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RETIREMENT BOARD MEMBERSCHIEF OF POLICE RICHARD SMITH CHAIRBAILUS TATE TREASURERWALTER BIXBY III(RET.) SERGEANT GARY JENKINS(RET.) SERGEANT ROBERT JONES9701 Marion Park Drive, B Kansas City, MO 64137(816) 482-8138 Toll Free (888) 813-8138 Fax (816) 763-1190LESLIE LEWISDONNA L. JASPER(RET.) POLICE OFFICER MATT TOMASICPATRICK TRYSLAOctober 9, 2017Dear Members,On behalf of the Retirement Systems Board I am pleased to provide you with the Police RetirementSystem of Kansas City, Missouri Comprehensive Annual Financial Report for the fiscal year endingApril 30, 2017. This annual report to our members provides financial information about yourretirement system and an update on changes that occurred during the past year.The pace of work at the Retirement Systems has not slowed down. This year we processed 44 newservice retirements and 14 disability retirements bringing the total number of retirees and survivingspouses receiving benefits to 1,308. The number of active members in the plan declined to 1,286.The Police Department is actively recruiting Police Officer candidates and lateral transfers to fillvacancies and add contributing members to the Police plan.The Retirement Board continued to work with our investment consultants to monitor theperformance and investment processes of our 14 investment managers. Investment returns for thefiscal year were 9.4% net of fees, a full 2% over our target allocation benchmark of 7.5%. All of ourmanagers had positive returns for the year and all but two managers outperformed their designatedbenchmark. The Investment Committee completed structure studies of our fixed income andequity portfolios. The fixed income study resulted in a recommendation to the Retirement Board toeliminate direct investments in global bonds and high yield bonds and instead add a bond managerwho has the flexibility to move between core, global, and high yield bonds. That recommendationwas implemented earlier this summer.The Retirement Systems staff worked during the year to document processes and create a BusinessContinuity Plan (BCP). In the event of an emergency or natural disaster, the staff and board havea playbook to follow to continue our work, maintain records on our active employees, and paybenefits to our retired members. One of the items in the BCP was to have an outside expert test ourcomputer systems and complete our first cybersecurity study. The Retirement Board hired a newaudit firm with the ability to complete the cybersecurity study. The result of the study was sharedwith the Police Department’s Information Technology staff. The study indicated that informationstored on Retirement System computers was secure and monitored appropriately.In an effort to enhance the overall operations of the Retirement Systems and to appropriately staffa retirement system of our size, we will be hiring a new Benefits Specialist this fall. An additionalstaff person will allow for more appropriate distribution of the work and segregation of duties withinthe office. Our auditors identified the need for better segregation duties in their annual review. AnIntroductory Section13

additional staff person will also allow us to work on cross training of job functions, provide betterservice for members during peak times of the year, and address other work processes identified inthe BCP.With the implementation of the Tier II benefit structure in 2013, the City began to contribute thefull amount of the actuarially required contributions. This year the City continued to make the fullrequired contributions.This year we said goodbye to Barbara Stuart as the elected Civilian Employees’ planrepresentative on the Retirement Board. Barb was first elected to the board in 2012 and was anoriginal member and Chair of the Investment Committee. We wish Barb the best and thank herfor helping to make significant changes to the decision making, due diligence, and monitoringprocesses related to our investments. This year we welcomed Donna Jasper to the RetirementBoard. Donna was elected to fill the unexpired term for a member of the Civilian Employees’plan. Many of you know Donna as a long time employee in Accounting where she is responsiblefor the IT systems.We also completed a thorough search for new legal counsel. After interviewing staff from severalwell-known Kansas City law firms, the Retirement Board retained Jonathan Dilly at Slagle,Bernard & Gorman. Jon had worked for several years with Gerald Gorman and was very familiarwith both of our plans and the legal issues faced by the Retirement Systems.In closing, I want to thank our members for your support as we work to ensure we have anaffordable and sustainable retirement benefit. I also want to thank our Retirement Systems stafffor their hard work in taking care of our members and implementing the plans and policies of theRetirement Board.Sincerely,Richard SmithRetirement Board Chairman14Introductory Section

Outside Professional ServicesACTUARYINVESTMENT ADVISORSCavanaugh MacdonaldConsulting, LLCPatrice Beckham, Byran HogeBellevue, NebraskaFCI AdvisorsPeter Greig, Gary CloudKansas City, MissouriAUDITORSAllen, Gibbs & Houlik, L.C.Andi WillemsWichita, KansasINVESTMENT MANAGEMENTCONSULTANTSRVK, Inc.Ryan Sullivan, Marcia BeardPortland, OregonMariner Institutional ConsultingRobert WoodardLawrence, KansasLEGAL COUNSELSlagle, Bernard & GormanJonathan N. DillyKansas City, MissouriMASTER TRUSTEE/CUSTODIANThe Northern Trust CompanyClaudiu BesoagaChicago, IllinoisLSV Asset ManagementKeith BruchChicago, IllinoisPGIMDarin Bright, Kevin SmithMadison, New JerseyAbbott Capital Management, LLCCharles van HorneNew York, New YorkJPMorgan InvestmentManagement, Inc.Lawrence Unrein, Katherine RosaNew York, New YorkNorthern Trust Global InvestmentsWilliam NickeyChicago, IllinoisShenkman Capital Management, Inc.Mark Flanagan, Nicole LupoNew York, New YorkArtisan PartnersSteven ButlerMilwaukee, WisconsinWellington Management CompanyJulie RancourtBoston, MassachusettsGrosvenor Capital ManagementMark RomanChicago, IllinoisGMO – GTAABrian HuggonBoston, MassachusettsBrandywine Global Opportunistic FundJon CordoPhiladelphia, PennsylvaniaMorgan Stanley Prime Property FundScott BrownNew York, New YorkFidelity InvestmentsEd SchollmeyerSmithfield, Rhode IslandIntroductory Section15

16Introductory Section

FinancialSectionIndependent Auditors’ Report18Management’s Discussionand Analysis20Financial Statements Statement of FiduciaryNet Position Statement of Changes inFiduciary Net Position Notes to the Financial StatementsRequired Supplementary Information Schedule of Changes inNet Pension Liability andRelated Ratios Schedule of City Contributions Schedule of Investment Returns Notes to Required SupplementaryInformationAdditional Financial Information Supplemental Schedule –Schedule of Expenses Schedule of Additions by Sourceand Deductions by TypeFinancial Section24252644454546495017

n Employees’ Retirement Systeme Police Department of Kansas City, MissouriCity, Missourion the Financial Statementsve audited the accompanying basic financial statements of the Civilian Employees’ment System of the Police Department of Kansas City, Missouri (Plan), a component unitIndependentAuditor’sCity of Kansas City, Missouri (City) whichare comprisedof Reportthe statement of fiduciary netas of April 30, 2017, and the statement ofchangesinfiduciarynetREPORTposition for the yearINDEPENDENT AUDITOR'SRetirement Systems Boardded, and therelated notes to the basic financial statements, which collectively comprisePolice Retirement System of Kansas City, Missouriic financial Kansasstatementsas listed in the table of contents.City, MissouriRetirement Systems BoardCivilian Employees’RetirementSystemementʼs Responsibilityfor theStatementsFinancialStatementsReport onOfthetheFinancialPolice Department of Kansas City, MissouriKansasCity,MissouriWe haveauditedforthe theaccompanyingbasic financialof the PoliceRetirementSystemement is responsiblepreparationand fairstatementspresentationof thesefinancialof Kansas withCity, Missouri(Plan),a componentunit of theCity of KansasMissouri(City)ents in accordanceaccountingprinciplesgenerallyacceptedin itionasofApril30,2017,andthea; this includes the design, implementation, and maintenance of internal control relevantofhavechangesin fiduciarynet positionstatementsfor basicthe yearthenandrelatednotesto theEmployees’auditedthefinancialstatementsof theCivilianpreparationstatementand Wefairpresentationof of the Police Department of Kansas City, Missouri (Plan), a componentunitement, whether dueto fraudSystemor error.the tablecontents.ofoftheCity of Kansas City, Missouri (City) which are comprised of the statement of fiduciary netposition as of April 30, 2017, and the statement of changes in fiduciary net position for the yearrʼs Responsibilitythen ended,and the relatedto thebasic financial statements, which collectively compriseManagement’sResponsibilityfor entsaslistedinof contents.ponsibility isto expressan opinionforonthethesefinancialstatementsbasedon financialour audit.WeManagementis responsiblepreparationand thefair tablepresentationof thesestatementsted our auditin llyacceptedintheUnitedin accordancewith atesofAmerica;Responsibility for the Financial Statementsof America.require that weplan and ofperformauditto obtainthisThoseincludesstandardsthe design, implementation,and maintenanceinternal thecontrolrelevantto thepreparationand fairpresentationfinancialstatementsthat arearefree frommaterialManagementis responsiblefor thepreparationandfairof these financialable assuranceaboutwhethertheof financialstatementsfreepresentationfrom ountingprinciplesgenerallyacceptedintheUnited States ofwhether due to fraud or error.ement.America; this includes the design, implementation, and maintenance of internal control relevantto Responsibilitythe preparationpresentationof financialaboutstatementsthat are freeit involvesAuditor’sperformingproceduresandto fairobtainaudit evidencethe amountsand from materialmisstatement,whetherduetofraudorerror.ures in theOurfinancialstatements.Theproceduresdepend basedon theauditor’sresponsibilityis to expressan opinionon theseselectedfinancial statementson ouraudit.nt, includingtheAuditorʼsassessmentthe riskswithofauditingmaterialmisstatementof theinfinancialWe conductedour Responsibilityaudit inofaccordancestandardsgenerally acceptedtheents, whetherdueto offraudor error.In makingthoseriskUnitedStatesAmerica.Those standardsrequirethat weplanassessments,and perform the theaudit auditorto financialstatementsbasedon our audit. Wers internalreasonablecontrol assurancerelevant aboutto theentity’spreparationandpresentationof thewhetherthe financialstatementsare fairfree frommaterial tingstandardsgenerallyacceptedl statements in order to design audit procedures that are appropriate in the in the UnitedStates of America. Those standards require that we plan and perform the audit to obtaintances, butAnnotforinvolvesthe purposeofproceduresexpressingan opinionon theeffectivenessof theauditperformingto obtainaudit evidenceaboutthe amounts andreasonable assurance about whether the financial statements are free from materialdisclosuresin the financialwestatements.selected dependon thealsoauditor’sinternal control.Accordingly,expressThenoproceduressuch opinion.An auditincludesmisstatement.judgment, includingofthe accountingassessment of therisks of usedmaterialandmisstatementof the financial ofng the appropriatenesspoliciesthe reasonablenessstatements,whetherdue to fraudor error.proceduresIn makingasthoseriskasassessments,the auditorAn outthe amounts andant accountingestimatesmadeby management,evaluatingtheoverallinternalcontrolto theentity’s preparationand fair presentationof the financialdisclosuresin therelevantfinancialstatements.The proceduresselected dependon the auditor’sation of theconsidersfinancialstatements.judgment,the assessmentof aretheappropriaterisks of materialmisstatementstatementsin orderincludingto design auditprocedures thatin the circumstances,but ofnot the ingthoseriskassessments,forauditthe purposeof expressingan opinionon theeffectivenessof theentity’s internalcontrol. a the auditoreve that theevidencewe haveobtainedis sufficientandappropriateto ’spreparationandfairpresentation of ther our audit Accordingly,opinion. we express no such opinion. An audit also includes evaluating the appropriatenessfinancialstatementsto designaudit proceduresare madeappropriatein theof accountingpoliciesused andintheorderreasonablenessof significantaccounting thatestimatesbycircumstances, but not for the purpose of expressing an opinion on the effectiveness of themanagement, as well as evaluating the overall presentation of the financial statements.entity’s internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness ofWe believethat the accountingaudit evidencewe have obtainedsufficient and appropriateto providea the overallsignificantestimatesmade byis management,as well asevaluatingbasis forourauditopinion.presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.18Financial Section

Retirement BoardPolice Retirement System of Kansas City, MissouriPage 2In our opinion, the financial statements referred to above present fairly, in all material respects,the fiduciary net position of the Civilian Employees’ Retirement System of the PoliceOpinionDepartment ofKansas City, Missouri as of April 30, 2017, and the changes in fiduciary netposition for thethen ended,in accordancewithaccountingprinciplesacceptedIn yearour opinion,the financialstatementsreferredto abovepresent generallyfairly, in allmaterialinrespects, thethe United StatesofAmerica.fiduciary net position of the Police Retirement System of Kansas City, Missouri as of April 30, 2017,and the changes in fiduciary net position for the year then ended, in accordance with accountingOther Mattersprinciples generally accepted in the United States of America.OpinionPrior Years Comparative InformationOther MattersYears ComparativeThe financial Priorstatementas of and Informationfor the year ended 2016 and prior were audited by otherauditors whose previous reports expressed an unmodified opinion on those statements.The financial statement as of and for the year ended 2016 and prior were audited by other auditorswhose previous reports expressed an unmodified opinion on those statements.Required Supplementary InformationRequired SupplementaryInformationAccounting principlesgenerally acceptedin the United States of America require that themanagement’sdiscussionand analysisandacceptedpensionininformationlisted ofin Americathe tablerequireof contentsAccountingprinciplesgenerallythe United Statesthat thebe presentedmanagement’sto ion,althoughnotadiscussion and analysis and pension information listed in the table of contentsbepart of the alAccountingStandardspresented to supplement the basic financial statements. Such information, although not a part ofBoard, who considersit to bestatements,an essentialpart ofbyfinancialreportingAccountingfor placingStandardsthe basicthe basic financialis requiredthe GovernmentalBoard, whofinancial statements in an appropriate operational, economic, or historical context. We haveconsiders it to be an essential part of financial reporting for placing the basic financial statements in anapplied certain limited procedures to the required supplementary information in accordance withappropriate operational, economic, or historical context. We have applied certain limited proceduresauditing standards generally accepted in the United States of America, which consisted ofto the requiredaboutsupplementaryinformationin accordancewith auditinggenerallyacceptedinquiries of managementthe methodsof preparingthe informationand information for consistency with management’s responses to our inquiries, the basic financialof preparingthe informationand comparingtheauditinformationfor consistencywith management’sstatements, andother knowledgewe obtainedduring ourof the basicfinancial statements.responsesto our inquiries,the anybasicassurancefinancial statements,and otherbecauseknowledgeobtained during ourWe do not expressan opinionor provideon the informationthewelimitedauditthe basicusfinancialstatements.We do notexpress anor orprovideanyanyassurance on theprocedures donotofprovidewith sufficientevidenceto expressanopinionopinionprovideassurance. information because the limited procedures do not provide us with sufficient evidence to express anopinion or provide any assurance.Supplementary InformationSupplementary InformationOur audit was conducted for the purpose of forming an opinion on the 2017 basic financialOur auditwas conductedfor thethe purposeforming statements.an opinion onThethe 2017basic financial statementsstatements thatcollectivelycomprisePlan’s mationinformation listed in the table of contents are presented for purposes of additional analysisand listed inthe tablearefinancialpresentedfor purposesof additionalanalysisare not a requiredpart ofare not a requiredpart

Police Retirement System of Kansas City, Missouri A Component Unit of the City of Kansas City, Missouri Comprehensive Annual Financial Report May 1, 2016 to April 30, 2017 71st Annual Report Prepared by: Kansas City Police Employees' Retirement Systems 9701 Marion Park Drive, B Kansas City, MO 64137 (816) 482-8138 or (888) 813-8138