Book 1 Page 417 04-24-2024 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF APRIL 24, 2024 Present: Chair Michael Hartley, Vice Chair Charles Joseph, Secretary/Treasurer: Shayla Griggs, and Trustee Scott Snow. Others: Attorney Pedro Herrera, Attorney Veronica Ucros, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Trustee Heather Mushrush. 1. CALL MEETING TO ORDER: Presenter(s): Chair Hartley. Chair Hartley called the Sarasota Firefighters' Pension Plan (Plan) Board of Trustees Regular meeting to order at 9.00 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary/lreasurer Griggs. Trustee Snow led the Board and meeting attendees in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley. Chair Hartley stated for the record, "We may disagree, but we will be respectful to one another. We will direct all comments to issues. We will not engage in personal attacks." 4. ROLL CALL: Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin called roll; Trustee Mushrush was not in attendance. Chair Hartley noted that Trustee Mushrush's absence was excused. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Membership Meeting of March 27, 2024. Presenter(s): Chair Hartley Vice Chair Joseph asked if Matthew Witschel of Hudson Edge Investment Partners (Hudson), had advised the Plan of any conversations between Hudson and Graystone Consulting, as discussed in the March 27, 2024, meeting. Pension Plans Administrator Martin advised that she has not received any communications from Mr. Witschel regarding the topic and would contact Mr. Witschel today. Vice Chair Joseph made a motion to approve the minutes of the March 27, 2024, Membership Meeting; Secretary Griggs seconded the motion. The motion passed unanimously (4-0). 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: Brown Advisory, Performance Review as of March 31, 2024. Presenter(s): Katie Erich, Regional Investment Consultant; Tom Simunovic, Investment Specialist, Large-Cap Sustainable Grow; Brown Advisory. Tom Simunovic of Brown Advisory (Brown) appeared before the Board telephonically and introduced himself. Mr. Simunovic provided a performance review from January 2023 through Q1 2024. In 2023, the portfolio returned 40% on an absolute basis and trailed the Russell 1000 Growth benchmark by 130 basis points (bps); in Q1 2024, the portfolio returned 11% absolute and trailed the benchmark by 30 bps. He was unconcerned about the relative performance because the portfolio performed as intended as a style-true, quality growth fund. The market favored growth managers in 2023, and the year was defined byi increased concentration across most broad-market indexes, unprecedented narrowness in which the top 10 companies provided 81% of the benchmark's return, and the persistence of intra-quarter volatility as the market flipped back and forth from bull to bear markets each month, as it had for the last 10 quarters. Volatile markets provide the least efficiency, and Brown strives to take advantage of short-term dislocations over the ensuing market cycle of 4 to 6 years, which is its typical holding period. Mr. Simunovic explained how stock picking benefited the portfolio's performance from Q1 2023 through Q1 2024. Large, cloud service providers, which utilize artificial intelligence (AI), such as Google, Amazon, and Microsoft, and semiconductor stocks which saw boosts in demands for microchips for AI both directly aided the portfolio's performance. The largest single contributor to performance was Nvidia which tripled in value during 2023 and is the portfolio's largest overweighted position; the portfolio's 5 semiconductor stocks, as at technology subsector, contributed the most to performance. Further, all of the portfolio's software stocks outperformed both the benchmark's software subsector, and the broader market. The portfolio saw greater returns in the Industrials, Materials, and Financial Services and Consumer Discretionary sectors. Mr. Simunovic discussed the portfolio's greatest detractors from performance during the same timeframe. The Health Care sector had the worst relative pertormance during 2023 since 1999. Destocking, lower demand for bioprocessing in Chinese companies, and investors' excessive demand for companies which produce GLP 1 inhibitor-based drugs all caused the portfolio's Health Care sector holdings to underperform. In Consumer Discretionary, the portfolio's positions in Nike and Home Depot underperformed; Brown has since sold off those positions. The last sector tol have an adverse impact on the portfolio's performance was Real Estate. Brown holds only one Real Estate stock, American Tower, which operates cell phone towers. While American Tower isn't nearly as sensitive to the factors which typically influence most real estate stocks, American Tower and the Real Estate sector lagged in 2023. Brown believes the underperformance in 2023 in Health Care, Consumer Discretionary, and Real Estate are all dislocations, and it has added to those respective positions. In 2023, Brown made approximately 20% more trades than it typically makes in a year, and turnover was approximately 19.1%; these indicate Brown made a greater number of smaller trades during the year and were trims and adds to existing holdings to take advantage of price dislocations. Brown believes the portfolio is appropriately balanced between durable, compound growth companies and rapid growth companies, and it is well-positioned for a broadening in market leadership away from the "magnificent 7" stocks and back to rewarding fundamentals instead of investor sentiment. There is a significant amount of uncertainty in the market as a result of wars in Ukraine and the Middle East, an energy crisis in Europe, continuing supply-chain issues, and a record number of national elections in countries around the world; this uncertainty will bring continued volatility in the market through the rest of 2024, and Brown will maintain its strategy of finding dislocations to rebalance and optimize the portfolio. To Chair Hartley's questions, Mr. Simunovic advised there have been no changes in the firm's ownership, senior leadership, or investment team. It has added 2 net positions to the equity research team which supports this strategy, however those additions do not directly impact the investment team. He added that Brown has held 33 stocks in the portfolio for the last 6 years; it has a self-imposed, 1-in/1-out" philosophy Book 1 Page 418 04-24-2024 9:00 a.m. Book 1 Page 419 04-24-2024 9:00 a.m. which requires any new stock added to the portfolio to be better than one it currently holds, and for the weakest stocks to be discarded. Because the strategy is registered as being "diversified, " the Securities and Exchange Commission (SEC), Internal Revenue Service, and comparable European Union agencies limit stock concentrations to 10% weighting in the portfolio, no more than 4 companies above 5% weights, and collectively, those 4 stocks cannot exceed 25% of the total portfolio. As of the end of Q1 2024, the portfolio's largest holding is Nvidia at 8%; excluding those stocks which are being transitioned in or out of the portfolio, its minimum weight is 1% sO that each holding contributes to performance. The Board thanked Mr. Simunovic for his presentation. 7.2. Presentation and Discussion Re: Richmond Capital, Performance Review as of March 31, 2024. Presenter(s): Paul Lundmark, Managing Director, Portfolio Manager, Richmond Capital. Paul Lundmark of Richmond Capital (Richmond) appeared before the Board and introduced himself. As explained in the presentation materials, Mr. Lundmark discussed how declining inflation in 2022 and 2023 led investors to expect the Federal Reserve (Fed) to reduce short term interest rates by as many as 7 times in 2024; the economy's stronger-nananticpaled performance as well as inflation lingering in the 3.5% to 4.0% range has changed that expectation and Richmond anticipates only 1 or 2 rate reductions this year. The Fed has indicated future rate reductions will be data dependent, as shown in the Fed Funds Target Rate Increases graph, and as a result, Treasury bond yields have increased dramatically. The Bloomberg Government/Credit Index Yield to Maturity is at its highest since 2008 and up from its lowest point of 1% in 2020. Mr. Lundmark explained that this environment was especially challenging for fixed income managers. Mr. Lundmark discussed the Portfolio Review page of the materials; the portfolio is neutral in duration relative to the index as Richmond believes it can add more value by over- and under-weighting sectors and with security selection. The average yield to maturity is greater than the index because of the number of non- treasury bonds in the portfolio; Richmond holds more corporate bonds, mortgage-backed securities (MBSs), commercial mortgage-backed securities (CMBSs), and asset-backed securities (ABSs) than the index. Turning to the Performance Review, Mr. Lundmark noted the portfolio outperformed its index in Q1 2024 due to the portfolio's overweight in banks, insurance, and energy, and CMBSs; he added that the portfolio's bank holdings have been uncontroversial and financially sound. The portfolio outperformed over the 3-, 5-, 7-, and 10-year timeframes due to the outperformance of its corporate bonds and being underweight to the 2-to 3-year portion of the curve because yields were sO low. He noted that the portfolio has been neutral in duration for the last 2 years which has rewarded its relative performance. Mr. Lundmark reviewed the Treasury Yield Curve; Rates Have Trended Higher page of the materials. On the Corporate Bond Allocation page, he pointed out that because corporate spreads have tightened, Richmond has reduced its duration contribution, and added to its MBS and ABS allocations which have added value back to the portfolio. Turning to page 9 of the materials, Mr. Lundmark reminded the Board that Fitch changed its AAA rating to AA+, similar to S&P; only Moody's currently has an AAA rating. He added that the BAA rating is because the index has that rating; Fitch and either Moody's or S&P has it at BBB. The portfolio has 1 A rating, which is Allstate, Aeon, Phillips 66, Duke Energy, and Schlumberger. He discussed the portfolio allocation by sector, noting its only Local Authority holding is the New Jersy Tumpike which has performed well. Although mortgage-backed securities have not performed as well as Richmond would have liked, it still has confidence in the sector over the long term. The 5.9% of the portfolio which is rated AAA includes ABSs and all CMBSS except for one agency CMBS; the agency CMBS is AA rated due to the subordination of other tranches. To Chair Hartley's question, all of the MBSs are backed by the Federal National Mortgage Association, and 1 CMBS is backed by the Government National Mortgage Association, and total approximately 8% of the portfolio. Mr. Lundmark provided a brief outlook as explained on page 10 of the materials. He added that the portfolio is very diversified with the largest corporate holding being only 1.3%. Richmond is conservative by nature and avoids overweighted positions because the risk outweighs the reward; if it chooses to deviate from the index, it will reduce its duration to be short. To Chair Hartley's question, there have been no changes to the firm, although it has added MBS and ABS analysts and expanded the staff. The Board thanked Mr. Lundmark for his presentation. 7.3. Presentation and Discussion Re: Sawgrass Asset Management; Performance Review as of March 31, 2024. Presenter(s): Marty LaPrade, CFA, Equity Portfolio Manager; Anthony Brooks, Equity Portfolio Manager; Sawgrass Asset Management. Marty LaPrade and Anthony Brooks of Sawgrass Asset Management (Sawgrass) appeared before the Board and introduced themselves. Mr. LaPrade began by discussing the Portfolio Summary and Portfolio Performance pages of the materials. While the portfolio has performed well on an absolute basis, it has generally trailed its benchmark because Sawgrass assumes less risk, and therefore it tends to better preserve assets in down markets than the index. He noted that the large cap growth index is sO heavily concentrated in the magnificent 7 stocks that the concentration exceeds the limits in the Plan's Investment Policy Statement; Sawgrass expects this concentration is unsustainable and will eventually dissipate. While abnormally low interest rates drove investors from the bond market to equities, the currently higher than normal interest rates are now making bonds extremely competitive with equities; Sawgrass anticipates this competition to exert downward pressure on stock prices. While growth stock prices have recently been driven by demand and not earnings, Sawgrass expects earnings growth will soon corollate more with prices because investors can secure comparable returns with bonds with less risk; similarly, Mr. LaPrade cautioned against expecting returns in the 18% to 30% range, as had been seen recently. Mr. Brooks discussed the Portfolio Recap: One Year Performance Attribution page of the materials. Consumer Discretionary performed well for the portfolio, as highlighted in the green box, compared to the purple box for the benchmark, while Consumer Staples, Health Care, Communications, and Technology in the red box underperformed. Sawgrass attributed the underperformance to concentrations in the benchmark. On the Portfolio Recap: Relative Contribution - One Year page, Mr. Brooks explained that not owning Nvidia and Meta accounted for 99% of the portfolio's relative underperforance; adding Netflix, Advanced Micro Devices (AMD), and Uber accounts for 113% of the underperformance. To Chair Hartley's question, Mr. Brooks explained that Sawgrass didn't take positions in Nvidia, Meta, Netflix, AMD, and Uber because of earnings growth inconsistencies or volatility risks. Mr. Brooks discussed the highest 10 contributing stocks highlighted in green, noting they all have consistent earnings growth. The stock weights highlighted in red are underweight relative to the benchmark due to concentration risks which ultimately hurt the portfolio's performance, however Sawgrass remains confident in their strategy and philosophy. Turning to the Outlook: A Return to Historical Growth Patterns page, Mr. Brooks asserted that Sawgrass has remained consistent to its style by focusing on low volatility, and the strategy will outperform over the long term with less risk and greater predictability in various environments. Sawgrass's outlook indicates the middle column is the most probable scenario with positive returns between 8% and 12% and is the type of environment in which Sawgrass excels. Chair Hartley noted that Sawgrass and Brown Advisory have very similar 3-year returns but vastly different strategies and volatilities. To Chair Hartley's question, Mr. LaPrade advised that Sawgrass has hired Brian Engel to develop institutional investors, and rehired Christine Turner as Director of Client Relations. The Board thanked Mr. LaPrade and Mr. Brooks for their presentation. Book 1 Page 420 04-24-2024 9:00 a.m. Book 1 Page 421 04-24-2024 9:00 a.m. 8. UNFINISHED BUSINESS: 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: In the Matter of XPonential Fitness. Presenter(s): Darren Check, Kessler, Topaz, Meltzer & Check, LLP. Attorney Herrera briefly explained how securities monitoring firms serve the Plan and introduced Attorney Darren Check of Kessler, Topaz, Meltzer & Check (KTMC). Attorney Check appeared before the Board and introduced himself. He reminded the Board that KTMC is currently representing the Plan in an action against Inovalon; while the latest decision wasn't favorable to the Plan, KTMC has filed an appeal to the Delaware Supreme Court. Attorney Check explained that the matter before the Board today involves XPonential Fitness (XF), which franchises various types of fitness studios. TPG, a private equity firm, had made considerable investments in XF and concluded XF was growing too quickly. Nevertheless, XF went public and promoted itself as a rapid-growth company which had never shut down any of its franchises; Attorney Check asserted that the actual franchise strategy may have been illegal because XF failed to disclose information to franchisees as required by state and federal law, and that although none of the franchises closed, many were inoperable, and hundreds were for sale due to mismanagement or unsustainable growth. Two institutions issued reports which asserted XF was, essentially, a house of cards which could not sustain its growth and had less franchises than it reported. In the days prior to one of the reports being published, 2 senior executives at XF sold nearly 4 million shares of company stock at approximately $21 per share and the stock price then dropped by 50%; this appears to be insider trading. While the XF executives assert the timing of the stock sale was coincidental and they were unaware of the report, the institution which published the report advised it had reached out to XF on multiple occasions prior to publishing for research and comment. Attorney Check stated that this appears to be a traditional case of mismanagement, insider trading, and of senior executives acting personal gains and ignoring shareholders' interests. The value of the Plan's holding in XPontential has dropped by approximately 50% since the stock was purchased, and the portfolio currently holds 4605 shares. KTMC asks for the Board's authorization to issue a "books and records demand" to XF for the purpose of determining legal action, which would be filed in Delaware State Court, on the basis that XF's executives violated their fiduciary responsibility to shareholders. Mr. Check added that the SEC is currently investigating the stock sale. While the information currently available to the public suggests there is sufficient evidence to move forward with a lawsuit, a books and records demand allows for more granular scrutiny prior to action. Chair Hartley thanked Attorney Check for appearing before the Board and providing the information and communications to date and expressed concern that the Plan lost 50% of its value in the stock. At Attorney Herrera's request, Attorney Check clarified that he asks for the Board to execute an engagement letter which would authorize KTMC to make a books and records demand of XF, as well as file a lawsuit on behalf of the Plan in the matter, however the Board would need to also approve any lawsuit separately before it could be filed. Further, all services would be performed on a contingency basis. Attorney Herrera reiterated that there would be no cost to the Plan unless the Plan prevailed in the lawsuit, and if it prevailed, a court would need to approve KTMC's fees. To Trustee Snow's questions, Attorney Check clarified that Oak Ridge currently holds 4605 shares of XF stock for the Plan, and that KTMC would request Oak Ridge continues to hold a certain number of shares during any litigation. While the law only requires a litigant to hold only 1 share of stock to have standing, KTMC typically asks managers to hold at least 100 to 200 shares in an escrow account to avoid any ambiguity. Attorney Check added that the stock price has not fluctuated significantly, and he suspects Oak Ridge may continue to hold the stock for a while. Trustee Snow reminded the Board of the Pharmacia lawsuit which took approximately 10 years to resolve, but he did not recall how many shares the Plan needed to retain for litigation. Attorney Check explained that the Pharmacia case was brought in federal court which does not require a litigant to maintain stock ownership to have standing; because the XF matter would be filed in a state court, a litigant must maintain some ownership interest to have standing to bring a lawsuit. Should the Board approve the request, KTMC would contact Oak Ridge through Attorney Herrera and request it maintain the position, or some minimal number of shares ifi it decided to sell the stock. To Vice Chair Joseph's question, Attorney Check advised that if the Board decides to move forward with litigation as well as terminate its contract with Oak Ridge, Oak Ridge would then put the retained XF shares into an escrow account which would be transferred to an existing or new fund manager which is contracted with the Plan; the Plan would not be required to liquidate the shares in terminating the manager. Attorney Check clarified that cases similar to this matter are typically resolved within 12 months. Further, the current value of the 4605 shares is approximately $55,000 as of close of market on April 23, 2024; the original investment was just over $100,000. Vice Chair Joseph expressed support for pursuing action against XF. To Trustee Snow's question, the Plan's position in XF is 4605 shares; Oak Ridge's portfolio likely has a much larger number of shares. Attorney Herrera advised that, if the Board wanted to make a motion, it would be to authorize KTMC to make a books and record demand of XF and authorize the Chair to execute the engagement letter accordingly. Secretary/Treasurer: Griggs advised that, although she does not typically support pursuing lead plaintiff status because of the staff time involved, she would support the Board's decision. Vice Chair Joseph made a motion, as stated by Attorney Herrera, to authorize KTMC to make a books and records demand of XPonential Fitness and authorize the Chair to execute the according engagement letter. Trustee Snow seconded the motion. The motion passed unanimously (4-0). The Board thanked Attorney Check for his presentation. 10. ATTORNEY MATTERS: Attorney Herrera introduced Attorney Veronica Ucros, who was recently hired by Sugarman & Susskind. Attorney Ucros advised that she was born in San Juan, Puerto Rico, received her undergraduate degree from Cornell University, and Juris Doctor degree from the University of Florida; she has practiced law for 3 years, and prior to joining Sugarman & Susskind she worked on civil and labor matters. Attorney Herrera reviewed the Florida Commission on Ethics (Commission) Form 1 electronic filing portal which became active January 1, 2024; Form 1 disclosures continue to be due by July 1 of each year. Sugarman & Suskind previously distributed a memorandum on the topic and would recirculate it. He explained that trustees must register through a web-portal, log in, and complete the disclosures each year. The account identity is tied to the e-mail address historically associated with each trustee. Secretary/Treasurer: Griggs clarified that trustees are responsible for registering themselves with the Commission via the portal and timely filing the appropriate disclosure; the City Auditor and Clerk does not register trustees with the Commission but would assist any trustee who has issues with it. She advised that the Commission most likely had each trustee's City of Sarasota (City) e-mail address. To Vice Chair Joseph's questions, Secretary/Treasurer Griggs and Attorney Herrera explained that it is the individual's responsibility to maintain their account with the Commission and update their contact information, including e-mail address, as appropriate. A trustee could use their personal e-mail address for the purpose of accessing the portal;, the Commission has an educational video on its website, the FPPTA has webinar training regarding the portal, and Sugarman & Susskind is also available to assist as needed. To Vice Chair Joseph's question, Attorney Herrera advised that a trustee who used a personal e-mail Book 1 Page 422 04-24-2024 9:00 a.m. Book 1 Page 423 04-24-2024 9:00 a.m. address, instead of a City-issued address, for the purpose of logging into the Commission's portal would likely not subject that trustee's personal e-mail history to public records request because the personal e-mail address was not used to conduct Board business; Secretary/Treasurer Griggs concurred. Attorney Herrera clarified that using a personal e-mail address to conduct Board business would potentially open that trustee' s personal e-mail address history to public records requests. Attorney Herrera noted that Form 1 changed in that, previously, the disclosure could be completed based on whether the amount exceeded 10% of the individual's gross income, or if it exceeded $2,500; the current form requires disclosure of items exceeding $2,500. This dollar amount notwithstanding, trustees must only disclose the existence of items greater than $2,500; trustees do not need to include the value of the items being disclosed. Vice Chair Joseph noted that, at an FPPTA conference, a presenter on the matter advised that the Commission now requires substantially more information to be disclosed. Attorney Herrera reiterated that the Form 1 requirements have not changed significantly; Secretary/Treasurer Griggs suggested that the FPPTA presenter may have been referring to Form 6; Attorney Herrera explained that the newly required Form 6 applies to publicly elected officials, including mayors, city and county commissioners, state legislators, the judiciary, and the governor's office and certain cabinet members, but does not apply to municipal pension plan trustees. 11. OTHER MATTERS: 11.1. Presentation and Discussion Re: Asset Allocation as of April 15, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation as of April 15, 2024, for the Board's information. Chair Hartley asked, regarding the historical summary provided in the materials, if the annual Plan amounts stated included deductions for expenses such as pension payroll. Pension Plans Administrator Martin confirmed they did, and that despite expenses, the Plan's value increased from 2022 to 2023 by approximately $2 million. Chair Hartley advised he will attend the summer FPPTA event but will look outside the FPPTA for trustee education in 2025. Vice Chair Joseph advised he was waiting for the FPPTA to publish the summer event agenda before deciding if he will attend. Vice Chair Joseph and Pension Plans Administrator Martin noted that the FPPTA requires trustees to attend at least 1 FPPTA event each year to maintain trustee certification. 11. ADJOURN. Chair Hartley adjourned the meeting at 10:22 a.m. Chair Michael Hartley SBe Secretay/reasurer Shayla Griggs