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DART Retirement Plan and Trust Financial Statements as of and for the Years Ended December 31, 2016 and 2015, and Independent Auditor’s Report

DART RETIREMENT PLAN AND TRUST FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2016 AND 2015

TABLE OF CONTENTS

Page

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) ...................................................................... 2

BASIC FINANCIAL STATEMENTS:

STATEMENTS OF NET POSITION .......................................................................................................................... 4 STATEMENTS OF CHANGES IN NET POSITION .................................................................................................. 5 NOTES TO FINANCIAL STATEMENTS .................................................................................................................. 6

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Crowe Horwath LLP Independent Member Crowe Horwath International

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 Retirement Plan and Trust (the “Plan”) as of and for the years ended December 31, 2016 and 2015, 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 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 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 financial position of the Plan as of December 31, 2016 and 2015, and the changes in financial position for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 2 - 3 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 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 Horwath LLP Dallas, Texas July 7, 2017

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DART RETIREMENT PLAN AND TRUST MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) December 31, 2016 and 2015 (In Thousands) As management of Dallas Area Rapid Transit (DART), we offer readers of the DART Retirement Plan and Trust (the Plan) financial statements this narrative overview and analysis of the financial activities of the Plan for the years ended December 31, 2016 and 2015. FINANCIAL HIGHLIGHTS

The Plan’s total investment income increased by $15,480 from 2015 to 2016 compared to a decrease of $10,359 from 2014 to 2015.

The Plan’s total net position increased by $20,780 in 2016 compared to an increase of $1,750 in 2015.

The Plan’s employer contributions were $15,540 in 2016 compared to $14,757 in 2015. Benefit payments and administrative expenses decreased by $2,755 in 2016 compared to an increase of

$2,979 in 2015.

OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the Plan’s basic 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 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 deteriorating. The statements of changes in net position present information showing how the Plan’s net position change during the most recent two calendar years. 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 except for benefit payments. 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 The Plan’s assets include investments reported at fair value, with the exception of Vanguard Retirement Savings Trust which is reported at contract value, as of December 31, 2016 and 2015. These assets are held in trust for pension benefits. The Plan’s net position increased by $20,780 in 2016 compared to an increase of $1,750 in 2015. The table on the following page shows a summary of the Plan’s net position as of December 31, 2016 and 2015, with comparative information for 2014.

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DART RETIREMENT PLAN AND TRUST MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) December 31, 2016 and 2015 (In Thousands)

Plan Net Position

2016

2015

2014

Total Investments $219,688

$198,908

$197,158

Net position $219,688 $198.908 $197,158 The following table shows a summary of changes in plan net position for the years ended December 31, 2016 and 2015 with comparative information for 2014.

Changes in Plan Net Position

2016 2015 2014

Investment Income $14,345 $(1,135) $9,224

Employer Contributions 15,540 14,757 14,660

Other Additions 12 - 8

Total Additions 29,897 13,622 23,892

Benefit Payments and Administrative Expenses (9,117) (11,872) (8,893)

Net Increase (Decrease) in Net Position 20,780 1,750 14,999

Beginning Net Position 198,908 197,158 182,159

Ending Net Position $219,688 $198,908 $197,158 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.

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DART RETIREMENT PLAN AND TRUST STATEMENTS OF NET POSITION December 31, 2016 and 2015 (In Thousands) ASSETS

2016

2015

Investments, Reported at Contract Value: (Note 3)

Vanguard Retirement Savings Trust $37,847 $37,638

Investments, Reported at Fair Value: (Note 3)

Morgan Stanley Institutional Fund Int’l Equity Portfolio: Class R-4 1 -

Vanguard Explorer Fund 1 -

Vanguard Inflation-Protected Securities Fund Investor Shares 10,128 9,271

Vanguard Mid-Cap Value Index Fund Investor Shares 12,077 6,966

Dodge & Cox International Stock Fund 17,541 16,685

Metropolitan West Total Return Bond Funds: Class I shares 29,867 32,203

Vanguard REIT Index Fund Investor Shares 10,959 12,304

Vanguard Short-Term Bond Index Fund Investor Shares 25,817 28,878

Vanguard Small-Cap Value Index Fund Investor Shares 12,469 6,228

Vanguard Total Bond Market Index Fund 2 -

Vanguard Total International Stock Index Fund 16,299 17,339

Vanguard Windsor II Fund 11,707 6,450

Vanguard Total Stock Market Index Fund Investor Shares 23,384 17,984

Vanguard PRIMECAP Fund 11,589 6,962

Total Investments reported at fair value 181,841 161,270

Total Investments 219,688 198,908

NET POSITION HELD IN TRUST FOR PLAN BENEFITS $219,688 $198,908 The accompanying notes are an integral part of these statements.

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DART RETIREMENT PLAN AND TRUST STATEMENTS OF CHANGES IN NET POSITION For the Years Ended December 31, 2016 and 2015 (In Thousands)

2016 2015

Investment Income:

Interest and Dividend Income $6,134 $4,476

Net Appreciation (Depreciation) in Fair Value of Investments 8,211 (5,611)

Total Investment Income 14,345 (1,135)

Employer Contributions 15,540 14,757

Other Additions 12

Net Additions 29,897 13,622

Deductions:

Benefit Payments 9,069 11,818

Administrative Expenses 48 54

Total Deductions 9,117 11,872

CHANGE IN NET POSITION 20,780 1,750

NET POSITION:

BEGINNING OF YEAR 198,908 197,158

END OF YEAR $219,688 $198,908 The accompanying notes are an integral part of these statements.

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DART RETIREMENT PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2016 and 2015 (In Thousands) 1. DESCRIPTION OF THE PLAN

The DART Retirement Plan and Trust (the Plan) is a single-employer defined contribution plan designed to provide retirement benefits to employees of Dallas Area Rapid Transit (DART). Participants should refer to the Plan Document for more detailed information. Participation – Prior to March 1, 2002, all DART employees were eligible to participate in the Plan, other than those former Dallas Transit System (DTS) employees who, as of October 1, 1987, were and will remain participants in the DART Employees' Defined Benefit Retirement Plan and Trust. Effective March 1, 2002 only full time employees are eligible to participate. Effective September 30, 2002 an eligible employee must be employed one hundred and eighty (180) days before they can become a Participant in the Plan. The number of participants was 3,710 of which 3,421 were active and 289 were retirees, beneficiaries, and terminated vested employees as of December 31, 2016. The number of participants was 3,552 of which 3,299 were active and 253 were retirees, beneficiaries, and terminated vested employees as of December 31, 2015. Contributions - DART contributes 7.7% of compensation to the retirement account of each participant. Participants are neither required nor permitted to make contributions to the Plan. The DART Retirement Committee (the “Committee”) directs the allocation of contributions to different investment options. Participant Accounts – Individual accounts are maintained for each Plan Participant. Each participant’s account is credited with DART’s contributions and Plan earnings, and charged with withdrawals and an allocation of Plan losses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. Vesting - Participants hired after December 31, 2005 become 100% vested in DART’s contributions to the Plan only after completing five years of service. These participants do not become vested in any portion of DART’s contribution to the Plan during the first five years of service. Participants hired before December 31, 2005 become 25% vested in DART's contributions to the Plan after two years of service, and thereafter vesting increases 25% for each year of additional service until they are 100% vested. A vesting year of service is each vesting computation period during which a participant completes at least 1,000 hours of service. In the event of death, disability, or termination after age 60, a participant would be 100% vested. Forfeitures and the Effect of Re-employment - The non-vested portion of a terminated participant's account becomes forfeiture upon the participant’s termination of employment. If the non-vested portion of the participant's account was forfeited upon receipt of a complete distribution of the vested portion of the account, such forfeiture may be restored if the participant is later re-employed before having five consecutive one-year breaks in service, and repays the earlier distribution within five years of re-employment. Forfeitures are used to reduce DART's current contribution and pay administrative expenses. Employer contributions were reduced by forfeitures of approximately $157 and $331 for the years ended December 31, 2016 and 2015, respectively. Administrative expenses of $35 and $53 for the Plan years ended December 31, 2016 and 2015, respectively, were paid using forfeitures. At December 31, 2016 and 2015, accumulated forfeitures of $13 and $0, respectively, were available for future use. Disability Retirement - Benefits begin as soon as administratively feasible after receipt by the Committee of the participant’s application for Disability Retirement and approval of disability retirement benefits by the Social Security Administration. "Disabled" or "Disability" means the participant has terminated employment because of a physical or mental condition that results in the participant being awarded disability retirement benefits by the Social Security Administration. If the participant terminates employment for any other reason, his/her benefits will generally begin as of the date authorization is received by the Trustee from the Retirement Committee.

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DART RETIREMENT PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2016 and 2015 (In Thousands)

Benefit Payment Options - In the event of death, disability, retirement or termination, participants (or their beneficiaries in the event of death) may elect a lump sum or installment method of payment. Plan Administration – The Plan is administered by a retirement committee consisting of eight members appointed by the President/Executive Director of DART. Substantially all administrative expenses are paid by the Plan. These expenses include investment management, trustee, record keeping, and pension consulting fees. Texas state law authorizes state and local governments and political subdivisions, like DART to establish retirement plans under Texas Government Code §801.001. Accordingly, DART can also amend the benefit terms of the Plan. Plan Amendment - The Employer has the right to amend this 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 - Although the employer has not expressed any intent to discontinue the Plan, it reserves the right in its sole discretion to terminate the Plan. In such event, each participant shall have a non-forfeitable right in one hundred percent (100%) of his/her account balance.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting – The Plan is maintained on the full accrual basis of accounting and the economic resources measurement focus. All economic resources, including financial and capital assets and related liabilities, both current and long-term, and the changes therein are reported in the Plan’s financial statements. Revenues, including contributions, are recognized when they are earned and expenses are recognized when the underlying transaction or event occurs, regardless of the timing of related cash flows. The Plan applies the Governmental Accounting Standards Board pronouncements applicable to benefit plan accounting and reporting. Investments and Income Recognition – Vanguard Fiduciary Trust Company (the Trustee) has discretionary control over investments and the reporting of investment transactions. Investment options include Vanguard funds. Investment transactions are accounted for on the trade-date basis (date the investments are purchased or sold). The specific identification method is used by the Trustee to determine the cost of investments sold. Realized and unrealized gains and losses are calculated using the revalued cost method. With the exception of the Vanguard Retirement Savings Trust, investments are stated at fair value as determined by the mutual fund’s quoted prices in active markets for identical assets at year-end and therefore are Level 1 assets. Fair value of a financial instrument is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Interest income is accrued when earned and dividend income is recorded on the ex-dividend date. The Vanguard Retirement Savings Trust is a common collective trust fund that holds underlying investments in investment contracts and is valued based on contract value as determined by Vanguard. Fair values of the Vanguard Retirement Savings Trust were $38,165 and $38,277 at December 31, 2016 and 2015, respectively. The Vanguard Retirement Savings Trust (“RST”) is sponsored by Vanguard Fixed Income Group. Participants do not have a beneficial ownership in specific underlying securities in the fund, but have an interest therein represented by units valued on a daily basis. Units are issued and redeemed daily at the RST’s constant net asset value (“NAV”) of $1 per unit. Distributions to the RST’s unit holders are declared daily from the net investment income and automatically reinvested in the RST, when paid. It is the policy of the RST to use its best efforts to maintain a stable net asset value of $1 per unit; although there is no guarantee that the RST will be able to maintain this value.

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Participants ordinarily may direct the withdrawal or transfer of all or a portion of their investment at contract value. Contract value represents contributions made to the RST, plus earnings, less participant withdrawals and administrative expenses. The RST imposes certain restrictions on the Plan, and the RST itself may be subject to circumstances that impact its ability to transact at contract value; however, Plan management believes that the occurrence of events that would cause the RST to transact at less than contract value is not probable. Estimates- The preparation of financial statements in conformity with generally accepted accounting principles requires the Plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Risks and Uncertainties- The Plan utilizes various investment securities including mutual funds and a common collective trust fund. Investment securities, in general, are exposed to various risks, such as interest rate risk, credit risk, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the financial statements.

3. INVESTMENTS

The assets of the Plan are held in the DART Retirement Plan and Trust. With the exception of the Vanguard Retirement Savings Trust, which is held at contract value, the Plan’s investments are stated at fair value. During the years ended December 31, 2016 and 2015, DART’s contributions were allocated among the following investment options, as described in the respective fund’s prospectus, as directed by the Committee. Vanguard Retirement Savings Trust: Invests primarily in investment contracts issued by insurance companies, banks or other financial institutions, including investment contracts backed by high-quality fixed income securities. The fund seeks to achieve its objective by diversifying among high credit-quality investments and investment contracts which are structured to smooth market gains and losses over time. Morgan Stanley Institutional Fund Int’l Equity Portfolio: Class R-4: Seeks a measure of downside protection. Applies strict investment criteria to help identify attractive businesses at a discount to their long-term fair value. In-depth fundamental company research is paramount to the fund’s bottom-up stock selection process with emphasis on companies with high or improving Returns on Operating Capital Employed, recurring cash flows and capable management. This investment discipline is maintained by strict adherence to the investment team’s longstanding investment process and cash-flow-based valuation criteria. Vanguard Explorer Fund: Invests mainly in the stocks of small companies. These companies tend to be unseasoned but are considered by the fund’s advisors to have superior growth potential. Also, these companies often provide little or no dividend income. The fund uses multiple investment managers. Vanguard Inflation-Protected Securities Fund Investor Shares: Invests at least 80% of its assets in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations. The fund may invest in bonds of any maturity; however, its dollar-weighted average maturity is expected to be in a range of 7 to 20 years. At a minimum, all bonds purchased by the fund will be rated “investment grade” or, if unrated, will be considered by the advisor to be investment grade. Vanguard Mid-Cap Value Index Fund Investor Shares: Employs an indexing investment approach designed to track the performance of the CRSP US Mid Cap Value Index, a broadly diversified index of value stocks of mid-size U.S. companies. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

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RETIREMENT PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2016 and 2015 (In Thousands)

Dodge & Cox International Stock Fund: Seeks long-term growth of principal and income. The fund invests primarily in a diversified portfolio of equity securities issued by non-U.S. companies from at least three different countries, including emerging markets. It will invest at least 80% of its total assets in common stocks, preferred stocks, securities convertible into common stocks, and securities that carry the right to buy common stocks of non-U.S. companies. The fund invests primarily in medium-to-large well established companies based on standards of the applicable market. Metropolitan West Total Return Bond Funds: Class I shares: Seeks to maximize long-term total return by investing, under normal circumstances, at least 80% of its net assets in investment grade fixed income securities or unrated securities. It may also invest up to 20% of the fund's net assets in securities rated below investment grade. Vanguard REIT Index Fund Investor Shares: Invests in stocks issued by equity real estate investment trusts (known as REITs) in an attempt to parallel the investment performance of the MSCI US REIT Index. Vanguard Short-Term Bond Index Fund Investor Shares: Seeks to track the performance of a market-weighted bond index with a short-term dollar-weighted average maturity. Vanguard Small-Cap Value Index Fund Investor Shares: Employs an indexing investment approach designed to track the performance of the CRSP US Small Cap Index, a broadly diversified index of stocks of smaller U.S. companies. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. Vanguard Total Bond Market Index Fund: Employs an indexing investment approach designed to track the performance of the Barclays U.S. Aggregate Float Adjusted Bond Index. This index measures a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year. The fund invests by sampling the index, meaning that it holds a range of securities that, in the aggregate, approximate the full index in terms of key risk factors and other characteristics. All of the fund’s investments will be selected through the sampling process, and at least 80% of the fund’s assets will be invested in bonds held in the index. The fund maintains a dollar-weighted average maturity consistent with that of the index, which currently ranges between 5 and 10 years. Vanguard Total International Stock Index Fund: Employs an indexing investment approach to track the performance of the FTSE Global All Cap ex US Index, a free-float-adjusted market-capitalization-weighted index designed to measure equity market performance of companies located in developed and emerging markets, excluding the United States. The index includes more than 5,300 stocks of companies located in 46 countries. The fund invests substantially all of its assets in the common stocks included in its target index. Vanguard Windsor II Fund: Invests mainly in large- and mid-capitalization companies whose stocks are considered by an advisor to be undervalued. Undervalued stocks are generally those that are out of favor with investors and the advisor feels are trading at prices that are below average in relation to such measures as earnings and book value. These stocks often have above-average dividend yields. The fund uses multiple investment advisors. Vanguard Total Stock Market Index Investor Shares: Employs an indexing investment approach designed to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and NASDAQ. The fund invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield.

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Vanguard PRIMECAP Fund: Invests in stocks considered to have above-average earnings growth potential that is not reflected in their current market prices. The fund’s portfolio consists predominantly of mid- and large-capitalization stocks. Credit Risk Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. This is measured by the assignment of ratings by nationally recognized rating agencies such as S&P and Moody’s. The following tables show the ratings of the underlying investments of the investment funds held by the Plan as of December 31, 2016 and 2015.

Credit rating as of December 31, 2016

Investment Type

Total Amount

Aa+/ Aaa

Aa

A

Baa

Below Baa

Not Rated

Short-term investments

$37,847 $26,606 $4,542 $3,823 $2,876 $ - $ -

Bonds 65,814 48,332 2,969 6,929 6,748 836 - Domestic Equity (Stocks)

72,725 - - - - - $72,725

International Equity (Stocks)

32,343 - - - - - 32,343

Real Estate Funds 10,959 - - - - - 10,959

Total Investments $219,688 $74,938 $7,511 $10,752 $9,624 $836 $116,027

Credit rating as of December 31, 2015 Investment Type

Total Amount

Aa+/ Aaa

Aa

A

Baa

Below Baa

Not Rated

Short-term investments

$37,638 $24,464 $5,570 $4,931 $2,673 $ - $ -

Bonds 70,352 43,509 1,917 7,774 12,450 4,702 - Domestic Equity (Stocks)

45,942 - - - - - $45,942


32,671 - - - - - 32,671

Real Estate Funds 12,305 - - - - - 12,305 Total Investments $198,908 $67,973 $7,487 $12,705 $15,123 $4,702 $90,918

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Custodial Credit Risk The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g. broker-dealer) 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. All of the Plan’s investments are in open-ended mutual funds and a common collective trust fund. The existence of these investments is not evidenced by securities that exist in physical book entry form and therefore, they 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. All of the investments held for the Plan are in mutual funds or a common collective trust fund. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. The Plan’s equity, real estate funds and short-term investments portfolio was $153,874 (70.0%) in 2016 compared to $128,556 (64.6%) in 2015. Debt securities were $65,814 (30.0%)in 2016 compared to $70,352 (35.4%) in 2015. Information about the sensitivity of the fair values of the Plan’s investments to market interest rate fluctuation as of December 31, 2016 and 2015 is shown as follows:

Maturity in Years as of December 31, 2016 Investment Type

Total Amount

<1 Year

1-5 Years

5-10 Years

10-20 Years

20-30 Years

>30 Years

N/A

Short-term Investments $37,847 $6,169 $22,784 $ 8,818 $76 $ - $ - $ - Bonds 65,814 2,575 39,376 16,444 3,562 3,857 - - Domestic Equity (Stocks) 72,725 - - - - 72,725 International Equity (Stocks)

32,343 - - - - - -

32,343

Real Estate Funds 10,959 - - - - - - 10.959

Total $219,688 $8,744 $62,160 $25,262 $3,638 $3,857 $ - $116,027

Maturity in Years as of December 31, 2015 Investment Type

Total Amount

<1 Year

1-5 Years

5-10 Years

10-20 Years

20-30 Years

>30 Years

N/A

Short-term Investments $37,638 $5,382 $24,276 $7,980 $ - $ - $ - $ - Bonds 70,352 2,758 42,766 17,033 3,959 3,836 - - Domestic Equity (Stocks) 45,942 - - - - - - $45,942 International Equity (Stocks) 32,671 - - - - - - 32,671 Real Estate Funds 12,305 - - - - - - 12,305

Total $198,908 $8,140 $67,042 $25,013 $3,959 $3,836 $ - $90,918

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Foreign Currency Risk Foreign Currency Risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit. The Plan’s foreign currency net position (foreign currency denominated investments) were $32,343 (14.72%) in 2016 as compared to $32,671 (16.43%) in 2015. The Plan’s exposure to foreign currency risk as of December 31, 2016 and 2015 is shown below. The amounts are shown in U.S. Dollars.

Investment Type

Currency

2016 Fair Value (USD)


International Equity (Stocks) Australian Dollar $829 $802 Brazil Real 1,057 709 British Pound 4,361 4,918 Canadian Dollar 1,471 1,182 Chilean Peso 45 42 Chinese Yuan Renminbi 1,309 956 Colombian Peso 17 19 Czech Koruna 7 6 Danish Krone 190 213 Egyptian Pound 11 11 European Monetary Unit (Euro) 7,697 8,021 Hong Kong Dollar 714 690 Hungarian Forint 10 8 Indian Rupee 955 868 Indonesian Rupiah 93 76 Israeli New Shekel 69 88 Krone 17 - Japanese Yen 5,546 5,561 Malaysian Ringgit 123 125 Mexican Peso 592 563 New Zealand Dollar 40 33 Norwegian Kroner 85 86 Peruvian Nuevo Sol 9 6 Philippine Peso 54 58 Polish Zloty 42 49 Russian Ruble 211 122 Qatari Riyal 13 Singapore Dollar 154 173 South African Rand 1,415 1,440 South Korean Won 1,338 1,318 Swedish Krona 555 689 Switzerland Franc 2,265 2,692 Taiwan New Dollar 519 485 Thai Baht 322 337 Turkish Lira 129 248 United Arab Emirates Dirham 79 77 Total $32,343 $32,671

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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. Level 3 inputs are significant unobservable inputs. The following tables show the fair value measurements of the underlying investments of the investment funds held by the plan as of December 31, 2016 and 2015.

Fair Value Measurements as of December 31, 2016

Investment Type Total Amount Level 1 Level 2 Level 3

Short-term Investments $37,847 N/A N/A N/A Bonds 65,814 $65,814 - - Domestic Equity (Stocks) 72,725 72,725 - - International Equity (Stocks) 32,343 32,343 - - Real Estate Funds 10,959 10,959 - - Total $219,688 $181,841 $ - $ -

Fair Value Measurements as of December 31, 2015

Investment Type Total Amount Level 1 Level 2 Level 3

Short-term Investments $37,638 N/A N/A N/A Bonds 70,352 $70,352 - - Domestic Equity (Stocks) 45,942 45,942 - - International Equity (Stocks) 32,671 32,671 - - Real Estate Funds 12,305 12,305 - - Total $198,908 $161,270 $ - $ -

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DART RETIREMENT PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2016 and 2015 (In Thousands) 4. TAX STATUS OF PLAN

The Internal Revenue Service (IRS) has determined and informed DART by letter dated July 9, 2009, that the Plan and related trust were designed in accordance with applicable regulations of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter and DART has been notified by letter dated March 30, 2017, that The Internal Revenue Service (IRS) has determined that the amended Plan and related trust are currently designed and operated in compliance with the applicable requirements of the IRC. The Plan and related trust continue to be tax-exempt. The Plan is subject to routine audits by the IRS; however, there are currently no audits for any tax periods in progress.

5. RELATED PARTY TRANSACTIONS

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

DART Capital Accumulation Plan and Trust Financial Statements as of and for the Years Ended December 31, 2016 and 2015, and Independent Auditor’s Report

DART CAPITAL ACCUMULATION PLAN AND TRUST FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2016 AND 2015

TABLE OF CONTENTS

Page

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) ...................................................................... 2

BASIC FINANCIAL STATEMENTS:

STATEMENTS OF PLAN NET POSITION ............................................................................................................... 4 STATEMENTS OF CHANGES IN NET POSITION HELD IN TRUST FOR PLAN BENEFITS ............................ 6 NOTES TO FINANCIAL STATEMENTS .................................................................................................................. 7

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Crowe Horwath LLP Independent Member Crowe Horwath International

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 Capital Accumulation Plan and Trust (the “Plan”) as of and for the years ended December 31, 2016 and 2015, 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 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 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 financial position of the Plan as of December 31, 2016 and 2015, and the changes in financial position for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 2 - 3 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 Horwath LLP Dallas, Texas July 7, 2017

DART CAPITAL ACCUMULATION PLAN AND TRUST MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) December 31, 2016 and 2015 (In Thousands)

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As management of Dallas Area Rapid Transit (DART), we offer readers of the DART Capital Accumulation Plan and Trust (the Plan) financial statements this narrative overview and analysis of the financial activities of the Plan for the years ended December 31, 2016 and 2015. FINANCIAL HIGHLIGHTS

The Plan’s total investment income increased by $16,108 from 2015 to 2016 compared to a decrease by

$14,888 from 2014 to 2015.

The Plan’s total net position increased by $19,038 in 2016 compared to an increase of $716 in 2015. The Plan’s employer and participant contributions were $19,457 in 2016 compared to $18,699 in 2015.

Benefit payments and administrative expenses decreased by $1,427 in 2016 compared to an increase of

$5,869 in 2015.

OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the Plan’s basic 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 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 deteriorating. The statements of changes in net position benefits present information showing how the Plan’s net position changed during the two most recent calendar years. 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, except for benefit payments. 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 The Plan’s assets include investments in mutual funds, a common collective trust fund, and notes receivable from participants as of December 31, 2016 and 2015. These assets are held in trust for pension benefits. The Plan’s net position increased by $19,038 in 2016 compared to an increase of $716 in 2015. The following table shows a summary of the Plan’s net position as of December 31, 2016 and 2015, with comparative information for 2014.

DART CAPITAL ACCUMULATION PLAN AND TRUST MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) December 31, 2016 and 2015 (In Thousands)

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Plan Net Position

2016 2015 2014

Total Investments $217,422 $198,461 $198,671

Total Receivables 15,941 15,864 14,938

Net position available for benefits $233,363 $214,325 $213,609

The following table shows a summary of changes in plan net position for the years ended December 31, 2016 and 2015, with comparative information for 2014.

Changes in Plan Net Position

2016 2015 2014

Investment Income $14,923 $(1,185) $13,703

Employer and Employee Contributions 19,457 18,699 18,151

Notes Receivable Interest Income 677 648 608

Other Additions - - 2

Total Additions 35,057 18,162 32,464

Benefits Payments and Administrative Expenses (16,019) (17,446) (11,577)

Net Increase (Decrease) in Net Position 19,038 716 20,887

Beginning Net Position 214,325 213,609 192,722

Ending Net Position $233,363 $214,325 $213,609

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 CAPITAL ACCUMULATION PLAN AND TRUST STATEMENTS OF NET POSITION For the Years Ended December 31, 2016 and 2015 (In Thousands)

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ASSETS 2016 2015

Investments, Reported at Contract Value: (Note 3)

Vanguard Retirement Savings Trust $37,938 $37,608

Investments, Reported at Fair Value: (Note 3)

Diamond Hill Small-Mid Cap Fund; Class Y 3,150 -

Dodge & Cox International Stock Fund 4,339 4,623

Metropolitan West Total Return Bond Fund: Class I Shares 565 329

Vanguard 500 Index Fund 13,781 12,673

Vanguard Explorer Fund - 2,971

Vanguard Global Equity Fund 696 651

Vanguard Life Strategy Moderate Growth Fund 3,392 3,686

Vanguard Mid-Cap Value Index Fund Investor Shares 4,650 4,193

Vanguard Small-Cap Value Index Fund Investor Shares 1,993 1,457

Vanguard Total Bond Market Index Fund 18,482 16,623

Vanguard Total International Stock Index Fund 11,060 9,185

Vanguard Windsor II Fund 18,140

17,256

Vanguard PRIMECAP Fund 23,323

22,677

Vanguard Treasury Money Market Fund 1 -

Vanguard Total Stock Market Index Fund Investor Shares 11,971 9,703

Vanguard Target Retirement 2010 Fund 911 799

Vanguard Target Retirement 2015 Fund 6,556 6,407








Vanguard Target Retirement 2055 Fund 1,067 660

Vanguard Target Retirement 2060 Fund 103 49

Vanguard Target Retirement Income Fund 1,542 1,129

Total Investments reported at fair value 179,484 160,853

Total Investments 217,422 198,461

DART CAPITAL ACCUMULATION PLAN AND TRUST STATEMENTS OF NET POSITION For the Years Ended December 31, 2016 and 2015 (In Thousands)

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The accompanying notes are an integral part of these statements

2016

2015

Receivables:

Notes Receivable from Participants $15,941 $15,864

Total Receivables 15,941 15,864 NET POSITION $233,363 $214,325

DART CAPITAL ACCUMULATION PLAN AND TRUST STATEMENTS OF CHANGES IN NET POSITION HELD IN TRUST FOR PLAN BENEFITS For the Years Ended December 31, 2016 and 2015 (In Thousands)

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The accompanying notes are an integral part of these statements

2016

2015 Investment Income:

Interest and Dividend Income

$6,503

$7,305

Net Appreciation (Depreciation) in Fair Value of Investments

8,420

(8,490)

Total Investment Income (Loss)

14,923

(1,185)

Employer Contributions 5,121 4,986

Participant Contributions 14,336 13,713

Total Contributions

19,457

18,699

Notes Receivable Interest Income

677

648 Total Additions

20,134

19,347

Net Additions

35,057

18,162

Deductions:

Benefit Payments

15,710

17,160

Administrative Expenses

309

286

Total Deductions

16,019

17,446

CHANGE IN NET POSITION

19,038

716

NET POSITION HELD:

BEGINNING OF YEAR

214,325

213,609

END OF YEAR

$233,363

$214,325

DART CAPITAL ACCUMULATION PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2016 and 2015 (In Thousands)

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1. DESCRIPTION OF THE PLAN

The DART Capital Accumulation Plan and Trust (the Plan) is a single employer defined contribution retirement plan designed to provide retirement benefits to all full-time employees of the Dallas Area Rapid Transit (DART). Participants should refer to the Plan Document for more detailed information. Participation – The number of participants was 3,959 of which 3,673 were active and 286 were retirees, beneficiaries, and terminated vested employees as of December 31, 2016. The number of participants was 3,793 of which 3,555 were active and 238 were retirees, beneficiaries, and terminated vested employees as of December 31, 2015. Employee Contributions – Upon employment participants may elect to contribute before-tax salary deferral contributions from 2% to 50%. If not already contributing, employees are automatically enrolled in the Plan one hundred and eighty (180) days after the first day the employee performs an hour of service as a regular, full-time employee of DART at a before-tax salary deferral rate of 4%. Participants may opt out of participation. Auto-enrolled participants’ contribution percentages increase by 1% each year up to 6%. For each calendar year, no participant shall contribute an amount through salary deferral that exceeds the maximum calendar year limit allowed by the Internal Revenue Service. Such excess deferrals, if any, plus or minus net earnings allocable thereto, shall be distributed back to participants no later than April 15 following the calendar year in which the excess deferral was made. DART Contributions –Employees may contribute to the Plan immediately; however, they do not receive DART matching contributions until one hundred and eighty (180) days after the first day the employee performs an hour of service as a regular, full-time employee of DART. DART matches 50% of the first 6% of before-tax salary deferral contributions of eligible participants. DART contributions are made as soon as administratively feasible, but not later than fifteen (15) days after the close of the pay period. Participant Accounts – Individual accounts are maintained for each Plan Participant. Each participant’s account is credited with the participant’s and DART’s contributions and Plan earnings, and charged with withdrawals and an allocation of Plan losses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. Vesting - Participants hired after December 31, 2005 become 100% vested in DART’s contributions to the Plan only after completing five years of service. These participants do not become vested in any portion of DART’s contribution to the Plan during the first five years of service. Participants hired before December 31, 2005 become 25% vested in DART's contributions to the Plan after two years of service, and thereafter vesting increases by 25% for each year of additional service until they are 100% vested. A vesting year of service is each vesting computation period during which a participant completes at least 1,000 hours of service. In the event of death, disability, or termination after age 60, a participant would be 100% vested. Forfeitures and the Effect of Re-employment - The non-vested portion of a terminated participant's account becomes a forfeiture upon the participant’s termination of employment. If the non-vested portion of the participant's account was forfeited upon receipt of a complete distribution of the vested portion of the account, such forfeiture may be restored if the participant is later re-employed before having five consecutive one-year breaks in service, and repays the earlier distribution prior to the said five consecutive one-year breaks in service. DART contributions were reduced by forfeitures of approximately $99 and $70 for the Plan year ended December 31, 2016 and 2015, respectively. Administrative expenses of $54 and $48 for the Plan years ended December 31, 2016 and 2015, respectively, were paid using forfeitures. At December 31, 2016 and 2015, accumulated forfeitures of $15 and $4, respectively, were available for future use.


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Commencement of Benefits - Generally, the distribution of the non-forfeitable portion of the participant’s account shall commence as of the Valuation Date that authorized distributions are received by the Trustee from the Retirement Committee following the participant’s termination of employment other than disability. Benefit Payment Options - In the event of death, disability (as determined by the Social Security Administration), retirement, or termination, participants (or their beneficiaries in the event of death) may elect a lump sum or installment method of payment. Notes Receivable from Participants - Loans may be granted to participants after having completed one or more vesting years of service. Such loans will not be in excess of the least of $50,000 reduced by the highest outstanding loan balance for the one-year period ending the day before the date of the loan or 50% of the vested portion of the participant's account. The loans carry an interest rate of current prime rate plus 1% and are for terms not to exceed five years for general loans. However, for the purchase of primary residence, the retirement committee may approve a loan repayable over a period of greater than five years. Notes Receivable balances are $15,941 and 15,864 as of December 31, 2016 and 2015 and $9,609 and $9,606 of these amounts are due in more than one year. Plan Administration – The Plan is administered by a retirement committee consisting of not less than five persons appointed by DART’s President/Executive Director. Substantially all administrative expenses of the Plan were paid by the Plan. The expenses include investment management, trustee, record keeping and pension consulting fees. Plan Amendment - The Employer has the right to amend this 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 - Although the employer has not expressed any intent to discontinue the Plan, it reserves the right in its sole discretion to terminate the Plan. In such event, each participant shall have a non-forfeitable right in one hundred percent (100%) of his/her account balance.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The Plan is maintained on the full accrual basis of accounting and the economic resources measurement focus. All economic resources, including financial and capital assets and related liabilities, both current and long-term, and the changes therein are reported in the Plan’s financial statements. Revenues, including contributions, are recognized when they are earned or when withheld from participants and expenses are recognized when the underlying transaction or event occurs, regardless of the timing of related cash flows. The Plan applies the Governmental Accounting Standards Board pronouncements applicable to benefit plan accounting and reporting. Investments – Vanguard Fiduciary Trust Company (the Trustee) has discretionary control over investments and the reporting of investment transactions. Investment options include Vanguard funds. Investment transactions are accounted for on the trade-date basis (date the investments are purchased or sold). The specific identification method is used by the Trustee to determine the cost of investments sold. Realized and unrealized gains and losses are calculated using the revalued cost method. With the exception of the Vanguard Retirement Savings Trust, which is held at contract value, investments are stated at fair value as determined by the mutual fund’s quoted prices in active markets for identical assets at year-end and therefore are Level 1 assets. Fair value of a financial instrument is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Interest income is accrued when earned and dividend income is recorded on the ex-dividend date. The Vanguard Retirement Savings Trust is a common collective trust fund that holds underlying investments in investment contracts and is valued based on contract value as determined by Vanguard. Fair values of the Vanguard Retirement Savings Trust were $38,256 and $38,247 at December 31, 2016 and 2015, respectively. Participant


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loans are valued at the outstanding loan balances, which approximate fair value. The Vanguard Retirement Savings Trust (“RST”) is sponsored by Vanguard Fixed Income Group. Participants do not have a beneficial ownership in specific underlying securities in the fund, but have an interest therein represented by units valued on a daily basis. Units are issued and redeemed daily at the RST’s constant net asset value (“NAV”) of $1 per unit. Distributions to the RST’s unit holders are declared daily from the net investment income and automatically reinvested in the RST, when paid. It is the policy of the RST to use its best efforts to maintain a stable net asset value of $1 per unit, although there is no guarantee that the RST will be able to maintain this value. Participants ordinarily may direct the withdrawal or transfer of all or a portion of their investment at contract value. Contract value represents contributions made to the RST, plus earnings, less participant withdrawals and administrative expenses. The RST imposes certain restrictions on the Plan, and the RST itself may be subject to circumstances that impact its ability to transact at contract value; however, Plan management believes that the occurrence of events that would cause the RST to transact at less than contract value is not probable. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires the Plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates.

Risks and Uncertainties- The Plan utilizes various investment securities including mutual funds and a common collective trust. Investment securities, in general, are exposed to various risks, such as interest rate risk, credit risk, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.

3. INVESTMENTS

DART has an agreement whereby the Trustee receives Plan contributions and allocates such contributions to the appropriate fund managers, as directed by the plan participants. Investment income of each fund is credited to each participant's account at the end of each day based on the account's relative percentage in each fund to total net position available for Plan benefits in each fund prior to credit for such income. During the 2016 and 2015 plan years, participants directed their contributions among the following investment funds, as described in the respective fund’s prospectus. Vanguard Retirement Savings Trust: Invests primarily in investment contracts issued by insurance companies, banks or other financial institutions, including investment contracts backed by high-quality fixed income securities. The fund seeks to achieve its objective by diversifying among high credit-quality investments and investment contracts which are structured to smooth market gains and losses over time. Diamond Hill Small-Mid Cap Fund; Class Y: Seeks to provide long-term capital appreciation. The fund normally invests at least 80% of its net assets in U.S. equity securities with small and medium market capitalizations that the Adviser believes are undervalued. Dodge and Cox International Stock Fund: Seeks long-term growth of principal and income. The fund invests primarily in a diversified portfolio of equity securities issued by non-U.S. companies from at least three different countries, including emerging markets. It will invest at least 80% of its total assets in common stocks, preferred stocks, securities convertible into common stocks, and securities that carry the right to buy common stocks of non-U.S. companies. The fund invests primarily in medium-to-large well established companies based on standards of the applicable market.


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Metropolitan West Total Return Bond Funds: Class I shares: Seeks to maximize long-term total return by investing, under normal circumstances, at least 80% of its net assets in investment grade fixed income securities or unrated securities. It may also invest up to 20% of the fund's net assets in securities rated below investment grade. Vanguard 500 Index Fund: Employs a “passive management”—or indexing—investment approach designed to track the performance of the Standard & Poor’s 500 Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. Vanguard Explorer Fund: Invests mainly in the stocks of small companies. These companies tend to be unseasoned but are considered by the fund’s advisors to have superior growth potential. Also, these companies often provide little or no dividend income. The fund uses multiple investment managers. Vanguard Global Equity Fund: Invests primarily in U.S. and foreign stocks chosen mostly on the basis of bottom-up stock analysis. The fund typically invests across a wide range of industries, and its holdings are expected to represent a mix of value and growth stocks, as well as a mix of established and emerging stock markets. The fund uses multiple investment advisors. Vanguard LifeStrategy Moderate Growth Fund: Invests in other Vanguard mutual funds according to a fixed formula that over time should reflect an allocation of approximately 60% of the fund’s assets to common stocks and 40% to bonds. The percentages of the fund’s assets allocated to each of the underlying funds are Vanguard Total Stock Market Index Fund 42%, Vanguard Total Bond Market II Index Fund 32%, Vanguard Total International Stock Index Fund 18%, and Vanguard Total International Bond Index Fund 8%. Vanguard Mid-Cap Value Index Fund Investor Shares: Employs an indexing investment approach designed to track the performance of the CRSP US Mid Cap Value Index, a broadly diversified index of value stocks of mid-size U.S. companies. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. Vanguard Small-Cap Value Index Fund Investor Shares: Employs an indexing investment approach designed to track the performance of the CRSP US Small Cap Index, a broadly diversified index of stocks of smaller U.S. companies. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. Vanguard Total Bond Market Index Fund: Employs an indexing investment approach designed to track the performance of the Barclays U.S. Aggregate Float Adjusted Bond Index. This index measures a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year. The fund invests by sampling the index, meaning that it holds a range of securities that, in the aggregate, approximate the full index in terms of key risk factors and other characteristics. All of the fund’s investments will be selected through the sampling process, and at least 80% of the fund’s assets will be invested in bonds held in the index. The fund maintains a dollar-weighted average maturity consistent with that of the index, which currently ranges between 5 and 10 years.

Vanguard Total International Stock Index Fund: Employs an indexing investment approach to track the performance of the FTSE Global All Cap ex US Index, a free-float-adjusted market-capitalization-weighted index designed to measure equity market performance of companies located in developed and emerging markets, excluding the United States. The index includes more than 5,300 stocks of companies located in 46 countries. The fund invests substantially all of its assets in the common stocks included in its target index.


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Vanguard Windsor II Fund: Invests mainly in large- and mid-capitalization companies whose stocks are considered by an advisor to be undervalued. Undervalued stocks are generally those that are out of favor with investors and the advisor feels are trading at prices that are below average in relation to such measures as earnings and book value. These stocks often have above-average dividend yields. The fund uses multiple investment advisors.

Vanguard PRIMECAP Fund: Invests in stocks considered to have above-average earnings growth potential that is not reflected in their current market prices. The fund’s portfolio consists predominantly of mid- and large-capitalization stocks. Vanguard Treasury Money Market Fund: Invests in high-quality, short-term money securities whose interest and principal payments are backed by the full faith and credit of the U.S. government. Under normal circumstances, at least 80% of the fund’s assets will be invested in U.S. Treasury securities; the remainder of the assets may be invested in securities issued by U.S. governmental agencies. The fund maintains a dollar weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less. Vanguard Total Stock Market Index Fund Investors Shares: Employs an indexing investment approach designed to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and NASDAQ. The fund invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield. Vanguard Target Retirement 2010 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2010. The fund’s asset allocation will become more conservative over time. Within seven years after 2010, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund, Vanguard Total International Stock Index Fund and Vanguard Short-Term Inflation-Protected Securities Fund. Vanguard Target Retirement 2015 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2015. The fund’s asset allocation will become more conservative over time. Within seven years after 2015, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund, Vanguard Total International Stock Index Fund and Vanguard Short-Term Inflation-Protected Securities Fund. Vanguard Target Retirement 2020 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2020. The fund’s asset allocation will become more conservative over time. Within seven years after 2020, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund.


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Vanguard Target Retirement 2025 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2025. The fund’s asset allocation will become more conservative over time. Within seven years after 2025, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund. Vanguard Target Retirement 2030 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2030. The fund’s asset allocation will become more conservative over time. Within seven years after 2030, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund. Vanguard Target Retirement 2035 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2035. The fund’s asset allocation will become more conservative over time. Within seven years after 2035, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund. Vanguard Target Retirement 2040 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2040. The fund’s asset allocation will become more conservative over time. Within seven years after 2040, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund. Vanguard Target Retirement 2045 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2045. The fund’s asset allocation will become more conservative over time. Within seven years after 2045, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund.

Vanguard Target Retirement 2050 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2050. The fund’s asset allocation will become more conservative over time. Within seven years after 2050, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund. Vanguard Target Retirement 2055 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2055. The fund’s asset allocation will become more conservative over time. Within seven years after 2055, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund. Vanguard Target Retirement 2060 Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors planning to retire and leave the workforce in or within few years of 2060. The fund’s asset allocation will become more conservative over time. Within seven years after 2060, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund and Vanguard Total International Stock Index Fund.


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Vanguard Target Retirement Income Fund: Invests in Vanguard mutual funds using an asset allocation designed for investors currently in retirement. The underlying funds are: Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Total International Bond Index Fund, Vanguard Total International Stock Index Fund and Vanguard Short-Term Inflation-Protected Securities Fund. Credit Risk Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. This is measured by the assignment of ratings by nationally recognized rating agencies such as S&P and Moody’s. The following tables show the ratings of the underlying investments of the investment funds held by the plan as of December 31, 2016 and 2015.


Investment Type Total

Amount Aa+/

Aaa

Aa

A

Baa Below

Baa Not

Rated

Short-term Investments $37,938 $26,670 $4,553 $3,832 $2,883 $ - $ - Bonds 19,047 13,078 861 2,273 2,819 16 - Balanced (Bonds & Stocks)

67,333 - - - - - 67,333

Domestic Equity (Stocks) 77,814 - - - - - 77,814 International Equity (Stocks) 15,290

- - - - -

15,290

Total Investments $217,422 $39,748 $5,414 $6,105 $5,702 $16 $160,437



Amount Aa+/

Aaa

Aa

A

Baa Below

Baa Not

Rated

Short-term Investments $37,608 $24,445 $5,566 $4,927 $2,670 $ - $ - Bonds 16,952 11,817 679 1,980 2,464 12 - Balanced (Bonds & Stocks)

58,512 - - - - - $58,512

Domestic Equity (Stocks) 71,672 - - - - - 71,672 International Equity (Stocks) 13,717

- - - - -

13,717

Total Investments $198,461 $36,262 $6,245 $6,907 $5,134 $12 $143,901 Custodial Credit Risk The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g. broker-dealer) 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. All of the Plan’s investments are in open-ended mutual funds and a common collective trust fund. The existence of these investments is not evidenced by securities that exist in physical book entry form and therefore, they 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. All of the investments held for the Plan are in mutual funds or a common collective trust fund.


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Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The Plan’s balanced, equity, and short-term investments portfolio was $198,375 (91.2%) in 2016 compared to $181,509 (91.5%) in 2015. Bonds were $19,047 (8.8%) in 2016 compared to $16,952 (8.5%) in 2015. Information about the sensitivity of the fair values of the Plan’s investments to market interest rate fluctuation as of December 31, 2016 and 2015 is shown below.

Maturity in Years as of December 31, 2016


Amount <1

Year 1-5

Years 5-10 Years

10-20 Years

20-30 Years

>30 Years

N/A

Short-term Investments

$37,938

$6,184

$22,839

$8,839

$ 76 $ - $ - $ -

Bonds 19,047 187 8,258 7,399 784 2,308 111 - Balanced (Bonds & Stocks)

67,333 - - - - - - 67,333

Domestic Equity (Stocks)

77,814 - - - - - - 77,814


15,290 - - - - - - 15,290

Total $217,422 $6,371 $31,097 $16,238 $860 $2,308 $111 $160,437

Maturity in Years as of December 31, 2015


Amount <1

Year 1-5

Years 5-10 Years

10-20 Years

20-30 Years

>30 Years

N/A

Short-term Investments

$37,608

$5,378

$24,257

$7,973 $ - $ - $ - $ -

Bonds 16,952 156 7,614 6,433 691 1,976 82 - Balanced (Bonds & Stocks)

58,512 - - - - - - 58,512

Domestic Equity (Stocks)

71,672 - - - - - - 71,672


13,717 - - - - - - 13,717

Total $198,461 $5,534 $31,871 $14,406 $691 $1,976 $82 $143,901


15

Foreign Currency Risk Foreign Currency Risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit. The Plan’s foreign currency net position (foreign currency denominated investments) were $15,290 (7.0%) in 2016 compared to $13,717 (6.9%) in 2015. The Plan’s exposure to foreign currency risk as of December 31, 2016 and 2015 is shown below. The amounts are shown in U.S. Dollars.

Investment Type

Currency



International Equity (Stocks) Australian Dollar $573 $434 Brazil Real 400 250

British Pound 2,003 2,057 Canadian Dollar 865 622 Chilean Peso 32 23 Chinese Yuan Renminbi 669 482 Colombian Peso 12 10 Czech Koruna 5 3 Danish Krone 138 118 Egyptian Pound 7 6 European Monetary Unit (Euro) 3,374 3,202 Hong Kong Dollar 375 314 Hungarian Forint 7 4 Indian Rupee 417 345 Indonesian Rupiah 65 41 Israeli New Shekel 47 49 Japanese Yen 2,697 2,364 Malaysian Ringgit 86 67 Mexican Peso 210 200 New Zealand Dollar 27 17 Norwegian Krone 62 51 Peruvian Nuevo Sol 6 4 Philippine Peso 37 31 Polish Zloty 29 26 Russian Ruble 114 67 Singapore Dollar 108 95 South African Rand 474 475 South Korean Won 589 526 Swedish Krona 292 295 Switzerland Franc 976 1,036 Taiwan New Dollar 371 276 Thai Baht 137 117 Turkish Lira 52 82 United Arab Emirates Dirham 34 28

Total $15,290 $13,717


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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. Level 3 inputs are significant unobservable inputs. The following tables show the fair value measurements of the underlying investments of the investment funds held by the plan as of December 31, 2016 and 2015.

Fair Value Measurements as of December 31, 2016 Investment Type Total Amount Level 1 Level 2 Level 3 Short-term Investments $37,938 N/A N/A N/A Bonds 19,047 $19,047 - - Balanced (Bonds & Stocks) 67,333 67,333 - - Domestic Equity (Stocks) 77,814 77,814 - - International Equity (Stocks) 15,290 15,290 - - Total $217,422 $179,484 $ - $ -

Fair Value Measurements as of December 31, 2015 Investment Type Total Amount Level 1 Level 2 Level 3 Short-term Investments $37,608 N/A N/A N/A Bonds 16,952 $16,952 - - Balanced (Bonds & Stocks) 58,512 58,512 - - Domestic Equity (Stocks) 71,672 71,672 - - International Equity (Stocks) 13,717 13,717 - - Total $198,461 $160,853 $ - $ -


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4. TAX STATUS OF PLAN The Internal Revenue Service (IRS) has determined and informed DART by letter dated January 30, 2012, that the Plan and related trust were designed in accordance with applicable regulations of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter and DART has been notified by letter dated March 30, 2017, that the Internal Revenue Service (IRS) has determined that the amended Plan and related trust are currently designed and operated in compliance with the applicable requirements of the IRC. The Plan and related trust continue to be tax-exempt. The Plan is subject to routine audits by the IRS; however, there are currently no audits for any tax periods in progress.

5. RELATED PARTY TRANSACTIONS

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

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