Book 1 Page 279 02-23-2022 9:00 a.m. MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF FEBRUARY 23, 2022 Present: Chair Michael Hartley, Vice Chair Shelia Roberson, Secretary/Treasurer Shayla Griggs, Trustee Charles Joseph, and Trustee Scott Snow. Others: Attorney Robert Sugarman, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: None. 1. CALL MEETING TO ORDER: Chair Hartley called the Sarasota Firefighters' Pension Plan (Plan) Board of Trustees regular meeting to order at 9.01 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary/reasurer Griggs Vice Chair Roberson led the Board and meeting attendees in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: 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: Pension Plans Administrator Martin called roll; Secretary/Treasurer Griggs was not present. Pension Plans Administrator Martin stated that Secretary/Treasurer: Griggs advised she was unavoidably delayed but will attend the meeting. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of January 28, 2021. Presenter(s): Chair Hartley. Trustee Snow advised thati in Item 9.1., New Business, Presentation and Discussion Re: Actuarial Valuation Report for Fiscal Year Ended September 30, 2021, Mr. Armstrong incorrectly stated the Cost-of-Living Allowance (COLA) would be affected by the Plan reaching 100% funded status, and that he appeared to be referring to Chapter 175 tax premium monies, and requested the minutes be amended. The Board concurred. Secretary/Treasurer: Griggs joined the meeting at 9:03 a.m. Pension Plans Administrator Martin advised a notation would be added to the January 28, 2022 Meeting minutes to acknowledge the error and would refer to the minutes of the February 23, 2022 meeting for a fuller discussion. Trustee Joseph asked, regarding Graystone Consulting's request at the January 28, 2022 meeting to rebalance monies into UBS which had been underweighted, if the Board considered the issues UBS had recently regarding valuations as well as its - multi-year disbursement queue. Pension Plans Administrator Martin noted that the monies being invested into UBS are in queue but would take a few weeks to arrive due to how investments in UBS are processed. Chair Hartley noted that the request to rebalance came from the Investment Consultant as result of UBS being out of compliance according to the Investment Policy Statement. The Board agreed this matter could be discussed further under Other Matters. Trustee Snow made a motion to adopt the minutes of the January 28, 2022 meeting as amended; Vice Chair Roberson seconded the motion. The motion carried unanimously (5-0). 5. PUBLIC INPUT: Chair Hartley noted this item was nadvertently skipped. There were no requests for public input. 9. NEW BUSINESS: 9.3. Presentation and Discussion Re: Sarasota County, Annual Contributions. Presenter(s): Chair Hartley. Chair Hartley asked that this item be discussed next as a representative of Sarasota County was in attendance at the meeting; the Board agreed by consensus. Chair Hartley explained the County has been sending required contributions to the City on a monthly basis. Now that the Plan has no active participants, the County requests to make contribution payments on a quarterly basis. This would be easier for the County to process until October 2023. Chair Hartley stated he communicated this to Attorney Pedro Herrera; and asked Attorney Robert Sugarman to confirm if this would be an issue. Attorney Sugarman, who appeared telephonically, explained there is no issue with the County paying quarterly and there may be some savings by paying annually due to accrued interest; he recommended allowing the County to set the payment schedule and directing the Plan's actuary to provide a computation of payments based on the County's requested schedule. Attorney Sugarman advised this could be approved by consensus; the Board approved. Chair Hartley noted that the County is already has payment calculations. Pension Plans Administrator Martin advised she would contact Brad Armstrong of Gabriel, Roeder, and Smith to request payment calculations of contributions based on annual and quarterly payments and forward the calculations to the County. She noted that, after the Plan receives the County's March 2022 payments, 13 payments will remain to be paid in the fiscal year and would work with the County to determine the appropriate start date and amounts to be paid. Chair Hartley stated he would follow up with e-mails to the County's Office of Financial Management, and include Attorney Sugarman's office and Pension Administration, to ensure each party agreed. 7. INVESTMENT PERFORMANCE REVIEW: Book 1 Page 280 02-23-2022 9:00 a.m. Book 1 Page 281 02-23-2022 9:00 a.m. 7.1. Presentation and Discussion Re: DePrince, Race, and Zollo; Performance Summary as of December 31, 2021. Presenter(s): Randy Renfrow, Small Cap Value Co-Portfolio Manager and Partner; Nate Rusbosin, Client Services and Marketing Associate; DePrince, Race, and Zollo. Randy Renfrow and Nate Rusbosin appeared before the Board and introduced themselves. Mr. Rusbosin gave an overview of DRZ's presentation and discussed the Firm Overview. He noted the firm has increased its client-base to approximately 80 clients and that founding partner Greg DePrince's ownership equity has been fully distributed; the firm remains independent. Approximately half of DRZ's employees have ownership equity and there have been no changes to the investment team. Mr. Rusbosin reviewed the buy and sell decisions outlined on the Three Equally Balanced Factors page of the materials as well as details on the Performance as of 12/31/2021 page. Mr. Renfrow recalled that at his previous appearance before the Board on February 24, 2021, he had expressed enthusiasm for opportunities in the banking and energy sectors. Over the last year, those two sectors led the market returns which has aided the current trend in which value is outperforming growth. Mr. Renfrow explained how DRZ's stock selection criteria rewards its investors during times of unwanted market volatility. Compared to a year ago, the portfolio is more balanced as shown on the Portfolio Positioning as of 12/31/2021; as of current, the weightings in financials and energy have been reduced and the weighting in healthcare has been increased. The portfolio's beta, which measures risk, is below 1, which suggests the 10% drop int the S&P 500 could be an opportunity to find more value investments. Mr. Renfrow reviewed the Top Ten Holdings. Chair Hartley asked if DRZ has seen any mid- or large-cap companies downgraded to small- or mid-cap due to COVID-19. Mr. Renfrow stated they have, and there has been considerable pressure in that area which may have contributed to some reductions in risk. Trustee Snow and Chair Hartley asked DRZ about the US Micro Value strategy listed on the Firm Overview page. Mr. Renfrow stated that the US Micro Value product has been available for approximately 10 years; all but 1 person on that investment team has been involved since that strategy's inception. The strategy invests in companies at the lowest end of the market capitalization spectrum. When the US Micro Value strategy began, micro-cap indicated capitalizations up to $500 million; as the market has grown, micro-cap indicates capitalizations up to approximately $1.5 billion. Because companies in the micro-cap space supply companies in the higher end, and conversely, higher end companies have demand dynamics impacting companies in the micro-end, this provides DRZ with a clearer perspective of the fuller economic environment. To Chair Hartley's question, Mr. Renfrow stated that DRZ is comfortable with capitalizations up to $2.5 billion. Mr. Rusbosin noted that DRZ has a client funded in the small cap space which will be closer to $2 billion. The strategy has exceeded $2 billion previously, and, being aware of liquidity issues, it is mindful of the $200 - $300 million remaining in capacity. Chair Hartley asked how DRZ's large cap value strategy is performing. Mr. Rusbosin stated that it is down approximately 0.5% while the index is down 4%, and the S&P is down 9-10%. As of September 30, 2021, DRZ's large cap fund was up 8.5% compared to the index being up 2.5%. To Chair Hartley's request, Mr. Rusbosin stated he would send 10- and 15-year performance information, noting the challenges for a value investor over the last 10 years. Mr. Renfrow pointed to the Cumulative Risk Factor Attribution (2016-2021) page of the materials which correlates risk and the team's ability to pick stocks. He noted that as the Risk Factors Effect Total rises, it becomes a tailwind for the portfolio. Vice Chair Roberson asked DRZ to an investment history on its performance page which states the dollar amounts under management since the Plan first invested in this strategy. Mr. Rusbosin stated they would include that at its next presentation and going forward. The Chair thanked DRZ for their presentation and appearance. 7.2. Presentation and Discussion Re: Oak Ridge Investments; Performance Summary as of December 31, 2021. Presenter(s): Rob McVicker, Executive Vice President, Senior Portfolio Manager, Oak Ridge Investments; Jim Barclay, Managing Director, Head of Advisory Sales, North Square Investments. Rob McVicker and Jim Barclay appeared before the Board and introduced themselves. Mr. Barclay explained that Brent Troy was unable to attend today's meeting; Mr. Barclay is appearing in Mr. Troy's place. Mr. Barclay began by discussing the Portfolio Market Values in the presentation materials, noting thet transactions over the last fiscal year, and that in the last quarter of calendar year 2021, this portfolio was down approximately 10% while the Russell 2000 Growth and Russell 2500 Growth indexes were down approximately 13% for the same timeframe. He reviewed the summary since inception, noting that the Plan has withdrawn more than it initially invested, but combined with investment gains, has a balance as of January 31, 2022 of approximately $8.5 million. He briefly reviewed the Asset Allocation and explained that the cash position of 6.34% as of January 31, 2022 was the unintentional result of rebalancing the portfolio; they have since reinvested that balance, as they typically maintain a 2 to 4% cash position. Mr. Barclay reviewed the Performance (Annualized Returns as of 1/31/20221) (sic), noting its relative outperformance compared to the Rusell 2000 Growth and Russell 2500 Growth Indexes, as well as the Current Fiscal Year. He stated there have been no changes in the portfolio management team. Mr. McVicker gave a brief review of Oak Ridge's Investment Philosophy and its Focus on Earnings. Regarding the Portfolio Characteristics, he noted Oak Ridge aims for a portfolio of 60 to 70 small cap stocks which have strong fundamentals and will weather market cycles. He explained that the Federal Reserve's cash injections into the economy and asset prices which has led to an aggressive index where 40% of the various indexes have non-eaming companies; Oak Ridge aims to participate in the growth in those areas, like biotech, with less exposure. However, because Oak Ridge has stocks with earnings, their price-to- earnings ratio becomes relatively distorted; the Harmonic Price-to-Eamings attempts to resolve that discrepancy and is essentially the average of the valuation of the portfolio. In that regard, Oak Ridge is slightly more expensive than the market, however it has a higher quality portfolio, and over the 5-year trailing period, it has outperformed the index by 20 to 30%. This gives them confidence in future growth. He discussed the Portfolio Positioning, noting it will always be overweighted in more consistent areas like healthcare equipment and technology, and underweight in spaces which have more questionable fundamentals like financials. He cautioned that the portfolio has no exposure to energy or materials; if the economy experiences hyperinflation, it is possible the portfolio will underperform, however to date, those positions have not hurt the portfolio. He noted the Top Ten Holdings, which he believes are A-grade companies which are visible and oredictable and provides a solid position. The Board had no questions for Mr. McVicker or Mr. Barclay and thanked them for their presentation. 8. UNFINISHED BUSINESS: Book 1 Page 282 02-23-2022 9:00 a.m. Book 1 Page 283 02-23-2022 9:00 a.m. Chair Hartley noted that the ongoing Board discussion regarding Graystone's Unified Management Account (UMA) platform will continue at the April 2022 meeting when Graystone next appears before the Board. He expressed concern that the investment consultant and custodian were the same, and asked Attorney Sugarman if that presents a conflict. Attorney Sugarman explained, based on his familiarity with the program which he stated has been presented to many of his clients, how the UMA program reduces costs by consolidating services. To Attorney Sugarman's question, Chair Hartly confirmed that Graystone advised the Plan could retain its current fund managers but expressed concem that, when the Plan replaces a manager, Graystone will only inform the Board of fund managers which also participate in the UMA. Attorney Sugarman confirmed that is one of the aspects of a program like the UMA: on one hand, all of the participating fund managers have been evaluated by Morgan Stanley; on the other, Morgan Stanley will evaluate those fund managers to sell products across all of Morgan Stanley's spectrum, and notj just public pension funds. Enrolling in the UMA would also necessitate using Morgan Stanley's custodian, which is First State. None of Sugarman & Suskind's clients which are enrolled in the UMA have identified any issues with First State, however there is a relationship between First State and Morgan Stanley. On the other hand, under the current structure, Salem Trust is contracted directly by the Plan and independent of Morgan Stanley. While First State's relationship with Morgan Stanley does not suggest impropriety, there are differences from the Plan's perspective than with Salem Trust. Vice Chair Roberson left the meeting at 9.51.am. Attorney Sugarman advised the Board that it is not required to always seek the lowest possible costs for services, and that ifi it finds value in Salem Trust's independence from the investment consultant, the Board would be justified in foregoing the costs savings presented in the UMA. On the other hand, if the Board believed First State was a legal and competent custodian, which Attomey Sugarman advised based on his experiences with other clients which use First State, they are, the Board could enroll in the UMA in good conscience. He encouraged raising the Chair's concern with Graystone at its next appearance; the Board could also request First State to attend with Graystone and explain their services and discuss their independence and management to compare to Salem Trust. Secretary/Treasurer Griggs advised that changing custodial banks would present significant challenges for Pension Administration. She stated that a more detailed discussion regarding those concerns could be continued when Graystone Consultants appears before the Board. Chair Hartley and Attorey Sugarman advised these challenges are important considerations in the decision to enroll or not in the UMA. Chair Hartley asked if Attorney Sugarman knew of any other comparable plans which are enrolled in the UMA, and if having to draw down Plan assets for monthly benefit payments created any advantages or disadvantages for the Plan by being in the UMA. Attorney Sugarman was unsure of any similar plans off hand but did not believe that should factor into the decision to enroll. Vice Chair Roberson returned to the meeting at 9.54 a.m. Attorney Sugarman advised the Board that it was not obligated to find the least expensive services in every circumstance; he further noted that if the current contracts and arrangements work well for the Plan, there are often unforeseen costs and challenges to changing those arrangements. 9. NEW BUSINESS: 9.1 Presentation and Discussion Re: Mauldin & Jenkins, Financial Statements for the Fiscal Years ending September 30, 2021 and 2020. Presenter(s): Alison Wester, CPA, Partner, Mauldin & Jenkins. Alison Wester of Mauldin & Jenkins appeared before the Board telephonically and introduced herself. At Chair Hartley's request, Ms. Wester clarified that the audit being presented was for the fiscal year ending September 30, 2021, and that the audit findings for the fiscal year ending September 30, 2020, which were previously accepted by the Board, were included for comparison purposes. Ms. Wester reviewed the Independent Auditor's Report, noting it is a clean and unmodified opinion, and explained what each section of the report represents. The Management Discussion and Analysis are unaudited but compared for consistency with the financial statements. Under Basic Financial Statements, Ms. Wester discussed the Statements of Fiduciary Net Position and the Statements of Changes in Fiduciary Net Position, noting the increased investment income, which correlated to the increase in fair value of the investments. She discussed each of the Notes to Financial Statements. Regarding Note 3, Investments, Fair Value Measurements, she stated that assets in Level 1 are valued using the exact securities in an active market, Level 2 are similar securities in an active market, and Level 3 is any other valuation method. Regarding Note 5, Net Pension (Asset) Liability, Ms. Wester stated that because of the investment performances, assumptions, and changes in the estimation process, the Plan is considered a net asset as of September 30, 2021; this could change based on investment performance or withdrawals, or changes to the determination of the pension liability. The last section of Note 5 contains the volatility table, which shows the effect of increasing or decreasing the discount rate, which is based on the expected rate of investment return, by 1%. Ms. Wester reviewed the Required Supplementary Information, noting the Schedule of Changes in the Net Pension Liability and Related Ratios will be reformatted in future audits for more legibility as it will eventually show 10 years of historical data. She reviewed the Other Supplementary Information, and Other Auditor's Report. At Vice Chair Roberson's request, Ms. Wester discussed the Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards in greater detail. She stated that significant deficiencies or material weaknesses are required to be reported in this section, although they would not opine on the effectiveness of internal controls. Those notwithstanding, Mauldin & Jenkins did not find any significant deficiencies or material weaknesses. At Chair Hartley's request, Ms. Wester reviewed the Statements of Fiduciary Net Position, Total Liabilities. She explained that the City of Sarasota prepaid its first contribution for fiscal year 2022 on September 30, 2021 in the amount of approximately $50,000, and therefore it was included in this report. Further, the deferred revenue is primarily the swing in the Chapter 175 monies, and the remainder of $99,000 is reported in the Required Supplementary Information. Chair Hartley, Pension Plans Administrator Martin, and Ms. Wester discussed an approximate $55,000 County contribution shortage from 2018. Chair Hartley noted the County has remitted payment and asked if it has been received; Pension Plans Administrator Martin stated that has not been received to date, but that Pension Administration, Ms. Wester, and County representatives had discussed the discrepancy and history in detail. Chair Hartley advised he would follow up with the County. Ms. Wester gave a brief review of her Book 1 Page 284 02-23-2022 9:00 a.m. Book 1 Page 285 02-23-2022 9:00 a.m. research into the discrepancy and noted it is listed on the Statements of Fiduciary Net Position under Accounts Receivable. Vice Chair Roberson made a motion to accept the Financial Statements for October 1, 2020 through September 30, 2021; Trustee Joseph seconded the motion. The motion carried unanimously (5-0). Pension Plans Administrator Martin advised that Pension Administration would distribute the Financial Statements to the City, County, and State of Florida as required. Ms. Wester reviewed the Auditor's Discussion and Analysis, including the Purpose of the Auditor's Discussion and Analysis, Governmental Practice, Additional Information, Independent Auditor's Report, Required Communications noting some staff changes at Mauldin & Jenkins which had been presented when the engagement letter had been issued, and Complementary Continuing Education and Newsletters for Government Clients. She thanked Secretary/Treasurer Griggs, Pension Plans Administrator Martin, and Pension Administration for their efforts. Chair Hartley thanked Ms. Wester for her presentation and service to the Plan. 9.2 Presentation and Discussion Re: Abraham, Fruchter & Twersky, LLP, Chegg, Inc., Securities Class Action, Recommendation to Seek Appointment as Lead Plaintiff. Presenter(s): Atara Twersky, Abraham, Fruchter & Twersky, LLP. Chair Hartley explained this is a securities class action suit which came up after the January 28, 2022 Board Meeting. Ms. Twersky was not in attendance at the meeting, in person or telephonically; Attorney Sugarman advised he would leave the meeting and contact Attorney Twersky to confirm her appearance. Chair Hartley explained that Abraham, Fruchter & Twersky provides securities monitoring, and determined the Plan had suffered trading losses in the amount of approximately $163,000 from investment in Chegg Inc. Chair Hartley had, with approval from Attorney Pedro Herrera, signed a Certification of Plaintiff, pending Board approval, sO that Abraham, Fruchter, & Twersky could begin the process of filing for lead plaintiff, with the intent to execute the Retention Agreement after approval by the Board. Vice Chair Roberson noted that the Plan has previously participated in litigation resulting from trading losses, and securities monitoring firms such as Abraham, Fruchter, & Twersky have represented the Plan at no cost until a judgment is awarded for the plaintiff. By consensus, the Board approved directing Abraham, Fruchter, & Twersky to file for lead plaintiff and he would sign the Retention Agreement if Attorney Sugarman approved. Attorney Sugarman returned before the Board telephonically; he explained the deadline to file for lead plaintiff was February 22, 2022, and Attorney Twersky advised she did not receive the signed Certification of Plaintiff and therefore could not file for Lead Plaintiff. Attorney Sugarman pointed out that he has another client which suffered significantly greater losses than the Plan as a result of Chegg Inc., and lead plaintiff is typically awarded to the party which suffered the greatest loss. In that context, he was believed it was unlikely the Plan would be awarded lead plaintiff. 10. ATTORNEY MATTERS: Attorney Sugarman advised all of the items he wished to bring up have been addressed in today's meeting. 11. OTHER MATTERS: Pension Plans Administrator Martin explained that the City's Information Technology Division will give a presentation on cybersecunity to the Board at its April 2022 meeting. Pension Administration is diligently working to complete and file the required State reports for Chapter 175 monies. Further, Cost-of-Living Allowance (COLA) were added in February 2022, and retirees should see that in their benefit checks. Chair Hartley asked Pension Administration for the status of the approximate 20 statements for those retirees who have available funds in the health trust account; Pension Plans Administrator Martin confirmed they would be distributed with payroll stubs. Trustee Snow confirmed with Pension Plans Administrator Martin that, as of October 1, 2021, the Plan is drawing down investment assets to replace declining employer contributions. Pension Plans Administrator Martin stated that assets are beginning to be drawn down with this fiscal year, and that in fiscal year 2023, the draw down amounts will be greater. Combined with the annual COLA payments, Trustee Snow asked what the new monthly payout amount will be for the Plan. Pension Plans Administrator Martin advised she would provide the number. Vice Chair Roberson left the meeting at 10.26 am. Chair Hartley explained that he discussed the Interlocal Agreement with the County; the County's understanding is that their contributions will end as of October 1, 2023 as stated in, and with the expiration of the Interlocal Agreement. He expressed concern that if the Plan's investments suffer significant losses during that fiscal year, the City will be obligated to make up the loss. He noted that the Plan Actuary could smooth out investment losses over several years, however the City and County have both contributed aggressively over the last 10 years to maximize the funded ratio. Pension Plans Administrator Martin advised that the monthly retiree payroll for February 2022, which includes COLA, was $1,066,823.66. 12. ADJOURN. Chair Hartley adjourned the meeting at 10:29 a.m. - N R rya ChairMichael Haptley Secrelary/)igasurer Shayla Gridgs Book 1 Page 286 02-23-2022 9:00 a.m.