WATER AND POWER EMPLOYEES RETIREMENT, DISABILITY AND DEATH BENEFIT INSURANCE PLAN 111 NORTH HOPE STREET ● ROOM 357 ● LOS ANGELES, CALIFORNIA 90012 ● (213) 367-1712 ● FAX (213) 367-1891

BOARD OF ADMINISTRATION LINDA P. LE (INTERIM) LATANYA BOGIN, PRESIDENT RETIREMENT PLAN MANAGER BARRY POOLE, VICE-PRESIDENT MARTIN L. ADAMS MONETTE CARRANCEJA ADOLFO FELIX ASSISTANT RETIREMENT PLAN MANAGER MARIO IGNACIO CYNTHIA McCLAIN-HILL WILLIAM FENG (INTERIM) VACANT (RETIREE MEMBER) ASSISTANT RETIREMENT PLAN MANAGER JEREMY WOLFSON CHIEF INVESTMENT OFFICER

July 27, 2020 REQUEST FOR PROPOSAL: GENERAL CONSULTANT Dear Proposer: The Board of Administration of the Water and Power Employees’ Retirement Plan (the Board), on behalf of the Water and Power Employees’ Retirement, Disability, and Death Benefit Insurance Plan and the Retiree Health Benefits Fund (the Water and Power Employees’ Retirement Plan, or the Plan), is seeking to hire the services of General Consultant after a request for proposal (RFP) process. The RFP and other required documents may be downloaded from the Plan’s website http://retirement.ladwp.com. Please submit the completed response to this RFP by 4:00 P.M. PT, Friday, August 21, 2020, in the following formats:

• One (1) hardcopy mailed to:

Los Angeles Department of Water and Power Employees’ Retirement Plan Carlo Manjikian, Senior Investment Officer 111 North Hope Street, Room 357 Los Angeles, California 90012-4207

• A master PDF version of the entire RFP response on a USB drive. The PDF should be editable/unencrypted and replicate the hardcopy of the RFP response in a single file.

• A PDF version of the RFP on a USB drive (it can be the same USB drive used above

with the questionnaire responses, attachments and exhibits as separate files. FACSIMILE, EMAIL, OR CD-ROM COPIES WILL NOT BE ACCEPTED FOR DEADLINE PURPOSES. HARD COPIES SUPPLEMENTED WITH A USB DRIVE COPY ARE REQUIRED FOR CONSIDERATION FOR THE GENERAL CONSULTING SERVICES. If you are selected as a finalist, please be prepared to provide TEN (10) additional hard copies of your RFP response. From the RFP release date until a contract for these services is fully executed, firms, including the incumbent, are prohibited from communicating with Board members or Staff, other than the RFP Administrator, concerning this RFP or the resulting contract. Any communications could be

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considered attempts to lobby or market services and is therefore prohibited. Firms will be disqualified from contract consideration if the prohibition is not honored. Any questions regarding this RFP should be submitted to Carlo Manjikian at investments@ladwp.com prior to 4:00 P.M. PT, August 7, 2020. Responses to questions will be shared with all participating Proposers. Please do not change the order of the RFP Questionnaire in your response.

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Table of Contents General Consultant

I. INTRODUCTION II. SERVICES TO BE PROVIDED III. MINIMUM QUALIFICATIONS CERTIFICATION IV. REQUIRED PROPOSAL DOCUMENTS V. PROPOSAL EVALUATION CRITERIA VI. SUBMISSION PROCEDURES VII. FEE PROPOSAL VIII. RFP QUESTIONNAIRE IX. COMPLIANCE DOCUMENTS X. CERTIFICATION

APPENDICES

APPENDIX A - Contract Requirements APPENDIX B - Non-Discrimination, Equal Employment Practices

Provision/ Affirmative Action Provisions; Living Wage Ordinance Forms and Worker Retention; Certification of Compliance with Child Support Obligations; W-9 Form; Tax Registration Certificate and/or Vendor Registration Number and Office of Finance Tax and Permit Division Contacts

APPENDIX C - Information and Vendor Questionnaire Package Contents (Exhibits A-M)

APPENDIX D - Statement of Investment Objectives, Goals, and Guidelines

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I. INTRODUCTION The Los Angeles Water and Power Employees’ Retirement, Disability, and Death Benefit Plan, including the Retiree Health Benefits Fund, administers a defined benefit pension plan with assets in excess of $15 billion. Selection of the General Consultant will be based upon demonstrated ability of the professionals to provide the expertise or assistance needed.

II. SERVICES TO BE PROVIDED

The Plan is seeking qualified Proposers to provide general consulting services. Under the direction of the Board, the Retirement Plan Manager and Retirement Office investment Staff, the General Consultant will (i) provide general consulting services for the Plan’s approximately $15.0 billion portfolio; and (ii) discharge of duties solely in the interests of the Plan’s participants and beneficiaries and with the judgment, care, skill, prudence and diligence that an expert would use in a similar situation. These services may involve several asset classes, including but not limited to: large cap and small cap domestic equity, developed markets equity, emerging markets equity, domestic fixed income, global fixed income, U.S. bank loans, treasury inflation protected securities, and alternative investment assets. As of March 31, 2020, the client’s investment portfolio was valued at approximately $14.1 billion in assets. The table below highlights asset allocations as of that date: Current

Allocations Asset class Benchmark 3/31/2020 Targets Domestic Equity Russell 3000 31.8 24.7 International Equity MSCI ACWI ex US IMI 17.5 20.4 Global Equity MSCI ACWI IMI 0.0 2.9 Fixed Income BLENDED BENCHMARK 25.2 25.0 Real Estate NCREIF + 50 bps 8.0 8.0 Hedge Funds CPI + 3% 5.2 5.0 Real Return CPI + 3% 4.5 5.0 Private Equity Russell 3000 + 3% 6.4 8.0 Cash --- 1.3 1.0

The scope of work covers general consulting to the Board by providing advice and expertise with respect to the investment and management of assets for a period of three years. The General Consultant is expected to perform its duties in accordance with the Plan’s investment guidelines. The proposer must be able to provide all of the services listed below unless otherwise indicated.

1. Advise on the development, implementation and/or revision of investment policies

and guidelines. 2. Analyze and advise on the capabilities of investment managers, including the

analysis of an investment manager’s personnel, investment philosophies and processes, internal risk controls, risk-adjusted performance and performance relative to benchmarks and peers.

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3. Conduct and/or assist in manager searches, selections, watch list placements and

terminations. 4. In conjunction with the Staff, periodically review the performance of investment

managers through various methods, including interviews and on-site visits. 5. Provide annual asset allocation reviews and recommendations, including annual

reports of general economic conditions and forecasts of interest rates, inflation, and risk and returns for all asset classes.

6. Advise on portfolio structure (e.g. active vs. passive, investment style mix) and

rebalancing strategies/policies. 7. Provide analytical software (or an on-line system) that will allow Staff to analyze

and evaluate asset allocation optimization scenarios, investment structures and styles, and manager performance (including the capability of determining if a manager’s performance is within established limits for tracking error or active risk).

8. Provide research and reports on various investment topics, and provide educational

presentations to the Board or Staff as requested. 9. Perform quarterly performance analysis by manager, asset class, and total fund,

including peer universe comparisons at the asset class and total fund levels, and provide quarterly reports on same.

10. Work cooperatively with the Plan’s actuarial consultant to provide periodic

asset/liability studies as requested (generally every three to five years). 11. May be required to assist with the selection of other consultants. 12. Advise on prospective alternative investment assets, such as hedge funds, private

credit, commodities, timber, overlay strategies, etc. 13. Work with Staff in the preparation of performance reporting. 14. Regularly attend Board Meetings.

III. MINIMUM QUALIFICATIONS CERTIFICATION

All proposals will be evaluated in two areas: 1) the Required Minimum Qualifications and 2) the Preferred Criteria, as specified below.

1. Required Minimum Qualifications (RMQ)

The Proposer must meet all of the following RMQs; otherwise its proposal will be rejected. For each RMQ, the Proposer must provide a detailed response stating how the Proposer complies and indicating that the Proposer has met the RMQ as of June 30, 2020. A response that is limited to a reference to other sections of the RFP will be insufficient. Any known deviations from the RMQs

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below must be disclosed in detail on this form.

1) Organization

a. Proposer must have been in existence for at least five (5) full years. ______(initial)

b. Proposer must not have been the subject of material litigation or claims or censured by the Securities and Exchange Commission (SEC) or subject to regulatory action within the last three (3) years. ______(initial)

c. Proposer must carry the appropriate coverage for errors and omissions and

professional liability insurance as indicated in Appendix A of this RFP. ______(initial)

d. The Proposer must comply with City of Los Angeles and the Los Angeles

Department of Water and Power requirements as indicated in Appendices B & C of this RFP. ______(initial)

e. The Proposer must agree to obtain a City of Los Angeles Business Tax

Registration Certificate. ______(initial)

f. The Proposer must complete the RFP questionnaire in its entirety as well as the City’s required attachments pertaining to Worker’s Compensation, Child Care and Equal Employment Opportunity, if applicable. ______(initial)

2) Investment Professionals

a. The Proposer must have provided investment consulting services

comparable to those detailed in the “Services to be Provided” on Section II of this RFP to at least three (3) public pension plans with at least $5 billion in assets, for a minimum of three (3) years as of June 30, 2020. ______(initial)

b. The Proposer must have a minimum of three (3) years full retainer lead institutional investment general consulting experience and not less than three (3) years with the firm. ______(initial)

c. The Proposer must be directly responsible for the management of the

account, and all personnel responsible for the account must be employees of the firm. ______(initial)

d. The Proposer must have at least five (5) investment professionals dedicated

full time to general consulting services. ______(initial)

e. The Proposer must be able to recommend changes to investment policies and investment guidelines. ______(initial)

f. The Proposer must have representatives available to present to and consult

with the Board on a wide variety of investment-related issues. ______(initial)

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3) Fiduciary Role a. The Proposer must be able to act as a fiduciary with respect to the Plan.

______(initial)

2. Preferred Criteria (PC) The following PCs are strongly desired by the Plan. Although failure to meet one or more of the PCs may not necessarily result in disqualification, Proposers who fail to meet one or more of the PCs may be considered less favorably in the selection process. Please provide a detailed answer for each of the PCs. Please do not only refer to other sections of the RFP. Any known deviations from the PCs below must be disclosed in detail on this form. 1. The Proposer should not have been involved in any material litigation in the

past five (5) years. ______(initial) 2. The Proposer should have at least three (3) existing U.S. based, tax-exempt

clients, each having at least $10 billion in assets receiving similar general consulting services. ______(initial)

3. The Proposer should be SEC registered. ______(initial) 4. The Proposer should have managed at least five (5) clients with a portfolio of at

least five (5) different asset classes within the last twelve months ending June 30, 2020. ______(initial)

Certification

By signing below, an authorized representative of the Proposer warrants that the Proposer meets all of the REQUIRED MINIMUM QUALIFICATIONS and understands the PREFERRED CRITERIA, as detailed above.

Authorized Signature (Print Name) Title Date Company

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IV. REQUIRED PROPOSAL DOCUMENTS

Any proposal that does not provide the information requested below or does not meet all the requirements will be rejected. All responses must be valid and shall remain in effect for at least 180 days to allow for contract negotiations. A. Sequence of Events

Event Date Provide written notification (prefer email) to the Plan of intent to submit proposal July 31, 2020

Deadline for any questions the Proposer may have regarding the information presented in this Request for Proposal. Requests must be made in writing (prefer fax or email). Include contact information and name of consulting service.

August 7, 2020

Deadline for submission of proposals August 21, 2020

Complete proposal evaluation TBD Expected presentations by finalist(s) TBD Expect to complete due diligence, contract negotiations, etc. TBD

B. Cover Letter

A cover letter should accompany the proposal and include the following: the company name and address, and the name, title or position and telephone number of the person or persons authorized to bind the organization to all commitments made in the proposal. The letter must be signed by the person or persons authorized to bind the Proposer contractually. The letter must also include the following statement:

“We have read the Request for Proposal (RFP) for pension plan

General Consulting services and fully understand its intent. We warrant that all information and statements in this RFP response are complete and true.

We certify that we have adequate personnel, equipment and facilities to provide the Plan’s requested services. We understand that our ability to meet the criteria and provide the required services shall be judged solely by the Retirement Board.

We have thoroughly examined the RFP requirements and our proposed fees cover all the services that we have indicated we can meet. We acknowledge and accept all terms and conditions included in the RFP. We acknowledge the receipt of any and all amendments made to this RFP.”

C. Signed Minimum Qualifications Certification

Proposers must initial and describe their compliance with all RMQ, as directed, sign

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the Minimum Qualifications Certification page (Section III), and include it as part of the response to this RFP.

D. Request for Proposal (RFP) Questionnaire

Proposers must complete and return all sections of the Proposal Questionnaire (Section VIII). The information requested must be provided in the presented format.

E. Contract Period

The contract period will be for a minimum of three years.

F. Insurance Requirements

It is the policy of the Department and the Plan that, upon the award of a contract, the selected Proposer must provide evidence of insurance that conforms to the insurance requirements of the proposal. Insurance requirements are explained in detail in Appendix A - “Contract Requirements” and the types and amounts of coverage required for this project are specifically outlined in Attachment A – “Contract Insurance Requirements” of Appendix A. When and if you are awarded a contract/agreement, acceptable evidence of required insurance, from insurers acceptable to the Department, will be required to be submitted within 30 days of the date of award and maintained throughout the term of the contract. Said evidence of insurance must be on file with the Risk Management Section of the Department in order to receive payment under any contract for services rendered, and in order to commence work under your contract.

For further information regarding these requirements, please contact:

Los Angeles Department of Water and Power Risk Management Section Phone: (213) 367-4674 Fax: (213) 367-4680

The Proposer selected will be required to comply with the insurance terms and conditions of the Plan and the City of Los Angeles, as discussed and enumerated in Appendix A of this RFP.

G. Other Relevant Items

Proposers must include their firm’s most recent annual report and/or statement of financial condition, as well as Certificate(s) of Insurance proving coverage as required by the Board and the City of Los Angeles (see Appendix A). Proposers must complete and return all other attachments as specified in the Appendices.

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V. PROPOSAL EVALUATION CRITERIA

The factors to be utilized in evaluating the proposals will include, but are not limited to, the following: 1. Experience (both quality and quantity) of the consulting organization and its staff in

providing pension plan services for other public pension plans. 2. Qualifications of professional staff to be assigned to the account, with particular

attention paid to relevant experience with public pension funds. 3. The quality, conciseness and completeness of the proposal. 4. The quality of the sample reports provided. 5. Reasonable fees.

VI. SUBMISSION PROCEDURES

A. Deadline

THE DEADLINE FOR SUBMISSION OF RESPONSES IS AUGUST 21, 2020. ALL MATERIAL MUST BE RECEIVED BY THE CLOSE OF BUSINESS (4:00 P.M. PT) ON THAT DAY. THIS DEADLINE WILL BE STRICTLY ENFORCED. Responses must be signed by an individual with authority to bind the firm and the authority of the individual signing must be stated thereon. • One (1) hardcopy mailed to:

Los Angeles Department of Water and Power Employees’ Retirement Plan Carlo Manjikian, Senior Investment Officer 111 North Hope Street, Room 357 Los Angeles, California 90012-4207

• A master PDF version of the entire RFP response on a USB drive. The PDF should be editable/unencrypted and replicate the hardcopy of the RFP response in a single file. • A PDF version of the RFP on a USB drive (it can be the same USB drive used above with the questionnaire responses, attachments and exhibits as separate files.

Copies must be sealed in an envelope or wrapping, which shall be clearly marked:

Name of Firm General Consultant RFP

If you are selected as a finalist, please be prepared to provide TEN (10) additional

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hard copies of your RFP response if requested.

B. Contact Information

Any questions regarding this RFP should be submitted in writing to the Plan, by emailing Carlo Manjikian at investments@ladwp.com prior to 4:00 PM PDT, on August 7, 2020. Responses to questions will be shared with all participating Proposers.

C. Preparation of Proposal

Each proposal shall be prepared simply and economically avoiding the use of elaborate promotional materials beyond those sufficient to provide a complete, accurate and reliable presentation. The Proposer understands and agrees that the Plan shall not have financial responsibility for any costs incurred by the Proposer in responding to this RFP. The responses become the property of the Plan and will subject to public inspection, consistent with subsection F below.

D. Withdrawal

Should the Proposer no longer satisfy the criteria or wish to decline further consideration, please notify the Plan by emailing Carlo Manjikian at investments@ladwp.com. A proposal may be withdrawn or modified at any time prior to the deadline date and time.

E. Contract Negotiations

This RFP in no manner obligates the Plan to the eventual procurement of services until confirmed by a contract. The Plan’s Board Members reserve their exclusive right to reject any or all proposals with or without reason. After a review of the proposals, and final presentations, the Plan intends to enter into contract negotiations with one General Consultant. The negotiations could include all aspects of services and fees. The firm awarded the contract will be required to enter into a written contract with the Plan in a form approved by the Board, including the standard contract requirements and language outlined in this RFP. This RFP and the proposal, or any part thereof, may be incorporated into and made part of the final contract.

F. Confidential or Proprietary Information

All information submitted in response to this RFP, regardless of whether it is marked or otherwise designated as “confidential,” is considered a public record and subject to disclosure without limitation in response to applicable requests pursuant to the California Public Records Act (Government Code Section 6250 et seq.).

VII. FEE PROPOSAL

FIRM Subsequent to being awarded the contract, in no case will the negotiations result in a fee which is higher than the fee contained in this proposal.

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In preparing the fee schedule, proposer must consider the requirements described in this RFP. Please provide fee schedules as requested in the following table.

Consulting Service Contract period of three years

General Consulting $

Total Fee $

The following should be taken into consideration:

1) The fees are to be proposed in U.S. Dollars.

2) All services will be paid quarterly in arrears.

3) Are the fees quoted negotiable?

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VIII. RFP QUESTIONAIRE

CITY OF LOS ANGELES WATER AND POWER EMPLOYEES’ RETIREMENT PLAN AND RETIREE HEALTH BENEFITS PLAN

111 NORTH HOPE STREET ROOM 357 LOS ANGELES, CALIFORNIA 90012-4207

GENERAL CONSULTANT QUESTIONNAIRE

Firm Name: ______________________________________________________

Contact Name: ____________________________________________________ Address: _________________________________________________________ Phone: _________________________ Fax: _____________________________

In order to be evaluated for this service, all responses must be completed using the format presented in the RFP. This includes question numbers, section titles, labels, etc. Do not re-order questions, change titles, or in any way change the formatting of the RFP.

PART 1: ORGANIZATION

1. Provide the following information:

Specific (proper) name of organization Company’s address Year began providing general consulting services

2. If selected for general consulting services, what is the name of the legal entity that

will be represented on the contract(s)? 3. Who should be contacted regarding any questions about the information contained

in your response to this RFP? Who will be the lead consultant? Provide the following contact information for each: title, phone, email, and address.

Name/Title Phone Email Address RFP Contact Lead Consultant

4. Provide a general description and history of the firm.

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5. Briefly describe your firm’s background and experience in providing general consulting services. In what year did your firm begin providing general consulting services and it what year did the firm begin providing general consulting services to public pension plan and tax-exempt clients?

6. Describe the ownership structure of the firm, including any subsidiaries, affiliated

companies or joint ventures. Are there any anticipated ownership changes and/or influences of parent organization(s)? If yes, please describe.

7. List all current owners of the firm and % ownership

Name/Company Relationship to Firm (if any) % Owned

8. Identify within which business unit/entity your consulting group is legally and

operationally situated. Also include a detailed organizational chart of your general consulting operations. Identify key geographic locations from which your general consulting business is operated. Please list the activities of other groups within the business unit in which your general consulting business is located.

9. Describe any significant organizational or personnel changes with the past three

years. Do you anticipate any changes in the future? 10. What is the importance of the general consulting services to the business strategy

of the firm and its parent company (if applicable)? Describe why you believe your firm will continue to be committed to the business.

11. Has your firm or any individual related to the consulting team, been the subject of

an audit by the SEC, IRS, DOL, NASD, or other regulatory body during the past three years? If so, please describe in detail.

12. Disclose any sanctions or disciplinary actions taken against the firm by the SEC,

NASD, or other regulatory body within the last five (5) years. 13. Disclose any legal claims or arbitration hearings the firm has been involved in,

settled, or been required to pay within the last five (5) years. 14. Describe the levels (dollar amounts) of coverage the firm has for SEC required

fidelity bonds, errors and omissions insurance, or any other insurance coverage the firm has to indemnify general consulting services clients against losses. Please include the maximum amount of coverage per claim.

PART 2: PERSONNEL 15. Complete the following table with information for the key professionals assigned to

the general consulting team. Please include both the front and back office teams. Briefly explain each individual’s responsibilities and identify who would serve as the client relationship manager, the general consultant, and consultant coordinator.

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Name (include designations) Title Location

Years with Firm

Years of General

Consulting Services

Experience Area of

Responsibility

16. Provide biographies and/or résumés of all personnel associated with general

consulting services team. 17. Please discuss the evolution of the general consulting services team including how

long the current team has been together? 18. Do you subcontract any aspect of your firm’s general consulting services to a third

party? If yes, please describe the nature and the rationale of these relationships. 19. Is your general consulting services group separate and distinct from the rest of the

organization? If not, how do you address the potential conflict of interests that can arise?

20. Does your firm have a succession plan in place for key senior personnel on the

general consulting services team? Please describe. 21. What policies control the workload as it relates to the number of clients serviced by

each account lead? Is there a limit on the number of accounts that an account lead may handle?

22. Indicate the number of personnel changes within the general consulting services

group for the past five (5) calendar years ending December 31, and for the first six (6) months of 2020 in the table below. Please breakout turnover by functional areas. Discuss the causes and impact of any turnover.

Position

2015 2016 2017 2018 2019 June 30,

2020

Gain Loss Gain Loss Gain Loss Gain Loss Gain Loss Gain Loss Principal, Managing Director

Research Client Servicing/Marketing

Consultants

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Manager Search (database) Data Processing

Legal Performance Evaluation of Technical Personnel

Administrative Other

23. List the names of key staff that have joined or left the firm over the past five (5)

years as of December 31, 2019. Include their title, functional area and start date/end date. Also note any pending team changes that have occurred or are anticipated to occur subsequent to this date.

PART 3: CLIENT INFORMATION

24. How many institutional clients does your firm currently provide a full range of

general consulting services as of June 30, 2020?

Public DB

Corp DB

Taft-Hartley End/Fdn DC

Mutual Plans Other

No. of Clients Under $1 billion $1 billion - $10 billion More than $10 billion

Indicate the total amount of assets under advisement for pension fund consulting services at the end of each calendar year from 2015 to 2019, and for the first six (6) months of 2020. Please state assets in US Dollars.

12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 6/30/20 No. of Clients Assets ($)

25. Please list three (3) clients similar in size and asset allocation to the Plan as references for whom you have provided general consulting services. Include client name, address, name and telephone number of contact person, and portfolio size.

26. Indicate the approximate aggregate market value in US Dollars of your full service

clients' investments in various asset classes as of June 30, 2020 (do not overlap amounts). Please include only clients in which you are the primary General Consultant for.

Domestic Equities Non-U.S. Equities Domestic Fixed Income

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Non-U.S. Fixed Income Real Return (excluding Real Estate) Real Estate Private Equity Private Credit Hedge Funds Cash Other TOTAL All Client’s Assets (100%)

27. Provide a list of clients that have terminated your services within the last five (5)

years, asset size of the client at time of termination, and the reasons for termination of each.

PART 4: ETHICAL CONDUCT 28. Has any current or former employee associated with the general consulting team

been party to any investigations, litigation (including any settled out of court), legal judgments or regulatory action during the past five (5) years ending June 30, 2020, while at this or any other firm? If so, please provide (i) a brief synopsis, (ii) the current status, and (iii) a comment on the action’s merits.

29. In addition to the investment consulting fees paid to your firm by clients who retain

your firm as their investment consultant, what other sources of revenue does your firm and/or your firm’s affiliates receive that relate (directly or indirectly) to the provision of investment consulting services?

30. List all services the firm, its principals, or any affiliate provide that generate

revenues for the firm and indicate the applicable percent of the firm’s total revenue during the last five (5) years ending December 31, and for the first six (6) months of 2020. Insert % under each year for each of these:

2015 2016 2017 2018 2019 6/30/20 Consulting for Plan Sponsors Money Management activities Services to Money Managers Services to Plan Sponsors Project-by-Project based fees Revenues from Subsidiaries

31. Did these services produce 100% of the firm’s revenue during the reporting period?

If not, provide information regarding differences. 32. Does your firm or any of its affiliates manage money or provide trust services for

clients? Does your firm have relationships with money managers that you recommend, consider for recommendation, or otherwise mention to clients for consideration? If so, please describe those relationships.

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33. Is your firm or affiliate a broker/dealer? If yes, does this broker/dealer execute trades for portfolios for which your firm provides consulting services? Do you have any arrangement with broker/dealers under which you or an affiliated/related company will benefit if money managers place trades for their clients with such broker/dealers?

34. Is the firm owned, in whole or in part, by a money management firm(s)? Has the

firm received loans from any money management firms, their subsidiaries, or principals? Does the firm manage money for the parent or affiliate? Does the firm’s parent or affiliate manage money for the firm? If so, explain.

35. Does the firm keep a record of all manager recommendations made to plan sponsor

clients? What percentage of manager turnover occurs during a normal year for your plan sponsor clients?

36. How are consultants’ recommendations to clients reviewed and monitored by your

organization? Does the firm adhere to a level of consistency in consultant recommendations?

37. Provide levels of coverage for fidelity bonds, errors and omissions coverage, and

other fiduciary coverage that your firm carries; include the name and address of the coverage provider.

38. Has the firm, its principals or any affiliate ever been the focus of a non-routine SEC

inquiry or investigation or a similar inquiry or investigation from any similar federal, state or self-regulatory body or organization? If yes, please provide details.

39. Has the firm been a party to any material litigation concerning fiduciary

responsibility or other investment related matters? If yes, please provide details. 40. Has the firm submitted a claim to your errors & omission, fiduciary liability and/or

fidelity bond insurance carrier(s)? If yes, please provide details. 41. Please provide a copy of your code of ethics policy. 42. Has the firm adopted the CFA Code of Ethics and Standards of Professional

Conduct or a written code of conduct or set of standards for professional behavior? If so, please attach the Code of Conduct and/or state how the CFA code of Ethics is monitored and enforced.

43. How does the firm identify and manage conflicts of interest? 44. Are there any potential conflicts of interest the firm would have in providing services

to the Plan? If yes, explain. 45. Disclose any relationship you have or have had with any Board member, consultant,

or employee. If there are no conflicts of interest, please state, “There are no conflicts of interest to report.”

46. Do you subcontract or outsource any parts of your investment consulting business?

If yes, please describe in detail which parts are performed externally and the reason

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for doing so. Please provide the name(s) of the providers, their office location, how long they have been in business, and the qualifications of the specific people who will be working on our account.

PART 5: INVESTMENT POLICY/ASSET ALLOCATION 46. Describe your public pension plan experience and approach in developing and

monitoring, and updating investment policies and objectives for a diversified pension plan. Comment on your process for analyzing a client's portfolio structure, for recommending modifications, and frequency. Describe the manner in which you assist Boards in developing and monitoring investment policy, strategy and asset mix.

47. Describe your firm’s experience in customizing asset allocation studies for

individual clients, including integration of liabilities and funding. How often does your firm recommend reviewing asset allocation?

48. Discuss how risk is assessed in the overall portfolio. Describe techniques that you

support for managing risk and risk budgeting. 49. Discuss how you optimize the number and types of managers and how you assess

the effect of including new managers. Discuss any statistical analysis that is performed.

50. What is your firm’s philosophy on active vs. passive investment management? 51. What is your philosophy on commingled vs. separate accounts? Describe any style

preferences, biases or reasons for such that your firm has towards:

• value vs. growth investing • large vs. small cap investing • non-US investments • emerging markets investments • real estate • private equity • timber, agriculture • infrastructure, commodities, TIPS • hedge funds • private credit

52. Briefly discuss your views on portfolio rebalancing, in particular:

• Trigger points for portfolio rebalancing (calendar, percentage, etc.) • Relative market value vs. volatility • Rebalancing to threshold vs. to target • Should the portfolio be rebalanced between asset classes, or also down to

the individual manager level? • How should illiquid asset classes be treated for rebalancing purposes?

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53. What systems will you make available to the Plan’s Staff to evaluate "what if" asset allocation scenarios?

54. Describe the firm’s capability and experience in conducting asset-liability studies.

How should a defined benefit plan’s liability structure, funding level, and changes in the contribution level be incorporated in the asset allocation decision? Given the long duration of pension liabilities, what is the most appropriate means of asset matching for those liabilities? Is this covered in your full retainer fee?

55. Describe the firm’s process for assisting clients with investment policy guideline

development and review. What specifically would the firm do to develop or review the policies of the Plan? How would the Plan be involved in the process?

PART 6: MANAGER DATABASE & SEARCH 56. Please describe the firm’s manager search process. How does the firm initially

screen managers? What criteria are emphasized in the latter stages of a search? How many manager searches did the firm perform in calendar year 2019 and for the first six (6) months of 2020?

57. How many different managers were recommended by you for each year from 2015

to 2019 and for the first six (6) months of 2020, in each asset category (as listed in question 26)?

58. During calendar years 2015, 2016, 2017, 2018, 2019, and for the first six (6) months

of 2020, what type and how many searches did you conduct for clients with over $5 billion in assets for each year?

59. Describe your experience and capabilities in conducting searches for investment

advisors and other investment services. 60. Describe your database that is used for manager searches.

a. How many managers do you maintain on your manager search database? b. Is your system purchased or proprietary? c. How do you gather, verify, analyze, and update manager information? How

frequently? How many years of performance data is on the system, and are simulated returns included?

d. How do you categorize managers? List manager styles, characteristics that

distinguish each style in your classification system, and include concise definitions.

e. What criteria do you use in evaluating managers? f. Would Plan’s Staff have access (web, remote access, etc.) to your database?

61. What fees or other consideration do you receive from managers who wish to be

maintained on your database?

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62. Describe the firm’s methodology and sources of data for analyzing and evaluating

a potential manager’s performance. Discuss benchmarks and comparisons with other managers. How is risk factored into this analysis? How do you verify investment manager information such as performance history and their compliance with Global Investment Performance Standards (GIPS)?

63. Briefly describe how a new client would transition to your firm. Do you backload

transaction and/or investment performance data? What problems have you encountered in transitioning a new client to your firm from their previous consultant? Please provide at least one reference (name, plan name, address, phone, email) of a recent client of yours whom we can contact regarding the transition process.

64. Provide one example of a written recommendation to hire, and one

recommendation to fire a manager that you have made within the last 12 months. Include copies of supporting documentation you provided to your client.

PART 7: ALTERNATIVE INVESTMENT CONSULTANT EXPERIENCE 65. Describe the factors you would consider in developing an effective alternative

investment policy (private equity, private credit, hedge funds, timberland, commodities, infrastructure, etc.) for a large public pension plan. Please describe how you would work with the Plan’s Private Equity and Real Estate consultants to incorporate your ideas into the Plan’s private investment allocations of the portfolio.

66. Describe your alternative assets investment philosophy as it applies to a client’s

total portfolio, alternative investments, risk, and expected returns. 67. Describe your firm’s capabilities and services with respect to hedge funds, private

credit, infrastructure, commodities, timberland, and other Real Return strategies. Does your firm have dedicated professional staff in these areas? What research and consulting work has your firm conducted for clients in these areas and indicate at what point in time your firm began providing those services? Are product offerings and consulting in the alternative space included in the general consulting fees?

PART 8: REPORTS

68. Include in Exhibit A, a sample of your firm’s standard reports and include samples

of any other kind of report that is relevant to the services requested herein. If reports include an executive summary, please include a sample in Exhibit A.

69. Provide a list of any research reports that were prepared for your clients or the

investment industry in the last three (3) years as of June 30, 2020. Include the topic of the research or article, and the name of the publication (and date) where it appeared, if applicable. Include one sample in Exhibit B.

PART 9: OTHER 70. Briefly summarize your philosophy relating to the consultant's relationship with

Boards, Staff, investment managers, or brokers.

22

71. Are there any standard or related services provided by you that are assigned to a

third party vendor? 72. What is your view on performance based fees for managers? Do you typically

recommend performance-based fees over asset-based fees (or vice versa)? If you have a preference of one over the other or no preference, please explain why?

73. Provide a yardstick, benchmark, measurement methodology, or other technique

that a public fund plan sponsor might use for ongoing quantitative and qualitative evaluation of a full service consultant.

74. Please describe your emergency preparedness and backup office/computer

system plans. Have you ever had to activate any parts of the plan? If so, describe the effectiveness of the plan and any post-activity modifications to that plan. How often do you test the plan?

75. Describe how your firm implements and uses the latest technology, and how such

technology adds value to your clients. What internet based technology/services do you provide to your clients?

PART 10: FEE PROPOSAL 76. List the frequency or schedule of specific services that will be provided under your

proposed fee (in Section VII). 77. Are your fees negotiable? 78. If your firm is bidding on more than one of the available consulting positions, please

provide your individual and bundled bids.

PART 11: MBE/WBE/OBE (Information provided in this section will be recorded for information-gathering purposes, but it will not be used in any way to evaluate or recommend potential candidates.)

79. Please describe the ownership structure of the organization by completing the table

below (as of June 30, 2020):

Minority/Female Ownership Structure % % African American Owned % Asian Owned % Hispanic Owned % Other Owned % Minority Female Owned % Non-Minority Female Owned % Total Minority & Female Ownership

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80. Please describe the composition of the firm’s workforce at the total firm level and for the product proposed for this mandate by completing the following table (as of June 30, 2020):

Firm-wide Product Proposed # of

Employees % of Total Employees

# of Employees

% of Total Employees

African American Asian Hispanic Other Minority Minority Female Non-Minority Female % Total Minority & Female Workforce

81. Supply information on any programs and initiatives that the firm has in place that

support minority and/or women in the workplace. 82. Does your firm sub-contract/outsource any other specific services to minority and/or

women owned businesses? Please describe. IX. COMPLIANCE DOCUMENTS

1. Appendix A contains the following documents:

a. Contract Requirements, including information on Insurance and Minority/Women Owned Business Enterprises

2. Appendix B contains the following documents:

i. Non-Discrimination, Equal Employment Practices Provisions, Affirmative Action

Provisions ii. Total Composition of Workforce iii. Living Wage Ordinance Forms and Service Contract Worker Retention iv. Certification of Compliance with Child Support Obligations v. W-9 Form vi. Tax Registration Certificate and/or Vendor Registration Number and Office of

Finance Tax and Permit Division Contacts

3. Appendix C contains the following documents:

a. Information and Vendor Questionnaire Package Contents (Exhibits A-M)

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END OF RFP

25

X. CERTIFICATION

The following certifies that all services and systems described are available, deliverable, and performed by professionals abiding to the highest fiduciary standards. In addition, audits performed by independent parties are diligently accomplished and documented. The undersigned hereby certifies that he or she is authorized to execute this RFP on behalf of _____________________________ and that the information, commitments, representations, and other provisions of the foregoing RFP are true and correct.

Name _______________________________________ Signature _______________________________________ Title _______________________________________ Date _______________________________________

APPENDIX A

Contract Requirements

1. CONFIDENTIALITY/ CONFIDENTIAL INFORMATION

a. Contractor shall maintain the confidentiality of all records, data, and other information disclosed by the Plan or its agents to Contractor and its Agents relating to the Account, Portfolio, or the Contract (“Plan Information”). For the avoidance of doubt, Plan Information shall include all Portfolio or Account-specific reports created by Contractor for the Board and/or the Plan under this Contract. Any such Portfolio or Account-specific reports shall be the property of the Board and shall be subject to the confidentiality provisions contained herein. Furthermore, all information furnished by the Board or the Plan to Contractor under this Contract shall be regarded as Plan Information by Contractor, unless written authority to the contrary has first been secured from the Board or the Plan, as applicable. Contractor shall not disclose Plan Information to any third parties (including its other clients) and shall maintain its confidentiality according to all applicable federal, state, county, and local laws, regulations, ordinances, and directives relating to confidentiality. Contractor shall inform all employees and Agents performing services under the Contract of the confidentiality provisions of this Contract. Contractor shall promptly notify the Plan of any breach of confidentiality or unauthorized access to or release of any confidential information. Notwithstanding the foregoing paragraph, Contractor may disclose such information (i) as required by law, (ii) as requested in writing by the Plan, or (iii) upon request by Contractor subject to the written consent of the Plan.

b. All confidential information and advice furnished by Contractor to the Board or the Plan under this Contract (“Contractor Information”) shall be treated as confidential and shall not be disclosed to third parties, except as provided herein.

c. With the exception of reports provided by Contractor to the Board for discussion during public session of the Investment Committee or Board meeting, all Contractor Information, including such information furnished to the Plan’s Agents, shall not be disclosed to third parties, except as required (i) by law, or (ii) by audit, regulatory examination, government agency request, or administrative or court order or subpoena. Contractor hereby acknowledges that the Plan is a public agency subject to state laws, including, without limitation, (i) the California Public Records Act (California Government Code §6250, et seq.) (the “Public Records Act”), which provides generally that all records relating to a public agency’s business are open to public inspection and copying unless otherwise exempted under the Public Records Act, and (ii) the Ralph M. Brown Act (California Government Code §54950, et seq.) (“Brown Act”) (collectively, “Open Records Laws”), which provides generally for open meetings for local legislative bodies. As a result, the Plan may publicly disclose Contractor Information as required

by these and similar laws. If the Plan determines that it is required by law to disclose any Contractor Information, any such disclosure shall not constitute a breach or violation of this Contract. If Contractor wishes to file a proceeding to oppose any such disclosure, Contractor shall assume the opposition to such disclosure(s) and shall indemnify the Plan and the Board for all costs incurred (including attorneys’ fees) in connection with any opposition to such disclosure.

2. DATA SECURITY PROTOCOLS

Contractor represents that it has adopted data security protocols, policies, and procedures that meet or exceed financial industry best practices for ensuring the safety and security of all confidential and proprietary information in its possession, whether that information exists in tangible or electronic forms. Contractor further warrants that these protocols, policies, and procedures will be regularly updated and revised in response to evolving best practices. Contractor shall provide a copy of any or all of these protocols, policies, and procedures, upon the Board’s request, subject to reasonable safeguards to ensure their confidentiality.

3. INDEMNIFICATION

Contractor shall indemnify, hold harmless, and, at the option of the indemnitee, defend the City, the Department, the Board of Water and Power Commissioners of the City of Los Angeles, the Plan, the Board and all of their officers, fiduciaries (excluding Contractor), employees, and agents, from all claims, damages, losses, liabilities, suits, costs, charges, expenses (including, but not limited to, reasonable attorneys’ fees and court costs), judgments, fines, and penalties, of any nature whatsoever (“Claims”) arising from or relating to the acts, omissions, errors, or misconduct, including bad faith, related to the performance of services under this Contract by Contractor or any of its employees, officers, directors, affiliates, sub-advisors, or agents, except for any Claims caused by the gross negligence or willful misconduct of the person seeking defense and/or indemnity. This indemnification and defense obligation shall survive the expiration or termination of this Contract.

4. GENERAL CONTRACT AND INSURANCE REQUIREMENTS

a. General Requirements.

It is the policy of the Plan that upon the award of a contract, the selected bidder/proposer must provide evidence of insurance that conforms to the insurance requirements of the bid/proposal. Insurance requirements are explained in detail in item k below, which specifically outlines the types and amounts of coverage required for this Contract.

(i) Acceptable evidence of required insurance, from insurers acceptable to the Department, will be required to be submitted within thirty (30) days of the date of award and maintained current throughout the term of this Contract. Said evidence of insurance must be on file with the Risk Management

Section in order to receive payment under any contract for services rendered, and in order to commence work under this Contract.

(ii) For further information regarding these requirements, please contact:

Ms. Josephine Herrera or Ms. Lupe Pulido Los Angeles Department of Water and Power Risk Management Section Phone: (213) 367-4674 or (213) 367- 4680

b. Additional Insured Status Required

Contractor shall procure at its own expense, and keep in effect at all times during the term of this Contract, the types and amounts of insurance specified. The specified insurance shall also, by provisions in the policies, by the City’s own endorsement form or by other endorsements to such policies, include the Department, the Board, the Plan, and all of its officers, employees and agents, and their successors and assigns, as additional insureds (except for Professional and Workers’ Compensation, if required) against the area of risk described herein as with respect to Contractor’s acts or omissions in its performance of the Contract or other related functions performed under the Contract. Such insurance shall not limit or qualify the liabilities and obligations of Contractor assumed under the Contract.

c. Severability of Interests and Cross Liability Required

Each specified insurance policy (General Liability and Excess or Umbrella, if required) shall contain a Severability of Interest and Cross Liability clause and a Contractual Liability Endorsement which shall also apply to liability assumed by Contractor under this Contract with the City of Los Angeles, the Department, and the Plan.

d. Primary and Non-Contributory Insurance Required

All such insurance shall be Primary and Noncontributing with any other insurance held by the Department or the Plan where liability arises out of or results from the acts or omissions of Contractor, its agents, employees, officers, assigns, or any person or entity acting for or on behalf of Contractor. Any insurance carried by the Department or the Plan, which may be applicable, shall be deemed to be excess insurance and Contractor’s insurance is primary for all purposes despite any conflicting provision in Contractor’s policies to the contrary.

e. Proof of Insurance for Renewal or Extension Required

At least ten (10) days after the expiration date of any of the policies required, Contractor shall file with the Department documentation showing that the insurance coverage has been renewed.

f. Submission of Acceptable Proof of Insurance and Notice of Cancellation

Contractor shall provide proof to the Department’s Risk Manager of all specified insurance and related requirements by use of Department’s own endorsement form(s), or by submittal of an Acord certificate of insurance accompanied with the required endorsement forms or by other written evidence of insurance acceptable to the Risk Manager, but always in a form acceptable to the Risk Manager. The documents evidencing all specified coverages shall be filed with the Department prior to Contractor beginning operations or occupying the premises hereunder. Said proof shall contain, at a minimum, the applicable policy number, the inclusive dates of policy coverages, the date the protection begins for the Plan and the insurance carrier’s name. It shall provide that such insurance shall not be subject to cancellation, material reduction in coverage, or non-renewal except after written notice by first class or electronic mail, to the LADWP Risk Management Section at least thirty (30) calendar days prior to the effective date thereof. The notification shall be sent by first class or electronic mail to: The Risk Management Section, Department of Water and Power, Post Office Box 51111, JFB Room 465, Los Angeles, California 90051-0100, Riskmanagement.Risky@ladwp.com.

g. Claims-Made Insurance Conditions

Should any portion of the required insurance be on a “Claims Made” policy, Contractor shall provide evidence that the “Claims Made” policy has been renewed or replaced with the same limits, terms, and conditions of the expiring policy, or that an extended discovery period has been purchased on the expiring policy at least for the contract under which the work was performed.

h. Failure to Maintain and Provide as Cause for Termination

Failure to maintain and provide acceptable evidence of the required insurance for the required period of coverage shall constitute a breach of contract, upon which the Department or the Plan may immediately terminate or suspend the Contract.

i. Sub-contractor Compliance

Contractor shall be responsible for all subcontractors’ compliance with the insurance requirements in amounts and types consistent with the scope of work being performed by each sub-contractor.

j. Specified Insurance Requirements

Attachment A (“Contract Insurance Requirements”) sets forth the insurance required of Contractor.

5. MAXIMUM PROTECTION TO BE PROVIDED

It is the specific intent of this provision that all available Professional Liability limits of insurance that Contractor procures in its normal course and scope of its business

operations be made available to the Department, the Board and the Plan. Contractor will be required to disclose those limits of insurance in its response to any Request for Information, and will be subsequently required to provide proof of insurance confirming those limits.

6. DISCLOSURE

a. Contractor will promptly contact and provide a written statement to the Board: whenever there are material adverse changes in its financial condition or whenever there are significant changes in its business, including, but not limited to, ownership (it being understood that 25% or more would be deemed significant) and key personnel (including, without limitation, those responsible for the account).

b. Contractor will promptly notify the Board in writing of any material litigation or regulatory proceedings commenced by it or to which Contractor is a named party that could have a material impact on the Accounts or the Portfolio.

c. Contractor shall provide the Board with its written policy addressing the handling of material, non-public information within Contractor’s business and the personal trading and investments of its investment professionals and other key personnel.

d. Contractor shall provide the Board with all internal policies concerning the management and disclosure of potential conflicts of interest that may exist within their business practices. Contractor shall, on an annual basis, reaffirm the past year’s policies and provide any amendments as appropriate.

Contractor agrees to promptly report in writing to the Board President and/or to the Retirement Plan Manager, any contact by anyone, including members of the Plan’s staff (unless their contact is for routine business purposes), the Board, the Commissioners, the Mayor’s Office, the Department or its applicable unions, or the Los Angeles City Council, who have either endorsed, suggested, or requested any specific contract, investment manager or advisor, consultant, investment, trade, strategy, or product to be included, excluded, recommended, or otherwise with respect to any services to be provided by Contractor under this Contract.

7. NON-DISCRIMINATION CLAUSE

a. Contractor agrees and obligates itself not to discriminate during the performance of this Contract against any employee or applicant for employment because of the employee’s or applicant’s race, color, religion, national origin, ancestry, sex, sexual orientation, age, or physical handicap. All subcontracts awarded under this Contract shall contain a like nondiscrimination clause.

b. The Contractor shall comply with the applicable nondiscrimination and affirmative action provisions of the laws of the United States of America, the State of California, and the City of Los Angeles. Contractor shall comply with the provisions of the Los Angeles Administrative Code Sections 10.8 through 10.13, to the extent

applicable hereto. The Affirmative Action Program of this Contract shall be the mandatory contract provisions set forth in the Los Angeles Administrative Code Section 10.8.4, and said provisions are incorporated herein by this reference. Contractor shall also comply with all rules, regulations, and policies of the City of Los Angeles, Office of Contract Compliance, relating to nondiscrimination and affirmative action, including the filing of all forms required by said Office. Any subcontract entered into by Contractor relating to this Contract, to the extent allowed hereunder, shall be subject to the provisions of this paragraph.

8. PROHIBITION AGAINST ASSIGNMENT OR DELEGATION

The acknowledges that a substantial inducement to the Plan and the Board for entering into this Contract was and is the reputation and competence of Contractor. Contractor may not, unless it has first obtained the written permission of the Board:

a. Assign or otherwise alienate any of its rights hereunder, including the right to payment; or

b. Delegate, assign, subcontract, or otherwise transfer any of its duties hereunder with respect to consulting duties. Notwithstanding the preceding sentence, Contractor is authorized, at its own expense and its sole discretion, to employ agents to advise or assist it in the performance of its duties or activities necessary to support the provision of its consulting services (i.e., administration duties which are not related to Contractor’s consulting duties). Contractor shall be responsible for the acts and omissions of all agents, sub-contractors, and delegates that provide services, or assist or advise Contractor in providing services, under this Contract.

9. NO WAIVER OF BOARD’S LEGAL RIGHTS

Nothing herein shall in any way constitute a waiver or limitation of any rights that the Board may have under applicable state and federal securities laws.

10. APPLICABLE LAW, INTERPRETATION AND ENFORCEMENT

a. Each party’s performance under this Contract shall comply with all applicable laws of the United States of America, the State of California, and the City of Los Angeles. This Contract shall be enforced and interpreted under the laws of the State of California and the City of Los Angeles without regard to principles of conflicts of law.

b. Any state court of the State of California or the United States District Court for the Central District of California, in the City of Los Angeles, has exclusive jurisdiction to settle any dispute between the parties, and neither party hereto waives its right to trial by jury.

c. If any part, term, or provision of this Contract shall be held void, illegal, unenforceable, or in conflict with any law of a federal, state, or local government having jurisdiction over this Contract, the validity of the remaining portions or provisions shall

not be affected thereby.

11. LOS ANGELES CITY BUSINESS TAX REGISTRATION CERTIFICATE

The Contractor represents that it will obtain a City of Los Angeles Business Tax Registration Certificate (s) required by the City of Los Angeles Business Tax Ordinance (Article 1, Chapter 2, Sections 21.00 and following, of the Los Angeles Municipal Code). For the term covered by this Contract, the Contractor shall maintain, or obtain as necessary, all such Certificates required of it under said Ordinance and shall not allow any such Certificate to be revoked or suspended.

12. SOLICITATION OF CONTRIBUTIONS

a. Fiduciaries of the Plan are prohibited from soliciting, directing, or receiving any contribution from Contractor. This prohibition applies to members of the Plan’s staff, Board, Commissioners, the Mayor’s Office, applicable union staff, the Los Angeles City Council, or other person engaged in business for gain, seeking to engage in business for gain, or who has a proceeding pending before the Board or has had such a matter pending during the preceding twelve (12) months. The Board shall be responsible for providing Contractor an updated and accurate list of persons covered by this section. For purposes of this paragraph, the following definitions apply:

(i) “Fiduciary” is defined as a member of the Board, and executive and senior management staff.

(ii) “Person” means a natural person or business entity of any type, and includes all directors, partners, officers and agents of such business entity.

(iii) “Business for gain” is defined as any contract for goods or services, and any investment related contract.

(iv) “Proceeding pending” means all ministerial, administrative, and legislative matters, potential contracts, current contracts, and contracts with the Board that have expired or terminated within the past twelve (12) months.

b. In the event any member of the Board or any executive or senior staff of the Board, or any person claiming to represent or to have influence with either the Board or with any member of the Board, contacts Contractor with respect to a contribution, Contractor shall promptly report by telephone and in writing such contact to the President of the Board and the Retirement Plan Manager.

c. Contractor further agrees to furnish an annual certification, attested to by a responsible officer of Contractor’s firm. The certification shall describe each contact reportable under the foregoing paragraph, listing the date(s) of such contact, the person making the contact, and the subject matter of the contact. The certification shall state that except as specifically described in the certification, no member of either the Board, executive or senior management staff of such Board, any Commissioner, any member of the City Attorney’s Office, the Mayor, Vice Mayor, union staff, City Council, any active

or inactive person employed by the Department, and no person claiming to represent or have influence with the Board has contacted Contractor with respect to soliciting, directing, or receiving any contribution. Such certification shall be filed with the President of the Board or with the Plan Manager, annually by January 30th of each year for the preceding calendar year.

13. CHILD SUPPORT ASSIGNMENT ORDERS

This Contract is subject to Section 10.10, Article 1, Chapter 1, Division 10 of the Los Angeles Administrative Code, Child Support Assignment Orders. Contractor is required to complete a Certification of Compliance with Child Support Obligations, which is attached hereto in Appendix B, and is incorporated herein by this reference.

14. STATE LAW REQUIREMENTS – PROTECTION OF PERSONAL

INFORMATION

a. State law (see Cal. Civil Code Sections 1798.29, 1798.81.5, and 1798.82, as amended) requires a person or entity that owns or licenses computerized data that includes personal information of a California resident to disclose any breach of the data base security system and to implement and maintain procedures and practices to protect personal information from unauthorized access, destruction, use, modification, or disclosure, and shall require by contract that non-affiliated third recipients of such personal information implement and maintain security procedures and practices to protect the personal information. Accordingly, if the Board entrusts Contractor with any personal information that concerns a California resident, Contractor agrees that it will implement and maintain such security procedures and practices, in conformance with Cal. Civil Code Sections 1798.29, 1798.81.5, and 1798.82, with respect to any personal identification information received under this Contract, as well as to promptly notify the Plan management and the Board of any breach in security. In addition, Contractor shall not share, disclose, or in any way transfer the personal identification information without the written approval of the Plan management or the Board.

b. Contractor shall be responsible for any and all liabilities, including but not limited to those stated below in this paragraph, that result from any violation of Cal. Civil Code Sections 1798.29, 1898.81.5, and/or 1798.82 that Contractor, its employees, agents, or subcontractors may cause pursuant to the activities performed by any of them under this Contract. Accordingly, Contractor agrees to indemnify and hold harmless the City of Los Angeles, its respective agencies and commissioners, the Department, the Commissioners the Board, the Plan and all its officers, employees, and authorized agents and, at the option of the City, to provide a defense, reasonably acceptable to the City, for the Department and/or the Board against any and all suits and causes of action, claims, charges, damages, demands, judgments, civil fines and penalties, or losses of any kind or nature whatsoever caused or brought by any person, including any aggrieved party, as defined in California Civil Code Sections 1798.29 and 1798.82, arising out of Contractor’s breach of any of its duties and obligations under California Civil Code Sections 1798.29, 1798.81.5, and/or 1798.82. The indemnification herein includes all awards, damages, interest, costs, and attorney’s fees, if any. Such defense will be

consistent with the City Charter of the City of Los Angeles, Sections 271, 272, and 273.

c. Contractor hereby agrees the definition of the “Personal Information” above includes medical information and health insurance information.

d. Medical information is further defined as any information regarding an individual’s medical history, mental or physical condition, or medical treatment or diagnosis by a health care professional, and health insurance information is further defined to include an individual’s health insurance policy number or subscriber information number, any unique identifier used by a health insurer to identify the individual, or any information in an individual’s application and claims history, including any appeals records.

15. SIGNATORIES OF CONTRACT, NOTICES,

COMMUNICATIONS, AMENDMENTS

a. The individuals whose signatures appear below warrant that they have full authority to execute this Contract on behalf of the party on whose behalf they have affixed their signatures to this Contract.

b. The parties recognize any notices and other communications on behalf of the Board or Contractor shall be made by the following individuals (whether verbally or in writing as applicable under the terms of this Contract):

CONTRACT INSURANCE REQUIRMENTS -- DEPARTMENT OF WATER AND POWER ADVISORS & CONSULTANTS - RETIREMENT BOARD ATTACHMENT A

Agreement/Activity/Operation: Reference/Agreement: Insurance Requirement: Investment Officer Phone Number:

Pension Fund Investment Services CERTIFICATE ACCEPTABLE (w/required endorsements)

PROFESSIONAL LIABILITY / CRIME INSURANCE OR FIDELITY BOND Scott Vargas / Carlo Manjikian

(213) 367-1929

Contract-required types and amounts of insurance as indicated below by checkmark are the minimum which must be maintained. All limits are Combined Single Limit (Bodily Injury/Property Damage) unless otherwise indicated. Firm 30 day Notice of Cancel- lation required by Receipted Delivery.

PER OCCURRENCE LIMITS ( ) WORKERS’ COMPENSATION(Stat. Limits)/Employer’s Liability: ( )

( ) CA / All States Endorsement ( ) Jones Act (Maritime Employment) ( ) Waiver of Subrogation ( ) Other:

( ) US L&H (Longshore and Harbor Workers) ( ) Outer Continental Shelf ( ) Black Lung (Coal Mine Health and Safety) ( ) Other:

( ) AUTOMOBILE LIABILITY: ( ) ( ) Owned Autos ( ) Any Auto ( ) Hired Autos ( ) Non-Owned Auto ( ) Contractual Liability ( ) Additional Insured ( ) MCS-90 (US DOT) ( ) Trucker’s Form ( ) Waiver of Subrogation ( ) Other:

( ) GENERAL LIABILITY: ( ) Limit Specific to Project ( ) Per Project Aggregate ( ) ( ) Property Damage ( ) Contractual Liability ( ) Personal Injury ( ) Premises and Operations ( ) Products/Completed Ops. ( ) Independent Contractors ( ) Fire Legal Liability ( ) Garagekeepers Legal Liab. ( ) Child Abuse/Molestation ( ) Corporal Punishment ( ) Collapse/Underground ( ) Explosion Hazard ( ) Watercraft Liability ( ) Pollution ( ) Addition Insured Status ( ) Waiver of Subrogation ( ) Airport Premises ( ) Hangarkeepers Legal Liab. ( ) Marine Contractors Liability ( ) Other: ( ) Other:

(✔) PROFESSIONAL LIABILITY: ( ) ( ) Contractual Liability ( ) Waiver of Subrogation (✔) 3 Year Discovery Tail ( ) Additional Insured ( ) Vicarious Liability Endt. (✔) Other: Limits: 2.5% PAUM

( ) AIRCRAFT LIABILITY: ( ) ( ) Passenger Per Seat Liability ( ) Contractual Liability ( ) Hull Waiver of Subrogation ( ) Pollution ( ) Additional Insured ( ) Other:

( ) PROPERTY DAMAGE: ( ) Loss Payable Status (AOIMA) ( ) ( ) Replacement Value ( ) Actual Cash Value ( ) Agreed Amount ( ) All Risk Form ( ) Named Perils Form ( ) Earthquake: ( ) Builder’s Risk:$ ( ) Boiler and Machinery ( ) Flood: ( ) Transportation Floater:$ ( ) Contractors Equipment$_ _ ( ) Loss of Rental Income: ( ) Scheduled Locations/Propt. ( ) Other: ( ) Other:

( ) WATERCRAFT: ( ) ( ) Protection and Indemnity ( ) Pollution ( ) Additional Insured ( ) Waiver of Subrogation ( ) Other: ( ) Other:

( ) POLLUTION: ( ) ( ) Incipient/Long Term ( ) Sudden and Accidental ( ) Additional Insured ( ) Waiver of Subrogation ( ) Contractor’s Pollution ( ) Other: _

(✔) CRIME: ( ) Joint Loss Payable Status (✔) Additional Insured ( $10,000,000.00 ) ( ) (✔) Employee Dishonesty

( ) Financial Institution Bond (✔) Loss of Monies/Securities ( ) In Transit Coverage (✔) Wire Transfer Fraud

(✔) Computer Fraud (✔) Commercial Crime (✔) Forgery/Alteration of Docs. ( ) Other: ( ) Other:

(✔) FIDELITY BOND: (✔) Joint Loss Payable Status ( $10,000,000.00 )

Insurance Req (07/10/20-LC)

APPENDIX B

Nondiscrimination, Equal Employment Practices and Affirmative Action Program (Non-Construction and Construction)

Bidders/Proposers are advised that any contract awarded pursuant to this procurement process shall be subject to the applicable provisions of Los Angeles Administrative Code Section 10.8.2., Non-discrimination Clause.

All contracts (both construction and non-construction) for which the consideration is $1,000 or more shall comply with the provisions of Los Angeles Administrative Code Sections 10.8.3., Equal Employment Practices Provisions. By affixing its signature on a contract that is subject to the Equal Employment Practices Provisions, the Contractor shall agree to adhere to the provisions in the Equal Employment Practices Provisions for the duration of the contract.

All contracts (both construction and non-construction) for which the consideration is $25,000 or more shall comply with the provisions of Los Angeles Administrative Code Sections 10.8.4., Affirmative Action Program Provisions. By affixing its signature on a contract that is subject to the Affirmative Action Program Provisions, the Contractor shall agree to adhere to the provisions in the Affirmative Action Program Provisions for the duration of the contract.

Furthermore, contractors shall include similar provisions in all subcontracts awarded for work to be performed under the contract with the City and shall impose the same obligations. The contract with the subcontractor that contends similar language shall be made available to the Office of Contract Compliance upon request.

Bidders/Proposers seeking additional information regarding the requirements of the City’s Non-Discrimination Clause, Equal Employment Practices and Affirmative Action Program may visit the Bureau of Contract Administration’s web site at http://bca.lacity.org.

ND/EEP/AA RFB/RFP/RFQ Language (Rev. 06/16)

DEPARTMENT OF WATER AND POWER WATER AND POWER EMPLOYEES RETIREMENT PLAN

Instructions to Complete and Submit the Worker Retention & Living Wage Ordinance (LWO) Forms:

NOTE: LWO Forms must be completed by Successful Bidder Only.

• Employee Information (Form OCC/LW-6)Submit within 10 days following award date of contract

• Subcontractor Information (Form OCC/LW-18)Submit within 10 days following award date of contract, if applicable

• Living Wage Ordinance OCC Exemption Application (FormOCC/LW-10) or Departmental Exemption Application (FormOCC/LW-28)Submit only if expressly covered under the Living Wage OrdinanceStatutory Exemptions

• Return Address: Director of Corporate Purchasing ServicesDepartment of Water & Power 111 N. Hope Street, Room 1114 Los Angeles, CA 90012-2694 P.O. BOX 51111 Los Angeles, CA 90051-0100 Attention: Living Wage Coordinator

Living Wage Ordinance and Worker Retention Ordinance

Unless approved for an exemption, contractors under contracts primarily for the furnishing of services to or for the City and that involve an expenditure in excess of $25,000 and a contract term of at least three (3) months, lessees and licensees of City property, and certain recipients of City financial assistance, shall comply with the provisions of Los Angeles Administrative Code Sections 10.37 et seq., Living Wage Ordinance (LWO) and 10.36 et seq., Worker Retention Ordinance (WRO).

Bidders/Proposers who believe that they meet the qualifications for one of the exemptions shall apply for exemption from the Ordinance by completing and submitting the appropriate Exemption/Non-Coverage Application form with their proposal. Application forms are as follows: Exemption Application (Form LW-10), Small Business Exemption Application (Form LW-26), 501(c)(3) Non-profit Exemption Application (Form OCC/LW-28), and Non-Coverage Determination Application (Form OCC/LW-29). These forms and more detailed information about the ordinances are available on the Bureau of Contract Administration’s website at https://bca.lacity.org.

LWO/SCWRO RFB/RFP/RFQ Language (Rev. 01/18)

Los Angeles Department of Water & Power

LWO – EMPLOYEE INFORMATION FORM REQUIRED DOCUMENTATION FOR ALL CONTRACTS SUBJECT TO LWO

This form must be submitted to the AWARDING DEPARTMENT within 30 DAYS of contract execution. INCOMPLETE SUBMISSIONS WILL BE RETURNED.

LW-6

THE LIVING WAGE ORDINANCE (LWO) REQUIRES THAT SUBJECT EMPLOYERS PROVIDE TO EMPLOYEES:

As of October 15, 2018 a wage of at least $13.25 per hour with an additional $1.25/hr for employees without health benefits, or $13.25 per hour for employees with health benefits (to be adjusted annually on July 1); At least 96 compensated hours off per year for sick leave, vacation or personal necessity at the employee’s request(pro-rated for part-time employees); and At least 80 additional hours off per year of uncompensated time off for personal or immediate family illness (pro- rated for part-time employees). Refer to the LWO Rules and Regulations, on the Bureau of Contract Administration website at http://bca.lacity.org/living-wages-ordinance-lwo, for details regarding the wage and benefit requirements of the Ordinance; and Information of their possible right to the federal Earned Income Tax Credit (EITC) and make available the forms required to secure advance EITC payments from the employer.

THE LIVING WAGE ORDINANCE (LWO) ALSO REQUIRES EMPLOYERS: Not to retaliate against any employee claiming non-compliance with the provisions of this Ordinance and to comply with federal law prohibiting retaliation for union organizing.

TO BE FILLED OUT BY THE CONTRACTOR:

1. Company Name: Email Address:

2. STATE the number of employees working ON THIS CITY CONTRACT:

3. ATTACH a copy of your company’s 1 st PAYROLL under THIS CITY CONTRACT.

4. Do you provide health benefits (such as medical, dental, vision, mental health, and disability insurance) to your

employees? Yes No

If YES, provide the employer's monthly contribution amount(s) toward the health benefits premium(s) for each employee working on THIS CITY CONTRACT.

**NOTE: Payroll information need not be submitted if ALL employees working on this City agreement earn an hourly wage of at least $15 per hour. If so, check the box below.

I certify under penalty of perjury that I do not have any employees earning less than $15 per hour working on this City contract.

FAILURE TO COMPLY WITH THESE REQUIREMENTS WILL RESULT IN WITHHOLDING OF PAYMENTS BY THE CITY CONTROLLER, OR A RECOMMENDATION TO THE AWARDING AUTHORITY FOR CONTRACT TERMINATION. ALL INFORMATION SUBMITTED IS SUBJECT TO VERIFICATION, AND FALSE INFORMATION MAY RESULT IN CONTRACT TERMINATION.

I understand that the employee information provided herein will be used by the City of Los Angeles, Office of Contract Compliance for the purpose of monitoring the Living Wage Ordinance.

Print Name of Person Completing This Form Signature of Person Completing This Form

Title Phone # Date

AWARDING DEPARTMENT USE ONLY:

Dept: Contact: Phone #: Contract #:

Form OCC/LW-6, Rev. 09/18 OFFICE OF CONTRACT COMPLIANCE, EEOE SECTION: (213) 847-2625

LW-10

TO BE REQUESTED BY CONTRACTORS ONLY

LWO EXEMPTION APPLICATION OCC APPROVAL REQUIRED

This application for exemption must be submitted by the Contractor along with its bid or proposal to the AWARDING DEPARTMENT. Awarding Departments may also apply for an exemption for OCC approval. INCOMPLETE SUBMISSIONS WILL BE RETURNED. Los Angeles Administrative Code section 10.37, the Living Wage Ordinance (LWO), presumes all City contractors are subject to the LWO unless this exemption application is approved.

CONTRACTOR INFORMATION: 1. Company Name: Phone #: 2. Company Address: 3. Are you a Subcontractor? Yes No If YES, state the name of your Prime Contractor:

4. Type of Service Provided:

EXEMPTION INFORMATION: CHECK OFF ONE BOX BELOW THAT BEST DESCRIBES THE TYPE OF EXEMPTION YOU ARE APPLYING FOR AND ATTACH THE SUPPORTING DOCUMENTATION LISTED ON THE RIGHT:

TO BE REQUESTED BY AWARDING DEPARTMENTS ONLY EXEMPTION SUPPORTING DOCUMENTATION REQUIRED

Grant Funded Services provided that the grant funding agency indicates in writing that the provisions of the Ordinance should not apply.

A copy of grant-funding agency’s determination to the OCC.

EXEMPTION SUPPORTING DOCUMENTATION REQUIRED CFAR: First Year Financial Assistant Recipient

CFAR: Employing Fewer than Five Employees CFAR: Hardship Waiver for Job Training and Preparation Programs CFAR: Exemption for Certain Employees

1. Memo justifying the exemption 2. Proof of startup date 3. List of employee names and hire dates 4. Copy of payrolls (20 weeks period for CFAR with less than 5 employees) 5. If applicable, a copy of the Awarding Authority's Hardship

Waiver Recommendation to City Council.

Collective bargaining agreement

A copy of the CBA with the superseding language clearly marked. In addition, Employers servicing the Airport must provide a copy of the most current payroll. Airline Food Caterers must provide payrolls and health benefit statements.

Student work-study or employment program Documentation detailing program policies and guidelines, and the amount paid to the students

By signing, the contractor certifies under penalty of perjury under the laws of the State of California that the information submitted in support of this application is true and correct to the best of the contractor’s knowledge.

Print Name of Person (Contractor) Completing This Form Signature of Person (Contractor) Completing This Form

Title Phone # Date ANY DETERMINATION/APPROVAL IS APPLICABLE ONLY TO THE LISTED CONTRACTOR FROM THE LWO DURING THE PERFORMANCE OF THIS CONTRACT. A SUBCONTRACTOR PERFORMING WORK ON THIS CONTRACT IS NOT EXEMPT UNLESS THE OFFICE OF CONTRACT COMPLIANCE HAS APPROVED A SEPARATE APPLICATION FOR THE INDIVIDUAL SUBCONTRACTOR.

AWARDING DEPARTMENT USE ONLY:

Dept: Contact: Phone #: Contract #: OCC USE ONLY:

Approved / Not Approved – Reason:

By Analyst: Date:

Form LW-10, Rev. 3/18 OFFICE OF CONTRACT COMPLIANCE, EEOE SECTION: (213) 847-2625

LW-18

LWO – SUBCONTRACTOR INFORMATION FORM REQUIRED DOCUMENTATION FOR ALL CONTRACTS SUBJECT TO LWO

This form must be submitted to the AWARDING DEPARTMENT within 30 DAYS of contract execution. INCOMPLETE SUBMISSIONS WILL BE RETURNED.

SECTION I: CONTRACTOR INFORMATION

1) Company Name: Contact Person: Phone Number:

2) Do you have subcontractors working on this City contract? Yes No If NO, This form is now complete – SIGN THE BOTTOM OF PAGE 2 AND SUBMIT TO THE AWARDING DEPARTMENT. If YES, a) STATE the number of your subcontractors ON THIS CITY CONTRACT:

b) Fill in PART A for EACH subcontractor in Section II, continue to Section III & IV (if applicable), AND SIGN Section V.

SECTION II: SUBCONTRACTOR INFORMATION

1. Subcontractor Name:

2. Contact Person: Phone #:

3. Address:

4. Purpose of Subcontract:

5. Amount of Subcontract: $ Term: Start Date / / End Date / /

6. Is this subcontractor exempted from or not subject to the LWO? Yes No If Yes, state the reason below. And see Section III for documents required.

1. Subcontractor Name:

2. Contact Person: Phone #:

3. Address:

4. Purpose of Subcontract:

5. Amount of Subcontract: $ Term: Start Date / / End Date / /

6. Is this subcontractor exempted from or not subject to the LWO? Yes No If Yes, state the reason below. And see Section III for documents required.

1. Subcontractor Name:

2. Contact Person: Phone #:

3. Address:

4. Purpose of Subcontract:

5. Amount of Subcontract: $ Term: Start Date / / End Date / /

6. Is this subcontractor exempted from or not subject to the LWO? Yes No If Yes, state the reason below. And see Section III for documents required.

Form LW-18, Rev. 2/19

1 OFFICE OF CONTRACT COMPLIANCE, EEOE SECTION: (213) 847-2625

LW-18

SECTION II: SUBCONTRACTOR INFORMATION (continued)

1. Subcontractor Name:

2. Contact Person: Phone #:

3. Address:

4. Purpose of Subcontract:

5. Amount of Subcontract: $ Term: Start Date / / End Date / /

6. Is this subcontract exempted from or not subject to the LWO? Yes No If Yes, state the reason below. And see Section III for documents required.

1. Subcontractor Name:

2. Contact Person: Phone #:

3. Address:

4. Purpose of Subcontract:

5. Amount of Subcontract: $ Term: Start Date / / End Date / /

6. Is this subcontract exempted from or not subject to the LWO? Yes No If Yes, state the reason below. And see Section III for documents required.

SECTION III: EXEMPTIONS or SUBCONTRACTS NOT SUBJECT TO LWO

EXEMPTION Or NON-COVERAGES

SUPPORTING DOCUMENTATION REQUIRED

501(c)(3) non-profit organization1 LW 28 – 501(c)(3) Non-Profit Exemption Application https://bca.lacity.org/Uploads/lwo/Template_LW%2028%20-%20501c3%20Nonprofit%20Exemption%20Application.pdf

Collective bargaining agreement w/supersession language2 LW 10 – OCC Exemption Application https://bca.lacity.org/Uploads/lwo/Template_LW%2010%20-%20OCC%20Exemption%20Application%20edited%203.20.18.pdf

Small Business3 LW 26 – Small Business Exemption Application (English & Spanish) https://bca.lacity.org/Uploads/lwo/LW26_Small_Business_Exemption_Application_%28English%29.pdf (English) https://bca.lacity.org/Uploads/lwo/LW26_Small_Business_Exemption_Application_%28Spanish%29.pdf (Spanish)

Governmental Entity4 or Utilities Companies5

NONE REQUIRED.

Construction contract6

NONE REQUIRED. SECTION IV: SUBCONTRACTS SUBJECT TO THE LWO (AND NOT ELIGIBLE FOR EXEMPTIONS)

Please have EACH of your Subcontractors that ARE SUBJECT to the LWO fill out the three forms below. Submit LW-6 and LW-18 ONLY to the Awarding Department (and supporting documentation, where applicable) and RETAIN LW-5 in your office. 1) Employee Information Form 2) Subcontractor Information Form 3) Subcontractor Declaration of Compliance Form (retain)

LW-6 - https://bca.lacity.org/Uploads/lwo/LW%206%20-%20Employee%20Information%20Form%2C%20as%20of%209-26-18.pdf

LW-18 - https://bca.lacity.org/Uploads/lwo/LW18_Subcontractor_Information_Form.pdf LW-5 - https://bca.lacity.org/Uploads/lwo/Template_LW%205%20CC%20rev%209-18-2018.pdf

SECTION V: SIGNATURE I understand that the Subcontractor Information provided herein is confidential and will be used by the City of Los Angeles’ Office of Contract Compliance for the purpose of monitoring the Living Wage Ordinance.

Print Name of Person Completing This Form Signature of Person Completing This Form

Title Phone # Date AWARDING DEPARTMENT USE ONLY:

Dept: Dept Contact: Contact Phone: Contract #:

Form LW-18, Rev. 2/19 OFFICE OF CONTRACT COMPLIANCE, EEOE SECTION: (213) 847-2625

2

ENDNOTES FOR LWO SUBCONTRACTOR INFORMATION FORM

1 Non-Profit 501(c)(3) Organizations: A corporation claiming exemption under Section 10.37.15(b) of the LWO as a corporation organized under Section 501(c)(3) of the United States Internal Revenue Code must provide the following additional documents in support of the application for exemption: (1) A copy of the most recent IRS letter indicating that the Employer has been recognized as a non-profit corporation organized under section 501(c)(3) of the United States Internal Revenue Code. (2) The LW-28 Non-Profit 501(c)(3) Exemption Application referred to in the LWO Rules and Regulations Appendix A must include the salary certification information. The salary certification must list the salary of the corporation’s chief executive officer (CEO), computed on an hourly basis, and the hourly wage rate of the lowest paid worker in the corporation. The salary of the CEO, when computed on an hourly basis, must be less than 8 times what the lowest paid worker is paid on an hourly basis. For purposes of this exemption, the ”chief executive officer (CEO)” means the CEO of the 501(c)(3) corporation that entered into the agreement or the highest paid person employed by the corporation if the CEO is not the highest paid employee. The “lowest paid worker” refers to the lowest paid worker employed by the 501(c)(3) corporation that entered into the Agreement with the City, regardless of whether the person works on the City Agreement. 2 Exemption by Collective Bargaining Agreement – LAAC 10.37.12: An Employer subject to provisions of the LWO may, by collective bargaining agreement (CBA), provide that the CBA, during its term, shall supersede the requirements of the LWO for those Employees covered by the CBA. The provisions of the LWO should not be interpreted to require an employer to reduce the wages and benefits required by the CBA. All parties to the CBA must specifically waive in full or in part the benefits required by the LWO. An Employer applying for this exemption shall submit a copy of the CBA. If the CBA does not specifically indicate that the LWO has been superseded, the Employer shall submit written confirmation from the union representing the Employees working on the Agreement that the union and the Employer have agreed to let the CBA supersede the LWO. (a) If the final CBA signed by the Employer and the union supersedes the LWO, in full or in part, the Employer shall be considered to be exempt from the LWO’s specified provisions for the time period covered by the effective dates of the superseding CBA. The Employer remains subject to all applicable provisions of the LWO for the time period not covered by the superseding CBA. If the Employer has not complied with the LWO requirements during the time period not covered by the superseding CBA, the Employer shall be required to make retroactive corrections for any period of violation, which may include making retroactive payments to affected employees for the relevant periods of violation. (b) If the final CBA signed by the Employer and the union does not supersede the LWO, the Employer shall be required to comply with all applicable LWO requirements, including the wage and benefits provisions. Compliance shall also be required retroactively to the date that the Employer first became subject to the LWO. If necessary, the Employer shall provide retroactive payments to affected Employees for any time period during which the Employer did not comply with the LWO. 3 Small Business Exemptions for Public Lessees and Licensees – LAAC 10.37.15(a): A public lessee or licensee claiming exemption from the LWO under section 10.37.15(a) shall submit the application for “Small Business Exemption” referred to in the LWO Rules and Regulations Appendix A, along with supporting documentation to verify that it meets the requirement that the lessee or licensee employs no more than seven (7) people on and off City property. (a) For purposes of this exemption, a lessee or licensee shall be deemed to employ a person if the person works for a company or entity that is owned or controlled by the lessee or licensee, regardless of where the company or entity is located; or if the person works for a company or entity that owns or controls the lessee or licensee, regardless of where the for a company or entity is located. Whether the lessee or licensee meets the seven (7) person limit shall be determined using the total number of people employed by all companies or businesses, which the lessee or licensee owns or controls, or which own or control the lessee or licensee. For purposes of this example, “control” means that one company owns a controlling interest in another company. (b) If a business operated by the lessee or licensee is part of a chain of businesses, the total number of people includes all everyone employed by the entire chain of businesses unless the business operated by the lessee or licensee is an independently owned and operated franchise. (c) A public lessee or licensee shall be deemed to employ no more than seven (7) people if its entire workforce (inclusive of the people falling within the guidelines stated in subsections (a) and (b) above) worked an average of no more than 1,214 hours per month for at least three-fourths of the of the previous calendar year. 4 Governmental Entities – LAAC 10.37.14(b): Agreements with governmental entities are not subject to the requirements of the LWO. If an Agreement is not subject to the LWO because the Employer is a governmental entity, Subcontractors performing work for the governmental entity on the Agreement are also not subject to the LWO. 5 Utilities Companies – LAAC Section 10.37.14(c): Contract for work done directly by a utility company pursuant to an order of the Public Utilities Commission. 6 Construction contracts – LAAC Section 10.37.14(a): Construction contracts are not subject to the LWO unless 1) there are employees not covered by prevailing wage or 2) if the prevailing wage is less than the required rate in 10.37.2.

LWO SMALL BUSINESS EXEMPTION APPLICATION This application for exemption is for lessees and licensees only and must be submitted along with your bid or proposal to the AWARDING DEPARTMENT. If approved, it will EXPIRE TWO (2) YEARS from the date of approval. This may be renewable in two (2) year increments upon meeting the requirements. INCOMPLETE SUBMISSIONS WILL BE RETURNED.

Los Angeles Administrative Code section 10.37, the Living Wage Ordinance (LWO), presumes all City contractors are subject to the LWO unless this exemption application is approved.

TO BE FILLED OUT BY THE CONTRACTOR:

1. Company Name: ____________________________________________________ Phone Number: ________________________

2. Company Address: _________________________________________________________________________________________

3. Are you a Sublessee or Sublicensee? Yes No If YES, state the name of your Prime Lessee or Prime Licensee:

________________________________________________________________________________________________________

4. STATE the total number of businesses you have (inside and outside the City of Los Angeles premises): _____________________

WORKFORCE INFORMATIONCHECK OFF ONE BOX IN PART A THAT BEST DESCRIBES YOUR BUSINESS AND ATTACH DOCUMENTATION LISTED IN PART B:

PART A PART B: SUPPORTING DOCUMENTATION REQUIRED

I have Seven (7) employees or LESS in the entire company (inside AND outside the City of Los Angeles premises).

My company’s workforce worked an average of no more than 1,214 hours per month for at least three-fourths of the calendar year.

Submit a completed Employee Worksheet (Form OCC/LW-26B). Information on the Employee Worksheet may subsequently require verification through payroll records.

OR Payrolls for the nine (9) months you would like to have reviewed.

If you DID NOT check off ANY boxes in PART A, your company IS NOT ELIGIBLE FOR AN EXEMPTION.If you checked off ANY box in PART A, ATTACH supporting documentation, SIGN, AND SUBMIT EXEMPTION FORM.

By signing, the contractor certifies under penalty of perjury under the laws of the State of California that the information submitted in support of this application is true and correct to the best of the contractor’s knowledge.

Print Name of Person Completing this Form Signature of Person Completing this Form

Title Phone # DateANY APPROVAL OF THIS APPLICATION EXEMPTS ONLY THE LISTED CONTRACTOR FROM THE LWO DURING THE PERFORMANCE OF THIS CONTRACT. A SUBCONTRACTOR PERFORMING WORK ON THIS CONTRACT IS NOT EXEMPT UNLESS THE OFFICE OF CONTRACT COMPLIANCE HAS APPROVED A SEPARATE EXEMPTION FOR THE INDIVIDUAL SUBCONTRACTOR.

AWARDING DEPARTMENT USE ONLY:

OCC USE ONLY: Approved / Not Approved – Reason: __________________________________________________________________________________________

LW-26A

OFFICE OF CONTRACT COMPLIANCE, EEOE SECTION: (213) 847-2625Form LW-26A, Rev. 7/17

5. STATE the total number of businesses you have inside the City of Los Angeles premises only: ____________________________

Dept: _____________ Contact: ____________________________ Phone #: ____________________ Contract #: ________________

By Analyst: ___________________________________________________________________________ Date: ______________________________

Submit a copy of your most recent State of California Form DE - 9C and the equivalent form(s) for business(es) in other states.

6. Location of lease or license: ________________________________________________________________________________

LWO EMPLOYEE WORKSHEET This worksheet must be completed for EACH company or business for which you have a controlling interest, whether or not it is on City premises. You may COPY THIS FORM as necessary for EACH company. Include the names of ALL PERSONS employed by EACH company, and the number of hours worked each month for the current year. 1. Company Name: ______________________________________________________________________ Company Phone: __________________________

2. Company Address: ______________________________________________________________________________________________________________3. Enter # of Hours worked: HOURS WORKED

EMPLOYEE NAME JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

4. TOTAL HOURS5. Check each box indicating which nine (9) months you would like be reviewed:

6a. TOTAL HOURS for the nine (9) months selected in 5 above : ___________ 6b. DIVIDE 6a by 9: ____________ 6c. Is 6b less than 1,214? YES NO

7. If 6c is NO, then this contract IS NOT ELIGIBLE FOR AN EXEMPTION. If YES, SIGN and ATTACH this form to LW-26A. I certify under penalty of perjury that the information herein is true and correct to the best of my knowledge. I will provide further documentation and proof upon request. I understand that the submission of false information may lead to the revocation of any approved exemption.

Print Name of Person Completing this Form Signature of Person Completing this Form

Title Phone # DateANY APPROVAL OF THIS APPLICATION EXEMPTS ONLY THE LISTED CONTRACTOR FROM THE LWO DURING THE PERFORMANCE OF THIS CONTRACT . A SUBCONTRACTOR PERFORMING WORK ON THIS CONTRACT IS NOT EXEMPT UNLESS THE OFFICE OF CONTRACT COMPLIANCE HAS APPROVED A SEPARATE EXEMPTION FOR THE INDIVIDUAL SUBCONTRACTOR.

Form LW-26B, Rev. 7/17

LW-26B

OFFICE OF CONTRACT COMPLIANCE, EEOE SECTION: (213) 847-2625

0.000.000.000.000.000.000.000.000.000.000.000.000.000.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

LW-28

LWO – 501(C)(3) NON-PROFIT EXEMPTION APPLICATION This application for exemption must be submitted along with your bid or proposal to the AWARDING DEPARTMENT. INCOMPLETE SUBMISSIONS WILL BE RETURNED. Los Angeles Administrative Code 10.37, the Living Wage Ordinance (LWO), presumes all City contractors are subject to the LWO unless this exemption application is approved.

TO BE FILLED OUT BY THE CONTRACTOR:

1. Company Name: Phone #: 2. Company Address:3. Are you a Subcontractor? Yes No If YES, state the name of your Prime Contractor:

4. Type of Service Provided:

EXEMPTION INFORMATION:

EXEMPTION SUPPORTING DOCUMENTATION REQUIRED

501(c)(3) Non-Profit Organizations:

A corporation organized under 501(c)(3) of the IRS Code qualifies for an exemption from the LWO if the highest paid employee makes less than eight times the hourly wage of the lowest paid employee.

The exemption is valid for all employees except Child Care Workers.

Therefore, even if a 501(c)(3) organization meets the salary test, Child Care Workers performing work on the City agreement must still be provided with the LWO required wage and time off benefits. Under the LWO’s Rules and Regulations, a Child Care Worker is an employee “whose work on an agreement involves the care or supervision of children 12 years of age and under.”

This is read broadly so that the term would include, for example, tutors working with children 12 or under.

1. ATTACH a copy of your 501(c)(3) letter from the IRS.

2. ANSWER the following questions:

A. STATE the hourly wage of HIGHEST paid employeein the organization: $

B. STATE the hourly wage of LOWEST paid employeein the organization: $

C. MULTIPLY B by 8: $

3. Based on Question 2 above, is A less than C?

YES If YES, sign and submit this application for final approval. NO If NO, your company is NOT eligible for an exemption.

4. Will there be any Child Care Workers (as defined bythe LWO Regulations) working on this Agreement?

YES NO

5. Fill & Submit LW-18 Subcontractor Information Form.

I declare under penalty of perjury under the laws of the State of California that: (1) I am authorized to bind the entity listed above; (2) the information provided on this form is true and correct to the best of my knowledge; and (3) the entity qualifies for exemption from the LWO on the basis indicated above. By signing below, I further agree that should the entity listed above cease to qualify for an exemption because of a change in salary structure, non-profit status, the hiring of employees, or any other reason, the entity will notify the Awarding Department and the Office of Contract Compliance of such change and comply with the LWO’s wage and time off requirements.

Print Name of Person Completing this Form Signature of Person Completing this Form

Title Phone # Date ANY APPROVAL OF THIS APPLICATION EXEMPTS ONLY THE LISTED CONTRACTOR FROM THE LWO DURING THE PERFORMANCE OF THIS CONTRACT. A SUBCONTRACTOR PERFORMING WORK ON THIS CONTRACT IS NOT EXEMPT UNLESS THE OFFICE OF CONTRACT COMPLIANCE HAS APPROVED A SEPARATE EXEMPTION FOR THE INDIVIDUAL SUBCONTRACTOR.

AWARDING DEPARTMENT USE ONLY:

Dept: Contact: Phone #: Contract #:

OCC USE ONLY:

Approved / Not Approved – Reason:

By Analyst: Date:

Form OCC/LW-28, Rev. 10/18 OFFICE OF CONTRACT COMPLIANCE, EEOE SECTION: (213) 847-2625

Print Name of Person Completing this Form

ANY DETERMINATION/APPROVAL IS APPLICABLE ONLY TO THE LISTED CONTRACTOR FROM THE LWO DURING THE PERFORMANCE OF THIS CONTRACT. A SUBCONTRACTOR PERFORMING WORK ON THIS CONTRACT IS NOT EXEMPT UNLESS THE OFFICE OF CONTRACT COMPLIANCE HAS APPROVED A SEPARATE APPLICATION FOR THE INDIVIDUAL SUBCONTRACTOR.

By signing, the contractor certifies under penalty of perjury under the laws of the State of California that the information submitted in support of this application is true and correct to the best of the contractor’s knowledge.

Signature of Person Completing this Form

Title Phone # Date

OCC USE ONLY

By OCC Analyst: Date:

Approved/ Not Approved - Reason:

LWO Non-Coverage Determination ApplicationOCC DETERMINATION REQUIRED

This application for non-coverage must be submitted by the Contractor. INCOMPLETE SUBMISSION WILL BE RETURNED.Los Angeles Administrative Code 10.37, the Living Wage Ordinance (LWO), presumes all City Contractors are subject to the LWO unless this non-coverage determination application is approved.

SECTION I: CONTRACTOR INFORMATION

1. Company Name:

3. Contact Person: Phone #:

If YES, state the name of the Prime Contractor:Yes No4. Are you a Subcontractor?

2. Address:

SECTION II: CONTRACT INFORMATION

4. Location of Service: Contact Person: Phone #:

3. Type of Service Provided:

1. Contract Amount: Start Date: End Date:2. Purpose of the Contract:

5. Awarding Dept:

SECTION III: NON-COVERAGE DETERMINATION REQUEST INFORMATIONPer Section 10.37.13 of the LWO, contractors may request a determination of non-coverage on any basis by this article, including, but not limited to: non-coverage, for failure to satisfy definition of "City financial assistance recipient", "public lease/license", or "service contract".

1. Request for non-coverage determination due to failure to satisfy the following definition:

City Financial Assistant Recipient Public Lease/License Service Contract Other

Provide a detailed memorandum explaining the basis of the request, which may include, but is not limited to: the terms of a city financial assistance agreement, purpose of the contract, location, and work performed. The OCC may request further information to issue a determination.

2.

Form OCC/LW-29, 7/17 Office of Contract Compliance, EEOE Section: (213) 847-2625

LW-29

City of Los Angeles Department of Water and Power

CERTIFICATION OF COMPLIANCE WITH CHILD SUPPORT OBLIGATIONS

This document must be returned with the Proposal/Bid Response

The Undersigned hereby agrees that will: Name of Business

1. Fully comply with all applicable State and Federal employment reporting

requirements for its employees.

2. Fully comply with and implement all lawfully served Wages and Earnings Assignment Orders and Notices of Assignment.

3. Certify that the principal owner(s) of the business are in compliance with any Wage

and Earnings Assignment Orders and Notices of Assignment applicable to them personally.

4. Certify that the business will maintain compliance with Child Support Obligations

Ordinance provisions.

I declare under penalty of perjury that the foregoing is true and was executed at:

City/County/State

Date Please check if company has already submitted to DWP certification relative to Child Support Obligations Ordinance.

Name of Business Address

Signature of Authorized Officer or Representative Print Name

Title Telephone Number

CLAIRE BARTELS DIRECTOR OF FINANCE

CITY TREASURER

CITY OF LOS ANGELES CALIFORNIA

ERIC GARCETTI MAYOR

IMPORTANT NOTICE

OFFICE OF FINANCE CITY HALL

200 NO. SPRING ST., ROOM 101 LOS ANGELES, CA 90012-5701 (USE MAIN ST. ENTRANCE)

(844) 663-4411

FAX (213) 978-1548 FINANCE.LACITY.ORG

Dear City of Los Angeles Vendor:

Re: Tax Registration Certificate (TRC) and/or Vendor Registration Number (VRN)

On October 14, 1987, the City of Los Angeles Controller’s Office implemented a program designed to ensure that all businesses (hereafter referred to as vendors), which contract to provide goods or services to the City, have fully complied with all business tax requirements. As such, each vendor must provide the Controller’s Office with a registration account number issued by the Los Angeles Office of Finance, prior to being paid for any goods or services provided.

The Office of Finance is responsible for the collection of various taxes, fees, and charges as required under the Los Angeles Municipal Code. Section 21.03 L.A.M.C. (Imposition of Tax) requires persons engaged in any business or occupation within the City of Los Angeles to register and pay the required tax due. Businesses, including vendors, owing a business tax are issued a Tax Registration Certificate (TRC). However, in some cases businesses are not required to pay a business tax, depending on the nature and location of that business. In those cases, the vendor is issued a Vendor Registration Number (VRN). In order to be paid under contract with the City, a Tax Registration Certificate Number (TRC) or Vendor Registration Number (VRN) must be provided to the Controller’s Office.

In order to obtain the required registration number, please complete and return the enclosed application (Exhibit A), along with the appropriate attachments, based on your business activity. Applications are reviewed by Office of Finance personnel and the appropriate registration number will be issued. An annual business tax is due upon issuance of a Tax Registration Certificate Number (TRC). All Vendor Registration Numbers (VRN) will be reviewed on an annual basis.

Additionally, non-profit organizations may apply for an exempt Tax Registration Certificate. Applications for exemption of the City of Los Angeles business tax are reviewed by the Office of Finance and/or the Los Angeles Police Department, Commission Investigation Division, Charitable Services Unit to determine if an exemption should be granted. The determination is generally completed in approximately thirty (30) days from the date all required documentation is submitted.

If you require non-profit tax exemption information, please contact the Tax Exemption Unit at (213) 978-3050, or if you have questions regarding Vendor Registration, please contact the Special Desk Unit at (844) 663-4411.

Enclosures (Revised 11/05)

Wpa#A3:vrnAPPL AN EQUAL OPPORTUNITY – AFFIRMATIVE ACTION EMPLOYER

Office of Finance (Main Office)

City Hall 200 North Spring Street

Room 101 Los Angeles, CA 90012

(844) 663-4411

Hours: 8:00 a.m. – 5:00 p.m. Monday – Friday

BRANCH OFFICES TELEPHONE NUMBERS HOURS

Van Nuys Civic Center 6262 Van Nuys Blvd #110

(844) 663-4411 Monday – Friday 8:00 a.m. – 5:00 p.m.

West Los Angeles 1828 Sawtelle Bl., Room 102

(844) 663-4411 Monday – Friday 8:00 a.m. – 5:00 p.m.

Figueroa Plaza Bldg. One Stop Ctr. 201 N. Figueroa St., 3rd Floor (Counter 17)

(844) 663-4411 Mon. Tue. Thu. Fri. 7:30 a.m.– 4:30 p.m. Wed. 9:00 a.m.- 4:30 p.m.

(Revised 11/05) C:ia/cr

(Revised 11/05) C:ia/cr

APPENDIX C INFORMATION AND VENDOR QUESTIONNAIRE PACKAGE

CONTENTS

EXHIBIT A APPLICATION

EXHIBIT B SELLING GOODS, WARES, OR MERCHANDISE AT WHOLESALE OR RETAIL

EXHIBIT C PROFESSIONAL OR OCCUPATIONAL/MISCELLANEOUS SERVICES

EXHIBIT D CONTRACTOR

EXHIBIT E LEASING OR RENTING TANGIBLE PERSONAL PROPERTY

EXHIBIT F LEASING OR RENTING COMMERCIAL PROPERTY

EXHIBIT G LEASING OR RENTING HOTEL ROOMS, APARTMENTS OR RESIDENTIAL UNITS

EXHIBIT H TRUCKING OR HAULING

EXHIBIT I TRANSPORTING PERSONS FOR HIRE

EXHIBIT J CERTIFICATION OF EXEMPTION – CONSTITUTIONAL/GOVERNMENT EXEMPTIONS

EXHIBIT K CERTIFICATE OF EXEMPTION – ONE TIME PURCHASE OVER $200

EXHIBIT L CONDUCTING, OPERATING, OR PROMOTING ANY ENTERTAINMENT, SHOW

OR EXHIBITION

EXHIBIT M CERTIFICATE OF EXEMPTION – VENDORS DEEMED CITY OF LOS ANGELES EMPLOYEES

(Revised 11/05) C:ia/cr

EXHIBIT A

APPLICATION FOR TAX REGISTRATION CERTIFICATE OR VENDOR REGISTRATION NUMBER

In order to obtain the required Tax Registration Certificate or a Vendor Registration Number, please complete the following information:

LEGAL NAME OF OWNER:

(Individual, Partnership, or Corporation)

BUSINESS NAME: (DBA or Fictitious Name of Business)

BUSINESS ADDRESS:

(Do Not Use a P.O. Box) Residential Non-residential

MAILING ADDRESS: (If Different from Business Address)

C/O:

DESCRIPTION OF BUSINESS:

BUSINESS START DATE WITHIN THE CITY OF LOS ANGELES: MONTH DAY YEAR

Please circle the exhibit(s) you are submitting with EXHIBIT A:

B C D E F G H I J K L M

SOCIAL SECURITY NUMBER (SSN), if there FEDERAL EMPLOYER IDENTIFICATION ARE NO business related employees: NUMBER (FEIN), if there ARE related employees:

OR

SSN FEIN NOTE: SSN/FEIN is confidential, not part of public record.

Signature: Title:

Telephone: ( ) Date:

Return this application and the applicable exhibits to the Office of Finance, Special Desk Unit, 200 N. Spring St, Room. 101, Los Angeles, California 90012. -------------------------------------------------------------------------------------------------------------------------------------------------- -

FOR OFFICE USE ONLY

EXHIBIT B

SELLING GOODS, WARES, OR MERCHANDISE AT WHOLESALE OR RETAIL

YES NO

1. Are you engaged in business within the City of Los Angeles?

(If Yes, (If No, Answer #2) Answer #3)

You are engaged in business within the City of Los Angeles when, through the physical presence of yourself, your employees, your agents, or your equipment, you carry on activities within the City of Los Angeles which are designed to solicit, promote, stimulate, or otherwise encourage the sale of goods, wares, or merchandise seven (7) or more days per calendar year. This includes the delivery of your merchandise within the City of Los Angeles in vehicles owned and operated by you or your employees.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

Account Number

If you do not have a valid City of Los Angeles Tax Registration Certificate, please report your City of Los Angeles gross receipts for the previous three calendar years or from the date you began conducting business within the City of Los Angeles.

YEAR GROSS RECEIPTS

20 $

20 $

20 $

3. If your answer to Question No. 1 is “NO”, but you do have customers within the City of Los Angeles, please indicate below the method or methods by which activities in Question No. 1are accomplished:

YES NO

a. Advertising

b. Telephone orders

c. Bid by mail

d. Independent Commission Brokers/Sales Representative

If method (d) is used, please provide:

Name

Address

City State

Telephone

e. Deliveries are made by means other than vehicles operated by you.

Signature Title

(Revised 11/05) C:ia/cr

EXHIBIT C

(Revised 11/05) C:ia/cr

PROFESSIONAL OR OCCUPATIONAL/MISCELLANEOUS SERVICES

YES NO

1. Are you engaged in business within the City of Los Angeles?

(If Yes, (If No, Answer #2) Answer #3)

You are engaged in business within the City of Los Angeles when, through physical presence, you carry on any trade, calling, occupation, vocation, profession or other means of livelihood, as an independent contractor, and when the gross receipts are derived from or attributable to activities engaged in within the City of Los Angeles for seven (7) or more days per calendar year.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

Account Number

If you do not have a valid City of Los Angeles Tax Registration Certificate, please report your City of Los Angeles gross receipts for the previous three calendar years or from the date you began conducting business within the City of Los Angeles.

YEAR GROSS RECEIPTS

20 $

20 $

20 $

3. If your answer to Question No. 1 “NO”, but you do have gross receipts derived from activities within the City of Los Angeles, please indicate below the nature of your activity.

Signature Title

(Revised 11/05) C:ia/cr

EXHIBIT D

CONTRACTOR

YES NO

1. Are you engaged in business within the City of Los Angeles?

(If Yes, (If No, Answer #2) Answer #3)

You are engaged in business within the City of Los Angeles when, as a contractor or subcontractor, you or your employees undertake any job or project upon land located within the City of Los Angeles including the erection, alteration, improvement, or repair of any type of structure; plumbing, plastering, sheet metal, electrical, cement or tile work; excavating; erection of scaffolding; construction of roads, railroads, pipe lines for seven (7) or more days per calendar year.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

Account Number

If you do not have a valid City of Los Angeles Tax Registration Certificate, please report your City of Los Angeles gross receipts for the previous three calendar years or from the date you began conducting business within the City of Los Angeles.

YEAR GROSS RECEIPTS

20 $

20 $

20 $

3. If your answer to Question No. 1 is “NO”, but you do have contracts with the City of Los Angeles, please provide the Los Angeles City job site addresses below.

Signature Title

EXHIBIT E

(Revised 11/05) C:ia/cr

LEASING OR RENTING TANGIBLE PERSONAL PROPERTY

YES NO

1. Are you engaged in business within the City of Los Angeles?

(If Yes, (If No, Answer #2) Answer #3)

You are engaged in business within the City of Los Angeles when, through the physical presence of yourself, your employees, your agents, or your equipment, you carry on activities within the City which are designed to solicit, promote, stimulate or otherwise encourage the leasing or rental of tangible personal property for seven (7) or more days per calendar year.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

Account Number

If you do not have a valid City of Los Angeles Tax Registration Certificate, please report your City of Los Angeles gross receipts for the previous three calendar years or from the date you began conducting business within the City of Los Angeles.

YEAR GROSS RECEIPTS

20 $

20 $

20 $

3. If your answer to Question No. 1 is “NO”: YES NO

a. Is the property installed at a location within the City of Los Angeles?

b. Is there a provision in the lease or rental agreement that use of property is to take place within the City of Los Angeles?

Signature Title

(Revised 11/05) C:ia/cr

EXHIBIT F

LEASING OR RENTING COMMERCIAL PROPERTY

YES NO

1. Are you engaged in business within the City of Los Angeles?

You are engaged in business within the City of Los Angeles when you rent or let a building, or structure, or any space therein of any kind on land located in the City of Los Angeles to a tenant for purposes other than dwelling for seven (7) or more days per calendar year.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

Account Number

If you do not have a valid City of Los Angeles Tax Registration Certificate, please report your City of Los Angeles gross receipts for the previous three calendar years or from the date you began conducting business within the City of Los Angeles.

YEAR GROSS RECEIPTS

20 $

20 $

20 $

3. Please provide the location(s) of the leased property within the City of Los Angeles.

Signature Title

(Revised 11/05) C:ia/cr

EXHIBIT G

LEASING OR RENTING HOTEL ROOMS, APARTMENTS OR RESIDENTIAL UNITS

YES NO

1. Are you engaged in business within the City of Los Angeles?

You are engaged in business within the City of Los Angeles when you conduct or operate in the City of Los Angeles a hotel, rooming house, apartment house, house court or bungalow court, any public camp, trailer camp, park or lot where the public may rent camping, trailer or tent space, and renting or letting rooms, apartments or other accommodations for dwelling in any such place for seven (7) or more days per calendar year.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

Account Number

If you do not have a valid City of Los Angeles Tax Registration Certificate, please report your City of Los Angeles gross receipts for the previous three calendar years or from the date you began conducting business within the City of Los Angeles.

YEAR GROSS RECEIPTS

20 $

20 $

20 $

3. If the answer to Questions No. 1 is “Yes” and you do not have a valid City of Los Angeles Tax Registration Certificate, please answer the following:

a. Do you rent four (4) or more units within the City of Los Angeles?

c. Does your total gross receipts from the activity exceed $20,000 per calendar year?

Signature Title

EXHIBIT H

TRUCKING OR HAULING Supporting documentation identified by the Office of Finance may be required.

YES NO

1. Are you engaged in business within the City of Los Angeles?

You are engaged in business within the City of Los Angeles when you, your employees or your agents operate a motor vehicle within the City for hire or compensation seven (7) or more days per calendar year.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

Account Number

3. Do you operate as a for hire motor carrier of property required to pay a fee to the State Under the Household Goods Carriers Uniform Business License Tax Act or the Motor Carriers of Property Uniform Fee Act? If your answer to questions 2 and 3 is “NO”, please contact the Office of Finance, Call Center at (844) 663-4411 for instructions on completing the following:

Please provide the following information for all vehicles: NO. OF DAYS

YEAR UNLADEN WEIGHT VEHICLE DAYS OPERATED

20

20

20

Signature Title

(Revised 11/05) C:ia/cr

EXHIBIT I

TRANSPORTING PERSONS FOR HIRE Supporting documentation identified by the Office of Finance may be required.

YES NO

1. Are you or do you plan to engage in business within the City of Los Angeles?

You are engaged in business within the City of Los Angeles when you, your employees or your agents operate a motor vehicle within the City for transportation of persons for hire or compensation seven (7) or more days per calendar year.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

If yes, please provide your Tax Registration Certificate account number:

3. Do you operate a charter party limousine(s) and have a business address outside the City of Los Angeles where all your vehicles are limousine(s) or luxury sedan(s) only, with a seating capacity of no more than 9 including the driver?

4. Do you have a franchise granted by the City Department of Transportation?

5. Do you operate your vehicle exclusively in Interstate Commerce?

6. Do you operate a vehicle(s) that meets all of the following: (1) Operated exclusively between fixed termini or over regular routes in passenger stage operations. (2) Operated as indicated in (1) under certificate issued by the Public Utilities Commission, AND (3) Operation has been issued a certificate of public convenience and necessity by the Interstate Commerce Commission.

If your answer to questions 2, 3, 4, 5 or 6 is “NO”, please contact the Office of Finance, Tax Exemption Unit at (844) 663-4411 for instructions on completing the following information for all vehicles:

YEAR

SEATING CAPACITY (including driver)

VEHICLE DAYS

NO. OF DAYS OPERATED

20

20

20

Additionally, please provide the following information for all vehicles that are operated within the City.

Vehicle Make (e.g. Lincoln, Ford,

Chevrolet, etc.)

Model (e.g. Towncar,

Excursion, Express, etc.)

Body Style (e.g. Sedan, SUV, Van,

etc.)

Seating Capacity (including Driver)

Print Name Date:

Signature Title

(Revised 11/05) C:ia/cr

EXHIBIT J CERTIFICATION OF EXEMPTION

CONSTITUTIONAL/GOVERNMENTAL EXEMPTION

The following entities are exempted from paying Business Taxes by the Constitution of the United States, the Constitution of the State of California or the Los Angeles Municipal Code:

1. Banks 2. Insurers – Insurance related activities which “In Lieu” taxes are paid to the State of California 3. Foreign governments – Agencies exempt from Domestic Taxation by Treaty, International Law or Custom 4. United States Government and Agencies 5. State of California 6. University of California 7. California State Universities and Colleges 8. Community Redevelopment Agency of the City of Los Angeles 9. Housing Authority of the City of Los Angeles 10. County of Los Angeles 11. Los Angeles Convention and Exhibition Center 12. Los Angeles Memorial Coliseum Commission 13. Districts and Political Subdivisions under the Laws of the State of California (such as):

a. Los Angeles Unified School District b. Los Angeles Community College District c. Los Angeles County Flood Control District d. Metropolitan Water District e. Metropolitan Transit Authority f. Mosquito Abatement Districts g. Wilmington Cemetery District h. Sanitation Districts

I declare, under penalty of perjury under the laws of the State of California, that to the best of my knowledge I/we are one of the entities described above and is/are exempted from paying the City of Los Angeles Business Tax.

Name of Agency

Nature of Business/Type of Agency

Address

Printed Name of Authorized Representative or Agent Phone Number

Signature Title

PLEASE RETURN THIS FORM TO THE DEPARTMENT TO WHICH YOU ARE PROVIDING SERVICES AND A COPY TO THE OFFICE OF FINANCE, 200 N. SPRING ST, RM. 101, LOS ANGELES, CALIFORNIA 90012, MAIL STOP 170 – ATTN: TAX EXEMPTION UNIT.

(Revised 11/05) C:ia/cr

EXHIBIT K

CERTIFICATION OF EXEMPTION FOR

ONE TIME PURCHASE OR SERVICE RENDERED OVER $200*

The hereby certifies that a one time (Name of Department/Bureau)

purchase of

(Type of Product/or Service)

costing was made from the (Cost of Purchase)

following business:

(Name of Company)

(Address)

(Company Representative) (Title) (Phone Number)

I/we further certifiy that to the best of our knowledge, the business is NOT LOCATED IN THE CITY OF LOS ANGELES, does not solicit or conduct business in the City for seven (7) or more days during a calendar year, and does not deliver the goods or merchandise in its own vehicles within the City for seven (7) or more days during a calendar year. Based on the information provided, this business would not appear to owe a Business Tax.

(Department/Bureau Representative)

(Title) (Phone Number) (Date)

c: Office of Finance 200 N. Spring St., Rm. 101 Los Angeles, CA 90012 Mail Stop 170 Attn: Tax Exemption Unit

(Revised 11/05) C:ia/cr

EXHIBIT L

CONDUCTING, OPERATING, OR PROMOTING ANY ENTERTAINMENT, SHOW OR EXHIBITION

YES NO

1. Are you engaged in business within the City of Los Angeles?

(If Yes, (If No, Answer #2) Answer #3)

You are engaged in business within the City of Los Angeles when, through physical presence, you conduct, operate or promote any entertainment, show or exhibition, where an admission fee is charged, collected or received, or where no admission fee is charged, collected or received but donations of any kind or character are solicited or accepted seven (7) or more days per calendar year.

2. If yes, do you have a valid City of Los Angeles Tax Registration Certificate?

Account Number

If you do not have a valid City of Los Angeles Tax Registration Certificate, please report your City of Los Angeles gross receipts for the previous three calendar years or from the date you began conducting business within the City of Los Angeles.

YEAR GROSS RECEIPTS

20 $

20 $

20 $

3. If your answer to Question No. 1 is “NO” and you do not have a valid City of Los Angeles Tax Registration Certificate, but you have conducted, operated, or promoted any entertainment, show or exhibition within the City of Los Angeles, please provide the name, location and dates of the shows/exhibitions below.

NAME OF SHOW/EXHIBITION LOCATION DATE

(If additional space is needed, please use a separate sheet)

Signature Title

(Revised 11/05) C:ia/cr

EXHIBIT M

VENDORS DEEMED CITY OF LOS ANGELES EMPLOYEES

EMPLOYEE STATEMENT:

I certify that I (Name of employee)

am currently working for

(Name of City Department/Bureau)

and that I am under contract with this department in the capacity of an employee as defined in Section 21.00 (Definitions), Subsection (k), Los Angeles Municipal Code and therefore not subject to payment of business taxes.

(Signature of employee) (Date)

EMPLOYER STATEMENT:

I certify that to the best of my understanding and belief, the above-named individual is deemed to be an employee of this City Department, based on Section 21.00 (Definitions), Subsection (k), Los Angeles Municipal Code, which I have reviewed, and therefore not subject to payment of business taxes.

(Department/Bureau Representative)

(Signature and Title) (Phone Number) (Date)

c: Office of Finance 200 N. Spring St., Rm. 101 Los Angeles, CA 90012 Mail Stop 170 Attn: Tax Exemption Unit

STATEMENT OF INVESTMENT OBJECTIVES, GOALS, AND GUIDELINES REVISED: 2020-05-20

Table of Contents

Page I. General Investment Goals ........................................................................................................................ 1

II. Policies and Procedures .......................................................................................................................... 2 2.1 Asset Allocation Policy .............................................................................................................. 2 2.2 Asset Class and Portfolio Component Definitions ..................................................................... 4 2.3 Responsibilities and Delegations ............................................................................................... 6

III. Investment Management Policy .............................................................................................................. 9 3.1 Manager Selection .................................................................................................................... 9 3.2 Manager Authority ..................................................................................................................... 9 3.3 Proxy Voting .............................................................................................................................. 9 3.4 Derivatives .............................................................................................................................. 10 3.5 Rebalancing ............................................................................................................................ 10

IV. Selection, Termination, and Monitoring of Investment Managers .................................................... 12 4.1 Selection Process of Investment Managers ............................................................................ 12 4.2 Process for Investment Manager Termination ........................................................................ 12 4.3 Monitoring Investment Managers ............................................................................................ 12

V. Policy for the Use of Placement Agents and Third-Party Marketers ................................................. 17

VI. Securities Lending Cash Collateral Investment Guidelines ............................................................... 21

VII. Domestic Equity Guidelines ................................................................................................................... 24 7.1 Passive Domestic Equity ........................................................................................................ 26 7.2 Active Large Cap Value Domestic Equity ............................................................................... 27 7.3 Active Large Cap Growth Domestic Equity ............................................................................. 28 7.4 Active Small Cap Value Domestic Equity ................................................................................ 29 7.5 Active Small Cap Growth Domestic Equity ............................................................................. 30

VIII. International Equity Guidelines ............................................................................................................. 31 8.1 Passive International Equity .................................................................................................... 33 8.2 Active Growth International Equity .......................................................................................... 34 8.3 Active Value International Equity ............................................................................................ 36 8.4 Active Small Cap International Equity ..................................................................................... 38 8.5 Active Emerging Markets Equity ............................................................................................. 40

IX. Global Equity Guidelines ......................................................................................................................... 42 9.1 Active Global Equity ................................................................................................................ 43

X. Fixed Income Guidelines ......................................................................................................................... 45 10.1 Active Principal Protection ...................................................................................................... 47 10.2 Active Extended Global Credit ................................................................................................ 49

10.3 Active U.S. Bank Loans .......................................................................................................... 53

XI. Real Return Guidelines ........................................................................................................................... 54 11.1 Passive Short Duration TIPS .................................................................................................. 55 11.2 Commodities ........................................................................................................................... 56 11.3 Timber ..................................................................................................................................... 59 11.4 Guidelines for Investment Evaluation ...................................................................................... 62

XII. Hedge Fund Guidelines .......................................................................................................................... 63 12.1 Custom Fund of Hedge Fund .................................................................................................. 69 12.2 Guidelines for Investment Evaluation ...................................................................................... 72

XIII. Real Estate Investment Policy ............................................................................................................... 73 13.1 Designated Responsibilities and Tasks .................................................................................. 85 13.2 Guidelines for Initial Manager Evaluation ................................................................................. 87 13.3 Guidelines for Ongoing Manager Evaluation............................................................................ 88 13.4 Global Real Estate Investment Trust Guidelines ...................................................................... 89

XIV. Private Equity Investment Policy .......................................................................................................... 91 14.1 Designated Responsibilities and Tasks ................................................................................ 100 14.2 Guidelines for Fund of Funds Evaluation .............................................................................. 102 14.3 Direct Partnership Guidelines and Investment Criteria .......................................................... 103

Appendix A. Glossary of Terms ...................................................................................................................................... 105 B. Proxy Voting Policy .................................................................................................................................... 107

WATER AND POWER EMPLOYEES’ RETIREMENT PLAN STATEMENT OF INVESTMENT OBJECTIVES, GOALS, AND GUIDELINES

Section I Page |1

I . General Investment Goals The following broad investment goals are adopted by the Board, consistent with generally accepted standards, Plan Document, City Charter, and California State Constitution: 1. The overall goal of the Water and Power Employees’ Retirement Plan’s (“The Plan”)

investment assets is to provide Plan participants with post-retirement benefits as set forth in the Plan documents, including the Retiree Health Benefits Fund. This will be accomplished through a carefully planned and executed investment program.

2. A secondary objective is to achieve an investment return which will allow the percentage of

Department revenues necessary to fund the Plan to be maintained consistent, or reduced, and which will provide for a full funding of the Plan's liabilities.

3. The Plan assets will be managed on a total return basis. While the Plan recognizes the

importance of the preservation of capital, it also adheres to the principle that varying degrees of investment risk are generally rewarded with compensating returns. The Board’s Investment Policy has been designed to produce the most favorable long-term total portfolio return consistent with reasonable levels of risk. Consequently, prudent risk-taking is warranted within the context of overall portfolio diversification. As a result, investment strategies are considered primarily in light of their impact on the Plan’s total assets with consideration of the Board's responsibility as established by the City Charter and by Article 16, Section 17 of the California State Constitution.

4. The Plan’s investment program shall at all times comply with existing and future applicable

City, State, and Federal regulations. 5. All transactions undertaken will be for the sole benefit of the Plan’s participants and

beneficiaries and for the exclusive purpose of providing benefits to them and defraying reasonable administrative expenses associated with the Plan.

6. The Plan has a long-term investment horizon, and utilizes an asset allocation which

encompasses a strategic, long-run perspective of capital markets. It is recognized that a strategic long-run asset allocation plan, implemented in a consistent and disciplined manner will be the major determinant of the Plan’s investment performance.

7. Investment actions are expected to comply with "prudent person" standards as described:

"...with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims".1

1 ERISA 404(a) (1) (B)

WATER AND POWER EMPLOYEES’ RETIREMENT PLAN STATEMENT OF INVESTMENT OBJECTIVES, GOALS, AND GUIDELINES

Section VI Page |2

I I . Policies and Procedures The policies and procedures of the Board’s investment program are designed to maximize the probability that the investment goals will be fulfilled. Investment policies may evolve as fund conditions change and as investment conditions warrant. The Board will review the Investment Policy Statement for any amendments as needed, but no less than triennially. 2.1 Asset Allocation Policy The Board adopts and implements an asset allocation policy that is predicated on a number of factors, including:

A projection of actuarial assets, liabilities, benefit payments and required contributions;

Historical and expected long-term capital market risk/return behavior;

An assessment of future economic conditions, including inflation and interest rate levels;

The current and projected funding status of the Plan; and

The results of an Asset/Liability Study completed at a minimum every 5 years. This policy provides for diversification of assets in an effort to maximize the investment return of the Plan consistent with market conditions. Asset allocation modeling identifies asset classes the Plan will utilize and the percentage that each class represents of the total fund. Due to the fluctuation of market values, positioning within a specified range is acceptable and constitutes compliance with the policy. It is anticipated the Plan’s asset allocation policy may be subject to periodic revisions. The Board will periodically monitor and assess the actual asset allocation versus policy and will rebalance as appropriate. The Board implements its asset allocation policy through the use of full discretion investment managers who invest the assets of the portfolios assigned to them, subject to specific investment guidelines provided by the Board. In accordance with Board Resolution 16-23, adopted by the Board September 23, 2015, the Long-Term Asset Allocation Target for the investment of the Plan's assets is shown below. Also on October 21, 2015, under Board Resolution 16-31, the Board adopted an Interim Asset Allocation Target to allow for a smooth transition to the Long-Term Asset Allocation Target. On November 8, 2017, under Board Resolution 18-40, the Board adopted an updated Interim Asset Allocation Target given the current funding level of the Plan’s alternative investments. The Interim Asset Allocation Target will be evaluated annually at fiscal year-end as the Plan works towards the approved Long-Term Asset Allocation Target. The Long-Term and Interim Asset Allocation Targets are as follows:

WATER AND POWER EMPLOYEES’ RETIREMENT PLAN STATEMENT OF INVESTMENT OBJECTIVES, GOALS, AND GUIDELINES

Section VI Page |3

Long-Term Interim

Domestic Equity 24.70% 32.50%

International Equity 20.40% 19.00%

Global Equity 2.90% 0.00%

Fixed Income 25.00% 25.50%

Real Return 5.00% 5.00%

Hedge Funds 5.00% 5.00%

Real Estate 8.00% 7.00%

Private Equity 8.00% 5.00%

Cash Equivalents 1.00% 1.00%

WATER AND POWER EMPLOYEES’ RETIREMENT PLAN STATEMENT OF INVESTMENT OBJECTIVES, GOALS, AND GUIDELINES

Section VI Page |4

2.2 Asset Class and Portfolio Component Definitions The Board will utilize the following portfolio components to fulfill the Long-Term Asset Allocation Target and total fund performance goals established in this document. 1. Domestic Equities – The Board expects that over the long run, total returns on domestic

equities will be higher than the returns of fixed income securities, understanding such returns may be subject to substantial volatility over shorter periods of time. For purposes of further investment diversification the Board adopted five components of the Plan’s domestic equity holdings as follows (see Board Resolutions 03-23 of October 9, 2002 and 03-19 of September 18, 2002):

Index Funds / Core Stocks – This portfolio will provide broadly diversified, core exposure through index funds to the US equity market, primarily in large capitalization companies. Index funds provide primary liquidity for asset allocation rebalancing. The target index fund to be tracked by this segment shall be the Russell 1000 Index.

Large Value Stocks – Large Cap Value stocks, covering the upper range of market capitalization, are expected to outperform the broad market during periods when the market prefers companies with a large margin of safety, such as downturns, or when the market rewards undervalued companies during rebounds. Value stocks typically exhibit higher dividend yield, lower P/E ratios, or lower Price/Book ratios.

Large Growth Stocks – Large Cap Growth stocks, covering the upper range of market capitalization whose valuations are more directly tied to future earnings prospects. Often, growth stocks sell at higher prices relative to expected or historical earnings growth in anticipation of sustained or accelerating growth. Growth stocks typically exhibit above average levels of positive earnings momentum, long-term earnings growth or return-on-equity. Strategies targeting growth stocks can range from those that focus on more volatile speculative growth stocks or more defensive sustainable growth stocks.

Small Value Stocks – The principal characteristic of the small value stock component is its emphasis in stocks with market capitalization generally ranging from $200 million - $2.0 billion which are undervalued due to a short-term event or issue which has caused the market to depreciate its value. Managers targeting small cap value stocks seek to invest where issues are less significant or less persistent than the market estimates. Value stocks typically exhibit higher dividend yield, lower P/E ratios, or lower Price/Book ratios.

Small Growth Stocks – The principal characteristic of the small growth stock component is its emphasis in stocks with market capitalization from $200 million - $2.0 billion which are generally characterized by faster growth and higher long-term returns during rising markets. Growth stocks typically exhibit above average levels of positive earnings momentum, long-term earnings growth or return-on-equity. Strategies targeting growth stocks can range from those that focus on more volatile speculative growth stocks or more defensive sustainable growth stocks.

2. Non-U.S. Equities – The Board expects that over the long run, total returns of Non-U.S.

equities will be similar to the returns of domestic equities and will provide diversification to the domestic equity asset class, as well as to the aggregate investment portfolio. The following two components of the Plan’s International equity holdings were adopted by the Board (see Resolution 03-22 of October 9, 2002):

Core International Stocks – This portfolio component provides exposure to broadly

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diversified equity markets outside the U.S. and consequently plays a significant role in diversifying the Board’s portfolio. This segment will concentrate on larger companies in established developed equity markets around the world.

Emerging Markets – This portfolio component is made up of equity positions in companies located in emerging, rapidly growing countries around the world. Because these are countries which are typically in the early development stages of economic growth, the returns in these countries are expected to be higher and more volatile on a year-to-year basis.

3. Fixed Income – The primary role of the fixed income portfolio is to provide a more stable

investment return and to generate income while diversifying the Plan’s investment assets. The following three components of the Plan’s fixed income holdings were adopted by the Board (see Resolution 13-91 of June 26, 2013):

Principal Protection – This segment will provide exposure to U.S. fixed income securities that contain relatively low levels of risk and exhibit lower volatility than other fixed income sectors or strategic classes. The portfolio will be entirely investment grade, and predominately consist of U.S. Treasuries, U.S. Agencies, and Securitized issues. Duration will be shorter than the broad fixed income market. Marginal allocations to outside benchmark securities (e.g. Foreign Sovereigns, Supranationals, etc.) will also be permitted, but subject to the investment grade rating requirement.

Extended Global Credit – This segment will provide exposure to fixed income securities that contain various levels of credit risk, and thus provide higher income and volatility than other fixed income sectors or strategic classes. The portfolio will primarily include fixed-rate instruments, but floating-rate securities will also be allowed. The portfolio will include both investment grade and non-investment grade rated securities, with an emphasis on Corporate Debt. Allocations to other entities, such as Non-U.S. Agencies, Local Authorities, Foreign Sovereigns, and Supranationals will also be included. Tactical allocations to sectors with less-or-no credit risk, such as U.S. Treasuries, will be allowed at the manager’s discretion. Exposure to this segment is meant to provide additional income and return to the fixed income portfolio, consistent with its higher risk profile compared to the Principal Protection segment.

U.S. Bank Loans – This segment will provide exposure to relatively illiquid floating-rate securities that provide a high level of income. The portfolio will emphasize non-investment grade issuers. Exposure to this segment is meant to provide additional income and return to the fixed income portfolio, as well as partially insulate the fixed income portfolio from interest rate risk. This segment will exhibit a higher risk profile compared to the Principal Protection segment.

4. Private Equity – This portfolio is expected to provide portfolio diversification and additional

return over and above the Plan’s public markets portfolio, consistent with its higher risk profile compared to other segments of the Plan’s portfolio. Examples of Private Equity Investment holdings will include venture capital, leveraged buyouts, distressed debt, and special equity funds.

5. Real Estate – This portfolio is expected to provide portfolio diversification due to real estate's

low correlation with the returns of publicly traded equities and fixed income. 6. Real Return – This portfolio is expected to provide a consistent return in excess of inflation.

Stable real returns should provide diversification versus other strategic classes. The real

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return class can contain numerous asset segments that, and when combined, is expected to produce the desired investment return and volatility outcome.

Treasury Inflation Protection Securities (“TIPS”) – This segment is designed to provide inflationary adjusted income through exposure to the U.S. TIPS market. This segment is expected to match or outperform inflation over a market cycle.

Commodities – This segment will provide exposure to areas available in the U.S. commodities market including Energy, Livestock, Agriculture, Industrial Metals and Precious Metals. It is expected that Commodities will provide positive exposure to rapid changes in inflation and inflation expectations.

7. Hedge Funds – This portfolio is expected to provide portfolio diversification with low

correlation of returns to publicly traded equities and fixed income. It is designed to enhance the risk-adjusted performance of the Plan and add incremental diversification versus the other class segments.

2.3 Responsibilities and Delegations

Responsibilities of the Board

The Board shall:

1. Act in a fiduciary capacity in the exercise of its duties.

2. Approve and amend the Investment Policy and Annual Strategic Policies.

3. Approve investment opportunities considered for the Plan. When evaluating investment

opportunities:

a. Review due diligence reports prepared by the Consultant(s)/Investment Staff.

b. Interview management teams of proposed investments, as necessary.

c. Approve or reject proposed investment opportunities.

4. Monitor the performance of the Consultant(s).

5. Receive and review performance reports from the Consultant(s)/Investment Staff.

Responsibilities of the Investment Staff

The Investment Staff shall:

Recommendations to the Board

Assist Consultant(s) in developing recommendations regarding Investment Policies, Strategies and Guidelines.

Investment Opportunity Sourcing

Review investment referrals received from Board members, etc.

As desired, perform initial gatekeeper functions by meeting with groups, and reviewing the investment documentation.

Perform preliminary due diligence prior to referring to the Consultant(s) for further due diligence.

Due Diligence

Forward contact information and materials to Consultant(s) for desired opportunities.

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Coordinate full due diligence review. o Initiate outside legal review (recommended). o Communicate status of legal review to Consultant(s).

Review Consultant(s) due diligence report, analysis, and recommendations for qualitative and quantitative reasonableness.

Assist Consultant(s) with on-going monitoring and due diligence. Investment Administration

Execute documents for investments approved by the Board. o Review and execute contracts, modifications, and other documentation. o Manage day-to-day Plan operations including setting up communications, setting

up custodial accounts, data requirements and standard wire instructions. o Coordinate capital calls and distributions. o Review and process a variety of reports from Managers.

Keep Consultant(s) apprised of operations, as needed. Performance Monitoring

Receive and review quarterly reports from Managers.

Receive and review full performance report (quarterly) and Strategic Plan (annually) from Consultant(s).

Consultant Evaluation

Review and assess: o Program performance. o Quality of analytical and technical work. o Responsiveness to requests from the Board and Investment Staff. o Availability to attend Board meetings and meetings with Investment Staff given

reasonable advance notice. o Ability to identify and mitigate risks. o Ability to proactively informing Investment Staff of new investment opportunities or

risks in the market place.

Responsibilities of the Consultant(s)

The Consultant(s) shall:

1. Act in a fiduciary capacity when exercising duties.

2. Report directly to the Board/Investment Staff on matters of policy.

3. Review the policy annually and notify the Board/Investment Staff if revisions are needed.

4. Bring non-conforming issues to the attention of the Board/Investment Staff.

5. Complete due diligence on potential investment opportunities.

6. Review proposed investments and make recommendations.

7. Complete manager and strategy due diligence on an as-needed basis.

8. Monitor the performance of the Plan and compliance with the Policy.

a. Consultant receives monthly and quarterly performance reports from Managers.

b. Consultant verifies performance of the Managers and reconciles data of the

Manager and Custodian.

9. Monitor and report on risk.

10. Prepare quarterly performance report and present to the Board/Investment Staff.

11. Provide the Board/Investment Staff with research items relevant to the Plan.

12. Provide ongoing education to the Board/Investment Staff.

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Additionally, the Consultant(s) shall follow the procedures outlined below when conducting a

Public Markets Manager search.

Investment Due Diligence

Long List of Candidates - Analyze the following aspects:

o Investment Strategy

o Organizational Structure

o Background and Experience

o Track record

o Terms

o Alignment of Interest

Upon completion, review findings with the Plan’s Board and recommend finalist

candidates.

Finalist Candidates

o Conduct onsite visits as appropriate.

o Upon completion, prepare and issue to the Plan’s Board a finalist book to

accompany finalist presentations.

o Arrange meeting to review materials and performance interviews.

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I I I . Investment Management Policy The Board will retain external investment managers to manage portfolios using a specific style and methodology. Managers are expected to establish an account for the Retirement Fund and an account for the Retirement Health Benefits Fund (individually, the “Account” and collectively, the “Accounts”). The Accounts should be equivalent to each other in structure, holdings, and performance. In instances where equivalent accounts cannot be created due to different asset sizes of the accounts, available account structures, or restrictions on the type of funds the manager can receive, the Board shall determine an appropriate alternative product and account structure as similar to the original portfolio as possible. Managers will have authority for implementing investment strategy, security selection, and trade execution, subject to the specific Manager Guidelines, contract, and legal restrictions, or other Board direction. Performance objectives will also be developed for each manager. The performance of the portfolio will be monitored and evaluated on a regular basis relative to each portfolio component's benchmark return and, if available, relative to a peer group of managers following similar investment styles. Investment actions are expected to comply with "prudent person" standards. Each investment manager will be expected to act as a fiduciary and to know the Investment Guidelines of the Board and comply with those at all times. The Board will also review each investment manager's adherence to its investment policy, and any material changes in the manager's organization (e.g. personnel changes, new business developments, etc.). The investment managers retained by the Board will be responsible for informing the Board of such material changes. Investment managers under contract with the Board shall have discretion to prudently establish and execute transactions with securities broker/dealer(s) as a manager may select. The investment managers shall obtain best execution with respect to every portfolio transaction. The following transactions will be prohibited: short sales; selling on margin; "prohibited transactions" as defined under the Employee Retirement Income Security Act (ERISA); and, transactions that involve a broker acting as a "principal," where such broker is also the investment manager who is making the transaction. Authorized transactions shall be those specifically outlined in writing by the Board. The investments of the Board’s assets will be subject to the following general policies: 3.1 Manager Selection The selection of investment managers must be accomplished in accordance with Board Policy. Each investment manager is expected to operate under formal contract delineating responsibilities and appropriate performance expectations. The Board will monitor investment manager exposure in the pursuit of creating a diversified portfolio. Exposures will be monitored mindful of asset class, investment team structure (single relative to team), size of firm, account structure (separate account vs. commingled), liquidity, and other considerations as needed. 3.2 Manager Authority The Board’s investment managers shall direct and manage the investment and reinvestment of assets allocated to their accounts in accordance with this document, applicable Local, State and Federal statutes and regulations. Investment managers shall also be subject to specific investment policies and guidelines adopted by the Board, and executed contracts. 3.3 Proxy Voting

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Proxy voting rights will be managed with the same care, skill, diligence and prudence as is exercised in managing other assets. Proxy voting rights will be exercised in the sole interest of the Plan’s members and beneficiaries in accordance with all applicable statutes consistent with the Board proxy policies. (Please refer to the guidelines developed by the proxy advisor, contained in Appendix B, for specific policy language). 3.4 Derivatives The Board’s investment managers may be permitted, under the terms of specific individual investment guidelines (as approved by the Board, in writing, and consistent with the manager’s mandate), to use derivative instruments as set forth in such manager’s investment guidelines, to control portfolio risk. Derivatives are contracts or securities whose returns are derived from the returns of other securities or indices. Allowable derivative instruments include, but are not limited to, futures and forwards. Examples of appropriate applications of derivative strategies include hedging interest rate and currency risk, maintaining exposure to a desired asset class while effecting asset allocation changes; and adjusting portfolio duration for fixed income. In no circumstances can managers borrow funds to purchase derivatives. If authorized in writing by the Board, Managers must ascertain and carefully monitor the creditworthiness of any third parties involved in any authorized derivative transactions. 3.5 Rebalancing The allocation to each asset class and to investment styles within asset classes is expected to remain stable over most market cycles. As markets move over time, the actual asset mix of the Plan’s portfolios may diverge from the target allocations established by the Board through the asset allocation process. If Plan assets are allowed to deviate too far from the target allocations, there is a risk that the portfolio will fail to meet the objectives set by the Board. On the other hand, continual rebalancing may result in significant transaction costs. The Board is responsible for final approval of all rebalancing recommendations. The Board will not attempt to time rises or falls in equity or bond markets by moving away from long-term targets because (1) market timing often results in lower returns than longer term strategies, and (2) there is no evidence that one can adequately predict market returns and subsequently time the market. Plan Investment Staff are responsible for monitoring the portfolios and, with input from the investment consultant, making rebalancing recommendations to the Board. Plan Investment Staff are responsible for implementing rebalancing decisions made by the Board.

A. With respect to each asset class and to the sub-asset classes for which the Board has set a target allocation, the Board, in consultation with its investment consultant, will establish rebalancing range limitations.

B. Investment Staff will monitor the portfolio’s asset allocation relative to the target allocations

and report to the Board. If the actual allocations fall within the defined ranges rebalancing may occur, but no rebalancing will be required. If actual allocations to an asset class, or to a sub-asset class, fall outside the predetermined range, Investment Staff, in consultation with the investment consultant will develop recommendations for rebalancing, including the time-frame for accomplishing the proposed rebalancing. Upon approval by the Board, Investment Staff will implement the proposed rebalancing. Rebalancing will not wait for scheduled meetings, although rebalancing can occur at such meetings. In the

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event that market conditions generate a need to rebalance between meetings, the Investment Staff, in consultation with the investment consultant, will review the situation and recommend a course of action to the President of the Board. The President shall determine whether a special meeting of the Board shall be called to approve a rebalancing action.

C. In making its recommendations for any required rebalancing, Investment Staff, in consultation with the investment consultant should generally prioritize implementation procedures as follows:

1. Drawing cash out of the portfolio (for benefit payments and expenses) from asset

classes that are above their range limitations (using interest payments, rental revenues and dividends); and

2. Selling overweighted assets and/or buying underweighted assets.

Long-Term Asset Allocation Targets and Ranges –

Asset Class Target

(% of Total Portfolio)

Maximum (% of Total Portfolio)

Minimum (% of Total Portfolio)

Range +/- %

Equity 48.0% 55.2% 40.8% +/-15% Domestic Equity 24.7% 28.4% 21.0% +/-15%

Large Cap 22.5% 25.9% 19.1% +/-15%

Large Cap Value 9.0% 10.4% 7.7% +/-15%

Large Cap Passive 4.5% 5.1% 3.8% +/-15%

Large Cap Growth 9.0% 10.4% 7.7% +/-15%

Small Cap 2.2% 2.6% 1.8% +/-20%

Small Cap Value 1.1% 1.3% 0.9% +/-20%

Small Cap Growth 1.1% 1.3% 0.9% +/-20% International Equity 20.4% 24.5% 16.3% +/-20%

Large Cap Developed Markets 13.0% 15.6% 10.4% +/-20%

Small Cap Developed Markets 1.9% 2.3% 1.5% +/-20%

Emerging Markets 5.5% 6.6% 4.4% +/-20% Global Equity 2.9% 3.5% 2.3% +/-20%

Fixed Income 25.0% 28.8% 21.3% +/-15%

Principal Protection 12.5% 14.4% 10.6% +/-15%

Extended Global Credit 11.3% 12.9% 9.6% +/-15%

Bank Loans 1.3% 1.4% 1.1% +/-15% Real Return 5.0% 7.5% 0% +50/-100%

Passive Short Duration TIPS 3.5% 5.3% 0% +50/-100%

Commodities 1.5% 2.3% 0% +50/-100%

Timber 0.0% 0.3% 0% Hedge Funds 5.0% 7.5% 0% +50/-100%

Real Estate 8.0% 12% 0% +50/-100%

Private Equity 8.0% 12% 0% +50/-100%

Cash Equivalents 1.0% 1.5% 0.5% +-/50%

Note all targets and ranges rounded to the nearest decimal point.

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*Actual allocation may fall outside the Target Ranges during periods of implementation.

IV. Selection, Termination, and Monitoring of Investment Managers

4.1 Selection Process of Investment Managers The process of investment manager selection shall originate with the Board. Unless the Board decides otherwise, all searches shall be conducted by Investment Staff and the Board’s investment consultant. The first step shall involve the establishment of appropriate minimum criteria such as minimum asset base, performance history, special firm qualifications, years of experience, etc. that reflect an appropriate level of institutional investment service. Based upon these criteria, Investment Staff and/or consultant shall design the appropriate request for proposal (“RFP”) or request for information (“RFI”) to be delivered to the institutional marketplace. Investment Staff and/or consultant shall devise a scoring system to evaluate the qualifications of the RFP/RFI respondents. Their objective shall be to narrow the field to several firms for in-depth review and finalist selection. The finalists shall then be scheduled for Board presentations. Following the Board’s selection, Investment Staff shall negotiate final terms and conditions with the chosen manager(s) and complete the review and negotiation of all appropriate contracts and agreements. 4.2 Process for Investment Manager Termination The Board reserves the right to terminate an investment manager for any reason, including, but not limited to, any of the following:

Failure to comply with the guidelines agreed upon for management of the Board’s portfolio, including holding unauthorized issues.

Failure to achieve performance objectives specified in the manager's guidelines.

Significant deviation from the manager's stated investment style, philosophy, and/or process.

Loss of key personnel.

Evidence of illegal or unethical behavior by the investment management firm.

Unwillingness to cooperate with reasonable requests by the Board, such as information, meetings or other material related to its portfolios.

4.3 Monitoring Investment Managers

1. Background - Why Investment Manager Monitoring Is Important

The monitoring of the Plan’s investment managers is critical because it is part of the fiduciary responsibility of the Board on behalf of Plan participants and beneficiaries. As the fiduciary for the Plan, the Board is responsible for determining when and whether certain factors may be detrimentally impacting an investment manager’s ability to invest on behalf of the Plan. In cases where such factors are deemed to have an irreversible detrimental impact, the Board

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should have a formal mechanism for taking the appropriate action with respect to the investment manager(s) in question. The procedures and criteria below allow such a process to take place. For example, one key factor might be an investment manager’s investment personnel. What happens if key investment personnel managing a portfolio on behalf of the Plan leave the firm? Since institutional investing is (in a very strong sense) a service business, changes in personnel could significantly alter an investment manager’s ability to produce favorable long-term investment results. Another example would be deterioration of an investment portfolio’s performance versus a pre-assigned benchmark, or versus other similarly managed portfolios, which might signal a significant change in an investment manager’s style or investment process. If the change in process is, indeed, material, then an institution (such as the Plan) that utilizes that investment manager might elect to replace that investment manager with another firm that has a process that better matches the institutional user’s original intentions/objectives. Finally, for a variety of reasons, a portfolio’s investment performance simply may not prove satisfactory (i.e., consistent and/or prolonged underperformance versus a pre-assigned benchmark). In such cases, the Board may lose confidence in the respective investment manager’s ability to add value. The monitoring procedures and criteria provide the Board with a systematic process for taking specific action(s) if such circumstances arise.

2. How the Investment Manager Monitoring Procedures Will Work

As highlighted above, ongoing monitoring of the Plan’s investment managers is a necessary component of the Board’s fiduciary role. Specifically, these procedures allow the Board to take action if they are not satisfied with specific aspects of an investment manager’s activities and/or investment performance. In addition, investment monitoring helps an institution achieve consistent long-term investment success. These monitoring procedures are designed to take place in sequence in order to provide an ample amount of information and feedback to the Board before any significant changes are decided upon. It is expected that the Board shall delegate all or a portion of these tasks to its investment consultant. The Board may review and modify investment performance criteria (as outlined below) or other portions of this document periodically on an as needed basis. There are two major groups of monitoring activities: Ongoing Monitoring and Periodic Monitoring. Both the investment manager and the Board (and/or its investment consultant) conduct certain monitoring functions. A significant aspect of the Ongoing Monitoring activity is the measurement and assessment of investment performance. This procedure is described below.

3. Ongoing Monitoring Activities Investment Performance Review of Investment Manager(s) and its (their) Investment Portfolio(s) As part of the ongoing reporting process, the investment manager will report quarterly and trailing annualized performance of the respective portfolio(s) to the Plan and its consultant on a quarterly basis (i.e., every three months). In addition, the investment manager will provide performance attribution statistics that explain the causes of under- or out-performance relative to the established benchmarks.

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The investment manager will also report any changes in investment-related personnel, organization or investment approach/strategy that may potentially impact the investment results of the portfolio in question. Independent Evaluation of Investment Performance by the Plan The Plan (or its investment consultant) will evaluate investment performance on a quarterly basis using the investment performance criteria outlined below. Such evaluations will also be used to verify the quarterly performance information disclosed by the investment managers themselves (see above). If the investment manager(s) do(es) not meet one or more of the criteria below, the Board will place the specific investment manager(s) on watch status for investment performance reasons. The quarterly evaluation will indicate (i) whether an investment manager is on watch status; (ii) the reason for watch status, (iii) the approximate date the investment manager and the respective portfolio was placed on watch status, (iv) the length the investment manager has been on watch status, and (v) additional comments. If the investment manager/portfolio was placed on watch status for investment performance reasons, the status report will also include post-watch investment performance to gauge if the investment manager is addressing investment performance issues. Periodic Monitoring Activities As part of its ongoing fiduciary responsibilities, as well as in assessing the potential of an investment manager to produce future added value, the Plan and its investment consultant should regularly review several qualitative aspects of an investment manager’s management and practices. Key qualitative factors include, but are not limited to:

Compliance with the guidelines agreed upon for management of the Board’s portfolio, including holding unauthorized issues;

Review of the investment manager(s) investment strategy and style, especially the buy/sell disciplines;

Review of portfolio activity, specifically the turnover rate, number of holdings, and execution costs;

Risk profile relative to the portfolio’s benchmark;

Review of organizational structure;

Stability of investment manager personnel and organization;

Review of investment manager contractual obligations to the Plan (including management fees);

Evidence of illegal or unethical behavior by the investment management firm;

Unwillingness to cooperate with reasonable requests by the Board, such as information, meetings or other material related to its portfolios.

As discussed in the above two sections, certain investment manager(s) may (i) fail to meet pre-established investment performance criteria and/or (ii) may prove sub-standard across any number of qualitative factors. In such cases, the next step would be for the Plan (or the Plan’s investment consultant) to produce a document called a Portfolio Review. This Portfolio Review would explain those factors where the investment manager(s) and/or portfolio(s) are failing to meet specific criteria and provide a basis for putting investment manager(s) on watch status. The Portfolio Review would typically be in the form of a memo to the Board.

4. Watch Status of an Investment Manager/Portfolio

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The purpose of a watch list is to focus attention and discussion on the managers that need it – due to difficulties or changes. However, being placed on the watch list does not suggest termination is imminent, as all managers, even top performers, experience some periods of underperformance. An investment manager/portfolio attains watch status if at least one of two events occurs: (i) the portfolio’s rolling 60 month net return is less than the benchmark’s return at two consecutive calendar quarter end dates, or (ii) after the Portfolio Review is conducted, Investment Staff and/or the investment consultant recommends to the Board that an investment manager is a candidate for watch status. However, a manager with less than 60 months of performance with the Plan may be placed on watch for material underperformance relative to the benchmark. An investment manager/portfolio may also be placed on watch at any time as a result of qualitative factors, including but not limited to:

Violation of investment guidelines

Deviation from stated investment style and/ or shifts in the firm’s philosophy or process

Turnover of one or more key personnel

Change in firm ownership or structure

Significant loss of clients and/or assets under management

Significant and persistent lack of responsiveness to client requests

Litigation

Failure to disclose significant information, including potential conflicts of interest

Chronic violations of the Plan’s Investment Policy

Any other issue or situation of which the Investment Staff, the Advisory Consultant and/or Board become aware that is deemed material.

The Board then approves or disapproves the recommendation. If the Board approves the recommendation to place a specific investment manager on watch status, Investment Staff will issue a formal notification to the investment manager. This formal notification of watch status will include, but not be limited to, the following items:

Meeting date when the Board approved the recommendation to place the investment manager on watch;

Reason(s) for placing the investment manager on watch status; and

Conditions for being released from watch status (see below).

Typically, once a manager is placed on watch status, it should exhibit improvement before being removed. However, there may be instances resulting from an organizational change/issue where a long watch period is warranted as there could be several material phases to the situation. For example, if a senior investment professional announces their plans to retire in the future in conjunction with the firm’s succession plan for their departure, the investment manager would attain watch status at the point of the retirement announcement through the transition period, and after the senior investment professional had left. Release from Watch Status Investment managers that show indications of an improvement, as reviewed by the investment consultant and determined by the Board, in one or more of the factors described earlier may be released from watch status. Examples of improvements warranting a change in status are:

Improved investment performance;

Investment style characteristics return to, and remain at, levels originally agreed upon;

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Qualitative factors (such as organizational structure stabilizes, personnel adjustments, compliance requirements, etc.) are met/satisfied.

To release an investment manager from watch status, the Board must formally take action to do so. This action should be supported by documentation (produced by Investment Staff and/or investment consultant) similar in format to the Portfolio Review described above. This document would highlight original reasons for the watch status and discussion of how the investment manager has addressed these issues and warrants release from watch status. Replacement/Termination If an investment manager is not released from watch status within a reasonable time, then the investment consultant should recommend that the Board replace and/or terminate the investment manager. The Board then approves or disapproves the recommendation. To terminate and/or replace an investment manager, the Board must formally take action to do so. This action should be supported by documentation (produced by Investment Staff and/or investment consultant) similar in format to the Portfolio Review described above. This document would highlight original reasons for the watch status and discussion of continued developments during watch status that led to the termination/replacement recommendation.

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V. Policy for the Use of Placement Agents and Third-Party Marketers This Policy is intended to supplement any applicable provisions of City, State or Federal law. Purpose The goal of this Policy is to prevent impropriety or the appearance of impropriety, to provide transparency and confidence in the decision-making process of the Plan, to help ensure that the Plan’s investment decisions are made by the Board solely on the merits of the investment opportunity in accordance with the Board Members’ fiduciary responsibility and to help avoid the appearance of undue influence on the Board or illegal pay-to-play practices, in the award of investment related contracts. This Policy sets forth the circumstances under which the Plan requires the full and timely disclosure of payments to Placement Agents2 in connection with the Plan’s investments. This Policy is intended to apply broadly to all investment contracts. The Plan adopts this Policy to require specific, timely, and updated disclosure of all Placement Agent relationships, compensation, and fees. This Policy shall apply in addition to, and is intended to supplement, any applicable state and city ethics, campaign finance, and lobbying laws found in the Los Angeles City Charter, Governmental Ethics, Lobbying and Campaign Finance Ordinances, the California Political Reform Act, and the California Constitution. Notification of this Policy will be sent to all firms that currently provide services to the Plan and all firms considered by Investment Staff or Consultants to be potential interview candidates. The Plan’s Board Members, Investment Staff, and Consultants will accept no gifts of any kind from any such firms. Firms who currently have contracts with the Plan will be required to disclose any relationships and payments made to any Placement Agency in relation with the Plan’s investments. Objectives

Formalize the Plan’s practice regarding appropriate disclosure of the use of Placement Agents ensuring that the Plan’s investment decisions are consistent with the Plan’s Statement of Investment Objectives, Goals, and Guidelines and with the Board’s fiduciary duties.

Make additional information available to the Plan’s Board Members, Investment Staff and Consultants when evaluating an investment opportunity to ensure that the use of Placement Agents is identified early during the due diligence process.

Provide transparency and confidence in the Plan’s investment decision-making through maximum disclosure and avoidance of conflicts of interest.

Application This Policy will apply to each of the Plan’s Investment Management Agreements entered into after the date this Policy is adopted, as well as to the Plan’s existing Investment Management Agreements.

2 Any person or entity hired, engaged, retained by, or acting on behalf of an Investment Manager or on behalf of another Placement

Agent as a finder, solicitor, marketer, consultant, broker, or other intermediary to market, solicit, obtain access to the Plan, and/or raise money or investments either directly or indirectly from the Plan.

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Responsibilities All investment proposals presented to the Plan shall state whether the Investment Manager (“Manager”) uses Placement Agents or third-party marketers, and, if so, shall identify any such Placement Agent or third-party marketer and describe his or her capacity used in relation to the specific mandate. Responsibilities of the Investment Managers At the time investment discussions are initiated between the Plan and a Manager, and prior to the Plan investing with any Manager, the Manager shall submit to the Plan’s Investment Staff a written statement of whether the Manager or any of its principals, employees, agents, or affiliates has compensated or agreed to compensate any person or entity to act as a Placement Agent or third-party marketer in connection with the Plan investments. If the Manager has used a Placement Agent in connection with any of the Plan investments, the statement should include the following information (Placement Agent Information):

A. The name of the Placement Agent;

B. Description of the amount paid or agreed to be paid to the Placement Agent; and description of the services rendered or the services expected to be performed by the Placement Agent or a third-party marketer, including payment to employees of the Manager who are retained in order to solicit, or who are paid based in whole or in part upon, an investment from the Plan;

C. Representation that the fee paid or payable to the Placement Agent is the sole obligation

of the Manager and not an obligation of the Plan or the limited partnership;

D. Clarification as to whether the Placement Agent is utilized by the Manager with all prospective clients or only with a subset of the Manager’s clients;

E. Copies of all agreements between the Manager and the Placement Agent and third-party

marketers;

F. Résumés of every officer, partner or principal of the Placement Agent or any employee of the Manager providing similar services; résumés shall include: education, professional designations, regulatory licenses and investment and work experience;

G. Full disclosure of any connection between the Placement Agent and the Plan, including

whether anyone receiving compensation or will receive compensation with respect to an investment in the Plan from the Placement Agent or the Manager is any of the following: (1) a current or former Plan Board Member, (2) a Plan employee, (3) a Plan consultant, (4) a member of the immediate family of anyone connected to the Plan, (5) a current or former elected or appointed official of the City of Los Angeles (“City”), (6) an employee of the City, (7) anyone seeking to be elected to public office of the City or a member of his/her campaign organization, or a political action committee;

H. Full disclosure of any contributions made by the Placement Agent or the Manager during

the prior 24-month period to any organization (including contributions to political campaign funds and donations to non-profits) in which any person listed in (G) is an officer, employee, or member of the Board or Advisory Board (or similar body). Additionally, any subsequent contributions made by the Placement Agent or Manager to any such organization during the time the Placement Agent or Manager is receiving compensation

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in connection with the Plan investment shall also be disclosed;

I. Full disclosure of the names of any current or former Plan Board Members, Plan employees, or Plan consultants who suggested the retention of the Placement Agent;

J. Name of the regulatory agencies the Placement Agent or any of its affiliates are registered

with, such as the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Association (“FINRA”), or any similar regulatory agency; proof and details of such registration shall be included, or an explanation as to why no registration is required;

K. Full disclosure of whether the Placement Agent or any of its affiliates is registered as a

lobbyist with the City of Los Angeles, or any state or national government; and L. If the Manager utilized the services of a person who would otherwise be a Placement

Agent but for an applicable exception provided in the California Government Code, a statement identifying the exemption being relied upon by the external manager and certifying that the external manager meets all of the applicable requirements of the exemption.3

The Manager shall notify the Plan’s Investment Staff of any changes to any of the information required above. Responsibilities of Investment Staff and Consultants At the time of the commencement of due diligence for a prospective investment commitment, the applicable Consultants shall provide the applicable Managers and Placement Agents with a copy of this Placement Agent Policy. Prior to the completion of due diligence and any recommendation to proceed with the engagement of a Manager or the decision to commit Plan assets to an investment, the applicable Consultant shall confirm that it has received all applicable disclosures pursuant to this Policy. For all new contracts and amendments to existing contracts as of the date of the adoption of this Policy, the Plan will:

A. Stop investment negotiations with a Manager who refuses to make all discloses required by this Policy;

B. Decline the opportunity to retain or invest with a Manager who has used or intends to use a Placement Agent who is not registered with the SEC, FINRA, or any similar regulatory agency and cannot provide an explanation acceptable to the Consultant and Investment Staff as to why no registration is required; and

C. Decline the opportunity to retain or invest with a Manager who has used or intends to use a Placement Agent or any of its affiliates that is required by applicable law to be registered as a lobbyist but is not so registered.

Investment Staff and Consultants will assist legal counsel as necessary in securing in the final contract terms and/or side letter agreements between the Plan and the Manager, pursuant to which the Manager:

A. Agrees to comply with this Policy.

3 i.e., California Government code Section 7513.8, subdivision (d) or 82047.3, which provides for certain exemptions to the definition

of a “placement agent.”

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B. Represents and warrants that it will notify the Plan’s Investment Staff of any changes to

any of the information required above within 14 calendar days of when the Manager knows or should have known of the change(s).

C. Agrees that it shall not solicit new investments from the Plan for 24 months from the date of determination, in the event that the Plan’s Board, in its sole discretion, determines that the Manager has refused or failed to provide all required disclosures pursuant to this Policy, or provided information pursuant to this Policy which is determined by the Plan’s Board in its sole discretion to be materially inaccurate.

At any Board or Committee meeting in which the Board or Committee will consider an investment or whether to enter into or renew an investment management contract, the applicable Consultant shall advise the Board of (1) the identity of any Placement Agent used by the Manager in connection with the proposed investment or contract and all applicable Placement Agent Information, and (2) any campaign contributions and/or gifts reported by each Placement Agent. Investment Staff shall maintain records of all information disclosed to the Plan in accordance with this policy, and provide the Board with notice of any violation of this policy as soon as practicable. Responsibilities of the Board The Board shall review each violation reported by Investment Staff and determine whether such violation is material and, if so, whether to instruct Investment Staff not to consider any new investment opportunities for the Plan from that Manager and/or Placement Agent for a period of 24 months from the date of the determination. No Right of Confidentiality All disclosures made pursuant to this Policy, and all attachments thereto, shall be public records and subject to disclosure under the California Public Records Act and the Ralph M. Brown Act. No confidentiality restrictions shall be placed on any such disclosures or any information provided pursuant to this Policy.

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VI. Securities Lending Cash Collateral Investment Guidelines

In accordance with the Agreement between the Lender and Bank, Cash Collateral received by the Bank on behalf of the Lender shall be held and maintained in a separately managed Cash Collateral Account established and maintained by the Bank for the Lender (the “Cash Collateral Account”), the assets of which shall be invested and reinvested in one or more of the Approved Investments below. While the Cash Collateral Account will be operated on a cost basis, there is no guarantee that there will not be differences from time to time between the cost and the underlying fair market value of the assets held in the Cash Collateral Account. The cost or book value of the investment assets held in the Cash Collateral Account and their fair market value may differ from time to time. This difference may result in a loss, which is the responsibility of the Lender. All Approved Investment, Credit Quality, Concentration and Liquidity guidelines set forth herein shall be applicable only at time of purchase (i.e., trade date). Approved Investments may have fixed or floating interest rate provisions. Floating rate notes will reset no less frequently than quarterly. Bank and/or Bank Affiliates may provide services with respect to Approved Investments, and may receive compensation with respect to these services. Lender consents to the retention by Bank and Bank Affiliates of such compensation.

A. Approved Investments 1. Instruments

Obligations of the U.S. Treasury as well as agencies and instrumentalities and establishments of the U.S. Government (“U.S. Government Securities”).

Repurchase transactions (including tri-party repurchase transactions) collateralized at 102% or greater at time of purchase and marked to market on each business day. Collateral will consist of one or more Approved Investments described herein without limitation on maturity, as well as equity securities.

Obligations issued by the central government of any OECD country and any of their respective agencies, instrumentalities or establishments (“OECD Obligations”).

Obligations issued by ‘supranational organizations’, including but not limited to African Development Bank, Asian Development Bank, Council of Europe, Eurofima, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, International Bank for Reconstruction and Development (“World Bank”), International Finance Corporation, and Nordic Investment Bank.

Commercial paper, notes, bonds and other debt obligations (including funding agreements and guaranteed investment contracts), whether or not registered under the Securities Act of 1933, as amended.

Certificates of deposit, time deposits and other bank obligations.

Asset-backed securities, including asset-backed commercial paper.

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Shares of money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940, including affiliated funds of the Bank. (These shares shall be deemed to have a final maturity of one business day for the purposes of the Maturity Guidelines in paragraph D.)

Units of unregistered, collective investment vehicles sponsored or advised by the Bank or a Bank Affiliate. (These units shall be deemed to have a final maturity of one business day for the purposes of the Maturity Guidelines in paragraph D.)

2. Currency

Shall be limited to the same currency in which the Cash Collateral being invested is denominated.

B. Credit Quality

Repurchase transaction counterparties must have executed a written repurchase agreement and they, or their parent company, must have a short term rating of at least A-2, P-2 or F2 or equivalent by at least one nationally recognized statistical rating organization (“NRSRO”).

Obligations issued by ‘supranational organizations’ must be rated AAA or equivalent by at least one NRSRO.

OECD Obligations, bank obligations, commercial paper (including asset-backed commercial paper), notes, bonds and other debt obligations must be rated at least A-1, P-1 or F1 or equivalent by an NRSRO. Obligations rated by more than one NRSRO must be rated A-1, P-1 or F1 or equivalent by at least two NRSROs. Obligations without a short term rating must have a long term rating of at least A, A2 or A or equivalent by an NRSRO. Obligations that have a long term rating from more than one NRSRO (but no short term rating) must be rated A, A2 or A or equivalent by at least two NRSROs. Obligations that are not rated will be Approved Investments if the issuer of the obligation meets the above rating criteria.

Asset-backed securities (other than asset-backed commercial paper) must be rated AAA, Aaa or AAA by at least one of the following NRSROs: Standard & Poor’s, Moody’s or Fitch. Asset-backed securities (other than asset-backed commercial paper) rated by more than one of the foregoing NRSROs must be rated AAA, Aaa or AAA by at least two of: Standard & Poor’s, Moody’s and Fitch. Asset-backed securities (other than asset-backed commercial paper) that have only short term ratings must be rated A-1+, P-1 or F1+ by a NRSRO. Asset-backed securities (other than asset-backed commercial paper) that have only a short term rating from more than one NRSRO must be rated A-1+, P-1 or F1+ by at least two NRSROs.

Registered money market funds must be rated in the highest category available to such funds by one NRSRO.

Collective investment vehicles sponsored or advised by the Bank or a Bank Affiliate do not require a rating by a NRSRO.

U.S. Government Securities do not require a rating by a NRSRO.

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C. Concentration Guidelines

Excluding U.S. Government Securities, repurchase agreements, shares of money market funds and collective investment vehicles, concentration of any Approved Investment in the Cash Collateral Account will not exceed 5% per issuer.

A maximum of 25% of the Cash Collateral in the Cash Collateral Account may be invested in repurchase transactions with a single counterparty.

D. Maturity Guidelines

Approved Investments will have a maximum final maturity of 397 days, except U.S. Government Securities, which shall have a final maturity not exceeding 762 days.

The weighted average maturity of Approved Investments in the Cash Collateral Account (based on the shorter of final maturity or days to reset for floating rate obligations) shall not exceed 60 days.

The weighted average life of Approved Investments in the Cash Collateral Account based on final maturity shall not exceed 120 days.

E. Liquidity Guidelines

All Approved Investments shall be deemed to be liquid at time of purchase, with the exception of time deposits and repurchase agreements having a final maturity greater than 7 days, which shall be deemed to be illiquid for purposes hereof.

“Illiquid” Approved Investments shall not exceed 5% of the total amount of Approved Investments in the Cash Collateral Account.

No Approved Investment having a final maturity longer than one business day shall be made if, immediately after such investment, the total amount of Approved Investments in the Cash Collateral Account would have less than 10% of total assets maturing in one business day.

No Approved Investments other than Weekly Liquid Assets (as defined below) shall be made if, immediately after such investment, the Cash Collateral Account would have less than 30% of total assets invested in Weekly Liquid Assets. Weekly Liquid Assets are defined as cash, direct obligations of the U.S. Government (i.e., bills, bonds and notes), U.S. government agency discount notes with a remaining maturity of 60 days or less, and any other Approved Investments that will mature in, or have an unconditional put option of, five business days or less.

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VII. Domestic Equity Guidelines Domestic equity investment managers retained by the Board will follow specific investment styles and mandates and will be evaluated against specific market benchmarks which represent their investment style, (see Board Resolution 03-23 adopted October 9, 2002). The aggregate developed domestic equity segment will have as its benchmark the Russell 3000. The Board’s domestic equity portfolio structural design, with approved benchmarks, is summarized as follows:

Board Approved Domestic Equity Asset Class & Manager Structure

Segment/Style Active/Passive Benchmark % of Asset

Class

Total Domestic Equity 82% Active / 18% Passive Russell 3000 100%

Large Cap Core Passive Russell 1000 18%

Large Cap Value Active Russell 1000 Value 37%

Large Cap Growth Active Russell 1000 Growth 37%

Small Cap Growth Active Russell 2000 Growth 4%

Small Cap Value Active Russell 2000 Value 4%

The percentage allocations to the various segments reflect the percentage weightings of these segments found in the broad market, as represented by the Russell 3000 Index. Additionally, investment results of active managers will be compared to the returns of a peer group of managers with similar investment styles. The Plan has appointed Manager(s) to manage a portion of the Plan’s assets. These assets will be managed in conformance with the objectives and guidelines delineated below and in accordance with the formal contract with the Retirement Board. General guidelines for domestic equity managers include the following (more specific guidelines for the different investment segments/managers are outlined in the below sections): 1. No securities shall be purchased on margin or sold short.

2. Managers shall not use derivatives within the Portfolio without the expressed written consent

of the Plan. If a Manager elects to use derivatives as part of its investment strategy, the Plan requires that the Manager provide written documentation of the rationale for using such instruments. Use of derivatives for speculation is prohibited. Only exchange-traded derivatives will be utilized.

3. Exchange listed futures and options on equity instruments may be used only if authorized in writing by the Board as a risk reducing strategy.

4. Convertible securities can be held in equity portfolios and will be considered equity holdings.

5. Unless stated otherwise below, managers shall not purchase stock (or securities convertible

into stock) of any single corporation if the purchase would cause their portfolio to include more than 5% of the outstanding voting stock of a company, or more than 2% in (the lesser of cost or market) value (assuming all shares are converted) of the assets of the Fund.

6. Managers shall invest in securities specifically authorized in these written guidelines.

Unauthorized investments include foreign securities listed and traded on U.S. exchanges, including American Depository Receipts (“ADRs”). Securities of all foreign companies, except for Benefit Driven Incorporations (“BDIs”) included in the Manager’s respective benchmark as outlined below, are unauthorized. Additional unauthorized investments

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include short sales, futures, direct investment in raw commodities, and the use of non-approved derivative securities (i.e. equity futures and forward contracts), and/or the purchase of securities on margin.

7. Other applicable plan and charter investment restriction must be complied with.

8. Any exemption or variation from these general guidelines requires prior written approval from the Board.

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7.1 Passive Domestic Equity Guidelines Portfolio Component Definition The Manager will manage a Russell 1000 Index Fund (“Fund”) for the Plan that will provide equity participation in industry sectors with market capitalization approximately in proportion to their share of the market as represented by the Russell 1000 Index. The focus of the portfolio will be the tracking of the equity market for large and mid-sized companies over both short-term and long-term horizons. The goal is to closely track the performance of the Russell 1000 Index within +/- 10 basis points annually. Portfolio Guidelines 1. The portfolio shall be equity securities of companies doing business in the United States. It is

expected that the portfolio will be fully invested (<1% cash). Equity securities shall be restricted to those issues listed on the New York, NASDAQ, or other nationally recognized United States stock exchanges.

2. The Board recognizes the Manager uses a computer-generated statistical data technique or statistical sampling technique/s in tracking the Russell 1000 Index.

3. For prudent diversification, no more than 5% of the lesser of cost or market value of the portfolio, shall be invested in any one issue, unless that issue represents more than 5% of the Russell 1000 Index. No issue shall be purchased in the portfolio if more than 10% of the outstanding shares of that company are held by the Manager in the total of all of its accounts.

Performance Objectives On an annual basis, the Manager is expected to perform in-line with the Russell 1000 Index return, net of fees. It is expected that, on an annual basis, the portfolio will produce investment returns that vary no more than +/- 10 basis points from the investment performance of the Russell 1000 Index.

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7.2 Active Large Cap Value Domestic Equity Guidelines Portfolio Component Definition The Manager(s) will manage an active value portfolio (“Portfolio”) for the Plan that will provide equity participation in industry sectors with market capitalization representative of the Russell 1000 Value Index. Given this orientation, the goal of the Portfolio is to provide superior performance versus the Russell 1000 Value Index over a complete investment cycle. Portfolio Guidelines 1. The Portfolio shall be equity securities of companies doing business in the United States. It is

expected that the Portfolio will be fully invested (<5% cash). Equity securities shall be restricted to those issues listed on the New York, NASDAQ, or other nationally recognized United States stock exchanges.

2. The Board recognizes the Manager is an active manager investing in a universe of securities that resembles the Russell 1000 Value Index. The Manager will adjust its Portfolio on an ongoing basis to attempt to outperform the investment results of the Russell 1000 Value Index.

3. For prudent diversification, no more than 5% of the lesser of cost or market value of the Portfolio shall be invested in any one issue, unless that issue represents more than 5% of the Russell 1000 Value Index. In such cases, the maximum amount allowed is 125% of the benchmark weight. At no time shall any specific issue represent more than 10% of the portfolio. In addition, no issue shall be purchased in the Portfolio if more than 10% of the outstanding shares of that company are held by the Manager in the total of all of its accounts.

Portfolio Characteristics 1. It is expected that the Portfolio’s weighted average price/earnings ratio on a 12-month trailing

basis in general will be no greater than 1.5x the market as represented by Russell 1000 Value Index.

2. It is expected that the Portfolio’s weighted average dividend yield on a quarterly basis will

generally be no less than 2/3rds the market as represented by the Russell 1000 Value Index. 4. It is expected that the Portfolio’s weighted average market capitalization should generally be

no less than one-half of the Russell 1000 Value Index.

Performance Objectives On an annual basis, the Manager is expected to outperform the Russell 1000 Value Index return, net of fees, to be measured over a market cycle of three-to-five years.

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7.3 Active Large Cap Growth Domestic Equity Guidelines Portfolio Component Definition The Manager(s) will manage an active growth portfolio (“Portfolio”) for the Plan that will provide equity participation in industry sectors with market capitalization representative of the Russell 1000 Growth Index. Given this orientation, the Manager is expected to provide superior performance versus the Russell 1000 Growth Index over a complete investment cycle. Portfolio Guidelines 1. The Portfolio shall be equity securities of companies doing business in the United States. It is

expected that the Portfolio will be fully invested (<5% cash). Equity securities shall be restricted to those issues listed on the New York, NASDAQ, or other nationally recognized United States stock exchanges.

2. The Board recognizes the Manager is an active manager investing in a universe of securities that resembles the Russell 1000 Growth Index. The Manager will adjust its Portfolio on an ongoing basis to attempt to outperform the investment results of the Russell 1000 Growth Index.

3. For prudent diversification, no more than 5% of the Portfolio at the lesser of cost or market value shall be invested in any one issue, unless that issue represents more than 5% of the Russell 1000 Growth Index. In such cases, the maximum amount allowed is 125% of the benchmark weight. At no time shall any specific issue represent more than 10% of the lesser of cost or market value of the portfolio. In addition, no issue shall be purchased in the Portfolio if more than 10% of the outstanding shares of that company are held by the Manager in the total of all of its accounts. See exception below.

Portfolio Characteristics 1. It is expected that the Portfolio's weighted average price/earnings ratio on a 12-month trailing

basis in general will be no less than 2/3rds of the market as represented by Russell 1000 Growth Index.

2. It is expected that the Portfolio's weighted average dividend yield on a quarterly basis will generally be no greater than 1.5x of the market as represented by the Russell 1000 Growth Index.

3. The Portfolio’s weighted average market capitalization should generally be no less than one-

half of the Russell 1000 Growth Index. Performance Objectives On an annual basis, the Manager is expected to outperform the Russell 1000 Growth Index return, net of fees, to be measured over a market cycle of three-to-five years. Exception 1. For T. Rowe Price Large Cap Growth, no issue shall be purchased in the Portfolio if more

than 15% of the outstanding shares of that company are held by the Manager in the total of all of its accounts.

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7.4 Active Small Cap Value Domestic Equity Guidelines Portfolio Component Definition The Manager(s) will manage an active value portfolio (“Portfolio”) for the Plan that will provide equity participation in industry sectors with market capitalization representative of the Russell 2000 Value Index. Given this orientation, the goal of the Portfolio is to provide superior performance versus the Russell 2000 Value Index over a complete investment cycle. Portfolio Guidelines 1. The Portfolio shall be equity securities of companies doing business in the United States. It is

expected that the Portfolio will be fully invested (<5% cash). Equity securities shall be restricted to those issues listed on the New York, NASDAQ, or other nationally recognized United States stock exchanges.

2. The Board recognizes the Manager is an active manager investing in a universe of securities that resembles the Russell 2000 Value Index. The Manager will adjust its Portfolio on an ongoing basis to attempt to outperform the investment results of the Russell 2000 Value Index.

3. For prudent diversification, no more than 5% of the Portfolio at the lesser of cost or market value shall be invested in any one issue, unless that issue represents more than 5% of the Russell 2000 Value Index. No issue shall be purchased in the Portfolio if more than 15 % of the outstanding shares of that company are held by the Manager in the total of all of its accounts.

4. Exchange Trade Funds (“ETFs”) may be used to temporarily invest excess cash. Portfolio Characteristics 1. It is expected that the Portfolio’s weighted average price/earnings ratio on a trailing 12-month

basis in general will be no greater than 1.5x of the market as represented by Russell 2000 Value Index.

2. It is expected that the Portfolio’s weighted average dividend yield on a quarterly basis will generally be no less than 2/3rds of the market as represented by the Russell 2000 Value Index.

3. It is expected that the Portfolio’s weighted average market capitalization should generally be

no less than one-half of the weighted average market capitalization of the Russell 2000 Value Index.

Performance Objectives On an annual basis the Manager is expected to outperform the Russell 2000 Value Index return, net of fees, to be measured over a market cycle of three-to-five years.

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7.5 Active Small Cap Growth Domestic Equity Guidelines Portfolio Component Definition The Manager(s) will manage active growth portfolio (“Portfolio”) for the Plan that will provide equity participation in industry sectors with market capitalization representative of the Russell 2000 Growth Index. Given this orientation, the goal of the Portfolio is to provide superior performance versus the Russell 2000 Growth Index over a complete investment cycle. Portfolio Guidelines 1. The Portfolio shall be equity securities of companies doing business in the United States. It is

expected that the Portfolio will be fully invested (<5% cash). Equity securities shall be restricted to those issues listed on the New York, NASDAQ, or other nationally recognized United States stock exchanges.

2. The Board recognizes Managers are active managers investing in a universe of securities that resembles the Russell 2000 Growth Index. Managers will adjust their Portfolio on an ongoing basis to attempt to outperform the investment results of the Russell 2000 Growth Index.

3. For prudent diversification, no more than 5% of the lesser of cost or market value of the Portfolio shall be invested in any one issue, unless that issue represents more than 5% of the Russell 2000 Growth Index. No issue shall be purchased in the Portfolio if more than 10% of the outstanding shares of that company are held by Managers in the total of all of its accounts.

Portfolio Characteristics 1. It is expected that the Portfolio's weighted average price/earnings ratio on a 12-month trailing

basis in general will be no less than 2/3rds of the market as represented by Russell 2000 Growth Index.

2. It is expected that the Portfolio’s weighted average dividend yield on a quarterly basis will generally be no greater than 1.5x of the market as represented by the Russell 2000 Growth Index.

3. It is expected that the Portfolio’s weighted average market capitalization should generally be no less than one-half of the weighted average market capitalization of the Russell 2000 Growth Index.

Performance Objectives On an annual basis Managers are expected to outperform the Russell 2000 Growth Index return, net of fees, to be measured over a market cycle of three-to-five years.

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VIII. International Equity Guidelines Non-U.S. equity (International Equity) investment managers retained by the Board will follow specific investment mandates and will be evaluated against specific market benchmarks which represent their investment mandates, (see Board Resolution 03-22, adopted October 9, 2002). The aggregate international equity segment will have as its benchmark the MSCI ACWI ex-U.S. IMI ND Index. The Board’s International Equity structural design, with approved benchmarks, are summarized as follows:

Board Approved Non-U.S. Equity Asset Class & Manager Structure

Segment/Style Active/Passive Benchmark % of Asset

Class

Total Non-U.S. Equity Active MSCI ACWI ex-U.S. IMI ND 100%

Developed Non-U.S. Passive MSCI World ex-U.S. IMI ND 17%

Developed LC Non-U.S. Active MSCI World ex-U.S. IMI ND 50%

Developed SC Non-U.S. Active MSCI ACWI ex-U.S. Small ND 9%

Emerging Markets Active MSCI Emerging Mkts IMI ND 27% MSCI ACWI ex-US IMI ND = Morgan Stanley Capital International All Country World Equity Investable Market Index, Excluding the U.S. MSCI World ex US IMI ND = Morgan Stanley Capital World Equity Investable Market Index, excluding the U.S. MSCI ACWI ex-U.S. Small ND = Morgan Stanley Capital International All Country World Equity Small Capitalization Index, Excluding the U.S. MSCI Emerging Markets IMI ND = Morgan Stanley Capital International Emerging Markets Equity Investable Market Index.

The percentage allocations of the various segments reflect the percentage weightings of these segments found in the broad Non-U.S. equity market, as represented by the MSCI ACWI ex-U.S. Investable Market Index. Additionally, investment results of active managers will be compared to the returns of a peer group of managers with similar investment styles. The Plan has appointed Manager(s) to manage a portion of the Plan’s assets. These assets will be managed in conformance with the objectives and guidelines delineated below and in accordance with the formal contract with the Retirement Board. General guidelines for active Non-U.S. equity managers include the following (more specific guidelines for the different investment segments/managers are outlined in the below sections): 1. Portfolios shall be comprised of debt instruments convertible into equity securities, forward

foreign exchange contracts, and equity securities of companies domiciled outside the U.S. including established and emerging countries.

2. Although a fully invested position is encouraged, cash equivalents are also permissible as a transitional/temporary investment subject to permanent investment.

3. Managers shall not use (non-currency) derivatives within the Portfolio without the expressed

written consent of the Plan. If a Manager elects to use derivatives as part of its investment strategy, the Plan requires that the Manager provide written documentation of the rationale for using such instruments. Use of derivatives for speculation is prohibited. Only exchange-traded derivatives will be utilized.

4. Managers shall not purchase stock (or securities convertible into stock) of any single

corporation if the purchase would cause their portfolio to include more than 5% of the outstanding voting stock of a company, or more than 2% in (the lesser of cost or market) value (assuming all shares are converted) of the assets of the Fund.

5. No securities shall be purchased on margin or sold short.

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6. Other applicable plan and charter investment restriction must be complied with.

7. Any exemption or variation from these general guidelines requires prior written approval from the Board.

8. While the aggregate developed non-U.S. equity segment will have as its benchmark the MSCI ACWI ex-U.S. Investable Market Index ND, managers within this segment will be assigned more specific style-oriented performance benchmarks.

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8.1 Passive International Equity Guidelines The Plan’s assets will be invested in a commingled fund. As a result, these guidelines generally conform to the Manager’s guidelines for the existing commingled MSCI World ex-U.S. Equity Investable Market Index ND Index Fund. Portfolio Component Definition The Manager will manage a MSCI World ex-U.S. Equity IMI ND Index Fund (“Fund”) for the Plan that will provide equity participation in industry sectors with market capitalization approximately in proportion to their share of the market as represented by the MSCI World ex-U.S. Equity IMI ND Index. The focus of the portfolio will be the tracking of the equity market for large, mid, and small-sized companies over both short-term and long-term horizons. The goal is to closely track the performance of the MSCI World ex-U.S. Equity IMI ND Index within +/- 30 basis points annually. Portfolio Guidelines 1. The portfolio shall be equity securities of companies doing business outside the United States.

It is expected that the portfolio will be fully invested (<1% cash). Equity securities shall be those issues listed on the major local-country stock exchanges. At times when direct ownership is precluded, American Depository Receipts (“ADR’s”) may be substituted in order to maintain full exposure to the underlying index.

2. The Board recognizes the Manager uses a computer-generated statistical data technique or statistical sampling technique/s in tracking the MSCI World ex-US IMI ND Index.

3. For prudent diversification, the Manager shall seek to hold securities in the MSCI World ex-

U.S. IMI ND Index as precisely matching their market weight as possible on an ongoing basis. Performance Objectives On an annual basis, the Manager is expected to perform in-line with the MSCI World ex-U.S. IMI ND Index return, net of fees. It is expected that, on an annual basis, the portfolio will produce investment returns that vary no more than +/- 30 basis points from the investment performance of the MSCI World ex-US IMI ND Index.

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8.2 Active Growth International Equity Guidelines Portfolio Component Definition The Manager(s) will manage an active international growth equity portfolio (“Portfolio”) for the Plan that is expected to invest in companies located in developed non-US markets that possess significant amounts of liquidity and capitalization. Emphasis shall be placed on medium and larger capitalized stocks. Portfolio Guidelines 1. The Portfolio shall be composed of cash equivalents and equity securities of companies doing

business outside the United States with minimum market capitalizations of $200 million. Equity securities shall be restricted to those issues listed on the major local-country stock exchanges. The markets that the Portfolio can invest in are those within the following indices:

a. MSCI World ex-U.S. Growth IMI ND

b. MSCI World ex-U.S. Equity IMI ND

SEC Rule 144A international equity instruments with registration rights are fully permissible. Those instruments without registration rights must not exceed 10% of the lesser of cost or market value of any single international equity portfolio.

American Depository Receipts (“ADRs”) are permissible up to 2.5% of the total portfolio.

Investing in Emerging Markets is prohibited. Emerging Markets shall be defined as those countries included in the MSCI Emerging Markets Investable Market Index ND.

In order to minimize transaction costs and market impact associated with country reclassification, and as MSCI reclassifies specific countries from one market to another (such as from emerging to developed or frontier to emerging), the Portfolio, with advance notification to the Retirement Plan Manager, may invest in such countries, subsequent to the announcement of MSCI’s formal reclassification and prior to its effective date.

2. Currency hedging up to a maximum of 25% of the portfolio value (notional) is permitted for

defensive purposes. Currency hedging shall be effected through the use of forward currency contracts and put and call options.

3. For prudent diversification the portfolio shall have a minimum of 30 issues quoted in at least

10 stock markets, although assets will not be specifically allocated to individual countries or markets. The maximum exposure to any individual issue will be no greater than the weight of the issue in the benchmark plus 3%. In addition, no issue shall be purchased in the portfolio if more than 15% of the outstanding shares of that company are held by the Portfolio in the total of all of its accounts. The Portfolio is required to identify to the Plan, on a quarterly basis, those holdings/issues in the portfolio where the Portfolio holds more than 10% of the outstanding shares in the total of its accounts.

5. The cash equivalent portion should not normally exceed 10% of the portfolio. Cash equivalents may be U.S. dollar or non-U.S. dollar denominated.

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Portfolio Characteristics 1. It is expected that the portfolio will invest across a broad array of countries within the MSCI

World ex U.S. Growth IMI ND and MSCI World ex U.S. Equity IMI ND. Regional and country weights, however, may vary significantly from the index.

2. It is expected that the portfolio's weighted average price/earnings ratio on a trailing 12-month basis in general will be within a +/- 0.5x range of the market as represented by MSCI World ex U.S. Growth IMI ND or MSCI World ex U.S. Equity IMI ND.

3. It is expected that the portfolio's weighted average dividend yield on a quarterly basis will generally be within a +/- 0.5x range of the market as represented by the MSCI World ex U.S. Growth IMI ND or MSCI World ex U.S. Equity IMI ND.

Performance Objectives On an annual basis the Portfolio is expected to outperform the MSCI World Growth ex U.S. IMI ND return, net of fees, to be measured over a market cycle of three-to-five years.

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8.3 Active Value International Equity Guidelines Portfolio Component Definition The Manager(s) will manage active international value equity portfolio (“Portfolio”) for the Plan that is expected to invest in companies located in developed non-US markets that possess significant amounts of liquidity and capitalization. Emphasis shall be placed on medium and larger capitalized stocks. Portfolio Guidelines 1. The Portfolio shall be composed of cash equivalents and equity securities of companies doing

business outside the United States (as defined using MSCI classification of issuer or issue) with minimum market capitalizations of $200 million. Equity securities shall be restricted to those issues listed on the major local-country stock exchanges. The markets that the Portfolio can invest in are those within the following indices:

a. MSCI World ex-U.S. Value IMI ND

b. MSCI World ex-U.S. Equity IMI ND

SEC Rule 144A international equity instruments with registration rights are fully permissible. Those instruments without registration rights must not exceed 10% of the lesser of cost or market value of any single international equity portfolio.

American Depository Receipts (“ADRs”) are permissible up to 2.5% of the total portfolio. Investing in Emerging Markets is prohibited. Emerging Markets shall be defined as those countries included in the MSCI Emerging Markets Investable Market Index ND.

In order to minimize transaction costs and market impact associated with country reclassification, and as MSCI reclassifies specific countries from one market to another (such as from emerging to developed or frontier to emerging), the Portfolio, with advance notification to the Retirement Plan Manager, may invest in such countries, subsequent to the announcement of MSCI’s formal reclassification and prior to its effective date.

2. Currency hedging up to a maximum of 25% of the portfolio value (notional) is permitted for

defensive purposes. Currency hedging shall be effected through the use of forward currency contracts and put and call options.

3. For prudent diversification the portfolio shall have a minimum of 30 issues quoted in at least

10 stock markets, although assets will not be specifically allocated to individual countries or markets. No more than 5% of the portfolio at the lesser of cost or market value shall be invested in any one issue. In addition, no issue shall be purchased in the Portfolio if more than 15% of the outstanding shares of that company are held by the Manager in the total of all of its accounts.

4. The cash equivalent portion should not normally exceed 10% of the portfolio. Cash equivalents may be U.S. dollar or non-U.S. dollar denominated.

Portfolio Characteristics 1. It is expected that the portfolio will invest across a broad array of countries within the MSCI

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World ex U.S. Value IMI ND, and MSCI World ex U.S. Equity IMI ND. Regional and country weights, however, may vary significantly from the index.

2. It is expected that the portfolio's weighted average price/earnings ratio on a trailing 12-month basis in general will be within a+/- 0.5x range of the market as represented by MSCI World ex U.S. Value IMI ND, MSCI World ex U.S. Equity IMI ND.

3. It is expected that the portfolio's weighted average dividend yield on a quarterly basis will generally be within a +/- 0.5x range of the market as represented by the MSCI World ex U.S. Value IMI ND, MSCI World ex U.S. Equity IMI ND.

Performance Objectives On an annual basis the Portfolio is expected to outperform the MSCI World Value ex U.S. IMI ND return, net of fees, to be measured over a market cycle of three-to-five years.

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8.4 Active Small Cap International Equity Guidelines Portfolio Component Definition The Manager(s) will manage an active international portfolio (“Portfolio”) for the Plan that is expected to invest in small companies located in non-US markets that possess significant amounts of liquidity. Given this orientation, the goal of the Portfolio is to provide superior performance versus the MSCI ACWI ex US Small ND Index over a complete investment cycle. Portfolio Guidelines 1. The Portfolio shall be composed of cash equivalents and equity securities of companies doing

business outside the United States (as defined using MSCI classification of issuer or issue) with minimum market capitalizations of $100 million. Equity securities shall be restricted to those issues listed on the major local-country stock exchanges. The markets that the Portfolio can invest in are those within the MSCI ACWI ex US Small ND Index.

SEC Rule 144A international equity instruments with registration rights are fully permissible. Those instruments without registration rights must not exceed 10% of the lesser of cost or market value of any single international equity portfolio.

American Depository Receipts (“ADRs”) are permissible up to 2.5% of the total portfolio. Investing in Emerging Markets is permitted but should be generally no greater than 1.5x of the market as represented by the MSCI ACWI ex US Small ND Index. Emerging Markets shall be defined as those countries included in the MSCI Emerging Markets Investable Market Index ND.

2. Currency hedging up to a maximum of 25% of the portfolio value (notional) is permitted for

defensive purposes. Currency hedging shall be effected through the use of forward currency contracts and put and call options.

3. For prudent diversification the portfolio shall have a minimum of 30 issues quoted in at least

10 stock markets, although assets will not be specifically allocated to individual countries or markets. No more than 5% of the portfolio at the lesser of cost or market value shall be invested in any one issue. In addition, no issue shall be purchased in the Portfolio if more than 15% of the outstanding shares of that company are held by the Manager in the total of all of its accounts.

4. Use of Exchange Traded Funds (“ETFs”) is permitted if the manager deems that this vehicle

is the most effective way to obtain exposure to certain segments of the market. When investing in ETFs the manager shall rebate all investment management fees associated with use of these funds. Commingled fund allocations shall be included in the calculation of portfolio guideline limitations based on underlying commingled fund holdings.

5. The cash equivalent portion should not normally exceed 10% of the portfolio. Cash equivalents may be U.S. dollar or non-U.S. dollar denominated.

Portfolio Characteristics 1. It is expected that the portfolio will invest across a broad array of countries within the MSCI

ACWI ex US Small ND Index. Regional and country weights, however, may vary significantly from the index.

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2. It is expected that the portfolio's weighted average price/earnings ratio on a trailing 12-month

basis in general will be within a+/- 0.5x range of the market as represented by MSCI ACWI ex US Small ND Index.

3. It is expected that the portfolio's weighted average dividend yield on a quarterly basis will generally be within a +/- 0.5x range of the market as represented by the MSCI ACWI ex US Small ND Index.

4. It is expected that the portfolio’s weighted average market capitalization will generally be

within a +/- 0.5x range of the market as represented by the MSCI ACWI ex US Small ND Index.

Performance Objectives On an annual basis the Portfolio is expected to outperform the MSCI ACWI ex US Small ND Index return, net of fees, to be measured over a market cycle of three-to-five years.

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8.5 Active Emerging Markets Equity Guidelines Portfolio Component Definition The Manager(s) will manage an active portfolio (“Portfolio”) for the Plan that will provide equity participation in companies that have a significant interest in developing markets. Given this orientation, the goal of the Portfolio is to provide superior performance versus the MSCI EM IMI ND over a complete investment cycle. Portfolio Guidelines 1. The Portfolio shall be composed of securities of non-U.S. domiciled companies doing

business in emerging markets with minimum market capitalizations of $100 million. Equity securities shall be restricted to those issues traded on recognized exchanges or traded over the counter. The markets that Manager(s) can invest in are those within the MSCI EM IMI ND. SEC Rule 144A international equity instruments with registration rights are fully permissible. Those instruments without registration rights must not exceed 10% of the lesser of cost or market value of any single international equity portfolio.

In order to minimize transaction costs and market impact associated with country reclassification, and as MSCI reclassifies specific countries from one market to another (such as from emerging to developed or frontier to emerging), the investment manager, with advance notification to the Retirement Plan Manager, may invest in such countries, subsequent to the announcement of MSCI’s formal reclassification and prior to its effective date.

2. Currency hedging up to a maximum of 25% of the portfolio value (notional) is permitted for defensive purposes. Currency hedging shall be effected through the use of forward currency contracts and put and call options.

3. Diversity shall be achieved both geographically and by industry sector. No more than 7% of the lesser of cost or market value of the portfolio shall be invested in any one issue. No issue shall be purchased in the portfolio if more than 10% of the outstanding shares of that company are held by Manager(s) in the total of all of its accounts.

4. The cash equivalent portion should not normally exceed 10% of the portfolio. Cash

equivalents may be U.S. dollar or non-U.S. dollar denominated.

5. Turnover in the portfolio shall not normally exceed 200% in any twelve month period. Turnover shall be defined as the total dollar value of the lesser of purchases or sales divided by the market value of the portfolio at the beginning of the period.

Portfolio Characteristics 1. It is expected that the portfolio will invest across a broad array of countries within the MSCI

EM IMI ND. Regional and country weights, however, may vary significantly from the index.

2. It is expected that the portfolio’s weighted average price/earnings ratio on a trailing 12-month basis, in general will be within a +/- 0.5x range of the market as represented by MSCI EM IMI ND.

3. It is expected that the portfolio’s weighted average dividend yield on a quarterly basis will be

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within a +/- 0.5x range of the market as represented by the MSCI EM IMI ND. Performance Objectives On an annual basis, the Manager(s) is expected to outperform the MSCI EM IMI ND return, net of fees, to be measured over a market cycle of three-to-five years.

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IX. Global Equity Guidelines Global equity investment managers retained by the Board will follow specific investment styles and mandates and will be evaluated against specific market benchmarks which represent their investment style, (see Board Resolution 03-23 adopted October 9, 2002). The aggregate global equity segment will have as its benchmark the MSCI ACWI IMI ND Index. Additionally, investment results of active managers will be compared to the returns of a peer group of managers with similar investment styles. The Plan has appointed Manager(s) to manage a portion of the Plan’s assets. These assets will be managed in conformance with the objectives and guidelines delineated below and in accordance with the formal contract with the Retirement Board. General guidelines for global equity managers include the following (more specific guidelines for the different investment segments/managers are outlined in the below sections): 1. Portfolios shall be comprised of debt instruments convertible into equity securities, forward

foreign exchange contracts, ADRs, and equity securities.

2. Although a fully invested position is encouraged, cash equivalents are also permissible as a transitional/temporary investment subject to permanent investment.

3. No securities shall be purchased on margin or sold short.

4. Managers shall not use (non-currency) derivatives within the Portfolio without the expressed written consent of the Plan. If a Manager elects to use derivatives as part of its investment strategy, the Plan requires that the Manager provide written documentation of the rationale for using such instruments. Use of derivatives for speculation is prohibited. Only exchange-traded derivatives will be utilized.

5. Exchange listed futures and options on equity instruments may be used only if authorized in writing by the Board as a risk reducing strategy.

6. Convertible securities can be held in equity portfolios and will be considered equity holdings.

7. Unless stated otherwise below, managers shall not purchase stock (or securities convertible

into stock) of any single corporation if the purchase would cause their portfolio to include more than 5% of the outstanding voting stock of a company (the lesser of cost or market) value (assuming all shares are converted).

8. Managers shall invest in securities specifically authorized in these written guidelines.

Additional unauthorized investments include short sales, futures, direct investment in raw commodities, and the use of non-approved derivative securities (i.e. equity futures and forward contracts), and/or the purchase of securities on margin.

9. Other applicable plan and charter investment restriction must be complied with.

10. Any exemption or variation from these general guidelines requires prior written approval

from the Board.

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9.1 Active Global Equity Guidelines Portfolio Component Definition The Manager(s) will manage an active value portfolio (“Portfolio”) for the Plan that is expected to invest in companies across the globe that possess significant amounts of liquidity and capitalization. Given this orientation, the goal of the Portfolio is to provide superior performance versus the MSCI ACWI IMI ND Index over a complete investment cycle. Portfolio Guidelines

1. The Portfolio shall be equity securities of companies with minimum market capitalizations of

$100 million. It is expected that the Portfolio will be fully invested (<5% cash). Equity securities shall be restricted to those issues listed on the major local-country stock exchanges. The markets that the Portfolio can invest in are those within the MSCI ACWI IMI Index.

2. The Board recognizes the Manager is an active manager investing in a universe of securities that resembles the MSCI ACWI IMI Index. The Manager will adjust its Portfolio on an ongoing basis to attempt to outperform the investment results of the MSCI ACWI IMI Index.

3. Diversity shall be achieved both geographically and by industry sector. For prudent

diversification the portfolio shall have a minimum of 30 issues quoted in at least 10 stock markets, although assets will not be specifically allocated to individual countries or markets. The maximum exposure to any individual issue will be no greater than the weight of the issue in the benchmark plus 3%. In addition, no issue shall be purchased in the portfolio if more than 15% of the outstanding shares of that company are held by the Portfolio in the total of all of its accounts. The Portfolio is required to identify to the Plan, on a quarterly basis, those holdings/issues in the portfolio where the Portfolio holds more than 10% of the outstanding shares in the total of its accounts.

4. SEC Rule 144A international equity instruments with registration rights are fully permissible.

Those instruments without registration rights must not exceed 10% of the lesser of cost or market value of any single international equity portfolio.

5. Currency hedging up to a maximum of 25% of the portfolio value (notional) is permitted for

defensive purposes. Currency hedging shall be effected through the use of forward currency contracts and put and call options.

6. The cash equivalent portion should not normally exceed 5% of the portfolio. Cash equivalents

may be U.S. dollar or non-U.S. dollar denominated. Portfolio Characteristics 1. It is expected that the portfolio will invest across a broad array of countries within the MSCI

ACWI IMI ND. Regional and country weights, however, may vary significantly from the index.

2. It is expected that the portfolio's weighted average price/earnings ratio on a trailing 12-month basis in general will be within a +/- 0.5x range of the market as represented by MSCI ACWI IMI ND.

Performance Objectives On an annual basis the Portfolio is expected to outperform the MSCI ACWI IMI ND return, net of

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fees, to be measured over a market cycle of three-to-five years.

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X. Fixed Income Guidelines The fixed income portfolios will be managed on a total return basis, following specific investment mandates and evaluated against specific market benchmarks which represent a specific investment mandate or market segment (see Board Resolution 13-91 of June 26, 2013). The aggregate fixed income segment will have as its benchmark the custom benchmark described in the below table. The Board’s fixed income structural design, with approved benchmarks, is summarized as follows:

Board Approved Fixed Income Asset Class & Manager Structure

Segment/Style Active/ Passive

Benchmark % of Asset

Class

Total Fixed Income Active

50% Barclays U.S. Intermediate Aggregate ex. Credit 30% Barclays Global Credit (hedged) 15% Barclays Global High Yield (hedged) 5% Credit Suisse Leveraged Loan Index

100%

Principal Protection Active Barclays U.S. Intermediate Aggregate ex. Credit

50%

Extended Global Credit Active 66.67% Barclays Global Credit (hedged) 33.33% Barclays Global High Yield (hedged)

45%

U.S. Bank Loans Active Credit Suisse Leveraged Loan Index 5%

The percentage allocations of the various segments reflect the strategic allocations as approved by the Board (see Board Resolution 13-91). Additionally, investment results of active managers will be compared to the returns of a peer group of managers with similar investment styles. The Plan has appointed Manager(s) to manage a portion of the Plan’s assets. These assets will be managed in conformance with the objectives and guidelines delineated below and in accordance with the formal contract with the Retirement Board. General guidelines for fixed income managers include the following (more specific guidelines for the different investment segments/managers are outlined in the below sections): 1. Any investments in securities (including, but not limited to, Build America Bonds, Recovery

Zone Economic Development Bonds, Tax Credit Bonds, et. al.) issued by the City of Los Angeles and/or any of its affiliates are not permitted and should not be held in the Plan’s portfolio.

2. Although a fully invested position is encouraged, cash equivalents are also permissible as a transitional/temporary investment, subject to permanent investment.

3. Managers are expected to have performed thorough due diligence on each security

purchased (which may include, but is not limited to, the analysis of company audited financial statements in the case of corporate holdings, relevant government reports and records, etc.), and such due diligence must be available for each investment in case of a Plan audit.

4. No securities shall be purchased on margin or sold short other than any initial and

maintenance margin required in connection with futures transactions which may be used only for risk management purposes.

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5. If a manager exceeds the portfolio produces characteristic limitations in these guidelines (or the below more specific guidelines), the manager is required to report these results to the Plan in a timely manner.

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10.1 Active Principal Protection Guidelines Portfolio Component Definition Manager(s) will manage an active portfolio (“Portfolio”) for the Plan that will utilize high quality fixed income securities, with a shorter duration portfolio positioning than the broad fixed income market. Given this orientation, the goal of the Portfolio is to provide superior performance versus the Barclays U.S. Intermediate Aggregate ex. Credit Bond Index over a complete investment cycle of three-to-five years. Portfolio Guidelines 1. The portfolio shall be composed of investment-grade fixed income securities as defined by

Barclays (the publisher of the Barclays Indices). Barclays defines an investment grade bond as follows: If a bond is rated by all three rating agencies (Moody’s, S&P, Fitch), then it must be rated investment grade (BBB- or Baa3) by two or more rating agencies. If a bond is rated by two rating agencies, the lowest rating determines investment grade status. If only one rating agency rates the bond, then that rating must be at least BBB- or Baa3. In the event of a downgrade below Baa3 or BBB-, Manager(s) must notify the Plan about the quality of the issue and make a recommendation on either the retention or deletion of the bond from the portfolio. There may be instances when debt issues convert into equity-oriented securities (i.e. preferred stock, common stock or warrants to purchase other equity securities). To handle these situations, managers are allowed to hold equity-oriented positions when received in exchange for, or conversion or cancellation of debt securities held in the portfolio. The manager(s) is required to inform the Plan 30 days prior to the conversion when they intend to hold the resulting equity-oriented positions. Equity-oriented securities can be held in the portfolio no longer than three months. The manager(s) is required to provide 30 days advance notice to extend the holding period beyond the original three month period. No more than 5% of the portfolio shall be invested in equity-oriented securities resulting from fixed-to-equity exchanges.

2. No more than 5% of the portfolio at the lesser of cost or market value will be invested in any one issuer, with the exception of U.S. Treasury, U.S. Agency and Government Sponsored Enterprises, or Government-Supported issuers (defined below).

3. Non-benchmark markets holdings (excluding cash) shall be limited to 20% of a single

manager portfolio. Benchmark markets are based on currency denomination and security type (e.g., USD U.S. Treasury bonds, USD U.S. Agency bonds, etc.). Security type is based on Barclays’ Class 2 sector classifications and instrument (e.g., bond versus loan). For example, a 30-year U.S. Treasury Bond would be considered a benchmark market security, even though it is not in the benchmark.

4. Permissible non-benchmark markets are limited to Government-Supported securities, agency mortgage-backed TBAs and dollar rolls, agency mortgage-backed CMOs, and 144a securities. Non-benchmark markets holdings are subject to the investment grade rating requirement. Corporate Debt is not permissible.

5. Government-Supported securities are defined as Supranationals, Local Authorities, sovereign

debt of OECD governments, and equivalently-rated agencies of OECD governments.

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6. Derivatives used for substitution, risk control, and arbitrage strategies are permitted. Use of derivatives for speculation is prohibited. For non-exchange traded derivatives, counterparty credit status shall be of the highest caliber with care taken to avoid credit guarantees extended through to parties less creditworthy than the primary counterparty in the transaction. Counterparty exposure is limited to firms with a short-term credit rating of at least A1/P1, single counterparty exposure limited to 5% of the cost value of the aggregate portfolio as well as any specific manager portfolio. Borrowed funds shall not be used.

7. For prudent diversification, the portfolio shall have a minimum of 25 issues. Additionally, the

combined allocation to ABS and CMBS cannot represent more than the greater of 10% or the benchmark weight plus 5% in the portfolio.

8. The cash equivalent portion should not normally exceed 10% of the portfolio. Portfolio Characteristics 1. The acceptable modified duration band around the Barclays U.S. Intermediate Aggregate ex.

Credit Index is ± 2 years. Performance Objectives On an annual basis, Manager(s) is/are expected to outperform the Barclays U.S. Intermediate Aggregate ex. Credit Index return, net of fees, to be measured over a market cycle of three-to-five years.

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10.2 Active Extended Global Credit Guidelines Portfolio Component Definition Manager(s) will manage an active portfolio (“Portfolio”) for the Plan that will provide participation in the higher return and higher volatility segments of the fixed income market. Given this orientation, the goal of the Portfolio is to provide superior performance versus the blended 66.67% Barclays Global Credit Bond Index (hedged) / 33.33% Barclays Global High Yield Index (hedged) over a complete investment cycle of approximately three-to-five years. Portfolio Guidelines 1. The portfolio shall be composed of securities throughout the credit risk spectrum, as defined

by Barclays (the publisher of the Barclays Indices). Barclays defines a non-investment grade bond as follows: If a bond is rated by all three rating agencies (Moody’s, S&P, Fitch), then it must be rated non-investment grade (BB+ or Ba1) by two or more rating agencies. If a bond is rated by two rating agencies, it must be rated below investment grade by at least one rating agency. If only one rating agency rates the bond, then a rating below BBB-or Baa3 is considered non-investment grade. The portfolio may contain investment grade, non-investment grade, and unrated bonds.

In the event of a downgrade below single C, or in the case of a default, Manager(s) must notify the Plan of the downgrade within two days of the date that the downgrade occurs. In the event of a downgrade below single C, or in the case of a default, if the Manager(s) elects to retain the bond in the portfolio the Manager(s) must inform the Plan of the downgrade within two days of the date that the downgrade occurs, and provide a rationale for continued retention of the holding.

There may be instances when debt issues convert into equity-oriented securities (i.e.

preferred stock, common stock or warrants to purchase other equity securities). To handle these situations, fixed income managers are allowed to hold equity-oriented positions when received in exchange for, or conversion or cancellation of debt securities held in the portfolio. The manager(s) is required to inform the Plan 30 days prior to the conversion when they intend to hold the resulting equity-oriented positions. Equity-oriented securities can be held in the portfolio no longer than six months. The manager(s) is required to provide 30 days advance notice to extend the holding period beyond the original six-month period. No more than 10% of the portfolio shall be invested in equity-oriented securities resulting from fixed-to-equity exchanges.

2. Non-benchmark markets holdings (excluding cash and excluding Government-Supported) shall

be limited to 50% of a single manager portfolio. Benchmark markets are based on currency denomination and security type (e.g., USD corporate industrial bonds, EUR corporate financial bond, etc.). Security type is based on Barclays’ Class 2 sector classifications and instrument (e.g., bond versus loan).

3. No more than 60% of a single manager portfolio may be invested in below investment grade

(Baa3 or BBB-) / unrated securities.

4. Non-benchmark Government-Supported markets holdings shall be limited to 40% of a single manager portfolio.

5. Government-Supported securities are defined as Supranationals, Local Authorities, U.S.

Treasuries, sovereign debt of OECD governments, U.S. Agencies and Government

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Sponsored Enterprises, and equivalently-rated agencies of OECD governments.

6. Minimum issuance size is $100 million.

7. Foreign net currency exposure shall be limited to 35%.

8. Foreign gross currency exposure shall be limited to 70%.

9. Currency exposure is measured as the absolute value of all country-level currency positions versus the U.S. dollar.

10. No more than 5% of the lesser of cost or market value will be invested in any one issuer, with

the exception of Government-Supported securities.

11. No more than 20% of the lesser of cost or market value will be invested in any one industry (as defined by Barclays), with the exception of Government-Supported securities.

12. Derivatives may be managed to protect market value and to maximize total returns, subject

to the following guidelines:

a. Eligible applications include but are not limited to the purchase, sale, exchange, conversion or other trade of exchange traded index option contracts, over-the-counter options, international fixed income futures, domestic fixed income futures and swaps.

b. The total relative economic impact risk of each derivative application will be monitored on a daily basis by the most appropriate risk management tools for the particular derivatives application.

c. In order to limit the financial risks associated with derivative applications, rigorous counterparty selection criteria and netting agreements shall be required to minimize counterparty risk. If utilized, the counterparty must be of an investment grade credit and the agreement must be marked to market no less frequently than monthly.

d. Borrowed funds shall not be used.

e. The maximum investment, as measured by net notional amount, in derivative instruments is 100% of the portfolio’s total market value.

f. The maximum amount, as measured by notional amount in a single type of swap

transaction, is 25% of the portfolio’s total market value excluding currency forwards.

g. The maximum investment, as measured by notional amount, in a single-name credit default swap is 5%.

h. The maximum aggregate individual counterparty exposure, measured as the net positive

mark to market of all outstanding derivative contracts with a counterparty, may not exceed 15% of the net asset value of the Managed Portfolio.

i. Individual counterparty exposure for each derivative instrument, measured as the net

positive mark to market of each outstanding derivative contract with a counterparty, may not exceed 10% of the net asset value of the Managed Portfolio.

j. When credit default swaps on an issuer or index are used to take credit exposure through

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selling protection, the portfolio should have full cash equivalent backing.

k. Derivatives can be used without cash backing to minimize risk; including the use of global interest rate futures and swaps.

l. Derivatives can be used to offset underlying portfolio risk without cash backing including

using interest rate futures to adjust duration risk, buying protection in the credit default swaps market to reduce existing portfolio credit risk, and to hedge currency risk by entering into currency futures and forwards.

m. Currency forwards and futures can be used for an overlay of FX on the portfolio.

n. The active currency exposure, measured as the difference between the actual exposure

in any one currency and the benchmark, should not exceed 25%. Currency short positions are allowed but should not exceed 25% of the benchmark (+/-25% versus benchmark per currency).

o. The term of any forward currency contract should not exceed two years.

p. The maximum for forward purchases and sales is 30% average calculated over a market cycle (typically 3-5 years) based on the portfolio’s total market value.

13. For prudent diversification, the portfolio shall have a minimum of 25 issues.

14. The cash equivalent portion should not normally exceed 10% of market value of the portfolio.

Cash equivalents held backing derivatives are excluded from the 10% limit. Exchange Traded Funds (“ETFs”) may be used to temporarily invest excess cash and provide short-term liquidity and/or market exposure. Investments in ETFs count toward the 10% cash equivalent limit. ETF allocations shall be included in the calculation of portfolio guideline limitations based on underlying ETF holdings. Cash equivalents are defined as follows:

a. For Delaware Investments cash equivalents are defined as short-term investment vehicles

(e.g., STIF accounts) or money market funds maintained by the custodian bank. Other high-quality, cash equivalent investments are permitted, including: commercial paper, certificates of deposit, discount notes, bankers acceptance notes, Treasury Bills, floating-rate notes, and collateralized repurchase agreements. To be considered high-quality, a security generally must carry a short-term rating of A2P2 or better.

b. For Neuberger Berman cash equivalents are defined as Treasury securities with a maturity of 3 months or less.

15. Use of commingled funds (including mutual funds) is permitted if the manager deems that this

vehicle is the most effective way to obtain exposure to certain segments of the market. When investing in commingled funds the manager shall rebate all investment management fees associated with use of these funds. Commingled fund allocations shall be included in the calculation of portfolio guideline limitations based on underlying commingled fund holdings.

Portfolio Characteristics 1. The acceptable modified duration band around the 66.67% Barclays Global Credit (hedged) /

33.33% Barclays Global High Yield (hedged) Index ± 4 years.

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Performance Objectives On an annual basis, Manager(s) is/are expected to outperform the 66.67% Barclays Global Credit (hedged) / 33.33% Barclays Global High Yield (hedged) Index return, net of fees, to be measured over an investment cycle of three-to-five years.

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10.3 Active U.S. Bank Loans Guidelines Portfolio Component Definition Manager(s) will manage an active portfolio (“Portfolio”) for the Plan that will provide participation in the higher return and higher volatility segments of the fixed income market. Given this orientation, the goal of the Portfolio is to provide superior performance versus the Credit Suisse Leveraged Loan Index over a complete investment cycle of three-to-five years. Portfolio Guidelines 1. Fixed-rate instruments shall be limited to 20% of a single manager portfolio.

2. Non-benchmark markets holdings (excluding cash) shall be limited to 40% of a single

manager portfolio. Benchmark markets are based on currency denomination and security type (e.g., USD corporate industrial loan, USD corporate utility loan). Security type is based on Credit Suisse Leveraged Loan Index classifications and instrument (e.g., bond versus loan).

3. No more than 5% of the lesser of cost or market value of any single manager portfolio will be

invested in any one issuer. 4. No more than 20% of the lesser of cost or market value of a single manager portfolio will be

invested in any one industry as defined by the Credit Suisse Leveraged Loan Index.

5. Managers are expected to have performed thorough due diligence on each security purchased (which may include, but is not limited to, the analysis of company audited financial statements in the case of corporate holdings, relevant government reports and records, etc.), and such due diligence must be available for each investment in case of a Plan audit.

6. A portfolio shall not use leverage nor purchase Collateralized Loan Obligations (CLOs). Portfolio Characteristics 1. The acceptable modified duration range of the portfolio is 0 to 2 years.

2. It is an objective of the portfolio that it will track the Credit Suisse Leveraged Loan Index

closely. The annual return dispersion between the Retirement Plan account and the Health Plan account should generally be no more than 15 basis points.

Performance Objectives On an annual basis, Manager(s) is/are expected to outperform the Credit Suisse Leveraged Loan Index return, net of fees, to be measured over a market cycle of three-to-five years.

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XI. Real Return Guidelines Strategic Objective The Real Return Class shall be managed to accomplish the following: 1. Prudently achieve long term results above inflation

2. Diversify the Plan’s investments

3. Hedge against inflation risks Performance Objective and Benchmark The Real Return Class shall have a benchmark index of the Consumer Price Index (CPI) + 1%. The performance objective is to outperform the benchmark, net of all fees, over a rolling five-year period. Investment Approaches and Parameters Prospective Real Return Class segment allocation ranges are listed in the table below. These segments may change, depending on Board preferences and tolerance for risk. In addition, several real return opportunities may present themselves over time that are not necessarily easily categorized into a specific asset class segment. These guidelines should reflect a reasonable level of flexibility to allow the Board to consider such opportunities. The segment allocation ranges are expressed as a percentage of the market value of the Plan Total portfolio.

Preliminary Segment Allocation Ranges*

Segment Range

Passive Short Duration TIPS 0.0%-5.3%

Commodities 0.0%-2.3% *As a percentage of the total Plan Portfolio

Specific allocation targets are avoided to allow for flexibility in designing and implementing a risk/objective-oriented (not asset-based) strategic class. However, one near-term objective of the Real Return Class portfolio is to maintain core holding positions in Passive Short Duration TIPS, and Commodities.

1. Passive Short Duration TIPS Program

The Passive Short Duration TIPS Program will operate under the policies and guidelines set forth in Section 11.1

2. Commodities Program

The Commodities Program will operate under the policies and guidelines set forth in Section 11.2.

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11.1 Passive Short Duration TIPS Guidelines

Strategic Objective

The Program shall be managed to accomplish the following:

A. Meet the objectives for the broader Real Return Class.

B. Hedge against inflation risks.

Portfolio Component Definition

The Manager will manage a Bloomberg US TIPS 0-5 Year Index Fund (“Fund”) for the Plan that

will provide participation in the short duration TIPS market. The focus of this portfolio will be the

tracking of the short duration TIPS market over both short-term and long-term horizons. The goal

is to closely track the performance of the Bloomberg US TIPS 0-5 Year Index within +/- 10 basis

points annually.

Portfolio Guidelines

1. The portfolio shall be invested and reinvested primarily in a portfolio of debt securities with

the objective of closely approximating the total rate of return for all outstanding United

States Treasury Inflation Protected Securities with a maturity of five years or less, as

defined by the Bloomberg US TIPS 0-5 Year Index.

2. The portfolio may use a representative sampling index strategy. This strategy involves investing in a representative sample of securities that collectively has an investment profile similar to the Bloomberg US TIPS 0-5 Year Index. The Manager may or may not hold all of the securities of the benchmark index.

Performance Objective and Benchmark

The Passive Short Duration TIPS Program will utilize the Bloomberg US TIPS 0-5 Year Index. On

an annual basis, the Manager is expected to perform in-line with the Bloomberg US TIPS 0-5

Year Index return, net of fees. It is expected that, on an annual basis, the portfolio will produce

investment returns that vary no more than +/- 10 basis points from the investment performance

of the Bloomberg US TIPS 0-5 Year Index.

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11.2 Commodities Guidelines Purpose This document sets forth the investment policy (“the Policy”) for the Plan’s Commodities Program (“the Program”). This Policy is designed to ensure that investment managers, consultants, and the Plan’s Board/Investment Staff take prudent and careful action while investing the Program. Additionally, use of this Policy provides assurance that there is sufficient flexibility in controlling the investment risks and returns associated with this segment of the portfolio. The Program is designed to meet the Plan’s long-term actuarial target through the identification and participation in active Commodities opportunities that are expected to generate attractive real rates of return while also providing diversification benefits. Strategic Objective Broadening the opportunity set of the Plan’s Real Return for achieving consistent investment returns not available in traditional public markets investments is the strategic objective of investing in Commodities. The Program is expected to develop a diversified portfolio of Commodities capable of achieving targeted investment returns on a risk-adjusted basis that are complementary to Real Return class goals. Commodity investment returns are expected to provide diversification and inflation protection over equity markets over extended time periods. Total rates of return from Commodities investments are expected to enhance the risk-adjusted return of the Real Return class. The Program is expected to emphasize exposures to different geographic segments as well as different types of Commodity investments. A secondary benefit of including Commodities in the real return investment allocation is that they capture participation in unexpected inflation and major shifts in headline inflation. Commodity investments shall be selected solely in the interest of the Plan’s participants and their beneficiaries in accordance with applicable law, and shall be selected to accomplish the following (within the Real Return class): 1. Enhance the Plan’s long-term risk-adjusted total return. 2. Provide added diversification to the Plan’s overall investment program. 3. Produce Inflation hedging characteristics over extended periods. 4. Provide incremental diversification versus other Real Return segments. Performance Objective The long-term (3-5 years) expected performance objective of the Program, net of all fees, shall be greater than the annualized rate of return of Bloomberg Commodity index. The Program is expected to maintain a low correlation with the other segments of the Real Return class. Investment Approaches and Parameters

A. General Approach Investments in the Program shall be selected to achieve stated performance objectives. In addition, Program investments are expected to be complementary to other segments in the Real Return portfolio.

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B. Investment Selection

A Commodity investment consists of using derivative (future) contracts and cash collateral as margin. An allocation to Commodities shall be diversified by geography, Commodity type (Energy, Agriculture, Livestock, Precious Metals, and Industrial Metals), through a diversified investment vehicle. Commodities shall be selected to enhance the Program’s ability to achieve the overall investment objective.

1. Such strategies that might be implemented through a Commodities portfolio could include, but are not limited to:

a. Crude oil b. Bent Crude Oil c. Heating Oil d. Natural Gas e. Unleaded Gas f. Live Cattle g. Lean Hogs h. Feeder Cattle i. Corn j. Soybeans k. Wheat l. Soybean Oil m. Coffee n. Cocoa o. Sugar p. Cotton q. Aluminum r. Zinc s. Nickel t. Lead u. Copper v. Gold w. Silver x. Platinum

2. Selection guidelines for prospective Commodity managers shall be developed and

maintained. These criteria shall be subject to review by:

a. The Board, b. Investment Staff and Consultant

To ensure conformity to the return and risk expectations of the Program, the selection guidelines may include, but are not limited to the following: Minimum requirements with respect to the following:

c. General Partner Investment Experience

d. Basic Investment Vehicle Terms

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e. Investment Goals and Objectives

f. Performance Criteria

g. Other relevant parameters that may apply

C. Management of Investments The Program shall be continually monitored and refined as needed to obtain the most effective mix of investments. Investments shall be continually reviewed in the following areas: 1. Fit with the Program Goals and Objectives 2. Targeted performance according to stated objectives 3. Targeted risk according to stated objectives 4. Diversity of underlying Commodity investments 5. Strategy diversification 6. Growth of assets

7. Organizational changes

D. Quality Control Processes

The Program shall employ a quality control process, which includes both the Investment Staff and Consultant to monitor Program efficiency, track investment performance, and control risk. 1. Monitoring Portfolio Performance: Actual net returns and risk will be compared to

benchmark(s) as appropriate, and to the expected return for the Commodities investment.

2. Risk Control: Program standards are maintained through the following processes –

a. Assessing the level of diversification in the portfolio on a regular basis, including

the level of diversification across types of Commodities invested (i.e. Energy, Agriculture, Livestock, Precious Metals, and Industrial Metals), geographic location, and across other factors as appropriate.

b. Documenting due diligence activities.

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11.3 Timber Guidelines Purpose This document sets forth the investment policy (“the Policy”) for the Plan’s Timber Program (“the Program”). This Policy is designed to ensure that investment managers, consultants, and the Plan’s Board/Investment Staff take prudent and careful action while investing the Program. Additionally, use of this Policy provides assurance that there is sufficient flexibility in controlling the investment risks and returns associated with this segment of the portfolio. The Program is designed to meet the Plan’s long-term actuarial target through the identification and participation in Timber opportunities that are expected to generate attractive real rates of return while also providing diversification benefits. Strategic Objective Broadening the opportunity set of the Plan’s Real Return for achieving consistent investment returns not available in traditional public markets investments is the strategic objective of investing in Timber. The Program is expected to develop a diversified portfolio of Timber capable of achieving targeted investment returns on a risk-adjusted basis that are complementary to Real Return class goals. Timber investment returns are expected to exhibit lower volatility than public investments for a given level of return while also being less correlated to the major asset classes. Total rates of return from Timber investments are expected to enhance the risk-adjusted return of the Real Return class. The Program is expected to emphasize exposures to different geographic segments as well as different types of Timber material. A secondary benefit of including Timber in the real return investment allocation is that they are long-term investments with inflation hedging benefits. Timber investments shall be selected solely in the interest of the Plan’s participants and their beneficiaries in accordance with applicable law, and shall be selected to accomplish the following (within the Real Return class): 1. Enhance the Plan’s long-term risk-adjusted total return.

2. Provide added diversification to the Plan’s overall investment program.

3. Produce Inflation Protected income/returns over extended periods.

4. Maintain a low correlation with traditional public markets. Performance Objective The long-term (7-10 years) expected performance objective of the Program, net of all fees, shall be greater than the annualized rate of return of NCREIF Timberland Index. The Program is expected to maintain a low correlation with the other segments of the Real Return class. Investment Approaches and Parameters

A. General Approach Investments in the Program shall be selected to achieve stated performance objectives. In addition, Program investments are expected to be complementary to other segments in the Real Return portfolio.

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1. The Program shall initially utilize Timber Private Partnerships to generate the attractive

risk-to-reward characteristics provided by these specialized and unique investment strategies.

2. The Program shall invest in funds through partnerships or other formation structures, e.g., limited liability companies (LLCs), where the general partner(s) or fund manager(s) have expertise in the specified mandates and in related areas material to the success of each investment type.

3. The inclusion of specified terms in Timber shall protect the interests of the Plan, and

shall address at a minimum the following issues:

a. Alignment of Interests: Vehicle terms shall be reviewed to assess the alignment of the General Partner’s interest with the Plan. The management fee, performance fee, performance objective, lock-up period, liquidity, General Partner investment, and other relevant terms to protect the Plan in the event of adverse performance results, shall be examined.

b. Leverage: Investments should only be made in investment vehicles (specific to Timber) which provide limited liability. The limited liability structure protects the Program from losing more than its invested capital. Leverage, as measured by the Loan-to-Value ratio (LTV) should be no greater than 30%.

B. Investment Selection

A Timber investment consists of productive land plus growing trees, and it can be in the form of natural forests or plantations. An allocation to Timber shall be diversified by geography, tree type (conifer/softwood vs. non-conifer/hardwood), and end-use (pulp, chip-n-saw, mature saw timber, and poles) through a diversified investment vehicle.

1. Selection guidelines for prospective Timber managers shall be developed and

maintained. These criteria shall be subject to review by: a. The Board, b. Investment Staff and Real Estate Consultant

To ensure conformity to the return and risk expectations of the Program, the selection guidelines may include, but are not limited to the following: Minimum requirements with respect to the following: a. General Partner Investment Experience b. Basic Investment Vehicle Terms c. Investment Goals and Objectives d. Performance Criteria e. Other relevant parameters that may apply

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C. Management of Investments The Program shall be continually monitored and refined as needed to obtain the most effective mix of investments. Investments shall be continually reviewed in the following areas: 1. Fit with the Program Goals and Objectives 2. Targeted performance according to stated objectives 3. Targeted risk according to stated objectives 4. Diversity of underlying Timber investments 5. Strategy diversification 6. Growth of assets 7. Organizational changes

D. Quality Control Processes

The Program shall employ a quality control process, which includes both the Investment Staff and Real Estate Consultant to monitor Program efficiency, track investment performance, and control risk. 1. Monitoring Portfolio Performance: Actual net returns and risk will be compared to

benchmark(s) as appropriate, and to the expected return for the Timber investment. 2. Risk Control: Program standards are maintained through the following processes –

a. Assessing the level of diversification in the portfolio on a regular basis, including

the level of diversification across types of Timber invested (i.e. Hardwood and Softwood), geographic location, and across other factors as appropriate.

b. Documenting due diligence activities.

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11.4 Guidelines for Investment Evaluation Organization: Firms considered for this Program are expected to include established, long-tenured firms in addition to potentially including recently formed organizations that may have relatively short track records. The principals shall be required to dedicate sufficient time and effort to the investment opportunity. The organization must have sufficient investment professionals and support staff to implement the proposed strategy. Alignment of interests (including ownership, compensation, general partner investment in fund/firm, etc.) will be important factors in the proposed investment opportunities. Investment Experience: The Program shall consider only Managers whose professionals have significant experience managing institutional assets. The principals shall demonstrate relevant experience and that they are specifically qualified to work in the market in which they propose to work. The Program shall not consider vehicles with less than three years of performance track record managing funds for institutional level investors. The experience of the investment professionals at the firm managing the proposed investment vehicle will be reviewed to ensure that experienced professionals are overseeing the investment. Performance: Proposed investment opportunities must have outperformed the Program return objectives, net of all fees, over long-term historical periods. The investment vehicle must also exhibit attractive risk characteristics having generated a Sharpe Ratio near 1.0 (or above) during such periods. Investment Strategy: The investment strategy of potential investment opportunities shall be assessed for appropriateness given the Program’s goals and objectives including risk tolerance and objectives. The proposed investment strategy and approach to portfolio construction shall provide reasonable assurance that the investment opportunity can produce the required return. Fund size: The Plan shall not represent more than 20% of a firm’s assets. Terms: At a minimum, investment terms are expected to be “in-line” with industry norms. In particular, the management fee, performance fee, utilization of a high water mark, and liquidity terms shall be examined to ensure appropriateness.

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XII. Hedge Fund Guidel ines Purpose This document sets forth the investment policy (“the Policy”) for the Plan’s Hedge Fund Program (“the Program”). This Policy is designed to ensure that investment managers, consultants, and the Plan’s Board/Investment Staff take prudent and careful action while investing for the Program. Additionally, use of this Policy provides assurance that there is sufficient flexibility in controlling the investment risks and returns associated with this segment of the portfolio. The Program is designed to meet the Plan’s long-term actuarial target through the identification and participation in Hedge Fund opportunities that are expected to generate attractive absolute rates of return while also providing diversification benefits. Strategic Objective Broadening the opportunity set of the Plan’s investment portfolio for achieving consistent investment returns not available in traditional public markets investments is the strategic objective of investing in Hedge Funds. The Program is expected to develop a diversified portfolio of Hedge Funds capable of achieving targeted investment returns on a risk-adjusted basis that are complementary to overall Portfolio goals. Hedge Fund investment returns are expected to exhibit lower volatility than public investments for a given level of return while also being less correlated to the major asset classes. Total rates of return from Hedge Fund investments are expected to be absolute return oriented while also providing preservation of capital. The Program is expected to emphasize exposures to more conservative (lower volatility and less market directionality) investment strategies. A secondary benefit of including Hedge Funds in the alternative investment allocation is that they are commonly more liquid vehicles than private market investments, and therefore can also be utilized as a future funding source for private market commitments. Hedge Fund investments shall be selected solely in the interest of the Plan’s participants and their beneficiaries in accordance with applicable law, and shall be selected to accomplish the following: 1. Enhance the Plan’s long-term risk-adjusted total return. 2. Provide added diversification to the Plan’s overall investment program. 3. Maintain a low correlation with the public global equity markets. Performance Objective Given the absolute return/capital preservation orientation of Hedge Fund investments and the Board’s desire to emphasize more conservative, less directional segments of the market, the long-term (3-5 years) expected performance objective of the Program, net of all fees, shall be the annualized rate of return of T-Bills plus 300 basis points. Use of the T-Bills reflects the absolute return nature of hedge fund investments while the 300 basis point premium accounts for higher degrees of risk undertaken. Over the long term (3-5 years), program annualized volatility is expected to be less than one third that of global public equity markets (as represented by the MSCI ACWI). The Program is expected to exhibit correlation to global public equity markets of less than or equal to 0.50 over the same long-term time period. Investment Approaches and Parameters

A. General Approach

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Investments in the Program shall be selected to achieve stated performance objectives. In addition, Program investments are expected to be complementary to the private equity investments in the alternative investment allocation and to the traditional investment vehicles in the Total Portfolio.

1. The Program shall initially utilize Hedge Fund of Funds to generate the attractive risk-

to-reward characteristics provided by these specialized and unique investment strategies. Other absolute return strategies/structures may be considered at a future date, including multi-strategy managers, tactical asset allocation managers, and other single strategy hedge fund managers as the Program evolves and matures.

2. The Program shall invest in funds through partnerships or other formation structures, e.g., limited liability companies (LLCs), where the general partner(s) or fund manager(s) have expertise in the specified mandates and in related areas material to the success of each investment strategy.

3. The inclusion of specified terms in Hedge Funds shall protect the interests of the Plan,

and shall address at a minimum the following issues:

a. Alignment of Interests: Vehicle terms shall be reviewed to assess the alignment of the General Partner’s interest with the Plan. The management fee, performance fee, performance objective, lock-up period, liquidity, General Partner investment, and other relevant terms to protect the Plan in the event of adverse performance results, shall be examined.

b. Leverage: It is recognized that hedge fund strategies may expose the Plan’s assets to leverage, meaning that an underlying partnership’s market exposure may exceed the market value-adjusted capital commitment by the amount of borrowed capital. Therefore, investments should only be made in investment vehicles (specific to Hedge Funds) which provide limited liability. The limited liability structure protects the Program from losing more than its invested capital.

B. Investment Selection

Hedge Fund of Funds shall be selected to enhance the Program’s ability to achieve the overall investment objective. Hedge Fund of Funds invests in a portfolio of individual hedge funds applying different investment strategies. 1. Such strategies that might be implemented through a Hedge Fund of Funds could

include, but are not limited to:

a. Convertible Arbitrage b. Distressed Securities c. Fixed Income Arbitrage d. Long/Short Credit e. Long/Short Equity f. Market Neutral g. Merger Arbitrage h. Multiple Arbitrage i. Statistical Arbitrage j. Commodity Trading Advisors k. Global Macro

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l. Emerging Markets

Selected Hedge Fund of Funds are expected to emphasize less volatile investment strategies given the Program’s conservative orientation.

2. The Hedge Fund of Funds manager will employ hedge funds that enter into long and/or short positions using, but not limited to, any of the following instruments:

a. Equities:

i. Common or preferred corporate stock traded on principal U.S. exchanges ii. Convertible corporate bonds, notes, or debentures

iii. Global Depository Receipts (GDRs) and American Depository Receipts

(ADRs)

b. Fixed Income:

i. Marketable investment grade and non-investment grade debt securities ii. Marketable non-U.S. debt securities

c. Derivatives:

i. Exchange traded equity, fixed income and currency futures contracts ii. Index futures contracts

iii. Over-the-counter (“OTC”) option contracts

iv. OTC forward foreign exchange contracts

v. Swaps

vi. Cash and money market instruments

3. Selection guidelines for prospective Hedge Fund of Funds shall be developed and

maintained (see sections 12.2 and 12.3). These criteria shall be subject to review by: a. The Board,

b. Investment Staff and Consultant

To ensure conformity to the return and risk expectations of the Program, the selection guidelines may include, but are not limited to the following: Minimum requirements with respect to the following: a. General Partner Investment Experience b. Basic Investment Vehicle Terms

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c. Investment Goals and Objectives d. Performance Criteria e. Other relevant parameters that may apply

C. Management of Investments

The Program shall be continually monitored and refined as needed to obtain the most effective mix of investments. The Program shall initially invest in Hedge Fund of Funds investments. Investments shall be continually reviewed in the following areas: 1. Fit with the Program Goals and Objectives 2. Targeted performance according to stated objectives 3. Targeted risk according to stated objectives 4. Diversity of underlying hedge funds 5. Strategy diversification 6. Growth of assets

7. Organizational changes

D. Quality Control Processes

The Program shall employ a quality control process, which includes both the Investment Staff and Consultant to monitor Program efficiency, track investment performance, and control risk. 1. Process Monitoring: Investment Staff and Consultant shall monitor transaction

processing to insure timely decision-making and an effective process. 2. Monitoring Portfolio Performance: Actual net returns and risk will be compared to

benchmark(s) as appropriate, and to the expected return for the Hedge Fund of Funds investment.

3. Risk Control: Program standards are maintained through the following processes –

a. Assessing the level of diversification in the portfolio on a regular basis, including

the level of diversification across Hedge Fund of Funds managers, investment strategy, underlying hedge fund manager, and across other factors as appropriate.

b. Documenting due diligence activities.

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E. Specific Risk Parameters The Program may be exposed to specific risk parameters that are associated with investing in hedge funds, including, but not limited to: 1. Operating and Business Risk: Certain hedge funds entail above average operating

and business risk.

2. Country Risk: Political, economic, and currency risks associated with investing outside of the U.S.

3. Valuation Risk: Some underlying holdings may be illiquid and not marked to market

very frequently. Therefore, there is risk of lagged valuations as a holding is priced less often.

4. Financial Leverage Risk: Many hedge funds employ high amounts of leverage to

underlying portfolio investments increasing the risk of loss of capital.

5. Disclosure Risk: Hedge funds are commonly reluctant to provide transparency regarding their portfolio positions limiting an investor’s ability to aggregate exposures.

6. Regulation Risk: Hedge funds and their managers are unencumbered by any

government oversight or restrictions. However, regulators in many jurisdictions have begun to regulate hedge funds to varying degrees.

F. Guidelines for Evaluating Program Candidates

Proposed investment opportunities shall be evaluated relative to their fit with the Program’s Investment Policy. Section 12.2 contains minimum criteria to be utilized in the screening of candidates.

Benchmark The primary performance benchmark for the Program shall be the annualized rate of return of T-Bills plus 300 basis points. The secondary performance benchmark shall be the HFRI FoF Conservative Index. It may be useful to view the primary benchmark in the context of longer term annualized performance, while the secondary benchmark shall be used to gauge shorter term relative performance. As appropriate, individual managers may be benchmarked against specific customized benchmarks and hedge fund indices may be utilized for relative market comparisons. General Reporting 1. Reports received from Hedge Fund of Funds managers

Investment Staff and Consultant shall require periodic reports (i.e. monthly and/or quarterly) from Hedge Fund of Funds managers to facilitate monitoring.

2. Monitoring Investments

Consultant, assisted by Investment Staff, shall monitor individual Hedge Fund of Funds managers and the Program as a whole. Monitoring includes performance measurement

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addressed below and may include other unique aspects to Hedge Fund of Funds, such as:

A. number of underlying hedge fund managers

B. allocations across investment strategies

C. asset growth at both the firm level and the fund level

D. personnel changes 3. Performance

The Plan shall assess the net performance of Hedge Fund of Funds investments relative to the following areas: A. Established objectives at both the Program level and Hedge Fund of Funds manager level

(if appropriate)

i. Monthly, quarterly, annual, since inception, etc.

B. Risk undertaken (i.e. volatility) C. Correlation with public equity markets

4. Board Reports

Quarterly reports shall be provided to the Board. These reports will include, but shall not be limited to, performance reviews of individual Hedge Fund of Funds managers (net of all fees) and aggregate Program results.

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12.1 Custom Fund of Hedge Fund Guidelines The Plan has appointed Manager(s) to manage a portion of the Plan's assets. These assets will be managed in conformity with the objectives and guidelines delineated below and in accordance with a formal contract with the Retirement Board. Portfolio Component Definition Manager(s) will manage a portfolio for the Plan that will provide participation in a portion of the Hedge Fund universe. Given this orientation, the goal of the Portfolio is to provide superior performance with limited principal loss versus the 90-day T-Bill+3% benchmark over a complete investment cycle. Portfolio Guidelines

A. Approach (The Portfolio)

1. The Portfolio shall maintain medium to low-volatility of approximately 1/3 of global equities, as measured by annualized standard deviation, over a full market cycle (3-5 years).

2. The Portfolio shall maintain a correlation of 0.5 or less to the broad equity markets

(as defined by the MSCI ACWI) 3. The Portfolio shall maintain liquidity such that no less than 75% of the Net Asset

Value of the Portfolio be available for redemption in cash annually and without penalty, subsequent to the expiry of any initial investor lock-ups. The remaining 25% shall be available for redemption within 2-years.

4. The Portfolio shall remain fully invested with no additional required capital and no

leverage at the portfolio level except for short-term borrowing purposes.

5. With respect to underlying manager concentration, the portfolio is not allowed to have exposure to underlying portfolios at more than 10% at cost and 14% at market value.

6. Underlying investment in new or emerging managers is limited to 5% at cost and

7% at market value. Emerging or new hedge fund managers are defined as those with assets of $300 million or less and/or track records of three years or less.

7. Underlying Hedge Fund Investments may include exposure to leverage or short

selling of securities or both. Risk management of leverage at the fund and portfolio level will be constrained by the guidelines already established in the IPS.

8. The negotiation of terms in Hedge Funds shall protect the interests of the Plan,

and shall address at a minimum the following issues:

a. Alignment of Interests: Vehicle terms including fees shall be negotiated to ensure the alignment of interests with those of the Plan. The management fee, carried interest, performance objective, return of capital, lock-up period, clawbacks, and other relevant terms shall protect the Plan in the event of adverse performance results, while ensuring that the limited liability status is maintained. As appropriate, a return of committed capital shall be negotiated.

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b. Leverage: It is recognized that the underlying Hedge Funds may expose the Plan’s assets to leverage, meaning that a partnership’s market exposure may exceed the market value-adjusted capital commitment by the amount of borrowed capital. The partnership or LLC agreements shall detail the amount of leverage and monitor leverage on a case-by-case basis

c. Reporting Requirements: To appropriately account for fees, individual

expenses, invested capital, and any other items affecting the investment, monthly, quarterly and yearly reporting shall be conducted, at the Plan’s discretion, to keep the client materially informed. An audit of the portfolio shall be undertaken annually.

d. The Plan’s Investment Staff and Consultant shall continually review the

efficacy of Hedge Fund investment vehicles. Formal presentation to the Plan’s Board shall be required at minimum annually.

B. Investment Selection

1. Individual Hedge Funds will be selected if they enhance the overall investment

program and may include investments across a wide array of asset classes and strategies. Such strategies that might be implemented through the Portfolio could include, but are not limited to:

a. Convertible Arbitrage b. Distressed Securities c. Fixed Income Arbitrage d. Long/Short Credit e. Long/Short Equity f. Market Neutral g. Merger Arbitrage h. Multiple Arbitrage i. Statistical Arbitrage j. Emerging Markets

2. The Investment Staff, with the assistance of the Consultant, shall develop and

maintain selection guidelines for Hedge Fund Investment Advisors to include the following: a. Minimum requirements with respect to the following:

(1) General Partner Investment Experience (2) SEC registration as an investment Advisor (3) Basic Investment Vehicle Terms, including the management of at least

$500 Million (4) Investment Goals and Objectives (5) Degree of Leverage (6) Performance Criteria (7) Due Diligence Process (8) Legal Constraints or Requirements, including registration of the hedge

fund investment advisor under the Investment Company Act of 1940.

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(9) Reporting Requirements, including the reporting of holdings and transactions to a third party risk aggregator, reviewable by Investment Staff and the consultant.

(10) Quality control processes including, but not limited to, investment monitoring and risk control

(11) Other relevant parameters that may apply

Performance Objectives The Portfolio is expected to outperform the 90-day T-Bills+3% Index, net of fees, to be measured over a market cycle of three-to-five years. For short term performance evaluation, the Portfolio will be measured, net of fees and expenses, against the HFRI FoF Conservative Index.

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12.2 Guidelines for Investment Evaluation Organization: Firms considered for this Program are expected to include established, long-tenured firms in addition to potentially including recently formed organizations that may have relatively short track records. The principals shall be required to dedicate sufficient time and effort to the investment opportunity. The organization must have sufficient investment professionals and support staff to implement the proposed strategy. Alignment of interests (including ownership, compensation, general partner investment in fund/firm, etc.) will be important factors in the proposed investment opportunities. Investment Experience: The Program shall consider only Managers whose professionals have significant experience managing institutional assets. The principals shall demonstrate relevant experience and that they are specifically qualified to work in the market in which they propose to work. The Program shall not consider vehicles with less than three years of performance track record managing funds for institutional level investors. The experience of the investment professionals at the firm managing the proposed investment vehicle will be reviewed to ensure that experienced professionals are overseeing the investment. Performance: Proposed investment opportunities must have outperformed the Program return objectives, net of all fees, over long-term historical periods. The investment vehicle must also exhibit attractive risk characteristics having generated a Sharpe Ratio near 1.0 (or above) during such periods. Investment Strategy: The investment strategy of potential investment opportunities shall be assessed for appropriateness given the Program’s goals and objectives including risk tolerance and objectives. The proposed investment strategy and approach to portfolio construction shall provide reasonable assurance that the investment opportunity can produce the required return. Fund size: The Plan shall not represent more than 20% of a firm’s assets. Terms: At a minimum, investment terms are expected to be “in-line” with industry norms. In particular, the management fee, performance fee, utilization of a high water mark, and liquidity terms shall be examined to ensure appropriateness.

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XIII. Real Estate Investment Policy Purpose This document sets forth the investment policy (“the Policy”) for the Plan’s Real Estate Program (“the Program”). This Policy is designed to ensure that investment managers, consultants, and Board/Investment Staff take prudent and careful action while investing in the Program. Additionally, use of this Policy provides assurance that there is sufficient flexibility in controlling the investment risks and returns associated with this segment of the portfolio. For purposes of this Policy, real estate shall be defined to include investments that are private or public, equity or debt positions in real property. Investments may be leveraged or unleveraged. As further set forth in this policy, the Plan will invest primarily in discretionary commingled funds through investment vehicles (e.g., limited liability companies, real estate investment trusts, and limited partnerships) owned with other suitable institutional investors (e.g., pension funds, endowments, foundations and sovereign funds). The investment and management of the Program shall be accomplished in a manner consistent with the “prudent man’s” standard of fiduciary care. This level of care requires that all the Plan’s fiduciaries act reasonably to accomplish the stated investment objectives and to safeguard the Program on behalf of the Plan’s participants and their beneficiaries. The implementation of this Real Estate Policy, including the selection of investment managers, shall be completed in a manner that enhances the Program’s diversification, thereby reducing risk by limiting exposure to any one investment, manager, real estate property type, geographic region, or other defined risk factor. The Program is designed to meet the Plan’s long-term actuarial target through the identification and participation in real estate opportunities that are expected to generate strong rates of return while also providing diversification benefits. The current allocation to real estate is 8% of the total portfolio. Strategic Objective The strategic objective of the Program is to develop a diversified real estate portfolio capable of achieving investment returns commensurate with Program targets. The portfolio will be invested in a diversified pool of real estate investments designed to capture the return and diversification (relative to the Plan’s equity, fixed income and other “alternative” investments) benefits of the real estate asset class. Real estate investments have a low correlation to other investment classes and therefore can contribute to reducing the risk and enhancing the returns of the total portfolio, as well as providing portfolio diversification. A diversified portfolio of attractive real estate opportunities is expected to be created by implementing a strategic “top down” assessment of attractive segments of the market for investment combined with a “bottom up” approach to manager identification. Consultant, with assistance from Investment Staff, shall proactively seek out the most attractive investment opportunities given current market conditions, while maintaining appropriate diversification. Portfolio weightings shall be a function of the specific risk and return profile of an investment opportunity and the Program’s overall needs.

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Real estate investments shall be considered solely in the interest of the Plan’s participants and their beneficiaries in accordance with applicable law, and shall be selected to accomplish the following: 1. Attractive Risk-Adjusted Returns. To obtain superior risk-adjusted returns by taking

advantage of the inefficiencies of real estate as compared to other asset classes. Active management, value creation and opportunistic strategies, as well as the prudent use of third-party debt, are approved methods for generating expected returns. The benchmarks for the Program will be 1) the NCREIF Property Index plus 50 basis points; and 2) custom benchmarks weighted quarterly on a risk/return basis based on the portfolio allocation.

2. Increased Program Diversification/Reduced Program Risk. To use real estate to enhance overall Program diversification and, in turn, reduce overall Program risk, given the historically low to negative return correlations that exist between real estate and other asset classes.

3. International Opportunities. To access international real estate markets through public and

private, and equity and debt real estate investments. By so doing, the Program will obtain exposure to diverse economies, populations and currencies.

4. Significant Current Cash Yields. To invest in real estate assets, which will generate a

significant cash return based primarily on current rental income. In general, as a portion of total investment return, higher levels of current income are expected from core and value than opportunistic investments; in contrast, higher levels of appreciation are expected from opportunistic than value and core investments.

5. Inflation-Hedge. To make investments primarily in real estate equity investments that are

likely to provide a reasonable hedge against price inflation.

6. Preservation of Principal. To achieve meaningful risk-adjusted returns without undue exposure to loss of investment principal.

7. Liability Hedge. To provide a hedge against changes in the Plan’s long-term liabilities. Responsibilities and Delegations The Plan will utilize the services of an In-Kind Distribution Manager to liquidate any in-kind distributions received from its private market managers.

Section 2.3 outlines specific responsibilities and tasks to be performed by the Board, Investment Staff, and Consultant(s). Performance Objective The real estate portfolio shall be benchmarked, on a net of fees basis, against the total rate of return of the National Council of Real Estate Investment Fiduciaries Real Property Index (“NCREIF Index”) plus 50 basis points over a rolling 5-year period as its benchmark. With respect to public real estate securities, the Consultant, the Investment Staff, and the Board shall use the FTSE EPRA NAREIT Global Developed Index (“NAREIT”). In the event that the Program includes both private and public real estate investments, the benchmark shall be a weighted benchmark based on the Program’s exposure to public and private real estate investments, weighted quarterly. Unlike public security asset classes, real estate asset class will take some time to invest. To reflect

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this properly in the Plan’s policy benchmark, the NCREIF Index will be phased in over time. Over the course of time, as the real estate allocation is being phased into, the total Plan Policy Benchmark will need to be adjusted to reflect the real estate component as a percentage of total Plan assets. Once the Program’s full allocation of 8% is achieved, real estate will maintain a 8% weighting to the Plan’s target blended benchmark. Investment Approaches and Parameters The Board shall review the Program annually via the Investment Policy and Annual Strategic Plan prepared by Consultant, with assistance from Investment Staff. The Annual Strategic Plan shall be based upon broad economic structural analyses, market conditions, and a review of the existing portfolio. The Annual Strategic Plan shall detail tactical priorities, strategy enhancements, and other objectives.

A. General Approach

A broad range of real estate investments shall be considered for the Program through the implementation of a disciplined investment strategy. The Plan’s investments may consist of a number of different investment strategies and investment vehicles. All investments in real estate assets are expected to adhere to the standards of fiduciary obligation to the beneficiaries of the Plan, and shall be considered in the context of the relevant risk/reward factors of this asset class.

B. Program Strategy

The Program Strategy shall be revised periodically as appropriate and updated through the Annual Strategic Plan. The Program Strategy shall contain the following elements: 1. Program goals and objectives 2. Structure of the Program 3. Strategic approach to the asset class

C. Management of Real Estate Investments The Program shall be continually refined to obtain the most effective mix of investments. Real estate investments shall be continually reviewed in the following areas: 1. Fit with the Annual Strategic Plan 2. Pace and timing of investment commitments, funding, and return of capital 3. Diversity of investment strategies (property type, geographic regions, and others as

appropriate) 4. Targeted performance according to stated objectives specific to the investment

D. Quality Control Processes

The Program shall employ a quality control process, which involves Consultant, with assistance from Investment Staff. The quality control process shall include: monitoring Program efficiency, tracking investment performance, and controlling risk. 1. Process Monitoring: Monitor transaction processing to ensure timely decision-making

and an effective process. 2. Portfolio Performance Monitoring: Compare actual returns to the benchmark(s) as

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appropriate, and to the expected return for the investment. 3. Risk Control: Program standards are maintained through the following processes-

a. Assessing the level of diversification in the portfolio on a continual basis, including the level of diversification across investment styles, property types, geographic distribution, and across other ranges as appropriate.

b. Documenting due diligence activities.

E. Guidelines for Evaluating Proposals

Proposed real estate opportunities shall be evaluated relative to their fit with the Program’s Investment Policy and Strategic Plan. Section 13.2 contains broad guidelines for initial real estate evaluation.

F. Portfolio Composition

The Program shall be divided into three segments, the Core Portfolio, the Value-Added Portfolio, and the Opportunistic Portfolio. Assignment of an investment to a particular portfolio shall be based on the investment’s risk and return characteristics.

Characteristics of Core Portfolio Investments: The Core Portfolio is expected to produce market level returns over time with a commensurate level of risk. Performance is expected to modestly outperform the composite NCREIF Property Index, on a net-of-fees basis. Income is expected to make up the majority of the total return for the Core Portfolio. To mitigate risk, the Core Portfolio shall be well diversified by property type, geography and, to the extent feasible, by manager. Usually, investments in the Core Portfolio shall be limited to office, retail, industrial and apartment properties. The Core Portfolio may also include limited investment in “other” property types that are generally considered non-core. All investments in the Core Portfolio will be U.S. based. Typical Core Portfolio properties shall exhibit “institutional” qualities. Generally, they are well located within their local and regional markets, of high-quality design and construction and have significant occupancy levels. Leverage may be used in the Core Portfolio on a limited basis to enhance investment returns. Leverage within the Core Portfolio will have a targeted guideline of 40% or less of the aggregate net assets. Consideration shall be given to the impact of debt financing on the risk and return characteristics of the leveraged investments as well as the total Core Portfolio.

Characteristics of Value-Added Portfolio Investments:

The Value-Added Portfolio is expected to produce above market level returns over time. Performance is expected to exceed the NCREIF Property Index, on a net-of-fees basis, by 200 basis points. While income is expected to be a part of the total return for the Value-Added Portfolio, appreciation is expected be the source for much of the total return.

The Value-Added Portfolio contains investments with expected returns in excess of investments contained within the Core Portfolio in addition to commensurately higher risk. Value-Added Portfolio investments involve efforts to increase property value such as

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releasing, repositioning, redevelopment, or development, as well as higher levels of debt, usually within the range of 40% to 70%. Value-Added investments may include traditional and non-traditional property types (e.g. hotels, mini-storage, senior housing, timber, etc.).

Characteristics of Opportunistic Portfolio Investments:

The Opportunistic Portfolio is expected to produce above market level returns over time. Performance is expected to exceed the NCREIF Property Index, on a net-of-fees basis, by 500 basis points or more. Opportunistic investments includes distressed assets, financial restructurings, and/or financial engineering opportunities (e.g., foreclosing on a mortgage and selling the equity interest) and potentially the purchase of REOCs. Investment may also be made in non-traditional property types which typically contain greater risk. Opportunistic investments typically have even greater appreciation potential than value investments (e.g., 50% of total returns); correspondingly, these investments offer a higher return potential and a higher risk profile than core or value investments. In many cases, since appreciation is the primary goal of opportunistic investing, many are originated with little, if any, in-place income and therefore less current income as a portion of total return. Higher leverage is used (i.e., up to 80% with some funds). The following table sets forth investment policy ranges for the above risk/return categories:

Investment Guidelines All investments will be managed as approved by the Board consistent with the objectives and policies of the Plan and subject to the investment guidelines outlined below. To the extent possible, Consultant, Investment Staff and the Board shall adhere to the following investment guidelines:

Alignment of Interests:

Preferred investments for the Program will be those that exhibit the highest degree of management accountability and the greatest alignment of interests. Consultant, with assistance from Investment Staff, will seek, but will not be limited to, dedicated management teams that: (i) co-invest or have substantial ownership interest in the investment entity, (ii) have controlling positions with provisions for liquidity, and (iii) have high levels of disclosure, as well as the mitigation of conflicts of interest.

Leverage: The Plan’s Real Estate Program may employ leverage. Consultant, with assistance from Investment Staff, shall be responsible for monitoring the use of leverage in the real estate portfolio in order to enhance investment returns. Such leverage may be at the manager or

Real Estate Program Risk/Return Diversification Guidelines

Risk/Return Strategy % of Asset Class Policy Range

Core 70% 50%-100%

Value 20% 0%-40%

Opportunistic 10% 0%-20%

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investment level. Because leverage also increases the volatility of the real estate portfolio, careful consideration will be given to the impact of leverage on investment and portfolio risk. In addition, limitations on the amount of leverage at the individual asset or investment entity level as well as debt service coverage requirements will be negotiated or arranged wherever possible. Leverage at the aggregate Real Estate Program level shall be limited to 50%. To preserve the character of the real estate asset class within the Plan’s composite investment portfolio, the aggregate asset class shall not be over-leveraged. This shall be measured by comparing the principal amount of debt secured by real estate investments in the portfolio annually to the gross market value of the real estate portfolio. Leverage for each strategy shall be limited, as shown in the table below:

Additionally, the Consultant shall monitor the Program’s leverage to evaluate compliance with the above stated guidelines through the quarterly performance report.

Valuations: The Investment Staff and Consultant shall review the manager’s proposed valuation policy and request that each investment be valued at least annually using internal valuations. Core and value-added funds may secure third party appraisals. Eligible Ownership Vehicles: The selection of appropriate investment ownership vehicles will focus on structural aspects that provide for (i) maximum liquidity and control, while mitigating risk, (ii) the highest level of accountability on the part of management, and (iii) alignment of interests. Such criteria are critical to the Plan’s ability to meet its objectives in the real estate asset class.

Real estate investments shall be made in commingled vehicles including, but not limited to: (i) closed-end funds and (ii) open-end funds. The table below profiles the Program’s investment structure diversification guidelines, specifically: (i) investment vehicle type; (ii) liquidity level; and (iii) the Policy range. More specific information on each type of investment vehicle is shown below the following table.

Real Estate Program Leverage Guideline

Investment Strategies Policy Range

Core Up to 40%

Value Up to 65%

Opportunistic Up to 75%

Total Up to 50%

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A. Closed-End Commingled Investments:

Investments in closed-end commingled vehicles shall have clearly articulated and viable exit strategies through which assets can be disposed of or liquidated upon termination of the investment and on an interim basis. The term of these investments shall also be limited to no more than seven to ten years and shall provide for a winding-up and orderly liquidation within this time period. Investment agreements for closed-end commingled vehicles shall include flexible provisions for early termination, removal of management by investors and interim liquidation of investor holdings.

B. Open-End Commingled Investments:

Open-end commingled fund investments shall include flexible redemption provisions, though such provisions often do not provide investors with liquidity at times when it is most needed. Therefore, it is critically important that such investments be made with the most proactive of managers.

In addition, to the extent possible, investments in closed and open-end commingled fund vehicles shall include an opportunity for investors to participate on advisory boards.

C. Public Real Estate Securities:

Public real estate related securities may comprise up to 20% of the Program’s allocation, on a buy and hold basis. These investments shall be paced over an appropriate time period as determined by the Consultant with the Managers to avoid a significant investment during a high valuation period.

D. Private Real Estate Separate Accounts

Private real estate separate account investments may comprise up to 20% of the Program’s allocation. These investments shall be paced over an appropriate time period as determined by the Consultant with the Managers. Examples of such assets are stand-alone real estate properties, such as office buildings.

Eligible Investment Types: Equity real estate investments may include direct or indirect equity investment in real estate (including all rights and interests incident thereto) such as: (i) interests in corporations, partnerships and other entities whose primary business is the acquisition, development and operation of real property, (ii) participating or convertible participating mortgages or other debt instruments convertible to equity interest in real property based on investment terms (and not merely by foreclosure upon default), (iii) options to purchase real estate, leaseholds, and sale-leasebacks, (iv) all other real estate related securities such as lower or unrated tranches of

Real Estate Program Investment Structure Diversification Guideline

Investment Vehicle Liquidity

Level Policy Range

Commingled Funds-Open-End Moderate Up to 90%

Commingled Funds-Closed-End Illiquid Up to 60%

Public Real Estate Securities Liquid Up to 20%

Private Real Estate Separate Accounts Illiquid Up to 20%

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pre-existing securities or structured debt instruments, which have equity features.

The following table sets forth the guidelines governing the Program’s investment structure.

Real Estate Program Investment Structure Diversification Guideline

Investment Structure Policy Range

Private Equity Real Estate 70%-100%

Private Debt 0%-20%

Public Equity 0%-20%

Public Debt 0%-10%

Diversification:

In portfolio theory, the principle of diversification is defined as the process of combining investment alternatives so that unique risk is reduced and the range of likely expected future returns is narrowed. This shall be accomplished in the real estate portfolio through the investment of capital among a number of different investment management organizations and in a variety of investment strategies and structures, property types and geographic regions, among other factors.

Diversification by Investment Manager: To reduce risk, the real estate portfolio shall be diversified by investment management organization. No single investment management organization shall manage more than 30% of the total committed capital of the Plan allocation (with the exception of within the first 12 months of the initial funding of the real estate portfolio). The Plan shall limit its exposure to any single Manager or investment, and be subject to other investment restrictions to reduce risk, as further defined below. 1. Maximum Manager Allocation. No single manager shall be allocated more than thirty

percent (30%) of the Program’s total allocation (including committed capital) at the time of the prospective investment commitment. The allocation amount calculation shall include all of the Program’s investment commitments remaining to the Manager plus the net asset value of the existing investments at the time of measurement or at the time of a prospective investment allocation.

2. Minimum Investment Size. The Program’s minimum investment commitment to a

commingled fund Manager shall be $10 million. 3. Maximum Investment Commitment. The Program’s maximum investment commitment

to a commingled fund Manager shall be shall be limited to fifteen percent (15%) of the Program’s allocation to real estate at the time of the prospective investment commitment.

4. Open-End Commingled Fund Guidelines. The Program shall not invest with a Manager

that has significant enterprise or platform risk unless the Program is adequately compensated for that risk. Accordingly, the Program’s investment in a single open-end commingled fund shall not exceed twenty percent (20%) of the total net market value of the commingled fund at the time of the prospective investment unless either (i) the Program receives adequate benefits to offset the associated risk (such as preferred fees and/or enhanced representation as a non-control investor) or (ii) it is determined that the Manager’s platform is viable and effective even without the Program’s commitment. The

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Plan shall not consider investments in an open-end commingled fund that has less than $100 million in net asset value, exclusive of the Program’s investment.

5. Closed-End Commingled Fund Guidelines. The Program shall not invest with a

Manager that has significant enterprise or platform risk unless the Program is adequately compensated for that risk. Accordingly, the Program’s investment in a single closed-end commingled fund shall not exceed twenty percent (20%) of the total investor commitments to the fund at the time of closing of the commitment period of the prospective investment unless either (i) the Program receives adequate benefits to offset the associated risk (such as preferred fees and/or enhanced representation as a non-control investor) or (ii) it is determined that the Manager’s platform is viable and effective even without the Program’s commitment. The Plan shall not consider investments in a commingled fund that has less than $100 million in net equity capital commitments, exclusive of the Program’s investment.

The Consultant and the Investment Staff shall be responsible for reviewing fund terms to ensure they are consistent with or have incorporated the applicable restrictions previously described. Even though a prospective commingled fund allocation may be in compliance with the Policy restrictions, the Consultant shall complete reasonable due diligence with respect to each prospective investment to determine whether it is appropriate for recommendation to the Investment Staff and the Board. The Consultant may consider a number of factors in determining whether investments are reasonable and appropriate for institutional investors, including the following: the level of investment by institutional investors (e.g., pension funds, endowments, foundations and sovereign funds); the size of the organization; the experience of key personnel; the track record of key personnel in investments comparable to the strategy to be undertaken; and the financial condition of the firm. Diversification by Geography: To reduce risk, investments in the real estate portfolio shall be well diversified by geography. The importance of location to the long-term value of real estate is based on local economic fundamentals and the other risk attributes (e.g., weather, earthquake and local government impact) of regional areas. The distribution of real estate investments by geographic region shall be monitored for compliance within the broad ranges set forth in the table below.

Real Estate Program Geographic Diversification Guidelines

Geographic Regions Policy Range

West Up to 50%

South Up to 40%

Midwest Up to 40%

East Up to 50%

International Up to 20%

The Consultant shall include in each Annual Strategic Plan investment guidelines and targets related to the Program’s international allocation. Diversification by Property Sector: To reduce risk, the real estate portfolio shall be well diversified by property type and primarily invested in apartment, industrial, office and retail assets. The Value-Added and Opportunistic

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components of the Portfolio are likely to contain a broader array of non-traditional property types. Property type portfolio exposure levels have had a significant impact on institutional investor returns since property types have historically performed differently during economic cycles. The guidelines governing the Program’s property type exposure are shown in the following table. The Consultant shall monitor the Program’s real estate in its quarterly performance reports to indicate the level of compliance with these guidelines.

Real Estate Program Property Diversification Guidelines

Property Types Policy Range

Residential Up to 40%

Industrial Up to 35%

Office Up to 40%

Retail Up to 40%

Hotel Up to 15%

Other Real Estate1 Up to 20% 1Includes other property types not included within the NCREIF Index, including senior living, manufactured housing, student housing, healthcare, land and self storage.

Real estate investments may include investments other than the traditional property types, such as healthcare and manufactured housing. The Consultant shall include a section in each Annual Strategic Plan reviewing the Program’s property-type exposures and investment objectives relating thereto. Diversification by Investment Life Cycle: Investment life cycle refers to the stage of development of a real estate investment. The stages of development include the following: (1) land or pre-development (i.e., un-entitled or partially-entitled land); (2) development/redevelopment (i.e., in process of entitling or constructing improvements); (3) leasing (i.e., less than full or market occupancy); and (4) operating (i.e., greater than market occupancy). As a result of the risks associated with development, at no time shall the Program have an exposure exceeding 10% to total non-operating investments (i.e., the total of pre-development/land, and development/redevelopment). Also, the Consultant shall monitor the Program’s exposure to different life cycles through the quarterly performance report, which shall indicate the Program’s non-operating investment exposure and whether a non-compliance issue exists. Dollar Cost Averaging: To reduce market risk, the Plan shall employ dollar cost averaging, or buying into investments over a period of time rather than all at once. More specifically, with regard to higher risk investments such as Value-Added or Opportunistic investments, the Fund shall endeavor to own such investments that are diversified by vintage year.

General

1. Investment Manager Reports Investment Staff shall require periodic reports (i.e. quarterly) from investment managers to facilitate monitoring. 2. Monitoring Investments

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Consultant, with assistance from Investment Staff, shall monitor individual investments and the portfolio as a whole. Monitoring includes diversification across real estate strategies to assure an appropriate mix to reduce risk in the Program’s investments. 3. Performance

The Plan shall assess the performance of real estate investments relative to the following areas:

a. Objectives established by the manager b. Risk undertaken c. The long-term performance objective, with appropriate interpretation if applied to

the short-term. 4. Investment Reports

Quarterly reports shall be provided to the Board. These reports include, but shall not be limited to, reviews of individual investments and their performance. Other Specific Policy Considerations Manager Investment Guidelines:

1. Minimum Requirements/Investment Strategies a. The principals shall demonstrate relevant experience in or directly applicable to the

market in which they propose to work. b. The principals shall demonstrate that they are specifically qualified to pursue the

proposed strategy in the market in which they propose to work. c. The principals shall demonstrate the requisite skills and experience necessary to

execute successfully the proposed strategy, including evidence from similar endeavors.

d. The principals shall dedicate sufficient time and effort to the proposed opportunity and make, within the context of the particular investment, a meaningful personal financial commitment.

e. The proposed strategy and business plan shall be set forth in sufficient detail to permit substantive and meaningful review of the opportunity, verification of the investment concept, and of the risk factors.

f. The proposed strategy and business plan shall provide reasonable assurance that the investment opportunity can produce the required return.

g. The risk/reward trade-off in the particular market that is addressed by a partnership proposal shall be attractive, based on reasonable assumptions.

h. The principals/general partner shall have a significant co-investment in relation to their net worth.

i. The manager will have a minimum of $200 million of assets under management and a track record of at least three years, which may include years together as a team at a previous organization.

2. Evaluation Criteria

Primary emphasis will be on the quality and experience of the investment partners in a partnership investment. Additional factors may include, as appropriate:

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a. Fit with the Program Strategy, Investment Policy and Strategic Plan, and within the overall Program.

b. A unique strategy that is not competitive with existing investments. c. Integrity of the general partner, its employees, and other investors. d. Quality of overall partnership governance, management of the Partnership, including

controls and reporting systems. e. Specific objectives. f. Relationship with the relevant parts of the investment community. g. Relationship with limited partners. h. Nature of value added involvement. i. Past financial performance of the individual investment professionals. j. Reasonable ratio of committed capital per partner. k. Appropriateness of terms and conditions. l. Alignment of interests with limited partners. m. Capital at risk. 3. Due Diligence

A due diligence review by Consultant shall include, but not be limited to, the following:

a. Discussions with principals of the proposed investment. b. Review and analysis of all pertinent offering documents including: offering

memorandums, subscription agreements, and private placement memorandums. c. Consideration of potential conflicts of interest, if any, posed by the proposed

investment and prior investments and activities of the principals. d. Review and analysis of the investment concept, including entry and exit strategies and

terms including fees, principal participation, and structure. e. Review and analysis of the fit within the Program, including fit with the Strategic Plan,

other constraints and guidelines, and compliance with applicable investment policies. f. Review of news articles, principals, prior investments, and concepts. g. Reference checks of principals. h. Review and analysis of track record including performance of prior and current

investments. i. Consideration of relative size of the proposed investment. j. Investigation of special terms and side letter agreements with past or present

investors. k. Review of any lawsuits or litigation involving the general partner, its principals,

employees and prior funds. l. Due diligence visit to the Partners’ offices. m. Ensure that the manager is operating in compliance with the Water & Power

Placement Agent Policy, if applicable. 4. Legal Constraints Legal provisions to be considered include, but are not limited to: a. Registered Investment Advisor (RIA): investment advisors retained by the Board are

so registered or comparable procedure is established. b. Regulatory (i.e. FCC, SEC, FTC). c. Bankruptcy or other material litigation. d. Appropriate alignment of interests.

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13.1 Designated Responsibilities and Tasks Additional Responsibilities of Consultant Deal Flow Management

Sourcing Opportunities o Perform gatekeeper functions by meeting with groups, reviewing the investment

documentation including the Private Placement Memorandums and Offerings documents

o Receive and review opportunities forwarded from the Plan o Meet and interview potential investment management teams o Evaluate opportunities presented outside of the Plan’s relationship for

appropriateness for the Program o Maintain a database of opportunities considered for the Program

Investment Due Diligence

Desk Review o Review offering memorandum, limited partnership agreement, marketing

materials, etc. o Analyze:

Manager and fund Market opportunity Investment strategy Due diligence file provided by Consultant General Partner background and experience Track record Terms Alignment of interest

o Upon completion, review findings with Board/Investment Staff and recommend further review or rejection

Full Due Diligence Review o Review completed due diligence questionnaire o Conduct reference checks o Conduct on-site visit as appropriate o Review economic and business terms of legal documents o Communicate status of Full Due Diligence Review to Board/Investment Staff o Upon completion, prepare and issue report to Board/Investment Staff with

recommendation for investment or rejection; include appropriate supporting documentation with the report

o Arrange meeting to review materials and recommendation o Provide copies of all Courtland due diligence materials to Investment Staff

Terms Negotiation o Negotiate specific partnerships terms, if appropriate

Performance Monitoring

Consultant o Receive copies of all notices of capital calls and cash distributions o Receive copies of all financial reports and other communications o Calculate performance and reconcile with the manager and master custodian, as

needed o Prepare quarterly evaluation reports, with information including, but not limited to:

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Partnership Commitment Contributions Distributions Fair Market Value TWR and IRR (where applicable) Performance by manager and strategy and risk/return classification Portfolio review of exposures/diversification Manager specific data/updates Real estate economic market overview

o Prepare Annual Strategic Plan and review of Investment Policy Duties of Manager

Adhere to GIPS-compliant reporting and performance measurement standards and comply with generally accepted accounting principles (“GAAP”) applied on a fair market value basis.

Execute and perform its duties under the terms of the investment vehicle documents.

Provide timely requests for capital contributions.

Provide quarterly financial statements, annual reports and other investment information requested by the Investment Staff and/or the Consultant.

Conduct annual meetings to discuss important developments regarding investment and management issues.

Provide quarterly questionnaires and compliance materials to the Consultant. Duties of Legal Counsel

The legal counsel selected by the Plan will represent the Plan and will review all real estate related documents and provide advice for special investment situations as needed. Execute and perform its duties under the terms of the investment vehicle documents.

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13.2 Guidelines for Initial Manager Evaluation

Organization: Firms considered for this Program are expected to include established, long-tenured firms in addition to potentially including recently formed organizations that may be raising their first institutional investment vehicle. Alignment of interests (including ownership, compensation, general partner commitment, etc.) will be important factors in the proposed investment opportunities. An extensive review of these key factors and governance rights is to be conducted during the evaluation. Investment Experience: The general partners are expected to have significant investment experience and expertise relevant to their investment strategy. Depending on the investment, greater emphasis may be placed on the experience of the members of a specific team rather than the firm as a whole as opportunities may result from professionals splitting from more established firms raising their first institutional fund. This also pertains to analyzing performance track records. The track records of the team may need to be examined on its own merit rather than requiring a track record representative of the entire firm. Staffing: The organization must have sufficient investment professionals and support staff to implement the proposed strategy. The amount of targeted capital commitments, average investment size and anticipated number of transactions shall be reviewed to assess the appropriate staffing level. Investment Strategy: The investment strategy of potential investment opportunities shall be assessed for appropriateness given the Program’s goals and objectives. The investment strategy is required to be proposed in sufficient detail to allow for extensive review of the opportunity, verification of the investment concept (given existing market conditions) and of the potential risk factors. Fund size: Aggregate fund sizes for potential opportunities will range significantly. The proposed fund size will be examined to ensure appropriateness for the proposed investment strategy given the investment approach and market dynamics. In addition, the Plan’s ownership position will be determined to ensure that there is sufficient diversification of investors in the fund. Type of Investments: Opportunities to be reviewed for the Program are expected to span Core and Value-Added real estate. Core investments will typically include well-located properties of high-quality design and construction that have significant occupancy levels; however, a limited number of investments may also include “other” property types that are generally considered non-core. Value-Added investments may involve efforts to increase property value such as releasing, repositioning, redevelopment, or development, as well as traditional and non-traditional property types (e.g. hotels, mini-storage, senior housing, timber, etc.). All real estate investments will be U.S. based. Terms: At a minimum, partnership terms are expected to be “in-line” with industry norms. In particular, the “distribution waterfall” will be examined for appropriate prioritization of distributions and the clawback provision will be reviewed to ensure adequate mechanisms are in place to protect the Plan. Given the opportunity or need, Consultant will negotiate various terms (particularly governance terms) to be “limited partner friendly” in order to compensate the Plan for the unique risks associated with investing in real estate investments.

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13.3 Guidelines for Ongoing Manager Evaluation Applicable Investment Strategies/Structures

Open-End Core Commingled Funds

Public Real Estate Securities Investment Performance Review of Investment Manager(s) and its (their) Investment Portfolio(s) As part of the ongoing reporting process, the investment manager will report quarterly and trailing annualized performance of the respective portfolio(s) to the Plan and its Consultant on a quarterly basis (i.e., every three months). In addition, the investment manager will provide performance attribution statistics that explain the causes of under- or out-performance relative to the established benchmarks. The investment manager will also report any changes in investment-related personnel, organization or investment approach/strategy that may potentially impact the investment results of the portfolio in question. Independent Evaluation of Investment Performance by the Plan The Plan (or its Consultant) will evaluate investment performance on a quarterly basis using the investment performance Watch Status criteria found in Section 4.3. Such evaluations will also be used to verify the quarterly performance information disclosed by the investment managers themselves. If the investment manager(s) do(es) not meet one or more of the criteria in Section 4.3, the Board will place the specific investment manager(s) on watch status for investment performance reasons. The quarterly evaluation will indicate (i) whether an investment manager is on watch status; (ii) the reason for watch status, (iii) the approximate date the investment manager and the respective portfolio was placed on watch status, (iv) the length the investment manager has been on watch status, and (v) additional comments. If the investment manager/portfolio was placed on watch status for investment performance reasons, the status report will also include post-watch investment performance to gauge if the investment manager is addressing investment performance issues. Periodic Monitoring Activities As part of its ongoing fiduciary responsibilities, as well as in assessing the potential of an investment manager to produce future added value, the Plan and its Consultant should regularly review several qualitative and quantitative aspects of an investment manager’s management and practices. Key factors include, but are not limited to:

Compliance with the guidelines agreed upon for management of the Board’s portfolio, including holding unauthorized issues;

Review of the investment manager(s) investment strategy and style, especially the acquisition/disposition (open-end core commingled funds) and buy/sell (public real estate securities) disciplines;

Review of portfolio valuation, including going-in cap rate, discount rate, and exit cap rate (open-end core commingled funds);

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Review of portfolio leverage levels;

Growth in portfolio asset level/assets under management;

Risk profile relative to the portfolio’s benchmark;

Review of organizational structure;

Stability of investment manager personnel and organization;

Review of investment manager contractual obligations to the Plan (including management fees);

Evidence of illegal or unethical behavior by the investment management firm;

Unwillingness to cooperate with reasonable requests by the Board, such as information, meetings or other material related to its portfolios.

As previously outlined, certain investment manager(s) may (i) fail to meet pre-established investment performance criteria and/or (ii) may prove sub-standard across any number of qualitative factors. In such cases, the next step would be for the Plan (or the Consultant) to produce a document called a Portfolio Review. This Portfolio Review would explain those factors where the investment manager(s) and/or portfolio(s) are failing to meet specific criteria and provide a basis for putting investment manager(s) on watch status. The Portfolio Review would typically be in the form of a memorandum to the Board. The watch status process will follow the same guidelines as outlined in Section 4.3. 13.4 Global Real Estate Investment Trust Guidelines The Plan has appointed Manager(s) to manage a portion of the Plan's assets. These assets will be managed in conformance with the objectives and guidelines delineated below and in accordance with the formal contract with the Retirement Board. Portfolio Component Definition The Manager has been designated as a global real estate investment trust (“REIT”) manager. As a global REIT manager, the Manager is expected to invest in companies located globally which invest in real estate-related activities, with an emphasis on generating cash flow from core investments. The goal of the Global REIT portfolio is to provide superior performance vs. the FTSE EPRA/NAREIT Global Developed Index over a complete investment cycle. Emphasis is also placed upon volatility compared to the Index. Portfolio Guidelines 1. The portfolio shall be composed of cash equivalents and equity securities of companies doing

business both in the United States and outside the United States with minimum market capitalizations of $200 million at purchase. Equity securities shall be restricted to those issues listed on the major local-country stock exchanges. The markets that the Manager can invest in are those within the FTSE EPRA/NAREIT Global Developed Index. SEC Rule 144A international equity instruments with registration rights are fully permissible. Those instruments without registration rights must not exceed 10% of the lesser of cost or

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market value of any single international equity portfolio. In order to minimize transaction costs and market impact associated with country reclassification, and as FTSE reclassifies specific countries from one market to another (such as from emerging to developed or frontier to emerging), the investment manager, with advance notification to the Retirement Plan Manager, may invest in such countries, subsequent to the announcement of FTSE’s formal reclassification and prior to its effective date.

2. The Manager shall not use (non-currency) derivatives within the portfolio without the

expressed written consent of the Plan. If the Manager elects to use derivatives as part of its investment strategy, the Plan requires that the Manager document the rationale for using such instruments. The Manager shall not invest in letter or restricted stock, naked options or future contracts, and uncovered short positions or commodities. Use of any derivative instrument for speculation is prohibited.

3. Currency hedging up to a maximum of 25% of the portfolio is permitted for defensive

purposes. Currency hedging shall be effected through the use of forward currency contracts.

4. For prudent diversification the portfolio shall have a minimum of 50 issues quoted in at least 10 countries/regions, although assets will not be specifically allocated to individual countries or markets. The maximum size of any single issue shall be the greater of 5% of the portfolio or 125% of the benchmark weight, except at no time shall any specific issue represent more than 10% of the lesser of cost or market value of the portfolio. In addition, no issue shall be purchased in the Portfolio if more than 10% of the outstanding shares of that company are held by the Manager in the total of all of its accounts.

5. The cash equivalent portion should not normally exceed 5% of the portfolio. Cash equivalents

may be U.S. dollar or non-U.S. dollar denominated.

6. Turnover in the portfolio shall not normally exceed 150% in any twelve month period. Turnover shall be defined as the total dollar value of the lesser of purchases or sales divided by the market value of the portfolio at the beginning of the period.

Portfolio Characteristics 1. It is expected that the portfolio will invest across a broad array of countries within the FTSE

EPRA/NAREIT Global Developed Index. Regional and country weights, however, may vary significantly from the index.

2. It is expected that the portfolio's weighted average dividend yield on a quarterly basis will be

within a +/- 0.5x range of the market as represented by the FTSE EPRA/NAREIT Global Developed Index.

Performance Objectives On an annual basis the Manager is expected to outperform the FTSE EPRA/NAREIT Global Developed Index, net of fees, to be measured over a market cycle of three-to-five years.

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XIV. Private Equity Investment Policy Purpose This document sets forth the investment policy (“the Policy”) for the Plan’s Private Equity Program (“the Program”). This Policy is designed to ensure that investment managers, consultants, and the Board of Administration of the Water and Power Employees’ Retirement, Disability and Death Benefits Plan and Board of Water and Power Employees’ Retiree Health Benefits Fund (hereinafter referred to as the “Board” of the “Retirement Plan” and “Health Fund”) and Investment Staff take prudent and careful action while investing the Program. Additionally, use of this Policy provides assurance that there is sufficient flexibility in controlling the investment risks and returns associated with this segment of the portfolio. The Program is designed to meet the Retirement Plan and Health Fund’s long-term actuarial target through the identification and participation in private equity opportunities that are expected to generate high rates of return while also providing diversification benefits. Strategic Objective The strategic objective of the Program is to develop a diversified private equity portfolio capable of achieving investment returns commensurate with Program targets. Private equity investments are expected to achieve attractive risk-adjusted returns and, by definition, possess a higher degree of risk with a higher return potential than traditional investments. Accordingly, total rates of return from private equity investments are expected to be greater than those that might be obtained from conventional public equity or debt investments. They have a low correlation to other investment classes and therefore can contribute to reducing the risk and enhancing the returns of a total portfolio, as well as providing portfolio diversification. A diversified portfolio of attractive private equity opportunities is expected to be created by implementing a strategic “top down” assessment of attractive segments of the market for investment combined with a “bottom up” approach to manager identification. Consultant, with assistance from Investment Staff, shall proactively seek out the most attractive investment opportunities given current market conditions, while maintaining appropriate diversification. Portfolio weightings shall be a function of the specific risk and return profile of an investment opportunity and the Program’s overall needs. Private equity investments shall be considered solely in the interest of the Retirement Plan and Health Fund’s participants and their beneficiaries in accordance with applicable law, and shall be selected to accomplish the following: 1. Enhance the Retirement Plan and Health Fund’s performance by generating strong long-term

results. 2. Hedge against long-term liabilities. 3. Provide added diversification to the Retirement Plan and Health Fund’s overall investment

program.

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Responsibilities and Delegations The Plan will utilize the services of an In-Kind Distribution Manager to liquidate any in-kind distributions received from its private market managers. Section 2.3 outlines specific responsibilities and tasks to be performed by the Board, Investment Staff and Consultant(s). Performance Objective The long-term (5-10 years) expected performance objective of the Program shall be the return of the Russell 3000 Index plus a 300 basis point risk premium. Use of the Russell 3000 Index reflects the opportunity cost of investing in private equity versus publicly traded common stocks. This index is reported one quarter in arrears.

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Investment Approaches and Parameters

A. General Approach Direct partnership investments shall be emphasized. Separately managed accounts and Fund of fund vehicles, investing in the primary market, secondary market, and co-investments shall also be considered on an opportunistic basis to access specific private equity exposures in the construction of a diversified private equity portfolio. Opportunities shall be sought with specific criteria appropriate for investment within a diversified private equity portfolio. Strategic reviews shall assess existing portfolio exposures, identify attractive segments of the market for opportunistic investment, and determine appropriate portfolio weightings. Based on these assessments, Retirement Plan and Health Fund and Consultant shall proactively seek out attractive investment opportunities, while maintaining appropriate diversification.

B. Program Strategy The Program Strategy shall be revised periodically as appropriate and updated through the Strategic Plan. The Strategic Plan shall contain the following elements: 1. Program goals and objectives 2. Structure of the program

3. Strategic approach to the asset class The Board shall review the Program annually via the Investment Policy and Strategic Plan prepared by Consultant with assistance from Investment Staff. The Strategic Plan shall be based upon broad economic structural analysis, market conditions, and a review of the existing portfolio. The Strategic Plan shall detail tactical priorities, strategy enhancements, and other objectives.

C. Management of Partnership Investments The Program shall be continually refined to obtain the most effective mix of investments. The Program shall invest primarily in private equity direct partnerships and secondarily, in opportunistic commitments to private equity fund of funds. Partnerships shall be continually reviewed in the following areas: 1. Fit with the Strategic Plan

2. Pace and timing of investment commitments, funding and return of capital

3. Diversity of sectors (industry, geographical, investment style, and others as

appropriate)

4. Targeted performance according to stated objectives specific to the investment

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D. Quality Control Processes The Program shall employ a quality control process, which includes Consultant, with assistance from Investment Staff, to monitor Program efficiency, track investment performance, and control risk. 1. Monitoring Portfolio Performance: Actual returns will be compared to the benchmark(s)

as appropriate, and to the expected return for the investment. 2. Risk Control: Program standards are maintained through the following processes –

a. Assessing the level of diversification in the portfolio on a continual basis, including

the level of diversification across investment style, geographic distribution, industry concentrations, and across other ranges as appropriate.

b. Documenting due diligence activities.

E. Specific Risk Parameters The Program will be exposed to specific risk parameters that are associated with investing in private equity, including, but not limited to: 1. Operating and Business Risk: Certain private equity investments entail above average

operating and business risk. 2. Liquidity Risk: Private equity investments lack liquidity and typically have time horizons

of 5-to-10 years. Secondary markets for such investments are limited; and, often, there is no current income.

3. Structural Risk: Specific fundamental rights and protections are negotiated, which

include mechanisms for taking remedial action. These basic protections may include advisory committee participation and specific termination provisions in partnership transactions.

4. Valuation Risk: Partnerships shall be evaluated to determine if the general partner

employs an appropriate valuation discipline.

F. Guidelines for Evaluating Proposals Proposed partnership opportunities shall be evaluated relative to their fit with the Program’s Investment Policy and Strategic Plan. Section 14.2 contains broad guidelines for initial partnership evaluation.

G. Types of Investments Investments with attractive return characteristics, that also enhance portfolio diversification and are not otherwise prohibited by the Retirement Plan and Health Fund, shall be considered for the Program. Fund of funds and direct partnerships will be considered for the Program. Fund of funds make commitments to a diversified portfolio of underlying private equity partnerships. This includes primary market fund of funds that commit capital to partnerships that are currently raising capital in addition to secondary market fund of funds that invest in existing partnerships that have already closed their fund and are investing capital. Fund of funds may invest in partnerships, and direct partnerships

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may be considered, that generally fall within the categories defined below. 1. Buyout and Corporate Restructuring Capital: Investments in leveraged buyouts,

management buyouts, equity buyouts, employee buyouts, buy-and-build, other acquisition strategies and restructurings, and related uses of capital.

2. Expansion Capital: Investments in established companies for the purpose of growing their businesses.

3. Venture Capital: Investments in relatively small, rapidly growing, private companies in various stages of development.

4. Energy and Natural Resources: Investments in the exploration, extraction, accumulation, generation, movement or sale of energy (e.g., oil, gas, coal, electricity), and other natural resources and related service companies.

5. Distressed Securities: Debt or equity securities investments in troubled companies, under the assumption that the securities will appreciate in value following a restructuring of the company’s obligations. This includes, but is not limited to, investments in companies that are insolvent or unable to pay their debts as they come due. This may include companies subject to the Bankruptcy Reform Act, specifically Chapter 7 (Liquidation) and Chapter 11 (Reorganization) and companies under-going restructurings outside of Bankruptcy Court.

6. Turnarounds: Investments in companies experiencing financial or operating difficulties. These companies may or may not be insolvent.

7. Mezzanine: Investments in unsecured or junior obligations that typically earn a coupon

or dividend payment and may have warrants on common stocks or conversion features to enhance returns.

8. Special Situations: This includes all other types of investments, e.g. active minority

positions, secondary investments, governance strategies, industry specific strategies, and unconventional investments.

9. International: Investments that are located in countries other than the United States,

or have significant portions of their operations outside of the United States shall be considered Aggregate exposure to investments outside the United States, on a market value basis, is not expected to exceed 35%.

Benchmark The long-term performance benchmark for the Program shall be the return of the Russell 3000 Index plus a 300 basis point risk premium. Given the nature of the asset class and the difficulty benchmarking shorter-term results, there may be significant deviations between Program results and benchmark performance over shorter time periods.

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General Reporting 1. Reports received from investment managers

Investment Staff shall require periodic reports (i.e. quarterly) from investment partners to facilitate monitoring.

2. Monitoring Investments Consultant, with assistance from Investment Staff, shall monitor the individual partnerships and the portfolio as a whole. Monitoring includes diversification across private equity investment types to assure an appropriate mix reducing risk in the Program’s investments. Given the opportunistic nature of the Program, specific areas may be emphasized over the short-term with the long-term goal of developing a diversified program. The following types of diversification should be monitored, including, but not limited to: A. Economic Sector Diversification - Private equity investments should be diversified among

sector groups;

B. Form of Investment - Private equity investments should be diversified throughout various forms and categories of investment (e.g., LBO’s, venture capital, distressed, mezzanine etc.);

C. Payback Diversification - Private equity investments can take significant time to pay back capital. The Retirement Plan and Health Fund should attempt to invest in partnerships across a spectrum of payback scenarios;

D. Geographic Diversification - The Retirement Plan and Health Fund should consider geographical diversification in investment selection; and

E. Time Diversification - The Retirement Plan and Health Fund should endeavor to invest in a consistent manner when appropriate risk adjusted return opportunities are available.

3. Performance

The Retirement Plan and Health Fund shall assess the performance of the partnerships relative to the following areas: A. Objectives established by the partnership

B. Risk undertaken

C. The long-term performance objective, with appropriate interpretation if applied to the short-

term. 4. Investment Reports

Quarterly reports shall be provided to the Board by the Consultant. These reports include, but shall not be limited to, reviews of individual investments and their performance.

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Other Specific Policy Considerations Partnership Investment Guidelines: 1. Minimum Requirements/Investment Styles

A. The principals shall demonstrate relevant experience in or directly applicable to the market

in which they propose to work.

B. The principals shall demonstrate that they are specifically qualified to pursue the proposed strategy in the market in which they propose to work.

C. The principals shall demonstrate the requisite skills and experience necessary to execute successfully the proposed strategy, including evidence from similar endeavors.

D. The principals shall dedicate sufficient time and effort to the proposed opportunity and make, within the context of the particular investment, a meaningful personal financial commitment.

E. The proposed strategy and business plan shall be set forth in sufficient detail to permit substantive and meaningful review of the opportunity, verification of the investment concept, and of the risk factors.

F. The proposed strategy and business plan shall provide reasonable assurance that the investment opportunity can produce the required return.

G. The risk/reward trade-off in the particular market that is addressed by a partnership proposal shall be attractive, based on reasonable assumptions.

H. The principals shall have a significant economic position in the partnership on an equal basis with Retirement Plan and Health Fund.

2. Evaluation Criteria

Primary emphasis will be on the quality and experience of the investment partners in a partnership investment. Additional factors may include, as appropriate:

A. Fit with the Investment Policy and Strategic Plan and within the overall Program

B. A unique strategy that is not competitive with existing investments

C. Integrity of the general partner, its employees, and other investors

D. Quality of overall partnership governance, management of the partnership, including

controls and reporting systems

E. Specific objectives

F. Relationship with the relevant parts of the investment community

G. Relationship with limited partners

H. Nature of value added involvement

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I. Past financial performance of the individual investment professionals

J. Reasonable ratio of underlying partnerships per partner

K. Reasonable ratio of committed capital per partner

L. Appropriateness of terms and conditions

M. Alignment of interests with limited partners

N. Capital at risk

3. Due Diligence

A due diligence review by Consultant, with assistance from Investment Staff, shall include, but not be limited to the following:

A. Discussions with principals of the proposed investment.

B. Review and analysis of all pertinent offering documents including: offering memorandums,

subscription agreements, and private placement memorandums.

C. Consideration of potential conflicts of interest, if any, posed by the proposed investment and prior investments and activities of the principals.

D. Review and analysis of the investment concept, including entry and exit strategies and

terms including fees, principal participation, and structure.

E. Review and analysis of the fit within the Program, including fit with the Strategic Plan, other constraints and guidelines, and compliance with applicable investment policies.

F. Review of news articles, principals, prior investments, and concepts.

G. Reference checks of principals.

H. Review and analysis of track record including performance of prior and current

investments.

I. Consideration of relative size of the proposed investment.

J. Investigation of special terms and side letter agreements with past or present investors.

K. Review of any lawsuits, litigation involving the general partner, its principals, employees and prior funds.

L. Due diligence visit to the Partner’s offices.

M. Complete operational due diligence, including reviewing firm operations, cash

management, valuations, compliance, information technology, key service providers, and financial reporting.

4. Legal Constraints

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Legal provisions to be considered include, but are not limited to:

A. Registered Investment Advisor (RIA): Investment advisors retained by the Retirement

Plan and Health Fund are so registered or comparable procedure is established.

B. Regulatory (i.e. FCC, SEC, FTC).

C. Bankruptcy or other material litigation.

D. Appropriate alignment of interests.

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14.1 Designated Responsibilities and Tasks Additional Responsibilities of Consultant Deal Flow Management

Sourcing Opportunities o Receive and review opportunities forwarded from the Retirement Plan and Health

Fund o Meet and interview potential investment management teams o Evaluate opportunities presented outside of the Retirement Plan and o Health Fund relationship for appropriateness of the Program o Maintain a database of opportunities considered for the Program

Investment Due Diligence

Desk Review: o Review due diligence questionnaire, offering memorandum, limited partnership

agreement, marketing materials, etc. o Analyze:

Market opportunity Investment strategy General Partner background and experience Track record Terms Alignment of interest

o Upon completion, review findings with the Retirement Plan and Health Fund and recommend review or rejection

Full Due Diligence Review: o Conduct reference checks o Conduct onsite visit as appropriate o Extensively review economic and business terms of legal documents o Communicate status of Full Due Diligence Review to the Retirement Plan and

Health Fund o Upon completion, prepare and issue report to the Retirement Plan and Health

Fund with recommendation for investment or rejection; include appropriate supporting documentation with the report

o Arrange meeting to review materials and recommendation

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Terms Negotiation: o Negotiate specific partnerships terms, if appropriate

Performance Monitoring

Consultant o Receives copies of all notices of capital calls and cash distributions o Receives copies of all financial reports and other communications o Calculates performance and reconciles same with the manager and master

custodian, as needed o Prepares periodic reports

Quarterly: one-page status report listing:

Partnership

Commitment

Contributions

Distributions

Fair Market Value

IRR Semi-Annual: full performance report

Containing brief market overview

Performance by manager, vintage year and segment

Review portfolio exposures/diversification

Provide manager specific data/updates Annual: market overview, Investment Policy and Strategic Plan review

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14.2 Guidelines for Fund of Funds and SMA Evaluation Organization: Firms considered for this Program are expected to include established, long-tenured firms. However, recently formed organizations that may be raising their first institutional fund of funds may also be considered. Alignment of interests (including ownership, compensation, general partner commitment, etc.) will be important factors in the proposed investment opportunities. An extensive review of these key factors and governance rights is to be conducted during the evaluation. Investment Experience: The general partners are expected to have significant decision-making investment experience and expertise relevant to their investment strategy. Depending on the investment, greater emphasis may be placed on the experience of the members of a specific team rather than the firm as a whole as opportunities may result from professionals splitting from more established firms raising their first institutional fund. This also pertains to analyzing performance track records. The track records of the team may need to be examined on their own merit rather than requiring a track record representative of the entire firm. Staffing: The organization must have sufficient investment professionals and support staff to implement the proposed strategy. The amount of targeted capital commitments, average investment size and anticipated number of transactions shall be reviewed to assess the appropriate staffing level. Investment Strategy: The investment strategy of potential investment opportunities shall be assessed for appropriateness given the Program’s goals and objectives. The investment strategy is required to be proposed in sufficient detail to allow for extensive review of the opportunity, verification of the investment concept (given existing market conditions) and of the potential risk factors. Fund size: Aggregate fund sizes for potential opportunities will range significantly. The proposed fund size will be examined to ensure appropriateness for the proposed investment strategy given the investment approach and market dynamics. In addition, the Retirement Plan and Health Fund’s ownership position will be determined to ensure that there is sufficient diversification of investors in the fund (i.e. Retirement Plan and Health Fund should not represent more than 20% of any particular fund). Type of Investments: Fund of funds opportunities to be reviewed for the Program are expected to span the global private equity segments, including: buyout/corporate restructuring, expansion capital, venture capital, energy/natural resources, distressed securities, special situations, etc. Terms: At a minimum, partnership terms are expected to be “in-line” with industry norms. In particular, the “distribution waterfall” will be examined for appropriate prioritization of distributions and the clawback provision will be reviewed to ensure adequate mechanisms are in place to protect the Retirement Plan and Health Fund. Given the opportunity or need, the Consultant will negotiate various terms (particularly governance terms) to be “limited partner friendly” in order to compensate the Retirement Plan and Health Fund for the unique risks associated with investing in private equity investments.

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14.3 Direct Partnership Guidelines and Investment Criteria For consideration to be included in the Retirement and Health Fund’s private equity portfolio, a direct partnership opportunity shall meet the following characteristics: Organization: Firms considered for direct partnership investment are expected to be established, experienced firms. Alignment of interests (including ownership, compensation, general partner commitment, etc.) will be important factors in the proposed investment opportunities. An extensive review of these key factors and governance rights is to be conducted during the evaluation. Investment Experience: Firms must have exhibited significant and relevant decision-making experience through the investment of at least one prior institutional partnership implementing the proposed investment strategy. Track Record: Firms must have demonstrated the ability to generate top-quartile performance results relative to their vintage year and investment strategy peers. Staffing: Firms must have maintained significant organizational stability with proven retention of key investment professionals. The organization must have sufficient investment professionals and support staff to implement the proposed strategy. The amount of targeted capital commitments, average investment size and anticipated number of transactions shall be reviewed to assess the appropriate staffing level. Investment Strategy: The investment strategy of potential investment opportunities shall be assessed for appropriateness given the Program’s goals and objectives. The investment strategy is required to be proposed in sufficient detail to allow for extensive review of the opportunity, verification of the investment concept (given existing market conditions) and of the potential risk factors. Fund size: Aggregate fund sizes for potential opportunities will range significantly. The proposed fund size will be examined to ensure appropriateness for the proposed investment strategy given the investment approach and market dynamics. In addition, the Retirement Plan and Health Fund’s ownership position will be determined to ensure that there is sufficient diversification of investors in the fund (i.e. Retirement Plan and Health Fund should not represent more than 20% of any particular fund). Type of Investments: Direct partnership opportunities to be reviewed for the Program are expected to span the global private equity segments, including: buyout/corporate restructuring, expansion capital, venture capital, energy/natural resources, distressed securities, special situations, etc. Terms: At a minimum, partnership terms are expected to be “in-line” with industry norms. In particular, the “distribution waterfall” will be examined for appropriate prioritization of distributions and the clawback provision will be reviewed to ensure adequate mechanisms are in place to protect the Retirement Plan and Health Fund. Given the opportunity or need, the Consultant will negotiate various terms (particularly governance terms) to be “limited partner friendly” in order to compensate the Retirement Plan and Health Fund for the unique risks associated with investing in private equity investments.

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Risk Controls The incorporation of direct partnerships into Retirement Plan and Health Fund’s private equity portfolio is intended to be opportunistic in nature and provide complementary exposures to existing holdings providing the potential for higher returns in a cost-effective manner. Direct partnership investments are expected to be a primary component of the portfolio and are to be utilized in a risk-controlled manner. To that end: 1. A commitment to a single direct partnership is not to exceed 40% of annual targeted

commitments, as outlined in the Annual Investment Strategy.

2. The Retirement Plan and Health Fund may not represent more than 20% of the limited partnership interests in a fund.

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Appendix A: Glossary of Terms Commodities: A sub-set of the managed futures investment approach that mainly involves the trading of derivatives and forward markets in the commodity sector. Commodity Trading Advisers (CTAs), regulated by the Commodity Futures Trading Commission (CFTC), are commonly retained to implement such strategies. Convertible Arbitrage: Convertible arbitrage is the trading of related securities whose future relationship can be reasonable predicted. Convertible securities are usually either convertible bonds or convertible preferred shares, which are most often exchangeable into the common stock of the company issuing the convertible security. The managers in this category attempt to buy undervalued instruments that are convertible into equity and then hedge out the market risks. Fair value is based on the optionality in the convertible bond and the manager’s assumption of the input variables, namely the future volatility of the stock. Directional Strategies: These strategies do not fit cleanly in either of the two above strategies and are commonly a hybrid of the two Short Selling: The short selling discipline has an equity component as well as fixed income component. Short sellers seek to profit from a decline in the value of stocks. In addition, the short seller earns interest on the cash proceeds from the short sale of stock. Emerging Markets: Emerging market hedge funds focus on equity or fixed income investing in emerging markets as opposed to developed markets. This style is usually more volatile not only because emerging markets are more volatile than developed markets, but also because most emerging markets allow for only limited short selling and do not offer a viable futures contract to control risk. The lack of opportunities to control risk suggests that hedge funds in emerging markets have a strong long bias. Distressed Securities: Distressed securities funds invest in the debt or equity of companies experiencing financial or operational difficulties or trade claims of companies that are in financial distress, typically in bankruptcy. These securities generally trade at substantial discounts to par value. Hedge fund managers can invest in a range of instruments from secured debt to common stock. The strategy exploits the fact that many investors are unable to hold below investment grade securities. Diversified: A diversified fund-of-hedge fund is a multi-strategy, multi-manager product that has exposures spanning the spectrum of hedge fund investment strategies. The blend of underlying hedge fund strategies incorporated into a diversified fund-of-hedge fund (i.e., portfolio construction) is commonly a function of the specific risk and return characteristics of the product. Equity Market-Neutral: Equity market-neutral is designed to produce consistent returns with very low volatility and correlation in a variety of market environments. The investment strategy is designed to exploit equity market inefficiencies and usually involves being simultaneously long and short matched equity portfolios of the same size within a country. Market neutral portfolios are designed to be either beta or currency-neutral or both. Equity market-neutral is best defined as either statistical arbitrage or equity long/short with zero exposure to the market.

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Event Driven: This investment strategy class focuses on identifying and analyzing securities that can benefit from the occurrence of extraordinary transactions. Event-driven strategies concentrate on companies that are, or may be, subject to restructuring, takeovers, mergers, liquidations, bankruptcies, or other special situations. The securities prices of the companies involved in these events are typically influenced more by the dynamics of the particular event than by the general appreciation or depreciation of the debt and equity markets. For example, the result and timing of factors such as legal decisions, negotiating dynamics, collateralization requirements, or indexing issues play a key element in the success of any event-driven strategy. Fixed Income Arbitrage: Fixed income arbitrage managers seek to exploit pricing anomalies within and across global fixed income markets and their derivatives, using leverage to enhance returns. In most cases, fixed income arbitrageurs take offsetting long and short positions in similar fixed income securities that are mathematically, fundamentally or historically interrelated. The relationship can be temporarily distorted by market events, investor preferences, exogenous shocks to supply or demand, or structural features of the fixed income market. Global Macro: Macro hedge funds pursue a base strategy such as equity long/short or futures trend following to which large scale and highly leveraged directional bets in other markets are added a few times each year. They move from opportunity to opportunity, from trend to trend, from strategy to strategy. Long/Short Equity: Long/short strategies combine both long as well as short equity positions. The short positions have three purposes, which can vary over time or by manager. First, the short positions are intended to generate alpha. This is one of the main differences when compared with traditional long-only managers. Stock selection skill can result in doubling the alpha. A long/short equity manager can add value by buying winners as well as selling losers. Second, the short positions can serve the purpose of hedging market risk. Third, the manager earns interest on the short as he collects the short rebate. Merger Arbitrage: Merger arbitrage (also known as risk arbitrage) specialists invest simultaneously in long and short positions in both companies involved in a merger or acquisition. In stock swap mergers, risk arbitrageurs are typically long the stock of the company being acquired and short the stock of the acquiring company. In the case of a cash tender offer, the risk arbitrageur is seeking to capture the difference between the tender price and the price at which the target company’s stock is trading. Relative Value Strategies: This class of investment strategy seeks to profit by capitalizing on the perceived mispricings (in the manager’s opinion) of related securities or financial instruments. Generally, relative-value and market neutral strategies avoid taking a directional bias with regards to the price movement of a specific stock or market. This makes this style most appealing for investors who are looking for high and stable returns accompanied by low correlation to the equity market. Sharpe Ratio: This ratio is a risk-adjusted measure of a fund’s performance. It is calculated as follows [(annualized rate of return)-(annualized risk-free interest rate)] / annualized standard deviation. For example, a fund with a Sharpe Ratio greater than 1.0 is achieving more than one unit of excess return per unit of risk undertaken.

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Appendix B: Proxy Voting Policy Every year, the Board votes the proxies for the companies in which it holds common stock. Proxy statements include descriptions of proposals to be voted on by shareholders, such as election of directors, appointment of outside auditors, shareholder proposals and those management proposals which would be dilutive of the Board’s ownership, set up anti-takeover barriers, provide “greenmail” or “golden parachutes”, or otherwise impair (or potentially impair) the economic value of the Board’s equity position in the company. The Board has drafted proxy voting guidelines to guide the voting of these proxies which are voted by the Plan or its designee in a manner consistent with the guidelines. The proxy items are grouped under the general categories of corporate governance items, business-related items, and social-related items.

I. Corporate Governance

1. Cumulative Voting - The ability to vote all shares for one seat on the corporation’s board of directors. The Board has consistently voted against cumulative voting proposals or voted to remove cumulative voting where it is permitted. It has been the Board’s view that cumulative voting would allow a special interest to gain one or more seats on the corporate board and disrupt the efficient management of the company.

AGAINST

2. Classified Board - The election of corporate directors for overlapping terms so that

only a fraction of the board of directors may be voted out of office in any year. The Board has consistently voted against classified board proposals and voted for repeal of classified board provisions because it has viewed a classified board of directors as one form of anti-takeover device because a majority of the corporate board of directors cannot be removed by a vote of the majority of the stockholders in any year. AGAINST

3. Confidential Voting - The demand that the corporation provide for a secret ballot and contract with an outside organization to conduct its proxy count. The Plan votes for the adoption of confidential voting because confidential voting preserves the ability of shareholders, including employees, to vote in a way that does not subject them to influence by the board or management. FOR

4. Pre-emptive Rights - Mandates that the corporation first offer to sell any new issue of stock or other convertible capital instruments to current stockholder before offering it to the public. The Board has voted against stock or convertible debt issuances with pre-emptive rights on the basis that such requirements slow down the corporation’s financing process and, if the Board’s advisors believe that the Board’s equity position should not be diluted, the additional shares can be purchased on the open market. Also, experience has shown that new issue prices are often higher than secondary market prices a short while later.

AGAINST

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With regard to an issuance without pre-emptive rights, The Board generally views such issuances more favorably. However, The Board may vote Against if negative factors are identified, including but not limited to: potentially excessive dilutive effects of the issuance, whether any price discount is disclosed and whether the discount may be excessive

5. Report Charitable Contributions - Report the company’s charitable contributions in its annual report. The Board has consistently voted “no”. It is the Board’s view that it would increase costs and not provide meaningful information to the shareholders.

AGAINST

6. Restrict Charitable Contributions - Restrict charitable contributions made by the

company. The Board has voted “no” consistently in the past three years.

AGAINST

7. Political Contributions - The company would affirm political non-partisanship by avoiding practices such as distributing contribution cards during supervisory meetings. The Board has consistently voted “no”. It is the board’s view that employees have the right to participate in the political process as they see fit. It is not the company’s business to encourage or discourage employee’s political activities.

AGAINST

8. Disclosure of Political Contributions Under Corporate Governance - It requires the

company to publish in major U.S. newspapers a statement of political contributions made during a specified time period. The Board has consistently voted against such proposals. It is the Board’s view that such disclosure unnecessarily adds to the company’s expense and serves no useful purpose for shareholders.

AGAINST

9. Director Ownership of Stock - Directors of the company would be required to own

a minimum number of shares of the company’s stock. The Board has voted against this proposal. It is the Board’s view that a director’s personal financial status is not an indicator of his/her qualifications as a board member.

AGAINST

10. Nomination Statement by the Board of Directors Candidates - Candidates for the

company’s board would provide reasons why shareholders should vote for them. The Board has consistently voted for this proposal. It is the Board’s view that nomination statements would be useful for shareholders in casting their votes.

FOR

11. Union Representation on Board - Mandate union members be put on the

company’s board of directors. The Board has consistently voted against such proposals. It is the Board’s view that such a member would represent a special interest group, and that the company’s board should represent the interest of all shareholders.

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AGAINST

12. Removal of Poison Pills - Removal of poison pills such as “shareholder rights”

including a “super majority” vote requirement. The Board has consistently voted for such proposals. The Board believes that poison pills allow company management to become entrenched and could reduce the market value of the stock.

FOR

13. Annual Meeting Location, Date, or Format - Rotate the annual meeting location

around major U.S. cities and/or change the date on which annual meeting is held. The Board has consistently voted “no”. It is the Board’s view that it would increase costs and not meaningfully benefit shareholders. Similarly, the Board is against a company holding shareholder meetings by virtual means only (e.g. only through the Internet). Virtual meeting technology can be a useful complement to a traditional, in-person shareholder meeting by expanding participation of shareholders who are unable to attend a shareholder meeting in person (i.e. a “hybrid meeting”). However, virtual-only meetings have the potential to curb the ability of a company’s shareholders to meaningfully communicate with the company’s management. The Board may vote against proposals to set a shortened notice period for shareholder meetings, in cases where it appears shareholders would be unreasonably disenfranchised as a result.

AGAINST

14. Governmental Service - The company will report to shareholders each year a list

of people employed by the company with the rank of Vice President or above, or as a consultant, lobbyist, legal counsel, investment banker or director, who in the previous five years have served in any governmental capacity, provided that information affecting the company’s competitive position may be omitted. The Board has consistently voted against such proposals. It is the Board’s view that such a report adds cost to the company without providing additional shareholder value.

AGAINST

15. Retaliatory measures against companies for changing or not changing their annual

meeting dates. A shareholder proposes retaliatory measures against the companies who do not schedule their annual meeting on dates that the shareholder finds desirable. An example of a retaliatory measure would be requesting any financial institution to stop making loans to companies that have changed their annual meeting dates to conflict with another company’s meeting date.

AGAINST

16. Provide Choice of Directors - Requires that for each directorship to be filled the

company submit two or more nominees, one of which would be elected by shareholders at annual meetings. The Board believes that this requirement would only complicate the nominating and electing process and that nominating committees of the company should be allowed to select and nominate the best

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candidates for directors.

AGAINST

17. Limit Term for Outside Directors - Limits terms of outside directors to an arbitrary number of years. The Board believes that arbitrary term limits would deprive a company of directors with valuable experience, knowledge and perspective.

AGAINST

18. Abolish Political Action Committee - Requires the elimination of political action

committees established by the company to encourage voluntary contributions to the employee’s chosen political candidates or parties. It is the Board’s view that employees have the right to participate in the political process as they see fit and that companies may provide convenience in exercising this right.

AGAINST

19. Non-key Board Committee / Shareholder Oversight Committee - This

section relates to proposals regarding the formation of board-level committees apart from the common key committees (e.g. Audit, Compensation, Nominating/Governance). This section also relates to proposals to form a committee of shareholders whose job is to advise the Board of Directors on vital policy matters and make certain that the Board of Directors is doing its oversight function effectively. Our Board believes that the committee’s work would be duplicative, expensive and bureaucratic and would only hinder management’s ability to act quickly in responding to a problem or opportunity.

AGAINST

20. Independence of Board and Committees - Proxies dealing with shareholder

proposals to require each member of the company’s board to satisfy certain criteria of independence. The proposals argue that the adoption of the criteria would ensure effective oversight of the executive department by the independent board. Some criteria prohibit directorship by any person connected to a firm that provides the company “significant” amount of business in consulting, legal, sale of goods or other services. Our retirement board agrees with the need for board independence but find some of the criteria too rigid, subjective, non-specific and difficult to implement. Our board believes that blind application of these criteria would prevent the hiring of the most qualified directors. Instead, our board believes that independence can also be achieved by increasing the proportion of the number of outside directors (who will have the presumption of independence) to the number of employee-directors (who will be presumed to be not independent). In the recent past, there have been numerous independence proposals. To simplify the determination of how to vote on these proposals, our board would determine quantitatively whether a company’s board and its key committees (nominating, audit and compensation) are “substantially independent”. The rule will be that whenever the existing number of employee-directors on the company’s board does not exceed 30% of all members, or conversely, if the number of outside directors is at least 70%, the company’s board and all its committees would be considered “substantially independent” and the independence proposal would automatically be voted against.

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AGAINST

21. Ratification of Auditors / Accounts & Reports - Like directors, auditors should be free from conflicts of interest and should assiduously avoid situations that require them to make choices between their own interests and the interests of the shareholders they serve. Therefore, the Plan will vote against ratification of an auditor where the non-audit fees exceed fees paid for audit services. In some markets outside the United States, companies will routinely propose approval of the company’s financial statements (“accounts and reports”) at annual shareholder meetings. The Board generally supports these proposals, unless they are lacking sufficient auditor review.

22. Performance of Audit Committee - The Board will withhold for all members of an audit committee who are up for election and who served on the committee at the time of the audit, if audit and audit-related fees total less than one-third of the total fees billed by the auditor.

23. Majority Voting for Directors - The Board will vote in favor of proposals that

recommend or require that companies adopt a majority vote standard for election of directors unless the company has a by-law requiring majority voting.

FOR

24. Election of Directors - The Board will withhold support for directors who fail to

attend more than 75% of board and committee meetings. The Plan will also withhold support from directors who serve on more than five public company boards and executives who serve on more than two public company boards. Furthermore, if the company is holding its meeting through virtual means only (an online meeting with no corresponding in-person meeting), the Plan may vote against members of the board who sit on the nominating/governance committee. However, the Board will take into account the possibility of a pandemic, epidemic, disaster, etc., when applying the policy on virtual-only shareholder meetings. If the company is holding its meeting through virtual means only due to an extenuating circumstance, the Plan may recommend reviewing members of the board who sit on the nominating/governance committee on a case-by-case basis. The Board will follow the recommendation of its proxy advisor when reviewing members up for election on the nominating and governance committee.

25. Independence of Directors - In examining the independence of directors, the Board will apply the independence definition of the applicable stock exchange.

26. Independence of Board - The Board will withhold for inside and/or affiliated

directors in order to satisfy a two-thirds board independence threshold.

27. Leadership of Board - The Board will withhold for the nominating and corporate governance committee chair when the company has neither an independent chairman nor independent lead director. The Board will follow the recommendation of its proxy advisor in evaluating proposals regarding the independence of the board chair and the separation of the chair and CEO positions.

28. Shareholder access to the proxy - The Board will support shareholder proposals

seeking shareholder access to the proxy in cases where there are sufficient safeguards built into the proposal limiting its use to shareholders with a specified

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minimum level of ownership that have held the shares for a specified minimum period of time.

29. Adoption of Exclusive Forum Provision - The Board will withhold for the nominating

and corporate governance committee chair when a company adopts an exclusive forum provision without shareholder approval outside of a spin-off, merger or Initial Public Offering.

30. Amendments to Company Articles or Bylaws - Management or shareholders

proposing to amend, modify or repeal company bylaws or articles of incorporation. The Board will follow the recommendation of its proxy advisor when evaluating these proposals. The proxy advisor typically believes changes to company articles or bylaws are best made at the discretion of management, except when such changes have a potentially negative impact on shareholder rights or responsible corporate governance.

31. Bundled Proposals - Proposals bundled together with unrelated items on the

agenda. The Board may vote against such bundled items if the proposals in aggregate undermine shareholder rights or otherwise violate the Board’s guidelines.

II. Business Related

1. Arbitrary Cap on Executive Compensation - Limit executives’ total compensation

to any arbitrary benchmark, such as 25 times the average employees’ salary, or 150 times the salary of the United States President. The Board has voted “no” consistently on such proposals. It is the Board’s view that any compensation cap based on arbitrary benchmarks does not take into consideration the company’s performance and would disadvantage the company’s ability to attract and retain key executives.

AGAINST

2. Disclosure of Executive Compensation - Disclose the name and title of all executives who are contractually earning more than $100,000 in annual compensation. The Board has voted “no” consistently. It is the Board’s view that such disclosure serves no useful purpose for the shareholders and would increase administrative expense of the company.

AGAINST

3. Mergers and Acquisitions - Shareholder proposals that required shareholders’ approval to consummate any merger, acquisition or sale of business units larger than an arbitrary dollar amount, such as 50 million or 2% of assets. The Board has consistently voted “no”. It is the Board’s view that it is management’s responsibility to manage and operate the company’s business including buying and selling business units, and that such shareholder approval would put the company at a competitive disadvantage.

AGAINST

4. Split Stock - Shareholders requesting splitting the stock to lower the price of stock

and broaden the stock’s appeal to small investors. The Board has voted “no”. It is

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the Board’s view that such determination should be made by the Board of Directors.

AGAINST

5. Economic Conversion - The company could establish an economic conversion

plan which would convert military/defense business into non-military business. The Board has consistently voted against such proposals. It is the Board’s view that company management has the responsibility to see to it that the conversion from military to non-military business would have the least impact on the shareholder’s interest.

AGAINST

6. Report on Impact of NAFTA - Shareholders requesting the company to prepare a

report on the impact of NAFTA on the company business. It is our Board’s view that a report is an unproductive use of company’s resource. Management has the responsibility of monitoring all trends, laws and regulations that may impact the company.

AGAINST

7. Executive Compensation Review - Shareholders requesting the company to

conduct a review of executive’s compensation, and how it may be linked to business, social and environmental goals. It is our Board’s view that such a review serves no useful purpose and would be a waste of company resource.

AGAINST

8. Stock Based Compensation Plan - The Board will follow the recommendations of

its proxy advisor in evaluating stock-based compensation plans. The proxy advisor analysis is quantitative and is focused on the cost of a plan as compared to the operating metrics of the business. The analysis compares the program with both absolute limits that are key to equity value creation and with the practices of a carefully chosen peer group for each company. In general, the proxy advisor model seeks to determine whether the proposed plan is either absolutely excessive or is more than one standard deviation away from the average plan for the peer group on a range of criteria, including dilution to shareholders and the projected annual cost relative to the company’s financial performance.

9. Option Backdating - The Board will withhold votes from compensation committee members who served on the compensation committee during a time a company backdated options.

10. Advisory Votes on Compensation - The Board will vote in favor of proposals calling

for annual non-binding votes on executive compensation. These proposals would allow shareholders to have real input on executive compensation practices. Furthermore, the Board will follow the recommendations of its proxy advisor in evaluating such non-binding advisory votes on executive compensation. The proxy advisor reviews each company’s compensation on a case-by-case basis, considering the context of industry, size, maturity, performance, financial condition, historic pay for performance practices, and any other relevant internal or external factors. The analysis has two main components: (i) a qualitative assessment of the

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structure of a company’s compensation program and the accompanying disclosure; and (ii) a quantitative assessment reflected in a proprietary pay-for-performance grade to address the relationship between relative executive compensation and relative performance among the company’s peers. In addition, qualitative factors such as an effective overall incentive structure, the relevance of selected performance metrics, significant forthcoming enhancements or reasonable long-term payout levels may result in support of a proposal even when there appears to be a quantitative disconnect between pay and performance.

11. Linking Executive Pay with Performance - The Board will support shareholder

proposals seeking or requiring that companies link executive pay to performance as long as they do not seek to set specified amounts or seek to cap executive pay. The Board will also generally support well-crafted resolutions seeking to expand a company’s recoupment policy (‘clawback’ provisions”). This can be a useful mechanism to recoup executive compensation or bonuses under certain circumstances such as fraud or mismanagement. So-called ‘clawback’ provisions serve to safeguard against unwarranted payments. Votes may be case Against management proposals related to a company’s compensation program if a company’s existing clawback provisions are not sufficiently robust.

FOR

12. Increase in Authorized Shares - The Board will vote in favor of proposals to increase authorized shares to effect a split as well as to reserve shares for specified future uses. Where a company has not provided a specific purpose for the increase, the Board would vote against an increase in authorized shares where the number of shares asked, if granted, would result in an increase in the ratio of unissued (reserved) shares to total authorized shares of more than three times.

13. Director Compensation Plans - The Board will follow the recommendations of its proxy advisor in evaluating director compensation plans as long as the plan does not allow stock options to be priced below 85% of fair market value on the grant date for non-employee directors, in which case the Board will vote against the plan. The analysis is based on a proprietary model comparing the cost of a plan compared to the plans of comparable companies with similar market capitalizations, as well as a case-by-case review by analysts.

14. Post-employment/Severance Agreements - The Board will follow the

recommendations of its proxy advisor in evaluating post-employment or severance plans (including so-called “Golden Parachutes.”) The proxy advisor uses a proprietary model to evaluate the value of such plans, as well as case-by-case review by analysts.

15. Employee Stock Purchase Plan - The plan must be open to all or virtually all

employees. The plan is administered through payroll deduction. The price at which the stock may be purchased must be at least 85% of fair market value. The plan provides a maximum amount of payroll deduction and maximum number of shares per employee per payroll accumulation period.

FOR

16. Stock Plan For Non-Employee Directors In Lieu Of Fees - The plan may grant nonqualified stock options or restricted stocks to outside directors in lieu of the

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cash fees due to these directors. The exercise price must be at least 85% of the fair market value at the date of grant. There must be a limit to the number of options issued to each director. In restricted stocks, the period within which the directors are not allowed to transfer the stocks must be at least three years from exercise date. All options must expire five years after the date of grant.

FOR

17. Shareholder Approval of Executive Compensation - Require shareholder approval to allow the company to grant base compensation to executives in excess of an arbitrary amount or to grant bonuses, options and other compensations in excess of an arbitrary percentage of base compensation. The Board believes that arbitrary caps on executive compensation which do not consider company’s performance would intrude on management’s prerogative and would disadvantage the company’s flexibility and ability to attract and retain key executives.

AGAINST

18. Change of Company’s Name - All proposals by management to change the

company’s name as a result of or subsequent to a merger or acquisition or disposal of a portion of the company’s business or in every instance where the proposed new name would more aptly describe the type, nature, composition, geographical location or substance of the company’s existing business.

FOR

19. Elimination of Pension Benefits for Outside Directors - All proposals by either

shareholders or management not to grant pension benefits to outside directors hired in the future and to stop accruing further benefits for existing outside directors. This policy will not cover the cases where in the same proposal, management proposes a new director compensation plan designed to compensate for the elimination of pension benefits.

FOR

20. Change of Control Triggering Unjustified Accrual of Benefits - Provision in incentive

plan that would automatically eliminate all restrictions on stock awards, allow immediate exercise of options or pay benefits when Change of Control is defined to include situations in which a person or a group acquires even less than 20% of the total number of shares outstanding that may be cast for the election of directors of the company. In most cases, incentive plan participants would not accrue benefits as a result of any acquisition of voting shares involving a percentage smaller than 20%, unless it is accompanied by management changes or an actual takeover of the company.

AGAINST

21. Outsiders Eligible for Benefits Under Employee Incentive Plans - Employee incentive plans that include as eligible participants those consultants and other persons not employed by the company or its subsidiaries.

AGAINST

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22. Restricted Stock Neither Tied To Performance Nor Limited - Employee incentive plans with awards of restricted stock not limited in number of shares, with no cost to the recipient, not tied to performance and given mainly to discourage resignations by restricting the sale or transfer of the stock during a time period. The cost to the company and to its shareholders of this type of awards can be controlled by clearly capping the number of restricted stock that can be granted to each individual or in the aggregate.

AGAINST

23. Housekeeping and Maintenance of Certificate of Incorporation - Deletion of

obsolete materials from the certificate and the necessary updating of the certificate for routine matters such as current addresses of service agents, and the like.

FOR

24. Elimination of Options and Stock Appreciation Rights - Shareholder proposing to

discontinue granting stock options and related rights, arguing that these are costly to administer and ineffective in retaining qualified people. However, the board believes that the company could be competitively disadvantaged without the ability to grant these incentives. Further, the board believes that options and SAR’s do contribute to shareholder value as long as the potential dilution they cause is not excessive.

AGAINST

25. Suspension of Pay Raises and Options Grants on Cut of Dividend - Shareholder

proposing to force a company that cuts dividend to suspend giving raises or options, arguing that executives and directors are responsible for lack of dividends and should also suffer certain consequences. The board disagrees that a cut in dividends is always a direct result of poor management performance. In a cyclical business like the car business, for instance, such a restriction could lead management to maintain a dividend or dividend level despite the fact that it would be detrimental to the financial health of the company.

AGAINST

26. Merger Increasing Shareholder Value - This will include all mergers in which the

acquiring company whose stock is in our portfolio has agreed to a merger price below the indicated value of the company being acquired or in which the acquired company whose stock is in our portfolio has agreed to a merger price above its indicated value. The indicated value of the company being acquired shall be determined based on the comparisons between the merging companies’ historical financial positions and results and based on the acquired company’s contributions to the merged companies’ financial position and results. The prospects for the merged companies’ earnings and stock price must also be considered. Both the staff and the investment advisor(s) must agree to the soundness of the mergers.

FOR

27. Merger Decreasing Shareholder Value - This will include all mergers in which the

acquiring company whose stock is in our portfolio has agreed to a merger price above the indicated value of the company being acquired or in which the acquired

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company whose stock is in our portfolio has agreed to a merger price below its indicated value. The indicated value of the company being acquired shall be determined based on the comparisons between the merging companies’ historical financial positions and results and based on the acquired company’s contributions to the merged companies’ financial position and results. The prospects for the merged companies’ earnings and stock price must also be considered. Both the staff and the investment advisor(s) must agree that the merger would negatively impact the portfolio.

AGAINST

28. Incentive Bonus Plans without Dollar Caps - Companies submit bonus plans to

shareholders for approval to secure exemption from the tax provision limiting the salary tax deduction to $1 million for each employee. Since the company is forced to seek shareholder approval, the tax provision provides a good opportunity for shareholders to vote against excessive compensation. In past cases, our board did not approve plans that determined the bonuses to individual employees by calculating the product of the net income or other earnings figure multiplied by a predetermined fixed percentage. Under this calculation and without a maximum limit, future bonuses could grow to huge sums as the earnings or the other variables used as bases grow. This could result in the payment of bonuses that are excessive and are not representative of the employee performances. Our board would automatically vote against any incentive bonus plan that does not provide for a maximum limit amount for each employee participant for each bonus year.

AGAINST

29. Authority to Repurchase or Reissue Shares - Proposals requesting the authority

to conduct share buybacks or reissue treasury shares. The Board will follow the recommendations of its proxy advisor in evaluating proposals to re-purchase outstanding shares or to re-issue treasury shares. The proxy advisor uses a proprietary model to evaluate the potential effect of repurchases or reissuances on share value and whether such operations are in the best interest of shareholders. Assessments of these proposals will also consider disclosure (or lack thereof) of any issue price discounts, and any potentially excessive dilution to shareholders.

30. Multi-class Share Structures – The Board believes that dual- or multi-class share structures are typically not in the best interests of common shareholders, and allowing one vote per share generally can protect common shareholders by ensuring that those who hold a minority of shares still have a voice on issues set forth by the board. With multi- or dual-class share structures, the voting power of one class of shareholders may be significantly different from that of the common shareholders, giving a small group of shareholders a significant amount of control over the affairs of the company. Furthermore, the economic stake of some shareholders could differ from the voting power, causing an uneven playing field. The Board will generally vote in favor of proposals to eliminate dual-class share structures. Similarly, we will generally vote against proposals to adopt a new class of common stock.

31. Authority to Transact Other Business – Proposals requesting shareholder approval

to conduct additional undefined business at the shareholder meeting, which has not yet been disclosed in proxy materials ahead of the meeting. A typical proposal

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might read: “In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any and all adjournments thereof.” By giving wide-ranging approval for unspecified activity, shareholders voting electronically (or less-commonly through the mail) would inherently grant full discretion to the individual serving as the in-person proxy at the meeting, without advance notice of the matters addressed. The Board does not approve of giving its proxy to management to vote on such other business items that may arise during an annual or special meeting. Since shareholders cannot know details beforehand (at the time of voting by proxy), this is viewed as giving unwarranted discretion.

III. Social Related

1. Withdrawal from Nuclear Facilities - Withdraw from the nuclear weapons business. The Board has voted “no” consistently. It is the Board’s view that the determination of the types of business ventures undertaken by the company is best left to the management of the company and its Board of Directors.

AGAINST

2. Military Contracts - Provide a report on military contract acceptance and execution

with proprietary information omitted. The Board has voted “no” consistently. It is the Board’s view that the report would add expense and not be pertinent since proprietary data would be excluded.

AGAINST

3. Animal Testing - Eliminate animal testing wherever possible. The Board has voted

“no” consistently. It is the Board’s view that it should be management’s decision to use animal testing if necessary to ensure safety of its products.

AGAINST

4. New Energy Policy - Expand energy conservation, reduce waste, utilize renewable

energy resources, and implement least-cost energy planning to minimize environmental damages. The Board has voted “no” consistently. It is the Board’s view that implementation of such a policy would be costly and would duplicate policies that have already been put into effect. There is also a concern that if the company cannot receive cooperation from regulatory agencies such as the state’s PUC, efforts to implement the shareholder’s policy could result in there being no policy at all.

AGAINST

5. CERES Principles - The CERES Principles is the previous Valdez Principles with

some modification. The proposal requests that the company endorse the Principles, make reports and pay fees on the report. The Board discussed the effect of the Principles over the past two years; at one point the Board began to abstain, but after reviewing specific companies’ environmental policies, it appeared that the Principles meddled too deeply in the companies’ business. It is the board’s view that CERES Principles do not address the environmental issues specific to a company’s business, and it would add to the company’s costs to implement it.

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AGAINST

6. MacBride Principles - The MacBride Principles address the issues of equal

employment opportunity and affirmative action in Northern Ireland. The Board has voted “no” consistently on such proposals.

AGAINST

7. Sales to ESCOM - Provide a report on the company’s business relationships to

ESCOM in South Africa, provided proprietary information is omitted. ESCOM is a principal source of electrical power supplying more than 50% of the electricity used on the African continent, and it serves the entire South Africa. The Board voted “no” consistently. It is the Board’s view that such a report would add cost to the company and unnecessarily meddle in the business affairs to the company.

AGAINST

8. Sales to SASOL - Provide a report on the company’s business relationship with

South Africa Coal, Oil and Gas Corporation (SASOL). The report would include 1) what is the current value of outstanding contracts awarded by SASOL, 2) what percentage of sales in South Africa comes from sales to SASOL, 3) what goods and services does the company provide to SASOL, 4) does the company sell goods and services to any government, 5) has South Africa government compelled the company to do business with it. The Board voted “no” in the last 2 years. It is the Board’s view that such a report would add cost to the company and unnecessarily meddle in the business affairs of the company.

AGAINST

9. Shareholder Proposals on Altering Company’s Business Directions Relating to

Tobacco, Alcohol and/or Firearms Businesses - Shareholders request the company to change the business direction and /or practices of the company. Examples of such proposals are as follows; 1) Conduct a report on consumer perceptions of cigarette advertisements to ensure company adherence to the Cigarette Advertising Code adopted in 1964, 2) Conduct a report on steps taken to discourage minors’ use of tobacco or alcohol, 3) Provide global health warning on cigarette sales worldwide, 4) Conduct a report on company’s promotion of lower priced cigarettes to African-Americans and lower-income persons, 5) Support the establishment of federal universal background checks for sales of guns and ammunition. The Board has consistently voted against these proposals. It is the Board’s view that such actions would increase costs to the company without providing pertinent information to shareholders.

AGAINST

10. Report on Maquiladora Operations - Requires the company to review and report

recommended changes on wages and benefits and environmental standards in Maquiladora operations in Mexico. The Board has consistently voted against any demands for more reports that would serve no purpose. It is the Board’s view that company’s management should make the decision as to wages and work conditions that would be fair, competitive and in compliance with local laws and regulations.

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AGAINST

11. Code of Conduct, EEO and Human Rights - Shareholder advocacy groups

recommending that the company review, change or expand and report their “code of conduct” or policies, guiding principles and objectives governing various sensitive areas including equal employment opportunity and worldwide labor and environmental protection laws, foreign investments and issues of human rights; or linking executive pay to social criteria. The proposals’ predominant concern appears to be the wider political, religious, social or moral implications while the specific economic effects of the proposal on the company itself are given little or no emphasis. In some cases, the shareholder advocacy groups recommend a more direct action than producing reports, e.g. termination of business in a foreign region that does not observe human rights or a recitation of specific company commitments to address the proposal’s concern. The Board has consistently voted against shareholder demands for more reports that would serve no purpose. The Board has also expressed disfavor of uneconomic demands that would also intrude deeply into the management’s prerogative. However, the Board has required to see in the company’s supporting arguments some indications that there is a code of conduct for the areas in question or that the company has taken or committed to take actions to conform with its code of conduct, and that the company is in full compliance with all the appropriate laws of the U.S. and the foreign countries in which the company operates. AGAINST

12. Other Reports Not Specifically Itemized in the Policy - Any proposal requesting

that a company prepare a report on any subject. The Board recognizes the fiduciary responsibility of voting proxies in a manner that maximizes long-term return for plan participants while encouraging companies to identify and mitigate financial, legal and reputational risks that could affect the company financially. Therefore, the Board believes that, in limited cases, such reports can provide relevant information about current or future risks to a company, whether environmental, labor or otherwise. However, the expense of researching and creating reports must be balanced against the potential risk to the company and by extension, shareholders, and whether the information is already provided to shareholders. Therefore, the Plan will generally support proposals that seek reports from companies regarding undisclosed potential risks to the company, such as from environmental or employment practices, but will oppose prescriptive proposals that seek the implementation of certain policies and actions, the cessation of certain activities or the adoption of certain principles and codes of conduct.

13. Divestment in Countries Implicated in Human Rights Abuse - The Board will follow the recommendations of its proxy advisor in evaluating proposals regarding a company’s divestment of operations and the cessation of conducting business in certain countries where human rights abuse have occurred in consideration of potential financial risks, whether direct or reputational, as well as regulatory mandates regarding limitations on investing in companies doing business in certain countries.

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IV. Global Issues Not Itemized Within the Guidelines Due to inevitable variations in market practice and regulations around the globe, it is impossible to forecast and itemize every unique situation which may appear on a proxy ballot. As noted elsewhere in these guidelines, the Board recognizes the fiduciary responsibility of voting proxies in a manner that maximizes long-term return for plan participants while encouraging companies to identify and mitigate financial, legal and reputational risks that could affect the company financially. Any proposals which do not fit neatly within another item of these guidelines will be approached on a case-by-case basis, taking into consideration the analysis and recommendation of the Board’s proxy advisor.

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Reference Resolution Number

Approval Date

Explanation

Part V, Section 5.1 03-60 2/26/2003 Adopted (A) general investment guidelines and objectives for the DWP Retirement Plan and (B) specific investment guidelines and objectives for the Plan's passive Russell 1000 investment manager.

Part VI, Sections 6.1, 6.2, 6.3

04-02 7/10/2003 Adopted general guidelines for the International Investments/Developed markets segment, and specific guidelines for the growth, core, and value investment manager styles.

Part V, Sections 5.1, 5.2, 5.3

04-32 9/17/2003 Adopted (A) specific guidelines for the Plan's domestic equity large cap growth and large cap value investment managers, and (B) amendment of investment guidelines and objectives for the Plan's passive Russell 1000 investment managers which were adopted in Reso 03-60 on 2/26/03.

Part V, Sections 5.1, 5.2, 5.3

04-57 12/17/2003 Amended the Plan's investment guidelines to provide specific guidelines for its active growth/value/core international equity segment of the portfolio.

Part V, Sections 5.4, 5.5

04-64 1/15/2004 Amended the Plan's investment guidelines to provide specific guidelines for its domestic small cap equity portfolio.

Part III, Section 3.3; Part IV, Section 4.2; Part VI, Section 6.2

04-82 2/18/2004 (A) Amended Fidelity Management Trust Company's benchmark from MSCI EAFE+Canada to MSCI EAFE, and (B) eliminated conflicting language in the investment guidelines re: fixed income (moved permissible securities from high yield to core fixed income section). Also attached copy of Board proxy policies as an exhibit.

Part III, Section 3.3; Part IV, Section 4.2; Part VI, Section 6.4

04-94 3/17/2004 1. Deleted reference to managers' proxy policies; 2. Clarified investment limits for diversification purposes in active large cap value domestic equity guidelines; 3. Provided guidelines for emerging markets equity managers; 4. Provided guidelines for active fixed income managers; 5. Expanded Table of Contents to include separate sections for above guidelines.

Part IV, Section 4.2 04-130 6/16/2004 Clarified language in the active high yield fixed income segment (notification in event of downgrade below single C).

Part VI, Section 6.2 05-13 7/21/2004 Accepted guidelines of Fidelity Management Trust commingled fund to supersede the Plan's approved guidelines for international equity mandate.

Part V, Section 5.4 Part VI, Sections 6.4, 6.5

05-28 05-29 05-30

9/15/2004 Changed language in active small cap value domestic equity segment (ETFs may be used to temporarily invest excess cash); accepting guidelines of T.Rowe Price's commingled fund to supersede the Plan's approved guidelines for emerging market mandate; accepting the guidelines of The Boston Company's commingled fund to supersede the Plan's approved guidelines for emerging market mandate.

Part IV, Section 4.2 05-42 10/20/2004 Amended the Plan's investment guidelines to add bank loans to the list of permissible investments in the active high yield fixed income manager guidelines.

Part IV, Section 4.2 05-57 12/15/2004 Amended the Plan's investment guidelines for the high yield fixed income mandate by changing certain language set forth in the guidelines.

Part IV, Section 4.2 05-89 6/22/2005 Amended the Plan's investment guidelines for the core and high yield fixed income mandates by changing certain language set forth in the guidelines.

Part IV, Section 4.2 Part VI, Section 6.3

06-18 10/19/2005 Amended the Plan's investment guidelines for fixed income mandates and for the international equity mandates by changing certain language set forth in the guidelines (recognition of Fitch bond ratings, clarified international benchmark MSCI EAFE + Canada Value net dividends index).

Part IV 06-25 12/7/2005 Amended the Plan’s investment guidelines to add section 4.0 - the investment manager performance monitoring procedures and criteria recommended by consultant.

Part IX, Section 9.2 Part X Part XI

07-61 07-62

4/4/2007 Updated the policy benchmark by incorporating benchmarks for real estate and alternative investments: for private equity, the new Cambridge Associates PE/VC blended index which includes an 85% allocation to the Cambridge Associates U.S. Private Equity Index and a 15% allocation to the Cambridge Associates U.S. Venture Capital Index benchmark; NCRIEF index for real estate asset class; T-Bills + 3% for hedge funds.

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Reference Resolution Number

Approval Date

Explanation

Part V, Section 5.1.5 08-05 8/1/2007 Updated the investment policy to incorporate the reconstitution of the Russell indices to include Benefit Driven Incorporations (BDIs) and to better define American Depository Receipts (ADRs) and exclude them from the investment policy.

08-49 1/16/2008 Ratified the Board’s action in connection with the adoption of a new asset

allocation structure.

Part V, Section 5.3 09-13 8/20/2008 Amended the investment policy to lower the R-squared value for Fred Alger management.

Part III, Section 3.4 09-16 8/20/2008 Modified the derivatives language.

Part VI, Section 6.2.4

09-58 1/21/2009 Amended the investment guidelines for Pyramis Global Advisors on max exposure limits.

Part VII, Section 7.1.1, Section 7.2.1

09-92 4/15/2009 Changed to the investment guidelines to permit holding in equity securities resulting from debt restructuring.

Part VI, Section 6.2.1, Section 6.3.1, Section 6.4.1, Section 6.5.1

09-93 4/15/2009 Revised investment policy guidelines to allow 144a securities for international equity managers.

Part V, Section 5.1.5, Section 5.2.5, Section 5.3.5, Section 5.4.5, Section 5.5.5

09-94 4/15/2009 Modified investment policy language for domestic managers with respect to international securities.

Part IV, Section 4.6 10-04 7/1/2009 Revised the investment policy to add a provision for the use of placement agents and third-party marketers.

Part V, Section 5.5.1 (exceptions)

10-52 1/13/2010 Amended the investment guidelines by raising the cash limit from five percent to eight percent for Frontier’s small cap growth mandate.

Part IX, Section 9.1 10-56 1/27/2010 Adopted Western Asset Management Company’s global inflation-linked securities (GILS) investment policy.

Part VI, Sections 6.2.1,6.3.1,6.4.1, 6.5.1

11-01 7/14/2010 Changed the investment policy to address future index reconstitutions for international developed markets equity mandates and emerging markets equity mandates.

Part II, Section 2.1 11-03 7/14/2010 Implemented the Retirement Plan’s evolving investment policy allocation schedule on October 1, 2010; implemented the newly adopted evolving investment policy allocation schedule for the Retiree Health Benefits Fund effective July 1, 2010; allocated the $100 million contribution from DWP according to the newly adopted evolving investment policy allocation schedule for the Retiree Health Benefits Fund; and reallocate $40 million pro-rata from the BlackRock passive account to the Plan’s three international developed managers.

Part X 11-09 8/18/2010 Incorporated revisions approved in the Real Estate Policy into the Plan’s Statement of Investment Objectives, Goals, and Guidelines.

Part XIII, Section 1 11-39 11/10/2010 Restricted the purchase of bonds issued by the City of Los Angeles, DWP, and its affiliates.

Part IV, Section 4.3 11-70 2/23/2011 GILS: Real Return Watch criteria added under "Schedule 1: Managers Watch Criteria."

Part VII 11-82 4/13/2011 Restricted T. Rowe from purchasing an issue in the portfolio if the manager holds 15% of the outstanding shares of that issuer company in all of its accounts.

Part II, Section 2.1 11-96 11-97

6/22/2011 Amended Plan's investment allocation targets and investment policy allocations.

Part II, Section 2.0.7 Part XV

12-07 7/27/2011 Approved Covered Calls Policy to be incorporated in the investment policy and attached to the RFP for the Covered Calls mandate.

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Reference Resolution Number

Approval Date

Explanation

Part XX 12-13 8/10/2011 Revised the Placement Agent Policy to better protect the Plan and reflect the market conditions that are representative of the Plan’s investment commitments.

Part VI & Part XVIII, Benchmark

12-26

12-27

9/28/2011 Adopted a restructuring plan for the International Equity asset class. Adopted Russell 3000 + 300 basis points as the benchmark the overall performance of the private equity portfolio.

Part XVII Part XVIII

12-62 2/22/2012 Moved the target date for the inclusion of Covered Calls in the investment policy from October 1, 2011 to April 1, 2012.

Part XXI, attachment C

12-64 3/14/2012 Approved Timber investment guidelines and incorporated it in the investment policy.

Part XXI, attachment B

12-69 3/28/2012 Approved Commodities investment guidelines and incorporated it in the investment policy.

Parts VI & VII 12-78

12-79

5/9/2012 Adopted passive developed international equity investment guidelines. Adopted active value international equity guidelines.

Part IV, Section 4.3, schedule 1

12-82 5/23/2012 Added watch criteria for active & passive covered calls and passive international equity mandates.

Part XVI 12-89 6/13/2012 Approved the use of interest rate futures and option on government securities in the Global Inflation Linked Securities (GILS) mandate.

Part VI, Section 6.3.4

13-06 7/11/2012 Granted MFS an increase in firm-wide ownership allowance of 15% per company from 10%.

Part IV, Section 4.5.4

13-07 7/11/2012 Revised the policy to provide active high yield fixed income managers higher threshold for watch criteria.

Part IV, Section 4.7 13-12 8/8/2012 Updated securities lending investment guidelines.

Part IX, Section 9.2 12-23 9/26/2012 Restructured the Real Return asset class to increase exposure in the Hedge Fund of Funds (HFoF) allocation. Revised guidelines to include managers that utilized Convergent and Divergent investment strategies.

Part VI, Sections 6.2, 6.3, 6.4 and 6.5

13-27 10/10/2012 Allowed Active International Equity managers the use of put and call options to hedge currency positions.

Part X, Part XI 13-54 1/23/2013 Allowed for the use of an in-kind manager to manage/liquidate in-kind distributions from the Plan’s private markets investment managers.

Part III 13-58 2/13/2013 Revised the IPS to include the investment manager’s responsibility to replicate, both in structure and holdings, the Plan’s portfolios in the Retirement Fund and Retiree Health Benefits Fund.

Part X 13-85 6/12/2013 Changed the target allocation range for Core real estate to 50-100%; widen the target allocation range for Value-Add real estate to 0-40; and widen the target allocation range for Opportunistic real estate to 0-20%.

Proxy Policy 14-05 8/14/2013 Amended the Proxy Policy to allow for automated proxy voting involving human rights issues, based on Glass Lewis’ recommendation.

Securities Lending Agreement

14-06 8/14/2013 Amended the Securities Lending Program agreement to incorporate equity non-cash collateral including indemnification provisions.

Part X, Section 10.3 14-18 10/9/2013 Added guidelines for Ongoing Real Estate Manager Evaluation for open-end commingled funds and REIT managers and incorporate them.

Part X, Section 10.4 14-20 10/9/2013 Adopted the Global REIT Investment Guidelines and incorporate them into in the Real Estate section.

Part VI, Section 6.2 14-21 10/9/2013 Revised the format of the international equity investment guidelines and established manager-specific guidelines for the active growth international equity portfolio managed by Pyramis.

Part IV, Section 4.5.4

14-22 10/9/2013 Enhanced the language on watch status monitoring process for the Public Market Managers regarding material organizational changes.

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Reference Resolution Number

Approval Date

Explanation

Part II, Section 2.2.7 Part IX, Section 9.2

14-43 14-44

14-45

11/27/2013 Changed the allocation in the Covered Calls Investment Guidelines between Active and Replication accounts. Increased the allocation of the Covered Calls portfolios to 50% from 20% for the Active mandate and decreased the allocation for the Replication mandate to 50% from 80%. Adopted the revised manager specific Investment Guidelines for both the Convergent and Divergent Hedge Fund of Funds mandates.

Part IV, Section 4.5.4

14-60 1/22/2014 Added watch status criteria for Active Commodities.

Part IX, Section 9.2 14-63 2/12/2014 Adopted language to allow the Plan’s Convergent HFoF manager additional three months to provide a full redemption of the Plan’s investment, if not possible within 12 months.

Part XI, Section 11.3 Part IX, Section 9.2

14-70

14-73

3/26/2014 Changed the Private Equity guidelines to broaden the types of private equity investments the retirement Board can consider and reduce fees. Revised the guidelines for the Divergent HFoF mandate to reduce the lower the volatility range from 6%-9% to 4%-7% and clarified the language associated with the correlation requirement.

Part IV, Section 4.2 Part VII

15-41 12/10/2014 Revised the Fixed Income guidelines to reflect the structural changes made to the mandate.

Part IV, Section 4.2 Part VII

16-16 8/26/2015 Revised the Fixed Income guidelines to change the U.S. Bank Loans benchmark to the Credit Suisse Leveraged Loan Index from the Barclays U.S. Bank Loans Index. Revised the Fixed Income guidelines to allow for Principal Protection managers the ability to include 144a securities in their portfolios. Additionally, limit combined exposure to ABS and CMBS for these managers to 10%. Revised the Extended Global Credit Fixed Income guidelines to limit below investment grade holdings limit to 60% from 80%, to clarify allowable derivatives and limits, and to allow managers the ability to hold ETFs and Commingled Funds with specified limitations. Established portfolio guidelines for Bank Loan manager.

Part X, Section 10.4 16-32 10/28/2015 Revised the Global Real Estate Investment Trust guidelines to (1) limit the maximum size of a single security to the greater of 5% of the portfolio or 125% of the benchmark weight, expect in no case more than 10% of the portfolio; and (2) allow turnover up to 150%.

Part IX, Section 9.2 16-41 12/9/2015 Revised the GAM and Morgan Stanley guidelines to clarify that an underlying hedge fund investments cannot rely solely on commodities to take risk, but rather that commodity investments may be part of a more diversified strategy.

All Sections 17-12 17-13

9/14/2016 Comprehensive review of the SOIOGG with the objectives of simplification and redundancy reduction, clarification, and to ensure up-to-date industry best practices are being followed. Material changes include updates to the Long-Term Target Asset Allocation, updates to the watch list policy, and the addition of a separate hedge fund section. Section references prior to these changes may not be accurate.

Part IX, Section 9.2 18-17 9/13/2017 Revised the Active Extended Global Credit guidelines to (1) incorporate derivatives language that elaborates on the use of derivatives in certain situations and sets limits based on certain scenarios; and (2) removes the six month term limit for investing in the managers’ commingled fund to allow for strategic investment.

Part XI, Section 11.1 18-18 9/13/2017 Revised the Custom Fund of Hedge Funds guidelines to (1) modify the liquidity constraints for the underlying hedge fund managers; (2) clarify the use of leverage at the partnership level; and (3) slightly increase the aggregate total gross exposure and eliminate the weighted average borrowing restriction.

Part II, Section 2.1 18-40 11/8/2017 Revised the interim asset allocation targets given the current funding level of the Plan’s alternative investments.

Appendix B 18-63 1/24/2018 Revised the proxy voting policy to reflect the most reasonable approach to current proxy voting topics in 2018.

Part II, Section 2.1 Part III, Section 3.5 Part VII Part VIII, Section 8.4 Part IX, Section 9.1

19-09 7/25/2018 Revised the long term asset allocation targets to reflect the approved new target allocations for the global equity asset class. Added guidelines for the two new Board approved equity investment mandates: global equity and international small cap equity.

WATER AND POWER EMPLOYEES’ RETIREMENT PLAN STATEMENT OF INVESTMENT OBJECTIVES, GOALS, AND GUIDELINES

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Part II, Section 2.1 Part III, Section 3.1 Part III, Section 3.5

19-30 9/26/2018 Added/removed language to comply with the recommendations presented by the Ad Hoc Committee for the Investment-focused Management Audit recommendations.

Appendix B 19-45 12/12/2018 Revised the proxy voting policy to address issues noted during the annual review and to clarify new proxy voting topics for 2019.

Part II, Section 2.1 Part XII, Section 12.2 Part XIV Part XIV, Section 14.2 Part XIV, Section 14.3 Appendix B

20-30 20-31 20-32 20-33

12/18/2019 Revised the Interim Asset Allocation Targets. Revised the Custom Fund of Hedge Funds guidelines to (1) remove language limiting the aggregate total gross leverage of the portfolio and (2) clarify that risk management is currently constrained by guidelines already in place. Revised the Private Equity Investment Policy to (1) reflect the evolved opportunity set of investment vehicles available in the private equity market; (2) include Staff in the due diligence process; (3) add language to include operational due diligence; and (4) update language that references the Pan’s prior consultant, PCA. Revised the proxy voting policy to address issues noted during the annual review and to clarify new proxy voting topics for 2020.

Appendix B 20-52 5/20/2020 Revised the proxy voting policy to address issues noted on March 25, 2020 by the Plan’s proxy service provider in response to the COVID-19 pandemic.

All references in the above table refer to the version of the Investment Policy Statements in effect as of the stated approval date.