EMPLOYEES' RETIREMENT SYSTEM OF THE COUNTY OF MILWAUKEE

MINUTES OF THE JULY 25, 2018 PENSION BOARD MEETING

1. Call to Order

The Chairman called the meeting to order at 8:30 a.m. at the Marcus Center for the Performing Arts, 929 North Water Street, Milwaukee, WI 53202.

2. Roll Call

Members Present

Linda Bedford Dr. George Cashman Aimee Funck Michael Harper (Chairman) William Holton Ronald Nelson David Zepecki

Members Excused

Laurie Braun (Vice Chair) Deputy LaValle Morgan

Others Present

Margaret Daun, Corporation Counsel James Carroll, Assistant Corporation Counsel Tim Coyne, Director—Retirement Plan Services Erika Bronikowski, Retirement Plan Services Manager Tina Lausier, Fiscal Officer, Retirement Plan Services CJ Pahl, Financial Services Manager, Office of the Comptroller Christopher Caparelli, Marquette Associates, Inc. Alexis Cann, Segall Bryant & Hamill Dr. Scott Decatur, Segall Bryant & Hamill Steven Huff, Reinhart Boerner Van Deuren s.c. Kimberly Handrahan, Former Milwuakee County Employee Daniel Bice, Milwaukee Journal Sentinal

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3. Chairman's Report

The Chairman began the meeting by stating that he believes it is important for the Pension Board to continue engaging in more deliberate conversations regarding the sustainability of ERS. The Chairman noted the Retirement Sustainability Taskforce met yesterday and the meeting was productive and insightful. The Chairman expressed hope that the Pension Board will continue to work with Marquette Associates on fine tuning ERS's Statement of Investment Policy. Optimizing the Fund's performance via asset allocation will play a significant role in achieving the Fund's assumed rate of return and potentially reducing the amount of unfunded liability.

4. Minutes—June 27, 2018 Pension Board Meetings

The Pension Board reviewed the minutes of the June 27, 2018 Pension Board meeting Board meeting.

The Pension Board unanimously approved the minutes of the

June 27, 2018 Pension Board meeting. Motion by Mr. Holton, seconded

by Mr. Zepecki.

5. Investments

(a) Segall Bryant & Hamill

Alexis Cann and Dr. Scott Decatur from Segall Bryant & Hamill ("Segall") distributed a booklet containing information on the international equity investment management services provided by Segall for ERS. Ms. Cann introduced herself as a Marketing Associate at Segall and introduced Dr. Decatur as Partner in the firm and the Director of Segall's international small cap strategy.

Ms. Cann began by providing a brief overview of the firm. Ms. Cann reported that Segall continues to experience strong and stable growth. Segall recently acquired an investment firm in Denver. Segall currently has approximately $20 billion in assets under management, which includes assets from its recent acquisition. Segall is a majority employee-owned firm with 39 partners. Dr. Decatur continues to head the firm's international small cap investment team along with Senior Portfolio Manager, Nicholas Fedako. Ms. Cann concluded her remarks by reporting that Segall added a Quantitative Research Analyst, Shawn Curry, to its international equity team last quarter.

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Dr. Decatur continued with a discussion of Segall's small cap strategy and the current market environment. Dr. Decatur first noted the market environment in 2018 has been difficult relative to Segall's specific investment strategy and has negatively affected its performance. The recent underperformance is related to some unique events occurring in the marketplace and the types of stocks in which Segall is invested. Dr. Decatur explained that Segall invests in value companies that are underpriced relative to their peers and capitalizes on that mispricing over the long term. These attractively-priced stocks also maintain a healthy balance of quality fundamentals and have consistently outperformed expensively-valued/high-quality stocks over the long-term. Dr. Decatur noted that Segall has been investing in stocks with these characteristics for over a decade and its strategy has been very successful over the long-term. However, in recent years, there has been an inversion in the market and expensively-valued stocks have outperformed inexpensive/high-quality stocks. Dr. Decatur stated that Segall adheres to its investment philosophy because of its successful long-term performance. There have historically been periods, such as 1999, where expensive/high-quality stocks dramatically outperformed inexpensive/high-quality stocks. However, this inversion was relatively short-lived and inexpensive/high-quality stocks outperformed in later years from 2000 to 2002. Dr. Decatur stated that Segall's underperformance is directly related to the inversion in the marketplace and the individual stocks in the portfolio. Segall's portfolio remains country- and sector-neutral, and Segall is not making bets on any other macro factors. Dr. Decatur noted that another market factor affecting Segall's performance is that larger cap stocks have been outperforming smaller cap stocks recently. Dr Decatur explained that Segall seeks smaller cap stocks because they typically provide for the best pricing opportunities.

Dr. Decatur called for questions.

The Chairman noted that since ERS's inception with Segall, it has trailed the index by approximately 550 basis points. The Chairman then asked what assurances Segall could provide to the Board that its high and persistent dislocation will change.

Dr. Decatur acknowledged the dislocation has been persistent over the last three quarters. Dr. Decatur stated it is Segall's objective to outperform the index and add value over the long-term. Dr. Decatur reiterated that Segall experienced a similar period of underperformance in 1998-1999 followed by a substantial rebound in years 2000-2002. Similarly, the markets were down in the spring of 2008 when Segall launched its strategy. This was followed by very strong double-digit outperformance in 2009 that remained

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strong for approximately six years. Dr. Decatur then stated that he would not attempt to predict when a turn in the market may occur. However, Segall is confident its primary investment thesis remains sound and does not believe a fundamental change is occurring in the marketplace.

The Chairman then noted that when the Board selected Segall, it understood that Segall would provide a strong dividend yield buffer on top of growth. The Chairman then asked if there was a stock selection issue because there is no dividend yield.

Dr. Decatur acknowledged that dividend yield is an important characteristic of the portfolio but explained that Segall does not specifically target dividend yield of individual companies. Rather, Segall analyzes a wide variety of valuation measures to ensure it is purchasing companies at a very fair price. Dr. Decatur stated that Segall's dividend yield is very strong and measures approximately 100 basis points above the overall index. This acts as a buffer against the volatility of the stocks themselves but cannot fully compensate for all situations. The companies in Segall's portfolio have very similar economic exposure relative to the index, but have higher profitability than the overall index because they are attractively-valued. Dr. Decatur reiterated that the market is currently paying for expensive companies but noted that Segall will not change its entire strategy to achieve short-term gain. Instead, Segall ensures the portfolio is sufficiently positioned according to its investment policy for when the market turns. Segall maintains highly confident that the market will return to its normal pattern as it has in every instance this has occurred in the past. Because the current market has offered up even better opportunities, Segall believes its portfolio is even better-positioned than normal for success when the market turns.

In response to a question from Dr. Cashman regarding Segall's estimated timeframe for a market inversion to occur, Dr. Decatur stated he was reluctant to guess when the turn would occur. Dr. Decatur noted that historically, similar cycles spanned approximately one year. Dr. Decatur reiterated that Segall avoids market timing and remains committed to its successfully-proven long-term strategy. All evidence points to this being a temporary inversion that will be followed by strong returns.

Mr. Nelson noted that Segall seeks to invest based on company characteristics. Mr. Nelson then questioned whether Segall reviews its country or sector concentrations in the portfolio.

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Mr. Decatur replied by stating that Segall maintains tight risk controls on its country and sector allocations. Segall's portfolio is closely aligned to the MSCI EAFE small cap index.

In response to a follow-up question from Mr. Nelson regarding Segall's modeling and stock selection process, Mr. Decatur explained that Segall first places companies into homogenous peer groups by sector or country to compare "apples to apples." Segall then applies its proprietary ranking process within those peer groupings. Each security is ranked based on traditional valuations metrics, and momentum and profitability factors. Based on this analysis, Segall then identifies any undervalued stocks with strong characteristics that meet its investment criteria.

Mr. Caparelli noted that ERS has a relatively short track record with Segall. Since inception with ERS, Segall's performance has lagged. However, Segall has been managing its small cap strategy for an extended period and its long-term performance is excellent. Mr. Caparelli then noted that with approximately 400 names in the portfolio with sector and country neutrality, the magnitude of Segall's underperformance is high. Mr. Caparelli then asked Dr. Decatur to discuss tracking error.

Dr. Decatur replied by acknowledging that Segall's underperformance since inception with ERS has been strong. Dr. Decatur then explained that its model is delivering coherently, with country and sector neutrality in place. The model itself is suffering strong underperformance and the portfolio's negative returns on a relative basis have been solely due to stock selection. Dr. Decatur stated that Segall has endured similar market periods but the cycle typically rebounds within a relatively short timeframe.

The Chairman then asked what type of predictive modeling Segall performs to capture trends or model future behavior of the portfolio.

Dr. Decatur stated that compared to most quantitative predictive modeling processes, Segall employs a relatively straightforward process. Dr. Decatur noted that Segall does not utilize a different model for each sector or country in its portfolio. Segall's process is simple. Segall seeks to invest in companies that are inexpensive relative to their peers, but also exhibit stronger and healthier fundamentals than their peers.

Dr. Decatur concluded by stating there is not a great deal of logic to support a prolonged period of outperformance of comparable companies that are more expensive and Segall remains confident in its process.

The Chairman called for questions and there were none.

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(b) Marquette Associates Report

Christopher Caparelli of Marquette Associates distributed the June 2018 monthly report.

Mr. Caparelli began by commenting on Segall Bryant's presentation. Mr. Caparelli noted the discussion was constructive and the Pension Board asked many insightful questions. Mr. Caparelli explained that Marquette reviews a considerable amount of historical data before making its active manager recommendations. While Marquette cannot predict the future, as long as Segall Bryant maintains its high quality investment team and strategy, any short-term underperformance should be weathered with the expectation that Segall Bryant will continue to deliver its favorable long-term performance.

Mr. Caparelli called for questions.

In response to a request from Mr. Morgan, Mr. Caparelli confirmed that Marquette will provide copies of the active manager presentation materials to the Board members in advance of the Pension Board meetings to allow for a more comprehensive review of the materials.

Mr. Caparelli next invited the Pension Board members to attend Marquette's annual Investment Symposium on September 28, 2018 at the Union League Club in Chicago, Illinois. Keynote speakers will include Nobel Prize recipient in economics, Richard Thaler, and John V. Miller, the co-head of fixed income and managing director at Nuveen Asset Management.

Mr. Christenson then summarized the 2018 market environment. Returns in June were fairly muted. However, the markets have been very active year-to-date, with volatility increasing substantially relative to 2017. Extremely strong returns in January were followed by a market correction in February and there has not been a great deal of absolute direction year-to-date. Although ERS's total return is up slightly year-to-date, the aggregate result of 2018 market activity for most client portfolios has been relatively flat. The S&P 500 was up 0.6% in June and is at 2.6% year-to-date. Large, small and mid-cap growth have systematically outperformed value and the spread between growth and value continues to widen. Mr. Caparelli noted this trend has not been beneficial to ERS as the Fund has a strategic tilt to value. While value has historically added approximately 2 percentage points of performance annually, value has been out of favor for approximately ten years. Performance in non-U.S. equity has been disappointing. The strengthening U.S. dollar has negatively

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affected returns in emerging markets once foreign currencies are converted to U.S. dollars. Performance in emerging markets is also being negatively affected by the Federal Reserve's (the "Fed") interest rate tightening schedule. Mr. Caparelli explained that rising U.S. interest rates creates stress on emerging markets. Emerging markets often maintain dollar-dominated debt and the rising rates creates concern that the debt may not be paid. However, Mr. Caparelli noted that Marquette has studied this phenomenon and concluded that emerging markets historically has an initial negative reaction to a Fed-tightening cycle, but typically outperforms over the longer-term. Fixed income is down year-to-date, with the aggregate benchmark at -1.6%. Mr. Caparelli explained the underperformance in fixed income is the result of higher interest rates as the short end of the yield curve has moved up. It is widely expected that the Fed will implement two additional rate increases in the second half of 2018. One increase will likely occur in September and a second increase could occur in December. If the anticipated action by the Fed occurs, it would bring four rate increases in 2018. This would have a marked impact on fixed income markets, where 1.5% to 2% yields on cash would once again become a genuine asset.

The Chairman noted that Brazil, Russia, India and China ("BRIC countries") have the greatest impact on emerging markets. The Chairman questioned whether we may be in the midst of an emerging markets recession and if the Fund may be overleveraged to BRIC countries.

Mr. Caparelli replied that the prevailing thought early in 2018 was the issues affected emerging markets were confined and specific to local economies. However, as the year progresses, countries such as Argentina and Turkey have been added to the list of troubled areas. Mr. Caparelli stated it is fair to question whether emerging markets may be in the midst of a recession. However, Mr. Caparelli noted Marquette does not attempt to time the markets. Mr. Caparelli explained that growth drivers are in place for emerging markets. Emerging markets is a very volatile asset class and standard deviations are fairly large from year to year. Although the cycle seems to be turning more quickly, Marquette believes it is beneficial to remain invested in emerging markets.

The Chairman followed up by commenting that he would like the Pension Board to think more proactively about the Fund's investments and what direction they may be headed.

Mr. Caparelli responded by stating that Marquette firmly believes in maintaining healthy long-term exposure to emerging markets. Mr. Caparelli noted that one area to consider is adding some exposure to

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emerging market debt. Debt exposure would provide some diversification but would come with its own challenges and concerns.

Dr. Cashman asked if Marquette is concerned about the direction of the yield curve.

Mr. Caparelli acknowledged Marquette is concerned about the direction of the yield curve. Because the market cycle is in its ninth year, there is always the possibility of a recession. However, there is a general consensus that the current market cycle still has room to grow. Mr. Caparelli suggested that trade policy and the Fed's monetary policy are two major concerns relative to a recession. The earlier rhetoric on tariffs by the Trump administration turned into actual policy over the last several months and that is an absolute concern. If the Fed implements more rate increases than it should in a given amount of time, such action could push the U.S. into a natural recession because higher interest rates would have a cooling effect on the economy. However, Mr. Caparelli noted the Fed will remain mindful of any additional changes to the yield curve as it considers implementing additional increases this year.

Mr. Caparelli continued with a discussion of the June 2018 flash report. Mr. Caparelli stated that Marquette has no recommended changes to the four managers on alert or on notice. The Fund's total market value as of June 30, 2018 was $1.735 billion. Mr. Caparelli reported that the Fund was generally in line with the investment policy targets and there was no need for any rebalancing. The slight underweight in fixed income is counterbalanced by $51.5 million in total cash equivalents. Mr. Caparelli noted that since Marquette compiled its June report, withdrawals of $16.5 million and $18 million were made to fund June and July benefit payments. Mr. Caparelli also noted that all cash is invested with futures through Northern Trust and remains equitized at all times. With an allocation of 9.7%, private equity is now near the 10% policy target. Mr. Caparelli noted that Marquette will likely review additional 2019 commitments to private equity with the Investment Committee in the fall of 2018.

The Chairman observed that total cash equivalents in the Fund do not quite account for the underweight in fixed income. The Chairman then asked how Marquette ensures the Fund maintains close to its policy targets in fixed income.

Mr. Caparelli explained that Marquette measures the Fund's combined allocations to fixed income and real estate to ensure that the Fund does not fall below a 25% allocation to non-equity investments. Mr. Caparelli noted that if additional funds are needed, it will likely be raised from equities.

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Mr. Caparelli next discussed net-of-fees performance as of June 30, 2018. The total Fund composite was down 30 basis points in June. The Fund is up 1.0% year-to-date relative to the total Fund benchmark at 0.4%. Mr. Caparelli noted the Fund's year-to-date outperformance is the result of the active managers adding value.

Mr. Nelson noted that the Fund's total market value in June is up approximately $12 million from May 2018. Mr. Nelson questioned whether the $12 million gain is due to cash flow as the Fund underperformed in June 2018.

Ms. Lausier explained that the added-value is related to cash flow. ERS received a $29 million contribution installment from the County in June 2018.

Mr. Caparelli then noted that ERS's peer group rankings were issued within the last two days and were not included in Marquette's June 2018 report. Relative to its peers, ERS's 1% year-to-date return ranks it in the top quartile of public defined benefit plans. Most of ERS's peers are closer to 0% year-to-date. As a result of higher interest rates, the Fund's fixed income composite is down -1.5% year-to-date. The U.S. equity and international equity composites are at 1.8% and -3.9% year-to-date respectively. Hedged equity is up 1.0% year-to-date and real estate is up at 3.7% year-to-date. The infrastructure composite is up at 6.6% year-to-date. Private equity is at 3.4% year-to-date. Mr. Caparelli noted that the Fund's alternative asset classes helped to enhance the total return year-to-date.

Mr. Caparelli next discussed active manager net-of-fee performance as of June 30, 2018. Fixed income manager, Galliard, has a -1.4% year-to date versus the benchmark at -1.6%. In U.S. equity, Boston Partners is at -1.8% year-to-date. Artisan Partners is having a favorable 2018 and is outperforming its benchmark year-to-date. Mesirow and Silvercrest are dramatically underperforming year-to-date relative to the 5.4% Russell 2000 benchmark. Mr. Caparelli noted the year-to-date underperformance by Silvercrest and Mesirow can be largely attributed to a high-quality/value tilt in those portfolios. Silvercrest has been a manager in the Fund for four full calendar years and has outperformed the benchmark in three of those years. Mr. Caparelli explained that significant short-term underperformance by Silvercrest in 2016 has affected its longer-term track record. However, Marquette is not overly concerned about Silvercrest's performance at this time. Mesirow's performance has been up and down for several years since its inception in the Fund. Marquette will address Mesirow in greater detail in the upcoming asset allocation discussions. In international equity, Segall Bryant is down -7.0% year-to-date relative to

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the benchmark at -1.3%. OFI has protected capital nicely in the emerging markets space, at -1.2% year-to-date relative to the benchmark at -6.7%. The Fund's hedged equity managers, ABS and Parametric, are both up around 1% year-to-date. For the three-month period, Parametric is up 3.1%. The Fund's real estate managers are all near 4% year-to-date. In infrastructure, IFM is at 10.1% year-to-date. Mr. Caparelli noted that ERS is now invested in IFM's hedged asset class. ERS has an election form in place to move to J.P. Morgan's hedged share class in approximately two months.

In response to a question from Mr. Nelson, Mr. Caparelli confirmed that unhedged currency in infrastructure has been a drag on the portfolio and Marquette recommends removing the currency risk.

Mr. Caparelli called for questions in open session and there were none.

Mr. Zepecki then moved that the Pension Board adjourn into closed session under the provisions of Wisconsin Statutes section 19.85(1)(e) with regard to agenda item 6 for considering the investing of public funds, or conducting other specified public business, whenever competitive or bargaining reasons require a closed session. At the conclusion of the closed session, the Pension Board may reconvene in open session to take whatever actions it may deem necessary concerning these matters.

The Pension Board unanimously agreed by a roll call vote of 7-0 to

enter into closed session to discuss agenda item 6. Motion by

Mr. Zepecki, seconded by Ms. Bedford.

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6. Investment Committee Meeting—July 16, 2018

The July 16, 2018 Investment Committee meeting minutes reported the Committee voted unanimously to enter into closed session to discuss asset allocation. After returning to open session, the Investment Committee took no formal action.

(a) Asset Allocation

The Pension Board discussed the matter in closed session.

The Pension Board agreed by roll call vote 7-0 to return to open

session. Motion by Ms. Bedford, seconded by Dr. Cashman.

After returning to open session, the Pension Board took no action.

7. Audit Committee Meeting—July 16, 2018

In open session, the Chairman noted the minutes of the July 18, 2018 Audit Committee meeting were included in the Pension Board's meeting materials and may serve to reflect all open discussions from that meeting. The Chairman then asked Mr. Coyne to provide a succinct review of the Audit Committee agenda items.

(a) Member Communications from Pension Board

Mr. Coyne reported that the Audit Committee discussed member communications from the Pension Board. Mr. Coyne stated that Retirement Plan Service ("RPS") will provide a full report on any updates to the matter at the next Audit Committee meeting.

(b) Baker Tilly Audit Resolution Report

Mr. Coyne reported that the Audit Committee reviewed the Agreed-Upon Procedures ("AUP") resulting from the Baker Tilly Audit. A more comprehensive update of the matter will be provided at the next Audit Committee meeting.

(c) Update on Earned Income Process

Mr. Coyne reported that the Audit Committee reviewed the status of the calendar year 2017 earned income process. At the recommendation of the Vice Chair of the Pension Board, Ms. Braun, RPS is working on making improvements to it processes for 2018.

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Mr. Coyne and Ms. Lausier presented additional discussion on the matter later in the Pension Board meeting during the Reports of Fiscal Officer.

(d) Milwaukee Deputy Sheriffs’ Association ("MDSA") Multiplier

Mr. Carroll noted for the record that the matter was scheduled for closed session discussion at the July 16 Audit Committee meeting. However, counsel for the MDSA requested that the matter be postponed to a future Audit Committee meeting.

(e) Pending/Potential Litigation

The Audit Committee voted unanimously to enter into closed session to discuss the matter. After returning to open session, the Audit Committee took no action on the matter.

The Pension Board discussed the matter in closed session later in the meeting.

(f) Benefit Calculation Errors & Corrections

The Audit Committee voted unanimously to enter into closed session to discuss the matter. After returning to open session, the Audit Committee took no action on the matter.

The Pension Board discussed the matter in closed session later in the meeting.

(g) Vitech/V3

The Audit Committee meeting minutes reported that Chairman Harper expressed concerns pertaining to the history between RPS and Vitech, particularly the 2017 implementation and subsequent administration of the program. The Chairman expressed hope that Vitech can move forward with the system and address the functionality issues. Mr. Coyne explained that RPS is making progress with Vitech and extending the capabilities of its current system to drive completion of outstanding issues. RPS is consistently communicating with Vitech and working towards a data cleanup project. Vice Chair Braun indicated that prior RPS staff had expressed similar sentiments regarding progress with Vitech to the Pension Board, with little to no improvement occurring. Mr. Coyne emphasized that RPS remains committed to resolving all Vitech-related issues. Chairman Harper and Vice Chair Braun expressed their appreciation for the work being performed.

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The Chairman then took the Pension Board's agenda out of order to next discuss appeals in open session.

8. Appeals

(a) Kimberly Handrahan

In open session Ms. Handrahan summarized the circumstances regarding her appeal.

Ms. Handrahan began by stating that she is contesting the denial letter she received after requesting a refund from her ERS membership account. Ms. Handrahan then stated "I left the County and I did not receive a letter indicating that I had to request said funds. After some time, I continued receiving letters from the retirement plan indicating my balance…and seeing that it was not growing or changing, I inquired about it." Ms. Handrahan explained that she wanted to reinvest the funds in her membership account and "do different things with it." However, after inquiring about the funds in her membership, Ms. Handrahan stated that she was informed she could not withdraw the funds because it was beyond the 180 day withdrawal period. Ms. Handrahan stated she then sent correspondence to RPS requesting an appeal. Ms. Handrahan further stated that "the burden was put on me to prove I did not receive a letter and you are supposed to prove you did not receive anything." Ms. Handrahan explained that she asked RPS when they sent the letter and whether they placed "a confirmation number or tracking number on that, and they did not." Ms. Handrahan also stated there is no real proof that RPS sent the letter "which is also what I am contesting." Ms. Handrahan concluded her remarks by reiterating that if RPS sent the letter, she did not receive it. Ms. Handrahan also suggested the letter could have been improperly delivered, lost in the mail or returned for different reasons. Ms. Handrahan then asked the Pension Board to allow her to obtain the funds in her membership account.

In response to a question from the Chairman, Ms. Handrahan stated that she was not advised or instructed in any way at the time she terminated her employment at the County.

The Chairman then asked Ms. Handrahan at what point she decided to withdraw the funds in her membership account.

Ms. Handrahan replied "After I left the County, I continued to receive quarterly statements regarding what I was invested in the retirement system

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and seeing that it was not changing, I inquired about it to see what the status was."

Mr. Holton observed that the appeal materials note Ms. Handrahan moved at some point.

Ms. Handrahan replied "This was after the termination, sometime afterwards. This is well beyond the 180 days."

The Chairman then explained to Ms. Handrahan that the Pension Board will discuss the matter in closed session.

In response to a question from the Chairman, Mr. Carroll confirmed that he would informally communicate the Pension Board's decision to Ms. Handrahan later today via e-mail or telephonically if she did not wish to wait for the Board to return from its closed session discussion. Mr. Carroll also explained to Ms. Handrahan that she will receive a formal written communication of the Pension Board's decision, if one is reached.

Mr. Carroll next noted for the record that Ms. Handrahan sent a letter dated July 20, 2018 indicating that she would be attending the July 25, 2018 Pension Board meeting. Mr. Carroll stated that he believed Ms. Handrahan's letter was received in the Office of Corporation Counsel on July 23, 2018. Mr. Carroll stated that because the July 20 letter was not substantive, it was not initially included in the Pension Board's meeting materials. However, Mr. Carroll noted that he distributed the July 20 letter to the Pension Board members during today's meeting and the Pension Board will consider the letter as part of its deliberations.

The Chairman called for questions.

In response to questions from Mr. Holton, Ms. Handrahan stated that she did receive quarterly statements after the 180 day withdrawal period.

In response to a request from the Chairman to state her new address on the record, Ms. Handrahan stated her current address was previously provided to RPS and she has been receiving correspondence at her current address.

In response to a question from Ms. Funck, Ms. Handrahan stated that she did not have an exit interview.

In response to a question from Ms. Daun, Ms. Handrahan confirmed that she was aware that she had a pension benefit while she was employed at the County.

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In response to follow-up questions from Ms. Daun, Ms. Handrahan confirmed that after she left County employment on July 8, 2016, she continued to receive quarterly benefit statements from ERS. Ms. Handrahan also confirmed that after she terminated employment, her address remained 585 West Riverwood Drive, Apartment 305, Oak Creek, 53154, until she moved in November 2016.

The Chairman called for questions and there were none.

The Chairman thanked Ms. Handrahan for her attendance.

Ms. Handrahan thanked the Pension Board and left the meeting.

(b) Aleman

In open session, Mr. Carroll reported that at the request of Ms. Aleman's counsel, the matter has been postponed to the September 2018 Pension Board meeting.

Mr. Zepecki then moved that the Pension Board adjourn into closed session under the provisions of Wisconsin Statutes section 19.85(1)(g) with regard to agenda items 7(d) through 7(f) and items 8 through 11 for the purpose of the Board receiving oral or written advice from legal counsel concerning strategy to be adopted with respect to pending or possible litigation. At the conclusion of the closed session, the Board may reconvene in open session to take whatever actions it may deem necessary concerning these matters.

The Pension Board agreed by roll call vote 7-0 to enter into closed

session to discuss agenda items 7(d) through 7(f) and items 8 through

11. Motion by Mr. Zepecki, seconded by Ms. Bedford.

9. Pending Litigation

(a) Walker, et al. v. Milwaukee County, et al.

The Pension Board took no action on this item.

(b) Baldwin v. ERS

The Pension Board took no action on this item.

(c) James Tietjen v. ERS, et al.

The Pension Board took no action on this item.

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(d) Milwaukee District Council 48 v. Milwaukee County

The Pension Board took no action on this item.

(e) Dennis Dietscher v. Pension Board of the Employees' Retirement System

The Pension Board took no action on this item.

(f) Watkins v. Pension Board

The Pension Board took no action on this item.

(g) Hoffmann v. Milwaukee County (State)

The Pension Board took no action on this item.

(h) Hoffmann v. Milwaukee County (Federal)

The Pension Board took no action on this item.

(i) Couturier v. ERS

The Pension Board took no action on this item.

10. Actuarial Valuation Error

The Pension Board took no action on this item.

11. Report on Compliance Review

The Pension Board took no action on this item.

The Pension Board agreed by roll call vote 7-0 to return to open session.

Motion by Ms. Bedford, seconded by Dr. Cashman.

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After returning to open session, the Pension Board made the following motions.

(a) Appeals—Kimberly Handrahan

The Pension Board voted 4-3, with Dr. Cashman and Messrs. Holton,

Zepecki and Harper approving, and Messes. Funck, Bedford and

Mr. Nelson disapproving, to deny the appeal by Kimberly Handrahan.

Motion by Dr. Cashman, seconded by Mr. Zepecki. The motion to

deny Ms. Handrahan's appeal failed to pass because it lacked the

necessary five votes as required by Ordinance section 201.24 (8.5).

Mr. Zepecki then offered a motion to lay over discussion of Ms. Handrahan's appeal to the next Pension Board meeting.

The Pension Board voted 6-1, with Ms. Funck disapproving, to lay over

the appeal of Ms. Handrahan to the next Pension Board meeting.

Motion by Mr. Zepecki, seconded by Mr. Holton.

Mr. Carroll noted that he would inform Ms. Handrahan of the Pension Board's decision to lay over the matter to the next Pension Board meeting.

12. Governance Audit Update

In open session, Mr. Coyne reported that RPS held an introductory telephone conference with Funston Advisory Services LLC ("Funston") two weeks ago to discuss the governance audit. Funston requested that RPS provide certain documentation so it can begin its review and the governance audit is now underway. The documentation provided to Funston included Ordinance sections relevant to the creation and governance of the Pension Board, RPS and Milwaukee County government, and other documentation related to the Pension Board and RPS. RPS is working on completing a profile of RPS and Milwaukee County government that will enable Funston to continue its audit. The current timeline is for Funston to complete its work and deliver a final analysis by early November 2018. Mr. Coyne noted that if RPS can continue to provide Funston with the documentation it needs, the audit could be completed ahead of schedule. Mr. Coyne also noted that Funston will be looking to interview certain Pension Board members as part of its audit. Mr. Coyne added that he will notify the Pension Board members well ahead of time regarding their availability for the interviews. Mr. Coyne concluded by stating that Funston is a strong group with a great deal of experience in public pension funds and he believes the proper individuals are involved.

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In response to a request from the Chairman, Mr. Coyne confirmed that he will provide an update on the Funston audit at the next Audit Committee meeting.

13. Reports of Interim Director—Retirement Plan Services & Fiscal Officer

(a) Retirements Granted Report—June 2018

Ms. Lausier presented the Retirements Granted Report for June 2018. Sixteen retirements from ERS were approved with a total monthly payment amount of $22,506.52. Of those sixteen retirements, nine were normal retirements and seven were deferred retirements. Five members retired under the Rule of 75. Six retirees chose the maximum option, eight retirees elected joint and survivor options, and two retirees elected the 10-year certain option. Three retirees elected backDROPs in amounts totaling $302,316.32.

(b) Retirement Plan Services Update

Mr. Coyne reported that the County launched its new website on July 17, 2018. Messes. Bronikowski and Alexander in RPS played key roles in completing work on the new website. Mr. Coyne noted the updated website is a vast improvement but as with any change, it will take some time to adjust. RPS will utilize the updated website to better educate ERS members and retirees on all aspects related to RPS.

Mr. Coyne next reported that RPS is conducting interviews to fill an open position in RPS for a Senior Compliance Analyst. Mr. Coyne noted this is a critical position because the individual will be responsible for fulfilling the final duties of the AUP resulting from the Baker Tilly audit. Duties of the Senior Compliance Analyst will include working with the Office of Corporation Counsel and Risk Management to perform additional policy research and complete documentation of the AUP. Mr. Coyne stated that RPS hopes to announce additional information regarding a potential candidate at the September 2018 cycle of meetings.

Mr. Coyne concluded by reporting that RPS received approval from the County Board's Finance and Audit Committee to engage Guatam Khurana to assist on a short-term project to continue documenting the AUP. Mr. Khurana was working as a retirement analyst on a contractual basis. Mr. Coye noted that Mr. Khurana will help RPS complete a significant amount of work relative to Baker Tilly's AUP recommendations.

(c) Fiscal Officer Report

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Ms. Lausier presented the portfolio activity and cash position reports for June 2018. Distributions were received from J.P. Morgan infrastructure for $1.3 million and Adams Street for $77,000. A capital call was received from Siguler Guff for $488,000. ERS also received the County's first installment for 2018 contributions of $29 million. Ms. Lausier explained that without the $29 million contribution from the County, the Fund would have been down approximately -$2.5 million in June. The County is expected to fund additional contributions of $27 million in September 2018 and $6 million in December 2018.

Ms. Lausier next discussed the funds approved by the Board for disbursements. The Pension Board approved the 2018 third quarter funding at its May meeting. Of that amount, $18 million will be utilized to fund July disbursements. Ms. Lausier noted that remaining third quarter funding reserves should be sufficient and she had no additional funding requests.

Ms. Lausier then presented the 2018 administrative and investment expenses report, the 2018 second quarter check register and the 2018 second quarter top ten vendor payment list.

In response to a question from the Chairman regarding payments issued to the Hancock County Clerk of Court on the check register, Ms. Lausier explained the payments are related to a qualified domestic relations order ("QDRO") for a retiree. As required by the QDRO, the ex-spouse of a retiree is receiving a portion of his monthly pension benefit. Ms. Lausier stated that the specific terms of the QDRO required that payments be made via Hancock County instead of directly to the alternate payee.

Ms. Daun noted with a QDRO, payments are sometimes issued via a third party so the ex-spouse need not publish her address.

In response to questions from the Chairman regarding payments issued to Votenet Solutions Inc. on the check register, Ms. Lausier explained that Votenet is the software RPS utilizes for Pension Board elections. The payments represent the ongoing cost of maintaining availability to the software per the contract.

In response to a question from the Chairman regarding payments issued to American Business Technologies on the check register, Ms. Lausier explained these are costs associated with mailing the Communicator, direct deposit notices and 1099s.

In response to a question from the Chairman regarding payments issued to Logan Productions, Ms. Lausier explained the expenses relate to the

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audio/visual equipment utilized for the 2018 annual Pension Board meeting at the Italian Community Center.

In response to a question from Mr. Nelson regarding the manner in which fees are paid to the Fund's investment managers, Ms. Lausier stated that typically, ERS receives a quarterly invoice for manager fees. However, OFI is one manager in the Fund that deducts its fee from distributions.

The Chairman then noted that Vitech is listed on the 2018 top ten vendor list and stated that Vitech will likely be invited to present at the September 2018 Pension Board meeting.

Ms. Lausier concluded with a discussion of updates to the 2017 Annual Report. Ms. Lausier referenced the final sentence in the first paragraph on page 25 of the Annual Report and noted the phrase "asset allocation as of December 31, 2017" should instead read "as of 2017 and 2016 respectively." The discount rates listed in the 2016 table on the bottom of page 24 should read "7%, 8% and 9%" instead of 6.75%, 7.75% and 8.75%. The date in the first sentence under section 11 on page 25 should read "June 24, 2018" instead of June 14, 2018. Ms. Lausier then explained that Baker Tilly issued its final two-page opinion letter on July 24, 2018. Baker Tilly's opinion letter will be inserted on pages 2 and 3 of the 2017 Annual Report. Ms. Lausier noted a copy Baker Tilly's letter to the members of the Pension Board Audit Committee was included with the meeting materials. Ms. Lausier also referenced a one page report listing minimal variances in the Annual Report provided by Baker Tilly. Ms. Lausier explained the variances are due to the fact that final statements from certain investment managers were received after the cutoff date to provide data to the actuary. A cutoff date must be imposed for the actuary to complete the valuation timely. Ms. Lausier stated she would issue the final version of the 2017 Annual Report to the Pension Board members within one week that will include all changes presented today. Ms. Lausier then requested approval of the 2017 Annual Report.

The Pension Board unanimously approved and accepted the 2017

Annual Report of the Pension Board with the changes incorporated as

detailed by Ms. Lausier. Motion by Mr. Zepecki, seconded by

Mr. Holton.

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14. Administrative Matters

(a) Public Pension Financial Forum Annual Conference Attendance ("P2F2")

The Pension Board discussed upcoming conference attendance to the P2F2 Annual Conference for Ms. Lausier and Ms. Kirsanoff October 21-24, 2018.

Mr. Coyne noted the P2F2 conference is the only event of its kind in the country and suggested the benefits of attending are incalculable. The P2F2 conference allows financial officers of public pension funds to connect with peers, learn about best practices, exchange ideas and understand the issues confronting public funds. Mr. Coyne suggested attendance is essential and recommended Messes. Lausier and Kirsanoff both attend.

Ms. Lausier explained the conference fee is $350 and the hotel expenses would be approximately $200 per night. Travel costs to the conference are estimated at approximately $450. Total costs are estimated at approximately $1,800 to $2,000.

The Pension Board unanimously approved costs for Ms. Lausier and

Ms. Kirsanoff to attend the October 21-24, 2018 P2F2 Annual

Conference. Motion by Mr. Holton, seconded by Dr. Cashman.

(b) August Pension Board Meeting

The Chairman explained the Pension Board typically recesses for August and asked whether the Board would like to continue its past practice.

The Pension Board agreed to recess for August 2018 and resume its monthly meetings in September.

Update on Earned Income Process (continued)

Ms. Lausier then noted she had additional information to present related to Audit Committee agenda item 7(c), update on earned income process.

Ms. Lausier explained that one individual did not provide RPS with the necessary documentation to perform the earned income calculation. The individual is receiving a disability pension and is required by the Ordinances and Rules to submit tax information on income from the prior year. Ms. Lausier explained that an individual can only earn a disability pension equal to what they would have made in the position they were disabled from. Ms. Lausier noted it is her understanding that the individual started their own business last year and it is unclear how this will affect the

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individual's earned income calculation. The individual in question reported that they filed an extension with the IRS for their 2017 tax return. As a result, the individual is also requesting an extension to provide the required earned income documentation to RPS. Ms. Lausier noted that the individual did not exceed the earned income limit in the prior year. RPS's options are to allow the individual an extension or, suspend the individual's benefit payments until RPS receives the required documentation.

In response to a question from Mr. Holton, Ms. Lausier stated that the individual did not provide RPS with a copy of the extension request submitted to the IRS.

The Chairman stated this is a situation where Rule 1010 would clearly apply. Under Rule 1010, the Pension Board is authorized to take whatever steps necessary to obtain the required earned income information directly from the IRS, independent of the individual receiving the disability pension.

In response to a question from Ms. Lausier, the Chairman stated that if the individual has not yet filed their tax return, the IRS would have a copy of the extension request.

The Chairman then recommended that per Rule 1010, absent any evidence of filing, the Pension Board should move to suspend the individual's benefit until the necessary documentation is received.

Ms. Lausier noted that Rule 1010 in part reads "In the event a member fails to provide the requested statement or authorization as required, the secretary shall forward the member's name and the facts of the member's noncompliance to the Pension Board. Upon referral, the Board may in its discretion suspend the member's pension or take whatever other action it deems appropriate in order to obtain documentation." Ms. Lausier then asked whether RPS should suspend the members benefit if the individual can provide a copy of the request for extension.

The Chairman stated that this is a grey area and deferred to counsel.

Mr. Huff explained that at a recent Audit Committee meeting, the Chair and Vice Chair noted that Rule 1010 specifically refers to obtaining copies of tax returns, not extensions. Mr. Huff advised that Rule 1010 provides for the individual to sign the form that would allow RPS to obtain the tax return directly from the IRS. The IRS will then either have an extension on file or it will not.

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Mr. Carroll stated that as Rule 1010 is written, it would be a discretionary decision of the Pension Board on whether or not the individual's benefit should be suspended. Mr. Carroll suggested that it would be appropriate to afford RPS additional time to determine whether the individual filed an extension. If RPS finds that the individual did not file an extension, RPS can then ask the Pension Board to approve suspension of the individual's benefits.

The Pension Board voted unanimously to grant RPS additional time to

determine the individual's tax filing status and provide an update on

that matter at the next Audit Committee or Pension Board meeting.

Motion by Mr. Zepecki, seconded by Mr. Holton.

In response to a request from the Chairman, Ms. Lausier confirmed that the IRS authorization form will also be submitted with this case.

During the discussion, Mr. Coyne reiterated that RPS will work with the Audit Committee to make improvements to the earned income process.

15. Adjournment

The meeting adjourned at 11:40 a.m.

Submitted by Steven D. Huff, Secretary of the Pension Board