MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF APRIL 28, 2023 Present: Chair Demetri Konstantopoulos, Vice Chair Johnathan Todd, Secretary/reasurer Shayla Griggs, Trustee Ronnie K. Baty, and Trustee Joseph "Jody" Hudgins Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: None. 1. CALL MEETING TO ORDER: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos called the regular meeting of the Police Officers' Pension Plan (Plan) Board of Trustees to order at 8:15 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos led the Board and those in attendance in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos stated for the record, "We may disagree, but we will be respectful of one another. We will direct all comments to issues. We will not engage in personal attacks.' a 4. ROLL CALL: Presenter: Pension Plans Administrator Martin. 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 Police Officers' Pension Plan Board of Trustees Regular Meeting of February 24, 2023. Presenter(s): Chair Konstantopoulos. Trustee Baty made a motion to approve the minutes of the Regular Meeting of February 24, 2023; Vice Chair Todd seconded the motion. The motion passed unanimously (5-0). The Board thanked Pension Administration for its thoroughness and sensitivity in drafting the minutes of the February 24, 2023, meetings. Book 1 Page 342 04-28-2023 8:15 a.m. Book 1 Page 343 04-28-2023 8:15 a.m. 6.2. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Special Meeting of February 24, 2023. Presenter(s): Chair Konstantopoulos. Trustee Hudgins made a motion to approve the minutes of the Special Meeting of February 24, 2023; Trustee Baty seconded the motion. The motion passed unanimously (5-0). 7. BOARD OF TRUSTEE REPORTS: 7.1. Presentation and Discussion Re: Annual Board Report for 2022. Presenter(s): Secretary/reasurer Griggs. Secretary/Treasurer Griggs presented the Annual Board Report for 2022 and thanked the Board for its focus on the fiduciary responsibility to the Plan. She explained the Report was presented to and accepted by the City Commission at its March 20, 2023, regular meeting. Trustee Baty made a motion to approve the Annual Board Report for 2022; Vice Chair Todd seconded the motion. The motion passed unanimously (5-0). 7.2. Presentation and Discussion Re: Proposed Annual Budget for Fiscal Year 2023 - 2024. Presenter(s): Secretary/Treasurer Griggs. Secretary/Treasurer: Griggs presented the Proposed Annual Budget for Fiscal Year 2023 - 2024; the proposed budget increased from the prior year, primarily due tothe City's 9% wage increase in October 2022. Attorney Christiansen advised that the Board is statutorily required to pass an administrative budget. Vice Chair Todd made a motion to approve the Proposed Annual Budget for Fiscal Year 2023 - 2024; Trustee Baty seconded the motion. The motion passed unanimously (5-0). 8. RETIREMENT REQUESTS: 8.1. Approval Re: Disability Retirement Request of BobbieSue Patrick. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin explained that the Board previously determined Officer Patrick was totally and permanently disabled as a result of her duties as a Police Officer. She selected the lifetime only option and the Plan's actuary, Gabriel, Roeder, Smith, confirmed the benefit computation performed by Pension Administration. Attorney Christiansen noted that if Officer Patrick were to die before the Plan paid benefits in the amount equivalent to her employee contributions, the pension benefit will also terminate. Trustee Baty made a motion to approve the Disability Retirement Request of BobbieSue Patrick; Trustee Hudgins seconded the motion. The motion passed unanimously (5-0). 9. INVESTMENT PERFORMANCE REVIEW: 9.1. Presentation and Discussion Re: Sawgrass Asset Management, Investment Performance Summary for Period Ending March 31, 2023. Presenter(s): David Siegel, CFA, Fixed Income Portfolio Manager, Sawgrass Asset Management. David Siegel of Sawgrass Asset Management (Sawgrass) appeared before the Board and introduced himself. Mr. Siegel stated that many of the issues which plagued the economy and market when he last appeared before the Board in 2022, such as rising interest rates and high inflation, still persist. He reviewed the details of the Portfolio Summary in the presentation materials and advised that Sawgrass received an additional placement of funds on March 6, 2023, which was at the peak of yield rates. Before reviewing the Portfolio Performance page, Mr. Siegel discussed the market environment during 2022, and noted the return on the portfolio's benchmark, the Barclays Capital Aggregate, was down more than 13% for the year; the benchmark's next worst negative return was approximately 3% in 1994. The benchmark's return in 2021 was approximately negative 1.5%, making 2022 the first time in the benchmark's history it had consecutive negative annual returns, which undoubtably affected both short- and long-term investments. Those not- withstanding, the portfolio and benchmark had positive absolute returns over the quarter-to-date, fiscal year-to-date, 5-year, and since inception timeframes. He added that when investors buy bonds in a rising interest rate environment, the new investments will have higher returns which makes a prolonged period of negative returns more noteworthy. The portfolio outperformed the benchmark over all timeframes. While the portfolio acted defensively during the downswing in 2022, Sawgrass repositioned it as rates peaked that year sO that, if rates stabilize or come down, the portfolio will be positioned to outperform. The page of the materials titled US TSY Short Term Rates Volatile and Trending Lower shows the 2-Year Treasury is a leading indicator to the Federal Reserve's (Fed's) actions. The Fed has been focused on controlling inflation using short-term interest rates, even though many analysts had predicted a year ago that inflation was only transitory. The downturn in 2023 in the 2-Year Treasury is due to the failure of 2 regional banks, as well as the market's concern about a larger economic impact; the page titled Unprecedented Volatility in the Treasury Market shows volatility in the day-to-day 2 Year Treasury market, indicating that market's concerns for the bank failures' potential reperçussions. On the page titled Re-Pricing of Fed Expectations, Mr. Siegel asserted the market had priced in the expectation that the Fed would continue raising interest rates through the end of 2023, then possibly lower rates in 2024. However, since the 2 regional bank failures, the market has repriced to only 1 additional rate increase which is anticipated in May 2023; whether future rate hikes will cause volatility is uncertain. On the page titled Curve Inversion Showing Signs of Reversing, Mr. Siegel stated the portfolio had a short duration as rates were rising; the portfolio is now neutral due to the uncertainty regarding whether the Fed will raise or lower rates. Sawgrass believes the 2-and 10-Year Treasury rate inversion, which is an indicator of a possible recession, has continued for too long, and they have underweighted the portfolio in the longer parts of the Treasury curve in anticipation they will underperform. As the Fed stops increasing short-term rates, Sawgrass believes the curve will steepen and the 10-Year will return to a higher yield than the 2- Year, and the portfolio is positioned to outperform in this scenario. Referencing the page titled Corporate Bond Spreads Holding In, Mr. Siegel explained that Sawgrass is looking for more opportunities in corporate bonds due to their relative consistency, other than during the COVID-19 pandemic in 2000 and the market crash in 2008 and 2009. Considering the fears and concerns in the current market, Sawgrass expects spreads to widen more over the next few quarters, at which point they will invest more in corporate bonds. Sawgrass had sold off its positions in regional banks prior to the 2 regional bank failures; while it did not foresee those failures, the relative values found in regional banks informed Sawgrass's sell decision. Sawgrass holds some larger banks, such as Morgan Stanley, JP Morgan, and Goldman Sachs, which are large, diversified, and not dependent on deposits for cashflows. On the page titled Bloomberg Agg Yield Has Increased Dramatically, Mr. Siegel discussed how the increase in the Aggregate Yield has created more investment opportunities than over the last decade. On the page titled Interest Rate Risk Exposure: Neutral Duration, Mr. Siegel explained that Sawgrass believes interest rates will probably go down or stabilize, and therefore it aims to be neutral to slightly long. Book 1 Page 344 04-28-2023 8:15 a.m. Book 1 Page 345 04-28-2023 8:15 a.m. Trustee Hudgins and Mr. Siegel discussed Credit Risk Exposure. Mr. Siegel explained that, to Sawgrass, credit risk incorporates the dollar amounts owned on a percentage basis, relative credit rating, maturity, and interest rate risk. Credit risk is a component of the dollars they own or percentages of corporate bonds, duration risk, and quality risk. While the term can be defined many ways, in the context of the page titled Credit Risk Exposure - Actively Managing, credit risk refers to the risk associated with corporate bond exposure, and not specifically to repayment-ability. The Board thanked Mr. Siegel for his presentation. 9.2. Presentation and Discussion Re: SSI Asset Management, Investment Performance Summary for Period Ending March 31, 2023. Presenter(s): Michael Opre. Portfolio Manager; James Kowal, Vice President; SSI Asset Management. James Kowal and Michael Opre appeared before the Board and introduced themselves. Mr. Kowal began by stating that there have been no significant changes to the investment team, and the members of which are listed in the presentation materials on the page titled Experienced Investment Team Ensures Consistency; the Plan is invested in the Convertible Strategies, and that team is supported by the Hedged Convertible Strategies team. On the page titled Convertibles Have Outperformed Bloomberg Fixed Income Indices, he explained that, while 2022 was a challenging year for bonds and equities, a longer time horizon shows that both fully discretionary convertible bonds, which is the line titled ICE BofA All US Converts (VXA0), or investment grade bonds, which is the line titled ICE BofAML US Invt Grade Convertible, are comparable to the broader fixed income industries. Mr. Opre discussed the US Convertible Universe & New ssuance Dynamics page. New issuances, which drive the convertible market, plummeted in 2022, and both bond and equity markets suffered which created more opportunities for investment in each area. He asserted that, due to the depth to which the market declined in 2022, a rebound of 200% is not an outrageous forecast as companies require more capital to fund growth, acquisitions, and to refinance debt. Referencing the page titled Why We Expect Strong Relative Performance, Mr. Opre stated that convertibles have more downside protection now than they have had in many years. To Trustee Hudgins' question, Mr. Opre explained that, because a convertible bond is a hybrid of a corporate bond with the option to convert the asset into the underlying equity in that company, as the stock value declines, more value is attributable to the bond component. The trading value is then a factor of interest rates and credit spreads between where the company can borrow money versus where the government can borrow money. The events of 2022 removed excess from both thel bond and stock markets and there are now less consequences to incorrectly forecasting the direction the market will take. Trustee Hudgins asked SSI to include more information on this topic when they next present to the Board; Mr. Opre stated that SSI may also send information to Burgess Chambers and Associates (BCA), the Plan's investment consultant, to distribute to the Board. Returning to the Why We Expect Strong Relative Performance page, Mr. Opre noted approximately 40% of the bond market is trading below par, and many of the underlying stock components of convertible bonds are trading at price-to-earnings and price-to-sales multiples well below their long-term averages. Balance sheets amongst companies which issue convertibles are strong; approximately half of the issuers only have convertible debt on their balance sheets. Further, the duration, or interest rate risk, is less than 2 years, which will additionally protect the portfolio against interest rate increases. Mr. Opre reviewed the portfolio positioning as noted on the Outlook for Convertibles page. Considering the risks of recession, SSI has positioned the portfolio to emphasize both credit quality and the metrics quality of the underlying companies. Although the portfolio holds some larger banks due to their yields, meaning they have low sensitivity to the underlying stock prices, regional banks are less than 2% of the convertible market and the portfolio has none at this time. There are attractive opportunities in the yield sector of the market in the 5% to 7% range due to their yield to maturity and yield to call rates. Mr. Opre briefly reviewed the page titled Market Segment & Sector Performance. On the Performance page, he reviewed the Fiscal YTD and Calendar Year Q1 returns, noting underperformance relative to the benchmark was due to the portfolio's aforementioned focus on higher quality; distressed companies which had been feeling significant negative pressures by the end of calendar year 2022 had a strong rally in early Q1 2023, which hurt the portfolio's relative performance. He briefly reviewed the Performance Review and Peer Performance Landscape: eVestment Alliance. On the Portfolio Construction page, Mr. Opre explained that the portfolio yield is less than the benchmark's due to the portfolio's higher quality. While convertibles are considered equity, the credit quality is presented for context and comparison purposes. He added that Delta is equity sensitivity, and as it increases, the more equity-like a convertible portfolio is. Typically, the portfolio's Delta nears 58%, and while it is currently at 44.72% and higher than the benchmark, it indicates the portfolio is more defensive without forgoing the opportunity for upside participation. He noted that he has already discussed the information stated on the Sector Allocation page. On the Portfolio Characteristics page, he explained that SSI manages for total return, and the Total Return Alternatives segment of the market is over-weighted in the portfolio, which typically refers to bonds trading between 80% and 120% of par value. He also pointed out that over half the market is categorized as Yield Alternatives, which emphasizes available income and a high degree of downside protection. To Trustee Hudgins' question, Mr. Opre and Mr. Kowal agreed the presentation materials should also include dollar amounts in addition to the percentage values. The Board thanked Mr. Opre and Mr. Kowal for their presentation. 10. UNFINISHED BUSINESS: None. 11. NEW BUSINESS: 12. ATTORNEY MATTERS: To Attorney Christiansen's questions, Pension Plans Administrator Martin confirmed the Plan advised the appropriate parties that the Board had declared an expected rate of investment return, as well as had the updated agreement with Newton for the Chair to execute. He recently updated the agreement with Allspring, which has been fully executed. Attorney Christiansen advised House Bill 3 has passed the Florida egislature; this will restrict public pension boards and other entities to making investment decisions based only on pecuniary factors, and not consider other factors such as Environmental, Social, and Governance (ESG) positions. Although Mr. Cole of BCA would likely confirm the Board already considers only pecuniary factors when it makes investment decisions, there will be reporting requirements to confirm. There are existing exceptions in State law which prohibit certain public entities from investing in companies which do business in countries such as Iran, Darfur, and Sudan even though that is considered social investing. He added that the Plan is not restricted from investing in companies which take positions in social, environmental, or governance issues, provided that the Board only focuses on pecuniary factors. For example, a municipal pension board could not refrain from investing in tobacco companies because that board objected to tobacco use; however, that board could refrain from investing in tobacco companies ifi it believed its customers will be consuming less tobacco products in the future which would cause a decline in value in that industry. Attorney Christiansen explained that the Secure Act 2.0 act, which passed in 2022, will require some changes to the Plan, including the required minimum distribution age; it is currently 72%, and will ultimately be raised to age 75. The Secure Act 2.0 also has guidance to ERISA plans regarding when a pension plan may require or waive recapture of overpayments of benefits; whether the Plan, which is not subject to ERISA, may incorporate the guidance is being determined. He asked for the Board's approval to draft a proposed ordinance for the Board's review to address the changes required by the Secure Act 2.0. Book 1 Page 346 04-28-2023 8:15 a.m. Book 1 Page 347 04-28-2023 8:15 a.m. Trustee Hudgins made a motion to authorize Attorney Christiansen to draft a proposed ordinance to address changes to the Plan required by the Secure Act 2.0; SecretaryTreasurer Griggs seconded the motion. The motion passed unanimously (5-0). At Secretary/Treasurer: Griggs' request, Attorney Christiansen discussed the adjustments made by the General Employees' Pension Plan (GEPP) Board of Trustees to their meeting attendance policy requirements, as he also serves that plan. Attorney Christiansen explained that the City Commission* 's policy regarding Commissioners participating virtually in Commission Meetings differs from the Board's policy. After Attorney Christiansen discussed the matter with City Attorney Robert Fournier, the GEPP Board directed Attorney Christiansen to soften its virtual attendance requirements; he proposed bringing a copy of the softened requirements to the Board's next meeting. A discussion amongst the Board and Attorney Christiansen ensued. The Board agreed that the in-person quorum requirement must be satisfied before a meeting may be called to order; based on the Board's current number of trustees, 3 trustees must be physically present before a meeting would be called to order. Before a trustee could participate virtually in a meeting, the Board must have an in-person quorum, and then determine extraordinary circumstances exist for that trustee. While the Plan's Operating Rules allow for virtual participation when extraordinary circumstances exist, the revised policy adopted by the GEPP Board has a broader definition of extraordinary circumstances: than the Plan's. If the Board determines a trustee may participate virtually, the virtually participating trustee's vote would count equally as the in- person trustees' votes. Attorney Christiansen advised he would also provide the Florida Attorney General's letter on the matter for the Board's review at a subsequent meeting. 13. OTHER MATTERS: 13.1. Presentation and Discussion Re: Asset Allocation as of April 13, 2023. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation as of April 13, 2023, for the Board's 's information. Pension Plans Administrator Martin advised the FPPTA summer conference registration is now open. Also, Pension Administration submitted the Plan's State Report for the 2022 fiscal year and audit; the current status shows, "Submitted. ADJOURN. Chair Konstantopoulos adjourned the meeting at 9:20 a.m. Trustee Hudgins noted he will not be available at the May 26, 2023, meeting. Chair DémeirfKonstanopouios Sécretary/Treasurer Shayla Griggs