REPORT DIGEST

TEACHERS’ RETIREMENT SYSTEM OF THE STATE OF ILLINOIS

COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2006

Summary of Findings:

Total findings this report 0

Total findings last report 1

Repeated findings 0

Release Date:

April 17, 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.state.il.us/auditor

INTRODUCTION

This digest covers our compliance attestation examination of the Teachers’ Retirement System (System) for the year ended June 30, 2006. A financial audit covering the year ending June 30, 2006 was issued separately. There were no material findings of noncompliance disclosed during our testing. We commend the System for maintaining effective internal controls.

FUNDING LEGISLATION

In June 2005, Public Act 94-0004 became law. This legislation further modified the funding plan of the System by reducing the amount of required employer (State) contributions for fiscal year 2006 and 2007 that would have otherwise been required under the previous funding legislation. The State contributions decreased approximately $372.4 million from $906.7 million in fiscal year 2005 to $534.3 million in fiscal years 2006.

AUDITORS’ OPINION

We conducted a compliance attestation examination of the System for the year ended June 30, 2006 as required by the Illinois State Auditing Act.

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

BKD LLP were our special assistant auditors for this engagement.

{Financial Data and Supplementary Information are summarized on the reverse page.}

TEACHERS' RETIREMENT SYSTEM OF ILLINOIS

COMPLIANCE ATTESTATION EXAMINATION

YEAR ENDED JUNE 30, 2006

OPERATING STATEMENT ANALYSIS	FY 2006	FY 2005
REVENUES: Contributions - Members..................................................... Contributions - State of Illinois........................................ Contributions - School Districts....................................... Total Contributions......................................................... Investment Income - Appreciation in Fair Value........... Investment Income - Income From Investments............ Total Investment Income................................................ Investment Expense........................................................... Total Revenues................................................................ EXPENSES: Benefits................................................................................... Refunds................................................................................ Administrative Expenses.................................................... Total Expenses.................................................................. Revenue over Expenses....................................................	$ 799,034,336 534,305,256 123,542,608 $1,456,882,200 2,971,529,661 1,153,956,504 $4,125,486,165 132,196,285 $5,450,172,080 $2,877,230,697 57,967,063 15,303,370 $2,950,501,130 $2,499,670,950	$ 761,790,009 906,749,310 148,813,036 $1,817,352,355 2,569,878,360 875,057,684 $3,444,936,044 114,896,886 $5,147,391,513 $2,533,102,848 59,395,758 14,403,715 $2,606,902,321 $2,540,489,192
SCHEDULE OF INVESTMENT PORTFOLIO - Fair Value	JUNE 30, 2006	JUNE 30, 2005
Equities: Common Stocks, U.S. Equities......................................... Common Stocks, Non - U.S. Equities ............................ Preferred Stocks, U.S. Equities ...................................... Preferred Stocks, Non - U.S. Equities............................ Total Equities............................................................ Fixed Income: U.S. Government, U.S. Treasuries................................... U.S. Government, Federal Agencies.............................. U.S. Government, Municipals (taxable)......................... U.S. Government, Index Linked Bonds.......................... U.S. Government, Backed Mortgages........................... U.S. Corporate: Asset Backed Securities...................... U.S. Corporate: Commercial Backed Mortgages.......... U.S. Corporate: Collateralized Mortgages..................... U.S. Corporate: Commingled / Closed End funds........ U.S. Corporate: Convertible Bonds................................ U.S. Corporate: Credit Obligations................................. Swaps / Swaptions........................................................... International Notes and Bonds...................................... Total Fixed Income................................................... Real Estate..................................................................................................... Short Term Investments.............................................................................. Private Equity............................................................................................... Foreign Currency......................................................................................... TOTAL INVESTMENTS.......................................................................	$12,575,262,796 7,244,296,966 37,767,710 174,064,874 $20,031,392,346 1,433,704,715 1,612,335,642 11,619,751 263,914,841 2,818,412,775 721,905,881 527,255,346 781,486,169 77,089,595 2,945,437 1,633,589,444 (3,157,583) 656,883,773 $10,537,985,786 3,946,280,351 1,516,251,424 1,513,997,646 34,040,496 $37,579,948,049	$12,499,580,367 6,118,615,710 60,156,653 108,842,145 $18,787,194,875 1,957,811,175 1,331,356,248 12,527,227 346,564,816 2,371,367,541 614,698,386 287,002,709 587,153,543 668,564,763 0 1,488,993,121 0 659,701,554 $10,325,741,083 3,525,456,881 1,413,132,556 1,068,633,225 28,166,730 $35,148,325,350
iNVESTMENTS USED FOR Benefits and Expenses	FY 2006	FY 2005
CONTRIBUTIONS: Member/Participants................................................ Employers.............................................................. State of Illinois Appropriations ........................ Total Contributions (1)................................. DEDUCTIONS: Benefits....................................................................... Refunds.................................................................... Administration........................................................ Total Deductions (2)...................................... Investments used to Pay Benefits and Expenses (1)-(2)..........................	$ 799,034,336 123,542,608 534,305,256 $ 1,456,882,200 $ 2,877,230,697 57,967,063 15,303,370 $ 2,950,501,130 $(1,493,618,930)	$ 761,790,009 148,813,036 906,749,310 $1,817,352,355 $2,533,102,848 59,395,758 14,403,715 $2,606,902,321 $(789,549,966)
SUPPLEMENTARY INFORMATION	FY 2006	FY 2005
Total investment manager fees.................................................................. Total time weighted return on investments (unaudited)........................ Average Number of System Employees................................................... Number of Retirement Annuitants............................................................ Value of General Obligation Bond, Pension Series 2003 investments.	$120,384,422 11.8% 169 75,747 $5,444,473,959	$104,221,360 10.8% 168 73,464 $5,187,826,491
EXECUTIVE DIRECTOR
During Engagement Period: Jon Bauman Currently: Jon Bauman

REPORT DIGEST

FUNDING LEGISLATION

SPECIAL ASSISTANT AUDITORS

YEAR ENDED JUNE 30, 2006

iNVESTMENTS USED FOR Benefits and Expenses

SUPPLEMENTARY INFORMATION

FY 2006

FY 2005