THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES PENSION PLAN FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015

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1 THE METROPOLITAN ST. LOUIS SEWER DISTRICT FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015

2 Contents Page Independent Auditors Report Management s Discussion And Analysis Financial Statements Statements of Fiduciary Net Position...13 Statements of Changes in Fiduciary Net Position...14 Notes to Financial Statements Required Supplementary Information Under GASB No. 67 Schedule of Changes in Net Pension Liability...30 Schedule of Employer Contributions...31 Actuarial Methods and Assumptions Used...32 Schedule of Annual Weighted Rate of Return on Investments...33 Statistical Section (Unaudited) Performance and Net Position Value...34 Revenues by Source and Total Employer Contributions...35 Expenses by Type and Total Benefit Payments...36 Member Count and Total Benefit Recipients...37 Top Ten Holdings by Investment Manager and Percentage Distribution...38 Schedule of Investment Manager and Advisor Fees...39

3 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT Board of Trustees The Metropolitan St. Louis Sewer District St. Louis, Missouri Report on the Financial Statements We have audited the accompanying financial statements of The Metropolitan St. Louis Sewer District Employees Pension Plan (the Plan), which comprise the statement of fiduciary net position as of December 31, 2016, and the related statements of changes in fiduciary net position for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Page 1

4 Board of Trustees The Metropolitan St. Louis Sewer District Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the fiduciary net position of the Plan as of December 31, 2016, and the changes in fiduciary net position for the year then ended, in accordance with accounting principles generally accepted in the United States of America. Other Matters The financial statements of The Metropolitan St. Louis Sewer District Employees Pension Plan as of December 31, 2015, were audited by predecessor auditors whose report dated August 16, 2016, expressed an unmodified opinion on those financial statements. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 3 through 12 and pension plan schedules on pages 30 through 33 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the basic financial statements. However, we did not audit the information and express no opinion on it. Other Information Our audit was conducted for the purpose of forming an opinion on the Plan s financial statements. The schedules included in the statistical section on pages 34 through 39, are presented for purposes of additional analysis and are not a required part of the financial statements. The schedules included in the statistical section are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedules included in the statistical section are fairly stated, in all material respects, in relation to the financial statements as a whole. CliftonLarsonAllen LLP St. Louis, Missouri August 29, 2017 Page 2

5 MANAGEMENT S DISCUSSION AND ANALYSIS For The Years Ended December 31, 2016 and 2015 As management of The Metropolitan St. Louis Sewer District Employees Pension Plan ( Plan ), we offer readers of the Plan s financial statements this Management s Discussion and Analysis ( MD&A ) of the financial activities of the Plan for the years ended December 31, 2016 and This MD&A is intended to supplement the Plan s financial statements, and we encourage readers to consider the information presented here in conjunction with those statements, which begin on page 13. The Plan is a noncontributory single employer defined benefit plan providing retirement benefits as well as death and disability benefits to all full-time employees of The Metropolitan St. Louis Sewer District ( District ) commencing service prior to January 1, 2011, the date entrance to the plan was frozen. OVERVIEW OF THE FINANCIAL STATEMENTS The following MD&A is intended to serve as an introduction to the Plan s financial statements. The basic financial statements are: 1) Statements of Fiduciary Net Position 2) Statements of Changes in Fiduciary Net Position 3) Notes to Financial Statements This report also contains required supplementary information to the basic financial statements, which provides actuarial information for use in analyzing the status of the Plan, and includes: 1) Schedule of Changes in Net Pension Liability 2) Schedule of Employer Contributions 3) Actuarial Methods and Assumptions Used 4) Schedule of Annual Weighted Rate of Return on Investments Certain revenues, expenses associated with administering the Plan, and other trend data are presented immediately following the required supplementary information in the statistical section of this report. The basic financial statements contained in this report are described below: The Statements of Fiduciary Net Position are a point in time snapshot of account balances at year-end. It reports the assets available for future payments to retirees, and any current liabilities that are owed as of the statement date. The resulting net position value [assets minus liabilities equal net position] represents the value of net position restricted for pension benefits. Page 3

6 Management s Discussion And Analysis (Continued) The Statements of Changes in Fiduciary Net Position display the effect of the Plan s transactions that occurred during the year [additions minus deductions equal net increase (decrease) in net position]. This net increase (decrease) in net position reflects the change in the net position value of the Statements of Fiduciary Net Position from the prior year to the current year. Both statements are in accordance with Governmental Accounting Standards Board ( GASB ) Pronouncements. The Notes to Financial Statements are an integral part of the financial statements and provide additional information that is essential for a comprehensive understanding of the data provided in the financial statements. These notes describe the accounting and administrative policies under which the Plan operates, and provides additional levels of detail for selected financial statement items. See Notes to Financial Statements beginning on page 15 of this report. Because of the long-term nature of a defined benefit pension plan, financial statements alone cannot provide sufficient information to properly reflect the ongoing Plan perspective. Therefore, in addition to the financial statements explained above, this financial report includes additional schedules entitled Required Supplementary Information Under GASB No. 67. The Schedule of Changes in Net Pension Liability (page 30) includes actuarial information about the status of the Plan from an ongoing, long-term perspective and overall net position of the Plan. The total pension liability is actuarially determined. A total pension liability in excess of Plan fiduciary net position indicates that a net pension liability exists. The Schedule of Employer Contributions (page 31) presents historical trend information regarding the value of total annual contributions actuarially determined to be paid by the District and the actual performance of the District in meeting this requirement. Actuarial Methods and Assumptions Used and the Schedule of Annual Weighted Rate of Return on Investments (pages 32 and 33) provide information regarding assumptions and interest rates used in the actuarial calculations. FINANCIAL HIGHLIGHTS 2016 Net position restricted for pension benefits totaled $251,010,031 as of December 31, 2016 for an increase of $6,797,792 or 2.8% as compared with December 31, This increase in net position primarily resulted from investment gains during the year offset by a 5.4% increase in benefits paid to retirees and beneficiaries as employer contributions remained essentially flat compared to the prior year. Page 4

7 Management s Discussion And Analysis (Continued) The Plan s funding objective is to meet long-term benefit obligations to the extent possible. As of December 31, 2016, the date of the latest actuarial valuation, the funded ratio of the Plan, defined as the Plan s fiduciary net position as a percentage of the actuarially determined total pension liability, was 78.92%. In general, this means that for every dollar of pension benefits due, the Plan has approximately $0.79 of net position available for payment. The Plan s funding ratio decreased by 3.36 percentage points as compared with the funding ratio for December 31, The decrease in the funding ratio is due to Plan performance below the assumed rate of return and an actuarial assumption change. For the December 31, 2016 actuarial valuation, the RP-2014 Mortality Tables were utilized while in prior years the RP Mortality Tables were assumed. As a result of this change and the lower return on the actuarial value of assets, the recommended contribution for the calendar year ending December 31, 2017 is increasing to $12,328,093 or 21.5% over the recommended contribution for the prior year of $10,145,562. Additions to the Plan s net position (page 14) increased from $8,261,503 for 2015 to $22,152,288 for 2016, an increase of $13,890,785 or 168.1%, due primarily to an increase of $14,776,074 in the appreciation of the fair value of the investments and an increase of $88,544 in the employer contributions offset by a reduction of $1,034,603 in interest and dividend income. Benefits paid to retirees and beneficiaries (deductions from the Plan s net position, page 14) increased from $14,474,566 for 2015 to $15,260,904 for 2016, an increase of $786,338 or 5.4%. Administrative expenses (deductions from the Plan s net position, page 14) increased from $90,519 for 2015 to $93,592 for 2016, an increase of $3,073 or 3.4%. FINANCIAL HIGHLIGHTS 2015 Net position restricted for pension benefits totaled $244,212,239 as of December 31, 2015 for a decrease of $6,303,582 or 2.5% as compared with December 31, This decrease consists of a net investment loss of $1,809,875 and Plan payments and expenses net of contributions of $4,493,707. The Plan s funding objective is to meet long-term benefit obligations to the extent possible. As of December 31, 2015, the date of the 2015 actuarial valuation, the funded ratio of the Plan, defined as the Plan s fiduciary net position as a percentage of the actuarially determined total pension liability, was 82.28%. In general, this means that for every dollar of pension benefits due, the Plan has approximately $0.82 of net position available for payment. The Plan s funding ratio decreased by 3.98 percentage points as compared with the funding ratio for December 31, The decrease in the funding ratio is primarily attributed to Plan performance below the assumed rate of return resulting in a decrease in the Plan s fiduciary net position. Page 5

8 Management s Discussion And Analysis (Continued) Additions to the Plan s net position (page 14) decreased from $17,749,266 for 2014 to $8,261,503 for 2015, a decrease of $9,487,763 or 53.5% due primarily to a reduction of $7,307,622 in the appreciation of the fair value of the investments, a reduction of $1,555,692 in interest and dividend income and a $611,468 reduction in the employer contributions. Benefits paid to retirees and beneficiaries (deductions from the Plan s net position, page 14) increased from $13,394,219 for 2014 to $14,474,566 for 2015, an increase of $1,080,347 or 8.1%. Administrative expenses (deductions from the Plan s net position, page 14) increased from $86,504 for 2014 to $90,519 for 2015, an increase of $4,015 or 4.6%. ANALYSIS OF FINANCIAL ACTIVITIES The Plan s funding objective is to meet long-term benefit obligations through investment income and contributions. Accordingly, the receipt of income from investments and employer contributions provide the reserves needed to finance future retirement benefits. Relative to the Public Plans peer group for 2016 and 2015, the Plan was up by 5.1% and down by 0.7%, respectively, which ranked in the 92 nd and 73 rd percentile for 2016 and 2015, respectively. Net position restricted for pension benefits increased by $6,797,792 in 2016 and decreased by $6,303,582 in This net position is used to meet ongoing benefit obligation to the Plan s participants and their beneficiaries. The Metropolitan St. Louis Sewer District s ( District ) contributions into the Plan, as determined by the Plan s actuary, increased slightly for 2016 compared to The primary reason for the increase was the return on the actuarial value of assets below the assumed rate of 7.0%. Overall, the Plan remains adequately funded and any cumulative difference between actuarial liabilities and assets is being amortized and funded over an appropriate period. It is important to remember that the Plan s funding is based on a long time horizon, where temporary ups and downs in the market are expected. The more critical factor is that the Plan be able to meet an expected earnings yield of 7.0% on average. Both the Plan s investment performance and the rate of return on actuarial value have averaged 2.4% over the last three years, which is below the actuarially assumed investment rate of 7.0%. Since this year s performance falls below the actuarially assumed investment rate, it could result in additional contributions in upcoming years. Page 6

9 Management s Discussion And Analysis (Continued) Based upon the Plan s actuarial computations under Statement No. 67 of the Governmental Accounting Standards Board, the actuarially determined total pension liability increased from $296,812,242 as of December 31, 2015 to $318,049,216 as of December 31, To calculate the net pension liability, the Plan s fiduciary net position is subtracted from the total pension liability. Reducing the total pension liabilities by the $251,010,031 and $244,212,239 Plan fiduciary net positions as of December 31, 2016 and 2015, respectively, results in net pension liabilities of $67,039,185 and $52,600,003 as of December 31, 2016 and 2015, respectively. The existence of a net pension liability means that additional future funding may be needed to reduce this liability. FINANCIAL ANALYSIS The condensed Statements of Fiduciary Net Position as compared to prior years are as follows: December 31, 2016 Change Amount $ ASSETS Investments at Fair Value $ 250,913,578 $ 244,122,518 $ 6,791,060 Other Assets 245, ,367 3,536 Total Assets 251,159, ,364,885 6,794,596 LIABILITIES 149, ,646 (3,196) NET POSITION RESTRICTED FOR PENSION BENEFITS $ 251,010,031 $ 244,212,239 $ 6,797,792 December 31, 2015 Change Amount $ ASSETS Investments at Fair Value $ 244,122,518 $ 250,217,335 $ (6,094,817) Other Assets 242, ,493 (226,126) Total Assets 244,364, ,685,828 (6,320,943) LIABILITIES 152, ,007 (17,361) NET POSITION RESTRICTED FOR PENSION BENEFITS $ 244,212,239 $ 250,515,821 $ (6,303,582) Page 7

10 Management s Discussion And Analysis (Continued) As previously noted, net position viewed over time may serve as a useful indicator of the Plan s financial position. At the close of calendar years 2016 and 2015, the assets of the Plan exceeded its liabilities by $251,010,031 and $244,212,239, respectively, in net position restricted for pension benefits. The net position is available to meet the Plan s ongoing obligation to the Plan s participants and their beneficiaries. Despite variations in the markets, management and the Plan s actuary concur that the Plan remains in a sound financial position to meet its obligations to the Plan s participants and their beneficiaries. The current financial position is the result of a successful investment program and prudent management practices that have been in place for many years. The condensed Statements of Changes in Fiduciary Net Position as compared to prior years are as follows: For the Years Ended December 31, 2016 Change Amount $ ADDITIONS Net Investment Income (Loss) $ 11,992,366 $ (1,809,875) $ 13,802,241 Employer Contributions 10,159,922 10,071,378 88,544 Total Additions 22,152,288 8,261,503 13,890,785 DEDUCTIONS Benefits Paid to Retirees and Beneficiaries 15,260,904 14,474, ,338 Administrative Expenses 93,592 90,519 3,073 Total Deductions 15,354,496 14,565, ,411 NET INCREASE (DECREASE) 6,797,792 (6,303,582) 13,101,374 NET POSITION RESTRICTED FOR PENSION BENEFITS, January 1 244,212, ,515,821 (6,303,582) NET POSITION RESTRICTED FOR PENSION BENEFITS, December 31 $ 251,010,031 $ 244,212,239 $ 6,797,792 Page 8

11 Management s Discussion And Analysis (Continued) For the Years Ended December 31, 2015 Change Amount $ ADDITIONS Net Investment Income (Loss) $ (1,809,875) $ 7,066,420 $ (8,876,295) Employer Contributions 10,071,378 10,682,846 (611,468) Total Additions 8,261,503 17,749,266 (9,487,763) DEDUCTIONS Benefits Paid to Retirees and Beneficiaries 14,474,566 13,394,219 1,080,347 Administrative Expenses 90,519 86,504 4,015 Total Deductions 14,565,085 13,480,723 1,084,362 NET INCREASE (DECREASE) (6,303,582) 4,268,543 (10,572,125) NET POSITION RESTRICTED FOR PENSION BENEFITS, January 1 250,515, ,247,278 4,268,543 NET POSITION RESTRICTED FOR PENSION BENEFITS, December 31 $ 244,212,239 $ 250,515,821 $ (6,303,582) As noted above, the funds needed to finance retirement benefits are accumulated through the collection of employer contributions and through earnings on investments (net of investment expense). Total additions for the years ended December 31, 2016 and 2015, total $22,152,288 and $8,261,503, respectively. Additions to Plan assets for 2016 increased from 2015 due to the increase in the fair values of the investments held by the Plan. The Plan was created to provide retirement, survivor, and disability benefits to qualified members and their beneficiaries. The cost of such programs includes recurring benefit payments as designated by the Plan and the cost of administering the Plan. As noted above, deductions for the year ended December 31, 2016 totaled $15,354,496, an increase of 5.4% over The increase in benefits paid resulted primarily from an increase in the number of retirees receiving benefits by 26 members or a 3.8% increase. Additions to Plan net position of $22,152,288 exceeded deductions from Plan net position of $15,354,496 for the year ended December 31, The Plan has consistently managed within its administrative expense budget, with no material variances between planned and actual expenditures. Page 9

12 Management s Discussion And Analysis (Continued) INVESTMENT PERFORMANCE The following are a few characteristics and achievements for the Plan for the year ended December 31, 2016: The Plan ended the year with a net position of $251,010,031. The Plan s performance for the year was 5.1% compared to the policy benchmark index of 6.6%, and the average five-year return was 6.0% compared to the policy benchmark index of 6.4%. The actual asset allocation is as follows: Actual Allowable December 31, Asset Class Target Range Equities: Domestic Large Cap Stocks 20.0 % % 20.7 % 21.1 % Domestic Small-Mid Cap Stocks International Developed Markets Stocks International Emerging Markets Stocks Fixed Income: Domestic Core Bonds Domestic Core "Plus" Bonds Global Bonds Emerging Fixed Income 0-7 Opportunistic Credit 0-5 High Yield Bonds 0-7 Other: Real Estate Global Tactical 0-12 Market Neutral 0-7 Real Assets Absolute Return 0-7 Hedge Funds Cash Equivalents Page 10

13 Management s Discussion And Analysis (Continued) All asset classes have been rebalanced when needed during the year in order to maintain a weighting consistent with the strategic allocation ranges. Resolution 2986, effective August 2011, authorized initial proposed targets and ranges. Resolution 3318, effective November 2016, authorized new proposed targets and ranges that were implemented in 2016 and are reflected above. Resolution 3226 was adopted July 2015 and resolved that the codified document entitled Metropolitan St. Louis Sewer District, Statement of Investment Policy, Objectives and Operating Guidelines including all appendices represents the Investment Policy, Objectives and Operating Guidelines of the Employees Pension Plan. Ordinance 13719, effective September 2013, authorized Pavilion to act as the Plan s investment consultant for the District and provide investment advisory services. Pavilion s contract to act as the Plan s investment consultant for the District and to provide investment advisory services was extended with Resolutions 3170, 3234 and 3298, which authorized the exercise of one-year renewal options. Overall asset class allocations changed moderately. Annual changes in asset allocation are the result of relative asset class performance, redemptions from investments to pay benefits and Plan expenses, contributions to new or existing investments, and regular rebalancing transactions. The largest changes in sub-classes were due to the liquidation of the Real Assets investment. Those funds were held in cash at year-end in preparation for additional funding into the Real Estate sub-class. While some of the sub-classes were over target by varying percentage points, they were all still within the target ranges. Resolution 2987, effective August 2011, authorized specific investment managers to act on behalf of the Plan to actively manage specific investment types. Resolution 3068, effective January 2013, amended the master list of authorized investment managers which was further amended for individual investment managers by Resolutions 3138 (February 2014), 3183 (December 2014), 3209 (May 2015), 3221 (June 2015), 3308 (October 2016) and 3319 and 3320 (both in November 2016). FIDUCIARY RESPONSIBILITIES The Board of Trustees and senior management are fiduciaries of the Plan and Trust. Fiduciaries are charged with the responsibility of assuring that the assets of the Plan are used exclusively for the benefit of the Plan s participants and their beneficiaries. Page 11

14 Management s Discussion And Analysis (Continued) REQUEST FOR INFORMATION This financial report is designed to provide the Board of Trustees, our members, ratepayers, investment managers, and creditors with an overview of the Plan s finances and accountability for the money received. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Tim Snoke, Secretary-Treasurer The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO tsnoke@stlmsd.com Page 12

15 STATEMENTS OF FIDUCIARY NET POSITION December 31, ASSETS Investments at Fair Value: Mutual Funds $ 85,978,099 $ 81,504,039 Collective Investment Funds 85,448,895 92,901,411 Corporate Obligations 21,073,241 21,641,376 Domestic Common Stocks 17,264,512 16,364,200 Real Estate Investments 16,029,927 15,125,222 US Treasury and Agency Obligations 12,165,384 12,267,405 Money Market Funds 11,399,948 2,603,081 Municipal Obligations 872,406 1,044,415 Foreign Stocks 681, ,369 Total Investments 250,913, ,122,518 Receivables Interest and Dividends Receivable 245, ,367 Total Receivables 245, ,367 Total Assets 251,159, ,364,885 LIABILITIES Accrued Expenses 149, ,646 Total Liabilities 149, ,646 NET POSITION RESTRICTED FOR PENSION BENEFITS $ 251,010,031 $ 244,212,239 See the accompanying Notes to Financial Statements. Page 13

16 STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION For the Years Ended December 31, ADDITIONS TO NET POSITION ATTRIBUTED TO: Investment Income: Net Appreciation (Depreciation) in Fair Value of Investments $ 9,913,748 $ (4,862,326) Interest and Dividends 2,894,259 3,928,862 Total Investment Income (Loss) 12,808,007 (933,464) Less - Investment Managers' and Advisors' Fees 815, ,411 Net Investment Income (Loss) 11,992,366 (1,809,875) Employer Contributions 10,159,922 10,071,378 Total Additions 22,152,288 8,261,503 DEDUCTIONS FROM NET POSITION ATTRIBUTED TO: Benefits Paid to Retirees and Beneficiaries 15,260,904 14,474,566 Administrative Expenses 93,592 90,519 Total Deductions 15,354,496 14,565,085 NET INCREASE (DECREASE) 6,797,792 (6,303,582) NET POSITION RESTRICTED FOR PENSION BENEFITS, January 1 244,212, ,515,821 NET POSITION RESTRICTED FOR PENSION BENEFITS, December 31 $ 251,010,031 $ 244,212,239 See the accompanying Notes to Financial Statements. Page 14

17 NOTES TO FINANCIAL STATEMENTS December 31, 2016 And Summary of Significant Accounting Policies The significant accounting policies applied by the Plan in the preparation of the accompanying financial statements are summarized as follows: Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting and adhere to U.S. Generally Accepted Accounting Principles as issued by the Governmental Accounting Standards Board ( GASB ). GASB Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25 ( GASB No. 67 ), was adopted during the year ended December 31, GASB No. 67 addresses the accounting and financial reporting requirements for pension plans. The requirements for GASB No. 67 require changes in presentation of the financial statements, notes to the financial statements and required supplementary information. Significant changes include an actuarial calculation of total and net pension liability/asset. It also includes comprehensive footnote disclosures regarding the total pension liability, the sensitivity of the net pension liability/asset to the discount rate, and increased investment activity disclosures. The implementation of GASB No. 67 did not significantly impact the accounting for investment balances. The total pension liability, determined in accordance with GASB No. 67, is presented in Note 6, Net Pension Liability of the District, and in the Required Supplementary Information. Estimates and Assumptions The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management and the Plan s actuary to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions to and deductions from net position during the reporting period. Actual results could differ from those estimates. Investment Valuation The Plan s investment assets, for which U.S. Bank, N.A., acts as trustee ( Trustee ), are reported at fair value as determined and certified by the Trustee. Investments traded on a national exchange are valued at reported sales prices. Investments that do not have an established market are reported at estimated fair value. The money market fund is reported at amortized cost, which approximates fair value. Payment of Benefits Benefits are recorded when paid. Page 15

18 Notes To Financial Statements (Continued) Recently Issued Accounting Standards During calendar year 2016, the Plan implemented Governmental Accounting Standards Board ( GASB ) Statement No. 72, Fair Value Measurement and Application. This Statement supersedes selected paragraphs and footnotes and amends selected paragraphs in various Statements of the Governmental Accounting Standards Board. The primary objective of this Statement is to improve financial reporting by state and local governments by clarifying the definition of fair value for financial reporting purposes, establishing general principles for measuring fair value, providing additional fair value application guidance, and enhancing disclosures about fair value measurements. The disclosures required by this Statement are presented in Footnote 4, Fair Value Measurement and Application. Subsequent Events Management has evaluated subsequent events through August 29, 2017, the date the financial statements were available for issue. 2. Description of Plan The following brief description of The Metropolitan St. Louis Sewer District Employees Pension Plan ( Plan ) is provided for general information purposes only. Members should refer to the Plan ordinance for more complete information. General The Plan is a noncontributory single employer defined benefit plan providing retirement benefits as well as death and disability benefits. As a condition of employment, all full-time employees of The Metropolitan St. Louis Sewer District ( District ) commencing service prior to January 1, 2011, were eligible to be covered by the Plan. As of January 1, 2011, the Plan was frozen to new employees. Instead, new employees of the District may participate in The Metropolitan St. Louis Sewer District Defined Contribution Plan and/or The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust. Current employees with less than ten years of service on January 1, 2011 could also voluntarily elect to transfer from the Plan and enter The Metropolitan St. Louis Sewer District Defined Contribution Plan. Page 16

19 Notes To Financial Statements (Continued) Membership in the Plan consists of: For the Years Ended December 31, Increase (Decrease) Active plan members (39) Retirees and beneficiaries currently receiving benefits Terminated members entitled to receive benefits (1) Total 1,517 1,531 (14) The District s Board of Trustees, primarily to improve benefits to members, amends the Plan, established on November 1, A Pension Committee consisting of two members of the District s Board of Trustees, two elected employee members and four members of the District s management staff administer the Plan, and thus the Pension Committee is also known as the Plan Administrator. A committee of the District s Board of Trustees, with the aid of an investment advisor, reviews and evaluates the Plan s investments and the related rates of return on a periodic basis. The Plan is exempt from the requirements of the Employee Retirement Income Security Act of 1974 ( Act ) and, as such, is not subject to the Act s reporting requirements. Benefit Payments and Vesting All benefits vest after five years of credited service. Members retiring at or after age 65 with five or more years credited service are entitled to a pension benefit. The Plan permits early retirement with reduced benefits beginning at age 55 if the member has completed five years of employment. Ordinance No provides for unreduced retirement benefits to any member whose combined age and term of service is equal to 75. Effective January 1, 1999, Ordinance No amended the Plan benefits formula. The annual benefit payable became 1.7% of final average earnings plus 0.4% of final average earnings that are in excess of covered earnings multiplied by the period of years and months of credited service not to exceed 35 years. Also, the annual reduction for early retirement was revised from 5% to 2% prior to age 60 and from 2.5% to 1% after age 60. Ordinance No , effective January 1, 2000, amended the Plan benefits formula to 1.45% of final average earnings plus 0.4% of final average earnings that are in excess of covered earnings multiplied by the period of years and months of credited service not to exceed 35 years. This ordinance also provided for a survivor s benefit for vested members who have not yet reached their normal retirement date or earned 75 points. The survivor s benefit is the greater of (a) 50% of the member s monthly-accrued retirement benefit as of the date of death, or (b) 15% of the monthly earnings and the member s monthly-accrued retirement benefit actuarially reduced under the 100% joint and survivor annuity option. Members are Page 17

20 Notes To Financial Statements (Continued) also able to select a Contingent Annuity Pop-Up option. This option allows the member to elect a survivor annuity for life, with the provision that if the beneficiary should predecease the member, the benefit shall increase to the amount payable had the survivor option not been selected. Ordinance Number 10872, effective January 1, 2001, further amended the Plan to extend the cost of living increases for retirees from a maximum of 30% to 45% of the original benefit. Effective August 1, 2004, Ordinance No amended the Plan to change the benefit formula to 1.7% of final average earnings plus 0.4% of final average earnings that are in excess of covered earnings multiplied by the period of years and months of credited service not to exceed 35 years without including accrued sick leave. An employee retiring from the District with five or more years of service will be compensated for any unused accrued sick leave at the rate of 1.25% for each year of District service multiplied by the unused accrued sick leave remaining at the employee s current rate of pay. Also, the Plan was amended to provide the retiring member with a 10% partial lump sum payment option. The balance of the distribution will be paid in accordance with any one of the other payment options available under the Plan. Effective August 27, 2011, Ordinance No amended the Plan to include the following: Upon termination or complete discontinuance of contributions under the Plan, the rights of all Members to benefits accrued to the date of such termination or discontinuance shall be non-forfeitable, to the extent then funded. The retirement benefit payable to a member who retires after the normal retirement date is the greater of (a) the benefit that would have been payable on the normal retirement date plus a special annual retirement benefit provided by the accumulated value, at 4% per annum interest, of the monthly benefit that would have been received prior to the postponed retirement date, or (b) the benefit determined as of the postponed retirement date under the normal formula. Amounts in participants accounts are distributed upon retirement, death, disability, or termination of employment. The normal form of retirement benefit is either a lump sum payment or equal monthly installments. 3. Cash and Investments Categories of Asset Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Plan s investment in a single issuer. Pursuant to Resolution 3318, the Plan is authorized to invest in: Page 18

21 Notes To Financial Statements (Continued) Equity Investments: Common stocks of corporations, mutual funds, or co-mingled equity funds (Domestic and International, both within defined limits); however, the investments in equities should not exceed 56% of total investments. Fixed Income Investments: U.S. government and agency securities, corporate bonds, debentures, notes, or other evidence of indebtedness assumed or guaranteed by corporations (Domestic and International, both within defined limits); however, the investment in fixed income should not exceed 73% of total investments. Short-term Securities: Commercial paper, treasury bills, certificates of deposit, and/or money market funds. Real Estate Investments: Real estate investment trusts and multi-employer property trusts; however, the investment in real estate should not exceed 10% of total investments. Hedge Funds, Global Tactical, Real Assets, Market Neutral, and Absolute Return Investments: These investment strategies help diversify the investment portfolio. These investments should not exceed 20%, 12%, 10%, 7% and 7% of total investments, respectively. The fair value of investments managed consisted of the following: As of December 31, Investments, at Fair Value Mutual Funds $ 85,978,099 $ 81,504,039 Collective Investment Funds 85,448,895 92,901,411 Corporate Obligations 21,073,241 21,641,376 Domestic Common Stocks 17,264,512 16,364,200 Real Estate Investments 16,029,927 15,125,222 US Treasury and Agency Obligations 12,165,384 12,267,405 Money Market Funds 11,399,948 2,603,081 Municipal Obligations 872,406 1,044,415 Foreign Stocks 681, ,369 Total Investments $ 250,913,578 $ 244,122,518 Page 19

22 Notes To Financial Statements (Continued) Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Plan does not have a formal investment policy that limits investment maturities as a means of managing its exposure to interest rates. The Plan had the following debt securities and maturities: As of December 31, 2016 Weighted Average Maturity Investment Type Fair Value (in Years) Corporate Obligations $ 21,073, U.S. Treasury and Agency Obligations 12,165, Municipal Obligations 872, Total $ 34,111,031 Portfolio Weighted Average Maturity in Years 4.73 As of December 31, 2015 Weighted Average Maturity Investment Type Fair Value (in Years) Corporate Obligations $ 21,641, U.S. Treasury and Agency Obligations 12,267, Municipal Obligations 1,044, Total $ 34,953,196 Portfolio Weighted Average Maturity in Years 4.55 The Plan will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates by: Structuring the investment portfolio so that securities mature to meet cash requirements for benefit payments, thereby avoiding the need to sell securities on the open market prior to maturity; and Page 20

23 Notes To Financial Statements (Continued) Monitoring fixed income investment managers performances to be sure the fixed income portion of the investment portfolio is managed to predetermined indexes. Credit Risk Investment credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its obligations. The Plan will minimize credit risk by: Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisors with which the Plan will do business; and Diversifying the portfolio so that potential losses on individual securities will be minimized. The following tables provide information on the credit ratings associated with the Plan s investments in debt securities: Credit Rating by Investment as of December 31, 2016 U.S. Treasury S & P & Agency Municipal Corporate Rating Obligations Obligations Obligations Total AAA $ $ $ 4,023,496 $ 4,023,496 AA 12,165, ,724 1,647,962 14,387,070 A 4,771,139 4,771,139 BBB 298,682 8,976,980 9,275,662 Not Rated 1,653,664 1,653,664 Total $ 12,165,384 $ 872,406 $ 21,073,241 $ 34,111,031 Page 21

24 Notes To Financial Statements (Continued) Credit Rating by Investment as of December 31, 2015 U.S. Treasury S & P & Agency Municipal Corporate Rating Obligations Obligations Obligations Total AAA $ $ $ 3,050,011 $ 3,050,011 AA 12,267, ,154 3,468,460 16,414,019 A 366,261 6,001,510 6,367,771 BBB 8,200,975 8,200,975 Not Rated 920, ,420 Total $ 12,267,405 $ 1,044,415 $ 21,641,376 $ 34,953,196 Investments Greater Than 5% Of Net Position Restricted For Pension Benefits Investments that exceed 5% or more of net position restricted for pension benefits at December 31, 2016 or 2015 are as follows: 4. Fair Value Measurement and Application December 31, Prudential Core Plus Bond Fund $ 29,118,894 $ 29,227,764 Morgan Stanley International Equity Fund I 26,020,030 25,530,686 Brandywine Global Bond Opportunistic Fixed Income 21,990,783 21,586,226 Lighthouse Global Long/Short Fund Limited 18,155,711 18,117,254 Vanguard Institutional Index Fund 16,867,477 15,602,554 Entrust Capital Diversified Fund 16,183,507 16,363,940 UBS Trumbull Property Fund 16,029,927 15,125,222 Vanguard Windsor II 12,835,945 12,791,751 T. Rowe Price Inst. Large-Cap Core Growth * 12,600,942 * Denotes less than 5%. The Plan categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The Plan had the following recurring fair value measurements of invested assets as of December 31, 2016 and December 31, 2015: Page 22

25 Notes To Financial Statements (Continued) Investments Measured at Fair Value Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Investments by Fair Value Level 12/31/2016 (Level 1) (Level 2) (Level 3) Debt Securities: Corporate Obligations $ 21,073,241 $ $ 21,073,241 $ US Treasury Notes and Bonds 10,511,013 10,511,013 US Government Agency Obligations 1,654,371 1,654,371 Municipal Obligations 872, ,406 Core Plus Bond Commingled Trust Fund 29,118,894 29,118,894 Global Fixed Income Collective Trust Fund 21,990,783 21,990,783 Total Debt Securities 85,220,708 10,511,013 74,709,695 Equity Securities: Domestic Equities 17,264,512 17,264,512 International Equities 681, ,166 Emerging Markets Fund 9,876,496 9,876,496 International Equity Fund 26,020,030 26,020,030 Small Cap Growth Fund 8,131,044 8,131, Index Fund 16,867,477 16,867,477 Large Cap Core Growth Fund 12,247,106 12,247,106 Large Cap Value Stock Fund 12,835,945 12,835,945 Total Equity Securities 103,923,776 17,945,678 85,978,098 Total Investments by Fair Value Level 189,144,484 $ 28,456,691 $ 160,687,793 $ Unfunded Redemption Redemption Investments Measured at the Net Asset Value (NAV) Commitments Frequency Notice Period Real Estate Funds (1) 16,029,927 $ 7,200,000 Quarterly 60 Days Global Long/Short Hedge Fund of Fund (2) 18,155,711 Monthly/Quarterly 90 Days/60 Days Diversified Hedge Fund of Fund (3) 16,183,508 Quarterly 90 Days Total Investments Measured at the Net Asset Value 50,369,146 Money Market at Amortized Cost 11,399,948 Total Investments at Fair Value $ 250,913,578 Page 23

26 Notes To Financial Statements (Continued) Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Investments by Fair Value Level 12/31/2015 (Level 1) (Level 2) (Level 3) Debt Securities: Corporate Obligations $ 21,641,376 $ $ 21,641,376 $ US Treasury Notes and Bonds 9,191,077 9,191,077 US Government Agency Obligations 3,076,328 3,076,328 Municipal Obligations 1,044,415 1,044,415 Core Plus Bond Commingled Trust Fund 29,227,764 29,227,764 Global Fixed Income Collective Trust Fund 21,586,226 21,586,226 Total Debt Securities 85,767,186 9,191,077 76,576,109 Equity Securities: Domestic Equities 16,364,200 16,364,200 International Equities 671, ,369 Emerging Markets Fund 7,495,925 7,495,925 International Equity Fund 25,530,686 25,530,686 Small Cap Growth Fund 7,482,180 7,482, Index Fund 15,602,554 15,602,554 Large Cap Core Growth Fund 12,600,942 12,600,942 Large Cap Value Stock Fund 12,791,751 12,791,751 Total Equity Securities 98,539,607 17,035,569 81,504,038 Total Investments by Fair Value Level 184,306,793 $ 26,226,646 $ 158,080,147 $ Unfunded Redemption Redemption Investments Measured at the Net Asset Value (NAV) Commitments Frequency Notice Period Real Estate Funds (1) 15,125,222 $ Quarterly 60 Days Global Long/Short Hedge Fund of Fund (2) 18,117,254 Monthly/Quarterly 90 Days/60 Days Diversified Hedge Fund of Fund (3) 16,363,942 Quarterly 90 Days Diversified Inflation Hedge (4) 7,606,226 Monthly 10 Days Total Investments Measured at the Net Asset Value 57,212,644 Money Market at Amortized Cost 2,603,081 Total Investments at Fair Value $ 244,122,518 (1) Real Estate Funds - The portfolio assets in this investment consist primarily of high-quality real estate investments located in major markets throughout the U.S. and are diversified by property type, geographic region and economic sector. The majority of the investments are stable, primarily income-oriented properties. The fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the investments. Distributions from dispositions are reinvested as the underlying investments are liquidated. (2) Global Long/Short Hedge Fund of Fund - Multi-manager fund of funds that invests principally in global equity markets, combining long investments with short sales in the Page 24

27 Notes To Financial Statements (Continued) pursuit of opportunities in rising or declining markets. The fund of fund manager has the ability to employ hedge fund managers that employ a variety of strategies within the long/short strategy. The fair values of the investments in this type have been determined using the NAV per share of the investments. Redemptions of greater than 90% of the shareholder's shares are subject to an estimated 10% holdback to be paid promptly after the completion of the Fund's year-end audit. (3) Diversified Hedge Fund of Fund - Seeks return, long-term capital growth and diversification through a combination of Managers trading a range of strategies, including, but not limited to, hedging, distressed securities, arbitrage and special situations. The fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the investments. Shareholders shall have the right to redeem Shares having a value of up to a maximum of 50% of the Net Asset Value of their shares, as of the close of business on the last business day of any calendar quarter (the Redemption Date ). Remaining shares shall be redeemed on the next quarterly Redemption Date. Redemptions of greater than 90% of the shareholder's shares are subject to an estimated 10% holdback to be paid generally no later than 30 days after the completion of the Fund's year-end audit. (4) Diversified Inflation Hedge - Seeks to provide strong relative performance versus broad equity and fixed income markets during rising inflation environments. The Portfolio invests in assets with linkages to general inflation and in sectors where supply and demand dynamics are expected to lead to localized inflation pressures. The fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the investments. Redemptions of any number of Units from the Fund pursuant to notice received by the Trustee at least ten (10) business days prior to such Valuation Date. 5. Contributions Required and Contributions Made Ordinances establishing the Plan provide for actuarially determined annual contributions by the District that are sufficient to pay benefits when due. The Entry Age Normal funding method is used to determine contributions. Contributions of $10,145,562 and $10,059,004, excluding certain professional fees paid by the District, were made to the Plan in 2016 and 2015, respectively. These contributions were made in accordance with actuarially determined contribution recommendations based on actuarial valuations performed at December 31, 2015 and 2014, respectively, and consisted of: Page 25

28 Notes To Financial Statements (Continued) December 31, Normal Cost $ 5,106,625 $ 5,253,091 Amortization of the Unfunded Actuarial Accrued Liability 4,375,209 4,147,847 Investment Rate of Return Factor of 7.0% 663, ,066 Current Year Contribution Due from the District as Calculated by the Plan's Actuary $ 10,145,562 $ 10,059,004 Certain professional fees, included in administrative expenses, are paid by the District and are recognized as contributions to the Plan and totaled $14,360 and $12,374 for the years ended December 31, 2016 and 2015, respectively. The District provides office space, utilities, and other services to the Plan at no cost. Other costs of administering the Plan are financed from Plan net position. 6. Net Pension Liability of the District During the year ended December 31, 2014, the District implemented GASB Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25. The schedule of net pension liability pursuant to the provisions of GASB Statement No. 67 as of December 31, 2016 and December 31, 2015 is as follows: Net Pension Liability December 31, Total Pension Liability $ 318,049,216 $ 296,812,242 Plan Fiduciary Net Position 251,010, ,212,239 Net Pension Liability $ 67,039,185 $ 52,600,003 Fiduciary Net Position as a Percentage of Total Pension Liability 78.92% 82.28% Covered Payroll $ 42,054,815 $ 43,344,502 Net Pension Liability as a Percentage of Covered Payroll % % Actuarial Assumptions: The total pension liability was determined by an actuarial valuation as of the measurement date (December 31), calculated based on the discount rate and actuarial assumptions below for December 31, 2016 and December 31, 2015: Page 26

29 Notes To Financial Statements (Continued) December 31, Inflation Rate 2.50% 2.50% Projected Salary Increases 4.25% 4.25% Investment Rate of Return 7.00% 7.00% For the December 31, 2016 valuation, mortality rates were based on the RP-2014 Mortality for Employees and Healthy Annuitants and the RP-2014 Disabled Mortality. For the December 31, 2015 valuation, mortality rates were based on the RP-2000 Mortality for Employees and Healthy Annuitants and the RP-2000 Disabled Mortality. Discount Rate December 31, Discount Rate 7.00% 7.00% Long-Term Expected Rate of Return, Net of Investment Expense 7.00% 7.00% Municipal Bond Rate N/A N/A The plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the discount rate for calculating the total pension liability is equal to the long-term expected rate of return. Long-Term Expected Rate of Return The long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The capital market assumptions as of December 31, 2016 are as follows: Long-Term Expected Arithmetic Target Real Rate Asset Class Allocation of Return Large Cap US Equity 20.0% 5.1% Small Cap US Equity 6.0% 6.3% Developed International Equity 10.0% 5.5% Emerging Market Equity 4.0% 7.0% Domestic Core Plus Fixed Income 26.0% 1.0% Global Fixed Income 9.0% 0.7% Hedge Funds 15.0% 2.8% Real Estate 10.0% 4.3% Assumed Inflation - Mean 2.5% The long-term expected rate of return is assumed to be 7.0%. Page 27

30 Notes To Financial Statements (Continued) Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the Net Pension Liability of the District, calculated using the discount rate of 7.00%, as well as what the District's Net Pension Liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.00%) or 1 percentage point higher (8.00%) than the current rate. 1% Current 1% Decrease Discount Rate Increase 6.00% 7.00% 8.00% Total Pension Liability $ 354,929,286 $ 318,049,216 $ 286,796,023 Plan Fiduciary Net Position 251,010, ,010, ,010,031 Net Pension Liability 103,919,255 67,039,185 35,785,992 Rate of Return For the years ended December 31, 2016 and 2015, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 4.95% and -0.76%, respectively. The money-weighted rate of return considers the changing amounts actually invested during a period and weights the amount of pension plan investments by the proportion of time they are available to earn a return during that period. External cash flows are determined on a monthly basis and are assumed to occur at the beginning of each month. External cash inflows are netted with external cash outflows, resulting in a net external cash flow in each month. The money-weighted rate of return is calculated net of investment expenses. 7. Risk Management The Plan is exposed to various risks of loss related to natural disasters, errors and omissions, loss of assets, torts, etc. The Plan has chosen to cover such losses through the purchase of commercial insurance. There has been no material insurance claim filed or paid during the past three fiscal years. 8. Risks and Uncertainties The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the amounts reported in the Statements of Fiduciary Net Position. Page 28

31 Notes To Financial Statements (Continued) Actuarial present value of accumulated Plan benefits are reported based on certain assumptions pertaining to interest rates, inflation rates, and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimations and assumptions process, it is at least reasonably possible that changes in these estimates and assumptions in the near term would be material to the financial statements. 9. Tax Status The plan received a favorable determination letter from the Internal Revenue Service on September 10, 2014, indicating the Plan and its underlying trust are qualified under Section 414(d) of the Internal Revenue Code. The Plan has not been amended since receiving the determination letter. Page 29

32 REQUIRED SUPPLEMENTARY INFORMATION

33 REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB NO. 67 Schedule of Changes in Net Pension Liability December 31, Total Pension Liabilty Service cost $ 5,106,625 $ 5,253,091 $ 5,409,485 Interest 20,609,223 20,198,502 19,900,507 Effect of economic/demographic gains or losses (882,851) (4,576,597) (3,667,991) Effect of assumption changes or inputs 11,664,881 6,500,227 Benefit payments (15,260,904) (14,474,566) (13,387,127) Net Change In Total Pension Liability 21,236,974 6,400,430 14,755,101 Total Pension Liability - Beginning 296,812, ,411, ,656,711 Total Pension Liability - Ending 318,049, ,812, ,411,812 Plan Fiduciary Net Position Contributions - employer (including employer paid expenses) 10,159,922 10,071,378 10,682,846 Net investment income 11,992,366 (1,809,875) 7,066,420 Benefit payments (15,260,904) (14,474,566) (13,394,219) Administrative expenses (93,592) (90,519) (86,504) Net Change In Plan Fiduciary Net Position 6,797,792 (6,303,582) 4,268,543 Plan Fiduciary Net Position - Beginning 244,212, ,515, ,247,278 Plan Fiduciary Net Position - Ending 251,010, ,212, ,515,821 District s Net Pension Liability - Ending $ 67,039,185 $ 52,600,003 $ 39,895,991 Plan Fiduciary Net Position As A Percentage Of Total Pension Liability 78.92% 82.28% 86.26% Covered Employee Payroll $ 42,054,815 $ 43,344,502 $ 44,663,896 The District's Net Pension Liability As A Percentage Of Covered Employee Payroll % % 89.32% Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. Page 30

34 REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB NO. 67 (Continued) Schedule of Employer Contributions Plan Year Actuarially Contribution Covered Contribution Ending Determined Annual Deficiency Employee as a % of December 31, Contribution Contribution (Excess) Payroll* Covered Payroll 2007 $ 7,673,240 $ 7,673,240 $ $ 43,640, % ,425,602 7,425,602 48,077, % ,859,535 8,859,535 52,267, % ,306,739 10,306,739 51,703, % ,969,154 10,969,154 49,432, % ,737,168 11,737,168 48,333, % ,391,287 11,391,287 46,600, % ,675,321 10,675,321 44,663, % ,059,004 10,059,004 43,344, % ,145,562 10,145,562 42,054, % * Payroll as of prior December 31 Measurement Date. Page 31

35 REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB NO. 67 (Continued) Actuarial Methods and Assumptions Used The following actuarial methods and assumptions were used in the December 31, 2016 funding valuation. Please see the valuation report dated May 16, 2017 for further details. Valuation Timing Actuarially determined contribution rates are calculated as of January 1 of the fiscal year in which the contributions are reported. Actuarial Cost Method Amortization Method Level percent or level dollar Closed, open, or layered periods Asset Valuation Method Smoothing period Entry Age Normal Level dollar Layered, 20 year periods 3 years Inflation 2.50% Salary Increases 4.25% Investment Rate of Return 7.00% Cost of Living Adjustments Retirement Age Turnover Disability Mortality 2.50%, with 45.00%/$750 per month lifetime cap Retirement rates are summarized in the 2017 Actuarial Valuation. Turnover rates are summarized in the 2017 Actuarial Valuation. Disability rates are summarized in the 2017 Actuarial Valuation. Healthy Lives: RP-2014 Mortality for Employees and Healthy Annuitants, male and female rates, with generational projection from 2006 based on the MP-2016 improvement scale; Disabled Lives: RP-2014 Disability Mortality, male and female rates. Page 32

36 REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB NO. 67 (Continued) Schedule of Annual Weighted Rate of Return on Investments Money-Weighted Rate of Return Plan Year Ending Money-Weighted December 31, Rate of Return 2007 N/A 2008 N/A 2009 N/A 2010 N/A 2011 N/A 2012 N/A 2013 N/A % % % Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. Page 33

37 STATISTICAL SECTION (UNAUDITED)

38 STATISTICAL SECTION For The Year Ended December 31, 2016 Net Position Value (NPV) as of Year December 31, Total Plan Performance 2007 $ 191,382, % ,808,625 (21.2) ,219, ,540, ,340, ,467, ,247, ,515, ,212,239 (2.5) ,010, Page 34

39 STATISTICAL SECTION For The Year Ended December 31, 2016 Revenues by Source Employer Contributions as a Percentage Net Employer of Covered Investment Year Contributions Payroll Income/(Loss) Total 2007 $ 7,731, $ 18,111,294 $ 25,842, ,460, (38,697,159) (31,236,667) ,910, ,480,945 38,391, ,347, ,597,109 29,944, ,981, ,144,533 13,126, ,742, ,391,578 35,133, ,397, ,001,334 35,399, ,682, ,066,420 17,749, ,071, (1,809,875) 8,261, ,159, ,992,366 22,152,288 Page 35

40 STATISTICAL SECTION For The Year Ended December 31, 2016 Expenses by Type Benefit Administrative Year Payments Expenses Total 2007 $ 8,540,957 $ 147,232 $ 8,688, ,232, ,221 9,337, ,832, ,157 9,980, ,508, ,434 10,624, ,233,668 91,863 11,325, ,910,664 96,434 12,007, ,537,990 81,482 12,619, ,394,219 86,504 13,480, ,474,566 90,519 14,565, ,260,904 93,592 15,354,496 Page 36

41 STATISTICAL SECTION For The Year Ended December 31, 2016 Member Count Retirees & Beneficiaries Currently Receiving Terminated Members Entitled to Receive Active Plan Year Benefits Benefits Members Total , , , , , , , , , ,517 1 New Actuarial excludes individuals covered by insurance policy. 2 New Actuarial excludes members with less than six months of service. Page 37

42 STATISTICAL SECTION For The Year Ended December 31, 2016 Top Ten Holdings by Investment Manager Market Percentage Value as of of Holding December 31, 2016 Plan Income Research Management $ 35,632, % Prudential Core Plus Bond Fund 29,118, % Morgan Stanley International Equity Fund I 26,020, % Brandywine Global Bond Opportunistic Fixed Income 21,990, % Lighthouse Global Long/Short Fund Limited 18,155, % Vanguard Institutional Index Fund 16,867, % Entrust Capital Diversified Fund 16,183, % UBS Trumbull Property Fund 16,029, % Vanguard Windsor II 12,835, % T. Rowe Price Inst. Large-Cap Core Growth 12,247, % Totals $ 205,082, % Page 38