MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JULY 28, 2023 Present: Chair Demetri Konstantopoulos, Vice Chair Johnathan Todd, SecretaryTreasurer 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): Secretary/lreasurer Griggs. Secretary/Treasurer: Griggs 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." 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 June 23, 2023. Presenter(s): Chair Konstantopoulos. Trustee Baty made a motion to approve the minutes of the Regular Meeting of June 23, 2023; Vice Chair Todd seconded the motion. The motion passed unanimously (5-0). 7. RETIREMENT REQUESTS: None. Book 1 Page 358 07-28-2023 8:15 a.m. Book 1 Page 359 07-28-2023 8:15 a.m. 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Franklin Templeton, Investment Performance Summary for Period Ending June 30, 2023. Presenter(s): Ann Reitman, CFA, Institutional Portfolio Manager; Mike Agnello, Client Relations Manager; Franklin Templeton. Ann Reitman, Mike Agnello, and Brian Kahley, CFA, CAIA, Senior Vice President, U.S. Institutional Client Service, of Franklin Templeton (Franklin) appeared before the Board and introduced themselves. Noting that the Plan is invested in the Small Cap Growth strategy, Mr. Agnello advised that as of May 31, 2023, Franklin is under contract to acquire Putnam Investments from Great-West and scheduled to close in Q4 2023; this will expand Franklin's retirement and insurance services. Ms. Reitman reviewed the Small Cap Investment team page of the materials; while there have been no changes to the strategy's management to date, EVP/CIO Mike McCarthy will step down from his position effective December 31, 2023; Johnathan Curtis, Franklin's Director of Portfolio Management, will assume the CIO position. Mr. McCarthy will continue as lead portfolio manager on the Small Cap Growth strategy, a position he has held since 2004. Turning to the Investment performance, Ms. Reitman contrasted the portfolio's current position to 1 year ago. In 2022, small cap growth stocks and equities in general faced a difficult environment due to uncontrolled inflation, the Federal Reserve's (Fed's) efforts to slow the economy down without causing a deep recession, uncertainty regarding corporate earnings, and other headwinds. While some concerns now remain, today's market outlook is significantly positive. Over the trailing one-year, the portfolio (net) is up more than 21% absolute and outperformed its index by 265 basis points. While the portfolio trailed the benchmark over the 3-year period due to the portfolio's overexposures to consumer-mpacted stocks, it led the benchmark over all greater timeframes. Ms. Reitman explained that Deter-than-expected earnings and resilient economic growth reversed the outlook from 2022 to 2023, and that the one-year returns were a result of broad-based stock selection. Ms. Reitman discussed Sector allocation, noting the portfolio's diversity, and considering it is a small cap growth fund, it is overweighted to Consumer Discretionary and holds absolute weight to Information Technology. The portfolio does not have a current exposure to Materials or Utilities, although that may change in the future. She asserted the portfolio is well-positioned for a greater time horizon. Franklin remains cautiously optimistic regarding the rest of 2023; it anticipates some volatility whichcould lead to purchasing opportunities. She explained how price-to-eamings (P/E) trailing 12 months for small cap growth stocks, which has traditionally averaged near 21 times, are currently at approximately 15 times. Additionally, small cap growth companies have historically outperformed large cap companies by 10% or more in the year following drawdowns of 20% or more, which is the current circumstance. In the same circumstance, Ms. Reitman asserted that Franklin's Small Cap Growth strategy has historically outperformed its index by almost 15%. Since 2002, the strategy's rolling 10-year return has outperformed the index 94% of the time, matched the index 3% of the time, and underperformed only 3% of the time. To Trustee Hudgins' request, Mr. Kahley advised that at Franklin Templeton's next appearance before the Board, the presentation materials will include a list of stocks in the portfolio. To Trustee Hudgins' questions, Ms. Reitman clarified that the larger Small Cap Growth Fund invests in initial public offerings (IPOs) and private placements, while the Separately Managed Accounts (SMA) the strategy in which the Plan is invested, may invest in IPOs, but does not invest in private placements. She discussed Franklin Venture Partners, which analyzes private placements and develops relationships with companies which offer private placements. She further explained that the portfolio holds a small position in Rent-the-Runway as that stock has not met Franklin's investment goals, however the firm does not have a high conviction in the stock. The Board thanked Franklin for its presentation. 8.2. Presentation and Discussion Re: JP Morgan, Investment Performance Summary for Period Ending June 30, 2023. Presenter(s): Melissa Anezinis, Investment Specialist; Katie Hammond, Client Advisor; J.P. Morgan (telephonic). Melissa Anezinis, Katie Hammond, and Lily Colley, Vice President and Investment Specialist of. J.P. Morgan appeared before the Board telephonically and introduced themselves. Ms. Anezinis provided a brief economic recap since J.P. Morgan's last appearance before the Board in July 2022, noting the economy has evaded a recession, contrary to most analysts' expectations. Although a recessionremains possible, J.P. Morgan believes a severe downturn is now unlikely. Despite an ambiguous outlook, constrained credit conditions, and investors' demands for higher returns from the asset class which brings downward pressure, J.P. Morgan is seeing fundamentals remain resilient. With the exception of office spaces, the portfolio is benefitting from positive rent growth and high occupancy. J.P. Morgan asserts its valuations have been adjusted to reflect the current capital market environment, and the magnitude of adjustments within Commercial real estate are lessening, and therefore it anticipates valuations to stabilize by the end of the year. Ms. Anezinis discussed the page of the materials titled J.P. Morgan Real Estate Americas: A premier manager of real estate in open-end funds, noting the Strategic Property Fund (SPF), which the Plan is invested in, represents approximately $40 billion of. J.P. Morgan's total real estate investments' Gross Asset Value of $76 billion. She briefly reviewed the pages titled Depth of Real Estate Americas platform creates differentiated information advantage, Strategic Property Fund Investment Team and Partners, and The market leading U.S. core real estate investment strategy. On the Portfolio Allocation page, Ms. Anezinis discussed the sector attributes in which J.P. Morgan has high conviction. The first are coastal, port-proximate, in-fill industrial properties which are desirable to facilitate timely port-to-porch delivery of goods. Since 2020, J.P. Morgan has built an industrial portfolio of properties in southern California which are close to sea- and land-based transportation and delivery locations. Over the last 5 years, J.P. Morgan has sold off $5 billion of low-growth, commodity office and $2 billion in retail spaces to improve the portfolio quality, which has since outperformed its peers. J.P. Morgan also has high conviction in its Extended Sector allocation, which are single-tamily rentals within the residential sector, or truck terminals, which facilitate supply chain delivery; J.P. Morgan has initiated Extended Sector investments with joint venture partners to drive relative value going forward. Ms. Anezinis reviewed J.P. Morgan's Sector Exposure over each timeframe, noting it has transitioned the portfolio towards its high-conviction sectors. Referencing the Geographic Exposure chart, she noted the portfolio's industrial and residential assets are withinh high-growth areas and are also diversified, and it has intentionally underweighted under-performing markets. She discussed how NOI Growth shows J.P. Morgan's ability to drive and grow rent which, in turn, drives valuations higher. On the page titled 3Q22 to 2Q23 - repricing core; evaluating the entry point, Ms. Anezinis noted the SPF's quarterly return was -1.575% (gross) compared to the ODCE Benchmark's -2.7% and explained that property values in the SPF have declined approximately 13% over the last 12 months; that notwithstanding, properties in 3 of the 4 sectors appear to be stabilizing based on the transaction market. She asserted the asset class is at a historic entry point as valuations should reach their bottom by year end and appreciate quickly into the next cycle. Ms. Anezinis reviewed each sector. The office sector has been the most challenged, as it has depreciated 18% over the last year; while leasing across the broader market has slowed down, J.P. Morgan asserts leasing within the office sector in the portfolio has increased. The industrials space has had some write-downs in Q2 2023 due to capital market adjustments, but it appears to be stabilizing. Because properties are in highly desirable areas, such as southern California, there will be opportunities in the near future to write-up the portfolio, as well as mark rents to market. Depreciation within the residential sector has been capital market-driven; J.P. Morgan has seen strong rent growth and leasing demand in the south and west. The retail sector has been the most resilient in the portfolio during this repricing period considering the significant write-downs at the beginning of the COVID-19 pandemic. Retailers have consolidated into the highest quality properties, and consumers have returned to shopping malls, strip centers, and restaurants in abundance; J.P. Morgan asserts this will be the strongest sector going forward. Book 1 Page 360 07-28-2023 8:15 a.m. Book 1 Page 361 07-28-2023 8:15 a.m. Turning to the page titled Short term repricing impacts filter through long term results, Ms. Anezinis clarified that the Plan's Investment summary as of June 30, 2023 was page 22 of the materials, and acknowledged the SPF's negative performance Q3 2022 when the index was positive; she asserted the portfolio is well positioned to narrow the gap to the benchmark. To Trustee Hudgins' questions, Ms. Anezinis discussed the Valuation Process page of the materials and emphasized that every property is externally appraised every quarter. SitusAMC, a third-party appraisal management firm, compiles data from J.P. Morgan's Asset Management team, external information, assumptions for rent-growth, capital markets, and other factors, to determine valuations. At least annually, every asset is appraised by a select group of third-party appraisers for more thorough valuations; in volatile markets, such as during the COVID-19 pandemic, assets may be appraised more frequently. J.P. Morgan has a separate valuation governance committee, which reports through the COO for Alternatives, and approves valuations; the valuation governance committee is isolated from the real estate group. Additionally, the real estate group can, based on experienced events such as sales or leasing activity, reduce internal or external valuations however they cannot increase valuations. The Board thanked J.P. Morgan for its presentation. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: None. 11. ATTORNEY MATTERS: 11.1. Presentation and Discussion Re: Summary Plan Description. Presenter(s): Scott Christiansen, Christiansen & Dehner, PA. Attorney Christiansen presented the updated Summary Plan Description (SPD) as requested by the Board and noted that most changes in the SPD are due to changes in ordinances. To Secretary/Treasurer: Griggs' question, Attorney Christiansen clarified that passage of the current proposed ordinance before the City Commission regarding the Secure 2.0 Act will not affect the SPD. Trustee Hudgins made a motion to approve the SPD as presented; Vice Chair Todd seconded the motion. The motion passed unanimously (5-0). Attorney Christiansen noted that all trustees have filed their financial disclosures. Attorney Christiansen discussed his memo, distributed at the meeting, regarding the changes to Chapters 112, 175, and 185, Florida Statutes, in Chapter 2023-28 made by the passage of House Bill 3. He advised that he distributed the memo to his clients, and his clients' investment consultants, and asked the consultants to propose amended language reflecting the changes effectuated by House Bill 3 in each plan's respective Investment Policy Statement. He advised that Larry Cole, the Plan's Investment Consultant, has already proposed some additional language which will ultimately be presented to the Board for adoption. To Trustee Hudgins' question, Attorney Christiansen confirmed that the Board has consistently made investment decisions based only on pecuniary factors, and therefore the law will not require any changes to the Board's investment philosophy, but there will be additional administrative requirements. Attorney Christiansen noted that the proposed ordinance regarding the Secure 2.0 Act is on the City Commission's August 7, 2023, meeting agenda, and he will be present for the item. Attorney Christiansen reminded the Board he had suggested allowing participants to pay claim indebtedness for prior military or police service through post-tax, regular, payroll deductions, but that the Board opted to delay until the City implemented a PayrollHuman Resources operating platform; he asked if the Board would consider taking up the matter again. Secretary/Treasurer Griggs and Pension Plans Administrator Martin advised that the operating platform is still being implemented, and that the City may not be ready to take on additional modifications to the payrol/HR system at this time. 12. OTHER MATTERS: 12.1. Presentation and Discussion Re: Proposed 2024 Calendar Year Meeting Dates. Presenter(s): Debra Martin, Pension Plans Administrator. Trustee Hudgins asked if Outlook Calendar requests could be sent for the proposed meeting dates. Pension Plans Administrator Martin advised they would be sent when the dates are approved. Attorney Christiansen advised that the Board could reduce the number of meetings each year and that many of his clients meet only quarterly, although the Board has traditionally met more frequently. A brief discussion ensued in which the Board agreed that meetings could be cancelled when no business was on the agenda, and that Pension Administration is careful to advise when critical business requires a quorum; the Board agreed to maintain the current number of meetings. Trustee Hudgins made a motion to approve the proposed 2024 Board meeting dates; Secretary/Treasurer Griggs seconded the motion. The motion passed unanimously (5-0). 12.2. Presentation and Discussion Re: Asset Allocation as of July 12, 2023. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation as of July 12, 2023 for the Board's information. Trustee Hudgins asked how often pension statements are issued to participants and if they are current. Pension Plans Administrator Martin explained that they are typically distributed annually, however because Gabriel, Roeder, and Smith (GRS), the Plan's actuary which prepares annual statements, just provided the statements dated September 30, 2022, Pension Administration is issuing those upon request to avoid distributing untimely information. GRS advised that, going forward, it will provide statements to the Plan by the end of the March of the subsequent year. 13. ADJOURN. Chair Konstantopoulos adjourned the meeting at 9:10 a.m. Chair Demetri Konstantopouios Seafetarylyeasirer ShaylaGriggs Book 1 Page 362 07-28-2023 8:15 a.m.