EMPLOYES' RETIREMENT SYSTEM OF THE CITY OF MILWAUKEE ANNUITY AND PENSION BOARD. Minutes of the Annual Meeting held January 27, 2014

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1 EMPLOYES' RETIREMENT SYSTEM OF THE CITY OF MILWAUKEE ANNUITY AND PENSION BOARD Minutes of the Annual Meeting held January 27, 2014 The meeting was called to der at 9:07 a.m. Board Members Present: Board Members Not Present: Retirement System Staff Present: John Barme, Chair Larry Holland Martin Matson (represented by John Egan) Michael J. Murphy Carmelo Patti Gust Petropoulos Tom Klusman Ron Walter Bernard J. Allen, Executive Direct Beth Cleary, Deputy Direct David Silber, Chief Investment Officer Suzanne Ftier, Board Stenographer Others Present: Rudy Konrad, City Attney s Office; and Mike Jankowski, Retiree. Introduction of New Board Member. Mr. Barme introduced the Board s newest member, Tom Klusman and welcomed him to the Board. Officers f Election of Chair. Mr. Barme passed the gavel to Mr. Petropoulos, Vice Chair. Mr. Petropoulos asked f a motion f nominations f Chair. It was moved by Mr. Holland and seconded by Mr. Murphy to nominate Mr. Barme f Chair. Mr. Petropoulos asked three me times f any further nominations. There being no further nominations, nominations were closed and a unanimous vote was cast f Mr. Barme as Chair of the Annuity and Pension Board. Election of Vice-Chair. Mr. Barme asked f a motion f nominations f Vice-Chair. It was moved by Mr. Patti and seconded by Mr. Holland to nominate Mr. Petropoulos f Vice-Chair. Mr. Barme asked three me times f any further nominations. There being no further nominations, nominations were closed and a unanimous vote was cast f Mr. Petropoulos as Vice-Chair of the Annuity and Pension Board. of Minutes. Mr. Allen presented the minutes of the Regular Meeting held December 19, It was moved by Mr. Petropoulos, seconded by Mr. Klusman, and

2 unanimously carried, to approve the Minutes of the Regular Meeting held December 19, Chief Investment Officer Rept. As a matter of infmation Board members received a copy of the CIO Rept. Mr. Silber handed out a copy of the Perfmance Update Charts. He stated that from an investment standpoint 2013 was an outstanding year. From a gross of fee perspective ERS is looking at a 19.6 percent return and, net of fees, that translates into 19.3 percent. He also spoke about the role of ERS asset allocation and manager perfmance, and perfmance so far in Mr. Silber repted that the Fund ended the month of December with a value of $4.9 billion, representing a monthly return of 1.5 percent, matching its blended benchmark return. He repted that as of January 24, 2014, the Fund is down approximately 1.7 percent and has a value of $4.82 billion. Mr. Silber stated that the 19.3 percent net of fee return in 2013 translated into: capital market gains of $818.8 million; paid out $333.3 million in benefits and expenses; and received contributions of $177.5 million. As of January 24, 2014, the Fund has year-todate: capital market losses of $73.3 million, paid out $2.1 million in benefits and expenses; and received contributions of $2.8 million. He indicated that the Fund will be withdrawing $12 million from the Nthern Trust S&P 500 Index Fund in January to pay monthly benefits and expenses. This is a lower number than usual because the ERS expects to received approximately $60 million in City and Agency contributions at the end of January. Mr. Silber infmed the Board that the investment team is fully staffed as Tom Courtright started on January 21, He would have been present at the meeting but f his need to attend New Employee Orientation. of Diversified Absolute Return Search Finalists. As a matter of infmation, Board members received a copy of a memandum from Callan Associates dated January 22, Mr. Silber spoke about the search f the Absolute Return managers stating the interviews befe the Investment Committee will be held on February 6 and 7. After discussion, it was moved by Mr. Petropoulos, seconded by Mr. Patti, and unanimously carried, to approve the Diversified Absolute Return Search Finalists. Investment Committee Rept. Mr. Petropoulos stated that the Committee welcomed Mr. Fuss who entertained the Committee with his musing, predictions and wisdom. Discussion ensued. Administration and Operations Committee Rept. Mr. Barme stated that the A & O Committee received updates on the IT Ptfolio and ganizational/personnel reclasses. 2

3 New Business. Authization to Sign Vouchers. The Secretary presented the following resolution in accdance with Section (11) of the Retirement Act: RESOLVED, That the following persons are hereby designated and authized to sign vouchers f payments from funds of the Employes' Retirement System to authize fund transfers with the custodian bank: And be it Any two of the following: Chairman, John Barme Vice Chairman, Gust Petropoulos City Comptroller, Martin Matson Special Deputy Comptroller, Glenn Steinbrecher Deputy Comptroller, John Egan Secretary & Executive Direct, Bernard J. Allen Deputy Direct, Beth Conradson Cleary Chief Investment Officer, David Silber FURTHER RESOLVED, That a duly-attested copy of this resolution, bearing on its face specimen signatures of the above-designated persons, shall be fwarded to the City Treasurer and the Custodian Bank. Retirements, Death Claims, and Refunds. Mr. Allen presented the following activity, as well as Service Credits f the month of December Active Death Benefits repted $165, Retired Death Benefits repted $113, Refund of Member Contributions paid $641, After discussion, it was moved by Mr. Petropoulos, seconded by Mr. Egan, and unanimously carried, that the above-indicated retirements, death claims, and refunds be approved. 3

4 Mr. Barme noted that a motion was needed f the Authization to Sign Vouchers. It was moved by Mr. Patti, seconded by Mr. Holland, and unanimously carried, to approve the Authization to Sign Vouchers. Conference Requests. Mr. Allen repted that requests to attend the following conferences had been submitted: Carmelo Patti 2014 Annual Institutional Symposium Spons: DFA Austin, TX Date(s): February 3 5, 2014 Estimated Cost: $1,500 Beth Cleary Winter Section Meeting Spons: National Assn. of Public Pension Attneys Washington, DC Date(s): February 19 21, 2014 Estimated Cost: $1,850 John Barme Roundtable f Public and Taft Hartley Plans Spons: Institutional Invests Los Angeles, CA Date(s): April 23 25, 2014 Estimated Cost: $1,500 John Barme 12 th Annual Pensions & Capital Stewardship Conference Spons: Lab & Wklife Program Harvard Law School Boston, MA Date(s): May 7 9, 2014 Estimated Cost: $1,500 Gust Petropoulos SALT Conference Spons: SkyBridge Capital Las Vegas, NV Date(s): May 13 16, 2014 Estimated Cost: $2,000 It was moved by Mr. Klusman, seconded by Mr. Patti, and unanimously carried, to approve the conference requests submitted by Messrs. Patti, Barme, Petropoulos, and Ms. Cleary. Referral to A & O Committee Close out of 2013 Budget and Referral to A & O Committee Baker Tilly Financial Audit. Mr. Allen stated these were annual items. Mr. Barme directed both items be referred to the A & O Committee. 4

5 2013 Securities Lending Budget. As a matter of infmation, Board members received a copy of the Annual Summary Securities Lending Income and Expenses: Mr. Silber updated the Board on the Securities Lending Budget and recommended approval of transferring the $1.52 million from the expense account to ERS cash account to use f paying ERS expenses. It was moved by Mr. Murphy, seconded by Mr. Holland, and unanimously carried, to approve transfer of the $1.52 million to ERS cash account. Medical Repts. All Duty & Ordinary Disability Applications & Re-examinations. Mr. Allen presented certifications of the Fire and Police Medical Panel Physicians and the Medical Council relative to Duty & Ordinary Disability Retirement benefits as follows: Police New Applications - Duty Joel Kujawa Effective 11/19/2013 Fire Re-examinations Robert Smith GC New Applications Duty Martha Wilxocson Sasha Gulley Jose Cavazos GC New Applications Ordinary Ronald Wilson Effective 1/4/2104 Jose Cavazos Effective 7/10/2013 Sasha Gulley Effective 10/25/2013 Denise Jackson Effective 11/28/2013 GC Re-examinations Ordinary Joseph Camuy Ajamu Nosakhere Elizabeth Shannon Susan Parkman Denial Denial Denial 5

6 GC Re-examinations Duty Dwaine Allison It was moved by Mr. Klusman, seconded by Mr. Patti, and unanimously carried, to accept the afementioned recommendations of the Fire and Police Medical Panel Physicians and the Medical Council. Unfinished Business. Legal Opinion and Service Requests Pending. As a matter of infmation, Mr. Allen presented a list of pending requests f legal opinions and service requests made to the City Attney. Legal Opinions Obtained. None. Legislation Requests Pending and Proposed Legislation. As a matter of infmation, Mr. Allen presented a list of pending requests f legislation. Executive Direct s Rept Inventy of ERS Projects. As a matter of infmation, Mr. Allen presented a rept on the ERS projects and updated the Board on ERS activities. Infmational The following is a list of infmational items: 1) Rept on Claims and Litigation Memandum dated January 27, 2014, which gives the status of litigation involving the ERS, as prepared by staff of the ERS and City Attney s office. 2) List of Client Conferences and Trustee Education f ) Class Action Lawsuit Rept. 4) Adjusted Quarterly Cost Basis of Equity December 31, ) Minutes of the Administration and Operations Committee Meeting held October 15, ) Minutes of the Administration and Operations Committee Meeting held December 17, ) Copies of the Board Rules and Regulations and ERS Ethics Policy. The following is a list of activities since the last Board meeting, copies sent with meeting notice and attached to minutes: 8) Rept on Bills. 9) Deployment of Assets. 10) Securities Lending Revenue and Budget Repts. 6

7 11) Preliminary Perfmance Rept/Asset and Manager Allocation Pie Charts. 12) ERS Holdings Rept. After discussion, it was moved by Mr. Petropoulos, seconded by Mr. Patti, and unanimously carried, to accept and place on file the afementioned infmational items. There being no further business, Mr. Barme adjourned the meeting at 9:50 a.m. Bernard J. Allen Secretary and Executive Direct (NOTE: All proceedings of the Annuity and Pension Board Meetings and related Committee Meetings are recded. All recdings and material mentioned herein are on file in the office of the Employes Retirement System, 789 N. Water Street, Suite 300.) 7