MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF APRIL 24, 2025 Present: Chair Ryan Chapdelain, Vice Chair Mark Nicholas, Secretary Shayla Griggs, Trustee Robert Reardon, Trustee Barry Keeler, and Trustee Jan Thornburg. Others: Attorney Stuart Kaufman telephonic), Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Treasurer Kelly Strickland 1. CALLI MEETING TO ORDER: Chair Chapdelain called the City of Sarasota (City), General Employees' Pension Plan (Plan) Board of Trustees Regular meeting to order at 10:00 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary Griggs. The Board and meeting attendees stated the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Chapdelain. 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 not engage in personal attacks." 4. ROLL CALL: Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin called roll. Treasurer Strickland was not present. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the General Employees' Pension Plan Board of Trustees Membership Meeting of March 27, 2025. Presenter(s): Chair Chapdelain. Trustee Keeler made a motion to approve the minutes of the March 27, 2025, Membership Meeting; Vice Chair Nicholas seconded the motion. The motion passed unanimously (6-0). 7. APPROVAL OF RETIREMENT REQUESTIS): None. 8. INVESTMENT PERFORMANCE REVIEW: Book 1 Page 484 04-24-2025 10:30 a.m. Book 1 Page 485 04-2.4-2025 10:30 a.m. 8.1. Presentation and Discussion Re: Franklin Templeton, Performance Review as of March 31, 2025. Presenter(s): Andrew Burkly, Institutional Portfolio Manager; Steve Votto, Institutional Sales; Franklin Templeton Franklin Templeton. Andrew Burkly and Steve Votto of Franklin Templeton (Templeton) appeared before the Board and introduced themselves. Mr. Votto explained that the Plan has been invested in Templeton's global equity strategy for approximately 30 years and thanked the Board for its continued confidence. He provided al brief firm and strategy overview, as well as a market summary. For the last decade and until Q4 2024, the market favored US equities and the US Dollar to internationals; year-to-date (YTD) in 2025, the market rotated to favoring international equities and currencies. Both the USI Dollar and S&P 500 have declined by approximately 10% in 2025 while international markets have steadily improved. The spread between domestic and international equities is at its greatest in the last 14 years because investors had been drawn to price-to-earning (P/E) multiple expansions found in domestic equities; value investors, on the other hand, prefer stocks driven by fundamentals. Templeton believes there is a significant amount of conversion remaining from domestic to international equities so that the outperformance seen in Q1 2025 may continue for some time. As of March 31, 2025, the portfolio was up 7.5%, and through April 24, 2025, up 8%; it is outperforming its benchmark on both an absolute and relative basis over the 1-year, 3-year, 5-year, and since inception bases. Mr. Burkly noted that the performance details Mr. Votto provided are on the Historical performance page of the materials; the portfolio is essentially flat for the year, despite significant market volatility. On the Performance attribution by sector (1 year) page, he advised that the Financial, Industrial, and Technology sectors contributed the most to the portfolio's performance. Templeton increased its allocation to European banks and asserted that since 2022, European banks outperformed the magnificent 7" mega-cap, tech stocks which dominated US stocks. In industrials, he discussed BAE Systems, which is a European aerospace and defense firm with an approximate $75 billion order backlog. Germany recently approved defense spending increases in response to the US's potential decreased involvement in diffusing international conflicts. Additionally, many European countries have been reforming their economies since the debt crisis in the early 2010s; this will provide more available spending on defense and similarly reward BAE Systems and its stockholders. SAP, a German business software company, is transitioning its clients to cloud-based applications. Templeton believes SAP will avoid US tariffs which are aimed away from services and towards manufacturing; SAP announced its eamnings on April 23, 2025, and reiterated its guidance for 2026 with little to no impacts due to tariffs. Mr. Burkly reviewed the Sector Allocation. The portfolio is overweight to Financials, and specifically to banks, which are currently trading at their approximate book value. It is also overweight in Energy, which was the best performing sector in Q1 2025 but is now faltering; Templeton's analysts believe oil prices will rise over the short term to the $60 - $70 per barrel range and the sector will improve. To Trustee Reardon's question, Mr. Burkly explained that European banks outperformed due to increased lending activity and improving spreads as interest rates decline; in Japan, banks have benefitted as companies take on more debt to finance projects, as well as increased economic activity. While there is significant global uncertainty, both domestic and international consumer debt is far lower than in previous downturns which provides some reassurance. Turning to the Geographic allocation, Mr. Burkly explained that while the United Kingdom appears to be heavily weighted, many of the banks and energy companies which are headquartered in that country have operations around the world. The portfolio is underweighted in Asia because it traditionally had no holdings in China. While it has a position in Ali Baba, it is a liquid position, and the stock is significantly undervalued. He briefly reviewed the Top ten holdings. The Board had no questions for Mr. Burkly or Mr. Votto and thanked them for their presentation. 8.2. Presentation and Discussion Re: Renaissance Investment Management, Performance Review as of March 31, 2025. Presenter(s): Michael Streitmarter, CFA, Portfolio Manager, Renaissance Investment Management. Michael Streitmarter of Renaissance Investment Management (Renaissance) appeared before the Board and introduced himself. Noting the Plan is invested in Renaissance's international equity strategy, Mr. Streitmarter provided al brief firm, strategy, and investment process overview as detailed in the presentation materials. As previously announced, Co-Portfolio Manager Joe Bruening retired at the end of 2024. Turning to the Trailing Performance Summary, Mr. Streitmarter explained that the portfolio had positive absolute returns but trailed relative to their benchmark, largely because the portfolio leans towards 'growthy" stocks which were disfavored in Q1 2025; it leads its benchmark over the 3-year, 5-year, and since inception timeframes. On the Portfolio Sector Attribution page, Mr. Streitmarter noted that the portfolio's position in BYD, a Chinese company which is the worid's largest producer of electric vehicles, within the Consumer Discretionary sector, saw 30% earnings growth in 2024 and is expected to continue to grow in 2025; he added that BYD does not export vehicles to the US and is therefore protected from any US/China trade war. Sony saw strong sales of its PlayStation game console even though it launched no new games in 2024; Grand Theft Auto 5is expected to be released in 2025 which should further boost sales. In Industrials, BAE Systems and Rolls Royce benefitted from increases in European countries' defense spendings. Detractors from performance were European banks, which tend to be value-oriented, and are not in the portfolio, and the portfolio's exposure to semiconductors in the technology sector. To Trustee Reardon's question, Mr. Streitmarter explained that Renaissance is looking closely at European banks, which are performing more like growth companies than previously, however the asset subclass remains cyclical and outside its style. Renaissance is instead considering emerging market banks which are far growthier, have attractive valuations, and grow independent of interest rates. On the Portfolio Country Attribution page, Mr. Streitmarter explained that performance benefitted by its overweighted holdings in China. As he mentioned, BYD has outperformed. Similarly, Ali Baba saw core e- commerce operations have begun to grow again, as well as its cloud and Al segments, which had been weak, are now seeing strong growth as it announced an agreement to provide Al services for Apple's iPhone in China. Golar, a Bermudan energy company which makes floating liquified natural gas facilities, has announced numerous new contracts. Performance was dragged by Constellium, a French aluminum company which experienced flooding at some of its operation centers and is exposed to the weakening automobile end-market; Renaissance sold its holdings in January 2025. The portfolio was also dragged by Tower Semiconductor in Israel; Renaissance likes the company as it is not located in Asia, however it was hurt by China's release of DeepSeek. The portfolio was also hurt by French holdings which declined in response to unfavorable election results in that country. On the Sector Allocation page, Mr. Streitmarter explained that it expanded its exposure to Consumer Discretionary, mostly through Chinese companies. Within Industrials, the theme of electrification is prominent with holdings like Schneider Electric, Hitachi, Prysmian SpA, which will all benefit as countries upgrade their respective power grids. Both sectors benefitted the portfolio while not holding European banks hurt the Financials sector. Mr. Streitmarter reviewed the Regional Allocation page; Western Europe is its largest allocation with holdings in 10 countries. He clarified that the page shows weight by company domicile; by revenue, the exposure to Westem Europe is closer to 25% as most of the companies have international operations. The overweight in North America is due to its holdings in Mexico, which has been attractive for several years with valuations being discounted by approximately 25%. Politically, Renaissance believes Mexico's President Sheinbaum will bring more economic growth than the former president, as well as successful trade negotiations with the US. The underweight to Asia/Pacific is driven more by single-country underweights, like to Australia, India, Taiwan, and Japan, as Renaissance sells off export-focused Book 1 Page 486 04-24-2025 10:30 a.m. Book 1 Page 487 04-24-2025 10:30 a.m. companies. As it reduces its allocation to Japan, Renaissance has increased its exposure to China. Since the end of the quarter, however, Renaissance has trimmed back its exposure to China because the US Securities and Exchange Commission Secretary indicated it may delist Chinese stocks from US exchanges; most of Renaissance's Chinese holdings have secondary listings on Chinese exchanges, and it sold its holdings in the 2 stocks which only had US listings. While Renaissance had confidence in the 2 companies it sold, it was unwilling to take the risk that either stock could devalue to nothing. To Chair Chapdelain's question, Mr. Streitmarter explained that China had announcea several economic stimulus packages in October 2024 which caused a minor rally there. China then refrained from further announcements while it monitored the impacts ofUS tariffs. China's Politburo meets in the coming days; Mr. Streitmarter anticipates more stimulus announcements over the next month. He noted that China has shifted the focus of its stimulus from manufacturing and exporting inexpensive goods to improving domestic demand and consumption, which is welcomed by Chinas allies and trading partners. On the page titled, Strong Relative Returns for International Equities, Mr. Streitmarter noted that Q1 2025 was the best quarter in 15 years; despite this performance, international equities still lag domestics over the rolling 1-year. The International Equities Attractively Valued page shows the disparity between domestic and international stocks; even after the domestic sell-off in Q1 2025, domestics remained at a premium and internationals remained at a discount relative to their history. Considering the divergence reached a peak in late 2024, Renaissance believes there is ample space for international stocks to continue their outperformance. There are many indications for continued outperformance of international equities in the respective Purchasing Managers indices of China, the US, and Eurozone, which shows US production is slowing while China and Europe are ramping up. The American exceptionalism trade has begun to unwind as unclear tariff policies and uncertainty in domestic markets have driven investors to look outside the US and weaken the US Dollar. He noted that a weak US Dollar benefits American investors who sell international equities when the trades are converted back to US Dollars. Mr. Streitmarter noted that American spending has been a tailwind for domestic equities; as European spending increases as it emerges from a period of austerity, it will likely favor European investments. To Trustee Reardon's questions regarding how Renaissance intends to boost returns to catch up to its benchmark, Mr. Streitmarter explained how the portfolio was hurt by a selloff in the infotech sector, its trimmed position in semiconductors, and inconsistent returns in China hurt Consumer Discretionary. He expressed confidence in the portfolio's emerging markets banks which Renaissance expects to outperform European banks, which are unattractive to Renaissance as they are not growthy enough for Renaissance's style. He clarified that, although its assigned benchmark is the MSCI ACWI ex US ETF, it also lists the S&P/BNW Mellon Classic ADR; those notwithstanding, they are for reference only and not a starting point in Renaissance's investment decisions. To Chair Chapdelain's question, Mr. Streitmarter advised that Renaissance is focusing, the portfolio on companies which generate revenue from Europe or Japan; it is unlikely to add to its positions in China due growing uncertainty, but it has continued confidence in its current Chinese holdings. Within Europe, Renaissance anticipates infrastructure companies will reward the portfolio. To Trustee Reardon's question, Mr. Streitmarter explained that if a stock int the portfolio were to be delisted, Renaissance would look for a speculative investor willing to purchase it at a considerable discount considering the stock may not be re-listed. When some Russian companies were delisted, stockholders were left holding unsellable stocks. Scott Owens of Graystone Consulting appeared before the Board and introduced himself. He asked Mr. Streitmarter to comment on the causes of the portfolio's relative underperforance. Mr. Streitmarter explained that underperformance was mostly attributable to not owning stocks in the benchmark which outperformed. He clarified that the benchmark's largest weight is approximately 1.8%, and no other weight exceeds 1.5%; Renaissance, however, takes 2% positions in 50 companies and therefore underperformance was not due to concentration limitations. The Board thanked Mr. Streitmarter for his presentation. 8.3. Presentation and Discussion Re: Graystone Consulting, Quarterly Performance Review as of March 31, 2025. Presenter(s): Scott Owens CFA, CIMA, Managing Director - Wealth Management, Institutional Consulting Director, Corporate Retirement Director, Impact Investing Director, Alternative Investment Director; Theodore Loew, CFA, Vice President, Institutional Consultant; Graystone Consulting. Mr. Owens introduced his presentation by discussing the severe market volatility and sensitivity of late; he reiterated his recommendation to maintain allocations near their respective targets. Although the portfolio was slightly overweight to domestic equities, and domestic equities performed poorly, the portfolio outperformed its benchmark for the quarter. In the currently volatile environment, he was comfortable overweighting defensive managers. He recommends clients construct portfolios byi identifying assets which corollate so that they complement each other in changing environments, then how volatile they are, and then price. Mr. Owens reviewed the Capital Market Returns page of the materials and compared them to the Q4 2024 returns. While most indices were down in Q1 2025, value indices performed the best; in Q4 2024, growth indices performed the best. Additionally, despite the mostly negative indices, the Sector Returns are generally positive with negative retums in the sectors which relate to the magnificent 7. He reminded the Board that, when the market rose and active managers underperformed indices which were highly concentrated as the magnificent 7, active managers declined less as the concentrated market fell. In international markets, the US Dollar fell in Q3 2024, and international equities outperformed domestic equites; the US. Dollar rose in Q4 2024, and international equities rallied; the US Dollar fell again in Q1 2025 and international again outperformed. In fixed income, declining rates resulted in stronger Q1 2025 returns; oppositely, in Q4 2024, rates went up and fixed income returns fell. Tuming to the Total Fund - Executive Summary, Mr. Owens explained that the portfolio fell on an absolute basis but still outperformed its benchmark; it has generated al higher retum since inception than its index but with less risk. The Asset Allocation Compliance by asset class page shows the portfolio IS slightly overweight in equities and slightly underweight in fixed income in an environment in which equities are underperforming and fixed income is outperforming; he attributed the portfolio's performance to managèr selection. On the Asset Allocation Compliance by manager page shows that each manager is within 1% Oi iis respective target, apart from fixed income, which is on target when cash is included. Mr. Owens reviewed each manager. Hudson Edgel has higher risk than its index but is currently outperforming. Clearbridge, from which he stated the Plan recently moved an allocation to a passive manager, is outperforming as the market declines; the portfolio's 2 large cap managers are responsible for approximately 200 basis points of the portfolio's outperformance. Vanguard is the portfolio's only passive manager and will likely outperform most active managers during large market swings. NFJ and Geneva, the portfolio's respective small cap value and small cap growth managers, both outperformed relatively with less risk and higher returns. Templeton also provided a higher return with less risk. He noted that Templeton is a value manager, however its index has both growth and value stocks; many of Templeton's competitors performed better because they drift from value into growth stocks while Templeton remained true to its style. Now that the market is favoring value, Templeton is outpertorming while style-drifting competitors lag. He added that the portfolio has both growth and value managers to balance the market's style preference. Renaissance also has slightly higher risk but also provided aj positive return since inception; Mr. Owens noted that Renaissance's relative returns have been positive over the Fiscal YTD, 3-year, 5-year, and since inception timeframes, but negative for the current quarter, 1-year, 7-year, and 10-year timeframes. In Fixed Income, Segall Bryant Hamill is providing positive returns, although the Current Quarter is 3 basis points negative. To Trustee Reardon's question, Mr. Owens explained that Segall Bryant Hamill's performance is reported on ag gross basis as required when also reporting risk metrics. He added that the Board decided toi invest in Segall Bryant Hamill as a short-term vehicle when the interest rate yield curve was inverted; the yield curve is now flat, and the Board may contemplate moving back to a longer-term manager. Segall Bryant Hamill is currently providing 80% to 90% of the yield with less risk, and divestment is not urgently needed. Further, if interest rates come down, Segall Bryant Hamill's allocation should become more valuable and therefore it may be advantageous to wait to divest. He discussed various options for divesting from Segall Bryant Hamill; the Book 1 Page 488 04-24-2025 10:30 a.m. Book 1 Page 489 04-24-2025 10:30 a.m. proceeds could be reinvested in Invesco, moved to a longer-term strategy at Segall Bryant Hamill, or temporarily moved to Invesco until a new fixed income manager is selected. He noted the importance of diversification of styles within asset classes and suggested splitting the fixed income allocation between Invesco as a long-term duration, a new core manager which transitions between short-, intermediate-, and long-term durations, and cash. Graystone would present a fixed income manager search and performance scenarios for the Board to consider before making any decisions. Chair Chapdelain expressed interest in receiving more information regarding alternative managers within the fixed income spectrum; the Board informally agreed. Mr. Owens advised he will bring a fixed income manager search to his next appearance before the Board. In real estate, Mr. Owens explained that the returns were down because the transaction market had slowed due to high interest rates which led to shortages of comparable sales; further, capitalization (cap) rates were at record lows. He clarified that rising cap rates result in negative impacts on real estate values. Cap rates are now normalizing, which will put downward pressure on pricing. Real estate managers are reporting to Graystone that transactions are returning, suggesting the asset class is rebounding offi its bottom. Both AEW and UBS are paying approximately 4% yields which match their retums, and which may indicate appraisals are stabilizing. To Chair Chapdelain's question regarding the pending real estate redemption request, Mr. Owens advised that the request is still pending and not likely to be satisfied soon; the Board may consider alternatives to real estate. He suggested private equity, private credit, and real estate investment trusts (REITS). He reminded the Board that it selected private real estate as a fixed income altemative because private real estate did not correlate to equities; REITS correlate to equities and have significantly different short-term returns than private real estate, but similar long-term returns. REITS are considered a liquid asset. To Mr. Owens' question, Pension Plans Administrator Martin advised that the Plan's controlling ordinances regarding investments were recently made significantly less restrictive. Attorey Kaufman appeared before the Board telephonically and advised Mr. Owens to first discuss any new asset classes with him before presenting the asset classes to the Board. Mr. Owens agreed and advised he will only. present an asset allocation study and education on private equity and private credit if the Board expressed interest and he would later present a manager search. To Chair Chapdelain's question, Mr. Owens explained that private credit and private equity are similar to real estate ini that they do noto correlate with equities and are more expensive investments; they are illiquid because they are not traded on public markets. Private equity has a more involved investment process and affords the investor a greater degree of influence on management than publicly traded stocks. The private credit market emerged in response to the Volcker Rule in the Dodd-Frank Act which restricted banks from engaging in certain investments to reduce financial risk. Graystone thoroughly researches every. company before recommending it, and they are currently returning 8% to 9%. He proposed various allocations within alternatives and advised he would include those scenarios in the asset allocation he will present to the Board at its June 26, 2025, meeting. Mr. Owens concluded his discussion of the managers with Lazard, noting its alpha of 2.98% is a significant relative contributor to the portfolio's performance. Since inception, it has paid slightly more than the benchmark, but with less risk. There are no compliance issues. To Trustee Reardon's question, Mr. Owens confirmed Lazard's benchmark, DJ Brookfield GBL Infr Comp TR, returned 18.60% over the 1-year period. Lazard favors investments in bridges and toll roads which provide stable returns and has little to no commodity exposure; the benchmark, however, is more concentrated in energy pipelines and commodities, which are energy price sensitive. When energy prices went up, the benchmark outperformed while Lazard lagged on a relative basis. To Chair Chapdelain's question, Mr. Owens recounted the decision which led to the Plan's divestment from Polen and investment in Vanguard. While the timing of that transition was unfortunate, Polen had been underperforming its benchmark with higher risk at the time the Board decided to sell its position. In hindsight, the portfolio would have higher short-term returns, however the relative loss will likely be insignificant over time. He reminded the Board that both Templeton and Renaissance discussed how the market has been very sensitive to political news. Should the market reverse course and further its concentration in the magnificent 7, the benchmark will again outperform the portfolio's active managers. Mr. Owens concluded his presentation by noting he will bring a fixed income manager ccarch as well as an asset allocation showing additional altematives at his next appearance in front of the Board. The Board thanked Mr. Owens for his presentation. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: None. 11. ATTORNEY MATTERS: Attorney Kaufman thanked the Board for accommodating his telephonic appearance. 11.1. Presentation and Discussion Re: Updated Summary Plan Description. Presenter(s): Stuart Kaufman, Klausner, Kaufman, Jensen & Levinson. Attorney Kaufman presented the updated Summary Plan Description and reviewed the changes to the document. Section 15 now explicitly affirms the Board's authority to correct errors and adjust payments as necessary to affect an actuarially correct payment; this is a long-standing authority in City ordinances. Section 19 eliminates tax deductions for alimony in accordance with federal law. Section 20 was added to affirm the Plan is qualified under Section 401 of the Internal Revenue (IRS) Code and must make periodic updates to maintain that qualification. There are other minor amendments. Attorney Kaufman asked the Board to approve the updated Summary Plan Description; upon approval, he will send a distributable copy to Pension Administration to provide to the membership.. Trustee Reardon made a motion to adopt the updated Summary Plan Description; Trustee Thornburg seconded the motion. The motion passed unanimously (6-0). 11.2. Presentation and Discussion Re: Electronic Financial Disclosure Management System for Form 1 Filing. Presenter(s): Stuart Kaufman, Klausner, Kaufman, Jensen & Levinson. Attorney Kaufman reminded the Board that trustees must file the Florida Commission on Ethics (Commission) Form 1 financial disclosure for 2024 by July 1, 2025; the form must be filed electronically, as had the 2023 form, and the Commission will impose $25 per day fines on trustees who fail to file by September 1, 2025, up to $1,500 until the form is filed. He added that, as noted in the materials, Form 6, which is significantly more detailed than Form 1, is only required for certain elected public officials and not applicable to pension board trustees. There is no pending state legislation that would affect the Plan. 12. OTHER MATTERS: Book 1 Page 490 04-24-2025 10:30 a.m. Book 1 Page 491 04-24-2025 10:30 a.m. Chair Chapdelain noted that, at the Board's February 20, 2025, Regular Meeting, Attorney Kaufman discussed a circumstance in which a participant who would be less than age 59%2 when they completed their DROP period, would be able to remain employed with the City after their DROP period ended; the employee would not be allowed to remain in the Plan or access their Plan benefits until they separated from City employment. He asked Attorney Kaufman to revisit the discussion for educational purposes. Attorney Kaufman explained that the employee is allowed to remain employed because of recent changes in the applicable IRS regulations; he will present educational information regarding those changes and in-service distributions to the Board at its May 22, 2025, meeting. To Trustee Thornburg's question, Pension Plans Administrator Martin advised that there are approximately 25 participants who potentially fit the above scenario. To Chair Chapdelain's question, Attorney Kaufman advised that, if the Board were to move forward with amending the Plan, the Plan's actuary would need to first determine any actuarial impact. 13. ADJOURN. Chair Chapdelain adjourned the General Employees Pension Plan Board of Trustees meeting at 11:46 a.m. - / 1 Chair Ryan Chapdelain Secretary Shlayla Griggs