Book 1 Page 180 02-26-2020 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF FEBRUARY 26, 2020. Present: Chair Michael Hartley, City Auditor and Clerk Shayla Griggs, Trustee Charles Joseph, and Trustee Scott Snow Others: Attorney Pedro Herrera, Pension Plans Administrator Debra Martin, and Senior Pension Analyst Anthony Ferrer. Absent: Vice Chair Sheila Roberson. 1. CALL1 THE MEETING TO ORDER: Chair Hartley called the meeting to order at 9:00 a.m. 2. PLEDGE OF CIVILITY: Trustee Joseph read into the record a memorandum from Mayor Willie Charles Shaw, dated February 13, 2015, entitled "City Commission and Advisory Board Meeting Protocols and Pledge of Civility." 3. PUBLICINPUT: None. 4. APPROVAL OF MINUTES: 4.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of January 22, 2020. Trustee Joseph questioned if under New Business, Item 7.1., paragraph 5, the word "by" should be "to". Consensus by the Board to make the correction. A motion was made by Trustee Snow and seconded by Trustee Joseph to approve the Minutes, with the correction, of the Firefighters' Pension Plan Board of Trustees Regular Meeting of January 22, 2020. Motion carried unanimously (3-0). Chair Hartley stated that Vice Chair Roberson is absent due to a work commitment, consensus was noted among the Board that this is an excused absence. 5. INVESTMENT PERFORMANCE REVIEW: 5.1. Presentation and Discussion Re: DePrince, Race & Zollo (DRZ) Performance Review as of December 31, 2019. Presenter(s): Nate Rusbosin, Client Service/Portfolio Management, and Matt Williams, Client Service/Marketing, DePrince, Race & Zollo, Inc. (DRZ). Mr. Williams and Mr. Rusbosin came before the Board and introduced themselves. Mr. Williams provided an update of the Firm; that DRZ has represented the Plan since January 2002; that DRZ uses a value investment discipline founded by Greg DePrince; that Mr. DePrince, cofounder of DRZ, stepped away last year and redistributed his shares back into DRZ; that Mr. DePrince had approximately a 21% equity stake in DRZ and those shares are being disseminated among DRZ professionals; that DRZ is independently owned and currently has $3.6 Billion in assets under management. Chair Hartley posed the question that with Mr. DePrince retiring, has the decision-making process changed, Mr. Williams replied Mr. DePrince retired on a day to day basis back in 2009; that Mr. DePrince was the Chairman of the Board; that the small cap value strategy team working with the Plan is intact. Mr. Williams gave a brief overview of performance as of December 31, 2019; that on a one-year basis, a return of 27.65% outpacing the Russell 2000 Value by about 500 basis points and concluded with an overview of the chart outlined on page six of the presentation materials, a representative small cap account VS Russell 2000 value risk factor attribution from 2014-2019. Mr. Rusbosin discussed portfolio positioning; that the consumer space has been a big driver of outperformance for the year; that there is an expectation of more opportunities in the cyclical space as a result of the coronavirus and concluded with a review of the top ten holdings. Mr. Williams reviewed the coronavirus impact on the market; that there have 2600 reported fatalities from the coronavirus in China; that, in comparison, the USA has reported 17,000 deaths from the common flu this year; that the fatalities have predominately been with an older population, with 60 percent above the age of 70; that in the past with the SARS, Ebola and Zika viruses, the market initially sold off about 7% - 11% ; that each time, about a quarter later, the market rallied roughly 30%; that the round of volatility is typically short term in nature. Trustee Snow posed the question why no representation in healthcare, Mr. Rusbosin replied there are not many that pay dividends and there are many non-profitable companies in this sector. Chair Hartley asked, on Page 24 of the presentation materials, every bad year is followed by a robust year for DRZ, what is the reasoning; Mr. Williams replied the stock selection methodology has not changed for 18 years; that 2015 was not a good year with a horrific third quarter influenced by energy holdings; that 2018 had a lousy fourth quarter with dramatic impacts; that any time there is underperformance, there is a review and then will move away or roundup position. The Board thanked Mr. Williams and Mr. Rusbosin for their presentation. 6. UNFINISHED BUSINESS: None. 7. NEW BUSINESS: 7.1. Presentation and Discussion Re: Independent Auditors Report for the Fiscal Year Ending September 30, 2019. Presenter(s): Allison Wester, CPA Partner, Mauldin & Jenkins, LLC. Ms. Wester came before the Board and introduced herself. Ms. Wester discussed the audit report and required external auditor communications performed for the Plan for the year ending September 30, 2019, issuing an unmodified opinion. Chair Hartley posed the question how many individuals audit the Plan, Ms. Wester replied generally a manager, two junior staff members and herself; that there is a relative short period of time on site to view information such as employee files; that there is rotation in staff, however the manager and herself have remained the same. Ms. Wester reviewed The Statement of Fiduciary Net Positions; that the Plan remained largely flat this year; that year over the year the net restricted for pensions decreased as seen on the Statement of Change in Fiduciary Net Position, going down about $800,000.00 year over year, mainly related to depreciation in the fair value of investments related the cyclical nature of what happened in the markets during 2019; that not all of those are realized loses sO those investments have the opportunity to rebound. Book 1 Page 181 02-26-2020 9:00 a.m Book 1 Page 182 02-26-2020 9:00 a.m Chair Hartley asked what total liabilities encompasses, Ms. Wester replied accounts payable throughout the year with timing differences such as Chapter 175 monies coming in and payment to investment managers, etc. Ms. Wester provided an overview of the notes to financial statements; that note one historically gives the summary of significant accounting policies and there is a reclassification this year; that mainly the only place this will be seen is in the Supplementary Information for the Investment Expenses to clarify summary classification between total investment expenses, then investment management and consultant fees. Chair Hartley posed the question where the long term expected rates of return information is obtained, Ms. Wester replied the investment advisors provide the information. Discussion ensued, noting to discuss with Mr. Owens of Graystone Consulting the long term expected rate of return figures. Chair Hartley asked where the breakout for post 2003 share information can be seen, Ms. Wester replied in Note 2, on page 14 of the presentation material. Ms. Wester presented the Schedule of Investment and Administrative Expenses noting the change in the requested breakout this year of investment and administrative expenses providing a comparative; that there is a reclassification of consulting fees in 2018; that there were a few items reclassified from 2018 administratively that were not previously disclosed to comply with 2019 groupings to give useful information; that the biggest increase is salaries which was related to a year of being fully staffed in the Pension Department. Chair Hartley noted when looking at the next budget, to review the numbers under travel as staff is encouraged to pursue continued education. A motion was made by' Trustee Joseph and seconded by Trustee Snow to approve the Independent Auditors report fori fiscal year ending September 31, 2019, as presented by Mauldin & Jenkins. Motion passed unanimously (3-0). The Board thanked Ms. Wester for her presentation. 7.2. Presentation and Discussion Re: SECURE ("Setting Every Community Up for Retirement Enhancement), Act. Presenter(s): Pedro Herrera, Attorney, Sugarman and Susskind, P.A. Attorney Herrera discussed the SECURE Act; that as of. January 1, 2019, the required minimum distribution age increased to age 72 for those not having reached age 70 % by December 31, 2019; that 457 Plan distributions have no age limit in respect to how long an employee can contribute, provided the employee is still working; that the general premise is to assist in the demographic change that people are working longer. 8. ATTORNEY MATTERS: Attorney Herrera reviewed the Legislative session; that there is a Bill filed, Senate Bill 1270, seeking to incorporate fiduciary training for public officials by requiring an additional five hours of training per term; that FPPTA has noted if this does happen, it will develop a program to try to assist in the training requirement; that there are provisions in the proposed statue that provide if the entity is receiving less than $300,000.00 in revenue it may be exempt by allowing for in house or local training. Attorey Herrera added his position is all the pension plans will probably fall under that dollar amount; that technically revenue is not defined and his understanding of revenue, generally speaking, is the money that is taken in from business is for the purpose of your business either from the sale of goods or services; that a pension fund technically does not have revenue; that a pension fund has income from contributions; that investment gains are income but not specifically revenue. Attorney Herrera stated the Cohen and Steers infrastructure contract should be finalized in the next week or two and will then be forward to Chair Hartley for Signature. Chair Hartley asked for an update on the securities fraud action alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") filed against Green Dot Corporation, Attorney Herrera replied that Atara Hirsch, Esq., Director of Institutional Investor Services, Abraham, Fruchter Twersky, LLPis finalizing the complaint then it would probably be sent over with a verification of stock for signature. 9. OTHER MATTERS: 9.1. Presentation and Discussion Re: Administrative Expense Budget Analysis. Presenter(s): Debra Martin, Pension Plans Administrator and Lori Boyer, Senior Pension Accountant. Ms. Martin presented the Administrative Expense Budget Analysis; that page one is a spreadsheet and the second column from the right is the Budget the Board approved for the fiscal year 2020; that the first column is where we are to date with the Budget; that administration is currently working on the Budget for Fiscal Year 2021 that needs to be presented to the City Commissioners in a report after presentation to the Board at the March 25, 2020 meeting; last year administration was advised to have the Budget remain flat; that line item equipment property rental will be removed as there is no ownership or rental of property; that duplicating and printing will have numbers in the next analysis as it has come to the attention of administration, that the processes for reading the copy machine for reimbursement to the Office of the City Auditor and Clerk for what pension administration uses the machine for has not occurred for about a year and a half as this process was overlooked due to staff changes. Chair Hartley noted we are doing well for the first quarter at 18.5%. Ms. Martin added that salaries are over 25%of the expected budget as that number comes from finance and was not updated last year SO this was not incorporated, therefore it will be a little higher than expected for the next budget; that even though salaries will be going up, there will be line items added, and line items removed, it is anticipated that the budget for 2021 may be a little less than the budget for 2020. Ms. Martin stated the second page is right out of the general ledger; that it is the Statement of Changes and Fiduciary Net Position; that the lower half are the budget items for the administrative expenses; that the other items on this page are for informational purposes only. Ms. Martin concluded by saying administration intends to present this analysis quarterly to show the Board where the Plan stands in the current budget. Chair Hartley brought to the Board's attention that he will seek the professional opinion of Scott Owens, from Graystone Consulting at the April 22, 2020 meeting regarding Lazard Asset Management International Infrastructure. Discussion ensued. 7. ADJOURN. Chair Hartey adjourned the Firefighters' Pension Plan Board of Trustees Regular Meeting at 10:34 a.m. I Chair Michael Hartley City Auditor and-Clerk Shayla Griggs Book 1 Page 183 02-26-2020 9:00 a.m