MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JULY 24, 2020 VIA TELECONFERENCE, which is allowable under Executive Order No. 20-69 issued by Governor DeSantis on March 20, 2020 Present: Vice Chair Demetri Konstantopoulos, Acting Secretary/Treasurer Johnathan Todd, and Trustee Jody Hudgins. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, Pension Specialist Peter Gottlieb. Absent: Chair Ronnie K. Baty, and City Auditor and Clerk Shayla Griggs. 1. CALLI MEETING TO ORDER: Vice Chair Konstantopoulos called the City of Sarasota Police Officers' Pension Plan Regular Board meeting to order at 8:16 a.m. 2. PLEDGE OF CIMILITY: Vice Chair Konstantopoulos 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 Plan Administrator Martin called a roll call. Vice Chair Konstantopoulos, Acting Secretary/Treasurer: Todd, and Trustee Hudgins, appeared telephonically. Pension Plans Administrator Martin and Attorey Christiansen also appeared telephonically. Pension Specialist Gottlieb appeared in person. Pension Plans Administrator Martin stated that Chair Baty will ask for an excused absence at the next meeting. 4. PUBLIC INPUT: Pension Plan Administrator Martin confirmed no one from the public had called to participate telephonically. 5. APPROVAL OF THE MINUTES: Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Regular Meeting of May 22, 2020. Trustee Hudgins motioned to approve the minutes of the Regular Meeting of May 22, 2020; Acting SecretarylTreasurer Todd seconded the motion. The Board approved the minutes unanimously (3-0). 6. BOARD ELECTION: 6.1. Appointment Re: Selection of Chair Presenter: Pension Plans Administrator Martin. Pension Plans Administrator Martin stated the Board must elect its officers annually; she asked for nominations for the Chair. Trustee Hudgins nominated Vice Chair Konstantopoulos as Chair; Acting Secretary/Treasurer Todd seconded the nomination. The Board elected Vice Chair Konstantopoulos as Chair unanimously (3-0). Book 1 Page 184 07-24-2020 8:15 a.m. Book 1 Page 185 07-24-2020 8:15 a.m. 6.2. Appointment Re: Selection of Vice Chair Presenter: Pension Plans Administrator Martin. Pension Plans Administrator Martin asked for nominations for Vice Chair and stated that Chair Baty had indicated he would be willing to serve on the Board in any capacity necessary. Trustee Hudgins nominated Acting Secretary/Treasurer Todd for the position of Vice Chair; Chair Konstantopoulos seconded the nomination. The Board elected Acting Secretary/Treasurer: Todd as Vice Chair unanimously (3-0). 6.3. Election Re: Selection of Secretary and Treasurer Presenter: Pension Plans Administrator Martin. Pension Plans Administrator Martin asked for nominations for Secretary and Treasurer and noted that City Auditor and Clerk Griggs was not eligible to be an officer of the Board at this time. Trustee Hudgins nominated former Chair Baty as Secretary and Treasurer; Vice Chair Todd seconded the nomination. The Board elected former Chair Baty as Secretary/Treasurer: unanimously (3-0). 7. RETIREMENT REQUESTIS): Chair Konstantopoulos asked Pension Plans Administrator Martin to present the retirement requests. 7.1. Approval Re: DROP Retirement Request of Timothy Bales. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Bales is 55 years old, and requests to enter the DROP effective July 1, 2020 with 20 years of service and has selected the 75% option to a Joint Annuitant. Vice Chair Todd made a motion to approve Mr. Bale's request for retirement. Trustee Hudgins seconded the motion. The motion carried unanimously (3-0). 7.2. Approval Re: DROP Retirement Request of Douglas Vollmer. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Volmer is 52 years old, has just over 20 years of service, and requests to enter the DROP effective July 1, 2020 and selected the 67% option to a Joint Annuitant. Trustee Hudgins made a motion to approve Mr. Vollmer's request for retirement. Vice Chair Todd seconded the motion. The motion carried unanimously (3-0). 7.3. Approval Re: DROP Retirement Request of Sean Gleason. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Gleason is 48 years old, has just over 25 years of service, and requests to enter the DROP effective July 1, 2020 and selected the lifetime only benefit. Vice Chair Todd made a motion to approve Mr. Gleason's request for retirement. Trustee Hudgins seconded the motion. The motion carried unanimously (3-0). 7.4. Approval Re: DROP Retirement Request of Kevin Schafer. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Schafer is 55 years old, has just over 25 years of service, and requests to enter the DROP effective July 1, 2020 and selected the 75% option to a Joint Annuitant. Vice Chair Todd made a motion to approve Mr. Schafer's request for retirement. Trustee Hudgins seconded the motion. The motion carried unanimously (3-0). 7.5. Approval Re: DROP Retirement Request of Eric Stafford. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Stafford 52 is years old, has almost 22 years of service, and requests to enter the DROP effective July 1, 2020 and selected the 100% to a Joint Annuitant benefit. Vice Chair Todd made a motion to approve Mr. Stafford's request for retirement. Trustee Hudgins seconded the motion. The motion carried unanimously (3-0). 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Capital Group, Portfolio Review as of March 31, 2020 Presenter(s): Claudette Grant, Relationship Manager, Jeb Bent, Investment Specialist, Capital GrouplAmerican Funds via teleconference. Ms. Grant appeared before the Board telephonically and introduced herself and Mr. Bent. Ms. Grant gave overviews of their presentation, organization, investment process, and how it has adjusted its operations in response to the COVID-19 pandemic, and added it has had no significant outflow due to the market volatility in the first quarter of 2020. Ms. Grant discussed how the Capital Group implements its investment strategy using bottom-up research with a number of portfolio managers based on the amount of assets under management in that strategy. Ms. Grant noted the EuroPacific Growth Fund, in which the Plan is invested, is one of its largest funds with approximately $148 billion under management as of July 21, 2020. Mr. Bent discussed the EuroPacific Growth Fund's history, performance, physical presence in Asia, that its excess returns have been generated by stock selection and first quarter 2020 investment performance; he noted that, calendar year to date as of Monday, July 20, 2020, the fund is down for the year 22 basis points but ahead of its bench mark by 6.5%, and its excess returns over 3 year, 5 year, and 10 years have been greater than 2.5%. Mr. Bent compared Capital Group's excess returns to both its benchmark and peers when value has lead growth, and when growth has led value, and discussed both the consistency of its performance and its top 20 holdings as of March 31, 2020 and July 21, 2020. Book 1 Page 186 07-24-2020 8:15 a.m. Book 1 Page 187 07-24-2020 8:15 a.m. The Board asked Mr. Bent to address how fund liquidity and value could change if several of its clients requested their portfolios be divested from companies locatedi in or having relationships with China. Mr. Bent stated thati it would be important to evaluate not just where a company is domiciled, but where each company's revenues were generated, noting China is the second largest economy in the world, and that Texas Instruments generates 40% of its revenues in China, and Boeing generate 20% of its revenues come from China, therefore the Capital Group believes those companies would continue to play an important role in a diversified portfolio. That notwithstanding, he stated there was sufficient liquidity in the market to accommodate entry and exit from investment. Ms. Grant added that because EuroPacific Growth Fund is a mutual fund, it has its own fund guidelines and does not embed institutional investors' investment guidelines over its own policy, but Capital Group may have other options for investments such as CITS or other versions of its interational equity strategy. Chair Konstantopoulos thanked Mr. Bent and Ms. Grant for their presentation. 8.2. Presentation and Discussion Re: JP Morgan Asset Management, Investment Performance Review as of June 30, 2020. Presenter(s): Kate Hurley, Executive Director, Client Advisor, Brad Lucas, Vice President, Investment Specialist, JP Morgan Asset Management via teleconference. Ms. Hurley appeared telephonically before the Board and introduced herself and Mr. Lucas. Ms. Hurley gave an organizational update and introduction to JP Morgan's presentation, and explained that it has begun the process of allowing employees to voluntarily return to the office from working remotely. Mr. Lucas presented an account summary, explaining iti invests in private US real estate in office buildings, industrial warehouses, retail units, and residential multifamily units, primarily in existing real estate but also with some amounts of development; he discussed how, over the last 5 years, JP Morgan has repositioned the fund by reducing its retail and office allocations, and doubled its industrial allocation. He noted negative performance in the second quarter, which he attributed to appraisers adding emphasis to market rents and rent growth in their valuations, with a negative 2.02% return which was comprised of 88 basis points of income and approximately 300 basis points of negative depreciation in assets. He broke out each sector's performance, noting the write down to its retail portfolio focuses the fund on the strengths of the office and industrial portfolios to de-risk and lock in durable income; he also noted the portfolio has an approximate 93% occupancy rate with limited development exposure completing in 2020. Mr. Lucas discussed JP Morgan's balance sheet, noting it is the largest fund in the ODCE Index, with a strong cash position at 2.8% of the net asset value, low leverage at 23% of the portfolio, and access to about $650 million of remaining capacity in its line of credit. Mr. Lucas acknowledged the Plan's request for redemption of $10 million, and stated it has paid out approximately $390,000 of the request due to the limited activity in the transaction market, and that as that market opens later in they year, more payouts of the redemption will be made. Mr. Lucas stated he believes the fund is positioned for stability for the in near future with limited multifamily and industrial projects due for completion in 2020. Trustee Hudgins and Mr. Lucas discussed JP Morgan's asset valuation and write down processes; Mr. Lucas stated that although it has seen increased capitalization rates in the retail sector, the fund's independent appraisers have generally not been making capitalization rate and discount rate adjustments, but instead have been adjusting assets' neto operating incomes so that market rents and rent growth assumptions over 5to 10 years have resulted in increases to the stabilized cap rates. Mr. Lucas stated that the retail sector comprises approximately 24% of the portfolio, that retail rent collections went up in June from approximately 34% to 46%, and the fund continues to work with all its tenants, particularly retail, to provide flexibility by deferring rent payments, restructuring or renegotiating leases, or providing free rent in exchange for lease extensions. He also added that JP Morgan and appraisers have been realistic in the valuations and assessments in the context of COVID-19, and the portfolio is structured to minimize risk and increase stability with long weighted average remaining lease terms, limited vacancy, and limited lease roll- overs this year. The Board thanked Ms. Hurley and Mr. Lucas for their report. 8.3. Presentation and Discussion Re: Franklin Templeton, Investment Performance Review as of June 30, 2020. Presenter(s): Brian Kahley, Vice President, George Russell, CFA, Institutional Portfolio Manager, Franklin Templeton via teleconference. Mr. Kahley appeared before the Board telephonically and introduced himself and Mr. Russell. Mr. Kahley stated that he is the Plan's relationship manager with Franklin Templeton, which is the Plan's small cap equity fund manager. He gave an organizational overview, noting that despite a difficult start to the year, the fund has positive returns year to date, and discussed its total portfolio structure. Mr. Kahley advised it has been in the process of acquiring Legg Mason with the expected first day of the new organization set for August 1, 2020, which should have the result of doubling and diversifying its assets under management. The Plan's assets and team at Franklin Templeton will not change through this transition. Mr. Russell discussed the portfolio's general construction and performance during the first and second quarters of 2020, noting it has a contrarian portfolio with more cyclical exposure than its benchmark, the Russell 2000 Growth Index, and that the selloffs in the first quarter benefited the strategy in the second quarter. He discussed sector performance, positioning and weighting, pointing out that because the benchmark had a significant rebalancing in June, the Plan's portfolio would be out of balance for some time, as well. He stated that it has consolidated, under industrials, its airlines position by selling Spirit Air and moving the funds to Regent Air and discussed other underperforming sectors. He noted that approximately 20% of the benchmark's health care allocation is biotech stocks, which is why the Plan's health care allocation is underweighted compared to the benchmark. Mr. Russell stated Franklin Templeton has made use of the downturn in the first quarter to upgrade the quality of its holdings, and believes the portfolio is well balanced between cyclical companies and those which will either be improved, or at least no longer negatively impacted by COVID-19. Chair Konstantopoulos thanked Mr. Kahley and Mr. Russell for their presentation. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: 10.1. Presentation and Discussion Re: DROP Option, Section 24-91(c/(2)b.4. Presenter(s): Scott Christiansen, Christiansen & Dehner, P.A. Attorney Christiansen explained that Christiansen & Dehner had recently updated its forms to address the change in notary law; the update included a form used by employees wishing to enter the DROP. In updating that form, Christensen & Dehner included an investment option for DROP which is prescribed in the controlling ordinances but had previously not been offered to employees. The form had previously allowed employees to choose between earning a flat 2.5% on their DROP funds, or a return equal to the net Plan return on their DROP funds. The third option now included on the updated form allows members to choose to have their DROP funds deposited into an investment plan or vehicle which the board makes available for DROP investment purposes. Attorney Christiansen explained that he recommended the Board not consider offering this option as it creates a Plan liability if the member's choice of investments did not perform as well as the other options. He stated they would change the form to remove the option because the Board has not, to date, taken any action to approve the option, and recommended the Board direct Christiansen & Dehner to address this when it next submits an ordinance for adoption. A discussion ensued. While the option constitutes a self-directed, IRA-style option, the Plan documents do not specify the credentials of a member's choice of investment manager, and therefore funds could be subject to mismanagement or abuse, yet the Board and Plan could retain responsibility for the management of the funds despite having been invested at a member's direction. Attorney Christiansen stated that when his office next drafts Book 1 Page 188 07-24-2020 8:15 a.m. Book 1 Page 189 07-24-2020 8:15 a.m. ar new ordinance, he would include removal of this language. Consensus was noted among the Board for Attorney Christiansen to proceed in removing this language when drafting the next ordinance change. 11. ATTORNEY MATTERS: Attorney Christiansen noted each of the Board members had filed their financial disclosure forms with the State of Florida. He also explained that State of Florida funds should be coming to the City towards the end of August, this check is required to be deposited within 5 days of receipt, and he does not know the amount of this disbursement. On. June 25, 2020, there was a 3-hour hearing on the defendant's motion to dismiss the Con Agra class action suit; the Court has not ruled on the motion. The judge in the Van Gostein case has not issued a ruling to date, but Attorney Christiansen informally affirmed the judge is aware of the case. The Board thanked Attorney Christiansen for his presentation. 12. OTHER MATTERS: None. 13. ADJOURN. Chair Konstantopoulos adjourned the meeting at 9:41 a.m. Chair Demetri Konstartopoulos Viçe ChairSohnathan Todd