Book 1 Page 433 07-31-2024 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JULY 31, 2024 Present: Vice Chair Charles Joseph, Trustee Scott Snow, and Trustee Heather Mushrush (telephonic). Others: Attorney Pedro Herrera (telephonic), Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Chair Michael Hartley and Secretary/Treasurer: Shayla Griggs. 1. CALL MEETING TO ORDER: Presenter(s): Chair Hartley. Vice Chair Joseph called the City of Sarasota (City), Firefighters Pension Plan (Plan) Board of Trustees Regular meeting to order at 9:00 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Pension Plans Administrator Martin. Vice Chair Joseph led the Board and meeting attendees in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Hartley. Trustee Snow 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 appeared telephonically; Chair Hartley and Secretary/reasurer Griggs were not present. 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 22, 2024. Presenter(s): Chair Hartley Vice Chair Joseph advised Attorney Herrera that only 2 trustees are physically present in City Chambers and 1 trustee is appearing telephonically. Attorney Herrera advised that, to conduct business, an in-person quorum must be present in City Chambers; as the number of trustees appearing in person did not constitute a quorum, the Board is unable to conduct official business at this meeting, however a quorum is not required fort the Board to receive information from presenters. The Board agreed that it could not approve the minutes of the May 22, 2024, meeting and would table the item for a subsequent meeting. 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: Lazard Investments, Performance Review as of June 30, 2024. Presenter(s): Michael Powers, Senior Advisor; Frank Sposato, Direcior; Lazard Asset Management. Frank Sposato and Michael Powers of Lazard Asset Management ("Lazard") appeared before the Board and introduced themselves. Mr. Sposato provided an overview of Lazard's presentation. There have been no changes to the investment team. John Reinsberg, who had previously headed the Global Equity strategy and more recently, has been involved in strategic initiatives, will be retiring; Mr. Reinsberg is not involved in the management of the portfolio. Assets under management are approximately the same as last year. The Plan is invested in Lazard's International Equity strategy with an allocation towards emerging markets. He noted that international equities are influenced by a myriad of factors including domestic and international interest rates, monetary policies, geopolitical conflicts, and elections, as well as uncertainties in each of these areas. Lazard looks for high quality companies which eam money and are reasonably priced. He asserted both the developed and emerging sides of the portfolio are performing as expected by staying true to its mandate. There have been no other changes to the firm or strategy. Mr. Powers explained that Lazard adds value to the portfolio through stock picking relative value, meaning by investing in high quality companies with good management and high return on equity and total capital. It has always had a premium to broad market return on capital. It is neither a deep value nor a heavily growthy investor and is instead on the relative value side of core, as well as being a growth at a reasonable price (GARP) investor. It usually has less debt and grows earnings faster than the broad market. Turning to the Market Summary 2024 Q2 page of the materials, Mr. Powers discussed how the normalization of inflation in the post-COVID-19 economy, as seen by stabilizing interest rates and the economy rebounding from unprecedented levels of domestic stimulus, has helped create a beneficial environment for the portfolio and equities in general. He explained that Lazard avoids investing in deep value stocks or very growthy stocks as opposite ends of the growth/value spectrum, and instead seeks relative value companies in the middle. That middle band favored by Lazard was not favored by the market for a period, however that appears to have reversed and both the emerging and developed market sides of the portfolio have outperformed by sector and geographic area. On the Performance Summary for the entire portfolio on page 18, Mr. Powers advised that as of July 31, 2024, portfolio is return is close to 8% year to date; it outperformed its benchmark over the 1-year and 3- year periods but underperformed relatively over the 5-year and since inception periods. He reviewed the Calendar Year returns, noting better performance in recent years. He attributed the poorer performance to the market favoring extreme styles and asserted that trend is waning. Mr. Powers reviewed the Attribution By Sector/Region, noting it had positive performance in 8 of the 11 sectors. He asserted that the only meaningful underperformance was in the Financial sector in which several banks brought down the sector; underperformance in the Materials and Industrials sectors was minor. Geographically, the portfolio outperformed in 5 of 7 regions. Mr. Powers reviewed Holdings By Sector, noting that the Information Technology sector has been the strongest in the most recent 2 years, as advancements in Artificial Intelligence and medications have invigorated the Tech and Health Care sectors, respectively. Mr. Powers briefly reviewed the Holdings By Country page. On the Performance Summary on page 37, Mr. Powers reminded the Board that Emerging Markets comprises approximately 25% of the portfolio and reviewed the periodic absolute and relative returns. Turning to the Emerging Markets Attribution by Country/Sector, he explained that 9 of the 11 sectors outperformed; performance is attributed to stock selection. Geographically, stock selection contributed to outperformance in 15 of the 20 countries. He noted that Information Technology, Communications, and Banking in emerging markets have outperformed those sectors in developed markets because of the room for growth and profitability. Mr. Powers stated that Lazard looks for value in multiple sources. While individual countries and sectors may outperform, identifying and investing in stocks which meet Lazard's investment criteria provides for Book 1 Page 434 07-31-2024 9:00 a.m. Book 1 Page 435 07-31-2024 9:00 a.m. more stable growth across the entire portfolio instead of a few select areas. To Trustee Snow's question, Mr. Powers explained how declining interest rates will be beneficial for the portfolio. Referencing pages 32 and 33, he discussed how some stocks are less expensive because of the market in which they are sold, and some stocks are less expensive because of the values of the US Dollar relative to the local currency. He cited the example of the US, in which analysts believe the Fed will cut relatively high interest rates, and Japan, which is anticipated to raise interest rates, caused the US Dollar to lose value against the Japanese Yen. Generally, lower interest rates tend to be good for emerging markets. To Vice Chair Joseph's question regarding the Emerging Markets Performance Summary, Mr. Powers and Mr. Sposato explained that in Calendar Year 2020, the market was favoring extreme deep value or very growthy stocks. During this timeframe, the least profitable and lowest quality companies were generating the most returns while high quality stocks lagged; he noted that in Calendar Year 2021, the market returned to favoring high quality. There were no changes to the investment team or strategy during this timeframe, and relative underperformance was attributed to the market's preference, and not mismanagement. The Board had no further questions for Mr. Powers or Mr. Sposato and thanked them for their presentation. 7.2. Presentation and Discussion Re: Renaissance Asset Management, Performance Review as of June 30, 2024. Presenter(s): Michael J. Streitmarter, CFA, Co-Portfolio Manager; Renaissance Asset Management. Michael Streitmarter of Renaissance Asset Management ("Renaissance) appeared before the Board and introduced himself. Mr. Streitmarter explained that Kora Jefferis was promoted from Operations to being a Research Associate. Also, Joe Bruening has announced his retirement at the end of 2024, at which time Mr. Streitmarter will become Lead Portfolio Manager. There have been no other changes to the. investment team and no significant changes to its process or philosophy. Renaissance is a GARP manager of an International Equity portfolio; he briefly reviewed its stock selection process. Mr. Streitmarter reviewed the Trailing Performance Summary page of the materials. Herexplained that while 2023 was a good year, that success did not continue into 2024. In June 2024, unfavorable election results in 2 countries which were overweighted in the portfolio dragged performance. He reminded the Board that from 2017 through Q3 2020, the market favored the most expensive stocks which adversely affected the portfolio's relative performance. The market is currently not being led by either extreme which is rewarding the portfolio. It still leads its benchmarks since inception. On the Portfolio Sector Attribution, Mr. Streitmarter advised that the portfolio's overweighted position in the semiconductor industry within the Information Technology sector contributed the most to performance; the Industrial and Materials sectors also contributed significantly. IGT in Consumer Discretionary, as well as Perion in Communication Services, detracted from performance and Renaissance has sold both positions. Mr. Streitmarter reviewed the Portfolio Country Attribution. France and Mexico had significant negative contributions due to the portfolio's relative overweighted positions combined with sell-offs due to election results. He discussed companies in Bermuda, United Kingdom, and Canada which aided or detracted from performance. Mr. Streitmarter. briefly reviewed the Characteristics page of the materials, noting which items was greater than the benchmark's. On the Sector Allocation Page, Renaissance has added to the Industrials sector, making it the portfolio's largest weight and overweight; it has added Prysmian, an Italian advanced cable manufacturer which has benefitted from the growth in data centers being developed in Italy, as well as Italy's efforts to update its aging power grid. Renaissance has pulled back its exposure to Information Technology considering how long that sector has outperformed. The portfolio's greatest underweight is in Financials in anticipation of declining interest rates in developed countries. On the Regional Allocation page, Mr. Streitmarter noted that the sizable weighting to Western Europe is misleading as the portfolio holds numerous companies which report their income in that region but have international operations. He explained that the portfolio's largest overweight to North. America is because it anticipates Mexico to be the greatest beneficiary of the decoupling of the United States and China. It's most significant underweight is in the Asia/Pacific region; Renaissance sees companies in India, Taiwan, and Japan as being overvalued, and it has long believed that too much consumer wealth in China is tied up in the real estate market. China's real estate issues notwithstanding, Renaissance continues to hold Ali Baba, an on-line marketplace, and BYD, an electric vehicle manufacturer due their respective low pricelearnings multiples. Mr. Streitmarter elaborated on how elections hurt the portfolio. In India, Prime Minister Modi's BJP Party lost its majority and will now require the Prime Minister to rely on political allies to continue his economic reforms. Although the country's stocks suffered a brief, dramatic loss, they resumed an upwards trend; the portfolio is underweighted in India compared to the benchmark and suffered on a relative basis. In France, the controlling moderate party lost a significant number of government seats, however none of the 3 major factions received a majority, and the result has been legislative gridlock; because no legislation has been passed that could favor one party or another, France has seen a rally in July 2024. In Mexico, Claudia Sheinbaum, the protégé of current President Andrés Manuel Lopez Obrador (AMLO) was elected and their party, Moreno, achieved a supermajority, thus ensuring AMLO's more controversial reforms. which had previously been blocked, are more likely to be enacted. Sheinbaum is seen as more business-friendly than AMLO, which may aid that country's performance in the portfolio. Additionally, the Mexican Peso and its equity market declined significantly when AMLO was elected in 2018, but both have performed very well over the ensuing years in large part to the United States/China decoupling. On page 14 of the materials, Mr. Streitmarter reiterated how inexpensive international equities have become in recent years, as discussed by Mr. Powers from Lazard. He asserted that domestic stocks are already trading at their highest decile in history, and therefore further priceleamings expansion seems unlikely. While some domestic outperformance over international is attributable to the mega-tech stocks and US Gross Domestic Product's (GDP) growth always having outpaced that of Europe, the US government continues to have massive deficits, and its debt/GDP has expanded significantly, while those of the Eurozone have remained flat for the last decade. At some point, the US will need to rein in government spending which will put downward pressure on domestic stocks and relatively benefit international stocks. To Vice Chair Joseph's question, Mr. Streitmarter explained that Kora Jefferis has takèn a similar path as Mr. Streitmarter, having started in operations, she attained her Certified Financial Planner certification, was promoted to a Research Associate, and is now working on her Charted Financial Analyst certification. The Board had no further questions for Mr. Streitmarter and thanked him for his presentation. 8. UNFINISHED BUSINESS: 9. NEW BUSINESS: 10. ATTORNEY MATTERS: 10.1. Presentation and Discussion Re: Potential Class Action against Perion Network, Ltd. Presenter(s): Pedro Herrera, Sugarman, Susskind, Braswell & Herrera. Attorney Herrera advised this matter would be taken up at the September 25, 2024, Board meeting. 11. OTHER MATTERS 11.1. Approval Re: Administrative Budget Analysis for January 1, 2024, through March 31, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Budget Analysis for the Board's information. She noted that thei items at 0% are due to the timing of when those items are paid. Book 1 Page 436 07-31-2024 9:00 a.m. Book 1 Page 437 07-31-2024 9:00 a.m. 11.2. Approval Re: Check Register for January 1, 2024, through March 31, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Check Register for the Board's information. She noted that the $746.04 payment to the General Employees' Pension Plan was for the accounting package which is shared by the City's defined benefit pension plans. 11.3. Presentation and Discussion Re: Asset Allocation as of July 15, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation for the Board's information. To Trustee Mushrush's question regarding Salaries on the Budget Analysis, Pension Plans Administrator Martin explained that the budgeted amount was determined before the City indicated it would issue larger- than-anticipated salary increases. If the total budget expenditure at the end of the fiscal year exceeds the budgeted amount, she will ask the Board for a budget adjustment for Salaries. 12. 12. ADJOURN. Vice Chair Joseph adjourned the meeting at 10:03 a.m. 600 2C ChairMichael Hartley SecreidyTreasurer Shayla Griggs