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GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Years Ended September 30, 2024 and 2023 AND REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Years Ended September 30, 2024 and 2023 TABLE OF CONTENTS DESCRIPTION PAGE Report of Independent Public Accountants 1-3 Management’s Discussion and Analysis 4-8 Basic Financial Statements: Statements of Fiduciary Net Position 9 Statements of Changes in Fiduciary Net Position 10 Notes to Financial Statements 11-29 Required Supplementary Information: Schedule of Changes in the Employers’ Net Pension Liability 31-32 Schedule of Employers’ Contributions – Last Ten Fiscal Years 33-34 Report of Independent Public Accountants on Internal Controls Over Financial Reporting and on Compliance and Other Matters Based on An Audit of Financial Statements Performed in Accordance with Government Auditing Standards 35-36 Investment Section 37-49 10200 Grand Central Avenue • Suite 250 • Owings Mills • Maryland 21117 • P 410.584.0060 • F 410.584.0061 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Trustees Government Employees’ Retirement System of the U.S. Virgin Islands Report on the Audit of the Financial Statements Opinion We have audited the accompanying statements of fiduciary net position of the Government Employees’ Retirement System of the U.S. Virgin Islands (the System) as of September 30, 2024 and 2023, and the related statements of changes in fiduciary net position for the years then ended and the related notes to the financial statements, as listed in the table of contents. In our opinion, the accompanying financial statements present fairly, in all material respects, the fiduciary net position of the System as of September 30, 2024, and 2023, and its respective changes in fiduciary net position for the years then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the System and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements The System’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the System’s ability to continue as a going concern for one year after the date that the financial statements are available to be issued, including any currently known information that may raise substantial doubt shortly thereafter. - 2 - Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal controls relevant to the audit 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 System’s internal controls. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events considered in the aggregate that raise substantial doubt about the System’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal controls– related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and the schedule of changes in the employers’ net pension liability and related notes, and the schedule of employers’ contributions and related notes, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the 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. - 3 - 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. Other Information Management is responsible for the other information included in the annual report. The other information comprises the investment section but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 8, 2025, on our consideration of the System’s internal controls over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal controls over financial reporting and compliance and the results of that testing, and not to provide an opinion on the System’s internal controls over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the System’s internal controls over financial reporting and compliance. Owings Mills, Maryland August 8, 2025 - 4 - GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS MANAGEMENT’S DISCUSSION AND ANALYSIS INTRODUCTION The following Management’s Discussion and Analysis (MD&A) of the Government Employees’ Retirement System of the U.S. Virgin Islands, (the System), financial performance introduces the financial statements of the System as of and for the years ended September 30, 2024 and 2023. Since the MD&A is designed to focus on current activities, resulting changes and current known facts, it should be read in conjunction with the financial statements, required supplemental information and other supplemental information which follow this discussion. All amounts, unless otherwise indicated, are expressed in thousands of dollars. REQUIRED FINANCIAL STATEMENTS The System is a component unit of the primary government of the U.S. Virgin Islands and is included in the Annual Comprehensive Financial Report of the Government. The financial statements for the System have been prepared under the accrual basis of accounting in conformity with U.S. generally accepted accounting principles, promulgated by the Governmental Accounting Standards Board. The Statements of Fiduciary Net Position presents the Plan’s assets and liabilities, and the resulting net position restricted for benefits, which are held in trust for pension benefits. These statements reflect a year- end snapshot of the System’s investments, at fair value, receivables and other assets and liabilities. The Statements of Changes in Fiduciary Net Position presents information showing how the Plan’s net position restricted for benefits held in trust for pension benefits changed during the year. These statements include additions for contributions by members and employers and investment earnings and deductions for annuity payments, refunded contributions, death benefit payments and administrative expenses. Notes to the Financial Statements are an integral part of the financial statements and provide additional information that is necessary in order to gain a comprehensive understanding of the data reported in the financial statements. This section also includes the disclosure of actuarial methods and significant assumptions used in the most recent actuarial valuations and the funded status of the Plan. Required Supplementary Information presents information concerning the System’s funding progress and its obligations to provide pension benefits to members. A schedule of required employer contributions is also presented and is useful in evaluating the condition of the Plan. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 6 - MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) 2024 2023 2022 2024-2023 2023-2022 Increase (Decrease) Percentage Increase (Decrease) Percentage Cash in money market accounts $ 750 $ 1,632 $ 80,611 $ (882) -54.04% $ (78,979) -97.98% Cash in operational accounts 18,753 24,354 39,671 (5,601) -23.00%. (5,994) -15.11% Total cash and cash equivalents $ 19,503 $ 25,986 $ 120,282 $ (6,483) -24.94% $ (84,973) -70.64%  The decrease in cash held in the money market accounts of approximately $882 thousand is the result of the System’s need for funds to meet benefits obligations.  The members’ loans increased $14.2 million to approximately $21.9 million as of September 30, 2024, from approximately $7.7 million as of September 30, 2023. There was a decrease of $5.6 million as of September 30, 2023, from approximately $13.3 million as of September 30, 2022. The increase in FY 2024 was attributable to the reinstatement of the member loan program in April 2024. As of September 30, 2024, the Plan’s total liabilities are $28.3 million compared with $26.5 as of September 30, 2023 and $31.4 million as of September 30, 2022. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 11 - NOTES TO FINANCIAL STATEMENTS 1. Description of the Plan The Government of the U.S. Virgin Islands Employees’ Retirement System (the System) is a multiple employer defined benefit pension plan. The System was established as of October 1, 1959, by the Government of the U.S. Virgin Islands (the Government or Employer) as an independent and separate agency to provide pension benefits to its employees, and includes Judicial, Executive, Legislative Branches and outside agencies. Under the provisions of the Virgin Islands Code, Title 3, Chapter 27, (the Code) the Board of Trustees of the System are responsible for the administration of the System. The System is a component unit of the Government of the U.S. Virgin Islands for financial reporting purposes and is included in the Government’s financial reports as a pension trust fund. Eligibility and Membership: The Plan covers all employees of the Government of the U.S. Virgin Islands except casual, provisional, or any part-time employee who does not regularly work at least 20 hours per week. The plan also covers employees whose services are compensated on a contractual fee or per diem basis who work exclusively for the Government at least 40 hours per week. Persons over the age of 55 may opt out of the Plan by providing formal notification to the Plan. The Plan provides retirement, death, and disability benefits to plan members. Benefits may be extended to beneficiaries of plan members. There are two tiers within the Plan: 1) Tier I - Employees hired prior to September 30, 2005 2) Tier II - Employees hired on or after October 1, 2005 Plan Membership as of September 30, 2024, consisted of: Retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them 8,936 Current employees 8,912 17,848 Vesting: The System provides for retirement, death, and disability benefits to plan members. Benefits may be extended to beneficiaries of plan members. Regular Tier I employees who have completed 30 years of credited service or have attained age 60 with at least 10 years of credited service are eligible for a full-service retirement annuity. Regular Tier II employees who have attained the age of 65 with at least ten years of service are eligible for a full-service retirement annuity. Members who are considered “safety employees” as defined in the Code are eligible for full retirement benefits when they have earned at least 20 years of government service or have reached the age of 55 with at least 10 years of credited service. Tier I regular and safety employees who have attained age 50 with at least 10 years of credited service may elect to retire early with a reduced benefit. Tier II regular and safety employees who have attained age 60 with at least 10 years of credited service may elect to retire early with a reduced benefit. Senators and members of the Legislature may receive a retirement annuity when they have attained age 50 and upon the completion of 6 years of credited service as a member of the legislature. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 12 - NOTES TO FINANCIAL STATEMENTS (continued) 1. Description of the Plan (continued) The semi-monthly annuity benefit payments are determined by applying a stipulated benefit ratio to the member’s average compensation. Average compensation for Tier I members is determined by averaging the five highest years of credited service within the last ten years of service, subject to the maximum salary limitations in effect during such service. Average compensation for Tier II members is determined by averaging the most recent five years of credited service within the last ten years of service, subject to the maximum salary limitations in effect during the service. The maximum annual salary that can be used in this computation is $65,000, except for senators and judges, whose annual salary is used. The Board may set cost-of-living increases for annuitants and pensioners and determine when the annuity should be paid based on the most recent actuarial valuation and the Consumer Price Index. The annual increase in the case of a disability annuity shall be 1 percent per year prior to the member’s attainment of age 60 and 1.5 percent per year thereafter. The Board of Trustees may not increase rates by more than 3.0% over a five-year period. The employer’s contributions together with the employee’s contributions and the income of the System should be sufficient to provide an adequate actuarially determined reserve for the benefits prescribed by the Code. Contributions: Contributions to the System are made by the employer (Government of the U.S. Virgin Islands and its Independent Instrumentalities) and employees. From time to time, The Board may actuarially determine the rate of contribution for Tier I members and employers of the System. The contributions required to fund the System on an “actuarial reserve basis” are calculated periodically by the System’s actuarial consultant. The actuarial valuation as of October 1, 2020 indicates that the current combined statutory employer and employee contribution rates are not sufficient to meet the costs of the System on an actuarial basis. The employer’s required contribution is 23.5% (effective January 1, 2020) of the employee’s annual salary and required employee contributions are 11% and 11.5% of annual salary for Tier I and Tier II regular employees respectively, 12% and 14% for Tier I and Tier II senators respectively, 15% for both Tier I and Tier II judges, and 13% and 13.625% for Tier I and Tier II safety (hazardous employees and eligible employees under Act 5226) respectively. Prior to June 29, 2000, member contributions were refundable without interest upon withdrawal from employment before retirement. Effective November 2, 2005, legislation was passed that required that the annual interest on refunded contributions be determined by the Board based on the experience of the System which shall not be less than 2%, nor more than 4% per annum. The system set the interest rate to 2% effective July 1, 2009. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 13 - NOTES TO FINANCIAL STATEMENTS (continued) 2. Summary of Significant Accounting Policies Reporting Entity. The accompanying financial statements include all activities and funds administered by GERS. GERS is a component unit of the Government of the U.S. Virgin Islands for financial reporting purposes. GERS financial statements are included in the fiduciary and proprietary funds in the Virgin Islands Annual Comprehensive Financial Report (ACFR). Basis of Accounting. The accompanying financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America, as applicable to governmental organizations. In doing so, GERS adheres to the reporting requirements established by the Governmental Accounting Standards Board (GASB). Employee and employer contributions are recognized as additions to the System’ net assets in the period in which employee services are performed. Benefits are recorded upon payment. Refunds are recognized when they are due and payable in accordance with the terms of the plan. Cash and Cash Equivalents. The System considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Methods Used to Value Investments. Investments in marketable securities are carried out at quoted market values. Shares of mutual funds are valued at the net asset value of shares held by the System at year-end. Purchases and sales are recorded on a trade-date basis. Realized gains and losses on securities are determined by the average cost method. Investments in member loans are valued at the outstanding principal balance less an allowance for estimated loan losses. Management of the System believes that, based upon interest rate and risk factors, this valuation approximates fair value. Investments in limited partnerships have no readily ascertainable market value and are based on the valuation reported by the general partners. The System’s office complex and other real property - St. Thomas/St. Croix real estate is carried at historical cost, net of accumulated depreciation. The carrying value for Havensight Mall real estate is based on an independent appraisal. The value of this investment is $46,500,000 and $41,000,000 as of September 30, 2024 and 2023, respectively. Rental income, net of related expenses and any abatements, is recorded when earned. There are certain market risks, credit risks, liquidity risks, foreign exchange risks, and even risks which may subject the System to economic changes occurring in certain industries, sectors, or geographies. Depreciation. Capital assets in excess of $1,000, utilized in the operation of the System are recorded at historical cost less depreciation, computed using the straight-line method over the estimated useful lives of the assets. Furniture and equipment are depreciated over 5 years and building and improvements over 25 years. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 14 - NOTES TO FINANCIAL STATEMENTS (continued) 2. Summary of Significant Accounting Policies (continued) Tax Exemption. The System is exempt from all income and property taxes. Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in determining the reported amounts of plan assets, liabilities and net position, and changes net position, and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. The System utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, 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 a change could materially affect the amounts reported in the financial statements. 3. Net Pension Liability The components of the net pension liability (NPL), of the System as of September 30, 2024, were as follows: Total Pension Liability (1) Plan Fiduciary Net Position (2) Net Pension Liability (1-2) Plan Fiduciary Net Position as a % of Total Pension Liability (2/1) $4,407,521,466 $455,384,375 $3,952,137,091 10.33% The components of the net pension liability (NPL), of the System as of September 30, 2023, were as follows: Total Pension Liability (1) Plan Fiduciary Net Position (2) Net Pension Liability (1-2) Plan Fiduciary Net Position as a % of Total Pension Liability (2/1) $4,491,404,535 $400,330,991 $4,091,073,544 8.91% GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 15 - NOTES TO FINANCIAL STATEMENTS (continued) 3. Net Pension Liability (continued) Valuation date Actuarially determined contributions are calculated as of September 30, 2023 Actuarial cost method Entry Age Normal Cost Method determined as a percentage of salary Amortization method Level dollar Amortization period 20 years open amortization Asset valuation method Market value Inflation 2.50% Salary Increases 5.00% per year for the plan years ending 2022-2026, and 4.00% thereafter Investment Rate of Return 4.87% net of pension plan investment expense, including inflation Mortality Non-annuitant: Pub-2010 General Below-Median Amount – Weighted Non-Annuitant survivor mortality table with generational projection using Scale MP-2021. Healthy annuitant: Pub-2010 General Below-Median Amount- Weighted Employee and Healthy Annuitant Mortality Tables (95% load for males) with generational projection using Scale MP-2021. Disabled annuitant: Based on Pub-2010 Non-safety Amount-Weighted Disabled Annuitant Mortality Table with generational projection using Scale MP-2021. The ranges are combined to produce the long term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding the expected inflation component. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 16 - NOTES TO FINANCIAL STATEMENTS (continued) 3. Net Pension Liability (continued) Valuation date Actuarially determined contributions are calculated as of September 30, 2022 Actuarial cost method Entry Age Normal Cost Method determined as a percentage of salary Amortization method Level dollar Amortization period 20 years open amortization Asset valuation method Market value Inflation 2.50% Salary Increases 5.00% per year for the plan years ending 2022-2026, and 4.00% thereafter Investment Rate of Return 4.77% net of pension plan investment expense, including inflation Mortality Non-annuitant: 110% of the RP-2014 Blue Collar Employee Mortality Table with generational projection from 2015 using Scale MP-2015. Healthy annuitant: 110% of the RP-2014 Blue Collar Healthy Annuitant Mortality Table with generational projection from 2015 using Scale MP-2015. Disabled annuitant: 125% of the RP-2014 Disabled Annuitant Mortality Table with generational projection from 2015 using Scale MP-2015 The ranges are combined to produce the long term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding the expected inflation component. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of September 30, 2024 and 2023 are summarized as follows: -- As of September 30, 2024 -- Asset Class Target Allocation Long-Term Expected Real Rate of Return Domestic equity 45% 6.39% Developed market equity 14% 6.49% Emerging markets 6% 7.79% Core fixed income 20% 1.59% High yield fixed income 10% 3.39% Cash 5% 0.79% Total 100% GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 17 - NOTES TO FINANCIAL STATEMENTS (continued) 3. Net Pension Liability (continued) -- As of September 30, 2023 -- Asset Class Target Allocation Long-Term Expected Real Rate of Return Domestic equity 45% 8.7% Developed market equity 14% 9.8% Emerging market equity 6% 10.0% Investment grade bonds 10% 4.7% TIPS 10% 4.5% High yield fixed income 10% 7.3% Cash 5% 2.9% Total 100% Discount rate: The discount rate used to measure the total pension liability was 4.87% and 4.77% as of September 30, 2023 and 2022, the respective measurement dates. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate. Based on those assumptions, the pension plan’s fiduciary net position was not projected to be available to make all projected future benefit payments of current plan members. Therefore, the long- term expected rate of return on pension plan investments of 6.00% was applied to all periods of projected benefit payments that are covered by projected assets. For periods where projected future benefit payments are not covered by projected assets, the yield on a 20-year AA Municipal Bond Index was applied. As of September 30, 2024, that rate was 4.09% as compared to 4.02% as of the prior year. Sensitivity of the net pension liability to changes in the discount rate. The following presents the net pension liability calculated using the discount rate of 4.87%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (3.87%) or 1- percentage-point higher (5.87%) than the current rate: 1% Decrease (3.87%) Current Discount (4.87%) 1% Increase (5.87%) Net pension liability $ 4,461,475,874 $ 3,952,137,091 $ 3,526,230,570 The following presents the net pension liability calculated using the discount rate of 4.77%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage- point lower (3.77%) or 1- percentage-point higher (5.77%) than the current rate. 1% Decrease (3.77%) Current Discount (4.77%) 1% Increase (5.77%) Net pension liability $ 4,618,086,578 $ 4,091,073,544 $ 3,650,096,650 GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 18 - NOTES TO FINANCIAL STATEMENTS (continued) 4. Investments (a) Marketable Securities The System’s investments in marketable securities are held in trust by a Custodian bank (State Street Bank and Trust Company) on behalf of the System and are managed by several professional investment managers. The System’s Board of Trustees has established investment policies that place limitations and provide guidelines on amounts that may be invested in certain investment categories. In addition, such policies provide guidance related to the type of investment transactions that can be entered. The System’s Board of Trustees authorizes the System to invest in the following: – United States Government agencies and instrumentalities obligations; – Bonds or notes which are general obligations of any state in the United States, or of any political subdivision; – Bonds or other obligations which are payable from revenue or earnings specifically pledged of a public utility, which is municipally owned either directly or indirectly through any civil division, authority, or public instrumentality of the municipality; provided that (a) the municipality has at least 30,000 inhabitants; (b) the utility has been in operation for at least 10 years prior to the date of the investment; (c) bonds or other obligations of such utility have not been in default for any period longer than 30 days; (d) rates for service are fixed and maintained and collected at all times so as to produce sufficient revenue or earnings to pay all operating and maintenance charges and both the principal and interest on such bonds or obligations; (e) the total investment in this type of security shall not at any time exceed 10 percent of the total investment of the System. – Bonds or any other evidence of indebtedness issued or guaranteed by any domestic railroad corporation, or in equipment trust certificates, provided that these securities bear a rating of “BBB” or better by any two nationally known security rating agencies. Not more than 2% of total investments should consist of any one issue of these bonds; – Bonds or other evidence of indebtedness of any domestic public utility corporation provided that these securities and investments bear a rating of “BBB” or better by any two nationally known security rating agencies. Not more than 2% of total investments should consist of any one issue of these bonds; – Bonds or other evidence of indebtedness of any domestic industrial corporation provided that these securities bear a rating of “BBB” or better by any two nationally known security rating agencies. Not more than 2% of total investments should consist of any one issue of these bonds; GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 19 - NOTES TO FINANCIAL STATEMENTS (continued) 4. Investments (continued) – Bonds or other obligations of the Commonwealth of Puerto Rico or of the Territories of the United States, provided that the investment in any one issue of bonds of these entities should not exceed 10% thereof, and that the total investment in all securities of any one of such entities should be limited to 2% of the total investment account of the System; – Bonds or other indebtedness issued by foreign governments or foreign corporations provided that (a) these securities bear a rating of “BBB” or better by any two internationally known securities rating agencies, and (b) not more than 2% of total investments should consist of any one issue of these bonds. The aggregate amount to be invested in foreign bonds should be limited to 10% of the market value of the total investment of the System on the date the investment is made; – Common and preferred stocks of any corporation chartered under the laws of the United States, or of any state, district, or territory thereof or common and preferred stocks of any foreign corporation if listed on any internationally recognized security exchange; The investment in the stock of any single corporation should not exceed 1% of the market value of the total investment of the fund on the date of purchase. The aggregate amount to be invested in common and preferred stocks should be limited to 60% of the market value of the total investments of the System on the date the investment is made. Investment in foreign stocks should be limited to 10% of the market value of the total investment of the System; The aggregate amount to be invested in common and preferred stock should be limited to 20% of the book value of the total investment of the System on the date the investment is made. – Mutual funds of any corporation chartered under the laws of the United States, or any state, district, or territory thereof if listed on a national security exchange; – Real property purchased and/or developed by the Board of Trustees for sale for homeownership purposes; – Loans to approved businesses by the Board of Trustees as alternative investments. (b) Limited Partnership The total value of the limited partnership investments as of September 30, 2024 and 2023, were as follows: 2024 2023 Mesirow $5,685,900 $7,617,672 GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 20 - NOTES TO FINANCIAL STATEMENTS (continued) 4. Investments (continued) (c) Net Appreciation in Fair Value of Investments, Interest and Dividends The fair value of the System’s investments as of September 30, 2024 and 2023, were listed below: 2024 2023 Corporate obligations $ 530 $ 1,090 Commingled and mutual funds 429,834,411 344,520,244 Limited partnerships 5,685,900 7,617.672 $ 435,520,841 $ 352,139,006 The investments generated interest and dividend income for the years ended September 30, 2024 and 2023 are listed below: 2024 2023 Investment interest & dividend $ 792,631 $ 1,852,851 In addition, the net appreciation in fair value System’s investments including gains and losses on investments bought and sold, as well as held during fiscal years 2024 and 2023 as listed below: 2024 2023 U.S. government and agency obligations $ - $ 431,873 Corporate obligations 114 1,035,436 Mortgage and asset-backed securities 16 557,218 Commingled and mutual funds 103,388,691 34,038,939 Other gains/losses/investments - (1,894) Limited partnership (491,699) (33,300) Totals $ 102,897,122 $ 36,028,272 GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 21 - NOTES TO FINANCIAL STATEMENTS (continued) 4. Investments (continued) (d) Custodial Credit Risk-Deposits GERS discloses cash and investments of all GERS – managed funds that are subjected to certain risks: custodial credit risk, concentration of credit risk, interest rate risk, credit risk and foreign currency risk, when such exposure exists. The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the System will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. Cash equivalents consist of money market accounts. As required by law, banks or trust companies designated as depositories of public funds of the Government and its various agencies, authorities, and instrumentalities are to maintain corporate surety bonds or pledge collateral satisfactory to the U.S. Virgin Islands Commissioner of Finance to secure all funds deposited. As of September 30, 2024 and 2023, all cash and cash equivalents were covered by federal deposit insurance, corporate surety bonds, or by collateral held by the System. (e) Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the System’s investment in a single issuer of securities. The System’s investment policy (the Investment Policy) establishes limitations on portfolio composition by investment type to limit its exposure to concentration of credit risk. (f) Credit Risk The Investment Policy is designed to minimize credit risk by restricting authorized investments to only those investments permitted by the statute, subject to certain additional limitations. These additional limitations consist of prohibitions against investments in derivative securities, options, futures, or short positions. However, the Investment Policy allows for investments in mortgage pass-through securities. The fair value and credit ratings of debt securities (excluding U.S. government obligations and obligations expressly guaranteed by the U.S. government), money market funds, mutual funds, and other pooled investments of fixed income securities as of September 30, 2024 and 2023, include the following: GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 24 - NOTES TO FINANCIAL STATEMENTS (continued) 4. Investments (continued) The total System’s cash, cash equivalents and investment securities as of September 30, 2024 and 2023 consists of: 2024 2023 System Cash $ 18,753,569 $ 24,353,644 Cash Equivalents 749,917 1,632,215 Total Cash and Cash Equivalent 19,503,486 25,985,859 Net investment in Havensight 7,565,601 9,323,623 Commingled and Mutual Funds and Other Investments 429,834,941 344,521,334 Limited partnership 5,685,900 7,617,672 $ 462,589,927 $ 387,448,488 (g) Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The System does not have a specific policy to manage interest rate risk, but requires investment managers to diversify by issue, maturity, sector, coupon, and geography. Investment managers retained by the System follow specific investment guidelines and are evaluated against specific market benchmarks that represent their investment style. Any exemption from general guidelines requires approval from the System’s Board of Trustees. As of September 30, 2024, the System had the following investments and maturities: Maturity (in years) Investment Type Fair Value Less Than 1 Year 1 to 5 Years 6 to 10 Years More Than 10 Years No Stated Maturity Date Commingled & Mutual Funds $ 429,834,411 $ - $ - $ - $ - $ 429,834,411 Corporate Obligations 530 530 - - - - Limited Partnership 5,685,900 - - - - 5,685,900 Totals $ 435,520,841 $ 530 $ - $ - $ - $ 435,520,311 As of September 30, 2023, the System had the following investments and maturities: Maturity (in years) Investment Type Fair Value Less Than 1 Year 1 to 5 Years 6 to 10 Years More Than 10 Years No Stated Maturity Date Commingled & Mutual Funds $ 344,520,244 $ - $ - $ - $ - $ 344,520,244 Corporate Obligations 1,090 1,090 - - - - Limited Partnership 7,617,672 - - - - 7,617,672 Totals $ 352,139,006 $ 1,090 $ - $ - $ - $ 352,137,916 GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 25 - NOTES TO FINANCIAL STATEMENTS (continued) 4. Investments (continued) (h) Fair Value Measurements The System categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. In accordance with GAAP, the System is required to classify certain assets and liabilities based on the following fair value hierarchy: • Level I: Quoted prices (unadjusted) for identical investments in active markets; • Level II: Observable inputs other than quoted market prices; and, • Level III: Unobservable inputs. These levels are determined by the System’s investment staff. These are determined at the fund level based on a review of the investment class, structure, and what kind of securities are held in the funds. The System will request information from the fund manager if necessary. The System had the following recurring fair value measurements as of September 30, 2024: 9/30/2024 Level I Level II Level III Investments by fair value level Debt securities Corporate bond $ 530 $ - $ 530 $ - Total debt securities 530 - 530 - Limited partnership-private equity fund of funds 5,685,900 - - 5,685,900 Private debt-direct lending/other investments 21,914,533 - - 21,914,533 Real estate/other real assets 46,500,000 - - 46,500,000 Total other investments 74,100,433 - - 74,100,433 Total investments by fair value level 74,100,963 $ - $ 530 $ 74,100,933 Investments measured at net assets value (NAV) Commingled equity funds 296,006,973 Commingled bond funds 133,827,438 Total investments measured at the NAV 429,834,411 Total investments $ 503,935,373 The valuation method for investments measured at the net asset value (NAV) per share, or equivalent, is presented in the table below: Investments measured at net assets value (NAV) Fair Value Unfunded Commitments Redemption Frequency Redemption Notice Period Commingled equity funds $ 296,006,973 - Daily None Commingled bond funds 133,827,438 - Daily None Total investments measured at the NAV $ 429,834,411 - GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 26 - NOTES TO FINANCIAL STATEMENTS (continued) 4. Investments (continued) The System had the following recurring fair value measurements as of September 30, 2023: 9/30/2023 Level I Level II Level III Investments by fair value level Debt securities Corporate bond $ 1,090 $ - $ 1,090 $ - Total debt securities 1,090 - 1,090 - Limited partnership-private equity fund of funds 7,617,672 - - 7,617,672 Private debt-direct lending/other investments 7,692,765 - - 7,692,765 Real estate/other real assets 41,000,000 - - 41,000,000 Total other investments 56,310,437 - - 56,310,437 Total investments by fair value level 56,311,527 $ - $ 1,090 $ 56,311,527 Investments measured at net assets value (NAV) Commingled equity funds 231,776,999 Commingled bond funds 112,743,245 Total investments measured at the NAV 344,520,244 Total investments $ 400,831,771 The valuation method for investments measured at the net asset value (NAV) per share, or equivalent, is presented in the table below: Investments measured at net assets value (NAV) Fair Value Unfunded Commitments Redemption Frequency Redemption Notice Period Commingled equity funds $ 231,776,999 - Daily None Commingled bond funds 112,743,245 - Daily None Total investments measured at the NAV $ 344,520,244 - Commingled equity and bond funds. This type includes seven commingled funds that invest in publicly traded domestic stocks, and domestic & global fixed income securities. The fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the investments. The total commingled fund assets can be liquidated on a daily basis. All of the underlying securities within the commingled funds carry a recurring fair value measurement level of 2. There are no unfunded commitments to commingled funds at September 30, 2024, and 2023. (k) Member Loans The System’s investments in member loans, net of allowances for loan losses, as of September 30, 2024 and 2023 were $21,914,533 and $7,692,765 respectively. Such investments in member loans generated interest income of $780,850 and $828,386 respectfully for the years ended September 30, 2024 and 2023. The average interest rate was 8% for the years ended September 2024 and 2023. (l) Real Estate The investment in the Havensight Mall has an appraised value of $46,500,000 and $41,000,000 as of September 30, 2024 and 2023, respectively. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 27 - NOTES TO FINANCIAL STATEMENTS (continued) 5. Capital Assets The System Facilities - St. Thomas/St. Croix are partially an investment of the System’s retirement funds in real estate held for rent or lease. The System utilizes portions of the buildings in the operation of the System. Depreciation is provided for only those portions of the buildings that are utilized in the operation of the System. The remaining areas of the buildings leased to other government agencies and commercial tenants are recorded at fair value. Capital asset activity for the fiscal years ended September 30, 2024 and 2023 was as follows: - - September 30, 2024 - - Balance Transfers/ Balance September 30, 2023 Additions Disposals September 30, 2024 Capital assets not being depreciated: Land 8,892,679 $ - $ - $ 8,892,679 $ Capital assets being depreciated: Buildings and Improvements 24,273,817 632,123 - 24,905,940 Furniture and Fixtures 1,317,508 4,283 - 1,321,791 Office Equipment 2,098,626 25,425 - 2,124,050 Vehicles 319,019 108,000 - 427,019 Computer Hardware/Software 5,521,974 32,833 - 5,554,806 Total capital assets being depreciated 33,530,943 802,664 - 34,333,606 Accumulated depreciation for: Buildings (10,722,969) (791,076) - (11,514,045) Furniture and Fixtures (1,306,397) (3,555) - (1,309,952) Office Equipment (2,035,688) (6,857) - (2,042,545) Vehicles (303,847) (22,583) - (326,430) Computer Hardware/Software (4,831,287) (243,722) - (5,075,009) Total accumulated depreciation (19,200,188) (1,067,793) - (20,267,981) Total capital assets being depreciated, net 14,330,755 (265,130) - 14,065,625 Capital Assets, Net 23,223,433 $ (265,130) $ - $ 22,958,304 $ GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 28 - NOTES TO FINANCIAL STATEMENTS (continued) 5. Capital Assets (continued) - - September 30, 2023 - - 6. Due from Agencies of the Government of the U.S. Virgin Islands As of September 30, 2024 and 2023 the amount recorded as due from Agencies of the Government of the U.S. Virgin Islands was $29,681,574 and $20,754,884, respectively. 7. Risks of Loss The System is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Claims against the System, Board of Trustees, or any of its staff as a result of an actual or alleged breach of fiduciary duty are insured with a commercial insurance policy. Coverage provided is limited to $5,000,000 with a deductible amount of $150,000. Defense costs incurred in defending such claims will be paid by the insurance company. However, the total defense cost and claims paid shall not exceed the total aggregate coverage of the policy. Balance Transfers/ Balance September 30, 2022 Additions Disposals September 30, 2023 Capital assets not being depreciated: Land 7,642,679 $ 1,250,000 $ - $ 8,892,679 $ Capital assets being depreciated: Buildings 24,114,953 158,864 - 24,273,817 Furniture and Fixtures 1,313,511 3,997 - 1,317,508 Office Equipment 2,097,767 859 - 2,098,626 Vehicles 319,019 - - 319,019 Computer Hardware/Software 5,360,608 161,365 - 5,521,974 Total capital assets being depreciated 33,205,858 325,085 - 33,530,943 Accumulated depreciation for: Buildings (10,066,490) (656,479) - (10,722,969) Furniture and Fixtures (1,301,056) (5,340) - (1,306,397) Office Equipment (2,026,887) (8,801) - (2,035,688) Vehicles (292,047) (11,800) - (303,847) Computer Hardware/Software (4,653,793) (177,494) - (4,831,287) Total accumulated depreciation (18,340,274) (859,914) - (19,200,188) Total capital assets being depreciated, net 14,865,583 (534,829) - 14,330,755 Capital Assets, Net 22,508,262 $ 715,171 $ - $ 23,223,433 $ GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 29 - NOTES TO FINANCIAL STATEMENTS (continued) 8. Litigation The System is a defendant in legal claims arising from its normal operations. It is management’s opinion, after consulting with its legal counsel, that losses, if any, resulting from these claims will not have a material effect on the System’s financial position. The System is also a plaintiff in various class action suits, whose outcomes are currently undeterminable. 9. Management Fees and Custodian Fees The custodian and investment advisers of the System’s investment fund are entitled to annual fees computed based on the market value of the System’s investment fund assets and reimbursement of out- of-pocket expenses incidental to custodial duties. Such fees amounted to $173,697 and $170,649, for the years ended September 30, 2024 and 2023, respectively. 10. Condensed Financial Statements The information below is condensed financial information for the operating activities of the Havensight Mall for the years ended September 30, 2024 and 2023: 2024 2023 Revenue $ 5,329,812 $ 4,370,810 Expense 6,651,118 5,457,301 Net Loss $ (1,321,306) $ (1,086,491) 11. Subsequent Events The System’s management has evaluated subsequent events from September 30, 2024 through August 8, 2025, the date the financial statements were available to be issued. The accompanying financial statements recognize the effects of subsequent events that provided evidence about conditions that exist at the balance sheet date, including the estimates inherent in the process of preparing financial statements. The accompanying financial statements do not recognize the effect of subsequent events that did not exist at the balance sheet date, but disclosures of such events, if any, are included in the accompanying notes. In May 2025 the Retiree Personal Loans program was reinstated with both districts (St. Thomas/St. John and St. Croix) receiving $7,500,000 each for the administering of the program. Members may receive a maximum of $7,500 with a loan term of up to five (5) years at an 8% interest rate. Only GERS retirees currently receiving an annuity check without existing loans are eligible for this Retiree Personal Loans program. On October 1, 2024, the System received $101,571,380 from the funding note, a short fall of $56,425,120 from the expected amount of $157,996,500. -30- REQUIRED SUPPLEMENTARY INFORMATION GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 32 - REQUIRED SUPPLEMENTARY INFORMATION (continued) Notes to Schedule of Changes in the Employers’ Net Pension Liability Benefits Provided: In the year ended September 30, 2016, there were changes to the eligibility and benefit amounts for Tier 2 Regular and Public Safety Employees for service and Early pensions reflected in this valuation. Change of Assumptions: In the year ended September 30, 2014, amounts reported as changes in assumptions resulted from a decrease in the discount rate used to measure the total pension liability from 4.87% as of September 30, 2013 to 4.42% as of September 30, 2014. In the year ended September 30, 2015, amounts reported as changes in assumptions resulted from a decrease in the discount rate used to measure the total pension liability from 4.42% as of September 30, 2014 to 3.84% as of September 30, 2015 and several changes in assumptions based on the actuarial experience study as of September 30, 2015 adopted by the Board effective September 30, 2015. The changes include changes to the long-term expected rate of return, salary scale, inflation, the mortality assumption for healthy and disabled lives, including the provision for future mortality improvement, retirement ages for active members, and pre-retirement decrement rates for turnover and disability. In the year ended September 30, 2016, amounts reported as changes in assumptions resulted from a decrease in the discount rate used to measure the total pension liability from 3.84% as of September 30, 2015 to 3.20% as of September 30, 2016. In the year ended September 30, 2017, amounts reported as changes in assumptions resulted from an increase in the discount rate and to measure the total pension liability from 3.20% as of September 30, 2016 to 3.74% as of September 30, 2017. In the year ended September 30, 2018, amounts reported as changes in assumptions resulted from an increase in the discount rate and to measure the total pension liability from 3.74% as of September 30, 2017 to 4.25% as of September 30, 2018. In the year ended September 30, 2019, amounts reported as changes in assumptions resulted from a decrease in the discount rate and to measure the total pension liability from 4.25% as of September 30, 2018 to 2.67% as of September 30, 2019. In the year ended September 30, 2020, amounts reported as changes in assumptions resulted from a decrease in the discount rate and to measure the total pension liability from 2.67% as of September 30, 2019 to 2.23% as of September 30, 2020. In the year ended September 30, 2021, amounts reported as changes in assumptions resulted from an increase in the discount rate and to measure the total pension liability from 2.23% as of September 30, 2020 to 2.52% as of September 30, 2021. In the year ended September 30, 2022, amounts reported as changes in assumptions resulted from an increase in the discount rate and to measure the total pension liability from 2.52% as of September 30, 2021 to 4.77% as of September 30, 2022. In the year ended September 30, 2023, amounts reported as changes in assumptions resulted from an increase in the discount rate and to measure the total pension liability from 4.77% as of September 30, 2022 to 4.87% as of September 30, 2023. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 33 - REQUIRED SUPPLEMENTARY INFORMATION (continued) SCHEDULE OF EMPLOYERS' CONTRIBUTIONS – LAST TEN FISCAL YEARS Fiscal Years Ended September 30 Actuarially Determined Contributions Actual Contributions Contribution Deficiency (Excess) Covered Payroll Percentage Contributed 2014 $ 189,715,251 $ 68,298,617 $ 121,416,634 $ 370,131,865 18.45% 2015 200,089,791 72,287,934 127,801,857 355,603,633 20.33% 2016 247,158,137 86,346,838 160,811,299 363,023,518 23.46% 2017 250,574,023 84,802,335 165,771,688 393,771,228 21.54% 2018 267,743,116 96,747,868 170,995,248 401,071,344 24.12% 2019 277,523,563 106,183,907 171,339,656 404,775,714 26.23% 2020 365,803,372 100,422,478 265,380,894 399,386,941 25.14% 2021 373,748,689 104,844,144 268,904,545 411,757,386 25.46% 2022 361,771,924 195,081,835 166,690,089 429,477,835 47.38% 2023 311,958,096 265,394,647 46,563,449 433,180,978 64.45% GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS - 34 - REQUIRED SUPPLEMENTARY INFORMATION (continued) SCHEDULE OF EMPLOYERS’ CONTRIBUTIONS Notes to Schedule of Employers’ Contributions Valuation date Actuarially determined contributions are calculated as of September 30, 2023 Methods and assumptions need to determine contribution rates: Actuarial cost method Entry Age Normal Cost Method determined as a percentage of salary Amortization method Level dollar, closed group Amortization period 20 years open amortization Asset valuation method Market value Inflation 2.50% Salary Increases 5.00% per year for the plan years ending 2022-2026, and 4.00% thereafter Investment Rate of Return 4.87% net of pension plan investment expense, including inflation Mortality Non-annuitant: 110% of the RP-2014 Blue Collar Employee Mortality Table with generational projection from 2015 using Scale MP-2021. Healthy annuitant: 110% of the RP-2014 Blue Collar Healthy Annuitant Mortality Table with generational projection from 2015 using Scale MP-2021. Disabled annuitant: 125% of the RP-2014 Disabled Annuitant Mortality Table with generational projection from 2021 using Scale MP-2021 10200 Grand Central Avenue • Suite 250 • Owings Mills • Maryland 21117 • P 410.584.0060 • F 410.584.0061 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON INTERNAL CONTROLS OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Board of Trustees Government Employees’ Retirement System of the U.S. Virgin Islands We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards), the financial statements of the Government Employees’ Retirement System of the U.S. Virgin Islands (the System) as of and for the year ended September 30, 2024, and the related notes to the financial statements, which collectively comprise the System’s basic financial statements, and have issued our report thereon dated August 8, 2025. Report on Internal Controls over Financial Reporting In planning and performing our audit of the financial statements, we considered the System’s internal controls over financial reporting (internal controls) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the System’s internal controls. Accordingly, we do not express an opinion on the effectiveness of the System’s internal controls. A deficiency in internal controls exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal controls, such that there is a reasonable possibility that a material misstatement of the System’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal controls that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal controls was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal controls that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal controls that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. - 36 - Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the System’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is to describe the scope of our testing of internal controls and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the System’s internal controls or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the System’s internal controls and compliance. Accordingly, this communication is not suitable for any other purpose. Owings Mills, Maryland August 8, 2025 INVESTMENT SECTION GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE U.S. VIRGIN ISLANDS INVESTMENT SECTION (continued) INVESTMENT OVERVIEW The Government Employees’ Retirement System of the Virgin Islands returned 24.3 percent gross of fees in fiscal year 2024, relative to the actuarial return target of 6.0 percent, and 7.3 percent for its policy benchmark. Including the payment of benefits, the market value of assets increased by approximately $96.5 million, from $455.4 million on September 30, 2023 to $551.9 million on September 30, 2024. During fiscal year 2024 equity and fixed income markets posted strong returns as the economic backdrop remained supportive of most risk assets. The System’s public total equity portfolio returned 35.1 percent while the total fixed income portfolio achieved 12.4 percent. The fiscal year’s performance was not evenly distributed across the other asset classes as the System’s private equity investments achieved negative returns, while real estate generated positive performance. The real estate and other real assets portfolio produced a dollar-weighted return of 2.6 percent for the fiscal year, while private equity was the weakest asset class at -6.6 percent. The Board's asset allocation strategy aims to achieve the actuarial rate of return over extended periods. This involves curating a diversified portfolio comprising various asset classes, each capable of yielding varying returns, whether large or small, positive or negative, within any given year. Through this diversification, the Board anticipates more consistent investment returns over time compared to a less diversified approach. This approach not only seeks to mitigate risk but also aims to capitalize on the distinct risk and return characteristics exhibited by different assets in diverse market conditions. Consequently, the Board expects this lower-risk portfolio to foster a larger asset pool for the System's beneficiaries in comparison to a more volatile portfolio with an equivalent average return. Understanding the Board's principles of asset allocation is pivotal when assessing performance over any single-year period. The System's asset allocation can be categorized into five main groups: Growth/Equity, Rate Sensitive, Credit, Cash, and Real Assets/Other Real Assets. During the fiscal year, the Board made no changes to the asset allocation. The Growth/Equity portfolio is comprised of public equity and private equity. Within public equity, there are dedicated allocations to U.S., international developed, and emerging markets. The objective of this asset class is to generate high returns associated with the economic growth underlying global economies. The Rate Sensitive category includes exposure to core, or investment-grade bonds. This asset class is designed to provide protection against most downturns in the equity market by offering a reliable income stream through the yield component. This yield also offers a degree of safeguarding against a deflationary setting, which is marked by declining interest rates. This asset class includes long-duration U.S. Treasury bonds, Treasury inflation protected securities, corporate bonds and securitized debt. The aim of the Credit asset class is to capitalize on the potentially greater returns provided by bonds rated below investment grade. The return goal resembles that of public equity, albeit with a reduced risk profile. This category encompasses high yield bonds. The purpose of the Cash asset class is to provide liquidity as part of the System’s internal cashflow process. Real Assets/Other Real Assets include real estate and undeveloped land. A significant portion of the assets in this category provides a regular income stream. Given the tangible or real nature of this asset - 38 - GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS INVESTMENT SECTION (Continued) class, it is anticipated to offer a certain degree of insulation against inflationary conditions, while also adding further diversification to the overall portfolio. INVESTMENT PERFORMANCE, POLICY, STATISTICS AND ACTIVITY The Board-adopted Investment Policy governs investment activity at the Government Employees Retirement System (GERS). The Board has adopted an investment policy that works to control the extent of downside risk to which the System is exposed while maximizing the potential for long-term increases in the value of assets. The Board is responsible for managing the assets of the Fund effectively, prudently, and for the exclusive benefit of GERS’ members and beneficiaries. INVESTMENT POLICY The Board approves the Statement of Investment Policy. The purpose of the policy is to set forth GERS’ investment philosophy and objectives. The policy establishes investment policies and describes the organization and division of responsibilities necessary to implement the Board’s philosophy and objectives prudently; and establishes a framework for making investment decisions, monitoring investment activity, and promotes effective communication between the Board, Staff, and other involved parties. INVESTMENT OBJECTIVES The primary objective of the investment portfolio is to achieve investment returns exceeding the return of our Policy Benchmark within prudent risk parameters. Over the long term, it is expected that investment returns also should meet or exceed the Board approved actuarial net investment return assumption of 6.0%. ASSET ALLOCATION The Board implements an asset allocation policy that is predicated on several factors, including: 1. A projection of actuarial assets, liabilities, and benefit payments and the cost of contributions. 2. Past and anticipated long-term behavior of capital market risk and return. 3. An assessment of future economic conditions, including inflation and interest rate levels; and 4. The current and projected funding status The asset allocation policy provides for diversification of assets to maximize the Fund’s investment return consistent with market conditions. Asset allocation modeling identifies asset classes that the Board will utilize and the percentage that each asset class represents of the total Fund. Due to fluctuations in market values, positioning within a specific range is acceptable and constitutes compliance with the policy. It is anticipated that periodic revisions to the policy may occur and implementing such changes may require an extended period. On January 31, 2022, ACT No. 8540 also known as the GERS Rescue Act was passed and thereafter signed into law. Through this legislation, over the next 30 years (through 2052), the System is expected to receive approximately $3.8 billion. In late fiscal year 2022 due to the updated projected cash flows expected the Board approved a transition from the Dynamic Asset Allocation structure, implemented in fiscal year 2015, to a more traditional asset allocation seeking a higher long-term target return. The Board has determined that the following asset allocation policy is currently appropriate for the Fund. - 39 - GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS INVESTMENT SECTION (Continued) The Board’s long-term asset class targets and ranges as of September 30, 2024 are shown below. ASSET CLASS LONG- TERM POLICY TARGET (%) RANGE (%) U.S. Equity 45 0-55 International Developed Market Equity 14 0-20 Emerging Market Equity 6 0-10 Investment Grade Bonds 10 0-80 TIPS 10 0-15 High Yield Bonds 10 0-15 Cash 5 0-35 Alternative Investments 0 0-35 Total Assets 100 - 40 - GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS INVESTMENT SECTION (Continued) INVESTMENT PERFORMANCE-ANNUALIZED RETURNS - SEPTEMBER 30, 2024 1 Year 3 Year 5 Year ECONOMIC AND CAPITAL MARKET OVERVIEW Investment returns between asset classes were positive, in absolute terms, in fiscal year 2024, with growth- oriented assets like public stocks and credit generating strong performance. In the first quarter of fiscal year 2024, markets experienced significant gains driven by expectations of interest rate cuts. The US equity market saw a rise of 12.1%, while non-US developed markets increased by 10.4%, and emerging markets gained 7.9%, despite China showing a decline. The second quarter presented a mixed performance with resilient economic data and rising inflation in the US. Although the US equity market rose by 10%, emerging markets struggled due to weak performance in China. Optimism returned in the third quarter of the fiscal year, with growth driven by anticipated interest rate cuts and ongoing AI investments. The US equity market added 3.2%, while emerging markets saw a 5.0% rally, particularly benefiting from a rebound in Chinese stocks. In the fourth quarter, markets continued to rally on the - 41 - GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS INVESTMENT SECTION (Continued) FIXED INCOME Emerging Markets Equities: Sector Allocation (%) vs MSCI Emerging Markets Index Note: The mandate percentages are calculated based on the total value of the portfolio including derivatives but excluding cash and cash equivalents. - 45 - GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS INVESTMENT SECTION (Continued) PUBLIC MARKETS INVESTMENTS EXPENSE1 1 Public Manager Expense analysis is based on manager fee schedule multiplied by market value as of September 30, 2024. The table is for illustrative purposes only. Total effective fee and market value does not include cash. Estimate does not take into consideration potential performance-based fees and fund expenses or charges. PRIVATE EQUITY GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS INVESTMENT SECTION (Continued) As of September 30, 2024, private equity totaled approximately $5.61 million or 1.2 percent of total assets. The asset class includes buyouts, growth equity, venture capital, and secondaries. Since the inception of the private equity program in fiscal year 2006, $24.1 million or 96.4 percent of the dollars committed had been called. The system invested in two funds-of-funds, Mesirow Financial Private Equity, L.P. Fund IV, and Fund V. From inception to September 30, 2024 Fund’s net internal- rate-of- return (IRR) was 10.9 percent and 16.1 percent, respectively. 1 Fair value is calculated using the Capital Account statement as of June 30, 2024, and adjusting for any cash flows that have occurred through September 30, 2024. 2 Total Value is calculated using the Capital Account statement as of June 30, 2024, and adjusting for any cash flows that have occurred through September 30, 2024, plus total distributions. 3 IRR as of June 30, 2024. The September 30, 2024 Capital Account statement and IRR were not yet available as of the production of this illustration. Figure 1: Mesirow Financial Private Equity Fund IV, L.P. Figure 2: Mesirow Financial Private Equity Fund V, L.P. - 48 - GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS INVESTMENT SECTION (Continued) - 49 -