-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WXhw0Nf8GaozTD+cFYZrTnqbwTfZM5DnFXmckhzf69z8pWSDq1pLbSSA2fqY+KFv GFx/fk0t9OyNXKu63PlcjA== 0000950136-02-001138.txt : 20020419 0000950136-02-001138.hdr.sgml : 20020419 ACCESSION NUMBER: 0000950136-02-001138 CONFORMED SUBMISSION TYPE: N-4 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES /NY/ CENTRAL INDEX KEY: 0000727920 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 135570651 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-86572 FILM NUMBER: 02614895 BUSINESS ADDRESS: STREET 1: 1290 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10104 BUSINESS PHONE: 2125541234 MAIL ADDRESS: STREET 1: 787 SEVENTH AVE CITY: NEW YORK STATE: NY ZIP: 10019 N-4 1 file001.txt REGISTRATION STATEMENT Registration No. 333- - ------------------------------------------------------------------------------- ----------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. [ ] ---- Post-Effective Amendment No. [ ] ---- AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. [ ] ---- (Check appropriate box or boxes) -------------------------------- THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Exact Name of Registrant) -------------------------------- THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Name of Depositor) 1290 Avenue of the Americas, New York, New York 10104 (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, including Area Code: (212) 554-1234 ROBIN WAGNER Vice President and Counsel The Equitable Life Assurance Society of the United States 1290 Avenue of the Americas, New York, New York 10104 (Names and Addresses of Agents for Service) ----------------------------------------- Please send copies of all communications to: (201)392-5279 PETER E. PANARITES MAUREEN SCANNELL BATEMAN Foley & Lardner Executive Vice President Washington Harbour and General Counsel 3000 K. Street, Northwest State Street Bank and Trust Company Washington, D.C. 20007 225 Franklin Street Boston, MA 02110 ----------------------------------------- CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- ---------------------------------------------------------------------------------------------------------------------------- Title of Securities Being Amount Being Proposed Maximum Proposed Maximum Amount of Registration Registered Registered Offering Price per Unit Aggregate Offering Price* Fee(2) - ---------------------------------------------------------------------------------------------------------------------------- Units of Interest Under Group Annuity Contract $40,000,000 $.000092(1)) $40,000,000(1) $3,680 - ----------------------------------------------------------------------------------------------------------------------------
* Estimated solely for purpose of determining the registration fee. (1) The Contract does not provide for a predetermined amount or number of units (2) Of the $75,000,000 of units of interest under group annuity contracts registered under Registration Statement File No. 333-51031, $59,924,858 for which a filing fee of $16,659 was previously paid are being carried forward. Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this registration statement. Supplement dated May 1, 2002 to Prospectus dated May 1, 2002 ------------------------------------------------------------------------ MEMBERS RETIREMENT PROGRAMS funded under contracts with THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES 1290 Avenue of the Americas, New York, New York 10104 Toll-Free Telephone 800-223-5790 ---------------------------------- VARIABLE ANNUITY BENEFITS ---------------------------------- This Prospectus Supplement should be read and retained for future reference by Participants in the Members Retirement Programs who are considering variable annuity payment benefits after retirement. This Prospectus Supplement is not authorized for distribution unless accompanied or preceded by the Prospectus dated May 1, 2002 for the appropriate Members Retirement Program. - ------------------------------------------------------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS: ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------ RETIREMENT BENEFITS When you become eligible to receive benefits under a Members Retirement Program, you may select one or more of the following forms of distribution, which are available in variable or fixed form. The law requires that if the value of your Account Balance is more than $5,000, you must receive a Qualified Joint and Survivor Annuity unless your Spouse consents to a different election. Life Annuity - annuity providing monthly payments for your life. No payments will be made after your death, even if you have received only one payment. Life Annuity Period Certain - an annuity providing monthly payments for your life or, if longer, a specified period of time. If you die before the end of that specified period, payments will continue to your beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years; the longer the specified period, the smaller the monthly payments will be. Joint and Survivor Annuity - Period Certain - an annuity providing monthly payments for your life and that of your beneficiary or, if longer, a specified period of time. If you and your beneficiary both die before the end of the specified period, payments will continue to your contingent beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years; the longer the specified period, the smaller the monthly payments will be. How Annuity Payments are Made When your distribution of benefits under an annuity begins, your Units in the Funds are redeemed. Part or all of the proceeds, plus part or all of your Account Balance in the General Account Options, may be used to purchase an annuity. The minimum amount that can be used to purchase any type of annuity is $5,000. Usually, a $350 charge will be deducted from the amount used to purchase the annuity to reimburse us for administrative expenses associated with processing the application and with issuing each month's annuity payment. Applicable premium taxes will also be deducted. Annuity payments may be fixed or variable. FIXED ANNUITY PAYMENTS. Fixed annuity payments are determined from our annuity rate tables in effect at the time the first annuity payment is made. The minimum amount of the fixed payments is determined from tables in our contract with the Trustees, which show the amount of proceeds necessary to purchase each $1 of monthly annuity payments (after deduction of any applicable taxes and the annuity administrative charge). These tables are designed to determine the amounts required to pay for the annuity selected, taking into account our administrative and investment expenses and mortality and expense risks. The size of your payment will depend upon the form of annuity chosen, your age and the 2 age of your beneficiary if you select a joint and survivor annuity. If our current group annuity rates for payment of proceeds would produce a larger payment, those rates will apply instead of the minimums in the contract tables. If we give any group pension client with a qualified plan a better annuity rate than those currently available for the Program, we will also make those rates available to Program participants. The annuity administrative charge may be greater than $350 in that case. Under our contract with the Trustees, we may change the tables but not more frequently than once every five years. Fixed annuity payments will not fluctuate during the payment period. VARIABLE ANNUITY PAYMENTS. Variable annuity payments are funded through our Separate Account No. 4 (Pooled) (the "Fund"), through the purchase of Annuity Units. The number of Annuity Units purchased is equal to the amount of the first annuity payment divided by the Annuity Unit Value for the due date of the first annuity payment. The amount of the first annuity payment is determined in the same manner for a variable annuity as it is for a fixed annuity. The number of Annuity Units stays the same throughout the payment period for the variable annuity but the Annuity Unit Value changes to reflect the investment income and the realized and unrealized capital gains and losses of the Fund, after adjustment for an assumed base rate of return of 5-3/4%, described below. The amounts of variable annuity payments are determined as follows: Payments normally start as of the first day of the second calendar month following our receipt of the proper forms. The first two monthly payments are the same. Payments after the first two will vary according to the investment performance of the Fund. Each monthly payment will be calculated by multiplying the number of Annuity Units credited to you by the Annuity Unit Value for the first business day of the calendar month before the due date of the payment. The Annuity Unit Value was set at $1.1553 as of July 1, 1969, the first day that Separate Account No. 4 (Pooled) was operational. For any month after that date, it is the Annuity Unit Value for the preceding month multiplied by the change factor for the current month. The change factor gives effect to the assumed annual base rate of return of 4-3/4% and to the actual investment experience of the Fund. Because of the adjustment for the assumed base rate of return, the Annuity Unit Value rises and falls depending on whether the actual rate of investment return is higher or lower than 5-3/4%. Illustration of Changes in Annuity Payments. To show how we determine variable annuity payments from month to month, assume that the amount you applied to purchase an annuity is enough to fund an annuity with a monthly payment of $363 and that the Annuity Unit Value for the due date of the first annuity payment is $1.05. The number of annuity units credited under your certificate would be 345.71 (363 divided by 1.05 = 345.71). If the 3 third monthly payment is due on March 1, and the Annuity Unit Value for February was $1.10, the annuity payment for March would be the number of units (345.71) times the Annuity Unit Value ($1.10), or $380.28. If the Annuity Unit Value was $1.00 on March 1, the annuity payment for April would be 345.71 times $1.00 or $345.71. Summary of Annuity Unit Values for the Fund This table shows the Annuity Unit Values with an assumed based rate of return of 5 3/4%. First Business Day of Annuity Unit Value --------------------- ------------------ October 1987 $4.3934 October 1988 $3.5444 October 1989 $4.8357 October 1990 $3.8569 October 1991 $5.4677 October 1992 $5.1818 October 1993 $6.3886 October 1994 $6.1563 October 1995 $7.4970 October 1996 $8.0828 October 1997 $11.0300 October 1998 $7.5963 October 1999 $9.8568 October 2000 $10.6810 October 2001 $7.3761 THE FUND The Fund (Separate Account No. 4 (Pooled)) was established pursuant to the Insurance law of the State of New York in 1969. It is an investment account used to fund benefits under group annuity contracts and other agreements for tax-deferred retirement programs administered by us. For a full description of the Fund, its investment policies, the risks of an investment in the Fund and information relating to the valuation of Fund assets, see the description of the Fund in our May 1, 2002 prospectus and the Statement of Additional Information. INVESTMENT MANAGER The Manager We, Equitable Life, act as Investment Manager to the Fund. As such, we have complete discretion over Fund assets and we invest and reinvest these assets in accordance with the investment policies described in our May 1, 2002 prospectus and Statement of Additional Information. 4 We are a New York stock life insurance company with our Home Office at 1290 Avenue of the Americas, New York, New York 10104. Founded in 1859, we are one of the largest insurance companies in the United States. Equitable Life, our sole stockholder AXA Financial, Inc., and their subsidiaries managed assets of approximately $481.0 billion as of December 31, 2001, including third party assets of $397.9 billion. Investment Management In providing investment management to the Fund, we currently use the personnel and facilities of our majority owned subsidiary, Alliance Capital Management L.P. ("Alliance"), for portfolio selection and transaction services. For a description of Alliance, see our May 1, 2002 Members Retirement Program prospectuses. Fund Transactions The Fund is charged for securities brokers commissions, transfer taxes and other fees relating to securities transactions. Transactions in equity securities for the Fund are executed primarily through brokers which are selected by Alliance/Equitable Life and receive commissions paid by the Fund. For 2001, 2000, and 1999, the Fund paid $3,576,437, $2,218,019, and $5,877,438, respectively, in brokerage commissions. For a full description of our policies relating to the selection of brokers, see the description of the fund in our May 1, 2002 Statement of Additional Information. 5 FINANCIAL STATEMENTS The financial statements of the Fund reflect applicable fees, charges and other expenses under the Members Retirement Programs as in effect during the periods covered, as well as the charges against the account made in accordance with the terms of all other contracts participating in the account. Separate Account No. 4 (Pooled): Page Report of Independent Accountants - PricewaterhouseCoopers LLP 7 Statement of Assets and Liabilities, December 31, 2001 8 Statement of Operations for the Year Ended December 31, 2001 9 Statement of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 10 Portfolio of Investments December 31, 2001 11 Notes to Financial Statements 14 6 - -------------------------------------------------------------------------------- Report of Independent Accountants - -------------------------------------------------------------------------------- To the Board of Directors of The Equitable Life Assurance Society of the United States and the Contractowners of Separate Account No. 4 of The Equitable Life Assurance Society of the United States In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and related statement of operations and statements of changes in net assets present fairly, in all material respects, the financial position of Separate Account No. 4 (Pooled) (The Growth Equity Fund) of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 2001, the results of its operations for the year then ended and the changes in its net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York February 6, 2002 7 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities DECEMBER 31, 2001 ASSETS: Investments (Notes 2 and 3): Common stocks -- at value (cost: $949,093,635)........................... $884,869,781 Short-term debt securities -- at value (amortized cost: $13,498,868)..... 13,498,868 Dividends and interest receivable ........................................ 422,696 - --------------------------------------------------------------------------- ------------ Total assets ............................................................. 898,791,345 - --------------------------------------------------------------------------- ------------ LIABILITIES: Due to Equitable Life's General Account .................................. 1,997,728 Due to custodian ......................................................... 145,431 Accrued expenses ......................................................... 625,054 - --------------------------------------------------------------------------- ------------ Total liabilities ........................................................ 2,768,213 - --------------------------------------------------------------------------- ------------ NET ASSETS ............................................................... $896,023,132 =========================================================================== ============ Amount retained by Equitable Life in Separate Account No. 4 .............. $ 1,392,138 Net assets attributable to contract owners ............................... 855,609,465 Net assets allocated to contracts in payout period ....................... 39,021,529 - --------------------------------------------------------------------------- ------------ NET ASSETS ............................................................... $896,023,132 =========================================================================== ============
CONTRACT CONTRACT UNITS OUTSTANDING UNIT VALUES ------------------- -------------- Institutional ......... 80,095 $ 6,350.37 RIA ................... 81,933 $ 611.48 MRP ................... 159,063 $ 261.19 ADA ................... 898,531 $ 310.23 EPP ................... 26,423 $ 623.23
The accompanying notes are an integral part of these financial statements. 8 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations YEAR ENDED DECEMBER 31, 2001 INVESTMENT INCOME (NOTE 2): Dividends (net of foreign taxes withheld of $15,633)...................... $ 3,708,270 Interest ................................................................. 870,837 - --------------------------------------------------------------------------- -------------- Total investment income .................................................. 4,579,107 - --------------------------------------------------------------------------- -------------- EXPENSES (NOTE 4): Investment management fees ............................................... (1,836,555) Expense charges .......................................................... (18,199) Operating expenses ....................................................... (2,895,077) - --------------------------------------------------------------------------- -------------- Total expenses ........................................................... (4,749,831) - --------------------------------------------------------------------------- -------------- Net investment loss ...................................................... (170,724) - --------------------------------------------------------------------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Net realized loss from security and foreign currency transactions ........ (84,356,380) Change in unrealized appreciation/depreciation of investments ............ (130,820,535) - --------------------------------------------------------------------------- -------------- Net realized and unrealized loss on investments .......................... (215,176,915) - --------------------------------------------------------------------------- -------------- NET DECREASE IN NET ASSETS ATTRIBUTABLE TO OPERATIONS .................... $ (215,347,639) =========================================================================== ==============
The accompanying notes are an integral part of these financial statements. 9 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2001 2000 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) ................................................. $ (170,724) $ 1,698,772 Net realized gain (loss) on investments and foreign currency transactions .... (84,356,380) 93,460,750 Change in unrealized appreciation/depreciation of investments ................ (130,820,535) (381,915,139) - ------------------------------------------------------------------------------- -------------- -------------- Net decrease in net assets attributable to operations ........................ (215,347,639) (286,755,617) - ------------------------------------------------------------------------------- -------------- -------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ................................................................ 218,850,121 297,267,595 Withdrawals .................................................................. (325,968,603) (575,963,871) Asset management fees ........................................................ (1,984,030) (3,249,116) Administrative fees .......................................................... (963,019) (2,098,122) - ------------------------------------------------------------------------------- -------------- -------------- Net decrease in net assets attributable to contributions and withdrawals ..... (110,065,531) (284,043,514) - ------------------------------------------------------------------------------- -------------- -------------- Net increase in amount retained by Equitable Life in Separate Account No. 4 .. 37,948 58,000 - ------------------------------------------------------------------------------- -------------- -------------- DECREASE IN NET ASSETS ....................................................... (325,375,222) (570,741,131) NET ASSETS -- BEGINNING OF YEAR .............................................. 1,221,398,354 1,792,139,485 - ------------------------------------------------------------------------------- -------------- -------------- NET ASSETS -- END OF YEAR .................................................... $ 896,023,132 $1,221,398,354 =============================================================================== ============== ==============
The accompanying notes are an integral part of these financial statements. 10 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 2001
NUMBER OF VALUE SHARES (NOTE 2) ------------- -------------- COMMON STOCKS: CAPITAL GOODS ENGINEERING & CONSTRUCTION (0.9%) Jacobs Engineering Group, Inc.* ........................................ 124,100 $ 8,190,600 ------------ CONSUMER MANUFACTURING BUILDING & RELATED (3.0%) American Standard Companies, Inc.* ..................................... 231,200 15,774,776 Centex Corp. ........................................................... 60,000 3,425,400 D.R.Horton, Inc. ....................................................... 166,000 5,388,360 KB Home ................................................................ 55,000 2,205,500 ------------ TOTAL CONSUMER MANUFACTURING (3.0%) ................................................ 26,794,036 ------------ CONSUMER SERVICES AIRLINES (1.5%) Southwest Airlines Co. ................................................. 734,700 13,577,256 ------------ BROADCASTING & CABLE (6.4%) AOL Time Warner, Inc.* ................................................. 510,000 16,371,000 Comcast Corp. SPL (Class A)* ........................................... 625,000 22,500,000 Liberty Media Corp. (Class A)* ......................................... 1,354,300 18,960,200 ------------ 57,831,200 ------------ CELLULAR COMMUNICATIONS (2.1%) AT&T Wireless Services, Inc.* .......................................... 1,000,000 14,370,000 Triton PCS Holdings, Inc.* ............................................. 150,300 4,411,305 ------------ 18,781,305 ------------ ENTERTAINMENT & LEISURE (4.1%) Harley-Davidson, Inc. .................................................. 674,000 36,604,940 ------------ MISCELLANEOUS (1.0%) Career Education Corp.* ................................................ 252,000 8,638,560 ------------ RETAIL - GENERAL MERCHANDISE (4.2%) Kohl's Corp.* .......................................................... 528,000 37,192,320 ------------ TOTAL CONSUMER SERVICES (19.3%) ........................................ 172,625,581 ------------
11
NUMBER OF VALUE SHARES (NOTE 2) ----------- -------------- ENERGY OIL SERVICE (2.5%) Baker Hughes, Inc. ..................................................... 310,000 $ 11,305,700 Transocean Sedco Forex, Inc. ........................................... 125,000 4,227,500 Weatherford International, Inc.*........................................ 183,000 6,818,580 ------------ TOTAL ENERGY (2.5%) .................................................... 22,351,780 ------------ FINANCE BANKING-REGIONAL (3.3%) Bank One Corp. ......................................................... 744,000 29,053,200 ------------ BROKERAGE & MONEY MANAGEMENT (4.2%) Legg Mason, Inc. ....................................................... 655,600 32,766,888 Merrill Lynch & Co., Inc. .............................................. 97,900 5,102,548 ------------ 37,869,436 ------------ INSURANCE (5.7%) American International Group, Inc. ..................................... 424,000 33,665,600 Gallagher (Arthur J.) & Co. ............................................ 261,800 9,029,482 XL Capital Ltd. (Class A) .............................................. 88,500 8,085,360 ------------ 50,780,442 ------------ MISCELLANEOUS (7.9%) AMBAC Financial Group, Inc. ............................................ 290,900 16,831,474 Citigroup, Inc. ........................................................ 645,700 32,594,936 MBNA Corp. ............................................................. 617,300 21,728,960 ------------ 71,155,370 ------------ TOTAL FINANCE (21.1%) .................................................. 188,858,448 ------------ HEALTH CARE DRUGS (6.7%) Allergan, Inc. ......................................................... 210,000 15,760,500 American Home Products Corp............................................. 181,000 11,106,160 Enzon, Inc. ............................................................ 118,000 6,641,040 King Pharmaceuticals, Inc.* ............................................ 230,000 9,689,900 Pfizer, Inc. ........................................................... 424,100 16,900,385 ------------ 60,097,985 ------------ MEDICAL PRODUCTS (2.4%) Stryker Corp. .......................................................... 370,000 21,596,900 ------------ MEDICAL SERVICES (11.1%) Cardinal Health, Inc. .................................................. 434,000 28,062,440
12 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 2001 (Concluded)
NUMBER OF VALUE SHARES (NOTE 2) ------------ ------------ Express Scripts, Inc.* ................................................... 491,600 $22,987,216 Health Management Associates, Inc. (Class A)* ............................ 1,332,100 24,510,640 Laboratory Corp. of America Holdings* .................................... 140,000 11,319,000 Tenet Healthcare Corp.* .................................................. 113,000 6,635,360 Wellpoint Health Networks, Inc.* ......................................... 48,500 5,667,225 ----------- 99,181,881 ----------- TOTAL HEALTH CARE (20.2%) ................................................ 180,876,766 ----------- MULTI-INDUSTRY COMPANIES (7.6%) Danaher Corp. ............................................................ 301,100 18,159,341 Tyco International Ltd. .................................................. 854,700 50,341,830 ----------- TOTAL MULTI-INDUSTRY COMPANIES (7.6%) .................................... 68,501,171 ----------- TECHNOLOGY COMMUNICATION EQUIPMENT (4.8%) Cisco Systems, Inc.* ..................................................... 1,290,600 23,372,766 Juniper Networks, Inc.* .................................................. 300,000 5,685,000 Nokia Oyj (ADR) .......................................................... 560,000 13,736,800 ----------- 42,794,566 ----------- COMPUTER SERVICES (2.2%) Affiliated Computer Services, Inc. (Class A)* ............................ 90,300 9,583,539 Fiserv, Inc.* ............................................................ 244,000 10,326,080 ----------- 19,909,619 ----------- CONTRACT MANUFACTURING (6.5%) Celestica, Inc.* ......................................................... 103,400 4,176,326 Flextronics International Ltd.* .......................................... 1,100,000 26,389,000 Sanmina-SCI Corp.* ....................................................... 791,300 15,746,870 Solectron Corp.* ......................................................... 1,021,300 11,520,264 ----------- 57,832,460 ----------- MISCELLANEOUS (1.3%) Thermo Electron Corp.* ................................................... 495,000 11,810,700 ----------- SEMICONDUCTOR CAPITAL EQUIPMENT (1.0%) Applied Materials, Inc.* ................................................. 230,000 9,223,000 ----------- SEMICONDUCTOR COMPONENTS (1.6%) Altera Corp.* ............................................................ 325,000 6,896,500 Applied Micro Circuits Corp.* ............................................ 341,100 3,861,252 Micron Technology, Inc.* ................................................. 119,000 3,689,000 ----------- 14,446,752 -----------
13
NUMBER OF VALUE SHARES (NOTE 2) -------------- --------------- SOFTWARE (4.5%) Amdocs Ltd.* ........................... 149,200 $ 5,068,324 BEA Systems, Inc.* ..................... 370,400 5,707,864 Check Point Software Technologies Ltd.* 54,000 2,154,060 Mercury Interactive Corp.* ............. 137,000 4,655,260 PeopleSoft, Inc.* ...................... 146,000 5,869,200 Veritas Software Corp.* ................ 376,200 16,861,284 ------------ 40,315,992 ------------ TOTAL TECHNOLOGY (21.9%) ............... 196,333,089 ------------ TRANSPORTATION AIR FREIGHT (1.3%) United Parcel Service, Inc. (Class B)... 217,000 11,826,500 ------------ UTILITIES ELECTRIC & GAS UTILITY (1.0%) AES Corp.* ............................. 520,600 8,511,810 ------------ TOTAL COMMON STOCKS (98.8%) (Cost $949,093,635).................. 884,869,781 ------------ PRINCIPAL AMOUNT ------ SHORT-TERM DEBT SECURITIES: U.S. GOVERNMENT AGENCY (1.5%) Freddie Mac Discount Notes 1.51%, 2002.. $13,500,000 13,498,868 ------------ TOTAL SHORT-TERM DEBT SECURITIES (1.5%) (Amortized Cost $13,498,868)......... 13,498,868 ------------ TOTAL INVESTMENTS (100.3%) (Cost/Amortized Cost $962,592,503)... 898,368,649 OTHER ASSETS LESS LIABILITIES (-0.3%) (2,345,517) ------------ NET ASSETS (100.0%) .................... $896,023,132 ============
- -------------------- * Non-income producing. The accompanying notes are an integral part of these financial statements. 14 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements - -------------------------------------------------------------------------------- 1. GENERAL Separate Account Nos. 4 (Pooled) (the Growth Equity Fund) (the Fund) of The Equitable Life Assurance Society of the United States (Equitable Life), a wholly owned subsidiary of AXA Financial, Inc., was established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the contracts, the net assets in the Funds are not chargeable with liabilities arising out of any other business of Equitable Life. These financial statements reflect the total net assets and results of operations for the Separate Account No. 4. The American Dental Association Members Retirement Program is one of the many products participating in this Fund. At December 31, 2001, interests of retirement and investment plans for employees, managers and agents of Equitable Life in Separate Account No. 4 aggregated $222,089,350 (24.8%) of the net assets of the Fund. Equitable Life is the investment manager for the Fund. Alliance Capital Management L.P. (Alliance) serves as the investment adviser to Equitable Life with respect to the management of the Fund. Alliance is a publicly traded limited partnership which is indirectly majority-owned by Equitable Life and AXA Financial, Inc. AXA Advisors, LLC (AXA Advisors), the successor to EQ Financial Consultants, Inc., is an affiliate of Equitable Life, and a distributor and principal underwriter of the contracts. AXA Advisors is registered with the SEC as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. Equitable Life, Alliance and AXA Advisors seek to obtain the best price and execution of all orders placed for the portfolios of the Equitable Funds considering all circumstances. In addition to using brokers and dealers to execute portfolio security transactions for accounts under their management, Equitable Life, Alliance and AXA Advisors may also enter into other types of business and securities transactions with brokers and dealers, which will be unrelated to allocation of the Fund's portfolio transactions. The contracts are sold by financial professionals who are registered representatives of AXA Advisors and licensed insurance agents of AXA Network, LLC, its subsidiaries and AXA Network Insurance Agency of Texas, Inc. (affiliates of Equitable Life). AXA Advisors receives commissions and other service-related payments under its distribution agreement with Equitable Life and its networking agreement with AXA Network. The net assets of the account are not chargeable with liabilities arising out of any other business Equitable Life may conduct. The excess of assets over reserves and other contract liabilities, if any, in the Separate Account No. 4 may be transferred to Equitable Life's General Account. Equitable Life's General Account is subject to creditor rights. The amount retained by Equitable Life in Separate Account No. 4 arises principally from (1) contributions from Equitable Life, (2) expense risk charges accumulated in the account, and (3) that portion, determined ratably, of the account's investment results applicable to those assets in the account in excess of the net assets for the contracts. Amounts retained by Equitable Life are not subject to charges for expense risks. 2. SIGNIFICANT ACCOUNTING POLICIES Security transactions are recorded on the trade date. Amortized cost of debt securities, where applicable, are adjusted for amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date; interest income (including amortization of premium and discount on securities using the effective yield method) is accrued daily. Realized gains and losses on the sale of investments are computed on the basis of the identified cost of the related investments sold. 15 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- Investment securities are valued as follows: Stocks listed on national securities exchanges and certain over-the-counter issues traded on the National Association of Securities Dealers, Inc. Automated Quotation (NASDAQ) national market system are valued at the last sale price, or, if there is no sale, at the latest available bid price. Foreign securities not traded directly, or in American Depository Receipt (ADR) form in the United States, are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into its U.S. dollar equivalent at current exchange rates. Futures and forward contracts are valued at their last sale price or, if there is no sale, at the latest available bid price. United States Treasury securities and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. Long-term (i.e., maturing in more than a year) publicly-traded corporate bonds are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where Equitable Life and Alliance deem it appropriate to do so, an over-the-counter or exchange quotation may be used. Convertible preferred stocks listed on national securities exchanges are valued at their last sale price or, if there is no sale, at the latest available bid price. Convertible bonds and unlisted convertible preferred stocks are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. Other assets that do not have a readily available market price are valued at fair value as determined in good faith by Equitable Life's investment officers. Short-term debt securities which mature in 60 days or less are valued at amortized cost. Short-term debt securities which mature in more than 60 days are valued at representative quoted prices. Transactions denominated in foreign currencies are recorded at the rate prevailing at the date of such transactions. Asset and liability accounts that are denominated in a foreign currency are adjusted to reflect the current exchange rate at the end of the period. Transaction gains or losses resulting from changes in the exchange rate during the reporting period or upon settlement of the foreign currency transactions are reflected under "Realized and Unrealized Gain (Loss) on Investments" in the Statement of Operations. Net assets allocated to contracts in the payout period are computed according to various mortality tables, depending on the year the benefits were purchased. The tables used are the 1971 GAM table, the 1983 GAM table, and the 1994 GAR. The assumed investment returns vary by contract and range from 4 percent to 6.5 percent. The contracts are participating group annuities, and, thus, the mortality risk is borne by the contract holder, as long as the contract has not been discontinued. Equitable Life retains the ultimate obligation to pay the benefits if the contract funds become insufficient and the contract holder elects to discontinue the contract. On November 21, 2000, the American Institute of Certified Public Accountants issued a revised Audit and Accounting Guide "Audits of Investment Companies" (the "Guide"), which was effective for the December 31, 2001 financial statements. In connection with the Company's implementation of the Guide, certain administrative and asset management fees have been reclassified from the Statement of Operations to the Statement of Changes in Net Assets, which is considered a change in application of an accounting principle. Adoption of the requirements of the Guide did not have a significant impact on the Fund's financial position or results of operations. 16 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. 3. INVESTMENT TRANSACTIONS For the year ended December 31, 2001, investment security transactions, excluding short-term debt securities, were as follows:
PURCHASES SALES --------------------------------------- -------------------------------------- STOCKS AND DEBT U.S. GOVERNMENT STOCKS AND DEBT U.S. GOVERNMENT FUND SECURITIES AND AGENCIES SECURITIES AND AGENCIES ----------------------------- ----------------- ------------------- ----------------- ------------------ The Growth Equity ......... $1,293,750,620 $ -- $1,377,319,088 $ --
4. EXPENSES Charges and fees relating to the Funds are paid to Equitable Life and are deducted in accordance with the terms of the various contracts which participate in the Fund. Depending upon the terms of a contract, sales-related fees and operating expenses are paid (i) by a reduction of an appropriate number of Fund Units or (ii) by a direct payment. Fees with respect to the American Dental Association Members Retirement Program are as follows: Investment Management and Administration Fees (Investment Management Fees): Equitable Life receives a fee based on the value of the Growth Equity Fund at a monthly rate of 1/12 of (i) 0.29 of 1% of the first $100 million and (ii) 0.20 of 1% of the excess over $100 million of its ADA Program assets. An Administrative fee is charged at a daily rate of 0.15% of average daily net assets. Program Expense Charge: In the year prior to May 1, 2001 the expense charge was made on the combined value of all investment options maintained under the contract with Equitable Life at a monthly rate 1/12 of (i) 0.625 of 1% of the first $400 million and (ii) 0.620 of 1% of the excess over $400 million. Effective May 1, 2001 an expense charge is made on the combined value of all investment options maintained under the contract with Equitable Life at a monthly rate of 1/12 of (i) 0.645 of 1% of the first $400 million and (ii) 0.640 of 1% of the excess over $400 million. A portion of the Program Expense Charge assessed by Equitable Life is made on behalf of the ADA and is equal to a monthly rate of 1/12 for (i) 0.025 of 1% of the first $400 million and (ii) 0.020 of 1% of the excess over $400 million. Currently, the ADA's portion of the Program Expense Charge was temporarily reduced to 0.01% for all assets value levels. The remainder of this charge is retained by Equitable Life. Direct Operating and Other Expenses: In addition to the charges and fees mentioned above, the Fund is charged for certain costs and expenses directly related to its operations. These may include transfer taxes, SEC filing fees and certain related expenses including printing of SEC filings, prospectuses and reports. A record maintenance and report fee of $3 is deducted quarterly from each participant's aggregate account balance. For clients with Investment Only plans, a record maintenance fee of $1 is deducted quarterly. Investment management fees, program expense charges and direct operating and other expenses are paid to Equitable Life by the Fund and are recorded as expenses in the accompanying Statement of Operations. 17 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) - -------------------------------------------------------------------------------- 5. TAXES No Federal income tax based on net income or realized and unrealized capital gains was applicable to contracts participat ing in the Fund by reason of applicable provisions of the Internal Revenue Code and no federal income tax payable by Equitable Life will affect such contracts. Accordingly, no provision for Federal income taxes is required. 6. NET INCREASE (DECREASE) IN ADA UNITS OUTSTANDING 2001 2000 ------------ ------------ The Growth Equity Fund .......... (69,106) (92,281) 7. INVESTMENT INCOME RATIO The investment income ratio is calculated by taking the gross investment income earned divided by the average net assets of a fund during the report period. Shown below is the investment income ratio throughout the periods indicated.
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 2001 2000 1999 1998 1997 ---------- ---------- ---------- ---------- ---------- The Growth Equity Fund ......... 0.46% 0.45% 0.54% 0.53% 0.56%
8. UNIT VALUES -- ADA Shown below are unit value ("contract unit value") and units outstanding for the American Dental Association Members Retirement Program issued by Equitable Life. Expense as a percentage of average net assets excludes charges made directly to contract holder accounts through redemption of units.
YEAR ENDED DECEMBER 31, 2001 ------------------ THE GROWTH EQUITY FUND ADA, 1.08% Unit Value, end of period .................................. $ 310.23 Net Assets (000's) ......................................... $278,756 Number of units outstanding, end of period (000's) ......... 899 Total Return ............................................... (18.85)%
Institutional contract unit values are determined at the end of each business day. Institutional unit values reflect the investment performance of the underlying Fund for the day and charges and expenses deducted by the Fund. Contract unit values (RIA, MRP, ADA, EPP) reflect the same investment results as the Institutional unit values presented on the Statement of Assets and Liabilities. In addition, ADA contract unit values reflect certain investment management and administrative fees and program expense charges, which vary by contract. These fees are charged as a percentage of net assets and are disclosed above for ADA contracts in percentage terms. 18 American Dental Association Members Retirement Program PROSPECTUS DATED MAY 1, 2002 - -------------------------------------------------------------------------------- Please read this prospectus and keep it for future reference. It contains important information you should know before participating in the Program or allocating amounts under the contract. ABOUT THE ADA PROGRAM The Program provides members of the American Dental Association and their eligible employees several plans for the accumulation of retirement savings on a tax-deferred basis. Through trusts ("trusts") maintained under these plans, you can allocate contributions among the investment options offered under the Program. There are currently twelve investment options under the Program including: 3-year and 5-year Guaranteed Rate Accounts, and, through the American Dental Association Members Retirement Program contract, nine investment funds and the Money Market Guarantee Account. THIS PROSPECTUS DESCRIBES THREE OF THE AVAILABLE INVESTMENT FUNDS: THE EQUITY INDEX FUND, THE LIFECYCLE FUND-CONSERVATIVE AND THE LIFECYCLE FUND-MODERATE. THIS PROSPECTUS ALSO DESCRIBES THE LIFECYCLE FUND GROUP TRUSTS IN WHICH THE TWO LIFECYCLE FUNDS INVEST. WHAT IS THE AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM CONTRACT? The American Dental Association Members Retirement Program contract is a deferred group annuity contract issued by THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES. Contributions to the trusts maintained under the plans will be allocated among our investment funds and our Money Market Guarantee Account, in accordance with participant instructions. - --------------------------------------------------------------------- INVESTMENT OPTIONS - --------------------------------------------------------------------- PRINCIPAL PROTECTION: SMALL/MID COMPANY STOCKS: o Money Market Guarantee o Aggressive Equity Fund Account INTERNATIONAL STOCKS: o Guaranteed Rate Accounts o ADA Foreign Fund LARGE COMPANY STOCKS: BALANCED/HYBRID: o ADA Large Cap Growth Fund(1) o Lifecycle Fund-Conservative o Equity Income Fund o Lifecycle Fund-Moderate o Equity Index Fund o Growth Equity Fund(2) SPECIALTY: o Real Estate Fund - ---------------------------------------------------------------------
(1) formerly named "ADA Blue Chip Growth Fund." (2) There is no capitalization on this fund. The capitalization size of the fund is driven by stock selection. Currently, the fund may be considered to be large capitalization. The Growth Equity Fund is managed by Equitable Life. The Real Estate Fund invests primarily in units of Equitable Life's Prime Property Fund. The Aggressive Equity Fund, ADA Foreign Fund, Equity Index Fund, Equity Income Fund and ADA Large Cap Growth Fund respectively invest in shares of the following mutual funds: MFS Emerging Growth Fund, Templeton Foreign Fund - Class A, State Street Global Advisors (SSgA) S&P 500 Index Fund, Putnam Equity Income Fund, and INVESCO Growth Fund ("Underlying Mutual Funds"). You should also read the prospectuses for the Underlying Mutual Funds (sent under separate cover) and keep them for future reference. The Lifecycle Funds - Conservative and Moderate ("Lifecycle Funds") each invest in units of a corresponding group trust ("Lifecycle Fund Group Trusts") maintained by State Street Bank and Trust Company ("State Street"). The Lifecycle Fund Group Trusts in turn invest in units of collective investment funds of State Street. We refer to these as the "Underlying State Street Funds." The Underlying State Street Funds are the S&P 500 Flagship Fund, Russell 2000 Index Securities Lending Fund, Daily EAFE Fund, Government Corporate Bond Fund, and Short Term Investment Fund, which we also describe in this prospectus. Each Underlying State Street Fund may invest cash on a temporary basis in other mutual funds managed by State Street. OTHER AVAILABLE INVESTMENT FUNDS AND INVESTMENT OPTIONS, EXCEPT THE EQUITY INDEX FUND AND THE LIFECYCLE FUNDS, ARE DESCRIBED, IN DETAIL, IN A SEPARATE PROSPECTUS FOR THOSE INVESTMENT FUNDS. You may obtain a copy of that prospectus, or of any Underlying Mutual Fund prospectus, by writing or calling us toll-free. See "How to reach us" on the back cover. We have filed registration statements relating to this offering with the Securities and Exchange Commission. A statement of additional information ("SAI"), dated May 1, 2002, which is part of the registration statements, is available free of charge upon request by writing to us or calling us toll-free. The SAI has been incorporated by reference into this prospectus. The table of contents for the SAI and a request form to obtain the SAI appear at the end of this prospectus. You may also obtain a copy of this prospectus and the SAI through the SEC web site at www.sec.gov. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO INVESTMENT RISKS AND POSSIBLE LOSS OF PRINCIPAL. About Equitable Life - -------------------------------------------------------------------------------- The Equitable Life Assurance Society of the United States ("Equitable Life") is the issuer of the group annuity contract that funds the Program. Equitable Life also makes forms of plans and trusts available, and offers recordkeeping and participant services to facilitate the operation of the Program. Equitable Life is a New York stock life insurance corporation and has been doing business since 1859. We are a wholly-owned subsidiary of AXA Financial, Inc. (previously The Equitable Companies Incorporated). The sole shareholder of AXA Financial, Inc. is AXA, a French holding company for an international group of insurance and related financial services companies. As the sole shareholder, and under its other arrangements with Equitable Life and Equitable Life's parent, AXA exercises significant influence over the operations and capital structure of Equitable Life and its parent. No company other than Equitable Life's related companies, however, has any legal responsibility to pay amounts that Equitable Life owes under the contract. Equitable Life manages over $481.0 billion in assets as of December 31, 2001. For more than 100 years Equitable Life has been among the largest insurance companies in the United States. We are licensed to sell life insurance and annuities in all fifty states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Our home office is located at 1290 Avenue of the Americas, New York, NY 10104. Contents of this prospectus - ----- ----- 1 Contents of this prospectus 1 - -------------------------------------------------------------------------------- ADA PROGRAM - ------------------------------------------------------------ Index of key words and phrases 3 The Program at a glance - key features 4 The Contract at a glance - key features 5 - ------------------------------------------------------------ 1 FEE TABLE 6 - ------------------------------------------------------------ Program expense charge and investment fund operating expenses 6 Examples 9 Selected financial data and condensed financial information 9 - ------------------------------------------------------------ 2 PROGRAM INVESTMENT OPTIONS 10 - ------------------------------------------------------------ Investment options 10 Risks and investment techniques: Lifecycle Fund Group Trusts and Underlying State Street Funds 14 Additional information about the funds 18 - ------------------------------------------------------------ 3 HOW WE VALUE YOUR ACCOUNT BALANCE IN THE INVESTMENT FUNDS 19 - ------------------------------------------------------------
- -------------------------------------------------------------------------------- When we use the words "we," "us" and "our," we mean Equitable Life. Please see the index of key words and phrases used in this prospectus. The index will refer you to the page where particular terms are defined or explained. When we address the reader of this prospectus with words such as "you" and "your," we generally mean the individual participant in one or more of the plans available in the Program unless otherwise explained. For example, "The Program" section of the prospectus is primarily directed at the employer. "You" and "your" also can refer to the plan participant when the contract owner has instructed us to take plan participant instructions as the contract owner's instructions under the contract, for example see "Transfers and access to your account." - ----- 2 Contents of this prospectus - -------------------------------------------------------------------------------- - -------------------------------------------------------------- 4 TRANSFERS AND ACCESS TO YOUR ACCOUNT 20 - -------------------------------------------------------------- Transfers among investment options 20 Disruptive transfer activity 20 Our Account Investment Management System (AIMS) and our Internet Website 20 Participant loans 21 Choosing benefit payment options 21 Spousal consent 22 Benefits payable after the death of a participant 22 - -------------------------------------------------------------- - -------------------------------------------------------------- 5 THE PROGRAM 23 - -------------------------------------------------------------- Eligible employers 23 Summary of plan choices 23 Getting started 24 How to make Program contributions 24 Allocating Program contributions 24 Distributions from the investment options 25 Rules applicable to participant distributions 25 - -------------------------------------------------------------- 6 PERFORMANCE INFORMATION 26 - -------------------------------------------------------------- Annual percentage change in fund unit values 27 Average annual percentage change in fund unit values - years ending December 31, 2001 27 How we calculate performance data 27 - -------------------------------------------------------------- 7 CHARGES AND EXPENSES 28 - -------------------------------------------------------------- Charges based on amounts invested in the Program 28 Plan and transaction expenses 29 Deductions and charges related to the Lifecycle Trusts and Underlying State Street Funds 30 - -------------------------------------------------------------- - -------------------------------------------------------------- 8 TAX INFORMATION 31 - -------------------------------------------------------------- Income taxation of distributions to qualified plan participants 31 Buying a contract to fund a retirement arrangement 31 Income taxation of distributions to qualified plan participants 31 - -------------------------------------------------------------- 9 MORE INFORMATION 33 - -------------------------------------------------------------- About Program changes or termination 33 IRS disqualification 33 About the separate accounts 33 About State Street 34 Underwriter 34 About legal proceedings 34 About our independent accountants 34 Reports we provide and available information 35 Acceptance 35 - -------------------------------------------------------------- APPENDIX I: SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION A-1 - -------------------------------------------------------------- - -------------------------------------------------------------- TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION S-1 - -------------------------------------------------------------- - -------------------------------------------------------------- About Equitable Life Inside Back Cover How to reach us Back Cover - --------------------------------------------------------------
ADA Program - ------ ------ 3 ADA Program 3 - -------------------------------------------------------------------------------- INDEX OF KEY WORDS AND PHRASES Below is an index of key words and phrases used in this prospectus. The index will refer you to the page where particular terms are defined or explained. This index should help you locate more information on the terms used in this prospectus.
PAGE ---- AIMS 20 beneficiary 22 benefit payment options 21 business day 20 contract 33 Contributions 24 disruptive transfer activity 20 eligible rollover distributions 31 Equitable Life S-2 GRAs 5 individually designed plan 23 Internet Website 20 IRA 31 investment funds front cover investment options front cover Lifecycle Funds 10 Lifecycle Fund Group Trusts 11 Market Timing 20 Master Plan 23 Master Trust 23 Pooled Trust 23 Program 23 Self Directed Prototype Plan 23 separate accounts 33 State Street 34 Trustees 33 Underlying Mutual Funds front cover Underlying State Street Funds 11 unit value 19 unit 19
- ----- 4 ADA Program - -------------------------------------------------------------------------------- THE PROGRAM AT A GLANCE - KEY FEATURES EMPLOYER CHOICE OF RETIREMENT PLANS Our Master Plan is a defined contribution master plan that can be adopted as a profit-sharing plan (401(k), SIMPLE 401(k) and safe harbor 401(k) features are available) and a defined contribution pension plan, or both. The Program's investment options are the only investment choices under the Master Plan. Our Self-Directed Prototype Plan gives added flexibility in choosing your investments. If you maintain your own individually-designed plan which invests through our Investment Only arrangement, you may use the investment options in the Program through our Pooled Trust. PLAN FEATURES MASTER PLAN: o Program investment options used as the only investment choices. o Plan-level and participant-level recordkeeping, benefit payments, tax withholding and reporting provided. o Use of our Master Trust. o No minimum amount must be invested. o 5500 reporting. o Automatic updates for law changes. SELF-DIRECTED PROTOTYPE PLAN: o You may combine Program investment options with individual stock and bond investments. o Our Pooled Trust is adopted for investment use only, and a minimum of $25,000 must be maintained in the Trust. o Recordkeeping services provided only for plan assets in Pooled Trust. o Third party recordkeeping services can be arranged through us. o Brokerage services can be arranged through us. INVESTMENT ONLY: o Our Pooled Trust is adopted for investment use only. o Recordkeeping services provided for plan assets in Pooled Trust. TAX ADVANTAGES: o On earnings No tax on investment earnings until withdrawn. o On transfers No tax on internal transfers. ADDITIONAL FEATURES FOR AMOUNTS HELD IN THE TRUST: o Toll-free number available for transfers and account information. o Internet Website access to account information and transactions. o Participant loans (if elected by your employer; some restrictions apply). o Regular statements of account. o Retirement Program Specialist and Account Executive support. o Daily valuation of accounts. PLAN CHARGES AND EXPENSES: o Plan and transaction charges that vary by type of plan adopted, or by specific transaction. - ----- ----- 5 ADA Program 5 - -------------------------------------------------------------------------------- THE CONTRACT AT A GLANCE - KEY FEATURES PROFESSIONAL INVESTMENT MANAGEMENT: The Program's investments are managed by registered professional investment advisers. GUARANTEED OPTIONS: The three guaranteed options include two Guaranteed Rate Accounts ("GRAs") and a Money Market Guarantee Account. TAX NOTE: Because you are purchasing an annuity contract to fund a qualified employer sponsored retirement arrangement, you should be aware that such annuities do not provide tax deferral benefits beyond those already provided by the Internal Revenue Code (the "Code"). Before purchasing one of these annuities, you should consider whether its features and benefits beyond tax deferral meet your needs and goals. You may also want to consider the relative features, benefits and costs of these annuities with any other investment that you may use in connection with your retirement plan or arrangement. (For more information, see "Tax information" later in this prospectus). CONTRACT CHARGES AND EXPENSES: o Program expense charge assessed against combined value of Program assets in the Trust. o Investment management and administration fees and other expenses charged on an investment fund-by-fund basis, as applicable. o Indirectly, charges of underlying investment vehicles for investment management, 12b-1 fees and other expenses. BENEFIT PAYMENT OPTIONS: o Lump sum. o Installments on a time certain or dollar certain basis. o Variety of annuity benefit payout options as available under your employer's plan. o Fixed or variable annuity options available. 1 Fee table - ----- 6 Fee table - -------------------------------------------------------------------------------- The fee tables and discussion below will help you understand the various charges and expenses you will bear under the contract. The tables reflect charges: (1) you will directly incur, including Program expense charge, administration fee, investment management fee and other expenses, and (2) fees and expenses of the Underlying Mutual Fund, and the Lifecycle Group Trusts and their underlying collective funds ("Underlying State Street Funds") that you will indirectly incur. Certain other Program charges also apply as described under "Plan and transaction expenses." If you annuitize your account, charges for premium taxes and other fees may apply. WHEN YOU PURCHASE OR REDEEM UNITS OF ANY OF THE INVESTMENT FUNDS YOU WILL PAY NO SALES LOAD, NO DEFERRED SALES CHARGE, NO SURRENDER FEES AND NO TRANSFER OR EXCHANGE FEES. PROGRAM EXPENSE CHARGE AND INVESTMENT FUND OPERATING EXPENSES The Program expense charge and investment fund operating expenses are paid out of each investment fund's assets. No investment management fees are paid to us by the Equity Index Fund or the Lifecycle Funds. State Street, however, is paid a management fee for managing the assets of the Lifecycle Fund Group Trusts underlying the Lifecycle Funds. The Program expense charge is based partly on the level of assets in the Trust and partly on the number of plans. An administration fee is based on investment fund assets. Each investment fund also incurs other expenses for services such as printing, mailing, legal, and similar items. All of these operating expenses are reflected in each investment fund's unit value. See "How we value your account balance in the investment funds" later in this prospectus. The tables that follow summarize the charges, at annual percentage rates, that apply to the Equity Index Fund and Lifecycle Funds. They do not include other charges which are specific to the various plans, such as enrollment fees or record maintenance and report fees. See "Charges and expenses," later in this prospectus for more details. THE EXPENSES SHOWN FOR THE INVESTMENT FUNDS ARE BASED ON AVERAGE PROGRAM ASSETS IN EACH OF THESE FUNDS DURING THE YEAR ENDED DECEMBER 31, 2001, AND REFLECT APPLICABLE FEES. The Equity Index Fund invests in shares of the SSgA S&P 500 Index Fund. The following table shows, at annual percentage rates, the charges and fees which are deducted from the Equity Index Fund and the SSgA S&P 500 Index Fund. No transaction charges are incurred by the Equity Index Fund when it purchases or redeems shares of the SSgA S&P 500 Index Fund, but the underlying mutual fund incurs its own operating expenses. No deduction is made from the assets of the SSgA S&P 500 Index Fund to compensate State Street for managing the assets of that Fund. THE CHARGES FOR THE SSGA S&P 500 INDEX FUND ARE SHOWN AS A PERCENTAGE OF THAT UNDERLYING MUTUAL FUND'S AVERAGE DAILY NET ASSETS.
EQUITY INDEX FUND - ------------------------------------------------------------------------------------------------------------------------- INVESTMENT FUND OPERATING EXPENSES ------------------------------------------------------------- PROGRAM INVESTMENT EXPENSE ADMINISTRATION MANAGEMENT OTHER CHARGE FEE FEE EXPENSES 12B-1 FEE TOTAL - ------------------------------------------------------------------------------------------------------------------------- Equity Index Fund 0.62% 0.15% None 0.14% None 0.91% SSgA S&P 500 Index Fund After Waiver (1) None None 0.04(2) 0.04 0.09 0.17(2) - ------------------------------------------------------------------------------------------------------------------------- TOTAL 0.62% 0.15% 0.04(2) 0.18% 0.09% 1.08%(2) - -------------------------------------------------------------------------------------------------------------------------
(1) Source: SSgA S&P 500 Index Fund Prospectus dated December 28, 2001. ----- Fee table 7 - -------------------------------------------------------------------------------- (2) Investment Management Fee for the SSgA S&P 500 Index Fund represents the fee for advisory, custody, transfer agency and administration services paid by the State Street Equity 500 Index Portfolio, the master fund in which the SSgA S&P 500 Index Fund invests all of its assets. SSgA Funds Management, Inc. has voluntarily agreed to reimburse the SSgA S&P 500 Index Fund for all expenses in excess of 0.18% until December 31, 2002. LIFECYCLE FUNDS No transaction charges are incurred by the Lifecycle Funds when units of a corresponding Lifecycle Fund Group Trust are purchased or redeemed, but annual operating expenses are incurred by each Lifecycle Fund Group Trust. A deduction is made from the assets of each Lifecycle Fund Group Trust to compensate State Street for managing the assets of the Lifecycle Fund Group Trusts. State Street may receive fees for managing the assets of other collective investment funds in which the Funds may invest on a temporary basis, and for managing the mutual funds in which assets of the Underlying State Street Funds may be invested. State Street has agreed to reduce its management fee charged each of the Lifecycle Fund Group Trusts to offset any management fees State Street receives attributable to the Lifecycle Trusts' investment in such other collective investment funds and mutual funds. State Street also receives an administration fee deducted from the assets of each Lifecycle Fund Group Trust, to compensate it for providing various recordkeeping and accounting services to the Lifecycle Trust. In addition, other expenses are deducted from the assets of the Underlying State Street Funds for custodial services provided to those Funds. The fees and charges which are deducted from the assets of the Lifecycle Funds, the Lifecycle Fund Group Trusts and the Underlying State Street Funds are shown in the table below. THE EXPENSES FOR EACH OF THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING STATE STREET FUNDS ARE EXPRESSED AS A PERCENTAGE OF THEIR RESPECTIVE AVERAGE NET ASSETS FOR 2001.
- ----------------------------------------------------------------------------------------------------------------------- PROGRAM INVESTMENT EXPENSE ADMINISTRATION MANAGEMENT OTHER CHARGE FEE FEE EXPENSES TOTAL - ----------------------------------------------------------------------------------------------------------------------- Lifecycle Fund - Conservative 0.62% 0.15% None 0.50%(1) 1.27% Lifecycle Fund Group Trust - Conservative None 0.10%(2) 0.17% 0.05%(1&3) 0.32% Underlying State Street Funds: S&P 500 Flagship Fund None None None -%(4) -%(4) Russell 2000 Index Securities Lending Fund None None None 0.03% -%(4) Daily EAFE Fund None None None 0.12%(4) 0.01%(4) Government Corporate Bond Fund None None None 0.01%(5) 0.01%(6) Short Term Investment Fund None None None -%(4) -%(4) - ----------------------------------------------------------------------------------------------------------------------- TOTAL 0.62% 0.25% 0.17% 0.57%(6) 1.61%(6) - -----------------------------------------------------------------------------------------------------------------------
- ----- 8 Fee table - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------- PROGRAM INVESTMENT EXPENSE ADMINISTRATION MANAGEMENT OTHER CHARGE FEE FEE EXPENSES TOTAL - --------------------------------------------------------------------------------------------------------------------------- Lifecycle Fund - Moderate 0.62% 0.15% None 0.18%(1) 0.95% Lifecycle Fund Group Trust - Moderate None 0.01%(2) 0.17% 0.01%(1,3&4) 0.19% Underlying State Street Funds: S&P 500 Flagship Fund None None None -%(4) -%(4) Russell 2000 Index Securities Lending Fund None None None 0.03% -%(4) Daily EAFE Fund None None None 0.12%(4) 0.02%(4) Government Corporate Bond Fund None None None 0.01%(5) -%(6) Short Term Investment Fund None None None -%(4) -%(4) - --------------------------------------------------------------------------------------------------------------------------- TOTAL 0.62% 0.16% 0.17% 0.21%(6) 1.16%(6) - ---------------------------------------------------------------------------------------------------------------------------
(1) These include a charge at the annual rate of .03% of the value of the respective program assets in the Lifecycle Funds - Conservative and Moderate to compensate Equitable Life for additional legal, accounting and other potential expenses resulting from the inclusion of the Lifecycle Fund Group Trusts and Underlying State Street Funds maintained by State Street among the investment options described in this prospectus and the SAI. On December 8, 1995, the Program's balance in the Balanced Fund (approximately $70 million) was transferred to the Lifecycle Fund - Moderate. The much larger balance in that Fund results in a much lower ratio of other expenses to total assets compared to the corresponding ratio for the Lifecycle Fund - Conservative. (2) Based on the Lifecycle Fund Group Trusts - Conservative and Moderate current fixed fee of $12,000 per year, per fund, and average net assets for 2001. (3) Based on the Lifecycle Fund Group Trusts - Conservative and Moderate average net assets for 2001. (4) Less than 0.01%. (5) Other expenses of the Underlying State Street Funds are based on expenses incurred by each Fund during 2001. (6) These totals are based upon a weighted average of the other expenses for each Underlying State Street Fund. In calculating the weighted average, expenses for each Underlying State Street Fund were multiplied by their respective target percentages within their respective Group Trust. See "Lifecycle Funds - Conservative" and "Lifecycle Funds - Moderate" later in this prospectus for a description of the targeted percentage weightings of the Lifecycle Fund Group Trusts - Conservative and Moderate. ----- Fee table 9 - -------------------------------------------------------------------------------- EXAMPLES You would pay the expenses shown below on a $1,000 initial investment over the time period indicated for each investment fund listed below, assuming a 5% annual rate of return. The examples include all annual fund operating expenses plus an estimate of average plan and transaction charges over the time periods indicated, assuming the account is not annuitized. The estimate is computed by aggregating all record maintenance and report fees and enrollment fees, divided by the average assets for the same period. See "Plan and transaction expenses" later in this prospectus. As the minimum amount that can be converted to an annuity is $5,000, the amount accumulated from the $1,000 contribution could not be paid in the form of an annuity at the end of any of the periods shown in the examples. There are no surrender charges, so the amounts would be the same, whether you withdraw all or a portion of your Account Balance. The examples assume the continuation of total expenses shown in the tables above for the entire one, three, five and ten year periods shown in the examples.
- ------------------------------------------------------------------------------ INVESTMENT FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------------ Equity Index(1) $11.32 $35.27 $61.09 $134.84 Lifecycle - Conservative 16.67 51.69 89.04 193.72 Lifecycle - Moderate 12.17 37.89 65.58 144.42 - ------------------------------------------------------------------------------
(1) The expenses shown reflect the reimbursement for all expenses in excess of .18% of the average daily net assets by SSgA Funds Management, Inc. discussed in the fee table above. The purpose of these tables and examples is to assist you in understanding the various costs and expenses that will be incurred, either directly or indirectly, when amounts are invested in the Funds. FUTURE EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, THE 5% RATE OF RETURN IN THE EXAMPLE IS NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE. We may deduct a $350 annuitization fee if you elect a variable annuity payout option. Assuming an annuity payout option could be issued, the expenses shown in the above example would, in each case, be increased by $5.44 based on the average amount applied to annuity payout options in 2001. SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION Please see APPENDIX I at the end of this prospectus for selected financial data and condensed financial information concerning the Equity Index Fund and Lifecycle Funds. FINANCIAL STATEMENTS The Equity Index Fund and the Lifecycle Funds are each separate accounts of ours as described in "About the separate accounts" under "More information" later in this prospectus. The financial statements for the Equity Index Fund (Separate Account No. 195), Lifecyle Fund - Conservative (Separate Account No. 197) and Lifecycle Fund - Moderate (Separate Account No. 198) may be found in the SAI for this prospectus. 2 Program Investment Options - ----- 10 Program Investment Options - -------------------------------------------------------------------------------- INVESTMENT OPTIONS You may choose from twelve investment options under the Program, eight of which are covered in a separate prospectus. Three of these are discussed below: the Equity Index Fund and the two Lifecycle Funds - Conservative and Moderate. Each of these three Funds has a different investment objective. We cannot assure you that any of these Funds will meet their investment objectives. Also discussed are the Lifecycle Fund Group Trusts in which the Lifecycle Funds invest and the Underlying State Street Funds in which the Lifecycle Fund Group Trusts invest. THE EQUITY INDEX FUND The Equity Index Fund invests in shares of the SSgA S&P 500 Index Fund, one of the Underlying Mutual Funds. The investment results you will experience will depend on the investment performance of SSgA S&P 500 Index Fund. The table below shows the investment objective and adviser for the SSgA S&P 500 Index Fund. UNDERLYING MUTUAL FUND
- ------------------------------------------------------------------- INVESTMENT FUND NAME OBJECTIVE ADVISER - ------------------------------------------------------------------- Equity Index Fund SSgA S&P Replicate the SSgA Funds 500 Index total return Management, Fund of the S&P Inc. 500 Index - -------------------------------------------------------------------
The underlying mutual fund used by the Equity Index Fund is selected by the ADA Trustees. We have no investment management responsibilities for the Equity Index Fund. As to that Fund, we act in accordance with the investment policies established by the ADA Trustees. PLEASE REFER TO THE PROSPECTUS AND SAI OF THE SSgA S&P 500 INDEX FUND FOR A MORE DETAILED DISCUSSION OF INVESTMENT OBJECTIVES AND STRATEGIES, THE ADVISER, RISK FACTORS AND OTHER INFORMATION CONCERNING THAT FUND. LIFECYCLE FUNDS - CONSERVATIVE AND MODERATE Each Lifecycle Fund invests in a Lifecycle Fund Group Trust. Each Lifecycle Trust has identical investment objectives and policies to the Lifecycle Fund to which it relates. We have no investment management responsibilities for the Lifecycle Funds. As to those Funds, we act in accordance with the investment policies established by the ADA Trustees. OBJECTIVES The Lifecycle Fund - Conservative seeks to provide current income and a low to moderate growth of capital by investing exclusively in units of the Lifecycle Group Trust - Conservative. The Lifecycle Fund - Moderate seeks to provide growth of capital and a reasonable level of current income by investing exclusively in units of the Lifecycle Group Trust - Moderate. In turn each of the Lifecycle Fund Group Trusts invests in a mix of Underlying State Street Funds. The following table diagrams this investment structure: ---------------------------------------------------------------------- LIFECYCLE FUND LIFECYCLE FUND CONSERVATIVE MODERATE (SA 197) (SA 198) ---------------------------------------------------------------------- ---------------------------------------------------------------------- LIFECYCLE FUND LIFECYCLE FUND GROUP TRUST GROUP TRUST CONSERVATIVE MODERATE ---------------------------------------------------------------------- UNDERLYING FUNDS -------------------------------------- S&P 500 FLAGSHIP FUND -------------------------------------- -------------------------------------- RUSSELL 2000 INDEX SECURITIES LENDING FUND -------------------------------------- -------------------------------------- DAILY EAFE FUND -------------------------------------- -------------------------------------- GOV'T CORPORATE BOND FUND -------------------------------------- -------------------------------------- SHORT TERM INVESTMENT FUND -------------------------------------- ----- Program Investment Options 11 - -------------------------------------------------------------------------------- THE LIFECYCLE FUND GROUP TRUSTS The Lifecycle Fund Group Trusts (Lifecycle Trusts) are maintained by State Street. Each of the Lifecycle Trusts is organized as a collective investment trust under Massachusetts law. Because of exclusionary provisions, the Lifecycle Fund Group Trusts are not subject to regulation under the Investment Company Act of 1940. Each Trust is operated by a single corporate trustee (State Street), which is responsible for all aspects of the Trust, including portfolio management, administration and custody. The Lifecycle Fund Group Trusts were selected by the ADA Trustees. State Street serves as the trustee and investment manager to the Lifecycle Fund Group Trusts. State Street is a trust company established under the laws of the Commonwealth of Massachusetts. It is a wholly-owned subsidiary of State Street Corporation, a publicly held bank holding company registered under the Federal Bank Holding Company Act of 1956, as amended. State Street's home office is located at 225 Franklin Street, Boston, Massachusetts 02110. State Street Global Advisors (SSgA) is the investment management arm of State Street. SSgA is a leading manager of retirement assets with $775 billion in assets under management as of December 31, 2001. SSgA's investment expertise spans multiple strategies, disciplines and markets around the world. SSgA's customers include corporate, union, public pension plans, endowments, foundations, other financial institutions and individuals worldwide. As of December 31, 2001, SSgA was ranked the largest U.S. manager of tax-exempt assets. INVESTMENT OBJECTIVES AND POLICIES Each Lifecycle Trust has the same investment objective as the Lifecycle Fund to which it relates. These investment objectives are described above. Each of the Lifecycle Trusts attempts to achieve its investment objective by investing 100% of its assets in a mix of underlying collective investment trusts (the Underlying State Street Funds) maintained by State Street and offered exclusively to tax exempt retirement plans. Unlike the Lifecycle Fund Group Trusts, however, which are available only under the ADA Program, the Underlying State Street Funds may receive contributions from other tax exempt retirement plans. INVESTMENT POLICIES OF THE LIFECYCLE FUND GROUP TRUST - CONSERVATIVE The table below shows the mix of Underlying State Street Funds targeted by the Lifecycle Fund Group Trust - Conservative. - --------------------------------------------------------- S&P 500 Flagship Fund 15% Russell 2000 Index Securities Lending Fund 5% Daily EAFE Fund 10% Government Corporate Bond Fund 50% Short Term Investment Fund 20% - ---------------------------------------------------------
INVESTMENT POLICIES OF THE LIFECYCLE FUND GROUP TRUST - MODERATE The table below shows the mix of Underlying State Street Funds targeted by the Lifecycle Fund Group Trust - Moderate. - --------------------------------------------------------- S&P 500 Flagship Fund 35% Russell 2000 Index Securities Lending Fund 10% Daily EAFE Fund 15% Government Corporate Bond Fund 30% Short Term Investment Fund 10% - ---------------------------------------------------------
The target percentages shown above for each Lifecycle Trust are reviewed annually by the ADA Trustees and may be revised as recommended, subject to State Street's approval. State Street, as investment manager of each Lifecycle Trust, from time to time makes adjustments in the mix of Underlying State Street Funds as needed to maintain, to the extent practicable, the target percentages in each of the Underlying State Street Funds. - ----- 12 Program Investment Options - -------------------------------------------------------------------------------- THE UNDERLYING STATE STREET FUNDS The Underlying State Street Funds are bank collective investment trusts. They are organized as common law trusts under Massachusetts law, and because of exclusionary provisions, are not subject to regulation under the 1940 Act. State Street serves as trustee and investment manager to each of the Underlying State Street Funds. S&P 500 FLAGSHIP FUND OBJECTIVE The investment objective of the S&P 500 Flagship Fund ("Flagship Fund") is to replicate, as closely as possible, the return of the Standard & Poor's 500 Index (the "S&P 500 Index"). The S&P 500 Index is comprised of stocks of 500 leading companies whose stocks are chosen for market size, liquidity and industry group representation by Standard & Poor's Corporation. The stocks are also representative of the broad U.S. equity market and the U.S. economy. The S&P 500 is a market-value weighted index (stock price time number of shares outstanding), with each stock's weight in the index proportionate to its market value. The "500" is one of the most widely used benchmarks of U.S. equity performance. The Flagship Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's Corporation, and Standard & Poor's Corporation makes no representation regarding the advisability of investing in this Fund. INVESTMENT POLICIES The Flagship Fund intends to achieve its objective by investing in all 500 stocks in the S&P 500 Index. In order to provide 100% equity exposure, the Flagship Fund may hold up to 25% of its value in S&P 500 futures contracts in lieu of cash equivalents. The Flagship Fund will use U.S. Treasury Bills and other short-term cash equivalents it holds as collateral for the futures contracts. For additional discussion related to the investment policies of the Flagship Fund, see discussion under "Risks and Investment Techniques" below, and the Statement of Additional Information. RUSSELL 2000 INDEX SECURITIES LENDING FUND OBJECTIVE The investment objective of the Russell 2000 Index Securities Lending Fund is to match, as closely as possible, the return of the Russell 2000 Index maintained by Frank Russell Company ("Frank Russell"). INVESTMENT POLICIES The Russell 2000 Index Securities Lending Fund seeks to fully replicate the Russell 2000 Index. The Russell 2000 Index Securities Lending Fund will invest its assets directly in shares of companies included in the Russell 2000 Index. The Russell 2000 Index is a broadly diversified small capitalization index consisting of approximately 2,000 common stocks. The Russell 2000 Index is a subset of the larger Russell 3000 Index. The Russell 3000 Index consists of the largest 3,000 publicly traded stocks of U.S. domiciled corporations and includes large, medium and small capitalization stocks. As such, the Russell 3000 Index represents approximately 98 percent of the total market capitalization of all U.S. stocks that trade on the New York and American Stock Exchanges and in the NASDAQ over-the-counter market. The Russell 2000 Index consists of the approximately 2,000 smallest stocks within the Russell 3000 Index and is, therefore, a broadly diversified index of small capitalization stocks. The composition of the Russell 2000 Index is updated continuously to reflect corporate actions affecting companies in the Index. Once a year, at the end of June, the Index is fully reconstituted and companies that no longer qualify for the Index because of fluctuations of market capitalization are replaced. The rate of change in the securities included in the Russell 2000 Index is significant, often higher than 20 percent a year of the total market capitalization of the Index. ----- Program Investment Options 13 - -------------------------------------------------------------------------------- The Russell 2000 Index Securities Lending Fund is neither sponsored by nor affiliated with Frank Russell. Frank Russell's only relationship to the Russell 2000 Fund is the licensing of the use of the Russell 2000 Stock Index. Frank Russell is the owner of the trademarks and copyrights relating to the Russell indices. For additional discussion related to the investment policies of the Russell 2000 Index Securities Lending Fund, see discussion under "Risks and Investment Techniques" below, and the Statement of Additional Information. DAILY EAFE FUND OBJECTIVE The investment objective of the Daily EAFE Fund is to closely match the performance of the Morgan Stanley Capital International EAFE Index ("EAFE Index") while providing daily liquidity. INVESTMENT POLICIES The Daily EAFE Fund seeks to achieve its objective by investing in other funds which invest in each of the foreign markets which comprise the EAFE Index. The Morgan Stanley Capital International Europe, Australasia, and Far East (MSCI EAFE) Index is a broadly diversified index representing over 1,000 stocks across 20 developed markets outside of North America. The Index captures about 60% of the available market capitalization in each country and is designed to offer investors access to some of the world's largest and most liquid equity securities outside the U.S. and Canada. The Daily EAFE Fund also may acquire interest-bearing cash equivalents, notes and other short-term instruments, including foreign currency time deposits or call accounts. As of December 31, 2001, companies located in Japan (20.12%) and the United Kingdom (25.45%) dominated the market capitalization of the EAFE Index, with companies located in Germany, France, Switzerland and Netherlands also being well represented on the Index. The Index covers a wide spectrum of industries. Morgan Stanley Capital International, the creator of the EAFE Index, is neither a sponsor of nor affiliated with the Daily EAFE Fund. The Daily EAFE Fund seeks to fully replicate the MSCI EAFE Index, but from time to time may not be able to hold all of the more than 1,000 stocks that comprise the EAFE Index because of the costs involved. From time to time the Daily EAFE Fund will hold a representative sample of the issues that comprise the EAFE Index. The Daily EAFE Fund selects stocks for inclusion based on country, market capitalization, industry weightings, and fundamental characteristics such as return variability, earnings valuation, and yield. In order to parallel the performance of the EAFE Index, the Daily EAFE Fund will invest in each country in approximately the same percentage as that country's weight in the EAFE Index. For additional discussion related to the investment policies of the Daily EAFE Fund, see discussion under "Risks and Investment Techniques" below, and the Statement of Additional Information. GOVERNMENT CORPORATE BOND FUND OBJECTIVE The investment objective of the Government Corporate Bond Fund ("GC Bond Fund") is to match or exceed the return of the Lehman Brothers Government Corporate Bond Index. INVESTMENT POLICIES The GC Bond Fund seeks to achieve its investment objective by making direct investment in marketable instruments and securities. The GC Bond Fund may make direct investments in (1) U.S. Government securities, including U.S. Treasury securities and other obligations issued or guaranteed as to interest and principal by the U.S. Government and its agencies and instrumentalities, (2) corporate securities, (3) asset backed securities, (4) mortgage backed securities including, but not limited to, collateralized mortgage obligations and real estate mortgage investment conduits, (5) repurchase and reverse repurchase agreements, (6) financial futures and option contracts, (7) interest rate exchange agreements and other swap agreements, (8) supranational and sovereign debt obligations including - ----- 14 Program Investment Options - -------------------------------------------------------------------------------- those of sub-divisions and agencies, and (9) other securities and instruments deemed by State Street, as trustee of the GC Bond Fund, to have characteristics consistent with the investment objective of this Fund. The GC Bond Fund will hold securities that have a minimum credit rating when purchased of Baa3 by Moody's or BBB- by Standard & Poor's. For additional discussion related to the investment policies of the GC Bond Fund, see discussion under "Risks and investment techniques" below and the Statement of Additional Information. SHORT TERM INVESTMENT FUND OBJECTIVE The investment objective of the Short Term Investment Fund ("STIF Fund") is, through active management, to provide safety of principal, daily liquidity, and a competitive yield by investing in high quality money market instruments. INVESTMENT POLICIES The STIF Fund intends to achieve its objective by investing in money market securities rated at least A-1 by Standard and Poor's and P-1 by Moody's at the time of issuance. If the issuer has long-term debt outstanding, such debt should be rated at least "A" by Standard & Poor's or "A" by Moody's. The STIF Fund may purchase Yankee and Euro certificates of deposit, Euro time deposits, U.S. Treasury bills, notes and bonds, federal agency securities, corporate bonds, repurchase agreements and banker's acceptances. Most of the STIF Fund's investments will have a range of maturity from overnight to 90 days. Twenty percent of the STIF Fund, however, may be invested in assets having a maturity in excess of 90 days but not more than thirteen months. For additional discussion regarding the investment policies of the STIF Fund, see discussion under "Risks and investment techniques" below, and the Statement of Additional Information. RISKS AND INVESTMENT TECHNIQUES: LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING STATE STREET FUNDS You should be aware that any investment in securities carries with it a risk of loss. The different investment objectives and policies of the Equity Index Fund and each of the Lifecycle Funds affect the return on these Funds. Additionally, there are market and financial risks inherent in any securities investment. By market risks, we mean factors which do not necessarily relate to a particular issuer but which affect the way markets, and securities within those markets, perform. We sometimes describe market risk in terms of volatility, that is, the range and frequency of market value changes. Market risks include such things as changes in interest rates, general economic conditions and investor perceptions regarding the value of debt and equity securities. By financial risks we mean factors associated with a particular issuer which may affect the price of its securities, such as its competitive posture, its earnings and its ability to meet its debt obligations. The risk factors and investment techniques associated with the Underlying State Street Funds in which the Lifecycle Fund Group Trusts invest are discussed below. The risks and investment techniques associated with investments by the Equity Index Fund in the SSgA S&P 500 Index Fund are discussed in the prospectus and Statement of Additional Information for the SSgA S&P 500 Index Fund. IN GENERAL You should note that the S&P 500 Flagship Fund, the Russell 2000 Index Securities Lending Fund and the Daily EAFE Fund are all index funds. An index fund is one that is not managed according to traditional methods of "active" investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, such funds utilize a "passive" investment approach, attempting to duplicate the investment performance of their benchmark indices through automated statistical analytic procedures. For example, the S&P 500 Flagship Fund attempts to match the return of the S&P 500 Index by using automated statistical methods to make stock selections. Similar methods ------- Program Investment Options 15 - -------------------------------------------------------------------------------- are employed in selecting stocks for the Russell 2000 Index Securities Lending Fund and the Daily EAFE Fund. Still, such Funds, to the extent they invest in the various types of securities discussed below, are subject to the risks associated with each of these investments. Also, you should note that each of the Underlying State Street Funds, for the purpose of investing uncommitted cash balances or to maintain liquidity to meet redemptions of Fund units, may invest temporarily and without limitation in certain short-term fixed income securities and other collective investment funds or registered mutual funds maintained or advised by State Street. The short-term fixed income securities in which an Underlying State Street Fund may invest include obligations issued or guaranteed as to principal and interest by the U.S. Government, its agencies and instrumentalities and repurchase agreements collateralized by these obligations, commercial paper, bank certificates of deposit, banker's acceptances, and time deposits. EQUITY SECURITIES Certain of the Underlying State Street Funds will invest in equity securities. Participants should be aware that equity securities fluctuate in value, often based on factors unrelated to the value of the issuer of the securities, and that fluctuations can be pronounced. The securities of the smaller companies in which some of the Underlying State Street Funds may invest may be subject to more abrupt or erratic market movements than larger, more established companies for two reasons: the securities typically are traded in lower volume and the issuers typically are subject, to a greater degree, to changes in earnings and profits. FIXED-INCOME SECURITIES Certain of the Underlying State Street Funds will invest in fixed-income securities. Although these are interest-bearing securities which promise a stable stream of income, participants should be aware that the prices of such securities are affected by changes in interest rates. Accordingly, the prices of fixed-income securities are subject to the risk of market price fluctuations. The values of fixed-income securities also may be affected by changes in the credit rating or financial condition of the issuing entities. Once the rating of a portfolio security has been changed, State Street will consider all relevant circumstances in determining whether a particular Underlying State Street Fund should continue to hold that security. Certain securities such as those rated Baa by Moody's and BBB by Standard & Poor's, may be subject to greater market fluctuations than lower yielding, higher rated fixed-income securities. Securities which are rated Baa by Moody's are considered medium grade obligations; they are neither highly protected nor poorly secured, and are considered by Moody's to have speculative characteristics. Securities rated BBB by Standard & Poor's are regarded as having adequate capacity to pay interest and repay principal, and while such debt securities ordinarily exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for securities in this category than in higher rated categories. FOREIGN SECURITIES The Daily EAFE Fund will invest in foreign securities. Such investments, however, entail special risks. Foreign securities markets generally are not as developed or efficient as those in the United States. Securities of some foreign issuers are less liquid and more volatile than securities of comparable U.S. issuers. Similarly, volume and liquidity in most foreign securities markets are less than in the United States and, at times, volatility of price can be greater than in the United States. In addition, there may be less publicly available information about a non-U.S. issuer, and non-U.S. issuers generally are not subject to uniform accounting and financial reporting standards, practices and requirements comparable to those applicable to U.S. issuers. Because evidences of ownership of foreign securities usually are held outside the United States, each of the Underlying State Street Funds investing in foreign securities will be subject to additional risks. Such risks include possible adverse political and economic developments, possible - ----- 16 Program Investment Options - -------------------------------------------------------------------------------- seizure or nationalization of foreign deposits, and possible adoption of governmental restrictions which might adversely affect the payment of principal and interest on the foreign securities or might restrict the payment of principal and interest to investors located outside the country of the issuers, whether from currency blockage or otherwise. Custodial expenses for a portfolio of non-U.S. securities generally are higher than for a portfolio of U.S. securities. Since foreign securities transactions involving the Underlying State Street Funds often are completed in currencies of foreign countries, the value of these securities as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency rates and exchange control regulations. Some currency exchange costs may be incurred when an Underlying State Street Fund changes investments from one country to another. Furthermore, some of these securities may be subject to brokerage or stamp taxes levied by foreign governments, which have the effect of increasing the cost of such investment. Income received by sources within foreign countries may be reduced by any withholding and other taxes imposed by such countries. FUTURES CONTRACTS Certain of the Underlying State Street Funds may invest in futures contracts. A purchase of a futures contract is the acquisition of a contractual right and obligation to acquire the underlying security at a specified price on a specified date. Although futures contracts by their terms may call for the actual delivery or acquisition of the underlying security, in most cases the contractual obligation is terminated before the settlement date of the contract without delivery of the security. The Underlying State Street Fund will incur brokerage fees when it purchases and sells futures contracts. The Underlying State Street Funds will not purchase futures contracts for speculation. Futures contracts are used to increase the liquidity of each Underlying State Street Fund and for hedging purposes. Transactions in futures contracts entail certain risks and transaction costs to which an Underlying State Street Fund would not otherwise be subject, and the Underlying State Street Fund's ability to purchase futures contracts may be limited by market conditions or regulatory limits. Because the value of a futures contract depends primarily on changes in the value of the underlying securities, the value of the futures contracts purchased by the Underlying State Street Fund generally reflects changes in the values of the underlying stocks or bonds. The risks inherent in the use of futures contracts include: (1) imperfect correlation between the price of the futures contracts and movements in the prices in the underlying securities; and (2) the possible absence of a liquid secondary market for any particular instrument at any time. An Underlying State Street Fund also may engage in foreign futures transactions. Unlike trading on domestic futures exchanges, trading on foreign futures exchanges is not regulated by the Commodity Futures Trading Commission and may be subject to greater risks than trading on domestic exchanges. For example, some foreign exchanges are principal markets so that no common clearing facility exists and an investor may look only to the broker for performance of the contract. In addition, any profits that an Underlying State Street Fund might realize from trading could be eliminated by adverse changes in the exchange rate, or such Underlying State Street Fund could incur losses as a result of those changes. Transactions on foreign exchanges may include both futures which are traded on domestic exchanges and those which are not. SECURITIES OF MEDIUM AND SMALLER SIZED COMPANIES. Certain of the Underlying State Street Funds may invest in the securities of medium and smaller sized companies with market capitalization of $500 million to $1.5 billion. Such companies may be dependent on the performance of only one or two products and, therefore, may be vulnerable to competition from larger companies with greater resources and to economic conditions affecting their market sector. Consequently, consistent earnings may not be as likely in such companies as they would be for larger companies. In addition, medium and smaller sized companies may be more dependent on access to equity markets to raise capital than larger companies with greater ability to support debt. ----- Program Investment Options 17 - -------------------------------------------------------------------------------- Medium and smaller sized companies may be new, without long business or management histories, and perceived by the market as unproven. Their securities may be held primarily by insiders or institutional investors, which may have an impact on marketability. The price of these stocks may rise and fall more frequently and to a greater extent than the overall market. LENDING OF SECURITIES Certain of the Underlying State Street Funds may from time to time lend securities from their portfolios to brokers, dealers and financial institutions and receive collateral consisting of cash, securities issued or guaranteed by the U.S. Government, or irrevocable letters of credit issued by major banks. The Underlying State Street Funds will invest this cash collateral in various collective investment funds maintained by State Street. The portion of net income from such investments will increase the return to the Underlying State Street Funds. However, an Underlying State Street Fund may experience a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement. All securities lending transactions in which the Underlying State Street Funds engage will comply with the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and related regulations. INVESTMENTS BY THE STIF FUND Each of the Lifecycle Fund Group Trusts will, and certain of the Underlying State Street Funds may, invest in the STIF Fund. This Fund intends to invest, among other things, in various U.S. Government Obligations, U.S. dollar-denominated instruments issued by foreign banks and foreign branches of U.S. banks, "when-issued" securities, and to enter into repurchase agreements with various banks and broker-dealers. The STIF Fund's activities with respect to each of these investments are discussed below. The STIF Fund may invest in a variety of U.S. Government obligations, including bills and notes issued by the U.S. Treasury and securities issued by agencies of the U.S. Government. The STIF Fund also may invest in U.S. dollar-denominated instruments issued by foreign banks and foreign branches of U.S. banks, a type of investment that may involve special risks. Such banks may not be required to maintain the same financial reserves or capital that are required of U.S. banks. Restrictions on loans to single borrowers, prohibitions on certain self-dealing transactions, and other regulations designed to protect the safety and solvency of U.S. banks may not be applicable to foreign banks and foreign branches of U.S. banks. In addition, investments of this type may involve the unique risks associated with investments in foreign securities described above. The STIF Fund may commit to purchasing securities on a "when-issued" basis, such that payment for and delivery of a security will occur after the date that this Fund commits to purchase the security. The payment obligation and the interest rate that will be received on the security are each fixed at the time of the purchase commitment. Prior to payment and delivery, however, the STIF Fund will not receive interest on the security, and will be subject to the risk of loss if the value of the when-issued security is less than the purchase price at time of delivery. Finally, the STIF Fund may enter into repurchase agreements with various banks and broker-dealers. In a repurchase agreement transaction, the STIF Fund acquires securities (usually U.S. Government obligations) for cash and obtains a simultaneous commitment from the seller to repurchase the securities at an agreed-upon price and date. The resale price is in excess of the acquisition price and reflects an agreed-upon rate of interest unrelated to the coupon rate on the purchased security. In these transactions, the securities purchased by the STIF Fund will have a total value at least equal to the amount of the repurchase price and will be held by State Street or a third-party custodian until repurchased. State Street will continually monitor the value of the underlying securities to verify that their value, including accrued interest, always equals or exceeds the repurchase price. - ----- 18 Program Investment Options - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION ABOUT THE FUNDS CHANGE OF INVESTMENT OBJECTIVES The ADA Trustees may change the investment objectives of the Equity Index Fund and Lifecycle Funds. The ADA Trustees may also change the mutual fund or collective investment fund in which any one of these Funds invests. The Trustees and we can make these changes without your consent. VOTING RIGHTS If SSgA S&P 500 Index Fund holds a meeting of shareholders, we will vote shares held in the corresponding Equity Index Fund in accordance with instructions received from employers, participants or trustees, as the case may be. Shares will be voted in proportion to the voter's interest in the Equity Index Fund holding the shares as of the record date for the shareholders meeting. We abstain from voting shares if we receive no instructions. Employers, participants or trustees will receive: (1) periodic reports relating to the SSgA S&P 500 Index Fund and (2) proxy materials, together with a voting instruction form, in connection with shareholder meetings. Participants do not have any voting rights with respect to their investments in a Lifecycle Fund. Similarly, participants do not have any voting rights with respect to matters such as the selection of State Street as trustee or investment manager or investment adviser of a Lifecycle Fund Group Trust or Underlying State Street Fund, or with respect to any changes in investment policy of any of these entities. 3 How we value your account balance in the Equity Index Fund and Lifecycle Funds ----- How we value your account balance in the Equity Index Fund and Lifecycle 19 Funds - -------------------------------------------------------------------------------- FOR AMOUNTS IN THE FUNDS When you invest in the Equity Index Fund and Lifecycle Funds, your contribution or transfer purchases "units" of that Fund. The unit value on any day reflects the value of the Fund's investments for the day and the charges and expenses we deduct from the Fund. We calculate the number of units you purchase by dividing the amount you invest by the unit value of the Fund as of the close of business on the day we receive your contribution or transfer instruction. On any given day, your account value in the Equity Index Fund and Lifecycle Funds equals the number of the Fund's units credited to your account, multiplied by that day's value for one Fund unit. In order to take deductions for expenses from any Fund, we cancel units having a value equal to the amount we need to deduct. Otherwise, the number of your Fund units of any Fund does not change unless you make additional contributions, make a withdrawal, effect a transfer, or request some other transaction that involves moving assets into or out of that Fund option. For a description of how Fund unit values are computed, see "How We Determine Unit Values for the Funds" in the SAI. 4 Transfers and access to your account - ----- 20 Transfers and access to your account - -------------------------------------------------------------------------------- TRANSFERS AMONG INVESTMENT OPTIONS You may transfer some or all of your amounts among all of the investment options if you participate in the Master Plan. Participants in other plans may make transfers as allowed by the plan. Transfers from the Equity Index Fund and Lifecycle Funds are permitted at any time except if there is any delay in redemptions from the Underlying Mutual Fund or, with respect to the Lifecycle Funds, the Lifecycle Fund Group Trusts in which they invest. DISRUPTIVE TRANSFER ACTIVITY You should note that the contract is not designed for professional "market timing" organizations or other organizations or individuals engaging in a market timing strategy, making programmed transfers, frequent transfers or transfers that are large in relation to the total assets of the underlying portfolio. These kind of strategies and transfer activities are disruptive to the underlying portfolios in which the variable investment options invest. If we determine that your transfer patterns among the variable investment options are disruptive to the underlying portfolios, we may, among other things restrict the availability of personal telephone requests, facsimile transmissions, automated telephone services, Internet services or any electronic transfer services . We may also refuse to act on transfer instructions of an agent who is acting on behalf of one or more owners. In making these determinations, we may consider the combined transfer activity in all annuity contracts and life insurance policies that we believe are under common ownership, control or direction. We currently consider transfers into and out of (or vice versa) the same variable investment option within a five business day period as potentially disruptive transfer activity. In order to prevent disruptive activity, we monitor the frequency of transfers, including the size of transfers in relation to portfolio assets in each underlying portfolio, and we take appropriate action, which may include the actions described above to restrict availability of voice, fax and automated transaction services, when we consider the activity of owners to be disruptive. We currently provide a letter to owners who have engaged in such activity of our intention to restrict such services. However, we may not continue to provide such letters. We may also, in our sole discretion and without further notice, change what we consider disruptive transfer activity, as well as change our procedures to restrict this activity. OUR ACCOUNT INVESTMENT MANAGEMENT SYSTEM ("AIMS") AND OUR INTERNET WEBSITE Participants may use our automated AIMS or our Internet Website to transfer between investment options, obtain account information, change the allocation of future contributions and maturing GRAs and hear investment performance information. To use AIMS, you must have a touch-tone telephone. Our Internet Website can be accessed at www.equitable.com/ada. We have established procedures to reasonably confirm the genuineness of instructions communicated to us by telephone when using AIMS and by the Internet Website. The procedures require personal identification information, including your Personal Security Code ("PSC") number, prior to acting on telephone instructions or accessing information on the Internet Website, and providing written confirmation of the transfers. We assign a PSC number to you after we receive your completed enrollment form. Thus, we will not be liable for following telephone instructions, or Internet instructions, we reasonably believe to be genuine. We reserve the right to limit access to this service if we determine that you are engaged in a market timing strategy (see "Disruptive transfer activity" above). A transfer request will be effective on the business day we receive the request. We will confirm all transfers in writing. ----- Transfers and access to your account 21 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Generally our business day is any day the New York Stock Exchange is open for trading, and generally ends at 4:00 p.m. Eastern Time. A business day does not include a day we choose not to open due to emergency conditions. We may also close early due to emergency conditions. - -------------------------------------------------------------------------------- PARTICIPANT LOANS Participant loans are available if the employer plan permits them. Participants must apply for a plan loan through the employer. Loan packages containing all necessary forms, along with an explanation of how interest rates are set, are available from our Account Executives. Loans are subject to restrictions under Federal tax laws and ERISA. Participants should consult with their attorneys or tax advisors regarding the advisability and procedures for obtaining such an exemption. A loan may not be taken from the Real Estate Fund, or from the Guaranteed Rate Accounts prior to maturity. If a participant is married, written spousal consent may be required for a loan. Generally, the loan amount will be transferred from the investment options into a loan account. The participant must pay the interest as required by Federal income tax rules. If you fail to repay the loan when due, the amount of the unpaid balance may be taxable and subject to additional penalty taxes. Interest paid on a retirement plan loan is not deductible. CHOOSING BENEFIT PAYMENT OPTIONS Benefit payments are subject to plan provisions. The Program offers a variety of benefit payment options for employees that adopt the Master Plan. (If you are a participant in a self-directed or individually-designed plan, ask your employer for information on benefit payment options under your Plan.) Your plan may allow you a choice of one or more of the following forms of distribution: o Qualified Joint and Survivor Annuity o Lump Sum Payment o Installment Payments o Life Annuity o Life Annuity - Period Certain o Joint and Survivor Annuity o Joint and Survivor Annuity - Period Certain o Cash Refund Annuity All of these options can be either fixed or variable except for the Cash Refund Annuity and the Qualified Joint and Survivor Annuity which are fixed options only. - -------------------------------------------------------------------------------- The amount of each payment in a fixed option remains the same. Variable option payments change to reflect the investment performance of the Growth Equity Fund. - -------------------------------------------------------------------------------- See "Types of Benefits" in the SAI for detailed information regarding each of the benefit payout options, and "Procedures for Withdrawals, Distributions and Transfers" in the SAI. - ----- 22 Transfers and access to your account - -------------------------------------------------------------------------------- Fixed annuities are available from insurance companies selected by the Trustees. Upon request, we will provide fixed annuity rate quotes available from one or more such companies. Participants may instruct us to withdraw all or part of their account balance and forward it to the annuity provider selected. Once we have distributed that amount to the company selected, we will have no further responsibility to the extent of the distribution. We provide the variable annuity options. Payments under variable annuity options reflect investment performance of the Growth Equity Fund. The minimum amount that can be used to purchase any type of annuity is $5,000. In most cases a variable annuity administrative charge of $350 will be deducted from the amount used to purchase an annuity from Equitable Life. Annuities purchased from other providers may also be subject to fees and charges. If you are a participant in a self-directed or individually-designed plan, ask your employer for information on benefit payment options under your Plan. SPOUSAL CONSENT If a participant is married and has an account balance greater than $5,000 (except for amounts contributed to the Rollover Account), federal law generally requires payment (subject to plan rules) of a Qualified Joint and Survivor Annuity payable to the participant for life and then to the surviving spouse for life, unless you and your spouse have properly waived that form of payment in advance. Please see "Spousal Consent Requirements" under "Types of Benefits" in the SAI. BENEFITS PAYABLE AFTER THE DEATH OF A PARTICIPANT If a participant dies before the entire benefit has been paid, the remaining benefits will be paid to the participant's beneficiary. If a participant dies before he or she is required to begin receiving benefits, the law generally requires the entire benefit to be distributed no more than five years after death. There are exceptions: (1) a beneficiary who is not the participant's spouse may elect payments over his or her life or a fixed period which does not exceed the beneficiary's life expectancy, provided payments begin within one year of death, (2) if the benefit is payable to the spouse, the spouse may elect to receive benefits over his or her life or a fixed period which does not exceed his/her life expectancy beginning any time up to the date the participant would have attained age 701/2 or, if later, one year after the participant's death, or (3) the spouse may be able to roll over all or part of the death benefit to a traditional individual retirement arrangement. If, at death, a participant was already receiving benefits, the beneficiary must continue to receive benefits subject to the Federal income tax minimum distribution rules. To designate a beneficiary or to change an earlier designation, a participant must have the employer send us a beneficiary designation form. In some cases, the spouse must consent in writing to a designation of any non-spouse beneficiary, as explained in "Spousal Consent Requirements" under "Types of Benefits" in the SAI. Under the Master Plan, on the day we receive proof of death, we automatically transfer the participant's account balance in the Equity Index Fund or the Lifecycle Funds to the Money Market Guarantee Account unless the beneficiary gives us other written instructions. 5 The Program ----- The Program 23 - -------------------------------------------------------------------------------- This section explains the ADA Program in further detail. It is intended for employers who wish to enroll in the Program, but contains information of interest to participants as well. You should, of course, understand the provisions of your plan and the Adoption Agreement that define the scope of the Program in more specific terms. References to "you" and "your" in this section are to you in your capacity as an employer. The Program is described in the prospectus solely to provide a more complete understanding of how the investment funds operate within the Program. The American Dental Association Members Retirement Program consists of several types of retirement plans and two retirement plan Trusts, the Master Trust and the Pooled Trust. Each of the Trusts invests exclusively in the group annuity contracts described in this prospectus and in the group annuity contract funding the GRAs. The Program is sponsored by the ADA, and the Trustees under the Master and Pooled Trusts are the members of the Council on Insurance of the ADA (the "Trustees"). The Program had 27,252 participants and $1.2 billion in assets at December 31, 2001. ELIGIBLE EMPLOYERS You can adopt the Program if you or at least one of your partners or other shareholders is a member of: (1) the ADA, (2) a constituent or component society of the ADA, or (3) an ADA-affiliated organization. Participation by an affiliated organization must first be approved by the ADA's Council on Insurance. Our Retirement Program Specialists are available to answer your questions about joining the Program. Please contact us by using the telephone number or addresses listed under "How to reach us - Information on joining the Program" on the back cover of the prospectus. SUMMARY OF PLAN CHOICES You have a choice of three retirement plan arrangements under the Program. You can: o Choose the MASTER PLAN - which automatically gives you a full range of services from Equitable Life. These include your choice of the Program investment options, plan-level and participant-level recordkeeping, benefit payments and tax withholding and reporting. Under the Master Plan employers adopt our Master Trust and your only investment choices are from the Investment Options. - -------------------------------------------------------------------------------- The Master Plan is a defined contribution master plan that can be adopted as a profit sharing plan, a defined contribution pension plan, or both. Traditional 401(k), SIMPLE 401(k), and Safe Harbor 401(k) are also available. - -------------------------------------------------------------------------------- o Choose the SELF-DIRECTED PROTOTYPE PLAN - which gives you added flexibility in choosing investments. This is a defined contribution prototype plan which can be used to combine the Program investment options with your own individual investments such as stocks and bonds. With this plan you must adopt our Pooled Trust and maintain a minimum balance of $25,000 at all times. You must arrange separately for plan level accounting and brokerage services. We provide recordkeeping services only for plan assets held in the Pooled Trust. You can use any plan recordkeeper or you can arrange through us to hire Trustar Retirement Services, Inc. at a special rate. You can also arrange through us brokerage services from CSFB or use the services of any other broker. - -------------------------------------------------------------------------------- The Pooled Trust is an investment vehicle used with individually designed qualified retirement plans. It can be used for both defined contribution and defined benefit plans. We provide recordkeeping services for plan assets held in the Pooled Trust. - -------------------------------------------------------------------------------- o Maintain your own INDIVIDUALLY DESIGNED PLAN - and use the Pooled Trust for investment options in the Program and your own individual investments. The - ----- 24 The Program - -------------------------------------------------------------------------------- Pooled Trust is for investment only and can be used for both defined benefit and defined contribution plans. Choosing the right plan depends on your own set of circumstances. We recommend that you review all plan, trust, participation and related agreements with your legal and tax counsel. GETTING STARTED If you choose the Master Plan, you must complete an Adoption Agreement. If you have your own individually designed plan and wish to use the Pooled Trust as an investment vehicle, the trustee of your plan must complete an Adoption Agreement. If you choose the Self-Directed Prototype Plan, you must complete the Prototype Plan adoption agreement as well as an Adoption Agreement in order to use the Pooled Trust. As an employer, you are responsible for the administration of the plan you choose. If you have a Self-Directed Prototype Plan, you are also responsible for appointing a plan trustee. Please see "Your Responsibilities as Employer" in the SAI. HOW TO MAKE PROGRAM CONTRIBUTIONS Contributions must be in the form of a check drawn on a bank in the U.S. clearing through the Federal Reserve System, in U.S. dollars, and made payable to The ADA Retirement Trust. All contribution checks should be sent to Equitable Life at the address shown "For Contribution Checks Only" in the "Information once you join the Program" section under "How to reach us" on the back cover of this prospectus. Third party checks are not acceptable, except for rollover contributions, tax-free exchanges or trustee checks that involve no refund. All checks are subject to collection. We reserve the right to reject a payment if it is received in an unacceptable form. All contributions must be accompanied by a Contribution Remittance form which designates the amount to be allocated to each participant by contribution type and fiscal year to which the Contribution will be applied. Contributions are normally credited on the business day that we receive them, provided the remittance form is properly completed and matches the check amount. Contributions are only accepted from the employer. Employees may not send contributions directly to the Program. Contributions are only accepted for properly enrolled participants. There is no minimum amount which must be contributed for investment if you adopt the Master Plan, or if you have your own individually designed plan that uses the Pooled Trust. If you adopt our Self-Directed Prototype Plan, you must, as indicated above, keep at least $25,000 in the Pooled Trust at all times. ALLOCATING PROGRAM CONTRIBUTIONS Under the Master Plan, participants make all of the investment decisions. Investment decisions in the Self-Directed Prototype Plan and individually designed plans are made either by the participant or by the plan trustees, depending on the terms of the plan. Participants may allocate contributions among any number of Program investment options. Allocation instructions can be changed at any time. IF WE DO NOT RECEIVE ADEQUATE INSTRUCTIONS, WE WILL ALLOCATE YOUR CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT UNTIL WE ARE PROPERLY INSTRUCTED OTHERWISE. WHEN TRANSACTION REQUESTS ARE EFFECTIVE. Contributions, as well as transfer requests and allocation changes (not including GRA maturity allocation changes discussed in the SAI), are effective on the business day they are received. In-service distribution requests are also effective on the business day they are received. Benefit payments are subject to Plan provisions. Transaction requests received after the end of a business day will be credited the next business day. Processing of any transaction may be delayed if a properly completed form is not received. Trustee-to-trustee transfers of plan assets are effective the business day after we receive all items we require, including check and mailing instructions, and a plan opinion/IRS ----- The Program 25 - -------------------------------------------------------------------------------- determination letter from the new or amended plan or adequate proof of qualified plan status. DISTRIBUTIONS FROM THE INVESTMENT OPTIONS Keep in mind two sets of rules when considering distributions or withdrawals from the Program. The first are rules and procedures that apply to the investment options, exclusive of the provisions of your plan. We discuss those in this section. The second are rules specific to your plan. We discuss those "Rules applicable to participant distributions" below. Certain plan distributions may be subject to Federal income tax, and penalty taxes. See "Tax information" later in this prospectus. AMOUNTS IN THE EQUITY INDEX FUND AND LIFECYCLE FUNDS. These are generally available for distribution at any time, subject to the provisions of your plan. However, there may be a delay for withdrawals from these Funds if there is any delay in redemptions from the related Underlying Mutual Fund, or with respect to the Lifecycle Funds, from the Lifecycle Fund Group Trusts in which they invest. Payments or withdrawals and application of proceeds to an annuity ordinarily will be made promptly upon request in accordance with plan provisions. However, we can defer payments, applications and withdrawals for any period during which the New York Stock Exchange is closed for trading, sales of securities are restricted or determination of the fair market value of assets is not reasonably practicable because of an emergency. If your plan is an employer or trustee-directed plan, you as the employer are responsible for ensuring that there is sufficient cash available to pay benefits. RULES APPLICABLE TO PARTICIPANT DISTRIBUTIONS In addition to our own procedures, distribution and benefit payment options under a tax qualified retirement plan are subject to complicated legal requirements. A general explanation of the Federal income tax treatment of distributions and benefit payment options is provided in "Tax information" later in this prospectus and in the SAI. You should discuss your options with a qualified financial advisor. Our Account Executives also can be of assistance. In general, under the Master Plan or our Self-Directed Prototype Plan, participants are eligible for benefits upon retirement, death or disability, or upon termination of employment with a vested benefit. Participants in an individually designed plan are eligible for retirement benefits depending on the terms of their plan. See "Benefit payment options" under "Transfers and access to your money" earlier in this prospectus and "Tax information" later in this prospectus for more details. For participants who own more than 5% of the business, benefits must begin no later than April 1 of the year after the participant reaches age 701/2. For all other participants, distribution must begin by April 1 of the later of the year after attaining age 701/2 or retirement from the employer sponsoring the plan. The IRS and Treasury recently have proposed revisions to the minimum distribution rules. We expect the rules to be finalized in 2002. The proposed revisions permit plan administrators, plan participants, and beneficiaries to apply the proposed revisions to distributions for the calender year 2002 provided that the plan adopts a model amendment to permit such distributions. Under the Master Plan, self-employed persons may generally not receive a distribution prior to age 591/2, and employees generally may not receive a distribution prior to a separation from service. 6 Performance information - ----- 26 Performance information - -------------------------------------------------------------------------------- The investment performance of the Equity Index Fund and Lifecycle Funds reflects changes in unit values experienced over time. The unit value calculations for the Funds include all earnings, including dividends and realized and unrealized capital gains. Unlike the typical mutual fund, the Funds reinvest, rather than distribute, their earnings. The following tables show the annual percentage change in Fund unit values, and the average annual percentage change in Fund unit values, for the appropriate period ended December 31, 2001. You may compare the performance results for each Fund with the data presented for certain unmanaged market indices, or "benchmarks." Performance data for the benchmarks do not reflect any deductions for investment advisory, brokerage or other expenses of the type typically associated with an actively managed investment fund. This overstates their rates of return and limits the usefulness of the benchmarks in assessing the performance of the Funds. The benchmark results have been adjusted to reflect reinvestment of dividends and interest for greater comparability. The benchmarks are: o Standard & Poor's 500 Index ("S&P 500") - a weighted index of the securities of 500 companies widely regarded by investors as representative of the stock market. o Russell 3000 Index ("Russell 3000") represents approximately 98% of the investable U.S. equity market. The Russell 3000 Index consists of the largest 3,000 publicly traded stocks of U.S. domiciled corporations and includes large, medium and small capitalization stocks. Russell performs a "reconstitution" of the indices annually. o Russell 2000 Index ("Russell 2000") - a broadly diversified small capitalization index of the approximately 2,000 smallest stocks within the Russell 3000 Index. o Morgan Stanley Capital International Europe, Australasia, and Far East Index ("MSCI EAFE") - a broadly diversified index representing approximately 1,000 stocks across 20 major developed markets in Europe, Australia, New Zealand and the Far East. The MSCI EAFE index captures about 60% of the available market capitalization in each country and is designed to offer global investors access to some of the world's largest and most liquid equity securities outside the U.S. and Canada. o Lehman Government/Corporate Bond Index ("Lehman") - an index widely regarded as representative of the bond market. o Salomon Brothers 3-Month T-Bill Index ("Salomon 3 Mo. T-Bill") - an index of direct obligations of the U.S. Treasury which are issued in maturities between 31 and 90 days. o Consumer Price Index (Urban Consumers - not seasonally adjusted) ("CPI") - an index of inflation that can be used as a non-securities benchmark. The annual percentage change in unit values represents the percentage increase or decrease in unit values from the beginning of one year to the end of that year. The average annual rates of return are time-weighted, assume an investment at the beginning of each period, and include the reinvestment of investment income. Historical results are presented for the Funds for the periods during which the Funds were available under the Program. Hypothetical results were calculated for prior periods, as described in "How we calculate performance data" below. For the Equity Index Fund, no results are presented for periods prior to 1993, as the SSgA S&P 500 Index Fund began operations during 1992. 1995 performance data for the Lifecycle Funds is shown for the period when the Funds commenced operations on May 1, 1995 through December 31, 1995. THE PERFORMANCE SHOWN DOES NOT REFLECT ANY RECORD MAINTENANCE AND REPORT OR ENROLLMENT FEES. NO PROVISIONS HAVE BEEN MADE FOR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON DISTRIBUTION. PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. ----- Performance information 27 - -------------------------------------------------------------------------------- ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES
- ------------------------------------------------------------------------------------------------------------------------------------ LIFECYCLE LIFECYCLE SALOMON EQUITY FUND - FUND - S&P RUSSELL RUSSELL MSCI 3-MO. INDEX* CONSERVATIVE MODERATE 500 2000 3000 EAFE LEHMAN T-BILL NCREIF - ------------------------------------------------------------------------------------------------------------------------------------ 2001 (12.9)% (0.3)% (5.3)% (11.9)% 2.5% (11.5)% (21.4)% 8.5% 4.1% 7.4% 2000 (10.0) 2.3 (2.7) (9.1) (3.0) (7.5) (14.2) 11.9 6.0 3.4 1999 19.8 5.1 12.0 21.1 21.3 20.99 27.0 (2.2) 4.7 2.7 1998 27.2 10.2 15.1 28.6 (2.6) 24.1 20.0 9.5 5.1 1.6 1997 31.7 9.9 16.1 33.4 22.4 31.8 1.8 9.8 5.2 1.9 1996 21.3 4.3 10.6 23.0 16.5 21.8 6.1 2.9 5.3 3.3 1995 35.1 5.9 10.1 37.5 28.4 36.8 11.2 19.2 5.7 2.9 1994 0.7 - - 1.3 1.8 0.2 7.8 (3.5) 4.2 2.7 1993 6.4 - - 10.0 18.9 10.9 32.6 11.0 3.1 2.7 1992 - - - 7.6 18.4 9.7 (12.2) 7.6 3.6 2.9 - ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES - YEARS ENDING DECEMBER 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ LIFECYCLE LIFECYCLE SALOMON EQUITY FUND - FUND - S&P RUSSELL RUSSELL MSCI 3-MO. INDEX* CONSERVATIVE MODERATE 500 2000 3000 EAFE LEHMAN T-BILL NCREIF - ------------------------------------------------------------------------------------------------------------------------------------ 1 Year (12.9)% (0.3)% (5.3)% (11.9)% 2.5% (11.5)% (21.4)% 8.5% 4.1% 7.4% 3 Years (2.1) 2.4 1.1 (1.0) 6.4 (0.3) (5.1) 5.9 4.9 10.3 5 Years 9.5 5.4 6.7 10.7 7.5 10.1 0.9 7.4 5.0 12.2 10 Years - - - 12.9 11.5 12.7 4.5 7.3 4.7 8.1 - ------------------------------------------------------------------------------------------------------------------------------------
* Hypothetical results, in bold, are based on underlying mutual fund performance before the inception of the respective Funds. HOW WE CALCULATE PERFORMANCE DATA The Equity Index Fund began operations as Separate Account No. 195 on February 1, 1994. For prior periods hypothetical results are shown. The results reflect the actual performance of SSgA S&P 500 Index Fund beginning with 1993, the first full year after that mutual fund began operations. For these hypothetical calculations we have applied the Program expense charge during those periods plus .15% in estimated other expenses to the historical investment experience of the SSgA S&P 500 Index Fund. The Lifecycle Fund - Conservative and the Lifecycle Fund - Moderate performance shown reflects actual investment performance of Separate Account No. 197 and Separate Account No. 198 for the period beginning May 1, 1995, when the Funds commenced operations. 7 Charges and expenses - ----- 28 Charges and expenses - -------------------------------------------------------------------------------- You will incur two general types of charges under the Program: o Charges based on the value of your assets in the Trust - these apply to all amounts invested in the Trust (including installment payout option payments), and do not vary by plan. These are, in general, reflected as reductions in the unit values of the Equity Index Fund and Lifecycle Funds. o Plan and transaction charges - these vary by plan or are charged for specific transactions, and are typically stated in a dollar amount. Unless otherwise noted, these are deducted in fixed dollar amounts by reducing the number of units in the Equity Index Fund and Lifecycle Funds. We make no deduction from your contributions or withdrawals for sales expenses. CHARGES BASED ON AMOUNTS INVESTED IN THE PROGRAM PROGRAM EXPENSE CHARGE We assess the Program expense charge against the combined value of Program assets in the Trust. The purpose of this charge is to cover the expenses that we and the ADA incur in connection with the Program.
- ------------------------------------------------------------------------ ANNUAL PROGRAM EXPENSE CHARGE* - ------------------------------------------------------------------------ VALUE OF PROGRAM ASSETS EQUITABLE LIFE ADA TOTAL - ------------------------------------------------------------------------ First $400 million .630% .025% .655% Over $400 million .630 .020 .650 - ------------------------------------------------------------------------
* The Program expense charge is determined by negotiation between us and the Trustees. The charge is primarily based on a formula that gives effect to total Program assets allocated to the Trust and the number of plans enrolled in the Program. Currently, the portion paid to the ADA has been reduced to 0.00% for all asset levels, but the ADA's portion could be increased in the future. For the 12 months beginning May 1, 2002, the total Program expense charge is 0.63%. For investment options other than GRAs, the Program expense charge is calculated based on Program assets in the Trust on January 31 of each year, and is charged at a monthly rate of 1/12 of the relevant annual charge. For a description of the Program expense charge as it relates to the Guaranteed Rate Accounts, please refer to our separate prospectus for the other Investment Options in the Program. We apply our portion of the Program expense charge toward the cost of maintenance of the investment funds, promotion of the Program investment funds and Money Market Guarantee Account, commissions, administrative costs, such as enrollment and answering participant inquiries, and overhead expenses such as salaries, rent, postage, telephone, travel, legal, actuarial and accounting costs, office equipment and stationery. The ADA's part of this fee covers developmental and administrative expenses incurred in connection with the Program. The ADA Trustees can direct us to raise or lower the ADA's part of this fee to reflect their expenses in connection with the Program. During 2001 we received $7,862,582 and the ADA received $152,761 under the Program expense charge. ADMINISTRATION FEES The computation of unit values for each investment fund also reflects fees charged for administration. We receive an administrative fee at the annual rate of .15% of assets held in the Equity Index Fund and Lifecycle Funds. As part of our administrative functions, we maintain records for all portfolio transactions and cash flow control, calculate unit values, monitor compliance with the New York Insurance Law and supervise custody matters for all these Funds. OTHER EXPENSES BORNE BY THE FUNDS Certain other expenses are charged directly to the Equity Index Fund and Lifecycle Funds. These include SEC filing fees and certain related expenses such as printing of SEC filings, prospectuses and reports, mailing costs, custodians' fees, financial accounting costs, outside auditing and legal expenses, and other costs related to the Program. The Equity Index Fund purchases and redeems shares in the SSgA S&P 500 Index Fund at net asset value. The net asset ----- Charges and expenses 29 - -------------------------------------------------------------------------------- value reflects charges for management, audit, legal, shareholder services, transfer agent and custodian fees. For a description of charges and expenses assessed by the SSgA S&P 500 Index Fund, which are indirectly borne by the Fund, please refer to the prospectus for the SSgA S&P 500 Index Fund. The Lifecycle Funds - Conservative and Moderate purchase and redeem units in the Lifecycle Fund Group Trusts - Conservative and Moderate, respectively, at net asset value. The net asset value reflects charges for investment management, audit, legal, custodian and other fees. By agreement with the ADA Trustees, we impose a charge at the annual rate of .03% of the value of the respective assets of the Lifecycle Funds - Conservative and Moderate. This charge compensates us for additional legal, accounting and other potential expenses resulting from the inclusion of the Lifecycle Fund Group Trusts and Underlying State Street Funds among the investment options described in this prospectus. For a description of charges and expenses assessed by the Lifecycle Fund Group Trusts, which are indirectly borne by the Lifecycle Funds, see "Deductions and charges related to the Lifecycle Trusts and Underlying State Street Funds," below. PLAN AND TRANSACTION EXPENSES ADA RETIREMENT PLAN, PROTOTYPE SELF-DIRECTED PLAN AND INDIVIDUALLY-DESIGNED PLAN FEES RECORD MAINTENANCE AND REPORT FEE. At the end of each calendar quarter, we deduct a record maintenance and report fee from each participant's Account Balance. This fee is: -------------------------------------------------------------- ADA Members Retirement Plan participants $3 per quarter Self-Directed Prototype Plan participants $3 per quarter Investment Only $1 per quarter -------------------------------------------------------------- ENROLLMENT FEE. We charge an employer a non-refundable enrollment fee of $25 for each participant enrolled under its plan. If we do not maintain individual participant records under an individually-designed plan, we instead charge the employer $25 for each plan or trust. If the employer fails to pay these charges, we may deduct the amount from subsequent contributions or from participants' account balances. PROTOTYPE SELF-DIRECTED PLAN FEES. Employers who participate in our Prototype Self-Directed Plan incur additional fees not payable to us, such as brokerage and administration fees. INDIVIDUAL ANNUITY CHARGES ANNUITY ADMINISTRATIVE CHARGE. If a participant elects a variable annuity payment option, we deduct a $350 charge from the amount used to purchase the annuity. This charge reimburses us for administrative expenses associated with processing the application for the annuity and issuing each month's annuity payment. The minimum amount that can be converted to an annuity, so that the charge would apply, is $5,000. Annuities purchased from other providers may also be subject to fees and charges. CHARGES FOR STATE PREMIUM AND OTHER APPLICABLE TAXES We deduct a charge designed to approximate certain applicable taxes that may be imposed on us, for example, for our state premium tax. Currently, we deduct the charge from the amount applied to provide an annuity payout option. The current tax charge that might be imposed on us varies by state and ranges from 0% to 1% (the rate is 1% in Puerto Rico). We reserve the right to deduct any applicable charges such as premium taxes from each contribution or from distributions or upon termination of your contract. If we have deducted any applicable tax charges from contributions, we will not deduct a charge for the same taxes later. If, however, an additional tax is later imposed on us when you make a partial or full withdrawal, or your contract is terminated, or you begin receiving annuity payments, we reserve the right to deduct a charge at that time. - ----- 30 Charges and expenses - -------------------------------------------------------------------------------- GENERAL INFORMATION ON FEES AND CHARGES We may change the fees and charges described above at any time with the ADA's consent. During 2001 we received total fees and charges under the Program of $11,111,953. DEDUCTIONS AND CHARGES RELATED TO THE LIFECYCLE TRUSTS AND UNDERLYING STATE STREET FUNDS In addition to the generally applicable Program fees and charges that we impose, State Street imposes fees and charges for providing investment management services, and custodial services, and for other expenses incurred in connection with operating the Lifecycle Fund Group Trusts and the Underlying State Street Funds. State Street deducts these fees from the assets of the Lifecycle Fund Group Trusts in which the Lifecycle Funds invest, or the Underlying State Street Funds in which the Lifecycle Fund Group Trusts invest. INVESTMENT MANAGEMENT FEE. Each Lifecycle Trust pays State Street a fee equal to .17% of the average annual net assets of each Lifecycle Trust for providing investment management services to the Trusts. No fee is paid to State Street for managing the assets of the Underlying State Street Funds with respect to investments made in such Funds by each Lifecycle Fund Group Trust. State Street may receive fees for managing the assets of other collective investment funds in which the Funds may invest on a temporary basis, and for managing the mutual funds in which assets of the Underlying State Street Funds may be invested. State Street has agreed to reduce its management fee charged to each of the Lifecycle Trusts to offset any management fees State Street receives attributable to the Trusts' investment in such other collective investment funds and mutual funds. FIXED ADMINISTRATION FEE. State Street also makes a deduction from the assets of each Lifecycle Fund Group Trust to compensate it for providing various recordkeeping and accounting services to such Trust and for periodically rebalancing the assets of each Trust to conform to the target percentage weightings for the Trust. This fee is currently fixed at $12,000 per year for each Trust. OTHER EXPENSES. Certain costs and expenses are charged directly to the Lifecycle Fund Group Trusts. These include legal and audit expenses and costs related to providing educational and other materials to ADA Program participants about the Lifecycle Fund investment options. In addition, participants indirectly incur expenses for audit and custodial services provided to the Underlying State Street Funds. State Street serves as custodian to each of these Funds. 8 Tax information ----- Tax information 31 - -------------------------------------------------------------------------------- In this section, we briefly outline current Federal income tax rules relating to adoption of the Program, contributions to the Program and distributions to participants under qualified retirement plans. Certain other information about qualified retirement plans appears here and in the SAI. We do not discuss the effect, if any, of state tax laws that may apply. The United States Congress has in the past considered and may in the future consider proposals for legislation that, if enacted, could change the tax treatment of qualified retirement plans. In addition, the Treasury Department may amend existing regulations, issue new regulations, or adopt new interpretations of existing laws. State tax laws or, if you are not a United States resident, foreign tax laws may affect the tax consequences to you or the beneficiary. These laws may change from time to time without notice and, as a result, the tax consequences may also change. There is no way of predicting whether, when or in what form any such change would be adopted. Any such change could have retroactive effects regardless of the date of enactment. We suggest you consult your legal or tax advisor. BUYING A CONTRACT TO FUND A RETIREMENT ARRANGEMENT Annuity contracts can be purchased in connection with retirement plans qualified under Code section 401. How these arrangements work, including special rules applicable to each, are described in the specific sections for each type of arrangement in the SAI. You should be aware that the funding vehicle for a qualified arrangement does not provide any tax deferral benefit beyond that already provided by the Code for all permissible funding vehicles. Before choosing an annuity contract, therefore, you should consider the annuity's features and benefits, such as the selection of investment funds and guaranteed options and choices of pay-out options, as well as the features and benefits of other permissible funding vehicles and the relative costs of annuities and other arrangements. You should be aware that cost may vary depending on the features and benefits made available and the charges and expenses of the investment options or funds that you elect. INCOME TAXATION OF DISTRIBUTIONS TO QUALIFIED PLAN PARTICIPANTS In this section, the word "you" refers to the plan participant. Amounts distributed to a participant from a qualified plan are generally subject to Federal income tax as ordinary income when benefits are distributed to you or your beneficiary. Generally speaking, only your post-tax contributions, if any, are not taxed when distributed. ELIGIBLE ROLLOVER DISTRIBUTIONS. Many types of distributions from qualified plans are "eligible rollover distributions" that can be transferred directly to another qualified plan, traditional individual retirement arrangement ("IRA"), an annuity under Section 403(b) of the Code or a retirement plan under Section 457 of the Code, or rolled over to another plan or IRA within 60 days of the receipt of the distribution. If a distribution is an "eligible rollover distribution," 20% mandatory Federal income tax withholding will apply unless the distribution is directly transferred to a qualified plan or IRA. See "Eligible Rollover Distributions and Federal Income Tax Withholding" in the SAI for a more detailed discussion. ANNUITY OR INSTALLMENT PAYMENTS. Each payment you receive is ordinary income for tax purposes, except where you have a "cost basis" in the benefit. Your cost basis is equal to the amount of your post-tax employee contributions, plus any employer contributions you had to include in gross income in prior years. You may exclude from gross income a portion of each annuity or installment payment you receive. If you (and your survivor) continue to receive payments after you have received your cost basis in the contract, all amounts will be taxable. IN-SERVICE WITHDRAWALS. Some plans allow in-service withdrawals of after-tax contributions. The portion of each withdrawal attributable to cost basis is not taxable. The portion of each withdrawal attributable to earnings is taxable. Withdrawals are taxable only after they exceed your - ----- 32 Tax information - -------------------------------------------------------------------------------- cost basis if they are attributable to your pre-January 1, 1987 contributions under plans that permitted those withdrawals as of May 5, 1986. Amounts that you include in gross income under this rule may also be subject to the additional 10% penalty tax on premature distributions described below. In addition, 20% mandatory Federal income tax withholding may also apply. PREMATURE DISTRIBUTIONS. You may be liable for an additional 10% penalty tax on all taxable amounts distributed before age 591/2 unless the distribution falls within a specified exception or is rolled over into an IRA or other qualified plan. The exceptions to the penalty tax include (a) distributions made on account of your death or disability, (b) distributions beginning after separation from service in the form of a life annuity or installments over your life expectancy (or the joint lives or life expectancies of you and your beneficiary), (c) distributions due to separation from active service after age 55 and (d) distributions you use to pay deductible medical expenses. WITHHOLDING. In almost all cases, 20% mandatory income tax withholding will apply to all "eligible rollover distributions" that are not directly transferred to a qualified plan or IRA. If a distribution is not an eligible rollover distribution, the recipient may elect out of withholding. The rate of withholding depends on the type of distribution. See "Eligible Rollover Distributions and Federal Income Tax Withholding" in the SAI. Under the ADA Master Retirement Plan, we will withhold the tax and send you the remaining amount. Under an individually designed plan or our prototype self-directed plan we will pay the full amount of the distribution to the plan's trustee. The trustee is then responsible for withholding Federal income tax upon distributions to you or your beneficiary. OTHER TAX CONSEQUENCES. Federal estate and gift taxes, state and local estate and inheritance taxes, and other tax consequences of participation in the Program, depend on the residence and the circumstances of each participant or beneficiary. For complete information on Federal, state, local and other tax considerations, you should consult a qualified tax advisor. 9 More information ----- More information 33 - -------------------------------------------------------------------------------- ABOUT PROGRAM CHANGES OR TERMINATIONS AMENDMENTS. The group annuity contract has been amended in the past and we and the Trustees may agree to amendments in the future. No future change can affect annuity benefits in the course of payment. If certain conditions are met, we may: (1) terminate the offer of any of the investment options and (2) offer new investment options with different terms. TERMINATION. We or the ADA Trustees may terminate the group annuity contract. If the contract is terminated, we will not accept any further contributions or perform any recordkeeping functions after the date of termination. We then would make arrangements with the ADA Trustees with respect to the assets held in the investment options that we provide, subject to the following: o transfers and withdrawals from the Real Estate Fund would continue to be subject to the restrictions described in this prospectus and in the SAI; o the ADA Trustees could transfer assets from the Money Market Guarantee Account in installments over a period of time not to exceed two years; however, during that time participants would be permitted to make transfers to funding vehicles provided by another financial institution (other than a money market fund or similar investment); and o amounts allocated to the GRAs would be held until maturity. If the ADA Trustees make arrangements with us, you may be able to continue to invest amounts in the investment options that we provide and elect payment of benefits through us. AGREEMENT WITH STATE STREET. We and State Street have entered into an Agreement with respect to various administrative, procedural, regulatory compliance and other matters relating to the availability of the Lifecycle Fund Group Trusts and Underlying State Street Funds in the ADA Program through the Lifecycle Funds. The Agreement does not contain an expiration date and is intended to continue in effect indefinitely. However, under the terms of the Agreement, we may terminate it upon three months prior written notice to State Street, and State Street may terminate it upon six months prior written notice to us. In the event of a termination of the Agreement, State Street has the right, upon four months' prior notice to us, to require the redemption of all units of the Lifecycle Fund Group Trusts held by the Lifecycle Funds. Should we receive notice of a required redemption, we will advise you promptly in order to allow you adequate time to transfer to one or more of the other Investment Options. IRS DISQUALIFICATION If your plan is found not to qualify under the Internal Revenue Code, we may: (1) return the plan's assets to the employer (in our capacity as the plan administrator) or (2) prevent plan participants from investing in the separate accounts. ABOUT THE SEPARATE ACCOUNTS Each investment fund is one of our separate accounts. We established the separate accounts under special provisions of the New York Insurance Law. These provisions prevent creditors from any other business we conduct from reaching the assets we hold in our investment funds for owners of our variable annuity contracts, including our group annuity contracts with the ADA Trustees. The results of each separate account's operations are accounted for without regard to Equitable Life's, or any other separate account's, operating results. We are the legal owner of all of the assets in the separate accounts and may withdraw any amounts we have in the separate accounts that exceed our reserves and other liabilities under variable annuity contracts. The separate accounts that we call the Equity Index Fund and Lifecycle Funds commenced operations on 1994 and 1995, respectively. Because of exclusionary provisions, none of the investment funds is subject to regulation under the Investment Company Act of 1940. The Equity Index Fund and Lifecycle Funds are used exclusively in the ADA Program. - ----- 34 More information - -------------------------------------------------------------------------------- ABOUT STATE STREET State Street, is one of the world's leading specialists in serving institutional investors, providing a full range of products and services. As of December 31, 2001, State Street was the largest manager of pension assets with $775 billion under management. State Street is subject to supervision and examination by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Massachusetts Commissioner of Banks. This, however, does not provide any protection against loss that may be experienced as a result of an investment in the Trusts. Further, State Street is required to comply with ERISA, to the extent applicable, in connection with the administration of the Program. TAX STATUS OF THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS. Each Trust is a tax-exempt group trust established pursuant to Revenue Ruling 81-100. As a tax-exempt group trust, each Trust is not subject to federal income tax unless the Trust generates unrelated business taxable income as defined in the Code ("UBTI"). It is the policy of State Street not to invest any portion of the assets of a Trust in a manner that will generate UBTI. If State Street determines, however, that a proposed investment cannot be structured to avoid UBTI and that the projected after-tax return on that investment is sufficient to justify the making of such investment, then State Street may elect to make that investment. In the unlikely event that any UBTI is incurred by a Trust, it is anticipated that any tax thereon would be reported and paid by the Trust as an expense of such Trust. UNDERWRITER AXA Advisors, LLC ("AXA Advisors"), the successor to EQ Financial Consultants, Inc. and an affiliate of Equitable Life, may be deemed to be the principal underwriter of separate account units under the group annuity contract. AXA Advisors is registered with the SEC as a broker-dealer under the 1934 Act and is a member of the National Association of Securities Dealers, Inc. AXA Advisors' principal business address is 1290 Avenue of the Americas, New York, NY 10104. The offering of the units under the contract is continuous. No person currently serves as underwriter for the Lifecycle Fund Group Trusts or the Underlying State Street Funds. ABOUT LEGAL PROCEEDINGS Equitable Life and its affiliates are parties to various legal proceedings. In our view, none of these proceedings is likely to have a material adverse effect upon the separate accounts, our ability to meet our obligations under the Program, or the distribution of group annuity contract interests under the Program. State Street is engaged in litigation of various kinds which in its judgment is not of material importance in relation to its total assets. None of the litigation now in progress is expected to affect any assets of the Equity Index Fund or the Lifecycle Funds or the Lifecycle Group Trusts or the Underlying State Street Funds in which the Lifecycle Trusts invest. ABOUT OUR INDEPENDENT ACCOUNTANTS The financial statements listed below and included in the SAI have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting: o The financial statements for Separate Account Nos. 195, 197 and 198 as of December 31, 2001 and for each of the two years in the period then ended. o The financial statements for Equitable Life as of December 31, 2001 and 2000 and for each of the three years in the period then ended. o The following financial statements as of December 31, 2001 and for each of the two years in the period then ended: o State Street Bank and Trust Company Lifecycle Fund Group Trust - Conservative ----- More information 35 - -------------------------------------------------------------------------------- o State Street Bank and Trust Company Lifecycle Fund Group Trust - Moderate o State Street Bank and Trust Company S&P 500 Flagship Fund and State Street Bank and Trust Company S&P 500 Flagship Non-Lending Fund o State Street Bank and Trust Company Russell 2000 Index Securities Lending Fund and State Street Bank and Trust Company Russell 2000 Index Fund o State Street Bank and Trust Company Daily EAFE Fund o State Street Bank and Trust Company Daily MSCI Europe Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Europe Index Fund o State Street Bank and Trust Company Daily MSCI Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Japan Index Fund o State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Fund o State Street Bank and Trust Company Government Corporate Bond Fund o State Street Bank and Trust Company Short Term Investment Fund REPORTS WE PROVIDE AND AVAILABLE INFORMATION We send reports annually to employers showing the aggregate Account Balances of all participants and information necessary to complete annual IRS filings. As permitted by the SEC's rules, we omitted certain portions of the registration statement filed with the SEC from this prospectus and the SAI. You may obtain the omitted information by: (1) requesting a copy of the registration statement from the SEC's principal office in Washington, D.C., and paying prescribed fees, or (2) by accessing the EDGAR Database at the SEC's Website at http://www.sec.gov. ACCEPTANCE The employer or plan sponsor, as the case may be: (1) is solely responsible for determining whether the Program is a suitable funding vehicle and (2) should carefully read the prospectus and other materials before entering into an Adoption Agreement. Appendix I: Selected financial data and condensed financial information ----- Appendix I: Selected financial data and condensed financial information A-1 - -------------------------------------------------------------------------------- SELECTED FINANCIAL DATA LIFECYCLE FUND GROUP TRUSTS The selected financial data below provides information with respect to investment income, expenses, and investment performance for each Lifecycle Fund Group Trust attributable to each unit outstanding for the period indicated. These selected per unit data and ratios for the years ended December 31, 2001 through 1996 have been derived from financial statements audited by PricewaterhouseCoopers LLP, independent accountants, in their reports included in the SAI. The selected financial data should be read in conjunction with the full financial statements of the Lifecycle Fund Group Trusts, which appear in the SAI.
- ------------------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 2001 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ LIFECYCLE FUND GROUP TRUST - CONSERVATIVE Net investment income (loss)* $ 0.09 $ 0.15 $ 0.10 $ 0.09 $ 0.06 $ 0.05 Net realized and unrealized gain (loss) 0.07 0.39 0.81 1.41 1.28 0.65 Net increase (decrease) 0.16 0.54 0.91 1.50 1.34 0.70 Net asset value Beginning of period 15.72 15.18 14.27 12.77 11.43 10.73 End of period $ 15.88 $ 15.72 $ 15.18 $ 14.27 $ 12.77 $ 11.43 Total return ** 1.02% 3.56% 6.38% 11.75% 11.72% 6.52% Ratio of expenses to average net assets (b) 0.30% 0.32% 0.38% 0.43% 0.66% 0.81% Ratio of net investment income (loss) to average net assets (a) 0.57% 0.96% 0.66% 0.68% 0.46% 0.31% Portfolio turnover 30% 71% 42% 77% 44% 54% Net assets, end of period (000s) $ 11,956 $ 11,599 $ 12,797 $ 13,516 $ 7,249 $ 4,534 LIFECYCLE FUND GROUP TRUST - MODERATE Net investment income (loss)* $ 0.05 $ 0.09 $ 0.06 $ 0.06 $ 0.05 $ 0.04 Net realized and unrealized gain (loss) (0.87) (0.43) 2.14 2.30 2.11 1.27 Net increase (decrease) (0.34) (0.34) 2.20 2.36 2.16 1.31 Net asset value Beginning of period 18.82 19.16 16.96 14.60 12.44 11.13 End of period $ 18.00 18.82 19.16 16.96 $ 14.60 $ 12.44 Total return** (4.36)% (1.78)% 12.97% 16.16% 17.36% 11.77% Ratio of expenses to average net assets (b) 0.17% .18% 0.19% 0.19% 0.20% 0.20% Ratio of net investment income (loss) to average net assets (a)(b) 0.28% .47% 0.34% 0.37% 0.37% 0.35% Portfolio turnover 21% 51% 33% 46% 22% 18% Net assets, end of period (000s) $106,783 $122,708 $132,764 $125,412 $108,435 $88,273 - ------------------------------------------------------------------------------------------------------------------------------------
* Net investment income (loss) per unit has been calculated based upon an average of units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (a) Ratio excludes income retained by the funds in which the Fund invests. (b) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. - ----- A-2 Appendix I: Selected financial data and condensed financial information - -------------------------------------------------------------------------------- UNDERLYING STATE STREET FUNDS The selected financial data below provides information with respect to investment income, expenses, and investment performance for each Underlying State Street Fund attributable to each Underlying State Street Fund unit outstanding for the periods indicated. These selected per unit data and ratios for the years ended December 31, 2001 through 1996 have been derived from financial statements audited by PricewaterhouseCoopers LLP, independent accountants, as stated in their reports included in the SAI. The selected financial data should be read in conjunction with the full financial statements of the Underlying State Street Funds, which appear in the SAI.
- ---------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2001 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------- S&P 500 FLAGSHIP FUND Net investment income* $ 2.77 $ 2.90 $ 2.99 $ 2.77 Net realized and unrealized gain (loss) (29.56) (25.33) 40.09 42.70 Distribution of securities lending fee income (a) (0.01) (0.03) (0.01) (0.01) Net increase (decrease) (26.79) (22.46) 43.07 45.46 NET ASSET VALUE Beginning of year 225.33 247.79 204.72 159.26 End of year $198.54 $225.33 $247.79 $204.72 Total return ** (11.89)% (9.05)% 21.04% 28.55% Ratio of expenses to average net assets*** 0.00% 0.00% 0.00% 0.00% Ratio of net investment income to average net assets 1.35% 1.20% 1.35% 1.55% Portfolio turnover 19% 26% 13% 18% Net assets, end of year (000s) $62,723 $64,361 $75,574 $49,893 - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 1997 1996 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- S&P 500 FLAGSHIP FUND Net investment income* $ 2.64 $ 2.48 $ 2.24 $ 1.90 $ 1.81 Net realized and unrealized gain (loss) 37.22 19.86 24.26 (0.93) 4.55 Distribution of securities lending fee income (a) 0.00 0.00 0.00 0.00 (0.01) Net increase (decrease) 39.86 22.34 26.50 0.97 6.35 NET ASSET VALUE Beginning of year 119.40 97.06 70.56 69.59 63.24 End of year $159.26 $119.40 $ 97.06 $70.56 $69.59 Total return ** 33.38% 23.02% 37.56% 1.39% 10.06% Ratio of expenses to average net assets*** 0.00% 0.00% 0.00% 0.00% 0.00% Ratio of net investment income to average net assets 1.86% 2.33% 2.66% 2.88% 2.68% Portfolio turnover 18% 27% 10% 12% 22% Net assets, end of year (000s) $36,664 $20,916 $15,135 $8,258 $5,753 - -----------------------------------------------------------------------------------------------------------------------------
* Net investment income has been calculated based on an average of month-end units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of each year and assumes reinvestment of distributions. The calculation includes only those expenses charged directly to the Fund. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. *** Zero amount represents that which is less than .005%. (a) Zero amount represents that which is less than $.005 per unit or (0.005) if negative. ----- Appendix I: Selected financial data and condensed financial information A-3 - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PERIOD ENDED DECEMBER YEAR ENDED DECEMBER 31, 31, --------------------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ RUSSELL 2000 INDEX SECURITIES LENDING FUND Net investment income* $ 0.41 $ 0.44 $ 0.39 $ 0.38 $ 0.36 $ 0.32 $ 0.03 $ 0.21 $ 0.17 Distribution of securities lending fee income (0.02) (0.02) (0.02) (0.02) (0.02) (0.01) (0.01) (0.01) 0.00 Net realized and unrealized gain (loss) 0.21 (1.28) 4.34 (1.06) 4.19 2.45 3.61 (0.46) 1.83 Net increase (decrease) 0.62 (0.86) 4.71 (0.70) 4.53 2.76 3.63 (0.26) 2.00 Net asset value Beginning of period 26.92 27.78 23.07 23.77 19.24 16.48 12.85 13.11 11.11 End of period $27.52 $ 26.92 $ 27.78 $ 23.07 $ 23.77 $ 19.24 $ 16.48 $ 12.85 $ 13.11 Total return%** 2.33 (3.01) 20.50 (2.88) 23.66 16.81 28.33 (1.98) 18.00 Ratio of expenses to average net assets (%)(c) 0.03 0.03 0.03 0.04 0.06 0.06 0.10 0.07 0.09 Ratio of net investment income to average net assets (%)(c) 1.56 1.57 1.61 1.61 1.63 1.80 1.80 1.61 1.37 Portfolio turnover (%) 91% 76 51 57 105 131 103 48 35 Net assets, end of year (000s) $2,287 $1,817,667 $1,903,731 $1,255,838 $1,174,146 $951,405 $536,849 $372,107 $451,119 - ------------------------------------------------------------------------------------------------------------------------------------
* Net investment income per unit has been calculated based upon an average month-end of units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and the end of the period and assumes reinvestment of distributions. The calculation includes only those expenses charged directly to the Russell 2000 Index Securities Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) 1996 ratios reflect net investment income and expenses attributable to the Russell 2000 Fund from its ownership of other collective investment funds.
- ------------------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ DAILY EAFE FUND Net investment income (loss)* $ 0.00 $ (0.00) $ 0.00 $ 0.21 $ 0.19 $ 0.19 $ 0.16 Net realized and unrealized gain (loss) (2.42) (1.93) 2.87 1.57 (0.07) 0.29 0.66 Net increase (decrease) (2.42) (1.93) 2.87 1.78 0.12 0.48 0.82 Net asset value Beginning of period 11.26 13.19 10.32 8.54 8.42 7.94 7.12 End of period $ 8.84 $ 11.26 $ 13.19 $ 10.32 $ 8.54 $ 8.42 $ 7.94 Total return(%) (21.49) (14.63) 27.83 20.84 1.43 6.07 11.56 Ratio of expenses to average net assets (%)(b) 0.00 0.00 0.00 0.11 0.11 0.19 0.20 Ratio of net investment income to average net assets (%)(b) 0.00 0.00 0.00 2.13 2.17 2.31 2.21 Portfolio turnover (%) 45 103 47 109 9 5 9 Net assets, end of year (000s) $ 432 $543,294 $515,570 $490,295 $277,080 $318,204 $154,010 - ------------------------------------------------------------------------------------------------------------------------------------
* Net investment income per unit has been calculated based upon an average month-end of units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in net asset value per unit between the beginning and end of each year. The calculation includes only those expenses charged directly to the Daily EAFE Fund. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (a) Zero amount represents that which is less than $0.005 per unit or $(0.005) if negative. - ----- A-4 Appendix I: Selected financial data and condensed financial information - -------------------------------------------------------------------------------- (b) Zero amount represents that which is less than 0.005%
- ------------------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ GOVERNMENT CORPORATE BOND FUND Net investment income* $ 0.12 $ 0.94 $ 0.86 $ 0.80 $ 0.83 $ 0.78 $ 0.70 Net realized and unrealized gain (loss) 1.21 0.61 (1.12) 0.38 0.32 (0.42) 1.17 Net increase (decrease) 1.33 1.55 (0.26) 1.18 1.15 0.36 1.87 Net asset value Beginning of year 15.47 13.92 14.18 13.00 11.85 11.49 9.62 End of year $16.80 $ 15.47 $ 13.92 $ 14.18 $ 13.00 $ 11.85 $ 11.49 Total return (%)** 8.60 11.14 (1.83) 9.09 9.70 3.13 19.44 Ratio of expenses to average net assets (%) 0.01 0.02 0.01 0.01 0.01 0.01 0.01 Ratio of net investment income to average net assets (%) 0.76 6.50 6.17 5.89 6.73 6.82 6.53 Portfolio turnover (%) 65 734 824 478 294 299 611 Net assets, end of year (000s) $ 443 $537,577 $4,807,644 $4,643,861 $4,273,490 $3,060,002 $1,991,393 - ------------------------------------------------------------------------------------------------------------------------------------
* Net investment income per unit has been calculated based on an average month-end of units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts.
- ------------------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT FUND Net investment income $ 0.0437 $ 0.0643 $ 0.0522 $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 Net realized gain (loss)* 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 Net change in net assets resulting from operations $ 0.0437 $ 0.0643 $ 0.0522 $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 Distributions from net investment income $ 0.0437 $ 0.0643 $ 0.0522 $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 Total return (%)** 4.46 6.63 5.35 5.65 5.77 5.62 6.21 Ratio of expenses to average net assets (%)*** 0.02 0.00 0.00 0.00 0.00 0.00 0.00 Ratio of net investment income to average net assets (%) 4.37 6.43 5.22 5.51 5.63 5.48 6.04 Net assets, end of year (000s) $134,778 $27,527,486 $22,958,561 $20,508,724 $18,563,057 $13,762,940 $12,393,148 - ------------------------------------------------------------------------------------------------------------------------------------
* Zero amounts represent those which are less than $.00005 per unit. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts *** Rounds to less than .005% ----- Appendix I: Selected financial data and condensed financial information A-5 - -------------------------------------------------------------------------------- EQUITY INDEX FUND AND LIFECYCLE FUND - CONSERVATIVE AND LIFECYCLE FUND - MODERATE: SEPARATE ACCOUNT NOS. 195, 197 AND 198 Unit values and number of units outstanding for these Funds are shown below.
- ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION FOR THE YEARS ENDING DECEMBER 31, DATE - ------------------------------------------------------------------------------------------------------------------------------------ 1994 1995 1996 1997 1998 1999 2000 2001 - --------------------------------------------------------------------------------------------------------------------- Equity Index Fund 2/1/94 - ------------------------------------------------------------------------------------------------------------------------------------ Unit Value $ 9.71 $13.12 $15.91 $20.95 $26.65 $31.94 $28.74 $25.03 - --------------------------------------------------------------------------------------------------------------------- Number of units outstanding 515 1,483 2,100 3,713 4,890 6,399 5,746 5,639 (000's) Lifecycle Fund - Conservative 5/1/95 - ------------------------------------------------------------------------------------------------------------------------------------ Unit Value - $10.59 $11.04 $12.13 $13.37 $14.06 $14.38 $14.34 - --------------------------------------------------------------------------------------------------------------------- Number of units outstanding - 281 409 596 1,009 906 804 831 (000's) Lifecycle Fund - Moderate 5/1/95 - ------------------------------------------------------------------------------------------------------------------------------------ Unit Value - $11.01 $12.18 $14.14 $16.28 $18.23 $17.74 $16.81 - --------------------------------------------------------------------------------------------------------------------- Number of units outstanding - 6,924 7,241 7,657 7,691 7,262 6,906 6,334 (000's) - ------------------------------------------------------------------------------------------------------------------------------------
Table of contents of statement of additional information - ----- Table of contents of S-1 statement of additional information - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE Funding of the Program SAI-2 Your Responsibilities as Employer SAI-2 Procedures for Withdrawals, Distributions and Transfers SAI-3 Types of Benefits SAI-5 Provisions of the Master Plan SAI-6 Additional Investment Policies and Techniques - The Underlying State Street Funds SAI-10 Investment Restrictions Applicable to the Funds SAI-14 How We Determine the Unit Value for the Funds SAI-15 How We Value the Assets of the Funds SAI-15 How State Street Values the Assets of the Underlying State Street Funds SAI-16 Transactions by the Underlying State Street Funds SAI-17 Investment Management Fee SAI-17 Underwriter SAI-17 Management: Equitable Life SAI-18 Management: State Street SAI-21 Financial Statements SAI-23
CLIP AND MAIL TO US TO RECEIVE A STATEMENT OF ADDITIONAL INFORMATION To: The Equitable Life Assurance Society of the United States Box 2486 G.P.O. New York, NY 10116 Please send me a copy of the Statement of Additional Information for the American Dental Association Members Retirement Program Prospectus dated May 1, 2002 (State Street). - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- Copyright 2002 by The Equitable Life Assurance Society of the United States. All rights reserved. About Equitable Life - -------------------------------------------------------------------------------- The Equitable Life Assurance Society of the United States ("Equitable Life") is the issuer of the group annuity contract that funds the Program. Equitable Life also makes forms of plans and trusts available, and offers recordkeeping and participant services to facilitate the operation of the Program. Equitable Life is a New York stock life insurance corporation and has been doing business since 1859. We are a wholly-owned subsidiary of AXA Financial, Inc. (previously The Equitable Companies Incorporated). The sole shareholder of AXA Financial, Inc. is AXA, a French holding company for an international group of insurance and related financial services companies. As the sole shareholder, and under its other arrangements with Equitable Life and Equitable Life's parent, AXA exercises significant influence over the operations and capital structure of Equitable Life and its parent. No company other than Equitable Life's related companies, however, has any legal responsibility to pay amounts that Equitable Life owes under the contract. Equitable Life manages over $481.0 billion in assets as of December 31, 2001. For more than 100 years Equitable Life has been among the largest insurance companies in the United States. We are licensed to sell life insurance and annuities in all fifty states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Our home office is located at 1290 Avenue of the Americas, New York, NY 10104. - -------------------------------------------------------------------------------- HOW TO REACH US You may communicate with our processing office as listed below for the purposes described. Certain methods of contacting us, such as by telephone or electronically may be unavailable or delayed (for example our facsimile service may not be available at all times and/or we may be unavailable due to emergency closing). In addition, the level and type of service available may be restricted based on criteria established by us. You can reach us as indicated below to obtain: o Copies of any plans, trusts, participation agreements, enrollment or other forms used in the Program. o Unit values and other account information under your plan. o Any other information or materials that we provide in connection with the Program. INFORMATION ON JOINING THE PROGRAM - -------------------------------------------------------------------------------- BY PHONE: - -------------------------------------------------------------------------------- 1-800-523-1125 (Retirement Program Specialists available weekdays 9am to 5pm Eastern Time) - -------------------------------------------------------------------------------- BY REGULAR MAIL: - -------------------------------------------------------------------------------- The ADA Members Retirement Program c/o Equitable Life, Box 2011 Secaucus, NJ 07096 - -------------------------------------------------------------------------------- BY REGISTERED, CERTIFIED, OR OVERNIGHT DELIVERY: - -------------------------------------------------------------------------------- The ADA Members Retirement Program c/o Equitable Life 200 Plaza Drive, Second Floor Secaucus, NJ 07094 - -------------------------------------------------------------------------------- BY INTERNET: - -------------------------------------------------------------------------------- The ADA Members Retirement Program Website www.equitable.com/ada, provides information about the Program, as well as several interactive tools and resources that can help answer some of your retirement planning questions. The Website also provides an email feature that can be accessed by clicking on either "Contact Us" or "Send E-Mail to the Equitable." INFORMATION ONCE YOU JOIN THE PROGRAM - -------------------------------------------------------------------------------- BY PHONE: - -------------------------------------------------------------------------------- 1-800-223-5790 in the US or 1-800-223-5790-0 from France, United Kingdom, Italy, Switzerland, Israel and Republic of Korea (Account Executives available weekdays 9am to 5pm Eastern Time) - -------------------------------------------------------------------------------- TOLL-FREE AIMS FOR AMOUNTS IN THE TRUST: - -------------------------------------------------------------------------------- By calling 1-800-223-5790 or 1-800-223-5790-0 you may, with your assigned personal security code, use AIMS to: o Transfer assets between investment options and obtain account information. o Change the allocation of future contributions and maturing guaranteed options. o Hear investment performance information, including investment fund unit values and current guaranteed option interest rates. AIMS operates 24 hours a day. You may speak with our Account Executives during regular business hours about any matters covered by AIMS. - -------------------------------------------------------------------------------- BY INTERNET FOR AMOUNTS IN THE TRUST: - -------------------------------------------------------------------------------- By logging on to www.equitable.com/ada, Client Services you may, with your social security number and your assigned personal security code, use the Internet to access certain retirement account information such as: o Investment performance, current and historical, investment fund unit values, and current guaranteed option interest rates. o Transfer assets between investment options and obtain account balance information o Change the allocation of future contributions and maturing guaranteed options. - -------------------------------------------------------------------------------- BY REGULAR MAIL: - -------------------------------------------------------------------------------- (correspondence): The ADA Members Retirement Program Box 2486 G.P.O. New York, NY 10116 - -------------------------------------------------------------------------------- FOR CONTRIBUTION CHECKS ONLY: - -------------------------------------------------------------------------------- The Association Members Retirement Program P.O. Box 1599 Newark, NJ 07101-9764 - -------------------------------------------------------------------------------- FOR REGISTERED, CERTIFIED, OR OVERNIGHT DELIVERY: - -------------------------------------------------------------------------------- The ADA Members Retirement Program c/o Equitable Life 200 Plaza Drive, 2B-55 Secaucus, NJ 07094 - -------------------------------------------------------------------------------- BY E-MAIL: - -------------------------------------------------------------------------------- We welcome your comments and questions regarding the ADA Retirement Program. If you have a comment or suggestion about the ADA Website we would appreciate hearing from you. Go to www.equitable.com/ada, Client Services and click on "Contact Us" or click on "email the ADA Members Retirement Program." No person is authorized by The Equitable Life Assurance Society of the United States to give any information or make any representations other than those contained in this prospectus and the SAI, or in other printed or written material issued by Equitable Life. You should not rely on any other information or representation. - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- MAY 1, 2002 AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM (STATE STREET) - -------------------------------------------------------------------------------- This Statement of Additional Information ("SAI") is not a prospectus. You should read this SAI in conjunction with Equitable Life's prospectus dated May 1, 2002 for the American Dental Association Members Retirement Program describing the EQUITY INDEX FUND AND THE LIFECYCLE FUND-CONSERVATIVE AND THE LIFECYCLE FUND-MODERATE. A copy of the prospectus to which this SAI relates is available at no charge by writing to the ADA Members Retirement Program at Box 2486 G.P.O., New York, New York 10116 or by calling our toll-free telephone number 1-800-223-5790 in the U.S., or 1-800-223-5790-0 from France, Israel, Italy, Republic of Korea, Switzerland, United Kingdom. Definitions of special terms used in this SAI are found in the prospectus. Certain of the cross references in this SAI are contained in the prospectus dated May 1, 2002 to which this SAI relates. CONTENTS OF THIS SAI
PAGE IN SAI ------------ The Program ......................................... SAI-2 Funding of the Program ............................ SAI-2 Your Responsibilities as Employer ................. SAI-2 Procedures for Withdrawals, Distributions and Transfers ...................................... SAI-3 Pre-Retirement Withdrawals ..................... SAI-3 Benefit Distributions .......................... SAI-3 Death Benefit .................................. SAI-4 Eligible Rollover Distributions and Federal Income Tax Withholding ....................... SAI-4 Types of Benefits ................................. SAI-5 Provisions of the Master Plan ..................... SAI-6 Plan Eligibility Requirements .................. SAI-6 Contributions to Qualified Plans ............... SAI-7 Contributions to the Master Plan ............... SAI-7 Allocation of Contributions .................... SAI-9 The Master Plan and Section 404(c) of ERISA ........................................ SAI-9 Vesting ........................................ SAI-9 Additional Investment Policies and Techniques -- The Underlying State Street Funds ................. SAI-10 Investment Restrictions Applicable to the Funds ..... SAI-14 How We Determine Unit Value for the Funds ........... SAI-15 How We Value the Assets of the Funds ................ SAI-15 How State Street Values the Assets of the Underlying State Street Funds ..................... SAI-16 Transactions by The Underlying State Street Funds ............................................. SAI-17 Investment Management Fee ........................... SAI-17 Underwriter ......................................... SAI-17 Management: Equitable Life .......................... SAI-18 Management: State Street ............................ SAI-21 Financial Statements ................................ SAI-23
- ---------- Copyright 2002 by The Equitable Life Assurance Society of The United States, 1290 Avenue of the Americas, New York, N.Y. 10104. All rights reserved. - -------------------------------------------------------------------------------- THE PROGRAM The Program consists of the Master Plan, Self-Directed Prototype Plan and Investment Only plans made available to members of the American Dental Association and their eligible employees. The following information regarding the Program is provided solely to provide a more complete understanding of how the investment funds available under Equitable Life's group annuity contract operate within the Program. In addition to issuing the group annuity contract under which the investment funds are available, we also provide administrative support, recordkeeping and marketing services in connection with the Program. We provide these services pursuant to an administrative services agreement between the ADA Trustees and Equitable Life. This agreement would normally terminate when the group annuity contract with Equitable Life terminates. FUNDING OF THE PROGRAM The Program is primarily funded through a group annuity contract issued to the ADA Trustees by Equitable Life. The contract governs the Investment Funds that are provided by Equitable Life under the Program. The ADA Trustees hold all contracts for the benefit of employers and participants in the Program. The ADA Trustees and Equitable Life also have an administrative services agreement for administrative support, recordkeeping and marketing services provided by Equitable Life. This agreement would normally terminate when the group annuity contract with Equitable Life terminates. YOUR RESPONSIBILITIES AS EMPLOYER If you adopt the Master Plan, you as the employer and plan administrator will have certain responsibilities, including: o sending us your contributions at the proper time and in the proper format (including contribution type and fiscal year); o maintaining all personnel records necessary for administering your plan; o determining who is eligible to receive benefits; o forwarding to us all the forms your employees are required to submit; o distributing summary plan descriptions and participant annual reports to your employees and former employees; o distributing our prospectuses and confirmation notices to your employees and, in some cases, former employees; o filing an annual information return for your plan with the Department of Labor, if required; o providing us the information with which to run special non-discrimination tests, if you have a 401(k) plan or your plan accepts post-tax employee or employer matching contributions; o determining the amount of all contributions for each participant in the plan; o forwarding salary deferral and post-tax employee contributions to us as soon as possible (and, in any event, no later than the 15th business day of the month following the month in which the employer withholds or receives participant contributions); o selecting interest rates and monitoring default procedures if you elect the loan provision in your plan; and o providing us with written instructions for allocating amounts in the plan's forfeiture account. If you, as an employer, have an individually designed plan, your responsibilities will not be increased in any way by adopting the Pooled Trust for investment only. If you adopt our self-directed prototype plan, SAI-2 - -------------------------------------------------------------------------------- you will be completely responsible for administering the plan and complying with all of the reporting and disclosure requirements applicable to qualified plans, with the assistance of the recordkeeper of your choice. We can provide guidance and assistance in the performance of your responsibilities. If you have questions about any of your obligations, you can contact our Account Executives at 1-800-223-5790 or write to us at Box 2486 G.P.O., New York, New York 10116. PROCEDURES FOR WITHDRAWALS, DISTRIBUTIONS AND TRANSFERS PRE-RETIREMENT WITHDRAWALS. Under the Master Plan, self-employed persons generally may not receive a distribution prior to age 591/2, and employees generally may not receive a distribution prior to separation from service. However, if the Master Plan is maintained as a profit sharing plan, you may request distribution of benefits after you reach age 591/2 even if you are still working. If the Master Plan is maintained as a 401(k) plan and you are under age 591/2, you may withdraw your own 401(k) contributions only if you can demonstrate financial hardship within the meaning of applicable income tax regulations. Each withdrawal must be at least $1,000 (or, if less, your entire account balance or the amount of your hardship withdrawal under a 401(k) plan). If your employer terminates the plan, all amounts (subject to GRA restrictions) may be distributed to participants at that time (except salary deferral amounts if there is a successor plan). You may withdraw all or part of your account balance under the Master Plan attributable to post-tax employee contributions at any time, subject to any withdrawal restrictions applicable to the Investment Options, provided that you withdraw at least $300 at a time (or, if less, your account balance attributable to post-tax employee contributions). See "Tax Information" in the prospectus. We pay all benefit payments (including withdrawals due to plan terminations) in accordance with the rules described below in the "Benefit Distributions" discussion. We effect all other participant withdrawals as of the close of the business day we receive the properly completed form. Under the self-directed prototype plan you may receive a distribution upon attaining normal retirement age as specified in the plan, or upon separation from service. If your employer maintains the self-directed prototype plan as a profit sharing plan, an earlier distribution of funds that have accumulated after two years is available if you incur a financial hardship, as defined in the plan. In addition, if you are married, your spouse may have to consent in writing before you can make any type of withdrawal, except for the purchase of a Qualified Joint and Survivor Annuity. See "Spousal Consent Requirement" below. Under an individually designed plan, the availability of pre-retirement withdrawals depends on the terms of the plan. We suggest that you ask your employer what types of withdrawals are available under your plan. Transfers and withdrawals from the Equity Index Fund may be delayed if there is any delay in redemption of shares of the SSgA S&P 500 Index Fund. We generally do not expect any such delays. Transfers and withdrawals from the Lifecycle Funds-Conservative and Moderate may be delayed if there is any delay in redemption of units of the Lifecycle Fund Group Trusts. We generally do not expect any such delays. BENEFIT DISTRIBUTIONS. In order for you to begin receiving benefits under the Master Plan, your employer must send us your properly completed Election of Benefits form and, if applicable, Beneficiary Designation form. Benefit payments will be made according to the provisions of your plan. SAI-3 - -------------------------------------------------------------------------------- Under an individually designed plan and our self-directed prototype plan, your employer must send us a Request for Disbursement Form. We will process single sum payments to your plan's trustee as of the close of business on the day we receive a properly completed form. If you wish to receive annuity payments, your plan's trustee may purchase a variable annuity contract from us. Fixed annuities are available from insurance companies selected by the Trustees. See "Types of Benefits." We will pay annuity payments directly to you and payments will commence according to the provisions of your plan. Transfers and withdrawals from the Equity Index Fund may be delayed if there is any delay in redemption of shares of the SSgA S&P 500 Index Fund. We generally do not expect any such delays. Transfers and withdrawals from the Lifecycle Funds-Conservative and Moderate may be delayed if there is any delay in redemption of units of the Lifecycle Fund Group Trusts. We generally do not expect any such delays. Please note that we use the value of your vested benefits at the close of the business day payment is due to determine the amount of benefits you receive. We will not, therefore, begin processing your check until the following business day. You should expect your check to be mailed within five days after processing begins. Annuity checks can take longer. If you buy a fixed annuity, your check will come from the insurance company you selected. If you are withdrawing more than $50,000 and you would like expedited delivery at your expense, you may request it on your Election of Benefits form. DEATH BENEFIT. If a participant in the Master Plan dies without designating a beneficiary, the vested benefit will automatically be paid to the spouse or, if the participant is not married, to the first surviving class of his or her (a) children, (b) parents and (c) brothers and sisters. If none of them survive, the participant's vested benefit will be paid to the participant's estate. If a participant in our prototype self-directed plan dies without designating a beneficiary, the vested benefit will automatically be paid to the spouse or, if the participant is not married, to the first surviving class of his or her (a) children, (b) grandchildren, (c) parents, (d) brothers and sisters and (e) nephews and nieces. If none of them survive, the participant's vested benefit will be paid to the participant's estate. ELIGIBLE ROLLOVER DISTRIBUTIONS AND FEDERAL INCOME TAX WITHHOLDING. All "eligible rollover distributions" are subject to mandatory Federal income tax withholding of 20% unless the participant elects to have the distribution directly rolled over to a qualified plan or traditional individual retirement arrangement (IRA). An "eligible rollover distribution" is generally any distribution that is not one of a series of substantially equal periodic payments made (not less frequently than annually): (1) for the life (or life expectancy) of the plan participant or the joint lives (or joint life expectancies) of the plan participant and his or her designated beneficiary, or (2) for a specified period of 10 years or more. In addition, the following are not subject to mandatory 20% withholding: o hardship withdrawals of salary deferred contributions from 401(k) plans; o certain corrective distributions under Code Section 401(k) plans; o loans that are treated as distributions; o a distribution to a beneficiary other than to a surviving spouse or a current or former spouse under a qualified domestic relations order; and o required minimum distributions under Code Section 401(a)(9). If we make a distribution to a participant's surviving spouse, or to a current or former spouse under a qualified domestic relations order, the distribution may be an eligible rollover distribution, subject to mandatory 20% withholding, unless one of the exceptions described above applies. If a distribution is not an "eligible rollover distribution", we will withhold income tax from all taxable payments unless the recipient elects not to have income tax withheld. SAI-4 - -------------------------------------------------------------------------------- TYPES OF BENEFITS Under the Master Plan, and under most self-directed prototype plans, you may select one or more of the following forms of distribution once you are eligible to receive benefits. If your employer has adopted an individually designed plan or a self-directed prototype profit sharing plan that does not offer annuity benefits, not all of these distribution forms may be available to you. We suggest you ask your employer what types of benefits are available under your plan. QUALIFIED JOINT AND SURVIVOR ANNUITY. An annuity providing equal monthly payments for your life and, after your death, for your surviving spouse's life. No payments will be made after you and your spouse die, even if you have received only one payment prior to the last death. THE LAW REQUIRES THAT IF THE VALUE OF YOUR VESTED BENEFITS EXCEEDS $5,000, YOU MUST RECEIVE A QUALIFIED JOINT AND SURVIVOR ANNUITY UNLESS YOUR SPOUSE CONSENTS IN WRITING TO A CONTRARY ELECTION. Please see "Spousal Consent Requirements" below. LUMP SUM PAYMENT. A single payment of all or part of your vested benefits. If you take a lump sum payment of only part of your balance, it must be at least $1,000. If your vested benefit is $5,000 or less, you will receive a lump sum payment of the entire amount. PERIODIC INSTALLMENTS. Monthly, quarterly, semi-annual or annual payments over a period of at least three years, where the initial payment on a monthly basis is at least $300. You can choose either a time-certain payout, which provides variable payments over a specified period of time, or a dollar-certain payout, which provides level payments over a variable period of time. During the installment period, your remaining account balance will be invested in whatever investment options you designate, other than the Real Estate Fund; each payment will be drawn pro rata from all the investment options you have selected. If you die before receiving all the installments, we will make the remaining payments to your beneficiary, subject to IRS minimum distribution rules and beneficiary election. Except in the case of participant accounts transferred from defined contribution plans, we do not offer installments for benefits under the individually designed plans or our self-directed prototype plan. For special conditions applying to installment payments involving the Real Estate Fund and the Guaranteed Rate Accounts, please refer to the prospectus and SAI for these options. LIFE ANNUITY. An annuity providing monthly payments for your life. No payments will be made after your death, even if you have received only one payment prior to your death. LIFE ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your life or, if longer, a specified period of time. If you die before the end of that specified period, payments will continue to your beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years. The longer the specified period, the smaller the monthly payments will be. JOINT AND SURVIVOR ANNUITY. An annuity providing monthly payments for your life and that of your beneficiary. You may specify the percentage of the original annuity payment to be made to your beneficiary. Subject to legal limitations, that percentage may be 100%, 75%, 50%, or any other percentage you specify. JOINT AND SURVIVOR ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your life and that of your beneficiary or, if longer, a specified period of time. If you and your beneficiary both die before the end of the specified period, payments will continue to your contingent beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years and the percentage of the annuity payment to be made to your beneficiary (as noted above under Joint and Survivor Annuity). The longer the specified period, the smaller your monthly payments will be. CASH REFUND ANNUITY. An annuity providing equal monthly payments for your life with a guarantee that the sum of those payments will be at least equal to the portion of your vested benefits used to purchase the annuity. If upon your death the sum of the monthly payments to you is less than that amount, your beneficiary will receive a lump sum payment of the remaining guaranteed amount. SAI-5 - -------------------------------------------------------------------------------- FIXED AND VARIABLE ANNUITY CHOICES Under a Qualified Joint and Survivor Annuity or a Cash Refund Annuity, the amount of the monthly payments is fixed at retirement and remains level throughout the distribution period. Under the Life Annuity, Life Annuity--Period Certain, Joint and Survivor Annuity and Joint and Survivor Annuity--Period Certain, you may select either fixed or variable payments. All forms of variable annuity benefits under the Program will be provided by us. The payments under variable annuity options reflect the investment performance of the Growth Equity Fund. If you are interested in a variable annuity, when you are ready to select your benefit please ask our Account Executives for our variable annuity prospectus supplement. Fixed annuities will be issued by insurance companies selected by the ADA Trustees from time to time. We do not currently offer fixed annuities under the Program. Upon your request, the companies selected by the Trustees will provide annuity benefit information. We have no further responsibility for the amount used to purchase a fixed annuity once it has been sent to the insurance company you select. The cost of a fixed annuity is determined by each issuing insurance company. Your Account Executive has more details regarding the insurance companies currently providing annuity benefits under the Program. SPOUSAL CONSENT REQUIREMENTS Under the Master Plan and the self-directed prototype plan, you may designate a non-spouse beneficiary any time after the earlier of: (1) the first day of the plan year in which you attain age 35, or (2) the date on which you separate from service with your employer. If you designate a beneficiary other than your spouse prior to your reaching age 35, your spouse must consent to the designation and, upon your reaching age 35, must again give his or her consent or the designation will lapse. In order for you to make a withdrawal, elect a form of benefit other than a Qualified Joint and Survivor Annuity or designate a non-spouse beneficiary, your spouse must consent to your election in writing within the 90 day period before your annuity starting date. To consent, your spouse must sign on the appropriate line on your election of benefits or beneficiary designation form. Your spouse's signature must be witnessed by a notary public or plan representative. If you change your mind, you may revoke your election and elect a Qualified Joint Survivor Annuity or designate your spouse as beneficiary, simply by filing the appropriate form. Your spouse's consent is not required for this revocation. It is also possible for your spouse to sign a blanket consent form. By signing this form, your spouse consents not just to a specific beneficiary or, with respect to the waiver of the Qualified Joint and Survivor Annuity, the form of distribution, but gives you the right to name any beneficiary, or if applicable, form of distribution you want. Once you file such a form, you may change your election whenever you want, even without spousal consent. No spousal consent to a withdrawal or benefit in a form other than a Qualified Joint and Survivor Annuity is required under certain self-directed prototype profit sharing plans that do not offer life annuity benefits. PROVISIONS OF THE MASTER PLAN PLAN ELIGIBILITY REQUIREMENTS. Under the Master Plan, the employer specifies the eligibility requirements for its plan in the Adoption Agreement. The employer may exclude any employee who has not attained a specified age (not to exceed 21) and completed a specified number of years (not to exceed two) in each of which he completed 1,000 hours of service. No more than one year of eligible service may be required for a 401(k) arrangement. The employer may also exclude salaried dentists (those with no ownership interest in the practice), employees of related employers, leased employees and certain other types of employees at the employer's election, provided such exclusion does not cause the plan to discriminate in favor of "highly compen- SAI-6 - -------------------------------------------------------------------------------- sated" employees (defined below). The Master Plan provides that a partner or shareholder may, upon commencement of employment or upon first becoming eligible to participate in any qualified plan of the employer, make a one-time irrevocable election not to participate in the plan. This election applies to all plans of the employer, now and in the future, and should be discussed with your tax advisor. CONTRIBUTIONS TO QUALIFIED PLANS. We outline below the current Federal income tax rules relating to contributions under qualified retirement plans. This outline assumes that you are not a participant in any other qualified retirement plan. The employer deducts contributions to the plan in the year it makes them. As a general rule, an employer must make contributions for any year by the due date (including extensions) for filing its Federal income tax return for that year. However, Department of Labor ("DOL") rules generally require that the employer contribute participants' salary deferral (or post-tax employee contribution) amounts under a 401(k) plan as soon as possible after the payroll period applicable to a deferral. In any event, the employer must make these contributions no later than the 15th business day of the month following the month in which the employer withholds or receives participant contributions. If the employer contributes more to the plan than it may deduct under the rules we describe below, the employer (a) may be liable for a 10% penalty tax on that nondeductible amount and (b) may risk disqualifying the plan. CONTRIBUTIONS TO THE MASTER PLAN. The employer makes annual contributions to its plan based on the plan's provisions. An employer that adopts the Master Plan as a profit sharing plan makes discretionary contributions as it determines annually. The aggregate employer contribution to the plan, including all participants' salary deferrals under a 401(k) arrangement, may not exceed 25% of all participants' compensation for the plan year. For plan purposes, compensation for self-employed persons does not include deductible plan contributions on behalf of the self-employed person. A 401(k) arrangement is available as part of the profit sharing plan. Employees may make pre-tax contributions to a plan under a 401(k) arrangement. The maximum amount that highly compensated employees may contribute depends on (a) the amount that non-highly compensated employees contribute and (b) the amount the employer designates as a nonforfeitable 401(k) contribution. Different rules apply to a SIMPLE 401(k) or safe harbor 401(k). For 2002, a "highly compensated" employee, for this purpose, is (a) an owner of more than 5% of the practice, or (b) anyone with earnings of more than $85,000 from the practice in 2001. For (b), the employer may elect to include only employees in the highest paid 20%. In any event, the maximum amount each employee may defer is limited to $11,000 for 2002 (which amount shall increase by $1,000 each year up to 2006), reduced by that employee's salary reduction contributions to simplified employee pension plans established before 1997 (SARSEPs), SIMPLE plans, employee contributions to tax deferred Section 403(b) arrangements, and contributions deductible by the employee under a trust described under Section 501(c)(18) of the Internal Revenue Code. The maximum amount a participant may defer in a SIMPLE 401(k) plan for 2002 is $7,000. Effective January 1, 2002, an additional "catch-up" elective deferral of up to $1,000 can be made by any employees who are at least age 50 at any time during 2002. (Catch up elective deferral amount increases $1,000 per year through 2006.) Matching contributions to a 401(k) plan on behalf of a self-employed individual are no longer treated as elective deferrals, and are the same as matching contributions for other employees. Employers may adopt a safe harbor 401(k) arrangement. Under this arrangement, an employer agrees to offer a matching contribution equal to (a) 100% of salary deferral contributions up to 3% of compensation SAI-7 - -------------------------------------------------------------------------------- and (b) 50% of salary deferral contributions that exceed 3% but are less than 5% of compensation or a 3% non-elective contribution to all eligible employees. These contributions must be non-forfeitable. If the employer makes these contributions and meets the notice requirements for safe harbor 401(k) plans, the plan is not subject to non-discrimination testing on salary deferral and matching or non-elective contributions. If the employer adopts the Master Plan as a defined contribution pension plan, its contribution is equal to the percentage of each participant's compensation that the Adoption Agreement specifies. Under any type of plan, an employer must disregard compensation in excess of $200,000 in 2002 in making contributions. This amount will be adjusted for cost-of-living changes in future years in $5,000 increments rounded to the next lowest multiple of $5,000. An employer may integrate contributions with Social Security. This means that contributions, for each participant's compensation, that exceed the integration level may be greater than contributions for compensation below the integration level. The Federal tax law imposes limits on this excess. Your Account Executive can help you determine the legally permissible contribution. Contributions for non-key employees must be at least 3% of compensation (or, under the profit sharing plan, the percentage the employer contributes for key employees, if less than 3%). In 2002, "key employee" means (a) an officer of the practice with earnings of more than $130,000 or (b) an owner of more than 5% of the practice, or (c) an owner of more than 1% of the practice with earnings of more than $150,000. For purposes of (a), no more than 50 employees (or, if less, the greater of three or 10% of the employees) shall be treated as officers. Certain plans may also permit participants to make post-tax contributions. We will maintain a separate account to reflect each participant's post-tax contributions and the earnings (or losses) on those contributions. Post-tax contributions are subject to complex rules under which the maximum amount that a highly compensated employee may contribute depends on the amount that non-highly compensated employees contribute. BEFORE PERMITTING ANY HIGHLY-COMPENSATED EMPLOYEE TO MAKE POST-TAX CONTRIBUTIONS, THE EMPLOYER SHOULD VERIFY THAT IT HAS PASSED ALL NON-DISCRIMINATION TESTS. If an employer employs only "highly compensated" employees (as defined above), the plan will not accept post-tax contributions. In addition, the employer may make matching contributions to certain plans, i.e., contributions based on the amount of post-tax or pre-tax 401(k) contributions that plan participants make. Special non-discrimination rules apply to matching contributions. These rules may limit the amount of matching contributions that an employer may make for highly compensated employees. These non-discrimination rules for matching contributions do not apply to SIMPLE and safe harbor 401(k) plans. Contributions (including forfeiture amounts) for each participant may not exceed the lesser of (a) $40,000 and (b) 100% of the participant's earnings (excluding, in the case of self-employed persons, all deductible plan contributions). The participant's post-tax contributions count toward this limitation. Each participant's account balance equals the sum of the amounts accumulated in each investment option. We will maintain separate records of each participant's interest in each of the investment options attributable to employer contributions, 401(k) non-elective contributions, 401(k) elective contributions, post-tax employee contributions SIMPLE employer, safe harbor non-elective, safe harbor matching and employer matching contributions. We will also account separately for any amounts rolled over from a previous employer's plan. Our records will also reflect each participant's percentage of vesting (see below) in his account balance attributable to employer contributions and employer matching contributions. The participant will receive an individual confirmation of each transaction (including the deduction of record maintenance and report fees). The participant will also receive an annual statement showing the participant's account balance in each investment option attributable to each type of contribution. Based on information that you supply, we will run the required special non-discrimination tests (Actual Deferral Percentage and Actual Contribution Percentage) applicable to (a) 401(k) plans (other than SIMPLE 401(k) and safe harbor 401(k)) and (b) plans that accept post-tax employee contributions or employer matching contributions. SAI-8 - -------------------------------------------------------------------------------- Non-discrimination tests do not apply to SIMPLE 401(k) plans, if the employer makes (a) a matching contribution equal to 100% of the amount each participant deferred, up to 3% of compensation, or (b) a 2% non-elective contribution to all eligible employees. The employer must also follow the notification and filing requirements outlined in the Master Plan to avoid non-discrimination tests. Under a SIMPLE 401(k) the employer must offer all eligible employees the opportunity to defer part of their salary into the plan and make either a matching or non-elective contribution. The matching contribution must be 100% of the salary deferral amount up to 3% of compensation. The non-elective contribution is 2% of compensation, which the employer must make for all eligible employees, even those not deferring. The matching or non-elective contribution must be non-forfeitable. The employer must notify employees which contribution the employer will make 60 days before the beginning of the year. Elective deferrals to a 401(k) plan are subject to applicable FICA (social security), Medicare and FUTA (unemployment) taxes. They may also be subject to state income tax. ALLOCATION OF CONTRIBUTIONS. You, as employer or participant, may allocate contributions among any number of the investment options. You may change allocation instructions at any time, and as often as needed, by calling our Automated Investment Management System ("AIMS") or accessing the Website on the Internet. New instructions become effective on the business day we receive them. Employer contributions may be allocated in different percentages than employee contributions. The allocation percentages elected for employer contributions automatically apply to any 401(k) qualified non-elective contributions, qualified matching contributions, employer matching contributions, SIMPLE employer, safe harbor non-elective and safe harbor matching contributions. Your allocation percentages for employee contributions automatically apply to any post-tax employee contributions and 401(k) salary deferral contributions. IF WE HAVE NOT RECEIVED VALID INSTRUCTIONS, WE WILL ALLOCATE CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT. You may, of course, transfer to another investment option at any time. THE MASTER PLAN AND SECTION 404(C) OF ERISA. The Master Plan is a participant directed individual account plan designed to comply with the requirements of Section 404(c) of ERISA. Section 404(c) of ERISA, and the related Department of Labor (DOL) regulation, provide that if a participant or beneficiary exercises control over the assets in his or her plan account, plan fiduciaries will not be liable for any loss that is the direct and necessary result of the participant's or beneficiary's exercise of control. This means that if the employer plan complies with Section 404(c), participants can make and are responsible for the results of their own investment decisions. Section 404(c) plans must, among other things, (a) make a broad range of investment choices available to participants and beneficiaries and (b) provide them with adequate information to make informed investment decisions. The Investment Options and documentation available under the ADA Program provide the broad range of investment choices and information needed in order to meet the requirements of Section 404(c). However, while our suggested summary plan descriptions, annual reports, prospectuses, and confirmation notices provide the required investment information, the employer is responsible for distributing this information in a timely manner to participants and beneficiaries. You should read this information carefully before making your investment decisions. VESTING. Vesting refers to the participant's rights with respect to that portion of a participant's Account Balance attributable to employer contributions under the Master Plan. If a participant is "vested," the amount or benefit in which the participant is vested belongs to the participant, and may not be forfeited. The participant's Account Balance attributable to (a) 401(k) contributions (including salary deferral, qualified non-elective and qualified matching contributions), (b) post-tax employee contributions and (c) rollover contributions always belong to the participant, and is nonforfeitable at all times. A participant becomes fully vested in all benefits if still employed at death, disability, attainment of normal retirement age or upon termination of the plan. If the participant terminates employment before that time, any benefits that have not yet vested under the plan's vesting schedule are forfeited. The normal retirement age is 65 under the Master Plan unless the employer elects a lower age on its Adoption Agreement. SAI-9 - -------------------------------------------------------------------------------- Benefits must vest in accordance with any of the schedules below or one at least as favorable to participants;
SCHEDULE A SCHEDULE B SCHEDULE C SCHEDULE E YEARS OF VESTED VESTED VESTED VESTED SERVICE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE - ---------- ------------ ------------ ------------ ----------- 1 0% 0% 0% 100% 2 100 20 0 100 3 100 40 100 100 4 100 60 100 100 5 100 80 100 100 6 100 100 100 100
If the plan requires more than one year of service for participation in the plan, the plan must use Schedule E or one at least as favorable to participants. Provided the employer plan is not "top-heavy," within the meaning of Section 416 of the Code, and provided that the plan does not require more than one year of service for participation, an employer may, in accordance with provisions of the American Dental Association Members Retirement Plan, instead elect one of the following vesting schedules or one at least as favorable to participants, further provided, however the following schedule is not available for matching contributions made in plan years beginning after 2001:
SCHEDULE F SCHEDULE G YEARS OF VESTED VESTED SERVICE PERCENTAGE PERCENTAGE - --------------- ------------ ----------- less than 3 0% 0% 3 20 0 4 40 0 5 60 100 6 80 100 7 100 100
All contributions to a SIMPLE 401(k) plan are 100% vested and not subject to the vesting schedule above. This rule, however, does not apply to employer and matching contributions made to a plan before the plan is amended to become a SIMPLE 401(k) plan. Non-elective and matching contributions required under a safe harbor 401(k) arrangement are 100% vested and not subject to the vesting schedule above. Matching contributions are required to vest at least as quickly as under a 3-year cliff or a 6-year "graded vesting" schedule. The 6-year schedule requires 20% vesting after 2 years of service increasing 20% per year thereafter. ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES -- THE UNDERLYING STATE STREET FUNDS The following discussion supplements the discussion of the investment policies and techniques of the Underlying State Street Funds for the Lifecycle Fund Group Trusts included under the section entitled "Program investment options" in the prospectus. Also discussed hereunder are the investment restrictions applicable to investments made by such Underlying State Street Funds. As a general matter, you should note that the S&P 500 Flagship Fund, the Russell 2000 Index Securities Lending Fund, and the Daily EAFE Fund are index funds and, therefore, not "actively" managed like other collective investment funds. Each of these Underlying State Street Funds utilizes a "passive" investment approach, attempting to duplicate the investment performance of its benchmark index through automated statistical analytic SAI-10 - -------------------------------------------------------------------------------- procedures. See the section of the prospectus entitled Investment Options-Risks and Investment Techniques for further discussion of this method of management. Therefore, some of the policies and investment techniques discussed below may not be engaged in to the same extent as if the Underlying State Street Funds were actively managed. U.S. GOVERNMENT SECURITIES. The Underlying State Street Funds may invest in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, which include U.S. Treasury securities that differ in their interest rates, maturities and times of issuance. Treasury Bills have initial maturities of one year or less; Treasury Notes have initial maturities of one to ten years; and Treasury Bonds generally have initial maturities of greater than ten years. Obligations issued or guaranteed by U.S. Government agencies and instrumentalities are supported in one of the following ways: (a) by the full faith and credit of the U.S. Treasury; (b) by the right of the issuer to borrow from the Treasury; (c) by discretionary authority of the U.S. Government to purchase certain obligations of the agency or instrumentality; or (d) only by the credit of the agency or instrumentality. These securities bear fixed, floating or variable rates of interest. Principal and interest may fluctuate based on generally recognized reference rates or the relationship of rates. While the U.S. Government provides financial support to such U.S. Government-sponsored agencies or instrumentalities, no assurance can be given that it will always do so, since it is not so obligated by law. FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES. Certain of the Underlying State Street Funds may invest in obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions, agencies or instrumentalities, if State Street determines that the obligations are of comparable quality to the other obligations in which such Underlying State Street Fund may invest. Such securities also include debt obligations of supranational entities. Supranational entities include international organizations designated or supported by governmental entities to promote economic reconstruction or development and international banking institutions and related government agencies. The percentage of such Underlying State Street Fund's assets invested in securities issued by foreign governments will vary depending on the relative yields of such securities, the economic and financial markets of the countries in which the investments are made and the interest rate climate of such countries. BANK OBLIGATIONS. The Underlying State Street Funds may invest in bank obligations, including certificates of deposit, time deposits, bankers' acceptances and other short-term obligations of domestic banks, foreign subsidiaries of domestic banks, foreign branches of domestic banks, and domestic and foreign branches of foreign banks, domestic savings and loan associations and other banking institutions. With respect to such securities issued by foreign branches of domestic banks, foreign subsidiaries of domestic banks, and domestic and foreign branches of foreign banks, such Underlying State Street Fund may be subject to additional investment risks that are different in some respects from those incurred by a fund which invests only in debt obligations of U.S. domestic issuers. These risks include possible future political and economic developments, the possible imposition of foreign withholding taxes on interest income payable on the securities, the possible establishment of exchange controls or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on these securities and the possible seizure or nationalization of foreign deposits. Certificates of deposit are negotiable certificates evidencing the obligation of a bank to repay funds deposited with it for a specified period of time. Time deposits are non-negotiable deposits maintained in a banking institution for a specified period of time at a stated interest rate. Time deposits which may be held by such Underlying State Street Fund will not benefit from insurance administered by the Federal Deposit Insurance Corporation. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and the drawer to pay the face amount of the instrument upon maturity. The other short-term obligations may include uninsured, direct obligations, bearing fixed, floating or variable interest rates. SAI-11 - -------------------------------------------------------------------------------- COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS. The Underlying State Street Funds may invest in commercial paper. Commercial paper is short-term, unsecured promissory notes issued to finance short-term credit needs. Any commercial paper in which such Underlying State Street Fund invests will consist only of direct obligations which, at the time of their purchase, are (a) rated not lower than Prime-1 by Moody's Investor Service ("Moody's"), A-1 by S&P, or any equivalent rating by any other nationally recognized statistical rating organization, (b) issued by companies having an outstanding unsecured debt issue currently rated not lower than Aa3 by Moody's or AA-by S&P, or any equivalent rating by any other nationally recognized statistical rating organization, or (c) if unrated, determined by State Street to be of comparable quality to those rated obligations which may be purchased by such Underlying State Street Fund. REPURCHASE AGREEMENTS. The Underlying State Street Funds may enter into repurchase agreements. Repurchase agreements involve the acquisition of an underlying debt instrument, subject to an obligation of the seller to repurchase, and to resell, the instrument at a fixed price usually not more than one week after its purchase. An Underlying State Street Fund may incur certain costs in connection with the sale of the securities if the seller does not repurchase them in accordance with the repurchase agreement. In addition, if bankruptcy proceedings are commenced with respect to the seller of the securities, realization on the securities by an Underlying State Street Fund may be delayed or limited. Each Underlying State Street Fund will consider on an ongoing basis the creditworthiness of the institutions with which it enters into repurchase agreements. FLOATING AND VARIABLE RATE OBLIGATIONS. An Underlying State Street Fund may purchase floating and variable rate demand notes and bonds, which are obligations ordinarily having stated maturities in excess of 13 months. Generally, the lender may demand repayment, and the borrower has a right to repay the loan prior to maturity. The interest rate generally fluctuates based on a published rate such as a bank's prime rate. Because these obligations are direct lending arrangements between the lender and borrower, the Underlying State Street Funds do not contemplate that such instruments generally will be traded, and there generally is no established secondary market for these obligations, although they are redeemable at face value. Accordingly, where the obligations are not secured by letters of credit or other credit support arrangements, the Underlying State Street Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS. An Underlying State Street Fund may invest in the securities of foreign issuers in the form of American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs"). These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs, which are sometimes referred to as Continental Depositary Receipts ("CDRs"), are receipts issued in Europe typically by non-United States banks and trust companies that evidence ownership of either foreign or domestic securities. FUTURES CONTRACTS. To the extent permitted by applicable regulations, an Underlying State Street Fund is permitted to use financial futures as a substitute for a comparable market position in the underlying securities. An Underlying State Street Fund may trade futures contracts in U.S. domestic markets or, to the extent permitted under applicable law, on exchanges located outside the United States. A stock index future obligates the seller to deliver (and the purchaser to take), effectively, an amount of cash equal to the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is made. With respect to stock indexes that are permitted investments, each Underlying State Street Fund intends to purchase and sell futures contracts on the stock index for which it can obtain the best price, with consideration also given to liquidity. SAI-12 - -------------------------------------------------------------------------------- Initially, when purchasing or selling futures contracts, an Underlying State Street Fund will be required to deposit with its custodian in the broker's name an amount of cash or cash equivalents up to approximately 10% of the contract amount, which is returned to the Fund upon termination. This amount is subject to change. Subsequent payments to and from the broker will be made daily as the price of the index or securities underlying the futures contract fluctuates. Although an Underlying State Street Fund intends to purchase or sell futures contracts only if there is an active market for such contracts, no assurance can be given that a liquid market will exist for any particular contract at any particular time. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. Futures contract prices could move to the limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and potentially subjecting the relevant Underlying State Street Fund to substantial losses. INTEREST RATE AND EQUITY INDEX SWAPS. An Underlying State Street Fund may enter into interest rate and index swaps. Interest-rate swaps are contracts in which one party agrees to pay interest at a floating rate for a specified period of time, while the counterparty agrees to pay interest at a fixed rate for the same period. Index swaps involve the exchange by an Underlying State Street Fund with another party of cash flows based upon the performance of an index or a portion of an index of securities which usually include dividends. Each Underlying State Street Fund will enter into swap transactions only if: (i) for transactions with maturities under one year, the counterparty has outstanding short-term paper rated at least A-1 by S&P, Prime-1 by Moody's, or any equivalent rating by any other nationally recognized statistical rating organization, or (ii) for transactions with maturities greater than one year, the counterparty has outstanding debt securities rated at least Aa by Moody's or AA by S&P, or any equivalent rating by any other nationally recognized statistical rating organization, or (iii) if unrated, State Street deems the counterparty's creditworthiness to be of equivalent quality. There is no limit on the amount of swap transactions that an Underlying State Street Fund may enter into. The risk of loss with respect to swaps is generally limited to the net amount of payments that the Underlying State Street Fund is contractually obligated to make. If the other party to a swap defaults, the Underlying State Street Fund's risk of loss consists of the net amount of payments that the Underlying State Street Fund contractually is entitled to receive. FOREIGN CURRENCY TRANSACTIONS. An Underlying State Street Fund may engage in currency exchange transactions either on a spot (i.e., cash) basis at the rate prevailing in the currency exchange market, or through entering into forward contracts to purchase or sell currencies. A forward currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which must be more than two days from the date of the contract, at a price set at the time of the contract. These contracts are entered into in the interbank market conducted directly between currency traders (typically commercial banks or other financial institutions) and their customers. LENDING PORTFOLIO SECURITIES. An Underlying State Street Fund may lend securities to brokers, dealers and other financial institutions. The Underlying State Street Fund will receive collateral of at least 100% cash, letters of credit or U.S. government securities. The Underlying State Street Fund can increase its income through the investment of the collateral as well as the interest receivable on the loan. An Underlying State Street Fund might experience a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement. SAI-13 - -------------------------------------------------------------------------------- RATINGS. The ratings of Moody's, S&P, or any other nationally recognized statistical rating organizations represent their opinions as to the quality of the obligations which they undertake to rate. It should be emphasized, however, that ratings are relative and subjective and, although ratings may be useful in evaluating the safety of interest and principal payments, they do not evaluate the market value risk of such obligations. Each Underlying State Street Fund will rely on State Street's judgment, analysis and experience in evaluating the creditworthiness of an issuer. INVESTMENT RESTRICTIONS APPLICABLE TO THE FUNDS EQUITY INDEX FUND. The Equity Index Fund will operate as discussed under Investment Options--Equity Index Fund in the prospectus, and will be subject to the investment policies and limitations described there. The prospectus for the SSgA S&P 500 Index Fund describes the investment objective, policies and limitations applicable to the SSgA S&P 500 Index Fund. A free copy of the SSgA S&P 500 Index Fund prospectus may be obtained by calling an Equitable Life Account Executive. LIFECYCLE FUNDS. The Lifecycle Funds will operate as discussed under Investment Options-Lifecycle Funds-The Lifecycle Fund Group Trusts-Conservative and Moderate in the prospectus, and will be subject to the investment policies and limitations described therein. LIFECYCLE FUND GROUP TRUSTS. The Lifecycle Fund Group Trusts will operate as discussed in Investment Options-The Lifecycle Fund Group Trusts-Conservative and Moderate in the prospectus, and will be subject to the investment policies and limitations described therein. UNDERLYING STATE STREET FUNDS: COMMON INVESTMENT RESTRICTIONS. In addition to the limitations discussed above under Additional Investment Policies and Techniques and in the prospectus under Investment Options, each Underlying State Street Fund will not: (1) Invest in securities for the purpose of obtaining control of management. (2) Engage in business of underwriting securities issued by others, except that an Underlying State Street Fund will not be deemed to be an underwriter or to be engaged in underwriting by virtue of having purchased securities subject to legal or contractual restrictions on disposition. (3) Make short sales of securities or purchase any securities on margin, except for such short-term credits as are necessary for the clearance of transactions. An Underlying State Street Fund may make initial margin deposits and variation margin payments in connection with transactions in futures contracts or related options. (4) Purchase or sell real estate or real estate mortgage loans, except that an Underlying State Street Fund may invest in securities secured by real estate or interests in real estate, or securities issued by companies which invest in real estate or interests in real estate. (5) Pledge, mortgage or hypothecate its assets, except to the extent necessary to (a) secure any permitted borrowings, (b) engage in transactions that involve the purchase of securities on a when-issued or forward commitment basis, (c) deposit assets in escrow in connection with writing covered put and call options, and (d) deposit assets as initial or variation margin or collateral in connection with transactions in options, forward contracts, futures contracts (including those relating to indices), and options on futures contracts or indices. (6) Invest 25% or more of the value of its total assets in securities of companies primarily engaged in any one industry (other than the U.S. Government, its agencies and instrumentalities), except to the extent necessary to comply with the industry weightings of a particular index in accordance with such Underlying State Street Fund's investment objective and policies. For purposes of this SAI-14 - -------------------------------------------------------------------------------- restriction, the concentration limit may be exceeded as a result of changes in the market value of portfolio securities in which an Underlying State Street Fund invests. This limit, however, may not be exceeded as a result of investments made by an Underlying State Street Fund. (7) Purchase or sell commodities or commodity futures contracts, except that an Underlying State Street Fund may enter into futures contracts to the extent provided in such Underlying State Street Fund's Declaration of Trust and as discussed under Additional Investment Policies and Techniques above and under Investment Options in the prospectus. While State Street or SSgA Funds Management, Inc. are not required to observe the foregoing restrictions (except where otherwise required by law or governmental regulation), it currently does not intend to change any of these restrictions. HOW WE DETERMINE UNIT VALUE FOR THE FUNDS We determine the Unit Value for the Equity Index Fund and each of the Lifecycle Funds at the end of each business day. The Unit Value for each of these Funds is calculated by first determining a gross unit value, which reflects only investment performance, and then adjusting it for Fund expenses to obtain the Fund Unit Value. We determine the gross unit value by multiplying the gross unit value for the preceding business day by the net investment factor for that subsequent business day. We calculate the net investment factor as follows: o First, we take the value of the Fund's assets at the close of business on the preceding business day. o Next, we add the investment income and capital gains, realized and unrealized, that are credited to the assets of the Fund during the business day for which we are calculating the net investment factor. o Then we subtract the capital losses, realized and unrealized, charged to the Fund during that business day. o Finally, we divide this amount by the value of the Fund's assets at the close of the preceding business day. The Fund Unit Value is calculated on every business day by multiplying the Fund Unit Value for the last business day of the previous month by the net change factor for that business day. The net change factor for each business day is equal to (a) minus (b) where: (a) is the gross unit value for that business day divided by the gross unit value for the last business day of the previous month; and (b) is the charge to the Fund for that month for the daily accrual of fees and other expenses times the number of days since the end of the preceding month. HOW WE VALUE THE ASSETS OF THE FUNDS The Equity Index Fund will invest all of its assets in the SSgA S&P 500 Index Fund. The Equity Index Fund's investments in the SSgA S&P 500 Index Fund will be valued at the underlying mutual fund's net asset value per share. The asset value of the Equity Index Fund is computed on a daily basis by reference to the SSgA S&P 500 Index Fund. See the prospectus of the SSgA S&P 500 Index Fund for information on valuation methodology. The Lifecycle Funds-Conservative and Moderate will invest all of their assets in the Lifecycle Fund Group Trusts-Conservative and Moderate, respectively. The Lifecycle Trusts, in turn, will invest all of their assets in the Underlying State Street Funds. The investments made by each of the Lifecycle Funds in units of the corresponding Lifecycle Fund Group Trust will be valued at the net asset value of the units of such Lifecycle Fund Group Trust. SAI-15 - -------------------------------------------------------------------------------- The units of each of the Lifecycle Fund Group Trusts will be valued each business day as of the close of the regular trading session of the New York Stock Exchange (currently 4 p.m. Eastern time). A business day is any business day on which the New York Stock Exchange is open for business. The net asset value of each unit is computed by dividing the current value of the assets of each Lifecycle Fund Group Trust, less its liabilities, by the number of units outstanding and rounding to the nearest cent. Investments made by each Lifecycle Fund Group Trust in the Underlying State Street Funds will be valued at the Underlying State Street Fund's net asset value per unit. The units of each Underlying State Street Fund are valued each business day in a manner that is similar to the method used for valuing units of the Lifecycle Fund Group Trusts daily. The method of valuing the assets of each Underlying State Street Fund is discussed below. HOW STATE STREET VALUES THE ASSETS OF THE UNDERLYING STATE STREET FUNDS State Street values the assets of each Underlying State Street Fund, other than the STIF Fund, in the following manner on a daily basis: o STOCKS listed on a national securities exchange or traded on the NASDAQ national market system are valued at the last sale price. If on a particular day there is no sale, such securities are valued at the latest available bid price reported on a composite tape. Other unlisted securities reported on the NASDAQ system are valued at inside (highest) quoted bid prices. o FOREIGN SECURITIES not traded directly, or in ADR form, in the United States, are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into dollars at current exchange rates. o UNITED STATES TREASURY SECURITIES and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. o LONG-TERM PUBLICLY TRADED CORPORATE BONDS (i.e., maturing in more than one year) are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where it is deemed appropriate to do so, an over-the-counter or exchange quotation may be used. o CONVERTIBLE PREFERRED STOCKS listed on national securities exchanges are valued at their last sale price or, if there is no sale, at the latest available bid price. o CONVERTIBLE BONDS and UNLISTED CONVERTIBLE PREFERRED STOCKS are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. o SHORT-TERM DEBT SECURITIES that mature in more than 60 days are valued at representative quoted prices. Short-term debt securities that mature in 60 days or less are valued at amortized cost, which approximates market value. State Street determines in good faith the fair values of securities and other assets that do not have a readily available market price in accordance with accepted accounting practices and applicable laws and regulations. Assets of the STIF Fund are valued at amortized cost on a daily basis. Under this method of valuation, securities purchased by the STIF Fund, such as bonds, notes, commercial paper, certificates of deposit, or other evidences of indebtedness, are recorded at original cost and adjusted daily for premium amortization or discount accretion. Use of the amortized cost method results in a value of portfolio securities that approximates the value computed by use of mark-to-market method (i.e., use of market SAI-16 - -------------------------------------------------------------------------------- values). Values computed under both methods approach each other the closer a debt obligation comes to maturity. In this regard, the STIF Fund will not hold debt obligations that have a remaining maturity of more than thirteen months. See discussion under Investment Options in the prospectus. TRANSACTIONS BY THE UNDERLYING STATE STREET FUNDS This section discusses the procedures followed by the Underlying State Street Funds, with respect to the buying and selling of portfolio securities for these Funds. In connections with such transactions, the Underlying State Street Funds pay brokerage commissions, transfer taxes, and other fees. Decisions to buy or sell securities for the Underlying State Street Funds are made by State Street in accordance with the investment policies and restrictions of each Underlying State Street Fund. Such decisions are made independently of the decisions made for other entities managed by State Street. There may be occasions, however, when the same investment decision is made for more than one account advised or managed by State Street. In such cases, State Street will allocate such purchases or sales among the affected accounts in as equitable a manner as it deems possible. The principal factors State Street will take into account in making this determination are the relative investment objectives of the affected client accounts, the relative sizes of the same or comparable securities held by or on behalf of such accounts, and the availability at the time of funds in each client account to make the investment. Portfolio securities held by one State Street client also may be held by one or more of its other clients. When two or more of State Street's clients are engaged in the simultaneous purchase or sale of securities, State Street allocates the amount of each transaction in accordance with the formulae deemed to be equitable as to each client. There may be circumstances, however, when purchases or sales of portfolio securities for one or more of State Street's clients will have an adverse effect on other clients. In placing portfolio transactions for an Underlying State Street Fund, State Street will seek the best price and most favorable execution available to such Fund. In this regard, State Street will take into account all factors which it considers relevant to making this decision, including the extent of any provision of any brokerage and research services to such Fund within the meaning of Section 28(e) of the Securities Exchange Act of 1934 ("1934 Act"), viewed in terms of either that particular transaction or the broker's or dealer's overall responsibilities to the Underlying State Street Fund. State Street periodically will review the brokerage commissions paid by an Underlying State Street Fund to determine whether the commissions paid over a particular period of time were reasonable in relation to the benefits provided to such Fund. It is possible that certain of the services received from a broker or dealer in connection with the execution of transactions will primarily benefit one or more other accounts for which State Street exercises discretion, or an Underlying State Street Fund other than that for which the transaction was executed. Conversely, any given Underlying State Street Fund may be the primary beneficiary of the service received as a result of portfolio transactions effected for such other accounts or Underlying State Street Funds. The investment management fees paid to State Street are not reduced by reason of receipt of such brokerage and research services. INVESTMENT MANAGEMENT FEE SSgA Funds Management, Inc. is the investment adviser to the SSgA S&P 500 Index Fund, the underlying mutual fund in which the Equity Index Fund invests. No investment management fee was paid to SSgA Funds Management, Inc. in 2001 for its management of the SSgA S&P 500 Index Fund. However, all of the assets of the SSgA S&P 500 Index Fund are invested through a master/feeder arrangement into the State Street Equity 500 Index Portfolio. SSgA Funds Management, Inc. and its affiliates are paid a total fee of 0.045% for advisory, custody, transfer agency and administration services provided to the State Street Equity 500 Index Portfolio. UNDERWRITER AXA Advisors, LLC ("AXA Advisors"), the successor to EQ Financial Consultants, Inc. and an affiliate of Equitable Life, may be deemed to be the principal underwriter of separate account units under the SAI-17 - -------------------------------------------------------------------------------- group annuity contract. AXA Advisors is registered with the SEC as a broker-dealer under the 1934 Act and is a member of the National Association of Securities Dealers, Inc. AXA Advisors' principal business address is 1290 Avenue of the Americas, New York, NY 10104. The offering of the units under the contract is continuous. No underwriting commissions have been paid during any of the last three fiscal years with respect to units of interest under the contract. See "Charges and expenses" in the prospectus. No person currently serves as underwriter for the Lifecycle Fund Group Trusts or the Underlying State Street Funds. MANAGEMENT: EQUITABLE LIFE We are managed by a Board of Directors which is elected by our shareholder(s). Our directors and certain of our executive officers and their principal occupations are as follows. Unless otherwise indicated, the following persons have been involved in the management of Equitable and/or its affiliates in various executive positions during the last five years.
DIRECTOR'S NAME AGE PRINCIPAL OCCUPATION - --------------- --- -------------------- Francoise Colloc'h 58 Member of the AXA Management Board and Group Executive President of AXA. Henri de Castries 47 Chairman of the Board, AXA Financial; Chairman of the Management Board and CEO of AXA's Management Board. Claus-Michael Dill 48 Chairman of Management Board of AXA Konzern AG, prior thereto, member of the Holding Management Board of Gerling-Konzern in Cologne. Joseph L. Dionne 68 Retired Chairman and Chief Executive Officer, The McGraw-Hill Companies. Denis Duverne 48 Executive Vice President, AXA; member, AXA Executive Board. Jean-Rene Fourtou 62 Vice Chairman of the Management Board, Aventis; prior thereto, Chairman and Chief Executive Officer, Rhone-Poulenc, S.A. Norman C. Francis 70 President, Xavier University of Louisiana. Donald J. Greene 68 Of Counsel, LeBoeuf, Lamb, Greene & MacRae; prior thereto, Partner of the firm. John T. Hartley 71 Retired Chairman and Chief Executive Officer and currently a Director, Harris Corporation. John H. F. Haskell, Jr. 70 Senior Advisor, UBS Warburg, LLC; prior thereto, Managing Director and member of the Board of Directors. Mary (Nina) Henderson 51 Retired Corporate Vice President, Core Business Development of Bestfoods (formerly CPC International, Inc.); prior thereto, Vice President and President, Bestfoods Grocery. W. Edwin Jarmain 63 President, Jarmain Group Inc. George T. Lowy 70 Partner, Cravath, Swaine & Moore. Didier Pineau-Valencienne 70 Vice Chairman, Credit Suisse First Boston; Honorary Chairman, Schneider and Square D; prior thereto, Chairman and Chief Executive Officer. George J. Sella, Jr. 73 Retired Chairman and Chief Executive Officer, American Cyanamid Company. Peter J. Tobin 57 Dean, Peter J. Tobin College of Business, St. John's University; prior thereto, Chief Financial Officer, Chase Manhattan Corp. Bruce W. Calvert 55 Chairman and Chief Executive Officer, Alliance Capital Management Corporation.
SAI-18 - --------------------------------------------------------------------------------
OFFICERS--DIRECTOR'S NAME AGE PRINCIPAL OCCUPATION - ------------------------- --- -------------------- Christopher M. Condron 54 Chairman of the Board and Chief Executive Officer of Equitable Life; President and Chief Executive Officer of AXA Financial, Inc.; Member of the Management Board of AXA; prior thereto, served both as President and Chief Operating Officer of Mellon Financial Corp. and Chairman and Chief Executive Officer of Dreyfus Corp. Stanley B. Tulin 52 Vice Chairman of the Board and Chief Financial Officer of Equitable Life and AXA Financial, Inc.; Executive Vice President and Member of the Executive Committee of AXA; prior thereto, Chairman of the Insurance Consulting and Actuarial Practice of Coopers & Lybrand, L.L.P. - -----------------------------------------------------------------------------------------------------
OTHER OFFICERS NAME AGE PRINCIPAL OCCUPATION - ------------------- --- -------------------- Leon B. Billis 55 Executive Vice President and AXA Group Deputy Chief Information Officer, Equitable Life and AXA Client Solutions, LLC; Director, Chief Executive Officer and President of AXA Technology Services America, Inc. Harvey Blitz 56 Senior Vice President of Equitable AXA Financial, Inc. and AXA Client Solutions, LLC; Executive Vice President of AXA Advisors, LLC. Kevin R. Byrne 46 Senior Vice President and Treasurer, Equitable Life, AXA Financial, Inc., AXA Client Solutions, LLC, and Equitable of Colorado, Inc. Judy A. Faucett 53 Senior Vice President of Equitable Life and AXA Client Solutions, LLC Alvin H. Fenichel 57 Senior Vice President and Controller of Equitable Life, AXA Financial, Inc. and AXA Client Solutions, LLC. Paul J. Flora 55 Senior Vice President and Auditor of Equitable Life, AXA Financial, Inc. and AXA Client Solutions, LLC. Donald R. Kaplan 48 Senior Vice President, Chief Compliance Officer and Associate General Counsel of Equitable Life and AXA Client Solutions, LLC. Richard J. Matteis 65 Executive Vice President of Equitable Life and AXA Client Solutions, LLC; prior thereto, Executive Vice President of Chase Manhattan Corp. Peter D. Noris 46 Executive Vice President and Chief Investment Officer, Equitable Life and AXA Financial, Inc. and AXA Client Solutions, LLC; President and Trustee of EQ ADVISORS TRUST; Executive Vice President and Chief Investment Officer of The Equitable of Colorado, Inc. Anthony C. Pasquale 54 Senior Vice President of Equitable Life and AXA Client Solutions, LLC; Pauline Sherman 58 Senior Vice President, Secretary and Associate General Counsel of Equitable Life, AXA Financial, Inc. and AXA Client Solutions, LLC; Senior Vice President, Secretary and Associate General Counsel of The Equitable of Colorado, Inc.
SAI-19 - --------------------------------------------------------------------------------
OTHER OFFICERS NAME AGE PRINCIPAL OCCUPATION - ------------------- --- -------------------- Richard V. Silver 46 Executive Vice President and General Counsel of Equitable Life, AXA Financial, Inc. and AXA Client Solutions, LLC; Executive Vice President and General Counsel, The Equitable of Colorado, Inc. Jennifer Blevins 44 Executive Vice President of Equitable Life and AXA Client Solutions, LLC; prior thereto, Senior Vice President and Managing Director Worldwide Human Resources of Chubb and Son, Inc. Selig Ehrlich 41 Executive Vice President and Chief Actuary of Equitable Life and AXA Client Solutions, LLC; prior thereto, Senior Vice President, Chief Actuary and Deputy General Manager. MaryBeth Farrell 44 Executive Vice President of Equitable Life and AXA Client Solutions, LLC. Stuart L. Faust 49 Senior Vice President and Deputy General Counsel of Equitable Life, AXA Financial, Inc. and AXA Client Solutions, LLC. John M. Lefferts 44 Executive Vice President and President of Retail Distribution of Equitable Life and AXA Client Solutions, LLC; Director and Executive Vice President of The Equitable of Colorado, Inc. William Levine 58 Executive Vice President and Chief Information Officer of Equitable Life and AXA Client Solutions, LLC; prior thereto, Senior Vice President of PaineWebber. William (Alex) 40 Executive Vice President of Equitable Life and AXA Client MacGillivray Solutions, LLC; Director, President and Chief Executive Officer of AXA Distributors, LLC and its subsidiaries. Charles A. Marino 43 Senior Vice President and Actuary of Equitable Life and AXA Client Solutions, LLC. Deanna M. Mulligan 38 Executive Vice President of Equitable Life and AXA Client Solutions, LLC.
SAI-20 - -------------------------------------------------------------------------------- MANAGEMENT: STATE STREET State Street is managed by its sole shareholder, State Street Corporation. Its directors and certain of its executive officers and their principal occupations are as follows:
DIRECTOR'S NAME PRINCIPAL OCCUPATION - --------------- -------------------- David A. Spina Chairman and Chief Executive Officer, State Street Corporation Ronald E. Logue President and Chief Operating Officer, State Street Corporation Tenley E. Albright, M.D. Chairman, Western Resources, Inc. I. MacAllister Booth Retired Chairman, President and CEO, Polaroid Corporation Truman S. Casner, Esquire Partner, Ropes & Gray Nader F. Darehshori Chairman, President and CEO, Houghton Mifflin Company Arthur L. Goldstein Chairman and CEO, Ionics, Incorporated David P. Gruber Retired Chairman and CEO, Wyman-Gordon Company Linda A. Hill Brett Donham Professor of Business Administration, Harvard Business School Charles R. LaMantia Retired Chairman and CEO, Arthur D. Little, Inc. Richard P. Sergel President and CEO, National Grid USA Gregory L. Summe Chairman and Chief Executive Officer, PerkinElmer, Inc. Diana Chapman Walsh President, Wellesley College
SAI-21 - --------------------------------------------------------------------------------
OTHER OFFICERS NAMES PRINCIPAL OCCUPATION* - -------------------- --------------------- Maureen Scannell Bateman Executive Vice President and General Counsel Joseph W. Chow Executive Vice President John A. Fiore Executive Vice President and CIO Stefan Gavell Executive Vice President and CFO Timothy B. Harbert Executive Vice President, Chairman and CEO, State Street Global Advisors Joseph L. Hooley Executive Vice President Luis de Ocejo Executive Vice President Stanley W. Shelton Executive Vice President John R. Towers Vice Chairman
- ---------- * All positions are with State Street Bank and Trust Company. SAI-22 - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS The financial statements of Equitable Life included in this Statement of Additional Information should be considered only as bearing upon the ability of Equitable Life to meet its obligations under the group annuity contract. They should not be considered as bearing upon the investment experience of the Separate Account Nos. 195, 197 and 198 or the Underlying Funds. The financial statements of Separate Account Nos. 195, 197 and 198 reflect applicable fees, charges and other expenses under the Program as in effect during the periods covered. SEPARATE ACCOUNT NOS. 195, 197 AND 198: Report of Independent Accountants ................................................................... SAI-26 Separate Account No. 195 (Equity Index Fund): Statement of Assets and Liabilities, December 31, 2001 .............................................. SAI-27 Statement of Operations for Year Ended December 31, 2001 ............................................ SAI-28 Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 .................. SAI-29 Separate Account No. 197 (Lifecycle Fund -- Conservative): Statement of Assets and Liabilities, December 31, 2001 .............................................. SAI-30 Statement of Operations for Year Ended December 31, 2001 ............................................ SAI-31 Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 .................. SAI-32 Separate Account No. 198 (Lifecycle Fund -- Moderate): Statement of Assets and Liabilities, December 31, 2001 .............................................. SAI-33 Statement of Operations for Year Ended December 31, 2001 ............................................ SAI-34 Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 .................. SAI-35 Separate Account Nos. 195, 197 and 198: Notes to Financial Statements ....................................................................... SAI-36 The Equitable Life Assurance Society of the United States Report of Independent Accountants ................................................................... F-1 Consolidated Balance Sheets, December, 2001 and 2000 ................................................ F-2 Consolidated Statements of Earnings for the Year Ended December 31, 2001, 2000 and 1999 ............. F-3 Consolidated Statements of Shareholders' Equity and Comprehensive Income for the Years Ended December 31, 2001, 2000 and 1999 ................................................................. F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 .......... F-5 Notes to Consolidated Financial Statements .......................................................... F-7
The financial statements for each of the Underlying Funds reflect charges for operating expenses, but do not include any investment management, Program or other charges imposed against the respective assets of the Lifecycle Funds and Lifecycle Fund Group Trusts. The financial statements of the Underlying Funds do, however, indirectly reflect any investment management fees and other charges paid by the entities in which the Underlying Fund invest. STATE STREET BANK AND TRUST COMPANY -- LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Report of Independent Accountants ................................................................... SAI-39 Lifecycle Fund Group Trust -- Conservative: Statement of Assets and Liabilities, December 31, 2001 .............................................. SAI-40 Statement of Operations for Year Ended December 31, 2001 ............................................ SAI-41 Statement of Changes in Net Assets for the Year Ended December 31, 2001 and December 31, 2000 ....... SAI-42 Selected Per Unit Data .............................................................................. SAI-43 Schedule of Investments ............................................................................. SAI-44 Notes to Financial Statements ....................................................................... SAI-45 STATE STREET BANK AND TRUST COMPANY -- LIFECYCLE FUND GROUP TRUST -- MODERATE Report of Independent Accountants ................................................................... SAI-47
SAI-23 - -------------------------------------------------------------------------------- Lifecycle Fund Group Trust -- Moderate: Statement of Assets and Liabilities, December 31, 2001 .............................................. SAI-48 Statement of Operations for the Year Ended December 31, 2001 ........................................ SAI-49 Statement of Changes in Net Assets for the Year Ended December 31, 2001 and December 31, 2000 ....... SAI-50 Selected Per Unit Data .............................................................................. SAI-51 Schedule of Investments ............................................................................. SAI-52 Notes to Financial Statements ....................................................................... SAI-53 STATE STREET BANK AND TRUST COMPANY -- UNDERLYING FUNDS FLAGSHIP FUND Report of Independent Accountants -- ................................................................ SAI-55 S&P 500 Flagship Fund and S&P 500 Flagship Non-Lending Fund: Combined Statement of Assets and Liabilities, December 31, 2001 ..................................... SAI-56 Combined Statement of Operations for the Year Ended December 31, 2001 ............................... SAI-57 Combined Statement of Changes in Net Assets for the Year Ended December 31, 2001 and 2000 ........... SAI-58 S&P 500 Flagship Non-Lending Fund Selected Per Unit Data ............................................ SAI-59 S&P 500 Flagship Fund Selected Per Unit Data ........................................................ SAI-60 Combined Schedule of Investments, December 31, 2001 ................................................. SAI-61 Notes to Combined Financial Statements .............................................................. SAI-75 RUSSELL 2000 FUND Report of Independent Accountants -- ................................................................ SAI-78 Russell 2000 Index Securities Lending Fund and Russell 2000 Index Fund: Combined Statement of Asset and Liabilities, December 31, 2001 ...................................... SAI-79 Combined Statement of Operations for the Year Ended December 31, 2001 ............................... SAI-80 Combined Statement of Changes in Net Assets for the Years Ended December 31, 2001 and SAI-81 2000 Russell 2000 Index Securities Lending Fund Selected Per Unit Data .................................... SAI-82 Russell 2000 Index Fund Selected Per Unit Data ....................................................... SAI-83 Combined Schedule of Investments ..................................................................... SAI-84 Notes to Combined Financial Statements ...............................................................SAI-127
The financial statements for the Russell 2000 Fund reflect direct investments made by this Fund in shares of companies included in the Russell 2000 Index. Beginning February 1, 1995, this Fund has invested in units of Russell 2000 Value and Growth Funds, which in turn invest in shares of companies included in the Russell 2000 Index. Beginning June 17, 1996, the Fund began making direct investment again. DAILY EAFE FUND Report of Independent Accountants -- ................................................................ SAI-130 Daily EAFE Securities Lending Fund: Statement of Assets and Liabilities, December 31, 2001 .............................................. SAI-131 Statement of Operations for the Year Ended December 31, 2001 ........................................ SAI-132 Statement of Changes in Net Assets for the Year Ended December 31, 2001 and 2000 .................... SAI-133 Selected Per Unit Data .............................................................................. SAI-134 Schedule of Investments ............................................................................. SAI-135 Notes to Financial Statements ....................................................................... SAI-136 DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Report of Independent Accountants ................................................................... SAI-138 Daily MSCI Europe Index Securities Lending Fund and Daily MSCI Europe Index Fund: Combined Statement of Assets and Liabilities, December 31, 2001 ..................................... SAI-139 Combined Statement of Operations for the Year Ended December 31, 2001 ............................... SAI-140
SAI-24 - -------------------------------------------------------------------------------- Combined Statement of Changes in Net Assets ....................................................... SAI-141 Daily MSCI Europe Index Securities Lending Fund Selected Per Unit Data ............................ SAI-142 Daily MSCI Europe Index Fund Selected Per Unit Data ............................................... SAI-143 Combined Schedule of Investments .................................................................. SAI-144 Notes to Combined Financial Statements ............................................................ SAI-159 DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Report of Independent Accountants ................................................................. SAI-162 Daily MSCI Japan Index Securities Lending Fund and Daily MSCI Japan Index Fund Combined Statement of Assets and Liabilities, December 31, 2001 ................................... SAI-163 Combined Statement of Operations for the Year Ended December 31, 2001 ............................. SAI-164 Combined Statement of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 ........ SAI-165 Daily MSCI Japan Index Securities Lending Fund Selected Per Unit Data ............................. SAI-166 Daily MSCI Japan Index Fund Selected Per Unit Data ................................................ SAI-167 Combined Schedule of Investments .................................................................. SAI-168 Notes to Combined Financial Statements ............................................................ SAI-177 DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Report of Independent Accountants ................................................................. SAI-179 Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund Daily MSCI Pacific Basin ex-Japan Index Fund Combined Statement of Assets and Liabilities, December 31, 2001 ................................... SAI-180 Combined Statement of Operations for the year Ended December 31, 2001 ............................. SAI-181 Combined Statement of Changes in Net Assets ....................................................... SAI-182 Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund Selected Per Unit Data ............ SAI-183 Daily MSCI Pacific Basin ex-Japan Index Fund Selected Per Unit Data ............................... SAI-184 Combined Schedule of Investments .................................................................. SAI-185 Notes to Financial Statements ..................................................................... SAI-192 GC BOND FUND Report of Independent Accountants -- .............................................................. SAI-194 Government Corporate Bond Fund: Statement of Assets and Liabilities, December 31, 2001 ............................................ SAI-195 Statement of Operations for the Year Ended December 31, 2001 ...................................... SAI-196 Statement of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 ................. SAI-197 Selected Per Unit Data ............................................................................ SAI-198 Schedule of Investments, December 31, 2001 ........................................................ SAI-199 Notes to Financial Statements ..................................................................... SAI-201 STIF FUND Report of Independent Accountants -- .............................................................. SAI-204 Short Term Investment Fund: Statement of Assets and Liabilities, December 31, 2001 ............................................ SAI-205 Statement of Operations for the Year Ended December 31, 2001 ...................................... SAI-206 Statement of Changes in Net Assets for the Year Ended December 31, 2001 and 2000 .................. SAI-207 Selected Per Unit Data ............................................................................ SAI-208 Schedule of Investments, December 31, 2001 ........................................................ SAI-209 Notes to Financial Statements ..................................................................... SAI-214
SAI-25 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of The Equitable Life Assurance Society of the United States and the Contractowners of Separate Account Nos. 195, 197 and 198 of the Equitable Life Assurance Society of the United States In our opinion, the accompanying statements of assets and liabilities and related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of Separate Account Nos. 195 (The Equity Index Fund), 197 (The Lifecycle Fund -- Conservative), and 198 (The Lifecycle Fund -- Moderate) of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 2001, the results of each of their operations for the year then ended and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares owned at December 31, 2001 with the underlying mutual funds' transfer agent, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York February 6, 2002 SAI-26 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 195 (THE EQUITY INDEX FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities DECEMBER 31, 2001 - ------------------------------------------------------------------------------------------ ASSETS: Investments in 7,463,831 shares of The SSgA S&P 500 Index Fund -- at value (cost: $164,913,359) (Note 2)............................................ $141,215,689 Cash ..................................................................... 89,263 - ------------------------------------------------------------------------------------------ Total assets ............................................................. 141,304,952 - ------------------------------------------------------------------------------------------ LIABILITIES: Accrued expenses ......................................................... 140,185 - ------------------------------------------------------------------------------------------ NET ASSETS ............................................................... $141,164,767 ========================================================================================== ADA CONTRACT UNITS OUTSTANDING 5,638,963 ADA CONTRACT UNIT VALUE $25.03
The accompanying notes are an integral part of these financial statements. SAI-27 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 195 (THE EQUITY INDEX FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations YEAR ENDED DECEMBER 31, 2001 - ------------------------------------------------------------------------------------------ INVESTMENT INCOME (NOTE 2): Dividends from The SSgA S&P 500 Index Fund ............................ $ 2,033,545 - ------------------------------------------------------------------------------------------ EXPENSES (NOTE 3): Administration fees and program expense charge ........................ (1,168,151) Operating expenses .................................................... (210,716) - ------------------------------------------------------------------------------------------ Total expenses ........................................................ (1,378,867) - ------------------------------------------------------------------------------------------ Net investment income ................................................. 654,678 - ------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Net realized loss from share transactions ............................. (3,733,043) Change in unrealized appreciation/depreciation of investments ......... (18,647,160) - ------------------------------------------------------------------------------------------ Net realized and unrealized loss on investments ....................... (22,380,203) - ------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS ATTRIBUTABLE TO OPERATIONS ................. $(21,725,525) ==========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-28 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 195 (THE EQUITY INDEX FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Changes in Net Assets - ------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 2001 2000 - ------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income . ................................................... $ 654,678 $ 488,054 Net realized gain (loss) on investments ................................... (3,733,043) 17,092,753 Change in unrealized appreciation/depreciation of investments ............. (18,647,160) (36,292,078) - ------------------------------------------------------------------------------------------------------------------ Net decrease in net assets attributable to operations ..................... (21,725,525) (18,711,271) - ------------------------------------------------------------------------------------------------------------------ FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ............................................................. 36,438,217 47,580,977 Withdrawals ............................................................... (38,684,612) (68,109,213) - ------------------------------------------------------------------------------------------------------------------ Net decrease in net assets attributable to contributions and withdrawals .. (2,246,395) (20,528,236) - ------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS .................................................... (23,971,920) (39,239,507) NET ASSETS -- BEGINNING OF YEAR ........................................... 165,136,687 204,376,194 - ------------------------------------------------------------------------------------------------------------------ NET ASSETS -- END OF YEAR ................................................. $141,164,767 $165,136,687 ==================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-29 SEPARATE ACCOUNT NO. 197 (THE LIFECYCLE FUND -- CONSERVATIVE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities DECEMBER 31, 2001 - ---------------------------------------------------------------------------------------------------------- ASSETS: Investments in 753,042 shares of The Lifecycle Fund Group Trust, Conservative -- at value (cost: $11,165,810) (Note 2) ........................................................... $11,956,041 Cash .................................................................................... 7,755 - ---------------------------------------------------------------------------------------------------------- Total assets ............................................................................ 11,963,796 - ---------------------------------------------------------------------------------------------------------- LIABILITIES: Accrued expenses ........................................................................ 46,287 - ---------------------------------------------------------------------------------------------------------- NET ASSETS .............................................................................. $11,917,509 ========================================================================================================== ADA CONTRACT UNITS OUTSTANDING 831,033 ADA CONTRACT UNIT VALUE $14.34
The accompanying notes are an integral part of these financial statements. SAI-30 SEPARATE ACCOUNT NO. 197 (THE LIFECYCLE FUND -- CONSERVATIVE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations YEAR ENDED DECEMBER 31, 2001 - -------------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 2): Dividends from The Lifecycle Fund Group Trust -- Conservative ......... $ -- - -------------------------------------------------------------------------------------- EXPENSES (NOTE 3): Administration fees and program expense charge ........................ (90,121) Operating expenses .................................................... (58,847) - -------------------------------------------------------------------------------------- Total expenses ........................................................ (148,968) - -------------------------------------------------------------------------------------- Net investment loss ................................................... (148,968) - -------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Net realized gain from share transactions ............................. 208,985 Change in unrealized appreciation/depreciation of investments ......... (94,006) - -------------------------------------------------------------------------------------- Net realized and unrealized gain on investments ....................... 114,979 - -------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS ATTRIBUTABLE TO OPERATIONS ................. $ (33,989) ======================================================================================
The accompanying notes are an integral part of these financial statements. SAI-31 SEPARATE ACCOUNT NO. 197 (THE LIFECYCLE FUND -- CONSERVATIVE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Changes in Net Assets - ----------------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment loss ..................................................................... $ (148,968) $ (145,400) Net realized gain on investments ........................................................ 208,985 448,336 Change in unrealized appreciation/depreciation of investments ........................... (94,006) (76,550) - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets attributable to operations ........................ (33,989) 226,386 - ----------------------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ........................................................................... 2,582,296 3,039,506 Withdrawals ............................................................................. (2,194,217) (4,445,912) - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets attributable to contributions and withdrawals ..... 388,079 (1,406,406) - ----------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS ....................................................... 354,090 (1,180,020) NET ASSETS -- BEGINNING OF YEAR ......................................................... 11,563,419 12,743,439 - ----------------------------------------------------------------------------------------------------------------------------- NET ASSETS -- END OF YEAR ............................................................... $11,917,509 $11,563,419 =============================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-32 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 198 (THE LIFECYCLE FUND -- MODERATE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities DECEMBER 31, 2001 - --------------------------------------------------------------------------------------------------------- ASSETS: Investments in 5,925,083 shares of The Lifecycle Fund Group Trust, Moderate -- at value (cost: $86,009,771) (Note 2) ......................................................... $106,669,266 Cash .................................................................................. 69,287 - --------------------------------------------------------------------------------------------------------- Total assets .......................................................................... 106,738,553 - --------------------------------------------------------------------------------------------------------- LIABILITIES: Accrued expenses ...................................................................... 287,604 - --------------------------------------------------------------------------------------------------------- NET ASSETS ............................................................................ $106,450,949 ========================================================================================================= ADA CONTRACT UNITS OUTSTANDING 6,334,176 ADA CONTRACT UNIT VALUE $16.81
The accompanying notes are an integral part of these financial statements. SAI-33 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 198 (THE LIFECYCLE FUND -- MODERATE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations YEAR ENDED DECEMBER 31, 2001 - ----------------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 2): Dividends from The Lifecycle Fund Group Trust -- Moderate ............. $ -- - ----------------------------------------------------------------------------------------- EXPENSES (NOTE 3) : Administration fees and program expense charge ........................ (881,234) Operating expenses .................................................... (199,613) - ----------------------------------------------------------------------------------------- Total expenses ........................................................ (1,080,847) - ----------------------------------------------------------------------------------------- Net investment loss ................................................... (1,080,847) - ----------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Net realized gain from share transactions ............................. 5,755,535 Change in unrealized appreciation/depreciation of investments ......... (11,223,957) - ----------------------------------------------------------------------------------------- Net realized and unrealized loss on investments ....................... (5,468,422) - ----------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS ATTRIBUTABLE TO OPERATIONS ................. $ (6,549,269) =========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-34 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 198 (THE LIFECYCLE FUND -- MODERATE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Changes in Net Assets - ----------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment loss ....................................................... $ (1,080,847) $ (1,182,384) Net realized gain on investments .......................................... 5,755,535 6,889,631 Change in unrealized appreciation/depreciation of investments ............. (11,223,957) (9,241,358) - ----------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to operations ..................... (6,549,269) (3,534,111) - ----------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ............................................................. 9,152,062 15,803,354 Withdrawals ............................................................... (18,672,929) (22,139,919) - ----------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to contributions and withdrawals .. (9,520,867) (6,336,565) - ----------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS .................................................... (16,070,136) (9,870,676) NET ASSETS -- BEGINNING OF YEAR ........................................... 122,521,085 132,391,761 - ----------------------------------------------------------------------------------------------------------------- NET ASSETS -- END OF YEAR ................................................. $ 106,450,949 $ 122,521,085 =================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-35 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements - -------------------------------------------------------------------------------- 1. GENERAL Separate Account Nos. 195 (the Equity Index Fund), 197 (the Lifecycle Fund -- Conservative) and 198 (the Lifecycle Fund -- Moderate) (collectively the Funds) of the Equitable Life Assurance Society of the United States (Equitable Life), a wholly-owned subsidiary of AXA Financial, Inc., were established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the contracts, the net assets in the Funds are not chargeable with liabilities arising out of any other business of Equitable Life. Separate Account No. 195 was established as of the opening of business on February 1, 1994 and Separate Account Nos. 197 and 198 were established as of the opening of business on May 1, 1995 to solely fund the American Dental Association Members Retirement Trust and the American Dental Association Members Pooled Trust for Retirement Plans (Trusts) sponsored by the American Dental Association (ADA). Equitable Life is the investment manager for the Funds. The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. Separate Account No. 195 invests its assets in shares of the SSgA S&P 500 Index Fund, a portfolio of the SSgA Funds, which is registered under the Investment Company Act of 1940 as an open-end management investment company. The investment manager of the SSgA S&P 500 Index Fund is State Street Bank and Trust Company (State Street). Separate Account Nos. 197 and 198 invest their assets in shares of the Lifecycle Fund Group Trusts -- Conservative and Moderate, respectively. The Lifecycle Funds Group Trusts are collective investment funds maintained by State Street. Each Lifecycle Fund Group is organized as a common law trust under Massachusetts Law, and, because of exclusionary provisions, is not subject to regulation under the Investment Company Act of 1940. State Street serves as the trustee and investment manager to each of these Group Trusts. On November 21, 2000, the American Institute of Certified Public Accountants issued a revised Audit and Accounting Guide "Audits of Investment Companies" (the "Guide"), which was effective for the December 31, 2001 financial statements. Adoption of the requirements of the Guide did not have a significant impact on the Funds' financial position or results of operations. 2. INVESTMENTS Realized gains and losses on investments include gains and losses on redemptions of the underlying fund's shares (determined on the identified cost basis) and capital gain distributions from the underlying funds. Dividends and realized gain distributions from underlying funds are recorded on the ex-dividend date. SAI-36 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) - ------------------------------------------------------------------------------ Investments in the SSgA S&P 500 Index Fund, the Lifecycle Funds -- Conservative's and Moderate's investments in the Lifecycle Fund Group Trusts -- Conservative and Moderate, respectively, are valued at the underlying mutual fund's or trust's net asset value per share. 3. EXPENSES Charges and fees related to the Funds are deducted in accordance with the terms of the various contracts which participate in the Funds and with respect to the American Dental Association Members Retirement Program as follows: Program Expense Charge: In the year prior to May 1, 2001 the expense charge was made on the combined value of all investment options maintained under the contract with Equitable Life at a monthly rate of 1/12 of (i) 0.625 of 1% of the first $400 million and (ii) 0.620 of 1% of the excess over $400 million. Effective May 1, 2001 an expense charge is made on the combined value of all investment options maintained under the contract with Equitable Life at a monthly rate of 1/12 of (i) 0.645 of 1% of the first $400 million and (ii) 0.640 of 1% of the excess over $400 millon. A portion of the Program Expense Charge assessed by Equitable Life is made on behalf of the ADA and is equal to a monthly rate of 1/12 for (i) 0.025 of 1% of the first $400 million and (ii) 0.020 of 1% of the excess over $400 million. Currently, the ADA's portion of the Program Expense Charge was temporarily reduced to 0.01% for all asset value levels. The remainder of this charge is retained by Equitable Life. Administration Fees: Equitable Life receives a fee based on the value of the Equity Index Fund and the Lifecycle Funds -- Conservative and Moderate at a monthly rate of 1/12 of 0.15 of 1% of their respective ADA Program assets. Direct Operating and Other Expenses: In addition to the charges and fees mentioned above, the Funds are charged for certain costs and expenses directly related to its operations. These may include transfer taxes, SEC filing fees and certain related expenses including printing of SEC filings, prospectuses and reports. A record maintenance and report fee of $3 is deducted quarterly from each participant's aggregate account balance. For clients with Investment Only plans, a record maintenance fee of $1 is deducted quarterly. These charges and fees are paid to Equitable Life by the Funds and are recorded as expenses in the accompanying Statement of Operations. 4. TAXES No federal income tax based on net income or realized and unrealized capital gains was applicable to contracts SAI-37 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) - -------------------------------------------------------------------------------- participating in the Funds, by reason of applicable provisions of the Internal Revenue Code and no federal income tax payable by Equitable Life will affect such contracts. Accordingly, no federal income tax provision is required. 5. NET INCREASE (DECREASE) IN ADA UNITS OUTSTANDING
2001 2000 ---- ---- The Equity Index Fund (107,350) (652,997) The Lifecycle Fund - Conservative 27,034 (102,378) The Lifecycle Fund - Moderate (571,871) (355,876)
6. INVESTMENT INCOME RATIO Shown below is the investment income ratio throughout the periods indicated for the Funds. These amounts represent the dividends, excluding distributions of capital gains, received by the Funds from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as asset-based charges, that result in direct reductions in the unit value. The recognition of investment income by the Funds is affected by the timing of the declaration of dividends by the underlying mutual fund in which the Funds invest.
YEAR ENDED DECEMBER 31, -------------------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- The Equity Index Fund 1.37% 1.16% 1.52% 1.71% 2.49% The Lifecycle Fund - Conservative -- -- -- -- -- The LIfecycle Fund - Moderate -- -- -- -- --
7. UNIT VALUES - ADA Shown below are unit values ("contract unit values") and units outstanding for American Dental Association Members Retirement Program issued by Equitable Life. Expense as a percentage of average net assets excludes charges made directly to contract holder accounts through redemption of units.
YEAR ENDED DECEMBER 31, 2001 ------------------ THE EQUITY INDEX FUND, .93% Unit Value, end of period $ 25.03 Net Assets (000's) $141,165 Number of units outstanding, end of period (000's) 5,639 Total Return (12.89)% THE LIFECYCLE FUND - CONSERVATIVE, 1.29% Unit Value end of period $ 14.34 Net Assets (000's) $ 11,917 Number of units outstanding, end of period (000's) 831,033 Total Return (0.29)% THE LIFECYCLE FUND - MODERATE, .96% Unit Value, end of period $ 16.81 Net Assets (000's) $106,451 Number of units outstanding, end of period (000's) 6,334 Total Return (5.27)%
SAI-38 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Lifecycle Fund Group Trust -- Conservative In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Lifecycle Fund Group Trust -- Conservative at December 31, 2001, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP March 1, 2002 SAI-39 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Statement of Assets and Liabilities DECEMBER 31, 2001 - --------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $11,231,996)........................................................... $11,955,254 Interest receivable ........................................................... 5,118 - --------------------------------------------------------------------------------------------- Total assets ................................................................ 11,960,372 - --------------------------------------------------------------------------------------------- LIABILITIES Payable for Fund units redeemed ............................................... 1,894 Accrued expenses .............................................................. 2,395 - --------------------------------------------------------------------------------------------- Total liabilities ........................................................... 4,289 - --------------------------------------------------------------------------------------------- Net assets (equivalent to $15.88 per unit based on 753,041 outstanding)........ $11,956,083 =============================================================================================
The accompanying notes are an integral part of these financial statements. SAI-40 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Statement of Operations YEAR ENDED DECEMBER 31, 2001 - --------------------------------------------------------------------------------------- INVESTMENT INCOME Interest ................................................................ $ 100,853 Securities lending fee income (net of related expenses) ................. 569 - --------------------------------------------------------------------------------------- Total investment income ............................................... 101,422 - --------------------------------------------------------------------------------------- EXPENSES Management .............................................................. 16,314 Administration .......................................................... 12,000 Audit ................................................................... 5,500 Other ................................................................... 1,000 - --------------------------------------------------------------------------------------- Total expenses ........................................................ 34,814 - --------------------------------------------------------------------------------------- Net investment income (loss) .......................................... 66,608 - --------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................... 230,507 - --------------------------------------------------------------------------------------- 230,507 - --------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................... (182,246) - --------------------------------------------------------------------------------------- (182,246) - --------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ............................... 48,261 - --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ......... $ 114,869 =======================================================================================
The accompanying notes are an integral part of these financial statements. SAI-41 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE
Statements of Changes in Net Assets YEAR ENDED DECEMBER 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ..................................................... $ 66,608 $ 111,746 Net realized gain (loss) ......................................................... 230,507 426,390 Net change in unrealized appreciation (depreciation) ............................. (182,246) (166,509) - ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. 114,869 371,627 - ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions ..... 242,306 (1,570,117) - ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets ............................................. 357,175 (1,198,490) NET ASSETS Beginning of year ................................................................ 11,598,908 12,797,398 - ----------------------------------------------------------------------------------------------------------------------- End of year ...................................................................... $11,956,083 $ 11,598,908 =======================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-42 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE
Financial Highlights (FOR A UNIT OF PARTICIPATION OUTSTANDING THROUGHOUT THE YEAR) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 15.72 $ 15.18 $ 14.27 $ 12.77 $11.43 - ----------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ................ 0.09 0.15 0.10 0.09 0.06 Net realized and unrealized gain (loss) ......... 0.07 0.39 0.81 1.41 1.28 - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ 0.16 0.54 0.91 1.50 1.34 - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 15.88 $ 15.72 $ 15.18 $ 14.27 $12.77 ======================================================================================================================= Total return (%) (b) ............................ 1.02 3.56 6.38 11.75 11.72 Ratios to Average Net Assets Ratio of expenses (%) (c) ....................... 0.30 0.32 0.38 0.43 0.66 Ratio of net investment income (%) (d) .......... 0.57 0.96 0.66 0.68 0.46 Portfolio turnover (%) .......................... 30 71 42 77 44 Net assets, end of year (000's) ................. $11,956 $11,599 $12,797 $13,516 $7,249
- ---------- (a) Net investment income per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. (d) Ratio excludes income retained by funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-43 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Schedule of Investments (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) DECEMBER 31, 2001 - ---------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY UNITS COLLECTIVE INVESTMENTS -- 100% (A) VALUE - ---------------------------------------------------------------------- 357,238 Government Corporate Bond Fund .......... $ 6,001,596 21,469 Russell 2000 Index ...................... 590,735 8,925 S&P 500 Flagship Fund ................... 1,771,946 2,389,636 Short Term Investment Fund .............. 2,389,636 135,944 Daily EAFE Fund ......................... 1,201,341 ----------- TOTAL INVESTMENTS -- 100% (COST $11,231,996)....................... $11,955,254 ===========
- ---------- (a) Collective Investment Funds advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-44 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Notes to Financial Statements December 31, 2001 - -------------------------------------------------------------------------------- 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Lifecycle Fund Group Trust -- Conservative (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to seek to provide current income and a low to moderate growth of capital. The Fund will attempt to achieve its investment objective by investing in other collective investment funds (each an "underlying fund"), managed by the Trustee. State Street Bank is Trustee, custodian, and recordkeeper of the Fund. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Equity investments of the underlying funds for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Fixed income investments of the underlying funds are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or other State Street Bank collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal income taxes and no federal income tax provision is required. SAI-45 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Notes to Financial Statements December 31, 2001 (Concluded) - -------------------------------------------------------------------------------- D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon value of the Fund as of the Fund's valuation date last preceding the date on which such order to contribute or withdraw assets is received. The Trustee, in its sole discretion, reserves the right to value any contribution or withdrawal as of the next succeeding valuation date or another date as the Trustee deems appropriate when the order is not received timely or in good order or when processing the order as of the preceding valuation date would be detrimental to the participants. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody, administration and audit fees. The Trustee is paid a management fee by the Fund at the annual rate of 0.17% of the Fund's daily net asset value. The Trustee is paid an annual administration fee of $12,000. The Fund indirectly bears the expenses paid by the underlying funds. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (including securities lending fee income, if any) and net realized gains are retained by the Fund. 3. GLOBAL SECURITIES LENDING PROGRAM Fund participants have authorized the Fund to invest in certain collective investment funds that participate in the Global Securities Lending Program maintained by State Street Bank. Income earned from securities lending activities is recorded on the accrual basis. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2001 were $3,762,233 and $3,438,270, respectively. 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 2001 2000 ----------------------- ---------------------------- UNITS AMOUNT UNITS AMOUNT ------- ---------- -------- ----------- Units issued .................... 137,372 $2,152,300 157,095 $ 2,418,826 Units redeemed .................. 122,164 1,909,994 (262,395) (3,988,943) ------- ---------- -------- ----------- Net increase (decrease) ......... 15,208 $ 242,306 (105,300) $(1,570,117) ======= ========== ======== ===========
All of the Fund's units outstanding were held by 1 unitholder at December 31, 2001 and December 31, 2000, respectively. SAI-46 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Lifecycle Fund Group Trust -- Moderate In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Lifecycle Fund Group Trust -- Moderate at December 31, 2001, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP March 1, 2002 SAI-47 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Statement of Assets and Liabilities DECEMBER 31, 2001 - -------------------------------------------------------------------------------------------------------- ASSETS: Investments in securities, at value (cost $94,919,422)..................................................................... $106,760,420 Interest receivable .................................................................... 22,830 - -------------------------------------------------------------------------------------------------------- Total assets ........................................................................... 106,783,250 - -------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for Fund units redeemed ........................................................ 101,567 Accrued expenses ....................................................................... 14,873 - -------------------------------------------------------------------------------------------------------- Total liabilities ...................................................................... 116,440 - -------------------------------------------------------------------------------------------------------- NET ASSETS (EQUIVALENT TO $18.00 PER UNIT BASED ON 5,925,082 OUTSTANDING) .............. $106,666,810 ========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-48 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Statement of Operations YEAR ENDED DECEMBER 31, 2001 - ----------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest ................................................................ $ 500,317 Securities lending fee income (net of related expenses) ................. 11,564 - ----------------------------------------------------------------------------------------- Total investment income ................................................. 511,881 - ----------------------------------------------------------------------------------------- EXPENSES: Management .............................................................. 175,604 Administration .......................................................... 12,000 Audit ................................................................... 5,500 Other ................................................................... 1,000 - ----------------------------------------------------------------------------------------- Total expenses .......................................................... 194,104 - ----------------------------------------------------------------------------------------- Net investment income ................................................... 317,777 - ----------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ............................................................. 4,691,303 - ----------------------------------------------------------------------------------------- 4,691,303 - ----------------------------------------------------------------------------------------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION): Investments ............................................................. (10,482,217) - ----------------------------------------------------------------------------------------- (10,482,217) - ----------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................. (5,790,914) - ----------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ (5,473,137) =========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-49 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE
Statements of Changes in Net Assets - ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income (loss) ..................................................... $ 317,777 $ 608,276 Net realized gain (loss) ......................................................... 4,691,303 7,567,286 Net change in unrealized appreciation (depreciation) ............................. (10,482,217) (10,523,114) - ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. (5,473,137) (2,347,552) - ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions .... (10,567,566) (7,708,686) - ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets ............................................ (16,040,703) (10,056,238) NET ASSETS: Beginning of year ................................................................ 122,707,513 132,763,751 - ----------------------------------------------------------------------------------------------------------------------- End of year ...................................................................... $106,666,810 $122,707,513 =======================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-50 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE
Financial Highlights (FOR A UNIT OF PARTICIPATION OUTSTANDING THROUGHOUT THE YEAR) - ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $18.82 $19.16 $16.96 $14.60 $12.44 - ----------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ................ 0.05 0.09 0.06 0.06 0.05 Net realized and unrealized gain (loss) ......... (0.87) (0.43) 2.14 2.30 2.11 - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ (0.82) (0.34) 2.20 2.36 2.16 - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $18.00 $18.82 $19.16 $16.96 $14.60 ===================================================================================================================== Total return (%) (b) ............................ (4.36) (1.78) 12.97 16.16 17.36 Ratios to Average Net Assets .................... Ratio of expenses (%) (c) ....................... 0.17 0.18 0.19 0.19 0.20 Ratio of net investment (%) (d) ................. 0.28 0.47 0.34 0.37 0.37 Portfolio turnover (%) .......................... 21 51 33 46 22 Net assets, end of year (000,000s) .............. $ 107 $ 123 $ 133 $ 125 $ 108
- ---------- (a) Net investment income per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. (d) Ratio excludes income retained by funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-51 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Schedule of Investments (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) DECEMBER 31, 2001 - ------------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY UNITS COLLECTIVE INVESTMENTS -- 100% (A) VALUE - ------------------------------------------------------------------------------------- 1,920,618 Government Corporate Bond Fund ...................... $ 32,266,378 384,794 Russell 2000 Index Securities lending Fund .......... 10,588,005 186,627 S&P 500 Flagship Fund ............................... 37,052,649 10,706,584 Short Term Investment Fund .......................... 10,706,584 1,827,181 Daily EAFE Fund ..................................... 16,146,804 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $94,919,422)................................... $106,760,420 =====================================================================================
- ---------- (a) Collective investment funds advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-52 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Notes to Financial Statements December 31, 2001 - -------------------------------------------------------------------------------- 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Lifecycle Fund Group Trust -- Moderate (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to seek to provide growth of capital and a reasonable level of current income. The Fund will attempt to achieve its investment objective by investing in other collective investment funds (each an "underlying fund"), managed by the Trustee. State Street Bank is Trustee, custodian, and recordkeeper of the Fund. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments of the underlying funds for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Fixed income investments of the underlying funds are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for on trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal income taxes and no federal income tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon value of the Fund as of the Fund's valuation date last preceding the date on which such order to contribute or withdraw assets is received. The Trustee, in its sole SAI-53 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Notes to Financial Statements December 31, 2001 (Concluded) - -------------------------------------------------------------------------------- discretion, reserves the right to value any contribution or withdrawal as of the next succeeding valuation date or another date as the Trustee deems appropriate when the order is not received timely or in good order or when processing the order as of the preceding valuation date would be detrimental to the participants. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received during the year, including but not limited to management, administration and audit fees. The Trustee is paid a management fee at the annual rate of 0.17% of the Fund's daily net asset value. Additionally, the Trustee is paid an annual administration fee of $12,000. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (including security lending fee income, if any) and net realized gains are retained by the Fund. 3. GLOBAL SECURITIES LENDING PROGRAM Fund participants have authorized the Fund to invest in certain collective investment funds that participate in the Global Securities Lending Program maintained by State Street Bank. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the year ended December 31, 2001 were $23,474,897 and $33,576,234, respectively. 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 2001 2000 -------------------------- -------------------------- UNITS AMOUNT UNITS AMOUNT -------- ------------ -------- ------------ Units issued .................... 246,036 $ 4,484,300 459,404 $ 8,788,959 Units redeemed .................. (839,853) (15,051,866) (868,011) (16,497,645) -------- ------------ -------- ------------ Net increase (decrease) ......... (593,817) $(10,567,566) (408,607) $ (7,708,686) ======== ============ ======== ============
All of the Fund's units were held by 1 unitholder at December 31, 2001 and December 31, 2000, respectively. SAI-54 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company S&P 500 Flagship Fund and State Street Bank and Trust Company S&P 500 Flagship Non-Lending Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company S&P 500 Flagship Fund and State Street Bank and Trust Company S&P 500 Flagship Non-Lending Fund at December 31, 2001, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP February 1, 2002 SAI-55 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Statement of Assets and Liabilities December 31, 2001 - -------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $445,387,041) (cost $63,093,912,168) ............................................................... $70,874,408,545 Investments held as collateral for securities loaned .................................. 471,644,961 Receivable for Fund units issued ...................................................... 203,484,991 Receivable for investments sold ....................................................... 381,260,259 Dividends receivable .................................................................. 71,634,135 Interest receivable ................................................................... 1,148,149 Tax reclaims receivable ............................................................... 423,141 - -------------------------------------------------------------------------------------------------------- Total assets ....................................................................... 72,004,004,181 - -------------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned ........................................... 471,644,961 Payable for Fund units redeemed ....................................................... 206,771,401 Payable for investments purchased ..................................................... 238,710,393 Variation margin payable .............................................................. 5,855,475 Accrued expenses ...................................................................... 177,679 - -------------------------------------------------------------------------------------------------------- Total liabilities .................................................................. 923,159,909 - -------------------------------------------------------------------------------------------------------- Net assets ............................................................................ $71,080,844,272 ======================================================================================================== S&P 500 Flagship Fund (315,924,088 units outstanding, at $198.54 per unit net asset value) ................. $62,723,495,364 S&P 500 Flagship Non-Lending Fund (42,094,080 units outstanding, at $198.54 per unit net asset value) .................. 8,357,348,908 - -------------------------------------------------------------------------------------------------------- $71,080,844,272 ========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-56 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Statement of Operations Year Ended December 31, 2001 - ------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends ............................................................................... $ 931,550,884 Interest ................................................................................ 27,860,391 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 3,710,107 - ------------------------------------------------------------------------------------------------------------ Total investment income ............................................................... 963,121,382 - ------------------------------------------------------------------------------------------------------------ EXPENSES Custody ................................................................................. 2,249,135 Audit ................................................................................... 32,500 Other ................................................................................... 2,000 - ------------------------------------------------------------------------------------------------------------ Total expenses ........................................................................ 2,283,635 - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) .......................................................... 960,837,747 - ------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................... 373,836,671 Foreign currency transactions ......................................................... (766,940) Futures contracts ..................................................................... (80,845,025) - ------------------------------------------------------------------------------------------------------------ 292,224,706 - ------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation): Investments ........................................................................... (10,364,024,332) Futures contracts ..................................................................... 18,869,964 - ------------------------------------------------------------------------------------------------------------ (10,345,154,368) - ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) ................................................. (10,052,929,662) - ------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ (9,092,091,915) ============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-57 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND
Combined Statement of Changes in Net Assets YEAR ENDED DECEMBER 31, 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ........................................................... $ 960,837,747 $ 1,006,205,225 Net realized gain (loss) ............................................................... 292,224,706 7,154,961,592 Net change in unrealized appreciation (depreciation) ................................... (10,345,154,368) (15,793,456,838) Net increase (decrease) in net assets resulting from operations ........................ (9,092,091,915) (7,632,290,021) - ---------------------------------------------------------------------------------------------------------------------------------- Distributions of securities lending fee income allocated to the S&P 500 Flagship Fund participants .......................................................................... (3,710,107) (9,515,633) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions .......... 3,483,508,705 (5,560,073,356) Net increase (decrease) in net assets .................................................. (5,612,293,317) (13,201,879,010) NET ASSETS Beginning of year ..................................................................... 76,693,137,589 89,895,016,599 - ---------------------------------------------------------------------------------------------------------------------------------- End of year ........................................................................... $ 71,080,844,272 $ 76,693,137,589 ==================================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-58 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP NON-LENDING FUND
Financial Highlights (For a Unit of Participation Outstanding Throughout the Year) YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 2001 2000 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $225.33 $247.79 $204.72 $159.26 $119.40 - --------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ................ 2.76 2.87 2.98 2.76 2.64 Net realized and unrealized gain (loss) ......... (29.55) (25.33) 40.09 42.70 37.22 - --------------------------------------------------------------------------------------------------------------- Total from investment operations ................ (26.79) (22.46) 43.07 45.46 39.86 - --------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $198.54 $225.33 $247.79 $204.72 $159.26 =============================================================================================================== Total return (%) (b) ............................ (11.89) (9.06) 21.04 28.54 33.38 =============================================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (c) ....................... 0.00 0.00 0.00 0.00 0.00 - --------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) .............. 1.34 1.19 1.34 1.55 1.85 - --------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) .......................... 19 26 13 18 18 - --------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .............. $ 8,357 $12,332 $14,321 $12,791 $ 7,563 ===============================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) Zero amounts represent that which are less than 0.005% or (0.005%) if negative. The accompanying notes are an integral part of these financial statements. SAI-59 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND
Financial Highlights (For a Unit of Participation Outstanding Throughout the Year) YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 2001 2000 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year ........................ $225.33 $247.79 $204.72 $159.26 $119.40 - -------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) .......................... 2.77 2.90 2.99 2.77 2.64 Net realized and unrealized gain (loss) ................... (29.56) (25.33) 40.09 42.70 37.22 - -------------------------------------------------------------------------------------------------------------------------- Total from investment operations .......................... (26.79) (22.46) 43.07 45.46 39.86 ========================================================================================================================== Distribution of securities lending fee income (b) ......... (0.01) (0.03) (0.01) (0.01) (0.00) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .............................. $198.54 $225.33 $247.79 $204.72 $159.26 ========================================================================================================================== Total return (%) (c) ...................................... (11.89) (9.05) 21.04 28.55 33.38 ========================================================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (b) ................................. 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) ........................ 1.35 1.20 1.35 1.55 1.86 - -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) .................................... 19 26 13 18 18 - -------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) ........................ $62,723 $64,361 $75,574 $49,893 $36,664 ==========================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. The accompanying notes are an integral part of these financial statements. SAI-60 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- SHARES VALUE - ---------------------------------------------------------------------------------- COMMON STOCK -- 99.4% Government Corporate Bond Fund .............. 357,238 $ 6,001,596 Abbott Laboratories ......................... 10,387,812 579,120,519 ADC Telecommunications Inc. ................. 5,196,534 23,904,056 Adobe Systems Inc. .......................... 1,595,603 49,543,473 Advanced Micro Devices Inc. ................. 2,294,575 36,391,960 AES Corp. ................................... 3,561,510 58,230,689 Aetna Inc. .................................. 960,897 31,699,992 Aflac Inc. .................................. 3,582,719 87,991,579 Agilent Technologies Incorporated ........... 3,047,715 86,890,355 Air Products & Chemicals Inc. ............... 1,536,879 72,094,994 Alberto-Culver Co ........................... 389,820 17,440,547 Albertson's Incorporated .................... 2,699,741 85,014,844 Alcan Inc. .................................. 2,123,256 76,288,588 Alcoa Incorporated .......................... 5,840,366 207,625,011 Allegheny Energy Incorporated ............... 832,349 30,147,681 Allegheny Technologies Incorporated ......... 529,730 8,872,978 Allergan Inc. ............................... 882,957 66,265,923 Allied Waste Industries Inc. ................ 1,292,661 18,174,814 Allstate Corporation ........................ 4,857,801 163,707,894 Alltel Corp. ................................ 2,114,548 130,531,048 Altera Corp. ................................ 2,577,470 54,693,913 AMBAC Financial Group Inc. .................. 713,130 41,261,702 Amerada Hess Corporation .................... 604,143 37,758,938 Ameren Corporation .......................... 922,467 39,020,354 American Electric Power Co. Inc. ............ 2,180,119 94,900,580 American Express Company .................... 8,874,850 316,743,396 American Greetings Corp. .................... 416,504 5,739,425 American Home Products Corp. ................ 8,884,309 545,141,200 American International Group Inc. ........... 17,600,951 1,397,515,509 American Power Conversion Corp. ............. 1,288,633 18,633,633 AmerisourceBergen Corp. ..................... 689,382 43,810,226 Amgen Inc. .................................. 7,053,804 398,116,698 AMR Corp. ................................... 1,027,501 22,779,697 Amsouth Bancorporation ...................... 2,474,090 46,760,301 Anadarko Petroleum Corporation .............. 1,704,791 96,917,368 Analog Devices Inc. ......................... 2,420,595 107,450,212 Andrew Corp. ................................ 568,008 12,433,695 Anheuser-Busch Companies Inc. ............... 6,031,892 272,701,837
The accompanying notes are an integral part of these financial statements. SAI-61 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - ------------------------------------------------------------------------------------- AOL Time Warner Inc. ............................. 29,747,368 $ 954,890,513 Aon Corp. ........................................ 1,799,689 63,924,953 Apache Corp. ..................................... 923,112 46,044,802 Apple Computer Inc. .............................. 2,325,147 50,920,719 Applied Biosystems Group - Applera Corp. ......... 1,437,336 56,444,185 Applied Materials Inc. ........................... 5,473,723 219,496,292 Applied Micro Circuits Corp. ..................... 2,001,400 22,655,848 Archer-Daniels-Midland Co. ....................... 4,433,817 63,625,274 Ashland Inc. ..................................... 466,283 21,486,321 AT&T Corp. ....................................... 23,788,322 431,520,161 AT&T Wireless Services Inc. ...................... 16,906,588 242,947,670 Autodesk Inc. .................................... 355,289 13,241,621 Automatic Data Processing Inc. ................... 4,174,235 245,862,441 Autozone Inc. .................................... 745,740 53,544,132 Avaya Incorporated ............................... 1,902,943 23,120,757 Avery Dennison Corp. ............................. 736,097 41,611,563 Avon Products Incorporated ....................... 1,586,018 73,749,837 Baker Hughes Incorporated ........................ 2,308,777 84,201,097 Ball Corp. ....................................... 183,529 12,975,500 Bank of America Corporation ...................... 10,605,457 667,613,518 Bank of New York Co., Inc. ....................... 5,026,687 205,088,830 Bank One Corporation ............................. 7,908,124 308,812,242 Barrick Gold Corporation ......................... 3,538,854 56,444,721 Bausch & Lomb Inc. ............................... 359,155 13,525,777 Baxter International Inc. ........................ 4,008,676 214,985,294 BB&T Corp. ....................................... 2,925,809 105,650,963 Bear Stearns Cos., Inc. .......................... 631,188 37,012,864 Becton Dickinson & Co. ........................... 1,719,801 57,011,403 Bed Bath & Beyond Inc. ........................... 2,029,269 68,792,219 Bellsouth Corporation ............................ 12,566,935 479,428,570 Bemis Company Inc. ............................... 352,930 17,357,097 Best Buy Co., Inc. ............................... 1,400,626 104,318,624 Big Lots Incorporated ............................ 742,099 7,717,830 Biogen Inc. ...................................... 994,328 57,024,711 Biomet Inc. ...................................... 1,798,841 55,584,187 Black & Decker Corporation ....................... 543,947 20,523,120 BMC Software Inc. ................................ 1,629,028 26,667,188 Boeing Company ................................... 5,630,663 218,357,111 Boise Cascade Corp. .............................. 376,532 12,805,853
The accompanying notes are an integral part of these financial statements. SAI-62 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - -------------------------------------------------------------------------------- Boston Scientific Corp. .................... 2,766,612 $ 66,730,681 Bristol-Myers Squibb Co. ................... 13,062,926 666,209,226 Broadcom Corp. ............................. 1,747,245 71,409,903 Brown-Forman Corp. - Class B ............... 456,600 28,583,160 Brunswick Corp. ............................ 630,177 13,712,652 Burlington Northern Santa Fe Corp. ......... 2,621,676 74,796,416 Burlington Resources Incorporated .......... 1,455,910 54,654,861 C.R. Bard Inc. ............................. 338,740 21,848,730 Calpine Corporation ........................ 2,011,280 33,769,391 Campbell Soup Company ...................... 2,723,494 81,350,766 Capital One Financial Corp. ................ 1,395,960 75,312,042 Cardinal Health Inc. ....................... 3,044,309 196,845,020 Carnival Corp. ............................. 3,901,417 109,551,789 Caterpillar Incorporated ................... 2,295,849 119,958,110 Cendant Corporation ........................ 6,455,230 126,587,060 Centex Corp. ............................... 399,216 22,791,241 CenturyTel Inc. ............................ 963,967 31,618,118 Charles Schwab Corp. ....................... 9,222,374 142,670,126 Charter One Financial Inc. ................. 1,447,024 39,286,702 ChevronTexaco Corp. ........................ 7,205,243 645,661,825 Chiron Corp. ............................... 1,271,556 55,745,015 Chubb Corporation .......................... 1,190,383 82,136,427 CIENA Corporation .......................... 2,171,006 31,067,096 Cigna Corporation .......................... 1,002,304 92,863,466 Cincinnati Financial Corp. ................. 1,071,695 40,885,164 Cinergy Corporation ........................ 1,097,524 36,690,227 Cintas Corp. ............................... 1,130,408 54,259,584 Circuit City Stores Inc. ................... 1,407,338 36,520,421 Cisco Systems Inc. ......................... 49,297,288 892,773,886 Citigroup Incorporated ..................... 34,696,208 1,751,464,580 Citizens Communications Company ............ 1,913,052 20,393,134 Citrix Systems Inc. ........................ 1,238,497 28,064,342 Clear Channel Communications ............... 3,963,765 201,795,276 Clorox Co. ................................. 1,575,279 62,302,284 CMS Energy Corporation ..................... 913,892 21,960,825 Coca-Cola Co. .............................. 16,712,731 788,005,267 Coca-Cola Enterprises Inc. ................. 2,948,024 55,835,575 Colgate-Palmolive Co. ...................... 3,759,238 217,095,994 Comcast Corp. .............................. 30,000 1,080,000
The accompanying notes are an integral part of these financial statements. SAI-63 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - ------------------------------------------------------------------------------------------- Comcast Corp. .......................................... 6,406,396 $ 230,630,256 Comerica Inc. .......................................... 1,190,153 68,195,767 Compaq Computer Corp. .................................. 11,358,761 110,861,507 Computer Associates International Incorporated ......... 3,848,110 132,721,314 Computer Sciences Corp. ................................ 1,136,768 55,678,897 Compuware Corp. ........................................ 2,458,118 28,981,211 Comverse Technology Inc. ............................... 1,249,364 27,948,273 Conagra Foods Inc. ..................................... 3,677,586 87,416,219 Concord EFS Inc. ....................................... 3,241,368 106,252,043 Conexant Systems Inc. .................................. 1,653,227 23,740,340 Conoco Incorporated .................................... 4,184,856 118,431,425 Conseco Inc. ........................................... 2,267,856 10,114,638 Consolidated Edison Inc. ............................... 1,413,456 57,047,084 Constellation Energy Group Inc. ........................ 1,095,395 29,082,737 Convergys Corp. ........................................ 1,144,741 42,916,340 Cooper Industries Inc. ................................. 622,178 21,726,456 Cooper Tire & Rubber Co. ............................... 492,508 7,860,428 Coors (Adolph) Co. ..................................... 257,370 13,743,558 Corning Inc. ........................................... 6,222,553 55,505,173 Costco Wholesale Corp. ................................. 3,086,517 136,979,624 Countrywide Credit Industries Inc. ..................... 813,522 33,329,996 Crane Co. .............................................. 400,293 10,263,513 CSX Corporation ........................................ 1,456,613 51,054,286 Cummins Inc. ........................................... 273,931 10,557,301 CVS Corporation ........................................ 2,659,438 78,719,365 Dana Corp. ............................................. 981,784 13,627,162 Danaher Corp. .......................................... 988,604 59,622,707 Darden Restaurants Inc. ................................ 784,853 27,783,796 Deere & Company ........................................ 1,594,525 69,616,962 Dell Computer Corp. .................................... 17,534,074 476,576,131 Delphi Automotive Systems Corporation .................. 3,756,269 51,310,635 Delta Air Lines Inc. ................................... 823,317 24,090,255 DeLuxe Corp. ........................................... 465,692 19,363,473 Devon Energy Corporation ............................... 885,426 34,221,715 Dillards Inc. .......................................... 561,956 8,991,296 Dollar General Corp. ................................... 2,287,169 34,078,818 Dominion Resources Inc/Va .............................. 1,754,476 105,444,008 Dover Corporation ...................................... 1,351,826 50,112,190 Dow Chemical Company ................................... 6,101,278 206,101,171
The accompanying notes are an integral part of these financial statements. SAI-64 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - ----------------------------------------------------------------------------------- Dow Jones & Co., Inc ........................... 587,974 $ 32,179,817 DTE Energy Co. ................................. 1,096,630 45,992,662 Du Pont (E.I.) de Nemours & Co ................. 7,018,264 298,346,403 Duke Energy Corp. .............................. 5,198,369 204,087,967 Dynegy Incorporated ............................ 2,180,837 55,611,344 Eastman Chemical Company ....................... 511,558 19,960,993 Eastman Kodak Co. .............................. 1,938,956 57,063,475 Eaton Corp. .................................... 464,618 34,572,225 Ecolab Inc. .................................... 855,652 34,439,993 Edison International ........................... 2,179,005 32,902,976 El Paso Corporation ............................ 3,444,207 153,646,074 Electronic Data Systems Corporation ............ 3,127,284 214,375,318 Eli Lilly & Co. ................................ 7,584,524 595,688,515 EMC Corp. ...................................... 14,787,325 198,741,648 Emerson Electric Company ....................... 2,869,390 163,842,169 Engelhard Corp. ................................ 875,796 24,242,033 Entergy Corp. .................................. 1,546,937 60,500,706 EOG Resources Inc. ............................. 779,139 30,472,126 Equifax Inc. ................................... 956,745 23,105,392 Equity Office Properties Trust ................. 2,717,284 81,735,903 Equity Residential Properties Trust ............ 1,771,231 50,852,042 Exelon Corporation ............................. 2,192,461 104,975,033 Exxon Mobil Corp. .............................. 46,013,349 1,808,324,616 Family Dollar Stores Inc. ...................... 1,174,352 35,207,073 Federal Home Loan Mortgage Corporation ......... 4,681,658 306,180,433 Federal National Mortgage Association .......... 6,735,002 535,432,659 Federated Department Stores Inc. ............... 1,322,514 54,090,823 Fedex Corporation .............................. 2,038,478 105,756,239 Fifth Third Bancorp ............................ 3,848,378 236,021,023 First Data Corp. ............................... 2,617,060 205,308,357 Firstenegy Corporation ......................... 2,000,678 69,983,716 Fiserv Inc. .................................... 1,248,514 52,837,112 FleetBoston Financial Corp. .................... 7,126,986 260,134,989 Fluor Corporation .............................. 522,554 19,543,520 Ford Motor Company ............................. 12,209,381 191,931,469 Forest Laboratories Inc. ....................... 1,185,183 97,125,747 Fortune Brands Inc. ............................ 1,021,332 40,434,534 FPL Group Inc. ................................. 1,201,596 67,770,014 Franklin Resources Inc. ........................ 1,760,288 62,085,358
The accompanying notes are an integral part of these financial statements. SAI-65 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - ----------------------------------------------------------------------------------- Freeport-McMoran Copper & Gold Inc. .......... 941,905 $ 12,612,108 Gannett Co., Inc. ............................ 1,788,523 120,242,401 Gap Incorporated ............................. 5,730,096 79,877,538 Gateway Inc. ................................. 2,130,331 17,127,861 General Dynamics Corp. ....................... 1,343,847 107,023,975 General Electric Capital Corporation ......... 66,852,571 2,679,451,046 General Mills Inc. ........................... 2,437,609 126,780,044 General Motors Corp. ......................... 3,655,349 177,649,961 Genuine Parts Co. ............................ 1,189,963 43,671,642 Genzyme Corp-Genl Division ................... 1,405,210 84,115,871 Georgia-Pacific Corp. ........................ 1,509,199 41,668,984 Gillette Company ............................. 7,160,878 239,173,325 Golden West Financial Corp. .................. 1,071,494 63,057,422 Goodrich Corp. ............................... 686,187 18,266,298 Goodyear Tire & Rubber Co. ................... 1,087,353 25,889,875 Great Lakes Chemical Corp. ................... 349,841 8,494,139 Guidant Corp. ................................ 2,047,584 101,969,683 H&R Block Inc. ............................... 1,228,269 54,903,624 H.J. Heinz Co. ............................... 2,406,468 98,953,964 Halliburton Company .......................... 2,925,094 38,318,731 Harley-Davidson Inc. ......................... 2,030,801 110,292,802 Harrah's Entertainment Inc. .................. 792,697 29,337,716 Hartford Financial Services Group ............ 1,605,499 100,873,502 Hasbro Inc. .................................. 1,152,923 18,711,940 HCA Inc. ..................................... 3,602,238 138,830,253 Health Management Associates Inc. ............ 1,634,970 30,083,448 Healthsouth Corp. ............................ 2,607,220 38,639,000 Hercules Inc. ................................ 718,830 7,188,300 Hershey Foods Corporation .................... 963,832 65,251,426 Hewlett-Packard Co. .......................... 13,034,916 267,737,175 Hilton Hotels Corporation .................... 2,463,792 26,904,609 Home Depot Incorporated ...................... 15,746,441 803,225,955 Honeywell International Inc. ................. 5,477,020 185,232,816 Household Finance Corp. ...................... 3,144,019 182,164,461 Humana Incorporated .......................... 1,137,353 13,409,392 Huntington Bancshares Inc. ................... 1,715,887 29,496,098 Illinois Tool Works Inc. ..................... 2,078,549 140,759,338 Immunex Corp. ................................ 3,569,292 98,905,081 IMS Health Inc. .............................. 1,959,979 38,239,190
The accompanying notes are an integral part of these financial statements. SAI-66 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) SHARES VALUE - ------------------------------------------------------------------------------------ INCO Limited .................................... 1,191,684 $ 20,187,127 Ingersoll-Rand Co ............................... 1,126,632 47,104,484 Intel Corp. ..................................... 45,310,267 1,425,007,897 International Business Machines Corp. ........... 11,593,548 1,402,355,566 International Flavors & Fragrances Inc. ......... 640,562 19,031,097 International Game Technology ................... 492,132 33,612,616 International Paper Company ..................... 3,313,862 133,714,332 Interpublic Group Cos. Inc. ..................... 2,508,338 74,096,305 Intuit Inc. ..................................... 1,387,971 59,377,399 ITT Industries Inc. ............................. 655,536 33,104,568 J.C. Penney Co., Inc. ........................... 1,786,638 48,060,562 Jabil Circuit Inc. .............................. 1,285,808 29,213,558 JDS Uniphase Corporation ........................ 8,779,357 76,204,819 Jefferson-Pilot Corp. ........................... 1,012,887 46,866,281 John Hancock Financial Services ................. 2,051,101 84,710,471 Johnson & Johnson ............................... 20,595,758 1,217,209,298 Johnson Controls Inc. ........................... 588,037 47,483,988 Jones Apparel Group Inc. ........................ 810,599 26,887,569 JP Morgan Chase & Co. ........................... 13,360,474 485,653,230 K Mart Corporation .............................. 3,277,983 17,897,787 KB Home ......................................... 299,572 12,012,837 Kellogg Company ................................. 2,709,002 81,540,960 Kerr-McGee Corp. ................................ 678,001 37,154,455 Keycorp ......................................... 2,838,634 69,092,352 Keyspan Corporation ............................. 963,299 33,378,310 Kimberly-Clark Corp. ............................ 3,582,702 214,245,580 Kinder Morgan Inc. .............................. 769,014 42,826,390 King Pharmaceuticals Inc. ....................... 1,649,647 69,499,628 KLA-Tencor Corp. ................................ 1,258,697 62,381,023 Knight Ridder Inc. .............................. 489,694 31,795,831 Kohls Corporation ............................... 2,262,761 159,388,885 Kroger Company .................................. 5,666,207 118,253,740 Leggett & Platt Inc. ............................ 1,339,985 30,819,655 Lehman Brothers Holdings Inc. ................... 1,658,160 110,765,088 Lexmark International Group Inc. ................ 857,069 50,567,071 Limited Inc. .................................... 2,837,082 41,761,847 Lincoln National Corp. .......................... 1,280,689 62,203,065 Linear Technology Corp. ......................... 2,148,037 83,859,364 Liz Claiborne Inc. .............................. 354,158 17,619,361
The accompanying notes are an integral part of these financial statements. SAI-67 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - ----------------------------------------------------------------------------------- Lockheed Martin Corp. ........................ 2,904,521 $ 135,553,995 Loews Corp. .................................. 1,313,423 72,737,366 Louisiana-Pacific Corp. ...................... 729,720 6,158,837 Lowe's Companies ............................. 5,232,879 242,857,914 LSI Logic Corp. .............................. 2,413,817 38,090,032 Lucent Technologies Inc. ..................... 23,018,400 144,785,736 Manor Care Inc. .............................. 689,576 16,349,847 Marathon Oil Corporation ..................... 2,088,688 62,660,640 Marriott International Inc. .................. 1,653,407 67,210,995 Marsh & McLennan Cos., Inc. .................. 1,840,751 197,788,695 Masco Corporation ............................ 3,075,382 75,346,859 Mattel Inc. .................................. 2,874,287 49,437,736 Maxim Integrated Products Inc. ............... 2,196,628 115,344,936 May Department Stores Co. .................... 2,044,194 75,594,294 Maytag Corp. ................................. 505,502 15,685,727 MBIA Inc. .................................... 986,287 52,894,572 MBNA Corp. ................................... 5,704,170 200,786,784 McDermott International Inc. ................. 478,165 5,867,085 McDonald's Corp. ............................. 8,653,344 229,054,016 McGraw-Hill Cos., Inc. ....................... 1,308,532 79,794,281 McKesson Corp. ............................... 1,907,209 71,329,617 Mead Corp. ................................... 664,767 20,534,653 Medimmune Inc. ............................... 1,430,640 66,310,164 Medtronic Inc. ............................... 8,168,611 418,314,569 Mellon Financial Corp. ....................... 3,197,926 120,305,976 Merck & Co., Inc. ............................ 15,299,572 899,614,834 Mercury Interactive Corp. .................... 553,125 18,795,188 Meredith Corp. ............................... 325,210 11,593,737 Merrill Lynch & Company Inc. ................. 5,678,472 295,961,961 Metlife Incorporated ......................... 4,991,844 158,141,618 MGIC Investment Corp. ........................ 712,718 43,988,955 Micron Technology Inc. ....................... 3,986,796 123,590,676 Microsoft Corp. .............................. 36,173,538 2,396,496,892 Millipore Corp. .............................. 315,134 19,128,634 Minnesota Mining & Manufacturing Co. ......... 2,674,494 316,151,936 Mirant Corporation ........................... 2,264,890 36,283,538 Molex Inc. ................................... 1,326,448 41,053,566 Moodys Corporation ........................... 1,051,658 41,919,088 Morgan Stanley Dean Witter & Co. ............. 7,438,849 416,129,213
The accompanying notes are an integral part of these financial statements. SAI-68 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - -------------------------------------------------------------------------- Motorola Incorporated ................ 14,752,157 $ 221,577,398 Nabors Industries Inc. ............... 986,784 33,876,295 National City Corp. .................. 3,997,455 116,885,584 National Semiconductor Corp. ......... 1,166,560 35,918,382 Navistar International Corp. ......... 406,140 16,042,530 NCR Corp. ............................ 647,031 23,849,563 Network Appliance Inc. ............... 2,174,727 47,561,279 New York Times Co. ................... 1,070,696 46,307,602 Newell Rubbermaid Inc. ............... 1,838,469 50,686,590 Newmont Mining Corp. ................. 1,307,861 24,993,224 Nextel Communications Inc. ........... 5,080,938 55,687,080 Niagara Mohawk Holdings Inc. ......... 1,074,333 19,047,924 Nicor Inc. ........................... 299,263 12,461,311 Nike Incorporated .................... 1,798,541 101,149,946 Nisource Incorporated ................ 1,380,153 31,826,328 Noble Drilling Corporation ........... 906,274 30,849,567 Nordstrom Inc. ....................... 898,153 18,169,635 Norfolk Southern Corp. ............... 2,599,191 47,643,171 Nortel Networks Corporation .......... 21,131,107 158,483,303 Northern Trust Corp. ................. 1,494,846 90,019,626 Northrop Grumman Corp. ............... 740,672 74,667,144 Novell Inc. .......................... 2,407,698 11,051,334 Novellus Systems Inc. ................ 964,693 38,057,139 Nucor Corp. .......................... 519,643 27,520,293 Nvidia Corporation ................... 931,187 62,296,410 Occidental Petroleum Corp. ........... 2,475,159 65,665,968 Office Depot Inc. .................... 1,993,016 36,950,517 Omnicom Group Inc. ................... 1,243,631 111,118,430 Oracle Corp. ......................... 37,586,395 519,068,115 PACCAR Inc. .......................... 506,050 33,207,001 Pactiv Corporation ................... 1,070,767 19,006,114 Pall Corp. ........................... 816,005 19,633,080 Palm Incorporated .................... 3,794,692 14,723,405 Parametric Technology Corp. .......... 1,775,786 13,868,889 Parker Hannifin Corp. ................ 802,483 36,841,995 Paychex Inc. ......................... 2,490,220 86,784,167 Peoples Energy Corp. ................. 238,284 9,038,112 PeopleSoft Inc. ...................... 1,969,747 79,183,829 Pepsi Bottling Group Inc. ............ 1,923,781 45,208,854
The accompanying notes are an integral part of these financial statements. SAI-69 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - -------------------------------------------------------------------------------------------- PepsiCo Inc. ............................................ 11,757,669 $ 572,480,904 PerkinElmer Inc. ........................................ 841,580 29,472,132 Pfizer Inc. ............................................. 42,389,120 1,689,206,432 PG&E Corp. .............................................. 2,587,178 49,777,305 Pharmacia Corporation ................................... 8,694,030 370,800,379 Phelps Dodge Corporation ................................ 528,441 17,121,488 Philip Morris Companies Inc. ............................ 14,577,690 668,387,086 Phillips Petroleum Co. .................................. 2,535,084 152,764,162 Pinnacle West Capital Corp. ............................. 564,055 23,605,702 Pitney Bowes Incorporated ............................... 1,641,886 61,751,332 Placer Dome Incorporated ................................ 2,182,627 23,812,461 PMC - Sierra Inc. ....................................... 1,094,631 23,271,855 PNC Financial Services Group Inc. ....................... 1,988,651 111,762,186 Power One Incorporated .................................. 546,144 5,685,359 PPG Industries Incorporated ............................. 1,170,099 60,517,520 Ppl Corporation ......................................... 1,008,634 35,150,895 Praxair Incorporated .................................... 1,088,058 60,115,205 Procter & Gamble Company ................................ 8,668,135 685,909,523 Progress Energy Incorporated ............................ 1,446,811 65,149,899 Progressive Corporation Ohio ............................ 492,803 73,575,488 Providian Financial Corp. ............................... 1,922,849 6,826,114 Public Service Enterprise Group Inc. .................... 1,432,283 60,428,020 Pulte Homes Inc. ........................................ 396,624 17,717,194 Qlogic Corp. ............................................ 618,180 27,515,192 Qualcomm Inc. ........................................... 5,059,073 255,483,186 Quintiles Transnational Corp. ........................... 808,993 12,984,338 Qwest Communications International Incorporated ......... 11,131,941 157,294,326 RadioShack Corporation .................................. 1,240,480 37,338,448 Raytheon Company ........................................ 2,563,095 83,223,695 Reebok International Ltd. ............................... 392,933 10,412,725 Regions Financial Corp. ................................. 1,514,916 45,356,585 Reliant Energy Inc. ..................................... 2,002,788 53,113,938 Robert Half International Inc. .......................... 1,196,532 31,947,404 Rockwell Collins Inc. ................................... 1,220,482 23,799,399 Rockwell International Corp. ............................ 1,224,490 21,869,391 Rohm & Haas Company ..................................... 1,463,733 50,689,074 Rowan Companies Inc. .................................... 643,098 12,456,808 Royal Dutch Petroleum Co. ............................... 14,323,074 702,117,087 RR Donnelley & Sons Co. ................................. 792,174 23,519,646
The accompanying notes are an integral part of these financial statements. SAI-70 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- --------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - --------------------------------------------------------------------------------------- Ryder Systems Inc. ............................... 398,151 $ 8,819,045 Sabre Holdings Corp. ............................. 887,250 37,575,038 SAFECO Corp. ..................................... 852,557 26,557,151 Safeway Incorporated ............................. 3,445,948 143,868,329 Sanmina-SCI Corp. ................................ 3,603,593 71,711,501 Sapient Corp. .................................... 823,878 6,360,338 Sara Lee Corporation ............................. 5,294,500 117,696,735 SBC Communications Inc. .......................... 22,671,729 888,051,625 Schering-Plough Corporation ...................... 9,872,515 353,534,762 Schlumberger Ltd. ................................ 3,876,779 213,029,006 Scientific-Atlanta Inc. .......................... 1,089,930 26,092,924 Sealed Air Corp. ................................. 560,027 22,860,302 Sears Roebuck and Company ........................ 2,184,808 104,084,253 Sempra Energy .................................... 1,405,727 34,510,598 Sherwin-Williams Co. ............................. 1,073,200 29,513,000 Siebel Systems Inc. .............................. 3,047,731 85,275,513 Sigma-Aldrich .................................... 508,602 20,044,005 Snap-On Inc. ..................................... 389,151 13,098,823 Solectron Corp. .................................. 5,344,144 60,281,944 Southern Co. ..................................... 4,570,190 115,854,317 Southtrust Corp. ................................. 2,273,178 56,079,301 Southwest Airlines Company ....................... 5,107,755 94,391,312 Sprint Corp-FON Group ............................ 5,927,092 119,016,007 Sprint Corp-PCS Group ............................ 6,602,157 161,158,652 St. Jude Medical Inc. ............................ 572,569 44,459,983 St. Paul Companies ............................... 1,449,440 63,731,877 Stanley Works .................................... 571,801 26,628,773 Staples Inc. ..................................... 3,044,955 56,940,659 Starbucks Corp. .................................. 2,662,879 50,727,845 Starwood Hotels & Resorts Worldwide Inc. ......... 1,346,861 40,203,801 State Street Corp. # ............................. 2,184,071 114,117,710 Stilwell Financial Inc. .......................... 1,493,164 40,643,924 Stryker Corp. .................................... 1,303,751 76,099,946 Sun Microsystems Inc. ............................ 21,899,072 269,358,586 Sunoco Incorporated .............................. 563,143 21,027,760 Suntrust Banks Incorporated ...................... 1,949,412 122,228,132 Supervalu Incorporated ........................... 890,736 19,703,080 Symbol Technologies Inc. ......................... 1,551,397 24,636,184 Synovus Financial Corp. .......................... 1,933,674 48,438,534
The accompanying notes are an integral part of these financial statements. SAI-71 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - ----------------------------------------------------------------------------------- Sysco Corporation ............................. 4,493,480 $ 117,819,046 T Rowe Price Group Inc. ....................... 855,350 29,706,306 Target Corporation ............................ 6,020,197 247,129,087 Teco Energy Incorporated ...................... 914,432 23,994,696 Tektronix Inc. ................................ 628,718 16,208,350 Tellabs Inc. .................................. 2,735,030 40,916,049 Temple Inland Inc. ............................ 327,119 18,557,461 Tenet Healthcare Corporation .................. 2,164,281 127,086,580 Teradyne Inc. ................................. 1,163,679 35,073,285 Texas Instruments Inc. ........................ 11,694,654 327,450,312 Textron Inc. .................................. 965,184 40,016,529 Thermo Electron Corp. ......................... 1,245,332 29,713,622 Thomas & Betts Corp. .......................... 400,602 8,472,732 Tiffany & Co. ................................. 1,015,928 31,971,254 TJX Companies, Inc. ........................... 1,871,138 74,583,561 TMP Worldwide Inc. ............................ 713,472 30,607,949 Torchmark Corp. ............................... 834,913 32,837,128 Toys R Us Incorporated ........................ 1,309,971 27,168,799 Transocean Sedco Forex Inc. ................... 2,117,074 71,599,443 Tribune Co. ................................... 1,989,708 74,474,770 Tricon Global Restaurants Inc. ................ 981,510 48,290,292 TRW Incorporated .............................. 851,741 31,548,487 Tupperware Corp. .............................. 376,931 7,255,922 TXU Corporation ............................... 1,710,205 80,636,166 Tyco International Ltd. ....................... 13,343,083 785,907,589 Unilever NV ................................... 3,789,992 218,341,439 Union Pacific Corporation ..................... 1,676,513 95,561,241 Union Planters Corporation .................... 932,519 42,084,582 Unisys Corp. .................................. 2,119,237 26,575,232 United Sts Steel Corporation New .............. 481 8,711 United Technologies Corp. ..................... 3,203,792 207,061,077 Unitedhealth Group Inc. ....................... 2,114,831 149,666,590 Univision Communications Incorporated ......... 1,477,883 59,795,146 Unocal Corp. .................................. 1,638,332 59,094,635 Unumprovident Corporation ..................... 1,638,673 43,441,221 US Airways Group Inc. ......................... 453,716 2,876,559 U.S. Bancorp .................................. 13,113,565 274,466,915 USA Education Inc. ............................ 1,080,283 90,765,378 UST Inc. ...................................... 1,090,152 38,155,320
The accompanying notes are an integral part of these financial statements. SAI-72 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) SHARES VALUE - ----------------------------------------------------------------------------------- USX United States Steel ........................ 599,418 $ 10,855,460 Veritas Software Co. ........................... 2,732,067 122,478,564 Verizon Communications ......................... 18,235,768 865,469,559 VF Corp. ....................................... 750,350 29,271,154 Viacom Inc. Class B ............................ 11,972,176 528,571,570 Visteon Corporation ............................ 882,173 13,267,881 Vitesse Semiconductor Corp. .................... 1,223,916 15,213,276 Vulcan Materials Company ....................... 675,500 32,383,470 W.W. Grainger Inc. ............................. 635,550 30,506,400 Wachovia Corporation ........................... 9,129,492 286,300,869 Wal-Mart Stores Inc. ........................... 29,981,021 1,725,407,759 Walgreen Co. ................................... 6,877,544 231,498,131 Walt Disney Co. ................................ 13,885,071 287,698,671 Washington Mutual Inc. ......................... 5,953,675 194,685,172 Waste Management Inc. .......................... 4,195,648 133,883,128 Waters Corp. ................................... 874,500 33,869,385 Watson Pharmaceuticals Inc. .................... 714,345 22,423,290 Wellpoint Health Networks Incorporated ......... 420,715 49,160,548 Wells Fargo & Company .......................... 11,509,081 500,069,569 Wendy's International Inc. ..................... 785,705 22,919,015 Westvaco Corporation ........................... 678,655 19,307,735 Weyerhaeuser Company ........................... 1,431,021 77,389,616 Whirlpool Corporation .......................... 456,027 33,440,460 Willamette Industries Inc. ..................... 727,683 37,926,838 William Wrigley Jr. Co. ........................ 1,503,062 77,212,295 Williams Cos Incorporated ...................... 3,433,349 87,619,066 Winn-Dixie Stores Inc. ......................... 944,769 13,462,958 WorldCom Inc-WorldCom Group .................... 19,548,476 275,242,542 Worthington Industries ......................... 563,332 7,999,314 Xcel Energy Incorporated ....................... 2,285,379 63,396,413 Xerox Corp. .................................... 4,637,616 48,323,959 Xilinx Inc. .................................... 2,220,413 86,707,128 Xl Capital Limited ............................. 884,076 80,769,183 Yahoo Inc. ..................................... 3,764,706 66,785,884 Zimmer Holdings Inc. ........................... 1,308,950 39,975,333 Zions Bancorporation ........................... 616,752 32,428,820 --------------- TOTAL COMMON STOCK ............................. 70,431,497,105 ---------------
The accompanying notes are an integral part of these financial statements. SAI-73 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
PRINCIPAL AMOUNT LONG TERM INSTRUMENTS -- 0.1% VALUE - --------------- ------------------ $ 75,600,000 United States Treasury Bills (a) 1.65% 14-MAR-02 .......... $ 73,350,520 STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS FOR TAX EXEMPT UNITS RETIREMENT FUNDS -- 0.5% - ------------ 367,560,920 Short Term Investment Fund* 2.43% ......................... 367,560,920 --------------- TOTAL INVESTMENTS -- 100% ................................. (COST $63,093,912,168)..................................... $70,874,408,545 ===============
- ---------- * Collective investment fund advised by State Street Global Advisors. # Parent company of State Street Bank and Trust Company. (a) At December 31, 2001, U.S. Treasury Bills with principal of $75,600,000 were pledged to cover initial margin requirements for open futures contracts. The following futures contracts were pledged to cover initial margin requirements for open futures contracts. The following futures contracts were open at December 31, 2001:
NUMBER OF FUTURES CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACT LONG/(SHORT) COST DATE GAIN/(LOSS) - --------------- ------------ ------------ ---------- ----------- S&P 500 Index 2,319 $665,021,485 March 2002 $1,236,215 ==========
The accompanying notes are an integral part of these financial statements. SAI-74 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") S&P 500 Flagship Fund and State Street Bank and Trust Company S&P 500 Flagship Fund (collectively, the "Fund") were formed by State Street Bank under the State Street Bank and Trust Company Investment Funds For Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match the return of the S&P 500 Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date. Interest income earned on securities, if any, is recorded net of applicable withholding taxes on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody and audit fees. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-75 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending fees, if any, is distributed monthly to participants of the Lending Fund. G. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the equity market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the daily fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. 3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the S&P 500 Flagship Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the S&P 500 Flagship Non-Lending Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2001, the market value of securities loaned by the Lending Fund was $445,387,041 against which was held cash collateral of $471,644,961 and securities of $10,317. Cash collateral provided by the Borrowers is invested State Street Bank and Trust Company Quality A Short-Term Investment Fund. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. SAI-76 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2001 were $18,034,841,869 and $13,840,426,696, respectively. 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 2001 2000 ------------------------------- -------------------------------- UNITS AMOUNT UNITS AMOUNT ----------- ---------------- ------------ ---------------- LENDING FUND Units issued .................. 99,682,659 $ 19,746,911,922 85,151,659 $ 20,427,157,830 Issued upon reinvestment of distributions ................ 2,093 411,656 -- -- Units redeemed ................ (69,392,439) (13,495,927,787) (104,516,489) (25,270,965,642) ----------- ---------------- ------------ ---------------- Total ........................ 30,292,313 $ 6,251,395,791 (19,364,830) $ (4,843,807,812) ----------- ---------------- ------------ ---------------- NON-LENDING FUND Units issued .................. 10,183,674 $ 2,090,382,395 16,353,498 $ 4,008,962,635 Units redeemed ................ (22,818,968) (4,858,269,481) (19,421,298) (4,725,228,179) ----------- ---------------- ------------ ---------------- Total ........................ (12,635,294) $ (2,767,887,086) (3,067,800) $ (716,265,544) ----------- ---------------- ------------ ---------------- Net increase (decrease) ....... 17,657,019 $ 3,483,508,705 (22,432,630) $ (5,560,073,356) =========== ================ ============ ================
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2001 held by 1 of the Lending Fund's unitholders aggregated 33% of the Lending Fund's total units outstanding. NON-LENDING FUND Units in excess of 10% of the Non-Lending Fund units outstanding at December 31, 2001 held by 4 of the Non-Lending Fund's unitholders aggregated 73% of the Non-Lending Fund's total units outstanding. SAI-77 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Russell 2000 Index Securities Lending Fund and State Street Bank and Trust Company Russell 2000 Index Fund In our opinion, the accompanying combined statements of assets and liabilities, including the schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Russell 2000 Index Securities Lending Fund and State Street Bank and Trust Company Russell 2000 Index Fund at December 31, 2001, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP February 8, 2002 SAI-78 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Statement of Assets and Liabilities December 31, 2001 - -------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $346,329,560), (total cost $2,767,491,916).................................................................. $2,637,068,959 Investments held as collateral for securities loaned ......................................... 369,692,783 Receivable for Fund units issued ............................................................. 32,036,049 Receivable for investments sold .............................................................. 3,241,429 Dividends receivable ......................................................................... 2,981,543 Interest receivable .......................................................................... 148,546 Tax reclaim receivable ....................................................................... 2,210 - -------------------------------------------------------------------------------------------------------------- Total assets .............................................................................. 3,045,171,519 - -------------------------------------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------------------------------------- Payable for collateral on securities loaned .................................................. 369,692,783 Payable for Fund units redeemed .............................................................. 7,596,899 Payable for investments purchased ............................................................ 25,611,474 Variation margin payable ..................................................................... 731,168 Accrued expenses ............................................................................. 77,909 - -------------------------------------------------------------------------------------------------------------- Total liabilities ......................................................................... 403,710,233 - -------------------------------------------------------------------------------------------------------------- Net assets ................................................................................... $2,641,461,286 ============================================================================================================== Russell 2000 Index Securities Lending Fund (83,097,238 units outstanding, at $27.52 per unit net asset value).......................................................... $2,286,512,621 Russell 2000 Index Fund (12,899,668 units outstanding, at $27.52 per unit net asset value) ... 354,948,665 - -------------------------------------------------------------------------------------------------------------- $2,641,461,286 ==============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-79 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Statement of Operations December 31, 2001 - ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of taxes withheld of $10,157)............................................... $ 31,048,788 Interest .................................................................................. 2,856,600 Securities lending fee income (net of related expenses), allocated to the Lending Fund .... 1,519,084 - ------------------------------------------------------------------------------------------------------------- Total investment income ................................................................. 35,424,472 - ------------------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................................... 707,814 Audit ..................................................................................... 21,000 Other ..................................................................................... 1,500 - ------------------------------------------------------------------------------------------------------------- Total expenses .......................................................................... 730,314 - ------------------------------------------------------------------------------------------------------------- Net investment income (loss) ............................................................ 34,694,158 - ------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ............................................................................. (68,014,698) Futures contracts ....................................................................... 1,949,412 - ------------------------------------------------------------------------------------------------------------- (66,065,286) - ------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ............................................................................. 93,736,611 Futures contracts ....................................................................... (2,316,794) - ------------------------------------------------------------------------------------------------------------- 91,419,817 - ------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................................... 25,354,531 - ------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ $ 60,048,689 =============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-80 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Statement of Changes in Net Assets December 31, 2001
YEAR ENDED DECEMBER 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ............................................................. $ 34,694,158 $ 39,142,017 Net realized gain (loss) ................................................................. (66,065,286) 182,093,370 Net change in unrealized appreciation (depreciation) ..................................... 91,419,817 (378,019,360) - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .......................... 60,048,689 (156,783,973) - ----------------------------------------------------------------------------------------------------------------------------- Distributions of securities lending fee income allocated to the lending fund participants (1,519,084) (1,820,976) - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions ............ 383,250,199 336,155,267 - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets .................................................... 441,779,804 177,550,318 NET ASSETS Beginning of year ....................................................................... 2,199,681,482 2,022,131,164 - ----------------------------------------------------------------------------------------------------------------------------- End of year ............................................................................. $2,641,461,286 $2,199,681,482 =============================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-81 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------- 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .................... $26.92 $27.78 $23.07 $23.77 $19.24 - ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ...................... 0.41 0.44 0.39 0.38 0.36 Net realized and unrealized gain (loss) ............... 0.21 (1.28) 4.34 (1.06) 4.19 - ----------------------------------------------------------------------------------------------------------------- Total from investment operations ...................... 0.62 (0.86) 4.71 (0.70) 4.53 Distribution of securities lending fee income ......... (0.02) (0.02) (0.02) (0.02) (0.02) - ----------------------------------------------------------------------------------------------------------------- Net asset value, end of year .......................... $27.52 $26.92 $27.78 $23.07 $23.77 ================================================================================================================= Total return (%) (b) .................................. 2.33 (3.01) 20.50 (2.88) 23.66 ================================================================================================================= Ratios to Average Net Assets Ratio of expenses (%) ................................. 0.03 0.03 0.03 0.04 0.06 - ----------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) .................... 1.56 1.57 1.61 1.61 1.63 - ----------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) ................................ 91 76 51 57 105 - ----------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .................... $2,287 $1,818 $1,904 $1,256 $1,174 =================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. The accompanying notes are an integral part of these financial statements. SAI-82 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $26.92 $27.78 $23.07 $23.77 $19.24 - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ................ 0.39 0.42 0.37 0.36 0.34 Net realized and unrealized gain (loss) ......... 0.21 (1.28) 4.34 (1.06) 4.19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations ................ 0.60 (0.86) 4.71 (0.70) 4.53 - ----------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $27.52 $26.92 $27.78 $23.07 $23.77 =========================================================================================================== Total return (%) (b) ............................ 2.23 (3.10) 20.42 (2.94) 23.54 =========================================================================================================== Ratios to Average Net Assets Ratio of expenses (%) ........................... 0.03 0.03 0.03 0.04 0.06 - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) .............. 1.48 1.48 1.54 1.55 1.56 - ----------------------------------------------------------------------------------------------------------- Portfolio turnover (%) .......................... 91 76 51 57 105 - ----------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .............. $ 355 $ 382 $ 118 $ 129 $ 120 ===========================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. The accompanying notes are an integral part of these financial statements. SAI-83 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- --------------------------------------------------------------------------------- SHARES VALUE - --------------------------------------------------------------------------------- COMMON STOCK -- 97.0% (unless otherwise noted) 1-800 Contacts Inc. ............................ 20,200 $ 251,288 1-800-Flowers.com Inc. ......................... 27,085 422,526 3 Dimensional Pharmaceutical Inc. .............. 17,900 151,971 3D Systems Corp. ............................... 24,300 346,275 3DO Co. ........................................ 98,667 205,227 3TEC Energy Corporation ........................ 47,000 658,000 4 Kids Entertainment Inc. ...................... 29,884 598,577 7-Eleven Inc. .................................. 79,500 930,945 99 Cents Only Stores ........................... 85,798 3,268,904 A. Schulman Inc. ............................... 94,918 1,295,631 A.O. Smith Corp. ............................... 29,979 584,591 Aaipharma Incorporated ......................... 29,500 742,220 AAR Corp. ...................................... 72,059 649,252 Aaron Rents Inc. ............................... 42,996 700,835 Abiomed Inc. ................................... 43,776 692,536 ABM Industries Inc. ............................ 56,165 1,760,773 Acacia Research Corp. .......................... 60,373 668,329 Acadia Reality Trust ........................... 56,800 360,680 Acclaim Entertainment Inc. ..................... 176,400 934,920 Accredo Health Incorporated .................... 84,023 3,335,713 Ackerley Group Inc. ............................ 44,779 783,633 Aclara BioSciences Incorporated ................ 104,208 528,335 Act Manufacturing Inc. ......................... 27,228 9,530 Actel Corp. .................................... 73,960 1,472,544 Action Performance Cos., Inc. .................. 47,500 1,453,975 Active Power Incorporated ...................... 112,100 762,280 Activision Inc. ................................ 112,150 2,917,021 Actrade Financial Technologies Limited ......... 22,300 656,735 Actuate Corporation ............................ 146,839 773,842 ACTV Incorporated .............................. 121,376 226,973 Acuity Brands Incorporated ..................... 128,631 1,556,435 Adaptec Inc. ................................... 342,200 4,961,900 Ade Corp. ...................................... 27,076 270,760 Adelphia Business Solutions Inc. ............... 84,795 49,198 Administaff Inc. ............................... 69,580 1,907,188 Adolor Corporation ............................. 102,042 1,831,654 Adtran Inc. .................................... 68,700 1,753,224 Advanced Digital Information ................... 193,498 3,103,708 Advanced Energy Industries Inc. ................ 60,488 1,611,400 Advanced Marketing Services Inc. ............... 47,632 869,284 Advanced Neuromodulation Systems Inc. .......... 20,200 712,050 Advanced Tissue Sciences Inc. .................. 231,398 1,008,895 Advanta Corp. .................................. 65,042 646,517 Advo Inc. ...................................... 60,162 2,586,966 AEP Industries Inc. ............................ 5,000 119,800 Aeroflex Inc. .................................. 192,098 3,636,415 Aether Systems Inc. ............................ 64,900 597,080
The accompanying notes are an integral part of these financial statements. SAI-84 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- AFC Enterprises ..................................... 30,000 $ 851,700 Affiliated Managers Group Inc. ...................... 70,519 4,970,179 Agco Corp. .......................................... 206,975 3,266,065 Agile Software Corp. ................................ 96,600 1,663,452 AGL Resources Inc. .................................. 172,689 3,975,301 Airborne Incorporated ............................... 154,791 2,295,551 Airgas Inc. ......................................... 186,907 2,826,034 Airgate Pcs Inc ..................................... 37,260 1,697,193 Airtran Holdings Inc. ............................... 190,842 1,259,557 Akamai Technologies Inc. ............................ 243,100 1,444,014 Aksys Limited ....................................... 51,800 240,870 Alabama National Bancorp ............................ 27,960 942,532 Alamosa Holdings Inc. ............................... 219,469 2,618,265 Alaska Air Group Inc. ............................... 84,859 2,469,397 Alaska Communications Systems Incorporated .......... 28,684 228,611 Albany International Corp. .......................... 52,699 1,143,568 Albany Molecular Research Incorporated .............. 68,382 1,811,439 Albemarle Corp. ..................................... 81,962 1,967,088 Alexander & Baldwin Inc. ............................ 132,027 3,525,121 Alexander's Inc. .................................... 4,873 277,274 Alexandria Real Estate Equities ..................... 48,046 1,974,691 Alexion Pharmaceuticals Inc. ........................ 54,228 1,325,332 Alfa Corp. .......................................... 122,389 2,746,409 Alico Inc. .......................................... 10,600 332,310 Align Technology Inc. ............................... 31,000 139,500 Allen Telecom Inc. .................................. 75,654 643,059 Alliance Fiber Optic Products Incorporated .......... 55,200 78,384 Alliance Gaming Corporation ......................... 47,000 1,381,330 Alliance Semiconductor Corp. ........................ 79,969 966,026 Alliant Techsystems Inc. ............................ 68,724 5,305,493 Alloy Inc ........................................... 54,300 1,169,079 Allscripts Healthcare Solutions Inc ................. 92,706 300,367 Alpha Industries .................................... 144,300 3,145,740 Alpharma Inc. ....................................... 99,537 2,632,754 Ambassadors International Inc. ...................... 20,500 430,295 AMC Entertainment Inc. .............................. 55,300 663,600 Amcol International Corp. ........................... 64,271 462,751 Amcore Financial Inc. ............................... 80,506 1,799,309 Amerco Inc. ......................................... 38,249 719,846 America Online Latin America Inc. ................... 66,000 300,300 America West Holding Corp. .......................... 101,612 355,642 American Axle & Manufacturing Holdings Inc. ......... 34,151 730,148 American Capital Strategies Limited ................. 100,336 2,844,526 American Financial Holdings Incorporated ............ 68,476 1,739,975 American Greetings Corp. ............................ 203,517 2,804,464 American Healthways Inc. ............................ 36,699 1,172,166 American Italian Pasta Co. .......................... 52,019 2,186,359
The accompanying notes are an integral part of these financial statements. SAI-85 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- American Management Systems Inc. ................... 132,200 $ 2,390,176 American Med Systems Holdings Incorporated ......... 99,400 2,056,586 American Physicians Capital Incorporated ........... 34,200 743,850 American Realty Investors Inc. ..................... 10,300 101,661 American States Water Co. .......................... 30,813 1,076,914 American Superconductor Corp. ...................... 70,803 868,045 American Woodmark Corp. ............................ 18,000 967,500 Ameripath Inc. ..................................... 87,553 2,802,572 Ameristar Casinos Inc. ............................. 8,000 200,400 Ameron International Corp .......................... 10,800 747,360 AmerUs Group Co. ................................... 132,400 4,745,216 Ametek Inc. ........................................ 103,540 3,301,891 AMLI Residential Properties ........................ 43,366 1,093,691 Amsurg Corporation ................................. 63,300 1,720,494 Amtran Inc. ........................................ 10,100 150,995 Amylin Pharmaceuticals Inc. ........................ 181,872 1,662,310 Anadigics Inc. ..................................... 98,354 1,499,898 Analogic Corp. ..................................... 20,227 778,942 Anaren Microwave Inc. .............................. 68,248 1,182,055 ANC Rental Corporation ............................. 111,575 3,347 Anchor Bancorp Wisconsin Inc. ...................... 57,497 1,019,997 Andrew Corp. ....................................... 263,200 5,761,448 Anixter International Inc. ......................... 87,966 2,551,894 Annaly Mortgage Management Incorporated ............ 189,500 3,032,000 Anntaylor Stores Corp. ............................. 77,731 2,720,585 Ansoft Corporation ................................. 19,000 277,400 answerthink inc. ................................... 132,200 863,266 Ansys Inc. ......................................... 47,700 1,175,805 Anthracite Capital Inc. ............................ 118,400 1,301,216 Antigenics Incorporated Delaware ................... 43,761 717,680 APAC Customer Services Inc. ........................ 75,590 196,534 Aphton Corp. ....................................... 45,993 671,498 Apogee Enterprises Inc. ............................ 89,600 1,417,472 Applebees International Inc. ....................... 107,424 3,673,901 Applica Incorporated ............................... 49,247 443,715 Applied Industrial Technologies Inc. ............... 52,501 979,144 Applied Innovation Inc. ............................ 31,400 194,680 Applied Molecular Evolution Incorporated ........... 47,800 588,418 Apria Healthcare Group Inc. ........................ 128,293 3,206,042 Aptargroup Inc. .................................... 102,739 3,598,947 Arbitron Incorporated .............................. 93,200 3,182,780 Arch Chemicals Inc. ................................ 64,160 1,488,512 Arctic Cat Inc. .................................... 49,847 847,399 Arden Group Inc. ................................... 4,300 258,000 Area Bancshares Corp. .............................. 46,424 903,875 Arena Pharmaceuticals Incorporated ................. 53,600 644,808 Argonaut Group Inc. ................................ 71,378 1,396,867
The accompanying notes are an integral part of these financial statements. SAI-86 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- Argosy Gaming Company ............................. 70,503 $ 2,292,758 Ariad Pharmaceuticals Inc. ........................ 92,028 490,509 Arkansas Best Corp. ............................... 64,272 1,852,319 Armor Holdings Inc. ............................... 57,208 1,544,044 Armstrong Holdings Incorporated ................... 115,526 393,944 Arqule Inc. ....................................... 66,400 1,128,800 Array Biopharma Incorporated ...................... 44,800 665,728 Arris Group Incorporated .......................... 171,700 1,675,792 Arrow Financial Corp. ............................. 19,005 554,756 Arrow International Inc. .......................... 37,981 1,516,961 Art Technology Group Incorporated ................. 157,700 548,796 Artesyn Technologies Inc. ......................... 102,332 952,711 Arthrocare Corp. .................................. 66,942 1,200,270 Artisan Components Inc ............................ 39,500 624,100 ArvinMeritor Inc. ................................. 213,382 4,190,822 Ascential Software Corporation .................... 823,500 3,335,175 Asiainfo Holdings Inc. ............................ 89,100 1,552,122 Aspect Communications Corp. ....................... 151,300 587,044 Aspect Medical Systems Inc. ....................... 37,144 371,440 Aspen Technology Inc. ............................. 98,584 1,656,211 Associated Estates Realty Corp. ................... 48,100 441,558 Astec Industries Inc. ............................. 46,225 668,414 AstroPower Inc. ................................... 38,500 1,556,555 Asyst Technologies Inc. ........................... 118,828 1,516,245 AT&T Latin America Corp. .......................... 129,700 153,046 Atlantic Coast Airlines Holdings Inc. ............. 126,022 2,935,052 Atlas Air Worldwide Holdings Inc. ................. 51,908 760,452 ATMI Inc. ......................................... 87,541 2,087,853 Atmos Energy Corp. ................................ 129,495 2,751,769 ATP Oil & Gas Corp. ............................... 12,800 38,144 Atrix Laboratories Inc. ........................... 61,300 1,263,393 ATS Medical Inc. .................................. 71,537 379,146 Atwood Oceanics Inc. .............................. 31,236 1,088,575 Audiovox Corp. .................................... 54,915 409,666 August Technology Corporation ..................... 19,600 216,384 Aurora Foods Inc. ................................. 79,160 399,758 Auspex Systems Inc. ............................... 132,900 239,220 Avanex Corporation ................................ 86,000 507,400 Avanir Pharmaceuticals ............................ 197,000 839,220 Avant Corp. ....................................... 124,321 2,547,337 Avant Immunotherapeutics Inc. ..................... 192,603 772,338 Avatar Holdings Inc. .............................. 14,900 351,044 AVI BioPharma Inc. ................................ 55,300 603,865 Aviall Inc. ....................................... 54,800 413,740 Avici Systems Inc. ................................ 144,100 419,331 Avid Technology Inc. .............................. 77,564 942,403 Avigen Incorporated ............................... 68,398 787,261
The accompanying notes are an integral part of these financial statements. SAI-87 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- Avista Corp. ...................................... 149,339 $ 1,980,235 Avocent Corporation ............................... 139,959 3,394,006 Aware Inc. ........................................ 67,258 558,241 Axt Incorporated .................................. 57,971 836,522 Aztar Corp. ....................................... 106,094 1,941,520 Baldor Electric Co. ............................... 74,967 1,566,810 Baldwin & Lyons Inc. .............................. 18,964 485,478 Ball Corp. ........................................ 87,510 6,186,957 Bally Total Fitness Holding ....................... 82,908 1,787,496 Bancfirst Corp. ................................... 14,796 513,421 Bancfirst Ohio Corp. .............................. 23,100 557,865 Bancorpsouth Inc. ................................. 264,142 4,384,757 Bandag Inc. ....................................... 34,541 1,200,645 Bank Mutual Corporation ........................... 33,300 508,824 Bank of Granite Corp. ............................. 34,261 677,340 Bankatlantic Bancorp Inc. ......................... 93,694 860,111 Bankunited Financial Corp. ........................ 58,500 868,725 Banner Corporation ................................ 31,200 527,592 Banta Corp. ....................................... 79,128 2,335,859 Barnes Group Inc. ................................. 49,572 1,189,232 Barra Inc. ........................................ 38,609 1,818,098 Bassett Furniture Industries Inc. ................. 30,600 428,706 Bay View Capital Corp. ............................ 193,416 1,417,739 BE Aerospace Inc. ................................. 99,400 911,498 Beacon Power Corporation .......................... 92,054 119,670 Beasley Broadcast Group Incorporated .............. 30,064 391,133 Beazer Homes USA Inc. ............................. 27,800 2,034,126 Bebe Stores Inc. .................................. 10,004 186,675 Bedford Property Investors ........................ 45,583 1,025,618 BEI Technologies Inc. ............................. 31,500 549,360 Bel Fuse Inc. -- Class B .......................... 25,219 631,736 Belden Inc. ....................................... 79,363 1,868,999 Bell Microproducts Incorporated ................... 51,400 648,668 Benchmark Electronics Inc. ........................ 63,502 1,203,998 Berry Petroleum Co. ............................... 55,400 869,780 Bethlehem Steel Corp. ............................. 376,265 169,319 Beverly Enterprises Inc. .......................... 318,886 2,742,420 Bio-Rad Laboratories .............................. 26,971 1,707,264 Bio-Technology General Corp. ...................... 191,618 1,577,016 BioMarin Pharmaceuticals Inc. ..................... 72,241 970,919 Biopure Corporation ............................... 52,034 739,403 Biosite Incorporated .............................. 37,662 691,851 BioSphere Medical Inc. ............................ 9,100 102,557 BKF Capital Group Inc. ............................ 17,300 496,510 Black Box Corporation ............................. 64,325 3,401,506 Blue Martini Software Incorporated ................ 94,200 283,542 Blyth Industries Inc. ............................. 104,951 2,440,111
The accompanying notes are an integral part of these financial statements. SAI-88 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- BMC Industries Inc. ............................... 82,800 $ 170,568 Bob Evans Farms Inc. .............................. 111,175 2,731,570 Boca Resorts Inc. -- Class A ...................... 93,655 1,226,880 BOK Financial Corporation ......................... 38,816 1,223,092 Bone Care International Inc. ...................... 29,622 507,425 BorgWarner Inc. ................................... 85,395 4,461,889 Borland Software Corp. ............................ 165,063 2,584,887 Boron Lepore & Associates Inc ..................... 23,900 329,581 Boston Beer Company Inc. .......................... 28,300 485,345 Boston Communications Group ....................... 45,200 513,020 Boston Private Financial Holdings Inc. ............ 39,300 867,351 Bowne & Co., Inc. ................................. 104,992 1,343,898 Boyd Gaming Corp. ................................. 89,923 584,500 Boyds Collection Limited .......................... 175,575 1,188,643 Boykin Lodging Company ............................ 52,954 422,043 Brady Corporation -- Class A ...................... 56,473 2,066,912 Brandywine Realty Trust ........................... 80,585 1,697,926 Braun Consulting Inc. ............................. 32,206 114,331 BRE Properties .................................... 144,400 4,470,624 Briggs & Stratton Corp. ........................... 67,806 2,895,316 Bright Horizons Family Solutions Inc. ............. 33,966 950,708 Brightpoint Inc. .................................. 175,629 551,475 Brio Software Inc. ................................ 56,977 164,094 Britesmile Inc. ................................... 42,400 212,000 Brookline Bancorp Inc. ............................ 36,476 599,665 Brooks Automation Inc. ............................ 60,776 2,471,760 Brown & Brown Inc. ................................ 137,732 3,760,084 Brown Shoe Co., Inc. .............................. 52,266 848,800 Bruker Daltonics Inc. ............................. 143,200 2,341,320 Brush Engineered Materials Inc. ................... 50,906 724,901 BSB Bancorp Inc. .................................. 29,556 700,773 Bsquare Corp. ..................................... 48,133 200,715 Buca Incorporated ................................. 36,157 586,105 Buckeye Technologies Inc. ......................... 65,484 753,066 Buckle Inc. ....................................... 19,123 426,443 Building Material Holding Corp. ................... 38,200 414,470 Burlington Coat Factory Warehouse ................. 58,836 988,445 Burnham Pacific Properties Inc. ................... 88,037 362,712 Bush Industries Inc. -- Class A ................... 32,027 347,813 Butler Manufacturing Co. .......................... 15,300 423,810 C&D Technologies Inc. ............................. 84,556 1,932,105 C-COR.net Corporation ............................. 101,831 1,483,678 Cable Design Technologies Corp. ................... 137,191 1,876,773 Cabot Oil & Gas Corp. ............................. 96,077 2,310,652 Cacheflow Incorporated ............................ 66,800 179,024 CACI International Inc. ........................... 58,908 2,325,982 Cadiz Inc. ........................................ 102,986 825,948
The accompanying notes are an integral part of these financial statements. SAI-89 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- Cal Dive International Inc. ....................... 104,463 $ 2,578,147 Calgon Carbon Corp. ............................... 102,104 852,568 California Pizza Kitchen Inc. ..................... 50,550 1,251,112 California Water Service Group .................... 42,803 1,102,177 Caliper Technologies Corporation .................. 72,114 1,125,700 Callon Petroleum Company .......................... 19,103 130,856 Cambrex Corp. ..................................... 70,932 3,092,635 Camden Property Trust ............................. 114,530 4,203,251 Caminus Corporation ............................... 27,113 623,599 Capital Automotive REIT ........................... 59,908 1,191,570 Capital City Bank Group Inc. ...................... 20,091 486,805 Capitol Federal Financial ......................... 91,280 1,902,275 Capitol Transamerica Corp. ........................ 27,400 450,730 Capstead Mortage Corporation ...................... 26,197 615,630 Caraustar Industries Inc. ......................... 90,924 630,103 Carbo Ceramics Inc. ............................... 24,377 954,603 Cardiodynamics International Corporation .......... 92,242 609,720 Career Education Corp. ............................ 132,902 4,555,881 Carlisle Cos., Inc. ............................... 98,629 3,647,300 Carpenter Technology Corp. ........................ 63,291 1,684,806 Carreker Corporation .............................. 49,865 294,204 Carrier Access Corp. .............................. 31,043 90,646 Cascade Natural Gas Corp. ......................... 36,507 804,979 Casella Waste Systems Inc. ........................ 56,766 840,704 Casey's General Stores Inc. ....................... 125,646 1,872,125 Cash America International Inc. ................... 65,049 552,917 Castle (A.M.) & Co. ............................... 20,200 165,640 Catalytica Energy Systems Incorporated ............ 58,400 266,888 Catapult Communications Corp. ..................... 15,700 409,142 Cathay Bancorp Inc. ............................... 25,239 1,616,558 Cato Corp. ........................................ 43,864 829,030 CBL & Associates Properties ....................... 66,142 2,083,473 CBRL Group Inc. ................................... 175,001 5,152,029 CCBT Financial Companies Inc. ..................... 25,300 597,080 CCC Information Services Group .................... 27,953 172,750 CDI Corp. ......................................... 36,745 698,155 CEC Entertainment Inc. ............................ 88,435 3,837,195 Celeritek Incorporated ............................ 35,715 478,224 Cell Genesys Inc. ................................. 113,757 2,643,713 Cell Pathways Inc. ................................ 87,129 606,418 Cell Therapeutics Inc. ............................ 107,817 2,602,702 Centennial Bancorp ................................ 62,370 460,291 Centennial Communications Corporation ............. 23,925 244,992 Centerpoint Properties Corporation ................ 72,090 3,590,082 Centex Construction Products Inc. ................. 19,573 627,315 Centillium Communications Incorporated ............ 80,797 635,064 Centra Software Inc. .............................. 62,100 496,800
The accompanying notes are an integral part of these financial statements. SAI-90 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------------- Central Coast Bancorp ................................. 17,800 $ 391,600 Central Parking Corp. ................................. 57,534 1,129,968 Central Vermont Public Service Corp. .................. 34,200 571,140 Century Aluminum Company .............................. 39,035 521,508 Centurybusiness Services Inc. ......................... 230,104 529,239 Cerus Corp ............................................ 37,114 1,697,965 CFS Bancorp Inc. ...................................... 47,400 680,190 CH Energy Group Inc. .................................. 54,666 2,376,331 Champion Enterprises Inc. ............................. 150,046 1,847,066 Championship Auto Racing Teams Inc. ................... 34,965 562,587 Charles River Laboratories International .............. 132,800 4,446,144 Charlotte Russe Holding Incorporated .................. 65,100 1,211,511 Charming Shoppes Inc. ................................. 308,373 1,637,461 Charter Municipal Mortgage Acceptance Company ......... 107,292 1,743,495 Chateau Communities Inc. .............................. 65,496 1,958,330 Checkpoint Systems Inc. ............................... 95,548 1,280,343 Cheesecake Factory .................................... 121,896 4,238,324 Chelsea Property Group Incorporated ................... 51,381 2,522,807 Chemed Corp. .......................................... 27,161 920,758 Chemfirst Inc. ........................................ 36,038 863,831 Chemical Financial Corp. .............................. 72,716 2,193,115 Chesapeake Corp. ...................................... 49,374 1,373,091 Chesapeake Energy Corp. ............................... 438,596 2,899,120 Chicos Fas Inc. ....................................... 72,671 2,885,039 Childrens Place ....................................... 33,596 912,131 Chiles Offshore Incorporated .......................... 28,000 556,920 ChipPAC Inc. .......................................... 94,800 703,416 Chittenden Corp. ...................................... 96,396 2,660,530 Choice Hotels International Inc. ...................... 107,728 2,386,175 Choice One Communications Incorporated ................ 18,976 66,416 Chordiant Software Inc. ............................... 86,483 684,081 Christopher & Banks Corporation ....................... 71,850 2,460,862 Church & Dwight Co., Inc. ............................. 116,017 3,089,533 Churchill Downs Inc. .................................. 8,577 317,092 Ciber Inc. ............................................ 156,044 1,474,616 Cima Labs Incorporated ................................ 45,900 1,659,285 Ciphergen Biosystems Incorporated ..................... 50,800 406,400 Circor International Incorporated ..................... 25,600 472,320 Circuit City Stores Inc. .............................. 116,600 2,651,484 Citizens Banking Corp. Mich ........................... 147,385 4,846,019 Citizens Inc. ......................................... 58,400 738,760 City Bank Lynnwood WA ................................. 29,122 697,763 City Holding Co. ...................................... 50,200 604,408 Claire's Stores Inc. .................................. 136,281 2,057,843 Clarcor Inc. .......................................... 71,539 1,942,284 Clarent Corp. ......................................... 87,648 470,670 Clark/Bardes Inc. ..................................... 33,400 842,682
The accompanying notes are an integral part of these financial statements. SAI-91 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ Cleco Corp. ....................................... 136,245 $ 2,993,303 Cleveland-Cliffs Inc. ............................. 29,034 531,322 Click Commerce Inc. ............................... 51,400 162,424 Closure Medical Corp. ............................. 16,156 377,404 CNA Surety Corporation ............................ 46,054 713,837 Coachmen Industries Inc. .......................... 44,169 530,028 Coastal Bancorp ................................... 12,600 364,140 Cobalt Corporation ................................ 29,100 185,658 Cobiz Incorporated ................................ 21,600 291,600 Coca-Cola Bottling Co. Consolidated ............... 2,913 110,286 Cognex Corp. ...................................... 105,200 2,694,172 Cognizant Technology Solutions Corp. .............. 28,208 1,155,964 Coherent Inc. ..................................... 88,491 2,736,142 Cohu Inc. ......................................... 64,118 1,266,330 Coinstar Inc. ..................................... 69,045 1,726,125 Coldwater Creek Inc. .............................. 12,030 254,795 Cole National Corp. ............................... 32,000 529,600 Collins & Aikman Corp. ............................ 380,484 2,929,727 Colonial Bancgroup Inc. ........................... 372,772 5,252,357 Colonial Properties Trust ......................... 48,003 1,495,293 Columbia Banking Systems Inc. ..................... 39,000 508,950 Columbia Laboratories Inc. ........................ 78,555 271,015 Comdisco Inc. ..................................... 354,200 184,184 Commerce Group Inc. ............................... 78,516 2,959,268 Commerce One Inc .................................. 909,700 3,247,629 Commercial Federal Corp. .......................... 147,035 3,455,322 Commercial Metals Co. ............................. 38,436 1,344,491 Commercial Net Lease Realty ....................... 97,964 1,273,532 Commonwealth Bancorp Inc. ......................... 25,900 573,685 Commonwealth Telephone Enterprises Inc. ........... 34,329 1,561,969 Commscope Inc. .................................... 165,700 3,524,439 Community Bank Systems Inc. ....................... 38,300 1,003,460 Community Banks Inc. .............................. 25,800 696,600 Community First Bankshares Inc. ................... 113,958 2,927,581 Community Trust Bancorp Inc. ...................... 30,400 722,000 Compucredit Corp. ................................. 37,082 436,084 Computer Network Technology Corporation ........... 95,924 1,706,488 Computerized Thermal Imaging Inc. ................. 187,300 290,315 Compx International Inc. .......................... 10,952 142,047 Comstock Resources Inc. ........................... 81,248 568,736 Conceptus Inc. .................................... 31,600 745,760 Concord Camera Corp. .............................. 75,143 595,133 Concurrent Computer Corp. ......................... 192,867 2,864,075 Conestoga Enterprises Incorporated ................ 27,600 881,823 Conmed Corp. ...................................... 75,339 1,503,766 Connecticut Bancshares Incorporated ............... 38,100 984,885 Connecticut Water Service Inc. .................... 22,650 669,761
The accompanying notes are an integral part of these financial statements. SAI-92 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ Connetics Corporation ............................. 93,596 $ 1,113,792 Consolidated Freightways Corp. .................... 50,400 256,536 Consolidated Graphics Inc. ........................ 30,000 577,500 Constellation 3D Inc. ............................. 43,700 37,582 Convera Corporation ............................... 63,506 212,745 Cooper Companies Inc .............................. 44,474 2,222,811 Cooper Tire & Rubber Company ...................... 205,024 3,272,183 CoorsTek Inc. ..................................... 27,419 873,021 Copart Inc. ....................................... 128,736 4,682,128 Copper Mountain Networks .......................... 158,800 268,372 Corillian Corporation ............................. 60,451 289,560 Corinthian Colleges Inc. .......................... 24,639 1,007,489 Corixa Corp. ...................................... 130,942 1,973,296 Corn Products International Inc. .................. 113,409 3,997,667 Cornerstone Realty Income Trust Inc. .............. 152,488 1,730,739 Corporate Executive Board Company ................. 111,278 4,083,903 Corporate Office Properties Trust ................. 28,100 333,547 Corrections Corp of America ....................... 84,435 1,567,114 Corus Bankshares Inc. ............................. 28,919 1,312,923 Corvas International Inc. ......................... 80,200 525,310 Corvel Corp. ...................................... 22,488 736,482 CoSine Communications Inc. ........................ 259,200 401,760 Cost Plus Inc. .................................... 68,052 1,803,378 Costar Group Inc. ................................. 39,816 955,982 Cousins Properties Inc. ........................... 114,224 2,782,497 Covance Inc. ...................................... 190,112 4,315,542 Covansys Corporation .............................. 58,753 525,839 Covanta Energy Corp. .............................. 161,110 728,217 Covenant Transport Inc. ........................... 21,800 347,928 Coventry Helath Care Inc. ......................... 207,040 4,130,448 CPB Inc. .......................................... 21,477 631,639 CPI Corp. ......................................... 19,766 328,116 Crawford & Company ................................ 115,047 1,348,351 Credence Systems Corp. ............................ 181,320 3,367,112 Credit Acceptance Corp. ........................... 42,328 376,719 Crestline Capital Corp. ........................... 44,081 1,369,156 Crompton Corporation .............................. 368,720 3,318,480 Crossmann Communities Inc. ........................ 19,758 652,014 Crossroads Systems Inc. ........................... 59,023 265,013 Crown America Realty Trust ........................ 63,000 491,400 Crown Cork & Seal Co., Inc. ....................... 377,700 959,358 Crown Media Holdings Incorporated ................. 48,445 546,944 Cryolife Inc. ..................................... 51,914 1,557,420 CSK Auto Corp. .................................... 72,876 725,116 CSS Industries Inc. ............................... 12,748 394,041 CT Communications Inc. ............................ 48,556 801,660 CTS Corp. ......................................... 95,741 1,522,282
The accompanying notes are an integral part of these financial statements. SAI-93 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ Cubic Corp. ....................................... 15,428 $ 792,382 Cubist Pharmaceuticals Incorporated ............... 84,904 3,053,148 Cumulus Media Inc. ................................ 90,200 1,459,436 Cuno Inc. ......................................... 48,413 1,476,596 Curis Incorporated ................................ 94,300 529,023 Curtiss-Wright Corp. .............................. 31,981 1,527,093 CV Therapeutics Inc. .............................. 63,990 3,328,760 CVB Financial Corp. ............................... 65,126 1,523,948 Cyberonics Inc. ................................... 60,538 1,606,073 Cygnus Inc. ....................................... 119,151 625,543 Cymer Inc. ........................................ 98,249 2,626,196 Cytec Industries Inc. ............................. 125,404 3,385,908 Cytogen Corp. ..................................... 236,063 710,550 Daisytek International Corp. ...................... 46,900 617,673 Daktronics Incorporated ........................... 40,400 341,380 Dal-Tile International Inc. ....................... 179,292 4,168,539 Datascope Corp. ................................... 36,433 1,235,807 Datastream Systems Inc. ........................... 49,415 304,891 DDI Corp /CA ...................................... 126,197 1,241,778 Dean Foods Company New ............................ 139,860 9,538,452 Deb Shops Inc. .................................... 15,700 380,725 Decode Genetics Inc. .............................. 103,500 1,014,300 Delaware Monte Foods Co. .......................... 74,975 638,037 dELiA*s Corp. ..................................... 106,200 658,440 Delphi Financial Group Inc. ....................... 42,861 1,427,271 Delta & Pine Land Co. ............................. 105,166 2,379,907 Deltagen Incorporated ............................. 33,900 311,880 Deltic Timber Corp. ............................... 30,301 830,247 Denbury Resources Inc ............................. 65,841 481,298 Dendreon Corporation .............................. 45,200 455,164 Dendrite International Inc. ....................... 97,078 1,362,004 Developers Diversified Realty Corp. ............... 159,651 3,049,334 Diagnostic Products Corp. ......................... 68,264 3,000,203 Dial Corp. ........................................ 301,437 5,169,645 Diamondcluster International Incorporated ......... 86,046 1,127,203 Dianon Systems Inc. ............................... 28,806 1,751,405 Digene Corp ....................................... 35,860 1,057,870 Digex Incorporated ................................ 63,800 190,762 Digimarc Corporation .............................. 32,237 598,963 Digital Generation Systems Incorporated ........... 108,500 120,435 Digital Insight Corp. ............................. 84,552 1,890,583 Digital Lightwave Inc. ............................ 36,800 345,184 Digitalthink Incorporated ......................... 71,398 771,098 Digitas Incorporated .............................. 15,376 61,812 Dillards Inc. ..................................... 205,694 3,291,104 Dime Community Bancorp Inc. ....................... 44,733 1,255,208 Dimon Inc. ........................................ 137,700 991,440
The accompanying notes are an integral part of these financial statements. SAI-94 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ Dionex Corp. ...................................... 63,178 $ 1,611,671 Direct Focus Inc. ................................. 94,556 2,950,147 Ditech Communications Corporation ................. 71,000 427,420 Diversa Corporation ............................... 79,725 1,128,109 Divine Incorporated ............................... 409,100 302,734 DMC Stratex Networks Inc. ......................... 267,500 2,081,150 Dobson Communications Corporation ................. 68,200 582,428 Docent Incorporated ............................... 107,200 339,824 Documentum Inc. ................................... 126,095 2,738,783 Dole Food Company ................................. 133,553 3,583,227 Dollar Thrifty Automotive Group ................... 71,381 1,106,405 Donaldson Co., Inc. ............................... 124,813 4,847,737 Doral Financial Corp. ............................. 119,747 3,737,304 Dover Downs Entertainment Inc. .................... 51,435 786,956 Downey Financial Corp. ............................ 61,838 2,550,817 DQE Inc. .......................................... 177,200 3,354,396 Dress Barn Inc. ................................... 45,078 1,127,401 Dreyers Grand Ice Cream Inc. ...................... 61,886 2,383,230 Dril Quip Inc. .................................... 19,856 478,530 DRS Technologies Inc .............................. 38,700 1,379,655 DSP Group Inc. .................................... 78,441 1,824,538 Duane Reade Inc. .................................. 34,526 1,047,864 Dupont Photomasks Inc. ............................ 15,569 676,473 Dura Automotive Systems Inc. ...................... 43,697 480,667 Duraswitch Industries Inc. ........................ 15,100 128,350 Durect Corporation ................................ 55,500 643,245 Dusa Pharmaceuticals Inc. ......................... 43,784 352,461 DVI Inc. .......................................... 38,499 662,183 Dyax Corporation .................................. 56,400 618,708 Dycom Industries Inc. ............................. 133,500 2,230,785 Dynacq International Inc. ......................... 12,900 287,283 E.piphany Inc. .................................... 193,700 1,687,127 Earthshell Corp. .................................. 144,575 289,150 East-West Bancorp Inc. ............................ 75,791 1,951,618 Eastgroup Properties Inc. ......................... 50,382 1,162,313 Echelon Corp. ..................................... 79,500 1,125,720 Eclipsys Corp. .................................... 138,602 2,321,583 Eden Bioscience Corp. ............................. 58,100 294,567 Edison Schools Inc. ............................... 83,181 1,634,507 Edo Corporation ................................... 30,500 806,725 Education Management Corp. ........................ 64,894 2,352,407 Edwards Lifesciences Corporation .................. 189,018 5,222,567 EEX Corp. ......................................... 106,421 195,815 eFunds Corp. ...................................... 149,741 2,058,939 Egl Incorporated .................................. 115,204 1,607,096 El Paso Electric Co. .............................. 162,138 2,351,001 Elantec Semiconductor Incorporated ................ 71,128 2,731,315
The accompanying notes are an integral part of these financial statements. SAI-95 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ Elcor Chemical Corp. .............................. 63,065 $ 1,752,576 Electro Rent Corp. ................................ 43,300 558,137 Electro Scientific Industries Inc. ................ 86,201 2,586,892 Electroglas Inc. .................................. 64,796 957,037 Electronics Boutique Holdings Corp. ............... 30,986 1,237,581 Electronics for Imaging Inc. ...................... 172,800 3,855,168 Elizabeth Arden Incorporated ...................... 27,600 421,452 Embarcadero Technologies Inc. ..................... 26,597 643,647 EMCOR Group Inc. .................................. 34,960 1,587,184 Emcore Corp. ...................................... 74,513 1,002,200 Emex Corporation .................................. 41,614 129,003 Emisphere Technologies Inc. ....................... 48,848 1,558,740 Empire District Electric Co. ...................... 60,174 1,263,654 Encompass Services Corporation .................... 184,365 534,659 Encore Aquisition Company ......................... 25,900 344,729 Encore Wire Corp. ................................. 39,300 475,530 Endo Pharmaceutical Holdings Incorporated ......... 71,400 833,238 Endocare Inc. ..................................... 42,213 756,879 Energen Corporation ............................... 87,715 2,162,175 Energy Conversion Devices Inc. .................... 43,494 825,081 Energy Partners Limited ........................... 64,100 483,955 Engage Technologies Incorporated .................. 52,100 22,924 Engineered Support Systems Incorporated ........... 22,100 756,041 Entergris Incorporated ............................ 122,400 1,341,504 Entertainment Properties Trust .................... 50,185 971,080 Entremed Inc. ..................................... 42,167 356,311 Entrust Technologies Inc. ......................... 154,900 1,578,431 Enzo Biochem Inc. ................................. 71,844 1,688,334 EPIQ Systems Inc. ................................. 33,450 647,258 Equity Inns Inc. .................................. 112,037 741,685 Equity One Incorporated ........................... 10,200 140,148 ESCO Technologies Inc. ............................ 32,889 1,134,342 Espeed Incorporated ............................... 45,915 380,176 Esperion Therapeutics Incorporated ................ 73,400 539,490 ESS Technology Inc. ............................... 90,932 1,933,214 Essex Property Trust .............................. 45,907 2,268,265 Esterline Technologies Corp. ...................... 71,004 1,136,774 Evergreen Resources ............................... 53,282 2,057,218 Exact Sciences Corporation ........................ 15,600 160,056 Exar Corp. ........................................ 125,353 2,613,610 Excel Technology Inc. ............................. 29,631 515,579 Exe Technologies Inc. ............................. 91,600 466,244 Exelixis Incorporated ............................. 108,138 1,797,254 Exide Corp. ....................................... 78,743 96,854 Extensity Incorporated ............................ 44,565 97,152 F&M Bancorp/Frederick MD .......................... 33,372 849,317 F5 Networks Incorporated .......................... 57,199 1,232,066
The accompanying notes are an integral part of these financial statements. SAI-96 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ Factory 2-U Stores Inc. ............................ 37,999 $ 761,500 Factset Research Systems Inc. ...................... 68,054 2,378,487 Fair, Isaac & Company Inc. ......................... 58,150 3,664,613 Fairchild Corp. .................................... 34,100 98,890 FalconStor Software Inc ............................ 140,491 1,272,848 Farmer Brothers Co. ................................ 2,963 785,195 Farmers Capital Bank Corp. ......................... 21,541 789,908 FBL Financial Group Inc. ........................... 36,852 614,691 Featherlite Manufacturing Incorporated ............. 74,654 226,948 Federal Agricultural Mortgage Corporation .......... 25,700 1,040,850 Federal Mogul Corp. ................................ 168,073 132,778 Federal Realty Investment Trust .................... 118,065 2,715,495 Federal Signal Corp. ............................... 141,777 3,157,374 FEI Co. ............................................ 47,913 1,509,739 Felcor Lodging Trust Inc. .......................... 98,316 1,642,860 Ferro Corp. ........................................ 91,164 2,352,031 Fibercore Incorporated ............................. 94,300 226,320 Fidelity Bankshares Inc. ........................... 50,000 798,500 Filenet Corp. ...................................... 113,897 2,310,970 Financial Federal Corp. ............................ 33,757 1,054,906 Financial Institutions Incorporated ................ 24,600 575,640 Finish Line Inc. ................................... 51,500 787,435 Finova Group Inc. .................................. 151,700 92,537 First American Financial Corp. ..................... 218,550 4,095,627 First Bancorp North Carolina ....................... 19,600 441,980 First Bancorp Puerto Rico .......................... 68,009 1,938,256 First Bank America Inc. ............................ 2,900 91,408 First Busey Corp. .................................. 28,385 609,710 First Charter Corp. ................................ 98,957 1,762,424 First Citizens Bancshares Inc. ..................... 19,656 1,921,374 First Commonwealth Financial Corp. ................. 183,159 2,109,992 First Community Bancshares Incorporated ............ 23,700 698,439 First Consulting Group Inc. ........................ 55,677 862,994 First Essex Bancorp Inc. ........................... 19,100 538,238 First Federal Capital Corp. ........................ 52,657 826,715 First Financial Bancorp ............................ 114,342 2,018,136 First Financial Bankshares Inc. .................... 34,975 1,052,747 First Financial Corp. -- Indiana ................... 20,611 903,792 First Financial Holdings Inc. ...................... 40,854 987,441 First Horizon Pharmaceutical ....................... 34,350 1,009,547 First Industrial Realty Trust Incorporated ......... 127,489 3,964,908 First Industries Corp. ............................. 29,173 639,180 First Merchants Corp. .............................. 34,362 825,375 First Midwest Bancorp Inc. ......................... 154,150 4,499,638 First Niagara Financial Group Incorporated ......... 29,706 499,952 First Place Financial Corporation .................. 45,500 716,625 First Republic Bank ................................ 36,600 883,890
The accompanying notes are an integral part of these financial statements. SAI-97 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ First Sentinel Bancorp Inc. ........................ 84,892 $ 1,062,848 First Source Corp. ................................. 39,838 824,647 Firstfed Financial Corp. ........................... 57,328 1,469,317 Fisher Communications Incorporated ................. 11,900 523,600 Fisher Scientific International Inc. ............... 172,375 5,033,350 Flagstar Bancorp Inc. .............................. 20,250 407,633 Fleetwood Enterprises Inc. ......................... 109,777 1,243,773 Fleming Companies., Inc. ........................... 132,068 2,443,258 Flir Systems Incorporated .......................... 34,100 1,293,072 Florida East Coast Industries Incorporated ......... 72,100 1,669,115 Florida Rock Industries Inc. ....................... 59,104 2,162,024 Flow International Corp. ........................... 38,900 481,193 Flowers Foods Inc. ................................. 53,200 2,123,744 Flowserve Corp. .................................... 140,568 3,740,514 Flushing Financial Corp. ........................... 31,950 568,710 FNB Corp ........................................... 83,321 2,195,508 Foamex International Inc. .......................... 49,600 401,760 Focal Communications Corporation ................... 19,800 12,078 Focal Communications Corporation -- WTS ............ 3,117 0 Footstar Inc. ...................................... 64,180 2,008,834 Forest City Enterprises Inc. ....................... 87,572 3,389,036 Forrester Research Inc. ............................ 40,111 807,836 Forward Air Corp. .................................. 48,777 1,654,516 Fossil Inc. ........................................ 38,295 804,195 Franklin Electric Co., Inc. ........................ 13,151 1,078,382 Freds Inc. ......................................... 39,073 1,600,430 Freemarkets Incorporated ........................... 92,100 2,207,637 Fremont General Corp. .............................. 192,252 1,503,411 Friedman Billings Ramsey Group ..................... 69,120 358,733 Friedmans Inc. ..................................... 41,700 351,114 Frontier Airls Inc. ................................ 90,621 1,540,557 Frontier Financial Corp. ........................... 52,696 1,378,527 Frontier Oil Corporation ........................... 82,898 1,379,423 Frontline Capital Group ............................ 126,200 13,882 FSI International Inc. ............................. 86,857 800,822 FTD.com Inc. ....................................... 26,500 185,500 FTI Consulting Inc. ................................ 30,400 997,120 Fuelcell Energy Incorporated ....................... 104,632 1,898,024 Furniture Brands International Inc. ................ 161,276 5,164,058 FYI Inc ............................................ 43,778 1,466,563 G&K Services Inc. .................................. 66,384 2,144,203 Gabelli Asset Management Inc. Class A .............. 16,850 727,920 Gables Residential Trust ........................... 75,554 2,236,398 Garan Inc. ......................................... 11,100 471,750 Gardner Denver Inc. ................................ 48,844 1,090,198 Gartner Group Inc. ................................. 250,694 2,930,613 Gaylord Entertainment Co. .......................... 71,345 1,755,087
The accompanying notes are an integral part of these financial statements. SAI-98 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------------- GBC Bancorp ............................................. 24,946 $ 735,907 Genaissance Pharmaceuticals ............................. 53,500 248,775 Gencorp Inc. ............................................ 101,030 1,425,533 Gene Logic Inc. ......................................... 86,608 1,631,695 Genelabs Technologies Inc. .............................. 122,200 226,070 Genencor International Incorporated ..................... 29,500 470,820 General Cable Corp. ..................................... 104,155 1,364,430 General Communication Inc. .............................. 121,153 1,033,435 Genesco Inc. ............................................ 69,440 1,441,574 GenesisIntermedia Inc. .................................. 35,200 207,680 Genlyte Group Inc. ...................................... 39,453 1,174,121 Genome Therapeutics Corp. ............................... 67,079 456,808 Genstar Therapeutics Corporation ........................ 33,200 82,004 Genta Incorporated ...................................... 74,601 1,061,572 Gentek Inc. ............................................. 16,782 28,697 Gentiva Health Services ................................. 66,840 1,467,138 Genuity Incorporated .................................... 557,700 881,166 Genzyme Corp-Genzyme Biosurgery Division ................ 110,500 586,755 Genzyme Molecular Oncology .............................. 44,800 358,400 Genzyme Transgenics Corp. ............................... 64,015 372,567 Georgia Gulf Corp. ...................................... 77,497 1,433,694 Gerber Scientific Inc. .................................. 62,418 580,487 German American Bancorp ................................. 28,350 459,270 Geron Corporation ....................................... 58,119 505,635 Getty Images Inc. ....................................... 107,300 2,465,754 Getty Realty Corp. ...................................... 36,400 686,140 Gibraltor Steel Corp. ................................... 18,493 323,997 Glacier Bancorp Inc. .................................... 47,100 980,622 Glatfelter .............................................. 37,978 591,697 Glenborough Realty Trust Inc. ........................... 64,647 1,254,152 Glimcher Realty Trust ................................... 79,834 1,503,274 Global Imaging Systems Inc. ............................. 21,900 326,967 Global Payments Inc. .................................... 111,384 3,831,610 Global Sports Inc. ...................................... 43,400 865,830 Globalscape Incorporated ................................ 7,870 1,181 Globespan Virata Inc. ................................... 338,930 4,389,143 Gold Banc Corporation Inc. .............................. 99,237 705,575 Golden Telecom Inc. ..................................... 28,836 336,516 Gorman-Rupp Co. ......................................... 21,900 588,015 Graco Inc. .............................................. 98,601 3,850,369 Granite Construction Inc. ............................... 97,635 2,351,051 Gray Communications Systems Inc. ........................ 27,500 381,700 Great American Financial Resources Incorporated ......... 18,622 349,163 Great Atlantic & Pacific Tea Co. ........................ 60,263 1,433,054 Great Lakes REIT Inc. ................................... 35,183 562,928 Great Southern Bancorp Inc. ............................. 17,000 518,500 Greater Bay Bancorp ..................................... 157,315 4,496,063
The accompanying notes are an integral part of these financial statements. SAI-99 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Green Mountain Coffee Inc. ........................ 13,400 $ 367,026 Greif Brothers Corp. .............................. 40,911 1,348,017 Grey Global Group Inc. ............................ 2,389 1,592,866 Grey Wolf Incorporated ............................ 478,796 1,422,024 Griffon Corp. ..................................... 88,483 1,327,245 Group 1 Automotive Inc. ........................... 52,013 1,482,891 Gtech Holdings Corp. .............................. 84,933 3,846,616 Guess ? Inc. ...................................... 19,416 145,620 Guilford Pharmaceuticals Inc. ..................... 77,665 931,980 Guitar Center Inc. ................................ 51,151 697,700 Gulf Islands Fabrication Inc. ..................... 23,033 288,143 Gulfmark Offshore Inc ............................. 13,700 387,847 Gymboree Corp. .................................... 95,600 1,140,508 H Power Corporation ............................... 72,600 226,512 H.B. Fuller Co. ................................... 88,866 2,556,675 Haemonetics Corp. ................................. 63,502 2,153,988 Hain Celestial Group Inc. ......................... 74,695 2,051,125 Hancock Fabrics Inc. .............................. 47,100 619,365 Hancock Holding Co. ............................... 25,871 1,113,488 Handleman Co. ..................................... 75,566 1,122,155 Handspring Incorporated ........................... 59,800 403,052 Harbor Florida Bancshares Inc. .................... 67,178 1,142,026 Harleysville Group Inc. ........................... 92,131 2,201,010 Harleysville National Corp. ....................... 57,916 1,363,922 Harman International Industries Inc. .............. 101,091 4,559,204 Harmonic Inc. ..................................... 183,500 2,205,670 Harsco Corp. ...................................... 129,743 4,450,185 Harvard Bioscience Inc. ........................... 21,400 212,716 Haverty Furniture ................................. 49,045 811,695 Hawaiian Electric Industries Inc. ................. 111,800 4,503,304 Hayes Lemmerz International Inc. .................. 53,757 13,439 Headwaters Incorporated ........................... 79,700 913,362 Health Care REIT Inc. ............................. 104,720 2,549,932 Healthcare Realty Trust Inc. ...................... 131,695 3,687,460 HealthExtras Inc. ................................. 35,300 201,563 Heartland Express Inc. ............................ 46,905 1,302,552 Heico Corp. ....................................... 37,032 558,072 Heidrick & Struggles International Inc. ........... 57,923 1,051,302 Helix Technology Corp. ............................ 73,428 1,655,801 Hemispherx Biopharma Inc. ......................... 55,200 248,400 Herbalife International Inc. ...................... 46,224 657,305 Hexcel Corp. ...................................... 66,963 206,246 HI/FN Inc. ........................................ 26,225 379,476 Hibbett Sporting Goods Incorporated ............... 11,100 336,330 Hickory Tech Corp. ................................ 38,301 649,202 Highwoods Properties Inc. ......................... 168,351 4,368,708 Hilb, Rogal & Hamilton Co. ........................ 45,347 2,541,699
The accompanying notes are an integral part of these financial statements. SAI-100 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- HNC Software Inc. ................................. 116,389 $ 2,397,613 Holly Corp. ....................................... 24,500 471,625 Hollywood Casino Corp. ............................ 33,400 350,700 Hollywood Entertainment Corp. ..................... 136,455 1,949,942 Home Properties Of NY Inc. ........................ 56,083 1,772,223 Hooper Holmes Inc. ................................ 181,244 1,622,134 Horace Mann Educators ............................. 127,261 2,700,478 Horizon Offshore Inc. ............................. 45,173 340,604 HOT Topic Inc. .................................... 58,621 1,840,113 HotJobs.com Ltd ................................... 80,151 832,769 Houston Exploration Co. ........................... 30,918 1,038,226 Hovnanian Enterprises Inc. ........................ 46,500 989,520 HRPT Properties Trust ............................. 420,037 3,637,520 Hudson River Bancorp Inc. ......................... 50,800 1,112,520 Hudson United Bancorp ............................. 146,414 4,202,082 Hughes Supply Inc. ................................ 74,934 2,313,213 Hutchinson Technology Inc. ........................ 81,730 1,897,771 Hydril Company .................................... 43,600 768,668 Hyperion Solutions Corp. .......................... 104,918 2,083,671 Hyseq Incorporated ................................ 50,385 388,972 I-many Inc. ....................................... 116,400 1,123,260 I-Stat Corp. ...................................... 53,448 421,705 Ibasis Incorporated ............................... 101,221 132,600 Iberiabank Corporation ............................ 16,700 462,924 ICT Group Inc. .................................... 6,500 120,965 ICU Medical Inc. .................................. 20,100 894,450 Identix Inc. ...................................... 109,069 1,591,317 Idex Corp. ........................................ 98,864 3,410,808 IDEXX Laboratories Inc. ........................... 106,490 3,036,030 IDT Corp. ......................................... 137,689 2,686,312 IDX Systems Corp. ................................. 51,265 666,958 Igen Inc. ......................................... 39,925 1,600,992 IHOP Corp. ........................................ 57,039 1,671,243 Ikon Office Solutions Inc. ........................ 452,799 5,293,220 Ilex Oncology Incorporated ........................ 101,012 2,731,364 Illumina Incorporated ............................. 54,500 640,920 Imation Corp. ..................................... 105,540 2,277,553 IMC Global Inc .................................... 351,500 4,569,500 Immune Response Corp. ............................. 103,201 138,289 Immunogen Inc. .................................... 123,379 2,045,624 Immunomedics Inc. ................................. 123,463 2,501,360 Impath Inc. ....................................... 50,609 2,252,607 Impax Laboratories Inc. ........................... 58,300 783,552 Impco Technologies Inc. ........................... 23,194 294,332 Impsat Fiber Networks Inc. ........................ 15,264 2,671 Inamed Corporation ................................ 46,920 1,410,884 Incyte Genomics Inc ............................... 212,900 4,164,324
The accompanying notes are an integral part of these financial statements. SAI-101 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Independence Community Bank Corp. ................... 188,556 $ 4,291,535 Independent Bank Corp. -- Mich ...................... 39,675 1,102,965 Independent Bank Corp. -- Mass ...................... 38,248 821,950 Indus International Inc. ............................ 91,692 669,352 IndyMac Bancorp Inc. ................................ 197,627 4,620,519 Inet Technologies Inc. .............................. 34,700 366,779 Infocus Corporation ................................. 123,704 2,723,962 Infogrames Incorporated ............................. 43,995 311,925 Information Holdings Inc. ........................... 63,980 1,811,274 Information Resources Inc. .......................... 93,400 775,220 Infospace Inc. ...................................... 794,500 1,628,725 Infousa Inc. ........................................ 88,576 614,717 Ingles Markets Inc. ................................. 36,521 436,426 Inkine Pharmaceutical Company ....................... 102,600 160,056 Inktomi Corporation ................................. 411,716 2,762,614 Innkeepers USA Trust ................................ 68,452 670,830 Innovative Solutions & Support Incorporated ......... 24,200 188,034 Input/Output Inc. ................................... 146,104 1,199,514 Insight Enterprises Inc. ............................ 124,944 3,073,622 Insignia Financial Group Inc. ....................... 69,352 749,002 Insituform Technologies Inc. ........................ 75,033 1,919,344 Insmed Incorporated ................................. 97,300 371,686 Inspire Phamaceutical Incorporated .................. 47,700 672,093 Insurance Auto Auctions Inc. ........................ 34,948 507,095 Integra Bank Corporation ............................ 52,830 1,106,260 Integra Lifesciences Corp ........................... 37,000 974,580 Integral Systems Incorporated Maryland .............. 27,900 537,075 Integrated Circuit Systems Incorporated ............. 89,681 2,025,894 Integrated Silicon Solution ......................... 80,562 986,079 Intellidata Technologies Corp. ...................... 134,509 380,660 Inter-Tel Inc. ...................................... 57,733 1,109,628 Interactive Data Corporation ........................ 116,493 1,647,211 Interactive Intelligence Inc. ....................... 19,025 132,224 Interdigital Communications Corp. ................... 177,912 1,725,746 Interface Incorporated .............................. 136,628 766,483 Intergraph Corp. .................................... 160,233 2,201,601 Intergrated Electrical Services ..................... 89,859 460,078 Interland Incorporated .............................. 193,582 408,458 Interlogix Incorporated ............................. 62,073 2,400,363 Intermagnetics General Corp. ........................ 46,770 1,211,343 Intermune Incorporated .............................. 90,933 4,479,360 Internap Network Services Corporation ............... 441,900 512,604 International Bancshares Corp. ...................... 51,762 2,181,768 International Game Technology ....................... 386 26,364 International Multifoods Corp. ...................... 51,810 1,238,259 International Specialty Products .................... 35,311 316,033 Internet Capital Group Inc. ......................... 608,154 735,866
The accompanying notes are an integral part of these financial statements. SAI-102 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Interneuron Pharmaceuticals Inc. .................. 122,000 $ 1,352,980 Interpool Inc. .................................... 43,900 845,075 Interstate Bakeries ............................... 91,014 2,200,719 Intertan Inc. ..................................... 88,939 1,117,074 Intertrust Technologies Corp. ..................... 226,213 278,242 InterVoice-Brite Inc. ............................. 97,964 1,253,939 Intrado Incorporated .............................. 39,900 1,069,320 Intuitive Surgical Incorporated ................... 103,400 1,037,102 Invacare Corp. .................................... 66,537 2,242,962 Investors Real Estate Trust ....................... 76,300 717,220 Iomega Corporation ................................ 171,922 1,435,549 Ionics Inc. ....................................... 56,649 1,701,169 IRT Property Co. .................................. 101,419 1,075,041 Irwin Financial Corp. ............................. 29,122 495,074 Isis Pharmaceuticals Inc. ......................... 131,688 2,922,157 Isle of Capri Casinos Inc. ........................ 67,040 896,995 ITC Deltacom Inc. ................................. 115,144 100,175 Itron Inc. ........................................ 44,900 1,360,470 ITT Educational Services Inc. ..................... 74,956 2,763,628 ITXC Corp. ........................................ 73,258 526,725 Ivex Packaging Corp. .............................. 48,925 929,575 Ixia .............................................. 132,700 1,705,195 IXYS Corporation .................................. 33,059 267,447 J Jill Group Incorporated ......................... 37,600 809,528 J&J Snack Foods Corp. ............................. 17,500 427,875 J. B. Hunt Transport Services Inc. ................ 47,592 1,104,134 Jack In The Box Inc. .............................. 117,014 3,222,566 Jakks Pacific Inc. ................................ 55,916 1,059,608 JD Edwards & Co ................................... 319,616 5,257,683 JDA Software Group Inc. ........................... 67,681 1,512,670 JDN Realty Corp. .................................. 104,145 1,284,108 Jefferies Group Inc. .............................. 74,182 3,138,640 JLG Industries Inc. ............................... 136,722 1,456,089 JM Smucker Company ................................ 61,079 2,160,975 Jni Corporation ................................... 66,348 551,352 John H. Harland Co. ............................... 93,781 2,072,560 John Wiley & Sons Inc. ............................ 143,090 3,295,363 Jones Lang Lasalle Inc. ........................... 97,379 1,757,691 Journal Register Co. .............................. 87,929 1,850,026 JP Realty Inc. .................................... 37,868 900,880 K V Pharmaceutical Co. ............................ 74,770 2,427,034 K-Swiss Inc. ...................................... 20,000 665,000 K2 Inc. ........................................... 53,300 384,293 Kadant Incorporated ............................... 36,961 535,935 Kaiser Aluminum Corp. ............................. 84,456 136,819 Kaman Corp. ....................................... 74,055 1,155,258 Kana Software Inc. ................................ 46,859 911,876
The accompanying notes are an integral part of these financial statements. SAI-103 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- Kansas City Life Insurance Co. ....................... 18,534 $ 687,611 Kansas City Southern Industries Incorporated ......... 193,250 2,730,622 Kaydon Corp. ......................................... 87,468 1,983,774 KB Home .............................................. 132,086 5,296,649 KCS Energy Inc. ...................................... 92,700 289,224 Keane Inc. ........................................... 169,100 3,048,873 Keithley Instruments Inc. ............................ 23,662 399,888 Kellwood Co. ......................................... 73,185 1,757,172 Kelly Services Inc. .................................. 51,698 1,131,669 Kendle International Inc. ............................ 28,900 582,624 Kennametal Inc. ...................................... 100,428 4,044,236 Kenneth Cole Productions Inc. ........................ 24,286 429,862 Keryx Biopharmaceuticals Incorporated ................ 38,100 278,130 Key Energy Group Inc. ................................ 303,895 2,795,834 Key Production Inc. .................................. 44,306 753,202 Key3Media Group Incorporated ......................... 110,054 586,588 Keynote Systems Inc. ................................. 69,454 649,395 Keystone Property Trust Corporation .................. 25,500 333,795 kforce Inc. .......................................... 81,331 511,572 Kilroy Realty Corp. .................................. 76,795 2,017,405 Kimball International Inc. ........................... 104,524 1,583,539 Kirby Corp. .......................................... 60,195 1,658,372 Knight Transportation Inc. ........................... 56,412 1,059,417 Koger Equity Inc. .................................... 88,662 1,445,191 Kopin Corp. .......................................... 211,200 2,956,800 Korn/Ferry International ............................. 124,392 1,324,775 KOS Pharmaceuticals Inc. ............................. 14,786 511,596 Kosan Biosciences Inc. ............................... 41,700 333,183 Kramont Reality Trust ................................ 64,600 943,160 Kroll Incorporated ................................... 45,100 681,010 Kronos Inc. .......................................... 59,383 2,872,950 Kulicke & Soffa Industries Inc. ...................... 155,479 2,666,465 La Jolla Pharmaceutical Co. .......................... 108,200 967,308 La-Z-Boy Inc. ........................................ 151,561 3,307,061 Labor Ready Inc. ..................................... 120,685 616,700 Laclede Group Incorporated ........................... 60,109 1,436,605 Ladish Company Inc. .................................. 27,400 299,208 Lakeland Bancorp Inc. ................................ 35,280 575,064 Lancaster Colony Corp. ............................... 89,034 3,161,597 Lance Inc. ........................................... 78,562 1,122,651 Landamerica Financial Group Inc. ..................... 58,502 1,679,007 Landauer Inc. ........................................ 25,400 859,790 Landry's Restaurants Inc. ............................ 47,113 878,657 Lands' End Inc. ...................................... 35,516 1,781,483 Landstar Systems Inc. ................................ 26,718 1,937,322 Lantronix Incorporated ............................... 57,900 365,928 Large Scale Biology Corporation ...................... 40,500 182,250
The accompanying notes are an integral part of these financial statements. SAI-104 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- LaSalle Hotel Properties .......................... 38,252 $ 449,078 Lawson Products Inc. .............................. 14,899 387,374 Leap Wireless International Inc. .................. 98,000 2,055,060 Learning Tree International Inc. .................. 38,449 1,072,727 Lecroy Corp. ...................................... 26,800 487,760 Lee Enterprises Inc. .............................. 139,628 5,078,270 Legato Systems Inc. ............................... 281,357 3,649,200 Lennox International Inc. ......................... 137,057 1,329,453 Lexar Media Incorporated .......................... 126,500 333,960 Lexent Incorporated ............................... 59,600 372,500 Lexicon Genetics Incorporated ..................... 111,518 1,286,918 Lexington Corporate Properties Trust .............. 63,814 989,117 LI-VI Inc. ........................................ 33,381 575,155 Libbey Inc. ....................................... 49,636 1,620,615 Liberate Technologies ............................. 339,500 3,897,460 Liberty Corp. ..................................... 54,057 2,224,446 Liberty Digital Inc. .............................. 71,600 247,736 Liberty Livewire Corp. ............................ 20,061 139,366 LifePoint Hospitals Inc. .......................... 123,552 4,205,710 Ligand Pharmaceuticals Inc. ....................... 130,499 2,335,932 Lightbridge Inc ................................... 77,399 940,398 Lightpath Technologies Incorporated ............... 62,277 221,083 Lincoln Electric Holdings Inc. .................... 103,410 2,527,340 Lindsay Manufacturing Co. ......................... 31,457 608,693 Linens 'N Things Inc. ............................. 114,887 2,929,618 Liqui-Box Corp. ................................... 7,968 328,680 Lithia Motors Inc. ................................ 20,900 432,630 Littelfuse Inc. ................................... 58,228 1,527,903 LNR Property Corp. ................................ 69,863 2,178,328 Local Financial Corp .............................. 60,000 839,400 Lodgenet Entertainment Corp. ...................... 31,817 543,753 Lone Star Steakhouse & Saloon ..................... 54,763 812,135 Lone Star Technologies Inc. ....................... 83,578 1,470,973 Longs Drug Stores Corp. ........................... 95,021 2,221,591 Longview Fibre Co. ................................ 164,856 1,946,949 Loudcloud Incorporated ............................ 82,200 348,528 Louisiana Quinta Pptys Incorporated ............... 406,156 2,331,335 Louisiana-Pacific Corp. ........................... 327,998 2,768,303 LSI Industries Inc. ............................... 49,450 860,430 LTX Corp. ......................................... 153,833 3,221,263 Luby's Cafeterias Inc. ............................ 66,343 378,819 Lufkin Industries Inc. ............................ 16,500 442,200 Luminex Corp. ..................................... 55,160 935,514 Lydall Inc. ....................................... 44,000 440,000 Lynch Interactive Corporation ..................... 6,000 414,000 M T R Gaming Group Inc. ........................... 66,600 1,065,600 M/I Schottenstein Homes Inc. ...................... 17,400 865,998
The accompanying notes are an integral part of these financial statements. SAI-105 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- MacDermid Inc. .................................... 64,963 $ 1,101,123 Macerich Co. ...................................... 98,282 2,614,301 Macrochem Corp. ................................... 63,500 193,675 Macromedia Inc. ................................... 189,860 3,379,508 Madison Gas & Electric Co. ........................ 53,198 1,407,087 MAF Bancorp Inc. .................................. 58,281 1,719,289 Magellan Health Services, Inc. .................... 67,700 429,895 Magna Entertainment Corp. ......................... 66,100 462,700 MagneTek Inc. ..................................... 59,781 538,627 Magnum Hunter Resources Incorporated .............. 91,800 761,940 Mail Well Holdings Inc. ........................... 99,408 407,573 Main Street Banks Inc. ............................ 28,700 470,680 Management Network Group Incorporated ............. 33,815 233,324 Manhattan Associates Inc. ......................... 47,675 1,389,726 Manitowoc Co., Inc. ............................... 78,491 2,441,070 Manufactured Home Communities Inc. ................ 46,942 1,465,060 Manufacturers Services Limited .................... 48,200 301,250 Mapinfo Corp. ..................................... 42,435 665,805 Marcus Corp. ...................................... 52,753 746,455 Martek Biosciences Corp. .......................... 47,184 1,026,252 Martha Stewart Living Inc. ........................ 25,457 418,768 Mastec Inc. ....................................... 67,100 466,345 Mathews International Corp. ....................... 94,364 2,319,467 Matrix Pharmaceutical Inc. ........................ 83,935 131,778 Matrixone Incorporated ............................ 96,483 1,253,314 Mattson Technology Inc. ........................... 107,354 945,789 Maui Land & Pineapple Co. ......................... 6,400 153,664 Maverick Tube Corp. ............................... 114,278 1,479,900 Maxim Pharmaceuticals Inc. ........................ 76,456 527,546 Maximus Inc. ...................................... 39,253 1,650,981 Maxwell Technologies Inc. ......................... 29,600 290,080 Maxygen Incorporated .............................. 92,504 1,625,295 MB Financial Corp. ................................ 43,500 1,182,765 Mcafee.com Inc. ................................... 20,032 679,285 McGrath RentCorp .................................. 21,122 792,497 McMoRan Exploration Co. ........................... 37,948 219,719 MCSi Inc. ......................................... 46,171 1,082,710 MDC Holdings Inc. ................................. 58,964 2,228,250 Measurement Specialties Inc. ...................... 35,500 334,055 Mechanical Technology Incorporated ................ 53,484 146,546 Med-Design Corp. .................................. 21,500 423,550 Medallion Financial Corp. ......................... 49,294 389,423 Medford Bancorp Inc. .............................. 18,600 393,576 Media General Incorporated ........................ 39,974 1,991,904 Medicines Company ................................. 75,700 877,363 Medis Technologies Limited ........................ 25,200 185,220 Medquist Inc. ..................................... 34,781 1,017,344
The accompanying notes are an integral part of these financial statements. SAI-106 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Meemic Holdings Inc. .............................. 1,800 $ 39,312 Memberworks Inc. .................................. 33,022 462,638 MEMC Electronic Materials Inc. .................... 120,592 428,102 Men's Wearhouse Inc. .............................. 102,235 2,111,153 Mentor Corp. ...................................... 66,450 1,897,812 Mercury Computer Systems Incorporated ............. 57,955 2,266,620 Meridian Resource Corp. ........................... 100,654 401,609 Meristar Hospitality Corporation .................. 122,954 1,745,947 Meritage Corporation .............................. 10,200 523,260 Merix Corp. ....................................... 41,600 717,600 Mesa Air Group Inc. ............................... 88,198 663,249 Mesaba Holdings Inc. .............................. 30,227 215,216 Mestek Inc. ....................................... 9,600 227,040 Metasolv Incorporated ............................. 92,874 729,934 Metawave Communications Corporation ............... 163,004 508,572 Methode Electronics Inc. .......................... 114,783 918,264 Metro One Telecommunications ...................... 56,724 1,715,901 Metromedia International Group Inc. ............... 239,090 193,663 MGI PHARMA Inc. ................................... 75,714 1,156,910 Michaels Stores Inc. .............................. 207,066 6,822,825 Micro General Corporation ......................... 31,000 425,010 Microfinancial Incorporated ....................... 21,000 215,250 Micros Systems Inc. ............................... 55,497 1,392,975 Microsemi Corporation ............................. 88,058 2,615,323 Microstrategy Inc. ................................ 92,587 356,460 Microtune Incorporated ............................ 74,800 1,754,808 Microvision Incorporated Washington ............... 31,527 448,944 Mid Atlantic Medical Services Inc. ................ 154,036 3,496,617 Mid Atlantic Reality Trust ........................ 38,100 592,455 Mid-America Apartment Communities Inc. ............ 47,111 1,239,019 Mid-America Bancorp ............................... 29,508 976,715 Mid-State Bancshares .............................. 75,664 1,231,810 Midas Inc. ........................................ 52,027 598,311 Middlesex Water Co. ............................... 15,200 515,584 Midland Co. ....................................... 11,896 521,045 Midway Games Inc. ................................. 92,022 1,381,250 Midwest Banc Holdings Incorporated ................ 17,700 376,125 Midwest Express Holdings Inc. ..................... 37,867 552,858 Milacron Inc. ..................................... 54,425 860,459 Millennium Cell Incorporated ...................... 47,600 248,472 Millennium Chemicals Inc. ......................... 208,061 2,621,569 Mills Corp. ....................................... 57,943 1,534,331 Mine Safety Appliances Co. ........................ 29,121 1,169,208 Minerals Technologies Inc. ........................ 64,060 2,987,758 MIPS Technologies Inc. ............................ 126,689 1,094,593 Miravant Medical Technologies ..................... 40,373 387,985 Mission West Properties ........................... 45,000 572,400
The accompanying notes are an integral part of these financial statements. SAI-107 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Mississippi Valley Bankshares Inc. ................ 18,160 $ 711,872 MKS Instruments Inc. .............................. 65,503 1,770,546 Mobile Mini Incorporated .......................... 41,036 1,605,328 Modine Manufacturing Co. .......................... 89,587 2,090,065 Modis Professional Services Inc. .................. 294,025 2,099,338 Moldflow Corporation .............................. 13,500 193,320 Molecular Devices Corp. ........................... 46,079 961,669 Monaco Coach Corp. ................................ 75,574 1,652,803 Montana Power Co. ................................. 338,900 1,948,675 Moog Inc. ......................................... 44,716 974,809 Movado Group Inc .................................. 29,100 558,720 Movie Gallery Inc. ................................ 22,649 551,730 Mro Software Incorporated ......................... 48,727 1,139,237 MRV Communications Inc. ........................... 252,146 1,069,099 MSC Industrial Direct Co. ......................... 129,900 2,565,525 Msc Software Corporation .......................... 90,300 1,408,680 MTS Systems Corp. ................................. 73,700 745,107 Mueller Industries Inc. ........................... 95,985 3,191,501 Multex.com Inc .................................... 80,267 361,202 Myers Industries Inc. ............................. 52,182 712,284 NABI Inc. ......................................... 116,313 1,200,350 Nacco Industries .................................. 21,504 1,221,212 Nanogen Incorporated .............................. 39,014 225,111 Nanometrics Incorporated .......................... 21,608 419,195 Nanophase Technologies Corporation ................ 35,200 207,328 Napro Biotherapeutics Inc. ........................ 81,500 929,100 Nash Finch Co. .................................... 36,400 1,132,040 Natco Group Incorporated .......................... 31,800 222,600 National Beverage Corp. ........................... 10,800 127,980 National Golf Properties Inc. ..................... 29,069 257,842 National Health Investors Inc. .................... 67,902 1,004,950 National Healthcare Corp .......................... 24,700 379,639 National Penn Bancshares Inc. ..................... 57,602 1,267,244 National Presto Industries Inc. ................... 14,240 395,160 National Processing Inc. .......................... 20,626 670,345 National Service Industries Inc. .................. 128,631 259,835 National Western Life Insurance Co. ............... 6,468 719,242 Nationwide Health Properties Inc. ................. 149,743 2,798,697 Nature's Sunshine Products Inc. ................... 34,800 408,552 Nautica Enterprises Inc. .......................... 83,764 1,071,342 Navigant Consulting Company ....................... 117,321 645,266 Navigant International Incorporated ............... 47,400 542,730 NBC Capital Corp. ................................. 17,100 525,141 NBT Bancorp Inc. .................................. 81,900 1,186,731 NBTY Inc. ......................................... 139,809 1,635,765 NCH Corp. ......................................... 6,223 324,529 NCI Building Systems Inc. ......................... 49,098 869,035
The accompanying notes are an integral part of these financial statements. SAI-108 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ NCO Group Inc. .................................... 60,972 $ 1,396,259 NDCHealth Corp. ................................... 104,036 3,594,444 Neon Communications Inc. .......................... 30,027 81,373 Neopharm Incorporated ............................. 38,220 957,411 Neose Technologies Inc. ........................... 38,532 1,411,042 Net.B@nk Inc. ..................................... 92,839 972,953 Net2Phone Incorporated ............................ 58,478 394,727 Netegrity Incorporated ............................ 74,271 1,437,887 NETIQ Corp. ....................................... 127,875 4,508,872 Netratings Incorporated ........................... 19,790 310,307 Netro Corporation ................................. 137,368 504,141 Netscout Systems Inc. ............................. 61,963 490,127 Network Plus Corporation .......................... 23,772 27,576 Neurocrine Biosciences Inc. ....................... 77,131 3,957,592 Neurogen Corp. .................................... 37,045 647,547 New Century Financial Corporation ................. 29,400 397,782 New England Business Service Inc. ................. 35,960 688,634 New Focus Incorporated ............................ 152,900 582,549 New Horizons Worldwide Incorporated ............... 19,900 228,850 New Jersey Resources Corp. ........................ 58,411 2,733,635 New York Community Bancorp Incorporated ........... 259,035 5,924,130 Newmark Homes Corporation ......................... 12,700 183,388 Newpark Resources Inc. ............................ 209,312 1,653,565 Newport Corp. ..................................... 111,300 2,145,864 Newport News Shipbuilding Inc. .................... 72 5,130 Newpower Holdings Incorporated .................... 129,100 95,534 Next Level Communications Incorporated ............ 62,800 210,380 Nextcard Incorporated ............................. 90,460 47,039 NL Industries Inc. ................................ 29,179 445,563 NMS Communciations Corp. .......................... 119,559 576,274 Nn Incorporated ................................... 34,800 388,020 Nordson Corp. ..................................... 75,630 1,997,388 Nortek Incorporated ............................... 25,307 706,065 North American Scientific Incorporated ............ 21,300 285,420 North Pittsburgh Systems Inc. ..................... 51,288 948,828 Northfield Laboratories Inc. ...................... 31,900 273,734 Northwest Bancorp Inc. ............................ 35,532 406,486 Northwest Natural Gas Co. ......................... 81,165 2,069,707 Northwestern Corp. ................................ 88,597 1,864,967 Novadigm Inc. ..................................... 43,909 416,696 Novatel Wireless Incorporated ..................... 77,100 94,062 Novavax, Inc. ..................................... 47,100 664,110 Novell Inc. ....................................... 1,124,557 5,161,717 Noven Pharmaceuticals Inc. ........................ 74,934 1,330,078 Novoste Corp ...................................... 45,648 398,964 NPS Pharmaceuticals Inc. .......................... 89,805 3,439,531 NS Group Inc. ..................................... 54,417 407,039
The accompanying notes are an integral part of these financial statements. SAI-109 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------- NTELOS Inc. ......................................... 58,587 $ 907,513 Nu Horizons Electrs Corporation ..................... 44,100 453,348 NU Skin Enterprises Inc. ............................ 143,435 1,255,056 Nuance Communications ............................... 89,552 814,923 Nuevo Energy Co. .................................... 46,336 695,040 Nui Corporation ..................................... 46,100 1,092,570 Numerical Technologies Inc. ......................... 61,057 2,149,206 NVR Inc. ............................................ 19,358 3,949,032 Nyfix Incorporated .................................. 74,729 1,496,075 NYMAGIC Inc. ........................................ 8,800 141,592 O Charleys Incorporated ............................. 52,849 978,235 O'Reilly Automotive Inc. ............................ 118,391 4,317,720 Oak Technology Inc. ................................. 150,244 2,065,855 Oceaneering International Inc. ...................... 70,997 1,570,454 Oceanfirst Financial Corporation .................... 21,530 520,165 Octel Corp .......................................... 29,600 532,800 Ocular Sciences Inc ................................. 54,393 1,267,357 Ocwen Financial Corp. ............................... 124,587 1,056,498 OfficeMax Inc. ...................................... 355,024 1,597,608 Offshore Logistics Inc. ............................. 53,022 941,671 Oglebay Norton Co. .................................. 6,000 93,000 Ohio Casualty Corp. ................................. 177,314 2,845,890 Oil States International Incorporated ............... 33,300 303,030 Old Second Bancorp Inc. ............................. 17,300 681,966 Olin Corp. .......................................... 113,028 1,824,272 Omega Financial Corp. ............................... 24,658 792,755 Omnova Solutions Incorporated ....................... 135,380 920,584 On Assignment Inc. .................................. 70,086 1,609,875 On Command Corp. .................................... 8,890 27,115 On Semiconductor Corp. .............................. 98,900 204,723 Oneida Ltd. ......................................... 41,384 535,923 Oneok Inc. .......................................... 174,224 3,108,156 Onyx Pharmaceuticals Inc. ........................... 54,600 279,552 Onyx Software Corporation ........................... 97,540 380,406 Oplink Communications Incorporated .................. 338,000 637,130 Opnet Technologies Inc. ............................. 25,700 370,337 Optical Cable Corp. ................................. 10,843 17,674 Optical Communication Products Incorporated ......... 17,900 70,526 Option Care Incorporated ............................ 27,800 543,490 Orasure Technologies Incorporated ................... 88,200 1,071,630 Orbital Sciences Corp. .............................. 109,359 451,653 Orchid Biosciences Incorporated ..................... 124,228 683,254 Oregon Steel Mills Inc. ............................. 76,000 376,200 Organogenesis Inc. .................................. 101,524 487,315 Oriental Financial Group Inc. ....................... 32,296 600,706 Osca Incorporated ................................... 20,100 419,085 Oshkosh B'gosh Inc. ................................. 29,814 1,250,399
The accompanying notes are an integral part of these financial statements. SAI-110 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- --00--------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------- Oshkosh Truck Corp. .................................. 53,485 $ 2,607,394 Osmonics Inc. ........................................ 31,800 445,836 OTG Software Inc. .................................... 45,338 453,380 Otter Tail Corp. ..................................... 81,045 2,361,651 Overseas Shipholding Group Inc. ...................... 88,018 1,980,405 Overture Services Inc. ............................... 61,027 2,162,187 Owens & Minor Inc. ................................... 113,596 2,101,526 Owens-Illinois Inc. .................................. 461,300 4,608,387 Oxford Industries Inc. ............................... 17,800 420,080 P F Changs China Bistro Incorporated ................. 28,628 1,354,104 Pacific Capital Bancorp .............................. 84,744 2,355,036 Pacific Northwest Bancorp ............................ 42,437 868,261 Pacific Sunwear Of California ........................ 94,989 1,939,675 Pacificare Health Systems ............................ 92,500 1,480,000 Packeteer Incorporated ............................... 65,358 481,688 Pain Therapeutics Incorporated ....................... 48,200 441,512 Palm Harbor Homes Inc. ............................... 51,670 1,237,496 Pan Pacific Retail Properties Inc. ................... 74,926 2,151,875 Panera Bread Company ................................. 31,300 1,628,852 Papa John's International Inc. ....................... 48,349 1,328,631 Paradigm Enetics Incorporated ........................ 78,515 447,536 Parexel International Corp. .......................... 75,720 1,086,582 Park Electrochemical Corp. ........................... 55,800 1,473,120 Park National Corp. .................................. 36,776 3,410,974 Parker Drilling Co. .................................. 293,517 1,083,078 Parkervision Inc. .................................... 24,540 515,340 Parkway Properties Inc. .............................. 28,169 935,211 Pathmark Stores Inc. ................................. 94,400 2,327,904 Patina Oil & Gas Corp. ............................... 58,847 1,618,292 PAXAR Corp. .......................................... 114,313 1,623,245 Paxson Communications Corp. .......................... 96,767 1,011,215 Pc Connection Inc. ................................... 24,379 361,541 PC-Tel Inc. .......................................... 40,269 391,012 Pdi Incorporated ..................................... 22,194 495,370 Pec Solutions Incorporated ........................... 5,244 197,227 Peco II Incorporated ................................. 40,900 243,764 Pediatrix Medical Group Inc. ......................... 67,537 2,290,855 Pegasus Communications Corp. ......................... 142,153 1,479,813 Pegasus Systems Inc. ................................. 81,613 1,158,905 Pemstar Incorporated ................................. 75,100 901,200 Penn Engineering & Manufacturing Corporation ......... 36,788 616,199 Penn National Gaming Inc. ............................ 30,121 913,871 Penn Virginia Corp. .................................. 24,394 831,835 Pennfed Financial Services ........................... 17,900 444,278 Pennsylvania Real Estate Invest Trust ................ 41,463 961,942 Pennzoil-Quaker State Co. ............................ 252,103 3,642,888 Penton Media Inc. .................................... 67,387 421,843
The accompanying notes are an integral part of these financial statements. SAI-111 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Penwest Pharmaceuticals Company ................... 43,400 $ 870,170 Peoples Energy Corp. .............................. 113,087 4,289,390 Peoples Holding Co. ............................... 18,000 666,000 PEP Boys-Manny Moe & Jack ......................... 144,021 2,469,960 Per Se Technologies Inc. .......................... 94,864 1,019,788 Peregrine Pharmaceuticals Incorporated ............ 343,517 1,178,263 Performance Food Group Inc. ....................... 138,032 4,854,585 Performance Technologies Inc. ..................... 30,200 402,264 Pericom Semiconductor Corporation ................. 64,750 938,875 Perini Corp. ...................................... 34,800 243,600 Perot Systems Corporation ......................... 198,828 4,060,068 Perrigo Co. ....................................... 192,874 2,279,771 Petroquest Energy Inc ............................. 66,700 354,844 PETSMART Inc. ..................................... 309,913 3,049,544 PFF Bancorp Inc. .................................. 38,608 1,065,581 Phar-Mor Corp. .................................... 162,300 381,405 Pharmaceutical Resources Inc. ..................... 60,458 2,043,480 Pharmacopeia Inc. ................................. 67,431 936,617 Pharmacyclics Inc. ................................ 48,574 482,826 Philadelphia Consolidated Holding Corp. ........... 35,923 1,354,656 Philadelphia Suburban Corp. ....................... 181,220 4,086,511 Phillips-Van Heusen Corp. ......................... 68,507 746,726 Phoenix Technology Ltd. ........................... 80,670 938,999 Photon Dynamics Incorporated ...................... 42,388 1,935,012 Photronics Inc. ................................... 83,642 2,622,177 Pico Holdings Incorporated ........................ 31,385 392,313 Piedmont Natural Gas Co., Inc. .................... 96,524 3,455,559 Pier 1 Imports Inc. ............................... 295,897 5,130,854 Pilgrim's Pride Corp. ............................. 44,954 609,127 Pinnacle Entertainment Incorporated ............... 55,498 334,653 Pinnacle Holdings Incorporated .................... 125,400 42,636 Pinnacle Systems Inc. ............................. 177,178 1,406,793 Pioneer-Standard Electronics Inc. ................. 87,605 1,112,583 Pitt-Des Moines Inc ............................... 13,400 415,400 Pittston Brink's Group ............................ 174,224 3,850,350 Pixelworks Incorporated ........................... 73,217 1,175,865 Plains Resources Inc. ............................. 78,319 1,927,431 Planar Systems Inc. ............................... 33,200 700,520 Plantronics Inc. .................................. 107,432 2,754,556 Plato Learning Inc. ............................... 46,000 764,060 Playboy Enterprises Inc. .......................... 44,636 753,902 Playtex Products Inc. ............................. 81,341 793,075 Plexus Corp. ...................................... 132,005 3,506,053 Plx Technology Inc. ............................... 51,827 653,538 PMA Capital Corporation ........................... 50,752 979,514 Polaris Industries Inc. ........................... 72,298 4,175,209 Polymedica Corporation ............................ 34,397 570,990
The accompanying notes are an integral part of these financial statements. SAI-112 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Polyone Corporation ............................... 247,575 $ 2,426,235 Pomeroy Computer Resources ........................ 29,800 402,300 Pope & Talbot Inc. ................................ 52,452 747,441 Port Financial Corp. .............................. 20,400 531,828 Portal Software Inc. .............................. 311,700 648,336 Possis Medical Inc. ............................... 55,600 968,552 Post Properties Inc. .............................. 116,500 4,136,915 Potlatch Corp. .................................... 92,889 2,723,505 Powell Industries Inc. ............................ 18,700 350,999 Power Integrations Inc. ........................... 83,020 1,896,177 Powerwave Technologies Inc. ....................... 195,600 3,379,968 Pozen Incorporated ................................ 58,500 307,125 Praecis Pharmaceuticals Incorporated .............. 152,992 890,413 Pre-Paid Legal Services Inc. ...................... 50,467 1,105,227 Prentiss Properties Trust ......................... 102,431 2,811,731 Presidential Life Corp. ........................... 72,845 1,497,693 Presstek Inc. ..................................... 106,025 972,249 PRI Automation Inc. ............................... 76,747 1,569,476 Price Communications Corporation .................. 150,921 2,881,082 Priceline.com Inc. ................................ 328,600 1,912,452 Pricesmart Incorporated ........................... 11,049 386,715 Prima Energy Corp ................................. 30,263 658,220 Prime Group Reality Trust ......................... 16,083 148,446 Prime Hospitality Corp. ........................... 147,273 1,627,367 Private Media Group Incorporated .................. 43,901 430,230 Prize Energy Corporation .......................... 15,264 352,904 ProAssurance Corp ................................. 69,519 1,222,144 Probusiness Services Inc .......................... 55,075 1,035,410 ProcureNet Inc. ................................... 64,900 9,735 Profit Recovery Group International Inc. .......... 126,921 1,034,406 Progenics Pharmaceuticals Incorporated ............ 23,900 441,433 Progress Software Corp. ........................... 97,408 1,683,210 Promistar Financial Corporation ................... 54,082 1,322,305 Proquest Company .................................. 44,627 1,513,302 Prosperity Bancshares Incorporated ................ 16,700 450,733 Proton Energy Systems Incorporated ................ 105,300 868,725 Provident Bancorp Incorporated .................... 12,400 362,080 Provident Bankshares Corp. ........................ 81,417 1,978,433 Province Healthcare Company ....................... 100,362 3,097,171 Proxim Inc. ....................................... 82,489 818,291 PS Business Parks Inc. ............................ 32,745 1,031,467 PSS World Medical Inc. ............................ 223,232 1,821,573 Public Service Co. of New Mexico .................. 127,571 3,565,609 Pulitzer Incorporated ............................. 26,194 1,335,894 Pumatech Inc. ..................................... 128,403 331,280 Pure Resources Inc. ............................... 40,000 804,000 PYR Energy Corp. .................................. 44,300 87,714
The accompanying notes are an integral part of these financial statements. SAI-113 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- QRS Corp. ......................................... 39,678 $ 559,460 Quaker Chemical Corp. ............................. 23,100 475,860 Quaker City Bancorp Inc ........................... 13,600 405,960 Quaker Fabric Corp. ............................... 38,500 319,935 Quanex Corp. ...................................... 41,024 1,160,979 Quicksilver Resources Inc. ........................ 24,200 461,010 Quiksilver Inc. ................................... 69,069 1,187,987 Quixote Corp. ..................................... 18,200 345,800 R&G Financial Corp. ............................... 31,790 544,881 Radiant Systems Inc. .............................. 52,329 601,784 Radisys Corp. ..................................... 53,452 1,050,866 Railamerica Incorporated .......................... 67,600 977,496 Rainbow Technologies Inc. ......................... 70,262 519,939 Ralcorp Holdings Inc. ............................. 96,876 2,199,085 Rambus Inc. ....................................... 264,100 2,110,159 Range Resources Corp. ............................. 170,000 773,500 Rare Hospitality International Inc. ............... 67,954 1,531,683 Raymond James Financial Inc. ...................... 120,752 4,289,111 Rayonier Inc. ..................................... 88,549 4,469,068 Rayovac Corp. ..................................... 62,874 1,106,582 RCN Corporation ................................... 88,600 259,598 Read-Rite Corp. ................................... 380,300 2,513,783 Realty Income Corp. ............................... 104,388 3,069,007 Reckson Associates Realty Corp. ................... 115,903 2,707,494 Recoton Corp. ..................................... 28,000 380,800 Red Hat Inc. ...................................... 80,000 568,000 Redwood Trust Inc. ................................ 22,900 554,867 Regal Beloit Corp. ................................ 62,628 1,365,290 Regency Centers Corp. ............................. 74,812 2,076,033 Regeneration Technologies Inc. .................... 40,000 407,600 Regeneron Pharmaceuticals Inc. .................... 83,023 2,337,928 Regent Communications Inc. ........................ 56,142 378,959 Regis Corp. ....................................... 120,318 3,101,798 Register.Com Incorporated ......................... 66,852 768,798 Rehabcare Group Inc. .............................. 52,098 1,542,101 Reliance Steel & Aluminum Co. ..................... 75,113 1,971,716 Remec Inc. ........................................ 150,895 1,507,441 Remington Oil & Gas Corp. ......................... 50,200 868,460 Renaissance Learning Incorporated ................. 23,014 701,237 Renal Care Group Inc. ............................. 155,734 4,999,061 Rent-A-Center Inc. ................................ 21,004 705,104 Rent-Way Inc ...................................... 76,666 459,229 Republic Bancorp Inc. ............................. 159,221 2,205,211 Republic Bancorp Incorporated Kentucky ............ 23,600 318,364 Republic Bancshares Inc ........................... 15,700 204,100 Research Frontiers Incorporated ................... 30,360 508,834 Resortquest International Incorporated ............ 51,100 243,236
The accompanying notes are an integral part of these financial statements. SAI-114 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Resource America Inc. ............................. 45,500 $ 424,970 Resources Connection Incorporated ................. 19,300 508,169 Respironics Inc. .................................. 98,143 3,399,674 Revlon Inc. ....................................... 18,341 122,151 RFS Hotel Investors Inc. .......................... 79,886 909,103 RGS Energy Group Inc. ............................. 109,295 4,109,492 RH Donnelley Corp ................................. 94,131 2,734,506 Ribozyme Pharmaceuticals Incorporated ............. 34,642 158,314 Richardson Electronics Ltd. ....................... 16,900 204,490 Rigel Pharmaceuticals Incorporated ................ 77,900 362,235 Riggs National Corp. .............................. 37,258 520,494 Right Management Consultants Incorporated ......... 27,750 480,075 Rightchoice Managed Care Inc. ..................... 13,539 947,595 Riviana Foods Inc. ................................ 17,263 306,418 RLI Corp. ......................................... 19,775 889,875 Roadway Corporation ............................... 36,235 1,329,824 Roanoke Electric Steel Corp. ...................... 39,200 540,960 Robbins & Myers Inc. .............................. 26,487 620,061 Robert Mondavi Corp. .............................. 25,414 965,732 Rock-Tenn Co. ..................................... 40,899 588,946 Rogers Corp. ...................................... 49,760 1,507,728 ROHN Industries Inc. .............................. 57,700 118,862 Rollins Inc. ...................................... 45,576 911,520 Roper Industries Inc. ............................. 93,744 4,640,328 Roxio Incorporated ................................ 57,400 949,970 Royal Bancshares Of Pennsylvania .................. 10,500 211,575 RPC Inc. .......................................... 32,713 577,384 RPM Inc. .......................................... 331,319 4,790,873 RTI International Metals Inc. ..................... 74,076 737,056 Ruby Tuesday Inc. ................................. 201,397 4,154,820 Ruddick Corp. ..................................... 96,527 1,543,467 Rudolph Technologies Inc. ......................... 30,052 1,031,385 Rural Celluar Corp ................................ 20,580 457,905 Russ Berrie & Co., Inc. ........................... 27,662 829,860 Russell Corp. ..................................... 78,809 1,182,923 Ryan's Family Steak Houses Inc. ................... 96,398 2,087,017 Ryder Systems Inc. ................................ 170,169 3,769,243 Ryerson Tull Inc. ................................. 68,731 756,041 Ryland Group Inc. ................................. 42,539 3,113,855 S&T Bancorp Inc. .................................. 75,675 1,837,389 S1 Corporation .................................... 195,300 3,159,954 Saba Software Inc. ................................ 92,535 483,033 Safeguard Scientifics Inc. ........................ 397,600 1,391,600 Saga Communications Inc. .......................... 30,826 638,098 Sage Incorporated ................................. 37,500 1,390,125 Salem Communications Corporation Delaware ......... 26,141 601,243 Salton Inc. ....................................... 17,030 321,526
The accompanying notes are an integral part of these financial statements. SAI-115 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Sanchez Computer Associates Inc. .................. 44,503 $ 380,501 Sanderson Farms Inc. .............................. 18,800 401,380 Sandy Spring Bancorp Inc .......................... 45,798 1,459,124 Sangamo Biosciences Incorporated .................. 29,700 277,398 Sangstat Medical Corp. ............................ 59,725 1,172,999 Santander Bancorp ................................. 22,315 433,134 Sapient Corp. ..................................... 262,900 2,029,588 Satcon Technology Corp. ........................... 26,314 136,833 Sauer-Danfoss Inc. ................................ 29,329 234,632 Saul Centers Inc. ................................. 31,144 664,924 SBA Communications Corp. .......................... 125,063 1,628,320 SBS Technologies Inc. ............................. 50,220 731,705 Scansource Inc .................................... 19,600 932,960 Schawk Inc ........................................ 30,500 335,500 Scholastic Corp. .................................. 89,323 4,495,627 School Specialty Inc. ............................. 49,601 1,134,871 Schuler Homes Inc. ................................ 98,400 1,953,240 Schweitzer-Mauduit International Inc. ............. 45,117 1,071,529 SciClone Pharmaceuticals Inc. ..................... 105,070 315,210 Scientific Games Corp. ............................ 49,300 431,375 Scios Inc. ........................................ 148,000 3,517,960 SCM Microsystems Inc. ............................. 46,102 674,933 Scotts Co. ........................................ 51,287 2,441,261 SCP Pool Corp. .................................... 59,055 1,621,060 Scpie Holdings Inc. ............................... 30,850 902,363 Seaboard Corp. .................................... 1,197 366,282 Seachange International Inc. ...................... 56,086 1,913,654 Seacoast Banking Corp. Florida .................... 11,000 510,400 Seacoast Financial Services Corporation ........... 75,403 1,293,161 Seacor Smit Inc. .................................. 53,627 2,488,293 Seattle Genetics Inc. /WA ......................... 21,000 119,700 Second Bancorp Inc. ............................... 25,900 559,699 Secure Computing Corp. ............................ 88,771 1,824,244 Seebeyond Technology Corporation .................. 97,336 944,159 Seitel Inc. ....................................... 61,197 832,279 Select Medical Corporation ........................ 27,700 445,416 Selectica Inc. .................................... 54,640 330,572 Selective Insurance Group Inc. .................... 80,054 1,739,573 Semco Energy Inc. ................................. 55,932 601,269 Semitool Inc. ..................................... 48,995 562,463 Senior Housing Properties Trust ................... 68,949 959,081 Sensient Technologies Corporation ................. 150,189 3,125,433 Sequa Corp. ....................................... 10,362 492,402 Sequenom Incorporated ............................. 87,475 933,358 Serena Software Inc. .............................. 52,217 1,135,198 Serologicals Corp. ................................ 59,100 1,270,650 ShopKo Stores Inc. ................................ 89,695 852,103
The accompanying notes are an integral part of these financial statements. SAI-116 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Shuffle Master Inc. ............................... 60,000 $ 940,200 Shurgard Storage Centers Inc. ..................... 97,948 3,134,336 Sierra Health Services Inc. ....................... 71,500 579,150 Sierra Pacific Resources .......................... 325,443 4,897,917 Signalsoft Corporation ............................ 53,200 237,804 Silgan Holdings Inc. .............................. 28,800 753,408 Silicon Graphics Inc. ............................. 636,382 1,336,402 Silicon Image Inc. ................................ 168,423 633,270 Silicon Laboratories Inc. ......................... 27,600 930,396 Silicon Storage Technology Inc. ................... 252,800 2,436,992 Silicon Valley Bancshares ......................... 133,550 3,569,791 Siliconix Inc. .................................... 17,392 476,889 Simmons First National Corp. ...................... 21,400 688,010 Simone Central Holdings Incorporated .............. 1,329 797 Simplex Solutions Inc. ............................ 12,100 200,255 Simpson Manufacturing Co. Inc. .................... 24,716 1,416,227 Sinclair Broadcast Group Inc. ..................... 72,140 682,444 Sipex Corp. ....................................... 77,754 999,139 Sirenza Microdevices Inc. ......................... 35,421 215,714 Sirius Satellite Radio Inc. ....................... 159,102 1,850,356 Sitel Corp. ....................................... 201,537 483,689 SJW Corp. ......................................... 5,961 508,414 Skechers U.S.A. Inc. .............................. 48,018 702,023 Skillsoft Corporation ............................. 14,900 386,208 Skyline Corp. ..................................... 20,083 647,677 Sl Green Realty Corp. ............................. 85,775 2,634,150 SLI Inc. .......................................... 72,156 188,327 Smart & Final Inc. ................................ 44,012 459,485 Sola International Inc. ........................... 71,600 1,389,040 Somera Communications Incorporated ................ 95,393 720,217 Sonic Automotive Inc. ............................. 73,820 1,730,341 Sonic Corp. ....................................... 67,321 2,423,556 Sonicblue Incorporated ............................ 294,615 1,190,245 Sonicwall Incorporated ............................ 135,894 2,641,779 Sonosite Incorporated ............................. 34,631 889,670 Sorrento Networks Corporation ..................... 38,270 137,389 Sotheby's Holdings Inc. ........................... 67,852 1,127,022 Soundview Technology Group Incorporated ........... 159,636 371,952 South Financial Group Incorporated ................ 134,007 2,378,624 South Jersey Industries Inc. ...................... 39,526 1,288,548 Southern Peru Copper Corp. ........................ 41,690 498,196 Southern Union Co. ................................ 105,989 1,998,953 Southwest Bancorp Of Texas ........................ 85,264 2,580,941 Southwest Gas Corp. ............................... 91,710 2,049,718 Southwestern Energy Company ....................... 81,953 852,311 Sovran Self Storage Inc. .......................... 41,700 1,298,955 Spanish Broadcasting Systems Incorporated ......... 123,570 1,222,107
The accompanying notes are an integral part of these financial statements. SAI-117 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Spartan Stores Incorporated ....................... 67,600 $ 808,496 Spartech Corp. .................................... 45,830 941,807 Specialty Laboratories Incorporated ............... 14,900 409,601 Spectralink Corporation ........................... 45,064 771,946 Spectrasite Holdings Inc. ......................... 233,259 837,400 Spectrian Corp. ................................... 34,300 378,329 Speechworks International Incorporated ............ 82,600 929,250 Speedway Motorsports Inc. ......................... 44,651 1,128,777 Spherion Corporation .............................. 168,690 1,646,414 Spiegel Inc. ...................................... 41,752 189,972 Spinnaker Exploration Co. ......................... 60,349 2,483,965 Sports Resorts International Inc. ................. 73,000 562,830 SPS Technologies Inc. ............................. 32,581 1,137,729 SPSS Inc. ......................................... 32,364 574,461 SRI/Surgical Express Incorporated ................. 5,200 83,200 St. Francis Capital Corp. ......................... 22,400 518,112 St. Mary Land & Exploration Co. ................... 88,560 1,876,586 Stamps.com Inc. ................................... 106,434 381,034 Stancorp Financial Group .......................... 94,520 4,466,070 Standard Commercial Corp. ......................... 30,400 501,600 Standard Microsystems Corp. ....................... 45,489 705,989 Standard Motor Products Inc. ...................... 22,400 311,360 Standard Pacific Corp. ............................ 84,338 2,051,100 Standard Register Co. ............................. 41,769 773,980 Standex International Corp. ....................... 34,532 751,071 Stanley Furniture Company, Incorporated ........... 16,700 396,959 Star Scientific Incorporated ...................... 60,156 152,195 Starbase Corporation .............................. 205,136 139,492 Starmedia Network Incorporated .................... 137,462 52,236 Startek Inc. ...................................... 29,039 550,289 State Auto Financial Corp. ........................ 37,326 606,174 Staten Islands Bancorp Inc. ....................... 180,138 2,938,051 Station Casinos Inc. .............................. 119,625 1,338,604 Steak N Shake Co. ................................. 77,224 852,553 Steel Dynamics Inc. ............................... 79,656 924,806 Stein Mart Inc. ................................... 75,343 629,867 Steinway Musical Instruments ...................... 18,500 307,285 Stellent Incorporated ............................. 61,346 1,813,388 Stepan Co. ........................................ 19,027 461,976 Stericycle Incorporated ........................... 51,070 3,109,142 Steris Corp. ...................................... 207,908 3,798,479 Sterling Bancorp .................................. 30,130 879,796 Sterling Bancshares Inc. .......................... 110,476 1,383,160 Sterling Financial Corporation .................... 35,600 867,216 Steven Madden Ltd. ................................ 28,474 400,629 Stewart & Stevenson Services Inc. ................. 82,836 1,558,145 Stewart Enterprises Inc. .......................... 310,178 1,857,966
The accompanying notes are an integral part of these financial statements. SAI-118 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Stewart Information Services Corp. ................ 37,653 $ 743,647 Stillwater Mining Co. ............................. 124,526 2,303,731 Stone Energy Corp. ................................ 68,669 2,712,425 Stoneridge Inc. ................................... 35,134 319,719 Storage USA Inc. .................................. 48,433 2,039,029 Stratos Lightwave Inc. ............................ 201,108 1,236,814 Strayer Education Inc. ............................ 14,023 683,201 Stride Rite Corp. ................................. 128,416 841,125 Student Loan Corp. ................................ 13,483 1,086,730 Sturm Ruger & Co., Inc. ........................... 57,794 692,372 Suffolk Bancorp ................................... 18,500 1,009,360 Summit Properties Inc. ............................ 78,861 1,973,102 Sun Communities Inc. .............................. 46,577 1,734,993 Sunrise Assisted Living Inc. ...................... 56,736 1,651,585 Sunrise Telecom Inc. .............................. 55,800 223,758 SuperGen Inc. ..................................... 49,453 708,167 Superior Energy Services Inc. ..................... 148,133 1,281,350 Superior Industries International Inc. ............ 60,109 2,419,387 Supertex Inc. ..................................... 28,099 492,013 Support.Com Incorporated .......................... 65,500 410,685 Surebeam Corporation .............................. 20,800 217,776 Surmodics Incorporated ............................ 43,016 1,568,363 Susquehanna Bancshares Inc. ....................... 129,070 2,691,109 Swift Energy Co. .................................. 76,778 1,550,916 Swift Transportation Co., Inc. .................... 183,488 3,946,827 Sws Group Incorporated ............................ 41,686 1,060,909 SY Bancorp Incorporated ........................... 16,300 542,790 Sybron Dental Specialties Incorporated ............ 118,866 2,565,128 Sykes Enterprises Inc. ............................ 71,480 667,623 Sylvan Learning Systems Inc. ...................... 94,714 2,090,338 Symmetricom Inc. .................................. 73,080 556,139 Symyx Technologies Incorporated ................... 84,337 1,791,318 Syncor International Corp. ........................ 61,309 1,755,890 Synplicity Incorporated ........................... 30,600 412,794 Syntel Inc ........................................ 14,454 186,890 Syntroleum Corp ................................... 62,975 447,123 Systems & Computer Technology Corporation ......... 101,169 1,046,087 Take Two Interactive Software ..................... 116,474 1,883,385 Talx Corporation .................................. 37,440 935,251 Tanger Factory Outlet Centers Inc. ................ 15,654 326,386 Tanox Incorporated ................................ 74,885 1,385,560 Targeted Genetics Corporation ..................... 111,026 300,880 Taubman Centers Inc. .............................. 94,805 1,407,854 TBC Corp. ......................................... 52,200 698,958 Techne Corp. ...................................... 132,500 4,882,625 Technitrol Inc. ................................... 99,408 2,745,649 Tecumseh Products Co. ............................. 48,684 2,464,871
The accompanying notes are an integral part of these financial statements. SAI-119 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ Tejon Ranch Co. ..................................... 22,691 $ 542,542 Teledyne Technologies Inc. .......................... 104,099 1,695,773 Teletech Holdings Inc. .............................. 112,600 1,613,558 Telik Incorporated .................................. 67,000 904,500 Tennant Co. ......................................... 27,562 1,022,550 Terayon Communication Systems ....................... 191,500 1,583,896 Terex Corp. ......................................... 104,003 1,824,213 Terra Industries Inc. ............................... 115,400 403,900 Terremark Worldwide Incorporated .................... 444,713 253,486 Tesoro Petroleum Corp. .............................. 110,314 1,446,217 Tetra Technologies Inc. ............................. 35,800 750,010 Tetra Tech Inc. ..................................... 159,493 3,175,506 Texas Biotechnology Corp. ........................... 133,920 870,480 Texas Industries Inc. ............................... 66,903 2,468,721 Texas Regional Bancshares Inc. ...................... 43,230 1,636,255 The Intercept Group Inc. ............................ 45,297 1,852,647 Theragenics Corp. ................................... 101,142 997,260 Therma Wave Incorporated ............................ 56,139 837,594 Third Wave Technologies Incorporated ................ 23,900 175,665 Thomas & Betts Corp. ................................ 186,900 3,952,935 Thomas Industries Inc. .............................. 47,676 1,191,900 Thor Industries Inc. ................................ 18,826 697,503 Thoratec Labs Corp. ................................. 112,204 1,907,468 Thornburg Mortgage Inc. ............................. 105,600 2,080,320 THQ Inc. ............................................ 77,945 3,777,994 Three Five Systems Inc. ............................. 65,159 1,036,680 Timken Co. .......................................... 155,659 2,518,563 Titan Corporation ................................... 197,300 4,922,635 Titan Pharmaceuticals Incorporated Delaware ......... 78,318 768,300 Titanium Metals Corp. ............................... 57,600 229,824 Tivo Incorporated ................................... 50,924 333,552 Toll Brothers Inc. .................................. 70,971 3,115,627 Tollgrade Communications Incorporated ............... 38,815 1,294,480 Tom Brown Inc. ...................................... 106,172 2,867,706 Tompkinstrustco Inc. ................................ 22,800 917,700 Too Incorporated .................................... 100,518 2,764,245 Topps Co., Inc. ..................................... 113,358 1,377,300 Toro Co. ............................................ 39,667 1,785,015 Tower Automotive Inc. ............................... 129,386 1,168,356 Town & Country Trust ................................ 46,252 966,667 Tradestation Group Incorporated ..................... 63,300 98,748 Trammell Crow Company ............................... 79,535 930,560 Transaction Systems Architects Inc. ................. 117,313 1,438,257 Transgenomic Incorporated ........................... 35,600 391,600 Transkaryotic Therapies Inc. ........................ 74,034 3,168,655 Transmontaigne Inc. ................................. 50,739 276,528 Transport World Entertainment Corp. ................. 83,807 636,933
The accompanying notes are an integral part of these financial statements. SAI-120 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------- Transwitch Corp. ...................................... 283,800 $ 1,277,100 TRC Companies Inc. .................................... 16,900 845,000 Tredegar Industries Inc. .............................. 47,631 904,989 Tremont Corp. ......................................... 2,500 72,250 Trendwest Resorts Inc. ................................ 25,527 646,344 Trex Incorporated ..................................... 18,240 346,378 Triad Guaranty Inc. ................................... 24,288 880,926 Triangle Pharmaceuticals Inc. ......................... 148,768 596,560 Triarc Companies ...................................... 36,064 876,355 Trico Marine Services Inc. ............................ 79,525 600,414 Trikon Technologies Inc. .............................. 30,900 363,075 Trimble Navigation Ltd. ............................... 79,883 1,294,903 Trimeris Incorporated ................................. 54,356 2,444,389 Trinity Industries Inc. ............................... 120,904 3,284,962 Tripath Imaging Incorporated .......................... 87,300 657,369 Tripath Technology Inc. ............................... 46,700 79,857 Triquint Semiconductor Inc. ........................... 421,997 5,173,683 Triumph Group Inc. .................................... 49,398 1,605,435 Trizetto Group Incorporated ........................... 77,007 1,010,332 Tropical Sportswear International Corporation ......... 14,500 271,875 Troy Financial Corporation ............................ 13,100 324,880 Trust Co. of New Jersey ............................... 59,093 1,489,144 Trustco Bank Corp. .................................... 225,577 2,835,503 TTM Technologies Inc. ................................. 35,100 355,212 Tuesday Morning Corporation ........................... 30,258 547,367 Tularik Incorporated .................................. 63,805 1,532,596 Tupperware Corp. ...................................... 163,439 3,146,201 Turnstone Systems Incorporated ........................ 88,100 349,757 Tweeter Home Entertainment Group Inc. ................. 63,269 1,834,801 Ubiquitel Incorporated ................................ 176,300 1,313,435 UCAR International Inc. ............................... 174,014 1,861,950 Ucbh Holdings Incorporated ............................ 63,512 1,806,281 UGI Corp. ............................................. 86,948 2,625,830 UICI .................................................. 125,507 1,694,344 Uil Holding Corporation ............................... 40,211 2,062,824 Ulticom Incorporated .................................. 27,025 271,872 Ultimate Electronics Incorporated ..................... 26,557 796,710 Ultratech Stepper Inc. ................................ 67,270 1,111,300 UMB Financial Corp. ................................... 55,152 2,206,064 Umpqua Holdings Corporation ........................... 42,900 579,150 Unb Corporation Ohio .................................. 31,100 576,905 Unifi Inc. ............................................ 161,587 1,171,506 Unifirst Corp. ........................................ 26,100 588,555 Unify Corp. ........................................... 45,300 11,325 Uniroyal Technology Corp. ............................. 39,708 127,066 Unisource Energy Corp. ................................ 102,488 1,864,257 Unit Corp. ............................................ 112,558 1,451,998
The accompanying notes are an integral part of these financial statements. SAI-121 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ United Auto Group Inc. .............................. 16,721 $ 431,569 United Bankshares Inc. .............................. 130,214 3,757,976 United Community Financial Corp. .................... 95,558 688,018 United Dominion Realty Trust ........................ 321,498 4,629,571 United Fire & Casualty Co. .......................... 18,800 538,244 United Industrial Corp. ............................. 40,800 683,400 United National Bancorp New Jersey .................. 46,097 1,106,789 United Natural Foods Inc. ........................... 28,922 723,050 United States Concrete Incorporated ................. 71,600 472,560 United Stationers Inc. .............................. 102,709 3,456,158 United Therapeutics Corp. ........................... 54,584 568,219 UnitedGlobalCom Inc. ................................ 242,200 1,211,000 Universal Access Global Holdings .................... 126,225 591,995 Universal American Financial Corporation ............ 142,300 966,217 Universal Compression Holdings Inc. ................. 35,563 1,048,753 Universal Corp. ..................................... 84,416 3,073,587 Universal Display Corporation ....................... 46,899 426,781 Universal Electronics Inc. .......................... 43,149 742,594 Universal Forest Products ........................... 36,617 766,394 Universal Health Realty Income Trust ................ 34,800 817,800 Unova Inc. .......................................... 142,338 825,560 Urban Outfitters Inc. ............................... 19,900 479,988 Urologix Incorporated ............................... 38,900 779,945 URS Corp. ........................................... 42,646 1,168,927 US Industries Inc. .................................. 229,652 587,909 US Oncology Incorporated ............................ 297,129 2,240,353 US Physical Therapy Inc. ............................ 13,650 220,584 US Restaurants Properties Inc. ...................... 59,300 864,594 US Unwired Incorporated ............................. 100,900 1,027,162 USB Holding Inc. .................................... 32,898 554,331 Usec Incorporated ................................... 261,033 1,868,996 Usfreightways Corporation ........................... 86,617 2,719,774 USG Corp. ........................................... 111,000 634,920 Usinternetworking Inc. .............................. 203,800 40,760 VA Software Corp. ................................... 96,400 236,180 Vail Resorts Inc. ................................... 23,638 419,102 Valence Technology Inc. ............................. 97,149 327,392 Valentis Incorporated ............................... 87,951 272,648 Valmont Industries Inc. ............................. 45,084 651,915 Value City Department Stores Inc. ................... 52,724 247,803 Value Line Inc. ..................................... 4,755 230,522 Valuevision International Inc. ...................... 74,069 1,451,012 Vans Inc. ........................................... 54,634 696,037 Varian Incorporated ................................. 97,583 3,165,593 Varian Semiconductor Equipment Incorporated ......... 105,749 3,657,858 Vasomedical Incorporated ............................ 167,769 620,745 Vastera Incorporated ................................ 60,800 1,009,888
The accompanying notes are an integral part of these financial statements. SAI-122 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ----------------------------------------------------------------------------------- Vaxgen Incorporated ............................... 29,993 $ 347,919 Vector Group Limited .............................. 55,954 1,838,089 Veeco Instruments Inc. ............................ 91,097 3,284,047 Ventana Medical Systems ........................... 40,679 920,159 Ventas Inc. ....................................... 192,823 2,217,464 Ventiv Health Inc. ................................ 48,548 177,686 Veritas DGC Inc. .................................. 98,000 1,813,000 Verity Inc. ....................................... 94,464 1,912,896 Versicor Incorporated ............................. 44,000 895,400 Verticalnet Incorporated .......................... 207,700 290,780 Vesta Insurance Group Inc. ........................ 118,700 949,600 Viasat Incorporated ............................... 41,867 653,125 Viasystems Group Inc. ............................. 175,414 110,511 Vical Inc. ........................................ 60,017 734,608 Vicor Corp. ....................................... 69,110 1,119,582 Vidamedinc ........................................ 121,400 949,348 Viewpoint Corporation ............................. 136,181 927,393 Vintage Petroleum Inc. ............................ 152,567 2,204,593 Virage Logic Corporation .......................... 26,300 505,749 Virgin Islands Technologies Incorporated .......... 19,000 132,050 Viropharma Inc .................................... 56,400 1,294,380 Visual Networks Inc ............................... 88,131 407,165 VISX Inc. ......................................... 156,767 2,077,163 Vital Signs Inc. .................................. 16,781 585,657 Vitria Technology Inc. ............................ 221,600 1,416,024 Volt Information Sciences Inc. .................... 24,062 411,460 Von Pharmaceuticls Incorporated ................... 104,200 459,522 W H Energy Services Incorporated .................. 65,700 1,251,585 W Holding Company Inc. ............................ 88,718 1,437,232 Wabash National Corp. ............................. 79,017 616,333 Wabtec Corp ....................................... 74,508 916,448 Wackenhut Corp. ................................... 28,849 715,455 Wackenhut Corrections Corp. ....................... 25,200 349,272 Wallace Computer Services Inc. .................... 121,882 2,314,539 Walter Industries Inc. ............................ 100,911 1,141,303 Washington Real Estate Investment Trust ........... 122,659 3,052,983 Washington Trust Bancorp Inc. ..................... 38,300 727,700 Waste Connections Inc. ............................ 86,886 2,692,597 Watchguard Technologies Inc. ...................... 63,336 412,317 Watsco Inc. ....................................... 53,448 758,962 Watson Wyatt & Co. Holdings ....................... 28,900 630,020 Watts Industries Inc. ............................. 52,787 791,805 Wausau-Mosinee Paper Corp. ........................ 151,492 1,833,053 Wave Systems Corporation .......................... 148,185 331,934 Waypoint Financial Corp. .......................... 111,200 1,676,896 WD40 Co. .......................................... 52,855 1,408,586 WebEx Communications Inc. ......................... 57,600 1,431,360
The accompanying notes are an integral part of these financial statements. SAI-123 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------- Webmethods Incorporated .............................. 72,200 $ 1,210,072 Websense Incorporated ................................ 52,247 1,675,561 Weingarten Realty Investors .......................... 90,311 4,334,928 Wellman Inc. ......................................... 89,012 1,378,796 Werner Enterprises Inc. .............................. 88,221 2,143,770 Wesbanco Inc. ........................................ 54,927 1,160,608 Wesco International Inc. ............................. 58,265 288,412 West Coast Bancorp (Oregon) .......................... 48,300 672,336 West Pharmaceutical Services Incorporated ............ 29,924 795,978 Westamerica Bancorporation ........................... 103,340 4,089,164 Westcorp ............................................. 36,483 681,138 Western Digital Corp. ................................ 598,311 3,751,410 Western Gas Resources Inc. ........................... 63,984 2,067,963 Western Multiplex Corp. .............................. 150,400 812,160 Westpoint Stevens Inc. ............................... 79,232 194,118 Westport Resources Corp. ............................. 99,152 1,720,287 Wet Seal Inc. ........................................ 44,100 1,038,555 WFS Financial Inc. ................................... 36,439 874,900 Wgl Holdings Incorporated ............................ 153,361 4,458,204 Whitney Holding Corp. ................................ 84,275 3,695,459 Wild Oats Markets Inc ................................ 58,407 579,982 Williams Clayton Energy Incorporated ................. 17,081 223,761 Wilson Greatbatch Technology Incorporated ............ 27,100 978,310 Wilsons Leather Experts Inc .......................... 32,262 368,109 Winnebago Industries Inc. ............................ 41,702 1,540,472 Winston Hotels ....................................... 42,200 326,628 Wintrust Financial Corporation ....................... 22,400 684,768 Wireless Facs Inc. ................................... 67,300 452,929 Witness Systems Incorporated ......................... 35,000 466,200 Wj Communication Inc. ................................ 51,200 186,880 WMS Industries Inc. .................................. 65,087 1,301,740 Wolverine Tube Inc. .................................. 34,181 387,954 Wolverine World Wide Inc. ............................ 134,571 2,025,294 Woodhead Industries .................................. 31,778 504,635 Woodward Governor Co. ................................ 28,742 1,674,221 World Acceptance Corp. ............................... 36,700 267,910 World Wrestling Federation Entertainment Inc ......... 34,818 457,857 Worthington Industries ............................... 211,193 2,998,941 WPS Resources Corp. .................................. 91,201 3,333,397 WR Berkley Corp. ..................................... 67,070 3,601,659 WSFS Financial Corp. ................................. 25,400 440,690 Wyndham International Incorporated ................... 460,834 258,067 X-Rite Inc. .......................................... 55,269 470,339 Xanser Corporation ................................... 83,000 166,830 Xicor Inc. ........................................... 74,200 823,620 Xm Satellite Radio Holdings Incorporated ............. 42,806 785,918 Xybernaut Corporation ................................ 132,830 316,135
The accompanying notes are an integral part of these financial statements. SAI-124 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------------------------- Yankee Candle Company Inc. ......................................... 46,185 $ 1,046,552 Yellow Corp. ....................................................... 83,916 2,106,292 York International Corp. ........................................... 123,327 4,702,459 Young Broadcasting Inc. ............................................ 46,162 828,608 Zale Corp. ......................................................... 104,932 4,394,552 Zebra Technologies Corp. ........................................... 84,883 4,711,855 Zenith National Insurance Corp. .................................... 25,492 712,246 Zixit Corporation .................................................. 38,800 196,328 Zoll Medical Corp. ................................................. 28,763 1,120,031 Zomax Optical Media Inc. ........................................... 89,797 717,478 Zoran Corp. ........................................................ 57,143 1,865,148 Zygo Corp. ......................................................... 44,529 708,011 -------------- TOTAL COMMON STOCK ................................................. 2,558,992,249 -------------- UNITS VALUE ---------- -------------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 2.6% SHORT TERM INVESTMENT FUND (B) ..................................... 68,897,103 68,897,103 - -------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT ---------- SHORT TERM U.S. GOVERNMENT OBLIGATIONS -- 0.4% UNITED STATES TREASURY BILLS (A) MATURITY DATE: MARCH 2002 ......... $ 9,210,000 9,179,607 - -------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $2,767,491,916).............................................. $2,637,068,959 =======================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-125 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001 (a) At December 31, 2001, U.S. Treasury Bills with principal of $9,210,000 were pledged to cover initial margin requirements for Open futures contracts. The following futures contracts were open at December 31, 2001:
NUMBER OF FUTURE CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) - -------------------- -------------- -------------- ------------ ------------ Russell 2000 Index 326 $78,012,581 March 2002 $1,743,319 ==========
(b) Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-126 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Russell 2000 Index Securities Lending Fund and State Street Bank and Trust Company Russell 2000 Index Fund (collectively, the "Fund") were formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match the return of the Russell 2000 Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. SAI-127 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 200 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody and audit fees. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending fees, if any, is distributed monthly to participants of the Lending Fund. G. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the equity market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the daily fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. 3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Russell 2000 Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Russell 2000 Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide SAI-128 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 200 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2001, the market value of securities loaned by the Lending Fund was $346,329,560 against which was held cash collateral of $369,692,783 and securities of $1,063,244. Cash collateral provided by the Borrowers is invested in State Street Bank and Trust Company Quality A Short-Term Investment Fund. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the year ended December 31, 2001 were $2,454,219,456 and $2,040,162,636, respectively. 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 2001 2000 ------------------------------ ------------------------------ UNITS AMOUNT UNITS AMOUNT ----------- -------------- ----------- ------------- LENDING FUND Units issued ...................... 41,268,081 $1,083,391,534 34,208,813 $ 987,716,543 Issued upon reinvestment of distributions .................... 8,907 235,421 -- -- Units redeemed .................... (25,713,324) (666,133,863) (35,213,065) (960,783,675) ----------- -------------- ----------- ------------- Total .......................... 15,563,664 $ 417,493,092 (1,004,252) $ 26,932,868 ----------- -------------- ----------- ------------- NON-LENDING FUND Units issued ...................... 6,009,120 $ 161,221,924 16,970,419 $ 501,422,530 Units redeemed .................... (7,302,832) (195,470,817) (7,039,666) (192,200,131) ----------- -------------- ----------- ------------- Total .......................... (1,293,712) $ (34,248,893) 9,930,753 $ 309,222,399 ----------- -------------- ----------- ------------- Total increase (decrease) ......... 14,269,953 $ 383,250,199 8,926,501 $ 336,155,267 =========== ============== =========== =============
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2001 held by 1 of the Lending Fund's unitholders aggregated 65% of the Lending Fund's total units outstanding. NON-LENDING FUND Units in excess of 10% of the Non-Lending Fund units outstanding at December 31, 2001 held by 3 of the Non-Lending Fund's unitholders aggregated 83% of the Non-Lending Fund's total units outstanding. SAI-129 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Daily EAFE Securities Lending Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Daily EAFE Securities Lending Fund at December 31, 2001, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP March 22, 2002 SAI-130 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE SECURITIES LENDING FUND Statement of Assets and Liabilities December 31, 2001 - ------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at value (cost $1,871,115,683)............................. $1,568,619,940 - ------------------------------------------------------------------------------------------------------ Total assets ...................................................................... 1,568,619,940 - ------------------------------------------------------------------------------------------------------ LIABILITIES .......................................................................... -- - ------------------------------------------------------------------------------------------------------ Net assets (equivalent to $8.84 per unit based on 177,475,807 units outstanding ...... $1,568,619,940 ======================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-131 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE SECURITIES LENDING FUND Statement of Operations December 31, 2001 - ---------------------------------------------------------------------------------------- INVESTMENT INCOME Securities lending fee income, net of related expenses ................. $ 1,825,860 - ---------------------------------------------------------------------------------------- Total investment income .............................................. 1,825,860 - ---------------------------------------------------------------------------------------- EXPENSES Audit .................................................................. 10,000 Other .................................................................. 1,000 - ---------------------------------------------------------------------------------------- Total expenses ....................................................... 11,000 - ---------------------------------------------------------------------------------------- Net investment income (loss) ......................................... 1,814,860 - ---------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments .......................................................... (203,453,567) - ---------------------------------------------------------------------------------------- (203,453,567) - ---------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments .......................................................... (221,831,431) - ---------------------------------------------------------------------------------------- (221,831,431) - ---------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................ (425,284,998) - ---------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $(423,470,138) ========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-132 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE SECURITIES LENDING FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31 2001 2000 - -------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ..................................................... $ 1,814,860 $ 1,071,789 Net realized gain (loss) ......................................................... (203,453,567) 128,346,609 Net change in unrealized appreciation (depreciation) ............................. (221,831,431) (425,789,179) Net increase (decrease) in net assets resulting from operations .................. (423,470,138) (296,370,781) - -------------------------------------------------------------------------------------------------------------------- Distributions of security lending fee income ..................................... (1,825,860) (1,073,463) - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions .... 273,614,842 259,887,727 Net increase (decrease) in net assets ............................................ (151,681,156) (37,556,517) NET ASSETS Beginning of year ............................................................... 1,720,301,096 1,757,857,613 - -------------------------------------------------------------------------------------------------------------------- End of year ..................................................................... $1,568,619,940 $1,720,301,096 ====================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-133 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, --------------------------------------------------------- 2001 2000 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year ..................... $ 11.26 $ 13.19 $10.32 $ 8.54 $ 8.42 - -------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ....................... 0.01 0.01 0.01 0.22 0.20 Net realized and unrealized gain (loss) ................ (2.42) (1.93) 2.87 1.57 (0.07) - -------------------------------------------------------------------------------------------------------------------- Total from investment operations ....................... (2.41) (1.92) 2.88 1.79 0.13 Distributions of securities lending fee income ......... (0.01) (0.01) (0.01) (0.01) (0.01) - -------------------------------------------------------------------------------------------------------------------- Net asset value, end of year ........................... $ 8.84 $ 11.26 $13.19 $10.32 $ 8.54 ==================================================================================================================== Total return (%) (b) ................................... (21.41) (14.62) 27.92 20.88 1.51 ==================================================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (c) (d) .......................... 0.00 0.00 0.00 0.11 0.11 - -------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) ..................... 0.11 0.06 0.07 2.17 2.23 - -------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) ................................. 67 61 47 109 9 - -------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) ..................... $ 1,569 $ 1,720 $1,758 $ 686 $ 333 ====================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (d) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. The accompanying notes are an integral part of these financial statements. SAI-134 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE SECURITIES LENDING FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2001
UNITS VALUE - --------------- -------------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 100% 129,834,610 Daily MSCI Europe Index Securities Lending Fund* .......................... $1,148,646,797 38,176,582 Daily MSCI Japan Index Securities Lending Fund* ........................... 315,567,624 9,758,437 Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund* .......... 104,405,519 -------------- TOTAL INVESTMENTS -- 100% (COST $1,871,115,683)...................................................... $1,568,619,940 ==============
- ---------- * Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-135 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE SECURITIES LENDING FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Daily EAFE Funds (collectively, the "Funds") are organized by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The Funds are organized into separate regional funds, a country fund and umbrella funds that hold investments in separate country and regional funds (individually, a "Fund"). State Street Bank is Trustee, custodian, and recordkeeper of the Funds. State Street Global Advisors, a division of State Street Bank, is the Funds' investment manager. The investment objective of the Daily EAFE Securities Lending Fund (the "Fund") is to match the performance of the MSCI EAFE Index primarily by investing directly in equity securities which comprise the Index, or indirectly by acquiring units of collective investment funds maintained by the Trustee (the "Collective Investment Funds"). The accounting policies of each separate country or regional fund are the same as described below. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Interest income earned on securities, if any, is recorded on the accrual basis; interest earned on foreign currency accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds in which the Fund invests may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. SAI-136 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE SECURITIES LENDING FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody, stamp duty, and audit fees. The Fund indirectly bears the expenses paid by the underlying funds. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated from security lending fees, if any, is distributed monthly. 3. GLOBAL SECURITIES LENDING PROGRAM Fund participants have authorized the Fund to invest in certain collective investment funds that participate in the Global Securities Lending Program maintained by State Street Bank. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2001 were $1,417,991,492 and $1,144,359,849, respectively. 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- 2001 2000 ------------------------------- ------------------------------- UNITS AMOUNT UNITS AMOUNT ------------ --------------- ------------ --------------- Units issued ................. 174,281,540 $ 1,708,959,582 134,323,929 $ 1,662,622,175 Units redeemed ............... (149,621,772) (1,435,344,740) (114,757,918) (1,402,734,448) ------------ --------------- ------------ --------------- Net increase (decrease) ...... 24,659,768 $ 273,614,842 19,566,011 $ 259,887,727 ============ =============== ============ ===============
Units in excess of 10% of the Fund units outstanding at December 31, 2001 held by 2 of the Fund's unitholders aggregated 67% of the Fund's total units outstanding. SAI-137 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Daily MSCI Europe Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Europe Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Daily MSCI Europe Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Europe Index Fund at December 31, 2001, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP February 22, 2002 SAI-138 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Statement of Assets and Liabilities December 31, 2001 - -------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $212,205,279), (total $1,668,362,301)................................................................. $1,434,126,938 Foreign currency, at value (cost $20,638,247)........................................... 20,810,000 Foreign currency, segregated, at value (cost $8,919,176)................................ 8,852,555 Investments held as collateral for securities loaned ................................... 221,172,288 Receivable for investments sold ........................................................ 6,313,536 Receivable for open foreign currency contracts ......................................... 150,138,373 Unrealized gain on open futures contracts .............................................. 1,783,666 Dividends receivable ................................................................... 932,587 Interest receivable .................................................................... 82,181 Tax reclaims receivable ................................................................ 2,032,244 - -------------------------------------------------------------------------------------------------------- Total assets ....................................................................... 1,846,244,368 - -------------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned ............................................ 221,172,288 Payable for Fund units redeemed ........................................................ 731,095 Payable for investments purchased ...................................................... 3,223,537 Payable for open foreign currency contracts ............................................ 149,058,197 Accrued expenses ....................................................................... 219,207 - -------------------------------------------------------------------------------------------------------- Total liabilities .................................................................. 374,404,324 - -------------------------------------------------------------------------------------------------------- NET ASSETS ............................................................................. $1,471,840,044 ======================================================================================================== Daily MSCI Europe Index Securities Lending Fund (129,905,503 units outstanding, at $8.85 per unit net asset value)..................... $1,149,243,609 Daily MSCI Europe Index Fund (36,464,899 units outstanding, at $8.85 per unit net asset value)...................... 322,596,435 - -------------------------------------------------------------------------------------------------------- $1,471,840,044 ========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-139 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Statement of Operations Year ended December 31, 2001 - ------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of taxes withheld of $4,616,886).......................................................... $ 44,828,994 Interest ................................................................................................ 3,014,029 Securities lending fee income (net of related expenses), allocated to the lending fund participants ..... 1,580,936 - ------------------------------------------------------------------------------------------------------------------------- Total investment income ............................................................................... 49,423,959 - ------------------------------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................................................. 1,021,364 Audit ................................................................................................... 15,500 Stamp duty .............................................................................................. 98,677 Other ................................................................................................... 28,830 - ------------------------------------------------------------------------------------------------------------------------- Total expenses ........................................................................................ 1,164,371 - ------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .......................................................................... 48,259,588 - ------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................................... (274,594,568) Foreign currency transactions ......................................................................... (4,089,575) Futures contracts ..................................................................................... (27,247,874) - ------------------------------------------------------------------------------------------------------------------------- (305,932,017) - ------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................................................... (324,897,137) Foreign currency transactions ......................................................................... (4,603,689) Futures contracts ..................................................................................... 7,552,734 - ------------------------------------------------------------------------------------------------------------------------- (321,948,092) - ------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................................................. (627,880,109) - ------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................................... $(579,620,521) =========================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-140 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ...................................................... $ 48,259,588 $ 59,560,570 Net realized gain (loss) .......................................................... (305,932,017) (7,314,446) Net change in unrealized appreciation (depreciation) .............................. (321,948,092) (343,137,302) - --------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. (579,620,521) (290,891,178) - --------------------------------------------------------------------------------------------------------------------------- Distributions of securities lending fee income allocated to the lending fund participants ..................................................................... (1,580,936) (833,365) - --------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions ..... (727,791,599) 137,215,571 - --------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets ............................................. (1,308,993,056) (154,508,972) NET ASSETS Beginning of year ................................................................ 2,780,833,100 2,935,342,072 - --------------------------------------------------------------------------------------------------------------------------- End of year ...................................................................... $ 1,471,840,044 $2,780,833,100 ===========================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-141 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, -------------------------------------------- 2001 2000 1999 1998(a) - ----------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of period ....................... $ 11.06 $12.16 $10.42 $10.00 - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) (b) (c) ....................... 0.21 0.25 0.23 (0.00) Net realized and unrealized gain (loss) .................... (2.41) (1.34) 1.52 0.42 - ----------------------------------------------------------------------------------------------------------- Total from investment operations ........................... (2.20) (1.09) 1.75 0.42 Distributions of securities lending fee income (b) ......... (0.01) (0.01) (0.01) (0.00) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period ............................. $ 8.85 $11.06 $12.16 $10.42 =========================================================================================================== Total return (%) (d) ....................................... (19.91) (8.99) 16.87 4.20 =========================================================================================================== Ratios to Average Net Assets Ratio of expenses (%) (b) (e) .............................. 0.05 0.04 0.10 0.00 - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) (e) ..................... 2.28 2.10 2.20 0.02 - ----------------------------------------------------------------------------------------------------------- Portfolio turnover (%) (b) ................................. 94.75 64.53 13.93 0.00 - ----------------------------------------------------------------------------------------------------------- Net assets, end of period (000,000s) ....................... $ 1,149 $1,272 $1,211 $ 499 ===========================================================================================================
(a) The Daily MSCI Europe Index Securities Lending Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation (not annualized for the period ended December 31, 1998) is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-142 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, -------------------------------------------- 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------ SELECTED PER UNIT DATA Net asset value, beginning of period ............ $ 11.06 $12.16 $10.42 $10.00 - ------------------------------------------------------------------------------------------------ Net investment income (loss) (b) (c) ............ 0.20 0.24 0.22 0.00 Net realized and unrealized gain (loss) ......... (2.41) (1.34) 1.52 0.42 - ------------------------------------------------------------------------------------------------ Total from investment operations ................ (2.21) (1.10) 1.74 0.42 - ------------------------------------------------------------------------------------------------ Net asset value, end of period .................. $ 8.85 $11.06 $12.16 $10.42 ================================================================================================ Total return (%) (d) ............................ (19.98) (9.05) 16.75 4.20 ================================================================================================ Ratios to Average Net Assets Ratio of expenses (%) (b) (e) ................... 0.05 0.04 0.10 0.00 - ------------------------------------------------------------------------------------------------ Ratio of net investment income (%) (e) .......... 2.15 2.04 2.14 0.02 - ------------------------------------------------------------------------------------------------ Portfolio turnover (%) (b) ...................... 94.75 64.53 13.93 0.00 - ------------------------------------------------------------------------------------------------ Net assets, end of period (000,000s) ............ $ 323 $1,509 $1,724 $ 979 ================================================================================================
(a) The Daily MSCI Europe Index Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation (not annualized for the period ended December 31, 1998) is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-143 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------------- COMMON STOCK -- 95.6% (UNLESS OTHERWISE NOTED) AUSTRIA -- 0.2% Bohler Uddeholm ....................................... 3,082 $ 123,435 BWT AG ................................................ 5,232 114,135 Erste Bank Der Ost .................................... 7,790 414,092 Flughafen Wien AG ..................................... 5,907 157,788 Mayr Melnhof Karto .................................... 3,979 188,340 Oesterreichische Elektrizitaetswirtschafts AG ......... 6,952 519,965 OMV AG ................................................ 7,514 629,706 Radex Heraklith Industriebeteiligungs AG .............. 6,405 41,632 Telekom Austria ....................................... 55,966 463,937 Virg Stahl AG ......................................... 3,436 98,207 Virg Technologie AG ................................... 4,193 92,179 Wienerberger Baust .................................... 19,328 271,052 -------------- 3,114,468 -------------- BELGIUM -- 1.5% Agfa Gevaert NV ....................................... 38,959 526,927 Barco ................................................. 3,468 121,663 Bekaert SA ............................................ 6,277 241,838 CMB ................................................... 2,254 103,258 Colruyt SA ............................................ 8,084 352,702 D Leteren Trading ..................................... 1,538 253,345 Delhaize Le Lion SA ................................... 20,164 1,049,413 Dexia ................................................. 100,971 1,451,959 Electrabel SA ......................................... 12,733 2,652,966 Fortis ................................................ 252,877 6,563,461 Gpe Bruxelles Lam ..................................... 28,209 1,483,176 Interbrew ............................................. 48,105 1,317,105 Kredietbank NV ........................................ 56,800 1,906,666 Omega Pharma .......................................... 106 4,799 Solvay SA ............................................. 18,436 1,110,503 Suez Lyonn ais de Eaux ................................ 185,560 1,652 Total ................................................. 33,930 302 UCB ................................................... 34,036 1,377,998 Union Miniere SA ...................................... 6,724 264,927 -------------- 20,784,660 -------------- DENMARK -- 1.2% Bang & Olufsen Holdings ............................... 3,755 87,686 Carlsberg Brewery A/S ................................. 7,977 333,388 Coloplast ............................................. 82 5,401 D/S AF 1912 ........................................... 205 1,399,309 D/S Svendborg ......................................... 142 1,292,370 Danisco A/S ........................................... 16,381 586,539 Danske Bank ........................................... 215,305 3,454,966 Dsv ................................................... 115 2,823 Falck ................................................. 5,752 644,044
The accompanying notes are an integral part of these financial statements. SAI-144 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ FLS Industries .................................... 14,777 $ 124,756 GN Store Nord ..................................... 1,358 8,131 H Lundbeck A/S .................................... 10,234 263,493 Iss International ................................. 11,782 579,890 Kobenhavn Lufthavne A/S ........................... 39 2,527 Navision Software ................................. 8,495 227,875 Neg Micon ......................................... 122 3,214 Nkt Holding ....................................... 7,542 97,091 Novo Nordisk A/S .................................. 93,828 3,837,144 Novozymes A/S ..................................... 21,086 425,480 Ostasiatiske Kompagni ............................. 5,994 134,228 Tele Danmark A/S .................................. 50,693 1,806,009 Tk Development .................................... 69 1,454 Topdanmark A/S .................................... 8,188 191,204 Vestas Wind Systems ............................... 29,482 804,964 William Demant Holdings ........................... 20,746 539,112 -------------- 16,853,098 -------------- FINLAND -- 3.3% Ameri Group ....................................... 6,893 181,057 Asko .............................................. 10,779 179,955 Comptel ........................................... 331 919 Enso Oy ........................................... 97,737 1,251,420 Fortum Oyj ........................................ 76,372 323,008 Instrumentarium Corp. ............................. 7,253 303,529 Kesko Oy .......................................... 27,098 248,519 Kone Corp ......................................... 4,843 357,913 Konecranes International .......................... 93 2,360 Metra Oy .......................................... 12,310 227,985 Metso Oyj ......................................... 41,149 432,341 Nokia AB .......................................... 1,418,940 36,588,756 Orion Yhtyma Oy ................................... 9,401 168,250 Outokumpu Oy ...................................... 37,594 396,663 Oyj Hartwall Abp .................................. 5,927 324,754 Pohjola ........................................... 11,543 204,016 Rautaruukki Oy .................................... 38,726 141,375 Sampo ............................................. 91,700 718,517 Sonera Group PLC .................................. 334,662 1,695,523 Tieto Corporation ................................. 25,007 662,420 UPM Kymmene Oy .................................... 75,162 2,492,928 -------------- 46,902,208 -------------- FRANCE -- 13.4% Accor ............................................. 54,678 1,987,820 Air Liquide ....................................... 23,762 3,330,219 Air Liquide (Prime Fidelity) ...................... 8,414 1,179,213 Alcatel ........................................... 318,321 5,441,913 Alstom ............................................ 1,331 14,802
The accompanying notes are an integral part of these financial statements. SAI-145 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- Altran Technologies ............................... 389 $ 17,578 Atos .............................................. 135 8,841 Axa ............................................... 418,562 8,746,976 Banque Nationale de Paris ......................... 116,036 10,383,502 BIC ............................................... 15,349 524,256 Bouygues .......................................... 67,638 2,216,275 Business Objects .................................. 378 12,638 Cap Gemini Sogeti SA .............................. 32,762 2,365,791 Carrefour Supermarche ............................. 163,773 8,516,089 Casino Guich Perr ................................. 3,031 9,932 Castorama Dubois .................................. 10,641 548,114 Club Mediterranee SA .............................. 5,363 195,784 Coflexip .......................................... 2,355 333,406 Compagnie de St. Gobain ........................... 22,569 3,406,176 Danone ............................................ 39,061 4,764,847 Dassault Systemes ................................. 21,681 1,042,457 Essilor Intl ...................................... 28,124 850,162 Etab Eco Casino Guich Perr & Company .............. 17,718 1,366,999 France Telecom .................................... 187,565 7,498,652 Imetal SA ......................................... 4,302 412,928 Lafarge ........................................... 9,175 856,972 Lafarge Coppee .................................... 34,119 3,186,815 Lagardere Groupe .................................. 37,948 1,588,078 Loreal ............................................ 137,374 9,895,509 Lvmh Moet Hennessy ................................ 99,546 4,050,653 Michelin .......................................... 37,140 1,225,223 Pechiney SA ....................................... 22,700 1,170,279 Pernod Ricard SA .................................. 15,476 1,198,845 Peugeot SA ........................................ 65,071 2,766,597 Pinault Printemps Redo ............................ 25,756 3,316,132 Publicis Group SA ................................. 38,614 1,022,861 Renault Regie Nationale ........................... 16,242 572,835 Rhone Poulenc SA .................................. 202,274 14,363,352 Sagem SA .......................................... 10,190 623,781 Sanofi Synthelabo ................................. 148,733 11,097,788 SGE- SB ........................................... 22,162 1,299,421 Soc Generale ...................................... 99,183 5,550,442 Sodexho Alliance .................................. 34,150 1,459,847 Spie Batignolles .................................. 46,347 2,228,437 Stmicroelectronics ................................ 192,511 6,179,394 Suez .............................................. 248,509 7,523,260 Technip ........................................... 4,738 632,807 Tf1 Tv Francaise .................................. 783 19,793 Thomson CSF ....................................... 31,811 1,097,575 Thomson Multimedia ................................ 656 20,152 TOTAL SA .......................................... 182,629 26,083 Uniball SA ........................................ 13,006 660,670
The accompanying notes are an integral part of these financial statements. SAI-146 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- Union Transport Aerien ............................ 543 $ 7,949 Usinor Sacilor .................................... 69,871 874,094 Valeo ............................................. 23,070 920,260 Vivendi Universal SA .............................. 264,973 14,509,812 Zodiac ............................................ 1,439 261,254 -------------- 191,439,354 -------------- GERMANY -- 10.2% Adidas AG ......................................... 13,220 992,303 Aixtron ........................................... 319 7,229 Allianz AG ........................................ 56,607 13,407,161 Altana AG ......................................... 434 21,640 BASF AG ........................................... 166,126 6,175,600 Bayer AG .......................................... 200,230 6,382,594 Bayer Vereinsbank ................................. 129,401 3,954,303 Beiersdorf AG ..................................... 16,722 1,898,381 Buderus AG ........................................ 18,421 506,823 Continental AG .................................... 35,374 467,730 Daimlerchrysler AG ................................ 274,421 11,814,052 Deutsche Bank AG .................................. 158,737 11,222,348 Deutsche Boerse AG ................................ 191 7,349 Deutsche Post AG .................................. 47,357 632,078 Deutsche Telekom .................................. 714,579 12,279,837 Douglas Holding AG ................................ 10,456 288,611 Epcos ............................................. 18,922 935,072 FAG Kugelfischer .................................. 17,877 190,853 Fresenius Medical ................................. 19,071 1,180,167 Gehe AG ........................................... 20,945 811,250 Heidelberg Zement ................................. 18,028 866,815 Heidelberger Zemen ................................ 6,716 60 Infineon Technologies AG .......................... 48,622 993,575 Kamps AG .......................................... 22,793 182,654 Karstadt AG ....................................... 23,371 923,943 Linde AG .......................................... 34,062 1,379,960 Lufthansa AG ...................................... 81,214 1,072,401 Man AG ............................................ 30,950 654,500 Marschollek Lauten ................................ 7,864 572,842 Merck KGAA ........................................ 31,691 1,170,751 Metro AG .......................................... 64,818 2,299,900 Munich Reinsurance ................................ 37,614 10,213,232 Preussag AG ....................................... 54,778 1,346,171 Rwe AG ............................................ 128,405 4,824,801 SAP AG ............................................ 75,857 9,881,549 Schering AG ....................................... 54,764 2,906,207 SGL Carbon ........................................ 6,014 120,752 Siemens AG ........................................ 243,309 16,107,354 Software AG ....................................... 114 4,365 Thyssen Krupp AG .................................. 140,039 2,043,681
The accompanying notes are an integral part of these financial statements. SAI-147 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- VEBA AG ........................................... 194,935 $ 10,098,308 Volkswagen AG ..................................... 85,405 3,992,341 WCM Beteil & Grundbe .............................. 59,601 647,438 -------------- 145,478,981 -------------- GREECE -- 0.5% Alpha Credit Bank ................................. 37,256 664,118 Aluminum Co. of Greece SA ......................... 3,199 95,136 Athens Water Supply & Sewage ...................... 11,852 67,117 Attica Enterprises ................................ 15,413 69,717 Bank of Piraeus ................................... 31,484 279,773 Commercial Bank Greece ............................ 18,394 607,624 Duty Free Shops ................................... 8,800 90,579 Efg Eurobank ...................................... 35,535 494,222 Folli Follie ...................................... 5,507 96,794 Fourlis ........................................... 7,701 30,308 Hellenic Bottling ................................. 25,465 367,319 Hellenic Petroleum ................................ 24,591 152,395 Hellenic Technodom ................................ 16,150 89,156 Intracom .......................................... 14,829 190,134 Lambrakis Publishing .............................. 9,773 37,766 Mailis ............................................ 12,098 56,661 National Bank of Greece ........................... 49,083 1,167,757 OTE Greek Telecom ................................. 67,793 1,104,641 Panafon Hellenic T ................................ 50,298 259,755 Papastratos Cigarette SA .......................... 6,434 83,641 Techniki Olympiaki ................................ 27,823 56,484 Titan Cement Company SA ........................... 7,678 273,186 Viohalco .......................................... 187,842 23,031 -------------- 6,522,125 -------------- IRELAND -- 1.1% Allied Irish Banks PLC ............................ 248,607 2,877,675 Bk Of Ireland ..................................... 146,396 1,358,257 CRH PLC ........................................... 146,613 2,588,691 DCC ............................................... 24,073 258,287 Elan Corporation .................................. 97,912 4,533,403 Green Property Co. ................................ 637 3,573 Greencore Group ................................... 54,242 135,232 Independent Newspapers PLC ........................ 145,527 272,112 Iona Technologies ................................. 6,131 126,923 Irish Permanent ................................... 81,216 824,388 Jefferson Smurfit Group PLC ....................... 305,569 666,592 Kerry Group PLC ................................... 48,172 585,480 Ryanair Hldgs ..................................... 202,125 1,277,802 Waterford Wedgewood PLC ........................... 211,249 165,525 -------------- 15,673,940 --------------
The accompanying notes are an integral part of these financial statements. SAI-148 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- --------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - --------------------------------------------------------------------------------------- ITALY -- 5.2% Acea Spar ............................................ 658 $ 4,464 Alitalia Linee ....................................... 406,561 362,726 Alleanza Assicurazioni SpA ........................... 49,057 539,452 Arn Mondadori Edit ................................... 70,393 445,013 Assicurazioni Generali ............................... 309,890 8,608,891 Autogrill SpA ........................................ 68,824 637,934 Autostrade SpA ....................................... 276,109 1,917,610 Banca Fideuram SpA ................................... 1,686 13,496 Banca Populare di Milano ............................. 104,842 365,937 Banco Ambrosiano Veneto SpA ITL 1000 ................. 1,294,874 3,239,805 Banco Ambrosiano Veneto SpA Di Risp ITL 1000 ......... 223,262 399,573 Bca Di Roma .......................................... 301,802 597,912 Bca Naz Del Lavoro ................................... 233,256 472,497 Benetton Group SpA ................................... 48,985 554,799 Bipop Carire ......................................... 551,584 913,502 Bulgari SpA .......................................... 60,538 470,034 Credito Italiano SA .................................. 1,103,967 4,433,204 E.Bis.com SpA ........................................ 78 3,549 Enel ................................................. 832,305 4,691,063 Eni .................................................. 933,739 11,706,126 Fiat SpA Eur 5 ....................................... 80,729 1,295,297 Fiat SpA Di Risp Eur 5 ............................... 21,193 218,140 Fiat SpA Priv Eur 5 .................................. 29,244 322,882 Gr Ed L Espresso ..................................... 95,867 286,809 Italcementi Di Risp .................................. 49,504 387,890 Italgas SpA .......................................... 71,755 673,407 La Rinascente SpA .................................... 83,307 290,030 Luxottica Group ...................................... 840 13,784 Mediaset ............................................. 243,462 1,779,752 Mediobanca SpA ....................................... 158,738 1,778,061 Mediolanum ........................................... 1,344 12,111 Monte Paschi Siena ................................... 4,796 11,957 Parmalat Finanz ...................................... 221,230 596,859 Pirelli SpA .......................................... 395,185 693,189 RAS SpA .............................................. 148,171 1,745,453 Sao Paolo Imi SpA .................................... 308,486 3,309,844 Seat Pagine Gialle ................................... 767,713 619,999 Snia SpA ............................................. 142,373 191,421 Telecom Italia Mobilia ............................... 1,763,823 9,847,083 Telecom Italia SpA Di Risp ITL 1000 .................. 249,572 1,333,313 Telecom Italia SpA ITL 1000 .......................... 983,504 8,406,833 Tiscali SpA .......................................... 48,024 435,303 -------------- 74,627,004 -------------- NETHERLANDS -- 7.9% ABN Amro Holdings NV ................................. 416,088 6,702,068 Aegon NV ............................................. 332,639 9,003,924
The accompanying notes are an integral part of these financial statements. SAI-149 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- Ahold (Kon.) NV ................................... 227,616 $ 6,623,231 Akzo Nobel NV ..................................... 83,906 3,746,701 Asm Lithography Holdings .......................... 127,482 2,215,714 Buhrmann NV ....................................... 36,377 399,370 Eads Euro Aero .................................... 43,738 531,200 Elsevier NV ....................................... 201,262 2,379,824 Getronics NV ...................................... 95,324 308,950 Hagemeyer ......................................... 30,155 563,850 Heineken NV ....................................... 86,250 3,270,784 IHC Caland NV ..................................... 8,042 375,931 Ing Groep NV ...................................... 549,212 14,005,483 KLM ............................................... 13,027 150,094 Kon Kpn NV ........................................ 464,359 2,360,886 Numico (Kon) NV ................................... 21,101 491,878 OCE NV ............................................ 24,462 245,471 Philips Electronics NV ............................ 386,115 11,475,935 Qiagen NV ......................................... 40,114 750,067 Royal Dutch Petroleum ............................. 623,147 31,570,963 TNT Post Group NV ................................. 130,368 2,820,735 Unilever NV ....................................... 167,691 9,832,197 Vedior ............................................ 31,565 378,581 Vendex NV ......................................... 25,789 293,461 Ver Ned Uitgevers ................................. 31,375 964,082 Wolters Kluwer .................................... 81,049 1,847,450 -------------- 113,308,830 -------------- NORWAY -- 0.7% Bergesen DY A/S ................................... 13,543 240,065 Bergesen DY ASA ................................... 5,913 93,608 DNB Holdings ...................................... 217,029 977,499 Edb Business Partner .............................. 280 1,576 Elkem ASA ......................................... 13,644 228,166 Frontline Ltd ..................................... 21,477 222,676 Kvaerner .......................................... 54,974 3,984 Kvaerner A/S ...................................... 29,963 28,895 Merkantildata ASA ................................. 46,923 55,451 Nera ASA .......................................... 34,631 74,900 Norsk Hydro ASA ................................... 74,071 3,104,941 Norske Skogsindust ................................ 31,766 596,733 Opticom A/S ....................................... 3,330 136,618 Orkla ASA ......................................... 61,530 1,042,672 Pan Fish ASA ...................................... 482 806 Petroleum Geo Services ............................ 28,830 223,381 Schibsted A/S ..................................... 19,367 186,765 Smedvig Series A .................................. 15,361 125,014 Smedvig Series B .................................. 11,945 81,899 Sparebanken Nor ................................... 289 8,764 Statoil ASA ....................................... 123,217 844,818
The accompanying notes are an integral part of these financial statements. SAI-150 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------- Tandberg ASA ....................................... 15,809 $ 352,494 Tandberg Televisjon ................................ 270 900 Telenor A/S Researchers ............................ 152,123 654,635 Tomra Systems ASA .................................. 50,125 480,585 Unified Storebrand ASA ............................. 120,023 695,801 -------------- 10,463,646 -------------- PORTUGAL -- 0.6% Banco Espirito Santo e Comercial de Lisboa ......... 43,629 562,120 BCO Com Portugues .................................. 575,241 2,330,485 BPI Sgps ........................................... 150,230 302,308 Brisa Auto Estrada ................................. 133,730 566,788 Cimpor Ciment Port ................................. 27,364 479,988 Elec De Portugal ................................... 698,070 1,516,610 Jeronimo Martins ................................... 26,675 219,701 Portugal Telecom ................................... 328,343 2,558,120 PT Multimedia Sgps ................................. 391 2,715 Sonae Sgps SA ...................................... 436,293 314,665 -------------- 8,853,500 -------------- SPAIN -- 3.8% Acerinox SA ........................................ 15,408 515,159 ACS Actividades Company ............................ 16,968 413,968 Aguas De Barcelona ................................. 371 4,559 Aguas De Barcelona Eur1 ............................ 36,764 458,285 Amadeus Global Travel .............................. 1,459 8,418 Autopistas Concesionaria Espanola SA ............... 51,103 509,168 Banco Bilbao Vizcaya ............................... 764,444 9,461,185 Banco Sant Cent Hisp ............................... 1,077,851 9,030,949 Corp Mapfre SA ..................................... 46,293 268,337 Corporacion Financiera Reunida SA .................. 665 6,614 Endesa SA .......................................... 252,598 3,951,725 Fom Const Y Contra ................................. 31,587 653,908 Gas Natural SDG .................................... 72,735 1,211,072 Grupo Dragados SA .................................. 45,740 612,125 Grupo Prisa Sa Ord Shs ............................. 541 5,058 Iberdrola SA ....................................... 214,035 2,786,232 Inditex ............................................ 54,520 1,039,340 Metrovacesa ........................................ 15,995 220,750 Puleva Biotech SA .................................. 4,311 11,439 Repsol SA .......................................... 274,589 4,004,812 Sol Melia SA ....................................... 48,598 369,540 Tabacalera SA ...................................... 81,474 1,385,599 Telefonica SA ...................................... 1,109,151 14,843,445 Telepizza .......................................... 57,423 88,965 Terra Networks SA .................................. 2,303 18,865 Tpi Telef Pubic Infomation ......................... 1,138 4,509 Union Electrica Fenosa SA .......................... 81,073 1,312,367
The accompanying notes are an integral part of these financial statements. SAI-151 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------- Vallehermoso SA ................................... 37,890 $ 235,823 Zeltia SA ......................................... 52,896 411,642 -------------- 53,843,858 -------------- SWEDEN -- 3.1% Assa Abloy ........................................ 98,519 1,418,094 Atlas Copco AB Series A ........................... 39,210 876,491 Atlas Copco AB Series B ........................... 19,565 411,241 Billerud .......................................... 11,859 80,263 Drott AB .......................................... 28,633 294,780 Electrolux AB ..................................... 102,978 1,536,267 Ericsson Lm Tel ................................... 2,420,731 13,153,137 Gambro Series A ................................... 70,096 437,666 Gambro Series B ................................... 26,310 165,528 Granges AB ........................................ 10,219 140,275 Hennes & Mauritz .................................. 198,680 4,109,811 Hoganas AG ........................................ 169 2,634 Mo Och Domsjo AB .................................. 288 6,548 Modern Time Group ................................. 18,594 409,442 Netcom Systems AB ................................. 34,763 1,252,613 Nobel Biocare ..................................... 141 5,880 Norden -- SEK 3.5 ................................. 805,295 4,260,455 OM Gruppen AB ..................................... 23,382 307,587 Sandvik AB ........................................ 72,871 1,559,477 Sas AB ............................................ 20,827 135,003 Securitas ......................................... 100,019 1,897,333 Skandia Forsakring ................................ 287,460 2,082,567 Skandinaviska Enskilda Banken ..................... 197,366 1,796,733 Skanska AB ........................................ 127,695 833,820 SKF International AB Series B ..................... 18,037 354,193 SKF International AB Series A ..................... 13,846 246,816 Ssab Svenskt Stal Series B ........................ 8,402 75,687 Ssab Svenskt Stal Series A ........................ 22,912 223,870 Svenska Cellulosa ................................. 64,504 1,764,723 Svenska Handelsbanken Series A .................... 182,566 2,680,085 Svenska Handelsbanken Series B Sek 4 .............. 18,055 251,280 Swedish Match Company ............................. 109,189 577,670 Telia ............................................. 360,272 1,603,819 Trelleborg AB ..................................... 29,491 226,305 Volvo AB Series A ................................. 38,843 627,611 Volvo AB Series B ................................. 84,843 1,423,431 WM Data AB ........................................ 103,093 258,460 -------------- 47,487,595 -------------- SWITZERLAND -- 10.3% Abb Ltd ........................................... 359,708 3,466,439 Adecco SA ......................................... 40,960 2,226,489 Ascom Holding AG .................................. 6,274 110,531
The accompanying notes are an integral part of these financial statements. SAI-152 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- Charles Vogele Hld ................................ 2,471 $ 94,878 Ciba Specialty Chemical ........................... 9,761 609,952 Clariant .......................................... 20,327 382,593 Credit Suisse Grp ................................. 342,571 14,608,220 Forbo Holding ..................................... 417 126,836 Georg Fischer AG .................................. 993 188,098 Givaudan AG ....................................... 2,467 751,853 Holcim Reg D ...................................... 2,882 126,021 Holcim Bearer ..................................... 7,954 1,715,071 Kudelski SA ....................................... 14,167 827,681 Kuoni Reisen Holding .............................. 845 224,444 Logitech International ............................ 11,885 434,869 Lonza Group AG .................................... 1,572 1,027,296 Merkur Holding AG ................................. 1,154 167,856 Nestle SA ......................................... 118,694 25,307,279 Novartis AG ....................................... 864,853 31,254,099 Oerlikon Buhrle Holding Limited ................... 3,657 394,268 Phonak ............................................ 5,700 130,458 Publicitas Holdings ............................... 694 140,029 Richemont Cie Fin ................................. 61,469 1,142,154 Roche Holdings Ltd. ............................... 43,165 3,535,771 Roche Holdings Ltd. Genusscheine NPV .............. 196,776 14,044,423 Schindler Holding AG .............................. 266 382,907 Serono SA ......................................... 1,029 898,043 SGS Holdings ...................................... 2,192 351,845 Sulzer Brothers Limited ........................... 1,022 156,966 Sulzer Medica ..................................... 2,394 100,934 Swatch Group BR ................................... 9,817 882,483 Swatch Group Reg D ................................ 40,173 796,056 Swiss Reinsurance ................................. 88,060 8,857,447 Swisscom AG ....................................... 15,155 4,198,820 Syngenta AG ....................................... 32,228 1,669,342 Synthes Stratec ................................... 641 446,302 Tecan Group AG .................................... 1,951 129,260 UBS AG ............................................ 398,669 20,121,943 Zurich Finance Svstems Group ...................... 25,145 5,898,920 -------------- 147,928,876 -------------- UNITED KINGDOM -- 32.6% 3I Group .......................................... 162,370 2,031,253 Aegis Group PLC ................................... 153,564 207,867 Aggreko ........................................... 33,668 178,864 Airtours PLC ...................................... 138,124 502,599 AMEC PLC .......................................... 64,736 372,182 Amey .............................................. 34,822 189,049 Argyll Group PLC .................................. 146,950 684,434 Arm Holdings ...................................... 269,829 1,409,923 Associated British Ports Holdings PLC ............. 46,609 284,926
The accompanying notes are an integral part of these financial statements. SAI-153 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------ AWG ............................................... 75,385 $ 592,504 BAA PLC ........................................... 296,611 2,376,604 Barclays PLC ...................................... 464,845 15,392,241 Barratt Developments PLC .......................... 66,035 411,608 Bass PLC .......................................... 241,607 2,391,282 BBA Group PLC ..................................... 123,222 507,559 Berkeley Group PLC ................................ 36,030 370,500 BG Group .......................................... 984,323 4,011,511 BICC PLC .......................................... 118,135 297,466 Billiton .......................................... 323,498 1,643,271 BOC Group PLC ..................................... 131,805 2,033,527 Boots Company., PLC ............................... 239,899 2,040,916 BP Amoco .......................................... 6,261,972 48,670,372 BPB Industries PLC ................................ 63,921 279,111 Brambles Industrie ................................ 192,555 952,897 British Aerospace ................................. 638,900 2,878,100 British Airways PLC ............................... 285,416 810,075 British American Tobacco PLC ...................... 578,514 4,904,809 British Land Company, PLC ......................... 138,245 939,677 British Sky Broadcast ............................. 395,202 4,348,638 BT Group .......................................... 2,398,853 8,833,574 BTG Incorporated .................................. 29,496 322,844 Bunzl PLC ......................................... 123,172 788,818 Cable & Wireless PLC .............................. 390,855 1,880,180 Cadbury Schweppes PLC ............................. 570,753 3,638,602 Canary Wharf Group ................................ 176,774 1,146,891 Capita Group PLC .................................. 175,568 1,252,781 Caradon ........................................... 127,946 235,575 Carlton Communications PLC ........................ 179,160 633,665 Celltech Group PLC ................................ 73,273 932,111 Centrica .......................................... 1,121,570 3,624,029 Chubb ............................................. 221,092 553,495 Close Brothers Group PLC .......................... 19,000 222,619 CMG ............................................... 163,741 579,130 Commercial Union PLC .............................. 628,783 7,733,388 Compass Group ..................................... 618,889 4,639,084 Corus Group ....................................... 832,434 872,358 Daily Mail & General Trust ........................ 42,519 401,024 De Lousiana Rue PLC ............................... 54,259 356,173 Diageo PLC ........................................ 946,130 10,810,176 Dixons Group ...................................... 515,644 1,763,722 ED&F Man Group .................................... 33,597 582,893 Electrocomponents PLC ............................. 115,827 903,622 EMI Group PLC ..................................... 210,312 1,092,810 Firstbus .......................................... 58,742 251,367 FKI PLC ........................................... 162,798 438,362 Gkn ............................................... 193,020 744,493
The accompanying notes are an integral part of these financial statements. SAI-154 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------------------------ GlaxoSmithKline PLC .................................................. 1,740,669 $ 43,652,966 Granada Compass ...................................................... 738,276 1,541,995 Great Portland Estates ............................................... 58,790 210,072 Great Universal Stores PLC ........................................... 280,726 2,635,449 Hammerson Property & Investment Development Corporation, PLC ......... 75,044 484,420 Hanson PLC ........................................................... 196,172 1,353,405 Hays PLC ............................................................. 462,114 1,399,023 Hbos ................................................................. 993,403 11,509,351 HSBC Holdings PLC .................................................... 2,609,448 30,612,301 IMI PLC .............................................................. 98,905 387,242 Imperial Chemical Industries PLC ..................................... 194,143 1,070,960 Imperial Tobacco ..................................................... 72,654 958,076 Invesco PLC .......................................................... 218,288 3,148,588 J. Sainsbury PLC ..................................................... 511,915 2,727,038 Johnson Matthey PLC .................................................. 58,615 813,897 Kidde ................................................................ 233,126 227,341 Kingfisher ........................................................... 346,075 2,019,886 Ladbroke Group PLC ................................................... 419,426 1,288,101 Land Securities PLC .................................................. 139,825 1,594,543 Lattice Group ........................................................ 940,946 2,136,494 Legal & General Group PLC ............................................ 1,437,838 3,327,510 Logica PLC ........................................................... 119,200 1,110,372 Marconi .............................................................. 784,754 476,873 Marks & Spencer PLC .................................................. 795,575 4,180,234 Misys ................................................................ 154,455 730,630 National Grid Company ................................................ 415,332 2,587,328 National Power PLC ................................................... 298,049 878,466 Next PLC ............................................................. 46,484 605,534 North West Water PLC ................................................. 147,507 1,321,457 Nycomed Amersham ..................................................... 170,335 1,647,446 Ocean Group .......................................................... 79,363 906,776 P&O Holdings PLC ..................................................... 187,805 649,890 P&O Princess Cruises ................................................. 184,712 1,075,393 Pace Micro Tech ...................................................... 63,265 322,288 Pearson PLC .......................................................... 223,116 2,568,736 Pilkington PLC ....................................................... 330,893 539,409 Provident Finanacial ................................................. 66,438 623,718 Prudential Corporation, PLC .......................................... 555,555 6,436,539 Railtrack Group (a) .................................................. 130,916 0 Rank Group ........................................................... 157,490 527,221 Reckitt & Colman ..................................................... 79,404 1,155,725 Reed International ................................................... 352,612 2,925,393 Rentokil Initial PLC ................................................. 523,941 2,104,766 Reuters Group PLC .................................................... 399,060 3,949,657 Rexam ................................................................ 109,729 598,515 RMC Group PLC ........................................................ 73,055 658,192 Rolls Royce PLC ...................................................... 88,406 214,244
The accompanying notes are an integral part of these financial statements. SAI-155 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------- Roya & Sun Alliance ............................... 200,512 $ 1,152,059 Royal Bank of Scotland Group PLC .................. 755,578 18,387,719 RTZ Corporation, PLC .............................. 296,951 5,687,913 Sage Group ........................................ 338,592 1,126,095 Schroders ......................................... 78,278 962,739 Scot Power ........................................ 514,781 2,847,203 Scottish & Newcastle Breweries PLC ................ 90,333 690,268 Scottish Hydro Electric PLC ....................... 119,845 1,064,050 Securicor ......................................... 86,642 148,176 Serco Group ....................................... 55,071 292,569 Seton Healthcare .................................. 53,194 420,025 Severn Trent PLC .................................. 47,882 501,087 Shell Transport & Trading Company PLC ............. 1,360,376 9,345,730 Siebe PLC ......................................... 933,381 1,620,054 Signet Group ...................................... 236,509 328,748 Slough Estates PLC ................................ 114,532 552,615 Smith & Nephew .................................... 245,851 1,485,020 Smiths Industries PLC ............................. 148,200 1,460,324 Spirent PLC ....................................... 116,663 268,289 Stagecoach Holdings ............................... 369,399 397,869 Tate & Lyle PLC ................................... 128,169 643,598 Taylor Woodrow PLC ................................ 150,614 372,672 TBS Group ......................................... 1,550,139 16,831,459 Telewest .......................................... 240,448 216,983 Tesco PLC ......................................... 1,942,368 7,039,522 TI Automotive (b) ................................. 195,737 40,712 Unilever .......................................... 812,239 6,667,687 United Business Media ............................. 46,730 326,475 Vodafone Group PLC ................................ 19,001,281 49,712,324 Whitbread ......................................... 41,200 329,217 Wimpey (George) PLC ............................... 104,511 333,134 Wolseley PLC ...................................... 153,698 1,286,318 WPP Group PLC ..................................... 303,010 3,351,837 Yorkshire Water PLC ............................... 54,817 283,241 Zeneca Group ...................................... 488,661 22,034,408 -------------- 467,049,150 -------------- TOTAL COMMON STOCK ................................ $1,370,331,293 --------------
The accompanying notes are an integral part of these financial statements. SAI-156 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------- SHARES VALUE - ------------------------------------------------------------------------- PREFERRED STOCK -- 0.1% BELGIUM -- 0.0% Fortis ............................... 46,620 $ 415 -------------- GERMANY -- 0.1% Boss Hugo AG ......................... 19,607 417,946 Fresenius Medical .................... 161 7,432 Mannesmann AG ........................ 11,473 183,880 Metro AG ............................. 192 7,736 Porsche AG ........................... 49 18,625 Prosiebensati Medical ................ 41,803 214,023 Rwe AG ............................... 10,599 294,917 Volkswagen AG ........................ 29,824 925,452 Wella AG ............................. 145 7,475 -------------- 2,077,486 -------------- TOTAL PREFERRED STOCK ............... 2,077,901 -------------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 4.3% SHORT TERM INVESTMENT FUND * ......... 61,717,744 61,717,744 - ------------------------------------------------------------------------ TOTAL INVESTMENTS -- 100% (COST $1,668,362,301) ............... $1,434,126,938 ========================================================================
* collective investment fund advised by State Street Global Advisors. (a) Issuer delisted due to bankruptcy. (b) Valued by management. The accompanying notes are an integral part of these financial statements. SAI-157 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001 a. At December 31, 2001, foreign currency balances totaling $8,852,555 were pledged to cover initial margin requirements for open futures contracts. The following futures contracts were open at December 31, 2001:
NUMBER OF FUTURES CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) - ----------------- -------------- -------------- -------------- -------------- FTSE 100 Index 559 $41,760,389 March 2002 $ 634,671 MIB 30 Index 69 9,764,972 March 2002 194,370 DAX Index 105 11,827,294 March 2002 299,787 CAC 40 10 EU 527 21,091,297 March 2002 764,500 IBEX Plus Index 183 13,669,795 January 2002 (109,662) ---------- $1,783,666 ==========
The following foreign currency contracts were open at December 31, 2001:
SETTLEMENT CONTRACTS IN EXCHANGE UNREALIZED DATE TO DELIVER FOR GAIN (LOSS) - ------------ -------------------- -------------------- -------------- 1/3/2002 EUR 3,373,364 CHF 5,000,000 $ 7,862 1/3/2002 CHF 10,000,000 USD 5,899,705 (123,303) 3/5/2002 USD 3,030,854 CHF 5,000,000 (19,169) 3/5/2002 USD 2,360,996 CHF 4,000,000 48,352 3/5/2002 CHF 5,000,000 USD 2,997,422 (14,263) 3/5/2002 USD 26,609,220 EUR 30,200,000 213,718 3/5/2002 USD 4,951,925 EUR 5,500,000 (66,953) 3/5/2002 USD 4,488,500 EUR 5,000,000 (47,616) 3/5/2002 USD 17,533,400 EUR 20,000,000 230,135 3/5/2002 USD 7,070,400 EUR 8,000,000 35,014 3/5/2002 EUR 13,000,000 USD 11,506,040 (40,258) 3/5/2002 EUR 13,500,000 USD 12,152,700 162,314 3/5/2002 USD 16,636,820 GBP 11,800,000 473,667 3/5/2002 USD 2,178,000 GBP 1,500,000 (2,938) 3/5/2002 USD 2,887,560 GBP 2,000,000 12,523 3/5/2002 USD 18,630,300 GBP 13,000,000 220,236 3/5/2002 GBP 4,900,000 USD 7,096,058 (9,145) ---------- $1,080,176 ==========
CHF: Swiss Franc EUR: Euro GBP: British Pound Sterling USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-158 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. The following is a summary of significant accounting policies followed by each Fund in the preparation of its financial statements. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of mangement estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income earned on securities, if any, is recorded net of applicable withholding taxes on the accrual basis; interest earned on foreign currency accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. Interest income includes accretion of discounts and amortization of premiums, if any. C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS The accounting records of the Fund are maintained in U.S. dollars. Foreign currency, investment securities, and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statement of Operations from the effects of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain or loss on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized appreciation/depreciation on foreign currency related transactions. The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against the foreign currency exposure of either specific transactions or portfolio positions. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed upon future date. Such contracts are valued based upon the difference in the forward exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, and any resulting unrealized gains or losses are recorded in the Fund's financial statements. The Fund records realized gains or losses at the time the forward contract is extinguished by entry into a closing transaction or by delivery of the currency. Risks in foreign currency contracts arise from the possible inability of counterparties to meet the contracts' terms and from movements in currency values. D. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. F. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody, stamp duty, and audit fees. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. G. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending fees, if any, is distributed monthly to participants of the Lending Fund. 2. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Daily MSCI Europe Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Daily MSCI Europe Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2001, the market value of securities loaned by the Lending Fund was $212,205,279 against which was held cash collateral of $221,172,288, securities of $10,070, and letters of credit of $172,728. Cash collateral provided by the Borrowers is invested in State Street Bank and Trust Company Quality A Short-Term Investment Fund. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2001 were $2,059,123,396 and $2,767,123,667, respectively. SAI-159 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 4. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- 2001 2000 -------------------------------- ------------------------------ UNITS AMOUNT UNITS AMOUNT ----------- --------------- ----------- ------------- LENDING FUND Units issued .................... 106,923,274 $ 1,012,218,585 82,045,890 $ 952,940,136 Units redeemed .................. (92,027,363) (842,130,556) (66,614,181) (763,180,830) ----------- --------------- ----------- ------------- Total ........................ 14,895,911 $ 170,088,029 15,431,709 $ 189,759,306 ----------- --------------- ----------- ------------- NON-LENDING FUND Units issued .................... 17,575,506 157,495,150 49,350,662 $ 577,851,791 Units redeemed .................. (117,522,825) (1,055,374,778) (54,661,764) (630,395,526) ------------ --------------- ----------- ------------- Total ........................ (99,947,319) $ (897,879,628) (5,311,102) $ (52,543,735) ------------ --------------- ----------- ------------- Net increase (decrease) ......... (85,051,408) $ (727,791,599) 10,120,607 $ 137,215,571 ============ =============== =========== =============
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2001 held by 1 of the Lending Fund's unitholders aggregated 99.9% of the Lending Fund's total units outstanding. NON-LENDING FUND Units in excess of 10% of the Non-Lending Fund units outstanding at December 31, 2001 held by 1 of the Non-Lending Fund's unitholders aggregated 98% of the Non-Lending Fund's total units outstanding. A transaction fee of .5% is charged on any contribution or withdrawal greater than 5% of the net asset value of the Fund. However, such fees are waived if the Fund's net participant activity on any day is less than 5% of the net asset value of the Fund. Such transaction fees are presented as a separate component of capital. For the year ended December 31, 2001 no participant transaction fees were charged. 5. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the equity markets. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the daily fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. SAI-160 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. 6. OPTIONS CONTRACTS The Fund may purchase or write options contracts to manage exposure to the securities markets and to fluctuations in interest rates. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument held by the Fund, or hedge the fair value of other Fund investments. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. Gain or loss is recognized when the option contract expires or is closed. When the Fund writes an option, the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. Options involve, to varying degrees, credit and market risks. Loss in value may arise from changes in the value of the underlying instruments. In writing a put option, the Fund assumes the risk of incurring a loss if the market price decreases and the option is exercised. Writing a call option will increase the risk of loss to the Fund, if the market price increases and the option is exercised. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market for the contracts or if the counterparties do not perform in accordance with the contracts' terms. SAI-161 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Daily MSCI Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Japan Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Daily MSCI Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Japan Index Fund at December 31, 2001, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP February 22, 2002 SAI-162 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Statement of Assets and Liabilities December 31, 2001 - ---------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $37,699,439), (total cost $519,282,638) .......................................................... $397,546,521 Foreign currency, at value (cost $3,310,465) ......................................... 3,315,758 Foreign currency, segregated, at value (cost $2,122,304) ............................. 1,944,822 Investments held as collateral for securities loaned ................................. 39,793,315 Receivable for investments sold ...................................................... 622,465 Receivable for open foreign currency contracts ....................................... 41,103,445 Unrealized gain on open futures contracts ............................................ 411,357 Dividends receivable ................................................................. 74,910 Interest receivable .................................................................. 27,942 - ---------------------------------------------------------------------------------------------------- Total assets .................................................................... 484,840,535 - ---------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned .......................................... 39,793,315 Payable for Fund units redeemed ...................................................... 201,843 Payable for open foreign currency contracts .......................................... 41,984,031 Accrued expenses ..................................................................... 92,842 - ---------------------------------------------------------------------------------------------------- Total liabilities ............................................................... 82,072,031 - ---------------------------------------------------------------------------------------------------- NET ASSETS ........................................................................... $402,768,504 ==================================================================================================== Daily MSCI Japan Index Securities Lending Fund (38,214,155 units outstanding, at $8.27 per unit net asset value) ................... $315,869,058 Daily MSCI Japan Index Fund (10,513,182 units outstanding, at $8.27 per unit net asset value) ................... 86,899,446 - ---------------------------------------------------------------------------------------------------- $402,768,504 ====================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-163 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Statement of Operations Year ended December 31, 2001 - ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of taxes withheld of $1,107,157) ............................................. $ 6,273,887 Interest .................................................................................... 840,154 Securities lending fee income (net of related expenses), allocated to the Lending Fund ...... 229,054 - ------------------------------------------------------------------------------------------------------------- Total investment income .................................................................. 7,343,095 - ------------------------------------------------------------------------------------------------------------- EXPENSES Custody ..................................................................................... 488,637 Audit ....................................................................................... 11,500 Other ....................................................................................... 11,127 - ------------------------------------------------------------------------------------------------------------- Total expenses ........................................................................... 511,264 - ------------------------------------------------------------------------------------------------------------- Net investment income (loss) ............................................................. 6,831,831 - ------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ............................................................................... (155,828,208) Foreign currency transactions ............................................................. (5,903,809) Futures contracts ......................................................................... (7,513,716) - ------------------------------------------------------------------------------------------------------------- (169,245,733) - ------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ............................................................................... (139,112,996) Foreign currency transactions ............................................................. 616,451 Futures contracts ......................................................................... 2,520,873 - ------------------------------------------------------------------------------------------------------------- (135,975,672) - ------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ..................................................... (305,221,405) - ------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............................. $(298,389,574) =============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-164 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ...................................................... $ 6,831,831 $ 13,764,868 Net realized gain (loss) .......................................................... (169,245,733) (19,122,610) Net change in unrealized appreciation (depreciation) .............................. (135,975,672) (514,234,360) - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. (298,389,574) (519,592,102) - -------------------------------------------------------------------------------------------------------------------------- Distributions of securities lending fee income allocated to the Lending Fund participants ..................................................................... (229,054) (210,360) - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions ..... (566,328,608) (64,918,696) - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets ............................................. (864,947,236) (584,721,158) NET ASSETS Beginning of year ................................................................ 1,267,715,740 1,852,436,898 - -------------------------------------------------------------------------------------------------------------------------- End of year ....................................................................... $ 402,768,504 $1,267,715,740 ==========================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-165 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, --------------------------------------------- 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------ SELECTED PER UNIT DATA Net asset value, beginning of period ....................... $ 11.69 $ 16.35 $10.10 $10.00 - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) (b)(c) ........................ 0.09 0.13 0.15 0.00 Net realized and unrealized gain (loss) .................... (3.50) (4.78) 6.11 0.10 - ------------------------------------------------------------------------------------------------------------ Total from investment operations ........................... (3.41) (4.65) 6.26 0.10 Distributions of securities lending fee income (b) ......... (0.01) (0.01) (0.01) (0.00) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period ............................. $ 8.27 $ 11.69 $16.35 $10.10 ============================================================================================================ Total return (%)(d) ........................................ (29.21) (28.45) 62.09 0.99 ============================================================================================================ RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%)(b)(e) ................................ 0.05 0.04 0.03 0.00 - ------------------------------------------------------------------------------------------------------------ Ratio of net investment income (%)(e) ...................... 0.76 0.88 1.15 0.02 - ------------------------------------------------------------------------------------------------------------ Portfolio turnover (%)(b) .................................. 62.9 44.8 6.69 0.00 - ------------------------------------------------------------------------------------------------------------ Net assets, end of period (000,000s) ....................... $ 316 $ 404 $ 491 $ 146 ============================================================================================================
(a) The Daily MSCI Japan Index Securities Lending Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation (not annualized for the period ended December 31, 1998) is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-166 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, ---------------------------------------------- 2001 2000 1999 1998(a) - -------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of period ............ $ 11.69 $ 16.35 $10.10 $10.00 - -------------------------------------------------------------------------------------------------- Net investment income (loss) (b)(c) ............. 0.08 0.12 0.14 0.00 Net realized and unrealized gain (loss) ......... (3.50) (4.78) 6.11 0.10 - -------------------------------------------------------------------------------------------------- Total from investment operations ................ (3.42) (4.66) 6.25 0.10 - -------------------------------------------------------------------------------------------------- Net asset value, end of period .................. $ 8.27 $ 11.69 $16.35 $10.10 ================================================================================================== Total return (%)(d) ............................. (29.26) (28.48) 61.88 0.99 ================================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%)(b)(e) ..................... 0.05 0.04 0.03 0.00 - -------------------------------------------------------------------------------------------------- Ratio of net investment (%)(e) .................. 0.70 0.84 1.07 0.02 - -------------------------------------------------------------------------------------------------- Portfolio turnover (%)(b) ....................... 62.9 44.8 6.69 0.00 - -------------------------------------------------------------------------------------------------- Net assets, end of period (000,000s) ............ $ 87 $ 864 $1,361 $ 626 ==================================================================================================
(a) The Daily MSCI Japan Index Fund commenced operation on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation (not annualized for the period ended December 31, 1998) is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-167 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------- SHARES VALUE - ----------------------------------------------------------------------------- COMMON STOCK -- 94.4% (unless otherwise noted) Acom Company ................................... 30,918 $ 2,253,946 Aderans ........................................ 100 2,954 Advantest ...................................... 23,884 1,352,819 Aiful Corporation .............................. 6,561 424,712 Ajinomoto Company, Incorporated ................ 172,195 1,682,516 All Nippon Airways Company, Limited ............ 89,000 206,534 Alps Electric Company .......................... 49,774 338,159 Amada Company, Limited ......................... 93,564 371,399 Amano Corporation .............................. 25,884 155,106 Aoyama Trading Co. ............................. 18,812 179,504 Asahi Bank ..................................... 781,503 489,185 Asahi Breweries ................................ 134,382 1,209,438 Asahi Chemical Industry ........................ 381,206 1,338,586 Asahi Glass Company, Limited ................... 280,540 1,659,683 Asatsu ......................................... 14,245 278,376 Ashikaga Bank .................................. 168,210 154,085 Autobacs Seven ................................. 10,555 245,746 Bank of Fukuoka Limited ........................ 177,193 600,563 Bank of Yokohama Limited ....................... 300,538 1,048,442 Banyu Pharmaceutical Company ................... 18,000 267,939 Bellsystem24 Inc ............................... 10 3,740 Benesse Corporation ............................ 23,965 621,992 Bridgestone Corporation ........................ 217,930 2,307,396 Canon Incorporated ............................. 246,153 8,474,428 Capcom Co., Ltd. ............................... 100 2,649 Casio Computer Company ......................... 75,656 328,035 Central Japan Railway .......................... 441 2,854,718 Chiba Bank ..................................... 95,000 310,382 Chubu Electric Power ........................... 82,800 1,491,664 Chugai Pharmaceutical Company .................. 67,687 784,859 Chuo Trust & Banking Company, Limited .......... 226,956 225,224 Citizen Watch Company .......................... 85,618 426,783 Coca Cola West Japan Company, Limited .......... 100 1,798 Cosmo Oil Company .............................. 251 354 Credit Saison Company .......................... 40,512 788,592 CSK Corporation ................................ 20,704 485,201 Dai Ichi Pharmaceutical Company ................ 75,634 1,472,265 Dai Nippon Printing ............................ 192,056 1,920,560 Daicel Chemical Industries Limited ............. 101,529 298,387 Daiei Incorporated ............................. 198,106 111,907 Daifuku Company ................................ 32,857 132,933 Daikin Industries .............................. 59,666 935,982 Daikyo Inc. .................................... 784 461 Daimaru Inc. ................................... 75,676 304,437 Dainippon Ink & Chemicals Incorporated ......... 220,965 315,423 Dainippon Screen ............................... 51,778 162,844 Daito Trust Construction ....................... 30,726 470,272
The accompanying notes are an integral part of these financial statements. SAI-168 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------------- Daiwa Bank Holdings ........................................... 567,385 $ 355,157 Daiwa House Industry .......................................... 145,334 829,846 Daiwa Kosho Lease Co., Ltd. ................................... 807 1,848 Daiwa Securities .............................................. 352,343 1,853,163 Denki Kagaku Kogyo ............................................ 127,423 295,699 East Japan Railway Company .................................... 954 4,609,786 Ebara Corporation ............................................. 82,625 498,273 Eisai Company, Limited ........................................ 77,654 1,932,458 Familymart Company, Limited ................................... 200 3,366 Fanuc Limited ................................................. 50,391 2,146,426 Fast Retailing Company ........................................ 4,500 400,534 Fuji Electric Company, Limited ................................ 1,000 2,122 Fuji Machine Manufacturing Co. ................................ 13,638 178,023 Fuji Photo Film Company, Limited .............................. 135,580 4,843,621 Fuji Soft ABC Inc. ............................................ 9,059 360,977 Fuji Television Network Incorporated .......................... 91 367,473 Fujikura ...................................................... 107,527 403,842 Fujisawa Pharmaceutical Company, Limited ...................... 32,000 737,710 Fujitsu Limited ............................................... 500,425 3,644,316 Fujitsu Support And Service Incorporated ...................... 100 1,656 Furukawa Electric ............................................. 157,147 834,918 General Sekiyu KK ............................................. 46,000 296,718 Gunma Bank .................................................... 141,338 647,350 Gunze Limited ................................................. 65,697 237,713 Hankyu Department Stores ...................................... 51,770 311,410 Haseko Corp. .................................................. 46 7 Hirose Electric ............................................... 9,550 651,004 Hitachi Limited ............................................... 842,962 6,177,431 Hitachi Software Engineering Company .......................... 100 3,374 Hitachi Zosen Corp. ........................................... 277,822 129,367 Hokuriku Bank Limited ......................................... 190,129 207,545 Honda Motor Company ........................................... 218,814 8,735,857 House Food Corporation ........................................ 31,855 261,406 Hoya Corporation .............................................. 30,701 1,835,029 Isetan Company ................................................ 53,718 550,712 Ishihara Sangyo Kaisha ........................................ 103,608 145,526 Ishikawajima Harima Heavy Industries Company, Limited ......... 361,345 562,705 Ito En ........................................................ 100 4,198 Ito Yokado Company ............................................ 105,815 4,781,869 Itochu Corporation ............................................ 377,183 852,261 Itochu Techno Scientific ...................................... 4,400 182,046 Japan Airlines Company, Limited ............................... 350,733 840,688 Japan Energy Corporation ...................................... 308,658 346,357 Japan Steel Works ............................................. 554 347 Japan Tobacco Incorporated .................................... 393 2,475,000 JGC Corporation ............................................... 69,720 514,651 Joyo Bank ..................................................... 241,878 670,242
The accompanying notes are an integral part of these financial statements. SAI-169 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- Jusco Company ........................................... 79,583 $ 1,798,211 Kadokawa Shoten P ....................................... 83 1,267 Kajima Corporation ...................................... 253,776 689,651 Kaken Pharmaceutical .................................... 26,894 146,583 Kamigumi Co. ............................................ 76,662 314,841 Kanebo .................................................. 142,382 217,377 Kaneka Corporation ...................................... 80,550 491,294 Kansai Electric Power ................................... 233,663 3,347,981 Kao Corporation ......................................... 162,216 3,374,340 Katokichi Co. ........................................... 15,232 243,014 Kawasaki Heavy Industries Limited ....................... 386,175 353,748 Kawasaki Kisen .......................................... 164,289 219,470 Kawasaki Steel .......................................... 840,858 853,696 Keihin Electric Express Railway ......................... 142,828 540,784 Keio Teito Electric Railway Company, Limited ............ 84,000 413,588 Keyence Corporation ..................................... 4,100 681,977 Kikkoman Corporation .................................... 54,751 296,324 Kinden Corporation ...................................... 72,864 340,959 Kinki Nippon Railway .................................... 450,305 1,443,726 Kirin Brewery Co. ....................................... 235,724 1,686,056 Kokuyo Company .......................................... 35,834 300,896 Komatsu ................................................. 252,766 904,941 Komori Corp. ............................................ 21,905 247,309 Konami Company, Limited ................................. 30,756 913,289 Konica Corporation ...................................... 98,542 579,969 Koyo Seiko Company ...................................... 54,751 193,091 Kubota Corporation ...................................... 337,206 885,488 Kuraray Company ......................................... 106,537 680,698 Kureha Chemical Industry Co., Ltd. ...................... 728 2,073 Kurita Water Industries Limited ......................... 37,431 464,887 Kyocera Corporation ..................................... 48,140 3,141,962 Kyowa Exeo Corp. ........................................ 31,865 189,487 Kyowa Hakko Kogyo ....................................... 104,459 495,981 Kyushu Electric Power Company, Limited .................. 53,300 768,171 Lawson .................................................. 6,200 177,481 Mabuchi Motor ........................................... 4,000 329,771 Maeda Road Construction Company ......................... 876 2,782 Makino Milling .......................................... 888 2,373 Makita Corporation ...................................... 42,803 211,401 Marubeni Corporation .................................... 410,096 247,310 Marui Company ........................................... 97,531 1,153,993 Matsushita Communication Industrial ..................... 13,300 360,420 Matsushita Electric Industrial Company, Limited ......... 549,475 7,059,286 Matsushita Electric Works Limited ....................... 61,000 502,435 Meiji Milk Product ...................................... 83,583 204,810 Meiji Seika Kaisha ...................................... 107,504 430,837 Meitec .................................................. 11,149 272,342
The accompanying notes are an integral part of these financial statements. SAI-170 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ------------------------------------------------------------------------------------------------ Minebea Company ................................................ 110,494 $ 595,487 Mitsubishi Corporation ......................................... 375,052 2,436,406 Mitsubishi Electric Corporation ................................ 543,287 2,102,645 Mitsubishi Estate Company, Limited ............................. 310,384 2,272,200 Mitsubishi Gas & Chemical Company, Limited ..................... 134,396 187,744 Mitsubishi Heavy Industries Limited ............................ 890,812 2,380,032 Mitsubishi Kasei Corporation ................................... 520,247 1,108,007 Mitsubishi Material Corporation ................................ 307,579 420,280 Mitsubishi Paper Mills Ltd. .................................... 90,593 129,320 Mitsubishi Rayon Company, Limited .............................. 175,210 458,756 Mitsubishi Tokyo Finance ....................................... 1,290 8,655,802 Mitsubishi Warehouse & Transportation Company, Limited ......... 46,788 331,445 Mitsui & Company, Limited ...................................... 400,031 1,981,833 Mitsui Engineering & Shipbuilding Company, Limited ............. 230,038 228,282 Mitsui Fudosan Company ......................................... 214,992 1,641,160 Mitsui Marine & Fire Insurance Company, Limited ................ 390,000 1,830,916 Mitsui Mining & Smelting Company, Limited ...................... 155,353 509,937 Mitsui OSK Lines Limited ....................................... 102,000 205,557 Mitsui Petrochemical Industries Limited ........................ 80,000 256,489 Mitsukoshi ..................................................... 132,390 371,905 Mitsumi Electric Company, Limited .............................. 300 3,442 Mizuho Holdings ................................................ 2,067 4,212,893 Mori Seiki Co. ................................................. 26,880 161,075 Murata Manufacturing Company ................................... 68,190 4,091,400 Namco .......................................................... 15,332 292,595 NEC Corporation ................................................ 437,606 4,466,254 New Oji Paper Company, Limited ................................. 247,851 985,728 NGK Insulators Limited ......................................... 95,544 708,193 NGK Spark Plug Company, Limited ................................ 49,718 358,273 Nichiei Co. .................................................... 16 120 Nichii Company ................................................. 614 5 Nichirei Corporation ........................................... 86,604 192,380 Nikko Securities Company, Limited .............................. 188,000 839,542 Nikon Corporation .............................................. 98,537 758,961 Nintendo Company, Limited ...................................... 33,831 5,926,881 Nippon Comsys Corp. ............................................ 37,832 202,445 Nippon Densan .................................................. 13,520 712,122 Nippon Express Company ......................................... 253,635 861,585 Nippon Light Metal Co. ......................................... 210 111 Nippon Meat Packers ............................................ 63,708 675,986 Nippon Oil Company, Limited .................................... 381,173 1,454,859 Nippon Sheet Glass ............................................. 100,440 317,421 Nippon Shinpan Company, Limited ................................ 608 761 Nippon Shokubai Company ........................................ 53,768 192,908 Nippon Steel Corporation ....................................... 1,720,549 2,482,319 Nippon Suisan .................................................. 658 914 Nippon Telegraph & Telephone Corporation ....................... 2,264 7,379,603
The accompanying notes are an integral part of these financial statements. SAI-171 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- --------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - --------------------------------------------------------------------------------- Nippon Unipac Hold ................................ 270 $ 1,205,725 Nippon Yusen ...................................... 325,446 981,307 Nippondenso Company ............................... 205,345 2,721,213 Nishimatsu Construction Company, Limited .......... 77,654 229,998 Nissan Motor Company, Limited ..................... 892,974 4,737,534 Nisshin Flour Milling ............................. 68,685 414,207 Nisshinbo Industries Incorporated ................. 60,718 225,259 Nissin Food Products .............................. 28,634 559,565 Nitto Denko Corporation ........................... 41,489 959,631 NKK Corporation ................................... 431,000 305,977 NOF Corp. ......................................... 737 1,446 Nomura Securities ................................. 518,679 6,651,761 Noritake Company .................................. 44,805 170,327 NSK Limited ....................................... 156,286 539,246 NTN Toyo Bearing Company, Limited ................. 130,411 211,047 NTT Data Corporation .............................. 197 700,779 NTT Mobile Communications ......................... 562 6,606,718 Obayashi Corporation .............................. 193,052 548,209 Oki Electric Industry Company, Limited ............ 70,000 229,771 Okuma Corp. ....................................... 840 1,186 Okumura Corp. ..................................... 64,685 158,997 Olympus Optical Company, Limited .................. 63,666 916,110 Omron Corporation ................................. 68,674 917,401 Onoda Cement Company, Limited ..................... 263,712 400,601 Onward Kashiyama .................................. 39,784 382,048 Oracle Corporation Japan .......................... 4,700 287,023 Orient Corporation ................................ 585 585 Oriental Land Company, Limited .................... 21,076 1,449,578 Orix Corporporation ............................... 21,792 1,952,962 Osaka Gas Company ................................. 639,801 1,528,685 Oyo Corp. ......................................... 62 572 Paris Miki Inc .................................... 100 2,626 Penta Ocean Construction Co., Ltd. ................ 573 556 Pioneer Electronic ................................ 47,574 1,038,638 Promise Company ................................... 28,010 1,515,961 Ricoh Company ..................................... 88,000 1,639,084 Rohm Company ...................................... 31,368 4,073,051 Sanden Corp. ...................................... 39,817 117,019 Sankyo Company .................................... 107,430 1,841,071 Sanrio Company .................................... 21,500 169,866 Sanwa Shutter Corp. ............................... 722 1,565 Sanyo Electric Company ............................ 473,631 2,237,997 Sapporo Breweries ................................. 93,569 259,279 Secom Company ..................................... 62,205 3,124,495 Sega Enterprises .................................. 34,200 682,695 Seino Transportation .............................. 41,815 169,814 Seiyu ............................................. 93,664 195,193
The accompanying notes are an integral part of these financial statements. SAI-172 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------------- Sekisui Chemical ....................................... 150,291 $ 395,805 Sekisui House .......................................... 175,083 1,269,686 Seven Eleven Japan ..................................... 57,469 2,096,960 Seventy Seven Bank ..................................... 106,513 470,771 Sharp Corporation ...................................... 285,575 3,341,881 Shimachu Co. ........................................... 14,339 197,024 Shimamura Co., Ltd. .................................... 7,455 438,195 Shimano Incorporated ................................... 37,923 431,338 Shimizu Corporation .................................... 206,998 701,581 Shin Etsu Chemical Company ............................. 111,569 4,011,374 Shionogi & Company ..................................... 92,864 1,587,904 Shiseido Company, Limited .............................. 110,595 1,022,371 Shizuoka Bank .......................................... 199,994 1,514,458 Sho-Bond Construction .................................. 67 588 Showa Denko KK ......................................... 299,681 320,270 Showa Shell Sekiyu KK .................................. 74,521 395,928 Skylark Company ........................................ 30,857 518,209 SMC Corporation ........................................ 17,211 1,752,632 Snow Brand Milk ........................................ 90,604 150,084 Softbank Corporation ................................... 70,882 1,147,098 Sony Corporation ....................................... 242,852 11,104,454 Sumitomo Bank .......................................... 1,281,563 5,429,523 Sumitomo Chemical ...................................... 372,984 1,267,007 Sumitomo Corporation ................................... 239,679 1,099,596 Sumitomo Electric Industries ........................... 180,069 1,257,734 Sumitomo Forestry ...................................... 48,786 256,220 Sumitomo Heavy Industries Limited ...................... 163,251 87,233 Sumitomo Metal Industries .............................. 997,376 319,769 Sumitomo Metal Mining .................................. 159,266 531,292 Sumitomo Osaka Cement .................................. 118,457 172,712 Sumitomo Realty & Development Company, Limited ......... 53,000 242,748 Sumitomo Trust Banking Company, Limited ................ 127,000 515,756 Suzuken Co Ltd ......................................... 100 1,580 Taisei Corporation ..................................... 268,772 582,681 Taisho Pharmaceutical Company, Limited ................. 71,573 1,125,499 Taiyo Yuden Company .................................... 34,453 522,055 Takara Shuzo Company ................................... 60,722 510,806 Takashimaya Company .................................... 84,610 499,264 Takeda Chemical Industries Limited ..................... 234,552 10,617,507 Takefuji Corporation ................................... 31,007 2,243,865 Takuma Co. ............................................. 24,892 170,444 TDK Corporation ........................................ 16,900 797,267 Teijin ................................................. 239,830 920,874 Teikoku Oil Company .................................... 84,664 309,573 Terumo Corporation ..................................... 55,632 721,093 Thk Company ............................................ 13,900 202,876 Tobu Railway Company ................................... 238,892 629,143
The accompanying notes are an integral part of these financial statements. SAI-173 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - -------------------------------------------------------------------------------------- Toda Construction ....................................... 89,598 $ 246,224 Toei .................................................... 817 2,195 Toho Company ............................................ 4,586 496,408 Tohoku Electric Power ................................... 132,760 1,822,156 Tokio Marine & Fire Insurance Company, Limited .......... 370,042 2,706,109 Tokyo Broadcasting ...................................... 19,915 302,526 Tokyo Dome Corp. ........................................ 797 1,758 Tokyo Electric Power .................................... 357,162 7,606,733 Tokyo Electron .......................................... 46,381 2,276,564 Tokyo Gas Company ....................................... 742,509 1,989,471 Tokyo Style Company ..................................... 28,880 247,795 Tokyu Corporation ....................................... 290,579 876,173 Toppan Printing Company ................................. 184,131 1,699,346 Toray Industries Incorpoated ............................ 370,216 895,866 Toshiba Corporaton ...................................... 850,353 2,921,060 Tosoh Corporation ....................................... 166,237 323,591 Tostem Corporation ...................................... 87,722 1,187,260 Toto .................................................... 103,323 492,953 Toyo Information ........................................ 12,144 290,158 Toyo Seikan Kaisha Limited .............................. 51,816 662,137 Toyobo Company .......................................... 192,120 240,517 Toyoda Auto Loom ........................................ 22,000 320,763 Toyoda Gosei ............................................ 200 2,473 Toyota Motor Corporation ................................ 827,461 20,970,767 Trans Cosmos Inc. ....................................... 6,869 178,804 Trend Micro Incorporated ................................ 13,000 307,634 Tsubakimoto Chain ....................................... 757 1,734 UBE Industries Limited .................................. 233,934 230,362 Ufj Hldgs ............................................... 331 730,221 Uni-Charm ............................................... 16,007 334,803 UNY Company, Limited .................................... 52,759 536,450 Ushio Inc. .............................................. 15,000 169,580 Wacoal Corporation ...................................... 42,811 341,181 West Japan Railway ...................................... 141 630,733 World Co., Ltd. ......................................... 13,834 417,132 Yakult Honsha ........................................... 48,778 364,904 Yamada Denki Company .................................... 3,600 252,824 Yamaha Corporation ...................................... 57,734 427,496 Yamaichi Securities Company (a) ......................... 117,000 0 Yamanouchi Pharmaceutical Company, Limited .............. 95,546 2,523,581 Yamato Transport Company, Limited ....................... 116,446 2,195,585 Yamazaki Baking Company ................................. 60,722 333,276 Yasuda Fire & Marine Insurance Company, Limited ......... 103,000 589,695 Yokogawa Electric ....................................... 68,681 547,875 ------------ 375,438,333 ------------
The accompanying notes are an integral part of these financial statements. SAI-174 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- UNITS ----- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 5.6% SHORT TERM INVESTMENT FUND* ....................... 22,108,188 22,108,188 - ---------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $519,282,638) .............................. $397,546,521 ==================================================================================
* Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-175 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001 (a) Issuer filed for bankruptcy. At December 31, 2001, foreign currency balances totaling $1,944,822 were pledged to cover initial margin requirements for open futures contracts. The following futures contracts were open at December 31, 2001:
NUMBER OF FUTURES CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) - ------------- -------------- -------------- ------------ ------------ TOPIX Index 368 $28,275,478 March 2002 $411,357
The following foreign currency contracts were open at December 31, 2001:
SETTLEMENT CONTRACTS IN EXCHANGE UNREALIZED DATE TO DELIVER FOR GAIN/(LOSS) - ------------ --------------------- ----------------------- -------------- 3/05/02 USD 12,327,762 JPY 1,512,000,000 $ (748,417) 3/05/02 USD 3,844,131 JPY 475,000,000 (206,440) 3/05/02 USD 2,030,697 JPY 258,000,000 (54,856) 3/05/02 USD 2,354,049 JPY 300,000,000 (56,560) 3/05/02 USD 12,367,628 JPY 1,600,000,000 (114,353) 3/05/02 JPY 638,000,000 USD 5,072,349 186,355 3/05/02 JPY 545,000,000 USD 4,287,456 113,685 ---------- $ (880,586) ==========
CURRENCY LEGEND - --------------- JPY: Japanese Yen USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-176 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITES LENDING FUND DAILY MSCI JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. The following is a summary of significant accounting policies followed by each Fund in the preparation of its financial statements. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of mangement estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income earned on securities, if any, is recorded net of applicable withholding taxes on the accrual basis; interest earned on foreign currency accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. Interest income includes accretion of discounts and amortization of premiums, if any. C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS The accounting records of the Fund are maintained in U.S. dollars. Foreign currency, investment securities, and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statement of Operations from the effects of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain or loss on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized appreciation/depreciation on foreign currency related transactions. The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against the foreign currency exposure of either specific transactions or portfolio positions. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed upon future date. Such contracts are valued based upon the difference in the forward exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, and any resulting unrealized gains or losses are recorded in the Fund's financial statements. The Fund records realized gains or losses at the time the forward contract is extinguished by entry into a closing transaction or by delivery of the currency. Risks in foreign currency contracts arise from the possible inability of counterparties to meet the contracts' terms and from movements in currency values. D. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. F. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody, stamp duty, and audit fees. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. G. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending fees, if any, is distributed monthly to participants of the Lending Fund. 2. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Daily MSCI Japan Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Daily MSCI Japan Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2001, the market value of securities loaned by the Lending Fund was $37,699,439 against which was held cash collateral of $39,793,315 and securities of $163,550. Cash collateral provided by the Borrowers is invested in State Street Bank and Trust Company Quality A Short-Term Investment Fund. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2001 were $590,260,047 and $1,155,191,550, respectively. SAI-177 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITES LENDING FUND DAILY MSCI JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 4. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 2001 2000 ---------------------------- ---------------------------- UNITS AMOUNT UNITS AMOUNT ----------- ------------- ----------- ------------- LENDING FUND Units issued ................ 31,180,851 $ 323,619,569 26,012,090 $ 383,577,970 Units redeemed .............. (27,514,913) (276,417,208) (21,494,020) (310,063,188) ----------- ------------- ----------- ------------- Total ...................... 3,665,938 $ 47,202,361 4,518,070 $ 73,514,782 ----------- ------------- ----------- ------------- NON-LENDING FUND Units issued ................ 7,472,877 $ 75,393,870 14,116,839 $ 212,567,898 Units redeemed .............. (70,817,765) (688,924,839) (23,495,149) (351,001,376) ----------- ------------- ----------- ------------- Total ...................... (63,344,888) $(613,530,969) (9,378,310) $(138,433,478) ----------- ------------- ----------- ------------- Net increase (decrease) ..... (59,678,950) $(566,328,608) (4,860,240) $ (64,918,696) =========== ============= =========== =============
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2001 held by 1 of the Lending Fund's unitholders aggregated 99.9% of the Lending Fund's total units outstanding. NON-LENDING FUND All of the Non-Lending Fund's units outstanding were held by one unitholder at December 31, 2001. A transaction fee of 0.35% is charged on any contribution or withdrawal greater than 5% of the net asset value of the Fund. However, such fees are waived if the Fund's net participant activity on any day is less than 5% of the net asset value of the Fund. Such transaction fees are presented as a separate component of capital. For the year ended December 31, 2001 no participant transaction fees were charged. 5. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the equity markets. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the daily fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. SAI-178 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Fund at December 31, 2001, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP February 22, 2002 SAI-179 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Statement of Assets and Liabilities December 31, 2001 - -------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $2,275,873), (cost $135,832,468) .................................................................... $129,040,991 Foreign currency, at value (cost $3,160,634).............................................. 3,163,309 Foreign currency, segregated, at value (cost $1,010,221).................................. 975,033 Investments held as collateral for securities loaned ..................................... 2,400,348 Receivable for open foreign currency contracts ........................................... 9,200,900 Unrealized gain on open futures contracts ................................................ 98,831 Dividends receivable ..................................................................... 56,892 Interest receivable ...................................................................... 7,066 - -------------------------------------------------------------------------------------------------------- Total assets ........................................................................ 144,943,370 - -------------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned .............................................. 2,400,348 Payable for Fund units redeemed .......................................................... 66,781 Payable for open foreign currency contracts .............................................. 9,199,310 Accrued expenses ......................................................................... 36,271 - -------------------------------------------------------------------------------------------------------- Total liabilities ................................................................... 11,702,710 - -------------------------------------------------------------------------------------------------------- NET ASSETS $133,240,660 ======================================================================================================== Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund (9,768,025 units outstanding, at $10.70 per unit net asset Value) ....................... $104,503,937 Daily MSCI Pacific Basin ex-Japan Index Fund (2,686,033 units outstanding, at $10.70 per unit net asset value)........................ 28,736,723 - -------------------------------------------------------------------------------------------------------- $133,240,660 ========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-180 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Statement of Operations December 31, 2001 - ----------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of taxes withheld of $307,443) ........................................... $ 7,381,937 Interest ................................................................................ 348,776 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 62,450 - ---------------------------------------------------------------------------------------------------------- Total investment income .............................................................. 7,793,163 - ---------------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................................. 155,591 Audit ................................................................................... 14,500 Stamp duty .............................................................................. 383 Other ................................................................................... 7,330 - ---------------------------------------------------------------------------------------------------------- Total expenses ....................................................................... 177,804 - ---------------------------------------------------------------------------------------------------------- Net investment income (loss) ......................................................... 7,615,359 - ---------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................... (20,138,580) Foreign currency transactions ......................................................... (642,484) Futures contracts ..................................................................... (1,512,521) - ---------------------------------------------------------------------------------------------------------- (22,293,585) - ---------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................................... (20,018,630) Foreign currency transactions ......................................................... (132,994) Futures contracts ..................................................................... 159,438 - ---------------------------------------------------------------------------------------------------------- (19,992,186) - ---------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................................. (42,285,771) - ---------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $(34,670,412) - ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. SAI-181 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2001 2000 - -------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) .................................................... $ 7,615,359 $ 10,515,179 Net realized gain (loss) ........................................................ (22,293,585) 892,048 Net change in unrealized appreciation (depreciation) ............................ (19,992,186) (69,528,511) - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. (34,670,412) (58,121,284) - -------------------------------------------------------------------------------------------------------------------- Distributions of securities lending fee income allocated to the Lending Fund participants .................................................................... (62,450) (62,910) - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions .... (165,984,977) (18,266,701) - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets ............................................ (200,717,839) (76,450,895) NET ASSETS Beginning of year ............................................................... 333,958,499 410,409,394 - -------------------------------------------------------------------------------------------------------------------- End of year ..................................................................... $ 133,240,660 $333,958,499 ====================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-182 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, ------------------------------------------- 2001 2000 1999 1998(a) - ----------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of period ....................... $11.85 $ 13.91 $ 9.97 $10.00 - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) (b)(c) ........................ 0.34 0.37 0.41 0.00 Net realized and unrealized gain (loss) .................... (1.48) (2.42) 3.54 (0.03) - ----------------------------------------------------------------------------------------------------------- Total from investment operations ........................... (1.14) (2.05) 3.95 (0.03) Distributions of securities lending fee income (b) ......... (0.01) (0.01) (0.01) (0.00) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period ............................. $10.70 $ 11.85 $13.91 $ 9.97 =========================================================================================================== Total return (%)(d) ........................................ (9.65) (14.76) 39.61 (0.30) RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%)(b)(e) ................................ 0.07 0.05 0.07 0.00 Ratio of net investment income (%)(b)(e) ................... 3.12 2.97 3.49 0.00 Portfolio turnover (%)(b) .................................. 76.89 65.01 15.69 0.00 Net assets, end of period (000,000s) ....................... $ 105 $ 103 $ 111 $ 38 ===========================================================================================================
(a) The Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation (not annualized for the period ended December 31, 1998) is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-183 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, -------------------------------------------- 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of period ............. $11.85 $ 13.91 $ 9.97 $10.00 - ------------------------------------------------------------------------------------------------- Net investment income (loss) (b)(c) .............. 0.33 0.36 0.40 0.00 Net realized and unrealized gain (loss) .......... (1.48) (2.42) 3.54 (0.03) - ------------------------------------------------------------------------------------------------- Total from investment operations ................. (1.15) (2.06) 3.94 (0.03) - ------------------------------------------------------------------------------------------------- Net asset value, end of period ................... $10.70 $ 11.85 $13.91 $ 9.97 ================================================================================================= Total return (%)(d) .............................. (9.70) (14.81) 39.52 (0.30) RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%)(b)(e) ...................... 0.07 0.05 0.07 0.00 Ratio of net investment income (%)(b)(e) ......... 3.06 2.90 3.40 0.00 Portfolio turnover (%)(b) ........................ 76.89 65.01 15.69 0.00 Net assets, end of period (000,000s) ............. $ 29 $ 231 $ 300 $ 166 =================================================================================================
(a) The Daily MSCI Pacific Basin ex-Japan Index Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation (not annualized for the period ended December 31, 1998) is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-184 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- --------------------------------------------------------------------------------------- SHARES VALUE - --------------------------------------------------------------------------------------- COMMON STOCK -- 92.5% (unless otherwise noted) AUSTRALIA -- 50.0% Amcor Limited ......................................... 175,753 $ 643,334 AMP Limited ........................................... 312,577 2,950,838 Aristocrat Leisure .................................... 117,411 396,716 Australia & New Zealand Banking Group Limited ......... 208,292 1,899,064 Australian Gas & Light Company ........................ 98,100 456,169 Australian Stock Exchange ............................. 14,153 81,876 Boral Limited ......................................... 157,629 265,497 Brambles Industries Limited ........................... 266,974 1,421,444 BRL Hardy Limited ..................................... 21,526 121,774 Broken Hill Proprietary Company, Limited .............. 1,036,339 5,570,814 Coca Cola Amatil ...................................... 160,551 491,603 Cochlear Limited ...................................... 14,351 334,288 Coles Myer Limited .................................... 295,798 1,272,044 Colonial First Station ................................ 59,659 66,277 Commercial Investments ................................ 160,697 109,418 Commonwealth Bank of Australia ........................ 348,258 5,338,022 Computershare Limited ................................. 150,641 407,197 CRA Limited ........................................... 86,751 1,652,399 CSL Limited ........................................... 44,241 1,166,206 CSR Limited ........................................... 260,526 905,625 David Jones Limited ................................... 108,163 65,341 Energy Development .................................... 428 1,468 Erg Limited ........................................... 173,767 48,928 Erg Limited -- DFD .................................... 50,289 14,160 Fairfax & Roberts Limited ............................. 71,801 141,263 Fosters Brewing Group ................................. 556,198 1,383,863 Futuris Corporation, Limited .......................... 168,317 159,414 Gandel Retail Trust ................................... 354,587 211,483 General Property Trust ................................ 494,257 716,089 Goodman Fielder Wattie Limited ........................ 354,245 250,271 Grosvenor Trust ....................................... 130,538 103,585 Harvey Norman Holding Npv ............................. 103,457 214,507 ICI Australia Limited ................................. 76,510 282,411 James Hardie Industries ............................... 107,183 328,850 Leighton Holdings Limited ............................. 59,190 313,629 Lend Lease Corporation, Limited ....................... 113,460 758,020 Macquarie Bank Limited ................................ 26,616 510,323 Macquarie Infrastructure Group ........................ 214,863 384,997 Mayne Nickless Limited ................................ 215,518 759,101 Metway Bank Limited ................................... 106,285 763,409 MIM Holdings Limited .................................. 479,456 279,821 Mirvac Group .......................................... 169,046 334,922 National Australia Bank Limited ....................... 433,705 7,074,043 Newcrest Mining Limited ............................... 77,627 164,528 News Corporation, Limited ............................. 496,084 3,967,522 Nine Network Australia Limited ........................ 18,227 91,447
The accompanying notes are an integral part of these financial statements. SAI-185 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- Normandy Mining Limited ........................... 492,187 $ 456,075 Nrma Insurance Group .............................. 195,870 312,860 Onesteel .......................................... 127,795 72,229 Origin Energy ..................................... 86,396 124,774 Pacific Dunlop Limited ............................ 246,783 130,131 Paperlinx Limited ................................. 89,174 222,374 QBE Insurance Group ............................... 145,530 572,191 Santos Limited .................................... 166,525 528,565 Schroders Property Fund ........................... 124,277 164,149 Sonic Healthcare Limited .......................... 32,119 131,547 Sons of Gwalia Limited ............................ 34,681 132,984 Southcorp Holdings Limited ........................ 174,453 674,300 Stockland Trust Group ............................. 225,427 498,560 Tab ............................................... 70,001 97,477 Tab Corporation Holdings Limited .................. 72,709 366,278 Telstra Corporation ............................... 1,440,787 4,012,603 Transurban Group .................................. 147,573 330,380 Wesfarmers Limited ................................ 101,000 1,602,398 Western Mining Corporation ........................ 308,226 1,510,584 Westfield Holdings ................................ 62,696 540,966 Westfield Trust -- New ............................ 40,948 71,275 Westfield Trust ................................... 504,787 895,187 Westpac Banking Corporation ....................... 489,051 3,944,573 Westralian Sands .................................. 60,180 137,101 Woodside Petroleum Limited ........................ 65,321 447,809 Woolworths Limited ................................ 288,913 1,662,497 Zimbabwe Platinum ................................. 18,400 9,513 ------------ 64,523,380 ------------ HONG KONG -- 27.8% Amoy Properties Limited ........................... 159,000 165,161 ASM Pacific Technologies .......................... 78,292 154,117 Bank of East Asia Limited ......................... 396,052 853,270 Cathay Pacific Airways Limited .................... 598,484 767,499 Cheung Kong (Holdings) Limited .................... 224,000 2,326,795 Cheung Kong Infras ................................ 63,000 98,162 CLP Holdings ...................................... 620,593 2,367,658 Esprit Holdings ................................... 240,561 271,477 Giordano International Limited .................... 399,996 176,970 Hang Seng Bank Limited ............................ 369,349 4,061,590 Henderson Land Development Company ................ 286,169 1,302,795 Hong Kong & China Gas Company, Limited ............ 1,240,739 1,527,484 Hong Kong Electric Holdings Limited ............... 206,500 767,968 Hong Kong Exchange ................................ 144,000 218,830 Hutchison Whampoa Limited ......................... 883,142 8,550,719 Hysan Development Company, Limited ................ 227,450 228,971 Johnson Electric Holdings ......................... 794,675 835,658 Li & Fung ......................................... 635,921 713,570
The accompanying notes are an integral part of these financial statements. SAI-186 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- Mtr Corporation ................................... 180,000 $ 235,449 New World Development Company, Limited ............ 500,520 436,471 Pacific Century ................................... 3,564,096 982,682 Peregrine Investment Holdings (a) ................. 45,000 1 Qpl Intl Hldgs -- warrants ........................ 224 11 Shangri-La Asia Limited ........................... 463,886 362,883 Sino Land Company, Limited ........................ 747,310 297,090 South China Morning Post .......................... 406,385 255,364 Sun Hung Kai Properties Limited ................... 530,982 4,289,883 Swire Pacific Limited ............................. 364,367 1,985,880 Television Broadcasting Limited ................... 90,375 391,733 Wharf Holdings Limited ............................ 506,809 1,238,125 ------------ 35,864,266 ------------ NEW ZEALAND -- 1.9% Auckland International ............................ 116,965 176,330 Baycorp Advantage ................................. 500 1,593 Carter Holt Harvey Limited ........................ 378,505 267,968 Contact Energy Limited ............................ 160,547 266,102 Fisher & Paykel Ap ................................ 18,186 76,493 Fisher & Paykel Industries ........................ 17,674 125,862 Fletcher Building ................................. 96,648 118,332 Fletcher Challenge Forestry Limited ............... 247,678 22,692 Independent Newspapers Limited .................... 675 1,026 Sky City .......................................... 29,753 78,061 Telecom Corporation of New Zealand ................ 498,825 1,038,678 Tower Limited ..................................... 654 1,343 Warehouse Group ................................... 84,859 233,241 ------------ 2,407,721 ------------ SINGAPORE -- 12.8% Allgreen Propertie ................................ 2,000 1,116 Capitaland ........................................ 448,774 454,485 Chartered Semi Conductors ......................... 246,439 653,967 City Developments Limited ......................... 182,511 597,992 Creative Technology ............................... 22,431 179,788 Cycle & Carriage Limited .......................... 63,686 106,230 Datacraft Asia .................................... 34,000 74,120 DBS Group Holdings Limited ........................ 352,461 2,634,152 First Capital Corporation ......................... 98,453 58,117 Fraser & Neave Limited ............................ 72,362 297,834 Ges International ................................. 2,000 612 Haw Par Brothers International Limited ............ 54,920 120,756 Hotel Properties .................................. 128,339 88,965 Keppel Corporation, Limited ....................... 185,379 285,121 Natsteel Limited .................................. 2,000 959 Neptune Orient Lines Limited ...................... 332,640 174,742 Overseas Chinese Bank ............................. 329,943 1,965,542
The accompanying notes are an integral part of these financial statements. SAI-187 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ---------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE - ---------------------------------------------------------------------------------- Overseas Union Enterprise Limited ................. 37,752 $ 130,849 Parkway Holdings Limited .......................... 202,956 105,517 Sembcorp Industrie ................................ 342,004 296,348 Sembcorp Logistics ................................ 1,000 975 Sembcorp Marine ................................... 3,000 1,340 Singapore Airlines ................................ 260,212 1,550,139 Singapore Exchange Limited ........................ 103,000 69,169 Singapore Press Holdings .......................... 105,025 1,239,938 Singapore Technical Engineering ................... 613,854 781,238 Singapore Telecommunications ...................... 1,772,979 1,689,923 SMRT Corporation Limited .......................... 3,000 1,162 St Assembly Test Services ......................... 1,000 1,186 Straits Steamship Land Limited .................... 1,000 931 United Overseas Bank Limited ...................... 334,662 2,301,764 United Overseas Land Limited ...................... 173,139 158,465 Venture Manufacturing ............................. 65,659 472,930 Wing Tai Holdings ................................. 162,073 71,974 ------------ 16,568,346 ------------ TOTAL COMMON STOCK ................................ 119,363,713 ------------
The accompanying notes are an integral part of these financial statements. SAI-188 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------------------------ SHARES VALUE - ------------------------------------------------------------------------------------------------------ PREFERRED STOCK -- 2.9% AUSTRALIA -- 2.9% News Corporation, Limited ............................................. 559,700 $ 3,739,326 ------------ NEW ZEALAND -- 0.0% Fletcher Challenge Limited ............................................ 494,414 45,298 ------------ TOTAL PREFERRED STOCK ................................................. 3,784,624 ------------ STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 4.6% UNITED STATES -- 4.6% SHORT TERM INVESTMENT FUND (B) ........................................ 5,892,654 5,892,654 - ------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 100% (COST $135,832,468) .................................................. $129,040,991 ======================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-189 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001 At December 31, 2001, foreign currency balances totaling $975,033 were pledged to cover initial margin requirements for open futures contracts. The following futures contracts were open at December 31, 2001:
NUMBER OF FUTURES CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) - --------------------------- ------------ ---------- -------- ----------- Share Price Index 200 139 $5,976,363 Mar-02 $ 100,394 Hang Seng Stock Index 47 $3,441,634 Jan-02 (13,304) MSCI Singapore Stock Index 56 $1,202,578 Jan-02 11,741 --------- $ 98,831 =========
The accompanying notes are an integral part of these financial statements. SAI-190 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2001 The following forward foreign currency contracts were open at December 31, 2000:
SETTLEMENT CONTRACTS IN EXCHANGE UNREALIZED DATE TO DELIVER FOR GAIN (LOSS) - ------------ ------------------- -------------------- ------------ 3/5/02 USD 2,375,900 AUD 4,600,000 $ (30,744) 3/5/02 USD 661,141 AUD 1,300,000 1,620 3/5/02 USD 1,515,000 AUD 3,000,000 14,449 3/5/02 USD 1,013,600 AUD 2,000,000 6,033 3/5/02 AUD 1,200,000 USD 614,232 2,452 3/5/02 AUD 1,400,000 USD 721,980 8,237 3/5/02 USD 1,410,618 HKD 11,000,000 (364) 3/5/02 USD 897,528 HKD 7,000,000 (93) --------- $ 1,590 =========
CURRENCY LEGEND - --------------- AUD: Australian Dollar HKD: Hong Kong Dollar USD: United States Dollar (a) Issuer filed for bankruptcy. (b) Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-191 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. The following is a summary of significant accounting policies followed by each Fund in the preparation of its financial statements. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of mangement estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income earned on securities, if any, is recorded net of applicable withholding taxes on the accrual basis; interest earned on foreign currency accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. Interest income includes accretion of discounts and amortization of premiums, if any. C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS The accounting records of the Fund are maintained in U.S. dollars. Foreign currency, investment securities, and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statement of Operations from the effects of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain or loss on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized appreciation/depreciation on foreign currency related transactions. The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against the foreign currency exposure of either specific transactions or portfolio positions. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed upon future date. Such contracts are valued based upon the difference in the forward exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, and any resulting unrealized gains or losses are recorded in the Fund's financial statements. The Fund records realized gains or losses at the time the forward contract is extinguished by entry into a closing transaction or by delivery of the currency. Risks in foreign currency contracts arise from the possible inability of counterparties to meet the contracts' terms and from movements in currency values. D. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. F. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody, stamp duty, and audit fees. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. G. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending fees, if any, is distributed monthly to participants of the Lending Fund. 2. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Daily MSCI Pacific Basin ex-Japan Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2001, the market value of securities loaned by the Lending Fund was $2,275,873 against which was held cash collateral of $2,400,348 and securities of $16,184. Cash collateral provided by the Borrowers is invested in State Street Bank and Trust Company Quality A Short-Term Investment Fund. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2001 were $189,631,241 and $345,862,370, respectively. SAI-192 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 4. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 2001 2000 ---------------------------- -------------------------- UNITS AMOUNT UNITS AMOUNT ---------- ------------- ---------- ------------ LENDING FUND Units issued ................... 8,947,758 $ 97,322,451 6,901,592 $ 85,942,337 Units redeemed ................. (7,839,044) (83,412,259) (6,195,577) (76,731,466) ---------- ------------- ---------- ------------ 1,108,714 $ 13,910,192 706,015 $ 9,210,871 ---------- ------------- ---------- ------------ NON-LENDING FUND Units issued ................... 1,675,381 $ 17,437,979 4,206,109 $ 52,207,133 Units redeemed ................. (18,508,788) (197,333,148) (6,244,611) (79,684,705) ----------- ------------- ---------- ------------ Total ......................... (16,833,407) $(179,895,169) (2,038,502) $(27,477,572) ----------- ------------- ---------- ------------ Net increase (decrease) ........ (15,724,693) $(165,984,977) (1,332,487) $(18,266,701) =========== ============= ========== ============
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2001 held by 1 of the Lending Fund's unitholders aggregated 99% of the Lending Fund's total units outstanding. NON-LENDING FUND All of the Non-Lending Fund's units outstanding were held by one unitholder at December 31, 2001. A transaction fee of .80% is charged on any contribution or withdrawal greater than 5% of the net asset value of the Fund. However, such fees are waived if the Fund's net participant activity on any day is less than 5% of the net asset value of the Fund. Such transaction fees are presented as a separate component of capital. For the year ended December 31, 2001 no participant transaction fees were charged. 5. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the equity markets. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contractsare valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the daily fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. SAI-193 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Government Corporate Bond Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Government Corporate Bond Fund at December 31, 2001, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP March 1, 2002 SAI-194 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Statement of Assets and Liabilities December 31, 2001 - --------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $412,277,149).............................. $443,212,066 Variation margin receivable ......................................................... 28,035 Interest receivable ................................................................. 509,251 Unrealized gain on open swap contracts .............................................. 12,076 - --------------------------------------------------------------------------------------------------- Total assets ..................................................................... 443,761,428 - --------------------------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased ................................................... 1,005,761 Accrued expenses .................................................................... 951 - --------------------------------------------------------------------------------------------------- Total Liabilities ................................................................ 1,006,712 - --------------------------------------------------------------------------------------------------- Net assets (equivalent to $16.80 per unit based on 26,355,113 units outstanding) .... $442,754,716 ===================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-195 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Statement of Operations December 31, 2001 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------ INVESTMENT INCOME Interest ............................................................ $ 3,911,680 - ------------------------------------------------------------------------------------ Total investment income ........................................... 3,911,680 - ------------------------------------------------------------------------------------ EXPENSES Custody ............................................................. 10,717 Audit ............................................................... 24,500 Other ............................................................... 1,000 - ------------------------------------------------------------------------------------ Total expenses .................................................... 36,217 - ------------------------------------------------------------------------------------ Net investment income (loss) ...................................... 3,875,463 - ------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ....................................................... 28,327,633 Futures contracts ................................................. 391,944 Swap contracts .................................................... 553,618 Written options ................................................... 62,969 - ------------------------------------------------------------------------------------ 29,336,164 - ------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation): Investments ....................................................... 9,243,801 Futures contracts ................................................. (520,717) Swap contracts .................................................... 12,076 - ------------------------------------------------------------------------------------ 8,735,160 - ------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) ............................. 38,071,324 - ------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... $41,946,787 ====================================================================================
The accompanying notes are an integral part of these financial statements. SAI-196 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2001 2000 - ---------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) .................................................... $ 3,875,463 $ 247,335,384 Net realized gain (loss) ........................................................ 29,336,164 (87,790,911) Net change in unrealized appreciation (depreciation) ............................ 8,735,160 149,172,273 - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ................. 41,946,787 308,716,746 - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions.... (136,768,706) (4,578,784,160) - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets ........................................... (94,821,919) (4,270,067,414) NET ASSETS Beginning of year .............................................................. 537,576,635 4,807,644,049 - ---------------------------------------------------------------------------------------------------------------------- End of year .................................................................... $442,754,716 $ 537,576,635 ======================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-197 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Financial Highlights (For a Unit of Participant Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------- 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $15.47 $13.92 $14.18 $13.00 $11.85 Net investment income (loss) (a) ................ 0.12 0.94 0.86 0.80 0.83 Net realized and unrealized gain (loss) ......... 1.21 0.61 (1.12) 0.38 0.32 - ----------------------------------------------------------------------------------------------------------- Total from investment operations ................ 1.33 1.55 (0.26) 1.18 1.15 - ----------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $16.80 $15.47 $13.92 $14.18 $13.00 =========================================================================================================== Total return (%) (b) ............................ 8.60 11.14 (1.83) 9.09 9.70 =========================================================================================================== Ratio to Average Net Assets Ratio of expenses (%) (c) ....................... 0.01 0.02 0.01 0.01 0.01 - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) .............. 0.76 6.50 6.17 5.89 6.73 - ----------------------------------------------------------------------------------------------------------- Portfolio turnover (%) .......................... 65 734 824 478 294 - ----------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .............. $ 443 $ 538 $4,808 $4,644 $4,273 ===========================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-198 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE - ----------------------------------------------------------------------------------------------------------------------------- DEBT INSTRUMENTS -- 10.0% $ 50,039,168 Asset Securitization Corporation IO Strip .......................... 1.07% 14-Apr-2029 $ 2,664,085 1,990,000 BMW Vehicle Lease Trust ............................................ 6.67% 25-Oct-2003 2,073,642 38,225,699 Chase Manhattan Bank-First Union National Bank IO Strip ............ 0.31% 15-Aug-2031 784,009 1,425,000 Citibank Credit Card Issuance Trust ................................ 6.65% 15-May-2008 1,451,786 4,978,419 CNH Equipment Test ................................................. 7.34% 15-Feb-2007 5,245,038 17,161,560 Credit Suisse First Boston Mortgage IO Strip ....................... 0.93% 15-Dec-2008 898,236 9,020,000 Credit Suisse First Boston Mortgage Securities Corp. IO Strip....... 1.94% 15-Aug-2034 964,689 750,000 Detroit Edison Securitization Funding LLC .......................... 5.51% 01-Mar-2007 775,045 1,879,000 Federal National Mortgage Association .............................. 5.26% 25-Aug-2027 1,897,790 870,000 Financing Corp. .................................................... 10.35% 03-Aug-2018 1,252,818 610,000 Financing Corp. .................................................... 9.40% 08-Feb-2018 814,844 27,783,131 GE Capital Commercial Mortgage Corporation IO Strip ................ 1.65% 15-Jan-2033 2,743,584 14,740,000 GE Capital Commercial Mortgage Corporation IO Strip ................ 1.05% 10-Jun-2038 943,065 9,870,000 JP Morgan Chase Commercial Mortgage Securities Corp. IO Strip....... 1.18% 12-Oct-2035 650,038 22,279,440 Morgan Stanley Dean Witter Capital IO Strip ........................ 0.85% 15-Oct-2035 911,474 2,870,000 Providian Master Trust ............................................. 7.49% 17-Aug-2009 2,974,660 15,413,497 Salomon Brothers Mortgage Secs VII Inc. IO Strip ................... 0.80% 15-Nov-2011 780,000 772,651 Toyota Auto Receivables Owner Trust ................................ 6.80% 15-Apr-2007 817,194 100,000 United States Treasury Bills (a) ................................... 1.93% 24-Jan-2002 99,879 1,250,000 United States Treasury Bond ........................................ 5.38% 15-Feb-2031 1,231,638 5,585,000 United States Treasury Bond ........................................ 8.13% 15-May-2021 7,122,665 3,600,000 United States Treasury Bond ........................................ 8.13% 15-Aug-2021 4,597,056 2,500,000 Washington Mutual .................................................. 5.42% 25-Sep-2031 2,525,488 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL DEBT INSTRUMENTS ............................................. 44,218,723 - ----------------------------------------------------------------------------------------------------------------------------- SHARES - ----------------------------------------------------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY -- 90.0% COLLECTIVE INVESTMENT FUNDS 10,145,831 Corporate Fund* .................................................... $114,769,645 17,331,498 Government Fund* ................................................... 196,556,523 4,413,118 Intermediate Corporate Index Fund* ................................. 64,550,674 1,460,457 Long Corporate Index Fund * ........................................ 20,887,462 2,229,039 Short Term Investment Fund* ........................................ 2,229,039 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL COLLECTIVE INVESTMENT FUNDS .................................. 398,993,343 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $412,277,149) ................................................ $443,212,066 =============================================================================================================================
* Collective investment funds advised by State Street Global Advisors The accompanying notes are an integral part of these financial statements. SAI-199 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Schedule of Investments Notes to Financial Statements December 31, 2001 (Concluded) - -------------------------------------------------------------------------------- (a) At December 31, 2001, U.S. Treasury Bills with principle of $95,000 were pledged to cover initial margin requirements for open futures contracts. The following futures were open at December 31, 2001:
NUMBER OF FUTURES CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) - -------------------- -------------- ---------- ------------ ----------- U.S. Treasury Note 46 $4,874,012 March 2002 $ (37,543) =========
The following swap contract was open at December 31, 2001:
CURRENT UNREALIZED NOTIONAL APPRECIATION AMOUNT DESCRIPTION (DEPRECIATION) - -------------- ----------- --------------- $10,000,000 Agreement with Goldman Sachs Capital Markets L.P. effective June 1, $(95,738) 2001 and terminating June 1, 2002 to make monthly payments equal to 1 month Libor less 20 basis points multiplied by the Current Notional Amount of $10,00,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers Commercial MBS Index. $10,000,000 Agreement with Goldman Sachs Capital Markets, L.P. effective June 1, 107,814 -------- 2001 and terminating June 1, 2002 to receive monthly payments equal to 1 month Libor plus 65 basis points multiplied by the Current Notional Amount of $10,000,000, and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers Long US Credit Index. $ 12,076 ========
The accompanying notes are an integral part of these financial statements. SAI-200 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Government Corporate Bond Fund (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match or exceed the return of the Lehman Brothers Government Corporate Bond Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Fixed income investments are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in collective investment funds or regulated investment companies are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody, administration and audit fees. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-201 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 F. DISTRIBUTIONS TO PARTICIPANTS Net investment income and net realized gains are retained by the Fund. G. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the bond market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the daily fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. H. SWAP CONTRACTS The Fund uses swap contracts to gain exposure to different underlying investments and to gain exposure to markets that might be difficult to invest in through conventional securities. Swap contracts entered into by the Fund typically represent the exchange by the Fund with a counterparty of a commitment to pay interest at a variable rate for a cash flow based on the change in market price and/or total return (change in market price plus interest income) of the relevant bond index. Such contracts may have a term of one to ten years, but typically require periodic interim settlement in cash, at which time both the value of the index and the specified interest rate are reset for the next settlement period. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from the Fund in accordance with the terms of the contract based on the closing level of the relevant index and interest accrual through valuation date. Changes in the value of the swap are reported as unrealized gains or losses in the Statement of Assets and Liabilities, while periodic cash settlements are reported as realized gains or losses in the Statement of Operations. Entering into a swap contract involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. Notional principal amounts are used to express the extent of involvement in the transactions, but are not delivered under the contracts. Accordingly, credit risk is limited to any amounts receivable from the counterparty. To reduce credit risk from potential counterparty default, the Fund enters into swap contracts with counterparties whose creditworthiness has been approved by the Trustee. The Fund bears the market risk arising from any change in index values or interest rates. SAI-202 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 I. OPTIONS CONTRACTS The Fund may purchase or write options contracts to manage exposure to the securities markets and to fluctuations in interest rates. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument held by the Fund, or hedge the fair value of other Fund investments. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. Gain or loss is recognized when the option contract expires or is closed. When the Fund writes an option, the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. Options involve, to varying degrees, credit and market risks. Loss in value may arise from changes in the value of the underlying instruments. In writing a put option, the Fund assumes the risk of incurring a loss if the market price decreases and the option is exercised. Writing a call option will increase the risk of loss to the Fund, if the market price increases and the option is exercised. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market for the contracts or if the counterparties do not perform in accordance with the contracts' terms. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2001 were $438,892,553 and $568,407,037, respectively. 4. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 2001 2000 ---------------------------- ------------------------------- UNITS AMOUNT UNITS AMOUNT ----------- ------------- ------------ --------------- Units issued .................... 10,626,856 $ 171,387,128 55,763,263 $ 791,480,555 Units redeemed .................. (19,016,480) (308,155,834) (366,321,896) (5,370,264,715) ----------- ------------- ------------ --------------- Net increase (decrease) ......... (8,389,624) $(136,768,706) (310,558,633) $(4,578,784,160) =========== ============= ============ ===============
Units in excess of 10% of the Fund units outstanding at December 31, 2001 held by 3 of the Fund's unitholders aggregated 62% of the Fund's total units outstanding. 5. NEW ACCOUNTING PRONOUNCEMENT In November 2000, the AICPA issued a revised Audit and Accounting Guide, Audits of Investment Companies, which is effective for fiscal years beginning after December 15, 2000. The revised Audit and Accounting Guide requires the Fund to classify as interest income any gains and losses realized on paydowns on mortgage-backed securities which had been included in realized gain/loss. Adopting this accounting principle does not affect the Fund's net asset value, but changes the classification of certain amounts between interest income and realized gain/loss in the Statement of Operations. The adoption of this principle is not material to the financial statements. SAI-203 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Short Term Investment Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Short Term Investment Fund at December 31, 2001, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP January 25, 2002 SAI-204 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Assets and Liabilities December 31, 2001 - ---------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at amortized cost ............................................ $34,675,867,460 Cash .................................................................................... 444 Interest ................................................................................ 177,699,544 Other receivables ....................................................................... 98,884 - ---------------------------------------------------------------------------------------------------------- Total assets ....................................................................... 34,853,666,332 - ---------------------------------------------------------------------------------------------------------- LIABILITIES Distributions payable ................................................................... 74,609,223 Accrued expenses ........................................................................ 543,485 - ---------------------------------------------------------------------------------------------------------- Total liabilities .................................................................. 75,152,708 - ---------------------------------------------------------------------------------------------------------- Net assets (equivalent to $1.00 per unit based on 34,777,996,848 units outstanding) ..... $34,778,513,624 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-205 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Operations Year ended December 31, 2001 - ------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest ............................................................... $1,534,471,736 - ------------------------------------------------------------------------------------------- EXPENSES Audit .................................................................. 35,500 Insurance .............................................................. 5,729,107 Other .................................................................. 23,473 - ------------------------------------------------------------------------------------------- Total expenses ..................................................... 5,788,080 - ------------------------------------------------------------------------------------------- Net investment income (loss) ....................................... 1,528,683,656 - ------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Investments ............................................................. 319,318 - ------------------------------------------------------------------------------------------- 319,318 - ------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ......... $1,529,002,974 ===========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-206 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2001 2000 - ------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) ............................................. $ 1,528,683,656 $ 1,864,928,501 Net realized gain (loss) ................................................. 319,318 23,185 - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations ......... 1,529,002,974 1,864,951,686 - ------------------------------------------------------------------------------------------------------------------ Distributions ............................................................ (1,528,683,656) (1,864,928,501) - ------------------------------------------------------------------------------------------------------------------ FROM PARTICIPANT TRANSACTIONS Net increase (decrease) in net assets resulting from participant transactions ............................................................ 7,250,708,768 4,568,901,576 - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets .................................... 7,251,028,086 4,568,924,761 NET ASSETS Beginning of year ....................................................... 27,527,485,538 22,958,560,777 - ------------------------------------------------------------------------------------------------------------------ End of year ............................................................. $34,778,513,624 $27,527,485,538 ==================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-207 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Financial Highlights (For a Unit of Participation Outstanding Throughout Each Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------ 2001 2000 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .................... 0.0437 0.0643 0.0522 0.0551 0.0563 Net realized and unrealized gain (loss) (a) ..... 0.0000 0.0000 0.0000 0.0000 0.0000 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ 0.0437 0.0643 0.0522 0.0551 0.0563 Distributions from net investment income ........ 0.0437 0.0643 0.0522 0.0551 0.0563 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ================================================================================================================================ Total return (%) (b) ............................ 4.46 6.63 5.35 5.65 5.77 ================================================================================================================================ Ratios to Average Net Assets Ratio of expenses (%) ........................... 0.02 0.00(c) 0.00(c) 0.00(c) 0.00(c) - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) .............. 4.37 6.43 5.22 5.51 5.63 - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000's) ................. $34,778,514 $27,527,486 $22,958,561 $20,508,724 $18,563,057 ================================================================================================================================
(a) Zero amounts represent that which are less than $0.00005 or ($0.00005) if negative. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. It assumes reinvestment of distributions and includes only those expenses charged directly to the Fund. (c) Rounds to less than .005%. The accompanying notes are an integral part of these financial statements. SAI-208 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE - -------------------------------------------------------------------------------------------------------------------- SHORT TERM INSTRUMENTS -- 93.5% $ 365,000,000 Abbey National Number America ..................... 2.01% 07-Jan-2002 $ 364,859,500 100,000,000 Abbey National Treasury Services PLC .............. 2.01% 20-May-2002 99,980,893 185,000,000 Abbey National Treasury Services PLC .............. 1.94% 16-May-2002 184,917,361 25,000,000 ABN Amro Bank NV .................................. 3.70% 30-Aug-2002 25,011,998 100,000,000 Amsterdam Funding Corporation ..................... 2.32% 11-Jan-2002 99,935,556 90,000,000 Amsterdam Funding Corporation ..................... 2.32% 14-Jan-2002 89,924,600 50,000,000 Amsterdam Funding Corporation ..................... 1.90% 04-Mar-2002 49,836,389 50,000,000 Amsterdam Funding Corporation ..................... 1.82% 22-Mar-2002 49,797,778 100,511,000 Asset Portfolio Funding Corporation ............... 2.05% 15-Feb-2002 100,253,441 100,000,000 Asset Securitization Corporation .................. 1.99% 08-Jan-2002 100,000,000 215,000,000 Asset Securitization Corporation .................. 1.85% 16-Jan-2002 215,000,000 215,000,000 Assets Securitization Cooperative ................. 1.88% 22-Jan-2002 215,000,000 50,000,000 Australia & NZ Banking Group ...................... 2.62% 23-Sep-2002 50,024,934 400,000,000 Bank of America Corporation ....................... 2.41% 28-Mar-2002 400,000,000 114,000,000 Bank of Nova Scotia ............................... 3.73% 12-Aug-2002 113,989,797 150,000,000 Bank of Novia Scotia Euro CD ...................... 2.06% 20-Feb-2002 150,002,072 50,000,000 Bank of Scotland .................................. 3.60% 10-Sep-2002 50,000,000 200,000,000 Bank of Scotland .................................. 3.43% 11-Mar-2002 200,000,000 275,000,000 Bank of Scotland .................................. 2.45% 07-Oct-2002 274,960,901 250,000,000 Bank of Scotland .................................. 2.00% 04-Feb-2002 250,004,706 100,000,000 Bank of Scotland .................................. 1.88% 07-May-2002 100,000,000 100,000,000 Bank of Scotland .................................. 1.88% 06-Jun-2002 100,000,000 25,000,000 Bank of Scotland .................................. 1.86% 13-May-2002 24,981,790 200,000,000 Bank One N A Chicago Illinois ..................... 1.87% 11-Feb-2002 200,000,000 150,000,000 Barclays Bank PLC ................................. 4.89% 28-Feb-2002 149,997,698 50,000,000 Barclays Bank PLC ................................. 4.31% 24-Apr-2002 50,005,865 50,000,000 Barclays Bank PLC ................................. 4.29% 25-Apr-2002 50,002,958 100,000,000 Barclays Bank PLC ................................. 3.37% 13-Sep-2002 100,563,551 250,000,000 Barclays Bank PLC ................................. 1.78% 01-Jan-2002 249,998,666 169,142,000 Barton Capital Corporation ........................ 1.95% 11-Jan-2002 169,050,381 158,658,000 Bavaria Trr Corporation Cp Years 1+2 .............. 2.20% 29-Jan-2002 158,386,519 150,550,000 Bayerische Hypotheken Und ......................... 2.04% 20-Feb-2002 150,123,442 250,000,000 Bayerische Hypotheken Und ......................... 1.81% 21-Mar-2002 250,000,000 400,000,000 Bayerische Hypotheken Wechsel ..................... 2.30% 22-Jan-2002 400,000,000 150,000,000 Bayerische Hypotheken Wechsel ..................... 1.92% 11-Feb-2002 150,003,400 210,000,000 Bayerische Landesbank ............................. 2.46% 04-Mar-2002 210,003,520 325,000,000 Bayerische Landesbank ............................. 2.06% 01-Jan-2002 324,866,305 250,000,000 Bellsouth Telecommunications ...................... 2.01% 04-Jan-2002 250,000,000 50,000,000 Blue Ridge Asset .................................. 1.97% 08-Jan-2002 49,980,847 124,364,000 Blue Ridge Asset .................................. 1.95% 09-Jan-2002 124,310,109 300,000,000 Canadian Imperial Bank Commerce New York .......... 1.77% 01-Jan-2002 299,993,076 250,000,000 Canadian Imperial Bank Commerce New York .......... 1.77% 01-Jan-2002 249,996,032 25,000,000 Canadian Imperial Bank of Commerce ................ 4.27% 23-Apr-2002 24,999,887 170,000,000 Canadian Imperial Bank of Commerce ................ 4.11% 10-May-2002 169,991,229 100,000,000 Canadian Imperial Bank of Commerce ................ 3.42% 21-Feb-2002 100,135,421 100,000,000 Canadian Imperial Bank of Commerce (NY) ........... 4.30% 01-May-2002 99,996,806 100,000,000 Canadian Imperial Bank of Commerce (NY) ........... 2.50% 15-Oct-2002 99,992,226 170,000,000 Canadian Imperial Bank of Commerce (NY) ........... 2.49% 15-Oct-2002 169,986,782 100,000,000 Cba Delaware Finance Incorporated ................. 2.27% 22-Jan-2002 99,867,583 75,000,000 Centex Home Mortgage Llc Extend ................... 2.10% 22-Feb-2002 74,772,500 400,000,000 Chase Manhattan Bank USA .......................... 2.25% 18-Jan-2002 400,000,000 400,000,000 Chase Manhattan Bank USA .......................... 1.75% 11-Mar-2002 400,000,000 200,000,000 Chase Manhattan Bank USA .......................... 1.75% 12-Mar-2002 200,000,000 100,000,000 Ciesco L P ........................................ 2.06% 19-Feb-2002 99,719,611
The accompanying notes are an integral part of these financial statements. SAI-209 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------------------------------------ PRINCIPAL VALUE - ------------------------------------------------------------------------------------------------------------------ SHORT TERM INSTRUMENTS (CONTINUED) $ 50,000,000 Citibank NA ..................................... 2.00% 19-Feb-2002 $ 50,000,000 50,000,000 Citibank NA New York ............................ 1.94% 04-Mar-2002 50,000,000 350,000,000 Citigroup Incorporated .......................... 1.91% 14-Jan-2002 350,000,000 178,000,000 Comerica Bank ................................... 1.89% 25-Jan-2002 178,000,000 125,000,000 Comerica Bank ................................... 1.87% 26-Jan-2002 124,997,010 185,000,000 Comerica Bank ................................... 1.86% 19-Jan-2002 184,995,751 400,000,000 Commerzbank AG .................................. 2.30% 12-Apr-2002 400,000,000 200,000,000 Corporate Asset Fund ............................ 2.06% 19-Feb-2002 199,439,222 100,000,000 Corporate Asset Fund ............................ 1.90% 07-Mar-2002 99,656,944 651,560,000 Credit Suisse Fb Grand Cayman ................... 1.00% 02-Jan-2002 651,560,000 50,000,000 Cregem Incorporated NA .......................... 2.06% 28-Feb-2002 49,834,056 100,000,000 Cxc Incorporated Yrs 3+4 144A ................... 2.25% 08-Jan-2002 99,956,250 100,000,000 Cxc Incorporated Yrs 3+4 144A ................... 2.22% 24-Jan-2002 99,858,167 50,000,000 Cxc Incorporated Yrs 3+4 144A ................... 2.20% 14-Jan-2002 49,960,278 100,000,000 Cxc Incorporated Yrs 3+4 144A ................... 2.20% 15-Jan-2002 99,914,444 100,000,000 Cxc Incorporated Yrs 3+4 144A ................... 1.90% 05-Mar-2002 99,667,500 50,000,000 Danske Corporation .............................. 2.46% 15-Oct-2002 49,984,250 40,000,000 Den Danske Corporation .......................... 3.61% 14-Jan-2002 39,947,856 100,000,000 Den Danske Corporation .......................... 3.38% 11-Mar-2002 99,352,167 150,000,000 Den Danske Corporation .......................... 2.25% 18-Jan-2002 149,840,625 175,000,000 Den Danske Corporation .......................... 1.87% 21-Jun-2002 173,445,563 80,000,000 Deutsche Bank AG ................................ 4.05% 13-May-2002 79,997,183 300,000,000 Deutsche Bank Canada ............................ 1.75% 01-Jan-2002 299,983,056 200,000,000 Dexia Bank ...................................... 4.05% 13-May-2002 199,992,958 100,000,000 Dexia Bank ...................................... 4.05% 13-May-2002 99,994,719 196,000,000 Dexia Clf Finance Company ....................... 2.04% 20-Feb-2002 195,444,667 300,000,000 Dexia Credit Local De Fractional Paris .......... 2.24% 29-Jan-2002 300,000,000 200,000,000 Dexia Delaware .................................. 2.15% 29-Jan-2002 199,665,556 170,000,000 Dresdner Bank ................................... 1.90% 11-Mar-2002 170,028,867 150,000,000 Dresdner Bank ................................... 1.88% 05-Mar-2002 150,005,175 25,000,000 Dresdner Bank ................................... 1.88% 13-May-2002 24,982,698 50,000,000 Dresdner Bank ................................... 1.80% 18-Mar-2002 49,998,921 250,000,000 Edison Asset Securitization ..................... 2.22% 25-Jan-2002 249,630,000 150,000,000 Edison Asset Securitization ..................... 2.20% 18-Jan-2002 149,844,167 200,000,000 Edison Asset Securitization ..................... 2.14% 25-Jan-2002 199,714,667 300,000,000 Edison Asset Securitization ..................... 1.82% 20-Mar-2002 298,817,000 25,000,000 Federal Home Loan Bank .......................... 2.50% 01-Oct-2002 25,000,000 100,000,000 Federal Home Loan Bank .......................... 1.96% 05-Jan-2002 100,000,000 200,000,000 Federal Home Loan Bank .......................... 1.73% 15-Jan-2002 199,992,761 100,000,000 Federal Home Loan Bank .......................... 1.72% 15-Mar-2002 99,651,222 30,000,000 Federal Home Loan Mortgage Corp. ................ 4.57% 28-Feb-2002 29,779,117 90,000,000 Federal Home Loan Mortgage Corp. ................ 3.33% 28-Feb-2002 89,517,150 100,000,000 Federal Home Loan Mortgage Corp. ................ 1.81% 27-Feb-2002 99,713,417 80,000,000 Federal National Mortgage Association ........... 4.60% 08-Feb-2002 79,611,556 70,000,000 Federal National Mortgage Association ........... 4.58% 22-Feb-2002 69,536,911 75,000,000 Federal National Mortgage Association ........... 3.82% 17-May-2002 73,917,667 100,000,000 Federal National Mortgage Association ........... 3.35% 31-Jan-2002 99,720,833 100,000,000 Federal National Mortgage Association ........... 2.34% 28-Mar-2002 99,441,000 118,945,000 Federal National Mortgage Association ........... 2.33% 28-Mar-2002 118,284,360 350,000,000 Federal National Mortgage Association ........... 2.24% 17-Jan-2002 349,652,333 150,000,000 Federal National Mortgage Association ........... 2.04% 23-May-2002 148,793,000 100,000,000 Federal National Mortgage Association ........... 1.99% 21-Feb-2002 99,718,083 100,000,000 Federal National Mortgage Association ........... 1.97% 03-Jun-2002 99,162,750
The accompanying notes are an integral part of these financial statements. SAI-210 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ----------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE - ----------------------------------------------------------------------------------------------------------------- SHORT TERM INSTRUMENTS (CONTINUED) $ 50,000,000 Federal National Mortgage Association ............. 1.73% 18-Mar-2002 $ 50,000,000 125,000,000 Federal National Mortgage Association ............. 1.68% 14-Mar-2002 124,580,000 92,000,000 Federal National Mortgage Association ............. 3.64% 28-Jun-2002 90,344,204 45,000,000 Federal National Mortgage Association ............. 3.45% 23-Aug-2002 43,990,875 80,000,000 First Tennessee Bank NA ........................... 2.21% 25-Jan-2002 80,000,000 100,000,000 Firstar Bank Na Milwaukee Wi ...................... 4.04% 13-May-2002 99,996,479 125,000,000 Firststar Bank NA Milwaukee Wi .................... 4.50% 18-Apr-2002 124,955,636 78,200,000 Ford Motor Credit Company ......................... 2.47% 29-Jan-2002 78,175,368 88,185,000 Ford Motor Credit Company ......................... 2.32% 25-Feb-2002 88,177,945 91,500,000 Ford Motor Credit Company ......................... 2.25% 20-Feb-2002 91,459,741 85,000,000 Ford Motor Credit Company ......................... 2.18% 04-Jun-2002 84,974,892 50,000,000 Ford Motor Credit Company ......................... 2.15% 10-Feb-2002 49,977,843 140,980,000 Ford Motor Credit Company ......................... 2.05% 19-Mar-2002 140,964,849 254,335,000 Ford Motor Credit Company ......................... 2.72% 16-Jan-2002 254,428,436 175,000,000 Fortis Bank Amsterdam ............................. 2.10% 28-Feb-2002 175,000,000 150,000,000 GE Capital International Funding .................. 2.25% 25-Jan-2002 149,775,000 15,000,000 General Electric Capital Corporation .............. 3.82% 30-Jul-2002 15,000,000 250,000,000 General Electric Capital Corporation .............. 2.08% 25-Apr-2002 248,353,333 250,000,000 General Electric Capital Corporation .............. 2.08% 24-May-2002 247,934,444 300,000,000 General Electric Capital Corporation .............. 2.05% 14-Feb-2002 299,248,333 100,000,000 General Electric Capital Corporation .............. 1.89% 28-Feb-2002 99,695,500 20,000,000 Giro Funding United States Corporation ............ 2.35% 16-Jan-2002 19,980,417 162,423,000 Giro Funding United States Corporation ............ 2.30% 14-Jan-2002 162,288,099 146,819,000 Giro Funding United States Corporation ............ 2.28% 22-Jan-2002 146,623,731 34,556,000 Giro Funding United States Corporation ............ 2.28% 25-Jan-2002 34,503,475 60,000,000 Giro Multi Funding Corp. .......................... 1.90% 07-Feb-2002 59,882,833 200,000,000 Halifax ........................................... 2.48% 01-Feb-2002 200,008,540 150,000,000 Halifax ........................................... 2.45% 01-Mar-2002 149,999,919 100,000,000 Halifax ........................................... 2.17% 30-Jan-2002 100,000,791 150,000,000 Halifax ........................................... 1.81% 21-Mar-2002 150,000,000 100,000,000 Harris Trust & Savings Bank ....................... 2.43% 07-Oct-2002 99,992,438 145,000,000 Holmes Financing PLC .............................. 1.91% 15-Jan-2002 145,000,000 200,000,000 ING Bank .......................................... 3.63% 25-Jan-2002 200,000,000 85,000,000 ING Bank .......................................... 3.60% 10-Sep-2002 85,000,000 100,000,000 ING Bank .......................................... 2.28% 02-Apr-2002 100,000,000 50,000,000 ING Bank .......................................... 1.91% 11-Feb-2002 50,000,000 150,000,000 ING Bank .......................................... 1.91% 20-Jun-2002 150,000,000 200,000,000 ING Bank .......................................... 1.89% 07-Jun-2002 200,000,000 300,000,000 ING Bank .......................................... 1.89% 21-Jun-2002 300,000,000 50,000,000 JP Morgan & Co., Inc. ............................. 2.51% 28-Jan-2002 50,010,556 145,625,000 Jupiter Section ................................... 2.30% 22-Jan-2002 145,429,620 50,000,000 Jupiter Section ................................... 2.09% 07-Jan-2002 49,982,583 100,000,000 Jupiter Section ................................... 2.04% 30-Jan-2002 99,835,667 60,015,000 Jupiter Section ................................... 1.94% 04-Mar-2002 59,814,483 300,000,000 Kbc Financial Prods Int Limited Discount .......... 1.90% 07-Feb-2002 99,414,167 120,000,000 KeyBank National Association ...................... 1.82% 01-Jan-2002 120,000,000 200,000,000 Landesbank Baden Wuerttemberg ..................... 3.48% 19-Feb-2002 200,000,000 100,000,000 Landesbank Baden Wuerttemberg ..................... 2.31% 22-Jan-2002 100,000,290 250,000,000 Landesbank Baden Wuerttemberg ..................... 2.30% 22-Jan-2002 250,000,000 200,000,000 Landesbank Baden Wuerttemberg ..................... 2.24% 28-Jan-2002 200,010,343 180,000,000 Landesbank Baden Wuerttemberg ..................... 2.15% 28-May-2002 180,108,661 100,000,000 Landesbank Baden Wuerttemberg ..................... 1.90% 05-Jun-2002 99,999,914 50,000,000 Landesbank Hessen Thuringen ....................... 2.15% 29-Apr-2002 50,001,624
The accompanying notes are an integral part of these financial statements. SAI-211 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- -------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE - -------------------------------------------------------------------------------------------------------------- SHORT TERM INSTRUMENTS (CONTINUED) $ 167,000,000 Landesbank Hessen Thuringen ................... 2.14% 28-May-2002 $ 167,174,965 100,000,000 Landesbank Hessen Thuringen ................... 1.95% 16-May-2002 99,959,042 100,000,000 Landesbank Hessen Thuringen ................... 1.86% 07-Mar-2002 100,000,000 200,000,000 Lloyds Bank ................................... 2.49% 25-Feb-2002 200,011,641 200,000,000 Lloyds Bank ................................... 1.89% 05-Jun-2002 200,008,363 100,000,000 Lloyds Bank ................................... 1.89% 06-Jun-2002 100,000,000 100,000,000 Lloyds Bank PLC ............................... 5.13% 20-Feb-2002 99,997,360 200,000,000 Lloyds Bank PLC ............................... 2.28% 22-Jan-2002 199,734,000 50,000,000 Lloyds Bank PLC New York ...................... 4.10% 14-May-2002 49,998,227 98,000,000 MBNA Master Credit Card Trust ................. 2.37% 09-Jan-2002 97,948,387 55,000,000 MBNA Master Credit Card Trust ................. 2.37% 17-Jan-2002 54,942,067 129,000,000 MBNA Master Credit Card Trust ................. 2.10% 15-Feb-2002 128,661,375 100,000,000 Merita Bank Plc, New York ..................... 2.44% 01-Apr-2002 100,000,000 100,000,000 Merita London ................................. 2.34% 18-Jan-2002 100,001,850 200,000,000 Merita London ................................. 2.32% 22-Jan-2002 200,002,320 250,000,000 Merita London ................................. 2.26% 28-Jan-2002 250,001,864 44,517,000 Montana Blanc Capital Corporation ............. 2.10% 07-Jan-2002 44,501,419 130,000,000 Montana Blanc Capital Corporation ............. 2.05% 24-Jan-2002 129,829,736 50,000,000 National Australia Bank Ltd. .................. 4.32% 24-Apr-2002 50,007,369 150,000,000 National Westminister Cd ...................... 1.76% 01-Jan-2002 149,998,610 75,000,000 National Westminster Bank PLC ................. 4.36% 03-Jun-2002 74,996,798 200,000,000 National Westminster Bank PLC ................. 4.19% 15-May-2002 199,992,859 150,000,000 National Westminster Yankee Cd ................ 5.20% 20-Feb-2002 149,996,043 150,000,000 National Westminster Yankee Cd ................ 5.14% 19-Feb-2002 149,996,121 200,000,000 Nestle Capital Corporation Yrs 1 + 2 .......... 1.92% 28-Mar-2002 199,082,667 100,000,000 New Center Asset Trust ........................ 2.44% 25-Mar-2002 99,437,444 45,000,000 New Center Asset Trust ........................ 2.28% 12-Apr-2002 44,712,150 25,000,000 Nordeutsche Landesbank Euro ................... 3.63% 28-Jan-2002 25,001,911 50,000,000 Nordeutsche Landesbank Euro ................... 3.51% 13-Feb-2002 50,000,587 100,000,000 Nordeutsche Landesbank Euro ................... 3.50% 13-Feb-2002 100,000,000 125,000,000 Nordeutsche Landesbank Euro ................... 2.30% 22-Jan-2002 125,000,000 100,000,000 Nordeutsche Landesbank Euro ................... 2.14% 28-May-2002 100,056,277 75,000,000 Nordeutsche Landesbank Euro ................... 1.97% 19-Feb-2002 74,991,830 125,000,000 Pennine Funding ............................... 2.29% 23-Jan-2002 124,825,069 84,000,000 Pennine Funding ............................... 2.29% 24-Jan-2002 83,877,103 84,000,000 Pennine Funding ............................... 2.28% 23-Jan-2002 83,882,960 115,000,000 Pennine Funding ............................... 2.07% 19-Feb-2002 114,675,988 93,000,000 Pennine Funding ............................... 2.05% 05-Feb-2002 92,814,646 35,000,000 Pennine Funding ............................... 1.93% 13-Feb-2002 34,919,315 50,249,000 Principal Resources Mortgage .................. 1.90% 11-Jan-2002 50,222,480 85,583,000 Receivables Capital Company ................... 2.10% 11-Jan-2002 85,533,077 100,000,000 Royal Bank of Canada .......................... 5.17% 19-Feb-2002 99,997,415 150,000,000 Royal Bank of Canada .......................... 1.77% 01-Jan-2002 149,996,489 170,000,000 Royal Bank of Scotland ........................ 3.63% 30-Aug-2002 169,980,819 200,000,000 Royal Bank of Scotland ........................ 3.61% 19-Aug-2002 199,981,515 100,000,000 Royal Bank Of Scotland ........................ 1.89% 06-Jun-2002 100,004,250 151,510,000 Sheffield Receivables Corporation ............. 2.33% 16-Jan-2002 151,362,909 90,000,000 Societe General North America Inc. ............ 1.97% 07-Feb-2002 89,817,775 150,000,000 Surrey Funding Corporation .................... 1.83% 18-Mar-2002 149,420,500 50,000,000 Svenska Handelsbanken ......................... 5.23% 23-Jan-2002 49,999,710 30,000,000 Svenska Handelsbanken ......................... 4.07% 30-Jul-2002 29,994,974 250,000,000 Svenska Handelsbanken ......................... 3.89% 29-Jul-2002 249,958,254 40,000,000 Svenska Handelsbanken ......................... 3.88% 23-Jul-2002 39,995,673
The accompanying notes are an integral part of these financial statements. SAI-212 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE - ------------------------------------------------------------------------------------------------------------------------- SHORT TERM INSTRUMENTS (CONTINUED) $ 140,000,000 Svenska Handelsbanken ..................................... 3.77% 24-Jul-2002 $ 139,988,539 125,000,000 Svenska Handelsbanken ..................................... 3.74% 06-Aug-2002 124,989,112 130,000,000 Swedbank Inc. ............................................. 2.04% 16-May-2002 129,005,500 45,000,000 Toronto Dominion Bank ..................................... 3.62% 22-Jan-2002 45,001,290 240,000,000 Toyota Motor Credit Corp Med Term Note Bank Ent ........... 1.84% 24-Mar-2002 240,000,000 111,710,000 Tulip Funding Corporation ................................. 2.29% 24-Jan-2002 111,546,562 150,000,000 UBS AG Stamford Branch .................................... 5.20% 20-Feb-2002 149,996,043 200,000,000 UBS AG Stamford Branch .................................... 5.13% 19-Feb-2002 199,994,828 150,000,000 UBS AG Stamford Branch .................................... 4.05% 14-May-2002 149,994,677 110,000,000 UBS AG Stamford Branch .................................... 3.73% 06-Aug-2002 109,987,225 50,000,000 United States Treasury Bills .............................. 2.30% 21-Mar-2002 49,748,188 200,000,000 US Bank National Association .............................. 4.13% 15-May-2002 200,000,000 165,000,000 Verizon Global Funding Corporation ........................ 2.59% 02-Oct-2002 161,747,392 112,000,000 Verizon Global Funding Corporation ........................ 2.45% 04-Oct-2002 109,900,560 150,000,000 Wells Fargo & Company ..................................... 2.14% 18-Jan-2002 149,848,417 150,000,000 Wells Fargo & Company ..................................... 2.13% 18-Jan-2002 149,849,125 200,000,000 Westdeutsche Landesbank ................................... 3.50% 19-Feb-2002 200,000,000 200,000,000 Westdeutsche Landesbank ................................... 2.44% 04-Apr-2002 200,000,000 85,000,000 Westdeutsche Landesbank ................................... 1.86% 13-May-2002 84,931,921 71,800,000 Windmill Funding Corporation .............................. 2.32% 14-Jan-2002 71,739,842 - ------------------------------------------------------------------------------------------------------------------------- TOTAL SHORT TERM INSTRUMENTS .............................. $32,425,722,460 - ------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE - ------------------------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS -- 6.5% $ 1,000,000,000 Merrill Lynch Tri Party Repo, 1.80% to be repurchased at $1,000,100,000 on 01/01/02 ............................... $ 1,000,000,000 700,000,000 Warburg Tri Party Repo, 1.35% to be repurchased $700,052,500 on 01/02/02 ................................. 700,000,000 550,145,000 Salomon Tri Party Repo, 1.80% to be repurchased at $550,200,015 on 01/02/02 ................................. 550,145,000 - ------------------------------------------------------------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENTS (cost $2,250,145,000)** ................................... 2,250,145,000 - ------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $34,675,867,460) .................................... $34,675,867,460 =========================================================================================================================
** Repurchase agreements are fully collateralized by U.S. Treasury or Government agency securities. The accompanying notes are an integral part of these financial statements. SAI-213 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ('State Street Bank') Short Term Investment Fund (the 'Fund') was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to provide safety of principal, daily liquidity, and a competitive yield by investing in high quality money market instruments. State Street Bank is Trustee, custodian, and recordkeeper of the Fund. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Investments are stated at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION Issuances and redemptions of participant units are made on each business day ("valuation date"). Participant units are typically purchased and redeemed at a constant net asset value of $1.00 per unit. In the event that a significant disparity develops between the constant net asset value and the market-value based net asset value of the Fund, the Trustee may determine that continued issuance or redemption at a constant $1.00 net asset value would create inequitable results for the Fund's unitholders. In these circumstances, the Trustee, in its sole discretion and acting on behalf of the Fund's unitholders, may direct that units be issued or redeemed at the market-value based net asset value until such time as the disparity between the market-value based and the constant net asset value per unit is deemed to be immaterial. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received, including but not limited to custody and audit fees. F. DISTRIBUTIONS TO PARTICIPANTS Distributions from net investment income are recorded on each valuation date and paid monthly. Net realized gains are retained by the Fund. SAI-214 - -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 G. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements whereby the Fund receives delivery of underlying collateral securities, and the seller of such securities agrees to repurchase the securities at an agreed upon price and time. The Fund values the underlying collateral securities daily on a mark-to-market basis to determine that the value, including accrued interest is at least equal to the repurchase price. The underlying collateral securities consist of securities in which the Fund is permitted to invest. The use of repurchase agreements involves certain risks. If the seller defaults as of a result of its bankruptcy or otherwise, and the value of the collateral declines, realization of the collateral by the Fund may be delayed or limited. The Fund may enter into repurchase agreements maturing within seven days with domestic dealers, banks and other financial institutions deemed to be creditworthy by the investment manager. Collateral for certain tri-party repurchase agreements is held at a custodian in a segregated account for the benefit of the Fund and the counterparty 3. INVESTMENT TRANSACTIONS Purchases and sales of short-term investments (including maturities) during the year ended December 31, 2001 were $857,822,165,826 and $851,278,655,421, respectively 4. FINANCIAL GUARANTY INSURANCE POLICY The Fund has entered into a Financial Guaranty Insurance Agreement (the "Default Insurance Policy") with MBIA Insurance Corporation ("MBIA") that provides limited coverage for certain loss events involving money market instruments held by the Fund. These loss events include non-payment of principal or interest or bankruptcy or insolvency of the issuer or credit enhancement provider (if any). The Default Insurance Policy is subject to an aggregate loss limitation of $360 million and a deductible of 0.30% of the holdings of the Fund, determined as of the close of business on the first business day prior to the loss event. The Default Insurance Policy is intended as a credit enhancement strategy for the Fund. The Default Insurance Policy does not cover losses resulting from changes in interest rates or other market developments. While the Default Insurance Policy is intended to provide some protection against credit risk and to help the Fund maintain a constant price per share of $1.00, there is no guarantee that the policy will do so. The Default Insurance Policy became effective February 15, 2001 and as of December 31, 2001, the Fund made no claims under the policy. 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- 2001 2000 ---------------------------------- -------------------------------- UNITS AMOUNT UNITS AMOUNT --------------- ---------------- -------------- --------------- Units issued .................... 109,889,289,902 $109,889,289,902 79,454,177,031 $79,454,177,031 Units redeemed .................. 102,638,581,134 102,638,581,134 74,885,275,455 74,885,275,455 --------------- ---------------- -------------- --------------- Net increase (decrease) ......... 7,250,708,768 $ 7,250,708,768 4,568,901,576 $ 4,568,901,576 =============== ================ ============== ===============
SAI-215 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholder of The Equitable Life Assurance Society of the United States In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of shareholder's equity and comprehensive income and of cash flows present fairly, in all material respects, the financial position of The Equitable Life Assurance Society of the United States and its subsidiaries ("Equitable Life") at December 31, 2001 and December 31, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York February 6, 2002, except as to Note 15, for which the date is February 28, 2002 F-1 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2000
DECEMBER 31 December 31, 2001 2000 ------------ ------------ (IN MILLIONS) ASSETS Investments: Fixed maturities: Available for sale, at estimated fair value ............. $ 23,265.9 $ 20,659.4 Held to maturity, at amortized cost ..................... -- 204.6 Mortgage loans on real estate ............................. 4,333.3 4,712.6 Equity real estate ........................................ 875.7 1,017.8 Policy loans .............................................. 4,100.7 4,034.6 Other equity investments .................................. 756.6 2,427.2 Other invested assets ..................................... 738.2 765.8 ------------ ------------ Total investments ..................................... 34,070.4 33,822.0 Cash and cash equivalents ................................... 627.8 2,116.8 Cash and securities segregated, at estimated fair value ..... 1,415.2 1,306.3 Broker-dealer related receivables ........................... 1,950.9 1,900.3 Deferred policy acquisition costs ........................... 5,513.7 5,128.8 Intangible assets, net ...................................... 3,370.2 3,525.8 Amounts due from reinsurers ................................. 2,233.7 2,097.9 Loans to affiliates ......................................... 400.0 -- Other assets ................................................ 3,754.1 3,787.4 Separate Accounts assets .................................... 46,947.3 51,705.9 ------------ ------------ TOTAL ASSETS ................................................ $ 100,283.3 $ 105,391.2 ============ ============ LIABILITIES Policyholders' account balances ............................. $ 20,939.1 $ 20,445.8 Future policy benefits and other policyholders liabilities .. 13,539.4 13,432.1 Broker-dealer related payables .............................. 1,260.7 1,283.0 Customers related payables .................................. 1,814.5 1,636.9 Amounts due to reinsurers ................................... 798.5 730.3 Short-term and long-term debt ............................... 1,475.5 1,630.2 Federal income taxes payable ................................ 1,885.0 2,003.3 Other liabilities ........................................... 1,702.0 1,650.7 Separate Accounts liabilities ............................... 46,875.5 51,632.1 Minority interest in equity of consolidated subsidiaries .... 1,776.0 1,820.4 Minority interest subject to redemption rights .............. 651.4 681.1 ------------ ------------ Total liabilities ..................................... 92,717.6 96,945.9 ------------ ------------ Commitments and contingencies (Notes 11, 13, 14, 15, 16) SHAREHOLDER'S EQUITY Common stock, $1.25 par value, 2.0 million shares authorized, issued and outstanding .................................... 2.5 2.5 Capital in excess of par value .............................. 4,694.6 4,723.8 Retained earnings ........................................... 2,653.2 3,706.2 Accumulated other comprehensive income ...................... 215.4 12.8 ------------ ------------ Total shareholder's equity ............................ 7,565.7 8,445.3 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY .................. $ 100,283.3 $ 105,391.2 ============ ============
See Notes to Consolidated Financial Statements. F-2 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 ---------- ---------- ---------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income ..................................................... $ 1,342.3 $ 1,413.3 $ 1,257.5 Premiums ..................................................... 1,019.9 1,175.0 1,177.1 Net investment income ........................................ 2,404.3 2,751.9 2,815.1 Gain on sale of equity investee .............................. -- 1,962.0 -- Investment losses, net ....................................... (207.3) (791.8) (108.2) Commissions, fees and other income ........................... 3,108.5 2,730.8 2,178.2 ---------- ---------- ---------- Total revenues ......................................... 7,667.7 9,241.2 7,319.7 ---------- ---------- ---------- BENEFITS AND OTHER DEDUCTIONS Policyholders' benefits ...................................... 1,886.9 2,060.3 2,048.6 Interest credited to policyholders' account balances ......... 981.7 1,048.5 1,092.8 Compensation and benefits .................................... 1,221.1 809.0 1,020.1 Commissions .................................................. 742.1 779.3 528.7 Distribution plan payments ................................... 488.0 476.0 346.6 Amortization of deferred sales commissions ................... 230.8 219.7 163.9 Interest expense ............................................. 102.6 116.3 93.0 Amortization of deferred policy acquisition costs ............ 287.9 309.0 380.0 Capitalization of deferred policy acquisition costs .......... (746.4) (778.1) (709.8) Writedown of deferred policy acquisition costs ............... -- -- 131.7 Rent expense ................................................. 156.2 120.1 113.9 Amortization of intangible assets, net ....................... 178.2 65.0 4.9 Expenses related to AXA's minority interest acquisition ...... -- 493.9 -- Other operating costs and expenses ........................... 845.7 936.7 795.4 ---------- ---------- ---------- Total benefits and other deductions .................... 6,374.8 6,655.7 6,009.8 ---------- ---------- ---------- Earnings from continuing operations before Federal income taxes and minority interest ......................... 1,292.9 2,585.5 1,309.9 Federal income tax expense ................................... (316.2) (958.3) (332.0) Minority interest in net income of consolidated subsidiaries . (370.1) (330.3) (199.4) ---------- ---------- ---------- Earnings from continuing operations .......................... 606.6 1,296.9 778.5 Earnings from discontinued operations, net of Federal income taxes ............................................. 43.9 58.6 28.1 Cumulative effect of accounting change, net of Federal income taxes ............................................. (3.5) -- -- ---------- ---------- ---------- Net Earnings ................................................. $ 647.0 $ 1,355.5 $ 806.6 ========== ========== ==========
See Notes to Consolidated Financial Statements. F-3 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 ---------- ---------- ---------- (IN MILLIONS) Common stock, at par value, beginning and end of year ...... $ 2.5 $ 2.5 $ 2.5 ---------- ---------- ---------- Capital in excess of par value, beginning of year .......... 4,723.8 3,557.2 3,110.2 (Decrease) increase in additional paid in capital in excess of par value ...................................... (29.2) 1,166.6 447.0 ---------- ---------- ---------- Capital in excess of par value, end of year ................ 4,694.6 4,723.8 3,557.2 ---------- ---------- ---------- Retained earnings, beginning of year ....................... 3,706.2 2,600.7 1,944.1 Net earnings ............................................... 647.0 1,355.5 806.6 Shareholder dividends paid ................................. (1,700.0) (250.0) (150.0) ---------- ---------- ---------- Retained earnings, end of year ............................. 2,653.2 3,706.2 2,600.7 ---------- ---------- ---------- Accumulated other comprehensive income (loss), beginning of year ........................................ 12.8 (392.9) 355.8 Other comprehensive income (loss) .......................... 202.6 405.7 (748.7) ---------- ---------- ---------- Accumulated other comprehensive income (loss), end of year . 215.4 12.8 (392.9) ---------- ---------- ---------- TOTAL SHAREHOLDER'S EQUITY, END OF YEAR .................... $ 7,565.7 $ 8,445.3 $ 5,767.5 ========== ========== ========== COMPREHENSIVE INCOME Net earnings ............................................... $ 647.0 $ 1,355.5 $ 806.6 ---------- ---------- ---------- Change in unrealized gains (losses), net of reclassification adjustments ............................................. 202.6 405.7 (776.9) Minimum pension liability adjustment ....................... -- -- 28.2 ---------- ---------- ---------- Other comprehensive income (loss) .......................... 202.6 405.7 (748.7) ---------- ---------- ---------- COMPREHENSIVE INCOME ....................................... $ 849.6 $ 1,761.2 $ 57.9 ========== ========== ==========
See Notes to Consolidated Financial Statements. F-4 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 ----------- ---------- ----------- (IN MILLIONS) Net earnings ......................................................... $ 647.0 $ 1,355.5 $ 806.6 Adjustments to reconcile net earnings to net cash provided by operating activities: Interest credited to policyholders' account balances ............... 981.7 1,048.5 1,092.8 Universal life and investment-type product policy fee income ................................................ (1,342.3) (1,413.3) (1,257.5) Net change in broker-dealer and customer related receivables/payables ............................................. 181.0 (422.9) (119.9) Gain on sale of equity investee .................................... -- (1,962.0) -- Investment losses, net ............................................. 207.3 791.8 108.2 Expenses related to AXA's minority interest acquisition ............ -- 493.9 -- Change in deferred policy acquisition costs ........................ (456.5) (462.4) (195.2) Change in future policy benefits ................................... (15.1) (825.6) 23.8 Change in property and equipment ................................... (228.5) (321.0) (256.3) Change in Federal income tax payable ............................... (231.5) 2,100.2 134.8 Purchase of segregated cash and securities, net .................... (108.8) (610.4) -- Other, net ......................................................... 485.4 289.3 18.7 ----------- ---------- ----------- Net cash provided by operating activities ............................ 119.7 61.6 356.0 ----------- ---------- ----------- Cash flows from investing activities: Maturities and repayments .......................................... 2,454.6 2,525.3 2,512.3 Sales .............................................................. 9,285.2 8,069.2 7,729.5 Purchases .......................................................... (11,833.9) (9,660.0) (11,439.5) Decrease (increase) in short-term investments ...................... 159.6 141.5 (182.0) Sale of equity investee ............................................ -- 1,580.6 -- Subsidiary acquisition ............................................. -- (1,480.0) -- Loans to affiliates ................................................ (400.0) -- -- Other, net ......................................................... (79.4) (162.1) (94.0) ----------- ---------- ----------- Net cash (used) provided by investing activities ..................... (413.9) 1,014.5 (1,473.7) ----------- ---------- ----------- Cash flows from financing activities: Policyholders' account balances: Deposits ......................................................... 3,198.8 2,695.6 2,403.3 Withdrawals and transfers to Separate Accounts ................... (2,458.1) (3,941.8) (1,818.7) Net (decrease) increase in short-term financings ................... (552.8) 225.2 378.2 Additions to long-term debt ........................................ 398.1 .3 .2 Shareholder dividends paid ......................................... (1,700.0) (250.0) (150.0) Proceeds from newly issued Alliance units .......................... -- 1,600.0 -- Other, net ......................................................... (80.8) 15.6 (183.6) ----------- ---------- ----------- Net cash (used) provided by financing activities ..................... (1,194.8) 344.9 629.4 ----------- ---------- ----------- Change in cash and cash equivalents .................................. (1,489.0) 1,421.0 (488.3) Cash and cash equivalents, beginning of year ......................... 2,116.8 695.8 1,184.1 ----------- ---------- ----------- Cash and Cash Equivalents, End of Year ............................... $ 627.8 $ 2,116.8 $ 695.8 =========== ========== ===========
F-5 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 CONTINUED
2001 2000 1999 -------- -------- -------- (IN MILLIONS) Supplemental cash flow information Interest Paid .................. $ 82.1 $ 97.0 $ 92.2 ======== ======== ======== Income Taxes Paid .............. $ 524.2 $ 358.2 $ 116.5 ======== ======== ========
See Notes to Consolidated Financial Statements. F-6 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) ORGANIZATION The Equitable Life Assurance Society of the United States ("Equitable Life") is an indirect, wholly owned subsidiary of AXA Financial, Inc. (the "Holding Company," and collectively with its consolidated subsidiaries, "AXA Financial"). Equitable Life's insurance business is conducted principally by Equitable Life and its wholly owned life insurance subsidiary, Equitable of Colorado ("EOC"). Equitable Life's investment management business, which comprises the Investment Services segment, is principally conducted by Alliance Capital Management L.P. ("Alliance"), and, through November 3, 2000, Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), an investment banking and brokerage affiliate which was sold. On September 20, 1999, as part of AXA Financial's "branding" strategic initiative, EQ Financial Consultants, Inc., a broker-dealer subsidiary of Equitable Life, was merged into a new company, AXA Advisors, LLC ("AXA Advisors"). Also, on September 21, 1999, AXA Advisors was transferred by Equitable Life to AXA Distribution Holding Corporation ("AXA Distribution"), a wholly owned indirect subsidiary of the Holding Company, for $15.3 million. The excess of the sales price over AXA Advisors' book value has been recorded in Equitable Life's books as a capital contribution. In February 2000, Equitable Life transferred AXA Network, LLC ("AXA Network") to AXA Distribution for $8.7 million. The excess of sales price over AXA Network's book value has been recorded in Equitable Life's financial statements as a capital contribution. Equitable Life continues to develop and market the "Equitable" brand of life and annuity products, while AXA Distribution's subsidiaries provide financial planning services, distribute products and manage customer relationships. In October 2000, Alliance acquired substantially all of the assets and liabilities of Sanford C. Bernstein Inc. ("Bernstein") for an aggregate current value of approximately $3.50 billion: $1.48 billion in cash and 40.8 million newly issued units in Alliance ("Alliance Units"). The Holding Company provided Alliance with the cash portion of the consideration by purchasing approximately 32.6 million Alliance Units for $1.60 billion in June 2000. Equitable Life and, collectively with its consolidated subsidiaries (the "Company"), recorded a non-cash gain of $416.2 million (net of related Federal income tax of $224.1 million) related to the Holding Company's purchase of Alliance Units which is reflected as an addition to capital in excess of par value. The acquisition was accounted for under the purchase method with the results of Bernstein included in the consolidated financial statements from the acquisition date. The excess of the purchase price over the fair value of net assets acquired resulted in the recognition of goodwill and intangible assets of approximately $3.40 billion and is being amortized over an estimated overall 20 year life. In connection with the issuance of Alliance Units to former Bernstein shareholders, the Company recorded a non-cash gain of $393.5 million (net of related Federal income tax of $211.9 million) which is reflected as an addition to capital in excess of par value. The Company's consolidated economic interest in Alliance was 39.2% at December 31, 2001, and together with the Holding Company's economic interest in Alliance exceeds 50%. In 1999, Alliance reorganized into Alliance Capital Management Holding L.P. ("Alliance Holding") and Alliance. Alliance Holding's principal asset is its interest in Alliance and it functions as a holding entity through which holders of its publicly traded units own an indirect interest in Alliance, the operating partnership. The Company exchanged substantially all of its Alliance Holding units for Alliance Units. F-7 AXA, a French holding company for an international group of insurance and related financial services companies, has been the Holding Company's largest shareholder since 1992. In October 2000, the Board of Directors of the Holding Company, acting upon a unanimous recommendation of a special committee of independent directors, approved an agreement with AXA for the acquisition of the approximately 40% of outstanding Holding Company common stock ("Common Stock") it did not already own. Under terms of the agreement, the minority shareholders of the Holding Company would receive $35.75 in cash and 0.295 of an AXA American Depositary Receipt ("AXA ADR") (before giving effect to AXA's May 2001 four-for-one stock split and related change in ADRs' parity) for each Holding Company share. On January 2, 2001, AXA Merger Corp. ("AXA Merger"), a wholly owned subsidiary of AXA, was merged with and into the Holding Company, resulting in AXA Financial becoming a wholly owned subsidiary of AXA. Effective January 1, 2002, AXA Client Solutions, LLC ("AXA Client Solutions"), a wholly owned subsidiary of the Holding Company, transferred to the Holding Company all of the outstanding equity in Equitable Life and AXA Distribution. Accordingly, those two companies are now direct, wholly owned subsidiaries of the Holding Company. 2) SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The preparation of the accompanying consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions (including normal, recurring accruals) that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) necessary in the opinion of management to present fairly the consolidated financial position of the Company and its consolidated results of operations and cash flows for the periods presented. The accompanying consolidated financial statements include the accounts of Equitable Life and its subsidiary engaged in insurance related businesses (collectively, the "Insurance Group"); other subsidiaries, principally Alliance; and those partnerships and joint ventures in which Equitable Life or its subsidiaries has control and a majority economic interest. The Company's investment in DLJ, which was sold in November 2000, was reported on the equity basis of accounting. All significant intercompany transactions and balances except those with discontinued operations (see Note 8) have been eliminated in consolidation. The years "2001," "2000" and "1999" refer to the years ended December 31, 2001, 2000 and 1999, respectively. Certain reclassifications have been made in the amounts presented for prior periods to conform those periods with the current presentation. Closed Block When it demutualized on July 22, 1992, Equitable Life established a Closed Block for the benefit of certain individual participating policies which were in force on that date. The assets allocated to the Closed Block, together with anticipated revenues from policies included in the Closed Block, were reasonably expected to be sufficient to support such business, including provision for the payment of claims, certain expenses and taxes, and for continuation of dividend scales payable in 1991, assuming the experience underlying such scales continues. Assets allocated to the Closed Block inure solely to the benefit of the Closed Block policyholders and will not revert to the benefit of the Holding Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of Equitable Life's General Account, any of its Separate Accounts or any affiliate of Equitable Life without the approval of the New York Superintendent of Insurance (the "Superintendent"). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the General Account. The excess of Closed Block liabilities over Closed Block assets represents the expected future post-tax contribution from the Closed Block which would be recognized in income over the period the policies and contracts in the Closed Block remain in force. F-8 Discontinued Operations In 1991, management discontinued the business of certain pension operations ("Discontinued Operations"). Discontinued Operations at December 31, 2001 principally consists of the Group Non-Participating Wind-Up Annuities ("Wind-Up Annuities"), for which a premium deficiency reserve has been established. Management reviews the adequacy of the allowance for future losses each quarter and makes adjustments when necessary. Management believes the allowance for future losses at December 31, 2001 is adequate to provide for all future losses; however, the quarterly allowance review continues to involve numerous estimates and subjective judgments regarding the expected performance of invested assets ("Discontinued Operations Investment Assets") held by Discontinued Operations. There can be no assurance the losses provided for will not differ from the losses ultimately realized. To the extent actual results or future projections of the discontinued operations differ from management's current best estimates and assumptions underlying the allowance for future losses, the difference would be reflected in the consolidated statements of earnings in discontinued operations. In particular, to the extent income, sales proceeds and holding periods for equity real estate differ from management's previous assumptions, periodic adjustments to the allowance are likely to result (see Note 8). New Accounting Pronouncements On January 1, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, as amended, that established new accounting and reporting standards for all derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities. Free-standing derivative instruments maintained by the Company at January 1, 2001 included interest rate caps, floors and collars intended to hedge crediting rates on interest-sensitive individual annuity contracts and certain reinsurance contracts. Based upon guidance from the Financial Accounting Standards Board ("FASB") and the Derivatives Implementation Group ("DIG"), caps, floors and collars could not be designated in a qualifying hedging relationship under SFAS No. 133 and, consequently, require mark-to-market accounting through earnings for changes in their fair values beginning January 1, 2001. In accordance with the transition provisions of SFAS No. 133, the Company recorded a cumulative-effect-type charge to earnings of $3.5 million to recognize the difference between the carrying values and fair values of free standing derivative instruments at January 1, 2001. With respect to adoption of the requirements on embedded derivatives, the Company elected a January 1, 1999 transition date, thereby effectively "grandfathering" existing accounting for derivatives embedded in hybrid instruments acquired, issued, or substantively modified before that date. As a consequence of this election, coupled with interpretive guidance from the FASB and the DIG with respect to issues specifically related to insurance contracts and features, adoption of the new requirements for embedded derivatives had no material impact on the Company's results of operation or its financial position. Upon its adoption of SFAS No. 133, the Company reclassified $256.7 million of held-to-maturity securities as available-for-sale. This reclassification resulted in an after-tax cumulative-effect-type adjustment of $8.9 million in other comprehensive income, representing the after-tax unrealized gain on these securities at January 1, 2001. The Company adopted the American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") 00-3, which established new accounting and reporting standards for demutualizations, prospectively as of January 1, 2001 with no financial impact upon initial implementation. Prior period reclassifications have been made to include Closed Block assets, liabilities, revenues and expenses on a line-by-line basis as required by SOP 00-3. SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" provides the accounting and reporting rules for sales, securitizations, servicing of receivables and other financial assets, for secured borrowings and collateral transactions and extinguishments of liabilities. SFAS No. 140 emphasizes the legal form of the transfer rather than the previous accounting that was based upon the risks and rewards of ownership. SFAS No. 140 is effective for transfers after March 31, 2001 and is principally applied prospectively. During 2001, no significant transactions were impacted by SFAS No. 140. F-9 In June 2001, the FASB issued SFAS No. 141, "Business Combinations," SFAS No. 142, "Goodwill and Other Intangible Assets," and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets". SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using only the purchase method. Under SFAS No. 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be tested for impairment. Other intangible assets will continue to be amortized over their useful lives and periodically tested for recoverability. Adoption of SFAS No. 142 is required as of January 1, 2002, at which time the amortization of goodwill ceases. Amortization of goodwill and other intangible assets for 2001 was approximately $95.9 million, net of minority interest of $82.3 million, of which $84.7 million, net of minority interest of $72.4 million, related to goodwill. Impairment losses for goodwill and indefinite-lived intangible assets that result from initial application of SFAS No. 142 will be reported as the cumulative effect of a change in accounting principle. Management's preliminary analysis suggests that no impairment of goodwill should result upon adoption of SFAS No. 142. Management will be formally assessing the impairment aspect of implementation of SFAS No. 142 during 2002. SFAS No. 144, effective beginning in first quarter 2002, retains many of the fundamental recognition and measurement provisions previously required by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of", except for the removal of goodwill from its scope and inclusion of specific guidance on cash flow recoverability testing and the criteria that must be met to classify a long-lived asset as held-for-sale. SFAS No. 144 will have no effect on the net earnings of the Company upon its adoption on January 1, 2002. Investments The carrying values of fixed maturities identified as available for sale are reported at estimated fair value. Changes in estimated fair value are reported in comprehensive income. Those fixed maturities which the Company has both the ability and the intent to hold to maturity are stated principally at amortized cost. The amortized cost of fixed maturities is adjusted for impairments in value deemed to be other than temporary. Mortgage loans on real estate are stated at unpaid principal balances, net of unamortized discounts and valuation allowances. Valuation allowances are based on the present value of expected future cash flows discounted at the loan's original effective interest rate or on its collateral value if the loan is collateral dependent. However, if foreclosure is or becomes probable, the collateral value measurement method is used. Impaired mortgage loans without provision for losses are loans where the fair value of the collateral or the net present value of the expected future cash flows related to the loan equals or exceeds the recorded investment. Interest income earned on loans where the collateral value is used to measure impairment is recorded on a cash basis. Interest income on loans where the present value method is used to measure impairment is accrued on the net carrying value amount of the loan at the interest rate used to discount the cash flows. Changes in the present value attributable to changes in the amount or timing of expected cash flows are reported as investment gains or losses. Real estate, including real estate acquired in satisfaction of debt, is stated at depreciated cost less valuation allowances. At the date of foreclosure (including in-substance foreclosure), real estate acquired in satisfaction of debt is valued at estimated fair value. Impaired real estate is written down to fair value with the impairment loss being included in investment gains (losses), net. Valuation allowances on real estate held for sale are computed using the lower of depreciated cost or current estimated fair value, net of disposition costs. Depreciation is discontinued on real estate held for sale. Depreciation of real estate held for production of income is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Valuation allowances are netted against the asset categories to which they apply. Policy loans are stated at unpaid principal balances. Partnerships and joint venture interests in which the Company has control and a majority economic interest (that is, greater than 50% of the economic return generated by the entity) are consolidated; those in which the Company does not have control and a majority economic interest are reported on the equity basis of accounting and are included either with equity real estate or other equity investments, as appropriate. Equity securities includes common stock classified as both trading and available for sale securities and non-redeemable preferred stock; they are carried at estimated fair value and are included in other equity investments. Short-term investments are stated at amortized cost which approximates fair value and are included with other invested assets. Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less. All securities owned as well as United States government and agency securities, mortgage-backed securities, futures and forwards transactions are recorded in the consolidated financial statements on a trade date basis. Net Investment Income, Investment Gains (Losses), Net and Unrealized Investment Gains (Losses) Net investment income and realized investment gains (losses), net ("investment results") related to certain participating group annuity contracts which are passed through to the contractholders are offset in amounts reflected as interest credited to policyholders' account balances. Realized investment gains (losses) are determined by identification with the specific asset and are presented as a component of revenue. Changes in the valuation allowances are included in investment gains or losses. F-10 Realized and unrealized holding gains (losses) on trading securities are reflected in net investment income. Unrealized investment gains and losses on fixed maturities and equity securities available for sale held by the Company are accounted for as a separate component of accumulated comprehensive income, net of related deferred Federal income taxes, amounts attributable to Discontinued Operations, Closed Block policyholders dividend obligation, participating group annuity contracts and deferred policy acquisition costs ("DAC") related to universal life and investment-type products and participating traditional life contracts. Recognition of Insurance Income and Related Expenses Premiums from universal life and investment-type contracts are reported as deposits to policyholders' account balances. Revenues from these contracts consist of amounts assessed during the period against policyholders' account balances for mortality charges, policy administration charges and surrender charges. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policyholders' account balances. Premiums from participating and non-participating traditional life and annuity policies with life contingencies generally are recognized as income when due. Benefits and expenses are matched with such income so as to result in the recognition of profits over the life of the contracts. This match is accomplished by means of the provision for liabilities for future policy benefits and the deferral and subsequent amortization of policy acquisition costs. For contracts with a single premium or a limited number of premium payments due over a significantly shorter period than the total period over which benefits are provided, premiums are recorded as income when due with any excess profit deferred and recognized in income in a constant relationship to insurance in force or, for annuities, the amount of expected future benefit payments. Premiums from individual health contracts are recognized as income over the period to which the premiums relate in proportion to the amount of insurance protection provided. Deferred Policy Acquisition Costs Acquisition costs, including commissions, underwriting, agency and policy issue expenses, all of which vary with and primarily are related to new business, are deferred. DAC is subject to recoverability testing at the time of policy issue and loss recognition testing at the end of each accounting period. For universal life products and investment-type products, DAC is amortized over the expected total life of the contract group as a constant percentage of estimated gross profits arising principally from investment results, mortality and expense margins and surrender charges based on historical and anticipated future experience, updated at the end of each accounting period. The effect on the amortization of DAC of revisions to estimated gross profits is reflected in earnings in the period such estimated gross profits are revised. The effect on the DAC asset that would result from realization of unrealized gains (losses) is recognized with an offset to accumulated comprehensive income in consolidated shareholder's equity as of the balance sheet date. For participating traditional life policies (substantially all of which are in the Closed Block), DAC is amortized over the expected total life of the contract group as a constant percentage based on the present value of the estimated gross margin amounts expected to be realized over the life of the contracts using the expected investment yield. At December 31, 2001, the expected investment yield, excluding policy loans, was 8.0% over a 40 year period. Estimated gross margin includes anticipated premiums and investment results less claims and administrative expenses, changes in the net level premium reserve and expected annual policyholder dividends. The effect on the amortization of DAC of revisions to estimated gross margins is reflected in earnings in the period such estimated gross margins are revised. The effect on the DAC asset that would result from realization of unrealized gains (losses) is recognized with an offset to accumulated comprehensive income in consolidated shareholder's equity as of the balance sheet date. For non-participating traditional life policies, DAC is amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are estimated at the date of policy issue and are consistently applied during the life of the contracts. Deviations from estimated experience are reflected in earnings in the period F-11 such deviations occur. For these contracts, the amortization periods generally are for the total life of the policy. In second quarter 1999, management completed a study of the cash flows and liability characteristics of its insurance product lines as compared to the expected cash flows of the underlying assets. That analysis reflected an assessment of the potential impact on future operating cash flows from current economic conditions and trends, including rising interest rates and securities market volatility and the impact of increasing competitiveness within the insurance marketplace (evidenced, for example, by the proliferation of bonus annuity products) on in force business. The review indicated that changes to the then-current invested asset allocation strategy were required to reposition assets with greater price volatility away from products with demand liquidity characteristics to support those products with lower liquidity needs. To implement these findings, the existing investment portfolio was reallocated, and prospective investment allocation targets were revised. The reallocation of the assets impacted investment results by product, thereby impacting the future gross margin estimates utilized in the amortization of DAC for universal life and investment-type products. The revisions to estimated future gross profits resulted in an after-tax writedown of DAC of $85.6 million (net of a Federal income tax benefit of $46.1 million) in 1999. Policyholders' Account Balances and Future Policy Benefits Policyholders' account balances for universal life and investment-type contracts are equal to the policy account values. The policy account values represent an accumulation of gross premium payments plus credited interest less expense and mortality charges and withdrawals. Equitable Life issues certain variable annuity products with a guaranteed minimum death benefit ("GMDB") feature. Equitable Life also issues certain variable annuity products that contain a guaranteed minimum income benefit ("GMIB") feature which, if elected by the policyholder upon annuitization after a stipulated waiting period from contract issuance, guarantees a minimum lifetime annuity that may be in excess of what the contract account value can purchase at current annuity purchase rates. Equitable Life bears the risk that a protracted significant downturn in the financial markets could result in GMDB and GMIB benefits being higher than what accumulated policyholder account balances would support. Equitable Life partially reinsures its exposure to the GMDB liability and reinsures approximately 80.0% of its liability exposure resulting from the GMIB feature. GAAP prohibits the recording of reserves for the potential benefit payments resulting from these features. For participating traditional life policies, future policy benefit liabilities are calculated using a net level premium method on the basis of actuarial assumptions equal to guaranteed mortality and dividend fund interest rates. The liability for annual dividends represents the accrual of annual dividends earned. Terminal dividends are accrued in proportion to gross margins over the life of the contract. For non-participating traditional life insurance policies, future policy benefit liabilities are estimated using a net level premium method on the basis of actuarial assumptions as to mortality, persistency and interest established at policy issue. Assumptions established at policy issue as to mortality and persistency are based on the Insurance Group's experience which, together with interest and expense assumptions, includes a margin for adverse deviation. When the liabilities for future policy benefits plus the present value of expected future gross premiums for a product are insufficient to provide for expected future policy benefits and expenses for that product, DAC is written off and thereafter, if required, a premium deficiency reserve is established by a charge to earnings. Benefit liabilities for traditional annuities during the accumulation period are equal to accumulated contractholders' fund balances and after annuitization are equal to the present value of expected future payments. Interest rates used in establishing such liabilities range from 2.25% to 10.9% for life insurance liabilities and from 2.25% to 8.37% for annuity liabilities. Individual health benefit liabilities for active lives are estimated using the net level premium method and assumptions as to future morbidity, withdrawals and interest. Benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. While management believes its disability income ("DI") reserves have been calculated on a reasonable basis and are adequate, there can be no assurance reserves will be sufficient to provide for future liabilities. Claim reserves and associated liabilities net of reinsurance ceded for individual DI and major medical policies were $104.2 million and $120.3 million at December 31, 2001 and 2000, respectively. At December F-12 31, 2001 and 2000, respectively, $1,101.8 million and $1,046.5 million of DI reserves and associated liabilities were ceded through an indemnity reinsurance agreement principally with a single reinsurer (see Note 11). Incurred benefits (benefits paid plus changes in claim reserves) and benefits paid for individual DI and major medical policies are summarized as follows:
2001 2000 1999 ------- -------- -------- (IN MILLIONS) Incurred benefits related to current year $ 44.0 $ 56.1 $ 150.7 Incurred benefits related to prior years. (10.6) 15.0 64.7 ------- -------- -------- Total Incurred Benefits ................. $ 33.4 $ 71.1 $ 215.4 ======= ======== ======== Benefits paid related to current year ... $ 10.7 $ 14.8 $ 28.9 Benefits paid related to prior years .... 38.8 106.0 189.8 ------- -------- -------- Total Benefits Paid ..................... $ 49.5 $ 120.8 $ 218.7 ======= ======== ========
Policyholders' Dividends The amount of policyholders' dividends to be paid (including dividends on policies included in the Closed Block) is determined annually by Equitable Life's board of directors. The aggregate amount of policyholders' dividends is related to actual interest, mortality, morbidity and expense experience for the year and judgment as to the appropriate level of statutory surplus to be retained by Equitable Life. At December 31, 2001, participating policies, including those in the Closed Block, represent approximately 19.0% ($38.5 billion) of directly written life insurance in force, net of amounts ceded. Separate Accounts Separate Accounts established under New York State Insurance Law generally are not chargeable with liabilities that arise from any other business of the Insurance Group. Separate Accounts assets are subject to General Account claims only to the extent Separate Accounts assets exceed Separate Accounts liabilities. Assets and liabilities of the Separate Accounts represent the net deposits and accumulated net investment earnings less fees, held primarily for the benefit of contractholders, and for which the Insurance Group does not bear the investment risk. They are shown as separate lines in the consolidated balance sheets. The Insurance Group bears the investment risk on assets held in one Separate Account; therefore, such assets are carried on the same basis as similar assets held in the General Account portfolio. Assets held in the other Separate Accounts are carried at quoted market values or, where quoted values are not available, at estimated fair values as determined by the Insurance Group. The investment results of Separate Accounts on which the Insurance Group does not bear the investment risk are reflected directly in Separate Accounts liabilities and are not reported in revenues in the consolidated statements of earnings. For 2001, 2000 and 1999, investment results of such Separate Accounts were (losses) gains of $(2,214.4) million, $8,051.7 million and $6,045.5 million, respectively. Deposits to Separate Accounts are reported as increases in Separate Accounts liabilities and are not reported in revenues. Mortality, policy administration and surrender charges on all Separate Accounts are included in revenues. Recognition of Investment Management Revenues and Related Expenses Commissions, fees and other income principally include investment management advisory and service fees. Investment management advisory and service fees are recorded as revenue as the related services are performed. Certain investment advisory contracts provide for a performance fee, in addition to or in lieu of a base fee, that is calculated as a percentage of the related investment results in excess of a stated benchmark over a specified period of time. Performance fees are recorded as revenue at the end of the measurement period. Transaction charges earned and related expenses are recorded on a trade date basis. Distribution revenues and shareholder servicing fees are accrued as earned. F-13 Institutional research services revenue consists of brokerage transaction charges and underwriting syndicate revenues related to services provided to institutional investors. Brokerage transaction charges earned and related expenses are recorded on a trade date basis. Syndicate participation and underwriting revenues include gains, losses and fees, net of syndicate expenses, arising from securities offerings in which Sanford C. Bernstein & Co., LLC ("SCB"), a wholly owned subsidiary of Alliance, acts as an underwriter or agent. Syndicate participation and underwriting revenues are recorded on the offering date. Sales commissions paid to financial intermediaries in connection with the sale of shares of open-end Alliance mutual funds sold without a front-end sales charge are capitalized and amortized over periods not exceeding five and one-half years, the period of time during which deferred sales commissions are expected to be recovered from distribution plan payments received from those funds and from contingent deferred sales charges received from shareholders of those funds upon the redemption of their shares. Contingent deferred sales charges reduce unamortized deferred sales commissions when received. At December 31, 2001 and 2000, respectively, deferred sales commissions totaled $648.2 million and $715.7 million and are included within Other assets. Other Accounting Policies In accordance with regulations of the Securities and Exchange Commission ("SEC"), securities with a fair value of $1.42 billion have been segregated in a special reserve bank custody account at December 31, 2001 for the exclusive benefit of securities broker dealer or brokerage customers under Rule 15c3-3 under the Securities Exchange Act of 1934, as amended. Intangible assets consist principally of goodwill resulting from acquisitions and costs assigned to contracts of businesses acquired. Goodwill is being amortized on a straight-line basis over estimated useful lives ranging from twenty to forty years. Costs assigned to investment contracts of businesses acquired are being amortized on a straight-line basis over estimated useful lives of twenty years. Impairment of intangible assets is evaluated by comparing the undiscounted cash flows expected to be realized from those intangible assets to their recorded values, pursuant to SFAS No. 121. If the expected future cash flows are less than the carrying value of intangible assets, an impairment loss is recognized for the difference between the carrying amount and the estimated fair value of those intangible assets. Capitalized internal-use software is amortized on a straight-line basis over the estimated useful life of the software. The Holding Company and its consolidated subsidiaries, including the Company, file a consolidated Federal income tax return. Current Federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. Deferred income tax assets and liabilities are recognized based on the difference between financial statement carrying amounts and income tax bases of assets and liabilities using enacted income tax rates and laws. Minority interest subject to redemption rights represents the 40.8 million private Alliance Units issued to former Bernstein shareholders in connection with Alliance's acquisition of Bernstein. The Holding Company has agreed to provide liquidity to these former Bernstein shareholders after a two-year lock-out period ending October 2002 by allowing the 40.8 million Alliance Units to be sold to the Holding Company at the prevailing market price over the subsequent eight years but generally not more than 20% of such Units in any one annual period. The Company accounts for its stock option plans in accordance with the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations. In accordance with the opinion, stock option awards result in compensation expense only if the current market price of the underlying stock exceeds the option strike price at the grant date. See Note 20 for the pro forma disclosures required by SFAS No. 123, "Accounting for Stock-Based Compensation". F-14 3) INVESTMENTS The following tables provide additional information relating to fixed maturities and equity securities:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE ----------- -------- -------- ----------- (IN MILLIONS) DECEMBER 31, 2001 Fixed Maturities: Available for Sale: Corporate ......................... $ 18,582.9 $ 663.5 $ 291.7 $ 18,954.7 Mortgage-backed ................... 2,428.7 39.1 5.5 2,462.3 U.S. Treasury, government and agency securities ............... 1,113.5 62.3 1.5 1,174.3 States and political subdivisions . 138.9 6.8 1.3 144.4 Foreign governments ............... 143.1 15.6 1.0 157.7 Redeemable preferred stock ........ 379.6 16.5 23.6 372.5 ----------- -------- -------- ----------- Total Available for Sale .............. $ 22,786.7 $ 803.8 $ 324.6 $ 23,265.9 =========== ======== ======== =========== Equity Securities: Available for sale .................. $ 54.9 $ 5.8 $ 1.6 $ 59.1 Trading securities .................. 4.9 .9 3.4 2.4 ----------- -------- -------- ----------- Total Equity Securities ............... $ 59.8 $ 6.7 $ 5.0 $ 61.5 =========== ======== ======== =========== December 31, 2000 Fixed Maturities: Available for Sale: Corporate ......................... $ 16,447.6 $ 328.1 $ 363.8 $ 16,411.9 Mortgage-backed ................... 2,304.5 20.2 7.8 2,316.9 U.S. Treasury, government and agency securities ............... 1,226.4 51.3 .4 1,277.3 States and political subdivisions . 125.4 4.8 1.1 129.1 Foreign governments ............... 191.4 17.8 5.3 203.9 Redeemable preferred stock ........ 315.7 13.5 8.9 320.3 ----------- -------- -------- ----------- Total Available for Sale .............. $ 20,611.0 $ 435.7 $ 387.3 $ 20,659.4 =========== ======== ======== =========== Held to Maturity: Corporate ........ $ 204.6 $ 6.0 $ .1 $ 210.5 =========== ======== ======== =========== Equity Securities: Available for sale .................. $ 31.4 $ 2.2 $ 4.6 $ 29.0 Trading securities .................. 1,607.1 2.5 46.3 1,563.3 ----------- -------- -------- ----------- Total Equity Securities ............... $ 1,638.5 $ 4.7 $ 50.9 $ 1,592.3 =========== ======== ======== ===========
For publicly-traded fixed maturities and equity securities, estimated fair value is determined using quoted market prices. For fixed maturities without a readily ascertainable market value, the Company determines estimated fair values using a discounted cash flow approach, including provisions for credit risk, generally based on the assumption such securities will be held to maturity. Such estimated fair values do not necessarily represent the values for which these securities could have been sold at the dates of the consolidated balance sheets. At December 31, 2001 and 2000, securities without a readily ascertainable market value having an amortized cost of $5,368.3 million and $5,079.7 million, respectively, had estimated fair values of $5,453.8 million and $5,093.3 million, respectively. F-15 The contractual maturity of bonds at December 31, 2001 is shown below:
AVAILABLE FOR SALE ------------------------------- AMORTIZED ESTIMATED COST FAIR VALUE ------------ ------------ (IN MILLIONS) Due in one year or less................................................ $ 369.0 $ 371.3 Due in years two through five.......................................... 4,844.7 4,993.8 Due in years six through ten........................................... 8,263.3 8,422.1 Due after ten years.................................................... 6,501.4 6,643.9 Mortgage-backed securities............................................. 2,428.7 2,462.3 ------------ ------------ Total.................................................................. $ 22,407.1 $ 22,893.4 ============ ============
Bonds not due at a single maturity date have been included in the above table in the year of final maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The Insurance Group's fixed maturity investment portfolio includes corporate high yield securities consisting of public high yield bonds, redeemable preferred stocks and directly negotiated debt in leveraged buyout transactions. The Insurance Group seeks to minimize the higher than normal credit risks associated with such securities by monitoring concentrations in any single issuer or a particular industry group. Certain of these corporate high yield securities are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa or National Association of Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 2001, approximately 7.9% of the $22,407.1 million aggregate amortized cost of bonds held by the Company was considered to be other than investment grade. The Insurance Group holds equity in limited partnership interests which primarily invest in securities considered to be other than investment grade. The carrying values at December 31, 2001 and 2000 were $695.2 million and $834.7 million, respectively. At December 31, 2001, the carrying value of fixed maturities which are non-income producing for the twelve months preceding the consolidated balance sheet date was $170.1 million. The payment terms of mortgage loans on real estate may from time to time be restructured or modified. The investment in restructured mortgage loans on real estate, based on amortized cost, amounted to $31.5 million and $116.9 million at December 31, 2001 and 2000, respectively. Gross interest income on these loans included in net investment income aggregated $3.2 million, $9.7 million and $10.3 million in 2001, 2000 and 1999, respectively. Gross interest income on restructured mortgage loans on real estate that would have been recorded in accordance with the original terms of such loans amounted to $4.2 million, $11.0 million and $11.7 million in 2001, 2000 and 1999, respectively. F-16 Impaired mortgage loans along with the related investment valuation allowances for losses follow:
DECEMBER 31, -------------- -------------- 2001 2000 -------------- -------------- (IN MILLIONS) Impaired mortgage loans with investment valuation allowances....... $ 114.2 $ 170.9 Impaired mortgage loans without investment valuation allowances.... 30.6 5.8 -------------- -------------- Recorded investment in impaired mortgage loans..................... 144.8 176.7 Investment valuation allowances.................................... (19.2) (45.7) -------------- -------------- Net Impaired Mortgage Loans........................................ $ 125.6 $ 131.0 ============== ==============
During 2001, 2000 and 1999, respectively, the Company's average recorded investment in impaired mortgage loans was $141.7 million, $169.8 million and $178.8 million. Interest income recognized on these impaired mortgage loans totaled $7.2 million, $12.4 million and $15.3 million ($.4 million, $.5 million and $.3 million recognized on a cash basis) for 2001, 2000 and 1999, respectively. The Insurance Group's investment in equity real estate is through direct ownership and through investments in real estate joint ventures. At December 31, 2001 and 2000, the carrying value of equity real estate held for sale amounted to $216.6 million and $587.0 million, respectively. For 2001, 2000 and 1999, respectively, real estate of $64.8 million, $21.6 million and $20.5 million was acquired in satisfaction of debt. At December 31, 2001 and 2000, the Company owned $376.5 million and $364.2 million, respectively, of real estate acquired in satisfaction of debt of which $11.1 million and $21.3 million, respectively, are held as real estate joint ventures. Accumulated depreciation on real estate was $160.3 million and $209.9 million at December 31, 2001 and 2000, respectively. Depreciation expense on real estate totaled $16.1 million, $21.7 million and $22.5 million for 2001, 2000 and 1999, respectively. Investment valuation allowances for mortgage loans and equity real estate and changes thereto follow:
2001 2000 1999 ------------- ------------ ------------ (IN MILLIONS) Balances, beginning of year........................ $ 126.2 $ 177.9 $ 257.2 Additions charged to income........................ 40.0 68.2 83.1 Deductions for writedowns and asset dispositions............................... (78.6) (119.9) (162.4) ------------- ------------ ------------ Balances, End of Year.............................. $ 87.6 $ 126.2 $ 177.9 ============= ============ ============ Balances, end of year comprise: Mortgage loans on real estate.................... $ 19.3 $ 50.5 $ 32.1 Equity real estate............................... 68.3 75.7 145.8 ------------- ------------ ------------ Total.............................................. $ 87.6 $ 126.2 $ 177.9 ============= ============ ============
F-17 4) JOINT VENTURES AND PARTNERSHIPS Included in equity real estate or other equity investments, as appropriate, is the Company's interest in real estate joint ventures and in limited partnership interests accounted for under the equity method with a total carrying value of $883.9 million and $1,037.2 million, respectively, at December 31, 2001 and 2000. The Company's total equity in net (losses) earnings for these real estate joint ventures and limited partnership interests was $(37.4) million, $242.2 million and $89.1 million, respectively, for 2001, 2000 and 1999. Summarized below is the combined financial information only for those real estate joint ventures and for those limited partnership interests accounted for under the equity method in which the Company has an investment of $10.0 million or greater and an equity interest of 10% or greater (10 and 14 individual ventures at December 31, 2001 and 2000, respectively) and the Company's carrying value and equity in net (losses) earnings for those real estate joint ventures and limited partnership interests:
DECEMBER 31, -------- -------- 2001 2000 -------- -------- (IN MILLIONS) BALANCE SHEETS Investments in real estate, at depreciated cost ............. $ 570.5 $ 657.7 Investments in securities, generally at estimated fair value 255.7 226.6 Cash and cash equivalents ................................... 23.7 34.5 Other assets ................................................ 39.4 63.5 -------- -------- Total Assets ................................................ $ 889.3 $ 982.3 ======== ======== Borrowed funds - third party ................................ $ 269.6 $ 53.8 Borrowed funds - the Company ................................ -- 12.9 Other liabilities ........................................... 20.3 22.5 -------- -------- Total liabilities ........................................... 289.9 89.2 -------- -------- Partners' capital ........................................... 599.4 893.1 -------- -------- Total Liabilities and Partners' Capital ..................... $ 889.3 $ 982.3 ======== ======== The Company's carrying value in these entities included above $ 188.2 $ 214.6 ======== ========
2001 2000 1999 ------- -------- -------- (IN MILLIONS) STATEMENTS OF EARNINGS Revenues of real estate joint ventures ........ $ 95.6 $ 147.6 $ 180.5 Revenues of other limited partnership interests 29.8 16.5 85.0 Interest expense - third party ................ (11.5) (17.0) (26.6) Interest expense - the Company ................ (.7) (2.0) (2.5) Other expenses ................................ (58.2) (88.0) (133.0) ------- -------- -------- Net Earnings .................................. $ 55.0 $ 57.1 $ 103.4 ======= ======== ======== The Company's equity in net earnings of these entities included above ..................... $ 13.2 $ 17.8 $ 9.5 ======= ======== ========
F-18 5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES) The sources of net investment income follows:
2001 2000 1999 ---------- ---------- ---------- (IN MILLIONS) Fixed maturities ............ $ 1,662.4 $ 1,761.8 $ 1,811.8 Mortgage loans on real estate 361.6 387.1 398.7 Equity real estate .......... 166.2 207.2 271.5 Other equity investments .... (50.4) 138.2 168.4 Policy loans ................ 268.2 258.3 246.8 Other investment income ..... 213.4 208.2 166.4 ---------- ---------- ---------- Gross investment income ... 2,621.4 2,960.8 3,063.6 Investment expenses ....... (217.1) (208.9) (248.5) ---------- ---------- ---------- Net Investment Income ....... $ 2,404.3 $ 2,751.9 $ 2,815.1 ========== ========== ==========
Investment (losses) gains including changes in the valuation allowances follow:
2001 2000 1999 -------- -------- -------- (IN MILLIONS) Fixed maturities ..................... $ (225.2) $ (795.0) $ (294.9) Mortgage loans on real estate ........ (11.4) (18.0) (1.9) Equity real estate ................... 34.5 1.6 (15.8) Other equity investments ............. (13.0) (23.4) 92.9 Issuance and sales of Alliance Units . (2.3) 3.9 5.5 Issuance and sales of DLJ common stock -- 38.8 106.0 Other ................................ 10.1 .3 -- -------- -------- -------- Investment Losses, Net .............. $ (207.3) $ (791.8) $ (108.2) ======== ======== ========
Writedowns of fixed maturities amounted to $287.5 million, $635.5 million and $226.5 million for 2001, 2000 and 1999, respectively, including $499.2 million in fourth quarter 2000. For 2001, 2000 and 1999, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $7,372.3 million, $7,685.5 million and $7,782.7 million. Gross gains of $156.2 million, $79.7 million and $76.2 million and gross losses of $115.9 million, $220.9 million and $220.2 million, respectively, were realized on these sales. The change in unrealized investment gains (losses) related to fixed maturities classified as available for sale for 2001, 2000 and 1999 amounted to $429.5 million, $954.5 million and $(1,668.8) million, respectively. In conjunction with the sale of DLJ in 2000, the Company received 11.4 million shares in Credit Suisse Group ("CSG") common stock, 2.8 million shares of which were immediately repurchased by CSG at closing. The CSG shares were designated as trading account securities. The $1.56 billion carrying value of CSG shares that were held by the Company at December 31, 2000 were sold in January 2001. Net investment income included realized gains of $27.1 million in 2001 and included unrealized holding losses of $43.3 million in 2000 on the CSG shares. F-19 On January 1, 1999, investments in publicly-traded common equity securities in the General Account portfolio within other equity investments amounting to $102.3 million were transferred from available for sale securities to trading securities. As a result of this transfer, unrealized investment gains of $83.3 million ($43.2 million net of related DAC and Federal income taxes) were recognized as realized investment gains in the consolidated statements of earnings. In 2001 and 2000, respectively, net unrealized holding gains (losses) on trading account equity securities of $25.0 million and $(42.2) million were included in net investment income in the consolidated statements of earnings. These trading securities had a carrying value of $2.4 million and $1,563.3 million and costs of $4.9 million and $1,607.1 million at December 31, 2001 and 2000, respectively. For 2001, 2000 and 1999, investment results passed through to certain participating group annuity contracts as interest credited to policyholders' account balances amounted to $96.7 million, $110.6 million and $131.5 million, respectively. Net unrealized investment gains (losses) included in the consolidated balance sheets as a component of accumulated comprehensive income and the changes for the corresponding years, including Discontinued Operations on a line-by-line basis, follow:
2001 2000 1999 -------- -------- ---------- (IN MILLIONS) Balance, beginning of year ........................ $ 12.9 $ (392.8) $ 384.1 Changes in unrealized investment (losses) gains ... 436.0 979.7 (1,821.3) Changes in unrealized investment losses (gains) attributable to: Participating group annuity contracts, Closed Block policyholder dividend obligation and other ................................... (48.6) (18.3) 25.0 DAC ........................................... (71.6) (262.1) 493.1 Deferred Federal income taxes ................. (113.2) (293.6) 526.3 -------- -------- ---------- Balance, End of Year .............................. $ 215.5 $ 12.9 $ (392.8) ======== ======== ========== Balance, end of year comprises: Unrealized investment gains (losses) on: Fixed maturities .............................. $ 496.0 $ 65.9 $ (904.6) Other equity investments ...................... 4.3 (2.3) (22.2) Other ......................................... (1.9) (1.2) 9.4 -------- -------- ---------- Total ....................................... 498.4 62.4 (917.4) Amounts of unrealized investment (losses) gains attributable to: Participating group annuity contracts, Closed Block policyholder dividend obligation and other ................................... (63.9) (15.3) 3.0 DAC ......................................... (99.9) (28.3) 233.8 Deferred Federal income taxes ............... (119.1) (5.9) 287.8 -------- -------- ---------- Total ............................................. $ 215.5 $ 12.9 $ (392.8) ======== ======== ==========
Changes in unrealized gains (losses) reflect changes in fair value of only those fixed maturities and equity securities classified as available for sale and do not reflect any changes in fair value of policyholders' account balances and future policy benefits. F-20 6) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) represents cumulative gains and losses on items that are not reflected in earnings. The balances for the past three years follow:
2001 2000 1999 --------- --------- ---------- (IN MILLIONS) Unrealized gains (losses) on investments ....................... $ 215.5 $ 12.9 $ (392.8) Minimum pension liability ...................................... (.1) (.1) (.1) --------- --------- ---------- Total Accumulated Other Comprehensive Income (Loss) .................................. $ 215.4 $ 12.8 $ (392.9) ========= ========= ==========
The components of other comprehensive income (loss) for the past three years follow:
2001 2000 1999 --------- --------- ---------- (IN MILLIONS) Net unrealized gains (losses) on investments: Net unrealized gains (losses) arising during the period .................................................. $ 525.2 $ 191.0 $ (1,625.6) (Gains) losses reclassified into net earnings during the period ........................................... (89.2) 788.7 (195.7) --------- --------- ---------- Net unrealized gains (losses) on investments .................... 436.0 979.7 (1,821.3) Adjustments for policyholders liabilities, DAC and deferred Federal income taxes ....................... (233.4) (574.0) 1,044.4 --------- --------- ---------- Change in unrealized gains (losses), net of adjustments ................................................. 202.6 405.7 (776.9) Change in minimum pension liability ............................. -- -- 28.2 --------- --------- ---------- Total Other Comprehensive Income (Loss) ......................... $ 202.6 $ 405.7 $ (748.7) ========= ========= ==========
7) CLOSED BLOCK The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in accumulated other comprehensive income) represents the expected maximum future post-tax earnings from the Closed Block which would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. As of January 1, 2001, the Company has developed an actuarial calculation of the expected timing of the Closed Block earnings. If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block. Many expenses related to Closed Block operations, including amortization of DAC, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block. F-21 Summarized financial information for the Closed Block is as follows:
DECEMBER 31, December 31, 2001 2000 ---------- ---------- (IN MILLIONS) CLOSED BLOCK LIABILITIES: Future policy benefits, policyholders' account balances and other ................................................ $ 9,049.9 $ 9,026.4 Other liabilities ........................................... 53.6 35.6 ---------- ---------- Total Closed Block liabilities .............................. 9,103.5 9,062.0 ---------- ---------- ASSETS DESIGNATED TO THE CLOSED BLOCK: Fixed maturities, available for sale, at estimated fair value (amortized cost of $4,600.4 and $4,373.5) ............................ 4,705.7 4,408.0 Mortgage loans on real estate ............................... 1,514.4 1,581.8 Policy loans ................................................ 1,504.4 1,557.7 Cash and other invested assets .............................. 141.0 174.7 Other assets ................................................ 214.7 238.9 ---------- ---------- Total assets designated to the Closed Block ................ 8,080.2 7,961.1 ---------- ---------- Excess of Closed Block liabilities over assets designated to the Closed Block ......................................... 1,023.3 1,100.9 Amounts included in accumulated other comprehensive income: Net unrealized investment gains, net of deferred Federal income tax of $20.4 and $12.2 ........................ 37.8 22.7 ---------- ---------- Maximum Future Earnings To Be Recognized From Closed Block Assets and Liabilities ................................... $ 1,061.1 $ 1,123.6 ========== ==========
Closed Block revenues and expenses were as follows:
2001 2000 1999 ---------- ---------- ---------- (IN MILLIONS) REVENUES: Premiums and other income .............. $ 571.5 $ 594.7 $ 619.1 Investment income (net of investment expenses of $3.0, $8.1, and $15.8) ..... 583.5 578.7 574.2 Investment losses, net ................. (42.3) (35.8) (11.3) ---------- ---------- ---------- Total revenues ......................... 1,112.7 1,137.6 1,182.0 ---------- ---------- ---------- BENEFITS AND OTHER DEDUCTIONS: Policyholders' benefits and dividends .. 1,009.3 1,025.2 1,024.7 Other operating costs and expenses ..... 4.7 5.2 5.5 ---------- ---------- ---------- Total benefits and other deductions .... 1,014.0 1,030.4 1,030.2 ---------- ---------- ---------- Net revenues before Federal income taxes 98.7 107.2 151.8 Federal income taxes ................... (36.2) (38.2) (60.3) ---------- ---------- ---------- Net Revenues ........................... $ 62.5 $ 69.0 $ 91.5 ========== ========== ==========
F-22 Impaired mortgage loans along with the related investment valuation allowances follows:
DECEMBER 31, ------------------ 2001 2000 ------- ------- (IN MILLIONS) Impaired mortgage loans with investment valuation allowances .. $ 26.7 $ 26.7 Impaired mortgage loans without investment valuation allowances 6.5 4.0 ------- ------- Recorded investment in impaired mortgages ..................... 33.2 30.7 Investment valuation allowances ............................... (5.8) (8.7) ------- ------- Net Impaired Mortgage Loans ................................... $ 27.4 $ 22.0 ======= =======
During 2001, 2000 and 1999, the Closed Block's average recorded investment in impaired mortgage loans was $30.8 million, $31.0 million and $37.0 million, respectively. Interest income recognized on these impaired mortgage loans totaled $1.2 million, $2.0 million and $3.3 million ($.1 million, $.1 million and $.3 million recognized on a cash basis) for 2001, 2000 and 1999, respectively. Valuation allowances amounted to $5.7 million and $9.1 million on mortgage loans on real estate and $9.8 million and $17.2 million on equity real estate at December 31, 2001 and 2000, respectively. Writedowns of fixed maturities amounted to $30.8 million and $27.7 million for 2001 and 2000, respectively, including $23.3 million in fourth quarter 2001. F-23 8) DISCONTINUED OPERATIONS Summarized financial information for Discontinued Operations follows:
DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- (IN MILLIONS) BALANCE SHEETS Mortgage loans on real estate ............................... $ 160.3 $ 330.9 Equity real estate .......................................... 252.0 350.9 Fixed maturities, available for sale, at estimated fair value (amortized cost of $542.9 and $321.5) ..................... 559.6 336.5 Other equity investments .................................... 22.3 43.1 Other invested assets ....................................... .4 1.9 ---------- ---------- Total investments ......................................... 994.6 1,063.3 Cash and cash equivalents ................................... 41.1 84.3 Other assets ................................................ 152.6 148.8 ---------- ---------- Total Assets ................................................ $ 1,188.3 $ 1,296.4 ========== ========== Policyholders liabilities ................................... $ 932.9 $ 966.8 Allowance for future losses ................................. 139.9 159.8 Other liabilities ........................................... 115.5 169.8 ---------- ---------- Total Liabilities ........................................... $ 1,188.3 $ 1,296.4 ========== ==========
2001 2000 1999 -------- -------- -------- (IN MILLIONS) STATEMENTS OF EARNINGS Investment income (net of investment expenses of $25.3, $37.0 and $49.3) ......... $ 91.6 $ 102.2 $ 98.7 Investment gains (losses), net ................ 33.6 (6.6) (13.4) Policy fees, premiums and other income ........ .2 .7 .2 -------- -------- -------- Total revenues ................................ 125.4 96.3 85.5 Benefits and other deductions ................. 100.7 106.9 104.8 Earnings credited (losses charged) to allowance for future losses ........................... 24.7 (10.6) (19.3) -------- -------- -------- Pre-tax loss from operations .................. -- -- -- Pre-tax earnings from releasing the allowance for future losses ........................... 46.1 90.2 43.3 Federal income tax expense .................... (2.3) (31.6) (15.2) -------- -------- -------- Earnings from Discontinued Operations ..................... $ 43.8 $ 58.6 $ 28.1 ======== ======== ========
The Company's quarterly process for evaluating the allowance for future losses applies the current period's results of discontinued operations against the allowance, re-estimates future losses and adjusts the allowance, if appropriate. Additionally, as part of the Company's annual planning process which takes place in the fourth quarter of each year, investment and benefit cash flow projections are prepared. These updated assumptions and estimates resulted in a release of allowance in each of the three years presented. Valuation allowances of $4.8 million and $2.9 million on mortgage loans on real estate and $5.0 million and $11.4 million on equity real estate were held at December 31, 2001 and 2000, respectively. During 2001, 2000 and 1999, discontinued operations' average recorded investment in impaired mortgage loans was $32.2 million, $11.3 million and $13.8 million, respectively. Interest income recognized on these impaired mortgage loans totaled $2.5 million, $.9 million and $1.7 million ($1.0 million, $.5 million and $.0 million recognized on a cash basis) for 2001, 2000 and 1999, respectively. F-24 At December 31, 2001 and 2000, discontinued operations had real estate acquired in satisfaction of debt with carrying values of $7.4 million and $4.5 million, respectively. In 2001, Federal Income tax expense for discontinued operations reflected a $13.8 million reduction in taxes due to settlement of open tax years. 9) SHORT-TERM AND LONG-TERM DEBT Short-term and long-term debt consists of the following:
DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- (IN MILLIONS) Short-term debt ................................ $ 229.6 $ 782.2 ---------- ---------- Long-term debt: Equitable Life: Surplus notes, 6.95%, due 2005 ............... 399.7 399.6 Surplus notes, 7.70%, due 2015 ............... 199.7 199.7 Other ........................................ .2 .4 ---------- ---------- Total Equitable Life ..................... 599.6 599.7 ---------- ---------- Alliance: Senior Notes, 5.625%, due 2006 ............... 398.0 -- ---------- ---------- Wholly Owned and Joint Venture Real Estate: Mortgage notes, 5.43% - 9.5%, due through 2017 248.3 248.3 ---------- ---------- Total long-term debt ........................... 1,245.9 848.0 ---------- ---------- Total Short-term and Long-term Debt ............ $ 1,475.5 $ 1,630.2 ========== ==========
Short-term Debt Equitable Life has a $350.0 million 5-year bank credit facility and a $250.0 million 364-day credit facility. The interest rates are based on external indices dependent on the type of borrowing ranging from 2.09% to 4.75%. There were no amounts outstanding under these credit facilities at December 31, 2001. Equitable Life has a commercial paper program with an issue limit of $1.0 billion. This program is available for general corporate purposes used to support Equitable Life's liquidity needs and is supported by Equitable Life's existing $600.0 million bank credit facilities. At December 31, 2001, there were no amounts outstanding under this program. Equitable Life has an $18.4 million line of credit available relating to reinsurance of which no amounts were outstanding at December 31, 2001. During 1998, Alliance increased its commercial paper program to $425.0 million and entered into a $425.0 million five-year revolving credit facility with a group of commercial banks to provide back-up liquidity for the commercial paper program. Under the credit facility, the interest rate, at the option of the borrower, is a floating rate generally based upon a defined prime rate, a rate related to the London Interbank Offered Rate ("LIBOR") or the Federal Funds Rate. A facility fee is payable on the total facility. Borrowings under the credit facility and the commercial paper program may not exceed $425.0 million in the aggregate. In July 1999, Alliance entered into a $200.0 million three-year revolving credit facility with a group of commercial banks. During October 2000, Alliance entered into a $250.0 million two-year revolving credit facility. The terms of the $200.0 million and $250.0 million credit facilities are generally similar to the $425.0 million credit facility. The revolving credit facilities will be used to fund commission payments to financial intermediaries for the sale of Back-End Load Shares under Alliance's mutual fund distribution system, capital expenditures and for general working capital purposes. The revolving credit facilities contain covenants which, among other things, require Alliance to meet certain financial ratios. Alliance was in compliance with the covenants at December 31, 2001. At December 31, 2001, Alliance had commercial paper outstanding totaling $198.2 million at an effective interest rate of 1.9%; there were no borrowings outstanding under Alliance's revolving credit facilities. F-25 In December 1999, Alliance established a $100.0 million extendible commercial notes ("ECN") program as a supplement to its $425.0 million commercial paper program. ECNs are short-term uncommitted debt instruments that do not require back-up liquidity support. At December 31, 2001, $24.9 million at an effective interest rate of 1.9% was outstanding under the ECN program. Long-term Debt Certain of the long-term debt agreements, principally mortgage notes, have restrictive covenants related to the total amount of debt, net tangible assets and other matters. At December 31, 2001, the Company is in compliance with all debt covenants. At December 31, 2001 and 2000, respectively, the Company has pledged real estate of $314.5 million and $298.8 million as collateral for certain long-term debt. At December 31, 2001, aggregate maturities of the long-term debt based on required principal payments at maturity was $248.5 million for 2002, $400.0 million for 2005, $400.0 million for 2006 and $200.0 million thereafter. In August 2001, Alliance issued $400.0 million 5.625% notes due 2006 in a public offering and are redeemable at any time. The registration statement filed with the SEC allows for the issuance of up to $600.0 million in senior debt securities. The proceeds were used to reduce commercial paper and credit facility borrowings and for other general partnership purposes. 10) FEDERAL INCOME TAXES A summary of the Federal income tax expense in the consolidated statements of earnings follows:
2001 2000 1999 -------- -------- -------- (IN MILLIONS) Federal income tax expense (benefit): Current ........................... $ (38.2) $ 820.6 $ 174.0 Deferred .......................... 354.4 137.7 158.0 -------- -------- -------- Total ............................... $ 316.2 $ 958.3 $ 332.0 ======== ======== ========
The Federal income taxes attributable to consolidated operations are different from the amounts determined by multiplying the earnings before Federal income taxes and minority interest by the expected Federal income tax rate of 35%. The sources of the difference and their tax effects follow:
2001 2000 1999 -------- -------- -------- (IN MILLIONS) Expected Federal income tax expense .... $ 452.5 $ 904.9 $ 458.4 Minority interest ...................... (126.9) (117.9) (47.8) Non deductible stock option compensation expense .............................. -- 34.4 -- Subsidiary gains ....................... -- 161.4 (37.1) Adjustment of tax audit reserves ....... (28.2) 17.9 27.8 Equity in unconsolidated subsidiaries .. -- (48.7) (64.0) Other .................................. 18.8 6.3 (5.3) -------- -------- -------- Federal Income Tax Expense ............. $ 316.2 $ 958.3 $ 332.0 ======== ======== ========
F-26 The components of the net deferred Federal income taxes are as follows:
DECEMBER 31, 2001 December 31, 2000 -------------- ------------ ------------ ----------- ASSETS LIABILITIES Assets Liabilities -------------- ------------ ------------ ----------- (IN MILLIONS) Compensation and related benefits...... $ -- $ 92.0 $ -- $ 79.7 Other.................................. -- .1 4.9 -- DAC, reserves and reinsurance.......... -- 1,020.1 -- 733.0 Investments............................ -- 333.3 -- 229.2 -------------- ------------ ------------ ----------- Total.................................. $ -- $ 1,445.5 $ 4.9 $ 1,041.9 ============== ============ ============ ===========
At December 31, 1999, $236.8 million in deferred tax assets were transferred to the Holding Company in conjunction with its assumption of the non-qualified employee benefit liabilities. See Note 12 for discussion of the benefit plans transferred. The deferred Federal income taxes impacting operations reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The sources of these temporary differences and their tax effects follow:
2001 2000 1999 ------------- ------------ ------------ (IN MILLIONS) DAC, reserves and reinsurance...................... $ 291.7 $ 403.3 $ 83.2 Investments........................................ 42.1 (140.7) 3.2 Compensation and related benefits.................. 15.7 (96.4) 21.0 Other.............................................. 4.9 (28.5) 50.6 ------------- ------------ ------------ Deferred Federal Income Tax Expense.......................................... $ 354.4 $ 137.7 $ 158.0 ============= ============ ============
Federal income taxes payable at December 31, 2000 included $858.2 million of taxes related to the gain on disposal of DLJ. The Internal Revenue Service (the "IRS") is in the process of examining the Holding Company's consolidated Federal income tax returns for the years 1992 through 1996. Management believes these audits will have no material adverse effect on the Company's results of operations. 11) REINSURANCE AGREEMENTS The Insurance Group assumes and cedes reinsurance with other insurance companies. The Insurance Group evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Ceded reinsurance does not relieve the originating insurer of liability. F-27 The effect of reinsurance (excluding group life and health) is summarized as follows:
2001 2000 1999 ------------- ------------ ------------ (IN MILLIONS) Direct premiums.................................... $ 990.0 $ 1,103.8 $ 1,039.5 Reinsurance assumed................................ 203.0 194.2 206.7 Reinsurance ceded.................................. (173.1) (123.0) (69.1) ------------- ------------ ------------ Premiums........................................... $ 1,019.9 $ 1,175.0 $ 1,177.1 ============= ============ ============ Universal Life and Investment-type Product Policy Fee Income Ceded.......................... $ 86.9 $ 92.1 $ 69.7 ============= ============ ============ Policyholders' Benefits Ceded...................... $ 370.3 $ 239.2 $ 155.6 ============= ============ ============ Interest Credited to Policyholders' Account Balances Ceded................................... $ 50.4 $ 46.5 $ 38.5 ============= ============ ============
Since 1997, the Company reinsures on a yearly renewal term basis 90% of the mortality risk on new issues of certain term, universal and variable life products. The Company's retention limit on joint survivorship policies is $15.0 million. All other in force business above $5.0 million is reinsured. The Insurance Group also reinsures the entire risk on certain substandard underwriting risks and in certain other cases. During July 2000, Equitable Life transferred, at no gain or loss, all the risk of its directly written DI business for years 1993 and prior through an indemnity reinsurance contract. The cost of the arrangement will be amortized over the expected lives of the contracts reinsured and will not have a significant impact on the results of operations in any specific period. At December 31, 2001 and 2000, respectively, reinsurance recoverables related to insurance contracts amounting to $2,233.7 million and $2,098.0 million, of which $1,060.4 million and $1,009.1 million relates to one specific reinsurer, are included in Other assets and reinsurance payables related to insurance contracts amounting to $798.5 million and $730.3 million are included in Other liabilities in the consolidated balance sheets. The Insurance Group cedes 100% of its group life and health business to a third party insurer. Insurance liabilities ceded totaled $444.2 million and $487.7 million at December 31, 2001 and 2000, respectively. In addition to the sale of insurance products, the Insurance Group acts as a professional retrocessionaire by assuming life and annuity reinsurance from professional reinsurers. The Insurance Group also assumes accident, health, aviation and space risks by participating in various reinsurance pools. Reinsurance assumed reserves at December 31, 2001 and 2000 were $540.2 million and $515.0 million, respectively. 12) EMPLOYEE BENEFIT PLANS The Company sponsors qualified and non-qualified defined benefit plans covering substantially all employees (including certain qualified part-time employees), managers and certain agents. The pension plans are non-contributory. Equitable Life's benefits are based on a cash balance formula or years of service and final average earnings, if greater, under certain grandfathering rules in the plans. Alliance's benefits are based on years of credited service, average final base salary and primary social security benefits. The Company's funding policy is to make the minimum contribution required by the Employee Retirement Income Security Act of 1974 ("ERISA"). Effective December 31, 1999, the Holding Company legally assumed primary liability from Equitable Life for all current and future obligations of its Excess Retirement Plan, Supplemental Executive Retirement Plan and certain other employee benefit plans that provide participants with medical, life insurance, and deferred compensation benefits; Equitable Life remains secondarily liable. The amount of the liability associated with employee benefits transferred was $676.5 million, including $183.0 million of non-qualified pension benefit obligations and $394.1 million of postretirement benefits obligations at December 31, 1999. This transfer was recorded as a non-cash capital contribution to Equitable Life. F-28 Components of net periodic pension credit follow:
2001 2000 1999 ------------- ------------ ------------ (IN MILLIONS) Service cost....................................... $ 32.1 $ 29.5 $ 36.7 Interest cost on projected benefit obligations..... 128.8 124.2 131.6 Expected return on assets.......................... (218.7) (223.2) (189.8) Net amortization and deferrals..................... .1 (.6) 7.5 ------------- ------------ ------------ Net Periodic Pension Credit........................ $ (57.7) $ (70.1) $ (14.0) ============ ============ ============
The projected benefit obligations under the pension plans were comprised of:
DECEMBER 31, ------------------------------- 2001 2000 ------------ ------------ (IN MILLIONS) Benefit obligations, beginning of year................................. $ 1,712.6 $ 1,659.6 Service cost........................................................... 27.1 24.5 Interest cost.......................................................... 128.8 124.2 Actuarial losses (gains)............................................... 64.4 13.4 Benefits paid.......................................................... (120.6) (109.1) ------------ ------------ Benefit Obligation, End of Year........................................ $ 1,812.3 $ 1,712.6 ============ ============
The funded status of the pension plans was as follows:
DECEMBER 31, ------------------------------- 2001 2000 ------------ ------------ (IN MILLIONS) Plan assets at fair value, beginning of year........................... $ 2,112.0 $ 2,341.6 Actual return on plan assets........................................... (148.0) (115.9) Contributions.......................................................... -- -- Benefits paid and fees................................................. (126.1) (113.7) ------------ ------------ Plan assets at fair value, end of year................................. 1,837.9 2,112.0 Projected benefit obligations.......................................... 1,812.3 1,712.6 ------------ ------------ Excess of plan assets over projected benefit obligations............... 25.6 399.4 Unrecognized prior service cost........................................ (46.3) 1.2 Unrecognized net loss (gain) from past experience different from that assumed.................................................... 550.1 71.3 Unrecognized net asset at transition................................... (1.6) (1.9) ------------ ------------ Prepaid Pension Cost, Net.............................................. $ 527.8 $ 470.0 ============ ============
The accrued liability for pension plans with projected benefit obligations in excess of plan assets was $16.7 million and $13.5 million at December 31, 2001 and 2000, respectively. The aggregate accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $49.7 million and $28.7 million, respectively, at December 31, 2001 and $38.9 million and $32.9 million, respectively, at December 31, 2000. The pension plan assets include corporate and government debt securities, equity securities, equity real estate and shares of group trusts managed by Alliance. The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of projected benefit obligations were 7.25% and 7.19%, respectively, at December 31, 2001 and 7.75% and 7.19%, respectively, at December 31, 2000. As of January 1, 2001 and 2000, the expected long-term rate of return on assets for the retirement plan was 10.25% and 10.5%, respectively. Prior to 1987, the qualified plan funded participants' benefits through the purchase of non-participating annuity contracts from Equitable Life. Benefit payments under these contracts were approximately $27.3 million, $28.7 million and $30.2 million for 2001, 2000 and 1999, respectively. F-29 Alliance maintains several unfunded deferred compensation plans for the benefit of certain eligible employees and executives. The Capital Accumulation Plan was frozen on December 31, 1987 and no additional awards have been made. For the active plans, benefits vest over a period ranging from 3 to 8 years and are amortized as compensation and benefit expense. ACMC, Inc. ("ACMC"), a subsidiary of the Company, is obligated to make capital contributions to Alliance in amounts equal to benefits paid under the Capital Accumulation Plan and the contractual unfunded deferred compensation arrangements. In connection with the acquisition of Bernstein, Alliance agreed to invest $96.0 million per annum for three years to fund open market purchases of Alliance Holding units or money market funds in each case for the benefit of certain individuals who were stockholders or principals of Bernstein or were hired to replace them. The Company has recorded compensation and benefit expenses in connection with the plans totaling $58.1 million, $29.8 million and $13.8 million for 2001, 2000 and 1999, respectively (including $34.6 million and $6.8 million for 2001 and 2000, respectively, relating to the Bernstein deferred compensation plan). 13) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS The Insurance Group primarily uses derivatives for asset/liability risk management and for hedging individual securities. Derivatives mainly are utilized to reduce the Insurance Group's exposure to interest rate fluctuations. Various derivative financial instruments are used to achieve this objective, including interest rate caps and floors to hedge crediting rates on interest-sensitive individual annuity contracts, interest rate futures to protect against declines in interest rates between receipt of funds and purchase of appropriate assets, and interest rate swaps to modify the duration and cash flows of fixed maturity investments. In addition, the Company periodically enters into forward and futures contracts to hedge certain equity exposures. Also, the Company has purchased reinsurance contracts to mitigate the risks associated with the impact of potential market fluctuations on future policyholder elections of guaranteed minimum income benefit features contained in certain annuity contracts issued by the Company. As earlier described in Note 2 of Notes to Consolidated Financial Statements, the Company adopted SFAS No. 133, as amended, on January 1, 2001. Consequently, all derivatives outstanding at December 31, 2001 are recognized on the balance sheet at their fair values. The outstanding notional amounts of derivative financial instruments purchased and sold were $6,675.0 million and $.3 million, respectively, at December 31, 2001. These amounts principally consist of interest rate cap contracts of Equitable Life that have a total fair value at December 31, 2001 of $13.6 million. At December 31, 2001 and during the year then ended, there were no hybrid instruments that required bifurcation of an embedded derivative component under the provisions of SFAS No. 133. All gains and losses on derivative financial instruments utilized by the Company in 2001 are reported in earnings for the current year as none of the derivatives were designated to qualifying hedging relationships under SFAS No. 133 either at initial adoption of the Statement or at inception of the contracts. Gross gains and gross losses recognized on derivative positions was $27.5 million and $4.6 million, respectively, for 2001. Fair Value of Financial Instruments The Company defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument. Certain financial instruments are excluded, particularly insurance liabilities other than financial guarantees and investment contracts. Fair market value of off-balance-sheet financial instruments of the Insurance Group was not material at December 31, 2001 and 2000. Fair values for mortgage loans on real estate are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be made. Fair values for F-30 foreclosed mortgage loans and problem mortgage loans are limited to the estimated fair value of the underlying collateral if lower. Fair values of policy loans are estimated by discounting the face value of the loans from the time of the next interest rate review to the present, at a rate equal to the excess of the current estimated market rates over the current interest rate charged on the loan. The estimated fair values for the Company's association plan contracts, supplementary contracts not involving life contingencies ("SCNILC") and annuities certain, which are included in policyholders' account balances, and guaranteed interest contracts are estimated using projected cash flows discounted at rates reflecting expected current offering rates. The estimated fair values for variable deferred annuities and single premium deferred annuities, which are included in policyholders' account balances, are estimated by discounting the account value back from the time of the next crediting rate review to the present, at a rate equal to the excess of current estimated market rates offered on new policies over the current crediting rates. Fair values for long-term debt are determined using published market values, where available, or contractual cash flows discounted at market interest rates. The estimated fair values for non-recourse mortgage debt are determined by discounting contractual cash flows at a rate which takes into account the level of current market interest rates and collateral risk. The estimated fair values for recourse mortgage debt are determined by discounting contractual cash flows at a rate based upon current interest rates of other companies with credit ratings similar to the Company. The Company's carrying value of short-term borrowings approximates their estimated fair value. The carrying value and estimated fair value for financial instruments not previously disclosed in Notes 3, 7 and 8:
DECEMBER 31, -------------------------------------------------------------------- 2001 2000 --------------------------------- --------------------------------- CARRYING ESTIMATED Carrying Estimated VALUE FAIR VALUE Value Fair Value --------------- ---------------- --------------- --------------- (IN MILLIONS) Consolidated: Mortgage loans on real estate.......... $ 4,333.3 $ 4,438.7 $ 4,712.6 $ 4,767.0 Other limited partnership interests.... 701.9 701.9 834.9 834.9 Policy loans........................... 4,100.7 4,476.4 4,034.6 4,290.0 Policyholders' account balances - investment contracts................. 12,256.4 12,514.0 11,488.8 11,663.8 Long-term debt......................... 1,245.9 1,280.6 848.0 847.5 Closed Block: Mortgage loans on real estate.......... $ 1,514.4 $ 1,532.6 $ 1,581.8 $ 1,582.6 Other equity investments............... 24.4 24.4 34.4 34.4 Policy loans........................... 1,504.4 1,664.8 1,557.7 1,667.6 SCNILC liability....................... 18.2 18.1 20.2 20.1 Discontinued Operations: Mortgage loans on real estate.......... $ 160.3 $ 171.6 $ 330.9 $ 347.7 Fixed maturities....................... 559.6 559.6 336.5 336.5 Other equity investments............... 22.3 22.3 43.1 43.1 Guaranteed interest contracts.......... 18.8 16.1 26.4 23.4 Long-term debt......................... 101.7 101.7 101.8 101.7
F-31 14) COMMITMENTS AND CONTINGENT LIABILITIES From time to time, the Company has provided certain guarantees or commitments to affiliates, investors and others. At December 31, 2001, these arrangements included commitments by the Company, under certain conditions, to make capital contributions of up to $8.5 million to affiliated real estate joint ventures and to provide equity financing to certain limited partnerships of $274.9 million. Management believes the Company will not incur any material losses as a result of these commitments. Equitable Life is the obligor under certain structured settlement agreements which it had entered into with unaffiliated insurance companies and beneficiaries. To satisfy its obligations under these agreements, Equitable Life owns single premium annuities issued by previously wholly owned life insurance subsidiaries. Equitable Life has directed payment under these annuities to be made directly to the beneficiaries under the structured settlement agreements. A contingent liability exists with respect to these agreements should the previously wholly owned subsidiaries be unable to meet their obligations. Management believes the need for Equitable Life to satisfy those obligations is remote. The Insurance Group had $10.5 million of letters of credit outstanding at December 31, 2001. The Company entered into continuity agreements with certain executives of the Company in connection with AXA's minority interest acquisition. The remaining continuity agreements generally provide cash severance payments ranging from 1.5 times to 2 times an executive's base salary plus bonus and other benefits. Such cash severance payments will generally be made if an executive's employment is terminated at any time within two years from December 27, 2000 for any reason other than the executive's death, disability, retirement or for cause, or if the executive resigns for good reason as defined in the agreements. In connection with cost reduction programs initiated in 2001, expenses related to continuity agreements, severance, benefits and outplacement were recorded, totaling $126.1 million related to the home office initiative and $24.5 million related to the field restructuring initiative. At December 31, 2001, in the event the remaining covered executives' employment terminates under the circumstances described above, cash severance payments that would be payable under these continuity agreements approximate $30.0 million. 15) LITIGATION A number of lawsuits have been filed against life and health insurers in the jurisdictions in which Equitable Life and its subsidiaries do business involving insurers' sales practices, alleged agent misconduct, alleged failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against other insurers, including material amounts of punitive damages, or in substantial settlements. In some states, juries have substantial discretion in awarding punitive damages. Equitable Life, Equitable Variable Life Insurance Company ("EVLICO," which was merged into Equitable Life effective January 1, 1997, but whose existence continues for certain limited purposes, including the defense of litigation) and EOC, like other life and health insurers, from time to time are involved in such litigations. Among litigations against Equitable Life, EVLICO and EOC of the type referred to in this paragraph are the litigations described in the following five paragraphs. In January 1996, an amended complaint was filed in an action entitled Frank Franze Jr. and George Busher, individually and on behalf of all others similarly situated v. The Equitable Life Assurance Society of the United States, and Equitable Variable Life Insurance Company in the United States District Court for the Southern District of Florida. The action was brought by two individuals who purchased variable life insurance policies. The plaintiffs purport to represent a nationwide class consisting of all persons who purchased variable life insurance policies from Equitable Life and EVLICO between September 30, 1991 and January 3, 1996. The amended complaint alleges that Equitable Life's and EVLICO's agents were trained not to disclose fully that the product being sold was life insurance. Plaintiffs allege violations of the Federal securities laws and seek rescission of the contracts or compensatory damages and attorneys' fees and expenses. Equitable Life and EVLICO have answered the amended complaint, denying the material allegations and asserting certain affirmative defenses. In May 1999, the Magistrate Judge issued a Report and Recommendation recommending that the District Judge deny Equitable Life's and EVLICO's motion for summary judgment and grant plaintiffs' motion for class certification. In July 1999, Equitable Life and EVLICO filed Objections to the Report and Recommendation and urged that the District Judge reject the Magistrate's recommendations and grant Equitable Life's and EVLICO's motion for summary judgment and deny plaintiffs' motion for class certification. In October 2000, the District Judge affirmed the Magistrate's F-32 Report and Recommendation and, accordingly, denied Equitable Life's and EVLICO's motion for summary judgment and granted plaintiffs' motion for class certification. In May 2001, with permission of the United States Court of Appeals for the Eleventh Circuit, Equitable Life and EVLICO appealed the District Court's order. Oral argument is scheduled for March 2002. In March 2000, an action entitled Brenda McEachern v. The Equitable Life Assurance Society of the United States and Gary Raymond, Jr. was commenced against Equitable Life and one of its agents in Circuit Court, Mobile County, Alabama, and asserts claims under state law. The action was brought by an individual who alleges that she purchased a variable annuity from Equitable Life in 1997. The action purports to be on behalf of a class consisting of all persons who from January 1, 1989 (i) purchased a variable annuity from Equitable Life to fund a qualified retirement plan, (ii) were charged allegedly unnecessary fees for tax deferral for variable annuities held in qualified retirement accounts, or (iii) were sold a variable annuity while owning a qualified retirement plan from Equitable Life. The complaint alleges various improper sales practices, including misrepresentations in connection with the use of variable annuities in a qualified retirement plan or similar arrangement, charging inflated or hidden fees, and failure to disclose unnecessary tax deferral fees. Plaintiff seeks damages, including punitive damages, in an unspecified amount and attorneys' fees and expenses. In May 2000, Equitable Life removed the case to the United States District Court for the Southern District of Alabama and filed a motion to dismiss the complaint, and plaintiff filed a motion to remand the case to state court. The court has permitted limited discovery on the issue of whether the Securities Litigation Uniform Standards Act applies. In November 2001, plaintiff filed a motion for leave to join additional plaintiffs. In June 2000, an action entitled Raymond Patenaude v. The Equitable Life Assurance Society of the United States, AXA Advisors, LLC and Equitable Distributors, Inc. was commenced in the Superior Court of California, County of San Diego. The complaint alleges that the defendants engaged in fraudulent and deceptive practices in connection with the marketing and sale of deferred annuity products to fund tax-qualified contributory retirement plans. The named plaintiff purports to act as a private attorney general on behalf of the general public of the State of California under California consumer protection statutes and also asserts individual common-law claims. On behalf of the named plaintiff and the general public, the complaint asserts claims for unlawful, unfair or fraudulent business acts and practices and for false or misleading advertising. On behalf of the named plaintiff alone, the complaint alleges claims for fraud, fraudulent concealment and deceit, negligent misrepresentation and negligence. The complaint seeks injunctive relief, restitution for members of the general public of the State of California who have been harmed by defendants' conduct, compensatory and punitive damages on behalf of the named plaintiff, and attorneys' fees, costs and expenses. In July 2000, the defendants removed the case to the United States District Court for the Southern District of California and filed a motion to dismiss the complaint. In October 2000, the District Court granted defendants' motion to dismiss the action. In November 2000, the plaintiff appealed; the appeal is fully briefed. In October 2000, an action entitled Sham Malhotra, et al. v. The Equitable Life Assurance Society of the United States, AXA Advisors, LLC and Equitable Distributors, Inc. was commenced in the Supreme Court of the State of New York, County of Nassau. The action was brought by two individuals who purchased Equitable Life deferred annuity products. The action purports to be on behalf of a class consisting of all persons who purchased an individual deferred annuity contract or who received a certificate to a group deferred annuity contract, sold by one of the defendants, which was used to fund a contributory retirement plan or arrangement qualified for favorable income tax treatment; excluded from the class are officers, directors and agents of the defendants. The complaint alleges that the defendants engaged in fraudulent and deceptive practices in connection with the marketing and sale of deferred annuity products to fund tax-qualified contributory retirement plans. The complaint asserts claims for: deceptive business acts and practices in violation of the New York General Business Law ("GBL"); use of misrepresentations and misleading statements in violation of the New York Insurance Law; false or misleading advertising in violation of the GBL; fraud, fraudulent concealment and deceit; negligent misrepresentation; negligence; unjust enrichment and imposition of a constructive trust; declaratory and injunctive relief; and reformation of the annuity contracts. The complaint seeks injunctive and declaratory relief, an unspecified amount of compensatory and punitive damages, restitution for all members of the class, and an award of attorneys' fees, costs and expenses. In October 2000, the defendants removed the action to the United States District Court for the Eastern District of New York, and thereafter filed a motion to dismiss. Plaintiffs filed a motion to remand the case to state court. In September 2001, the District Court issued a decision granting defendants' motion to dismiss and denying plaintiffs' motion to remand, and judgment was entered in favor of the defendants. In October 2001, plaintiffs filed a motion seeking leave to reopen the case for the purpose of F-33 filing an amended complaint. In addition, plaintiffs filed a new complaint in the District Court, alleging a similar class and similar facts. The new complaint asserts causes of action for violations of Federal securities laws in addition to the state law causes of action asserted in the previous complaint. In January 2002, the defendants filed a motion to dismiss the new action. Between June 2000 and December 2001 twelve lawsuits were filed in the state courts of Mississippi (the "Mississippi Actions") by more than 70 plaintiffs naming as defendants Equitable Life, EVLICO, EOC and various present and former individual sales agents associated with Equitable Life, EVLICO and/or EOC. The actions arise from the purchase by each of the plaintiffs of various types of life insurance policies from Equitable Life, EVLICO and/or EOC. The policies at issue include term, variable and whole life policies purchased as early as 1954. The actions allege misrepresentations in connection with the sale of life insurance policies including that the defendants misrepresented the stated number of years that premiums would need to be paid. Plaintiffs assert claims for breach of contract, fraud, fraudulent inducement, misrepresentation, conspiracy, negligent supervision and other tort claims. Plaintiffs seek unspecified compensatory and punitive damages. The parties are engaged in discovery in each of the pending actions. In October 2000, an action entitled American National Bank and Trust Company of Chicago, as trustee f/b/o Emerald Investments LP and Emerald Investments LP v. AXA Client Solutions, LLC; The Equitable Life Assurance Society of the United States; and AXA Financial, Inc. was commenced in the United States District Court for the Northern District of Illinois. The complaint alleges that the defendants (i) in connection with certain annuities issued by Equitable Life breached an agreement with the plaintiffs involving the execution of mutual fund transfers, and (ii) wrongfully withheld withdrawal charges in connection with the termination of such annuities. Plaintiffs seek unspecified lost profits and injunctive relief, punitive damages and attorneys' fees. Plaintiffs also seek return of the withdrawal charges. In February 2001, the District Court granted in part and denied in part defendants' motion to dismiss the complaint. In March 2001, plaintiffs filed an amended complaint. The District Court granted defendants' motion to dismiss AXA Client Solutions and the Holding Company from the amended complaint, and dismissed the conversion claims in June 2001. The District Court denied defendants' motion to dismiss the remaining claims. Equitable Life has answered the amended complaint. On September 12, 1997, the United States District Court for the Northern District of Alabama, Southern Division, entered an order certifying James Brown as the representative of a class consisting of "[a]ll African-Americans who applied but were not hired for, were discouraged from applying for, or would have applied for the position of Sales Agent in the absence of the discriminatory practices, and/or procedures in the [former] Southern Region of AXA Financial from May 16, 1987 to the present." The second amended complaint in James W. Brown, on behalf of others similarly situated v. The Equitable Life Assurance Society of the United States alleges, among other things, that Equitable Life discriminated on the basis of race against African-American applicants and potential applicants in hiring individuals as sales agents. Plaintiffs sought a declaratory judgment and affirmative and negative injunctive relief, including the payment of back-pay, pension and other compensation. The court referred the case to mediation, pursuant to which the parties reached a proposed settlement agreement in November 2000. In connection therewith, the case was dismissed in the United States District Court for the Northern District of Alabama, Southern Division and refiled in the United States District Court for the Northern District of Georgia, Atlanta Division. The final settlement required notice to be given to class members and was subject to court approval. A hearing was held in January 2002 and thereafter, an order was entered approving the settlement. In November 1997, an amended complaint was filed in Peter Fischel, et al. v. The Equitable Life Assurance Society of the United States alleging, among other things, that Equitable Life violated ERISA by eliminating certain alternatives pursuant to which agents of Equitable Life could qualify for health care coverage. In March 1999, the United States District Court for the Northern District of California entered an order certifying a class consisting of "[a]ll current, former and retired Equitable agents, who while associated with Equitable satisfied [certain alternatives] to qualify for health coverage or contributions thereto under applicable plans." Plaintiffs allege various causes of action under ERISA, including claims for enforcement of alleged promises contained in plan documents and for enforcement of agent bulletins, breach of a unilateral contract, breach of fiduciary duty and promissory estoppel. In June 2000, plaintiffs appealed to the Court of Appeals for the Ninth Circuit contesting the District Court's award of legal fees to plaintiffs' counsel in connection with a previously settled count of the complaint unrelated to the health benefit claims. In that appeal, plaintiffs have challenged the District Court's subject matter jurisdiction over the health benefit claims. Oral argument on this appeal was heard in November 2001. In May 2001, plaintiffs filed a second amended complaint which, among other things, alleges that Equitable Life failed to comply with plan F-34 amendment procedures and deletes the promissory estoppel claim. Equitable Life answered the complaint in June 2001. In September 2001, Equitable Life filed a motion for summary judgment on all of plaintiffs' claims, and plaintiffs filed a motion for partial summary judgment on all claims except their claim for breach of fiduciary duty. A putative class action entitled Stefanie Hirt, et al. v. The Equitable Retirement Plan for Employees, Managers and Agents, et al. was filed in the District Court for the Southern District of New York in August 2001 against The Equitable Retirement Plan for Employees, Managers and Agents (the "Retirement Plan") and The Officers Committee on Benefit Plans of Equitable Life, as Plan Administrator. The action was brought by five participants in the Retirement Plan and purports to be on behalf of "all Plan participants, whether active or retired, their beneficiaries and Estates, whose accrued benefits or pension benefits are based on the Plan's Cash Balance Formula." The complaint challenges the change, effective January 1, 1989, in the pension benefit formula from a final average pay formula to a cash balance formula. Plaintiffs allege that the change to the cash balance formula violates ERISA by reducing the rate of accruals based on age, failing to comply with ERISA's notice requirements and improperly applying the formula to retroactively reduce accrued benefits. The relief sought includes a declaration that the cash balance plan violates ERISA, an order enjoining the enforcement of the cash balance formula, reformation and damages. Defendants answered the complaint in October 2001. In September 1999, a complaint was filed in an action entitled R.S.M. Inc., et al. v. Alliance Capital Management L.P., et al. in the Chancery Court of the State of Delaware. The action was brought on behalf of a purported class of owners of limited partnership units of Alliance Capital Management Holding L.P. ("Alliance Holding") challenging the then-proposed reorganization of Alliance Holding. Named defendants include Alliance Holding, four Alliance Holding executives, the general partner of Alliance Holding and Alliance, which is a wholly owned indirect subsidiary of Equitable Life, and Alliance, which is the operating partnership whose units are not publicly traded. Equitable Life is obligated to indemnify the defendants for losses and expenses arising out of the litigation. Plaintiffs allege, inter alia, inadequate and misleading disclosures, breaches of fiduciary duties, and the improper adoption of an amended partnership agreement by Alliance Holding. The complaint seeks, inter alia, payment of unspecified money damages and an accounting of all benefits alleged to have been improperly obtained by the defendants. In August 2000, plaintiffs filed a first amended and supplemental class action complaint. The amended complaint alleges in connection with the reorganization that, inter alia, the partnership agreement of Alliance Holding was not validly amended, the reorganization of Alliance Holding was not validly effected, the information disseminated to holders of units of limited partnership interests in Alliance Holding was materially false and misleading, and the defendants breached their fiduciary duties by structuring the reorganization in a manner that was grossly unfair to plaintiffs. Plaintiffs seek declaratory, monetary and injunctive relief relating to the allegations contained in the amended complaint. In September 2000, all defendants other than Robert H. Joseph, Jr., filed an answer to the amended complaint denying the material allegations contained therein. In lieu of joining in the answer to the amended complaint, Mr. Joseph filed a motion to dismiss in September 2000. In November 2000, defendants, other than Mr. Joseph, filed a motion to dismiss the amended complaint. In December 2000, plaintiffs filed a motion for partial summary judgment on the claim that the Alliance Holding partnership agreement was not validly amended. In April 2001, the Chancery Court issued a decision granting in part and denying in part defendants' motion to dismiss; the claim alleging that the partnership agreement of Alliance Holding was not validly amended was one of the claims dismissed. In October 2001, a memorandum of understanding was executed, setting forth the terms of a settlement in principle, and in December 2001, a stipulation of settlement was filed with the Delaware Court of Chancery. The settlement is subject to a number of conditions, including preparation of definitive documentation and approval, after a hearing, by the Delaware Court of Chancery. Subsequent to the August 30, 2000 announcement of AXA's proposal to purchase the outstanding shares of AXA Financial common stock that it did not already own, the following fourteen putative class action lawsuits were commenced in the Delaware Court of Chancery: Fred Buff v. AXA Financial, Inc., et al., Sarah Wolhendler v. Claude Bebear, et al.; Jerome and Selma Stone v. AXA Financial, Inc., et al.; Louis Deranieri v. AXA Financial, Inc., et al.; Maxine Phillips v. AXA Financial, Inc., et al.; Ruth Ravnitsky v. AXA Financial, Inc., et al.; Richard Kager v. AXA Financial, Inc., et al.; Mortimer Cohen v. AXA Financial, Inc., et al.; Lee Koneche, et al. v. AXA Financial, Inc., et al.; Denver Employees Retirement Plan v. AXA Financial, Inc., et al.; Harry Hoffman v. AXA Financial, Inc., et al.; Joseph Villari v. AXA Financial, Inc., et al.; Max Boimal v. AXA Financial, Inc., et al.; and Jay Gottlieb v. AXA Financial, Inc., et al. AXA Financial, AXA, and directors and/or officers of AXA Financial are named as defendants in each of these lawsuits. The various plaintiffs each purport to represent a class consisting of owners of AXA Financial F-35 common stock and their successors in interest, excluding the defendants and any person or entity related to or affiliated with any of the defendants. They challenge the adequacy of the offer announced by AXA and allege that the defendants have engaged or will engage in unfair dealing, overreaching and/or have breached or will breach fiduciary duties owed to the minority shareholders of AXA Financial. The complaints seek declaratory and injunctive relief, an accounting, and unspecified compensatory damages, costs and expenses, including attorneys' fees. The Delaware suits have been consolidated under the name In re AXA Financial, Inc. Shareholders Litigation. A similar lawsuit was filed in the Supreme Court of the State of New York, County of New York, after the filing of the first Delaware action; it is captioned Harbor Finance Partners v. AXA Financial, Inc., et al. In December 2000, the parties to the Delaware suits reached a proposed agreement for settlement and executed a memorandum of understanding. Shortly thereafter, agreement was reached with the plaintiff in the New York suit to stay proceedings in New York and to participate in and be bound by the terms of the settlement of the Delaware suits. In November 2001, the parties filed a stipulation of settlement with the Delaware Court of Chancery. The settlement, which does not involve any payment by AXA Financial, is subject to conditions, including approval, after a hearing, by the Delaware Court of Chancery. The hearing on the settlement is scheduled for March 2002. Subsequent to the August 30, 2000 announcement of the proposed sale of DLJ, four putative class action lawsuits were filed in the Delaware Court of Chancery naming AXA Financial as one of the defendants and challenging the sale of DLJ because the transaction did not include the sale of DLJdirect tracking stock. These actions are captioned Irvin Woods, et al. v. Joe L. Roby, et al.; Thomas Rolle v. Joe L. Roby, et al.; Andrew Loguercio v. Joe L. Roby, et al.; and Robert Holschen v. Joe L. Roby, et al. The plaintiffs in these cases purport to represent a class consisting of the holders of DLJdirect tracking stock and their successors in interest, excluding the defendants and any person or entity related to or affiliated with any of the defendants. Named as defendants are AXA Financial, DLJ and the DLJ directors. The complaints assert claims for breaches of fiduciary duties, for violation of class members' voting rights under 8 Del. C. ss.242, and for breach of implied contractual promise, and seek an unspecified amount of compensatory damages and costs and expenses, including attorneys' fees. The parties in these cases have agreed to extend the time for defendants to respond to the complaints. Subsequent to the August 30, 2000 announcement of the proposed sale of DLJ, a putative class action lawsuit was filed in the United States District Court, Southern District of New York, captioned Siamac Sedighim v. Donaldson, Lufkin & Jenrette, Inc., et al. This action challenges the sale of DLJ (for omitting the DLJdirect tracking stock) and also alleges Federal securities law claims relating to the initial public offering of the DLJdirect tracking stock. The complaint alleges claims for violations of the securities laws, breaches of the fiduciary duties of loyalty, good faith and due care, aiding and abetting such breaches, and breach of contract. The plaintiff purports to represent a class consisting of: all purchasers of DLJdirect tracking stock in the initial public offering and thereafter (with respect to the securities law claims); and all owners of DLJdirect tracking stock who allegedly have been or will be injured by the sale of DLJ (with respect to all other claims). Named as defendants are AXA Financial, Equitable Life, AXA, DLJ, Donaldson, Lufkin & Jenrette Securities Corporation, Credit Suisse Group, Diamond Acquisition Corp., and DLJ's directors. The complaint seeks declaratory and injunctive relief, an unspecified amount of damages, and costs and expenses, including attorney's fees. In February 2001, defendants moved to dismiss the complaint and in October 2001, the court granted defendants' motion, dismissing all claims based on Federal law with prejudice and dismissing all claims based on state law on jurisdictional grounds, and entered judgment for the defendants. The plaintiffs did not file a notice of appeal, and their time to appeal has expired. In April 2001, a putative class action entitled David Uhrik v. Credit Suisse First Boston (USA), Inc., et al. was filed in Delaware Court of Chancery on behalf of the holders of CSFBdirect tracking stock (formerly known as DLJdirect tracking stock). Named defendants include AXA Financial, Credit Suisse First Boston (USA), Inc., the former directors of DLJ and the directors of Credit Suisse First Boston (USA), Inc. The complaint challenges the sale of DLJ common stock as well as the March 2001 offer by Credit Suisse to purchase the publicly owned CSFBdirect tracking stock for $4 per share and asserts claims for breaches of fiduciary duties and breach of contract. Plaintiffs seek injunctive relief, an unspecified amount of compensatory damages, and costs and expenses, including attorneys' fees. The Uhrik action, along with the actions captioned Irvin Woods, et al. v. Joe L. Roby, et al.; Thomas Rolle v. Joe L. Roby, et al.; Andrew Loguercio v. Joe L. Roby, et al.; and Robert Holschen v. Joe. L. Roby, et al., are among the actions that have been consolidated under the caption In re CSFBdirect Tracking Stock Shareholders Litigation. In May 2001, the Delaware Court of Chancery ordered that the Uhrik complaint be the operative complaint in the consolidated actions. A memorandum of understanding outlining the terms of a proposed settlement was executed in July 2001. It is anticipated that a stipulation of settlement will be filed with the Delaware Court F-36 of Chancery in or before March 2002. The proposed settlement, which does not involve any payment by AXA Financial, is subject to a number of conditions, including confirmatory discovery and approval, after a hearing, by the Delaware Court of Chancery. In April 2001, an amended class action complaint entitled Miller, et al. v. Mitchell Hutchins Asset Management, Inc., et al. was filed in Federal District Court in the Southern District of Illinois against Alliance, Alliance Fund Distributors, Inc. ("AFD"), a wholly owned subsidiary of Alliance, and other defendants alleging violations of the Investment Company Act of 1940, as amended ("ICA"), and breaches of common law fiduciary duty. The allegations in the amended complaint concern six mutual funds with which Alliance has investment advisory agreements, including Premier Growth Fund, Alliance Health Care Fund, Alliance Growth Fund, Alliance Quasar Fund, Alliance Fund and Alliance Disciplined Value Fund. The amended complaint alleges principally that (i) certain advisory agreements concerning these funds were negotiated, approved, and executed in violation of the ICA, in particular because certain directors of these funds should be deemed interested under the ICA; (ii) the distribution plans for these funds were negotiated, approved, and executed in violation of the ICA; and (iii) the advisory fees and distribution fees paid to Alliance and AFD, respectively, are excessive and, therefore, constitute a breach of fiduciary duty. Alliance and AFD believe that plaintiffs' allegations are without merit and intend to vigorously defend against these allegations. At the present time, management of Alliance and AFD are unable to estimate the impact, if any, that the outcome of this action may have on Alliance's results of operations or financial condition. On December 7, 2001 a complaint entitled Benak v. Alliance Capital Management L.P. and Alliance Premier Growth Fund ("Benak Complaint") was filed in Federal District Court in the District of New Jersey against Alliance and Alliance Premier Growth ("Premier Growth Fund") alleging violation of the ICA. The principal allegations of the Benak Complaint are that Alliance breached its duty of loyalty to Premier Growth Fund because one of the directors of the General Partner of Alliance served as a director of Enron Corp. ("Enron") when Premier Growth Fund purchased shares of Enron and as a consequence thereof, the investment advisory fees paid to Alliance by Premier Growth Fund should be returned as a means of recovering for Premier Growth Fund the losses plaintiff alleges were caused by the alleged breach of the duty of loyalty. Plaintiff seeks recovery of fees paid by Premier Growth Fund to Alliance during the twelve months preceding the lawsuit. On December 21, 2001 a complaint entitled Roy v. Alliance Capital Management L.P. and Alliance Premier Growth Fund ("Roy Complaint") was filed in Federal District Court in the Middle District of Florida, Tampa Divisions, against Alliance and Premier Growth Fund. The allegations and relief sought in the Roy Complaint are virtually identical to the Benak Complaint. On December 26, 2001 a compliant entitled Roffe v. Alliance Capital Management L.P. and Alliance Premier Growth Fund ("Roffe Complaint") was filed in the Federal District Court in the District of New Jersey against Alliance and Premier Growth Fund. The allegations and relief sought in the Roffe Complaint are virtually identical to the Benak Complaint. On February 14, 2002, a complaint entitled Tatem v. Alliance Capital Management L.P. and Alliance Premier Growth Fund ("Tatem Complaint") was filed in the Federal District Court in the District of New Jersey against Alliance and Premier Growth Fund. The allegations and relief sought in the Tatem Complaint are virtually identical to the Benak Complaint. Alliance believes the plaintiffs' allegations in the Benak Complaint, Roy Complaint, Roffe Complaint and Tatem Complaint are without merit and intends to vigorously defend against these allegations. At the present time Alliance's management is unable to estimate the impact, if any, that the outcome of these actions may have on Alliance's results of operations or financial condition. Although the outcome of litigation generally cannot be predicted with certainty, the Company's management believes that (i) the settlement of the Brown, R.S.M., In re AXA Financial, Inc. Shareholders Litigation and the Uhrik litigations will not have a material adverse effect on the consolidated financial position or results of operations of the Company and (ii) the ultimate resolution of the other litigations described above should not have a material adverse effect on the consolidated financial position of the Company. The Company's management cannot make an estimate of loss, if any, or predict whether or not any of such other litigations described above will have a material adverse effect on the Company's consolidated results of operations in any particular period. In addition to the matters previously reported and those described above, the Holding Company, the Company and their subsidiaries are involved in various legal actions and proceedings in connection with their businesses. Some of the actions and proceedings have been brought on behalf of various alleged classes of claimants and certain of these claimants seek damages of unspecified amounts. While the ultimate outcome of such matters cannot be predicted with certainty, in the opinion of management no such matter is likely to have a material adverse effect on the Company's consolidated financial position or results of operations. F-37 However, it should be noted that the frequency of large damage awards, including large punitive damage awards that bear little or no relation to actual economic damages incurred by plaintiffs in some jurisdictions, continues to create the potential for an unpredictable judgment in any given matter. 16) LEASES The Company has entered into operating leases for office space and certain other assets, principally information technology equipment and office furniture and equipment. Future minimum payments under noncancelable operating leases for 2002 and the four successive years are $114.6 million, $107.3 million, $112.9 million, $100.5 million, $84.4 million and $921.0 million thereafter. Minimum future sublease rental income on these noncancelable operating leases for 2002 and the four successive years is $6.0 million, $4.6 million, $4.6 million, $4.6 million, $3.1 million and $21.1 million thereafter. At December 31, 2001, the minimum future rental income on noncancelable operating leases for wholly owned investments in real estate for 2002 and the four successive years is $80.3 million, $86.8 million, $82.9 million, $77.0 million, $75.4 million and $601.6 million thereafter. The Company has entered into capital leases for certain information technology equipment. Future minimum payments under noncancelable capital leases for 2002 and the three successive years are $4.9 million, $4.6 million, $2.7 million and $.9 million. 17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION Equitable Life is restricted as to the amounts it may pay as dividends to the Holding Company. Under the New York Insurance Law, a domestic life insurer may, without prior approval of the Superintendent, pay a dividend to its shareholders not exceeding an amount calculated based on a statutory formula. This formula would permit Equitable Life to pay shareholder dividends not greater than $544.0 million during 2002. Payment of dividends exceeding this amount requires the insurer to file notice of its intent to declare such dividends with the Superintendent who then has 30 days to disapprove the distribution. For 2001, 2000 and 1999, the Insurance Group statutory net income totaled $547.7 million, $1,068.6 million and $547.0 million, respectively. Statutory surplus, capital stock and Asset Valuation Reserve ("AVR") totaled $6,100.4 million and $6,226.5 million at December 31, 2001 and 2000, respectively. In 2001, 2000 and 1999, respectively, $1.7 billion, $250.0 million and $150.0 million in dividends were paid to the Holding Company by Equitable Life. At December 31, 2001, the Insurance Group, in accordance with various government and state regulations, had $23.5 million of securities deposited with such government or state agencies. In 1998 the National Association of Insurance Commissioners ("NAIC") approved a codification of statutory accounting practices ("Codification"), which provides regulators and insurers with uniform statutory guidance, addressing areas where statutory accounting previously was silent and changing certain existing statutory positions. Equitable Life and EOC became subject to Codification rules for all state filings upon adoption of Codification by the respective states. On December 27, 2000, an emergency rule was issued by the New York Insurance Department ("NYID"), which adopted Codification in New York effective on January 1, 2001 except where the guidance conflicted with New York Law. Equitable Life is required to prepare the Quarterly and Annual Statements and Audited financial statements in accordance with New York rules and regulations which are filed in all states. Differences between the New York regulations and Codification consist of the accounting for deferred taxes and goodwill. The implementation of Codification resulted in a $1,630.9 million increase to surplus and capital stock, principally due to the $1,660.8 million valuation adjustment related to Alliance. The NYID is currently expected to adopt Codification's accounting for deferred income taxes and goodwill effective in 2002. The impact of adopting the deferred tax accounting is estimated to be a $363.6 million decrease to surplus and capital stock at December 31, 2001. The application of the Codification rules as adopted by the State of Colorado had no significant effect on Equitable Life or EOC. F-38 The NYID requires quarterly disclosure reconciling both net income and capital and surplus between practices prescribed and permitted by the State of New York and the January 1, 2001 NAIC Accounting Practices and Procedures manual. The 2001 reconciliation for Equitable Life follows:
DECEMBER 31, 2001 ----------------- (IN MILLIONS) Net Income, State of New York basis ................................ $ 543.7 Prescribed Practices ............................................... -- Permitted Practices ................................................ -- ---------- Net Income, NAIC Basis ............................................. $ 543.7 ========== Statutory surplus and capital stock, State of New York basis ....... $ 5,446.0 Prescribed Practices: Deferred tax liability ......................................... (363.6) Permitted practices ................................................ -- ---------- Statutory Surplus and Capital Stock, NAIC Basis .................... $ 5,082.4 ==========
The differences between statutory surplus and capital stock determined in accordance with Statutory Accounting Principles ("SAP") and total shareholders' equity under GAAP are primarily: (a) the inclusion in SAP of an AVR intended to stabilize surplus from fluctuations in the value of the investment portfolio; (b) future policy benefits and policyholders' account balances under SAP differ from GAAP due to differences between actuarial assumptions and reserving methodologies; (c) certain policy acquisition costs are expensed under SAP but deferred under GAAP and amortized over future periods to achieve a matching of revenues and expenses; (d) Federal income taxes are generally accrued under SAP based upon revenues and expenses in the Federal income tax return while under GAAP deferred taxes provide for timing differences between recognition of revenues and expenses for financial reporting and income tax purposes; (e) the valuation of assets under SAP and GAAP differ due to different investment valuation and depreciation methodologies, as well as the deferral of interest-related realized capital gains and losses on fixed income investments; (f) the valuation of the investment in Alliance and Alliance Holding under SAP reflects a portion of the market value appreciation rather than the equity in the underlying net assets as required under GAAP; (g) the provision for future losses of the discontinued Wind-Up Annuities business is only required under GAAP; (h) reporting the surplus notes as a component of surplus in SAP but as a liability in GAAP; (i) computer software development costs are capitalized under GAAP but expensed under SAP; and (j) certain assets, primarily pre-paid assets, are not admissible under SAP but are admissible under GAAP. Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ in certain instances from GAAP. The following reconciles the Insurance Group's statutory change in surplus and capital stock and statutory surplus and capital stock determined in accordance with accounting practices prescribed by the NYID with net earnings and equity on a GAAP basis. F-39
2001 2000 1999 ---------- ---------- ---------- (IN MILLIONS) Net change in statutory surplus and capital stock .............................................. $ 104.1 $ 1,321.4 $ 848.8 Change in asset valuation reserves ........................... (230.2) (665.5) (6.3) ---------- ---------- ---------- Net change in statutory surplus, capital stock and asset valuation reserves ............................... (126.1) 655.9 842.5 Adjustments: Future policy benefits and policyholders' account balances ......................................... 278.7 262.6 (80.4) DAC ........................................................ 458.5 469.1 198.2 Deferred Federal income taxes .............................. (354.8) (127.3) (154.3) Valuation of investments ................................... 67.9 (134.8) 21.5 Valuation of investment subsidiary ......................... (1,507.9) (29.2) (133.6) Limited risk reinsurance ................................... -- -- 128.4 Dividends paid to the AXA Financial ........................ 1,700.0 250.0 150.0 Capital contribution ....................................... -- -- (470.8) Stock option expense related to AXA's minority interest acquisition ..................................... -- (493.9) -- Other, net ................................................. 135.8 448.8 253.8 GAAP adjustments of Other Discontinued Operations ............................................... (5.1) 54.3 51.3 ---------- ---------- ---------- Net Earnings of the Insurance Group .......................... $ 647.0 $ 1,355.5 $ 806.6 ========== ========== ==========
DECEMBER 31, ---------------------------------------------- 2001 2000 1999 ---------- ---------- ---------- (IN MILLIONS) Statutory surplus and capital stock .......................... $ 5,446.0 $ 5,341.9 $ 4,020.5 Asset valuation reserves ..................................... 654.4 884.6 1,550.1 ---------- ---------- ---------- Statutory surplus, capital stock and asset valuation reserves ......................................... 6,100.4 6,226.5 5,570.6 Adjustments: Future policy benefits and policyholders' account balances ......................................... (1,120.7) (1,399.4) (1,662.0) DAC ........................................................ 5,513.7 5,128.8 4,928.6 Deferred Federal income taxes .............................. (1,252.2) (640.7) (223.5) Valuation of investments ................................... 635.9 140.2 (717.3) Valuation of investment subsidiary ......................... (2,590.8) (1,082.9) (1,891.7) Limited risk reinsurance ................................... -- -- (39.6) Issuance of surplus notes .................................. (539.4) (539.1) (539.1) Other, net ................................................. 942.6 776.2 501.5 GAAP adjustments of Other Discontinued Operations ............................................... (123.8) (164.3) (160.0) ---------- ---------- ---------- Equity of the Insurance Group ................................ $ 7,565.7 $ 8,445.3 $ 5,767.5 ========== ========== ==========
18) BUSINESS SEGMENT INFORMATION The Company's operations consist of Insurance and Investment Services. The Company's management evaluates the performance of each of these segments independently and allocates resources based on current and future requirements of each segment. F-40 The Insurance segment offers a variety of traditional, variable and interest-sensitive life insurance products, disability income, annuity products, mutual fund and other investment products to individuals and small groups. It also administers traditional participating group annuity contracts with conversion features, generally for corporate qualified pension plans, and association plans which provide full service retirement programs for individuals affiliated with professional and trade associations. This segment includes Separate Accounts for individual insurance and annuity products. The Investment Services segment principally includes Alliance. Alliance provides diversified investment management and related services globally to a broad range of clients including: (a) institutional clients, including pension funds, endowments and domestic and foreign financial institutions, (b) private clients, including high net worth individuals, trusts and estates and charitable foundations, (c) individual investors, principally through a broad line of mutual funds, and (d) institutional investors by means of in-depth research, portfolio strategy and other services. This segment also includes institutional Separate Accounts that provide various investment options for large group pension clients, primarily defined benefit and contribution plans, through pooled or single group accounts. Intersegment investment advisory and other fees of approximately $116.6 million, $153.2 million and $75.6 million for 2001, 2000 and 1999, respectively, are included in total revenues of the Investment Services segment. The following tables reconcile segment revenues and earnings from continuing operations before Federal income taxes to total revenues and earnings as reported on the consolidated statements of earnings and segment assets to total assets on the consolidated balance sheets, respectively.
2001 2000 1999 ------------ ------------ ----------- (IN MILLIONS) SEGMENT REVENUES: Insurance ............................... $ 4,763.3 $ 4,681.9 $ 5,179.4 Investment Services ..................... 2,994.4 4,672.5 2,163.8 Consolidation/elimination ............... (90.0) (113.2) (23.5) ------------ ------------ ----------- Total Revenues .......................... $ 7,667.7 $ 9,241.2 $ 7,319.7 ============ ============ =========== SEGMENT EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE FEDERAL INCOME TAXES AND MINORITY INTEREST: Insurance ............................... $ 707.5 $ (192.5) $ 555.7 Investment Services ..................... 585.4 2,778.0 754.2 ------------ ------------ ----------- Total Earnings from Continuing Operations before Federal Income Taxes and Minority Interest .................... $ 1,292.9 $ 2,585.5 $ 1,309.9 ============ ============ ===========
2001 2000 1999 ------------ ------------ ----------- (IN MILLIONS) ASSETS: Insurance ............................... $ 84,568.9 $ 88,641.1 $ 86,840.1 Investment Services ..................... 15,808.8 16,807.2 12,961.7 Consolidation/elimination ............... (94.4) (57.1) (8.9) ------------ ------------ ----------- Total Assets ............................ $ 100,283.3 $ 105,391.2 $ 99,792.9 ============ ============ ===========
F-41 19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The quarterly results of operations for 2001 and 2000 are summarized below:
THREE MONTHS ENDED ------------------------------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ------------- ------------- ------------ ------------- (IN MILLIONS) 2001 Total Revenues................ $ 2,023.1 $ 1,898.6 $ 1,804.8 $ 1,941.2 ============= ============= ============ ============ Earnings from Continuing Operations.................. $ 227.1 $ 120.3 $ 119.2 $ 140.0 ============= ============= ============ ============ Net Earnings.................. $ 233.6 $ 118.5 $ 118.7 $ 176.2 ============= ============= ============ ============ 2000 Total Revenues................ $ 1,898.9 $ 1,954.5 $ 1,982.9 $ 3,404.9 ============= ============= ============ ============ Earnings from Continuing Operations.................. $ 226.6 $ 256.9 $ 70.5 $ 742.9 ============= ============= ============ ============ Net Earnings.................. $ 221.7 $ 255.4 $ 70.5 $ 807.9 ============= ============= ============ ============
F-42 20) ACCOUNTING FOR STOCK-BASED COMPENSATION The Holding Company sponsors a stock incentive plan for employees of Equitable Life. Alliance sponsors its own stock option plans for certain employees. The Company has elected to continue to account for stock-based compensation using the intrinsic value method prescribed in APB No. 25. Had compensation expense as related to options awarded under AXA Financial's Stock Incentive Plans been determined based on SFAS No. 123's fair value based method, including the cost of the amendments and modifications made in connection with AXA's acquisition of the minority interest in the Holding Company, the Company's pro forma net earnings for 2001, 2000 and 1999 would have been $624.8 million, $1,627.3 million and $757.1 million, respectively. In conjunction with approval of the agreement for AXA's acquisition of the minority interest in the Holding Company's Common Stock, generally all outstanding options awarded under the 1997 and 1991 Stock Incentive Plans were amended to become immediately and fully exercisable pursuant to their terms upon expiration of the initial tender offer. In addition, the agreement provided that at the effective time of the merger, the terms of all outstanding options granted under those Plans would be further amended and converted into options of equivalent intrinsic value to acquire a number of AXA ordinary shares in the form of ADRs. Also pursuant to the agreement, holders of non-qualified options were provided with an alternative to elect cancellation of those options at the effective time of the merger in exchange for a cash payment from the Holding Company. For the year ended December 31, 2000, the Company recognized compensation expense of $493.9 million, representing the cost of these Plan amendments and modifications offset by an addition to capital in excess of par value. Beginning in 2001, under the 1997 Stock Incentive Plan, the Holding Company can issue options to purchase AXA ADRs. The options, which include Incentive Stock Options and Nonstatutory Stock Options, are issued at the fair market value of the AXA ADRs on the date of grant. Generally, one-third of stock options granted vest and become exercisable on each of the first three anniversaries of the date such options were granted. Options are currently exercisable up to 10 years from the date of grant. Following completion of the merger of AXA Merger with and into the Holding Company, certain employees exchanged AXA ADR options for tandem Stock Appreciation Rights ("SARs") and at-the-money AXA ADR options of equivalent intrinsic value. The maximum obligation for the SARs is $73.3 million, based upon the underlying price of AXA ADRs at January 2, 2001, the closing date of the aforementioned merger. The Company recorded a reduction in the SARs liability of $63.2 million for 2001, reflecting the variable accounting for the SARs, based on the change in the market value of AXA ADRs for the period ended December 31, 2001. F-43 The Black-Scholes option pricing model was used in determining the fair values of option awards used in the pro-forma disclosures above. The option pricing assumptions for 2001, 2000 and 1999 follow:
HOLDING COMPANY ALLIANCE ----------------------------------------- ------------------------------ 2001(1) 2000 1999 2001 2000 1999 ------------- ------------- ------------ -------------------- --------- Dividend yield.... 1.52% 0.32% 0.31% 5.80% 7.20% 8.70% Expected volatility...... 29% 28% 28% 33% 30% 29% Risk-free interest rate............ 4.98% 6.24% 5.46% 4.5% 5.90% 5.70% Expected life in years........ 5 5 5 7.2 7.4 7 Weighted average fair value per option at grant-date...... $9.42 $11.08 $10.78 $9.23 $8.32 $3.88
(1) Beginning in 2001, the option pricing assumptions reflect options granted by the Holding Company representing rights to acquire AXA ADRs. F-44 A summary of the activity in the option shares of the Holding Company and Alliance's option plans follows, including information about options outstanding and exercisable at December 31, 2001. Outstanding options at January 2, 2001 to acquire AXA ADRs reflect the conversion of 11.5 million share options of the Holding Company that remained outstanding following the above-described cash settlement made pursuant to the agreement for AXA's acquisition of the minority interest in the Holding Company's Common Stock. All information presented below as related to options to acquire AXA ADRs gives appropriate effect to AXA's May 2001 four-for-one stock split and the related changes in ADR parity for each Holding Company share option:
HOLDING COMPANY ALLIANCE ------------------------------------ -------------------------------- Common Stock Weighted Weighted and Average Average AXA ADRs Exercise Units Exercise (In Millions) Price (In Millions) Price ------------------- --------------- -------------- ----------------- Holding Company Option Shares: Balance as of December 31, 1998................ 21.4 $22.00 12.3 $14.92 Granted.......................... 4.3 $31.70 2.0 $30.18 Exercised........................ (2.4) $13.26 (1.5) $ 9.51 Forfeited........................ (.6) $24.29 (.3) $17.79 ------------------- -------------- Balance as of December 31, 1999................ 22.7 $24.60 12.5 $17.95 Granted.......................... 6.5 $31.06 4.7 $50.93 Exercised........................ (4.5) $18.57 (1.7) $10.90 Forfeited........................ (1.2) $26.15 (.1) $26.62 ------------------- -------------- Balance as of December 31, 2000................ 23.5 $27.20 15.4 $28.73 =================== ============== AXA ADR Option Shares: Balance as of January 2, 2001...... 18.3 $21.65 Granted.......................... 17.0 $31.55 2.5 $50.34 Exercised........................ (2.2) $11.57 (1.7) $13.45 Forfeited........................ (3.1) $32.02 (.3) $34.33 ------------------- -------------- Balance as of December 31, 2001................ 30.0 $26.89 15.9 $33.58 =================== ==============
F-45 Information about options outstanding and exercisable at December 31, 2001 follows:
Options Outstanding Options Exercisable --------------------------------------------------- ------------------------------------- Weighted Average Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices (In Millions) Life (Years) Price (In Millions) Price --------------------------------------- ---------------- --------------- ------------------ ---------------- AXA ADRs ---------------------- $ 6.325 - $ 9.01 1.9 2.25 $ 6.75 1.9 $ 6.75 $10.195 - $14.30 2.2 5.69 $13.32 2.2 $13.34 $15.995 - $22.84 5.2 7.29 $18.87 4.4 $18.74 $26.095 - $33.025 15.7 6.58 $30.97 2.6 $26.78 $36.03 5.0 7.48 $36.03 5.0 $36.03 ----------------- ------------------ $ 6.325 - $36.03 30.0 6.51 $26.89 16.1 $23.24 ================= ================== Alliance ---------------------- $ 7.97 - $18.78 4.7 4.20 $12.92 4.3 $12.48 $ 22.50 - $27.31 2.5 6.94 $26.29 1.4 $26.30 $ 30.25 - $46.78 1.7 7.93 $30.30 .6 $30.25 $ 48.50 - $50.56 4.9 9.18 $49.36 .5 $48.50 $ 51.10 - $58.50 2.1 8.95 $53.78 .5 $53.75 ----------------- ------------------ $ 7.97 - $58.50 15.9 7.20 $33.57 7.3 $21.42 ================= ==================
The Company's ownership interest in Alliance will continue to be reduced upon the exercise of unit options granted to certain Alliance employees. Options are exercisable over a period of up to ten years. In 1997, Alliance Holding established a long-term incentive compensation plan under which grants are made to key employees for terms established by Alliance Holding at the time of grant. These awards include options, restricted Alliance Holding units and phantom restricted Alliance Holding units, performance awards, other Alliance Holding unit based awards, or any combination thereof. At December 31, 2001, approximately 12.4 million Alliance Holding units of a maximum 40.0 million units were subject to options granted and 25,500 Alliance Holding units were subject to awards made under this plan. 21) RELATED PARTY TRANSACTIONS Beginning January 1, 2000, the Company reimburses the Holding Company for expenses relating to the Excess Retirement Plan, Supplemental Executive Retirement Plan and certain other employee benefit plans that provide participants with medical, life insurance, and deferred compensation benefits. Such reimbursement was based on the cost to the Holding Company of the benefits provided which totaled $19.1 million and $16.0 million, respectively, for 2001 and 2000. The Company paid $590.5 million and $678.9 million, respectively, of commissions and fees to AXA Distribution and its subsidiaries for sales of insurance products for 2001 and 2000. The Company charged AXA Distribution's subsidiaries $522.6 million and $395.0 million, respectively, for their applicable share of operating expenses for 2001 and 2000, pursuant to the Agreements for Services. In September 2001, Equitable Life loaned $400.0 million to AXA Insurance Holding Co. Ltd., a subsidiary of AXA. This investment has an interest rate of 5.89% and matures on June 15, 2007. All payments, including interest payable semi-annually, are guaranteed by AXA. Both Equitable Life and Alliance, along with other AXA affiliates, participate in certain cost sharing and servicing agreements which include technology and professional development arrangements. Payments by Equitable Life and Alliance to AXA totaled approximately $12.7 million in 2001. F-46 Commissions, fees and other income includes certain revenues for services provided to mutual funds managed by Alliance described below:
2001 2000 1999 ----------------- ---------------- ------------------ (IN MILLIONS) Investment advisory and services fees.............. $ 1,088.2 $ 1,021.8 $ 895.8 Distribution revenues.............................. 544.6 621.6 441.8 Shareholder servicing fees......................... 87.2 85.6 62.3 Other revenues..................................... 11.0 11.6 9.9 Brokerage.......................................... 9.0 1.7 --
22) PRO FORMA FINANCIAL INFORMATION (UNAUDITED) Assuming the Bernstein acquisition had occurred on January 1, 1999, revenues for the Company would have been $8.79 billion and $7.05 billion for 2000 and 1999, respectively, on a pro forma basis. The impact of the acquisition on net earnings on a pro-forma basis would not have been material. This pro forma financial information does not necessarily reflect the results of operations that would have resulted had the Bernstein acquisition actually occurred on January 1, 1999, nor is the pro forma financial information necessarily indicative of the results of operations that may be achieved for any future period. F-47 PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) Financial Statements included in Part B. The following are included in the Statement of Additional Information relating to the American Dental Association Members Retirement Program: 1. Separate Account No. 195: -Report of Independant Accountants -Statement of Assets and Liabilities, December 31, 2001 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Notes to Financial Statements 2. Separate Account No. 197: -Report of Independant Accountants -Statement of Assets and Liabilities, December 31, 2001 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Notes to Financial Statements 3. Separate Account No. 198: -Report of Independant Accountants -Statement of Assets and Liabilities, December 31, 2001 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Notes to Financial Statements 4. The Equitable Life Assurance Society of the United States: -Report of Independent Accountants - Pricewaterhouse LLP -Consolidated Balance Sheets, December 31, 2001 and 2000 -Consolidated Statements of Earnings for the Years Ended December 31, 2001, 2000 and 1999 -Consolidated Statements of Equity for Years Ended December 31, 2001, 2000 and 1999 -Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999 -Notes to Consolidated Financial Statements 5. Lifecycle Group Trust - Conservative: -Report of Independent Accountants - Lifecycle Group Trust Conservative -Statements of Assets and Liabilities, December 31, 2001 -Statements of Operations for the Year Ended December 31, 2001 -Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2001 C-1 6. Lifecycle Group Trust - Moderate: -Report of Independent Accountants - Lifecycle Group Trust - Moderate -Statements of Assets and Liabilities, December 31, 2001 -Statements of Operations for the Year Ended December 31, 2001 -Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2001 7. S&P 500 Flagship Fund: -Report of Independent Accountants - S&P 500 Index with Futures: -Combined Statements of Assets and Liabilities Ended December 31, 2001 -Combined Statements of Operations for the Years Ended December 31, 2001 and 2000 -Combined Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 Schedule of Investments, December 31, 2001 8. Russell 2000 Fund: -Report of Independent Accountants - Russell 2000 Fund -Statements of Assets and Liabilities, December 31, 2001 -Statements of Operations for the Year Ended December 31, 2001 -Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2001 9. Daily EAFE Fund: -Report of Independent Accountants - Daily EAFE Fund -Statements of Assets and Liabilities, December 31, 2001 -Statements of Operations for the Year Ended December 31, 2001 -Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2001 10. Daily Government/Corporate Bond Fund: -Report of Independent Accountants - Daily Government/Corporate Bond Fund -Statements of Assets and Liabilities, December 31, 2001 -Statements of Operations for the Year Ended December 31, 2001 -Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2001 C-2 11. Short Term Investment Fund: -Report of Independent Accountants - Short Term Investment Fund -Statements of Assets and Liabilities, December 31, 2001 -Statements of Operations for the Year Ended December 31, 2001 -Statements of Changes in Net Assets for the Years Ended December 31, 2001 and 2000 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2001 (b) Exhibits. The following Exhibits are filed herewith: 1.(a) Resolutions of the Board of Directors of The Equitable Life Assurance Society of the United States ("Equitable") authorizing the establishment of Separate Accounts Nos. 197 and 198, incorporated by reference to Registration Statement No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (b) Action by Brian S. O'Neil, Executive Vice President and Chief Investment Officer of Equitable, dated October, 1993 establishing Separate Account No. 195 and copies of resolutions of the Board of Directors of Equitable referenced in said action, incorporated by reference to Registration Statement No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. 2. Not applicable. 3. (a)(1)Service Agreement, effective as of February 1, 1994, among The Seven Seas Series Fund, Russell Fund Distributors, Inc. in its capacity as distributor of the Seven Seas Series Fund and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No.33-75614 on Form N-4 of Registrant, filed on February 23, 1994. (a)(2)Service Agreement, effective as of February 1, 1994, between State Street Bank and Trust Company and The Equitable Life Assurance Society of The United States, incorporated by reference to Registration No.33-75614 on Form N-4 of Registrant, filed on February 23, 1994. (b) Letter Agreement between The Equitable Life Assurance Society of the United States and the Trustees of the American Dental Association Members Retirement Trust and Trustees of the American Dental Association Members Pooled Trust for Retirement, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 29, 1994. (c) Letter Agreement between The Equitable Life Assurance Society of the United States and the Trustees of the American Dental Association Members Retirement Trust and Trustees of the American Dental Association Members Pooled Trust for Retirement, incorporated by reference to C-3 Registration No. 33-75616 on Form N-4 of Registrant, filed on April 28, 1995. (d) Form of Agreement, effective as of May 1, 1995, between State Street Bank and Trust Company and The Equitable Life Assurance Society of the United States regarding Lifecycle Fund Group Trusts and Underlying Funds, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 28, 1995. 4. (a) Exhibit 6(a)(2) (Group Annuity Contract AC 2100, as amended and restated effective February 1, 1991 on contract Form No. APC 1,000-91, among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement 33-40162, filed on December 20, 1991. (b) Rider No. 1 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-46995 on Form N-3 of Registrant, filed on April 8, 1992. (c) Form of Rider No. 2 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-46995 on Form N-3 of Registrant, filed on April 8, 1992. (d) Rider No. 3 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States incorporated by reference to Exhibit No. 4(i) to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 29, 1994. (e) Form of Rider No. 4 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 29, 1994. (f) Form of Rider No. 5 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by C-4 reference to Registration No. 33-75616 on Form N-4 of Registrat, filed on February 27, 1995. (g) Form of Rider No. 6 to Group Annuity Contract 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Post-Effective Amendment No. 3 to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 30, 1996. (h) Form of Rider No. 7 to Group Annuity Contract 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Post-Effective Amendment No. 3 to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 30, 1996. (i) Form of Rider No. 8 to Group Annuity Contract 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Post-Effective Amendment No. 3 to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 30, 1996. (j) Form of Rider No. 9 to Group Annuity Contract 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement No. 33-75616 on Form N-4, filed on April 30, 1997. 5. (a) Exhibit 7(a) (Form of Participation Agreement for the standardized Profit-Sharing Plan under the ADA Program), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed on April l6, 1986. (b) Exhibit 7(b) (Form of Participation Agreement for the non-standardized Profit-Sharing Plan under the ADA Program), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed on April l6, 1986. (c) Exhibit 7(e) (Copy of Attachment to Profit Sharing Participation Agreement under the American Dental Association Members Retirement Plan), incorporated by reference to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1988. (d) Exhibit 7(e)(2) (Form of Participant Enrollment Form under the ADA Program), incorporated by reference to Post-Effective Amendment No. 2 on Form N-3 to Registration C-5 Statement on Form S-1 of Registrant, filed on April 2l, l987. (e) Exhibit 7(v) (Form of Simplified Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. (f) Exhibit 7(w) (Form of Non-Standardized Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. (g) Exhibit 7(x) (Form of Standardized Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. 6. (a) Copy of the Restated Charter of The Equitable Life Assurance Society of the United States, as amended January 1, 1997, incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement No. 33-75616, filed on April 29, 1997. (b) By-Laws of The Equitable Life Assurance Society of the United States, as amended November 21, 1996, incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement No. 33-75616, filed on April 29, 1997. 7. Not applicable 8. (a) Exhibit 11(a)(2) (Form of American Dental Association Members Retirement Plan, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. C-6 (b) Exhibit 11(g)(2) (Form of American Dental Association Members Retirement Trust, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. (c) Exhibit 11(i) (Form of First Amendment to the American Dental Association Members Retirement Trust), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant, filed on December 20, 1991. (d) Exhibit 11(g) (Copy of Administration Services Agreement, dated January 10, 1986, among The Equitable Life Assurance Society of the United States, the Trustees of the Trust maintained under the American Dental Association Members Retirement Plan, the Trustees of the Pooled Trust maintained by the American Dental Association and the Council of Insurance of the American Dental Association), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed on April l6, 1986. (e) Exhibit 11(j) (Copy of American Dental Association Members Pooled Trust for Retirement Plans, dated as of January 1, 1984), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant on Form N-3 of Registrant, filed on December 20, 1991. (f) Exhibit 11(k) (Form of First Amendment to the American Dental Association Members Pooled Trust for Retirement Plans, dated as of January 1, 1984), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant, filed on December 20, 1991. (g) Administrative Services Agreement among The Equitable Life Assurance Society of the United States, the Trustees of the American Dental Association Members Retirement Trust and of the American Dental Association Member Retirement Trust for Retirement Plans and the Council on Insurance of the American Dental Association, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 29, 1994. (h) Declaration of Trust dated February 21, 1991 for the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (i) First Amendment to the Declaration of Trust dated as of July 19, 1991, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. C-7 (j) Fund Declaration of State Street Bank and Trust Company establishing the Lifecycle Fund Group Trust-Conservative dated February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (j)(j) Second Amended and restated Declaration of Trust of the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, dated as of March 13, 1997 filed with this Registration Statement No. 333-35596 on April 30, 2001. (k) First Amendment and Fund Declaration for the Lifecycle Group Trust-Conservative, effective April 26, 1995, incorporated by reference to Registration No. 33-75616, filed on April 28, 1995. (l) Fund Declaration of State Street Bank and Trust Company establishing the Lifecycle Fund Group Trust-Moderate dated February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (m) First Amendment and Fund Declaration for the Lifecycle Fund Group Trust-Moderate, effective April 26, 1995, incorporated by reference to Registration No. 33-75616, filed on April 28, 1995. (n) Amendment and Fund Declaration for the S&P 500 Flagship Fund effective September 1, 1991, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (n)(n) Amendment and Fund Declaration for S&P 500 Flagship Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (o) Amendment and Fund Declaration for the Short Term Investment Fund effective September 1, 1991, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (o)(o) Second Amendment and Fund Declaration for Short Term Investment Fund, effective November 1, 1998, filed with this Registration Statement No. 333-35596 on April 30, 2001. (p) Fund Declaration for the Daily EAFE Fund effective September 16, 1993, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (p)(p) Amendment and Fund Declaration for the Daily EAFE Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (q) First Amendment and Fund Declaration for the Daily Government/Corporate Bond Fund effective November 30, 1994, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (q)(q) Amendment and Fund Declaration for the Government Corporate Bond Fund, effective September 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (r) Second Amendment and Fund Declaration for the Russell 2000 Fund effective February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (r)(r) Amendment and Fund Declaration for the Russell 2000 Index Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (s) Fund Declaration for the Russell 2000 Growth Fund effective February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (s)(s) Amendment and Fund Declaration for the Russell 2000 Growth Index Securities Lending Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (t) Fund Declaration for the Russell 2000 Value Fund effective February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (t)(t) Amendment and Fund Declaration for the Russell 2000 Value Index Securities Lending Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. C-8 9. (a) Opinion and Consent of Peter A. Weinberg, Vice President and Counsel and The Equitable Life Assurance Society, incorporated by reference to Pre-Effective Amendment No. 1 to Registration No. 33-75616 of Registrant, filed on April 29, 1994. (b) Opinion and Consent of Mary P. Breen, Vice President and Associate General Counsel of The Equitable Life Assurance Society of the United States, incorporated herein by reference to Registration Statement File No. 333-51031 filed April 24, 1998. (c) Opinion and Consent of Mary Joan Hoene, Vice President and Counsel of the Equitable Life Assurance Society of the United States, incorporated herein by reference to Exhibit No. 9(c) to Registration Statement No. 333-77113, filed on April 26, 1999. (d) Opinion and Consent of Robin Wagner, Vice President and Counsel of the Equitable Life Assurance Society of the United States. Previously filed with this Registration Statement, File No. 333-35596, on April 26, 2000. (e) Opinion and Consent of Robin Wagner, Vice President and Counsel of the Equitable Life Assurance Society of the United States. 10. (a) Consent of Peter A. Weinberg (included within Exhibit 9(a) above). (b) Consent of Mary P. Breen (included within Exhibit 9(b) above). (b)(i)Consent of Mary Joan Hoene (included within Exhibit 9(c)). (b)(ii)Consent of Robin Wagner (included within Exhibit 9(d) above). (c) Consent of Robin Wagner (included within Exhibit 9(e). (d) Consent of PricewaterHouseCoopers LLP. (e) Powers of Attorney (Equitable). Previously filed with this Registration Statement, File No. 333-35596, on April 26, 2000. (f) Powers of Attorney (State Street). (g) Power of Attorney for Claus-Michael Dill (Equitable), filed with this Registration Statement No. 333-35596, on April 30, 2001. (h) Power of Attorney for Christopher M. Condron incorporated herein by reference to the Registration Statement on Form N-4, (File No. 333-61380) filed on May 22, 2001. (i) Power of Attorney for Bruce W. Calvert incorporated herein by reference to Exhibit 23(f) to the Registration Statement on Form N-4 (File No. 333-67876), filed on August 17, 2001. 11. Not applicable. 12. Not applicable. 13. Not applicable. 14. Not Applicable. C-9 Item 25: Directors and Officers of Equitable. Set forth below is information regarding the directors and principal officers of Equitable. Equitable's address is 1290 Avenue of Americas, New York, New York 10104. The business address of the persons whose names are preceded by an asterisk is that of Equitable. POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- DIRECTORS Bruce W. Calvert Director Alliance Capital Management Corporation 1345 Avenue of the Americas New York, N.Y. 10105 Francoise Colloc'h Director AXA 25, Avenue Matignon 75008 Paris, France Henri de Castries Director AXA 25, Avenue Matignon 75008 Paris, France Claus-Michael Dill Director AXA Konzern AG Gereonsdriesch 9-11 50670 Cologne, Germany Joseph L. Dionne Director 198 North Wilton Rd. New Canaan, CT 06840 Denis Duverne Director AXA 25, Avenue Matignon 75008 Paris, France Jean-Rene Fourtou Director Aventis 46 quai de la Rapee 75601 Paris Cedex 12 France Norman C. Francis Director Xavier University of Louisiana 1 Drexel Drive New Orleans, LA 70125 C-10 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- Donald J. Greene Director LeBouef, Lamb, Greene & MacRae 125 West 55th Street New York, NY 10019-4513 John T. Hartley Director Harris Corporation 1025 W. NASA Boulevard Melbourne, FL 32919 John H.F. Haskell Jr. Director UBS Warburg LLC 299 Park Ave. 40th Floor New York, NY 10171 Mary R. (Nina) Henderson Director 425 East 86th Street Apt 12-C New York, NY 10028 W. Edwin Jarmain Director 77 King Street West Toronto, M5K 1K2 Canada George T. Lowy Director Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 C-11 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- Didier Pineau-Valencienne Director Credit Suisse First Boston 64, rue de Miromesil 75008 Paris, France George J. Sella, Jr. Director P.O. Box 397 Newton, NJ 07860 Peter J. Tobin Director St. John's University 8,000 Utopia Parkway Jamaica, NY 11439 OFFICER-DIRECTORS - ----------------- *Christopher M. Condron Chairman of the Board, Chief Executive Officer and Director * Stanley B. Tulin Vice Chairman of the Board, Chief Financial Officer and Director OTHER OFFICERS - -------------- *Leon Billis Executive Vice President and AXA Group Deputy Chief Information Officer *Harvey Blitz Senior Vice President *Kevin R. Byrne Senior Vice President and Treasurer *Selig Erlich Executive Vice President and Chief Actuary *Stuart L. Faust Senior Vice President and Chief Actuary *Alvin H. Fenichel Senior Vice President and Controller Jennifer Blevins Executive Vice President MaryBeth Farrell Executive Vice President John Lefferts Executive Vice President and President of Retail Distribution William (Alex) MacGillivray Executive Vice President Deanna Mulligan Executive Vice President C-12 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- *Paul J. Flora Senior Vice President and Auditor *James D. Goodwin Senior Vice President *Edward J. Hayes Senior Vice President *Donald R. Kaplan Senior Vice President and Chief Compliance Officer and Associate General Counsel *William I. Levine Executive Vice President and Chief Information Officer *Richard J. Matteis Executive Vice President *Peter D. Noris Executive Vice President and Chief Investment Officer *Anthony C. Pasquale Senior Vice President *Pauline Sherman Senior Vice President, Secretary and Associate General Counsel *Richard V. Silver Executive Vice President and General Counsel *Naomi J. Weinstein Vice President C-13 Item 26. Persons Controlled by or Under Common Control with the Insurance Company or Registrant: Separate Account Nos. 195, 197 and 198 of The Equitable Life Assurance Society of the United States (the "Separate Accounts") are separate accounts of Equitable. Equitable, a New York stock life insurance company, is a wholly owned subsidiary of AXA Financial, Inc. (the "Holding Company") (formerly the Equitable Companies, Incorporated). AXA owns 100% of the Holding Company's outstanding common stock. AXA is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable Life. AXA, a French company, is the holding company for an international group of insurance and related financial services companies. C-14 AXA GROUP CONSOLIDATED COMPANIES AS AT JUNE 30, 2000
ACTIVITY COUNTRY CONSOLIDATED COMPANY SHAREHOLDERS OWNERSHIP FINANCIAL SERVICES AUSTRALIA NATIONAL MUTUAL FUND MANAGEMENT AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 & REAL ESTATE FINANCIAL SERVICES BELGIUM AXA INVESTMENT MANAGERS BRUSSELS AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES BELGIUM AXA BANK BELGIUM AXA HOLDINGS BELGIUM 100.00 & REAL ESTATE FINANCIAL SERVICES BELGIUM IPPA VASTGOED AXA HOLDINGS BELGIUM 100.00 & REAL ESTATE FINANCIAL SERVICES BELGIUM ROYALE BELGE INVESTISSEMENT AXA ROYALE BELGE NON VIE 33.03 & REAL ESTATE FINANCIAL SERVICES BELGIUM ROYALE BELGE INVESTISSEMENT AXA ROYALE BELGE 66.97 & REAL ESTATE FINANCIAL SERVICES BELGIUM AXA REAL ESTATE INVESTMENT MANAGERS AXA BANK BELGIUM 0.10 & REAL ESTATE BENELUX FINANCIAL SERVICES BELGIUM AXA REAL ESTATE INVESTMENT MANAGERS AXA REAL ESTATE INVESTMENT MANAGERS SA 99.90 & REAL ESTATE BENELUX FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA ROYALE BELGE NON VIE 1.75 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA ROYALE BELGE 2.15 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA 47.31 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA CORPORATE SOLUTIONS 0.75 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA ASSURANCES IARD 14.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA KONZERN AG 6.84 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS DIRECT ASSURANCES IARD 0.19 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA LEVEN NV 1.95 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS NATIONAL MUTUAL FUND MANAGEMENT 3.77 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA UK PLC 17.05 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA COURTAGE IARD 0.84 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA FRANCE FINANCE AXA CONSEIL VIE 50.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA FRANCE FINANCE AXA ASSURANCES VIE 50.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA GESTION FCP AXA INVESTMENT MANAGERS PARIS 99.99 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS PRIVATE EQUITY AXA INVESTMENT MANAGERS PRIVATE EQUITY 100.00 & REAL ESTATE EUROPE SA FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS PRIVATE EQUITY AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA MULTI MANAGER FRANCE AXA INVESTMENT MANAGERS 0.01 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA MULTI MANAGER FRANCE AXA MULTIMANAGER LIMITED 99.93 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS PARIS AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA CREDIT COMPAGNIE FINANCIERE DE PARIS 65.00 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES AXA ASSURANCES IARD 21.19 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES SOCIETE BEAUJON 0.92 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES COMPAGNIE FINANCIERE DE PARIS 51.07 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES JOUR FINANCE 20.63 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES AXA COURTAGE IARD 2.53 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA BANQUE COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE BANQUE DE MARCHES ET D'ARBITRAGE AXA 19.51 & REAL ESTATE FINANCIAL SERVICES FRANCE BANQUE DE MARCHES ET D'ARBITRAGE AXA COURTAGE IARD 8.20 & REAL ESTATE FINANCIAL SERVICES FRANCE COMPAGNIE FINANCIERE DE PARIS AXA 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE CFP - CREDIT COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA ASSET MANAGEMENT CONSULTANT AXA INVESTMENT MANAGERS 99.95 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA GESTION INTERESSEMENT AXA INVESTMENT MANAGERS PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE BANQUE DES TUILERIES COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS FUNDS AXA INVESTMENT MANAGERS 98.84 & REAL ESTATE MANAGEMENT FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS FUNDS AXA INVESTMENT MANAGERS PARIS 1.16 & REAL ESTATE MANAGEMENT FINANCIAL SERVICES FRANCE AXA ASSET MANAGEMENT PRIVATE EQUITY AXA INVESTMENT MANAGERS PRIVATE 50.48 & REAL ESTATE EQUITY EUROPE SA FINANCIAL SERVICES FRANCE AXA REAL ESTATE MANAGEMENT INVESTMENT AXA REAL ESTATE INVESTMENT MANAGERS SA 99.96 & REAL ESTATE MANAGERS FINANCIAL SERVICES FRANCE AXA REAL ESTATE INVESTMENT MANAGERS SA AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE SOFAPI COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE HOLDING SOFFIM COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE SOFINAD COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES GERMANY AXA ASSET MANAGEMENT DEUTSCHLAND AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE GMBH FINANCIAL SERVICES GERMANY AXA INVESTMENT MANAGERS DEUTSCHLAND AXA INVESTMENT MANAGERS 85.00 & REAL ESTATE GMBH FINANCIAL SERVICES GERMANY AXA TRUST GMBH SUN LIFE DEUTSCHLAND LIMITED 100.00 & REAL ESTATE FINANCIAL SERVICES GERMANY AXA VORSORGEBANK AXA KONZERN AG 100.00 & REAL ESTATE FINANCIAL SERVICES GERMANY AXA REAL ESTATE MANAGEMENT AXA VERSICHERUNG 14.00 & REAL ESTATE DEUTSCHLAND FINANCIAL SERVICES GERMANY AXA REAL ESTATE MANAGEMENT AXA REAL ESTATE INVESTMENT MANAGERS SA 86.00 & REAL ESTATE DEUTSCHLAND FINANCIAL SERVICES GERMANY AXA BAUSPARKASSE AG AXA KONZERN AG 66.67 & REAL ESTATE FINANCIAL SERVICES GERMANY AXA BAUSPARKASSE AG AXA LEBEN 33.01 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA ASSET MANAGEMENT LTD AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA INVESTMENT MANAGERS GS AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA INVESTMENT MANAGERS LIMITED AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA MULTIMANAGER LIMITED AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA REAL ESTATE INVESTMENT AXA REAL ESTATE INVESTMENT MANAGERS SA 100.00 & REAL ESTATE MANAGERS LTD FINANCIAL SERVICES GREAT BRITAIN AXA INVESTMENT MANAGERS UK AXA INVESTMENT MANAGERS 66.67 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA INVESTMENT MANAGERS UK AXA ASSET MANAGEMENT LTD 33.33 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN SUN LIFE DEUTSCHLAND LIMITED AXA ASSET MANAGEMENT LTD 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN SUN LIFE GLOBAL MANAGEMENT LIMITED AXA ASSET MANAGEMENT LTD 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN SUN LIFE GLOBAL SERVICES LIMITED AXA ASSET MANAGEMENT LTD 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN SUN LIFE MANAGEMENT LIMITED SUN LIFE GLOBAL MANAGEMENT LIMITED 100.00 & REAL ESTATE ISLE OF MAN FINANCIAL SERVICES HONG KONG AXA INVESTMENT MANAGERS HK SAR AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES HONG KONG AXA INVESTMENT MANAGERS HONG KONG AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES HUNGARY AXA BIZTOSITO PENSION FUND AXA KONZERN AG (Austria) 100.00 & REAL ESTATE FINANCIAL SERVICES ITALY AXA INVESTMENT MANAGERS ITALIA AXA INVESTMENT MANAGERS 99.00 & REAL ESTATE FINANCIAL SERVICES ITALY AXA INVESTMENT MANAGERS ITALIA AXA ASSICURAZIONI 1.00 & REAL ESTATE FINANCIAL SERVICES ITALY AXA REAL ESTATE INVESTMENT MANAGERS AXA REAL ESTATE INVESTMENT MANAGERS SA 100.00 & REAL ESTATE ITALIA FINANCIAL SERVICES JAPAN AXA INVESTMENT MANAGERS TOKYO AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES SPAIN AXA REAL ESTATE INVESTMENT MANAGERS AXA REAL ESTATE INVESTMENT MANAGERS SA 100.00 & REAL ESTATE IBERICA FINANCIAL SERVICES THE NETHERLANDS AXA INVESTMENT MANAGERS DEN HAAG AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA GLOBAL STRUCTURED PRODUCT AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS HOLDINGS INC. AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS NEW YORK AXA INVESTMENT MANAGERS ROSE 100.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS PRIVATE AXA INVESTMENT MANAGERS PRIVATE EQUITY 100.00 & REAL ESTATE EQUITY F FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS ROSE AXA INVESTMENT MANAGERS 90.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS ROSE AXA INVESTMENT MANAGERS HOLDING INC. 10.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA ROSENBERG LLC AXA INVESTMENT MANAGERS ROSE 50.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES ALLIANCE CAPITAL MANAGEMENT CORP. THE EQUITABLE LIFE ASSURANCE SOCIETY 74.91 & REAL ESTATE FINANCIAL SERVICES UNITED STATES ALLIANCE CAPITAL MANAGEMENT CORP. AXA FINANCIAL INC. 25.09 & REAL ESTATE HOLDINGS & MISC. AUSTRALIA AXA ASIA PACIFIC HOLDINGS LIMITED AXA EQUITY & LAW LIFE ASSURANCE SOCIETY 8.90 BUSINESSES HOLDINGS & MISC. AUSTRALIA AXA ASIA PACIFIC HOLDINGS LIMITED AXA 42.10 BUSINESSES HOLDINGS & MISC. AUSTRIA AXA KONZERN AG (Austria) AXA LEBEN 10.05 BUSINESSES HOLDINGS & MISC. AUSTRIA AXA KONZERN AG (Austria) AXA VERSICHERUNG 89.95 BUSINESSES HOLDINGS & MISC. BELGIUM ROYALE BELGE INTERNATIONAL ROYALE BELGE INVESTISSEMENT 100.00 BUSINESSES HOLDINGS & MISC. BELGIUM AXA HOLDINGS BELGIUM AXA CORPORATE SOLUTION ASSURANCE 6.21 BUSINESSES HOLDINGS & MISC. BELGIUM AXA HOLDINGS BELGIUM AXA 84.28 BUSINESSES HOLDINGS & MISC. BELGIUM AXA HOLDINGS BELGIUM AXA COURTAGE IARD 5.41 BUSINESSES HOLDINGS & MISC. BELGIUM AXA HOLDINGS BELGIUM VINCI BV 4.07 BUSINESSES HOLDINGS & MISC. FRANCE AXA CHINA AXA CHINA REGION LIMITED 49.00 BUSINESSES HOLDINGS & MISC. FRANCE AXA CHINA AXA 51.00 BUSINESSES HOLDINGS & MISC. FRANCE AXA PARTICIPATION II AXA 100.00 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA INVESTMENT MANAGERS 2.33 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA INSURANCE HOLDING JAPAN 4.21 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA ROYALE BELGE NON VIE 3.45 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA ROYALE BELGE 4.24 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA 20.17 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA CORPORATE SOLUTIONS 3.27 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA KONZERN AG 14.28 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA FRANCE ASSURANCE 20.03 BUSINESSES HOLDINGS & MISC. FRANCE SOCIETE BEAUJON AXA 99.77 BUSINESSES HOLDINGS & MISC. FRANCE SOCIETE BEAUJON AXA ASSURANCES IARD 0.22 BUSINESSES HOLDINGS & MISC. FRANCE COLISEE EXCELLENCE AXA PARTICIPATION II 100.00 BUSINESSES HOLDINGS & MISC. FRANCE JOUR FINANCE AXA CONSEIL VIE 60.47 BUSINESSES HOLDINGS & MISC. FRANCE JOUR FINANCE AXA ASSURANCES IARD 39.53 BUSINESSES HOLDINGS & MISC. FRANCE MOFIPAR AXA 100.00 BUSINESSES HOLDINGS & MISC. FRANCE AXA FRANCE ASSURANCE AXA 100.00 BUSINESSES HOLDINGS & MISC. GERMANY AXA KONZERN AG AXA 25.49 BUSINESSES HOLDINGS & MISC. GERMANY AXA KONZERN AG KOLNISCHE VERWALTUNGS 25.63 BUSINESSES HOLDINGS & MISC. GERMANY AXA KONZERN AG VINCI BV 39.73 BUSINESSES HOLDINGS & MISC. GERMANY GRE CONTINENTAL EUROPE HOLDING GMBH AXA KONZERN AG 100.00 BUSINESSES HOLDINGS & MISC. GERMANY KOLNISCHE VERWALTUNGS AXA 8.83 BUSINESSES HOLDINGS & MISC. GERMANY KOLNISCHE VERWALTUNGS AXA KONZERN AG 23.02 BUSINESSES HOLDINGS & MISC. GERMANY KOLNISCHE VERWALTUNGS VINCI BV 67.72 BUSINESSES HOLDINGS & MISC. GREAT BRITAIN AXA EQUITY & LAW PLC AXA 99.94 BUSINESSES HOLDINGS & MISC. GREAT BRITAIN GUARDIAN ROYAL EXCHANGE PLC AXA UK PLC 100.00 BUSINESSES HOLDINGS & MISC. GREAT BRITAIN AXA UK PLC AXA EQUITY & LAW PLC 21.70 BUSINESSES HOLDINGS & MISC. GREAT BRITAIN AXA UK PLC AXA 78.30 BUSINESSES HOLDINGS & MISC. ITALY AXA ITALIA S.P.A AXA CONSEIL VIE 1.76 BUSINESSES HOLDINGS & MISC. ITALY AXA ITALIA S.P.A AXA 98.24 BUSINESSES HOLDINGS & MISC. JAPAN AXA INSURANCE HOLDING JAPAN AXA 96.42 BUSINESSES
ACTIVITY COUNTRY CONSOLIDATED COMPANY SHAREHOLDERS OWNERSHIP HOLDINGS & MISC. LUXEMBOURG AXA LUXEMBOURG SA AXA HOLDINGS BELGIUM 100.00 BUSINESSES HOLDINGS & MISC. MOROCCO AXA ONA AXA 51.00 BUSINESSES HOLDINGS & MISC. SINGAPORE AXA INSURANCE INVESTMENT HOLDING AXA 100.00 BUSINESSES HOLDINGS & MISC. SPAIN AXA AURORA AXA 100.00 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS GELDERLAND AXA HOLDINGS BELGIUM 100.00 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV AXA ROYALE BELGE NON VIE 17.29 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV AXA ROYALE BELGE 21.24 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV GELDERLAND 38.94 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV ROYALE BELGE INTERNATIONAL 12.77 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV AXA HOLDINGS BELGIUM 4.11 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA VERZEKERINGEN AXA NEDERLAND BV 100.00 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS VINCI BV AXA 100.00 BUSINESSES HOLDINGS & MISC. TURKEY AXA OYAK HOLDING AS AXA 50.00 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. AXA EQUITY & LAW LIFE ASSURANCE SOCIETY 4.09 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. AXA 92.48 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. AXA CORPORATE SOLUTIONS 2.95 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. SOCIETE BEAUJON 0.44 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. AXA CORPORATE SOLUTIONS REINSURANCE CY 0.03 BUSINESSES INSURANCE & REINSURANCE AUSTRALIA AUSTRALIAN CASUALTY INSURANCE AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 PTY LTD INSURANCE & REINSURANCE AUSTRALIA NATIONAL MUTUAL HEALTH INSUR PY AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 LIMITED INSURANCE & REINSURANCE AUSTRALIA NATIONAL MUTUAL INTERNATIONAL AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 INSURANCE & REINSURANCE AUSTRALIA NATIONAL MUTUAL FINANCIAL SERVICES AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 INSURANCE & REINSURANCE AUSTRIA AXA VERSICHERUNG AXA KONZERN AG (Austria) 100.00 INSURANCE & REINSURANCE AUSTRIA AXA LEBEN AXA KONZERN AG (Austria) 100.00 INSURANCE & REINSURANCE BELGIUM AXA ROYALE BELGE AXA HOLDINGS BELGIUM 99.58 INSURANCE & REINSURANCE BELGIUM AXA ROYALE BELGE UAB 0.42 INSURANCE & REINSURANCE BELGIUM ARDENNE PREVOYANTE AXA ROYALE BELGE NON VIE 0.05 INSURANCE & REINSURANCE BELGIUM ARDENNE PREVOYANTE AXA HOLDINGS BELGIUM 99.95 INSURANCE & REINSURANCE BELGIUM ASSURANCES LA POSTE AXA HOLDINGS BELGIUM 50.00 INSURANCE & REINSURANCE BELGIUM ASSURANCES LA POSTE VIE AXA HOLDINGS BELGIUM 50.00 INSURANCE & REINSURANCE BELGIUM UAB NON VIE AXA HOLDINGS BELGIUM 100.OO INSURANCE & REINSURANCE CANADA AXA CS ASSURANCE CANADA AXA CORPORATE SOLUTION ASSURANCE 100.00 INSURANCE & REINSURANCE CANADA AXA CANADA AXA 100.00 INSURANCE & REINSURANCE CHINA AXA MINMETALS ASSURANCE CO LTD AXA CHINA 51.00 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTION ASSURANCE AXA CORPORATE SOLUTIONS 98.49 INSURANCE & REINSURANCE FRANCE AXA CONSEIL VIE AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE ARGOVIE AXA COLLECTIVES 94.03 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA 94.97 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA ASSURANCES IARD 2.72 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA FRANCE ASSURANCE 0.10 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA COURTAGE IARD 2.20 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA COLLECTIVES 0.02 INSURANCE & REINSURANCE FRANCE AXA ASSURANCES IARD AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE AXA RE FINANCE AXA CORPORATE SOLUTIONS 65.83 INSURANCE & REINSURANCE FRANCE AXA RE FINANCE AXA CESSIONS 13.17 INSURANCE & REINSURANCE FRANCE AXA ASSURANCES VIE AXA FRANCE ASSURANCE 88.87 INSURANCE & REINSURANCE FRANCE AXA ASSURANCES VIE AXA COLLECTIVES 11.13 INSURANCE & REINSURANCE FRANCE C.G.R.M. MONTE-CARLO AXA CORPORATE SOLUTIONS 99.99 INSURANCE & REINSURANCE FRANCE JURIDICA AXA FRANCE ASSURANCE 98.51 INSURANCE & REINSURANCE FRANCE DIRECT ASSURANCES IARD AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE DIRECT ASSURANCES VIE AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE NATIO ASSURANCES AXA ASSURANCES IARD 50.00 INSURANCE & REINSURANCE FRANCE NSM VIE AXA ASSURANCES IARD 0.16 INSURANCE & REINSURANCE FRANCE NSM VIE AXA FRANCE ASSURANCE 39.91 INSURANCE & REINSURANCE FRANCE AXA ASSISTANCE AXA 100.00 INSURANCE & REINSURANCE FRANCE SPS RE AXA CORPORATE SOLUTIONS 69.94 INSURANCE & REINSURANCE FRANCE AXA CESSIONS AXA CORPORATE SOLUTIONS 100.00 INSURANCE & REINSURANCE FRANCE SAINT GEORGES RE AXA 100.00 INSURANCE & REINSURANCE FRANCE AXA CONSEIL IARD AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE AXA COURTAGE IARD AXA FRANCE ASSURANCE 99.65 INSURANCE & REINSURANCE FRANCE AXA COLLECTIVES AXA ASSURANCES IARD 3.69 INSURANCE & REINSURANCE FRANCE AXA COLLECTIVES AXA FRANCE ASSURANCE 95.71 INSURANCE & REINSURANCE GERMANY AXA LEBEN AXA KONZERN AG 47.81 INSURANCE & REINSURANCE GERMANY AXA LEBEN AXA VERSICHERUNG 52.19 INSURANCE & REINSURANCE GERMANY AXA VERSICHERUNG AXA KONZERN AG 74.41 INSURANCE & REINSURANCE GERMANY AXA VERSICHERUNG GRE CONTINENTAL EUROPE HOLDING GMBH 25.59 INSURANCE & REINSURANCE GERMANY AXA KRANKEN VERSICHERUNG AXA KONZERN AG 52.69 INSURANCE & REINSURANCE GERMANY AXA KRANKEN VERSICHERUNG AXA LEBEN 46.71 INSURANCE & REINSURANCE GERMANY AXA ART AXA KONZERN AG 100.00 INSURANCE & REINSURANCE GREAT BRITAIN ACS ASSURANCE UK BRANCH AXA CORPORATE SOLUTION ASSURANCE 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA EQUITY & LAW LIFE ASSURANCE AXA SUN LIFE 100.00 SOCIETY INSURANCE & REINSURANCE GREAT BRITAIN AXA INSURANCE UK GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA SUN LIFE AXA UK PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA UK HOLDING PLC AXA CORPORATE SOLUTIONS 100.00 INSURANCE & REINSURANCE GREAT BRITAIN E_BUSINESS AXA UK AXA UK PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN THE ROYAL EXCHANGE ASSURANCE PLC GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA GLOBAL RISKS (U.K.) LTD AXA CORPORATE SOLUTIONS 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA UK AXA 100.00 INSURANCE & REINSURANCE GREAT BRITAIN PPP GROUP PLC GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA PPP HEALTHCARE LTD AXA INSURANCE UK 100.00 INSURANCE & REINSURANCE GREAT BRITAIN PPP LIFETIMECARE GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA REINSURANCE UK PLC AXA UK HOLDING PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN ENGLISH & SCOTTISH AXA UK 100.00 INSURANCE & REINSURANCE HONG KONG AXA CHINA REGION LIMITED NATIONAL MUTUAL INTERNATIONAL 100.00 INSURANCE & REINSURANCE HONG KONG AXA INSURANCE HONG-KONG AXA 17.50 INSURANCE & REINSURANCE HONG KONG AXA INSURANCE HONG-KONG AXA INSURANCE INVESTMENT HOLDING 82.50 INSURANCE & REINSURANCE HONG KONG AXA GENERAL INSURANCE HK AXA 100.00 INSURANCE & REINSURANCE HUNGARY AXA BIZTOSITO AXA KONZERN AG (AUSTRIA) 100.00 INSURANCE & REINSURANCE IRELAND GUARDIAN PMPA GROUP LTD GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE ITALY AXA INTERLIFE AXA ITALIA S.P.A 100.00 INSURANCE & REINSURANCE ITALY AXA ASSICURAZIONI AXA ITALIA S.P.A 98.12 INSURANCE & REINSURANCE ITALY AXA ASSICURAZIONI AXA COLLECTIVES 1.88 INSURANCE & REINSURANCE ITALY UAP VITA AXA ITALIA S.P.A 100.00 INSURANCE & REINSURANCE JAPAN AXA GROUP LIFE JAPAN AXA INSURANCE HOLDING JAPAN 100.00 INSURANCE & REINSURANCE JAPAN AXA LIFE JAPAN AXA INSURANCE HOLDING JAPAN 100.00 INSURANCE & REINSURANCE JAPAN AXA NON LIFE INSURANCE CO LTD AXA 100.00 INSURANCE & REINSURANCE LUXEMBOURG AXA ASSURANCE LUXEMBOURG AXA LUXEMBOURG SA 100.00 INSURANCE & REINSURANCE LUXEMBOURG AXA ASSURANCE. VIE LUXEMBOURG AXA LUXEMBOURG SA 100.00 INSURANCE & REINSURANCE LUXEMBOURG CREALUX AXA HOLDINGS BELGIUM 100.00 INSURANCE & REINSURANCE LUXEMBOURG FUTUR RE AXA CORPORATE SOLUTION ASSURANCE 100.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA INSURANCE UK 20.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA PORTUGAL COMPANHIA DE SEGUROS 5.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA VERSICHERUNG 20.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA ASSICURAZIONI 5.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA AURORA IBERICA 10.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE ROYALE BELGE INVESTISSEMENT 20.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE SAINT GEORGES RE 20.00 INSURANCE & REINSURANCE MOROCCO AXA ASSURANCE MAROC AXA ONA 99.99 INSURANCE & REINSURANCE MOROCCO EPARGNE CROISSANCE AXA ASSURANCE MAROC 99.59 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA CORPORATE SOLUTION ASSURANCE 9.07 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA PORTUGAL SEGUROS VIDA 2.15 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA CONSEIL VIE 5.37 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA 83.02 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA CONSEIL VIE 87.63 DE VIDA SA INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA 7.46 DE VIDA SA INSURANCE & REINSURANCE SINGAPORE AXA INSURANCE SINGAPORE AXA 25.77 INSURANCE & REINSURANCE SINGAPORE AXA INSURANCE SINGAPORE AXA INSURANCE INVESTMENT HOLDING 74.23 INSURANCE & REINSURANCE SINGAPORE AXA LIFE SINGAPOUR NATIONAL MUTUAL INTERNATIONAL 100.00 INSURANCE & REINSURANCE SINGAPORE AXA CORPORATE SOLUTIONS. ASIA AXA CORPORATE SOLUTIONS 100.00 PACIFIC PRIVATE LTD INSURANCE & REINSURANCE SPAIN AXA AURORA VIDA DE SEGUROS Y AXA AURORA 99.68 REASEGUROS INSURANCE & REINSURANCE SPAIN AYUDA LEGAL SA DE SEGUROS Y AXA AURORA VIDA 12.00 REASEGUROS INSURANCE & REINSURANCE SPAIN AYUDA LEGAL SA DE SEGUROS Y AXA AURORA IBERICA 88.00 REASEGUROS INSURANCE & REINSURANCE SPAIN HILO DIRECT SA DE SEGUROS Y AXA AURORA 50.00 REASEGUROS INSURANCE & REINSURANCE SPAIN AXA AURORA IBERICA AXA AURORA 99.68
ACTIVITY COUNTRY CONSOLIDATED COMPANY SHAREHOLDERS OWNERSHIP INSURANCE & REINSURANCE SWITZERLAND AXA COMPAGNIE D'ASSURANCES AXA 99.95 INSURANCE & REINSURANCE SWITZERLAND AXA COMPAGNIE D'ASSURANCE SUR LA VIE AXA 94.99 INSURANCE & REINSURANCE SWITZERLAND AXA COMPAGNIE D'ASSURANCE SUR LA VIE AXA COMPAGNIE D'ASSURANCES 5.00 INSURANCE & REINSURANCE THE NETHERLANDS AXA LEVEN NV AXA VERZEKERINGEN 100.00 INSURANCE & REINSURANCE THE NETHERLANDS UNIROBE GROEP AXA NEDERLAND BV 100.00 INSURANCE & REINSURANCE THE NETHERLANDS AXA SCHADE AXA VERZEKERINGEN 100.00 INSURANCE & REINSURANCE THE NETHERLANDS AXA ZORG NV AXA VERZEKERINGEN 100.00 INSURANCE & REINSURANCE TURKEY AXA OYAK HAYAT SIGORTA AXA OYAK HOLDING AS 100.00 INSURANCE & REINSURANCE TURKEY AXA OYAK SIGORTA AXA OYAK HOLDING AS 70.92 INSURANCE & REINSURANCE UNITED STATES AXA CORPORATE SOLUTION INSURANCE CO AXA CORPORATE SOLUTIONS REINSURANCE 100.00 CY INSURANCE & REINSURANCE UNITED STATES AXA CORP. SOLUTIONS PROPERTY AXA CORPORATE SOLUTIONS REINSURANCE 100.00 & CASUALTY CY INSURANCE & REINSURANCE UNITED STATES AXA AMERICA CORPORATE SOLUTIONS, INC AXA CORPORATE SOLUTIONS 100.00 INSURANCE & REINSURANCE UNITED STATES THE EQUITABLE LIFE ASSURANCE SOCIETY AXA FINANCIAL INC. 100.00 INSURANCE & REINSURANCE UNITED STATES AXA CORPORATE SOLUTIONS REINSURANCE AXA AMERICA CORPORATE SOLUTIONS, INC 100.00 CY INSURANCE & REINSURANCE UNITED STATES AXA CORPORATE SOLUTIONS AMERICA INS. AXA CORPORATE SOLUTIONS PROPERTY 100.00 CY & CASUALTY INSURANCE & REINSURANCE UNITED STATES AXA CORPORATE SOLUTIONS LIFE AXA CORPORATE SOLUTIONS REINSURANCE CY 100.00 REINSURANCE COMPANY
SUBSIDIARY ORGANIZATION CHART- 2002 03/07/02 - ----------------------------------- LAST UPDATED: 2/5/02 State of State of Type of Incorp. or Principal Federal Subsidiary Domicile Operation Tax ID # ---------- -------- --------- --------- - ------------------------------------------------------------------------------------------------------------------------------------ AXA Financial, Inc. (Notes 1 & 2) ** DE NY 13-3623351 - ------------------------------------------------------------------------------------------------------------------------------------ Frontier Trust Company, FSB (Note 7) ND ND 45-0373941 --------------------------------------------------------------------------------------------------------------------------------- AXA Client Solutions, LLC (Note 2) DE NY 52-2197822 --------------------------------------------------------------------------------------------------------------------------------- AXA Distribution Holding Corporation DE NY 13-4078005 --------------------------------------------------------------------------------------------------------------------------------- AXA Advisors, LLC (Note 5) DE NY 13-4071393 ------------------------------------------------------------------------------------------------------------------------------ AXA Network, LLC (Note 6) Operating DE NY 06-1555494 ------------------------------------------------------------------------------------------------------------------------------ AXA Network of Alabama, LLC Operating AL AL 06-1562392 --------------------------------------------------------------------------------------------------------------------------- AXA Network of Connecticut, Maine and New York, LLC Operating DE NY 13-4085852 --------------------------------------------------------------------------------------------------------------------------- AXA Network Insurance Agency of Massachusetts, LLC Operating MA MA 04-3491734 --------------------------------------------------------------------------------------------------------------------------- AXA Network of Nevada, Inc. Operating NV NV 13-3389068 --------------------------------------------------------------------------------------------------------------------------- AXA Network of Puerto Rico, Inc. Operating P.R. P.R. 66-0577477 --------------------------------------------------------------------------------------------------------------------------- AXA Network Insurance Agency of of Texas, Inc. Operating TX TX 75-2529724 --------------------------------------------------------------------------------------------------------------------------- Paramount Planners, LLC Operating DE NY 06-1602479 ------------------------------------------------------------------------------------------------------------------------------ The Equitable Life Assurance Society of the United States (Note 2)* Insurance NY NY 13-5570651 --------------------------------------------------------------------------------------------------------------------------------- The Equitable of Colorado, Inc.* Insurance CO CO 13-3198083 ------------------------------------------------------------------------------------------------------------------------------ Equitable Deal Flow Fund, L.P. Investment DE NY 13-3385076 ------------------------------------------------------------------------------------------------------------------------------ Equitable Managed Assets, L.P. Investment DE NY 13-3385080 --------------------------------------------------------------------------------------------------------------------------- Real Estate Partnership Equities (various) Investment ** - ------------------------------------------------------------------------------------------------------------------------------ Equitable Holdings, LLC (Notes 3 & 4) HCO NY NY 22-2766036 ------------------------------------------------------------------------------------------------------------------------------ See Attached Listing A --------------------------------------------------------------------------------------------------------------------------- ACMC, Inc. (Note 4) HCO DE NY 13-2677213 ------------------------------------------------------------------------------------------------------------------------------ Wil-Gro, Inc Investment PA PA 23-2702404 ------------------------------------------------------------------------------------------------------------------------------ STCS, Inc. Investment DE NY 13-3761592 ------------------------------------------------------------------------------------------------------------------------------ Fox Run, Inc. Investment MA NY 23-2762596 ------------------------------------------------------------------------------------------------------------------------------ FTM Corp. Investment MD MD 13-3778225 ------------------------------------------------------------------------------------------------------------------------------ EVSA, Inc. Investment DE PA 23-2671508 ------------------------------------------------------------------------------------------------------------------------------ Equitable Rowes Wharf, Inc. Investment MA MA 04-3272826 ------------------------------------------------------------------------------------------------------------------------------ ELAS Realty, Inc. Investment DE GA 58-2271596 ------------------------------------------------------------------------------------------------------------------------------ Prime Property Funding II, Inc. Operating DE NY 13-3961599 ------------------------------------------------------------------------------------------------------------------------------ Sarasota Prime Hotels, LLC Investment FL GA 58-2330533 ------------------------------------------------------------------------------------------------------------------------------ ECLL, Inc. Investment MI GA 58-2377569 ------------------------------------------------------------------------------------------------------------------------------
Number of Parent's Shares Percent of Comments Owned Ownership (e.g., Basis of Control) --------- --------- ------------------------ AXA Financial, Inc. (Notes 1 & 2) ** - ------------------------------------------------------------------------------------------------------------------------ Frontier Trust Company, FSB (Note 7) 1,000 100.00% --------------------------------------------------------------------------------------------------------------------- AXA Client Solutions, LLC (Note 2) 100.00% --------------------------------------------------------------------------------------------------------------------- AXA Distribution Holding Corporation - 100.00% --------------------------------------------------------------------------------------------------------------------- AXA Advisors, LLC (Note 5) - 100.00% ------------------------------------------------------------------------------------------------------------------ AXA Network, LLC (Note 6) - 100.00% ------------------------------------------------------------------------------------------------------------------ AXA Network of Alabama, LLC - 100.00% --------------------------------------------------------------------------------------------------------------- AXA Network of Connecticut, Maine and New York, LLC - 100.00% --------------------------------------------------------------------------------------------------------------- AXA Network Insurance Agency of Massachusetts, LLC - 100.00% --------------------------------------------------------------------------------------------------------------- AXA Network of Nevada, Inc. 100.00% --------------------------------------------------------------------------------------------------------------- AXA Network of Puerto Rico, Inc. 100.00% --------------------------------------------------------------------------------------------------------------- AXA Network Insurance Agency of of Texas, Inc. 100.00% -------------------------------------------------------------------------------------------------------------- Paramount Planners, LLC - 100.00% ------------------------------------------------------------------------------------------------------------------ The Equitable Life Assurance Society of the United States (Note 2)* 2,000,000 100.00% NAIC # 62944 --------------------------------------------------------------------------------------------------------------------- The Equitable of Colorado, Inc.* 1,000,000 100.00% NAIC # 62880 ------------------------------------------------------------------------------------------------------------------ Equitable Deal Flow Fund, L.P. - - G.P & L.P. ------------------------------------------------------------------------------------------------------------------ Equitable Managed Assets, L.P. - - G.P. --------------------------------------------------------------------------------------------------------------- Real Estate Partnership Equities (various) - - ** ------------------------------------------------------------------------------------------------------------------ Equitable Holdings, LLC (Notes 3 & 4) - 100.00% ------------------------------------------------------------------------------------------------------------------ See Attached Listing A --------------------------------------------------------------------------------------------------------------- ACMC, Inc. (Note 4) 5,000,000 100.00% ------------------------------------------------------------------------------------------------------------------ Wil-Gro, Inc 1,000 100.00% ------------------------------------------------------------------------------------------------------------------ STCS, Inc. 1,000 100.00% ------------------------------------------------------------------------------------------------------------------ Fox Run, Inc. 1,000 100.00% ------------------------------------------------------------------------------------------------------------------ FTM Corp. 1,000 100.00% ------------------------------------------------------------------------------------------------------------------ EVSA, Inc. 50 100.00% ------------------------------------------------------------------------------------------------------------------ Equitable Rowes Wharf, Inc. 1,000 100.00% ------------------------------------------------------------------------------------------------------------------ ELAS Realty, Inc. 1,000 100.00% ------------------------------------------------------------------------------------------------------------------ Prime Property Funding II, Inc. 100.00% ------------------------------------------------------------------------------------------------------------------ Sarasota Prime Hotels, LLC - 100.00% ------------------------------------------------------------------------------------------------------------------ ECLL, Inc. 100.00% ------------------------------------------------------------------------------------------------------------------
SUBSIDIARY ORGANIZATION CHART- 2002 03/07/02 - ----------------------------------- * Affiliated Insurer ** Information relating to Equitable's Real Estate Partnership Equities is disclosed in Schedule BA, Part 1 of Equitable Life's Annual Statement, which has been filed with the N.Y.S. Insurance Department. *** All subsidiaries are corporations, except as otherwise noted. 1. The name was changed from The Equitable Companies Incorporated on Sept. 3, 1999. 2. AXA Financial, Inc. transferred ownership of Equitable Life to AXA Client Solutions, LLC effective Sept. 20, 1999. Effective January 1, 2002, AXA Client Solutions, LLC transferred ownership of Equitable Life to AXA Financial, Inc. 3. Equitable Holding Corp. was merged into Equitable Holdings, LLC on Dec. 19, 1997. 4. In October 1999, Alliance Capital Management Holding L.P. ("Alliance Holding") reorganized by transferring its business and assets to Alliance Capital Management L.P., a newly formed private partnership ("Alliance Capital"). As of December 31, 2001, AXF and its subsidiaries owned 51.66% of the issued and outstanding units of limited partnership interest in Alliance Capital (the "Alliance Capital Units"). AXF held directly 32,621,075 Alliance Capital Units (13.12%); Equitable Life directly owned 5,219,396 Alliance Capital Units (2.10%); ACMC, Inc. owned 66,220,822 Alliance Capital Units (26.63%), and ECMC, LLC owned 24,415,727 Alliance Capital Units (9.82%). Alliance Capital Management Corporation also owns a 1% general partnership interest in Alliance Capital. In addition, ECMC, LLC and ACMC, Inc. each own 722,178 units (0.96% each), respectively, representing assignments of beneficial ownership of limited partnership interests in Alliance Holding (the "Alliance Holding Units"), and Alliance Capital Management Corp. owns 100,000 units of general partnership interest (0.13%), in Alliance Holding. Alliance Holding Units are publicly traded on the New York Stock exchange. 5. EQ Financial Consultants (formerly, Equico Securities, Inc.) was merged into AXA Advisors, LLC on Sept. 20, 1999. AXA Advisors, LLC was transferred from Equitable Holdings, LLC to AXA Distribution Holding Corporation on Sept. 21, 1999. 6. Effective March 15, 2000, Equisource of New York, Inc. and 14 of its subsidiaries were merged into AXA Network, LLC, which was then sold to AXA Distribution Holding Corp. EquiSource of Alabama, Inc. became AXA Network of Alabama, LLC. EquiSource Insurance Agency of Massachusetts, Inc. became AXA Network Insurance Agency of Massachusetts, LLC. Equisource of Nevada, Inc., of Puerto Rico, Inc., and of Texas, Inc., changed their names from "EquiSource" to become "AXA Network", respectively. 7. Effective June 6, 2000, Frontier Trust Company was sold by ELAS to AXF and merged into Frontier Trust Company, FSB. 8. Effective June 1, 2001, Equitable Structured Settlement Corp was transferred from ELAS to Equitable Holdings, LLC. SUBSIDIARY ORGANIZATION CHART- 2002 03/07/02 - -------------------------------------------------------------------------------- Dissolved: - On November 3, 2000, Donaldson, Lufkin & Jenrette, Inc. was sold to Credit Suisse Group. - EVLICO, Inc. was dissolved in 1999. - Equitable Capital Management Corp. became ECMC, LLC on November 30, 1999. - Prime Property Funding, Inc. was dissolved in Feb. 1999. - CCMI Corp. was dissolved on October 7, 1999. - HVM Corp. was dissolved on Feb. 16, 1999. - Six-Pac G.P., Inc. dissolved July 12,1999 - Sarasota Prime Hotels, Inc. became Sarasota Prime Hotels, LLC. - Franconom, Inc. was dissolved on December 4, 2000. - Equitable Underwriting & Sales Agency (Bahamas) Ltd. was dissolved on December 31, 2000. - EVLICO East Ridge, Inc. dissolved Jan. 13, 2001 - EREIM LP Associates (L.P.) dissolved March 27, 2001. - EREIM Managers Corporation dissolved March 27, 2001. - ML/EQ Real Estate Portfolio, L.P. dissolved March 27, 2001. - EML Associates, L.P. dissolved March 27, 2001. - EQ Services, Inc. dissolved May 11, 2001. - Equitable BJVS, Inc. dissolved October 3, 1999. - GP/EQ Southwest, Inc. dissolved October 21, 1997 - 100 Federal Street Funding Corporation dissolved August 31, 1998. - 100 Federal Street Realty Corporation dissolved December 20, 2001.
SUBSIDIARY ORGANIZATION CHART - 2002 LISTING A - EQUITABLE HOLDINGS, LLC 03/07/02 - ----------------------------------- State of State of Type of Incorp. or Principal Federal Subsidiary Domicile Operation Tax ID # ---------- -------- --------- --------- AXA Financial, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ The Equitable Life Assurance Society of the United States * --------------------------------------------------------------------------------------------------------------------------------- Equitable Holdings, LLC ------------------------------------------------------------------------------------------------------------------------------ ELAS Securities Acquisition Corporation Operating DE NY 13-3049038 --------------------------------------------------------------------------------------------------------------------------- Equitable Casualty Insurance Company * Operating VT VT 06-1166226 --------------------------------------------------------------------------------------------------------------------------- ECMC, LLC (See Note 4 on Page 2) Operating DE NY 13-3266813 --------------------------------------------------------------------------------------------------------------------------- Equitable Capital Private Income & Equity Partnership II, L.P. Investment DE NY 13-3544879 --------------------------------------------------------------------------------------------------------------------------- Alliance Capital Management Corporation (See Note 4 on Page 2) Operating DE NY 13-3633538 --------------------------------------------------------------------------------------------------------------------------- See Attached Listing B --------------------------------------------------------------------------------------------------------------------------- Equitable JV Holding Corp. Operating DE NY 13-3555850 --------------------------------------------------------------------------------------------------------------------------- Equitable JVS, Inc. Investment DE GA 58-1812697 --------------------------------------------------------------------------------------------------------------------------- Astor Times Square Corp. Investment NY NY 13-3593699 ------------------------------------------------------------------------------------------------------------------------ Astor/Broadway Acquisition Corp. Investment NY NY 13-3593692 ------------------------------------------------------------------------------------------------------------------------ PC Landmark, Inc. Investment TX TX 75-2338215 ------------------------------------------------------------------------------------------------------------------------ EJSVS, Inc. Investment DE NJ 58-2169594 ------------------------------------------------------------------------------------------------------------------------ Equitable JVS II, Inc. Investment MD MD 52-1877232 --------------------------------------------------------------------------------------------------------------------------- AXA Distributors, LLC Operating DE NY 52-2233674 --------------------------------------------------------------------------------------------------------------------------- AXA Distributors Insurance Agency of Alabama, LLC Operating DE AL 52-2255113 ------------------------------------------------------------------------------------------------------------------------ AXA Distributors Insurance Agency, LLC Operating DE CT, ME, NY 06-1579051 ------------------------------------------------------------------------------------------------------------------------ Equitable Distributors Insurance Agency of Massachusetts, LLC Operating MA MA 04-3567096 ------------------------------------------------------------------------------------------------------------------------ Equitable Distributors Insurance Agency of Texas, Inc. Operating TX TX 74-3006330 ------------------------------------------------------------------------------------------------------------------------ J.M.R. Realty Services, Inc. Operating DE NY 13-3813232 --------------------------------------------------------------------------------------------------------------------------- Equitable Structured Settlement Corp. (See Note 8 on Page 2) Operating DE NJ 22-3492811 --------------------------------------------------------------------------------------------------------------------------- Number of Parent's Shares Percent of Comments Owned Ownership (e.g., Basis of Control) ----- --------- ------------------------ AXA Financial, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ The Equitable Life Assurance Society of the United States * --------------------------------------------------------------------------------------------------------------------------------- Equitable Holdings, LLC ------------------------------------------------------------------------------------------------------------------------------ ELAS Securities Acquisition Corporation 500 100.00% --------------------------------------------------------------------------------------------------------------------------- Equitable Casualty Insurance Company * 1,000 100.00% --------------------------------------------------------------------------------------------------------------------------- ECMC, LLC (See Note 4 on Page 2) - 100.00% --------------------------------------------------------------------------------------------------------------------------- Equitable Capital Private Income & Equity ECMC is G.P. Partnership II, L.P. - - ("Deal Flow Fund II") ------------------------------------------------------------------------------------------------------------------------ Alliance Capital Management Corporation (See Note 4 on Page 2) 100 100.00% --------------------------------------------------------------------------------------------------------------------------- See Attached Listing B ------------------------------------------------------------------------------------------------------------------------ Equitable JV Holding Corp. 1,000 100.00% --------------------------------------------------------------------------------------------------------------------------- Equitable JVS, Inc. 1,000 100.00% --------------------------------------------------------------------------------------------------------------------------- Astor Times Square Corp. 100 100.00% ------------------------------------------------------------------------------------------------------------------------ Astor/Broadway Acquisition Corp. 100 100.00% G.P. of Astor Acquisition. L.P. ------------------------------------------------------------------------------------------------------------------------ PC Landmark, Inc. 1,000 100.00% ------------------------------------------------------------------------------------------------------------------------ EJSVS, Inc. 1,000 100.00% ------------------------------------------------------------------------------------------------------------------------ Equitable JVS II, Inc. 1,000 100.00% --------------------------------------------------------------------------------------------------------------------------- AXA Distributors, LLC - 100.00% --------------------------------------------------------------------------------------------------------------------------- AXA Distributors Insurance Agency of Alabama, LLC - 100.00% ------------------------------------------------------------------------------------------------------------------------ AXA Distributors Insurance Agency, LLC - 100.00% ------------------------------------------------------------------------------------------------------------------------ Equitable Distributors Insurance Agency of Massachusetts, LLC - 100.00% ------------------------------------------------------------------------------------------------------------------------ Equitable Distributors Insurance Agency of Texas, Inc. 1,000 100.00% ------------------------------------------------------------------------------------------------------------------------ J.M.R. Realty Services, Inc. 1,000 100.00% --------------------------------------------------------------------------------------------------------------------------- Equitable Structured Settlement Corp. (See Note 8 on Page 2) 100 100.00% --------------------------------------------------------------------------------------------------------------------------- * Affiliated Insurer Equitable Investment Corp merged into Equitable Holdings, LLC on November 30, 1999. Equitable Capital Management Corp. became ECMC, LLC on November 30, 1999. Effective March 15, 2000, Equisource of New York, Inc. and its subsidiaries were merged into AXA Network, LLC, which was then sold to AXA Distribution Holding Corp. Effective January 1, 2002, Equitable Distributors, Inc. merged into AXA Distributors, LLC.
SUBSIDIARY ORGANIZATION CHART - 2002 LISTING B - ALLIANCE CAPITAL MANAGEMENT CORP. 03/07/02 - --------------------------------------------- State of State of Type of Incorp. or Principal Federal Subsidiary Domicile Operation Tax ID # ---------- -------- --------- --------- AXA Financial, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ The Equitable Life Assurance Society of the United States --------------------------------------------------------------------------------------------------------------------------------- Equitable Holdings, LLC ----------------------------------------------------------------------------------------------------------------------------- Alliance Capital Management Corporation -------------------------------------------------------------------------------------------------------------------------- Alliance Capital Management Holding L.P. (See Note 4 on Page 2) Operating DE NY ----------------------------------------------------------------------------------------------------------------------- Alliance Capital Management L.P. (See Note 4 on Page 2) Operating DE NY 13-3434400 ----------------------------------------------------------------------------------------------------------------------- Albion Alliance LLC Operating DE NY 13-3903734 -------------------------------------------------------------------------------------------------------------------- Cursitor Alliance LLC HCO DE MA 22-3424339 -------------------------------------------------------------------------------------------------------------------- Cursitor Alliance Holdings Ltd. Operating U.K. U.K. - ----------------------------------------------------------------------------------------------------------------- Draycott Partners. Ltd. Operating MA U.K. 98-0116774 -------------------------------------------------------------------------------------------------------------- Cursitor Alliance Services Ltd. Operating U.K. U.K. - -------------------------------------------------------------------------------------------------------------- Cursitor Management Co. S.A. Operating Lux. Lux. - -------------------------------------------------------------------------------------------------------------- Alliance Asset Allocation Ltd. Operating U.K. U.K. - -------------------------------------------------------------------------------------------------------------- Cursitor Eaton Asset Management Co. Operating NY MA 13-3379955 ----------------------------------------------------------------------------------------------------------- Alliance Cecogest Operating France France - ----------------------------------------------------------------------------------------------------------- Alliance Capital Management LLC HCO DE NY -------------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein & Co., LLC HCO DE NY ----------------------------------------------------------------------------------------------------------------- Alliance Capital Management Corp. of Delaware HCO DE NY 13-2778645 -------------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein Ltd. Operating U.K. U.K. - ----------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein (CREST Nominees)Ltd. Operating U.K. U.K. - -------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein Proprietary Ltd. Operating Aust. Aust. - ----------------------------------------------------------------------------------------------------------------- Alliance Global Investor Services, Inc. Operating DE NJ 13-3211780 ----------------------------------------------------------------------------------------------------------------- Alliance Fund Distributors, Inc. Operating DE NY 13-3191825 ----------------------------------------------------------------------------------------------------------------- Alliance Capital Oceanic Corp. Operating DE NY 13-3441277 ----------------------------------------------------------------------------------------------------------------- Alliance Capital Latin America Ltd. Operating Brazil Brazil - ----------------------------------------------------------------------------------------------------------------- Alliance Capital Management Australia Limited Operating Aust. Aust. - ----------------------------------------------------------------------------------------------------------------- Alliance Capital Management New Zealand Limited Operating N.Z. N.Z. - ----------------------------------------------------------------------------------------------------------------- Alliance Capital Australia Limited Operating Aust. Aust. - ----------------------------------------------------------------------------------------------------------------- Far Eastern Alliance Aset Management Operating Taiwan Taiwan - -------------------------------------------------------------------------------------------------------------- Meiji - Alliance Capital Corp. Operating DE NY 13-3613617 ----------------------------------------------------------------------------------------------------------------- Alliance Capital (Luxembourg) S.A. Operating Lux. Lux. - ----------------------------------------------------------------------------------------------------------------- Alliance Barra Research Institute, Inc. Operating DE NY 13-3548918 ----------------------------------------------------------------------------------------------------------------- Alliance Capital Management Canada, Inc. Operating DE Canada 13-3630460 ----------------------------------------------------------------------------------------------------------------- Alliance Capital Global Derivatives Corp. Operating DE NY 13-3626546 ----------------------------------------------------------------------------------------------------------------- ACM Global Investor Services S.A. Operating Lux. Lux. - ----------------------------------------------------------------------------------------------------------------- ACM Fund Services (Espana) S.L. Operating Spain Spain - -------------------------------------------------------------------------------------------------------------- Alliance Capital Management (Singapore) Ltd. Operating Singapore Singapore - ----------------------------------------------------------------------------------------------------------------- ACM International (France) SAS Operating France France - ----------------------------------------------------------------------------------------------------------------- ACM CIIC Investment Management Ltd. Operating Cayman Isl. Cayman Isl. ----------------------------------------------------------------------------------------------------------------- ACM Software Services Ltd. Operating DE NY 13-3910857 ----------------------------------------------------------------------------------------------------------------
Number of Parent's Shares Percent of Comments Owned Ownership (e.g., Basis of Control) ----- --------- ------------------------ AXA Financial, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ The Equitable Life Assurance Society of the United States --------------------------------------------------------------------------------------------------------------------------------- Equitable Holdings, LLC ----------------------------------------------------------------------------------------------------------------------------- Alliance Capital Management Corporation owns 1% GP interest in Alliance Capital Management L.P. and 100,000 GP units in Alliance Capital Management Holding L.P. -------------------------------------------------------------------------------------------------------------------------- Alliance Capital Management Holding L.P. (See Note 4 on Page 2) - ----------------------------------------------------------------------------------------------------------------------- Alliance Capital Management L.P. (See Note 4 on Page 2) ----------------------------------------------------------------------------------------------------------------------- Albion Alliance LLC 37.60% Equitable Life = 4.7%; 3rd parties = 57.7% -------------------------------------------------------------------------------------------------------------------- Cursitor Alliance LLC 93.00% Cursitor Holdings L.P. = 7% -------------------------------------------------------------------------------------------------------------------- Cursitor Alliance Holdings Ltd. 100.00% ----------------------------------------------------------------------------------------------------------------- Draycott Partners. Ltd. 100.00% -------------------------------------------------------------------------------------------------------------- Cursitor Alliance Services Ltd. 100.00% -------------------------------------------------------------------------------------------------------------- Cursitor Management Co. S.A. 100.00% -------------------------------------------------------------------------------------------------------------- Alliance Asset Allocation Ltd. 100.00% -------------------------------------------------------------------------------------------------------------- Cursitor Eaton Asset Management Co. 50.00% Cursitor Alliance LLC = 50% ----------------------------------------------------------------------------------------------------------- Alliance Cecogest 75.00% Cursitor Alliance Services Ltd. = 25% ----------------------------------------------------------------------------------------------------------- Alliance Capital Management LLC 100.00% -------------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein & Co., LLC 100.00% ----------------------------------------------------------------------------------------------------------------- Alliance Capital Management Corp. of Delaware 10 100.00% -------------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein Ltd. 100.00% ----------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein (CREST Nominees)Ltd. 100.00% -------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein Proprietary Ltd. 100.00% ----------------------------------------------------------------------------------------------------------------- Alliance Global Investor Services, Inc. 100 100.00% formerly, Alliance fund Services, Inc. ----------------------------------------------------------------------------------------------------------------- Alliance Fund Distributors, Inc. 100 100.00% ----------------------------------------------------------------------------------------------------------------- Alliance Capital Oceanic Corp. 1,000 100.00% inactive ----------------------------------------------------------------------------------------------------------------- Alliance Capital Latin America Ltd. 99.00% Alliance Capital Oceanic Corp owns 1% ---------------------------------------------------------------------------------------------------------------- Alliance Capital Management Australia Limited 50.00% 3rd parties = 50% ----------------------------------------------------------------------------------------------------------------- Alliance Capital Management New Zealand Limited 50.00% 3rd parties = 50% ----------------------------------------------------------------------------------------------------------------- Alliance Capital Australia Limited 100.00% ----------------------------------------------------------------------------------------------------------------- Far Eastern Alliance Aset Management 20.00% 3rd parties = 80% -------------------------------------------------------------------------------------------------------------- Meiji - Alliance Capital Corp. 50,000 50.00% Meiji Mutual Life owns 50% ----------------------------------------------------------------------------------------------------------------- Alliance Capital (Luxembourg) S.A. 3,999 99.98% Alliance Cap. Oceanic Corp. owns 0.025% ----------------------------------------------------------------------------------------------------------------- Alliance Barra Research Institute, Inc. 1,000 100.00% ----------------------------------------------------------------------------------------------------------------- Alliance Capital Management Canada, Inc. 18,750 100.00% ----------------------------------------------------------------------------------------------------------------- Alliance Capital Global Derivatives Corp. 1,000 100.00% ----------------------------------------------------------------------------------------------------------------- ACM Global Investor Services S.A. 99.00% Alliance Capital Oceanic Corp. owns 1% ----------------------------------------------------------------------------------------------------------------- ACM Fund Services (Espana) S.L. 100.00% -------------------------------------------------------------------------------------------------------------- Alliance Capital Management (Singapore) Ltd. 100.00% ----------------------------------------------------------------------------------------------------------------- ACM International (France) SAS 100.00% ----------------------------------------------------------------------------------------------------------------- ACM CIIC Investment Management Ltd. 54.00% 3rd parties = 46% ----------------------------------------------------------------------------------------------------------------- ACM Software Services Ltd. 100.00% -----------------------------------------------------------------------------------------------------------------
SUBSIDIARY ORGANIZATION CHART- 2002 LISTING B - ALLIANCE CAPITAL MANAGEMENT CORP. 03/07/02 - --------------------------------------------- State of State of Type of Incorp. or Principal Federal Subsidiary Domicile Operation Tax ID # ---------- -------- --------- --------- AXA Financial, Inc. - ------------------------------------------------------------------------------- The Equitable Life Assurance Society of the United States --------------------------------------------------------------------------- Equitable Holdings, LLC ------------------------------------------------------------------------ Alliance Capital Management Corporation --------------------------------------------------------------------- Alliance Capital Management L.P. ------------------------------------------------------------------ Alliance Capital Management Corp. of Delaware (Cont'd) -------------------------------------------------------------------------------------------------------------------- Alliance Capital (Mauritius) Private Ltd. Operating Mauritius Mauritius - ---------------------------------------------------------------------------------------------------------------- Alliance Capital Asset Management (India) Private Ltd Operating India India - ------------------------------------------------------------------------------------------------------------- ACAM Trust Company Private Ltd. Operating India India - ---------------------------------------------------------------------------------------------------------------- Alliance Eastern Europe, Inc. Operating DE NY 13-3802178 ---------------------------------------------------------------------------------------------------------------- Alliance Capital Management (Asia) Ltd. Operating DE Singapore 13-3752293 ---------------------------------------------------------------------------------------------------------------- Alliance Capital Asset Management (Japan) Ltd Operating Japan Japan - ---------------------------------------------------------------------------------------------------------------- Alliance Capital Limited Operating U.K. U.K. - ---------------------------------------------------------------------------------------------------------------- Alliance Capital Services Ltd. Operating U.K. U.K. - ------------------------------------------------------------------------------------------------------------- Dimensional Trust Management Ltd. Operating U.K. U.K. - ---------------------------------------------------------------------------------------------------------------- Alliance Corporate Finance Group Inc. Operating DE NY 52-1671668 ---------------------------------------------------------------------------------------------------------------- Alliance SBS-AGRO Capital Management Co. Operating Russia Russia - ---------------------------------------------------------------------------------------------------------------- Whittingdale Holdings Ltd. Operating U.K. U.K. - ---------------------------------------------------------------------------------------------------------------- Alliance Capital Whittingdale Ltd. Operating U.K. U.K. - ------------------------------------------------------------------------------------------------------------- ACM Investments Ltd. Operating U.K. U.K. - ------------------------------------------------------------------------------------------------------------- Whittingdale Nominees Ltd. Operating U.K. U.K. - ------------------------------------------------------------------------------------------------------------- Hanwha Investment Trust Mgmt. Co., Ltd Operating So Korea So Korea - ---------------------------------------------------------------------------------------------------------------- New Alliance Asset Management (Asia) Ltd Operating H.K. H.K. - ---------------------------------------------------------------------------------------------------------------- ACM New-Alliance (Luxembourg) S.A. Operating Lux. Lux. - ---------------------------------------------------------------------------------------------------------------- Alliance Capital Mgmt. (Proprietary) Ltd. Operating So Africa So Africa - ---------------------------------------------------------------------------------------------------------------- Alliance-MBCA Capital (Private) Ltd. Operating Zimbabwe Zimbabwe - ------------------------------------------------------------------------------------------------------------- Alliance Odyssey Capital Mgmt. (Nambia) (Proprietary) Ltd. Operating Nambia Nambia - ------------------------------------------------------------------------------------------------------------- Alliance-MBCA Capital (Private) Ltd. Operating Zimbabwe Zimbabwe - ------------------------------------------------------------------------------------------------------------- Alliance Odyssey Capital Mgmt. (Nambia) (Proprietary) Ltd. Operating Nambia Nambia - -------------------------------------------------------------------------------------------------------------
Number of Parent's Shares Percent of Comments Owned Ownership (e.g., Basis of Control ----- --------- ----------------------- AXA Financial, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ The Equitable Life Assurance Society of the United States -------------------------------------------------------------------------------------------------------------------------------- Equitable Holdings, LLC ----------------------------------------------------------------------------------------------------------------------------- Alliance Capital Management Corporation -------------------------------------------------------------------------------------------------------------------------- Alliance Capital Management L.P. ----------------------------------------------------------------------------------------------------------------------- Alliance Capital Management Corp. of Delaware (Cont'd) -------------------------------------------------------------------------------------------------------------------- Alliance Capital (Mauritius) Private Ltd. 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance Capital Asset Management (India) Private Ltd 75.00% 3rd parties = 25% ------------------------------------------------------------------------------------------------------------- ACAM Trust Company Private Ltd. 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance Eastern Europe, Inc. 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance Capital Management (Asia) Ltd. 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance Capital Asset Management (Japan) Ltd 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance Capital Limited 250,000 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance Capital Services Ltd. 1,000 100.00% ------------------------------------------------------------------------------------------------------------- Dimensional Trust Management Ltd. 50,000 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance Corporate Finance Group Inc. 1,000 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance SBS-AGRO Capital Management Co. 49.00% 3rd parties = 51% ---------------------------------------------------------------------------------------------------------------- Whittingdale Holdings Ltd. 100.00% ---------------------------------------------------------------------------------------------------------------- Alliance Capital Whittingdale Ltd. 100.00% ------------------------------------------------------------------------------------------------------------- ACM Investments Ltd. 100.00% ------------------------------------------------------------------------------------------------------------- Whittingdale Nominees Ltd. 100.00% ------------------------------------------------------------------------------------------------------------- Hanwha Investment Trust Mgmt. Co., Ltd 20.00% 3rd parties = 80% ---------------------------------------------------------------------------------------------------------------- New Alliance Asset Management (Asia) Ltd 50.00% 3rd parties = 50% ---------------------------------------------------------------------------------------------------------------- ACM New-Alliance (Luxembourg) S.A. 1.00% 3rd parties = 99% ---------------------------------------------------------------------------------------------------------------- Alliance Capital Mgmt. (Proprietary) Ltd. 80.00% 3rd parties = 20% ---------------------------------------------------------------------------------------------------------------- Alliance-MBCA Capital (Private) Ltd. 50.00% 3rd parties = 50% ------------------------------------------------------------------------------------------------------------- Alliance Odyssey Capital Mgmt. (Nambia) (Proprietary) Ltd. 100.00% ------------------------------------------------------------------------------------------------------------- Alliance-MBCA Capital (Private) Ltd. 50.00% 3rd parties = 50% ------------------------------------------------------------------------------------------------------------- Alliance Odyssey Capital Mgmt. (Nambia) (Proprietary) Ltd. 100.00% -------------------------------------------------------------------------------------------------------------
Item 27. Number of Contractowners. As of February 28, 2002 the number of participants in the American Dental Association Members Program offered by the Registrant was 27,541. Item 28. Indemnification (a) Indemnification of Directors and Officers The By-Laws of The Equitable Life Assurance Society of the United States ("Equitable Life") provide, in Article VII, as follows: 7.4 Indemnification of Directors, Officers and Employees. (a) To the extent permitted by the law of the State of New York and subject to all applicable requirements thereof: (i) any person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that he or she, or his or her testator or intestate, is or was a director, officer or employee of the Company shall be indemnified by the Company; (ii) any person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that he or she, or his or her testator or intestate serves or served any other organization in any capacity at the request of the Company may be indemnified by the Company; and (iii) the related expenses of any such person in any of said categories may be advanced by the Company. (b) To the extent permitted by the law of the State of New York, the Company may provide for further indemnification or advancement of expenses by resolution of shareholders of the Company or the Board of Directors, by amendment of these By-Laws, or by agreement. (Business Corporation Law ss. 721-726; Insurance Law ss. 1216) The directors and officers of Equitable Life are insured under policies issued by Lloyd's of London, X.L. Insurance Company and ACE Insurance Company. The annual limit on such policies is $150 million, and the policies insure that officers and directors against certain liabilities arising out of their conduct in such capacities. (b) Indemnification of Principal Underwriter To the extent permitted by law of the State of New York and subject to all applicable requirements thereof, AXA Advisors LLC has undertaken to indemnify each of its directors and officers who is made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact the director or officer, or his or her testator or intestate, is or was a director or officer of AXA Advisors LLC. (c) Undertaking Insofar as indemnification for liability arising under the Securities Act of 1933 ("Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will by governed by the final adjudication of such issue. Item 29. Principal Underwriters (a) AXA Advisors, LLC, an affiliate of Equitable is the principal underwriter for Equitable's Separate Account No. 301, Separate Account No. 45, 49 Separate Account A, Separate Account I, Separate Account FP and EQ Advisors Trust. AXA Advisors, LLC's principal business address is 1290 Avenue of the Americas, New York, NY 10104. Set forth below is certain information regarding the directors and principal officers of AXA Advisors, LLC. The business address of the persons whose names are preceded by an asterisk is that of AXA Advisors, LLC.
(b) NAME AND PRINCIPAL POSITIONS AND OFFICES WITH UNDERWRITER BUSINESS ADDRESS (AXA ADVISORS, LLC) ---------------- --------------------------------------- *Harvey E. Blitz Executive Vice President and Director *G. Patrick McGunagle Executive Vice President and Director *Richard V. Silver Director *Mark R. Wutt Director *David Conine Director 1345 Avenue of Americas New York, NY 10105 Edward J. Hayes Executive Vice President 200 Plaza Drive Secaucus, NJ 07096 *Peter D. Noris Executive Vice President *Nik Malvania Executive Vice President *James Bodovitz Senior Vice President and General Counsel Stephen T. Burnthall Senior Vice President 6435 Shiloh Road Suite A Alpharetta, GA 30005 Richard Magaldi Senior Vice President 6435 Shiloh Road Suite A Alpharetta, GA 30005 *Robert Schmiedt Senior Vice President Kevin R. Byrne Senior Vice President and Treasurer Eric Mosholt Senior Vice President *Jill Cooley Senior Vice President *Donna M. Dazzo First Vice President *Amy Franceschini First Vice President *Philomena Scamardella First Vice President *Mark D. Godofsky Vice President and Controller *Michael Brzozowski Vice President *David Mahler Vice President and Compliance Officer *Linda J. Galasso Vice President and Secretary *Francesca Divone Assistant Secretary
(c) Not Applicable C-16 Item 30. Location of Accounts and Records The records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are maintained by The Equitable Life Assurance Society of the United States at: 135 West 50th Street New York, New York 10020; 1290 Avenue of the Americas, New York, New York 10104; and 200 Plaza Drive, Secaucus, New Jersey 07094. Item 31. Management Services Not applicable. Item 32. Undertakings The Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted; (b) to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; (c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. C-17 SIGNATURES As required by the Securities Act of 1933, the Registrant has caused this Registration Statement to be signed on its behalf, in the City and State of New York, on the 18th day of April, 2002. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Registrant) By: The Equitable Life Assurance Society of the United States By: /s/ Robin Wagner ----------------------- Robin Wagner Vice President and Counsel C-18 SIGNATURES As required by the Securities Act of 1933, the Depositor has caused this Registration Statement to be signed on its behalf in the City and State of New York, on this 18th day of April, 2002. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Depositor) By: /s/ Robin Wagner ----------------------- Robin Wagner Vice President and Counsel As required by the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the date indicated: PRINCIPAL EXECUTIVE OFFICERS: *Christopher M. Condron Chairman of the Board, Chief Executive Officer and Director PRINCIPAL FINANCIAL OFFICER: *Stanley B. Tulin Vice Chairman of the Board and Chief Financial Officer PRINCIPAL ACCOUNTING OFFICER: *Alvin H. Fenichel Senior Vice President and Controller *DIRECTORS: Bruce W. Calvert Donald J. Greene George T. Lowy Francoise Colloc'h John T. Hartley Edward D. Miller Christopher M. Condron John H.F. Haskell, Jr. Didier Pineau-Valencienne Henri de Castries Mary R. (Nina) Henderson George J. Sella, Jr. Claus-Michael Dill Peter J. Tobin Stanley B. Tulin Joseph L. Dionne W. Edwin Jarmain Denis Duverne Jean-Rene Fourtou Norman C. Francis /s/ Robin Wagner ------------------ Robin Wagner Attorney-in-Fact April 18, 2002 C-19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, State Street Bank and Trust Company, in its capacity as Trustee of the undersigned collective investment trusts, has duly caused this Amendment to the Registration Statement to be signed by the undersigned, thereto duly authorized, in the City of Boston and Commonwealth of Massachusetts, on this 18th day of April, 2002. LIFECYCLE FUND GROUP TRUST - CONSERVATIVE LIFECYCLE FUND GROUP TRUST - MODERATE S&P 500 FLAGSHIP FUND RUSSELL 2000 INDEX SECURITIES LENDING FUND DAILY EAFE FUND GOVERNMENT CORPORATE BOND FUND SHORT TERM INVESTMENT FUND STATE STREET BANK AND TRUST COMPANY By: /s/ Maureen Scannell Bateman ------------------------------------ Maureen Scannell Bateman Executive Vice President and General Counsel By: /s/ Timothy B. Harbert ------------------------------------ Timothy B. Harbert Executive Vice President C-20 Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed on behalf of the following persons in the capacities and on this 18th of April, 2002. PRINCIPAL EXECUTIVE OFFICER: David A. Spina PRINCIPAL FINANCIAL OFFICER: Stefan M. Gavell PRINCIPAL ACCOUNTING OFFICER: Frederick P. Baughman Directors: David A. Spina* Tenley E. Albright, M.D.* I. MacAllister Booth* Truman S. Casner, Esq.* Nader F. Darehshori* Arthur L. Goldstein* David P. Gruber* Linda A. Hill* Charles R. LaMantia* Ronald E. Logue* Dennis J. Picard* Richard P. Sergel* Gregory L. Summe* Diana Chapman Walsh By: /s/ Maureen Scannell Bateman ------------------------------ Maureen Scannell Bateman* Attorney-in-Fact By: /s/ Timothy B. Harbert ------------------------------ Timothy B. Harbert* Attorney-in-Fact By: /s/ Stefan M. Gavell ------------------------------------ Stefan M. Gavell Executive Vice President and Chief Financial Officer By: /s/ Frederick P. Baughman ------------------------------------ Frederick P. Baughman Senior Vice President, Comptroller and Chief Accounting Officer C-21 EXHIBIT INDEX EXHIBIT NO. - ---------- 9(e) Opinion and Consent 10(e) Consent of PricewaterhouseCooper LLP. 10(f) Powers of Attorney (State Street) EX-9.(E) 3 file002.txt OPINION AND CONSENT OF COUNSEL ROBIN WAGNER Vice President and Counsel (212) 314-3962 Fax: (212) 314-3964 E-Mail: Robin.Wagner@Equitable.Com LAW DEPARTMENT [EQUITABLE LOGO] April 18, 2002 The Equitable Life Assurance Society of the United States 1290 Aveune of the Americas New York, NY 10104 Dear Sirs: This opinion is furnished in connection with the Form N-4 Registration Statement of The Equitable Life Assurance Society of the United States ("Equitable") under the Securities Act of 1933, as amended (the "Act"), relating to separate account units of interest ("Units") under a group annuity contract, as amended, issued by Equitable to Chase Manhattan Bank, N.A. as the Trustee of The American Dental Association Members Retirement Trust (State Street) and of the American Dental Association Members Pooled Trust for Retirement Plans (State Street) (the "Members Contract") (the separate accounts included in the Members Contract being referred to herein collectively as the "Separate Accounts"). The Members Contract is designed to provide benefits under retirement plans and trusts adopted by members of certain associations for themselves and their employees. Such plans and trusts will be qualified under Section 401 of the Internal Revenue Code of 1986, as amended. The securities being registered are to be offered in the manner described in the Registration Statement covering up to $40 million of the plan contributions to be received under the Members Contract. I have examined all such corporate records of Equitable and such other documents and such laws as I consider appropriate as a basis for the opinion hereinafter expressed. In the basis of such examination, it is my opinion that 1. Equitable is a corporation duly organized and validly existing under the laws of the State of New York. 2. The Separate Accounts were duly created pursuant to the provisions of the New York Insurance Law. The Equitable Life Assurance Society of the United States April 18, 2002 Page 2 3. Assets allocated to the Separate Accounts are owned by Equitable; Equitable is not a trustee with respect thereto. Under New York State law, the income, gains and losses, whether or not realized, from assets allocated to a Separate Account must be credited to or charged against such Account, without regard to the other income, gains or losses of Equitable. 4. The Members Contract provides that the portion of the assets of the Separate Accounts equal to the reserves and other contract liabilities with respect to the Separate Accounts shall not be chargeable with liabilities arising out of any other business Equitable may conduct. 5. The Members Contract and the Units issued thereunder have been duly authorized; and the Members Contract constitutes, and the Units when issued thereunder will constitute, validly issued and binding obligations of Equitable in accordance with their terms. I hereby consent to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Robin Wagner ------------------------------------------- Robin Wagner Vice President and Counsel EX-10.(E) 4 file003.txt CONSENT OF INDEPENDENT ACCOUNTANTS CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Statement of Additional Information constituting part of this Registration Statement on Form N-4 (the "Registration Statement") of (1) our report dated February 6, 2002 relating to the financial statements of Separate Account Nos. 195, 197 and 198 of The Equitable Life Assurance Society of the United States for the year ended December 31, 2001; (2) our reports dated February 6, 2002 relating to the consolidated financial statements of The Equitable Life Assurance Society of the United States for the year ended December 31, 2001; and (3) our reports relating to the financial statements of the following funds established under the Declaration of Trust of the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans: Lifecycle Fund Group Trust - Conservative (report dated March 1, 2002), Lifecycle Group Trust - Moderate (report dated March 1, 2002), S&P 500 Flagship Fund and S&P 500 Flagship Non-Lending Fund (Combined Financial Statements) (report dated February 1, 2002), Russell 2000 Index Securities Lending Fund and Russell 2000 Index Fund (Combined Financial Statements) (report dated February 8, 2002), Daily EAFE Securities Lending Fund (report dated March 22, 2002), Daily MSCI Europe Index Securities Lending Fund and Daily MSCI Europe Index Fund (Combined Financial Statements) (report dated February 22, 2002), Daily MSCI Japan Index Securities Lending Fund and Daily MSCI Japan Index Fund (Combined Financial Statements) (report dated February 22, 2002), Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund and Daily MSCI Pacific Basin ex-Japan Index Fund (Combined Financial Statements) (report dated February 22, 2002), Government Corporate Bond Fund (report dated March 1, 2002), and Short Term Investment Fund (report dated January 25, 2002) for the years ended December 31, 2001 and 2000. We also consent to the use in the Prospectus Supplement constituting part of this Registration Statement of our report dated February 6, 2002 relating to the financial statements of Separate Account No. 4 of The Equitable Life Assurance Society of the United States. We also consent to the references to us under the headings "Condensed Financial Information" and "About Our Independent Accountants" in such Registration Statement. /s/ PriceWaterhouseCoopers PricewaterhouseCoopers New York, New York April 17, 2002 EX-10.(F) 5 file004.txt POWER OF ATTORNEY POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT we, the undersigned officer and Directors of State Street Bank and Trust Company, hereby severally constitute David A. Spina, Ronald E. Logue, John R. Towers, Maureen Scannell Bateman and Timothy B. Harbert our true and lawful attorneys with full power to them, and any two of them acting together, to sign for us in our names in the capacities indicated below, any and all Registration Statements on Form N-4 or successor forms (the "Registration Statement") of The Equitable Life Assurance Society of the United States (the "Equitable") and any and all reports, forms and schedules of the Equitable required or permitted to be filed under the Securities Act of 1933, as amended (the "Securities Act"), or under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), pertaining to such Registration Statement, including, without limitation, any and all Annual Reports on Form 10-K, and any and all amendments to the Registration Statement and such forms, reports, and schedules, and generally to do all such things in our names and in our capacities as officers and Directors to enable State Street Bank and Trust Company to comply with the provisions of the Securities Act and the Exchange Act, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, or the Registration Statement and any and all such reports, forms and schedules and any and all amendments thereto. This Power of Attorney may be executed in any number of counterparts, all of which together shall constitute one and the same document. Witness our hands on the dates set forth below.
Signature Capacity Date --------- -------- ---- /s/ David A. Spina - ---------------------------- Director/Chairman and Chief Executive April 17, 2002 David A. Spina Officer of State Street Bank and Trust Company /s/ Ronald E. Logue - ---------------------------- Director of State Street Bank and April 17, 2002 Ronald E. Logue Trust Company /s/ Tenley E. Albright, M.D. - ---------------------------- Director of State Street Bank and April 17, 2002 Tenley E. Albright, M.D. Trust Company /s/ I. MacAllister Booth - ---------------------------- Director of State Street Bank and April 17, 2002 I. MacAllister Booth Trust Company /s/ Truman S. Casner, Esq. - ---------------------------- Director of State Street Bank and April 17, 2002 Truman S. Casner, Esq. Trust Company /s/ Nader F. Darehshori - ---------------------------- Director of State Street Bank and April 17, 2002 Nader F. Darehshori Trust Company /s/ Arthur L. Goldstein - ---------------------------- Director of State Street Bank and April 17, 2002 Arthur L. Goldstein Trust Company /s/ David P. Gruber - ---------------------------- Director of State Street Bank and April 17, 2002 David P. Gruber Trust Company /s/ Linda A. Hill - ---------------------------- Director of State Street Bank and April 17, 2002 Linda A. Hill Trust Company /s/ Charles R. LaMantia - ---------------------------- Director of State Street Bank and April 17, 2002 Charles R. LaMantia Trust Company /s/ Dennis J. Picard - ---------------------------- Director of State Street Bank and April 17, 2002 Dennis J. Picard Trust Company /s/ Richard P. Sergel - ---------------------------- Director of State Street Bank and April 17, 2002 Richard P. Sergel Trust Company /s/ Gregory L. Summe - ---------------------------- Director of State Street Bank and April 17, 2002 Gregory L. Summe Trust Company - ---------------------------- Director of State Street Bank and April 17, 2002 Diana Chapman Walsh Trust Company
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