MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING MAY 27, 2022 Present: Chair Demetri Konstantopoulos, Vice Chair Johnathan Todd, Secretary/Treasurer Shayla Griggs, and Trustee Ronnie K. Baty. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Trustee Joseph "Jody" Hudgins 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): Secretary/reasurer Griggs. Secretary/Treasurer Griggs led the Board and those in attendance in the Pledge of Allegiance. Chair Konstantopoulos asked for a moment of silence for the shooting victims at Robb Elementary School in Uvalde, Texas. 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." 4. ROLL CALL: Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin called roll. Trustee Hudgins was not present; Pension Plans Administrator Martin advised Trustee Hudgins would request an excused absence at the next meeting. 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 April 22, 2022. Presenter(s): Chair Konstantopoulos. Trustee Baty made a motion to approve the minutes of the Regular Meeting of April 22, 2022; Vice Chair Todd seconded the motion. Book 1 Page 279 05-27-2022 8:15 a.m. Book 1 Page 280 05-27-2022 8:15 a.m. The motion carried unanimously (4-0). 6.2. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Special Meeting of April 22, 2022. Presenter/s): Chair Konstantopoulos. Trustee Baty made a motion to approve the minutes of the Special Meeting of April 22, 2022; Vice Chair Todd seconded the motion. The motion carried unanimously (4-0). 7. RETIREMENT REQUEST(S): None. 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Frontier Capital, Investment Performance Summary for Period Ending March 31, 2022 Presenter(s): Rushan (Greg) Jiang, FA, Portfolio Manager, Frontier Small Cap Value Portfolios; Leigh Anne Yoo, Director of Sales and Marketing; Frontier Capital. Leigh Anne Yoo and Greg Jiang appeared before the Board telephonically and introduced themselves. Ms. Yoo discussed the Overview slide in their materials, noting it is a small- and mid-cap value investor with over $11 billion under management, there have been no changes in its investment team or process. She reviewed Frontier's Investment Strategies, its Representative Client List, and Investment Team. Mr. Jiang explained that this strategy focuses on selecting stocks which have solid business models, unrecognized earning power, and attractive valuations. He reviewed the Fiscal Year Performance and Equity Attribution - Trailing 1 Year, noting that within the health care sector, money-losing companies held in the benchmark but not by Frontier aided Frontier's relative outperformance and in technology. Frontier holds smaller companies with strong earnings and that reinvest in themselves for future growth. While Energy was the worst performing sector in the portfolio, the best performing stock, PDC Energy, is an energy company which found greater earnings due to the increases in oil prices. Mr. Jiang discussed the Portfolio Composition and commented on its overweighted and underweighted sectors; he noted Frontier holds no Consumer Staples stocks due to their expensive valuations. He discussed Portfolio Activity. Larry Cole of Burgess Chambers & Associates appeared before the Board and introduced himself. Mr. Cole asked Frontier to discuss how small cap companies have been affected by supply chain issues. Mr. Jiang noted that many sectors have been impacted, especially the Consumer Discretionary and Technology sectors. Domestically, building materials have been difficult to secure. While the labor supply remains ample, component shortages and logistic issues remain headwinds today. The Board thanked Frontier for its presentation. 8.2. Presentation and Discussion Re: Burgess Chambers & Associates, Quarterly Investment Performance Review for Period Ending March 31, 2022. Presenter(s): Larry M. Cole, Executive Vice President, Burgess Chambers & Associates. Mr. Cole explained this may be the worst quarterly performance he's seen. While he has confidence in the portfolio's construction, the managers that should provide downside protection did not perform as intended. Both Granite and Allspring, formerly known as Wells, have demonstrated histories of downside protection, yet declined in price more than their respective benchmarks during the last quarter. Much of the negative performance is attributed to a small group of big tech names and how much a fund has weighted in each, as well as fears of inflation and rising interest rates, supply chain issues, oil prices, the war in Ukraine, as well as complications from it such as food and fertilizer shortages. Mr. Cole is focused on the Consumer Price Index (CPI), which is the measurement of inflation at the retail level, as well as the Producer Price Index (PPI), which is a measurement of producers' costs to deliver goods to market. For the last several months, the PPI has been 3% to 5% above the CPI, which means manufacturers are absorbing the increased costs associated with production and delivery instead of passing those costs on to consumers, and therefore inflation should continue to rise or corporate earnings will decline, which has already been seen. He noted that Target's stock dropped 25% in a single day because their production costs were higher than anticipated and their forecast for transportation costs was $1 billion more than expected. He anticipates at least one or two more quarters of poor performance in the market. To Vice Chair Todd's question, Mr. Cole asserted supply chain issues and wages were the primary causes of the market's performance. He added that the Federal Reserve's (Fed's) attempts to moderate inflation through interest rate hikes will also affect the stock market as rising interest rates will, generally, drive stocks; price-to-earnings (PE) multiple down. The historically low interest rates have left stocks as the last investment available, which has driven the PE multiple higher. As the Fed increases rates, stock prices will fall. It is possible that the market as a whole has already responded to the Fed's anticipated rate hikes, however individual companies are only just beginning to show the effects of rising interest rates. Mr. Cole noted the Fed's efforts to combat inflation by raising short-term interest rates has not been effective as the 10-year treasury bond, the price of which is subject to market forces, is still under 3%. Further concerning is whether short-term interest rates will exceed long-term rates, which is indication the economy will begin ar recession; while they inverted briefly earlier this year, they quickly righted. To Chair Konstantopoulos's question, Mr. Cole recommended maintaining the current portfolio. As bearish as he is in the short term, he believes liquidating a portion of the portfolio to time the market would be foolish for an institutional investor such as a pension fund which has a long time-horizon to weather such fluctuations. On a fiscal year-to-date basis, Mr. Cole estimated the portfolio is down between 7% and 8%, which is far less than the on-paper gains of 2021. To its advantage, when the Plan's actuary issues a valuation, the valuation will smooth gains and losses over several years, and the Board reduced its expected rate of investment return, which both relieve some pressures brought by this year's declining market. Mr. Cole discussed which sectors performed well in the last quarter. He noted the eight straight weeks of down markets, which has not occurred since the 1980s. Mr. Cole reviewed the Investment Compliance Policy Review, noting all criteria have been satisfied, Investment Performance Net, Actual VS. Target Asset Allocation, and Asset Allocation & Performance - Gross, noting the Plan ranked in the bottom 64th percentile compared to its peer group of public pension funds across the country mostly because the Plan is heavily invested in stocks. He noted the Value, Energy, and Financial sectors in the portfolio have performed relatively well. He reviewed each of the asset classes in the portfolio. Mr. Cole reviewed the Fiscal Year Rates of Return and Total Fund, noting that over the 5 Years Rolling Percentile Ranking - 5 Years, the portfolio is consistently outperforming the benchmark. He expressed concern with the portfolio's down-market capture being over 100% and stated he would like to Book 1 Page 281 05-27-2022 8:15 a.m. Book 1 Page 282 05-27-2022 8:15 a.m. see that closer to 90%. The Board had no questions for Mr. Cole and thanked him for his presentation. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: 10.1. Presentation and Discussion Re: Christiansen & Dehner, AbbVie Inc. Securities Litigation. Presenter(s): Scott Christiansen, Christiansen & Dehner; Sabrina Tirabassi, Robins Geller Rudman & Dowd, LLP. Attorney Christiansen explained this item is regarding potential securities litigation, and introduced Sabrina Tirabassi from Robbins Geller Rudman & Dowd, LLP (Robbins Geller), Attorney Tirabassi appeared before the Board elephonically and provided a brief history of Robbins Geller. In the AbbVie matter, the Plan has the opportunity to file for lead plaintiff, which would allow the Plan to direct the course of litigation. The Plan lost approximately $40,000 as a result of its investment in AbbVie, which is the largest of which Robbins Geller is aware. She explained that AbbVie is one of the world's largest pharmaceutical companies, comparable to Eli Lily and Company, Pfizer, and Johnson & Johnson. During the class period, AbbVie withheld safety and efficacy information from its shareholders, the public, and its customers regarding its new drug, Rinvoq, which is used to treat rheumatoid arthritis; AbbVie is seeking approval from the US Food and Drug Administration (FDA) to expand the application of Rinvoq to other conditions such as psoriatic arthritis, ankylosing spondylitis, and atopic dermatitis. AbbVie led investors to believe that Rinvoq was safer than similar acting drugs from competing pharmaceutical companies, specifically Xeljanz and Xeljanz XR (collectively Xeljanz), which was developed by Pfizer. Xeljanz carries an FDA-required label warning of elevated risks of serious heart-related issues, cancer, and other adverse effects. AbbVie's assertion that Rinvoq was safer than Xeljanz downplayed the likelihood that the FDA would require Rinvoq to carry a safety warning label similarly to Xeljanz's, which would have resulted in a negative effect on AbbVie's revenue source. Because AbbVie's claims regarding Rinvoq were false, AbbVie's financial statements which relied on profits from Rinvoq were also false and form the basis of the litigation. To Chair Konstantopoulos's, Vice Chair Todd's, and Attorney Christiansen's questions, Attorney Tirabassi explained that the Plan would remain part of the class action even if it were not lead plaintiff, and that she would have more information about other co-plaintiffs after June 6, 2022, the filing date for lead plaintiff, and the presiding judge can review the motions. Typically, lead plaintiff is awarded to the client with the greatest loss; the Plan has the greatest loss of Robbins Geller's clients, however there are other plaintiffs in the class action which have other attorneys. The complaint was filed by Kessler Topaz Meltzer & Check, LLP (Kessler Topaz). She explained Robbins Geller would take on this case on a contingency basis, meaning it would seek payment only if the Plan prevailed in the litigation or was awarded a settlement. Attorney Christiansen explained that he has worked with Kessler Topaz in other class actions, and should Kessler Topaz represents the lead plaintiff, the Plan would not be ill served. To Mr. Cole' 's questions, Attorney Tirabassi explained that the class period was from April 30, 2021 through August 31, 2021, and the manager which held the stock was BNY Mellon. Vice Chair Todd made a motion to not seek lead plaintiff status in the AbbVie litigation. Trustee Baty seconded the motion. The motion carried unanimously (4-0). Attorney Christiansen thanked Attorney Tirabassi for her presentation. 11. ATTORNEY MATTERS: 11.1. Presentation and Discussion Re: Christiansen & Dehner, Conagra Litigation Report. Presenter(s): Scott Christiansen, Christiansen & Dehner. Attorney Christiansen explained, and Attorney Tirabassi confirmed, that the Plan as represented by Robbins Geller was a named plaintiff in a complaint against Conagra which was denied by a court. The Plan appealed and was again denied. Attorney Christiansen reminded the Board that all trustees must each file a state financial disclosure forms by July 1. Attorney Christiansen explained in the matter of BobbieSue Patrick, that he had received additional questions from the trustees for the Independent Medical Examination (IME) physician. One of the questions asked for a definitive cause of Officer Patrick's condition, however that is not the standard of review, and the question was restated. Attorney Christiansen incorporated additional questions from Officer Patrick's attorey and submitted the questions to the IME physician who, in turn, had additional questions for Officer Patrick who is submitting a reply for the physician's review. Vice Chair Todd asked who determines which physician performs an IME. Attorney Christiansen explained that he selects the IME physician as allowed under the Plan's operating rules. Attorney Christiansen stated that he makes every effort to find a physician who is board certified in the specialty applicable to the applicant's condition, however that has become progressively more difficult to secure one due to the unpopular nature of IMES. He seeks physicians outside the geographic region of the applicant to minimize the possibility of a professional relationship between the IME physician and the applicant's physician(s). Upon receipt of the IME physician's response, the Board may schedule a continuation of the initial hearing; the Board will receive all of the correspondence and included medical records between the Plan, the IME physician, and Officer Patrick related to the Board's and Officer Patrick's additional questions. 12. OTHER MATTERS: 12.1. Presentation and Discussion Re: Administrative Expense Budget Analysis. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin explained this is as of March 31, 2022 and presented for the Board's information. To Trustee Baty's question, Pension Plans Administrator Martin explained she expects budget overrides for Legal & Judicial fees due to the request for disability benefits. Further, the Accounting and Auditing Book 1 Page 283 05-27-2022 8:15 a.m. Book 1 Page 284 05-27-2022 8:15 a.m. expense exceeded the budget by $500 because that had been underbudgeted. 12.2. Presentation and Discussion Re: Check Register, January 1, 2022 through March 31, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin explained that the payments to individuals are related to disbursements of share funds, and payments to trustees is the reimbursement of approved travel expenses. Pension Plans Administrator Martin noted that the State Report which is required to be filed annually with the Department of Retirement, which is required for the release of State Insurance Premium monies, has been accepted. 13. ADJORN. Chair Konstantopoulos adjourned the meeting at 9:30 a.m. / Chair Demetrit Konstantopoulos Secretary/easurer Shayla Griggs