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10 Memorandum To Water & Power Employees Retirement Plan ( The Plan ) From RVK, Inc. ( RVK ) Subject T. Rowe Price Onsite Review Date November 8, 2017 Summary LADWP Staff and RVK visited the offices of T. Rowe Price ( TRP or the firm ) to conduct an evaluation of the investment, trading, compliance and operations personnel and processes. The analysis was focused on the people and processes that directly influence the current U.S. Large Cap Growth ( LCG ) and U.S. Large Cap Value ( LCV ) mandates. The main decision makers for each strategy were interviewed as part of the visit. Following the visit, RVK affirms it s positive rating of both strategies. Background The Plan s total exposure to the LCG and LCV strategies was approximately $699 million and $669 million as of September 30, 2017, respectively. The Plan initially retained the LCG strategy in the first half of 2010 and in the LCV strategy in the second half of Firm T. Rowe Price is a publicly traded firm based in Baltimore, Maryland (NYSE: TROW ). The firm was founded in Employees control approximately 16% of available shares. The firm is focused solely on providing investment management with additional offices in Hong Kong, London, Singapore, Sydney and Tokyo. The firm has nearly 6,000 employees across the globe with over 400 dedicated to investment management duties. The firm manages over $900 billion in assets across equity, fixed income, and multi-asset strategies. There is over $30 billion invested in the LCG strategy and approximately $20 billion in the LCV strategy. Rob Sharps, the former portfolio manager for the LCG strategy, was interviewed to discuss initiatives he hoped to start at the firm after being appointed CIO in Mr. Sharps emphasized the importance of avoiding complacency without altering the culture of the firm. One potential change aimed at employee retention and recruitment included allowing investment professionals to be based in the New York or San Francisco offices if it better suits their lifestyle. Another initiative that Mr. Sharps spreaheaded was working with the leaders of the different portfolio management groups to create more thought pieces, such as estimating the impact of the megacap technology platform companies on other industries and the potential disruptions caused by better battery technology. Focusing their employee recruitment efforts on a few key universities and increasing the diversity of investment teams are also current areas of emphasis. Personnel from the business continuity, compliance and operations procedures were also interviewed during the onsite visit. With regard to business continuity, the firm has multiple office rvkuhns.com

11 locations each having different plans in the event of a disaster. These plans include dedicated alternate office space, full data back-up and the ability of key personnel to work remotely. These plans are tested on an annual basis. Within the operations group, the most recent change was TRP contracting with BNY Mellon to handle back office functions, such as trade reconciliation and settlement. The transition to BNY Mellon is ongoing and is being implemented slowly in order to avoid any disruptions for clients. The Enterprise Risk Group ( ERG ) oversees the compliance team at the firm. The ERG provides the firm s board a dashboard which highlights the different risks faced by the firm and the estimated impact and likelihood of each risk. This dashboard helps the board determine which processes or teams need to be enhanced to handle reputational, operational or performance risks. A key focus of the ERG is reducing the cybersecurity risks at the firm. This includes hiring consultants, white-hat hackers, to attempt to breach their systems and testing employees with staged phishing attacks. The firm continues to hire personnel and purchase systems to improve their compliance and operations efforts. Team The LCG and LCV portfolio management teams are both supported by a central analyst group. The analysts within this group are charged with covering specific industries. Analysts research companies within their coverage area and assign ratings to companies, from one to five, based on their evaluation of the underlying quality, fundamental outlook, and current valuation of the company. The analysts generate reports and forecasts for each of the stocks in their prescribed universe, which are made available to portfolio managers for discussion on a formal and informal basis. The LCG strategy is led by portfolio manager Taymour Tamaddon who assumed leadership in 2016 after Robert Sharps became CIO of the firm. Mr. Tamaddon is supported by associate portfolio manager David Rowlett. Mr. Rowlett was promoted to this position in 2015 after excelling in the analyst position for the previous six years. He works closely with the central analyst team at T. Rowe Price to generate ideas, monitor holdings, and assist with client service efforts. Portfolio managers Larry Puglia, who manages the US Large Cap Core Growth strategy, and Joe Fath, who manages the US Growth Equity strategy, also contribute to the stock discussion. There are three portfolio managers, John Linehan, Brian Finn and Heather McPherson, that work together to construct the LCV portfolio. In addition to their responsibilities on the LCV strategy, Mr. Linehan manages the US Large Cap Equity Income strategy while Mr. Finn manages the US Value Equity strategy. These strategies also provide large cap value exposure and there will be holdings overlap between all three portfolios. Ms. McPherson focuses her time on the LCV strategy. RVK

12 Product Strategy and Process The LCG strategy seeks to exploit the market s tendency to overestimate earnings growth rates and overemphasize the effect of near-term trends. The universe of stocks with a market capitalization of $5 billion or greater is screened for high earnings growth and high return on invested capital, which results in an initial universe of around 200 companies. The goal is to identify companies likely to generate double-digit earnings per share growth over a three-year time frame. In order to determine this likelihood, the team reviews rankings and research conducted by members of the central analyst team. Mr. Tamaddon and Mr. Rowlett review and confirm the central analyst research and conduct further due diligence on stocks for potential inclusion in the portfolio. The portfolio will usually consist of stocks with a 60-80% annual turnover. There is a 5% cash limit, +/- 4% index relative position size limit, +/- 3% index relative sector limit, and a +/- 3% index relative industry limit. The philosophy behind the LCV strategy is that companies with stable intrinsic values and volatile stock prices provide opportunities to invest at attractive valuations. The team attempts to identify companies that have declining stock prices and possess a positive catalyst which could improve investor perception at some point in the future. The universe of stocks with a capitalization of $5 billion or greater is screened through a relative valuation filter which uses P/E, P/S and dividend yield to narrow the list of investable options. Fundamental research from the TRP analyst pool is reviewed for this list of names to identify the highest rated stocks on which to perform further research. The PM team works with the analysts to understand the ratings behind each of the stocks with special attention paid to whether the problems with each stock are correctable and whether the market is correctly valuing the financial outlook for each company. The highest ranked stocks which the portfolio management team feels have the highest probability of realizing a positive outlook are purchased for the portfolio. The portfolio holds stocks with annual turnover of 20-50%. The sector weights vary from 0.5X to 2.0X the sector weights of the value sectors of the S&P 500 and the primary sectors of the Russell 1000 Value, individual position sizes are incremental and average 1-2% with a 5% max position size. During the onsite visit, there was an in-depth discussion with each management team on the subject of sourcing substitute holdings when the Plan s account restrictions affected their model portfolio holdings. The Plan s accounts prohibit investment in non-u.s. companies and stocks where TRP has significant ownership. Both teams consult the firm s Portfolio Modeling Group which provides a list of highly-rated stocks that deliver similar risk characteristics as the restricted stocks. The LCG team is more likely to use fewer substitute stocks as they require a growth rate RVK

13 that are comparable to the restricted stocks. The LCV team will normally spread the capital across multiple stocks in order to replicate risk exposure and minimize the differences with their model portfolio. Risk Management and Trading The risk management team uses BarraOne to analyze the portfolios and holds quarterly meetings with the portfolio management teams to review the top risks within each portfolio. Portfolio managers use this information to verify that any risks in the portfolio are intentional and expected to be rewarded. The risk management team is increasing their use of the MSCI Barra suite going forward as they reduce their use of internally built risk systems created using Matlab. A trading demonstration was conducted during the onsite visit. This demonstration included the Portfolio Modeling Group receiving a trade order from a portfolio manager, reviewing the multiple checks required to verify that the trade is appropriate for a given portfolio and pre-trade analysis provided to the trading group. Trades are implemented using the Charles River order management system and Portware for execution management. Traders are measured against the stock price at the time the order was received with the goal being to execute the trade near that arrival price while minimizing market impact and commission costs. Every affected client receives average cost and trades are allocated on a pro-rata basis. Conclusion The primary change associated with the Plan s accounts was the appointment of a new portfolio manager for the LCG strategy in Performance of the LCG strategy continued to be positive after Mr. Tamaddon assumed leadership and he is supported by a deep team of portfolio managers, analysts and risk management personnel. The management of the LCV strategy also experienced a change with the retirement of Mr. Rogers in 2015, but has remained stable since that time. Based on the discussions with investment, trading, compliance and operations personnel, RVK affirms the same level of conviction in both strategies as expressed in the contract renewal memos issued in RVK