MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF SEPTEMBER 30, 2024 Present: Chair Ryan Chapdelain, Vice Chair Mark Nicholas, Treasurer Kelly Strickland, Secretary Shayla Griggs (Telephonic), and Trustee Jan Thornburg. Others: Attorney Stuart Kaufman, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Peter Gottlieb. Absent: Trustee Robert Reardon and Trustee Barry Keeler 1. CALL MEETING TO ORDER: Chair Chapdelain called the City of Sarasota (City), General Employees' Pension Plan (Plan) Board of Trustees Regular meeting to order at 10:03 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Anthony Ferrer, Senior Pension Analyst. Senior Pension Analyst Ferrer led the Board and meeting attendees in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: 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 avoid personal attacks." 4. ROLL CALL: Senior Pension Analyst Ferrer called roll. Secretary Griggs appeared telephonically; Trustees Reardon and Keeler were not present. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the General Employees' Pension Plan Board of Trustees Regular Meeting of July 30, 2024. Presenter(s): Chair Chapdelain. Vice Chair Nicholas made a motion to approve the minutes of the July 30, 2024, Regular Meeting; Treasurer Strickland seconded the motion. The motion passed unanimously (5-0). 7. APPROVAL OF RETIREMENT REQUEST/S): 7.1. Presentation and Discussion: The Normal Retirement Request of Robert Hoek. Presenter: Anthony Ferrer, Senior Pension Analyst. Senior Pension Analyst Ferrer advised that Mr. Hoek earned 23.20 years of service and requests a normal retirement at age 65. Book 1 Page 450 99-30-2024 10:00 a.m. Book 1 Page 451 09-30-2024 10:00 a.m. Trustee Thornburg made a motion to approve Mr. Hoek's request for retirement; Vice Chair Nicholas seconded the motion. The motion passed unanimously (5-0). 7.2. Presentation and Discussion: The Early Retirement Request of Robin Carter. Presenter: Anthony Ferrer, Senior Pension Analyst. Senior Pension Analyst Ferrer advised that Ms. Carter earned 25 years of service and requests a normal retirement. Vice Chair Nicholas made a motion to approve Mr. Carter request for retirement; Trustee Thornburg seconded the motion. The motion passed unanimously (5-0). 7.3. Presentation and Discussion: The Early Retirement Request of Roger Barfield. Presenter: Anthony Ferrer, Senior Pension Analyst. Senior Pension Analyst Ferrer advised that Mr. Barfield earned 27.10 years of service and requests a lump sum retirement at age 57. Consistent with Pension Administration practice, Peter Strong of Gabriel, Roeder, and Smith (GRS), the Plan's actuary, certified the benefit amount to be paid. To Chair Chapdelain's request, Senior Pension Analyst Ferrer confirmed that Mr. Barfield requests an early retirement. Treasurer Strickland made a motion to approve Mr. Barfield's request for retirement; Vice Chair Nicholas seconded the motion. The motion passed unanimously (5-0). 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Geneva Capital, Performance Review as of June 30, 2024. Presenter(s): Matthew Pistorio, CFA, Principal, Client Portfolio Manager, Geneva Capital. Matthew Pistorio of Geneva Capital appeared before the Board and introduced himself and his presentation. Mr. Pistorio reviewed page 2 of the materials, noting that as of September 30, 2024, there are between $6.5 billion and $7 billion in assets under management as a result of adding clients and cash flows, as well as market activity; the Plan is invested in Geneva's small-cap growth strategy. On page 3, Mr. Pistorio advised that W. Scott Priebe, in accordance with a well-planned and announced transition, will move off of the investment team and eventually into retirement. Over the past several years, Mr. Priebe has not been involved in trading and instead focused on providing high-level perspective and mentorship within the investment team; Geneva has been communicating this to Morgan Stanley on an ongoing basis. Geneva recently added Courtney Jentz as a Research Analyst, but there have been no other changes to the investment team. On the Account overview page, Mr. Pistorio discussed the fund's relative outperformance across all measurements shown, and noted the data is as of August 31, 2024, and not September 30, 2024. Mr. Pistorio reiterated Geneva's commitment to high quality investing, meaning profitable companies with great management teams and conservative balance sheets, to achieve consistent, repeatable performance. On the Market cycle performance page, the chart on the right demonstrates the portfolio outperforms in both bear and bull markets, but tends to lag in speculative markets, such as economic recovery years, or when returns aren't driven by fundamentals. In calendar year 2024, the market has been somewhat mixed between high quality and speculative. The portfolio's performance has been driven by stock selection within the Industrial and Financial sectors; Mr. Pistorio discussed Construction Partners in Industrials, Onto Innovations in Technology, and Kinsale Capital in Financials, which were the portfolio's top contributors to performance. He briefly discussed the Strategy and Index Industry Weightings on page 8 of the materials, noting that Geneva's Industrials sector includes both traditional industrial companies as well as business service companies, such as ExIService Holdings, which is a software development company, and Exponent Inc, which provides outsourced scientific research. Mr. Pistorio reviewed the Buys and sells page. Geneva is a long-term oriented investor, with hold-time goals between 5 and 10 years; it sells approximately 15% to 20% of the portfolio each year. Because the portfolio added as many new stocks as it has, there will be more sales in the near future; this is typical behavior for the portfolio. He reviewed FirstService Corp and Vertex Inc, which are the most recent additions to the portfolio. Mr. Pistorio provided a brief market outlook. Geneva believes the market is now pricing in between 200 and 250 basis points of short-term interest rate cuts through 2025, however the Federal Reserve (Fed) will not need to cut rates by that amount over the next 15 months unless the economy is weaker than currently determined. Geneva expects the Fed to cut short-term interest rates 1 additional time in 2024, and perhaps a few more times in 2025, however the Fed will be exceedingly cautious because of the how difficult it would be to control an inflation recurrence, should that happen. They expect short-term interest rates will normalize between 3.0% and 3.5%, which will benefit the types of high-quality companies in which Geneva invests and stop rewarding lower quality companies in the index which do not earn money and yet thrived in a 0% interest rate environment. He referenced page 13 of the materials and advised that small-cap stocks are the most attractive relative to large-cap stocks since the tech bubble. The Board thanked Mr. Pistorio for his presentation and Geneva's service to the Plan. 8.2. Presentation and Discussion Re: NFJ, Performance Review as of June 30, 2024. Presenter(s): John Mowrey, Executive Managing Director, Chief Investment Officer Senior Portfolio Manager/Analyst; NFJ. John Mowrey of NFJ appeared before the Board and introduced himself and his presentation. Noting the portfolio is in the Small Cap Value strategy, Mr. Mowrey advised that there have been no changes in the investment team, however, it has added analysts over the years who are proficient in accounting and finance, as well as big data and machine learning because of the vast quantities of data available to investors. He asserted value managers may lag growth managers in embracing these types of skill sets. Mr. Mowrey reviewed the Fundamental Analysis page of the materials, noting NFJ does not invest in the approximate 25% of the companies in the small cap space which do not earn money. He stressed NFJ's competitive advantage due to its custom peer: sets in the valuation process, which he analogized to a real estate appraisal using sales comparisons to find an appropriate value. He explained that Home Depot and Lowe's are mapped to the consumer discretionary sector, while Sherwin Williams is mapped to the chemicals and materials sector. Because Sherwin Williams has the same end users as Home Depot and Lowes, their respective valuations are comparable; conversely, Sherwin Williams' valuation will be an outlier compared to traditional chemiçals and materials sector companies because of those differing end customers. While NFJ does not ignore traditional sector mapping, its own peer sets provide more information to better clarify investment decisions. He explained the importance of dividend growth as an offset for retirees to the inflation which is consistently present in the system; he explained that although year to year changes in inflation, which the Fed uses to set interest rates, may change, the prices consumers pay may not change. Dividend growth is a key component to the strategy because it consistently outpaces inflation. Mr. Mowrey explained NFJ's qualitative and quantitative views on quality. Turning to the Portfolio Statistics, Mr. Mowrey compared the portfolio to the benchmark. He explained that, in looking at Valuations, forward Price to Earnings (PE), the benchmark includes companies which do not earn money, yet those companies are excluded from the porttolio; if the portfolio included non-earning companies, the portfolio's forward PE multiple would be higher. The index's trailing PE is pushed up by non-earning Book 1 Page 452 09-30-2024 10:00 a.m. Book 1 Page 453 09-30-2024 10:00 a.m. companies. He noted the portfolio outpaces the index in Dividend Yield and Dividend Growth Rate, and the Returns on Equity and Assets exceed the index because the of the portfolio's bias towards quality. On the Performance page, Mr. Mowrey noted that 2023 was a strong year for the portfolio because it had strategically positioned the portfolio in 2022 based on what it determined to be attractive valuations while most investors were focused on the narrative of an impending recession. Year to date in 2024, the portfolio is down 2% relative; quarter to date, the gap is approximately 60 basis points. Page 16 of the materials, The Power of Active Management & Compounding, shows the portfolio is up over 1050% since inception. He thanked the Board for its confidence in the strategy. On the Sector Exposure page, Mr. Mowrey pointed out that the blue chart is from 2023, and the green chart is 2024. NFJ has added to its added to Utilities and Real Estate allocations, which are atypical sectors for growth managers; it has decreased its industrial and technology holdings. Although the Financials sector appears to be unchanged, NFJ has added significantly within the sector to its regional bank allocation in the aftermath of the March 2023 regional banking crisis. While the crisis depressed stock prices across the sector, the actual liquidity issue only effected a select group of regional banks; NFJ then invested in high-quality regional banks which did not have liquidity issues, but had depressed stock prices, and the portfolio has been rewarded accordingly. Mr. Mowrey reminded the Board that the portfolio is overweighted in Real Estate Investment Trusts (REITs), Banks, and Utilities, which are all sensitive to changes in interest rates. Referencing page 20 of the materials, Mr. Mowrey explained why the history of the difference between the Fed Funds Rate and the 2-Year Treasury Bond Yield indicates the Fed the Fed will continue to make significant cuts in short-term interest rates, which will accordingly reward each of the overweighted sectors. Mr. Mowrey briefly discussed the page titled We Believe Small Value is Well Positioned in 2024. He noted that since 2000, the portfolio has generated a significant amount of return, and the Russell 2000 value, relative to the S&P 500, is at the approximate level it had been in 2000. He noted that the environment in 2000 is very similar to today in that, at both points, the Fed had previously increased interest rates and began to cut them, the US Dollar was: strong, emerging markets were out ofi favor, and there were large dislocations between value and growth, as well as large- and small-cap stocks. On page 25 of the materials, Mr. Mowrey explained how individual mega-cap companies have market capitalizations comparable to that of the entire small-cap space. It therefore takes only: a small shift of money from even one of the mega-caps to make a dramatic move in the small-cap space; he asserted this is what happened in 2000 and may be about to occur now. He concluded with page 26, which shows how the Magnificent Seven mega-cap stocks now crowd the top of the market similarly to 1973, when IBM, AT&T, Exxon, Eastman Kodak, GM, Sears, and Xerox dominated. He asserted that growth stocks were favored by the market since 2008, and now the environment appears similar to that of 2000, which was when value began being favored. To Chair Chapdelain's question, Mr. Mowrey explained, referencing page 20, that the spread between the Fed Funds Rate and the 2 Year Treasury Bond is 200 basis points; as the Fed reduced rates by 50 basis points, it is reasonable to expect the Fed to reduce short term rates by another 150 basis points over time. He believes the Fed will take 12 to 18 months to effectuate that reduction, but reductions will be faster than most analysts expect. While this risks a recession, Mr. Mowery noted that utilities and REITS can act defensively in a bear market; the banks in the portfolio have very low valuation levels and therefore may also act defensively in a declining market. The Board thanked Mr. Mowery for his presentation. 9. UNFINISHED BUSINESS: None. 10. NEW BUSINESS: 10.1. Presentation and Discussion Re: Proposal to Provide Audit Services for Fiscal Year Ending September 30, 2024. Presenter(s): Daniel Anderson, CPA Mauldin & Jenkins. Daniel Anderson of Mauldin & Jekins appeared before the Board and introduced himself. Mr. Anderson noted that Alison Wester, who previously oversaw the Plan's audits, has retired effective September 30, 2024; Mr. Anderson has been involved with the Plan's prior audits as a support and quality assurance partner, and with the 2024 audit, is the engagement lead partner. The remaining engagement team, including Jennifer Trotter as engagement manager, remains the same as prior years. Mr. Anderson presented the audit engagement letter, noting the opinions Mauldin & Jenkins will issue, the scope of the audit, that it follows generally accepted auditing standards as well as Government Auditing Standards, it provides reasonable assurance of the fairness of presentation of the financial statements, and that on the conclusion of the audit, it will issue a written opinion ensuring the financial statements are free of material misstatement. It will issue a "yellow book" report in accordance with government auditing standards which will discuss the compliance and internal controls the Plan is required to follow. He addressed Management's obligation to follow responsible accounting policies and procedures for the Plan, as well as the financial statements themselves; Mauldin & Jenkins will work with Management to eview the policies and procedures, evaluate the internal control of the audit process, and test year end significant account balances, major transaction cycles, and participant data to ensure the Plan is within compliance of its stated structure. The letter provides a timeline for the audit, although as the fiscal year ends September 30, 2024, Mauldin & Jenkins has already begun its initial risk assessment and evaluation of internal controls; it will adhere to the established audit timeline unless circumstances dictate otherwise. Mr. Anderson noted that, although it is still int the evaluation process, accounting standards require Management's override of internal controls to constitute a significant risk, as noted on page 3 of the engagement letter; if any additional significant risks are identified, Mauldin & Jenkins will communicate those to the Board at the conclusion of the audit. Lastly, Mr. Anderson noted that GASB 100 has been pronounced as being in effect for the 2024 Fiscal Year; he does not anticipate it will impact the Plan's audit unless the City changes its valuation technique for the fair value of investments, in which case GASB 100 would be implemented and disclosed in the financial statements. Chair Chapdelain, Mr. Anderson, and Senior Pension Analyst Ferrer discussed the engagement letter and agreed it is substantially the same as prior letters; updates to the generally accepted accounting standards were effective with the 2023 Financial Statements but were only minor. Attorney Kaufman advised the engagement letter was standard, and the fee was very reasonable. To Trustee Thornburg's question, Mr. Anderson noted that the characterization of Management's override of internal controls as being a significant risk is standard on all audits; it has been identified as such in previous audits, however it has only been disclosed in the engagement letter for the past 2 fiscal years. To Attorney Kaufman's questions, Mr. Anderson confirmed the 2023 audit was clean and unmodified; Senior Pension Analyst Ferrer discussed the estimated timeline for the presentation of the Plan's actuarial valuation and financial statements occurring in January and February of 2025, respectively. Treasurer Strickland made a motion to accept Mauldin & Jenkins' engagement letter as presented; Vice Chair Nicholas seconded the motion. The motion passed unanimously (5-0). 11. ATTORNEY MATTERS: 11.1. Presentation and Discussion Re: Personal Services Agreement. Presenter(s): Stuart Kaufman, Klausner, Kaufman, Jensen & Levinson. Attorney Kaufman presented the Professional Services Agreement between the Plan and Klausner, Kaufman, Jensen, & Levinson (KKJL) to replace the agreement between the Plan and Christiansen & Dehner, PA, as assigned tol KKJL. Attorney Kaufman noted that KKJL's agreement is the same as Christiansen & Dehner's, with Book 1 Page 454 09-30-2024 10:00 a.m. Book 1 Page 455 09-30-2024 10:00 a.m. the exceptions that KKJL removed an annual cost-of-living increase to its fee, KKJL charges a reduced fee for services performed by associates and paralegals, and KKJL declares itself, and requires all parties which contract with the Plan to declare themselves, as fiduciaries to the Plan. He noted the Board may terminate the contract at any time without reason, but with sufficient notice. The contract allows the Plan to share KKJL's travel expenses with the City's Police Officer's Pension Plan (POPP) when meetings are held. on the same dates. To Chair Chapdelain's questions, Attorney Kaufman advised that KKJL's rates are within $5 of Christiansen & Dehner's, and that multiple plans sharing travel expenses is common in the industry. Treasurer Strickland made a motion to accept KKJL's Professional Services Agreement as presented; Vice Chair Nicholas seconded the motion. The motion passed unanimously (5-0). 11.2. Presentation and Discussion Re: Proposed Ordinance Change. Presenter(s): Stuart Kaufman, Klausner, Kaufman, Jensen & Levinson. Attorney Kaufman presented the draft ordinance which would allow the Board to expand its investment options, as recommended by former Attorney Christiansen. Should the City Commission approve the proposed ordinance, the Board would, using its Investment Consultant, then update its Investment Policy Statement (IPS). The Board would need to receive education on any new asset class in which it chose to invest prior to making such investment. He noted that the proposed ordinance is the same as an ordinance the Commission approved fori the POPP, however the POPP is subject to restrictions in Chapter 185 of Florida Statutes regarding maximum allocations in international investments, while the Plan is not. If the Board approved the proposed ordinance, it would be sent with a statement of no-impact from GRS to the City Commission for 2 readings. The ordinance and no-impact statement would also need to be filed with the State of Florida, Division of Retirement prior to the second reading. Chair Chapdelain, Treasurer Strickland, Attorney Kaufman, and Senior Pension Analyst Ferrer discussed the order of events to involved in an ordinance change involving the IPS. They agreed that after the City Commission approves an ordinance regarding investments, the Board may amend and approve its IPS through thel Investment Consultant; upon the Board's approval of the updated IPS, the Board sends a copy oft the revised IPS to the City Commission as a courtesy, and to the Division of Retirement. The IPS is effective 31 days after iti is approved by the Board. Chair Chapdelain, Secretary Griggs, Attorney Kaufman, and Senior Pension Analyst Ferrer discussed the timing of sending a Board-approved proposed ordinance to the Commission. While there was interest among trustees in presenting a proposed ordinance to the City Commission before any current Commissioners' respective terms expire, the requirement to advertise a proposed ordinance will delay presentation to the City Commission until at least its November 4, 2024, meeting. To Vice Chair Nicholas' question, Attorney Kaufman advised that the proposed ordinance, Section (a)(2)g. "Any investment prohibited by state or federal law," - was stricken as it is also stated in the IPS, and Attorney Kaufman must advise the Board ifi it were to express interest in any such prohibited investment. Trustee Thornburg agreed but noted that if the proposed ordinance mirrored that of the POPP, the Board could reasonably move forward. By consensus, the Board agreed to table this item until the October 14, 2024, meeting. Secretary Griggs asked for as much information as soon as possible to allow for advertising. To Chair Chapdelain's question, Attorney Kaufman advised that, of his approximate 250 clients, roughly 12 are closed plans. 12. OTHER MATTERS: 12.1. Presentation and Discussion Re: Proposed 2025 Board Meeting Dates. Presenter(s): Anthony Ferrer, Senior Pension Analyst. Senior Pension Analyst Ferrer presented the Proposed 2025 Board Meeting Dates, noting that Pension Administration worked with Attorney Kaufman's office to determine the proposed dates. Trustee Thornburg made a motion to accept the Proposed 2025 Board Meeting Dates; Treasurer Strickland seconded the motion. The motion passed unanimously (5-0). 12.2. Presentation and Discussion Re: Asset Allocation as of September 16, 2024. Presenter(s): Anthony Ferrer, Senior Pension Analyst. Senior Pension Analyst Ferrer presented the Asset Allocation for the Board's information, noting it is prepared each month to determine the accounts from which to draw funds to issue the retiree payroll, and that the international allocation is less than 15%. To Chair Chapdelain's question, Senior Pension Analyst Ferrer explained that funds are taken from allocations which exceed their respective target. To Vice Chair Nicholas's question, Senior Pension Analyst Ferrer explained there is an unsatisfied redemption request with UBS which was made in 2022; UBS has no timetable for satisfying the redemption as it is an illiquid investment, however the Plan continues to receive income based on the unredeemed balances invested with its real estate fund managers. 12.3. Approval Re: Administrative Budget Analysis for April 1, 2024, through June 30, 2024. Presenter(s): Anthony Ferrer, Senior Pension Analyst. Senior Pension Analyst Ferrer presented the Administrative Budget for the Board's information, noting some items, such as Accounting and Auditing, are 100% expended due to the timing of the invoice and will have no further expense during the fiscal year. 12.4. Approval Re: Check Register for April 1, 2024, through June 30, 2024. Presenter(s): Anthony Ferrer, Senior Pension Analyst. Senior Pension Analyst Ferrer presented the Check Register for the Board's information as most payments are made by ACH. The Board had no questions. 13. ADJOURN. Chair Chapdelain adjourned the General Employees Pension Plan Board of Trustees meeting at 11:15 a.m. 5A Ong2 Chair Ryan Chapdelain Sefrotary Slayla Griggs Book 1 Page 456 09-30-2024 10:00 a.m.