MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF FEBRUARY 26, 2025 Present: Chair Michael Hartley, Vice Chair Charles Joseph, Secretary/Treasurer Shayla Griggs, Trustee Scott Snow, and Trustee Heather Mushrush. Others: Attorney Pedro Herrera, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: None. 1. CALL MEETING TO ORDER: Presenter(s): Chair Hartley. Chair Hartley 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): Secretary/reasurer Griggs. Vice Chair Joseph led the Board and meeting attendees in the Pledge of Allegiance. 3. PLEDGE OF CIMILITY: Presenter(s): Chair Hartley. Chair Hartley 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; all trustees were 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 January 22, 2025. Presenter(s): Chair Hartley Vice Chair Joseph made a motion to approve the minutes of the Regular Meeting of January 22, 2025; Trustee Snow seconded the motion. The motion passed unanimously (5-0). 9. NEW BUSINESS: With the Board's consent, Chair Hartley called 9. New Business, item 9.2. Book 1 Page 454 02-26-2025 9:00 a.m. Book 1 Page 455 02-26-2025 9:00 a.m. 9.2. Presentation and Discussion Re: Mauldin & Jenkins, Financial Statements for the Fiscal Years ending September 30, 2024, and 2023. Presenter(s): Daniel Anderson, CPA, Partner, Mauldin & Jenkins (Telephonic). Attorney Herrera joined the meeting at 9:03 a.m. Daniel Anderson of Mauldin & Jenkins appeared before the Board telephonically and introduced himself. Mr. Anderson briefly reviewed the Auditor's Discussion and Analysis, noting that the opinion is unmodified, which is the highest assurance an auditor can render; the audit was performed under generally accepted auditing standards as well as Govemnment Auditing Standards. He briefly reviewed each paragraph under the Independent Auditor's Report, Compliance Reports, and Required Communications. The Yellow Book Report would list any deficiencies when Mauldin and Jenkins tested the Plan's internal controls and compliance with laws and regulation, however it identified none. Mr. Anderson advised that the fair value of investments and the actuarially determined employer contributions, which are the 2 most sensitive accounting estimates in the financial statements, were reasonable and in accordance with accounting standards. Turning to the financial statements, Mr. Anderson briefly reviewed the Statements of Changes in Fiduciary Net Position For the Years Ended September 30, 2024 and 2023; the net position increase of $19 million for fiscal year 2024 from the prior fiscal year was largely due to investment gains. He noted that Sarasota County's employer contribution ended in Fiscal Year 2023, and the only contributions starting in Fiscal Year 2024 are from the City and the State of Florida in the form of Chapter 175 premium tax distributions. As stated in Note 5. Net Pension Liability, the net pension liability in Fiscal Year 2024 was just under $5 million which is almost $14 million less than in Fiscal Year 2023 resulting in a fiduciary net position as a percentage of the total pension liability of approximately 97%. The last paragraph of Note 5 shows how the Plan's net pension liability changes if the expected rate of investment return (EROR) is increased or decreased by 1%; he asserted that even a declared EROR of 5.6% would result in a healthy funded ratio. Mr. Anderson encouraged the Board to review Management's Discussion and Analysis, which is management's narrative of events which led to the amounts contained in the financial statements. Pension Plans Administrator Martin left the meeting at 9:10 a.m. and returned at 9:11 a.m. The Board and Attomey Herrera discussed the ERORS used in the actuarial valuations as of September 30, 2023, September 30, 2024, and September 30, 2025, as approved in the Board's February 28, 2024, meeting. To Chair Hartley's question, Mr. Anderson reviewed the sensitivity of the net pension liability to the EROR. To Trustee Mushrush's question, Mr. Anderson advised that the Plan's funded ratio is amongst the highest of his clients, although some have exceeded 100%. Many pension plans' funded ratios increased in 2024 due to strong investment returns, although many plans also declare higher ERORS, which lowers their respective funded ratios. He added that the funded ratio is based on data as of a single, specific date, and that it can change dramatically over time; the Schedule of Changes in the Net Pension Liability and Related Ratios includes pertinent information from the last 10 years, including the Plan's funded ratios as of each fiscal year end. To Vice Chair Joseph's question, Chair Hartley and Pension Plans Administrator Martin explained that the funded ratio calculated by Mauldin & Jenkins is performed on an accounting basis while the funded ratio calculated by the Plan's actuary smooths in gains and losses over 3-year periods which reduces the year- to-year volatility of required employer contributions. Vice Chair Joseph made a motion to accept the Financial Statements as presented by Mauldin & Jenkins; Trustee Mushrush seconded the motion. The motion passed unanimously (5-0). The Board thanked Mr. Anderson for his presentation and service to the Plan. 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: Quarterly Performance Review as of December 31, 2024. Presenter(s): Scott Owens, Managing Director - Wealth Management, Institutional Consulting Director, Corporate Retirement Director, Impact Investing Director, Altornative Investment Director; Theodore Loew, Vice President, Institutional Consultant. Scott Owens and Theodore Loew appeared before the Board and introduced themselves and their presentations. Before Mr. Owens began the quarterly performance review, he addressed item 9.1. by discussing the merits of adding a large cap core manager to the investment portfolio. He noted the portfolio already includes 2 large cap value managers and 2 large cap growth managers. Having just a core manager in the large cap space would allow the portfolio the flexibility to take advantage of the market's short-term preference for growth or value stocks. Having large cap value, growth, and core managers preserves diversity and reduces that flexibility to adapt to the current market preference, although the same effect may be also achieved by replacing all the large cap managers with an index fund. He noted that adding a core manager may impact the portfolio's returns more in the short-term than long-term. The Board and Mr. Owens discussed various scenarios of adding a large cap core manager to the portfolio, including divesting from some or several managers and adding a core manager, or adding a core manager to the existing portfolio. Vice Chair Joseph noted that the Board previously expressed an intent to reduce the number of managers in the portfolio; Mr. Owens agreed and advised that the number of managers in the portfolio is the Board's preference. Turning to the Quarterly Performance Summary report, Mr. Owens discussed the Capital Market Returns pages. The S&P's 1-year return for 2024 is the second consecutive year in which the return exceeded 20%; this has not occurred since the 1980s, however the dismal performance in 2022 had many investors defensive going into 2023 and 2024, which supports the importance of an Investment Policy Statement to establish targets and ranges. He noted the rotation from Q3 2024, when the market favored small cap, value, and international equities, and the fixed income sector had near-double-digit retums, to Q4 2024, when the market retured to favoring growth, large cap, and domestic equities, and fixed income had negative returns. Considering the portfolio is very diversified, and only 4 of the 11 sectors had positive returns for the quarter, the Board should anticipate relative underperformance. Mr. Owens explained that international investments rallied in Q3 2024 because the US Dollar was weaker, and therefore the return was boosted when the local currencies were converted back to US Dollars; in Q4 2024, a strengthening US Dollar resulted in losses at the point of conversion in every geographic index. Mr. Owens discussed how the inverted yield curve caused more volatility in fixed income than in equities on a percentage basis. There was tremendous capitulation in the market in Q3 2024 and Q4 2024; while Graystone anticipates positive retums for calendar year 2025, it also anticipates continued uncertainty and volatility. While the market is currently hypersensitive to news, Graystone continues to recommend diversified portfolios which stabilize retums by lessening both gains and losses. Turning to the US Treasury Yield Curves, Mr. Owens explained that the inverted oranye line, which is the yield curve as of December 29, 2023, was unsustainable and that it had generally normalized by the end of 2024 when short-term yields, which the Fed controls, dropped and long-term yields, increased; he noted that 90-day yields remain higher than some short-and intermediate-term yields as a result of recent inflation and Consumer Price Index reports. He discussed the complex and dynamic nature of the economy which makes forecasting the effects of economic policies difficult, which then causes more uncertainty for the market. He explained how the Fed was buying bonds after the Great Financial Crisis in 2008 which led to loweri interest rates over the ensuing decade. The Fed is no longer buying bonds to the same degree, which should result in long-term interest rates rising over time. He explained how the market had been momentum driven since the 2008 financial crisis, meaning investors were focusing on companies' revenues to determine stock values instead of companies' earnings, which does not necessarily reflect a company's health because frequently, the revenue growth was a result of lower borrowing costs and did not result in higher eamings. Book 1 Page 456 02-26-2025 9:00 a.m. Book 1 Page 457 02-26-2025 9:00 a.m. Referencing the Global Yield Differentials page, Mr. Owens asserted that govemment bond yield rates remain strong relative to the rest of the world. On the page titled US Dollar and Other Niajor Currencies, the dark blue line shows the US Dollar is highest compared to other countries' as well as its own history. On the US Stocks Valuation Metrics page, Mr. Owens explained how price-to-earings (P/E) ratios are currently nearing record highs which indicates investors' expectations that profits are going to go up; because the market is both hypersensitive and expecting significant profits, those companies which fail to meet their earnings forecasts may likely see declining stock prices until they reach more reasonable P/E ratios, which is currently being seen in some sectors. On the Eamings Growth and Revisions page, Mr. Owens noted that forward earnings growth in foreign markets is also hampered by the costs to convert investments from local currencies back into US Dollars, and therefore he anticipates domestic equities to be safer investments. On the US Equity Performance VS Earnings Performance page, Mr. Owens noted that every time prices equals eamings, prices decline. That the two have the most significant divergence since 1994 suggests that there will soon be either unexpected high earnings or a price decline; Mr. Owens suggested that unexpectedly high eamings are improbable for the current environment. He asserted that active managers can differentiate fundamentally sound stocks from those with stretched valuations while passive managers/index funds cannot and have substantially more volatility. That notwithstanding, active managers tend to lag passive managers in concentrated markets, as has been seen. Mr. Loew reviewed the individual managers. The Asset Allocation & Time Weighted Performance reflects performance comparable to the broader market. While the quarter was slightly negative for many asset classes and the entire portfolio, each manager's returns across all other timeframes remain positive on an absolute basis, apart from UBS. The managers performed consistently with their respective strategy, and therefore performance was unsurprising. In Alternatives, which consist of private real estate and global infrastructure managers, Mr. Loew explained that the report includes the fixed income benchmark because UBS Private Real Estate, UBS Private Real Estate Income, and Cohen & Steers Global Infrastructure were selected as alternatives to fixed income; each manager has outperformed relatively over the longer term. Mr. Owens added that the Board had taken assets from Richmond, a fixed income manager, and invested it with UBS Private Real Estate. While Richmond's 10-year return relative to its benchmark was +.25%, Richmond trailed UBS Private Real Estate by over 1%. While UBS underperformed its own benchmark, it still outperformed Richmond, and therefore from an allocation perspective, UBS privatc Real Estate was a beneficial investment. The UBS Private Real Estate Income Fund had an even higher 10-year return. Similarly, while Sawgrass and Brown Advisory underperformed their benchmark, they both outperformed on an absolute basis and therefore contributed to the portfolio's overall return. On the Total Fund - Risk / Return Analysis, Mr. Loew noted the portfolio's return was earned with lower risk. The Cash Flow Analysis page shows that, since inception, the portfolio's Income almost matches the Net Contributions, meaning investments have eamed almost enough to cover the Plan's benefit payments, which does not include market gains; after market gains and net contributions, the portfolio's total value has nearly doubled since inception. The Asset Allocation Compliance pages show the portfolio is overweighted to equities and cash, and underweighted to fixed income and altematives, which is appropriate for the current environment. Each manager is near or at target except for underweights to Richmond and UBS, which are currently dragging the portfolio. The Board may consider contemplating what asset class it would like to move into as it divests from private real estate. Mr. Loew reviewed each of the managers. Wedge and Hudson Edge, both large cap value managers, underperformed absolutely, but outperformed relatively, meaning they performed defensively as intended. He noted that Hudson does have a higher downside capture rate. Sawgrass, a large cap growth manager, also underperformed relatively; while Sawgrass owns many, if not all, of the magnificent 7 mega-cap tech stocks which are leading the market, it is restricted from holding the same concentrations found in the market and therefore its relative underperformance is expected. Brown has higher beta and standard deviation, meaning it is higher risk; while it outperformed Sawgrass, it still underperformed relative to its benchmark. Mr. Loew noted that, if the Board wished to remove any managers in favor of a core manager, it could reasonably divest from Hudson Edge and Brown Advisory. DePrince, Race & Zoilo (DRZ) lagged slightly on a relative basis for the quarter and year but outperformed over most timeframes. Mr. Owens added that DRZ's slightly higher Standard Deviation and high upside capture, with low downside capture which shows its volatility is only on the upside, which is desirable when the manager also has a low downside capture. Mr. Loew continued with Congress SMID Growth. He noted that the Russell 2500 benchmark is cap- weighted, meaning companies with higher capitalization rates occupy more space; 2 of the companies in the benchmark will move out of the Russell 2500 and into the large cap benchmark. This indicates that the same concentration issues which loom over the larger market cast a similar shadow over Congress, meaning investors should anticipate underperformance on a relative basis. Mr. Owens added that the 2 companies moving out of the Russell 2500 benchmark are Palantir and AppLovin. Both companies saw dramatic rises in 2024 but lost significant value in 2025 and represent the valuation stretches he described on the US Stocks Valuation Metrics page. As such, Congress is likely performing better relative to the benchmark. Mr. Loew continued with Lazard. While its relative and absolute performance across most timeframes is disappointing, and Graystone has held internal conversations regarding the fund, Graystone does not have a recommendation at this time. Renaissance appears to have begun to recover with relative outperformance over most timeframes. Richmond outperformed relatively across all timeframes. In alternatives, the UBS Trumbull Property Fund had a positive absolute retum for the quarter, suggesting the real estate market may have reached the bottom of its cycle. He noted that the approximate 1% return was entirely income. Institutional investors have begun to purchase properties, giving further cause for a positive outlook. The UBS Trumbull Property Income Fund also had a positive quarter on both absolute and relative bases. Cohen & Steers Global Infrastructure had a negative performance however it continues to produce a stable income; Graystone still supports the asset class as a diversifier and has no recommendation regarding it. There are no concerns regarding the Compliance Checklist. 8. UNFINISHED BUSINESS: None. 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Graystone Consulting, Large Cap Core Manager Search. Presenter(s): Scott Owens, Managing Director - Wealth Management, Institutional Consulting Director, Corporate Retirement Director, Impact Investing Director, Alternative Investment Director; Theodore Loew, Vice President, Institutional Consultant. Vice Chair Joseph advised that he is troubled by events that occurred at the most recent FPPTA Winter School; 2 separate fund managers approached him and stated that they are working with Graystone to manage accounts for the Plan, and that Graystone would announce those decisions at today's meeting; 1 manager went as far as stating that Graystone was drafting a proposed ordinance change to allow that manager to serve the Plan. Vice Chair Joseph stated that neither manager had been selected by the Board, nor had the Board approved of a proposed ordinance change. He expressed concern that Graystone's selection process could have a bias such that 1 manager artificially appeared to be clearly superior to the other presented managers, which would usurp the Board's decision-making authority. Mr. Owens explained that when Graystone compiles manager searches for the Plan, it identifies those managers it believes would fit appropriately into the portfolio based on historical performance, asset class, and style, and notifies those managers as part of the research process, however Graystone makes no assurance to those managers regarding the Board's choice. Further, Graystone's selection and compilation process has remained consistent over time to present managers within a specific asset class and style which have different attributes so that the Board may select the most appropriate manager. He expressed concern that any manager would approach a trustee and assert that the manager had already been selected when the selection process had not concluded. Book 1 Page 458 02-26-2025 9:00 a.m. Book 1 Page 459 02-26-2025 9:00 a.m. The Board, Attorney Herrera, Mr. Owens, and Mr. Loew discussed the matter further. The Board has not expressed any interest in investing in a new asset class which would necessitate an ordinance change, however, ifi it did, and that asset class were prohibited by a controlling ordinance, an amended ordinance would be appropriate. Additionally, before the Board invested in a new asset class, Graystone advised it would present to the Board an asset allocation study and education materials, in addition to the manager search. Attorney Herrera suggested that the client representatives may have been overly zealous, and advised the issue should be addressed outside of the Board's meeting. Secretary/Treasurer: Griggs reminded the Board and Graystone that the Board's invèstment decision- making authority cannot be dictated by any investment manager; Mr. Owens agreed and reiterated the investment manager search process. To Vice Chair Joseph's question, Mr. Owens stated that Graystone wouldn't present a manager that it did not have confidence in, but that itp presents an array of managers which have different attributes, styles, and approaches to investing so that the Board may select the manager the Board believes is most appropriate. Mr. Owens stressed the need to understand why managers under- or out-perform in various environments sO that investors make informed decisions and not emotional ones. Turning to the Large Cap Core Manager Search Summary (Summary), Mr. Owens compared Allspring, Fayez Sarofim (Fayez), Great Lakes, Waycross Partners (Waycross), and the S&P 500, noting they are all approved and "blend" managers, meaning they invest in both growth and value stocks. Allspring performs its own quantitative research to find stocks with discounted P/E ratios. Iti invests in smaller companies than what the other presented managers invest in, and therefore Allspring has the lowest Market Cap rate of the group; it only invests in domestic companies. Fayez allows multinational companies and performs top-down analysis, meaning it identifies sectors it believes will outperform and then selects companies within those sectors; it has the highest cost of the presented managers. Great Lakes creates computer models which find high value companies with growth potential; it has high stock turnover, which is uncommon in this space. Waycross has a very low turnover and is also the most concentrated of the presented managers. Mr. Owens reviewed the Total Assets line of the Summary, noting that Graystone has not identified any correlation between the size of a firm and its performance; that notwithstanding, if the market turns against as smaller firm and it loses a significant amount of assets under management, the firm may need to cut costs faster than a larger firm, although he did not anticipate that issue with any of the presented managers. To Chair Hartley's question, Mr. Owens advised that he was unsure of where Allspring was based, and that it had previously been known as Wells Fargo; later in the meeting Attorney Herrera clarified that Allspring is based in Charlotte, NC. Turning to the Investment Manager Search Analysis, Mr. Owens reviewed the! 5-year Rolling Period Returns and the 5-Year Rolling Periods Alpha pages, noting that each manager has periods of out- and underperformance. The 3-Year Risk/Return Analysis shows that Waycross has moré risk than Allspring, but they both have the highest returns. The managers have the same relative positions over the 5-year period. He noted that the managers with the highest risk had higher returs, and managers with less risk had lower returns; in that context, the managers performed consistently over all timeframes. The Manager Style Analysis page shows that Allspring is the most balanced between growth and value and has had stronger returns; Fayez, Great Lakes, and Waycross are very growthy managers, but have had weaker returns. He noted that the market has generally favored growth for the last 10 years, and younger core managers may not have necessarily demonstrated the ability to successfully transition their respective portfolios out of growth and into value when the market rotates to the latter. Mr. Owens explained that a core manager can actively rebalance its portfolio between growth and value; while the Board can do that with the current managers, the Board will likely only make such a decision at the prompting of the investment consultant at a quarterly performance review, and thus less frequently than a core manager would. To Chair Hartley's question, Mr. Owens referred to Hudson Edge's, Sawgrass', and Brown's respective pages in the Performance Summary Report and noted that if the Board were to change its large cap allocation, he would recommend divesting, in whole or in part, from those managers which have provided the lowest risk-adjusted return, meaning the highest downside capture rates, lowest upside capture rates, and underperform their benchmark. Mr. Owens discussed various allocation models as well as the possibility of performing additional growth and value manager searches; he noted that growth managers will likely underperform relatively in the current environment due to concentration limitations which do not exist for the index. Mr. Loew added that if the Board added 2 large cap core managers to the existing large cap space, assuming the managers have dissimilar holdings, the 6 large cap managers would hold approximately 400 of the 500 stocks in the S&P 500; rather, the portfolio may be more productive with an S&P 500 index fund. To Trustee Snow's question, Mr. Loew advised that only Allspring has a minimum initial investment at $15 million. Chair Hartley noted that many managers can be flexible about initial investment amounts. Chair Hartley expressed interest in interviewing portfolio managers from Allspring and Waycross. Trustee Snow expressed concern for Fayez and Great Lakes, which may hold up to 15% in cash; Mr. Owens concurred and noted that typically manages hold 5% or less in cash. To Trustee Snow's question, Mr. Owens explained that by divesting from Hudson Edge and Brown and investing with Allspring, the portfolio would have about the same risk; by divesting from Hudson Edge and Brown and investing with Waycross, the portfolio would take on slightly more risk. Chair Hartley expressed a preference for first interviewing potential managers and then deciding whether to retain or divest from any of the portfolio's existing managers. To Trustee Snow's question, Mr. Owens assured the Board that the core managers are fully liquid. Mr. Loew advised that he had a note to research liquidity in thei infrastructure funds and confirmed that they have daily liquidity; the only illiquid funds in the current portfolio are the 2 real estate managers. To Vice Chair Joseph's question, Mr. Owens clarified that all private placement real estate funds, which are what the Plan has, have liquidity issues; Real Estate Investment Trusts have daily liquidity but also corollate very closely to stocks. Vice Chair Joseph advised that, while he does not oppose changing the portfolio allocation, he would vote against changing the allocation at this time; Secretarylreasurer: Griggs concurred but would defer to the Board. Chair Hartley made a motion to direct Graystone to invite Allspring and Waycross to make presentations to the Board about their respective strategies. Trustee Mushrush asked about the consequences of delaying a decision in the matter for a quarter or more, especially considering the new presidential administration. Chair Hartley advised that, even if the Board were to change the portfolio, it would take 6 months for the change to be effectuated. Chair Hartley advised that the motion died for lack of a second. Referring to page. 23 of the Performance Summary, Mr. Owens asked the Board to authorize Graystone to reduce the allocations of Lazard and Renaissance to 4% respectively and reinvest the proceeds into DRZ and Congress; he cautioned against adding the proceeds into the large cap space which is already overweight. He clarified that he recommends only changing the allocations, and he does not recommend changing the targets or ranges. To Chair Hartley's comment, Secretary/Treasurer Griggs, Attorney Herrera, and Pension Plans Administrator Martin advised that Graystone must be authorized by the Board to make their recommended changes because it is reallocating the portfolio, but that a change to the investment policy is not required because the reallocations are within the target ranges. Vice Chair Joseph asked if Graystone is recommending liquidating $895,000 from Renaissance and $862,000 from Lazard. Mr. Owens explained that the amounts in the Summary Report are as of December 31, 2024, and the dollar amounts have likely changed since that date, and therefore he based his request Book 1 Page 460 02-26-2025 9:00 a.m. Book 1 Page 461 02-26-2025 9:00 a.m. using percentages of the portfolio allocation. To Trustee Snow's question, Mr. Owens explained that, if approved, thei intent is to slightly underweight the international managers at 4% and slightly overweight the small- and SMID-cap managers at 6%. To Vice Chair Joseph's question, Mr. Owens explained that, although the small- and SMID-cap managers and the international managers have comparable growth expectations, there is enough uncertainty and risk in international markets to warrant leaning the portfolio's allocation away from intemational and towards domestic equities. If the uncertainty resolves quickly, the Board can re-balance the portfolio back to targets. Trustee Snow made a motion to reduce the allocations of Lazard and Renaissance to 4% respectively and reinvest the proceeds into DRZ and Congress. Chair Hartley seconded the motion. The motion passed unanimously (5-0). The Board thanked Mr. Owens and Mr. Loew for their presentation and ensuing discussion. To Mr. Owens' question, Pension Plans Administrator Martin advised that the Plan has a sufficient balance in the Receipts and Disbursements (R&D) account for upcoming benefit payments. To Chair Hartley's question, Pension Plans Administrator Martin advised that UBS last made a redemption payment in January 2025; Mr. Loew advised that redemption payments had been erratic and are becoming more regular. Mr. Owens advised that, in his last conversation with it, UBS advised that it has continued confidence it will be able to fully satisfy the redemption queue in approximately 2.5 years as they had previously forecasted. The Board, Pension Plans Administrator Martin, and Mr. Owens discussed what to do with the proceeds of the UBS redemption when it is finally satisfied. While real estate earnings and current redemptions are going into the R&D account, if the Board fully liquidates the allocation, Graystone will bring asset allocation studies with proposed investments. He noted that if the Board would like to diversify outside of the current menu of approved investments, the City Commission would need to approve a revised ordinance allowing any new asset classes. He added that the Board sought alternatives to bonds when bonds paid 1% to 2%; they are currently paying much more. 10. ATTORNEY MATTERS: 10.1. Presentation and Discussion Re: Potential Class Action against Block, Inc. Presenter(s): Pedro Herrera, Sugarman, Susskind, Braswell & Herrera, P.A.; Atara Twersky, Abraham, Fruchter, and Twersky, LLP (telephonic). Attorney Herrera introduced the item and Attorney Twersky of Abraham, Fruchter, and Twersky, LLP (AFT) who appeared before the Board telephonically. Attorney Twersky provided a brief explanation of securities monitoring and how AFT serves the Plan. She reviewed the contents of the presentation materials which state that Block Inc. engaged in numerous compliance failures which allowed customers of 2 of its subsidiary companies, Square and Cash App, to make digital payment transactions for widespread illegal activities; the failures were compounded by Block Inc's senior managements misleading statements and disregard of numerous internal alerts and whistleblowers, which resulted in multiple regulatory investigations from the US Securities and Exchange Commission (SEC) and US Department of Justice. Pursuant to the revelations, Block Inc's stock price experienced dramatic declines in March 2023 and August 2023, which resulted in an approximate $355,000 loss to the Plan during the class period. Attorney Twersky noted that any action by the Plan would be civil and not criminal, and under the SEC Act of 1934 under Sections 10(b) and 20(a); based on the amount of loss, AFT recommends the Plan file for lead plaintiff. She reminded the Board that AFT works on contingency, meaning the Plan would not be required to pay any legal fees unless there is an award of damages. The deadline to file for lead plaintiff is March 18, 2025. To the Board's and Attorney Herrera's questions, Attorney Twersky explained that the Plan owned shares in Block Inc. during the class period through Brown Advisory. Because the action is civil and not derivative, the Plan is not required to continue to own the shares, and Brown Advisory may sell its shares of Block Inc. at its discretion. Secretary/Treasurer Griggs advised that, consistently with her long-held position, she does not support filing for lead plaintiff in this matter. Vice Chair Joseph made a motion to direct Abraham, Fruchter, and Twersky, LLP, to file on behalf of the Plan for lead plaintiff in the matter against Block Inc.; Trustee Snow seconded the motion. The motion passed 4-1, with Secretary/Treasurer Griggs dissenting. Attorney Herrera asked Attorney Twersky to prepare an engagement letter for the Chair to execute. Attorney Herrera advised that on January 5, 2025, the Social Security Fairness Act (Act) went into effect, retroactive to Social Security benefit payments made as of January 1, 2024. The Act repealed the Social Security Reduction Act and the Windfall Elimination provision, which had reduced payable Social Security benefits based on the amount of time a person, or a person's spouse, worked in a position which did not contribute to Social Security and earned a pension benefit. The Social Security Administration estimates that the repeals will impact approximately 3 million benefit recipients nationwide, of which approximately 180,000 are Floridians. The repeal does not directly impact the Plan and is provided only for the Board's and Pension Administration's information. Attorney Herrera advised that the Internal Revenue Service (IRS) has changed how it enforces the taxation of line-of-duty (LOD) disability benefits; he clarified that the law has not changed. The IRS code has consistently considered the portion of an LOD disabilitant's benefit which is based on a recipient's age and/or service to be taxable; accordingly, the IRS had directed pension plans to report those portions of earnings on 1099-Rs as code "O" or "undetermined. He noted that Florida law provides for a minimum benefit of 42% of earnings, irrespective of the employee's age or service, although some pension plans have voluntarily increased that percentage. Because the minimum benefit is not based on age or service, the minimum benefit portion is not taxable. If a disabilitant earned a pension that is greater than the minimum benefit, then the difference between the earned disability benefit and the minimum benefit is taxable. At Pension Plans Administrator Martin's request, Attorney Herrera advised he would discuss this matter further with her after the meeting. 11. OTHER MATTERS None. 12. ADJOURN. Chair Hartley adjourned the meeting at 11:12 a.m. - . 64 npa Chair Michael Hartley Secrelay/Teasurer Shayla Griggs Book 1 Page 462 02-26-2025 9:00 a.m.