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THE METROPOLITAN ST. LOUIS
SEWER DISTRICT DEFERRED
COMPENSATION PLAN AND TRUST
FINANCIAL STATEMENTS
DECEMBER 31, 2003
Independent Auditors’ Report
Board of Trustees
The Metropolitan St. Louis Sewer District
We have audited the accompanying Statements of Plan Net Assets of The
Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust
as of December 31, 2003 and 2002, and the related Statement of Changes in
Plan Net Assets for the years then ended. These financial statements are the
responsibility of the Plan Administrator. Our responsibility is to express an
opinion on these financial statements based upon our audits.
We conducted our audits 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 of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all
material respects, the plan net assets of The Metropolitan St. Louis Sewer
District Deferred Compensation Plan and Trust as of December 31, 2003 and
2002, and the changes in plan net assets for the years then ended, in
conformity with accounting principles generally accepted in the United States
of America.
The Management’s Discussion and Analysis on pages 2 through 4 is not a
required part of the basic financial statements, but is supplementary
information required by the Governmental Accounting Standards Board. We
have applied certain limited procedures that consisted principally of inquiries
of management regarding the methods of measurement and presentation of
the supplementary information. However, we did not audit the information
and express no opinion on it.
August 31, 2004
2
METROPOLITAN ST. LOUIS SEWER DISTRICT
Deferred Compensation Plan and Trust
Management Discussion and Analysis
This report consists of a series of financial statements related to The Metropolitan St. Louis
Sewer District’s Deferred Compensation Plan and Trust (“Plan”). The Statements of Net Assets
Available for Plan Benefits and the Statement of Changes in Net assets Available for Plan
Benefits (on pages 5 and 6) provide information about this plan. These statements include all
assets and liabilities using the accrual basis of accounting. All of the current year’s revenues
and expenses are taken into account regardless of when cash is received or paid.
Our discussion and analysis of The Metropolitan St. Louis Sewer District’s Deferred
Compensation Plan and Trust financial performance provides an overview of the Plan’s
financial activities for the fiscal year ended December 31, 2003. Please read it in conjunction
with the plan’s financial section and notes to the financial section.
FINANCIAL HIGHLIGHTS
Plan Assets, Deferrals and Deductions
Net assets available for plan benefits exceeded $16.2 million at the end of 2003 and the net
asset value increased by $3.5 million from that of December 31, 2002 due to the impact of the
overall increase in value of the equity markets during the year. Contribution from participants
was approximately $2.0 million, which was approximately $92 thousand or (4.3%) less than
contributions in the prior year. The increase in the equity markets which as measured by the
S&P 500 Index increased by 26.4% in 2003. This along with no change in the interest and
dividends, along with a reduction of plan participants of some (11.0%) net resulted in a $4.8
million increase of plan additions overall.
Plan Additions for 2003 and 2002 (in thousands)
2003 2002 % Change
Employee Contributions $2,042 $2,134 (4.3)%
Interest and Dividends 288 287 0.3%
Appreciation/(Depreciation) in fair
value - net
2,459 (2,382) 203.2%
Investment Expense (1) (1) 0.0%
Distributions to participants decreased by (31.9%) from that of December 31, 2002. However
there were 51 individuals that retired in 2003 vs. 31 retried in 2002. There were higher
balanced participants retired in 2002 than in 2003.
3
Plan Deduction for 2003 and 2002 (in thousands)
2003 2002 %
Change
Distribution to Participants $1,239 $1,819 (31.9%)
Investment Aspects
Employee participation in the Plan is on a voluntary basis. As of December 31, 2003 there were
577 Plan participants comprised of active employees of the District, retirees or surviving
spouses and terminated employees with account balances. Investment decisions are participant
directed. The participants are offered a diversified series of investment options to elect from.
These investment options represent a series of mutual funds primarily sponsored and managed
by the Vanguard Group. A breakdown of the participant directed asset allocation is as follows.
Asset Allocation as of
December 31, 2003
61%19%
9%
6%5%Equity
Balanced
Fixed Income
Stable Value
Cash Equivalents
Asset Allocation as of
December 31, 2002
58%17%
11%
6%8%Equity
Balanced
Fixed Income
Stable Value
Cash Equivalents
Independent investment consultants, Yanni-Partners & NEPC, monitored investment
performance of the various options offered to the participants. For 2003 the investment
consultant reported that all actively managed funds with the exception of the large
capitalization growth fund met or exceeded the appropriate benchmarks, for the balanced or
lifestyle funds three of the five investment options met or exceeded their benchmarks.
Performance of the funds are measured net of the corresponding expense ratios.
Certain participants with assets valued at $1,157,209 are invested in a series of fixed and
variable rate annuity contracts sponsored by Lincoln National Life Insurance Company. The
Lincoln National Life option was phased out in 1992, and any balances represent undistributed
participant balances. This option is no longer available to new participants or for current
deferrals.
4
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 plan participants and the beneficiaries.
Request for Information
This financial report is designed to provide the Board of Trustees, participants, investment
managers, and other interested parties with an overview of the Plans finances and
accountability for the money received. Questions concerning any of the information provided in
this report or requests for additional information should be addressed to:
Karl J. Tyminski, Secretary-Treasurer
2350 Market Street
St. Louis, MO 63103-2555
Phone: (314) 768-6222
Fax: (314) 768-2701
kjtymi@stlmsd.com
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THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFFERRED COMPENSATON PLAN AND TRUST
STATEMENTS OF PLAN NET ASSETS
December 31, 2003 and 2002
2003 2002
Investments at Fair Value $ 16,236,409 $ 12,686,959
Net Assets Held in Trust
for Plan Benefits $ 16,236,409 $ 12,686,959
See accompanying notes to financial statements.
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THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFFERRED COMPENSATON PLAN AND TRUST
STATEMENTS OF CHANGES IN PLAN NET ASSETS
For the Years Ended December 31, 2003 and 2002
2003 2002
Additions:
Employee Contributions $ 2,041,688 $ 2,133,784
Investment Income (Loss):
Dividends and Interest 288,344 286,935
Net Appreciation (Depreciation) in Fair
Value of Investments 2,458,597 (2,381,618 )
Less: Investment Expenses (550) (600 )
Net Investment Income (Loss) 2,746,391 (2,095,283 )
Total Additions 4,788,079 38,501
Deductions:
Distributions to Participants 1,238,629 1,819,333
Net Increase (Decrease) 3,549,450 (1,780,832 )
Net Assets Held in Trust for Plan
Benefits, Beginning of Year 12,686,959 14,467,791
Net Assets Held in Trust for Plan
Benefits, End of Year $ 16,236,409 $ 12,686,959
See accompanying notes to financial statements.
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THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFFERRED COMPENSATON PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2003 and 2002
1. Plan Description:
General: The Plan is a defined contribution benefit plan covering substantially all employees of the
District. The District’s Board of Trustees established the Plan in September 1996. The first
contributions were made in October 1996. The Metropolitan St. Louis Sewer District (District) does
not contribute to the plan. All assets of the Plan are the sole property of The Metropolitan St. Louis
Sewer District Deferred Compensation Plan and Trust and are not subject to the claims of the
creditors of the District.
The Plan Administrator issues a publicly available Summary Plan Description. That information
may be obtained by writing: The Metropolitan St. Louis Sewer District, 2350 Market Street, St.
Louis, MO 63103-2555.
Contributions: Under the plan provisions, employees of the District are eligible to contribute into
the Plan, through payroll deferral, any amount not previously reduced or withheld from their total
compensation. In accordance with The Revenue Act of 1978, the Plan limits an individual’s annual
contribution to 25% of annual gross taxable compensation, not to exceed $12,000 for the year ended
December 31, 2003 and $11,000 for the year ended December 31, 2002. Amounts contributed by
participants are deferred for federal and state income tax purposes until received as a withdrawal or
distribution from the Plan.
Effective January 1, 2002, the Plan was amended and restated to comply with the Economic Growth
and Tax Relief Reconciliation act of 2001. The Act made significant changes to Section 457(b) of the
Internal Revenue Code of 1986, as previously amended, such as: increasing the maximum allowable
dollar contribution to $12,000 for 2003 and if the participant is over the age of 50, they can
contribute up to $14,000, increasing the maximum deferral percentage of taxable compensation to
100% as well as other changes.
Participant contributions may be allocated to the Vanguard Group accounts only, in 1% increments
as the participant directs. No contributions are currently made to the Lincoln National accounts:
Equity option: Vanguard Windsor II Fund, Vanguard 500 Index Fund, and Vanguard U.S.
Growth Fund – Investment objective is long-term capital growth.
Diversification option: Vanguard Small-Cap and Mid-Cap Index Fund and Vanguard
International Growth Fund – Investment objective is long-term capital growth.
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NOTES TO FINANCIAL STATEMENTS: Continued
1. Plan Description, continued:
Life Strategy option: Vanguard Life Strategy Growth, Vanguard Life Strategy Moderate
Growth, Vanguard Life Strategy Conservative Growth, and Vanguard Life Strategy Income
Funds – Investment objective is long-term capital growth and/or Income.
Bond option: Vanguard Total Bond Market Index Fund – Investment objective is income
stability and conservation of principal.
Balanced option: Vanguard Balanced Index Fund – Investment objective is income,
conservation of principal, and long-term growth.
Stable Value option: Vanguard Retirement Savings Trust – Investment objective is income
stability and conservation of principal.
Money Market option: Vanguard Federal Money Market Fund –
Loan Fund: Effective January 1, 2003, the Plan allows participants to take out a loan from
their account, usually a percentage of their vested balance that the participant will pay
himself or herself back.
Participant Accounts: Each participant’s account is credited with the participant’s contribution and
allocations of plan earnings. Allocations are based on participants’ account balances, as defined.
There are no forfeitures applicable to the Plan. Participants’ contributions are immediately fully
vested.
At December 31, 2003 and 2002, approximately 577 and 655 District employees, respectively,
actively participated in the Plan.
Distributions: Participants contributing to the Plan may receive benefits, or withdraw the present
value of funds contributed to the Plan, upon retirement, disability, or termination of employment
from the District or due to financial hardship as defined by the Plan, if approved by the Plan
Administrator.
Participants may select various payout options including lump sum or equal annual payments over
various periods. Participants may also elect to have the value of their account converted into fixed or
variable annuity contracts. All investments, including annuity contracts, remain assets of the Plan
until payments are made to the participants.
Tax Status: The Plan received a favorable determination letter from the Internal Revenue Service
on June 23, 1999, indicating the Plan and its underlying trust are qualified under Section 457 of the
code.
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NOTES TO FINANCIAL STATEMENTS: Continued
2. Summary of Significant Accounting Policies and Plan Asset Matters:
Basis of Accounting: The financial statements of the Plan are prepared under the accrual method of
accounting. Benefit payments to participants are recorded upon distribution.
Accounting Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires the Plan Administrator to make certain estimates and
assumptions that affect the reported amounts in the financial statements. Actual results could differ
from those estimates.
Investment Valuation: Purchases and sales of mutual funds are recorded on the settlement date.
Investments in mutual funds are valued at fair value based on quoted market prices. Investments in
annuity contracts are valued at amounts reported by the custodians, which approximate fair value.
These values are based on actuarial assumptions as to anticipated mortality, withdrawals, and
investment yield.
Administrative Expenses: All general administrative costs of the Plan are paid by the District,
except those attributable to participants’ choice of optional investments or optional forms of benefit
payments. These expenses are charged to the respective participants’ account balance.
3. Investments in Mutual Funds:
Investments in mutual funds held by the custodians in the Plan’s name at December 31, 2003 and
2002, were as follows:
2003 2002
Vanguard Group, Inc.
Vanguard Retirement Savings
Trust $ 791,894 * $ 647,700 *
Vanguard 500 Index Fund 2,368,225 * 1,705,609 *
Vanguard Balanced Index
Fund 2,130,783 * 1,634,786 *
Vanguard Federal Money
Market Fund 751,264 * 924,252 *
Vanguard International
Growth Fund 235,261 146,007
Vanguard LifeStrategy
Conservative Growth 145,934 69,245
Vanguard LifeStrategy
Growth Fund 348,679 182,916
Vanguard LifeStrategy
Income Fund 78,539 25,872
Vanguard LifeStrategy
Moderate Growth Fund 267,577 91,765
Vanguard Mid-Cap Index
Fund 288,887 174,883
Vanguard Small-Cap Index
Fund 522,329 267,348
Balance Carried Forward 7,929,372 5,870,383
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3. Investments in Mutual Funds, Continued
Balance Brought Forward $ 7,929,372 $ 5,870,383
Vanguard Total Bond
Market Index Fund 1,000,699 * 1,232,704 *
Vanguard U.S. Growth Fund 1,719,901 * 1,268,240 *
Vanguard Windsor II Fund 4,143,634 * 3,136,810
Loan Fund 285,594 -
15,079,200 11,508,137
Lincoln National Life:
Fixed earnings option:
Lincoln National Fixed $ 648,275 $ 729,353 *
Variable earnings option:
Growth & Income Fund 198,487 177,948
Special Opportunity Fund 112,599 86,998
Managed Fund 23,727 29,327
Equity-Income Fund 32,441 29,256
Money Market Fund 5,847 5,891
Bond Fund 31,242 36,799
Aggressive Growth Fund 10,104 7,698
International Fund 35,398 28,857
Social Awareness Fund 9,296 7,755
Global Asset (Putnam)
Fund 2,107 3,190
Trend Fund 19,693 14,723
Capital Appreciation
Fund 4,543 3,467
AFIS Growth Fund - -
DGPF Real Estate
(REIT) Series 12,879 9,707
Small Cap Value Series 6,453 4,601
AMT Mid-Cap Growth Portfolio 4,118 3,252
1,157,209 1,178,822
$16,236,409 $12,686,959
• Represents 5% or more of the Plan’s net assets.