DART Employees’ Defined Benefit Retirement Plan and Trust · DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAN AND TRUST STATEMENTS OF FIDUCIARY NET POSITION September 30, 2018

DART Employees’ Defined Benefit Retirement Plan and Trust

Financial Statements as of and for the Years Ended September 30, 2018 and 2017

DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAND AND TRUST FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED

SEPTEMBER 30, 2018 AND 2017

TABLE OF CONTENTS

Page

INDEPENDENT AUDITOR’S REPORT ..................................................................................................................... 1

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED):

MANAGEMENT’S DISCUSSION AND ANALYSIS .............................................................................................. 3

BASIC FINANCIAL STATEMENTS:

STATEMENTS OF FIDUCIARY NET POSITION .................................................................................................... 5 STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION ........................................................................... 6 NOTES TO FINANCIAL STATEMENTS .................................................................................................................. 7

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED):

SCHEDULE OF DART’S NET PENSION LIABILITY .......................................................................................... 18 SCHEDULE OF CHANGES IN DART’S NET PENSION LIABILITY ................................................................. 18 SCHEDULE OF DART’S CONTRIBUTIONS ........................................................................................................ 19 SCHEDULE OF INVESTMENT RETURNS ........................................................................................................... 19

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION ........................................................................... 19

Crowe LLP Independent Member Crowe Global

1.

INDEPENDENT AUDITOR'S REPORT

Board of Directors Dallas Area Rapid Transit Dallas, Texas

Report on the Financial Statements

We have audited the accompanying financial statements of the DART Employees’ Defined Benefit Retirement Plan and Trust (the Plan), as of and for the years ended September 30, 2018 and 2017, and the related notes to the financial statements, which collectively comprise the Plan’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the plan net position of the Plan as of September 30, 2018 and 2017, and the changes in plan net position for the years then ended in accordance with accounting principles generally accepted in the United States of America.

2.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Required Supplementary Information as identified in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic 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.

Crowe LLP

Dallas, Texas April 26, 2019

DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAN AND TRUST MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

SEPTEMBER 30, 2018 and 2017 (In Thousands)

3.

As management of Dallas Area Rapid Transit (DART), we offer readers of the DART Employees’ Defined Benefit Retirement Plan and Trust (the “Plan”) financial statements this narrative overview and analysis of the financial activities of the Plan for the fiscal years ended September 30, 2018 and 2017.

FINANCIAL HIGHLIGHTS

Net Position of the Plan was $186,845 as of September 30, 2018 compared to $180,355 as of September 30,2017.

The Plan’s total Net Position increased by $6,490 from 2017 to 2018 compared to an increase of $12,021 from2016 to 2017.

Benefit payments and administrative expenses increased by $620 from 2017 to 2018 compared to an increase of$2,150 from 2016 to 2017.

Employer and employee contributions didn’t change from 2017 to 2018 compared to an increase of $783 from2016 to 2017.

The Plan’s total net investment income is $10,679 in 2018 compared to $15,590 during 2017, a decrease of$4,911 from 2017 to 2018 compared to a decrease of $478 from 2016 to 2017.

OVERVIEW OF THE FINANCIAL STATEMENTS

The discussion and analysis is intended to serve as an introduction to the Plan’s financial statements. The Plan’s financial statements are composed of financial statements and notes to the financial statements.

Financial Statements. The financial statements are designed to provide readers with an overview of the Plan’s finances.

The Statements of Fiduciary Net Position present information on all of the Plan’s assets and liabilities, with the difference between the two reported as Net Position. Over time, increases or decreases in Net Position may serve as a useful indicator of whether the financial position of the Plan is improving or weakening.

The Statements of Changes in Fiduciary Net Position present information showing how the Plan’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, some items reported in this statement will only result in cash flows in future fiscal periods.

Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the financial statements.

FINANCIAL ANALYSIS

As noted earlier, net position may serve over time as a useful indicator of the Plan’s financial position. In the case of the Plan, assets exceeded liabilities by $186,845 at September 30, 2018 and $180,355 at September 30, 2017.

The Plan’s assets include cash and cash equivalents (4%), and investments (96%) as of September 30, 2018 compared to cash and cash equivalents (3%), and investments (97%) as of September 30, 2017. These assets are held in trust for pension benefits.

DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAN AND TRUST MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

SEPTEMBER 30, 2018 and 2017 (In Thousands)

4.

The Plan’s net position increased by $6,490 from 2017 to 2018 compared to an increase of $12,021 from 2016 to 2017. The following table shows a summary of Plan Net Position.

Plan Net Position

2018 2017 2016 Total assets (cash, cash equivalents, receivables, and investments)

$187,551 $181,233 $168,863

Total liabilities (706) (878) (529) Net Pension Position $186,845 $180,355 $168,334

The following table shows a summary of Changes in Plan Net Position for the fiscal years ended September 30, 2018 and 2017 with comparative information for 2016. Investment income reflects the net investment gain or loss in stocks, governmental securities, and corporate bonds.

Changes in Plan Net Position

2018 2017 2016 Investment income, net $10,679 $15,590 $16,068 Employer and employee contributions 10,002 10,002 9,219 Total additions 20,681 25,592 25,287 Benefit payments and administrative expenses (14,191) (13,571) (11,421) Net increase in Plan Net Position 6,490 12,021 13,866 Beginning Net Position 180,355 168,334 154,468 Ending Net Position $186,845 $180,355 $168,334

REQUESTS FOR INFORMATION

This financial report is designed to provide a general overview of the Plan’s finances. If you have questions concerning any of the information provided in this report or need additional financial information, contact the Chief Financial Officer at Dallas Area Rapid Transit, 1401 Pacific Avenue, P.O. Box 660163, Dallas, TX 75266-7220.

DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAN AND TRUST STATEMENTS OF FIDUCIARY NET POSITION

September 30, 2018 and 2017 (In Thousands)

5.

2018 2017 ASSETS

Cash and cash equivalents $7,170 $4,994

Accounts receivable, investments in-transit - 76

Other receivables 3 -

Investments at fair value (Note 3)

Equity investments 93,260 91,937

Fixed income 68,630 67,716

Real estate investments 18,488 16,510

Total investments 180,378 176,163

TOTAL ASSETS 187,551 181,233

LIABILITIES

Accounts payable, investment management, accrued benefits, and administrative fees

181 771

Accounts payable, investments in-transit 525 107

TOTAL LIABILITIES 706 878

NET POSITION RESTRICTED FOR PENSIONS $186,845 $180,355

The accompanying notes are an integral part of these statements.

DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAN AND TRUST STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION

For the Years Ended September 30, 2018 and 2017 (In Thousands)

6.

2018 2017

ADDITIONS:

Investment income:

Net investment gain $7,584 $13,219

Interest and dividends 3,570 3,056 Investment manager fees (475) (685)

Total investment income, net 10,679 15,590

Contributions:

Employer 10,000 10,000

Employee 2 2

Total contributions 10,002 10,002

Total additions 20,681 25,592

DEDUCTIONS:

Benefit payments 14,107 13,471

Administrative expenses 84 100

Total deductions 14,191 13,571

NET INCREASE IN NET POSITION 6,490 12,021

NET POSITION:

BEGINNING OF YEAR 180,355 168,334

END OF YEAR $186,845 $180,355

The accompanying notes are an integral part of these statements.

DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS


7.

1. DESCRIPTION OF THE PLAN

The following description of the DART Employees' Defined Benefit Retirement Plan and Trust (the “Plan”) isprovided for general information purposes only. Participants should refer to the Plan Document for more detailedinformation.

General – The Plan is a single-employer defined benefit pension plan that was designed to provide retirement,death, and disability benefits to certain employees of Dallas Area Rapid Transit (“DART”). Participants of thePlan are those employees who, as of September 30, 1995, were covered under one of three predecessor plans, DallasTransit System Retirement Plan A (“Plan A”), Dallas Transit System Retirement Plan B (“Plan B”) and DallasTransit System Employees Retirement Plan. The three predecessor plans were amended, restated, and consolidatedinto this Plan, effective October 1, 1995. No new employees are eligible to participate in the Plan.

Plan Membership – At October 1, 2018, the Plan's membership consisted of 1,149 total members; 212 activeemployees and 796 retirees and beneficiaries collecting benefits, and 141 terminated vested participants not yetreceiving benefits. At October 1, 2017, the Plan's membership consisted of 1,163 total members; 245 activeemployees and 768 retirees and beneficiaries collecting benefits, and 150 terminated vested participants not yetreceiving benefits.

Pension Benefits at Normal Retirement Date – A participant may elect normal retirement at age 60. Under normalretirement, a participant is entitled to monthly benefits equal to: 1) 2% times the number of years of credited serviceup to October 1, 1983; 2) plus 1.5% times the number of years of credited service after October 1, 1983 (2% forparticipants who are required to make contributions); 3) and the sum multiplied by the participant's final averagemonthly compensation.

A participant may elect early retirement at age 55 and completion of 10 years of credited service (30 years ofcredited service in the case of a participant who was in Plan A on September 30, 1995). Monthly income underthis election will equal normal retirement benefits reduced by 5/12 of 1% for each full month by which theparticipant's early retirement date precedes the normal retirement date. Participants may also elect a distributionoption to receive 20% of the monthly benefit as a lump-sum payment and 80% as an annuity.

Disability and Death Benefits – "Disabled" or "Disability" means the participant has terminated employment dueto a physical or mental condition that results in the participant being awarded disability retirement benefits by theSocial Security Administration. A participant who becomes disabled after completion of ten years of creditedservice, or whose disability is service related, will receive benefits earned through the date of termination. If thedisability is service-related, there is a minimum monthly benefit equal to 20% of final average monthlycompensation. Beneficiaries of participants who die after completion of ten years of credited service or whosedeath is service related will receive benefits equal to 50% of the reduced amount that would have been payable tothe participant based on the assumption that the participant lived until Normal Retirement Date, retired, and electedthe Joint and Fractional Survivor Election. If death is service related, there is a minimum monthly benefit equal tothe greater of 20% of final average monthly compensation or $250.

Contributions – Participants in Plan A on September 30, 1995, are required to contribute 3% of their base monthlysalaries to the Plan. DART's contribution amount to the Plan is actuarially determined each year. The contributionamount is determined using the minimum funding standard under IRC Section 412 as it existed in 1986. The actualcontributions and percentage of covered payroll for the years ended September 30, 2018, and 2017, were as follows:

2018 2017 Amount % of covered payroll Amount % of covered payroll

Contributions: DART $10,000 69.77 $10,000 63.93

Employees 2 0.01 2 0.01 Total $10,002 69.78 $10,002 63.94



8.

Vesting – Participants vest after 10 years of credited service. A participant who was in Plan A on September 30, 1995 must complete 20 years of credited service and attain age 50 before termination of employment to be vested. A vested participant who terminates employment is eligible for benefits deferred to the normal retirement date based on benefits earned through date of termination or early retirement if the participant attains age 55 and 10 years of service. A participant who was in Plan A on September 30, 1995 is eligible for deferred benefits if he/she attains age 50 and had completed 20 years of service before termination of employment.

Plan Administration – The Plan is administered by a Plan Committee consisting of five members: two persons appointed by the Chairman of the DART Board, two persons elected by Plan participants, and one person appointed by the President/Executive Director of DART. Investment manager fees and substantially all administrative expenses are paid by the Plan. The administrative expenses include trustee, actuary, legal, and pension consulting fees.

Plan Amendment – The Employer has the right to amend the Plan to the extent that it may deem advisable, provided; that no such amendment shall impair or adversely affect the right of any Participant which has matured, and no such amendment shall increase the duties or responsibilities of the Trustee without its consent given in writing.

Plan Termination – While the employer has not expressed any intent to discontinue the Plan, it may do so following approval of the DART Board. In the event the Plan is terminated, participants and their beneficiaries shall be entitled to benefits accrued.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting – The accompanying financial statements are prepared on the accrual basis of accounting.Employer contributions are recognized within the fiscal year contributions are due. Benefits are recognized whendue and payable according to the terms of the Plan agreement. The Northern Trust Company (‘Trustee”) has trusteeresponsibilities for the Plan. Investment transactions are accounted for on the trade-date basis (date the investmentsare purchased or sold). The specific identification method is used by the Trustee to determine the cost ofinvestments sold. Realized and unrealized gains and losses are calculated using the revalued cost method.

Investments – The Plan’s investments are stated at fair value. If available, quoted market prices are used to valueinvestments. Shares of mutual funds are valued at the value of shares held by the Plan at year end. The fair valueof the common collective trust investments and of the other investment funds is estimated by the issuer based onthe fair value of the underlying investments.

Estimates – The preparation of financial statements in conformity with generally accepted accounting principlesrequires the Plan Administrator to make estimates and assumptions that affect certain reported amounts anddisclosures. Actual results may differ from those estimates.

Risks and Uncertainties - The Plan invests in various investment securities. Investment securities are exposed tovarious risks such as interest rate, market, and credit risks. Due to the level of risk associated with certaininvestment securities, it is at least reasonably possible that changes in the values of investment securities will occurin the near term and such changes could materially affect the amounts reported in the Statements of Fiduciary NetPosition available for benefits.

The actuarial accrued liability is calculated based on certain actuarial assumptions. Plan contributions are alsocalculated and made based on certain actuarial assumptions. These assumptions pertaining to interest rates, inflationrates and employee demographics are subject to change. Due to uncertainties inherent in the estimations andassumptions process, it is at least reasonably possible that changes in these estimates and assumptions in the nearterm would be material to the financial statements.



9.

3. INVESTMENTS

Investment Policy – The Plan’s policy with respect to allocation of invested assets is established and can be amendedby the Plan Committee by a majority vote of its members. The Plan Committee’s adopted asset allocation as ofSeptember 30, 2018 is follows:

Target Allocation U.S. Market Equities 39% International Equity 10% Global Bonds 40% Real Estate 10% Cash 1%

The Plan invests in a variety of investments selected to meet the objectives of the Plan. Net investment income is credited to the individual investments based upon average monthly balances invested by each one. The assets consist of funds managed by several investment management firms. The following is a description of the investment objectives of each fund held or firm that managed or held investments during the current year per the firm’s investment management agreement or the fund’s objectives:

Garcia Hamilton Intermediate Fixed Income Portfolio and CS McKEE Intermediate Government / Credit FixedIncome portfolio invest in government agency bonds, mortgage-backed bonds, and corporate bonds.

Ryan Labs Intermediate Market Enhanced Fixed Income Portfolio invests in investment-grade fixed incomesecurities.

Brandywine Global Opportunities Bond Fund and Guggenheim Macro Opportunities Fund invests in investment-grade fixed income securities of companies that are located globally.

Earnest Partners, US Total Market Index NL Fund, and Seizert Capital Partners Large Cap Core Equity investin domestic stocks providing current income and capital growth potential.

First Eagle Investment Management International All Cap Value Equity, Oppenheimer International GrowthFund, and Jo Hambro Funds invests primarily equity securities of companies that are located outside of theUnited States.

Northern Trust S&P 400 Mid Cap Index Fund invests in mid-cap company stocks in approximately the sameproportions as the Standard & Poor’s 400 Index. The primary objective is to provide investment results thatapproximate the aggregate performance of the Standard & Poor’s 400.

TerraCap Partners III hold investments in a pooled real estate fund of diversified properties.

The Vanguard REIT ETF seeks to track the performance of the MSCI US REIT Index. REITSs in the indexmust have a market value of at least $100 million and adequate share and trading volume to be considered liquid.The index consists of Equity REITS, which own and manage real estate properties such as retail, residentialapartment, and industrial spaces. They generate income from rental and lease payments and offer potential forgrowth from property appreciation. Mortgage REITS and Hybrid REITS are not included in the index.

Intercontinental U.S. Real Estate Investment Fund is an open-ended commingled fund with an enhanced coreinvestment strategy that includes all property types. Its primary focus is on general contracting and engineering.

American Strategic Value Realty Fund is an open-ended value-added real estate commingled fund that investsin property types located in target market opportunities to add value at different stages. The goal is to providesolid performance and minimize losses.



10.

The following table shows the allocation of the Plan's total investments as of September 30, 2018 and 2017, and the allocation of Changes in Net Position for the years then ended.

INVESTMENTS 2018 2017

Fixed income investments:

Fixed income separately managed accounts:

Garcia Hamilton Intermediate Fixed Income Portfolio $35,683 * $25,021 *

CS McKee Intermediate Government / Credit Fixed Income Portfolio - 21,603 *

Ryan Labs Intermediate Market Enhanced Fixed Income Portfolio 21,092 *

35,683 67,716

Fixed Income common collective trust funds:

Brandywine Global Opportunities Bond Fund 16,060 * -

Guggenheim Macro Opportunities Fund 16,887 * -

32,947 -

Total fixed income investments 68,630 67,716

Equity investments: Stock common collective trust funds:

US Total Market Index NL Fund 15,461 * 15,445 *

Northern Trust S&P 400 Mid Cap Index Fund 24,492 * 24,500 *

Stock mutual funds:

Oppenheimer International Growth 5,802 5,912

First Eagle Investment Management International All Cap Value Equity 7,463 7,518

Separately managed accounts: Jo Hambro 6,567 6,013 Earnest Partners portfolio 15,104 * 14,925 * Seizert Capital Partners Large Cap Core Equity 18,371 * 17,624 *

Total separately managed accounts 40,042 38,562 Total equity investments 93,260 91,937 Real estate investments: TerraCap Partners III 2,121 2,370 Intercontinental U.S. Real Estate Investment Fund 9,192 - Real Estate Separate Account – Vanguard REIT ETF American Strategic Value Realty Fund

5,437 1,738

14,140 -

*

Total real estate investments 18,488 16,510 TOTAL INVESTMENTS $180,378 $176,163

Net appreciation (depreciation) in fair value of investments:

Fixed income investments $(1,947) $(1,373)

Equity investments, including stock mutual funds 9,531 14,592

Net appreciation in fair value of investments 7,584 13,219

Interest and dividends 3,570 3,056

Investment manager fees (475) (685)

NET INVESTMENT INCOME $10,679 $15,590

* Represents five percent or more of the Plan’s net position



11.

Rate of Return - The money-weighted rate of return for the Plan investments for the Plan years ended September 30, 2018 was 5.99% compared to 9.36% as of September 30, 2017. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Credit Risk – Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. This risk is measured by the assignment of credit rating by nationally recognized rating agencies such as S&P and Moody’s. The following tables show the rating of the Plan’s investments as of September 30, 2018 and 2017.

Credit Rating as of September 30, 2018

Investment Type Total

Amount AA+/ AAA AA A < BAA

Not Rated

Fixed Income Investments: Agency $4,028 $ 4,028 $ - $ - $ - $ - Corporate Bonds and Notes 34,964 2,474 5,382 14,001 10,223 2,884 Mortgage Backed Securities 140 32 19 54 35 - U.S. Treasury Bonds & Notes 20,623 20,623 - - - - Non-U.S. Government Bonds 8,875 2,018 1,222 3,446 2,189 -

68,630 29,175 6,623 17,501 12,447 2,884 Equity Investments 93,260 - - - - 93,260 Real Estate Funds 18,488 - - - - 18,488

Total $ 180,378 $ 29,175 $ 6,623 $17,501 $12,447 $114,632

Credit Rating as of September 30, 2017


Amount AA+/ AAA AA A < BAA

Not Rated

Fixed Income Investments: Agency $ 13,312 $ 13,312 $ - $ - $ - $ - Asset Backed Securities 1,413 1,006 - 305 102 - Corporate Bonds and Notes 25,342 375 $5,155 13,283 6,239 290 Municipal/Provincial bonds 101 - 37 64 - - Mortgage Backed Securities 1,167 139 - 348 119 561 U.S. Treasury Bonds & Notes 26,381 26,381 - - - -

67,716 41,213 5,192 14,000 6,460 851 Equity Investments 91,937 - - - - 91,937 Real Estate Funds 16,510 - - - - 16,510

Total $ 176,163 $ 41,213 $ 5,192 $14,000 $ 6,460 $109,298

On August 5, 2011, Standard and Poor, one of three nationally recognized raters of US debt and securities, downgraded the rating of long-term United States sovereign debt from AAA to AA+ for the first time since 1941 with negative outlook. The two other national raters, Moody’s and Fitch, continue to have the highest ratings, but also have the debt on their watch lists.

Custodial Credit Risk

The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the Plan will not be able to recover the value of its investment or collateral securities that are in the possession of another party. Approximately 56.01% ($104,653) of the Plan’s Net Position represent investments in external investment pools and open-ended mutual funds for 2018 compared to 38.75% ($69,885) for 2017. The existence of these investments is



12.

not evidenced by securities that exist in physical form and therefore, they are not exposed to custodial credit risk. The investments managed by Garcia Hamilton & Associates, CS McKee, Ryan Labs, Jo Hambro ,Earnest Partners, and Seizert Capital Partners which represent approximately 40.53% ($75,725) of the total net position of the Plan for 2018 compared to approximately 58.93% ($106,278) for 2017, are registered in the name of the Plan and therefore, are not exposed to custodial credit risk.

Concentration of Credit Risk

Concentration of credit risk is the risk of loss attributed to the magnitude of the Plan’s investments in a single issuer. In the investment portfolios managed separately, there is no individual investment in any one issuer that represents five percent or more of the Plan's net position (see table of investments on page 10) as of September 30, 2018 or 2017.

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, longer the maturities date of an investment, the greater the sensitivity of its fair value to changes in market interest rates. At September 30, 2018, the Plan’s portfolio consists of 51.70% ($93,260) equity investments, 10.25% ($18,488) real estate funds, and 38.05% ($68,630) debt securities. At September 30, 2017, the Plan’s portfolio consists of 52.19% ($91,937) equity investments, 9.37% ($16,510) real estate funds, and 38.44% ($67,716) debt securities. Information about the sensitivity of the fair values of the Plan’s investments to market interest rate fluctuation as of September 30, 2018 and 2017, are shown as follows:

Maturity (in Months as of September 30, 2018)


Amount 12 Months

or less 13 to 24 Months

25 to 60 Months

More than 60 Months

Not Applicable

Fixed Income Investments: Agency $4,028 $900 $- $- $3,128 $ - Corporate Bonds and Notes 34,964 1,974 2,472 15,647 14,871 - Mortgage Backed Securities 140 - - - 140 - U.S. Treasury Bonds & Notes 20,623 136 - 2,898 17,589 - Non-U.S. Government Bonds 8,875 2,019 842 823 5,191 -

68,630 5,029 3,314 19,368 40,919 Equity Investments 93,260 - - - - 93,260 Real Estate Funds 18,488 - - - - 18,488 Total $180,378 $5,029 $3,314 $19,368 $40,919 $111,748

Maturity (in Months as of September 30, 2017)


Amount 12 Months

or less 13 to 24 Months

25 to 60 Months

More than 60 Months

Not Applicable

Fixed Income Investments: Agency $13,312 $3,135 $4,807 $1,287 $4,084 $ - Asset Backed Securities 1,413 - 100 906 407 - Corporate Bonds and Notes 25,342 1,282 2,332 10,775 10,953 - Municipal/Provincial bonds 101 - - 101 - - Mortgage Backed Securities 1,167 - - - 1,167 - U.S. Treasury Bonds & Notes 26,381 401 3,698 10,853 11,429 -

67,716 4,818 10,937 23,922 28,039 - Equity Investments 91,937 - - - - 91,937 Real Estate Funds 16,510 - - - - 16,510 Total $176,163 $4,818 $10,937 $23,922 $28,039 $108,447

Foreign Currency Risk



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Foreign Currency Risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit. Approximately, 17.20% or $31,034 of the Plan’s investments for 2018, and 6.24% or $10,992 for 2017, are in foreign currency – denominated investments. The Plan’s exposure to foreign currency risk as of September 30, 2018 and 2017, are shown in U.S. Dollars in the table below.

Investment Type Currency 2018 Fair Value (In US Dollars)

2017 Fair Value (In US Dollars)

Equity Investments Australian Dollar $1,888 $106 Barbadian Dollar 39 - Bermudian Dollar 86 - Brazilian Real 732 53 British Pound 2,959 1,264 Canadian Dollar Cayman Island Dollar

925 3,820

714 -

Chilean Peso 79 60 Chinese Renminbi 258 65 Colombian Peso 459 - Danish Krone 416 292 European Monetary Unit (Euro) 4,782 3,607 Hong Kong Dollar 635 386 Indian Rupee 218 171 Indonesian Rupiah 598 8 Israeli Shekel 62 15 Japanese Yen 4,972 2,251 Malaysian Ringgit 1,108 8 Mexican Peso New Zealand Dollar

2,428 178

218 -

Norwegian Krone 178 53 Polish Zloty 1,017 23 Russian Ruble 20 15 Singapore Dollar 436 158 South African Rand 877 53 South Korean Won 377 226 Swedish Krona 317 235 Swiss Franc 952 848 Taiwanese Dollar 40 8 Thai Baht 178 140 Turkish Lira - 15

Total $31,034 $10,992



14.

The plan categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs and are valued using a matrix pricing model. Level 3 inputs are significant unobservable inputs and are valued using future projected cash flows. DART has the following fair value measurements as of September 30, 2018 and 2017.

Fair Value Measurements as of September 30, 2018


Amount Level 1 Level 2 Level 3 Agency $ 4,028 $ - $ 4,028 $ -

Corporate Bonds and Notes 34,964 - 34,964 -

Mortgage Backed Securities 140 - 140 -

U.S. Treasury Bonds & Notes 20,623 - 20,623 -

Non-U.S. Government Bonds 8,875 - - 8,875

Equity Investments 93,260 93,260 - -

Real Estate Funds 18,488 5,437 - 13,051

Total $180,378 $ 98,697 $ 59,755 $ 21,926

Fair Value Measurements as of September 30, 2017


Amount Level 1 Level 2 Level 3 Agency $ 13,312 $ - $ 13,312 $ - Asset Backed Securities 1,413 - 1,413 - Corporate Bonds and Notes 25,342 - 25,342 - Municipal/Provincial Bonds 101 - 101 - Mortgaged Backed Securities 1,167 - 1,167 - US Treasury Bonds & Notes 26,381 - 26,381 - Equity Investments 91,937 91,937 - - Real Estate Funds 16,510 14,140 - 2,370Total $ 176,163 $ 106,077 $ 67,716 $ 2,370



15.

4. NET PENSION LIABILITY OF DART AND ACTUARIAL ASSUMPTIONS

The components of the net pension liability of DART at September 30, 2018 and 2017:

2018 2017 Total pension liability $234,176 $225,254 Plan fiduciary net position (186,845) (180,355) DART’s net pension liability $47,331 $44,899

Plan fiduciary net position as a percentage of total pension liability 79.79% 80.07%

Actuarial Assumptions as of October 1, 2018

The total pension liability was determined by actuarial valuation as of October 1, 2018 using the following actuarial assumptions.

Investment Return 6.75% compounded annually, net of expenses. Salary Scales 3.00% per annum. Mortality Rate Healthy Lives: PubG-2010 employee rates with mortality improvement

projections to the valuation date using Scale MP-2018.

Mortality Rate Disabled Lives: PubG-2010 disabled retiree rates with mortality improvement projections to the valuation date using Scale MP-2018.

Retirement Age Ages 55 to 70. Inflation 2.5% per annum. Actuarial Cost Method Entry Age Normal (level percent of pay)

Actuarial assumptions used in the October 1, 2018 valuation were based on the census data collected as of October 1, 2018.

Best estimates of arithmetic rates of return for each major asset class included in the pension plan's target asset allocation as of September 30, 2018 are summarized in the following table (note that the rates shown below include the inflation component):

Target Allocation Estimate of expected

long-term rate of return U.S. Market Equities 39% 3.6% Global Bonds 40% 1.9% International Equities 10% 5.3% Real Estate 10% 6.1% Cash 1% 0.30%

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.



16.

Discount Rate

The discount rate used to measure the total pension liability was 6.75 percent. The projections of cash flows used to determine the discount rate assumed that DART contributions will continue to follow the current funding policy. Based on this assumption, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members.

Sensitivity of the net pension liability to changes in the discount rate

The following presents the net pension liability of DART calculated using the discount rate of 6.75 percent, as well as what DART net pension liability would be if it were calculated using a discount rate that is one percentage-point lower (5.75 percent) and one percentage-point higher (7.75 percent) than the current rate.

1% Decrease (5.75%)

Current Discount Rate (6.75%)

1% increase (7.75%)

DART net pension liability $70,952 $47,331 $27,056

Actuarial Assumptions as of October 1, 2017

The total pension liability was determined by actuarial valuation as of October 1, 2017 using the following actuarial assumptions.

Investment Return 6.75% compounded annually, net of expenses. Salary Scales 3.00% per annum. Mortality Rate Healthy Lives: RP-2000 Combined Healthy Table (sex distinct) with rates

increased by 8.59% and with fully generational mortality improvement projections using Scale AA.

Mortality Rate Disabled Lives: RP-2000 Disabled Mortality Table (sex distinct). Retirement Age Ages 55 to 70. Inflation 2.5% per annum. Actuarial Cost Method Entry Age Normal (level percent of pay)

Actuarial assumptions used in the October 1, 2017 valuation were based on the census data collected as of October 1, 2017.

Best estimates of arithmetic rates of return for each major asset class included in the pension plan's target asset allocation as of September 30, 2017 are summarized in the following table (note that the rates shown below include the inflation component):

Target Allocation Estimate of expected

long-term rate of return U.S. Market Equities 39% 4.30% U.S. Market Fixed Income 40% 0.70% International Equities 10% 5.60% Real Estate 10% 6.70% Cash 1% -0.50%



17.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

Discount Rate

The discount rate used to measure the total pension liability was 6.75 percent. The projections of cash flows used to determine the discount rate assumed that DART contributions will continue to follow the current funding policy. Based on this assumption, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members.

Sensitivity of the net pension liability to changes in the discount rate

The following presents the net pension liability of DART calculated using the discount rate of 6.75 percent, as well as what DART net pension liability would be if it were calculated using a discount rate that is one percentage-point lower (5.75 percent) and one percentage-point higher (7.75 percent) than the current rate.

1% Decrease (5.75%)

Current Discount Rate (6.75%)

1% increase (7.75%)

DART net pension liability $67,609 $44,899 $25,289

5. TAX STATUS OF PLAN

The Internal Revenue Service (“IRS”) issued a determination letter dated January 30, 2012, stating that the Plan was inaccordance with Internal Revenue Code Sections 401 and the applicable plan design requirements as of that date. Planmanagement believes that the Plan was operated during the Plan year and continues to be operated in accordance with theapplicable IRS regulations.

The Plan is subject to routine audits by the IRS; however, there are currently no audits for any tax periods in progress. ThePlan Administrator believes it is no longer subject to income tax examinations for years prior to 2008.

6. RELATED PARTY TRANSACTIONS

The Plan invests in funds managed by the Trustee. These transactions are therefore related party transactions, which areexempt from prohibited transaction rules.

DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAN AND TRUST REQUIRED SUPPLEMENTARY INFORMATION

For the Year Ended September 30, 2018 and 2017 (In Thousands)

18.

Schedule of DART’s Net Pension Liability* (Amounts in Thousands, Except Percentages)

2018 2017 2016 2015 2014

Total pension liability $234,176 $225,254 $220,462 $218,166 $219,019 Plan fiduciary net position (186,845) (180,355) (168,334) (154,468) (156,829) DART’s net pension liability $47,331 $44,899 $52,128 $63,698 $62,190

Plan fiduciary net position as a percentage of total pension liability

79.79% 80.07% 76.35% 70.80% 71.61%

Covered payroll $14,333 $15,642 $18,914 $19,129 $19,438

DART’s net pension liability as a percentage of covered payroll

330.22% 293.43% 275.60% 332.99% 319.94%

Schedule of Changes in DART’s Net Pension Liability (Amounts in Thousands, Except Percentages)

2018 2017 2016 2015 2014

Total pension liability Service cost $988 $1,107 $1,282 $954 $502 Interest 14,795 14,501 14,969 14,644 14,674 Changes in benefit terms - - - - - Difference between expected and

actual experience 1,920 2,655 (2,815) (5,082) - Changes in assumptions 5,326 - 63 - - Benefit payments (14,107) (13,471) (11,203) (11,369) (11,364)

Net change in total pension liability 8,922 4,792 2,296 (853) 3,812

Total pension liability – beginning 225,254 220,462 $218,166 $219,019 $215,207

Total pension liability – ending (a) $234,176 $225,254 $220,462 $218,166 $219,019

Plan fiduciary net position Contributions-employer $10,000 $10,000 $9,217 $8,706 $9,122 Contributions-member 2 2 2 2 2 Net investment income 10,679 15,590 16,067 520 12,532 Benefit payments (14,107) (13,471) (11,202) (11,369) (11,364) Administrative expenses (84) (100) (218) (219) (250)

Net change in plan fiduciary net position 6,490 12,021 13,866 (2,361) 10,042 Plan fiduciary net position-beginning 180,355 168,334 154,468 156,829 146,787 Plan fiduciary net position-ending (b) $186,845 $180,355 $168,334 $154,468 $156,829

DART’s net pension liability-ending (a) – (b) $47,331 $44,899 $52,128 $63,698 $62,190

*The schedule of DART’s net pension liability and the schedule of changes in DART’s net pension liability are presentedhere only for four years since the information required by GASB Statement No. 67, Financial Reporting for PensionPlans, an amendment of GASB Statement No. 25, is available for the years ended September 30, 2018, 2017, 2016, 2015,and 2014.



19.

Schedule of DART’s Contributions (Amounts in Thousands, Except Percentages)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Actuarially determined contribution $5,036 $6,212 $6,266 $8,045 $9,074 $9,122 $8,706 $9,217 $7,755 $7,235 Contributions in relation to the actuarially determined contribution 5,036 6,212 6,266 8,045 9,074 9,122 8,706 9,217 10,000 10,000 Contribution deficiency (excess) $ - $ - $ - $ - $ - $ - $ - $ - ($2,245) ($2,765)

Covered payroll $24,721 $23,904 $23,727 $19,306 $19,467 $19,438 $19,129 $18,914 $15,642 $14,333

Contributions as a percentage of covered payroll

20.37% 25.99% 26.41% 41.67% 46.61% 46.93% 45.51% 48.73% 63.93% 69.77%

Schedule of Investment Returns*

2018 2017 2016 2015 2014

Annual money-weighted rate of return, net of investment expenses

5.99% 9.36% 10.48% 0.33% 8.27%

*The schedule of investment returns presented here is for four years only since the information required by GASBStatement No. 67, Financial Reporting for Pension Plans, an amendment of GASB Statement No. 25, is available startingonly from the year ended September 30, 2014.

Notes to Required Supplementary Information

Changes in benefit terms – there was no change in benefit terms during Plan fiscal years 2018, 2017, 2016, and 2015.

Changes in assumptions: For measurement date 09/30/2018, the assumed rates of mortality have been amended to adopt the Pub-2010 Public Retirement Plan Mortality Tables for General Employees (Below-Median, Amount-Weighted) which were released with an exposure draft based on a comprehensive review of recent mortality experience of public retirement plans in the United State as performed by The Society of Actuaries’ Retirement Plans Experience Committee. For measurement date 09/30/2016, amounts reported as changes of assumptions resulted from an actuarial experience study dated August 19, 2016, the Retirement Committee approved a number of changes to the actuarial assumptions and methods, as outlined below: - The actuarial cost method was changed from The Projected Unit Credit to The Entry Age Normal actuarial cost method.- The assumed rate of investment return was lowered from 7.00% to 6.75% per year, net of all expenses. - The salary

increase assumption was lowered from 3.25% to 3.00% per year until the assumed retirement age.- The assumed rates of retirement were amended at certain ages.- The assumed rates of disablement were reduced in half.- The outdated funding method of developing the minimum required contribution as if the plan were subject to Section412 of the Internal Revenue Code of 1986 was removed. Beginning with this valuation, the minimum requiredcontribution will be developed to be consistent with the methodology utilized for other public pension plans.

- The assumed rates of mortality were amended to remove incorporating fully generational mortality improvements andimplement projecting mortality improvements to the valuation date.

- The assumed rates of termination were amended at certain ages and to eliminate varying rates by gender.

Methods and assumptions used in calculation of actuarially determined contributions. Actuarially determined contributions are calculated as of October 1, in the Plan fiscal year in which contributions are reported. That is, the contribution calculated as of October 1, 2018 will be made during the Plan fiscal year ended September 30, 2019.



20.

Actuarial Cost Method: Entry Age Normal actuarial cost method is used to determine contributions

Actuarial cost method Entry Age Normal Investment rate of return, 6.75%, net of pension plan investment expenses Amortization method Level dollar Remaining amortization period (in years)

Gains and losses are amortized over 15 years, assumption changes and plan changes are amortized over 30 years

Asset valuation method Actuarial value of assets are calculated based on 5-year phase-in of investment gains and losses

Inflation 2.50% Salary increase 3.00% Mortality Healthy mortality rates were based on the RP-2000 combined mortality

table for males and females increased by 8.59% and projected generationally from 2000 by Scale AA. Disabled mortality rates were based on the RP-2000 disabled mortality tables for males and females.

Documents

DART Employees’ Defined Benefit Retirement Plan and Trust · DART EMPLOYEES’ DEFINED BENEFIT RETIREMENT PLAN AND TRUST STATEMENTS OF FIDUCIARY NET POSITION September 30, 2018