Book 1 Page 373 7-26-2023 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JULY 26, 2023 Present: Chair Michael Hartley, Vice Chair Charles Joseph, Secretary/Treasurer Shayla Griggs, and Trustee Scott Snow. Others: Attorney Robert Sugarman (telephonic), Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Trustee Heather Mushrush. 1. CALL MEETING TO ORDER: 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. SecretarylTreasurer Griggs 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 willl be respectful to one another. We will direct all comments to issues. We will not engage in personal attacks." 4. ROLL CALL: Pension Plans Administrator Martin called roll; Trustee Mushrush was absent. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of May 24, 2023. Presenter(s): Chair Hartley. Vice Chair Joseph made a motion to approve the minutes of the May 24, 2023 regular meeting; Trustee Snow seconded the motion. The motion passed unanimously (4-0). 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: Lazard Asset Management; Performance Review as of June 30, 2023. Presenter(s): Michael Powers, Senior Advisor, Portfolio Manager/Analyst; Frank Sposato, Director; Lazard Asset Management. Michael Powers and Frank Sposato of Lazard Asset Management (Lazard) appeared before the Board and introduced themselves. Mr. Sposato noted that the performance results in the presentation materials are as of March 30, 2023; Lazard will announce its Q2 2023 performance on Thursday, July 27, 2023 and will forward an updated performance report to the Board. He advised that Peter Orszag, former Director of the United States (U.S.) Office of Management and Budget, will become the CEO of Lazard Freres & Co. LLC, which is Lazard's parent company, but will not be directly involved in portfolio management. Mr. Sposato reviewed the Portfolio Management team and Lazard's Investment Philosophy, Objectives and Process page of the presentation materials, noting that the strategy will typically outperform in flat or negative markets; when the market surges, Lazard's strategy tends to underperform. Mr. Powers noted that both the developed and emerging market sides of the portfolio are outperforming with positive returns. He explained how governmental economic stimulus in response to the COVID-19 pandemic caused uncontrolled inflation which has prompted the Federal Reserve Bank (Fed) toraise short term interest rates to tighten the economy. Despite the Fed's efforts to control inflation and investors' concerns of a looming recession which caused a market decline in anticipation of a recession, unemployment remained low and corporate eamings have continued to grow both domestically and internationally. The US economy has not experienced any significant recessive period since the pandemic and international corporate returns have continued to grow, albeit modestly. These have all led to the portfolio's significant outperformance year- to-date and over the 1-year periods. He reviewed the Performance Summary; as of July 24, 2023, the portfolio was up 15.2% year-to-date. On the page titled Extreme Style Headwinds Are Subsiding, Mr. Powers explained how, since mid-2019, federal stimulus and low interest rates benefitted the weakest companies and caused rallies in low-quality stocks. He asserted the portfolio outperforms when the graph is within the shaded, "relative value," area, when growth and value are both outperforming. Mr. Sposato added that the market typically settles within that middle area, however there are periods when the market favors one style more than the other, which are more difficult environments for the strategy. Mr. Powers reviewed the Attribution By Sector, noting its overweighted positions in Information Technology and Industrials and underweighted positions in Consumer Staples and Materials benefitted the portfolio. Its position in Consumer Discretionary detracted from performance as luxury stocks, which tend to have high price-to-earnings ratios and are not held in the portfolio, outperformed as China's economy has re-opened after COVID-19 shutdowns. He briefly reviewed the Attribution by Region. Turning to the page titled Performance Summary, Mr. Powers noted the portfolio outperformed relative to the MSCI Emerging Markets Index for 11 continuous quarters. On the page titled Attribution by Country/Sector = 2023 Q2, he explained how Technology stocks, automobile-related stocks within the Consumer Discretionary sector, and telecom stocks within the Communications Sector all contributed to the portfolio's outperformance. He reviewed the attribution by Country, noting outperformance in China, Brazil, and Hugary which have had interest rate cuts and business-friendly policies. Outperformance by Korean and Taiwanese stocks were related to global companies located in those respective countries. To Vice Chair Joseph's question, Mr. Powers explained that in calendar year 2020, the portfolio underperformed the MSCI Emerging Markets Index by 18% as the market heavily favored growth stocks at that time; however, when comparing the portfolio to the MSCI EM Value Index, the portfolio underperformed by only 5%. Mr. Sposato added that during that time period, the index was extremely conçentrated in 5 or 6 stocks, which were primarily Chinese companies, and not held in the portfolio. Although the index outpertormed Lazard at that time, the Chinese government tightened controls on those companies which caused the index to underperform relative to the portfolio. Book 1 Page 374 7-26-2023 9:00 a.m. Book 1 Page 375 7-26-2023 9:00 a.m. To Chair Hartley's question, Mr. Powers explained that Lazard defines a "full market cycle" as an up period followed by a down period, measured peak to peak. He added that the last 3 years have been very atypical considering the pandemic, stimulus, inflation, and efforts to control inflation were unprecedented. The Board thanked Mr. Sposato and Mr. Powers for their presentation. 7.2. Presentation and Discussion Re: Renaissance Investments; Performance Review as of June 30, 2023. Presenter(s): Mike Streitmarter, Portfolio Manager, Renaissance Investments. Mike Streitmarter of Renaissance Investments (Renaissance) appeared before the Board and introduced himself. Mr. Streitmarter reviewed the Firm Overview and Investment Team pages of the presentation materials, noting that Research Analyst Andy Temming left the firm and has been replaced by Patrick Martinak, and Mr. Streitmarter was named Co-Portfolio Manager as of April 1, 2023. There have been no changes to its investment strategy or process. He reviewed the Investment Philosophy and Investment Process Overview pages of the materials. On the page titled Trailing Performance Summary, Mr. Streitmarter noted positive returns for the calendar year and shorter timeframes; Renaissance underperformed the benchmark over the 5- and 7-year periods as they include a period when the market was led by a select number of expensive growth stocks which Renaissance does not own. The portfolio has led the benchmark since inception in 2008. He reviewed the Portfolio Sector Attribution, noting some of its greatest contributors and detractors and their respective causes. He reviewed the best and worst performing countries as noted on the Portfolio Country Attribution. Mr. Streitmarter reviewed the portfolio Characteristics, noting the portfolio's holdings have less expensive valuations, but higher earnings growth, return on assets, and retum on equity relative to the benchmark; these characteristics have been stable over time. He reviewed the Sector Allocation and discussed some of the stocks Renaissance has added and sold. Renaissance has become bearish on Consumer Discretionary stocks, notably because the Chinese consumer sentiment remains depressed, European consumers continue to fight inflation, and US consumers, while relatively stronger than elsewhere in the world, have exhausted most of their savings amassed during the COVID-19 pandemic. Renaissance is also bearish on Financials, although it has interest in some banks in emerging markets where banks are expected to grow independent of interest rates. To Chair Hartley's questions Mr. Streitmarter explained that Renaissance does not typically invest in utilities and instead it focuses on growth companies; the one utility in the portfolio is a Chinese company which has more industrial clients and has more growth potential. He also explained how Airbus, a French airplane manufacturer, has benefitted from issues affecting aircraft made by Boeing, it's primary rival. Mr. Streitmarter reviewed the Regional Allocation. He explained that the International Equity ADR for Western Europe is misleading, as many of the companies based in Europe have customers outside of their respective home countries; the portfolio's actual revenue exposure to Western Europe is just below 30%. Renaissance has added toi its allocation in North America, specifically in Mexico, and decreased its exposure in Asia/Pacific. While China continues to show positive signs which could be conducive to growth, the geopolitical risks generally outweigh any potential rewards of investment opportunities there; Renaissance has nominal Chinese holdings including Ali Baba and Tencent. To Chair Hartley's questions, Mr. Streitmarter explained that new sanctions and restrictions are steadily being added to China, specifically on semiconductors due to its potential military applications; he asserted there are rumors that tariffs may be lowered to encourage China's return to negotiations on other international issues, however, there has not been any positive movement to date. While the portfolio is underweighted in Chinese stocks, Renaissance does not anticipate reducing that allocation further as the holdings have more potential rewards than geopolitical risk. Mr. Streitmarter explained how the most expensive stocks led the market from January 1, 2017 through September 30, 2020, which was a challenging period for the portfolio as it had a low allocation to those stocks. From October 1, 2020 through June 30, 2023, value stocks and the portfolio outperformed. Mr. Streitmarter explained that global economies continue to work to bring inflation down. Because the U.S. has better controlled inflation than the United Kingdom and Europe, the U.S. will likely end its rate hikes while the United Kingdom and Europe continue to raise its, which will put downward pressure on the US Dollar. Japan, however, has maintained interest rates at negative 10 basis points throughout the interest rate cycle. Renaissance believes Japan may change its economic policies away from negative interest rates, easily available money, and a depreciated Yen, and move towards higher rates and Yen appreciation. In turn, Renaissance is changing its focus from Japanese companies' export revenues to those which have some domestic revenue exposure and would benefit from changes in Japan's economic policies. Mr. Streitmarter discussed the page titled Europe Dodged an Energy Crisis and explained how a warmer- than-normal 2022/2023 European winter as well China, the world's largest energy consumer, shutting down its economy, led to post-winter European gas supplies being at their highest levels in the last 6 years; this is a significant headwind for investors looking at European traditional energy companies and should indicate an energy crisis, however that has not happened to date. Going forward, China is not expected to shut down its economy again, and Russia, another sizable energy supplier, stopped supplying energy in September; these may lead to greater demand and less supply and higher prices for European energy stocks. On the page titled China Imports to U.S. Decreasing, Mr. Streitmarter discussed the U.S.'s decoupling from China; this will negatively impact the world economy as U.S. companies are forced to divert manufacturing out of China. This will also benefit southeast Asian countries with less expensive labor markets, such as India, Vietnam, and Indonesia, as companies relocate factories from China to those less expensive markets. Mexico is also benefitting as its labor force is less expensive and its proximity to the U.S. allows for less shipping costs compared to Asian companies. The Board thanked Mr. Streitmarter for his presentation. 8. UNFINISHED BUSINESS: None. 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Sarasota County, GASB Statements Nos. 68 and 71 Engagement. Presenter(s): Kimberli Radtke, Director, Office of Financial Management; Sarasota County. Kimberli Radtke and Nicole Jovanovski, Director of Finance, Clerk and Comptrollers Office, Sarasota County (County) appeared before the Board. Book 1 Page 376 7-26-2023 9:00 a.m. Book 1 Page 377 7-26-2023 9:00 a.m. Ms. Jovanovski explained this request is made each year as the Plan is multi-employer; the County requests the Board authorize the Plan actuary to provide a Schedule of Collective Pension Amounts = Net Pension Liability, Total Deferred Inflows and Outflows of Resources and Pension Expense, reflective of the proportionate share for the City and County, and to authorize the Plan auditor to render an opinion on the Plan actuary's Schedule of Collective Pension Amounts. This will allow Sarasota County and City to meet their respective GASB 68 and 71 requirements. Chair Hartley and Pension Plans Administrator Martin noted the County has made this request for several years as well as paid for the services. To Pension Plan Administrator Martin's request, Ms. Radtke clarified that the County would like the original executed engagement letter upon its availability. Attorney Sugarman appeared before the Board telephonically and confirmed that the matter may be approved on consensus because it is part of the Board's regular business. The Board approved the County's request on consensus. 10. ATTORNEY MATTERS: Attorney Sugarman reminded the Board that Florida House Bill 3, which requires the Board to only consider pecuniary factors when making investment decisions, has been enacted. This law will only have a minimal impact on the Plan because the Plan has never considered Environmental, Social, or Governmental (ESG) factors, which are non-pecuniary, when making investment decisions. New contracts entered into as of July 1, 2023, or amendments to existing contracts signed as of July 1, 2023, will obligate investment managers to include specific disclaimer language in correspondence to companies in which they are considering making investments. If correspondence includes discussion of ESG factors, the correspondence must also advise that the views in the letter are those of the sender, and not of the people of the State of Florida. If the disclaimer is omitted, the Plan may terminate its relationship with the investment manager immediately. The Plan will also need to submit a report to the State of Florida by December 15 of every other year starting in 2023; Sugarman Susskind anticipates the Department of Management Services, which regulates public pension plans, to issue rules and a form prior to that date. The City of Sarasota may have other obligations under the Secure Act 2.0 which are separate from pensions. Attorney Sugarman provided the example of American Medical Response (AMR), which seeks and profits from the privatization of fire and rescue services; although no longer applicable because the Plan is closed, AMR could have caused a negative financial impact on the Plan when it was open if it had convinçed the Plan Sponsor to privatize. A second example is BP Oil during the 2010 spill in the Gulf of Mexico; because an oil spill could have adversely impacted Florida's beaches, which then would have adversely impacted the tourism industry, and consequently diminished local tax revenues to the City as the Plan's employer, BP's environmental record becomes a pecuniary factor. He reiterated that House Bill 3 will have only a minimal effect on the Plan. Attorney Sugarman advised that he reviewed a Qualified Institutional Buyer (QIB) form for Richmond Capital. He explained that when some types of stocks become available for purchase, such as initial public offerings, only qualified investors may purchase those stocks; typically, qualified investors are institutional investors, or they may be private individuals with significant assets. The QIB form confirms the Plan is a qualified buyer and authorizes the fund manager to buy a specific stock in question, should the fund manager decide to do SO. He reiterated that the QIB form does not guarantee the fund manager will buy the stock, nor does it give the buy/sell decision to any entity other than the fund manager. 11. OTHER MATTERS: 11.1. Presentation and Discussion Re: Asset Allocation as of July 7, 2023. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation as of July 7, 2023 for the Board's information. Trustee Snow advised that the State of Florida Ethics Commission will require annual financial disclosures to be submitted electronically starting in 2024, and that it was taking over the process from the County Elections Supervisor. Secretary/Treasurer: Griggs advised she would look into the matter. Chair Hartley advised he would like to attend the FPPTA trustee school in October. ADJOURN. Chair Hartley noted the meeting length was exactly 1 hour, and adjourned the meeting at 10:00 a.m. 1/ Chair Michaël Hartley Secfely/Treasurer" Shaylar Griggs Book 1 Page 378 7-26-2023 9:00 a.m.