Los Angeles Department of Water and Power MSCI World ex-US IMI Review
14 November 2018
For Use With Institutional Investors Only — Proprietary And Confidential Presenter Biographies
Jeremy Watt, Director, is a member of the US and Canada Institutional team within BlackRock's Institutional Client Business. He is responsible for developing and maintaining relationships with institutional investors, including public and private pension plans, foundations and endowments. Mr. Watt's service with the firm dates back to 1996, including his years with Barclays Global Investors (BGI), which merged with BlackRock in 2009. At BGI, he was a senior client relationship officer for the US Institutional Client Service Group. Mr. Watt began his career at BGI as a senior data analyst before serving as a project manager for BGI's Global Market Data Group. Prior to joining BGI, Mr. Watt was a fund accountant and a securities operations analyst at Invesco. Mr. Watt earned a BA degree in business studies from Charles Sturt University.
Christian De Leon, Vice President, is an Index Equity strategist within BlackRock's ETF and Index Investments group.
Mr. De Leon's service with the firm dates back to 2010. Before transitioning to the ETF and Index Investments group, he was a product manager in the US & Canada Defined Contribution group. In this role, Mr. De Leon ensured that institutional defined contribution clients had the resources and information they needed for optimal plan design and implementation. In addition, he focused on institutional and regulatory operations. Mr. De Leon began his career as a manager of Equity Portfolio Accounting at State Street.
Mr. De Leon earned a BS degree in managerial economics from University of California, Davis, and an M.S. in Financial Analysis and Investment Management from Saint Mary's College.
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 1 Table of contents
1. BlackRock Update 2. Index Investment Process and Discipline 3. Market Overview 4. Performance Review 5. Portfolio Review and Characteristics 6. Fee Schedule Appendix
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 2 1. BlackRock Update BlackRock at a glance
BlackRock Mission Statement
Create a better financial future for our clients by building the most respected investment and risk manager in the world
BlackRock facts $6.44 trillion managed across asset classes • Established in 1988 Passive • NYSE: BLK Fixed Income 1.0 tn • $6.44 trillion assets under management Active Fixed Income Multi-Asset • More than 13,500 employees 819 bn 492 bn
• More than 2,000 investment professionals Cash Alternatives1 Management • Offices in over 34 countries 139 bn 443 bn • 25 primary investment centers globally Advisory 1.7 bn • Clients in over 100 countries Active Equity 301 bn • Over 850 iShares® ETFs Globally
• Through BlackRock Solutions, the Firm provides risk management and enterprise investment services for over 200 Passive clients Equity 3.1 tn • Financial Markets Advisory business managed or advised on over $8 trillion in asset and derivative portfolios
• Transition Management team partners w ith clients to save costs Assets as of 30 September 2018 1 and reduce risks w hen changing investment exposures Includes commodity and currency mandates
As of 30 September 2018. All figures are represented in USD.
ICB0717U-224519-684043 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 4 Firm culture and structure reinforce our client-centric approach
Independent asset manager focused only on clients History of innovation and evolution • Established in 1988 and public since 1999 (NYSE: BLK) to better serve investors • Independent Board of Directors 1970s • Pioneered index and quantitative investing • No proprietary trading • Created the First Term Trust (closed-end fund) • Group dedicated to corporate governance 1980s • Initiated fixed income and international indexing Deep understanding of regulatory requirements • Created the industry’s first target date fund • Manage portfolios for clients subject to varied and complex 1990s • Introduced exchange-traded funds under World Equity regulatory regimes Benchmark Shares (WEBS) brand (now iShares® ETFs) • Operate on behalf of investors under more than 80 regulatory authorities worldwide • Launched BlackRock Solutions® for risk management and advisory services • Significant experience managing portfolios for official 2000s • Enhanced capabilities by strengthening equities, and adding institutions and governments alternatives, real estate, passive, and scientific investments BlackRock Solutions® foundation for managing risk • Launched Financial Markets Advisory business
• Deliberate, diversified and scaled risk enables us to invest • Engaged by US and European governments for critical risk with conviction in pursuit of alpha assessments and banking sector stabilization strategies • Internally developed risk tools and analysis offered directly • Launched BlackRock Investment Institute to clients as a service 2010s • Introduced Global Capital Markets desk • Reinforces transparency and our responsibility to clients • Launched first target maturity fixed income ETF • Created an index to track sovereign credit risk (BlackRock Sovereign Risk Index)
Timeline includes history from predecessor entities
ICB0717U-224433-675228 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 5 BlackRock corporate governance
BlackRock is a public company • Established in 1988 and public since 1999 (NYSE: BLK) Independent ownership structure • Board composed of 18 Directors: 14 independents, 3 BlackRock, and 1 PNC
Board Members Global Executive Committee (GEC) Laurence Fink Chairman & Chief Executive Officer Mathis Cabiallavetta* Sir Deryck Maughan* Robert Kapito President Philipp Hildebrand Vice Chairman Pamela Daley* Robert Kapito Barbara Novick Vice Chairman Bill Demchak Cheryl Mills* David Blumer Head of BlackRock Alternative Investors Jessica Einhorn * Gordon Nixon* Geraldine Buckingham Head of Corporate Strategy Head of Institutional Client Business Laurence Fink Charles Robbins* Edwin Conway Frank Cooper III Chief Marketing Officer William Ford* Ivan Seidenberg* Robert Fairbairn Head of Strategic Partner Program Fabrizio Freda * Marco Antonio Slim Domit* Rob Goldstein Chief Operating Officer & Head of BRS Chief Risk Officer Murry Gerber* Susan Wagner Ben Golub Richard Kushel Head of Multi-Asset Strategies & Fixed Income Margaret Johnson* Mark Wilson* Rachel Lord Head of Europe, Middle East & Africa Mark McCombe Head of the Americas Chris Meade Chief Legal Officer Richard Prager Head of Trading, Liquidity and Investments Platform Gary Shedlin Chief Financial Officer Jeff Smith Head of Human Resources Derek Stein Head of Business Operations & Technology Head of Asia Pacific * Independent Ryan Stork Mark Wiedman Head of iShares & Index Investments Mark Wiseman Head of Active Equities & Chairman, BAI
As of 30 September 2018
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 6 The LADWP Account Coverage Team
Name Title Phone Email
Jeremy Watt Director (415) 670-7208 jeremy.watt@blackrock.com
Rick Castro Associate (213) 613-3828 [email protected]
400 Howard Street San Francisco Office address San Francisco, CA 94105
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 7 2. Index Investment Process and Discipline BlackRock’s Index Equity Platform
Global leader in Index Equity assets1 • We seek to deliver consistent performance with efficient outcomes for our clients • Thousands of skillful and thoughtful decisions made each year for swift response to market trends and client demands Extensive and flexible platform for index strategies • Over 2,000 funds managed against 850+ benchmarks • Daily liquidity with T-1 notification (for US equities) and T-2 notification (for non US equities)2 • Modular fund structure and asset allocation platform facilitates custom and outcome oriented solutions
Total index managed assets of $3.5 trillion USD Distribution of assets by vehicle type in 2018 YTD
$3.5T In billions USD $3.4T ETF 40.66%
$2.7T 1,364 1,450 $2.4T $2.4T $2.2T 977 808 841 721 Separate Account 33.80% 2,044 2,094 1,566 1,529 1,680 1,445 CTF 23.17% Other 2013 2014 2015 2016 2017 2018 YTD 2.37% Non-ETF Global iShares Source: BlackRock, Inc. and its affiliates (together “BlackRock”) as of 30 September 2018 1 In terms of AUM. Source: Pensions & Investments 2 Frontier markets commingled fund and currency hedged funds are currently open bi -monthly and monthly, respectively
BETA0817U-241751-726371 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 9 BlackRock: Partnering with you to help meet your indexing needs
A comprehensive set of strategies and We are a fiduciary – we act in your best services – from portfolio construction and interests risk analytics to access to industry leaders Committed to offering seamless & efficient Cost effective and transparent pricing client service Value Client Focus We partner with investors of all sizes to help build better, more cost efficient index portfolios
We aim to deliver market exposure that is We seek to achieve precise and transparent, investable, and rules-based consistent exposures We are at the forefront of index Long track record in securities lending to innovation, allowing investors to execute help enhance returns market views and access targeted corners Proprietary risk management platform – Innovation of the globe Performance we believe rigorous risk analysis is critical to We use technology to continuously re- the delivery of superior indexing define indexing
Trusted to manage over $3.5 trillion1 in Client needs are different – index index assets globally customization allows us to address your Pooled, segregated and exchange traded indexing requirements in the wrapper you vehicles prefer Supported by Aladdin® technology
Expertise Customization
1 Source: BlackRock, as of 30 September 2018
BETA0817U-241751-726371 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 10 47 years of experience driving index forward
We constantly reinvest in and reinvent our business so our clients have access to high quality index solutions Drive the industry forward through our ability to create specialized, innovative investments afforded by our scale and depth of expertise Forge new ground for clients — first manager to offer opportunities in equity index developed, emerging, and frontier markets Evolve capabilities to continuously deliver on emerging trends — smart beta, global benchmarking, overlay strategies Serve as an index advocate on behalf of clients and as a key partner to index providers seeking our practitioner knowledge
47 years of Index Equity — Continual evolution of products, technology and capabilities
BlackRock Index Equity AUM
World Equity Triple A: iShares Eliminated EAFE Frontier Minimum Project Vision Index pioneer Def ined Emerging Benchmark asset allocation Exchange- div idend Index Plus Markets Volatility ETFs and innov ator contribution Market Shares (WEBS) PM tool Traded Funds f lipping capabilities Equity Index Journey ESG f und Fundamentally Management Risk model weighted series enhancements strategies
1971 2018
Fund of f und structures Factor ETFs EM Directed FX Currency Aladdin EAFE Equity Income Hedged Russell Index Inv estment Migration Index strategy Daily openings Equity and Funds Analy sis: EAFE iShares f or all f unds T-2 f or currency First 401(k) index portf olio ETFs Small ETFs Securities International hedging Target Date management Cap Lending Emerging Fund (Lif ePath) tool Markets Small Cap
BETA0817U-241751-726371 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 11 Index strategies continue to be a growing portion of client portfolios
Investors today are enhancing their passive allocations in three strategies:
Enhanced index strategy Index Factor-based strategy designed to actively seek alpha, Factors Plus designed to provide Return by tactically employing event incremental returns over driven trading that focus on IPOs, Enhancement capitalization weighted Strategies index changes, and other corporate events that might indices through broad, cause price dislocation persistent sources of return
Securities Return enhancement Lending strategy designed to capture scarcity premium by lending securities
Factor-based strategy Minimum Currency designed to reflect the Risk reduction strategy Risk Volatility characteristics of a Hedged designed to minimize or Reduction minimum variance strategy eliminate foreign exchange Strategies focused on returns as well € $ risk as the lowest absolute risk
Market cap weighted Environmental, Market cap weighted Commodities Social, and Alternative strategy designed to give strategy designed to Governance Index exposure to commodities incorporate ESG factors Strategies through the use of while minimizing tracking commodity futures error to traditional indices
BETA1117U-298687-892792 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 12 Americas – Investments Pillar
ETF and Index Investments Business
Investments Pillar Leadership
Manish Mehta Global Head of Investments, Products, and Markets
Americas Portfolio Management Global Research Global Strategy
Alan Mason Ananth Madhavan Jessica Irschick Head of Americas Portfolio Global Head of ETF and Global Head of Index Management Index Inv estment Research Product Strategy
Portfolio Management Research Strategy
Developed U.S. & Canada Index Asset Investment Emerging Index Plus Index Research Global Strategy Markets ETF Allocation Research
Rachel Aguirre Jennifer Hsui, CFA Amy W hitelaw Greg Savage, CFA Creighton Jue, CFA Stephanie Allen Head of Developed Head of Emerging Head of U.S. & Canada Head of Index Global Head of Index Plus Global Head of + 30 Research Officers Americas Markets Portfolio Markets Portfolio ETF Portfolio Asset Allocation Portfolio Management Index Research Management Management Management Scott Dohemann, CFA Head of U.S. Product Strategy U.S. Inst’l International Defined Benefit & Timothy Murray, CFA Emerging Inst’l U.S. ETF Defined Contribution Index Plus Index Research Emily Foote, CFA + 5 Portfolio + 6 Portfolio + 6 Portfolio + 6 Portfolio + 5 Portfolio + 9 Index Christian De Leon Managers Managers Managers Managers Managers Researchers Valerie Wong Jacqueline Ramkumar International International Kevin Kim Canada ETF FX / Synthetics Developed Inst’l Emerging ETF Niyati Mohan Grace Lancaster + 8 Portfolio + 45Portfolio + 4 Portfolio + 4 Portfolio Managers Managers Managers Managers EMEA
International Andrew Graver* Developed ETF Head of EMEA Index Strategy + 5 Portfolio Rita Gemelou* Managers Norbert van Veldhuizen* Caroline Hertrich* Dovile Silenskyte* Enrico Zamagna* Emilie Karlsson*
APAC
Jonathan Howie* Head of APAC As of 30 September 2018 Index Strategy Marina Hinterhaeuser* * Located outside of the US Priya Anoop* Wirawan Tiojaya*
BETA0817U-241751-726371 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 13 Core investment philosophy of total performance management
We believe that superior investment outcomes are best achieved through a disciplined, objective process to manage return, risk and cost
Return Seek to deliver consistent and Return reliable performance Flexible strategies and solutions
Risk Proprietary portfolio & risk management system helps manage investment and Total operational risk Performance Management Cost Trading cost integrated into portfolio construction using Risk Cost proprietary transaction cost models Potential for reduced transaction costs through netting of client flows Focus on best execution for all external trading, including FX
BETA0817U-241751-726371 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 14 Our index investment management process is anything but passive
Deep expertise and investment skill underpin consistent historical performance • BlackRock’s index portfolios are managed using a team approach to strategy, portfolio management, research, and trading
The ability to capture gains on hundreds of investment decisions adds up over time • Portfolio managers’ decision-making process involves deciding on corporate actions such as dividends, stock splits, spinoffs, rights offerings, and mergers & acquisitions
Detail-intensive investment decisions in pursuit of performance with precision and reliability
Benchmark Knowledge Portfolio Construction Efficient Trading Performance & Oversight
Analysis of forthcoming index Teams of portfolio managers Industry’s largest internal market Daily review by portfolio managers changes dedicated by region place for potential netting of client Monthly Investment Review flow s Audit daily updates from index Supported by leading technology Committee providers and risk models Best execution sought on all Independent Risk & Quantitative Develop trade strategies to trades Analysis Group Rapid dividend reinvestment and thoughtfully incorporate index cash equitization Economies of scale events Dedicated trading research team
Risk Management Leverage RQA and BlackRock’s proprietary Aladdin® system to help identify, monitor and minimize risk
BETA0817U-241751-726371 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 15 Factors PMs use to preserve value
Our portfolio managers use skill and ingenuity in pursuit of creating efficient outcomes, and have delivered benchmark returns as planned each year
Index Equity PMs are experts in the capital markets they transact — actively driving hundreds of decisions each year
Local market Macro economic PMs evaluate aggregate views, activities, and sentiments of convention events other investors, including:
Net flows of BLK and other indexers Expected Capital Markets Expected activity of profit-motivated investors External activity of Local market conventions and behaviors Perspective Market other Macro economic events (Fed announcement, jobs report) sentiment investors Company earnings releases Index Market sentiment that could affect rebalancing Equity Portfolio Managers PMs have detailed understanding of benchmark changes in Corporate context of each Fund: actions Liquidity Profile Fund-Specific Ensure funds are fully invested in light of client flows or dividend Factors payments Construct each trade to explicitly trade off risk and cost
Carefully evaluate corporate actions to help minimize risk and Benchmark Benchmark Risk model and preserve value methodology optimization Develop creative trading strategies for less liquid positions Partner with index providers regarding benchmark changes
BETA0817U-241751-726371 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 16 Major sources of tracking error:
Global & domestic index funds EnhancesReturn Tax Reclaim Process Maximize Impact
Securities Lending Return
Treatment of Corporate Actions Enhances Optimization
Treatment of Index Changes
Transaction Costs Minimize Reduces Return Cash Drag Impact ReducesReturn
Illiquidity
BETA0817U-241751-726371 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 17 2018 FTSE & MSCI market classification summary
FTSE and MSCI announced a number of country reclassifications to their Developed and Emerging markets universes in 2018
Poland was promoted to Developed Market status in Saudi Arabia was officially added to the 2018 Annual September 2017’s Country Classification, primarily driven Market Classification Review in 2017. The country will be by Poland’s equity market between 2004 – 2017. There will implemented in a two-step inclusion process, be a single tranche inclusion occurring in September commencing in May 2019 through to August 2019 and is Poland 2018. Saudi projected to make up 2.6% of the MSCI Emerging Arabia Markets.
Saudi Arabia has been on the Watch List since 2015 and Argentina will be included in the MSCI Emerging Markets made a number of improvements to the market Index coinciding with the May 2019 Semi-Annual Index infrastructure during 2017. The country will be implemented Review, and make up 0.6% of the index. MSCI will in several tranches due to their projected size of 2.7% in continue to restrict the inclusion in the index to only foreign , such as ADRs, due to Saudi the FTSE Emerging Index beginning March 2019. Argentina listings of Argentinian companies Arabia liquidity conditions.
Kuwait will be implemented as a Secondary Emerging Market status within the FTSE Global Equity Index Series in two 50% tranches. The first tranche will be implemented in September 2018 and the second in December 2018. Kuwait
Source: MSCI and FTSE as of 9/30/18
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 18 August 2018 MSCI Quarterly Index Rebalance results
August’s MSCI Quarterly Rebalance resulted in slight outperformance on effective date
• 99% of trades were executed on trade date
BlackRock traded 474 MSCI funds and executed 23.1k orders worth nearly $7 billion
Rebalance highlights MSCI index change details
The street projected a two-way turnover of 0.50% for DM August 2017 August 2018 for DM and 1.30% for EM. Index # Adds # Deletes The overall DM trade went wrong way with the buys Turnov er Turnov er underperforming the sells by -0.5% on effective date, 1 1 0.20% 0.16% while in EM the buy basket outperformed the sell basket EAFE by 0.85%. EAFE SC 1 2 0.64% 0.35% MSCI completed the second tranche of the China A shares inclusion at this quarterly rebalance resulting in Emerging 17 3 0.22% 0.73% higher than usual turnover in EM. Standard China A moved circa 20 bps worse day over day, and all Emerging SC 3 10 0.46% 1.45% names moved < 2% vs last price pre-auction at the close on effective date. Turnover was a tepid $36.3bn with the World 1 1 0.27% 0.31% A-share inclusion trade closing near the day low - the exact opposite of May. Frontier 100 0 0 0.30% 0.00%
Source: BlackRock and MSCI as of August 2018. Past performance is not indicative of future results.
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 19 BlackRock’s scale and internal network for netting client flows facilitates the potential to significantly lower transaction costs
BlackRock transaction costs vs. ex-ante estimates1
Average client cost in 2017, as of Dec 31, 2017
25 20 20 15 15 14 13 12 9 10 7 7 6 5 5 3
Transaction costs (bp) costs Transaction 2 2 2 1 1 0 Buy Sell Buy Sell Buy Sell Buy Sell S&P 500 MSCI EAFE MSCI ACWI ex-US IMI MSCI EM
Actual Client T-Cost T-Cost Estimate Pre Netting of Flows
The scale of BlackRock’s CTFs and global trading footprint resulted in reduced T costs: • On average, we have netted internally approximately 40 – 50% of client flows • Market trades reflect the industry’s most competitive commission rates
Source: BlackRock. BlackRock Flagship Index Funds shown. 1 Estimated transaction costs includes commissions and taxes based on BlackRock’s current standard negotiated rates Netting of client flows is not guaranteed, and may depend on several other factors, including but not limited to, client flows and external trading markets. Historical transaction costs are not indicative of future results.
BETA0517U-166515-461707 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 20 3. Market Overview Market review for 2018
Developed market equities, as represented by the MSCI World Index, increased 5.09% (in U.S. dollar terms) in the third quarter of 2018. Risk sentiment was elevated as steady corporate earnings and economic growth supported DM generally in the face of rising U.S. protectionism. In Japan, equities rallied +3.7% in the quarter as a -2.5% depreciation in the yen helped export names. The September release of the country’s Q2 GDP number indicated growth had reached an annualized 3%, which was the fastest growth rate since Q1 2016. Inflation data also exceed expectations. Switzerland also provided a boost to the index, as the country rallied +6.2%. The impressive price action was the result of strength in Swiss biotech names. Elsewhere, the United Kingdom detracted from performance with the country down -1.7%. Continued Brexit uncertainty weighed on the market, influencing a -1.5% decline in sterling. Italy also weighed on the overall MSCI EAFE complex, as a rift between the populist government and the E.U. regarding the country’s budget plans was a source of investor concern. In the U.S., large cap equities reached all-time highs in the third quarter as impressive economic growth and earnings results fueled risk-on appetite and outweighed the specter of trade wars. Despite the announcement of tariffs on $505bn of Chinese goods and China’s retaliatory measures, U.S. equity volatility was limited. The average level of the CBOE Volatility Index (VIX) in the third quarter was 12.9, lower than both the first and second quarters. Macroeconomic releases continued to showcase strength in both labor and economic conditions. Job gains were impressive and th e unemployment rate eventually fell to 3.7% in September, the lowest level since 1969. Survey indicators also signaled improvement as the U.S. consumer confidence increased to the highest level since 2000 and the Institute for Supply Management (ISM) manufacturing and non- manufacturing indexes reached multi-year highs. The strength of the economy allowed the U.S. Federal Reserve to raise the target range of the benchmark federal funds rate to 2%to 2¼%. Additionally, the FOMC removed its description of monetary policy as “accommodative.” The increase in benchmark rates and positive interpretation of growth, coupled with high levels of U.S. government debt issuance, pushed the yield on the 10yr U.S. Treasury up 20 bps from the start of the quarter to 3.06% at the quarter’s end.
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 22 4. Performance Review LADWP performance overview
Our investment objective for the Los Angeles Department of Water and Power Fund is to replicate the risk and return of the MSCI World ex-US IMI Index
Water and Power Retirement Plan: $590,613,209
Retirement Health Benefits Fund: $99,407,455
Fund (gross) Fund (net) Index Difference
3 month 1.04% 1.04% 0.98% 0.06%
Year-to-date -1.22% -1.24% -1.62% 0.38%
1 year 3.24% 3.21% 2.78% 0.43%
3 year 10.21% 10.18% 9.72% 0.46%
Since inception annualized 7.33% 7.30% 6.91% 0.39%
Source: BlackRock As of 30 September 2018 Benchmark is the MSCI World ex-U.S. IMI Index Inception date: 25 September 2012
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 24 LADWP performance overview
Our investment objective for the Los Angeles Department of Water and Power Fund is to replicate the risk and return of the MSCI World ex-US IMI Index
Water and Power Retirement Plan: $590,613,209
Retirement Health Benefits Fund: $99,407,455
Fund (gross) Fund (net) Index Difference
2012 3.53% 3.52% 3.49% 0.03%
2013 22.00% 21.97% 21.57% 0.40%
2014 -4.13% -4.16% -4.45% 0.29%
2015 -1.62% -1.65% -1.95% 0.30%
2016 3.45% 3.42% 2.95% 0.47%
2017 25.71% 25.68% 25.17% 0.51%
2018 YTD -1.22% -1.24% -1.62% 0.38%
Since inception annualized 7.33% 7.30% 6.91% 0.39%
Source: BlackRock As of 30 September 2018 Benchmark is the MSCI World ex-U.S. IMI Index Inception date: 25 September 2012
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 25 LADWP performance overview
12%
8%
4%
0%
-4% 3 month Year-to-date 1 year 3 year Since inception annualized
Fund (gross) Fund (net)
Fund (gross) Fund (net) Index Difference
3 month 1.04% 1.04% 0.98% 0.06%
Year-to-date -1.22% -1.24% -1.62% 0.38%
1 year 3.24% 3.21% 2.78% 0.43%
3 year 10.21% 10.18% 9.72% 0.46%
Since inception annualized 7.33% 7.30% 6.91% 0.39%
Source: BlackRock As of 30 September 2018 Benchmark is the MSCI World ex-U.S. IMI Index Inception date: 25 September 2012
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 26 LADWP performance overview
30% 25% 20% 15% 10% 5% 0% -5% -10% 2012 2013 2014 2015 2016 2017 2018 YTD Since inception annualized
Fund (gross) Fund (net) Benchmark
Fund (gross) Fund (net) Index Difference 2012 3.53% 3.52% 3.49% 0.03% 2013 22.00% 21.97% 21.57% 0.40% 2014 -4.13% -4.16% -4.45% 0.29% 2015 -1.62% -1.65% -1.95% 0.30% 2016 3.45% 3.42% 2.95% 0.47% 2017 25.71% 25.68% 25.17% 0.51% 2018 YTD -1.22% -1.24% -1.62% 0.38% Since inception annualized 7.33% 7.30% 6.91% 0.39%
Source: BlackRock As of 30 September 2018 Benchmark is the MSCI World ex-U.S. IMI Index Inception date: 25 September 2012
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 27 LADWP portfolio attribution — Sectors
Our investment objective for the Los Angeles Department of Water and Power Fund is to replicate the risk and return of the MSCI World ex-US IMI Index
As this is a passive portfolio, portfolio attribution of sectors is not applicable
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 28 LADWP portfolio attribution — Top contributors/detractors
Our investment objective for the Los Angeles Department of Water and Power Fund is to replicate the risk and return of the MSCI World ex-US IMI Index
As this is a passive portfolio, contributors/detractors are at index levels. There are no active over/underweights for attribution.
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 29 LADWP portfolio attribution — Stock selection
Our investment objective for the Los Angeles Department of Water and Power Fund is to replicate the risk and return of the MSCI World ex-US IMI Index.
As this is a passive portfolio, stock selection is not performed. Individual securities are weighted at index levels, therefore attribution is not applicable.
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 30 5. Portfolio Review and Characteristics BlackRock MSCI World ex-U.S. IMI Index Fund As of 30 September 2018 Characteristics
Fund information Country allocation (%) MSCI World ex USA IMI Net Benchmark Dividend Return Index Total fund value $0.69B United France Kingdom 9.25 Number of issues in fund 3,570 Japan 16.10 23.32 Number of issues in benchmark 3,566 Canada 8.84
Top 10 holdings Germany Country Weight (%) 8.00 Nestle Sa Sw itzerland 1.38
Novartis Ag Sw itzerland 0.99
HSBC Holdings Plc United Kingdom 0.94
Roche Holding Par Ag Sw itzerland 0.90 Sw itzerland 6.89 Finland 1.04 Australia 6.19 Norw ay 0.88 Royal Dutch Shell Plc Class A United Kingdom 0.85 Hong Kong 3.00 Israel 0.70 Total Sa France 0.84 Netherlands 2.97 Ireland 0.49 Sw eden 2.87 Austria 0.31 BP Plc United Kingdom 0.83 Spain 2.66 New Zealand 0.28 Italy 2.27 Portugal 0.16 Toyota Motor Corp Japan 0.77 Denmark 1.52 China 0.01 Singapore 1.19 Malta 0.00 Royal Dutch Shell Plc Class B United Kingdom 0.71 Belgium 1.04 Greece 0.00
SAP Germany 0.64
Fund inception date 25 September 2012 Data is used for analytical purposes only. Breakdowns may not sum to 100 percent due to rounding, exclusion of cash, STIF and statistically immaterial factors. Portfolio holdings are subject to change and are not intended asa recommendation of individual securities. Sources: BlackRock, MSCI Inc.
BES-0181 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 32 Sector diversification
Sector weights Fund Index Difference
Communication Services 5.18 5.17 0.01
Consumer Discretionary 10.74 10.74 0.00
Consumer Staples 9.90 9.90 0.00
Energy 7.02 7.01 0.01
Financials 20.09 20.10 -0.01
Health Care 9.76 9.80 -0.04
Industrials 15.10 15.08 0.02
Information Technology 6.48 6.46 0.02
Materials 8.43 8.43 0.00
Real Estate 4.25 4.27 -0.02
Utilities 3.04 3.04 0.00
Source: BlackRock As of 30 September 2018
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 33 Country diversification
Country weights Fund Index Difference Australia 6.20 6.19 0.01 Austria 0.31 0.30 0.01 Belgium 1.04 1.02 0.02 Canada 8.82 8.82 0.00 Denmark 1.52 1.54 -0.02 Finland 1.04 1.02 0.02 France 9.26 9.21 0.05 Germany 8.00 8.10 -0.10 Greece 0.00 0.00 0.00 Hong Kong 3.00 2.99 0.01 Ireland 0.49 0.51 -0.02 Israel 0.70 0.69 0.01 Italy 2.27 2.27 0.00 Japan 23.32 23.28 0.04 Netherlands 2.96 2.95 0.01 New Zealand 0.29 0.29 0.00 Norw ay 0.88 0.88 0.00 Portugal 0.16 0.18 -0.02 Singapore 1.22 1.20 0.02 Spain 2.66 2.65 0.01 Sw eden 2.87 2.85 0.02 Sw itzerland 6.89 7.00 -0.11 United Kingdom 16.10 16.05 0.05
Source: BlackRock As of 30 September 2018
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 34 Portfolio value
Water and Power Retirement Plan Initial value as of 25 September 2012 $417,381,420
Contributions $18,000,000
Withdrawals $53,000,000
Interest* $282
Change in market value** $208,231,507
Market value as of 30 September 2018 $590,613,209
Retirement Health Benefits Fund Initial value as of 25 September 2012 $60,887,594
Contributions $14,600,000
Withdrawals $10,000,000
Interest* $220
Change in market value** $33,919,641
Market value as of 30 September 2018 $99,407,455
Source: BlackRock As of 30 September 2018 Please note that the change in portfolio value detailed above is only relevant to the MSCI World ex-US IMI Index Fund managed by BlackRock Institutional Trust, N.A. * Interest earned is from assets held in the Money Market Fund which is the sweep vehicle for the MSCI World ex-US IMI Index Fund. ** As of 30 September 2018
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 35 Portfolio characteristics
Characteristics breakdown Fund Index Beta 1.00 1.00 Debt/capital 32.69 32.71 Dividend yield 3.05 3.06 DPS Grow th — 5 years (%) 9.23 9.23 Earnings Per Share — 5 year growth 6.63 6.61 Earnings Per Share — 3-5 year grow th 9.63 9.62 % in Benchmark by total mkt cap 99.95 100.00 P/E using FY1 est 14.52 14.52 Price/book ratio 1.68 1.68 Price/cash flow ratio 8.19 8.19 P/earnings ratio (excl. neg.earnings) 14.60 14.61 P/earnings (incl. neg earnings) 16.02 16.02 Price/sales ratio 1.20 1.20 ROE 14.71 14.72 5 Year ROE 15.70 15.68 Median market capitalization ($B) 1.13 1.13 Weighted market capitalization (average) ($B) 40.17 40.29 Weighted median market capitalization ($B) 21.52 21.54 Average market capitalization ($B) 4.91 4.89 % Top 10 holdings 8.85 8.90
Source: BlackRock As of 30 September 2018
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 36 LADWP Diversification: Comparison of risk exposures to benchmark
The portfolio is managed on an optimized basis Risk exposures with risk characteristics similar to the Barra Style Factors (Standard Deviation) Active benchmark Market 0.00 • Predicted (ex-Anti) Tracking Error: 0.02% Beta 0.00 • Number of Stocks Held In Portfolio: 3,570 Momentum 0.00 • Beta: 1.0 Size 0.00 Earnings Yield 0.00 Residual Volatility 0.00 Grow th 0.00 Dividend Yield 0.00 Book-To-Price 0.00 Leverage 0.00 Liquidity 0.00 Non-Linear Size 0.00
Source: Barra, BlackRock, as of 30 September 2018
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 37 6. Fee Schedule LADWP Fee Schedule
LADWP Management Fee Schedule
Annual fee (bps)
2.8
As of 31 August 2017
FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 39 Appendix Important notes
For recipients in the US: In the US this material is for institutional investors only. For recipients in the EU: In the EU issued by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Conduct Authority). Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Registered in England No. 2020394. Tel: 020 7743 3000. For your protection, telephone c alls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited.
For recipients in Korea: For distribution in Korea for Professional Investors only ("Professional Investors") as defined in the local regulation.
For recipients in Singapore: In Singapore, the information provided is issued by BlackRock (Singapore) Limited (company registration number: 200010143N) f or institutional investors only. This information may not be circulated or distributed to any person in Singapore other than (i) to an institutional inv estor pursuant to Section 304 of the Securities and Futures Act ("SFA") or (ii) otherwise pursuant to and in accordance with the conditions of any other applicable provision of the SFA.
For recipients in Hong Kong: In Hong Kong, the information provided is issued by BlackRock Asset Management North Asia Limited and is only for distribution to "professional investors" (as defined in the Securities and Futures Ordinances (Cap. 571 of the laws of Hong Kong)) and should not be relied upon by an y other persons.
For recipients in China: These materials may not be distributed to individuals resident in the PRC or entities registered in the PRC unless such parti es have received all the required PRC government approvals to participate in any investment or receive any investment advisory or investment management services
For recipients in Latin America: In Latin America, for Institutional and Professional Investors only (not for public distribution). This material is solely for educational purposes and does not constitute investment advice, or an offer or a solicitation to sell or a solicitation of an offer to buy any shares of any fu nds (nor shall any such shares be offered or sold to any person) in any jurisdiction within Latin America in which such an offer, solicitation, purchase or sale would be unlawful under the securities laws of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds have not been registered with the securities regulator of Braz il, Chile, Colombia, Mexico, Panama, Peru, Uruguay or any other securities regulator in any Latin American country, and thus, might not be publicly offered within any such country. The secu rities regulators of such countries have not confirmed the accuracy of any information contained herein. No information discussed herein can be provided to the general public in Latin America.
This document contains general information only and is not intended to be relied upon as a forecast, research, investment adv ice, or a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information does not take into account your financial circumstances. An assessment should be made as to whether the information is appropriate for you having regard to your objectives, financial situation and needs.
The opinions expressed are as of 9.30.18 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non- proprietary sources deemed by BlackRock, Inc. and/or its subsidiaries (together, “BlackRock”) to be reliable, are not necessa rily all inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Any investments named within this material may not necessarily be held in any accounts managed by BlackRock. Reliance upon information in this material is at the sole discretion of the reader. Past performance is no guarantee of future results.
BlackRock® is a registered trademark of BlackRock, Inc. All other trademarks are the property of their respective owners.
© 2018 BlackRock, Inc. All rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, and iSHARES are registered trademarks of BlackRock, Inc. or its subsidiaries. All other trademarks are the property of their respective owners.
UIM-0254 FOR USE WITH INSTITUTIONAL INVESTORS ONLY — PROPRIETARY AND CONFIDENTIAL 41