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<br />JUL-08-1999 THU 11:00 AM CRETEX PURCHASING <br /> <br />Supplemental Investment Fund <br /> <br />Bond Market <br />Account <br /> <br />Objective <br />The Bond Market Account is <br />invested pl'imnrily in jnvestll1~nt. <br />graue government bonds, corporate <br />bonds and mortgage sccurities with <br />intermediate to long matl.lritii:s. As <br />sllch, it is a more conservative <br />investmcnt alternnrive than any of the <br />accounts described in the previolls <br />sections. At the end of fisci'll year <br />1998, the market vnlue of the <br />ACCOUIH was $35 million. <br /> <br />The Account earns investment <br />returns through interest income and <br />capital apprecialion. Because bond <br />prices move inversely with intcrest <br />rales, the Account entails some ri;;k <br />for inVeSlQrs. However, historically, <br />it represents a lower risk alternative <br />thnn the investment options that <br />include common stocks. <br /> <br />Management <br />Since July 1997, the structure ofrhe <br />Bond Market Accotlnt has included <br />active Clnd semi.pa;;sive managers <br />and has mirrored the structure of the <br />Bond Pool utilized by the Basic and <br />Post F\lnds. (Prior to July 1997, the <br />Bond Market Account used only <br />active managcrs.) <br /> <br />Performance <br />The Bond M<lrket ACcount is <br />expected to exceed the performance <br />OfLhc bond market, as represented by <br />the Lehman Brothers Aggregate <br />Bond Index. for fiscal year 1993, the <br />Accoullt outperfomled by 0.5 <br />percenTage point. For the lT10~t recent <br />five years. the Account h:u <br />omperformed by 0.3 percentage <br />point annllalized. <br /> <br />Total Account rcsults for the last five <br />years are shown in Figmc 30. <br /> <br />FAX NO. 6122418210 <br />:#\ <br /> <br />P, 09/12 <br /> <br />Figure Jfl. HondA1arkct A~"COWll FY 1994./998 <br /> <br />I.Bond ! <br />I Market. <br />I . <br />: 0 Lehman /13 <br />i Agg.- ~ <br />'_...___._._1 rf <br /> <br />1S. <br /> <br />I- <br /> <br />10 ...- <br /> <br />~ ....-.... <br /> <br />.... <br /> <br />- <br /> <br /> <br /> <br />JJ <br /> <br />5 ".." <br /> <br />.Il" <br /> <br /> <br />.I.U +- +- <br /> <br />+- <br /> <br />o 'IJ"+ <br /> <br />.5. <br /> <br />1994 1995 1995 1997 1998 3 Yr. 5 Yr. <br /> <br /> Annualized <br />" 1994 1995 1996 1991 1998 3 Yr. 5 Yr. <br />Bond M:lrk.:lI -1.7% 12J~% 5.3% 9.3% 11.0% 8.5% 7.2% <br />Lchm.ln Aggn:gall:* -1.2 12.5 5.0 8.2 10.5 7.9 6.9 <br /> <br />· Lehman Brothers Aggregate Bond rndcx. Prior to 7/1/94 the Salomon Broad <br />Investment Grade Bond Indcx was the benchmark. <br /> <br />29 <br /> <br />