Results of Operations Ginnie Mae believes that the following discus- sion will provide the reader with information that is relevant to an assessment and under- standing of Ginnie Mae’s financial condition and of the results of operations.  The discus- sion should be read in conjunction with the financial statements and notes thereto.  Ginnie Mae’s operating results are subject to fluctua- tion each year depending on the frequency and severity of losses resulting from general economic conditions, mortgage market conditions, and terminating issuers. MBS Program Income MBS program income includes Guaranty Fees, New Issuer Fees, Commitment Fees, Handling Fees, and Transfer of Servicing Fees. Guaranty Fees and Commitment Fees com- prise approximately 95 percent of total MBS program revenues.  Guaranty Fees represent income streams earned by providing Ginnie Mae’s guaranty of the full faith and credit of the United States Government to MBS issuers. These income streams are recognized over the life of the outstanding mortgage-backed secu- rities.  Commitment Fees represent income that Ginnie Mae earns for providing approved issuers with authority to pool mortgages into Ginnie Mae mortgage-backed securities. Commitment Fees increased 94.7 percent from $16.9 million in Fiscal Year 2000 to $32.9 million in Fiscal Year 2001.  This in- crease resulted from a surge in MBS issuance activity.  New commitments issued by Ginnie Mae amounted to $161.7 billion during Fiscal Year 2001, an 84.8 percent increase from Fiscal Year 2000. Steady growth in the MBS portfolio was responsible for the increase in MBS program income.  MBS Guaranty Fees increased 3.4 percent to $382.9 million in Fiscal Year 2001 from $370.3 million in Fiscal Year 2000.  The Guaranty Fees are collected on the aggregate principal balance of the guaranteed securities outstanding of the non-defaulted issuer portfolio. The following chart represents the remaining principal balance outstanding of the MBS portfolio as of September 30, 2001: Remaining Principal Balance Outstanding of the MBS Portfolio Fiscal Year Dollars in Millions 1997 $530,553 1998 $542,207 1999 $569,650 2000 $603,471 2001 $604,309 Interest Income Ginnie Mae funds its investment portfolio through its excess revenues over expenses. As a result, the corresponding interest income has steadily increased over the past five years. For Fiscal Year 2001, interest income increased 3.5 percent to $430.3 million from $415.8 million in Fiscal Year 2000.  This increase is directly related to Ginnie Mae’s investment strategy and the success of its increasing investment portfolio.  Ginnie Mae invests the excess of its accumulated revenues over expenses only in U.S. Government securities, as mandated by the U.S. Treasury.  However, the interest rate of return has continually decreased and, therefore, the revenue generat- ed as a percentage of income continues to decline. Multiclass Revenues and Miscellaneous Income Multiclass revenue is part of the MBS pro- gram revenues and is composed of REMIC and Platinum program fees.  Miscellaneous income, also a component of the MBS pro- gram revenues, is earned from the Ginnie Mae II portfolio.  The Multiclass revenue bal- ance fluctuates based on market conditions and issuance activity.  Ginnie Mae issued 19 G i n n i e   M a e   A n n u a l   R e p o r t   2 0 0 1