Firemen's Annuity and Benefit Fund of Chicago, Illinois ... - Fabf.org
Firemen's Annuity and Benefit Fund of Chicago, Illinois ... - Fabf.org
Firemen's Annuity and Benefit Fund of Chicago, Illinois ... - Fabf.org
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
MANAGEMENT’S DISCUSSION AND ANALYSIS<br />
This section presents Management’s Discussion <strong>and</strong> Analysis <strong>of</strong> the financial position <strong>and</strong> performance <strong>of</strong><br />
the <strong>Firemen's</strong> <strong>Annuity</strong> <strong>and</strong> <strong>Benefit</strong> <strong>Fund</strong> <strong>of</strong> <strong>Chicago</strong> (Plan) for the year ended December 31, 2006. This<br />
discussion is presented as a narrative overview <strong>of</strong> the financial activities <strong>and</strong> significant changes <strong>of</strong> the Plan<br />
<strong>and</strong> should be read in conjunction with the Plan’s financial statements.<br />
Overview <strong>of</strong> the Financial Statements<br />
The discussion <strong>and</strong> analysis which follows is intended to serve as an introduction to the Plan’s basic financial<br />
reporting, including the following statements:<br />
Statement <strong>of</strong> Plan Net Assets presents the financial position <strong>of</strong> the Plan at fiscal year-end. It<br />
indicates the assets available for the payment <strong>of</strong> future benefits <strong>and</strong> any current liabilities that are<br />
owed as <strong>of</strong> the statement date. Investments are shown at fair value. All assets <strong>and</strong> liabilities are<br />
determined on an accrual basis.<br />
Statement <strong>of</strong> Changes in Plan Net Assets presents the results <strong>of</strong> activities during the year. All<br />
changes affecting the assets <strong>and</strong> liabilities <strong>of</strong> the Plan are reflected on an accrual basis when the<br />
activity occurred, regardless <strong>of</strong> the timing <strong>of</strong> the related cash flows. In that regard, changes in the<br />
fair values <strong>of</strong> investments are included in the year’s activity as net appreciation in fair value <strong>of</strong><br />
investments.<br />
Notes to Financial Statements provide additional information that is essential to achieving a better<br />
underst<strong>and</strong>ing <strong>of</strong> the data provided in the financial statements. The notes present information about<br />
the Plan’s accounting policies, significant account balances <strong>and</strong> activities, material risks, obligations,<br />
<strong>and</strong> subsequent events, in any.<br />
Required Supplementary <strong>and</strong> Additional Information Schedules provide detailed, historical<br />
trend information <strong>of</strong> assets, liabilities <strong>and</strong> employer contributions presented after the Notes to the<br />
Financial Statements.<br />
The financial statements are prepared in accordance with GASB Pronouncements.<br />
Financial Highlights<br />
The net assets <strong>of</strong> the Plan increased by $116.8 million, a 9.2% increase during 2006. The increase<br />
in assets was directly attributable to an increase in the value <strong>of</strong> total investments achieved by strong<br />
investment returns during the year.<br />
The gross rate <strong>of</strong> return <strong>of</strong> the investment portfolio for 2006 was 15.5% versus 2005’s return <strong>of</strong><br />
10.7%. Above benchmark performance returns across many <strong>of</strong> the Plan’s equity <strong>and</strong> fixed income<br />
investments contributed to 2006’s results.<br />
The actuarial funding <strong>of</strong> the Plan for 2006 was 40.36%, contrasted against 2005’s funding level <strong>of</strong><br />
41.75%. The slight decrease in the funding level during 2006 was primarily due to the recognition <strong>of</strong><br />
the additional liability attributable to the changes in salary levels resulting from the new 2006<br />
contract between the City <strong>of</strong> <strong>Chicago</strong> <strong>and</strong> Local 2.<br />
7