to lower market risk.  Of the $6.56 billion investment balance at September 30, 2001, $440.4 million was held in overnight certifi- cates.  The balance of the portfolio’s maturi- ties are spread over time to ensure that Ginnie Mae has a ready source of funds to meet vari- ous liquidity needs.  Emergency liquidity needs are met through short-term maturities. The following chart illustrates the compo- nents of Ginnie Mae’s Investments in U.S. Government Securities at September 30, 2001: Components of Investment in U.S. Government Securities Fiscal Year 2001 U.S. Treasury Notes 93% U.S. Treasury Overnight Securities 7% Capital Adequacy Ginnie Mae’s activities involving the guaranty of MBS have historically operated at a profit. Ginnie Mae has never had to exercise its authority to borrow funds from the U.S. Treasury to finance its operations.  Ginnie Mae’s net income continues to build and strengthen the Corporation’s capital base and programs.  Ginnie Mae believes it maintains adequate capital to withstand downturns in the housing market that could cause severe issuer defaults.  Ginnie Mae’s capital is backed by the full faith and credit guaranty of the United States Government. As of September 30, 2001, Ginnie Mae had an Investment of U.S. Government balance of $8.1 billion after establishing reserves for losses on its credit activities, compared with $7.3 billion as of September 30, 2000.  Ginnie Mae’s net earnings are used to build reserves which it believes to be sound.  Over the past three years, Ginnie Mae has increased its capital adequacy ratio (Investment of U.S. Government plus loan loss reserve as a per- centage of total assets and RPB) from 1.28 percent to 1.41 percent.  To assess the strength of its capital position, Ginnie Mae uses a “stress test” methodology that measures Ginnie Mae’s ability to withstand severe economic conditions. The following chart describes Ginnie Mae’s Capital Reserves (Investment of U.S. Government) at September 30 for the last five years: Capital Reserves (Investment of U.S. Government) Fiscal Year Dollars in Millions 1997 $5,135 1998 $5,809 1999 $6,556 2000 $7,319 2001 $8,124 Risk Management Ginnie Mae continues to enhance its automat- ed systems and business processes to increase the efficiency of its operations and to reduce its business risk.  During Fiscal Year 2001, Ginnie Mae continued periodic reviews of all master subservicers and major contractors to assure compliance with the terms and condi- tions of their contracts with Ginnie Mae. Additionally, the audits and reviews provided Ginnie Mae with a mechanism for continuing to strengthen its internal controls and mini- mize risks. Compliance with the CFO Act Ginnie Mae has prepared a separate manage- ment report in compliance with the Chief Financial Officers Act of 1990 that contains detailed information.  It is available upon request from the Ginnie Mae Office of Finance at (202) 401-2064. 22 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