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Supplemental Investment Fund <br /> <br />t <br /> <br />1 <br />t <br /> t <br /> ! <br /> ! <br /> ! <br /> <br />Income Share Account <br /> <br />objective <br />The Income Share Account <br />resembles the Basic and Post <br />Reiirement Funds in terms of <br />investment objectives. The Account <br />seeks to maximize long-term <br />inflation-adjusted rates of return. The <br />Income Share Account pursues this <br />objective within the constraints of <br />protecting against adverse financial <br />environments and limiting short run <br />portfolio return volatility. <br /> <br />The SBI invests the Income Share <br />Account in a balanced portfolio of <br />common stocks and fixed income <br />securities with the following long- <br />team asset mix: 60% domestic <br />stocks, 35% bonds, 5% cash <br />equivalents. <br /> <br />Common stocks provide the potential <br />%r significant long-term capital <br /> 2preciation, while bonds provide <br />both a hedge against deflation and <br />the diversification needed to limit <br />excessive portfolio return volatility. <br /> <br />At the close of fiscal year 1999, the <br />value of the Income Share Account <br />was $643 million. <br /> <br />Management <br />The Income Share Account's <br />nvestment management structure <br />:ombines internal and external <br />management. SBI staff manage the <br />ixed income segment. The common <br />stock segment is managed externally <br />as part of a passively managed index <br />fund designed to track the Wilshire <br />i5000. The manager for this portion <br />i of the Account is Barclays Global <br /> Investors. <br /> <br /> Performance <br /> Similar to the other SBI funds which <br /> utilize a multi-manager investment <br /> :ructure, the Board evaluates the <br /> performance of the Income Share <br /> Account on two levels: <br /> <br />TotalAccount. The Income <br />Share Account is expected to <br />exceed the returns of a <br />composite of market indices <br />weighted in the same proportion <br />as its long term asset allocation. <br /> <br />Individual Manager. The <br />passive stock manager is <br />expected to track closely the <br />performance of the Wilshire <br />5000. The internal bond <br />manager for the Account is <br />expected to exceed the <br />performance of the Lehman <br />Brothers Aggregate Bond Index. <br /> <br />The Income Share Account provided <br />a return of 13.6% for fiscal year <br />1999, matching its composite index. <br />Over the most recent five years, the <br />Income Share Account has exceeded <br />its composite. Figure 26 shows a five <br />year history of performance results. <br /> <br />Figure 26. Income Share Account FY 1995-1999 <br /> <br />25 <br /> <br />· Income <br />Share <br /> 20 <br />[] Composite* <br /> <br /> 15 <br /> <br />Q~ <br /> <br /> 10 <br /> <br />0 <br /> 1~5 1996 1~7 1~8 1~9 3Yr. <br /> <br />5Yr. <br /> <br /> 1995 1996 1997 1998 1999 <br />Income Share 19.3% 17.6% 21.4% 21.7% 13.6% <br /> <br />Composite* 19.4 17.4 20.5 21.2 13.6 <br /> <br /> * 60% Wilshire 5000/35% Lehman Brothers Aggregate Bond Index/ <br /> 5% 3 Month T-Bill Composite. <br /> <br /> Annualized <br />3 Yr. 5 Yr. <br />18.8% 18.7% <br />18.4 18.4 <br /> <br />25 <br /> <br /> <br />