MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES MEMBERSHIP MEETING OF APRIL 26, 2024 Present: Chair Johnathan Todd, Vice Chair Ronnie K. Baty, Secretary/Treasurer Shayia Griggs, Trustee Tyler Rossnagle. 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 Todd. Chair Todd 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/Treasurer Griggs. Secretary/Treasurer: Griggs led the Board and those in attendance in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Presenter(s): Chair Todd. Chair Todd 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. Trustee Hudgins was not 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 23, 2024. Presenter(s): Chair Todd. Trustee Baty made a motion to approve the minutes of the Regular Meeting of February 23, 2024; Trustee Rossnagle seconded the motion. The motion passed unanimously (4-0). 7. BOARD OF TRUSTEE REPOR: 7.1. Presentation and Discussion: Annual Board Report for 2023. Presenter: Secretary/Treasurer Griggs. Book 1 Page 394 04-26-2024 8:15 a.m. Book 1 Page 395 04-26-2024 8:15 a.m. Secretary/Treasurer: Griggs presented the Annual Board Report for 2023 to the Board; the City Commission accepted and approved the report at its Monday, March 18, 2024, Regular meeting. The Board accepted Annual Board Report for 2023 by consensus. 7.2. Presentation and Discussion Re: Proposed Annual Budget for Fiscal Year 2024 - 2025. Presenter(s): Secretary/Treasurer Griggs. Secretary/Treasurer Griggs presented the Proposed Annual Budget for Fiscal Year 2024 - 2025. To Vice Chair Baty's question, Secretary/Treasurer: Griggs clarified that most of the increase in the proposed budget, compared to the 2023 - 2024 budget, was due to increases in staff salaries. Vice Chair Baty made a motion to approve the Proposed Annual Budget for Fiscal Year 2024 - 2025; Trustee Rossnagle seconded the motion. The motion passed unanimously (4-0). 8. RETIREMENT REQUESTS: None. 9. INVESTMENT PERFORMANCE REVIEW: 9.1. Presentation and Discussion Re: Sawgrass Asset Management, Investment Performance Summary for Period Ending March 31, 2024. Presenter(s): Liridon Gila, CFA, Co-CIO, Portfolio Manager, Sawgrass Asset Management. Liridon Gila of Sawgrass Asset Management (Sawgrass) appeared before the Board telephonically and introduced himself. Mr. Gila advised that Sawgrass has rehired Christine Turner as the Director of Institutional Client Relations and hired Brian Engel in Institutional Distribution. Mr. Gila reviewed the Portfolio Summary and Portfolio Performance pages of the materials, noting a slight negative absolute return for the quarter, which he attributed to a sell-off in response to the Federal Reserve (Fed) revising its estimate of the number of times it will reduce interest rates in 2024 from 6 to 2, if not less; Sawgrass anticipates the Fed will make no rate cuts in 2024. Mr. Gila asserted that the Bloomberg US Aggregate A+ index, which is a higher quality than the full Bloomberg US Aggregate, may be a better benchmark for the portfolio; he noted the portfolio is roughly matching the full Aggregate index and outperforming the A+ index over the 3-, 5-, and since inception timeframes. While fixed income had been an unexciting asset class when interest rates were at or near zero, the dramatic rise in rates to almost 5.5% was a loss in the short term but will benefit the portfolio over the long term. On the Fed Cuts Repriced page of the materials, Mr. Gila explained how the market has responded to the expected number of times the Fed will reduce interest rates. While Sawgrass believes that inflation has peaked and therefore is bullish on the fixed income asset class, the market is still adjusting to a post-COVID economy and Fed's response to the fiscal crisis. Referencing pages 38 and 39 of the materials, Mr. Gila explained that, although inflation shows some sporadic volatility, it is well-controlled, especially when the rent component of the total inflation basket as based on the Consumer Price Index is replaced with real-time data; accordingly, Sawgrass asserts that inflation will remain sticky for a short period of time, however it will eventually come down to the long-term target of 2%. While consumers have not fully felt the impact of rising interest rates, the Fed is trying to decelerate the economy at the same time that fiscal policy is trying to accelerate it. Many developed countries around the world which had very accommodative fiscal policies, which added significant and lasting structural debt, have also experienced prolonged periods of lower nominal rates, suggesting more financial repression; barring emerging-market type practices, which would be detrimental to each respective country's middle class and economy. Secondly, the M2 in the US economy, which is the money supply that includes cash outside the private banking system and current account deposits, as well as savings, money market, and mutual funds, and time deposits under $1,000, has been shrinking since last year. Noting that ar negative money supply growth hasn't occurred in the last 40 years, Mr. Gila asserted that an inflation rate of 2% is commensurate with a 6% money supply growth rate. He added that there is typically an 18- to 24- month lag from the negative money supply growth to when the effect of that negative growth is seen in real asset priçing; it will be a disinflationary force in the near future. Although Sawgrass believes deflationary forces will prevail, Mr. Gila explained how globalization, aging demographics, and technology put inflationary pressures on world economies. Nevertheless, Sawgrass is not overly concerned regarding the slight uptick in recent inflation numbers. Mr. Gila discussed the page of the materials titled Record for Consecutive Days of Curve Inversion. Attractive yields and liability-driven buyers such as pension funds, insurance companies and annuity buyers, are dominating fixed income and causing record-level tightness in credit markets. Sawgrass is finding the most value, and accordingly has the greatest active weight in the difference between long- and short-term rates. He noted that, historically, long- and short-term yield curve inversions have accurately predicted either recessions or periods of economic slowdowns, and therefore at least a slowdown is inevitable; accordingly, the largest overweight in the portfolio is for the difference between the long- and short-term curve to normalize. When the yield curve returns to its traditional shape, the portfolio will outperform. The portfolio's duration is neutral until there is more clarity from the Fed regarding future rate cuts. Mr. Gila discussed the page titled Corporate Bonds Trading at Rich Relative Valuations, noting that Apple bonds are trading comparably to Treasury bonds. Sawgrass has an underweight to corporate credit relative to the market but has dry powder in the event that unemployment numbers go up and the probability of recession increases, as those would bring more volatility int the spread market. On page 14 of the materials, Mr. Gila explained that Sawgrass has shifted the underweighted portion of the portfolio into lower-coupon, geno/govemmem-nsured mortgage-backed securities (MBSs). The page shows one of the securities in the portfolio, the 30-year mortgage with a 3.5% coupon, compared to an A rated Treasury bond, and an A rated corporate bond, each of which have similar durations; under scenario 3, in which there are no changes to rates, MBSs maintain a decent carry to be captured. While MBSs are AAA rated due to the underlying collateral, there always remains a risk of prepayment when interest rates drop. However, because Sawgrass favors low coupon rates, those borrowers have little incentive, if not a disincentive, to pay off their mortgages early. In concluding his presentation, Mr. Gila reiterated the portfolio's overweight to MBSs and underweight to corporate bonds; the portfolio will produce significant return going forward because yields are very good, and inflation will be controlled at approximately 2%. High interest rates have allowed fixed income to adequately diversify portfolios away from equities as well as generate a noteworthy income. The Board had no questions and thanked Mr. Gila for his presentation. 9.2. Presentation and Discussion Re: SSI Asset Management, Investment Performance Summary for Period Ending March 31, 2024. Presenter(s): Michael Opre, Portfolio Manager, SSI Asset Management. Michael Opre of SSI Asset Management (SSI) appeared before the Board and introduced himself. Mr. Opre advised that the Convertible team has had no staff changes, and the firm hired two additional people in Client Services, one of whom, Brittany Schubert, will be the Plan's client services contact. Mr. Opre discussed the Market Environment pages of the materials, noting the economy is holding up considering it grew in 4 of the last 5 quarters and inflation continues to abate. Because the rate at which inflation is dropping has slowed, the Fed is reducing its projected number of interest rate cuts in 2024; açcordingly, SSI anticipates corporate earnings to remain around 10% to 11% for the year which is a favorable environment for the markets in general and convertible securities. On the U.S. Convertible Universe & New Issuance Dynamic page, Mr. Opre explained that the surge of new issuance in early 2024 is important as it replenishes the supply of bonds which are maturing; SSI estimates there will be a total of $60 billion of new issuance in 2024. Further, the higher-than-average Coupon Rate and discounted Book 1 Page 396 04-26-2024 8:15 a.m. Book 1 Page 397 04-26-2024 8:15 a.m. Conversion Premium have created a favorable environment for new issuances. On the Outlook page, Mr. Opre noted that convertibles are currently less sensitive to changes in equity prices, which makes them more defensive than they traditionally have been, and the portfolio's 2-year duration is lower than the Bloomberg Aggregate's approximate 6-year duration; these should help limit the portfolio against fluctuations due to moves in interest rates. Mr. Opre discussed Portfolio Snapshot, noting the yield to maturitylyleld to call, which is not stated on the page, is close to 3%. He explained that Delta, which is the sensitivity of a convertible bond's price to changes in the price of the underlying stock, signifies the growth in income profile in the portfolio. Additionally, convertibles are considered equity investments according to the investment policy gyidelines, and therefore are not constrained by quality requirements applicable to fixed income. On the Performance page,. Mr. Opre noted that during 2023 as the Fed was raising interest rates, total return convertible funds underperformed while lower quality convertibles were the strongest performers, which is contrary to expectations considering rising interest rates; by the end of 2023, leadership returned to a more traditional market, as can be seen in the Fiscal YTD and 1Q'24 columns. Returns have been driven largely by rising stock prices, and, to a lesser extent, decreases in credit spreads. Long-term, the portfolio has captured approximately 83% of the upside of the Rusell 2000 small cap stock index, which tends to correlate closely to issuers of convertible bonds. The portfolio has captured approximately 60% of large cap stocks as measured by the S&P 500 index, which is at the lower end of its historical range primarily due to the impact of the magnificent 7 stocks. On the Portfolio Attribution page, Mr. Opre explained that companies which benefit from artificial intelligence, on-line security companies, and travel and leisure firms were strong performers which lifted the portfolio's performance. Renewable energy and companies which have been hurt tby rising interest rates dragged pertormance; SSI has reduced positions in those companies. Mr. Opre discussed the Portfolio Sector Allocation and Portfolio Position pages of the materials. Considering the favorable trends in growth and inflation, SSI has overweighted sectors which benefit from that type of environment, such as technology, industrials, and financials, and underweighted utilities. SSI suspects a pull-back in the convertible market may be looming, however new, attractively priced issuance is a positive sign and it will benefit the portfolio. Given the advancements occurring in technology, the portfolio's performance is trending positively. Mr. Opre asserted convertibles are again providing equity- like returns with fixed income-like protections. The Board had no questions for Mr. Opre and thanked him for his presentation. 10. UNFINISHED BUSINESS: None. 11. NEW BUSINESS: 12. ATTORNEY MATTERS: Attorney Christiansen noted there are two pending disability cases which will come before the Board. In the matter of former Officer Ainscoe, an initial hearing is scheduled for May 29, 2024, and she is scheduled to undergo an independent medical evaluation (IME). In the matter of Officer Michael Pangallo, Attorney Christiansen is scheduling an IME; when the IME has been completed, the Board will be able to schedule an initial hearing. Attorney Christiansen advised the Board that, due to a personal scheduling conflict, he must delay presenting to the City Commission the proposed ordinance which liberalizes the requirements for investments. He advised he will present it to the City Commission before he retires. Attorney Christiansen asked the Board for approval to update the Plan's Operating Rules due to clear changes in the Florida Commission on Ethics Form 1, Environmental, Social, and Government restrictions regarding investments, and changes in State law regarding confidential records. Trustee Rossnagle made a motion to authorize Attorney Christiansen to update the Plan's Operating Rules as explained; Vice Chair Baty seconded the motion. The motion passed unanimously (4-0). Attorney Christiansen asked regarding offering members the option to pay for claimed service indebtedness through automatic payroll deduction, how the City of Sarasota (City) city was progressing in implementing, Workday, its new payroll system. Pension Plans Administrator Martin advised there are still issues being resolved. Secretary/Treasurer: Griggs advised she would like to allow the City a full year from Workday's roll-out sO that the City may complete its audit and budget processes before requesting an enhancement, such as an indebtedness payment option. Because the Workday roll-out anniversary will be after Attorney Christiansen retires, Secretary/Treasurer Griggs assured Attorney Christiansen the option will be pursued. 12.1. Presentation and Discussion Re: Consent to Assignment of Legal Services Agreement. Presenter(s): Scott Christiansen, Attorney, Christiansen & Dehner, P.A. Attorney Christiansen announced he will retire effective August 1, 2024, and provided a brief history of Christiansen & Dehner's prior client transitions. He recommends the Plan transition to Klausner, Kaufman, Jensen & Levinson (KKJL) and introduced Attorney Stuart Kaufman, who is a senior partner there and would assume representation of the Plan, should the Board approve the transition. Attorney Christiansen advised that the Board could initiate a Request for Proposal (RFP) to find a different firm, however based on his experience with KKJL as well as other pension attorneys in Florida, he believes KKJL is the best law firm for the Plan and his remaining clients. He recommends the Board authorize assignment of Attorney Christiansen's contract to KKJL effective August 1, 2024. Attorney Christiansen noted that his assistant, Debbie McCord, who has worked for Christiansen & Dehner for more than 30 years, will transition to KKJL on a full-time basis. Additionally, Attorney Christiansen will be "of counsel" with KKJL, and he will be available after he retires to consult on projects and answer questions about his former clients. He noted that the Board is not required to do an RFP, and that as a fiduciary of the Plan, he has performed the appropriate due diligence on behalf of the Board to recommend KKJL. Chair Todd advised that the Board values Attorney Christiansen's recommendation and thanked him for his efforts. To Vice Chair Baty's questions, Attorney Christiansen advised that only 2 of his prior clients in the last 10 years opted to go to RFPS instead of accepting his recommendations and they had experienced no issues in transitioning to their respective new counsels. Attorney Kaufman appeared before the Board and introduced himself and KKJL. He explained that the firm initially began practicing both pension and labor law but narrowed its scope approximately 15 years ago to just pension law. The firm represents over 200 pension plans in Florida and across the country, and he has been with KKJL for approximately 30 years. The firm has 8 attorneys, and it has already begun to work with Ms. McCord. All of Christiansen & Dehner's clients which previously transitioned to KKJL have continued with KKJL. KKJL offers all legal services applicable to pensions and, if the transition is approved, it would be at fiduciary to the Plan; the firm has experience in disability hearings, including the condition which affects Officer Pangallo. The firm has one attorney who is dedicated to processing disability cases and would work with Ms. McCord on the Ainscoe and Pangallo cases which will come before the Board. The firm has litigation experience and founding partner Bob Klausner has argued before the US Supreme Court on behalf of the Kentucky Retirement System. Attorney Kaufman noted that three of the four partners each present at the FPPTA's and other Trustee education events. Attorey Klausner represents clients outside of Florida including the Louisiana Pension Fund, the Louisiana Sherrifs Pension Fund, the Texas Municipal Retirement System, in California, American Samoa, the US Virgin Islands Pension Fund. Attorney Kaufman explained that he would represent the Plan and appear at meetings personally, barring unforeseen emergencies; because the firm has multiple partners and associate attorneys, the firm can accommodate unforeseen issues and conflicts. Two attorneys would work with the Plan, along with Ms. McCord, to provide a seamless transition. KKJL would serve at the Board's pleasure, and the Board could terminate that contract at any time for no reason and go out for an RFP, although Attorney Kaufman expressed confidence the Board would be satisfied by his representation. He added that KKJL is the only pension firm in Florida which solely performs pension law. While there are other pension attoreys in Florida, those firms also Book 1 Page 398 04-26-2024 8:15 a.m. Book 1 Page 399 04-26-2024 8:15 a.m. practice labor and employment law, which could potentially lead to a conflict if a firm were to represent both a pension plan and a union in the same case. To Chair Todd's question, Attorney Kaufman advised that the firm is located in Plantation, FL and he resides in Ft. Lauderdale. He also represents Tampa Police and Firefighters pension funds, amongst the State's other more sizable plans. To the Board's questions, Attorney Kaufman advised he would assume Attorney Christiansen's contract and fees and would be the Plan's primary point of contact, and he is available by telephone and e-mail; his office responds to all contact within 24 hours. The Board contemplated a decision to transition to KKJL without Trustee Hudgins present, as he may have additional questions and input regarding the selection of an attorney. While the Consent to Assignment agreement as drafted automatically goes into effect if the Board failed to object by June 30, 2024, Attorney Christiansen recommended the Board act sooner than later sO that, if any additional work were required, that process could begin as promptly as possible. a Chair Todd asked if Trustee Hudgins would be available at the May 24, 2024, meeting; Attorney Christiansen advised that he believed Trustee Hudgins would be gone all summer. Vice Chair Baty made a motion to authorize assignment of Attorney Christiansen's contract to KKJL effective August 1, 2024; Trustee Rossnagle seconded the motion. The motion passed unanimously (4-0). The Board and Attorney Christiansen each acknowledged the lengthy partnership; Attorney Christiansen reiterated his confidence in transitioning to KKJL's representation. 13. OTHER MATTERS: 13.1. Presentation and Discussion Re: Administrative Budget Analysis for October 1, 2023, through December 31, 2023. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Administrative Budget Analysis for Q1 for Fiscal Year 2024 for the Board's information. Items with no expenditure were due to the timing of when the expenses are incurred. The Board had no questions. 13.2. Presentation and Discussion Re: Check Register for October 1, 2023, through December 31, 2023. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Check Register for Q1 for Fiscal Year 2024 for the Board's information. Amounts paid to individuals are DROP rollovers or payments to outside vendors. Payment to a former trustee was for reimbursement of travel expenses. Payments to the General Employees' Pension Fund and Firefighters' Pension Fund are reimbursements of shared expenses for supplies. The Board had no questions. 13.3. Presentation and Discussion Re: Asset Allocation as of April 15, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation as of April 15, 2024, for the Board's information. The Board had no questions. Pension Plans Administrator Martin noted that the record for the initial hearing scheduled for May 29, 2024, less the IME report, is available in Pension Administration for Trustees to receive and review. Pension Administration will notify the Trustees when IME report is available. 14. ADJOURN. Chair Todd adjourned the meeting at 9:21 a.m. A C L 2 46 Chair Johnathan Todd Secretary/Treaisurer Shayla Gnggs Book 1 Page 400 04-26-2024 8:15 a.m.