Book 1 Page 254 05-10-2021 8:30 a.m. MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF MAY 10, 2021. Present: Chair Ryan Chapdelain, Vice Chair Susan Blake, Secretary Shayla Griggs, Treasurer Kelly Strickland, Trustee Kari McVaugh, Trustee Robert Reardon, and Trustee Mark Nicholas. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, Pension Specialist Peter Gottlieb Absent: None. 1. CALL MEETING TO ORDER: Chair Chapdelain called the meeting to order at 8:30 a.m. 2. PLEDGE OF CIVILITY: Chair Chapdelain stated for the record, We may disagree, but we will always be respectful to one another. We will direct all comments to issues, and we will not engage in personal attacks." 3. ROLL CALL: Pension Plans Administrator Martin called roll. Trustee McVaugh was not present at roll call. Pension Plans Administrator Martin appeared telephonically. Also appearing in person were Attorney Christiansen and Pension Specialist Gottlieb. 4. PUBLIC INPUT: None. 5. APPROVAL OF THE MINUTES: 5.1. Approval Re: Minutes of the General Employees' Pension Plan Board of Trustees Regular Meeting of April 26, 2021. Presenter(s): Chair Chapdelain. Vice Chair Blake made a motion to approve the minutes of the April 25, 2021 meeting; Trustee Nicholas seconded the motion. Motion passed unanimously (6-0). 6. APPROVAL OF RETIREMENT REQUESTIS): None. 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: HGK Asset Management, Investment Performance Review as of March 31, 2021. Presenter(s): Michael Pendergast, CFA, CIO, and CEO; Matt Witschel, Director of National Accounts, HGK. Asset Management. Matt Witschel and Michael Pendergast appeared before the Board telephonically and introduced themselves. Trustee McVaugh entered the meeting at 8:32 a.m. Mr. Witschel gave an introduction and overview of their presentation, noting HGK, as a value investor, has outperformed growth stocks over the last year which evidences the market rotation away from favoring growth. He stated the portfolio is up during the first quarter of 2021 by 16%, and 450 basis points ahead of the Russell 1000 Value index. Mr. Witschel discussed HGK's Investment Philosophy, Statement of Changes Calendar QTD, March 31, 2021, Statement of Changes Since Inception, April 2013 - March 2021, Long Term Performance Calendar Year, March 31, 2021, and Long-Term Performance by the Fiscal Year. He explained how growth had traditionally outperformed value, but the current market has benefitted HGK's investment style. Mr. Pendergast discussed the Attribution Analysis YTD, March 31, 2021, noting the outperformance is mostly due to security selection, the Client Guidelines, Portfolio Characteristics, pointing to where the portfolio's holdings are more profitable and less expensive than the those of the benchmark, as well as the Top Ten Holdings. Mr. Pendergast discussed the Portfolio Commentary, expanding upon how the year-to-date underperformance of Hyper Growth and outperformance of Cyclical Value contrast sharply with results from the first 10 months of 2020. Mr. Pendergast's audio connection to the meeting suspended from 8:45:38 to 8:45: 57. Mr. Pendergast's discussion of the Portfolio Commentary continued in which he expanded upon why investors needed to be in the extremes of growth and value to participate in their respective leadership roles, how growth will be, in contrast with the extreme concentration of 2020, more evenly distributed in 2021 and 2022; he forecasted increases in earnings for value stocks in 2021 and into 2022, discussed the relative and absolute costs to purchase value and growth stocks, how value stocks have dominated growth in post-bear markets, and how higher and lower quality stocks perform after recessions. Mr. Pendergast concluded his remarks by stating how HGK continues to focus on high quality value stocks as opportunities present themselves. He thanked the Board for its business and trust. Chair Chapdelain thanked Mr. Witschel and Mr. Pendergast for their presentation. 7.2. Presentation and Discussion Re: Polen Capital, Investment Performance Review as of March 31, 2021. Presenter(s): Anthony Xuereb, Senior Relationship Manager; Lauren Harmon, Research Analyst Polen Capital. Mr. Xuereb and Ms. Harmon appeared before the Board telephonically and introduced themselves. Mr. Xuereb introduced their presentation and gave a brief overview, noting it has been a large-cap growth manager for the Plan since 2012, there have been no changes to the firm since its last presentation aside from a gradual return for employees from working at home to being in the office, and that Polen Capital has added Rana Pritanjali to the research team as an analyst. Responding to Chair Chapdelain's question, Mr. Xuereb explained that John Gunther, who normally presents on behalf of Polen Capital to the Board, remains with Polen but unavailable due to personal reasons; Mr. Xuereb anticipates Mr. Gunther will present at Polen's next appearance. Ms. Harmon discussed Polen's investment strategy, portfolio composition, and average holding time. She gave a brief market recap of 2020, noting that while it outperformed the S&P 500, Polen underperformed its benchmark, the Russell 1000 Growth, because of stocks Polen did not own, Apple, Amazon, and Tesla, which accounted for approximately 40% of the return for the index. Ms. Harmon noted three factors during the pandemic which were relevant to the fund's performance: its healthy exposure to enterprise software which had strong performance, its exposure to the payment sector including Visa and PayPal which were ideally suited to perform during the pandemic, and Polen's holdings in Facebook and Google. Ms. Harmon noted the rotation from growth to value which is not favorable to Polen's investment strategy. She Book 1 Page 255 05-10-2021 8:30 a.m. Book 1 Page 256 05-10-2021 8:30 a.m. discussed the Performance Attribution = Quarter including the top and bottom 5 holdings. Trustee Reardon asked how Facebook may be affected by pending Department of Justice antitrust litigation, as well as Apple's change in how it collects the user-data which Facebook uses for advertisement targeting. Ms. Harmon explained that Polen closely monitors regulatory concerns on all its technology holdings, as that remains the greatest risk for the enterprise software sector. Because Facebook, Google, and similar companies provide a significant value to consumers, Polen believes the risk they could be broken up under antitrust laws or suffer due to new regulations is relatively low. Trustee Reardon asked if Polen or anyone else has quantified the potential loss Facebook could face due to an inability to hyper-target ads as a result in Apple's change in data collection. Ms. Harmon stated it would be a very difficult number to quantify at this point, but that Polen continues to monitor the ongoing litigation; she also asserted that the relative value of advertisement space on Facebook is superior to other platforms which reduces the risk of losses. Trustee McVaugh left the meeting at 9:15am and returned at 9:17am. Secretary Griggs left the meeting at 9:18am and returned at 9:22 am. Ms. Harmon discussed the Portfolio Activity, noting that while it does not attempt to time the market when changing the portfolio, it has increased the quality by adding Amazon and Netflix and selling Dollar General and Regeneron. Chair Chapdelain thanked Mr. Xeureb and Ms. Harmon for their presentation. 7.3. Presentation and Discussion Re: Graystone Consulting, Quarterly Investment Performance Review as of March 31, 2021. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant; Andrew MclIvaine, Institutional Consultant; Graystone Consulting. Mr. Owens appeared before the Board telephonically and introduced himself. Mr. Owens commented on the dramatic market performance over the last 12 months, noting that 14 months ago the market was at record high levels and therefore over a 14-month period, the change has not been as significant. He explained that the recovery from the recession was not a result of economic performance but of government stimulus. While there is less uncertainty in the market now, new factors, such as inflation, interest rates, and the long-term effect of policies, are now of concern. Graystone's position is that, fundamentally, 2021 and 2022 will be a positive year, the annual Gross Domestic Product may be between 8 and 10%, and market volatility will normalize and continue. Referring to the Performance Summary, Mr. Owens discussed Capital Markets Returns, highlighting the US Equity Markets, S&P 500 Sector Returns, Developed Markets Equity Returns, Emerging Markets Equity Returns, and Fixed Income Returns. Treasurer Strickland left the meeting at 9:26am and returned at 9:31am. Mr. Owens discussed the Total Fund - Executive Summary and Risk/Return Analysis - Since Inception. He reviewed how to read the Asset Allocation & Time Weighted Performance as well as the Asset Allocation & Net Dollar Weighted Performance pages. Mr. Owens discussed the Asset Allocation Compliance, noting the portfolio is overweighted, although within tolerance, in those sectors which are forecasted to outperform and underweighted in those sectors which are not expected to perform as well. Mr. Owens reviewed each of the managers' Executive Summaries. Mr. Owens clarified that NFJ, by its own admission, will underperform any time the market favors lower quality stocks; at the same time, over the last year it trailed its benchmark by 38%; should lower quality stocks remain in favor at the end of the next quarter, Mr. Owens stated he would bring a Small Cap Value search for the Board, and would suggest asking them to appear before the Board. At the same time, Mr. Owens cautioned against abandoning a high-quality stock investor if high quality returns to favor. Trustee Reardon asked what was causing the lack of upside capture in the infrastructure fund. Mr. Owens explained that travel contributes significantly to Lazard's revenues, and travel had been reduced during the COVID-19 pandemic. Other infrastructure funds invest in other types of projects, such as cell phone towers, which were not as adversely affected. Mr. Owens reviewed the Compliance Checklist and explained that Polen had held Facebook slightly too long which caused it to exceed tolerance, and that Invesco was holding 1 or 2 bonds which had their ratings reduced below A, but that it had not purchased any bonds which were less than A rated. He reviewed the Policy Index History. Trustee Reardon asked Mr. Owens about investment in cryptocurrencies. Mr. Owens stated that many of his clients have asked about this topic. Without addressing the value of the investment, cryptocurrencies may not be a suitable investment for public plans because they have no underlying value, cash flow, or anything to determine its change in value other than demand. In the context of boards with fiduciary responsibilities for other people's money, prudent investors will seek investments with an underlying intrinsic value and noted that Graystone will continue to analyze cryptocurrencies for their suitability for pension plan investments. Chair Chapdelain thanked Mr. Owens for his presentation and asked him to remain in the meeting for a later item. 8. UNFINISHED BUSINESS: None. 9. NEW BUSINESS: None. 10. ATTORNEY MATTERS: Attorney Christiansen stated Vice Chair Blake's and Trustee Nicholas's terms are expiring June 30, 2021, and the Board has approved amendment to its operating rules to accommodate a nomination process. He stated the Board traditionally selects its officers at its July meeting. Financial Disclosures are due July 1, and trustees should receive them in the mail soon and he would follow up with the State to ensure they were timely filed. Chair Chapdelain asked Pension Administration to forward user- completable electronic versions of the forms. Secretary Griggs confirmed that Pension Administration would do sO. The State of Florida did not pass legislation applicable to the Board or Plan. Attorney Christiansen asked for a copy of the executed Assignment of Agreement for Franklin Templeton. Regarding the 2 disability cases, Attorney Christiansen stated he has received John Trumpet's medical records and is in the process of setting up an independent medical examination (IME). Regarding Kandy Lee, Attorney Christiansen stated he has received the submitted medical records, but is unable to proceed with an IME as he has been unable to secure an appropriate specialist and asked the Board for direction. Secretary Griggs advised that Ms. Lee had been under her management authority in the City Auditor and Clerk's office. Attorney Christiansen stated that would only be an issue if Secretary Griggs believed she could not render an unbiased decision regarding Ms. Lee's disability request; Secretary Griggs stated she would not have an issue remaining unbiased. Attorney Christiansen stated, regarding the inability to proceed with an IME with an appropriate specialist, one option would be for the Board to hold a disability hearing and review the records submitted without having an independent medical review. Ms. Lee has applied for Social Security Disability but has not received a response to date. A second option would be for an IME company to have a general practitioner review the records. None of the appropriate specialists Attorney Christiansen has contacted to perform the IME are willing to do so. Book 1 Page 257 05-10-2021 8:30 a.m. Book 1 Page 258 05-10-2021 8:30 a.m. Attorney Christiansen stated that the Board is required by the Plan to obtain an IME unless the Board decides it would be prudent to waive the IME, or the Board could use the disability applicant's physician as its medical expert. A discussion amongst the Board ensued. The Board expressed concern rendering a determination based on medical documentation without a medical expert to review the submitted medical records. Attorney Christiansen stated that having an IME company review the records, which would likely involve a general practitioner issue a report, would cost approximately $5,000, and would be more expensive than having a specialist perform the review. Attorney Christiansen advised the Board it could have a hearing at which it reviews the submitted medical records. If the Board felt comfortable rendering a decision it could do sO; if the Board was not comfortable making a decision, the Board could recess the hearing sO that an IME could be performed. The Board expressed reluctance to review medical records without the benefit of a subject matter expert as the trustees lack medical training. Attorney Christiansen further advised the Board that while the Plan attempts to maintain as much confidentiality as possible regarding medical records, and that they would not be posted to a website, and trustees would be required to return all medical records to be destroyed, the Plan was required to retain a copy of the records that a member of the public would be allowed to review upon request under public records laws. He further clarified that a disability applicant has the right to be present at the initial hearing at which the Board discussed her records. The Board contemplated holding a hearing to review the submitted medical records and, if needed, requesting an IME. Secretary Griggs asked Attorney Christiansen if he understood what was being requested. Attorney Christiansen stated that the consensus appeared to be that the Board wished to proceed with a hearing at which it could decide to approve the disability or request an IME, which would be reflected in the minutes. He provided the hypothetical example of at fireman whose leg was crushed in an accident and requested disability. AI Board would not need an IME to determine the former fireman satisfied the requirements of being totally and permanently disabled. Attorney Christiansen outlined the process of a disability hearing. The Board discussed the merits of proceeding with a hearing versus requesting an IME with a general practitioner. Treasurer Strickland made a motion to direct Attorney Christiansen to obtain an independent review with a general practitioner. Attorney Christiansen stated the cost of the review would be in the approximately $5,000. Trustee Nicholas asked for a description of the records. Attorney Christiansen explained the records consist generally of medical records and charts, with physician statements addressing the physician's professional opinion as to whether she meets the criteria set forth in the plan. Trustee McVaugh seconded the motion. The motion carried (6-1) with Chair Chapdelain dissenting. 11. OTHER MATTERS Chair Chapdelain stated that he will have a scheduling conflict attending the July 26, 2021 meeting, and asked if the trustees, attorney, or investment consultant would be available on Monday, August 9, 2021. He asked Attorney Christiansen if that would have an impact on nominating board officers. Treasurer Strickland advised she would need to request an excused absence as she is unavailable that date. Pension Plans Administrator Martin advised the Plan will hold an election for Seat 1 because Pension Administration received 2 nomination forms for that seat. She asked if it would be appropriate to wait until August to conclude the election because the operating rules required election forms to be unsealed and counted at a board meeting within 10 days of the last date for return of ballots. The ballot return date has not been set. Chair Chapdelain stated that when previous elections had not concluded until after the expiration of a seat, the outgoing trustee had been allowed to continue to serve until the election was finalized. Attorney Christiansen stated the description by Chair Chapdelain is in compliance with the operating rules of the Board. The Board agreed to change the July 26, 2021 meeting to August 9, 2021. Vice Chair Blake announced she had earned her CPPT certification; the Board congratulated her on her achievement. 12. ADJOURN: Chair Chapdelain adjourned the General Employees' Pension Plan Board of Trustees regular meeting at 10:28am. hal 1 Chair Ryançhapdelain Secretary Shayla Grggs Book 1 Page 259 05-10-2021 8:30 a.m.