REPORT DIGEST

 

ILLINOIS STATE

BOARD OF

INVESTMENT

 

 

FINANCIAL AUDIT

For the Year Ended:

June 30, 2006

 

 

Release Date:

March 27, 2007 

 

 

 

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

 

 

 

 

To obtain a copy of the Report contact:

Office of the Auditor General

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

 

 

 

This Report Digest and the Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

 

 

INTRODUCTION

 

      This digest covers our financial audit of the Illinois State Board of Investment (ISBI) for the year ended June 30, 2006.  A report on the results of our compliance attestation examination for the year ending June 30, 2006 is being issued separately.

 

     Pursuant to the Illinois Pension Code, the Illinois State Board of Investment manages the investments of the State Employees’ Retirement System, General Assembly Retirement System and the Judges’ Retirement System.

 

LEGISLATION AFFECTING ISBI

 

     Public Act 94-0004 became law June 1, 2005 and addressed the early retirement option (ERO), benefit changes and funding reductions.   The Act established specific dollar amounts to be contributed by the State as employer contributions for fiscal years 2006 and 2007, as opposed to the State’s contribution being calculated based on the existing funding formula.

 

     The legislative funding reduction will be approximately $429.4 million in fiscal year 2007 for employer contributions to the State Employees’, Judges’ and General Assembly Retirement Systems.  Member systems’ withdrawals increased by approximately $211 million in fiscal year 2006 from $ 547.7 million in fiscal year 2005 to $759 million in fiscal year 2006.

   

AUDITORS' OPINION

 

      Our auditors state the June 30, 2006 financial statements of the Illinois State Board of Investment are fairly presented. 

 

 

 

 

                                   ____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:RPU:pp

 

SPECIAL ASSISTANT AUDITORS

 

      Our special assistant auditors for this audit were KPMG LLP.

 

 

 

{Financial data is summarized on the reverse page}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ILLINOIS STATE BOARD OF INVESTMENT

FINANCIAL AUDIT

FOR THE YEAR ENDED JUNE 30, 2006

 

OPERATING STATEMENT ANALYSIS

FY 2006

FY 2005

Revenues: Investment Income - Appreciation in Fair Value......

                Investment Income - Interest & Dividends..............

                Investment Income - Securities Lending..................

                 Total Investment Income....................................

Expenses: Salaries and Benefits.........................................

                Operating Expenses..............................................

External Support (consulting and investment fees)..

                    Total Expenses..................................................

 Revenue Over Expenses...............................

Member Systems’ Withdrawals..............................................

Net Assets Beginning of the Year..........................................

Net Assets End of the Year...................................................

  $    892,599,986 

306,226,121

       4,321,712 

$ 1,203,147,819 

$        1,173,380 

413,205

     28,556,047 

$      30,142,632

$ 1,173,005,187

(759,000,000)

10,902,479,667

$11,316,484,854

  $     766,090,763 

262,157,730

        3,674,829 

 $  1,031,923,322 

$         1,082,345 

374,817

      23,025,047 

$       24,482,209

$  1,007,441,113

(547,700,000)

10,442,738,554

$10,902,479,667

EXTERNAL SUPPORT EXPENSES

FY 2006

FY 2005

Custody................................................................................

Consulting and Professional....................................................

Investment Advisors / Managers............................................

Investment Services and Research.........................................

         Total External Support Expenses....................................

$     224,730 

739,748

27,434,504

     157,065

$28,556,047

$     197,857   

647,218

22,010,299

     169,673 

$23,025,047

MEMBER SYSTEMS’ WITHDRAWALS

FY 2006

FY 2005

State Employees’ Retirement System...................................

Judges’ Retirement System......................................................

General Assembly Retirement System......................................

Total Member Systems’ Withdrawals...............................

$721,000,000

28,500,000

    9,500,000

$759,000,000

$518,000,000

21,600,000

    8,100,000

$547,700,000

INVESTMENT PORTFOLIO ANALYSIS - Fair Value

JUNE 30, 2006

JUNE 30, 2005

Government and Agency Obligations........................................

Foreign Obligations..................................................................

Corporate Obligations..............................................................

Convertible Bonds...................................................................

Common Stock & Equity Funds................................................

Preferred Stock.......................................................................

Foreign Equity Securities..........................................................

Hedge Funds...........................................................................

Real Estate Investments........................................................

Private Equity......................................................................

Money Market Instruments......................................................

Forward Foreign Exchange Contracts.......................................

Total Investment Portfolio...............................................

$ 1,110,919,988 

104,455,671

1,382,574,163

0

5,369,124,032

1,057,334 

1,113,268,102

416,462,183

1,134,025,154

482,264,036

320,641,552

              26,145

$11,434,818,360

$ 1,130,079,107 

88,970,486

1,643,935,794

1,404,244

5,529,033,328

1,593,391 

1,035,874,373

0

778,951,123

466,871,030

283,461,008

         (497,874)

$10,959,676,010

SELECTED ACCOUNT BALANCES

JUNE 30, 2006

JUNE 30, 2005

Cash.....................................................................................

Total Accounts Receivable.....................................................

Capital Assets.......................................................................

Operating Expenses Payable..................................................

Investment Purchases Payable.................................................

$  80,644,137 

$184,529,093

$       45,348

$   6,893,061

$376,678,007

$  13,722,061 

$294,208,301

$        41,772

    $    5,944,261

$359,224,216

BOARD CHIEF EXECUTIVES

 

 

During Engagement Period: Executive Director: William R. Atwood. Chairman: Edward M. Smith (through 12-31-2005), Michael Goetz (starting March 2006).

Currently:  Executive Director: William R. Atwood.  Chairman: Michael Goetz.