Annual Report PDF file 2009 - State of Illinois

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INDEPENDENT AUDITORS’ REPORTHonorable William G. HollandAuditor GeneralState of IllinoisBoard of DirectorsIllinois State Board of Investment:As Special Assistant Auditors for the Auditor General, we have audited the accompanying statements of net assets of the IllinoisState Board of Investment (Board), an internal investment pool of the State of Illinois, as of June 30, 2009 and June 30, 2008,and the related statements of changes in net assets for the years then ended, as listed in the table of contents. These financialstatements are the responsibility of the Board’s management. Our responsibility is to express opinions on these financialstatements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of theUnited States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Board’s internal control over financial reporting. Accordingly, we express no such opinion. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.As discussed in Note 1, the financial statements present only the Board and do not purport to, and do not present fairly thefinancial position of the State of Illinois as of June 30, 2009 and June 30, 2008, and the changes in its financial position for theyears then ended in conformity with accounting principles generally accepted in the United States of America.In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the IllinoisState Board of Investment as of June 30, 2009 and June 30, 2008, and the changes in its net assets for the years then ended, inconformity with accounting principles generally accepted in the United States of America.In accordance with Government Auditing Standards, we have also issued, under separate cover, our report dated January 20,2010 on our consideration of the Board’s internal control over financial reporting and on our tests of its compliance with certainprovisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe thescope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to providean opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed inaccordance with Government Auditing Standards and should be considered in assessing the results of our audit.The accompanying management’s discussion and analysis on pages 12 and 13 is not a required part of the basic financialstatements but is supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally of inquiries of management regarding themethods of measurement and presentation of the required supplementary information. However, we did not audit the informationand express no opinion on it.Chicago, IllinoisJanuary 20, 2010McGladrey & Pullen, LLP is a member firm of RSM International,an affiliation of separate and independent legal entities.1ILLINOIS STATE BOARD OF INVESTMENT11
MANAGEMENT’S DISCUSSION AND ANALYSISIn October 1969, the Illinois State Board of Investment wascreated by enactment of Article 22A of the Illinois PensionCode by the 76th General Assembly of Illinois. By statute, theBoard was given the responsibility for management of theassets of the General Assembly Retirement System, theJudges’ Retirement System of Illinois and the StateEmployees’ Retirement System of Illinois. Board membershipconsists of five members appointed by the Governor and fourex officio members consisting of the State Treasurer and theChairman of the Board of Trustees of each of the retirementsystems. The Board maintains their office in Chicago, IL.The following Management Discussion and Analysis (MD&A)provides an introduction and overview of the Illinois StateBoard of Investment (ISBI or Board) financial activities for thefiscal years ended June 30, 2009 and 2008.Financial HighlightsThe net assets of the Board totaled approximately $8.7 billionat fiscal year end June 30, 2009. The decrease from theprevious year is primarily the result of investment losses.General Market RiskISBI is exposed to general market risk. This general marketrisk is reflected in asset valuations fluctuating with marketvolatility. Any impact from market volatility on ISBI’sinvestment portfolio depends in large measure on how deepthe market downturn is, how long it lasts, and how it fits withinfiscal year reporting periods. The resulting market risk andassociated realized and unrealized gains and losses couldsignificantly impact ISBI’s financial condition. The readers ofthese financial statements are advised that financial marketscontinue to be volatile and may experience significantchanges on almost a daily basis.Overview of the Financial StatementsThe Board’s financial statements are prepared on an accrualbasis in accordance with U. S. generally accepted accountingprinciples promulgated by the Governmental AccountingStandards Board and are comprised of the Statement of NetAssets, the Statement of Changes in Net Assets, and Notes toFinancial Statements.The Statement of Net Assets presents information on theBoard’s assets and liabilities and the resulting net assets. Thisstatement also reflects the Board’s investments along with thecash and short-term investments, receivables, and otherassets and liabilities.The decrease in investments at June 30, 2009 is a result of aninvestment loss of 20.1% for the fiscal year, net of expenseswhich are shown in the Statement of Changes in Net Assets.The decrease in liabilities for fiscal 2009 compared with 2008consisted mainly of decreases in the securities lendingcollateral obligation and unsettled investment purchases.Condensed Summary of Net AssetsJune 30 2009/2008 2008/20072009 2008 2007 Change Change$ $ $ $ $Cash 12,662,039 43,667,005 42,916,419 (31,004,966) 750,586Receivables 186,099,275 187,106,001 548,269,714 (1,006,726) (361,163,713)Investments 8,735,057,063 11,429,528,114 12,805,770,746 (2,694,471,051) (1,376,242,632)Securities lending collateral 1,395,768,802 1,703,959,890 2,084,820,497 (308,191,088) (380,860,607)Prepaid expenses 16,184 16,242 14,740 (58) 1,502Capital assets 57,635 52,797 49,283 4,838 3,514Total assets 10,329,660,998 13,364,330,049 15,481,841,399 (3,034,669,051) (2,117,511,350)Liabilities 1,645,606,726 2,049,276,888 2,929,645,238 (403,670,162) (880,368,350)Net assets 8,684,054,272 11,315,053,161 12,552,196,161 (2,630,998,889) (1,237,143,000)ILLINOIS STATE BOARD OF INVESTMENT12
Page 1 and 2: 2009ANNUALREPORTILLINOISSTATEBOARDO
Page 3 and 4: BOARD MEMBERSCHAIRMANRonald E. Powe
Page 5 and 6: International Equity 17%U.S. Equity
Page 7 and 8: % Investment Returns June 30201510T
Page 9 and 10: FINANCIAL HIGHLIGHTSFISCAL YEARS EN
Page 11: FINANCIALSTATEMENTS2009ILLINOIS STA
Page 15 and 16: STATEMENT OF NET ASSETSJUNE 30, 200
Page 18 and 19: Note 2Deposits, Investments, and In
Page 20 and 21: Note 2 (continued)Deposits, Investm
Page 22 and 23: Note 2 (continued)Deposits, Investm
Page 24 and 25: Note 3 General StateMember Systems
Page 26 and 27: Note 4PensionsPlan DescriptionAll o
Page 28 and 29: SUPPLEMENTALFINANCIALINFORMATION200
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PORTFOLIO OF INVESTMENTSJUNE 30, 20
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PORTFOLIO DATAFISCAL YEARS ENDED JU
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INVESTMENT TRANSACTIONS WITH BROKER
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RESTRICTED INVESTMENTSPublic Act 95
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STAFF AND INVESTMENT MANAGERSEXECUT
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Annual Report PDF file 2009 - State of Illinois

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