broker used.

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Trading Review of External Equity Portfolios Portfolio Strategy Metric Observations

MFS Intl’ Dev Val

Non-US All Country

Total Costs Costs deteriorated from prior year.

Execution Efficiency Consistently efficient.

Commission Recapture Participated for the first time. Participation rate (1%).

Commission Rates

Gross commission rates (10 bps, 3rd qtile). Estimated net of commission (recapture) savings (10 bps, 3rd qtile). JP Morgan (70%), HSBC Securities (30%), and Morgan Stanley (<1%) were the only recapture brokers used.

Pyramis Non-US All Country

Total Costs Costs improved over the prior year. Generally high cost.

Execution Efficiency Average as compared with peer portfolios.

Commission Recapture Participated for the first time. Participation rate 17% .

Commission Rates

Commission rates (10 bps, 3rd qtile). Net of commission (recapture) savings, commission rates of (9 bps, 3rd qtile). Instinet (42%), ITG (38%), and Macquarie Securities (11%) were the largest recapture brokers used.

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Trading Review of External Equity Portfolios Portfolio Strategy Metric Observations

T. Rowe Price

Large Cap Growth

Total Costs Costs deteriorated over the prior year as delay costs increased

Execution Efficiency

Average when compared with peer portfolios. Recaptured trades had relative poor performance to non-recaptured trades.

Commission Recapture Participation rate is 3%.

Commission Rates

Gross rates (1.9 cps, 1st qtile) are above peer averages. Net of commission (recapture) savings, commission rates (1.9 cps. 1st qtile) are efficient. Bank of America (52%), Piper Jaffray (38%) and Weeden & Co (10%) were the recapture brokers used.

T. Rowe Price

Large Cap Value

Total Costs Costs deteriorated from the prior year.

Execution Efficiency

Average when compared with peer portfolios. Recaptured trades had relative strong performance to non-recaptured trades.

Commission Recapture Participation rates of 3%.

Commission Rates

Gross rates (1.7 cps, 2nd qtile) are above peer averages. Net of commission (recapture) savings, commission rates (1.7 cps, 2nd qtile) are efficient. Bank of America (62%), Weeden & Co (20%), and Piper Jaffray (18%) were the only recapture brokers used.

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Trading Review of External Equity Portfolios

Portfolio Strategy Metric Observations

Vontobel Emerging Market

Total Costs Costs deteriorated over the prior year

Execution Efficiency

Average, when compared with peer portfolios. Recaptured trades had relative strong performance to non-recaptured trades.

Commission Recapture Participated for the first time. Participation rate 4% .

Commission Rates

Commission rates (13 bps, 3rd qtile). Net of commission (recapture) savings, commission rates of (12 bps, 2nd qtile). Macquarie Securities was the only recapture broker used.

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Trading Review of Comingled Equity Portfolios

Portfolio Strategy Metric Observations

BlackRock Large Cap Passive

Total Costs Costs efficient versus the Close

Execution Efficiency Efficient quarterly executions.

Commission Recapture Did not participate.

Commission Rates

Efficient commission rates of (0.1 cps, 1st qtile).

LA Capital Emerging Market

Total Costs Slight increase in costs from the prior year.

Execution Efficiency Average, when compared with peer portfolios.

Commission Recapture Did not participate.

Commission Rates

Efficient commission rates (9 bps, 2nd qtile).

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Aggregate Separate Account Portfolios - FX 2Q15-1Q16 Summary Total FX Dollars Traded: US$ 927.8 MM Total Costs/Savings vs. Avg Daily Mid-Point : -2 bp

FX Dollars Traded through Custodian: US$ 120.7 MM Total Costs/Savings

vs. Avg Daily Mid-Point : -7 bp

Review • $927.8 mm of FX Trading activity occurred during the review period, The custodian share of the FX trades was at

13%.

• FX Execution Rates were generally in line with industry benchmarks during the review period. Trades executed by the custodian and other counterparties were inline. In aggregate, Buys and Sells were randomly distributed, and within their respective daily range.

• 99% of Custodial trades were executed by Vontobel.

• Morgan Stanley (16%) , JP Morgan (15%), Custodian (13%) were allocated the largest amount of overall volume during the review period. 36% of all transactions were Forwards.

• Top 5 Currency Pairs (EUR.USD, USD.JPY, GBP.USD, USD.CAD and EUR.CHF) represented 70% of total volume during the review period. Overall, 5% of FX activity occurred in restricted markets.

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Review • FX Execution Rates were generally in line with industry benchmarks during the review period. • Vontobel had slightly higher execution rates as 41% of executions were in restricted markets. 99% of executions were

through the custodian.

Manager FX Executions 2Q15-1Q16

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Conclusions and Recommendations

Trading costs and manager’s overall trading processes were not materially

affected by the Commission Recapture program.

LADWP’s commission recapture program has been implemented in a prudent manner.

Savings from Commission Recapture further reduced gross directed rates from 1.5 cps to 1.0 cps.

Recommend the continuation of the Commission Recapture program as long

as it is fiscally viable.

FX trading costs were generally inline.

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Appendix

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Steven Glass, J.D. President and CEO

Steven Glass purchased Zeno Consulting Group, LLC, formerly known as Plexus Plan Sponsor Group, Inc. in January 2010, from its’ parent corporation Investment Technology Group, Inc. Steve first joined Plexus in 1996, and has headed up all client servicing, sales/marketing, and product development for institutional clients such as plan sponsors, mutual fund boards, and other entities exercising oversight over 3rd party investment managers. These services include fiduciary advice regarding: due diligence monitoring, transition management, construction of prudent directed brokerage programs, soft dollar audits, manager searches and terminations, and assistance to trading desks. In December 1999, his Division was named Consultant of the Year by Plan Sponsor Magazine. Prior to joining Plexus, he served as General Counsel to the District of Columbia Retirement Board, where he provided fiduciary guidance on investment management issues, and developed the Board’s Transaction Cost Monitoring Program. Steve received his Juris Doctorate from Drake University Law School and has a Master’s Degree in Law from Antioch Law School. He has written and spoken on trading costs, manager transitions and plan sponsor fiduciary obligations. Two articles (published in The Journal of Investment Consulting) have been cited as “seminal reading” for any plan sponsor concerned about transaction costs. In addition, an article on the fiduciary responsibilities of plan sponsors when implementing transitions (published in Institutional Investor’s 2003 Investment Guide), was selected by The Practicing Law Institute for inclusion in its "ERISA 2004 Course Handbook."

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Warren Chun, CFA Senior Consultant

Warren joined Zeno Consulting Group, LLC, formerly known as Plexus Plan Sponsor Group, in 2008. He provides consulting to plan sponsors, as well as supports plan sponsor clients through the preparation and production of Sponsor Monitor and Transition Management services. Warren also manages Zeno’s Fixed Income product. Prior to joining Zeno, he served as a Portfolio Manager at a convertible securities money manager and as an Analyst at Wilshire Associates, and has over 25 years of industry experience.

Vinod Pakianathan Senior Consultant

Vinod joined Zeno Consulting Group, LLC, formerly known as Plexus Plan Sponsor Group, in 1994. As Managing Director of Consulting, Vinod oversees Zeno's flagship product Sponsor Monitor. Vinod consults with some of Zeno's largest plan sponsor and fund oversight board clients, and supports product development for all Zeno services. Further, Vinod has primary responsibility for the Transition Services provided by Zeno. Vinod has a BS in Engineering and obtained his MBA from the University of Iowa. He has twenty years of industry experience.

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Chris Phillips, CFA Senior Consultant

Chris joined Zeno Consulting Group, LLC, formerly known as Plexus Plan Sponsor Group, in 2002. He services and advises institutional clients such as plan sponsors, mutual fund boards, and other entities exercising oversight over 3rd party investment managers by evaluating the trading activity and performance of managed portfolios. He provides support to Zeno through the ongoing development of products and new business. Additionally, he serves as the firm’s liaison to traditional investment consultants and other entities engaged in the use of Zeno services. Chris has over 15 years of investment related experience and served as investment analyst for the District of Columbia Retirement Board. Chris earned the right to use the Chartered Financial Analyst designation in 1998 and is currently a member of CFA Institute and the CFA Society of Washington DC.

Brian Greene Business Development

Brian joined Zeno Consulting Group, LLC, formerly known as Plexus Plan Sponsor Group, in 2006. He heads sales and business development of Zeno’s three product lines: Trade Cost Analysis, Transition Management Consulting and Directed Brokerage/Soft Dollar Audits. Prior to joining Zeno, Brian has worked for over twelve years in sales, marketing and servicing the plan sponsor community on trading costs, transition management and directed brokerage programs while working with such firms as BNY Brokerage, Lynch, Jones & Ryan and First Union Securities.

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Tracy Grassi Business Development

Tracy joined Zeno Consulting Group, LLC, formerly known as Plexus Plan Sponsor Group, in 2003. Tracy is part of Zeno’s business development team, managing all marketing campaigns, coordinating events and educating prospective clients. Prior to joining Zeno, Tracy worked for Catequil Asset Management, LLC supporting a team of equity traders. Prior to Catequil, Tracy worked for Brown Brothers Harriman & Co. as a short-term money markets trader. Tracy has more than 15 years of experience in the financial industry, most recently working with the Plan Sponsor community.

Cole Bovasso Investment Analyst

Cole joined Zeno Consulting Group, LLC, formerly known as Plexus Plan Sponsor Group, in 2003. As head of report production, Cole is responsible for overseeing the collection and processing of client data, as well as the timely delivery of finished reports. Cole also has primary responsibility for managing outside data vendors and software subcontractors essential to Zeno’s report production processes. Prior to joining Zeno, Cole worked in licensing for Virgin Records America.

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For further information please contact:

Warren Chun, CFA Senior Consultant

310.417.9042 warren.chun@zenocg.com

The information contained herein has been taken from trade and statistical services and other sources we deem reliable but we do not represent that such information is accurate or complete and it should not be relied upon as such. No guarantee or warranty is made as to the reasonableness of the assumptions or the accuracy of the models or market data used by Zeno Consulting Group, LLC (Zeno) or the actual results that may be achieved. The screen shots provided in this presentation represent hypothetical examples of certain products available from Zeno. They contain sample data and are provided for informational purposes only. None of these materials is intended to be used for trading or investment purposes or as an offer to sell or the solicitation of an offer to buy any security or financial product. These materials do not provide any form of advice (investment, tax or legal). All trademarks, service marks, and trade names not owned by Zeno are owned by their respective owners. All functionality described herein is subject to change without notice. These materials are not to be copied, displayed or transmitted in any form without the prior written permission of Zeno.

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