-----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, JMCv3jyq+8mBFfa+QNCZUdlzF2fSdbMWRpKC/Ms68MjzWba+CD59tw5W58z/1mr9 RZXJfm22D5FmCqsGpLX01A== 0000950136-97-000537.txt : 19970501 0000950136-97-000537.hdr.sgml : 19970501 ACCESSION NUMBER: 0000950136-97-000537 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970430 EFFECTIVENESS DATE: 19970430 SROS: NONE 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-75616 FILM NUMBER: 97591803 BUSINESS ADDRESS: STREET 1: 787 SEVENTH AVE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125541234 MAIL ADDRESS: STREET 1: 787 SEVENTH AVE CITY: NEW YORK STATE: NY ZIP: 10019 485BPOS 1 POST-EFFECTIVE AMENDMENT Registration No. 33-75616 - ------------------------------------------------------------------------------- ----------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. [ ] ---- Post-Effective Amendment No. 4 [X] ---- 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 ANTHONY A. DREYSPOOL Vice President and Associate General 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 John R. Towers Freedman, Levy, Kroll & Simonds Senior Vice President 1050 Connecticut Avenue, N.W., and General Counsel Suite 825 State Street Bank and Trust Company Washington, D.C. 20036 225 Franklin Street Boston, MA 02110 ----------------------------------------- Approximate Date of Proposed Public Offering: Continuous It is proposed that this filing will become effective (check appropriate box): [ ] Immediately upon filing pursuant to paragraph (b) of Rule 485. [ X ] On May 1, 1997 pursuant to paragraph (b) of Rule 485. [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [ ] On (date) pursuant to paragraph (a)(1) of Rule 485. [ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485. [ ] On (date) pursuant to paragraph (a)(3) of Rule 485. If appropriate, check the following box: [ ] This post-effective amendment designates a new effective date for previously filed post-effective amendment. -------------------------------- AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM PROSPECTUS -MAY 1, 1997 - ----------------------------------------------------------------------------- The American Dental Association Members Retirement Program offers you ten investment options from which to choose. This prospectus describes three of the seven Separate Accounts under the group annuity contract issued by THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES: 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. The Lifecycle Fund Group Trusts are collective investment funds maintained by State Street Bank and Trust Company ("State Street"). THE PROGRAM The American Dental Association Members Retirement Program offers ADA members and other eligible persons the choice of several plans to accumulate retirement savings for themselves and their employees. THE INVESTMENT OPTIONS The Program allows you to choose from ten Investment Options. The Investment Options are: Seven Separate Accounts or "Funds": o Growth Equity Fund o Aggressive Equity Fund o ADA Foreign Fund o Equity Index Fund o Real Estate Fund o Lifecycle Fund--Conservative o Lifecycle Fund--Moderate Three Guaranteed Options: o 3 year Guaranteed Rate Account o 5 year Guaranteed Rate Account o Money Market Guarantee Account The Aggressive Equity Fund, ADA Foreign Fund and the Equity Index Fund each invest in shares of a corresponding mutual fund, the MFS Emerging Growth Fund, the Templeton Foreign Fund and The SSgA S&P 500 Index Fund (formerly known as "The Seven Seas S&P 500 Index Fund"), respectively. We refer to these as the "underlying mutual funds." The Lifecycle Funds--Conservative and Moderate ("Lifecycle Funds") each invest in units of a corresponding group trust maintained by State Street. We refer to these as the "Lifecycle Fund Group Trusts." The Lifecycle Fund Group Trusts in turn invest in units of collective investment funds of State Street. We refer to these as the "Underlying Funds." The Underlying Funds are the S&P 500 Flagship Fund, Russell 2000 Fund, Daily EAFE Fund, Daily Government/Corporate Bond Fund, and Short Term Investment Fund. The prospectuses for the underlying mutual funds and our separate prospectus for all of the Investment Options, except the Equity Index and Lifecycle Funds, describe in detail the investment objectives, policies and risks of these Funds and should be read carefully and retained for future reference. Copies of these prospectuses may be obtained by writing or calling as indicated below. THIS PROSPECTUS DESCRIBES IN DETAIL ONLY THE EQUITY INDEX FUND, LIFECYCLE FUNDS, LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS. (Cover page continued.) The Equitable Life Assurance Society of the United States P.O. Box 2486 G.P.O. New York, NY 10116 Calls for current participants: Calls for all others: 1-800-223-5790 1-800-523-1125 This prospectus provides important information you should be aware of before investing. Additional information is included in the Statement of Additional Information (the "SAI") dated May 1, 1997, which has been filed with the Securities and Exchange Commission. Parts of the SAI have been incorporated by reference into this prospectus. A table of contents for the SAI appears at page 46 of this prospectus. To obtain a copy of the SAI free of charge, complete the SAI request form on page 46 and mail it to us, or call or write at the above address. KEEP THIS PROSPECTUS FOR FUTURE REFERENCE. - ----------------------------------------------------------------------------- NONE OF THE SECURITIES DESCRIBED IN THIS PROSPECTUS HAS BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNITS OF THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS MAINTAINED BY STATE STREET ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED, GUARANTEED, OR ENDORSED BY, THE U.S. GOVERNMENT, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, ENTITY OR PERSON, AND INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. TABLE OF CONTENTS
PAGE -------- SUMMARY................................................................................... 5 CONDENSED FINANCIAL INFORMATION........................................................... 9 SELECTED FINANCIAL DATA .................................................................. 11 INVESTMENT OPTIONS........................................................................ 16 THE EQUITY INDEX FUND..................................................................... 16 LIFECYCLE FUNDS--CONSERVATIVE AND MODERATE................................................ 17 THE LIFECYCLE FUND GROUP TRUSTS........................................................... 18 Lifecycle Fund Group Trust--Conservative................................................. 18 Lifecycle Fund Group Trust--Moderate..................................................... 18 THE UNDERLYING FUNDS...................................................................... 19 S&P 500 Flagship Fund.................................................................... 19 Russell 2000 Fund...................................................................... 19 Daily EAFE Fund........................................................................ 20 Daily Government/Corporate Bond Fund................................................... 21 Short Term Investment Fund............................................................. 21 Voting Rights: The Lifecycle Funds..................................................... 21 Risks and Investment Techniques: Lifecycle Fund Group Trusts and Underlying Funds...... 21 HOW WE CALCULATE THE VALUE OF AMOUNTS ALLOCATED TO THE EQUITY INDEX AND LIFECYCLE FUNDS.......................................................... 25 EQUITABLE LIFE AND STATE STREET........................................................... 27 Equitable Life.......................................................................... 27 The Separate Accounts.................................................................. 27 State Street........................................................................... 28 The Lifecycle Fund Group Trusts and Underlying Funds................................... 28 INVESTMENT PERFORMANCE.................................................................. 29 Measuring the Investment Performance of the Funds...................................... 29 Unmanaged Market Indices............................................................... 29 How Performance Data Are Presented..................................................... 30 Annual Percentage Change in Fund Unit Values........................................... 30 Average Annual Percentage Change in Fund Unit Values--Years Ending December 31, 1996 .. 30 THE PROGRAM............................................................................... 31 Employers Who May Participate in the Program............................................ 31 Choices for the Employer............................................................... 31 Summary of the Plans and Trusts........................................................ 31 3 PAGE -------- Information on Joining the Program........................................................ 32 Choosing the Right Plan................................................................ 32 Getting Started In The Program After Choosing A Plan................................... 32 Communicating With Us After You Enroll................................................. 33 Your Responsibilities As the Employer.................................................. 33 When Transactions Are Effective........................................................ 33 Minimum Investments.................................................................... 34 Making Contributions to the Program.................................................... 34 Our Account Investment Management (AIM) System......................................... 34 Allocating Contributions Among the Investment Options.................................. 34 Transfers Among the Investment Options................................................. 35 Distributions From the Investment Options.............................................. 35 When Distributions Are Available to Participants....................................... 35 Participant Loans...................................................................... 36 Benefit Payment Options................................................................ 36 Spousal Consent Rules.................................................................. 37 Benefits Payable After the Death of a Participant...................................... 37 DEDUCTIONS AND CHARGES.................................................................... 38 CHARGES BASED ON AMOUNTS INVESTED IN THE PROGRAM.......................................... 38 Program Expense Charge.................................................................. 38 Administration Fee..................................................................... 39 Other Expenses Borne Directly by the Funds............................................. 39 PLAN AND TRANSACTION EXPENSES........................................................... 40 ADA Retirement Plan, Prototype Self-Directed Plan and Individually-Designed Plan Fees.. 40 Individual Annuity Charges............................................................. 40 General Information On Fees and Charges................................................ 40 DEDUCTIONS AND CHARGES RELATED TO THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS ... 41 FEDERAL INCOME TAX CONSIDERATIONS......................................................... 42 Adopting the Program.................................................................... 42 Income Taxation of Distributions to Qualified Plan Participants........................ 42 Other Tax Consequences................................................................. 43 MISCELLANEOUS............................................................................. 44 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION ................................. 46
4 SUMMARY 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. The purpose of the Program is to provide members of the American Dental Association (the "ADA") and their employees with a program to invest, accumulate, and then distribute funds for retirement. 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 22,113 participants and $1.1 billion in assets at December 31, 1996. EQUITABLE LIFE The Equitable Life Assurance Society of the Unites States ("Equitable Life") is a diversified financial services organization serving a variety of insurance, investment management and investment banking customers. We are one of the largest life insurance companies in the United States, and have been in business since 1859. In this prospectus, the terms "we," "our," and "us" mean Equitable Life. STATE STREET State Street is a Massachusetts trust company that, among other things, provides a variety of investment-related services to pension and mutual funds. Through its institutional investment arm, State Street Global Advisors ("SSgA"), State Street offers a selection of investment products with management styles ranging from indexed to fully active. As of December 31, 1995, State Street ranked as the largest U.S. manager of tax-exempt assets and the largest manager of international index assets. THE INVESTMENT OPTIONS Ten Investment Options are available under the Program. Seven of the Investment Options are Separate Accounts, or Funds, consisting of six Equity Funds and the Real Estate Fund. The Funds operate like mutual funds in many ways. However, because of exclusionary provisions, they are not subject to regulation under the Investment Company Act of 1940 (the "1940 Act"). The three additional Investment Options are guaranteed options funded through our general account. They include two Guaranteed Rate Accounts and the Money Market Guarantee Account. ONLY THREE OF THESE INVESTMENT OPTIONS ARE DESCRIBED IN DETAIL IN THIS PROSPECTUS: THE EQUITY INDEX FUND AND THE TWO LIFECYCLE FUNDS (COLLECTIVELY REFERRED TO AS "THE FUNDS"). FOR ADDITIONAL INFORMATION ON THE OTHER AVAILABLE INVESTMENT OPTIONS, PLEASE REFER TO OUR SEPARATE PROSPECTUS FOR THOSE OPTIONS. THE EQUITY INDEX FUND (Separate Account No. 195) Invests in shares of the SSgA S&P 500 Index Fund, which seeks to achieve a total return that parallels the return of the Standard & Poor's 500 Composite Stock Price Index, by investing in the stocks in the Index. State Street serves as the investment advisor to SSgA S&P 500 Index Fund. THE LIFECYCLE FUND--CONSERVATIVE (Separate Account No. 197) Invests in units of the Lifecycle Fund Group Trust--Conservative, maintained by State Street, which in turn invests in units of the five Underlying Funds maintained by State Street to provide current collective income and a low to moderate growth of capital. 5 THE LIFECYCLE FUND--MODERATE (Separate Account No. 198) Invests in units of the Lifecycle Fund Group Trust--Moderate, maintained by State Street, which in turn invests in units of five Underlying Funds maintained by State Street to provide growth of capital and a reasonable level of current income. There is no assurance that the Funds will achieve their respective objectives. No person is authorized by Equitable Life or by State Street to give any information or make any representations other than those contained in this prospectus or in other printed or written material issued by these companies, and you should not rely on any other information or representation. YOUR CHOICE OF RETIREMENT PLANS As an employer, you can use the Program to adopt our profit-sharing plan (including 401(k) and SIMPLE 401(k) features), defined contribution pension master plan or our self-directed prototype plan. You can also have your own individually-designed plan and use our Pooled Trust as a funding vehicle. See The Program for additional information on your choices. FUND EXPENSES TRANSACTION EXPENSES Transaction expenses are charges you pay when you buy or sell units of the Funds.
SALES LOAD NONE DEFERRED SALES CHARGE NONE SURRENDER FEES NONE TRANSFER OR EXCHANGE FEE NONE
If you annuitize your account, premium taxes and other fees may apply. ANNUAL FUND OPERATING EXPENSES Operating expenses for the Funds are paid out of each Fund's assets. Equitable Life deducts three types of operating expenses from the assets of each Fund: a Program expense charge to compensate Equitable Life and the ADA for the costs incurred in connection with the Program, an administration fee which covers the costs related to providing administration services in connection with offering the Funds, and other expenses--such as legal, auditing, and accounting--borne directly by the Funds. No management fees are paid to us by the Equity Index Fund and the Lifecycle Funds, although, as discussed below, a management fee is paid to State Street for managing the assets of the SSgA S&P 500 Index Fund underlying the Equity Index Fund and the Lifecycle Fund Group Trusts underlying the Lifecycle Funds. Premium taxes may also be applicable. For a more detailed discussion of fees and charges, see Deductions and Charges. For a discussion of the calculation of Fund unit values, see How We Calculate the Value of Amounts Allocated to the Funds. EQUITY 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. Deductions are made from the assets of the SSgA S&P 500 Index Fund to pay for expenses borne directly by the Fund, such as 12b-1 fees, the costs of printing prospectuses and the costs for providing various services to the Fund, such as legal, accounting, and auditing. For a more detailed description of charges and expenses incurred by the SSgA S&P 500 Index Fund, see the prospectus for that Fund. 6 The fees and charges which are deducted from the assets of the Equity Index Fund and the SSgA S&P 500 Index Fund are illustrated in the table presented below. This table does not reflect other charges which are specific to the various plans participating in the Program, such as enrollment, record maintenance and reporting fees. The expenses shown in the table are based on average Program assets in the Equity Index Fund during the year ended December 31, 1996, restated to reflect current applicable fees.
INVESTMENT PROGRAM MANAGEMENT EXPENSE ADMINISTRATION OTHER FEE CHARGE FEE EXPENSES 12B-1 FEE TOTAL - ---------------------------------- --------- -------------- ---------- ----------- ---------- Equity Index Fund None 0.64% 0.15% 0.38%(2) None 1.17% SSgA S&P 500 Index Fund(1) 0.00%(3) None None 0.13% 0.05% 0.18%(3) TOTAL 0.00%(3) 0.64% 0.15% 0.51%(2) 0.05% 1.35%(3) - ---------------------------------- --------- -------------- ---------- ----------- ----------
(1) Source: SSgA S&P 500 Index Fund Prospectus dated December 29, 1996. (2) Includes expenses incurred in connection with the organization of the Equity Index Fund. Organizational expenses were initially paid by us and we are being reimbursed from the Fund over a five year period. Organizational expenses were $33,917 and are being amortized over the period which ends December 31, 1998. (3) State Street voluntarily agrees to waive up to the full amount of its management fee of .10% of average daily net assets to the extent that total expenses exceed .15% of average daily net assets on an annual basis. The total operating expenses of the SSgA S&P 500 Index Fund absent the waiver would be .28% of average daily net assets on an annual basis. The gross annual management expense before the fee waiver would be .10% of average daily net assets. This agreement will remain in effect for the current fiscal year. (See Note 1.) If the waiver agreement is terminated, the full amount of State Street's management fee may be assessed and the total Fund expenses may increase. 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 Group Trust. State Street does not receive a fee for managing the assets of the Underlying Funds in which a Lifecycle Fund Group Trust invests. 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 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 Group Trusts' investment in such other collective investment funds and mutual funds. Other expenses are deducted from the assets of each Lifecycle Fund Group Trust and Underlying Fund to pay for services, such as legal and auditing, provided directly to each Lifecycle Fund Group Trust. 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 Group Trust. In addition, other expenses are deducted from the assets of the Underlying 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 Funds are illustrated in the table below. This table does not reflect other charges which are specific to the various plans participating in the Program, such as enrollment, record maintenance and reporting fees. See Plan and Transaction Expenses. 7
INVESTMENT PROGRAM MANAGEMENT EXPENSE ADMINISTRATION OTHER FEE CHARGE FEE EXPENSES TOTAL - -------------------------- ------------ --------- -------------- ------------ --------- Lifecycle Fund - Conservative None 0.64% 0.15% 1.33%(1) 2.12% Lifecycle Fund Group Trust - Conservative 0.17% None 0.26%(2) 0.38%(1&3) 0.81% Underlying Funds(4): S&P 500 Flagship Fund None None None --%(4&5) --%(5) Russell 2000 Fund None None None 0.06%(4) 0.06% Daily EAFE Fund None None None 0.19%(4) 0.19% Daily Government/Corporate Bond Fund None None None 0.01%(4) 0.01% Short Term Investment Fund None None None --%(4&5) --%(5) TOTAL 0.17% 0.64% 0.41% 1.71%(6) 2.93%(6) - -------------------------- ------------ --------- ------------------------ ---------
INVESTMENT PROGRAM MANAGEMENT EXPENSE ADMINISTRATION OTHER FEE CHARGE FEE EXPENSES TOTAL - -------------------------- ------------ --------- -------------- ------------ --------- Lifecycle Fund - Moderate None 0.64% 0.15% 0.28%(1) 1.07% Lifecycle Fund Group Trust - Moderate 0.17% None 0.01%(2) 0.02%(1&3) 0.20% Underlying Funds(4): S&P 500 Flagship Fund None None None --%(4&5) --%(5) Russell 2000 Fund None None None 0.06%(4) 0.06% Daily EAFE Fund None None None 0.19%(4) 0.19% Daily Government/Corporate Bond Fund None None None 0.01%(4) 0.01% Short Term Investment Fund None None None --%(4&5) --%(5) TOTAL 0.17% 0.64% 0.16% 0.30%(6) 1.27%(6) - -------------------------- ------------ --------- ------------------------ ---------
(1) These include a charge at the annual rate of .03% of the value of the respective 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 Funds maintained by State Street among the Investment Options described in this prospectus and the SAI. Other expenses also include costs incurred by Equitable Life and State Street in connection with the organization of the Lifecycle Funds. Organizational expenses were initially paid by Equitable Life and State Street and are being reimbursed from the Lifecycle Funds over a five year period. Organizational expenses were $150,087 and will be amortized pro rata, based on the assets of each Fund, over the period ending June 30, 2000. 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 $11,100 per year, per fund and average net assets for 1996. (3) Based on the Lifecycle Fund Group Trusts--Conservative and Moderate average net assets for 1996. (4) Other expenses of the Underlying Funds are based on expenses incurred by each Fund during 1996. (5) Less than 0.01%. (6) These Totals are based upon a weighted average of the Other Expenses for each Underlying Fund. In calculating the weighted average, expenses for each Underlying Fund were multiplied by their respective target percentages within their respective Group Trust. See Investment Options--The Equity Funds--Lifecycle Funds--Conservative and Moderate for a description of the targeted percentage weightings of the Lifecycle Fund Group Trusts--Conservative and Moderate. 8 EXAMPLES You would pay the following expenses on a $1,000 investment over the time period indicated for each Fund listed below, assuming a 5% annual rate of return. The Examples include all annual fund operating expenses listed in the tables above plus an estimate of average plan and transaction charges over the time periods indicated for a $1,000 initial investment, 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 ADA Members Retirement Plan, Prototype Self-Directed Plan and Individually-designed Plan Fees. Although the Program has no minimum contribution, the minimum amount that can be converted to an annuity is $3,500. There are no surrender charges, so the amounts would be the same, whether or not you withdraw all or a portion of your Account Balance.
1 YEAR 3 YEAR 5 YEAR 10 YEAR - -------------------- ----------- ----------- ----------- ------------ Equity Index Fund(1) $14.06(1) $43.69(1) $ 75.47(1) $165.34(1) Lifecycle Fund - Conservative 29.96 91.63 155.71 327.04 Lifecycle Fund - Moderate 13.25 41.21 71.25 156.44 - -------------------- ----------- ----------- ----------- ------------
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. (1) The returns shown reflect the waiver of the .10% investment management fee by State Street. CONDENSED FINANCIAL INFORMATION EQUITY INDEX FUND: SEPARATE ACCOUNT NO. 195 Condensed financial information for the SSgA S&P 500 Index Fund is contained in the prospectus for that Fund, copies of which may be obtained by calling an Account Executive. Those financial statements, however, do not reflect the Program expense charge, and the daily accrual of direct expenses deducted from amounts held in Separate Account No. 195, the Equity Index Fund. Unit values for the Equity Index Fund are shown below and do reflect the deduction of Program expense charges and daily accrual of direct expenses. The Equity Index Fund was established at $10.00 on February 1, 1994, the date this Fund began operations.
EQUITY INDEX FUND -------------- Unit value as of: December 31, 1996........... $15.91 December 31, 1995 .......... $13.12 December 31, 1994 .......... $ 9.71 Number of Units outstanding at December 31, 1996 (000's) .................... 2,100
9 LIFECYCLE FUND--CONSERVATIVE: SEPARATE ACCOUNT NO. 197 Unit Values for the Lifecycle Fund--Conservative are shown below and reflect the deduction of Program expense charges and daily accrual of direct expenses. The Lifecycle Fund--Conservative began operations on May 1, 1995. The value for a Lifecycle Fund--Conservative Unit was established at $10.00 on that date.
LIFECYCLE FUND-- CONSERVATIVE --------------- Unit value as of: December 31, 1996........... $11.04 December 31, 1995 .......... $10.59 Number of Units outstanding at December 31, 1996 (000's) .................... 408
LIFECYCLE FUND--MODERATE: SEPARATE ACCOUNT NO. 198 Unit Values for the Lifecycle Fund--Moderate are shown below and reflect the deduction of Program expense charges and daily accrual of direct expenses. The Lifecycle Fund--Moderate began operations on May 1, 1995. The value for a Lifecycle Fund--Moderate Unit was established at $10.00 on that date.
LIFECYCLE FUND-- MODERATE --------------- Unit value as of: December 31, 1996........... $12.18 December 31, 1995 .......... $11.01 Number of Units outstanding at December 31, 1996 (000's) .................... 7,241
FULL FINANCIAL STATEMENTS. The financial statements of Separate Account No. 195, 197 and 198 and the Consolidated Financial Statements of Equitable Life are contained in the SAI. 10 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. The selected financial data has been audited by Price Waterhouse 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 Lifecycle Fund Group Trusts, which appear in the SAI.
YEAR ENDED PERIOD ENDED DECEMBER 31, DECEMBER 31, 1996 1995* -------------- -------------- LIFECYCLE FUND GROUP TRUST-CONSERVATIVE Net investment income (loss)**.................................... $ 0.05 $ (0.08) Net realized and unrealized gain (loss)........................... 0.65 0.81 -------------- -------------- Net increase (decrease)........................................... 0.70 0.73 Net asset value Beginning of period............................................... 10.73 10.00 -------------- -------------- End of period..................................................... $ 11.43 $ 10.73 ============== ============== Total return (%)***............................................... 6.52 7.30 ============== ============== Ratio of expenses to average net assets (a)....................... 0.81% 2.13% Ratio of net investment income (loss) to average net assets (a)(b)........................................................... 0.31 (1.04)% Portfolio turnover................................................ 54% 131% Net assets, end of period (000s).................................. $ 4,534 $ 2,983 ============== ============== LIFECYCLE FUND GROUP TRUST-MODERATE Net investment income (loss)**.................................... $ 0.04 $ (0.01) Net realized and unrealized gain (loss)........................... 1.27 1.14 -------------- -------------- Net increase (decrease)........................................... 1.31 1.13 Net asset value Beginning of period............................................... 11.13 10.00 End of period..................................................... $ 12.44 $ 11.13 ============== ============== Total return (%)***............................................... 11.77 11.30 ============== ============== Ratio of expenses to average net assets (a)....................... 0.20% 0.52% Ratio of net investment income (loss) to average net assets (a)(b)........................................................... 0.35% (0.07)% Portfolio turnover................................................ 18% 30% Net assets, end of period (000s).................................. $88,273 $76,246 ============== ==============
* Investment operations commenced on May 5, 1995. ** Net investment income has been calculated based upon an average of units outstanding. *** Total return calculation (not annualized) 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, and does not include expenses charged to the fund in which the Fund invests. (a) Annualized for the period ended December 31, 1995. (b) Ratio excludes income retained by the funds in which the Fund invests (see Note 2). 11 UNDERLYING FUNDS The selected financial data below provides information with respect to investment income, expenses, and investment performance for each Underlying Fund attributable to each Underlying Fund unit outstanding for the periods indicated. The selected financial data has been audited by Price Waterhouse 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 Funds, which appear in the SAI.
YEAR ENDED DECEMBER 31, ---------------------------------------------- 1996 1995 1994 1993 1992 --------- --------- -------- -------- -------- S&P 500 FLAGSHIP FUND Net investment income**................... $ 2.48 $ 2.24 $ 1.90 $ 1.81 $ 1.54 Net realized and unrealized gain (loss) .. 19.86 24.26 (0.93) 4.55 3.04 Distribution of securities lending fee income (a) .............................. 0.00 0.00 0.00 (0.01) (0.01) --------- --------- -------- -------- -------- Net increase (decrease)................... 22.34 26.50 0.97 6.35 4.57 NET ASSET VALUE Beginning of year......................... 97.06 70.56 69.59 63.24 58.67 --------- --------- -------- -------- -------- End of year............................... $119.40 $97.06 $70.56 $69.59 $63.24 ========= ========= ======== ======== ======== Total return(%)***........................ 23.02 37.56 1.39 10.06 7.81 ========= ========= ======== ======== ======== 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 .............................. 2.33% 2.66% 2.88% 2.68% 2.58% --------- --------- -------- -------- -------- Portfolio turnover........................ 27% 10% 12% 22% 19% --------- --------- -------- -------- -------- Average broker commission per share (b) . $ 0.04 N/A N/A N/A N/A --------- --------- -------- -------- -------- Net assets, end of year (000,000s)........ $20,916 $15,135 $8,258 $5,753 $4,233 ========= ========= ======== ======== ========
* Less than .01% ** Net investment income has been calculated based on an average of units outstanding. *** Total return calculation is based on the value of a single unit of participation outstanding throughout the entire 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 dividends. 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. (a) Zero amounts per unit represent those which are less than $.005. (b) Represents total commissions paid on portfolio securities divided by total number of shares purchased or sold on which commissions were charged. This disclosure is required by the SEC beginning in 1996. 12
PERIOD ENDED DECEMBER 31, ----------------------------------------------------- 1996 1995 1994 1993 1992(A) ---------- ---------- ---------- ---------- --------- RUSSELL 2000 FUND Net investment income (b).............. $ 0.32 $ 0.03 $ 0.21 $ 0.17 $ 0.04 Distribution of securities lending fee income (c)............................ (0.01) (0.01) (0.01) 0.00 0.00 ---------- ---------- ---------- ---------- --------- Net realized and unrealized gain (loss)................................ 2.45 3.61 (0.46) 1.83 1.07 Net increase (decrease)................ 2.76 3.63 (0.26) 2.00 1.11 NET ASSET VALUE Beginning of period.................... 16.48 12.85 13.11 11.11 10.00 ---------- ---------- ---------- ---------- --------- End of period ......................... $ 19.24 $ 16.48 $ 12.85 $ 13.11 $ 11.11 ========== ========== ========== ========== ========= Total return (d) ...................... 16.81% 28.33% (1.98)% 18.00% 11.10% ========== ========== ========== ========== ========= Ratio of expenses to average net assets (e)(f) ........................ 0.06% 0.10% 0.07% 0.09% 0.39% ---------- ---------- ---------- ---------- --------- Ratio of net investment income to average net assets (e)(f)............. 1.80% 1.80% 1.61% 1.37% 1.88% ---------- ---------- ---------- ---------- --------- Portfolio turnover .................... 131% 103% 48% 35% 1% ---------- ---------- ---------- ---------- --------- Average broker commission per share (g) .................................. $ 0.02 N/A N/A N/A N/A ---------- ---------- ---------- ---------- --------- Net assets, end of period (000s) ..... $951,405 $536,849 $372,107 $451,119 $148,285 ========== ========== ========== ========== =========
============= (a) The Russell 2000 Fund commenced operations on October 31, 1992. (b) Net investment income has been calculated based on an average of units outstanding. Also, see Note 1 to the financial statements of the Russell 2000 Funds in the SAI which accompanies this prospectus. (c) Zero amounts represent those which are less than $.005 per unit. (d) Total return calculation (not annualized) 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 the end of the period and assumes reinvestment of distributions. The calculation includes only those expenses charged directly to the Russell 2000 Fund. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) 1992 data annualized. (f) 1995 ratio reflects net investment income and expenses attributable to the Russell 2000 Fund from its ownership in other collective investment funds. (g) Represents total commissions paid on portfolio securities divided by total number of shares purchased or sold on which commissions were charged. This disclosure is required by the SEC beginning in 1996. 13
PERIOD ENDED DECEMBER 31, ---------------------------------------- 1996 1995 1994 1993** --------- --------- ---------- --------- DAILY EAFE FUND Net investment income (loss)*.................... $ 0.29 $0.25 $ 0.19 $(0.01) Distribution of securities lending fee income (a)............................................. (0.01) (0.01) 0.00 0.00 Net realized and unrealized gain (loss) ......... 0.44 0.99 0.59 (0.13) --------- --------- ---------- --------- Net increase (decrease).......................... 0.72 1.23 0.78 (0.14) NET ASSET VALUE Beginning of period.............................. 11.87 10.64 9.86 10.00 --------- --------- ---------- --------- End of period.................................... $ 12.59 $11.87 $10.64 $ 9.86 ========= ========= ========== ========= Total return***.................................. 6.15% 11.64% 7.91% (1.40)% ========= ========= ========== ========= Ratio of expenses to average net assets (b) .... 0.19% 0.20% 0.19% 0.57% --------- --------- ---------- --------- Ratio of net investment income to average net assets (b) ..................................... 2.38% 2.22% 1.88% (0.14)% --------- --------- ---------- --------- Portfolio turnover............................... 5% 9% 47% 28% --------- --------- ---------- --------- Average broker commission per share (c) ........ $0.0149 N/A N/A N/A --------- --------- ---------- --------- Net assets, end of year (000s)................... $99,048 $75,760 $139,678 $229,612 ========= ========= ========== =========
======================== * Net investment income (loss) per unit has been calcuated based upon an average of monthly units outstanding. ** The Daily EAFE Fund commenced operations on September 30, 1993. *** Total return is based on the value of a single unit of participation outstanding throughout the entire period. It represents the percentage change in the net asset value per unit between the beginning and end of each period and assumes reinvestment of any distributions. 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 amounts represent those which are less than $.005 per unit. (b) 1993 data annualized. (c) Represents total commission paid on portfolio securities divided by total number of shares purchased or sold on which commissions were charged. This disclosure is required by the SEC beginning in 1996. 14
PERIOD ENDED DECEMBER 31, 1996 1995 1994 1993* ------------ ------------ ------------ --------- DAILY GOVERNMENT/CORPORATE FUND Net investment income**....................... $ 0.78 $ 0.70 $ 0.73 $ 0.11 Net realized and unrealized gain (loss) ...... (0.42) 1.17 (1.05) (0.17) ------------ ------------ ------------ --------- Net increase (decrease)....................... 0.36 1.87 (0.32) (0.06) NET ASSET VALUE Beginning of period........................... 11.49 9.62 9.94 10.00 ------------ ------------ ------------ --------- End of period................................. $ 11.85 $ 11.49 $ 9.62 $ 9.94 ============ ============ ============ ========= Total return (a)***........................... 3.13% 19.44% (3.22)% (3.27)% ============ ============ ============ ========= Ratio of expenses to average net assets (a) . 0.01% 0.01% 0.01% 0.02% Ratio of net investment income to average net assets (a) .................................. 6.82% 6.53% 6.81% 5.94% Portfolio turnover............................ 299% 611% 144% 23% Net assets, end of period (000s).............. $3,060,002 $1,991,393 $1,540,440 $322,680 ============ ============ ============ =========
================ (a) 1993 data annualized. * Investment operations commenced on October 25, 1993. ** Net investment income has been calculated based on 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. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. SHORT-TERM INVESTMENT FUND
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------ ------------- ------------- Net investment income ............ $0.0548 $0.0604 $0.0424 $0.0336 $0.0402 ============= ============= ============ ============= ============= Distributions from net investment income........................... $0.0548 $0.0604 $0.0424 $0.0336 $0.0402 ============= ============= ============ ============= ============= Total return**.................... 5.62% 6.21% 4.32% 3.41% 4.09% Ratio of expenses to average net assets*.......................... --% --% --% --% --% Ratio of net investment income to average net assets............... 5.60% 6.04% 4.24% 3.36% 4.02% Net assets, end of year (000s) .......................... $13,762,940 $12,393,148 $9,239,219 $12,657,842 $10,016,685 ============= ============= ============ ============= =============
================ * Less than .01%. ** Total return calculation assumes dividend reinvestment and 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. 15 INVESTMENT OPTIONS Ten INVESTMENT OPTIONS are available under the Program. Three of these are discussed below: the Equity Index Fund and the two Lifecycle Funds--Conservative and Moderate. Also discussed are the Lifecycle Fund Group Trusts in which the Lifecycle Funds invest and the Underlying Funds in which the Lifecycle Fund Group Trusts invest. Each of the Funds discussed below has a different investment objective that it seeks to achieve by following specific investment policies. The investment objective of these Funds can only be changed by the Trustees. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES OF ANY OF THESE FUNDS WILL BE MET. See Risks and Investment Techniques. THE EQUITY INDEX FUND OBJECTIVE. The Equity Index Fund seeks to achieve a total return which parallels that of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index") by investing in a mutual fund designated by the Trustees, the SSgA S&P 500 Index Fund (formerly known as "The Seven Seas S&P 500 Index Fund"). There is no assurance that this objective will be met. INVESTMENT POLICIES. The Equity Index Fund will invest 100 percent of its assets in shares of the SSgA S&P 500 Index Fund. THE SSGA S&P 500 INDEX FUND. The SSgA S&P 500 Index Fund's investment objective is to emulate the total return of the S&P 500 Index. The SSgA S&P 500 Index Fund seeks to achieve its objective by investing in all 500 stocks in the S&P 500 Index in proportion to their weightings in the S&P 500 Index. To the extent that all 500 stocks cannot be purchased, the SSgA S&P 500 Index Fund will purchase a representative sample of the stocks listed in the S&P 500 Index in proportion to their weightings. The SSgA Fund was organized as a Massachusetts business trust and is registered under the 1940 Act as an open-end diversified management investment company. As a series mutual fund, The SSgA Fund issues shares in different investment portfolios, one of which is the SSgA S&P 500 Index Fund. The investment adviser of the SSgA S&P 500 Index Fund is State Street. "S&P 500" IS A TRADEMARK OF STANDARD & POOR'S CORPORATION THAT HAS BEEN LICENSED FOR USE BY THE SSGA S&P 500 INDEX FUND. THE SSGA S&P 500 INDEX 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 THE SSGA S&P 500 INDEX FUND. The S&P 500 Index is composed of 500 common stocks which are chosen by Standard and Poor's Corporation to best capture the price performance of a large cross-section of the United States publicly traded stock market. The S&P 500 Index is structured to approximate the general distribution of industries in the United States economy. The inclusion of a stock in the S&P 500 Index in no way implies that Standard & Poor's Corporation believes the stock to be an attractive investment, nor is Standard & Poor's a sponsor of or in any way affiliated with the SSgA S&P 500 Index Fund or the Equity Index Fund. The 500 securities, most of which trade on the New York Stock Exchange, represent approximately 75 percent of the market value of all common stocks. Each stock in the S&P 500 Index is weighted by market capitalization. That is, each security is weighted by its total market value relative to the total market values of all the securities in the S&P 500 Index. Component stocks included in the S&P 500 Index are chosen with the aim of achieving a distribution at the index level representative of the various components of the United States gross national product and therefore do not represent the 500 largest companies. Aggregate market value and trading activity are also considered in the selection process. A limited percentage of the S&P 500 Index may include Canadian securities. No other foreign securities are eligible for inclusion. 16 For further information about the SSgA S&P 500 Index Fund, see the SSgA S&P 500 Index Fund's prospectus and the related Statement of Additional Information. Free additional copies of the SSgA S&P 500 Index Fund prospectus and copies of the related Statement of Additional Information may be obtained by calling an Equitable Life Account Executive. Participants and employers should carefully read the prospectus of the SSgA S&P 500 Index Fund before they allocate contributions or transfer amounts to the Equity Index Fund. VOTING RIGHTS. The SSgA S&P 500 Index Fund does not hold annual meetings of shareholders. If a meeting of shareholders is held, they may vote on such matters as election of trustees and any other matters requiring a vote by shareholders under the 1940 Act. Equitable Life will vote the shares of the SSgA S&P 500 Index Fund allocated to the Equity Index Fund in accordance with instructions received from employers, participants or trustees, as appropriate, in the Equity Index Fund. Each employer, participant or trustee, as appropriate, will be allowed to instruct Equitable Life on how to vote shares of the SSgA S&P 500 Index Fund in proportion to their interest in the Equity Index Fund as of the record date for the shareholder meeting. Equitable Life will abstain from voting shares for which no instructions are received. Employers, participants or trustees will receive periodic reports about the SSgA S&P 500 Index Fund and proxy materials together with a voting instruction form, in connection with shareholder meetings. The costs of soliciting voting instructions from participants will be borne by the SSgA S&P 500 Index Fund. LIFECYCLE FUNDS--CONSERVATIVE AND MODERATE Each Lifecycle Fund is a separate account of Equitable Life. Contributions may be made to the Lifecycle Fund -- Conservative and/or the Lifecycle Fund--Moderate. Each of the Lifecycle Funds invests in a Lifecycle Fund Group Trust--Conservative or Moderate having identical investment objectives and policies as the Lifecycle Fund to which it relates. In turn each of the Lifecycle Fund Group Trusts invests in a mix of Underlying Funds. The following table diagrams this investment structure: UNDERLYING FUNDS ------------------- | Lifecycle Fund- | | Conservative | | (SA 197) | ------------------- ------------------- | Lifecycle Fund | | Group Trust- | | Conservative | ------------------- ------------ ----------- --------- ---------------- -------------- | S&P 500 | | Russell | | Daily | | Daily Gov't. | | Short Term | | Flagship | | 2000 | | EAFE | | Corporate | | Investment | | Fund | | Fund | | Fund | | Bond Fund | | Fund | ------------ ----------- --------- ---------------- -------------- ------------------- | Lifecycle Fund- | | Moderate | | (SA 198) | ------------------- ------------------ | Lifecycle Fund | | Group Trust- | | Moderate | ------------------ ------------ ----------- --------- ---------------- -------------- | S&P 500 | | Russell | | Daily | | Daily Gov't. | | Short Term | | Flagship | | 2000 | | EAFE | | Corporate | | Investment | | Fund | | Fund | | Fund | | Bond Fund | | Fund | ------------ ----------- --------- ---------------- -------------- 17 THE LIFECYCLE FUND GROUP TRUSTS The Lifecycle Fund Group Trusts are collective investment funds maintained by State Street. Each Lifecycle Fund Group Trust is organized as a common law trust under Massachusetts law, and because of exclusionary provisions, is not subject to regulation under the 1940 Act. There are two Lifecycle Fund Group Trusts: the Lifecycle Fund Group Trust--Conservative and the Lifecycle Fund Group Trust--Moderate. State Street serves as the trustee and investment manager to each of these Group Trusts. Each of the Lifecycle Fund Group Trusts attempts to achieve its investment objective by investing in a mix of underlying collective investment funds (the "Underlying Funds") maintained by State Street and offered exclusively to tax exempt retirement plans. LIFECYCLE FUND GROUP TRUST--CONSERVATIVE OBJECTIVE. The Lifecycle Fund Group Trust--Conservative seeks to provide current income and a low to moderate growth of capital. There is no assurance that this objective will be met. INVESTMENT POLICIES. The Lifecycle Fund Group Trust--Conservative seeks to achieve its objective by investing 100% of its assets in units of a mix of Underlying Funds in accordance with certain target percentage weightings. The table below shows the mix of Underlying Funds targeted by the Lifecycle Fund Group Trust--Conservative.
S&P 500 Flagship Fund 15% Russell 2000 Fund 5% Daily EAFE Fund 10% Daily Government/Corporate Bond Fund 50% Short Term Investment Fund 20%
The target percentages shown above 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 the Lifecycle Fund Group Trust--Conservative, from time to time makes adjustments in the mix of Underlying Funds as needed to maintain, to the extent practicable, the target percentages in each of the Underlying Funds. LIFECYCLE FUND GROUP TRUST--MODERATE OBJECTIVE. The Lifecycle Fund Group Trust--Moderate seeks to provide growth of capital and a reasonable level of current income. There is no assurance that this objective will be met. INVESTMENT POLICIES. The Lifecycle Fund Group Trust--Moderate intends to achieve its investment objective by investing 100% of its assets in units of a mix of Underlying Funds in accordance with certain target percentage weightings. The table below shows the mix of Underlying Funds targeted by the Lifecycle Fund Group Trust--Moderate.
S&P 500 Flagship Fund 35% Russell 2000 Fund 10% Daily EAFE Fund 15% Daily Government/Corporate Bond Fund 30% Short Term Investment Fund 10%
The target percentages shown above 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 the Lifecycle Fund Group Trust--Moderate, from time to time makes adjustments in the mix of Underlying Funds as needed to maintain, to the extent practicable, the target percentages in each of the Underlying Funds. 18 THE UNDERLYING FUNDS Like the Lifecycle Fund Group Trusts, the Underlying Funds are collective investment 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 Funds may receive contributions from other tax exempt retirement plans. The Underlying Funds 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 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 total return of the S&P 500 Index. "S&P 500" is a trademark of Standard & Poor's Corporation that has been licensed for use by the Flagship Fund. 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. For further information on the S&P 500 Index, see the discussion of the Equity Index Fund under Investment Options. 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. U.S. Treasury Bills and other short-term cash equivalents owned by the Flagship Fund will be held as collateral for the futures contracts. For additional discussion related to the investment policies of the Flagship Fund, see discussion below under Risks and Investment Techniques and the Statement of Additional Information. RUSSELL 2000 FUND OBJECTIVE. The investment objective of the Russell 2000 Fund is to replicate, as closely as possible, the return of the Russell 2000 Index maintained by Frank Russell Company ("Frank Russell"). The Russell 2000 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. It 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. INVESTMENT POLICIES. The Russell 2000 fully replicates the Russell 2000 Index with the possible exception of the smallest securities in the index, due to the relative illiquidity of those securities. 19 The composition of the Russell 2000 Index is updated monthly to reflect changes in the stock market capitalization of companies in the Index. Once a year, 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. The Russell 2000 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 Fund, see discussion below under Risks and Investment Techniques 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 directly in each of the foreign markets which comprise the EAFE Index. The EAFE Index is a broadly diversified international index consisting of more than 1,100 companies traded on the markets of Europe, Australia, New Zealand and the Far East. The investments may include equity securities, equity-based derivatives, futures contracts, index swaps and foreign exchange contracts. 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, 1996, Japan (31.0%) and the United Kingdom (18.6%) dominated the market capitalization of the EAFE Index, with companies located in Germany, France, Switzerland and Hong Kong also being well represented on the Index. The Index covers a wide spectrum of industries, with the banking and finance industry constituting 24.7%, consumer goods 19.4%, services 18.3%, capital equipment 12.0%, materials 9.2% of the market capitalization of the Index (as of December 31, 1996). 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 will not be able to hold all of the more than 1,000 stocks that comprise the EAFE Index because of the costs involved. Instead the Daily EAFE Fund will hold a representative sample of the issues that comprise the EAFE Index. Stocks will be selected for inclusion in the Daily EAFE Fund 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 the country's weight in the EAFE Index. For additional discussion related to the investment policies of the Daily EAFE Fund, see discussion below under Risks and Investment Techniques and the Statement of Additional Information. DAILY GOVERNMENT/CORPORATE BOND FUND OBJECTIVE. The investment objective of the Daily 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. In addition, the GC Bond Fund may make direct 20 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 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 securities in the GC Bond Fund will 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 below under Risks and Investment Techniques and the Statement of Additional Information. SHORT TERM INVESTMENT FUND OBJECTIVE. The investment objective of the Short Term Investment Fund ("STIF Fund") is to maintain a diversified portfolio of short-term securities. 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 investments may 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 below under Risks and Investment Techniques and the Statement of Additional Information. VOTING RIGHTS: THE LIFECYCLE FUNDS 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 Fund, or with respect to any changes in investment policy of any of these entities. RISKS AND INVESTMENT TECHNIQUES: LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING 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 21 Underlying 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 Seven Seas S&P 500 Index Fund are discussed in the prospectus and Statement of Additional Information for that Fund. IN GENERAL. You should note that the Flagship Fund, the 2000 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 Flagship Fund attempts to match the return of the S&P 500 Index by using automated statistical methods to make stock selections. Similar methods are employed in selecting stocks for the 2000 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 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 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 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 Funds may invest may be subject to more abrupt or erratic market movements than larger, more established companies, both because the securities typically are traded in lower volume and because the issuers typically are subject, to a greater degree, to changes in earnings and profits. FIXED-INCOME SECURITIES. Certain of the Underlying 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 and, therefore, 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 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 22 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 Funds investing in foreign securities will be subject to additional risks. Such risks include possible adverse political and economic developments, possible 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 purchased by the Underlying 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 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 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 Fund will incur brokerage fees when it purchases and sells futures contracts. The Underlying Funds will not purchase futures contracts for speculation. Futures contracts are used to increase the liquidity of each Underlying Fund and for hedging purposes. Transactions in futures contracts entail certain risks and transaction costs to which an Underlying Fund would not otherwise be subject, and the Underlying 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 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 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 Fund might realize from trading could be eliminated by adverse changes in the exchange rate, or such Underlying 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. 23 SECURITIES OF MEDIUM AND SMALLER SIZED COMPANIES. Certain of the Underlying 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. 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 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. Cash collateral will be invested in various collective investment funds maintained by State Street. The net income from such investments will increase the return to the Underlying Funds. All securities lending transactions in which the Underlying 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 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, 24 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. HOW WE CALCULATE THE VALUE OF AMOUNTS ALLOCATED TO THE EQUITY INDEX AND LIFECYCLE FUNDS CONTRIBUTIONS AND TRANSFERS: PURCHASE OF FUND UNITS. The portion of each contribution or transfer allocated to the Equity Index Fund or the Lifecycle Funds will be used to purchase Units. Your interest in each Fund is represented by the value of the Units credited to your Account for that Fund. The number of Units purchased by a contribution or transfer to a Fund is calculated by dividing the amount allocated by the Unit Value calculated as of the close of business on the day we receive your contribution or transfer instruction. The number of Units credited to your Account will not vary because of any subsequent fluctuation in the Unit Value, but the value of a Unit fluctuates with the investment experience of the Fund. In other words, the Unit Value will reflect the investment income and realized and unrealized capital gains and losses of that Fund as well as the deductions and charges we make to the Fund. HOW WE DETERMINE THE UNIT VALUE. 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. 25 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. 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 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. 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 Funds will be valued at the Underlying Fund's net asset value per unit. The units of each Underlying 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. Assets of the Flagship Fund, 2000 Fund, Daily EAFE Fund and the GC Bond Fund are valued on the basis of readily available market values or, if no such values are available, on the basis of fair values as determined in good faith by State Street. Assets of the STIF Fund are valued at amortized cost. 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 valued daily by adjusting for premium amortization or discount accretion. 26 EQUITABLE LIFE AND STATE STREET EQUITABLE LIFE Equitable Life is a New York stock life insurance company that has been in business since 1859. For more than 100 years we have been among the largest life insurance companies in the United States. Equitable Life has been selling annuities since the turn of the century. Our Home Office is located at 1290 Avenue of the Americas, New York, New York 10104. We are authorized to sell life insurance and annuities in all fifty states, the District of Columbia, Puerto Rico and the Virgin Islands. We maintain local offices throughout the United States. We are one of the nation's leading pension fund managers. Equitable Life is a wholly-owned subsidiary of The Equitable Companies Incorporated (the "Holding Company"). The largest stockholder of the Holding Company is AXA-UAP ("AXA"). As of January 1, 1997, AXA beneficially owns 63.8% of the outstanding shares of common stock of the Holding Company (assuming conversion of the convertible preferred stock held by AXA). Under its investment arrangements with Equitable Life and the Holding Company, 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 service companies. Equitable Life, the Holding Company and their subsidiaries managed assets of approximately $239.8 billion as of December 31, 1996, including third party assets of approximately $184.8 billion. These assets are primarily managed for retirement and annuity programs for businesses, tax-exempt organizations and individuals. This broad customer base includes nearly half the Fortune 100, more than 42,000 small businesses, state and local retirement funds in more than half the 50 states, approximately 250,000 employees of educational and non-profit institutions, as well as nearly 500,000 individuals. Millions of Americans are covered by Equitable Life's annuity, life, health and pension contracts. THE SEPARATE ACCOUNTS Each of the seven Funds is a separate account of Equitable Life; we own all of the assets of the separate accounts. A separate account is a separate investment account which we use to support our group annuity contracts, and for other purposes permitted by applicable law. We keep the assets of each separate account segregated from our general account and from any other separate accounts we may have. Although the assets of the Funds are our property, our obligation to you under the group annuity contract equals the value of your accumulation in each Fund. Income, gains and losses, whether or not realized, from assets invested in the Funds are, in accordance with the group annuity contract, credited to or charged against each Fund without regard to our other income, gains or losses. The portion of each Fund's assets we hold on your behalf may not be used to satisfy obligations that may arise out of any other business we conduct. We may, however, transfer amounts owed to us, such as fees and expenses, to our general account at any time. We may make these transfers even if the Fund in question does not have sufficient liquidity to make all withdrawals requested by participants. The separate account which we call the Equity Index Fund was established on February 1, 1994. The separate accounts which we call the Lifecycle Funds were established on May 1, 1995. The Funds are governed by the laws and regulations of the state of New York, where we are domiciled, and may also be governed by laws of other states in which we do business. The Equity Index Fund and Lifecycle Funds are used exclusively for the ADA Program. Because of exclusionary provisions, the Separate Accounts are not subject to regulations under the 1940 Act. 27 We do not manage the Equity Index Fund or the Lifecycle Funds. We act in accordance with the investment policies established by the Trustees. STATE STREET 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. Through its institutional investment arm, SSgA, State Street provides a comprehensive array of investment products that span the spectrum from indexed to fully active investment management approaches. Its customers include corporate, union, and public pension plans, endowments, foundations and other financial institutions in the U.S. and abroad. As of December 31, 1995, State Street was ranked the largest U.S. manager of tax-exempt assets and the largest manager of international index assets. It had total assets of $292.0 billion under management at December 31, 1996. THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS Each of the Lifecycle Fund Group Trusts and the Underlying Funds (referred to collectively herein as "Trust" or "Trusts") is a collective investment fund maintained by State Street. Although similar in many respects to mutual funds, a collective investment fund is excluded from regulation under the 1940 Act if it is maintained by a bank and consists only of assets of tax qualified retirement plans. The Trusts and Underlying Funds each satisfy both of these requirements, and are not subject to the 1940 Act as otherwise applicable to mutual funds. 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. Under the Trusts, participants have no voting rights with respect to the selection of State Street, as trustee, the selection of the Trust's investment adviser or manager, or changes to any investment policy of the Trust. 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. 28 INVESTMENT PERFORMANCE MEASURING THE INVESTMENT PERFORMANCE OF THE FUNDS We recognize that the performance of the Funds that you invest your retirement savings in is important to you. The purpose of this discussion is to give you an overview of how our Funds have performed in the past year. OF COURSE, PAST PERFORMANCE CANNOT BE USED TO PREDICT FUTURE PERFORMANCE. Fund performance is most often measured by the change in the value of fund units over time. Unlike typical mutual funds, which usually distribute earnings annually, separate account funds reinvest all earnings. As described previously, the unit value calculations for the Funds include all earnings, including dividends and realized and unrealized capital gains. Changes in the unit values can be expressed in terms of the Fund's annual percentage change, its average annual change, or its cumulative change over a period of years. Each of these measurements is valuable on its own. In addition, it often is helpful to compare the Fund's performance with the results of unmanaged market indices. The following tables and graphs provide a historical view of the Funds' investment performance. The information presented includes performance results for each Fund, along with data representing unmanaged market indices. Financial statements for the Funds can be found in the SAI. UNMANAGED MARKET INDICES Unmanaged market indices, or "benchmarks," while providing a broader perspective on relative performance, are only a tool for comparison. Performance data for the unmanaged market indices do not reflect any deductions for investment advisory, brokerage or other expenses of the type typically associated with an actively managed fund. This effectively overstates the rate of return of the market indices relative to that which would be available to a typical investor, and limits the usefulness of these indices in assessing the performance of the Funds. Since the Funds do not distribute dividends or interests, the market indices have been adjusted to reflect reinvestment of dividends and interest to provide greater comparability. We have presented data for the following unmanaged indices. Both of these may be appropriate comparative measures of performance for the Funds. o STANDARD AND POOR'S 500 INDEX ("S&P 500") -an unmanaged weighted index of the securities of 500 industrial, transportation, utility and financial companies widely regarded by investors as representative of the stock market. This index should not be confused with the performance of the Equity Index Fund nor that of the SSgA S&P 500 Index Fund, which seek to emulate the results of the S&P 500 Index. See The Investment Options -- The Equity Index Fund for more information. o RUSSELL 2000 INDEX ("RUSSELL 2000")--an unmanaged broadly diversified index maintained by Frank Russell Company consisting of the approximately 2,000 smallest stocks within the 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. o MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("EAFE")--an unmanaged index of the securities of over 1,000 companies traded on the markets of Europe, Australia, New Zealand and the Far East. o LEHMAN GOVERNMENT/CORPORATE BOND INDEX ("LEHMAN")--an unmanaged index widely regarded by investors as representative of the bond market. o SALOMON BROTHERS 3-MONTH T-BILL INDEX ("SALOMON 3 MO. T-BILL")--an unmanaged 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. 29 HOW PERFORMANCE DATA ARE PRESENTED We have shown performance on several different bases: o The annual percentage changes in Fund Unit Values, o The average annual percentage change in Fund Unit Values THE FUNDS' PERFORMANCE SHOWN MAY NOT REPRESENT YOUR ACTUAL EXPERIENCE AND IT DOES NOT REPRESENT THE EFFECT OF THE RECORD MAINTENANCE AND REPORT OR ENROLLMENT FEES. The annual percentage change in Fund unit values represents the percentage increase or decrease in unit values from the beginning of one year to the end of that year. During any year unit values will, of course, increase or decrease reflecting fluctuations in the securities markets. 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. Performance data for the Equity Index Fund reflects the performance of Separate Account No. 195 for the period beginning February 1, 1994. For periods prior to February 1, 1994, hypothetical performance is shown, which reflects the performance of the SSgA S&P 500 Index Fund beginning 1993, the first full year after that 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. No results are shown for periods prior to 1993, as the State Street 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. ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES*
LIFECYCLE LIFECYCLE SALOMON EQUITY FUND-- FUND-- S&P RUSSELL 3-MO. INDEX CONSERVATIVE MODERATE 500 2000 EAFE LEHMAN T-BILL CPI - ------ -------- -------------- ----------- ------- --------- ------ -------- --------- ------ 1996 21.3% 4.3% 10.6% 23.0% 16.5% 6.1% 2.9% 5.3% 3.3% - ------ -------- -------------- ----------- ------- --------- ------ -------- --------- ------ 1995 35.1 5.9 10.1 37.5 28.4 11.2 19.2 5.7 2.9 - ------ -------- -------------- ----------- ------- --------- ------ -------- --------- ------ 1994 0.7 -- -- 1.3 -1.8 7.8 -3.5 4.2 2.7 - ------ -------- -------------- ----------- ------- --------- ------ -------- --------- ------ 1993 6.4 -- -- 10.0 18.9 32.6 11.0 3.1 2.7 - ------ -------- -------------- ----------- ------- --------- ------ -------- --------- ------
AVERAGE ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES -- YEARS ENDING DECEMBER 31, 1996*
LIFECYCLE LIFECYCLE SALOMON EQUITY FUND-- FUND-- S&P RUSSELL 3-MO. INDEX CONSERVATIVE MODERATE 500 2000 EAFE LEHMAN T-BILL CPI - --------- -------- -------------- ----------- ------- --------- ------ -------- --------- ------ 1 Year 21.3% 4.3% 10.6% 23.0% 16.5% 6.1% 2.9% 5.3% 3.3% - --------- -------- -------------- ----------- ------- --------- ------ -------- --------- ------ 2 Years 28.0 -- -- 30.0 22.3 8.6 10.8 5.5 2.9 - --------- -------- -------------- ----------- ------- --------- ------ -------- --------- ------ 3 Years 18.2 -- -- 19.7 13.7 8.3 5.8 5.1 2.8 - --------- -------- -------------- ----------- ------- --------- ------ -------- --------- ------
* Hypothetical results are shown in italics. PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. NO PROVISIONS HAVE BEEN MADE FOR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON DISTRIBUTIONS. 30 THE PROGRAM The purpose of this section is to explain the ADA Members Retirement Program in more detail. Although we have described important aspects of the Program, you should understand that the provisions of your plan and the Participation Agreement will define the scope of the Program and its specific terms and conditions. This section is for employers, and for the purposes of this section, "you" and "your" refer to you in that role although you may also be a participant in the plan. EMPLOYERS WHO MAY PARTICIPATE IN THE PROGRAM If you are a sole proprietor, a partner or a shareholder in a professional corporation, your practice, as an employer, can adopt the Program if you or at least one of your fellow partners or shareholders is a member of: o the ADA, o one of its constituent or component societies, or o an ADA-affiliated organization whose participation in the Program has been approved by the Council on Insurance of the ADA. ADA constituent or component societies may also adopt the Program for their own employees within certain limitations imposed by the Internal Revenue Code. CHOICES FOR THE EMPLOYER The ADA Members Retirement Program gives you a variety of approaches to choose from. You can: o Adopt our Master Plan, which gives you options as to types of plans and plan provisions. The Master Plan uses the Program Investment Options as the exclusive investment choices. o Adopt the Self-Directed Prototype plan, which gives additional flexibility to choose investments, or o Maintain your own individually-designed plan, but use the Investment Options as an investment for your plan. SUMMARY OF THE PLANS AND TRUSTS THE MASTER PLAN -- Under the Master Plan, you will automatically receive a full range of services from Equitable Life, including your choice of the Investment Options, plan-level and participant-level recordkeeping, benefit payments and tax withholding and reporting. o The Master Plan is a defined contribution master plan which can be adopted as a profit sharing plan (including optional 401(k) and SIMPLE 401(k) features), a defined contribution pension plan, or both. THE SELF-DIRECTED PROTOTYPE PLAN -is a defined contribution prototype plan which can be used to combine the Program Investment Options with individual investments such as stocks and bonds. Employers must also adopt the Pooled Trust and maintain a minimum of $25,000 in the Trust at all times. We provide recordkeeping services only for plan assets held in the Pooled Trust. THE ADA MEMBERS POOLED TRUST FOR RETIREMENT PLANS -is an investment vehicle to be used by those who have an individually designed qualified retirement plan. The Pooled Trust is for investment only and can be used for both defined benefit and defined contribution plans. We provide participant-level or plan-level recordkeeping services for plan assets held in the Pooled Trust. 31 INFORMATION ON JOINING THE PROGRAM Our Retirement Program Specialists are available to answer your questions about joining the Program. To reach one of our Retirement Program Specialists, call or write to us at:
By Phone 1-800-523-1125, ext. 2608 From Alaska, 0-201-583-2395, collect Specialists are available from 9 a.m. to 5 p.m. Eastern Time, Monday through Friday. By Regular Mail The ADA Members Retirement Program c/o Equitable Life Box 2011 Secaucus, New Jersey 07096 By Registered, Certified or The ADA Members Retirement Program Overnight Mail c/o Equitable Life 200 Plaza Drive, 2-B55 Secaucus, New Jersey 07094
CHOOSING THE RIGHT PLAN Choosing the right plan depends on your own unique set of circumstances. Although Equitable Life's Retirement Program Specialists can help explain the Program, you and your tax advisors must decide which plan is best for you. GETTING STARTED IN THE PROGRAM AFTER CHOOSING A PLAN To adopt the Master Plan, you must complete a Participation Agreement. If you have your own plan and wish to use the Pooled Trust as an investment option, the trustee of your plan must complete the appropriate Participation Agreement. Our Retirement Program Specialists can help you complete the Participation Agreement for review by your tax advisor. To adopt our prototype self-directed plan, you must complete the prototype plan adoption agreement and a Participation Agreement for the Pooled Trust. In addition, you must also 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 of your choice or you can arrange through us to hire Trust Consultants, Inc. at a special rate. You can also arrange through us brokerage services from our affiliate, Pershing Discount Brokerage Services, at special rates or use the services of any other broker. 32 COMMUNICATING WITH US AFTER YOU ENROLL
By Phone To Reach an Account 1-800-223-5790 Executive (9 a.m. to 5 p.m. Eastern Time, Monday through Friday) To Reach the Account 1-800-223-5790 (24 Hours) Investment Management ("AIM") System: - -------------------------------------------------------------------------------------------- By Regular Mail (Other than The ADA Members Retirement Program contribution checks) Box 2486 G.P.O. New York, New York 10116 - -------------------------------------------------------------------------------------------- By Registered, Certified or The ADA Members Retirement Program c/o Equitable Life Overnight Mail 200 Plaza Drive, Second Floor Secaucus, New Jersey 07094 - -------------------------------------------------------------------------------------------- For Contribution Checks Only The Association Members Retirement Program P.O. Box 1599 Newark, New Jersey 07101-9764
YOUR RESPONSIBILITIES AS THE EMPLOYER Employers adopting the Master Plan are responsible for the plan and its administration. This includes certain responsibilities relating to the administration and continued qualification of your plan. See Your Responsibilities As Employer in the SAI for a list of responsibilities which you will have if you adopt the Master Plan. If you have an individually designed plan, you already have these responsibilities; they are not increased in any way by your adoption of the Pooled Trust for investment purposes only. It is your responsibility to determine that the terms of your plan are consistent with the provisions of the Pooled Trust and our practices described in this prospectus and the SAI. If you utilize our prototype self-directed plan, you will have responsibilities as the plan administrator and will also have to appoint a plan trustee; these responsibilities will be greater than those required by the adoption of the Master Plan. Again it is also your responsibility to determine that the terms of your plan are consistent with the provisions of the Pooled Trust and our practices described in this prospectus and the SAI. You should consult your legal advisor for an understanding of your legal responsibilities under the self-directed plan. We will give you guidance and assistance in the performance of your responsibilities. The ultimate responsibility, however, rests with you. WHEN TRANSACTIONS ARE EFFECTIVE A business day is any day both we and the New York Stock Exchange are open. Contributions, transfers, and allocation changes are normally effective on the business day they are received. Distribution requests are also effective on the business day they are received unless, as in the Master Plan, there are plan provisions to the contrary. However, we may have to delay the processing of any transaction which is not accompanied by a properly completed form or which is not mailed to the correct address. An Account 33 Executive will generally be available to speak with you each business day from 9 a.m. to 5 p.m. Eastern Time. We may, however, close due to emergency conditions. MINIMUM INVESTMENTS There is no minimum amount which must be invested if you adopt the Master Plan, or if you have your own individually-designed plan and use the Pooled Trust as an investment. If you adopt our self-directed prototype plan, you must keep at least $25,000 in the Pooled Trust at all times. MAKING CONTRIBUTIONS TO THE PROGRAM You should send contribution checks or money orders payable to The ADA Retirement Trust to the address shown under Communicating With Us After You Enroll. All contributions must be accompanied by a properly completed Contribution Remittance form which designates the amount to be allocated to each participant. Contributions are normally credited on the business day that we receive them, provided the remittance form is properly completed. Contributions are only accepted from the employer. Employees may not send contributions directly to the Program. OUR ACCOUNT INVESTMENT MANAGEMENT (AIM) SYSTEM We offer an automated telephone system for participants to transfer between investment options, obtain account information and change the allocation of future contributions. To use the AIM System, you must have a Personal Security Code (PSC) number, which you obtain by completing an AIMS Authorization form. If you have a touch-tone telephone you may make transfers on the AIM System. Procedures have been established by Equitable Life for its AIM System that are considered to be reasonable and are designed to confirm that instructions communicated by telephone are genuine. Such procedures include requiring certain personal identification information prior to acting on telephone instructions and providing written confirmation of instructions communicated by telephone. If Equitable Life does not employ reasonable procedures to confirm that instructions communicated by telephone are genuine, we may be liable for any losses arising out of any action on our part or any failure or omission to act as a result of our own negligence, lack of good faith or willful misconduct. In light of the procedures established, Equitable Life will not be liable for following telephone instructions that we reasonably believe to be genuine. We may discontinue the telephone transfer service at any time without notice. ALLOCATING CONTRIBUTIONS AMONG THE INVESTMENT OPTIONS Under the Master Plan, participants make all investment decisions. Under an individually-designed plan or our self-directed prototype plan, either the participants or the plan trustees make the investment allocation decisions, depending on the terms of the plan. Contributions may be allocated among any number of the Investment Options. Allocation instructions may be changed at any time, and as often as needed, by calling the AIM System. New instructions become effective on the business day we receive them. You may allocate employer contributions in different percentages than employee contributions. IF WE HAVE NOT RECEIVED VALID INSTRUCTIONS, WE WILL ALLOCATE YOUR CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT. 34 TRANSFERS AMONG THE INVESTMENT OPTIONS Participants in the Master Plan may make transfers on a daily basis without charge. Participants in other plans may make transfers whenever the plan allows them to do so. We do not charge a fee for transfers. (If an individually designed plan does not allow transfers by individual participants, only you as employer or trustee may make a transfer.) Participants may use the AIM System to transfer amounts among the investment options. All transfers are made as of the close of business on the day we receive the authorized instructions, provided we receive the request by 4:00 p.m. Eastern time. Transfer requests received after that time will be processed as of the close of business on the following business day. Transfers from the Equity Index Fund and the 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. See The Equity Index Fund and Lifecycle Fund-Conservative and Moderate. DISTRIBUTIONS FROM THE INVESTMENT OPTIONS There are two sets of rules that must be kept in mind when considering distributions or withdrawals from the Program. The first are the rules and procedures which apply to the Investment Options, exclusive of the provisions of your plan. These are discussed in this section. The second are the rules specific to your plan; these are discussed under When Distributions are Available to Participants. Amounts in the Equity Index Fund and the Lifecycle Funds 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 the redemptions from the underlying mutual fund and the Lifecycle Fund Group Trusts. Please note that certain plan distributions may be subject to penalty or excise taxes. See The Program and Federal Income Tax Considerations for more details. Payments or withdrawals out of the Equity Index Fund and the Lifecycle Funds 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 from these Funds 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 of the Funds is not reasonably practicable because of an emergency. WHEN DISTRIBUTIONS ARE AVAILABLE TO PARTICIPANTS In addition to the rules and procedures generally applicable to investments in the Investment Options under the Program, there are other important rules regarding the distribution and benefit payment options for each type of plan. Distributions and benefit payment options under a qualified retirement plan are subject to extremely complicated legal requirements. Certain plan distributions may be subject to penalty or excise taxes. A general explanation of the federal income tax treatment of distributions and benefit payment options is provided in Federal Income Tax Considerations in both this prospectus and the SAI. If a participant retires, becomes disabled or terminates employment, the benefit payment options available should be discussed with a qualified financial advisor. Our Account Executives can also 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. ("Vested" refers to the nonforfeitable portion of your benefits under the plan.) Participants in an individually 35 designed plan are eligible for retirement benefits depending on the terms of that plan. See Benefit Payment Options and Federal Income Tax Considerations 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 70-1/2. For all other participants, distribution must begin by April 1 of the later of the year after attaining age 70 1/2 or retirement. Under the Master Plan, self-employed persons may generally not receive a distribution prior to age 59-1/2 and employees generally may not receive a distribution prior to a separation from service. PARTICIPANT LOANS The Master Plan permits participants to borrow a portion (not to exceed $50,000) of his or her vested Account Balance (all plans combined), if the employer has elected this feature. If the participant is a sole proprietor, partner who owns more than 10% of the business, or a shareholder-employee of an S Corporation who owns more than 5% of the business, he or she presently may not borrow from his or her vested Account Balance without first obtaining a prohibited transaction exemption from the Department of Labor. Participants should consult with their attorneys or tax advisors regarding the advisability and procedures for obtaining such an exemption. Loans are also available under our self-directed prototype plan and under an individually designed plan if the terms of the plan allow them. Generally speaking, when a loan is taken, an amount equal to the loan is transferred out of the Investment Options and is set up as a loan account. While the loan is outstanding, the participant must pay interest on the loan. Any principal and interest paid will be added to the participant's loan account balance and will be taxable on distribution. If you fail to repay the loan when due, the amount of the unpaid balance may be taxable and subject to additional penalty taxes. The interest paid on a retirement plan loan may not be deductible. Loans from the plan should be applied for through the employer. Loans are subject to restrictions under federal tax laws and all plans of the employer are aggregated for purposes of these restrictions. Loan kits containing all necessary forms, along with an explanation of how interest rates are set, are available from our Account Executives. If a participant is married, written spousal consent will be required for a loan. BENEFIT PAYMENT OPTIONS We offer a variety of benefit payment options to participants who are eligible to receive benefits from a plan. However, many self-directed and individually-designed plans do not allow all of these options, so you should ask your employer for details on which of these options may be available. Your plan may allow for one or more of the following forms of distribution to be selected: 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 36 See Types of Benefits in the SAI for detailed information regarding each of these options, and Procedures for Withdrawals, Distributions and Transfers in the SAI. The annuity options may be either fixed or variable except for the Cash Refund Annuity and the Qualified Joint and Survivor Annuity. Fixed annuities are available from insurance companies selected by the Trustees, which meet criteria established by the Trustees from time to time. 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 $3,500. In most cases an 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. SPOUSAL CONSENT RULES If a participant is married and has an Account Balance greater than $3,500, federal law generally requires payment of a Qualified Joint and Survivor Annuity payable to the participant for life and then to the surviving spouse for life, unless the participant and spouse have properly waived that form of payment in advance. If a participant is married, the spouse must consent in writing before any type of withdrawal can be made. See Spousal Consent Requirements 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 beneficiary. The law generally requires the entire benefit to be distributed no more than five years after death. There are two exceptions -- (1) if the benefit is payable to the spouse, the spouse may elect to receive benefits over his or her life or a fixed period measured by life expectancy beginning any time up to the date the participant would have attained age 70-1/2 or, if later, one year after the participant's death, and (2) a beneficiary who is not the participant's spouse may elect payments over his or her life or a fixed period measured by life expectancy, provided payments begin within one year of death. If, at death, a participant was already receiving benefits, the beneficiary can continue to receive benefits based on the payment option selected by the participant. To designate a beneficiary or to change an earlier designation, a participant must have the employer send us a beneficiary designation form. The spouse must consent in writing to a designation of any non-spouse beneficiary, as explained in Procedures for Withdrawals, Distributions and Transfers -- Spousal Consent Requirements in the SAI. 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. 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. 37 DEDUCTIONS AND CHARGES There are two general types of expenses you may incur under the Program. The first is expenses which are based on amounts invested in the Program. These are deducted from the assets of a particular Fund in which you invest, or from the assets of an underlying vehicle in which such Fund invests. The expenses deducted from the Equity Index Fund and the Lifecycle Funds are the Program expense charge, the administration fee, and certain other expenses. These charges are deducted regardless of the type of plan you may have. The charges also apply to amounts being distributed under installment payout options. The charges deducted from the SSgA S&P 500 Index Fund in which the Equity Index Fund invests, the Lifecycle Fund Group Trusts in which the Lifecycle Funds invest, or the Underlying Funds in which the Lifecycle Fund Group Trusts invest, include investment management fees, administration fees, custodial fees and certain other expenses. These charges reduce the net asset value of The SSgA S&P 500 Index Fund and the Lifecycle Fund Group Trusts, and are ultimately reflected in the Unit Values of the Equity Index Fund and the Lifecycle Funds. See Investment Management Fee under Deductions and Charges Related to the Lifecycle Fund Group Trusts and Underlying Funds. The second type of charge is expenses which vary by the type of plan you have or which are charged for specific transactions. These are typically stated in terms of a defined dollar amount. Unless otherwise noted, fees which are set in fixed dollar amounts are deducted by reducing the number of Units in the Equity Index or Lifecycle Funds in which you invest. No deductions are made from contributions or withdrawals for sales expenses. The applicable deductions and charges are described in detail below. 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 all of the Investment Options available under the Program, including Investment Options not described in this prospectus. The purpose of this charge is to cover the expenses incurred by Equitable Life and the ADA in connection with the Program. The Unit Values of the Equity Index and Lifecycle Funds reflect the deduction of this charge.
ANNUAL PROGRAM EXPENSE CHARGE* - ----------------------- ------------------------------ VALUE OF PROGRAM ASSETS EQUITABLE LIFE ADA TOTAL - ----------------------- -------------- ------- ------- First $400 million .630% .025% .655% - ----------------------- -------------- ------- ------- Over $400 million .630 .020 .650 - ----------------------- -------------- ------- -------
*Effective May 1, 1997 the amount payable to us is based on two components consisting of (i) a declining percentage of total Program assets ranging from 0.51% of the first $500 million to 0.45% of Program assets over $2 billion, and (ii) an annual charge per plan enrolled in the Program. The per plan charge includes two components, an annual charge and an additional charge for plan set-up. The maximum total per plan charge is currently $400. The per plan charge will be adjusted for inflation. For the 12 months beginning May 1, 1997, the Program expense charge is 0.630%. In addition, the ADA assesses a Program expense charge to reimburse it for expenses it incurs in connection with the Program. This charge equals 0.025% of the first $400 million of Program assets as of January 31 of each year and 0.020% of such assets over $400 million. Currently, the portion paid to the ADA has been reduced to 0.01% for all asset levels, but the charge could in the future be increased to the levels set forth in the preceding sentence. 38 For all Investment Options (other than the Guaranteed Rate Accounts), including the Equity Index and Lifecycle Funds, the Program expense charge is calculated based on Program assets on January 31 in 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. The portion of the Program expense charge paid to Equitable Life is applied toward the cost of maintenance of the Investment Options, promotion of the Program, 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 Trustees can direct Equitable Life to raise or lower the ADA's part of this fee to reflect their expenses in connection with the Program. Currently, this fee has been reduced to 0.01% for all asset value levels. During 1996, Equitable received $7,203,202 and the ADA received $114,285 under the Program expense charge then in effect. ADMINISTRATION FEE The computation of the Unit Values for the Equity Index and Lifecycle Funds also reflects the deduction of charges for administration. Equitable Life receives an administration fee at the annual rate of .15% of assets held in the Equity Index and Lifecycle Funds. This fee covers the costs related to providing administrative services in connection with the offering of these Funds. Equitable Life maintains records for all portfolio transactions and cash flow control, calculates Unit Values, and monitors compliance with the New York Insurance Law in connection with these Funds. OTHER EXPENSES BORNE DIRECTLY BY THE FUNDS Certain costs and expenses are charged directly to the Equity Index Fund and the Lifecycle Funds. These may include Securities and Exchange Commission filing fees and certain related expenses including printing of SEC filings, prospectuses and reports, mailing costs, financial accounting costs and outside auditing and legal expenses. By agreement with the ADA Trustees, Equitable Life imposes a charge at the annual rate of .03% of the value of the respective assets of the Lifecycle Funds-Conservative and Moderate to compensate it for additional legal, accounting and other potential expenses resulting from the inclusion of the Lifecycle Fund Group Trusts and Underlying Funds maintained by State Street among the Investment Options described in this prospectus. All of these costs are included as "Other Expenses" in the tables of Annual Fund Operating Expenses and Summary of Fund Expenses. The Equity Index Fund purchases and sells shares in the SSgA S&P 500 Index Fund at net asset value. The net asset value reflects charges for investment 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 Equity Index Fund, please refer to the prospectus for the SSgA S&P 500 Index Fund. In addition, the Lifecycle Funds purchase and sell units of each Lifecycle Fund Group Trust at net asset value, which reflects charges for management, administration and custodial services, and other expenses incurred by the Lifecycle Fund Group Trusts, as well as other expenses and custodial fees incurred by the Underlying Funds in which each Lifecycle Fund Group Trust invests. See discussion below under Deductions and Charges Related to the Lifecycle Fund Group Trusts and Underlying Funds. 39 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 Participants in Pooled-Trust Arrangement ..... $1 per quarter
ENROLLMENT FEE. The employer must pay us a non-refundable enrollment fee of $25 for each participant enrolling under its plan. If we do not maintain individual participant records under an individually-designed plan, the employer is instead charged $25 for each plan or trust. If these charges are not paid by the employer, the amount may be deducted from subsequent contributions or from participants' Account Balances. PROTOTYPE SELF-DIRECTED PLAN FEES. Employers who participate in our prototype self-directed plan will 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, a $350 charge will usually be deducted from the amount used to purchase the annuity to reimburse us for administrative expenses associated with processing the application for the annuity and with issuing each month's annuity payment. Annuities purchased from other providers may also be subject to fees and charges. See Distributions From the Investment Options and Benefit Payment Options for details. PREMIUM TAXES. In certain jurisdictions, amounts used to purchase an annuity are subject to a premium tax (rates currently range up to 5%). Taxes depend, among other things, on your place of residence, applicable laws and the form or annuity benefit you select. We will deduct any premium taxes based on your place of residence at the time the annuity payments begin. GENERAL INFORMATION ON FEES AND CHARGES The fees and charges described above may be changed at any time by the mutual consent of Equitable Life and the ADA. During 1996 we received total fees and charges under the Program of $10,298,698. 40 DEDUCTIONS AND CHARGES RELATED TO THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS In addition to the generally applicable Program fees and charges described above, fees and charges imposed by State Street are deducted from the assets of the Lifecycle Fund Group Trusts in which the Lifecycle Funds invest, or the Underlying Funds in which the Lifecycle Fund Group Trusts invest. Fees are paid to State Street 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 Funds. INVESTMENT MANAGEMENT FEE. A fee equal to .17% of the average annual net assets of each Lifecycle Fund Group Trust is paid to State Street for providing investment management services to the Group Trusts. No fee is paid to State Street for managing the assets of the Underlying Funds with respect to investments made in such Fund 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 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 Group Trusts' investment in such other collective investment funds and mutual funds. FIXED ADMINISTRATION FEE. A deduction is made from the assets of each Lifecycle Fund Group Trust to compensate State Street 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 $11,100 per year for each Group 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 Funds and to the Russell 2000 Value and Growth Funds. State Street serves as custodian to each of these Funds. 41 FEDERAL INCOME TAX CONSIDERATIONS Current federal income tax rules relating to adoption of the Program and generally to distributions to participants under qualified retirement plans are outlined briefly below. The rules relating to contributions are outlined briefly in the SAI under Provisions of the ADA Plans. For purposes of this outline we have assumed that you are not a participant in any other qualified retirement plan. We have not attempted to discuss other current federal income tax rules that govern participation, vesting, funding or prohibited transactions, although some information on these subjects appears here and in the SAI; nor do we discuss the reporting and disclosure or fiduciary requirements of the Employee Retirement Income Security Act. In addition, we do not discuss the effect, if any, of state tax laws that may apply. FOR INFORMATION ON THESE MATTERS, WE SUGGEST THAT YOU CONSULT YOUR TAX ADVISOR. ADOPTING THE PROGRAM If you adopt an ADA Plan, you will not need IRS approval unless you adopt certain provisions. We will tell you whether it is desirable for you to submit your plan to the Internal Revenue Service for approval. If you make such a submission, you will have to pay an IRS user's fee. The Internal Revenue Service does not have to approve your adoption of the Pooled Trust. 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. LUMP SUM DISTRIBUTIONS. If your benefits are distributed to you in a lump sum after you have participated in the plan for at least five taxable years, you may be able to use five-year averaging. Under this method, the tax on the lump sum distribution is calculated separately from taxes on any other income you may have during the year. The tax is calculated at ordinary income tax rates in the year of the distribution, but as if it were your only income in each of five years. The tax payable is the sum of the five years' calculations. To qualify for five-year averaging, the distribution much consist of your entire balance in the plan and must be made in one taxable year of the recipient after you have attained age 59-1/2. Five-year averaging is available only for one lump sum distribution. If you were born before 1936, you may elect to have special rules apply to one lump sum distribution. You may elect either ten-year averaging using 1986 rates or five-year averaging using then current rates. In addition, you may elect separately to have the portion of your distribution attributable to pre-1974 contributions taxed at a flat 20% rate. Effective January 1, 2000, five year averaging on lump sum distributions may no longer be used. ELIGIBLE ROLLOVER DISTRIBUTIONS. Many types of distributions from qualified plans are "eligible rollover distributions" that can be transferred directly to another qualified plan or individual retirement arrangement ("IRA"), 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. 42 ANNUITY OR INSTALLMENT PAYMENTS. Each payment you receive is treated as ordinary income 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 were required to include in gross income in prior years. A portion of each annuity or installment payment you receive will be excluded from gross income. If you (and your survivor) continue to receive payments after your cost basis in the contract has been paid out, all amounts will be taxable. IN SERVICE WITHDRAWALS; HARDSHIP WITHDRAWALS. Some plans allow in-service withdrawals of after-tax contributions. The portion of each in-service withdrawal attributable to cost basis is received income tax-free. The portion that is attributable to earnings will be included in your gross income. Amounts contributed before January 1, 1987 to employer plans which on May 5, 1986 permitted such withdrawals are taxable withdrawals only to the extent that they exceed the amount of your cost basis. Other amounts are treated as partly a return of cost basis with the remaining portion treated as earnings. Amounts included 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 59-1/2 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 used to pay deductible medical expenses. EXCESS DISTRIBUTIONS. There is a 15% excise tax on aggregated distributions in excess of a threshold amount from qualified plans, IRAs and Section 403(b) tax deferred annuities (even if those plans were maintained by unrelated employers). For distributions to individual participants, this tax is temporarily suspended for the years 1997, 1998 and 1999. 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 distributions. See Eligible Rollover Distributions and Federal Income Tax Withholding in the SAI. Under the Master Plan, we will withhold the tax and send you the remaining amount. Under an individually designed plan or our prototype self-directed plan that uses the Pooled Trust for investment only, 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 and state and local estate, inheritance, 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. 43 MISCELLANEOUS CHANGE OR DISCONTINUANCE OF THE PROGRAM. The group annuity contract has been amended from time to time, and may be amended in the future. No future change can affect annuity benefits in the course of payment. Provided certain conditions are met, we may terminate the offer of any of the Investment Options and offer new ones with different terms. Our contract with the Trustees may be terminated by us or the ADA. If our contract with the Trustees is terminated, we will not accept any further contributions or perform recordkeeping functions after the date of termination. At that time we would make arrangements with the Trustees as to the disposition of the assets in the Investment Options we provide, subject to the various restrictions related to investments in the Real Estate Fund, Money Market Guarantee Account, and the Guaranteed Rate Accounts. For a discussion of these restrictions, please refer to the prospectus for these Investment Options. You may be able to continue to invest amounts in the Investment Options we provide and elect payment of benefits through us if the Trustees make arrangements with us. AGREEMENT WITH STATE STREET. Equitable Life 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 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, the Agreement provides, among other things, that it may be terminated by Equitable Life upon three months prior written notice to State Street, or by State Street upon six months prior written notice to Equitable Life. In the event of a termination of the Agreement, State Street has the right, upon four months' prior notice to Equitable Life 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. DISQUALIFICATION OF PLAN. If your plan is found not to qualify under the Internal Revenue Code, we may return the plan's assets to the employer, as the plan administrator or we may prevent plan participants from investing in the separate accounts. REPORTS. We send reports annually to employers showing the aggregate Account Balances of all participants and information necessary to complete annual IRS filings. REGULATION. Equitable Life is subject to regulation and supervision by the Insurance Department of the State of New York, which periodically examines Equitable Life's affairs. Equitable Life also is subject to the insurance laws and regulations of all jurisdictions in which it is authorized to do business. This regulation does not, however, involve any supervision of the investment policies of the Funds or of the selection of any investments except to determine compliance with the law of New York. Equitable Life is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which it does business for purposes of determining solvency and compliance with local insurance laws and regulations. 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. LEGAL PROCEEDINGS. Both Equitable Life and State Street are separately engaged in litigation of various kinds which, in the judgment of each company, is not of material importance in relation to each company's 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 Fund Group Trusts or the Underlying Funds in which the Group Trusts invest. 44 ADDITIONAL INFORMATION. A registration statement relating to the offering described in this prospectus has been filed with the Securities and Exchange Commission under the Securities Act of 1933. Certain portions of the Registration Statement have been omitted from this prospectus and the SAI pursuant to the rules and regulations of the Commission. The omitted information may be obtained by requesting a copy of the registration statement from the Commission's principal office in Washington, D.C., and paying the Commission's prescribed fees or by accessing the Securities and Exchange Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. EXPERTS. The financial statements of Separate Account Nos. 195, 197 and 198 as of December 31, 1996 and for the two periods then ended included in the SAI, the condensed financial information for Separate Account No. 195, 197 and 198 as of December 31, 1996 and 1995 included in this prospectus and the financial statements of Equitable Life as of December 31, 1996 and 1995 and for the three years ended December 31, 1996 included in the SAI, have been so included in reliance upon the reports of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. For 1995 and 1996, the selected financial data included in the prospectus and the audited financial statements included in the SAI for each of the Underlying Funds, the Lifecycle Fund Group Trust--Conservative and the Lifecycle Fund Group Trust--Moderate have been audited by Price Waterhouse LLP, independent accountants, as stated in their reports that appear in the SAI. The selected financial data included in the prospectus and the audited financial statements have been so included in reliance upon the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. ACCEPTANCE. The employer or plan sponsor, as the case may be, is solely responsible for determining whether the Program is a suitable funding vehicle and should, therefore, carefully read the prospectus and other materials before entering into a Participation Agreement. 45 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE ---------- The Contracts........................................................... 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-7 Additional Investment Policies and Techniques--The Underlying Funds .... SAI-11 Investment Restrictions................................................. SAI-14 How the Assets of the Funds Are Valued.................................. SAI-15 How the Assets of the Underlying Funds Are Valued....................... SAI-15 Transactions by the Underlying Funds.................................... SAI-17 Investment Management Fee............................................... SAI-17 Underwriter............................................................. SAI-18 Management.............................................................. SAI-19 Financial Statements.................................................... SAI-22
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, 1997 (State Street). Name - ----------------------------------------------------------------------------- Address: - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- - ---------------------------------------------------------------------- Copyright 1997 by The Equitable Life Assurance Society of the United States. All rights reserved. 46 - ----------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION - ----------------------------------------------------------------------------- MAY 1, 1997 AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM Separate Account Units of interest under a group annuity contract with THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, 1290 Avenue of the Americas, New York, New York 10104, which funds the American Dental Association Members Retirement Program. Toll-free tele-phone number 1-800-223-5790. - ----------------------------------------------------------------------------- This Statement of Additional Information is not a prospectus. It should be read in conjunction with the prospectus dated May 1, 1997 for the American Dental Association Members Retirement Program describing the Equity Index Fund and the Lifecycle Funds--Conservative and Moderate. A copy of the prospectus to which this Statement of Additional Information relates is available at no charge by writing to The Equitable Life Assurance Society of the United States ("Equitable Life"), at Box 2486 G.P.O., New York, New York 10116 or by calling our toll-free telephone number. The following information is contained primarily in the prospectus: Investment Objectives and Policies Investment Advisory Services Certain of the cross references in this Statement of Additional Information are contained in the prospectus dated May 1, 1997 to which this Statement of Additional Information relates. TABLE OF CONTENTS
PAGE ---------- The Contracts................................. 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 Spousal Consent Requirements................. SAI-4 Eligible Rollover Distributions and Federal Income Tax Withholding.............. SAI-5 Types of Benefits ............................ SAI-5 Provisions of the Master Plan ................ SAI-7 Plan Eligibility Requirements................ SAI-7 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 Funds ............ SAI-11 Investment Restrictions ...................... SAI-14 How the Assets of the Funds are Valued ....... SAI-15 How the Assets of the Underlying Funds are Valued ...................................... SAI-15 Transactions by the Underlying Funds ......... SAI-17 Investment Management Fee..................... SAI-17 Underwriter................................... SAI-18 Management.................................... SAI-19 Financial Statements.......................... SAI-22 - ------------ Copyright 1997 by The Equitable Life Assurance Society of The United States. All rights reserved.
ADDITIONAL INFORMATION ABOUT THE PROGRAM THE CONTRACTS The Program is primarily funded through a group annuity contract issued to the Trustees by Equitable Life. The contract governs the Investment Options that are provided by Equitable Life under the Program. The Trustees hold this contract for the benefit of employers and participants in the Program. In addition, the Trustees and Equitable Life have entered into an administrative services agreement that governs Equitable Life's duties relating to administrative support, recordkeeping and marketing for the Program. This agreement would under most circumstances terminate at the same time as the group annuity contract. 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; 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 Internal Revenue Service, 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; 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. SAI-2 If you, as an employer, have an individually designed plan, your responsibilities will not be increased in any way by your adoption of the Pooled Trust for investment only. If you adopt our self-directed prototype plan, 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 will give you guidance and assistance in the performance of your responsibilities. The ultimate responsibility, however, rests with you. If you have questions about any of your obligations, you can contact Equitable Life's 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 may generally not receive a distribution prior to age 59 1/2, and employees may generally not receive a distribution prior to separation from service. However, if your employer maintains the Master Plan as a profit sharing plan, you may request distribution of benefits after you reach age 59 1/2 even if you are still working. If your employer maintains the Master Plan as a 401(k) plan and you are under age 59 1/2, 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. 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 Federal Income Tax Considerations in the prospectus. All benefit payments (including withdrawals due to plan terminations) will be paid in accordance with the rules described below under Benefit Distributions. All other withdrawals will be effected as of the close of business on the day we receive the properly completed form. If you are married, your spouse must consent in writing before you can make any type of withdrawal. See Spousal Consent Requirements below. 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 Requirements 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 from the Equity Index Fund and the Lifecycle Funds--Conservative and Moderate are permitted daily except under infrequent circumstances when they may be subject to a delay. 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 SAI-3 form. If we receive your properly completed forms on or before the 15th of the month, your benefits will commence as of the close of business on the first business day of the next month; if your forms arrive after the 15th, your benefits will commence as of the close of business on the first business day of the second following month. Under an individually designed plan and our self-directed prototype plan, your employer must send us a request for disbursement form. We will send 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. Annuity payments will be paid directly to you and will commence as of the close of business on the first business day of the next month if we receive your properly completed forms on or before the 15th of the month. If we receive your properly completed forms after the 15th, annuity payments will commence as of the close of business on the first business day of the second following month. Transfers and withdrawals from the Equity Index Fund may be deferred 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 deferred 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 business on the 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 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. Distributions under a qualified retirement plan such as yours are subject to extremely complicated legal requirements. When you are ready to retire, we suggest that you discuss the available payment options with your employer or financial advisor. Our Account Executives can provide you or your employer with information. 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 the first day of the plan year in which you attain age 35 or 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 and 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 form of distribution, but gives you the right to name any beneficiary, or SAI-4 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 and individually designed profit sharing plans that do not offer life annuity benefits. 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 individual retirement arrangement (IRA). An "eligible rollover distribution" is 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 specific period of 10 years or more. In addition, the following are not subject to mandatory 20% withholding: o certain corrective distributions under Internal Revenue Code (Code) Section 401(k) plans; o certain loans that are treated as distributions; and o a distribution to a beneficiary other than to a surviving spouse or a current or former spouse under a qualified domestic relations order. If a distribution is made 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" income tax will be withheld from all taxable payments unless the recipient elects not to have income tax withheld. TYPES OF BENEFITS Under the Master Plan, and under most self-directed prototype plans, except as provided below, you may select one or more of the following forms of distribution once you are eligible to receive benefits. Please see Benefit Distributions under Procedures for Withdrawals, Distributions and Transfers. Not all of these distribution forms may be available to you, if your employer has adopted an individually designed plan or a self-directed prototype profit sharing plan that does not offer annuity benefits. We suggest you ask your employer what types of benefits are available under your plan. Fixed annuities are available from insurance companies selected by the Trustees, which meet criteria established by the Trustees from time to time. Fixed annuities are currently not available from Equitable Life. The types of fixed annuity benefits described below will be available through one or more of such companies. Upon your request, the companies will provide annuity benefit information. We will have no further responsibility for the amount used to purchase the annuity once it has been sent to the insurance company you select. The cost of a fixed annuity is determined by each insurance company based on its current annuity purchase rates. The amount of your monthly annuity benefit will depend on the type of annuity selected, your age and the age of your beneficiary if you select a joint and survivor annuity. An Equitable Life Account Executive has more details regarding the insurance companies currently providing annuity benefits under the Program. 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. THE LAW REQUIRES THAT IF THE VALUE OF YOUR VESTED BENEFITS SAI-5 EXCEEDS $3,500, YOU MUST RECEIVE A QUALIFIED JOINT AND SURVIVOR ANNUITY UNLESS YOUR SPOUSE CONSENTS IN WRITING TO A CONTRARY ELECTION. Please see Spousal Consent Requirements under Procedures for Withdrawals, Distributions and Transfers for an explanation of the procedures for electing not to receive a Qualified Joint and Survivor Annuity. 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 $3,500 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 Options you designate, other than the Real Estate Fund; each payment will be drawn pro rata from all the Options you have selected. If you die before receiving all the installments, we will make the remaining payments to your beneficiary. 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. LIFE ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your life or, if longer, a specific 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 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 the 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. 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 call an Equitable Life Account Executive for the variable annuity prospectus supplement. SAI-6 PROVISIONS OF THE MASTER PLAN PLAN ELIGIBILITY REQUIREMENTS. Under the Master Plan, the employer specifies the eligibility requirements for its plan in the Participation 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 eligibility 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 compensated" 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 or to make a reduced contribution. 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. Current federal income tax rules relating to contributions under qualified retirement plans are outlined briefly below. For purposes of this outline we have assumed that you are not a participant in any other qualified retirement plan. The employer's contributions to the plan are deductible in the year for which they are made. As a general rule, employer contributions must be made for any year by the due date (including extensions) for filing the employer's federal income tax return for that year. However, under Department of Labor rules participants' salary deferrals under a 401(k) plan must be contributed by the employer as soon as practicable after the payroll period for which the deferral is made, but no later than the 15th business day of the month following the month in which participant contributions are withheld or received by the employer. If the employer contributes more to the plan than is deductible under the rules described below, the employer may be liable for a 10% penalty tax on that nondeductible amount and 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 contributions in discretionary amounts to be determined annually. The aggregate employer contribution to the plan, including participants' salary deferrals under a 401(k) arrangement, is limited to 15% of all participants' compensation for the plan year. For plan purposes, compensation for self-employed persons does not include deductible plan contributions made on behalf of the self-employed person. A 401(k) arrangement is available as part of the profit sharing plan. Under a 401(k) arrangement, employees are permitted to make contributions to the plan on a pre-tax basis. The maximum amount that may be contributed by highly compensated employees is limited depending upon the amount that is contributed by non-highly compensated employees and the amount the employer designates as a nonforfeitable 401(k) contribution. In 1997, "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 $80,000 from the practice in 1996. 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 $9,500 for 1997 reduced by that employee's salary reduction contributions to simplified employee pension (SEPs), employee contributions to tax deferred (Section 403(b)) annuities, and contributions deductible by the employee under a trust described under Section 501(c)(18) of the Code. The maximum amount a participant may defer in a SIMPLE 401(k) plan for 1997 is $6,000. SAI-7 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 is specified in the Participation Agreement. Under either type of plan, compensation in excess of $160,000 must be disregarded in making contributions. Contributions may be integrated with Social Security which means that contributions with respect to each participant's compensation in excess of the integration level may exceed contributions made with respect to compensation below the integration level, within limits imposed by the Code. Your Account Executive can help you determine the legally permissible contribution. Contributions on behalf of non-key employees must be at least 3% of compensation (or, under the profit sharing plan, the percentage contributed on behalf of key employees, if less than 3%). In 1997, a "key employee" means (a) an owner of one of the ten largest (but more than 1/2%) interests in the practice with earnings of more than $30,000, or (b) an officer of the practice with earnings of more than $62,500 or (c) an owner of more than 5% of the practice, or (d) 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) thereon. Post-tax contributions are now subject to complex rules under which the maximum amount that may be contributed by highly compensated employees is limited, depending on the amount contributed by non-highly compensated employees. BEFORE PERMITTING ANY HIGHLY-COMPENSATED EMPLOYEE TO MAKE POST-TAX CONTRIBUTIONS, THE EMPLOYER SHOULD MAKE SURE THAT ALL NON-DISCRIMINATION TESTS HAVE BEEN PASSED. If an employer employs only "highly compensated" employees (as defined above), post-tax contributions may not be made to the plan. In addition, the employer may make matching contributions to certain plans, i.e., contributions which are based upon the amount of post-tax or pre-tax 401(k) contributions made by plan participants. Special non-discrimination rules apply to matching contributions and may limit the amount of matching contributions that may be made on behalf of highly compensated employees. Contributions on behalf of each participant are limited to the lesser of $30,000 and 25% of his earnings (excluding, in the case of self-employed persons, all deductible plan contributions). The participant's post-tax contributions are taken into account for purposes of applying 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 and employer matching contributions. Any amounts rolled over from the plan of a previous employer will also be accounted for separately. 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 his Account Balance in each Investment Option attributable to each type of contribution. Based on information supplied by you, we will run the required special non-discrimination test (Actual Deferral Percentage and Actual Contribution Percentage) applicable to 401(k) plans and plans that accept post-tax employee contributions or employer matching contributions. SAI-8 Non-discrimination tests do not apply to SIMPLE 401(k) plans, as long as the employer makes a matching contribution equal to 100% of the amount deferred by each participant, up to 3% of compensation or a 2% non-elective contribution to all eligible employees and follows the notification and filing requirements outlined in the SIMPLE 401(k) model amendment to the Master Plan. Elective deferrals to a 401(k) plan are subject to applicable FICA (social security), Medicare tax and FUTA (unemployment) taxes. They may also be subject to state income tax. ALLOCATION OF CONTRIBUTIONS. Contributions may be allocated among any number of the Investment Options. Allocation instructions may be changed at any time, and as often as needed, by filing a Change of Investment Allocation form or by calling the AIM System. 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 will automatically apply to any 401(k) qualified non-elective contributions, qualified matching contributions and matching contributions. The allocation percentages for employee contributions will 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. 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, make a broad range of investment choices available to Participants and beneficiaries and must provide them with enough information to make informed investment decisions. The ADA Program provides the broad range of investment choices and information that are needed in order to meet the requirements of Section 404(c). Our suggested summary plan descriptions, annual reports, prospectuses, and confirmation notices provide the required investment information; it is the employer's responsibility, however, to see that this information is distributed in a timely manner to participants and beneficiaries. You should read this information carefully before making your investment decisions. VESTING. Vesting refers to the nonforfeitable portion of a participant's Account Balance attributable to employer contributions under the Master Plan. The participant's Account Balance attributable to 401(k) contributions (including salary deferral, qualified non-elective and qualified matching contributions), post-tax employee contributions and to rollover contributions is nonforfeitable at all times. A participant will become 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 become vested under the plan's vesting schedule will be forfeitable. The normal retirement age is 65 under the Master Plan. 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 YEARS OF VESTED VESTED VESTED SERVICE PERCENTAGE PERCENTAGE PERCENTAGE - ---------- ------------ ------------ ------------ 1 0% 0% 0% 2 100 20 0 3 100 40 100 4 100 60 100 5 100 80 100 6 100 100 100
If the plan requires more than one year of service for participation, it must use Schedule A or one at least as favorable to participants. All contributions to a SIMPLE 401(k) plan are 100% vested and not subject to the vesting schedule above. This does not include employer and matching contributions made to a plan before amending to a SIMPLE 401(k) plan. SAI-10 ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES -- THE UNDERLYING FUNDS The following discussion supplements the discussion of the investment policies and techniques of the Underlying Funds for the Lifecycle Fund Group Trusts included under the section entitled Investment Options in the prospectus. Also discussed hereunder are the investment restrictions applicable to investments made by such Underlying Funds. As a general matter, you should note that the Flagship Fund, the 2000 Fund, and the Daily EAFE Fund are index funds and, therefore, not "actively" managed like other collective investment funds. Each of these Underlying Funds utilizes a "passive" investment approach, attempting to duplicate the investment performance of its benchmark index through automated statistical analytic 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 Funds were actively managed. U.S. GOVERNMENT SECURITIES. The Underlying 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. Some obligations issued or guaranteed by U.S. Government agencies and instrumentalities are supported by the full faith and credit of the U.S. Treasury; others, by the right of the issuer to borrow from the Treasury; others, by discretionary authority of the U.S. Government to purchase certain obligations of the agency or instrumentality; and others, 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 Funds may invest in obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions, agencies or instrumentalities that are determined by State Street to be of comparable quality to the other obligations in which such Underlying 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 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 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 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. SAI-11 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 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. COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS. The Underlying 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 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 Fund. REPURCHASE AGREEMENTS. The Underlying 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. Certain costs may be incurred by an Underlying Fund 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 Fund may be delayed or limited. Each Underlying 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 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, it is not contemplated 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 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 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. SAI-12 FUTURES CONTRACTS. To the extent permitted by applicable regulations, an Underlying Fund is permitted to use financial futures as a substitute for a comparable market position in the underlying securities. An Underlying 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 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. Initially, when purchasing or selling futures contracts, an Underlying 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 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 Fund to substantial losses. INTEREST RATE AND EQUITY INDEX SWAPS. An Underlying 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 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 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 may be entered into by an Underlying Fund. The risk of loss with respect to swaps is generally limited to the net amount of payments that the Underlying Fund is contractually obligated to make. If the other party to a swap defaults, the Underlying Fund's risk of loss consists of the net amount of payments that the Underlying Fund contractually is entitled to receive. FOREIGN CURRENCY TRANSACTIONS. An Underlying 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. SAI-13 LENDING PORTFOLIO SECURITIES. An Underlying Fund may lend securities to brokers, dealers and other financial institutions. The Underlying Fund will receive collateral of cash, letters of credit or U.S. government securities. The Underlying Fund can increase its income through the investment of the collateral as well as the interest receivable on the loan. An Underlying Fund might experience a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement. 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 Fund will rely on State Street's judgment, analysis and experience in evaluating the creditworthiness of an issuer. INVESTMENT RESTRICTIONS 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 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 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 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 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 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 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 (1) secure any permitted borrowings, (2) engage in transactions that involve the purchase of securities on a when-issued or forward commitment basis, (3) deposit assets in escrow in connection with writing SAI-14 covered put and call options, and (4) 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 Fund's investment objective and policies. For purposes of this restriction, the concentration limit may be exceeded as a result of changes in the market value of portfolio securities in which an Underlying Fund invests. This limit, however, may not be exceeded as a result of investments made by an Underlying Fund. (7) Purchase or sell commodities or commodity futures contracts, except that an Underlying Fund may enter into futures contracts to the extent provided in such Underlying 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 is 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 THE ASSETS OF THE FUNDS ARE VALUED The Equity Index Fund will invest all of its assets in the SSgA S&P 500 Index Fund. The asset value of the SSgA S&P 500 Index Fund is computed on a daily basis by 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 Group Trusts, in turn, will invest all of their assets in the Underlying Funds. The method of valuing the assets of each Underlying Fund is discussed below. The method used for valuing the units of the Group Trust and Underlying Funds is discussed under How We Calculate the Value of the Amounts Allocated to the Equity Index and Lifecycle Funds in the prospectus. HOW THE ASSETS OF THE UNDERLYING FUNDS ARE VALUED The assets of each Underlying Fund, other than the STIF Fund, will be valued 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. SAI-15 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 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. SAI-16 TRANSACTIONS BY THE UNDERLYING FUNDS This section discusses the procedures followed by the Underlying Funds, with respect to the buying and selling of portfolio securities for these Funds. In connections with such transactions, the Underlying Funds pay brokerage commissions, transfer taxes, and other fees. Decisions to buy or sell securities for the Underlying Funds are made by State Street in accordance with the investment policies and restrictions of each Underlying 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, transactions are allocated as to amount 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 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 Fund. State Street periodically will review the brokerage commissions paid by an Underlying 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 Fund other than that for which the transaction was executed. Conversely, any given Underlying Fund may be the primary beneficiary of the service received as a result of portfolio transactions effected for such other accounts or Underlying 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 No investment management fee was paid to State Street in 1996, with respect to the Program's investment, by the SSgA S&P 500 Index Fund, the underlying mutual fund in which the Equity Index Fund invests. SAI-17 UNDERWRITER EQ Financial Consultants, Inc. ("EQ Financial"), a wholly-owned subsidiary of Equitable Life, may be deemed to be the principal underwriter of separate account units under the group annuity contract. EQ Financial 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. EQ Financial's principal business address is 1755 Broadway, New York, NY 10019. 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 Deductions and Charges in the prospectus. No person currently serves as underwriter for the Lifecycle Fund Group Trusts or the Underlying Funds. SAI-18 MANAGEMENT EQUITABLE LIFE Equitable Life is managed by its sole shareholder, The Equitable Companies Incorporated. Its directors and certain of its executive officers and their principal occupations are as follows:
DIRECTORS NAME PRINCIPAL OCCUPATION ---------------------------- --------------------------------------------------------------------- Claude Bebear Chairman of the Executive Board, AXA-UAP Christopher Brockson Retired Chief Executive Officer, AXA-UAP Equity & Law Life Assurance Society Francoise Colloc'h Senior Executive Vice President, Human Resources and Communications, AXA-UAP Henri de Castries Senior Executive Vice President, Financial Services and Life Insurance Activities, AXA-UAP Joseph L. Dionne Chairman and Chief Executive Officer, The McGraw-Hill Companies William T. Esrey Chairman, President and Chief Executive Officer, Sprint Corporation Jean-Rene Fourtou Chairman and Chief Executive Officer, Rhone Paulenc, S.A. Norman C. Francis President, Xavier University of Louisiana Donald J. Greene Counselor-at-Law, Partner, Le Boeuf, Lamb, Greene & MacRae John T. Hartley Retired Chairman and Chief Executive Officer, Harris Corporation John H.F. Haskell, Jr. Director and Managing Director, Dillon, Read & Co., Inc. Mary R. (Nina) Henderson President, CPC Specialty Markets Group of CPC International, Inc. W. Edwin Jarmain President, Jarmain Group Inc. G. Donald Johnston, Jr. Retired Chairman and Chief Executive Officer, JWT Group, Inc. Winthrop Knowlton Chairman, Knowlton Brothers, Inc. Arthur L. Liman Counselor-at-Law, Partner, Paul, Weiss, Rifkind, Wharton & Garrison George T. Lowy Counselor-at-Law, Partner, Cravath, Swaine & Moore Didier Pineau-Valencienne Chairman and Chief Executive Officer, Schneider, S.A. George J. Sella, Jr. Retired Chairman and Chief Executive Officer, American Cyanamid Company Dave H. Williams Chairman of the Board and Chief Executive Officer, Alliance Capital Management, L.P.
Unless otherwise indicated, the following persons have been involved in the management of Equitable Life in various executive positions during the last five years.
OFFICER-DIRECTORS NAME PRINCIPAL OCCUPATION - -------------------------- ----------------------------------------------------------------- William T. McCaffrey Senior Executive Vice President and Chief Operating Officer Joseph J. Melone Director, President and Chief Executive Officer, The Equitable Companies Incorporated; Chairman, Chief Executive Officer and President, Equitable Life
SAI-19
OTHER OFFICERS NAME PRINCIPAL OCCUPATION* ---------------------- --------------------------------------------------------------------- Stanley B. Tulin Senior Executive Vice President and Chief Financial Officer; prior thereto, Chairman, Insurance Consulting and Actuarial Practice, Coopers & Lybrand Robert E. Garber Executive Vice President and General Counsel Peter D. Noris Executive Vice President and Chief Investment Officer. Prior to May 1995, Vice President/Manager, Insurance Company Investment Strategies Group, Salomon Brothers, Inc. Prior to November 1992, as Principal, Fixed Income Insurance Group, Morgan Stanley & Company Jose Suquet Executive Vice President and Chief Agency Officer Gordon G. Dinsmore Senior Vice President and Chief Valuation Actuary Alvin H. Fenichel Senior Vice President and Controller Kevin R. Byrne Vice President and Treasurer Paul J. Flora Senior Vice President and Auditor Pauline Sherman Vice President, Secretary and Associate General Counsel
- ------------ * Current positions listed are with Equitable Life unless otherwise specified. 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:
DIRECTORS NAME PRINCIPAL OCCUPATION - ----------------------------- ----------------------------------------------------------------- Tenley E. Albright, M.D. Chairman, Western Resources, Inc. Joseph A. Baute, Jr. Former Chairman, Markem Corporation I. MacAllister Booth Retired Chairman, President and CEO, Polaroid Corporation James I. Cash, Jr. The James E. Robison Professor of Business Administration, Harvard Business School 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 Charles F. Kaye President, Transportation Investments, Inc. John M. Kucharski Chairman, and CEO, EG&G, Inc. Charles R. LaMantia President and CEO, Arthur D. Little, Inc. David B. Perini Chairman and President, Perini Corporation SAI-20 DIRECTORS NAME PRINCIPAL OCCUPATION - ----------------------------- ----------------------------------------------------------------- Dennis J. Picard Chairman and CEO, Raytheon Company Alfred Poe Former President, Meal Enhancement Group, Campbell Soup Company Bernard W. Reznicek President, Premier Group; Retired Chairman and Chief Executive Officer, Boston Edison Robert E. Weissman Chairman and CEO, Cognizant Corporation
OFFICER-DIRECTORS NAME PRINCIPAL OCCUPATION - -------------------------- -------------------------------------------------------- Marshall N. Carter Chairman and CEO, State Street Bank and Trust Company David A. Spina President and Chief Operating Officer State Street Bank and Trust Company William S. Edgerly Chairman Emeritus OTHER OFFICERS NAMES PRINCIPAL OCCUPATION* - -------------------------- -------------------------------------------------------- A. Edward Allinson Executive Vice President George K. Bird, IV Executive Vice President Dale L. Carleton Executive Vice President Joseph W. Chow Executive Vice President Susan Comeau Executive Vice President James J. Darr Executive Vice President Howard H. Fairweather Executive Vice President Timothy B. Harbert Executive Vice President Ronald E. Logue Executive Vice President Nicholas A. Lopardo Executive Vice President Jacques-Phillipe Marson Executive Vice President Ronald O'Kelley CFO, Treasurer, Executive Vice President Albert E. Peterson Executive Vice President William M. Reghitto Executive Vice President David J. Sexton Executive Vice President Stanley W. Shelton Executive Vice President
- ------------ * All positions are with State Street Bank and Trust Company. SAI-21 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 Equity Index Fund. The financial statements of Separate Account No. 195 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-25 Separate Account No. 195 (Equity Index Fund): Statement of Assets and Liabilities, December 31, 1996................ SAI-26 Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1996 and 1995.......................................... SAI-27 Separate Account No. 197 (Lifecycle Fund--Conservative): Statement of Assets and Liabilities, December 31, 1996 ............... SAI-28 Statement of Operations and Changes in Net Assets for the Year Ended December 31, 1996 and the Period May 1, 1995 (commencement of operations) to December 31, 1995 ................................... SAI-29 Separate Account No. 198 (Lifecycle Fund--Moderate): Statement of Assets and Liabilities, December 31, 1996 ............... SAI-30 Statement of Operations and Changes in Net Assets for the Year Ended December 31, 1996 and the Period May 1, 1995 (commencement of operations) to December 31, 1995 ................................... SAI-31 Separate Account Nos. 195, 197 and 198: Notes to Financial Statements ........................................ SAI-32 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Report of Independent Accountants-- ........................ SAI-34 Consolidated Balance Sheets, December 31, 1996 and 1995............... SAI-35 Consolidated Statements of Earnings for the Years Ended December 31, 1996, 1995 and 1994................................................. SAI-36 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1996, 1995 and 1994.................................... SAI-37 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994................................................. SAI-38 Notes to Consolidated Financial Statements............................ SAI-39
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 Funds invest. SAI-22 STATE STREET BANK AND TRUST COMPANY-- LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
Report of Independent Accountants-- ......................... SAI-83 Lifecycle Fund Group Trust--Conservative: Statement of Assets and Liabilities, December 31, 1996................. SAI-84 Statement of Operations for Year Ended December 31, 1996 and the Period Ended December 31, 1995.............................................. SAI-85 Statement of Changes in Net Assets for the Year Ended December 31, 1996 and the Period Ended December 31, 1995............................... SAI-86 Selected Per Unit Data................................................. SAI-87 Notes to Financial Statements.......................................... SAI-88
STATE STREET BANK AND TRUST COMPANY-- LIFECYCLE FUND GROUP TRUST--MODERATE
Report of Independent Accountants-- ......................... SAI-91 Lifecycle Fund Group Trust--Moderate: Statement of Assets and Liabilities, December 31, 1996................. SAI-92 Statement of Operations for the Year Ended December 31, 1996 and the Period Ended December 31, 1995....................................... SAI-93 Statement of Changes in Net Assets for the Year Ended December 31, 1996 and the Period Ended December 31, 1995............................... SAI-94 Selected Per Unit Data................................................. SAI-95 Notes to Financial Statements.......................................... SAI-96
STATE STREET BANK AND TRUST COMPANY--UNDERLYING FUNDS FLAGSHIP FUND
Report of Independent Accountants-- ....................... SAI-99 S&P 500 Flagship Fund and S&P 500 Index Fund with Futures: Combined Statement of Assets and Liabilities, December 31, 1996...... SAI-100 Combined Statement of Operations for the Year Ended December 31, 1996............................................................... SAI-101 Combined Statement of Changes in Net Assets for the Years Ended December 31, 1996 and 1995......................................... SAI-102 S&P 500 Index Fund with Futures Selected Per Unit Data............... SAI-103 S&P 500 Flagship Fund Selected Per Unit Data......................... SAI-104 Notes to Combined Financial Statements............................... SAI-105 Combined Schedule of Investments, December 31, 1996.................. SAI-109
2000 FUND Report of Independent Accountants-- ...................... SAI-120 Russell 2000 Fund and Russell 2000 Non-Lending Fund: Combined Statement of Assets and Liabilities, December 31, 1996..... SAI-121 Combined Statement of Operations for the Year Ended December 31, 1996.............................................................. SAI-122 Combined Statement of Changes in Net Assets for the Years Ended December 31, 1996 and 1995........................................ SAI-123 Selected Per Unit Data ............................................. SAI-124 Notes to Financial Statements ...................................... SAI-126 Combined Schedule of Investments.................................... SAI-131
SAI-23 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 the 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 investments again.
DAILY EAFE FUND Report of Independent Accountants-- ....................... SAI-172 Daily EAFE Fund and Daily EAFE Fund Non-Lending: Combined Statement of Assets and Liabilities, December 31, 1996...... SAI-173 Combined Statement of Operations for the Year Ended December 31, 1996............................................................... SAI-174 Combined Statement of Changes in Net Assets for the Years Ended December 31, 1996 and 1995......................................... SAI-175 Daily EAFE Fund Selected Per Unit Data............................... SAI-176 Daily EAFE Non-Lending Fund Selected Per Unit Data................... SAI-177 Notes to Combined Financial Statements............................... SAI-178 Combined Schedule of Investments, December 31, 1996 ................. SAI-183
GC BOND FUND Report of Independent Accountants-- .................... SAI-208 Daily Government/Corporate Fund: Statement of Assets and Liabilities, December 31, 1996 ............ SAI-209 Statement of Operations for the Year Ended December 31, 1996 ...... SAI-210 Statement of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 ................................................... SAI-211 Selected Per Unit Data............................................. SAI-212 Notes to Financial Statements...................................... SAI-213 Schedule of Investments, December 31, 1996 ........................ SAI-216 STIF FUND Report of Independent Accountants-- .................... SAI-223 Short Term Investment Fund: Statement of Assets and Liabilities, December 31, 1996............. SAI-224 Statement of Operations for the Year Ended December 31, 1996....... SAI-225 Statement of Changes in Net Assets for the Years Ended December 31, 1996 and 1995.................................................... SAI-226 Selected Per Unit Data............................................. SAI-227 Notes to Financial Statements...................................... SAI-228 Schedule of Investments, December 31, 1996......................... SAI-230
SAI-24 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of The Equitable Life Assurance Society of the United States and the Participants in the American Dental Association Members Retirement Program In our opinion, the accompanying statements of assets and liabilities, and the related statements of operations and changes in net assets present fairly, in all material respects, the financial position of Separate Account Nos. 195, 197 and 198 of the Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 1996 and each of their results of operations and changes in net assets for the periods indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 include confirmation of shares owned in the underlying mutual fund with the transfer agent, provide a reasonable basis for the opinion expressed above. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The selected per unit information (appearing under "Condensed Financial Data" in the prospectus) is presented for the purpose of satisfying regulatory reporting requirements and is not a required part of the basic financial statements. Such selected per unit information has been subject to auditing procedures applied during the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Price Waterhouse LLP New York, New York February 10, 1997 SAI-25 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, 1996
ASSETS: Investments in shares of The SSgA S&P 500 Index Fund-at value (cost: $30,674,317)(Notes 2 and 5)............................................... $33,428,766 Receivable from Equitable Life's General Account . 32,269 - ------------------------------------------------- ------------- Total assets................................... 33,461,035 LIABILITIES--Accrued expenses..................... 58,732 - ------------------------------------------------- ------------- NET ASSETS ....................................... $33,402,303 ================================================= =============
See Notes to Financial Statements. SAI-26 SEPARATE ACCOUNT NO. 195 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1995 - ------------------------------------------------------------------- -------------- -------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2)--Dividends from The SSgA S&P 500 Index Fund............................................................... $ 714,952 $ 387,701 EXPENSES (NOTE 3)................................................... (315,573) (155,529) - ------------------------------------------------------------------- -------------- -------------- NET INVESTMENT INCOME............................................... 399,379 232,172 - ------------------------------------------------------------------- -------------- -------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2): Realized gain from share transactions............................... 2,170,339 997,758 Realized gain distribution from The SSgA S&P 500 Index Fund ........ 1,199,133 394,652 - ------------------------------------------------------------------- -------------- -------------- Net realized gain .................................................. 3,369,472 1,392,410 - ------------------------------------------------------------------- -------------- -------------- Unrealized appreciation of investments: Beginning of year................................................... 1,485,778 5,910 End of year......................................................... 2,754,449 1,485,778 - ------------------------------------------------------------------- -------------- -------------- Change in unrealized appreciation/depreciation...................... 1,268,671 1,479,868 - ------------------------------------------------------------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS..................... 4,638,143 2,872,278 - ------------------------------------------------------------------- -------------- -------------- Increase in net assets attributable to operations................... 5,037,522 3,104,450 - ------------------------------------------------------------------- -------------- -------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions....................................................... 25,357,074 22,746,218 Withdrawals ........................................................ (16,441,539) (11,398,912) - ------------------------------------------------------------------- -------------- -------------- Increase in net assets attributable to contributions and withdrawals........................................................ 8,915,535 11,347,306 - ------------------------------------------------------------------- -------------- -------------- INCREASE IN NET ASSETS.............................................. 13,953,057 14,451,756 NET ASSETS--BEGINNING OF YEAR....................................... 19,449,246 4,997,490 - ------------------------------------------------------------------- -------------- -------------- NET ASSETS--END OF YEAR............................................. $ 33,402,303 $ 19,449,246 =================================================================== ============== ==============
See Notes to Financial Statements. SAI-27 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, 1996
ASSETS: Investments in shares of the Lifecycle Fund Group Trust Conservative-at value (cost $4,325,438)(Note 2).................................................... $4,561,626 - ------------------------------------------------------ ------------ LIABILITIES: Due to Equitable Life's General Account................ 24,209 Accrued expenses....................................... 27,155 - ------------------------------------------------------ ------------ Total liabilities...................................... 51,364 - ------------------------------------------------------ ------------ NET ASSETS............................................. $4,510,262 ====================================================== ============
See Notes to Financial Statements. SAI-28 SEPARATE ACCOUNT NO. 197 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets
FOR THE PERIOD MAY 1, 1995* YEAR ENDED TO DECEMBER 31, 1996 DECEMBER 31, 1995 - ------------------------------------------------------------------- ----------------- ----------------- FROM OPERATIONS: EXPENSES (NOTE 3)................................................... $ (92,493) $ (23,691) - ------------------------------------------------------------------- ----------------- ----------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2): Realized gain from share transactions .............................. 155,169 41,403 - ------------------------------------------------------------------- ----------------- ----------------- Unrealized appreciation of investments: Beginning of period................................................ 110,188 -- End of period...................................................... 236,188 110,188 - ------------------------------------------------------------------- ----------------- ----------------- Change in unrealized appreciation/depreciation...................... 126,000 110,188 - ------------------------------------------------------------------- ----------------- ----------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS..................... 281,169 151,591 - ------------------------------------------------------------------- ----------------- ----------------- Increase in net assets attributable to operations................... 188,676 127,900 - ------------------------------------------------------------------- ----------------- ----------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions....................................................... 4,350,710 4,323,495 Withdrawals......................................................... (3,002,761) (1,477,758) - ------------------------------------------------------------------- ----------------- ----------------- Increase in net assets attributable to contributions and withdrawals........................................................ 1,347,949 2,845,737 - ------------------------------------------------------------------- ----------------- ----------------- INCREASE IN NET ASSETS.............................................. 1,536,625 2,973,637 NET ASSETS--BEGINNING OF PERIOD..................................... 2,973,637 -- - ------------------------------------------------------------------- ----------------- ----------------- NET ASSETS--END OF PERIOD........................................... $ 4,510,262 $ 2,973,637 =================================================================== ================= =================
- ------------ * Commencement of operations. See Notes to Financial Statements. SAI-29 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, 1996
ASSETS: Investments in shares of the Lifecycle Fund Group Trust Moderate-at value (cost: $79,126,053)(Note 2).......... $88,294,348 Receivable from Equitable Life's General Account.............. 36,210 - --------------------------------------------------------------------------- Total assets............................................... 88,330,558 LIABILITIES--Accrued expenses................................. 138,273 - --------------------------------------------------------------------------- NET ASSETS.................................................... $88,192,285 ===========================================================================
See Notes to Financial Statements. SAI-30 SEPARATE ACCOUNT NO. 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets
FOR THE PERIOD MAY 1, 1995* YEAR ENDED TO DECEMBER 31, 1996 DECEMBER 31, 1995 - ------------------------------------------------------------------- ----------------- ----------------- FROM OPERATIONS: EXPENSES (NOTE 3) .................................................. $ (897,989) $ (95,847) - ------------------------------------------------------------------- ----------------- ----------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2): Realized gain from share transactions............................... 981,358 66,530 - ------------------------------------------------------------------- ----------------- ----------------- UNREALIZED APPRECIATION OF INVESTMENTS: Beginning of period................................................ 828,281 -- End of period...................................................... 9,168,295 828,281 - ------------------------------------------------------------------- ----------------- ----------------- Change in unrealized appreciation/depreciation...................... 8,340,014 828,281 - ------------------------------------------------------------------- ----------------- ----------------- Net Realized and Unrealized Gain on Investments..................... 9,321,372 894,811 - ------------------------------------------------------------------- ----------------- ----------------- Increase in net assets attributable to operations................... 8,423,383 798,964 - ------------------------------------------------------------------- ----------------- ----------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions....................................................... 19,188,987 77,246,884 Withdrawals......................................................... (15,636,555) (1,829,378) - ------------------------------------------------------------------- ----------------- ----------------- Increase in net assets attributable to contributions and withdrawals........................................................ 3,552,432 75,417,506 - ------------------------------------------------------------------- ----------------- ----------------- INCREASE IN NET ASSETS ............................................. 11,975,815 76,216,470 NET ASSETS--BEGINNING OF PERIOD..................................... 76,216,470 -- - ------------------------------------------------------------------- ----------------- ----------------- NET ASSETS--END OF PERIOD .......................................... $ 88,192,285 $76,216,470 =================================================================== ================= =================
- ------------ * Commencement of operations. See Notes to Financial Statements. SAI-31 SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements 1. Separate Account Nos. 195 (the Equity Index Fund), 197 (the Lifecycle Fund-Conservative) and 198 (the Lifecycle Fund-Moderate) (the Funds) of The Equitable Life Assurance Society of the United States (Equitable Life), a wholly-owned subsidiary of The Equitable Companies Incorporated, were established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the applicable 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 generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions 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. Separate Account No. 195 invests its assets in shares of the SSgA S&P 500 Index Fund (formerly the Seven Seas S & P 500 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, are 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. 2. 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 ex-date. 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 are valued at the underlying mutual fund's or trust's net asset value per share. 3. Charges and fees relating to the Funds are deducted in accordance with the terms of the contracts issued by Equitable Life to the Trusts. With respect to the American Dental Association Members Retirement Program, these expenses consist of program expense charge, direct expenses and record maintenance and report fee. These charges and fees are paid to Equitable Life by the Funds and are recorded as expenses in the accompanying Statements of Operations and Changes in Net Assets. 4. No Federal income tax based on net income or realized and unrealized capital gains was applicable to contracts 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. SAI-32 SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) 5. The SSgA S&P 500 Index Fund and the Lifecycle Fund Group Trusts have provided Equitable Life with the following information as of December 31, 1996. The SSgA S&P 500 Index Fund had total assets of $860.7 million and a net asset value per share of $15.57. Its five major industry group concentrations were as follows: Consumer Non-Durables (21.7%), Financials (16.3%), Technology (12.2%), Healthcare (10.1%) and Utilities (9.6%). The Lifecycle Fund Group Trust-Conservative had total assets of $4.5 million and a net asset value per share of $11.43. The Lifecycle Fund Group Trust-Moderate had total assets of $88.3 million and a net asset value per share of $12.44. SAI-33 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 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, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 the opinion expressed above. As discussed in Note 2 to the consolidated financial statements, Equitable Life changed its methods of accounting for long-duration participating life insurance contracts and long-lived assets in 1996, for loan impairments in 1995 and for postemployment benefits in 1994. Price Waterhouse LLP New York, New York February 10 SAI-34 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995
1996 1995 ----------------- ----------------- (IN MILLIONS) ASSETS Investments: Fixed maturities: Available for sale, at estimated fair value................. $ 18,077.0 $ 15,899.9 Mortgage loans on real estate................................. 3,133.0 3,638.3 Equity real estate............................................ 3,297.5 3,916.2 Policy loans.................................................. 2,196.1 1,976.4 Investment in and loans to affiliates......................... 685.0 636.6 Other equity investments...................................... 597.3 621.1 Other invested assets......................................... 288.7 706.1 ----------------- ----------------- Total investments......................................... 28,274.6 27,394.6 Cash and cash equivalents....................................... 538.8 774.7 Deferred policy acquisition costs............................... 3,104.9 3,075.8 Amounts due from discontinued GIC Segment....................... 996.2 2,097.1 Other assets.................................................... 2,552.2 2,718.1 Closed Block assets............................................. 8,495.0 8,582.1 Separate Accounts assets........................................ 29,646.1 24,566.6 ----------------- ----------------- TOTAL ASSETS.................................................... $ 73,607.8 $ 69,209.0 ================= ================= LIABILITIES Policyholders' account balances................................. $ 21,865.6 $ 21,911.2 Future policy benefits and other policyholders' liabilities..... 4,416.6 4,007.3 Short-term and long-term debt................................... 1,766.9 1,899.3 Other liabilities............................................... 2,785.1 3,380.7 Closed Block liabilities........................................ 9,091.3 9,221.4 Separate Accounts liabilities................................... 29,598.3 24,531.0 ----------------- ----------------- Total liabilities......................................... 69,523.8 64,950.9 ----------------- ----------------- Commitments and contingencies (Notes 10, 12, 13, 14 and 15) 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.................................. 3,105.8 3,105.8 Retained earnings............................................... 798.7 788.4 Net unrealized investment gains................................. 189.9 396.5 Minimum pension liability....................................... (12.9) (35.1) ----------------- ----------------- Total shareholder's equity................................ 4,084.0 4,258.1 ----------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY...................... $ 73,607.8 $ 69,209.0 ================= =================
See Notes to Consolidated Financial Statements. SAI-35 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------------- ----------------- ----------------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income................................................ $ 874.0 $ 788.2 $ 715.0 Premiums................................................ 597.6 606.8 625.6 Net investment income................................... 2,175.9 2,088.2 1,998.6 Investment (losses) gains, net.......................... (9.8) 5.3 91.8 Commissions, fees and other income...................... 1,081.8 897.1 847.4 Contribution from the Closed Block...................... 125.0 143.2 137.0 ----------------- ----------------- ----------------- Total revenues.................................... 4,844.5 4,528.8 4,415.4 ----------------- ----------------- ----------------- BENEFITS AND OTHER DEDUCTIONS Interest credited to policyholders' account balances.... 1,270.2 1,248.3 1,201.3 Policyholders' benefits................................. 1,317.7 1,008.6 914.9 Other operating costs and expenses...................... 2,048.0 1,775.8 1,857.7 ----------------- ----------------- ----------------- Total benefits and other deductions............... 4,635.9 4,032.7 3,973.9 ----------------- ----------------- ----------------- Earnings from continuing operations before Federal income taxes, minority interest and cumulative effect of accounting change........................... 208.6 496.1 441.5 Federal income taxes.................................... 9.7 120.5 100.2 Minority interest in net income of consolidated subsidiaries.......................................... 81.7 62.8 50.4 ----------------- ----------------- ----------------- Earnings from continuing operations before cumulative effect of accounting change................ 117.2 312.8 290.9 Discontinued operations, net of Federal income taxes.... (83.8) - - Cumulative effect of accounting change, net of Federal income taxes.......................................... (23.1) - (27.1) ----------------- ----------------- ----------------- Net Earnings............................................ $ 10.3 $ 312.8 $ 263.8 ================= ================= =================
See Notes to Consolidated Financial Statements. SAI-36 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------------- ----------------- ----------------- (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 as previously reported......................................... 2,913.6 2,913.6 2,613.6 Cumulative effect on prior years of retroactive restatement for accounting change....................................... 192.2 192.2 192.2 ----------------- ----------------- ----------------- Capital in excess of par value, beginning of year as restated. 3,105.8 3,105.8 2,805.8 Additional capital in excess of par value..................... - - 300.0 ----------------- ----------------- ----------------- Capital in excess of par value, end of year................... 3,105.8 3,105.8 3,105.8 ----------------- ----------------- ----------------- Retained earnings, beginning of year as previously reported... 781.6 484.0 217.6 Cumulative effect on prior years of retroactive restatement for accounting change....................................... 6.8 (8.4) (5.8) ----------------- ----------------- ----------------- Retained earnings, beginning of year as restated.............. 788.4 475.6 211.8 Net earnings.................................................. 10.3 312.8 263.8 ----------------- ----------------- ----------------- Retained earnings, end of year................................ 798.7 788.4 475.6 ----------------- ----------------- ----------------- Net unrealized investment gains (losses), beginning of year as previously reported...................................... 338.2 (203.0) 131.9 Cumulative effect on prior years of retroactive restatement for accounting change....................................... 58.3 (17.5) 12.7 ----------------- ----------------- ----------------- Net unrealized investment gains (losses), beginning of year as restated............................................ 396.5 (220.5) 144.6 Change in unrealized investment (losses) gains................ (206.6) 617.0 (365.1) ----------------- ----------------- ----------------- Net unrealized investment gains (losses), end of year......... 189.9 396.5 (220.5) ----------------- ----------------- ----------------- Minimum pension liability, beginning of year.................. (35.1) (2.7) (15.0) Change in minimum pension liability........................... 22.2 (32.4) 12.3 ----------------- ----------------- ----------------- Minimum pension liability, end of year........................ (12.9) (35.1) (2.7) ----------------- ----------------- ----------------- TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 4,084.0 $ 4,258.1 $ 3,360.7 ================= ================= =================
See Notes to Consolidated Financial Statements. SAI-37 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------------- ----------------- ----------------- (IN MILLIONS) Net earnings.................................................. $ 10.3 $ 312.8 $ 263.8 Adjustments to reconcile net earnings to net cash provided by operating activities: Interest credited to policyholders' account balances........ 1,270.2 1,248.3 1,201.3 Universal life and investment-type policy fee income........ (874.0) (788.2) (715.0) Investment losses (gains)................................... 9.8 (5.3) (91.8) Change in Federal income taxes payable...................... (197.1) 221.6 38.3 Other, net.................................................. 364.4 127.3 (19.4) ----------------- ----------------- ----------------- Net cash provided by operating activities..................... 583.6 1,116.5 677.2 ----------------- ----------------- ----------------- Cash flows from investing activities: Maturities and repayments................................... 2,275.1 1,897.4 2,323.8 Sales....................................................... 8,964.3 8,867.1 5,816.6 Return of capital from joint ventures and limited partnerships.............................................. 78.4 65.2 39.0 Purchases................................................... (12,559.6) (11,675.5) (7,564.7) Decrease (increase) in loans to discontinued GIC Segment.... 1,017.0 1,226.9 (40.0) Other, net.................................................. 56.7 (624.7) (478.1) ----------------- ----------------- ----------------- Net cash (used) provided by investing activities.............. (168.1) (243.6) 96.6 ----------------- ----------------- ----------------- Cash flows from financing activities: Policyholders' account balances: Deposits.................................................. 1,925.4 2,586.5 2,082.5 Withdrawals............................................... (2,385.2) (2,657.1) (2,864.4) Net decrease in short-term financings....................... (.3) (16.4) (173.0) Additions to long-term debt................................. - 599.7 51.8 Repayments of long-term debt................................ (124.8) (40.7) (199.8) Proceeds from issuance of Alliance units.................... - - 100.0 Payment of obligation to fund accumulated deficit of discontinued GIC Segment.................................. - (1,215.4) - Capital contribution from the Holding Company............... - - 300.0 Other, net.................................................. (66.5) (48.4) 26.5 ----------------- ----------------- ----------------- Net cash (used) by financing activities....................... (651.4) (791.8) (676.4) ----------------- ----------------- ----------------- Change in cash and cash equivalents........................... (235.9) 81.1 97.4 Cash and cash equivalents, beginning of year.................. 774.7 693.6 596.2 ----------------- ----------------- ----------------- Cash and Cash Equivalents, End of Year........................ $ 538.8 $ 774.7 $ 693.6 ================= ================= ================= Supplemental cash flow information Interest Paid............................................... $ 109.9 $ 89.6 $ 34.9 ================= ================= ================= Income Taxes (Refunded) Paid................................ $ (10.0) $ (82.7) $ 49.2 ================= ================= =================
See Notes to Consolidated Financial Statements. SAI-38 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") converted to a stock life insurance company on July 22, 1992 and became a wholly owned subsidiary of The Equitable Companies Incorporated (the "Holding Company"). Equitable Life's insurance business is conducted principally by Equitable Life and its wholly owned life insurance subsidiary, Equitable Variable Life Insurance Company ("EVLICO"). Effective January 1, 1997, EVLICO was merged into Equitable Life, which will continue to conduct the Company's insurance business. Equitable Life's investment management business, which comprises the Investment Services segment, is conducted principally by Alliance Capital Management L.P. ("Alliance"), Equitable Real Estate Investment Management, Inc. ("EREIM") and Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), an investment banking and brokerage affiliate. AXA-UAP ("AXA"), a French holding company for an international group of insurance and related financial services companies, is the Holding Company's largest shareholder, owning approximately 60.8% at December 31, 1996 (63.6% assuming conversion of Series E Convertible Preferred Stock held by AXA and 54.4% if all securities convertible into, and options on, common stock were to be converted or exercised). 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation ----------------------------------------------------- The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles ("GAAP"). The accompanying consolidated financial statements include the accounts of Equitable Life and its wholly owned life insurance subsidiaries (collectively, the "Insurance Group"); non-insurance subsidiaries, principally Alliance, an investment advisory subsidiary, and EREIM, a real estate investment management subsidiary; and those partnerships and joint ventures in which Equitable Life or its subsidiaries has control and a majority economic interest (collectively, including its consolidated subsidiaries, the "Company"). The Company's investment in DLJ is reported on the equity basis of accounting. Closed Block assets and liabilities and results of operations are presented in the consolidated financial statements as single line items (see Note 6). Unless specifically stated, all disclosures contained herein supporting the consolidated financial statements exclude the Closed Block related amounts. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions 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. All significant intercompany transactions and balances have been eliminated in consolidation other than intercompany transactions and balances with the Closed Block and the discontinued Guaranteed Interest Contract ("GIC") Segment (see Note 7). The years "1996," "1995" and "1994" refer to the years ended December 31, 1996, 1995 and 1994, respectively. SAI-39 Certain reclassifications have been made in the amounts presented for prior periods to conform these periods with the 1996 presentation. Closed Block ------------ As of July 22, 1992, Equitable Life established the Closed Block for the benefit of certain classes of individual participating policies for which Equitable Life had a dividend scale payable in 1991 and which were in force on that date. Assets were allocated to the Closed Block in an amount which, together with anticipated revenues from policies included in the Closed Block, was reasonably expected to be sufficient to support such business, including provision for 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 holders of policies included in the Closed Block and will not revert to the benefit of the Holding Company. The plan of demutualization prohibits the reallocation, transfer, borrowing or lending of assets between the Closed Block and other portions of Equitable Life's General Account, any of its Separate Accounts or to 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. Discontinued Operations ----------------------- In 1991, the Company's management adopted a plan to discontinue the business operations of the GIC Segment, consisting of the Group Non-Participating Wind-Up Annuities ("Wind-Up Annuities") and Guaranteed Interest Contract ("GIC") lines of business. The Company established a pre-tax provision for the estimated future losses of the GIC line of business and a premium deficiency reserve for the Wind-Up Annuities. Subsequent losses incurred have been charged to the two loss provisions. Management reviews the adequacy of the allowance and reserve each quarter. During the fourth quarter 1996 review, management determined it was necessary to increase the allowance for expected future losses of the GIC Segment. Management believes the loss provisions for GIC contracts and Wind-Up Annuities at December 31, 1996 are adequate to provide for all future losses; however, the determination of loss provisions continues to involve numerous estimates and subjective judgments regarding the expected performance of discontinued operations investment assets. There can be no assurance the losses provided for will not differ from the losses ultimately realized (See Note 7). Accounting Changes ------------------ In 1996, the Company changed its method of accounting for long-duration participating life insurance contracts, primarily within the Closed Block, in accordance with the provisions prescribed by Statement of Financial Accounting Standards ("SFAS") No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration Participating Contracts". The effect of this change, including the impact on the Closed Block, was to increase earnings from continuing operations before cumulative effect of accounting change by $19.2 million, net of Federal income taxes of $10.3 million for 1996. The financial statements for 1995 and 1994 have been retroactively restated for the change which resulted in an increase (decrease) in earnings before cumulative effect of accounting change of $15.2 million, net of Federal income taxes of $8.2 million, and $(2.6) million, net of Federal income tax benefit of $1.0 million, respectively. Shareholder's equity increased $199.1 million as of January 1, 1994 for the effect of SAI-40 retroactive application of the new method. (See "Deferred Policy Acquisition Costs," "Policyholders' Account Balances and Future Policy Benefits" and Note 6.) The Company implemented SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," as of January 1, 1996. The statement requires long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable. Effective with SFAS No. 121's adoption, impaired real estate is written down to fair value with the impairment loss being included in investment gains (losses), net. Before implementing SFAS No. 121, valuation allowances on real estate held for the production of income were computed using the forecasted cash flows of the respective properties discounted at a rate equal to the Company's cost of funds. The adoption of the statement resulted in the release of valuation allowances of $152.4 million and recognition of impairment losses of $144.0 million on real estate held and used. Real estate which management has committed to disposing of by sale or abandonment is classified as real estate to be disposed of. Valuation allowances on real estate to be disposed of continue to be computed using the lower of estimated fair value or depreciated cost, net of disposition costs. Implementation of the SFAS No. 121 impairment requirements relative to other assets to be disposed of resulted in a charge for the cumulative effect of an accounting change of $23.1 million, net of a Federal income tax benefit of $12.4 million, due to the writedown to fair value of building improvements relating to facilities being vacated beginning in 1996. In the first quarter of 1995, the Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan". This statement applies to all loans, including loans restructured in a troubled debt restructuring involving a modification of terms. This statement addresses the accounting for impairment of a loan by specifying how allowances for credit losses should be determined. Impaired loans within the scope of this statement are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Company provides for impairment of loans through an allowance for possible losses. The adoption of this statement did not have a material effect on the level of these allowances or on the Company's consolidated statements of earnings and shareholder's equity. Beginning coincident with issuance of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," implementation guidance in November 1995, the Financial Accounting Standards Board ("FASB") permitted companies a one-time opportunity, through December 31, 1995, to reassess the appropriateness of the classification of all securities held at that time. On December 1, 1995, the Company transferred $4,794.9 million of securities classified as held to maturity to the available for sale portfolio. As a result, consolidated shareholder's equity increased by $149.4 million, net of deferred policy acquisition costs ("DAC"), amounts attributable to participating group annuity contracts and deferred Federal income taxes. In the fourth quarter of 1994 (effective as of January 1, 1994), the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which required employers to recognize the obligation to provide postemployment benefits. Implementation of this statement resulted in a charge for the cumulative effect of accounting change of $27.1 million, net of a Federal income tax benefit of $14.6 million. New Accounting Pronouncements ----------------------------- The FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant or, alternatively, to continue to apply the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Companies which elect to continue SAI-41 to apply APB Opinion No. 25 must provide pro forma net income disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company accounts for stock option plans sponsored by the Holding Company, DLJ and Alliance in accordance with the provisions of APB Opinion No. 25 (see Note 21). In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 125 specifies the accounting and reporting requirements for transfers of financial assets, the recognition and measurement of servicing assets and liabilities and extinguishments of liabilities. SFAS No. 125 is effective for transactions occurring after December 31, 1996 and is to be applied prospectively. In December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125," which defers for one year the effective date of provisions relating to secured borrowings and collateral and transfers of financial assets that are part of repurchase agreements, dollar-roll, securities lending and similar transactions. Management has not yet determined the effect of implementing SFAS No. 125. Valuation of Investments ------------------------ Fixed maturities identified as available for sale are reported at estimated fair value. 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. Effective with the adoption of SFAS No. 114 on January 1, 1995, the valuation allowances are based on the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. However, if foreclosure is or becomes probable, the measurement method used is collateral value. Prior to the adoption of SFAS No. 114, the valuation allowances were based on losses expected by management to be realized on transfers of mortgage loans to real estate (upon foreclosure or in-substance foreclosure), on the disposition or settlement of mortgage loans and on mortgage loans management believed may not be collectible in full. In establishing valuation allowances, management previously considered, among other things the estimated fair value of the underlying collateral. 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 available for sale are computed using the lower of current estimated fair value or depreciated cost, net of disposition costs. Prior to the adoption of SFAS No. 121, valuation allowances on real estate held for the production of income were computed using the forecasted cash flows of the respective properties discounted at a rate equal to the Company's cost of funds. Policy loans are stated at unpaid principal balances. Partnerships and joint venture interests 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. Common stocks are carried at estimated fair value and are included in other equity investments. SAI-42 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 are recorded in the consolidated financial statements on a trade date basis. Investment Results and Unrealized Investment Gains (Losses) ----------------------------------------------------------- Net investment income and realized investment gains and losses (collectively, "investment results") related to certain participating group annuity contracts which are passed through to the contractholders are reflected as interest credited to policyholders' account balances. Realized investment gains and losses are determined by specific identification and are presented as a component of revenue. Valuation allowances are netted against the asset categories to which they apply and changes in the valuation allowances are included in investment gains or losses. Unrealized investment gains and losses on fixed maturities available for sale and equity securities held by the Company are accounted for as a separate component of shareholder's equity, net of related deferred Federal income taxes, amounts attributable to the discontinued GIC Segment, participating group annuity contracts, and 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 --------------------------------- The costs of acquiring new business, principally commissions, underwriting, agency and policy issue expenses, all of which vary with and are primarily related to the production of new business, are deferred. SAI-43 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 (periods ranging from 15 to 35 years and 5 to 17 years, respectively) 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 unrealized gains (losses) 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 (40 years) 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, 1996, the expected investment yield ranged from 7.30% grading to 7.68% over 13 years. 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. Deviations of actual results from estimated experience are reflected in earnings in the period such deviations occur. The effect on the DAC asset that would result from realization of unrealized gains (losses) is recognized with an offset to unrealized gains (losses) in consolidated shareholder's equity as of the balance sheet date. For non-participating traditional life and annuity policies with life contingencies, 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 such deviations occur. For these contracts, the amortization periods generally are for the total life of the policy. For individual health benefit insurance, DAC is amortized over the expected average life of the contracts (10 years for major medical policies and 20 years for disability income ("DI") products) in proportion to anticipated premium revenue at time of issue. In the fourth quarter of 1996, the DAC related to DI contracts issued prior to July 1993 was written off. 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. 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, include a margin SAI-44 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 11.5% for life insurance liabilities and from 2.25% to 13.5% for annuity liabilities. During the fourth quarter of 1996, a loss recognition study on participating group annuity contracts and conversion annuities ("Pension Par") was completed which included management's revised estimate of assumptions, including expected mortality and future investment returns. The study's results prompted management to establish a premium deficiency reserve which decreased earnings from continuing operations and net earnings by $47.5 million ($73.0 million pre-tax). 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. During the fourth quarter of 1996, the Company completed a loss recognition study of the DI business which incorporated management's revised estimates of future experience with regard to morbidity, investment returns, claims and administration expenses and other factors. The study indicated DAC was not recoverable and the reserves were not sufficient. Earnings from continuing operations and net earnings decreased by $208.0 million ($320.0 million pre-tax) as a result of strengthening DI reserves by $175.0 million and writing off unamortized DAC of $145.0 million. The determination of DI reserves requires making assumptions and estimates relating to a variety of factors, including morbidity and interest rates, claims experience and lapse rates based on then known facts and circumstances. Such factors as claim incidence and termination rates can be affected by changes in the economic, legal and regulatory environments and work ethic. While management believes its 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 for individual disability income and major medical policies were $711.8 million and $639.6 million at December 31, 1996 and 1995, respectively (excluding $175.0 million of reserve strengthening in 1996). Incurred benefits (benefits paid plus changes in claim reserves) and benefits paid for individual DI and major medical policies (excluding $175.0 million of reserve strengthening in 1996) are summarized as follows:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Incurred benefits related to current year.......... $ 189.0 $ 176.0 $ 188.6 Incurred benefits related to prior years........... 69.1 67.8 28.7 ----------------- ---------------- ----------------- Total Incurred Benefits............................ $ 258.1 $ 243.8 $ 217.3 ================= ================ ================= Benefits paid related to current year.............. $ 32.6 $ 37.0 $ 43.7 Benefits paid related to prior years............... 153.3 137.8 132.3 ----------------- ---------------- ----------------- Total Benefits Paid................................ $ 185.9 $ 174.8 $ 176.0 ================= ================ =================
SAI-45 Policyholders' Dividends ------------------------ The amount of policyholders' dividends to be paid (including those 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. Equitable Life is subject to limitations on the amount of statutory profits which can be retained with respect to certain classes of individual participating policies that were in force on July 22, 1992 which are not included in the Closed Block and with respect to participating policies issued subsequent to July 22, 1992. Excess statutory profits, if any, will be distributed over time to such policyholders and will not be available to Equitable Life's shareholder. Earnings in excess of limitations, if any, would be accrued as policyholders' dividends. At December 31, 1996, participating policies, including those in the Closed Block, represent approximately 24.2% ($52.3 billion) of directly written life insurance in force, net of amounts ceded. Federal Income Taxes -------------------- The Company files a consolidated Federal income tax return with the Holding Company and its non-life insurance subsidiaries. Current Federal income taxes were 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 were 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. Separate Accounts ----------------- Separate Accounts are established in conformity with the New York State Insurance Law and 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 the value of such assets exceeds the Separate Accounts liabilities. Assets and liabilities of the Separate Accounts, representing 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, are shown as separate captions 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. For 1996, 1995 and 1994, investment results of such Separate Accounts were $2,970.6 million, $1,963.2 million and $665.2 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. SAI-46 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, 1996 ----------------- Fixed Maturities: Available for Sale: Corporate.......................... $ 13,645.2 $ 451.5 $ 121.0 $ 13,975.7 Mortgage-backed.................... 2,015.9 11.2 20.3 2,006.8 U.S. Treasury securities and U.S. government and agency securities................ 1,539.4 39.2 19.3 1,559.3 States and political subdivisions.. 77.0 4.5 - 81.5 Foreign governments................ 302.6 18.0 2.2 318.4 Redeemable preferred stock......... 139.1 3.3 7.1 135.3 ----------------- ----------------- ---------------- --------------- Total Available for Sale............... $ 17,719.2 $ 527.7 $ 169.9 $ 18,077.0 ================= ================= ================ =============== Equity Securities: Common stock......................... $ 98.7 $ 49.3 $ 17.7 $ 130.3 ================= ================= ================ =============== December 31, 1995 ----------------- Fixed Maturities: Available for Sale: Corporate.......................... $ 10,910.7 $ 617.6 $ 118.1 $ 11,410.2 Mortgage-backed.................... 1,838.0 31.2 1.2 1,868.0 U.S. Treasury securities and U.S. government and agency securities................ 2,257.0 77.8 4.1 2,330.7 States and political subdivisions.. 45.7 5.2 - 50.9 Foreign governments................ 124.5 11.0 .2 135.3 Redeemable preferred stock......... 108.1 5.3 8.6 104.8 ----------------- ----------------- ---------------- --------------- Total Available for Sale............... $ 15,284.0 $ 748.1 $ 132.2 $ 15,899.9 ================= ================= ================ =============== Equity Securities: Common stock......................... $ 97.3 $ 49.1 $ 18.0 $ 128.4 ================= ================= ================ ===============
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 has determined an estimated fair value using a discounted cash flow approach, including provisions for credit risk, generally based upon the assumption such securities will be held to maturity. Estimated fair value for equity securities, substantially all of which do not have a readily ascertainable market value, has been determined by the Company. 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, 1996 SAI-47 and 1995, securities without a readily ascertainable market value having an amortized cost of $3,915.7 million and $3,748.9 million, respectively, had estimated fair values of $4,024.6 million and $3,981.8 million, respectively. The contractual maturity of bonds at December 31, 1996 is shown below: AVAILABLE FOR SALE ------------------------------------ AMORTIZED ESTIMATED COST FAIR VALUE ---------------- ----------------- (IN MILLIONS) Due in one year or less........... $ 539.6 $ 542.5 Due in years two through five..... 2,776.2 2,804.0 Due in years six through ten...... 6,044.7 6,158.1 Due after ten years............... 6,203.7 6,430.3 Mortgage-backed securities........ 2,015.9 2,006.8 ---------------- ----------------- Total............................. $ 17,580.1 $ 17,941.7 ================ ================= 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 the total investments in any single issuer or total investment in 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, 1996, approximately 14.20% of the $17,563.7 million aggregate amortized cost of bonds held by the Insurance Group were considered to be other than investment grade. In addition to its holdings of corporate high yield securities, the Insurance Group is an equity investor in limited partnership interests which primarily invest in securities considered to be other than investment grade. The Company has restructured or modified the terms of certain fixed maturity investments. The fixed maturity portfolio includes amortized costs of $5.5 million and $15.9 million at December 31, 1996 and 1995, respectively, of such restructured securities. These amounts include fixed maturities which are in default as to principal and/or interest payments, are to be restructured pursuant to commenced negotiations or where the borrowers went into bankruptcy subsequent to acquisition (collectively, "problem fixed maturities") of $2.2 million and $1.6 million as of December 31, 1996 and 1995, respectively. Gross interest income that would have been recorded in accordance with the original terms of restructured fixed maturities amounted to $1.4 million, $3.0 million and $7.5 million in 1996, 1995 and 1994, respectively. Gross interest income on these fixed maturities included in net investment income aggregated $1.3 million, $2.9 million and $6.8 million in 1996, 1995 and 1994, respectively. SAI-48 Investment valuation allowances and changes thereto are shown below:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Balances, beginning of year........................ $ 325.3 $ 284.9 $ 355.6 SFAS No. 121 release............................... (152.4) - - Additions charged to income........................ 125.0 136.0 51.0 Deductions for writedowns and asset dispositions............................... (160.8) (95.6) (121.7) ----------------- ---------------- ----------------- Balances, End of Year.............................. $ 137.1 $ 325.3 $ 284.9 ================= ================ ================= Balances, end of year comprise: Mortgage loans on real estate.................... $ 50.4 $ 65.5 $ 64.2 Equity real estate............................... 86.7 259.8 220.7 ----------------- ---------------- ----------------- Total.............................................. $ 137.1 $ 325.3 $ 284.9 ================= ================ =================
At December 31, 1996, the carrying values of investments held for the production of income which were non-income producing for the twelve months preceding the consolidated balance sheet date were $25.0 million of fixed maturities and $2.6 million of mortgage loans on real estate. At December 31, 1996 and 1995, mortgage loans on real estate with scheduled payments 60 days (90 days for agricultural mortgages) or more past due or in foreclosure (collectively, "problem mortgage loans on real estate") had an amortized cost of $12.4 million (0.4% of total mortgage loans on real estate) and $87.7 million (2.4% of total mortgage loans on real estate), respectively. 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 $388.3 million and $531.5 million at December 31, 1996 and 1995, respectively. These amounts include $1.0 million and $3.8 million of problem mortgage loans on real estate at December 31, 1996 and 1995, 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 $35.5 million, $52.1 million and $44.9 million in 1996, 1995 and 1994, respectively. Gross interest income on these loans included in net investment income aggregated $28.2 million, $37.4 million and $32.8 million in 1996, 1995 and 1994, respectively. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
DECEMBER 31, ---------------------------------------- 1996 1995 ------------------- ------------------- (IN MILLIONS) Impaired mortgage loans with provision for losses.................. $ 340.0 $ 310.1 Impaired mortgage loans with no provision for losses............... 122.3 160.8 ------------------- ------------------- Recorded investment in impaired mortgage loans..................... 462.3 470.9 Provision for losses............................................... 46.4 62.7 ------------------- ------------------- Net Impaired Mortgage Loans........................................ $ 415.9 $ 408.2 =================== ===================
SAI-49 Impaired mortgage loans with no 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. During 1996 and 1995, respectively, the Company's average recorded investment in impaired mortgage loans was $552.1 million and $429.0 million. Interest income recognized on these impaired mortgage loans totaled $38.8 million and $27.9 million for 1996 and 1995, respectively, including $17.9 million and $13.4 million recognized on a cash basis. The Insurance Group's investment in equity real estate is through direct ownership and through investments in real estate joint ventures. At December 31, 1996 and 1995, the carrying value of equity real estate available for sale amounted to $345.6 million and $255.5 million, respectively. For 1996, 1995 and 1994, respectively, real estate of $58.7 million, $35.3 million and $189.8 million was acquired in satisfaction of debt. At December 31, 1996 and 1995, the Company owned $771.7 million and $862.7 million, respectively, of real estate acquired in satisfaction of debt. Depreciation of real estate is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Accumulated depreciation on real estate was $587.5 million and $662.4 million at December 31, 1996 and 1995, respectively. Depreciation expense on real estate totaled $91.8 million, $121.7 million and $117.0 million for 1996, 1995 and 1994, respectively. As a result of the implementation of SFAS No. 121, during 1996 no depreciation expense has been recorded on real estate available for sale. SAI-50 4) JOINT VENTURES AND PARTNERSHIPS Summarized combined financial information of real estate joint ventures (34 and 38 individual ventures as of December 31, 1996 and 1995, respectively) and of 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 is as follows:
DECEMBER 31, ------------------------------------ 1996 1995 ---------------- ----------------- (IN MILLIONS) FINANCIAL POSITION Investments in real estate, at depreciated cost........................ $ 1,883.7 $ 2,684.1 Investments in securities, generally at estimated fair value........... 2,430.6 2,459.8 Cash and cash equivalents.............................................. 98.0 489.1 Other assets........................................................... 427.0 270.8 ---------------- ----------------- Total assets........................................................... 4,839.3 5,903.8 ---------------- ----------------- Borrowed funds - third party........................................... 1,574.3 1,782.3 Borrowed funds - the Company........................................... 137.9 220.5 Other liabilities...................................................... 415.8 593.9 ---------------- ----------------- Total liabilities...................................................... 2,128.0 2,596.7 ---------------- ----------------- Partners' Capital...................................................... $ 2,711.3 $ 3,307.1 ================ ================= Equity in partners' capital included above............................. $ 806.8 $ 902.2 Equity in limited partnership interests not included above............. 201.8 212.8 Other.................................................................. 9.8 8.9 ---------------- ----------------- Carrying Value......................................................... $ 1,018.4 $ 1,123.9 ================ =================
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) STATEMENTS OF EARNINGS Revenues of real estate joint ventures............. $ 348.9 $ 463.5 $ 537.7 Revenues of other limited partnership interests.... 386.1 242.3 103.4 Interest expense - third party..................... (111.0) (135.3) (114.9) Interest expense - the Company..................... (30.0) (41.0) (36.9) Other expenses..................................... (282.5) (397.7) (430.9) ----------------- ---------------- ----------------- Net Earnings....................................... $ 311.5 $ 131.8 $ 58.4 ================= ================ ================= Equity in net earnings included above.............. $ 73.9 $ 49.1 $ 18.9 Equity in net earnings of limited partnerships interests not included above..................... 35.8 44.8 25.3 Other.............................................. .9 1.0 1.8 ----------------- ---------------- ----------------- Total Equity in Net Earnings....................... $ 110.6 $ 94.9 $ 46.0 ================= ================ =================
SAI-51 5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES) The sources of net investment income are summarized as follows:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities.................... $ 1,307.4 $ 1,151.1 $ 1,036.5 Mortgage loans on real estate....... 303.0 329.0 385.7 Equity real estate.................. 442.4 560.4 561.8 Other equity investments............ 94.3 76.9 36.1 Policy loans........................ 160.3 144.4 122.7 Other investment income............. 217.4 273.0 322.4 ----------------- ---------------- ----------------- Gross investment income........... 2,524.8 2,534.8 2,465.2 ----------------- ---------------- ----------------- Investment expenses............... 348.9 446.6 466.6 ----------------- ---------------- ----------------- Net Investment Income............... $ 2,175.9 $ 2,088.2 $ 1,998.6 ================= ================ ================= Investment gains (losses), net, including changes in the valuation allowances, are summarized as follows:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................... $ 60.5 $ 119.9 $ (14.3) Mortgage loans on real estate...................... (27.3) (40.2) (43.1) Equity real estate................................. (79.7) (86.6) 20.6 Other equity investments........................... 18.9 12.8 75.9 Issuance and sales of Alliance Units............... 20.6 - 52.4 Other.............................................. (2.8) (.6) .3 ----------------- ---------------- ----------------- Investment (Losses) Gains, Net..................... $ (9.8) $ 5.3 $ 91.8 ================= ================ =================
Writedowns of fixed maturities amounted to $29.9 million, $46.7 million and $30.8 million for 1996, 1995 and 1994, respectively, and writedowns of equity real estate subsequent to the adoption of SFAS No. 121 amounted to $23.7 million for the year ended December 31, 1996. For 1996, 1995 and 1994, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $8,353.5 million, $8,206.0 million and $5,253.9 million. Gross gains of $154.2 million, $211.4 million and $65.2 million and gross losses of $92.7 million, $64.2 million and $50.8 million, respectively, were realized on these sales. The change in unrealized investment (losses) gains related to fixed maturities classified as available for sale for 1996, 1995 and 1994 amounted to $(258.0) million, $1,077.2 million and $(742.2) million, respectively. During each of 1995 and 1994, one security classified as held to maturity was sold. During the eleven months ended November 30, 1995 and the year ended December 31, 1994, respectively, twelve and six securities so classified were transferred to the available for sale portfolio. All actions were taken as a result of a significant SAI-52 deterioration in creditworthiness. The aggregate amortized costs of the securities sold were $1.0 million and $19.9 million with a related investment gain of $-0- million and $.8 million recognized in 1995 and 1994, respectively; the aggregate amortized cost of the securities transferred was $116.0 million and $42.8 million with gross unrealized investment losses of $3.2 million and $3.1 million charged to consolidated shareholder's equity for the eleven months ended November 30, 1995 and the year ended December 31, 1994, respectively. On December 1, 1995, the Company transferred $4,794.9 million of securities classified as held to maturity to the available for sale portfolio. As a result, unrealized gains on fixed maturities increased $395.6 million, offset by DAC of $126.5 million, amounts attributable to participating group annuity contracts of $39.2 million and deferred Federal income taxes of $80.5 million. For 1996, 1995 and 1994, investment results passed through to certain participating group annuity contracts as interest credited to policyholders' account balances amounted to $136.7 million, $131.2 million and $175.8 million, respectively. In 1996, Alliance acquired the business of Cursitor-Eaton Asset Management Company and Cursitor Holdings Limited (collectively, "Cursitor") for approximately $159.0 million. The purchase price consisted of $94.3 million in cash, 1.8 million of Alliance's publicly traded units ("Alliance Units"), 6% notes aggregating $21.5 million payable ratably over four years, and substantial additional consideration which will be determined at a later date. The excess of the purchase price, including acquisition costs and minority interest, over the fair value of Cursitor's net assets acquired resulted in the recognition of intangible assets consisting of costs assigned to contracts acquired and goodwill of approximately $122.8 million and $38.3 million, respectively, which are being amortized over the estimated useful lives of 20 years. The Company recognized an investment gain of $20.6 million as a result of the issuance of Alliance Units in this transaction. At December 31, 1996, the Company's ownership of Alliance Units was approximately 57.3%. In 1994, Alliance sold 4.96 million newly issued Alliance Units to third parties at prevailing market prices. The Company continues to hold its 1% general partnership interest in Alliance. The Company recognized an investment gain of $52.4 million as a result of these transactions. SAI-53 Net unrealized investment gains (losses), included in the consolidated balance sheets as a component of equity and the changes for the corresponding years, are summarized as follows:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Balance, beginning of year as restated............. $ 396.5 $ (220.5) $ 144.6 Changes in unrealized investment (losses) gains.... (297.6) 1,198.9 (856.7) Changes in unrealized investment losses (gains) attributable to: Participating group annuity contracts.......... - (78.1) 40.8 DAC............................................ 42.3 (216.8) 273.6 Deferred Federal income taxes.................. 48.7 (287.0) 177.2 ----------------- ---------------- ----------------- Balance, End of Year............................... $ 189.9 $ 396.5 $ (220.5) ================= ================ ================= Balance, end of year comprises: Unrealized investment gains (losses) on: Fixed maturities............................... $ 357.8 $ 615.9 $ (461.3) Other equity investments....................... 31.6 31.1 7.7 Other, principally Closed Block................ 53.1 93.1 (5.1) ----------------- ---------------- ----------------- Total........................................ 442.5 740.1 (458.7) Amounts of unrealized investment (gains) losses attributable to: Participating group annuity contracts........ (72.2) (72.2) 5.9 DAC.......................................... (52.0) (94.3) 122.4 Deferred Federal income taxes................ (128.4) (177.1) 109.9 ----------------- ---------------- ----------------- Total.............................................. $ 189.9 $ 396.5 $ (220.5) ================= ================ =================
SAI-54 6) CLOSED BLOCK Summarized financial information of the Closed Block follows:
DECEMBER 31, -------------------------------------- 1996 1995 ----------------- ----------------- (IN MILLIONS) Assets Fixed Maturities: Available for sale, at estimated fair value (amortized cost, $3,820.7 and $3,662.8)...................................... $ 3,889.5 $ 3,896.2 Mortgage loans on real estate................................... 1,380.7 1,368.8 Policy loans.................................................... 1,765.9 1,797.2 Cash and other invested assets.................................. 336.1 440.9 DAC............................................................. 876.5 792.6 Other assets.................................................... 246.3 286.4 ----------------- ----------------- Total Assets.................................................... $ 8,495.0 $ 8,582.1 ================= ================= Liabilities Future policy benefits and policyholders' account balances...... $ 8,999.7 $ 8,923.5 Other liabilities............................................... 91.6 297.9 ----------------- ----------------- Total Liabilities............................................... $ 9,091.3 $ 9,221.4 ================= =================
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Premiums and other revenue......................... $ 724.8 $ 753.4 $ 798.1 Investment income (net of investment expenses of $27.3, $26.7 and $19.0).............. 546.6 538.9 523.0 Investment losses, net............................. (5.5) (20.2) (24.0) ----------------- ---------------- ----------------- Total revenues............................... 1,265.9 1,272.1 1,297.1 ----------------- ---------------- ----------------- Benefits and Other Deductions Policyholders' benefits and dividends.............. 1,106.3 1,077.6 1,121.6 Other operating costs and expenses................. 34.6 51.3 38.5 ----------------- ---------------- ----------------- Total benefits and other deductions.......... 1,140.9 1,128.9 1,160.1 ----------------- ---------------- ----------------- Contribution from the Closed Block................. $ 125.0 $ 143.2 $ 137.0 ================= ================ =================
In the fourth quarter of 1996, the Company adopted SFAS No. 120, which prescribes the accounting for individual participating life insurance contracts, most of which are included in the Closed Block. The implementation of SFAS No. 120 resulted in an increase (decrease) in the contribution from the Closed Block of $27.5 million, $18.8 million and $(14.0) million in 1996, 1995 and 1994, respectively. SAI-55 The fixed maturity portfolio, based on amortized cost, includes $.4 million and $4.3 million at December 31, 1996 and 1995, respectively, of restructured securities which includes problem fixed maturities of $.3 million and $1.9 million, respectively. During the eleven months ended November 30, 1995, one security classified as held to maturity was sold and ten securities classified as held to maturity were transferred to the available for sale portfolio. All actions resulted from significant deterioration in creditworthiness. The amortized cost of the security sold was $4.2 million. The aggregate amortized cost of the securities transferred was $81.3 million with gross unrealized investment losses of $.1 million transferred to equity. At December 1, 1995, $1,750.7 million of securities classified as held to maturity were transferred to the available for sale portfolio. As a result, unrealized gains of $88.5 million on fixed maturities were recognized, offset by DAC amortization of $52.6 million. At December 31, 1996 and 1995, problem mortgage loans on real estate had an amortized cost of $4.3 million and $36.5 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had an amortized cost of $114.2 million and $137.7 million, respectively. At December 31, 1996 and 1995, the restructured mortgage loans on real estate amount included $.7 million and $8.8 million, respectively, of problem mortgage loans on real estate. Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
DECEMBER 31, ------------------------------------ 1996 1995 ---------------- ----------------- (IN MILLIONS) Impaired mortgage loans with provision for losses......... $ 128.1 $ 106.8 Impaired mortgage loans with no provision for losses...... .6 10.1 ---------------- ----------------- Recorded investment in impaired mortgages................. 128.7 116.9 Provision for losses...................................... 12.9 17.9 ---------------- ----------------- Net Impaired Mortgage Loans............................... $ 115.8 $ 99.0 ================ =================
During 1996 and 1995, respectively, the Closed Block's average recorded investment in impaired mortgage loans was $153.8 million and $146.9 million, respectively. Interest income recognized on these impaired mortgage loans totaled $10.9 million and $5.9 million for 1996 and 1995, respectively, including $4.7 million and $1.3 million recognized on a cash basis. Valuation allowances amounted to $13.8 million and $18.4 million on mortgage loans on real estate and $3.7 million and $4.3 million on equity real estate at December 31, 1996 and 1995, respectively. Writedowns of fixed maturities amounted to $12.8 million, $16.8 million and $15.9 million for 1996, 1995 and 1994, respectively. As of January 1, 1996, the adoption of SFAS No. 121 resulted in the recognition of impairment losses of $5.6 million on real estate held and used. Many expenses related to Closed Block operations are charged to operations outside of the Closed Block; accordingly, the contribution from the Closed Block does 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. SAI-56 7) DISCONTINUED OPERATIONS Summarized financial information of the GIC Segment follows:
DECEMBER 31, -------------------------------------- 1996 1995 ----------------- ----------------- (IN MILLIONS) Assets Mortgage loans on real estate........... $ 1,111.1 $ 1,485.8 Equity real estate...................... 925.6 1,122.1 Other invested assets................... 474.0 665.2 Other assets............................ 226.1 579.3 ----------------- ----------------- Total Assets............................ $ 2,736.8 $ 3,852.4 ================= ================= Liabilities Policyholders' liabilities.............. $ 1,335.9 $ 1,399.8 Allowance for future losses............. 262.0 164.2 Amounts due to continuing operations.... 996.2 2,097.1 Other liabilities....................... 142.7 191.3 ----------------- ----------------- Total Liabilities....................... $ 2,736.8 $ 3,852.4 ================= =================
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Investment income (net of investment expenses of $127.5, $153.1 and $183.3).................... $ 245.4 $ 323.6 $ 394.3 Investment (losses) gains, net..................... (18.9) (22.9) 26.8 Policy fees, premiums and other income............. .2 .7 .4 ----------------- ---------------- ----------------- Total revenues..................................... 226.7 301.4 421.5 Benefits and other deductions...................... 250.4 326.5 443.2 Losses charged to allowance for future losses...... (23.7) (25.1) (21.7) ----------------- ---------------- ----------------- Pre-tax loss from operations....................... - - - Pre-tax loss from strengthening of the allowance for future losses...................... (129.0) - - Federal income tax benefit......................... 45.2 - - ----------------- ---------------- ----------------- Loss from Discontinued Operations.................. $ (83.8) $ - $ - ================= ================ =================
In 1991, management adopted a plan to discontinue the business operations of the GIC Segment consisting of group non-participating Wind-Up Annuities and the GIC lines of business. The loss allowance and premium deficiency reserve of $569.6 million provided for in 1991 were based on management's best judgment at that time. The Company's quarterly process for evaluating the loss provisions applies the current period's results of the discontinued operations against the allowance, re-estimates future losses, and adjusts the provisions, if appropriate. Additionally, as part of the Company's annual planning process which takes place in the fourth SAI-57 quarter of each year, investment and benefit cash flow projections are prepared. These updated assumptions and estimates resulted in the need to strengthen the loss provisions by $129.0 million, resulting in a post-tax charge of $83.8 million to discontinued operations' results in the fourth quarter of 1996. Management believes the loss provisions for Wind-Up Annuities and GIC contracts at December 31, 1996 are adequate to provide for all future losses; however, the determination of loss provisions continues to involve numerous estimates and subjective judgments regarding the expected performance of discontinued operations investment assets. 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 loss provisions, 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 loss provisions are likely to result. In January 1995, continuing operations transferred $1,215.4 million in cash to the GIC Segment in settlement of its obligation to provide assets to fund the accumulated deficit of the GIC Segment. Subsequently, the GIC Segment remitted $1,155.4 million in cash to continuing operations in partial repayment of borrowings by the GIC Segment. No gains or losses were recognized on these transactions. Amounts due to continuing operations at December 31, 1996, consisted of $1,080.0 million borrowed by the discontinued GIC Segment offset by $83.8 million representing an obligation of continuing operations to provide assets to fund the accumulated deficit of the GIC Segment. Investment income included $88.2 million of interest income for 1994 on amounts due from continuing operations. Benefits and other deductions include $114.3 million, $154.6 million and $219.7 million of interest expense related to amounts borrowed from continuing operations in 1996, 1995 and 1994, respectively. Valuation allowances amounted to $9.0 million and $19.2 million on mortgage loans on real estate and $20.4 million and $77.9 million on equity real estate at December 31, 1996 and 1995, respectively. As of January 1, 1996, the adoption of SFAS No. 121 resulted in a release of existing valuation allowances of $71.9 million on equity real estate and recognition of impairment losses of $69.8 million on real estate held and used. Writedowns of fixed maturities amounted to $1.6 million, $8.1 million and $17.8 million for 1996, 1995 and 1994, respectively and writedowns of equity real estate subsequent to the adoption of SFAS No. 121 amounted to $12.3 million for 1996. The fixed maturity portfolio, based on amortized cost, includes $6.2 million and $15.1 million at December 31, 1996 and 1995, respectively, of restructured securities. These amounts include problem fixed maturities of $.5 million and $6.1 million at December 31, 1996 and 1995, respectively. At December 31, 1996 and 1995, problem mortgage loans on real estate had amortized costs of $7.9 million and $35.4 million, respectively, and mortgage loans on real estate for which the payment terms have been restructured had amortized costs of $208.1 million and $289.3 million, respectively. SAI-58 Impaired mortgage loans (as defined under SFAS No. 114) along with the related provision for losses were as follows:
DECEMBER 31, ------------------------------------ 1996 1995 ---------------- ----------------- (IN MILLIONS) Impaired mortgage loans with provision for losses....... $ 83.5 $ 105.1 Impaired mortgage loans with no provision for losses.... 15.0 18.2 ---------------- ----------------- Recorded investment in impaired mortgages............... 98.5 123.3 Provision for losses.................................... 8.8 17.7 ---------------- ----------------- Net Impaired Mortgage Loans............................. $ 89.7 $ 105.6 ================ =================
During 1996 and 1995, the GIC Segment's average recorded investment in impaired mortgage loans was $134.8 million and $177.4 million, respectively. Interest income recognized on these impaired mortgage loans totaled $10.1 million and $4.5 million for 1996 and 1995, respectively, including $7.5 million and $.4 million recognized on a cash basis. At December 31, 1996 and 1995, the GIC Segment had $263.0 million and $310.9 million, respectively, of real estate acquired in satisfaction of debt. 8) SHORT-TERM AND LONG-TERM DEBT Short-term and long-term debt consists of the following:
DECEMBER 31, -------------------------------------- 1996 1995 ----------------- ----------------- (IN MILLIONS) Short-term debt.................................... $ 174.1 $ - ----------------- ----------------- Long-term debt: Equitable Life: 6.95% surplus notes scheduled to mature 2005..... 399.4 399.3 7.70% surplus notes scheduled to mature 2015..... 199.6 199.6 Eurodollar notes, 10.5% due 1997................. - 76.2 Zero coupon note, 11.25% due 1997................ - 120.1 Other............................................ .5 16.3 ----------------- ----------------- Total Equitable Life......................... 599.5 811.5 ----------------- ----------------- Wholly Owned and Joint Venture Real Estate: Mortgage notes, 4.92% - 12.50% due through 2006.. 968.6 1,084.4 ----------------- ----------------- Alliance: Other............................................ 24.7 3.4 ----------------- ----------------- Total long-term debt............................... 1,592.8 1,899.3 ----------------- ----------------- Total Short-term and Long-term Debt................ $ 1,766.9 $ 1,899.3 ================= =================
SAI-59 Short-term Debt --------------- Equitable Life has a $350.0 million bank credit facility available to fund short-term working capital needs and to facilitate the securities settlement process. The credit facility consists of two types of borrowing options with varying interest rates. The interest rates are based on external indices dependent on the type of borrowing and at December 31, 1996 range from 5.73% (the London Interbank Offering Rate ("LIBOR") plus 22.5 basis points) to 8.25% (the prime rate). There were no borrowings outstanding under this bank credit facility at December 31, 1996. Equitable Life has a commercial paper program with an issue limit of $500.0 million. This program is available for general corporate purposes used to support Equitable Life's liquidity needs and is supported by Equitable Life's existing $350.0 million five-year bank credit facility. There were no borrowings outstanding under this program at December 31, 1996. In February 1996, Alliance entered into a new $250.0 million five-year revolving credit facility with a group of banks which replaced its $100.0 million revolving credit facility and its $100.0 million commercial paper back-up revolving credit facility. Under the new revolving credit facility, the interest rate, at the option of Alliance, is a floating rate generally based upon a defined prime rate, a rate related to the LIBOR or the Federal Funds rate. A facility fee is payable on the total facility. The revolving credit facility will be used to provide back-up liquidity for commercial paper to be used under Alliance's $100.0 million commercial paper program, to fund commission payments to financial intermediaries for the sale of Class B and C shares under Alliance's mutual fund distribution system, and for general working capital purposes. As of December 31, 1996, Alliance had not issued any commercial paper under its $100.0 million commercial paper program and there were no borrowings outstanding under Alliance's revolving credit facility. At December 31, 1996, long-term debt expected to mature in 1997 totaling $174.1 million was reclassified as short-term debt. Long-term Debt -------------- Several of the long-term debt agreements have restrictive covenants related to the total amount of debt, net tangible assets and other matters. The Company is in compliance with all debt covenants. On December 18, 1995, Equitable Life issued, in accordance with Section 1307 of the New York Insurance Law, $400.0 million of surplus notes having an interest rate of 6.95% scheduled to mature in 2005 and $200.0 million of surplus notes having an interest rate of 7.70% scheduled to mature in 2015 (together, the "Surplus Notes"). Proceeds from the issuance of the Surplus Notes were $596.6 million, net of related issuance costs. The unamortized discount on the Surplus Notes was $1.0 million at December 31, 1996. Payments of interest on or principal of the Surplus Notes are subject to prior approval by the Superintendent. The Company has pledged real estate, mortgage loans, cash and securities amounting to $1,406.4 million and $1,629.7 million at December 31, 1996 and 1995, respectively, as collateral for certain long-term debt. At December 31, 1996, aggregate maturities of the long-term debt based on required principal payments at maturity for 1997 and the succeeding four years are $494.9 million, $316.7 million, $19.7 million, $5.4 million, $0 million, respectively, and $946.7 million thereafter. SAI-60 9) FEDERAL INCOME TAXES A summary of the Federal income tax expense (benefit) in the consolidated statements of earnings is shown below:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Federal income tax expense (benefit): Current............................... $ 97.9 $ (11.7) $ 4.0 Deferred.............................. (88.2) 132.2 96.2 ----------------- ---------------- ----------------- Total................................... $ 9.7 $ 120.5 $ 100.2 ================= ================ =================
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 the tax effects of each are as follows:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Expected Federal income tax expense..... $ 73.0 $ 173.7 $ 154.5 Non-taxable minority interest........... (28.6) (22.0) (17.6) Differential earnings amount............ - - (16.8) Adjustment of tax audit reserves........ 6.9 4.1 (4.6) Equity in unconsolidated subsidiaries... (32.3) (19.4) (12.5) Other................................... (9.3) (15.9) (2.8) ----------------- ---------------- ----------------- Federal Income Tax Expense.............. $ 9.7 $ 120.5 $ 100.2 ================= ================ =================
Prior to the date of demutualization, Equitable Life reduced its deduction for policyholder dividends by the differential earnings amount. This amount was computed, for each tax year, by multiplying Equitable Life's average equity base, as determined for tax purposes, by an estimate of the excess of an imputed earnings rate for stock life insurance companies over the average mutual life insurance companies' earnings rate. The differential earnings amount for each tax year was subsequently recomputed when actual earnings rates were published by the Internal Revenue Service. As a stock life insurance company, Equitable Life no longer is required to reduce its policyholder dividend deduction by the differential earnings amount, but differential earnings amounts for pre-demutualization years were still being recomputed in 1994. The components of the net deferred Federal income tax account are as follows:
DECEMBER 31, 1996 December 31, 1995 --------------------------------- --------------------------------- ASSETS LIABILITIES Assets Liabilities --------------- ---------------- --------------- --------------- (IN MILLIONS) DAC, reserves and reinsurance.......... $ - $ 166.0 $ - $ 304.4 Investments............................ - 328.6 - 326.9 Compensation and related benefits...... 259.2 - 293.0 - Other.................................. - 1.8 - 32.3 --------------- ---------------- --------------- --------------- Total.................................. $ 259.2 $ 496.4 $ 293.0 $ 663.6 =============== ================ =============== ===============
SAI-61 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 the tax effects of each are as follows:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) DAC, reserves and reinsurance......... $ (156.2) $ 63.3 $ 12.0 Investments........................... 78.6 13.0 89.3 Compensation and related benefits..... 22.3 30.8 10.0 Other................................. (32.9) 25.1 (15.1) ----------------- ---------------- ----------------- Deferred Federal Income Tax (Benefit) Expense................... $ (88.2) $ 132.2 $ 96.2 ================= ================ =================
The Internal Revenue Service is in the process of examining the Holding Company's consolidated Federal income tax returns for the years 1989 through 1991. Management believes these audits will have no material adverse effect on the Company's results of operations. 10) 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. The effect of reinsurance (excluding group life and health) is summarized as follows:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Direct premiums.................................... $ 461.4 $ 474.2 $ 476.7 Reinsurance assumed................................ 177.5 171.3 180.5 Reinsurance ceded.................................. (41.3) (38.7) (31.6) ----------------- ---------------- ----------------- Premiums........................................... $ 597.6 $ 606.8 $ 625.6 ================= ================ ================= Universal Life and Investment-type Product Policy Fee Income Ceded.......................... $ 48.2 $ 44.0 $ 27.5 ================= ================ ================= Policyholders' Benefits Ceded...................... $ 54.1 $ 48.9 $ 20.7 ================= ================ ================= Interest Credited to Policyholders' Account Balances Ceded................................... $ 32.3 $ 28.5 $ 25.4 ================= ================ =================
Effective January 1, 1994, all in force business above $5.0 million was reinsured. During 1996, the Company's retention limit on joint survivorship policies was increased to $15.0 million. The Insurance Group also reinsures the entire risk on certain substandard underwriting risks as well as in certain other cases. The Insurance Group cedes 100% of its group life and health business to a third party insurance company. Premiums ceded totaled $2.4 million, $260.6 million and $241.0 million for 1996, 1995 and 1994, respectively. Ceded death and disability benefits totaled $21.2 million, $188.1 million and $235.5 million for 1996, 1995 and 1994, respectively. Insurance liabilities ceded totaled $652.4 million and $724.2 million at December 31, 1996 and 1995, respectively. SAI-62 11) 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 and EREIM'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. Components of net periodic pension cost (credit) for the qualified and non-qualified plans are as follows:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Service cost....................................... $ 33.8 $ 30.0 $ 30.3 Interest cost on projected benefit obligations..... 120.8 122.0 111.0 Actual return on assets............................ (181.4) (309.2) 24.4 Net amortization and deferrals..................... 43.4 155.6 (142.5) ----------------- ---------------- ----------------- Net Periodic Pension Cost (Credit)................. $ 16.6 $ (1.6) $ 23.2 ================= ================ =================
The funded status of the qualified and non-qualified pension plans is as follows:
DECEMBER 31, ------------------------------------ 1996 1995 ---------------- ----------------- (IN MILLIONS) Actuarial present value of obligations: Vested.................................................. $ 1,672.2 $ 1,642.4 Non-vested.............................................. 10.1 10.9 ---------------- ----------------- Accumulated Benefit Obligation............................ $ 1,682.3 $ 1,653.3 ================ ================= Plan assets at fair value................................. $ 1,626.0 $ 1,503.8 Projected benefit obligation.............................. 1,765.5 1,743.0 ---------------- ----------------- Projected benefit obligation in excess of plan assets..... (139.5) (239.2) Unrecognized prior service cost........................... (17.9) (25.5) Unrecognized net loss from past experience different from that assumed....................................... 280.0 368.2 Unrecognized net asset at transition...................... 4.7 (7.3) Additional minimum liability.............................. (19.3) (51.9) ---------------- ----------------- Prepaid Pension Cost...................................... $ 108.0 $ 44.3 ================ =================
The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of projected benefit obligations were 7.5% and 4.25%, respectively, at December 31, 1996 and 7.25% and 4.50%, respectively, at December 31, 1995. As of January 1, 1996 and 1995, the expected long-term rate of return on assets for the retirement plan was 10.25% and 11%, respectively. SAI-63 The Company recorded, as a reduction of shareholder's equity, an additional minimum pension liability of $12.9 million and $35.1 million, net of Federal income taxes, at December 31, 1996 and 1995, respectively, representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability. The pension plan's assets include corporate and government debt securities, equity securities, equity real estate and shares of Group Trusts managed by Alliance. 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 $34.7 million, $36.4 million and $38.1 million for 1996, 1995 and 1994, respectively. The Company provides certain medical and life insurance benefits (collectively, "postretirement benefits") for qualifying employees, managers and agents retiring from the Company on or after attaining age 55 who have at least 10 years of service. The life insurance benefits are related to age and salary at retirement. The costs of postretirement benefits are recognized in accordance with the provisions of SFAS No. 106. The Company continues to fund postretirement benefits costs on a pay-as-you-go basis and, for 1996, 1995 and 1994, the Company made estimated postretirement benefits payments of $18.9 million, $31.1 million and $29.8 million, respectively. The following table sets forth the postretirement benefits plan's status, reconciled to amounts recognized in the Company's consolidated financial statements:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Service cost....................................... $ 5.3 $ 4.0 $ 3.9 Interest cost on accumulated postretirement benefits obligation.............................. 34.6 34.7 28.6 Net amortization and deferrals..................... 2.4 (2.3) (3.9) ----------------- ---------------- ----------------- Net Periodic Postretirement Benefits Costs......... $ 42.3 $ 36.4 $ 28.6 ================= ================ =================
DECEMBER 31, ------------------------------------ 1996 1995 ---------------- ----------------- (IN MILLIONS) Accumulated postretirement benefits obligation: Retirees................................................ $ 381.8 $ 391.8 Fully eligible active plan participants................. 50.7 50.4 Other active plan participants.......................... 60.7 64.2 ---------------- ----------------- 493.2 506.4 Unrecognized prior service cost........................... 50.5 56.3 Unrecognized net loss from past experience different from that assumed and from changes in assumptions....... (150.5) (181.3) ---------------- ----------------- Accrued Postretirement Benefits Cost...................... $ 393.2 $ 381.4 ================ =================
SAI-64 At January 1, 1994, medical benefits available to retirees under age 65 are the same as those offered to active employees and medical benefits will be limited to 200% of 1993 costs for all participants. The assumed health care cost trend rate used in measuring the accumulated postretirement benefits obligation was 9.5% in 1996, gradually declining to 3.5% in the year 2009 and in 1995 was 10%, gradually declining to 3.5% in the year 2008. The discount rate used in determining the accumulated postretirement benefits obligation was 7.50% and 7.25% at December 31, 1996 and 1995, respectively. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefits obligation as of December 31, 1996 would be increased 7%. The effect of this change on the sum of the service cost and interest cost would be an increase of 8%. 12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS Derivatives ----------- 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. Accounting for interest rate swap transactions is on an accrual basis. Gains and losses related to interest rate swap transactions are amortized as yield adjustments over the remaining life of the underlying hedged security. Income and expense resulting from interest rate swap activities are reflected in net investment income. The notional amount of matched interest rate swaps outstanding at December 31, 1996 was $649.9 million. The average unexpired terms at December 31, 1996 range from 2.2 to 2.7 years. At December 31, 1996, the cost of terminating outstanding matched swaps in a loss position was $8.3 million and the unrealized gain on outstanding matched swaps in a gain position was $11.4 million. The Company has no intention of terminating these contracts prior to maturity. During 1996, 1995 and 1994, net gains (losses) of $.2 million, $1.4 million and $(.2) million, respectively, were recorded in connection with interest rate swap activity. Equitable Life has implemented an interest rate cap program designed to hedge crediting rates on interest-sensitive individual annuities contracts. The outstanding notional amounts at December 31, 1996 of contracts purchased and sold were $5,050.0 million and $500.0 million, respectively. The net premium paid by Equitable Life on these contracts was $22.5 million and is being amortized ratably over the contract periods ranging from 3 to 5 years. Income and expense resulting from this program are reflected as an adjustment to interest credited to policyholders' account balances. Substantially all of DLJ's business related to derivatives is by its nature trading activities which are primarily for the purpose of customer accommodations. DLJ's derivative activities consist primarily of option writing and trading in forward and futures contracts. Derivative financial instruments have both on-and-off balance sheet implications depending on the nature of the contracts. DLJ's involvement in swap contracts is not significant. 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 timing, 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 SAI-65 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, 1996 and 1995. Fair value 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 foreclosed mortgage loans and problem mortgage loans are limited to the estimated fair value of the underlying collateral if lower. The estimated fair values for the Company's liabilities under GIC and association plan contracts are estimated using contractual cash flows discounted based on the T. Rowe Price GIC Index Rate for the appropriate duration. For durations in excess of the published index rate, the appropriate Treasury rate is used plus a spread equal to the longest duration GIC rate spread published. The estimated fair values for those group annuity contracts which are classified as universal life type contracts are measured at the estimated fair value of the underlying assets. The estimated fair values for single premium deferred annuities ("SPDA") are estimated using projected cash flows discounted at current offering rates. The estimated fair values for supplementary contracts not involving life contingencies ("SCNILC") and annuities certain are derived using discounted cash flows based upon the estimated current offering rate. Fair value for long-term debt is 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 fair value of short-term borrowings approximates their carrying value. SAI-66 The following table discloses carrying value and estimated fair value for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
DECEMBER 31, -------------------------------------------------------------------- 1996 1995 --------------------------------- --------------------------------- CARRYING ESTIMATED Carrying Estimated VALUE FAIR VALUE Value Fair Value --------------- ---------------- --------------- --------------- (IN MILLIONS) Consolidated Financial Instruments: ----------------------------------- Mortgage loans on real estate.......... $ 3,133.0 $ 3,394.6 $ 3,638.3 $ 3,973.6 Other joint ventures................... 467.0 467.0 492.7 492.7 Policy loans........................... 2,196.1 2,221.6 1,976.4 2,057.5 Policyholders' account balances: Association plans.................... 78.1 77.3 101.0 100.0 Group annuity contracts.............. 2,141.0 1,954.0 2,335.0 2,395.0 SPDA................................. 1,062.7 1,065.7 1,265.8 1,272.0 Annuities certain and SCNILC......... 654.9 736.2 646.4 716.7 Long-term debt......................... 1,592.8 1,557.7 1,899.3 1,962.9 Closed Block Financial Instruments: ----------------------------------- Mortgage loans on real estate.......... 1,380.7 1,425.6 1,368.8 1,461.4 Other equity investments............... 105.0 105.0 151.6 151.6 Policy loans........................... 1,765.9 1,798.0 1,797.2 1,891.4 SCNILC liability....................... 30.6 34.9 34.8 39.6 GIC Segment Financial Instruments: ---------------------------------- Mortgage loans on real estate.......... 1,111.1 1,220.3 1,485.8 1,666.1 Fixed maturities....................... 42.5 42.5 107.4 107.4 Other equity investments............... 300.5 300.5 455.9 455.9 Guaranteed interest contracts.......... 290.7 300.5 329.0 352.0 Long-term debt......................... 102.1 102.2 135.1 136.0
13) COMMITMENTS AND CONTINGENT LIABILITIES The Company has provided, from time to time, certain guarantees or commitments to affiliates, investors and others. These arrangements include commitments by the Company, under certain conditions: to make capital contributions of up to $244.9 million to affiliated real estate joint ventures; to provide equity financing to certain limited partnerships of $205.8 million at December 31, 1996, under existing loan or loan commitment agreements; and to provide short-term financing loans which at December 31, 1996 totaled $14.6 million. Management believes the Company will not incur any material losses as a result of these commitments. SAI-67 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 satisfaction of those obligations by Equitable Life is remote. At December 31, 1996, the Insurance Group had $51.6 million of letters of credit outstanding. 14) LITIGATION A number of lawsuits has 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, 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, EVLICO and The Equitable of Colorado, Inc. ("EOC"), like other life and health insurers, from time to time are involved in such litigation. To date, no such lawsuit has resulted in an award or settlement of any material amount against the Company. Among litigations pending against Equitable Life, EVLICO and EOC of the type referred to in this paragraph are the litigations described in the following eight paragraphs. An action entitled Golomb et al. v. The Equitable Life Assurance Society of the United States was filed on January 20, 1995 in New York County Supreme Court. The action purports to be brought on behalf of a class of persons insured after 1983 under Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by Equitable Life (the "policies"). The complaint alleges that premium increases for these policies after 1983, all of which were filed with and approved by the New York State Insurance Department and certain other state insurance departments, breached the terms of the policies, and that statements in the policies and elsewhere concerning premium increases constituted fraudulent concealment, misrepresentations in violation of New York Insurance Law Section 4226 and deceptive practices under New York General Business Law Section 349. The complaint seeks a declaratory judgment, injunctive relief restricting the methods by which Equitable Life increases premiums on the policies in the future, a refund of premiums, and punitive damages. Plaintiffs also have indicated that they will seek damages in an unspecified amount. Equitable Life moved to dismiss the complaint in its entirety on the grounds that it fails to state a claim and that uncontroverted documentary evidence establishes a complete defense to the claims. On May 29, 1996, the New York County Supreme Court entered a judgment dismissing the complaint with prejudice. Plaintiffs have filed a notice of appeal of that judgment. In January 1996, separate actions were filed in Pennsylvania and Texas state courts (entitled, respectively, Malvin et al. v. The Equitable Life Assurance Society of the United States and Bowler et al. v. The Equitable Life Assurance Society of the United States), making claims similar to those in the New York action described above. The Texas action also claims that Equitable Life misrepresented to Texas policyholders that the Texas Insurance Department had approved Equitable Life's rate increases. These actions are asserted on behalf of proposed classes of Pennsylvania issued or renewed policyholders and Texas issued or renewed policyholders, insured under the policies. The Pennsylvania and Texas actions seek compensatory and punitive damages and injunctive relief restricting the methods by which Equitable Life increases premiums in the future based on the common law and statutes of those states. On February 9, 1996, Equitable Life removed the Pennsylvania action, Malvin, to the United States District Court for the Middle District of Pennsylvania. Following the decision granting Equitable Life's motion to dismiss the New York action SAI-68 (Golomb), on the consent of the parties the District Court ordered an indefinite stay of all proceedings in the Pennsylvania action, pending either party's right to reinstate the proceeding, and ordered that for administrative purposes the case be deemed administratively closed. On February 2, 1996, Equitable Life removed the Texas action, Bowler, to the United States District Court for the Northern District of Texas. On May 20, 1996, the plaintiffs in Bowler amended their complaint by adding allegations of misrepresentation regarding premium increases on other types of guaranteed renewable major medical insurance policies issued by Equitable Life up to and including 1983. On July 1, 1996, Equitable Life filed a motion for summary judgment dismissing the first amended complaint in its entirety. In August, 1996, the court granted plaintiffs leave to file a supplemental complaint on behalf of a proposed class of Texas policyholders claiming unfair discrimination, breach of contract and other claims arising out of alleged differences between premiums charged to Texas policyholders and premiums charged to similarly situated policyholders in New York and certain other states. Plaintiffs seek refunds of alleged overcharges, exemplary or additional damages citing Texas statutory provisions which among other things, permit two times the amount of actual damage plus additional penalties if the acts complained of are found to be knowingly committed, and injunctive relief. Equitable Life has also filed a motion for summary judgment dismissing the supplemental complaint in its entirety. Plaintiffs also obtained permission to add another plaintiff to the first amended and supplemental complaints. Plaintiffs have opposed both motions for summary judgment and requested that certain issues be found in their favor. Equitable Life is in the process of replying. On May 22, 1996, a separate action entitled Bachman v. The Equitable Life Assurance Society of the United States, was filed in Florida state court making claims similar to those in the previously reported Golomb action. The Florida action is asserted on behalf of a proposed class of Florida issued or renewed policyholders insured after 1983 under Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by Equitable Life. The Florida action seeks compensatory and punitive damages and injunctive relief restricting the methods by which Equitable Life increases premiums in the future based on various common law claims. On June 20, 1996, Equitable Life removed the Florida action to Federal court. Equitable Life has answered the complaint, denying the material allegations and asserting certain affirmative defenses. On December 6, 1996, Equitable Life filed a motion for summary judgment and plaintiff is expected to file its response to that motion shortly. On November 6, 1996, a proposed class action entitled Fletcher, et al. v. The Equitable Life Assurance Society of the United States, was filed in California Superior Court for Fresno County, making substantially the same allegations concerning premium rates and premium rate increases on guaranteed renewable policies made in the Bowler action. The complaint alleges, among other things, that differentials between rates charged California policyholders and policyholders in New York and certain other states, and the methods used by Equitable Life to calculate premium increases, breached the terms of its policies, that Equitable Life misrepresented and concealed the facts pertaining to such differentials and methods in violation of California law, and that Equitable Life also misrepresented that its rate increases were approved by the California Insurance Department. Plaintiffs seek compensatory damages in an unspecified amount, rescission, injunctive relief and attorneys' fees. Equitable Life removed the action to Federal court; plaintiff has moved to remand the case to state court. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, the Company's management believes that the ultimate resolution of the Golomb, Malvin, Bowler, Bachman and Fletcher litigations should not have a material adverse effect on the financial position of the Company. Due to the early stage of such litigations, the Company's management cannot make an estimate of loss, if any, or predict whether or not such litigations will have a material adverse effect on the Company's results of operations in any particular period. SAI-69 An action was instituted on April 6, 1995 against Equitable Life and its wholly owned subsidiary, EOC, in New York state court, entitled Sidney C. Cole et al. v. The Equitable Life Assurance Society of the United States and The Equitable of Colorado, Inc., No. 95/108611 (N. Y. County). The action is brought by the holders of a joint survivorship whole life policy issued by EOC. The action purports to be on behalf of a class consisting of all persons who from January 1, 1984 purchased life insurance policies sold by Equitable Life and EOC based upon their allegedly uniform sales presentations and policy illustrations. The complaint puts in issue various alleged sales practices that plaintiffs assert, among other things, misrepresented the stated number of years that the annual premium would need to be paid. Plaintiffs seek damages in an unspecified amount, imposition of a constructive trust, and seek to enjoin Equitable Life and EOC from engaging in the challenged sales practices. On June 28, 1996, the court issued a decision and order dismissing with prejudice plaintiff's causes of action for fraud, constructive fraud, breach of fiduciary duty, negligence, and unjust enrichment, and dismissing without prejudice plaintiff's cause of action under the New York State consumer protection statute. The only remaining causes of action are for breach of contract and negligent misrepresentation. Plaintiffs made a motion for reargument with respect to this order, which was submitted to the court in October 1996. This motion was denied by the court on December 16, 1996. On May 21, 1996, an action entitled Elton F. Duncan, III v. The Equitable Life Assurance Society of the United States, was commenced against Equitable Life in the Civil District Court for the Parish of Orleans, State of Louisiana. The action is brought by an individual who purchased a whole life policy. Plaintiff alleges misrepresentations concerning the extent to which the policy was a proper replacement policy and the number of years that the annual premium would need to be paid. Plaintiff purports to represent a class consisting of all persons who purchased whole life or universal life insurance policies from Equitable Life from January 1, 1982 to the present. Plaintiff seeks damages, including punitive damages, in an unspecified amount. On July 26, 1996, an action entitled Michael Bradley v. Equitable Variable Life Insurance Company, was commenced in New York state court. The action is brought by the holder of a variable life insurance policy issued by EVLICO. The plaintiff purports to represent a class consisting of all persons or entities who purchased one or more life insurance policies issued by EVLICO from January 1, 1980. The complaint puts at issue various alleged sales practices and alleges misrepresentations concerning the extent to which the policy was a proper replacement policy and the number of years that the annual premium would need to be paid. Plaintiff seeks damages, including punitive damages, in an unspecified amount and also seeks injunctive relief prohibiting EVLICO from canceling policies for failure to make premium payments beyond the alleged stated number of years that the annual premium would need to be paid. On September 21, 1996 Equitable Life, EVLICO and EOC made a motion to have this proceeding moved from Kings County Supreme Court to New York County for joint trial or consolidation with the Cole action. The motion was denied by the court on January 9, 1997. On January 10, 1997, plaintiffs moved for certification of a nationwide class consisting of all persons or entities who were sold one or more life insurance products on a "vanishing premium" basis and/or were allegedly induced to purchase additional policies from EVLICO, using the cash value accumulated in existing policies, from January 1, 1980 through and including December 31, 1996. Plaintiffs further moved to have Michael Bradley designated as the class representative. Discovery regarding class certification is underway. On December 12, 1996, an action entitled Robert E. Dillon v. The Equitable Life Assurance Society of the United States and The Equitable of Colorado, was commenced in the United States District Court for the Southern District of Florida. The action is brought by an individual who purchased a joint whole life policy from EOC. The complaint puts at issue various alleged sales practices and alleges misrepresentations concerning the alleged impropriety of replacement policies issued by Equitable Life and EOC and alleged misrepresentations regarding the number of years premiums would have to be paid on the defendants' policies. Plaintiff brings claims for breach of contract, fraud, negligent misrepresentation, money had and received, unjust enrichment and imposition of a constructive trust. Plaintiff purports to represent two classes SAI-70 of persons. The first is a "contract class," consisting of all persons who purchased whole or universal life insurance policies from Equitable Life and EOC and from whom Equitable Life and EOC have sought additional payments beyond the number of years allegedly promised by Equitable Life and EOC. The second is a "fraud class," consisting of all persons with an interest in policies issued by Equitable Life and EOC at any time since October 1, 1986. Plaintiff seeks damages in an unspecified amount, and also seeks injunctive relief attaching Equitable Life's and EOC's profits from their alleged sales practices. Equitable Life's and EOC's time to answer or move with respect to the complaint has been extended until February 24, 1997. Although the outcome of litigation cannot be predicted with certainty, particularly in the early stages of an action, the Company's management believes that the ultimate resolution of the Cole, Duncan, Bradley and Dillon litigations should not have a material adverse effect on the financial position of the Company. Due to the early stages of such litigations, the Company's management cannot make an estimate of loss, if any, or predict whether or not any such litigation will have a material adverse effect on the Company's results of operations in any particular period. On January 3, 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, No. 94-2036 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 since September 30, 1991. The basic allegation of the amended complaint is 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. The court denied Equitable Life and EVLICO's motion to dismiss the amended complaint on September 24, 1996. Equitable Life and EVLICO have answered the amended complaint, denying the material allegations and asserting certain affirmative defenses. Currently, the parties are conducting discovery in connection with plaintiffs' attempt to certify a class. On January 9, 1997, an action entitled Rosemarie Chaviano, 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, was filed in Massachusetts state court making claims similar to those in the Franze action and alleging violations of the Massachusetts securities laws. The plaintiff purports to represent all persons in Massachusetts who purchased variable life insurance contracts from Equitable Life and EVLICO from January 9, 1993 to the present. The Massachusetts action seeks rescission of the contracts or compensatory damages, attorneys' fees, expenses and injunctive relief. Although the outcome of any litigation cannot be predicted with certainty, particularly in the early stages of an action, the Company's management believes that the ultimate resolution of the litigations discussed in this paragraph should not have a material adverse effect on the financial position of the Company. Due to the early stages of such litigation, the Company's management cannot make an estimate of loss, if any, or predict whether or not any such litigation will have a material adverse effect on the Company's results of operations in any particular period. Equitable Life recently responded to a subpoena from the U.S. Department of Labor ("DOL") requesting copies of any third-party appraisals in Equitable Life's possession relating to the ten largest properties (by value) in the Prime Property Fund ("PPF"). PPF is an open-end, commingled real estate separate account of Equitable Life for pension clients. Equitable Life serves as investment manager in PPF and has retained EREIM as advisor. In early 1995, the DOL commenced a national investigation of commingled real estate funds with pension investors, including PPF. The investigation now appears to be focused principally on appraisal and valuation procedures in respect of fund properties. The most recent request from the DOL seems to reflect, at least in part, an interest in the relationship between the valuations for those properties reflected in appraisals prepared for local property tax proceedings and the valuations used by PPF for other SAI-71 purposes. At no time has the DOL made any specific allegation that Equitable Life or EREIM has acted improperly and Equitable Life and EREIM believe that any such allegation would be without foundation. While the outcome of this investigation cannot be predicted with certainty, in the opinion of management, the ultimate resolution of this matter should not have a material adverse effect on the Company's consolidated financial position or results of operations in any particular period. Equitable Casualty Insurance Company ("Casualty"), an indirect wholly owned subsidiary of Equitable Life, is party to an arbitration proceeding that commenced in August 1995. The proceeding relates to a dispute among Casualty, Houston General Insurance Company ("Houston General") and GEICO General Insurance Company ("GEICO General") regarding the interpretation of a reinsurance agreement. The arbitration panel issued a final award in favor of Casualty and GEICO General on June 17, 1996. Casualty and GEICO General moved in the pending Texas state court action, with Houston General's consent, for an order confirming the arbitration award and entering judgment dismissing the action. The motion was granted on January 29, 1997. The parties have also stipulated to the dismissal without prejudice of a related Texas Federal court action brought by Houston General against GEICO General and Equitable Life. In connection with confirmation of the arbitration award, Houston General paid to Casualty approximately $839,600 in settlement of certain reimbursement claims by Casualty against Houston General. On July 25, 1995, a Consolidated and Supplemental Class Action Complaint ("Complaint") was filed against the Alliance North American Government Income Trust, Inc. (the "Fund"), Alliance and certain other defendants affiliated with Alliance, including the Holding Company, alleging violations of Federal securities laws, fraud and breach of fiduciary duty in connection with the Fund's investments in Mexican and Argentine securities. The Complaint, which seeks certification of a plaintiff class of persons who purchased or owned Class A, B or C shares of the Fund from March 27, 1992 through December 23, 1994, seeks an unspecified amount of damages, costs, attorneys' fees and punitive damages. The principal allegations of the Complaint are that the Fund purchased debt securities issued by the Mexican and Argentine governments in amounts that were not permitted by the Fund's investment objective, and that there was no shareholder vote to change the investment objective to permit purchases in such amounts. The Complaint further alleges that the decline in the value of the Mexican and Argentine securities held by the Fund caused the Fund's net asset value to decline to the detriment of the Fund's shareholders. On September 26, 1996, the United States District Court for the Southern District of New York granted the defendants' motion to dismiss all counts of the complaint. On October 11, 1996, plaintiffs filed a motion for reconsideration of the court's decision granting defendants' motion to dismiss the Complaint. On November 25, 1996, the court denied plaintiffs' motion for reconsideration. On October 29, 1996, plaintiffs filed a motion for leave to file an amended complaint. The principal allegations of the proposed amended complaint are that the Fund did not properly disclose that it planned to invest in mortgage-backed derivative securities and that two advertisements used by the Fund misrepresented the risks of investing in the Fund. Plaintiffs also reiterated allegations in the Complaint that the Fund failed to hedge against the risks of investing in foreign securities despite representations that it would do so. Alliance believes that the allegations in the Complaint are without merit and intends to vigorously defend against these claims. While the ultimate outcome of this matter cannot be determined at this time, management of Alliance does not expect that it will have a material adverse effect on Alliance's results of operations or financial condition. On January 26, 1996, a purported purchaser of certain notes and warrants to purchase shares of common stock of Rickel Home Centers, Inc. ("Rickel") filed a class action complaint against Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") and certain other defendants for unspecified compensatory and punitive damages in the United States District Court for the Southern District of New York. The suit was brought on behalf of the purchasers of 126,457 units consisting of $126,457,000 aggregate principal amount of 13 1/2% senior notes due 2001 and 126,457 warrants to purchase shares of common stock of Rickel issued SAI-72 by Rickel in October 1994. The complaint alleges violations of Federal securities laws and common law fraud against DLJSC, as the underwriter of the units and as an owner of 7.3% of the common stock of Rickel, Eos Partners, L.P., and General Electric Capital Corporation, each as owners of 44.2% of the common stock of Rickel, and members of the Board of Directors of Rickel, including a DLJSC Managing Director. The complaint seeks to hold DLJSC liable for alleged misstatements and omissions contained in the prospectus and registration statement filed in connection with the offering of the units, alleging that the defendants knew of financial losses and a decline in value of Rickel in the months prior to the offering and did not disclose such information. The complaint also alleges that Rickel failed to pay its semi-annual interest payment due on the units on December 15, 1995 and that Rickel filed a voluntary petition for reorganization pursuant to Chapter 11 of the United States Bankruptcy Code on January 10, 1996. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. Although there can be no assurance, DLJ does not believe the outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of this litigation, based on the information currently available to it, DLJ's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In October 1995, DLJSC was named as a defendant in a purported class action filed in a Texas State Court on behalf of the holders of $550.0 million principal amount of subordinated redeemable discount debentures of National Gypsum Corporation ("NGC") canceled in connection with a Chapter 11 plan of reorganization for NGC consummated in July 1993. The named plaintiff in the State Court action also filed an adversary proceeding in the Bankruptcy Court for the Northern District of Texas seeking a declaratory judgment that the confirmed NGC plan of reorganization does not bar the class action claims. Subsequent to the consummation of NGC's plan of reorganization, NGC's shares traded for values substantially in excess of, and in 1995 NGC was acquired for a value substantially in excess of, the values upon which NGC's plan of reorganization was based. The two actions arise out of DLJSC's activities as financial advisor to NGC in the course of NGC's Chapter 11 reorganization proceedings. The class action complaint alleges that the plan of reorganization submitted by NGC was based upon projections by NGC and DLJSC which intentionally understated forecasts, and provided misleading and incorrect information in order to hide NGC's true value and that defendants breached their fiduciary duties by, among other things, providing false, misleading or incomplete information to deliberately understate the value of NGC. The class action complaint seeks compensatory and punitive damages purportedly sustained by the class. The Texas State Court action, which had been removed to the Bankruptcy Court, has been remanded back to the state court, which remand is being opposed by DLJSC. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaint. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of such litigation, based upon the information currently available to it, DLJ's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In November and December 1995, DLJSC, along with various other parties, was named as a defendant in a number of purported class actions filed in the U.S. District Court for the Eastern District of Louisiana. The complaints allege violations of the Federal securities laws arising out of a public offering in 1994 of $435.0 million of first mortgage notes of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints seek to hold DLJSC liable for various alleged misstatements and omissions contained in the prospectus dated November 9, 1994. DLJSC intends to defend itself vigorously against all of the allegations contained in the complaints. Although there can be no assurance, DLJ does not believe that the ultimate outcome of this litigation will have a material adverse effect on its financial condition. Due to the early stage of this SAI-73 litigation, based upon the information currently available to it, DLJ's management cannot make an estimate of loss, if any, or predict whether or not such litigation will have a material adverse effect on DLJ's results of operations in any particular period. In addition to the matters described above, Equitable Life and its subsidiaries and DLJ and its 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. 15) LEASES The Company has entered into operating leases for office space and certain other assets, principally data processing equipment and office furniture and equipment. Future minimum payments under noncancelable leases for 1997 and the succeeding four years are $113.7 million, $110.6 million, $100.3 million, $72.3 million, $59.3 million and $427.3 million thereafter. Minimum future sublease rental income on these noncancelable leases for 1997 and the succeeding four years are $9.8 million, $6.0 million, $4.5 million, $2.4 million, $.8 million and $.1 million thereafter. At December 31, 1996, the minimum future rental income on noncancelable operating leases for wholly owned investments in real estate for 1997 and the succeeding four years are $263.0 million, $242.1 million, $219.8 million, $194.3 million, $174.6 million and $847.1 million thereafter. 16) OTHER OPERATING COSTS AND EXPENSES Other operating costs and expenses consisted of the following:
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Compensation costs................................. $ 647.3 $ 595.9 $ 687.5 Commissions........................................ 329.5 314.3 313.0 Short-term debt interest expense................... 8.0 11.4 19.0 Long-term debt interest expense.................... 137.3 108.1 98.3 Amortization of policy acquisition costs........... 405.2 317.8 313.4 Capitalization of policy acquisition costs......... (391.9) (391.0) (410.9) Rent expense, net of sub-lease income.............. 113.7 109.3 116.0 Other.............................................. 798.9 710.0 721.4 ----------------- ---------------- ----------------- Total.............................................. $ 2,048.0 $ 1,775.8 $ 1,857.7 ================= ================ =================
During 1996, 1995 and 1994, the Company restructured certain operations in connection with cost reduction programs and recorded pre-tax provisions of $24.4 million, $32.0 million and $20.4 million, respectively. The amounts paid during 1996, associated with cost reduction programs, totaled $17.7 million. At December 31, 1996, the liabilities associated with cost reduction programs amounted to $44.5 million. The 1996 cost reduction program included restructuring costs related to the consolidation of insurance operations' service centers. The 1995 cost reduction program included relocation expenses, including the accelerated amortization of building improvements associated with the relocation of the home office. The 1994 cost SAI-74 reduction program included costs associated with the termination of operating leases and employee severance benefits in connection with the consolidation of 16 insurance agencies. Amortization of DAC included $145.0 million writeoff of DAC related to DI contracts in the fourth quarter of 1996. 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, the Superintendent has broad discretion to determine whether the financia1 condition of a stock life insurance company would support the payment of dividends to its shareholders. For 1996, 1995 and 1994, statutory net (loss) earnings totaled $(351.1) million, $(352.4) million and $67.5 million, respectively. No amounts are expected to be available for dividends from Equitable Life to the Holding Company in 1997. At December 31, 1996, the Insurance Group, in accordance with various government and state regulations, had $21.9 million of securities deposited with such government or state agencies. Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ in certain instances from GAAP. The New York Insurance Department (the "Department") recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the New York Insurance Law, and for determining whether its financial condition warrants the payment of a dividend to its stockholders. No consideration is given by the Department to financial statements prepared in accordance with GAAP in making such determinations. The following reconciles the Company's statutory change in surplus and capital stock and statutory surplus and capital stock determined in accordance with accounting practices prescribed by the Department with net earnings and equity on a GAAP basis.
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Net change in statutory surplus and capital stock.. $ 56.0 $ 78.1 $ 292.4 Change in asset valuation reserves................. (48.4) 365.7 (285.2) ----------------- ---------------- ----------------- Net change in statutory surplus, capital stock and asset valuation reserves..................... 7.6 443.8 7.2 Adjustments: Future policy benefits and policyholders' account balances............................... (298.5) (66.0) (5.3) DAC.............................................. (13.3) 73.2 97.5 Deferred Federal income taxes.................... 108.0 (158.1) (58.7) Valuation of investments......................... 289.8 189.1 45.2 Valuation of investment subsidiary............... (117.7) (188.6) 396.6 Limited risk reinsurance......................... 92.5 416.9 74.9 Contribution from the Holding Company............ - - (300.0) Issuance of surplus notes........................ - (538.9) - Postretirement benefits.......................... 28.9 (26.7) 17.1 Other, net....................................... 12.4 115.1 (44.0) GAAP adjustments of Closed Block................. (9.8) 15.7 (9.5) GAAP adjustments of discontinued GIC Segment........................................ (89.6) 37.3 42.8 ----------------- ---------------- ----------------- Net Earnings of the Insurance Group................ $ 10.3 $ 312.8 $ 263.8 ================= ================ =================
SAI-75
DECEMBER 31, -------------------------------------------------------- 1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Statutory surplus and capital stock................ $ 2,258.9 $ 2,202.9 $ 2,124.8 Asset valuation reserves........................... 1,297.5 1,345.9 980.2 ----------------- ---------------- ----------------- Statutory surplus, capital stock and asset valuation reserves............................... 3,556.4 3,548.8 3,105.0 Adjustments: Future policy benefits and policyholders' account balances............................... (1,305.0) (1,006.5) (940.5) DAC.............................................. 3,104.9 3,075.8 3,219.4 Deferred Federal income taxes.................... (306.1) (452.0) (29.4) Valuation of investments......................... 286.8 417.7 (794.1) Valuation of investment subsidiary............... (782.8) (665.1) (476.5) Limited risk reinsurance......................... (336.5) (429.0) (845.9) Issuance of surplus notes........................ (539.0) (538.9) - Postretirement benefits.......................... (314.4) (343.3) (316.6) Other, net....................................... 126.3 4.4 (79.2) GAAP adjustments of Closed Block................. 783.7 830.8 740.4 GAAP adjustments of discontinued GIC Segment........................................ (190.3) (184.6) (221.9) ----------------- ---------------- ----------------- Equity of the Insurance Group...................... $ 4,084.0 $ 4,258.1 $ 3,360.7 ================= ================ =================
18) BUSINESS SEGMENT INFORMATION The Company has two major business segments: Insurance Operations and Investment Services. Interest expense related to debt not specific to either business segment is presented as Corporate interest expense. Information for all periods is presented on a comparable basis. The Insurance Operations 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 and 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 provides investment fund management, primarily to institutional clients. This segment includes the Company's equity interest in DLJ and Separate Accounts which provide various investment options for group clients through pooled or single group accounts. Intersegment investment advisory and other fees of approximately $127.5 million, $124.1 million and $135.3 million for 1996, 1995 and 1994, respectively, are included in total revenues of the Investment Services segment. These fees, excluding amounts related to the discontinued GIC Segment of $15.7 million, $14.7 million and $27.4 million for 1996, 1995 and 1994, respectively, are eliminated in consolidation. SAI-76
1996 1995 1994 ----------------- ---------------- ----------------- (IN MILLIONS) Revenues Insurance operations............................... $ 3,742.9 $ 3,614.6 $ 3,507.4 Investment services................................ 1,126.1 949.1 935.2 Consolidation/elimination.......................... (24.5) (34.9) (27.2) ----------------- ---------------- ----------------- Total.............................................. $ 4,844.5 $ 4,528.8 $ 4,415.4 ================= ================ ================= Earnings (loss) from continuing operations before Federal income taxes, minority interest and cumulative effect of accounting change Insurance operations............................... $ (36.6) $ 303.1 $ 327.5 Investment services................................ 311.9 224.0 227.9 Consolidation/elimination.......................... .2 (3.1) .3 ----------------- ---------------- ----------------- Subtotal..................................... 275.5 524.0 555.7 Corporate interest expense......................... (66.9) (27.9) (114.2) ----------------- ---------------- ----------------- Total.............................................. $ 208.6 $ 496.1 $ 441.5 ================= ================ =================
DECEMBER 31, ------------------------------------ 1996 1995 ---------------- ----------------- (IN MILLIONS) Assets Insurance operations........... $ 60,464.9 $ 56,720.5 Investment services............ 13,542.5 12,842.9 Consolidation/elimination...... (399.6) (354.4) ---------------- ----------------- Total.......................... $ 73,607.8 $ 69,209.0 ================ ================= SAI-77 19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The quarterly results of operations for 1996 and 1995, are summarized below:
THREE MONTHS ENDED ------------------------------------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ----------------- ----------------- ------------------ ------------------ (IN MILLIONS) 1996 ---- Total Revenues................ $ 1,169.7 $ 1,193.6 $ 1,193.6 $ 1,287.6 ================= ================= ================== ================== Earnings (Loss) from Continuing Operations before Cumulative Effect of Accounting Change........ $ 94.8 $ 87.1 $ 93.2 $ (157.9) ================= ================= ================== ================== Net Earnings (Loss)........... $ 71.7 $ 87.1 $ 93.2 $ (241.7) ================= ================= ================== ================== 1995 ---- Total Revenues................ $ 1,079.1 $ 1,164.0 $ 1,138.8 $ 1,146.9 ================= ================= ================== ================== Net Earnings.................. $ 66.3 $ 101.7 $ 100.2 $ 44.6 ================= ================= ================== ==================
The quarterly results of operations for 1996 and 1995 have been restated to reflect the Company's accounting change adopted in the fourth quarter of 1996 for long-duration participating life contracts in accordance with the provisions prescribed by SFAS No. 120. Net earnings for the three months ended December 31, 1996 includes a charge of $339.3 million related to writeoffs of DAC on DI contracts of $94.3 million, reserve strengthening on DI business of $113.7 million, pension par of $47.5 million and the discontinued GIC Segment of $83.8 million. 20) INVESTMENT IN DLJ On December 15, 1993, the Company sold a 61% interest in DLJ to the Holding Company for $800.0 million in cash and securities. The excess of the proceeds over the book value in DLJ at the date of sale of $340.2 million has been reflected as a capital contribution. In 1995, DLJ completed the initial public offering ("IPO") of 10.58 million shares of its common stock, which included 7.28 million of the Holding Company's shares in DLJ, priced at $27 per share. Concurrent with the IPO, the Company contributed equity securities to DLJ having a market value of $21.2 million. Upon completion of the IPO, the Company's ownership percentage was reduced to 36.1%. The Company's ownership interest will be further reduced upon the issuance of common stock after the vesting of forfeitable restricted stock units acquired by and/or the exercise of options granted to certain DLJ employees. DLJ restricted stock units represents forfeitable rights to receive approximately 5.2 million shares of DLJ common stock through February 2000. The results of operations of DLJ are accounted for on the equity basis and are included in commissions, fees and other income in the consolidated statements of earnings. The Company's carrying value of DLJ is included in investment in and loans to affiliates in the consolidated balance sheets. SAI-78 Summarized balance sheets information for DLJ, reconciled to the Company's carrying value of DLJ, are as follows:
DECEMBER 31, ------------------------------------ 1996 1995 ---------------- ----------------- (IN MILLIONS) Assets: Trading account securities, at market value............................ $ 15,728.1 $ 10,821.3 Securities purchased under resale agreements........................... 20,598.7 18,748.2 Broker-dealer related receivables...................................... 16,525.9 13,023.7 Other assets........................................................... 2,651.0 1,983.3 ---------------- ----------------- Total Assets........................................................... $ 55,503.7 $ 44,576.5 ================ ================= Liabilities: Securities sold under repurchase agreements............................ $ 29,378.3 $ 26,744.8 Broker-dealer related payables......................................... 19,409.7 12,915.5 Short-term and long-term debt.......................................... 2,704.5 1,742.0 Other liabilities...................................................... 2,164.0 1,750.5 ---------------- ----------------- Total liabilities...................................................... 53,656.5 43,152.8 Cumulative exchangeable preferred stock................................ - 225.0 DLJ's company-obligated mandatorily redeemed preferred securities of subsidiary trust holding solely debentures of DLJ...... 200.0 - Total shareholders' equity............................................. 1,647.2 1,198.7 ---------------- ----------------- Total Liabilities, Cumulative Exchangeable Preferred Stock and Shareholders' Equity................................................. $ 55,503.7 $ 44,576.5 ================ ================= DLJ's equity as reported............................................... $ 1,647.2 $ 1,198.7 Unamortized cost in excess of net assets acquired in 1985 and other adjustments................................................ 23.9 40.5 The Holding Company's equity ownership in DLJ.......................... (590.2) (499.0) Minority interest in DLJ............................................... (588.6) (324.3) ---------------- ----------------- The Company's Carrying Value of DLJ.................................... $ 492.3 $ 415.9 ================ =================
SAI-79 Summarized statements of earnings information for DLJ reconciled to the Company's equity in earnings of DLJ is as follows:
1996 1995 ---------------- ----------------- (IN MILLIONS) Commission, fees and other income...................................... $ 1,818.2 $ 1,325.9 Net investment income.................................................. 1,074.2 904.1 Dealer, trading and investment gains, net.............................. 598.4 528.6 ---------------- ----------------- Total revenues......................................................... 3,490.8 2,758.6 Total expenses including income taxes.................................. 3,199.5 2,579.5 ---------------- ----------------- Net earnings........................................................... 291.3 179.1 Dividends on preferred stock........................................... 18.7 19.9 ---------------- ----------------- Earnings Applicable to Common Shares................................... $ 272.6 $ 159.2 ================ ================= DLJ's earnings applicable to common shares as reported................. $ 272.6 $ 159.2 Amortization of cost in excess of net assets acquired in 1985.......... (3.1) (3.9) The Holding Company's equity in DLJ's earnings......................... (107.8) (90.4) Minority interest in DLJ............................................... (73.4) (6.5) ---------------- ----------------- The Company's Equity in DLJ's Earnings................................. $ 88.3 $ 58.4 ================ =================
21) ACCOUNTING FOR STOCK-BASED COMPENSATION The Holding Company sponsors a stock option plan for employees of Equitable Life. DLJ and Alliance each sponsor their own stock option plans for certain employees. The Company elected to continue to account for stock-based compensation using the intrinsic value method prescribed in APB Opinion No. 25. Had compensation expense of the Company's stock option incentive plans for options granted after December 31, 1994 been determined based on the estimated fair value at the grant dates for awards under those plans, the Company's pro forma net earnings for 1996 and 1995 would have been as follows: 1996 1995 --------------- --------------- (IN MILLIONS) Net Earnings As Reported......... $ 10.3 $ 312.8 Pro Forma........... $ 3.2 $ 311.3 SAI-80 The fair value of options and units granted after December 31, 1994, used as a basis for the above pro forma disclosures, was estimated as of the date of grants using Black-Scholes option pricing models. The option and unit pricing assumptions for 1996 and 1995 are as follows:
HOLDING COMPANY DLJ ALLIANCE ------------------------- -------------------------- ----------------------------- 1996 1995 1996 1995 1996 1995 ----------- ----------- ----------- ------------ ------------- ------------- Dividend yield........... 0.80% 0.96% 1.54% 1.85% 8.0% 8.0% Expected volatility...... 20.00% 20.00% 25.00% 25.00% 23.00% 23.00% Risk-free interest rate.. 5.92% 6.83% 6.07% 5.86% 5.80% 6.00% Expected Life............ 5 YEARS 5 years 5 YEARS 5 years 7.43 YEARS 7.43 years Weighted fair value per option granted..... $6.94 $5.90 $9.35 - $2.69 $2.24
A summary of the Holding Company and DLJ stock option plans and Alliance's Unit option plans are as follows:
HOLDING COMPANY DLJ ALLIANCE ----------------------------- ----------------------------- ----------------------------- Options Options Options Outstanding Outstanding Outstanding Weighted Weighted Weighted Average Average Average Shares Exercise Shares Exercise Units Exercise (In Millions) Price (In Millions) Price (In Millions) Price ------------- ------------- ------------- ------------- ------------- ------------- Balance as of January 1, 1994........ 6.1 - 3.2 Granted................ .7 - 1.2 Exercised.............. - - (.5) Forfeited.............. - - (.1) ------------- ------------- ------------- Balance as of December 31, 1994...... 6.8 - 3.8 Granted................ .4 9.2 1.8 Exercised.............. (.1) - (.5) Expired................ (.1) - - Forfeited.............. (.3) - (.3) ------------- ------------- ------------- Balance as of December 31, 1995...... 6.7 $20.27 9.2 $27.00 4.8 $17.72 Granted................ .7 $24.94 2.1 $32.54 .7 $25.12 Exercised.............. (.1) $19.91 - - (.4) $13.64 Expired................ (.6) $20.21 - - - - Forfeited.............. - - (.2) $27.00 (.1) $19.32 ------------- ------------- ------------- Balance as of December 31, 1996...... 6.7 $20.79 11.1 $28.06 5.0 $19.07 ============= ============= ============= ============= ============= =============
SAI-81 Information with respect to stock and unit options outstanding and exercisable at December 31, 1996 is as 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 --------------------- ----------------- --------------- ----------------- ------------------- ---------------- Holding Company --------------------- $18.125-$27.75 6.7 7.00 $20.79 3.4 $20.18 ================= =============== ================= =================== ================ DLJ --------------------- $27.00-$33.50 11.1 9.00 $28.06 - - ================= =============== ================= =================== ================ Alliance --------------------- $ 6.0625-$15.9375 1.3 4.76 $12.97 1.2 $12.58 $16.3125-$19.75 1.1 8.19 $19.13 .2 $18.69 $19.875 -$19.875 1.0 7.36 $19.88 .4 $19.88 $20.75 -$24.375 .9 8.46 $22.05 .3 $21.84 $24.375 -$25.125 .7 9.96 $25.13 - - ----------------- ------------------- $ 6.0625-$25.125 5.0 7.43 $19.07 2.1 $15.84 ================= =============== ================= =================== ================
SAI-82 REPORT OF INDEPENDENT ACCOUNTANTS To the Participant and Trustee of the State Street Bank and Trust Company Lifecycle Fund Group Trust -- Conservative In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the selected per unit data present fairly, in all material respects, the financial position of the State Street Bank and Trust Company Lifecycle Fund Group Trust -- Conservative (the "Fund") at December 31, 1996, the results of its operations for the year then ended, and changes in its net assets and the selected per unit data for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and selected per unit data (hereafter referred to as "financial statements") are the responsibility of the Fund's 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 generally accepted auditing standards 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, 1996 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts April 10, 1997 SAI-83 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--CONSERVATIVE Statement of Assets and Liabilities December 31, 1996 - -----------------------------------------------------------------------------
ASSETS Investments in State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans: Daily EAFE Fund Non-Lending (36,606 units)................................... $ 460,760 Daily Government/Corporate Bond Fund (192,367 units)......................... 2,278,967 Russell 2000 Fund (11,962 units)............................................. 230,227 S&P 500 Flagship Fund (5,656 units).......................................... 675,356 Short Term Investment Fund (935,592 units)................................... 935,592 - ---------------------------------------------------------------------------- ----------- Total investments, at value (cost $ 4,289,387)............................... 4,580,902 - ---------------------------------------------------------------------------- ----------- Interest and other receivables............................................... 4,415 - ---------------------------------------------------------------------------- ----------- Total assets.............................................................. 4,585,317 - ---------------------------------------------------------------------------- ----------- LIABILITIES Payable to custodian......................................................... 27,449 Accrued expenses............................................................. 23,539 - ---------------------------------------------------------------------------- ----------- Total liabilities......................................................... 50,988 - ---------------------------------------------------------------------------- ----------- NET ASSETS (equivalent to $11.43 per unit based on 396,691 units outstanding)................................................................ $4,534,329 ============================================================================ ===========
The accompanying notes are an integral part of these financial statements SAI-84 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--CONSERVATIVE Statement of Operations Year Ended December 31, 1996 - -----------------------------------------------------------------------------
INVESTMENT INCOME Interest........................................................... $ 47,999 Securities lending fee............................................. 188 - ------------------------------------------------------------------ --------- Total investment income.......................................... 48,187 - ------------------------------------------------------------------ --------- EXPENSES Accounting and recordkeeping....................................... 11,100 Audit.............................................................. 4,500 Legal.............................................................. 11,997 Management......................................................... 7,299 - ------------------------------------------------------------------ --------- Total expenses................................................... 34,896 - ------------------------------------------------------------------ --------- Net investment income.............................................. 13,291 - ------------------------------------------------------------------ --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments............................ 109,095 Net change in unrealized appreciation (depreciation) on investments....................................................... 158,996 - ------------------------------------------------------------------ --------- Net realized and unrealized gain (loss)............................ 268,091 - ------------------------------------------------------------------ --------- Net increase (decrease) in net assets resulting from operations ... $281,382 ================================================================== =========
The accompanying notes are an integral part of these financial statements SAI-85 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--CONSERVATIVE Statement of Changes in Net Assets
PERIOD ENDED DECEMBER 31, 1996 1995* - ---------------------------------------------------------------------------- ------------ ----------- FROM OPERATIONS Net investment income (loss)................................................. $ 13,291 $ (14,008) Net realized gain (loss) on investments...................................... 109,095 33,019 Net change in unrealized appreciation (depreciation) on investments ......... 158,996 132,519 - ---------------------------------------------------------------------------- ------------ ----------- Net increase (decrease) in net assets resulting from operations ............. 281,382 151,530 - ---------------------------------------------------------------------------- ------------ ----------- FROM PARTICIPANT TRANSACTIONS Net increase (decrease) in net assets resulting from participant transactions................................................................ 1,270,391 2,831,026 - ---------------------------------------------------------------------------- ------------ ----------- Net increase (decrease) in net assets........................................ 1,551,773 2,982,556 NET ASSETS Beginning of period.......................................................... 2,982,556 -- - ---------------------------------------------------------------------------- ------------ ----------- End of period................................................................ $4,534,329 $2,982,556 ============================================================================ ============ ===========
- ------------ * Investment operations commenced on May 5, 1995. The accompanying notes are an integral part of these financial statements SAI-86 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--CONSERVATIVE Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31 ------------------ 1996 1995* - ------------------------------------------------------------------ -------- --------- Net investment income (loss)**..................................... $ 0.05 $(0.08) Net realized and unrealized gain (loss)............................ 0.65 0.81 - ------------------------------------------------------------------ -------- --------- Net increase (decrease)............................................ 0.70 0.73 NET ASSET VALUE Beginning of period ............................................... 10.73 10.00 - ------------------------------------------------------------------ -------- --------- End of period...................................................... $11.43 $10.73 ================================================================== ======== ========= Total return (%)***................................................ 6.52 7.30 ================================================================== ======== ========= Ratio of expenses to average net assets (a)........................ 0.81% 2.13% Ratio of net investment income (loss) to average net assets (a) (b)............................................................... 0.31% (1.04%) Portfolio turnover................................................. 54% 131% Net assets, end of period (000s)................................... $4,534 $2,983 ================================================================== ======== =========
* Investment operations commenced on May 5, 1995. ** Net investment income has been calculated based upon an average of units outstanding. *** Total return calculation (not annualized) 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, and does not include expenses charged to the funds in which the Fund invests. (a) Annualized for the period ended December 31, 1995. (b) Ratio excludes income retained by the funds in which the Fund invests (see Note 2). The accompanying notes are an integral part of these financial statements SAI-87 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--CONSERVATIVE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE The State Street Bank and Trust Company ("State Street Bank") Lifecycle Fund Group Trust -- Conservative (the "Fund") was formed under a Declaration of Trust dated February 21, 1991 as amended and restated through July 19, 1991. The Fund's objective is to seek to provide current income and a low to moderate growth of capital. State Street Bank is the Fund's Trustee and custodian. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION Investments in State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans are valued at the net asset value per unit on the valuation date. Investments held by State Street Bank Investment Funds for Tax Exempt Retirement Plans in securities listed on a national securities exchange and over-the-counter securities are valued at the last reported sale price on the valuation date or, if no sale price was reported on the valuation date, the last published sale price. Certain investments held by underlying funds are valued at fair value 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. Investments held by the Short Term Investment Fund are stated at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are accounted for on the trade date (the date the order to buy or sell is executed). The cost of securities contributed to, and proceeds related to securities delivered by, the Fund in connection with the issuance and redemption of its units of participation are based on the valuations of those securities determined as described above. The cost of securities delivered and the net gain or loss on securities sold is determined using the average cost method. With the exception of the Short Term Investment Fund, the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, in which the Fund invests, retain all investment income earned (except for securities lending fee income). Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income. Distributions from the Short Term Investment Fund are accrued daily. 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). SAI-88 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--CONSERVATIVE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 The number of and value of units issued in connection with a contribution of assets to the Fund or redeemed in connection with a withdrawal from the Fund shall be determined on the basis of the value of the Fund as of the Fund's last preceding valuation date to the date on which such order to contribute assets or order to withdraw assets is received; provided, however, that 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 reasonably deems appropriate. E. EXPENSES According to the Declaration of Trust, the Fund may pay certain expenses for services received during the year. The Trustee is paid a management fee by the Fund at the annual rate of 0.17%. Additionally, the Trustee is paid an annual fee of $11,100 for providing various recordkeeping and accounting services to the Fund. F. DISTRIBUTIONS TO PARTICIPANTS All net investment income and net realized gains are retained by the Fund. G. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the Trustee to make estimates and assumptions 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. 3. SECURITIES LENDING PROGRAM Certain collective investment funds in which the Fund invests engage in securities lending activities, under which the Trustee, as agent, loans securities to certain banks 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 fair market value of the loaned securities. To the extent cash is provided as collateral, it is invested by the Trustee in short-term obligations, money market securities or other collective investment funds. The Trustee, as lending agent, indemnifies the Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Participants of the Fund, however, bear the risk of loss with respect to the investment of collateral. A portion of the income generated upon investment of the cash collateral is remitted to the Borrowers, and the remainder is allocated between the Fund and the Trustee in its capacity as lending agent. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, excluding short-term investments and including in-kind contributions and redemptions, if any, during the year ended December 31, 1996 were $3,309,226 and $2,321,289, respectively, resulting in a net realized gain of $109,095. Purchases and sales of short-term investments (including maturities) were $1,148,279 and $822,422, respectively. SAI-89 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--CONSERVATIVE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
PERIOD ENDED DECEMBER 31, 1996 1995 ------------------------- ------------------------- UNITS AMOUNT UNITS AMOUNT Units issued.................................... 356,358 $ 3,869,523 430,911 $ 4,402,424 Units redeemed.................................. (237,533) (2,599,132) (153,045) (1,571,398) ----------- ------------- ----------- ------------- Net increase (decrease) in units and net assets resulting from participant transactions ....... 118,825 $ 1,270,391 277,866 $ 2,831,026 =========== ============= =========== =============
All of the Fund's units outstanding were held by one unitholder at December 31, 1996. SAI-90 REPORT OF INDEPENDENT ACCOUNTANTS To the Participant and Trustee of the State Street Bank and Trust Company Lifecycle Fund Group Trust -- Moderate In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the selected per unit data present fairly, in all material respects, the financial position of the State Street Bank and Trust Company Lifecycle Fund Group Trust -- Moderate (the "Fund") at December 31, 1996, the results of its operations for the year then ended, and the changes in its net assets and the selected per unit data for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and selected per unit data (hereafter referred to as "financial statements") are the responsibility of the Fund's 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 generally accepted auditing standards 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, 1996 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts April 10, 1997 SAI-91 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--MODERATE Statement of Assets and Liabilities December 31, 1996 - -----------------------------------------------------------------------------
ASSETS Investments in State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans: Daily EAFE Fund Non-Lending (1,076,200 units) ................................. $13,546,124 Daily Government/Corporate Bond Fund (2,262,612 units)......................... 26,805,166 Russell 2000 Fund (469,903 units).............................................. 9,043,754 S&P 500 Flagship Fund (258,819 units).......................................... 30,904,075 Short Term Investment Fund (7,989,989 units)................................... 7,989,989 - ------------------------------------------------------------------------------ ------------- Total investments, at value (cost $79,528,686).............................. 88,289,108 - ------------------------------------------------------------------------------ ------------- Interest and other receivables................................................. 43,339 - ------------------------------------------------------------------------------ ------------- Total assets................................................................ 88,332,447 - ------------------------------------------------------------------------------ ------------- LIABILITIES Payable to custodian........................................................... 24,039 Accrued expenses............................................................... 35,445 - ------------------------------------------------------------------------------ ------------- Total liabilities........................................................... 59,484 - ------------------------------------------------------------------------------ ------------- Net assets (equivalent to $12.44 per unit based on 7,094,543 units outstanding).................................................................. $88,272,963 ============================================================================== =============
The accompanying notes are an integral part of these financial statements. SAI-92 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--MODERATE Statement of Operations Year ended December 31, 1996 - -----------------------------------------------------------------------------
INVESTMENT INCOME Interest .......................................................... $ 452,104 Securities lending fee............................................. 6,247 - ------------------------------------------------------------------ ----------- Total investment income......................................... 458,351 - ------------------------------------------------------------------ ----------- EXPENSES Accounting and recordkeeping....................................... 11,100 Audit.............................................................. 4,500 Legal.............................................................. 11,997 Management......................................................... 139,984 - ------------------------------------------------------------------ ----------- Total expenses.................................................. 167,581 - ------------------------------------------------------------------ ----------- Net investment income.............................................. 290,770 - ------------------------------------------------------------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments............................ 1,108,666 Net change in unrealized appreciation (depreciation) on investments....................................................... 7,887,616 - ------------------------------------------------------------------ ----------- Net realized and unrealized gain (loss)............................ 8,996,282 - ------------------------------------------------------------------ ----------- Net increase (decrease) in net assets resulting from operations ... $9,287,052 ================================================================== ===========
The accompanying notes are an integral part of these financial statements. SAI-93 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--MODERATE Statement of Changes in Net Assets
PERIOD ENDED DECEMBER 31, --------------------------- 1996 1995* - ---------------------------------------------------------------------------- ------------- ------------- FROM OPERATIONS Net investment income (loss)................................................. $ 290,770 $ (6,553) Net realized gain (loss) on investments...................................... 1,108,666 29,206 Net change in unrealized appreciation (depreciation) on investments ......... 7,887,616 872,806 - ---------------------------------------------------------------------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations ............. 9,287,052 895,459 - ---------------------------------------------------------------------------- ------------- ------------- FROM PARTICIPANT TRANSACTIONS Net increase (decrease) in net assets resulting from participant transactions................................................................ 2,739,940 75,350,512 - ---------------------------------------------------------------------------- ------------- ------------- Net increase (decrease) in net assets........................................ 12,026,992 76,245,971 NET ASSETS Beginning of period.......................................................... 76,245,971 -- - ---------------------------------------------------------------------------- ------------- ------------- End of period................................................................ $88,272,963 $76,245,971 ============================================================================ ============= =============
- ------------ * Investment operations commenced on May 5, 1995. The accompanying notes are an integral part of these financial statements. SAI-94 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--MODERATE Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, ------------------- 1996 1995* - ----------------------------------------------------------------- --------- --------- Net investment income (loss)**.................................... $ 0.04 $ (0.01) Net realized and unrealized gain (loss)........................... 1.27 1.14 - ----------------------------------------------------------------- --------- --------- Net increase (decrease)........................................... 1.31 1.13 NET ASSET VALUE Beginning of period............................................... 11.13 10.00 - ----------------------------------------------------------------- --------- --------- End of period..................................................... $ 12.44 $ 11.13 - ----------------------------------------------------------------- --------- --------- Total return (%)***............................................ 11.77 11.30 - ----------------------------------------------------------------- --------- --------- Ratio of expenses to average net assets (a)....................... 0.20% 0.52% Ratio of net investment income (loss) to average net assets (a)(b)........................................................... 0.35% (0.07%) Portfolio turnover................................................ 18% 30% Net assets, end of period (000s).................................. $88,273 $76,246 ================================================================= ========= =========
- ------------ * Investment operations commenced on May 5, 1995. ** Net investment income has been calculated based upon an average of units outstanding. *** Total return calculation (not annualized) 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, and does not include expenses charged to the funds in which the Fund invests. (a) Annualized for the period ended December 31, 1995. (b) Ratio excludes income retained by funds in which the Fund invests (see Note 2). The accompanying notes are an integral part of these financial statements. SAI-95 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--MODERATE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE The State Street Bank and Trust Company ("State Street Bank") Lifecycle Fund Group Trust -- Moderate (the "Fund") was formed under a Declaration of Trust dated February 21, 1991 as amended and restated through July 19, 1991. The Fund's objective is to seek to provide a reasonable level of current income and growth of capital. State Street Bank is the Fund's Trustee and custodian. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION Investments in State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans are valued at the net asset value per unit on the valuation date. Investments held by State Street Bank Investment Funds for Tax Exempt Retirement Plans in securities listed on a national securities exchange and over-the-counter securities are valued at the last reported sale price on the valuation date or, if no sale price was reported on the valuation date, the last published sale price. Certain investments held by underlying funds are valued at fair value 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. Investments held by the Short Term Investment Fund are stated at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are accounted for on the trade date (the date the order to buy or sell is executed). The cost of securities contributed to, and proceeds related to securities delivered by, the Fund in connection with the issuance and redemption of its units of participation are based on the valuations of those securities determined as described above. The cost of securities delivered and the net gain or loss on securities sold is determined using the average cost method. With the exception of the Short Term Investment Fund, the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, in which the Fund invests, retain all investment income earned (except for securities lending fee income). Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income. Distributions from the Short Term Investment Fund are accrued daily. 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). SAI-96 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--MODERATE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 The number of and value of units issued in connection with a contribution of assets to the Fund or redeemed in connection with a withdrawal from the Fund shall be determined on the basis of the value of the Fund as of the Fund's last preceding valuation date to the date on which such order to contribute assets or order to withdraw assets is received; provided, however, that 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 reasonably deems appropriate. E. EXPENSES According to the Declaration of Trust, the Fund may pay certain expenses for services received during the year. The Trustee is paid a management fee by the Fund at the annual rate of 0.17%. Additionally, the Trustee is paid a fee annually of $11,100 for providing various recordkeeping and accounting services to the Fund. F. DISTRIBUTIONS TO PARTICIPANTS All net investment income and net realized gains are retained by the Fund. G. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the Trustee to make estimates and assumptions 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. 3. SECURITIES LENDING PROGRAM Certain collective investment funds in which the Fund invests engage in securities lending activities, under which the Trustee, as agent, loans securities to certain banks 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 fair market value of the loaned securities. To the extent cash is provided as collateral, it is invested by the Trustee in short-term obligations, money market securities or other collective investment funds. The Trustee, as lending agent, indemnifies the Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Participants of the Fund, however, bear the risk of loss with respect to the investment of collateral. A portion of the income generated upon investment of the cash collateral is remitted to the Borrowers, and the remainder is allocated between the Fund and the Trustee in its capacity as lending agent. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, excluding short-term investments and including in-kind contributions and redemptions, if any, during the year ended December 31, 1996 were $17,539,199 and $14,907,008, respectively, resulting in a net realized gain of $1,108,666. Purchases and sales of short-term investments (including maturities) were $2,618,182 and $2,236,795, respectively. SAI-97 STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST--MODERATE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
PERIOD ENDED DECEMBER 31, 1996 1995 ------------------------- ------------------------- UNITS AMOUNT UNITS AMOUNT Units issued..................... 1,071,085 $12,433,172 6,932,464 $76,246,459 Units redeemed................... (826,360) (9,693,232) (82,646) (895,947) ----------- ------------- ----------- ------------- Net increase (decrease) in units and net assets resulting from participant transactions .. 244,725 $ 2,739,940 6,849,818 $75,350,512 =========== ============= =========== =============
All of the Fund's units outstanding were held by one unitholder at December 31, 1996. SAI-98 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of the State Street Bank and Trust Company S&P 500 Flagship Fund and the State Street Bank and Trust Company S&P 500 Index Fund with Futures 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 selected per unit data present fairly, in all material respects, the financial position of the State Street Bank and Trust Company S&P 500 Flagship Fund and the State Street Bank and Trust Company S&P 500 Index Fund with Futures (the "Funds") at December 31, 1996, the results of their operations for the year then ended, and the changes in their net assets and their selected per unit data for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and selected per unit data (hereafter referred to as "financial statements") are the responsibility of the Fund's 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 generally accepted auditing standards 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, 1996 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts March 10, 1997 SAI-99 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Statement of Assets and Liabilities December 31, 1996 - -----------------------------------------------------------------------------
ASSETS Investments in securities, at value (cost $17,233,576,411) ....... $24,387,024,008 Collateral held for loaned securities, at value................... 713,171,684 Receivable for investments sold................................... 10,482,249 Receivable for fund units issued.................................. 871,007,667 Dividends receivable.............................................. 39,963,493 Interest receivable............................................... 2,058,819 - ----------------------------------------------------------------- --------------- Total assets..................................................... 26,023,707,920 - ----------------------------------------------------------------- --------------- LIABILITIES Collateral on securities loaned................................... 713,171,684 Payable for investments purchased................................. 1,039,455,703 Payable for fund units redeemed................................... 2,479,796 Payable to custodian.............................................. 4,054,186 Accrued expenses.................................................. 39,448 Variation margin payable.......................................... 9,663,768 - ----------------------------------------------------------------- --------------- Total liabilities................................................ 1,768,864,585 - ----------------------------------------------------------------- --------------- Net Assets ....................................................... $24,254,843,335 ================================================================= =============== S&P 500 Flagship Fund: 175,174,322 units outstanding, at $119.40 per unit net asset value............................................................ $20,916,085,359 S&P 500 Index Fund with Futures: 27,962,436 units outstanding, at $119.40 per unit net asset value............................................................ 3,338,757,976 - ----------------------------------------------------------------- --------------- $24,254,843,335 ================================================================= ===============
The accompanying rules are an integral part of the financial statements SAI-100 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Statement of Operations Year ended December 31, 1996 - -----------------------------------------------------------------------------
INVESTMENT INCOME Dividends (net of taxes withheld of $3,666)................................. $ 449,021,586 Interest ................................................................... 17,627,901 Securities lending fee income, net of related expenses (Note 3) ........... 561,261 - --------------------------------------------------------------------------- --------------- Total investment income................................................... 467,210,748 - --------------------------------------------------------------------------- --------------- EXPENSES Audit ...................................................................... 27,999 Custody .................................................................... 245,563 - --------------------------------------------------------------------------- --------------- Total expenses ........................................................... 273,562 - --------------------------------------------------------------------------- --------------- Net investment income....................................................... 466,937,186 - --------------------------------------------------------------------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS Net realized gain (loss): Investments ............................................................... 534,042,688 Futures contracts.......................................................... 64,873,769 - --------------------------------------------------------------------------- --------------- 598,916,457 - --------------------------------------------------------------------------- --------------- Net change in unrealized appreciation (depreciation): Investments ............................................................... 3,142,759,498 Futures contracts.......................................................... (7,725,400) - --------------------------------------------------------------------------- --------------- 3,135,034,098 - --------------------------------------------------------------------------- --------------- Net realized and unrealized gain (loss) on investments and futures contracts.................................................................. 3,733,950,555 - --------------------------------------------------------------------------- --------------- Net increase (decrease) in net assets resulting from operations ........... $4,200,887,741 =========================================================================== ===============
The accompanying rules are an integral part of the financial statements SAI-101 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, ------------------------------ 1996 1995 - ----------------------------------------------------------------------------------- --------------- -------------- FROM OPERATIONS Net investment income.............................................................. $ 466,937,186 $ 324,063,367 Net realized gain (loss) on investments and futures contracts...................... 598,916,457 326,376,133 Net change in unrealized appreciation (depreciation) on investments and futures contracts......................................................................... 3,135,034,098 3,134,480,988 - ----------------------------------------------------------------------------------- --------------- -------------- Net increase (decrease) in net assets resulting from operations..................... 4,200,887,741 3,784,920,488 - ----------------------------------------------------------------------------------- --------------- -------------- Distributions of securities lending fee income to S&P 500 Flagship Fund participants (Note 3).............................................................. (561,261) (229,747) - ----------------------------------------------------------------------------------- --------------- -------------- FROM PARTICIPANT TRANSACTIONS Net increase (decrease) in net assets resulting from participant transactions ..... 2,754,178,689 3,825,334,848 - ----------------------------------------------------------------------------------- --------------- -------------- Net increase (decrease) in net assets.............................................. 6,954,505,169 7,610,025,589 NET ASSETS Beginning of year.................................................................. 17,300,338,166 9,690,312,577 - ----------------------------------------------------------------------------------- --------------- -------------- End of year........................................................................ $24,254,843,335 $17,300,338,166 =================================================================================== =============== ==============
The accompanying rules are an integral part of the financial statements SAI-102 STATE STREET BANK AND TRUST COMPANY S&P 500 INDEX FUND WITH FUTURES Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, --------------------------------------------- 1996 1995 1994 1993 1992 - -------------------------------------------- --------- -------- -------- -------- -------- Net investment income**...................... $ 2.48 $ 2.24 $ 1.90 $ 1.80 $ 1.53 Net realized and unrealized gain (loss) ..... 19.86 24.26 (0.93) 4.55 3.04 - -------------------------------------------- --------- -------- -------- -------- -------- Net increase (decrease)...................... 22.34 26.50 0.97 6.35 4.57 NET ASSET VALUE Beginning of year............................ 97.06 70.56 69.59 63.24 58.67 - -------------------------------------------- --------- -------- -------- -------- -------- End of year.................................. $119.40 $97.06 $70.56 $69.59 $63.24 ============================================ ========= ======== ======== ======== ======== Total return (%)***.......................... 23.02 37.56 1.39 10.06 7.79 ============================================ ========= ======== ======== ======== ======== 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.................................. 2.33% 2.66% 2.88% 2.68% 2.57% - -------------------------------------------- --------- -------- -------- -------- -------- Portfolio turnover........................... 27% 10% 12% 22% 19% - -------------------------------------------- --------- -------- -------- -------- -------- Average broker commission per share (a) ..... $ 0.04 N/A N/A N/A N/A Net assets, end of year (000,000s)........... $ 3,339 $2,165 $1,432 $ 275 $ 155 ============================================ ========= ======== ======== ======== ======== - ------------ * Less than .01%. ** Net investment income has been calculated based on an average of units outstanding. *** Total return calculation is based on the value of a single unit of participation outstanding throughout the entire 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 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) Represents total commissions paid on portfolio securities divided by total number of shares purchased or sold on which commisions were charged. This disclosure is required by the SEC beginning in 1996. The accompanying rules are an integral part of the financial statements SAI-103 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ---------------------------------------------- 1996 1995 1994 1993 1992 - ------------------------------------------------ --------- --------- -------- -------- -------- Net investment income**.......................... $ 2.48 $ 2.24 $ 1.90 $ 1.81 $ 1.54 Net realized and unrealized gain (loss) ......... 19.86 24.26 (0.93) 4.55 3.04 Distribution of securities lending fee income (a)............................................. 0.00 0.00 0.00 (0.01) (0.01) - ------------------------------------------------ --------- --------- -------- -------- -------- Net increase (decrease).......................... 22.34 26.50 0.97 6.35 4.57 NET ASSET VALUE Beginning of year................................ 97.06 70.56 69.59 63.24 58.67 - ------------------------------------------------ --------- --------- -------- -------- -------- End of year...................................... $119.40 $ 97.06 $70.56 $69.59 $63.24 ================================================ ========= ========= ======== ======== ======== Total return (%)***.............................. 23.02 37.56 1.39 10.06 7.81 ================================================ ========= ========= ======== ======== ======== 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.......................................... 2.33% 2.66% 2.88% 2.68% 2.58% - ------------------------------------------------ --------- --------- -------- -------- -------- Portfolio turnover............................... 27% 10% 12% 22% 19% - ------------------------------------------------ --------- --------- -------- -------- -------- Average broker commission per share (b) ......... $ 0.04 N/A N/A N/A N/A Net assets, end of year (000,000s)............... $20,916 $15,135 $8,258 $5,753 $4,233 ================================================ ========= ========= ======== ======== ======== - ------------ * Less than .01%. ** Net investment income has been calculated based on an average of units outstanding. *** Total return calculation is based on the value of a single unit of participation outstanding throughout the entire 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 dividends. 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. (a) Zero amounts per unit represent those which are less than $.005. (b) Represents total commissions paid on portfolio securities divided by total number of shares purchased or sold on which commissions were charged. This disclosure is required by the SEC beginning in 1996. The accompanying rules are an integral part of the financial statements SAI-104 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 1. INVESTMENT OBJECTIVE The State Street Bank and Trust Company ("State Street Bank") S&P 500 Flagship Fund and S&P 500 Index Fund with Futures (collectively, the "Funds") are diversified equity pooled funds. The Funds were formed under a Declaration of Trust dated February 21, 1991, as amended and restated through July 19, 1991. Each Fund's objective is to replicate, as closely as possible, the Standard & Poor's (S&P) 500 Index, which is accomplished by investing in substantially all of the equity securities which comprise the Index. Additionally, each of the Funds may hold up to 25% of its value in S&P 500 stock index futures contracts and hold units of certain State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, consistent with its investment objectives. State Street Bank is the Funds' Trustee and custodian. State Street Global Advisors, a division of State Street Bank, is the Funds' investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION Investments in securities listed on a national securities exchange and over-the-counter securities are valued at the last reported sale price on the valuation date, or if no sale price was reported on the valuation date, the last published sale price. Short-term investments are stated at amortized cost which approximates market. Investments in registered investment companies or other State Street Bank and Trust Investment Funds for Tax Exempt Retirement Plans are valued at net asset value per share/unit on the valuation date. Futures contracts are valued at the settlement price established each day by the board of trade or exchange upon which they are traded. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are accounted for on the trade date (date the order to buy or sell is executed). The cost of securities contributed to, and proceeds related to securities delivered by, the Fund in connection with the issuance and redemption of its units of participation are based on the valuations of those securities determined as described above. The cost of securities delivered and the net gain or loss on securities sold is determined using the average cost method. Interest income is recorded on the accrual basis. Interest income is increased by accretion of discount and reduced by amortization of premium. Dividend income, net of applicable withholding taxes, is recorded on ex-dividend date. C. INCOME TAXES It is the Funds' 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 Funds are exempt from federal income taxes and no federal income tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset values of the Funds are determined each business day (valuation date). Issuances and redemptions of Fund units are made based upon the closing market value of the securities bought or sold as of the valuation date, adjusted for the related market effect and transaction costs previously described. SAI-105 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES NOTES TO COMBINED DECEMBER 31, 1996 FINANCIAL STATEMENTS The transaction costs and market effect associated with the investment of proceeds from the issuance of Fund units are those incurred upon disposition of investments to settle redemption of Fund units are allocated to the applicable participant. Transaction costs include brokerage commissions, taxes and other direct costs related to security transactions. 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. E. EXPENSES According to the Declaration of Trust, the Funds may pay certain expenses for services received during the year. The Trustee is paid a fee by the Funds for custodial services at the annual rate of $50,000, plus a charge for each security and futures transaction executed. F. DISTRIBUTIONS TO PARTICIPANTS All net investment income (excluding securities lending fees) and net realized gains are retained by the Funds. Income generated by securities lending is distributed to S&P 500 Flagship Fund participants monthly. G. FUTURES CONTRACTS The Funds may use futures contracts to manage their exposure to the equity market. Buying futures tends to increase the Funds' exposure to the underlying instrument. Futures contracts involve, to varying degrees, credit and market risks. The Funds enter into futures contracts only on exchanges or boards of trades 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. The maximum potential loss from a long futures contract is the U.S. dollar value of the notional amount at the time the contract is opened. The potential loss on a short contract is unlimited. Upon entering into a futures contract, the Funds are 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 Funds each day, depending on the daily fluctuation in the value of the underlying securities, and are recorded as unrealized gains or losses by the Funds. Such receipts or payments are known as "variation margin". A gain or loss is realized when the contract is closed or expires. H. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles require the Trustee to make estimates and assumptions 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. SAI-106 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 3. SECURITIES LENDING PROGRAM The participants in the S&P 500 Flagship Fund (the "Lending Fund") have authorized the Lending Fund to participate in the 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 Index Fund with Futures (the "Index Fund"), except that the Lending Fund engages in securities lending activities. Accordingly, the financial statements of the Lending Fund and the Index Fund (collectively, the "Funds") have been prepared on a combined basis, with separate disclosure of the participant transactions and per unit data of each of the Funds. Each of the Funds maintains a divided pro-rata interest in the combined assets and liabilities (including each investment security position) proportionate to the net asset value of the outstanding combined units of the Funds. All interfund transactions have been eliminated in the combined financial statements. Under the 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 fair market value of the loaned securities. At December 31, 1996, the value of securities loaned by the Lending Fund was $678,297,399 against which was held cash collateral of $713,171,684. Cash collateral provided is invested in a variety of registered investment companies managed by State Street Bank. 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. 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. All income earned from lending activities is distributed monthly to Lending Fund participants. Participants in each of the Lending Fund or the Index Fund may exchange their units for units of the other fund on any valuation date. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, excluding short-term investments and including in-kind contributions and redemptions, if any, during the year ended December 31, 1996 were $5,699,762,775 and $2,391,064,474, respectively, resulting in a net realized gain (loss) of $535,370,256. This gain (loss) is prior to the recognition of the market effect and transaction costs associated with contributions and redemptions. SAI-107 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 5. UNITS OF PARTICIPATION Participant transactions for each Fund were as follows:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------- 1996 1995 ------------------------------ ------------------------------ UNITS AMOUNT UNITS AMOUNT -------------- --------------- -------------- --------------- S&P 500 FLAGSHIP FUND: Units issued .................... 98,935,366 $10,682,791,463 66,412,094 $ 5,900,504,862 Units redeemed .................. (79,681,942) (8,532,480,187) (27,527,383) (2,251,812,851) -------------- --------------- -------------- --------------- Total ......................... 19,253,424 $ 2,150,311,276 38,884,711 $ 3,648,692,011 -------------- --------------- -------------- --------------- S&P 500 INDEX FUND WITH FUTURES: Units issued .................... 9,657,971 $ 1,027,503,584 6,080,185 $ 501,064,924 Units redeemed .................. (3,999,223) (423,636,171) (4,070,455) (324,422,087) -------------- --------------- -------------- --------------- Total ......................... 5,658,748 $ 603,867,413 2,009,730 $ 176,642,837 -------------- --------------- -------------- --------------- Net increase (decrease) in units and net assets resulting from participant transactions ..... 24,912,172 $ 2,754,178,689 40,894,441 $ 3,825,334,848 ============== =============== ============== ===============
S&P 500 FLAGSHIP FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 1996 held by 1 of the Lending Fund's 150 unitholders aggregated 11% of the Lending Fund's total units outstanding. During the year ended December 31, 1996, the net market effect and transaction costs (absorbed by) credited to participants in issuance and redemption of Lending Fund units were $1,190,607. S&P 500 INDEX FUND WITH FUTURES Units in excess of 10% of the Index Fund units outstanding at December 31, 1996 held by 1 of the Index Fund's 19 unitholders aggregated 59% of the Index Fund's total units outstanding. During the year ended December 31, 1996, the net market effect and transaction costs (absorbed by) credited to participants in issuance and redemption of Index Fund units were $136,961. A redemption by one or more unitholders individually holding 10% or more of the Funds' units may cause the remaining unitholders to bear proportionately higher operating expenses and otherwise adversely affect the Funds' future liquidity and investment operations. As described under "Issuances and Redemptions of Units of Participation", however, redeeming unitholders bear the transaction costs and market effect arising from any redemption of units; additionally, in certain circumstances, redemptions may be made on an in-kind basis. These practices may tend to mitigate the potential adverse effects of such redemptions. SAI-108 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (showing percentage of total value of investments) December 31, 1996
SHARES VALUE - --------------------------------------------------- ------------- --------------- COMMON STOCK 98.0% 3COM Corp........................................... 723,768 $ 53,106,477 Abbott Laboratories................................. 3,270,142 165,959,706 Adolph Coors Co. Class B............................ 181,191 3,442,629 Advanced Micro Devices Inc.......................... 561,303 14,453,552 Aetna Inc........................................... 648,939 51,915,120 Air Products & Chemicals Inc........................ 497,637 34,399,158 Airtouch Communications............................. 2,101,364 53,059,441 Alberto Culver Co. Class B Conv..................... 117,924 5,660,352 Albertson's Inc..................................... 1,063,604 37,890,892 Alcan Aluminum Ltd.................................. 903,243 30,371,546 Alexander & Alexander Services Inc.................. 223,039 3,875,303 Allegheny Teledyne Inc.............................. 739,500 17,008,500 Allergan Inc........................................ 280,202 9,982,196 Allied Signal Inc................................... 1,191,676 79,842,292 Allstate Corp....................................... 1,892,796 109,545,568 Alltel Corp......................................... 784,920 24,626,865 Aluminum Co. of America............................. 742,105 47,309,194 Alza Corp........................................... 348,395 9,014,721 Amdahl Corp......................................... 556,238 6,744,386 Amerada Hess Corp................................... 399,912 23,144,907 American Brands Inc. ............................... 730,993 36,275,528 American Electric Power Co., Inc.................... 771,530 31,729,171 American Express Co................................. 1,992,017 112,548,960 American General Corp............................... 869,948 35,559,124 American Greetings Corp. Class A.................... 289,009 8,200,630 American Home Products Corp......................... 2,697,275 158,127,747 American International Group Inc.................... 1,975,404 213,837,483 American Stores Co. ................................ 639,398 26,135,393 Ameritech Corp...................................... 2,313,328 140,245,510 Amgen Inc........................................... 1,134,540 61,690,612 Amoco Corp.......................................... 2,096,720 168,785,960 AMP Inc. ........................................... 908,756 34,873,511 AMR Corp............................................ 384,579 33,891,024 Andrew Corp......................................... 264,453 14,032,537 Anheuser Busch Cos., Inc............................ 2,102,757 84,110,280 Aon Corp............................................ 463,797 28,813,389 Apple Computer...................................... 507,690 10,598,029 Applied Materials Inc............................... 755,237 27,141,330 Archer Daniels Midland Co........................... 2,310,653 50,834,366 Armco Inc. ......................................... 380,412 1,569,200 Armstrong World Industries Inc...................... 171,901 11,947,120 Asarco Inc.......................................... 177,516 4,415,711 Ashland Inc......................................... 265,612 11,653,727 AT&T Corp........................................... 6,824,677 296,873,449 Atlantic Richfield Co............................... 679,426 90,023,945 Autodesk Inc........................................ 185,330 5,189,240 Automatic Data Processing Inc....................... 1,219,087 52,268,355 Autozone Inc........................................ 632,400 17,391,000 Avery Dennison Corp................................. 494,288 17,485,438 The accompanying notes are an integral part of the financial statements. SAI-109 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- Avon Products Inc................................... 573,421 $ 32,756,675 B.F. Goodrich Co. .................................. 232,735 9,425,768 Baker Hughes Inc.................................... 611,069 21,081,881 Ball Corp........................................... 139,447 3,625,622 Baltimore Gas & Electric Co......................... 619,692 16,576,761 BancOne Corp........................................ 1,813,600 77,984,800 Bank of Boston Corp. ............................... 653,678 41,998,811 Bank of New York Co., Inc........................... 1,656,271 55,899,146 Bankamerica Corp.................................... 1,517,002 151,320,949 Bankers Trust New York Corp......................... 343,605 29,635,931 Barnett Banks Inc................................... 828,433 34,069,307 Barrick Gold Corp................................... 1,419,407 40,807,951 Battle Mountain Gold Co............................. 952,205 6,546,409 Bausch & Lomb Inc................................... 216,716 7,585,060 Baxter International Inc............................ 1,159,516 47,540,156 Bay Networks Inc.................................... 798,936 16,677,789 Becton Dickinson & Co............................... 582,393 25,261,296 Bell Atlantic Corp.................................. 1,836,933 118,941,412 Bellsouth Corp...................................... 4,178,643 168,712,711 Bemis Co., Inc. .................................... 204,472 7,539,905 Beneficial Corp..................................... 223,954 14,193,085 Bethlehem Steel Corp. .............................. 445,632 4,010,688 Beverly Enterprises Inc............................. 417,573 5,324,056 Biomet Inc.......................................... 468,328 7,083,461 Black & Decker Corp................................. 379,269 11,425,479 Boatmens Bancshares Inc............................. 685,531 44,216,749 Boeing Co........................................... 1,518,674 161,548,947 Boise Cascade Corp.................................. 196,303 6,232,620 Boston Scientific Corp.............................. 770,171 46,210,260 Briggs & Stratton Corp.............................. 108,660 4,781,040 Bristol-Myers Squibb Co............................. 2,109,299 229,386,266 Brown Forman Corp. Class B.......................... 276,075 12,630,431 Browning Ferris Industries Inc...................... 882,347 23,161,609 Brunswick Corp...................................... 393,420 9,442,080 Burlington Northern................................. 656,360 56,693,095 Burlington Resources Inc............................ 532,858 26,842,722 C.R. Bard Inc....................................... 231,745 6,488,860 Cabletron Systems Inc............................... 656,006 21,812,200 Caliber System, Inc................................. 162,978 3,137,327 Campbell Soup Co.................................... 991,569 79,573,412 Carolina Power & Light Co........................... 618,316 22,568,534 Case Corp........................................... 315,076 17,171,642 Caterpillar Inc..................................... 811,460 61,062,365 Centex Corp......................................... 122,442 4,606,880 Central & South West Corp........................... 871,652 22,336,082 Ceridian Corp....................................... 288,106 11,668,293 Champion International Corp......................... 404,455 17,492,679 Charming Shoppes Inc. .............................. 421,913 2,135,935 Chase Manhattan Corp................................ 1,866,652 166,598,691 Chevron Corp........................................ 2,743,857 178,350,705 The accompanying notes are an integral part of the financial statements. SAI-110 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- Chrysler Corp....................................... 3,070,674 $ 101,332,242 Chubb Corp.......................................... 735,172 39,515,495 CIGNA Corp. ........................................ 328,914 44,937,875 Cincinnati Milacron Inc............................. 160,624 3,513,650 Cinergy Corp........................................ 665,140 22,199,048 Circuit City Stores Inc............................. 433,337 13,054,277 Cisco Systems Inc................................... 2,746,956 174,775,075 Citicorp............................................ 1,994,541 205,437,723 Clorox Co........................................... 217,892 21,870,910 Coca Cola Co........................................ 10,495,219 552,310,900 Cognizant Corp...................................... 737,363 24,332,979 Colgate Palmolive Co................................ 618,358 57,043,525 Columbia Gas System Inc............................. 219,612 13,972,814 Columbia/HCA Healthcare Corp........................ 2,819,749 114,904,772 Comcast Corp. Class A............................... 438,500 7,728,563 Comcast Corp. Class A Special....................... 918,976 16,369,260 Comerica, Inc....................................... 491,785 25,757,239 Compaq Computer Corp................................ 1,127,764 83,736,477 Computer Associates International Inc............... 1,543,510 76,789,622 Computer Sciences Corp. ............................ 326,616 26,823,339 ConAgra Inc......................................... 1,026,971 51,091,807 Conrail Inc......................................... 329,361 32,812,590 Consolidated Edison Co. of New York Inc............. 978,409 28,618,463 Consolidated Natural Gas Co......................... 399,760 22,086,740 Cooper Industries Inc............................... 472,557 19,906,464 Cooper Tire & Rubber Co. ........................... 353,999 6,991,480 Corestates Financial Corp........................... 948,715 49,214,591 Corning Inc......................................... 966,299 44,691,329 CPC International Inc............................... 607,512 47,082,180 Crane Co. .......................................... 188,941 5,479,289 Crown Cork & Seal Co., Inc.......................... 555,137 30,185,574 CSX Corp. .......................................... 856,867 36,202,631 CUC International Inc............................... 1,671,632 39,701,260 Cummins Engine Co., Inc. ........................... 160,421 7,379,366 CVS Corp............................................ 469,230 19,414,391 Cyprus Amax Minerals Co............................. 380,291 8,889,302 Dana Corp........................................... 466,632 15,223,869 Darden Restaurants Inc.............................. 586,391 5,130,921 Data General Corp. ................................. 175,066 2,538,457 Dayton Hudson Corp.................................. 915,455 35,931,609 Dean Witter Discover & Co........................... 682,971 45,246,829 Deere & Co.......................................... 1,105,353 44,904,966 Dell Computer Corp.................................. 763,134 40,541,494 Delta Air Lines Inc................................. 326,201 23,119,496 DeLuxe Corp......................................... 345,701 11,321,708 Digital Equipment Corp.............................. 658,460 23,951,482 Dillard Department Stores Inc. Class A.............. 485,596 14,992,777 Dominion Resources Inc.............................. 736,777 28,365,914 Dover Corp.......................................... 497,901 25,019,525 Dow Chemical Co..................................... 1,026,182 80,427,014 The accompanying notes are an integral part of the financial statements. SAI-111 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- Dow Jones & Co., Inc................................ 384,728 $ 13,032,661 Dresser Industries Inc. ............................ 739,788 22,933,428 DSC Communications Corp............................. 502,777 8,987,139 DTE Energy Co. ..................................... 609,068 19,718,577 Duke Power Co....................................... 854,263 39,509,664 Dun & Bradstreet Corp. ............................. 741,963 17,621,621 E.I. du Pont de Nemours & Co........................ 2,358,633 222,595,989 Eastern Enterprises ................................ 86,545 3,061,529 Eastman Chemical Co................................. 326,839 18,057,855 Eastman Kodak Co.................................... 1,401,807 112,495,012 Eaton Corp.......................................... 319,673 22,297,192 Echlin Inc. ........................................ 243,912 7,713,717 Echo Bay Mines Ltd.................................. 525,053 3,478,476 Ecolab Inc. ........................................ 277,832 10,453,429 Edison International................................ 1,834,308 36,456,871 EG&G Inc............................................ 198,263 3,990,043 El Paso Natural Gas Co.............................. 1 47 Eli Lilly & Co...................................... 2,338,338 170,698,674 EMC Corp............................................ 991,688 32,849,665 Emerson Electric Co................................. 940,202 90,964,543 Engelhard Corp...................................... 585,616 11,199,906 Enron Corp.......................................... 1,063,968 45,883,620 Enserch Corp. ...................................... 301,959 6,945,057 Entergy Corp........................................ 981,334 27,232,018 Exxon Corp.......................................... 5,239,969 513,516,962 Federal Express Corp................................ 477,728 21,258,896 Federal Home Loan Mortgage Corp..................... 757,261 83,393,368 Federal National Mortgage Association............... 4,600,152 171,355,662 Federated Department Stores Inc..................... 886,319 30,245,636 Fifth Third Bancorp................................. 440,648 27,678,202 First Bank System Inc............................... 576,317 39,333,635 First Chicago NBD Corp.............................. 1,342,042 72,134,757 First Data Corp. ................................... 1,890,246 68,993,979 First Union Corp. .................................. 1,207,033 89,320,442 Fleet Financial Group Inc........................... 1,118,198 55,770,125 Fleetwood Enterprises Inc........................... 149,787 4,119,143 Fleming Cos., Inc. ................................. 158,120 2,727,570 Fluor Corp. ........................................ 352,213 22,101,366 FMC Corp............................................ 144,847 10,157,396 Ford Motor Co....................................... 4,959,356 158,079,472 Foster Wheeler Corp. ............................... 173,675 6,447,684 FPL Group Inc....................................... 784,072 36,067,312 Freeport McMoRan Copper & Gold Class B.............. 817,984 24,437,272 Frontier Corp....................................... 689,500 15,599,938 Fruit of the Loom Inc. Class A...................... 324,973 12,308,352 Gannett Co., Inc.................................... 589,439 44,134,245 Gap Inc............................................. 1,233,296 37,153,042 General Dynamics Corp............................... 269,566 19,004,403 General Electric Co................................. 6,937,189 685,914,562 General Instrument Corp............................. 535,633 11,583,064 The accompanying notes are an integral part of the financial statements. SAI-112 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- General Mills Inc................................... 668,583 $ 42,371,448 General Motors Corp................................. 3,169,249 176,685,632 General Reinsurance Corp............................ 349,785 55,178,584 General Signal Corp. ............................... 200,334 8,564,279 Genuine Parts Co. .................................. 519,756 23,129,142 Georgia Pacific Corp................................ 380,650 27,406,800 Giant Foods Inc. Class A............................ 279,683 9,649,064 Giddings & Lewis Inc................................ 166,003 2,137,289 Gillette Co......................................... 2,339,117 181,866,347 Golden West Financial Corp. ........................ 245,968 15,526,730 Goodyear Tire & Rubber Co........................... 649,096 33,347,307 GPU Inc............................................. 505,867 17,009,778 Great Atlantic & Pacific Tea Co., Inc............... 161,262 5,140,226 Great Lakes Chemical Corp........................... 279,300 13,057,275 Great Western Financial Corp........................ 594,749 17,247,721 Green Tree Financial Corp........................... 583,207 22,526,370 GTE Corp............................................ 4,061,255 184,787,102 Guidant Corp........................................ 311,800 17,772,600 H&R Block Inc....................................... 436,395 12,655,455 H.F. Ahmanson & Co.................................. 479,962 15,598,765 H.J. Heinz Co....................................... 1,562,051 55,843,323 Halliburton Co...................................... 552,281 33,274,930 Harcourt General Inc................................ 300,523 13,861,623 Harnischfeger Industries Inc........................ 200,867 9,666,724 Harrahs Entertainment Inc........................... 427,471 8,495,986 Harris Corp......................................... 172,162 11,814,617 Hasbro Inc.......................................... 371,429 14,439,302 Helmerich & Payne Inc............................... 108,234 5,641,697 Hercules Inc........................................ 456,015 19,722,649 Hershey Foods Corp.................................. 646,139 28,268,581 Hewlett Packard Co.................................. 4,278,524 214,995,831 HFS Inc............................................. 516,410 30,855,497 Hilton Hotels Corp. ................................ 1,078,470 28,175,029 Home Depot Inc...................................... 2,023,043 101,405,030 Homestake Mining Co................................. 589,358 8,398,352 Honeywell Inc. ..................................... 538,962 35,436,751 Household International Inc......................... 415,633 38,342,144 Houston Industries Inc.............................. 1,062,938 24,048,972 Humana Inc.......................................... 675,527 12,919,454 IBM................................................. 2,189,162 330,563,462 Ikon Offices Solutions, Inc......................... 540,398 27,898,047 Illinois Tool Works Inc............................. 513,175 40,989,853 INCO Ltd............................................ 679,330 21,653,644 Ingersoll Rand Co. ................................. 453,263 20,170,204 Inland Steel Industries Inc......................... 204,149 4,082,980 Intel Corp.......................................... 3,454,670 452,345,853 Intergraph Corp..................................... 203,608 2,086,982 International Flavors & Fragrances.................. 453,194 20,393,730 International Paper Co.............................. 1,258,555 50,814,158 Interpublic Group of Cos., Inc...................... 348,858 16,570,755 The accompanying notes are an integral part of the financial statements. SAI-113 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- ITT Corp............................................ 484,370 $ 21,009,549 ITT Hartford Group Inc. ............................ 501,457 33,848,347 ITT Industries Inc.................................. 487,542 11,944,779 J.C. Penney Co., Inc................................ 949,578 46,291,927 J.P. Morgan & Co., Inc. ............................ 784,375 76,574,609 James River Corp. of Virginia ...................... 381,898 12,650,371 Jefferson-Pilot Corp. .............................. 319,780 18,107,543 John Harland Co. ................................... 157,301 5,190,933 Johnson & Johnson................................... 5,625,583 279,872,754 Johnson Controls Inc................................ 173,243 14,357,514 Jostens Inc. ....................................... 209,340 4,422,308 K Mart Corp......................................... 2,030,504 21,066,479 Kaufman & Broad Home Corp. ......................... 169,236 2,178,914 Kellogg Co.......................................... 874,630 57,397,594 Kerr McGee Corp..................................... 220,182 15,853,104 Keycorp............................................. 964,526 48,708,563 Kimberly-Clark Corp. ............................... 1,202,666 114,553,936 King World Productions Inc.......................... 157,707 5,815,446 Knight-Ridder Inc................................... 399,811 15,292,771 Kroger Co........................................... 534,017 24,831,790 Laidlaw Inc. Class B................................ 1,179,790 13,567,585 Limited, Inc........................................ 1,147,340 21,082,373 Lincoln National Corp............................... 436,970 22,940,925 Liz Claiborne Inc................................... 355,274 13,722,458 Lockheed Martin Corp................................ 840,073 76,866,679 Loews Corp.......................................... 507,749 47,855,343 Longs Drug Stores Corp. ............................ 102,354 5,028,140 Louisiana Land & Exploration Co. ................... 145,861 7,821,796 Louisiana-Pacific Corp.............................. 410,942 8,681,150 Lowes Cos., Inc..................................... 727,939 25,841,834 LSI Logic Corp...................................... 544,806 14,573,561 Luby's Cafeterias Inc............................... 7,200 143,100 Lucent Technologies Inc............................. 2,687,164 124,281,335 Mallinckrodt Inc.................................... 325,355 14,356,289 Manor Care Inc...................................... 281,611 7,603,497 Marriott International Inc.......................... 567,798 31,370,839 Marsh & McLennan Cos., Inc.......................... 316,112 32,875,648 Masco Corp. ........................................ 693,723 24,974,028 Mattel Inc.......................................... 1,191,015 33,050,666 May Department Stores Co............................ 1,050,478 49,109,846 Maytag Corp. ....................................... 408,176 8,061,476 MBIA Inc............................................ 180,400 18,265,500 MBNA Corp........................................... 961,164 39,888,306 McDermott International Inc......................... 228,134 3,792,728 McDonald's Corp..................................... 2,953,464 133,644,246 McDonnell Douglas Corp.............................. 914,209 58,509,376 McGraw-Hill Inc..................................... 434,668 20,049,062 MCI Communications Corp............................. 2,885,582 94,322,462 Mead Corp........................................... 228,275 13,268,484 Medtronic Inc....................................... 1,014,591 68,992,188 The accompanying notes are an integral part of the financial statements. SAI-114 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- Mellon Bank Corp.................................... 575,619 $ 40,868,949 Mercantile Stores Co., Inc. ........................ 123,173 6,081,667 Merck & Co., Inc.................................... 5,081,373 402,698,810 Meredith Corp....................................... 113,050 5,963,388 Merrill Lynch & Co., Inc............................ 706,988 57,619,522 MFS Communications Co., Inc......................... 229,700 12,518,650 MGIC Investment Corp. .............................. 255,944 19,451,744 Micron Technology Inc. ............................. 874,127 25,458,949 Microsoft Corp. .................................... 5,026,722 415,332,905 Millipore Corp...................................... 193,188 7,993,154 Minnesota Mining & Manufacturing Co................. 1,761,177 145,957,544 Mobil Corp. ........................................ 1,664,363 203,468,377 Monsanto Co......................................... 2,503,750 97,333,281 Moore Corp., Ltd.................................... 386,117 7,867,134 Morgan Stanley Group Inc............................ 653,781 37,347,240 Morton International Inc............................ 617,001 25,142,791 Motorola Inc........................................ 2,493,803 153,057,159 NACCO Industries Inc. Class A....................... 46,446 2,484,861 Nalco Chemical Co. ................................. 272,337 9,838,174 National City Corp. ................................ 936,096 42,007,308 National Semiconductor Corp......................... 578,744 14,106,885 National Service Industries Inc..................... 225,187 8,416,364 NationsBank Corp.................................... 1,222,716 119,520,489 Navistar International Corp......................... 287,313 2,621,731 New York Times Co. Class A.......................... 372,557 14,157,166 Newell Co........................................... 706,621 22,258,561 Newmont Mining Corp................................. 406,412 18,186,937 Niagara Mohawk Power Corp. ......................... 568,356 5,612,516 Nicor Inc........................................... 209,128 7,476,326 Nike Inc. .......................................... 1,229,803 73,480,729 Noram Energy Corp................................... 567,059 8,718,532 Nordstrom Inc....................................... 336,962 11,941,091 Norfolk Southern Corp............................... 536,754 46,965,975 Northern States Power Co. .......................... 284,460 13,049,603 Northern Telecom Ltd................................ 1,049,681 64,949,012 Northrop Grumman Corp............................... 221,323 18,314,478 Norwest Corp........................................ 1,562,919 67,986,976 Novell Inc.......................................... 1,453,003 13,758,122 Nucor Corp.......................................... 367,326 18,733,626 NYNEX Corp.......................................... 1,861,220 89,571,212 Occidental Petroleum Corp........................... 1,333,689 31,174,980 Ohio Edison Co. .................................... 621,069 14,129,320 ONEOK Inc........................................... 111,858 3,355,740 Oracle Corp......................................... 2,771,969 115,729,706 Oryx Energy Co...................................... 470,967 11,656,433 Owens Corning Fiberglas Corp........................ 215,662 9,192,593 PACCAR Inc. ........................................ 164,985 11,218,980 Pacific Enterprises ................................ 349,626 10,619,890 Pacific Gas & Electric Co........................... 1,712,908 35,971,068 Pacific Telesis Group .............................. 1,794,478 65,947,066 The accompanying notes are an integral part of the financial statements. SAI-115 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- PacifiCorp.......................................... 1,231,974 $ 25,255,467 Pall Corp. ......................................... 526,896 13,435,848 PanEnergy Corp...................................... 650,042 29,251,890 Parker Hannifin Corp................................ 321,709 12,466,224 PECO Energy Co...................................... 936,844 23,655,311 Pennzoil Co......................................... 192,419 10,871,674 Peoples Energy Corp................................. 156,631 5,305,875 Pep Boys--Manny, Moe & Jack......................... 261,072 8,027,964 PepsiCo Inc......................................... 6,527,328 190,924,344 Perkin-Elmer Corp................................... 209,872 12,356,214 Pfizer Inc.......................................... 2,723,850 225,739,069 Pharmacia & Upjohn Inc.............................. 2,102,331 83,304,866 Phelps Dodge Corp................................... 282,861 19,093,118 Philip Morris Cos., Inc............................. 3,429,208 386,214,551 Phillips Petroleum Co............................... 1,126,217 49,835,102 Pioneer HI-Bred International Inc................... 349,291 24,450,370 Pitney Bowes Inc.................................... 640,070 34,883,815 Placer Dome Inc..................................... 928,287 20,190,242 PNC Bank Corp....................................... 1,442,187 54,262,286 Polaroid Corp....................................... 159,980 6,959,130 Potlatch Corp....................................... 121,723 5,234,089 PP&L Resources Inc.................................. 648,466 14,914,718 PPG Industries Inc. ................................ 788,908 44,277,461 Praxair Inc......................................... 659,325 30,411,366 Price Costco Inc.................................... 874,428 21,970,004 Procter & Gamble Co. ............................... 2,874,241 308,980,907 Providian Corp...................................... 394,168 20,250,381 Public Service Enterprise Group Inc................. 1,005,519 27,400,393 Pulte Corp. ........................................ 115,293 3,545,260 Quaker Oats Co. .................................... 569,122 21,697,776 R.R. Donnelley & Sons Co. .......................... 632,671 19,850,053 Ralston Purina Co. ................................. 455,585 33,428,549 Raychem Corp........................................ 193,388 15,495,214 Raytheon Co......................................... 1,007,387 48,480,499 Reebok International Ltd............................ 280,168 11,767,056 Republic New York Corp.............................. 233,294 19,042,623 Reynolds Metals Co.................................. 277,102 15,621,625 Rite Aid Corp. ..................................... 484,278 19,250,051 Rockwell International Corp. ....................... 931,546 56,707,863 Rohm & Haas Co...................................... 276,614 22,578,618 Rowan Cos., Inc. ................................... 361,917 8,188,372 Royal Dutch Petroleum Co............................ 2,253,812 384,838,399 Rubbermaid Inc...................................... 623,526 14,185,217 Russell Corp........................................ 165,523 4,924,309 Ryan's Family Steak Houses Inc...................... 18,200 125,125 Ryder Systems Inc................................... 330,961 9,308,278 SAFECO Corp......................................... 561,417 22,140,883 Safety-Kleen Corp................................... 288,020 4,716,328 Salomon Inc......................................... 429,732 20,251,121 Santa Fe Energy Resources Inc....................... 403,223 5,594,719 The accompanying notes are an integral part of the financial statements. SAI-116 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- Santa Fe Pacific Gold Corp.......................... 548,813 $ 8,438,000 Sara Lee Corp. ..................................... 2,042,216 76,072,546 SBC Communications Inc.............................. 2,554,540 132,197,445 Schering-Plough Corp................................ 1,564,277 101,286,936 Schlumberger Ltd.................................... 1,048,722 104,741,110 Scientific Atlanta Inc. ............................ 315,599 4,733,985 Seagate Technology.................................. 1,003,388 39,633,826 Seagram Co., Ltd.................................... 1,517,177 58,790,609 Sears Roebuck & Co.................................. 1,654,725 76,324,191 Service Corp. International ........................ 1,011,513 28,322,364 Shared Medical Systems Corp......................... 103,058 5,075,607 Sherwin-Williams Co. ............................... 353,073 19,772,088 Shoneys Inc......................................... 14,600 102,200 Sigma Aldrich Corp.................................. 212,715 13,281,393 Silicon Graphics Inc................................ 733,428 18,702,414 Snap On Inc......................................... 262,788 9,361,823 Sonat Inc........................................... 372,334 19,175,201 Southern Co......................................... 2,821,764 63,842,410 Southwest Airlines Co............................... 604,890 13,383,191 Springs Industries Inc.............................. 91,272 3,924,696 Sprint Corp......................................... 1,817,347 72,466,712 St. Jude Medical Inc................................ 308,773 13,161,449 St. Paul Cos. Inc................................... 363,351 21,301,452 Stanley Works ...................................... 370,416 10,001,232 Stone Container Corp. .............................. 433,760 6,452,180 Stride Rite Corp. .................................. 270,805 2,708,050 Sun Co., Inc........................................ 296,608 7,229,820 Sun Microsystems Inc................................ 1,568,810 40,298,807 Suntrust Banks Inc.................................. 942,252 46,405,911 Supervalu Inc....................................... 283,759 8,051,662 Sysco Corp. ........................................ 750,382 24,481,213 Tandem Computers Inc................................ 502,065 6,903,394 Tandy Corp. ........................................ 249,712 10,987,329 Tektronix Inc....................................... 149,373 7,655,366 Tele-Communications Inc............................. 2,709,051 35,386,979 Tellabs Inc......................................... 768,976 28,932,722 Temple Inland Inc................................... 230,273 12,463,526 Tenet Healthcare Corp............................... 911,190 19,932,281 Tenneco Inc......................................... 722,354 32,596,224 Texaco Inc.......................................... 1,106,328 108,558,435 Texas Instruments Inc............................... 797,425 50,835,844 Texas Utilities Co.................................. 950,985 38,752,639 Textron Inc......................................... 349,514 32,941,694 Thermo Electron Corp................................ 628,800 25,938,000 Thomas & Betts Corp................................. 175,618 7,793,049 Time Warner Inc..................................... 2,405,266 90,197,475 Times Mirror Co..................................... 445,842 22,180,640 Timken Co. ......................................... 179,201 8,220,846 TJX Cos., Inc....................................... 348,101 16,491,285 Torchmark Corp...................................... 317,549 16,036,225 The accompanying notes are an integral part of the financial statements. SAI-117 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- Toys R Us Inc....................................... 1,128,937 $ 33,868,110 TransAmerica Corp. ................................. 291,766 23,049,514 Travelers Inc....................................... 2,701,624 122,586,189 Tribune Co. ........................................ 254,805 20,097,744 Trinova Corp. ...................................... 110,404 4,015,946 TRW Inc. ........................................... 538,168 26,639,316 Tupperware Corp..................................... 278,179 14,917,349 Tyco International Ltd.............................. 662,616 35,035,821 Unicom Inc.......................................... 932,761 25,301,142 Unilever NV......................................... 660,865 115,816,591 Union Camp Corp..................................... 283,476 13,535,979 Union Carbide Corp.................................. 556,858 22,761,571 Union Electric Co................................... 412,317 15,874,205 Union Pacific Corp.................................. 1,029,340 61,889,067 Union Pacific Resources Group Inc................... 1,057,360 30,927,780 Unisys Corp......................................... 711,744 4,804,272 United Healthcare Corp.............................. 770,961 34,693,245 United Technologies Corp............................ 1,045,342 68,992,572 Unocal Corp......................................... 1,054,254 42,829,069 UNUM Corp........................................... 316,324 22,854,409 US Bancorp.......................................... 652,123 29,304,777 US Surgical Corp.................................... 227,311 8,950,371 US West Inc. Communications Group................... 1,989,354 64,156,666 US West Inc. Media Group............................ 2,618,650 48,445,025 USAir Group Inc..................................... 296,139 6,922,249 USF&G Corp.......................................... 496,247 10,359,156 USLIFE Corp......................................... 144,364 4,800,103 UST Inc............................................. 797,611 25,822,656 USX Marathon Group.................................. 1,233,068 29,439,498 USX United States Steel............................. 354,590 11,125,261 VF Corp............................................. 271,405 18,319,838 Viacom Inc. Class B................................. 1,494,403 52,117,305 W.W. Grainger Inc. ................................. 212,285 17,035,871 Wachovia Corp....................................... 701,514 39,635,541 Wal Mart Stores Inc................................. 9,660,078 220,974,284 Walgreen Co. ....................................... 1,055,184 42,207,360 Walt Disney Co...................................... 2,856,303 198,870,096 Warner Lambert Co. ................................. 1,153,119 86,483,925 Wells Fargo & Co.................................... 401,205 108,225,049 Wendy's International Inc........................... 488,965 10,023,783 Western Atlas Inc................................... 224,606 15,918,950 Westinghouse Electric Corp. ........................ 2,619,052 52,053,658 Westvaco Corp....................................... 421,239 12,110,621 Weyerhaeuser Co..................................... 823,839 39,029,373 Whirlpool Corp. .................................... 311,527 14,524,946 Whitman Corp. ...................................... 438,451 10,029,567 Willamette Industries Inc. ......................... 223,968 15,593,772 William Wrigley Jr. Co.............................. 481,424 27,080,100 Williams Cos., Inc.................................. 666,126 24,979,706 Winn Dixie Stores Inc............................... 585,324 18,510,872 The accompanying notes are an integral part of the financial statements. SAI-118 STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND AND S&P 500 INDEX FUND WITH FUTURES Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------- --------------- WMX Technologies Inc................................ 2,050,935 $ 66,911,754 Woolworth Corp...................................... 553,368 12,104,925 Worldcom Inc........................................ 2,498,276 65,111,318 Worthington Industries.............................. 327,239 5,931,207 WR Grace & Co....................................... 385,792 19,964,736 Xerox Corp.......................................... 1,396,717 73,502,232 --------------- Total Common Stock (Cost $16,749,902,506)............................ $23,903,350,103 --------------- PRINCIPAL AMOUNT U.S. GOVERNMENT OBLIGATIONS -0.1% U.S. Treasury Bills 4.90% 06-Mar-97 (a) $ 20,000,000 19,825,778 U.S. Treasury Bills 4.96% 06-Mar-97 (a) ............ 1,000,000 991,182 U.S. Treasury Bills 5.05% 06-Mar-97 (a) ............ 1,000,000 991,031 --------------- Total U.S. Government Obligations .................. 21,807,991 --------------- STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS FOR TAX EXEMPT RETIREMENT PLANS -1.9% UNITS ------------- SHORT TERM INVESTMENT FUND ......................... 461,865,914 461,865,914 - --------------------------------------------------- ------------- --------------- TOTAL INVESTMENTS--100% (Cost $17,233,576,411) ........................... $24,387,024,008 =================================================== ============= ===============
(a) At December 31, 1996, U.S. Treasury Bills were pledged to cover margin requirements for open futures contracts. - ----------------------------------------------------------------------------- The following long futures contracts were open at December 31, 1996:
FUTURES NUMBER OF MATURITY UNREALIZED CONTRACT CONTRACTS DATE GAIN (LOSS) - -------------- ------------------------------ ------------- -------------- S&P 500 Index 950 March, 1997 $(4,403,275) ============== (Notional Amount $358,040,775)
The accompanying notes are an integral part of the financial statements. SAI-119 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of the State Street Bank and Trust Company Russell 2000 Fund and the State Street Bank and the Trust Company Russell 2000 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 selected per unit data present fairly, in all material respects, the financial position of the State Street Bank and Trust Company Russell 2000 Fund and the State Street Bank and Trust Company Russell 2000 Non-Lending Fund (the "Funds") at December 31, 1996, the results of their operations for the year then ended, and the changes in their net assets and their selected per unit data for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and selected per unit data (hereafter referred to as "financial statements") are the responsibility of the Fund's 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 generally accepted auditing standards 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, 1996 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts March 26, 1997 The accompanying notes are an integral part of the financial statements. SAI-120 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Statement of Assets and Liabilities December 31, 1996 - -----------------------------------------------------------------------------
ASSETS Investment in securities, at value (cost $947,561,017) ......... $ 984,818,322 Collateral held for loaned securities, at value ................ 64,003,544 Receivable for investments sold ................................ 10,366 Dividends receivable ........................................... 1,171,346 Interest and other receivables ................................. 231,732 - ---------------------------------------------------------------- --------------- Total assets ................................................ 1,050,235,310 - ---------------------------------------------------------------- --------------- LIABILITIES Collateral on securities loaned ................................ 64,003,544 Variation margin payable ....................................... 310,888 Accrued expenses ............................................... 50,616 - ---------------------------------------------------------------- --------------- Total liabilities ........................................... 64,365,048 - ---------------------------------------------------------------- --------------- NET ASSETS ..................................................... $ 985,870,262 ================================================================ =============== Russell 2000 Fund: 49,457,774 units outstanding, at $19.24 per unit net asset value ......................................................... $ 951,404,626 Russell 2000 Non-Lending Fund: 1,791,660 units outstanding, at $19.24 per unit net asset value 34,465,636 - ---------------------------------------------------------------- --------------- $ 985,870,262 ================================================================ ===============
The accompanying notes are an integral part of the financial statements. SAI-121 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Statement of Operations* Year ended December 31, 1996** - -----------------------------------------------------------------------------
INVESTMENT INCOME Dividends (net of taxes withheld of $122) .................................. $ 10,985,753 Interest ................................................................... 1,796,194 Securities lending fee income, net of related expenses (Note 3) ........... 399,647 - ---------------------------------------------------------------------------- -------------- Total investment income .................................................. 13,181,594 - ---------------------------------------------------------------------------- -------------- EXPENSES Audit ...................................................................... 25,230 Custody .................................................................... 381,646 - ---------------------------------------------------------------------------- -------------- Total expenses ........................................................... 406,876 - ---------------------------------------------------------------------------- -------------- Net investment income ...................................................... 12,774,718 - ---------------------------------------------------------------------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS Net realized gain (loss): Investments ............................................................... 174,309,587 Futures contracts ......................................................... 2,101,712 - ---------------------------------------------------------------------------- -------------- 176,411,299 - ---------------------------------------------------------------------------- -------------- Net change in unrealized appreciation (depreciation): Investments ............................................................... (71,757,270) Futures contracts ......................................................... (112,775) - ---------------------------------------------------------------------------- -------------- (71,870,045) - ---------------------------------------------------------------------------- -------------- Net realized and unrealized gain (loss) on investments and futures contracts 104,541,254 - ---------------------------------------------------------------------------- -------------- Net increase (decrease) in net assets resulting from operations ........... $117,315,972 ============================================================================ ==============
- ------------ * The Russell 2000 Non-Lending Fund commenced operations on September 30, 1996. ** See Note 1 to the financial statements. The accompanying notes are an integral part of the financial statements. SAI-122 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, ---------------------------- 1996* 1995 - ------------------------------------------------------------------------------ -------------- ------------- FROM OPERATIONS** Net investment income........................................................ $ 12,774,718 $ 806,636 Net realized gain (loss) on investments and futures contracts .............. 176,411,299 3,720,072 Net change in unrealized appreciation (depreciation) on investments and futures contracts .......................................................... (71,870,045) 110,075,573 - ------------------------------------------------------------------------------ -------------- ------------- Net increase (decrease) in net assets resulting from operations ............. 117,315,972 114,602,281 - ------------------------------------------------------------------------------ -------------- ------------- Distribution of securities lending fee income (Note 3) ....................... (399,647) (297,597) - ------------------------------------------------------------------------------ -------------- ------------- FROM PARTICIPANT TRANSACTIONS Net increase (decrease) in net assets resulting from participant transactions 332,105,190 50,437,261 - ------------------------------------------------------------------------------ -------------- ------------- Net increase (decrease) in net assets ....................................... 449,021,515 164,741,945 NET ASSETS Beginning of year ........................................................... 536,848,747 372,106,802 - ------------------------------------------------------------------------------ -------------- ------------- End of year ................................................................. $985,870,262 $536,848,747 ============================================================================== ============== =============
- ------------ * The Russell 2000 Non-Lending Fund commenced operations on September 30, 1996. ** See Note 1 to the financial statements. The accompanying notes are an integral part of the financial statements. SAI-123 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, ----------------------------------------------------- 1996 1995 1994 1993 1992(A) - --------------------------------------------------- ---------- ---------- ---------- ---------- --------- Net investment income (b) ......................... $ 0.32 $ 0.03 $ 0.21 $ 0.17 $ 0.04 Distribution of securities lending fee income (c) . (0.01) (0.01) (0.01) 0.00 0.00 Net realized and unrealized gain (loss) ........... 2.45 3.61 (0.46) 1.83 1.07 - --------------------------------------------------- ---------- ---------- ---------- ---------- --------- Net increase (decrease)............................ 2.76 3.63 (0.26) 2.00 1.11 NET ASSET VALUE Beginning of period................................ 16.48 12.85 13.11 11.11 10.00 - --------------------------------------------------- ---------- ---------- ---------- ---------- --------- End of period...................................... $ 19.24 $ 16.48 $ 12.85 $ 13.11 $ 11.11 =================================================== ========== ========== ========== ========== ========= Total return (d)................................... 16.81% 28.33% (1.98)% 18.00% 11.10% =================================================== ========== ========== ========== ========== ========= Ratio of expenses to average net assets (e)(f) .... 0.06% 0.10% 0.07% 0.09% 0.39% - --------------------------------------------------- ---------- ---------- ---------- ---------- --------- Ratio of net investment income to average net assets (e)(f)..................................... 1.80% 1.80% 1.61% 1.37% 1.88% - --------------------------------------------------- ---------- ---------- ---------- ---------- --------- Portfolio turnover................................. 131% 103% 48% 35% 1% - --------------------------------------------------- ---------- ---------- ---------- ---------- --------- Average broker commission per share (g)............ $ 0.02 N/A N/A N/A N/A - --------------------------------------------------- ---------- ---------- ---------- ---------- --------- Net assets, end of period (000s)................... $951,405 $536,849 $372,107 $451,119 $148,285 =================================================== ========== ========== ========== ========== =========
- ------------ (a) The Russell 2000 Fund commenced operations on October 31, 1992. (b) Net investment income has been calculated based on an average of units outstanding. Also, see Note 1 to the financial statements. (c) Zero amounts represent those which are less than $.005 per unit. (d) Total return calculation (not annualized) 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 the end of the period and assumes reinvestment of distributions. The calculation includes only those expenses charged directly to the Russell 2000 Fund. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) 1992 data annualized. (f) 1995 ratio reflects net investment income and expenses attributable to the Russell 2000 Fund from its ownership in other collective investment funds. (g) Represents total commissions paid on portfolio securities divided by total number of shares purchased or sold on which commissions were charged. This disclosure is required by the SEC beginning in 1996. The accompanying notes are an integral part of the financial statements. SAI-124 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 NON-LENDING FUND Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, 1996(A) - ------------------------------------------------------- -------------- Net investment income (b).............................. $ 0.09 Net realized and unrealized gain (loss)................ 0.84 - ------------------------------------------------------- -------------- Net increase (decrease)................................ 0.93 NET ASSET VALUE Beginning of period.................................... 18.31 - ------------------------------------------------------- -------------- End of period.......................................... $ 19.24 ======================================================= ============== Total return (c)....................................... 5.08% - ------------------------------------------------------- -------------- Ratio of expenses to average net assets (d)............ 0.06% - ------------------------------------------------------- -------------- Ratio of net investment income to average net assets (d).................................................... 1.80% - ------------------------------------------------------- -------------- Portfolio turnover...................................... 131% - ------------------------------------------------------- -------------- Average broker commission per share (e)................. $ 0.02 - ------------------------------------------------------- -------------- Net assets, end of period (000s)........................ $34,466 ======================================================= ==============
- ------------ (a) The Russell 2000 Non-Lending Fund commenced operations on September 30, 1996. (b) Net investment income has been calculated based on an average of units outstanding. (c) Total return calculation (not annualized) 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 the end of the period. The calculation includes only those expenses charged directly to the Russell 2000 Non-Lending Fund. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (d) 1996 data annualized. (e) Represents total commissions paid on portfolio securities divided by total number of shares purchased or sold on which commissions were charged. This disclosure is required by the SEC beginning in 1996. The accompanying notes are an integral part of the financial statements. SAI-125 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE The State Street Bank and Trust Company ("State Street Bank") Russell 2000 Fund and the State Street Bank and Trust Company Russell 2000 Non-Lending Fund (collectively, the "Funds") are equity pooled funds formed under a Declaration of Trust dated February 21, 1991, as amended and restated through July 19, 1991. Pursuant to the Declaration of Trust, the Russell 2000 Fund and the Russell 2000 Non-Lending Fund were formed under separate Fund Declarations effective September 30, 1992 and 1996, respectively. As stated in the Fund Declarations, the Funds' objective is to replicate, as closely as possible, the return of the Russell 2000 Index. From February 1, 1995 through June 17, 1996, the Russell 2000 Fund invested in two other State Street Bank collective investment funds, the Russell 2000 Grouth Fund and the Russell 2000 Value Fund. Effective June 18, 1996, the Russell 2000 Growth Fund and the Russell 2000 Value Fund ceased operations. All assets and liabilities of these funds were transferred to the Russell 2000 Fund. The results of operations of the Russell 2000 Growth Fund and the Russell 2000 Value Fund for the period January 1, 1996 through June 17, 1996 have been consolidated in the 1996 results of operations of the Russell 2000 Fund. The Russell 2000 Fund recorded a $174,542,657 realized gain on securities as a result of this transaction. Subsequent to this transaction, the Funds have invested directly in the securities contained in the Russell 2000 Index. The Funds may also invest in U.S. Treasury Bills, short-term fixed income securities, equity index futures, Standard & Poor's Depository Receipts ("SPDRs") traded on the American Stock Exchange, certain other derivative instruments, and units in short-term commingled investment funds maintained by the Trustee, as well as shares of money market funds and short-term mutual funds for which the Trustee acts as investment advisor. State Street Bank is the Funds' Trustee and custodian. State Street Global Advisors, a division of State Street Bank, is the Funds' investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION Investments in securities listed on a national securities exchange and over-the-counter securities are valued at the last reported sale price on the valuation date, or if no sale price was reported on the valuation date, the last published sale price. Short-term investments are stated at amortized cost which approximates market. Investments in registered investment companies or other State Street Bank Investment Funds for Tax Exempt Retirement Plans are valued at the net asset value per share/unit on the valuation date. Futures contracts are valued at the settlement price established each day on the board of trade or exchange upon which they are traded. B. SECURITY TRANSACTIONS AND RELATED INCOME Security transactions are accounted for on the trade date (date the order to buy or sell is executed). The cost of securities contributed to, and proceeds related to securities delivered by, the Funds in connection with the issuance and redemption of units of participation are based on the valuations of those securities determined as described above. The cost of securities delivered and the net gain or loss on securities sold are determined using SAI-126 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 the average cost method. Dividend income is recorded net of applicable withholding taxes on the ex-dividend date. Interest income is recorded on the accrual basis and is increased by accretion of discount and reduced by amortization of premium. The Russell 2000 Growth Fund and the Russell 2000 Value Fund retained all net investment income (excluding securities lending fee income) and net realized gains. Accordingly, 1996 and 1995 realized and unrealized gains and losses reported by the Russell 2000 Fund include a component attributable to net investment income. 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 Funds are exempt from federal income taxes and no federal income tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset values of the Funds are determined on each business day (valuation date). Issuances and redemptions of participant units are made based upon the closing market value of the securities bought or sold as of the valuation date, adjusted for the related market effect and transaction costs described below. Transaction costs and market effect associated with the investment of proceeds from the issuance of Fund units or those incurred upon the disposition of investments to settle redemption of Fund units are allocated to the applicable participant. Transaction costs include brokerage commissions, taxes and other direct costs related to security transactions. 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. E. EXPENSES According to the Declaration of Trust, the Funds may pay certain expenses for services received during the year. The Trustee is paid a custody fee at the annual rate of $50,000 plus .0125% of the net asset value of assets custodied, and a transaction charge of $15 per trade for equity trades and $275 for futures transactions. F. DISTRIBUTIONS TO PARTICIPANTS All net investment income (excluding securities lending fee income) and net realized gains are retained by the Funds. Income generated by securities lending is distributed monthly to participants monthly to participants of the Russell 2000 Fund. G. FUTURES CONTRACTS The Funds may use futures contracts to manage their exposure to the equity market. Buying futures tends to increase the Funds' exposure to the underlying instrument. Selling futures tends to decrease the Funds' exposure to the underlying instrument, or hedge other Fund investments. Futures contracts involve, to varying degrees, credit SAI-127 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 and market risks. The Funds enter 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 instrument 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. The maximum potential loss on a long futures contract is the U.S. dollar value of the notional amount at the time the contract is opened. The potential loss on a short futures contract is unlimited. Upon entering into a futures contract, the Funds are required to deposit either in cash or in 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 Funds periodically, depending on the daily fluctuation in the value of the underlying securities, and are recorded as unrealized gains or losses by the Funds. A gain or loss is realized when the contract is closed or expires. H. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the Trustee to make estimates and assumptions 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. 3. SECURITIES LENDING PROGRAM The participants in the Russell 2000 Fund (the "Lending Fund") have authorized the Lending Fund to participate in the 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 Non-Lending Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activities. 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 per unit data of each of the Funds. Each of the Funds maintains a divided pro-rata interest in the combined assets and liabilities (including each investment security position) proportionate to the net asset value of the outstanding combined units of the Funds. All interfund transactions have been eliminated in the combined financial statements. Under the 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 102% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the fair market value of the loaned securities. At December 31, 1996, the value of the securities loaned by the Lending Fund was $60,810,020 against which was held cash collateral of $64,003,544. Cash collateral provided by the Borrowers is invested in a variety of registered investment companies. 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. SAI-128 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 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. All income earned from lending activities is distributed monthly to the Lending Fund participants. Participants in each of the Funds may exchange their units for units of the other fund on any valuation date. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, excluding short-term investments and including transactions related to the Fund reorganization (see Note 1) and in-kind contributions and redemptions, if any, during the year ended December 31, 1996 were $1,235,036,580 and $934,353,813, respectively, resulting in a net realized gain (loss) of $174,347,592. This gain (loss) is prior to the recognition of the market effect and transaction costs associated with contributions and redemptions. 5. UNITS OF PARTICIPATION Participant transactions for the Funds were as follows:
PERIOD ENDED DECEMBER 31, ---------------------------------------------------------- 1996 1995 ----------------------------- ---------------------------- UNITS AMOUNT UNITS AMOUNT ------------- --------------- ------------- -------------- RUSSELL 2000 FUND Units issued.................................... 26,821,340 $ 474,201,831 10,327,958 $145,764,191 Units redeemed.................................. (9,933,191) (174,945,263) (6,710,651) (95,326,930) ------------- --------------- ------------- -------------- Total......................................... 16,888,149 $ 299,256,568 3,617,307 $ 50,437,261 ============= =============== ============= ============== RUSSELL 2000 NON-LENDING FUND Units issued.................................... 1,791,660 $ 32,848,622 Units redeemed.................................. -- -- ------------- --------------- Total......................................... 1,791,660 $ 32,848,622 ------------- --------------- Net increase (decrease) in units and net assets resulting from participant transactions ....... 18,679,809 $ 332,105,190 ============= ===============
The Non-Lending Fund commenced operations on September 30, 1996. Initial Non-Lending Fund units had an offering price equivalent to the net asset value per unit of the Lending Fund on the commencement date. RUSSELL 2000 FUND Units in excess of 10% of the Lending Fund's units outstanding at December 31, 1996 held by one of the Lending Fund's 40 unitholders aggregated 49% of the Lending Fund's total units outstanding. SAI-129 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 During the year ended December 31, 1996, the net market effect and transaction costs (absorbed by) credited to participants in issuance and redemption of Lending Fund units were $67,015. RUSSELL 2000 NON-LENDING FUND All of the Non-Lending Fund's units outstanding at December 31, 1996 were held by two unitholders. Both unitholders held more than 10% of the Non-Lending Fund's total units outstanding. During the period ended December 31, 1996, the net market effect and transaction costs (absorbed by) credited to participants in issuance and redemption of Non-Lending Fund units were $(29,010). A redemption by one or more unitholders individually holding 10% or more of Funds' units may cause the remaining unitholders to bear proportionately higher operating expenses and otherwise adversely affect the Funds' future liquidity and investment operations. As described under "Issuances and Redemptions of Units of Participation", however, redeeming unitholders bear the transaction costs and market effect arising from any redemption of units; additionally, in certain circumstances, redemptions may be made on an in-kind basis. These practices may tend to mitigate the potential adverse effects of such redemptions. SAI-130 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 1996
SHARES VALUE - --------------------------------------------------- ------------ -------------- COMMON STOCK 96.1% 1st Source Corp. ................................... 10,991 $ 269,280 20th Century Industries............................. 65,800 1,110,375 3D Systems Corp. ................................... 6,800 86,700 3DO Co. ............................................ 15,100 72,669 7th Level Inc. ..................................... 13,300 49,875 A. O. Smith Corp. .................................. 21,500 642,312 A. Schulman Inc. ................................... 52,400 1,283,800 A. T. Cross Co. .................................... 15,200 176,700 A.M. Castle & Co. .................................. 16,050 308,963 Aames Financial Corp. .............................. 20,300 728,262 AAR Corp. .......................................... 20,800 629,200 Aaron Rents Inc. ................................... 19,900 278,600 ABC Rail Products Corp. ............................ 11,400 226,575 ABM Industries Inc. ................................ 20,900 386,650 ABR Information Services Inc. ...................... 14,375 566,016 ABT Building Products Corp. ........................ 14,600 365,000 ACC Corp. .......................................... 20,000 605,000 Acceptance Insurance Cos., Inc. .................... 16,700 329,825 Access Health Marketing Inc. ....................... 18,750 839,062 Acclaim Entertainment Inc. ......................... 42,900 139,425 Ackerley Communications, Inc. ...................... 25,400 298,450 Acme Metals Inc. ................................... 15,800 306,125 Acordia Inc. ....................................... 18,200 527,800 ACT Networks Inc. .................................. 13,900 507,350 Actel Corp. ........................................ 26,200 622,250 Action Performance Cos., Inc. ...................... 7,100 127,800 Activision Inc. .................................... 18,700 240,763 Acuson Corp. ....................................... 29,400 716,625 ACX Technologies.................................... 18,600 369,675 Acxiom Corp. ....................................... 68,000 1,632,000 Adac Laboratories................................... 25,500 608,812 Adelphia Communications Corp. ...................... 21,300 122,475 Adolph Coors Co. ................................... 51,800 984,200 Advanced Energy Industries Inc. .................... 3,100 16,663 Advanced Lighting Technologies Inc. ................ 3,300 80,025 Advanced Polymer Systems Inc. ...................... 22,100 168,513 Advanced Technology Laboratories Inc. .............. 20,800 644,800 Advanced Tissue Sciences Inc. ...................... 50,700 484,819 Advent Software Inc. ............................... 5,500 167,063 Advo Inc. .......................................... 31,700 443,800 Affiliated Computer Services Inc. .................. 35,600 1,059,100 AG Chemical Equipment Inc. ......................... 5,300 96,725 AGL Resources Inc. ................................. 74,200 1,567,475 Agouron Pharmaceuticals Inc. ....................... 17,400 1,178,850 Air & Water Technologies Corp. ..................... 25,300 145,475 Air Express International Corp. .................... 26,137 842,918 Airborne Freight Corp. ............................. 26,700 624,112 Alamo Group Inc. ................................... 11,000 188,375 Alaska Air Group Inc. .............................. 19,900 417,900 The accompanying notes are an integral part of the financial statements. SAI-131 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Albank Financial Corp. ............................. 16,800 $ 527,100 Albany International Corp. ......................... 33,700 779,312 Alex Brown Inc. .................................... 19,400 1,406,500 Alexander & Alexander Services Inc. ................ 55,500 964,312 Alexander's Inc. ................................... 5,200 411,450 Alfa Corp. ......................................... 29,100 367,388 Aliant Communications Inc. ......................... 50,800 863,600 Alkermes Inc. ...................................... 19,200 446,400 Allen Group Inc. ................................... 31,900 709,775 Alliance Entertainment Corp. ....................... 16,000 30,000 Alliance Pharmaceutical Corp. ...................... 39,100 532,737 Alliance Semiconductor Corp. ....................... 31,000 220,875 Alliant Techsystems Inc. ........................... 12,900 709,500 Allied Capital Commercial Corp. .................... 19,800 460,350 Allied Group Inc. .................................. 28,575 932,259 Allied Products Corp. .............................. 13,100 389,725 Allied Waste Industries Inc. ....................... 82,400 762,200 Alltrista Corp. .................................... 9,625 247,844 Allwaste Inc. ...................................... 38,700 198,338 Alpharma Inc. ...................................... 18,600 265,050 Alteon Inc. ........................................ 25,000 131,250 Alternative Resources Corp. ........................ 17,100 297,113 Altron Inc. ........................................ 19,450 408,450 Amax Gold Inc. ..................................... 64,900 413,737 AMC Entertainment Inc. ............................. 2,800 40,250 Amcast Industrial Corp. ............................ 10,600 262,350 Amcol International Corp. .......................... 24,300 382,725 Amcore Financial Inc. .............................. 15,835 423,586 Amerco.............................................. 21,900 766,500 America West Airlines Inc. ......................... 65,815 1,044,813 American Annuity Group Inc. ........................ 9,793 138,326 American Bankers Insurance Group Inc. .............. 28,000 1,431,500 American Buildings Co. ............................. 5,600 133,700 American Business Information, Inc. ................ 14,200 315,950 American Business Products Inc. .................... 17,812 447,526 American Eagle Outfitters, Inc. .................... 4,300 33,863 American Federal Bank FSB........................... 15,000 283,125 American Financial Enterprises Inc. ................ 2,300 63,825 American Freightways Corp. ......................... 28,500 317,063 American Health Properties Inc. .................... 28,500 680,437 American Heritage Life Insurance Corp. ............. 11,115 291,769 American HomePatient Inc. .......................... 10,200 277,950 American Homestar Corp. ............................ 6,700 152,425 American Media Inc. ................................ 55,100 323,713 American Medical Response........................... 25,300 822,250 American Mobile Satellite Corp. .................... 23,100 282,975 American Oncology Resources Inc. ................... 64,800 664,200 American Paging Inc. ............................... 200 938 American Radio Systems Corp. ....................... 20,800 566,800 American Satellite Network Industries--WTS (b) ..... 1,750 0 The accompanying notes are an integral part of the financial statements. SAI-132 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- American Telecasting Inc. .......................... 11,200 $ 64,400 Americredit Corp. .................................. 41,200 844,600 Amerin Corp. ....................................... 30,400 782,800 Amerisource Health Corp. ........................... 32,700 1,577,775 Ameron Inc. ........................................ 4,800 247,800 Ametek Inc. ........................................ 45,600 1,014,600 Amisys Managed Care Systems Inc. ................... 11,900 202,300 Amli Residential Properties Trust................... 12,900 301,538 Ampex Corp. ........................................ 38,000 356,250 Amre Inc. (b)....................................... 17,000 27,625 Amresco Inc. ....................................... 19,100 510,925 Amvestors Financial Corp. .......................... 17,200 253,700 Amylin Pharmaceuticals Inc. ........................ 29,000 377,000 Anadigics Inc. ..................................... 7,300 286,525 Analogic Corp. ..................................... 10,700 358,450 Analysts International Corp. ....................... 19,174 541,665 Anchor Bancorp (Wisconsin) Inc. .................... 7,900 282,425 Anchor Gaming....................................... 8,500 342,125 Ancor Communications Inc. .......................... 7,400 103,600 Angeion Corp. ...................................... 35,300 123,550 Angelica Corp. ..................................... 13,800 263,925 Anixter International Inc. ......................... 47,900 772,387 Ann Taylor Stores Corp. ............................ 32,000 560,000 Antec Corp. ........................................ 21,700 195,300 Apartment Investment & Management Co. .............. 16,500 466,125 Aphton Corp. ....................................... 6,200 120,900 APL Ltd............................................. 32,600 770,175 Apogee Enterprises Inc. ............................ 19,100 759,225 Apple South Inc. ................................... 33,500 452,250 Applebees International Inc. ....................... 42,900 1,179,750 Applied Digital Access Inc. ........................ 13,600 74,800 Applied Industrial Technologies Inc. ............... 15,975 445,303 Applied Innovation Inc. ............................ 12,300 75,338 Applied Magnetics Corp. ............................ 33,107 989,072 Applied Power Inc. ................................. 16,700 661,737 Applix Inc. ........................................ 12,400 271,250 APS Holding Corp. .................................. 19,400 300,700 Aptargroup Inc. .................................... 24,400 860,100 Aquarion Co. ....................................... 9,700 270,388 Aquila Gas Pipeline Corp. .......................... 5,800 92,075 Arbor Drugs Inc. ................................... 36,618 636,238 Arbor Health Care Co. .............................. 8,100 210,600 Arbor Software Corp. ............................... 16,100 390,425 Arcadian Corp. ..................................... 51,500 1,364,750 Arch Communications Group Inc. ..................... 26,821 251,447 Arctic Cat Inc. .................................... 30,000 296,250 Argonaut Group Inc. ................................ 24,400 750,300 Argosy Gaming Corp. ................................ 14,800 68,450 Argyle Television Inc. ............................. 14,500 355,250 Armco Inc. ......................................... 118,300 487,987 The accompanying notes are an integral part of the financial statements. SAI-133 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Armor All Products Corp. ........................... 13,200 $ 250,800 Arnold Industries Inc. ............................. 28,400 450,850 Arrow International Inc. ........................... 15,700 451,375 Arthrocare Corp. ................................... 5,000 36,250 Arthur J. Gallagher & Co. .......................... 19,300 598,300 Arvin Industries Inc. .............................. 29,700 735,075 Ascent Entertainment Group Inc. .................... 7,900 127,388 Ashland Coal Inc. .................................. 11,800 327,450 Aspen Technology Inc. .............................. 14,100 1,131,525 Associated Banc Corp. .............................. 22,825 970,062 Associated Estates Realty Corp. .................... 15,500 368,125 Associated Group Inc. .............................. 8,600 264,450 AST Research Inc. .................................. 45,677 191,272 Astea International Inc. ........................... 8,800 50,050 Astoria Financial Corp. ............................ 24,100 888,687 ATC Communications Group Inc. ...................... 22,900 303,425 Atlantic Energy Inc. ............................... 71,800 1,229,575 Atlantic Southeast Airlines Inc. ................... 31,800 695,625 Atlantic Telecommunications Network Inc. .......... 6,800 103,700 Atmos Energy Corp. ................................. 20,600 491,825 ATS Medical Inc. ................................... 18,300 141,825 Atwood Oceanics Inc. ............................... 6,700 425,450 Aura Systems Inc. .................................. 89,000 194,688 Auspex Systems Inc. ................................ 35,300 410,362 Authentic Fitness Corp. ............................ 24,700 296,400 Avalon Properties Inc. ............................. 38,700 1,112,625 Avant Corp. ........................................ 19,526 619,950 Avatar Holdings Inc. ............................... 10,100 323,200 Aviall Inc. ........................................ 19,100 176,675 Avid Technology Inc. ............................... 27,800 288,425 Avondale Industries Inc. ........................... 17,100 367,650 Aztar Corp. ........................................ 60,200 421,400 Baby Superstore Inc. ............................... 14,400 345,600 Bacou USA Inc. ..................................... 3,000 49,875 Baldor Electric Co. ................................ 27,235 670,662 Baldwin & Lyons Inc. ............................... 16,100 295,838 Ball Corp. ......................................... 41,200 1,071,200 Ballard Medical Products............................ 37,600 700,300 Bally's Grand, Inc. ................................ 940 33,840 Bancorpsouth Inc. .................................. 25,890 718,447 Banctec Inc. ....................................... 28,582 589,504 Bank of Granite Corp. .............................. 12,475 361,775 Bankatlantic Bancorp Inc., Class B.................. 11,400 152,475 Bankatlantic Bancorp Inc., Class A.................. 1,524 19,812 Bankers Corp. ...................................... 16,920 340,515 Bankers Life Holding Corp. ......................... 24,700 617,500 Banknorth Group Inc. ............................... 10,000 415,000 Banta Corp. ........................................ 42,550 973,331 Barefoot Inc. ...................................... 17,600 279,400 Barnes Group Inc. .................................. 4,700 282,000 The accompanying notes are an integral part of the financial statements. SAI-134 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Barnett Banks Inc. ................................. 16,700 $ 455,075 Barr Laboratories Inc. ............................. 6,850 173,819 Barra Inc. ......................................... 8,700 239,250 Barrett Resources Corp. ............................ 42,570 1,814,546 Bassett Furniture Industries Inc. .................. 19,062 467,019 Battle Mountain Gold Co. ........................... 311,300 2,140,187 Bay Apartment Communities Inc. ..................... 25,800 928,800 Bay State Gas Co. .................................. 18,500 522,625 Bay View Capital Corp. ............................. 7,900 334,763 BBN Corp. .......................................... 29,100 654,750 BDM International Inc. ............................. 20,100 1,090,425 BE Aerospace Inc. .................................. 25,000 678,125 Beacon Properties................................... 45,100 1,651,787 Belco Oil & Gas Corp. .............................. 9,200 251,850 Belden & Blake Corp. ............................... 14,200 362,100 Belden Inc. ........................................ 32,200 1,191,400 Bell & Howell Co. .................................. 19,400 460,750 Benton Oil & Gas Co. ............................... 41,100 929,887 Berg Electric Corp. ................................ 8,700 255,563 Berkshire Realty Co. , Inc. ........................ 37,200 367,350 Berlitz International Inc. ......................... 3,075 63,806 Berry Petroleum Co. ................................ 24,600 353,625 Best Buy Co. , Inc. ................................ 41,700 443,062 BET Holdings Inc. .................................. 9,200 264,500 Big Flower Press Holdings Inc. ..................... 19,100 358,125 Billing Info Concepts Corp. ........................ 19,400 557,750 Bindley Western Industries Inc. .................... 10,000 193,750 Bio Rad Laboratories Inc. .......................... 14,800 444,000 Bio Technology General Corp. ....................... 67,300 883,312 Biomatrix Inc. ..................................... 9,200 147,200 Birmingham Steel Corp. ............................. 39,000 741,000 Bisys Group Inc. ................................... 35,200 1,304,600 BJ Services Co. .................................... 50,687 2,585,037 Black Box Inc. ..................................... 24,300 1,002,375 Black Hills Corp. .................................. 20,200 568,125 Blair Corp. ........................................ 10,300 198,275 Block Drug Co. , Inc. .............................. 18,108 832,988 Blount International Inc. .......................... 15,150 581,381 BMC Industries Inc. ................................ 39,200 1,234,800 BMC West Corp. ..................................... 16,450 201,513 Bob Evans Farms Inc. ............................... 57,600 777,600 Boca Research Inc. ................................. 6,800 70,550 BOK Financial Corp. ................................ 6,967 188,109 Bombay Co. , Inc. .................................. 55,300 255,763 Books A Million Inc. ............................... 9,400 64,625 Boole & Babbage Inc. ............................... 23,475 586,875 Borg Warner Automotive Inc. ........................ 19,000 731,500 Borg Warner Security Corp. ......................... 14,200 152,650 Borland International Inc. ......................... 45,600 247,950 Boston Beer Inc. ................................... 23,800 243,950 The accompanying notes are an integral part of the financial statements. SAI-135 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Boston Technology Inc. ............................. 31,200 $ 897,000 Bowne & Co. , Inc. ................................. 24,300 598,387 Box Energy Corp. ................................... 25,100 229,038 Boyd Gaming Corp. .................................. 33,800 278,850 Bradley Real Estate Inc. ........................... 24,364 438,552 BRC Holdings Inc. .................................. 7,600 340,100 BRE Properties Inc. ................................ 43,582 1,078,654 Breed Technologies Inc. ............................ 18,900 491,400 Brenton Banks Inc. ................................. 7,145 197,381 Brightpoint Inc. ................................... 18,000 535,500 Bristol Hotel Co. .................................. 21,600 685,800 Brite Voice Systems Inc. ........................... 14,700 218,663 Broadband Technologies Inc. ........................ 15,800 233,050 Broderbund Software Inc. ........................... 22,400 666,400 Brooktrout Technology Inc. ......................... 13,500 378,000 Brown Group Inc. ................................... 25,000 459,375 Brush Wellman Inc. ................................. 22,300 365,163 BT Office Products International Inc. .............. 16,100 142,888 Buckeye Cellulose Corp. ............................ 20,400 543,150 Buffets Inc. ....................................... 61,905 564,883 Burlington Coat Factory Warehouse Corp. ............ 24,200 314,600 Burlington Industries, Inc. ........................ 86,200 948,200 Burnham Pacific Properties Inc. .................... 23,300 349,500 Burr-Brown Corp. ................................... 22,800 592,800 Bush Boake Allen Inc. .............................. 7,900 210,338 Bush Industries Inc. ............................... 13,850 266,613 Butler Manufacturing Co. ........................... 8,750 354,375 BWIP Holding Inc. .................................. 33,500 552,750 C D I Corp. ........................................ 13,900 394,412 C Tec Corp. ........................................ 17,300 419,525 C-Cor Electronics Inc. ............................. 14,400 190,800 Cable Design Technologies Corp. .................... 22,850 711,206 Cabot Oil & Gas Corp. .............................. 26,900 460,662 Caere Corp. ........................................ 21,900 251,850 CAI Wireless Systems Inc. .......................... 38,710 38,710 Cairn Energy USA Inc. .............................. 22,500 225,000 Cal Fed Bancorp Inc. ............................... 63,380 1,552,810 Calgene Inc. ....................................... 41,900 209,500 Calgon Carbon Corp. ................................ 52,800 646,800 Cali Reality Corp. ................................. 21,000 648,375 California Amplifier Inc. .......................... 19,800 121,275 California Microwave Inc. .......................... 23,600 351,050 California Water Service Co. ....................... 9,400 394,800 Calmat Co. ......................................... 27,100 508,125 Cambrex Corp. ...................................... 16,050 525,637 Camco International Inc. ........................... 34,400 1,586,700 Camden Property Trust............................... 20,300 581,087 Canandaigua Wine Co. , Inc. ........................ 22,200 743,700 Cannondale Corp. ................................... 10,400 234,000 Capital Reinsurance Corp. .......................... 15,700 732,012 The accompanying notes are an integral part of the financial statements. SAI-136 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Capital Southwest Corp. ............................ 3,500 $ 252,000 Capitol American Financial Corp. ................... 5,200 189,150 Capmac Holdings Inc. ............................... 5,200 172,250 Capstead Mortgage Corp. ............................ 49,625 1,191,000 Capstone Pharmacy Services Inc. .................... 15,300 174,038 Capsure Holdings Corp. ............................. 15,400 175,175 Caraustar Industries Inc. .......................... 33,700 1,120,525 Carlisle Cos., Inc. ................................ 18,600 1,125,300 Carmike Cinemas Inc. ............................... 14,200 360,325 Carolina First Corp. ............................... 13,900 269,313 Carpenter Technology Corp. ......................... 21,300 780,112 Carr America Realty Corp. .......................... 45,500 1,330,875 Carrington Laboratories Inc. ....................... 11,900 92,225 Carson Pirie Scott & Co. ........................... 22,900 578,225 Carter Wallace Inc. ................................ 31,400 490,625 Cascade Corp. ...................................... 13,500 217,688 Caseys General Stores Inc. ......................... 35,700 669,375 Cash America International Inc. .................... 40,000 340,000 Casino America Inc. ................................ 27,922 89,001 Casino Data Systems................................. 13,400 92,125 Casino Magic Corp. ................................. 43,400 107,144 Castle & Cooke, Inc. ............................... 21,100 334,963 Catalina Marketing Corp. ........................... 26,900 1,482,862 Catellus Development Corp. ......................... 101,400 1,153,425 Cato Corp. ......................................... 27,550 137,750 Cavalier Homes Inc. ................................ 15,625 179,688 CBL & Associates Properties Inc. ................... 28,500 737,437 CBT Corp. .......................................... 9,600 264,000 CCB Financial Corp. ................................ 20,550 1,402,537 Cellpro Inc. ....................................... 21,300 266,250 Cellstar Corp. ..................................... 13,600 244,800 Cellular Communications International Inc. ........ 14,400 417,600 Cellular Communications of Puerto Rico.............. 15,500 306,125 Cellular Technical Services Co. , Inc. ............. 25,606 512,120 Cellularvision USA Inc. ............................ 4,800 33,600 Centennial Cellular Corp. .......................... 21,515 260,869 Centennial Technologies Inc. ....................... 16,200 842,400 Centerpoint Properties Corp. ....................... 19,700 645,175 Centex Construction Products Inc. .................. 15,600 280,800 Centex Corp. ....................................... 40,400 1,520,050 Central Hudson Gas & Electric Corp. ................ 23,900 749,862 Central Louisiana Electric Co. , Inc. .............. 30,200 834,275 Central Maine Power Co. ............................ 45,000 523,125 Central Parking Corp. .............................. 7,100 237,850 Centura Banks Inc. ................................. 32,300 1,441,387 Century Communications Corp. ....................... 45,800 260,488 Cephalon Inc. ...................................... 34,400 705,200 Cerner Corp. ....................................... 32,600 505,300 CFW Communications Co. ............................. 18,000 398,250 Chad Therapeutics Inc. ............................. 15,135 213,782 The accompanying notes are an integral part of the financial statements. SAI-137 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Champion Enterprises Inc. .......................... 69,444 $1,354,158 Chancellor Braodcasting Co. ........................ 23,600 560,500 Chaparral Steel Co. ................................ 5,100 61,838 Charles E. Smith Residential........................ 14,200 415,350 Charming Shoppes Inc. .............................. 128,200 649,012 Charter Power Systems Inc. ......................... 8,800 268,400 Chase Brass Industries Inc. ........................ 13,600 270,300 Checkfree Corp. .................................... 28,600 489,775 Cheesecake Factory.................................. 12,300 222,938 Chelsea GCA Realty, Inc. ........................... 15,000 519,375 Chemed Corp. ....................................... 11,500 419,750 Chemfirst Inc. ..................................... 28,000 647,500 Chemical Financial Corp. ........................... 13,921 553,360 Chesapeake Corp. ................................... 29,000 909,875 Chicago Miniature Lamp Inc. ........................ 5,750 238,625 Chips & Technologies Inc. .......................... 29,300 534,725 Chiquita Brands International Inc. ................. 42,100 536,775 Chittenden Corp. ................................... 13,887 331,552 Chronimed Inc. ..................................... 17,900 243,888 Church & Dwight Co. , Inc. ......................... 24,800 567,300 Chyron Corp. ....................................... 132,300 380,363 Ciber Inc. ......................................... 11,800 354,000 CIDCO, Inc. ........................................ 21,300 372,750 Cilcorp Inc. ....................................... 18,300 670,237 Cincinnati Milacron Inc. ........................... 54,300 1,187,812 Circon Corp. ....................................... 15,300 233,325 Citation Corp. ..................................... 7,900 80,975 Citfed Bancorp Inc. ................................ 10,350 341,550 Citizens Bancorp.................................... 18,300 1,134,600 Citizens Banking Corp. ............................. 15,400 485,100 Citizens Corp. ..................................... 9,500 213,750 Citizens Utilities Co. ............................. 107,952 1,200,966 Citrix Systems Inc. ................................ 35,500 1,386,719 City National Corp. ................................ 50,807 1,098,701 Cityscape Financial Corp. .......................... 8,100 212,625 CKE Restaurants Inc. ............................... 26,800 964,800 CKS Group Inc. ..................................... 2,600 72,475 Claire's Stores Inc. ............................... 64,825 842,725 Clarcor Inc. ....................................... 20,200 446,925 Clarify Inc. ....................................... 14,400 691,200 Cleveland-Cliffs Inc. .............................. 14,000 635,250 Cliffs Drilling Co. ................................ 9,800 619,850 Clinicorp Inc. ..................................... 500 47 Clintrials Research Inc. ........................... 12,150 276,413 CMAC Investment Corp. .............................. 31,800 1,168,650 CMG Information Services Inc. ...................... 9,600 160,800 CML Group Inc. ..................................... 72,800 245,700 CNB Bancshares Inc. ................................ 25,857 1,079,530 CNS Inc. ........................................... 26,500 380,938 Coachmen Industries Inc. ........................... 21,300 604,387 The accompanying notes are an integral part of the financial statements. SAI-138 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Coast Savings Financial Inc. ....................... 24,600 $ 900,975 Coastal Physician Group Inc. ....................... 28,800 100,800 Coastcast Corp. .................................... 10,200 147,900 Coca Cola Bottling Co. Consolidated................. 8,200 399,750 Cocensys Inc. ...................................... 29,900 171,925 Coeur D'Alene Mines Corp. .......................... 30,898 467,332 Cognex Corp. ....................................... 48,500 897,250 Coherent Communications Systems Corp. .............. 12,400 241,800 Coherent Inc. ...................................... 15,300 646,425 Cohu Inc. .......................................... 12,600 292,950 Cole National Corp. ................................ 16,200 425,250 Cole Taylor Financial Group Inc. ................... 11,300 299,450 Collagen Corp. ..................................... 11,200 204,400 Collective Bancorp Inc. ............................ 28,150 988,769 Collins & Aikman Corp. ............................. 95,200 595,000 Colonial Bancgroup Inc. ............................ 16,200 648,000 Colonial Properties Trust........................... 24,100 732,037 Coltec Industries Inc. ............................. 66,500 1,255,187 Columbia Laboratories Inc. ......................... 36,000 522,000 Columbus McKinnon Corp. ............................ 5,300 82,813 Columbus Realty Trust............................... 17,300 393,575 Comforce Corp. ..................................... 3,100 44,175 Commerce Bancorp Inc. .............................. 15,445 509,685 Commerce Group Inc. ................................ 26,300 664,075 Commercial Federal Corp. ........................... 20,500 984,000 Commercial Intertech Corp. ......................... 18,600 253,425 Commercial Metals Co. .............................. 16,533 498,057 Commercial Net Lease Realty Inc. ................... 21,400 339,725 Commonwealth Aluminum Corp. ........................ 12,500 192,188 Commonwealth Bancorp Inc. .......................... 22,555 338,325 Commonwealth Energy Systems......................... 23,500 552,250 Community First Bankshares Inc. .................... 14,900 409,750 Community Trust Bancorp Inc. ....................... 10,850 265,825 Comnet Cellular Inc. ............................... 18,900 526,837 Compdent Corp. ..................................... 13,200 465,300 Compucom Systems Inc. .............................. 31,300 336,475 Computer Horizons Corp. ............................ 20,800 800,800 Computer Language Research Inc. .................... 4,400 47,300 Computer Management Sciences Inc. .................. 4,200 97,650 Computer Network Technology Corp. .................. 37,400 187,000 Computer Products Inc. ............................. 34,000 663,000 Computer Task Group Inc. ........................... 10,200 439,875 ComputerVision Corp. ............................... 89,100 824,175 Comshare Inc. ...................................... 15,300 267,750 Comverse Technology Inc. ........................... 29,200 1,104,125 Conceptus Inc. ..................................... 3,500 35,875 Cone Mills Corp. ................................... 28,500 224,438 Conmed Corp. ....................................... 19,600 401,800 Connecticut Energy Corp. ........................... 12,100 257,125 Connecticut Natural Gas Corp. ...................... 13,900 354,450 The accompanying notes are an integral part of the financial statements. SAI-139 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Conseco Inc. ....................................... 11,293 $ 719,907 Consolidated Products Inc. ......................... 15,330 298,935 Continental Homes Holding Corp. .................... 9,600 204,000 Control Data Systems Inc. .......................... 20,100 442,200 Cooper & Chyan Technology Inc. ..................... 9,800 320,950 Copart Inc. ........................................ 10,000 131,250 Copley Pharmaceutical Inc. ......................... 7,245 67,016 Copytele Inc. ...................................... 63,000 311,063 Coram Healthcare Corp. ............................. 64,100 320,500 Corestaff Inc. ..................................... 18,400 435,850 Cor Therapeutics Inc. .............................. 26,600 262,675 Cort Business Services Corp. ....................... 16,300 336,188 Corus Bankshares Inc. .............................. 11,800 380,550 Cousins Properties Inc. ............................ 30,700 863,437 Covenant Transport Inc. ............................ 15,100 217,063 Coventry Corp. ..................................... 39,300 364,139 CP Clare Corp. ..................................... 14,600 146,000 CPB Inc. ........................................... 6,500 193,375 CPI Corp. .......................................... 19,300 323,275 CRA Managed Care Inc. .............................. 4,100 184,500 Crawford & Co. ..................................... 32,300 738,862 Creative Biomolecules Inc. ......................... 39,400 408,775 Credence Systems Corp. ............................. 29,150 586,644 Credit Acceptance Corp. ............................ 28,600 672,100 Cree Research Inc. ................................. 13,300 124,688 Crescent Real Estate Equities....................... 28,500 1,503,375 Criimi Mae Inc. .................................... 41,500 534,312 Crompton & Knowles Corp. ........................... 93,744 1,804,572 Cross Timbers Oil Co. .............................. 20,100 505,012 Crown America Realty Trust.......................... 36,400 273,000 Crown Central Petroleum Corp. ...................... 8,100 100,238 Cryolife Inc. ...................................... 12,000 150,000 CSG Systems International Inc. ..................... 4,000 61,500 CSS Industries Inc. ................................ 10,000 260,000 CTS Corp. .......................................... 5,400 230,850 Cubic Corp. ........................................ 7,200 166,500 Culbro Corp. ....................................... 2,600 168,675 Cullen/Frost Bankers Inc. .......................... 30,440 1,012,130 Culligan Water Technologies Inc. ................... 23,700 959,850 Cuno Inc. .......................................... 18,600 276,675 Curative Health Services Inc. ...................... 14,100 390,394 Curtiss Wright Corp. ............................... 4,000 201,500 CWM Mortgage Holdings Inc. ......................... 63,800 1,371,700 Cybercash Inc. ..................................... 7,900 181,700 Cygnus Inc. ........................................ 22,400 324,800 Cyrix Corp. ........................................ 22,300 395,825 Cytel Corp. ........................................ 17,100 58,781 Cytogen Corp. ...................................... 62,500 343,750 Cytyc Corp. ........................................ 3,000 81,000 D.R. Horton Inc. ................................... 27,955 304,011 The accompanying notes are an integral part of the financial statements. SAI-140 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Daisytek International Corp. ....................... 5,100 $ 209,100 Daka International Inc. ............................ 16,900 162,663 Dallas Semiconductor Corp. ......................... 38,400 883,200 Dames & Moore Inc. ................................. 21,100 308,588 Daniel Industries Inc. ............................. 13,300 196,175 Dart Group Corp. ................................... 2,500 232,500 Data Broadcasting Corp. ............................ 35,300 247,100 Data General Corp. ................................. 47,000 681,500 Data Processing Corp. .............................. 2,600 48,100 Data Translation Inc. .............................. 2,500 10,000 Data Transmission Network Corp. .................... 12,400 275,900 Datascope Corp. .................................... 18,600 372,000 Datastream Systems Inc. ............................ 5,200 93,600 Dauphin Deposit Corp. .............................. 42,400 1,399,200 Davox Corp. ........................................ 7,400 305,250 Day Runner Inc. .................................... 7,100 138,450 Dean Foods Co. ..................................... 53,800 1,735,050 DecisionOne Corp. .................................. 11,800 194,700 Dekalb Genetics Corp. .............................. 18,600 948,600 Delchamps Inc. ..................................... 7,500 145,313 Delphi Financial Group Inc. ........................ 17,200 507,400 Delta & Pine Land Co. .............................. 27,598 883,136 Dendrite International Inc. ........................ 11,500 94,875 Department 56 Inc. ................................. 28,300 700,425 Deposit Guaranty Corp. ............................. 53,000 1,643,000 Depotech Corp. ..................................... 15,000 245,625 Desktop Data Inc. .................................. 9,600 184,800 Destec Energy Inc. ................................. 19,700 307,813 Detroit Diesel Corp. ............................... 11,600 266,800 Developers Diversified Realty Corp. ................ 25,800 957,825 Devon Energy Corp. ................................. 25,200 875,700 Devon Group Inc. ................................... 9,700 266,750 Devry Inc. ......................................... 35,800 841,300 Dexter Corp. ....................................... 32,600 1,039,125 DH Technology Inc. ................................. 9,850 236,400 Diagnostic Products Corp. .......................... 15,200 393,300 Dialogic Corp. ..................................... 10,600 333,900 Diamond Multimedia Systems Inc. .................... 40,300 478,562 Diana Corp. ........................................ 4,525 124,438 Digi International Inc. ............................ 17,900 170,050 Digital Microwave Corp. ............................ 20,700 577,012 DII Group Inc. ..................................... 17,200 399,900 Dimon Inc. ......................................... 46,700 1,079,937 Dionex Corp. ....................................... 16,900 591,500 Discount Auto Parts Inc. ........................... 11,800 275,825 Documentum Inc. .................................... 13,900 469,125 Donaldson Co. , Inc. ............................... 28,700 961,450 Donnkenny Inc. ..................................... 14,500 67,063 Doubletree Corp. ................................... 41,810 1,881,433 Downey Financial Corp. ............................. 23,828 467,615 The accompanying notes are an integral part of the financial statements. SAI-141 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Dravo Corp. ........................................ 18,400 $ 259,900 Dress Barn, Inc. ................................... 22,100 331,500 Dreyers Grand Ice Cream, Inc. ...................... 15,000 435,000 DSP Communications Inc. ............................ 66,200 1,282,625 DT Inductries Inc. ................................. 7,000 245,000 Duke Realty Investments Inc. ....................... 40,600 1,563,100 Dura Pharmaceuticals Inc. .......................... 58,100 2,774,275 Duriron Co. , Inc. ................................. 33,600 911,400 Duty Free International Inc. ....................... 28,100 407,450 Dynatech Corp. ..................................... 24,700 1,092,975 E'Town Corp. ....................................... 10,000 316,250 E. W. Blanch Holdings, Inc. ........................ 14,000 281,750 Eagle Hardware & Garden, Inc. ...................... 25,900 537,425 Eagle River Interactive Inc. ....................... 4,000 31,500 Eagle USA Airfreight Inc. .......................... 6,500 170,625 Earthgrains Co. .................................... 12,700 663,575 Eastern Enterprises................................. 28,200 997,575 Eastern Utilities Associates........................ 27,200 472,600 Eaton Vance Corp. .................................. 9,900 471,487 Egghead Inc. ....................................... 17,600 92,400 EIS International Inc. ............................. 13,000 112,125 El Paso Electric Co. ............................... 77,800 505,700 Elcom International Inc. ........................... 6,500 51,188 Elcor Chemical Corp. ............................... 10,600 226,575 Electro Rent Corp. ................................. 9,700 241,288 Electro Scientific Industries Inc. ................. 11,700 304,200 Electroglas Inc. ................................... 25,900 417,637 Eltron International Inc. .......................... 8,000 161,000 Embrace Systems Corp. (b)........................... 3,800 0 Emcare Holdings Inc. ............................... 10,400 241,800 Emeritus Corp. ..................................... 12,300 166,050 Emmis Broadcasting Corp. ........................... 11,600 379,900 Empire District Electric Co. ....................... 22,700 425,625 Employee Solutions Inc. ............................ 23,600 483,800 Encad Inc. ......................................... 12,700 523,875 Endosonics Corp. ................................... 18,000 274,500 Energen Corp. ...................................... 14,450 437,112 Energy Conversion Devices Inc. ..................... 16,100 219,363 Energy Ventures Inc. ............................... 18,600 946,275 Enhance Financial Services Group Inc. .............. 16,800 613,200 Ennis Business Forms Inc. .......................... 20,925 235,406 Enterprise Systems Inc. ............................ 3,900 91,650 Envoy Corp. ........................................ 18,900 708,750 Enzo Biochem Inc. .................................. 27,227 493,489 Epic Design Technology Inc. ........................ 16,700 417,500 Epitope Inc. ....................................... 19,200 220,800 Equimed Inc. ....................................... 19,100 66,850 Equity Corp. International.......................... 11,650 233,000 Equity Inns Inc. ................................... 30,200 392,600 Ergo Science Corp. ................................. 11,400 149,625 The accompanying notes are an integral part of the financial statements. SAI-142 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- ESS Technology Inc. ................................ 25,000 $ 703,125 Esterline Technologies Corp. ....................... 11,900 310,888 Etec Systems Inc. .................................. 20,900 799,425 Ethan Allen Interiors Inc. ......................... 20,200 777,700 Evans & Sutherland Computer Co. .................... 13,000 325,000 Evans Withycombe Residential........................ 24,800 520,800 Evergreen Media Corp. .............................. 29,150 728,750 Exabyte Corp. ...................................... 31,500 421,312 Excalibur Technologies Corp. ....................... 12,000 189,000 Excel Realty Trust Inc. ............................ 21,400 543,025 Excite Inc. ........................................ 5,100 52,275 Executive Risk Inc. ................................ 13,000 481,000 Executive Telecard Ltd.............................. 24,600 153,750 Executone Information Systems Inc. ................. 54,900 130,388 Exide Corp. ........................................ 24,100 554,300 Expeditors International of Washington Inc. ....... 34,000 782,000 Express Scripts Inc. ............................... 23,100 828,712 Extended Stay America Inc. ......................... 46,000 925,750 EZ Communications Inc. ............................. 9,500 347,938 F & M National Corp. ............................... 25,902 553,655 Fab Industries, Inc. ............................... 5,900 162,250 Fabri Centres America Inc. ......................... 20,450 329,756 Fair Isaac & Co. , Inc. ............................ 9,800 383,425 Fairchild Corp. .................................... 20,600 303,850 Falcon Building Prods Inc. ......................... 6,200 91,450 Falcon Drilling..................................... 16,100 631,925 Family Dollar Stores Inc. .......................... 56,600 1,153,225 Farmer Brothers Co. ................................ 1,030 156,560 Fastcomm Communications Corp. ...................... 14,200 86,975 Fedders Corp. ...................................... 58,700 366,875 Federal Mogul Corp. ................................ 48,400 1,064,800 Federal Realty Investment Trust..................... 46,500 1,261,312 Felcor Suite Hotels Inc. ........................... 32,100 1,135,537 Ferro Corp. ........................................ 36,200 1,027,175 Fibreboard Corp. ................................... 12,300 415,125 Fidelity National Financial Inc. ................... 12,298 186,007 Fieldcrest Cannon Inc. ............................. 11,800 188,800 Figgie International Holdings Inc. ................. 25,300 303,600 Filenet Corp. ...................................... 20,300 649,600 Financial Federal Corp. ............................ 15,200 254,600 Financial Security Assurance Holdings Ltd. ......... 40,153 1,320,030 Financial Trust Corp. .............................. 11,574 461,513 Fingerhut Cos., Inc. ............................... 64,100 785,225 First American Financial Corp. ..................... 13,880 570,815 First Citizens Bancshares Inc. ..................... 15,200 1,170,400 First Commerce Bancshares Inc. ..................... 15,500 410,750 First Commercial Corp. ............................. 31,086 1,154,068 First Commonwealth Financial Corp. ................. 30,200 562,475 First Federal Savings Bank of Colorado.............. 20,778 353,226 First Financial Bancorp............................. 19,180 623,356 The accompanying notes are an integral part of the financial statements. SAI-143 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- First Financial Bankshares Inc. .................... 8,875 $ 355,000 First Financial Corp. .............................. 49,875 1,221,937 First Financial Corp.--Indiana...................... 7,360 272,320 First Hawaiian Inc. ................................ 32,800 1,148,000 First Industrial Reality Trust Inc. ................ 32,700 993,262 First Indiana Corp. ................................ 8,299 221,998 First Michigan Bank Corp. .......................... 35,458 1,050,443 First Midwest Bancorp Inc. ......................... 20,625 672,891 First Savings Bank Inc. ............................ 13,300 244,388 First Union Corp. .................................. 23 1,718 First United Bancshares Inc. ....................... 9,700 305,550 First Western Bancorp Inc. ......................... 10,700 280,875 Firstbank (Puerto Rico)............................. 16,400 426,400 Firstbank of Illinois Co. .......................... 13,550 470,862 Firstfed Financial Corp. ........................... 12,575 276,650 Firstmerit Corp. ................................... 42,200 1,498,100 Fisher Scientific International Inc. ............... 27,800 1,310,075 Fleming Cos., Inc. ................................. 51,600 890,100 Flores & Rucks Inc. ................................ 16,400 873,300 Florida East Coast Industries Inc. ................. 5,200 454,350 Florida Rock Industries Inc. ....................... 8,200 268,550 Flowers Industries Inc. ............................ 77,600 1,668,400 Fluke Corp. ........................................ 7,800 348,075 FM Bancorporation Inc. ............................. 8,720 259,420 FNB Corp. .......................................... 13,550 311,650 Foamex International Inc. .......................... 19,000 313,500 Foodbrands America Inc. ............................ 14,900 204,875 Foodmaker Inc. ..................................... 55,100 489,012 Forcenergy Inc. .................................... 12,300 445,875 Foremost Corp. of America........................... 12,200 732,000 Forest City Enterprises Inc. ....................... 5,200 314,600 Forest Oil Corp. ................................... 28,000 493,500 Fort Wayne National Corp. .......................... 16,150 613,700 Fossil Inc. ........................................ 6,300 85,050 Foxmeyer Health Corp. .............................. 18,918 30,742 Franchise Finance Corp. ............................ 55,900 1,544,237 Franklin Electric Co. , Inc. ....................... 5,800 271,150 Franklin Electronic Publishers, Inc. ............... 10,900 132,163 Franklin Quest Co. ................................. 22,900 480,900 Freeport-McMoran Copper & Gold Inc. ................ 34,300 1,101,887 Fremont General Corp. .............................. 28,097 871,007 Friedmans Inc. ..................................... 19,500 287,625 Frontier Insurance Group Inc. ...................... 15,180 580,635 Frozen Food Express Industries Inc. ................ 8,267 74,403 FSI International Inc. ............................. 29,500 442,500 FTP Software Inc. .................................. 45,500 273,000 Fuisz Technologies Ltd.............................. 17,500 137,813 Fulton Financial Corp. ............................. 44,855 964,382 Fund American Enterprises Holding, Inc. ............ 9,394 899,475 Furniture Brands International Inc. ................ 83,000 1,162,000 The accompanying notes are an integral part of the financial statements. SAI-144 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Furon Co. .......................................... 13,300 $ 282,625 Fusion Systems Corp. ............................... 12,300 261,375 G & K Services, Inc. ............................... 28,200 1,064,550 Gables Residential Trust............................ 22,300 646,700 Gadzooks Inc. ...................................... 11,400 208,050 Gainsco Inc. ....................................... 28,163 271,069 Galileo Electro Optics Corp. ....................... 9,100 228,638 Galoob (Lewis) Toys Inc. ........................... 19,600 274,400 Garden Ridge Corp. ................................. 22,900 197,513 Gasonics International Corp. ....................... 11,700 119,925 GATX Corp. ......................................... 28,200 1,367,700 Gaylord Container Corp. ............................ 72,700 445,287 GC Cos., Inc. ...................................... 8,200 283,925 Gelman Sciences Inc. ............................... 9,300 302,250 Geltex Pharmaceuticals Inc. ........................ 17,500 424,375 Gencorp Inc. ....................................... 35,100 636,187 Genelabs Technologies Inc. ......................... 49,000 300,125 General Binding Corp. .............................. 7,200 214,200 General Communication Inc. ......................... 35,200 286,000 General Datacomm Industries Inc. ................... 28,400 298,200 General Growth Properties Inc. ..................... 37,100 1,196,475 General Magic Inc. ................................. 15,000 34,688 General Reinsurance Corp. .......................... 60 9,465 General Scanning Inc. .............................. 8,000 94,000 Genesco Inc. ....................................... 37,300 345,025 Genesis Health Ventures Inc. ....................... 33,800 1,052,025 Geneva Steel Co. ................................... 12,600 37,800 Genovese Drug Stores Inc. .......................... 1 17 Genrad Inc. ........................................ 33,100 769,575 Gensia Inc. ........................................ 34,700 160,488 Gentex Corp. ....................................... 42,800 861,350 Genus Inc. ......................................... 17,800 97,900 Genzyme Transgenics Corp. .......................... 580 3,553 Geon Co. ........................................... 30,100 590,712 Geotek Communications Inc. ......................... 79,400 565,725 Geoworks............................................ 14,100 345,450 Gerber Scientific Inc. ............................. 25,200 374,850 Getchell Gold Corp. ................................ 35,635 1,367,493 Getty Petroleum Corp. .............................. 11,518 187,168 Giant Industries Inc. .............................. 11,600 162,400 Gibraltar Steel Corp. .............................. 4,400 115,500 Gibson Greetings Inc. .............................. 20,500 402,312 Giddings & Lewis Inc. .............................. 43,800 563,925 Gilead Sciences Inc. ............................... 41,400 1,035,000 Gleason Corp. ...................................... 4,400 145,750 Glendale Federal Bank FSB........................... 60,100 1,397,325 Glimcher Realty Trust............................... 30,000 660,000 Global Industrial Technologies Inc. ................ 29,600 654,900 Global Industries Ltd............................... 31,400 584,825 Golden Books Family Entertainment Inc. ............. 25,800 287,025 The accompanying notes are an integral part of the financial statements. SAI-145 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Goulds Pumps Inc. .................................. 29,400 $ 674,362 Graco Inc. ......................................... 18,400 450,800 Grancare Inc. ...................................... 27,161 485,503 Granite Construction Inc. .......................... 16,150 306,850 GRC International Inc. ............................. 14,100 114,563 Great Financial Corp. .............................. 19,500 567,937 Greenbrier Cos., Inc. .............................. 10,100 104,788 Greenfield Industries Inc. ......................... 21,700 664,562 Greenwich Air Services Inc. ........................ 9,800 220,500 Greif Brothers Corp. ............................... 25,000 706,250 Grey Advertising Inc. .............................. 1,130 282,500 Greyhound Lines Inc. ............................... 71,100 275,513 Griffon Corp. ...................................... 41,300 505,925 Guarantee Life Cos., Inc. .......................... 13,500 249,750 Guaranty National Corp. ............................ 19,711 330,159 Guilford Mills Inc. ................................ 17,350 461,944 Gulf South Medical Supply Inc. ..................... 19,600 502,250 H. B. Fuller Co. ................................... 19,100 897,700 Ha Lo Industries Inc. .............................. 12,500 343,750 Hach Co. ........................................... 3,150 59,850 Hadco Corp. ........................................ 11,500 563,500 Haemonetics Corp. .................................. 31,600 596,450 Halliburton Co. .................................... 79 4,772 Hancock Fabrics Inc. ............................... 28,400 294,650 Hancock Holding Co. ................................ 11,615 470,407 Handleman Co. ...................................... 49,400 419,900 Handy & Harman...................................... 20,200 353,500 Harbinger Corp. .................................... 12,700 333,375 Hardinge Brothers Inc. ............................. 8,400 223,650 Harken Energy Corp. ................................ 99,000 297,000 Harleysville Group Inc. ............................ 8,200 250,100 Harleysville National Corp. ........................ 9,025 218,856 Harman International Industries Inc. ............... 19,815 1,102,209 Harmonic Lightwaves Inc. ........................... 15,200 233,700 Harper Group Inc. .................................. 16,350 388,313 Harris Savings Bank................................. 2,200 40,150 Harte-Hanks Communications, Inc. ................... 22,068 612,387 Hartford Steam Boiler Inspection & Insurance ....... 28,100 1,303,137 Hartmarx Corp. ..................................... 27,600 155,250 Harveys Casino Resorts.............................. 9,800 165,375 HCC Insurance Holdings Inc. ........................ 39,200 940,800 HCIA Inc. .......................................... 3,400 117,300 Health Care Property Investors Inc. ................ 39,600 1,386,000 Health Care REIT Inc. .............................. 20,400 499,800 Health Management Systems Inc. ..................... 20,025 280,350 Healthcare Realty Trust............................. 17,300 458,450 Healthdyne Technologies Inc. ....................... 20,600 182,825 Healthplan Services Corp. .......................... 10,400 219,700 Heartland Express Inc. ............................. 20,335 495,666 Heartland Wireless Communication Inc. .............. 17,700 232,313 The accompanying notes are an integral part of the financial statements. SAI-146 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Hearx Ltd........................................... 90,500 $ 254,531 Hechinger Co. ...................................... 50,200 103,538 Hecla Mining Co. ................................... 69,000 388,125 Heftel Broadcasting Corp. .......................... 10,400 327,600 Heilig Meyers Co. .................................. 67,800 1,101,750 Helix Technology Corp. ............................. 10,100 292,900 Helmerich & Payne Inc. ............................. 33,700 1,756,612 Henry Schein Inc. .................................. 8,600 295,625 Herbalife International Inc. ....................... 16,700 544,837 Heritage Financial Services Inc. ................... 5,700 121,125 Heritage Media Corp. ............................... 45,400 510,750 Herman Miller Inc. ................................. 33,500 1,896,937 Hexcel Corp. ....................................... 51,600 838,500 Highlands Insurance Group........................... 15,600 315,900 Highwaymaster Communications Inc. .................. 29,000 525,625 Highwoods Properties Inc. .......................... 43,300 1,461,375 Hilb Rogal & Hamilton Co. .......................... 18,762 248,597 HMT Technology Corp. ............................... 13,300 199,708 HNC Software Inc. .................................. 20,600 643,750 Hollinger International Inc. ....................... 30,400 349,600 Holly Corp. ........................................ 8,200 219,350 Hollywood Entertainment Corp. ...................... 29,100 538,350 Hollywood Park Inc. ................................ 18,400 276,000 Hologic Inc. ....................................... 16,300 403,425 Holophane Corp. .................................... 14,900 283,100 Home Beneficial Corp. .............................. 17,300 655,237 Homeland Bankshares Corp. .......................... 7,100 294,650 Hon Industries Inc. ................................ 32,200 1,062,600 Hondo Oil & Gas Co. ................................ 4,100 44,588 Horace Mann Educators Corp. ........................ 31,300 1,263,737 Horizon CMS Healthcare Corp. ....................... 72,016 909,202 Horizon Group Inc. ................................. 25,092 498,703 Hospitality Properties Trust........................ 31,400 910,600 Host Marriott Services Corp. ....................... 39,800 363,175 Houghton Mifflin Co. ............................... 19,800 1,121,175 House of Fabrics Inc. .............................. 15 51 House of Fabrics Inc.--WTS.......................... 37 74 HPR Inc. ........................................... 17,100 235,125 HSN Inc. ........................................... 17,080 405,650 Hubco Inc. ......................................... 27,108 664,146 Hudson Foods Inc. .................................. 29,000 551,000 Huffy Corp. ........................................ 17,100 245,813 Hughes Supply Inc. ................................. 8,700 375,188 Hugoton Capital L.P................................. 19,000 192,375 Human Genome Sciences Inc. ......................... 25,800 1,051,350 Hunt Manufacturing Co. ............................. 11,300 204,813 Huntco Inc. ........................................ 9,700 143,075 Hutchinson Technology Inc. ......................... 6,900 524,400 Hybridon Inc. ...................................... 32,900 193,288 Hyperion Software Corp. ............................ 22,700 482,375 The accompanying notes are an integral part of the financial statements. SAI-147 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- I Stat Corp. ....................................... 18,400 $ 437,000 I2 Technologies Inc. ............................... 800 30,600 ICN Pharmaceuticals Inc. ........................... 48,794 957,582 ICOS Corp. ......................................... 38,800 295,850 ICU Medical Inc. ................................... 7,500 59,063 IDEC Pharmaceuticals Corp. ......................... 16,900 401,375 Identix Inc. ....................................... 24,600 201,413 Idex Corp. ......................................... 23,150 923,106 IDT Corp. .......................................... 4,700 51,700 IDX Systems Corp. .................................. 8,400 240,450 IES Industries Inc. ................................ 41,600 1,242,800 IHOP Corp. ......................................... 11,300 266,963 IKOS Systems Inc. .................................. 12,100 242,000 Imatron Inc. ....................................... 102,600 339,863 Imclone Systems Inc. ............................... 29,900 291,525 Imco Recycling Inc. ................................ 15,900 232,538 Immulogic Pharmaceutical Corp. ..................... 25,600 163,200 Immune Response Corp. .............................. 24,100 198,825 Immunex Corp. ...................................... 24,800 483,600 Immunomedics Inc. .................................. 32,400 178,200 Imnet Systems Inc. ................................. 13,800 334,650 IMP Inc. ........................................... 42,900 95,184 Imperial Bancorp.................................... 22,257 534,168 Imperial Credit Industries Inc. .................... 32,072 673,512 In Focus Systems Inc. .............................. 10,600 229,225 Inacom Corp. ....................................... 12,300 492,000 Inbrand Corp. ...................................... 11,850 248,850 Incontrol Inc. ..................................... 17,200 137,600 Incyte Pharmaceuticals Inc. ........................ 9,000 463,500 Indiana Energy Inc. ................................ 27,000 658,125 Individual Inc. .................................... 4,200 25,200 Indus Group Inc. ................................... 3,900 100,425 Inference Corp. .................................... 12,600 91,350 Information Resources Inc. ......................... 36,600 512,400 Ingles Markets Inc. ................................ 9,600 120,000 Inhale Therapeutic Systems.......................... 16,000 242,000 Inphynet Medical Management Inc. ................... 15,300 275,400 Insignia Financial Group Inc. ...................... 45,100 1,014,750 Insilco Corp. ...................................... 13,300 512,050 Insituform Technologies Inc. ....................... 31,785 234,414 Inso Corp. ......................................... 10,900 433,275 Integon Corp. ...................................... 18,500 328,375 Integra Lifesciences Corp. ......................... 44,401 205,355 Integrated Device Technology........................ 105,600 1,438,800 Integrated Health Services Inc. .................... 30,600 745,875 Integrated Measurement Systems Inc. ................ 2,600 45,175 Integrated Packaging Assembly Corp. ................ 8,800 71,088 Integrated Process Equipment Corp. ................. 21,000 378,000 Integrated Silicon Solution......................... 20,200 174,225 Integrated Systems Inc. ............................ 23,300 605,800 The accompanying notes are an integral part of the financial statements. SAI-148 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Intellidata Technologies Corp. ..................... 19,000 $ 137,750 Intelligent Electronics Inc. ....................... 41,400 331,200 Intelliquest Information Group...................... 2,300 52,325 Inter-Regional Financial Group Inc. ................ 16,600 585,150 Inter-Tel Inc. ..................................... 11,000 209,000 Intercardia Inc. ................................... 2,300 49,450 Intercel Inc. ...................................... 15,300 187,425 Interdigital Communications Corp. .................. 60,500 347,875 Interface Inc. ..................................... 27,100 545,387 Intergraph Corp. ................................... 55,600 569,900 Interim Services Inc. .............................. 21,700 770,350 Intermagnetics General Corp. ....................... 18,641 223,692 Intermedia Commerce of Florida...................... 22,100 569,075 Intermet Corp. ..................................... 26,500 427,312 International Cabletel Inc. ........................ 40,233 1,015,883 International Dairy Queen Inc. ..................... 20,700 414,000 International Family Entertainment Inc. ............ 38,925 603,337 International Imaging Materials, Inc. .............. 9,500 216,125 International Multifoods Corp. ..................... 23,800 431,375 Interpool Inc. ..................................... 13,900 324,913 Intersolv Inc. ..................................... 30,800 284,900 Interstate Power Co. ............................... 13,800 400,200 Intervoice Inc. .................................... 24,300 297,675 Intevac Inc. ....................................... 3,900 66,300 Invacare Corp. ..................................... 40,500 1,113,750 Investment Technology Group Inc. ................... 6,600 127,050 Investors Financial Services Corp. ................. 430 11,503 Ionics Inc. ........................................ 22,100 1,060,800 IPC Information Systems Inc. ....................... 4,500 68,063 Iron Mountain Inc. ................................. 6,100 184,525 IRT Property Co. ................................... 37,900 435,850 Irvine Apartment Communities Inc. .................. 23,500 587,500 Irwin Financial Corp. .............................. 8,400 207,900 Isis Pharmaceuticals, Inc. ......................... 34,900 628,200 Isolyser Inc. ...................................... 29,800 208,600 ITI Technologies Inc. .............................. 14,200 214,775 Itron Inc. ......................................... 12,100 214,775 ITT Educational Services Inc. ...................... 7,550 174,594 J & L Specialty Steel Inc. ......................... 24,900 283,238 J. B. Hunt Transport Services Inc. ................. 31,000 434,000 J. M. Smucker Co. , Class A......................... 40,300 710,287 J.C. Penney Co. , Inc. ............................. 35 1,706 Jabil Circuit Inc. ................................. 8,300 332,000 Jack Henry & Associates Inc. ....................... 10,100 361,075 Jacobs Engineering Group Inc. ...................... 29,000 685,125 Jacor Communications Inc.--WTS...................... 8,700 17,400 Jacor Communications Inc. .......................... 8,800 240,900 Jayhawk Acceptance Corp. ........................... 13,800 155,250 JDA Software Group Inc. ............................ 4,700 133,950 JDN Realty Corp. ................................... 16,200 447,525 The accompanying notes are an integral part of the financial statements. SAI-149 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Jefferies Group Inc. ............................... 14,100 $ 569,287 Jefferson Bankshares Inc. .......................... 20,000 572,500 Jenny Craig Inc. ................................... 7,500 66,563 John Alden Financial Corp. ......................... 32,100 593,850 John Harland Co. ................................... 42,800 1,412,400 John Nuveen & Co. , Inc. ........................... 9,100 241,150 John Wiley & Sons Inc. ............................. 17,800 574,050 Jones Intercable Inc. .............................. 29,200 310,250 Jones Medical Industries Inc. ...................... 31,200 1,142,700 Jostens Inc. ....................................... 47,000 992,875 JP Foodservice Inc. ................................ 16,700 465,512 JP Realty Inc. ..................................... 17,200 445,050 JSB Financial Inc. ................................. 11,600 440,800 Juno Lighting Inc. ................................. 24,200 387,200 Just For Feet Inc. ................................. 25,850 678,562 Justin Industries Inc. ............................. 26,550 305,325 K2 Inc. ............................................ 19,683 541,282 Kaiser Aluminum Corp. .............................. 12,000 139,500 Kaman Corp. ........................................ 25,400 330,200 Kansas City Life Insurance Co. ..................... 4,300 273,050 Katz Media Group Inc. .............................. 21,100 237,375 Kaufman & Broad Home Corp. ......................... 53,600 690,100 Kaydon Corp. ....................................... 21,900 1,032,037 KCS Energy Inc. .................................... 14,000 500,500 Keane Inc. ......................................... 46,050 1,462,087 Kelley Oil & Gas Corp. ............................. 27,700 67,519 Kellwood Co. ....................................... 29,700 594,000 KEMET Corp. ........................................ 52,200 1,213,650 Kennametal Inc. .................................... 36,300 1,411,162 Kenneth Cole Productions Inc. ...................... 10,100 156,550 Kent Electronics Corp. ............................. 34,700 893,525 Keravision Inc. .................................... 17,900 246,125 Keystone Financial Group Inc. ...................... 52,698 1,317,450 Keystone International Inc. ........................ 42,700 859,337 KFX Inc. ........................................... 9,900 54,450 Kimball International Inc. ......................... 25,600 1,059,200 Kimco Realty Corp. ................................. 36,700 1,279,912 Kinder-Care Learning Centres Inc. .................. 14,300 268,125 Kinetic Concepts Inc. .............................. 23,600 289,100 Kirby Corp. ........................................ 33,100 653,725 Klamath First Bancorp Inc. ......................... 18,200 286,650 KN Energy Inc. ..................................... 28,808 1,130,714 Knickerbocker Village Inc. ......................... 6,400 40,800 Knight Transportation Inc. ......................... 3,100 58,900 Koger Equity Inc. .................................. 20,400 382,500 Kronos Inc. ........................................ 10,950 350,400 Kuhlman Corp. ...................................... 17,500 339,063 Kulicke & Soffa Industries Inc. .................... 26,700 507,300 L.S. Starrett Co. .................................. 9,600 272,400 Labone Inc. ........................................ 3,200 59,200 The accompanying notes are an integral part of the financial statements. SAI-150 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Laboratory Corp. America Holdings................... 115,40 $ 331,775 Laclede Gas Co. .................................... 23,900 576,587 Lance Inc. ......................................... 22,200 399,600 Land's End Inc. .................................... 21,900 580,350 Landauer Inc. ...................................... 11,700 286,650 Landec Corp. ....................................... 2,800 21,350 Landrys Seafood Restaurants Inc. ................... 21,500 459,562 Landstar Systems Inc. .............................. 16,500 383,625 Lattice Semiconductor Corp. ........................ 30,750 1,414,500 Lawson Products Inc. ............................... 10,800 236,250 Lawter International Inc. .......................... 39,500 498,687 La-Z-Boy Inc. ...................................... 18,400 542,800 LCA Vision Inc. .................................... 6,100 15,250 Learning Tree International Inc. ................... 8,400 247,800 LeaRonal Inc. ...................................... 9,500 218,500 Legato Systems Inc. ................................ 26,100 851,512 Legg Mason Inc. .................................... 20,350 783,475 Lennar Corp. ....................................... 35,900 978,275 Level One Communications Inc. ...................... 19,000 679,250 Libbey Inc. ........................................ 20,000 557,500 Liberty Bancorp Inc. ............................... 7,400 368,150 Liberty Corp. ...................................... 20,300 796,775 Liberty Financial Cos., Inc. ....................... 7,536 292,962 Liberty Property.................................... 40,100 1,032,575 Life Re Corp. ...................................... 13,700 529,162 Life Technologies Inc. ............................. 14,800 370,000 Life USA Holding Inc. .............................. 21,300 255,600 Lifecore Biomedical Inc. ........................... 16,100 289,800 Ligand Pharmaceuticals Inc. ........................ 28,935 430,408 Lilly Industries Inc. .............................. 26,688 487,056 LIN Television Corp. ............................... 17,600 743,600 Lincoln Electric Co. ............................... 34,500 1,134,187 Lindsay Manufacturing Co. .......................... 9,550 446,462 Liposome Co. , Inc. ................................ 44,300 847,237 Liqui-Box Corp. .................................... 5,400 175,500 Littelfuse Inc. .................................... 16,700 809,950 Living Centers of America Inc. ..................... 18,600 516,150 Logic Works Inc. ................................... 6,800 38,250 Logicon Inc. ....................................... 17,400 635,100 LoJack Corp. ....................................... 28,700 287,000 Lomak Petroleum Inc. ............................... 19,200 328,800 Lone Star Industries Inc. .......................... 15,900 586,312 Lone Star Technologies Inc. ........................ 26,700 453,900 Long Island Bancorp Inc. ........................... 34,100 1,193,500 Longs Drug Stores Corp. ............................ 19,000 933,375 Longview Fibre Co. ................................. 70,600 1,297,275 Louis Dreyfus Natural Gas Holdings Corp. .......... 8,000 137,000 LSI Industries Inc. ................................ 12,000 159,000 LTC Properties...................................... 24,800 458,800 LTX Corp. .......................................... 53,200 312,550 The accompanying notes are an integral part of the financial statements. SAI-151 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Luby's Cafeterias Inc. ............................. 33,000 $ 655,875 Lukens Inc. ........................................ 21,300 428,662 Lunar Corp. ........................................ 7,800 273,000 Lydall Inc. ........................................ 23,800 535,500 M.S. Carriers Inc. ................................. 12,900 206,400 Mac Frugals Bargains Inc. .......................... 34,700 906,537 MacDermid Inc. ..................................... 7,800 214,500 Macerich Co. ....................................... 23,800 621,775 Madison Gas & Electric Co. ......................... 20,650 418,162 MAF Bancorp Inc. ................................... 14,281 496,265 Mafco Consolidated Group Inc. ...................... 7,100 180,163 Mafco Consolidated Group Inc.--Rts.................. 31,300 29,344 Magellan Health Services Inc. ...................... 44,500 995,687 Magna Bancorp Inc. ................................. 20,700 362,250 Magna Group Inc. ................................... 37,300 1,100,350 MagneTek Inc. ...................................... 26,900 346,338 MAI Systems Corp. .................................. 457 2,999 MAIC Holdings Inc. ................................. 12,030 407,516 Mail Boxes Etc...................................... 11,400 256,500 Manhattan Bagel Inc. ............................... 2,200 15,950 Manitowoc Co. , Inc. ............................... 15,950 645,975 Manufactured Home Communities Inc. ................. 32,900 764,925 Manugistics Group Inc. ............................. 9,900 393,525 Marcus Corp. ....................................... 15,575 330,969 Marine Drilling Cos., Inc. ......................... 54,600 1,074,937 Mariner Health Group Inc. .......................... 38,800 324,950 Marisa Christina Inc. .............................. 6,500 53,625 Mark Twain Bancshares Inc. ......................... 19,250 938,437 Markel Corp. ....................................... 5,240 471,600 Marquette Medical Systems Inc. ..................... 14,300 316,388 Marshall Industries................................. 23,600 722,750 Martek Biosciences Corp. ........................... 16,700 334,000 MascoTech Inc. ..................................... 46,800 766,350 Mastec Inc. ........................................ 8,900 471,700 Material Sciences Corp. ............................ 20,400 367,200 Mathews International Corp. ........................ 11,100 313,575 Matria Healthcare Inc. ............................. 47,600 226,100 Matrix Pharmaceutical Inc. ......................... 24,100 147,613 Mattson Technology Inc. ............................ 14,100 133,950 Maxicare Health Plans Inc. ......................... 25,400 565,150 Maxis Inc. ......................................... 9,900 121,275 MAXXAM Inc. ........................................ 8,300 395,287 May & Speh Inc. .................................... 9,200 112,700 McClatchy Newspapers Inc. .......................... 41,800 1,463,000 McDonald & Co. Investments Inc. .................... 11,420 396,845 McGrath RentCorp.................................... 8,400 216,300 McWhorter Technologies Inc. ........................ 8,900 203,588 MDL Information Systems Inc. ....................... 10,300 191,838 MDU Resources Group Inc. ........................... 37,600 864,800 Meadowbrook Insurance Group Inc. ................... 6,500 136,500 The accompanying notes are an integral part of the financial statements. SAI-152 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Measurex Corp. ..................................... 19,800 $ 475,200 Medcath Inc. ....................................... 15,100 241,600 Media 100 Inc. ..................................... 10,000 88,750 Media General Inc. ................................. 16,700 505,175 Medimmune Inc. ..................................... 19,200 326,400 Medusa Corp. ....................................... 22,000 756,250 Mentor Corp. ....................................... 32,300 952,850 Mercer International Inc. .......................... 16,600 170,150 Mercury Interactive Corp. .......................... 20,900 271,700 Meridian Diognostic................................. 12,200 158,600 Meridian Industrial Trust Inc. ..................... 14,900 312,900 Merix Corp. ........................................ 6,500 99,125 Merrill Corp. ...................................... 7,700 177,100 Merry Land & Investment Co. , Inc. ................. 51,600 1,109,400 Mesa Air Group Inc. ................................ 36,700 247,725 Mesa, Inc. ......................................... 93,300 489,825 Metatools Inc. ..................................... 12,600 148,050 Methode Electronics Inc. ........................... 42,700 864,675 Metricom Inc. ...................................... 15,800 237,000 Metrocall Inc. ..................................... 16,277 81,639 Metrocall Inc.--Rts................................. 7,878 0 Metromedia International Group Inc. ................ 51,084 504,454 Meyer Fred Inc. .................................... 36,600 1,299,300 MGI Properties...................................... 15,800 347,600 Michael's Stores Inc. .............................. 26,200 314,400 Michaels Foods...................................... 14,600 186,150 MicroAge Inc. ...................................... 19,200 384,000 Microchip Technology Inc. .......................... 48,700 2,477,612 Microcom Inc. ...................................... 20,300 251,213 Micros Systems Inc. ................................ 11,400 350,550 Microtouch Systems Inc. ............................ 10,500 252,000 Microware Systems Corp. ............................ 7,300 104,025 Mid Am Inc. ........................................ 28,528 488,535 Mid Atlantic Medical Services Inc. ................. 57,500 769,062 Mid-America Apartment Communities Inc. ............. 13,900 401,362 Midcom Communications Inc. ......................... 20,700 175,950 Midwest Express Holdings Inc. ...................... 6,200 223,200 Mikasa Inc. ........................................ 10,800 110,700 Miller Industries Inc. ............................. 22,050 441,000 Mills Co. .......................................... 19,600 467,950 Mine Safety Appliances Co. ......................... 3,900 207,675 Minerals Technologies Inc. ......................... 31,200 1,279,200 Minimed Inc. ....................................... 4,600 148,350 Minnesota Power & Light Co. ........................ 39,200 1,078,000 Mississippi Chemical Corp. ......................... 38,652 927,648 Mitchell Energy & Development Corp. ................ 50,400 1,127,700 ML Bancorp Inc. .................................... 14,300 201,988 MMI Cos., Inc. ..................................... 13,100 422,475 Mobile Telecommunications Technologies Corp. ...... 74,000 629,000 Mobilemedia Corp. .................................. 56,100 24,544 The accompanying notes are an integral part of the financial statements. SAI-153 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Modine Manufacturing Co. ........................... 30,100 $ 805,175 Mohawk Industries Inc. ............................. 28,877 635,294 Molten Metal Technology Inc. ....................... 20,000 235,000 Morgan Keegan Inc. ................................. 19,084 326,814 MorningStar Group Inc. ............................. 9,300 182,513 Morrison Health Care Inc. .......................... 11,033 162,737 Morrison Knudsen Corp. ............................. 9,700 87,300 MOSAIX Inc. ........................................ 8,100 129,600 Mosinee Paper Corp. ................................ 12,352 438,496 Mossimo Inc. ....................................... 1,500 18,563 Movie Gallery Inc. ................................. 8,800 114,400 MRV Communications Inc. ............................ 18,800 408,900 MTS Systems Corp. .................................. 12,800 256,000 Mueller Industries Inc. ............................ 24,000 924,000 Multicare Cos., Inc. ............................... 19,250 389,812 Mycogen Corp. ...................................... 24,300 522,450 Myers Industries Inc. .............................. 17,038 287,516 Mylex Corp. ........................................ 29,600 370,000 Myriad Genetics Inc. ............................... 12,600 318,150 NABI, Inc. ......................................... 40,500 354,375 NAC Reinsurance Corp. .............................. 20,800 704,600 NACCO Industries Inc. .............................. 9,600 513,600 Nash Finch Co. ..................................... 15,100 320,875 National Auto Credit Inc. .......................... 17,330 207,960 National Bancorp of Alaska Inc. .................... 5,900 404,150 National City Bancshares Inc. ...................... 11,544 337,662 National Commerce Bancorp........................... 34,075 1,303,369 National Computer Systems Inc. ..................... 19,500 497,250 National Data Corp. ................................ 35,700 1,552,950 National Education Corp. ........................... 51,000 777,750 National Golf Properties Inc. ...................... 15,400 487,025 National Health Investors Inc. ..................... 24,900 943,087 National Instruments Corp. ......................... 11,500 368,000 National Media Corp. ............................... 20,200 141,400 National Penn Bancshares Inc. ...................... 8,902 232,565 National Presto Industries Inc. .................... 6,200 231,725 National Steel Corp. ............................... 26,200 242,350 National Surgery Centers Inc. ...................... 13,000 494,000 National Western Life Insurance Co. ................ 3,100 269,700 Nationwide Health Properties Inc. .................. 56,900 1,379,825 Nature's Sunshine Products Inc. .................... 20,379 366,822 Nautica Enterprises Inc. ........................... 51,100 1,290,275 Navistar International Corp. ....................... 101,800 928,925 NBTY Inc. .......................................... 21,500 408,500 NCH Corp. .......................................... 5,600 337,400 NCI Building Systems Inc. .......................... 9,300 320,850 Neopath Inc. ....................................... 15,200 277,400 Neoprobe Corp. ..................................... 26,000 399,750 Neose Technologies Inc. ............................ 10,500 189,000 Netcom Online Communications........................ 14,900 193,700 The accompanying notes are an integral part of the financial statements. SAI-154 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- NetManage Inc. ..................................... 41,500 $ 249,000 Network Appliance Inc. ............................. 23,600 1,200,650 Network Equipment Technologies Inc. ................ 27,100 447,150 Network Peripherals Inc. ........................... 13,700 243,175 Neurex Corp. ....................................... 18,500 314,500 Neurogen Corp. ..................................... 17,200 331,100 Neuromedical Systems Inc. .......................... 39,700 526,025 Nevada Power Co. ................................... 65,800 1,348,900 New England Business Service Inc. .................. 16,400 352,600 New Jersey Resources Corp. ......................... 25,000 731,250 New York Bancorp Inc. .............................. 13,386 518,707 Newfield Exploration Co. ........................... 51,000 1,326,000 Newpark Resources Inc. ............................. 14,890 554,652 Nexstar Pharmaceuticals Inc. ....................... 38,800 582,000 NFO Research Inc. .................................. 11,600 255,200 NHP Inc. ........................................... 11,000 170,500 Nichols Research Corp. ............................. 12,300 313,650 Nimbus CD International Inc. ....................... 20,600 175,100 NL Industries Inc. ................................. 33,600 365,400 NN Ball & Roller Inc. .............................. 10,225 155,931 Noel Group.......................................... 31,200 218,400 Norrell Corp. ...................................... 18,600 506,850 North American Mortgage Co. ........................ 20,300 400,925 North Carolina Natural Gas Corp. ................... 8,050 232,444 North Fork Bancorporation Inc. ..................... 33,700 1,200,562 North Side Savings Bank (New York).................. 6,763 368,584 Northfield Laboratories Inc. ....................... 19,000 204,250 Northland Cranberries Inc. ......................... 17,500 402,500 Northwest Natural Gas Co. .......................... 30,550 733,200 Northwestern Public Service Co. .................... 13,100 448,675 Nova Corp. ......................................... 800 17,700 Novacare Inc. ...................................... 87,000 957,000 Novadigm Inc. ...................................... 15,400 127,050 Novellus Systems Inc. .............................. 22,700 1,230,056 Noven Pharmaceuticals Inc. ......................... 22,800 319,200 NPC International Inc. ............................. 25,700 212,025 Nu-kote Holding Inc. ............................... 31,400 321,850 Nuevo Energy Co. ................................... 16,200 842,400 NUI Corp. .......................................... 12,800 289,600 NVR Inc. ........................................... 13,200 171,600 NYMAGIC Inc. ....................................... 6,300 113,400 O'Reilly Automotive Inc. ........................... 6,700 214,400 O'Sullivan Corp. ................................... 19,600 215,600 Oak Industries Inc. ................................ 24,660 567,180 Oak Technology...................................... 47,200 531,000 Oasis Residential Inc. ............................. 21,100 480,025 Occusystems Inc. ................................... 28,900 780,300 Oceaneering International Inc. ..................... 33,800 536,575 OEA Inc. ........................................... 22,400 1,024,800 Offshore Logistics Inc. ............................ 25,600 496,000 The accompanying notes are an integral part of the financial statements. SAI-155 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Ogden Corp. ........................................ 67,700 $1,269,375 OHM Corp. .......................................... 26,300 223,550 OIS Optical Imaging Systems Inc. ................... 25,800 40,313 Old National Bancorp................................ 34,200 1,342,350 Olympic Financial Ltd............................... 49,300 708,687 OM Group Inc. ...................................... 25,350 684,450 Omega Financial Corp. .............................. 9,200 322,000 Omega Healthcare Investors Inc. .................... 23,009 765,049 OMI Corp. .......................................... 41,100 359,625 On Assignment Inc. ................................. 6,500 191,750 ONBANCorp Inc. ..................................... 19,796 734,926 Oncogene Science Inc. .............................. 26,200 167,025 One Valley Bancorp of West Virginia Inc. .......... 27,000 1,002,375 Oneida Ltd.......................................... 12,550 225,900 ONEOK Inc. ......................................... 32,000 960,000 Ontrak Systems Inc. ................................ 4,600 67,275 Optical Coating Laboratory Inc. .................... 14,900 160,175 Optical Data Systems Inc. .......................... 13,600 163,200 Orange & Rockland Utilities Inc. ................... 18,200 652,925 Orbital Sciences Corp. ............................. 40,400 696,900 Oregon Metallurgical Corp. ......................... 10,900 351,525 Oregon Steel Mills Inc. ............................ 29,700 497,475 Organogenesis Inc. ................................. 18,975 438,797 Orion Capital Corp. ................................ 19,068 1,165,531 Ortel Corp. ........................................ 8,900 213,600 Orthodontic Centres of America Inc. ................ 22,500 360,000 Orthologic Corp. ................................... 26,600 149,625 Oshkosh B Gosh Inc. , Class A....................... 16,100 245,525 Osmonics Inc. ...................................... 14,500 319,000 Ostex International Inc. ........................... 9,600 52,800 Otter Tail Power Co. ............................... 15,400 494,725 Outboard Marine Corp. .............................. 28,700 473,550 Overseas Shipholding Group Inc. .................... 38,900 661,300 Owen Healthcare Inc. ............................... 18,000 477,000 Owens & Minor Inc. Holding Co. ..................... 35,900 367,975 Oxford Resources Corp. ............................. 6,400 197,600 P Com Inc. ......................................... 23,400 693,225 P.H. Glatfelter Co. ................................ 36,600 658,800 Pacific Scientific Co. ............................. 16,500 185,625 Palm Harbor Homes Inc. ............................. 15,750 441,000 Palmer Wireless Inc. ............................... 11,900 124,950 Palomar Medical Technologies........................ 25,600 166,400 Papa John's International Inc. ..................... 17,475 589,781 Paragon Group Inc. ................................. 21,900 388,725 Paragon Trade Brands Inc. .......................... 14,200 426,000 Parexel International Corp. ........................ 11,900 614,337 Park Electrochemical Corp. ......................... 14,000 318,500 Park National Corp. ................................ 5,800 307,400 Park-Ohio Industries Inc. .......................... 8,600 110,725 Parker & Parsley Petroleum Co. ..................... 49,200 1,808,100 The accompanying notes are an integral part of the financial statements. SAI-156 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Parker Drilling Co. ................................ 73,300 $ 705,512 PathoGenesis Corp. ................................. 16,300 354,525 Patriot American Hospitality Inc. .................. 28,700 1,237,687 Patterson Dental Co. ............................... 19,350 546,637 PAXAR Corp. ........................................ 32,015 552,259 Paxson Communications Corp. ........................ 2,600 20,475 Payless Cashways Inc. .............................. 44,700 89,400 Payment Services Inc. .............................. 40,500 708,750 PDT Inc. ........................................... 6,950 194,600 Peak Technologies Group Inc. ....................... 12,500 150,000 PEC Israel Economic Corp. .......................... 7,700 128,975 Pediatrix Medical Group............................. 12,400 457,250 Penn Engineering & Manufacturing Corp. ............. 11,500 238,625 Penn National Gaming Inc. .......................... 7,800 111,150 PennCorp Financial Group Inc. ...................... 31,700 1,141,200 Pennsylvania Enterprises Inc. ...................... 6,500 285,188 Pennsylvania REIT................................... 9,100 221,813 Pentair Inc. ....................................... 51,800 1,670,550 People's Bank....................................... 16,100 464,887 People's Choice TV Corp. ........................... 17,000 104,125 Peoples First Corp. ................................ 12,258 312,579 Peoples Heritage Financial Group Inc. .............. 34,251 959,028 Pepsi Cola Puerto Rico Bottling Co. ................ 16,200 64,800 Perceptron Inc. .................................... 9,000 308,250 Perclose Inc. ...................................... 11,900 240,975 Performance Food Group Co. ......................... 13,450 208,475 Periphonics Corp. .................................. 15,100 441,675 Perrigo Co. ........................................ 92,500 844,062 Personal Group of America Inc. ..................... 16,600 400,475 Petco Animal Supplies Inc. ......................... 19,700 408,775 Pete's Brewing Co. ................................. 8,000 64,000 Petroleum Heat & Power Co. , Inc. .................. 27,300 174,038 Petrolite Corp. .................................... 8,100 388,800 Pharmaceutical Product Development Inc. ............ 18,404 464,701 Pharmacopeia Inc. .................................. 14,400 279,000 PHH Corp. .......................................... 48,200 2,072,600 Philadelphia Suburban Corp. ........................ 23,050 458,119 Phillips-Van Heusen Corp. .......................... 34,100 490,187 Phoenix Duff & Phelps Corp. ........................ 59,300 422,512 Phoenix Technology Ltd.............................. 21,900 353,138 Photronics Inc. .................................... 12,350 336,538 PHP Healthcare Corp. ............................... 15,100 386,938 Phymatrix Corp. .................................... 10,600 151,050 Physician Corp. of America.......................... 52,600 526,000 Physicians Computer Network Inc. ................... 27,800 236,300 Physicians Health Services, Inc. ................... 9,100 134,225 Physicians Resource Group Inc. ..................... 30,500 541,375 Physio Control International Corp. ................. 21,800 490,500 Piedmont Natural Gas Co. , Inc. .................... 39,900 932,662 Pier 1 Imports Inc. ................................ 61,300 1,080,412 The accompanying notes are an integral part of the financial statements. SAI-157 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Pilgrim's Pride Corp. .............................. 2,200 $ 18,975 Pinkerton's Inc. ................................... 5,900 148,238 Pinnacle Systems Inc. .............................. 10,200 107,100 Pioneer Financial Services Inc. .................... 10,300 257,500 Pioneer Group Inc. ................................. 28,700 681,625 Pioneer-Standard Electronics Inc. .................. 31,075 407,859 Piper Jaffray Cos., Inc. ........................... 15,000 234,375 Pittston Bulington Group............................ 25,000 500,000 Pittway Corp. ...................................... 20,200 1,080,700 Pixar............................................... 9,800 127,400 Plains Resources Inc. .............................. 22,100 345,313 Planar Systems Inc. ................................ 10,700 125,725 Plantronics Inc. ................................... 11,500 517,500 PLATINUM Technology Inc. ........................... 67,094 914,156 Playboy Enterprises Inc. ........................... 27,800 271,050 Players International Inc. ......................... 43,300 232,738 Playtex Family Products Corp. ...................... 36,700 293,600 Ply Gem Industries Inc. ............................ 12,600 155,925 Poe & Brown Inc. ................................... 7,400 196,100 Polaris Industries Inc. ............................ 37,600 893,000 Policy Management Systems Corp. .................... 21,800 1,005,525 Pool Energy Services Co. ........................... 23,600 362,850 Pope & Talbot Inc. ................................. 18,300 290,513 Possis Medical Inc. ................................ 16,400 342,350 Post Properties Inc. ............................... 28,900 1,163,225 Power Control Technologies Inc. .................... 31,300 234,750 Pre-Paid Legal Services Inc. ....................... 28,200 514,650 Precision Castparts Corp. .......................... 28,400 1,409,350 Precision Systems Inc. ............................. 18,900 94,500 Premark International Inc. ......................... 77,400 1,722,150 Premenos Technology Corp. .......................... 7,700 66,413 Premiere Radio Networks Inc. ....................... 3,000 37,875 Premiere Technologies Inc. ......................... 10,300 257,500 Presidential Life Corp. ............................ 36,900 445,106 PRI Automation Inc. ................................ 8,600 391,300 Price Enterprises Inc. ............................. 18,600 323,175 Price REIT Inc. .................................... 12,100 465,850 Pricellular Corp. .................................. 29,893 343,770 Pride Petroleum Services Inc. ...................... 41,200 957,900 Primadonna Resorts Inc. ............................ 10,700 181,900 Primark Corp. ...................................... 35,600 881,100 Prime Hospitality Corp. ............................ 42,500 685,312 Prime Medical Services Inc. ........................ 12,400 134,850 Prism Solutions Inc. ............................... 6,100 50,325 Production Operators Corp. ......................... 11,500 534,750 Proffitt's Inc. .................................... 24,200 892,375 Profit Recovery Group International Inc. .......... 6,400 102,400 Progress Software Corp. ............................ 16,300 326,000 Project Software & Development Inc. ................ 8,000 339,000 Pronet Inc. ........................................ 11,100 48,563 The accompanying notes are an integral part of the financial statements. SAI-158 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Protein Design Inc. ................................ 16,100 $ 587,650 Protocol Systems Inc. .............................. 14,000 182,000 Provident Bancorp Inc. ............................. 25,050 851,700 Provident Bankshares Corp........................... 10,596 413,244 Proxim Inc. ........................................ 13,900 319,700 Psinet Inc. ........................................ 33,500 364,313 Public Service Co. of New Mexico.................... 51,600 1,012,650 Public Service Co. of North Carolina Inc. ......... 27,200 496,400 Public Storage Inc. ................................ 79,100 2,452,100 Puerto Rican Cement Inc. ........................... 6,200 193,750 Pulitzer Publishing Co. ............................ 7,882 365,528 Pulte Corp. ........................................ 24,800 762,600 Pure Atria Corp. ................................... 33,939 839,990 PXRE Corp. ......................................... 18,496 457,776 Quaker State Corp. ................................. 49,500 699,187 Quality Dining Inc. ................................ 9,700 173,388 Quality Food Centers Inc. .......................... 12,161 410,434 Quanex Corp. ....................................... 17,600 481,800 Quarterdeck Office Systems.......................... 38,900 160,463 Queens County Bancorp., Inc. ....................... 9,366 443,714 Quick & Reilly Group Inc. .......................... 15,625 466,797 Quickresponse Services Inc. ........................ 8,400 239,400 Quickturn Design Systems Inc. ...................... 19,200 393,600 Quiksilver Inc. .................................... 10,500 224,438 Quintel Entertainment Inc. ......................... 5,100 47,813 R.P. Scherer Corp. ................................. 31,500 1,582,875 RAC Financial Group Inc. ........................... 10,400 219,700 Radisys Corp. ...................................... 8,300 404,625 Railtex Inc. ....................................... 12,100 305,525 Rainbow Technologies Inc. .......................... 8,200 152,725 Rainforest Cafe Inc. ............................... 12,850 301,975 Ralcorp Holdings Inc. .............................. 43,800 925,275 Ramtron International Corp. ........................ 41,000 246,000 Raptor Systems Inc. ................................ 2,900 58,363 RARE Hospitality International Inc. ................ 10,000 188,750 Raymond James Financial Inc. ....................... 21,887 659,346 RCSB Financial Inc. ................................ 15,500 449,500 Realty Income Corp. ................................ 31,300 747,287 Reckson Associates Realty Corp. .................... 11,800 498,550 Recoton Corp. ...................................... 14,700 219,581 Red Brick Systems Inc. ............................. 17,600 404,800 Red Roof Inns Inc. ................................. 13,600 210,800 Redhook Ale Brewery Inc. ........................... 11,300 108,763 Redwood Trust Inc. ................................. 13,200 491,700 Regal Beloit Corp. ................................. 28,400 557,350 Regal Cinemas Inc. ................................. 35,562 1,093,531 Regency Health Services Inc. ....................... 22,500 216,563 Regency Realty Corp. ............................... 14,800 388,500 Regeneron Pharmaceuticals Inc. ..................... 28,900 466,012 Regis Corp. ........................................ 15,100 245,375 The accompanying notes are an integral part of the financial statements. SAI-159 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Reinhold Industries Inc. ........................... 966 $ 3,140 Reinsurance Group of America Inc. .................. 23,500 1,107,437 Reliance Group Holdings Inc. ....................... 85,288 778,253 Reliance Steel & Aluminum Co. ...................... 10,300 360,500 Remedy Corp. ....................................... 15,200 817,000 Renaissance Communications Corp. ................... 15,550 555,912 Renaissance Solutions Inc. ......................... 2,900 129,775 Renal Treatment Centers Inc. ....................... 40,500 1,032,750 Reno Air Inc. ...................................... 3,600 26,325 Renters Choice Inc. ................................ 18,200 263,900 Republic Bancorp Inc. .............................. 19,097 222,003 Republic Industries Inc. ........................... 16,650 519,272 Research Medical Corp. ............................. 15,000 345,000 ReSound Corp. ...................................... 20,000 142,500 Resource Bancshares Mortgage Group Inc. ............ 17,452 248,691 Resource Mortgage Capital Inc. ..................... 27,800 816,625 Res-Care Inc. ...................................... 9,000 157,500 Respironics Inc. ................................... 24,300 422,212 Rexall Sundown Inc. ................................ 13,800 375,188 Rexel Inc. ......................................... 19,000 301,625 Rexene Corp. ....................................... 25,500 347,438 RFS Hotel Investors Inc. ........................... 33,700 665,575 Riggs National Corp. ............................... 27,550 475,237 Rightchoice Managed Care Inc. ...................... 3,700 39,313 Rio Hotel & Casino Inc. ............................ 21,500 314,438 Riscorp Inc. ....................................... 48,300 175,088 Riser Foods Inc. ................................... 12,000 381,000 Risk Capital Holding Inc. .......................... 22,000 426,250 Rite Aid Corp. ..................................... 49,205 1,955,899 Rival Co. .......................................... 14,200 353,225 Riviana Foods Inc. ................................. 10,000 172,500 RLI Corp. .......................................... 7,599 253,617 RMI Titanium Co. ................................... 15,600 438,750 Roadway Express Inc. ............................... 17,900 346,813 Robbins & Myers Inc. ............................... 10,200 255,000 Robert Mondavi Corp. ............................... 10,400 379,600 Roberts Pharmaceutical Corp. ....................... 17,100 192,375 Robotic Vision Systems Inc. ........................ 20,300 241,063 ROC Communities Inc. ............................... 16,800 466,200 Rochester Gas & Electric Corp. ..................... 52,900 1,011,712 Rock-Tenn Co. ...................................... 45,090 890,527 Rogers Corp. ....................................... 10,700 290,238 Rohr Inc. .......................................... 28,300 640,287 Rollins Environmental Services Inc. ................ 81,900 143,325 Rollins Inc. ....................................... 29,000 580,000 Rollins Truck Leasing Corp. ........................ 51,075 644,822 Romac International Inc. ........................... 8,200 180,400 Roosevelt Financial Group Inc. ..................... 47,749 1,002,729 Roper Industries Inc. .............................. 18,400 719,900 Roses Stores Inc.--WTS.............................. 2,148 67 The accompanying notes are an integral part of the financial statements. SAI-160 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Ross Stores Inc. ................................... 34,900 $1,745,000 Ross Technology Inc. ............................... 28,900 101,150 RoTech Medical Corp. ............................... 36,100 758,100 Rouge Steel Co. .................................... 11,400 240,825 Royal Gold Inc. .................................... 13,800 184,575 RPC Energy Services Inc. ........................... 9,000 135,000 RTW Inc. ........................................... 15,400 282,975 Ruby Tuesday Inc. .................................. 18,950 350,575 Ruddick Corp. ...................................... 35,000 490,000 Rural/Metro Corp. .................................. 13,200 475,200 Russ Berrie & Co. Inc. ............................. 12,200 219,600 Ryan's Family Steak Houses Inc. .................... 71,600 492,250 Ryland Group Inc. .................................. 20,700 284,625 S & T Bancorp Inc. ................................. 14,400 442,800 S. E. Rykoff & Co. ................................. 36,343 576,945 S3 Inc. ............................................ 69,300 1,126,125 Safeskin Corp. ..................................... 10,800 526,500 Safety-Kleen Corp. ................................. 80,100 1,311,637 Saga Communications................................. 11,000 214,500 Samsonite Corp. .................................... 15,200 583,300 Sanderson Farms Inc. ............................... 10,300 172,525 Sandisk Corp. ...................................... 24,000 234,000 Sangstat Medical Corp. ............................. 17,300 458,450 Sanmina Corp. ...................................... 24,500 1,384,250 Santa Cruz Operation Inc. .......................... 26,500 185,500 Sapient Corp. ...................................... 2,000 84,250 Saul Centers Inc. .................................. 12,400 196,850 Savannah Foods & Industries Inc. ................... 30,500 411,750 Sbarro Inc. ........................................ 17,000 433,500 Schnitzer Steel Industries Inc. .................... 5,900 151,188 Scholastic Corp. ................................... 16,900 1,136,525 Schweitzer-Mauduit International, Inc. ............. 21,900 692,587 Sciclone Pharmaceuticals Inc. ...................... 18,700 149,600 Scientific Games Holdings Corp. .................... 17,800 476,150 Scios Nova Inc. .................................... 48,856 300,006 Scopus Technology................................... 11,800 548,700 Scotsman Industries Inc. ........................... 12,600 297,675 Scotts Co. ......................................... 26,200 520,725 SDL Inc. ........................................... 11,750 308,438 Seaboard Corp. ..................................... 520 138,320 Seacor Holdings Inc. ............................... 14,300 900,900 Seafield Capital Corp. ............................. 6,400 248,000 Seagull Energy Corp. ............................... 82,972 1,825,384 Seattle Filmworks Inc. ............................. 10,700 218,013 Secure Computing Corp. ............................. 20,100 183,413 Security Capital Corp. ............................. 12,800 944,000 Security Corp. ..................................... 11,800 414,475 Segue Software Inc. ................................ 2,800 51,100 SEI Investments Corp. .............................. 17,400 387,150 Seitel Inc. ........................................ 14,700 588,000 The accompanying notes are an integral part of the financial statements. SAI-161 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Selective Insurance Group, Inc. .................... 19,500 $ 741,000 Semitool Inc. ...................................... 11,250 106,875 Sepracor Inc. ...................................... 36,800 611,800 Sequa Corp. ........................................ 11,000 431,750 Sequent Computer Systems Inc. ...................... 41,300 733,075 Sequus Pharmaceuticals Inc. ........................ 38,700 619,200 Serologicals Corp. ................................. 10,900 385,588 Service Merchandise Co. , Inc. ..................... 135,800 577,150 SFX Broadcasting Inc. .............................. 9,500 282,625 Sheldahl Co. ....................................... 13,700 256,875 Shiloh Industries Inc. ............................. 7,000 113,750 Shoneys Inc. ....................................... 51,300 359,100 ShopKo Stores Inc. ................................. 25,200 378,000 Shorewood Packaging Corp. .......................... 19,200 374,400 Showbiz Pizza Time, Inc. ........................... 23,100 418,687 Showboat Inc. ...................................... 22,300 384,675 Shuffle Master Inc. ................................ 15,400 136,675 Shurgard Storage Centres Inc. ...................... 31,700 939,112 Sierra Health Services Inc. ........................ 20,000 492,500 Sierra Pacific Resources............................ 42,600 1,224,750 Sierra Semi-Conductor Corp. ........................ 41,000 615,000 SIG Corp. , Inc. ................................... 21,400 740,975 Silicon Storage Technology Inc. .................... 28,800 140,400 Silicon Valley Bancshares........................... 12,200 393,450 Silicon Valley Group Inc. .......................... 42,200 849,275 Siliconix Inc. ..................................... 14,500 340,750 Simpson Industries Inc. ............................ 25,375 276,350 Simpson Manufacturing Inc. ......................... 5,300 121,900 Simula Inc. ........................................ 9,100 122,850 Sirrom Capital Corp. ............................... 9,600 352,800 Sitel Corp. ........................................ 29,200 412,450 Skyline Corp. ...................................... 13,600 336,600 Skywest Inc. ....................................... 9,800 135,975 Smart & Final Inc. ................................. 13,900 300,588 Smart Modular Technologies Inc. .................... 18,700 469,837 Smith Micro Software Inc. .......................... 100 488 Smithfield Foods Inc. .............................. 22,500 855,000 Smiths Food & Drug Centers Inc. .................... 16,837 521,947 Snyder Oil Corp. ................................... 36,300 630,712 Sodak Gaming Inc. .................................. 14,300 219,863 Sofamor/Danek Group Inc. ........................... 31,000 945,500 Software 2000 Inc. ................................. 7,300 61,138 Sola International Inc. ............................ 34,500 1,311,000 Solv Ex Corp. ...................................... 19,000 266,000 Somatix Therapy Corp. .............................. 21,000 69,563 Somatogen Inc. ..................................... 26,700 293,700 Sonic Corp. ........................................ 18,950 483,225 Sotheby's Holdings Inc. ............................ 59,900 1,115,637 South Jersey Industries Inc. ....................... 12,020 292,988 South West Property Trust Inc. ..................... 29,100 491,062 The accompanying notes are an integral part of the financial statements. SAI-162 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Southdown Inc. ..................................... 23,500 $ 731,437 Southeastern Michigan Gas........................... 17,720 327,820 Southern California Water Co. ...................... 12,000 261,000 Southern Energy Homes Inc. ......................... 12,550 144,325 Southern Union Co. ................................. 11,388 250,536 Southwest Gas Corp. ................................ 33,800 650,650 Southwestern Energy Co. ............................ 33,800 511,225 Sovereign Bancorp Inc. ............................. 62,764 823,777 Sovran Self Storage Inc. ........................... 10,100 315,625 Spacelabs Medical Inc. ............................. 14,000 287,000 Spartech Corp. ..................................... 22,900 254,763 Specialty Equipment Cos., Inc. ..................... 16,600 207,500 Spectrum Holobyte Inc. ............................. 39,200 294,000 Speedfam International Inc. ........................ 6,400 182,400 Spelling Entertainment Group Inc. .................. 15,900 117,263 Spieker Properties Inc. ............................ 42,600 1,533,600 Spine Tech Inc. .................................... 14,100 352,500 Spinnaker Industries Inc. , Class A................. 1,600 92,800 Spinnaker Industries Inc. .......................... 300 11,100 Sports & Recreation Inc. ........................... 27,100 210,025 Sports Authority Inc. .............................. 43,950 955,912 Springs Industries Inc. ............................ 19,300 829,900 SPS Technologies Inc. .............................. 8,200 526,850 SPS Transaction Services Inc. ...................... 9,700 147,925 SPSS Inc. .......................................... 8,900 248,088 SPX Corp. .......................................... 15,500 600,625 Spyglass Inc. ...................................... 17,000 212,500 SQA Inc. ........................................... 2,900 96,425 St John Knits Inc. ................................. 20,300 883,050 St Paul Bancorp Inc. ............................... 24,815 728,941 Staar Surgical Co. ................................. 17,300 229,225 Stac Electronics.................................... 33,600 222,600 Standard Financial Inc. ............................ 24,400 478,850 Standard Microsystems Corp. ........................ 20,400 193,800 Standard Motor Products Inc. ....................... 9,900 137,363 Standard Pacific Corp. ............................. 44,800 257,600 Standard Products Co. .............................. 19,975 509,362 Standard Register Co. .............................. 18,400 598,000 Standex International Corp. ........................ 16,200 500,175 Stanford Telecommunications Inc. ................... 6,300 217,350 Stanhome Inc. ...................................... 24,800 657,200 Stant Corp. ........................................ 22,900 360,675 Starsight Telecast Inc. ............................ 35,200 330,000 Starter Corp. ...................................... 15,500 89,125 State Auto Financial Corp. ......................... 8,250 148,500 State Of The Art Inc. .............................. 14,300 176,963 Station Casinos Inc. ............................... 27,400 277,425 Steck Vaughn Publishing Corp. ...................... 3,400 37,400 Steel Technologies Inc. ............................ 10,200 135,150 Stein Mart Inc. .................................... 11,500 232,875 The accompanying notes are an integral part of the financial statements. SAI-163 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Stepan Co. ......................................... 12,198 $ 248,534 Stewart & Stevenson Services Inc. .................. 42,800 1,246,550 Stillwater Mining Co. .............................. 21,100 382,438 Stone & Webster Inc. ............................... 9,000 283,500 Stone Energy Corp. ................................. 11,900 355,513 Storage Computer Corp. ............................. 3,100 40,688 Storage Trust Realty................................ 16,500 445,500 Storage USA Inc. ................................... 29,000 1,091,125 Stormedia Inc. ..................................... 25,900 417,637 Strategic Distribution Inc. ........................ 11,200 88,200 Stratosphere Corp. ................................. 9,900 8,353 Stratus Computer Inc. .............................. 34,100 929,225 Strawbridge & Clothier.............................. 10,112 160,528 Stride Rite Corp. .................................. 65,200 652,000 Structural Dynamics Research Corp. ................. 48,200 964,000 Student Loan Corp. ................................. 6,100 227,225 Studio Plus Hotels Inc. ............................ 14,300 225,225 Sturm Ruger & Co. , Inc. ........................... 25,200 488,250 Submicron Systems Corp. ............................ 21,900 90,338 Sumitomo Bank of California......................... 5,100 127,500 Summit Care Corp. .................................. 5,400 88,425 Summit Medical Systems Inc. ........................ 10,600 80,825 Summit Properties Inc. ............................. 25,000 553,125 Summit Technology Inc. ............................. 44,300 243,650 Sun Communities Inc. ............................... 19,300 665,850 Sun Healthcare Group Inc. .......................... 55,720 752,220 Sunrise Medical Inc. ............................... 24,500 388,937 Sunriver Corp. ..................................... 22,000 35,750 Sunshine Mining Co. ................................ 280,500 262,969 Superior Industries International Inc. ............. 29,800 689,125 Superior Services Inc. ............................. 3,500 71,313 Supertex Inc. ...................................... 9,500 124,688 Susquehanna Bancshares Inc. ........................ 18,150 628,444 Swift Energy Co. ................................... 19,600 585,550 Swift Transportation Co. , Inc. .................... 17,100 401,850 Sylvan Learning Systems Inc. ....................... 24,350 693,975 Symantec Corp. ..................................... 76,000 1,102,000 Symmetricom Inc. ................................... 20,600 409,425 Sync Research Inc. ................................. 22,200 305,250 Synetic Inc. ....................................... 24,000 1,164,000 Syratech Corp. ..................................... 4,900 154,350 System Software Associates Inc. .................... 38,700 411,187 Systemix Inc. ...................................... 3,800 57,950 Systems & Computer Technology Corp. ................ 19,100 305,600 Systemsoft Corp. ................................... 23,500 349,563 Target Therapeutics Inc. ........................... 14,600 613,200 Taubman Centers Inc. ............................... 41,000 527,875 TBC Corp. .......................................... 28,962 217,215 TCA Cable TV Inc. .................................. 22,100 665,762 TCSI Corp. ......................................... 16,600 103,750 The accompanying notes are an integral part of the financial statements. SAI-164 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Tech Data Corp. .................................... 47,800 $1,308,525 Tech Sym Corp. ..................................... 8,700 258,825 Techne Corp. ....................................... 12,900 335,400 Technitrol Inc. .................................... 8,900 341,538 Technology Solutions Co. ........................... 23,450 973,175 Tecnol Medical Products Inc. ....................... 18,600 281,325 Tejas Gas Corp. .................................... 19,085 908,923 Tejon Ranch Co. .................................... 13,700 196,938 Tekelec Inc. ....................................... 9,300 146,475 Tel-Save Holdings Inc. ............................. 11,400 330,600 Telco Systems Inc. ................................. 16,000 304,000 Teleflex Inc. ...................................... 24,900 1,297,912 Teltrend Inc. ...................................... 8,300 230,325 Telxon Corp. ....................................... 21,900 268,275 Tencor Instruments.................................. 43,700 1,152,587 Tennant Co. ........................................ 11,800 324,500 Tesoro Petroleum Corp. ............................. 37,000 518,000 Tetra Tech. Inc. ................................... 16,575 327,356 Tetra Technologies, Inc. ........................... 17,400 439,350 Texas Industries Inc. .............................. 15,678 793,699 The Buckle Inc. .................................... 2,200 55,000 The Colonial Gas Co. ............................... 11,550 245,438 The Gymboree Corp. ................................. 33,300 761,737 The Men's Wearhouse Inc. ........................... 16,050 393,225 The Town & Country Trust............................ 21,300 311,513 The Trust Co. of New Jersey......................... 26,900 376,600 Theragenics Corp. .................................. 14,000 316,750 Theratech Inc. ..................................... 20,450 270,963 Theratx Inc. ....................................... 21,700 222,425 Thermo Ecotek Corp. ................................ 6,200 94,550 Thermo Power Corp. ................................. 5,000 39,688 Thermo Remediation Inc. ............................ 3,200 28,000 Thermo Terratech, Inc. ............................. 4,300 42,463 Thermospectra Corp. ................................ 6,000 73,500 Thermotrex Corp. ................................... 12,700 347,663 Thiokol Corp. ...................................... 24,900 1,114,275 Thomas & Betts Corp. ............................... 16,716 741,772 Thomas Industries Inc. ............................. 15,900 331,913 Thomas Nelson Inc. ................................. 15,749 234,266 Thor Industries Inc. ............................... 6,900 174,225 Thoratec Labs Corp. ................................ 6,400 60,800 Thornburg Mortgage Asset Corp. ..................... 20,400 436,050 Timberland Co. ..................................... 11,200 425,600 Titan Wheel International Inc. ..................... 20,800 265,200 TJ International Inc. .............................. 21,300 495,225 TNP Enterprises Inc. ............................... 15,200 416,100 Toll Brothers Inc. ................................. 31,400 612,300 Tom Brown, Inc. .................................... 26,000 542,750 Tootsie Roll Industries Inc. ....................... 24,071 953,813 Top Source Technologies Inc. ....................... 32,500 81,250 The accompanying notes are an integral part of the financial statements. SAI-165 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Topps Co. , Inc. ................................... 61,300 $ 245,200 Toro Co. ........................................... 16,600 605,900 Toronto Dominion Bank............................... 4,779 121,865 Tosco Corp. ........................................ 1 79 Total Renal Care Holdings Inc. ..................... 700 25,375 Tower Automotive Inc. .............................. 8,600 268,750 Toy Biz Inc. ....................................... 24,400 475,800 TR Financial Corp. ................................. 11,800 418,900 Tracor Inc. ........................................ 30,400 646,000 Tractor Supply Co. ................................. 4,600 94,875 Trans Financial Inc. ............................... 15,500 356,500 Trans World Airlines Inc. .......................... 24,900 169,631 Transaction Network Services Inc. .................. 11,600 133,400 Transaction Systems Architects Inc. ................ 36,600 1,216,950 Transcend Services Inc. ............................ 30,200 158,550 Transitional Hospitals Corp. ....................... 61,600 592,900 Transtexas Gas Corp. ............................... 12,200 176,900 Transwitch Corp. ................................... 11,600 60,900 Tredegar Industries Inc. ........................... 11,150 447,394 Tremont Corp. ...................................... 6,500 234,813 Trenwick Group Inc. ................................ 7,600 351,500 Trescom International Inc. ......................... 17,900 143,200 Triangle Pacific Corp. ............................. 19,300 464,406 Triarc Cos., Inc. .................................. 29,620 340,630 Trident Microsystems Inc. .......................... 16,300 275,063 Trigen Energy Corp. ................................ 4,300 123,625 Trimas Corp. ....................................... 21,700 518,087 Trimble Navigation Ltd.............................. 25,300 290,950 TriNet Corporate Realty Trust Inc. ................. 16,900 599,950 Trinova Corp. ...................................... 35,900 1,305,862 Triquint Semiconductor Inc. ........................ 11,600 305,950 True North Communications, Inc...................... 24,400 533,750 Trump Hotels & Casino Resorts....................... 33,400 400,800 Trustco Bank Corp. ................................. 28,159 601,899 Trustmark Corp. .................................... 36,300 925,650 Tseng Laboratories Inc. ............................ 18,900 59,063 TSX Corp. .......................................... 15,150 134,456 Tuboscope Vetco International Corp. ................ 58,700 909,850 Turbochef Inc. ..................................... 4,100 90,713 Tuscon Electric Power Co. .......................... 44,520 740,145 Tyco Toys Inc. ..................................... 45,200 531,100 UGI Corp. .......................................... 45,000 1,006,875 UICI................................................ 46,400 1,508,000 Ultramar Diamond Shamrock........................... 32,129 1,016,080 Ultratech Stepper Inc. ............................. 23,100 548,625 UMB Financial Corp. ................................ 22,640 916,924 Unifirst Corp. ..................................... 26,700 567,375 Union Acceptance Corp. ............................. 7,700 136,675 Uniphase Corp. ..................................... 22,700 1,191,750 Unison Software Inc. ............................... 3,100 82,925 The accompanying notes are an integral part of the financial statements. SAI-166 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- United Bankshares Inc. ............................. 21,100 $ 696,300 United Carolina Bancshares Corp. ................... 33,500 1,323,250 United Cities Gas Co. .............................. 18,500 416,250 United Companies Financial Corp. ................... 36,296 966,381 United Dental Care Inc. ............................ 7,600 230,850 United Dominion Realty Trust Inc. .................. 77,300 1,198,150 United Fire & Casualty Co. ......................... 13,575 478,519 United Illuminating Co. ............................ 19,400 608,675 United International Holdings Inc. ................. 53,300 652,925 United Meridian Corp. .............................. 40,700 2,106,225 United Stationers Inc. ............................. 19,600 382,200 United Television Inc. ............................. 5,700 490,912 United Video Satellite Group Inc. .................. 13,800 241,500 United Waste Systems Inc. .......................... 54,000 1,856,250 United Water Resources Inc. ........................ 34,600 536,300 United Wisconsin Services Inc. ..................... 9,400 246,750 Unitog Co. ......................................... 12,550 341,988 Unitrode Corp. ..................................... 14,500 425,937 Universal Corp. .................................... 47,900 1,538,787 Universal First Products Inc. ...................... 18,000 238,500 Universal Foods Corp. .............................. 35,200 1,240,800 Universal Health Realty Income Trust................ 10,100 207,050 Universal Health Services Inc. ..................... 45,300 1,296,712 UNR Industries Inc. ................................ 30,300 181,800 Urban Outfitters Inc. .............................. 15,200 197,600 Urban Shopping Centers Inc. ........................ 17,300 501,700 Urohealth Systems Inc. ............................. 16,000 128,000 Uromed Corp. ....................................... 27,700 270,075 US Bancorp Inc. .................................... 7,900 334,763 US Bioscience Inc. ................................. 28,800 363,600 US Can Co. ......................................... 15,700 264,938 US Data Corp. ...................................... 6,600 37,125 US Filter Corp. .................................... 52,850 1,677,987 US Freightways Corp. ............................... 31,700 869,769 US Home Corp. ...................................... 16,300 423,800 US Long Distance Corp. ............................. 20,500 164,000 US Office Products Co. ............................. 47,200 1,610,700 US Trust Corp. ..................................... 12,900 1,019,100 USA Detergents Inc. ................................ 8,600 357,975 UST Corp. .......................................... 23,200 478,500 Valassis Communications Inc. ....................... 29,500 623,187 Valhi Inc. ......................................... 13,400 85,425 Vallicorp Holdings Inc. ............................ 18,200 370,825 Valmont Industries Inc. ............................ 11,600 478,500 Valspar Corp. ...................................... 21,000 1,189,125 Value City Department Stores Inc. .................. 11,300 118,650 Value Line Inc. .................................... 2,800 123,900 Valuevision International Inc. ..................... 32,900 176,838 Valujet Inc. ....................................... 49,600 319,300 Vanguard Cellular Systems Inc. ..................... 38,200 601,650 The accompanying notes are an integral part of the financial statements. SAI-167 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Vans Inc. .......................................... 13,300 $ 166,250 Vanstar Corp. ...................................... 21,300 521,850 Vantive Corp. ...................................... 12,900 403,125 Varco International Inc. ........................... 25,000 578,125 Ventritex Inc. ..................................... 24,700 608,237 Veritas DGC Inc. ................................... 12,400 229,400 Veritas Software Co. ............................... 14,500 721,375 Verity Inc. ........................................ 10,900 167,588 Vertex Pharmaceuticals Inc. ........................ 26,700 1,074,675 Vesta Insurance Group Inc. ......................... 26,150 820,456 Veterinary Centers America Inc. .................... 19,700 216,700 Viasoft Inc. ....................................... 24,400 1,152,900 Vical Inc. ......................................... 21,900 361,350 Vicor Corp. ........................................ 41,700 695,869 Videolan Technologies Inc. ......................... 11,900 18,594 Videoserver Inc. ................................... 18,300 777,750 Viewlogic Systems Inc. ............................. 22,900 260,488 Vintage Petroleum Inc. ............................. 14,900 514,050 Visio Corp. ........................................ 10,500 519,750 Visioneer Communications Inc. ...................... 5,400 24,300 VISX Inc. .......................................... 15,700 347,363 Vital Signs Inc. ................................... 6,900 179,400 Vitalink Pharmacy Services Inc. .................... 2,200 50,600 Vitesse Semiconductor Corp. ........................ 25,200 1,146,600 Vivus Inc. ......................................... 24,600 891,750 VLSI Technology Inc. ............................... 63,700 1,520,837 Volt Information Sciences Inc. ..................... 7,000 306,250 Vornado Realty Trust................................ 33,400 1,753,500 VWR Corp. .......................................... 25,900 433,825 W. H. Brady Co. .................................... 28,600 704,275 W.R. Berkley Corp. ................................. 19,400 984,550 Waban Inc. ......................................... 43,100 1,120,600 Wabash National Corp. .............................. 25,200 463,050 Wackenhut Corp. .................................... 14,900 257,025 Wackenhut Corrections Corp. ........................ 9,100 182,000 Walbro Corp. ....................................... 11,800 215,350 Walden Residential Properties Inc. ................. 14,500 360,688 Wall Data Inc. ..................................... 9,100 137,638 Walter Industries Inc. ............................. 57,100 806,537 Wang Laboratories Inc. ............................. 49,300 998,325 Washington Energy Co. .............................. 34,600 713,625 Washington Federal Inc. ............................ 57,800 1,531,700 Washington Gas Light Co. ........................... 58,400 1,321,300 Washington National Corp. .......................... 15,500 426,250 Washington Real Estate Investment Trust............. 41,650 728,875 Waters Corp. ....................................... 35,500 1,078,312 Watkins Johnson Co. ................................ 12,400 303,800 Watsco Inc. ........................................ 17,300 499,537 Watts Industries Inc. .............................. 25,300 604,037 Wausau Paper Mills Co. ............................. 38,625 714,562 The accompanying notes are an integral part of the financial statements. SAI-168 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Waverly Inc. ....................................... 4,100 $ 97,375 WD40 Co. ........................................... 8,800 448,937 Webb (Del) Corp. ................................... 23,100 378,263 Weeks Corp. ........................................ 15,300 508,725 Weingarten Realty Investors......................... 32,400 1,316,250 Wellman Inc. ....................................... 37,500 642,187 Wellsford Residential Property Trust................ 22,124 536,507 Werner Enterprises Inc. ............................ 29,050 526,531 Wesbanco Inc. ...................................... 11,600 377,000 West Co. , Inc. .................................... 18,100 511,325 West Marine Inc. ................................... 11,500 324,875 Westamerica Bancorporation.......................... 13,300 768,075 Westcorp............................................ 12,795 279,891 Westell Technologies................................ 1,100 25,163 Western Gas Resources Inc. ......................... 19,600 377,300 Western Investment Real Estate Trust................ 25,400 330,200 Western Pacific Airlines Inc. ...................... 7,500 52,500 Western Water Co. .................................. 9,200 133,400 Westinghouse Air Brake Co. ......................... 24,600 310,575 Westpoint Stevens Inc. ............................. 23,100 690,112 Westwood One Inc. .................................. 43,600 724,850 Wet Seal Inc. ...................................... 7,700 164,588 WFS Financial Inc. ................................. 6,200 123,225 White River Corp. .................................. 5,900 321,550 Whitney Holding Corp. .............................. 22,500 795,937 Whittaker Corp. .................................... 15,100 190,638 Whole Foods Market Inc. ............................ 26,000 585,000 WHX Corp. .......................................... 31,700 281,338 Wicor Inc. ......................................... 24,900 893,287 Williams Sonoma Inc. ............................... 25,937 943,458 Wilmar Industries Inc. ............................. 12,600 349,650 Wind River Systems Inc. ............................ 13,800 653,775 Windmere Corp. ..................................... 24,200 311,575 Winnebago Industries Inc. .......................... 24,000 174,000 Winstar Communications Inc. ........................ 36,400 764,400 Winthrop Resources Corp. ........................... 4,000 115,000 Wireless One Inc. .................................. 17,800 117,925 Wireless Telecom Group Inc. ........................ 22,300 231,363 WLR Foods Inc. ..................................... 19,600 242,550 WMS Industries Inc. ................................ 24,900 498,000 Wolverine Tube Inc. ................................ 18,600 655,650 Wolverine World Wide Inc. .......................... 39,375 1,141,875 Wonderware Corp. ................................... 21,900 194,705 Workgroup Technology Corp. ......................... 3,500 23,188 World Acceptance Corp. ............................. 31,400 215,875 World Airways Inc. ................................. 2,600 21,125 World Color Press Inc. ............................. 46,500 895,125 WPL Holdings Inc. .................................. 41,900 1,178,437 WPS Resources Corp. ................................ 31,700 903,450 Wyle Laboratories................................... 17,800 703,100 The accompanying notes are an integral part of the financial statements. SAI-169 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - --------------------------------------------------- ------------ -------------- Wyman-Gordon Co. ................................... 27,300 $ 607,425 Wynn's International Inc. .......................... 13,100 414,287 X-Rite Inc. ........................................ 17,900 295,350 Xicor Inc. ......................................... 25,200 258,300 Xircom Inc. ........................................ 21,900 476,325 Xoma Corp. ......................................... 38,800 198,850 Xpedite Systems Inc. ............................... 3,700 78,625 Xtra Corp. ......................................... 22,100 958,587 Yahoo Inc. ......................................... 3,900 66,300 Yankee Energy Systems Inc. ......................... 14,250 304,594 Yellow Corp. ....................................... 29,000 416,875 Young Broadcasting Inc. ............................ 12,200 356,850 Youth Services Inc. ................................ 9,100 138,775 Zale Corp. ......................................... 45,100 862,537 Zebra Technologies Corp. ........................... 26,800 626,450 Zeigler Coal Holding Co. ........................... 20,300 433,912 Zenith Electronics Corp. ........................... 38,300 416,512 Zenith National Insurance Corp. .................... 13,600 372,300 Zero Corp. ......................................... 12,650 253,000 Zila Inc. .......................................... 34,300 227,238 Zilog Inc. ......................................... 26,550 693,619 Zoltek Cos., Inc. .................................. 10,200 371,025 Zoran Corp. ........................................ 5,100 91,800 Zurich Reinsurance Centre Holdings Inc. ............ 15,100 471,875 Zurn Industries Inc. ............................... 16,700 436,287 Zygo Corp. ......................................... 6,100 317,200 Zytec Corp. ........................................ 9,400 99,875 -------------- Total Common Stock (Cost $909,384,887)............................... 946,642,192 -------------- PRINCIPAL AMOUNT U.S. GOVERNMENT OBLIGATIONS -0.1% US Treasury Bills 4.85% 06-Mar-97 (a)............... $ 200,000 198,275 US Treasury Bills 4.90% 06-Mar-97 (a)............... 1,000,000 991,289 -------------- TOTAL U.S. GOVERNMENT OBLIGATIONS................... 1,189,564 -------------- STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS FOR TAX EXEMPT RETIREMENT PLANS -3.8% UNITS SHORT TERM INVESTMENT FUND.......................... 36,986,566 36,986,566 - --------------------------------------------------- ------------ -------------- TOTAL INVESTMENTS--100% (Cost $947,561,017)............................... $984,818,322 =================================================== ============ ==============
The accompanying notes are an integral part of the financial statements. SAI-170 STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 FUND RUSSELL 2000 NON-LENDING FUND Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 The following long futures contracts were open at December 31, 1996:
FUTURES NUMBER OF NOTIONAL MATURITY UNREALIZED CONTRACTS CONTRACTS AMOUNT DATE GAIN (LOSS) - -------------- ----------- ------------- ------------- ------------ Russell 2000 .. 216 $39,287,025 March, 1997 $(112,775) ============
(a) At December 31, 1996, U.S. Treasury Bills were pledged to cover margin requirements for open futures contracts. (b) Issuer filed for bankruptcy. The accompanying notes are an integral part of the financial statements. SAI-171 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of the State Street Bank and Trust Company Daily EAFE Fund and the State Street Bank and Trust Company Daily EAFE Fund Non-Lending 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 selected per unit data present fairly, in all material respects, the financial position of the State Street Bank and Trust Company Daily EAFE Fund and the State Street Bank and Trust Company Daily EAFE Fund Non-Lending at December 31, 1996, the results of their operations for the year then ended, and the changes in their net assets and their selected per unit data for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and selected per unit data (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 generally accepted auditing standards 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, 1996 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts April 10, 1997 SAI-172 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Statement of Assets and Liabilities December 31, 1996 - -----------------------------------------------------------------------------
ASSETS Investments in securities, at value (cost $378,664,783).......................................... $414,208,889 Foreign currency................................................................................. 42,644,083 Foreign currency, segregated..................................................................... 2,206,904 Investment in State Street Bank and Trust Company Quality A Short-Term Investment Fund, at value 13,498,662 Receivable for investments sold.................................................................. 3,013,911 Dividends, interest and other receivables........................................................ 846,876 - ------------------------------------------------------------------------------------------------ -------------- Total assets.................................................................................. 476,419,325 - ------------------------------------------------------------------------------------------------ -------------- LIABILITIES Collateral on securities loaned.................................................................. 13,498,662 Payable to custodian............................................................................. 121,000 Payable for investments purchased................................................................ 43,443,494 Payable for open forward foreign currency contracts.............................................. 559,248 Payable for fund units redeemed.................................................................. 26,946 Variation margin payable......................................................................... 1,388,941 Accrued expenses................................................................................. 128,532 - ------------------------------------------------------------------------------------------------ -------------- Total liabilities............................................................................. 59,166,823 - ------------------------------------------------------------------------------------------------ -------------- NET ASSETS....................................................................................... $417,252,502 ================================================================================================ ============== Daily EAFE Fund (7,869,113 units outstanding, at $12.59 per unit net asset value)............................... $ 99,048,088 Daily EAFE Fund Non-Lending (25,280,513 units outstanding, at $12.59 per unit net asset value).............................. 318,204,414 - ------------------------------------------------------------------------------------------------ -------------- $417,252,502 ================================================================================================ ==============
The accompanying notes are an integral part of the financial statements. SAI-173 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Statement of Operations Year ended December 31, 1996 - -----------------------------------------------------------------------------
INVESTMENT INCOME Dividends (net of taxes withheld of $611,280) .................................................... $ 5,548,208 Interest.......................................................................................... 3,004,419 Securities lending fee income (net of related expenses), allocated to Daily EAFE Fund ............ 62,368 - -------------------------------------------------------------------------------------------------- ------------- Total investment income ........................................................................ 8,614,995 - -------------------------------------------------------------------------------------------------- ------------- EXPENSES.......................................................................................... 638,468 - -------------------------------------------------------------------------------------------------- ------------- Net investment income .......................................................................... 7,976,527 - -------------------------------------------------------------------------------------------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss): Investments...................................................................................... 400,125 Futures contracts................................................................................ 2,289,457 Foreign currency and related forward contracts................................................... (3,617,520) - -------------------------------------------------------------------------------------------------- ------------- Net realized gain (loss) on investments, futures contracts and foreign currency ................ (927,938) - -------------------------------------------------------------------------------------------------- ------------- Net change in unrealized appreciation (depreciation): Investments...................................................................................... 14,160,238 Futures contracts................................................................................ (1,410,996) Foreign currency and related forward contracts................................................... (615,122) - -------------------------------------------------------------------------------------------------- ------------- Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency............................................................................... 12,134,120 - -------------------------------------------------------------------------------------------------- ------------- Net realized and unrealized gain (loss) on investments, futures contracts and foreign currency . 11,206,182 - -------------------------------------------------------------------------------------------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................................. $19,182,709 ================================================================================================== =============
The accompanying notes are an integral part of the financial statements. SAI-174 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1995 - ------------------------------------------------------------------------------- -------------- -------------- FROM OPERATIONS Net investment income......................................................... $ 7,976,527 $ 4,448,240 Net realized gain (loss) on investments, futures contracts and foreign currency...................................................................... (927,938) 3,275,177 Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency............................................... 12,134,120 11,650,516 - ------------------------------------------------------------------------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations................ 19,182,709 19,373,933 - ------------------------------------------------------------------------------- -------------- -------------- Distributions of securities lending fee income to Daily EAFE Fund participants. (62,368) (58,096) - ------------------------------------------------------------------------------- -------------- -------------- FROM PARTICIPANT TRANSACTIONS Net increase (decrease) in net assets resulting from participant transactions.. 168,362,362 (32,466,781) - ------------------------------------------------------------------------------- -------------- -------------- Net increase (decrease) in net assets ......................................... 187,482,703 (13,150,944) NET ASSETS Beginning of year............................................................. 229,769,799 242,920,743 - ------------------------------------------------------------------------------- -------------- -------------- End of year................................................................... $417,252,502 $229,769,799 =============================================================================== ============== ==============
The accompanying notes are an integral part of the financial statements. SAI-175 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, ---------------------------------------- 1996 1995 1994 1993** - -------------------------------------------------------- --------- --------- ---------- --------- Net investment income (loss)*........................... $ 0.29 $ 0.25 $ 0.19 $ (0.01) Distributions of securities lending fee income (a) .... (0.01) (0.01) 0.00 0.00 Net realized and unrealized gain (loss) ................ 0.44 0.99 0.59 (0.13) - -------------------------------------------------------- --------- --------- ---------- --------- Net increase (decrease) ................................ 0.72 1.23 0.78 (0.14) NET ASSET VALUE Beginning of period .................................... 11.87 10.64 9.86 10.00 - -------------------------------------------------------- --------- --------- ---------- --------- End of period .......................................... $ 12.59 $ 11.87 $ 10.64 $ 9.86 ======================================================== ========= ========= ========== ========= Total return*** ........................................ 6.15% 11.64% 7.91% (1.40)% - -------------------------------------------------------- --------- --------- ---------- --------- Ratio of expenses to average net assets (b) ............ 0.19% 0.20% 0.19% 0.57% Ratio of net investment income to average net assets (b) 2.38% 2.22% 1.88% (0.14)% Portfolio turnover ..................................... 5% 9% 47% 28% Average broker commission per share (c) ................ $0.0149 N/A N/A N/A Net assets, end of period (000s) ....................... $99,048 $75,760 $139,678 $229,612 ========= ========= ========== =========
- ------------ * Net investment income (loss) per unit has been calculated based upon an average of monthly units outstanding. ** The Daily EAFE Fund commenced operations on September 30, 1993. *** Total return is based on the value of a single unit of participation outstanding throughout the entire period. It represents the percentage change in the net asset value per unit between the beginning and end of each period and assumes reinvestment of any distributions. 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 amounts represent those which are less than $.005 per unit. (b) 1993 data annualized. (c) Represents total commission paid on portfolio securities divided by total number of shares purchased or sold on which commissions were charged. This disclosure is required by the SEC beginning in 1996. The accompanying notes are an integral part of the financial statements. SAI-176 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND NON-LENDING Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, --------------------------------- 1996 1995 1994** - ---------------------------------------------------- ---------- ----------- ---------- Net investment income*............................... $ 0.28 $ 0.24 $ 0.19 Net realized and unrealized gain (loss).............. 0.44 0.99 0.59 - ---------------------------------------------------- ---------- ----------- ---------- Net increase (decrease).............................. 0.72 1.23 0.78 NET ASSET VALUE Beginning of period.................................. 11.87 10.64 9.86 - ---------------------------------------------------- ---------- ----------- ---------- End of year ......................................... $ 12.59 $ 11.87 $ 10.64 ==================================================== ========== =========== ========== Total return***...................................... 6.07% 11.56% 7.91% - ---------------------------------------------------- ---------- ----------- ---------- Ratio of expenses to average net assets.............. 0.19% 0.20% 0.19% Ratio of net investment income to average net assets.............................................. 2.31% 2.15% 1.85% Portfolio turnover................................... 5% 9% 47% Average broker commission per share (a) ............. $ 0.0149 N/A N/A Net assets, end of year (000s)....................... $318,204 $154,010 $103,242 ========== =========== ==========
- ------------ * Net investment income per unit has been calculated using an average of monthly units outstanding. ** The Daily EAFE Fund Non-Lending commenced operations on January 3, 1994. *** Total return is based on the value of a single unit of participation outstanding throughout the entire year. It represents the percentage change in the 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 Non-Lending. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (a) Represents total commissions paid on portfolio securities divided by total number of shares purchased or sold on which commissions were charged. This disclosure is required by the SEC beginning in 1996. The accompanying notes are an integral part of the financial statements. SAI-177 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE The State Street Bank and Trust Company ("State Street Bank") Investment Funds for Tax Exempt Retirement Plans have been formed under a Declaration of Trust dated May 19, 1983, as amended and restated through July 19, 1991. The Daily EAFE Fund and the Daily EAFE Fund Non-Lending (together, the "Fund") were established through Fund Declarations effective September 16, 1993 and January 3, 1994, respectively, and commenced investment operations on September 30, 1993 and January 3, 1994, respectively. State Street Bank is the Fund's Trustee and custodian. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. The investment objective of the Fund is to closely match the performance of the Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index (the "Index"), while providing daily liquidity. The Fund may invest in equity securities, equity-based derivatives, swaps, short-term instruments and foreign exchange contracts, as well as in commingled funds or mutual funds maintained by the Fund's Trustee. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION Investments for which market quotations are readily available are valued at the last reported sale price on the valuation date or, if no sales are reported for that day, the more recent of the last published sale 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 are stated at amortized cost which approximates market. Foreign securities quoted in foreign currencies (which constitute most of the investments) and foreign currencies are translated into U.S. dollars at the current exchange rate. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are accounted for on the trade date (date the order to buy or sell is executed). The cost of securities contributed to, and proceeds related to securities delivered by, the Fund in connection with the issuance and redemption of units of participation are based on the valuations of those securities determined as described above. The cost of securities delivered and the net gain or loss on securities sold are determined using the average cost method. Dividend income is recorded net of applicable withholding taxes on the ex-dividend date or as soon as the Fund is informed of the ex-dividend date. Interest income earned on foreign securities is recorded net of applicable withholding taxes on the accrual basis; interest earned on foreign currency transaction accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. C. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS The accounting records of the Fund are maintained in U.S. dollars. 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 date of the transactions. SAI-178 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against either specific transactions or portfolio positions. Such contracts are valued based upon the applicable forward exchange rates 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 contract's terms and from movements in currency values. The maximum potential loss from such contracts is the aggregate face value in U.S. dollars at the time the contract was opened. 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 income taxes and no federal income tax provision is required. E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined on each business day (valuation date) and any other day determined by the Trustee. Issuances and redemptions of Fund units are made on the basis of the value of the Fund as of the Fund's last preceding valuation date on which such order to issue or redeem is received. From the Fund's inception through October 31, 1996, a transaction fee of .5% was charged on contributions and withdrawals and is presented in Note 5 as a separate component of paid in capital. Effective November 1, 1996, a transaction fee of .5% is charged on contributions or withdrawals greater than 5% of the net asset value of the Fund. F. EXPENSES Under the Fund Declaration, the Fund may pay certain expenses for services received during the year. These transactions include, but are not limited to, transaction, holding, stamp duty and audit fees. The Fund also pays an annual fee of $50,000 for daily pricing services to the Trustee in its capacity as custodian. G. DISTRIBUTIONS TO PARTICIPANTS All net investment income (excluding securities lending fee income) and net realized gains are retained by the Fund. Income generated by securities lending is distributed monthly. H. FUTURES CONTRACTS The Fund may use futures contracts to manage its exposure to the equity market. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. 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 SAI-179 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 not be an exact correlation between a futures contract and the underlying index. The maximum potential loss on a long futures contract is the U.S. dollar value of the notional amount at the time the contract is opened. The potential loss on a short futures contract is unlimited. 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 securities, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. I. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the Trustee to make estimates and assumptions 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. 3. SECURITIES LENDING PROGRAM; PRINCIPLES OF COMBINATION The participants in the Daily EAFE Fund (the "EAFE Fund") have authorized the EAFE Fund to participate in the Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the EAFE Fund are identical to those of the Daily EAFE Fund Non-Lending (the "Non-Lending Fund"), except that the EAFE Fund engages in securities lending activities. Accordingly, the financial statements of the EAFE Fund and the Non-Lending Fund (collectively, the "Fund") have been prepared on a combined basis, with separate disclosure of the participant transactions and per unit data of the EAFE Fund and the Non-Lending Fund. The EAFE Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position) 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 Securities Lending Program, securities held by the EAFE 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 fair market value of the loaned securities. At December 31, 1996, the value of securities loaned by the EAFE Fund was $13,094,336 against which was held cash collateral of $13,498,662. Cash collateral provided by the Borrowers is invested in a variety of registered investment companies. At December 31, 1996, the cash collateral held by the Fund was 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 EAFE 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. Income earned from lending activities is distributed to EAFE Fund participants monthly. State Street Bank, as lending agent, indemnifies the EAFE Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. EAFE Fund participants, however, bear the risk of loss with respect to the investment of collateral. SAI-180 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, excluding short-term investments and including in-kind contributions and redemptions, if any, during the year ended December 31, 1996 were $186,158,398 and $15,571,835, respectively, resulting in a net realized gain (loss) of $400,125. 5. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1996 1995 ---------------------------- ----------------------------- UNITS AMOUNT UNITS AMOUNT ------------- -------------- ------------- --------------- DAILY EAFE FUND Units issued..................... 260,114 $ 3,283,151 -- $ -- Interfund transfers (net)........ 1,332,149 15,595,684 -- -- Units redeemed................... (105,475) (1,328,475) (6,742,000) (70,246,080) Paid in capital from transaction fees (Note 2E).................. -- 406 -- 246,080 ------------- -------------- ------------- --------------- Total............................ 1,486,788 $ 17,550,766 (6,742,000) $(70,000,000) ------------- -------------- ------------- --------------- DAILY EAFE FUND NON-LENDING Units issued..................... 20,560,785 $249,590,583 9,429,069 $105,163,988 Interfund transfers (net)........ (1,332,149) (15,595,684) -- -- Units redeemed................... (6,922,598) (84,485,013) (6,155,370) (68,452,109) Paid in capital from transaction fees (Note 2E).................. -- 1,301,710 -- 821,340 ------------- -------------- ------------- --------------- Total............................ 12,306,038 $150,811,596 3,273,699 $ 37,533,219 ------------- -------------- ------------- --------------- Net increase (decrease) in units and net assets resulting from participant transactions........ 13,792,826 $168,362,362 (3,468,301) $(32,466,781) ============= ============== ============= ===============
DAILY EAFE FUND Units in excess of 10% of EAFE Fund units outstanding at December 31, 1996 held by 1 of the EAFE Fund's 11 unitholders aggregated 81% of the EAFE Fund's total units outstanding. DAILY EAFE FUND NON-LENDING Units in excess of 10% of Non-Lending Fund units outstanding at December 31, 1996 held by 2 of the Non-Lending Fund's 34 unitholders aggregated 24% of the Non-Lending Fund's total units outstanding. SAI-181 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 A redemption by one or more unitholders individually holding 10% or more of the Fund's units may cause the remaining unitholders to bear proportionately higher operating expenses and otherwise adversely affect the Fund's future liquidity and investment operations. As described under "Issuances and Redemptions of Units of Participation", however, redeeming unitholders may bear transaction costs arising from the redemption of units; additionally, in certain circumstances, redemptions may be made on an in-kind basis. These practices may tend to mitigate the potential adverse effects of such redemptions. Participants in each of the EAFE Fund or the Non-Lending Fund may exchange their units for units of the other fund on any valuation date. 6. REALIZED GAINS AND LOSSES ON FOREIGN CURRENCY 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 investments in securities are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on investments in securities. Net realized gain (loss) from foreign currency transactions amounted to $(3,617,520) for the year ended December 31, 1996. SAI-182 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (showing percentage of total value of investments) December 31, 1996
SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- COMMON STOCK 88.1% (unless otherwise noted) AUSTRALIA 2.4% Aberfoyle Ltd. AUD0.50....................................................... 4,875 $ 12,468 Amcor Ltd. Ord AUD1.......................................................... 40,063 257,434 Ashton Mining Ltd. AUD0.50................................................... 14,439 25,116 Australian Gas Light Co. Ord AUD1............................................ 18,400 104,642 Australian National Industries Ltd. AUD0.30.................................. 40,474 40,185 Boral Ltd. Ord AUD0.50....................................................... 71,416 203,073 Brambles Industries Ltd. AUD0.50............................................. 13,992 272,838 Broken Hill Proprietary Co., Ltd. Ord AUD1................................... 125,635 1,788,228 Burns, Philp & Co., Ltd. AUD0.50............................................. 33,074 58,845 Coca Cola Amatil Ltd. AUD0.50................................................ 34,373 367,210 Coles Myer Ltd. AUD0.50...................................................... 68,531 281,962 CRA Ltd. AUD2................................................................ 20,827 326,714 Crown Ltd. AUD0.50........................................................... 31,600 66,011 CSR Ltd. AUD1................................................................ 62,038 216,813 David Jones Ltd. AUD0.30..................................................... 19,899 27,659 Delta Gold NL AUD0.25........................................................ 10,400 19,495 Email Ltd. AUD0.50........................................................... 18,432 59,586 Faulding (FH) & Co., Ltd. AUD0.50............................................ 6,142 41,516 Fosters Brewing Group AUD1................................................... 124,214 251,585 Futuris Corp., Ltd. AUD0.20.................................................. 26,521 36,232 General Property Trust AUD1.................................................. 72,701 141,475 Gio Australia Holding AUD1................................................... 37,649 96,291 Goodman Fielder Wattie Ltd. AUD0.50.......................................... 77,639 96,201 Great Central Mines NL AUD0.20............................................... 13,100 37,250 Howard Smith Ltd. AUD1....................................................... 11,586 95,246 ICI Australia Ltd. AUD1...................................................... 18,813 203,969 James Hardie Industries Ltd. AUD1............................................ 24,922 78,389 Leighton Holdings Ltd. Ord AUD0.50........................................... 16,400 70,342 Lend Lease Corp., Ltd. AUD0.50............................................... 15,440 299,234 Metal Manufacturers Ltd. AUD0.50............................................. 9,700 23,884 MIM Holdings Ltd. AUD0.50.................................................... 102,529 143,329 National Australia Bank Ltd. AUD1............................................ 93,215 1,095,776 Newcrest Mining Ltd. AUD0.50................................................. 14,965 59,432 News Corp., Ltd. AUD0.50 Pfd................................................. 126,815 668,826 Normandy Mining Ltd. AUD0.20................................................. 102,135 141,156 North Ltd. AUD0.50........................................................... 44,399 129,776 Pacific Dunlop Ltd. AUD0.50.................................................. 64,837 164,796 Pioneer International Ltd. AUD0.50........................................... 56,222 167,460 Plutonic Resources Ltd. AUD0.50.............................................. 9,700 45,072 QBE Insurance Group AUD1..................................................... 17,982 94,695 QCT Resources Ltd. AUD0.50................................................... 41,319 55,792 Renison Goldfields Consolidated Ltd. AUD0.50................................. 10,837 48,117 Rothmans Holdings Ltd. AUD0.50............................................... 6,200 39,889 Samantha Gold NL AUD0.20..................................................... 9,200 19,145 Santos Ltd. AUD0.25.......................................................... 34,023 137,822 Schroders Property Fund AUD1................................................. 20,681 37,945 Sons of Gwalia Ltd. AUD0.25.................................................. 5,200 30,688 Southcorp Holdings Ltd. Ord AUD0.50.......................................... 36,680 116,537 The accompanying notes are an integral part of the financial statements. SAI-183 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Stockland Trust Group AUD1.10................................................ 20,648 $ 53,301 Tab Corp. Holdings Ltd. AUD1................................................. 19,100 91,025 Western Mining Corp. AUD0.50................................................. 70,494 444,017 Westfield Trust New Units AUD1 .............................................. 2,499 4,605 Westfield Trust Units AUD1................................................... 70,191 132,688 Westpac Banking Corp. AUD1................................................... 114,476 651,031 ------------- 10,172,813 ------------- AUSTRIA 0.4% Austria Mikros Systeme International AG ATS100............................... 200 15,425 Austrian Airlines ATS1000.................................................... 200 30,444 Bank Austria AG ATS100....................................................... 3,700 273,076 Bank Austria AG ATS100 Rfd 1/12/96........................................... 300 22,058 Bank Austria AG ATS100 Rfd 1May96............................................ 320 23,529 Bau Holdings AG ATS100 Rfd 01Apr93........................................... 300 17,935 Bohler Uddeholm ATS100....................................................... 800 57,198 BWT AG ATS100................................................................ 100 10,323 Creditanstalt-Bankverein ATS100.............................................. 1,990 134,570 EA Generali AG ATS100........................................................ 500 147,608 Flughafen Wien AG ATS100..................................................... 1,500 76,387 Lenzing AG ATS100............................................................ 300 19,125 Mayr Melnhof Karto ATS100.................................................... 800 39,116 Oesterreichische Brau Beteiligungs AG ATS100................................. 600 40,685 Oesterreichische Elektrizitaetswirtschafts AG ATS100......................... 2,100 157,023 OMV AG ATS100................................................................ 1,876 211,319 Radex Heraklith Industriebeteiligungs AG ATS100.............................. 950 30,061 Steyr-Daimler Puch AG ATS100................................................. 700 11,172 Universale-Bau AG ATS100..................................................... 300 13,838 VA Technologie AG ATS100 Bearer.............................................. 1,000 156,788 Wienerberger Baustoff Industrie ATS100....................................... 500 96,868 ------------- 1,584,548 ------------- BELGIUM 1.1% Barco NV NPV................................................................. 800 138,016 Bekaert SA NPV............................................................... 160 101,497 Cementbedrijven Cimenteries NPV.............................................. 1,550 140,778 Delhaize Le Lion SA NPV...................................................... 3,545 210,371 Electrabel SA NPV............................................................ 3,760 888,967 Electrabel SA NPV Vvpr Strip................................................. 585 571 Fortis AG NPV................................................................ 2,622 420,154 Generale de Banque NPV Vvpr Strip............................................ 91 51 Generale de Banque Put Wts 15Nov99 Tractebel................................. 955 13,830 Generale de Banque NPV....................................................... 1,125 402,867 Gevaert Photo Producten, NV NPV.............................................. 1,790 123,975 Glaverbel SA NPV............................................................. 462 53,597 Groupe Bruxelles Lambert NPV................................................. 1,600 205,764 Kredietbank NV NPV Vvpr Strip................................................ 125 38,880 Kredietbank NV NPV........................................................... 895 293,031 Petrofina SA NPV............................................................. 1,600 508,744 Royale Belge NPV............................................................. 1,100 226,826 The accompanying notes are an integral part of the financial statements. SAI-184 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Solvay SA NPV................................................................ 575 $ 351,631 Tractebel Capital NPV........................................................ 955 444,210 Union Miniere SA NPV......................................................... 1,705 115,404 ------------- 4,679,164 ------------- DENMARK 0.8% Aarhus Oliefabrik A/S A DKK100............................................... 222 11,478 Aarhus Oliefabrik A/S B DKK100............................................... 47 2,438 Bang & Olufsen Holding DKK10 Series B........................................ 880 42,666 Carlsberg Brewery A/S A DKK20................................................ 2,443 164,830 Carlsberg Brewery A/S B DKK20................................................ 1,987 134,063 D/S AF 1912 B DKK1000........................................................ 15 385,241 D/S Svendborg B DKK1000...................................................... 10 374,646 Danisco A/S DKK20............................................................ 3,840 233,047 Den Danske Bank A/S DKK100................................................... 3,876 312,109 FLS Industries A/S B DKK100.................................................. 640 81,914 Gn Store Nord A/S DKK100..................................................... 413 40,258 ISS International Service System A/S Series B DKK20.......................... 2,062 54,181 Korn Og Foderstof DKK20...................................................... 840 34,018 Lauritzen Holdings A/S B DKK20............................................... 171 20,002 NKT Holding A/S DKK100....................................................... 521 30,913 Novo Nordisk A/S DKK20 B..................................................... 2,657 499,969 Ostasiatiske Kompagni Dkr100................................................. 1,487 32,266 Radiometer A/S B Shares DKK20................................................ 706 41,889 SAS Danmark A/S DKK10........................................................ 3,254 40,269 Sophus Berendsen A/S A Shares DKK20.......................................... 454 58,492 Sophus Berendsen A/S B DKK20................................................. 1,447 185,938 Superfos A/S DKK100.......................................................... 429 54,180 Tele Danmark A/S Series B DKK10.............................................. 9,081 500,318 Unidanmark A/S A DKK100 Regd................................................. 3,691 190,841 ------------- 3,525,966 ------------- FINLAND 0.7% Ameri Group A FIM20.......................................................... 1,925 39,678 Cultor Ltd. Series 2 FIM12................................................... 500 25,710 Cultor Ltd. Series 1 Ord FIM12............................................... 1,000 54,242 Instrumentarium Corp. Series A FIM10......................................... 1,100 40,239 Instrumentarium Corp. Series B FIM10......................................... 400 14,493 Kemira Oy Ord FIM10.......................................................... 9,700 122,065 Kesko Oy FIM10............................................................... 6,600 92,936 Kone Corp. B FIM50........................................................... 500 55,110 Metra Oy A FIM20............................................................. 1,000 56,194 Metra Oy B FIM20............................................................. 900 50,380 Nokia AB Oy FIM5 Series K.................................................... 7,600 438,620 Nokia AB Oy FIM5 Series A.................................................... 14,600 845,147 Outokumpu Oy A FIM10......................................................... 9,400 160,100 Pohjola Ord Series A FIM5.................................................... 1,600 37,839 Pohjola Series B FIM5........................................................ 1,600 35,930 Sampo Insurance Co., Ltd. A FIM20............................................ 1,100 86,635 Stockmann AB B FIM20......................................................... 450 26,850 Stockmann AB A FIM20......................................................... 600 36,450 The accompanying notes are an integral part of the financial statements. SAI-185 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Merita Ltd. Series A FIM10................................................... 66,020 $ 204,835 UPM Kymmene Oy FIM10......................................................... 19,895 416,547 ------------- 2,840,000 ------------- FRANCE 5.9% Accor SA FRF100.............................................................. 2,066 261,091 Air Liquide FRF70............................................................ 2,442 380,476 Air Liquide FRF70 ........................................................... 2,135 332,644 Alcatel Alsthom CGE FRF40.................................................... 10,135 812,547 AXA FRF60.................................................................... 12,126 769,712 Banque Nationale de Paris FRF25.............................................. 12,982 501,421 BIC SA FRF50................................................................. 1,750 261,887 Bongrain Group FRF50......................................................... 110 42,466 Bouygues SA FRF50............................................................ 1,480 153,158 Canal Plus FRF20............................................................. 1,566 345,202 Carrefour SA FRF100.......................................................... 2,408 1,563,709 Chargeurs International FRF100............................................... 400 19,774 Club Mediterranee SA FRF25................................................... 681 44,118 Compagnie Bancaire SA FRF100................................................. 1,760 207,863 Compagnie de St. Gobain FRF100............................................... 5,413 764,242 Compagnie de Suez FRF75...................................................... 10,259 435,319 Compagnie Financiere Paribas FRF50 A Shares.................................. 7,779 525,054 Compagnie Generale de Geophysique FRF10...................................... 125 8,656 Compagnie Generale des Eaux FRF100........................................... 7,586 938,255 Compagnie Par Reesco FRF50................................................... 530 42,186 Comptoirs Modernes FRF100.................................................... 325 175,040 Credit National SA FRF100.................................................... 744 42,761 Dollfus-Mieg & Cie FRF75..................................................... 250 6,049 Eridania Beghin-Say FRF65.................................................... 1,624 260,837 Essilor International Compagnie Generale FRF20............................... 560 169,655 Etab Eco Casino Guich Perr & Co. FRF10....................................... 3,846 178,732 Europe 1 Communication FRF100 Regd........................................... 64 13,542 Fin Pour L'Expans D'Telecomm SA FRF100....................................... 650 10,027 Groupe Danone FRF10.......................................................... 4,551 632,910 GTM Entrepose FRF50.......................................................... 736 33,977 Havas SA FRF15............................................................... 4,031 282,235 Imetal SA FRF50.............................................................. 975 143,658 L'Oreal SA FRF10............................................................. 4,259 1,600,771 Lafarge FRF25 ............................................................... 5,913 354,066 Lagardere Groupe FRF40 Regd.................................................. 6,098 167,030 Legrand SA FRF10 ............................................................ 1,740 295,868 Louis Vuitton Moet Hennessy FRF10............................................ 5,481 1,527,654 Lyonnaise des Eaux-Dumer FRF60............................................... 3,706 344,239 Michelin FRF12 Regd Class B.................................................. 7,280 392,231 Moulinex SA FRF10............................................................ 1,395 32,066 Nord Est FRF50............................................................... 750 18,624 Pathe FRF100................................................................. 500 120,220 Pernod Ricard SA FRF20....................................................... 3,542 195,536 Peugeot SA FRF35............................................................. 3,129 351,492 Pinault Printemps FRF100..................................................... 1,388 549,454 Primagaz FRF10............................................................... 1,250 146,909 The accompanying notes are an integral part of the financial statements. SAI-186 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Promodes SA FRF20............................................................ 1,200 $ 338,155 Rhone Poulenc SA FRF25 Ord A Shares.......................................... 20,332 691,839 SAGEM FRF50.................................................................. 250 150,515 Saint Louis FRF100........................................................... 510 126,745 Salomon SA FRF10 ............................................................ 900 77,037 Sanofi SA FRF25.............................................................. 6,567 651,799 Sefimeg FRF100 Regd.......................................................... 998 72,180 Seita FRF50.................................................................. 3,250 135,656 Sidel FRF15.................................................................. 1,750 120,172 Simco FRF100 Regd............................................................ 770 67,094 Simco FRF100 Rfd1Jul96....................................................... 31 2,602 Skis Rossignol FRF25 ........................................................ 600 16,585 Societe Eurafrance FRF200.................................................... 230 99,188 Societe Generale FRF30....................................................... 5,744 619,832 Societe National Elf Aquitaine FRF50......................................... 17,105 1,553,953 Sodexho SA FRF100............................................................ 433 240,704 Sommer Allibert FRF5......................................................... 1,000 29,815 Spie Batignolles FRF50....................................................... 8,345 385,082 Technip FRF20................................................................ 1,000 93,675 Thomson CSF FRF20............................................................ 7,505 242,958 TOTAL SA FRF50 B Shares...................................................... 15,139 1,228,872 Unibail SA FRF100 Regd....................................................... 450 44,664 Union Assurance Ltd. FRF10................................................... 16,634 414,346 Union Immobiliere France FRF100.............................................. 412 33,562 Usinor Sacilor FRF20......................................................... 15,250 221,469 Valeo FRF20.................................................................. 4,380 269,601 ------------- 24,383,463 ------------- GERMANY 6.9% Adidas AG DEM5............................................................... 2,850 245,961 AGIV AG DEM5................................................................. 1,800 26,046 Allianz AG Holding DEM50..................................................... 1,452 2,638,116 AMB Aachener & Muenchener Bet DEM50.......................................... 50 32,444 AMB Aachener & Muenchener Bet (Regd) DEM50................................... 262 187,009 BASF AG DEM5................................................................. 39,200 1,507,868 Bayer AG DEM5................................................................ 45,350 1,848,018 Bayer Hypothe & Weschel Bank DEM5............................................ 15,980 482,687 Bayerische Vereinsbank AG DEM5............................................... 16,950 695,114 Beiersdorf AG DEM5 .......................................................... 5,400 266,654 Bilfinger & Berger DEM5...................................................... 1,900 69,658 Brau & Brunnen AG DEM50...................................................... 221 15,000 Buderus AG DEM50............................................................. 150 73,973 CKAG Colonia Konzern DEM5.................................................... 1,340 110,428 Continental AG DEM5.......................................................... 6,050 108,744 Daimler Benz AG DEM5......................................................... 33,030 2,271,871 Degussa AG DEM50............................................................. 550 248,572 Deutsche Bank AG DEM5........................................................ 32,130 1,499,025 Deutsche Telekom DEM5........................................................ 141,000 2,968,951 Didier Werke AG DEM50........................................................ 100 7,916 DLW AG DEM50................................................................. 50 3,034 Douglas Holding AG DEM5...................................................... 2,050 80,478 The accompanying notes are an integral part of the financial statements. SAI-187 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Dresdner Bank AG DEM5........................................................ 28,600 $ 855,532 Dyckerhoff AG DEM50.......................................................... 71 26,952 Escada AG DEM50.............................................................. 50 8,079 FAG Kugelfischer DEM5........................................................ 3,200 43,501 Heidelberg Zement DEM5....................................................... 2,760 222,971 Herlitz AG DEM50............................................................. 105 11,923 Hochtief AG DEM5............................................................. 4,500 178,120 Holsten Brauerei AG DEM50.................................................... 62 13,679 IWKA AG DEM50................................................................ 100 23,684 Karstadt AG DEM50............................................................ 533 179,846 Klockner Humboldt Deutz DEM5................................................. 2,250 10,220 Linde AG DEM50............................................................... 538 328,155 Lufthansa AG DEM5............................................................ 24,500 333,852 MAN AG DEM50................................................................. 728 176,201 Mannesmann AG DEM50.......................................................... 2,370 1,025,754 Merck KGAA DEM5.............................................................. 11,050 397,229 Metro AG DEM5................................................................ 5,817 468,048 Munich Reinsurance DEM100.................................................... 520 1,297,385 Preussag AG DEM50............................................................ 1,000 226,137 PWA Papierwerke Waldhof Aschaffenberg AG DEM50............................... 350 46,558 Rheinmetall Berlin AG DEM50.................................................. 100 16,092 RWE AG DEM5.................................................................. 21,680 917,225 Salamander AG DEM50.......................................................... 100 9,863 SAP AG DEM5.................................................................. 3,900 530,173 Schering AG DEM5............................................................. 4,400 370,878 SGL Carbon DEM5.............................................................. 1,350 169,944 Siemens AG DEM5.............................................................. 35,950 1,691,243 Strabag AG DEM50............................................................. 100 6,359 Thyssen AG DEM50............................................................. 2,000 354,292 VEBA AG DEM5................................................................. 31,350 1,810,493 VIAG AG DEM50................................................................ 1,654 648,249 VIAG AG DEM50 Rfd 1/1/97..................................................... 51 19,359 Volkswagen AG DEM50.......................................................... 1,805 749,594 ------------- 28,555,157 ------------- HONG KONG 3.2% Applied International Holdings HKD0.20....................................... 31,000 1,844 Bank of East Asia Ltd. HKD2.50............................................... 68,489 304,592 Cathay Pacific Airways Ltd. HKD0.20.......................................... 215,000 339,108 Cheung Kong (Holdings) Ltd. HKD0.50.......................................... 144,000 1,279,897 China Light & Power Co., Ltd. HKD5........................................... 124,207 552,388 Chinese Estates Holdings Ord HKD0.10......................................... 120,499 133,974 Dickson Concept Inc. HKD0.30................................................. 15,600 58,487 Electric & Eltek International Holdings Ltd. HKD0.10......................... 49,000 10,769 Giordano International HKD0.10............................................... 45,000 38,397 Hang Lung Development Co., Ltd. HKD1......................................... 84,000 184,615 Hang Seng Bank Ltd. HKD5..................................................... 120,712 1,466,959 Hong Kong & China Gas Co., Ltd. HKD0.25...................................... 187,152 361,722 Hong Kong & Shanghai Hotels Wts 10Dec98 ..................................... 4,500 1,687 Hong Kong & Shanghai Hotels Ltd. HKD0.50..................................... 73,000 137,789 The accompanying notes are an integral part of the financial statements. SAI-188 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Hong Kong Aircraft Engineering Co. HKD1...................................... 9,200 $ 28,308 Hong Kong Telecommunications Ltd. HKD0.50.................................... 719,000 1,157,279 Hopewell Holdings Ltd. HKD0.50............................................... 274,000 177,117 Hutchison Whampoa Ltd. HKD0.25............................................... 226,000 1,774,984 Hysan Development Co., Ltd. HKD5............................................. 64,000 254,842 Johnson Electric Holdings HKD0.10............................................ 23,900 66,123 Kumagai Gumi Ltd. HKD1....................................................... 23,000 26,762 Lai Sun Garment International Ltd. HKD0.50................................... 13,000 20,672 Miramar Hotel & Investment HKD0.70........................................... 36,350 72,841 New World Development Co., Ltd. HKD1......................................... 109,708 741,079 Oriental Press Group HKD0.25................................................. 91,000 40,882 Peregrine Investment Holdings HKD0.60........................................ 39,000 66,807 Playmates Toys Holdings HKD0.10.............................................. 30,000 8,048 Regal Hotel International HKD0.10............................................ 194,000 67,718 Shangri-La Asia Ltd. HKD1.................................................... 99,000 146,548 Shun Tak Holdings Ltd. HKD0.25............................................... 91,000 60,588 South China Morning Post HKD0.10............................................. 109,000 90,187 Stelux Holdings International HKD0.10........................................ 45,000 11,635 Sun Hung Kai Properties Ltd. HKD0.50......................................... 149,320 1,829,098 Swire Pacific Ltd.A HKD0.60.................................................. 99,000 943,924 Tai Cheung Holdings Ltd. HKD0.10............................................. 38,600 36,429 Television Broadcasting Ltd. HKD0.05......................................... 26,000 103,866 Wharf Holdings Ltd. HKD1..................................................... 141,400 705,629 Wing Lung Bank Ltd. HKD5..................................................... 12,075 81,957 Winsor Industrial Corp., Ltd. HKD0.50........................................ 10,000 2,340 ------------- 13,387,891 ------------- IRELAND 0.3% Allied Irish Banks PLC Ord IEP0.25........................................... 47,100 315,701 Crean (James) PLC Units...................................................... 3,100 9,969 CRH PLC Ord IEP0.25.......................................................... 25,226 261,312 Fyffes PLC Ord IEP0.05....................................................... 19,122 35,603 Greencore Group Ord IEP0.50.................................................. 12,948 82,843 Independent Newspapers PLC Ord IEP0.25....................................... 17,243 89,017 Irish Life PLC Ord IEP0.10................................................... 21,870 101,243 Jefferson Smurfit Group PLC Ord IEP0.25...................................... 75,962 230,792 Kerry Group PLC Ord IEP0.10.................................................. 5,300 53,825 Waterford Wedgewood PLC Ord IEP0.05.......................................... 50,437 64,882 Woodchester Investments PLC Ord IEP0.20...................................... 15,552 57,385 ------------- 1,302,572 ------------- ITALY 2.7% Arnoldo Mondadori Editore SpA ITL1000 Ord.................................... 8,000 64,979 Assicurazioni Generali ITL2000............................................... 59,585 1,126,648 Banca Commerciale Italiana SpA ITL1000....................................... 116,950 212,287 Banca Populare di Milano ITL1000............................................. 13,000 65,834 Banco Ambrosiano Veneto SpA Ord ITL1000...................................... 29,100 69,855 Banco Ambrosiano Veneto SpA ITL1000 non conv................................. 11,500 21,480 Benetton Group SpA ITL500.................................................... 11,400 143,878 Bulgari SpA ITL500........................................................... 4,000 81,026 Burgo Cartiere SpA ITL5000................................................... 8,400 38,671 The accompanying notes are an integral part of the financial statements. SAI-189 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Cementir SpA ITL1000......................................................... 13,100 $ 8,366 Cogefar Impresit SpA ITL1000................................................. 33,300 25,843 Credito Italiano SA ITL500................................................... 142,500 156,136 Danieli & Cofficine Meccaniebe SpA ITL2000................................... 2,100 17,264 Danieli & Cofficine Meccaniebe SpA ITL2000 non conv.......................... 2,100 8,770 Edison SpA ITL1000........................................................... 41,400 261,388 ENI SpA ITL1000 Regd......................................................... 515,000 2,636,814 Falck, Accia & Ferr Lombarde ITL2500......................................... 5,880 23,493 Fiat SpA ITL1000............................................................. 222,530 671,761 Fiat SpA ITL1000 non conv.................................................... 45,790 80,106 Gilardini Industriale SpA ITL1000............................................ 27,500 34,092 IMI ITL5000.................................................................. 38,000 324,893 INA Ist Nazionale Assoc ITL1000.............................................. 276,000 358,682 IST Bancario S.Paolo(to) ITL10000............................................ 50,740 310,347 Italcementi SpA ITL2000...................................................... 10,910 60,990 Italcementi SpA ITL2000 non conv............................................. 5,200 12,705 Italgas ITL1000.............................................................. 42,660 177,738 La Previdente ITL1000........................................................ 3,100 16,841 La Rinascente SpA ITL1000.................................................... 10,778 62,378 La Rinascente SpA ITL1000 non conv........................................... 2,100 5,359 Marzotto & Figli SpA ITL1000................................................. 3,200 20,625 Mediaset ITL1000............................................................. 76,000 349,885 Mediobanca SpA ITL1000....................................................... 32,366 174,229 Montedison SpA ITL1000 non conv.............................................. 36,600 23,252 Montedison SpA New ITL1000 .................................................. 260,727 177,305 Olivetti & C SpA Ord ITL1000................................................. 237,247 83,477 Parmalat Finanziaria SpA ITL1000............................................. 94,500 144,189 Pirelli SpA ITL1000.......................................................... 92,183 170,664 Pirelli SpA ITL1000 non conv................................................. 4,200 6,174 RAS SpA ITL1000.............................................................. 22,376 208,235 RAS SpA ITL1000 non conv..................................................... 8,913 47,188 S.A.I. ITL1000 non conv...................................................... 3,100 11,000 S.A.I. ITL1000............................................................... 7,500 69,056 Saffa SpA Ord A ITL1000...................................................... 3,100 5,821 Sasib SpA ITL1000............................................................ 4,366 13,639 Sasib SpA ITL1000 non conv................................................... 3,100 5,801 Sirti SpA ITL1000............................................................ 13,732 83,087 Snia BPD SpA ITL1000 non conv................................................ 200 148 Snia BPD SpA ITL1000......................................................... 43,500 44,916 Societa Italiana L'Eserc SpA (Sip) ITL1000 non conv.......................... 101,489 197,571 Telecom Italia Mobilia ITL50 Di Risp......................................... 91,989 130,981 Telecom Italia Mobilia ITL50................................................. 397,265 1,001,980 Telecom Italia SpA ITL1000................................................... 383,765 994,432 ------------- 11,042,279 ------------- JAPAN 27.8% 77 Bank JPY50................................................................ 24,000 196,433 Acom Co. JPY50............................................................... 9,000 383,045 Advantest Corp. JPY50........................................................ 5,100 238,589 Ajinomoto Co., Inc. JPY50.................................................... 40,000 406,651 Alps Electric Co. JPY50...................................................... 10,000 108,555 The accompanying notes are an integral part of the financial statements. SAI-190 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Amada Co., Ltd. JPY50........................................................ 18,000 $ 139,571 Amano Corp. JPY50............................................................ 6,000 64,099 Aoki Corp. JPY50............................................................. 21,000 43,603 Aoyama Trading Co. JPY50..................................................... 4,000 106,143 Arabian Oil Co. JPY500....................................................... 3,300 122,254 Asahi Bank Ltd. JPY50........................................................ 143,000 1,268,976 Asahi Breweries Ltd. JPY50................................................... 27,000 279,142 Asahi Chemical Industry JPY50................................................ 90,000 508,659 Asahi Glass Co., Ltd. JPY50.................................................. 73,000 685,535 Ashikaga Bank Ltd. JPY50..................................................... 38,000 183,010 Autobacs Seven JPY50......................................................... 2,400 169,346 Bank of Tokyo JPY50.......................................................... 289,400 5,360,644 Bank of Yokohama Ltd. JPY50.................................................. 71,000 458,775 Bridgestone Corp. JPY50...................................................... 49,000 928,750 Brother Industries Ltd. JPY50................................................ 17,000 73,232 Canon, Inc. JPY50............................................................ 53,000 1,168,950 Casio Computer Co. JPY50..................................................... 17,000 131,231 Chiba Bank Ltd. JPY50........................................................ 48,000 326,699 Chiyoda Corp. JPY50.......................................................... 10,000 64,702 Chugai Pharmaceutical Co. JPY50.............................................. 15,000 125,355 Citizen Watch Co., Ltd. JPY50................................................ 19,000 135,866 Cosmo Oil Co. Ltd JPY50...................................................... 39,000 187,154 Credit Saison Co., Ltd. JPY50................................................ 8,500 189,670 CSK Corp. JPY50.............................................................. 4,000 104,764 Dai Ichi Pharmaceutical Co. JPY50............................................ 17,000 272,422 Dai Nippon Printing Co., Ltd. JPY50.......................................... 47,000 822,004 Daicel Chemical Industries Ltd. JPY50........................................ 23,000 107,599 Daido Steel Co., Ltd. JPY50.................................................. 27,000 100,026 Daiei Inc. JPY50............................................................. 44,000 335,487 Daifuku Co., Ltd. JPY50...................................................... 7,000 88,050 Daikin Industries, Ltd. JPY50................................................ 16,000 141,983 Daikyo Inc. JPY50............................................................ 8,000 37,701 Daimaru Inc. JPY50........................................................... 14,000 74,662 Dainippon Ink & Chemicals Inc. JPY50......................................... 49,000 181,106 Dainippon Screen Manufacturing Co., Ltd. JPY50............................... 10,000 73,662 Daito Trust Construction JPY50............................................... 8,800 97,803 Daiwa House Industry JPY50................................................... 32,000 410,787 Daiwa Kosho Lease Co., Ltd. JPY50............................................ 9,000 69,010 Daiwa Securities Co., Ltd. JPY50............................................. 84,000 745,412 Denki Kagaku Kogyo KK JPY50.................................................. 30,000 73,662 East Japan Railway Co. JPY50000.............................................. 249 1,117,679 Ebara Corp. JPY50............................................................ 18,000 234,169 Eisai Co., Ltd. JPY50........................................................ 16,450 323,133 Ezaki Glico Co., Ltd. JPY50.................................................. 8,000 68,924 Fanuc Ltd. JPY50............................................................. 14,700 469,863 Fuji Bank Ltd. JPY50......................................................... 180,000 2,620,832 Fuji Photo Film Co., Ltd. JPY50.............................................. 32,000 1,053,158 Fujikura Ltd JPY50........................................................... 21,000 167,899 Fujita Corp. JPY50........................................................... 31,000 88,938 Fujita Kanko Inc. JPY50...................................................... 8,000 148,186 The accompanying notes are an integral part of the financial statements. SAI-191 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Fujitsu Ltd. JPY50........................................................... 114,000 $1,060,739 Furukawa Electric Ltd. JPY50................................................. 40,000 189,196 Gakken JPY50................................................................. 5,000 28,216 Gunma Bank Ltd. JPY50........................................................ 31,000 269,751 Gunze Ltd. JPY50............................................................. 15,000 77,669 Hankyu Corp. JPY50........................................................... 53,000 262,557 Hankyu Department Store JPY50................................................ 12,000 118,894 Haseko Corp. JPY50........................................................... 24,000 64,099 Hazama Corp. JPY50........................................................... 20,000 55,311 Higo Bank JPY50.............................................................. 16,000 106,556 Hirose Electric Co., Ltd. JPY50.............................................. 2,400 138,744 Hitachi Ltd. JPY50........................................................... 207,000 1,926,079 Hitachi Zosen Corp. JPY50.................................................... 62,000 240,372 Hokuriku Bank Ltd. JPY50..................................................... 42,000 205,531 Honda Motor Co., Ltd. JPY50.................................................. 61,000 1,739,554 House Food Industrial Co., Ltd. JPY50........................................ 7,000 112,777 Hoya Corp. JPY50............................................................. 7,000 274,403 Inax Corp. JPY50............................................................. 15,000 110,881 Industrial Bank of Japan Ltd. JPY50.......................................... 157,440 2,726,410 Isetan Co., Ltd. JPY50....................................................... 14,000 180,925 Ishihara Sangyo Kaisha JPY50................................................. 14,000 33,773 Ito Yokado Co., Ltd. JPY50................................................... 26,000 1,128,974 ITOCHU Corp. JPY50........................................................... 89,000 476,936 Itoham Foods JPY50........................................................... 14,000 86,603 Iwatani International Corp. JPY50............................................ 13,000 55,217 Jaccs Co., Ltd. JPY50........................................................ 9,000 69,785 Japan Airlines Co., Ltd. JPY50............................................... 109,000 577,539 Japan Energy Corp. JPY50..................................................... 67,000 181,830 Japan Metals & Chemicals JPY50............................................... 7,000 23,279 Japan Steel Works Ltd. JPY50................................................. 17,000 38,666 JGC Corp. JPY50.............................................................. 9,000 67,382 Joyo Bank Ltd. JPY50 Rfd 12Oct96............................................. 4,000 23,641 Joyo Bank Ltd. JPY50......................................................... 51,000 306,694 Jusco Co., Ltd. JPY50........................................................ 20,000 677,178 Kajima Corp. JPY50........................................................... 60,000 428,018 Kaken Pharmaceutical JPY50................................................... 4,000 23,744 Kamigumi Co., Ltd. JPY50..................................................... 16,000 104,764 Kandenko Co. Ltd JPY50....................................................... 12,900 122,254 Kanebo Ltd. JPY50............................................................ 32,000 65,891 Kaneka Corp. JPY50........................................................... 22,000 112,398 Kansai Electric Power Co., Inc. JPY500....................................... 60,800 1,257,172 Kansai Paint Co., Ltd. JPY50................................................. 14,000 62,721 Kao Corp. JPY50.............................................................. 37,000 430,344 Katokichi Co. JPY50.......................................................... 3,000 58,155 Kawasaki Heavy Industries Ltd. JPY50......................................... 85,000 350,780 Kawasaki Kisen Kaisha Ltd. JPY50............................................. 36,000 81,882 Kawasaki Steel JPY50......................................................... 202,000 579,530 Keihin Electric Express Railway JPY50........................................ 31,480 144,016 Kikkoman Corp. JPY50......................................................... 10,000 59,016 Kinden Corp. JPY50........................................................... 16,200 205,169 The accompanying notes are an integral part of the financial statements. SAI-192 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Kinki Nippon Railway JPY50................................................... 100,370 $ 625,205 Kirin Brewery Co., Ltd. JPY50................................................ 65,000 638,408 Kissei Pharmaceutical Co., Ltd. JPY50........................................ 3,300 65,392 Kokuyo Co., Ltd. JPY50....................................................... 8,000 197,122 Komatsu Ltd. JPY50........................................................... 61,000 499,268 Komori Corp. JPY50........................................................... 5,000 105,971 Konami Co., Ltd. JPY50....................................................... 2,000 68,062 Konica Corp. JPY50........................................................... 22,000 145,567 Koyo Seiko Co., Ltd. JPY50................................................... 12,000 99,250 Kubota Corp. JPY50........................................................... 88,000 423,813 Kumagai Gumi Co., Ltd. JPY50................................................. 42,000 103,851 Kurabo Industries JPY50...................................................... 12,000 34,117 Kuraray Co., Ltd. JPY50...................................................... 21,000 193,590 Kureha Chemical Industry Co., Ltd. JPY50..................................... 12,000 47,868 Kurita Water Industries Ltd. JPY50........................................... 8,600 173,378 Kyocera Corp. JPY50.......................................................... 12,000 746,446 Kyowa Hakko Kogyo Co., Ltd. JPY50............................................ 27,000 205,635 Kyudenko Co., Ltd. JPY50..................................................... 4,000 41,354 Lion Corp. JPY50............................................................. 19,000 94,124 Maeda Road Construction Co., Ltd. JPY50...................................... 5,000 57,724 Makino Milling Machine Co., Ltd. JPY50....................................... 5,000 31,834 Makita Corp. JPY50........................................................... 10,000 139,571 Marubeni Corp. JPY50......................................................... 93,000 399,018 Maruha Corp. JPY50........................................................... 13,000 37,296 Marui Co., Ltd. JPY50........................................................ 23,000 414,147 Matsushita Electric Industrial Co., Ltd. JPY50............................... 131,000 2,133,109 Meiji Milk Products JPY50.................................................... 18,000 91,497 Meiji Seika Kaisha Ltd. JPY50................................................ 24,000 124,270 Minebea Co. Ltd JPY50........................................................ 24,000 200,155 Misawa Homes Co., Ltd. JPY50................................................. 6,000 41,871 Mitsubishi Corp. JPY50....................................................... 97,000 1,002,843 Mitsubishi Electric Corp. JPY50.............................................. 132,000 784,699 Mitsubishi Estate Co., Ltd. JPY50............................................ 81,000 830,447 Mitsubishi Gas & Chemical Co., Inc. JPY50.................................... 31,000 111,372 Mitsubishi Heavy Industries Ltd. JPY50....................................... 210,000 1,664,513 Mitsubishi Kasei Corp. JPY50................................................. 135,000 436,159 Mitsubishi Material Corp. JPY50.............................................. 70,000 282,244 Mitsubishi Oil Co., Ltd. JPY50............................................... 28,000 167,175 Mitsubishi Paper Mills Ltd. JPY50............................................ 16,000 62,445 Mitsubishi Rayon Co., Ltd. JPY50............................................. 39,000 144,146 Mitsubishi Trust & Banking Corp. JPY50....................................... 81,000 1,081,675 Mitsubishi Warehouse & Transportation Co., Ltd. JPY50........................ 10,000 129,232 Mitsui & Co., Ltd. JPY50..................................................... 97,000 785,560 Mitsui Engineering & Shipbuilding Co., Ltd. JPY50............................ 52,000 105,729 Mitsui Fudosan Co., Ltd. JPY50............................................... 50,000 499,698 Mitsui Marine & Fire Insurance Co., Ltd. JPY50............................... 45,000 241,535 Mitsui Mining & Smelting Co., Ltd. JPY50..................................... 31,000 105,497 Mitsui OSK Lines Ltd. JPY50.................................................. 68,000 162,281 Mitsui Soko Co. JPY50........................................................ 7,000 45,654 Mitsui Toatsu Chemicals Inc. JPY50........................................... 49,000 149,022 The accompanying notes are an integral part of the financial statements. SAI-193 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Mitsui Trust & Banking Co., Ltd. JPY50....................................... 74,000 $ 576,979 Mitsukoshi Ltd. JPY50........................................................ 30,000 212,458 Mori Seiki Co., Ltd. JPY50................................................... 5,000 68,924 Murata Manufacturing Co., Ltd. JPY50......................................... 15,000 497,545 Nagase & Co., Ltd. JPY50..................................................... 9,000 74,515 Nagoya Railroad Co., Ltd. JPY50.............................................. 50,000 191,695 Namco JPY50.................................................................. 3,000 91,755 Nankai Electric Railway JPY50................................................ 30,750 165,579 NEC Corp. JPY50.............................................................. 96,000 1,157,922 New Oji Paper Co., Ltd. JPY50................................................ 65,166 411,533 NGK Insulators Ltd. JPY50.................................................... 21,000 199,018 NGK Spark Plug Co., Ltd. JPY50............................................... 14,000 153,183 Nichido Fire & Marine Insurance Co., Ltd. JPY50.............................. 28,100 159,783 Nichii Co. Ltd. JPY50........................................................ 18,000 260,532 Nichirei Corp. JPY50......................................................... 16,000 77,608 Nihon Cement Co., Ltd. JPY50................................................. 21,000 106,927 Niigata Engineering Co., Ltd. JPY50.......................................... 15,000 41,871 Nikon Corp. JPY50............................................................ 23,000 285,345 Nippon Beet Sugar Manufacturing Co. JPY50.................................... 8,000 29,637 Nippon Comsys Corp. JPY50.................................................... 7,000 79,607 Nippon Express Co. Ltd. JPY50................................................ 67,000 458,327 Nippon Fire & Marine Insurance Co., Ltd. JPY50............................... 36,000 162,833 Nippon Light Metal Co. JPY50................................................. 33,000 135,332 Nippon Meat Packers JPY50.................................................... 14,000 180,925 Nippon Oil Co., Ltd. JPY50................................................... 76,000 389,593 Nippon Paper Industries JPY50................................................ 59,000 274,490 Nippon Sharyo Ltd. JPY50..................................................... 7,000 50,056 Nippon Sheet Glass Co., Ltd. JPY50........................................... 27,000 95,606 Nippon Shinpan Co., Ltd. JPY50............................................... 19,000 106,401 Nippon Shokubai Co., Ltd. JPY50.............................................. 10,000 74,093 Nippon Steel Corp. JPY50..................................................... 423,000 1,246,369 Nippon Suisan Kaisha Ltd. JPY50.............................................. 16,000 56,518 Nippon Yusen KK JPY50........................................................ 72,000 325,045 Nippondenso Co., Ltd. JPY50.................................................. 54,000 1,298,010 Nishimatsu Construction Co., Ltd. JPY50...................................... 17,000 147,928 Nissan Motor Co., Ltd. JPY50................................................. 154,000 891,600 Nisshinbo Industries Inc. JPY50.............................................. 15,000 116,568 Nissin Food Products JPY50................................................... 8,000 170,242 Nitto Denko Corp. JPY50...................................................... 9,000 131,817 NKK Corp. JPY50.............................................................. 219,000 492,453 NOF Corp. JPY50.............................................................. 10,000 43,250 Nomura Securities Co., Ltd. JPY50............................................ 122,000 1,828,896 Noritake Co., Ltd. JPY50..................................................... 10,000 83,226 NSK Ltd. JPY50............................................................... 35,000 211,683 NTN Toyo Bearing Co., Ltd. JPY50............................................. 29,000 157,405 Obayashi Corp. JPY50......................................................... 46,000 309,916 Odakyu Electric Railway JPY50................................................ 45,080 269,929 Okamoto Industries Inc. JPY50................................................ 7,000 33,109 Okuma Corp. JPY50............................................................ 8,000 63,686 Okumura Corp. JPY50.......................................................... 15,000 90,980 The accompanying notes are an integral part of the financial statements. SAI-194 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Olympus Optical Co., Ltd. JPY50.............................................. 16,000 $ 151,633 Omron Corp. JPY50............................................................ 16,000 300,508 Onoda Cement Co., Ltd. JPY50................................................. 36,000 152,908 Onward Kashiyama Co., Ltd. JPY50............................................. 11,000 154,476 Orient Corp. JPY50........................................................... 21,000 112,716 Orix Corp. JPY50............................................................. 4,000 166,107 Osaka Gas Co., Ltd. JPY50.................................................... 157,000 428,784 Oyo Corp. JPY50.............................................................. 2,000 86,672 Penta Ocean Construction Co., Ltd. JPY50..................................... 22,000 97,803 Pioneer Electronic Corp. JPY50............................................... 11,000 209,443 QP Corp. JPY50............................................................... 8,000 64,789 Renown Inc. JPY50............................................................ 12,000 31,946 Rohm Co. JPY50............................................................... 7,000 458,344 Sakura Bank Ltd. JPY50....................................................... 213,000 1,519,462 Sanden Corp. JPY50........................................................... 7,000 55,966 Sankyo Aluminium Industries Co., Ltd. JPY50.................................. 16,000 62,859 Sankyo Co., Ltd. JPY50....................................................... 28,000 791,247 Sanrio Co., Ltd. JPY50....................................................... 3,000 24,166 Sanwa Shutter Corp. JPY50.................................................... 15,000 111,786 Sanyo Electric Co., Ltd. JPY50............................................... 120,000 496,252 Sapporo Breweries JPY50...................................................... 21,000 173,688 Sato Kogyo JPY50............................................................. 12,000 41,768 Secom Co., Ltd. JPY50........................................................ 7,000 422,762 Sega Enterprises Ltd. JPY50.................................................. 6,300 211,683 Seino Transportation JPY50................................................... 9,000 99,250 Seiyu Ltd. JPY50............................................................. 14,000 137,503 Sekisui Chemical Co., Ltd. JPY50............................................. 34,000 342,724 Sekisui House Ltd. JPY50..................................................... 44,000 447,316 Sharp Corp. JPY50............................................................ 70,000 995,089 Shimachu JPY50............................................................... 3,000 76,764 Shimano Inc. JPY50........................................................... 9,000 152,753 Shimizu Corp. JPY50.......................................................... 49,000 365,168 Shin-Etsu Chemical Co., Ltd. JPY50........................................... 20,800 378,117 Shionogi & Co., Ltd. JPY50................................................... 22,000 156,750 Shiseido Co., Ltd. JPY50..................................................... 25,000 288,619 Shizuoka Bank Ltd. JPY50..................................................... 50,000 529,853 Showa Denko KK JPY50......................................................... 65,000 148,962 Skylark Co., Ltd. JPY50...................................................... 6,000 91,497 SMC Corp. JPY50.............................................................. 4,000 268,459 Snow Brand Milk Products Co., Ltd. JPY50..................................... 20,000 112,863 Sony Corp. JPY50............................................................. 23,300 1,523,624 Sumitomo Bank Ltd. JPY50..................................................... 195,000 2,805,635 Sumitomo Cement Co., Ltd. JPY50.............................................. 28,000 92,393 Sumitomo Chemical Co., Ltd. JPY50............................................ 101,000 399,406 Sumitomo Corp. JPY50......................................................... 65,000 511,286 Sumitomo Electric Industries JPY50........................................... 43,000 600,155 Sumitomo Forestry Co., Ltd. JPY50............................................ 11,000 133,626 Sumitomo Heavy Industries Ltd. JPY50......................................... 37,000 112,208 Sumitomo Marine & Fire Insurance Co., Ltd. JPY50............................. 42,000 260,532 Sumitomo Metal Industries JPY50.............................................. 193,000 473,895 The accompanying notes are an integral part of the financial statements. SAI-195 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Sumitomo Metal Mining Co. JPY50.............................................. 35,000 $ 235,504 Taisei Corp. JPY50........................................................... 63,000 325,666 Taisho Pharmaceutical Co., Ltd. JPY50........................................ 21,000 493,926 Taiyo Yuden Co. Ltd JPY50.................................................... 7,000 97,700 Takara Shuzo Co., Ltd. JPY50................................................. 11,000 77,238 Takara Standard JPY50........................................................ 9,000 74,826 Takashimaya Co. JPY50........................................................ 19,000 227,535 Takeda Chemical Industries Ltd. JPY50........................................ 54,000 1,130,525 Takuma Co., Ltd JPY50........................................................ 4,000 43,767 Teijin Ltd. JPY50............................................................ 60,000 261,566 Teikoku Oil Co., Ltd. JPY50.................................................. 15,000 81,287 Toa Corp. JPY50.............................................................. 12,000 62,652 Tobu Railway Co., Ltd. JPY50................................................. 53,000 258,904 Toei JPY50................................................................... 9,000 57,844 Toho Co. JPY500.............................................................. 1,100 159,214 Tohoku Electric Power Co., Inc. JPY500....................................... 30,900 612,303 Tokai Bank Ltd. JPY50........................................................ 125,000 1,303,093 Tokio Marine & Fire Insurance Co., Ltd. JPY50................................ 96,000 901,525 Tokyo Broadcasting System Inc. JPY50......................................... 11,000 167,744 Tokyo Dome Corp. JPY50....................................................... 10,000 174,033 Tokyo Electric Power Co., Inc. JPY500........................................ 84,100 1,840,389 Tokyo Electron Ltd. JPY50.................................................... 9,000 275,265 Tokyo Gas Co., Ltd. JPY50.................................................... 175,000 473,421 Tokyo Steel Manufacturing JPY50.............................................. 9,700 137,891 Tokyo Style JPY50............................................................ 6,000 83,743 Tokyo Tatemono Co. Ltd JPY50................................................. 14,000 62,721 Tokyotokeiba JPY20........................................................... 18,000 58,155 Tokyu Corp. JPY50............................................................ 68,000 385,492 Toppan Printing Co. Ltd JPY50................................................ 43,000 537,176 Toray Industries Inc. JPY50.................................................. 87,000 535,927 Tosoh Corp. JPY50............................................................ 37,000 126,553 Tostem Corp. JPY50........................................................... 14,000 385,974 Toto Ltd. JPY50.............................................................. 21,000 238,821 Toyo Engineering Corp. JPY50................................................. 8,000 35,703 Toyo Exterior Co. JPY50...................................................... 3,000 44,456 Toyo Seikan Kaisha Ltd. JPY50................................................ 12,000 288,447 Toyobo Co., Ltd. JPY50....................................................... 43,000 128,922 Toyoda Auto Loom Works Ltd. JPY50............................................ 17,000 317,825 Toyota Motor Corp. JPY50..................................................... 235,000 6,742,052 Trans Cosmos Inc. JPY50...................................................... 1,000 31,533 Tsubakimoto Machinery + Engineering JPY50.................................... 12,000 64,099 UBE Industries Ltd. JPY50.................................................... 51,000 144,120 Uni-Charm JPY50.............................................................. 4,000 97,872 Uniden Corp. JPY50........................................................... 2,000 26,363 Unitika Ltd. JPY50........................................................... 30,000 64,616 UNY Co., Ltd. JPY50.......................................................... 12,000 219,178 Wacoal Corp. JPY50........................................................... 10,000 110,278 Yamaguchi Bank Ltd. JPY50.................................................... 12,000 175,756 Yamaha Corp. JPY50........................................................... 12,000 203,670 Yamaichi Securities Co. JPY50................................................ 75,000 332,773 The accompanying notes are an integral part of the financial statements. SAI-196 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Yamanouchi Pharmaceutical Co., Ltd. JPY50.................................... 20,000 $ 410,097 Yamato Transport Co., Ltd. JPY50............................................. 23,000 237,788 Yamazaki Baking Co. Ltd JPY50................................................ 14,000 223,141 Yasuda Trust & Banking Co., Ltd. JPY50....................................... 69,000 291,884 Yokogawa Electric Corp. JPY50................................................ 16,000 137,848 ------------- 115,771,036 ------------- MALAYSIA 2.6% Aluminium Co. of Malaysia Bhd MYR1........................................... 6,300 9,380 Amalgamated Steel Mills Bhd Ord MYR0.50...................................... 86,800 64,615 AMMB Holdings Bhd MYR1....................................................... 29,400 246,795 Antah Holdings Bhd Ord MYR0.50............................................... 17,220 23,592 Aokam Perdana Bhd MYR1....................................................... 14,000 16,575 Berjaya Group Bhd MYR1....................................................... 60,650 51,632 Berjaya Leisure Bhd MYR1..................................................... 31,900 48,251 Commerce Asset Holdings Bhd MYR1............................................. 21,700 163,255 DCB Holdings Bhd MYR1........................................................ 56,700 194,201 Edaran Otomobil Nasional Bhd MYR1............................................ 17,100 170,966 Ekran Bhd MYR1............................................................... 20,200 84,783 Golden Hope Plantations Bhd MYR1............................................. 69,200 117,822 Golden Plus Holdings Bhd MYR1................................................ 8,300 15,446 Guinness Anchor Bhd MYR0.50.................................................. 20,700 50,818 Highlands & Lowlands Bhd Ord MYR0.50......................................... 42,300 70,681 Hong Leong Industries Bhd MYR0.50............................................ 14,880 50,670 Hong Leong Properties Bhd Ord MYR0.50........................................ 48,500 64,142 Hume Industries Bhd MYR1..................................................... 17,500 110,176 Idris Hydraulic (Malaysia) Bhd MYR0.50....................................... 37,200 42,864 IGB Corp. Bhd MYR0.50........................................................ 33,000 36,718 Industrials Oxygen Inc. Bhd MYR0.50.......................................... 61,400 94,331 Jaya Tiasa Holdings MYR1..................................................... 18,000 95,506 Johan Holdings Bhd MYR0.50................................................... 21,700 18,474 Kedah Cement Holdings Bhd MYR1............................................... 28,600 56,622 Kelanamas Industries Bhd MYR1................................................ 6,800 12,709 Kemayan Corp. Bhd MYR0.50.................................................... 22,500 30,647 Kian Joo Can Factory Bhd MYR0.50............................................. 8,300 46,011 Kuala Lumpur Kepong Bhd Ord MYR1............................................. 51,500 130,509 Land & General Bhd MYR1...................................................... 34,900 83,605 Landmarks Bhd MYR1........................................................... 28,900 38,449 Leader Universal Holdings Bhd MYR1........................................... 30,000 62,958 Magnum Corp. Bhd MYR0.50..................................................... 111,700 216,721 Malayan Banking Bhd MYR1..................................................... 84,900 941,279 Malayan Cement Bhd MYR0.50................................................... 20,700 47,539 Malayan United Industries Bhd MYR1........................................... 87,800 65,359 Malayawata Steel Bhd MYR1.................................................... 7,300 13,759 Malaysia Mining Corp. Bhd MYR1............................................... 57,800 66,829 Malaysian Airline System Bhd Ord MYR1........................................ 53,500 138,755 Malaysian International Shipping Corp. Bhd MYR1 Alien Market................. 76,833 228,172 Malaysian Mosaics Bhd MYR1................................................... 18,600 23,862 Malaysian Oxygen Bhd MYR0.50................................................. 9,800 50,445 Malaysian Pacific Industries Bhd MYR0.50..................................... 14,966 58,074 Malaysian Resources Corp. Bhd MYR1........................................... 37,300 146,955 The accompanying notes are an integral part of the financial statements. SAI-197 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- MBF Capital Bhd MYR1......................................................... 54,000 $ 87,666 Metroplex Bhd MYR0.50........................................................ 57,600 70,703 Mulpha International Bhd MYR0.50............................................. 53,000 45,959 Multi Purpose Holdings MYR1.................................................. 51,700 100,309 Mycom Bhd MYR1............................................................... 23,666 29,987 Nestle Malaysia Bhd MYR1..................................................... 16,500 132,627 New Straits Times Press Bhd MYR1............................................. 13,400 77,466 Oriental Holdings Bhd MYR1................................................... 14,420 98,208 Palmco Holdings Bhd MYR1..................................................... 8,400 9,579 Pan-Malaysia Cement Works Bhd MYR0.50........................................ 51,400 51,899 Perlis Plantations Bhd MYR1.................................................. 25,000 77,707 Perusahaan Otomobil Nasional Bhd MYR1........................................ 40,300 255,316 Petaling Garden Bhd MYR0.50.................................................. 13,400 17,509 Pilecon Engineering Bhd MYR0.50.............................................. 11,500 14,025 Promet Bhd MYR1.............................................................. 36,200 31,391 Public Bank Bhd MYR0.50 Alien Market......................................... 82,866 175,543 Rashid Hussain Bhd MYR1...................................................... 24,600 162,669 Resorts World Bhd MYR0.50.................................................... 81,800 372,481 RJ Reynolds Bhd MYR1......................................................... 17,600 47,737 Rothmans of Pall Mall Bhd MYR0.50............................................ 21,200 222,451 Selangor Properties Bhd MYR1................................................. 23,800 26,104 Shell Refining Co. MYR1...................................................... 21,200 62,118 Sime Darby Bhd MYR0.50....................................................... 173,700 684,346 Sungei Way Holdings Rights .................................................. 2,400 2,423 Sungei Way Holdings Bhd MYR1................................................. 24,000 71,273 Ta Enterprise Bhd MYR1....................................................... 44,000 58,190 Tan Chong Motor Holdings Bhd MYR0.50......................................... 46,500 78,804 Tech Resources Industries Bhd MYR1........................................... 60,200 118,708 Telekom Malaysia Bhd MYR1.................................................... 148,900 1,326,569 Tenaga Nasional Bhd MYR1..................................................... 225,900 1,082,316 Time Engineering Bhd MYR1.................................................... 35,000 64,858 UMW Holdings Bhd MYR1........................................................ 19,300 90,176 United Engineers (Malaysia) Ltd. MYR0.50..................................... 57,000 514,591 YTL Corp., Bhd Ord MYR0.50................................................... 44,800 241,251 ------------- 10,803,911 ------------- NETHERLANDS 4.7% ABN Amro Holdings NV NLG5.................................................... 24,234 1,574,692 Akzo Nobel NV NLG20.......................................................... 5,191 708,218 Elsevier NV NLG0.10.......................................................... 48,503 818,758 Getronics NV NLG 0.25........................................................ 5,956 161,485 Heineken NV NLG25............................................................ 3,664 647,735 Hollandsche Beton Groep NV Ord NLG20......................................... 209 43,243 IHC Caland NV NLG2........................................................... 1,675 95,573 ING Groep NV Cva NLG1........................................................ 57,364 2,062,690 KLM Royal Dutch Airlines NLG20............................................... 6,300 177,003 Kon Hoogovens NV Cva NLG20................................................... 2,250 93,652 Kon Pvc Nederlanden NLG10.................................................... 34,152 1,301,085 Koninklijke Ahold NV NLG1.25................................................. 12,175 760,146 Koninklijke KNP Bt NV NLG2.50................................................ 7,085 154,413 The accompanying notes are an integral part of the financial statements. SAI-198 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Koninklijke Pakhoed NV Cva NLG5.............................................. 1,879 $ 58,658 Nedlloyd Groep NV NLG10...................................................... 1,572 43,076 Oce van der Grinten NV NLG4.................................................. 1,319 143,048 Philips Electronics NV NLG10................................................. 25,030 1,012,892 Royal Dutch Petroleum Co. NLG5 Br............................................ 39,144 6,854,386 Stad Rotterdam Cva NLG2.50................................................... 2,004 79,127 Stork NV NLG10............................................................... 1,896 66,751 Unilever NV Cva NLG4......................................................... 11,686 2,064,540 Wolters Kluwer NV Cva NLG1................................................... 4,951 656,870 ------------- 19,578,041 ------------- NEW ZEALAND 0.4% Brierley Investment Ltd. NZD0.50............................................. 188,740 174,710 Carter Holt Harvey Ltd. NZD0.50.............................................. 122,137 277,035 Ceramco Corp., Ltd. Ord NZD0.50.............................................. 1,900 1,812 Fisher & Paykel Industries NZD0.50........................................... 6,865 26,922 Fletcher Challenge Forestry Ltd. NZD......................................... 56,678 94,917 Fletcher Challenge Ltd. Paper Shares NZD0.40................................. 52,200 107,336 Fletcher Challenge Ltd. Energy Shs NZD0.40................................... 26,050 75,470 Fletcher Challenge Ltd. Building Shares NZD0.40.............................. 26,050 80,072 Lion Nathan Ltd. NZD0.25..................................................... 38,700 92,703 Telecom Corp. of New Zealand NZD1............................................ 133,360 680,370 ------------- 1,611,347 ------------- NORWAY 0.6% Aker AS NOK20 B.............................................................. 600 12,121 Aker AS NOK20 Series A....................................................... 3,300 73,386 Bergesen DY A/S NOK2.50 A.................................................... 3,700 90,394 Bergesen DY A/S NOK2.50 B (Non Vtg).......................................... 1,600 38,087 Christiania Bank NOK7........................................................ 43,300 136,978 Dyno Industrier A/S NOK20.................................................... 1,800 45,667 Elkem AS NOK20 A............................................................. 3,400 56,175 Hafslund ASA NOK1 Ser A...................................................... 6,147 45,245 Hafslund ASA NOK1 Ser B...................................................... 4,467 30,571 Helikopter Service A/S NOK11.50.............................................. 1,400 18,198 Kvaerner AS NOK12.50 B....................................................... 700 30,366 Kvaerner AS NOK12.50......................................................... 2,400 116,704 Leif Hoegh & Co., A/S NOK2................................................... 2,100 44,398 Norsk Hydro AS NOK20......................................................... 17,666 954,485 Norske Skogsindustrier AS NOK20 A............................................ 2,200 73,386 Norske Skogsindustrier AS NOK20 B............................................ 400 12,184 Nycomed NOK4 Ser A........................................................... 4,247 64,849 Nycomed NOK4 Ser B........................................................... 2,867 44,001 Orkla A/S NOK25 B............................................................ 800 50,741 Orkla AS NOK25 A............................................................. 3,100 216,040 Petroleum Geo Services A/S NOK5.............................................. 2,300 89,689 Storebrand ASA A NOK20....................................................... 22,200 128,637 Unitor Ships Service NOK12.50................................................ 1,300 16,694 Vard A/S NOK2 A.............................................................. 13,285 22,262 ------------- 2,411,258 ------------- The accompanying notes are an integral part of the financial statements. SAI-199 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- SINGAPORE 1.3% Amcol Holdings (a) SGD0.25................................................... 17,667 $ 0 Chuan Hup Holdings SGD1...................................................... 16,000 10,695 City Developments Ltd. SGD0.50............................................... 54,680 492,542 Comfort Group SGD0.25........................................................ 37,000 32,800 Creative Technology Ord SGD0.25.............................................. 6,000 62,625 Cycle & Carriage Ltd. SGD1................................................... 16,000 195,596 DBS Land Ltd. SGD1........................................................... 64,000 235,630 Development Bank of Singapore Ltd. SGD1 (Alien Market)....................... 24,250 327,656 First Capital Corp. SGD1..................................................... 17,000 51,287 Fraser & Neave Ltd. SGD1..................................................... 20,800 214,126 Goldtron Ltd. SGD0.20........................................................ 23,000 13,401 Hai Sun Hup Group Ltd. SGD0.20............................................... 30,000 22,090 Haw Par Brothers International Ltd. SGD1..................................... 13,200 30,009 Hotel Properties SGD1........................................................ 28,000 45,239 Inchcape Bhd SGD0.50......................................................... 11,000 38,218 IPC Corp. SGD0.05............................................................ 70,000 24,521 Jurong Shipyard Ltd. SGD0.50................................................. 8,000 40,320 Keppel Corp., Ltd. SGD1...................................................... 36,000 280,526 Lum Chang Holdings Ltd. SGD0.50.............................................. 19,600 17,235 Metro Holdings SGD1.......................................................... 6,600 23,309 Natsteel Ltd. SGD0.50........................................................ 23,000 52,288 Neptune Orient Lines Ltd. SGD1............................................... 50,000 43,251 Overseas Chinese Banking Corp. SGD1 Alien Market............................. 37,400 465,227 Overseas Union Enterprise Ltd. SGD1.......................................... 9,000 45,039 Parkway Holdings Ltd. SGD0.50................................................ 21,000 82,571 Prima Ltd. SGD1.............................................................. 2,000 7,363 Robinson & Co., Ltd. SGD1.................................................... 4,000 16,300 Sembawang Maritime Ltd. SGD1................................................. 6,000 17,158 Shangri La Hotel Ltd. SGD1................................................... 11,000 37,589 Singapore Airlines Ltd. SGD1 (Alien Market).................................. 48,000 435,802 Singapore Press Holdings Ltd. SGD1 (Alien Market)............................ 12,800 252,559 Singapore Technical Industries SGD1.25....................................... 48,000 120,103 Singapore Telecommunications SGD0.15......................................... 425,000 1,002,645 Straits Trading Co., Ltd. SGD1............................................... 21,000 51,044 United Industrial Corp., Ltd. SGD1........................................... 94,000 79,297 United Overseas Bank Ltd. SGD1 (Alien Market)................................ 38,634 430,862 United Overseas Land Ltd. SGD1............................................... 35,000 53,296 Van Der Horst Ltd. SGD1...................................................... 8,000 33,457 ------------- 5,383,676 ------------- SPAIN 2.2% Acerinox SA ESP1000 Regd..................................................... 834 120,283 Aguila SA ESP500............................................................. 1,507 7,218 Argentaria Corp Bancaria De Espana ESP500.................................... 9,150 408,699 Autopistas Concesionaria Espanola SA ESP500.................................. 16,685 229,607 Banco Bilbao Vizcaya ESP600 Regd............................................. 16,364 881,888 Banco Central Hispanoamericano SA ESP500 Regd................................ 11,928 305,823 Banco de Santander SA ESP750 Regd............................................ 11,654 744,530 Corporacion Financiera Alba SA ESP1000....................................... 1,100 110,951 The accompanying notes are an integral part of the financial statements. SAI-200 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Corporacion Mapfre Compania Internacional de Reaseguros SA ESP500 Regd ...... 2,173 $ 132,143 Dragados Y Construciones SA ESP500........................................... 3,968 61,011 Ebro Agricolas ESP100........................................................ 3,350 58,849 Empresa Nacional de Celulosas ESP1000........................................ 1,200 14,346 Empresa Nacional de Electricidad ESP800...................................... 18,912 1,343,432 Ercros SA ESP500............................................................. 10,400 6,396 Fomento de Construcciones y Contratas SA ESP500.............................. 1,050 97,674 Gas Natural Sdg SA ESP600.................................................... 2,735 634,995 General de Aguas d' Barcelona ESP500......................................... 3,178 131,933 General de Aguas d' Barcelona New Esp500 Rfd 1/1/97.......................... 43 1,785 Iberdrola SA ESP500.......................................................... 66,954 947,110 INM Metrovacesa ESP500....................................................... 1,539 56,496 Inmobiliaria Urbis SA ESP500................................................. 2,300 9,195 Portland Valderrivas ESP500.................................................. 450 30,236 Prosegur Seguridad ESP100 Regd............................................... 4,250 39,208 Repsol SA ESP500............................................................. 21,826 835,622 Sarrio SA ESP500............................................................. 3,750 12,339 Tabacalera SA ESP500 Regd.................................................... 2,553 109,716 Telefonica de Espana SA ESP500............................................... 68,428 1,586,088 Union Electrica Fenosa SA ESP500............................................. 22,186 237,936 Uralita SA ESP500............................................................ 3,362 26,234 Vallehermoso SA ESP500....................................................... 3,010 65,141 Viscofan Envolturas Celulosi ESP100.......................................... 1,500 21,910 Zardoya Otis SA ESP1000...................................................... 695 80,680 ------------- 9,349,474 ------------- SWEDEN 2.2% AB Electrolux B SEK25........................................................ 4,700 272,584 AGA AB A SEK5................................................................ 7,600 114,646 AGA AB B SEK5................................................................ 6,300 94,112 ASEA AB A SEK50.............................................................. 4,300 484,915 ASEA AB B SEK50.............................................................. 1,700 192,209 Astra AB A SEK2.50........................................................... 31,965 1,577,651 Astra AB B SEK2.50........................................................... 7,300 351,743 Atlas Copco AB A SEK5........................................................ 7,800 188,488 Atlas Copco AB B SEK5........................................................ 3,400 82,660 Autoliv AB SEK10............................................................. 3,200 140,129 Diligentia SEK10............................................................. 3,360 52,900 Ericsson LM Telephone B SEK2.50.............................................. 60,960 1,883,796 Esselte AB A SEK12.50........................................................ 1,100 24,971 Esselte AB B SEK12.50........................................................ 800 17,692 Euroc AB A SEK25............................................................. 3,400 124,487 H&M AB B SEK5................................................................ 2,600 359,461 Securitas AB Ser B SEK2...................................................... 4,200 122,100 Skandia Foersaekrings AB SEK5................................................ 6,500 183,729 Skandinaviska Enskilda Banken A SEK10........................................ 33,600 344,464 Skanska AB B SEK10........................................................... 8,000 353,251 SKF International AB B SEK12.50.............................................. 3,700 87,515 SKF International AB A SEK12.50.............................................. 3,000 68,761 Stadshypotek AB A SEK25...................................................... 7,700 210,882 Stora Kopparbergs B SEK5..................................................... 3,600 49,034 The accompanying notes are an integral part of the financial statements. SAI-201 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Stora Kopparbergs Series A SEK5.............................................. 16,700 $ 229,906 Svenska Cellulosa B SEK10.................................................... 12,570 254,971 Svenska Handelsbanken B SEK10................................................ 1,100 30,287 Svenska Handelsbanken A SEK10................................................ 13,200 378,910 Swedish Match Co. SEK2....................................................... 27,800 97,715 Trelleborg AB B SEK25........................................................ 7,100 94,105 Volvo AB A SEK5.............................................................. 9,100 198,579 Volvo AB B SEK5.............................................................. 20,500 451,853 ------------- 9,118,506 ------------- SWITZERLAND 5.6% Adia SA CHF10................................................................ 1,185 296,515 Alusuisse Lonza Holdings AG CHF125 Br........................................ 145 113,058 Alusuisse Lonza Holdings AG CHF125 Regd...................................... 297 235,999 BBC Brown Boveri Ltd. CHF100................................................. 580 719,169 BBC Brown Boveri Ltd. CHF20 Regd............................................. 375 90,483 CS Holding AG CHF20 Regd..................................................... 13,650 1,397,732 Danzas Holding AG Ptg Certs CHF20............................................ 175 35,905 Forbo Holding CHF50 Regd..................................................... 105 42,225 Georg Fischer AG CHF100 Regd................................................. 30 6,144 Georg Fischer AG CHF500 Br................................................... 35 36,230 Grands Magasins Jelmoli CHF50 Br............................................. 25 13,777 Grands Magasins Jelmoli CHF10 Regd........................................... 95 10,046 Holderbank Financiere Glaris Ltd. CHF50 Br................................... 515 366,652 Kuoni Reisen Holding CHF50 Regd Series B..................................... 20 48,406 Merkur Holding AG CHF25 Regd................................................. 295 56,241 Moevenpick Holdings CHF50 Br................................................. 45 12,868 Moevenpick Holdings Ptg Certs CHF50.......................................... 15 3,709 Nestle SA CHF10 Regd......................................................... 2,854 3,054,214 Novartis AG CHF20 Regd....................................................... 4,396 5,018,668 Novartis AG CHF20 Br......................................................... 562 641,186 Roche Holding Ltd. CHF100 Br................................................. 116 1,304,439 Roche Holding Ltd. NPV....................................................... 510 3,955,652 Schindler Holding AG Ptg Certs CHF100........................................ 95 102,938 Schweize Bankgesellschaft CHF100 Br.......................................... 1,858 1,623,052 Schweize Bankverein CHF50 Regd............................................... 5,498 1,042,032 SGS Holding CHF100 Br........................................................ 122 298,913 Sika Finanz AG CHF60 Br...................................................... 170 40,512 SMH Swiss Corp. for Microelectronics & Watchmaking Industries Ltd. CHF10 Regd........................................................................ 1,045 148,641 SMH Swiss Corp. for Microelectronics & Watchmaking Industries Ltd. CHF50 Br . 253 155,440 Sulzer AG CHF100 Regd........................................................ 160 92,106 Sulzer AG Ptg Certs CHF100................................................... 81 43,190 Swiss Reinsurance Co. CHF10 Regd............................................. 1,043 1,109,955 Swissair Transport Co., Ltd. CHF350 Regd..................................... 161 129,850 Zurich Insurance CHF10 Regd.................................................. 3,295 912,824 ------------- 23,158,771 ------------- UNITED KINGDOM 16.3% Abbey National PLC Ord GBP0.10............................................... 88,100 1,151,752 AMEC PLC Ord GBP0.50......................................................... 8,109 12,766 Amstrad PLC Ord GBP0.25...................................................... 4,580 11,540 The accompanying notes are an integral part of the financial statements. SAI-202 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Anglian Water PLC Ord GBP1................................................... 16,900 $ 170,041 Argos PLC Ord GBP0.10 5/7.................................................... 17,849 234,260 Argyll Group PLC Ord GBP0.25................................................. 67,953 468,601 Arjo Wiggins Appleton PLC Ord GBP0.25........................................ 51,467 158,082 Associated British Foods PLC Ord GBP0.05..................................... 56,400 466,140 Barclays PLC Ord GBP1........................................................ 96,000 1,643,532 Barratt Developments PLC Ord GBP0.10......................................... 11,750 50,667 Bass PLC Ord GBP0.25......................................................... 55,100 775,021 BAT Industries PLC Ord GBP0.25............................................... 193,914 1,605,995 BBA Group PLC Ord GBP0.25.................................................... 26,000 156,605 BICC PLC Ord GBP0.50......................................................... 26,241 123,482 Blue Circle Industries PLC Ord GBP0.50....................................... 46,042 281,263 BOC Group PLC Ord GBP0.25.................................................... 30,198 451,627 Boots Co., PLC GBP0.25....................................................... 56,700 584,076 Bowater PLC Ord GBP0.50...................................................... 31,250 193,575 Bowthorpe Holdings PLC Ord GBP0.10........................................... 12,138 94,088 BPB Industries PLC Ord GBP0.50............................................... 31,400 206,324 British Aerospace PLC Ord GBP0.10............................................ 26,869 587,587 British Airways PLC Ord GBP0.25.............................................. 60,300 625,803 British Gas PLC Ord GBP0.25.................................................. 275,100 1,054,456 British Land Co., PLC Ord GBP0.25............................................ 26,833 238,760 British Petroleum Co., PLC Ord GBP0.25....................................... 352,997 4,228,232 British Sky Broadcasting PLC Ord GBP0.50..................................... 107,600 961,109 British Steel PLC GBP0.50.................................................... 127,700 349,624 British Telecommunications PLC Ord GBP0.25................................... 394,600 2,667,129 BTR PLC Ord GBP0.25.......................................................... 250,886 1,223,520 Burmah Castrol PLC Ord GBP1.................................................. 12,670 239,351 Cable & Wireless PLC Ord GBP0.25............................................. 139,366 1,163,768 Cadbury Schweppes PLC Ord GBP0.25............................................ 61,680 520,333 Calor Group PLC Ord GBP0.50.................................................. 6,600 33,316 Caradon PLC Ord GBP0.25...................................................... 37,600 154,415 Carlton Communications PLC GBP0.05........................................... 36,310 317,868 Chubb Security PLC Ord GBP0.05............................................... 14,200 79,091 Coats Viyella PLC Ord GBP0.20................................................ 35,206 80,726 Commercial Union PLC Ord GBP0.25............................................. 42,188 494,503 Courtaulds PLC Ord GBP0.25................................................... 25,400 171,680 Courtaulds Textile PLC Ord GBP0.25........................................... 3,975 15,100 De La Rue Co., PLC Ord GBP0.25............................................... 14,098 138,712 Delta PLC Ord GBP0.25........................................................ 6,200 40,580 East Midlands Electricity PLC Ord 56 9/11P................................... 12,124 137,339 Electrocomponents PLC Ord GBP0.10............................................ 26,459 208,720 EMI PLC Ord GBP0.25.......................................................... 26,767 631,961 English China Clays PLC Ord GBP0.25.......................................... 15,469 50,293 FKI PLC GBP0.10.............................................................. 35,420 123,037 FR Group PLC Ord GBP0.25..................................................... 4,580 48,120 General Electric Co., PLC Ord GBP0.05........................................ 173,300 1,135,761 GKN PLC Ord GBP1............................................................. 21,900 375,118 Glaxo Holdings PLC Ord GBP0.25............................................... 220,000 3,576,318 Granada Group PLC Ord GBP0.25................................................ 53,215 785,841 Grand Metropolitan PLC Ord GBP0.25........................................... 131,446 1,030,155 The accompanying notes are an integral part of the financial statements. SAI-203 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Great Portland Estates PLC Ord GBP0.50....................................... 20,375 $ 73,216 Great Universal Stores PLC Ord Stock GBP0.25................................. 63,100 661,881 Guardian Royal Exchange PLC Ord GBP0.05...................................... 56,463 269,078 Guinness PLC Ord GBP0.25..................................................... 120,900 949,574 Hammerson Property & Investment Development Corp., PLC Ord GBP0.25 .......... 17,768 122,831 Hanson PLC Ord GBP0.25....................................................... 322,100 451,954 Harrison & Crosfield PLC Ord GBP0.25......................................... 35,910 81,111 Hepworth PLC Ord GBP0.25..................................................... 15,300 65,975 HSBC Holdings PLC Ord HKD10.................................................. 112,298 2,446,190 HSBC Holdings PLC Ord GBP0.75................................................ 54,114 1,208,398 Hyder PLC Ord GBP1.20........................................................ 8,783 112,117 IMI PLC Ord GBP0.25.......................................................... 21,700 138,874 Imperial Chemical Industries PLC Ord GBP1.................................... 45,500 599,114 J. Sainsbury PLC Ord GBP0.25................................................. 115,042 761,828 Johnson Matthey PLC Ord GBP1................................................. 13,513 127,638 Kerry Group PLC A Ord IEP0.10................................................ 6,100 62,106 Kingfisher PLC GBP0.25....................................................... 41,985 452,610 Ladbroke Group PLC Ord GBP0.10............................................... 73,278 290,905 Laird Group PLC Ord GBP0.25.................................................. 7,200 48,912 Land Securities PLC Ord GBP1................................................. 32,100 409,764 Lasmo PLC Ord GBP0.25........................................................ 60,557 243,513 Legal & General Group Ord 10P................................................ 78,125 497,973 Lex Service PLC Ord GBP0.25.................................................. 5,716 31,006 London Electricity PLC Ord Gbp0.58 1/3....................................... 10,900 126,924 Lonrho PLC Ord GBP0.25....................................................... 39,269 83,994 Lucas Varity Ord GBP0.25..................................................... 88,966 339,484 Marks & Spencer PLC Ord GBP0.25.............................................. 176,800 1,488,460 Marley PLC Ord GBP0.25....................................................... 13,338 28,643 MEPC PLC Ord GBP0.25......................................................... 26,300 195,315 Mercury Assets Management Group PLC Ord GBP0.05.............................. 11,481 243,608 Meyer International PLC Ord GBP0.25.......................................... 6,412 39,718 National Grid Group Ord GBP0.10.............................................. 106,934 356,813 National Power PLC Ord GBP0.50............................................... 71,300 595,387 Next PLC Ord GBP0.10......................................................... 23,500 228,807 North West Water PLC Ord GBP1................................................ 32,574 345,026 Northern Electric Ord 56 12/23P.............................................. 5,419 59,995 Ocean Group PLC Ord GBP0.25.................................................. 9,800 81,164 P & O Holdings PLC Ord GBP1.................................................. 37,990 384,190 Pearson PLC Ord GBP0.25...................................................... 35,600 453,833 Pilkington PLC Ord GBP0.50................................................... 62,994 170,312 Provident Financial PLC Ord GBP0.10.......................................... 16,800 144,025 Prudential Corp., PLC Ord GBP0.05............................................ 120,115 1,011,235 Racal Electronics PLC Ord GBP0.25............................................ 14,200 62,204 Railtrack Group Ord 25P Regd Int Certs 200P.................................. 31,400 207,399 Rank Group Ord GBP0.10....................................................... 52,182 391,097 Redland PLC Ord GBP0.25...................................................... 32,615 205,937 Reed International PLC Ord GBP0.25........................................... 35,100 659,476 Reuters Holdings PLC Ord GBP0.025............................................ 105,200 1,351,003 RMC Group PLC Ord GBP0.25.................................................... 15,650 267,796 Rolls Royce PLC Ord GBP0.20.................................................. 90,861 399,577 The accompanying notes are an integral part of the financial statements. SAI-204 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- Royal Bank of Scotland Group PLC Ord GBP0.25................................. 50,545 $ 486,076 RTZ Corp., PLC Ord GBP0.10 Regd.............................................. 67,072 1,076,549 Rugby Group PLC Ord GBP0.25.................................................. 40,200 64,661 Schroders PLC Ord GBP1....................................................... 12,200 317,108 Scottish & Newcastle Breweries PLC Ord GBP0.20............................... 38,542 453,086 Scottish Power PLC Ord GBP0.50............................................... 72,417 434,948 Sears PLC Ord GBP0.25........................................................ 95,500 153,611 Sedgwick Group PLC GBP0.10................................................... 34,320 76,932 Slough Estates PLC Ord GBP0.25............................................... 24,500 116,128 Smithkline Beecham Ord GBP0.125.............................................. 172,647 2,387,043 Smiths Industries PLC Ord GBP0.25............................................ 19,000 260,746 Southern Electronics Corp. Ord 53 71/93...................................... 16,244 220,145 St James Place Capital Ord GBP0.15........................................... 8,300 13,777 Sun Alliance Group PLC Ord GBP0.25........................................... 95,324 726,674 T&N PLC Ord GBP1............................................................. 26,928 80,176 Tarmac PLC Ord GBP0.50....................................................... 46,693 78,701 Tate & Lyle PLC GBP0.25...................................................... 24,924 201,516 Taylor Woodrow PLC Ord GBP0.25............................................... 24,200 62,943 TBS Group Ord GBP0.25........................................................ 324,318 2,391,873 Tesco PLC Ord GBP0.05........................................................ 135,040 818,004 Thames Water PLC Ord GBP1.................................................... 23,200 242,560 Thorn PLC Ord GBP0.25........................................................ 27,167 117,612 TI Group PLC Ord GBP0.25..................................................... 29,523 292,502 Transport Development Group PLC Ord GBP0.25.................................. 5,800 18,857 Unigate PLC Ord GBP0.25...................................................... 14,900 106,064 Unilever PLC Ord GBP0.05..................................................... 51,100 1,237,278 United Biscuits PLC Ord GBP0.25.............................................. 33,200 119,870 Vickers PLC Ord GBP0.50...................................................... 16,700 72,584 Vodafone Group PLC Ord GBP0.05............................................... 191,700 810,231 Williams Holdings PLC Ord GBP0.25............................................ 36,384 214,170 Willis Corroon Group PLC Ord GBP0.125........................................ 17,663 42,918 Wilson Holdings PLC Ord GBP0.25.............................................. 8,600 24,502 Wimpey (George) PLC Ord GBP0.25.............................................. 18,300 39,143 Wolseley PLC GBP0.25......................................................... 35,600 280,524 Zeneca Group Ord GBP0.25..................................................... 59,400 1,672,023 ------------- 68,067,288 ------------- UNITED STATES 0.0% Millennium Chemicals Inc. Common............................................. 3,750 66,563 ------------- PREFERRED STOCK 0.4% AUSTRALIA (0.1%) News Corp. Ltd. Pfd AUD0.50.................................................. 72,287 321,531 Sydney Harbour Casino Holdings Ltd. Pfd AUD1 ................................ 34,700 53,469 ------------- 375,000 ------------- AUSTRIA 0.0% Bau Holdings AG Pfd ATS100................................................... 100 4,991 Creditanstalt-Bankverein Pfd ATS100.......................................... 1,100 50,740 Z Landerbank Bank Austria AG Pfd ATS100...................................... 400 15,499 ------------- 71,230 ------------- The accompanying notes are an integral part of the financial statements. SAI-205 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 SHARES VALUE - ---------------------------------------------------------------------------- ------------ ------------- FRANCE 0.0% Etab Eco Casino Guich Perr & Co. FRF10 Pfd................................... 704 $ 25,729 GERMANY 0.3% CKAG Colonia Konzern Non Vtg Pfd DEM5........................................ 500 34,716 Dyckerhoff AG Pfd DEM50...................................................... 70 19,304 Escada AG Pfd DEM50.......................................................... 50 8,208 Friedrich Grohe AG Pfd DEM50................................................. 150 41,367 Herlitz AG Pfd DEM50......................................................... 66 7,024 MAN AG Pfd DEM50............................................................. 200 40,036 Metro AG Non Vtg Pref DEM5................................................... 400 22,581 Rheinmetall Berlin AG Pfd DEM50.............................................. 66 8,565 RWE AG Non Vtg Pfd DEM5...................................................... 13,900 469,016 SAP AG Pfd DEM5.............................................................. 2,700 376,679 Volkswagen AG Pfd DEM50...................................................... 400 128,350 ------------- 1,155,846 ------------- ITALY 0.0% Fiat SpA Privilege ITL1000................................................... 60,850 100,250 La Rinascente SpA Privilege ITL1000.......................................... 2,100 4,765 ------------- 105,015 ------------- SINGAPORE 0.0% Goldtron Ltd. Non Red Conv Cum Pfd........................................... 4,600 2,680 ------------- PRINCIPAL AMOUNT U.S. GOVERNMENT OBLIGATIONS 1.4% United States Treasury Bills 4.845% 20-Mar-97 (b)............................ $ 5,960,000 5,897,435 ------------- UNITS STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS FOR TAX EXEMPT RETIREMENT PLANS 10.1% Short Term Investment Fund................................................... 41,989,134 41,989,134 ------------- TOTAL INVESTMENTS--100% (Cost $378,664,783)........................................................ $414,208,889 =============
The accompanying notes are an integral part of the financial statements. SAI-206 STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND DAILY EAFE FUND NON-LENDING Combined Schedule of Investments (Concluded) (showing percentage of total value of investments) December 31, 1996 - ----------------------------------------------------------------------------- The following long futures contracts were open at December 31, 1996:
FUTURES NUMBER OF NOTIONAL MATURITY UNREALIZED CONTRACT CONTRACTS VALUE DATE GAIN (LOSS) - --------------------- ----------- ----------------- -------------- ------------ All Ordinaries Index 36 A$ 2,159,100 March 1997 $ 35,748 DAX Index ............ 23 DM 6,529,700 March 1997 98,655 CAC 40 Index ......... 47 FF 21,601,200 March 1997 58,831 Hang Seng Index ...... 26 HK$ 17,433,000 January 1997 8,404 Nikkei 300 Index .... 812 yen 2,359,672,000 March 1997 (743,474) pounds sterling FTSE Index ........... 63 6,335,438 March 1997 273,733 OMX Index ............ 55 SKr 9,997,625 January 1997 50,143 MIB 30 Index ......... 16 Lr2,552,700,000 March 1997 4,700 ------------ $(213,260) ============
The outstanding forward foreign currency contracts at December 31, 1996 are as follows:
SETTLEMENT CONTRACTS IN EXCHANGE UNREALIZED DATE TO DELIVER FOR GAIN (LOSS) - ------------ ----------------- ----------------- ------------ 3/21/97 ..... A$ 1,832,000 $ 1,456,531 $ 4,076 3/21/97 ..... $ 3,145,016 A$ 3,976,000 7,065 3/21/97 ..... DM 5,948,000 $ 3,837,419 (40,061) 3/21/97 ..... $ 8,083,468 DM 12,493,000 60,951 3/21/97 ..... FF 15,675,500 $ 2,997,246 (30,286) 3/21/97 ..... $ 7,146,057 FF 37,331,000 64,297 3/21/97 ..... Lr 2,291,953,000 $ 1,492,040 (10,025) 3/21/97 ..... $ 3,125,573 Lr 4,799,473,000 19,847 3/21/97 ..... yen 2,143,100,000 $ 18,671,371 11,903 3/21/97 ..... $ 39,406,250 yen 4,413,500,000 (967,675) 3/21/97 ..... $ 1,352,747 SKr 9,221,000 946 pounds sterling 3/21/97 ..... 4,988,000 $ 8,409,019 (108,817) pounds sterling 3/21/97 ..... $ 19,094,780 11,434,000 428,531 ------------ $(559,248) ============
Currency Legend A$ Australian Dollar pounds sterling British Pound Sterling FF French Franc DM German Mark HK$ Hong Kong Dollar Lr Italian Lira yen Japanese Yen SKr Swedish Krona $ U.S. Dollar (a) Issuer filed for bankruptcy. (b) At December 31, 1996, these securities were pledged to cover margin requirements for open futures contracts. The accompanying notes are an integral part of the financial statements. SAI-207 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of the State Street Bank and Trust Company Daily 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 selected per unit data present fairly, in all material respects, the financial position of the State Street Bank and Trust Company Daily Government/Corporate Bond Fund (the "Fund") at December 31, 1996, the results of its operations for the year then ended, and the changes in its net assets and the selected per unit data for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and selected per unit data (hereafter referred to as "financial statements") are the responsibility of the Fund's 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 generally accepted auditing standards 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, 1996 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts March 10, 1997 SAI-208 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Statement of Assets and Liabilities December 31, 1996 - -----------------------------------------------------------------------------
ASSETS Investments in securities, at value (cost $3,058,109,797) ................................................ $3,080,182,066 Receivable for investments sold ....................................... 9,202,487 Interest receivable ................................................... 49,859,329 - ---------------------------------------------------------------------- --------------- Total assets ....................................................... 3,139,243,882 - ---------------------------------------------------------------------- --------------- LIABILITIES Payable for investments purchased ..................................... 79,193,403 Accrued expenses ...................................................... 48,711 - ---------------------------------------------------------------------- --------------- Total liabilities .................................................. 79,242,114 - ---------------------------------------------------------------------- --------------- NET ASSETS (equivalent to $11.85 per unit based on 258,288,303 units outstanding) ......................................................... $3,060,001,768 ====================================================================== ===============
The accompanying notes are an integral part of the financial statements. SAI-209 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Statement of Operations Year ended December 31, 1996 - -----------------------------------------------------------------------------
INVESTMENT INCOME Interest ........................................................... $170,510,337 - -------------------------------------------------------------------- --------------- EXPENSES Audit .............................................................. 18,000 Custody ............................................................ 300,645 - -------------------------------------------------------------------- --------------- Total expenses ................................................... 318,645 - -------------------------------------------------------------------- --------------- Net investment income ............................................ 170,191,692 - -------------------------------------------------------------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ............................ (7,925,396) Net change in unrealized appreciation (depreciation) on investments (65,598,636) - -------------------------------------------------------------------- --------------- Net realized and unrealized gain (loss) ............................ (73,524,032) - -------------------------------------------------------------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .... $ 96,667,660 ==================================================================== ===============
The accompanying notes are an integral part of the financial statements. SAI-210 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 1996 1995 - ----------------------------------------------------------------------------- --------------- --------------- FROM OPERATIONS Net investment income ........................................................ $ 170,191,692 $ 111,519,777 Net realized gain (loss) on investments ...................................... (7,925,396) 70,530,694 Net change in unrealized appreciation (depreciation) on investments ......... (65,598,636) 113,689,214 - ----------------------------------------------------------------------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations ........... 96,667,660 295,739,685 - ----------------------------------------------------------------------------- --------------- --------------- FROM PARTICIPANT TRANSACTIONS Net increase (decrease) in net assets resulting from participant transactions 971,941,551 155,213,160 - ----------------------------------------------------------------------------- --------------- --------------- Net increase (decrease) in net assets ........................................ 1,068,609,211 450,952,845 NET ASSETS Beginning of year ............................................................ 1,991,392,557 1,540,439,712 - ----------------------------------------------------------------------------- --------------- --------------- END OF YEAR .................................................................. $3,060,001,768 $1,991,392,557 ============================================================================= =============== ===============
The accompanying notes are an integral part of the financial statements. SAI-211 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Period)
PERIOD ENDED DECEMBER 31, ------------------------------------------------ 1996 1995 1994 1993* - -------------------------------------------------------- ------------ ------------ ------------ --------- Net investment income** ................................. $ 0.78 $ 0.70 $ 0.73 $ 0.11 Net realized and unrealized gain (loss) ................. (0.42) 1.17 (1.05) (0.17) - -------------------------------------------------------- ------------ ------------ ------------ --------- Net increase (decrease) ................................. 0.36 1.87 (0.32) (0.06) NET ASSET VALUE Beginning of period ..................................... 11.49 9.62 9.94 10.00 - -------------------------------------------------------- ------------ ------------ ------------ --------- END OF PERIOD ........................................... $ 11.85 $ 11.49 $ 9.62 $ 9.94 ======================================================== ============ ============ ============ ========= Total return (a)*** ..................................... 3.13% 19.44% (3.22)% (3.27)% - -------------------------------------------------------- ------------ ------------ ------------ --------- Ratio of expenses to average net assets (a) ............. 0.01% 0.01% 0.01% 0.02% Ratio of net investment income to average net assets (a) 6.82% 6.53% 6.81% 5.94% Portfolio turnover ...................................... 299% 611% 144% 23% Net assets, end of period (000s) ........................ $3,060,002 $1,991,393 $1,540,440 $322,680 - -------------------------------------------------------- ------------ ------------ ------------ ---------
- ------------ (a) 1993 data annualized. * Investment operations commenced on October 25, 1993. ** Net investment income has been calculated based on 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. This 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 the financial statements. SAI-212 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE The State Street Bank and Trust Company ("State Street Bank") Daily Government/Corporate Bond Fund (the "Fund") is a fixed income fund formed under a Declaration of Trust dated February 21, 1991 as amended and restated through July 19, 1991. The Fund's objective is to match or exceed the return of the Lehman Brothers Aggregate Bond Index. State Street Bank is the Fund's Trustee and custodian. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION Investments in securities listed on a national securities exchange and over-the-counter securities are valued at the last reported sale price on the valuation date, or if no sale price was reported on the valuation date, the last published sale price. Short-term investments are stated at amortized cost which approximates market. Investments in registered investment companies or other State Street Bank Investment Funds for Tax Exempt Retirement Plans are valued at net asset value per share/unit on the valuation date. Certain investments are valued at fair value 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. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are accounted for on the trade date (date the order to buy or sell is executed). The cost of securities contributed to, and proceeds related to securities delivered by, the Fund in connection with the issuance and redemption of its units of participation are based on the valuations of those securities determined as described above. The cost of securities delivered and the net gain or loss on securities sold is determined using the average cost method. Interest income, net of applicable withholding taxes, is recorded on the accrual basis. Interest income is increased by accretion of discount and reduced by amortization of premium. 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) and any other day determined by the Trustee. Issuances and redemptions of Fund units are made on such days and at such unit principal values. E. EXPENSES According to the Declaration of Trust, the Fund may pay certain expenses for services received during the year. The Trustee is paid a custody fee at the annual rate of .0125% of the Fund's net asset value. SAI-213 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 F. DISTRIBUTIONS TO PARTICIPANTS All net investment income and net realized gains are retained by the Fund. G. DELAYED DELIVERY COMMITMENTS The Fund may purchase or sell securities on a delayed delivery, when issued, or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. H. DOLLAR ROLL TRANSACTIONS The Fund may enter into dollar roll transactions. A dollar roll transaction involves a sale by the Fund of securities that it holds with an agreement by the Fund to repurchase substantially similar securities at an agreed upon price and date. During the period between the sale and repurchase, the Fund will not be entitled to accrue interest and/or receive principal payments on the securities sold. Dollar roll transactions involve the risk that the market value of the securities sold by the Fund may decline below the repurchase price of those securities. In the event the buyer of the securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of proceeds of the transaction may be restricted pending a determination by or with respect to the other party. I. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the Trustee to make estimates and assumptions 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. 3. INVESTMENT TRANSACTIONS Purchases and sales, excluding short-term investments and including in-kind contributions and redemptions, if any, during the year ended December 31, 1996 were $8,627,763,408 and $7,450,666,028, respectively, resulting in a net realized gain (loss) of ($7,925,396). SAI-214 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 4. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 1996 1995 ----------------------------- ------------------------------ UNITS AMOUNT UNITS AMOUNT -------------- -------------- -------------- --------------- Units issued...................... 114,745,253 $1,312,397,893 68,144,527 $ 728,525,510 Units redeemed.................... (29,740,964) (340,456,342) (54,935,984) (573,312,350) -------------- -------------- -------------- --------------- Net increase (decrease) in units and net assets resulting from participant transactions......... 85,004,289 $ 971,941,551 13,208,543 $ 155,213,160 ============== ============== ============== ===============
Units in excess of 10% of Fund units outstanding at December 31, 1996 held by 2 of the Fund's 27 unitholders aggregated 71% of the Fund's total units outstanding. A redemption by one or more unitholders individually holding 10% or more of Fund units may cause the remaining unitholders to bear proportionately higher operating expenses and otherwise adversely affect the Fund's future liquidity and investment operations. SAI-215 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 1996
PRINCIPAL AMOUNT VALUE - ------------- -------------------------------------------------------- ----------- --------------- NOTES & DEBENTURES 96.6% $ 9,500,000 ABN Amro Bank NV 7.55%................................... 28-Jun-06 $ 9,851,187 5,150,000 ABN Amro Bank NV 7.25%................................... 31-May-05 5,233,677 6,400,000 ABN Amro Bank NV 7.00%................................... 01-Apr-08 6,345,126 5,380,000 Aetna Services Inc. 7.63%................................ 15-Aug-26 5,442,134 2,500,000 Aetna Services Inc. 6.97%................................ 15-Aug-36 2,543,985 16,850,000 Aetna Services Inc. 6.75%................................ 15-Aug-01 16,930,324 5,000,000 Airtouch Communications Inc. 7.00%....................... 01-Oct-03 5,029,625 7,350,000 Alltel Corp. 6.75%....................................... 15-Sep-05 7,277,720 2,000,000 American General Finance Corp. 8.50%..................... 15-Aug-98 2,068,900 5,200,000 American General Finance Corp. 8.50%..................... 15-Jun-99 5,440,307 4,925,000 American General Finance Corp. 8.25%..................... 15-Jan-98 5,031,971 9,650,000 American General Finance Corp. 6.88%..................... 01-Jul-99 9,773,636 4,000,000 Anadarko Petroleum Corp. 7.25%........................... 15-Nov-96 3,838,068 11,200,000 Apache Corp. 7.63%....................................... 01-Nov-96 11,156,992 6,250,000 Applied Materials Inc. 6.70%............................. 06-Sep-05 6,101,025 2,091,727 Arkansas State Development Finance Authority 9.75% ...... 15-Nov-05 2,333,802 9,500,000 Asset Securitization Corp. 7.04%......................... 13-Nov-26 9,519,297 3,550,000 Associates Corp. 8.13%................................... 15-Jan-98 3,623,059 5,525,000 Associates Corp. 7.25%................................... 15-May-98 5,603,842 16,450,000 Associates Corp. of North America 6.38%.................. 15-Aug-98 16,526,969 3,165,000 Associates Corp. of North America 6.25%.................. 15-Mar-99 3,167,722 15,165,000 Associates Corp. of North America 9.13%.................. 01-Apr-00 16,316,782 6,295,000 Associates Corp. of North America 8.80%.................. 01-Aug-98 6,543,464 19,450,000 Associates Corp. of North America 7.30%.................. 15-Mar-98 19,714,909 3,675,000 Associates Corp. of North America 7.25%.................. 01-Sep-99 3,755,703 10,325,000 Associates Corp. of North America 6.75%.................. 15-Oct-99 10,442,602 7,550,000 Associates Corp. of North America 6.00%.................. 15-Mar-99 7,515,194 4,325,000 Australia & New Zealand Banking 6.25%.................... 01-Feb-04 4,170,169 1,650,000 Avco Financial Services Inc. 7.25%....................... 15-Jul-99 1,679,469 250,000 BankAmerica Corp. 7.20%.................................. 15-Sep-02 255,215 10,440,000 BankAmerica Corp. 6.88%.................................. 01-Jun-03 10,436,346 4,500,000 BankAmerica Corp. 6.85%.................................. 01-Mar-03 4,494,960 5,000,000 Bayerische Landesbank 6.38%.............................. 15-Oct-05 4,869,600 7,000,000 Bell Telephone Co. 9.50%................................. 15-Oct-10 8,502,459 6,500,000 Beneficial Corp. 9.13%................................... 15-Feb-98 6,716,190 1,363,000 Beneficial Corp. 9.00%................................... 17-Jul-98 1,421,950 10,300,000 Beneficial Corp. 8.31%................................... 06-Dec-99 10,822,148 6,500,000 Beneficial Corp. 8.00%................................... 01-Nov-99 6,769,334 1,940,000 Beneficial Corp. 7.99%................................... 17-Feb-00 2,023,808 2,000,000 Beneficial Corp. 7.91%................................... 15-Mar-99 2,066,660 9,100,000 Berkley (WR) Capital Trust 8.20%......................... 15-Dec-45 8,950,432 1,000,000 Berkley (WR) Corp. 9.88%................................. 15-May-08 1,191,337 3,200,000 Berkley (WR) Corp. 8.70%................................. 01-Jan-22 3,531,363 4,275,000 Boeing Co. 7.88%......................................... 15-Apr-43 4,590,880 11,000,000 Branch Banking & Trust Co. 5.70%......................... 01-Feb-01 10,674,334 5,000,000 Burlington Northern Santa Fe 7.29%....................... 01-Jun-36 5,204,040 1,000,000 Carter Holt Harvey Ltd. 8.38%............................ 15-Apr-15 1,084,037 1,635,000 Carter Holt Harvey Ltd. 7.63%............................ 15-Apr-02 1,696,329 320,911 Case Equipment Loan Trust 7.30%.......................... 15-Mar-02 324,192 The accompanying notes are an integral part of the financial statements. SAI-216 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 1996 PRINCIPAL AMOUNT VALUE - ------------- -------------------------------------------------------- ----------- --------------- $ 3,000,000 Caterpillar Financial Services 8.12%..................... 10-Mar-98 $ 3,075,630 11,350,000 Caterpillar Financial Services 6.92%..................... 15-Aug-00 11,489,185 5,965,000 Chase Manhattan Corp. 6.63%.............................. 15-Jan-98 6,005,502 5,000,000 Chase Manhattan Corp. 6.45%.............................. 29-Mar-01 4,965,950 4,500,000 Chase Manhattan Corp. 5.50%.............................. 15-Feb-01 4,325,688 5,000,000 Chase Manhattan Credit Card Master Trust 6.73% .......... 15-Feb-03 5,046,765 12,212,918 Chase Manhattan Grantor Trust 5.90%...................... 15-Nov-01 12,175,608 13,500,000 Chemical Bank 7.00%...................................... 01-Jun-05 13,471,650 5,000,000 CIT Group Holdings Inc. 7.13%............................ 17-Jun-02 5,107,995 1,050,000 CIT Group Holdings Inc. 6.75%............................ 30-Apr-98 1,058,957 18,515,000 CIT Group Holdings Inc. 6.50%............................ 13-Jul-98 18,662,009 14,925,000 CIT Group Holdings Inc. 6.38%............................ 21-May-99 14,977,237 22,365,000 CIT Group Holdings Inc. 6.35%............................ 31-Jul-98 22,469,422 3,500,000 CIT Group Holdings Inc. 5.85%............................ 16-Mar-98 3,496,080 9,120,000 CIT Group Holdings Inc. 5.63%............................ 01-Apr-98 9,079,325 5,000,000 CIT Group Holdings Inc. 5.38%............................ 25-Jan-99 4,927,400 12,000,000 Citicorp 8.63%........................................... 01-Dec-02 13,079,280 10,365,000 Citicorp 6.70%........................................... 30-Apr-01 10,403,807 3,590,000 Citizens Utilities Co. 7.05%............................. 01-Oct-46 3,437,174 1,000,000 Columbia/HCA Heatlthcare Corp. 8.36%..................... 15-Apr-24 1,119,859 6,175,000 Comerica Bank 6.75%...................................... 12-May-98 6,239,096 13,000,000 Comerica Bank 6.65%...................................... 01-Jun-00 13,080,418 3,360,000 Commercial Credit Group Inc. 10.00%...................... 01-May-99 3,625,070 850,000 Commercial Credit Group Inc. 8.50%....................... 15-Feb-98 870,434 10,000,000 Commercial Credit Group Inc. 6.13%....................... 01-Mar-00 9,871,500 2,700,000 Commercial Credit Group Inc. 6.00%....................... 15-Apr-00 2,658,366 13,715,000 Commercial Credit Group Inc. 6.00%....................... 15-Jun-00 13,502,555 9,545,000 Commercial Credit Group Inc. 5.70%....................... 01-Mar-98 9,518,828 5,455,000 Commercial Credit Group Inc. 5.55%....................... 15-Feb-01 5,273,021 5,430,000 Continental Bank NA 7.88%................................ 01-Feb-03 5,720,255 5,000,000 Crown Cork & Seal Co. 7.50%.............................. 15-Dec-96 4,897,885 4,900,000 Crown Cork & Seal Fin Plc 7.00%.......................... 15-Dec-06 4,857,664 15,985,000 Dean Witter Discover & Co. 6.00%......................... 01-Mar-98 15,994,383 4,000,000 Deere (John) Capital Corp. 6.50%......................... 20-Sep-99 4,016,360 7,000,000 Deere (John) Capital Corp. 6.43%......................... 09-Aug-99 7,019,110 13,800,000 Deere (John) Capital Corp. 6.35%......................... 15-Mar-01 13,701,192 14,315,000 Discover Card Master Trust I 5.40%....................... 16-Nov-01 14,153,956 23,640,000 Discover Card Trust 6.25%................................ 16-Aug-00 23,676,878 3,275,000 Discover Credit Corp. 9.00%.............................. 01-Apr-98 3,394,734 3,650,000 Eastern Energy Ltd. 6.75%................................ 01-Dec-06 3,549,760 5,360,000 Enersis SA 7.40%......................................... 01-Dec-16 5,200,486 4,600,000 Enersis SA 6.60%......................................... 01-Dec-26 4,513,704 4,350,000 Enron Corp. 9.65%........................................ 15-May-01 4,781,242 27,960,000 Equitable Life Assurance Society 7.70% (R)............... 01-Dec-15 27,847,042 27,225,000 Farm Credit Systems 9.38%................................ 21-Jul-03 31,369,435 9,750,000 Federal Home Loan Banks 7.00%............................ 20-Jun-01 9,984,585 2,969,393 Federal Home Loan Mortgage Corp. 6.42%................... 01-Dec-05 2,892,041 3,000,000 Federal Home Loan Mortgage Corp. 5.95%................... 19-Jan-06 2,857,500 1,686,876 Federal Home Loan PC 8.75%............................... 01-Jul-08 1,750,661 7,865,889 Federal Home Loan PC 7.50%............................... 01-Sep-01 7,971,528 The accompanying notes are an integral part of the financial statements. SAI-217 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 1996 PRINCIPAL AMOUNT VALUE - ------------- -------------------------------------------------------- ----------- --------------- $ 866,983 Federal Home Loan PC 7.00%............................... 01-Aug-01 $ 872,939 1,138,746 Federal Home Loan PC 7.00%............................... 01-Sep-01 1,146,569 5,100,000 Federal Home Loan PC 6.78%............................... 01-Jan-97 5,130,804 4,133,002 Federal Home Loan PC 6.50%............................... 01-Oct-99 4,100,682 11,100,000 Federal National Mortgage Association 9.05%.............. 10-Apr-00 12,015,029 2,004,178 Federal National Mortgage Association 7.49%.............. 01-Sep-06 2,063,990 985,633 Federal National Mortgage Association 5.50%.............. 01-Dec-08 935,425 12,580,936 Federal National Mortgage Association 5.50%.............. 01-Jan-09 11,939,766 3,251,938 Federal National Mortgage Association 5.50%.............. 01-Jul-09 3,085,276 976,493 Federal National Mortgage Association 5.50%.............. 01-Jun-11 922,786 16,135,000 Finland (Republic of) 7.88%.............................. 28-Jul-04 17,364,584 7,195,000 First Chicago Corp. 6.50%................................ 01-Nov-01 7,137,800 13,125,000 First Data Corp. 6.82%................................... 18-Sep-01 13,235,394 30,335,000 First Data Corp. 6.44%................................... 09-Aug-99 30,380,533 20,000,000 First National Bank of Boston 7.38%...................... 15-Sep-06 20,434,180 4,000,000 First Union National Bank 7.13%.......................... 15-Oct-06 4,030,960 10,000,000 Fletcher Challenge Capital Canada Inc. 8.25%............. 20-Jun-16 10,616,720 5,000,000 Fletcher Challenge Capital Canada Inc. 7.75%............. 20-Jun-06 5,175,870 22,000,000 Ford Credit Auto Lease Trust 5.80%....................... 15-May-99 21,860,234 7,705,000 Ford Credit Auto Loan Master Trust 6.50%................. 15-Aug-02 7,728,300 11,875,000 Ford Credit Auto Loan Master Trust 5.50%................. 15-Feb-03 10,788,295 7,000,000 Ford Credit Auto Owner Trust 6.30%....................... 15-Jan-01 6,879,600 11,610,000 Ford Motor Credit Co. 8.38%.............................. 15-Jan-00 12,224,866 2,750,000 Ford Motor Credit Co. 7.75%.............................. 01-Oct-99 2,841,107 18,000,000 Ford Motor Credit Co. 7.00%.............................. 25-Sep-01 18,268,380 6,700,000 Ford Motor Credit Co. 6.85%.............................. 15-Aug-00 6,773,291 30,500,000 Ford Motor Credit Co. 6.25%.............................. 26-Feb-98 30,601,443 11,125,000 Ford Motor Credit Co. 5.63%.............................. 15-Dec-98 11,016,120 22,015,000 Ford Motor Credit Co. 5.63%.............................. 15-Jan-99 21,795,158 15,325,000 General Electric Capital Corp. 8.75%..................... 21-May-07 17,413,384 3,000,000 General Electric Capital Corp. 8.63%..................... 12-Mar-98 3,087,180 275,000 General Electric Capital Corp. 8.63%..................... 15-Jun-08 312,830 4,000,000 General Electric Capital Corp. 8.09%..................... 01-Apr-04 4,294,160 4,000,000 General Electric Capital Corp. 7.88%..................... 01-Dec-06 4,281,400 3,614,000 General Electric Capital Corp. 7.65%..................... 23-Feb-98 3,694,267 2,441,000 General Motors Acceptance Corp. 9.63%.................... 15-May-00 2,668,118 9,045,000 General Motors Acceptance Corp. 8.40%.................... 15-Oct-99 9,503,672 13,800,000 General Motors Acceptance Corp. 8.25%.................... 20-Jan-98 14,131,062 6,850,000 General Motors Acceptance Corp. 7.38%.................... 26-May-99 7,010,564 1,210,601 General Motors Acceptance Corp. 7.15%.................... 15-Mar-00 1,223,833 4,500,000 General Motors Acceptance Corp. 7.13%.................... 01-Jun-99 4,573,485 6,685,000 General Motors Acceptance Corp. 6.75%.................... 25-Feb-98 6,749,778 17,750,000 General Motors Acceptance Corp. 6.63%.................... 17-Apr-00 17,832,182 5,700,000 General Motors Acceptance Corp. 6.45%.................... 24-May-99 5,718,411 6,000,000 General Motors Acceptance Corp. 6.13%.................... 23-Apr-98 6,015,420 2,370,000 General Motors Acceptance Corp. 6.00%.................... 30-Dec-98 2,360,520 6,500,000 General Motors Acceptance Corp. 5.95%.................... 16-Jul-98 6,495,190 8,000,000 General Motors Acceptance Corp. 5.88%.................... 30-Mar-98 7,998,160 10,710,000 General Motors Acceptance Corp. 5.88%.................... 12-Jan-99 10,638,993 5,930,000 General Motors Acceptance Corp. 5.38%.................... 09-Mar-98 5,897,148 The accompanying notes are an integral part of the financial statements. SAI-218 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 1996 PRINCIPAL AMOUNT VALUE - ------------- -------------------------------------------------------- ----------- --------------- $ 4,646,399 Government Trust Certificates 9.63%...................... 15-May-02 $ 4,960,589 632,530 Government Trust Certificates 9.40%...................... 15-May-02 717,171 12,677,694 Government Trust Certificates 9.25%...................... 15-Nov-01 14,093,716 278,963 Government Trust Certificates 8.00%...................... 15-May-98 283,058 1,600,000 GTE Corp. 10.75%......................................... 15-Sep-17 1,726,538 2,800,000 GTE Corp. 9.38%.......................................... 01-Dec-00 3,076,836 14,600,000 GTE Corp. 8.85%.......................................... 01-Mar-98 15,065,316 5,000,000 GTE Corp. 8.75%.......................................... 01-Nov-21 5,765,350 4,526,471 Guaranteed Export Trust 6.28%............................ 15-Jun-04 4,489,761 5,000,000 Household Finance Corp. 9.77%............................ 12-Mar-98 5,217,100 8,000,000 Hydro Quebec 8.05%....................................... 07-Jul-24 8,774,432 7,500,000 IBM Corp. 7.25%.......................................... 01-Nov-02 7,737,030 15,960,000 Integra Bank 6.55%....................................... 15-Jun-00 16,006,603 International Bank For Reconstruction & Development 22,461,000 9.25%.................................................... 15-Jul-17 27,905,075 International Bank For Reconstruction & Development 5,420,000 8.63%.................................................... 15-Oct-16 6,330,235 International Bank For Reconstruction & Development 5,000,000 5.20%.................................................... 15-Dec-98 4,925,980 14,750,000 International Lease Finance Corp. 6.63%.................. 15-Aug-00 14,822,570 3,000,000 International Lease Finance Corp. 6.13%.................. 01-Nov-99 2,979,906 3,850,000 Ireland (Republic of) 9.50%.............................. 03-Apr-00 4,208,878 22,825,000 Ireland (Republic of) 8.63%.............................. 15-Apr-01 24,685,831 11,000,000 Ireland Republic 7.88%................................... 01-Dec-01 11,616,220 47,040,000 Israel US Government Guaranteed Notes 8.00%.............. 15-Nov-01 50,191,115 10,600,000 Israel US Government Guaranteed Notes 7.63%.............. 15-Aug-04 11,234,951 4,950,000 Israel US Government Guaranteed Notes 6.63%.............. 15-Feb-04 4,979,868 23,500,000 Israel Short Term US Government Guaranteed Notes 6.38% .. 15-Aug-01 23,496,898 3,580,000 Israel US Government Guaranteed Notes 5.63%.............. 15-Sep-03 3,416,004 5,805,000 Kemper Corp. 6.88%....................................... 15-Sep-03 5,816,204 1,500,000 Key Bank NA 7.13%........................................ 15-Aug-06 1,503,446 10,000,000 Key Bank NA 6.05%........................................ 06-Apr-98 9,997,870 8,725,000 Key Bank NA 6.00%........................................ 07-Oct-98 8,728,315 7,000,000 KFW International Finance Inc. 9.38%..................... 15-Jul-98 7,342,895 2,000,000 KFW International Finance Inc. 9.00%..................... 23-Feb-99 2,108,160 6,000,000 KFW International Finance Inc. 8.85%..................... 15-Jun-99 6,356,460 1,000,000 KFW International Finance Inc. 8.62%..................... 15-Oct-01 1,087,343 1,105,000 KFW International Finance Inc. 8.20%..................... 01-Jun-06 1,215,228 17,800,000 KFW International Finance Inc. 8.00%..................... 15-Feb-10 19,502,677 2,500,000 KFW International Finance Inc. 7.63%..................... 15-Feb-04 2,642,605 13,335,000 KFW International Finance Inc. 7.20%..................... 15-Mar-14 13,520,490 12,400,000 KFW International Finance Inc. 7.00%..................... 01-Mar-13 12,350,896 5,230,000 Korea Development Bank 7.25%............................. 15-May-06 5,325,338 9,275,000 Korea Development Bank 6.63%............................. 21-Nov-03 9,183,001 16,600,000 Landeskreditbank Baden 7.88%............................. 15-Oct-01 17,536,074 5,300,000 Landeskreditbank Baden Wurttemburg 7.63%................. 01-Feb-23 5,604,368 5,000,000 Lockheed Martin Corp. 6.85%.............................. 15-May-01 5,044,500 2,915,000 Malayan Banking Berhad New York Branch 7.13%............. 15-Sep-05 2,896,519 5,690,000 Manitoba (Province of) 9.63%............................. 15-Mar-99 6,086,024 1,500,000 Manitoba (Province of) 9.50%............................. 01-Oct-00 1,650,867 5,300,000 Manitoba (Province of) 8.00%............................. 15-Apr-02 5,631,759 23,826,000 Manitoba (Province of) 7.75%............................. 01-Feb-02 25,047,559 21,219,000 Manitoba (Province of) 6.88%............................. 15-Sep-02 21,509,912 The accompanying notes are an integral part of the financial statements. SAI-219 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 1996 PRINCIPAL AMOUNT VALUE - ------------- -------------------------------------------------------- ----------- --------------- $10,495,000 Manitoba (Province of) 6.75%............................. 01-Mar-03 $10,574,531 5,000,000 Manitoba (Province of) 9.00%............................. 15-Dec-00 5,434,600 6,000,000 Margaretten Financial Corp. 6.75%........................ 15-Jun-00 6,019,440 1,000,000 MBNA Master Credit Card Trust 6.20%...................... 15-Aug-99 1,010,406 19,488,000 MBNA Master Credit Card Trust 5.40%...................... 15-Sep-00 19,256,483 3,500,000 Medpartners Inc. 7.38%................................... 01-Oct-06 3,512,250 4,000,000 Merrill Lynch & Co., Inc. 9.00%.......................... 01-May-98 4,151,088 5,590,000 Metropolitan Life Insurance Co. 7.70% (R)................ 01-Nov-15 5,589,100 6,300,000 Midland Bank PLC 7.65%................................... 01-May-25 6,644,156 3,375,000 Morgan Stanley Group Inc. 9.25%.......................... 01-Mar-98 3,497,006 5,400,000 Morgan Stanley Group Inc. 6.50%.......................... 30-Mar-01 5,380,236 16,740,000 Morgan Stanley Group Inc. 5.63%.......................... 01-Mar-99 16,528,741 13,620,000 National Australia Bank Ltd. 9.70%....................... 15-Oct-98 14,434,067 8,000,000 National City Bank 6.35%................................. 15-Mar-01 7,942,168 3,000,000 National Westminster Bank PLC 9.45%...................... 01-May-01 3,319,530 5,012,718 NationsBank Auto Grantor Trust 5.85%..................... 15-Jun-02 5,003,710 12,700,000 NationsBank Corp. 6.75%.................................. 15-Aug-00 12,820,396 7,115,000 NationsBank Corp. 6.65%.................................. 09-Apr-02 7,130,923 5,750,000 NationsBank Corp. 5.85%.................................. 05-Feb-02 5,525,756 5,400,000 NationsBank Corp. 5.75%.................................. 25-Jan-01 5,234,814 13,125,000 NationsBank Corp. 5.13%.................................. 15-Sep-98 12,913,163 5,000,000 NationsBank Credit Card Master Trust 6.45%............... 15-Apr-03 5,018,750 18,330,000 New England Mutual Life Insurance Co. 7.88% (R) ......... 15-Feb-24 18,469,161 10,650,000 New York Life Insurance Co. 6.40% (R).................... 15-Dec-03 10,390,129 27,315,000 New Zealand (Government of) 8.75%........................ 15-Dec-06 31,248,852 10,740,000 New Zealand Government 10.63%............................ 15-Nov-05 13,461,194 3,095,000 News America Holdings Inc. 7.70%......................... 30-Oct-25 2,929,851 5,500,000 News America Holdings Inc. 7.45%......................... 01-Jun-00 5,628,194 14,500,000 Nordbanken AB 7.25%...................................... 30-Oct-06 14,609,228 12,000,000 Norsk Hydro AS 7.50%..................................... 01-Oct-16 12,280,920 10,000,000 Norwest Corp. 6.25%...................................... 15-Apr-99 10,004,720 3,000,000 Norwest Corp. 6.13%...................................... 15-Oct-00 2,969,520 5,000,000 Norwest Corp. 6.00%...................................... 13-Oct-98 4,995,400 15,000,000 Norwest Corp. 6.00%...................................... 15-Mar-00 14,816,250 2,869,000 Norwest Corp. 5.75%...................................... 15-Mar-98 2,860,709 10,400,000 Norwest Financial Inc. 7.25%............................. 15-Mar-00 10,620,792 1,000,000 Norwest Financial Inc. 6.68%............................. 15-Sep-99 1,009,366 13,250,000 Norwest Financial Inc. 6.38%............................. 01-Oct-99 13,276,672 5,000,000 Norwest Financial Inc. 6.25%............................. 15-Mar-99 5,002,200 5,300,000 Occidental Petroleum Corp. 9.25%......................... 01-Aug-19 6,376,944 8,813,000 Old Kent Bank & Trust Co. 6.88%.......................... 15-Apr-98 8,917,434 10,000,000 Old Kent Financial Corp. 6.63%........................... 15-Nov-05 9,644,600 8,500,000 Paine Webber 6.80% (a)................................... 01-Jun-01 8,569,063 2,000,000 PepsiCo Inc. 6.13%....................................... 15-Jan-98 2,006,232 16,500,000 Petroliam Nasional Bhd 7.75% (R)......................... 15-Aug-15 17,003,745 12,085,000 Petroliam Nasional Bhd 7.63% (R)......................... 15-Oct-26 12,518,368 15,000,000 Petroliam Nasional Bhd 7.13% (R)......................... 18-Oct-06 15,137,250 5,000,000 Petroliam Nasional Bhd 6.63% (R)......................... 18-Oct-01 5,003,300 6,000,000 Praxair Inc. 6.90%....................................... 01-Nov-06 5,952,876 2,000,000 Praxair Inc. 6.85%....................................... 15-Jun-05 1,978,240 The accompanying notes are an integral part of the financial statements. SAI-220 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 1996 PRINCIPAL AMOUNT VALUE - ------------- -------------------------------------------------------- ----------- --------------- $ 8,910,000 Premier Auto Trust 6.15%................................. 06-Mar-00 $ 8,943,315 14,640,000 Premier Auto Trust 6.05%................................. 06-Apr-00 14,591,761 11,000,000 Premier Auto Trust 6.00%................................. 06-Oct-99 11,039,413 4,000,000 Premier Auto Trust 6.00%................................. 06-May-00 4,001,292 13,795,000 Premier Auto Trust 5.90%................................. 06-Jul-99 13,801,842 4,700,000 Private Export Funding Corp. 5.80%....................... 01-Feb-04 4,392,347 2,000,000 Province of Nova Scotia 9.13%............................ 01-May-21 2,402,878 4,200,000 Province of Ontario 8.00%................................ 17-Oct-01 4,448,972 19,375,000 Province of Ontario 7.75%................................ 04-Jun-02 20,451,494 5,000,000 Province of Ontario 6.00%................................ 21-Feb-06 4,756,250 7,475,000 Province of Quebec 9.13%................................. 01-Mar-00 8,037,688 415,000 Province of Quebec 8.63%................................. 19-Jan-05 456,110 8,030,000 Province of Quebec 7.50%................................. 15-Jul-23 7,990,251 7,000,000 Province of Quebec 7.13%................................. 09-Feb-24 6,653,423 10,000,000 Province of Saskatchewan 9.38%........................... 15-Dec-20 12,310,390 2,455,000 Republic New York Corp. 9.50%............................ 15-Apr-14 2,960,983 5,000,000 Republic of Finland 6.95%................................ 15-Feb-26 4,850,315 5,000,000 Resolution Funding Corp. 8.88%........................... 15-Jul-20 6,157,330 19,750,000 Resolution Funding Corp. 8.13%........................... 15-Oct-19 22,565,580 5,000,000 Santander Financial Issuances Ltd. 7.88%................. 15-Apr-05 5,231,500 1,000,000 Santander Financial Issuances Ltd. 7.25%................. 30-May-06 1,007,360 9,050,000 Sears Credit Account Master Trust II 6.25%............... 15-Jan-03 9,062,534 3,000,000 Sears Roebuck & Co. 9.50%................................ 01-Jun-99 3,205,350 4,050,000 Sears Roebuck Acceptance Corp. 6.54%..................... 06-May-99 4,071,384 12,200,000 Sears Roebuck Acceptance Corp. 6.38%..................... 16-Feb-99 12,230,866 11,000,000 Sears Roebuck Acceptance Corp. 6.22%..................... 25-Mar-99 10,988,120 5,000,000 Sears Roebuck Acceptance Corp. 6.11%..................... 26-Oct-98 4,997,750 5,000,000 Signet Group 5.20%....................................... 15-Feb-02 4,929,650 1,125,000 Societe Generale 9.88%................................... 15-Jul-03 1,298,964 15,525,000 Societe Generale 7.40%................................... 01-Jun-06 15,807,571 13,425,000 Society National Bank 7.25%.............................. 01-Jun-05 13,600,599 3,000,000 Southern Investments UK PLC 6.80%........................ 01-Dec-06 2,929,650 7,000,000 SPNB Home Equity Loan 8.85%.............................. 15-May-98 7,202,062 35,000,000 Standard Credit Card Master Trust I 5.50%................ 07-Feb-00 34,362,440 8,450,000 Suntrust Banks Inc. 6.00%................................ 15-Feb-26 7,913,501 5,000,000 Telekom Malaysia Berhad 7.88% (R)........................ 01-Aug-25 5,191,250 700,000 Tenneco Inc. 7.45%....................................... 15-Dec-25 688,261 2,500,000 Time Warner Entertainment Co., LP 8.38%.................. 15-Jul-33 2,510,950 9,500,000 Transamerica Finance Corp. 8.38%......................... 15-Feb-98 9,715,840 4,350,000 Transamerica Finance Corp. 6.80%......................... 15-Mar-99 4,395,762 5,640,000 Transamerica Finance Corp. 5.82%......................... 09-Jun-98 5,618,286 1,600,000 Union Carbide Corp. 7.75%................................ 01-Oct-96 1,621,549 13,000,000 Union Pacific Corp. 7.25%................................ 01-Nov-08 13,049,335 6,200,000 US Bancorp 6.25%......................................... 03-Aug-98 6,248,794 13,090,000 US Leasing International Inc. 6.63%...................... 15-May-03 12,954,479 25,610,000 US Treasury Bonds 13.25%................................. 15-May-14 39,727,513 500,000 US Treasury Bonds 12.75%................................. 15-Nov-10 707,735 2,500,000 US Treasury Bonds 12.00%................................. 15-Aug-13 3,576,175 2,435,000 US Treasury Bonds 11.75%................................. 15-Nov-14 3,504,501 40,000 US Treasury Bonds 11.25%................................. 15-Feb-15 59,069 The accompanying notes are an integral part of the financial statements. SAI-221 STATE STREET BANK AND TRUST COMPANY DAILY GOVERNMENT/CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 1996 PRINCIPAL AMOUNT VALUE - ------------- -------------------------------------------------------- ----------- --------------- $12,320,000 US Treasury Bonds 9.88%.................................. 15-Nov-15 $ 16,456,810 1,185,000 US Treasury Bonds 9.25%.................................. 15-Feb-16 1,504,393 400,000 US Treasury Bonds 9.00%.................................. 15-Nov-18 501,936 11,500,000 US Treasury Bonds 8.88%.................................. 15-Feb-19 14,276,215 37,000,000 US Treasury Bonds 8.75%.................................. 15-Nov-08 41,543,970 3,500,000 US Treasury Bonds 8.75%.................................. 15-May-17 4,270,560 31,150,000 US Treasury Bonds 8.75%.................................. 15-Aug-20 38,377,734 3,260,000 US Treasury Bonds 8.50%.................................. 15-Feb-20 3,915,553 3,445,000 US Treasury Bonds 8.13%.................................. 15-Aug-19 3,984,900 15,000,000 US Treasury Bonds 8.13%.................................. 15-Aug-21 17,414,100 16,300,000 US Treasury Bonds 8.00%.................................. 15-Nov-21 18,688,928 8,183,000 US Treasury Bonds 7.88%.................................. 15-Feb-21 9,249,327 6,071,000 US Treasury Bonds 7.50%.................................. 15-Nov-16 6,571,858 6,840,000 US Treasury Bonds 7.50%.................................. 15-Nov-24 7,481,250 46,395,000 US Treasury Bonds 7.25%.................................. 15-Aug-22 49,077,095 5,990,000 US Treasury Bonds 7.13%.................................. 15-Feb-23 6,253,919 71,775,000 US Treasury Bonds 6.75% (a).............................. 15-Aug-26 72,313,312 6,011,000 US Treasury Bonds 6.25%.................................. 15-Aug-23 5,635,313 5,000,000 US Treasury Bonds 6.00%.................................. 15-Feb-26 4,550,800 32,000 US Treasury Notes 8.88%.................................. 15-Nov-98 33,670 22,855,000 US Treasury Notes 6.50%.................................. 15-Oct-06 22,980,017 15,000 US Treasury Notes 6.25%.................................. 15-Feb-03 14,981 11,450,000 US Treasury Notes 5.88%.................................. 15-Nov-99 11,405,231 10,000,000 US Treasury Notes 5.88%.................................. 30-Nov-01 9,854,700 11,275,000 US Treasury Notes 5.75%.................................. 15-Aug-03 10,936,750 6,000,000 US Treasury Notes 5.75%.................................. 31-Dec-98 5,985,960 5,050,000 Usinor Sacilor 7.25%..................................... 01-Aug-06 5,049,546 33,030,000 Victorian Public Authority Finance Agency 8.45% ......... 01-Oct-01 35,598,479 10,850,000 Victorian Public Authority Financing 8.25%............... 15-Jan-02 11,528,136 5,500,000 Wachovia Bank NA 6.70%................................... 14-Apr-99 5,546,530 5,000,000 Wells Fargo & Co. 6.88%.................................. 01-Apr-06 4,916,650 7,500,000 Wendys International Inc. 7.00%.......................... 15-Dec-25 6,987,338 13,412,000 Westpac Banking Capital Corp. 7.88%...................... 15-Oct-02 14,158,512 3,000,000 Willamette Industries Inc. 7.35%......................... 01-Jul-26 3,137,571 - ------------- -------------------------------------------------------------------- --------------- TOTAL NOTES & DEBENTURES (Cost $2,953,401,618) .......... 2,975,473,887 - ------------- -------------------------------------------------------------------- --------------- UNITS - ------------- -------------------------------------------------------------------- --------------- STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS FOR TAX EXEMPT RETIREMENT PLANS--3.4% 104,708,179 Short Term Investment Fund .............................. $ 104,708,179 - ------------- -------------------------------------------------------------------- --------------- TOTAL INVESTMENTS--100% (Cost $3,058,109,797) ........... $3,080,182,066 ============= ==================================================================== ===============
(a) A portion of these securities have been purchased on a delayed delivery basis. (R) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $117,149,345 or 3.8% of total investments, as of December 31, 1996. The accompanying notes are an integral part of the financial statements. SAI-222 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of the 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 selected per unit data present fairly, in all material respects, the financial position of State Street Bank and Trust Company Short Term Investment Fund (the "Fund") at December 31, 1996, the results of its operations for the year then ended, and the changes in its net assets and the selected per unit data for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and selected per unit data (hereafter referred to as "financial statements") are the responsibility of the Fund's 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 generally accepted auditing standards 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, 1996 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts March 3, 1997 SAI-223 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Assets and Liabilities December 31, 1996
ASSETS Investments in securities, at amortized cost ............................ $13,749,690,548 Cash..................................................................... 762 Interest and other receivables .......................................... 85,167,867 - ------------------------------------------------------------------------ ---------------- Total assets ......................................................... 13,834,859,177 - ------------------------------------------------------------------------ ---------------- LIABILITIES Distributions payable ................................................... 71,893,608 Accrued expenses ........................................................ 26,000 - ------------------------------------------------------------------------ ---------------- Total liabilities .................................................... 71,919,608 - ------------------------------------------------------------------------ ---------------- Net assets (equivalent to $1.00 per unit based on 13,762,946,432 units outstanding) ........................................................... $13,762,939,569 ======================================================================== ================
The accompanying notes are an integral part of the financial statements. SAI-224 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Operations Year ended December 31, 1996 - -----------------------------------------------------------------------------
INVESTMENT INCOME Interest ...................................................... $781,333,955 - --------------------------------------------------------------- --------------- EXPENSES Audit ......................................................... 22,000 Other ......................................................... 14,670 - --------------------------------------------------------------- --------------- Total expenses .............................................. 36,670 - --------------------------------------------------------------- --------------- Net investment income ....................................... 781,297,285 - --------------------------------------------------------------- --------------- Net realized gain (loss) on investments ........................ (39,765) - --------------------------------------------------------------- --------------- Net increase (decrease) in net assets resulting from operations $781,257,520 =============================================================== ===============
The accompanying notes are an integral part of the financial statements. SAI-225 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, -------------------------------- 1996 1995 - ----------------------------------------------------------------------------- ---------------- --------------- FROM OPERATIONS Net investment income ........................................................ $ 781,297,285 $ 716,462,126 Net realized gain (loss) on investments ...................................... (39,765) 164,710 - ----------------------------------------------------------------------------- ---------------- --------------- Net increase in net assets resulting from operations ......................... 781,257,520 716,626,836 - ----------------------------------------------------------------------------- ---------------- --------------- Distributions from net investment income ..................................... (781,297,285) (716,462,126) - ----------------------------------------------------------------------------- ---------------- --------------- FROM PARTICIPANT TRANSACTIONS Net increase (decrease) in net assets resulting from participant transactions 1,369,831,060 3,153,764,191 - ----------------------------------------------------------------------------- ---------------- --------------- Net increase (decrease) in net assets ........................................ 1,369,791,295 3,153,928,901 NET ASSETS Beginning of year............................................................. 12,393,148,274 9,239,219,373 - ----------------------------------------------------------------------------- ---------------- --------------- End of year .................................................................. $13,762,939,569 $12,393,148,274 ============================================================================= ================ ===============
The accompanying notes are an integral part of the financial statements. SAI-226 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Selected Per Unit Data (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 1996 1995 1994 1993 1992 - ----------------------------------------- ------------- ------------- ------------ ------------- ------------ Net investment income..................... $ 0.0548 $ 0.0604 $ 0.0424 $ 0.0336 $ 0.0402 ========================================= ============= ============= ============ ============= ============ Distributions from net investment income . $ 0.0548 $ 0.0604 $ 0.0424 $ 0.0336 $ 0.0402 ========================================= ============= ============= ============ ============= ============ Total return**............................ 5.62% 6.21% 4.32% 3.41% 4.09% Ratio of expenses to average net assets* . --% --% --% --% --% Ratio of net investment income to average net assets............................... 5.60% 6.04% 4.24% 3.36% 4.02% Net assets, end of year (000s)............ $13,762,940 $12,393,148 $9,239,219 $12,657,842 $10,016,685 ========================================= ============= ============= ============ ============= ============
- ------------ * Less than .01%. ** Total return calculation assumes dividend reinvestment and 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. The accompanying notes are an integral part of the financial statements. SAI-227 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. INVESTMENT OBJECTIVE The State Street Bank and Trust Company ("State Street Bank") Short Term Investment Fund (the "Fund") is a money market pooled fund formed under a Declaration of Trust dated May 19, 1983, as amended and restated through August 1, 1992. The Fund's objective is to maintain a diversified portfolio of short-term securities. The investments of the Fund are currently limited to high-quality bonds, notes, commercial paper and other evidences of indebtedness which are payable on demand or which have a maturity date not exceeding three months from the date of purchase, except that up to 20% of the Fund's investments may be placed in securities with a maturity date not exceeding 13 months. State Street Bank is the Fund's Trustee and custodian. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION Investments are stated at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are accounted for on the trade date (date the order to buy or sell is executed). The cost of securities contributed to, and proceeds related to securities delivered by, the Fund in connection with the issuance and redemption of its units of participation are based on the valuations of those securities determined as described above. The cost of securities delivered and the net gain or loss on securities sold is determined using the average cost method. Interest income is recorded on the accrual basis. Interest income is increased by accretion of discount and reduced by amortization of premium. 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 funds of employee benefit plans. 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 Issuances and redemptions of participant units are made on each day the New York Stock Exchange is open (valuation date). Participant units are typically purchased and redeemed at a constant net asset value of $1 per unit. In the event that a significant disparity exists between the constant net asset value and the market based net asset value of the Fund, the Trustee may determine that continued redemption at a constant $1 net asset value will create inequitable results for the Fund's unitholders. In these circumstances, the Trustee, at its sole discretion and acting on behalf of the Fund's unitholders, may direct that units be redeemed at the market based net asset value until such time as the disparity between the market based and the constant net asset value per unit is deemed to be immaterial. E. EXPENSES According to the Declaration of Trust, the Fund may pay certain expenses for services received during the year. SAI-228 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 F. DISTRIBUTIONS TO PARTICIPANTS Distributions from net investment income are recorded on each valuation date and distributed monthly. All net realized gains are retained by the Fund. G. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the Trustee to make estimates and assumptions 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. 3. INVESTMENT TRANSACTIONS Purchases and sales of short-term investments (including maturities) during the year ended December 31, 1996 were $893,160,398,940 and $891,917,413,847, respectively. 4. UNITS OF PARTICIPATION Participant transactions for the Fund were as follows:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 1996 1995 --------------------------------- --------------------------------- UNITS AMOUNT UNITS AMOUNT ---------------- ---------------- ---------------- ---------------- Units issued ............. 62,949,538,186 $ 62,949,538,186 42,906,095,439 $ 42,906,095,439 Units redeemed ........... (61,579,707,126) (61,579,707,126)(39,752,331,248) (39,752,331,248) ---------------- ---------------- ---------------- ---------------- Net increase in units and net assets resulting from participant transactions ........... 1,369,831,060 $ 1,369,831,060 3,153,764,191 $ 3,153,764,191 ================ ================ ================ ================
SAI-229 State Street Bank and Trust Company Short Term Investment Fund Schedule of Investments (showing percentage of total value of investments) December 31, 1996
PRINCIPAL MATURITY AMORTIZED AMOUNT DATE COST - -------------- --------------------------------------------------------------- ------------ -------------- SHORT TERM INSTRUMENTS 96.4% $ 25,000,000 Abbey National PLC 5.11%........................................ 17-Mar-97 $ 24,988,146 80,000,000 Abbey National PLC 5.39%........................................ 17-Mar-97 80,001,637 65,000,000 Abbey National Treasury Services PLC 5.45%...................... 16-Apr-97 64,992,241 75,000,000 Abbey National Treasury Services PLC 5.39%...................... 21-Feb-97 75,000,000 75,000,000 Abbey National Treasury Services PLC 5.50%...................... 20-Mar-97 75,000,000 50,000,000 Abbey National Treasury Services PLC 5.37%...................... 01-Jan-97* 49,985,932 40,000,000 ABN Amro Bank NV 5.43%.......................................... 13-Feb-97 40,000,473 50,000,000 ABN Amro Bank NV 5.75%.......................................... 10-Apr-97 49,993,507 48,000,000 AIG Matched Funding Corp. 5.61%................................. 15-Jan-97* 48,000,000 30,000,000 AIG Matched Funding Corp. 5.63%................................. 15-Jan-97* 29,999,361 50,000,000 American Express Credit Corp. 5.58%............................. 14-Jan-97* 49,997,065 50,000,000 Ameritech Capital Funding Corp. 6.00%........................... 07-Jan-97 49,950,000 25,000,000 Australia & New Zealand Banking Group 5.59%..................... 21-Jan-97 25,000,200 25,000,000 Avco Financial Services Inc. 5.46%.............................. 18-Feb-97* 24,998,910 50,000,000 Bank America National Trust & Svgs Association 5.50% ........... 19-Jun-97 50,000,000 150,000,000 Bank of America 5.40%........................................... 05-Feb-97 150,000,000 125,000,000 Bank of America 5.38%........................................... 06-Feb-97 125,000,000 100,000,000 Bank of America 5.38%........................................... 13-Feb-97 100,000,000 45,000,000 Bank of America 5.38%........................................... 19-Feb-97 45,000,000 150,000,000 Bank of Montreal 5.50%.......................................... 08-Jan-97 150,000,000 135,000,000 Bank of New York 5.50%.......................................... 12-Mar-97 134,995,305 50,000,000 Bank of Nova Scotia 5.41%....................................... 05-Feb-97 50,000,000 150,000,000 Bank of Nova Scotia 5.41%....................................... 28-Feb-97 150,000,000 125,000,000 Bank of Scotland 5.49%.......................................... 13-Jun-97 125,000,000 130,000,000 Bank One 5.43%.................................................. 01-Jan-97* 129,913,057 74,000,000 Bank One 5.69%.................................................. 28-Oct-97 73,960,614 50,000,000 Bayerische Hypotheken Bank 5.42%................................ 12-Mar-97 50,000,959 47,500,000 Bayerische Hypotheken Und 5.38%................................. 13-Feb-97 47,500,560 34,400,000 Bayerische Hypotheken Und 5.38%................................. 25-Feb-97 34,399,139 50,000,000 Bayerische Landesbank 5.48%..................................... 15-Jan-97* 49,998,664 100,000,000 Bayerische Vereinsbank 5.75%.................................... 07-Jan-97 100,000,000 50,000,000 Bayerische Vereinsbank 5.53%.................................... 20-Jun-97 50,005,743 50,000,000 Bayerische Vereinsbank 5.43%.................................... 13-Mar-97 50,000,973 80,000,000 Beneficial Corp. 5.58%.......................................... 15-Jan-97* 80,011,886 200,000,000 Boatmen's National Bank of St. Louis 6.75%...................... 02-Jan-97 200,000,000 45,000,000 Caisse d' Amort de la Dette 5.30%............................... 17-Jan-97 44,894,000 75,000,000 Caisse des Depots 6.53%......................................... 02-Jan-97 74,986,396 80,000,000 Caisse des Depots 5.44%......................................... 23-Jan-97 79,734,044 160,000,000 Canadian Imperial Bank 5.57%.................................... 31-Jan-97 160,000,000 75,000,000 Canadian Imperial Bank 5.41%.................................... 30-Jan-97 75,000,000 The accompanying notes are an integral part of the financial statements. SAI-230 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 PRINCIPAL MATURITY AMORTIZED AMOUNT DATE COST - -------------- --------------------------------------------------------------- ------------ -------------- $ 65,000,000 Canadian Imperial Bank 5.39%.................................... 03-Feb-97 $ 65,000,000 400,000,000 Chase Manhattan Corp. 7.00%..................................... 02-Jan-97 400,000,000 50,000,000 Cheltenham & Glouster Building 5.35%............................ 23-Jun-97 48,714,514 55,000,000 Cheltenham & Glouster Building 5.28%............................ 25-Mar-97 54,330,467 100,000,000 Cit Group Holdings Inc. Med Term 5.35%.......................... 01-Jan-97* 99,909,225 215,000,000 Comerica Bank 5.58%............................................. 14-Jan-97* 215,000,000 100,000,000 Comerica Bank 5.47%............................................. 13-Jan-97* 99,981,338 142,000,000 Commerzbank AG 5.47%............................................ 10-Jan-97 141,998,910 75,000,000 Commonwealth Bank Australia 5.35%............................... 12-Feb-97 74,531,875 50,000,000 Commonwealth Bank Australia 5.29%............................... 21-Feb-97 49,625,292 25,000,000 Commonwealth Edison Co. 5.35%................................... 10-Jan-97 24,966,563 50,000,000 Commonwealth Edison Co. 5.32%................................... 22-Jan-97 49,844,833 70,000,000 Daimler-Benz North America 5.38%................................ 07-Jan-97 69,937,233 55,000,000 Daimler-Benz North America 5.38%................................ 16-Jan-97 54,876,708 50,000,000 Daimler-Benz North America 5.35%................................ 12-Feb-97 49,687,917 100,000,000 Daimler-Benz North America 5.35%................................ 21-Mar-97 98,827,069 35,350,000 Daimler-Benz North America 5.37%................................ 27-Mar-97 34,901,792 50,000,000 Den Danske Bank 5.53%........................................... 17-Jan-97 50,000,000 45,000,000 Den Danske Corp. 5.35%.......................................... 06-Feb-97 44,759,250 100,000,000 Den Danske Grand Cayman 5.59%................................... 21-Jan-97 100,000,000 45,000,000 Deutsche Bank Finance Inc. 5.70%................................ 06-Jan-97 44,964,375 100,000,000 Deutsche Bank Finance Inc. 5.21%................................ 11-Mar-97 99,992,721 25,000,000 E.I. Du Pont de Nemours & Co. 5.26%............................. 14-Feb-97 24,839,278 25,000,000 E.I. Du Pont de Nemours & Co. 5.26%............................. 18-Mar-97 24,722,389 25,000,000 E.I. Du Pont de Nemours & Co. 5.26%............................. 19-Mar-97 24,718,736 50,300,000 FCC National Bank 4.94%......................................... 26-Feb-97 50,279,825 59,000,000 Federal Farm Credit Bank 5.60%.................................. 03-Jun-97 58,965,376 62,000,000 Federal Farm Credit Bank 5.55%.................................. 02-May-97 61,974,308 86,000,000 Federal Farm Credit Banks Consolidated Systems 5.43% ........... 17-Jan-97* 85,916,668 65,000,000 Federal Farm Credit Banks Consolidated Systems 5.36% ........... 02-Jan-97* 64,947,034 87,000,000 Federal Farm Credit Banks Consolidated Systems 5.25% ........... 01-Jan-97* 86,919,598 90,000,000 Federal Home Loan Bank 5.61%.................................... 05-Jun-97 89,913,969 46,500,000 Federal Home Loan Bank 5.47%.................................... 19-Jan-97* 46,467,950 120,000,000 Federal Home Loan Bank 5.39%.................................... 02-Jan-97* 119,928,880 55,000,000 Federal Home Loan Bank Consolidated Discount Notes 5.40% ....... 16-Jan-97 54,876,250 50,000,000 Federal Home Loan Mortgage Discount Notes 5.42%................. 22-Jan-97 49,841,917 55,400,000 Federal Home Loan Mortgage Discount Notes 5.36%................. 24-Feb-97 54,954,584 50,000,000 Federal National Mortgage Association 5.53%..................... 29-Oct-97 49,932,790 100,000,000 Federal National Mortgage Association 5.48%..................... 19-Jan-97* 99,984,558 130,000,000 Federal National Mortgage Association 5.39%..................... 28-Mar-97* 129,967,189 203,000,000 Federal National Mortgage Association 5.35%..................... 12-Mar-97* 202,882,749 The accompanying notes are an integral part of the financial statements. SAI-231 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 PRINCIPAL MATURITY AMORTIZED AMOUNT DATE COST - -------------- --------------------------------------------------------------- ------------ -------------- $ 50,000,000 Federal National Mortgage Association 5.32%..................... 19-Feb-97* $ 49,965,595 85,000,000 Federal National Mortgage Association 5.31%..................... 06-Mar-97* 84,977,571 28,880,000 Federal National Mortgage Association 5.30%..................... 28-Jan-97 28,765,202 90,000,000 Federal National Mortgage Association 4.78%..................... 14-Feb-97 89,991,236 150,000,000 Federal National Mortgage Association 4.77%..................... 01-Jan-97* 149,985,570 110,000,000 First Bank NA 5.59%............................................. 15-Jan-97* 109,999,092 70,000,000 Ford Motor Credit Co. 5.65%..................................... 18-Feb-97* 70,017,561 200,000,000 General Electric Capital Corp. 7.00%............................ 02-Jan-97 199,961,111 50,000,000 General Electric Capital Corp. 5.48%............................ 17-Jan-97* 50,000,000 75,000,000 General Electric Capital Corp. 5.38%............................ 18-Mar-97 74,148,167 50,000,000 General Electric Capital Corp. 5.32%............................ 27-Jan-97 49,807,889 50,000,000 General Electric Capital Corp. 5.32%............................ 05-Feb-97 49,741,389 100,000,000 General Electric Capital Corp. 5.30%............................ 11-Feb-97 99,396,389 50,000,000 General Electric Capital Corp. 5.29%............................ 19-Feb-97 49,639,986 50,000,000 Gillette Co. 5.28%.............................................. 16-Jan-97 49,890,000 48,990,000 Gillette Co. 5.28%.............................................. 05-Mar-97 48,537,332 25,000,000 Household Finance Corp 5.54%.................................... 31-Mar-97* 24,996,274 50,000,000 Household Finance Corp. 5.48%................................... 26-Feb-97* 50,000,000 125,000,000 Household Finance Corp. 5.42%................................... 24-Feb-97* 124,992,731 40,000,000 IBM Credit Corp. 5.46%.......................................... 20-Mar-97* 39,983,808 100,000,000 ING Bank 7.00%.................................................. 02-Jan-97 100,000,000 30,000,000 International Business Machines Corp. 5.46%..................... 20-Jun-97 29,985,608 74,710,000 International Nederlanden US Funding Corp. 5.48%................ 02-Jan-97 74,698,627 90,500,000 International Nederlanden US Funding Corp. 5.48%................ 03-Jan-97 90,472,448 140,000,000 J. P. Morgan & Co., Inc. 6.50%.................................. 02-Jan-97 139,974,722 25,000,000 Key Bank N A Medium Term Note 5.61%............................. 19-Dec-97 24,965,041 100,000,000 Key Bank NA 5.59%............................................... 01-Jan-97* 99,949,370 83,500,000 Key Bank NA 5.51%............................................... 10-Jan-97* 83,450,330 66,000,000 Key Bank NA 5.51%............................................... 10-Jan-97* 65,960,740 95,000,000 KFW International Finance Inc. 5.32%............................ 31-Jan-97 94,578,833 46,000,000 M & I Madison Bank 5.66%........................................ 14-Jan-97* 46,004,554 60,000,000 MCI Communications 5.32%........................................ 27-Jun-97 58,430,600 62,000,000 MCI Communications 5.31%........................................ 22-May-97 60,710,555 65,000,000 MCI Communications 5.31%........................................ 27-May-97 63,600,225 35,000,000 MCI Communications 5.31%........................................ 19-Jun-97 34,127,537 160,000,000 Merrill Lynch & Co., Inc. 6.75%................................. 02-Jan-97 159,970,000 50,000,000 Merrill Lynch & Co., Inc. 5.35%................................. 21-Jan-97 49,851,389 100,000,000 Merrill Lynch & Co., Inc. 5.32%................................. 12-Feb-97 99,379,333 100,000,000 Merrill Lynch & Co., Inc. 5.30%................................. 24-Mar-97 98,792,778 200,000,000 Morgan Stanley Group Inc. 6.79%................................. 02-Jan-97 199,962,278 25,000,000 Morgan Guaranty Trust Co. 5.95%................................. 06-Jun-97 24,994,871 The accompanying notes are an integral part of the financial statements. SAI-232 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (Continued) (showing percentage of total value of investments) December 31, 1996 PRINCIPAL MATURITY AMORTIZED AMOUNT DATE COST - -------------- --------------------------------------------------------------- ------------ -------------- $ 25,000,000 Morgan Guaranty Trust Co. 5.85%................................. 09-May-97 $ 25,000,000 30,200,000 Morgan Guaranty Trust Co. 5.73%................................. 12-Aug-97 30,154,520 50,000,000 Morgan Guaranty Trust Co. 5.47%................................. 07-Jan-97 50,000,082 75,000,000 Morgan Guaranty Trust Co. 5.38%................................. 14-Feb-97* 74,952,515 55,000,000 Morgan Guaranty Trust Co. 5.39%................................. 01-Jan-97* 54,990,893 85,000,000 Morgan Guaranty Trust Co. 5.08%................................. 28-Feb-97 84,923,661 50,000,000 Morgan Guaranty Trust Co. 4.90%................................. 13-Feb-97 49,993,961 100,000,000 National Australia Bank Ltd. 5.50%.............................. 06-Jan-97 100,000,000 25,000,000 National Australia Bank Ltd. 5.39%.............................. 06-Feb-97 24,999,652 50,000,000 National Australia Bank Ltd. 5.38%.............................. 22-Jan-97 50,000,000 50,000,000 National Australia Funding 5.45%................................ 13-Jan-97 49,909,167 106,000,000 National Westminster Bank PLC 5.51%............................. 06-Jan-97 106,000,435 100,000,000 National Westminster Bank PLC 5.41%............................. 10-Feb-97 100,001,101 25,000,000 NationsBank Corp. 5.65%......................................... 16-Apr-97 24,975,743 120,000,000 Norwest Corp. 4.96%............................................. 20-Feb-97 120,000,000 70,600,000 Oesterreichische Kontrollbank 5.33%............................. 31-Jan-97 70,286,712 80,000,000 Pfizer Incorporated 5.45%....................................... 05-Mar-97 79,237,000 35,000,000 Pfizer Incorporated 5.40%....................................... 02-Apr-97 34,522,250 50,000,000 PNC Bank NA 5.56%............................................... 21-Jan-97* 49,994,608 29,000,000 PNC Bank NA 5.50%............................................... 13-Jan-97* 28,989,475 50,000,000 PNC Bank NA 5.46%............................................... 02-Jan-97* 49,975,635 25,000,000 Rabobank 5.47%.................................................. 07-Jan-97 25,000,041 25,000,000 Rabobank NA 5.25%............................................... 11-Mar-97 25,000,455 63,000,000 Student Loan Marketing Association 5.99%........................ 18-Sep-97 63,001,705 53,000,000 Student Loan Marketing Association 5.62%........................ 29-Oct-97 52,965,909 20,000,000 Sudwestdeutsche Landesbank 5.51%................................ 28-Apr-97 20,001,378 40,000,000 Sudwestdeutsche Landesbank 5.46%................................ 19-Mar-97 39,998,030 60,000,000 Suntrust Banks Inc. 6.75%....................................... 02-Jan-97 60,000,000 8,302,000 Svenska Grand Cayman 6.75%...................................... 02-Jan-97 8,302,000 50,000,000 Svenska Handelsbanken 5.75%..................................... 22-May-97 49,990,752 300,000,000 Swiss Bank Corp. 6.50%.......................................... 02-Jan-97 300,000,000 20,000,000 Swiss Bank Corp. 5.40%.......................................... 03-Feb-97 19,999,396 75,000,000 Tiers Trust 5.64%............................................... 15-Jan-97* 75,000,000 175,000,000 UBS Finance Delaware Inc. 5.55%................................. 21-Jan-97 174,460,417 25,000,000 United States Treasury Notes 7.50%.............................. 31-Jan-97 25,049,932 60,000,000 United States Treasury Notes 6.88%.............................. 28-Feb-97 60,153,360 30,000,000 United States Treasury Notes 6.63%.............................. 31-Mar-97 30,078,699 50,000,000 US National Bank 5.52%.......................................... 16-Jan-97* 49,988,683 100,000,000 US National Bank 5.29%.......................................... 01-Jan-97* 99,974,405 50,000,000 Vermont American Corp. 5.47%.................................... 27-Jan-97 49,802,472 50,000,000 Wachovia Bank NA 5.47%.......................................... 12-Jan-97* 49,995,775 The accompanying notes are an integral part of the financial statements. SAI-233 STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (Concluded) (showing percentage of total value of investments) December 31, 1996 PRINCIPAL MATURITY AMORTIZED AMOUNT DATE COST - -------------- --------------------------------------------------------------- ------------ -------------- $ 50,000,000 Wachovia Bank NA 5.44%.......................................... 07-Jan-97* $ 49,993,879 125,000,000 Wachovia Bank NA 5.53%.......................................... 17-Jan-97* 124,994,898 25,000,000 Walt Disney Co. 5.26%........................................... 14-Feb-97 24,839,278 150,000,000 Westdeutsche Landesbank 5.75%................................... 10-Jan-97 150,000,000 100,000,000 Westdeutsche Landesbank 5.63%................................... 17-Jan-97 100,000,000 58,000,000 Westdeutsche Landesbank 5.40%................................... 03-Feb-97 57,989,882 24,000,000 Westdeutsche Landesbank 5.38%................................... 12-Feb-97 23,998,658 115,000,000 Westpac Banking Corp. 6.24%..................................... 04-Sep-97 115,000,000 30,000,000 Westpac Banking Corp. 5.92%..................................... 28-Aug-97 29,996,243 50,000,000 Westpac Banking Corp. 5.81%..................................... 09-Apr-97 49,998,715 25,000,000 Westpac Banking Corp. 5.61%..................................... 02-Apr-97 24,998,804 50,000,000 Westpac Banking Corp. 5.53%..................................... 14-Mar-97 49,998,106 20,000,000 Westpac Banking Corp. 5.53%..................................... 24-Jan-97* 20,006,199 75,000,000 Westpac Banking Corp. 5.51%..................................... 19-Jun-97 75,003,426 24,000,000 Westpac Banking Corp. 5.34%..................................... 04-Mar-97 23,997,649 50,000,000 Westpac Banking Corp. 5.15%..................................... 04-Mar-97 49,995,092 25,000,000 Wool International 5.26%........................................ 28-Feb-97 24,788,139 100,000,000 Woolwich Building Society 5.33%................................. 30-Jan-97 99,570,639 - -------------- ------------------------------- ................................------------ -------------- TOTAL SHORT TERM INSTRUMENTS ................................... 13,249,690,110 - -------------- ------------------------------- ................................------------ -------------- SHARES OTHER INVESTMENTS--0% 438 SSgA Money Market Fund (a)...................................... 438 - -------------- ------------------------------- ................................------------ -------------- PRINCIPAL AMOUNT REPURCHASE AGREEMENT--3.6% $500,000,000 Goldman Sachs Government Repo 6.55% (collaterized by US Treasury Notes 6.25%--7.75% due 7/31/98--11/30/99, valued at $505,914,069) .................................................. 02-Jan-97 500,000,000 - -------------- ------------------------------- ................................------------ -------------- TOTAL INVESTMENTS--100%......................................... $13,749,690,548 ============== ============================================================================ ===============
- ------------ (a) Registered Investment Company advised by State Street Global Advisors. * Variable rate security. Rate disclosed is that which was in effect at December 31, 1996. Date disclosed is the next interest rate reset date. The accompanying notes are an integral part of the financial statements. SAI-234 Supplement dated May 1, 1997 to Prospectus dated May 1, 1997 - ------------------------------------------------------------------------------- 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, 1997 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 $3,500, you must receive a Qualified Joint and Survivor Annuity unless your Spouse consents to a different election. 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. 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 $3,500. 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 - 2 - 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 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 5-3/4% 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%. - 3 - 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 / 1.05 = 345.71). If the 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
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. - 4 - 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, 1997 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, 1997 prospectus and Statement of Additional Information. 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 Equitable Companies, Inc., and their subsidiaries managed assets of approximately $239.8 billion as of December 31, 1996, including third party assets of $184.8 billion. Investment Management In providing investment management to the Funds, 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, 1997 Members Retirement Program prospectus. 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 1996 and 1995, the Fund paid $5,682,578 and $6,044,623, 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, 1997 Statement of Additional Information. - 5 - FINANCIAL STATEMENTS The financial statements of the Fund reflect applicable fees, charges and other expenses under the Members 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 - Price Waterhouse LLP 7 Statement of Assets and Liabilities, 8 December 31, 1996 Statement of Operations and Changes in Net Assets for the Years Ended December 31, 1996 and 1995 9 Portfolio of Investments December 31, 1996 10 Notes to Financial Statements 15 - 6 - - ------------------------------------------------------------------------------ REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of The Equitable Life Assurance Society of the United States and the Participants in the American Dental Association Members Retirement Program In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and changes in net assets present fairly, in all material respects, the financial position of Separate Account No. 4 of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 1996 and its results of operations and changes in net assets for each of the two years in the period then ended, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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, 1996 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The selected per unit information (appearing under "Condensed Financial Information" in the prospectus) is presented for the purpose of satisfying regulatory reporting requirements and is not a required part of the basic financial statements. Such selected per unit information has been subjected to auditing procedures applied during the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Price Waterhouse LLP New York, New York February 10, 1997 - 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, 1996 - -----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------- ASSETS: Investments (Notes 2 and 3): Common stocks--at market value (cost: $1,991,952,527) ................................ $2,440,835,888 Preferred stocks--at market value (cost: $1,742,250) ................................. 1,809,000 Long-term debt securities--at value (amortized cost: $2,863,053) ..................... 2,493,750 Participation in Separate Account No. 2A--at amortized cost, which approximates market value, equivalent to 85,593 units at $255.57 ................................. 21,875,326 Cash................................................................................... 2,419,444 Receivables: Securities sold ...................................................................... 18,681,125 Dividends............................................................................. 474,057 - -------------------------------------------------------------------------------------- -------------- Total assets.......................................................................... 2,488,588,590 - -------------------------------------------------------------------------------------- -------------- LIABILITIES: Payables: Securities purchased ................................................................. 13,390,630 Due to Equitable Life's General Account .............................................. 15,548,100 Investment management fees payable ................................................... 7,688 Accrued expenses ...................................................................... 475,122 Amount retained by Equitable Life in Separate Account No. 4 (Note 1) ................. 641,292 - -------------------------------------------------------------------------------------- -------------- Total liabilities..................................................................... 30,062,832 - -------------------------------------------------------------------------------------- -------------- NET ASSETS (NOTE 1): Net assets attributable to participants' accumulations ................................ 2,432,753,839 Reserves and other contract liabilities attributable to annuity benefits ............. 25,771,919 - -------------------------------------------------------------------------------------- -------------- NET ASSETS ............................................................................ $2,458,525,758 ====================================================================================== ==============
See Notes to Financial Statements. - 8 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Operations and Changes in Net Assets - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 - ---------------------------------------------------------------------------- -------------- --------------- FROM OPERATIONS: INVESTMENT INCOME (NOTE 2): Dividends (net of foreign taxes withheld--1996: $62,998 and 1995: $239,657) $ 13,755,557 $ 19,610,344 Interest and amortization of premium ........................................ 292,364 (852,218) - ---------------------------------------------------------------------------- -------------- --------------- Total ....................................................................... 14,047,921 18,758,126 EXPENSES (NOTE 4) ........................................................... (18,524,630) (16,007,109) - ---------------------------------------------------------------------------- -------------- --------------- NET INVESTMENT INCOME (LOSS) ................................................ (4,476,709) 2,751,017 - ---------------------------------------------------------------------------- -------------- --------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2): Realized gain from security and foreign currency transactions .............. 218,176,662 260,870,246 - ---------------------------------------------------------------------------- -------------- --------------- Unrealized appreciation of investments and foreign currency transactions: Beginning of year .......................................................... 290,870,386 41,831,973 End of year ................................................................ 448,580,808 290,870,386 - ---------------------------------------------------------------------------- -------------- --------------- Change in unrealized appreciation/depreciation .............................. 157,710,422 249,038,413 - ---------------------------------------------------------------------------- -------------- --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ............................. 375,887,084 509,908,659 - ---------------------------------------------------------------------------- -------------- --------------- Increase in net assets attributable to operations ........................... 371,410,375 512,659,676 - ---------------------------------------------------------------------------- -------------- --------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ............................................................... 552,427,638 422,289,107 Withdrawals ................................................................. (590,972,941) (474,530,080) - ---------------------------------------------------------------------------- -------------- --------------- Decrease in net assets attributable to contributions and withdrawals ....... (38,545,303) (52,240,973) - ---------------------------------------------------------------------------- -------------- --------------- Decrease in accumulated amount retained by Equitable Life in Separate Account No. 4 (Note 1) ..................................................... 536,145 113,489 - ---------------------------------------------------------------------------- -------------- --------------- INCREASE IN NET ASSETS ...................................................... 333,401,217 460,532,192 NET ASSETS--BEGINNING OF YEAR ............................................... 2,125,124,541 1,664,592,349 - ---------------------------------------------------------------------------- -------------- --------------- NET ASSETS--END OF YEAR ..................................................... $2,458,525,758 $2,125,124,541 ============================================================================ ============== ===============
See Notes to Financial Statements. - 9 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1996
- ---------------------------------------------------------- ------------ --------------- NUMBER OF VALUE SHARES (NOTE 3) - ---------------------------------------------------------- ------------ --------------- COMMON STOCKS: BUSINESS SERVICES ENVIRONMENTAL CONTROL (1.7%) Republic Industries, Inc.* ................................ 1,355,000 $ 42,259,063 --------------- PRINTING, PUBLISHING & BROADCASTING (0.1%) Australis Media Ltd. Conv. Note* .......................... 25,000,000 2,483,906 --------------- PROFESSIONAL SERVICES (0.7%) Ceridian Corp.* ........................................... 170,000 6,885,000 Service Corp. International ............................... 360,000 10,080,000 --------------- 16,965,000 --------------- TOTAL BUSINESS SERVICES (2.5%) ............................ 61,707,969 --------------- CONSUMER CYCLICALS AIRLINES (6.9%) America West Airlines, Inc. (Class B)* .................... 1,250,000 19,843,750 Continental Airlines, Inc. (Class B)* ..................... 1,300,000 36,725,000 Delta Air Lines, Inc. ..................................... 375,000 26,578,125 KLM Royal Dutch Airlines .................................. 230,000 6,411,250 Northwest Airlines Corp. (Class A)* ....................... 1,400,000 54,775,000 UAL Corp.* ................................................ 400,000 25,000,000 --------------- 169,333,125 --------------- FOOD SERVICES, LODGING (1.2%) Host Marriott Corp.* ...................................... 1,000,000 16,000,000 La Quinta Motor Inns, Inc. ................................ 700,000 13,387,500 --------------- 29,387,500 --------------- HOUSEHOLD FURNITURE, APPLIANCES (1.2%) Industrie Natuzzi (ADR) ................................... 1,000,000 23,000,000 Sunbeam Corp. ............................................. 255,800 6,586,850 --------------- 29,586,850 --------------- LEISURE-RELATED (0.3%) Carnival Corp. ............................................ 225,000 7,425,000 --------------- RETAIL--GENERAL (1.6%) AutoZone, Inc.* ........................................... 500,000 13,750,000 CompUSA, Inc.* ............................................ 1,200,000 24,750,000 --------------- 38,500,000 --------------- TOTAL CONSUMER CYCLICALS (11.2%) .......................... 274,232,475 --------------- - 10 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1996 (Continued) - ---------------------------------------------------------- ------------ --------------- NUMBER OF VALUE SHARES (NOTE 3) - ---------------------------------------------------------- ------------ --------------- CONSUMER NONCYCLICALS DRUGS (1.5%) Centocor, Inc.* ........................................... 750,000 $ 26,812,500 Geltex Pharmaceuticals, Inc.* ............................. 210,000 5,092,500 MedImmune, Inc.* .......................................... 300,000 5,100,000 --------------- 37,005,000 --------------- HOSPITAL SUPPLIES & SERVICES (1.9%) Columbia/HCA Healthcare Corp. ............................. 540,000 22,005,000 Oxford Health Plans, Inc.* ................................ 200,000 11,712,500 Saint Jude Medical, Inc.* ................................. 310,000 13,213,750 --------------- 46,931,250 --------------- SOAPS & TOILETRIES (1.0%) Colgate Palmolive Co. ..................................... 275,000 25,368,750 --------------- TOBACCO (6.7%) Loews Corp. ............................................... 1,750,000 164,937,500 --------------- TOTAL CONSUMER NONCYCLICALS (11.1%) ....................... 274,242,500 --------------- CREDIT-SENSITIVE BANKS (1.0%) First Union Corp. ......................................... 320,000 23,680,000 --------------- FINANCIAL SERVICES (8.0%) A.G. Edwards, Inc. ........................................ 300,000 10,087,500 Dean Witter Discover & Co. ................................ 420,000 27,825,000 Legg Mason, Inc. .......................................... 935,000 35,997,500 MBNA Corp. ................................................ 900,000 37,350,000 Merrill Lynch & Co., Inc. ................................. 1,000,000 81,500,000 Resource Bancshares Mortgage Group, Inc. .................. 248,800 3,545,400 --------------- 196,305,400 --------------- INSURANCE (11.4%) CNA Financial Corp.* ...................................... 1,700,000 181,900,000 IPC Holdings Ltd. ......................................... 207,400 4,640,575 Life Re Corp. ............................................. 721,000 27,848,625 NAC Re Corp. .............................................. 564,600 19,125,825 PMI Group, Inc. ........................................... 12,600 697,725 Travelers Group, Inc. ..................................... 1,020,000 46,282,500 --------------- 280,495,250 --------------- - 11 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1996 (Continued) - ---------------------------------------------------------- ------------ --------------- NUMBER OF VALUE SHARES (NOTE 3) - ---------------------------------------------------------- ------------ --------------- UTILITY--TELEPHONE (7.8%) Frontier Corp. ............................................ 365,000 $ 8,258,125 Telephone & Data Systems, Inc. ............................ 4,550,000 164,937,500 WorldCom, Inc.* ........................................... 755,000 19,677,188 --------------- 192,872,813 --------------- TOTAL CREDIT-SENSITIVE (28.2%) ............................ 693,353,463 --------------- ENERGY COAL & GAS PIPELINES (0.2%) Nabors Industries, Inc.* .................................. 250,000 4,812,500 --------------- OIL--DOMESTIC (0.5%) Ultramar Diamond Shamrock Corp. ........................... 408,000 12,903,000 --------------- OIL--INTERNATIONAL (0.0%) Tatneft (ADR)* ............................................ 19,000 912,000 --------------- OIL--SUPPLIES & CONSTRUCTION (8.8%) Coflexip* ................................................. 75,000 1,968,750 Diamond Offshore Drilling, Inc.* .......................... 350,000 19,950,000 ENSCO International, Inc.* ................................ 550,000 26,675,000 Marine Drilling Co., Inc.* ................................ 56,500 1,112,344 Noble Drilling Corp.* ..................................... 1,100,000 21,862,500 Parker Drilling Co.* ...................................... 4,900,000 47,162,500 Rowan Cos., Inc.* ......................................... 4,000,000 90,500,000 Transocean Offshore, Inc. ................................. 110,000 6,888,750 --------------- 216,119,844 --------------- TOTAL ENERGY (9.5%) ....................................... 234,747,344 --------------- TECHNOLOGY ELECTRONICS (13.7%) Applied Materials, Inc.* .................................. 250,000 8,984,375 Cisco Systems, Inc.* ...................................... 3,000,000 190,875,000 IDT Corp.* ................................................ 155,000 1,705,000 LSI Logic Corp.* .......................................... 210,000 5,617,500 Seagate Technology, Inc.* ................................. 2,150,000 84,925,000 Teradyne, Inc.* ........................................... 603,000 14,698,125 3Com Corp.* ............................................... 400,000 29,350,000 --------------- 336,155,000 --------------- OFFICE EQUIPMENT (1.7%) Compaq Computer Corp.* .................................... 400,000 29,700,000 Sterling Software, Inc.* .................................. 376,700 11,913,138 --------------- 41,613,138 --------------- - 12 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1996 (Continued) - ---------------------------------------------------------- ------------ --------------- NUMBER OF VALUE SHARES (NOTE 3) - ---------------------------------------------------------- ------------ --------------- OFFICE EQUIPMENT SERVICES (4.5%) Checkfree Corp.* .......................................... 416,700 $ 7,135,988 Electronic Data Systems Corp. ............................. 900,000 38,925,000 Informix Corp.* ........................................... 1,150,000 23,431,250 Oracle Corp.* ............................................. 400,000 16,700,000 Sterling Commerce, Inc.* .................................. 700,000 24,675,000 --------------- 110,867,238 --------------- TELECOMMUNICATIONS (16.8%) American Online, Inc.* .................................... 150,000 4,987,500 American Satellite Network--Rights* ....................... 70,000 0 Cellular Communications Puerto Rico, Inc.* ................ 482,200 9,523,450 Colt Telecom Group PLC (ADR)* ............................. 175,000 3,368,750 Deutsche Telekom AG (ADR)* ................................ 1,300,000 26,487,500 DSC Communications Corp.* ................................. 720,000 12,870,000 MFS Communications Co., Inc.* ............................. 820,000 44,690,000 Millicom International Cellular S.A.* ..................... 1,775,000 57,021,874 Netscape Communications Corp.* ............................ 400,000 22,750,000 Nokia Corp. (ADR) ......................................... 600,000 34,575,000 Palmer Wireless, Inc.* .................................... 102,000 1,071,000 Rogers Cantel Mobile Communications, Inc. (Class B)(ADR)* 1,364,100 26,429,437 Scientific Atlanta, Inc. .................................. 2,650,400 39,756,000 U.S. Cellular Corp.* ...................................... 3,200,000 89,200,000 Vanguard Cellular Systems, Inc. (Class A)* ................ 2,615,000 41,186,250 --------------- 413,916,761 --------------- TOTAL TECHNOLOGY (36.7%) .................................. 902,552,137 --------------- TOTAL COMMON STOCKS (99.2%) (Cost $1,991,952,527)..................................... 2,440,835,888 --------------- PREFERRED STOCKS: CONSUMER CYCLICALS AIRLINES (0.1%) Continental Airlines Financial Trust 8.5% Conv., 2020 ................................... 27,000 1,809,000 --------------- TOTAL CONSUMER CYCLICALS (0.1%) ........................... 1,809,000 --------------- TOTAL PREFERRED STOCKS (0.1%) (Cost $1,742,250) ........................................ 1,809,000 ---------------
- 13 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 1996 (Concluded)
- ------------------------------------------------------------------------ ------------ -------------- PRINCIPAL VALUE AMOUNT (NOTE 3) - ------------------------------------------------------------------------ ------------ -------------- LONG-TERM DEBT SECURITIES: TECHNOLOGY TELECOMMUNICATIONS (0.1%) U.S. Cellular Corp., Zero Coupon Conv., 2015 ................................................ $7,500,000 $ 2,493,750 -------------- TOTAL TECHNOLOGY (0.1%) ................................................. 2,493,750 -------------- TOTAL LONG-TERM DEBT SECURITIES (0.1%) (Amortized Cost $2,863,053) ............................................ 2,493,750 -------------- PARTICIPATION IN SEPARATE ACCOUNT NO. 2A, at amortized cost, which approximates market value, equivalent to 85,593 units at $255.57 (0.9%) each ................................................. 21,875,326 -------------- TOTAL INVESTMENTS (100.3%) (Cost/Amortized Cost $2,018,433,156) ................................... 2,467,013,964 LIABILITIES IN EXCESS OF CASH AND RECEIVABLES (-0.3%) ................... (7,846,914) AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 4 (0.0%)(NOTE 1) .................................. (641,292) -------------- NET ASSETS (100.0%) ..................................................... $2,458,525,758 ============== Reserves attributable to participants' accumulations .................... $2,432,753,839 Reserves and other contract liabilities attributable to annuity benefits 25,771,919 -------------- NET ASSETS .............................................................. $2,458,525,758 ==============
* Non-income producing. See Notes to Financial Statements. - 14 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements 1. Separate Account No. 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 The Equitable Companies Incorporated, was established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the applicable contracts, the net assets in the Fund are not chargeable with liabilities arising out of any other business of Equitable Life. The excess of assets over reserves and other contract liabilities amounting to $641,292 as shown in the Statements of Assets and Liabilities in Separate Account No. 4 may be transferred to Equitable Life's General Account. Interests of retirement and investment plans for Equitable Life employees, managers, and agents in Separate Account No. 4 aggregated $288,921,270 (11.8%), at December 31, 1996 and $246,531,777 (11.6%), at December 31, 1995, of the net assets in 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. Equitable Life and Alliance seek to obtain the best price and execution of all orders placed for the Fund considering all circumstances. In addition to using brokers and dealers to execute portfolio security transactions for accounts under their management, Equitable Life and Alliance 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 accompanying financial statements are prepared in conformity with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions 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. 2. Security transactions are recorded on the trade date. Amortized cost of debt securities consists of cost adjusted, where applicable, 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. 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 Statements of Operations and Changes in Net Assets. - 15 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) Equitable Life's internal short-term investment account, Separate Account No. 2A, was established to provide a more flexible and efficient vehicle to combine and invest temporary cash positions of certain eligible accounts (Participating Funds) under Equitable Life's management. Separate Account No. 2A invests in debt securities maturing in sixty days or less from the date of acquisition. At December 31, 1996, the amortized cost of investments held in Separate Account No. 2A consists of the following: - -----------------------------------------------------------------------------
AMORTIZED COST % - -------------------------------------------------------- -------------- -------- Commercial Paper, 5.3%-6.9% due 01/02/97 through 02/18/97................................................ $292,301,486 87.9% Time Deposits, 6.5% due 01/02/97......................... 40,000,000 12.0 - -------------------------------------------------------- -------------- -------- Total Investments........................................ 332,301,486 99.9 Cash and Receivables Less Liabilities.................... 175,640 0.1 - -------------------------------------------------------- -------------- -------- Net Assets of Separate Account No. 2A.................... $332,477,126 100.0% ======================================================== ============== ======== Units Outstanding........................................ 1,300,905 Unit Value............................................... $255.57 - -------------------------------------------------------- -------------- --------
Participating Funds purchase or redeem units depending on each participating account's excess cash availability or cash needs to meet its liabilities. Separate Account No. 2A is not subject to investment management fees. Separate Account No. 2A is valued daily at amortized cost, which approximates market value. For 1996 and 1995, investment security transactions, excluding short-term debt securities, were as follows: - -----------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 4 ------------------------------ COST OF NET PROCEEDS PURCHASES OF SALES - ----------------------------------------------- -------------- -------------- Stocks and long-term corporate debt securities: 1996.......................................... $2,439,864,229 $2,487,456,851 1995.......................................... 2,037,876,834 2,082,648,235 U.S. Government obligations: 1996.......................................... -- -- 1995.......................................... -- --
---------------------------------------------------------------------------- 3. 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 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. 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. - 16 - - ----------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) Long-term 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. Separate Account No. 2A is valued daily at amortized cost, which approximates market value. Short-term debt securities purchased directly by the Funds 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. 4. Charges and fees are deducted in accordance with the terms of the various contracts which participate in the Fund. With respect to the American Dental Association Members Retirement Program, these expenses consist of investment management and accounting fees, program expense charge, direct expenses and record maintenance and report fee. These charges and fees are paid to Equitable Life by the Fund and are recorded as expenses in the accompanying Statements of Operations and Changes in Net Assets. 5. No Federal income tax based on net income or realized and unrealized capital gains was applicable to contracts participating in the Fund for the two years ended December 31, 1996, by reason of applicable provisions of the Internal Revenue Code and no Federal income tax payable by Equitable Life for such years will affect such contracts. Accordingly, no Federal income tax provision is required. - 17 - 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, 1996 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Notes to Financial Statements 2. Separate Account No. 197: -Report of Independant Accountants -Statement of Assets and Liabilities, December 31, 1996 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Notes to Financial Statements 3. Separate Account No. 198: -Report of Independant Accountants -Statement of Assets and Liabilities, December 31, 1996 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Notes to Financial Statements 4. The Equitable Life Assurance Society of the United States: -Report of Independent Accountants - Price Waterhouse -Consolidated Balance Sheets, December 31, 1996 and 1995 -Consolidated Statements of Earnings for the Years Ended December 31, 1996, 1995 and 1994 -Consolidated Statements of Equity for Years Ended December 31, 1996, 1995 and 1994 -Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 -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, 1996 -Statements of Operations for the Year Ended December 31, 1996 -Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 1996 C-1 6. Lifecycle Group Trust - Moderate: -Report of Independent Accountants - Lifecycle Group Trust - Moderate -Statements of Assets and Liabilities, December 31, 1996 -Statements of Operations for the Year Ended December 31, 1996 -Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 1996 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, 1996 -Combined Statements of Operations for the Years Ended December 31, 1996 and 1995 -Combined Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 Schedule of Investments, December 31, 1996 8. Russell 2000 Fund: -Report of Independent Accountants - Russell 2000 Fund -Statements of Assets and Liabilities, December 31, 1996 -Statements of Operations for the Year Ended December 31, 1996 -Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 1996 9. Daily EAFE Fund: -Report of Independent Accountants - Daily EAFE Fund -Statements of Assets and Liabilities, December 31, 1996 -Statements of Operations for the Year Ended December 31, 1996 -Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 1996 10. Daily Government/Corporate Bond Fund: -Report of Independent Accountants - Daily Government/Corporate Bond Fund -Statements of Assets and Liabilities, December 31, 1996 -Statements of Operations for the Year Ended December 31, 1996 -Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 1996 C-2 11. Short Term Investment Fund: -Report of Independent Accountants - Short Term Investment Fund -Statements of Assets and Liabilities, December 31, 1996 -Statements of Operations for the Year Ended December 31, 1996 -Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 1996 (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. (Filed as Exhibit 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. 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, adopted August 6, 1992, incorporated by reference to Post-Effective Amendment No. 2 to Registrant No. 33-46995 on Form N-3 of Registrant, filed on March 2, 1993. (b) By-Laws of The Equitable Life Assurance Society of the United States, as amended through July 22, 1992, incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-46995 on Form N-3 of Registrant, filed on March 2, 1993. (c) Copy of the Certificate of Amendment to the Restated Charter of The Equitable Life Assurance Society of the United States, adopted November 18, 1993, 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. (d) By-Laws of The Equitable Life Assurance Society of the United States, as amended November 21, 1996. (e) Copy of the Restated Charter of The Equitable Life Assurance Society of the United States, as amended January 1, 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. (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. (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. (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. (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. (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. (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. (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. C-8 9. Not applicable. 10. (a) Consent of Price Waterhouse LLP. (b) Powers of Attorney (Equitable). (c) Powers of Attorney (State Street), incorporated by reference to Registration No. 33-75616 of Registrant, filed on April 28, 1995. 11. Not applicable. 12. Not applicable. 13. Not applicable. 14. Not Applicable. 27. Financial Data Schedule. 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 the 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 - --------- Claude Bebear Director AXA-UAP 23, Avenue Matignon 75008 Paris, France Christopher J. Brocksom Director AXA Equity & Law Elbury 9 Weedon Lane Buckinghamshire HP 6505 England Francoise Colloc'h Director AXA-UAP 23, Avenue Matignon 75008 Paris, France Henri de Castries Director AXA-UAP 23, Avenue Matignon 75008 Paris, France Joseph L. Dionne Director The McGraw-Hill Companies 1221 Avenue of the Americas New York, NY 10020 William T. Esrey Director Sprint Corporation P.O. Box 11315 Kansas City, MO 64112 Jean-Rene Fourtou Director Rhone-Poulenc S.A. 25 Quai Paul Doumer 92408 Courbevoie Cedex, France C-10 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- Norman C. Francis Director Xavier University of Louisiana 7325 Palmetto Street New Orleans, LA 70125 Donald J. Greene Director LeBouef, Lamb, Greene & MacRae 125 West 55th Street New York, NY 10019-4513 John T. Hartley Director Harris Corporation 1025 NASA Boulevard Melbourne, FL 32919 John H.F. Haskell, Jr. Director Dillion, Read & Co., Inc. 535 Madison Avenue New York, NY 10028 Mary R. (Nina) Henderson Director CPC International, Inc. International Plaza P.O. Box 8000 Englewood Cliffs, NJ 07632-9976 W. Edwin Jarmain Director Jarmain Group Inc. 121 King Street West Suite 2525 Toronto, Ontario M5H 3T9, Canada G. Donald Johnston, Jr. Director 184-400 Ocean Road John's Island Vero Beach, FL 32963 Winthrop Knowlton Director Knowlton Brothers, Inc. 530 Fifth Avenue New York, NY 10036 Arthur L. Liman Director Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019 C-11 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE - ---------------- --------- George T. Lowy Director Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 Didier Pineau-Valencienne Director Schneider S.A. 64/70 Avenue Jean-Baptiste Clement 92646 Boulogne-Billancourt Cedex France George J. Sella, Jr. Director P.O. Box 397 Newton, NJ 07860 Dave H. Williams Director Alliance Capital Management Corporation 1345 Avenue of the Americas New York, NY 10105 OFFICER-DIRECTORS - ----------------- *James M. Benson President and Director (until 5/1/97) *William T. McCaffrey Senior Executive Vice President, Chief Operating Officer and Director *Joseph J. Melone Chairman of the Board, Chief Executive Officer and Director; President (effective 5/1/97) OTHER OFFICERS - -------------- *A. Frank Beaz Senior Vice President *Leon Billis Senior Vice President *Harvey Blitz Senior Vice President and Deputy Chief Financial Officer *Kevin R. Byrne Vice President and Treasurer *Jerry M. de St. Paer Executive Vice President *Gordon G. Dinsmore Senior Vice President *Alvin H. Fenichel Senior Vice President and Controller C-12 *Paul J. Flora Senior Vice President and Auditor *Robert E. Garber Executive Vice President and General Counsel *Donald R. Kaplan Vice President and Chief Compliance Officer and Associate General Counsel *Michael S. Martin Senior Vice President *Peter D. Noris Executive Vice President and Chief Investment Officer *Anthony C. Pasquale Senior Vice President *Pauline Sherman Vice President, Secretary and Associate General Counsel *Samuel B. Shlesinger Senior Vice President *Richard V. Silver Senior Vice President and Deputy General Counsel *Jose Suquet Executive Vice President and Chief Agency Officer *Stanley B. Tulin Senior Executive Vice President and Chief Financial Officer
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 The Equitable Companies Incorporated (the "Holding Company"), a publicly traded company. The largest stockholder of the Holding Company is AXA-UAP. As of January 1, 1997, AXA-UAP beneficially owned 63.8% of the outstanding common stock of the Holding Company (assuming conversion of the convertible preferred stock held by AXA-UAP). Under its investment arrangements with Equitable Life and the Holding Company, AXA-UAP is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable Life. AXA-UAP, a French company, is the holding company for an international group of insurance and related financial services companies. C-14 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES The Equitable Companies Incorporated (l991) (Delaware) Donaldson, Lufkin & Jenrette, Inc. (1993) (Delaware) (44.1%) (See Addendum B(1) for subsidiaries) The Equitable Life Assurance Society of the United States (1859) (New York) (a)(b) The Equitable of Colorado, Inc. (l983) (Colorado) EVLICO, INC. (1995) (Delaware) EVLICO East Ridge, Inc. (1995) (California) GP/EQ Southwest, Inc. (1995) (Texas) (5.885%) Franconom, Inc. (1985) (Pennsylvania) Frontier Trust Company (1987) (North Dakota) Gateway Center Buildings, Garage, and Apartment Hotel, Inc. (inactive) (pre-l970) (Pennsylvania) Equitable Deal Flow Fund, L.P. Equitable Managed Assets (Delaware) EREIM LP Associates (99%) EML Associates, L.P. (19.8%) Alliance Capital Management L.P. (2.71% limited partnership interest) ACMC, Inc. (1991) (Delaware)(s) Alliance Capital Management L.P. (1988) (Delaware) (49.09% limited partnership interest) EVCO, Inc. (1991) (New Jersey) EVSA, Inc. (1992) (Pennsylvania) Prime Property Funding, Inc. (1993) (Delaware) Wil Gro, Inc. (1992) (Pennsylvania) Equitable Underwriting and Sales Agency (Bahamas) Limited (1993) (Bahamas) (a) Registered Broker/Dealer (b) Registered Investment Advisor C-15 The Equitable Companies Incorporated (cont.) Donaldson Lufkin & Jenrette, Inc. The Equitable Life Assurance Society of the United States (cont.) Fox Run Inc. (1994) (Massachusetts) STCS, Inc. (1992) (Delaware) CCMI Corporation (1994) (Maryland) FTM Corporation (1994) (Maryland) HVM Corporation (1994) (Maryland) Equitable BJVS, Inc. (1992) (California) Equitable Rowes Wharf, Inc. (1995) (Massachusetts) GP/EQ Southwest, Inc. (1995) (Texas) (94.132%) Camelback JVS, Inc. (1995) (Arizona) ELAS Realty, Inc. (1996) (Delaware) Equitable Realty Assets Corporation (1983) (Delaware) 100 Federal Street Realty Corporation (Massachusetts) Equitable Structured Settlement Corporation (1996) (Delaware) Equitable Holding Corporation (1985) (Delaware) EQ Financial Consultants, Inc. (formerly Equico Securities, Inc.) (l97l) (Delaware) (a) (b) ELAS Securities Acquisition Corp. (l980) (Delaware) 100 Federal Street Funding Corporation (Massachusetts) EquiSource of New York, Inc. (1986) (New York) (See Addendum A for subsidiaries) Equitable Casualty Insurance Company (l986) (Vermont) EREIM LP Corp. (1986) (Delaware) EREIM LP Associates (1%) EML Associates (.02%) Six-Pac G.P., Inc. (1990) (Georgia) Equitable Distributors, Inc. (1988) (Delaware) (a) (a) Registered Broker/Dealer (b) Registered Investment Advisor C-16 The Equitable Companies Incorporated (cont.) Donaldson Lufkin & Jenrette, Inc. The Equitable Life Assurance Society of the United States (cont.) Equitable Holding Corporation (cont.) Equitable JVS, Inc. (1988) (Delaware) Astor/Broadway Acquisition Corp. (1990) (New York) Astor Times Square Corp. (1990) (New York) PC Landmark, Inc. (1990) (Texas) Equitable JVS II, Inc. (1994) (Maryland) EJSVS, Inc. (1995) (New Jersey) Donaldson, Lufkin & Jenrette, Inc. (1985 by EIC; 1993 by EQ and EHC) (Delaware) (36.1%) (See Addendum B(1) for subsidiaries) JMR Realty Services, Inc. (1994) (Delaware) Equitable Structured Settlement Corporation (1996) (Delaware) Equitable Investment Corporation (l97l) (New York) Stelas North Carolina Limited Partnership (50% limited partnership interest) (l984) Equitable JV Holding Corporation (1989) (Delaware) Alliance Capital Management Corporation (l991) (Delaware) (b) (See Addendum B(2) for subsidiaries) Equitable Capital Management Corporation (l985) (Delaware) (b) Alliance Capital Management L.P. (1988) (Delaware) (14.67% limited partnership interest) EQ Services, Inc. (1992) (Delaware) Equitable Agri-Business, Inc. (1984) Delaware Equitable Real Estate Investment Management, Inc. (l984) (Delaware) (b) (See Addendum B(3) for subsidiaries) (a) Registered Broker/Dealer (b) Registered Investment Advisor C-17 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES ADDENDUM A - SUBSIDIARY OF EQUITABLE HOLDING CORPORATION HAVING MORE THAN FIVE SUBSIDIARIES EquiSource of New York, Inc. (formerly Traditional Equinet Business Corporation of New York) has the following subsidiaries that are brokerage companies to make available to Equitable Agents within each state traditional (non-equity) products and services not manufactured by Equitable: EquiSource of Alabama, Inc. (1986) (Alabama) EquiSource of Arizona, Inc. (1986) (Arizona) EquiSource of Arkansas, Inc. (1987) (Arkansas) EquiSource Insurance Agency of California, Inc. (1987) (California) EquiSource of Colorado, Inc. (1986) (Colorado) EquiSource of Delaware, Inc. (1986) (Delaware) EquiSource of Hawaii, Inc. (1987) (Hawaii) EquiSource of Maine, Inc. (1987) (Maine) EquiSource Insurance Agency of Massachusetts, Inc. (1988) (Massachusetts) EquiSource of Montana, Inc. (1986) (Montana) EquiSource of Nevada, Inc. (1986) (Nevada) EquiSource of New Mexico, Inc. (1987) (New Mexico) EquiSource of Pennsylvania, Inc. (1986) (Pennsylvania) EquiSource Insurance Agency of Utah, Inc. (1986) (Utah) EquiSource of Washington, Inc. (1987) (Washington) EquiSource of Wyoming, Inc. (1986) (Wyoming) C-18 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES ADDENDUM B - INVESTMENT SUBSIDIARIES HAVING MORE THAN FIVE SUBSIDIARIES Donaldson, Lufkin & Jenrette, Inc. has the following subsidiaries, and approximately 150 other subsidiaries, most of which are special purpose subsidiaries (the number fluctuates according to business needs): Donaldson, Lufkin & Jenrette, Securities Corporation (1985) (Delaware) (a) (b) Wood, Struthers & Winthrop Management Corp. (1985) (Delaware) (b) Autranet, Inc. (1985) (Delaware) (a) DLJ Real Estate, Inc. DLJ Capital Corporation (b) DLJ Mortgage Capital, Inc. (1988) (Delaware) Column Financial, Inc. (1993) (Delaware) (50%) Alliance Capital Management Corporation (as general partner) (b)has the following subsidiaries: Alliance Capital Management L.P. (1988) (Delaware) (b) Alliance Capital Management Corporation of Delaware, Inc. (Delaware) Alliance Fund Services, Inc. (Delaware) (a) Alliance Fund Distributors, Inc. (Delaware) (a) Alliance Capital Oceanic Corp. (Delaware) Alliance Capital Management Australia Pty. Ltd. (Australia) Meiji - Alliance Capital Corp. (Delaware) (50%) Alliance Capital (Luxembourg) S.A. (99.98%) Alliance Eastern Europe Inc. (Delaware) Alliance Barra Research Institute, Inc. (Delaware) (50%) Alliance Capital Management Canada, Inc. (Canada) (99.99%) Alliance Capital Management (Brazil) Llda Alliance Capital Global Derivatives Corp. (Delaware) Alliance International Fund Services S.A. (Luxembourg) Alliance Capital Management (India) Ltd. (Delaware) Alliance Capital Mauritius Ltd. Alliance Corporate Finance Group, Incorporated (Delaware) Equitable Capital Diversified Holdings, L.P. I Equitable Capital Diversified Holdings, L.P. II Curisitor Alliance L.L.C. (Delaware) Curisitor Holdings Limited (UK) Alliance Capital Management (Japan), Inc. Alliance Capital Management (Asia) Ltd. Alliance Capital Management (Turkey), Ltd. Cursitor Alliance Management Limited (UK) (a) Registered Broker/Dealer (b) Registered Investment Advisor C-19 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES ADDENDUM B - (CONT.) INVESTMENT SUBSIDIARIES HAVING MORE THAN FIVE SUBSIDIARIES Equitable Real Estate Investment Management, Inc. (b) has the following subsidiaries: Equitable Realty Portfolio Management, Inc. (1984) (Delaware) EQK Partners (100% general partnership interest) Compass Management and Leasing Co. (formerly EREIM, Inc.) (1984) (Colorado) Equitable Real Estate Capital Markets, Inc. (1987) (Delaware) (a) EPPNLP Corp. (1987) (Delaware) Equitable Pacific Partners Corp. (1987) (Delaware) Equitable Pacific Partners Limited Partnership EREIM Managers Corp. (1986) (Delaware) ML/EQ Real Estate Portfolio, L.P. EML Associates, L.P. (80%) Compass Retail, Inc. (1990) (Delaware) Compass Management and Leasing, Inc. (1991) (Delaware) CJVS, Inc. (1994) (California) Compass Cayman (1996) (Cayman Islands) Compass Management and Leasing (UK) Limited Column Financial, Inc. (1993) (Delaware) (50%) Buckhead Strategic Corp. (1994) (Delaware) Buckhead Strategic Fund, L.P. BH Strategic Co. I, L.P. BH Strategic Co. II, L.P. BH Strategic Co. III, L.P. BH Strategic Co. IV, L.P. Community Funding, Inc. (1994) (Delaware) Community Mortgage Fund, L.P. (1994) (Delaware) Buckhead Strategic Corp., II (1995) (Delaware) Buckhead Strategic Fund L.P. II Buckhead Co. I, L.P. Buckhead Co. II, L.P. Buckhead Co. III, L.P. HYDOC, L.L.C. Headwind Holding Corp. Buckhead Co. IV, L.P. Tricon Corp. Tricon, L.P. Equitable Real Estate Hyperion Capital Advisors LLC (1995) (Delaware) (a) Registered Broker/Dealer (b) Registered Investment Advisor C-20 AXA GROUP CHART The information listed below is dated as of December 31, 1996; percentages shown represent voting power. The name of the owner is noted when AXA indirectly controls the company.
AXA INSURANCE AND REINSURANCE BUSINESS HOLDING COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Axa Assurances Iard France 99% Axa Assurances Vie France 100% by Axa and Axa Courtage Vie Axa Courtage Iard France 99.9% by Axa and Axa Assurances Iard Axa Courtage Vie France 99.4% by Axa and Axa Assurances Iard and Axa Courtage Iard Alpha Assurances Vie France 100% Axa Direct France 100% Direct Assurances Iard France 100% by Axa Direct Direct Assurance Vie France 100% by Axa Direct Axa Direkt Versicherung A.G. Germany 100% owned by Axa Direct Axiva France 100% by Axa and Axa Courtage Vie Defense Civile France 95% Societe Francaise d'Assistance France 100% by SFA Holding Monvoisin Assurances France 99.9% by different companies and Mutuals Societe Beaujon France 99.9% Lor Finance France 99.9% Jour Finance France 100% by Alpha Assurances Iard and by Axa Assurances Iard Compagnie Auxiliaire pour le France 99.8% by Societe Beaujon Commerce and l'Industrie C.F.G.A. France 99.96% owned by Mutuals and Finaxa Axa Global Risks France 100% owned by Axa and Mutuals Saint Bernard Diffusion France 94.92% owned by Direct Assurances Iard Sogarep France 95%, (100% with Mutuals) Argovie France 100% by Axiva and SCA Argos Finargos France 70.5% owned by Axiva C-21 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Astral Finance France 99.33% by Axa Courtage Vie Argos France N.S. Finaxa Belgium Belgium 100% Axa Belgium Belgium 26.8% by Axa(SA) and 72.6% by Finaxa Belgium De Kortrijske Verzekering Belgium 99.8% by Axa Belgium Juris Belgium 100% owned by Finaxa Belgium Finaxa Luxembourg Luxembourg 100% Axa Assurance IARD Luxembourg Luxembourg 99.9% Axa Assurance Vie Luxembourg Luxembourg 99.9% Axa Aurora Spain 50% owned by Axa Aurora Polar SA de Seguros y Spain 99.4% owned by Axa Aurora Reaseguros Axa Vida SA de Seguros y Spain 89.82% owned by Aurora Polar Reaseguros 5% by Axa Axa Gestion de Seguros y Spain 99.1% owned by Axa Aurora Reaseguros Hilo Direct Seguros Spain 99.9% by Axa Aurora Axa Assicurazioni Italy 100% owned by Axa Eurovita Italy 30% owned by Axa Assicurazioni Axa Equity & Law plc U.K. 99.9% owned by Axa Axa Equity & Law Life U.K. 100% by Axa Equity & Law plc Assurance Society Axa Equity & Law International U.K. 100% owned by Axa Equity & Law Life Assurance Society Axa Leven The Netherlands 100% by Axa Equity & Law Life Assurance Society Axa Insurance U.K. 100% owned by Axa Axa Global Risks U.K. 100% owned by Axa Global Risks (France) Axa Canada Canada 100% owned by Axa Boreal Insurance Canada 100% owned by Gestion Fracapar Axa Assurances Inc. Canada 100% owned by Axa Canada C-22 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Axa Insurance Inc. Canada 100% owned by Axa Canada and Axa Assurance Inc. Anglo Canada General Canada 100% owned by Axa Canada Insurance Cy Axa Pacific Insurance Canada 100% by Boreal Insurance Boreal Assurances Agricoles Canada 100% by Boreal Insurance Sime Axa Berhad Malaysia 30% owned by Axa and Axa Reassurance Axa Sime Investment Holdings Singapore 50% Pte Ltd Axa Sime Assurance Hong Kong 100% owned by Axa Sime Invt. Holdings Pte Ltd Axa Sime Assurance Singapore 100% owned by Axa Sime Invt Holdings Pte Ltd Axa Life Insurance Hong Kong 100% PT Asuransi Axa Indonesia Indonesia 80% Equitable Cies Incorp. U.S.A. 60.8% between Axa, 44.69% Financiere 45, 3.8%, Lorfinance 7.6% and Axa Equity & Law Life Association Society 4.8% Equitable Life Assurance of U.S.A. 100% owned by Equitable Cies the USA Inc. National Mutual Holdings Ltd Australia 51% between Axa, 42.1% and Axa Equity & Law Life Assurance Society 8.9% The National Mutual Life Australia 100% owned by National Mutual Association of Australasia Ltd Holdings Ltd National Mutual International Australia 100% owned by National Mutual Pty Ltd Holdings Ltd National Mutual (Bermuda) Ltd Australia 100% owned by National Mutual International Pty Ltd National Mutual Asia Ltd Australia 55% owned by National Mutual Holdings Ltd and 20% by Datura Ltd and 13% by National Mutual Life Association of Australasia Australian Casualty & Life Ltd Australia 100% owned by National Mutual Holdings Ltd National Mutual Health Australia 100% owned by National Mutual Insurance Pty Ltd Holdings Ltd C-23 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Axa Reassurance France 100% owned by Axa, Axa Assurances Iard and Axa Global Risks Axa Re Finance France 80% owned by Axa Reassurance Axa Re Vie France 99.9% owned by Axa Reassurance Axa Cessions France 100% by Axa Axa Re Mexico Mexico 100% owned by Axa Reassurance Axa Re Asia Singapore 100% owned by Axa Reassurance Axa Re U.K. Plc U.K. 100% owned by Axa Re U.K. Holding Axa Re U.K. Holding U.K. 100% owned by Axa Reassurance Axa Re U.S.A. U.S.A. 100% owned by Axa America and Axa Reassurance Axa America U.S.A. 100% owned by Axa Reassurance International Technology U.S.A. 80% owned by Axa America Underwriters Inc. (INTEC) Axa Re Life U.S.A. 100% owned by Axa Re Vie C.G.R.M. Monaco 100% owned by Axa Reassurance Axa Life Insurance Japan 100% owned by Axa Dongbu Axa Life Insurance Co Korea 50% owned by Axa Ltd Axa Oyak Hayat Sigota Turkey 60% owned by Axa Oyak Sigorta Turkey 11% owned by Axa
C-24
AXA FINANCIAL BUSINESS COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Compagnie Financiere de Paris France 96.9%, (100% with Mutuals) (C.F.P.) Axa Banque France 98.7% owned by C.F.P. Financiere 78 France 100% owned by C.F.P. Axa Credit France 65% owned by C.F.P. Axa Gestion Interessement France 100% owned by Axa Asset Management Europe Compagnie Europeenne de France 100% owned by C.F.P. Credit (C.E.C.) Fidei France 20.7% owned by C.F.P. and 10.8% by Axamur Societe de Placements France 98.58% with Mutuals Selectionnes S.P.S. Presence et Initiative France 100% with Mutuals Vamopar France 100% owned by Societe Beaujon Financiere Mermoz France 100% Axa Asset Management Europe France 100% Axa Asset Management France 100% owned by Axa Asset Partenaires Management Europe Axa Asset Management Conseils France 100% owned by Axa Asset Management Europe Axa Asset Management France 100% owned by Axa Asset Distribution Management Europe Axa Equity & Law Home Loans U.K. 100% owned by Axa Equity & Law Plc Axa Equity & Law Commercial U.K. 100% owned by Axa Equity & Loans Law Plc C-25 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Alliance Capital Management U.S.A. 59% held by ELAS Donaldson Lufkin & Jenrette U.S.A. 44.1% owned by Equitable Cies Inc. and 36.1% by Equitable Holding Cies National Mutual Funds Australia 100% owned by National Management (Global) Ltd Holdings Ltd National Mutual Funds USA 100% by National Mutual Funds Management North America Management (Global) Ltd. Holding Inc. Cogefin Luxembourg 100% owned by Axa Belgium Financiere 45 France 99.8% owned by Axa Mofipar France 99.76% owned by Axa ORIA France 100% owned by Axa Millesimes Axa Oeuvres d'Art France 100% by Mutuals Axa Cantenac Brown France 100% by Societe Beaujon Axa Suduiraut France 99.6% owned by Societe Beaujon Colisee Acti Finance 2 France 100% owned by Axa Assurances Iard Mutuelle
C-26
AXA REAL ESTATE BUSINESS COMPANY COUNTRY VOTING POWER - ------- ------- ------------ C.I.P.M. France 97.8% with Mutuals Fincosa France 100% owned by C.I.P.M. Prebail France 100% owned by Societe Beaujon and C.F.P. Axamur France 100% by different companies and Mutuelles Parigest France 100% by the Mutuals, C.I.P.M. and Fincosa Parimmo France 100% by the insurance companies and Mutuals S.G.C.I. France 100% by different companies and Mutuelles Transaxim France 100% owned by S.G.C.I. and C.P.P. Compagnie Parisienne de France 100% owned by S.G.C.I. Participations Monte Scopando France 100% owned by C.P.P. Matipierre France 100% by different companies Securimmo France 87.12% by different companies and Mutuals Paris Orleans France 100% by Axa Courtage Iard Colisee Bureaux France 100% by different companies and Mutuals Colisee Premiere France 100% by different companies and Mutuals Colisee Laffitte France 100% by Colisee Bureaux Foniere Carnot Laforge France 100% by Colisee Premiere Parc Camoin France 100% by Colisee Premiere Delta Point du Jour France 100% owned by Matipierre Paroi Nord de l'Arche France 100% owned by Matipierre Falival France 100% owned by Axa Reassurance Compagnie du Gaz d'Avignon France 99% owned by Axa Ass Iard Ahorro Familiar France 42.2% owned by Axa Assurances Iard Fonciere du Val d'Oise France 100% owned by C.P.P. Sodarec France 100% owned by C.P.P. C-27 COMPANY COUNTRY VOTING POWER - ------- ------- ------------ Centrexpo France 100% owned by C.P.P. Fonciere de la Vile du Bois France 100% owned by Centrexpo Colisee Seine France 100% owned by different companies Translot France 100% owned by SGCI S.N.C. Dumont d'Urville France 100% owned by Colisee Premiere Colisee Federation France 100% by SGCI Colisee Saint Georges France 100% by SGCI Drouot Industrie France 50% by SGCI and 50% by Axamur Colisee Vauban France 99.6% by Matipierre Fonciere Colisee France 100% by Matipierre and different companies Axa Pierre S.C.I. France 97.6% owned by different companies and Mutuals Axa Millesimes France 85.2% owned by AXA and the Mutuals Chateau Suduirault France 100% owned by Axa Millesimes Diznoko Hongrie 95% owned by Axa Millesimes Compagnie Fonciere Matignon France 100% by different companies and Mutuals Equitable Real Estate U.S.A. 100% owned by ELAS Investment Quinta do Noval Vinhos S.A. Portugal 99.6% owned by Axa Millesimes
C-28
OTHER AXA BUSINESS COMPANY COUNTRY VOTING POWER - ------- ------- ------------ A.N.F. France 95.4% owned by Finaxa Lucia France 20.6% owned by Axa Assurances Iard and 8.6% by Mutuals Schneider S.A. France 10.4%
C-29 ORGANIZATION CHART OF EQUITABLE'S AFFILIATES NOTES 1. The year of formation or acquisition and state or country of incorporation of each affiliate is shown. 2. The chart omits certain relatively inactive special purpose real estate subsidiaries, partnerships, and joint ventures formed to operate or develop a single real estate property or a group of related properties, and certain inactive name-holding corporations. 3. All ownership interests on the chart are 100% common stock ownership except: (a) The Equitable Companies Incorporated's 44.1% interest in Donaldson, Lufkin & Jenrette, Inc. and Equitable Holding Corporation's 36.1% interest in same; (b) as noted for certain partnership interests; (c) Equitable Life's ACMC, Inc.'s and Equitable Capital Management Corporation's limited partnership interests in Alliance Capital Management L.P.; (d) as noted for certain subsidiaries of Alliance Capital Management Corp. of Delaware, Inc.; (e) Treasurer Robert L. Bennett's 20% interest in Compass Management and Leasing Co. (formerly EREIM, Inc.); and (f) DLJ Mortgage Capital's and Equitable Real Estate's respective ownerships, 50% each in Column Financial, Inc. 4. The operational status of the entities shown as having been formed or authorized but "not yet fully operational" should be checked with the appropriate operating areas, especially for those that are start-up situations. 5. The following entities are not included in this chart because, while they have an affiliation with The Equitable, their relationship is not the ongoing equity-based form of control and ownership that is characteristic of the affiliations on the chart, and, in the case of the first two entities, they are under the direction of at least a majority of "outside" trustees: The Equitable Funds The Hudson River Trust EQ Advisors Trust Separate Accounts 6. This chart was last revised on April 1, 1997. C-30 Item 27. Number of Contractowners As of March 31, 1997, the number of participants in the American Dental Association Members Program offered by the Registrant was 23,162. Item 28. Indemnification (a) Indemnification of Principal Underwriter: to the extent permitted by law of the State of New York and subject to all applicable requirements thereof, Equico Securities, Inc. ("Equico") undertook 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 that he or she, is or was a director or officer of Equico. (b) Undertaking: insofar as indemnification for liability arising under the Securities Act of 1933 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 be governed by the final adjudication of such issue. Item 29. Principal Underwriters (a) EQ Financial Consultants, Inc. ("EQ Financial"), a wholly-owned subsidiary of Equitable, is the principal underwriter for Equitable's Separate Account No. 301 and Separate Account A, Separate Account I and Separate Account FP. EQ Financials's principal business address is 1755 Broadway, NY, NY 10019. (b) See Item 25. (c) Not applicable. C-31 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. 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; and (d) Equitable represents that the fees and charges deducted under the Contract described in this Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Equitable under the Contract. Equitable bases its representation on its assessment of all of the facts and circumstances, including such relevant factors as: the nature and extent of such services, expenses and risks, the need for Equitable to earn a profit, the degree to which the Contract includes innovative features, and regulatory standards for the grant of exemptive relief under the Investment Company Act of 1940 used prior to October 1996, including the range of industry practice. C-32 SIGNATURES As required by the Securities Act of 1933, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this amended Registration Statement and has caused this amended Registration Statement to be signed on its behalf, in the City and State of New York, on the 30th day of April, 1997. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Registrant) By: The Equitable Life Assurance Society of the United States By: /s/Naomi J. Weinstein --------------------- Naomi J. Weinstein Vice President C-33 SIGNATURES As required by the Securities Act of 1933, the Depositor certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this amended Registration Statement and has caused this amended registration statement to be signed on its behalf in the City and State of New York, on this 30th day of April, 1997. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Depositor) By: /s/Naomi J. Weinstein --------------------- Naomi J. Weinstein Vice President As required by the Securities Act of 1933 and the Investment Company Act of 1940 this amendment to the registration statement has been signed by the following persons in the capacities and on the date indicated: PRINCIPAL EXECUTIVE OFFICERS: Joseph J. Melone Chairman of the Board, Chief Executive Officer and Director James M. Benson President and Director William T. McCaffrey Senior Executive Vice President, Chief Operating Officer and Director PRINCIPAL FINANCIAL OFFICER: Stanley B. Tulin Senior Executive Vice President and Chief Financial Officer PRINCIPAL ACCOUNTING OFFICER: /s/ Alvin H. Fenichel - --------------------- Alvin H. Fenichel Senior Vice President and April 30, 1997 Controller DIRECTORS: Claude Bebear Norman C. Francis Arthur L. Liman James M. Benson Donald J. Greene George T. Lowy Christopher J. Brocksom John T. Hartley William T. McCaffrey Francoise Colloc'h John H.F. Haskell, Jr. Joseph J. Melone Henri de Castries Mary R. (Nina) Henderson Didier Pineau-Valencienne Joseph L. Dionne W. Edwin Jarmain George J. Sella, Jr. William T. Esrey G. Donald Johnston, Jr. Dave H. Williams Jean-Rene Fourtou Winthrop Knowlton /s/Naomi J. Weinstein ------------------ Naomi J. Weinstein Attorney-in-Fact April 30, 1997 C-34 EXHIBIT INDEX EXHIBIT NO. PAGE NO. - ---------- -------- 4(j) Form of Rider No. 9 to Group Annuity Contract 2100. 6(d) By-Laws of The Equitable Life Assurance Society of the United States, as amended November 21, 1996. 6(e) Restated Charter of The Equitable Life Assurance Society of the United States, as amended January 1, 1997. 10(a) Consent of Price Waterhouse LLP. 10(b) Powers of Attorney (Equitable). 27 Financial Data Schedule. C-35 EX-4.(J) 2 FORM OF RIDER NO. 9 TO GROUP ANNUITY CONTRACT 2100 Attached to and made part of GROUP ANNUITY CONTRACT NO. AC 2100 between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES and TRUSTEES OF THE AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT TRUST AND OF THE AMERICAN DENTAL ASSOCIATION MEMBERS POOLED TRUST FOR RETIREMENT PLANS RIDER NO. 9 IT IS HEREBY AGREED that, effective as May 1, 1997, said Contract is amended as described below. 1. As of May 1, 1997, the definition of "Employer Plan" is added after the definition of Employer: "EMPLOYER PLAN - the retirement program of an Employer which adopts the Plan or an individually designed plan that has adopted the Pooled Trust." 2. Section 5.1 is amended to read as follows: 5.1 "On each May 1 commencing with May 1, 1997, an annual program expense charge, consisting of the sum of the components described in subsections (a) and (b) of this Section 5.1, shall be paid to Equitable from the Funding Accounts. (a) A "Percentage Charge" consisting of the sum of the amounts derived by multiplying the following percentages times the aggregate balance of the Funding Accounts as of the immediately preceding January 31: (i) 0.535% of the first $400 million of the aggregate balance; (ii) 0.530% of the next $100 million of the balance; (iii) 0.520% of the next $500 million of the balance; (iv) 0.500% of the next $500 million of the balance; (v) 0.485% of the next $500 million of the balance; and (vi) 0.470% of the balance in excess of $2 billion. Page 1 (b) An amount equal to the total of a "per plan charge" of (x) $150 for each Employer Plan which is enrolled in the Program as of January 31 of each year and (y) $400 for each Employer Plan which enrolled in the Program during the calendar year ended immediately before such January 31. The per plan charge will exclude inactive Employer Plans which have no balances in the Funding Accounts as of that January 31. Commencing January 31, 1998 and on January 31 of each year thereafter, the per plan charge will be increased at a rate equal to the increase in the Consumer Price Index (as a measure of change in consumer prices-among the components are housing costs, food, transportation and electricity) during the 12 consecutive month period ending with such December 31, but the per plan charge will never increase more than 5% pr year. The per plan charge calculated as of each January 31 will be converted to a basis point charge equal to the ratio that such charge bears to the aggregate balance of the Funding Accounts as of such January 31. The program expense charge will be calculated as of each January 31. One-twelfth of the program expense charge will be charged to Participants' account balances on a daily basis during the 12 consecutive months beginning May 1 of the same calendar year. In the case of a Funding Account that is not valued every Business Day, a pro rata portion of the then applicable program expense charge will be charged to Participants' Accounts in such Funding Account on each Business Day for which a value is established. On the date each GRA is opened, Equitable will determine a pro rata portion of the then applicable program expense charge for amounts held in such GRA, which shall constitute the program expense charge for said GRA until its maturity. The net interest rate declared by Equitable on a Fixed Income Product will reflect the compounded effect of the then applicable program expense charge. As soon as practicable after the end of each quarter, Equitable will remit a portion of the program expense charge to the ADA as reimbursement for its expenses in connection with its duties with respect to the Plan and Trusts, calculated as described above but based on the following percentages of the total amounts held in the Funding Accounts as of the applicable January 31: (a) 0.025% of the aggregate balances in the Funding Accounts not in excess of $400 million; and (b) 0.020% of the aggregate balances in the Funding Accounts in excess of $400 million. The ADA's portion of the program expense charge applicable to GRAs shall be calculated based on the amount Equitable will receive as a program expense charge with respect to each GRA. Page 2 If the ADA determines that its expenses for any year are less or greater than the amount which equals its portion of the program expense charge, it may direct Equitable, upon at least 60 days prior written notice, to decrease or increase the percentages set forth in Subsection (a) of 5.1; provided, however, that it makes a corresponding decrease or increase in the portion of the program expense charge that Equitable must remit to the ADA. No change in the program expense charge made pursuant to this paragraph shall affect the program expense charge which is applicable to GRAs which were opened prior to the effective date of the change. Equitable shall have no responsibility for remitting to the ADA pursuant to this Section 5.1 amounts Equitable has not received from a Major Insurance Carrier or Major Bank which is making GRAs available as a Funding Account pursuant to Article III or Section 4.5. The parties agree that the program expense charge may be changed as of May 1, 1998 and as of any succeeding May 1. Sections 7.1 through 7.6 are amended to read as follows: 7.1. A party may terminate this Contract on the last day of any month, provided written notice of such termination is received by the other party at least 24 months before the date of termination. No amounts may be contributed or transferred to any Funding Account on or after the date on which the termination of this Contract is effective. 7.2 If the Administrative Agreement is terminated for cause, either party may elect, upon three months' written notice, to terminate this Contract as of the date of termination of the Administrative Agreement. For purposes of this Section 7.2, "cause," with respect to Equitable, shall mean (a) Equitable's willful misconduct, gross negligence or gross and continued nonfeasance in the performance of its duties under the Administrative Agreement, (b) a decline in Equitable's insurance claims paying ratings such that it is both "Baa" or below as rated by Moody's Investors Service and "BBB" or below as rated by Standard & Poor's Corporation or (c) a greater than six percent decrease in the number of Employers participating in the Program, based on Program participation on December 31, 1990, which is the result of concern about Equitable's financial condition; "cause," with respect to the Trustees, shall mean the making available to ADA members by the ADA or the Trustees of any investment product that is not made available pursuant to the terms of this Contract and which is marketed for use in qualified retirement plans. As of the date of termination of the Administrative Agreement, the fees set forth in Article V shall cease to be paid to Equitable. If neither party elects to terminate this Contract upon termination of the Administrative Agreement for cause, (a) the Trustees shall appoint a successor recordkeeper under the Trusts and shall require such recordkeeper to comply with Equitable's reasonable administrative requirements, (b) Equitable shall receive fees from the Funding Accounts it provides in accordance with its standard fee schedule charged for investment management and administrative services to group pension clients receiving Page 3 similar investment products and no recordkeeping services and (c) Equitable shall no longer be responsible for receiving, directing, redirecting or disbursing any amounts to or from any Funding Account provided by any other party. 7.3 Following the termination of this Contract, Equitable shall pay the amounts allocated on behalf of Participants in the Funding Accounts it provides (in cash in the case of amounts allocated to the Money Market Guarantee and in cash or marketable assets, or both, in the case of any other Funding Account) to any person designated in writing by the Trustees (or, if the Trustees make no such designation, to the Trustees), except that: (a) Equitable shall not transfer any such amount that is invested in a GRA provided by Equitable prior to the stated maturity, except as otherwise provided in this Contract; (b) Equitable will pay the value of the Trusts' interests in the Real Estate Fund in cash derived from contributions and transfers to, and from liquidating assets of, the Real Estate Fund. Equitable may defer the transfer of all or part of the amounts held for the Trusts in the Real Estate Fund for such time as Equitable reasonably considers necessary to obtain the requisite liquidity to pay the amount to be withdrawn or to protect the interests of other clients in the Real Estate Fund or in Equitable's Pooled Separate Account No. 8; (c) Beginning May 1, 1997, if the Trustees terminate this Contract for cause which is based on the second and third definitions of "cause" listed in Section 7.2, except as provided in Section 7.5, Equitable shall transfer amounts held under the Money Market Guarantee in twenty-one monthly installments beginning on the last Business Day of the month following the date the termination of this Contract is effective. The amount of each monthly installment will be determined as of the date it becomes payable and will be equal to (i) the amount then held under the Money Market Guarantee, divided by (ii) the number of installments that have not yet been made (including the current payment), less (iii) the aggregate amount that has been paid out by Equitable from the Money Market Guarantee pursuant to Section 7.5 since the date of the last installment; provided, however, that in no event shall the amount of any monthly installment be less than zero (in the event the amount under clause "(iii)" above exceeds the quotient resulting from dividing clause "(i)" by clause "(ii)" above, such excess shall be added to the amounts referred to in clause "(iii)" above when determining the amount payable in the next succeeding installment). 7.4 The parties may agree to terminate the Money Market Guarantee, at any time, subject to the payout provisions of this Section 7.4. Except as provided in Section 7.5, if the Administrative Agreement is not then terminated, Equitable shall transfer amounts held under the Money Market Guarantee in monthly installments over a period of not more than 24 months Page 4 beginning at the end of the month following such agreement. If the Administrative Agreement is terminated by either party, Equitable will begin payment of the amounts held under the Money Market Guarantee over a period of 24 months beginning at the end of the month immediately succeeding the termination date of the Administrative Agreement. The amount of each monthly installment will be determined as of the date it becomes payable and will be equal to (i) the amount then held under the Money Market Guarantee divided by (ii) the number of installments that have not yet been made (including the current payment), less (iii) the aggregate amount that has been paid out by Equitable from the Money Market Guarantee pursuant to Section 7.5 since the date of the last installment; provided, however, that in no event shall the amount of any monthly installment be less than zero (in the event the amount under clause "(iii)" above exceeds the quotient resulting from dividing clause "(i)" by clause "(ii)" above, such excess shall be added to the amounts referred to in clause "(iii)" above when determining the amount payable in the next succeeding installment). 7.5 Equitable shall transfer amounts from the Money Market Guarantee without regard to Section 7.3 and 7.4 as necessary to satisfy Participant requests for withdrawals, transfers and benefit distributions under the Plan which are made solely at the direction of the Participant, without any direction or influence by the Trustees or the ADA (other than objective announcements regarding general issues relating to the Trusts or the Funding Accounts or neutral recitations of facts in response to specific Participant inquiries) and subject to reasonable administrative procedures which Equitable may institute upon termination of this Contract; provided, however, that Equitable shall not be required to transfer any amounts pursuant to this Section if (a) the Participant has requested a transfer to another funding option (i) which is a Fixed Income Product with a stated maturity of less than one year or (ii) in which the possible loss of principal amounts invested is significantly affected by changes in prevailing interest rates (including money market funds), the investments of which have an average maturity of less than one year, or (b) the Participant has any amounts (which can be transferred or reallocated without restriction or penalty) allocated to any funding option (i) which is a Fixed Income Product with a stated maturity of less than one year or (ii) in which the possible loss of principal amounts invested is significantly affected by changes in prevailing interest rates (including money market funds), the investments of which have an average maturity of less than one year. 7.6 Equitable shall not be responsible for any amounts which are held by a Major Insurance Carrier or Major Bank or any other provider of Funding Accounts pursuant to Article III or Section 4.5. Page 5 NEW YORK, NEW YORK FOR THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES: By: By: ------------------------------- ------------------------------- Chairman and Chief Executive President and Chief Operating Officer Officer By: ------------------------------------ Vice President and Secretary --------------------------------- ---------------------------------- Assistant Registrar Date of Issue FOR THE CONTRACTHOLDER: Trustees of the American Dental Association Members Retirement Trust and of the American Dental Association Members Pooled Trust for Retirement Plans , Trustee , Trustee - ------------------------------ ------------------------------ , Trustee , Trustee - ------------------------------ ------------------------------ , Trustee , Trustee - ------------------------------ ------------------------------ , Trustee , Trustee - ------------------------------ ------------------------------ , Trustee , Trustee - ------------------------------ ------------------------------ , Trustee , Trustee - ------------------------------ ------------------------------ , Trustee , Trustee - ------------------------------ ------------------------------ , Trustee , Trustee - ------------------------------ ------------------------------ Page 6 EX-6.(D) 3 BY-LAWS OF EQUITABLE THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES BY-LAWS ------- As Amended November 21, 1996 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES BY-LAWS ------- Table of Contents ARTICLE I SHAREHOLDERS................................................ 1 Section 1.1 Annual Meetings............................................ 1 Section 1.2 Notice of Meetings; Waiver................................. 1 Section 1.3 Organization; Procedure.................................... 2 Section 1.4 Action Without a Meeting................................... 2 ARTICLE II BOARD OF DIRECTORS.......................................... 2 Section 2.1 Regular Meetings........................................... 2 Section 2.2 Special Meetings........................................... 2 Section 2.3 Independent Directors; Quorum.............................. 2 Section 2.4 Notice of Meetings......................................... 3 Section 2.5 Newly Created Directorships; Vacancies................................................ 3 Section 2.6 Presiding Officer.......................................... 3 Section 2.7 Telephone Participation in Meetings; Action by Consent Without Meeting.......................................... 3 ARTICLE III COMMITTEES.................................................. 4 Section 3.1 Committees................................................. 4 Section 3.2 Authority of Committees.................................... 5 Section 3.3 Quorum and Manner of Acting................................ 5 Section 3.4 Removal of Members......................................... 6 Section 3.5 Vacancies.................................................. 6 Section 3.6 Subcommittees.............................................. 6 Section 3.7 Alternate Members of Committees............................ 6 Section 3.8 Attendance of Other Directors.............................. 6 ARTICLE IV OFFICERS.................................................... 6 Section 4.1 Chairman of the Board...................................... 6 Section 4.2 Vice-Chairman of the Board................................. 7 Section 4.3 President.................................................. 7 Section 4.4 Chief Executive Officer.................................... 7 Section 4.5 Secretary.................................................. 7 Section 4.6 Other Officers............................................. 8 ARTICLE V CAPITAL STOCK............................................... 8 Section 5.1 Transfers of Stock; Registered Shareholders.................................. 8 Section 5.2 Transfer Agent and Registrar............................... 9 ARTICLE VI EXECUTION OF INSTRUMENTS..................................... 9 Section 6.1 Execution of Instruments................................... 9 Section 6.2 Facsimile Signatures of Former Officers.......................................... 10 Section 6.3 Meaning of Term "Instruments".............................. 10 ARTICLE VII GENERAL..................................................... 10 Section 7.1 Reports of Committees...................................... 10 Section 7.2 Independent Certified Public Accountants....................................... 10 Section 7.3 Directors' Fees............................................ 10 Section 7.4 Indemnification of Directors, Officers and Employees................................... 10 Section 7.5 Waiver of Notice........................................... 11 Section 7.6 Company.................................................... 11 ARTICLE VIII AMENDMENT OF BY-LAWS....................................... 11 Section 8.1 Amendment of By-Laws....................................... 11 Section 8.2 Notice of Amendment........................................ 12 BY-LAWS OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES ARTICLE I --------- SHAREHOLDERS ------------ Section 1.1. Annual Meetings. The annual meeting of the shareholders of the Company for the election of Directors and for the transaction of such other business as properly may come before such meeting shall be held at the principal office of the Company on the third Wednesday in the month of May at 3:00 P.M., local time, or at such other place, within or without the State of New York, or on such other earlier or later date in April or May or at such other hour as may be fixed from time to time by resolution of the Board of Directors and set forth in the notice or waiver of notice of the meeting. [Business Corporation Law Secs. 602(a), (b)]* Section 1.2. Notice of Meetings; Waiver. The Secretary or any Assistant Secretary shall cause written notice of the place, date and hour of each meeting of the shareholders, and, in the case of a special meeting, the purpose or purposes for which such meeting is called and by or at whose direction such notice is being issued, to be given, personally or by first class mail, not fewer than ten nor more than fifty days before the date of the meeting to each shareholder of record entitled to vote at such meeting. No notice of any meeting of shareholders need be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting or who attends the meeting, in person or by proxy, without protesting prior to its conclusion the lack of notice of such meeting. [Business Corporation Law Secs. 605, 606] - -------------- * Citations are to the Business Corporation Law and Insurance Law of the State of New York, as in effect on [date of adoption], and are inserted for reference only, and do not constitute a part of the By-Laws. Section 1.3. Organization; Procedure. At every meeting of shareholders the presiding officer shall be the Chairman of the Board or, in the event of his or her absence or disability, the President or, in his or her absence, any officer of the Company designated by the shareholders. The order of business and all other matters of procedure at every meeting of shareholders may be determined by such presiding officer. The Secretary, or in the event of his or her absence or disability, an Assistant Secretary or, in his or her absence, an appointee of the presiding officer, shall act as Secretary of the meeting. Section 1.4. Action Without a Meeting. Any action required or permitted to be taken by shareholders may be taken without a meeting on written consent signed by the holders of all the outstanding shares entitled to vote on such action. [Business Corporation Law Sec. 615] ARTICLE II ---------- BOARD OF DIRECTORS ------------------ Section 2.1. Regular Meetings. Regular meetings of the Board of Directors shall be held at the principal office of the Company on the third Thursday of each month, except January and August, unless a change in place or date is ordered by the Board of Directors. The first regular meeting of the Board of Directors following the annual meeting of the shareholders of the Company is designated as the Annual Meeting. [Business Corporation Law Sec. 710] Section 2.2. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, the President, or two directors. [Business Corporation Law Sec. 710] Section 2.3. Independent Directors; Quorum. Not less than one-third of the Board of Directors shall be persons who are not officers or employees of the Company or of any entity controlling, controlled by, or under common control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or of any such entity. A majority of the entire Board of Directors, including at least one Director who is not an officer or employee of the Company or of any entity controlling, controlled by, or under common control with the Company and who is not a beneficial owner of a controlling interest in the voting stock of the Company or of any such entity, shall constitute a quorum for the transaction of business at any regular or special meeting of the Board of Directors, except as otherwise prescribed by these By-Laws. Except as otherwise prescribed by law, the Charter of the Company, or these By-Laws, the vote of a majority of the Directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board of Directors. A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting from time to time and from place to place. As used in these By-Laws "entire Board of Directors" means the total number of directors which the Company would have if there were no vacancies. [Business Corporation Law Secs. 707, 708; Insurance Law Sec. 1202] Section 2.4. Notice of Meetings. Notice of a regular meeting of the Board of Directors need not be given. Notice of a change in the time or place of a regular meeting of the Board of Directors shall be given to each Director at least five days in advance thereof in writing and by telephone or telecopy. Notice of each special meeting of the Board of Directors shall be given to each Director at least 24 hours prior to the special meeting, personally or by telephone or telegram or telecopy, and shall state in general terms the purpose or purposes of the meeting. Any such notice for a regular or special meeting not specifically required by this Section 2.4 to be given by telephone or telecopy shall be deemed given to a director when sent by mail, telegram, cablegram or radiogram addressed to such director at his or her address furnished to the Secretary. Notice of an adjourned regular or special meeting of the Board of Directors shall be given if and as determined by a majority of the directors present at the time of the adjournment, whether or not a quorum is present. [Business Corporation Law Sec. 711] Section 2.5. Newly Created Directorships; Vacancies. Any newly created directorships resulting from an increase in the number of Directors and vacancies occurring in the Board of Directors for any reasons (including vacancies resulting from the removal of a Director without cause) shall be filled by the shareholders of the Company. [Business Corporation Law Sec. 705; Insurance Law Sec. 4211] Section 2.6. Presiding Officer. In the absence or inability to act of the Chairman of the Board at any regular or special meeting of the Board of Directors, any Vice-Chairman of the Board, or the President, as designated by the chief executive officer, shall preside at such meeting. In the absence or inability to act of all of such officers, the Board of Directors shall select from among their number present a presiding officer. Section 2.7. Telephone Participation in Meetings; Action by Consent Without Meeting. Any Director may participate in a meeting of the Board or any committee thereof by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and such participation shall constitute presence in person at such meeting; provided that one meeting of the Board each year shall be held without the use of such conference telephone or similar communication equipment. When time is of the essence, but not in lieu of a regularly scheduled meeting of the Board of Directors, any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or such committee, as the case may be, consent in writing to the adoption of a resolution authorizing the action and such written consents and resolution are filed with the minutes of the Board or such committee, as the case may be. [Business Corporation Law Sec. 708] ARTICLE III ----------- COMMITTEES ---------- Section 3.1. Committees. (a) The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may establish from among its members an Executive Committee of the Board composed of three or more Directors. Not less than one-third of the members of such committee shall be persons who are not officers or employees of the Company or of any entity controlling, controlled by, or under common control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or of any such entity. (b) The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, shall establish from among its members one or more committees with authority to discharge the responsibilities enumerated in this subsection (b). Each such committee shall be composed of three or more Directors and shall be comprised solely of Directors who are not officers or employees of the Company or of any entity controlling, controlled by, or under common control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or of any such entity. Such committee or committees shall have responsibility for: (i) Recommending to the Board of Directors candidates for nomination for election by the shareholders to the Board of Directors; (ii) Evaluating the performance of officers deemed by any such committee to be principal officers of the Company and recommending their selection and compensation; (iii) Recommending the selection of independent certified public accountants; (iv) Reviewing the scope and results of the independent audit and of any internal audit; and (v) Reviewing the Company's financial condition. (c) The Board of Directors, by resolution adopted from time to time by a majority of the entire Board of Directors, may establish from among its members one or more additional committees of the Board, each composed of five or more Directors. Not less than one-third of the members of each such committee shall be persons who are not officers or employees of the Company or of any entity controlling, controlled by, or under common control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or of any such entity. [Business Corporation Law Sec. 712; Insurance Law Sec. 1202] Section 3.2. Authority of Committees. Each committee shall have all the authority of the Board of Directors, to the extent permitted by law and provided in the resolution creating such committee, provided, however, that no committee shall have authority as to the following matters: (a) the submission to shareholders of any action as to which shareholder approval is required by law; (b) the filling of vacancies in the Board of Directors or in any committee thereof; (c) the fixing of compensation of the Directors for serving on the Board of Directors or any committee thereof; (d) the amendment or repeal of the By-Laws, or the adoption of new By-Laws; or (e) the amendment or repeal of any resolution of the Board of Directors unless such resolution of the Board of Directors by its terms provides that it may be so amended or repealed. Section 3.3. Quorum and Manner of Acting. A majority of the total membership that a committee would have if there were no vacancies (including at least one Director who is not an officer or employee of the Company or of any entity controlling, controlled by, or under common control with the Company and who is not a beneficial owner of a controlling interest in the voting stock of the Company or of any such entity) shall constitute a quorum for the transaction of business. The vote of a majority of the members present at the time of the vote, if a quorum is present at such time, shall be the act of such committee. Except as otherwise prescribed by these By-Laws or by the Board of Directors, each committee may elect a chairman from among its members, fix the times and dates of its meetings, and adopt other rules of procedure. Section 3.4. Removal of Members. Any member (and any alternate member) of a committee may be removed by vote of a majority of the entire Board of Directors. Section 3.5. Vacancies. Any vacancy occurring in any committee for any reason may be filled by vote of a majority of the entire Board of Directors. Section 3.6. Subcommittees. Any committee may appoint one or more subcommittees from its members. Any such subcommittee may be charged with the duty of considering and reporting to the appointing committee on any matter within the responsibility of the committee appointing such subcommittee but cannot act in place of the appointing committee. Section 3.7. Alternate Members of Committees. The Board of Directors may designate, by resolution adopted by a majority of the entire Board of Directors, one or more directors as alternate members of any committee who may replace any absent member or members at a meeting of such committee. [Business Corporation Law Sec. 712] Section 3.8. Attendance of Other Directors. Except as otherwise prescribed by the Board of Directors, members of the Board of Directors may attend any meeting of any committee. ARTICLE IV ---------- OFFICERS -------- Section 4.1. Chairman of the Board. The Board of Directors may at a regular or special meeting elect from among their number a Chairman of the Board who shall hold office, at the pleasure of the Board of Directors, until the next Annual Meeting. The Chairman of the Board shall preside at all meetings of the Board of Directors and also shall exercise such powers and perform such duties as may be delegated or assigned to or required of him or her by these By-Laws or by or pursuant to authorization of the Board of Directors. Section 4.2. Vice-Chairman of the Board. The Board of Directors may at a regular or special meeting elect from among their number one or more Vice-Chairmen of the Board who shall hold office, at the pleasure of the Board of Directors, until the next Annual Meeting. The Vice-Chairmen of the Board shall exercise such powers and perform such duties as may be delegated or assigned to or required of them by these By-Laws or by or pursuant to authorization of the Board of Directors or by the Chairman of the Board. Section 4.3. President. The Board of Directors shall at a regular or special meeting elect from among their number a President who shall hold office, at the pleasure of the Board of Directors, until the next Annual Meeting and until the election of his or her successor. The President shall exercise such powers and perform such duties as may be delegated or assigned to or required of him or her by these By-Laws or by or pursuant to authorization of the Board of Directors or (if the President is not the chief executive officer) by the chief executive officer. The President and Secretary may not be the same person. Section 4.4. Chief Executive Officer. The Chairman of the Board or the President shall be the chief executive officer of the Company as the Board of Directors from time to time shall determine, and the Board of Directors from time to time may determine who shall act as chief executive officer in the absence or inability to act of the then incumbent. Subject to the control of the Board of Directors, and to the extent not otherwise prescribed by these By-Laws, the chief executive officer shall have plenary power over all departments, officers, employees, and agents of the Company, and shall be responsible for the general management and direction of all the business and affairs of the Company. Section 4.5. Secretary. The Board of Directors shall at a regular or special meeting elect a Secretary who shall hold office, at the pleasure of the Board of Directors, until the next Annual Meeting and until the election of his or her successor. The Secretary shall issue notices of the meetings of the shareholders and the Board of Directors and its committees, shall keep the minutes of the meetings of the shareholders and the Board of Directors and its committees and shall have custody of the Company's corporate seal and records. The Secretary shall exercise such powers and perform such other duties as relate to the office of the Secretary, and also such powers and duties as may be delegated or assigned to or required of him or her by or pursuant to authorization of the Board of Directors or by the Chairman of the Board or (if the Chairman of the Board is not the chief executive officer) the chief executive officer. Section 4.6. Other Officers. The Board of Directors may elect such other officers as may be deemed necessary for the conduct of the business of the Company. Each such officer elected by the Board of Directors shall exercise such powers and perform such duties as may be delegated or assigned to or required of him or her by the Board of Directors or the chief executive officer, and shall hold office until the next Annual Meeting, but at any time may be suspended by the chief executive officer or by the Board of Directors, or removed by the Board of Directors. [Business Corporation Law Secs. 715, 716] ARTICLE V --------- CAPITAL STOCK ------------- Section 5.1. Transfers of Stock; Registered Shareholders. (a) Shares of stock of the Company shall be transferable only upon the books of the Company kept for such purpose upon surrender to the Company or its transfer agent or agents of a certificate (unless such shares shall be uncertificated shares) representing shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer. Within a reasonable time after the transfer of uncertificated shares, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates. (b) Except as otherwise prescribed by law, the Board of Directors may make such rules, regulations and conditions as it may deem expedient concerning the subscription for, issue, transfer and registration of, shares of stock. Except as otherwise prescribed by law, the Company, prior to due presentment for registration of transfer, may treat the registered owner of shares as the person exclusively entitled to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. [Business Corporation Law Sec. 508(d), (f); Insurance Law Sec. 4203] Section 5.2 Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates representing shares to bear the signature of any such transfer agents or registrars. The same person may act as transfer agent and registrar for the Company. ARTICLE VI ---------- EXECUTION OF INSTRUMENTS ------------------------ Section 6.1. Execution of Instruments. (a) Any one of the following, namely, the Chairman of the Board, any Vice-Chairman of the Board, the President, any Vice-President (including a Deputy or Assistant Vice-President or any other Vice-President designated by a number or a word or words added before or after the title Vice-President to indicate his or her rank or responsibilities), the Secretary, or the Treasurer, or any officer, employee or agent designated by or pursuant to authorization of the Board of Directors or any committee created under these By-Laws, shall have power in the ordinary course of business to enter into contracts or execute instruments on behalf of the Company (other than checks, drafts and other orders drawn on funds of the Company deposited in its name in banks) and to affix the corporate seal. If any such instrument is to be executed on behalf of the Company by more than one person, any two or more of the foregoing or any one or more of the foregoing with an Assistant Secretary or an Assistant Treasurer shall have power to execute such instrument and affix the corporate seal. (b) The signature of any officer may be in facsimile on any such instrument if it shall also bear the actual signature, or personally inscribed initials, of an officer, employee or agent empowered by or pursuant to the first sentence of this Section to execute such instrument, provided that the Board of Directors or a committee thereof may authorize the issuance of insurance contracts and annuity contracts on behalf of the Company bearing the facsimile signature of an officer without the actual signature or personally inscribed initials of any person. (c) All checks, drafts and other orders drawn on funds of the Company deposited in its name in banks shall be signed only pursuant to authorization of and in accordance with rules prescribed from time to time by the Board of Directors or a committee thereof, which rules may permit the use of facsimile signatures. Section 6.2. Facsimile Signatures of Former Officers. If any officer whose facsimile signature has been placed upon any instrument shall have ceased to be such officer before such instrument is issued, it may be issued with the same effect as if he or she had been such officer at the time of its issue. Section 6.3. Meaning of Term "Instruments". As used in this Article VI, the term "instruments" includes, but is not limited to, contracts and agreements, checks, drafts and other orders for the payment of money, transfers of bonds, stocks, notes and other securities, and powers of attorney, deeds, leases, releases of mortgages, satisfactions and all other instruments entitled to be recorded in any jurisdiction. ARTICLE VII ----------- GENERAL ------- Section 7.1. Reports of Committees. Reports of any committee charged with responsibility for supervising or making investments shall be submitted at the next meeting of the Board of Directors. Reports of other committees of the Board of Directors shall be submitted at a regular meeting of the Board of Directors as soon as practicable, unless otherwise directed by the Board of Directors. Section 7.2 Independent Certified Public Accountants. The books and accounts of the Company shall be audited throughout each year by such independent certified public accountants as shall be selected by the Board of Directors. Section 7.3. Directors' Fees. The Directors shall be paid such fees for their services in any capacity as may have been authorized by the Board of Directors. No Director who is a salaried officer of the Company shall receive any fees for serving as a Director of the Company. [Business Corporation Law Sec. 713(e)] Section 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 Secs. 721-726; Insurance Law Sec. 1216] Section 7.5. Waiver of Notice. Notice of any meeting of the Board of Directors or any committee thereof shall not be required to be given to any Director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior to or at its commencement, the lack of notice to him. [Business Corporation Law Sec. 711(c)] Section 7.6. Company. The term "Company" in these By-Laws means The Equitable Life Assurance Society of the United States. ARTICLE VIII ------------ AMENDMENT OF BY-LAWS -------------------- Section 8.1. Amendment of By-Laws. Subject to Section 1210 of the Insurance Law of the State of New York, all By-Laws of the Corporation, whether adopted by the Board of Directors or the shareholders, shall be subject to amendment, alteration or repeal, and new By-Laws may be made, either (a) by the shareholders at any annual or special meeting of shareholders the notice of which shall have specified or summarized the proposed amendment, alteration, repeal or new By-Laws, or (b) by resolution adopted by the Board of Directors at any regular or special meeting, the notice or waiver of notice of which, unless none is required hereunder, shall have specified or summarized the proposed amendment, alteration, repeal or new By-Laws, provided, however, that the shareholders may at any time provide in the By-Laws that any specified provision or provisions of the By-Laws may be amended, altered or repealed only in the manner specified in the foregoing clause (a), in which event such provision or provisions shall be subject to amendment, alteration or repeal only in such manner. [Business Corporation Law Sec. 601(a); Insurance Law Sec. 1210] Section 8.2. Notice of Amendment. If any By-Law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the By-Law so adopted, amended or repealed, together with a concise statement of the changes made. [Business Corporation Law Sec. 601 (b).] EX-6.(E) 4 RESTATED CHARTER OF EQUITABLE THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES RESTATED CHARTER ---------------- As Amended January 1, 1997 RESTATED CHARTER OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES ARTICLE I The name of the corporation shall continue to be The Equitable Life Assurance Society of the United States. ARTICLE II The principal office of the corporation shall be located in the City of New York, County of New York, State of New York. ARTICLE III (a) The business to be transacted by the corporation shall be the kinds of insurance business specified in Paragraphs 1, 2 and 3 of Subsection (a) of Section 1113 of the Insurance Law of the State of New York, as follows: (1) "Life insurance": every insurance upon the lives of human beings, and every insurance appertaining thereto, including the granting of endowment benefits, additional benefits in the event of death by accident, additional benefits to safeguard the contract from lapse, accelerated payments of part or all of the death benefit or a special surrender value upon diagnosis (A) of terminal illness defined as a life expectancy of twelve months or less, or (B) of a medical condition requiring extraordinary medical care or treatment regardless of life expectancy, or provide a special surrender value, upon total and permanent disability of the insured, and optional modes of settlement of proceeds. "Life insurance" also includes additional benefits to safeguard the contract against lapse in the event of unemployment of the insured. Amounts paid the insurer for life insurance and proceeds applied under optional modes of settlement or under dividend options may be allocated by the insurer to one or more separate accounts pursuant to section four thousand two hundred forty of the Insurance Law of the State of New York; (2) "Annuities": all agreements to make periodical payments for a period certain or where the making or continuance of all or some of a series of such payments, or the amount of any such payment, depends upon the continuance of human life, except payments made under the authority of paragraph (1) above. Amounts paid the insurer to provide annuities and proceeds applied under optional modes of settlement or under dividend options may be allocated by the insurer to one or more separate accounts pursuant to section four thousand two hundred forty of the Insurance Law of the State of New York; (3) "Accident and health insurance": (i) insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workers' compensation law, except as specified in item (ii) hereof; and (ii) non-cancellable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but excluding insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective date or renewal date; and any amendments to such paragraphs or provisions in substitution therefor which may be hereafter adopted; such other kind or kinds of business now or hereafter authorized by the laws of the State of New York to stock life insurance companies; and such other kind or kinds of business to the extent necessarily or properly incidental to the kind or kinds of insurance business which the corporation is authorized to do. (b) The corporation shall also have all other rights, powers, and privileges now or hereafter authorized or granted by the Insurance Law of the State of New York or any other law or laws of the State of New York to stock life insurance companies having power to do the kind or kinds of business hereinabove referred to and any and all other rights, powers, and privileges of a corporation now or hereafter granted by the laws of the State of New York and not prohibited to such stock life insurance companies. - 2 - ARTICLE IV The business of the corporation shall be managed under the direction of the Board of Directors. ARTICLE V (a) The Board of Directors shall consist of not less than 13 (except for vacancies temporarily unfilled) nor more than 36 Directors, as may be determined from time to time by a vote of a majority of the entire Board of Directors. No decrease in the number of Directors shall shorten the term of any incumbent Director. (b) The Board of Directors shall have the power to adopt from time to time such By-Laws, rules and regulations for the governance of the officers, employees and agents and for the management of the business and affairs of the corporation, not inconsistent with this Charter and the laws of the State of New York, as may be expedient, and to amend or repeal such by-laws, rules and regulations, except as provided in the By-Laws. (c) Any or all of the Directors may be removed at any time, either for or without cause, by vote of the shareholders. (d) No Director shall be personally liable to the corporation or any of its shareholders for damages for any breach of duty as a Director; provided, however, that the foregoing provision shall not eliminate or limit (i) the liability of a Director if a judgment or other final adjudication adverse to him or her establishes that his or her acts or omissions were in bad faith or involved intentional misconduct or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled, or were acts or omissions which (a) he or she knew or reasonably should have known violated the Insurance Law of the State of New York or (b) violated a specific standard of care imposed on Directors directly, and not by reference, by a provision of the Insurance Law of the State of New York (or any regulations promulgated thereunder) or (c) constituted a knowing violation of any other law; or (ii) the liability of a Director for any act or omission prior to September 21, 1989. - 3 - ARTICLE VI (a) The Directors of the corporation shall be elected at each annual meeting of shareholders of the corporation in the manner prescribed by law. The annual meeting of shareholders shall be held at such place, within or without the State of New York, and at such time as may be fixed by or under the By-Laws. At each annual meeting of shareholders, directors shall be elected to hold office for a term expiring at the next annual meeting of shareholders. (b) Newly created directorships resulting from an increase in the number of Directors and vacancies occurring in the Board of Directors shall be filled by vote of the shareholders. (c) Each Director shall be at least twenty-one years of age, and at all times a majority of the Directors shall be citizens and residents of the United States, and not less than three of the Directors shall be residents of the State of New York. (d) The Board of Directors shall elect such officers as are provided for in the By-Laws at the first meeting of the Board of Directors following each annual meeting of the shareholders. In the event of the failure to elect officers at such meeting, officers may be elected at any regular or special meeting of the Board of Directors. A vacancy in any office may be filled by the Board of Directors at any regular or special meeting. ARTICLE VII The duration of the corporate existence of the corporation shall be perpetual. ARTICLE VIII The amount of the capital of the corporation shall be $2,500,000, and shall consist of 2,000,000 Common Shares, par value $1.25 per share. - 4 - EX-10.(A) 5 CONSENT OF PRICE WATERHOUSE LLP CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Statement of Additional Information constituting part of this Post-Effective Amendment No. 4 to the Registration Statement No. 333-75616 on Form N-4 (the "Registration Statement") of our report dated February 10, 1997 relating to the financial statements of Separate Account Nos. 195, 197, and 198 of The Equitable Life Assurance Society of the United for the year ended December 31, 1996, and our report dated February 10, 1997 relating to the consolidated financial statements of The Equitable Life Assurance Society of the United States for the year ended December 31, 1996, which reports appear in such Statement of Additional Information, and to the incorporation by reference of our reports into the Prospectus which constitutes part of this Registration Statement. We also consent to the references to us under the headings "Condensed Financial Information" and "Experts" in the Prospectus. /s/ Price Waterhouse LLP - ------------------------ Price Waterhouse LLP New York, New York April 30, 1997 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the inclusion in the Statement of Additional Information constituting part of this Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 (No. 33-75616) of The Equitable Life Assurance Society of the United States of our reports relating to the following funds established under the Declaration of Trust of the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans: FUND REPORT DATE Lifecycle Fund Group Trust - Conservative April 10, 1997 Lifecycle Fund Group Trust - Moderate April 10, 1997 S&P 500 Flagship Fund and S&P 500 Index Fund with Futures (Combined Financial Statements) March 10, 1997 Russell 2000 Fund and Russell 2000 Non-Lending Fund (Combined Financial Statements) March 26, 1997 Daily EAFE Fund and Daily EAFE Fund Non-Lending (Combined Financial Statements) April 10, 1997 Daily Government/Corporate Bond Fund March 10, 1997 Short Term Investment Fund March 3, 1997 We also consent to the references to us relating to the funds listed above appearing under the headings "Selected Financial Data" and "Experts" in the Prospectus constituting part of this Registration Statement. /s/ Price Waterhouse LLP - ------------------------ Price Waterhouse LLP Boston, Massachusetts April 29, 1997 EX-10.(B) 6 POWERS OF ATTORNEY (EQUITABLE) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 24th day of February, 1997 /s/ Claude Bebear POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 6th day of February, 1997 /s/ James M. Benson POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ Christopher Brocksom POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 Francoise Colloc'h POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ Henri de Castries POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ Joseph L. Dionne POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ William T. Esrey POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ Jean-Rene Foutou POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 11th day of February, 1997 /s/ Norman C. Francis POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ Donald J. Greene POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ John T. Hartley POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 19th day of February, 1997 /s/ John H.F. Haskell, Jr. POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 11th day of February, 1997 /s/ W. Edwin Jarmain POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 3rd day of February, 1997 /s/ G. Donald Johnston, Jr. POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ Winthrop Knowlton POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ Arthur L. Liman POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ George T. Lowy POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ William T. McCaffrey POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ Joseph J. Melone POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 20th day of February, 1997 /s/ George J. Sella, Jr. POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 3rd day of February, 1997 /s/ Dave H. Williams POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of The Equitable Life Assurance Society of the United States (the "Company"), a New York stock life insurance company, hereby constitutes and appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Donald R. Kaplan, Pauline Sherman, Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Jerome S. Golden and Dennis D. Witte and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution to each, for him or her and on his or her behalf and in his or her name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 with respect to any insurance or annuity contracts or other agreements providing for allocation of amounts to Separate Accounts of the Company, and related units or interests in Separate Accounts: registration statements on any form or forms under the Securities Act of 1933 and the Investment Company Act of 1940 and annual reports on any form or forms under the Securities Exchange Act of 1934, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his, her or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 28th day of February, 1997 /s/ Stanley B. Tulin EX-27.1 7 SA 195 (THE EQUITY INDEX FUND)
6 0000727920 SEP ACCT. NO. 195 (ADA) 01 THE EQUITY INDEX FUND 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 30,674,317 33,428,766 32,269 0 0 33,461,035 0 0 58,732 58,732 0 0 0 0 0 0 0 0 0 33,402,303 714,952 0 0 315,573 399,379 3,369,472 1,268,671 5,037,522 0 0 0 0 0 0 0 13,953,057 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.2 8 SA 197 (THE LIFECYCLE FUND-CONSERVATIVE)
6 0000727920 SEP ACCT. NO. 197 (ADA) 02 THE LIFECYCLE FUND-CONSERVATIVE 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 4,325,438 4,561,626 0 0 0 4,561,626 0 0 51,364 51,364 0 0 0 0 0 0 0 0 0 4,510,262 0 0 0 92,493 (92,493) 155,169 126,000 188,676 0 0 0 0 0 0 0 1,347,949 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.3 9 SA 198 (THE LIFECYCLE FUND-MODERATE)
6 0000727920 SEP ACCT. NO. 3 (MRP) 03 THE LIFECYCLE FUND-MODERATE 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 79,126,053 88,294,348 36,210 0 0 88,330,558 0 0 138,273 138,273 0 0 0 0 0 0 0 0 0 88,192,285 0 0 0 897,989 (897,989) 981,358 8,340,014 8,423,383 0 0 0 0 0 0 0 11,975,815 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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