WIXLIB

InvestmentsMontgomery County has established a Board to be responsible for the investment management of thePlans’ assets for the exclusive benefit of the members and participants. The Board consists of thirteen membersappointed by the County Executive and confirmed by the County Council.In overseeing the management of the assets of the Plans, the Board has developed sound and prudentinvestment policies. The Board believes an appropriate balance must be struck between risks taken and returnssought to ensure the long-term health of the defined benefit plan. The Board has adopted an investment policy thatworks to control the extent of downside risk to which the System is exposed while maximizing the potential forlong- term increases in the value of assets. To achieve this objective, System assets are allocated to a broad array ofinvestment sectors as follows: domestic equity 14.2 percent, international equity 12.9 percent, global equity 2.7percent, high yield 7.7 percent, emerging markets debt 1.3 percent, private equity 14.0 percent, credit opportunities2.4 percent, directional hedge funds 2.1 percent, long duration and cash 10.0 percent, diversifying hedge funds 2.4percent, public real assets 11.0 percent, private real assets 6.5 percent, and inflation indexed bonds 12.8 percent. Forthe twelve months ended June 30, 2021, the total time-weighted return achieved by the System’s investments was again of 27.0 percent, compared to the gain recorded by the System’s benchmark index of 21.0 percent and theactuarial assumed rate of return of 7.5 percent.Section 33-125 of the Montgomery County Code authorizes the Board to establish for members of the RSPa diversified slate of mutual and commingled investment funds from which participants may select options. TheBoard has developed an investment policy outlining its oversight of the investment products offered.The Board has also established a diversified slate of mutual and commingled funds for the County’sDeferred Compensation Plan which offers a range of options from which participants may select. The Board hasconstructed an investment policy stipulating investment objectives and oversight by the Board.FundingThe System’s actuary uses a five-year smoothed market-related value to determine the actuarial value ofassets. The smoothing prevents extreme volatility in employer contribution rates due to short-term fluctuations inthe investment markets. For the June 30, 2021 valuation, the actuarial value of assets was 4.7 billion and theaggregate actuarial liability was 4.6 billion, resulting in a funded status ratio of 103.2%.The Schedule of Changes in the Employers’ net pension liability and related ratios, included as RequiredSupplementary Information in the Financial Section, expresses the System’s fiduciary net position as a percentage ofthe total pension liability, providing one indication of the System’s funding status on a going-concern basis. Theactuary has determined that the present net asset base, expected future contributions, and investment earningsthereon, are sufficient to provide for full payment of future benefits under the entry-age normal actuarial costmethod.Internal Control Structure and Budgetary ControlsThe Plans’ management is responsible for maintaining internal accounting controls to provide reasonableassurance that transactions are properly authorized and recorded as necessary to permit preparation of financialstatements in conformity with U.S. generally accepted accounting principles. We believe the internal controls ineffect during the fiscal year ended June 30, 2021 adequately safeguard the Plans’ assets and provide reasonableassurance regarding the proper recording of financial transactions. In addition, the Board, in conjunction with theChief Administrative Officer, approves and actively monitors the annual budgets for each plan. Because the cost ofinternal controls should not exceed the anticipated benefits, the objective is to provide reasonable, rather thanabsolute, assurance that the financial statements are free of any material misstatement.Independent Audit and Actuarial CertificationThe independent public accountants’ report and actuarial certification are included in this report.6

AWARDS AND ACKNOWLEDGEMENTSCertificate of Achievement for Excellence in Financial ReportingThe Government Finance Officers Association of the United States and Canada (GFOA) awarded aCertificate of Achievement for Excellence in Financial Reporting to the Montgomery County Employee RetirementPlans for its annual comprehensive financial report for the fiscal year ended June 30, 2020. The Certificate ofAchievement is a prestigious national award, recognizing conformance with the highest standards for preparation ofstate and local government financial reports. In order to be awarded a Certificate of Achievement, a governmentunit must publish an easily readable and efficiently organized annual comprehensive financial report, whosecontents conform to program standards. Such a report must satisfy both generally accepted accounting principlesand applicable legal requirements.A Certificate of Achievement is valid for a period of one year only. The Montgomery County EmployeeRetirement Plans have received the Certificate of Achievement for the last twenty-one consecutive years. Webelieve our current annual comprehensive financial report continues to meet the Certificate of Achievement programrequirements, and we are submitting it to the GFOA.AcknowledgementsThe Plans’ annual comprehensive financial report was prepared by the Montgomery County EmployeeRetirement Plans’ staff in conjunction with staff support from the County’s Department of Finance. I would like toexpress my appreciation to the employees who have worked hard throughout the year to ensure the successfuloperation of the Plans.Respectfully submitted,Richard S. MadalenoChief Administrative OfficerPlan Administrator7

BOARD OF INVESTMENT TRUSTEESJoseph F. BeachChairPublic RepresentativeTerm Expired March 2020Berke AttilaSecretaryMontgomery County Director ofHuman ResourcesEx-Officio MemberJeffrey D. BuddleVice-ChairFire & Rescue BargainingUnit DesigneeBarry KaplanMontgomery County CouncilRepresentativeTerm Expires March 2023Diane WurdemanNon-BargainingUnit RepresentativeTerm Expired March 2020Jennifer BryantMontgomery County Director ofManagement and BudgetEx-Officio MemberMichael J. CoveyouMontgomery CountyDirector of FinanceEx-Officio MemberGino RenneOPT/SLT BargainingUnit DesigneeKelda J.C. SimpsonPolice BargainingUnit DesigneeDeborah SneadRetired EmployeesRepresentativeTerm Expires March 2024Christine KelleherMontgomery County CouncilRepresentativeTerm Expires March 2024George WilliePublic RepresentativeTerm Expired March 2020Berke AttilaMontgomery County Director ofHuman ResourcesEx-Officio Member8

ADMINISTRATIVE ORGANIZATIONProfessional ServicesActuaryGabriel Roeder Smith & CompanyAuditorSB & Company, LLCCustodial BankThe Northern Trust CompanyInvestment ConsultantsAberdeen Asset Management, Inc.Franklin Park Associates, LLCNEPC, LLCInvestment Managers-Employees' Retirement SystemAberdeen Asset Management, Inc.Acadian Asset Management LLCAdams Street PartnersAltaris Capital PartnersAltus Capital PartnersArrowstreet CapitalArroyo Energy Investors LLCAtlas Capital ResourcesBanner Ridge PartnersBison Capital PartnersBlackRock Financial ManagementBlackstone Inc.Bridgewater AssociatesBV Investment PartnersCaprock Management, LLCCarmel PartnersCastlelake LPCenter Rock Capital PartnersCIBC Asset ManagementClearlake Capital GroupCrest Rock PartnersDW Healthcare PartnersEagle Asset Management*EMR CapitalEnerVest Ltd.Excelsior Energy CapitalFederal Capital PartnersFirst Quadrant LPFranklin Park Associates, LLCGMO LLCGraycliff PartnersGreyrock Capital GroupGrosvenor Capital ManagementGryphon International*Gryphon PartnersGQG PartnersHampshire CompaniesHarbourVest PartnersHighclere International Investors LLPHomestead CapitalJ.F. Lehman & CompanyJuniper Capital LPK1 Investment Management LLCKimmeridge Energy Management CompanyKPS Capital Partners, LPLandmark Partners Inc.LBA RealtyLevine Leichtman Capital PartnersLime Rock ResourcesLongpoint Realty PartnersLoomis Sayles & Co.Luxor Capital PartnersLyme Timber CompanyMagna Hospitality GroupMarathon Asset Management (EMD)Marathon Asset Management LLP*Mason Wells Inc.Melford Capital Partners LLPMeridian Realty PartnersMiddleGround CapitalMondrian Investment Partners Ltd.Morgan StanleyNew Energy CapitalNISA Investment AdvisorsNomura Asset ManagementOdyssey Investment PartnersP/E Investments LLcPearlmark Real Estate PartnersPhoenician ResourcesPolunin Capital Partners LimitedPost Road GroupPrinceton Equity GroupPrincipal Real Estate InvestorsPineBridge Investments LLCResource Land HoldingsRhumbline Advisors*Riverside PartnersRiverside Acceleration CapitalRidgewood InfrastructureSchroder Investment ManagementSenator Investment GroupSiris Capital Group LLCSunstone PartnersTA AssociatesTailwater CapitalThoma Bravo LPTimesSquare Capital Management*VSS Capital PartnersWCM Investment Management*Wellington Management*Whitehorse Liquidity PartnersWicks GroupWNG CapitalWoodbourne Capital* Public equity commission brokers are listed on page 60.9

Montgomery County Employee Retirement PlansAdministrative Organization ChartCOUNTY EXECUTIVECHIEF ADMINISTRATIVEOFFICERBOARD OFINVESTMENTTRUSTEESExecutive ion10Financial Reporting &Compliance

FINANCIAL SECTION11

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTSThe Honorable County Council of Montgomery County, MarylandBoard of Investment TrusteesMontgomery County Employee Retirement PlansReport on the Financial StatementsWe have audited each of the accompanying statements of fiduciary net position of the MontgomeryCounty Employee Retirement Plans (the Plans) as of June 30, 2021, and the related statements ofchanges in fiduciary net position for the year then ended and the related notes to the financialstatements, as listed in the table of contents.Management’s Responsibility for the Financial StatementsThe Plans’ management is responsible for the preparation and fair presentation of these financialstatements in accordance with accounting principles generally accepted in the United States ofAmerica; this includes the design, implementation, and maintenance of internal controls relevant tothe preparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government AuditingStandards, issued by the Comptroller General of the United States. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the basic financialstatements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the basic financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal controls relevant tothe entity’s preparation and fair presentation of the basic financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the entity’s internal controls. Accordingly, we express no such opinion. Anaudit also includes evaluating the appropriateness of accounting policies used and the reasonablenessof significant accounting estimates made by management, as well as evaluating the overallpresentation of the basic financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.12

OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, thefiduciary net position of the Plans as of June 30, 2021, and the respective changes in its fiduciary netposition for the year then ended in accordance with accounting principles generally accepted in theUnited States of America.Other MattersRequired Supplementary InformationAccounting principles generally accepted in the United States of America require that themanagement’s discussion and analysis and the schedules of changes in the employer’s net pensionliability and related ratios, employer contributions and investment returns, as listed in the table ofcontents, be presented to supplement the basic financial statements. Such information, although not apart of the basic financial statements, is required by the Governmental Accounting Standards Boardwho considers it to be an essential part of financial reporting for placing the basic financialstatements in an appropriate operational, economic, or historical context. We have applied certainlimited procedures to the required supplementary information in accordance with auditing standardsgenerally accepted in the United States of America, which consisted of inquiries of managementabout the methods of preparing the information and comparing the information for consistency withmanagement’s responses to our inquiries, the financial statements, and other knowledge we obtainedduring our audit of the financial statements. We do not express an opinion or provide any assuranceon the information because the limited procedures do not provide us with sufficient evidence toexpress an opinion or provide any assurance.Other InformationOur audit was conducted for the purpose of forming an opinion on the financial statements thatcollectively comprise the Plans’ basic financial statements. The schedules of administrative expensesand investment expenses, the statements of fiduciary net position and changes in fiduciary netposition for the Employees’ Retirement System, Retirement Savings Plan and the DeferredCompensation Plan (supplementary information) and the introduction, investment, actuarial, andstatistical sections, as listed in the table of contents, are presented for purposes of additional analysisand are not a required part of the basic financial statements.The supplementary information is the responsibility of management and was derived from and relatesdirectly to the underlying accounting and other records used to prepare the basic financial statements.Such information has been subjected to the auditing procedures applied in the audit of the basicfinancial statements and certain additional procedures, including comparing and reconciling suchinformation directly to the underlying accounting and other records used to prepare the basicfinancial statements or to the basic financial statements themselves, and

Chevy Chase; Strathmore Hall Foundation, Inc.; Washington Suburban Transit Commission SkyPoint Federal ; Credit Union; and certain employees of the State Department of Assessments and Taxation; and the District Court of Maryland. The System is closed to employees hired on or after October 1, 1994, except public safety bargaining