MINUTES OF STATE TEACHERS RETIREMENT BOARD MEETINGS. October 19, 2017

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1 MINUTES OF STATE TEACHERS RETIREMENT BOARD MEETINGS October 19, 2017

2 Oct. 19, 2017 October 19, 2017 The State Teachers Retirement Board met at the STRS Ohio offices in Columbus, Ohio, on Thursday, Oct. 19, 2017, at approximately 9:15 a.m. The meeting was called to order by the Chair, Mark Hill. The following members were in attendance: Mr. Hill, Craig Brooks, Carol Correthers, Taiyia Hayden, Tim Myers, Dale Price, Wade Steen, Robert Stein, Rita Walters and Sarah Wickham, representing the Superintendent of Public Instruction. MOTION TO EXCUSE ABSENCE Mr. Hill moved, seconded by Mr. Stein to excuse Yoel Mayerfeld from the Oct. 19, 2017, Retirement Board meeting. Upon roll call the vote was as follows: Mr. Hill, yes; Mr. Stein, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Myers, yes; Mr. Price, yes; Mr. Steen, yes; Ms. Walters, yes; Ms. Wickham, yes. Motion carried. APPROVAL OF MINUTES Mr. Hill moved, seconded by Mr. Stein to approve the minutes of the September 2017 Retirement Board meeting. Upon roll call the vote was as follows: Mr. Hill, yes; Mr. Stein, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Myers, yes; Mr. Price, yes; Mr. Steen, yes; Ms. Walters, yes; Ms. Wickham, yes. Motion carried. REPORT FROM THE INVESTMENT DEPARTMENT The chair recognized John Morrow, deputy executive director Investments, for the Report From the Investment Department. Mr. Morrow provided three highlights as a summary for the investment activity report: The STRS Ohio Total Fund return for September was +1.3%. Investment assets at the end of September 2017 were $76.4 billion. There was significant allocation activity that preceded the asset mix target weight changes on Oct. 1, 2017.

3 A memo was included in the Report From the Investment Department (INV_10_2017) that recommended increasing the Liquid Alternatives maximum market value from $1 billion to $2.5 billion in the Alternative Investments asset class within Opportunistic/Diversified. Miscellaneous comments were provided regarding the liquidation of a $150 million Domestic Equities small cap external portfolio managed by Next Century Growth, the economic letter published in the activity report and total fund returns for fiscal 2018 were estimated at about 4.5% percent through mid-october. Mr. Morrow presented the initial review of the Statement of Investment Objectives and Policy and Statement of Fund Governance. Since these policies were updated as recently as May 2017 following the Asset-Liability Study, very few revisions were proposed. A letter from Callan supporting the proposed changes and the full document, with the proposed changes marked, was included in the report. A second review and approval is scheduled for the December 2017 meeting, returning the required annual review to its prior schedule. Mark Regenbogen, director International Equity, presented a Foreign Exchange Overview at the request of the board. Mr. Regenbogen discussed how changes in the U.S. dollar impacts companies and investment returns. He also reviewed staff s outlook for the U.S. dollar relative to the major foreign currencies. Mr. Regenbogen closed his presentation with an explanation of STRS Ohio s policy of using a 50% hedged benchmark for developed countries, noting that results have been favorable since the 1998 inception compared to a non-hedged benchmark. Mike Joecken of Callan commented on the asset class presentation and stated that Callan does not recommend a level of hedging to its clients, but believes it is important for clients to actively consider the benefits and costs of hedging and maintain a policy. He stated that most public funds choose an unhedged approach to foreign currency exposure. Mr. Joecken also informed the board that an STRS Ohio small cap manager, Richard Thaler of Fuller and Thaler, received a Nobel Prize in behavioral economics and finance. The September 2017 investment transactions (as appended on Pages 54 through 170) were reviewed without objection. There were no requests from the board. REPORT FROM THE FINANCE DEPARTMENT The chair recognized Paul Snyder, deputy executive director Finance, for a Report From the Finance Department. Mr. Snyder introduced Kim Nicholl and Matthew Strom from Segal Consulting, to review the preliminary results of the Actuarial Valuation as of July 1, Ms. Nicholl provided a brief review of the discussion topics in the presentation. She then explained the purpose of an actuarial valuation and how it is performed. II

4 Ms. Nicholl reviewed the changes to the assumptions following the five-year experience review and summarized the results of the actuarial valuation. The market value of assets, as calculated by Segal, returned 14.1% for year ending June 30, Segal showed the separate effect of the assumption changes and reducing the COLA to 0% on the funded ratio and the funding period. The funded ratio based on the actuarial value of assets, increased to 75.1% from 69.6%. The amortization period for the unfunded liability decreased to 18.4 years from 26.6 years. The unfunded accrued liability decreased to $23.9 billion from $30.6 billion in Mr. Snyder then provided a review of the dashboard and summary scorecard. The dashboard is a one page summary of the metrics used for informing the board about the financial health of the system. As of the July 1, 2017, actuarial valuation, the scorecard reflects a score of -5. There were no requests from the board. EXECUTIVE SESSION Mr. Hill moved, seconded by Mr. Stein to enter executive session under authority of Division (G)(1) of Section of the Revised Code for the purpose of discussing appointment, employment or compensation of a public employee or official, (G)(3) of Section of the Revised Code for the purpose of conferring with the board s attorney regarding pending or imminent court action and Division (G)(5) of Section of the Revised Code for the purpose of discussing matters required to be kept confidential by federal law or state statutes. Upon roll call the vote was as follows: Mr. Hill, yes; Mr. Stein, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Myers, yes; Mr. Price, yes; Mr. Steen, yes; Ms. Walters, yes; Ms. Wickham, yes. Motion carried. Public session resumed at approximately 1:15 p.m. Mr. Steen was called away from the meeting. EXECUTIVE DIRECTOR S REPORT Mr. Hill recognized Executive Director Michael Nehf for the Executive Director s Report. Mr. Nehf highlighted items from his October Executive Director s Report containing the topics listed below and offered to answer any questions. The full report is appended on Pages 1 and 2. Annual Statements of Account Mailed to Members Member Services Earns High Satisfaction Scores for First Quarter Online Reemployed Retiree Payment Application Now Available Staff Provides Updates to Various Member Groups Employers Submitting Payroll Estimates III

5 Preliminary Financial Statements Included in October Board Materials Annual System Audit of Investment Reporting Requirements Completed RECOGNITION OF PERSONS WISHING TO ADDRESS THE BOARD Mr. Hill recognized Denise Clough to address the board. Ms. Clough asked the board to consider recording future meetings for posting on the STRS Ohio website. The chair recognized Dan MacDonald to address the board. Mr. MacDonald expressed concern about the suspension of the COLA. He also asked several questions about the Global Investment Performance Standards (GIPS) and requested board members addresses be added to the STRS Ohio website. Mr. Hill recognized James Robertson to address the board. Mr. Robertson suggested several studies the board should commission regarding benefit payments. REPORT ON ENTERPRISE RISK MANAGEMENT The chair recognized Mr. Snyder for the Enterprise Risk Management (ERM) update. Mr. Snyder reviewed the governance and framework for identifying and addressing enterprisewide risks. Enterprise risk management is owned by senior leadership and managed in their respective areas in line with their job functions. Mr. Snyder reviewed the significant risk topics discussed in the last year. Board approved changes to assumptions to recognize continual improvement in participant s longevity, lower expected investment returns and lower expected payroll growth. Board adopted asset mix changes as a result of the asset-liability study and a new liquidity treasury portfolio was added to mitigate liquidity risk concerns. Board approved reducing the COLA to 0% to preserve the fiscal integrity of the plan and to maintain funding period and funded ratio within the scorecard parameters. Board is evaluating action because the Health Care Fund solvency concerns caused by health care trend rates and investment return volatility. Staff continues participation in The Risk Institute attending The Digital Revolution and Risk Evolution annual conference. IV

6 Mr. Snyder reviewed the ERM impact and probability analysis. There was little movement from the prior year analysis. He provided examples of ongoing policies and processes that provide ERM monitoring tools and feedback. There were no requests from the board. REPORT FROM MEMBER BENEFITS HEALTH CARE Mr. Hill recognized Gary Russell, deputy executive director Member Benefits, for a Report From Member Benefits Health Care. Mr. Russell began by reviewing the criteria for selecting a pathway for determining the level of subsidy provided for health care premiums. In particular, Mr. Russell discussed the solvency period, the level of protection against inflation and the transition to the new pathway. The options still under consideration provide a solvency period for the health care fund of between 30 to 33 years and 5% to 7% inflation protection for Medicare enrollees and 0% to 1% inflation protection for non-medicare enrollees. Mr. Russell then reviewed the projected lifetime costs for each of the options under consideration and the projected premiums with each option for a retiree with at least 30 years of service credit. He explained that there would be two sets of premiums for non-medicare enrollees under option 7 Medicare subsidy for all due to grandfathering members who retired before Following discussion, Mr. Price moved, seconded by Mr. Myers to approve health care strategic pathway option 3b below to be implemented January 1, Option Non-Medicare Subsidy Increase Cap Medicare Subsidy Increase Cap Non-Medicare Grandfathered If Retired Prior To Projected Years of Solvency 3 0% 5% a 1% 5% b 0% 6% Grandfathered 7% Non-Grandfathered decrease to Medicare subsidy then 7% cap 7% Upon roll call the vote was as follows: Mr. Price, yes; Mr. Myers, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Stein, no; Ms. Walters, no; Ms. Wickham, yes; Mr. Hill, yes. Motion carried. There were no requests from the board. V

7 REPORT AND APPROVAL OF EXPENSES DURING SEPTEMBER 2017 Mr. Hill moved, seconded by Mr. Stein that the report appended on Pages 3 through 8 be accepted and the expenditures for the month ended Sept. 30, 2017, in the total amount of $8,849,356 be approved. Upon roll call the vote was as follows: Mr. Hill, yes; Mr. Stein, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Myers, yes; Mr. Price, yes; Ms. Walters, yes; Ms. Wickham, yes. Motion carried. CONSENT MOTION Mr. Hill moved, seconded by Mr. Stein that the Retirement Board approves the member benefitsrelated motions appended on Pages 9 through 53. Upon roll call the vote was as follows: Mr. Hill, yes; Mr. Stein, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Myers, yes; Mr. Price, yes; Ms. Walters, yes; Ms. Wickham, yes. Motion carried. AD HOC COMMITTEE FOR BOARD EDUCATION & PLANNING REPORT Mr. Hill moved, seconded by Mr. Stein that the following Ad Hoc Committee for Board Education & Planning report be approved as submitted and that the board affirm and adopt the recommendations of the committee. The Ad Hoc Committee for Board Education & Planning was called to order at approximately 3:20 p.m. on Thursday, September 21, 2017, by the chair, Mr. Stein. Committee members Ms. Hayden, Mr. Myers and Ms. Walters were in attendance along with board member Mr. Price. The committee agreed that the purpose of the January meeting is for education and strategic planning and confirmed the meeting will take place at the STRS Ohio offices in Columbus on Jan. 25 and 26, Dr. Ed Gaydos will serve as the meeting facilitator. The committee discussed proposed topics for the meeting, including: Strategic Goals update Board self-assessment Best practices among public pension plans related to governance, investments, benefits and health care Board s role in disability review process Ethics provisions applicable to Ohio public pension officials Plan governance and fiduciary duties Executive director evaluation and goal setting VI

8 Technology refresher Staff will work with committee chair Mr. Stein to fully develop the January meeting agenda. The ad hoc committee meeting adjourned at approximately 4 p.m. Upon roll call the vote was as follows: Mr. Hill, yes; Mr. Stein, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Myers, yes; Mr. Price, yes; Ms. Walters, yes; Ms. Wickham, yes. Motion carried. WAIVER OF COMPLIANCE WITH OPERATIONAL ASSET PROTECTION POLICY Mr. Hill moved, seconded by Mr. Stein to waive compliance with Paragraph E of the Board s Operational Asset Protection Policy in reference to the continuation of third party administrator services from Aetna Life Insurance Company and Medicare Mutual Insurance, LLC, and the continuation of the Medicare Advantage PPO plan from Aetna Life Insurance Company to support the STRS Ohio Health Care Program. Upon roll call the vote was as follows: Mr. Hill, yes; Mr. Stein, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Myers, yes; Mr. Price, yes; Ms. Walters, yes; Ms. Wickham, yes. Motion carried. OLD BUSINESS/NEW BUSINESS Mr. Myers provided a review of the NCTR 95 th Annual Conference. Mr. Hill stated in response to member requests, the Retirement Board is moving the public participation portion of future board meetings to a morning time slot. There was brief discussion regarding the request to record future meetings. The practice of recording the board meetings was stopped several years ago. The board is not required to record its meetings and when it did, the demand was very low for those recordings. Approved minutes are posted to the STRS Ohio website and provide enough detail for the membership to know what the board discussed. ADJOURNMENT Mr. Hill announced there was no meeting scheduled in November. The next Retirement Board meetings will be held during Dec. 13, 14 & 15, With no further business to come before the board the meeting adjourned at 2:40 p.m. VII

9 A P P E N D I C E S

10 Executive Director s Report Oct. 19, 2017 Annual Statements of Account Mailed to Members Members began receiving their Annual Statements for the Defined Benefit Plan at the end of September. Mailing will continue through mid-october for the Combined Plan and Reemployed Retiree statements. Many STRS Ohio members have chosen paperless delivery of their Annual Statement and instead view the statement through their Online Personal Account. Nearly 59,000 members have now opted out of receiving paper statements. Regardless of whether a member received a paper statement, all members can view a PDF version of their statement through the STRS Ohio website s Online Personal Account section. Member Services Earns High Satisfaction Scores for First Quarter About 3,100 members who called the Member Services Center, met with a benefits counselor or attended a member education program during the first quarter chose to complete a satisfaction survey. Nearly 95% of respondents gave positive ratings for the service they received, stating they were satisfied with the service or STRS Ohio met their expectations. Members who met with a retirement counselor rated the counselor a perfect 10 in 67% of the responses. Presenters at group education programs were rated a perfect 10 in 34% of the responses. Online Reemployed Retiree Payment Application Now Available The online payment application for reemployed retirees was launched on the Online Personal Account section of the STRS Ohio website on Oct. 3. The new functionality allows reemployed retirees to apply to withdraw their account through the secure online portal. In addition, follow up requests to employers for the reemployed retiree s last day of service and current fiscal year contributions are automatically requested through the employer self-service site. This provides more application options for reemployed retirees and will increase the processing efficienc y, as about 3,000 reemployed lump-sum withdrawals are processed annually. The project was a cross-departmental effort of Member Benefits, Finance, ITS and Communication Services. Staff Provides Updates to Various Member Groups Member education specialists and benefits counselors were invited to speak at 12 meetings across the state in September. More than 500 members and retirees attended one of these sessions. Staff presented at three schools as part of in-service programs and at nine Ohio Retirement Teacher Association chapters. Presenters updated the groups on the recent changes to the cost-of-living adjustment and reviewed health care options and costs for the 2018 plan year. In addition, Governmental Relations staff provided STRS Ohio updates to about 60 members at meetings of the Buckeye Association of School Administrators and the Ohio Council of Higher Education Retirees. Employers Submitting Payroll Estimates STRS Ohio sent payroll estimate requests to 926 school districts in September. The Finance Department collects estimated payroll figures annually and uses the estimates to adjust deductions of employer contributions from state foundation payments. In fiscal 2017, more than $1.1 billion in employer contributions was received directly from the State of Ohio on behalf of city, local, exempted villages and community schools. As of Oct. 6, STRS Ohio had received 739 estimates. Estimated payroll thus far reflects a 3.2% increase over the prior year for the reporting schools. Preliminary Financial Statements Included in October Board Materials Preliminary financial statements show unaudited plan net position increased 7.6% to end June 2017 at $75.8 billion. The Health Care Fund ended June 30, 2017, at $3.5 billion, up from $3.2 billion at June 30, The defined contribution fund increased to $1.25 billion in fiscal year 2017 from $1.03 billion in fiscal year Total plan contributions in fiscal 2017 were $3.5 billion, up from $3.3 billion in fiscal 2016; total investment income was $9.7 billion, up considerably from $390 million in fiscal 2016; and total plan deductions (including benefit payments, refunds and administrative expenses) were $7.8 billion, below the $8.1 billion figure in fiscal CliftonLarsonAllen will complete its audit and report to the board at the December board meeting. More detailed information about the fiscal year 2017 financial statements is included with the October board materials. (continued)

11 Annual System Audit of Investment Reporting Requirements Completed The investment reporting requirements of the Office of Budget and Management (OBM) were submitted in September. CliftonLarsonAllen completed its audit of investment information for fiscal year 2017 and provided a clean opinion on the schedules that were submitted to OBM. The OBM requirements are provided so that the State of Ohio may report the investment information in its Comprehensive Annual Financial Report. These requirements include investment disclosures as defined by GASB Statement No. 40 Deposit and Investment Risk Disclosures, GASB Statement No. 53 Accounting and Financial Reporting for Derivative Instruments and GASB Statement No. 72 Fair Value Measurement and Application. The Executive Director s Report highlights items of interest for the board each month. In addition, the Strategic Goals document has also been updated and is included in the board s meeting materials, along with a current copy of Legislative News.

12 STATE TEACHERS RETIREMENT SYSTEM Actual Expenses vs. Budget For the Month and Fiscal Year-to-Date Ended September 30, 2017 Expected Prior Year-to- Budget- Annual Year-to- September August Date to-date Budget Date Salaries and Wages $ 5,763,234 $ 3,857,933 $ 13,491,978 $ 13,432,553 $ 60,533,200 $ 13,400,006 Fringe Benefits 1,501,209 1,261,730 4,007,673 4,091,470 16,713,300 4,009,500 Professional and Technical Services 731, ,746 2,045,046 2,459,648 10,759,000 2,659,401 Repairs and Maintenance 304, ,204 1,515,218 1,377,509 5,728,500 1,811,629 Travel and Vehicles 40,577 22,557 72, , ,900 90,441 Communications 186, , , ,515 2,004, ,208 Utilities 86,630 93, , ,692 1,018, ,950 Supplies and Materials 43,559 75, , , , ,232 Other Expenses 29,496 26, , ,317 1,142, ,676 Total Operating Expenses $ 8,687,110 $ 6,521,731 $ 22,096,380 $ 22,591,660 $ 99,555,600 $ 22,861,043 Capital Budget $ 162,036 $ 37,037 $ 234,993 $ 234,993 $ 3,306,000 $ 342,111 State of Ohio Expenses $ 210 $ 194 $ 62,294 $ 62,294 $ 364,000 $ 57,406 Staffing Information: September August July Budgeted FTE Associates Full Time Equivalent Associates Open FTE Positions Mr. Hill moved, seconded by Mr. Stein, that the report be accepted and the expenditures for the month ending September 30, 2017 in the total amount of $8,849,356 be approved. Upon roll call the vote was as follows: Mr. Hill, yes; Mr. Stein, yes; Mr. Brooks, yes; Ms. Correthers, yes; Ms. Hayden, yes; Mr. Myers, yes; Mr. Price, yes; Ms. Walters, yes; Ms. Wickham, yes. Motion carried.

13 STATE TEACHERS RETIREMENT SYSTEM Actual Expenses vs. Budget For the Month and Fiscal Year-to-Date Ended September 30, 2017 Expected Prior Year-to- Budget- Annual Year-to- September August Date to-date Budget Date SALARIES AND WAGES Salaries and Wages $ 5,747,353 $ 3,839,364 $ 13,398,458 $ 13,331,473 $ 49,516,900 $ 13,284,811 Other Compensation 2, ,338 15,250 33,100 16,898 Incentive Compensation ,000,000 0 Unused Vacation and Sick Leave 0 5,593 48,034 48,034 1,823,000 53,249 Overtime 11,551 5,406 24,223 20,870 90,600 20,448 Service Awards 1,950 6,875 16,925 16,925 69,600 24,600 Total Salaries and Wages $ 5,763,234 $ 3,857,933 $ 13,491,978 $ 13,432,553 $ 60,533,200 $ 13,400,006 FRINGE BENEFITS OPERS Employer Cost $ 816,335 $ 542,142 $ 1,900,947 $ 1,873,833 $ 7,919,100 $ 1,881,406 Medical/Hospitalization Insurance 512, ,586 1,626,167 1,687,500 6,750,000 1,661,697 Medicare 81,896 54, , , , ,938 Dental Insurance 50,575 50, , , , ,224 Educational Assistance ,878 31,925 31, ,000 24,732 Workers' Compensation 12,821 8,902 30,797 32, ,000 32,623 Life Insurance 17,142 17,164 50,890 50, ,300 50,374 Disability Insurance 6,913 6,891 20,688 20,562 81,900 20,538 Wellness (2,595) (2,140) (6,815) 0 0 (7,032) Unemployment Compensation 5,026 5,000 10, ,300 0 Total Fringe Benefits $ 1,501,209 $ 1,261,730 $ 4,007,673 $ 4,091,470 $ 16,713,300 $ 4,009,500 PROFESSIONAL AND TECHNICAL SERVICES Actuary $ 0 $ 0 $ 0 $ 1,589 $ 272,500 $ 2,993 Audit , ,500 21,833 Banking Expense 13,877 9,232 37,516 61, ,500 55,920 Board Election Processing ,000 0 Contract Services 1, ,000 48, ,000 37,881 Custodial Banking Fees 33,531 20,647 86, ,750 2,512, ,073 Data Management and Analytics ,000 (2,122) Disaster Recovery 1,094 1,055 2,149 2,232 14,000 2,167 Employment Verification , Health Care Consultant ,000 20,800 Insurance Consultant ,500 15,331 92,500 15,000 Investigative Services ,111 1,033 15,800 1,096 Investment Consultant 20,834 20,833 41, , , ,691 Investment Research Services 563, ,098 1,265,974 1,241,271 2,550,000 1,180,263 Legal Fees 5,606 10,498 16,517 32, ,000 32,575 Medical Examinations 34,096 29,051 81, , ,000 87,157 Other Consulting Services 41,544 12,261 53, , , ,109 Quotation and Analytic Services 3,633 9, , ,000 1,972, ,832 Real Estate Contract Services 0 6,981 6,981 12,500 50,000 0 Recruitment Fees 0 1,045 16,255 2,811 22,400 4,406 Temporary Employment Services 11,429 1,564 13,361 5,000 20,000 2,904 Total Professional/Technical Services $ 731,116 $ 432,746 $ 2,045,046 $ 2,459,648 $ 10,759,000 $ 2,659,401

14 September Expenses vs. Budget Page 2 Expected Prior Year-to- Budget- Annual Year-to- September August Date to-date Budget Date REPAIRS AND MAINTENANCE Building Maintenance and Equipment $ 16,093 $ 56,527 $ 117,801 $ 199,067 $ 715,000 $ 200,482 Copiers 5,756 6,192 11,811 39, ,000 31,301 Data Processing Equipment 267, ,477 1,342,824 1,077,250 4,309,000 1,502,325 Elevators ,000 0 Mail Center Equipment 3, ,831 7,936 21,500 3,831 Property Tax and Leases 9,057 9,056 27,169 40, ,000 60,522 Safety and Security Equipment 1,451 7,283 8,734 6, ,000 4,277 Trash Removal 759 1,669 3,048 5,454 20,000 8,891 Total Repairs and Maintenance $ 304,468 $ 610,204 $ 1,515,218 $ 1,377,509 $ 5,728,500 $ 1,811,629 TRAVEL AND VEHICLES Gasoline $ 637 $ 545 $ 1,182 $ 1,856 $ 12,000 $ 1,175 Staff and Board Travel 39,859 21,821 70,786 98, ,900 88,029 Vehicle Maintenance ,925 13,000 1,237 Total Travel and Vehicles $ 40,577 $ 22,557 $ 72,340 $ 102,530 $ 723,900 $ 90,441 COMMUNICATIONS Courier Services $ 1,884 $ 1,464 $ 4,305 $ 4,159 $ 27,200 $ 3,922 Outsourced Distribution 1,418 4,921 6,339 26, ,000 2,946 Photography / Media ,000 0 Postage 127, , , ,500 1,130, ,594 Printing 23,973 22,399 46, , , ,138 Telecommunications 32,377 5,728 57,674 54, ,900 44,608 Total Communications $ 186,821 $ 141,298 $ 473,645 $ 482,515 $ 2,004,100 $ 273,208 UTILITIES Electricity $ 76,969 $ 79,957 $ 156,926 $ 165,898 $ 800,000 $ 176,798 Natural Gas 1,685 6,365 8,050 10, ,000 13,941 Oil ,000 0 Water 7,976 7,300 15,276 24,223 80,000 24,211 Total Utilities $ 86,630 $ 93,622 $ 180,252 $ 200,692 $ 1,018,000 $ 214,950 SUPPLIES AND MATERIALS Equipment Supplies $ 25,740 $ 54,698 $ 100,715 $ 140,820 $ 593,800 $ 147,750 Food Service Supplies 629 7,802 6,854 12,000 48,000 11,582 Office Supplies 5,831 4,028 11,211 8,282 65,000 6,308 Personal Computer Software ,290 19,132 80,300 15,737 Publications/Subscriptions 9,274 4,838 14,620 27, ,600 21,156 Uniforms 2,031 3,326 7,409 9,560 36,000 11,699 Total Supplies and Materials $ 43,559 $ 75,374 $ 143,099 $ 217,428 $ 932,700 $ 214,232

15 September Expenses vs. Budget Page 3 Expected Prior Year-to- Budget- Annual Year-to- September August Date to-date Budget Date OTHER EXPENSES Board Employer Reimbursement $ 0 $ 0 $ 0 $ 0 $ 3,000 $ 0 Conferences and Seminars 11,247 6,686 24,138 23,689 89,900 19,474 Dues and Licenses 3,329 1,668 9,764 10, ,500 10,409 Equipment Rental Insurance 0 3,881 95, , , ,137 Member/Employer Education Programs 6,874 9,409 13,675 41, ,200 17,687 Miscellaneous Expense 1,094 1,476 2,618 3,951 25,000 3,254 Other Board Expense ,175 22, Other Staff Expense 1, ,281 1,000 4,000 (236) Training 5,193 2,844 19,142 39, ,000 33,117 Total Other Expenses $ 29,496 $ 26,267 $ 167,129 $ 227,317 $ 1,142,900 $ 187,676 Total Operating Expenses $ 8,687,110 $ 6,521,731 $ 22,096,380 $ 22,591,660 $ 99,555,600 $ 22,861,043 Expected Prior Year-to- Budget- Annual Year-to- September August Date to-date Budget Date Building Improvements $ 0 $ 0 $ 35,920 $ 35,920 $ 320,000 $ 11,314 Furniture & Fixtures Audio Visual Information Processing 24, ,999 24, , ,334 Maintenance ,200 0 Miscellaneous Office ,500 0 Telecommunications Vehicles Computer Software 137,037 37, , ,074 2,104, ,463 Total Capital Budget $ 162,036 $ 37,037 $ 234,993 $ 234,993 $ 3,306,000 $ 342,111 Total State of Ohio Expenses $ 210 $ 194 $ 62,294 $ 62,294 $ 364,000 $ 57,406

16 September 2017 Expense Notes Salaries and Fringe Benefits Salaries and Wages and associated fringe benefits were higher in September due to three paydays versus the typical two paydays per month. Professional and Technical Services Custodial Banking Fees includes one month of domestic custody charges. Fees to the Board s alternative investment advisor are included in Investment Consultant. Quarterly fundamental and annual S&P research are included in Investment Research Services. Government relations support and external investment performance verification services are included in Other Consulting Services. Temporary Employment Services includes three months of external safety and security services. Repairs and Maintenance Building Maintenance and Equipment includes generator and computer room HVAC maintenance. Annual maintenance for imaging equipment, IBM hardware and software, performance monitoring, and data mapping tools are included in Data Processing Equipment. Annual mail equipment maintenance is included in Mail Center Equipment. Travel and Vehicles Staff and Board Travel includes counseling and employer meetings, health care and board conference travel, and investment due diligence trips. Communications Annual member statements are included in Postage. Six weeks of phone charges are included in Telecommunications due to billing changes. Utilities Electricity, Gas and Water charges are for the month of August. Supplies and Materials Replacement monitors, printers and laptop computers are included in Equipment Supplies. Annual American City Business Journal subscriptions and Windows 10 and tax reference guides are included in Publications/Subscriptions. Other Expenses Conferences and Seminars includes internal audit education and registration fees for the National Council on Teacher Retirement and MRI real estate annual conferences. Online safety education is included in Training. Capital Budget September capital items include STaRS Version 10 upgrade costs and a security firewall upgrade.

17 ***UNAUDITED*** State Teachers Retirement System of Ohio Statement of Changes in Net Position For the Period July 1, 2017 through September 30, 2017 Defined Benefit Plans Defined Contribution Postemployment Healthcare Totals Additions: Contributions: Member 371,645,290 21,999,985 $393,645,275 Employer 387,692,277 9,428,565 $397,120,842 Transfers from Defined Contribution Plan 6,045,287 (6,045,287) Medicare D reimbursement 13,098,312 13,098,312 Benefit recipient healthcare premiums 83,673,918 83,673,918 Other retirement systems 5,887,439 5,887,439 Total contributions 771,270,294 25,383,263 96,772, ,425,787 Net investment income (loss) 2,230,920,118 43,079, ,000,000 2,390,000,000 Total additions $3,002,190,412 $68,463,145 $212,772,230 $3,283,425,787 Deductions: Service retirement 1,695,035,929 1,695,035,929 Disability retirement 52,269,543 52,269,543 Survivor benefits 31,286,318 31,286,318 Health care 153,473, ,473,831 Other 13,865,028 13,865,028 Total benefit payments 1,792,456, ,473,831 1,945,930,649 Refunds to members who have withdrawn 69,258,196 10,859,143 80,117,339 Administrative expenses 21,515, ,835 22,158,674 Total deductions $1,883,230,853 $10,859,143 $154,116,666 $2,048,206,662 Net increase (decrease) $1,118,959,559 $57,604,002 $58,655,564 $1,235,219,125 Net position held in trust for pension and postemployment healthcare benefits Beginning of year 71,118,707,206 1,252,518,913 3,475,778,910 75,847,005,029 End of period $72,237,666,765 $1,310,122,915 $3,534,434,474 $77,082,224,154 ***UNAUDITED***

18 PROPOSED MOTION Retirement Board Consent Motion October 19, 2017 Mr. Hill moved, seconded by Mr. Stein, that the Retirement Board approve the following member benefits-related motions. 1. Survivor Benefits 2. Recommended Disability Benefits 3. Disability Transfer to OPERS/SERS 4. Denial or Termination of Disability Benefits 5. Termination of Disability Benefits 6. Rescind Prior Action 7. Action on Appeal Hearing 8. Service Retirements and Reemployment Benefits 10/19/2017

19 THE STATE TEACHERS RETIREMENT SYSTEM OF OHIO 275 East Broad Street Columbus, OH (The following reports are not public information. Reference Section , Ohio Revised Code.) REPORT TO THE RETIREMENT BOARD ON REQUEST FOR CONTRIBUTIONS DURING LEAVE OF ABSENCE REPORT TO THE RETIREMENT BOARD ON SURVIVOR BENEFITS REPORT TO THE RETIREMENT BOARD ON RECOMMENDED DISABILITY BENEFITS REPORT TO THE RETIREMENT BOARD ON DISABILITY TRANSFERS TO OPERS/SERS REPORT TO THE RETIREMENT BOARD ON DENIAL OR TERMINATION OF DISABILITY BENEFITS REPORT TO THE RETIREMENT BOARD ON RESCIND ACTION OF DENIALS REPORT TO THE RETIREMENT BOARD ON ACTION ON APPEAL HEARINGS REPORT TO THE RETIREMENT BOARD ON SERVICE RETIREMENTS AND REEMPLOYMENT BENEFITS REPORT TO THE RETIREMENT BOARD ON FINAL AVERAGE SALARY

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