Metropolitan Transit Authority Transport Workers Union ... · METROPOLITAN TRANSIT AUTHORITY TRANSPORT WORKERS UNION PENSION PLAN LOCAL, 260, AFL-CIO 1900 Main St. Houston, TX 77002

Metropolitan Transit Authority

Transport Workers Union Pension Plan, Local 260, AFL-CIO Comprehensive Annual Financial Report

December 31, 2012 and 2011

Prepared by the Metropolitan Transit Authority Of Harris County, Texas

Divisions of Accounting and Treasury Services

Table of Contents Page Number

Introductory Section (Unaudited) 1

Transmittal Letter from the Vice-Chairperson of the Trustees 2

The Trustees and Their Responsibilities 4

Consultants and Money Managers 4

Organization 5

Certificate of Achievement for Excellence in Financial Reporting 6

Financial Section 7

Independent Auditor’s Report 8

Management’s Discussion and Analysis (Unaudited) 10

Basic Financial Statements 13

Statements of Plan Net Position 14

Statements of Changes in Plan Net Position 15

Notes to the Basic Financial Statements 16

Required Supplemental Information (Unaudited)

Schedule of Funding Progress 24

Schedule of Employer Contributions 24

Other Supplemental Information (Unaudited)

Schedule of Investment and Administrative Services 25

Investment Section (Unaudited) 27

Overview of the Investment Policy 28

Current Money Managers 30

Investment values and results 33

Actuarial Section (Unaudited) 37

Actuary’s letter 38

Actuarial Assumptions 42

Information about Participants 43

Financial Experience 46

Statistical Section (Unaudited) 53

Schedules of Payments to Participants 54

Schedule of Participants for 10 years 55

Statements of Changes in Plan Net Position for10 Years 56

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Introductory Section

(Unaudited)

This section provides a quick overview of the Transport Workers Union Pension Plan, Local 260, AFL-CIO Comprehensive Annual Financial Report and includes the transmittal letter from the Vice-Chairperson of the MTA/TWU Union Pension Board of Trustees, and information on performance, organizational structure, and responsibility for financial reporting. The prior year Certificate of Achievement for Excellence in Financial Reporting is also included.

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METROPOLITAN TRANSIT AUTHORITY TRANSPORT WORKERS UNION PENSION PLAN LOCAL, 260, AFL-CIO

1900 Main St. Houston, TX 77002

July 29, 2013 Plan participants, MTA/TWU Union Pension Board of Trustees, Members, and the Board of Directors of the Metropolitan Transit Authority of Harris County, Texas (METRO) I am pleased to present the Transport Workers Union Pension Plan, Local 260, AFL-CIO (Plan) Comprehensive Annual Financial Report (CAFR) for the year ended December 31, 2012. The Plan is a defined benefit, non-contributory plan which is for employees covered by the collective bargaining agreement. The CAFR has five sections and is one of the few reports which brings together the major financial and management elements of a pension plan. This Introductory Section discusses the overview of the CAFR, the Plan’s performance as well as the MTA/TWU Union Pension Board of Trustees (Trustees) and METRO’s (the Plan sponsor) responsibilities for managing the Plan and providing accurate, reliable financial information.

The Trustees and METRO are dedicated to providing quality financial information and earned (for the first year) the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officer Association.

The five sections of the CAFR, listed below, provide you with information that is useful in evaluating the Plan’s performance and sustainability. These sections are:

• Introductory Section

• Financial Section

• Investment Section

• Actuarial Section

• Statistical Section

Identifying Opportunities and Monitoring Performance of the Plan

During the year the Trustees and financial advisor met at least quarterly to discuss investment opportunities and performance. Topics included general market conditions, money managers’ performance and new investment opportunities ranging from commodities to real estate. Like most pension plans, we continue to evaluate methods of improving investment returns while minimizing risk.

As part of this process, the Trustees decided to remove all funds from Alliance Bernstein US diversified Large Capital Value, Atlanta Capital High Quality Growth Plus, and some funds from State Street Global Advisors – Russell 2000 index and allocate funds to new money managers. New money managers included Herndon Capital Management Large Capital Value, GW Inc., Small Capital Equity, Morgan Dempsey Capital Management LLC Small/Micro Capital Equity, and State Street Global Advisors (SSGA) Russell 1000 Growth Index Fund. Information on the Plan’s investment policy is located in the notes to the basic financial statements and the Investment Section of this report.

Funding, Returns and Funded Status Funding for the Plan is provided by METRO and is based on annual independent actuarial calculations. This was a very good year for the Plan as METRO continued to fund the actuarial required contribution

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and the investment return was 15.06% (net of fees) or 2.41% above the Plan’s current asset mix benchmark. While the current year investment returns are favorable, the approximate investment return for last 10 years is 6.7% or 1.3% below the investment policy and actuarial investment rate of 8.0% net of fees. Additional information on the Plan’s investment performance is located in the Investment Section of this report. Two key measurements in evaluating performance are the Plan’s funded ratio and value of the unfunded actuarial accrued liabilities. These measurements indicate how successful the Plan has been in accumulating assets to pay retirees and their beneficiaries. The Plan’s unfunded actuarial accrued liabilities (UAAL) increased to $85.7 million from $81.7 million or 4.9% and the funded ratio declined from 68.0% to 67.9% or 0.1 % between 2012 and 2011. The increase in the liabilities and decline in the funded ratio is primarily the result of investment losses from prior years now being recognized.

Future changes

The Governmental Accounting Standard Board issued Statement No. 67, Financial Reporting for Pension Plans which becomes effective for the Plan in 2014 while Statement No. 68, Accounting and Financial Reporting for Pension Plans become effective in 2015 for the Plan’s sponsor. These standards will require the use of the entry age actuarial cost method and establishes additional requirements for investment (discount) rate, financial statement presentation and note disclosures. It is anticipated these changes will increase the Plan’s unfunded actuarial accrued liability while reducing its funded ratio.

The Financial Reporting Entity and Responsibilities for Internal Controls

The Plan is not a component unit of METRO or any other plans and the accompanying basic financial statements include all activities for which the Plan is financially accountable as defined by GASB No. 14, The Financial Reporting Entity.

The responsibility for accuracy, reliability and fairness in the presentation of financial information and related disclosures rests with the Trustees and METRO. All disclosures that are necessary to enable the reader to gain an understanding of the Plan’s financial activities have been included. The Trustees and METRO are also responsible for ensuring that an adequate internal control structure is in place for preparation of financial information, safeguarding of assets, effective and efficient use of resources and compliance with applicable laws and regulations

Other Information and Acknowledgement

Each section of the CAFR provides information that is useful in evaluating the Plan’s performance. You will find Management’s Discussion and Analysis located in the Financial Section starting on page 10 of the CAFR. McConnell & Jones LLP, Certified Public Accountants, audited the Plan’s basic financial statements. The Plan’s audited financial statements along with the actuarial report are sent each year to the state’s Pension Review Board. The Trustees appreciate the work and dedication of all those who support the objectives of the Plan.

Arthur C. Smiley III Vice-Chairperson, Transport Workers Union Pension Plan, Local 260, AFL-CIO

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The Trustees’ and Their Responsibilities

METRO’s President and Chief Executive Officer and the Transport Workers Union, Local 260, AFL-CIO each appoint two Trustees to oversee the administration of the Plan. These Trustees are fiduciaries (based on state law) and must act for the exclusive purpose of accumulating sufficient assets to pay retiree benefits as they come due. They follow the prudent person rule when authorizing expenses and implementing the investment policy. The Trustees are dedicated professionals who are not compensated for their work and as of December 31, 2012 included:

Susan Bailey, CPA, Chairperson

Arthur C. Smiley III, CPA, Vice-Chairperson

John Bland

Horace Marves

Consultants and Money Managers

The Trustees rely on many professionals with different skills to ensure the Plan is operating as intended and include:

Consultants Activity

Gray and Company Financial advisor

Milliman Actuary

Fulbright & Jaworski L.L.P. Legal counsel

State Street Bank and Trust Co Asset custodian and benefit payment services

Money managers Market segment

Direct investment Herndon Large Capital Value Domestic equity

GW Capital's (U.S.) Small Cap Domestic equity

Morgan Dempsey Capital Management LLC Small/Micro Cap Equity

Domestic equity

Mutual fund

T. Rowe Price International equity

Commingled funds

GMO Global fixed income

Brandywine Global fixed income

State Street Bank and Trust Co. Russell 1000 Growth Index Fund

State Street Bank and Trust Co. Russell 2000 Index Fund

Additional information on investment and actuarial performance can be found in those sections of this report.

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Organization

The organization listing provides an overview of all those involved in supporting the Plan.

• The Trustees are responsible for the operations of the Plan. They select the Financial Advisor, Money Managers and Consultants who report directly to the Trustees.

• Support Staff is provided by Human Resources and the Finance Department.

• Plan Participants are those who are eligible to participate in the Plan.

• The Financial Advisor is responsible for assisting in the development and implementation of an effective investment policy while monitoring the performance of the Money Managers and the overall markets where investments are made.

• Money Managers are responsible for investing the Plan’s assets.

• Consultants consist of several organizations which provide services including legal, actuarial, asset custodial, disbursing agent and independent auditing.

Pension Committee

Plan Participants

ConsultantsMoney Managers

Financial Advisor

Support Staff Provided by

METRO

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The responsibility for the accuracy, reliability and fairness of the presentation of financial information and related disclosures in the Comprehensive Annual Financial Report rests with the Trustees and METRO. All disclosures that are necessary to enable the reader to gain an understanding of the Plan’s financial activities have been included. The Trustees and METRO is also responsible for ensuring that an adequate internal control structure is in place for preparation of financial information, safeguarding of assets, effective and efficient use of resources and compliance with applicable laws and regulations. The internal control structure has been designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of cost and benefits requires estimates and judgment by management. In addition, the Plan is required by state law to have independent certified public accountants perform annual financial audits. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Transport Workers Union Pension Plan, Local 260, AFL–CIO for its CAFR for the year ended December 31, 2011. This is the first year to receive this award and reflects the commitment to quality financial reporting. In order to receive this award you must publish an easily readable and efficiently organized CAFR report which satisfies both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year. We believe that our current CAFR will continue to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

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Financial Section

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Independent Auditor’s Report To Participants and Trustees

Metropolitan Transit Authority Transport Workers Union Pension Plan Local 260, AFL-CIO:

Report on the Financial Statements We have audited the accompanying financial statements of the Metropolitan Transit Authority Transport Workers Union Pension Plan Local 260, AFL-CIO (“Plan”), which comprise the Statements of Plan Net Position as of December 31, 2012 and 2011, and the related Statements of Changes in Net Plan Position for the years then ended, and the related Notes to Financial Statements (collectively, “Plan’s financial statements”). Plan Management’s Responsibility for the Financial Statements Plan’s management is responsible for the preparation and fair presentation of these Plan’s financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”); this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Plan’s financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these Plan’s financial statements based on our audits. We conducted our audits in accordance with the auditing standards generally accepted in the United States of America (“US GAAS”). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the Plan’s financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Plan’s financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Plan’s financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Plan’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 Plan’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 Plan’s management, as well as evaluating the overall presentation of the Plan’s financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion In our opinion, the Plan’s financial statements referred to above present fairly, in all material respects, the financial status of the Plan as of December 31, 2012 and 2011, and changes therein for the years then ended, in accordance with US GAAP. Other Matters Required Supplemental Information US GAAP requires that the management’s discussion and analysis, schedule of funding progress and schedule of employer contributions, as listed in the table of contents, be presented to supplement the Plan’s financial statements. Such information, although not a part of the Plan’s financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the Plan’s financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplemental information in accordance with US GAAS, 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 Plan’s financial statements, and other knowledge we obtained during our audit of the Plan’s financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information

Our audits were conducted for the purposes of forming an opinion on the Plan’s financial statements. The introductory section, other supplemental information (included in the financial section), investment section, actuarial section, and statistical section (collectively “Other Information”), as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the Plan’s financial statements.

The Other Information has not been subjected to the auditing procedures applied in the audit of the Plan’s financial statements and, accordingly, we do not express an opinion or provide any assurance on the Other Information. Houston, Texas July 29, 2013

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Management’s Discussion and Analysis (Unaudited)

This discussion and analysis section provides an overview of the performance of the Plan and should be read in conjunction with the rest of the basic financial statements of the Plan.

The Plan is a single employer, defined benefit plan with the goal of accumulating sufficient assets over time to pay retirement benefits and related operating cost. This goal is accomplished by receiving annual contributions from METRO, investment returns on the Plan’s assets and achieving the remaining actuarial assumptions. Employees do not contribute to the Plan and the Plan does not cover postemployment health care cost. The annual funding requirement and the funded status of the Plan are developed each year from an independent actuarial study. Contributions to the Plan are approved by METRO’s Board of Director as part of METRO’s annual operating budget.

Adequate diversification in both markets and money managers continues to be an important part of the Plan’s investment strategy. During the year, the Trustees removed funds from two money managers and partially from a third. These funds were redistributed to four new money managers. Additional information relating to the Plan’s investment performance and individual money manager’s contributions is located in the Investment Section (Unaudited) of this report.

Financial Highlights

The sustainability of a pension plan is reflected in its actuarial determined funding level which is primarily affected by contributions, earnings on investments, and performance against actuarial assumptions. This analysis covers those three areas for the last three years.

Contributions to the Plan are made exclusively by METRO, the sponsoring entity, through monthly contributions that are based on an independent actuarial report. Contributions for the current and two previous years were:

2012 2011 2010 $ 14,444,476 $ 13,493,652 $ 12,416,849

Increase in contributions is primarily due to lower than expected investment returns and the aging of Plan participants.

Earning on investments is recovering from earlier market declines due to the credit and debt crisis. A significant part of this recovery is due to the Federal Reserve’s commitment to its monetary easing program which supported the markets throughout the year. The Federal Reserve has provided additional transparency, tying increases in the federal funds rate to a 6.5% unemployment rate. While the yield curve steepened in the fourth quarter it still remains well below historical averages. The following three schedules reflect the net appreciation (loss) on investments, market values of investments and related changes for the previous three years. Volatility remains high as reflected in the net appreciation (loss) on investments during the last three years which were:

2012 2011 2010 $ 24,177,917 $ (1,312,402) $ 22,401,396

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Fair value of investments in thousands was:

2012 2011 2010 Domestic equities $ 47,678 $ 59,199 $ 61,249 Mutual fund 26,707 22,511 25,702 Commingled Funds 115,696 82,382 77,937 Total investments $ 190,081 $ 164,092 $ 164,888

Changes in fair value of investments in thousands were:

2012 2011 2010 Domestic equities $ (11,521) $ (2,050) $ 7,734 Mutual fund 4,196 (3,191) 5,218 Commingled Funds 33,314 4,445 11,733 Total investments $ 25,989 $ (796) $ 24,685

The Plan’s funded ratio and balance of the unfunded actuarial accrued liabilities (UAAL) are two key indicators used in evaluating the progress made in accumulating sufficient assets to pay retirement benefit. The funded ratio declined by 2.2% and the UAAL increased by $13,644 or 18.9% between 2011 and 2013. These changes are primarily due to lower than expected actuarial returns on Plan’s investments offset by small demographic gains.

January 1 2013 2012 2011

Funded Ratio 67.9% 68.0% 70.1% Changes (0.1)% (2.1)% (1.4)%

January 1

(000)

2013 2012 2011 UAAL Balance $ 85,698 $ 81,715 $ 72,054 Changes 3,983 9,661 7,353

Starting in 2014 the Plan is required to implement Governmental Accounting Standard No. 67, Financial Reporting for Pension Plans. In addition, in FY2015 METRO, the Plan’s sponsor is required to implement Government Accounting Standards No. 68, Accounting and Financial Reporting for Pensions. Both standards require the use of the entry age actuarial cost method and establishes additional requirements for investment (discount) rate, financial statement presentation, and note disclosures. It is anticipated these change will reduce the Plan’s funded ratio and increase the UAAL balance.

The condensed Statement of Changes in Plan Net Position and related changes for the current and last two years are presented below. They provide an overview of contributions, net investment income, benefit payments, administrative services and changes in the assets that are held for payments of benefits.

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Additions, deductions and nets asset held by the trust for pension benefits for the last three years ended December 31, 2012, 2011 and 2010 were:

2012 2011 2010 Additions Employer contributions $ 14,444,476 $ 13,493,652 $ 12,416,849 Net investment income 25,382,692 (506,247) 23,647,625Total additions 39,827,168 12,987,405 36,064,474

Deductions Paid to Plan members and beneficiaries 13,474,692 12,432,267 11,618,089 Administrative services 192,453 186,582 707,785Total deductions 13,667,145 12,618,849 12,325,874

Change in net position 26,160,023 368,556 23,738,600

Net position – restricted for pension benefits Beginning of the year 167,130,639 166,762,083 143,023,483 End of the year $ 193,290,662 $ 167,130,639 $ 166,762,083

Changes for the last three years ended December 31, 2012, 2011 and 2010 were:

2012 2011 2010 Additions Employer contributions $ 950,824 $ 1,076,803 $ 231,121 Net investment income 25,888,939 (24,153,872) (8,897,930)Total additions 26,839,763 (23,077,069) (8,666,809)

Deductions Paid to Plan members and beneficiaries 1,042,425 814,178 1,059,799 Administrative services 5,871 (521,203) 157,057Total deductions 1,048,296 292,975 1,216,856

Change in net position 25,791,467 (23,370,044) (9,883,665)

Net position – restricted for pension benefits Beginning of the year 368,556 23,738,600 33,622,265 End of the year $ 26,160,023 $ 368,556 $ 23,738,600

During 2012 net investment income improved due to general market conditions and benefit payments and distributions continue to increase as more active employees are electing to retire. Please review the unaudited Investment and Actuarial sections of this report for additional information.

Contact information

If you have questions about this report or need additional information please contact the Director of Accounting, Metropolitan Transit Authority of Harris County, Texas, P.O. Box 61429 Houston, Texas 77208-1429.

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Basic Financial Statements

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Metropolitan Transit Authority Transport Workers Union Pension Plan, Local 260, AFL-CIO

Statements of Plan Net Position December 31, 2012 and 2011

2012 2011 Assets Cash equivalents $ 3,374,871 $ 3,426,031Investments, at fair value: Domestic equities 47,678,241 59,198,924 Mutual fund 26,706,753 22,510,603 Commingled funds 115,695,995 82,382,337Total investments 190,080,989 164,091,864

Interest and dividends receivable 77,724 75,313 Securities in transit - 276,549Total assets 193,533,584 167,869,757

Liabilities and plan net position Accounts payable 198,582 152,102 Securities in transit 44,340 587,016Total liabilities 242,922 739,118

Net position – restricted for pension benefits 193,290,662 167,130,639Total liabilities and plan net position $ 193,533,584 $ 167,869,757

The accompanying notes are an integral part of the Plan’s basic financial statements.

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Statements of Changes in Plan Net Position Years Ended December 31, 2012 and 2011

2012 2011 Additions Employer contributions $ 14,444,476 $ 13,493,652 Investment income Interest and dividends 1,899,115 1,498,725 Net appreciation (loss) on investments 24,177,917 (1,312,402) Investment income 26,077,032 186,323 Less: investment expenses 694,340 692,570 Net investment income 25,382,692 (506,247)

Total additions 39,827,168 12,987,405

Deductions Paid to Plan members and beneficiaries 13,474,692 12,432,267 Administrative services 192,453 186,582Total deductions 13,667,145 12,618,849 Change in net position 26,160,023 368,556Net position – restricted for pension benefits Beginning of the year 167,130,639 166,762,083 End of the year $ 193,290,662 $ 167,130,639

The accompanying notes are an integral part of the Plan’s basic financial statements.

Notes to the 2012 Financial Statements for the Metropolitan Transit Authority Transport Workers Union Pension Plan and Trust Local 260, AFL, CIO

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Notes to the Basic Financial Statements

1. Overview of the Plan

Plan Description

The Metropolitan Transit Authority (METRO) established the Transport Workers Union Pension Plan, Local 260, AFL-CIO (Plan) for the purpose of accumulating funds to pay retirement benefits and certain related administrative costs. This Plan is a single employer, non-contributory defined benefit pension plan which is for employees covered by the collective bargaining agreement. The Plan was closed to new members on October 1, 2012. Retirement benefits are established during periodic negotiations with the Transport Workers Union of America, AFL-CIO and Local 260 of the Transport Workers Union of America, AFL-CIO (Union). Contributions made to the Plan are based on an independent actuarial report which is completed each year.

The Plan provides for monthly normal retirement benefits based on the participant’s years of service but not less than $300 each month. The calculation for the monthly normal retirement benefit is based on the designated dollar amount times the number of credited years of service. The designated dollar amount used to determine the monthly normal retirement benefit is based on date of retirement and as allowed by the Union labor agreement. The most current monthly amounts paid for recent retirees are as follows:

August 1, 2002 through July 31, 2003 $ 50 August 1, 2003 through July 31, 2004 51 August 1, 2004 through July 31, 2005 52 August 1, 2005 through July 31, 2006 53 August 1, 2006 through July 31, 2007 53 August 1, 2007 through January 31, 2009 54 February 1, 2009 through present 60

Participants can only choose monthly distributions. No lump sum payments are available unless the participant has a balance of $5,000 or less.

Plan participants are 100% vested after five years of credited services. Participants become eligible to receive benefits at the earlier of 28 years of credit services or at age 60 with 5 years of credited services. The requirements for early retirement with reduced benefits are that an employee reaches age 55 with 25 years of credited service. In addition, the Plan provides for disability retirement benefits with the requirement being 5 years of credit services. Additional requirements include 5 years of vesting service for vested deferred retirement benefits and for pre-retirement spousal benefits.


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Changes in plan participants between January 1, 2013 and January 1, 2012 were:

Participants 2013 2012 Change Active 2,274 2,504 (230)

Terminated and vested 607 591 16

Receiving benefits

Retired 925 862 63

Disabled 194 205 (11)

Beneficiaries 108 92 16

Total receiving benefits 1,227 1,159 68

Total for all participants 4,108 4,254 (146)

Plan Administration

METRO’s Human Resources Department manages most of the day-to-day activities of the Plan including reviewing retirement options with participants, setting-up retiree payment information with State Street Bank and Trust (payment provider) and responding to retirement questions. The Finance Department provides support that includes administering the overall Plan, preparing financial reports and coordinating and reviewing actuarial information. Administrative services provided by METRO are not charged to the Plan and not reported as cost in the Statements of Changes in Plan Net Position.

The asset custodian is State Street Bank (a federally regulated banking and trust company) which also provides administrative services that include issuing retiree’s monthly checks, lump sum distributions, paying authorized operating expenses and complying with federal tax reporting requirements. The single mutual fund and four commingled funds maintain independent asset custodial accounts and are audited each year. While the Plan is not covered by the Employee Retirement Income Security Act of 1974, it must comply with Texas state law which covers many topics including:

• An actuarial valuation is performed by an entity that meets specific actuarial experience requirements and files with the State Pension Review Board at least every three years.

• The actuary should make recommendations to ensure the actuarial soundness of the plan.

• An independent actuarial audit is completed every five years with the related report filed with the State Pension Review Board 30 days after finalizing.

• Annual financial reports are to be audited by a certified public accountant and filed with the State Pension Review Board within 211 days after the close of the Plan’s fiscal year.

• Investment managers (money managers) must acknowledge in writing their fiduciary responsibilities and must be registered under the Investment Advisors Act of 1940.

• Plan assets are to be kept in an asset custodian account, and money managers (other than banks) cannot be an asset custodian.

• Evaluation of investment services and performance should be done at frequent intervals.


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Funding Policy

METRO’s Board of Directors authorizes the funding of the Plan as part of their annual budgeting processes. METRO will fund each month 1/12 of the annual required contribution (ARC) as calculated each year by an independent actuary. The ARC includes both normal cost and an amount to amortize the unfunded actuarial accrued liability over a 30 year closed period. Plan participants do not contribute to the Plan.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying basic financial statements of the Plan are presented in accordance with generally accepted accounting principles established by the Governmental Accounting Standards Board (GASB), which designates accounting principles and financial reporting standards applicable to State and local governmental units. The accompanying basic financial statements of the Plan include solely the activities of the Plan relating to the accumulation and investment of the net assets and related income necessary to provide the service, disability and death benefits required under the terms of the Plan document.

Basis of Accounting

The basis of accounting is the method by which revenues and expenses are recognized and reported in the Plan’s basic financial statements. The accrual basis of accounting is used by the Plan. Under the accrual basis of accounting, revenues, which include contributions and investment income, are recognized when they are earned and collection is reasonably assured, and expenses are recognized when the liability is incurred. Employer contributions are recognized when due, pursuant to formal commitments according to the Plan document. Benefits paid to members are recognized when paid in accordance with the terms of the Plan.

Cash Equivalents

The Plan considers cash invested by the asset custodian in SSgA U.S. Government Short Term Investment Fund, a commingled fund, as cash equivalents. The balance as of December 31, 2012 was $3,374,871 of which $1,762,910 was available to domestic money managers for the purchase of securities and $1,611,961 was available to the Plan administrator for payment of retirement benefits and operating expenses. Cash equivalents are uninsured and uncollateralized.

Investment Expenses

Investment expenses incurred directly by the Plan include fees paid to the financial advisor, Gray and Company and the four money managers; Brandywine Global Opportunistic Fixed Income, Herndon Capital Management Large Capital Value, GW Capital Inc., Small Capital Equity (U.S.), Morgan Dempsey Capital Management LLC Small/Micro Capital Equity.

Administrative Expenses

Administrative expenses are paid directly by the Plan which includes custodial account, disbursing agent, actuary, audit and legal services. Other support costs necessary for the Plan to effectively operate are provided directly by METRO and not reported in the Statements of Changes in Plan Net Position


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Use of Estimates

The preparation of the Plan’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities at the date of the Plan’s financial statements, revenues and expenses during the reporting period, and disclosures. Accordingly, actual results could differ from these estimates.

Investment Valuation and Income Recognition

Investments in the one international equity mutual fund and four commingled funds are valued based on the Net Asset Value per unit which approximates fair value of the underlying investments on specific valuation dates. If no sales are reported for that day, investments will be valued at the last published sales price, the mean between the last posted bid and ask price or at fair value as determined in good faith by the fund money manager with assistance from their asset custodian or an independent valuation service. Investments made directly in domestic equities are reported at fair value based on a national security exchange. Unrealized gains and losses are presented as net appreciation (loss) in fair value of investments on the statements of changes in plan net position, along with gains and losses realized on sales of investments. Purchases and sales of investments are recorded on the trade date. Dividend income is recorded on the ex-dividend date. Interest and income from other investments are recorded as earned.

3. Actuarial Assumptions

The annual required contribution (ARC) to the Plan is based on actuarial assumptions prepared by an independent actuary based on information furnished by METRO. Actuarial assumptions are evaluated each January 1st using the following key actuarial assumptions:

Schedule of Key Actuarial Assumptions

Valuation date January 1st 2013

Cost method Projected unit credit

Asset valuation method Five-year smoothed market value

Investment rate of return 8.0% per annum

Cost of living adjustments None

Projected salary increase None

Assumed annual retirement rate Varying percentage ranging from 5% to 100% for ages 65 through 70 years

Mortality RP-2000 Combined Mortality with Projection Scale AA to year 2013

Disabled Mortality RP-2000 Disabled Mortality with Projection Scale AA to year 2013

Amortization of gains/losses

Method Level dollars/re-established annually

Period 30 years closed


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Key actuarial assumptions are consistent from the prior year with the exception of a change in the mortality and disabled mortality tables that were updated to reflect projection to year 2013. Additionally, period of amortization of gains/losses changed from 30 years open to 30 years closed.

Actuarial assumptions used in the annual actuarial evaluation process represent the best estimates of Plan management, as approved by the MTA/TWU Union Pension Board of Trustees (Trustees), and reflect a long-term perspective while reducing short-term volatility. Since the ARC to the Plan is based on these actuarial assumptions, including the cost method used by the actuary, any future changes to those assumptions or the cost method, as discussed in notes 7 & 8 to the Plan’s financial statements, may affect the future funded status and funding progress of the Plan.

4. Funded Status and Funding Progress

The Plan’s funded status and funding progress for the last two years in thousands were:

Actuarial Value of Assets

Actuarial Accrued

Liabilities (AAL)

Unfunded Actuarial Accrued

Liabilities (UAAL)

Funded Ratio

Covered Payroll

UAAL as a Percentage of Covered

Payroll January 1, 2013 $ 181,661 $ 267,359 $ 85,698 67.9% $ 91,830 93.3% January 1, 2012 173,838 255,553 81,715 68.0% 94,043 86.9% The Plan’s Schedule of Funding Progress is presented under the required supplementary information on page 24. This schedule presents multiyear trend information about whether the actuarial value of the Plan’s assets are increasing or decreasing over time relative to the AAL for future benefit payments.

5. Investments

Investment Managers

The Plan uses two passive and six active managers in implementing its investment strategy. Domestic equity investments consist of two passive and three active managers. International investments consist of one mutual fund equity manager and two fixed income fund managers. All money managers have accepted, in writing, the responsibilities of a fiduciary.

Direct investment in domestic equity is reflected by ownership of specific stocks. Ownership in the domestic equity index funds, the international mutual equity fund and the two international fixed income funds are based on net asset value of the related fund. While the direct investment in domestic stock can be actively traded, the remaining investments must be redeemed with the issuing fund. Additional information on each money managers and their performance is located in the Investment Section (Unaudited) starting on page 27.


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Value of the Plan’s investments as of December 31, 2012 and 2011 and related changes are as follows:

2012 2011 Change Domestic equities $ 47,678,241 $ 59,198,924 $ (11,520,683) Mutual fund 26,706,753 22,510,603 4,196,150 Commingled Funds 115,695,995 82,382,337 33,313,658 Total investments $ 190,080,989 $ 164,091,864 $ 25,989,125

The Plan’s investment policy limits concentration risk and the Plan did not own any investments of a single issuer whose value exceeded 5 percent of the Plan’s net position.

Types of Investment Risks

Investing has several types of risks some of which include; custodial, credit, investment concentration, foreign currency, and interest rate. The Plan manages these risks by using an independent asset custodian (State Street Bank and Trust Company), compliance monitoring by the financial advisor, reviewing independent financial audits of the mutual and commingled funds, and allocation of investment dollars among eight money managers who operate in separate markets and whose performance is measured using difference indexes.

Asset Custodian

State Street Bank and Trust Company is the Plan’s asset custodian. Investments made by domestic money managers are listed separately while the net asset values for the mutual and commingled funds are reported in total by related money manager. To safeguard the funds underlying investments they used independent asset custodians, issued independently audited annual financial reports and comply with oversight rules issued by government agencies. Additional information for each money manager is located in the Investment Section (Unaudited) starting on page 27 of this report.

Managing investment concentration, credit and foreign currency risk

Domestic

The maximum weighting (at time of purchase) in any one company of the investment manager’s portfolio holdings do not exceed 8% or 5% more than the index weight, whichever is greater.

International

The maximum weighting (at time of purchase) in any one company does not exceed 7%.

Currency hedging, foreign exchange contracts and similar strategies are permitted as part of a defensive strategy to protect the portfolio assets and enhance returns.

Global Fixed Income

The fixed income portfolio may include both domestic and/or international fixed income securities.


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Unless authorized by the Plan in advance and in writing, the minimum quality rating of an investment is BBB-. For an issue that is not rated, the security must be of “equivalent” quality to a BBB- rating or above in the opinion of the investment manager, or the security must be a government bond or a bond of a supranational authority which does not have a recognized credit rating.

The maximum holding (cost basis) in any one security does not exceed 5%, excluding AAA rated sovereign debt.

To manage currency risk, no investment manager shall has exposure to any one currency exceeding 70% for the Euro, 50% for the Japanese Yen, 40% for British Sterling and 25% for others excluding the U.S. Dollar.

Currency hedging, foreign exchange contracts and similar strategies are permitted as part of a defensive strategy to protect the portfolio assets and enhance returns.

Interest Rate Risk

A change in interest rate will affect the underlying value of fixed income investments. Generally, increases in interest rates will reduce the value of the portfolio while decreases will add value. To manage this risk, the Plan’s financial advisor will monitor the duration (the weighted average of time until cash flows are received, measured in years) of each fixed income money manager’s portfolio in relation to the appropriate indexes. Significant variances from the benchmark will be discussed with the Trustees and the related money manager.

GMO Emerging Country Debt Investment Fund PLC duration was 7.6 years and has a policy of managing the portfolio to within +/- 2 years of the duration benchmark used in JPMorgan Emerging Market Bond Index.

Brandywine Global Opportunistic Fixed Income Fund duration was 6.3 years and has a policy of managing the portfolio to within +/- 1.5 years of the duration benchmark used in Barclays Global Aggregate Index.

Additional credit risk disclosure

The two international fixed income (Global Fixed Income) funds invest in developed and emerging markets sovereign debt. While the funds themselves have not been rated by any nationally recognized rating agency, most of their investments are rated as discussed above.

6. Federal Income Tax

The Plan received its latest favorable letter of determination dated July 6, 2012 from the Internal Revenue Service stating that the Fund qualifies as a tax-exempt plan and trust. The Plan’s management believe the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code.

Accounting principles generally accepted in the United States of America require Plan’s management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Plan’s management has analyzed the tax positions


23

taken by the Plan, and has concluded that as of December 31, 2012 and 2011, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the Plan’s financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

7. Risks and Uncertainties

Investments securities are exposed to various risks, as discussed in note 5 above, including market volatility. Significant changes in the value of investments can have a direct and material effect on the net asset value of the Plan and the amount of the unfunded actuarial accrued liabilities. The Trustees have taken steps to minimize these risks by maintaining a diversified investment portfolio and hiring professional money managers and other consultants.

The actuary, as discussed in note 3 above, uses actuarial assumptions when calculating the Plan’s funding requirements, the actuarial present value of accumulated plan benefits and other actuarial information. Due to uncertainties inherent in the estimation and assumptions process, it is at least reasonably possible that changes in these actuarial assumptions in the near term could be material to the Plan’s financial statements

8. Recent Accounting Pronouncements

In June 2012, the GASB issued Statement No. 67, Financial reporting for Pension Plans – An amendment of GASB Statement No. 25. This Statement requires the use of the entry age actuarial cost method and a long-term investment return rate using a yield or index rate on tax-exempt 20-year, AA-or-higher rated municipal bonds when the plan has not accumulated sufficient assets to pay benefits or is not meeting its expected investment return. This Statement is effective for financial statements for fiscal years beginning after June 15, 2012. These requirements will increase the Plan’s future unfunded actuarial accrued liabilities and reduce the Plan’s funded ratio.

In June 2012, GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement No. 27. This standard will be used by the Plan’s sponsor to record and report pension information in their financial statement and must comply with similar provision as listed above. This Statement is effective for fiscal years beginning after June 15, 2014 and it is anticipated that these requirements will increase the Plan’s future unfunded actuarial accrued liabilities and reduce the Plan’s funded ratio reported by the Plan’s sponsor on their Statement of Net Position.

9. Reclassification

Certain amounts reported in the Plan’s prior year financial statements under investments have been reclassified to conform to the current year’s presentation. Consequently, amounts reported under investments decreased by $1,641,297 with a corresponding increase in $1,641,297 under cash equivalents. This change in reclassification had no affect the ending net position of the Plan as of December 31, 2011.

10. Subsequent Events

The Plan’s Management has evaluated subsequent events through July 29, 2013; the date the Plan’s financial statements were available to be issued. No changes were made, or are necessary to be made, to the Plan’s financial statements, as a result of this evaluation.

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Required Supplemental Information

(Unaudited)

Schedule of funding progress of the Plan for the current and each of the previous six years as of January 1 is presented below (US dollars in thousands):

Actuarial Valuation Date


Actuarial Accrued

Liabilities (AAL)


Liabilities (UAAL)

Funded Ratio

Covered Payroll

UAAL as a Percentage of

Covered Payroll

January 1, 2013 $ 181,661 $ 267,359 $ 85,698 67.9% $ 91,830 93.3%

January 1, 2012 173,838 255,553 81,715 68.0% 94,043 86.9%

January 1, 2011 168,964 241,018 72,054 70.1% 93,675 76.9%

January 1, 2010 162,390 227,091 64,701 71.5% 88,184 73.4%

January 1, 2009 131,281 204,685 73,404 64.1% 85,317 86.0%

January 1, 2008 160,889 193,595 32,706 83.1% 84,414 38.7%

January 1, 2007 139,914 172,140 32,226 81.3% 81,287 39.6% Two key measurements in evaluating performance are the unfunded actuarial accrued liabilities and the funded ratio. These measurements indicate how successful the Plan has been in accumulating assets to pay retirees and their beneficiaries. The Plan’s unfunded actuarial accrued liabilities increased since 2007 by $53 million to $86 million or 165.9 percent while the Plan’s funded ration declined from 81.3% to 67.9 or 13.4 percent. This decline is primarily related to investment earning which is not achieving the actuarial investment return of 8%.

Schedule of employer contributions to the Plan for the current and each of the previous six years is presented below (us dollars in thousands):

Plan Year

Annual Required

Contribution Actual

Contribution Percentage Contributed

Investment Return

Equivalent Single

Amortization Period

December 31, 2012 $ 14,444 $ 14,444 100.0% 8% 30 years

December 31, 2011 13,494 13,494 100.0% 8% 30 years

December 31, 2010 12,417 12,417 100.0% 8% 30 years

December 31, 2009 12,186 12,186 100.0% 8% 30 years

December 31, 2008 8,827 8,827 100.0% 8% 30 years

December 31, 2007 8,527 16,527 193.8% 8% 30 years

December 31, 2006 9,402 17,541 186.5% 8% 30 years

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Other Supplemental Information (Unaudited)

Schedule of Investment and Administrative Services for the Years Ended December 31, 2012 and 2011

Type 2012 2011

Investment services

Direct payments to money managers:

Brandywine $ 256,248 $ 288,629

Alliance Bernstein 74,530 139,113

GMO - 22,481

State Street Global Advisor-R1000 7,029 -

Herndon Capital Management 41,078 -

GW Capital 34,465 -

Atlanta Capital 154,902 163,597

Morgan Dempsey 63,088 -

Total of all Money Managers 631,340 613,820

Financial advisor Gray and Company 63,000 78,750

Total investment services 694,340 692,570

Administrative services:

Audit Services – McConnell & Jones LLP 13,700 13,700

Legal counsel- Fulbright & Jaworski 4,522 500 Custodian and disbursement agent – State Street Bank and Trust

142,351 140,908

Actuary- Milliman 34,913 32,526

Other (3,033) (1,052)

Total administrative services 192,453 186,582

Total Investment and administrative services $ 886,793 $ 879,152

Direct administrative support provided by METRO and money manager’s fee associated with the international equity mutual fund and State Street index funds are not included in this schedule.

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27

Investment Section (Unaudited)

Information used to prepare this section of the CAFR came from the investment policy; the year-end performance report provided by Gray and Company and independently audited financial reports for the commingled and mutual fund money managers.

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Overview of the Investment Policy General

The Trustees’ responsibilities include establishing, implementing and updating an investment policy which provides the framework for making and monitoring investment performance. A copy of this policy can be obtained by contacting METRO’s Treasury Department. Key points of the policy include: 1. Establish reasonable expectation, objective and guidelines for the investment of the assets in the

Plan. 2. Create the framework for a well-diversified asset mix that can be expected to generate

achievable long-term returns at a level of risk acceptable to the Plan, including:

• Describing an appropriate risk posture for the investments.

• Specifying broad target asset allocation ranges and constraints.

• Establishing investments guidelines regarding the selection of investments managers, permissible securities and diversification of assets.

• Specifying the criteria for evaluating and reporting on the performance of the Plan’s investment managers.

3. Defines the responsibilities of the Trustees, financial advisor and money managers. 4. Encourage effective communication between all participants. Financial advisor

To assist in implementing the investment policy the Trustees hired, during 2010, Gray and Company as their financial advisor. As the Plan’s financial advisor, Gray and Company is responsible for assisting in updating and implementing the investment policy which includes monitoring compliance, reporting financial results and recommending investment strategies Investment objective

The Trustees invest using a long-term view with the objective of achieving the actuarial rate of return of 8%, net of manager fees and administrative expenses. A period of five to seven years is used in measuring progress toward achieving this objective. Generally, returns on the traditional asset classes within the Plan’s investment pool (Total Domestic Equity and Total Fixed Income) should exceed the return on a composite of non-managed market indices weighted in proportion to the actual structure of the Plan’s portfolio. Generally, the investment portfolio should benefit from active management.

Marketability and investment values

Investments are limited to those that are readily marketable with the exception of certain categories such as real estate, private equity, and certain alternative investments. No investment should be made in non-marketable securities without prior approval from the Trustees.

Asset values are generally established based on national securities exchange with specific valuation approaches discussed within the description of active money managers portion of this section.

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Diversification

To ensure effective diversification the Trustees allocate funds to various asset classes and money managers that invest in different markets using various investment strategies as discussed in the following pages.

To achieve the investment objective, the Trustees can invest in markets based on the following percentages:

Investment

Policy

Domestic equities 25-70% International equities 0-30% Private equities 0-10% Hedge funds 0-20% Real Estate 0-15% Global Fixed Income 20-50% Short-term investments 0-20%

The actual asset allocation as of December 31, 2012, in thousands, complied with the investment guidelines as reflected in the following graph reported in thousands.

Domestic equities consisting of three

active managers and two SSgA index

funds$90,233 or 46.7%

International equities consisting of one mutual fund

$26,707 or 13.8%

Global Fixed Incomeconsisting of two

commingled funds$73,141 or 37.8%

Short-term investments

Cash Equivalents$3,375 or 1.7%

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Current Money Managers

In addition to asset allocation, money managers are essential in earning adequate investment returns. The Plan ended the year with eight money managers that are responsible for implementing the investment policy and related strategy by directly purchasing/selling investments. All money managers are required to accept the role of a fiduciary as defined by the Employee Retirement Income Security Act. To ensure a diversified investment portfolio, the Trustees select money managers that invest in different parts of the worldwide markets using different investment strategies. The Trustees and financial advisor follow a stringent money manager selection process some of which include: evaluating investment strategy and investment team continuity, reviewing performance history, performing on-site visits and conducting multiple interviews. Only upon completion of this process will the Trustees vote on the final selection of a money manager.

During the year all funds were removed from Alliance Bernstein US diversified Large Capital Value, Atlanta Capital High Quality Growth Plus, and some funds from State Street Global Advisors – Russell 2000 Index and allocated to new money managers. New money managers include Herndon Capital Management Large Capital Value, GW Capital Inc., Small Capital Equity, Morgan Dempsey Capital Management LLC Small/Micro Capital Equity, and State Street Global Advisors (SSGA) Russell 1000 Growth Index Fund.

The following information discusses the individual money manager and their investment approaches which include: market segment, investment style and how investments are valued. The discussion also includes information on administrative oversight such as independent audits, asset custodians and regulatory agencies.

Domestic Equity Active Managers

Herndon Capital Management Large Capital Value strategy reflects that true value is defined by companies that trade at a discount to what their fundamentals merit. This product is designed to give exposure to companies which are undervalued versus their peers but have demonstrated the ability to produce better than average market returns. The goal is to outperform the Russell 1000 Value Index over a market cycle with a strong focus on maintaining both quality and liquidity. A rigorous risk management process is applied during construction of the portfolio which is fully invested at all times. The asset custodian is State Street Bank and Trust with investments reported at fair value based on a national securities exchange.

GW Capital Inc., Small Capital Equity strategy combines an emphasis on sector selection and fundamental security analysis. Sectors that are expected to perform well are identified by business and market cycle analysis. Key sector characteristics are improving financial trends and attractive valuation levels. Stocks are selected on the basis of valuation parameters and a qualitative judgment of management’s commitment to enhancing shareholder value. Portfolios show both traditional value holdings (low price/earnings ratio and low price-to-book values), and growth oriented holdings with relatively higher valuations. Smaller companies and those with little institutional ownership or sponsorship are emphasized. The asset custodian is State Street Bank and Trust with investments reported at fair value based on a national securities exchange.

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Morgan Dempsey Capital Management LLC Small/Micro Capital Equity focuses on the area of the market where they can gain a significant advantage through bottom-up, fundamental research. Their ability to pursue micro-cap companies in addition to small-cap stocks provides them with opportunities that are off limits to many larger institutional strategies. The firm pursues companies with strong competitive characteristics and equally strong balance sheets that are selling at a discount to estimated intrinsic value. As a buy-and-hold investor, the firm wants to be a long-term partner with great companies. While they consider themselves value investors, growth is one of the many factors they take into consideration when computing intrinsic value estimates. The asset custodian is State Street Bank and Trust with investments reported at fair value based on a national securities exchange.

Domestic Equity Passive Manager Index Fund (commingled funds)

State Street Global Advisors (SSGA) Russell 1000 Growth Index Fund is managed using a passive (indexing) investment approach by which SSGA attempts to match, before expenses, the performance of the index. SSGA may employ a sampling or optimization technique to construct the portfolio. State Street Bank and Trust is the trustee, asset custodian and record keeper of the fund and has exclusive management and control of the Trust. The annual financial reports were audited by PricewaterhouseCoopers LLP with regulatory oversight provided by the U.S. Office of the Comptroller of the Currency.

State Street Global Advisors Russell (SSGA) 2000 Index Fund is managed using a passive (indexing) investment approach by which SSGA attempts to match, before expenses, the performance of the index. SSGA may employ a sampling or optimization technique to construct the portfolio. State Street Bank and Trust is the trustee, asset custodian and record keeper of the fund and has exclusive management and control of the Trust. The annual financial reports were audited by PricewaterhouseCoopers LLP with regulatory oversight provided by the U.S. Office of the Comptroller of the Currency.

Mutual Fund (international equity)

T. Rowe Price Institutional International Growth Equity Fund (IGEF) is a diversified, open-end management investment company and is one of the portfolios established by T. Rowe Price Institutional International Funds, Inc. and registered under the Investment Company Act of 1940. The IGEF commenced operations on September 7, 1989 and seeks long-term growth of capital through investment primarily in common stocks of established non U.S. companies. Annual financial reports were audited by PricewaterhouseCoopers LLP with JP Morgan Chase London providing asset custodial services.

Investments are valued at fair value as listed or regularly traded on a security exchange or in the case of over-the-counter (OTC) markets are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made, except for OTC Bulletin board securities which are valued at the mean of the latest bid and asked prices. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for the security. Listed securities not traded on a particular day are valued at the mean of the latest bid and asked prices for domestic securities and the last quoted sale price for international securities. This information is used when calculating the net asset value per unit.

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International Fixed Income (commingled funds)

Brandywine Global Opportunistic Fixed Income Fund (BGOFIF) is a separate portfolio of the Brandywine Global Investment Management Trust (the Trust). The Trust was organized on May 1, 2006 by Brandywine Global Investment Management, LLC a corporation organized under the laws of the state of Delaware, and registered as an investment advisor under the Investment Advisor Act of 1940. The Trust was organized with the objective of achieving interest income and long-term capital appreciation by investing in U.S. fixed income and developing and emerging markets sovereign debt securities. Annual financial statements of BGOFIF were audited by Kreischer Miller with Bank of New York Mellon providing accounting and asset custodial services.

Investments are valued at fair value based on market valuations provided by independent pricing services or based on values determined in good faith by the investment advisor. This information is used when calculating the net asset value per unit.

GMO Emerging Country Debt Investment Fund PLC (GMO) is a limited liquidity investment company created under the laws of Ireland as a public limited company pursuant to the Companies Acts, 1963 to 2009. It was incorporated on May 20, 2003, under registration number 371261. The investment objective of GMO is to achieve higher total returns by investing at least 50% of its net assets in government securities of emerging countries, related derivatives securities and in GMO Alpha LIBOR (Offshore), L.P., Series (ALP-B), a Bermuda exempted limited partnership. The fund may also hold securities by investing in other collective investment schemes. Annual financial statements were audited by PricewaterhouseCoopers, Chartered Accountants and Statutory Audit Firm Dublin, Ireland. Asset custodial and administrative services are provided by State Street, Ireland.

Investments are valued at fair value using official closing price or last sales price on the primary exchange or market where the investments are traded. The asset custodian will use State Street Fund Services (Ireland) Limited (the Administrator) to independently determine fair value when information is not available or the amount currently reported may not be representative of fair value. This information is used when calculating the net asset value per share.

Proxy Voting

The Investment Policy requires investment managers to vote in the best interest of the Plan and must be able to support all proxy voting in written format as requested.

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Investment values and results

The following schedules were developed from information provided by the Plan’s financial advisor, Gray and Company and represents information included in the quarterly reporting package provided to the Trustees.

Market values of investments by asset class, market segment and money manager with related changes between 2012 and 2011 were:

Market Value

(000)

Investments 2012 2011 Change

Money managers

Domestic equity

Alliance Bernstein - US Diversified Value Large Capital $ - $ 28,836 $ (28,836)

Atlanta Capital - High Quality Growth Plus Large Capital - 30,363 (30,363)

Herndon Large Capital Value 31,620 - 31,620

GW Capital Small Capital Equity 6,573 - 6,573

Morgan Dempsey Small/Micro Capital Equity 9,485 - 9,485

Total domestic equity 47,678 59,199 (11,521)

Mutual Fund - International equity

T. Rowe Price Institutional International Growth Equity 26,707 22,511 4,196

Commingled Funds

Brandywine- Global Opportunistic Fixed Income 60,859 53,348 7,511

GMO Emerging Country Debt 12,282 9,787 2,495

State Street Global Advisors – Russell 2000 Index 7,131 19,247 (12,116)

State Street Global Advisors – Russell 1000 Growth Index 35,424 - 35,424

Total commingled funds 115,696 82,382 33,314

Total net investments $ 190,081 $ 164,092 $ 25,989

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Asset values and related portfolio percentages by asset class, market segment and money managers as of December 31, 2012 were:

Investments Market Value

Percent of Portfolio

Money managers

Domestic equity Herndon Large Capital Value $ 31,620 16.64

GW Capital Small Capital Equity 6,573 3.46

Morgan Dempsey Small/Micro Capital Equity 9,485 4.99

Total domestic equity 47,678 25.09

Mutual Fund - International equity

T. Rowe Price Institutional International Growth Equity 26,707 14.05

Commingled Funds

Brandywine- Global Opportunistic Fixed Income 60,859 32.01

GMO Emerging Country Debt 12,282 6.46

State Street Global Advisors – Russell 2000 Index 7,131 3.75

State Street Global Advisors – Russell 1000 Growth Index 35,424 18.64

Total commingled funds 115,696 60.86

Total net investments $ 190,081 100.00

The percentage of the portfolio invested in the mutual and commingled funds are reflected in the previous schedule. The ten largest holding of total domestic equity included:

Company Market Value

% of Portfolio

Aflac Inc. $ 1,018,895 2.14

TJX Cos Inc. 919,000 1.93

Federated Investment Inc. 897,544 1.88

Hollyfrontier Corp 892,224 1.87

Marathon Pete Corp 886,536 1.86

Gilead Sciences Inc. 883,089 1.85

Halliburton 870,164 1.83

Altria Group Inc 817,171 1.71

Exxon Mobil Corp 810,714 1.70

Health Mgmt Assoc In 802,788 1.68

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Investment returns

The investment returns are calculating using the geometric method. The total net return for the Plan during the last 10 years was approximately 6.78% which is below the investment policy and actuarial return goal of 8%. The following schedule reports the investment returns for the total Plan and by active money managers as of December 31, 2012. Included in the schedule are investment returns by investments type, segment and with comparisons to their primary benchmark. Net returns for the total Plans were not available for 3 and 5 years.

Periods Ended December 31, 2012

Last Quarter 1 Year 2 Years 3 Years 5 years

Total Returns for the Plan (gross of fees) - - - 10.48 3.47

Total Returns for the Plan (net of fees) 2.16 15.06 7.05 - -

Current Asset Mixed Benchmark 0.99 12.65 6.29 8.34 2.92

Over (under) performance 1.17 2.41 0.76 2.14 0.55

Returns by Money Manager (net of fees)

Herndon Large Capital Value .02 - - - -

The Russell 1000 Value 1.53 - - - -

Over (under) performance (1.51) - - - -

GW Capital Small Capital Equity 5.58 - - - -


Over (under) performance 2.35 - - - -

Morgan Dempsey Small/Micro Capital Equity 3.56 - - - -


Over (under) performance 0.33 - - - -

T. Rowe Price Institutional International Growth Equity 5.59 17.98 1.27 5.45 (1.83)

The MSCI ACWI ex (Net) 5.85 16.83 0.41 3.87 (2.89)

Over (under) performance (0.26) 1.15 0.86 1.58 1.06

Brandywine – Global Opportunistic Fixed Income 2.88 14.08 11.14 11.99 -

The Barclays Global Aggregate (0.48) 4.32 4.98 5.17 -

Over (under) performance 3.36 9.76 6.16 6.82 -

GMO Emerging Country Debt 5.52 25.43 15.83 17.68 -

The JP Morgan – Emerging Market Bond I 3.33 18.53 13.39 13.18 -

Over (under) performance 2.19 6.90 2.44 4.50 -

State Street Global Advisors – Russell 1000 Growth (1.33) - - - -

The Russell 1000 Growth Index (1.31) - - - -

Over (under) performance (0.02) - - - -

State Street Global Advisors – Russell 2000 Index 1.85 16.30 5.56 12.24 3.55

The Russell 2000 1.89 16.34 5.59 12.25 3.56

Over (under) performance (0.04) (0.04) (0.03) (0.01) (0.01)

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The following schedule reflects returns by major asset class:

Gross and Net Composite Returns by Market

SLast Quarter 1 Year 2 Years 3 Years 5 Years

Gross Returns Total Equity Composite 1.55 15.42 4.96 9.10 *

Net of fees 1.49 14.91 4.45 * *

Gross Returns Domestic Equity Composite 0.43 14.51 5.90 9.83 1.50

Net of fees 0.36 14.04 5.44 * *

Gross Returns International Equity Composite 5.59 18.64 1.94 5.98 (1.53)

Net of fees 5.59 17.98 1.27 5.45 (1.83)

Gross Returns Global Fixed Income Composite 3.41 16.27 12.33 13.27 -

Net of fees 3.31 15.84 11.89 - -

* Calculations were not available due to change in financial advisor.

A complete listing of all investments owned by the Plan can be obtained by contacting METRO’s Treasury Department.

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Actuarial Section (Unaudited)

Information presented in this section is from Appendix A and B of the independent actuarial report, prepared by Milliman, with the most recent valuation occurring January 1, 2013. A complete copy of the report can be obtained by contacting METRO’s Treasury Department. Actuarial assumptions and results are reviewed for reasonableness by members of the Trustees and METRO each year during discussions with the actuary. Ultimately, the Trustees and METRO are responsible for selecting the actuarial assumptions used to calculate annual funding requirements, asset values and the balance of the unfunded actuarial accrued liability. State law requires the actuary’s report along with the audited annual financial report be filed each year with the Pension Review Board. In addition, the actuarial assumptions must be independently audited by a different actuary every five years and their report reviewed by the Trustees, Plan’s sponsored, original actuary and filed with the State’s Pension Review Board. Starting in 2014 the Plan will implement Governmental Accounting Standard Board Statement No. 67 Financial Reporting for Pension Plans. This standard will require the use of the entry age actuarial cost method and establishes additional requirements for investment (discount) rate, financial statement presentation and note disclosures. It is anticipated these changes will increase the Plan’s unfunded actuarial accrued liability while reducing its funded ratio.

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39

40

41

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Actuarial assumptions

This section includes information on the Trustees and Plan sponsor’s responsibility for actuarial assumptions; changes to any assumptions, a list of those assumptions, information on Plan participants, and financial experience used in evaluating the progress made in accumulating sufficient assets to pay retirement benefits.

The Trustees and Plan sponsor are responsible for selecting actuarial assumptions that are used to determine annual funding requirements and the Plan’s funded status. To ensure the actuarial assumptions are appropriate, the Trustees has employed Milliman as the Plan’s independent actuary since 2009.

Actuarial assumptions were the same as last year with the exception of the amortization period and open to new member assumptions which are now both closed.

Significant actuarial assumptions Valuation date

January 1 2013

Investment rate of return

8%

Earning progression

None

Explicit provision for expenses

$184,966

Mortality rates

RP 2000 Combined Mortality with Projection Scale AA to year 2013

Disability mortality

RP 2000 Disability Mortality with Projection Scale to AA to year 2013

Marriage rates

a. Percentage married: Male -85%; Female -60%

b. Age difference: Males are assumed to be 3 years older than their spouse.

Optional form of election

None, limited to monthly annuity payments

Actuarial cost method

Projected unit credit

Amortization period and method for the unfunded actuarial accrued liabilities

30 years closed with level dollars

Actuarial value of plan assets uses a 5 year smoothed market value method

4/5 of the gain/(loss) during the year just ended; plus

3/5 of the gain/(loss) during the prior year; plus

2/5 of the gain/(loss) two years prior; plus

1/5 of the gain/loss) three year prior

Actuarial value cannot exceed 120% or be less than 80% of market value

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Disability and withdrawal rates

Disability Rates

Age Male Female Age Withdrawal Rates *

25 .14% .08% 25 8.40%

30 .19% .15% 30 6.28%

35 .26% .25% 35 4.55%

40 .39% .38% 40 3.18%

45 .59% .56% 45 2.12%

50 1.00% .88% 50 1.26%

55 1.77% 1.57% 55 .98%

60 2.78% 1.89% 60 1.96%

64 3.30% 1.90% 64 2.58%

* Higher withdraws rates are assumed during the first three years of employment. Retirement rates

Age Retirement Rates Age Retirement Rates

Under 60 5% 65 75%

60 5% 66 10%

61 5% 67 10%

62 25% 68 10%

63 10% 69 10%

64 10% 70 100%

Information about Participants

Inactive Participants with Deferred Benefits Participants in Pay Status

Age Number of Participants

Monthly Benefit

Age

Number of Participants

Monthly Benefits

<30 4 $ 1,443 <55 78 $ 58,090

30-34 29 11,687 55-59 166 180,721

35-39 45 19,538 60-64 280 291,027

40-44 69 33,508 65-69 357 336,365

45-49 82 43,764 70-74 181 176,315

50-54 140 81,030 75-79 82 57,258

55-59 152 92,011 80-84 41 22,641

60-64 77 49,001 85-89 26 14,261

65 & up 9 5,323 90 & up 16 5,274

Total 607 $ 337,305 Total 1,227 $ 1,141,952

44

Changes in participants from January 1, 2012 to January 1, 2013 were:

Active Participants

Inactive Participants

with Deferred Benefits

Participants in Pay Status

Total Participants as of January 1, 2012 2,504 591 1,159 4,254

Terminated non-vested (134) - - (134)

Terminated vested (28) 28 - -

Died without beneficiary (4) - (33) (37)

Died with beneficiary - - - -

Retired (65) 14 77 -

New participants or beneficiaries - - - -

Re-hired 1 - (1) -

Net data adjustment - 1 24 25

Participants as of December 31, 2012 2,274 607 1,227 4,108

New participants as of January 1, 2013 - - - -

Participants as of January 1, 2013 2,274 607 1,227 4,108

Summary of active participants by age and service years as of January 1, 2013 were:

<1 1-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40 & Total

Age

0-24 - 13 1 - - - - - - - 14

25-29 - 57 30 2 - - - - - - 89

30-34 2 56 44 24 - - - - - - 126

35-39 5 68 52 54 10 - - - - - 189

40-44 3 76 62 81 34 9 - - - - 265

45-49 8 79 82 94 49 59 10 - - - 381

50-54 4 70 57 116 46 75 48 25 4 - 445

55-59 3 53 57 63 46 69 94 39 15 - 439

60-64 1 21 30 52 16 45 50 20 16 - 251

65-69 - 3 2 14 10 10 15 2 4 - 60

70 & up - 2 1 2 2 3 3 2 - - 15

Total 26 498 418 502 213 270 220 88 39 - 2,274

45

Participant valuation data for the last five years were:

Participants Monthly Benefits

Covered Payroll

(000) Valuation Active Deferred Retired Total Retired Deferred

Jan 1, 2013 2,274 607 1,227 4,108 $ 1,141,952 $ 337,305 $ 91,830

Jan 1, 2012 2,504 591 1,159 4,254 1,059,865 326,441 94,043

Jan 1, 2011 2,552 578 1,070 4,200 967,717 315,726 93,675

Jan 1, 2010 2,502 591 1,020 4,113 895,879 325,861 88,184

Jan 1, 2009 2,540 535 972 4,047 812,043 283,804 85,317

*

Participant changes for the last five years were:

Participants Changes

Active Deferred Retired Total Active Deferred Retired Total

Jan 1, 2013 2,274 607 1,227 4,108 (230) 16 68 (146)

Jan 1, 2012 2,504 591 1,159 4,254 (48) 13 89 54

Jan 1, 2011 2,552 578 1,070 4,200 (50) (13) 50 87

Jan 1, 2010 2,502 591 1,020 4,113 (38) 56 48 66

Jan 1, 2009 2,540 535 972 4,047 * * * *

*

No additional members were added since the Plan was closed to new participants as of October 1, 2012. * Valuation data was not available for 2008 due to a change in the Plan’s actuary.

46

Financial Experience

Summary of Key Valuation Results

Actuarial Valuation

For Plan Year Beginning

Participants data January 1, 2013 January 1, 2012

Number of participants

Active 2,274 2,504

Terminated vested 607 591

Retired 925 862

Disabled 194 205

Beneficiaries 108 92

Total participants 4,108 4,254

Total annual compensation $44,388,906 $47,184,896 Assets Market value $193,489,244 $167,130,346 Investment yield in prior year 16.23% 0.1% Actuarial value $181,660,677 $173,837,727 Investment yield in prior year 4.9% 2.8% Actuarial present value Present value of benefits $ 310,673,112 $ 303,473,469

Actuarial value of assets 181,660,677 173,837,727

Unfunded present value of benefits 129,012,435 129,635,742

Actuarial accrued liabilities 267,359,430 255,552,909

Actuarial value of assets 181,660,677 173,837,727

Unfunded actuarial accrued liabilities 85,698,753 81,715,182

Cost and contributions

Normal cost 6,224,683 6,653,635

Past service contribution 7,048,519 6,720,880

(30 years level dollar amortization)

Interest on contribution 1,061,856 1,069,961

Annual required contribution $ 14,335,058 $ 14,444,476

47

Market and Actuarial Values and Returns The estimated investment returns on the market value of assets assumes all cash flows of contributions, benefit payments, and all administrative expenses are paid at mid-year. The estimated investment returns on the market value of assets for the last three years were:

January 1, 2013 January 1, 2012 January 1, 2011

Beginning market value of assets $ 167,130,346 $ 166,762,025 $ 143,023,485

Net non-investment cash flows (710,842) 187,478 97,670

Investment income 27,069,740 180,843 23,640,870

Ending market value of assets $ 193,489,244 $ 167,130,346 $ 166,762,025

Approximate investment return 16.23% 0.11% 16.52%

The estimated investment return on the actuarial value of assets is determined for the schedule of MB of IRS Form 5500 using a simplified formula as specified in the form instructions. It assumes all cash flows of the contributions, benefit payments, and administrative expenses are paid at mid-year. The estimated investment returns on the actuarial value of assets for the last three years were:

January 1, 2013 January 1, 2012 January 1, 2011

Beginning actuarial value of assets $ 173,837,727 $ 168,963,695 $ 162,389,627

Net non-investment cash flows (710,842) 187,478 97,670

Investment income 8,533,792 4,686,554 6,476,398

Ending actuarial value of assets $ 181,660,677 $ 173,837,727 $ 168,963,695

Estimated investment return 4.92% 2.77% 3.99%

The Unfunded Actuarial Accrued Liability represents the balance of the present value of benefits that is allocated to employees’ service before the current plan year and not yet funded. The balances and related components for the last three years were:

Actuarial accrued liability

January 1, 2013

January 1, 2012

January 1, 2011

Active participants $ 122,225,939 $ 120,692,122 $ 117,637,323

Terminated vested participants 21,416,227 20,085,739 18,089,325

Deferred participants 380,480 372,581 343,660

Retired participants 103,437,940 94,302,027 84,778,119

Disabled participants 15,137,208 16,198,451 16,385,651

Beneficiaries 4,761,636 3,901,989 3,784,037

Total 267,359,430 255,552,909 241,018,115

Actuarial value of assets 181,660,677 173,837,727 168,963,695

Unfunded actuarial accrued liabilities $ 85,698,753 $ 81,715,182 $ 72,054,420

48

Normal cost is the amount allocated to the current Plan year under the Plan’s actuarial cost method and for the last three years consisted of:

Normal cost

January 1, 2013

January 1, 2012

January 1, 2011

Withdrawal $ 239,701 $ 267,659 $ 270,625

Early retirement 114,651 126,273 134,886

Unreduced retirement 4,709,360 4,944,155 4,844,427

Death 76,770 82,734 83,559

Disability 899,235 976,344 984,318

Total 6,039,717 6,397,165 6,317,815

Loading for expense 184,966 256,470 250,000

Total normal cost $ 6,224,683 $ 6,653,635 $ 6,567,815

The Actuarial Value of Assets is the market value of assets less a weighted average of asset gains (losses) over a four-year period (five-year smoothing), but not less than 80% nor more than 120% of the market value of the assets. The actuarial value of assets as of January 1, 2013 is determined below.

Actuarial value of assets

Market value of assets as of December 31, 2012 $ 193,489,244 Unrecognized asset gains or losses

a. 80% of gain during plan year ending December 31, 2012 (10,211,333)

b. 60% of loss during plan year ending December 31,2011 7,945,432

c. 40% of gain during plan year ending December 31, 2010 (4,843,976)

d. 20% of gain during plan year ending December 31, 2009 (4,718,690)

Total (11,828,567)

Actuarial value of assets as of January 1, 2013 $ 181,660,677

49

Actuarial (Gain)/Loss for Prior Year

The actuarial (gain)/loss for the prior year is the difference between the expected and actual unfunded actuarial accrued liability as of the beginning of the current plan year and is determined as follows.

Unfunded actuarial accrued liability as of January 1, 2012 $ 81,715,182

Normal cost as of January 1, 2012 6,664,892

Interest on (1) and (2) to end of the plan year 7,070,406

Subtotal 95,450,480

Employer contributions for the plan year 14,444,476

Interest on employer contributions to the end of the plan year 584,857

Subtotal 15,029,333

Changes in actuarial accrued liabilities

Plan amendment -

Change in actuarial assumption -

Changes in cost method -

Total -

Expected unfunded actuarial accrued liability as of January 1, 2013 80,421,147

Actual unfunded actuarial accrued liability as of January 1, 2013 85,698,753

Actuarial (gain)/loss for the prior year plan $ 5,277,606

Demographic experience (gain)/loss from prior years $ (1,543,339)

Actuarial value of assets (gain)/loss for prior years 6,820,945

$ 5,277,606

50

Solvency Test

Actuarial Accrued Liability (AAL) Portion of AAL Covered by Assets (1) (2) (3) (4) (5) (1) (2) (3) (4)

Valuation Date

January 1

Active Member

Contributions

Retirees and Beneficiaries

Active and Inactive Members (ER

Financed Portion)

Total

Actuarial Value

of Assets

2013 $ - $ 123,336,784 $ 144,022,646 $ 267,359,430 $ 181,660,667 N/A 100% 40.5% 67.9% 2012 - 114,402,467 141,150,442 255,552,909 173,837,727 N/A 100% 42.1% 68.0% 2011 - 104,947,807 136,070,308 241,018,115 168,963,695 N/A 100% 47.0% 70.1% 2010 - 98,480,190 128,610,649 227,090,839 162,389,627 N/A 100% 49.7% 71.5% 2009 - 89,655,474 115,029,390 204,684,864 131,281,462 N/A 100% 36.2% 64.1%

Information for 2008 was not available due to change in actuaries.

51

Schedule of Funding Progress in thousands

Actuarial Valuation Date


Actuarial Accrued

Liabilities (AAL)


Liabilities (UAAL)

Funded Ratio

Covered Payroll

UAAL as a Percentage of

Covered Payroll

January 1, 2013 $ 181,661 $ 267,359 $ 85,698 67.9% 91,830 93.3%

January 1, 2012 173,838 255,553 81,715 68.0% 94,043 86.9%

January 1, 2011 168,964 241,018 72,054 70.1% 93,675 76.9%

January 1, 2010 162,390 227,091 64,701 71.5% 88,184 73.4%

January 1, 2009 131,281 204,685 73,404 64.1% 85,317 86.0%

January 1, 2008 160,889 193,595 32,706 83.1% 84,414 38.7%

January 1, 2007 139,914 172,140 32,226 81.3% 81,287 39.6%

January 1, 2006 121,483 164,424 42,941 73.9% 82,900 51.8%

January 1, 2005 104,180 146,044 41,864 71.3% 87,157 48.0%

January 1, 2004 98,135 131,147 33,012 74.8% 87,119 37.9%

January 1, 2003 89,273 118,565 29,292 75.3% 84,370 34.7%

January 1, 2002 82,865 105,012 22,147 78.9% 81,573 27.1%

January 1, 2001 75,549 94,382 18,833 80.0% 78,251 24.1%

January 1, 2000 65,213 85,739 20,526 76.1% 78,611 26.1%

January 1, 1999 54,904 70,065 15,161 78.4% 68,412 22.2%

January 1, 1998 45,671 63,992 18,321 71.4% 69,324 26.4%

January 1, 1997 37,528 59,629 22,101 62.9% 68,933 32.1%

January 1, 1996 32,595 48,038 15,443 67.9% 67,953 22.7%

January 1, 1995 27,895 44,101 16,206 63.3% 61,255 26.5%

Analysis of the dollar amounts of actuarial value of assets, actuarial accrued liability and unfunded actuarial accrued liability in isolation can be misleading. Expressing the actuarial value of assets as a percentage of the actuarial accrued liability provides one indication of the Plan’s 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 the percentage the stronger is the Plan. Trends in unfunded actuarial accrued liability and covered payroll are both affected by inflation. Expressing the unfunded actuarial accrued liability as a percentage of covered payroll approximately adjusts for the effects of inflation and aids analysis of the Plan’s progress made in accumulating sufficient assets to pay benefits when due. Generally, the smaller the percentage the stronger is the Plan. Selection of the investment return rate and actuarial cost method will significantly affect the value of the actuarial accrued liabilities.

52

Schedule of Contributions in thousands

Calendar Year

Annual Required

Contribution Actual

Contribution Percentage Contributed

Investment Return

Equivalent Single

Amortization Period

December 31, 2012 $ 14,444 $ 14,444 100.0% 8% 30 years

December 31, 2011 13,494 13,494 100.0% 8% 30 years

December 31, 2010 12,417 12,417 100.0% 8% 30 years

December 31, 2009 12,186 12,186 100.0% 8% 30 years

December 31, 2008 8,827 8,827 100.0% 8% 30 years

December 31, 2007 8,527 16,527 193.8% 8% 30 years

December 31, 2006 9,403 17,541 186.5% 8% 30 years

December 31, 2005 9,959 18,759 188.4% 8% 30 years

December 31, 2004 8,420 8,420 100.0% 8% 30 years

December 31, 2003 6,979 6,979 100.0% 8% 30 years

December 31, 2002 5,488 5,488 100.0% 8% 30 years

December 31, 2001 4,969 4,969 100.0% 8% 30 years

December 31, 2000 5,538 5,538 100.0% 8% 30 years

December 31, 1999 4,706 4,706 100.0% 8% 30 years

December 31, 1998 5,134 5,134 100.0% 7% 30 years

December 31, 1997 4,752 4,831 101.7% 7% 30 years

December 31, 1996 3,288 3,448 104.9% 7% 30 years

December 31, 1995 3,200 3,200 100.0% 7% 30 years

53

Statistical Section

(Unaudited)

The statistical section provides additional financial trend and participants was developed from information provided by the Plan’s administrator, actuarial and audited financial reports.

54


Schedules of Payments to Participants Approximate average annuity benefit payments during the last ten years were:

Participants Receiving Benefits

Approximate Average Annual Benefit (000)

Payments (000)

End of Year

December 31 2012 1,227 $ 13,475 $ 10,982

December 31 2011 1,159 12,432 10,726

December 31 2010 1,070 11,618 10,858

December 31 2009 1,020 10,558 10,351

December 31 2008 972 9,403 9,674

December 31 2007 950 9,290 9,779

December 31 2006 951 8,265 8,691

December 31 2005 843 6,213 7,370

December 31 2004 746 5,692 7,630

December 31 2003 662 4,960 7,492

Participants receiving benefits continue to increase as more employees are reaching eligible retirement age. Benefits are based on a fixed rate multiplied by years of service as listed below. The Plan was closed to new participants on October 1, 2012

August 1, 2002 through July 31, 2003 $ 50 August 1, 2003 through July 31, 2004 51 August 1, 2004 through July 31, 2005 52 August 1, 2005 through July 31, 2006 53 August 1, 2006 through July 31, 2007 53 August 1, 2007 through January 31, 2009 54 February 1, 2009 through present 60

55


Schedule of Participants for Ten Years

For the Last Ten Years as of January 1, 2013

Participants 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

Active 2,274 2,504 2,552 2,502 2,540 2,464 2,444 2,447 2,673 2,780

Terminated and vested 607 591 578 591 535 434 326 323 284 267

Receiving benefits

Retired 925 862 777 899 824 950 951 843 746 662

Disabled 194 205 205 53 53 - - - - -

Beneficiaries 108 92 88 68 95 - - - - -

Total receiving benefits 1,227 1,159 1,070 1,020 972 950 951 843 746 662

Total participants 4,108 4,254 4,200 4,113 4,047 3,848 3,721 3,613 3,703 3,709

Retired and disabled was not separately identified in actuarial reports prior to 2009.

56


Statements of Changes in Plan Net Position for 10 Years From December 31, 2012 to December 31, 2003

2012 2011 2010 2009 2008 Additions Employer contributions $ 14,444,476 $ 13,493,652 $ 12,416,849 $ 12,185,728 $ 8,826,606 Investment income Interest and dividends 1,899,115 1,498,725 1,246,229 1,532,692 2,958,370 Net appreciation (loss) on investments 24,177,917 (1,312,402) 22,401,396 31,012,863 (54,088,497) Investment income 26,077,032 186,323 23,647,625 32,545,555 (51,130,127) Less investment services 694,340 692,570 - - - Net investment income 25,382,692 (506,247) 23,647,625 32,545,555 (51,130,127)Total additions 39,827,168 12,987,405 36,064,474 44,731,283 (42,303,521) Deductions Paid to Plan members and beneficiaries 13,474,692 12,432,267 11,618,089 10,558,290 9,403,082 Administrative services 192,453 186,582 707,785 550,728 670,387Total deductions 13,667,145 12,618,849 12,325,874 11,109,018 10,073,469 Change in net position 26,160,023 368,556 23,738,600 33,622,265 (52,376,990)

Net position – restricted for pension benefits Beginning of the year 167,130,639 166,762,083 143,023,483 109,401,218 161,778,208 End of the year $ 193,290,662 $ 167,130,639 $ 166,762,083 $ 143,023,483 $ 109,401,218

Source: Annual audited financial reports Prior to 2011 investment expenses were included as part of Administrative expenses

(Continued on next page)

57


Statements of Changes in Plan Net Position for 10 Years From December 31, 2012 to December 31, 2003

2007 2006 2005 2004 2003 Additions to plan net assets Employer contributions $ 16,527,492 $ 17,540,722 $ 18,761,661 $ 8,419,726 $ 6,979,317 Investment income Interest and dividends 3,636,856 3,266,399 2,876,475 2,127,453 2,025,325 Net appreciation (loss) on investments 6,356,175 12,082,677 3,871,198 5,863,250 13,910,372 Investment income 9,993,031 15,349,076 6,747,673 7,990,703 15,935,697 Less investment services - - - - - Net investment income 9,993,031 15,349,076 6,747,673 7,990,703 15,935,697Total additions 26,520,523 32,889,798 25,509,334 16,410,429 22,915,014 Deductions Paid to Plan members and beneficiaries 9,289,658 8,265,265 6,212,595 5,691,916 4,960,281 Administrative services 603,156 535,480 468,113 443,037 367,384Total deductions 9,892,814 8,800,745 6,680,708 6,134,953 5,327,665 Change in net position 16,627,709 24,089,053 18,828,626 10,275,476 17,587,349

Net position – restricted for pension benefits Beginning of the year 145,150,499 121,061,446 102,232,820 91,957,344 74,369,995 End of the year $ 161,778,208 $ 145,150,499 $ 121,061,446 $ 102,232,820 $ 91,957,344

Source: Annual audited financial reports Prior to 2011 investment expenses were included as part of Administrative expenses

STATE PENSION REVIEW BOARD OF TEXAS

The State Pension Review Board (PRB) has received and reviewed the documentation you recently

submitted. At this time, your plan is currently in compliance with Government Code §802.103 and

§802.104 and we have updated our records based on this information.

The membership and assets information is displayed on two tables on the following page; please review

the information in order to verify that it is correct. The third table shows the dates of the most recent

actuarial valuation, benefits summary and investment policy that have been received by our office for your

plan. If any of these documents have been updated, please submit the most recent copy to our office.

Please feel free to contact our office at one of the numbers shown below if you have any questions

regarding the information shown.

Sincerely,

State Pension Review Board

(800) 213-9425

(512) 463-1736

7/31/2013

Houston MTA Workers Union Pension Plan

PO Box 61429

Houston, TX 77208

Houston MTA Workers Union Pension Plan

7/31/2013

Page 2

Membership Information

Total Members 4,108

Total Annuitants 1,227

Asset Breakdown

If any of these documents have been updated, please submit the most recent copy to our office

Investment Policy 8/8/2008

Actuarial Valuation 1/1/2012

Benefit Summary 8/1/2004

Most recent date on file with the PRBDocument

Total Net Assets $193,290,662.00

Liabilities $242,922.00

Cash $3,374,871.00

Equities $47,678,241.00

Mutual Funds $142,402,748.00

Receivables $77,724.00

Documents

Metropolitan Transit Authority Transport Workers Union ... · METROPOLITAN TRANSIT AUTHORITY TRANSPORT WORKERS UNION PENSION PLAN LOCAL, 260, AFL-CIO 1900 Main St. Houston, TX 77002