MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES MEMBERSHIP MEETING OF MARCH 27, 2024 Present: Chair Michael Hartley, Vice Chair Charles Joseph, Secretary/Treasurer: Shayla Griggs, and Trustee Scott Snow. Others: Attorney Madison Levine (telephonic), 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 Membership meeting to order at 9.00 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary/Treasurer 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. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of February 28, 2024. Presenter(s): Chair. Hartley Vice Chair Joseph made a motion to approve the minutes of the February 28, 2024, regular meeting; Trustee Snow seconded the motion. The motion passed unanimously (4-0). 7. BOARD OF TRUSTEE REPORTS: 7.1. Presentation and Discussion Re: Annual Board Report for 2023. Presenter(s): Secretary/lreasurer Griggs. Book 1 Page 410 03-27-2024 9:00 a.m. Book 1 Page 411 03-27-2024 9:00 a.m. Secretary/Treasurer Griggs presented the Annual Board Report for 2023. Chair Hartley asked if the budgeted amount for personnel costs for Fiscal Year (FY) 2025 is sufficient. Secretary/Treasurer: Griggs and Pension Plans Administrator Martin confirmed it is, but Pension Administration could request an adjustment for any line which were to exceed its budgeted amount. The Board accepted the Annual Board Report for 2023 by consensus. 7.2. Presentation and Discussion Re: Proposed Annual Budget for Fiscal Year 2024 - 2025. Presenter(s): Secretary/reasurer Griggs. Secretary/Treasurer Griggs presented the Proposed Annual Budget for Fiscal Year (FY) 2024 - 2025 for administrative expenses; the Board accepted it by consensus. Chair Hartley asked the Board to hear item 10.1. Financial Statements for the Fiscal Years ending September 30, 2023 and 2022 out of order; the Board consented. 10. NEW BUSINESS: 10.1 Presentation and Discussion: Mauldin & Jenkins, Financial Statements for the Fiscal Years ending September 30, 2023, and 2022 Presenter(s): Alison Wester, CPA, Partner, Mauldin & Jenkins. Alison Wester and Jennifer Trotter of Mauldin & Jenkins appeared before the Board and introduced themselves. Ms. Wester presented the Financial Statements for the Fiscal Years Ended September 30, 2023 and 2022. The opinion is clean and unmodified. She advised that pages 41 through 8, the Management's Discussion and Analysis, are unaudited but reviewed and compared for consistency with the Financial Statements. Page 9 is the Statements of Fiduciary Net Position showing assets and liabilities; page 10i is the Statements of Changes in Fiduciary Net Position which shows investment volatility and the impact that has on thel Plan's position. She noted that the Governmental Accounting Standards Board (GASB) requires reporting the fair value of both realized and unrealized gains and losses to the Plan each year. SecretarylTreasurer Griggs left the meeting at 9:07 a.m. Ms. Wester explained each of the Notes to Financial Statements beginning on page 11. Note 3 identifies a concentration in one real estate fund with a fair value of $13 million. Regarding Fair Value Measurements, Ms. Wester clarified that securities in Level 1 are valued using prices of identical investments in an active market. Securities in Level 2 are valued using prices of similar securities in active markets. Securities in Level 3 are valued using any other valuation method; the Plan has no assets measured at net asset value which is an additional type of valuation. Note 4 reiterates that the Interlocal Agreement between the City of Sarasota (City) and Sarasota County (County) has expired and therefore employer contributions are now being paid by the City of Sarasota (City). Note 5, Net Pension Liability, is a disclosure for the Plan but is recorded on the City's financial statements. The total pension liability less the Plan fiduciary net position equals the Net Pension Liability. Note 5 also contains the actuarial assumptions. To Chair Hartley's question, Ms. Wester advised that the rate of inflation, as well as much of the data used in the Financial Statements, are taken from the actuarial valuation. Ms. Wester explained that the Current Single Discount chart shows how the net pension liability changes if the discount rate, which is based on the expected ROR, is increased by 1% and decreased by 1%. Secretary/Treasurer Griggs returned to the meeting at 9:10 a.m. In the required Supplementary Information, the Schedule of Changes in the Plan's Net Pension Liability now shows 10 complete years. The total pension liability data at the top of the page comes from the actuarial valuations and the fiduciary net position data on the bottom comes from previous financial statements. On the Schedule of Contributions, the assumptions are from the Actuarial Valuation, and the contribution amounts incorporate deferred revenue from Chapter 175, which is typical and noted on page 23. To Vice Chair Joseph's question regarding the investment rate of return, Ms. Wester explained that contributions are calculated 2 years prior to their payment, and therefore the investment rate of 6.85% will be reduced to 6.7% in the Financial Statements for Fiscal Year 2025. Page 24 shows a 10-year history of investment returns; the Other Supplementary Information contains the Schedule of Investment and Administrative Expenses. To Chair Hartley's question, Ms. Wester explained that, although the Notes to the schedule on page. 23 have not been included in prior reports, the Board agreed in 2019 to separate cumulative contributions in excess of $173,799, however Fiscal Year 2023 is the first time there have been excess cumulative contributions. Ms. Wester explained that, had Mauldin & Jenkins identified any significant deficiencies and/or material weaknesses, these would be reported in the Independent. Auditor's Report on Internal Controls Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards; she advised that, while Mauldin & Jenkins did not identify any significant deficiencies or material weaknesses, it cannot confirm none exist. Ms. Wester briefly reviewed the contents oft the. Auditor's Discussion and Analysis, Financial and Compliance Audit Summary. To Chair Hartley's questions, Ms. Wester advised that Mauldin & Jenkins has audited the Plan for the last 9 years, however the firm has had no significant changes to its structure or management, other than that the firm has grown in size. She noted that information about Mauldin & Jenkins is reported in the Additional Information section of the Auditor's Discussion and Analysis. Ms. Trotter advised that the audit process takes approximately 2 months and all services are now performed remotely. Vice Chair Joseph made a motion to accept the Financial Statements for Fiscal Years Ending September 30, 2023 and 2022; SecretarylTreasurer: Griggs seçonded the motion. The motion carried unanimously (4-0). To Trustee Snow's and Chair Hartley's question, Ms. Wester advised she has not noticed any increase in the number of public pension plans which are closing, although at least 1 plan has opted to withdraw from the Florida Retirement System (FRS) and return to its previous plan sponsorship. The Board thanked Mauldin & Jenkins for their presentation. 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Hudson Edge Investment Partners, Performance Review as of December 31, 2023. Presenter(s): Matthew Witschel, Director, National Accounts, Hudson Edge Investment Partners. Matthew Witschel of Hudson Edge Investment Partners (Hudson) appeared before the Board and introduced himself. Noting the portfolio isi in the large cap value strategy, Mr. Witschel provided a brief firm overview; Eric Chung joined Hudson's Fixed Income team in 2023 which has allowed it to offer a core plus fixed income strategy. Mr. Witschel discussed Hudson's name change from HGK Asset Management. Regarding the Large Cap Investment Team, Mr. Witschel advised that Lead Portfolio Manager Michael Pendergast, who has led the Book 1 Page 412 03-27-2024 9:00 a.m. Book 1 Page 413 03-27-2024 9:00 a.m. strategy for 32 years, has committed to staying at least an additional 5 years; Mr. Witschel anticipates one of the listed investment team members will be advançed to CO-lead portfolio manager in anticipation of Mr. Pendergast's eventual retirement. Mr. Witschel reviewed Hudson's Investment Philosophy and noted the portfolio's price to earnings (P/E) ratio is approximately 13x earnings. He reviewed the Statement of Changes Trailing 1-Year as of December 31, 2023, and Statement of Changes Since Inception; he noted the return slightly lagged its benchmark, but that over the last 9 years, the portfolio has averaged an approximate 8% return. He briefly reviewed the Long Term Performance as of Q4 2024. On the Attribution Analysis YTD, December 31, 2023, Mr. Witschel explained that, although the market favored growth style managers during the year, the portfolio was aided by traditional value sectors: Utilities, Energy, Real Estate, and Materials. He discussed how the entire regional banking subsector was negatively impacted due to the failures of a select few banks, which in turn dragged down the portfolio's Financial allocation. Dollar General and Genuine Parts had lagging performance which adversely affected the Consumer Discretionary allocation. The allocation to Information Technology had a negative impact on the portfolio's performance because it does not hold Meta, the parent company of Facebook, which was reclassified out of the growth index and into the value index in 2022 due to its lagging performance, and then it rebounded significantly in 2023. The underperformance in 2023 was between January and June; the portfolio modestly outperformed from July through December. As of close of business on March 26, 2024, the portfolio is up slightly more than 6% year to date and is approximately matching the benchmark. To Chair Hartley's question, Mr. Witschel advised that he was unaware of any conversations between Hudson and Graystone regarding negative excess return in 2023 but he would discuss it with Graystone and provide Pension Administration with commentary to be distributed to the Board. Turning to the Top Ten Holdings, Mr. Witschel explained that the frequency with which Financials appears is misleading as the Russell 1000 index is approximately 20% in Financials; while tho portfolio's sector weighting are comparable to the index's, individual stock weightings in the portfolio are approximately equal. Mr. Witschel reviewed the Portfolio Commentary, noting that Hudson believes the Federal Reserve (Fed) will, despite reducing short term interest rates several times in 2024, preserve a "higher for longer" rate environment and the 10-Year Treasury bond will remain in the 3% to 4% range, which is favorable to active managers. Referencing page 15 of the materials, Mr. Witschel noted that the magnificent 7 stocks were responsible for more than 50% of the S&P 500's return in 2023 and there are parallels to the "dot com" technology bubble in the early 2000s (tech bubble); he cautioned that Hudson is not characterizing the current period as a new bubble. While many of the leading tech stocks during the early 2000s are still market leaders and strong companies, many of those stocks' prices have yet to recover from their respective highs experienced during the tech bubble. This notwithstanding, IBM was up in 2022, returned nearly 50% in 2023, and contributed to the portfolio's outperformance in those years. Hudson believes artificial intelligence (AI) is still in its infancy, and although investors have recently rewarded just the magnificent 71 because the potential impacts of Al, all companies will eventually benefit from Al; Mr. Witschel analogized the impact of Al on commerce to that of the internet during the tech bubble. Hudson sees the magnificent 7 broadening to allow for more stocks to contribute to the market's performance which will benefit active management. He reminded the Board that the portfolio correlates approximately .5 to its index, and it is a good portfolio diversifier. The Board thanked Mr. Witschel for his presentation. 8.2. Presentation and Discussion Re: Wedge Capital; Performance Summary as of December 31, 2023. Presenter(s): Richard Wells, General Partner, Wedge Capital Management. Richard Wells ofWedge Capital Management (Wedge) appeared before the Board and introduced himself. Mr. Wells provided a brief firm overview, noting there have been no significant changes, although 1 partner will retire in the next week reducing the total number of partners to 12. The Plan is invested in the QVM Large Cap strategy, which is Wedge's largest, and it now offers a SMID cap strategy. He briefly reviewed Wedge's investment process in which it subdivides its universe into 8 sectors, and then runs 8 individual models for each sector in which the fundamental factors of Value, Contrarian, and Momentum are applied to each stock within each sector, and finally applies analyst oversight to produce the portfolio. He noted the 8s sectors predate the development of the Russell Global Industry Classifiçation Standards (GICS), and that while analysts cannot override the fundamental factors, they may ncorporate information not reflected in the outcome; Wedge runs its portfolio models twice each month at varying times. The portfolio weights are equal to the broader market and not the index, which tends to overweight tech, and underweight financials. Within each of the 8 sectors, Wedge equally weights each stock. Wedge outperformed the benchmark in 2023; as of March 26, 2024, the portfolio is up 14.4% and the benchmark is up almost 7%. On the Performance Overview as of February 29, 2024, Mr. Wells reviewed the Activity Summary and Performance History. Chair Hartley explained that being closed, the Plan withdraws approximately $1.1 million from investments each month to fund retiree payments, and many of those withdrawals are taken from Wedge. Turning to pages 8 and 9 of the materials, Mr. Wells discussed Wedge's consistent performance; he noted that the strategy has had positive excess returns since 1994. Of Wedge's 101 QVM accounts, the net amount of outperformance has been $1.2 Billion. Page 10 of the materials summarizes the performance attribution; Mr. Wells reviewed the Year-to-Date section. To Chair Hartley's question, Mr. Wells explained that they make their buy and sell decisions based on their investment process, and not necessarily based on individual stock or sector performance. On the Performance Attribution Analysis By QVM Sector for the period 12/31/2022 - 12/31/2023, Mr. Wells advised that the portfolio's average Tech weight is twice that of the benchmark; while this is typical, many of the portfolio's Tech holdings are atypical technology stocks. In calendar year 2023, the sector outperformance was almost 5%, and in stocks it outperformed by 1% in 2023. He added that in February 2022, the portfolio underperformed in stock selection and outperformed in sector weighting, which is the opposite of February 2024, in which the portfolio outperformed in stock selection and underperformed in sector weighting. On the Characteristics As of 12/31/23 page, Mr. Wells noted the portfolio's P/E of 13.5x is still less than both the Russell 1000 Value, and broader Russell 1000; he reviewed the Sector Weighting and noted the portfolio is more aligned with the broader market index than the value benchmark. To Chair Hartley's question, Mr. Wells explained that there is a scarcity of value stocks in the Energy sector, and the portfolio has typically been underweighted there. The sector is usually commodity-driven and it requires betting on interest rates and picking commodity prices, which is beyond the purview of this strategy. On the Balancing Value with other Characteristics page, Mr. Wells discussed how the portfolio's lower Trailing P/E, Forward P/E and Price/Cash Flow, but higher Return on Earnings, Earnings per Share Growth, and Number of Upward Earnings Per Share Revisions, relative to the Russell 1000 Value index are positive characteristics for a value portfolio. Mr. Wells discussed the page titled Style Leadership Has Been Volatile Between Value and Growth, noting that when the graph trends up, growth is favored; when it trends down, value is favored. On the page titled, 2023 Russell Index Performance, he explained why the current environment is challenging for value investors. He noted that, when the early 2000s' tech bubble ended, the portfolio outperformed as a result of the value factors in their investment models. Wedge does not believe technology stocks are currently overvalued or that a new tech bubble now exists, however tech is currently favored; when it falls out of favor, Wedge believes the portfolio is sufficiently positioned to continue to perform. To Chair Hartley's questions, Mr. Wells explained that Wedge has offered a fixed income strategy since the firm's founding in 1984. That portfolio is high quality and conservative; it currently has more taxable municipal bonds than treasury bonds and has approximately $1.8 Billion under management. He asserted that Wedge's fixed income strategy is very defensive and focused on protecting principle, quality-driven, and rated higher than its benchmark. The strategy's client list includes some from Florida, and although they require a $5 Million initial minimum investment although the minimum investment and pricing may be negotiable for existing clients. Chair Hartley and Mr. Wells discussed the Plan's long-term need to derisk the portfolio as benefit recipients Book 1 Page 414 03-27-2024 9:00 a.m. Book 1 Page 415 03-27-2024 9:00 a.m. age, noting that the Board recently reduced its expected rate of investment return to 6.7% and has made the portfolio significantly more defensive in recent years. The Board thanked Mr. Wells for his presentation. 9. UNFINISHED BUSINESS: 9.1. Presentation and Discussion Re: Gabriel, Roeder, and Smith, Actuarial Valuation Report for Fiscal Year Ended September 30, 2023. Presenter(s): Chair Hartley. Chair Hartley noted that the Actuarial Valuation has been updated to reflect the Board's recently declared investment return assumption to 6.7%, and increased the employer contribution requirement by $342 thousand, as stated on page A-3, Comment C. The Total Adjusted Contribution Requirement to be paid by the City is $2,384,178, ais stated on page B-2. Vice Chair Joseph made a motion to adopt the Actuarial Valuation Report for Fiscal Year Ended September 30, 2023; Secretary/Treasurer: Griggs seconded the motion. The motion passed unanimously (4-0). 11. ATTORNEY MATTERS: Attorney Levine appeared before the Board elephonicaly and asked if Attorney Darren Check was before the Board to discuss a derivative action; Chair Hartley advised that he has been in contact with Attorney Check regarding potential securities litigation but did not receive materials in sufficient time to present them to the Board at this meeting, and that it will be on the April 24, 2024, meeting agenda. 12. OTHER MATTERS: 12.1. Presentation and Discussion Re: Administrative Budget Analysis as of December 31, 2023. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Administrative Budget Analysis as of December 31, 2023. She advised that the second column should state, "Year to Date Actual 2024," and that some of the items show $0 expenditure because of when those charges will be incurred, or they are billed annually. 12.2. Presentation and Discussion Re: Check Register for October 1, 2023, through December 31, 2023. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Check Register for October 1, 2023, through December 31, 2023. Payments to trustees are for travel reimbursements; items to the General Employees' Pension Plan are reimbursements for shared expenses. To Vice Chair Joseph's question, Pension Plans Administrator Martin clarified that Pension Benefit Information, LLC searches publicly available records for participants deaths in the event that no one otherwise reports the death to Pension Administration. 12.3. Presentation and Discussion Re: Asset Allocation as of March 13, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation as of March 13, 2024, for the Board's information. Pension Plans Administrator Martin advised that the historical information sheet included with presentation materials will be updated for the Board's April 24, 2024, meeting; it includes information reported in the Financial Statements. Pension Plans Administrator Martin advised that the Annual Report required by the Bureau of Local Retirement Systems, Division of Retirement for Chapters 175 or 185 defined benefit plans, was filed in advance of its due date; and Pension Administration is awaiting a response. 13. ADJOURN. Vice Chair Joseph adjourned the meeting at 10:16 a.m. shlhag Chair Michael Hartley Secrelary/yeasurer Shayla Gliggs Book 1 Page 416 03-27-2024 9:00 a.m.