CCP 10-31-1994 - Laserfiche WebLink

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Portfolio Composition INSTITUTIONAL As a percentage of total assets GOVERNMENT INCOME u,s. Agency .verse Floaters 21 % PORTFOLIO u.s. Agency Inverse Interest-Only 7% RE"'-'\ ' U.S. Agency Lt:l t=D Z-bonds 15% September 30, 1994 U.S. Agency OCT 21 1994 Interest-Only 1 % Ci1Y OF ARDEN HILLS u.s. Agency Institutional Government Income Portfolio's investment objective is a Mortgage-Backed 8% high level of current income consistent with preservation of capital. u.s. Agency Principal-Only 16% Short-Term 2% Portfolio Commentary u.s. Treasury 30% I July and August presented an improved fixed income market and illustrated the recovery capability of the fund. Total return in July was Net Assets vs Total Assets +2.86% compared to the Merrill Lynch 3- to 5.Year Index of +1.36%. August'S total rerurns were +0.77% and +0.30%, tespectively. The bond market was down sharply in September however, which resulted in the $625,169,757 fund recotding a -0.3 7% return for the q uaner with the index ending slightly higher at +0.61 %. (Total teturns do not include the fund's sales charge and assume reinvested dividends.) Quartet-end clearing of invenrory by firms dealing in mottgage-backed derivative securities, and few buyers willing to take on excess inventory at the end of the quarrer . forced down the market values of these securities. Net Assets Total Assets We conrinue to implemenr the following portfolio strategy: The difference between the fund's total assets and net 1. Rebalancing the portfolio. We continue to emphasize shorr-rerm assets ref/ects the sale-forward (dollar-roil) program. Treasury securities and de-emphasize the purchase of securities through Through this program, the fund commits to buy mortgage-backed securities in the future at today's the sale-forward (dollat-roll) program. These steps should help teduce price. In return, the fund eams a fee. The value of fluctuations in the fund's net asset value, although fluctuation is likely to securities the fund has committed to buy must be reflected in the fund's net asset value at the time of continue. These steps will also reduce the earnings of the fund. As of the commitment. The more securities purchased in the quaner end, the fund's sale-forward program was decreased to sale-forward program. the more potential there is for net asset value (NA V) volatility. approximately 8% of total assets. Also as of September 30, we had $200 million in principal value of 14, 2~, and 4-year Treasury securities, which Fund Performance had a market value of $185 million. Our long-term objective is to increase Ftmd performance calculations are through these securities to 50% of the portfolio. Furrher addition of short-term September 30, 1994, and ref/ect the reinvestment of all securities will help bring us closer to realigning the fund's average life with dividend and capital gains distributions. our three- to five-year target. In the wake of the matket developments that One-Year Total Return occurred in 1994, the fund's curtent projected volatiliry is significantly Does not reflect the fund's 1.5% sales charge. greater than its targeted range, and there can be no assurance that its Institutional Govenunent Income Portfolio.....-26.65% projected volatility will move back within its targeted range in the Merrill Lynch 3-S Year Treasury Index..........2.30% near future. Average Annual Total Returns 2. Maintaining the dividend. The fund continues to pay monrhly Reflects the fund's 1.5% sales charge. dividends at a rate of 7.5 cents per share, and we currently anticipate no ~e- Year ,....................................................27.75% changes to the dividend policy. Since its inception, the fund has paid 75 e~ Year .......................................................5.090/0 dividends of 7.5 cents per share and 51.9 cents pet share in capital gains. ince Inception (7/11/88) ...............................5.79% 3. Recovering the fund's net asset value. The fund maintains its recovery potential. Currently, 92 % of the portfolio is invested in securities that Continued on back page -