MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF APRIL 8, 2024 Present: Chair Ryan Chapdelain, Vice Chair Mark Nicholas, Treasurer Kelly Strickland, Secretary Shayla Griggs, Trustee Robert Reardon, Trustee Barry Keeler, and Trustee Jan Thornburg. Others: Pension Plans Administrator Debra Martin and Pension Specialist Peter Gottlieb. Absent: None. 1. CALL MEETING TO ORDER: Chair Chapdelain called the General Employees' Pension Plan (Plan) Board of Trustees Regular meeting to order at 2:00 p.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary Griggs. Secretary Griggs led the Board and meeting attendees in the Pledge of Allegiance. 3. 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 avoid personal attacks. n 4. ROLL CALL: Pension Plans Administrator Martin called roll. All trustees were present. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the General Employees' Pension Plan Board Membership Meeting of March 26, 2024. Presenter(s): Chair Chapdelain. Trustee Keeler made a motion to approve the minutes of the March 26, 2024, Membership Meeting; Trustee Reardon seconded the motion. The motion passed unanimously (7-0). 7. APPROVAL OF RETIREMENT REQUESTIS): 7.1. Presentation and Discussion Re: Early Retirement Request of Veda Mahadi. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised that Ms. Mahadi requests an early retirement with 23.10 years of service at age 62; she selected the Lifetime Option. Book 1 Page 426 04-08-2024 2:00 p.m. Book 1 Page 427 04-08-2024 2:00 p.m. To Trustee Reardon's question, Pension Plans Administrator Martin advised that Ms. Mahadi worked in the Office of the City Auditor and Clerk. Vice Chair Nicholas made a motion to approve the Early Retirement Request of Ms. Mahadi; Trustee Keeler seconded the motion. The motion carried unanimously (7-0). 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Franklin Templeton, Investment Performance Review as of February 29, 2024. Presenter(s): Andrew Burkly, Institutional Portfolio Manager; Steve Votto, Institutional Sales; Franklin Templeton. Andrew Burkly and Steve Votto of Franklin Templeton (Templeton) appeared before the Board and introduced themselves. Noting the Plan has been invested in Templeton's International Equity strategy for approximately 30 years, Mr. Votto provided a brief firm overview and history, as well as highlights of the fund's performance in 2023. Even in an environment which is challenging for value managers such as Templeton, the portfolio outperformed the Russell 1000 Value index and its benchmark, the MSCI All Country World ex-US Index NR (MCI NR) in 2023 but underperformed the S&P 500. The portfolio's trailing Price to Earnings Ratio (P/E) is 14x earnings; the S&P's is 28x, the Russell 1000's is 18x, and the MSCI NR is 14x. He noted the portfolio continues to have an attractive valuation even after a strong performance in calendar year 2023. Mr. Burkly provided a market overview, noting strong pertormance over the last 6 months; the Federal Reserve (Fed) has changed from increasing short-term interest rates to leaving them unchanged. Even though valuations over the broader market have increased slightly, Templeton remains optimistic as a value investor. Domestically, the economy will be focused on recovering from a soft landing and international economies will sluggishly follow. Turning to the Performance attribution by sector (1 Year), Mr. Burkly discussed how Taiwan Semiconductor in the Technology sector, BAE and CRH in Industrials, and Honda Motors in Consumer Discretionary aided the portfolio's performance. Pharmaceutical companies broadly underperformed within the Health Care sector and detracted from performance however Templeton still believes there are values to be found in that sector. Turning to the Sector allocation, Mr. Burkly discussed the portfolio's long-running overweight to Energy; even though the current $90 price per barrel price of oil is well above its normalized range of $60 to $70, there have been significant investments in expenditures and resourcing, and the conflicts Middle East will continue to push prices upward. The portfolio is underweighted in Financials, although it has some exposure to banks such as Lloyds Bank in the United Kingdom. Mr. Burkly reviewed the Geographic allocation page of the materials. Although firm founder Sir John Templeton had divested from Japan during the 1980s due to overinflated valuations, the strategy has recently moved back into that country as Prime Minister Shinzo Abe's economic reforms have refocused attention away from companies and onto shareholders; Japan is currently the portfolio's largest overweight and that has benefitted performance. The portfolio has no holdings in China due to regulatory opacity while the index has an approximate 10% weighting in China which has rewarded the portfolio. He discussed the Top ten holdings and Portfolio characteristics. Mr. Burkly concluded by providing Templeton's outlook. Interest rates have increased considerably over time and are unlikely to return to pre-pandemic levels which will benefit stock picking investors such as Templeton. To Trustee Reardon's question, Mr. Burkly explained that the portfolio has no direct exposure to the James River restructuring, but that it holds positions in companies such as Mitsubishi, which manufactures construction equipment and will be secondary beneficiaries. The Board thanked Mr. Votto and Mr. Burkly for their presentation. 8.2. Presentation and Discussion Re: Renaissance Investment Management, Investment Performance Review as of December 31, 2023. Presenter(s): Michael J. Streitmarter, CFA, Partner, Portfolio Manager, Renaissance Investment Management. Micheal Streitmarter of Renaissance Investment Management (Renaissance) appeared before the Board and introduced himself. Mr. Streitmarter provided a brief firm overview, noting it hired Patrick Martinak as a Research Analyst and promoted Kora Jefferis from the operations group to Research Associate. Co-Portfolio Manager Joe Bruening will retire at the end of 2024, at which time Mr. Streitmarter will become lead Portfolio Manager. There are no changes to Renaissance' s strategy, philosophy, ori investment process, and itr remains a "growth at a reasonable price" manager. Mr. Streitmarter reviewed the Trailing Performance Summary, noting it outperformed its index, the MSCI All Country World Index ex US ETF (MSCI ETF), and that outperformance continued year-to-date in 2024 by approximately 5% absolute and 1% relative to its index. He noted that the portfolio trailed the benchmark over the 7-year period because some of the most expensive stocks in the index had significant outperformance; the portfolio outperformed thei index since inception. Turning to the Portfolio Sector Attribution, Mr. Streitmarter advised that even though the portfolio's overweight in Information Technology, a result of positions in semiconductor companies, benefitted performance, stock selection was the largest contributor to performance. He explained how increased consumer travel has rewarded Rolls Royce, which makes aircraft engines; the company has restructured its balance sheet which led to Fitch upgrading its credit rating to investment grade and should lead to a resumption of dividend payments in the near future. Vermillion, a Canadian-based oil and gas company, detracted from performance; the firm has exposure to European consumer energy prices, and the last 2 European winters were less severe than expected which drove down consumer demand for heating oil. At the same time, the European Union imposed a windfall tax in 2022 and 2023 which detracted significantly from Vermillion's cashflow and required the company to refocus on debt reduction instead of shareholder returns; the windfall tax was not renewed for 2024 and Vermillion has indicated it will shift management's focus back to shareholder returns. Mr. Streitmarter reviewed the Portfolio Country Attribution. Renesas Electronics, Tokyo Electron, and Shin-Etsu aided Japan in outperforming. In France, Airbus is outperforming as a result of issues with its main rival Boeing; due to circumstances within the industry, Airbus's margins are expected to remain high for the foreseeable future. Mr. Streitmarter discussed Sendas, a Brazilian company which is similar to Costco in the United States that detracted from performance; it had added debt as interest rates rose and undertook store conversions in 2023 which detracted from returns; going forward, as rates decline and the costs associated with store conversions have abated the stock is expected to outperform. To Chair Chapdelain's question, Mr. Streitmarter explained the portfolio has a 5% to 6% exposure to China while the benchmark's exposure is 8%. The biggest detractor for the Chinese allocation is the real estate sector, which is fraught with complicated issues which are not easily resolvable. While the Chinese government could reflate an asset bubble, a significant amount of consumer wealth is tied to real estate. Similarly, unemployment and the technology sectors are also rife with problems; Renaissance is holding its positions in Chinese companies, including Ali Baba, Tencent, and BYD, because their valuations are considerably less than their respective long-term averages or their valuations are less than those of their competitors. He speculated that if the Chinese government can resolve its regulatory issues, there would be a dramatic upswing in Chinese stocks. Mr. Streitmarter briefly reviewed the portfolio Characteristics and asserted the P/Es, Return on Assets, and Return on Equity should remain consistent and higher than the benchmark going into the future. He reviewed the Sector Allocation, noting Information Technology was driven by the semiconductor subsector; it has added to the Industrials sector by adding Hitachi which has sold off less profitable sub-companies and added resources towards the more profitable sub-companies such as Green Transformation. Renaissance has decreased its allocation to Health Care due to issues with individual companies and not a larger concern for the sector. In Financials, the portfolio has exposures to emerging market banks which will grow independent of interest rates, such as ICICIi in India and Rakyat in Indonesia; although this is a large allocation, it is significantly underweight relative to the index. Book 1 Page 428 04-08-2024 2:00 p.m. Book 1 Page 429 04-08-2024 2:00 p.m. To Trustee Reardon's question, Mr. Streitmarter explained that the Information Technology sector contains no Software and Services companies as those companies tend to have higher prices and are screened out of Renaissance's quantitative selection process. Turning to the Regional Allocation, Mr. Streitmarter explained that, while Western Europe appears to have the largest allocation, many of the companies are muti-nationals which generate revenues outside that region; the portfolio's revenue exposure to Western Europe is closer to 30% and Renaissance is still finding attractive valuations there. It has increased its North American allocation by buying Mexican companies which are expected to replace Chinese suppliers to the United States; the benchmark holds approximately 1% in Mexico while the portfolio has approximately 6%. Mr. Streitmarter provided a market and economic outlook; he discussed the domestic market's shift in 2020 from favoring expensive growth stocks to favoring value stocks. Inflation has driven investor sentiment and market returns for the last several years. As domestic and international inflation rates level off and decline, investors speculate which international bank will be the first to reduce their interest rates; this has placed upward pressure on the US Dollar. He noted that inflation in Japan did not spike as it did in the rest of the developed world but allowed the Bank of Japan to raise interest rates back into positive territory. Because the Bank of Japan indicated it will maintain an ulra-accommodative policy, contrary to other countries' central banks' message of maintaining higher for longer" rate environments, the Yen has depreciated relative to other currencies. Despite encouraging signs in Japan, such as its first stock market high in 30 years, Renaissance sees more risk than reward as it is concerned the Bank of Japan will need to raise rates just as other countries will be lowering rates, which will then drive Japanese stock prices down. To Chair Chapdelain's question, Mr. Streitmarter clarified that the Fiscal Year Performance Summary shows Fiscal Year end through December 31, 2023, and that calendar year-to-date, the portfolio is up approximately 5% on an absolute basis and up approximately 1% relative to its benchmark. The Board thanked Mr. Streitmarter for his presentation. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: None. 11. ATTORNEY MATTERS: None. 12. OTHER MATTERS: Pension Plans Administrator Martin advised that Pension Administration has received a self-nomination form from Trustee Keeler for seat 1, and that Vice Chair Nicholas indicated he will submit a self-nomination form for Seat 4. An asset allocation was not presented to the Board as it just received an allocation at the March 26, 2024, meeting. 13. ADJOURN. Chair Chapdelain adjourned the General Employees' Pension Plan Board of Trustees meeting at 2:31 p.m. a - 3 Chair Ryan Chapdelain Secretary/ Shayla Griggs/