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HomeMy Public PortalAboutPension Plan 2008 Audited FinancialsTHE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN CONTENTS Page INDEPENDENT AUDITORS' REPORT 1 MANAGEMENT'S DISCUSSION AND ANALYSIS 2 - 9 FINANCIAL STATEMENTS Statements of Plan Net Assets 10 Statements of Changes in Plan Net Assets 11 Notes to Financial Statements 12 - 22 REQUIRED SUPPLEMENTAL ,INFORMATION Schedule of Funding in Progress 23 Schedule of Employer Contributions in Accordance with GASB Statement No. 25 23 Note to Required Supplemental Information 24 STATISTICAL SECTION (Unaudited) Performance and Net Asset Value 25 Historical Trend Information: Revenue by Source 26 Expenses by Type 27 Member Count 28 Graphs: Total Benefit Payments 29 Employer Contributions 29 Total Benefit Recipients 30 Top Ten Investment Holdings 31 Schedule of Investment Managers and Advisor Fees 32 SCHMERSAHL TRELOAR & .noill Certified Public Accountants Independent Auditors' Report To the Board of Trustees of the Metropolitan St. Louis Sewer District We have audited theaccompanying statement of plan net .assets of the Metropolitan St. Louis Sewer District Employees' Pension Plan (the "Plan") as of December 31, 2008, and the related statement of changes in plan net assets for the year then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Metropolitan St. Louis Sewer District Employees' Pension Plan as of and for the year ended December 31, 2007, were audited by other auditors whose report dated November 12, 2008, expressed an unqualified opinion on those statements. We conducted our audit in accordance with U.S. generally accepted auditing standards. 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 consideration of internal control over financial reporting as a basisfor designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides 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 as of December 31, 2008, and changes in plan net assets for the year then ended, in conformity with U.S. generally accepted accounting principles. The management's discussion and analysis (the "MD&A") and the schedules of funding progress and employer contributions (the "schedules"), as listed in the table of contents, are not a required part of the basic financial statements but are supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures to the MD&A and the schedules, which consisted principally of inquires of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. The statistical data included in the statistical section of this report has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. November 6, 2009 (314) 966-2727 • fax (314) 966-6464 • 3660 S. Geyer Rd., Suite 200 • St. Louis, MO 63127 • e-mail: stcpa@stcpa.com THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN 'MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2008 As management of The Metropolitan St. Louis Sewer District Employees' Pension 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 year ended December 31, 2008. 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 10. 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 plan net assets 2) Statements of changes in plan net assets 3) Notes to financial statements This report also contains required supplemental information to the basic financial statements which provides actuarial information for use in analyzing the funded status of the Plan and includes: 1) Schedule of funding in progress 2) Schedule of employer contributions in accordance with GASB Statement No. 25 3) Note to required supplemental information Certain revenues, expenses associated with administering the Plan, and other trend data are presented immediately following the note to required supplemental information in the statistical section of this report. The basic financial statements contained in this report are described below: • The statement of plan net assets is 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 assets value [assets - liabilities = net assets] represents the value of assets held in trust for pension benefits. • The statements of changes in plan net assets displays the effect of pension fund transactions that occurred during the fiscal year [additions - deductions = net increase (decrease) in net assets]. This net increase (decrease) in net assets reflects the change in the net assets value of the statements of plan net assets from the prior year to the current year. Both statements are in compliance with Governmental Accounting Standards Board (GASB) Pronouncements. 2 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2008 • 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 provide additional levels of detail for selected financial statement items. See notes to financial statements beginning on page 12 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 two additional schedules entitled "required supplemental information". The schedule of funding in progress (page 23) includes actuarial information about the status of the Plan from an ongoing, long-term perspective and the progress made in accumulating sufficient assets to pay pension benefits when due. Valuation assets in excess of actuarial accrued liabilities indicate that sufficient assets exist to fund the future pension benefits of the current members and benefit recipients, whereas, excess liabilities requires future funding or investment performance in excess of the actuarial assumed investment returns. • The schedule of employer contributions in accordance with GASB Statement No. 25 (page 23) presents historical trend information regarding the value of total annual contributions required to be paid by employers and the actual performance of employers in meeting this requirement. • The note to required supplemental information provides explanatory detail to aid in understanding the required supplemental schedules. FINANCIAL HIGHLIGHTS 2008 • Net assets held in trust for pension benefits totaled $150,808,626 as of December 31, 2008 for a decrease of $40,573,866 or (21.2%) as compared with December 31, 2007. This decrease in net assets primarily resulted from cumulative investment losses during the year and an increase of $692,022 in benefit payments. • The Plan's funding objective is to meet long-term benefit obligations to the extent possible. As of December 31, 2008, the date of the latest actuarial valuation, the funded ratio of the Plan was 86.6%. In general, this means that for every dollar of pension benefits due, the Plan has approximately $0.87 of net assets available for payment. The Plan's funding ratio decreased by 8.0% as compared with the funding ratio for December 31, 2007. The decrease in the funding ratio is primarily attributed to a decline in the value of investments. • Total decrease to the Plan's net assets (page 11) amounted to $40,573,866 for the year 2008 consisting of an investment loss of $38,697,158, and plan payments and administrative expenses net of contributions of $1,876,708. 3 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2008 • Administrative expenses (deductions to the Plan's net assets, page 11) increased from $99,074 for fiscal 2007 to $104,221or approximately $5,147 (5.2%) which primary reflect the net impact of an increase in the cost of legal fees. FINANCIAL HIGHLIGHTS 2007 • Net assets held in trust for pension benefits totaled $191,382,492 as of December 31, 2007 for an increase of $17,125,561 or 9.8% as compared with December 31, 2006. This increase in net assets primarily resulted from cumulative investment gains during the year that more than offset a $699,174 increase in benefit payments. • The Plan's funding objective is to meet long-term benefit obligations to the extent possible. As of December 31, 2007, the date of the latest actuarial valuation, the funded ratio of the Plan was 94.6%. In general, this means that for every dollar of pension benefits due, the Plan has approximately $0.95 of net assets available for payment. The Plan's funding ratio increased by 3.5% as compared with the funding ratio for December 31, 2006. The increase in the funding ratio is attributed to both plan contributions and improved cumulative investment returns. Total additions to the Plan's net assets (page 11) amounted to $25,765,592 for the year 2007 consisting of an investment gain of $18,063,136 and employer contributions of $7,702,456. • Administrative expenses (deductions to the Plan's net assets, page 11) decreased from $150,548 for fiscal 2006 to $99,074 for 2007 or approximately $51,474 (34.2%) which primary reflected the net impact of a decrease in the cost of actuarial services and the reclassification of certain fees to investment manager and advisor fees. 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 employer contributions and the income from investments provide the reserves needed to finance future retirement benefits. The Metropolitan St. Louis Sewer District's contributions into the Plan continue to increase as the result of a combination of factors, including an increase in salaries and a lower than anticipated investment performance as measured on an actuarially smoothed basis. Relative to the Public Fund peer group for 2008 and 2007, the Fund was down by 19.9% and up by 11.2%, respectively, which ranked in the 17th and 8th percentile, respectively, of the Public Fund universe. Net assets held in trust for pension benefits decreased by $40,573,866 in 2008 and increased by $17,125,561 in 2007. These net assets are used to meet ongoing benefit obligation to the Plan's participants and their beneficiaries. Required employer contributions as determined by the Plan's actuary increased for 2008 compared to 2007. The item that most significantly increased the required plan contribution by the employer is the decline in the market value of the assets, in particular is the decline in the value of the equity investments. As the years roll forward and total assets and liabilities grow, the Plan's investment 4 TIE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2008 income will play a more significant role in funding future retirement benefits - eventually providing 80% - 90% of the necessary funds. Therefore, investment return over the long-term is critical to the funding status of the Plan. In 2008 net investment loss of $(38,697,158) was significantly lower than the actuarially assumed investment income, and the 2007 net investment income of $18,063,136 was higher than the actuarially assumed investment income. Overall, the Plan is adequately funded and any accumulative 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, on average, 7.5%. The Plan's average return for both 2008 and 2007 was negative (5.6%), which is below the actuarially assumed investment rate of 7.5%, and could, depending on future investment performance, require additional contributions in future years. The Plan continues to retain an investment consultant to identify opportunities to improve investment return. A suggestion made by the investment consultant is that the Plan should more broadly diversify its investment asset base. As such, the Plan added new asset classes that have helped to offset the impact from the significant decline in the value of equity investments that was experienced in 2008. Based upon our latest actuarial valuations for the years ended December 31, 2008 and 2007, the Plan's actuarial value of assets was less than its actuarial value of liabilities by $28,387,059and $10,477,707, respectively. This means that additional future funding will be needed to continue to reduce this liability. FINANCIAL ANALYSIS The condensed statements of plan net assets as compared to prior years are as follows: ASSETS Investments at fair value Other assets Total Assets LIABILITIES December 31 2008 2007 $150,347,966 6,004,424 156,352,390 5,543,764 $190,730,668 2,053,823 192,784,491 1,401,999 2008 Change Amount Percent ($40,382,702) 3,950,601 ( 36,432,101) 4,141,765 (21.2)% 192.4 (18.9) 295.4 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS $150,808,626 $191,382,492 ($40,573,866) (21.2)% THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2008 ASSETS Investments at fair value Other assets Total Assets December 31 2007 2006 $190,730,668 2,053,823 192,784,491 LIABILITIES 1,401,999 $174,086,388 7,496,267 181,582,655 7,325,724 2006 Change Amount Percent $16,644,280 9.6% (5,442,444) (72.6) 11,201,836 6.2 (5,923,725) (80.9) NET ASSETS HELD IN TRUST FOR PENSION BENEFITS $191,382,492 $174,256,931 $17,125,561 9.8% As previously noted, net assets viewed over time may serve as a useful indication of the Plan's financial position. At the close of calendar years 2009 and 2008, the assets of the Plan exceeded its liabilities with $150,808,626 and $191,382,492, respectively, in net assets held in trust for pension benefits. The net assets are available to meet the Plan's ongoing obligation to the . Plan's participants and their beneficiaries. Despite variations in the stock market, 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 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 plan nets assets as compared to prior years are as follows: ADDITIONS Net investment (loss) income Employer contributions Total (Deductions) Additions For the Years Endeded December 31, 2008 Change 2008 2007 $(38,697,158) $ 18,063,136 7,460,492 7,702,456 (31,236,666) 25,765,592 DEDUCTIONS Benefits paid to retirees and beneficiaries 9,232,979 8,540,957 Administrative expenses 104,221 99,074 Total Deductions 9,337,200 8,640,031 NET (DECREASE) INCREASE (40,573,866) NET ASSETS HELD IN TRUST FOR PENSION BENEFITS, JANUARY 1 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS, DECEMBER 31 191,382,492 $150,808,626 Amount Percent $(56,760,294) (314.2)% (241,964) (3.1) (57,002,258) (221.2) 692,022 5,147 697,169 8.1 5.2 8.1 17,125,561 (57,699,427) (336.9) 174,256,931 17,125,561 9.8 $191,382,492 $(40,573,866) (21.2)% 6 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2008 ADDITIONS Net investment income Employer contributions Total Additions For the Years Endeded December 31, 2007 Change 2007 2006 Amount Percent $ 18,063,136 $ 17,565,462 $ 497,674 2.8% 7,702,456 6,861,223 841,233 12.3 25,765,592 24,426,685 1,338,907 5.5 DEDUCTIONS Benefits paid to retirees and beneficiaries 8,540,957 7,841,783 699,174 8.9 Administrative expenses 99,074 150,548 (51,474) (34.2) Total Deductions 8,640,031 7,992,331 647,700 8.1 NET INCREASE 17,125,561 16,434,354 691,207 4.2 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS, JANUARY 1 174,256,931 157,822,577 16,434,354 10.4 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS, DECEMBER 31 $191,382.492 $174,256,931 $17,125,561 9.8% 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 (deductions) for the years ended December 31, 2008 and 2007, totaled $(31,236,666) and $25,765,592, respectively. The Plan experienced a deduction to net assets for 2008 due largely to investment losses. The investment section of this report summarizes the results of investment activity for the year ended December 31, 2008. 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, 2008 totaled $9,337,200, an increase of 8.1% over 2007. The increase in benefits paid resulted primarily from an increase in the number of retirees receiving benefits. The Plan has consistently managed within its administrative expense budget, with no material variances between planned and actual expenditures. Investment Performance - 2008 The following are a few characteristics and achievements for the Plan for the year ending December 31, 2008: • The Plan ended the year with $150,808,626 in net assets. 7 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2008 The Plan's performance for the year was negative (19.9)% compared to the passive policy index of negative (20.2)%, and the average five-year return was 3.0% compared to the passive policy index of 2.8%. • The District retains an independent investment consultant to monitor the investment performance of the Plan and identify opportunities for improved returns. The recommendation of the investment consultant has been to more broadly diversify the investment asset base of the Plan. • The strategic asset allocation compared to the December 31, 2008 actual allocation was as follows: Asset Class Proposed Actual Target Range 2008 2007 Equities: Domestic Large -Cap Stocks 20.0% 16 - 24 17.3 19.6 Domestic Small -Cap Stocks 10.0 8 - 12 8.4 9.2 International Developed Markets Stocks 10.0 8 - 12 9.3 9.7 International Emerging Markets Stocks 3.0 2 - 5 2.3 3.5 Fixed Income: Domestic Core Bonds 20.0 16 - 24 20.3 19.2 Global Bonds 8.0 6 - 10 9.4 8.1 High Yield Bonds 5.0 3 - 7 4.5 4.5 Other: Global Tactical 10.0 8 - 12 9.9 9.7 Real Estate 5.0 3 - 7 5.9 5.1 Market Neutral 5.0 3 - 7 6.5 5.6 Absolute Return 4.0 3 - 7 4.1 3.9 Cash Equivalents - - 2.1 1.9 All asset classes have been rebalanced when needed during the year in order to maintain a weighting consistent with the strategic allocation ranges. The large -cap stocks were diversified between active value, active growth, and passive core strategies. The fund had a 60% large -cap growth value and 40% large -cap growth allocation which added value to the fund during the year as value stocks outperformed growth stocks. The purpose of employing a Global Tactical allocation manager is to provide an additional layer of diversification with the twin goals of increasing return and decreasing risk. Global Tactical asset allocation managers have the ability to invest in more than one asset class and full authority to adjust the weighting of the asset classes under their discretion. The Absolute Return allocation investment objective is to achieve attractive long-term, risk adjusted, returns in a variety of capital market conditions. The fund -of -funds portfolio should achieve this 8 THE METROPOLITAN OPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2008 objective by purchasing investment funds that utilize a broad range of absolute return oriented investment strategies. The Plan Administrator and the Consultant will review the Plan's asset allocation quarterly to determine if the allocation is consistent with the established exposure ranges. If an asset class is at or beyond the maximum/minimum range as determined at the quarterly asset allocation review, the Plan Administrator, with the assistance of the Consultant, will develop a plan to rebalance the allocation target. At a minimum, a rebalancing plan will move the allocation to the midpoint between the maximum/minimum limit violated and the target allocation. The Plan Administrator and the Consultant will consider market conditions and transaction costs, as well as any other relevant factors when rebalancing, but shall have a predisposition to transfer funds from asset classes that are outperforming to asset classes that are underperforming. 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. 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: Karl J. Tyminski, Secretary -Treasurer The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO 63103-2555 E-mail: kjtymi@stlmsd.com 9 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATEMENTS OF PLAN NET ASSETS December 31 2008 2007 ASSETS Investments at fair value: Mutual funds $ 58,922,082 $ 79,191,173 Corporate obligations 34,749,104 28,293,559 Collective investment fund 18,709,555 20,541,658 Domestic common stocks 16,734,623 17,271,953 Foreign obligations 7,426,150 12,547,217 Money market funds 6,678,377 13,344,451 U.S. Treasury and agency obligations 5,326,542 16,025,339 Foreign stocks 984,004 1,989,958 Municipal obligations 817,529 1,356,398 Domestic preferred stock 168,962 Total Investments 150,347,966 190,730,668 Receivables: Due from brokers for forward currency exchange contracts 5,195,803 1,120,647 Due from brokers for pending sales securities sold 57,416 69,684 Interest and dividends receivable 751,205 863,492 Total Receivables 6,004,424 2,053,823 Total Assets 156,352,390 192,784,491 LIABILITIES Due to brokers for forward currency exchange contracts 5,140,015 1,096,610 Due to brokers for securities purchased 138,858 152,391 Accrued expenses 264,891 152,998 Total Liabilities 5,543,764 1,401,999 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS (a schedule of funding progress is presented on page 25) See notes to financial statements $150,808,626 $191,382,492 10 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATEMENTS OF CHANGES IN PLAN NET ASSETS For The Years Ended December 31 2008 2007 (REDUCTIONS OF) ADDITIONS TO NET ASSETS ATTRIBUTED TO: Investment income: Net (depreciation) appreciation in fair value of investments $(41,855,346) $ 12,823,681 Interest and dividends 3,872,588 5,932,903 Total Investment (Loss) Income (37,982,758) 18,756,584 Less - Investment managers and advisor fees 714,400 693,448 Net Investment (Loss) Income (38,697,158) 18,063,136 Employer contributions 7,460,492 7,702,456 Total (Reductions) Additions (31,236,666) 25,765,592 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits paid to retirees and beneficiaries 9,232,979 8,540,957 Administrative expenses 104,221 99,074 Total Deductions 9,337,200 8,640,031 NET (DECREASE) INCREASE NET ASSETS HELD IN TRUST FOR PENSION BENEFITS, JANUARY 1 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS, DECEMBER 31 See notes to financial statements (40,573,866) 17,125,561 191,382,492 174,256,931 $150,808,626 $191,382,492 11 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE A — DESCRIPTION OF PLAN The following brief description of THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN (the "Plan") is provided for general information purposes only. Members should refer to the Plan ordinance for more complete information. 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 (the "District") are covered by the Plan. Membership in the Plan consists of: December 31 Increase 2008 2007 (Decrease) Retirees and beneficiaries currently receiving benefits 532 504 28 Terminated members entitled to receive benefits 196 198 (2) Active plan members 885 811 74 Total 1,613 1,513 100 The District's Board of Trustees, primarily to improve benefits to members, amends the Plan, established on November 1, 1967. 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. 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 and, as such, is not subject to the Act's reporting requirements. 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 60 months of employment. Ordinance No. 10664 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. 10491 amended the Plan benefits formula. The annual benefit payable became 1.40% of final average earnings plus 0.40% 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. 10664, 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 equal to the greater of 50% of the member's monthly 12 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE A — DESCRIPTION OF PLAN (Continued) accrued retirement benefit as of the date of death, or 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 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. 11781 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. A member who retires between August 1, 2004 and July 1, 2007 is entitled to select the greater of the above or the benefit calculated under the 1.45%/1.85% benefit formula including accrued sick leave. Sick leave is paid out at 1.25% per year of service times the amount of leave accrued. 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. 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. NOTE B — 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: 1. Basis of Accounting The Plan's financial statements are prepared using the accrual basis of accounting. Employer contributions are recognized as revenues in the period when due and the District's Trustees have made a formal commitment to provide the contribution. Benefits are recognized when due and payable in accordance with the terrus of the Plan. Plan expenses are recorded when the corresponding liabilities are incurred regardless of when payment is made. Investment purchases and sales are recorded on a trade -date basis. 13 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2. Use of Estimates 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 assets during the reporting period. Actual results could differ from those estimates. 3. Method Used to Value Investments The Plan's investment assets, which are trusteed by U.S. Bank, N.A., 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 cost, which approximates fair value. NOTE C — CASH AND INVESTMENTS 1. Categories of Asset Risk The Plan is authorized to invest in: Equity Investments: Common stocks of corporations, mutual funds, or commingled equity funds (Domestic and International, both within defined limits); however, the investments in equities cannot exceed 53% 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 cannot exceed 41% 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 cannot exceed 7% of total investments. • Global Tactical Asset Allocation, Market Neutral, and Absolute Return: These investment strategies help diversify the investment portfolio while increasing return and decreasing risk. These investments cannot exceed 12%, 7%, and 7% of total investments, respectively. 14 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE C — CASH AND INVESTMENTS (Continued) 1. Categories of Asset Risk (Continued) • Futures Contracts: Currency forward contracts for the purpose of currency risk management of non-U.S. investments. The fair value of investments managed consisted of the following: December 31 2008 2007 Investments, at fair value Mutual funds: Domestic equity $ 20,225,660 $ 28,030,598 Foreign equity 17,508,911 25,232,194 Balanced 14,940,962 18,532,206 Fixed 6,246,549 7,396,175 Corporate obligations 34,749,104 28,293,559 Collective investment funds: Equity market neutral 9,721,941 10,715,369 Real estate 8,987,614 9,826,289 Domestic common stocks 16,734,623 17,271,953 Foreign obligations 7,426,150 12,547,217 Money market funds 6,678,377 13,344,451 U.S. Treasury and agency obligations 5,326,542 16,025,339 Foreign stocks 984,004 1,989,958 Municipal obligations 817,529 1,356,398 Domestic preferred stock - 168,962 Total Investments $150,347,966 $190,730,668 2. Interest Rate Risk The Plan had the following debt securities and maturities: December 31, 2008 Weighted Average Investment Type Fair Value Maturity (Years) Corporate obligations $34,749,104 4.21 U.S. Treasury and agency obligations 5,326,542 5.82 Foreign obligations 7,426,150 5.52 Municipal obligations 817,529 1.77 $48,319,325 Portfolio weighted average maturity 4.55 15 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE C — CASH AND INVESTMENTS (Continued) 2. Interest Rate Risk (Continued) December 31, 2007 Weighted Average Investment Type Fair Value Maturity (Years) Corporate obligations $28,293,559 3.88 U.S. Treasury and agency obligations 16,025,339 4.81 Foreign obligations 12,547,217 3.69 Municipal obligations 1,356,398 2.25 $58,222,513 Portfolio weighted average maturity 4.05 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. • Monitoring fixed income investment managers performance to be sure the fixed income portion of the investment portfolio is managed to predetermined indexes. 3. Credit Risk The Plan will minimize credit risk, the risk of loss due to failure of the security issuer or backer, by: • Pre -qualifying the financial institutions, broker/dealers, inteiiuediaries, 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: 16 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE C — CASH. AND INVESTMENTS (Continued) 3. Credit Risk (Continued) Credit Rating By Investment as of December 31, 2008. S&P Rating AAA AA A BBB BB B CCC Not Rated Total U.S. Treasury & Agency Municipal Obligations Obligations $5,326,542 $177,978 489,239 150,312 $5,326,542 Corporate Obligations $ 7,709,188 4,745,697 12,339,435 4,493,941 2,062,219 2,847,416 515,203 36,005 Foreign Obligations Totals $2,724,668 959,013 2,524,190 577,183 240,324 400,772 $15,938,376 6,193,949 15,013,937 5,071,124 2,302,543 3,248,188 515,203 36,005 $817,529 $34,749,104 $7,426,150 $48,319,325 Credit Rating By Investment as of December 31, 2007 S&P Rating AAA AA A BBB BB B CCC Not Rated U.S. Treasury & Agency Obligations Municipal Obligations Corporate Foreign Obligations Obligations Totals $16,025,339 $ 768,713 $ 9,836,800 $ 7,110,047 $33,740,899. 587,685 4,041,275 576,620 5,205,580 5,294,242 3,210,272 8,504,514 - 3,103,884 176,185 3,280,069 - 376,340 924,356 1,300,696 - 5,200,580 484,800 5,685,380 - 440,438 440,438 - 64,937 64,937 Total $16,025,339 $1,356,398 $28,293,559 $12,547,217 $58,222,513 4. Foreign Currency Risk Foreign Currency Risk is the risk that changes in exchange rates will adversely impact the fair value of an investment. The Plan's policy is to allow the individual investment manager to decide what action to take regarding their respective portfolio's foreign currency exposure. The following table demonstrates the Plan's current level of foreign currency exposure: 17 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE C - CASH AND INVESTMENTS (Continued) 4. Foreign Currency Risk (Continued) Foreign Currency Exposures By Asset Class In U.S. Dollars as of December 31, 2008 Currency Foreign Equities Obligations Totals Australian Dollar $ , - $1,364,347 $1,364,347 Brazil Real . 393,338 393,338 British Pound Sterling 745,662 745,662 Canadian Dollar - 387,700. 387,700 Indonesia Rupiah - 282,921 282,921 Malaysian Ringgit 764,371 764,371 Mexican Peso 574,819 574,819 New Zealand Dollar 504,379 504,379 Polish Zloty - 654,209 654,209 South Africa Rand 342,014 342,014 Swedish Krona - 319,374 319,374 Not denominated in a foreign currency 984,004 1,093,016 2,077,020 $984,004 $7,426,150 $8,410,154 Foreign Currency Exposures By Asset Class In U.S. Dollars as of December 31, 2007 Currency Australian Dollar Brazil Real British Pound Sterling Canadian Dollar Indonesia Rupiah Malaysian Ringgit Mexican Peso New Zealand Dollar Norwegian Krone Polish Zloty Singapore Dollar South Africa Rand Swedish Krona Not denominated in a foreign currency Foreign Equities Obligations Totals 1,989,958 $ 1,896,101 $ 1,896,101 529,147 529,147 1,028,126 1,028,126 789,292 789,292 395,208 395,208 723,967 723,967 669,280 669,280 621,346 621,346 767,972 767,972 1,138,968 1,138,968 1,055,877 1,055,877 682,761 682,761 1,319,772 1,319,772 929,400 2,919,358 $1,989,958 $12,547,217 $14,537,175 18 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE C - CASH AND INVESTMENTS (Continued) 5. Open Foreign Currency Exchange Contracts in U.S. Dollars : Open Contracts as of December 31, 2008 Aggregate Fair Cost Delivery Unrealized Unrealized Value Value Dates Appreciation Depreciation Foreign currency exchange contracts purchased: 'Australian Dollar $ 133,862 $ 133,682 1/9/2009 $ 180 $ - British Pound 612,721 691,796 1/22/2009 79,075. British Pound 506,088 537,788 3/12/2009 31,700 Canadian Dollar 399,352 395,431 1/24/2009 3,921 New Turkish 185,926 223,886 1/26/2009 37,960 Euro 2,151,797 2,093,279 3/6/2009 58,518 New Zealand Dollar 136,165 133,424 3/17/2009 2,741 Norwegian 130,675 132,076 1/26/2009 1,401 Foreign currency exchange contracts sold: British Pound 770,871 612,721 1/22/2009 158,150 New Turkish 168,340 185,926 1/26/2009 - 17,586 Totals $223,510 $167,722 Open Contracts as of December 31, 2007 Aggregate Fair Cost Delivery Unrealized Unrealized Value Value Dates Appreciation Depreciation Foreign currency exchange contracts purchased: Canadian Dollar $139,825 $139,131 1/24/2008 $ 694 $ Foreign currency exchange contracts sold: British Pound 957,479 980,822 3/20/2008 23,343 Totals $ 694 $ 23,343 19 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE C — CASH AND INVESTMENTS (Continued) 5. Open Foreign Currency Exchange Contracts in U.S. Dollars (Continued) The fair value of open currency forward contracts, including any unrealized appreciation or depreciation, is recorded in the statements of plan net assets as amounts due from/to brokers for securities sold/purchased. Based upon the advice of the Plan's investment consultant and the Plan's investment policy and guidelines, the investments in currency forward contracts do not, in the Plans' judgment, have any legal risk. The currency forward contracts are executed through large money center banks with credit rating standards. The credit risk exposure could be with the bank counterparty. Depending on the bank, the degree of credit risk could vary. Based on the assessment of the Plan's investment manager trading the account and Plan's investment consultant, the risk is minimal NOTE D — INVESTMENTS GREATER THAN 5% OF NET ASSETS HELD IN TRUST FOR PENSION BENEFITS Investments which exceed 5% or more of net assets held in trust for pension benefits are as follows: December 31 2008 2007 GMO Global Balanced Asset Allocation $14,940,962 $18,532,206 Morgan Stanley Institutional International Equity 14,048,692 18,547,348 Pyramis US Equity Market Neutral 9,721,941 10,715,369 Vanguard Windsor II Fund 9,195,040 12,491,093 UBS Real Estate 8,987,614 9,826,289 First American Prime Money Market 13,344,451 CIGNA Small Cap Fund 10,070,073 NOTE E — 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 $7,425,602 and $7,673,240, excluding certain professional fees paid by the District, were made to the Plan in 2008 and 2007, respectively. These contributions were made in accordance with actuarially determined contribution requirements based on actuarial valuations performed at January 1, 2008 and 2007, respectively, and consisted of: 20 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE E — CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE (Continued) For The Years Ended December 31, 2008 2007 Noiival Cost $5,793,713 $5,617,087 Amortization of the unfunded actuarial accrued liability 1,113,824 1,520,811 Inflation factor of 7.5% Current Year Contribution Due From The District As Calculated By The Plan's Actuary 6,907,537 518,065 7,137,898 535,342 $7,425,602 $7,673,240 Certain professional fees, included in administrative expenses are paid by the District and are recognized as contributions to the Plan and totaled $34,890 and $29,216 for the years ended December 31, 2008 and 2007. 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 assets. NOTE F — FUNDED STATUS AND FUNDING PROGRESS The funded status of the Plan as of January 1, 2009, the most recent actuarial valuation date, and January 1, 2008 is as follows (dollar amounts in thousands): Valuation For The Entry Age UAAL As Actuarial Actuarial A Years Actuarial Accrued Unfunded Annual Percentage Beginning Value Of Liability AAL Funded Covered Of Covered January 1 Assets (AAL) (UAAL) Ratio Payroll Payroll 2009 $183,679 $212,066 $28,387 86.6% $48,077 59.0% 2008 185,356 195,834 10,478 94.6 43,640 24.0 The schedules of funding progress, presented as required supplemental information following the notes to financial statements, present multi -year trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the AALs for benefits. Additional information as of the latest actuarial valuation follows: Valuation dates Actuarial cost method Amortization method Amortization period January 1, 2009 and 2008 Entry Age Normal Level dollar closed 20 year period 21 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 NOTE F - FUNDED STATUS AND FUNDING PROGRESS (Continued) Asset valuation method Three-year average of adjusted market values Post -retirement cost -of -living CPI with maximum 3% of current benefit of $50 if less, and benefit increases lifetime maximum 45% in the original benefit or $750 if less Actuarial assumptions: Investment rate of return 7.5% per annum (1) Projected salary increases Years of service 0 10.0% per annum (1) 1 7.5% per annum (1) 2 5.0% per annum (1) 3+ 4.5% per annum (1) Social Security wage base 4.0% per annum increase (1) (1) Includes inflation component of 3% NOTE G — 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 changes could materially affect the amounts reported in the statements of plan net assets. 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. NOTE H — 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. NOTE I — RECLASSIFICATIONS Certain reclassifications have been made to the December 31, 2008 amounts in order to conform to the presentation of the December 31, 2009 financial statements 22 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN REQUIRED SUPPLEMENTAL INFORMATION DECEMBER 31, 2008 AND 2007 REQUIRED SUPPLEMENTAL INFORMATION SECTION THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN REQUIRED SUPPLEMENTAL INFORMATION DECEMBER 31, 2008 AND 2007 Six -year historical trend infatuation about the Plan is presented herewith as required supplementary information. This information is intended to help users assess Plan funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons with other plans. SCHEDULE OF FUNDING IN PROGRESS (dollars in thousands) Valuation For The Entry Age Actuarial Actuarial UAAL As A Years Actuarial Accrued Unfunded Annual Percentage Beginning Value of Liability AAL Funded Covered Of Covered January 1 Assets (AAL) (UAAL) Ratio Payroll Payroll 2009 $183,679 $212,066 $28,387 86.6 % $48,077 59.0 % 2008 185,356 195,834 10,478 94.6 43,640 24.0 2007 170,757 187,432 16,675 91.1 42,113 39.6 2006 158,321 177,630 19,309 89.1 40,144 48.1 2005 142,986 168,237 25,251 85.0 39,382 64.2 2004 133,966 159,444 25,478 84.0 37,637 67.7 Analysis of the dollar amounts of plan net assets, AAL, and UAAL in isolation can be misleading. Expressing plan net assets as a percentage of the AAL provides one indication of Plan funding status on a going -concern basis. Analysis of this percentage over time indicates whether the Plan is becoming financially stronger or weaker. Generally, the greater this percentage, the stronger the Plan. Trends in the UAAL and annual covered payroll are both affected by inflation. Expressing the UALL as a percentage of annual covered payroll approximately adjusts for the effects of inflation and aids analysis of Plan progress made in accumulating sufficient assets to pay benefits when due. Generally, the smaller this percentage, the stronger the Plan. SCHEDULE OF EMPLOYER CONTRIBUTIONS IN ACCORDANCE WITH GASB STATEMENT NO.25 Contribution As A For The Annual Percentage Of Years Ended Required Actual Percentage Covered December 31 Contribution Contribution Contributed Payroll 2008 $7,549,421 $7,460,492 98.8 % 15.5 % 2007 7,260,259 7,702,456 106.1 17.7 2006 7,015,905 6,861,223 97.8 16.3 2005 6,980,026 7,192,531 103.0 17.9 2004 6,384,774 6,797,077 106.5 17.3 2003 5,385,572 6,002,479 111.5 15.9 23 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN REQUIRED SUPPLEMENTAL INFORMATION DECEMBER 31, 2008 AND 2007 Annual Required Contribution (ARC) The ARC applicable to the Plan's year ended each year on December 31 in accordance with GASB Statement No. 25 requires blending of the actuarial valuations. The ARC is presented each year using the aggregate of the District's ARCs for the portions of the District's fiscal years that overlap the Plan's fiscal year. 24 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 STATISTICAL SECTION (UNAUDITED) THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 p e T T /AL Year NAV 12/31 Total Plan Performance 1999 $ 125,365,457 10.9% 2000 125,256,835 (0.1) 2001 123,040,018 (1.8) 2002 113,176,548 (8.0) 2003 137,024,216 21.1 2004 149,053,173 8.8 2005 157,822,577 5.9 2006 174,256,931 10.4 2007 191,382,492 9.8 2008 150,808,626 (21.2) sN 2 $250.0 $200.0 $150.0 $100.0 $50.0 $0.0 $137.0 $149.1 $157.8 $150.8 $191.4 $174.3 Net Asset Value (NAV) 12/31 $125.4 $125.3 $123.0 $113.2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 25 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 Revenues by Source Year Employers Contributions Employers Contributions as a Percentage of Covered Payroll Investment Income (Net) Total 1999 $ 2,968,216 8.1% $ 12,758,125 $ 15,726,341 2000 2,986,650 7.9 831,238 3,817,888 2001 3,971,540 10.6 (1,878,456) 2,093,084 2002 4,789,473 12.7 (9,726,380) (4,936,907) 2003 6,002,479 15.9 23,559,415 29,561,894 2004 6,797,077 17.3 11,551,937 18,349,014 2005 7,192,531 17.9 8,475,275 15,667,806 2006 6,861,223 16.3 17,565,462 24,426,685 2007 7,702,456 17.7 18,063,136 25,765,592 2008 7,460,492 15.5 (38,697,158) (31,236,666) 26 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 Expenses by Type Year Benefit Payments Administrative Expense Total 1999 $ 3,250,637 $ 141,336 $ 3,391,973 2000 3,694,444 232,066 3,926,510 2001 4,211,174 98,727 4,309,901 2002 4,830,167 96,396 4,926,563 2003 5,607,334 106,892 5,714,226 2004 6,198,470 121,587 6,320,057 2005 6,781,416 116,986 6,898,402 2006 7,841,783 150,548 7,992,331 2007 8,540,957 99,074 8,640,031 2008 9,232,979 104,221 9,337,200 27 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 Member Count Year Retirees & Beneficiaries Currently Receiving Benefits Terminated Members Entitled to Receive Benefits Active Plan Members Total 1999 410 151 934 1,495 2000 428 164 890 1,482 2001 443 175 855 1,473 2002 459 182 829 1,470 2003 482 194 788 1,464 2004 490 190 808 1,488 2005 4601 198 7802 1,438 2006 481' 199 7982 1,478 2007 5041 198 8112 1,513 2008 5321 196 8852 1,613 1 New actuarial census excluded individuals covered by insurance policy. 2 New actuarial census excludes members with less than six months of service. 28 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 Total Benefit Payments (Dollar Amounts in Millions) $10,000 $9,000 - $8,000 $7,000 - $6,000 - $5,000 - $4,000 - $3,000 $2,000 $1,000 $0 $3,250.6 $3,694.4 $4,211.2 $4,830.2 $6,781.4 $6,198.5 $5,607.3 $7,841.8 $9,233.0 541.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Employer Contributions (Dollar Amouits in Millions) $9,000 - $8,000 - $7,000 - $6,000 - $5,000 - $4,000 - $3,000 - $2,000 - $1,000 - $0 es 1999 �^h ‘b, esry, 2000 2001 2002 2003 2004 2005 2006 2007 2008 29 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 Total Benefit Recipents 600 - 500 - 400 - 300 - 200 - 100 - 410 428 443 459 482 490 460 481 504 532 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 New actuarial census for 2005 through 2008 excluded individuals covered by insurance policy. 30 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 Top 10 Investment Holdings As of December 31, 2008 As of December 31, 2007 Holding Market Value Percentage of Plan Market Value Percentage of Plan GMO Global Balanced Asset Allocation $ 14,940,962 9.9% $ 18,532,206 9.7% Morgan Stanley Inst. International Equity 14,048,692 9.3 18,547,348 9.7 Pyramis U.S. Equity Market Neutral Fund 9,721,941 6.5 10,715,369 5.6 Vanguard Windsor II Fund 9,195,040 6.1 12,491,093 6.5 UBS Real Estate 8,987,614 6.0 9,826,289 5.1 CIGNA Small Cap Fund 7,075,371 4.7 10,070,073 5.3 PIMCO All Asset Fund 6,246,555 4.2 7,396,175 3.9 Vanguard 500 Index Fund 3,955,249 2.6 5,469,432 2.9 Morgan Stanley Emerging Mkts. Fund 3,460,219 2.3 6,684,846 3.5 First American Prime Money Mkt 3,186,524 2.1 13,344,451 7.0 TOTALS $ 80,818,167 53.7% $ 113,077,282 59.2% 31 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN STATISTICAL SECTION (UNAUDITED) DECEMBER 31, 2008 AND 2007 Schedule of Investment Managers And Advisor Fees For the Years Ended December 31, 2008 and 2007 2008 2007 Managers Fees: Income Research Management $ 136,901 $ 118,975 UBS Real Estate Separate Account 114,709 116,572 Fidelity Investments 90,677 84,205 Waddell & Reed 71,476 80,486 Brandywine Asset Management 68,238 65,765 PENN Capital Management 60,168 64,760 Kennedy Capital /ARK Asset Managers 57,957 60,763 Buford, Dickson, Harper, & Sparrow 44,704 47,769 Total Managers Fees 644,830 639,295 Advisor Fees: NEPC Investment Advisor 69,570 54,153 TOTAL $ 714,400 $ 693,448 32