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<br />JUL-08-1999 THU 10:59 AM CRETEX PURCHASING <br /> <br />Objective <br />The Income Sh:lrc ACCOLlnt <br />resembles the Basic and Post <br />Retiremcnt Funds in terms of <br />investment objectivcs. The Account <br />seeks to mnximi7.c long-tcnn <br />innmion-adj\lsred rates of return. The <br />Incomc Share Account pursues this /lIdivilllllll Mllllnger. The <br />objective within the constraints of pnssive .~t()ck manager is <br />protecting against adverse financial expected to track closely the <br />environments nnd limiting shorr run performance of the Wilshire <br />p(1rtl:Olio ~~~,~\rrLyolatili~....__" 5000. The internal bond <br />.' "' manager for the Account is <br />"Tll;'S~~'il1ve:;t~ the Income s~ar~ expected to exceed the <br />l Account in a bal,mced po\tf()lio of"\ performance of the Lehman <br />common stocks and fixed income ...... '. ...... Brothers Aggregate BOlld Index. <br />5ccuritics with the following long- . '..... ....'..-...."_ ,'__ <br />term ,1:;SC[ mix: 60% domestic ? ft(ll1 ([ ~-S E It r fJ it- A. $ ~ <br />stocks, 35% bonds, 5% cash I N 1J6Tnt:;~igrlr~ 26. Income SharI! AC'collntFY /994-/998 <br />. I / <br />,~Iva ents. 1> 0 t.-l (, ,- .../~ <br /> <br />'....,....~..... . ... ..-., . . .25 ....,~. <br />Common stockS-p~Q'vidc"thcp-(iicntjal . "-"'. ..... .., ." <br />for signiticant long-tcnll capital r'.1i"corre-"-" <br />::l.pprcciation, while bonds provide Share <br />both <l hedge against deflation <lnd IOCorrpoSitC. <br />the diversification needed [0 limit J <br />excessive portfolio return volatility. I ...------- <br /> <br />Supplemental Investment Fund <br /> <br />Income Share Account <br /> <br /> <br />At the close of fiscal year 1998, the <br />value of the Income Sh,m:l Account <br />was $575 million. <br /> <br />Management <br />The Income Share Account's <br />investment management Slructure <br />combines internal and external <br />m::magcmcnt. soi staff manage thc <br />I1xcd income segment. The common <br />slock segment is mallnged externally <br />as part of a passively managed index <br />fund designed to track the Willihire . <br />5000. Since July 1995, the manager <br />for thi~ portion of the Account has <br />been Barclays Globnl Investors. <br /> <br />Performance <br />Similar to the other S9I funds which <br />utilize a multi-manager investment <br />structure, the Board evaluares the <br />performance of the Income Share <br />Accollnt 011 two levels: <br /> <br />FAX NQ 6122418210 <br /> <br />p, 06/12 <br /> <br />;t:J. \ <br /> <br />?tZ. /rn rI't"Z- Y /tec. D c~ IV r <br /> <br />TOf,,1 Accmmf. Thc Income <br />Sharc Account is expected to <br />exceed the returns of a <br />composite of marl<c:t indices <br />weighted in the same proportion <br />as its long term asset allocmion. <br /> <br />The Tnc()lne Share Account provided <br />a return of 21.7% for fiscal year <br />1998, outperforming its composite <br />index. Over the most recent fiye <br />years, the Income Share Account has <br />also exceeded its composite, Figure <br />26 shows n five year history of <br />pcrformance results. <br /> <br />c <br />~ <br />III <br />Cl. <br /> <br /> <br />15 _,. _. _.. <br /> <br />10 ......._ <br /> <br /> 0 <br /> 1994 1995 1996 1997 1998 3Yr. 5Yr, <br /> Annulllized <br /> 1994 1995 1996 1997 1998 J Yr. 5 Yr. <br />Income Share 1.2% 19.3% 17.6% 21..40/0 21.7% 20.2% 16,0% <br />Composite. 0.4 19.4 17.4 20.5 21.2 19.7 15.5 <br /> <br />*60% Wilshin: 5000/35% Lehman Brolhl:rs Aggregnte Bond Indr::oI.1 <br />5% 90-Day T-Bill Composill.:. Prior to 7/1194, the Salomon I3roalJ Inveslment <br />Grade Bond Index W:lS llsed:ls;1 component of the Comp~~sile. <br /> <br />25 <br />