2006 NBAA Annual Report

Functional Allocation of ExpensesThe costs of providing the various programs and other activities havebeen summarized on a functional basis in the accompanying consolidatedstatements of activities. Accordingly, certain costs have beenallocated among the programs and supporting services benefited basedupon salaries and related costs.Use of EstimatesThe preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilitiesat the date of the financial statements and the reported amounts ofrevenue and expenses during the reporting period. Actual results coulddiffer from those estimates.2. Investments in Marketable SecuritiesInvestments in marketable securities are comprised of the following asof June 30, 2006 and 2005:2006 2005Cost Market Cost MarketMutual Funds $ 3,515,408 $ 3,478,614 $ 3,123,630 $ 3,183,361Public Equity 7,650,894 8,333,339 7,857,302 8,416,382Government Bonds 2,401,967 2,350,507 1,674,568 1,743,009Structured Products 1,472,900 1,539,978 1,275,000 1,294,196Real Estate Securities 505,200 639,748 464,159 538,939Total Investments $ 15,546,369 $16,342,186 $14,394,659 $15,175,887For the years ended June 30, 2006 and 2005, net investment income,including interest earned on the Association’s cash accounts, consistedof the following:2006 2005Dividends and interest income $ 629,868 $ 423,485Unrealized gains 5,046 607,673Realized gains 689,728 167,697Net investment income $ 1,324,642 $ 1,198,8553. Retirement PlansDuring the year ended June 30, 1998, the Association established theNational Business Aviation Association, Inc. 401(k) Profit Sharing Planand Trust for all eligible employees. All plan participants have theoption of deferring a percentage of their annual salary, subject tocertain IRS limitations. The Association may match a portion of thesalary deferred by each employee. For the years ended June 30, 2006and 2005, the Association contributed $584,691 and $431,593,respectively.4. Postretirement Benefits Other Than PensionsThe Association provides health care benefits to certain retiredemployees. Active employees become eligible for benefits after meetingcertain age and service requirements. The plan is contributory foremployees under the age of 62, non-contributory for employees whohave reached the age of 62 and contains other cost-sharing featuressuch as deductibles. The plan is unfunded.During the year ended June 30, 2006, the Association amended theplan to change eligibility requirements and employee contributionrequirements. These plan changes will be effective January 1, 2007.During the year ended June 30, 2005, the Association determinedthat previously amended eligibility requirements pertaining to theAssociation’s Postretirement Health Care Benefit plan had not beenproperly communicated to the plan actuary and all necessary adjustmentswere done.Obligations and Funded StatusA summary of the actuarial evaluation for this plan including the fundedstatus and the accrued benefit cost at June 30, are as follows:2006 2005Benefit obligation at June 30 $ 3,118,186 $ 2,811,285Fair value of plan assets at June 30 — —Funded status $ (3,118,186) $ (2,811,285)Accrued postretirement benefits cost reflectedin the accompanying consolidated statementsof financial position $ 3,118,186 $ 2,811,285The Association incurred investment management fees of $168,603and $64,905 during the years ended June 30, 2006 and 2005,respectively.2006 NBAA ANNUAL REPORT 17