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vestors, or to the Secretary of the Treasury (the Secretary of the Treasury may not at any one time hold more than $2.25 billion of such obligations), (2) subscriptions by the Secretary of the Treasury to FNMA preferred stock ($92.8 million was authorized in 1955, $50 million in 1957 and $65 million in 1958, making a total of $207.8 million), (3) mandatory contributions into capital incident to subscriptions for the Association's common stock by mortgage sellers and by borrowers, (4) the sale of mortgages to the in vesting public, (5) repayments and prepayments of mortgage principal, and (6) income from operations. Recommendations for such legislation as may be necessary or desirable to transfer ownership of the Association to the private holders of the common stock must be submitted to the Congress as promptly as practicable after all of the Treasury-held preferred stock has been retired. Meanwhile, the present interim program, financed by private as well as by Government investment funds, is treated as a trust fund. Operations are discussed in part I of this document in connection with the program's general fund financing and effect on budget expenditures.

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1 Balances of selected resources are identified on the statement of financial condition.

• Repayment of borrowings or purchase of preferred stock from Treasury represent obligations and expenditures of this fund but do not decrease the authority available to the fund since they may be reborrowed from or resold to Treasury at some future time.

The secondary market operations of the Federal National Mortgage Association were authorized by the Housing Act of 1954 to provide limited liquidity for Government insured and guaranteed mortgages and to improve the distribution of investment capital available for home mortgage financing. Mortgage purchases and short-term loans secured by FHA-insured and VA-guaranteed mortgages under these operations are financed by the proceeds from (1) the sale of obligations to private in

35,000

5,400

7,400

11,400

1911 1.962,238

1,981,738 2,176,938 2,008,240 2,032,301 2,236,501

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ments. 4. Dividends..

5. Interest paid on dividend credits and deposits....

6. Other expenses.

1,600

-1,345 -1.835

1,600 14 -33

1.581

1,315 1,305 2,135 2,235

1,870

1,870

3333

30 53 1,069

331

1965 1966 estimate estimate

This fund consists of gifts, bequests, and proceeds of sale of property left in the care of the facilities by former beneficiaries; patient's fund balances and proceeds of sale of effects of beneficiaries who die leaving no heirs or without having otherwise disposed of their estate. Such funds are used to promote the comfort and welfare of veterans at hospitals and homes where no general appropriation is available (38 U.S.C. chs. 83 and 85).

Object Classification (in thousands of dollars)

87

30

1,600

1,780 1,780

-1,315 -2,135

1964 1965 actual estimate

366,992

1,724

1.780 33

-33

NATIONAL SERVICE LIFE INSURANCE FUND Program and Financing (in thousands of dollars)

39,962 219,466

30

55

-1,305

-2,235

1,200

380

85

30

1,780

1,298 2,335

1,873

1,780 1,780

1,780 33

-33

1966 estimate

30

55

1,200

380

1966 1964 1965 actual estimate estimate

85

30

1,780

353,350 342,011

1,850

1,800

36,830 52,700 210,000 112,750

6,600

6,117

614

6,400
250

350

Total operating costs..

635,358 608,680 515,728

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1966 estimate

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1965

1966

1964 actual

Program and Financing (in thousands of dollars)-Continued

Assets of the fund, which are largely invested in special

Treasury interest-bearing securities and in policy loans, Identification code

1964

1965 29-00-8132-0-7-805

are expected to increase from $6,316 million as of June 30, actual estimate

1964, to $6,711 million as of June 30, 1966. The actuarial Program by activities–Continued

estimate of policy obligations as of June 30, 1964, totals Capital outlay, funded:

$6,259 million, leaving a balance of $57.3 million for con7. Policy loans made..

93,380 90,775 88,640
8. Policy liens established.

710
720

1920 tingency reserves

The income of the fund derives from premium receipts, Total capital outlay.... 94,090 91,495 89,360 interest on investments, and payments which are made to

the fund from the appropriation "Veterans insurance and 10 Total program, costs, fund

indemnities,” for claims (1) resulting from extra hazards ed-obligations...

729,448
700, 175 605,088

of the veterans' service, and (2) arising on certain policies Financing:

held by personnel on active duty. Administrative ex14 Receipts and reimbursements from:

penses are charged to the appropriation General operating Non-Federal sources:

expenses.
Optional income settlement. –46,335 -47,700 -52,140
Income offsets and refunds.

În order to bolster the economy, all dividends are being –78,386 -81.852 -80,602 Other noncash adjustments. -24, 107 -25,173 -24,788 disbursed in January rather than being spread through21 Unobligated balance available, start

out the calendar year. The accelerated payment of diviof year: U.S. securities (par). -5,391,941 -5,472,061 -5,590, 128

dends advanced $99 million of dividend expenditures into 24 Unobligated balance available, end of year: U.S. securities (par)..

1964 from 1965 and an estimated $94.5 million into 1965 5,472,061 1615,590,128 28 5,807,200

from 1966. 60 New obligational authority (ap

The fund is operated on a commercial basis to the greatpropriation). 660,741 663,517 664,630 est possible extent consistent with law. In the program

and financing statement, the noncash transactions, which Relation of obligations to expenditures:

are offset by other claims of the fund, are excluded from 10 Total obligations..

729,448 700,175 605.088 program costs in order to show obligations. The follow70 Receipts and other offsets (items 11

ing business-type statements of revenue and expense and 17)..

-148,828 - 154,725 -157,530 of financial condition include these noncash transactions 71 Obligations affecting expendi

relating to the status of insurance policy accounts. tures.

580,620 545,450 447,558 72 Obligated balance, start of year:

Revenue, Expense, and Retained Earnings (in thousands of dollars) Treasury balance

7,390 13,787 8,488 U.S. securities (par)....

321,974 310,931 299,072 74 Obligated balance, end of

estimate estimate
year:
Treasury balance.

-13.787 --8,488 -8,989
U.S. securities (par)
-310,931 -299,072 -306,900 Revenue:
Funded.

758,809 759,616 766,615 90 Expenditures.

585,267 562,608 439,229
Unfunded.

12,202 12,550

50_1

12,900 Total revenue..

771,011 772.166 779,515 Expense...

763,571 This fund (72 Stat. 1154) was established in 1940 as the

769,488 776,218 financing mechanism for World War II servicemen's and

Net income or loss for the year.

7,440 2,678 3,297 veterans' insurance program authorized by the National

Analysis of retained earnings: Retained earnService Life Insurance Act of 1940. Over 22 million

ings, start of year.

49,825

59,943 policies have been issued under this program. Because

Retained earnings, end of year..

57,265 59,943 63,240 issuance of new policies ended in 1951 the insurance in force will continue to decline. The general decline in the

Financial Condition (in thousands of dollars)
activity of the fund is indicated in the following table
(dollars in millions):

estimate
June 30, June 30. June 30, June 30,
1963
1964

1965 Number of policies in

Assets: 4,954,018

4,853,000 4,913,197

7,390 Treasury balance

13,787 4.793,000

8,488 8,989 Amount of insurance in

U.S. securities (par) - 5,713,915 5,782.992 5,889,200 6,114,100 force.. $32,239

Accounts receivable, net. 11,546 12,729 $32, 108 $31,700 $31,300

13,530 14,257 Policy loans..

463,060 506,308 539,100 572,840 Policy liens..

392
398
400

400 The status of the fund excluding noncash transactions is as follows (in thousands of dollars):

Total assets. 6,196,303 6,316,214 6,450,718 6,710,586

Liabilities: 1965

1966 actual actual

Current.

340,910 337,446 321,090 330,146 Unexpended balance of fund, be

Operating reserves: 5,810,651 5,721,305 5,796,779 5,897,688 Policy reserves 3,437,089 3,624,928 3,848,970 4,055,800

Premium waiver dis

ability reserves.. 147,468 174,339 179,565 184,120 Interest on investments...

175,023 176,471 178,362 180,877 Reserve for future inPayments from general and

stallments on ma-
special funds...
5.993 5,969 6,000 5,950

tured contracts..

2,070,595 1.967,002 1,882,000 1,822,600 476,733 478,300 479,155 477,803 Total disability in

come reserves.

32,916 39,733 46,400 52,430 657,749 660,741 663,517 664,630 Reserve for dividends. 117.500 115,500 112,750 202,250

747,095 585,267 Unexpended balance of fund, end

562,608 439,229

Total liabilities - 6,146,478 6,258,949 6,390,775 6,647,346 5,721,305 5,796,779 5,897,688 6,123,089

57,2653

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1963 actual

1964 actual

1965 estimate

1966 eslimate

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1966 estimate

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Unexpended balance of fund,

beginning of year... 1,032,123 1,004,791 982,713 962,368 UNITED STATES GOVERNMENT LIFE INSURANCE FUND Cash income during year:

Interest on investments.

35,113 34,464 34,213 33, 485 Program and Financing (in thousands of dollars)

Payments from general and
special fund..

- 240

-143 80 Identification code

128

Premiums and other receipts.. 16,926 29-00-8150-0-7-805

15,805

13,553

14,753

Total annual cash income. 51,799 50,127 49,046 47,168 Program by activities:

Cash outgo during year...

79.131 72,204 69,391

62,998 Operating costs, funded:

Unexpended balance of fund, end 1. Death claims.. 48,668 48,587 50,159

1,004,791 982,713 962,368 946,538 2. Disability claims.

24,454 24,396 23,672 3. Cash surrenders and matured en

Assets of the fund, which are largely invested in interestdowments.

9,182 8,271 7,450 4. Dividends.

bearing securities and policy loans,

are estimated to decline 14,616 14,500 7,700 from $1,078 million as of June 30, 1964, to $1,032 million 5. Interest paid on dividend credits and deposits.-

427 450 455 as of June 30, 1966, as an increasing number of policies 6. Other expense.

23
20

20 mature through death or disability. The actuarial evaluaTotal operating costs.

97,369

tion of policy obligations as of June 30, 1964, totals $1,042 96,224 89,456

million, leaving a balance of $36 million for contingency Capital outlay. funded:

reserves. 7 Policy loans made.

10,391 8,500 6,750 The income of the fund derives from premium receipts, 8. Policy liens established.

173 120 100 interest on investments, and payments which are made to Total capital outlay

10,564 8,620 6,850

the fund from the appropriation Veterans insurance and

indemnities, for claims" (a) resulting from the extra 10 Total program costs, funded--ob

hazards of the veteran's service, and (b) arising on certain ligations. 107,933 104,844 96,306 policies held by personnel on active military duty.

Administrative expenses are charged to the appropriation
Financing:
14 Receipts and reimbursements from: Non-

General operating expenses.
Federal sources:

In order to bolster the economy, all dividends are being
Optional income settlement.

-17,250 -17,233 -16,922 disbursed in January rather than being spread throughout Income offsets and refunds.

-3,608 -3,384 -3,137 Other noncash adjustments..

-14,635 -13,729 -12,725

the calendar year. The accelerated payment of dividends 21 Unobligated balance available, start of year:

advanced $7 million of expenditures into 1964 from 1965 U.S. securities (par)---

-984,669 -962,355 -940,903 and an estimated $6.5 million into 1965 from 1966. 24 Unobligated balance available, end of year:

The fund is operated on a commercial basis to the U.S. securities (par).

962,355 940,903

924,549

greatest possible extent consistent with law. In the 60 New obligational authority (appropria

program and financing statement, the noncash transaction).

50,127 49,046 47,168 tions, which are offset by other claims of the fund, are

excluded from program costs in order to show the obliga

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