N-4 1 file001.txt REGISTRATION STATEMENT Registration No. 333- ------------------------------------------------------------------------------- ----------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. [ ] ---- Post-Effective Amendment No. [ ] ---- AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. [ ] ---- (Check appropriate box or boxes) -------------------------------- THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Exact Name of Registrant) -------------------------------- THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Name of Depositor) 1290 Avenue of the Americas, New York, New York 10104 (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, including Area Code: (212) 554-1234 ROBIN WAGNER Vice President and Counsel The Equitable Life Assurance Society of the United States 1290 Avenue of the Americas, New York, New York 10104 (Names and Addresses of Agents for Service) ----------------------------------------- Please send copies of all communications to: (201)392-5279 PETER E. PANARITES MAUREEN SCANNELL BATEMAN Foley & Lardner Executive Vice President Washington Harbour and General Counsel 3000 K. Street, Northwest State Street Bank and Trust Company Washington, D.C. 20007 225 Franklin Street Boston, MA 02110 ----------------------------------------- CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
---------------------------------------------------------------------------------------------------------------------------- Title of Securities Being Amount Being Proposed Maximum Proposed Maximum Amount of Registration Registered Registered Offering Price per Unit Aggregate Offering Price* Fee ---------------------------------------------------------------------------------------------------------------------------- Units of Interest Under Group Annuity Contract $40,000,000 $.0000809(1)) $40,000,000(1) $3,236 ----------------------------------------------------------------------------------------------------------------------------
* Estimated solely for purpose of determining the registration fee. (1) The Contract does not provide for a predetermined amount or number of units Pursuant to Rule 429 promulgated under the Securities Act of 1933, as amended, the prospectus contained in this Registration Statement is also made part of Registration Statement File No. 333-86572 of the Registrant. Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this registration statement. American Dental Association Members Retirement Program PROSPECTUS DATED MAY 1, 2003 -------------------------------------------------------------------------------- Please read this prospectus and keep it for future reference. It contains important information you should know before participating in the Program or allocating amounts under the contract. ABOUT THE ADA PROGRAM The Program provides members of the American Dental Association and their eligible employees several plans for the accumulation of retirement savings on a tax-deferred basis. Through trusts ("trusts") maintained under these plans, you can allocate contributions among the investment options offered under the Program. There are currently fourteen investment options under the Program including: 3-year and 5-year Guaranteed Rate Accounts, and, through the American Dental Association Members Retirement Program contract, eleven investment options (the "Funds") and the Money Market Guarantee Account. This prospectus describes three of the available investment funds: the Equity Index Fund, the Lifecycle Fund-Conservative and the Lifecycle Fund-Moderate. This prospectus also describes the Lifecycle Fund Group Trusts in which the two Lifecycle Funds invest. WHAT IS THE AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM CONTRACT? The American Dental Association Members Retirement Program contract is a deferred group annuity contract issued by The Equitable Life Assurance Society of the United States. Contributions to the trusts maintained under the plans will be allocated among our investment funds and our Money Market Guarantee Account, in accordance with participant instructions. -------------------------------------------------------------------------------- INVESTMENT OPTIONS -------------------------------------------------------------------------------- PRINCIPAL PROTECTION: INTERNATIONAL STOCKS: o Money Market Guarantee o Foreign Fund(3) Account o Guaranteed Rate Accounts BALANCED/HYBRID: o Lifecycle Fund-Conservative LARGE COMPANY STOCKS: o Lifecycle Fund-Moderate o Large Cap Growth Fund(1) o Equity Income Fund BOND FUND: o Equity Index Fund o Growth Equity Fund(2) o U.S. Bond Fund SMALL/MID COMPANY STOCKS: o Aggressive Equity Fund o Small Cap Value Fund --------------------------------------------------------------------------------
(1) Formerly named "ADA Large Cap Growth Fund." (2) There is no capitalization on this fund. The capitalization size of the fund is driven by stock selection. Currently, the fund may be considered to be large capitalization. (3) Formerly named "ADA Foreign Fund." The Growth Equity Fund is managed by Equitable Life. The Aggressive Equity Fund, Foreign Fund, Equity Index Fund, Equity Income Fund, Large Cap Growth Fund, Small Cap Value Fund and U.S. Bond Fund respectively invest in shares of the following mutual funds: MFS Emerging Growth Fund, Templeton Foreign Fund - Class A, State Street Global Advisors (SSgA) S&P 500 Index Fund, Putnam Equity Income Fund, INVESCO Growth Fund, Strong Advisor Small Cap Value Fund and Western Asset Core Portfolio - Institutional Class ("Underlying Mutual Funds"). You should also read the prospectuses for the Underlying Mutual Funds (which you have previously received or accompany this prospectus) and keep them for future reference. You may obtain a copy of any underlying Mutual Fund prospectus by writing or calling us toll-free. See "How to reach us" on the back cover. The Lifecycle Funds - Conservative and Moderate ("Lifecycle Funds") each invest in units of a corresponding group trust ("Lifecycle Fund Group Trusts") maintained by State Street Bank and Trust Company ("State Street"). The Lifecycle Fund Group Trusts in turn invest in units of collective investment funds of State Street. We refer to these as the "Underlying State Street Funds." The Underlying State Street Funds are the S&P 500 Flagship Fund, Russell 2000 Index Securities Lending Fund, Daily EAFE Fund, Government Corporate Bond Fund, and Short Term Investment Fund, which we also describe in this prospectus. Each Underlying State Street Fund may invest cash on a temporary basis in other mutual funds managed by State Street. Other available investment funds and investment options, except the Equity Index Fund and the Lifecycle Funds, are described, in detail, in a separate prospectus for those investment funds, which accompanies this prospectus. We have filed registration statements relating to this offering with the Securities and Exchange Commission. A statement of additional information ("SAI"), dated May 1, 2003, which is part of the registration statements, is available free of charge upon request by writing to us or calling us toll-free. The SAI has been incorporated by reference into this prospectus. The table of contents for the SAI and a request form to obtain the SAI appear at the end of this prospectus. You may also obtain a copy of this prospectus and the SAI through the SEC web site at www.sec.gov. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The securities are not insured by the FDIC or any other agency. They are not deposits or other obligations of any bank and are not bank guaranteed. They are subject to investment risks and possible loss of principal. 90516/ADA State Street Contents of this prospectus -------------------------------------------------------------------------------- ADA PROGRAM Index of key words and phrases 3 The Program at a glance - key features 4 Employer choice of retirement plans 4 Plan features 4 The Contract at a glance - key features 5 -------------------------------------------------------------------------------- 1 FEE TABLE 6 -------------------------------------------------------------------------------- Examples 9 Selected financial data and condensed financial information 10 Financial statements of investment funds 10 -------------------------------------------------------------------------------- 2 PROGRAM INVESTMENT OPTIONS 11 -------------------------------------------------------------------------------- Investment options 11 The Equity Index Fund 11 Lifecycle Funds - Conservative and Moderate 11 Risks and investment techniques: Lifecycle Fund Group Trusts and Underlying State Street Funds 15 Additional information about the funds 19 -------------------------------------------------------------------------------- 3 HOW WE VALUE YOUR ACCOUNT BALANCE IN THE INVESTMENT FUNDS 20 -------------------------------------------------------------------------------- For amounts in the Funds 20 --------------------------------------------------------------------------------
When we use the words "we," "us" and "our," we mean Equitable Life. Please see the index of key words and phrases used in this prospectus. The index will refer you to the page where particular terms are defined or explained. When we address the reader of this prospectus with words such as "you" and "your," we generally mean the individual participant in one or more of the plans available in the Program unless otherwise explained. For example, "The Program" section of the prospectus is primarily directed at the employer. "You" and "your" also can refer to the plan participant when the contract owner has instructed us to take plan participant instructions as the contract owner's instructions under the contract, for example see "Transfers and access to your account." 1 CONTENTS OF THIS PROSPECTUS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4 TRANSFERS AND ACCESS TO YOUR ACCOUNT 21 -------------------------------------------------------------------------------- Transfers among investment options 21 Disruptive transfer activity 21 Our Account Investment Management System (AIMS) and our Internet Website 21 Participant loans 22 Choosing benefit payment options 22 Spousal consent 23 Benefits payable after the death of a participant 23 -------------------------------------------------------------------------------- 5 THE PROGRAM 24 -------------------------------------------------------------------------------- Eligible employers 24 Summary of plan choices 24 Getting started 24 How to make Program contributions 25 Allocating Program contributions 25 Distributions from the investment options 25 Rules applicable to participant distributions 26 -------------------------------------------------------------------------------- 6 PERFORMANCE INFORMATION 27 -------------------------------------------------------------------------------- Annual percentage change in fund unit values 28 Average annual percentage change in fund unit values - years ending December 31, 2002 28 How we calculate performance data 28 -------------------------------------------------------------------------------- 7 CHARGES AND EXPENSES 29 -------------------------------------------------------------------------------- Charges based on amounts invested in the Program 29 Other expenses borne by the investment funds 29 Plan and transaction expenses 30 Individual annuity charges 30 Charges for state premium and other applicable taxes 30 General information on fees and charges 30 Deductions and charges related to the Lifecycle Trusts and Underlying State Street Funds 31 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 8 TAX INFORMATION 32 -------------------------------------------------------------------------------- Buying a contract to fund a retirement arrangement 32 Income taxation of distributions to qualified plan participants 32 -------------------------------------------------------------------------------- 9 MORE INFORMATION 34 -------------------------------------------------------------------------------- About Program changes or termination 34 IRS disqualification 34 About the separate accounts 34 About State Street 34 Underwriter 35 About legal proceedings 35 About our independent accountants 35 Reports we provide and available information 36 Acceptance 36
-------------------------------------------------------------------------------- APPENDIX I: SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION A-1 -------------------------------------------------------------------------------- TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION S-1 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- About Equitable Life Inside Back Cover How to reach us Back Cover --------------------------------------------------------------------------------
2 CONTENTS OF THIS PROSPECTUS ADA Program -------------------------------------------------------------------------------- INDEX OF KEY WORDS AND PHRASES Below is an index of key words and phrases used in this prospectus. The index will refer you to the page where particular terms are defined or explained. This index should help you locate more information on the terms used in this prospectus.
PAGE ------------ AIMS 21 beneficiary 23 benefit payment options 22 business day 22 contract 34 Contributions 25 disruptive transfer activity 21 eligible rollover distributions 32 Equitable Life S-2 GRAs 5 individually designed plan 24 Internet Website 21 IRA 32 investment funds front cover investment options front cover Lifecycle Funds 11 Lifecycle Fund Group Trusts 12 Market Timing 21 Master Plan 24 Master Trust 24 Pooled Trust 24 Program 24 separate accounts 34 State Street 34 Trustees 34 Underlying Mutual Funds front cover Underlying State Street Funds 12 unit value 20 unit 20
3 ADA PROGRAM -------------------------------------------------------------------------------- THE PROGRAM AT A GLANCE - KEY FEATURES EMPLOYER CHOICE OF RETIREMENT PLANS Our Master Plan is a defined contribution master plan that can be adopted as a profit-sharing plan (401(k), SIMPLE 401(k) and safe harbor 401(k) features are available) and a defined contribution pension plan, or both. The Program's investment options are the only investment choices under the Master Plan. If you maintain your own individually-designed plan which invests through our Investment Only arrangement, you may use the investment options in the Program through our Pooled Trust. PLAN FEATURES MASTER PLAN: o Program investment options used as the only investment choices. o Plan-level and participant-level recordkeeping, benefit payments, tax withholding and reporting provided. o Use of our Master Trust. o No minimum amount must be invested. o 5500 reporting. o Automatic updates for law changes. INVESTMENT ONLY: o Our Pooled Trust is adopted for investment use only. o Recordkeeping services provided for plan assets in Pooled Trust. TAX ADVANTAGES: o On earnings No tax on investment earnings until withdrawn. o On transfers No tax on internal transfers. ADDITIONAL FEATURES FOR AMOUNTS HELD IN THE TRUST: o Toll-free number available for transfers and account information. o Internet Website access to account information and transactions. o Participant loans (if elected by your employer; some restrictions apply). o Regular statements of account. o Retirement Program Specialist and Account Executive support. o Daily valuation of accounts. PLAN CHARGES AND EXPENSES: o Plan and transaction charges that vary by type of plan adopted, or by specific transaction. 4 ADA PROGRAM -------------------------------------------------------------------------------- THE CONTRACT AT A GLANCE - KEY FEATURES PROFESSIONAL INVESTMENT MANAGEMENT: The Program's investments are managed by professional investment advisers. GUARANTEED OPTIONS: The three guaranteed options include two Guaranteed Rate Accounts ("GRAs") and a Money Market Guarantee Account. TAX NOTE: Because you are purchasing an annuity contract to fund a qualified employer sponsored retirement arrangement, you should be aware that such annuities do not provide tax deferral benefits beyond those already provided by the Internal Revenue Code (the "Code"). Before purchasing one of these annuities, you should consider whether its features and benefits beyond tax deferral meet your needs and goals. You may also want to consider the relative features, benefits and costs of these annuities with any other investment that you may use in connection with your retirement plan or arrangement. (For more information, see "Tax information" later in this prospectus). CONTRACT CHARGES AND EXPENSES: o Program expense charge assessed against combined value of Program assets in the Trust. o Investment management and administration fees and other expenses charged on an investment fund-by-fund basis, as applicable. o Record maintenance and report fee. o Enrollment fee. o Investment accounting fee (applicable to GRAs only). o Annuity administrative fee. o Indirectly, charges of underlying investment vehicles for investment management, administrative fees, 12b-1 fees and other expenses. BENEFIT PAYMENT OPTIONS: o Lump sum. o Installments on a time certain or dollar certain basis. o Variety of annuity (fixed or variable) benefit payout options as available under your employer's plan. 5 ADA PROGRAM 1 Fee table -------------------------------------------------------------------------------- The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the contract. Each of the charges and expenses is more fully described in "Charges and expenses" later in this Prospectus. These tables relate to contracts with amounts invested in the Equity Index Fund and the Lifecycle Funds only. For a complete Fee table, please see the ADA prospectus which accompanies this Prospectus. The first table describes fees and expenses that you will pay if you purchase a variable annuity payout option. WHEN YOU PURCHASE OR REDEEM UNITS OF ANY OF THE INVESTMENT FUNDS YOU WILL PAY NO SALES LOAD, NO DEFERRED SALES CHARGE, NO SURRENDER FEES AND NO TRANSFER OR EXCHANGE FEES. Charges designed to approximate certain taxes that may be imposed on us, such as premium taxes in your state, may apply. Charges for certain features shown in this table are mutually exclusive.
-------------------------------------------------------------------------------------------------- CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE IF YOU PURCHASE AN ANNUITY PAYOUT OPTION -------------------------------------------------------------------------------------------------- Charge if you purchase a variable annuity payout option $350 -------------------------------------------------------------------------------------------------- The next table describes the fees and expenses that you will pay periodically during the time that you own the contract, not including the underlying trust portfolio fees and expenses. -------------------------------------------------------------------------------------------------- CHARGES WE DEDUCT FROM YOUR INVESTMENT FUNDS EXPRESSED AS AN ANNUAL PERCENTAGE OF DAILY NET ASSETS -------------------------------------------------------------------------------------------------- Maximum program expense charge(1) .655% ---- Administrative fee .15% ---- Program-related other expenses(2) .45% ---- Charges we deduct from your account value at the end of each calendar quarter -------------------------------------------------------------------------------------------------- Record maintenance and report fee(3) $3.00 -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- CHARGES WE MAY DEDUCT FROM YOUR ACCOUNT VALUE -------------------------------------------------------------------------------------------------- Enrollment fee(4) $25 per participant -------------------------------------------------------------------------------------------------- CHARGES WE DEDUCT FROM AMOUNTS IN THE GRAS AND THE MONEY MARKET GUARANTEE ACCOUNT -------------------------------------------------------------------------------------------------- Investment accounting fee(5) .02% Maximum program expense charge(1) .655% --------------------------------------------------------------------------------------------------
(1) This charge will fluctuate from year-to-year based on assets in the Trust and the number of plans in the Program. For the 12 month period beginning May 1, 2003, the total program expense charge is .63%. This charge is also deducted from amounts in the GRAs and the Money Market Guarantee Account. For a description of how the charge is calculated for amounts in the investment funds, GRAs and the Money Market Guarantee Account, see "Charges based on amounts in the Program" in "Charges and expenses" later in this Prospectus. (2) These expenses vary by investment fund and will fluctuate from year to year based on actual expenses. See the tables that provide the expenses for each individual investment fund later in this section. (3) For Investment only retirement arrangements, the fee is $1.00 per quarter. (4) This fee is charged to the employer. If the employer fails to pay this charge, we may deduct it from participant's account value or from subsequent contributions. (5) We charge an annual investment accounting fee of 0.02% on all amounts of Program assets invested in the GRAs only. This fee is reflected in the interest credited to the GRAs. 6 FEE TABLE -------------------------------------------------------------------------------- A proportionate share of all fees and expenses paid by an Underlying Mutual Fund and/or Trust that corresponds to any investment fund to which monies are allocated also applies. The table below shows the lowest and highest total operating expenses (as of December 31, 2002) charged by any of the Underlying Mutual Fund and/or Trust that you will pay periodically during the time that you own the Policy.
------------------------------------------------------------------------------------------ PORTFOLIO OPERATING EXPENSES EXPRESSED AS AN ANNUAL PERCENTAGE OF AVERAGE DAILY NET ASSETS ------------------------------------------------------------------------------------------ Total Annual Portfolio Operating Expenses for Lowest Highest 2002 (expenses that are deducted from Portfolio ------ ------- assets including management fees, 12b-1 fees, administration fees and/or other expenses .16% .35% ------------------------------------------------------------------------------------------
The following tables show the operating expenses of each available Underlying Mutual Fund and/or Trust ("Portfolio") and separate account expenses that are also applicable to certain investment funds. These fees and expenses are reflected in the investment fund net asset value each day. Therefore, they reduce the investment return of the Portfolio and the related investment fund. Actual fees and expenses are likely to fluctuate from year to year. UNDERLYING TRUST AND/OR STATE STREET EXPENSES AND SEPARATE ACCOUNT EXPENSES EXPRESSED AS AN ANNUAL PERCENTAGE OF AVERAGE DAILY NET ASSETS FOR LIFECYCLE FUNDS No transaction charges are incurred by the Lifecycle Funds when units of a corresponding Lifecycle Fund Group Trust are purchased or redeemed, but annual operating expenses are incurred by each Lifecycle Fund Group Trust. A deduction is made from the assets of each Lifecycle Fund Group Trust to compensate State Street for managing the assets of the Lifecycle Fund Group Trusts. State Street may receive fees for managing the assets of other collective investment funds in which the Funds may invest on a temporary basis, and for managing the mutual funds in which assets of the Underlying State Street Funds may be invested. State Street has agreed to reduce its management fee charged each of the Lifecycle Fund Group Trusts to offset any management fees State Street receives attributable to the Lifecycle Trusts' investment in such other collective investment funds and mutual funds. State Street also receives an administration fee deducted from the assets of each Lifecycle Fund Group Trust, to compensate it for providing various recordkeeping and accounting services to the Lifecycle Trust. In addition, other expenses are deducted from the assets of the Underlying State Street Funds for custodial services provided to those Funds. The fees and charges which are deducted from the assets of the Lifecycle Funds, the Lifecycle Fund Group Trusts and the Underlying State Street Funds are shown in the table below.
--------------------------------------------------------------------------------------------------------------- PROGRAM INVESTMENT EXPENSE ADMINISTRATION MANAGEMENT OTHER CHARGE FEE FEE EXPENSES TOTAL --------------------------------------------------------------------------------------------------------------- Lifecycle Fund - Conservative 0.655% 0.15% None 0.45%(1) 1.26% Lifecycle Fund Group Trust - Conservative None 0.09%(2) 0.17% 0.04%(1&3) 0.30% Underlying State Street Funds: S&P 500 Flagship Fund None None None -%(4)(5) -%(4)(6) Russell 2000 Index Securities Lending Fund None None None 0.03%(5) -%(4)(6) Daily EAFE Fund None None None -%(4)(5) -%(4)(6) ---------------------------------------------------------------------------------------------------------------
7 FEE TABLE --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------- PROGRAM INVESTMENT EXPENSE ADMINISTRATION MANAGEMENT OTHER CHARGE FEE FEE EXPENSES TOTAL --------------------------------------------------------------------------------------------------------------- Government Corporate Bond Fund None None None 0.01%(5) 0.01%(6) Short Term Investment Fund None None None 0.02%(5) -%(4)(6) --------------------------------------------------------------------------------------------------------------- TOTAL 0.655% 0.24% 0.17% 0.50%(6) 1.57%(6) ---------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------- PROGRAM INVESTMENT EXPENSE ADMINISTRATION MANAGEMENT OTHER CHARGE FEE FEE EXPENSES TOTAL --------------------------------------------------------------------------------------------------------------------- Lifecycle Fund - Moderate 0.655% 0.15% None 0.20%(1) 1.01% Lifecycle Fund Group Trust - Moderate None 0.01%(2) 0.17% 0.01%(1&3) 0.19% Underlying State Street Funds: S&P 500 Flagship Fund None None None -%(4)(5) -%(4)(6) Russell 2000 Index Securities Lending Fund None None None 0.03%(5) -%(4)(6) Daily EAFE Fund None None None -%(4)(5) -%(4)(6) Government Corporate Bond Fund None None None 0.01%(5) -%(4)(6) Short Term Investment Fund None None None 0.02%(5) -%(4)(6) -------------------------------------------------------------------------------------------------------------------- TOTAL 0.655% 0.16% 0.17% 0.21%(5) 1.20%(6) --------------------------------------------------------------------------------------------------------------------
(1) These include a charge at the annual rate of .03% of the value of the respective program assets in the Lifecycle Funds - Conservative and Moderate to compensate Equitable Life for additional legal, accounting and other potential expenses resulting from the inclusion of the Lifecycle Fund Group Trusts and Underlying State Street Funds maintained by State Street among the investment options described in this prospectus and the SAI. On December 8, 1995, the Program's balance in the Balanced Fund (approximately $70 million) was transferred to the Lifecycle Fund - Moderate. The much larger balance in that Fund results in a much lower ratio of other expenses to total assets compared to the corresponding ratio for the Lifecycle Fund - Conservative. (2) Based on the Lifecycle Fund Group Trusts - Conservative and Moderate current fixed fee of $12,000 per year, per fund, and average net assets for 2002. (3) Based on the Lifecycle Fund Group Trusts - Conservative and Moderate average net assets for 2002. (4) Less than 0.01%. (5) Other expenses of the Underlying State Street Funds are based on expenses incurred by each Fund during 2002. Fees have been rounded to 2 decimal points. (6) These totals are based upon a weighted average of the other expenses for each Underlying State Street Fund. In calculating the weighted average, expenses for each Underlying State Street Fund were multiplied by their respective target percentages within their respective Group Trust. See "Lifecycle Funds - Conservative" and "Lifecycle Funds - Moderate" later in this prospectus for a description of the targeted percentage weightings of the Lifecycle Fund Group Trusts - Conservative and Moderate. UNDERLYING MUTUAL FUND AND SEPARATE ACCOUNT EXPENSES EXPRESSED AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS FOR EQUITY INDEX FUND The Equity Index Fund invests in shares of the SSgA S&P 500 Index Fund. No transaction charges are incurred by the Equity Index Fund when it purchases or redeems shares of the SSgA S&P 500 Index Fund, but the underlying mutual fund incurs its own operating expenses. No deduction is made from the assets of the SSgA S&P 500 Index Fund to compensate State Street for managing the assets of that Fund. 8 FEE TABLE --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------- PROGRAM INVESTMENT EXPENSE ADMINISTRATION MANAGEMENT OTHER CHARGE FEE FEE EXPENSES 12b-1 FEE TOTAL ------------------------------------------------------------------------------------------------------------------- Equity Index Fund 0.655% 0.15% None 0.17% None 0.98% SSgA S&P 500 Index Fund(1) None None 0.04(2) 0.04 0.08 0.16(2) ------------------------------------------------------------------------------------------------------------------- TOTAL 0.655% 0.15% 0.04(2) 0.21% 0.08% 1.14%(2) -------------------------------------------------------------------------------------------------------------------
(1) Source: SSgA S&P 500 Index Fund Prospectus dated December 27, 2002. Fees have been rounded to two decimal points. (2) The Management Fee represents the fees paid by the S&P Master Fund for advisory, custody, transfer agency and administration services. The Advisor has contractually agreed to reimburse the SSgA S&P 500 Index Fund for all expenses in excess of .18% of average daily assets on an annual basis until December 31, 2003. The total annual expenses shown reflect the expenses of both the S&P 500 Index and the S&P Master Fund. EXAMPLES These examples are intended to help you compare the cost of investing in the contract with the cost of investing in other variable annuity contracts. These costs include contract owner transaction expenses, contract fees, separate account annual expenses, and underlying fund fees and expenses. The examples below show the expenses that a hypothetical contract owner would pay in the situations illustrated and assumes the maximum charges applicable under the contract, including the record maintenance and report fee and the enrollment fee. For purposes of these examples, the program expense charge has been rounded to .66%. Since there are no surrender charges in connection with amounts invested in the Funds, the expenses are the same whether or not the participant withdraws amounts held in any of the Funds. The guarantee rate accounts and moneymarket guarantee account are not covered by the fee table and examples. However, the ongoing expenses do apply to the guarantee rate accounts and moneymarket guarantee account. These examples should not be considered a representation of past or future expenses for each option. Actual expenses may be greater or less than those shown. Similarly, the annual rate of return assumed in the examples is not an estimate or guarantee of future investment performance. These examples assume that you invest $10,000 in the indicated options under the contract for the time periods shown. The examples also assume that your investment has a 5% return each year and assumes the fees and expenses of each of the available Underlying Mutual Funds or Trusts and/or Underlying State Street Funds in addition to the expenses described above. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
----------------------------------------------------------------------------------------------------------------------------------- IF YOU DO NOT SURRENDER YOUR CONTRACT AT THE END IF YOU ANNUITIZE AT THE END OF THE APPLICABLE TIME PERIOD: OF THE APPLICABLE TIME PERIOD:* ---------------------------------------------------------------------------------------------------------- 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------------------------------------------------------------- Equity Index(1) $ 153.13 $ 422.33 $ 709.97 $ 1,519.41 $ 503.13 $ 722.33 $ 1,059.97 $ 1,869.41 Lifecycle - Conservative 200.75 568.05 957.70 2,039.69 550.75 918.05 1,307.70 2,389.69 Lifecycle - Moderate 162.65 451.58 759.89 1,625.38 512.65 801.58 1,109.89 1,975.38 -----------------------------------------------------------------------------------------------------------------------------------
* Assuming an annuity payout option could be issued. Generally, the minimum amount that can be used to purchase any type of annuity is $5,000 (see "Individual annuity charges" in "Charges and expenses" later in this Prospectus). 9 FEE TABLE -------------------------------------------------------------------------------- SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION Please see APPENDIX I at the end of this prospectus for selected financial data and condensed financial information concerning the Equity Index Fund and Lifecycle Funds. For complete condensed financial information, please see the ADA Prospectus that accompanies this Prospectus. FINANCIAL STATEMENTS OF INVESTMENT FUNDS The Equity Index Fund and the Lifecycle Funds are each separate accounts of ours as described in "About the separate accounts" under "More information" later in this prospectus. The financial statements for the Equity Index Fund (Separate Account No. 195), Lifecyle Fund - Conservative (Separate Account No. 197) and Lifecycle Fund - Moderate (Separate Account No. 198) may be found in the SAI for this prospectus. 10 FEE TABLE 2 Program Investment Options -------------------------------------------------------------------------------- INVESTMENT OPTIONS You may choose from FOURTEEN INVESTMENT OPTIONS under the Program, eleven of which are covered in a separate prospectus. Three of these are discussed below: the Equity Index Fund and the two Lifecycle Funds - Conservative and Moderate. Each of these three Funds has a different investment objective. We cannot assure you that any of these Funds will meet their investment objectives. Also discussed are the Lifecycle Fund Group Trusts in which the Lifecycle Funds invest and the Underlying State Street Funds in which the Lifecycle Fund Group Trusts invest. THE EQUITY INDEX FUND The Equity Index Fund invests in shares of the SSgA S&P 500 Index Fund, one of the Underlying Mutual Funds. The investment results you will experience will depend on the investment performance of SSgA S&P 500 Index Fund. The table below shows the investment objective and adviser for the SSgA S&P 500 Index Fund. UNDERLYING MUTUAL FUND
-------------------------------------------------------------------------------- INVESTMENT FUND NAME OBJECTIVE ADVISER -------------------------------------------------------------------------------- Equity Index Fund SSgA S&P Replicate the SSgA Funds 500 Index total return Management, Fund of the S&P Inc. 500 Index --------------------------------------------------------------------------------
The underlying mutual fund used by the Equity Index Fund is selected by the ADA Trustees. We have no investment management responsibilities for the Equity Index Fund. As to that Fund, we act in accordance with the investment policies established by the ADA Trustees. PLEASE REFER TO THE PROSPECTUS AND SAI OF THE SSGA S&P 500 INDEX FUND FOR A MORE DETAILED DISCUSSION OF INVESTMENT OBJECTIVES AND STRATEGIES, THE ADVISER, RISK FACTORS AND OTHER INFORMATION CONCERNING THAT FUND. LIFECYCLE FUNDS - CONSERVATIVE AND MODERATE Each Lifecycle Fund invests in a Lifecycle Fund Group Trust. Each Lifecycle Trust has identical investment objectives and policies to the Lifecycle Fund to which it relates. We have no investment management responsibilities for the Lifecycle Funds. As to those Funds, we act in accordance with the investment policies established by the ADA Trustees. OBJECTIVES The Lifecycle Fund - Conservative seeks to provide current income and a low to moderate growth of capital by investing exclusively in units of the Lifecycle Group Trust - Conservative. The Lifecycle Fund - Moderate seeks to provide growth of capital and a reasonable level of current income by investing exclusively in units of the Lifecycle Group Trust - Moderate. In turn each of the Lifecycle Fund Group Trusts invests in a mix of Underlying State Street Funds. The following table diagrams this investment structure: [GRAPHIC OMITTED] -------------------------------------------------------------------------------- LIFECYCLE FUND LIFECYCLE FUND CONSERVATIVE MODERATE (SA 197) (SA 198) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LIFECYCLE FUND LIFECYCLE FUND GROUP TRUST GROUP TRUST CONSERVATIVE MODERATE -------------------------------------------------------------------------------- UNDERLYING FUNDS -------------------------------------------------------------------------------- S&P 500 FLAGSHIP FUND -------------------------------------------------------------------------------- RUSSELL 2000 INDEX SECURITIES LENDING FUND -------------------------------------------------------------------------------- DAILY EAFE FUND -------------------------------------------------------------------------------- GOV'T CORPORATE BOND FUND -------------------------------------------------------------------------------- SHORT TERM INVESTMENT FUND -------------------------------------------------------------------------------- 11 PROGRAM INVESTMENT OPTIONS -------------------------------------------------------------------------------- THE LIFECYCLE FUND GROUP TRUSTS The Lifecycle Fund Group Trusts (Lifecycle Trusts) are maintained by State Street. Each of the Lifecycle Trusts is organized as a collective investment trust under Massachusetts law. Because of exclusionary provisions, the Lifecycle Fund Group Trusts are not subject to regulation under the Investment Company Act of 1940. Each Trust is operated by a single corporate trustee (State Street), which is responsible for all aspects of the Trust, including portfolio management, administration and custody. The Lifecycle Fund Group Trusts were selected by the ADA Trustees. State Street serves as the trustee and investment manager to the Lifecycle Fund Group Trusts. State Street is a trust company established under the laws of the Commonwealth of Massachusetts. It is a wholly-owned subsidiary of State Street Corporation, a publicly held bank holding company registered under the Federal Bank Holding Company Act of 1956, as amended. State Street's home office is located at 225 Franklin Street, Boston, Massachusetts 02110. State Street Global Advisors (SSgA) is the investment management arm of State Street. SSgA is a leading manager of retirement assets with $762.9 billion in assets under management as of December 31, 2002. SSgA's investment expertise spans multiple strategies, disciplines and markets around the world. SSgA's customers include corporate, union, public pension plans, endowments, foundations, other financial institutions and individuals worldwide. As of May 27, 2002, SSgA was ranked the largest manager of U.S. Institutional Tax-Exempt Assets. INVESTMENT OBJECTIVES AND POLICIES Each Lifecycle Trust has the same investment objective as the Lifecycle Fund to which it relates. These investment objectives are described above. Each of the Lifecycle Trusts attempts to achieve its investment objective by investing 100% of its assets in a mix of underlying collective investment trusts (the Underlying State Street Funds) maintained by State Street and offered exclusively to tax exempt retirement plans. Unlike the Lifecycle Fund Group Trusts, however, which are available only under the ADA Program, the Underlying State Street Funds may receive contributions from other tax exempt retirement plans. INVESTMENT POLICIES OF THE LIFECYCLE FUND GROUP TRUST - CONSERVATIVE The table below shows the mix of Underlying State Street Funds targeted by the Lifecycle Fund Group Trust - Conservative. --------------------------------------------------------------------------- S&P 500 Flagship Fund 15% Russell 2000 Index Securities Lending Fund 5% Daily EAFE Fund 10% Government Corporate Bond Fund 50% Short Term Investment Fund 20% ---------------------------------------------------------------------------
INVESTMENT POLICIES OF THE LIFECYCLE FUND GROUP TRUST - MODERATE The table below shows the mix of Underlying State Street Funds targeted by the Lifecycle Fund Group Trust - Moderate. --------------------------------------------------------------------------- S&P 500 Flagship Fund 35% Russell 2000 Index Securities Lending Fund 10% Daily EAFE Fund 15% Government Corporate Bond Fund 30% Short Term Investment Fund 10% ---------------------------------------------------------------------------
The target percentages shown above for each Lifecycle Trust are reviewed annually by the ADA Trustees and may be revised as recommended, subject to State Street's approval. State Street, as investment manager of each Lifecycle Trust, from time to time makes adjustments in the mix of Underlying State Street Funds as needed to maintain, to the extent practicable, the target percentages in each of the Underlying State Street Funds. 12 PROGRAM INVESTMENT OPTIONS -------------------------------------------------------------------------------- THE UNDERLYING STATE STREET FUNDS The Underlying State Street Funds are bank collective investment trusts. They are organized as common law trusts under Massachusetts law, and because of exclusionary provisions, are not subject to regulation under the 1940 Act. State Street serves as trustee and investment manager to each of the Underlying State Street Funds. S&P 500 FLAGSHIP FUND OBJECTIVE The investment objective of the S&P 500 Flagship Fund ("Flagship Fund") is to replicate, as closely as possible, the return of the Standard & Poor's 500 Index (the "S&P 500 Index"). The S&P 500 Index is comprised of stocks of 500 leading companies whose stocks are chosen for market size, liquidity and industry group representation by Standard & Poor's Corporation. The stocks are also representative of the broad U.S. equity market and the U.S. economy. The S&P 500 is a market-value weighted index (stock price time number of shares outstanding), with each stock's weight in the index proportionate to its market value. The "500" is one of the most widely used benchmarks of U.S. equity performance. The Flagship Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's Corporation, and Standard & Poor's Corporation makes no representation regarding the advisability of investing in this Fund. INVESTMENT POLICIES The Flagship Fund intends to achieve its objective by investing in all 500 stocks in the S&P 500 Index. In order to provide 100% equity exposure, the Flagship Fund may hold up to 25% of its value in S&P 500 futures contracts in lieu of cash equivalents. The Flagship Fund will use U.S. Treasury Bills and other short-term cash equivalents it holds as collateral for the futures contracts. For additional discussion related to the investment policies of the Flagship Fund, see discussion under "Risks and Investment Techniques" below, and the Statement of Additional Information. RUSSELL 2000 INDEX SECURITIES LENDING FUND OBJECTIVE The investment objective of the Russell 2000 Index Securities Lending Fund is to match, as closely as possible, the return of the Russell 2000 Index maintained by Frank Russell Company ("Frank Russell"). INVESTMENT POLICIES The Russell 2000 Index Securities Lending Fund seeks to fully replicate the Russell 2000 Index. The Russell 2000 Index Securities Lending Fund will invest its assets directly in shares of companies included in the Russell 2000 Index. The Russell 2000 Index is a broadly diversified small capitalization index consisting of approximately 2,000 common stocks. The Russell 2000 Index is a subset of the larger Russell 3000 Index. The Russell 3000 Index consists of the largest 3,000 publicly traded stocks of U.S. domiciled corporations and includes large, medium and small capitalization stocks. As such, the Russell 3000 Index represents approximately 98 percent of the total market capitalization of all U.S. stocks that trade on the New York and American Stock Exchanges and in the NASDAQ over-the-counter market. The Russell 2000 Index consists of the approximately 2,000 smallest stocks within the Russell 3000 Index and is, therefore, a broadly diversified index of small capitalization stocks. The composition of the Russell 2000 Index is updated continuously to reflect corporate actions affecting companies in the Index. Once a year, at the end of June, the Index is fully reconstituted and companies that no longer qualify for the Index because of fluctuations of market capitalization are replaced. The rate of change in the securities included in the Russell 2000 Index is significant, often higher than 20 percent a year of the total market capitalization of the Index. 13 PROGRAM INVESTMENT OPTIONS -------------------------------------------------------------------------------- The Russell 2000 Index Securities Lending Fund is neither sponsored by nor affiliated with Frank Russell. Frank Russell's only relationship to the Russell 2000 Fund is the licensing of the use of the Russell 2000 Stock Index. Frank Russell is the owner of the trademarks and copyrights relating to the Russell indices. For additional discussion related to the investment policies of the Russell 2000 Index Securities Lending Fund, see discussion under "Risks and Investment Techniques" below, and the Statement of Additional Information. DAILY EAFE FUND OBJECTIVE The investment objective of the Daily EAFE Fund is to closely match the performance of the Morgan Stanley Capital International EAFE Index ("EAFE Index") while providing daily liquidity. INVESTMENT POLICIES The Daily EAFE Fund seeks to achieve its objective by investing in other funds which invest in each of the foreign markets which comprise the EAFE Index. The Morgan Stanley Capital International Europe, Australasia, and Far East (MSCI EAFE) Index is a broadly diversified index representing over 1,000 stocks across 20 developed markets outside of North America. The Index captures about 60% of the available market capitalization in each country and is designed to offer investors access to some of the world's largest and most liquid equity securities outside the U.S. and Canada. The Daily EAFE Fund also may acquire interest-bearing cash equivalents, notes and other short-term instruments, including foreign currency time deposits or call accounts. As of December 31, 2002, companies located in Japan (21.2%) and the United Kingdom (27.7%) dominated the market capitalization of the EAFE Index, with companies located in France, Germany, Switzerland and Netherlands also being well represented on the Index. The Index covers a wide spectrum of industries. Morgan Stanley Capital International, the creator of the EAFE Index, is neither a sponsor of nor affiliated with the Daily EAFE Fund. The Daily EAFE Fund seeks to fully replicate the MSCI EAFE Index, but from time to time may not be able to hold all of the more than 1,000 stocks that comprise the EAFE Index because of the costs involved. From time to time the Daily EAFE Fund will hold a representative sample of the issues that comprise the EAFE Index. The Daily EAFE Fund selects stocks for inclusion based on country, market capitalization, industry weightings, and fundamental characteristics such as return variability, earnings valuation, and yield. In order to parallel the performance of the EAFE Index, the Daily EAFE Fund will invest in each country in approximately the same percentage as that country's weight in the EAFE Index. For additional discussion related to the investment policies of the Daily EAFE Fund, see discussion under "Risks and Investment Techniques" below, and the Statement of Additional Information. GOVERNMENT CORPORATE BOND FUND OBJECTIVE The investment objective of the Government Corporate Bond Fund ("GC Bond Fund") is to match or exceed the return of the Lehman Brothers Government Corporate Bond Index. INVESTMENT POLICIES The GC Bond Fund seeks to achieve its investment objective by making direct investment in marketable instruments and securities. The GC Bond Fund may make direct investments in (1) U.S. Government securities, including U.S. Treasury securities and other obligations issued or guaranteed as to interest and principal by the U.S. Government and its agencies and instrumentalities, (2) corporate securities, (3) asset backed securities, (4) mortgage backed securities including, but not limited to, collateralized mortgage obligations and real estate mortgage investment conduits, (5) repurchase and reverse repurchase agreements, (6) financial futures and option contracts, (7) interest rate exchange agreements and other swap agreements, (8) supranational and sovereign debt obligations including 14 PROGRAM INVESTMENT OPTIONS -------------------------------------------------------------------------------- those of sub-divisions and agencies, and (9) other securities and instruments deemed by State Street, as trustee of the GC Bond Fund, to have characteristics consistent with the investment objective of this Fund. The GC Bond Fund will hold securities that have a minimum credit rating when purchased of Baa3 by Moody's or BBB- by Standard & Poor's. For additional discussion related to the investment policies of the GC Bond Fund, see discussion under "Risks and investment techniques" below and the Statement of Additional Information. SHORT TERM INVESTMENT FUND OBJECTIVE The investment objective of the Short Term Investment Fund ("STIF Fund") is, through active management, to provide safety of principal, daily liquidity, and a competitive yield by investing in high quality money market instruments. INVESTMENT POLICIES The STIF Fund intends to achieve its objective by investing in money market securities rated at least A-1 by Standard and Poor's and P-1 by Moody's at the time of issuance. If the issuer has long-term debt outstanding, such debt should be rated at least "A" by Standard & Poor's or "A" by Moody's. The STIF Fund may purchase Yankee and Euro certificates of deposit, Euro time deposits, U.S. Treasury bills, notes and bonds, federal agency securities, corporate bonds, repurchase agreements and banker's acceptances. Most of the STIF Fund's investments will have a range of maturity from overnight to 90 days. The maximum expected average time to receipt of principal of any single security will not exceed 397 days. For additional discussion regarding the investment policies of the STIF Fund, see discussion under "Risks and investment techniques" below, and the Statement of Additional Information. RISKS AND INVESTMENT TECHNIQUES: LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING STATE STREET FUNDS You should be aware that any investment in securities carries with it a risk of loss. The different investment objectives and policies of the Equity Index Fund and each of the Lifecycle Funds affect the return on these Funds. Additionally, there are market and financial risks inherent in any securities investment. By market risks, we mean factors which do not necessarily relate to a particular issuer but which affect the way markets, and securities within those markets, perform. We sometimes describe market risk in terms of volatility, that is, the range and frequency of market value changes. Market risks include such things as changes in interest rates, general economic conditions and investor perceptions regarding the value of debt and equity securities. By financial risks we mean factors associated with a particular issuer which may affect the price of its securities, such as its competitive posture, its earnings and its ability to meet its debt obligations. The risk factors and investment techniques associated with the Underlying State Street Funds in which the Lifecycle Fund Group Trusts invest are discussed below. The risks and investment techniques associated with investments by the Equity Index Fund in the SSgA S&P 500 Index Fund are discussed in the prospectus and Statement of Additional Information for the SSgA S&P 500 Index Fund. IN GENERAL You should note that the S&P 500 Flagship Fund, the Russell 2000 Index Securities Lending Fund and the Daily EAFE Fund are all index funds. An index fund is one that is not managed according to traditional methods of "active" investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, such funds utilize a "passive" investment approach, attempting to duplicate the investment performance of their benchmark indices through automated statistical analytic procedures. For example, the S&P 500 Flagship Fund attempts to match the return of the S&P 500 Index by using automated statistical methods to make stock selections. Similar methods 15 PROGRAM INVESTMENT OPTIONS -------------------------------------------------------------------------------- are employed in selecting stocks for the Russell 2000 Index Securities Lending Fund and the Daily EAFE Fund. Still, such Funds, to the extent they invest in the various types of securities discussed below, are subject to the risks associated with each of these investments. Also, you should note that each of the Underlying State Street Funds, for the purpose of investing uncommitted cash balances or to maintain liquidity to meet redemptions of Fund units, may invest temporarily and without limitation in certain short-term fixed income securities and other collective investment funds or registered mutual funds maintained or advised by State Street. The short-term fixed income securities in which an Underlying State Street Fund may invest include obligations issued or guaranteed as to principal and interest by the U.S. Government, its agencies and instrumentalities and repurchase agreements collateralized by these obligations, commercial paper, bank certificates of deposit, banker's acceptances, and time deposits. EQUITY SECURITIES Certain of the Underlying State Street Funds will invest in equity securities. Participants should be aware that equity securities fluctuate in value, often based on factors unrelated to the value of the issuer of the securities, and that fluctuations can be pronounced. The securities of the smaller companies in which some of the Underlying State Street Funds may invest may be subject to more abrupt or erratic market movements than larger, more established companies for two reasons: the securities typically are traded in lower volume and the issuers typically are subject, to a greater degree, to changes in earnings and profits. FIXED-INCOME SECURITIES Certain of the Underlying State Street Funds will invest in fixed-income securities. Although these are interest-bearing securities which promise a stable stream of income, participants should be aware that the prices of such securities are affected by changes in interest rates. Accordingly, the prices of fixed-income securities are subject to the risk of market price fluctuations. The values of fixed-income securities also may be affected by changes in the credit rating or financial condition of the issuing entities. Once the rating of a portfolio security has been changed, State Street will consider all relevant circumstances in determining whether a particular Underlying State Street Fund should continue to hold that security. Certain securities such as those rated Baa by Moody's and BBB by Standard & Poor's, may be subject to greater market fluctuations than lower yielding, higher rated fixed-income securities. Securities which are rated Baa by Moody's are considered medium grade obligations; they are neither highly protected nor poorly secured, and are considered by Moody's to have speculative characteristics. Securities rated BBB by Standard & Poor's are regarded as having adequate capacity to pay interest and repay principal, and while such debt securities ordinarily exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for securities in this category than in higher rated categories. FOREIGN SECURITIES The Daily EAFE Fund will invest in foreign securities. Such investments, however, entail special risks. Foreign securities markets generally are not as developed or efficient as those in the United States. Securities of some foreign issuers are less liquid and more volatile than securities of comparable U.S. issuers. Similarly, volume and liquidity in most foreign securities markets are less than in the United States and, at times, volatility of price can be greater than in the United States. In addition, there may be less publicly available information about a non-U.S. issuer, and non-U.S. issuers generally are not subject to uniform accounting and financial reporting standards, practices and requirements comparable to those applicable to U.S. issuers. Because evidences of ownership of foreign securities usually are held outside the United States, each of the Underlying State Street Funds investing in foreign securities will be subject to additional risks. Such risks include possible adverse political and economic developments, possible 16 PROGRAM INVESTMENT OPTIONS -------------------------------------------------------------------------------- seizure or nationalization of foreign deposits, and possible adoption of governmental restrictions which might adversely affect the payment of principal and interest on the foreign securities or might restrict the payment of principal and interest to investors located outside the country of the issuers, whether from currency blockage or otherwise. Custodial expenses for a portfolio of non-U.S. securities generally are higher than for a portfolio of U.S. securities. Since foreign securities transactions involving the Underlying State Street Funds often are completed in currencies of foreign countries, the value of these securities as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency rates and exchange control regulations. Some currency exchange costs may be incurred when an Underlying State Street Fund changes investments from one country to another. Furthermore, some of these securities may be subject to brokerage or stamp taxes levied by foreign governments, which have the effect of increasing the cost of such investment. Income received by sources within foreign countries may be reduced by any withholding and other taxes imposed by such countries. FUTURES CONTRACTS Certain of the Underlying State Street Funds may invest in futures contracts. A purchase of a futures contract is the acquisition of a contractual right and obligation to acquire the underlying security at a specified price on a specified date. Although futures contracts by their terms may call for the actual delivery or acquisition of the underlying security, in most cases the contractual obligation is terminated before the settlement date of the contract without delivery of the security. The Underlying State Street Fund will incur brokerage fees when it purchases and sells futures contracts. The Underlying State Street Funds will not purchase futures contracts for speculation. Futures contracts are used to increase the liquidity of each Underlying State Street Fund and for hedging purposes. Transactions in futures contracts entail certain risks and transaction costs to which an Underlying State Street Fund would not otherwise be subject, and the Underlying State Street Fund's ability to purchase futures contracts may be limited by market conditions or regulatory limits. Because the value of a futures contract depends primarily on changes in the value of the underlying securities, the value of the futures contracts purchased by the Underlying State Street Fund generally reflects changes in the values of the underlying stocks or bonds. The risks inherent in the use of futures contracts include: (1) imperfect correlation between the price of the futures contracts and movements in the prices in the underlying securities; and (2) the possible absence of a liquid secondary market for any particular instrument at any time. An Underlying State Street Fund also may engage in foreign futures transactions. Unlike trading on domestic futures exchanges, trading on foreign futures exchanges is not regulated by the Commodity Futures Trading Commission and may be subject to greater risks than trading on domestic exchanges. For example, some foreign exchanges are principal markets so that no common clearing facility exists and an investor may look only to the broker for performance of the contract. In addition, any profits that an Underlying State Street Fund might realize from trading could be eliminated by adverse changes in the exchange rate, or such Underlying State Street Fund could incur losses as a result of those changes. Transactions on foreign exchanges may include both futures which are traded on domestic exchanges and those which are not. SECURITIES OF MEDIUM AND SMALLER SIZED COMPANIES. Certain of the Underlying State Street Funds may invest in the securities of medium and smaller sized companies with market capitalization of $500 million to $1.5 billion. Such companies may be dependent on the performance of only one or two products and, therefore, may be vulnerable to competition from larger companies with greater resources and to economic conditions affecting their market sector. Consequently, consistent earnings may not be as likely in such companies as they would be for larger companies. In addition, medium and smaller sized companies may be more dependent on access to equity markets to raise capital than larger companies with greater ability to support debt. 17 PROGRAM INVESTMENT OPTIONS -------------------------------------------------------------------------------- Medium and smaller sized companies may be new, without long business or management histories, and perceived by the market as unproven. Their securities may be held primarily by insiders or institutional investors, which may have an impact on marketability. The price of these stocks may rise and fall more frequently and to a greater extent than the overall market. LENDING OF SECURITIES Certain of the Underlying State Street Funds may from time to time lend securities from their portfolios to brokers, dealers and financial institutions and receive collateral consisting of cash, securities issued or guaranteed by the U.S. Government, or irrevocable letters of credit issued by major banks. The Underlying State Street Funds will invest this cash collateral in various collective investment funds maintained by State Street. The portion of net income from such investments will increase the return to the Underlying State Street Funds. However, an Underlying State Street Fund may experience a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement. All securities lending transactions in which the Underlying State Street Funds engage will comply with the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and related regulations. INVESTMENTS BY THE STIF FUND Each of the Lifecycle Fund Group Trusts will, and certain of the Underlying State Street Funds may, invest in the STIF Fund. This Fund intends to invest, among other things, in various U.S. Government Obligations, U.S. dollar-denominated instruments issued by foreign banks and foreign branches of U.S. banks, "when-issued" securities, and to enter into repurchase agreements with various banks and broker-dealers. The STIF Fund's activities with respect to each of these investments are discussed below. The STIF Fund may invest in a variety of U.S. Government obligations, including bills and notes issued by the U.S. Treasury and securities issued by agencies of the U.S. Government. The STIF Fund also may invest in U.S. dollar-denominated instruments issued by foreign banks and foreign branches of U.S. banks, a type of investment that may involve special risks. Such banks may not be required to maintain the same financial reserves or capital that are required of U.S. banks. Restrictions on loans to single borrowers, prohibitions on certain self-dealing transactions, and other regulations designed to protect the safety and solvency of U.S. banks may not be applicable to foreign banks and foreign branches of U.S. banks. In addition, investments of this type may involve the unique risks associated with investments in foreign securities described above. The STIF Fund may commit to purchasing securities on a "when-issued" basis, such that payment for and delivery of a security will occur after the date that this Fund commits to purchase the security. The payment obligation and the interest rate that will be received on the security are each fixed at the time of the purchase commitment. Prior to payment and delivery, however, the STIF Fund will not receive interest on the security, and will be subject to the risk of loss if the value of the when-issued security is less than the purchase price at time of delivery. Finally, the STIF Fund may enter into repurchase agreements with various banks and broker-dealers. In a repurchase agreement transaction, the STIF Fund acquires securities (usually U.S. Government obligations) for cash and obtains a simultaneous commitment from the seller to repurchase the securities at an agreed-upon price and date. The resale price is in excess of the acquisition price and reflects an agreed-upon rate of interest unrelated to the coupon rate on the purchased security. In these transactions, the securities purchased by the STIF Fund will have a total value at least equal to the amount of the repurchase price and will be held by State Street or a third-party custodian until repurchased. State Street will continually monitor the value of the underlying securities to verify that their value, including accrued interest, always equals or exceeds the repurchase price. 18 PROGRAM INVESTMENT OPTIONS -------------------------------------------------------------------------------- ADDITIONAL INFORMATION ABOUT THE FUNDS CHANGE OF INVESTMENT OBJECTIVES The ADA Trustees may change the investment objectives of the Equity Index Fund and Lifecycle Funds. The ADA Trustees may also change the mutual fund or collective investment fund in which any one of these Funds invests. The Trustees and we can make these changes without your consent. VOTING RIGHTS If SSgA S&P 500 Index Fund holds a meeting of shareholders, we will vote shares held in the corresponding Equity Index Fund in accordance with instructions received from employers, participants or trustees, as the case may be. Shares will be voted in proportion to the voter's interest in the Equity Index Fund holding the shares as of the record date for the shareholders meeting. We abstain from voting shares if we receive no instructions. Employers, participants or trustees will receive: (1) periodic reports relating to the SSgA S&P 500 Index Fund and (2) proxy materials, together with a voting instruction form, in connection with shareholder meetings. Participants do not have any voting rights with respect to their investments in a Lifecycle Fund. Similarly, participants do not have any voting rights with respect to matters such as the selection of State Street as trustee or investment manager or investment adviser of a Lifecycle Fund Group Trust or Underlying State Street Fund, or with respect to any changes in investment policy of any of these entities. 19 PROGRAM INVESTMENT OPTIONS 3 How we value your account balance in the Equity Index Fund and Lifecycle Funds -------------------------------------------------------------------------------- FOR AMOUNTS IN THE FUNDS When you invest in the Equity Index Fund and Lifecycle Funds, your contribution or transfer purchases "units" of that Fund. The unit value on any day reflects the value of the Fund's investments for the day and the charges and expenses we deduct from the Fund. We calculate the number of units you purchase by dividing the amount you invest by the unit value of the Fund as of the close of business on the day we receive your contribution or transfer instruction. On any given day, your account value in the Equity Index Fund and Lifecycle Funds equals the number of the Fund's units credited to your account, multiplied by that day's value for one Fund unit. In order to take deductions for expenses from any Fund, we cancel units having a value equal to the amount we need to deduct. Otherwise, the number of your Fund units of any Fund does not change unless you make additional contributions, make a withdrawal, effect a transfer, or request some other transaction that involves moving assets into or out of that Fund option. For a description of how Fund unit values are computed, see "How We Determine Unit Values for the Funds" in the SAI. 20 HOW WE VALUE YOUR ACCOUNT BALANCE IN THE EQUITY INDEX FUND AND LIFECYCLE FUNDS 4 Transfers and access to your account -------------------------------------------------------------------------------- TRANSFERS AMONG INVESTMENT OPTIONS You may transfer some or all of your amounts among all of the investment options if you participate in the Master Plan. Participants in other plans may make transfers as allowed by the plan. Transfers from the Equity Index Fund and Lifecycle Funds are permitted at any time except if there is any delay in redemptions from the Underlying Mutual Fund or, with respect to the Lifecycle Funds, the Lifecycle Fund Group Trusts in which they invest. In addition, we reserve the right to restrict transfers among variable investment funds as described in your contract, including limitations on the number, frequency or dollar amount of transfers. DISRUPTIVE TRANSFER ACTIVITY You should note that the contract is not designed for professional "market timing" organizations or other organizations or individuals engaging in a market timing strategy, making programmed transfers, frequent transfers or transfers that are large in relation to the total assets of the underlying portfolio. These kind of strategies and transfer activities are disruptive to the underlying portfolios in which the variable investment options invest. If we determine that your transfer patterns among the variable investment options are disruptive to the underlying portfolios, we may, among other things restrict the availability of personal telephone requests, facsimile transmissions, automated telephone services, Internet services or any electronic transfer services . We may also refuse to act on transfer instructions of an agent who is acting on behalf of one or more owners. In making these determinations, we may consider the combined transfer activity in all annuity contracts and life insurance policies that we believe are under common ownership, control or direction. We currently consider transfers into and out of (or vice versa) the same variable investment option within a five business day period as potentially disruptive transfer activity. In order to prevent disruptive activity, we monitor the frequency of transfers, including the size of transfers in relation to portfolio assets in each underlying portfolio, and we take appropriate action, which may include the actions described above to restrict availability of voice, fax and automated transaction services, when we consider the activity of owners to be disruptive. We currently provide a letter to owners who have engaged in such activity of our intention to restrict such services. However, we may not continue to provide such letters. We may also, in our sole discretion and without further notice, change what we consider disruptive transfer activity, as well as change our procedures to restrict this activity. OUR ACCOUNT INVESTMENT MANAGEMENT SYSTEM ("AIMS") AND OUR INTERNET WEBSITE Participants may use our automated AIMS or our Internet Website to transfer between investment options, obtain account information, change the allocation of future contributions and maturing GRAs and hear investment performance information. To use AIMS, you must have a touch-tone telephone. Our Internet Website can be accessed at www.equitable.com/ada. We have established procedures to reasonably confirm the genuineness of instructions communicated to us by telephone when using AIMS and by the Internet Website. The procedures require personal identification information, including your Personal Security Code ("PSC") number, prior to acting on telephone instructions or accessing information on the Internet Website, and providing written confirmation of the transfers. We assign a PSC number to you after we receive your completed enrollment form. Thus, we will not be liable for following telephone instructions, or Internet instructions, we reasonably believe to be genuine. We reserve the right to limit access to this service if we determine that you are engaged in a market timing strategy (see "Disruptive transfer activity" above). A transfer request will be effective on the business day we receive the request. We will confirm all transfers in writing. 21 TRANSFERS AND ACCESS TO YOUR ACCOUNT -------------------------------------------------------------------------------- Generally our business day is any day the New York Stock Exchange is open for trading, and generally ends at 4:00 p.m. Eastern Time. A business day does not include a day we choose not to open due to emergency conditions. We may also close early due to emergency conditions. -------------------------------------------------------------------------------- PARTICIPANT LOANS Participant loans are available if the employer plan permits them. Participants must apply for a plan loan through the employer. Loan packages containing all necessary forms, along with an explanation of how interest rates are set, are available from our Account Executives. Loans are subject to restrictions under Federal tax laws and ERISA. Participants should consult with their attorneys or tax advisors regarding the advisability and procedures for obtaining such an exemption. A loan may not be taken from the Guaranteed Rate Accounts prior to maturity. If a participant is married, written spousal consent may be required for a loan. Generally, the loan amount will be transferred from the investment options into a loan account. The participant must pay the interest as required by Federal income tax rules. If you fail to repay the loan when due, the amount of the unpaid balance may be taxable and subject to additional penalty taxes. Interest paid on a retirement plan loan is not deductible. CHOOSING BENEFIT PAYMENT OPTIONS Benefit payments are subject to plan provisions. The Program offers a variety of benefit payment options for employees that adopt the Master Plan. (If you are a participant in an individually-designed plan, ask your employer for information on benefit payment options under your Plan.) Your plan may allow you a choice of one or more of the following forms of distribution: o Qualified Joint and Survivor Annuity o Lump Sum Payment o Installment Payments o Life Annuity o Life Annuity - Period Certain o Joint and Survivor Annuity o Joint and Survivor Annuity - Period Certain o Cash Refund Annuity All of these options can be either fixed or variable except for the Cash Refund Annuity and the Qualified Joint and Survivor Annuity which are fixed options only. ----------------------------------------------------------------------------- The amount of each payment in a fixed option remains the same. Variable option payments change to reflect the investment performance of the Growth Equity Fund. ----------------------------------------------------------------------------- See "Types of Benefits" in the SAI for detailed information regarding each of the benefit payout options, and "Procedures for Withdrawals, Distributions and Transfers" in the SAI. 22 TRANSFERS AND ACCESS TO YOUR ACCOUNT -------------------------------------------------------------------------------- Fixed annuities are available from insurance companies selected by the Trustees. Upon request, we will provide fixed annuity rate quotes available from one or more such companies. Participants may instruct us to withdraw all or part of their account balance and forward it to the annuity provider selected. Once we have distributed that amount to the company selected, we will have no further responsibility to the extent of the distribution. We provide the variable annuity options. Payments under variable annuity options reflect investment performance of the Growth Equity Fund. The minimum amount that can be used to purchase any type of annuity is $5,000. In most cases a variable annuity administrative charge of $350 will be deducted from the amount used to purchase an annuity from Equitable Life. Annuities purchased from other providers may also be subject to fees and charges. SPOUSAL CONSENT If a participant is married and has an account balance greater than $5,000 (except for amounts contributed to the Rollover Account), federal law generally requires payment (subject to plan rules) of a Qualified Joint and Survivor Annuity payable to the participant for life and then to the surviving spouse for life, unless you and your spouse have properly waived that form of payment in advance. Please see "Spousal Consent Requirements" under "Types of Benefits" in the SAI. BENEFITS PAYABLE AFTER THE DEATH OF A PARTICIPANT Regardless of whether a participant's death occurs before or after your Required Beginning Date, an individual death beneficiary calculates annual post-death required minimum distribution payments based on the beneficiary's life expectancy using the "term certain method." That is, he or she determines his or her life expectancy using the approved life expectancy tables as of the calendar year after the participant's death and reduces that number by one each subsequent year. If a participant dies before the entire benefit has been paid, the remaining benefits will be paid to the participant's beneficiary. If a participant dies before he or she is required to begin receiving benefits, the law generally requires the entire benefit to be distributed no more than five years after death. There are exceptions: (1) a beneficiary who is not the participant's spouse may elect payments over his or her life or a fixed period which does not exceed the beneficiary's life expectancy, provided payments begin within one year of death, (2) if the benefit is payable to the spouse, the spouse may elect to receive benefits over his or her life or a fixed period which does not exceed his/her life expectancy beginning any time up to the date the participant would have attained age 701/2 or, if later, one year after the participant's death, or (3) the spouse may be able to roll over all or part of the death benefit to a traditional individual retirement arrangement. If, at death, a participant was already receiving benefits, the beneficiary must continue to receive benefits subject to the Federal income tax minimum distribution rules. To designate a beneficiary or to change an earlier designation, a participant must have the employer send us a beneficiary designation form. In some cases, the spouse must consent in writing to a designation of any non-spouse beneficiary, as explained in "Spousal Consent Requirements" under "Types of Benefits" in the SAI. Under the Master Plan, on the day we receive proof of death, we automatically transfer the participant's account balance in the Equity Index Fund or the Lifecycle Funds to the Money Market Guarantee Account unless the beneficiary gives us other written instructions. 23 TRANSFERS AND ACCESS TO YOUR ACCOUNT 5 The Program -------------------------------------------------------------------------------- This section explains the ADA Program in further detail. It is intended for employers who wish to enroll in the Program, but contains information of interest to participants as well. You should, of course, understand the provisions of your plan and the Adoption Agreement that define the scope of the Program in more specific terms. References to "you" and "your" in this section are to you in your capacity as an employer. The Program is described in the prospectus solely to provide a more complete understanding of how the investment funds operate within the Program. The American Dental Association Members Retirement Program consists of several types of retirement plans and two retirement plan Trusts, the Master Trust and the Pooled Trust. Each of the Trusts invests exclusively in the group annuity contracts described in this prospectus and in the group annuity contract funding the GRAs. The Program is sponsored by the ADA, and the Trustees under the Master and Pooled Trusts are the members of the Council on Insurance of the ADA (the "Trustees"). The Program had 27,147 participants and $1 billion in assets at December 31, 2002. ELIGIBLE EMPLOYERS You can adopt the Program if you or at least one of your partners or other shareholders is a member of: (1) the ADA, (2) a constituent or component society of the ADA, or (3) an ADA-affiliated organization. Participation by an affiliated organization must first be approved by the ADA's Council on Insurance. Our Retirement Program Specialists are available to answer your questions about joining the Program. Please contact us by using the telephone number or addresses listed under "How to reach us - Information on joining the Program" on the back cover of the prospectus. SUMMARY OF PLAN CHOICES You have a choice of two retirement plan arrangements under the Program. You can: o Choose the MASTER PLAN - which automatically gives you a full range of services from Equitable Life. These include your choice of the Program investment options, plan-level and participant-level recordkeeping, benefit payments and tax withholding and reporting. Under the Master Plan employers adopt our Master Trust and your only investment choices are from the Investment Options. -------------------------------------------------------------------------------- The Master Plan is a defined contribution master plan that can be adopted as a profit sharing plan, a defined contribution pension plan, or both. Traditional 401(k), SIMPLE 401(k), and Safe Harbor 401(k) are also available. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Pooled Trust is an investment vehicle used with individually designed qualified retirement plans. It can be used for both defined contribution and defined benefit plans. We provide recordkeeping services for plan assets held in the Pooled Trust. -------------------------------------------------------------------------------- o Maintain your own INDIVIDUALLY DESIGNED PLAN - and use the Pooled Trust for investment options in the Program and your own individual investments. The Pooled Trust is for investment only and can be used for both defined benefit and defined contribution plans. Choosing the right plan depends on your own set of circumstances. We recommend that you review all plan, trust, participation and related agreements with your legal and tax counsel. GETTING STARTED If you choose the Master Plan, you must complete an Adoption Agreement. If you have your own individually designed plan and wish to use the Pooled Trust as an investment vehicle, the trustee of your plan must complete an Adoption Agreement. As an employer, you are responsible for the administration of the plan you choose. Please see "Your Responsibilities as Employer" in the SAI. 24 THE PROGRAM -------------------------------------------------------------------------------- HOW TO MAKE PROGRAM CONTRIBUTIONS Contributions must be in the form of a check drawn on a bank in the U.S. clearing through the Federal Reserve System, in U.S. dollars, and made payable to The ADA Retirement Trust. All contribution checks should be sent to Equitable Life at the address shown "For Contribution Checks Only" in the "Information once you join the Program" section under "How to reach us" on the back cover of this prospectus. Third party checks are not acceptable, except for rollover contributions, tax-free exchanges or trustee checks that involve no refund. All checks are subject to collection. We reserve the right to reject a payment if it is received in an unacceptable form. All contributions must be accompanied by a Contribution Remittance form which designates the amount to be allocated to each participant by contribution type and fiscal year to which the Contribution will be applied. Contributions are normally credited on the business day that we receive them, provided the remittance form is properly completed and matches the check amount. Contributions are only accepted from the employer. Employees may not send contributions directly to the Program. Contributions are only accepted for properly enrolled participants. There is no minimum amount which must be contributed for investment if you adopt the Master Plan, or if you have your own individually designed plan that uses the Pooled Trust. ALLOCATING PROGRAM CONTRIBUTIONS Under the Master Plan, participants make all of the investment decisions. Investment decisions in the individually designed plans are made either by the participant or by the plan trustees, depending on the terms of the plan. Participants may allocate contributions among any number of Program investment options. Allocation instructions can be changed at any time. IF WE DO NOT RECEIVE ADEQUATE INSTRUCTIONS, WE WILL ALLOCATE YOUR CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT. YOU MAY, OF COURSE, TRANSFER TO ANOTHER INVESTMENT OPTION AT ANY TIME. WHEN TRANSACTION REQUESTS ARE EFFECTIVE. Contributions, as well as transfer requests and allocation changes (not including GRA maturity allocation changes discussed in the SAI), are effective on the business day they are received. In-service distribution requests are also effective on the business day they are received. Benefit payments are subject to Plan provisions. Transaction requests received after the end of a business day will be credited the next business day. Processing of any transaction may be delayed if a properly completed form is not received. Trustee-to-trustee transfers of plan assets are effective the business day after we receive all items we require, including check and mailing instructions, and a plan opinion/IRS determination letter from the new or amended plan or adequate proof of qualified plan status. DISTRIBUTIONS FROM THE INVESTMENT OPTIONS Keep in mind two sets of rules when considering distributions or withdrawals from the Program. The first are rules and procedures that apply to the investment options, exclusive of the provisions of your plan. We discuss those in this section. The second are rules specific to your plan. We discuss those "Rules applicable to participant distributions" below. Certain plan distributions may be subject to Federal income tax, and penalty taxes. See "Tax information" later in this prospectus. AMOUNTS IN THE EQUITY INDEX FUND AND LIFECYCLE FUNDS. These are generally available for distribution at any time, subject to the provisions of your plan. However, there may be a delay for withdrawals from these Funds if there is any delay in redemptions from the related Underlying Mutual Fund, or with respect to the Lifecycle Funds, from the Lifecycle Fund Group Trusts in which they invest. Payments or withdrawals and application of proceeds to an annuity ordinarily will be made promptly upon request in accordance with plan provisions. However, we can defer 25 THE PROGRAM -------------------------------------------------------------------------------- payments, applications and withdrawals for any period during which the New York Stock Exchange is closed for trading, sales of securities are restricted or determination of the fair market value of assets is not reasonably practicable because of an emergency. If your plan is an employer or trustee-directed plan, you as the employer are responsible for ensuring that there is sufficient cash available to pay benefits. RULES APPLICABLE TO PARTICIPANT DISTRIBUTIONS In addition to our own procedures, distribution and benefit payment options under a tax qualified retirement plan are subject to complicated legal requirements. A general explanation of the Federal income tax treatment of distributions and benefit payment options is provided in "Tax information" later in this prospectus and in the SAI. You should discuss your options with a qualified financial advisor. Our Account Executives also can be of assistance. In general, under the Master Plan, participants are eligible for benefits upon retirement, death or disability, or upon termination of employment with a vested benefit. Participants in an individually designed plan are eligible for retirement benefits depending on the terms of their plan. See "Benefit payment options" under "Transfers and access to your money" earlier in this prospectus and "Tax information" later in this prospectus for more details. For participants who own more than 5% of the business, benefits must begin no later than April 1 of the year after the participant reaches age 701/2. For all other participants, distribution must begin by April 1 of the later of the year after attaining age 701/2 or retirement from the employer sponsoring the plan. Distributions must be made according to rules in the Code and Treasury Regulations and the terms of the plan. Treasury Regulations on required minimum distributions were proposed in 1987, revised in 2001 and finalized in 2002. The 2002 final Regulations apply beginning in November 2002. The 2002 final Regulations include Temporary Regulations applicable to annuity contracts used to fund plans. Certain provisions of the Temporary Regulations concerning the actuarial value of additional contract benefits which could have increased the amount required to be distributed from contracts have been suspended for 2003. However, these or similar provisions may apply in future years. Under transitional rules, the 1987 and 2001 proposed regulations may continue to apply to annuity payments. Please consult your plan administrator and tax advisor concerning applicability of these complex rules to your situation. Under the Master Plan, self-employed persons may generally not receive a distribution prior to age 591/2, and employees generally may not receive a distribution prior to a separation from service. 26 THE PROGRAM 6 Performance information -------------------------------------------------------------------------------- The investment performance of the Equity Index Fund and Lifecycle Funds reflects changes in unit values experienced over time. The unit value calculations for the Funds include all earnings, including dividends and realized and unrealized capital gains. Unlike the typical mutual fund, the Funds reinvest, rather than distribute, their earnings. The following tables show the annual percentage change in Fund unit values, and the average annual percentage change in Fund unit values, for the appropriate period ended December 31, 2002. You may compare the performance results for each Fund with the data presented for certain unmanaged market indices, or "benchmarks." Performance data for the benchmarks do not reflect any deductions for investment advisory, brokerage or other expenses of the type typically associated with an actively managed investment fund. This overstates their rates of return and limits the usefulness of the benchmarks in assessing the performance of the Funds. The benchmark results have been adjusted to reflect reinvestment of dividends and interest for greater comparability. The benchmarks are: o Standard & Poor's 500 Index ("S&P 500") - a weighted index of the securities of 500 companies widely regarded by investors as representative of the stock market. o Russell 2000 Index ("RL 2000") - a broadly diversified small capitalization index of the approximately 2,000 smallest stocks within the Russell 3000 Index. o Morgan Stanley Capital International Europe, Australasia, and Far East Index ("EAFEDV") - a broadly diversified index representing approximately 1,000 stocks across 20 major developed markets in Europe, Australia, New Zealand and the Far East. The MSCI EAFE index captures about 60% of the available market capitalization in each country and is designed to offer global investors access to some of the world's largest and most liquid equity securities outside the U.S. and Canada. o Lehman Brothers Government/Corporate Bond Index ("LEHBR") - an index widely regarded as representative of the bond market. o Salomon Brothers 3-Month T-Bill Index ("SAL3T") - an index of direct obligations of the U.S. Treasury which are issued in maturities between 31 and 90 days. Conservative Benchmark: S&P500 Index (15.0%), RL2000 Index (5.0%), EAFEDV Index (10.0%), LEHBR Index (50.0%), SAL3T Index (20.0%). Moderate Benchmark: S&P500 Index (35.0%), RL2000 Index (10.0%), EAFEDV Index (15.0%), LEHBR Index (30.0%), SAL3T Index (10.0%). The annual percentage change in unit values represents the percentage increase or decrease in unit values from the beginning of one year to the end of that year. The average annual rates of return are time-weighted, assume an investment at the beginning of each period, and include the reinvestment of investment income. 27 PERFORMANCE INFORMATION -------------------------------------------------------------------------------- Historical results are presented for the Funds for the periods during which the Funds were available under the Program. Hypothetical results were calculated for prior periods, as described in "How we calculate performance data" below. For the Equity Index Fund, no results are presented for periods prior to 1993, as the SSgA S&P 500 Index Fund began operations during 1992. 1995 performance data for the Lifecycle Funds is shown for the period when the Funds commenced operations on May 1, 1995 through December 31, 1995. THE PERFORMANCE SHOWN DOES NOT REFLECT ANY CHARGES DESIGNED TO APPROXIMATE CERTAIN TAXES THAT MAY BE IMPOSED ON US, SUCH AS PREMIUM TAXES IN YOUR STATE OR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON DISTRIBUTION. PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. ANNUAL PERCENTAGE CHANGE IN FUND* UNIT VALUES
--------------------------------------------------------------------------------------------------------------------------------- ANNUAL PERIOD ENDING LAST BUSINESS DAY OF ---------------------------------------------------------------------------------------------- FUND 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 --------------------------------------------------------------------------------------------------------------------------------- EQUITY INDEX FUND* 6.4 0.7 35.1 21.3 31.7 27.2 19.8 (10.0) (12.9) (23.1) S&P 500 Index 10.0 1.3 37.5 23.0 33.4 28.6 21.1 (9.1) (11.9) (22.1) LIFECYCLE FUND-CONSERVATIVE FUND - - 5.9 4.3 9.9 10.2 5.1 2.3 (0.3) (1.8) Conservative Benchmark - - 18.7 7.3 12.1 12.3 6.5 4.1 1.1 (0.4) LIFECYCLE FUND-MODERATE FUND - - 10.1 10.6 16.1 15.1 12.0 (2.7) (5.3) (10.0) Moderate Benchmark - - 23.8 11.9 17.4 16.5 13.1 (1.4) (4.3) (9.1) ---------------------------------------------------------------------------------------------------------------------------------
* Hypothetical performance shown in bold. AVERAGE ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES - YEARS ENDING DECEMBER 31, 2002
--------------------------------------------------------------------------------------------------------------------------------- SINCE DATE OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION INCEPTION --------------------------------------------------------------------------------------------------------------------------------- EQUITY INDEX FUND (23.09) (15.52) (1.68) N/A 7.62 2/1/94 S&P 500 Index (22.10) (14.55) (0.59) 9.35 N/A* LIFECYCLE FUND-CONSERVATIVE FUND (1.81) 0.05 3.02 N/A 4.56 5/1/95 Conservative Benchmark (0.42) 1.58 4.62 7.20 N/A* LIFECYCLE FUND-MODERATE FUND (10.01) (6.04) 1.35 N/A 5.54 5/1/95 Moderate Benchmark (9.06) (4.95) 2.51 7.79 N/A* ---------------------------------------------------------------------------------------------------------------------------------
* Not available HOW WE CALCULATE PERFORMANCE DATA The Equity Index Fund began operations as Separate Account No. 195 on February 1, 1994. For prior periods hypothetical results are shown. The results reflect the actual performance of SSgA S&P 500 Index Fund beginning with 1993, the first full year after that mutual fund began operations. For these hypothetical calculations we have applied the Program expense charge during those periods plus .15% in estimated other expenses to the historical investment experience of the SSgA S&P 500 Index Fund. The Lifecycle Fund - Conservative and the Lifecycle Fund - Moderate performance shown reflects actual investment performance of Separate Account No. 197 and Separate Account No. 198 for the period beginning May 1, 1995, when the Funds commenced operations. 28 PERFORMANCE INFORMATION 7 Charges and expenses -------------------------------------------------------------------------------- You will incur two general types of charges under the Program: o Charges based on the value of your assets in the Trust - these apply to all amounts invested in the Trust (including installment payout option payments), and do not vary by plan. These are, in general, reflected as reductions in the unit values of the Equity Index Fund and Lifecycle Funds. o Plan and transaction charges - these vary by plan or are charged for specific transactions, and are typically stated in a dollar amount. Unless otherwise noted, these are deducted in fixed dollar amounts by reducing the number of units in the Equity Index Fund and Lifecycle Funds. We make no deduction from your contributions or withdrawals for sales expenses. CHARGES BASED ON AMOUNTS INVESTED IN THE PROGRAM PROGRAM EXPENSE CHARGE We assess the Program expense charge against the combined value of Program assets in the Trust. The purpose of this charge is to cover the expenses that we and the ADA incur in connection with the Program. The maximum charge is as follows:
-------------------------------------------------------------------------------- ANNUAL PROGRAM EXPENSE CHARGE ------------------------------------------- VALUE OF PROGRAM ASSETS EQUITABLE LIFE ADA TOTAL -------------------------------------------------------------------------------- First $400 million .630% .025% .655% Over $400 million .630 .020 .650 --------------------------------------------------------------------------------
The Program expense charge is determined by negotiation between us and the Trustees. The charge is primarily based on a formula that gives effect to total Program assets allocated to the Trust and the number of plans enrolled in the Program. Currently, the portion paid to the ADA has been reduced to 0.00% for all asset levels, but the ADA's portion could be increased in the future. For the 12 months beginning May 1, 2003, the total Program expense charge is .63%. For investment option funds and the Money Market Guarantee Account, the Program expense charge is calculated based on Program assets in the Trust on January 31 of each year, and is charged at a monthly rate of 1/12 of the relevant annual charge. For a description of the Program expense charge as it relates to the Guaranteed Rate Accounts, please refer to our separate prospectus for the other Investment Options in the Program. We apply our portion of the Program expense charge toward the cost of maintenance of the investment funds, promotion of the Program investment funds and Money Market Guarantee Account, commissions, administrative costs, such as enrollment and answering participant inquiries, and overhead expenses such as salaries, rent, postage, telephone, travel, legal, actuarial and accounting costs, office equipment and stationery. The ADA's part of this fee covers developmental and administrative expenses incurred in connection with the Program. The ADA Trustees can direct us to raise or lower the ADA's part of this fee to reflect their expenses in connection with the Program. During 2002, we received $7,249,685 and the ADA received $41,029 under the Program expense charge. PROGRAM-RELATED ADMINISTRATION FEES The computation of unit values for each investment fund also reflects fees charged for administration. We receive an administrative fee at the annual rate of .15% of assets held in the Equity Index Fund and Lifecycle Funds. As part of our administrative functions, we maintain records for all portfolio transactions and cash flow control, calculate unit values, monitor compliance with the New York Insurance Law and supervise custody matters for all these Funds. OTHER EXPENSES BORNE BY THE INVESTMENT FUNDS Certain other expenses are charged directly to the Equity Index Fund and Lifecycle Funds. These include SEC filing fees and certain related expenses such as printing of SEC filings, prospectuses and reports, mailing costs, custodians' fees, financial accounting costs, outside auditing and legal expenses, and other costs related to the Program. 29 CHARGES AND EXPENSES -------------------------------------------------------------------------------- The Equity Index Fund purchases and redeems shares in the SSgA S&P 500 Index Fund at net asset value. The net asset value reflects charges for management, audit, legal, shareholder services, transfer agent and custodian fees. For a description of charges and expenses assessed by the SSgA S&P 500 Index Fund, which are indirectly borne by the Fund, please refer to the prospectus for the SSgA S&P 500 Index Fund. The Lifecycle Funds - Conservative and Moderate purchase and redeem units in the Lifecycle Fund Group Trusts - Conservative and Moderate, respectively, at net asset value. The net asset value reflects charges for investment management, audit, legal, custodian and other fees. By agreement with the ADA Trustees, we impose a charge at the annual rate of .03% of the value of the respective assets of the Lifecycle Funds - Conservative and Moderate. This charge compensates us for additional legal, accounting and other potential expenses resulting from the inclusion of the Lifecycle Fund Group Trusts and Underlying State Street Funds among the investment options described in this prospectus. For a description of charges and expenses assessed by the Lifecycle Fund Group Trusts, which are indirectly borne by the Lifecycle Funds, see "Deductions and charges related to the Lifecycle Trusts and Underlying State Street Funds," below. PLAN AND TRANSACTION EXPENSES ADA RETIREMENT PLAN 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 Investment Only $1 per quarter -------------------------------------------------------------------------------- ENROLLMENT FEE. We charge an employer a non-refundable enrollment fee of $25 for each participant enrolled under its plan. If we do not maintain individual participant records under an individually-designed plan, we instead charge the employer $25 for each plan or trust. If the employer fails to pay these charges, we may deduct the amount from subsequent contributions or from participants' account balances. INDIVIDUAL ANNUITY CHARGES ANNUITY ADMINISTRATIVE CHARGE. If a participant elects a variable annuity payment option, we deduct a $350 charge from the amount used to purchase the annuity. This charge reimburses us for administrative expenses associated with processing the application for the annuity and issuing each month's annuity payment. The minimum amount that can be converted to an annuity, so that the charge would apply, is $5,000. Annuities purchased from other providers may also be subject to fees and charges. CHARGES FOR STATE PREMIUM AND OTHER APPLICABLE TAXES We deduct a charge designed to approximate certain applicable taxes that may be imposed on us, for example, for our state premium tax. Currently, we deduct the charge from the amount applied to provide an annuity payout option. The current tax charge that might be imposed on us varies by state and ranges from 0% to 1%. We reserve the right to deduct any applicable charges such as premium taxes from each contribution or from distributions or upon termination of your contract. If we have deducted any applicable tax charges from contributions, we will not deduct a charge for the same taxes later. If, however, an additional tax is later imposed on us when you make a partial or full withdrawal, or your contract is terminated, or you begin receiving annuity payments, we reserve the right to deduct a charge at that time. GENERAL INFORMATION ON FEES AND CHARGES We may change the fees and charges described above at any time with the ADA's consent. During 2002 we received total fees and charges under the Program of $10,094,473. 30 CHARGES AND EXPENSES -------------------------------------------------------------------------------- DEDUCTIONS AND CHARGES RELATED TO THE LIFECYCLE TRUSTS AND UNDERLYING STATE STREET FUNDS In addition to the generally applicable Program fees and charges that we impose, State Street imposes fees and charges for providing investment management services, custodial services and for other expenses incurred in connection with operating the Lifecycle Fund Group Trusts and the Underlying State Street Funds. State Street deducts these fees from the assets of the Lifecycle Fund Group Trusts in which the Lifecycle Funds invest, or the Underlying State Street Funds in which the Lifecycle Fund Group Trusts invest. INVESTMENT MANAGEMENT FEE. Each Lifecycle Trust pays State Street a fee equal to .17% of the average annual net assets of each Lifecycle Trust for providing investment management services to the Trusts. No fee is paid to State Street for managing the assets of the Underlying State Street Funds with respect to investments made in such Funds by each Lifecycle Fund Group Trust. State Street may receive fees for managing the assets of other collective investment funds in which the Funds may invest on a temporary basis, and for managing the mutual funds in which assets of the Underlying State Street Funds may be invested. State Street has agreed to reduce its management fee charged to each of the Lifecycle Trusts to offset any management fees State Street receives attributable to the Trusts' investment in such other collective investment funds and mutual funds. FIXED ADMINISTRATION FEE. State Street also makes a deduction from the assets of each Lifecycle Fund Group Trust to compensate it for providing various recordkeeping and accounting services to such Trust and for periodically rebalancing the assets of each Trust to conform to the target percentage weightings for the Trust. This fee is currently fixed at $12,000 per year for each Trust. OTHER EXPENSES. Certain costs and expenses are charged directly to the Lifecycle Fund Group Trusts. These include legal and audit expenses. In addition, participants indirectly incur expenses for audit and custodial services provided to the Underlying State Street Funds. State Street serves as custodian to each of these Funds. 31 CHARGES AND EXPENSES 8 Tax information -------------------------------------------------------------------------------- In this section, we briefly outline current Federal income tax rules relating to adoption of the Program, contributions to the Program and distributions to participants under qualified retirement plans. Certain other information about qualified retirement plans appears here and in the SAI. We do not discuss the effect, if any, of state tax laws that may apply. The United States Congress has in the past considered and may in the future, without notice, consider proposals for legislation that, if enacted, could change the tax treatment of qualified retirement plans. In addition, the Treasury Department may amend existing regulations, issue new regulations, or adopt new interpretations of existing laws. State tax laws or, if you are not a United States resident, foreign tax laws may affect the tax consequences to you or the beneficiary. These laws may change from time to time without notice and, as a result, the tax consequences may also change. There is no way of predicting whether, when or in what form any such change would be adopted. Any such change could have retroactive effects regardless of the date of enactment. We suggest you consult your legal or tax advisor. BUYING A CONTRACT TO FUND A RETIREMENT ARRANGEMENT Annuity contracts can be purchased in connection with retirement plans qualified under Code section 401. How these arrangements work, including special rules applicable to each, are described in the specific sections for each type of arrangement in the SAI. You should be aware that the funding vehicle for a qualified arrangement does not provide any tax deferral benefit beyond that already provided by the Code for all permissible funding vehicles. Before choosing an annuity contract, therefore, you should consider the annuity's features and benefits, such as the selection of investment funds and guaranteed options and choices of pay-out options, as well as the features and benefits of other permissible funding vehicles and the relative costs of annuities and other arrangements. You should be aware that cost may vary depending on the features and benefits made available and the charges and expenses of the investment options or funds that you elect. INCOME TAXATION OF DISTRIBUTIONS TO QUALIFIED PLAN PARTICIPANTS In this section, the word "you" refers to the plan participant. Amounts distributed to a participant from a qualified plan are generally subject to Federal income tax as ordinary income when benefits are distributed to you or your beneficiary. Generally speaking, only your post-tax contributions, if any, are not taxed when distributed. ELIGIBLE ROLLOVER DISTRIBUTIONS. Many types of distributions from qualified plans are "eligible rollover distributions" that can be transferred directly to another qualified plan, traditional individual retirement arrangement ("IRA"), an annuity under Section 403(b) of the Code or a retirement plan under Section 457 of the Code, or rolled over to another plan or IRA within 60 days of the receipt of the distribution. If a distribution is an "eligible rollover distribution," 20% mandatory Federal income tax withholding will apply unless the distribution is directly transferred to a qualified plan or IRA. See "Eligible Rollover Distributions and Federal Income Tax Withholding" in the SAI for a more detailed discussion. ANNUITY OR INSTALLMENT PAYMENTS. Each payment you receive is ordinary income for tax purposes, except where you have a "cost basis" in the benefit. Your cost basis is equal to the amount of your post-tax employee contributions, plus any employer contributions you had to include in gross income in prior years. You may exclude from gross income a portion of each annuity or installment payment you receive. If you (and your survivor) continue to receive payments after you have received your cost basis in the contract, all amounts will be taxable. IN-SERVICE WITHDRAWALS. Some plans allow in-service withdrawals of after-tax contributions. The portion of each withdrawal attributable to cost basis is not taxable. The portion of each withdrawal attributable to earnings is taxable. Withdrawals are taxable only after they exceed your 32 TAX INFORMATION -------------------------------------------------------------------------------- cost basis if they are attributable to your pre-January 1, 1987 contributions under plans that permitted those withdrawals as of May 5, 1986. Amounts that you include in gross income under this rule may also be subject to the additional 10% penalty tax on premature distributions described below. In addition, 20% mandatory Federal income tax withholding may also apply. PREMATURE DISTRIBUTIONS. You may be liable for an additional 10% penalty tax on all taxable amounts distributed before age 591/2 unless the distribution falls within a specified exception or is rolled over into an IRA or other qualified plan. The exceptions to the penalty tax include (a) distributions made on account of your death or disability, (b) distributions beginning after separation from service in the form of a life annuity or installments over your life expectancy (or the joint lives or life expectancies of you and your beneficiary), (c) distributions due to separation from active service after age 55 and (d) distributions you use to pay deductible medical expenses. WITHHOLDING. In almost all cases, 20% mandatory income tax withholding will apply to all "eligible rollover distributions" that are not directly transferred to a qualified plan or IRA. If a distribution is not an eligible rollover distribution, the recipient may elect out of withholding. The rate of withholding depends on the type of distribution. See "Eligible Rollover Distributions and Federal Income Tax Withholding" in the SAI. Under the ADA Master Retirement Plan, we will withhold the tax and send you the remaining amount. Under an individually designed plan 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. Certain tax advantages of a tax-qualified retirement plan may not be available under certain state and local tax laws. This outline does not discuss the effect of any state or local tax laws. It also does not discuss the effect of federal estate and gift tax laws (or state and local estate, inheritance and other similar tax laws). This outline assumes that the participant does not participate in any other qualified retirement plan. Finally, it should be noted that many tax consequences depend on the particular jurisdiction or circumstances of a participant or beneficiary. We cannot provide detailed information on all tax aspects of the plans or contracts. Moreover, the tax aspects that apply to a particular person's plan or contract may vary depending on the facts applicable to that person. We do not discuss state income and other state taxes, federal income tax and withholding rules for non-U.S. taxpayers, or federal gift and estate taxes. Rights or values under plans or contracts or payments under the contracts, for example, amounts due to beneficiaries, may be subject to gift or estate taxes. You should not rely only on this document, but should consult your tax advisor before your purchase. 33 TAX INFORMATION 9 More information -------------------------------------------------------------------------------- ABOUT PROGRAM CHANGES OR TERMINATIONS AMENDMENTS. The group annuity contract has been amended in the past and we and the Trustees may agree to amendments in the future. No future change can affect annuity benefits in the course of payment. If certain conditions are met, we may: (1) terminate the offer of any of the investment options and transfer any amounts in that investment option to another option and (2) offer new investment options with different terms. TERMINATION. We or the ADA Trustees may terminate the group annuity contract. If the contract is terminated, we will not accept any further contributions or perform any recordkeeping functions after the date of termination. We then would make arrangements with the ADA Trustees with respect to the assets held in the investment options that we provide, subject to the following: o the ADA Trustees could transfer assets from the Money Market Guarantee Account in installments over a period of time not to exceed two years; however, during that time participants would be permitted to make transfers to funding vehicles provided by another financial institution (other than a money market fund or similar investment); and o amounts allocated to the GRAs would be held until maturity. If the ADA Trustees make arrangements with us, you may be able to continue to invest amounts in the investment options that we provide and elect payment of benefits through us. AGREEMENT WITH STATE STREET. We and State Street have entered into an Agreement with respect to various administrative, procedural, regulatory compliance and other matters relating to the availability of the Lifecycle Fund Group Trusts and Underlying State Street Funds in the ADA Program through the Lifecycle Funds. The Agreement does not contain an expiration date and is intended to continue in effect indefinitely. However, under the terms of the Agreement, we may terminate it upon three months prior written notice to State Street, and State Street may terminate it upon six months prior written notice to us. In the event of a termination of the Agreement, State Street has the right, upon four months' prior notice to us, to require the redemption of all units of the Lifecycle Fund Group Trusts held by the Lifecycle Funds. Should we receive notice of a required redemption, we will advise you promptly in order to allow you adequate time to transfer to one or more of the other Investment Options. IRS DISQUALIFICATION If your plan is found not to qualify under the Internal Revenue Code, we may: (1) return the plan's assets to the employer (in our capacity as the plan administrator) or (2) prevent plan participants from investing in the separate accounts. ABOUT THE SEPARATE ACCOUNTS Each investment fund is one of our separate accounts. We established the separate accounts under special provisions of the New York Insurance Law. These provisions prevent creditors from any other business we conduct from reaching the assets we hold in our investment funds for owners of our variable annuity contracts, including our group annuity contracts with the ADA Trustees. The results of each separate account's operations are accounted for without regard to Equitable Life's, or any other separate account's, operating results. We are the legal owner of all of the assets in the separate accounts and may withdraw any amounts we have in the separate accounts that exceed our reserves and other liabilities under variable annuity contracts. The separate accounts that we call the Equity Index Fund and Lifecycle Funds commenced operations on 1994 and 1995, respectively. Because of exclusionary provisions, none of the investment funds is subject to regulation under the Investment Company Act of 1940. The Equity Index Fund and Lifecycle Funds are used exclusively in the ADA Program. ABOUT STATE STREET State Street, is one of the world's leading specialists in serving institutional investors, providing a full range of products and services. As of December 31, 2002, State 34 MORE INFORMATION -------------------------------------------------------------------------------- Street was the second largest manager of pension assets with $762.9 billion under management. State Street is subject to supervision and examination by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Massachusetts Commissioner of Banks. This, however, does not provide any protection against loss that may be experienced as a result of an investment in the Trusts. Further, State Street is required to comply with ERISA, to the extent applicable, in connection with the administration of the Program. Tax status of the Lifecycle Fund Group Trusts and Underlying Funds. Each Trust is a tax-exempt group trust established pursuant to Revenue Ruling 81-100. As a tax-exempt group trust, each Trust is not subject to federal income tax unless the Trust generates unrelated business taxable income as defined in the Code ("UBTI"). It is the policy of State Street not to invest any portion of the assets of a Trust in a manner that will generate UBTI. If State Street determines, however, that a proposed investment cannot be structured to avoid UBTI and that the projected after-tax return on that investment is sufficient to justify the making of such investment, then State Street may elect to make that investment. In the unlikely event that any UBTI is incurred by a Trust, it is anticipated that any tax thereon would be reported. UNDERWRITER AXA Advisors, LLC ("AXA Advisors"), the successor to EQ Financial Consultants, Inc. and an affiliate of Equitable Life, may be deemed to be the principal underwriter of separate account units under the group annuity contract. AXA Advisors is registered with the SEC as a broker-dealer under the 1934 Act and is a member of the National Association of Securities Dealers, Inc. AXA Advisors' principal business address is 1290 Avenue of the Americas, New York, NY 10104. The offering of the units under the contract is continuous. No person currently serves as underwriter for the Lifecycle Fund Group Trusts or the Underlying State Street Funds. ABOUT LEGAL PROCEEDINGS Equitable Life and its affiliates are parties to various legal proceedings. In our view, none of these proceedings is likely to have a material adverse effect upon the separate accounts, our ability to meet our obligations under the Program, or the distribution of group annuity contract interests under the Program. State Street is engaged in litigation of various kinds which in its judgment is not of material importance in relation to its total assets. None of the litigation now in progress is expected to affect any assets of the Equity Index Fund or the Lifecycle Funds or the Lifecycle Group Trusts or the Underlying State Street Funds in which the Lifecycle Trusts invest. ABOUT OUR INDEPENDENT ACCOUNTANTS The financial statements listed below and incorporated in the SAI have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting: o The financial statements for Separate Account Nos. 195, 197 and 198 as of December 31, 2002 and for each of the two years in the period then ended. o The financial statements for Equitable Life as of December 31, 2002 and 2001 and for each of the three years in the period then ended. o The following financial statements as of December 31, 2002 and for each of the two years in the period then ended: o State Street Bank and Trust Company Lifecycle Fund Group Trust - Conservative o State Street Bank and Trust Company Lifecycle Fund Group Trust - Moderate o State Street Bank and Trust Company S&P 500 Flagship Fund and State Street Bank and Trust Company S&P 500 Flagship Non-Lending Fund o State Street Bank and Trust Company Russell 2000 Index Securities Lending Fund and State Street Bank and 35 MORE INFORMATION -------------------------------------------------------------------------------- Trust Company Russell 2000 Index Fund o State Street Bank and Trust Company Daily EAFE Fund o State Street Bank and Trust Company Daily MSCI Europe Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Europe Index Fund o State Street Bank and Trust Company Daily MSCI Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Japan Index Fund o State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Fund o State Street Bank and Trust Company Government Corporate Bond Fund o State Street Bank and Trust Company Short Term Investment Fund o State Street Bank and Trust Company Long Corporate Index Fund and State Street Bank and Trust Company Long Corporate Index Securities Lending Fund o State Street Bank and Trust Company Intermediate Corporate Index Fund and State Street Bank and Trust Company Intermediate Corporate Index Securities Lending Fund o State Street Bank and Trust Company Government Fund o State Street Bank and Trust Company Limited Duration Bond Fund o State Street Bank and Trust Company Passive 1-3 Year Credit Index Fund REPORTS WE PROVIDE AND AVAILABLE INFORMATION We send reports annually to employers showing the aggregate Account Balances of all participants and information necessary to complete annual IRS filings. As permitted by the SEC's rules, we omitted certain portions of the registration statement filed with the SEC from this prospectus and the SAI. You may obtain the omitted information by: (1) requesting a copy of the registration statement from the SEC's principal office in Washington, D.C., and paying prescribed fees, or (2) by accessing the EDGAR Database at the SEC's Website at http://www.sec.gov. ACCEPTANCE The employer or plan sponsor, as the case may be: (1) is solely responsible for determining whether the Program is a suitable funding vehicle and (2) should carefully read the prospectus and other materials before entering into an Adoption Agreement. 36 MORE INFORMATION Appendix I: Selected financial data and condensed financial information -------------------------------------------------------------------------------- SELECTED FINANCIAL DATA LIFECYCLE FUND GROUP TRUSTS The selected financial data below provides information with respect to investment income, expenses, and investment performance for each Lifecycle Fund Group Trust attributable to each unit outstanding for the period indicated. These selected per unit data and ratios for the years ended December 31, 2002 through 1996 have been derived from financial statements audited by PricewaterhouseCoopers LLP, independent accountants, in their reports included in the SAI. The selected financial data should be read in conjunction with the full financial statements of the Lifecycle Fund Group Trusts, which appear in the SAI.
---------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------- 2002 2001 2000 ---------------------------------------------------------------------------------------------- LIFECYCLE FUND GROUP TRUST - CONSERVATIVE Net investment income (loss)* $ 0.02 $ 0.09 $ 0.15 Net realized and unrealized gain (loss) (0.11) 0.07 0.39 Net increase (decrease) (0.09) 0.16 0.54 Net asset value Beginning of period $ 15.88 15.72 15.18 End of period $ 15.79 $ 15.88 $ 15.72 Total return ** (0.58)% 1.02% 3.56% Ratio of expenses to average net assets (b) 0.30% 0.30% 0.32% Ratio of net investment income (loss) to average net assets 0.10% 0.57% 0.96% Portfolio turnover 41% 30% 71% Net assets, end of period (000s) $14,327 $11,956 $11,599 LIFECYCLE FUND GROUP TRUST - MODERATE Net investment income (loss)* $ 0.00 $ 0.05 $ 0.09 Net realized and unrealized gain (loss) (1.63) (0.87) (0.43) Net increase (decrease) (1.63) (0.82) (0.34) Net asset value Beginning of period $ 18.00 18.82 19.16 End of period $ 16.37 $ 18.00 18.82 Total return** (9.09)% (4.36)% (1.78)% Ratio of expenses to average net assets (a) 0.19% 0.17% .18% Ratio of net investment income (loss) to average net assets 0.02% 0.28% .47% Portfolio turnover 25% 21% 51% Net assets, end of period (000s) $90,032 $106,783 $122,708 ---------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------ 1999 1998 1997 1996 ------------------------------------------------------------------------------------------------------ LIFECYCLE FUND GROUP TRUST - CONSERVATIVE Net investment income (loss)* $ 0.10 $ 0.09 $ 0.06 $ 0.05 Net realized and unrealized gain (loss) 0.81 1.41 1.28 0.65 Net increase (decrease) 0.91 1.50 1.34 0.70 Net asset value Beginning of period 14.27 12.77 11.43 10.73 End of period $ 15.18 $ 14.27 $ 12.77 $ 11.43 Total return ** 6.38% 11.75% 11.72% 6.52% Ratio of expenses to average net assets (b) 0.38% 0.43% 0.66% 0.81% Ratio of net investment income (loss) to average net assets 0.66% 0.68% 0.46% 0.31% Portfolio turnover 42% 77% 44% 54% Net assets, end of period (000s) $ 12,797 $ 13,516 $ 7,249 $ 4,534 LIFECYCLE FUND GROUP TRUST - MODERATE Net investment income (loss)* $ 0.06 $ 0.06 $ 0.05 $ 0.04 Net realized and unrealized gain (loss) 2.14 2.30 2.11 1.27 Net increase (decrease) 2.20 2.36 2.16 1.31 Net asset value Beginning of period 16.96 14.60 12.44 11.13 End of period 19.16 16.96 $ 14.60 $ 12.44 Total return** 12.97% 16.16% 17.36% 11.77% Ratio of expenses to average net assets (a) 0.19% 0.19% 0.20% 0.20% Ratio of net investment income (loss) to average net assets 0.34% 0.37% 0.37% 0.35% Portfolio turnover 33% 46% 22% 18% Net assets, end of period (000s) $132,764 $125,412 $108,435 $88,273 ------------------------------------------------------------------------------------------------------
* Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (a) 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-1 APPENDIX I: SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- UNDERLYING STATE STREET FUNDS The selected financial data below provides information with respect to investment income, expenses, and investment performance for each Underlying State Street Fund attributable to each Underlying State Street Fund unit outstanding for the periods indicated. These selected per unit data and ratios for the years ended December 31, 2002 through 1993 have been derived from financial statements audited by PricewaterhouseCoopers LLP, independent accountants, as stated in their reports included in the SAI. The selected financial data should be read in conjunction with the full financial statements of the Underlying State Street Funds, which appear in the SAI.
--------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2002 2001 2000 1999 --------------------------------------------------------------------------------------------------------- S&P 500 FLAGSHIP FUND Net investment income* $ 2.81 $ 2.77 $ 2.90 $ 2.99 Net realized and unrealized gain (loss) (46.56) (29.55) (25.33) 40.09 Distribution of securities lending fee income (a) (0.01) (0.01) (0.03) (0.01) Net increase (decrease) (43.76) (26.79) (22.46) 43.07 NET ASSET VALUE Beginning of year 198.54 225.33 247.79 204.72 End of year $154.78 $198.54 $225.33 $247.79 Total return ** (22.03)% (11.89)% (9.05)% 21.04% Ratio of expenses to average net assets*** 0.00% 0.00% 0.00% 0.00% Ratio of net investment income to average net assets 1.62% 1.35% 1.20% 1.35% Portfolio turnover 24% 19% 26% 13% Net assets, end of year (000,000)s $53,996 $62,723 $64,361 $75,574 --------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- 1998 1997 1996 1995 1994 1993 ------------------------------------------------------------------------------------------------------------------------ S&P 500 FLAGSHIP FUND Net investment income* $ 2.77 $ 2.64 $ 2.48 $ 2.24 $ 1.90 $ 1.81 Net realized and unrealized gain (loss) 42.70 37.22 19.86 24.26 (0.93) 4.55 Distribution of securities lending fee income (a) (0.01) 0.00 0.00 0.00 0.00 (0.01) Net increase (decrease) 45.46 39.86 22.34 26.50 0.97 6.35 NET ASSET VALUE Beginning of year 159.26 119.40 97.06 70.56 69.59 63.24 End of year $204.72 $159.26 $119.40 $ 97.06 $70.56 $69.59 Total return ** 28.55% 33.38% 23.02% 37.56% 1.39% 10.06% Ratio of expenses to average net assets*** 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Ratio of net investment income to average net assets 1.55% 1.86% 2.33% 2.66% 2.88% 2.68% Portfolio turnover 18% 18% 27% 10% 12% 22% Net assets, end of year (000,000)s $49,893 $36,664 $20,916 $15,135 $8,258 $5,753 ------------------------------------------------------------------------------------------------------------------------
* Net investment income per unit has been calculated based upon an average of month-end units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of each year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. *** Zero amount represents that which is less than .005%. (a) Zero amount represents that which is less than $.005 per unit or (0.005) if negative. A-2 APPENDIX I: SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------------- 2002 2001 2000 1999 -------------------------------------------------------------------------------- RUSSELL 2000 INDEX SECURITIES LENDING FUND Net investment income* $ 0.37 $ 0.41 $ 0.44 $ 0.39 Distribution of securities lending fee income (0.02) (0.02) (0.02) (0.02) Net realized and unrealized gain (loss) (5.97) 0.21 (1.28) 4.34 Net increase (decrease) (5.62) 0.62 (0.86) 4.71 Net asset value Beginning of period 27.52 26.92 27.78 23.07 End of period $21.90 $27.52 $26.92 $27.78 Total return%** (20.33)% 2.33 (3.01) 20.50 Ratio of expenses to average net assets (%)(c)(d) 0.03% 0.03 0.03 0.03 Ratio of net investment income to average net assets (%)(c) 1.50% 1.56 1.57 1.61 Portfolio turnover (%) 92% 91% 76 51 Net assets, end of year (000,000)s $1,949 $2,287 $1,818 $1,904 -------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 1998 1997 1996 1995 1994 1993 ---------------------------------------------------------------------------------------------- RUSSELL 2000 INDEX SECURITIES LENDING FUND Net investment income* $ 0.38 $ 0.36 $ 0.32 $ 0.03 $ 0.21 $ 0.17 Distribution of securities lending fee income (0.02) (0.02) (0.01) (0.01) (0.01) 0.00 Net realized and unrealized gain (loss) (1.06) 4.19 2.45 3.61 (0.46) 1.83 Net increase (decrease) (0.70) 4.53 2.76 3.63 (0.26) 2.00 Net asset value Beginning of period 23.77 19.24 16.48 12.85 13.11 11.11 End of period $23.07 $23.77 $19.24 $16.48 $12.85 $13.11 Total return%** (2.88) 23.66 16.81 28.33 (1.98) 18.00 Ratio of expenses to average net assets (%)(c)(d) 0.04 0.06 0.06 0.10 0.07 0.09 Ratio of net investment income to average net assets (%)(c) 1.61 1.63 1.80 1.80 1.61 1.37 Portfolio turnover (%) 57 105 131 103 48 35 Net assets, end of year (000,000)s $1,256 $1,174 $ 951 $ 537 $ 372 $ 451 ----------------------------------------------------------------------------------------------
* Net investment income per unit has been calculated based upon an average month-end of units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and the end of the period and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Russell 2000 Index Securities Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) 1996 ratios reflect net investment income and expenses attributable to the Russell 2000 Fund from its ownership of other collective investment funds. (d) The calculation includes only those expenses charged directly to the Fund and does not include expenses charged to the funds in which the Fund invests.
---------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------- 2002 2001 2000 ---------------------------------------------------------------------------------------- DAILY EAFE FUND Net investment income (loss)*(a) $ (0.00) $ (0.00) $ (0.00) Net realized and unrealized gain (loss) (1.40) (2.42) (1.93) Net increase (decrease) (1.40) (2.42) (1.93) Net asset value Beginning of period 8.84 11.26 13.19 End of period $ 7.44 $ 8.84 $ 11.26 Total return(%)** (15.75)% (21.49) (14.63) Ratio of expenses to average net assets (%)(b)(c) 0.00% 0.00 0.00 Ratio of net investment income to average net assets (%)(b) 0.00% 0.00 0.00 Portfolio turnover (%) 117% 45 103 Net assets, end of year (000s) $ 329 $ 432 $ 543 ---------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------------------ 1999 1998 1997 1996 1995 -------------------------------------------------------------------------------------------------------- DAILY EAFE FUND Net investment income (loss)*(a) $ 0.00 $ 0.21 $ 0.19 $ 0.19 $ 0.16 Net realized and unrealized gain (loss) 2.87 1.57 (0.07) 0.29 0.66 Net increase (decrease) 2.87 1.78 0.12 0.48 0.82 Net asset value Beginning of period 10.32 8.54 8.42 7.94 7.12 End of period $13.19 $10.32 $ 8.54 $ 8.42 $ 7.94 Total return(%)** 27.83 20.84 1.43 6.07 11.56 Ratio of expenses to average net assets (%)(b)(c) 0.00 0.11 0.11 0.19 0.20 Ratio of net investment income to average net assets (%)(b) 0.00 2.13 2.17 2.31 2.21 Portfolio turnover (%) 47 109 9 5 9 Net assets, end of year (000s) $ 516 $ 490 $ 277 $ 318 $ 154 --------------------------------------------------------------------------------------------------------
* Net investment income (less) per unit has been calculated based upon an average month-end of units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (a) Zero amount represents that which is less than $0.005 per unit or $(0.005) if negative. (b) Zero amount represents that which is less than 0.005% or (0.005%) if negative. (c) The calculation includes only those expenses charged directly to the Fund and does not include expenses charged to the funds in which the Fund invests. A-3 APPENDIX I: SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 1997 1996 1995 --------------------------------------------------------------------------------------------------------------------------- GOVERNMENT CORPORATE BOND FUND Net investment income* $ 0.12 $ 0.12 $ 0.94 $ 0.86 $ 0.80 $ 0.83 $ 0.78 $ 0.70 Net realized and unrealized gain (loss) 1.78 1.21 0.61 (1.12) 0.38 0.32 (0.42) 1.17 Net increase (decrease) 1.90 1.33 1.55 (0.26) 1.18 1.15 0.36 1.87 Net asset value Beginning of year 16.80 15.47 13.92 14.18 13.00 11.85 11.49 9.62 End of year $18.70 $16.80 $15.47 $13.92 $14.18 $13.00 $11.85 $11.49 Total return (%)** 11.34% 8.60 11.14 (1.83) 9.09 9.70 3.13 19.44 Ratio of expenses to average net assets (%)(a) 0.01% 0.01 0.02 0.01 0.01 0.01 0.01 0.01 Ratio of net investment income to average net assets (%) 0.69% 0.76 6.50 6.17 5.89 6.73 6.82 6.53 Portfolio turnover (%) 96% 65 734 824 478 294 299 611 Net assets, end of year (000s) $ 457 $ 443 $ 538 $4,808 $4,644 $4,273 $3,060 $1,991 ---------------------------------------------------------------------------------------------------------------------------
* Net investment income per unit has been calculated based upon an average of month-end of units outstanding. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. This result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (a) 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.
-------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ----------------------------------------------- 2002 2001 2000 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT FUND Net investment income $ 0.0197 $ 0.0437 $ 0.0643 Net realized gain (loss)* $ 0.0000 0.0000 0.0000 Net change in net assets resulting from operations $ 0.0197 $ 0.0437 $ 0.0643 Distributions from net investment income $ 0.0197 $ 0.0437 $ 0.0643 Total return (%)** 1.99% 4.46 6.63 Ratio of expenses to average net assets (%)*** 0.02% 0.02 0.00 Ratio of net investment income to average net assets (%) 1.97% 4.37 6.43 Net assets, end of year (000s) $39,508,195 $34,778,514 $27,527,486 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------------- 1999 1998 1997 1996 1995 -------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT FUND Net investment income $ 0.0522 $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 Net realized gain (loss)* 0.0000 0.0000 0.0000 0.0000 0.0000 Net change in net assets resulting from operations $ 0.0522 $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 Distributions from net investment income $ 0.0522 $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 Total return (%)** 5.35 5.65 5.77 5.62 6.21 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 (%) 5.22 5.51 5.63 5.48 6.04 Net assets, end of year (000s) $22,958,561 $20,508,724 $18,563,057 $13,762,940 $12,393,148 --------------------------------------------------------------------------------------------------------------
* Zero amounts represent those which are less than $.00005 per unit. ** Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. It assumes reinvestment of distributions and includes only those expenses charged directly to the Fund. *** Zero amounts represent that which are less than 0.005% or (0.005%) if negative. A-4 APPENDIX I: SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- EQUITY INDEX FUND AND LIFECYCLE FUND - CONSERVATIVE AND LIFECYCLE FUND - MODERATE: SEPARATE ACCOUNT NOS. 195, 197 AND 198 Unit values and number of units outstanding for these Funds are shown below.
------------------------------------------------------------------------------------ FOR THE YEARS ENDING DECEMBER 31, ------------------------------------------------------------------------------------ 1994 1995 1996 1997 1998 ------------------------------------------------------------------------------------ Equity Index Fund ------------------------------------------------------------------------------------ Unit Value $9.71 $13.12 $15.91 $20.95 $26.65 ------------------------------------------------------------------------------------ Number of units 515 1,483 2,100 3,713 4,890 outstanding (000's) ------------------------------------------------------------------------------------ Lifecycle Fund - Conservative ------------------------------------------------------------------------------------ Unit Value - $10.59 $11.04 $12.13 $13.37 ------------------------------------------------------------------------------------ Number of units - 281 409 596 1,009 outstanding (000's) ------------------------------------------------------------------------------------ Lifecycle Fund - Moderate ------------------------------------------------------------------------------------ Unit Value - $11.01 $12.18 $14.14 $16.28 ------------------------------------------------------------------------------------ Number of units - 6,924 7,241 7,657 7,691 outstanding (000's) ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------- INCEPTION FOR THE YEARS ENDING DECEMBER 31, DATE ------------------------------------------------------------------------------------- 1999 2000 2001 2002 ------------------------------------------------------------------------- Equity Index Fund 2/1/94 ------------------------------------------------------------------------------------- Unit Value $31.94 $28.74 $25.03 $19.25 ------------------------------------------------------------------------- Number of units 6,399 5,746 5,639 5,580 outstanding (000's) ------------------------------------------------------------------------- Lifecycle Fund - Conservative 5/1/95 ------------------------------------------------------------------------------------- Unit Value $14.06 $14.38 $14.34 $14.08 ------------------------------------------------------------------------- Number of units 906 804 831 1,015 outstanding (000's) ------------------------------------------------------------------------- Lifecycle Fund - Moderate 5/1/95 ------------------------------------------------------------------------------------- Unit Value $18.23 $17.74 $16.81 $15.12 ------------------------------------------------------------------------- Number of units 7,262 6,906 6,334 5,937 outstanding (000's) -------------------------------------------------------------------------------------
A-5 APPENDIX I: SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE Funding of the Program SAI-2 Your Responsibilities as Employer SAI-2 Procedures for Withdrawals, Distributions and Transfers SAI-3 Types of Benefits SAI-5 Provisions of the Master Plan SAI-6 Additional Investment Policies and Techniques - The Underlying State Street Funds SAI-10 Investment Restrictions Applicable to the Funds SAI-14 How We Determine the Unit Value for the Funds SAI-15 How We Value the Assets of the Funds SAI-15 How State Street Values the Assets of the Underlying State Street Funds SAI-16 Transactions by the Underlying State Street Funds SAI-16 Investment Management Fee SAI-17 Underwriter SAI-17 Management: Equitable Life SAI-18 Management: State Street SAI-21 Financial Statements SAI-23
CLIP AND MAIL TO US TO RECEIVE A STATEMENT OF ADDITIONAL INFORMATION To: The Equitable Life Assurance Society of the United States Box 2486 G.P.O. New York, NY 10116 Please send me a copy of the Statement of Additional Information for the American Dental Association Members Retirement Program Prospectus dated May 1, 2003 (State Street). -------------------------------------------------------------------------------- Name -------------------------------------------------------------------------------- Address -------------------------------------------------------------------------------- Copyright 2003 by The Equitable Life Assurance Society of the United States. All rights reserved. S-1 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION About Equitable Life -------------------------------------------------------------------------------- The Equitable Life Assurance Society of the United States ("Equitable Life") is the issuer of the group annuity contract that funds the Program. Equitable Life also makes forms of plans and trusts available, and offers recordkeeping and participant services to facilitate the operation of the Program. Equitable Life is a New York stock life insurance corporation and has been doing business since 1859. We are a wholly-owned subsidiary of AXA Financial, Inc. (previously The Equitable Companies Incorporated). The sole shareholder of AXA Financial, Inc. is AXA, a French holding company for an international group of insurance and related financial services companies. As the sole shareholder, and under its other arrangements with Equitable Life and Equitable Life's parent, AXA exercises significant influence over the operations and capital structure of Equitable Life and its parent. No company other than Equitable Life's related companies, however, has any legal responsibility to pay amounts that Equitable Life owes under the contract. AXA Financial, Inc., and its consolidated subsidiaries managed approximately $415.31 billion in assets as of December 31, 2002. For more than 100 years Equitable Life has been among the largest insurance companies in the United States. We are licensed to sell life insurance and annuities in all fifty states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Our home office is located at 1290 Avenue of the Americas, New York, NY 10104. -------------------------------------------------------------------------------- HOW TO REACH US You may communicate with our processing office as listed below for the purposes described. Certain methods of contacting us, such as by telephone or electronically may be unavailable or delayed (for example our facsimile service may not be available at all times and/or we may be unavailable due to emergency closing). In addition, the level and type of service available may be restricted based on criteria established by us. You can reach us as indicated below to obtain: o Copies of any plans, trusts, participation agreements, enrollment or other forms used in the Program. o Unit values and other account information under your plan. o Any other information or materials that we provide in connection with the Program. INFORMATION ON JOINING THE PROGRAM -------------------------------------------------------------------------------- BY PHONE: -------------------------------------------------------------------------------- 1-800-523-1125 (Retirement Program Specialists available weekdays 9am to 5pm Eastern Time) -------------------------------------------------------------------------------- BY REGULAR MAIL: -------------------------------------------------------------------------------- The ADA Members Retirement Program c/o Equitable Life, Box 2011 Secaucus, NJ 07096 -------------------------------------------------------------------------------- BY REGISTERED, CERTIFIED, OR OVERNIGHT DELIVERY: -------------------------------------------------------------------------------- The ADA Members Retirement Program c/o Equitable Life 200 Plaza Drive, Second Floor Secaucus, NJ 07094 -------------------------------------------------------------------------------- BY INTERNET: -------------------------------------------------------------------------------- The ADA Members Retirement Program Website www.equitable.com/ada, provides information about the Program, as well as several interactive tools and resources that can help answer some of your retirement planning questions. The Website also provides an email feature that can be accessed by clicking on either "Contact Us" or "Send E-Mail to the Equitable." INFORMATION ONCE YOU JOIN THE PROGRAM -------------------------------------------------------------------------------- BY PHONE: -------------------------------------------------------------------------------- 1-800-223-5790 in the US or 1-800-223-5790-0 from France, United Kingdom, Italy, Switzerland, Israel and Republic of Korea (Account Executives available weekdays 9am to 5pm Eastern Time) -------------------------------------------------------------------------------- TOLL-FREE AIMS FOR AMOUNTS IN THE TRUST: -------------------------------------------------------------------------------- By calling 1-800-223-5790 or 1-800-223-5790-0 you may, with your assigned personal security code, use AIMS to: o Transfer assets between investment options and obtain account information. o Change the allocation of future contributions and maturing guaranteed options. o Hear investment performance information, including investment fund unit values and current guaranteed option interest rates. AIMS operates 24 hours a day. You may speak with our Account Executives during regular business hours about any matters covered by AIMS. -------------------------------------------------------------------------------- BY INTERNET FOR AMOUNTS IN THE TRUST: -------------------------------------------------------------------------------- By logging on to www.equitable.com/ada, Client Services you may, with your social security number and your assigned personal security code, use the Internet to access certain retirement account information such as: o Investment performance, current and historical, investment fund unit values, and current guaranteed option interest rates. o Transfer assets between investment options and obtain account balance information o Change the allocation of future contributions and maturing guaranteed options. -------------------------------------------------------------------------------- BY REGULAR MAIL: -------------------------------------------------------------------------------- (correspondence): The ADA Members Retirement Program Box 2486 G.P.O. New York, NY 10116 -------------------------------------------------------------------------------- FOR CONTRIBUTION CHECKS ONLY: -------------------------------------------------------------------------------- The Association Members Retirement Program P.O. Box 1599 Newark, NJ 07101-9764 -------------------------------------------------------------------------------- FOR REGISTERED, CERTIFIED, OR OVERNIGHT DELIVERY: -------------------------------------------------------------------------------- The ADA Members Retirement Program c/o Equitable Life 200 Plaza Drive, 2B-55 Secaucus, NJ 07094 -------------------------------------------------------------------------------- BY E-MAIL: -------------------------------------------------------------------------------- We welcome your comments and questions regarding the ADA Retirement Program. If you have a comment or suggestion about the ADA Website we would appreciate hearing from you. Go to www.equitable.com/ada, Client Services and click on "Contact Us" or click on "email the ADA Members Retirement Program." No person is authorized by The Equitable Life Assurance Society of the United States to give any information or make any representations other than those contained in this prospectus and the SAI, or in other printed or written material issued by Equitable Life. You should not rely on any other information or representation. -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION -------------------------------------------------------------------------------- MAY 1, 2003 AMERICAN DENTAL ASSOCIATION MEMBERS RETIREMENT PROGRAM (STATE STREET) -------------------------------------------------------------------------------- This Statement of Additional Information ("SAI") is not a prospectus. You should read this SAI in conjunction with Equitable Life's prospectus dated May 1, 2003 for the American Dental Association Members Retirement Program describing the EQUITY INDEX FUND AND THE LIFECYCLE FUND-CONSERVATIVE AND THE LIFECYCLE FUND-MODERATE. A copy of the prospectus to which this SAI relates is available at no charge by writing to the ADA Members Retirement Program at Box 2486 G.P.O., New York, New York 10116 or by calling our toll-free telephone number 1-800-223-5790 in the U.S., or 1-800-223-5790-0 from France, Israel, Italy, Republic of Korea, Switzerland, United Kingdom. Definitions of special terms used in this SAI are found in the prospectus. Certain of the cross references in this SAI are contained in the prospectus dated May 1, 2003 to which this SAI relates. CONTENTS OF THIS SAI
PAGE IN SAI PAGE IN SAI ----------- ----------- The Program ......................................... SAI-2 Vesting ...................................... SAI-9 Funding of the Program ............................ SAI-2 Additional Investment Policies and Techniques -- Your Responsibilities as Employer ................. SAI-2 The Underlying State Street Funds ............... SAI-10 Procedures for Withdrawals, Distributions and Investment Restrictions Applicable to the Funds ... SAI-13 Transfers ...................................... SAI-3 How We Determine Unit Value for the Funds ......... SAI-15 Pre-Retirement Withdrawals ..................... SAI-3 How We Value the Assets of the Funds .............. SAI-15 Benefit Distributions .......................... SAI-3 How State Street Values the Assets of the Death Benefit .................................. SAI-4 Underlying State Street Funds ................... SAI-16 Eligible Rollover Distributions and Federal Transactions by The Underlying State Street Income Tax Withholding ....................... SAI-4 Funds ........................................... SAI-16 Types of Benefits ................................. SAI-5 Investment Management Fee ......................... SAI-17 Provisions of the Master Plan ..................... SAI-6 Underwriter ....................................... SAI-17 Plan Eligibility Requirements .................. SAI-6 Management: Equitable Life ........................ SAI-18 Contributions to Qualified Plans ............... SAI-7 Management: State Street .......................... SAI-21 Contributions to the Master Plan ............... SAI-7 Financial Statements .............................. SAI-23 Allocation of Contributions .................... SAI-9 The Master Plan and Section 404(c) of ERISA ........................................ SAI-9
---------- Copyright 2003 by The Equitable Life Assurance Society of The United States, 1290 Avenue of the Americas, New York, N.Y. 10104. All rights reserved. -------------------------------------------------------------------------------- THE PROGRAM The Program consists of the Master Plan and Investment Only plans made available to members of the American Dental Association and their eligible employees. The following information regarding the Program is provided solely to provide a more complete understanding of how the investment funds available under Equitable Life's group annuity contract operate within the Program. In addition to issuing the group annuity contract under which the investment funds are available, we also provide administrative support, recordkeeping and marketing services in connection with the Program. We provide these services pursuant to an administrative services agreement between the ADA Trustees and Equitable Life. This agreement would normally terminate when the group annuity contract with Equitable Life terminates. FUNDING OF THE PROGRAM The Program is primarily funded through a group annuity contract issued to the ADA Trustees by Equitable Life. The contract governs the Investment Funds that are provided by Equitable Life under the Program. The ADA Trustees hold all contracts for the benefit of employers and participants in the Program. The ADA Trustees and Equitable Life also have an administrative services agreement for administrative support, recordkeeping and marketing services provided by Equitable Life. This agreement would normally terminate when the group annuity contract with Equitable Life terminates. YOUR RESPONSIBILITIES AS EMPLOYER If you adopt the Master Plan, you as the employer and plan administrator will have certain responsibilities, including: o sending us your contributions at the proper time and in the proper format (including contribution type and fiscal year); o maintaining all personnel records necessary for administering your plan; o determining who is eligible to receive benefits; o forwarding to us, and when required, signing, all the forms your employees are required to submit; o distributing summary plan descriptions and participant annual reports to your employees and former employees; o distributing our prospectuses and confirmation notices to your employees and, in some cases, former employees; o filing an annual information return for your plan with the Department of Labor, if required; o providing us the information with which to run special non-discrimination tests, if you have a 401(k) plan or your plan accepts post-tax employee or employer matching contributions; o determining the amount of all contributions for each participant in the plan; o forwarding salary deferral and post-tax employee contributions to us as soon as possible (and, in any event, no later than the 15th business day of the month following the month in which the employer withholds or receives participant contributions); o selecting interest rates and monitoring default procedures if you elect the loan provision in your plan; and o providing us with written instructions for allocating amounts in the plan's forfeiture account. If you, as an employer, have an individually designed plan, your responsibilities will not be increased in any way by adopting the Pooled Trust for investment only. If you adopt our self-directed prototype plan, SAI-2 -------------------------------------------------------------------------------- you will be completely responsible for administering the plan and complying with all of the reporting and disclosure requirements applicable to qualified plans, with the assistance of the recordkeeper of your choice. We can provide guidance and assistance in the performance of your responsibilities. If you have questions about any of your obligations, you can contact our Account Executives at 1-800-223-5790 or write to us at Box 2486 G.P.O., New York, New York 10116. PROCEDURES FOR WITHDRAWALS, DISTRIBUTIONS AND TRANSFERS PRE-RETIREMENT WITHDRAWALS. Under the Master Plan, self-employed persons generally may not receive a distribution prior to age 59 1/2, and employees generally may not receive a distribution prior to separation from service. However, if the Master Plan is maintained as a profit sharing plan, you may request distribution of benefits after you reach age 59 1/2 even if you are still working. If the Master Plan is maintained 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 (except salary deferral amounts if there is a successor plan). You may withdraw all or part of your account balance under the Master Plan attributable to post-tax employee contributions at any time, subject to any withdrawal restrictions applicable to the Investment Options, provided that you withdraw at least $300 at a time (or, if less, your account balance attributable to post-tax employee contributions). See "Tax Information" in the prospectus. We pay all benefit payments (including withdrawals due to plan terminations) in accordance with the rules described below in the "Benefit Distributions" discussion. We effect all other participant withdrawals as of the close of the business day we receive the properly completed form. Under the self-directed prototype plan you may receive a distribution upon attaining normal retirement age as specified in the plan, or upon separation from service. If your employer maintains the self-directed prototype plan as a profit sharing plan, an earlier distribution of funds that have accumulated after two years is available if you incur a financial hardship, as defined in the plan. In addition, if you are married, your spouse may have to consent in writing before you can make any type of withdrawal, except for the purchase of a Qualified Joint and Survivor Annuity. See "Spousal Consent Requirement" below. Under an individually designed plan, the availability of pre-retirement withdrawals depends on the terms of the plan. We suggest that you ask your employer what types of withdrawals are available under your plan. Transfers and withdrawals from the Equity Index Fund may be delayed if there is any delay in redemption of shares of the SSgA S&P 500 Index Fund. We generally do not expect any such delays. Transfers and withdrawals from the Lifecycle Funds-Conservative and Moderate may be delayed if there is any delay in redemption of units of the Lifecycle Fund Group Trusts. We generally do not expect any such delays. BENEFIT DISTRIBUTIONS. In order for you to begin receiving benefits under the Master Plan, your employer must send us your properly completed Election of Benefits form and, if applicable, Beneficiary Designation form. Benefit payments will be made according to the provisions of your plan. SAI-3 -------------------------------------------------------------------------------- Under an individually designed plan and our self-directed prototype plan, your employer must send us a Request for Disbursement Form. We will process single sum payments to your plan's trustee as of the close of business on the day we receive a properly completed form. If you wish to receive annuity payments, your plan's trustee may purchase a variable annuity contract from us. Fixed annuities are available from insurance companies selected by the Trustees. See "Types of Benefits." We will pay annuity payments directly to you and payments will commence according to the provisions of your plan. Transfers and withdrawals from the Equity Index Fund may be delayed if there is any delay in redemption of shares of the SSgA S&P 500 Index Fund. We generally do not expect any such delays. Transfers and withdrawals from the Lifecycle Funds-Conservative and Moderate may be delayed if there is any delay in redemption of units of the Lifecycle Fund Group Trusts. We generally do not expect any such delays. Please note that we use the value of your vested benefits at the close of the business day payment is due to determine the amount of benefits you receive. We will not, therefore, begin processing your check until the following business day. You should expect your check to be mailed within five days after processing begins. Annuity checks can take longer. If you buy a fixed annuity, your check will come from the insurance company you selected. If you are withdrawing more than $50,000 and you would like expedited delivery at your expense, you may request it on your Election of Benefits form. DEATH BENEFIT. If a participant in the Master Plan dies without designating a beneficiary, the vested benefit will automatically be paid to the spouse or, if the participant is not married, to the first surviving class of his or her (a) children, (b) parents and (c) brothers and sisters. If none of them survive, the participant's vested benefit will be paid to the participant's estate. If a participant in our prototype self-directed plan dies without designating a beneficiary, the vested benefit will automatically be paid to the spouse or, if the participant is not married, to the first surviving class of his or her (a) children, (b) grandchildren, (c) parents, (d) brothers and sisters and (e) nephews and nieces. If none of them survive, the participant's vested benefit will be paid to the participant's estate. ELIGIBLE ROLLOVER DISTRIBUTIONS AND FEDERAL INCOME TAX WITHHOLDING. All "eligible rollover distributions" are subject to mandatory Federal income tax withholding of 20% unless the participant elects to have the distribution directly rolled over to a qualified plan or traditional individual retirement arrangement (IRA). An "eligible rollover distribution" is generally any distribution that is not one of a series of substantially equal periodic payments made (not less frequently than annually): (1) for the life (or life expectancy) of the plan participant or the joint lives (or joint life expectancies) of the plan participant and his or her designated beneficiary, or (2) for a specified period of 10 years or more. In addition, the following are not subject to mandatory 20% withholding: o hardship withdrawals; o certain corrective distributions under Code Section 401(k) plans; o loans that are treated as distributions; o a distribution to a beneficiary other than to a surviving spouse or a current or former spouse under a qualified domestic relations order; and o required minimum distributions under Code Section 401(a)(9). If we make a distribution to a participant's surviving spouse, or to a current or former spouse under a qualified domestic relations order, the distribution may be an eligible rollover distribution, subject to mandatory 20% withholding, unless one of the exceptions described above applies. If a distribution is not an "eligible rollover distribution", we will withhold income tax from all taxable payments unless the recipient elects not to have income tax withheld. SAI-4 -------------------------------------------------------------------------------- TYPES OF BENEFITS Under the Master Plan, and under most self-directed prototype plans, you may select one or more of the following forms of distribution once you are eligible to receive benefits. If your employer has adopted an individually designed plan or a self-directed prototype profit sharing plan that does not offer annuity benefits, not all of these distribution forms may be available to you. We suggest you ask your employer what types of benefits are available under your plan. QUALIFIED JOINT AND SURVIVOR ANNUITY. An annuity providing equal monthly payments for your life and, after your death, for your surviving spouse's life. No payments will be made after you and your spouse die, even if you have received only one payment prior to the last death. THE LAW REQUIRES THAT IF THE VALUE OF YOUR VESTED BENEFITS EXCEEDS $5,000, YOU MUST RECEIVE A QUALIFIED JOINT AND SURVIVOR ANNUITY UNLESS YOUR SPOUSE CONSENTS IN WRITING TO A CONTRARY ELECTION. Please see "Spousal Consent Requirements" below. LUMP SUM PAYMENT. A single payment of all or part of your vested benefits. If you take a lump sum payment of only part of your balance, it must be at least $1,000. If your vested benefit is $5,000 or less, you will receive a lump sum payment of the entire amount. PERIODIC INSTALLMENTS. Monthly, quarterly, semi-annual or annual payments over a period of at least three years, where the initial payment on a monthly basis is at least $300. You can choose either a time-certain payout, which provides variable payments over a specified period of time, or a dollar-certain payout, which provides level payments over a variable period of time. During the installment period, your remaining account balance will be invested in whatever investment options you designate, each payment will be drawn pro rata from all the investment options you have selected. If you die before receiving all the installments, we will make the remaining payments to your beneficiary, subject to IRS minimum distribution rules and beneficiary election. Except in the case of participant accounts transferred from defined contribution plans, we do not offer installments for benefits under the individually designed plans or our self-directed prototype plan. For special conditions applying to installment payments involving the Guaranteed Rate Accounts, please refer to the prospectus and SAI for these options. LIFE ANNUITY. An annuity providing monthly payments for your life. No payments will be made after your death, even if you have received only one payment prior to your death. LIFE ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your life or, if longer, a specified period of time. If you die before the end of that specified period, payments will continue to your beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years. The longer the specified period, the smaller the monthly payments will be. JOINT AND SURVIVOR ANNUITY. An annuity providing monthly payments for your life and that of your beneficiary. You may specify the percentage of the original annuity payment to be made to your beneficiary. Subject to legal limitations, that percentage may be 100%, 75%, 50%, or any other percentage you specify. JOINT AND SURVIVOR ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your life and that of your beneficiary or, if longer, a specified period of time. If you and your beneficiary both die before the end of the specified period, payments will continue to your contingent beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years and the percentage of the annuity payment to be made to your beneficiary (as noted above under Joint and Survivor Annuity). The longer the specified period, the smaller your monthly payments will be. CASH REFUND ANNUITY. An annuity providing equal monthly payments for your life with a guarantee that the sum of those payments will be at least equal to the portion of your vested benefits used to purchase the annuity. If upon your death the sum of the monthly payments to you is less than that amount, your beneficiary will receive a lump sum payment of the remaining guaranteed amount. SAI-5 -------------------------------------------------------------------------------- FIXED AND VARIABLE ANNUITY CHOICES Under a Qualified Joint and Survivor Annuity or a Cash Refund Annuity, the amount of the monthly payments is fixed at retirement and remains level throughout the distribution period. Under the Life Annuity, Life Annuity--Period Certain, Joint and Survivor Annuity and Joint and Survivor Annuity--Period Certain, you may select either fixed or variable payments. All forms of variable annuity benefits under the Program will be provided by us. The payments under variable annuity options reflect the investment performance of the Growth Equity Fund. If you are interested in a variable annuity, when you are ready to select your benefit please ask our Account Executives for our variable annuity prospectus supplement. Fixed annuities will be issued by insurance companies selected by the ADA Trustees from time to time. We do not currently offer fixed annuities under the Program. Upon your request, the companies selected by the Trustees will provide annuity benefit information. We have no further responsibility for the amount used to purchase a fixed annuity once it has been sent to the insurance company you select. The cost of a fixed annuity is determined by each issuing insurance company. Your Account Executive has more details regarding the insurance companies currently providing annuity benefits under the Program. SPOUSAL CONSENT REQUIREMENTS Under the Master Plan, you may designate a non-spouse beneficiary any time after the earlier of: (1) the first day of the plan year in which you attain age 35, or (2) the date on which you separate from service with your employer. If you designate a beneficiary other than your spouse prior to your reaching age 35, your spouse must consent to the designation and, upon your reaching age 35, must again give his or her consent or the designation will lapse. In order for you to make a withdrawal, elect a form of benefit other than a Qualified Joint and Survivor Annuity or designate a non-spouse beneficiary, your spouse must consent to your election in writing within the 90 day period before your annuity starting date. To consent, your spouse must sign on the appropriate line on your election of benefits or beneficiary designation form. Your spouse's signature must be witnessed by a notary public or plan representative. If you change your mind, you may revoke your election and elect a Qualified Joint Survivor Annuity or designate your spouse as beneficiary, simply by filing the appropriate form. Your spouse's consent is not required for this revocation. It is also possible for your spouse to sign a blanket consent form. By signing this form, your spouse consents not just to a specific beneficiary or, with respect to the waiver of the Qualified Joint and Survivor Annuity, the form of distribution, but gives you the right to name any beneficiary, or if applicable, form of distribution you want. Once you file such a form, you may change your election whenever you want, even without spousal consent. No spousal consent to a withdrawal or benefit in a form other than a Qualified Joint and Survivor Annuity is required under certain self-directed prototype profit sharing plans that do not offer life annuity benefits. PROVISIONS OF THE MASTER PLAN PLAN ELIGIBILITY REQUIREMENTS. Under the Master Plan, the employer specifies the eligibility requirements for its plan in the Adoption Agreement. The employer may exclude any employee who has not attained a specified age (not to exceed 21) and completed a specified number of years (not to exceed two) in each of which he completed 1,000 hours of service. No more than one year of eligible service may be required for a 401(k) arrangement. The employer may also exclude salaried dentists (those with no ownership interest in the practice), employees of related employers, leased employees and certain other types of employees at the employer's election, provided such exclusion does not cause the plan to discriminate in favor of "highly compensated" employees (defined below). SAI-6 -------------------------------------------------------------------------------- CONTRIBUTIONS TO QUALIFIED PLANS. We outline below the current Federal income tax rules relating to contributions under qualified retirement plans. This outline assumes that you are not a participant in any other qualified retirement plan. The employer deducts contributions to the plan in the year it makes them. As a general rule, an employer must make contributions for any year by the due date (including extensions) for filing its Federal income tax return for that year. However, Department of Labor ("DOL") rules generally require that the employer contribute participants' salary deferral (or post-tax employee contribution) amounts under a 401(k) plan as soon as possible after the payroll period applicable to a deferral. In any event, the employer must make these contributions no later than the 15th business day of the month following the month in which the employer withholds or receives participant contributions. If the employer contributes more to the plan than it may deduct under the rules we describe below, the employer (a) may be liable for a 10% penalty tax on that nondeductible amount and (b) may risk disqualifying the plan. CONTRIBUTIONS TO THE MASTER PLAN. The employer makes annual contributions to its plan based on the plan's provisions. An employer that adopts the Master Plan as a profit sharing plan makes discretionary contributions as it determines annually. The aggregate employer contribution to the plan may not exceed 25% of all participants' compensation for the plan year. For plan purposes, compensation for self-employed persons does not include deductible plan contributions on behalf of the self-employed person. A 401(k) arrangement is available as part of the profit sharing plan. Employees may make pre-tax contributions to a plan under a 401(k) arrangement. The maximum amount that highly compensated employees may contribute depends on (a) the amount that non-highly compensated employees contribute and (b) the amount the employer designates as a nonforfeitable 401(k) contribution. Different rules apply to a SIMPLE 401(k) or safe harbor 401(k). For 2003, a "highly compensated" employee, for this purpose, is (a) an owner of more than 5% of the practice, or (b) anyone with earnings of more than $90,000 from the practice in 2002. 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 $12,000 for 2003 (which amount shall increase by $1,000 each year up to 2006), reduced by that employee's salary reduction contributions to simplified employee pension plans established before 1997 (SARSEPs), SIMPLE plans, employee contributions to tax deferred Section 403(b) arrangements, and contributions deductible by the employee under a trust described under Section 501(c)(18) of the Internal Revenue Code. The maximum amount a participant may defer in a SIMPLE 401(k) plan for 2003 is $8,000. Effective January 1, 2003, an additional "catch-up" elective deferral of up to $2,000 can be made by any employees who are at least age 50 at any time during 2003. (Catch up elective deferral amount increases $1,000 per year through 2006.) Matching contributions to a 401(k) plan on behalf of a self-employed individual are no longer treated as elective deferrals, and are the same as matching contributions for other employees. Employers may adopt a safe harbor 401(k) arrangement. Under this arrangement, an employer agrees to offer a matching contribution equal to (a) 100% of salary deferral contributions up to 3% of compensation and (b) 50% of salary deferral contributions that exceed 3% but are less than 5% of compensation or a 3% non-elective contribution to all eligible employees. These contributions must be non-forfeitable. If the employer makes these contributions and meets the notice requirements for safe harbor 401(k) plans, the plan is not subject to non-discrimination testing on salary deferral and matching or non-elective contributions. 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 the Adoption Agreement specifies. Under any type of plan, an employer must disregard compensation in excess of $200,000 in 2003 in making contributions. This amount will be adjusted for cost-of-living changes in future years in $5,000 increments rounded to the next lowest multiple of $5,000. An employer may integrate contributions with Social Security. This means that contributions, for each participant's compensation, that exceed the integration level may be greater than contributions for compensation below the integration level. The Federal tax law imposes limits on this excess. Your Account Executive can help you determine the legally permissible contribution. Except in the case of certain non-top heavy plans, contributions for non-key employees must be at least 3% of compensation (or, under the profit sharing plan, the percentage the employer contributes for key employees, if less than 3%). In 2003, "key employee" means (a) an officer of the practice with earnings of more than $130,000 or (b) an owner of more than 5% of the practice, or (c) an owner of more than 1% of the practice with earnings of more than $150,000. For purposes of (a), no more than 50 employees (or, if less, the greater of three or 10% of the employees) shall be treated as officers. Certain plans may also permit participants to make post-tax contributions. We will maintain a separate account to reflect each participant's post-tax contributions and the earnings (or losses) on those contributions. Post-tax contributions are subject to complex rules under which the maximum amount that a highly compensated employee may contribute depends on the amount that non-highly compensated employees contribute. BEFORE PERMITTING ANY HIGHLY-COMPENSATED EMPLOYEE TO MAKE POST-TAX CONTRIBUTIONS, THE EMPLOYER SHOULD VERIFY THAT IT HAS PASSED ALL NON-DISCRIMINATION TESTS. If an employer employs only "highly compensated" employees (as defined above), the plan will not accept post-tax contributions. In addition, the employer may make matching contributions to certain plans, i.e., contributions based on the amount of post-tax or pre-tax 401(k) contributions that plan participants make. Special non-discrimination rules apply to matching contributions. These rules may limit the amount of matching contributions that an employer may make for highly compensated employees. These non-discrimination rules for matching contributions do not apply to SIMPLE and safe harbor 401(k) plans. Contributions (including forfeiture amounts) for each participant may not exceed the lesser of (a) $40,000 and (b) 100% of the participant's earnings (excluding, in the case of self-employed persons, all deductible plan contributions). The participant's post-tax contributions count toward this limitation. Each participant's account balance equals the sum of the amounts accumulated in each investment option. We will maintain separate records of each participant's interest in each of the investment options attributable to employer contributions, 401(k) non-elective contributions, 401(k) elective contributions, post-tax employee contributions, SIMPLE employer, safe harbor non-elective, safe harbor matching and employer matching contributions. We will also account separately for any amounts rolled over or transferred from an IRA or eligible employer plan. Our records will also reflect each participant's percentage of vesting (see below) in his account balance attributable to employer contributions and employer matching contributions. The participant will receive an individual confirmation of each transaction (including the deduction of record maintenance and report fees). The participant will also receive an annual statement showing the participant's account balance in each investment option attributable to each type of contribution. Based on information that you supply, we will run the required special non-discrimination tests (Actual Deferral Percentage and Actual Contribution Percentage) applicable to (a) 401(k) plans (other than SIMPLE 401(k) and safe harbor 401(k)) and (b) plans that accept post-tax employee contributions or employer matching contributions. Non-discrimination tests do not apply to SIMPLE 401(k) plans, if the employer makes (a) a matching contribution equal to 100% of the amount each participant deferred, up to 3% of compensation, or (b) a 2% non-elective contribution to all eligible employees. The employer must also follow the notification and filing requirements outlined in the Master Plan to avoid non-discrimination tests. SAI-8 -------------------------------------------------------------------------------- Under a SIMPLE 401(k) the employer must offer all eligible employees the opportunity to defer part of their salary into the plan and make either a matching or non-elective contribution. The matching contribution must be 100% of the salary deferral amount up to 3% of compensation. The non-elective contribution is 2% of compensation, which the employer must make for all eligible employees, even those not deferring. The matching or non-elective contribution must be non-forfeitable. The employer must notify employees which contribution the employer will make 60 days before the beginning of the year. Elective deferrals to a 401(k) plan are subject to applicable FICA (social security), Medicare and FUTA (unemployment) taxes. They may also be subject to state income tax. ALLOCATION OF CONTRIBUTIONS. You, as employer or participant, may allocate contributions among any number of the investment options. You may change allocation instructions at any time, and as often as needed, by calling our Automated Investment Management System ("AIMS") or accessing the Website on the Internet. New instructions become effective on the business day we receive them. Employer contributions may be allocated in different percentages than employee contributions. The allocation percentages elected for employer contributions automatically apply to any 401(k) qualified non-elective contributions, qualified matching contributions, employer matching contributions, SIMPLE employer, safe harbor non-elective, safe harbor matching contributions and rollover contributions. Your allocation percentages for employee contributions automatically apply to any post-tax employee contributions and 401(k) salary deferral contributions. IF WE HAVE NOT RECEIVED VALID INSTRUCTIONS, WE WILL ALLOCATE CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT. You may, of course, transfer to another investment option at any time. THE MASTER PLAN AND SECTION 404(c) OF ERISA. The Master Plan is a participant directed individual account plan designed to comply with the requirements of Section 404(c) of ERISA. Section 404(c) of ERISA, and the related Department of Labor (DOL) regulation, provide that if a participant or beneficiary exercises control over the assets in his or her plan account, plan fiduciaries will not be liable for any loss that is the direct and necessary result of the participant's or beneficiary's exercise of control. This means that if the employer plan complies with Section 404(c), participants can make and are responsible for the results of their own investment decisions. Section 404(c) plans must, among other things, (a) make a broad range of investment choices available to participants and beneficiaries and (b) provide them with adequate information to make informed investment decisions. The Investment Options and documentation available under the ADA Program provide the broad range of investment choices and information needed in order to meet the requirements of Section 404(c). However, while our suggested summary plan descriptions, annual reports, prospectuses, and confirmation notices provide the required investment information, the employer is responsible for distributing this information in a timely manner to participants and beneficiaries. You should read this information carefully before making your investment decisions. VESTING. Vesting refers to the participant's rights with respect to that portion of a participant's Account Balance attributable to employer contributions under the Master Plan. If a participant is "vested," the amount or benefit in which the participant is vested belongs to the participant, and may not be forfeited. The participant's Account Balance attributable to (a) 401(k) contributions (including salary deferral, qualified non-elective and qualified matching contributions), (b) post-tax employee contributions and (c) rollover contributions always belong to the participant, and is nonforfeitable at all times. A participant becomes fully vested in all benefits if still employed at death, disability, attainment of normal retirement age or upon termination of the plan. If the participant terminates employment before that time, any benefits that have not yet vested under the plan's vesting schedule are forfeited. The normal retirement age is 65 under the Master Plan unless the employer elects a lower age on its Adoption Agreement. Benefits must vest in accordance with any of the schedules below or one at least as favorable to participants; SAI-9 --------------------------------------------------------------------------------
SCHEDULE A SCHEDULE B SCHEDULE C SCHEDULE E YEARS OF VESTED VESTED VESTED VESTED SERVICE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE ---------- ------------ ------------ ------------ ------------ 1 0% 0% 0% 100% 2 100 20 0 100 3 100 40 100 100 4 100 60 100 100 5 100 80 100 100 6 100 100 100 100
If the plan requires more than one year of service for participation in the plan, the plan must use Schedule E. Provided the employer plan is not "top-heavy," within the meaning of Section 416 of the Code, and provided that the plan does not require more than one year of service for participation, an employer may, in accordance with provisions of the American Dental Association Members Retirement Plan, instead elect one of the following vesting schedules or one at least as favorable to participants, further provided, however the following schedule is not available for matching contributions made in plan years beginning after 2002:
SCHEDULE F SCHEDULE G YEARS OF VESTED VESTED SERVICE PERCENTAGE PERCENTAGE --------------- ------------ ----------- less than 3 0% 0% 3 20 0 4 40 0 5 60 100 6 80 100 7 100 100
All contributions to a SIMPLE 401(k) plan are 100% vested and not subject to the vesting schedule above. This rule, however, does not apply to employer and matching contributions made to a plan before the plan is amended to become a SIMPLE 401(k) plan. Non-elective and matching contributions required under a safe harbor 401(k) arrangement are 100% vested and not subject to the vesting schedule above. Matching contributions are required to vest at least as quickly as under a 3-year cliff or a 6-year "graded vesting" schedule. The 6-year schedule requires 20% vesting after 2 years of service increasing 20% per year thereafter. ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES -- THE UNDERLYING STATE STREET FUNDS The following discussion supplements the discussion of the investment policies and techniques of the Underlying State Street Funds for the Lifecycle Fund Group Trusts included under the section entitled "Program investment options" in the prospectus. Also discussed hereunder are the investment restrictions applicable to investments made by such Underlying State Street Funds. As a general matter, you should note that the S&P 500 Flagship Fund, the Russell 2000 Index Securities Lending Fund, and the Daily EAFE Fund are index funds and, therefore, not "actively" managed like other collective investment funds. Each of these Underlying State Street Funds utilizes a "passive" investment approach, attempting to duplicate the investment performance of its benchmark index through automated statistical analytic procedures. See the section of the prospectus entitled Investment Options-Risks and Investment Techniques for further discussion of this method of management. Therefore, some of the policies and investment techniques discussed below may not be engaged in to the same extent as if the Underlying State Street Funds were actively managed. SAI-10 -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES. The Underlying State Street Funds may invest in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, which include U.S. Treasury securities that differ in their interest rates, maturities and times of issuance. Treasury Bills have initial maturities of one year or less; Treasury Notes have initial maturities of one to ten years; and Treasury Bonds generally have initial maturities of greater than ten years. Obligations issued or guaranteed by U.S. Government agencies and instrumentalities are supported in one of the following ways: (a) by the full faith and credit of the U.S. Treasury; (b) by the right of the issuer to borrow from the Treasury; (c) by discretionary authority of the U.S. Government to purchase certain obligations of the agency or instrumentality; or (d) only by the credit of the agency or instrumentality. These securities bear fixed, floating or variable rates of interest. Principal and interest may fluctuate based on generally recognized reference rates or the relationship of rates. While the U.S. Government provides financial support to such U.S. Government-sponsored agencies or instrumentalities, no assurance can be given that it will always do so, since it is not so obligated by law. FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES. Certain of the Underlying State Street Funds may invest in obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions, agencies or instrumentalities, if State Street determines that the obligations are of comparable quality to the other obligations in which such Underlying State Street Fund may invest. Such securities also include debt obligations of supranational entities. Supranational entities include international organizations designated or supported by governmental entities to promote economic reconstruction or development and international banking institutions and related government agencies. The percentage of such Underlying State Street Fund's assets invested in securities issued by foreign governments will vary depending on the relative yields of such securities, the economic and financial markets of the countries in which the investments are made and the interest rate climate of such countries. BANK OBLIGATIONS. The Underlying State Street Funds may invest in bank obligations, including certificates of deposit, time deposits, bankers' acceptances and other short-term obligations of domestic banks, foreign subsidiaries of domestic banks, foreign branches of domestic banks, and domestic and foreign branches of foreign banks, domestic savings and loan associations and other banking institutions. With respect to such securities issued by foreign branches of domestic banks, foreign subsidiaries of domestic banks, and domestic and foreign branches of foreign banks, such Underlying State Street Fund may be subject to additional investment risks that are different in some respects from those incurred by a fund which invests only in debt obligations of U.S. domestic issuers. These risks include possible future political and economic developments, the possible imposition of foreign withholding taxes on interest income payable on the securities, the possible establishment of exchange controls or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on these securities and the possible seizure or nationalization of foreign deposits. Certificates of deposit are negotiable certificates evidencing the obligation of a bank to repay funds deposited with it for a specified period of time. Time deposits are non-negotiable deposits maintained in a banking institution for a specified period of time at a stated interest rate. Time deposits which may be held by such Underlying State Street Fund will not benefit from insurance administered by the Federal Deposit Insurance Corporation. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and the drawer to pay the face amount of the instrument upon maturity. The other short-term obligations may include uninsured, direct obligations, bearing fixed, floating or variable interest rates. COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS. The Underlying State Street Funds may invest in commercial paper. Commercial paper is short-term, unsecured promissory notes issued to finance short-term credit needs. Any commercial paper in which such Underlying State Street Fund invests will consist only of direct obligations which, at the time of their purchase, are (a) rated not lower SAI-11 -------------------------------------------------------------------------------- than Prime-1 by Moody's Investor Service ("Moody's"), A-1 by S&P, or any equivalent rating by any other nationally recognized statistical rating organization, (b) issued by companies having an outstanding unsecured debt issue currently rated not lower than Aa3 by Moody's or AA-by S&P, or any equivalent rating by any other nationally recognized statistical rating organization, or (c) if unrated, determined by State Street to be of comparable quality to those rated obligations which may be purchased by such Underlying State Street Fund. REPURCHASE AGREEMENTS. The Underlying State Street Funds may enter into repurchase agreements. Repurchase agreements involve the acquisition of an underlying debt instrument, subject to an obligation of the seller to repurchase, and to resell, the instrument at a fixed price usually not more than one week after its purchase. An Underlying State Street Fund may incur certain costs in connection with the sale of the securities if the seller does not repurchase them in accordance with the repurchase agreement. In addition, if bankruptcy proceedings are commenced with respect to the seller of the securities, realization on the securities by an Underlying State Street Fund may be delayed or limited. Each Underlying State Street Fund will consider on an ongoing basis the creditworthiness of the institutions with which it enters into repurchase agreements. FLOATING AND VARIABLE RATE OBLIGATIONS. An Underlying State Street Fund may purchase floating and variable rate demand notes and bonds, which are obligations ordinarily having stated maturities in excess of 13 months. Generally, the lender may demand repayment, and the borrower has a right to repay the loan prior to maturity. The interest rate generally fluctuates based on a published rate such as a bank's prime rate. Because these obligations are direct lending arrangements between the lender and borrower, the Underlying State Street Funds do not contemplate that such instruments generally will be traded, and there generally is no established secondary market for these obligations, although they are redeemable at face value. Accordingly, where the obligations are not secured by letters of credit or other credit support arrangements, the Underlying State Street Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS. An Underlying State Street Fund may invest in the securities of foreign issuers in the form of American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs"). These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs, which are sometimes referred to as Continental Depositary Receipts ("CDRs"), are receipts issued in Europe typically by non-United States banks and trust companies that evidence ownership of either foreign or domestic securities. FUTURES CONTRACTS. To the extent permitted by applicable regulations, an Underlying State Street Fund is permitted to use financial futures as a substitute for a comparable market position in the underlying securities. An Underlying State Street Fund may trade futures contracts in U.S. domestic markets or, to the extent permitted under applicable law, on exchanges located outside the United States. A stock index future obligates the seller to deliver (and the purchaser to take), effectively, an amount of cash equal to the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is made. With respect to stock indexes that are permitted investments, each Underlying State Street Fund intends to purchase and sell futures contracts on the stock index for which it can obtain the best price, with consideration also given to liquidity. Initially, when purchasing or selling futures contracts, an Underlying State Street Fund will be required to deposit with its custodian in the broker's name an amount of cash or cash equivalents up to approximately 10% of the contract amount, which is returned to the Fund upon termination. This amount is subject to change. Subsequent payments to and from the broker will be made daily as the price of the index or securities underlying the futures contract fluctuates. SAI-12 -------------------------------------------------------------------------------- Although an Underlying State Street Fund intends to purchase or sell futures contracts only if there is an active market for such contracts, no assurance can be given that a liquid market will exist for any particular contract at any particular time. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. Futures contract prices could move to the limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and potentially subjecting the relevant Underlying State Street Fund to substantial losses. INTEREST RATE AND EQUITY INDEX SWAPS. An Underlying State Street Fund may enter into interest rate and index swaps. Interest-rate swaps are contracts in which one party agrees to pay interest at a floating rate for a specified period of time, while the counterparty agrees to pay interest at a fixed rate for the same period. Index swaps involve the exchange by an Underlying State Street Fund with another party of cash flows based upon the performance of an index or a portion of an index of securities which usually include dividends. Each Underlying State Street Fund will enter into swap transactions only if: (i) for transactions with maturities under one year, the counterparty has outstanding short-term paper rated at least A-1 by S&P, Prime-1 by Moody's, or any equivalent rating by any other nationally recognized statistical rating organization, or (ii) for transactions with maturities greater than one year, the counterparty has outstanding debt securities rated at least Aa by Moody's or AA by S&P, or any equivalent rating by any other nationally recognized statistical rating organization, or (iii) if unrated, State Street deems the counterparty's creditworthiness to be of equivalent quality. There is no limit on the amount of swap transactions that an Underlying State Street Fund may enter into. The risk of loss with respect to swaps is generally limited to the net amount of payments that the Underlying State Street Fund is contractually obligated to make. If the other party to a swap defaults, the Underlying State Street Fund's risk of loss consists of the net amount of payments that the Underlying State Street Fund contractually is entitled to receive. FOREIGN CURRENCY TRANSACTIONS. An Underlying State Street Fund may engage in currency exchange transactions either on a spot (i.e., cash) basis at the rate prevailing in the currency exchange market, or through entering into forward contracts to purchase or sell currencies. A forward currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which must be more than two days from the date of the contract, at a price set at the time of the contract. These contracts are entered into in the interbank market conducted directly between currency traders (typically commercial banks or other financial institutions) and their customers. LENDING PORTFOLIO SECURITIES. An Underlying State Street Fund may lend securities to brokers, dealers and other financial institutions. The Underlying State Street Fund will receive collateral of at least 100% cash, letters of credit or U.S. government securities. The Underlying State Street Fund can increase its income through the investment of the collateral as well as the interest receivable on the loan. An Underlying State Street Fund might experience a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement. RATINGS. The ratings of Moody's, S&P, or any other nationally recognized statistical rating organizations represent their opinions as to the quality of the obligations which they undertake to rate. It should be emphasized, however, that ratings are relative and subjective and, although ratings may be useful in evaluating the safety of interest and principal payments, they do not evaluate the market value risk of such obligations. Each Underlying State Street Fund will rely on State Street's judgment, analysis and experience in evaluating the creditworthiness of an issuer. INVESTMENT RESTRICTIONS APPLICABLE TO THE FUNDS EQUITY INDEX FUND. The Equity Index Fund will operate as discussed under Investment Options--Equity Index Fund in the prospectus, and will be subject to the investment policies and limitations described SAI-13 -------------------------------------------------------------------------------- there. The prospectus for the SSgA S&P 500 Index Fund describes the investment objective, policies and limitations applicable to the SSgA S&P 500 Index Fund. A free copy of the SSgA S&P 500 Index Fund prospectus may be obtained by calling an Equitable Life Account Executive. LIFECYCLE FUNDS. The Lifecycle Funds will operate as discussed under Investment Options-Lifecycle Funds-The Lifecycle Fund Group Trusts-Conservative and Moderate in the prospectus, and will be subject to the investment policies and limitations described therein. LIFECYCLE FUND GROUP TRUSTS. The Lifecycle Fund Group Trusts will operate as discussed in Investment Options-The Lifecycle Fund Group Trusts-Conservative and Moderate in the prospectus, and will be subject to the investment policies and limitations described therein. UNDERLYING STATE STREET FUNDS: COMMON INVESTMENT RESTRICTIONS. In addition to the limitations discussed above under Additional Investment Policies and Techniques and in the prospectus under Investment Options, each Underlying State Street Fund will not: (1) Invest in securities for the purpose of obtaining control of management. (2) Engage in business of underwriting securities issued by others, except that an Underlying State Street Fund will not be deemed to be an underwriter or to be engaged in underwriting by virtue of having purchased securities subject to legal or contractual restrictions on disposition. (3) Make short sales of securities or purchase any securities on margin, except for such short-term credits as are necessary for the clearance of transactions. An Underlying State Street Fund may make initial margin deposits and variation margin payments in connection with transactions in futures contracts or related options. (4) Purchase or sell real estate or real estate mortgage loans, except that an Underlying State Street Fund may invest in securities secured by real estate or interests in real estate, or securities issued by companies which invest in real estate or interests in real estate. (5) Pledge, mortgage or hypothecate its assets, except to the extent necessary to (a) secure any permitted borrowings, (b) engage in transactions that involve the purchase of securities on a when-issued or forward commitment basis, (c) deposit assets in escrow in connection with writing covered put and call options, and (d) deposit assets as initial or variation margin or collateral in connection with transactions in options, forward contracts, futures contracts (including those relating to indices), and options on futures contracts or indices. (6) Invest 25% or more of the value of its total assets in securities of companies primarily engaged in any one industry (other than the U.S. Government, its agencies and instrumentalities), except to the extent necessary to comply with the industry weightings of a particular index in accordance with such Underlying State Street Fund's investment objective and policies. For purposes of this restriction, the concentration limit may be exceeded as a result of changes in the market value of portfolio securities in which an Underlying State Street Fund invests. This limit, however, may not be exceeded as a result of investments made by an Underlying State Street Fund. (7) Purchase or sell commodities or commodity futures contracts, except that an Underlying State Street Fund may enter into futures contracts to the extent provided in such Underlying State Street Fund's Declaration of Trust and as discussed under Additional Investment Policies and Techniques above and under Investment Options in the prospectus. While State Street or SSgA Funds Management, Inc. are not required to observe the foregoing restrictions (except where otherwise required by law or governmental regulation), it currently does not intend to change any of these restrictions. SAI-14 -------------------------------------------------------------------------------- HOW WE DETERMINE UNIT VALUE FOR THE FUNDS We determine the Unit Value for the Equity Index Fund and each of the Lifecycle Funds at the end of each business day. The Unit Value for each of these Funds is calculated by first determining a gross unit value, which reflects only investment performance, and then adjusting it for Fund expenses to obtain the Fund Unit Value. We determine the gross unit value by multiplying the gross unit value for the preceding business day by the net investment factor for that subsequent business day. We calculate the net investment factor as follows: o First, we take the value of the Fund's assets at the close of business on the preceding business day. o Next, we add the investment income and capital gains, realized and unrealized, that are credited to the assets of the Fund during the business day for which we are calculating the net investment factor. o Then we subtract the capital losses, realized and unrealized, charged to the Fund during that business day. o Finally, we divide this amount by the value of the Fund's assets at the close of the preceding business day. The Fund Unit Value is calculated on every business day by multiplying the Fund Unit Value for the last business day of the previous month by the net change factor for that business day. The net change factor for each business day is equal to (a) minus (b) where: (a) is the gross unit value for that business day divided by the gross unit value for the last business day of the previous month; and (b) is the charge to the Fund for that month for the daily accrual of fees and other expenses times the number of days since the end of the preceding month. HOW WE VALUE THE ASSETS OF THE FUNDS The Equity Index Fund will invest all of its assets in the SSgA S&P 500 Index Fund. The Equity Index Fund's investments in the SSgA S&P 500 Index Fund will be valued at the underlying mutual fund's net asset value per share. The asset value of the Equity Index Fund is computed on a daily basis by reference to the SSgA S&P 500 Index Fund. See the prospectus of the SSgA S&P 500 Index Fund for information on valuation methodology. The Lifecycle Funds-Conservative and Moderate will invest all of their assets in the Lifecycle Fund Group Trusts-Conservative and Moderate, respectively. The Lifecycle Trusts, in turn, will invest all of their assets in the Underlying State Street Funds. The investments made by each of the Lifecycle Funds in units of the corresponding Lifecycle Fund Group Trust will be valued at the net asset value of the units of such Lifecycle Fund Group Trust. 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 tenth of a cent. Investments made by each Lifecycle Fund Group Trust in the Underlying State Street Funds will be valued at the Underlying State Street Fund's net asset value per unit. The units of each Underlying State Street Fund are valued each business day in a manner that is similar to the method used for valuing units of the Lifecycle Fund Group Trusts daily. SAI-15 -------------------------------------------------------------------------------- The method of valuing the assets of each Underlying State Street Fund is discussed below. HOW STATE STREET VALUES THE ASSETS OF THE UNDERLYING STATE STREET FUNDS State Street values the assets of each Underlying State Street Fund, other than the STIF Fund, in the following manner on a daily basis: o STOCKS listed on a national securities exchange are valued at the last sale price. Stocks listed on the NASDAQ national market system are valued at the normalized price, which is the last traded price if it falls within the concurrent Best Bid and Offer. If it does not fall within this range, it will be the Bid (if higher) or Ask (if lower). If on a particular day there is no sale, such securities are valued at the latest available bid price reported on a composite tape. Other unlisted securities reported on the NASDAQ system are valued at inside (highest) quoted bid prices. o FOREIGN SECURITIES not traded directly, or in ADR form, in the United States, are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into dollars at current exchange rates. o UNITED STATES TREASURY SECURITIES and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. o LONG-TERM PUBLICLY TRADED CORPORATE BONDS (i.e., maturing in more than one year) are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where it is deemed appropriate to do so, an over-the-counter or exchange quotation may be used. o CONVERTIBLE PREFERRED STOCKS listed on national securities exchanges are valued at their last sale price or, if there is no sale, at the latest available bid price. o CONVERTIBLE BONDS and UNLISTED CONVERTIBLE PREFERRED STOCKS are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. o SHORT-TERM DEBT SECURITIES that mature in more than 60 days are valued at representative quoted prices. Short-term debt securities that mature in 60 days or less are valued at amortized cost, which approximates market value. State Street determines in good faith the fair values of securities and other assets that do not have a readily available market price in accordance with accepted accounting practices and applicable laws and regulations. Assets of the STIF Fund are valued at amortized cost on a daily basis. Under this method of valuation, securities purchased by the STIF Fund, such as bonds, notes, commercial paper, certificates of deposit, or other evidences of indebtedness, are recorded at original cost and adjusted daily for premium amortization or discount accretion. Use of the amortized cost method results in a value of portfolio securities that approximates the value computed by use of mark-to-market method (i.e., use of market values). Values computed under both methods approach each other the closer a debt obligation comes to maturity. In this regard, the STIF Fund will not hold debt obligations that have a remaining maturity of more than thirteen months. See discussion under Investment Options in the prospectus. TRANSACTIONS BY THE UNDERLYING STATE STREET FUNDS This section discusses the procedures followed by the Underlying State Street Funds, with respect to the buying and selling of portfolio securities for these Funds. In connections with such transactions, the Underlying State Street Funds pay brokerage commissions, transfer taxes, and other fees. SAI-16 -------------------------------------------------------------------------------- Decisions to buy or sell securities for the Underlying State Street Funds are made by State Street in accordance with the investment policies and restrictions of each Underlying State Street Fund. Such decisions are made independently of the decisions made for other entities managed by State Street. There may be occasions, however, when the same investment decision is made for more than one account advised or managed by State Street. In such cases, State Street will allocate such purchases or sales among the affected accounts in as equitable a manner as it deems possible. The principal factors State Street will take into account in making this determination are the relative investment objectives of the affected client accounts, the relative sizes of the same or comparable securities held by or on behalf of such accounts, and the availability at the time of funds in each client account to make the investment. Portfolio securities held by one State Street client also may be held by one or more of its other clients. When two or more of State Street's clients are engaged in the simultaneous purchase or sale of securities, State Street allocates the amount of each transaction in accordance with the formulae deemed to be equitable as to each client. There may be circumstances, however, when purchases or sales of portfolio securities for one or more of State Street's clients will have an adverse effect on other clients. In placing portfolio transactions for an Underlying State Street Fund, State Street will seek the best price and most favorable execution available to such Fund. In this regard, State Street will take into account all factors which it considers relevant to making this decision, including the extent of any provision of any brokerage and research services to such Fund within the meaning of Section 28(e) of the Securities Exchange Act of 1934 ("1934 Act"), viewed in terms of either that particular transaction or the broker's or dealer's overall responsibilities to the Underlying State Street Fund. State Street periodically will review the brokerage commissions paid by an Underlying State Street Fund to determine whether the commissions paid over a particular period of time were reasonable in relation to the benefits provided to such Fund. It is possible that certain of the services received from a broker or dealer in connection with the execution of transactions will primarily benefit one or more other accounts for which State Street exercises discretion, or an Underlying State Street Fund other than that for which the transaction was executed. Conversely, any given Underlying State Street Fund may be the primary beneficiary of the service received as a result of portfolio transactions effected for such other accounts or Underlying State Street Funds. The investment management fees paid to State Street are not reduced by reason of receipt of such brokerage and research services. INVESTMENT MANAGEMENT FEE SSgA Funds Management, Inc. is the investment adviser to the SSgA S&P 500 Index Fund, the underlying mutual fund in which the Equity Index Fund invests. No investment management fee was paid to SSgA Funds Management, Inc. in 2002 for its management of the SSgA S&P 500 Index Fund. However, all of the assets of the SSgA S&P 500 Index Fund are invested through a master/feeder arrangement into the State Street Equity 500 Index Portfolio. SSgA Funds Management, Inc. and its affiliates are paid a total fee of 0.045% for advisory, custody, transfer agency and administration services provided to the State Street Equity 500 Index Portfolio. UNDERWRITER AXA Advisors, LLC ("AXA Advisors"), the successor to EQ Financial Consultants, Inc. and an affiliate of Equitable Life, may be deemed to be the principal underwriter of separate account units under the group annuity contract. AXA Advisors is registered with the SEC as a broker-dealer under the 1934 Act and is a member of the National Association of Securities Dealers, Inc. AXA Advisors' principal business address is 1290 Avenue of the Americas, New York, NY 10104. The offering of the units under the contract is continuous. No underwriting commissions have been paid during any of the last three fiscal years with respect to units of interest under the contract. See "Charges and expenses" in the prospectus. No person currently serves as underwriter for the Lifecycle Fund Group Trusts or the Underlying State Street Funds. SAI-17 -------------------------------------------------------------------------------- MANAGEMENT: EQUITABLE LIFE We are managed by a Board of Directors which is elected by our shareholder(s). Our directors and certain of our executive officers and their principal occupations are as follows. Unless otherwise indicated, the following persons have been involved in the management of Equitable and/or its affiliates in various executive positions during the last five years.
DIRECTOR'S NAME AGE PRINCIPAL OCCUPATION --------------- --- -------------------- Francoise Colloc'h 59 Member of the AXA Management Board and Group Executive Vice President of AXA. Henri de Castries 48 Chairman of the Board, AXA Financial, Inc.; Chairman of the Management Board of AXA. Claus-Michael Dill 49 Chairman of the Management Board of AXA Konzern AG; prior thereto, member of the Holding Management Board of Gerling-Konzern in Cologne. Joseph L. Dionne 69 Retired Chairman and Chief Executive Officer, The McGraw-Hill Companies. Denis Duverne 49 Executive Vice President, AXA; member, AXA Executive Committee; Member, AXA Management Board. Jean-Rene Fourtou 63 Chairman and Chief Executive Officer, Vivendi Universal and Vice Chairman of the Supervisory Board, Aventis; prior thereto, Chairman and Chief Executive Officer, Rhone-Poulenc, S.A. Donald J. Greene 69 Of Counsel, LeBoeuf, Lamb, Greene & MacRae; prior thereto, Partner of the firm. Mary (Nina) Henderson 52 Retired Corporate Vice President, Core Business Development of Bestfoods (formerly CPC International, Inc.); prior thereto, Vice President and President, Bestfoods Grocery. W. Edwin Jarmain 64 President, Jarmain Group Inc. Peter J. Tobin 59 Dean, Peter J. Tobin College of Business, St. John's University; prior thereto, Chief Financial Officer, Chase Manhattan Corp. Bruce W. Calvert 56 Chairman and Chief Executive Officer, Alliance Capital Management Corporation. John C. Graves 39 President and Chief Operating Officer, Graves Ventures, LLC. James F. Higgins 55 Senior Advisor, Morgan Stanley. Christina Johnson 52 President and Chief Executive Officer, Saks Fifth Avenue Enterprises. Scott D. Miller 50 President, Hyatt Hotels Corporation. Joseph H. Moglia 53 Chief Executive Officer, Ameritrade Holding Corporation.
SAI-18 --------------------------------------------------------------------------------
OFFICER-DIRECTORS NAME AGE PRINCIPAL OCCUPATION ---------------------- --- -------------------- Christopher M. Condron 55 Director, Chairman of the Board, President and Chief Executive Officer, Equitable Life and AXA Financial Services, LLC; Director, President and Chief Executive Officer, AXA Financial, Inc., Director, Chairman of the Board, President and Chief Executive Officer, The Equitable of Colorado, Inc.; prior thereto, President and Chief Operating Officer, Mellon Financial Corporation and Chairman and Chief Executive Officer, Dreyfus Corp. Stanley B. Tulin 53 Vice Chairman of the Board and Chief Financial Officer of Equitable Life, AXA Financial, Inc. and AXA Financial Services, LLC; Executive Vice President and Member of the Executive Committee of AXA; prior thereto, Chairman of the Insurance Consulting and Actuarial Practice of Coopers & Lybrand, L.L.P. Leon B. Billis 56 Executive Vice President and AXA Group Deputy Chief Information Officer, Equitable Life and AXA Financial Services, LLC; Director, Chief Executive Officer and President of AXA Technology Services of America, Inc. Harvey Blitz 57 Senior Vice President, Equitable Life, AXA Financial, Inc. and AXA Financial Services, LLC; Director and Executive Vice President, AXA Advisors, LLC. Kevin R. Byrne 47 Senior Vice President and Treasurer, Equitable Life, AXA Financial, Inc., AXA Financial Services, LLC and The Equitable of Colorado, Inc. Judy A. Faucett 54 Senior Vice President of Equitable Life and AXA Financial Services, LLC. Alvin H. Fenichel 58 Senior Vice President and Controller of Equitable Life, AXA Financial, Inc. and AXA Financial Services, LLC. Paul J. Flora 56 Senior Vice President and Auditor of Equitable Life, AXA Financial, Inc. and AXA Financial Services, LLC. Donald R. Kaplan 48 Senior Vice President, Chief Compliance Officer and Associate General Counsel of Equitable Life and AXA Financial Services, LLC. Richard J. Matteis 66 Executive Vice President of Equitable Life and AXA Financial Services, LLC; prior thereto, Executive Vice President of Chase Manhattan Corp. Peter D. Noris 47 Executive Vice President and Chief Investment Officer of Equitable Life, AXA Financial, Inc. and AXA Financial Services, LLC; President and Trustee of EQ Advisors Trust; Executive Vice President and Chief Investment Officer of The Equitable of Colorado, Inc. Anthony C. Pasquale 55 Senior Vice President of Equitable Life and AXA Financial Services, LLC. Pauline Sherman 59 Senior Vice President, Secretary and Associate General Counsel of Equitable Life, AXA Financial, Inc., AXA Financial Services, LLC; and The Equitable of Colorado, Inc.
SAI-19 --------------------------------------------------------------------------------
OFFICER-DIRECTORS NAME AGE PRINCIPAL OCCUPATION ---------------------- --- -------------------- Richard V. Silver 47 Executive Vice President and General Counsel, Equitable Life, AXA Financial, Inc., AXA Financial Services, LLC and The Equitable of Colorado, Inc.; Director, AXA Advisors, LLC. Jennifer L. Blevins 45 Executive Vice President, Equitable Life and AXA Financial Services, LLC; prior thereto, Senior Vice President and Managing Director, Worldwide Human Resources, Chubb & Son, Inc. Selig Ehrlich 42 Executive Vice President and Chief Actuary, Equitable Life and AXA Financial Services, LLC; prior thereto, Chief Actuary, Senior Vice President and Deputy General Manager, Equitable Life. MaryBeth Farrell 45 Executive Vice President, Equitable Life and AXA Financial Services, LLC; prior thereto, Controller and Senior Vice President, GreenPoint Financial/GreenPoint Bank. Stuart L. Faust 50 Senior Vice President and Deputy General Counsel, Equitable Life, AXA Financial, Inc. and AXA Financial Services, LLC. John M. Lefferts 45 Executive Vice President and President of Retail Distribution, Equitable Life and AXA Financial Services, LLC; Director and Executive Vice President, The Equitable of Colorado, Inc. and Director, President and Chief Executive Officer, AXA Advisors, LLC. William I. Levine 59 Executive Vice President and Chief Information Officer, Equitable Life and AXA Financial Services, LLC; prior thereto, Senior Vice President, Paine Webber. Deanna M. Mulligan 39 Executive Vice President, Equitable Life and AXA Financial Services, LLC; prior thereto, Principal, McKinsey and Company, Inc. Jerald E. Hampton 48 Executive Vice President, Equitable Life and AXA Financial Services, LLC; Director and Vice Chairman of the Board, AXA Advisors, LLC; Director, Chairman and CEO, AXA Network, LLC; Director and Chairman of the Board of AXA Distributors, LLC; prior thereto, Executive Vice President and Director of the Private Client Financial Services Division, Salomon Smith Barney. Charles A. Marino 44 Senior Vice President and Actuary, Equitable Life and AXA Financial Services, LLC; prior thereto, Vice President of Equitable Life.
SAI-20 -------------------------------------------------------------------------------- MANAGEMENT: STATE STREET State Street is managed by its sole shareholder, State Street Corporation. Its directors and certain of its executive officers and their principal occupations are as follows:
DIRECTOR'S NAME PRINCIPAL OCCUPATION --------------- -------------------- Tenley E. Albright, M.D. Chairman, Western Resources, Inc. I. MacAllister Booth Retired Chairman, President and CEO, Polaroid Corporation Truman S. Casner, Esquire Of Counsel, Ropes & Gray Nader F. Darehshori Retired Chairman, President and CEO, Houghton Mifflin Company Arthur L. Goldstein Chairman and CEO, Ionics, Incorporated David P. Gruber Retired Chairman and CEO, Wyman-Gordon Company Linda A. Hill Wallace Brett Donham Professor of Business Administration, Harvard Business School Charles R. LaMantia Retired Chairman and CEO, Arthur D. Little, Inc. Ronald E. Logue President and Chief Operating Officer, State Street Corporation Dennis J. Picard Chairman Emeritus, Raytheon Company Alfred Poe Private Investor Richard P. Sergel President and CEO, National Grid USA Ronald L. Skates Private Investor David A. Spina Chairman and Chief Executive Officer, State Street Corporation Gregory L. Summe Chairman, President, and Chief Executive Officer, PerkinElmer, Inc. Diana Chapman Walsh President, Wellesley College Robert E. Weissman Chairman, Shelburne Investments
SAI-21 --------------------------------------------------------------------------------
OTHER OFFICERS NAMES PRINCIPAL OCCUPATION* -------------------- --------------------- Maureen Scannell Bateman Executive Vice President and General Counsel Stefan Gavell Executive Vice President and Treasurer Timothy B. Harbert Executive Vice President, Chairman and CEO, State Street Global Advisors Edward J. Resch Executive Vice President and Chief Financial Officer John R. Towers Vice Chairman
---------- * All positions are with State Street Bank and Trust Company. SAI-22 -------------------------------------------------------------------------------- FINANCIAL STATEMENTS The financial statements of Equitable Life included in this Statement of Additional Information should be considered only as bearing upon the ability of Equitable Life to meet its obligations under the group annuity contract. They should not be considered as bearing upon the investment experience of the Separate Account Nos. 195, 197 and 198 or the Underlying Funds. The financial statements of Separate Account Nos. 195, 197 and 198 reflect applicable fees, charges and other expenses under the Program as in effect during the periods covered. SEPARATE ACCOUNT NOS. 195, 197 AND 198: Report of Independent Accountants .................................................. SAI-28 Separate Account No. 195 (Equity Index Fund): Statement of Assets and Liabilities, December 31, 2002 ............................. SAI-29 Statement of Operations for Year Ended December 31, 2002 ........................... SAI-30 Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 . SAI-31 Separate Account No. 197 (Lifecycle Fund -- Conservative): Statement of Assets and Liabilities, December 31, 2002 ............................. SAI-32 Statement of Operations for Year Ended December 31, 2002 ........................... SAI-33 Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 . SAI-34 Separate Account No. 198 (Lifecycle Fund -- Moderate): Statement of Assets and Liabilities, December 31, 2002 ............................. SAI-35 Statement of Operations for Year Ended December 31, 2002 ........................... SAI-36 Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 . SAI-37 Separate Account Nos. 195, 197 and 198: Notes to Financial Statements ...................................................... SAI-38
The financial statements for each of the Underlying Funds reflect charges for operating expenses, but do not include any investment management, Program or other charges imposed against the respective assets of the Lifecycle Funds and Lifecycle Fund Group Trusts. The financial statements of the Underlying Funds do, however, indirectly reflect any investment management fees and other charges paid by the entities in which the Underlying Fund invest. STATE STREET BANK AND TRUST COMPANY -- LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Report of Independent Accountants .................................................... SAI-42 Lifecycle Fund Group Trust -- Conservative: Statement of Assets and Liabilities, December 31, 2002 ............................... SAI-43 Statement of Operations for Year Ended December 31, 2002 ............................. SAI-44 Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 .... SAI-45 Selected Per Unit Data ............................................................... SAI-47 Schedule of Investments .............................................................. SAI-48 Notes to Financial Statements ........................................................ SAI-49 STATE STREET BANK AND TRUST COMPANY -- LIFECYCLE FUND GROUP TRUST -- MODERATE Report of Independent Accountants .................................................... SAI-51 Lifecycle Fund Group Trust -- Moderate: Statement of Assets and Liabilities, December 31, 2002 ............................... SAI-52 Statement of Operations for the Year Ended December 31, 2002 ......................... SAI-53 Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 .... SAI-54 Selected Per Unit Data ............................................................... SAI-56 Schedule of Investments .............................................................. SAI-57 Notes to Financial Statements ........................................................ SAI-58 STATE STREET BANK AND TRUST COMPANY -- UNDERLYING FUNDS FLAGSHIP FUND Report of Independent Accountants .................................................... SAI-60 S&P 500 Flagship Fund and S&P 500 Flagship Non-Lending Fund: Combined Statement of Assets and Liabilities, December 31, 2002 ...................... SAI-61
SAI-23 -------------------------------------------------------------------------------- Combined Statement of Operations for the Year Ended December 31, 2002 ................ SAI-62 Combined Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 .............................................................................. SAI-63 S&P 500 Flagship Fund Selected Per Unit Data ......................................... SAI-65 S&P 500 Flagship Non-Lending Fund Selected Per Unit Data ............................. SAI-66 Combined Schedule of Investments, December 31, 2002 .................................. SAI-67 Notes to Combined Financial Statements ............................................... SAI-81 RUSSELL 2000 FUND Report of Independent Accountants .................................................... SAI-84 Russell 2000 Index Securities Lending Fund and Russell 2000 Index Fund: Combined Statement of Asset and Liabilities, December 31, 2002 ....................... SAI-85 Combined Statement of Operations for the Year Ended December 31, 2002 ................ SAI-86 Combined Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 .............................................................................. SAI-87 Russell 2000 Index Securities Lending Fund Selected Per Unit Data .................... SAI-89 Russell 2000 Index Fund Selected Per Unit Data ....................................... SAI-90 Combined Schedule of Investments ..................................................... SAI-91 Notes to Combined Financial Statements ............................................... SAI-137
The financial statements for the Russell 2000 Fund reflect direct investments made by this Fund in shares of companies included in the Russell 2000 Index. Beginning February 1, 1995, this Fund has invested in units of Russell 2000 Value and Growth Funds, which in turn invest in shares of companies included in the Russell 2000 Index. Beginning June 17, 1996, the Fund began making direct investment again. DAILY EAFE FUND Report of Independent Accountants .................................................... SAI-140 Daily EAFE Fund: Statement of Assets and Liabilities, December 31, 2002 ............................... SAI-141 Statement of Operations for the Year Ended December 31, 2002 ......................... SAI-142 Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 .... SAI-143 Selected Per Unit Data ............................................................... SAI-145 Schedule of Investments .............................................................. SAI-146 Notes to Financial Statements ........................................................ SAI-147 DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Report of Independent Accountants .................................................... SAI-150 Daily MSCI Europe Index Securities Lending Fund and Daily MSCI Europe Index Fund: Combined Statement of Assets and Liabilities, December 31, 2002 ...................... SAI-151 Combined Statement of Operations for the Year Ended December 31, 2002 ................ SAI-152 Combined Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 .............................................................................. SAI-153 Daily MSCI Europe Index Securities Lending Fund Selected Per Unit Data ............... SAI-155 Daily MSCI Europe Index Fund Selected Per Unit Data .................................. SAI-156 Combined Schedule of Investments ..................................................... SAI-157 Notes to Combined Financial Statements ............................................... SAI-172 DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Report of Independent Accountants .................................................... SAI-176 Daily MSCI Japan Index Securities Lending Fund and Daily MSCI Japan Index Fund Combined Statement of Assets and Liabilities, December 31, 2002 ...................... SAI-177 Combined Statement of Operations for the Year Ended December 31, 2002 ................ SAI-178
SAI-24 -------------------------------------------------------------------------------- Combined Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 ............................................................................ SAI-179 Daily MSCI Japan Index Securities Lending Fund Selected Per Unit Data ................ SAI-181 Daily MSCI Japan Index Fund Selected Per Unit Data ................................... SAI-182 Combined Schedule of Investments ..................................................... SAI-183 Notes to Combined Financial Statements ............................................... SAI-192 DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Report of Independent Accountants .................................................... SAI-196 Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund Daily MSCI Pacific Basin ex-Japan Index Fund Combined Statement of Assets and Liabilities, December 31, 2002 ...................... SAI-197 Combined Statement of Operations for the Year Ended December 31, 2002 ................ SAI-198 Combined Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 ............................................................................. SAI-199 Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund Selected Per Unit Data SAI-201 Daily MSCI Pacific Basin ex-Japan Index Fund Selected Per Unit Data .................. SAI-202 Combined Schedule of Investments ..................................................... SAI-203 Notes to Combined Financial Statements ............................................... SAI-209 GOVERNMENT CORPORATE BOND FUND Report of Independent Accountants .................................................... SAI-213 Government Corporate Bond Fund: Statement of Assets and Liabilities, December 31, 2002 ............................... SAI-214 Statement of Operations for the Year Ended December 31, 2002 ......................... SAI-215 Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 .... SAI-216 Selected Per Unit Data ............................................................... SAI-218 Schedule of Investments, December 31, 2001 ........................................... SAI-219 Notes to Financial Statements ........................................................ SAI-221 GOVERNMENT FUND Report of Independent Accountants .................................................... SAI-225 Government Fund Statement of Assets and Liabilities, December 31, 2002 ............................... SAI-226 Statement of Operations for Year ended December 31, 2002 ............................. SAI-227 Statement of Changes in Net Assets for the Years ended December 31, 2002 and 2001 .... SAI-228 Statement of Cash Flows for the Year ended December 31, 2002 ......................... SAI-230 Selected per Unit Data ............................................................... SAI-231 Schedule of Investments December 31, 2002 ............................................ SAI-232 Notes to Financial Statements ........................................................ SAI-235 LIMITED DURATION BOND FUND Report of Independent Accountants .................................................... SAI-240 Limited Duration Bond Fund Statement of Assets and Liabilities, December 31, 2002 ............................... SAI-241 Statement of Operations for Year ended December 31, 2002 ............................. SAI-242 Statement of Changes in Net Assets for the Year ended December 31, 2002 .............. SAI-243 Selected per Unit Data ............................................................... SAI-245 Schedule of Investments December 31, 2002 ............................................ SAI-246 Notes to Financial Statements ........................................................ SAI-251 INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Report on Independent Accountants .................................................... SAI-255
SAI-25 -------------------------------------------------------------------------------- Intermediate Corporate Index Securities Lending Fund Intermediate Corporate Index Fund Combined Statement of Assets and Liabilities, December 31, 2002 ...................... SAI-256 Combined Statement of Operations for Year ended December 31, 2002 .................... SAI-257 Combined Statement of Changes in Net Assets for the Years ended December 31, 2002 and 2001 ............................................................................. SAI-258 Intermediate Corporate Index Securities Lending Fund Selected per Unit Data .......... SAI-260 Intermediate Corporate Index Fund Selected Per Unit Data ............................. SAI-261 Combined Schedule of Investments December 31, 2002 ................................... SAI-262 Notes to Combined Financial Statements ............................................... SAI-296 PASSIVE 1-3 YEAR CREDIT INDEX FUND Report of Independent Accountants .................................................... SAI-298 Passive 1-3 Year Credit Index Fund Statement of Assets and Liabilities, December 31, 2002 ............................... SAI-299 Statement of Operations for Year ended December 31, 2002 ............................. SAI-300 Statement of Changes in Net Assets for the Year ended December 31, 2002 .............. SAI-301 Selected per Unit Data ............................................................... SAI-303 Schedule of Investments December 31, 2002 ............................................ SAI-304 Notes to Financial Statements ........................................................ SAI-317 LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Report of Independent Accountants .................................................... SAI-319 Long Corporate Index Securities Lending Fund Long Corporate Index Fund Combined Statement of Assets and Liabilities, December 31, 2002 ...................... SAI-320 Combined Statement of Operations for Year ended December 31, 2002 .................... SAI-321 Combined Statement of Changes in Net Assets for the Years ended December 31, 2002 and 2001 ............................................................................. SAI-322 Long Corporate Index Securities Lending Fund Selected per Unit Data .................. SAI-324 Long Corporate Index Fund Selected per Unit Data ..................................... SAI-325 Combined Schedule of Investments December 31, 2002 ................................... SAI-326 Notes to Combined Financial Statements ............................................... SAI-346 STIF FUND Report of Independent Accountants .................................................... SAI-348 Short Term Investment Fund: Statement of Assets and Liabilities, December 31, 2002 ............................... SAI-349 Statement of Operations for the Year Ended December 31, 2002 ......................... SAI-350 Statement of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 .... SAI-351 Selected Per Unit Data ............................................................... SAI-353 Schedule of Investments, December 31, 2002 ........................................... SAI-354 Notes to Financial Statements ........................................................ SAI-359 The Equitable Life Assurance Society of the United States Report of Independent Accountants .................................................... F-1 Consolidated Balance Sheets, December, 2002 and 2001 ................................. F-2 Consolidated Statements of Earnings for the Year Ended December 31, 2002, 2001 and 2000 ............................................................................ F-3 Consolidated Statements of Shareholders' Equity and Comprehensive Income for the Years Ended December 31, 2002, 2001 and 2000 .................................... F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000 ............................................................................ F-5 Notes to Consolidated Financial Statements ........................................... F-6
SAI-26 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of The Equitable Life Assurance Society of the United States and the Contractowners of Separate Account Nos. 195, 197 and 198 of The Equitable Life Assurance Society of the United States In our opinion, the accompanying statements of assets and liabilities and related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of Separate Account Nos. 195 (The Equity Index Fund), 197 (The Lifecycle Fund -- Conservative), and 198 (The Lifecycle Fund -- Moderate) of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 2002, and the results of each of their operations for the year then ended and the changes in each of their net assets for each of the two years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of shares owned at December 31, 2002 with the underlying mutual funds, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP New York, New York February 4, 2003 SAI-27 -------------------------------------------------------------------------------- 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, 2002 ------------------------------------------------------------------------------------------ ASSETS: Investments in 7,401,602 shares of The SSgA S&P 500 Index Fund -- at value (cost: $161,023,371) (Notes 2 and 4)..................................... $107,476,615 Due from Equitable Life's General Account ................................ 79,363 ------------------------------------------------------------------------------------------ Total assets ............................................................. 107,555,978 ------------------------------------------------------------------------------------------ LIABILITIES: Due to Custodian ......................................................... 4,819 Accrued expenses ......................................................... 115,426 ------------------------------------------------------------------------------------------ Total liabilities ........................................................ 120,245 ------------------------------------------------------------------------------------------ NET ASSETS ............................................................... $107,435,733 ========================================================================================== ADA Units Outstanding .................................................... 5,579,732 ADA Unit Value ........................................................... $ 19.25
The accompanying notes are an integral part of these financial statements. SAI-28 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 195 (THE EQUITY INDEX FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations YEAR ENDED DECEMBER 31, 2002 ----------------------------------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 2): Dividends from The SSgA S&P 500 Index Fund ............................................... $ 1,496,339 ----------------------------------------------------------------------------------------------------------- EXPENSES (NOTE 3): Administration fees and program expense charge ........................................... (983,894) Operating expenses ....................................................................... (206,985) ----------------------------------------------------------------------------------------------------------- Total expenses ........................................................................... (1,190,879) ----------------------------------------------------------------------------------------------------------- Net investment income .................................................................... 305,460 ----------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Net realized loss from share transactions ................................................ (3,503,727) Change in unrealized appreciation/depreciation of investments ............................ (29,849,086) ----------------------------------------------------------------------------------------------------------- Net realized and unrealized loss on investments .......................................... (33,352,813) ----------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS ATTRIBUTABLE TO OPERATIONS .................................... $ (33,047,353) ===========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-29 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 195 (THE EQUITY INDEX FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Changes in Net Assets --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2002 2001 ---------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income ..................................................... $ 305,460 $ 654,678 Net realized loss on investments .......................................... (3,503,727) (3,733,043) Change in unrealized appreciation/depreciation of investments ............. (29,849,086) (18,647,160) ---------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to operations ..................... (33,047,353) (21,725,525) ---------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ............................................................. 37,882,899 36,438,217 Withdrawals ............................................................... (38,564,580) (38,684,612) ---------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to contributions and withdrawals .. (681,681) (2,246,395) ---------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS .................................................... (33,729,034) (23,971,920) NET ASSETS -- BEGINNING OF YEAR ........................................... 141,164,767 165,136,687 ---------------------------------------------------------------------------------------------------------------- NET ASSETS -- END OF YEAR ................................................. $ 107,435,733 $ 141,164,767 ================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-30 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 197 (THE LIFECYCLE FUND -- CONSERVATIVE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities DECEMBER 31, 2002 -------------------------------------------------------------------------------------------------------- ASSETS: Investments in 907,573 shares of The Lifecycle Fund Group Trust, Conservative -- at value (cost: $13,931,146) (Notes 2 and 4)..................................................... $14,326,948 Cash .................................................................................... 59,528 -------------------------------------------------------------------------------------------------------- Total assets ............................................................................ 14,386,476 -------------------------------------------------------------------------------------------------------- LIABILITIES: Due to Equitable Life's General Account ................................................. 49,888 Accrued expenses ........................................................................ 45,544 -------------------------------------------------------------------------------------------------------- Total liabilities ....................................................................... 95,432 -------------------------------------------------------------------------------------------------------- NET ASSETS .............................................................................. $14,291,044 ======================================================================================================== ADA Units Outstanding ................................................................... 1,014,946 ADA Unit Value .......................................................................... $ 14.08
The accompanying notes are an integral part of these financial statements. SAI-31 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 197 (THE LIFECYCLE FUND -- CONSERVATIVE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations YEAR ENDED DECEMBER 31, 2002 -------------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 2): Dividends from The Lifecycle Fund Group Trust -- Conservative ......... $ -- -------------------------------------------------------------------------------------- EXPENSES (NOTE 3): Administration fees and program expense charge ........................ (106,443) Operating expenses .................................................... (63,812) -------------------------------------------------------------------------------------- Total expenses ........................................................ (170,255) -------------------------------------------------------------------------------------- Net investment loss ................................................... (170,255) -------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Net realized gain from share transactions ............................. 365,644 Change in unrealized appreciation/depreciation of investments ......... (394,429) -------------------------------------------------------------------------------------- Net realized and unrealized loss on investments ....................... (28,785) -------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS ATTRIBUTABLE TO OPERATIONS ................. $ (199,040) ======================================================================================
The accompanying notes are an integral part of these financial statements. SAI-32 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 197 (THE LIFECYCLE FUND -- CONSERVATIVE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Changes in Net Assets --------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment loss ....................................................... $ (170,255) $ (148,968) Net realized gain on investments .......................................... 365,644 208,985 Change in unrealized appreciation/depreciation of investments ............. (394,429) (94,006) --------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to operations ..................... (199,040) (33,989) --------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ............................................................. 8,984,510 2,582,296 Withdrawals ............................................................... (6,411,935) (2,194,217) --------------------------------------------------------------------------------------------------------------- Net increase in net assets attributable to contributions and withdrawals .. 2,572,575 388,079 --------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS .................................................... 2,373,535 354,090 NET ASSETS -- BEGINNING OF YEAR ........................................... 11,917,509 11,563,419 --------------------------------------------------------------------------------------------------------------- NET ASSETS -- END OF YEAR ................................................. $ 14,291,044 $ 11,917,509 =============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-33 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 198 (THE LIFECYCLE FUND -- MODERATE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Assets and Liabilities DECEMBER 31, 2002 -------------------------------------------------------------------------------- ASSETS: Investments in 5,501,128 shares of The Lifecycle Fund Group Trust, Moderate -- at value (cost: $84,057,581) (Notes 2 and 4)..................................................... $90,031,463 Cash .................................................................................... 109,846 ------------------------------------------------------------------------------------------------------- Total assets ............................................................................ 90,141,309 ------------------------------------------------------------------------------------------------------- LIABILITIES: Due to Equitable Life's General Account ................................................. 49,527 Accrued expenses ........................................................................ 303,080 ------------------------------------------------------------------------------------------------------- Total liabilities ....................................................................... 352,607 ------------------------------------------------------------------------------------------------------- NET ASSETS .............................................................................. $89,788,702 ======================================================================================================= ADA Units Outstanding ................................................................... 5,937,466 ADA Unit Value .......................................................................... $ 15.12
The accompanying notes are an integral part of these financial statements. SAI-34 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 198 (THE LIFECYCLE FUND -- MODERATE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations YEAR ENDED DECEMBER 31, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 2): Dividends from The Lifecycle Fund Group Trust -- Moderate ............. $ -- ---------------------------------------------------------------------------------------- EXPENSES (NOTE 3): Administration fees and program expense charge ........................ (782,188) Operating expenses .................................................... (203,915) ---------------------------------------------------------------------------------------- Total expenses ........................................................ (986,103) ---------------------------------------------------------------------------------------- Net investment loss ................................................... (986,103) ---------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Net realized gain from share transactions ............................. 4,801,444 Change in unrealized appreciation/depreciation of investments ......... (14,685,613) ---------------------------------------------------------------------------------------- Net realized and unrealized loss on investments ....................... (9,884,169) ---------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS ATTRIBUTABLE TO OPERATIONS ................. $ (10,870,272) ========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-35 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 198 (THE LIFECYCLE FUND -- MODERATE) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Changes in Net Assets ----------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2002 2001 ----------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment loss ....................................................... $ (986,103) $ (1,080,847) Net realized gain on investments .......................................... 4,801,444 5,755,535 Change in unrealized appreciation/depreciation of investments ............. (14,685,613) (11,223,957) ----------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to operations ..................... (10,870,272) (6,549,269) ----------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ............................................................. 16,370,925 9,152,062 Withdrawals ............................................................... (22,162,900) (18,672,929) ----------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to contributions and withdrawals .. (5,791,975) (9,520,867) ----------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS .................................................... (16,662,247) (16,070,136) NET ASSETS -- BEGINNING OF YEAR ........................................... 106,450,949 122,521,085 ----------------------------------------------------------------------------------------------------------------- NET ASSETS -- END OF YEAR ................................................. $ 89,788,702 $ 106,450,949 =================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-36 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements -------------------------------------------------------------------------------- 1. GENERAL Separate Account Nos. 195 (the Equity Index Fund), 197 (the Lifecycle Fund -- Conservative) and 198 (the Lifecycle Fund -- Moderate) (collectively the Funds) of the Equitable Life Assurance Society of the United States (Equitable Life), a wholly-owned subsidiary of AXA Financial, Inc., were established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the contracts, the net assets in the Funds are not chargeable with liabilities arising out of any other business of Equitable Life. Separate Account No. 195 was established as of the opening of business on February 1, 1994 and Separate Account Nos. 197 and 198 were established as of the opening of business on May 1, 1995 to solely fund the American Dental Association Members Retirement Trust and the American Dental Association Members Pooled Trust for Retirement Plans (Trusts) sponsored by the American Dental Association (ADA). Equitable Life is the investment manager for the Funds. Separate Account No. 195 invests its assets in shares of the SSgA S&P 500 Index Fund, a portfolio of the SSgA Funds, which is registered under the Investment Company Act of 1940 as an open-end management investment company. The investment manager of the SSgA S&P 500 Index Fund is State Street Bank and Trust Company (State Street). Separate Account Nos. 197 and 198 invest their assets in shares of the Lifecycle Fund Group Trusts -- Conservative and Moderate, respectively. The Lifecycle Funds Group Trusts are collective investment funds maintained by State Street. Each Lifecycle Fund Group is organized as a common law trust under Massachusetts Law, and, because of exclusionary provisions, is not subject to regulation under the Investment Company Act of 1940. State Street serves as the trustee and investment manager to each of these Group Trusts. 2. SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. On November 21, 2000, the American Institute of Certified Public Accountants issued a revised Audit and Accounting Guide "Audits of Investment Companies" (the "Guide"), which was effective for the December 31, 2001 financial statements. Adoption of the requirements of the Guide did not have a significant impact on the Funds' financial position or results of operations. Investments: Realized gains and losses on investments include gains and losses on redemptions of the underlying fund's shares (determined on the identified cost basis) and capital gain distributions from the underlying funds. Dividends and realized gain distributions from underlying funds are recorded on the ex-dividend date. Investments in the SSgA S&P 500 Index Fund and the Lifecycle Fund Group Trusts -- Conservative and Moderate, respectively, are valued at the underlying mutual fund's or trust's net asset value per share. Amounts due to/from the General Account represent receivables/payables for policy related transactions predominately related to premiums, surrenders and death benefits. SAI-37 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- 3. EXPENSES Charges and fees related to the Funds are deducted in accordance with the terms of the various contracts which participate in the Funds and with respect to the American Dental Association Members Retirement Program as follows: Program Expense Charge: In the year prior to May 1, 2002 the expense charge was made on the combined value of all investment options maintained under the contract with Equitable Life at a monthly rate of 1/12 of (i) 0.645 of 1% of the first $400 million and (ii) 0.640 of 1% of the excess over $400 million. Effective May 1, 2002 an expense charge is made on the combined value of all investment options maintained under the contract with Equitable Life at a monthly rate of 1/12 of (i) 0.655 of 1% of the first $400 million and (ii) 0.650 of 1% of the excess over $400 millon. A portion of the Program Expense Charge assessed by Equitable Life is made on behalf of the ADA and is equal to a monthly rate of 1/12 for (i) 0.025 of 1% of the first $400 million and (ii) 0.020 of 1% of the excess over $400 million. The ADA's portion of the Program Expense Charge is 0.00% and 0.01% for 2002 and 2001, respectively, and may be increased for all asset value levels. Administration Fees: Equitable Life receives a fee based on the value of the Funds at a monthly rate of 1/12 of 0.15 of 1% of their respective ADA Program assets. Operating Expenses: In addition to the charges and fees mentioned above, the Funds are charged for certain costs and expenses directly related to its operations. These may include transfer taxes, SEC filing fees and certain related expenses including printing of SEC filings, prospectuses and reports. A record maintenance and report fee of $3 is deducted quarterly from each participant's aggregate account balance. For clients with Investment Only plans, a record maintenance fee of $1 is deducted quarterly. 4. PURCHASES AND SALES ON INVESTMENTS For the year ended December 31, 2002, the cost of purchases and proceeds of sales on investment transactions were as follows for Separate Account Nos. 195, 197 and 198: PURCHASES SALES -------------- -------------- The Equity Index Fund $16,454,718 $16,840,978 The Lifecycle Fund - Conservative 7,182,688 4,782,996 The Lifecycle Fund - Moderate 7,910,046 14,663,681 SAI-38 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- 5. TAXES 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. 6. CHANGES IN UNITS OUTSTANDING Accumulation units issued and redeemed during the periods indicated were (in thousands): YEAR ENDED DECEMBER 31, ------------------------- 2002 2001 ----------- ----------- THE EQUITY INDEX FUND Issued 1,724 1,359 Redeemed (1,783) (1,466) ------ ------ Net Decrease (59) (107) ------ ------ THE LIFECYCLE FUND - CONSERVATIVE Issued 633 180 Redeemed (449) (153) ------ ------ Net Increase 184 27 ------ ------ THE LIFECYCLE FUND - MODERATE Issued 1,024 530 Redeemed (1,421) (1,102) ------ ------ Net Decrease (397) (572) ------ ------ 7. INVESTMENT INCOME RATIO Shown below is the investment income ratio throughout the periods indicated for Separate Account Nos. 195, 197 and 198. These amounts represent the dividends, excluding distributions of capital gains, received by the Funds from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as asset-based charges, that result in direct reductions in the unit value. The recognition of investment income by the Funds is affected by the timing of the declaration of dividends by the underlying mutual fund in which the Funds invest.
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 2002 2001 2000 1999 1998 ---------- ---------- ---------- ---------- ---------- The Equity Index Fund 1.22% 1.37% 1.16% 1.52% 1.71% The Lifecycle Fund - Conservative -- -- -- -- -- The LIfecycle Fund - Moderate -- -- -- -- --
SAI-39 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NOS. 195, 197 AND 198 OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) -------------------------------------------------------------------------------- 8. ACCUMULATION UNIT VALUES Shown below is accumulation unit value information for American Dental Association Members Retirement Program units outstanding of Separate Account Nos. 195, 197 and 198. The unit values presented reflect charges for administrative fees, program expenses and certain operating expenses. The fees are charged as a percentage of net assets and are disclosed below in percentage terms. Expenses as a percentage of average net assets excludes charges made directly to contractholder accounts through redemption of units.
YEAR ENDED DECEMBER 31, ----------------------------- 2002 2001 ------------- ------------- THE EQUITY INDEX FUND, .97% Unit Value, end of period $ 19.25 $ 25.03 Net Assets (000's) $107,436 $141,165 Number of units outstanding, end of period (000's) 5,580 5,639 Total Return (23.09)% (12.91)% THE LIFECYCLE FUND - CONSERVATIVE, 1.26% Unit Value end of period $ 14.08 $ 14.34 Net Assets (000's) $ 14,291 $ 11,918 Number of units outstanding, end of period (000's) 1,015 831 Total Return (1.81)% (0.28)% THE LIFECYCLE FUND - MODERATE, 1.00% Unit Value, end of period $ 15.12 $ 16.81 Net Assets (000's) $ 89,789 $106,451 Number of units outstanding, end of period (000's) 5,937 6,334 Total Return (10.05)% (5.24)%
SAI-40 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Lifecycle Fund Group Trust -- Conservative In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Lifecycle Fund Group Trust -- Conservative at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 21, 2003 SAI-41 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Statement of Assets and Liabilities DECEMBER 31, 2002 ------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $13,911,358)......................................................... $14,375,658 Interest receivable ........................................................ 3,923 ------------------------------------------------------------------------------------------- Total assets .............................................................. 14,379,581 ------------------------------------------------------------------------------------------- LIABILITIES Payable for Fund units redeemed ............................................ 49,888 Accrued expenses ........................................................... 3,116 ------------------------------------------------------------------------------------------- Total liabilities ......................................................... 53,004 ------------------------------------------------------------------------------------------- Net assets (equivalent to $15.79 per unit based on 907,573 outstanding) $14,326,577 ===========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-42 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Statement of Operations YEAR ENDED DECEMBER 31, 2002 ---------------------------------------------------------------------------------------- INVESTMENT INCOME Interest ................................................................ $ 53,722 Securities lending fee income (net of related expenses) ................. 612 ---------------------------------------------------------------------------------------- Total investment income ............................................... 54,334 ---------------------------------------------------------------------------------------- EXPENSES Management .............................................................. 23,757 Administration .......................................................... 12,000 Audit ................................................................... 4,500 Other ................................................................... 750 ---------------------------------------------------------------------------------------- Total expenses ........................................................ 41,007 ---------------------------------------------------------------------------------------- Net investment income (loss) .......................................... 13,327 ---------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................... 216,433 ---------------------------------------------------------------------------------------- 216,433 ---------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................... (258,958) ---------------------------------------------------------------------------------------- (258,958) ---------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ............................... (42,525) ---------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ......... $ (29,198) ========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-43 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE
Statements of Changes in Net Assets YEAR ENDED DECEMBER 31, 2002 2001 ---------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ..................................................... $ 13,327 $ 66,608 Net realized gain (loss) ......................................................... 216,433 230,507 Net change in unrealized appreciation (depreciation) ............................. (258,958) (182,246) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. (29,198) 114,869 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions ..... 2,399,692 242,306 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets ............................................. 2,370,494 357,175 NET ASSETS Beginning of year ................................................................ 11,956,083 11,598,908 ---------------------------------------------------------------------------------------------------------------------- End of year ...................................................................... $14,326,577 $11,956,083 =====================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-44 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Statements of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------------------------------------------------------------------------------------ UNITS AMOUNT UNITS AMOUNT ------------------------------------------------------------------------------------------------------------------ UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ........................................ 463,479 $ 7,182,688 137,372 $ 2,152,300 Units redeemed ...................................... (308,947) (4,782,996) (122,164) (1,909,994) ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) ............................. 154,532 $ 2,399,692 15,208 $ 242,306 ------------------------------------------------------------------------------------------------------------------
All of the Fund's units outstanding were held by one unitholder at December 31, 2002. The accompanying notes are an integral part of these financial statements. SAI-45 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Financial Highlights (FOR A UNIT OF PARTICIPATION OUTSTANDING THROUGHOUT THE YEAR)
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 --------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 15.88 $ 15.72 $ 15.18 $ 14.27 $ 12.77 --------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ................ 0.02 0.09 0.15 0.10 0.09 Net realized and unrealized gain (loss) ......... (0.11) 0.07 0.39 0.81 1.41 --------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ (0.09) 0.16 0.54 0.91 1.50 --------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 15.79 $ 15.88 $ 15.72 $ 15.18 $ 14.27 ===================================================================================================================== Total return (%) (b) ............................ (0.58) 1.02 3.56 6.38 11.75 Ratios to Average Net Assets Ratio of expenses (%) (c) ....................... 0.30 0.30 0.32 0.38 0.43 Ratio of net investment income (%) .............. 0.10 0.57 0.96 0.66 0.68 Portfolio turnover (%) .......................... 41 30 71 42 77 Net assets, end of year (000's) ................. $14,327 $11,956 $11,599 $12,797 $13,516
---------- (a) Net investment income per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-46 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Schedule of Investments (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) DECEMBER 31, 2002 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY UNITS COLLECTIVE INVESTMENTS -- 100% VALUE -------------------------------------------------------------------------------------- 194,370 Daily EAFE Fund(1) ................................... $ 1,447,082 383,841 Government Corporate Bond Fund(1) .................... 7,179,356 32,856 Russell 2000 Index Security Lending Fund(1) .......... 719,674 13,932 S&P 500 Flagship Fund(1) ............................. 2,156,366 2,873,180 Short Term Investment Fund(1) ........................ 2,873,180 ----------- TOTAL COLLECTIVE INVESTMENT FUNDS .................... 14,375,658 ----------- TOTAL INVESTMENTS -- 100% (COST $13,911,358).................................... $14,375,658 ===========
---------- (1) Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-47 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Notes to Financial Statements December 31, 2002 -------------------------------------------------------------------------------- 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Lifecycle Fund Group Trust -- Conservative (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to seek to provide current income and a low to moderate growth of capital. The Fund will attempt to achieve its investment objective by investing in other collective investment funds (each an "underlying fund"), managed by the Trustee, which have characteristics consistent with the overall investment objective. Refer to the financial statements of each underlying fund for disclosure of its accounting policies. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments of the underlying funds for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Fixed income investments of the underlying funds are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. SAI-48 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE Notes to Financial Statements December 31, 2002 (Concluded) -------------------------------------------------------------------------------- D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the value of the Fund as of the Fund's valuation date last preceding the date on which such order to contribute or withdraw assets is received. The Trustee, in its sole discretion, reserves the right to value any contribution or withdrawal as of the next succeeding valuation date or another date as the Trustee deems appropriate. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Trustee is paid a management fee by the Fund at the annual rate of 0.17% of the Fund's daily net asset value. The Trustee is paid an annual administration fee of $12,000. The Fund indirectly bears the expenses paid by the underlying funds, if any. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (including security lending fee income, if any) and net realized gains are retained by the Fund. 3. GLOBAL SECURITIES LENDING PROGRAM Fund participants have authorized the Fund to invest in certain collective investment funds that participate in the Global Securities Lending Program maintained by State Street Bank. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $9,024,372 and $6,561,442, respectively. SAI-49 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Lifecycle Fund Group Trust -- Moderate In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Lifecycle Fund Group Trust -- Moderate at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 21, 2003 SAI-50 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Statement of Assets and Liabilities -------------------------------------------------------------------------------- DECEMBER 31, 2002 ------------------------------------------------------------------------------------------ ASSETS: Investments in securities, at value (cost $90,492,495).................................................... $90,094,664 Interest receivable ................................................... 12,430 ------------------------------------------------------------------------------------------ Total assets .......................................................... 90,107,094 ------------------------------------------------------------------------------------------ LIABILITIES: Payable for Fund units redeemed ....................................... 49,527 Accrued expenses ...................................................... 25,671 ------------------------------------------------------------------------------------------ Total liabilities ..................................................... 75,198 ------------------------------------------------------------------------------------------ NET ASSETS (EQUIVALENT TO $16.37 PER UNIT BASED ON 5,501,128 OUTSTANDING) $90,031,896 ==========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-51 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Statement of Operations YEAR ENDED DECEMBER 31, 2002 ------------------------------------------------------------------------------------------ INVESTMENT INCOME: Interest ................................................................ $ 196,993 Securities lending fee income (net of related expenses) ................. 9,488 ------------------------------------------------------------------------------------------ Total investment income ................................................. 206,481 ------------------------------------------------------------------------------------------ EXPENSES: Management .............................................................. 168,136 Administration .......................................................... 12,000 Audit ................................................................... 5,500 Other ................................................................... 750 ------------------------------------------------------------------------------------------ Total expenses .......................................................... 186,386 ------------------------------------------------------------------------------------------ Net investment income (loss) ............................................ 20,095 ------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ............................................................. 2,337,453 ------------------------------------------------------------------------------------------ 2,337,453 ------------------------------------------------------------------------------------------ NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION): Investments ............................................................. (12,238,829) ------------------------------------------------------------------------------------------ (12,238,829) ------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) ................................. (9,901,376) ------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ (9,881,281) ==========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-52 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE
------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------------------------------------------------------------------------------------------ Statement of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS: Net investment income (loss) ..................................................... $ 20,095 $ 317,777 Net realized gain (loss) ......................................................... 2,337,453 4,691,303 Net change in unrealized appreciation (depreciation) ............................. (12,238,829) (10,482,217) ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations .................. (9,881,281) (5,473,137) ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from participant transactions .... (6,753,633) (10,567,566) ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets ............................................ (16,634,914) (16,040,703) NET ASSETS: Beginning of year ................................................................ 106,666,810 122,707,513 ------------------------------------------------------------------------------------------------------------------------ End of year ...................................................................... $ 90,031,896 $ 106,666,810 ========================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-53 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE
Statement of Changes in Net Assets (Continued) --------------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------------------------------------------------------------------------------------- UNITS AMOUNT UNITS AMOUNT --------------------------------------------------------------------------------------------------------------------------- UNITS OF PARTICIPATION: PARTCIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ........................................ 466,959 $ 7,910,046 246,036 $ 4,484,300 Units redeemed ...................................... (890,913) (14,663,679) (839,853) (15,051,866) --------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) ............................. (423,954) $ (6,753,633) (593,817) $ (10,567,566) ===========================================================================================================================
All of the Fund's units outstanding were held by one unitholder at December 31, 2002. The accompanying notes are an integral part of these financial statements. SAI-54 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Financial Highlights
(FOR A UNIT OF PARTICIPATION OUTSTANDING THROUGHOUT THE YEAR) ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 18.00 $ 18.82 $ 19.16 $ 16.96 $ 14.60 ----------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a)(b) ............. 0.00 0.05 0.09 0.06 0.06 Net realized and unrealized gain (loss) ......... (1.63) (0.87) (0.43) 2.14 2.30 ----------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ (1.63) (0.82) (0.34) 2.20 2.36 ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 16.37 $ 18.00 $ 18.82 $ 19.16 $ 16.96 ===================================================================================================================== Total return (%) (c) ............................ (9.09) (4.36) (1.78) 12.97 16.16 Ratios to Average Net Assets Ratio of expenses (%) (d) ....................... 0.19 0.17 0.18 0.19 0.19 Ratio of net investment (loss) (%) .............. 0.02 0.28 0.47 0.34 0.37 Portfolio turnover (%) .......................... 25 21 51 33 46 Net assets, end of year (000,000s) .............. $ 90 $ 107 $ 123 $ 133 $ 125
---------- (a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Zero amounts represent that which are less than $0.005 or 0.005% or($0.005) or (0.005%) if negative. (c) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (d) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-55 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Schedule of Investments
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS) DECEMBER 31, 2001 ------------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY UNITS COLLECTIVE INVESTMENT FUNDS -- 100.0% VALUE ------------------------------------------------------------------------------------- 1,825,990 Daily EAFE Fund(1) ................................. $13,594,499 1,441,145 Government Corporate Bond Fund(1) .................. 26,955,170 411,810 Russell 2000 Index Security Lending Fund(1) ........ 9,020,278 203,670 S&P 500 Flagship Fund(1) ........................... 31,523,070 9,001,647 Short Term Investment Fund(1) ...................... 9,001,647 ------------------------------------------------------------------- TOTAL COLLECTIVE INVESTMENT FUNDS .................. 90,094,664 TOTAL INVESTMENTS -- 100% (COST $90,492,495).................................. $90,094,664 ==================================================================================
---------- (1) Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-56 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Notes to Financial Statements December 31, 2002 -------------------------------------------------------------------------------- 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Lifecycle Fund Group Trust -- Moderate (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to seek to provide growth of capital and a reasonable level of current income. The Fund will attempt to achieve its investment objective by investing in other collective investment funds (each an "underlying fund"), managed by the Trustee, which have characteristics consistent with the overall investment objective. Refer to the financial statements of each underlying fund for disclosure of its accounting policies. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments of the underlying funds for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Fixed income investments of the underlying funds are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions SAI-57 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIFECYCLE FUND GROUP TRUST -- MODERATE Notes to Financial Statements December 31, 2002 (Concluded) -------------------------------------------------------------------------------- of Fund units are made on such days, based upon the value of the Fund as of the Fund's valuation date last preceding the date on which such order to contribute or withdraw assets is received. The Trustee, in its sole discretion, reserves the right to value any contribution or withdrawal as of the next succeeding valuation date or another date as the Trustee deems appropriate. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Trustee is paid a management fee by the Fund at the annual rate of .17% of the Fund's daily net asset value. The Trustee is paid an annual administration fee of $12,000. The Fund indirectly bears the expenses paid by the underlying funds, if any. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (including security lending fee income, if any) and net realized gains are retained by the Fund. 3. GLOBAL SECURITIES LENDING PROGRAM Fund participants have authorized the Fund to invest in certain collective investment funds that participate in the Global Securities Lending Program maintained by State Street Bank. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $25,082,603 and $31,846,983, respectively. SAI-58 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company S&P 500 Flagship Fund and State Street Bank and Trust Company S&P 500 Flagship Non-Lending Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company S&P 500 Flagship Fund and State Street Bank and Trust Company S&P 500 Flagship Non-Lending Fund at December 31, 2002, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 14, 2003 SAI-59 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Statement of Assets and Liabilities December 31, 2002 ---------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $1,332,723,937) (cost $66,296,198,091).................................................................. $58,754,013,378 Investments held as collateral for securities loaned .................................... 1,413,118,780 Receivable for investments sold ......................................................... 295,968,070 Variation margin receivable ............................................................. 1,423,800 Dividends receivable .................................................................... 91,250,653 Interest receivable ..................................................................... 894,871 ---------------------------------------------------------------------------------------------------------- Total assets ............................................................................ 60,556,669,552 ---------------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned ............................................. 1,413,118,780 Payable for Fund units redeemed ......................................................... 322,453,953 Accrued expenses ........................................................................ 170,642 ---------------------------------------------------------------------------------------------------------- Total liabilities .................................................................... 1,735,743,375 ---------------------------------------------------------------------------------------------------------- NET ASSETS .............................................................................. $58,820,926,177 ========================================================================================================== S&P 500 FLAGSHIP FUND (348,868,687 units outstanding, at $154.78 per unit net asset value) ................... $53,996,200,471 S&P 500 FLAGSHIP NON-LENDING FUND (31,172,485 units outstanding, at $154.78 per unit net asset value) .................... 4,824,725,706 ---------------------------------------------------------------------------------------------------------- $58,820,926,177 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-60 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Statement of Operations Year Ended December 31, 2002 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of taxes withheld of $1,895) ............................................. $ 1,023,939,896 Interest ................................................................................ 13,273,830 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 4,128,421 -------------------------------------------------------------------------------------------------------------- Total investment income ............................................................... 1,041,342,147 -------------------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................................. 2,117,472 Audit ................................................................................... 62,000 Other ................................................................................... 1,500 -------------------------------------------------------------------------------------------------------------- Total expenses ........................................................................ 2,180,972 -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .......................................................... 1,039,161,175 -------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................... (1,596,514,243) Futures contracts ..................................................................... (158,938,095) -------------------------------------------------------------------------------------------------------------- (1,755,452,338) -------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................................... (15,322,681,091) Futures contracts ..................................................................... (32,974,704) -------------------------------------------------------------------------------------------------------------- (15,355,655,795) -------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................................. (17,111,108,133) -------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ (16,071,946,958) ==============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-61 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ---------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ................................................. $ 1,039,161,175 $ 960,837,747 Net realized gain (loss) ..................................................... (1,755,452,338) 292,224,706 Net change in unrealized appreciation (depreciation) ......................... (15,355,655,795) (10,345,154,368) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .............. (16,071,946,958) (9,092,091,915) ---------------------------------------------------------------------------------------------------------------------- Distributions of security lending fee income, allocated to the Lending Fund participants ................................................................ (4,128,421) (3,710,107) Net increase (decrease) in net assets resulting from participant transactions 3,816,157,284 3,483,508,705 ---------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS ........................................ (12,259,918,095) (5,612,293,317) NET ASSETS Beginning of year ........................................................... 71,080,844,272 76,693,137,589 ---------------------------------------------------------------------------------------------------------------------- End of year ................................................................. $ 58,820,926,177 $ 71,080,844,272 ======================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-62 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------------- 2002 2001 -------------------------------------- ------------------------------------- UNITS AMOUNT UNITS AMOUNT ---------------------------------------------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: LENDING FUND Units issued ................................ 94,473,861 $ 16,124,195,966 99,682,659 $ 19,746,911,922 Issued upon reinvestment of distributions ... -- -- 2,093 411,656 Units redeemed .............................. (61,529,262) (10,446,896,132) (69,392,439) (13,495,927,787) ---------------------------------------------------------------------------------------------------------------------------- Total ...................................... 32,944,599 $ 5,677,299,834 30,292,313 $ 6,251,395,791 ---------------------------------------------------------------------------------------------------------------------------- NON-LENDING FUND Units issued ................................ 4,397,428 $ 762,548,309 10,183,674 $ 2,090,382,395 Units redeemed .............................. (15,319,023) (2,623,690,859) (22,818,968) (4,858,269,481) ---------------------------------------------------------------------------------------------------------------------------- Total ...................................... (10,921,595) $ (1,861,142,550) (12,635,294) $ (2,767,887,086) ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) ..................... 22,023,004 $ 3,816,157,284 17,657,019 $ 3,483,508,705 ============================================================================================================================
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2002 held by 1 of the Lending Fund's unitholders aggregated 31% of the Lending Fund's total units outstanding. NON-LENDING FUND Units in excess of 10% of the Non-Lending Fund units outstanding at December 31, 2002 held by 4 of the Non-Lending Fund's unitholders aggregated 76% of the Non-Lending Fund's total units outstanding. The accompanying notes are an integral part of these financial statements. SAI-63 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2002 2001 2000 1999 1998 ------------ ------------ ------------ ------------ ------------ SELECTED PER UNIT DATA Net asset value, beginning of year ......... $ 198.54 $ 225.33 $ 247.79 $ 204.72 $ 159.26 ----------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ........... 2.81 2.77 2.90 2.99 2.77 Net realized and unrealized gain (loss)..... (46.56) (29.55) (25.33) 40.09 42.70 ----------------------------------------------------------------------------------------------------------------------- Total from investment operations ........... (43.75) (26.78) (22.43) 43.08 45.47 Distribution of securities lending fee income .................................... (0.01) (0.01) (0.03) (0.01) (0.01) ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of year ............... $ 154.78 $ 198.54 $ 225.33 $ 247.79 $ 204.72 ======================================================================================================================= Total return (%) (b) ....................... (22.03) (11.89) (9.05) 21.04 28.55 ======================================================================================================================= RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (c) .................. 0.00 0.00 0.00 0.00 0.00 ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) ......... 1.62 1.35 1.20 1.35 1.55 ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) ..................... 24 19 26 13 18 ----------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) ......... $ 53,996 $ 62,723 $ 64,361 $ 75,574 $ 49,893 =======================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. The accompanying notes are an integral part of these financial statements. SAI-64 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP NON-LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2002 2001 2000 1999 1998 ------------ ------------ ------------ ------------ ------------ SELECTED PER UNIT DATA Net asset value, beginning of year ......... $ 198.54 $ 225.33 $ 247.79 $ 204.72 $ 159.26 ----------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ........... 2.80 2.76 2.87 2.98 2.76 Net realized and unrealized gain (loss)..... (46.56) (29.55) (25.33) 40.09 42.70 ----------------------------------------------------------------------------------------------------------------------- Total from investment operations ........... (43.76) (26.79) (22.46) 43.07 45.46 ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of year $ 154.78 $ 198.54 $ 225.33 $ 247.79 $ 204.72 ======================================================================================================================= Total return (%) (b) ....................... (22.04) (11.89) (9.06) 21.04 28.54 ======================================================================================================================= RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (c) .................. 0.00 0.00 0.00 0.00 0.00 ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) ......... 1.61 1.34 1.19 1.34 1.55 ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) ..................... 24 19 26 13 18 ----------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) ......... $ 4,825 $ 8,357 $ 12,332 $ 14,321 $ 12,791 =======================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) Zero amounts represent that which are less than 0.005% or (0.005%) if negative. The accompanying notes are an integral part of these financial statements. SAI-65 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE --------------------------------------------------------------------------------------- COMMON STOCK -- 98.6% 3M Co .................................. 2,757,789 $ 340,035,384 Abbott Laboratories .................... 11,147,604 445,904,160 ACE Ltd ................................ 1,865,356 54,729,545 ADC Telecommunications Inc ............. 5,333,081 11,146,139 Adobe Systems Inc ...................... 1,697,572 42,101,483 Advanced Micro Devices Inc ............. 2,384,114 15,401,376 AES Corp/The ........................... 3,853,427 11,637,350 Aetna Inc .............................. 1,078,037 44,328,881 Aflac Inc .............................. 3,677,328 110,761,119 Agilent Technologies Inc ............... 3,302,441 59,311,840 Air Products & Chemicals Inc ........... 1,617,887 69,164,669 Alberto-Culver Co ...................... 398,016 20,060,006 Albertson's Inc ........................ 2,889,443 64,319,001 Alcoa Inc .............................. 6,011,765 136,948,007 Allegheny Energy Inc ................... 865,233 6,541,161 Allegheny Technologies Inc ............. 579,632 3,611,107 Allergan Inc ........................... 917,888 52,888,707 Allied Waste Industries Inc ............ 1,402,518 14,025,180 Allstate Corp/The ...................... 5,050,927 186,833,790 Alltel Corp ............................ 2,208,573 112,637,223 Altera Corp ............................ 2,770,976 34,166,134 AMBAC Financial Group Inc .............. 768,852 43,240,236 Amerada Hess Corp ...................... 630,254 34,695,483 Ameren Corp ............................ 1,032,138 42,905,977 American Electric Power Co Inc ......... 2,411,532 65,907,170 American Express Co .................... 9,379,087 331,550,725 American Greetings ..................... 400,790 6,332,482 American International Group ........... 18,543,341 1,072,732,277 American Power Conversion .............. 1,382,546 20,945,572 American Standard Cos Inc .............. 508,669 36,186,713 AmerisourceBergen Corp ................. 749,382 40,698,936 Amgen Inc .............................. 9,127,938 441,244,523 AMR Corp ............................... 1,098,330 7,248,978 AmSouth Bancorp ........................ 2,494,843 47,900,986 Anadarko Petroleum Corp ................ 1,774,769 85,011,435 Analog Devices Inc ..................... 2,610,847 62,320,918 Andrew Corp ............................ 662,765 6,813,224
The accompanying notes are an integral part of these financial statements. SAI-66 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Anheuser-Busch Cos Inc ........................... 6,141,743 $ 297,260,361 Anthem Inc ....................................... 1,000,801 62,950,383 AOL Time Warner Inc .............................. 31,798,883 416,565,367 AON Corp ......................................... 2,144,113 40,502,295 Apache Corp ...................................... 958,840 54,644,292 Apollo Group Inc ................................. 1,255,904 55,259,776 Apple Computer Inc ............................... 2,613,330 37,449,019 Applera Corp -- Applied Biosystems Group ......... 1,518,042 26,626,457 Applied Materials Inc ............................ 11,753,265 153,145,043 Applied Micro Circuits Corp ...................... 2,142,644 7,906,356 Archer-Daniels-Midland Co ........................ 4,592,841 56,951,228 Ashland Inc ...................................... 449,520 12,824,806 AT&T Corp ........................................ 5,462,524 142,626,502 AT&T Wireless Services Inc ....................... 19,150,423 108,199,890 Autodesk Inc ..................................... 850,683 12,164,767 Automatic Data Processing ........................ 4,287,365 168,279,076 Autozone Inc ..................................... 707,771 50,004,021 Avaya Inc ........................................ 2,604,169 6,380,214 Avery Dennison Corp .............................. 783,515 47,857,096 Avon Products Inc ................................ 1,661,504 89,505,220 Baker Hughes Inc ................................. 2,397,700 77,181,963 Ball Corp ........................................ 382,223 19,565,995 Bank of America Corp ............................. 10,638,668 740,132,133 Bank of New York Co Inc/The ...................... 5,161,037 123,658,447 Bank One Corp .................................... 8,352,354 305,278,539 Bausch & Lomb Inc ................................ 384,609 13,845,924 Baxter International Inc ......................... 4,321,272 120,995,616 BB&T Corp ........................................ 3,416,653 126,381,994 Bear Stearns Cos Inc/The ......................... 706,814 41,984,752 Becton Dickinson & Co ............................ 1,832,549 56,240,929 Bed Bath & Beyond Inc ............................ 2,091,847 72,231,477 BellSouth Corp ................................... 13,264,608 343,155,409 Bemis Co ......................................... 379,834 18,851,161 Best Buy Co Inc .................................. 2,295,738 55,442,073 Big Lots Inc ..................................... 822,371 10,879,968 Biogen Inc ....................................... 1,063,719 42,612,583 Biomet Inc ....................................... 1,895,881 54,335,949 BJ Services Co ................................... 1,169,391 37,783,023 Black & Decker Corp .............................. 530,204 22,740,450
The accompanying notes are an integral part of these financial statements. SAI-67 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) BMC Software Inc .......................... 1,702,565 $ 29,130,887 Boeing Co/The ............................. 5,939,900 195,957,301 Boise Cascade Corp ........................ 413,512 10,428,773 Boston Scientific Corp .................... 2,912,652 123,845,963 Bristol-Myers Squibb Co ................... 13,804,333 319,570,309 Broadcom Corp ............................. 1,956,751 29,468,670 Brown-Forman Corp ......................... 486,607 31,804,634 Brunswick Corp ............................ 639,906 12,708,533 Burlington Northern Santa Fe Corp ......... 2,716,533 70,657,023 Burlington Resources Inc .................. 1,435,347 61,217,550 Calpine Corp .............................. 2,713,008 8,844,406 Campbell Soup Co .......................... 2,917,548 68,474,852 Capital One Financial Corp ................ 1,652,682 49,117,709 Cardinal Health Inc ....................... 3,220,393 190,615,062 Carmax Inc ................................ 63,498 1,135,344 Carnival Corp ............................. 4,163,003 103,866,925 Caterpillar Inc ........................... 2,443,510 111,717,277 Cendant Corp .............................. 7,439,272 77,963,571 Centerpoint Energy Inc .................... 2,183,442 18,559,257 Centex Corp ............................... 473,720 23,780,744 CenturyTel Inc ............................ 1,007,764 29,608,106 Charles Schwab Corp/The ................... 9,656,577 104,773,860 Charter One Financial Inc ................. 1,637,153 47,035,406 ChevronTexaco Corp ........................ 7,623,173 506,788,541 Chiron Corp ............................... 1,301,818 48,948,357 Chubb Corp ................................ 1,229,672 64,188,878 CIENA Corp ................................ 3,104,659 15,957,947 Cigna Corp ................................ 1,006,614 41,391,968 Cincinnati Financial Corp ................. 1,140,400 42,822,020 Cinergy Corp .............................. 1,242,666 41,902,698 Cintas Corp ............................... 1,207,034 55,221,806 Circuit City Stores Inc ................... 1,453,247 10,783,093 Cisco Systems Inc ......................... 51,699,682 677,265,834 Citigroup Inc ............................. 36,772,399 1,294,020,721 Citizens Communications Co ................ 2,001,130 21,111,922 Citrix Systems Inc ........................ 1,359,937 16,754,424 Clear Channel Communications Inc .......... 4,302,637 160,445,334 Clorox Co ................................. 1,635,795 67,476,544 CMS Energy Corp ........................... 1,017,959 9,609,533
The accompanying notes are an integral part of these financial statements. SAI-68 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Coca-Cola Co/The .............................. 17,689,491 $ 775,153,496 Coca-Cola Enterprises Inc ..................... 3,169,675 68,845,341 Colgate-Palmolive Co .......................... 3,865,151 202,649,867 Comcast Corp Class A .......................... 12,362,137 291,375,569 Comcast Corp Special Class A .................. 4,089,700 92,386,323 Comerica Inc .................................. 1,248,495 53,984,924 Computer Associates International Inc ......... 4,103,191 55,393,079 Computer Sciences Corp ........................ 1,278,693 44,050,974 Compuware Corp ................................ 2,708,247 12,999,586 Comverse Technology Inc ....................... 1,332,579 13,352,442 ConAgra Foods Inc ............................. 3,828,596 95,753,186 Concord EFS Inc ............................... 3,800,392 59,818,170 ConocoPhillips ................................ 4,840,609 234,237,070 Consolidated Edison Inc ....................... 1,516,042 64,916,918 Constellation Energy Group Inc ................ 1,174,683 32,679,681 Convergys Corp ................................ 1,233,493 18,687,419 Cooper Industries Ltd ......................... 680,094 24,789,426 Cooper Tire & Rubber Co ....................... 521,888 8,005,762 Coors (Adolph) ................................ 254,672 15,598,660 Corning Inc ................................... 8,093,799 26,790,475 Costco Wholesale Corp ......................... 3,238,564 90,874,106 Countrywide Financial Corp .................... 936,874 48,389,542 CR Bard Inc ................................... 364,135 21,119,830 Crane Co ...................................... 420,637 8,383,295 CSX Corp ...................................... 1,519,609 43,020,131 Cummins Inc ................................... 293,348 8,251,879 CVS Corp ...................................... 2,844,346 71,023,320 Dana Corp ..................................... 1,204,117 14,160,416 Danaher Corp .................................. 1,086,454 71,380,028 Darden Restaurants Inc ........................ 1,263,219 25,832,829 Deere & Co .................................... 1,697,690 77,839,087 Dell Computer Corp ............................ 18,484,956 494,287,723 Delphi Corp ................................... 4,041,974 32,537,891 Delta Air Lines Inc ........................... 935,606 11,320,833 Deluxe Corp ................................... 449,872 18,939,611 Devon Energy Corp ............................. 1,146,978 52,646,290 Dillard's Inc/AR .............................. 678,057 10,753,984 Dollar General Corp ........................... 2,387,850 28,534,808 Dominion Resources Inc/VA ..................... 2,147,272 117,885,233
The accompanying notes are an integral part of these financial statements. SAI-69 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Dover Corp .................................... 1,447,910 $ 42,221,056 Dow Chemical Co/The ........................... 6,530,154 193,945,574 Dow Jones & Co Inc ............................ 599,476 25,915,347 DTE Energy Co ................................. 1,201,715 55,759,576 Du Pont EI de Nemours & Co .................... 7,101,494 301,103,346 Duke Energy Corp .............................. 6,297,240 123,048,070 Dynegy Inc .................................... 2,622,734 3,094,826 Eastman Chemical Co ........................... 555,757 20,435,185 Eastman Kodak Co .............................. 2,047,529 71,745,416 Eaton Corp .................................... 491,598 38,398,720 eBay Inc ...................................... 2,141,079 145,207,978 Ecolab Inc .................................... 910,563 45,072,869 Edison International .......................... 2,369,363 28,076,952 EL Paso Corp .................................. 4,300,764 29,933,317 Electronic Arts Inc ........................... 988,575 49,201,378 Electronic Data Systems Corp .................. 3,435,853 63,322,771 Eli Lilly & Co ................................ 8,008,668 508,550,418 EMC Corp/Massachusetts ........................ 15,678,622 96,266,739 Emerson Electric Co ........................... 3,015,404 153,333,293 Engelhard Corp ................................ 972,319 21,731,330 Entergy Corp .................................. 1,522,487 69,410,182 EOG Resources Inc ............................. 828,823 33,086,614 Equifax Inc ................................... 1,053,989 24,389,305 Equity Office Properties Trust (REIT) ......... 2,869,323 71,675,689 Equity Residential (REIT) ..................... 1,956,534 48,091,606 Exelon Corp ................................... 2,289,913 120,838,709 Exxon Mobil Corp .............................. 48,109,366 1,680,941,248 Family Dollar Stores .......................... 1,264,997 39,480,556 Fannie Mae .................................... 7,087,658 455,949,039 Federated Department Stores ................... 1,473,380 42,374,409 FedEx Corp .................................... 2,107,685 114,278,681 Fifth Third Bancorp ........................... 4,142,745 242,557,720 First Data Corp ............................... 5,387,988 190,788,655 First Tennessee National Corp ................. 905,720 32,551,577 FirstEnergy Corp .............................. 2,124,629 70,049,018 Fiserv Inc .................................... 1,365,195 46,348,370 FleetBoston Financial Corp .................... 7,524,355 182,841,827 Fluor Corp .................................... 565,992 15,847,776 Ford Motor Co ................................. 12,980,315 120,716,930
The accompanying notes are an integral part of these financial statements. SAI-70 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Forest Laboratories Inc ....................... 1,287,385 $ 126,446,955 Fortune Brands Inc ............................ 1,069,553 49,744,910 FPL Group Inc ................................. 1,321,148 79,440,629 Franklin Resources Inc ........................ 1,827,721 62,288,732 Freddie Mac ................................... 4,987,163 294,491,975 Freeport-McMoRan Copper & Gold Inc ............ 1,149,926 19,295,758 Gannett Co Inc ................................ 1,915,680 137,545,824 Gap Inc/The ................................... 6,189,712 96,064,330 Gateway Inc ................................... 2,304,204 7,235,201 General Dynamics Corp ......................... 1,455,512 115,523,987 General Electric Co ........................... 70,934,180 1,727,247,273 General Mills Inc ............................. 2,622,305 123,117,220 General Motors Corp ........................... 4,007,822 147,728,319 Genuine Parts Co .............................. 1,262,995 38,900,246 Genzyme Corp-Genl Division .................... 1,518,109 44,890,483 Georgia-Pacific Corp .......................... 1,742,638 28,161,030 Gillette Co/The ............................... 7,575,136 229,981,129 Golden West Financial Corp .................... 1,109,388 79,665,152 Goldman Sachs Group Inc ....................... 3,424,880 233,234,328 Goodrich Corp ................................. 770,099 14,108,214 Goodyear Tire & Rubber Co/The ................. 1,264,374 8,610,387 Great Lakes Chemical Corp ..................... 352,988 8,429,353 Guidant Corp .................................. 2,162,431 66,710,996 H&R Block Inc ................................. 1,290,370 51,872,874 Halliburton Co ................................ 3,114,345 58,269,395 Harley-Davidson Inc ........................... 2,179,600 100,697,520 Harrah's Entertainment Inc .................... 808,751 32,026,540 Hartford Financial Services Group Inc ......... 1,762,284 80,060,562 Hasbro Inc .................................... 1,345,647 15,542,223 HCA Inc ....................................... 3,703,872 153,710,688 Health Management Associates Inc .............. 1,727,377 30,920,048 Healthsouth Corp .............................. 2,814,938 11,822,740 Hercules Inc .................................. 882,108 7,762,550 Hershey Foods Corp ............................ 968,289 65,301,410 Hewlett-Packard Co ............................ 21,826,182 378,902,520 Hilton Hotels Corp ............................ 2,699,564 34,311,458 HJ Heinz Co ................................... 2,466,958 81,088,909 Home Depot Inc ................................ 16,836,509 403,402,756 Honeywell International Inc ................... 5,866,094 140,786,256
The accompanying notes are an integral part of these financial statements. SAI-71 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Household International Inc .................... 3,268,427 $ 90,894,955 Humana Inc ..................................... 1,300,873 13,008,730 Huntington Bancshares Inc ...................... 1,734,977 32,461,420 Illinois Tool Works Inc ........................ 2,190,922 142,103,201 IMS Health Inc ................................. 2,010,232 32,163,712 Ingersoll-Rand Co .............................. 1,220,595 52,558,821 Intel Corp ..................................... 47,347,093 737,194,238 International Business Machines Corp ........... 12,072,267 935,600,693 International Flavors & Fragrances Inc ......... 671,132 23,556,733 International Game Technology .................. 623,951 47,370,360 International Paper Co ......................... 3,438,686 120,250,849 Interpublic Group Cos Inc ...................... 2,812,200 39,595,776 Intuit Inc ..................................... 1,493,031 70,053,015 ITT Industries Inc ............................. 657,028 39,875,029 Jabil Circuit Inc .............................. 1,374,093 24,623,747 Janus Capital Group Inc ........................ 1,580,395 20,655,763 JC Penney Co Inc Holding Co .................... 1,843,863 42,427,288 JDS Uniphase Corp .............................. 9,764,968 24,119,471 Jefferson-Pilot Corp ........................... 1,059,630 40,382,499 John Hancock Financial Services Inc ............ 2,068,167 57,701,859 Johnson & Johnson .............................. 21,208,980 1,139,134,316 Johnson Controls Inc ........................... 643,021 51,550,994 Jones Apparel Group Inc ........................ 918,732 32,559,862 JP Morgan Chase & Co ........................... 14,168,595 340,046,280 KB Home ........................................ 358,051 15,342,485 Kellogg Co ..................................... 2,925,375 100,252,601 Kerr-McGee Corp ................................ 717,982 31,806,603 Keycorp ........................................ 3,024,979 76,047,972 KeySpan Corp ................................... 1,000,684 35,264,104 Kimberly-Clark Corp ............................ 3,680,067 174,692,780 Kinder Morgan Inc .............................. 809,036 34,197,952 King Pharmaceuticals Inc ....................... 1,803,675 31,005,173 Kla-Tencor Corp ................................ 1,347,472 47,660,085 Knight-Ridder Inc .............................. 596,181 37,708,448 Kohl's Corp .................................... 2,433,274 136,141,680 Kroger Co ...................................... 5,632,620 87,023,979 Leggett & Platt Inc ............................ 1,390,702 31,207,353 Lehman Brothers Holdings Inc ................... 1,721,376 91,732,127 Lexmark International Inc ...................... 901,146 54,519,333
The accompanying notes are an integral part of these financial statements. SAI-72 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Lincoln National Corp ................ 1,391,761 $ 43,951,812 Linear Technology Corp ............... 2,281,305 58,675,165 Liz Claiborne Inc .................... 765,600 22,700,040 Lockheed Martin Corp ................. 3,269,481 188,812,528 Loews Corp ........................... 1,313,043 58,377,892 Louisiana-Pacific Corp ............... 742,820 5,987,129 Lowe's Cos Inc ....................... 5,535,294 207,573,525 LSI Logic Corp ....................... 2,617,650 15,103,841 Ltd Brands ........................... 3,727,927 51,930,023 Lucent Technologies Inc .............. 24,118,035 30,388,724 Manor Care Inc ....................... 698,418 12,997,559 Marathon Oil Corp .................... 2,256,151 48,033,455 Marriott International Inc ........... 1,707,203 56,115,763 Marsh & McLennan Cos Inc ............. 3,839,084 177,404,072 Marshall & Ilsley Corp ............... 1,514,396 41,464,162 Masco Corp ........................... 3,549,120 74,708,976 Mattel Inc ........................... 3,183,194 60,958,165 Maxim Integrated Products ............ 2,319,776 76,645,399 May Department Stores Co/The ......... 2,051,221 47,137,059 Maytag Corp .......................... 646,656 18,429,696 MBIA Inc ............................. 1,062,080 46,582,829 MBNA Corp ............................ 9,102,465 173,128,884 McDermott International Inc .......... 450,552 1,973,418 McDonald's Corp ...................... 9,108,021 146,456,978 McGraw-Hill Cos Inc/The .............. 1,387,583 83,865,517 McKesson Corp ........................ 2,081,986 56,276,082 MeadWestvaco Corp .................... 1,519,449 37,545,585 Medimmune Inc ........................ 1,798,217 48,857,556 Medtronic Inc ........................ 8,667,394 395,233,166 Mellon Financial Corp ................ 3,095,329 80,819,040 Merck & Co Inc ....................... 16,033,324 907,646,472 Mercury Interactive Corp ............. 598,016 17,731,174 Meredith Corp ........................ 351,974 14,469,651 Merrill Lynch & Co Inc ............... 6,159,739 233,762,095 Metlife Inc .......................... 4,875,270 131,827,301 MGIC Investment Corp ................. 793,786 32,783,362 Micron Technology Inc ................ 4,334,523 42,218,254 Microsoft Corp ....................... 38,224,656 1,976,214,715 Millipore Corp ....................... 398,195 13,538,630
The accompanying notes are an integral part of these financial statements. SAI-73 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Mirant Corp ........................... 2,854,134 $ 5,394,313 Molex Inc ............................. 1,368,192 31,523,144 Monsanto Co ........................... 1,897,838 36,533,382 Moody's Corp .......................... 1,104,632 45,610,255 Morgan Stanley ........................ 7,835,106 312,777,432 Motorola Inc .......................... 16,569,629 143,327,291 Nabors Industries Ltd ................. 1,032,509 36,416,592 National City Corp .................... 4,394,490 120,057,467 National Semiconductor Corp ........... 1,400,231 21,017,467 Navistar International Corp ........... 434,371 10,559,559 NCR Corp .............................. 717,099 17,023,930 Network Appliance Inc ................. 2,402,637 24,026,370 New York Times Co ..................... 1,075,958 49,203,559 Newell Rubbermaid Inc ................. 1,905,637 57,797,970 Newmont Mining Corp ................... 2,870,398 83,327,654 Nextel Communications Inc ............. 6,879,156 79,454,252 Nicor Inc ............................. 372,375 12,671,921 Nike Inc .............................. 1,929,084 85,786,365 NiSource Inc .......................... 1,624,455 32,489,100 Noble Corp ............................ 952,152 33,468,143 Nordstrom Inc ......................... 965,619 18,317,792 Norfolk Southern Corp ................. 2,869,493 57,361,165 North Fork Bancorporation Inc ......... 1,185,287 39,991,583 Northern Trust Corp ................... 1,577,443 55,289,377 Northrop Grumman Corp ................. 1,296,937 125,802,889 Novell Inc ............................ 2,579,229 8,614,625 Novellus Systems Inc .................. 1,056,217 29,658,573 Nucor Corp ............................ 559,757 23,117,964 Nvidia Corp ........................... 1,089,366 12,538,603 Occidental Petroleum Corp ............. 2,622,312 74,604,776 Office Depot Inc ...................... 2,240,437 33,068,850 Omnicom Group ......................... 1,348,505 87,113,423 Oracle Corp ........................... 38,598,255 416,861,154 Paccar Inc ............................ 829,919 38,284,163 Pactiv Corp ........................... 1,138,197 24,880,986 Pall Corp ............................. 893,735 14,907,500 Parametric Technology Corp ............ 1,879,823 4,737,154 Parker Hannifin Corp .................. 805,084 37,138,525 Paychex Inc ........................... 2,683,132 74,859,383
The accompanying notes are an integral part of these financial statements. SAI-74 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Peoples Energy Corp ......................... 242,415 $ 9,369,340 Peoplesoft Inc .............................. 2,224,152 40,701,982 Pepsi Bottling Group Inc .................... 2,082,080 53,509,456 PepsiCo Inc ................................. 12,351,585 521,483,919 PerkinElmer Inc ............................. 914,111 7,541,416 Pfizer Inc .................................. 44,152,903 1,349,754,245 PG&E Corp ................................... 2,920,352 40,592,893 Pharmacia Corp .............................. 9,186,894 384,012,169 Phelps Dodge Corp ........................... 711,766 22,527,394 Philip Morris Cos Inc ....................... 14,793,453 599,578,650 Pinnacle West Capital Corp .................. 600,980 20,487,408 Pitney Bowes Inc ............................ 1,695,880 55,387,441 Plum Creek Timber Co Inc (REIT)(1) .......... 1,320,849 31,172,036 PMC -- Sierra Inc ........................... 1,188,919 6,610,390 PNC Financial Services Group Inc ............ 2,063,929 86,478,625 Power-One Inc ............................... 583,676 3,309,443 PPG Industries Inc .......................... 1,265,262 63,452,889 PPL Corp .................................... 1,164,973 40,401,264 Praxair Inc ................................. 1,175,568 67,912,563 Principal Financial Group ................... 2,482,232 74,789,650 Procter & Gamble Co ......................... 9,247,155 794,700,501 Progress Energy Inc ......................... 1,649,692 71,514,148 Progressive Corp/The ........................ 1,560,731 77,459,080 Providian Financial Corp .................... 2,042,297 13,254,508 Prudential Financial Inc .................... 4,142,396 131,479,649 Public Service Enterprise Group Inc ......... 1,582,888 50,810,705 Pulte Homes Inc ............................. 435,084 20,827,471 QLogic Corp ................................. 605,663 20,901,430 Qualcomm Inc ................................ 5,605,295 203,976,685 Quest Diagnostics ........................... 690,575 39,293,718 Quintiles Transnational Corp ................ 832,783 10,076,674 Qwest Communications International .......... 11,856,700 59,283,500 RadioShack Corp ............................. 1,218,982 22,843,723 Rational Software Corp ...................... 1,402,843 14,575,539 Raytheon Co ................................. 2,890,362 88,878,632 Reebok International Ltd .................... 425,023 12,495,676 Regions Financial Corp ...................... 1,588,262 52,984,420 Reliant Resources Inc ....................... 9,741 31,171 RJ Reynolds Tobacco Holdings Inc ............ 635,598 26,765,032
The accompanying notes are an integral part of these financial statements. SAI-75 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Robert Half International Inc ................... 1,237,556 $ 19,937,027 Rockwell Automation Inc ......................... 1,339,883 27,748,977 Rockwell Collins Inc ............................ 1,297,513 30,180,152 Rohm & Haas Co .................................. 1,591,119 51,679,545 Rowan Cos Inc ................................... 810,179 18,391,063 RR Donnelley & Sons Co .......................... 806,245 17,551,954 Ryder System Inc ................................ 463,488 10,400,671 Sabre Holdings Corp ............................. 1,024,017 18,544,948 Safeco Corp ..................................... 989,107 34,292,340 Safeway Inc ..................................... 3,246,079 75,828,405 Sanmina-SCI Corp ................................ 3,743,443 16,808,059 Sara Lee Corp ................................... 5,681,405 127,888,427 SBC Communications Inc .......................... 23,666,019 641,585,775 Schering-Plough Corp ............................ 10,423,012 231,390,866 Schlumberger Ltd ................................ 4,069,899 171,302,049 Scientific-Atlanta Inc .......................... 1,122,442 13,312,162 Sealed Air Corp ................................. 590,048 22,008,790 Sears Roebuck and Co ............................ 2,270,962 54,389,540 Sempra Energy ................................... 1,449,126 34,271,830 Sherwin-Williams Co/The ......................... 1,072,305 30,292,616 Siebel Systems Inc .............................. 3,381,590 25,294,293 Sigma-Aldrich Corp .............................. 542,595 26,424,377 Simon Property Group Inc ........................ 1,316,203 44,843,036 SLM Corp ........................................ 1,113,005 115,596,699 Snap-On Inc ..................................... 419,451 11,790,768 Solectron Corp .................................. 5,875,066 20,856,484 Southern Co/The ................................. 5,030,762 142,823,333 SouthTrust Corp ................................. 2,571,606 63,904,409 Southwest Airlines Co ........................... 5,517,111 76,687,843 Sprint Corp-FON Group ........................... 6,356,080 92,036,038 Sprint Corp-PCS Group ........................... 7,129,900 31,228,962 St Jude Medical Inc ............................. 1,306,474 51,893,147 St Paul Cos ..................................... 1,616,763 55,050,780 Stanley Works/The ............................... 605,652 20,943,446 Staples Inc ..................................... 3,294,142 60,282,799 Starbucks Corp .................................. 2,742,505 55,892,252 Starwood Hotels & Resorts Worldwide Inc ......... 1,444,528 34,293,095 State Street Corp(2) ............................ 2,336,258 91,114,062 Stryker Corp .................................... 1,400,238 93,983,975
The accompanying notes are an integral part of these financial statements. SAI-76 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Sun Microsystems Inc ............................. 22,982,708 $ 71,476,222 Sungard Data Systems Inc ......................... 2,032,914 47,895,454 Sunoco Inc ....................................... 542,868 18,012,360 SunTrust Banks Inc ............................... 2,032,271 115,676,865 Supervalu Inc .................................... 960,291 15,854,404 Symbol Technologies Inc .......................... 1,670,299 13,729,858 Synovus Financial Corp ........................... 2,133,948 41,398,591 Sysco Corp ....................................... 4,713,561 140,416,982 T Rowe Price Group Inc ........................... 873,489 23,828,780 Target Corp ...................................... 6,502,718 195,081,540 TECO Energy Inc .................................. 1,162,890 17,989,908 Tektronix Inc .................................... 633,724 11,527,440 Tellabs Inc ...................................... 2,896,442 21,057,133 Temple-Inland Inc ................................ 389,990 17,475,452 Tenet Healthcare Corp ............................ 3,488,608 57,213,171 Teradyne Inc ..................................... 1,304,901 16,976,762 Texas Instruments Inc ............................ 12,271,403 184,193,759 Textron Inc ...................................... 994,940 42,772,471 Thermo Electron Corp ............................. 1,205,923 24,263,171 Thomas & Betts Corp .............................. 414,483 7,004,763 Tiffany & Co ..................................... 1,037,755 24,812,722 TJX Cos Inc ...................................... 3,849,296 75,138,258 TMP Worldwide Inc ................................ 792,146 8,959,171 Torchmark Corp ................................... 851,578 31,108,144 Toys R US Inc .................................... 1,513,948 15,139,480 Transocean Inc ................................... 2,315,300 53,714,960 Travelers Property Casualty Corp Class-B ......... 7,138,673 104,581,559 Tribune Co ....................................... 2,171,723 98,726,528 Tupperware Corp .................................. 413,216 6,231,297 TXU Corp ......................................... 2,205,628 41,201,131 Tyco International Ltd ........................... 14,073,053 240,367,745 Union Pacific Corp ............................... 1,812,257 108,499,827 Union Planters Corp .............................. 1,430,706 40,260,067 Unisys Corp ...................................... 2,316,033 22,928,727 United Parcel Service Inc ........................ 7,927,825 500,087,201 United States Steel Corp ......................... 745,694 9,783,505 United Technologies Corp ......................... 3,391,201 210,050,990 UnitedHealth Group Inc ........................... 2,162,292 180,551,382 Univision Communications Inc -- Class A .......... 1,614,284 39,549,958
The accompanying notes are an integral part of these financial statements. SAI-77 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ----------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Unocal Corp ........................ 1,782,760 $ 54,516,801 UnumProvident Corp ................. 1,604,128 28,136,405 US Bancorp ......................... 13,763,523 292,061,958 UST Inc ............................ 1,230,138 41,123,513 Veritas Software Corp .............. 2,940,022 45,923,144 Verizon Communications Inc ......... 19,506,864 755,890,988 VF Corp ............................ 799,550 28,823,778 Viacom Inc ......................... 12,505,371 509,718,922 Visteon Corp ....................... 936,384 6,517,233 Vulcan Materials Co ................ 718,078 26,927,925 Wachovia Corp ...................... 9,784,762 356,556,727 Wal-Mart Stores Inc ................ 31,614,110 1,596,828,696 Walgreen Co ........................ 7,284,500 212,634,555 Walt Disney Co ..................... 14,588,048 237,931,063 Washington Mutual Inc .............. 6,832,211 235,916,246 Waste Management Inc ............... 4,355,622 99,830,856 Waters Corp ........................ 1,053,973 22,955,532 Watson Pharmaceuticals Inc ......... 762,227 21,548,157 WellPoint Health Networks .......... 1,042,312 74,170,922 Wells Fargo & Co ................... 12,103,062 567,270,516 Wendy's International Inc .......... 831,983 22,521,780 Weyerhaeuser Co .................... 1,552,524 76,399,706 Whirlpool Corp ..................... 494,097 25,801,745 Williams Cos Inc ................... 3,715,330 10,031,391 Winn-Dixie Stores Inc .............. 1,011,289 15,452,496 WM Wrigley Jr Co ................... 1,593,431 87,447,493 Worthington Industries ............. 602,432 9,181,064 WW Grainger Inc .................... 674,088 34,749,236 Wyeth .............................. 9,442,364 353,144,414 Xcel Energy Inc .................... 2,857,829 31,436,119 Xerox Corp ......................... 5,217,412 42,000,167 Xilinx Inc ......................... 2,408,024 49,605,294 XL Capital Ltd ..................... 953,899 73,688,698 Yahoo Inc .......................... 4,239,166 69,310,364 Yum! Brands Inc .................... 2,123,103 51,421,555 Zimmer Holdings Inc ................ 1,374,546 57,071,150 Zions Bancorporation ............... 583,052 22,942,513 --------------- TOTAL COMMON STOCK ................. $57,935,662,309 ---------------
The accompanying notes are an integral part of these financial statements. SAI-78 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
PRINCIPAL AMOUNT VALUE ------------------ ------------------ U.S. GOVERNMENT OBLIGATIONS -- 0.1% United States Treasury Bills 1.18% 03/13/2003 ......... USD 75,600,000 $ 75,424,062 UNITS ----------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 1.3% Short Term Investment Fund(3) ......................... 742,927,007 742,927,007 --------------- TOTAL INVESTMENTS -- 100% (COST $66,296,198,091) ......................... $58,754,013,378 ===============
---------- 1 Real Estate Investment Trust 2 Parent company of State Street Bank and Trust Company 3 Collective investment fund advised by State Street Global Advisors. At December 31, 2002, U.S. Treasury Bills with principal of $75,600,000 were pledged to cover margin requirements for open futures contracts. The following futures contracts were open at December 31, 2002: NUMBER OF FUTURES CONTRACT NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) --------------- -------------- --------------- ------------ ----------------- S&P 500 Index 4,068 $925,579,789 March 2003 $ (31,738,489) ============== USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-79 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") S&P 500 Flagship Fund and State Street Bank and Trust Company S&P 500 Flagship Non-Lending Fund (collectively, the "Fund") were formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match the return of the S&P 500 Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date. Interest income earned on securities, if any, is recorded net of applicable withholding taxes on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-80 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending, if any, is distributed monthly to participants of the Lending Fund. G. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. 3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the S&P 500 Flagship Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the S&P 500 Flagship Non-Lending Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2002, the market value of securities loaned by the Lending Fund are disclosed on the Statement of Assets and Liabilities. Cash collateral provided by the Borrowers is recorded on the Statement of Assets and Liabilities and is invested in State Street Bank and Trust Company Quality D Short-Term Investment Fund. SAI-81 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY S&P 500 FLAGSHIP FUND S&P 500 FLAGSHIP NON-LENDING FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Underlying State Street Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Underlying State Street Fund. State Street Bank, as lending agent, indemnifies the Underlying State Street Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. The Underlying State Street Fund participants, however, bear the risk of loss with respect to the investment of collateral. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $20,138,547,042 and $15,338,582,007, respectively. SAI-82 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Russell 2000 Index Securities Lending Fund and State Street Bank and Trust Company Russell 2000 Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Russell 2000 Index Securities Lending Fund and State Street Bank and Trust Company Russell 2000 Index Fund at December 31, 2002, and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 14, 2003 SAI-83 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at value, (including securities on loan of $322,175,677) (cost $2,787,703,062) ................................................................... $2,194,093,107 Investments held as collateral for securities loaned ..................................... 344,348,724 Receivable for Fund units issued ......................................................... 1,489,933 Receivable for investments sold .......................................................... 925,907 Variation margin receivable .............................................................. 29,300 Dividends receivable ..................................................................... 3,267,120 Interest receivable ...................................................................... 59,039 Tax reclaims receivable .................................................................. 3,784 ------------------------------------------------------------------------------------------------------------ Total assets .......................................................................... 2,544,216,914 ------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for collateral on securities loaned .............................................. 344,348,724 Payable for Fund units redeemed .......................................................... 1,489,933 Payable for investments purchased ........................................................ 4,428,848 Accrued expenses ......................................................................... 77,202 ------------------------------------------------------------------------------------------------------------ Total liabilities ..................................................................... 350,344,707 ------------------------------------------------------------------------------------------------------------ NET ASSETS ............................................................................... $2,193,872,207 ============================================================================================================ RUSSELL 2000 INDEX SECURITIES LENDING FUND (88,962,476 units outstanding, at $21.90 per unit net asset value) ..................................................... $1,948,657,719 RUSSELL 2000 INDEX FUND (11,194,828 units outstanding, at $21.90 per unit net asset value) 245,214,488 ------------------------------------------------------------------------------------------------------------ $2,193,872,207 ============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-84 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Statement of Operations Year Ended December 31, 2002 -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends (net of taxes withheld of $3,100) ............................................. $ 35,038,850 Interest ................................................................................ 1,310,728 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 1,724,775 ------------------------------------------------------------------------------------------------------------ Total investment income ............................................................... 38,074,353 ------------------------------------------------------------------------------------------------------------ EXPENSES Custody ................................................................................. 774,133 Audit ................................................................................... 35,000 Other ................................................................................... 4,057 ------------------------------------------------------------------------------------------------------------ Total expenses ........................................................................ 813,190 ------------------------------------------------------------------------------------------------------------ Net investment income (loss) .......................................................... 37,261,163 ------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments .......................................................................... (139,161,694) Futures contracts .................................................................... (14,883,539) ------------------------------------------------------------------------------------------------------------ (154,045,233) ------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation): Investments ........................................................................... (463,186,998) Futures contracts ..................................................................... (3,085,186) ------------------------------------------------------------------------------------------------------------ (466,272,184) ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) ................................................. (620,317,417) ------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ (583,056,254) ============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-85 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ............................................................. $ 37,261,163 $ 34,694,158 Net realized gain (loss) ................................................................. (154,045,233) (66,065,286) Net change in unrealized appreciation (depreciation) ..................................... (466,272,184) 91,419,817 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .......................... (583,056,254) 60,048,689 ------------------------------------------------------------------------------------------------------------------------------- Distributions of security lending fee income, allocated to the Lending Fund participants . (1,724,775) (1,519,084) Net increase (decrease) in net assets resulting from participant transactions ............ 137,191,950 383,250,199 ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS .................................................... (447,589,079) 441,779,804 NET ASSETS Beginning of year ....................................................................... 2,641,461,286 2,199,681,482 ------------------------------------------------------------------------------------------------------------------------------- End of year ............................................................................. $2,193,872,207 $2,641,461,286 ===============================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-86 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Statement of Changes in Net Assets (Continued) Year ended December 31, 2002
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- 2002 2001 ----------------------------------- --------------------------------- UNITS AMOUNT UNITS AMOUNT ---------------------------------------------------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: LENDING FUND Units issued ............................................. 39,664,311 $ 989,136,517 41,268,082 $1,083,391,534 Issued upon reinvestment of distributions ................ -- -- 8,907 235,421 Units redeemed ........................................... (33,799,074) (803,195,584) (25,713,324) (666,127,863) ---------------------------------------------------------------------------------------------------------------------------------- Total ................................................... 5,865,237 $ 185,940,933 15,563,665 $ 417,499,092 ---------------------------------------------------------------------------------------------------------------------------------- NON-LENDING FUND Units issued ............................................. 5,617,431 $ 143,251,491 6,009,120 $ 161,221,924 Units redeemed ........................................... (7,322,271) (192,000,474) (7,302,832) (195,470,817) ---------------------------------------------------------------------------------------------------------------------------------- Total ................................................... (1,704,840) $ (48,748,983) (1,293,712) $ (34,248,893) ---------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) ................................ 4,160,397 $ 137,191,950 14,269,953 $ 383,250,199 ==================================================================================================================================
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2002 held by 1 of the Lending Fund's unitholders aggregated 69% of the Lending Fund's total units outstanding. NON-LENDING FUND Units in excess of 10% of the Non-Lending Fund units outstanding at December 31, 2002 held by 2 of the Non-Lending Fund's unitholders aggregated 88% of the Non-Lending Fund's total units outstanding. The accompanying notes are an integral part of these financial statements. SAI-87 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .................... $ 27.52 $ 26.92 $ 27.78 $ 23.07 $ 23.77 ----------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ...................... 0.37 0.41 0.44 0.39 0.38 Net realized and unrealized gain (loss) ............... (5.97) 0.21 (1.28) 4.34 (1.06) ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations ...................... (5.60) 0.62 (0.84) 4.73 (0.68) Distribution of securities lending fee income ......... (0.02) (0.02) (0.02) (0.02) (0.02) ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .......................... $ 21.90 $ 27.52 $ 26.92 $ 27.78 $ 23.07 ============================================================================================================================= Total return (%) (b) .................................. (20.33) 2.33 (3.01) 20.50 (2.88) ============================================================================================================================= RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (c) ............................. 0.03 0.03 0.03 0.03 0.04 ----------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) .................... 1.50 1.56 1.57 1.61 1.61 ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) ................................ 92 91 76 51 57 ----------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .................... $ 1,949 $ 2,287 $ 1,818 $ 1,904 $ 1,256 =============================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-88 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 27.52 $ 26.92 $ 27.78 $ 23.07 $ 23.77 ----------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ................ 0.35 0.39 0.42 0.37 0.36 Net realized and unrealized gain (loss) ......... (5.97) 0.21 (1.28) 4.34 (1.06) ----------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ (5.62) 0.60 (0.86) 4.71 (0.70) ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 21.90 $ 27.52 $ 26.92 $ 27.78 $ 23.07 ======================================================================================================================= Total return (%) (b) ............................ (20.39) 2.23 (3.10) 20.42 (2.94) ======================================================================================================================= RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (c) ....................... 0.03 0.03 0.03 0.03 0.04 ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) .............. 1.42 1.48 1.48 1.54 1.55 ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) .......................... 92 91 76 51 57 ----------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .............. $ 245 $ 355 $ 382 $ 118 $ 129 =======================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non- Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-89 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK -- 97.4% 1-800 Contacts Inc ............................. 18,600 $ 512,802 1-800-FLOWERS.COM Inc .......................... 49,585 309,906 1st Source Corp ................................ 48,838 818,037 3D Systems Corp ................................ 27,600 215,280 3TEC Energy Corp ............................... 53,600 760,584 4Kids Entertainment Inc ........................ 34,884 770,239 7-Eleven Inc ................................... 82,300 617,250 aaiPharma Inc. ................................. 37,200 521,544 Aaon Inc ....................................... 35,750 658,873 AAR Corp ....................................... 91,897 473,270 Aaron Rents Inc ................................ 48,896 1,069,844 ABC Bancorp .................................... 34,000 440,300 Abgenix Inc. ................................... 281,300 2,073,181 Abiomed Inc. ................................... 51,676 188,101 ABM Industries Inc. ............................ 135,830 2,105,365 AC Moore Arts & Crafts Inc ..................... 43,500 552,885 Acacia Research -- Acacia Technologies ......... 68,173 164,297 Acacia Research -- CombiMatrix ................. 38,053 138,513 Acadia Realty Trust ............................ 50,900 377,678 Acclaim Entertainment Inc ...................... 239,600 158,136 Acme Communications Inc ........................ 36,200 288,514 Actel Corp ..................................... 74,360 1,206,119 Action Performance Cos Inc ..................... 53,200 1,010,800 Active Power Inc ............................... 101,408 180,506 Actrade Financial Technologies Ltd(1) .......... 15,400 1,540 Actuant Corp ................................... 33,400 1,551,430 Actuate Corp ................................... 144,439 255,657 Acuity Brands Inc .............................. 150,031 2,031,420 ADE Corp ....................................... 27,876 166,420 Administaff Inc ................................ 69,680 418,080 Adolor Corp .................................... 111,242 1,526,240 Adtran Inc ..................................... 72,400 2,381,960 Advanced Digital Information Corp .............. 223,398 1,499,001 Advanced Energy Industries Inc ................. 57,488 731,247 Advanced Marketing Services .................... 48,632 714,890 Advanced Neuromodulation Systems Inc ........... 33,100 1,161,810 Advanced Power Technology Inc .................. 20,200 65,630 Advanta Corp ................................... 78,000 732,420 Advisory Board Co/The .......................... 15,500 463,450 Advo Inc ....................................... 68,362 2,244,324 AEP Industries Inc ............................. 10,500 137,235 Aeroflex Inc ................................... 217,348 1,499,701 Aeropostale Inc ................................ 45,800 484,106 Aether Systems Inc ............................. 130,000 488,800 AFC Enterprises ................................ 45,100 947,551 Aftermarket Technology Corp .................... 23,200 336,400
The accompanying notes are an integral part of these financial statements. SAI-90 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Agile Software Corp ............................. 135,600 $ 1,049,544 AGL Resources Inc ............................... 200,089 4,862,163 Airborne Inc .................................... 175,291 2,599,566 Airgas Inc ...................................... 207,507 3,579,496 AirGate PCS Inc ................................. 75,060 46,537 Airtran Holdings Inc ............................ 216,042 842,564 Akamai Technologies Inc ......................... 335,400 580,242 Aksys Ltd ....................................... 96,500 511,450 Alabama National Bancorp ........................ 35,360 1,538,160 Alamo Group Inc ................................. 20,200 247,450 Alamosa Holdings Inc ............................ 241,469 125,564 Alaris Medical Inc .............................. 46,600 284,260 Alaska Air Group Inc ............................ 88,259 1,910,807 Alaska Communications Systems Group Inc ......... 34,400 63,296 Albany International Corp ....................... 83,699 1,729,221 Albany Molecular Research Inc ................... 74,282 1,098,705 Alderwoods Group Inc ............................ 146,600 693,271 Alexander & Baldwin Inc ......................... 145,527 3,753,141 Alexander's Inc ................................. 7,373 475,927 Alexandria Real Estate Equities Inc ............. 63,546 2,707,060 Alexion Pharmaceuticals Inc ..................... 62,228 878,659 Alfa Corp ....................................... 128,478 1,543,149 Alico Inc ....................................... 11,600 308,560 Align Technology Inc ............................ 117,900 325,522 Alkermes Inc .................................... 199,600 1,251,492 Allegiance Telecom Inc .......................... 378,000 253,260 Allegiant Bancorp Inc ........................... 41,200 751,035 Allen Telecom Inc ............................... 97,754 925,730 Alliance Gaming Corp ............................ 151,800 2,585,154 Alliance Imaging Inc ............................ 39,400 208,820 Alliance Semiconductor Corp ..................... 83,869 329,605 Allos Therapeutics .............................. 82,200 618,144 Alloy Inc ....................................... 109,900 1,203,405 Allscripts Healthcare Solutions Inc ............. 79,506 190,019 Alpharma Inc .................................... 105,937 1,261,710 Altiris Inc ..................................... 14,000 222,880 AM Castle & Co .................................. 30,900 140,595 Ambassadors Group Inc ........................... 17,500 226,468 AMC Entertainment Inc ........................... 105,900 937,215 Amcol International Corp ........................ 67,000 388,600 Amcore Financial Inc ............................ 88,306 1,916,240 Amerco Inc ...................................... 32,049 141,657 American Capital Strategies Ltd ................. 145,836 3,148,599 American Financial Holdings Inc/CT .............. 75,176 2,246,259 American Healthways Inc ......................... 39,599 692,983
The accompanying notes are an integral part of these financial statements. SAI-91 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) American Home Mortgage Holdings Inc ........... 31,200 $ 343,200 American Italian Pasta Co ..................... 58,419 2,101,916 American Management Systems ................... 143,500 1,720,565 American Medical Security Group Inc ........... 21,600 301,968 American Medical Systems Holdings Inc ......... 71,200 1,154,152 American National Bankshares Inc/VA ........... 20,700 538,200 American Pharmaceutical Partners Inc .......... 32,900 585,620 American Physicians Capital Inc ............... 28,800 541,728 American States Water Co ...................... 55,369 1,281,792 American Superconductor Corp .................. 77,174 232,294 American Tower Corp ........................... 565,200 1,995,156 American Woodmark Corp ........................ 17,200 817,000 AMERIGROUP Corp ............................... 36,000 1,091,160 Ameripath Inc ................................. 99,653 2,142,540 Align Technology Inc .......................... 117,900 325,522 Alkermes Inc .................................. 199,600 1,251,492 Allegiance Telecom Inc ........................ 378,000 253,260 Allegiant Bancorp Inc ......................... 41,200 751,035 Allen Telecom Inc ............................. 97,754 925,730 Alliance Gaming Corp .......................... 151,800 2,585,154 Alliance Imaging Inc .......................... 39,400 208,820 Alliance Semiconductor Corp ................... 83,869 329,605 Allos Therapeutics ............................ 82,200 618,144 Alloy Inc ..................................... 109,900 1,203,405 Allscripts Healthcare Solutions Inc ........... 79,506 190,019 Alpharma Inc .................................. 105,937 1,261,710 Altiris Inc ................................... 14,000 222,880 AM Castle & Co ................................ 30,900 140,595 Ambassadors Group Inc ......................... 17,500 226,468 AMC Entertainment Inc ......................... 105,900 937,215 Amcol International Corp ...................... 67,000 388,600 Amcore Financial Inc .......................... 88,306 1,916,240 Amerco Inc .................................... 32,049 141,657 American Capital Strategies Ltd ............... 145,836 3,148,599 American Financial Holdings Inc/CT ............ 75,176 2,246,259 American Healthways Inc ....................... 39,599 692,983 American Home Mortgage Holdings Inc ........... 31,200 343,200 American Italian Pasta Co ..................... 58,419 2,101,916 American Management Systems ................... 143,500 1,720,565 American Medical Security Group Inc ........... 21,600 301,968 American Medical Systems Holdings Inc ......... 71,200 1,154,152 American National Bankshares Inc/VA ........... 20,700 538,200 American Pharmaceutical Partners Inc .......... 32,900 585,620 American Physicians Capital Inc ............... 28,800 541,728 American States Water Co ...................... 55,369 1,281,792
The accompanying notes are an integral part of these financial statements. SAI-92 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) American Superconductor Corp .................. 77,174 $ 232,294 American Tower Corp ........................... 565,200 1,995,156 American Woodmark Corp ........................ 17,200 817,000 AMERIGROUP Corp ............................... 36,000 1,091,160 Ameripath Inc ................................. 99,653 2,142,540 Ameristar Casinos Inc ......................... 37,600 530,160 Ameritrade Holding Corp ....................... 329,400 1,864,404 Ameron International Corp ..................... 13,600 750,040 Ametek Inc .................................... 117,840 4,535,662 AMLI Residential Properties ................... 50,366 1,071,788 Amsurg Corp ................................... 73,700 1,505,691 Amylin Pharmaceuticals Inc .................... 215,872 3,484,174 Anadigics Inc ................................. 96,254 248,335 Analogic Corp ................................. 24,027 1,208,270 Anaren Inc .................................... 83,348 733,462 Anchor Bancorp Wisconsin Inc .................. 76,897 1,595,613 Angelica Corp ................................. 33,300 687,645 Anixter International Inc ..................... 109,666 2,549,735 AnnTaylor Stores Corp ......................... 154,958 3,164,242 answerthink inc ............................... 172,100 430,250 Ansys Inc ..................................... 54,900 1,108,980 Anteon International Corp ..................... 51,800 1,243,200 Anthracite Capital Inc ........................ 168,200 1,833,380 Antigenics Inc ................................ 79,161 810,609 Anworth Mortgage Asset Corp ................... 82,200 1,033,254 AO Smith Corp ................................. 59,079 1,595,724 APAC Customer Services Inc .................... 79,790 186,709 Apex Mortgage Capital Inc ..................... 107,200 701,088 Aphton Corp ................................... 68,893 267,994 Apogee Enterprises Inc ........................ 104,000 930,904 Applera Corp -- Celera Genomics Group ......... 246,600 2,355,030 Applica Inc ................................... 55,247 276,235 Applied Films Corp ............................ 40,500 809,595 Applied Industrial Technologies Inc ........... 69,601 1,315,459 Applied Molecular Evolution Inc ............... 56,000 114,800 Apria Healthcare Group Inc .................... 143,593 3,193,508 Arbitron Inc .................................. 104,600 3,504,100 Arch Chemicals Inc ............................ 73,560 1,342,470 Arch Coal Inc ................................. 160,500 3,465,195 Arctic Cat Inc ................................ 51,747 827,952 Arden Group Inc ............................... 5,200 314,704 Arena Pharmaceuticals Inc ..................... 64,500 419,895 Argonaut Group Inc ............................ 75,278 1,110,351 Argosy Gaming Co .............................. 89,803 1,699,971 Ariad Pharmaceuticals Inc ..................... 107,528 258,067
The accompanying notes are an integral part of these financial statements. SAI-93 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Ariba Inc .................................... 953,700 $ 2,365,176 Arkansas Best Corp ........................... 75,072 1,950,446 Armor Holdings Inc ........................... 83,570 1,150,759 Arqule Inc ................................... 75,800 231,190 Array Biopharma Inc .......................... 70,100 389,055 Arris Group Inc .............................. 237,300 847,161 Arrow Financial Corp ......................... 24,240 745,865 Arrow International Inc ...................... 32,381 1,316,935 Artesyn Technologies Inc ..................... 111,332 427,515 Arthrocare Corp .............................. 78,542 773,639 Artisan Components Inc ....................... 53,200 820,876 Asbury Automotive Group Inc .................. 27,500 231,275 Ascent Media Group Inc ....................... 236 264 Ascential Software Corp ...................... 877,100 2,105,040 AsiaInfo Holdings Inc ........................ 111,800 708,812 Aspect Communications Corp ................... 169,500 481,380 Aspen Technology Inc ......................... 136,584 386,533 Associated Estates Realty .................... 57,500 388,125 Astec Industries Inc ......................... 59,225 588,104 AstroPower Inc ............................... 72,999 583,262 Asyst Technologies Inc ....................... 142,928 1,050,521 At Road Inc .................................. 73,900 305,207 ATA Holdings Corp ............................ 15,300 69,921 Atherogenics Inc ............................. 90,900 673,569 Atlantic Coast Airlines Holdings Inc ......... 146,822 1,766,269 Atlas Air Worldwide Holdings Inc ............. 60,108 90,763 ATMI Inc ..................................... 95,041 1,760,159 Atmos Energy Corp ............................ 147,195 3,432,587 Atrix Labs Inc ............................... 70,400 1,079,866 Atwood Oceanics Inc .......................... 33,236 1,000,404 Audiovox Corp ................................ 56,915 588,558 August Technology Corp ....................... 26,700 135,102 Aurora Foods Inc ............................. 92,689 72,297 Avanex Corp .................................. 197,300 206,770 AVANIR Pharmaceuticals ....................... 191,700 191,700 Avatar Holdings Inc .......................... 15,500 356,500 Avenue A Inc ................................. 124,400 360,760 Aviall Inc ................................... 66,800 537,740 Avid Technology Inc .......................... 87,964 2,018,774 Avigen Inc ................................... 67,498 385,414 Avista Corp .................................. 168,439 1,947,155 Avocent Corp ................................. 149,359 3,318,757 Axcelis Technologies Inc ..................... 350,400 1,965,394 AXT Inc ...................................... 71,171 128,108 Aztar Corp ................................... 123,094 1,757,782
The accompanying notes are an integral part of these financial statements. SAI-94 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Baker (Michael) Corp ..................... 20,700 $ 226,665 Baldor Electric Co ....................... 110,967 2,191,598 Baldwin & Lyons Inc ...................... 20,064 472,507 Bally Total Fitness Holding Corp ......... 110,808 785,629 Banc Corp ................................ 45,300 351,528 Bancfirst Corp ........................... 13,396 629,612 Bandag Inc ............................... 37,641 1,455,954 Bank Mutual Corp ......................... 39,750 919,418 Bank of Granite Corp ..................... 46,600 815,500 Bank of the Ozarks Inc ................... 14,200 332,848 BankAtlantic Bancorp Inc ................. 144,604 1,366,508 Bankunited Financial Corp ................ 77,800 1,258,804 Banner Corp .............................. 37,400 705,364 Banta Corp ............................... 90,428 2,827,684 Barnes Group Inc ......................... 36,872 750,345 Barra Inc ................................ 54,609 1,656,291 Bassett Furniture Industries Inc ......... 37,100 531,272 Bay View Capital Corp .................... 228,616 1,314,542 BE Aerospace Inc ......................... 135,600 493,584 Beasley Broadcasting Group Inc ........... 18,400 220,064 Beazer Homes USA Inc ..................... 41,945 2,541,867 Bebe Stores Inc .......................... 12,404 166,214 Bedford Property Investors ............... 52,283 1,343,150 BEI Technologies Inc ..................... 36,300 406,197 Bel Fuse Inc ............................. 35,719 719,738 Belden Inc ............................... 81,063 1,233,779 Bell Microproducts Inc ................... 60,471 335,009 Benchmark Electronics Inc ................ 79,602 2,281,393 Benihana Inc ............................. 17,535 236,723 Bentley Pharmaceuticals Inc .............. 49,400 397,670 Berkshire Hills Bancorp Inc .............. 22,300 525,165 Berry Petroleum Co ....................... 60,900 1,038,345 Beverly Enterprises Inc .................. 354,286 1,009,715 Bio-Rad Laboratories Inc ................. 61,242 2,370,065 Bio-Reference Labs Inc ................... 24,700 152,399 Bio-Technology General Corp .............. 217,318 695,635 BioMarin Pharmaceuticals Inc ............. 123,541 870,964 Biopure Corp ............................. 66,734 248,250 Bioreliance Corp ......................... 11,100 257,187 Biosite Inc .............................. 39,862 1,356,105 BKF Capital Group Inc .................... 21,100 372,415 Black Box Corp ........................... 73,225 3,280,480 Black Hills Corp ......................... 96,100 2,548,572 Blair Corp ............................... 27,900 650,628 Blyth Inc ................................ 113,651 3,041,301
The accompanying notes are an integral part of these financial statements. SAI-95 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) BOB Evans Farms ................................ 126,475 $ 2,953,191 Boca Resorts Inc ............................... 103,255 1,104,829 Bombay Co Inc/The .............................. 122,300 611,500 Bone Care International Inc .................... 29,942 291,336 Borland Software Corp .......................... 214,063 2,632,975 Boston Beer Co Inc ............................. 32,400 463,320 Boston Communications Group .................... 43,200 549,072 Boston Private Financial Holdings Inc .......... 66,700 1,324,662 BostonFed Bancorp Inc .......................... 13,200 352,440 Bowne & Co Inc ................................. 122,492 1,463,779 Boyd Gaming Corp ............................... 109,223 1,534,583 Boyds Collection Ltd ........................... 64,275 427,429 Boykin Lodging Co .............................. 60,354 563,103 Bradley Pharmaceuticals ........................ 28,000 364,840 Brady Corp ..................................... 67,073 2,236,885 Brandywine Realty Trust ........................ 96,985 2,115,243 Bridgford Foods Corp ........................... 11,600 130,036 Briggs & Stratton .............................. 76,906 3,266,198 Bright Horizons Family Solutions Inc ........... 35,666 1,002,928 Britesmile Inc ................................. 68,800 22,704 Broadwing Inc .................................. 688,500 2,423,520 Brookline Bancorp Inc .......................... 213,408 2,539,555 Brooks-PRI Automation Inc ...................... 123,676 1,417,327 Brookstone Inc ................................. 30,200 436,692 Brown Shoe Co Inc .............................. 64,466 1,536,225 Bruker AXS Inc ................................. 17,595 31,847 Bruker Daltonics Inc ........................... 34,100 165,726 Brush Engineered Materials Inc ................. 65,506 360,283 Bryn Mawr Bank Corp ............................ 13,600 498,168 BSB Bancorp Inc ................................ 32,056 672,214 Buca Inc ....................................... 55,457 461,402 Buckeye Technologies Inc ....................... 99,084 609,367 Buckle Inc/The ................................. 24,023 432,414 Building Material Holding Corp ................. 42,300 604,890 Burlington Coat Factory Warehouse Corp ......... 64,536 1,158,421 Bush Industries Inc ............................ 28,200 136,488 Butler Manufacturing Co ........................ 20,800 402,480 BWAY Corp ...................................... 13,100 259,118 C&D Technologies Inc ........................... 94,656 1,672,572 C-COR.net Corp ................................. 101,330 336,416 Cable Design Technologies Corp ................. 155,841 919,462 Cabot Microelectronics Corp .................... 81,600 3,851,520 Cabot Oil & Gas Corp ........................... 97,277 2,410,524 Cache Inc ...................................... 9,700 133,860 CACI International Inc ......................... 102,508 3,653,385
The accompanying notes are an integral part of these financial statements. SAI-96 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Cadiz Inc ................................. 132,686 $ 72,977 CAL Dive International Inc ................ 132,863 3,122,281 Calgon Carbon Corp ........................ 118,704 586,398 California First National Bancorp ......... 9,900 126,720 California Pizza Kitchen Inc .............. 49,050 1,236,060 California Water Service Group ............ 51,803 1,225,141 Caliper Technologies Corp NMS ............. 89,814 269,442 Cambrex Corp .............................. 80,332 2,426,830 Camden National Corp ...................... 29,000 701,800 Caminus Corp .............................. 40,413 94,566 Cantel Medical Corp ....................... 27,500 348,150 Capital Automotive REIT ................... 77,308 1,832,200 Capital City Bank Group Inc ............... 25,774 1,010,083 Capitol Bancorp Ltd ....................... 29,700 689,040 Capstead Mortgage Corp .................... 33,897 835,561 Capstone Turbine Corp ..................... 283,800 255,420 Caraustar Industries Inc .................. 96,524 915,048 CARBO Ceramics Inc ........................ 32,577 1,097,845 Cardiac Science Inc ....................... 208,100 459,901 Cardiodynamics International Corp ......... 126,042 386,949 Carlisle Cos Inc .......................... 108,929 4,507,482 Carmike Cinemas Inc ....................... 8,100 159,165 Carpenter Technology ...................... 70,791 881,348 Carreker Corp ............................. 69,165 313,317 Cascade Bancorp ........................... 45,900 634,338 Cascade Corp .............................. 32,900 524,755 Cascade Natural Gas Corp .................. 40,607 812,140 Casella Waste Systems Inc ................. 56,766 504,650 Casey's General Stores Inc ................ 141,546 1,728,277 Cash America International Inc ............ 73,949 703,994 Catapult Communications Corp .............. 16,900 201,955 Cathay Bancorp Inc ........................ 56,278 2,138,001 Cato Corp/The ............................. 53,464 1,154,288 CB Bancshares Inc ......................... 11,990 509,815 CBL & Associates Properties Inc ........... 71,142 2,849,237 CCBT Financial Cos Inc .................... 29,100 747,288 CCC Information Services Group ............ 41,653 739,341 CDI Corp .................................. 42,945 1,158,656 Cell Genesys Inc .......................... 120,657 1,345,446 Cell Therapeutics Inc ..................... 119,917 871,797 Centene Corp .............................. 18,000 604,620 Centennial Communications Corp ............ 23,325 60,878 Center Trust Inc .......................... 31,400 244,920 Centex Construction Products Inc .......... 23,973 842,651 Centillium Communications Inc ............. 100,797 227,801
The accompanying notes are an integral part of these financial statements. SAI-97 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Central Coast Bancorp ............................ 25,400 $ 501,904 Central Garden and Pet Co ........................ 52,000 962,520 Central Parking Corp ............................. 63,134 1,190,707 Central Vermont Public Service Corp .............. 44,400 811,632 Century Aluminum Co .............................. 43,135 319,630 Century Bancorp Inc/Mass ......................... 10,300 273,156 Century Business Services Inc .................... 278,904 739,096 Cepheid Inc ...................................... 87,100 444,036 Ceres Group Inc .................................. 70,000 134,400 Cerus Corp ....................................... 46,414 997,901 CFS Bancorp Inc .................................. 44,100 630,630 CH Energy Group Inc .............................. 59,366 2,768,237 Champion Enterprises Inc ......................... 179,246 510,851 Championship Auto Racing Teams Inc ............... 31,165 115,311 Champps Entertainment Inc ........................ 25,600 243,456 Charles River Associates Inc ..................... 24,000 339,840 Charlotte Russe Holding Inc ...................... 27,200 288,592 Charming Shoppes ................................. 435,478 1,820,298 Charter Financial Corp/GA ........................ 14,500 450,673 Charter Municipal Mortgage Acceptance Co ......... 148,792 2,584,517 Chateau Communities Inc .......................... 77,796 1,789,308 Chattem Inc ...................................... 38,200 785,010 Checkers Drive-In Restaurant ..................... 21,700 135,842 Checkpoint Systems Inc ........................... 117,248 1,212,344 Chelsea Property Group Inc ....................... 109,362 3,642,848 Chemed Corp ...................................... 35,761 1,264,151 Chemical Financial Corp .......................... 80,416 2,585,374 Cherokee Inc ..................................... 16,100 235,060 Chesapeake Corp .................................. 51,774 924,166 Chesapeake Energy Corp ........................... 505,696 3,914,087 Chicago Pizza & Brewery Inc ...................... 33,600 231,840 Childrens Place .................................. 42,696 454,285 ChipPAC Inc ...................................... 187,800 666,690 Chiquita Brands International Inc ................ 127,100 1,685,346 Chittenden Corp .................................. 106,996 2,726,258 Choice Hotels International Inc .................. 72,428 1,644,116 Cholestech Corp .................................. 41,400 288,144 Chordiant Software Inc ........................... 97,983 141,096 Christopher & Banks Corp ......................... 81,550 1,692,163 Churchill Downs Inc .............................. 21,977 839,082 Ciber Inc ........................................ 206,044 1,061,127 Cima Labs Inc .................................... 51,700 1,250,675 Ciphergen Biosystems Inc ......................... 78,170 269,687 CIRCOR International Inc ......................... 36,400 578,760 Cirrus Logic Inc ................................. 275,200 792,576
The accompanying notes are an integral part of these financial statements. SAI-98 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Citizens First Bancorp Inc ..................... 33,000 $ 694,947 Citizens Inc ................................... 85,350 640,125 City Bank Lynnwood WA .......................... 26,622 658,895 City Holding Co ................................ 61,300 1,731,725 CKE Restaurants Inc ............................ 188,100 808,830 Claire's Stores Inc ............................ 152,181 3,358,635 Clarcor Inc .................................... 89,039 2,873,289 Clark/Bardes Inc ............................... 49,400 950,950 ClearOne Communications Inc .................... 28,100 125,045 Cleco Corp ..................................... 144,645 2,025,030 Cleveland-Cliffs Inc ........................... 33,234 659,695 Closure Medical Corp ........................... 18,056 189,227 CNA Surety Corp ................................ 58,254 457,294 CNET Networks Inc .............................. 445,300 1,206,763 Coachmen Industries Inc ........................ 54,069 854,290 Coastal Bancorp Inc ............................ 13,600 439,960 Coastal Financial Corp ......................... 27,900 380,556 Cobalt Corp .................................... 36,900 509,220 CoBiz Inc ...................................... 25,600 380,160 Coca-Cola Bottling Co Consolidated ............. 2,913 187,918 Cognex Corp .................................... 117,300 2,161,839 Cognizant Technology Solutions Corp ............ 29,308 2,116,917 Coherent Inc ................................... 103,191 2,058,660 Cohu Inc ....................................... 75,618 1,111,585 Coinstar Inc ................................... 77,145 1,747,334 Coldwater Creek Inc ............................ 17,400 334,080 Cole National Corp ............................. 39,800 453,720 Collins & Aikman Corp .......................... 94,212 419,243 Colonial Properties Trust ...................... 49,503 1,680,132 Columbia Bancorp ............................... 21,700 478,051 Columbia Banking Systems Inc ................... 47,500 598,975 Columbia Laboratories Inc ...................... 97,355 327,113 Columbus McKinnon Corp/NY ...................... 34,900 133,353 Comfort Systems USA Inc ........................ 138,300 463,305 Commerce Group Inc ............................. 88,616 3,322,214 Commercial Net Lease Realty .................... 133,619 2,048,379 Commerical Federal Corp ........................ 159,635 3,727,477 Commerical Metals Co ........................... 87,872 1,427,041 Commonwealth Bancorp Inc ....................... 27,700 1,284,449 Commonwealth Telephone Enterprises Inc ......... 39,229 1,405,967 CommScope Inc .................................. 179,300 1,416,470 Community Bank System Inc ...................... 41,600 1,304,160 Community Banks Inc ............................ 28,890 800,253 Community First Bankshares Inc ................. 141,358 3,740,333 Community Trust Bancorp Inc .................... 46,060 1,157,948
The accompanying notes are an integral part of these financial statements. SAI-99 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Compucom Systems Inc ............................. 74,400 $ 417,384 CompuCredit Corp ................................. 54,482 385,188 Computer Horizons Corp ........................... 107,100 350,217 Computer Network Technology Corp ................. 97,860 694,806 Computer Programs & Systems Inc .................. 9,400 232,744 Compx International Inc .......................... 11,700 97,929 Comstock Resources Inc ........................... 83,048 771,516 Conceptus Inc .................................... 57,400 687,652 Concord Camera Corp .............................. 87,543 475,358 Concord Communications Inc ....................... 58,000 521,420 Concurrent Computer Corp ......................... 203,367 585,697 Conmed Corp ...................................... 94,739 1,855,937 Connecticut Bancshares Inc/de .................... 39,197 1,507,125 Connecticut Water Service Inc .................... 27,850 702,683 Connetics Corp ................................... 110,396 1,326,960 Consolidated Graphics Inc ........................ 40,200 894,450 Cooper Cos Inc ................................... 106,948 2,675,839 CoorsTek Inc ..................................... 29,519 754,210 Corinthian Colleges Inc .......................... 133,678 5,061,049 Corixa Corp ...................................... 170,742 1,091,041 Corn Products International Inc .................. 118,809 3,579,715 Cornell Cos Inc .................................. 46,600 419,400 Cornerstone Realty Income Trust Inc .............. 168,588 1,341,960 Corporate Executive Board Co ..................... 131,978 4,212,738 Corporate Office Properties Trust SBI MD ......... 59,500 834,785 Correctional Properties Trust .................... 25,000 542,500 Corrections Corp of America ...................... 101,935 1,748,185 Corus Bankshares Inc ............................. 31,719 1,384,852 Corvel Corp ...................................... 22,988 821,821 Cost Plus Inc /California ........................ 68,952 1,976,854 CoStar Group Inc ................................. 44,416 819,475 Courier Corp ..................................... 13,800 632,592 Covance Inc ...................................... 220,812 5,429,767 Covansys Corp .................................... 70,053 263,259 Covenant Transport Inc ........................... 20,000 379,200 CPB Inc .......................................... 50,554 1,387,707 CPI Corp ......................................... 26,300 381,087 Crawford & Co .................................... 95,447 477,235 Cray Inc ......................................... 159,300 1,221,831 Credence Systems Corp ............................ 216,920 2,023,864 Credit Acceptance Corp ........................... 46,928 299,448 Cree Inc ......................................... 256,900 4,200,315 Crompton Corp .................................... 398,020 2,368,219 Cross Country Inc ................................ 118,700 1,655,865 Cross Media Marketing Corp ....................... 30,500 16,775
The accompanying notes are an integral part of these financial statements. SAI-100 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Crown American Realty Trust .............. 89,300 $ 821,560 Crown Castle International Corp .......... 723,800 2,714,250 Crown Cork & Seal Co Inc ................. 574,300 4,565,685 Crown Media Holdings Inc ................. 93,745 211,864 CryoLife Inc ............................. 58,014 396,236 CSK Auto Corp ............................ 103,576 1,139,336 CSS Industries Inc ....................... 10,548 349,139 CT Communications Inc .................... 61,656 696,713 CTS Corp ................................. 111,041 860,568 Cubic Corp ............................... 56,084 1,033,628 Cubist Pharmaceuticals Inc ............... 95,304 784,352 Culp Inc ................................. 22,800 193,800 Cuno Inc ................................. 56,113 1,858,463 CuraGen Corp ............................. 155,100 721,215 Curative Health Services Inc ............. 34,400 593,400 Curtiss-Wright Corp ...................... 37,381 2,385,655 CV Therapeutics Inc ...................... 93,190 1,697,922 CVB Financial Corp ....................... 93,707 2,382,969 Cyberonics ............................... 80,438 1,480,059 Cytec Industries Inc ..................... 142,404 3,884,781 D&K Healthcare Resources Inc ............. 45,900 470,062 Daisytek International Corp .............. 70,300 557,479 Daktronics Inc ........................... 46,200 618,156 Datascope Corp ........................... 43,433 1,077,182 Datastream Systems Inc ................... 52,215 334,176 Dave & Buster's Inc ...................... 44,700 386,655 DDI Corp /CA ............................. 137,197 30,183 DEB Shops Inc ............................ 16,600 368,686 Decode Genetics Inc ...................... 132,907 245,878 DEL Laboratories Inc ..................... 15,740 317,948 Del Monte Foods Co ....................... 659,575 5,078,728 dELiA*s Corp ............................. 73,900 33,255 Delphi Financial Group ................... 48,161 1,828,192 Delta & Pine Land Co ..................... 132,966 2,713,836 Deltagen Inc ............................. 33,000 15,840 Deltic Timber Corp ....................... 34,101 910,497 Denbury Resources Inc .................... 81,800 924,340 Dendrite International Inc ............... 105,878 790,909 Department 56 ............................ 39,700 512,130 DHB Industries Inc ....................... 67,500 112,050 DiamondCluster International Inc ......... 87,346 274,266 Dianon Systems Inc ....................... 31,006 1,479,296 Digene Corp .............................. 41,560 476,278 Digimarc Corp ............................ 30,637 347,424 Digital Insight Corp ..................... 102,952 894,653
The accompanying notes are an integral part of these financial statements. SAI-101 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Digital River Inc .............................. 97,400 $ 1,163,930 Digitas Inc .................................... 28,176 97,489 Dime Community Bancshares ...................... 79,399 1,520,491 DIMON Inc ...................................... 141,500 849,000 Dionex Corp .................................... 63,834 1,896,508 Discovery Partners International Inc ........... 54,709 152,091 Diversa Corp ................................... 85,325 772,191 DJ Orthopedics Inc ............................. 26,700 100,392 DocuCorp International Inc ..................... 25,400 168,173 Documentum Inc ................................. 139,995 2,192,322 Dollar Thrifty Automotive Group ................ 85,181 1,801,578 Dominion Homes Inc ............................. 6,500 92,625 DoubleClick Inc ................................ 431,400 2,441,724 Dover Downs Gaming & Entertainment Inc ......... 35,304 320,913 Dover Motorsports Inc .......................... 44,935 208,948 DQE Inc ........................................ 256,300 3,906,012 Dress Barn Inc ................................. 100,556 1,337,395 Drew Industries Inc ............................ 18,900 303,345 Drexler Technology Corp ........................ 30,800 388,080 Dril-Quip Inc .................................. 25,256 426,826 DRS Technologies Inc ........................... 57,600 1,804,608 Drugstore.Com .................................. 87,173 209,215 DSP Group Inc .................................. 97,441 1,541,517 Duane Reade Inc ................................ 75,126 1,277,142 Ducommun Inc ................................... 26,000 412,100 Dupont Photomasks Inc .......................... 42,969 999,029 Dura Automotive Systems Inc .................... 53,397 536,106 Durect Corp .................................... 84,300 170,286 DVI Inc ........................................ 37,799 285,382 Dycom Industries Inc ........................... 169,442 2,245,107 Dynacq International Inc ....................... 18,300 262,934 Dynamics Research Corp ......................... 23,600 330,636 E.piphany Inc .................................. 228,800 954,096 Earthlink Inc .................................. 438,700 2,390,915 Earthshell Corp ................................ 240,900 139,722 East-West Bancorp Inc .......................... 85,391 3,080,907 Eastgroup Properties ........................... 53,682 1,368,891 Echelon Corp ................................... 90,600 1,015,626 Eclipsys Corp .................................. 130,802 699,791 EDO Corp ....................................... 53,900 1,120,042 eFunds Corp .................................... 169,441 1,543,608 EGL Inc ........................................ 123,704 1,762,782 El Paso Electric Co ............................ 170,638 1,877,018 Electro Rent Corp .............................. 50,200 608,474 Electro Scientific Industries Inc .............. 99,601 1,992,020
The accompanying notes are an integral part of these financial statements. SAI-102 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Electroglas Inc ............................ 70,296 $ 108,256 Electronics Boutique Holdings Corp ......... 33,986 537,319 Electronics for Imaging .................... 195,600 3,180,652 Elizabeth Arden Inc ........................ 44,300 655,640 ElkCorp .................................... 69,365 1,200,015 Embarcadero Technologies Inc ............... 25,997 155,202 Embrex Inc ................................. 24,700 274,862 EMC INS Group Inc .......................... 9,400 167,978 EMCOR Group Inc ............................ 52,260 2,770,303 Emcore Corp ................................ 78,413 171,724 Empire District Electric Co/The ............ 81,074 1,475,547 EMS Technologies Inc ....................... 37,800 590,096 Encore Acquisition Co ...................... 31,100 572,862 Encore Wire Corp ........................... 50,200 454,310 Endo Pharmaceuticals Holdings Inc .......... 73,600 566,646 Endocardial Solutions Inc .................. 50,200 169,676 Endocare Inc ............................... 64,013 220,205 Energen Corp ............................... 123,715 3,600,107 Energy Conversion Devices Inc .............. 52,971 519,169 Energy Partners Ltd ........................ 65,300 698,710 EnergySouth Inc ............................ 14,000 394,800 Engineered Support Systems Inc ............. 44,400 1,627,704 Ennis Business Forms ....................... 58,500 679,770 Entegris Inc ............................... 165,400 1,703,620 Enterasys Networks Inc ..................... 576,323 899,064 Entertainment Properties Trust ............. 59,485 1,399,087 Entrust Inc ................................ 160,600 539,616 Enzo Biochem Inc ........................... 82,345 1,152,830 Enzon Pharmaceuticals Inc .................. 155,200 2,594,944 Eon Labs Inc ............................... 34,900 659,959 EPIQ Systems Inc ........................... 34,150 523,178 Epix Medical Inc ........................... 45,200 326,796 Equity Inns Inc ............................ 148,537 894,193 Equity One Inc ............................. 22,200 296,370 eResearch Technology Inc ................... 31,299 524,258 Escalade Inc ............................... 14,000 280,000 ESCO Technologies Inc ...................... 43,189 1,597,993 eSpeed Inc ................................. 78,715 1,333,511 Esperion Therapeutics Inc .................. 104,900 745,629 ESS Technology ............................. 104,132 654,990 Essex Property Trust Inc ................... 51,607 2,624,216 Esterline Technologies Corp ................ 76,504 1,351,826 EUniverse Inc .............................. 39,200 222,656 Euronet Worldwide Inc ...................... 42,100 316,171 Evergreen Resources Inc .................... 68,434 3,069,265
The accompanying notes are an integral part of these financial statements. SAI-103 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Exact Sciences Corp ............................... 41,200 $ 446,196 Exar Corp ......................................... 136,153 1,688,297 Excel Technology Inc .............................. 29,331 524,732 Exelixis Inc ...................................... 161,838 1,294,704 Exploration Co of Delaware Inc (The) .............. 66,000 196,680 ExpressJet Holdings Inc ........................... 110,000 1,127,500 Extreme Networks .................................. 378,100 1,236,387 Exult Inc ......................................... 174,200 553,956 F&M Bancorp/Frederick MD .......................... 36,772 1,176,704 F5 Networks Inc ................................... 79,899 858,115 Factory 2-U Stores Inc ............................ 49,699 169,523 Factset Research Systems Inc ...................... 74,254 2,099,117 FalconStor Software Inc ........................... 125,191 485,741 FAO Inc ........................................... 56,200 26,414 Farmer Bros Co .................................... 3,263 1,008,267 Farmers Capital Bank Corp ......................... 23,241 772,763 FBL Financial Group Inc ........................... 41,852 814,858 FBR Asset Investment Corp ......................... 74,400 2,522,160 Federal Agricultural Mortgage Corp ................ 27,000 827,280 Federal Realty Invs Trust ......................... 137,465 3,865,516 Federal Signal Corp ............................... 166,677 3,236,867 FEI Co ............................................ 87,713 1,341,132 FelCor Lodging Trust Inc .......................... 164,816 1,885,495 Ferro Corp ........................................ 113,964 2,784,141 Fidelity Bankshares Inc ........................... 54,400 973,760 Fidelity National Information Solutions Inc ....... 50,766 875,714 Filenet Corp ...................................... 115,797 1,412,723 Financial Federal Corp ............................ 40,957 1,029,249 Financial Industries Corp ......................... 25,100 357,424 Financial Institutions Inc ........................ 26,500 778,040 Finisar Corp ...................................... 471,893 448,298 Finish Line ....................................... 70,200 740,610 Finlay Enterprises Inc ............................ 17,500 211,050 First Bancorp Puerto Rico ......................... 116,963 2,643,364 First Bancorp/NC .................................. 25,200 592,452 First Banks America Inc ........................... 2,500 101,350 First Busey Corp-Cl A ............................. 33,785 779,082 First Charter Corp ................................ 110,057 1,981,026 First Citizens BancShares Inc ..................... 22,056 2,130,610 First Commonwealth Financial Corp ................. 205,959 2,368,529 First Community Bancorp/CA ........................ 28,300 931,947 First Community Bancshares Inc/VA ................. 31,920 981,859 First Consulting Group Inc ........................ 66,377 382,332 First Defiance Financial Corp ..................... 18,700 353,430 First Essex Bancorp Inc ........................... 24,600 821,640
The accompanying notes are an integral part of these financial statements. SAI-104 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) First Federal Capital Corp ........................ 61,557 $ 1,188,604 First Financial Bancorp ........................... 128,142 2,100,376 First Financial Bankshares Inc .................... 44,975 1,709,050 First Financial Corp/Indiana ...................... 23,611 1,148,203 First Financial Holdings Inc ...................... 47,254 1,170,009 First Horizon Pharmaceutical Corp ................. 81,250 607,588 First Indiana Corp ................................ 43,866 812,398 First Merchants Corp .............................. 52,555 1,197,728 First National Corp ............................... 25,790 618,960 First Niagara Financial Group Inc ................. 33,406 872,565 First Oak Brook Bancshares Inc .................... 15,100 474,442 First of Long Island Corp/The ..................... 12,799 467,164 First Place Financial Corp (Warren/Ohio) .......... 47,000 781,610 First Republic Bank ............................... 38,600 771,614 First Sentinel Bancorp Inc ........................ 88,492 1,273,400 First South Bancorp Inc/VA ........................ 10,000 355,800 First State Bancorporation ........................ 22,200 550,560 Firstfed America Bancorp .......................... 26,525 659,146 FirstFed Financial Corp ........................... 60,228 1,743,601 Fisher Communications Inc ......................... 18,000 948,960 Flagstar Bancorp Inc .............................. 48,874 1,055,678 Fleetwood Enterprises Inc ......................... 123,377 968,509 Fleming Cos Inc ................................... 170,068 1,117,347 Flir Systems Inc .................................. 52,400 2,557,120 Florida East Coast Industries ..................... 81,600 1,893,120 Florida Rock Industries Inc ....................... 71,104 2,705,507 Flow International Corp ........................... 53,300 135,915 Flowers Foods Inc ................................. 81,700 1,593,967 Flushing Financial Corp ........................... 33,550 549,482 FMC Corp .......................................... 105,900 2,893,188 FNB Corp/VA ....................................... 19,600 465,108 Foamex International Inc .......................... 88,900 280,924 Focal Communications Corp -- Warrants (1) ......... 3,116 31 Footstar Inc ...................................... 69,380 482,885 Forrester Research Inc ............................ 49,511 770,886 Forward Air Corp .................................. 40,577 787,600 Fossil Inc ........................................ 69,992 1,423,637 Foundry Networks Inc .............................. 311,900 2,195,776 Fpic Insurance Group Inc .......................... 29,600 204,240 Franklin Electric Co Inc .......................... 22,102 1,061,117 Franklin Financial Corp/TN ........................ 8,900 204,077 Fred's Inc ........................................ 75,609 1,943,151 Freemarkets Inc ................................... 138,700 893,089 Fremont General Corp .............................. 215,952 969,624 Friedman Billings Ramsey Group Inc ................ 57,920 542,131
The accompanying notes are an integral part of these financial statements. SAI-105 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Friedman's Inc ................................... 63,300 $ 549,444 Frontier Airlines Inc ............................ 100,421 678,846 Frontier Financial Corp .......................... 57,996 1,483,538 Frontier Oil Corp ................................ 90,098 1,551,488 FSI International Inc ............................ 100,557 452,507 FTI Consulting Inc ............................... 78,300 3,143,745 FuelCell Energy Inc .............................. 120,932 792,346 G&K Services Inc ................................. 69,884 2,473,963 Gabelli Asset Management Inc ..................... 22,750 683,410 Gables Residential Trust ......................... 90,354 2,252,525 Gaiam Inc ........................................ 17,600 182,512 Galyans Trading Co Inc ........................... 37,900 379,000 Gardner Denver Inc ............................... 54,544 1,107,243 Gart Sports Co ................................... 22,900 443,115 Gartner Inc ...................................... 297,094 2,733,265 Gaylord Entertainment Co ......................... 79,745 1,642,747 GBC Bancorp/California ........................... 28,446 550,715 GenCorp Inc ...................................... 111,830 885,694 Gene Logic Inc ................................... 94,908 596,971 Genencor International Inc ....................... 32,700 319,806 General Binding Corp ............................. 24,000 203,520 General Cable Corp ............................... 113,355 430,749 General Communication ............................ 141,103 946,801 Genesco Inc ...................................... 69,640 1,297,393 Genesee & Wyoming Inc ............................ 39,000 793,650 Genesis Health Ventures Inc ...................... 102,500 1,583,625 Genesis Microchip Inc ............................ 108,600 1,417,230 Genlyte Group Inc ................................ 44,153 1,375,807 Genta Inc ........................................ 159,001 1,222,718 Gentiva Health Services Inc ...................... 83,440 735,106 Genzyme Corp-Genzyme Biosurgery Division ......... 137,800 351,390 Georgia Gulf Corp ................................ 99,597 2,304,675 German American Bancorp .......................... 36,000 559,800 Geron Corp ....................................... 86,219 310,388 Getty Realty Corp ................................ 54,700 1,036,565 Gibraltar Steel Corp ............................. 30,493 580,587 Glacier Bancorp Inc .............................. 55,000 1,296,400 Gladstone Capital Corp ........................... 31,300 515,511 Glatfelter ....................................... 33,778 444,518 Glenborough Realty Trust Inc ..................... 54,047 963,118 Glimcher Realty Trust ............................ 106,234 1,885,654 Global Imaging Systems Inc ....................... 29,200 536,696 Global Industries Ltd ............................ 233,000 971,610 Global Power Equipment Group Inc/ ................ 81,300 400,809 GlobespanVirata Inc .............................. 388,030 1,711,212
The accompanying notes are an integral part of these financial statements. SAI-106 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Gold Banc Corp Inc ............................. 122,337 $ 1,213,705 Golden Telecom Inc ............................. 53,636 678,495 Goody's Family Clothing Inc .................... 53,300 236,652 Gorman-Rupp Co/The ............................. 27,100 636,850 GrafTech International Ltd ..................... 201,014 1,198,043 Granite Construction Inc ....................... 117,035 1,814,043 Granite State Bankshares Inc ................... 19,300 843,217 Graphic Packaging International Corp ........... 81,000 456,840 Gray Television Inc ............................ 32,500 385,125 Great American Financial Resources Inc ......... 23,222 399,418 Great Atlantic & Pacific Tea Co ................ 53,163 428,494 Great Lakes Chemical Corp ...................... 131,155 3,131,981 Great Lakes Reit Inc ........................... 48,000 799,200 Great Southern Bancorp Inc ..................... 19,800 727,650 Green Mountain Coffee Roasters Inc ............. 11,400 172,254 Greif Brothers Corp ............................ 46,711 1,111,722 Grey Global Group Inc .......................... 2,589 1,582,138 Grey Wolf Inc .................................. 599,296 2,391,191 Griffon Corp ................................... 96,903 1,319,819 Group 1 Automotive Inc ......................... 65,513 1,564,450 GSI Commerce Inc ............................... 80,500 293,825 Guess ? Inc .................................... 25,816 108,169 Guilford Pharmaceuticals Inc ................... 78,365 311,893 Guitar Center Inc .............................. 46,651 772,541 Gulf Island Fabrication Inc .................... 23,833 387,286 Gulfmark Offshore Inc .......................... 47,400 699,150 Gymboree Corp .................................. 87,300 1,384,578 Haemonetics Corp/Mass .......................... 65,902 1,414,257 Hain Celestial Group Inc ....................... 84,595 1,285,844 Hall Kinion & Associates Inc ................... 32,200 180,030 Hancock Fabrics Inc /DE ........................ 58,800 896,700 Hancock Holding Co ............................. 47,756 2,132,305 Handleman Co ................................... 85,366 981,709 Handspring Inc ................................. 193,000 183,350 Hanger Orthopedic Group Inc .................... 72,800 957,320 Hanmi Financial Corp ........................... 28,100 471,237 Hanover Compressor Co .......................... 168,100 1,543,158 Harbor Florida Bancshares Inc .................. 76,978 1,733,545 Harland (John H.) Co ........................... 102,181 2,261,266 Harleysville Group Inc ......................... 106,431 2,812,971 Harleysville National Corp ..................... 66,786 1,784,522 Harmonic Inc ................................... 229,800 528,540 Harris Interactive Inc ......................... 130,821 385,922 Harvard Bioscience Inc ......................... 63,900 210,742 Harvest Natural Resources Inc .................. 127,000 819,150
The accompanying notes are an integral part of these financial statements. SAI-107 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Haverty Furniture Cos Inc ................... 54,145 $ 752,616 Hawthorne Financial Corp .................... 22,200 633,588 HB Fuller Co ................................ 101,366 2,623,352 Headwaters Inc .............................. 100,200 1,554,102 Health Care REIT Inc ........................ 138,220 3,738,851 Healthcare Realty Trust Inc ................. 148,795 4,352,254 Healthcare Services Group ................... 33,100 431,624 HealthExtras Inc ............................ 63,800 258,390 HealthTronics Surgical Services Inc ......... 23,800 190,662 Heartland Express Inc ....................... 108,463 2,484,996 Hecla Mining Co ............................. 299,100 1,513,446 Heico Corp .................................. 46,600 494,426 Heidrick & Struggles Inc .................... 62,023 909,877 Helix Technology Corp ....................... 98,428 1,102,394 Heritage Property Investment Trust .......... 66,000 1,648,020 Herley Industries Inc ....................... 40,400 703,283 Hexcel Corp ................................. 86,963 260,889 Hibbett Sporting Goods Inc .................. 26,050 623,116 Hickory Tech Corp ........................... 48,301 460,309 Hilb Rogal & Hamilton Co .................... 117,894 4,821,865 Hollinger International Inc ................. 181,600 1,845,056 Holly Corp .................................. 32,900 718,865 Hollywood Casino Corp ....................... 33,300 408,924 Hollywood Entertainment Corp ................ 189,955 2,868,321 Hologic Inc ................................. 66,400 810,744 Home Properties Of NY Inc ................... 91,783 3,161,924 Homestore Inc ............................... 284,700 241,995 Hooper Holmes Inc ........................... 184,344 1,131,872 Horace Mann Educators Corp .................. 126,561 1,940,180 Horizon Offshore Inc ........................ 65,473 326,056 Horizon Organic Holding Corp ................ 23,100 373,989 HOT Topic Inc ............................... 112,831 2,581,573 Houston Exploration Co ...................... 34,618 1,059,311 Hovnanian Enterprises Inc ................... 52,500 1,664,250 HRPT Properties Trust ....................... 454,037 3,741,265 Hudson River Bancorp ........................ 52,900 1,309,275 Hughes Supply Inc ........................... 84,334 2,304,005 Humboldt Bancorp ............................ 41,640 437,220 Hutchinson Technology Inc ................... 88,530 1,832,571 Hydril Co ................................... 39,900 940,443 Hypercom Corp ............................... 124,100 462,893 Hyperion Solutions Corp ..................... 117,200 3,008,524 I-many Inc .................................. 126,900 180,198 IBERIABANK Corp ............................. 20,700 831,312 ICT Group Inc ............................... 9,500 110,105
The accompanying notes are an integral part of these financial statements. SAI-108 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) ICU Medical Inc ............................ 38,000 $ 1,417,400 Identix Inc ................................ 308,406 1,588,291 IDEX Corp .................................. 97,364 3,183,803 Idexx Laboratories Inc ..................... 112,890 3,708,437 iDine Rewards Network Inc .................. 65,000 690,300 Heritage Property Investment Trust ......... 66,000 1,648,020 Herley Industries Inc ...................... 40,400 703,283 Hexcel Corp ................................ 86,963 260,889 Hibbett Sporting Goods Inc ................. 26,050 623,116 Hickory Tech Corp .......................... 48,301 460,309 Hilb Rogal & Hamilton Co ................... 117,894 4,821,865 Hollinger International Inc ................ 181,600 1,845,056 Holly Corp ................................. 32,900 718,865 Hollywood Casino Corp ...................... 33,300 408,924 Hollywood Entertainment Corp ............... 189,955 2,868,321 Hologic Inc ................................ 66,400 810,744 Home Properties Of NY Inc .................. 91,783 3,161,924 Homestore Inc .............................. 284,700 241,995 Hooper Holmes Inc .......................... 184,344 1,131,872 Horace Mann Educators Corp ................. 126,561 1,940,180 Horizon Offshore Inc ....................... 65,473 326,056 Horizon Organic Holding Corp ............... 23,100 373,989 HOT Topic Inc .............................. 112,831 2,581,573 Houston Exploration Co ..................... 34,618 1,059,311 Hovnanian Enterprises Inc .................. 52,500 1,664,250 HRPT Properties Trust ...................... 454,037 3,741,265 Hudson River Bancorp ....................... 52,900 1,309,275 Hughes Supply Inc .......................... 84,334 2,304,005 Humboldt Bancorp ........................... 41,640 437,220 Hutchinson Technology Inc .................. 88,530 1,832,571 Hydril Co .................................. 39,900 940,443 Hypercom Corp .............................. 124,100 462,893 Hyperion Solutions Corp .................... 117,200 3,008,524 I-many Inc ................................. 126,900 180,198 IBERIABANK Corp ............................ 20,700 831,312 ICT Group Inc .............................. 9,500 110,105 ICU Medical Inc ............................ 38,000 1,417,400 Identix Inc ................................ 308,406 1,588,291 IDEX Corp .................................. 97,364 3,183,803 Idexx Laboratories Inc ..................... 112,890 3,708,437 iDine Rewards Network Inc .................. 65,000 690,300 IDX Systems Corp ........................... 59,265 1,009,283 iGate Corp ................................. 61,400 160,868 Igen International Inc ..................... 55,925 2,396,386 Ihop Corp .................................. 71,839 1,724,136
The accompanying notes are an integral part of these financial statements. SAI-109 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Ii-Vi Inc ................................... 36,081 $ 579,461 Ilex Oncology Inc ........................... 111,212 785,157 Illumina Inc ................................ 87,200 293,864 Imagistics International Inc ................ 58,800 1,176,000 Imation Corp ................................ 123,740 4,340,799 ImClone Systems Inc ......................... 179,000 1,901,159 Imco Recycling Inc .......................... 34,600 281,298 Immucor Inc ................................. 38,600 781,650 Immunogen Inc ............................... 146,279 453,465 Immunomedics Inc ............................ 156,863 724,707 IMPAC Mortgage Holdings Inc ................. 156,000 1,794,000 Impath Inc .................................. 55,709 1,098,581 Impax Laboratories Inc ...................... 94,400 378,544 IMPCO Technologies Inc ...................... 34,294 160,839 Inamed Corp ................................. 43,620 1,343,496 Incyte Genomics Inc ......................... 244,500 1,114,920 Independence Holding Co ..................... 10,200 218,994 Independent Bank Corp/MA .................... 41,448 945,014 Independent Bank Corp/MI .................... 45,278 1,370,112 Indevus Pharmaceuticals Inc ................. 122,000 260,958 Inet Technologies Inc ....................... 32,400 197,640 InFocus Corp ................................ 131,704 811,297 Infogrames Inc .............................. 41,495 73,446 Infonet Services Corp ....................... 218,600 432,828 Informatica Corp ............................ 198,500 1,143,360 Information Holdings Inc .................... 37,180 577,034 Information Resources Inc ................... 96,700 154,720 Inforte Corp ................................ 23,400 181,350 infoUSA Inc ................................. 84,576 420,343 Ingles Markets Inc .......................... 35,800 421,330 Inktomi Corp ................................ 541,216 865,946 Innkeepers USA Trust ........................ 90,452 692,862 Input/Output Inc ............................ 154,404 656,217 Inrange Technologies Corp ................... 48,800 114,680 Insight Communications ...................... 147,900 1,831,002 Insight Enterprises Inc ..................... 149,144 1,239,387 Insignia Financial Group Inc ................ 64,752 469,452 Insituform Technologies Inc ................. 81,833 1,395,253 Insurance Auto Auctions Inc ................. 37,048 614,626 Integra Bank Corp ........................... 57,030 1,016,275 Integra LifeSciences Holdings Corp .......... 63,900 1,127,835 Integral Systems Inc/MD ..................... 34,100 683,705 Integrated Defense Technologies Inc ......... 24,900 361,050 Integrated Electrical Services Inc .......... 111,959 431,042 Integrated Silicon Solutions Inc ............ 90,762 395,722
The accompanying notes are an integral part of these financial statements. SAI-110 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Inter Parfums Inc ............................ 18,100 $ 140,094 Inter-Tel Inc ................................ 62,733 1,311,747 Intercept Inc ................................ 56,897 963,323 Interchange Financial Services Cp/Nj ......... 34,000 547,400 Interdigital Communications Corp ............. 194,012 2,824,815 Interface Inc ................................ 171,628 526,898 Intergraph Corp .............................. 164,333 2,918,554 Interland Inc ................................ 437,382 568,597 Intermagnetics General Corp .................. 55,270 1,085,503 Intermet Corp ................................ 72,300 303,660 InterMune Inc ................................ 87,433 2,230,416 International Bancshares Corp ................ 79,852 3,150,161 International Multifoods Corp ................ 56,510 1,197,447 International Specialty Products Inc ......... 39,511 403,407 Internet Security Systems .................... 133,500 2,447,055 Interpool Inc ................................ 22,600 362,956 Interpore International ...................... 61,500 393,600 Interstate Bakeries .......................... 154,514 2,356,339 Intertan Inc ................................. 84,539 604,454 Intertrust Technologies Corp ................. 269,200 1,138,716 Interwoven Inc ............................... 384,600 999,960 Intrado Inc .................................. 60,500 592,900 Intuitive Surgical Inc ....................... 105,690 651,050 Invacare Corp ................................ 94,737 3,154,742 Inverness Medical Innovations Inc ............ 21,200 278,780 Investors Real Estate Trust .................. 118,591 1,183,538 Invision Technologies Inc .................... 39,400 1,038,584 Iomega Corp .................................. 184,322 1,446,928 Ionics Inc ................................... 64,549 1,471,717 IRT Property Co .............................. 123,419 1,464,984 Irwin Financial Corp ......................... 54,622 901,263 Isis Pharmaceuticals Inc ..................... 160,888 1,060,252 Isle of Capri Casinos Inc .................... 52,940 700,926 Itla Capital Corp ............................ 17,500 581,525 Itron Inc .................................... 72,700 1,393,659 ITT Educational Services Inc ................. 152,512 3,591,658 ITXC Corp .................................... 49,258 114,279 Ixia ......................................... 78,400 286,160 IXYS Corp .................................... 52,059 367,537 J Jill Group Inc/The ......................... 64,300 898,914 J&J Snack Foods Corp ......................... 21,300 760,623 j2 Global Communications Inc ................. 18,500 352,240 Jack in the Box Inc .......................... 133,914 2,315,373 Jakks Pacific Inc ............................ 87,516 1,178,841 Jarden Corp .................................. 39,600 945,252
The accompanying notes are an integral part of these financial statements. SAI-111 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) JB Hunt Transport Services Inc ............. 78,992 $ 2,314,466 JDA Software Group Inc ..................... 97,481 941,666 JDN Realty Corp ............................ 129,045 1,413,043 Jefferies Group Inc ........................ 68,682 2,882,584 JLG Industries Inc ......................... 154,222 1,161,292 JM Smucker Co/The .......................... 158,240 6,299,534 Jo-Ann Stores Inc .......................... 51,800 1,189,846 Johnson Outdoors Inc ....................... 13,700 135,219 Jones Lang LaSalle Inc ..................... 111,579 1,716,085 Journal Register Co ........................ 98,629 1,753,624 Joy Global Inc ............................. 161,900 1,822,994 K-Swiss Inc ................................ 44,600 968,266 K2 Inc ..................................... 69,200 650,480 Kadant Inc ................................. 51,461 771,915 Kaman Corp ................................. 80,055 880,605 Kansas City Life Ins Co .................... 11,834 448,509 Kansas City Southern ....................... 210,950 2,531,400 Kaydon Corp ................................ 98,668 2,092,748 Keane Inc .................................. 202,136 1,817,203 Keithley Instruments Inc ................... 21,662 270,775 Kellwood Co ................................ 89,785 2,334,410 Kelly Services Inc ......................... 59,898 1,480,080 Kendle International Inc ................... 38,800 341,479 Kennametal Inc ............................. 122,828 4,235,109 Kenneth Cole Productions Inc ............... 24,786 503,156 Kensey Nash Corp ........................... 23,100 422,037 Key Energy Services Inc .................... 403,495 3,619,350 Keynote Systems Inc ........................ 51,654 398,769 Keystone Automotive Industries Inc ......... 34,800 522,696 Keystone Property Trust .................... 51,500 873,955 kforce Inc ................................. 55,331 233,497 Kilroy Realty Corp ......................... 86,195 1,986,795 Kimball International ...................... 119,424 1,701,792 Kindred Healthcare Inc ..................... 39,000 707,889 Kirby Corp ................................. 65,795 1,802,125 Knight Trading Group Inc ................... 298,600 1,430,294 Knight Transportation Inc .................. 84,912 1,783,152 Koger Equity Inc ........................... 66,662 1,039,927 Kopin Corp ................................. 250,500 981,960 Korn/Ferry International ................... 138,292 1,034,424 Kos Pharmaceuticals Inc .................... 18,786 356,934 Kosan Biosciences Inc ...................... 62,600 379,982 Kramont Realty Trust ....................... 67,600 990,340 Kroll Inc .................................. 93,599 1,785,869 Kronos Inc/MA .............................. 71,083 2,629,360
The accompanying notes are an integral part of these financial statements. SAI-112 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Kulicke & Soffa Industries Inc ............... 169,779 $ 971,136 KV Pharmaceutical Co ......................... 79,100 1,835,120 Kyphon Inc ................................... 22,000 187,880 La Jolla Pharmaceutical Co ................... 157,700 1,025,050 La Quinta Corp ............................... 481,856 2,120,166 LabOne Inc ................................... 17,600 311,872 Labor Ready Inc .............................. 143,985 924,384 Laclede Group Inc/The ........................ 66,009 1,597,418 Ladish Co Inc ................................ 33,500 270,010 Lakeland Bancorp Inc ......................... 42,713 763,281 Lakeland Financial Corp ...................... 18,200 426,790 Lance Inc .................................... 85,862 1,016,520 Landamerica Financial Group Inc .............. 66,302 2,350,406 Landauer Inc ................................. 29,400 1,021,650 Landry's Restaurants Inc ..................... 75,813 1,610,268 Landstar System Inc .......................... 54,536 3,182,721 Lannett Co Inc ............................... 11,200 183,456 LaSalle Hotel Properties ..................... 60,652 849,128 Lattice Semiconductor Corp ................... 306,800 2,690,636 Lawson Products .............................. 16,899 523,531 Lawson Software Inc .......................... 44,200 254,150 Learning Tree International Inc .............. 37,649 515,791 LeCroy Corp .................................. 35,000 388,500 Leeds Federal Bankshares Inc ................. 4,400 140,360 Legato Systems Inc ........................... 303,831 1,528,270 LendingTree Inc .............................. 24,100 310,408 Lennox International Inc ..................... 152,757 1,917,100 Lexar Media Inc .............................. 118,600 743,622 Lexicon Genetics Inc/tx ...................... 116,918 553,022 Lexington Corporate Properties Trust ......... 95,014 1,510,723 Libbey Inc ................................... 55,636 1,446,536 Liberate Technologies ........................ 376,000 537,680 Liberty Corp ................................. 58,957 2,287,532 Lifecore Biomedical Inc ...................... 33,900 290,862 Lifeline Systems Inc ......................... 12,300 275,889 Ligand Pharmaceuticals Inc ................... 187,999 1,009,555 Lightbridge Inc .............................. 107,399 660,504 Lincoln Electric Holdings Inc ................ 112,510 2,604,607 Lindsay Manufacturing Co ..................... 35,957 769,480 Linens 'N Things Inc ......................... 130,087 2,939,966 Liquidmetal Technologies ..................... 18,500 190,180 Lithia Motors Inc ............................ 41,900 657,411 Littelfuse Inc ............................... 71,828 1,211,020 LNR Property Corp ............................ 81,263 2,876,710 Local Financial Corp ......................... 65,800 963,970
The accompanying notes are an integral part of these financial statements. SAI-113 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Lodgenet Entertainment Corp ............... 36,617 $ 391,070 Lone Star Steakhouse & Saloon ............. 58,263 1,126,806 Lone Star Technologies .................... 99,278 1,478,249 Longs Drug Stores Corp .................... 109,321 2,267,318 Longview Fibre Co ......................... 177,056 1,280,115 Looksmart ................................. 242,400 601,152 Louisiana-Pacific Corp .................... 366,525 2,954,192 LSB Bancshares Inc ........................ 31,300 507,060 LSI Industries Inc ........................ 47,950 664,108 LTC Properties Inc ........................ 56,800 381,696 LTX Corp .................................. 163,646 986,785 Luby's Inc ................................ 63,400 184,494 Lufkin Industries Inc ..................... 20,300 476,035 Luminex Corp .............................. 63,460 260,821 Lydall Inc ................................ 51,200 581,120 M/I Schottenstein Homes Inc ............... 43,800 1,217,640 Macatawa Bank Corp ........................ 23,200 460,520 MacDermid Inc ............................. 91,363 2,087,645 Macerich Co/The ........................... 117,182 3,603,347 Macrovision Corp .......................... 144,300 2,314,572 MAF Bancorp Inc ........................... 66,581 2,259,093 Magma Design Automation Inc ............... 69,100 661,978 Magna Entertainment Corp .................. 162,600 1,008,120 Magnetek Inc .............................. 67,781 300,948 Magnum Hunter Resources Inc ............... 174,559 1,038,626 Mail-Well Inc ............................. 98,308 245,770 Main Street Banks Inc ..................... 38,900 746,880 MainSource Financial Group Inc ............ 22,050 529,443 Manhattan Associates Inc .................. 70,475 1,667,439 Manitowoc Co .............................. 93,491 2,384,021 Mantech International Corp ................ 24,600 469,122 Manufactured Home Communities Inc ......... 46,142 1,367,187 Manufacturers Services Ltd ................ 52,800 292,512 Manugistics Group Inc ..................... 223,700 536,880 MAPICS Inc ................................ 48,100 334,295 Mapinfo Corp .............................. 60,435 335,414 Marcus Corp ............................... 70,253 997,593 Marine Products Corp ...................... 28,100 276,785 MarineMax Inc ............................. 24,000 283,440 Martek Biosciences Corp ................... 71,584 1,801,053 Martha Stewart Living Omnimedia ........... 30,757 303,572 Marvel Enterprises Inc .................... 64,800 581,904 MASSBANK Corp ............................. 13,500 382,050 Massey Energy Co .......................... 221,700 2,154,924 Mastec Inc ................................ 83,727 246,995
The accompanying notes are an integral part of these financial statements. SAI-114 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Material Sciences Corp ........................ 36,400 $ 471,016 Matria Healthcare Inc ......................... 27,100 235,499 Matrixone Inc ................................. 158,183 680,187 Matthews International Corp ................... 99,564 2,223,364 Mattson Technology Inc ........................ 61,054 174,614 Maui Land & Pineapple Co Inc .................. 8,400 133,056 Maverick Tube Corp ............................ 133,178 1,735,309 MAXIMUS Inc ................................... 62,353 1,627,413 Maxtor Corp ................................... 710,900 3,597,154 Maxwell Shoe Co ............................... 47,300 549,626 Maxygen ....................................... 104,704 797,844 MB Financial Corp ............................. 41,800 1,454,222 McData Corp ................................... 229,400 1,628,740 MCG Capital Corp .............................. 83,200 893,568 Mcgrath Rentcorp .............................. 31,822 739,543 MCSi Inc ...................................... 86,464 410,704 MDC Holdings Inc .............................. 69,264 2,650,041 Med-Design Corp ............................... 31,000 249,798 Medarex Inc ................................... 240,200 948,790 Medcath Corp .................................. 20,100 201,000 Mediacom Communications Corp .................. 186,800 1,645,708 Medical Staffing Network Holdings Inc ......... 26,200 419,200 Medicines Co .................................. 84,500 1,353,690 Medis Technologies Ltd ........................ 38,331 191,655 MedQuist Inc .................................. 35,481 718,845 MedSource Technologies Inc .................... 36,300 235,587 MEEMIC Holdings Inc ........................... 3,800 109,972 Memberworks Inc ............................... 33,222 597,332 MEMC Electronic Materials Inc ................. 208,592 1,579,041 Men's Wearhouse Inc ........................... 107,335 1,840,795 Mentor Corp ................................... 69,150 2,662,275 Mentor Graphics Corp .......................... 230,200 1,809,372 Merchants Bancshares Inc ...................... 14,700 331,338 Mercury Computer Systems Inc .................. 77,755 2,373,083 Meridian Medical Technologies Inc ............. 11,500 510,600 Meridian Resource Corp ........................ 123,754 111,379 Meristar Hospitality Corp ..................... 148,954 983,096 Merit Medical Systems Inc ..................... 38,800 772,896 Meritage Corp ................................. 30,000 1,009,500 Merix Corp .................................... 51,171 429,836 Mesa Air Group Inc ............................ 121,898 496,125 Mesaba Holdings Inc ........................... 36,200 221,544 Mestek Inc .................................... 9,300 166,749 MetaSolv Inc .................................. 91,974 126,004 Methode Electronics ........................... 118,283 1,297,565
The accompanying notes are an integral part of these financial statements. SAI-115 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Metris Cos Inc ................................ 124,036 $ 306,369 Metro One Telecommunications .................. 67,524 435,530 MFA Mortgage Investments Inc .................. 159,100 1,336,440 MGE Energy Inc ................................ 57,098 1,528,571 MGI Pharma Inc ................................ 89,014 645,352 Micromuse Inc ................................. 257,500 983,650 Micros Systems Inc ............................ 59,897 1,342,891 Microsemi Corp ................................ 95,958 584,384 Microtune Inc ................................. 158,544 496,243 MID Atlantic Realty Trust ..................... 61,500 1,070,100 Mid-America Apartment Communities Inc ......... 50,711 1,239,884 Mid-State Bancshares .......................... 89,364 1,467,536 Midas Inc ..................................... 20,227 130,060 Middlesex Water Co ............................ 25,200 528,444 Midland Co/The ................................ 26,892 510,948 Midway Games Inc .............................. 101,422 422,930 Midwest Banc Holdings Inc ..................... 33,000 625,350 Midwest Express Holdings Inc .................. 46,767 250,203 Milacron Inc .................................. 63,325 376,784 Millennium Chemicals Inc ...................... 220,261 2,096,885 Mills Corp/The ................................ 76,843 2,254,574 MIM Corp ...................................... 83,600 484,880 Mine Safety Appliances Co ..................... 28,821 929,477 Minerals Technologies Inc ..................... 71,860 3,100,759 MIPS Technologies Inc ......................... 143,989 436,287 Mission West Properties ....................... 51,700 511,830 Mobile Mini Inc ............................... 42,236 661,838 Modine Manufacturing Co ....................... 101,287 1,790,754 Modtech Holdings Inc .......................... 30,900 299,730 Molecular Devices Corp ........................ 55,779 918,680 Monaco Coach Corp ............................. 85,174 1,409,630 Monarch Casino & Resort Inc ................... 12,900 177,117 Monolithic System Technology Inc .............. 65,300 788,824 Monro Muffler Inc ............................. 21,200 358,280 Monterey Pasta Co ............................. 51,000 191,250 Moog Inc ...................................... 54,016 1,676,657 Mossimo Inc ................................... 26,000 143,000 Mothers Work Inc .............................. 10,300 362,869 Movado Group Inc .............................. 35,100 660,231 Movie Gallery Inc ............................. 59,373 771,849 MPS Group Inc ................................. 329,825 1,827,231 MRO Software Inc .............................. 61,727 749,674 MRV Communications Inc ........................ 308,045 329,608 MSC.Software Corp ............................. 91,400 705,608 MTR Gaming Group Inc .......................... 80,800 643,168
The accompanying notes are an integral part of these financial statements. SAI-116 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) MTS Systems Corp ......................... 70,900 $ 710,418 Mueller Industries Inc ................... 98,785 2,691,891 Multimedia Games Inc ..................... 36,000 988,560 Myers Industries Inc ..................... 67,752 724,946 Mykrolis Corp ............................ 136,662 997,633 Myriad Genetics Inc ...................... 81,700 1,192,820 Nabi Biopharmaceuticals .................. 131,613 816,001 NACCO Industries Inc ..................... 19,604 858,067 Nanometrics Inc .......................... 30,708 128,667 Napro Biotherapeutics Inc ................ 93,100 63,308 Nara Bancorp Inc ......................... 16,200 336,474 NASB Financial Inc ....................... 9,700 223,100 Nash Finch Co ............................ 32,600 251,998 Nassda Corp .............................. 14,900 167,178 Nastech Pharmaceutical Inc ............... 28,800 246,240 NATCO Group Inc .......................... 34,200 214,776 National Beverage Corp ................... 11,500 175,950 National Health Investors Inc ............ 81,902 1,316,984 National Health Realty Inc ............... 18,900 275,940 National Healthcare Corp ................. 30,300 530,250 National Penn Bancshares Inc ............. 66,467 1,764,699 National Presto Industries Inc ........... 16,900 496,522 National Western Life INS ................ 7,768 745,728 Nationwide Health Properties Inc ......... 175,443 2,619,364 Natures Sunshine Prods Inc ............... 41,400 401,994 Nautica Enterprises Inc .................. 91,564 1,017,276 Nautilus Group Inc ....................... 97,681 1,305,018 Navigant Consulting Inc .................. 137,621 811,964 Navigant International Inc ............... 40,400 498,132 Navigators Group Inc ..................... 13,200 302,940 NBC Capital Corp ......................... 25,533 643,432 NBT Bancorp Inc .......................... 107,800 1,840,146 NBTY Inc ................................. 147,609 2,594,966 NCI Building Systems Inc ................. 65,898 1,437,894 NCO Group Inc ............................ 65,272 1,041,088 NDCHealth Corp ........................... 113,336 2,255,386 Nektar Therapeutics ...................... 193,000 1,559,440 Neoforma Inc ............................. 26,800 320,260 Neopharm Inc ............................. 41,220 417,971 Neose Technologies Inc ................... 38,032 337,344 Net2Phone Inc ............................ 54,578 221,041 Netbank Inc .............................. 173,739 1,681,794 Netegrity Inc ............................ 91,471 297,555 NetFlix Inc .............................. 21,290 234,403 NETIQ Corp ............................... 130,675 1,613,836
The accompanying notes are an integral part of these financial statements. SAI-117 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Netratings Inc ........................ 23,890 $ 171,984 Netro Corp ............................ 34,362 93,808 Netscout Systems Inc .................. 53,663 233,434 NetScreen Technologies Inc ............ 36,600 616,344 Neurocrine Biosciences Inc ............ 99,368 4,537,143 Neurogen Corp ......................... 41,345 150,082 New Century Financial Corp ............ 54,100 1,373,599 New England Business Svc Inc .......... 40,060 977,464 New Focus Inc ......................... 226,600 870,144 New Jersey Resources Corp ............. 96,416 3,045,781 Newpark Resources ..................... 256,212 1,114,522 Newport Corp .......................... 136,516 1,714,641 Nextel Partners Inc ................... 240,900 1,462,263 NIC Inc ............................... 87,600 126,144 NL Industries ......................... 29,779 506,243 NN Inc ................................ 40,400 403,596 Nordson Corp .......................... 78,530 1,949,900 Nortek Holdings Inc ................... 30,307 1,386,545 North Pittsburgh Systems Inc .......... 54,788 746,815 Northwest Bancorp Inc ................. 40,032 592,073 Northwest Natural Gas Co .............. 89,965 2,434,453 Northwest Pipe Co ..................... 18,100 313,130 Northwestern Corp ..................... 138,797 705,089 Novadigm Inc .......................... 32,909 76,678 Novastar Financial Inc ................ 38,200 1,185,346 Novell Inc ............................ 1,279,497 4,273,520 Noven Pharmaceuticals Inc ............. 74,234 685,180 NPS Pharmaceuticals Inc ............... 105,105 2,645,493 NS Group Inc .......................... 56,617 369,143 NU Horizons Electronics Corp .......... 42,900 247,962 Nu Skin Enterprises Inc ............... 160,735 1,923,998 Nuance Communications Inc ............. 123,952 307,401 Nuevo Energy Co ....................... 59,136 656,410 NUI Corp .............................. 56,000 966,560 Numerical Technologies Inc ............ 104,057 360,037 NYFIX Inc ............................. 84,229 379,031 NYMAGIC Inc ........................... 6,200 120,590 O'Charleys Inc ........................ 58,449 1,199,958 Oak Technology Inc .................... 200,644 531,707 Oakley Inc ............................ 88,000 903,760 Oceaneering International Inc ......... 83,097 2,055,820 OceanFirst Financial Corp ............. 39,245 881,050 Octel Corp ............................ 36,700 579,860 Ocular Sciences Inc ................... 60,693 941,955 Ocwen Financial Corp .................. 125,487 351,364
The accompanying notes are an integral part of these financial statements. SAI-118 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Odyssey HealthCare Inc ..................... 43,300 $ 1,502,510 Odyssey Re Holdings Corp ................... 61,600 1,090,320 OfficeMax Inc .............................. 406,324 2,031,620 Offshore Logistics Inc ..................... 65,122 1,427,474 Ohio Casualty Corp ......................... 179,814 2,328,591 Oil States International Inc ............... 62,200 802,380 Old Second Bancorp Inc ..................... 25,333 937,321 Olin Corp .................................. 178,444 2,774,804 Omega Financial Corp ....................... 30,758 1,102,674 Omega Healthcare Investors Inc ............. 60,300 225,522 Omnicell Inc ............................... 45,300 120,045 Omnivision Technologies Inc ................ 72,300 981,111 Omnova Solutions Inc ....................... 153,280 617,718 On Assignment Inc .......................... 75,886 646,549 ON Semiconductor Corp ...................... 123,400 169,058 Oneida Ltd ................................. 47,284 521,543 Oneok Inc .................................. 191,024 3,667,661 Onyx Pharmaceuticals Inc ................... 41,600 241,696 Onyx Software Corp ......................... 144,640 224,192 Openwave Systems Inc ....................... 636,600 1,273,200 Oplink Communications Inc .................. 383,600 303,044 Opnet Technologies Inc ..................... 40,800 329,705 Optical Communication Products Inc ......... 25,000 27,000 Option Care Inc ............................ 43,974 350,033 OraSure Technologies Inc ................... 86,400 470,880 Orbital Sciences Corp ...................... 150,659 635,781 Oregon Steel Mills Inc ..................... 93,100 374,262 Oriental Financial Group ................... 38,625 949,403 Orthologic Corp ............................ 108,400 391,324 Oshkosh B'Gosh Inc ......................... 38,414 1,077,513 Oshkosh Truck Corp ......................... 52,685 3,240,128 OSI Pharmaceuticals Inc .................... 127,200 2,086,080 OSI Systems Inc ............................ 23,600 400,728 Osmonics Inc ............................... 38,800 657,272 Otter Tail Corp ............................ 89,845 2,416,831 Overland Storage Inc ....................... 24,200 352,860 Overseas Shipholding Group ................. 95,918 1,716,932 Overstock.com Inc .......................... 8,500 110,500 Overture Services Inc ...................... 180,227 4,921,999 Owens & Minor Inc .......................... 119,096 1,955,556 Oxford Industries Inc ...................... 19,900 510,435 Pacific Capital Bancorp .................... 126,025 3,207,336 Pacific Northwest Bancorp .................. 56,737 1,418,425 Pacific Sunwear Of California .............. 158,984 2,812,418 Pacific Union Bank ......................... 37,800 435,078
The accompanying notes are an integral part of these financial statements. SAI-119 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Pacificare Health Systems ........................... 124,700 $ 3,504,070 Packeteer Inc ....................................... 73,558 504,608 Pain Therapeutics Inc ............................... 57,600 137,664 Palm Harbor Homes Inc ............................... 64,270 1,122,797 Palm Inc ............................................ 103,350 1,622,595 PAM Transportation Services ......................... 9,500 239,495 Pan Pacific Retail Properties Inc ................... 118,226 4,318,796 Panera Bread Co ..................................... 82,100 2,857,901 Papa John's International Inc ....................... 45,449 1,267,118 Paradyne Networks Corp .............................. 87,200 111,616 Parametric Technology Corp .......................... 919,005 2,315,893 Parexel International Corp .......................... 84,220 925,578 Park Electrochemical Corp ........................... 63,800 1,224,960 Parker Drilling Co .................................. 255,217 566,582 Parkervision Inc .................................... 27,340 223,094 Parkvale Financial Corp ............................. 17,100 394,155 Parkway Properties Inc/Md ........................... 26,669 935,549 Partners Trust Financial Group Inc .................. 21,100 340,132 Party City Corp ..................................... 23,100 277,200 Pathmark Stores Inc ................................. 108,700 551,109 Patina Oil & Gas Corp ............................... 85,708 2,712,658 Paxar Corp .......................................... 111,313 1,641,867 Paxson Communications Corp .......................... 102,967 212,112 Payless Shoesource Inc .............................. 79,300 4,081,571 PC Connection Inc ................................... 18,279 92,675 PC-Tel Inc .......................................... 72,300 490,194 PDF Solutions Inc ................................... 37,500 259,875 PDI Inc ............................................. 27,194 293,450 Peapack Gladstone Financial Corp .................... 20,400 698,700 Pec Solutions Inc ................................... 30,544 913,266 Pediatrix Medical Group Inc ......................... 78,837 3,158,210 Peet's Coffee & Tea Inc ............................. 31,400 443,682 Pegasus Solutions Inc ............................... 86,213 864,716 Pegasystems Inc ..................................... 19,100 97,601 Penford Corp ........................................ 24,900 350,841 Penn Engineering & Manufacturing Corp ............... 41,788 445,042 Penn National Gaming Inc ............................ 108,632 1,722,904 Penn Traffic Co ..................................... 37,200 130,200 Penn Virginia Corp .................................. 27,394 995,772 Pennfed Financial Services .......................... 18,300 496,845 Pennrock Financial Services Corp .................... 24,709 685,675 Pennsylvania Real Estate Investment Trust (REIT)(2) . 51,463 1,338,038 Penton Media Inc .................................... 59,100 40,188 Penwest Pharmaceuticals Co .......................... 52,500 556,500 Peoples Bancorp Inc/OH .............................. 29,500 755,200
The accompanying notes are an integral part of these financial statements. SAI-120 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Peoples Holding Co/The ....................... 20,500 $ 835,375 PEP Boys-Manny Moe & Jack .................... 169,621 1,967,604 Per-Se Technologies Inc ...................... 108,164 970,123 Peregrine Pharmaceuticals Inc ................ 339,917 265,135 Pericom Semiconductor Corp ................... 72,650 603,722 Perrigo Co ................................... 222,474 2,703,059 Petroleum Helicopters ........................ 8,100 240,084 Petroquest Energy Inc ........................ 94,000 390,100 PF Chang's China Bistro Inc .................. 56,256 2,042,093 PFF Bancorp Inc .............................. 39,308 1,228,375 Pharmaceutical Resources Inc ................. 66,158 1,971,508 Pharmacopeia Inc ............................. 89,531 798,617 Philadelphia Consolidated Holding Co ......... 61,223 2,167,294 Phillips-Van Heusen .......................... 84,407 975,745 Phoenix Technologies Ltd ..................... 89,670 517,396 Photon Dynamics Inc .......................... 60,188 1,372,286 Photronics Inc ............................... 95,342 1,306,185 Pico Holdings Inc ............................ 26,085 350,322 Piedmont Natural Gas Co ...................... 109,924 3,885,813 Pilgrims Pride Corp .......................... 48,400 396,880 Pinnacle Entertainment Inc ................... 83,198 576,562 Pinnacle Systems Inc ......................... 206,478 2,810,166 Pioneer Standard Electronics ................. 108,505 996,076 Pixelworks Inc ............................... 117,417 681,019 Plains Exploration & Production Co ........... 88,019 858,185 Plains Resources Inc ......................... 88,019 1,043,025 Planar Systems Inc ........................... 46,900 967,547 Plantronics Inc .............................. 131,832 1,994,618 PLATO Learning Inc ........................... 58,800 349,272 Playboy Enterprises .......................... 49,836 504,839 Playtex Products Inc ......................... 102,341 1,011,129 Plexus Corp .................................. 153,805 1,350,408 Plug Power Inc ............................... 59,300 266,257 PLX Technology Inc ........................... 46,327 181,139 PMA Capital Corp ............................. 96,852 1,387,889 PNM Resources Inc ............................ 128,871 3,069,707 PolyMedica Corp .............................. 34,897 1,076,223 PolyOne Corp ................................. 292,375 1,146,110 Pomeroy Computer Resources ................... 32,800 383,760 Pope & Talbot Inc ............................ 55,752 795,024 Port Financial Corp .......................... 15,800 704,996 Portal Software Inc .......................... 376,200 303,970 Possis Medical Inc ........................... 58,800 1,058,400 Post Properties Inc .......................... 117,500 2,808,250 Potlatch Corp ................................ 101,589 2,425,945
The accompanying notes are an integral part of these financial statements. SAI-121 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE -------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Powell Industries Inc ................. 21,300 $ 363,783 Power Integrations Inc ................ 91,720 1,559,240 Power-One Inc ......................... 185,900 1,054,053 Powerwave Technologies Inc ............ 240,400 1,298,160 Pozen Inc ............................. 81,600 420,240 PracticeWorks Inc ..................... 48,500 383,150 Praecis Pharmaceuticals Inc ........... 181,092 588,549 Pre-Paid Legal Services Inc ........... 45,267 1,185,995 Prentiss Properties Trust ............. 108,131 3,057,945 Presidential Life Corp ................ 68,645 681,645 Presstek Inc .......................... 107,125 493,846 PRG-Schultz International Inc ......... 123,121 1,095,777 Price Communications Corp ............. 173,821 2,403,944 Price Legacy Corp ..................... 69,700 195,160 Priceline.com Inc ..................... 461,900 739,040 Pricesmart Inc ........................ 16,049 372,818 Prima Energy Corp ..................... 37,663 842,145 Prime Hospitality Corp ................ 159,273 1,298,075 Prime Medical Services Inc ............ 46,900 406,623 Primedia Inc .......................... 500,600 1,031,236 Princeton Review Inc .................. 58,600 290,070 Priority Healthcare Corp .............. 84,100 1,951,120 Private Media Group Ltd ............... 54,801 178,103 PrivateBancorp Inc .................... 12,200 461,770 ProAssurance Corp ..................... 78,219 1,642,599 Probusiness Services Inc .............. 71,375 713,750 ProcureNet Inc 3 ...................... 64,900 9,735 Progenics Pharmaceuticals Inc ......... 28,800 191,808 Progress Software Corp ................ 109,108 1,412,949 ProQuest Co ........................... 53,527 1,049,129 Prosperity Bancshares Inc ............. 48,300 917,700 Protection One Inc .................... 54,300 108,600 Protein Design Labs Inc ............... 311,600 2,648,600 Proton Energy Systems Inc ............. 102,900 308,700 Provident Bancorp Inc ................. 10,900 338,445 Provident Bankshares Corp ............. 87,017 2,011,050 Province Healthcare Co ................ 166,492 1,619,967 Proxim Corp ........................... 462,289 402,191 Proxymed Inc .......................... 14,200 148,248 PS Business Parks Inc ................. 37,045 1,178,031 PSS World Medical Inc ................. 251,332 1,719,111 PTEK Holdings Inc ..................... 173,200 762,080 Pulitzer Inc .......................... 32,294 1,451,615 QMed Inc .............................. 20,800 130,208 QRS Corp .............................. 56,478 372,755
The accompanying notes are an integral part of these financial statements. SAI-122 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Quadramed Corp ............................. 96,400 $ 252,568 Quaker Chemical Corp ....................... 26,000 603,200 Quaker City Bancorp Inc .................... 17,200 566,396 Quaker Fabric Corp ......................... 41,400 287,730 Quanex Corp ................................ 60,024 2,010,804 Quanta Services Inc ........................ 107,800 377,300 Quantum Corp ............................... 453,700 1,211,379 Quest Software Inc ......................... 131,000 1,350,610 Quicksilver Resources Inc .................. 38,200 856,826 Quidel Corp ................................ 90,000 312,210 Quiksilver Inc ............................. 71,369 1,902,698 Quixote Corp ............................... 22,200 400,932 Quovadx Inc ................................ 61,340 148,443 R&G Financial Corp ......................... 56,090 1,304,093 Racing Champions Ertl Corp ................. 30,800 420,420 Radiant Systems Inc ........................ 59,829 576,153 Radiologix Inc ............................. 69,600 160,776 Radisys Corp ............................... 61,952 494,377 RailAmerica Inc ............................ 106,600 764,322 Rainbow Technologies Inc ................... 87,262 625,669 Raindance Communications Inc ............... 158,900 513,247 RAIT Investment Trust ...................... 58,500 1,263,600 Ralcorp Holdings Inc ....................... 109,176 2,744,685 Rambus Inc ................................. 291,605 1,956,670 Ramco-Gershenson Properties ................ 31,700 626,075 Range Resources Corp ....................... 180,100 972,540 Rare Hospitality International Inc ......... 68,854 1,901,747 Rayovac Corp ............................... 116,974 1,559,263 Raytech Corp-Del ........................... 156,300 890,910 RCN Corp ................................... 217,000 115,010 Read-Rite Corp ............................. 337,600 118,160 Realty Income Corp ......................... 117,588 4,115,580 Red Hat Inc ................................ 396,600 2,343,906 Redback Networks Inc ....................... 490,700 412,188 Redwood Trust Inc .......................... 39,800 1,102,460 Regal-Beloit Corp .......................... 84,128 1,741,450 Regeneron Pharmaceuticals Inc .............. 117,623 2,177,202 Regent Communications Inc .................. 89,342 528,011 Regis Corp ................................. 152,618 3,966,542 Register.com ............................... 95,552 429,984 RehabCare Group Inc ........................ 57,798 1,102,786 Reliance Steel & Aluminum Co ............... 82,713 1,723,739 Remec Inc .................................. 182,095 706,529 Remedytemp Inc ............................. 17,700 247,800 Remington Oil & Gas Corp ................... 71,200 1,168,392
The accompanying notes are an integral part of these financial statements. SAI-123 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Renaissance Learning Inc ................. 34,814 $ 657,985 Rent-Way Inc ............................. 92,366 323,281 Republic Bancorp Inc/KY .................. 25,700 289,639 Republic Bancorp Inc/MI .................. 188,163 2,214,679 Republic Bancshares Inc .................. 16,000 314,400 Res-Care Inc ............................. 50,500 183,265 Research Frontiers Inc ................... 29,660 247,364 Resmed Inc ............................... 109,300 3,341,301 Resource America Inc ..................... 54,100 487,495 Resources Connection ..................... 69,400 1,610,774 Respironics Inc .......................... 118,943 3,619,554 Restoration Hardware Inc ................. 64,000 320,640 Retek Inc ................................ 182,000 495,040 Revlon Inc ............................... 44,841 137,213 Rex Stores Corp .......................... 32,000 326,720 RFS Hotel Investors Inc .................. 106,186 1,153,180 RH Donnelley Corp ........................ 96,191 2,819,358 Richardson Electronics Ltd ............... 21,400 185,324 Rigel Pharmaceuticals Inc ................ 76,100 82,949 Riggs National Corp ...................... 47,658 738,222 Right Management Consultants Inc ......... 57,325 759,556 Rita Medical Systems Inc ................. 31,200 157,560 Riverstone Networks Inc .................. 442,900 938,948 Riviana Foods Inc ........................ 19,763 534,016 RLI Corp ................................. 45,250 1,262,475 RMH Teleservices Inc ..................... 46,700 490,350 Roadway Corp ............................. 40,835 1,503,136 Roanoke Electric Steel Corp .............. 35,600 338,200 Robbins & Myers Inc ...................... 34,687 638,241 Robert Mondavi ........................... 33,514 1,038,934 Rock-Tenn Co ............................. 36,699 494,703 Rogers Corp .............................. 54,860 1,220,635 Rollins Inc .............................. 51,776 1,317,699 Roper Industries Inc ..................... 104,244 3,815,330 Roxio Inc ................................ 65,200 311,004 Royal Bancshares Of Pennsylvania ......... 17,100 365,940 Royal Gold Inc ........................... 46,500 1,158,827 RPC Inc .................................. 36,613 424,711 RSA Security Inc ......................... 160,050 958,700 RTI International Metals Inc ............. 70,776 714,838 Ruddick Corp ............................. 109,627 1,500,794 Rudolph Technologies Inc ................. 30,852 591,124 Russ Berrie & Co Inc ..................... 36,662 1,238,442 Russell Corp ............................. 88,309 1,478,293 Ryan's Family STK Houses Inc ............. 156,597 1,777,376
The accompanying notes are an integral part of these financial statements. SAI-124 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Ryerson Tull Inc ............................. 79,131 $ 482,699 S&T Bancorp Inc .............................. 93,175 2,334,127 S1 Corp ...................................... 254,500 1,135,070 Safeguard Scientifics Inc .................... 403,528 548,798 Saga Communications Inc ...................... 52,557 998,583 Salem Communications Corp /DE ................ 32,641 815,046 Salix Pharmaceuticals Ltd .................... 65,000 454,350 Salton Inc ................................... 26,630 256,181 Sanchez Computer Associates .................. 38,903 112,041 Sanderson Farms Inc .......................... 18,000 376,380 Sandisk Corp ................................. 214,500 4,354,350 Sandy Spring Bancorp Inc ..................... 52,198 1,644,237 Sangamo Biosciences Inc ...................... 60,500 182,105 Sangstat Medical Corp ........................ 90,825 1,026,323 Santander BanCorp ............................ 27,816 361,608 Sapient Corp ................................. 290,200 594,910 Sauer-Danfoss Inc ............................ 34,529 272,779 Saul Centers Inc ............................. 37,044 881,647 Saxon Capital Inc ............................ 103,100 1,289,781 SBS Technologies Inc ......................... 48,520 444,443 ScanSoft Inc ................................. 189,400 984,880 Scansource Inc ............................... 16,700 823,310 Schawk Inc ................................... 24,200 239,822 Schnitzer Steel Industries Inc ............... 13,000 271,700 School Specialty Inc ......................... 52,901 1,056,962 Schulman (A.) Inc ............................ 104,918 1,952,524 Schweitzer-Mauduit International Inc ......... 53,317 1,306,267 Scientific Games Corp ........................ 156,200 1,134,012 Scios Inc .................................... 166,400 5,421,312 SCM Microsystems Inc ......................... 62,402 265,209 SCP Pool Corp ................................ 63,055 1,841,206 SCS Transportation Inc ....................... 53,158 526,796 Seaboard Corp ................................ 1,300 312,000 Seachange International Inc .................. 76,886 472,849 Seacoast Banking Corp of Florida ............. 37,900 714,036 Seacoast Financial Services Corp ............. 87,803 1,757,026 Seacor Smit Inc .............................. 60,927 2,711,252 Seattle Genetics Inc /wa ..................... 64,000 198,400 Second Bancorp Inc ........................... 31,200 826,800 Secure Computing Corp ........................ 98,871 633,763 Seebeyond Technology Corp .................... 186,636 453,525 Select Medical Corp .......................... 64,000 863,360 Selective Insurance Group .................... 90,554 2,280,150 SEMCO Energy Inc ............................. 58,832 358,875 Seminis Inc .................................. 68,800 198,144
The accompanying notes are an integral part of these financial statements. SAI-125 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Semitool Inc ............................ 51,595 $ 320,405 Senior Housing Properties Trust ......... 166,449 1,766,024 Sensient Technologies Corp .............. 155,189 3,487,097 Sepracor Inc ............................ 251,600 2,432,972 Sequa Corp .............................. 21,862 855,023 Sequenom Inc ............................ 137,998 248,396 Serena Software Inc ..................... 59,817 944,510 Serologicals Corp ....................... 74,400 818,400 Service Corp International/US ........... 1,038,440 3,447,621 Sharper Image Corp ...................... 25,200 439,236 Shenandoah Telecom Co ................... 10,900 533,228 Shoe Carnival Inc ....................... 25,900 362,885 ShopKo Stores Inc ....................... 101,495 1,263,613 Shuffle Master Inc ...................... 61,500 1,175,265 Shurgard Storage Centers Inc ............ 120,265 3,769,105 Sierra Health Services .................. 83,900 1,007,639 Sierra Pacific Resources ................ 359,243 2,335,080 Silgan Holdings Inc ..................... 37,700 930,436 Silicon Graphics Inc .................... 641,982 725,440 Silicon Image Inc ....................... 211,523 1,269,138 Silicon Laboratories Inc ................ 91,600 1,747,728 Silicon Storage Technology Inc .......... 267,100 1,079,084 Siliconix Inc ........................... 20,392 477,173 Simmons First National Corp ............. 25,900 949,235 SimpleTech Inc .......................... 39,000 117,780 Simpson Manufacturing Co Inc ............ 53,432 1,757,913 Sinclair Broadcast Group Inc ............ 114,340 1,329,774 Sipex Corp .............................. 103,654 383,520 Sirius Satellite Radio Inc .............. 217,302 139,073 Sitel Corp .............................. 229,437 275,324 Sizeler Property Investors .............. 42,100 391,109 SJW Corp ................................ 6,800 530,740 Skechers U.S.A. Inc ..................... 54,818 465,405 Skyline Corp ............................ 21,483 633,749 Skyworks Solutions Inc .................. 482,404 4,158,322 SL Green Realty Corp .................... 93,075 2,941,170 Smart & Final Inc ....................... 33,812 175,822 Sola International Inc .................. 77,900 1,012,700 Solutia Inc ............................. 379,600 1,377,948 Somera Communications Inc ............... 117,193 316,421 Sonic Corp .............................. 127,681 2,616,184 Sonic Innovations Inc ................... 33,600 128,016 SONICblue Inc ........................... 291,799 131,310 SonicWALL Inc ........................... 185,094 671,891 SonoSite Inc ............................ 48,731 636,914
The accompanying notes are an integral part of these financial statements. SAI-126 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Sonus Networks Inc ....................... 631,900 $ 631,900 Sotheby's Holdings ....................... 156,552 1,408,968 SoundView Technology Group Inc ........... 272,436 408,654 Sourcecorp ............................... 56,678 1,053,644 South Financial Group Inc/The ............ 161,787 3,342,519 South Jersey Industries Inc .............. 41,726 1,377,793 Southern Union Co ........................ 147,908 2,440,482 Southwest Bancorp Inc/OK ................. 19,100 496,409 Southwest Bancorp of Texas Inc ........... 99,364 2,862,677 Southwest Gas Corp ....................... 117,510 2,755,610 Southwest Water Co ....................... 34,020 450,765 Southwestern Energy Co ................... 95,553 1,094,082 Sovran Self Storage Inc .................. 45,700 1,296,052 Spanish Broadcasting System .............. 123,470 888,984 Spartan Motors Inc ....................... 31,300 356,194 Spartech Corp ............................ 51,130 1,054,812 Specialty Laboratories ................... 27,900 269,514 Spectralink Corp ......................... 68,064 488,700 SpeechWorks International Inc ............ 94,700 263,266 Speedway Motorsports Inc ................. 49,151 1,267,113 Spherion Corp ............................ 203,290 1,362,043 Spinnaker Exploration Co ................. 85,049 1,875,330 Sports Authority Inc ..................... 114,600 802,200 Sports Resorts International Inc ......... 85,000 498,950 SPS Technologies Inc ..................... 43,781 1,039,799 SPSS Inc ................................. 41,264 577,283 SRA International Inc .................... 18,400 498,456 SS&C Technologies Inc .................... 25,400 270,535 St Francis Capital Corp .................. 26,200 613,604 St Mary Land & Exploration Co ............ 98,060 2,451,500 Stage Stores Inc ......................... 72,800 1,531,712 Stamps.com Inc ........................... 128,534 600,254 Standard Commercial Corp ................. 37,600 680,560 Standard Microsystems Corp ............... 50,274 978,835 Standard Motor Products Inc .............. 23,900 310,700 Standard Register Co/The ................. 64,569 1,162,242 Standard-Pacific Corp .................... 114,138 2,824,916 Standex International Corp ............... 38,332 913,835 Stanley Furniture Co Inc ................. 17,200 399,900 Starrett (L.S.) Co ....................... 24,000 398,400 Startek Inc .............................. 37,839 1,044,356 State Auto Financial Corp ................ 45,126 699,453 State Bancorp Inc ........................ 27,500 495,000 Staten Island Bancorp Inc ................ 198,438 3,996,541 Station Casinos Inc ...................... 121,205 2,145,329
The accompanying notes are an integral part of these financial statements. SAI-127 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Steak N Shake Co/The ...................... 80,824 $ 808,240 Steel Dynamics Inc ........................ 114,656 1,379,312 Stein Mart Inc ............................ 80,043 488,262 Steinway Musical Instruments .............. 16,600 270,082 Stepan Co ................................. 20,927 523,175 Stericycle Inc ............................ 118,540 3,838,207 Sterling Bancorp/NY ....................... 37,076 975,840 Sterling Bancshares Inc/TX ................ 132,776 1,622,523 Sterling Financial Corp/PA ................ 62,375 1,475,169 Sterling Financial Corp/WA ................ 43,400 816,788 Steven Madden Ltd ......................... 31,074 561,507 Stewart & Stevenson Services .............. 101,936 1,441,375 Stewart Enterprises Inc ................... 337,078 1,877,862 Stewart Information Services Corp ......... 61,153 1,308,063 Stillwater Mining Co ...................... 162,226 867,909 Stone Energy Corp ......................... 75,469 2,517,646 Stoneridge Inc ............................ 46,934 558,515 StorageNetworks Inc ....................... 241,200 279,792 Stratex Networks Inc ...................... 279,900 618,579 Stratos Lightwave Inc ..................... 21,480 94,491 Strattec Security Corp .................... 12,900 618,426 Strayer Education Inc ..................... 32,723 1,881,573 Stride Rite Corp .......................... 136,916 981,688 Sturm Ruger & Co Inc ...................... 72,194 690,897 Suffolk Bancorp ........................... 42,100 1,331,202 Summit America Television Inc ............. 124,500 332,415 Summit Bancshares Inc/TX .................. 18,500 360,750 Summit Properties Inc ..................... 76,761 1,366,346 Sun Bancorp Inc-NJ ........................ 20,000 266,000 Sun Bancorp Inc/PA ........................ 16,600 303,465 Sun Communities Inc ....................... 53,477 1,955,654 Sunrise Assisted Living Inc ............... 64,736 1,611,279 Suntron Corp .............................. 100 467 SuperGen Inc .............................. 104,453 379,164 Superior Energy Services .................. 169,133 1,386,891 Superior Financial Corp ................... 24,800 455,601 Superior Industries International ......... 74,809 3,094,100 Supertex Inc .............................. 33,699 501,778 Surebeam Corp ............................. 230,228 930,121 SureWest Communications ................... 47,800 1,778,160 SurModics Inc ............................. 49,116 1,408,647 Susquehanna Bancshares Inc ................ 142,570 2,971,301 Swift Energy Co ........................... 84,978 821,737 SWS Group Inc ............................. 49,786 675,098 SY Bancorp Inc ............................ 20,700 767,970
The accompanying notes are an integral part of these financial statements. SAI-128 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Sybron Dental Specialties Inc .............. 134,066 $ 1,990,880 Sycamore Networks Inc ...................... 554,000 1,601,060 SYKES Enterprises Inc ...................... 82,880 271,846 Sylvan Learning Systems Inc ................ 115,214 1,889,510 Symyx Technologies ......................... 81,637 1,027,810 Synaptics Inc .............................. 13,300 101,080 Syncor International Corp-Del .............. 62,609 1,736,148 Synplicity Inc ............................. 30,500 115,290 Syntel Inc ................................. 18,454 387,719 Syntroleum Corp ............................ 61,475 106,352 Sypris Solutions Inc ....................... 15,600 159,276 Systems & Computer Technology Corp ......... 106,269 913,913 Take-Two Interactive Softwar ............... 132,874 3,121,210 Talk America Holdings Inc .................. 84,333 472,265 Talx Corp .................................. 42,040 543,157 Tanger Factory Outlet Centrs ............... 22,700 703,700 Tanox Inc .................................. 85,385 772,734 Tasty Baking Co ............................ 33,100 287,970 Taubman Centers Inc ........................ 104,105 1,689,624 TBC Corp ................................... 56,900 683,369 Techne Corp ................................ 148,500 4,242,348 Technical Olympic USA Inc .................. 10,600 156,986 Technitrol Inc ............................. 141,618 2,285,715 Tecumseh Products Co ....................... 54,484 2,404,379 Tejon Ranch Co ............................. 25,491 757,083 Tekelec .................................... 161,700 1,689,765 Teledyne Technologies Inc .................. 110,299 1,729,488 TeleTech Holdings Inc ...................... 134,300 975,018 Telik Inc .................................. 118,400 1,380,544 Tellium Inc ................................ 269,200 172,288 Tennant Co ................................. 33,062 1,077,821 Tenneco Automotive Inc ..................... 138,600 559,944 Terayon Corp ............................... 217,100 445,055 Terex Corp ................................. 150,118 1,672,315 Terra Industries Inc ....................... 109,800 167,994 Tesoro Petroleum Corp ...................... 222,014 1,003,503 Tetra Tech Inc ............................. 175,393 2,139,795 Tetra Technologies Inc ..................... 47,500 1,015,075 Texas Biotech Corp ......................... 148,020 207,228 Texas Industries Inc ....................... 73,703 1,790,983 Texas Regional Bancshares Inc .............. 79,945 2,841,325 Theragenics Corp ........................... 103,842 418,483 Therasense Inc ............................. 80,900 675,515 Therma-Wave Inc ............................ 90,739 95,276 Thomas & Betts Corp ........................ 152,180 2,571,842
The accompanying notes are an integral part of these financial statements. SAI-129 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Thomas Industries Inc ......................... 50,176 $ 1,307,587 Thomas Nelson Inc ............................. 28,700 287,574 Thor Industries Inc ........................... 53,452 1,840,352 Thoratec Corp ................................. 170,604 1,301,709 Thornburg Mortgage Inc ........................ 179,000 3,597,900 THQ Inc ....................................... 142,067 1,882,388 Three-Five Systems Inc ........................ 76,659 494,451 TIBCO Software Inc ............................ 294,100 1,817,538 Tier Technologies Inc ......................... 52,500 840,000 Time Warner Telecom Inc ....................... 156,300 329,793 Tivo Inc ...................................... 62,524 327,001 Tollgrade Communications Inc .................. 44,815 525,680 Tom Brown Inc ................................. 117,672 2,953,567 Tompkins Trustco Inc .......................... 26,400 1,164,240 Too Inc ....................................... 119,318 2,806,359 Topps Co/The .................................. 134,458 1,169,785 Toro Co ....................................... 43,867 2,803,101 Touch America Holdings Inc .................... 360,400 140,556 Tower Automotive Inc .......................... 228,486 1,028,187 Town & Country Trust/The ...................... 52,952 1,117,287 Tractor Supply Co ............................. 49,600 1,864,960 Trammell Crow Co .............................. 101,135 910,215 Trans World Entertainment ..................... 64,610 234,534 Transaction Systems Architects Inc ............ 119,413 776,185 Transcontinental Realty Investors Inc ......... 12,000 211,680 Transkaryotic Therapies Inc ................... 102,434 1,014,097 Transmeta Corp/Delaware ....................... 397,900 465,543 Transmontaigne Inc ............................ 50,039 232,181 TRC Cos Inc ................................... 29,849 391,917 Tredegar Corp ................................. 95,231 1,428,465 Tremont Corp .................................. 3,100 92,380 Trex Co Inc ................................... 23,540 830,962 Triad Guaranty Inc ............................ 28,088 1,035,324 Triangle Pharmaceuticals Inc .................. 123,468 733,400 Triarc Cos .................................... 49,264 1,292,687 Trico Bancshares .............................. 17,100 420,660 Trico Marine Services Inc ..................... 78,525 261,488 Trikon Technologies Inc ....................... 36,200 181,000 Trimble Navigation Ltd ........................ 94,283 1,177,595 Trimeris Inc .................................. 53,606 2,309,883 Trinity Industries Inc ........................ 126,704 2,402,308 TriPath Imaging Inc ........................... 80,900 216,812 Tripos Inc .................................... 26,700 195,711 Triquint Semiconductor Inc .................... 472,697 2,004,235 Triton PCS Holdings Inc ....................... 70,500 277,065
The accompanying notes are an integral part of these financial statements. SAI-130 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Triumph Group Inc ................................. 50,698 $ 1,619,294 Trizetto Group .................................... 107,307 658,865 Tropical Sportswear International Corp ............ 25,900 232,323 Troy Financial Corp ............................... 30,854 832,441 Trust Co Of N J ................................... 67,793 1,886,747 Trustco Bank Corp NY .............................. 259,677 2,799,318 TTM Technologies Inc .............................. 65,800 217,732 Tuesday Morning Corp .............................. 29,658 507,152 Tularik Inc ....................................... 153,605 1,145,893 Tupperware Corp ................................... 186,539 2,813,008 Turnstone Systems Inc ............................. 146,600 395,820 Tweeter Home Entertainment Group Inc .............. 76,669 449,280 Tyler Technologies Inc ............................ 114,900 479,133 UAL Corp .......................................... 259,200 370,656 Ubiquitel Inc ..................................... 129,400 51,760 UCBH Holdings Inc ................................. 63,712 2,704,574 UGI Corp .......................................... 96,948 3,624,886 UICI .............................................. 140,607 2,186,439 UIL Holdings Corp ................................. 42,311 1,475,385 Ulticom Inc ....................................... 44,925 336,488 Ultimate Electronics Inc .......................... 38,657 392,369 Ultratech Stepper Inc ............................. 76,870 756,324 UMB Financial Corp ................................ 58,451 2,236,394 Umpqua Holdings Corp .............................. 103,045 1,880,571 Unifi Inc ......................................... 175,587 921,832 Unifirst Corp/MA .................................. 27,700 559,540 Unilab Corp ....................................... 4,800 87,840 Union Acceptance Corp ............................. 25,900 16,058 Union Bankshares Corp ............................. 26,400 719,400 Unisource Energy Corp ............................. 100,288 1,733,980 Unit Corp ......................................... 152,358 2,826,241 United Auto Group Inc ............................. 63,821 795,848 United Bankshares Inc ............................. 130,491 3,792,199 United Community Banks Inc/GA ..................... 60,400 1,471,948 United Community Financial Corp/OH ................ 114,858 993,522 United Defense Industries Inc ..................... 74,300 1,731,190 United Fire & Casualty Co ......................... 24,400 816,180 United Industrial Corp/New York ................... 36,600 585,600 United National Bancorp NJ ........................ 59,239 1,365,459 United Natural Foods Inc .......................... 66,722 1,691,403 United Online Inc ................................. 75,800 1,208,328 United Stationers Inc ............................. 108,109 3,113,647 United Surgical Partners International Inc ........ 60,700 948,195 United Therapeutics Corp .......................... 56,984 951,633 Unitil Corp ....................................... 15,600 386,880
The accompanying notes are an integral part of these financial statements. SAI-131 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Universal American Financial Corp ................. 80,800 $ 470,175 Universal Compression Holdings Inc ................ 60,663 1,160,483 Universal Corp-Va ................................. 94,316 3,485,919 Universal Display Corp ............................ 65,999 520,732 Universal Electronics Inc ......................... 54,049 526,437 Universal Forest Products Inc ..................... 48,717 1,038,695 Universal Health Rlty Income ...................... 37,400 981,750 Unizan Financial Corp ............................. 79,860 1,577,235 UNOVA Inc ......................................... 148,938 893,628 Urban Outfitters Inc .............................. 25,200 593,964 Urologix Inc ...................................... 55,600 184,036 URS Corp .......................................... 83,546 1,188,860 Urstadt Biddle Properties Inc ..................... 65,700 727,956 US Concrete Inc ................................... 68,500 374,695 US Industries Inc ................................. 236,652 622,395 US Oncology Inc ................................... 244,629 2,120,933 US Physical Therapy Inc ........................... 34,900 389,135 US Restaurants Properties Inc ..................... 69,400 977,152 US Unwired Inc .................................... 279,800 137,102 US Xpress Enterprises Inc ......................... 26,600 233,016 USB Holding Co Inc ................................ 43,986 778,552 USEC Inc .......................................... 291,933 1,757,437 Usfreightways Corp ................................ 95,817 2,754,739 USG Corp .......................................... 134,500 1,136,525 Vail Resorts Inc .................................. 30,838 467,812 Valhi Inc ......................................... 69,700 578,510 Valmont Industries Inc ............................ 46,884 909,550 Value Line Inc .................................... 5,142 223,368 Valueclick Inc .................................... 216,300 603,477 Valuevision Media Inc ............................. 68,769 1,030,160 Vans Inc .......................................... 72,834 413,697 Varian Inc ........................................ 106,583 3,057,866 Varian Semiconductor Equipment Associates Inc ..... 110,149 2,617,250 Vastera Inc ....................................... 114,800 648,735 VCA Antech Inc .................................... 63,100 946,500 Vector Group Ltd .................................. 75,340 875,451 Veeco Instruments Inc ............................. 86,797 1,003,373 Ventana Medical Systems ........................... 45,179 1,041,376 Ventas Inc ........................................ 220,523 2,524,988 Verint Systems Inc ................................ 15,100 304,718 Veritas DGC Inc ................................... 108,700 858,730 Verity Inc ........................................ 76,264 1,021,251 Versicor Inc ...................................... 78,300 844,857 Vesta Insurance Group Inc ......................... 118,200 325,050 Vialta Inc ........................................ 1,363 416
The accompanying notes are an integral part of these financial statements. SAI-132 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Viasat Inc ...................................... 63,167 $ 728,947 Viasys Healthcare Inc ........................... 95,700 1,424,973 Vical Inc ....................................... 67,717 234,978 Vicor Corp ...................................... 67,110 553,725 Viewpoint Corp .................................. 128,381 240,072 Vignette Corp ................................... 857,800 1,052,521 Vintage Petroleum Inc ........................... 171,967 1,814,252 Virage Logic Corp ............................... 35,000 351,050 Virbac Corp ..................................... 30,000 168,300 Virco Manufacturing ............................. 13,670 139,434 Virginia Financial Group Inc .................... 26,500 789,700 Visx Inc ........................................ 172,716 1,654,619 Vital Signs Inc ................................. 19,581 585,080 VitalWorks Inc .................................. 130,200 501,270 Vitesse Semiconductor Corp ...................... 736,600 1,609,471 Vitria Technology Inc ........................... 226,200 169,650 Vivus Inc ....................................... 109,300 407,689 Volt Information Sciences Inc ................... 25,362 433,690 W Holding Co Inc ................................ 153,039 2,511,370 W-H Energy Services Inc ......................... 84,400 1,231,396 Wabash National Corp ............................ 91,617 767,750 Wabtec Corp ..................................... 124,308 1,745,284 Wackenhut Corrections Corp ...................... 35,600 395,516 Wallace Computer Services Inc ................... 133,682 2,875,500 Walter Industries Inc ........................... 97,311 1,053,878 Warwick Community Bancorp Inc ................... 11,700 331,461 Washington Real Estate Investment Trust ......... 129,559 3,303,755 Washington Trust Bancorp Inc .................... 46,100 900,333 Waste Connections Inc ........................... 99,386 3,837,293 WatchGuard Technologies ......................... 94,336 601,958 Water Pik Technologies Inc ...................... 39,100 287,385 Watsco Inc ...................................... 60,348 988,500 Watson Wyatt & Co Holdings ...................... 72,100 1,568,175 Watts Industries Inc ............................ 56,887 895,401 Wausau-Mosinee Paper Corp ....................... 127,292 1,428,216 Waypoint Financial Corp ......................... 126,300 2,248,140 WCI Communities Inc ............................. 25,200 257,040 Wd-40 Co ........................................ 57,755 1,525,887 WebEx Communications Inc ........................ 81,300 1,219,500 webMethods Inc .................................. 164,200 1,349,724 Websense Inc .................................... 74,047 1,581,718 Weis Markets Inc ................................ 38,900 1,207,845 Wellman Inc ..................................... 117,712 1,587,935 Wellsford Real Properties Inc ................... 19,600 308,896 Werner Enterprises Inc .......................... 137,894 2,968,858
The accompanying notes are an integral part of these financial statements. SAI-133 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) WesBanco Inc ............................... 74,427 $ 1,740,848 WESCO International Inc .................... 56,865 312,189 West Coast Bancorp/OR ...................... 55,500 840,825 West Marine Inc ............................ 34,300 469,567 West Pharmaceutical Services Inc ........... 47,424 1,157,146 Westar Energy Inc .......................... 196,000 1,940,400 Westcorp ................................... 40,199 844,179 Western Digital Corp ....................... 682,435 4,360,760 Western Gas Resources Inc .................. 66,384 2,446,250 Western Wireless Corp ...................... 192,800 1,021,840 Westfield Financial Inc .................... 15,700 243,350 Westpoint Stevens Inc ...................... 128,732 75,952 Westport Resources Corp .................... 55,252 1,149,242 Wet Seal Inc/The ........................... 87,582 942,470 WFS Financial Inc .......................... 27,026 565,138 WGL Holdings Inc ........................... 174,961 4,185,067 White Electronic Designs Corp .............. 67,000 512,550 Whitehall Jewellers Inc .................... 36,900 350,550 Wild Oats Markets Inc ...................... 76,807 792,648 William Lyon Homes Inc ..................... 17,300 377,659 Willow Grove Bancorp Inc ................... 17,900 248,810 Wilson Greatbatch Technologies Inc ......... 76,000 2,219,200 Wilsons The Leather Experts ................ 53,962 269,810 Wind River Systems ......................... 244,700 1,003,270 Winnebago Industries ....................... 41,802 1,639,892 Winston Hotels Inc ......................... 62,000 483,600 Wintrust Financial Corp .................... 51,300 1,606,716 Wireless Facilities Inc .................... 74,900 450,149 Witness Systems Inc ........................ 36,500 125,560 WMS Industries Inc ......................... 79,287 1,187,719 Wolverine World Wide Inc ................... 146,371 2,211,666 Women First Healthcare Inc ................. 54,500 248,575 Woodhead Industries Inc .................... 32,900 371,770 Woodward Governor Co ....................... 32,542 1,415,577 World Acceptance Corp ...................... 40,500 308,205 World Fuel Services Corp ................... 30,700 629,350 World Wrestling Entertainment Inc .......... 32,218 259,355 Worthington Industries ..................... 236,992 3,611,758 WPS Resources Corp ......................... 112,874 4,381,769 WR Grace & Co .............................. 217,200 425,712 Wright Medical Group Inc ................... 56,800 991,671 WSFS Financial Corp ........................ 26,600 877,002 Wyndham International Inc .................. 412,300 94,829 X-Rite Inc ................................. 66,600 465,534 Xicor Inc .................................. 69,100 257,743
The accompanying notes are an integral part of these financial statements. SAI-134 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) XM Satellite Radio Holdings Inc ......... 198,940 $ 535,149 Yankee Candle Co Inc .................... 96,685 1,546,960 Yardville National Bancorp .............. 19,600 337,904 Yellow Corp ............................. 102,316 2,577,442 Young Broadcasting Inc .................. 54,262 714,631 Young Innovations Inc ................... 15,200 353,704 Zenith National Insurance Corp .......... 30,092 707,764 Zoll Medical Corp ....................... 29,763 1,061,646 Zomax Inc/MN ............................ 105,197 447,087 Zoran Corp .............................. 93,714 1,318,556 Zygo Corp ............................... 61,929 432,884 Zymogenetics Inc ........................ 30,100 297,990 -------------- TOTAL COMMON STOCK ...................... 2,137,339,189 -------------- PRINCIPAL VALUE --------------- --------------- DEBT INSTRUMENTS -- 0.0% MicroStrategy Inc 7.50% 6/24/2007 .................... USD 626,274 250,510 ------------- U.S. GOVERNMENT OBLIGATIONS -- 0.4% United States Treasury Bills 1.18% 3/13/2003 ......... USD 9,210,000 9,188,566 ------------- UNITS ------------ STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 2.2% Short Term Investment Fund (4) ....................... 47,314,842 47,314,842 ---------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost $2,787,703,062)................................ $2,194,093,107 ==============================================================================================
(1) Issuer filed for bankruptcy. (2) Real Estate Investment Trust (3) Valued by management. (4) Collective investment fund advised by State Street Global Advisors. At December 31, 2002, U.S. Treasury Bills with principal of $9,210,000 were pledged to cover margin requirements for open futures contracts. The following futures contracts were open at December 31, 2002:
NUMBER OF FUTURE CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) -------------------- -------------- -------------- ------------ --------------- Russell 2000 Index 293 $57,480,667 March 2003 (1,341,867) ==========
USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-135 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Russell 2000 Index Securities Lending Fund and State Street Bank and Trust Company Russell 2000 Index Fund (collectively, the "Fund") were formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match the return of the Russell 2000 Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. SAI-136 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending, if any, is distributed monthly to participants of the Lending Fund. G. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. 3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Russell 2000 Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Russell 2000 Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. SAI-137 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY RUSSELL 2000 INDEX SECURITIES LENDING FUND RUSSELL 2000 INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2002, the market value of securities loaned by the Lending Fund are disclosed on the Statement of Assets and Liabilities. Cash collateral provided by the Borrowers is recorded on the Statement of Assets and Liabilities and is invested in State Street Bank and Trust Company Quality D Short-Term Investment Fund. The Fund received securities of credit valued at $190,829 as additional collateral. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $2,403,026,828 and $2,285,528,939, respectively. SAI-138 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Daily EAFE Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Daily EAFE Fund at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 21, 2003 SAI-139 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at value (cost $383,449,166) .......................... $328,704,612 Foreign currency, at value (cost $424) ........................................... 425 ------------------------------------------------------------------------------------------------ Total assets .................................................................. 328,705,037 ------------------------------------------------------------------------------------------------ LIABILITIES Total liabilities ................................................................ 0 ------------------------------------------------------------------------------------------------ NET ASSETS (equivalent to $7.44 per unit based on 44,151,637 units outstanding)... $328,705,037 ================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-140 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND Statement of Operations Year Ended December 31, 2002 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends .............................................................. $ 1 --------------------------------------------------------------------------------------------- Total investment income .............................................. 1 --------------------------------------------------------------------------------------------- EXPENSES Audit .................................................................. 6,500 Professional fees ...................................................... 2,000 --------------------------------------------------------------------------------------------- Total expenses ....................................................... 8,500 --------------------------------------------------------------------------------------------- Net investment income (loss) ......................................... (8,499) --------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments .......................................................... (98,462,890) --------------------------------------------------------------------------------------------- (98,462,890) --------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments .......................................................... 39,698,860 --------------------------------------------------------------------------------------------- 39,698,860 --------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................ (58,764,030) --------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ (58,772,529) =============================================================================================
The accompanying notes are an integral part of these financial statements. SAI-141 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ---------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ..................................................... $ (8,499) $ (13,012) Net realized gain (loss) ......................................................... (98,462,890) (42,006,444) Net change in unrealized appreciation (depreciation) ............................. 39,698,860 (68,411,854) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. (58,772,529) (110,431,310) Net increase (decrease) in net assets resulting from participant transactions .... (44,378,271) (1,007,099) ---------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS ............................................ (103,150,800) (111,438,409) NET ASSETS Beginning of year ............................................................... 431,855,837 543,294,246 ---------------------------------------------------------------------------------------------------------------------- End of year ..................................................................... $ 328,705,037 $ 431,855,837 =====================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-142 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 2002 2001 ---------------------------------- ---------------------------------- UNITS AMOUNT UNITS AMOUNT ---------------------------------------------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ......................................... 59,566,784 $ 476,406,124 27,424,924 $ 253,164,802 Units redeemed ....................................... (64,285,714) (520,784,395) (26,822,235) (254,171,901) ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) .............................. (4,718,930) $ (44,378,271) 602,689 $ (1,007,099) ==========================================================================================================================
Units in excess of 10% of the Fund units outstanding at December 31, 2002 held by 4 of the Fund's unitholders aggregated 64% of the Fund's total units outstanding. The accompanying notes are an integral part of these financial statements. SAI-143 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .......... $ 8.84 $ 11.26 $ 13.19 $ 10.32 $ 8.54 ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) (b) ........ (0.00) (0.00) (0.00) 0.00 0.21 Net realized and unrealized gain (loss) ..... (1.40) (2.42) (1.93) 2.87 1.57 ----------------------------------------------------------------------------------------------------------------- Total from investment operations ............ (1.40) (2.42) (1.93) 2.87 1.78 ----------------------------------------------------------------------------------------------------------------- Net asset value, end of year ................ $ 7.44 $ 8.84 $ 11.26 $ 13.19 $ 10.32 ================================================================================================================= Total return (%) (c) ........................ (15.75) (21.49) (14.63) 27.83 20.84 ================================================================================================================= RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (b) (d) ............... 0.00 0.00 0.00 0.00 0.11 ----------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) (b)....... (0.00) (0.00) (0.00) 0.00 2.13 ----------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) ...................... 117 45 103 47 109 ----------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .......... $ 329 $ 432 $ 543 $ 516 $ 490 =================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (d) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-144 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ----------------------------------------------------------------------------------------------------- COMMON STOCK -- 0.0% .................................... Idris Hydraulic Malaysia Bhd ............................ 72,200 $ 950 Kelanamas Industries BHD(1) ............................. 7,800 0 Kemayan Corporation Berhad(1) ........................... 500 0 Pilecon Engineering BHD ................................. 500 24 Pilecon Engineering BHD -- Warrants ..................... 500 7 Promet BHD(1) ........................................... 75,200 0 Warisan TC Holdings Bhd ................................. 25 15 ------------ TOTAL COMMON STOCK ...................................... 996 ============ UNITS ------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 100.0% Daily MSCI Europe Index Fund(2) ......................... 32,457,635 234,895,908 Daily MSCI Japan Index Fund(2) .......................... 9,379,848 69,645,372 Daily MSCI Pacific Basin Ex-Japan Index Fund(2) ......... 2,402,778 24,162,336 ------------ TOTAL COLLECTIVE INVESTMENT FUNDS ....................... 328,703,616 ----------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $383,449,166) ..................................... $328,704,612 =====================================================================================================
---------- (1) Issuer delisted due to bankruptcy. (2) Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-145 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Daily EAFE Funds (collectively, the "Funds") are organized by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The Funds are organized into separate regional funds, a country fund and umbrella funds that hold investments in separate country and regional funds. State Street Bank is Trustee, custodian, and recordkeeper of the Funds and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Funds' investment manager. The investment objective of the Daily EAFE Fund (the "Fund") is to match the performance of the MSCI EAFE Index. Refer to the financial statements of each separate regional or country fund for disclosure of its accounting policies. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Interest income earned on securities, if any, is recorded on the accrual basis; interest earned on foreign currency accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds in which the Fund invests may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS The accounting records of the Fund are maintained in U.S. dollars. Foreign currency, investment securities, and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. SAI-146 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 Reported net realized gains and losses on foreign currency transactions represent net gains and losses from disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statement of Operations from the effects of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain or loss on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized appreciation/ depreciation on foreign currency related transactions. The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against the foreign currency exposure of either specific transactions or portfolio positions. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed upon future date. Such contracts are valued based upon the difference in the forward exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, and any resulting unrealized gains or losses are recorded in the Fund's financial statements. The Fund records realized gains or losses at the time the forward contract is extinguished by entry into a closing transaction or by delivery of the currency. Risks in foreign currency contracts arise from the possible inability of counterparties to meet the contracts' terms and from movements in currency values. D. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit. A transaction fee of 0.5% is charged on any contribution or withdrawal greater than 5% of the net asset value of the Fund. However, such fees are waived if the Fund's net participant activity on any day is less than 5% of the net asset value of the Fund. During the year, transaction fees of $30,496 were charged by the Fund. F. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. G. DISTRIBUTIONS TO PARTICIPANTS Net investment income and net realized gains are retained by the Fund. SAI-147 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY EAFE FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $434,621,451 and $479,008,115, respectively. SAI-148 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Daily MSCI Europe Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Europe Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Daily MSCI Europe Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Europe Index Fund at December 31, 2002, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 21, 2003 SAI-149 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $320,007,122) (cost $2,384,105,285) ................................................................ $1,823,062,077 Foreign currency, at value (cost $23,984,739) ......................................... 24,811,125 Foreign currency, segregated, at value (cost $12,118,824) ............................. 12,863,241 Investments held as collateral for securities loaned .................................. 334,081,824 Receivable for open foreign currency contracts ........................................ 503,312,300 Dividends receivable .................................................................. 2,413,389 Interest receivable ................................................................... 30,450 Tax reclaims receivable ............................................................... 1,177,148 --------------------------------------------------------------------------------------------------------- Total assets ....................................................................... 2,701,751,554 --------------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned ........................................... 334,081,824 Payable for open foreign currency contracts ........................................... 501,349,559 Unrealized loss on open futures contracts ............................................. 1,604,983 Accrued expenses ...................................................................... 200,384 --------------------------------------------------------------------------------------------------------- Total liabilities .................................................................. 837,236,750 --------------------------------------------------------------------------------------------------------- NET ASSETS ............................................................................ $1,864,514,804 ========================================================================================================= DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND (222,006,303 units outstanding, at $7.24 per unit net asset value) ................... $1,606,743,207 DAILY MSCI EUROPE INDEX FUND (35,616,718 units outstanding, at $7.24 per unit net asset value) .................... 257,771,597 --------------------------------------------------------------------------------------------------------- $1,864,514,804 =========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-150 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Statement of Operations Year ended December 31, 2002 -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends (net of taxes withheld of $3,897,555) ......................................... $ 38,863,872 Interest ................................................................................ 1,246,740 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 1,471,653 ------------------------------------------------------------------------------------------------------------ Total investment income ............................................................... 41,582,265 ------------------------------------------------------------------------------------------------------------ EXPENSES Custody ................................................................................. 774,556 Audit ................................................................................... 28,500 Other ................................................................................... 29,673 ------------------------------------------------------------------------------------------------------------ Total expenses ........................................................................ 832,729 ------------------------------------------------------------------------------------------------------------ Net investment income (loss) .......................................................... 40,749,536 ------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................... (117,052,412) Foreign currency transactions ......................................................... 7,368,759 Futures contracts ..................................................................... (19,239,030) ------------------------------------------------------------------------------------------------------------ (128,922,683) ------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation): Investments ........................................................................... (326,807,845) Foreign currency transactions ......................................................... 2,596,135 Futures contracts ..................................................................... (3,388,650) ------------------------------------------------------------------------------------------------------------ (327,600,360) ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) ................................................. (456,523,043) ------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ (415,773,507) ============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-151 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ............................................................ $ 40,749,536 $ 48,259,588 Net realized gain (loss) ................................................................ (128,922,683) (305,932,017) Net change in unrealized appreciation (depreciation) .................................... (327,600,360) (321,948,092) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ........................ (415,773,507) (579,620,521) ------------------------------------------------------------------------------------------------------------------------------- Distributions of security lending fee income, allocated to the Lending Fund participants (1,471,653) (1,580,936) Net increase (decrease) in net assets resulting from participant transactions ........... 809,919,920 (727,791,599) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS ................................................... 392,674,760 (1,308,993,056) NET ASSETS Beginning of year ...................................................................... 1,471,840,044 2,780,833,100 ------------------------------------------------------------------------------------------------------------------------------- End of year ............................................................................ $1,864,514,804 $ 1,471,840,044 ===============================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-152 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- 2002 2001 ------------------------------------- ------------------------------------ UNITS AMOUNT UNITS AMOUNT ----------------- ------------------- ---------------- ------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: LENDING FUND Units issued ......................................... 394,449,132 $ 3,097,155,258 106,923,274 $ 1,012,218,585 Units redeemed ....................................... (302,348,332) (2,277,704,469) (92,027,363) (842,130,556) ------------------------------------------------------------------------------------------------------------------------------- Total ............................................... 92,100,800 $ 819,450,789 14,895,911 $ 170,088,029 ------------------------------------------------------------------------------------------------------------------------------- NON-LENDING FUND Units issued ......................................... 42,252,590 $ 330,591,702 17,575,506 $ 157,495,150 Units redeemed ....................................... (43,100,771) (340,122,571) (117,522,825) (1,055,374,778) ------------------------------------------------------------------------------------------------------------------------------- Total ............................................... (848,181) $ (9,530,869) (99,947,319) $ (897,879,628) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) .............................. 91,252,619 $ 809,919,920 (85,051,408) $ (727,791,599) ===============================================================================================================================
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2002 held by 2 of the Lending Fund's unitholders aggregated 98% of the Lending Fund's total units outstanding. NON-LENDING FUND Units in excess of 10% of the Non-Lending Fund units outstanding at December 31, 2002 held by 1 of the Non-Lending Fund's unitholders aggregated 91% of the Non-Lending Fund's total units outstanding. The accompanying notes are an integral part of these financial statements. SAI-153 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 2002 2001 2000 1999 1998 (a) ---------- ----------- ----------- ----------- ----------- SELECTED PER UNIT DATA Net asset value, beginning of year .......... $ 8.85 $ 11.06 $ 12.16 $ 10.42 $ 10.00 ------------------------------------------------------------------------------------------------------------------ Net investment income (loss) (b) (c) ........ 0.19 0.21 0.25 0.23 (0.00) Net realized and unrealized gain (loss) ..... (1.79) (2.41) (1.34) 1.52 0.42 ------------------------------------------------------------------------------------------------------------------ Total from investment operations ............ (1.60) (2.20) (1.09) 1.75 0.42 Distributions of securities lending fee income (b) ................................. (0.01) (0.01) (0.01) (0.01) (0.00) ------------------------------------------------------------------------------------------------------------------ Net asset value, end of year ................ $ 7.24 $ 8.85 $ 11.06 $ 12.16 $ 10.42 ================================================================================================================ Total return (%) (d) ........................ (18.11) (19.91) (8.99) 16.87 4.20 ================================================================================================================ RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (b) (e) ............... 0.05 0.05 0.04 0.10 0.00 ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (%) (e)....... 2.42 2.28 2.10 2.20 0.02 ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) (b) .................. 26.40 94.75 64.53 13.93 0.00 ------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000,000s) .......... $ 1,607 $ 1,149 $ 1,272 $ 1,211 $ 499 ================================================================================================================
(a) The Daily MSCI Europe Index Securities Lending Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning andend of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-154 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 2002 2001 2000 1999 1998 (a) ---------- ----------- ----------- ----------- ----------- SELECTED PER UNIT DATA Net asset value, beginning of year .......... $ 8.85 $ 11.06 $ 12.16 $ 10.42 $ 10.00 ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (b) (c) ........ 0.18 0.20 0.24 0.22 0.00 Net realized and unrealized gain (loss) ..... (1.79) (2.41) (1.34) 1.52 0.42 ---------------------------------------------- -------- -------- -------- -------- -------- Total from investment operations ............ (1.61) (2.21) (1.10) 1.74 0.42 ---------------------------------------------- -------- -------- -------- -------- -------- Net asset value, end of year ................ $ 7.24 $ 8.85 $ 11.06 $ 12.16 $ 10.42 ================================================================================================================ Total return (%) (d) ........................ (18.19) (19.98) (9.05) 16.75 4.20 ================================================================================================================ RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (b) (e) ............... 0.05 0.05 0.04 0.10 0.00 ---------------------------------------------- -------- -------- -------- -------- -------- Ratio of net investment income (%) (e)....... 2.31 2.15 2.04 2.14 0.02 ---------------------------------------------- -------- -------- -------- -------- -------- Portfolio turnover (%) (b) .................. 26.40 94.75 64.53 13.93 0.00 ---------------------------------------------- -------- -------- -------- -------- -------- Net assets, end of year (000,000s) .......... $ 258 $ 323 $ 1,509 $ 1,724 $ 979 ================================================================================================================
(a) The Daily MSCI Europe Index Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-155 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ----------------------------------------------------------------------------------------------------------------- COMMON STOCK -- 95.8% AUSTRIA -- 0.2% Bohler Uddeholm .................................................. 4,067 $ 188,343 Erste Bank der Oesterreichischen Sparkassen AG ................... 10,901 733,845 Flughafen Wien AG ................................................ 3,700 124,249 Mayr-Melnhof Karton AG ........................................... 1,732 128,138 OMV AG ........................................................... 8,090 794,461 RHI AG ........................................................... 6,578 50,737 Telekom Austria AG ............................................... 69,950 708,364 VA Technologie ................................................... 5,644 91,804 Verbund -- Oesterreichische Elektrizitaetswirtschafts AG ......... 6,109 520,171 Voestalpine AG ................................................... 3,611 87,724 Wienerberger AG .................................................. 19,427 345,555 -------------- 3,773,391 -------------- BELGIUM -- 1.6% AGFA-Gevaert NV .................................................. 59,565 1,328,285 Barco NV ......................................................... 5,600 293,538 Bekaert SA ....................................................... 10,128 458,612 Colruyt SA ....................................................... 15,328 844,474 Compagnie Maritime Belge SA ...................................... 4,107 221,097 D'ieteren NV ..................................................... 2,479 335,589 Delhaize Group ................................................... 31,362 583,188 Dexia ............................................................ 224,517 2,787,246 Electrabel ....................................................... 16,012 3,889,895 Fortis ........................................................... 477,502 8,418,326 Fortis VVPR Strip ................................................ 46,620 489 Groupe Bruxelles Lambert SA ...................................... 43,509 1,781,133 Interbrew ........................................................ 77,349 1,826,327 KBC Bancassurance Holding ........................................ 49,483 1,578,076 Omega Pharma SA .................................................. 3,841 110,120 Solvay SA ........................................................ 27,761 1,913,999 Suez Lyonn Eaux .................................................. 185,560 1,947 Total Fina Elf SA VVPR Strip ..................................... 33,930 356 UCB SA ........................................................... 59,035 1,858,541 Umicore .......................................................... 11,608 501,023 -------------- 28,732,261 -------------- DENMARK -- 1.1% Bang & Olufsen A/S ............................................... 5,680 114,750 Carlsberg A/S .................................................... 12,727 560,083 Coloplast A/S .................................................... 205 14,915 D/S 1912 ......................................................... 143 1,004,062 Dampskibsselskabet Svendborg ..................................... 98 996,842 Danisco A/S ...................................................... 26,481 899,741 Danske Bank A/S .................................................. 289,375 4,783,159 DSV DE Sammenslut Vogn A/S ....................................... 287 6,974 FLS Industries A/S ............................................... 20,577 164,247
The accompanying notes are an integral part of these financial statements. SAI-156 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) GN Store Nord ........................ 46,292 $ 135,377 Group 4 Falck A/S .................... 35,464 749,026 H Lundbeck A/S ....................... 23,966 636,534 ISS A/S .............................. 16,885 608,288 Kobenhavns Lufthavne ................. 94 6,773 NEG Micon A/S ........................ 292 4,930 NKT Holding A/S ...................... 16,684 174,421 Novo-Nordisk A/S ..................... 153,528 4,435,564 Novozymes A/S ........................ 33,918 709,186 Ostasiatiske Kompagni ................ 9,594 222,286 TDC A/S .............................. 90,093 2,189,210 TK Development ....................... 173 1,246 Topdanmark A/S ....................... 17,979 520,700 Vestas Wind Systems A/S .............. 48,989 487,928 William Demant Holding ............... 33,698 726,009 -------------- 20,152,251 -------------- FINLAND -- 2.8% Amer Group ........................... 11,293 413,596 Fortum Oyj ........................... 175,980 1,154,209 Instrumentarium OYJ .................. 22,906 917,754 KCI Konecranes International ......... 7,430 181,593 Kesko OYJ ............................ 28,698 364,400 Kone OYJ ............................. 16,523 496,076 Metso Oyj ............................ 50,049 540,971 Nokia OYJ ............................ 2,329,225 37,030,993 Orion-Yhtymae OY ..................... 19,063 426,101 Outokumpu OYJ ........................ 41,241 359,210 Pohjola Group PLC .................... 8,522 132,982 Rautaruukki OYJ ...................... 40,726 147,018 Sampo Oyj ............................ 141,900 1,079,597 Stora Enso Oyj ....................... 326,356 3,441,906 Tietoenator Oyj ...................... 38,387 523,683 UPM-Kymmene Oyj ...................... 120,562 3,871,446 Uponor Oyj ........................... 14,979 306,206 Wartsila Oyj Series B ................ 19,910 251,141 -------------- 51,638,882 -------------- FRANCE -- 11.7% Accor SA ............................. 83,213 2,520,164 Air France ........................... 27,686 268,456 Air Liquide .......................... 45,046 5,942,002 Alcatel SA ........................... 485,160 2,128,152 Alstom ............................... 85,310 425,241 Altran Technologies SA ............... 20,385 97,762 Arcelor .............................. 151,248 1,860,195 Atos Origin .......................... 7,009 170,642 The accompanying notes are an integral part of these financial statements.
SAI-157 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ----------------------------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Autoroutes du Sud de la France ................................. 16,174 $ 390,888 Aventis SA ..................................................... 297,833 16,189,888 AXA ............................................................ 611,162 8,202,914 BNP Paribas .................................................... 351,530 14,324,223 Bouygues ....................................................... 75,690 2,114,403 Business Objects SA ............................................ 20,463 301,279 Cap Gemini SA .................................................. 45,052 1,029,706 Carrefour SA ................................................... 234,897 10,459,039 Casino Guichard Perrachon SA ................................... 12,345 916,556 Casino Guichard Perrachon SA -- Warrants Exp. 12/15/03 ......... 3,031 286 Cie de Saint-Gobain ............................................ 137,578 4,036,709 Cie Generale D'Optique Essilor International SA ................ 43,510 1,792,132 Club Mediterranee .............................................. 7,005 168,339 Dassault Systemes SA ........................................... 18,676 402,555 European Aeronautic Defense and Space Co ....................... 96,917 1,001,792 France Telecom ................................................. 182,982 3,202,917 Groupe Danone .................................................. 56,070 7,543,274 Imerys SA ...................................................... 3,504 442,723 L'Oreal SA ..................................................... 148,869 11,333,994 Lafarge SA ..................................................... 58,317 4,394,009 Lagardere S.C.A. ............................................... 58,101 2,360,196 LVMH Moet Hennessy Louis Vuitton SA ............................ 97,096 3,989,095 Michelin (C.G.D.E.) ............................................ 56,903 1,962,203 Pechiney SA .................................................... 32,591 1,143,682 Pernod-Ricard .................................................. 19,713 1,909,395 Peugeot SA ..................................................... 69,662 2,840,796 Pinault-Printemps-Redoute ...................................... 29,646 2,180,848 Publicis Groupe ................................................ 49,062 1,040,011 Renault SA ..................................................... 70,222 3,299,883 Sagem SA ....................................................... 5,392 364,965 Sanofi-Synthelabo SA ........................................... 177,332 10,839,876 Schneider Electric SA .......................................... 91,509 4,329,974 Societe BIC SA ................................................. 18,755 646,538 Societe Generale ............................................... 134,631 7,841,142 Societe Television Francaise 1 ................................. 40,409 1,079,637 Sodexho Alliance SA ............................................ 42,093 971,793 STMicroelectronics NV .......................................... 257,251 5,042,840 Suez SA ........................................................ 366,262 6,357,241 Technip-Coflexip SA ............................................ 6,836 489,246 Thales SA ...................................................... 32,302 855,240 Thomson/ex-TMM ................................................. 63,857 1,089,608 Total Fina Elf SA .............................................. 280,909 40,120,382 Unibail Holding ................................................ 19,734 1,404,061 Valeo SA ....................................................... 33,017 1,035,977 Vinci SA ....................................................... 28,277 1,593,488
The accompanying notes are an integral part of these financial statements. SAI-158 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE --------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Vivendi Universal SA ....................... 414,509 $ 6,694,434 Zodiac SA .................................. 20,630 419,777 -------------- 213,562,568 -------------- GERMANY -- 7.6% Adidas-Salomon AG .......................... 20,720 1,789,497 Aixtron AG ................................. 18,497 88,319 Allianz AG ................................. 88,107 8,381,457 Altana AG .................................. 25,252 1,152,727 BASF AG .................................... 255,114 9,659,221 Bayer AG ................................... 337,830 7,249,913 Bayerische Hypo-und Vereinsbank AG ......... 165,101 2,636,973 Beiersdorf AG .............................. 15,122 1,683,705 Buderus AG ................................. 28,121 649,224 Continental AG ............................. 56,574 884,595 DaimlerChrysler AG ......................... 398,689 12,279,584 Deutsche Bank AG ........................... 261,537 12,048,665 Deutsche Boerse AG ......................... 11,084 443,860 Deutsche Lufthansa AG ...................... 89,214 821,994 Deutsche Post AG ........................... 179,162 1,880,127 Deutsche Telekom ........................... 980,574 12,605,432 Douglas Holding AG ......................... 13,856 244,717 E.ON AG .................................... 274,935 11,093,476 Epcos AG ................................... 28,192 292,001 Fresenius Medical Care AG .................. 17,065 706,650 Gehe AG .................................... 12,850 500,286 HeidelbergCement AG ........................ 13,928 518,870 Infineon Technologies AG ................... 161,602 1,185,401 KarstadtQuelle AG .......................... 19,271 333,679 Linde AG ................................... 40,662 1,493,475 MAN AG ..................................... 46,850 646,512 Merck KGaA ................................. 22,691 604,823 Metro AG ................................... 67,918 1,621,465 MLP AG ..................................... 18,882 186,259 Muenchener Rueckversicherungs AG ........... 50,014 5,983,258 Qiagen NV .................................. 65,320 332,452 RWE AG ..................................... 171,418 4,443,188 SAP AG ..................................... 96,557 7,652,213 Schering AG ................................ 83,264 3,621,788 Siemens AG ................................. 374,636 15,922,300 ThyssenKrupp AG ............................ 162,839 1,819,908 TUI AG ..................................... 63,078 1,069,696 Volkswagen AG .............................. 104,905 3,824,435 WCM Beteiligungs & Grundbesitz-AG .......... 109,819 288,110 -------------- 138,640,255 --------------
The accompanying notes are an integral part of these financial statements. SAI-159 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ----------------------------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) GREECE -- 0.5% Alpha Bank A.E. ............................................. 70,073 $ 847,119 Aluminum of Greece S.A.I.C. ................................. 5,106 94,412 Attica Enterprise Holding SA ................................ 28,101 73,133 Coca Cola Hellenic Bottling Co SA ........................... 46,444 644,321 Commercial Bank Of Greece ................................... 33,545 509,023 EFG Eurobank Ergasias SA .................................... 64,800 761,613 EYDAP Athens Water Supply & Sewage Co SA .................... 18,935 71,931 Folli -- Follie SA .......................................... 8,785 148,979 Greek Organization of Football Prognostics SA ............... 35,863 377,852 Hellenic Duty Free Shops SA ................................. 14,058 89,400 Hellenic Petroleum SA ....................................... 44,820 259,628 Hellenic Technodomiki Tev SA ................................ 29,451 182,345 Hellenic Telecommunications Organization SA ................. 123,622 1,359,560 Intracom SA ................................................. 27,040 121,448 MJ Maillis SA ............................................... 19,318 82,711 National Bank of Greece SA .................................. 61,537 870,497 Papastratos Cigarette Co .................................... 10,268 172,188 Piraeus Bank SA ............................................. 57,412 363,899 Technical Olympic SA ........................................ 44,419 152,892 Titan Cement Co SA .......................................... 14,001 537,164 Viohalco .................................................... 41,996 167,468 Vodafone-Panafon SA ......................................... 91,710 523,548 -------------- 8,411,131 -------------- IRELAND -- 1.2% Allied Irish Banks .......................................... 450,405 6,078,346 Bk of Ireland ............................................... 535,778 5,481,896 CRH PLC ..................................................... 271,243 3,344,550 DCC ......................................................... 39,070 401,801 Elan Corporation ............................................ 176,911 380,584 Greencore Group ............................................. 86,528 231,546 Independent Newspapers PLC .................................. 236,149 384,113 Irish Life + Perm ........................................... 147,562 1,594,972 Kerry Group PLC ............................................. 75,519 1,010,433 Ryanair Hldgs ............................................... 287,885 2,039,220 Waterford Wedgewood PLC ..................................... 352,223 181,115 -------------- 21,128,576 -------------- ITALY -- 4.6% ACEA SpA .................................................... 15,776 69,864 Alitalia SpA ................................................ 535,561 136,008 Alleanza Assicurazioni SpA .................................. 139,479 1,056,787 Arnoldo Mondadori Editore SpA ............................... 89,743 555,640 Assicurazioni Generali SpA .................................. 414,940 8,534,590 Autogrill SpA ............................................... 84,233 655,885 Autostrade Concessioni e Costruzioni Autostrade SpA ......... 336,878 3,351,369
The accompanying notes are an integral part of these financial statements. SAI-160 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ----------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Banca Fideuram SpA .......................... 39,295 $ 184,738 Banca Intesa SpA ............................ 1,605,124 3,385,680 Banca Intesa SpA Di Risp .................... 341,262 562,249 Banca Monte dei Paschi di Siena SpA ......... 108,719 256,132 Banca Nazionale del Lavoro SpA .............. 486,705 538,840 Banca Popolare di Milano SCRL ............... 162,342 591,155 Benetton Group SpA .......................... 22,135 197,442 Bulgari SpA ................................. 101,538 481,624 Capitalia SpA ............................... 659,050 842,378 e.Biscom .................................... 188 5,386 Enel SpA .................................... 923,181 4,805,182 ENI-Ente Nazionale Idrocarburi SpA .......... 1,139,289 18,112,893 Fiat SpA .................................... 96,929 788,309 Fiat SpA Di Risp ............................ 30,257 132,722 Fiat SpA Priv ............................... 41,741 190,543 FinecoGroup SpA ............................. 686,982 320,809 Gruppo Editoriale L'Espresso SpA ............ 110,912 361,976 Italcementi SpA ............................. 44,504 448,344 Italcementi SpA Di Risp ..................... 8,762 48,457 Italgas SpA ................................. 77,968 1,060,383 Luxottica Group SpA ......................... 19,039 251,143 Mediaset SpA ................................ 256,962 1,957,703 Mediobanca SpA .............................. 174,138 1,432,686 Mediolanum SpA .............................. 31,324 161,399 Parmalat Finanziaria SPA .................... 265,980 633,601 Pirelli SpA ................................. 488,185 450,825 Rinascente SPA (LA) ......................... 91,057 422,354 Riunione Adriatica di Sicurta SpA ........... 156,521 1,905,337 Sanpaolo IMI SpA ............................ 366,536 2,384,787 Seat-Pagine Gialle SpA ...................... 1,485,064 1,011,419 Snam Rete Gas SpA ........................... 318,050 1,084,726 SNIA SpA .................................... 176,373 335,931 Snia SpA -- Rights .......................... 176,373 7,496 Telecom Italia SpA .......................... 1,033,104 7,838,331 Telecom Italia SpA Di Risp .................. 732,072 3,695,219 TIM SpA ..................................... 1,543,573 7,046,245 Tiscali SpA ................................. 73,628 330,695 UniCredito Italiano SpA ..................... 1,329,717 5,316,496 -------------- 83,941,778 -------------- NETHERLANDS -- 7.5% ABN Amro Holding NV ......................... 676,960 11,068,066 Aegon NV .................................... 619,740 7,973,358 Akzo Nobel NV ............................... 137,466 4,360,886 ASML Holding NV ............................. 220,021 1,837,886 Buhrmann NV ................................. 45,412 198,246
The accompanying notes are an integral part of these financial statements. SAI-161 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Getronics NV ............................... 166,757 $ 101,497 Hagemeyer NV ............................... 52,585 380,761 Heineken NV ................................ 94,154 3,675,556 IHC Caland NV .............................. 14,542 767,597 ING Groep NV ............................... 813,693 13,781,782 KLM-Koninklijke Luchtvaart Mij NV .......... 11,517 110,949 Koninklijke Ahold NV ....................... 309,176 3,925,838 Koninklijke Philips Electronics NV ......... 632,244 11,080,069 Koninklijke Vendex KBB NV .................. 44,848 487,107 OCE NV ..................................... 39,824 438,809 Reed Elsevier NV ........................... 301,401 3,684,783 Royal Dutch Petroleum Co ................... 1,021,648 44,975,348 Royal KPN NV ............................... 837,678 5,450,170 TPG NV ..................................... 161,503 2,618,487 Unilever NV ................................ 274,587 16,871,285 VNU NV ..................................... 106,338 2,773,040 -------------- 136,561,520 -------------- NORWAY -- 0.7% Bergesen DY A/S Class A .................... 23,343 444,773 Bergesen DY A/S Class B .................... 10,213 165,112 DnB Holding ASA ............................ 191,429 900,810 EDB Business Partner ASA ................... 750 2,003 Frontline Ltd .............................. 37,364 326,300 Gjensidige NOR ASA ......................... 9,488 310,891 Kvaerner ASA ............................... 133,482 71,291 Merkantildata ASA .......................... 48,623 36,497 Nera ASA ................................... 58,060 62,856 Norsk Hydro ASA ............................ 84,471 3,785,969 Norske Skogindustrier ASA .................. 40,906 578,657 Orkla ASA .................................. 104,430 1,778,751 Schibsted ASA .............................. 30,867 320,800 Smedvig ASA Series A ....................... 24,661 117,471 Smedvig ASA Series B ....................... 12,145 49,262 Statoil ASA ................................ 213,676 1,804,344 Storebrand ................................. 163,023 611,829 Tandberg ASA ............................... 52,588 303,637 Telenor ASA ................................ 222,140 849,729 Tomra Systems ASA .......................... 75,182 489,439 -------------- 13,010,421 -------------- PORTUGAL -- 0.5% Banco BPI SA ............................... 260,200 595,258 Banco Comercial Portugues SA ............... 767,594 1,836,571 Banco Espirito Santo SA .................... 57,661 756,369 Brisa-Auto Estradas de Portugal SA ......... 141,964 786,599 Cimpor Cimentos de Portugal SA ............. 20,558 345,177
The accompanying notes are an integral part of these financial statements. SAI-162 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE --------------------------------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Electricidade de Portugal SA ............................................ 893,645 $ 1,491,089 Jeronimo Martins ........................................................ 46,802 341,343 Portugal Telecom SGPS SA ................................................ 463,025 3,182,636 PT Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA ......... 1,014 10,662 Sonae SGPS SA ........................................................... 615,756 258,470 -------------- 9,604,174 -------------- SPAIN -- 3.5% Acerinox SA ............................................................. 17,668 648,743 ACESA Infraestructuras SA ............................................... 72,240 818,734 Acesa Infraestructuras SA -- Rights ..................................... 72,240 41,695 ACS Actividades Cons y Serv ............................................. 18,015 579,437 Altadis SA .............................................................. 111,628 2,546,678 Amadeus Global Travel Distribution ...................................... 57,343 236,491 Banco Bilbao Vizcaya Argentaria SA ...................................... 1,142,082 10,930,333 Banco Santander Central Hispano SA ...................................... 1,568,948 10,767,815 Corp Mapfre SA .......................................................... 46,250 375,174 Endesa SA ............................................................... 349,869 4,093,753 Fomento de Construcciones Y Contratas SA ................................ 29,797 669,156 Gas Natural SDG SA ...................................................... 105,735 2,005,018 Grupo Dragados SA ....................................................... 52,588 894,011 Iberdrola SA ............................................................ 297,661 4,170,081 Iberia Lineas Aereas de Espana .......................................... 168,035 246,870 Inditex SA .............................................................. 79,733 1,883,453 Metrovacesa SA .......................................................... 19,264 408,356 NH Hoteles SA ........................................................... 26,730 229,733 Promotora de Informaciones SA (PRISA) ................................... 2,610 17,009 Puleva Biotech SA ....................................................... 4,849 15,367 Repsol YPF SA ........................................................... 376,609 4,979,692 Sociedad General de Aguas de Barcelona SA ............................... 34,570 348,267 Sociedad General de Aguas de Barcelona SA -- Rights ..................... 345 3,233 Sol Melia SA ............................................................ 39,302 155,488 Telefonica Publicidad e Informacion SA .................................. 24,290 77,235 Telefonica SA ........................................................... 1,664,263 14,897,461 Telepizza ............................................................... 58,956 46,401 Terra Networks SA ....................................................... 84,726 356,535 Union Fenosa SA ......................................................... 91,859 1,209,781 Vallehermoso SA ......................................................... 37,265 387,149 Zeltia SA ............................................................... 56,067 318,895 -------------- 64,358,044 -------------- SWEDEN -- 2.7% Assa Abloy AB ........................................................... 150,719 1,721,109 Atlas Copco AB Series A ................................................. 54,710 1,067,414 Atlas Copco AB Series B ................................................. 33,365 591,612 Drott AB ................................................................ 48,433 539,176 Electrolux AB ........................................................... 151,478 2,390,395
The accompanying notes are an integral part of these financial statements. SAI-163 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Gambro AB Series A ....................... 108,696 $ 605,024 Gambro AB Series B ....................... 45,110 250,574 Hennes & Mauritz AB ...................... 230,255 4,439,517 Hoganas AB ............................... 4,442 84,116 Holmen AB ................................ 16,988 412,354 Modern Times Group AB .................... 31,669 256,236 Nobel Biocare Holding AG ................. 8,460 539,837 Nordea AB ................................ 1,085,795 4,785,159 OM AB .................................... 39,482 188,499 Sandvik AB ............................... 106,671 2,381,131 Sapa AB .................................. 4,419 81,145 SAS AB ................................... 42,013 238,192 Securitas AB ............................. 143,719 1,715,398 Skandia Forsakrings AB ................... 422,160 1,124,042 Skandinaviska Enskilda Banken AB ......... 228,766 1,903,473 Skanska AB ............................... 201,795 1,181,131 SKF AB Series A .......................... 17,146 443,738 SKF AB Series B .......................... 30,837 799,830 Ssab Svenskt Stal AB Series A ............ 32,112 379,596 Ssab Svenskt Stal AB Series B ............ 14,402 161,155 Svenska Cellulosa AB ..................... 92,104 3,107,729 Svenska Handelsbanken Series A ........... 267,966 3,567,426 Svenska Handelsbanken Series B ........... 20,455 260,579 Swedish Match AB ......................... 185,189 1,455,872 Tele2 AB ................................. 44,138 1,167,618 Telefonaktiebolaget LM Ericsson .......... 7,429,062 5,200,932 TeliaSonera AB ........................... 887,851 3,342,191 Trelleborg AB ............................ 36,291 293,633 Volvo AB Series A ........................ 50,443 787,331 Volvo AB Series B ........................ 110,243 1,796,622 WM-Data AB ............................... 166,193 144,958 -------------- 49,404,744 -------------- SWITZERLAND -- 11.3% Abb Ltd .................................. 447,352 1,271,493 Adecco SA ................................ 62,245 2,439,921 Centerpulse .............................. 5,291 922,204 Ciba Specialty Chemical .................. 31,563 2,200,530 Clariant ................................. 68,641 1,097,104 Credit Suisse Grp ........................ 571,581 12,401,410 Forbo Holding AG ......................... 696 207,386 Georg Fischer AG ......................... 1,610 163,014 Givaudan AG .............................. 3,338 1,496,753 Holcim ................................... 13,188 2,394,003 Kudelski SA .............................. 16,106 218,404 Kuoni Reisen Holding ..................... 1,486 280,499
The accompanying notes are an integral part of these financial statements. SAI-164 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------ COMMON STOCK (CONTINUED) Logitech International SA ..................... 21,429 $ 639,290 Lonza Group AG ................................ 14,052 853,669 Nestle SA ..................................... 189,335 40,120,890 Novartis AG ................................... 1,310,597 47,819,208 Phonak Holding AG ............................. 18,565 174,546 PubliGroupe SA ................................ 985 156,722 Richemont Cie Fin ............................. 249,597 4,657,267 Roche Holding AG .............................. 22,951 2,904,770 Roche Holdings AG Genusscheine NPV ............ 335,934 23,408,723 Schindler Holding AG .......................... 2,680 522,355 Serono SA ..................................... 3,347 1,793,684 SGS Holdings .................................. 2,333 701,908 Sulzer AG ..................................... 1,662 225,975 Swatch Group BR ............................... 17,031 1,416,479 Swatch Group Reg D ............................ 28,525 482,740 Swiss Reinsurance ............................. 149,332 9,795,626 Swisscom AG ................................... 12,661 3,667,267 Syngenta AG ................................... 51,132 2,960,235 Synthes-Stratec Inc ........................... 2,181 1,337,592 Tecan Group AG ................................ 6,787 223,337 UBS AG ........................................ 599,782 29,149,744 Unaxis Holding AG ............................. 4,910 328,470 Valora Holding AG ............................. 2,050 392,891 Zurich Finance Services Group ................. 71,578 6,677,921 -------------- 205,504,030 -------------- UNITED KINGDOM -- 38.3% 3I Group Plc .................................. 294,442 2,630,821 Aegis Group Plc ............................... 549,407 692,113 Aggreko Plc ................................... 124,453 295,526 Amec Plc ...................................... 145,618 335,821 Amersham PLC .................................. 338,197 3,027,214 Amvescap Plc .................................. 304,219 1,949,252 ARM Holdings Plc .............................. 491,767 380,014 Associated British Ports Holdings Plc ......... 158,189 1,017,400 AstraZeneca Plc ............................... 823,424 29,428,973 Aviva Plc ..................................... 1,092,023 7,788,147 AWG Plc ....................................... 85,306 595,343 BAA Plc ....................................... 507,162 4,115,057 BAE Systems Plc ............................... 1,484,651 2,963,771 Balfour Beatty Plc ............................ 208,085 484,069 Barclays PLC .................................. 3,157,051 19,567,752 Barratt Developments plc ...................... 114,688 721,927 BBA Group Plc ................................. 233,659 694,969 Berkeley Group Plc ............................ 66,138 631,932 BG Group Plc .................................. 1,679,793 7,247,516
The accompanying notes are an integral part of these financial statements. SAI-165 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) BHP Billiton PLC ......................... 1,115,950 $ 5,960,110 BOC Group Plc ............................ 236,570 3,381,982 Boots Company PLC ........................ 422,332 3,984,283 BP PLC ................................... 10,690,920 73,492,255 BPB Plc .................................. 236,548 936,813 Brambles Industries PLC .................. 349,371 854,927 British Airways PLC ...................... 275,235 598,186 British American Tobacco Plc ............. 778,496 7,776,726 British Land Co Plc ...................... 250,464 1,822,562 British Sky Broadcasting Plc ............. 585,542 6,023,619 BT Group PLC ............................. 4,126,728 12,955,049 Bunzl Plc ................................ 224,417 1,372,897 Cable & Wireless Plc ..................... 1,092,424 787,015 Cadbury Schweppes Plc .................... 978,455 6,096,077 Canary Wharf Group Plc ................... 235,365 892,342 Capita Group Plc ......................... 308,423 1,228,911 Carlton Communications Plc ............... 308,147 665,995 Celltech Group Plc ....................... 132,840 737,813 Centrica Plc ............................. 2,009,418 5,531,781 Chubb Plc ................................ 400,184 565,334 Close Brothers Group Plc ................. 70,168 628,076 Compass Group PLC ........................ 1,062,352 5,643,922 Corus Group Plc .......................... 1,509,852 662,368 Daily Mail & General Trust ............... 151,171 1,415,197 De La Rue Plc ............................ 95,614 448,703 Diageo Plc ............................... 1,580,653 17,176,668 Dixons Group Plc ......................... 939,130 2,192,261 Electrocomponents Plc .................... 209,986 970,221 EMI Group PLC ............................ 380,679 851,868 Exel plc ................................. 143,707 1,591,714 Firstgroup Plc ........................... 209,603 794,670 FKI Plc .................................. 287,691 407,575 GKN Plc .................................. 351,820 1,137,037 GlaxoSmithKline plc ...................... 2,890,534 55,469,334 Granada Plc .............................. 1,336,301 1,715,669 Great Portland Estates Plc ............... 95,360 342,350 GUS PLC .................................. 479,029 4,449,756 Hammerson Plc ............................ 135,615 1,028,318 Hanson Plc ............................... 355,275 1,578,601 Hays Plc ................................. 821,007 1,225,912 HBOS PLC ................................. 1,797,641 18,955,833 Hilton Group Plc ......................... 762,523 2,050,067 HSBC Holdings Plc ........................ 4,451,979 49,203,077 IMI Plc .................................. 174,279 736,500 Imperial Chemical Industries plc ......... 575,059 2,129,310 Imperial Tobacco Group Plc ............... 347,054 5,894,516
The accompanying notes are an integral part of these financial statements. SAI-166 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) International Power Plc ................................. 539,478 $ 831,594 Invensys Plc ............................................ 1,689,445 1,434,713 J Sainsbury Plc ......................................... 701,227 3,146,822 Johnson Matthey Plc ..................................... 105,850 1,363,262 Kelda Group Plc ......................................... 189,704 1,294,914 Kidde Plc ............................................... 369,300 420,634 Kingfisher PLC .......................................... 1,252,989 4,488,238 Land Securities Group PLC ............................... 221,512 2,799,404 Legal & General Group PLC ............................... 3,093,774 4,781,437 Lloyds TSB Group Plc .................................... 2,657,122 19,078,533 LogicaCMG PLC ........................................... 368,741 890,454 Man Group Plc ........................................... 125,181 1,787,560 Marks & Spencer Group PLC ............................... 1,098,830 5,572,367 Misys Plc ............................................... 282,606 800,742 National Grid Transco PLC ............................... 1,475,513 10,843,823 Next Plc ................................................ 153,791 1,823,485 Novar Plc ............................................... 207,719 362,831 P&O Princess Cruises Plc ................................ 334,548 2,321,316 Pearson Plc ............................................. 381,067 3,524,439 Peninsular and Oriental Steam Navigation Co/The ......... 329,354 872,223 Pilkington Plc .......................................... 512,086 478,156 Provident Financial Plc ................................. 118,483 1,133,029 Prudential PLC .......................................... 970,887 6,861,702 Rank Group Plc .......................................... 281,651 1,208,390 Reckitt Benckiser PLC ................................... 257,048 4,986,547 Reed Elsevier PLC ....................................... 603,162 5,165,879 Rentokil Initial Plc .................................... 911,790 3,229,357 Reuters Group Plc ....................................... 691,418 1,975,776 Rexam Plc ............................................... 211,089 1,440,888 Rio Tinto Plc ........................................... 507,044 10,121,991 RMC Group Plc ........................................... 131,556 777,276 Rolls-Royce Plc ......................................... 702,383 1,209,919 Royal & Sun Alliance Insurance Group .................... 714,000 1,387,982 Royal Bank of Scotland Group Plc ........................ 1,295,047 31,023,235 SABMiller PLC ........................................... 385,556 2,740,418 Safeway Plc ............................................. 508,714 1,746,471 Sage Group Plc .......................................... 588,903 1,260,939 Schroders PLC ........................................... 63,117 519,237 Scottish & Newcastle Plc ................................ 371,002 2,768,373 Scottish & Southern Energy Plc .......................... 409,219 4,479,848 Scottish Power Plc ...................................... 882,172 5,148,253 Securicor Plc ........................................... 310,938 424,240 Serco Group Plc ......................................... 219,870 541,572 Severn Trent PLC ........................................ 165,990 1,854,556 Shell Transport & Trading Co PLC ........................ 4,623,847 30,445,659 Signet Group PLC ........................................ 826,085 904,341
The accompanying notes are an integral part of these financial statements. SAI-167 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE -------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Six Continents PLC .................. 418,280 $ 3,380,410 Slough Estates Plc .................. 205,980 1,124,148 Smith & Nephew PLC .................. 447,357 2,740,359 Smiths Group PLC .................... 269,223 3,014,449 SSL International Plc ............... 93,731 388,561 Stagecoach Group PLC ................ 581,824 276,320 Tate & Lyle Plc ..................... 203,036 1,029,632 Taylor Woodrow Plc .................. 273,895 747,399 Telewest Communications Plc ......... 545,923 17,578 Tesco Plc ........................... 3,365,148 10,510,044 TI Automotive Ltd1 .................. 195,737 0 Unilever Plc ........................ 1,316,389 12,524,787 United Business Media PLC ........... 161,961 756,148 United Utilities Plc ................ 268,418 2,696,465 Vodafone Group Plc .................. 32,435,724 59,137,154 Whitbread PLC ....................... 142,652 1,242,435 Wimpey George Plc ................... 184,157 788,621 Wolseley Plc ........................ 279,138 2,343,537 WPP Group Plc ....................... 558,021 4,262,706 -------------- 698,185,395 -------------- TOTAL COMMON STOCK .................. 1,746,609,421 --------------
The accompanying notes are an integral part of these financial statements. SAI-168 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------ SHARES VALUE ------------------------------------------------------------------------ PREFERRED STOCK -- 0.5% FRANCE -- 0.0% Casino Guichard Perrachon SA ......... 830 $ 45,249 -------------- GERMANY -- 0.3% Fresenius Medical Care AG ............ 9,328 280,449 Henkel KGaA .......................... 30,062 1,910,176 Hugo Boss AG ......................... 25,990 273,557 Metro AG ............................. 192 6,901 Porsche AG ........................... 2,832 1,176,873 ProSieben SAT.1 Media AG ............. 59,646 406,852 RWE AG ............................... 18,086 393,824 Volkswagen AG ........................ 48,724 1,278,275 Wella AG ............................. 3,974 237,708 -------------- 5,964,615 -------------- NETHERLANDS -- 0.2% Numico NV ............................ 71,180 896,356 Vedior NV ............................ 55,823 318,679 Wolters Kluwer NV .................... 130,265 2,269,230 -------------- 3,484,265 -------------- TOTAL PREFERRED STOCK ................ 9,494,129 -------------- UNITS ------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 3.7% SHORT TERM INVESTMENT FUND2 .......... 66,958,527 66,958,527 --------------------------------------- ---------- -------------- TOTAL INVESTMENTS -- 100% (Cost $2,384,105,285) ............... $1,823,062,077 ======================================= ==============
1 Valued by management. 2 Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-169 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002 At December 31, 2002, foreign currency balances totaling $12,863,241 were pledged to cover margin requirements for open futures contracts. The following futures contracts were open at December 31, 2002:
NUMBER OF FUTURES CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) ---------------------- -------------- -------------- -------------- -------------- CAC 40 10 EURO Index 617 $20,001,287 March 2003 $ (118,316) DAX Stock Index 55 4,353,255 March 2003 (162,048) FTSE 100 Index 73 4,615,368 March 2003 (18,115) IBEX 35 Plus Index 316 20,652,891 January 2003 (814,445) MIB 30 Index 123 15,933,573 March 2003 (492,059) ------------ (1,604,983) ============
The following foreign currency contracts were open at December 31, 2002:
SETTLEMENT CONTRACTS IN EXCHANGE UNREALIZED DATE TO DELIVER FOR GAIN/(LOSS) ------------ -------------------- -------------------- -------------- 03/05/2003 EUR 14,000,000 USD 13,827,940 $ (824,458) 03/05/2003 EUR 27,000,000 USD 26,804,790 (1,453,405) 03/05/2003 EUR 12,000,000 USD 12,052,200 (506,998) 03/05/2003 EUR 34,000,000 USD 34,600,100 (984,294) 03/05/2003 EUR 9,000,000 USD 9,170,370 (249,028) 03/05/2003 EUR 43,000,000 USD 43,843,230 (1,160,563) 03/05/2003 EUR 20,000,000 USD 20,834,000 (97,997) 03/05/2003 GBP 7,500,000 USD 11,555,625 (464,242) 03/05/2003 GBP 10,000,000 USD 15,598,300 (428,189) 03/05/2003 GBP 2,000,000 USD 3,129,400 (75,898) 03/05/2003 GBP 13,000,000 USD 20,493,980 (340,456) 03/05/2003 GBP 14,000,000 USD 22,281,700 (155,385) 03/05/2003 GBP 3,000,000 USD 4,786,650 (21,297) 03/05/2003 USD 30,603,200 EUR 31,000,000 1,841,395 03/05/2003 USD 30,602,270 EUR 31,000,000 1,842,325 03/05/2003 USD 6,040,500 EUR 6,000,000 239,099 03/05/2003 USD 40,406,000 EUR 40,000,000 1,457,993 03/05/2003 USD 42,014,340 EUR 41,000,000 896,253 03/05/2003 USD 27,730,620 EUR 27,000,000 527,575 03/05/2003 USD 12,311,200 GBP 8,000,000 509,991 03/05/2003 USD 16,913,325 GBP 11,000,000 715,813 03/05/2003 USD 23,581,200 GBP 15,000,000 458,534 03/05/2003 USD 20,659,210 GBP 13,000,000 175,226 03/05/2003 USD 4,747,200 GBP 3,000,000 60,747 ------------ $ 1,962,741 ============
EUR: Euro GBP: British Pound Sterling USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-170 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 State Street Bank and Trust Company ("State Street Bank") Daily EAFE Funds (collectively, the "Funds") are organized by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The Funds are organized into separate regional funds, a country fund and umbrella funds that hold investments in separate country and regional funds (individually, a "Fund"). State Street Bank is Trustee, custodian, and recordkeeper of each Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is each Fund's investment manager. The investment objective of each Fund is generally to match, as closely as possible, the total return of the relevant portion of the MSCI World Index (the "Index"). 1. THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY EACH FUND IN THE PREPARATION OF ITS FINANCIAL STATEMENTS. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date or as soon thereafter as the Fund is informed of the dividend. Interest income earned on securities, if any, is recorded net of applicable withholding taxes on the accrual basis; interest earned on foreign currency accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. Interest income includes accretion of discounts and amortization of premiums, if any. C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS The accounting records of the Fund are maintained in U.S. dollars. Foreign currency, investment securities, and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statement of Operations from the effects of SAI-171 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain or loss on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized appreciation/ depreciation on foreign currency related transactions. The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against the foreign currency exposure of either specific transactions or portfolio positions. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed upon future date. Such contracts are valued based upon the difference in the forward exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, and any resulting unrealized gains or losses are recorded in the Fund's financial statements. The Fund records realized gains or losses at the time the forward contract is extinguished by entry into a closing transaction or by delivery of the currency. Risks in foreign currency contracts arise from the possible inability of counterparties to meet the contracts' terms and from movements in currency values. D. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. A transaction fee of 0.5% is charged on any contribution or withdrawal greater than 5% of the net asset value of the Fund. However, such fees are waived if the Fund's net participant activity on any day is less than 5% of the net asset value of the Fund. During the year, transaction fees of $504,610, $305,891, and $109,359 were charged by the Daily MSCI Europe Index Fund, the Daily MSCI Japan Index Fund and the Daily MSCI Pacific Basin ex-Japan Fund, respectively. F. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. G. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending, if any, is distributed monthly to participants of the Lending Fund. SAI-172 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 2. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Daily MSCI Europe Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Daily MSCI Europe Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2002, the market value of securities loaned by the Lending Fund are disclosed on the Statement of Assets and Liabilities. Cash collateral provided by the Borrowers is recorded on the Statement of Assets and Liabilities and is invested in State Street Bank and Trust Company Quality D Short-Term Investment Fund. The Fund received securities valued at $88,082 as additional collateral. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $3,752,005,950 and $2,916,966,148, respectively. 4. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. SAI-173 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND DAILY MSCI EUROPE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. SAI-174 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Daily MSCI Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Japan Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Daily MSCI Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Japan Index Fund at December 31, 2002, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 21, 2003 SAI-175 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $113,468,876) (cost $ 812,761,951 $1,070,502,241) Foreign currency, at value (cost $753,451) ............................................... 781,335 Foreign currency, segregated, at value (cost $3,705,796) ................................. 3,846,636 Investments held as collateral for securities loaned ..................................... 119,041,511 Receivable for open foreign currency contracts ........................................... 152,407,481 Dividends receivable ..................................................................... 239,052 Interest receivable ...................................................................... 39,302 ---------------------------------------------------------------------------------------------------------- Total assets .......................................................................... 1,089,117,268 ---------------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned .............................................. 119,041,511 Payable for open foreign currency contracts .............................................. 151,690,159 Unrealized loss on open futures contracts ................................................ 274,521 Accrued expenses ......................................................................... 87,929 ---------------------------------------------------------------------------------------------------------- Total liabilities ..................................................................... 271,094,120 ---------------------------------------------------------------------------------------------------------- NET ASSETS ............................................................................... $ 818,023,148 ========================================================================================================== DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND (100,795,532 units outstanding, at $7.42 per unit net asset value) ...................... $ 748,380,249 DAILY MSCI JAPAN INDEX FUND (9,379,848 units outstanding, at $7.42 per unit net asset value) ........................ 69,642,899 ---------------------------------------------------------------------------------------------------------- $ 818,023,148 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-176 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Statement of Operations Year Ended December 31, 2002 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of taxes withheld of $836,640) ........................................... $ 4,755,850 Interest ................................................................................ 437,139 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 568,355 -------------------------------------------------------------------------------------------------------------- Total investment income ............................................................... 5,761,344 -------------------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................................. 329,067 Audit ................................................................................... 22,500 Other ................................................................................... 12,964 -------------------------------------------------------------------------------------------------------------- Total expenses ........................................................................ 364,531 -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .......................................................... 5,396,813 -------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................... (46,243,961) Foreign currency transactions ......................................................... (684,665) Futures contracts ..................................................................... (7,699,020) -------------------------------------------------------------------------------------------------------------- (54,627,646) -------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................................... (136,004,175) Foreign currency transactions ......................................................... 1,944,847 Futures contracts ..................................................................... (685,878) -------------------------------------------------------------------------------------------------------------- (134,745,206) -------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................................. (189,372,852) -------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ (183,976,039) ==============================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-177 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) ..................................................... $ 5,396,813 $ 6,831,831 Net realized gain (loss) ......................................................... (54,627,646) (169,245,733) Net change in unrealized appreciation (depreciation) ............................ (134,745,206) (135,975,672) ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations .................. (183,976,039) (298,389,574) ------------------------------------------------------------------------------------------------------------------------ Distributions of security lending fee income, allocated to the Lending Fund participants .................................................................... (568,355) (229,054) Net increase (decrease) in net assets resulting from participant transactions .... 599,799,038 (566,328,608) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS ............................................ 415,254,644 (864,947,236) NET ASSETS Beginning of year ............................................................... 402,768,504 1,267,715,740 ------------------------------------------------------------------------------------------------------------------------ End of year ..................................................................... $ 818,023,148 $ 402,768,504 ========================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-178 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 2002 2001 ---------------------------------- ---------------------------------- UNITS AMOUNT UNITS AMOUNT ---------------------------------------------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: LENDING FUND Units issued ......................................... 158,203,427 $1,364,754,394 31,180,851 $ 323,619,569 Units redeemed ....................................... (95,622,050) (753,998,032) (27,514,913) (276,417,208) ---------------------------------------------------------------------------------------------------------------------------- Total ............................................. 62,581,377 $ 610,756,362 3,665,938 $ 47,202,361 ---------------------------------------------------------------------------------------------------------------------------- NON-LENDING FUND Units issued ......................................... 11,746,571 $ 93,740,098 7,472,877 $ 75,393,870 Units redeemed ....................................... (12,879,905) (104,697,422) (70,817,765) (688,924,839) ---------------------------------------------------------------------------------------------------------------------------- Total ............................................. (1,133,334) $ (10,957,324) (63,344,888) $ (613,530,969) ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) .............................. 61,448,043 $ 599,799,038 (59,678,950) $ (566,328,608) ============================================================================================================================
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2002 held by 2 of the Lending Fund's unitholders aggregated 98% of the Lending Fund's total units outstanding. NON-LENDING FUND All of the Non-Lending Fund's units outstanding were held by one unitholder at December 31, 2002. The accompanying notes are an integral part of these financial statements. SAI-179 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 2002 2001 2000 1999 1998(A) ---------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 8.27 $ 11.69 $ 16.35 $ 10.10 $ 10.00 ---------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (b)(c) ............. 0.07 0.09 0.13 0.15 0.00 Net realized and unrealized gain (loss) ......... (0.91) (3.50) (4.78) 6.11 0.10 ---------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ (0.84) (3.41) (4.65) 6.26 0.10 Distributions of securities lending fee income (b) ..................................... (0.01) (0.01) (0.01) (0.01) (0.00) ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 7.42 $ 8.27 $ 11.69 $ 16.35 $ 10.10 ====================================================================================================================== Total return (%) (d) ............................ (10.20) (29.21) (28.45) 62.09 0.99 ====================================================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%)(b)(e) ..................... 0.05 0.05 0.04 0.03 0.00 ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%)(e) ........... 0.80 0.76 0.88 1.15 0.02 ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%)(b) ....................... 28.70 62.9 44.8 6.69 0.00 ---------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .............. $ 748 $ 316 $ 404 $ 491 $ 146 ======================================================================================================================
(a) The Daily MSCI Japan Index Securities Lending Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-180 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 2002 2001 2000 1999 1998(A) ---------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 8.27 $ 11.69 $ 16.35 $ 10.10 $ 10.00 ---------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (b)(c) ............. 0.06 0.08 0.12 0.14 0.00 Net realized and unrealized gain (loss) ......... (0.91) (3.50) (4.78) 6.11 0.10 ---------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ (0.85) (3.42) (4.66) 6.25 0.10 ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 7.42 $ 8.27 $ 11.69 $ 16.35 $ 10.10 ====================================================================================================================== Total return (%)(d) ............................. (10.28) (29.26) (28.48) 61.88 0.99 ====================================================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%)(b)(e) ..................... 0.05 0.05 0.04 0.03 0.00 ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment (%)(e) .................. 0.71 0.70 0.84 1.07 0.02 ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%)(b) ....................... 28.70 62.9 44.8 6.69 0.00 ---------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .............. $ 70 $ 87 $ 864 $ 1,361 $ 626 ======================================================================================================================
(a) The Daily MSCI Japan Index Fund commenced operation on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-181 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE --------------------------------------------------------------------------------- COMMON STOCK -- 94.8% 77 Bank Ltd ............................ 223,513 $ 915,373 Acom Co Ltd ............................ 50,348 1,654,649 Aderans ................................ 21,800 486,812 Advantest Corp ......................... 47,984 2,151,132 Aeon Co Ltd ............................ 159,183 3,769,312 Aeon Credit Service Co Ltd ............. 12,700 461,254 Aiful Corp ............................. 28,861 1,084,689 Ajinomoto Co Inc ....................... 379,195 3,959,068 All Nippon Airways Co Ltd .............. 322,000 594,236 Alps Electric Co Ltd ................... 99,774 1,101,407 Amada Co Ltd ........................... 163,564 446,572 Amano Corp ............................. 45,884 280,323 Anritsu Corp ........................... 53,000 202,764 Aoyama Trading Co Ltd .................. 39,112 550,409 Ariake Japan Co Ltd .................... 9,600 271,813 Asahi Breweries Ltd .................... 264,382 1,733,287 Asahi Glass Co Ltd ..................... 524,540 3,213,454 Asahi Kasei Corp ....................... 842,206 2,086,530 Asatsu-DK Inc .......................... 24,945 442,481 Ashikaga Bank Ltd ...................... 454,210 524,368 Autobacs Seven Co Ltd .................. 19,455 397,559 Avex Inc ............................... 12,600 152,576 Bank of Fukuoka Ltd .................... 349,193 1,400,656 Bank of Yokohama Ltd ................... 625,538 2,472,211 Banyu Pharmaceutical Co Ltd ............ 90,700 851,435 Bellsystem 24 Inc ...................... 1,790 349,493 Benesse Corp ........................... 47,365 530,846 Bridgestone Corp ....................... 414,202 5,130,841 Canon Inc .............................. 572,153 21,551,562 Capcom Co Ltd .......................... 27,643 416,264 Casio Computer Co Ltd .................. 140,656 783,464 Central Japan Railway Co ............... 615 3,829,822 Chiba Bank Ltd ......................... 436,000 1,388,792 Chubu Electric Power Co Inc ............ 430,100 7,683,593 Chugai Pharmaceutical Co Ltd ........... 144,287 1,373,930 Citizen Watch Co Ltd ................... 181,618 809,606 COCA-COLA WEST JAPAN CO LTD ............ 26,500 396,372 Credit Saison Co Ltd ................... 81,512 1,390,931 CSK Corp ............................... 43,604 914,923 Dai Nippon Printing Co Ltd ............. 417,056 4,614,431 Daicel Chemical Industries Ltd ......... 176,529 498,333 Daiei Inc .............................. 168,053 182,682 Daifuku Co Ltd ......................... 69,857 209,565
The accompanying notes are an integral part of these financial statements. SAI-182 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Daiichi Pharmaceutical Co Ltd ................. 157,352 $ 2,258,115 Daikin Industries Ltd ......................... 108,666 1,721,514 Daimaru Inc ................................... 150,676 449,476 Dainippon Ink and Chemicals Inc ............... 440,965 706,020 Dainippon Screen Manufacturing Co Ltd ......... 96,778 337,626 Daito Trust Construction Co Ltd ............... 56,126 1,241,516 Daiwa House Industry Co Ltd ................... 302,334 1,701,855 Daiwa Securities Group Inc .................... 777,343 3,452,092 Denki Kagaku Kogyo K K ........................ 266,423 581,474 Denso Corp .................................... 327,245 5,369,057 Dowa Mining Co Ltd ............................ 187,787 791,215 East Japan Railway Co ......................... 2,198 10,909,430 Ebara Corp .................................... 173,625 536,954 Eisai Co Ltd .................................. 162,854 3,657,250 FamilyMart .................................... 42,500 832,666 Fanuc Ltd ..................................... 73,991 3,273,386 Fast Retailing Co Ltd ......................... 40,021 1,409,689 Fuji Electric Co Ltd .......................... 339,000 591,329 Fuji Machine Manufacturing Co Ltd ............. 30,538 288,216 Fuji Photo Film Co Ltd ........................ 299,998 9,783,368 Fuji Soft ABC Inc ............................. 21,159 334,315 Fuji Television Network Inc ................... 148 596,141 Fujikura Ltd .................................. 212,527 505,036 Fujisawa Pharmaceutical Co Ltd ................ 159,000 3,637,693 Fujitsu Ltd ................................... 1,099,425 3,140,685 Fujitsu Support and Service Inc ............... 14,500 168,619 Furukawa Electric Co Ltd ...................... 315,147 661,259 Gunma Bank Ltd ................................ 246,338 1,071,125 Gunze Ltd ..................................... 136,697 503,384 Hankyu Department Stores ...................... 82,770 399,656 Hino Motors Ltd ............................... 142,000 487,014 Hirose Electric Co Ltd ........................ 20,450 1,561,279 Hitachi Cable Ltd ............................. 107,000 266,891 Hitachi Ltd ................................... 1,948,992 7,472,751 Hitachi Software Engineering Co Ltd ........... 18,476 420,369 Hitachi Zosen Corp ............................ 660,822 139,214 Hokuriku Bank Ltd ............................. 447,129 602,854 Honda Motor Co Ltd ............................ 435,014 16,092,622 House Foods Corp .............................. 45,855 433,163 Hoya Corp ..................................... 71,801 5,027,946 Isetan Co Ltd ................................. 106,818 732,703 Ishihara Sangyo Kaisha Ltd .................... 225,608 231,939
The accompanying notes are an integral part of these financial statements. SAI-183 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Ishikawajima-Harima Heavy Industries Co Ltd ......... 800,345 $ 728,383 ITO EN Ltd .......................................... 15,900 538,620 Ito-Yokado Co Ltd ................................... 244,087 7,198,993 Itochu Corp ......................................... 939,183 2,033,960 Itochu Techno-Science Corp .......................... 17,356 367,830 Japan Airlines System Corp .......................... 426,733 909,779 Japan Tobacco Inc ................................... 481 3,218,286 JFE Holdings Inc .................................... 315,785 3,834,551 JGC Corp ............................................ 150,720 843,331 Joyo Bank Ltd ....................................... 504,878 1,403,975 JSR Corp ............................................ 120,193 1,207,298 Kajima Corp ......................................... 527,776 1,178,568 Kaken Pharmaceutical Co Ltd ......................... 59,894 248,822 Kamigumi Co Ltd ..................................... 142,662 685,239 Kanebo Ltd .......................................... 281,382 267,938 Kaneka Corp ......................................... 168,550 901,907 Kansai Electric Power Co Inc ........................ 462,763 6,991,945 Kao Corp ............................................ 391,216 8,587,829 Katokichi Co Ltd .................................... 29,732 445,967 Kawasaki Heavy Industries Ltd ....................... 812,175 643,334 Kawasaki Kisen Kaisha Ltd ........................... 326,289 560,908 Keihin Electric Express Railway Co Ltd .............. 281,828 1,282,440 Keio Electric Railway Co Ltd ........................ 375,000 1,987,655 Keyence Corp ........................................ 20,000 3,480,239 Kikkoman Corp ....................................... 107,751 747,275 Kinden Corp ......................................... 98,864 364,898 Kinki Nippon Railway Co Ltd ......................... 994,305 2,144,957 Kirin Brewery Co Ltd ................................ 473,122 3,010,088 Kokuyo Co Ltd ....................................... 62,134 516,780 Komatsu Ltd ......................................... 635,329 2,071,900 Komori Corp ......................................... 38,905 395,705 Konami Corp ......................................... 61,856 1,428,208 Konica Corp ......................................... 159,542 1,157,543 Koyo Seiko Co Ltd ................................... 72,751 323,079 Kubota Corp ......................................... 629,206 1,707,292 Kuraray Co Ltd ...................................... 257,537 1,597,263 Kurita Water Industries Ltd ......................... 72,231 727,362 Kyocera Corp ........................................ 111,140 6,471,538 Kyowa Exeo Corp ..................................... 69,865 220,775 Kyowa Hakko Kogyo Co Ltd ............................ 223,459 926,450 Kyushu Electric Power Co Inc ........................ 260,500 3,810,803 Lawson Inc .......................................... 44,386 1,069,722
The accompanying notes are an integral part of these financial statements. SAI-184 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Mabuchi Motor Co Ltd ............................. 19,400 $ 1,785,186 Makita Corp ...................................... 82,803 600,072 Marubeni Corp .................................... 821,096 754,188 Marui Co Ltd ..................................... 215,231 2,107,512 Matsushita Electric Industrial Co Ltd ............ 1,513,475 14,921,764 Matsushita Electric Works Ltd .................... 266,000 1,645,268 Meiji Dairies Corp ............................... 150,583 474,577 Meiji Seika Kaisha Ltd ........................... 214,504 630,841 Meitec Corp ...................................... 25,849 631,685 Millea Holdings Inc .............................. 957 6,886,981 Minebea Co Ltd ................................... 219,494 763,892 Mitsubishi Chemical Corp ......................... 1,121,247 2,239,282 Mitsubishi Corp .................................. 700,052 4,276,883 Mitsubishi Electric Corp ......................... 1,105,792 2,553,190 Mitsubishi Estate Co Ltd ......................... 624,384 4,756,410 Mitsubishi Gas Chemical Co ....................... 245,396 341,201 Mitsubishi Heavy Industries Ltd .................. 1,969,812 4,813,731 Mitsubishi Logistics Corp ........................ 74,788 364,896 Mitsubishi Materials Corp ........................ 659,579 722,552 Mitsubishi Paper Mills ........................... 192,593 233,702 Mitsubishi Rayon Co Ltd .......................... 344,210 786,053 Mitsubishi Tokyo Financial Group Inc ............. 2,366 12,859,779 Mitsui & Co Ltd .................................. 816,031 3,809,566 Mitsui Chemicals Inc ............................. 352,000 1,569,124 Mitsui Engineering & Shipbuilding Co Ltd ......... 457,038 331,215 Mitsui Fudosan Co Ltd ............................ 473,992 3,075,536 Mitsui Mining & Smelting Co Ltd .................. 378,353 873,588 Mitsui O.S.K. Lines Ltd .......................... 526,000 1,090,385 Mitsui Sumitomo Insurance Co Ltd ................. 864,000 3,975,259 Mitsui Trust Holdings Inc ........................ 334,000 543,204 Mitsukoshi Ltd ................................... 267,390 556,546 Mitsumi Electric Co Ltd .......................... 40,700 370,748 Mizuho Holdings Inc .............................. 3,886 3,634,836 Mori Seiki Co Ltd ................................ 42,180 214,685 Murata Manufacturing Co Ltd ...................... 159,366 6,244,644 Mycal Corp1 ...................................... 4,614 0 Namco Ltd ........................................ 26,532 444,473 NEC Corp ......................................... 967,150 3,618,561 NET One Systems Co Ltd ........................... 86 365,973 NGK Insulators Ltd ............................... 183,544 1,002,246 NGK Spark Plug Co Ltd ............................ 104,718 677,706 Nichirei Corp .................................... 180,604 506,793
The accompanying notes are an integral part of these financial statements. SAI-185 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE -------------------------- --------------- COMMON STOCK (CONTINUED) Nidec Corp ................................ 21,820 $ 1,360,647 Nikko Cordial Corp ........................ 885,000 2,983,062 Nikon Corp ................................ 177,537 1,334,482 Nintendo Co Ltd ........................... 68,131 6,367,008 Nippon Comsys Corp ........................ 87,832 297,535 Nippon Express Co Ltd ..................... 510,635 2,000,887 Nippon Kayaku Co Ltd ...................... 86,000 319,592 Nippon Meat Packers Inc ................... 115,708 1,155,422 Nippon Mining Holdings Inc ................ 365,000 489,045 Nippon Oil Corp ........................... 936,173 4,244,216 Nippon Sanso Corp ......................... 120,000 364,035 Nippon Sheet Glass Co Ltd ................. 230,440 413,615 Nippon Shokubai Co Ltd .................... 105,768 444,748 Nippon Steel Corp ......................... 3,506,549 4,107,275 Nippon System Development Co Ltd .......... 11,800 138,215 Nippon Telegraph & Telephone Corp ......... 3,657 13,281,933 Nippon Unipac Holding ..................... 594 2,577,821 Nippon Yusen Kabushiki Kaisha ............. 632,446 2,131,781 Nishimatsu Construction Co Ltd ............ 152,654 448,945 Nissan Chemical Industries ................ 90,000 336,732 Nissan Motor Co Ltd ....................... 1,551,074 12,103,266 Nisshin Seifun Group Inc .................. 114,685 763,471 Nisshinbo Industries ...................... 96,718 335,787 Nissin Food Products Co Ltd ............... 56,934 1,271,384 Nitto Denko Corp .......................... 89,489 2,548,857 Nomura Holdings Inc ....................... 1,214,679 13,654,519 Noritake Co Ltd ........................... 70,805 201,669 NSK Ltd ................................... 307,286 792,361 NTN Corp .................................. 285,411 986,083 NTT Data Corp ............................. 867 2,396,360 NTT DoCoMo Inc ............................ 12,062 22,259,863 Obayashi Corp ............................. 396,052 881,080 Obic Co Ltd ............................... 3,100 539,437 OJI Paper Co Ltd .......................... 548,269 2,356,258 Oki Electric Industry Co Ltd .............. 294,000 475,672 Okumura Corp .............................. 151,685 489,554 Olympus Optical Co Ltd .................... 154,815 2,523,066 Omron Corp ................................ 145,674 2,148,222 Onward Kashiyama Co Ltd ................... 70,784 554,724 Oracle Corp Japan ......................... 24,500 593,558 Oriental Land Co Ltd ...................... 30,976 1,876,780 ORIX Corp ................................. 52,092 3,358,084
The accompanying notes are an integral part of these financial statements. SAI-186 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------ SHARES (UNLESS OTHERWISE NOTED) VALUE -------------------------- --------------- COMMON STOCK (CONTINUED) Osaka Gas Co Ltd ........................ 1,382,801 $ 3,414,180 Paris Miki Inc .......................... 16,200 228,113 Pioneer Corp ............................ 98,974 1,855,710 Promise Co Ltd .......................... 56,710 2,021,432 QP Corp/Japan ........................... 62,000 491,110 Resona Holdings Inc ..................... 2,709,015 1,483,829 Ricoh Co Ltd ............................ 425,000 6,972,908 Rohm Co Ltd ............................. 73,381 9,343,447 Saizeriya Co Ltd ........................ 18,720 277,322 Sanden Corp ............................. 90,817 296,933 Sankyo Co Ltd ........................... 246,930 3,098,330 Sanrio Co Ltd ........................... 33,800 168,046 Sanyo Electric Co Ltd ................... 1,028,631 2,678,411 Sapporo Breweries Ltd ................... 184,569 304,841 Secom Co Ltd ............................ 136,205 4,671,394 Sega Corp ............................... 66,400 654,656 Seino Transportation Co Ltd ............. 84,815 496,726 Seiyu Ltd ............................... 124,664 364,527 Sekisui Chemical Co Ltd ................. 300,291 776,855 Sekisui House Ltd ....................... 341,083 2,414,340 Seven -- Eleven Japan ................... 253,829 7,742,993 Sharp Corp .............................. 610,265 5,795,640 Shimachu Co Ltd ......................... 30,039 607,513 Shimamura Co Ltd ........................ 10,955 697,900 Shimano Inc ............................. 50,923 772,406 Shimizu Corp ............................ 378,998 948,533 Shin-Etsu Chemical Co Ltd ............... 246,669 8,085,804 Shionogi & Co Ltd ....................... 192,864 2,727,107 Shiseido Co Ltd ......................... 233,595 3,037,306 Shizuoka Bank Ltd ....................... 411,994 2,655,898 Showa Denko K K ......................... 625,681 796,139 Showa Shell Sekiyu KK ................... 90,621 629,238 Skylark Co Ltd .......................... 59,057 783,313 SMC Corp/Japan .......................... 34,511 3,239,678 Snow Brand Milk Products Co Ltd ......... 99,301 143,927 Softbank Corp ........................... 127,282 1,453,334 Sompo Japan Insurance Inc ............... 509,000 2,972,419 Sony Corp ............................... 601,752 25,151,175 Stanley Electric Co Ltd ................. 96,556 1,078,088 Sumitomo Bakelite Co Ltd ................ 97,000 400,522 Sumitomo Chemical Co Ltd ................ 738,984 2,920,565 Sumitomo Corp ........................... 475,679 2,044,293
The accompanying notes are an integral part of these financial statements. SAI-187 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE -------------------------- --------------- COMMON STOCK (CONTINUED) Sumitomo Electric Industries Ltd ............. 386,069 $ 2,501,787 Sumitomo Forestry Co Ltd ..................... 78,786 435,524 Sumitomo Heavy Industries Ltd ................ 367,251 204,252 Sumitomo Metal Industries .................... 2,108,376 763,969 Sumitomo Metal Mining Co Ltd ................. 334,266 1,394,301 Sumitomo Mitsui Financial Group Inc .......... 2,548 7,965,855 Sumitomo Osaka Cement Co Ltd ................. 282,457 371,309 Sumitomo Realty & Development Co Ltd ......... 224,003 911,717 Sumitomo Trust & Banking Co Ltd .............. 598,000 2,423,848 Suruga Bank Ltd .............................. 121,000 476,169 Suzuken Co Ltd ............................... 24,200 583,231 Taiheiyo Cement Corp ......................... 563,712 712,537 Taisei Corp .................................. 594,772 947,265 Taisho Pharmaceutical Co Ltd ................. 117,573 1,728,869 Taiyo Yuden Co Ltd ........................... 69,853 740,499 Takara Holdings Inc .......................... 120,722 525,940 Takashimaya Co Ltd ........................... 176,610 692,034 Takeda Chemical Industries Ltd ............... 549,652 22,973,573 Takefuji Corp ................................ 50,577 2,919,461 Takuma Co Ltd ................................ 44,892 242,107 TDK Corp ..................................... 77,800 3,133,766 Teijin Ltd ................................... 541,830 1,296,703 Teikoku Oil Co Ltd ........................... 147,664 589,810 Terumo Corp .................................. 123,132 1,703,739 THK Co Ltd ................................... 70,200 773,164 TIS Inc ...................................... 26,144 385,980 Tobu Railway Co Ltd .......................... 500,892 1,329,578 Toda Corp .................................... 131,598 220,679 Toho Co Ltd/Tokyo ............................ 90,886 872,328 Tohoku Electric Power Co Inc ................. 293,560 4,321,643 Tokyo Broadcasting System Inc ................ 24,915 313,248 Tokyo Electric Power Co Inc .................. 789,772 15,007,465 Tokyo Electron Ltd ........................... 102,535 4,639,866 Tokyo Gas Co Ltd ............................. 1,736,509 5,443,510 Tokyo Style Co Ltd ........................... 55,880 473,711 Tokyu Corp ................................... 656,579 2,312,716 TonenGeneral Sekiyu KK ....................... 204,000 1,340,861 Toppan Printing Co Ltd ....................... 384,131 2,890,612 Toray Industries Inc ......................... 818,216 1,737,511 Toshiba Corp ................................. 1,878,708 5,889,268 Tosoh Corp ................................... 349,237 841,677 Tostem Inax Holding Corp ..................... 171,722 2,604,699
The accompanying notes are an integral part of these financial statements. SAI-188 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE -------------------------- --------------- COMMON STOCK (CONTINUED) Toto Ltd ................................. 215,323 $ 796,552 Toyo Seikan Kaisha Ltd ................... 96,816 1,154,417 Toyobo Co Ltd ............................ 380,120 496,491 Toyoda Gosei Co Ltd ...................... 35,600 668,981 Toyota Industries Corp ................... 96,800 1,456,038 Toyota Motor Corp ........................ 1,611,561 43,320,802 Trans Cosmos Inc ......................... 14,869 151,985 Trend Micro Inc .......................... 59,000 1,009,269 Ube Industries Ltd/Japan ................. 493,934 495,308 UFJ Holdings Inc ......................... 2,169 2,193,309 Uni-Charm Corp ........................... 28,407 1,127,471 Union Tool Co ............................ 6,400 162,333 UNY Co Ltd ............................... 90,759 887,935 Ushio Inc ................................ 75,220 824,016 Wacoal Corp .............................. 66,811 515,143 West Japan Railway Co .................... 687 2,437,238 World Co Ltd ............................. 25,134 482,898 Yakult Honsha Co Ltd ..................... 101,778 1,159,550 Yamada Denki Co Ltd ...................... 81,700 1,724,602 Yamaha Corp .............................. 106,334 982,965 Yamaha Motor Co Ltd ...................... 72,004 594,623 Yamanouchi Pharmaceutical Co Ltd ......... 223,246 6,471,444 Yamato Transport Co Ltd .................. 269,446 3,519,350 Yamazaki Baking Co Ltd ................... 97,722 547,612 Yokogawa Electric Corp ................... 149,681 929,596 ------------ TOTAL COMMON STOCK ....................... 770,283,555 ------------ UNITS --------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 5.2% SHORT TERM INVESTMENT FUND2 .............. 42,478,396 42,478,396 ----------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost $1,070,502,241) ................... $812,761,951 ===================================================================================
The accompanying notes are an integral part of these financial statements. SAI-189 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (1) Issuer delisted due to bankruptcy. (2) Collective investment fund advised by State Street Global Advisors. At December 31, 2002, foreign currency balances totaling $3,846,636 were pledged to cover margin requirements for open futures contracts. The following futures contracts were open at December 31, 2002: NUMBER OF FUTURE CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) ------------- -------------- -------------- ------------ -------------- TOPIX Index 492 $34,872,482 March 2003 $ (274,521) ========== The following foreign currency contracts were open at December 31, 2002: SETTLEMENT CONTRACTS IN EXCHANGE UNREALIZED DATE TO DELIVER FOR GAIN/(LOSS) ------------ ------------------------ ----------------------- ------------ 03/05/2003 USD 14,077,143 JPY 1,750,000,000 $ 705,512 03/05/2003 USD 17,938,536 JPY 2,200,000,000 645,373 03/05/2003 USD 18,198,663 JPY 2,200,000,000 385,246 03/05/2003 USD 37,167,045 JPY 4,500,000,000 845,496 03/05/2003 JPY 2,290,000,000 USD 18,958,523 (385,637) 03/05/2003 JPY 1,000,000,000 USD 8,177,618 (269,614) 03/05/2003 JPY 1,400,000,000 USD 11,273,412 (552,711) 03/05/2003 JPY 503,000,000 USD 4,085,279 (163,678) 03/05/2003 JPY 1,900,000,000 USD 15,637,860 (411,879) 03/05/2003 JPY 520,000,000 USD 4,311,774 (80,786) ---------- $ 717,322 ========== JPY: Japanese Yen USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-190 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 State Street Bank and Trust Company ("State Street Bank") Daily EAFE Funds (collectively, the "Funds") are organized by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The Funds are organized into separate regional funds, a country fund and umbrella funds that hold investments in separate country and regional funds (individually, a "Fund"). State Street Bank is Trustee, custodian, and recordkeeper of each Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is each Fund's investment manager. The investment objective of each Fund is generally to match, as closely as possible, the total return of the relevant portion of the MSCI World Index (the "Index"). 1. THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY EACH FUND IN THE PREPARATION OF ITS FINANCIAL STATEMENTS. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date or as soon thereafter as the Fund is informed of the dividend. Interest income earned on securities, if any, is recorded net of applicable withholding taxes on the accrual basis; interest earned on foreign currency accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. Interest income includes accretion of discounts and amortization of premiums, if any. C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS The accounting records of the Fund are maintained in U.S. dollars. Foreign currency, investment securities, and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statement of Operations from the effects SAI-191 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain or loss on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized appreciation/ depreciation on foreign currency related transactions. The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against the foreign currency exposure of either specific transactions or portfolio positions. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed upon future date. Such contracts are valued based upon the difference in the forward exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, and any resulting unrealized gains or losses are recorded in the Fund's financial statements. The Fund records realized gains or losses at the time the forward contract is extinguished by entry into a closing transaction or by delivery of the currency. Risks in foreign currency contracts arise from the possible inability of counterparties to meet the contracts' terms and from movements in currency values. D. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. A transaction fee of 0.5% is charged on any contribution or withdrawal greater than 5% of the net asset value of the Fund. However, such fees are waived if the Fund's net participant activity on any day is less than 5% of the net asset value of the Fund. During the year, transaction fees of $504,610, $305,891, and $109,359 were charged by the Daily MSCI Europe Index Fund, the Daily MSCI Japan Index Fund and the Daily MSCI Pacific Basin ex-Japan Fund, respectively. F. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-192 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 G. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending, if any, is distributed monthly to participants of the Lending Fund. 2. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Daily MSCI Japan Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Daily MSCI Japan Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2002, the market value of securities loaned by the Lending Fund are disclosed on the Statement of Assets and Liabilities. Cash collateral provided by the Borrowers is recorded on the Statement of Assets and Liabilities and is invested in State Street Bank and Trust Company Quality D Short-Term Investment Fund. The Fund received securities valued at $804,084 and letter of credit valued at $91,200 as additional collateral. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $1,538,124,956 and $940,446,596, respectively. 4. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. SAI-193 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. SAI-194 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund and State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index Fund at December 31, 2002, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 21, 2003 SAI-195 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $48,995,521) (cost $321,529,724) ................................................................ $280,000,350 Foreign currency, at value (cost $3,428,524) ........................................ 3,476,924 Foreign currency, segregated, at value (cost $1,592,258) ............................ 1,601,801 Investments held as collateral for securities loaned ................................ 52,203,432 Receivable for open foreign currency contracts ...................................... 55,062,255 Unrealized gain on open futures contracts ........................................... 56,004 Dividends receivable ................................................................ 283,015 Interest receivable ................................................................. 13,102 Tax reclaims receivable ............................................................. 1,355 --------------------------------------------------------------------------------------------------- Total assets ..................................................................... 392,698,238 --------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned ......................................... 52,203,432 Payable for open foreign currency contracts ......................................... 54,928,083 Unrealized loss on open futures contracts ........................................... 146,764 Accrued expenses .................................................................... 36,941 --------------------------------------------------------------------------------------------------- Total liabilities ................................................................ 107,315,220 --------------------------------------------------------------------------------------------------- NET ASSETS $285,383,018 =================================================================================================== DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND (25,976,369 units outstanding, at $10.06 per unit net asset value).................. $261,220,486 DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND (2,402,778 units outstanding, at $10.06 per unit net asset value) .................. 24,162,532 --------------------------------------------------------------------------------------------------- $285,383,018 ===================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-196 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Statement of Operations December 31, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of taxes withheld of $211,763) ........................................... $ 7,864,723 Interest ................................................................................ 151,164 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 87,265 ---------------------------------------------------------------------------------------------------------- Total investment income ............................................................... 8,103,152 ---------------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................................. 134,069 Audit ................................................................................... 17,500 Other ................................................................................... 8,612 ---------------------------------------------------------------------------------------------------------- Total expenses ........................................................................ 160,181 ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .......................................................... 7,942,971 ---------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................... (6,409,784) Foreign currency transactions ......................................................... 211,717 Futures contracts ..................................................................... (1,857,283) ---------------------------------------------------------------------------------------------------------- (8,055,350) ---------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................................... (34,737,897) Foreign currency transactions ......................................................... 223,372 Futures contracts ..................................................................... (189,590) ---------------------------------------------------------------------------------------------------------- (34,704,115) ---------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................................. (42,759,465) ---------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ (34,816,494) ==========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-197 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ----------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ..................................................... $ 7,942,971 $ 7,615,359 Net realized gain (loss) ......................................................... (8,055,350) (22,293,585) Net change in unrealized appreciation (depreciation) ............................. (34,704,115) (19,992,186) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. (34,816,494) (34,670,412) ----------------------------------------------------------------------------------------------------------------------- Distributions of security lending fee income, allocated to the Lending Fund participants ................................................................... (87,265) (62,450) Net increase (decrease) in net assets resulting from participant transactions .... 187,046,117 (165,984,977) ----------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS ............................................ 152,142,358 (200,717,839) NET ASSETS Beginning of year ............................................................... 133,240,660 333,958,499 ----------------------------------------------------------------------------------------------------------------------- End of year ..................................................................... $ 285,383,018 $ 133,240,660 ======================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-198 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------- 2002 2001 ------------------------------------ ------------------------------------ UNITS AMOUNT UNITS AMOUNT --------------------------------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: LENDING FUND Units issued .................... 40,695,262 $ 442,788,689 8,947,758 $ 97,322,451 Units redeemed .................. (24,486,918) (252,434,824) (7,839,044) (83,412,259) --------------------------------------------------------------------------------------------------------------- Total ........................ 16,208,344 $ 190,353,865 1,108,714 $ 13,910,192 --------------------------------------------------------------------------------------------------------------- NON-LENDING FUND Units issued .................... 3,118,525 $ 32,587,956 1,675,381 $ 17,437,979 Units redeemed .................. (3,401,780) (35,895,704) (18,508,788) (197,333,148) --------------------------------------------------------------------------------------------------------------- Total ........................ (283,255) $ (3,307,748) (16,833,407) $ (179,895,169) --------------------------------------------------------------------------------------------------------------- Net increase (decrease) ......... 15,925,089 $ 187,046,117 (15,724,693) $ (165,984,977) ===============================================================================================================
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2002 held by 2 of the Lending Fund's unitholders aggregated 98% of the Lending Fund's total units outstanding. NON-LENDING FUND All of the Non-Lending Fund's units outstanding were held by one unitholder at December 31, 2002. The accompanying notes are an integral part of these financial statements. SAI-199 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, --------------------------------------------------------- 2002 2001 2000 1999 1998(a) ---------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year ......................... $ 10.70 $ 11.85 $ 13.91 $ 9.97 $ 10.00 ---------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (b)(c) ........................ 0.37 0.34 0.37 0.41 0.00 Net realized and unrealized gain (loss) .................... (1.00) (1.48) (2.42) 3.54 (0.03) ---------------------------------------------------------------------------------------------------------------------- Total from investment operations ........................... (0.63) (1.14) (2.05) 3.95 (0.03) Distributions of securities lending fee income (b) ......... (0.01) (0.01) (0.01) (0.01) (0.00) ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of year ............................... $ 10.06 $ 10.70 $ 11.85 $ 13.91 $ 9.97 ====================================================================================================================== Total return (%)(d) ........................................ (5.96) (9.65) (14.76) 39.61 (0.30) ====================================================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%)(b)(e) ................................ 0.07 0.07 0.05 0.07 0.00 ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%)(b)(e) ................... 3.54 3.12 2.97 3.49 0.00 ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%)(b) .................................. 29.38 76.89 65.01 15.69 0.00 ---------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) ......................... $ 261 $ 105 $ 103 $ 111 $ 38 ======================================================================================================================
(a) The Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-200 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 2002 2001 2000 1999 1998(a) ---------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year ............... $ 10.70 $ 11.85 $ 13.91 $ 9.97 $ 10.00 ---------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (b)(c) .............. 0.36 0.33 0.36 0.40 0.00 Net realized and unrealized gain (loss) .......... (1.00) (1.48) (2.42) 3.54 (0.03) ---------------------------------------------------------------------------------------------------------------------- Total from investment operations ................. (0.64) (1.15) (2.06) 3.94 (0.03) ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of year ..................... $ 10.06 $ 10.70 $ 11.85 $ 13.91 $ 9.97 ====================================================================================================================== Total return (%)(d) .............................. (6.01) (9.70) (14.81) 39.52 (0.30) ====================================================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%)(b)(e) ...................... 0.07 0.07 0.05 0.07 0.00 ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%)(b)(e) ......... 3.49 3.06 2.90 3.40 0.00 ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%)(b) ........................ 29.38 76.89 65.01 15.69 0.00 ---------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) ............... $ 24 $ 29 $ 231 $ 300 $ 166 ======================================================================================================================
(a) The Daily MSCI Pacific Basin ex-Japan Index Fund commenced operations on December 18, 1998. (b) Zero amounts represent that which are less than $0.005 or 0.005% or ($0.005) or (0.005%) if negative. (c) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (d) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) Not annualized for the period ended December 31, 1998. The accompanying notes are an integral part of these financial statements. SAI-201 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE -------------------------------------------------------------------------------------------- COMMON STOCK -- 92.5% AUSTRALIA -- 58.8% Alumina Ltd ....................................... 769,594 $ 2,123,455 Amcor Ltd ......................................... 569,098 2,720,697 AMP Diversified Property Trust .................... 326,099 479,265 AMP Ltd ........................................... 785,794 4,946,932 Ansell Ltd ........................................ 117,523 496,329 Aristocrat Leisure Ltd ............................ 187,884 495,132 Australia & New Zealand Banking Group Ltd ......... 1,036,406 10,125,461 Australian Gas Light Co Ltd ....................... 292,884 1,738,288 Australian Stock Exchange Ltd ..................... 70,252 451,367 BHP Billiton Ltd .................................. 2,561,758 14,641,634 BHP Steel Ltd ..................................... 548,072 996,840 Boral Ltd ......................................... 395,587 968,984 Brambles Industries Ltd ........................... 668,410 1,768,993 BRL Hardy Ltd ..................................... 108,936 432,460 CFS Gandel Retail Trust (1) ....................... 842,943 650,286 Coca-Cola Amatil Ltd .............................. 286,367 849,804 Cochlear Ltd ...................................... 36,331 797,452 Coles Myer Ltd .................................... 778,765 2,762,691 Commonwealth Bank of Australia .................... 867,034 13,182,121 Commonwealth Property Office Fund ................. 847,934 558,642 Computershare Ltd ................................. 317,707 330,966 CSL Ltd ........................................... 109,663 1,333,826 CSR Ltd ........................................... 647,849 2,305,559 David Jones Ltd ................................... 281,235 171,032 Deutsche Office Trust ............................. 794,463 532,361 Energy Developments Ltd ........................... 59,037 86,766 Foster's Group Ltd ................................ 1,423,014 3,605,845 Futuris Corp Ltd .................................. 444,717 328,050 General Property Trust ............................ 1,309,871 2,190,637 Goodman Fielder Ltd ............................... 805,176 807,042 Harvey Norman Holdings Ltd ........................ 365,344 541,057 Iluka Resources Ltd ............................... 161,098 417,286 Insurance Australia Group Ltd ..................... 954,931 1,473,357 James Hardie Industries NV ........................ 284,003 1,092,268 John Fairfax Holdings Ltd ......................... 508,565 922,121 Leighton Holdings Ltd ............................. 93,021 532,706 Lend Lease Corp Ltd ............................... 270,628 1,481,236 Macquarie Bank Ltd ................................ 137,364 1,825,452 Macquarie Infrastructure Group .................... 1,303,122 2,348,121 Mayne Group Ltd ................................... 560,370 1,028,674 MIM Holdings Ltd .................................. 1,382,456 1,175,476 Mirvac Group ...................................... 427,725 997,127 National Australia Bank Ltd ....................... 1,070,805 19,144,302 Newcrest Mining Ltd ............................... 218,827 887,194 Newmont Mining Corp ............................... 3 9
The accompanying notes are an integral part of these financial statements. SAI-202 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE --------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) News Corp Ltd ................................... 1,014,547 $ 6,558,424 OneSteel Ltd .................................... 354,057 358,865 Orica Ltd ....................................... 196,212 1,160,113 Origin Energy Ltd ............................... 448,583 937,135 PaperlinX Ltd ................................... 248,560 712,417 Patrick Corp Ltd ................................ 113,080 834,147 Principal Office Fund ........................... 645,357 545,101 Publishing & Broadcasting Ltd ................... 90,238 439,532 QBE Insurance Group Ltd ......................... 387,150 1,776,733 Rio Tinto Ltd ................................... 215,476 4,119,306 Santos Ltd ...................................... 428,415 1,452,267 SciGen Ltd ...................................... 151,468 6,482 Sonic Healthcare Ltd ............................ 151,468 557,807 Sons of Gwalia Ltd .............................. 106,508 155,334 Southcorp Ltd ................................... 434,521 1,125,522 Stockland ....................................... 564,306 1,531,606 Suncorp-Metway Ltd .............................. 363,527 2,282,427 TAB Ltd ......................................... 325,899 556,046 TABCORP Holdings Ltd ............................ 258,293 1,548,987 Telstra Corp Ltd ................................ 1,513,648 3,758,797 Transurban Group ................................ 300,003 679,105 Wesfarmers Ltd .................................. 257,629 3,858,885 Westfield Holdings Ltd .......................... 292,319 2,213,934 Westfield Trust ................................. 1,368,705 2,674,390 Westfield Trust -- New .......................... 5,287 10,122 Westpac Banking Corp ............................ 1,250,554 9,682,568 WMC Resources Ltd ............................... 769,594 1,828,772 Woodside Petroleum Ltd .......................... 322,938 2,251,258 Woolworths Ltd .................................. 726,063 4,660,844 Zimbabwe Platinum ............................... 18,400 15,956 ------------- 165,038,185 ------------- HONG KONG -- 20.7% ASM Pacific Technology .......................... 117,371 231,782 Bank of East Asia ............................... 932,852 1,596,950 BOC Hong Kong Holdings Ltd ...................... 1,803,339 1,849,970 Cathay Pacific Airways Ltd ...................... 681,484 930,685 Cheung Kong Holdings Ltd ........................ 1,027,496 6,686,725 Cheung Kong Infrastructure Holdings Ltd ......... 308,000 527,265 CLP Holdings Ltd ................................ 1,232,107 4,961,070 Esprit Holdings Ltd ............................. 359,426 603,779 Giordano International Ltd ...................... 979,996 383,285 Hang Lung Properties Ltd ........................ 788,500 763,389 Hang Seng Bank Ltd .............................. 521,749 5,553,119 Henderson Land Development ...................... 411,169 1,236,404 Hong Kong & China Gas ........................... 2,524,012 3,252,780 Hong Kong Electric Holdings ..................... 946,500 3,586,538 Hong Kong Exchanges and Clearing Ltd ............ 710,000 892,240
The accompanying notes are an integral part of these financial statements. SAI-203 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ---------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Hutchison Whampoa Ltd ............................. 1,454,142 $ 9,099,634 Hysan Development Co Ltd .......................... 421,918 311,095 Johnson Electric Hldgs ............................ 1,002,809 1,105,895 Li & Fung Ltd ..................................... 1,080,882 1,025,669 MTR Corp .......................................... 862,424 912,372 New World Development Ltd ......................... 953,020 473,556 PCCW Ltd .......................................... 6,240,829 984,339 SCMP Group Ltd .................................... 500,810 208,715 Shangri-La Asia Ltd ............................... 679,279 448,593 Sino Land Co ...................................... 1,059,702 339,720 Sun Hung Kai Properties Ltd ....................... 900,982 5,326,161 Swire Pacific Ltd ................................. 641,367 2,454,982 Television Broadcasts Ltd ......................... 194,375 613,159 Wharf Holdings Ltd ................................ 834,809 1,578,979 ------------ 57,938,850 ------------ NEW ZEALAND -- 2.5% Auckland International Airport Ltd ................ 149,313 433,445 Carter Holt Harvey Ltd ............................ 691,702 633,141 Contact Energy Ltd ................................ 214,673 445,770 Fisher & Paykel Appliances Holdings Ltd ........... 41,371 217,473 Fisher & Paykel Healthcare Corp ................... 54,436 269,068 Fletcher Building Ltd ............................. 274,545 481,063 Fletcher Challenge Forests Ltd .................... 111,520 57,747 Independent Newspapers Ltd ........................ 119,301 190,321 Sky City Entertainment Group Ltd .................. 154,569 654,055 Telecom Corp of New Zealand Ltd ................... 1,263,939 2,994,798 Tower Ltd ......................................... 87,658 96,284 Warehouse Group Ltd ............................... 101,961 390,381 ------------ 6,863,546 ------------ SINGAPORE -- 10.5% Allgreen Properties Ltd ........................... 263,000 144,047 CapitaLand Ltd .................................... 743,332 475,698 Chartered Semiconductor Manufacturing Ltd ......... 423,246 173,251 City Developments Ltd ............................. 295,511 708,749 Creative Technology Ltd ........................... 47,231 334,933 Cycle & Carriage .................................. 60,455 118,505 Datacraft Asia Ltd ................................ 80,000 52,400 DBS Group Holdings Ltd ............................ 726,961 4,610,303 Fraser & Neave Ltd ................................ 125,325 563,583 GES International Ltd ............................. 78,000 13,266 Guocoland Ltd ..................................... 220,453 90,240 Haw Par Corp Ltd .................................. 93,203 175,175 Hotel Properties Ltd .............................. 273,339 146,558 Keppel Corp Ltd ................................... 360,379 768,753 Keppel Land Ltd ................................... 121,000 67,668 NatSteel Ltd ...................................... 47,000 55,820
The accompanying notes are an integral part of these financial statements. SAI-204 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------- SHARES (UNLESS OTHERWISE NOTED) VALUE ------------------------------------------------------------------------------------------- COMMON STOCK (CONTINUED) Neptune Orient Lines Ltd ....................... 715,640 $ 379,584 Oversea-Chinese Banking Corp ................... 648,943 3,610,435 Overseas Union Enterprise Ltd .................. 70,752 238,627 Parkway Holdings Ltd ........................... 444,956 193,682 SembCorp Industries Ltd ........................ 773,004 349,846 SembCorp Logistics Ltd ......................... 162,000 146,636 SembCorp Marine Ltd ............................ 92,000 48,002 Singapore Airlines Ltd ......................... 367,212 2,159,448 Singapore Exchange Ltd ......................... 534,000 378,680 Singapore Land Ltd ............................. 47,000 85,627 Singapore Press Holdings Ltd ................... 233,025 2,445,117 Singapore Technologies Engineering Ltd ......... 869,854 827,477 Singapore Telecommunications Ltd ............... 4,181,979 2,989,711 SMRT Corp Ltd .................................. 349,000 115,696 ST Assembly Test Services Ltd .................. 88,000 58,345 United Overseas Bank Ltd ....................... 789,662 5,372,160 United Overseas Land Ltd ....................... 205,639 190,879 Venture Corp Ltd ............................... 135,659 1,087,149 Wing Tai Holdings Ltd .......................... 373,853 112,084 ------------ 29,288,134 ------------ TOTAL COMMON STOCK ............................. 259,128,715 ------------ PREFERRED STOCK -- 2.6% AUSTRALIA -- 2.6% News Corp Ltd .................................. 1,332,106 7,163,538 ------------ NEW ZEALAND -- 0.0% Fletcher Challenge Forests Ltd ................. 241,639 123,862 ------------ TOTAL PREFERRED STOCK .......................... 7,287,400 ------------
UNITS ------------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 4.9% SHORT TERM INVESTMENT FUND (2) ................ 13,584,2356 13,584,235 ----------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost $321,529,724)........................... $280,000,350 =========================================================================================
(1) Issuer delisted due to noncompliance with exchange regulations (2) Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-205 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002 -------------------------------------------------------------------------------- At December 31, 2002, foreign currency balances totaling $1,601,801 were pledged to cover margin requirements for open futures contracts. The following futures contracts were open at December 31, 2002:
NUMBER OF FUTURES CONTRACTS NOTIONAL MATURITY UNREALIZED CONTRACTS LONG/(SHORT) COST DATE GAIN/(LOSS) ---------------------------- -------------- ------------- -------------- -------------- Hang Seng Stock Index 59 $3,659,887 January 2003 $ (146,764) MSCI Singapore Stock Index 131 2,469,193 January 2003 20,122 SFE SPI 200 Index 182 7,663,223 March 2003 35,882 ---------- $ (90,760) ==========
The accompanying notes are an integral part of these financial statements. SAI-206 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002 -------------------------------------------------------------------------------- The following foreign currency contracts were open at December 31, 2002: SETTLEMENT CONTRACTS IN EXCHANGE UNREALIZED DATE TO DELIVER FOR GAIN/(LOSS) ------------ -------------------- -------------------- ------------ 03/05/2003 AUD 3,000,000 USD 1,665,660 $ (13,483) 03/05/2003 AUD 4,400,000 USD 2,438,348 (24,395) 03/05/2003 AUD 7,000,000 USD 3,930,150 12,149 03/05/2003 AUD 8,000,000 USD 4,483,360 5,645 03/05/2003 AUD 3,000,000 USD 1,677,000 (2,143) 03/05/2003 AUD 2,000,000 USD 1,122,460 3,031 03/05/2003 HKD 5,000,000 USD 640,886 (130) 03/05/2003 HKD 13,000,000 USD 1,666,239 (402) 03/05/2003 HKD 10,000,000 USD 1,281,804 (227) 03/05/2003 HKD 12,000,000 USD 1,537,909 (529) 03/05/2003 HKD 5,000,000 USD 640,853 (163) 03/05/2003 SGD 1,000,000 USD 567,859 (9,199) 03/05/2003 SGD 1,000,000 USD 572,541 (4,517) 03/05/2003 SGD 1,500,000 USD 859,648 (5,937) 03/05/2003 USD 7,174,700 AUD 13,000,000 101,587 03/05/2003 USD 2,762,950 AUD 5,000,000 35,622 03/05/2003 USD 4,492,000 AUD 8,000,000 (14,285) 03/05/2003 USD 3,928,750 AUD 7,000,000 (10,749) 03/05/2003 USD 1,676,610 AUD 3,000,000 2,533 03/05/2003 USD 2,435,179 HKD 19,000,000 681 03/05/2003 USD 1,153,580 HKD 9,000,000 249 03/05/2003 USD 1,538,245 HKD 12,000,000 193 03/05/2003 USD 1,730,459 HKD 13,500,000 284 03/05/2003 USD 640,927 HKD 5,000,000 89 03/05/2003 USD 2,275,701 SGD 4,000,000 32,530 03/05/2003 USD 565,355 SGD 1,000,000 11,703 03/05/2003 USD 568,764 SGD 1,000,000 8,294 03/05/2003 USD 859,845 SGD 1,500,000 5,741 -------- $134,172 ======== AUD: Australian Dollar HKD: Hong Kong Dollar SGD: Singapore Dollar USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-207 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 State Street Bank and Trust Company ("State Street Bank") Daily EAFE Funds (collectively, the "Funds") are organized by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The Funds are organized into separate regional funds, a country fund and umbrella funds that hold investments in separate country and regional funds (individually, a "Fund"). State Street Bank is Trustee, custodian, and recordkeeper of each Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is each Fund's investment manager. The investment objective of each Fund is generally to match, as closely as possible, the total return of the relevant portion of the MSCI World Index (the "Index"). 1. THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY EACH FUND IN THE PREPARATION OF ITS FINANCIAL STATEMENTS. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Equity investments for which market quotations are readily available are valued at the last reported sale price on valuation date, or if no sales are reported for that day, the more recent of the last published sale price or the mean between the last reported bid and asked prices, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded net of applicable withholding taxes on the ex-dividend date or as soon thereafter as the Fund is informed of the dividend. Interest income earned on securities, if any, is recorded net of applicable withholding taxes on the accrual basis; interest earned on foreign currency accounts is recorded when the Trustee is first notified of the amount credited by the depository bank. Interest income includes accretion of discounts and amortization of premiums, if any. C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS The accounting records of the Fund are maintained in U.S. dollars. Foreign currency, investment securities, and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statement of Operations from the effects of SAI-208 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain or loss on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized appreciation/ depreciation on foreign currency related transactions. The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against the foreign currency exposure of either specific transactions or portfolio positions. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed upon future date. Such contracts are valued based upon the difference in the forward exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, and any resulting unrealized gains or losses are recorded in the Fund's financial statements. The Fund records realized gains or losses at the time the forward contract is extinguished by entry into a closing transaction or by delivery of the currency. Risks in foreign currency contracts arise from the possible inability of counterparties to meet the contracts' terms and from movements in currency values. D. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit and the closing market value on the valuation date of the securities bought or sold. The cost or proceeds of securities bought or sold are recorded at the execution price. Market effect is the difference between the execution price of the investment on the trade date and the investment's closing market value on the valuation date. Market effect and transaction costs (which include brokerage commissions, taxes and other direct costs related to the transactions), are recorded as realized gain/loss. A transaction fee of 0.5% is charged on any contribution or withdrawal greater than 5% of the net asset value of the Fund. However, such fees are waived if the Fund's net participant activity on any day is less than 5% of the net asset value of the Fund. During the year, transaction fees of $504,610, $305,891, and $109,359 were charged by the Daily MSCI Europe Index Fund, the Daily MSCI Japan Index Fund and the Daily MSCI Pacific Basin ex-Japan Fund, respectively. F. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. G. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending, if any, is distributed monthly to participants of the Lending Fund. SAI-209 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 2. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Daily MSCI Pacific Basin ex-Japan Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2002, the market value of securities loaned by the Lending Fund are disclosed on the Statement of Assets and Liabilities. Cash collateral provided by the Borrowers is recorded on the Statement of Assets and Liabilities and is invested in State Street Bank and Trust Company Quality D Short-Term Investment Fund. The Fund received securities valued at $31,444 as additional collateral. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $517,682,447 and $325,221,608, respectively. 4. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. SAI-210 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. SAI-211 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Government Corporate Bond Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Government Corporate Bond Fund at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 21, 2003 SAI-212 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $423,210,150) ......................... $474,427,228 Interest receivable ............................................................. 267,767 Unrealized gain on open swap contracts .......................................... 424,028 ----------------------------------------------------------------------------------------------- Total assets ................................................................. 475,119,023 ----------------------------------------------------------------------------------------------- LIABILITIES Payable for Fund units redeemed ................................................. 5 Payable for investments purchased ............................................... 17,099,558 Open written options, at value (premiums received $428,519) ..................... 908,037 Accrued expenses ................................................................ 1,471 Unrealized loss on open swap contracts .......................................... 145,547 ----------------------------------------------------------------------------------------------- Total liabilities ............................................................ 18,154,618 ----------------------------------------------------------------------------------------------- Net Assets (equivalent to $18.70 per unit based on 24,431,040 units outstanding) $456,964,405 ===============================================================================================
The accompanying notes are an integral part of these financial statements. SAI-213 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Statement of Operations Year Ended December 31, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME Interest ............................................................... $ 3,054,669 ----------------------------------------------------------------------------------------- Total investment income .............................................. 3,054,669 ----------------------------------------------------------------------------------------- EXPENSES Custody ................................................................ 8,229 Audit .................................................................. 17,500 Other .................................................................. 3,079 ----------------------------------------------------------------------------------------- Total expenses ....................................................... 28,808 ----------------------------------------------------------------------------------------- Net investment income (loss) ......................................... 3,025,861 ----------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments .......................................................... 22,520,489 Futures contracts .................................................... 468,624 Swap contracts ....................................................... 954,332 Written options ...................................................... (128,667) ----------------------------------------------------------------------------------------- 23,814,778 ----------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments .......................................................... 20,282,161 Futures contracts .................................................... 37,543 Swap contracts ....................................................... 266,405 Written options ...................................................... (479,518) ----------------------------------------------------------------------------------------- 20,106,591 ----------- Net realized and unrealized gain (loss) ................................ 43,921,369 ----------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $46,947,230 =========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-214 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ----------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ..................................................... $ 3,025,861 $ 3,875,463 Net realized gain (loss) ......................................................... 23,814,778 29,336,164 Net change in unrealized appreciation (depreciation) ............................. 20,106,591 8,735,160 ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. 46,947,230 41,946,787 ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions .... (32,737,541) (136,768,706) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets ............................................ 14,209,689 (94,821,919) NET ASSETS Beginning of year ............................................................... 442,754,716 537,576,635 ----------------------------------------------------------------------------------------------------------------------- End of year ..................................................................... $ 456,964,405 $ 442,754,716 =======================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-215 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------------------------------------------------------------------------------------- UNITS AMOUNT UNITS AMOUNT --------------------------------------------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ......................................... 4,953,943 $ 88,008,911 10,626,856 $ 171,387,128 Units redeemed ....................................... (6,878,016) (120,746,452) (19,016,480) (308,155,834) --------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) .............................. (1,924,073) $ (32,737,541) (8,389,624) $ (136,768,706) ===========================================================================================================================
Units in excess of 10% of the Fund units outstanding at December 31, 2002 held by 3 of the Fund's unitholders aggregated 64% of the Fund's total units outstanding. The accompanying notes are an integral part of these financial statements. SAI-216 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 16.80 $ 15.47 $ 13.92 $ 14.18 $ 13.00 Net investment income (loss) (a) ................ 0.12 0.12 0.94 0.86 0.80 Net realized and unrealized gain (loss) ......... 1.78 1.21 0.61 (1.12) 0.38 ----------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ 1.90 1.33 1.55 (0.26) 1.18 ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 18.70 $ 16.80 $ 15.47 $ 13.92 $ 14.18 ===================================================================================================================== Total return (%) (b) ............................ 11.34 8.60 11.14 (1.83) 9.09 ===================================================================================================================== Ratio to Average Net Assets Ratio of expenses (%) (c) ....................... 0.01 0.01 0.02 0.01 0.01 ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) .............. 0.69 0.76 6.50 6.17 5.89 ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) .......................... 96 65 734 824 478 ----------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .............. $ 457 $ 443 $ 538 $ 4,808 $ 4,644 =====================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (c) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-217 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 ------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------------- DEBT INSTRUMENTS -- 6.7% USD 610,000 Financing Corp Fico .............................................. 9.40% 02/08/2018 $ 894,184 870,000 Financing Corp Fico .............................................. 10.35% 08/03/2018 1,370,352 650,000 Freddie Mac ...................................................... 6.25% 07/15/2032 731,536 27,569,484 GE Capital Commercial Mortgage Corporation -- IO Strip(1) ........ 1.91% 12/15/2020 2,679,395 1,530,000 Providian Master Trust ........................................... 7.49% 08/17/2009 1,606,500 1,550,000 United States Treasury Bond ...................................... 5.38% 02/15/2031 1,689,019 2,000,000 United States Treasury Note ...................................... 4.00% 11/15/2012 2,035,938 15,000,000 United States Treasury Note ...................................... 1.75% 12/31/2004 15,051,563 2,785,000 United States Treasury Note/Bond ................................. 8.13% 05/15/2021 3,914,680 1,300,000 United States Treasury Note/Bond ................................. 8.13% 08/15/2021 1,829,789 ----------------------------------------------------------------------------------------------------------------------------- TOTAL DEBT INSTRUMENTS ........................................... 31,802,956 ----------------------------------------------------------------------------------------------------------------------------- PRINCIPAL ----------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 0.1% USD 410,000 United States Treasury Bill ...................................... 1.15% 02/06/2003 409,411 ------------------------------------------------------------------------------------- ----- ---------- ------------ UNITS ----------------------------------------------------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 93.0% 16,336,874 Government Fund(2) ............................................... 206,890,166 10,197,999 Intermediate Corporate Index Fund(2) ............................. 164,065,414 3,128,229 Long Corporate Index Fund(2) ..................................... 49,842,069 20,397,555 Short Term Investment Fund(2) .................................... 20,397,555 ----------------------------------------------------------------------------------------------------------------------------- TOTAL COLLECTIVE INVESTMENT FUNDS ................................ 441,195,204 -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF EXPIRATION DATE/ CONTRACTS STRIKE PRICE ----------- ----------------------- PURCHASED OPTIONS -- 0.2% Eurodollar Futures (call) ....................... 340 March 2003 / 98.00 178,500 Eurodollar Futures (call) ....................... 340 March 2003 / 97.00 786,250 US Treasury Notes 10 Yr. Futures (call) ......... 470 January 2003 / 118.00 51,406 US Treasury Notes 10 Yr. Futures (put) .......... 32 January 2003 / 111.00 3,002 US Treasury Notes 10 Yr. Futures (put) .......... 32 January 2003 / 107.00 499 ------------------------------------------------- --- ----------------------- ------- TOTAL PURCHASED OPTIONS ......................... 1,019,657 -------------------------------------------------- --------- TOTAL INVESTMENTS -- 100% (COST $423,210,150).............................. $474,427,228 ===================================================================================================
1 Interest only securities represent the right to receive the monthly interest payments on an underlying pool of mortgages. Payments of principal on the pool would reduce the value of the "interest only" holding. 2 Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-218 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Concluded) -------------------------------------------------------------------------------- The following written options were open at December 31, 2002:
NUMBER OF EXPIRATION DATE/ OPTIONS CONTRACTS CONTRACTS STRIKE PRICE VALUE ----------------------------------------- ----------- ----------------------- ----------- Eurodollar Futures (call) 680 March 2003 / 97.50 $884,000 US Treasury Notes 10 Yr. Futures (call) 470 January 2003 / 119.00 22,034 US Treasury Notes 10 Yr. Futures (put) 64 January 2003 / 109.00 2,003 -------- $908,037 ======== (TOTAL PREMIUMS RECEIVED $428,519)
The following swap contracts were open at December 31, 2002:
CURRENT NOTIONAL UNREALIZED AMOUNT DESCRIPTION GAIN/(LOSS) ------------- ------------------------------------------------------------------------------------- ------------ $ 5,000,000 Agreement with Lehman Brothers effective October 1, 2002 and terminating on $ 136,253 January 1, 2003 to make monthly payments equal to 1 month LIBOR minus 45 basis points multiplied by the Current Notional Amount of $5,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers CMBS ERISA Eligible Index. $ 5,000,000 Agreement with Merrill Lynch effective September 3, 2002 and terminating on (140,019) September 2, 2003 to receive monthly payments equal to 1 month LIBOR plus 65 basis points multiplied by the Current Notional Amount of $5,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Merrill Lynch U.S. Corporates and All Yankees Index. $ 2,000,000 Agreement with Morgan Stanley effective October 19, 2002 and terminating on (5,528) October 19, 2007 to receive credit protection through the payment of the Current Notional Amount of $2,000,000 in the event of a default of $10,000,000 by issuer, Simon Property Group, L.P.; and to make quarterly payments equal to a premium of 115 basis points per annum multiplied by the Current Notional Amount. $ 2,000,000 Agreement with Morgan Stanley effective October 19, 2002 and terminating on 13,472 October 19, 2007 to receive credit protection through the payment of the Current Notional Amount of $2,000,000 in the event of a default of $10,000,000 by issuer, ERP Operating Limited Partnership; and to make quarterly payments equal to a premium of 115 basis points per annum multiplied by the Current Notional Amount. $10,000,000 Agreement with Morgan Stanley effective August 30, 2002 and terminating on 274,303 February 28, 2003 to make monthly payments equal to 1 month LIBOR minus 60 basis points multiplied by the Current Notional Amount of $10,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the ERISA-eligible component of the Lehman Brothers CMBS Investment Grade Index. ---------- $ 278,481 ==========
USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-219 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Government Corporate Bond Fund (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match or exceed the return of the Lehman Brothers Government Corporate Bond Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Fixed income investments are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-220 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 F. DISTRIBUTIONS TO PARTICIPANTS Net investment income and net realized gains are retained by the Fund. G. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. H. CREDIT DEFAULT SWAP CONTRACTS CREDIT DEFAULT SWAP CONTRACTS. The Underlying State Street Fund may invest in credit default swaps. Credit default swap contracts entered into by the Underlying State Street Fund typically represent the exchange by the Underlying State Street Fund with a counterparty of a commitment to provide a level of credit protection for a commitment to receive interest at a fixed rate based on the potential risk of default of the relevant underlying issuer. Providing credit protection to a counterparty tends to increase the Underlying State Street Fund's exposure to the underlying instrument. Receiving credit protection from a counterparty tends to decrease a Fund's exposure to the underlying instrument held by an Underlying State Street Fund, or hedge the fair value of other Underlying State Street Fund investments. Such contracts may have a term of one to ten years, but typically require periodic interim settlement in cash. During the period that the credit default swap contract is open, the contract is marked-to-market in accordance with the terms of the contract based on the current interest rate spreads and credit risk of the referenced obligation of the underlying issuer and interest accrual through valuation date. Changes in the value of the credit default swap are recorded as unrealized gains or losses, while periodic cash settlements are recorded as realized gains or losses. Entering into a credit default swap contract involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. Notional principal amounts are used to express the extent of involvement in the transactions, and may be delivered under the contracts in the event of default of the underlying issuer. In addition to credit exposure to the underlying issuer implicit in the contract, credit risk is applicable to any amounts receivable from the counterparty. To reduce credit risk from potential counterparty default, the Fund enters into credit default swap contracts with counterparties whose creditworthiness has been approved by the Trustee. The Underlying State Street Fund bears the interest rate risk arising from any change in the interest rate or credit rating of the underlying issuer. SAI-221 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 I. TOTAL RETURN AND INTEREST RATE SWAP CONTRACTS The Fund may invest in swap contracts. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund uses interest rate swap contracts to manage its exposure to interest rates, and total return swap contracts to gain exposure to different underlying instruments. Interest rate swap contracts typically represent the exchange between the Fund and a counterparty of respective commitments to make variable rate and fixed rate payments with respect to a notional amount of principal. Total return swap contracts typically represent the exchange by the Fund with a counterparty of a commitment to pay interest at a variable rate for a cash flow based on the change in market price and/or total return (change in market price plus related income, if any) of the relevant index or security. Swap contracts may have a term of one to ten years, but typically require periodic interim settlement in cash, at which time the specified value of the index or security and/or variable interest rate are reset for the next settlement period. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from the Fund in accordance with the terms of the contract based on the closing level of the relevant index or security and/or interest accrual through valuation date. Changes in the value of swap contracts are recorded as unrealized gains or losses. Periodic cash settlements on total return swaps are recorded as realized gains or losses, and on interest rate swaps as adjustments to interest income. Entering into a swap contract involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. Notional principal amounts are used to express the extent of involvement in the transactions, but are not delivered under the contracts. Accordingly, credit risk is limited to any amounts receivable from the counterparty. To reduce credit risk from potential counterparty default, the Fund enters into swap contracts with counterparties whose creditworthiness has been approved by the Trustee. The Fund bears the market risk arising from any change in index or security values or interest rates. J. OPTION CONTRACTS The Fund may purchase or write option contracts to manage exposure to the securities markets and to fluctuations in interest rates. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument held by the Fund, or hedge the fair value of other Fund investments. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. Gain or loss is recognized when the option contract expires or is closed. When the Fund writes an option, the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from options. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. Options involve, to varying degrees, credit and market risks. Loss in value may arise from changes in the value of the underlying instruments. In writing a put option, the Fund assumes the risk of incurring a loss if the market price decreases and the option is exercised. Writing a call option will increase the risk of loss to the Fund, if the market price increases and the option is exercised. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market for the contracts or if the counterparties do not perform in accordance with the contracts' terms. SAI-222 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $422,332,948 and $433,452,512, respectively. Written option transactions during the year were as follows:
CONTRACT PREMIUMS AMOUNTS RECEIVED ------------------------------------------------------------------------------------------ Written options outstanding at beginning of year ......... $ -- $ -- Options opened ........................................... 66,079 2,251,163 Options exercised ........................................ -- -- Options expired .......................................... -- -- Options closed ........................................... (64,865) (1,822,644) ------------------------------------------------------------------------------------------ Written options outstanding at end of year ............... $ 1,214 $ 428,519 =========================================================================================
SAI-223 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Government Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of cash flows and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Government Fund at December 31, 2002, and the results of its operations, its cash flows the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 21, 2003 SAI-224 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $877,925,371) ......................... $884,030,759 Interest receivable ............................................................. 6,372,813 Unrealized gain on open swap contracts .......................................... 2,382,745 ------------------------------------------------------------------------------------------------- Total assets ................................................................. 892,786,317 ------------------------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased ............................................... 385,310,309 Open written options, at value (premiums received $622,440) ..................... 1,482,000 Accrued expenses ................................................................ 2,201 ------------------------------------------------------------------------------------------------- Total liabilities ............................................................ 386,794,510 ------------------------------------------------------------------------------------------------- NET ASSETS (equivalent to $12.66 per unit based on 39,952,182 units outstanding) $505,991,807 =================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-225 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Statement of Operations Year ended December 31, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME Interest ............................................................... $ 14,336,965 ----------------------------------------------------------------------------------------- Total investment income .............................................. 14,336,965 ----------------------------------------------------------------------------------------- EXPENSES Custody ................................................................ 26,880 Audit .................................................................. 20,000 Other .................................................................. 3,757 ----------------------------------------------------------------------------------------- Total expenses ....................................................... 50,637 ----------------------------------------------------------------------------------------- Net investment income (loss) ......................................... 14,286,328 ----------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments .......................................................... 45,532,298 Futures contracts .................................................... (1,243,526) Swap contracts ....................................................... 1,689,483 Written options ...................................................... 604,847 Written swaptions .................................................... (1,811,250) ----------------------------------------------------------------------------------------- 44,771,852 ----------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments .......................................................... (3,929,095) Futures contracts .................................................... (825,802) Swap contracts ....................................................... 2,052,433 Written options ...................................................... (1,153,717) Written swaptions .................................................... 1,600,000 ----------------------------------------------------------------------------------------- (2,256,181) ----------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................ 42,515,671 ----------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 56,801,999 =========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-226 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ...................................................... $ 14,286,328 $ 29,330,791 Net realized gain (loss) .......................................................... 44,771,852 41,546,311 Net change in unrealized appreciation (depreciation) .............................. (2,256,181) (7,314,168) ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. 56,801,999 63,562,934 ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions ..... (123,620,565) (357,117,676) ------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS ............................................. (66,818,566) (293,554,742) NET ASSETS Beginning of year ................................................................ 572,810,373 866,365,115 ------------------------------------------------------------------------------------------------------------------------- End of year ...................................................................... $ 505,991,807 $ 572,810,373 =========================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-227 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 2002 2001 ---------------------------------- ---------------------------------- UNITS AMOUNT UNITS AMOUNT ---------------------------------------------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ......................................... 8,643,358 $ 104,033,767 15,392,539 $ 168,186,626 Units redeemed ....................................... (19,203,904) (227,654,332) (47,379,381) (525,304,302) ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) .............................. (10,560,546) $ (123,620,565) (31,986,842) $ (357,117,676) ============================================================================================================================
Units in excess of 10% of the Fund units outstanding at December 31, 2002 held by 2 of the Fund's unitholders aggregated 96% of the Fund's total units outstanding. The accompanying notes are an integral part of these financial statements. SAI-228 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Statement of Cash Flows Year ended December 31, 2002 ---------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH CASH FLOWS FROM OPERATING ACTIVITIES: Net increase (decrease) in net assets from operations ................................... $ 56,801,999 Adjustments to reconcile net increase in net assets from operations to net cash provided by (used for) operating activities: Purchase of investment securities ..................................................... (8,221,435,877) Proceeds from disposition of investment securities .................................... 8,408,353,709 Increase (decrease) in options written ................................................ 295,430 Increase (decrease) in swaptions written .............................................. (1,963,250) Sale of short term investment securities (net) ........................................ (317,741,820) Amortization (accretion) of premium (discount) ........................................ 357,535 Dollar roll income .................................................................... (5,582,372) (Increase) decrease in variation margin ............................................... 156,118 (Increase) decrease in interest receivable ............................................ (2,925,547) (Increase) decrease in receivable for investments sold ................................ 81,252,718 (Increase) decrease in unrealized gain on swap contracts .............................. (2,052,433) Increase (decrease) in payable for investments purchased .............................. 168,947,199 Increase (decrease) in accrued expenses ............................................... 239 Net (increase) decrease in unrealized appreciation (depreciation) on investments ...... 3,929,095 Net (increase) decrease in unrealized appreciation (depreciation) on written options .. 1,153,717 Net (increase) decrease in unrealized appreciation (depreciation) on written swaptions (1,600,000) Net realized (gain) loss on investments ............................................... (45,532,298) Net realized (gain) loss on written options ........................................... (604,847) Net realized (gain) loss on written swaptions ......................................... 1,811,250 ---------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) operating activities .................................... 123,620,565 ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from units sold ................................................................ 104,033,767 Payments on units redeemed .............................................................. (227,654,332) ---------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) financing activities .................................... (123,620,565) ---------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash .......................................................... -- CASH: Beginning balance ....................................................................... -- ---------------------------------------------------------------------------------------------------------------- Ending balance .......................................................................... $ -- ================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-229 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ----------------------------------------- 2002 2001 2000 (a) --------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 11.34 $ 10.50 $ 10.00 --------------------------------------------------------------------------------------------- Net investment income (loss) (b) ................ 0.32 0.41 0.15 Net realized and unrealized gain (loss) ......... 1.00 0.43 0.35 --------------------------------------------------------------------------------------------- Total from investment operations ................ 1.32 0.84 0.50 --------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 12.66 $ 11.34 $ 10.50 ============================================================================================= Total return (%) (d) ............................ 11.68 8.00 5.01(c) --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (e) ....................... 0.01 0.01 0.00(c) --------------------------------------------------------------------------------------------- Ratio of net investment income (%) .............. 2.73 3.79 1.53(c) --------------------------------------------------------------------------------------------- Portfolio turnover% ............................. 1,569 5,506 1,607(c) --------------------------------------------------------------------------------------------- Net assets, end of year (000,000s) .............. $ 506 $ 573 $ 866 =============================================================================================
(a) The Fund commenced operations on October 6, 2000. (b) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (c) Not annualized. (d) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (e) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-230 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE --------------------------------------------------------------------------------------------------------------------------- DEBT INSTRUMENTS -- 47.1% USD 5,000,000 Fannie Mae(1) ........................................ 7.13% 06/15/2010 $ 6,031,500 7,800,000 Fannie Mae(1) ........................................ 5.25% 01/15/2009 8,530,314 10,000,000 Fannie Mae ........................................... 2.91% 02/25/2022 10,009,160 13,000,000 Fannie Mae ........................................... 3.05% 12/12/2005 13,125,378 8,500,000 Fannie Mae ........................................... 7.13% 01/15/2030 10,534,133 18,400,000 Fannie Mae(1) ........................................ 4.38% 10/15/2006 19,529,024 800,000 Fannie Mae ........................................... 4.38% 09/15/2012 802,464 2,570,000 Federal Home Loan Bank System ........................ 5.63% 11/15/2011 2,824,687 8,000,000 Federal Home Loan Bank System ........................ 4.75% 06/28/2004 8,376,721 8,000,000 Federal Home Loan Bank System ........................ 3.63% 10/15/2004 8,276,240 5,000,000 Federal Home Loan Bank System ........................ 4.50% 11/15/2012 5,071,450 10,000,000 Federal National Mortgage Association ................ 2.75% 11/14/2005 10,042,601 15,000,000 Federal National Mortgage Association ................ 2.13% 11/26/2004 15,061,350 5,200,000 Freddie Mac .......................................... 4.00% 10/29/2007 5,297,604 6,800,000 Freddie Mac(1) ....................................... 4.50% 07/23/2007 7,011,072 5,000,000 Freddie Mac(1) ....................................... 5.75% 03/15/2009 5,611,100 11,800,000 Freddie Mac .......................................... 5.25% 02/15/2004 12,306,692 5,000,000 Freddie Mac .......................................... 4.75% 10/11/2012 4,997,650 10,000,000 Freddie Mac .......................................... 4.50% 08/15/2004 10,462,201 21,600,347 Nextcard Credit Card Master Note Trust 144A .......... 1.72% 01/15/2003 1,480,321 1,695,098 Nextcard Credit Card Master Note Trust 144A .......... 1.62% 12/15/2006 1,567,966 5,805,000 Resolution Funding Corp .............................. 8.13% 10/15/2019 7,877,327 3,100,000 United States Treasury Bond(1) ....................... 11.25% 02/15/2015 5,163,546 4,110,000 United States Treasury Bond .......................... 5.38% 02/15/2031 4,478,626 10,000,000 United States Treasury Note .......................... 4.00% 11/15/2012 10,142,200 4,475,000 United States Treasury Note .......................... 3.25% 08/15/2007 4,586,248 8,200,000 United States Treasury Note .......................... 2.00% 11/30/2004 8,268,633 1,700,000 United States Treasury Note .......................... 3.00% 11/15/2007 32,083,887 20,000,000 United States Treasury Note/Bond(1) .................. 11.63% 11/15/2004 23,705,000 5,000,000 United States Treasury Note/Bond(1) .................. 9.38% 02/15/2006 6,103,600 11,100,000 United States Treasury Note/Bond ..................... 3.63% 03/31/2004 11,420,124 7,000,000 United States Treasury Note/Bond(1) .................. 5.25% 11/15/2028 7,305,410 10,000,000 United States Treasury Note/Bond ..................... 5.88% 02/15/2004 10,517,601 5,000,000 United States Treasury Note/Bond(1) .................. 6.88% 05/15/2006 5,752,551 8,000,000 United States Treasury Note/Bond(1) .................. 6.50% 02/15/2010 9,563,760 14,375,000 United States Treasury Note/Bond(1) .................. 5.75% 11/15/2005 15,893,432 15,376,000 United States Treasury Note/Bond(1) .................. 8.88% 08/15/2017 22,484,324 12,400,000 United States Treasury Note/Bond(1) .................. 7.88% 2/15/2021 17,058,594 7,,479,000 United States Treasury Note/Bond(1) .................. 7.13% 02/15/2023 9,629,960 11,500,000 United States Treasury Note/Bond(1) .................. 6.88% 08/15/2025 14,539,909 20,000,000 United States Treasury Note/Bond ..................... 12.38% 05/15/2004 22,988,000 --------------------------------------------------------------------------------------------------------------------------- TOTAL DEBT INSTRUMENTS ............................... $416,512,360 ---------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. SAI-231 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------- SHARES VALUE ---------------------------------------------------------------------------------- SHORT TERM INSTRUMENTS -- 0.4% 140,000 United States Treasury Bill ........... $ 139,839 1,620,000 United States Treasury Bill ........... 1,618,161 1,610,000 United States Treasury Bill ........... 1,608,157 ---------------------------------------------------------------------------------- TOTAL SHORT TERM INSTRUMENTS .......... 3,366,157 ----------------------------------------------------------------------------------
---------------------------------------------------------------------------------- UNITS ---------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 52.3% 19,775,518 Limited Duration Bond Fund(3)............... $201,670,732 260,864,135 Short Term Investment Fund(3) .............. 260,864,135 ---------------------------------------------------------------------------------- TOTAL COLLECTIVE INVESTMENT FUNDS .......... 462,534,867 ----------------------------------------------------------------------------------
---------------------------------------------------------------------------------- NUMBER OF EXPIRATION DATE/ CONTRACTS STRIKE PRICE ---------------------------------------------------------------------------------- PURCHASED OPTIONS -- 0.2% Eurodollar Futures (call) ......... 570 March 2003 / 98.00 $ 299,250 Eurodollar Futures (call) ......... 570 March 2003 / 97.00 1,318,125 ---------------------------------------------------------------------------------- TOTAL PURCHASED OPTIONS ........... 1,617,375 ---------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $877,925,371) .............. 884,030,759 ==================================================================================
1 All or a portion of this security has been purchased on a delayed delivery basis. 2 Variable rate security. Rate disclosed is that which was in effect at December 31, 2002. Date disclosed is the next interest rate reset date. 3 Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-232 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 -------------------------------------------------------------------------------- The following written options were open at December 31, 2002:
OPTIONS NUMBER OF EXPIRATION DATE/ CONTRACTS CONTRACTS STRIKE PRICE VALUE ($) -------------------------------------------------------- ----------- -------------------- ---------- Eurodollar Futures (call) (premiums received $622,440) 1,140 March 2003 / 97.50 1,482,000
The following swap contracts were open at December 31, 2002:
CURRENT NOTIONAL UNREALIZED AMOUNT DESCRIPTION GAIN/(LOSS) -------------- -------------------------------------------------------------------------------- ------------ $ 15,000,000 Agreement with Lehman Brothers effective August 29, 2002 and terminating on $ 52,325 August 29, 2007 to provide credit protection through the payment of the Current Notional Amount of $15,000,000 in the event of a default of $10,000,000 by issuer, Fannie Mae; and to receive quarterly payments equal to a premium of 26 basis points multiplied by the Current Notional Amount. $ 7,000,000 Agreement with Merrill Lynch effective June 28, 2002 and terminating on $ 26,954 June 28, 2007 to provide credit protection through the payment of the Current Notional Amount of $7,000,000 in the event of a default of $10,000,000 by issuer, Fannie Mae; and to receive quarterly payments equal to a premium of 23 basis points multiplied by the Current Notional Amount. $100,000,000 Agreement with Lehman Brothers effective September 1, 2002 and terminating on $2,303,466 March 1, 2003 to make monthly payments equal to 1 month LIBOR minus 5 basis points multiplied by the Current Notional Amount of $100,000,000; and to make or receive payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers U.S. Government Index. ---------- $2,382,745 ----------
USD : United States Dollar The accompanying notes are an integral part of these financial statements. SAI-233 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Government Fund (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match or exceed the return of the Lehman Brothers Government Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Fixed income investments are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-234 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 F. DISTRIBUTIONS TO PARTICIPANTS Net investment income and net realized gains are retained by the Fund. G. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. H. SWAPTION CONTRACTS The Fund may purchase or write swaption contracts to manage exposure to fluctuations in interest rates or hedge the fair value of other Fund investments. Swaption contracts entered into by the Fund typically represent an option that gives the purchaser the right, but not the obligation, to enter into a swap contract on a future date. If a call swaption is exercised, the purchaser will enter a swap to receive the fixed rate and pay a floating rate in exchange. Exercising a put would entitle the purchaser to pay a fixed rate and receive a floating rate. Swaption contracts are marked-to-market as the net amount due to or from the Fund in accordance with the terms of the contract based on the closing level of the relevant market rate of interest. Changes in the value of the swaption are reported as unrealized gains or losses. When the Fund writes a swaption, the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the swaption written. Premiums received from writing swaptions that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. Entering into a swaption contract involves, to varying degrees, the elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities, associated with both option contracts and swap contracts. To reduce credit risk from potential counterparty default, the Fund enters into swaption contracts with counterparties whose creditworthiness has been approved by the Trustee. The Fund bears the market risk arising from any change in index values or interest rates. SAI-235 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 I. TOTAL RETURN AND INTEREST RATE SWAP CONTRACTS The Fund may invest in swap contracts. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund uses interest rate swap contracts to manage its exposure to interest rates, and total return swap contracts to gain exposure to different underlying instruments. Interest rate swap contracts typically represent the exchange between the Fund and a counterparty of respective commitments to make variable rate and fixed rate payments with respect to a notional amount of principal. Total return swap contracts typically represent the exchange by the Fund with a counterparty of a commitment to pay interest at a variable rate for a cash flow based on the change in market price and/or total return (change in market price plus related income, if any) of the relevant index or security. Swap contracts may have a term of one to ten years, but typically require periodic interim settlement in cash, at which time the specified value of the index or security and/or variable interest rate are reset for the next settlement period. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from the Fund in accordance with the terms of the contract based on the closing level of the relevant index or security and/or interest accrual through valuation date. Changes in the value of swap contracts are recorded as unrealized gains or losses. Periodic cash settlements on total return swaps are recorded as realized gains or losses, and on interest rate swaps as adjustments to interest income. Entering into a swap contract involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. Notional principal amounts are used to express the extent of involvement in the transactions, but are not delivered under the contracts. Accordingly, credit risk is limited to any amounts receivable from the counterparty. To reduce credit risk from potential counterparty default, the Fund enters into swap contracts with counterparties whose creditworthiness has been approved by the Trustee. The Fund bears the market risk arising from any change in index or security values or interest rates. J. CREDIT DEFAULT SWAP CONTRACTS The Fund may invest in credit default swaps. Credit default swap contracts entered into by the Fund typically represent the exchange by the Fund with a counterparty of a commitment to provide a level of credit protection for a commitment to receive interest at a fixed rate based on the potential risk of default of the relevant underlying issuer. Providing credit protection to a counterparty tends to increase a Fund's exposure to the underlying instrument. Receiving credit protection from a counterparty tends to decrease a Fund's exposure to the underlying instrument held by a Fund, or hedge the fair value of other Fund investments. Such contracts may have a term of one to ten years, but typically require periodic interim settlement in cash. During the period that the credit default swap contract is open, the contract is marked-to-market in accordance with the terms of the contract based on the current interest rate spreads and credit risk of the referenced obligation of the underlying issuer and interest accrual through valuation date. Changes in the value of the credit default swap are recorded as unrealized gains or losses, while periodic cash settlements are recorded as realized gains or losses. Entering into a credit default swap contract involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. Notional principal amounts are used to express the extent of involvement in the transactions, and may be delivered under the contracts in the event of default of the underlying issuer. In addition to credit exposure to the underlying issuer implicit in the contract, credit risk is applicable to any amounts receivable from the counterparty. To reduce credit risk from potential counterparty default, the Fund enters into credit default swap contracts with counterparties whose creditworthiness has been approved by the Trustee. The Fund bears the interest rate risk arising from any change in the interest rate or credit rating of the underlying issuer. SAI-236 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 K. OPTIONS CONTRACTS The Fund may purchase or write option contracts to manage exposure to the securities markets and to fluctuations in interest rates. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument held by the Fund, or hedge the fair value of other Fund investments. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. Gain or loss is recognized when the option contract is exercised, expires or is closed. When the Fund writes an option, the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from written options. The difference between the premium and the amount paid for a closing purchase, including brokerage commissions, is also recorded as a realized gain/loss. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as an addition to cost of investments. Options involve, to varying degrees, credit and market risks. Loss in value may arise from changes in the value of the underlying instruments. In writing a put option, the Fund assumes the risk of incurring a loss if the market price decreases and the option is exercised. Writing a call option will increase the risk of loss to the Fund, if the market price increases and the option is exercised. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market for the contracts or if the counterparties do not perform in accordance with the contracts' terms. L. DOLLAR ROLL TRANSACTIONS The Fund may enter into dollar roll transactions. A dollar roll transaction may involve the sale of securities by the Fund with a simultaneous purchase of the same securities at an agreed upon price and date. During the period between the sale and purchase, 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 purchase price of those securities. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $8,221,435,877 and $8,408,353,709, respectively. Written option transactions during the year were as follows:
CONTRACT PREMIUMS AMOUNTS RECEIVED ------------ --------------- Written options outstanding at beginning of year ......... 2,542 $ 931,857 Options opened ........................................... 75,669 3,865,595 Options exercised ........................................ -- -- Options expired .......................................... (2,736) (753,494) Options closed ........................................... (74,335) (3,421,518) ------- ------------ Written options outstanding at end of year ............... 1,140 $ 622,440 ======= ============
SAI-237 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY GOVERNMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 Written swaption transactions during the year were as follows:
NOTIONAL PREMIUMS AMOUNTS RECEIVED ----------------- ------------- Written swaptions outstanding at beginning of year ......... $ 80,000,000 $ 152,000 Swaptions opened ........................................... 30,000,000 51,750 Swaptions exercised ........................................ -- -- Swaptions expired .......................................... -- -- Swaptions closed ........................................... (110,000,000) (203,750) -------------- ---------- Written swaptions outstanding at end of year ............... $ -- $ -- ============== ==========
SAI-238 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Limited Duration Bond Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Limited Duration Bond Fund at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for the period indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provides a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 21, 2003 SAI-239 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Statement of Assets and Liabilities December 31, 2002 --------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $639,879,087)............................................................... $639,865,678 Variation margin receivable ....................................................... 19,863 Interest receivable ............................................................... 2,279,228 Unrealized gain on open swap contracts ............................................ 82,313 --------------------------------------------------------------------------------------------------- Total assets ................................................................... 642,247,082 --------------------------------------------------------------------------------------------------- LIABILITIES Accrued expenses .................................................................. 9,172 Open swap contracts, at value (net proceeds received $834,008)..................... 3,994,929 --------------------------------------------------------------------------------------------------- Total liabilities .............................................................. 4,004,101 --------------------------------------------------------------------------------------------------- NET ASSETS (equivalent to $10.20 per unit based on 62,582,543 units outstanding) .. $638,242,981 ===================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-240 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Statement of Operations Year Ended December 31, 2002 (a) ------------------------------------------------------------------------------------------ INVESTMENT INCOME Interest ............................................................... $ 14,939,953 ------------------------------------------------------------------------------------------ Total investment income .............................................. 14,939,953 ------------------------------------------------------------------------------------------ EXPENSES Custody ................................................................ 59,269 Audit .................................................................. 17,499 Other .................................................................. 4,481 ------------------------------------------------------------------------------------------ Total expenses ....................................................... 81,249 ------------------------------------------------------------------------------------------ Net investment income (loss) ......................................... 14,858,704 ------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments .......................................................... 457,061 Futures contracts .................................................... (202,225) Swap contracts ....................................................... (2,228,632) ------------------------------------------------------------------------------------------ (1,973,796) ------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation): Investments .......................................................... (13,409) Futures contracts .................................................... (1,649,438) Swap contracts ....................................................... (3,078,608) ------------------------------------------------------------------------------------------ (4,741,455) ------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) ................................ (6,715,251) ------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 8,143,453 ==========================================================================================
(a) The Fund commenced operations on February 28, 2002. The accompanying notes are an integral part of these financial statements. SAI-241 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Statement of Changes in Net Assets Year ended December 31, 2002 (a) ----------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ...................................................... $ 14,858,704 Net realized gain (loss) .......................................................... (1,973,796) Net change in unrealized appreciation (depreciation) .............................. (4,741,455) ----------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. 8,143,453 ----------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions ..... 630,099,528 ----------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS ............................................. 638,242,981 NET ASSETS Beginning of year ................................................................ 0 ----------------------------------------------------------------------------------------------------- End of year ...................................................................... $638,242,981 =====================================================================================================
(a) The Fund commenced operations on February 28, 2002. The accompanying notes are an integral part of these financial statements. SAI-242 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, 2002 (a) --------------------------------- UNITS AMOUNT ------------------------------------------------------------------------------------------ UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ......................................... 65,093,911 $ 655,441,282 Units redeemed ....................................... (2,511,368) (25,341,754) ------------------------------------------------------------------------------------------ Net increase (decrease) .............................. 62,582,543 $ 630,099,528 ==========================================================================================
Units in excess of 10% of the Fund units outstanding at December 31, 2002 held by 3 of the Fund's unitholders aggregated 89% of the Fund's total units outstanding. (a) The Fund commenced operations on February 28, 2002. The accompanying notes are an integral part of these financial statements. SAI-243 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Financial Highlights Year ended December 31, 2002 (a) (For a Unit of Participation Outstanding Throughout the Year) SELECTED PER UNIT DATA Net asset value, beginning of year .................... $ 10.00 ------------------------------------------------------------------- Net investment income (loss) (b) ...................... 0.34 Net realized and unrealized gain (loss) ............... (0.14) ------------------------------------------------------------------- Total from investment operations ...................... 0.20 ------------------------------------------------------------------- Net asset value, end of year .......................... $ 10.20 =================================================================== Total return (%) (c) .................................. 1.98 =================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (d) (e) ......................... 0.02 ------------------------------------------------------------------- Ratio of net investment income (loss) (%) (e) ......... 3.32 ------------------------------------------------------------------- Portfolio turnover (%) (e) ............................ 181.00 -------------------------------------------------------------------
(a) The Fund commenced operations on February 28, 2002. (b) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (c) Total return calculation (not annualized for the period ended December 31, 2002) is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (d) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. (e) Not annualized. The accompanying notes are an integral part of these financial statements. SAI-244 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ---------------------------------------------------------------------------------------------------------------------------------- DEBT INSTRUMENTS -- 78.5% USD 8,000,000 Access Group Inc ...................................................... 1.79% 09/25/2025 $ 8,037,776 6,628,651 Accredited Mortgage Loan Trust ........................................ 1.74% 07/25/2032 6,624,757 12,698,000 ACE Securities Corp ................................................... 2.27% 08/25/2032 12,670,204 3,718,000 American Express Credit Account Master Trust .......................... 1.56% 04/15/2008 3,726,067 5,000,000 American Express Credit Account Master Trust .......................... 1.80% 12/15/2009 4,985,160 5,000,000 American Express Credit Account Master Trust .......................... 1.87% 03/15/2010 4,999,995 2,788,000 American Express Credit Account Master Trust(1) ....................... 1.56% 01/15/2003 2,794,092 10,667,000 Amortizing Residential Collateral Trust ............................... 2.42% 01/25/2033 10,666,989 10,000,000 Amortizing Residential Collateral Trust ............................... 2.17% 08/25/2032 9,893,080 122,475,337 Amortizing Residential Collateral Trust IO(2) ......................... 6.00% 11/25/2004 8,637,451 10,000,000 Asset Backed Securities Corp Home Equity .............................. 2.27% 10/15/2032 9,978,070 8,614,000 Associates Corp Of N. America -- Senior Note .......................... 6.25% 11/01/2008 9,495,755 12,097,000 Bank One Issuance Trust ............................................... 2.38% 12/15/2009 12,052,229 5,000,000 Bank One Issuance Trust ............................................... 1.76% 05/15/2008 4,996,000 169,976,637 Bear Stearns Commercial Mortgage Securities 144A - IO Strip(2) ........ 0.88% 10/15/2036 5,547,867 74,263,149 Bear Stearns Commercial Mortgage Securities 144A - IO Strip(2) ........ 2.34% 08/15/2038 8,764,240 3,098,000 Capital Auto Receivables Asset Trust .................................. 1.49% 03/15/2005 3,098,038 3,315,000 Capital One Master Trust .............................................. 1.52% 08/15/2006 3,315,318 8,859,000 Capital One Master Trust(1) ........................................... 1.56% 01/15/2003 8,836,675 2,903,000 Carco Auto Loan Master Trust .......................................... 1.50% 10/17/2005 2,902,817 8,321,096 CDC Mortgage Capital Trust ............................................ 2.45% 01/25/2032 8,378,977 10,000,000 Centex Home Equity .................................................... 2.10% 09/25/2032 9,943,910 1,549,000 Chase Credit Card Master Trust(1) ..................................... 1.56% 01/15/2003 1,552,385 1,000,045 Chase Funding Mortgage Loan Asset-Backed Certificates ................. 1.66% 12/25/2030 998,811 3,167,053 Chase Funding Mortgage Loan Asset-Backed Certificates ................. 1.67% 10/25/2031 3,163,905 3,000,000 Chase Funding Mortgage Loan Asset-Backed Certificates ................. 2.32% 11/25/2031 3,025,068 4,480,000 Chase Funding Mortgage Loan Asset-Backed Certificates ................. 2.02% 01/25/2032 4,460,539 3,250,000 Chase Funding Mortgage Loan Asset-Backed Certificates ................. 2.52% 03/25/2032 3,234,052 7,500,000 Chase Funding Mortgage Loan Asset-Backed Certificates ................. 1.92% 05/25/2031 7,499,993 8,655,000 Citibank Credit Card Issuance Trust ................................... 2.61% 02/09/2009 8,636,331 5,000,000 Citibank Credit Card Issuance Trust ................................... 2.03% 10/15/2005 4,986,755 2,000,000 Citibank Credit Card Issuance Trust ................................... 2.86% 01/15/2010 1,998,280 1,300,000 Citibank Credit Card Issuance Trust(1) ................................ 1.89% 03/10/2003 1,303,579 2,478,000 Citibank Credit Card Issuance Trust(1) ................................ 1.74% 02/07/2003 2,484,195 5,130,079 CNH Equipment Trust ................................................... 7.34% 02/15/2007 5,287,106 528,662 Conseco Finance ....................................................... 5.37% 06/15/2032 529,075 3,996,647 Crusade Global Trust .................................................. 1.59% 06/20/2032 3,987,974 1,549,000 Discover Card Master Trust I(1) ....................................... 1.58% 01/15/2003 1,553,237 3,098,000 Discover Card Master Trust I(1) ....................................... 1.57% 01/15/2003 3,104,929 10,000,000 Discover Card Master Trust I .......................................... 1.77% 04/15/2008 9,985,870
The accompanying notes are an integral part of these financial statements. SAI-245 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE --------------------------------------------------------------------------------------------------------------------------------- USD 6,723,471 EQCC Trust(1) .................................................... 1.72% 01/27/2003 $ 6,715,309 44,888,894 Fannie Mae Grantor Trust IO(2) ................................... 5.25% 10/25/2004 2,713,623 120,100,000 Fannie Mae Grantor Trust IO(2) ................................... 4.24% 05/25/2005 8,246,546 2,189,000 First USA Credit Card Master Trust(1) ............................ 1.56% 01/21/2003 2,193,233 1,549,000 Fleet Credit Card Master Trust II(1) ............................. 1.57% 01/15/2003 1,553,114 1,549,000 Fleet Credit Card Master Trust II ................................ 1.64% 04/16/2007 1,554,991 7,000,000 Fleet Credit Card Master Trust II ................................ 1.75% 07/15/2005 7,000,417 3,098,000 Ford Credit Auto Owner Trust ..................................... 7.15% 01/15/2005 3,104,558 88,530,958 GE Capital Commercial Mortgage Corp IO(2) ........................ 1.91% 08/11/2036 7,670,588 4,490,357 GMAC Commercial Mortgage Securities Inc .......................... 2.87% 01/11/2014 4,490,353 7,000,000 Gracechurch Card Funding PLC ..................................... 1.87% 10/15/2009 6,999,993 5,800,578 Granite Mortgages PLC ............................................ 2.07% 10/20/2021 5,804,058 6,503,655 GSAMP Trust ...................................................... 1.74% 07/25/2032 6,485,158 7,298,000 GSAMP Trust ...................................................... 2.27% 10/20/2032 7,282,229 4,650,000 Holmes Financing PLC ............................................. 1.98% 10/15/2006 4,654,650 930,000 Holmes Financing PLC(1) .......................................... 1.94% 01/15/2003 930,093 3,098,000 Holmes Financing PLC(1) .......................................... 1.92% 01/15/2003 3,098,929 10,000,000 Holmes Financing PLC ............................................. 2.15% 07/15/2040 10,000,600 3,098,000 Honda Auto Receivables Owner Trust ............................... 3.40% 02/18/2005 3,151,379 3,098,000 Household Credit Card Master Note Trust I ........................ 1.56% 08/15/2008 3,105,262 1,549,000 Household Credit Card Master Note Trust I ........................ 1.58% 10/15/2008 1,549,000 82,250,000 JP Morgan Chase Commercial Mortgage Securities Corp 144A IO(2).... 1.71% 07/12/2037 6,685,527 2,705,804 Kingfisher Securitisation PTY Ltd ................................ 1.59% 09/20/2032 2,704,180 41,625,000 LB-UBS Commercial Mortgage Trust 144A IO(2) ...................... 1.53% 07/15/2035 2,869,336 84,988,000 LB-UBS Commercial Mortgage Trust 144A IO(2) ...................... 1.48% 10/15/2035 6,788,247 6,694,038 Long Beach Mortgage Loan Trust ................................... 1.72% 08/25/2032 6,676,988 9,814,085 Long Beach Mortgage Loan Trust ................................... 1.88% 11/26/2032 9,828,894 1,549,000 MBNA Credit Card Master Note Trust(1) ............................ 1.80% 01/15/2003 1,545,169 12,590,000 MBNA Credit Card Master Note Trust ............................... 2.89% 10/15/2008 12,528,536 4,647,000 MBNA Credit Card Master Note Trust ............................... 1.78% 01/15/2009 4,632,209 1,549,000 MBNA Master Credit Card Trust USA ................................ 1.54% 02/15/2007 1,551,146 1,549,000 MBNA Master Credit Card Trust USA(1) ............................. 1.89% 01/17/2003 1,550,969 1,814,568 Medallion Trust .................................................. 1.59% 02/18/2003 1,814,568 1,549,000 National City Credit Card Master Trust(1) ........................ 1.58% 01/15/2003 1,553,599 1,549,000 National City Credit Card Master Trust ........................... 1.57% 08/15/2007 1,552,662 7,000,000 Option One Mortgage Loan Trust ................................... 1.99% 10/12/2032 6,916,567 3,408,000 Providian Master Trust ........................................... 1.54% 08/15/2007 3,408,961 2,762,880 Residential Asset Securities Corp ................................ 1.66% 03/25/2032 2,756,404 11,000,000 Residential Asset Securities Corp ................................ 2.52% 04/25/2032 10,870,343 7,500,000 Residential Asset Securities Corp ................................ 2.07% 04/25/2032 7,469,963 10,000,000 Residential Asset Securities Corp ................................ 1.69% 08/25/2032 9,965,000
The accompanying notes are an integral part of these financial statements. SAI-246 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------------------- USD 5,000,000 Residential Asset Securities Corp ............. 7.85% 09/25/2031 $ 5,507,985 8,150,897 Saxon Asset Securities Trust .................. 2.02% 02/25/2028 8,105,912 4,330,000 Saxon Asset Securities Trust .................. 2.02% 05/25/2032 4,293,507 56,834,733 Saxon Asset Securities Trust IO2 .............. 5.00% 12/25/2032 4,622,994 10,000,000 Sears Credit Account Master Trust ............. 1.85% 08/17/2009 9,953,300 3,098,000 Sears Credit Account Master Trust ............. 1.53% 06/15/2008 3,091,270 10,000,000 Sears Credit Account Master Trust ............. 1.64% 04/16/2013 9,891,770 1,549,000 Sears Credit Account Master Trust(1) .......... 1.60% 01/15/2003 1,539,473 6,000,000 Sequoia Mortgage Trust ........................ 2.39% 10/20/2033 6,007,086 7,702,000 Sequoia Mortgage Trust ........................ 1.42% 09/20/2032 7,641,039 422,313 SLM Student Loan Trust ........................ 1.89% 07/25/2008 422,536 1,518,782 SLM Student Loan Trust ........................ 1.89% 01/25/2009 1,518,942 4,799,643 SMS Student Loan Trust ........................ 1.81% 10/27/2025 4,799,355 34,578,935 Structured Asset Securities Corp IO(2) ........ 6.00% 07/25/2032 2,438,645 2,454,729 WFS Financial Owner Trust(1) .................. 1.56% 03/20/2003 2,455,567 ------------------------------------------------------------------------------------------------------------------- TOTAL DEBT INSTRUMENTS ........................ 502,400,283 ------------------------------------------------------------------------------------------------------------------- SHARES ------------------------------------------------------------------------------------------------------------------- SHORT TERM INSTRUMENTS -- 0.3% 510,000 United States Treasury Bill(3) ................ 509,427 1,300,000 United States Treasury Bill(3) ................ 1,298,545 ------------------------------------------------------------------------------------------------------------------- 1,807,972 ------------------------------------------------------------------------------------------------------------------- UNITS ------------------------------------------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 21.2% 5,245,171 Intermediate Corporate Index Fund(4) .......... 84,384,303 1,673,596 Long Corporate Index Fund(4) .................. 26,665,407 1,993,422 Passive 1-3 Year Credit Index Fund(4) ......... 21,259,843 3,347,870 Short Term Investment Fund(4) ................. 3,347,870 ------------------------------------------------------------------------------------------------------------------- TOTAL COLLECTIVE INVESTMENT FUNDS ............. 135,657,423 ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $639,879,087)................................................ $639,865,678 ===================================================================================================================
1 Variable rate security. Rate disclosed is that which was in effect at December 31, 2002. Date disclosed is the next interest rate reset date. 2 Interest only securities represent the right to receive the monthly interest payments on an underlyiing pool of mortgages. Payments of principal on the pool would reduce the value of the "interest only" holding. 3 All or a portion of this security was pledged to cover margin requirements for open swap contracts. 4 Collective investment fund advised by State Street Global Advisors. The accompanying notes are an integral part of these financial statements. SAI-247 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 At December 31, 2002, U.S. Treasury Bills with principal of $300,000 were pledged to cover initial margin requirements for open futures contracts. The following futures contracts were open at December 31, 2002:
NUMBER OF FUTURES CONTRACTS UNREALIZED CONTRACTS LONG/(SHORT) NOTIONAL COST MATURITY DATE GAIN/(LOSS) -------------------- -------------- --------------- ---------------- ---------------- Eurodollar Futures (47) $-11,829,537 March 2004 $ (211,951) Eurodollar Futures (44) -10,550,499 June 2004 (175,051) Eurodollar Futures (36) -8,617,344 September 2004 (128,857) Eurodollar Futures (34) -8,129,177 December 2004 (105,624) Eurodollar Futures (24) -5,748,167 June 2005 (36,434) Eurodollar Futures (16) -3,837,174 September 2005 (11,427) Eurodollar Futures (7) -1,675,422 December 2005 (5,103) Eurodollar Futures (56) -13,621,639 March 2003 (193,562) Eurodollar Futures (54) -13,087,297 June 2003 (228,429) Eurodollar Futures (51) -12,319,546 September 2003 (236,017) Eurodollar Futures (49) -11,798,942 December 2003 (233,621) Eurodollar Futures (32) -7,647,435 March 2005 (83,362) ------------ $ (1,649,438) ============
The following swap contracts were open at December 31, 2002
CURRENT NOTIONAL UNREALIZED AMOUNT DESCRIPTION GAIN/(LOSS) ------------- ----------------------------------------------------------------------------------- --------------- $8,614,000 Agreement with Goldman Sachs effective December 17, 2002 and terminating on $ (1,795) December 1, 2008 to receive credit protection through the payment of the Current Notional Amount of $8,614,000 in the event of a default of $10,000,000 by issuer, Associates Corporation of North America; and to make quarterly payments equal to a premium of 50 basis points per annum multiplied by the Current Notional Amount. 15,000,000 Agreement with Goldman Sachs effective May 10, 2002 and terminating on May 10, 26,663 2007 to provide credit protection through the payment of the Current Notional Amount of $15,000,000 in the event of a default of $10,000,000 by issuer, Federal National Mortgage Association; and to receive quarterly payments equal to a premium of 27 basis points multiplied by the Current Notional Amount. 5,000,000 Agreement with Goldman Sachs effective July 11, 2002 and terminating on May 15, 3,750 2007 to provide credit protection through the payment of a proportional amount of the Current Notional Amount of $5,000,000 in the event of a default of $10,000,000 by one of the issues within GREMLIN Class A; and to receive quarterly payments equal to a premium of 60 basis points per annum multiplied by the Current Notional Amount. 8,614,000 Agreement with Goldman Sachs effective December 17, 2002 and terminating on (1,050,799) November 1, 2008 to receive quarterly payments equal to 3 month LIBOR plus 71 basis points multiplied by the Current Notional Amount of $8,614,000 (with net proceeds received of $834,008); and to make semiannual payments equal to the Current Notional Amount multiplied by the Fixed Rate of 6.25% per annum. 10,000,000 Agreement with Lehman Brothers effective July 16, 2002 and terminating on $ (278,952) February 1, 2003 to receive monthly payments equal to 1 month LIBOR plus 40 basis points multiplied by the Current Notional Amount of $10,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers U.S Credit Index. 35,000,000 Agreement with Lehman Brothers effective December 1, 2002 and terminating on (976,331) June 1, 2003 to receive monthly payments equal to 1 month LIBOR plus 40 basis points multiplied by the Current Notional Amount of $35,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers Credit Index.
The accompanying notes are an integral part of these financial statements. SAI-248 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
CURRENT NOTIONAL UNREALIZED AMOUNT DESCRIPTION GAIN/(LOSS) ------------ ------------------------------------------------------------------------------------- ---------------- 10,000,000 Agreement with Lehman Brothers effective October 1, 2002 and terminating on (278,952) April 1, 2003 to receive monthly payments equal to 1 month LIBOR plus 40 basis points multiplied by the Current Notional Amount of $10,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers Credit Index. 10,000,000 Agreement with Lehman Brothers effective May 16, 2002 and terminating on June 1, (278,952) 2003 to receive monthly payments equal to 1 month LIBOR plus 40 basis points multiplied by the Current Notional Amount of $10,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers U.S Credit Index. 20,000,000 Agreement with Lehman Brothers effective November 1, 2002 and terminating on (557,903) May 1, 2003 to receive monthly payments equal to 1 month LIBOR plus 40 basis points multiplied by the Current Notional Amount of $20,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Lehman Brothers Credit Index. 20,000,000 Agreement with Merrill Lynch effective September 3, 2002 and terminating on (560,078) September 2, 2003 to receive monthly payments equal to 1 month LIBOR plus 65 basis points multiplied by the Current Notional Amount of $20,000,000; and to receive or make payments equal to the Current Notional Amount multiplied by the month to date total return of the Merrill Lynch U.S. Corporates & All Yankees Index. 30,000,000 Agreement with Morgan Stanley effective August 30, 2002, and terminating on (11,167) February 28, 2003 to receive monthly payments equal to the nominal spread of the ERISA-eligible component of the Lehman Brothers CMBS Investment Grade Index plus 60 basis points multiplied by the Current Notional Amount of $30,000,000; and to receive or make payments equal to the change in the nominal spread of the ERISA-eligible component of the Lehman Brothers CMBS Investment Grade Index multiplied by the Modified Adjusted Duration at inception (4.95%) multiplied by the Current Notional Amount. 15,000,000 Agreement with J. P. Morgan Chase effective September 5, 2002 and terminating on 51,900 September 5, 2007 to provide credit protection through the payment of the Current Notional Amount of $15,000,000 in the event of a default of $10,000,000 by issuer, Federal National Mortgage Association; and to receive quarterly payments equal to a premium of 27 basis points per annum multiplied by the Current Notional Amount. ------------ $ (3,912,616) ============
USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-249 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Limited Duration Bond Fund (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match or exceed the total rate of return of the J.P. Morgan three-month U.S. Dollar LIBOR Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Fixed income investments are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit. SAI-250 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income and net realized gains are retained by the Fund. G. FUTURES CONTRACTS The Fund may use futures contracts to manage exposure to the market. Buying futures tends to increase a fund's exposure to the underlying instrument. Selling futures tends to decrease a fund's exposure to the underlying instrument held by a fund, or hedge the fair value of other fund investments. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the fluctuation in the value of the underlying index or security, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires. Futures contracts involve, to varying degrees, credit and market risks. The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or if there is an illiquid secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index or security. H. CREDIT DEFAULT SWAP CONTRACTS The Fund may invest in credit default swaps. Credit default swap contracts entered into by the Fund typically represent the exchange by the Fund with a counterparty of a commitment to provide a level of credit protection for a commitment to receive interest at a fixed rate based on the potential risk of default of the relevant underlying issuer. Providing credit protection to a counterparty tends to increase a Fund's exposure to the underlying instrument. Receiving credit protection from a counterparty tends to decrease a Fund's exposure to the underlying instrument held by a Fund, or hedge the fair value of other Fund investments. Such contracts may have a term of one to ten years, but typically require periodic interim settlement in cash. During the period that the credit default swap contract is open, the contract is marked-to-market in accordance with the terms of the contract based on the current interest rate spreads and credit risk of the referenced obligation of the underlying issuer and interest accrual through valuation date. Changes in the value of the credit default swap are recorded as unrealized gains or losses, while periodic cash settlements are recorded as realized gains or losses. SAI-251 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 Entering into a credit default swap contract involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. Notional principal amounts are used to express the extent of involvement in the transactions, and may be delivered under the contracts in the event of default of the underlying issuer. In addition to credit exposure to the underlying issuer implicit in the contract, credit risk is applicable to any amounts receivable from the counterparty. To reduce credit risk from potential counterparty default, the Fund enters into credit default swap contracts with counterparties whose creditworthiness has been approved by the Trustee. The Fund bears the interest rate risk arising from any change in the interest rate or credit rating of the underlying issuer. I. TOTAL RETURN AND INTEREST RATE SWAP CONTRACTS The Fund may invest in swap contracts. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund uses interest rate swap contracts to manage its exposure to interest rates, and total return swap contracts to gain exposure to different underlying instruments. Interest rate swap contracts typically represent the exchange between the Fund and a counterparty of respective commitments to make variable rate and fixed rate payments with respect to a notional amount of principal. Total return swap contracts typically represent the exchange by the Fund with a counterparty of a commitment to pay interest at a variable rate for a cash flow based on the change in market price and/or total return (change in market price plus related income, if any) of the relevant index or security. Swap contracts may have a term of one to ten years, but typically require periodic interim settlement in cash, at which time the specified value of the index or security and/or variable interest rate are reset for the next settlement period. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from the Fund in accordance with the terms of the contract based on the closing level of the relevant index or security and/or interest accrual through valuation date. Changes in the value of swap contracts are recorded as unrealized gains or losses. Periodic cash settlements on total return swaps are recorded as realized gains or losses, and on interest rate swaps as adjustments to interest income. Entering into a swap contract involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. Notional principal amounts are used to express the extent of involvement in the transactions, but are not delivered under the contracts. The Fund may receive upfront payments on swap contracts which are included within the value of the contract as reported in the Schedule of Investments. Accordingly, credit risk is limited to any amounts receivable from the counterparty. To reduce credit risk from potential counterparty default, the Fund enters into swap contracts with counterparties whose creditworthiness has been approved by the Trustee. The Fund bears the market risk arising from any change in index or security values or interest rates. J. OPTION CONTRACTS The Fund may purchase or write option contracts to manage exposure to the securities markets and to fluctuations in interest rates. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument held by the Fund, or hedge the fair value of other Fund investments. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. Gain or loss is recognized when the option contract is exercised, expires or is closed. SAI-252 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LIMITED DURATION BOND FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 When the Fund writes an option, the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from written options. The difference between the premium and the amount paid for a closing purchase, including brokerage commissions, is also recorded as a realized gain/loss. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as an addition to cost of investments. Options involve, to varying degrees, credit and market risks. Loss in value may arise from changes in the value of the underlying instruments. In writing a put option, the Fund assumes the risk of incurring a loss if the market price decreases and the option is exercised. Writing a call option will increase the risk of loss to the Fund, if the market price increases and the option is exercised. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market for the contracts or if the counterparties do not perform in accordance with the contracts' terms. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $1,470,152,136 and $807,939,883, respectively. SAI-253 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Intermediate Corporate Index Securities Lending Fund and State Street Bank and Trust Company Intermediate Corporate Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Intermediate Corporate Index Securities Lending Fund and State Street Bank and Trust Company Intermediate Corporate Index Fund at December 31, 2002, and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 21, 2003 SAI-254 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Statement of Assets and Liabilities December 31, 2002 ---------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value , (including securities on loan of $385,815,352) (cost $4,952,942,076) ................................................................. $5,247,002,835 Investments held as collateral for securities loaned ................................... 394,688,426 Receivable for investments sold ........................................................ 73,269,550 Interest receivable .................................................................... 62,079,339 ---------------------------------------------------------------------------------------------------------- Total assets ........................................................................ 5,777,040,150 ---------------------------------------------------------------------------------------------------------- LIABILITIES Due to custodian ....................................................................... 7,101,456 Payable for collateral on securities loaned ............................................ 394,688,426 Payable for investments purchased ...................................................... 26,274,348 Accrued expenses ....................................................................... 79,648 ---------------------------------------------------------------------------------------------------------- Total liabilities ................................................................... 428,143,878 ---------------------------------------------------------------------------------------------------------- NET ASSETS ............................................................................. $5,348,896,272 ========================================================================================================== INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND (288,739,757 units outstanding, at $16.09 per unit net asset value) ................... $4,645,354,033 INTERMEDIATE CORPORATE INDEX FUND (43,729,846 units outstanding, at $16.09 per unit net asset value) .................... 703,542,239 ---------------------------------------------------------------------------------------------------------- $5,348,896,272 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-255 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Statement of Operations Year Ended December 31, 2002 ---------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest ................................................................................ $202,020,077 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 1,106,319 ---------------------------------------------------------------------------------------------------------- Total investment income ............................................................... 203,126,396 ---------------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................................. 679,235 Audit ................................................................................... 44,500 Other ................................................................................... 50,105 ---------------------------------------------------------------------------------------------------------- Total expenses ........................................................................ 773,840 ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .......................................................... 202,352,556 ---------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................... 22,562,741 ---------------------------------------------------------------------------------------------------------- 22,562,741 ---------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................................... 198,790,680 ---------------------------------------------------------------------------------------------------------- 198,790,680 ---------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) .................................................. 221,353,421 ---------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $423,705,977 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-256 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ---------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ............................................................. $ 202,352,556 $ 225,766,153 Net realized gain (loss) ................................................................. 22,562,741 (8,690,668) Net change in unrealized appreciation (depreciation) ..................................... 198,790,680 81,142,600 ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ......................... 423,705,977 298,218,085 ---------------------------------------------------------------------------------------------------------------------------- Distributions of security lending fee income, allocated to the Lending Fund participants . (1,106,319) (1,002,703) Net increase (decrease) in net assets resulting from participant transactions ............ 1,062,361,161 722,650,639 ---------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS .................................................... 1,484,960,819 1,019,866,021 NET ASSETS Beginning of year ....................................................................... 3,863,935,453 2,844,069,432 ---------------------------------------------------------------------------------------------------------------------------- End of year ............................................................................. $5,348,896,272 $3,863,935,453 ============================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-257 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 2002 2001 ------------------------------------ ---------------------------------- UNITS AMOUNT UNITS AMOUNT ---------------- ------------------- ---------------- ----------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: LENDING FUND Units issued ......................................... 121,108,967 $ 1,858,913,303 85,366,737 $1,207,579,198 Units redeemed ....................................... (75,038,580) (1,134,511,320) (53,914,328) (767,633,557) ---------------------------------------------------------------------------------------------------------------------------- Total ............................................... 46,070,387 $ 724,401,983 31,452,409 $ 439,945,641 ---------------------------------------------------------------------------------------------------------------------------- NON-LENDING FUND Units issued ......................................... 42,583,640 $ 650,556,897 23,518,191 $ 337,555,296 Units redeemed ....................................... (20,353,372) (312,597,719) (3,731,072) (54,850,298) ---------------------------------------------------------------------------------------------------------------------------- Total ............................................... 22,230,268 $ 337,959,178 19,787,119 $ 282,704,998 Net increase (decrease) .............................. 68,300,655 $ 1,062,361,161 51,239,528 $ 722,650,639 ============================================================================================================================
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2002 held by 2 of the Lending Fund's unitholders aggregated 90% of the Lending Fund's total units outstanding. NON-LENDING FUND Units in excess of 10% of the Non-Lending Fund units outstanding at December 31, 2002 held by 4 of the Non-Lending Fund's unitholders aggregated 93% of the Non-Lending Fund's total units outstanding. The accompanying notes are an integral part of these financial statements. SAI-258 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- 2002 2001 2000 1999 1998 -------------- -------------- -------------- -------------- -------------- SELECTED PER UNIT DATA Net asset value, beginning of year ................ $ 14.63 $ 13.36 $ 12.17 $ 12.16 $ 11.21 ---------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) .................. 0.72 0.95 0.90 0.82 0.79 Net realized and unrealized gain (loss) ........... 0.74 0.33 0.29 (0.81) 0.16 ---------------------------------------------------------------------------------------------------------------------------- Total from investment operations .................. 1.46 1.28 1.19 0.01 0.95 Distributions of securities lending fee income (b) ....................................... (0.00) (0.01) (0.00) (0.00) (0.00) ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of year ...................... $ 16.09 $ 14.63 $ 13.36 $ 12.17 $ 12.16 ============================================================================================================================ Total return (%) (c) .............................. 10.02 9.54 9.75 0.10 8.54 ============================================================================================================================ RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (d) ......................... 0.02 0.02 0.02 0.01 0.01 ---------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) (%) ......... 4.74 6.68 7.10 6.90 6.78 ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover ................................ 91.82 127.62 148.23 72.22 49.78 ---------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000's) ................... $4,645,354 $3,549,466 $2,821,196 $1,637,005 $1,142,018 ============================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Zero amounts represent that which are less than $0.005 or 0.005% or $(0.005) or (0.005%) if negative. (c) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (d) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-259 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, --------------------------------------- 2002 2001 2000 (a) ------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 14.63 $ 13.36 $ 12.94 ------------------------------------------------------------------------------------------- Net investment income (loss) (b) ................ 0.72 0.94 0.15 Net realized and unrealized gain (loss) ......... 0.74 0.33 0.27 ------------------------------------------------------------------------------------------- Total from investment operations ................ 1.46 1.27 0.42 ------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 16.09 $ 14.63 $ 13.36 =========================================================================================== Total return (%) (c) ............................ 9.99 9.51 3.27 =========================================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (d) ....................... 0.02 0.02 0.02 ------------------------------------------------------------------------------------------- Ratio of net investment income (%) .............. 4.71 6.65 6.93 ------------------------------------------------------------------------------------------- Portfolio turnover (%) .......................... 91.82 127.62 148.23 ------------------------------------------------------------------------------------------- Net assets, end of year (000's) ................. $703,542 $314,469 $22,873 ===========================================================================================
(a) The Non-Lending Fund commenced operations on October 31, 2000. (b) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (c) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (d) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-260 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------- DEBT INSTRUMENTS -- 74.7% CANADA -- 0.3% USD 2,110,000 Bp Canada Finance Co ......................... 3.38% 10/31/2007 $ 2,138,341 3,000,000 Canadian Government Bond ..................... 6.75% 08/28/2006 3,430,272 2,800,000 Hydro Quebec ................................. 6.30% 05/11/2011 3,196,982 1,630,000 New Brunswick Province of .................... 3.50% 10/23/2007 1,655,793 1,100,000 Ontario Electricity Financial Corp ........... 6.10% 01/30/2008 1,243,371 1,385,000 Province of British Columbia/Canada .......... 5.38% 10/29/2008 1,527,494 2,780,000 Province of Ontario .......................... 5.13% 07/17/2012 2,974,746 750,000 Province of Quebec ........................... 7.00% 01/30/2007 863,073 -------------- 17,030,072 -------------- UNITED STATES -- 74.4% 1,500,000 360 Communications Co ........................ 7.50% 03/01/2006 1,641,765 2,100,000 Abbott Laboratories .......................... 6.40% 12/01/2006 2,367,534 6,470,000 Abbott Laboratories .......................... 5.63% 07/01/2006 7,045,517 1,100,000 ABN Amro Bank NV/Chicago ..................... 7.55% 06/28/2006 1,255,629 3,200,000 ABN Amro Bank NV/Chicago ..................... 7.13% 06/18/2007 3,649,612 1,000,000 ABN Amro Bank NV/New York .................... 8.25% 08/01/2009 1,081,513 1,000,000 Ace INA Holdings Inc ......................... 8.30% 08/15/2006 1,151,084 2,620,000 ACE Ltd ...................................... 6.00% 04/01/2007 2,798,222 1,500,000 Aegon NV ..................................... 8.00% 08/15/2006 1,687,202 1,522,000 Aetna Inc .................................... 7.38% 03/01/2006 1,664,039 1,325,000 Aetna Inc .................................... 7.88% 03/01/2011 1,503,969 2,100,000 Ahold Finance USA Inc ........................ 6.25% 05/01/2009 2,102,466 3,150,000 Ahold Finance USA Inc ........................ 8.25% 07/15/2010 3,489,102 1,600,000 Alabama Power Co ............................. 7.13% 10/01/2007 1,849,226 1,040,000 Alberta Energy Co Ltd ........................ 7.65% 09/15/2010 1,227,081 2,315,000 Albertson's Inc .............................. 7.50% 02/15/2011 2,668,015 3,000,000 Albertson's Inc .............................. 8.35% 05/01/2010 3,584,869 2,000,000 Alcan Inc .................................... 6.45% 03/15/2011 2,246,678 545,000 Alcan Inc .................................... 4.88% 09/15/2012 554,654 6,375,000 Alcoa Inc .................................... 7.38% 08/01/2010 7,494,100 2,235,000 Alcoa Inc .................................... 6.50% 06/01/2011 2,532,615 3,350,000 Alcoa Inc .................................... 6.00% 01/15/2012 3,687,016 2,450,000 Alcoa Inc .................................... 4.25% 08/15/2007 2,550,832 3,290,000 Alcoa Inc .................................... 5.88% 06/01/2006 3,580,125 1,000,000 Allegheny Technologies Inc ................... 8.38% 12/15/2011 1,164,531 1,000,000 Allegiance Corp .............................. 7.30% 10/15/2006 1,143,436 2,000,000 Alliance Capital Management LP ............... 5.63% 08/15/2006 2,143,727 2,600,000 Alliant Energy Resources Inc ................. 7.38% 11/09/2009 2,346,899 2,955,000 Allstate Corp/The ............................ 7.20% 12/01/2009 3,395,119
The accompanying notes are an integral part of these financial statements. SAI-261 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------- USD 800,000 Allstate Corp/The ....................... 5.38% 12/01/2006 $ 866,181 850,000 Allstate Corp/The ....................... 6.13% 02/15/2012 933,989 2,565,000 Alltel Corp ............................. 7.00% 07/01/2012 2,943,932 2,250,000 Amerada Hess Corp ....................... 7.38% 10/01/2009 2,542,376 3,500,000 Amerada Hess Corp ....................... 5.90% 08/15/2006 3,783,997 1,965,000 Amerada Hess Corp ....................... 6.65% 08/15/2011 2,150,069 1,000,000 AmerenEnergy Generating Co .............. 8.35% 11/01/2010 1,150,082 4,730,000 American Airlines Inc ................... 7.86% 10/01/2011 4,493,500 350,000 American Airlines Inc ................... 7.02% 10/15/2009 325,500 1,100,000 American Airlines Inc ................... 6.82% 05/23/2011 913,000 3,625,000 American Electric Power Co Inc .......... 6.13% 05/15/2006 3,534,375 1,840,000 American Express Co ..................... 5.50% 09/12/2006 1,994,775 3,500,000 American Express Co ..................... 3.75% 11/20/2007 3,549,531 1,000,000 American Financial Group Inc ............ 7.13% 12/15/2007 1,108,048 1,020,000 American Financial Group Inc ............ 7.13% 04/15/2009 985,840 2,330,000 American General Corp ................... 7.50% 08/11/2010 2,763,694 100,000 American General Finance Corp ........... 5.91% 06/12/2006 108,118 4,280,000 American General Finance Corp ........... 5.88% 07/14/2006 4,638,401 2,025,000 American General Finance Corp ........... 5.75% 03/15/2007 2,182,540 75,000 American General Finance Corp ........... 5.38% 09/01/2009 78,520 4,030,000 American General Finance Corp ........... 5.38% 10/01/2012 4,106,142 3,300,000 American General Finance Corp ........... 4.50% 11/15/2007 3,404,419 2,340,000 Ameritech Capital Funding ............... 6.15% 01/15/2008 2,606,837 1,500,000 Amvescap Plc ............................ 5.90% 01/15/2007 1,617,919 5,220,000 Anadarko Finance Co ..................... 6.75% 05/01/2011 5,898,454 1,685,000 Anadarko Petroleum Corp ................. 5.38% 03/01/2007 1,800,870 900,000 Anadarko Petroleum Corp ................. 6.13% 03/15/2012 982,552 500,000 Anadarko Petroleum Corp ................. 5.00% 10/01/2012 504,749 1,400,000 Anderson Exploration Ltd ................ 6.75% 03/15/2011 1,535,939 2,535,000 Anheuser-Busch Cos Inc .................. 9.00% 12/01/2009 3,284,308 900,000 Anheuser-Busch Cos Inc .................. 6.00% 04/15/2011 1,000,680 1,000,000 Anheuser-Busch Cos Inc .................. 7.50% 03/15/2012 1,229,481 1,125,000 Anheuser-Busch Cos Inc .................. 5.75% 04/01/2010 1,228,879 3,591,000 Anheuser-Busch Cos Inc .................. 7.10% 06/15/2007 3,891,399 4,465,000 Anthem Inc .............................. 6.80% 08/01/2012 4,883,838 15,000 Anthem Insurance Cos Inc ................ 9.13% 04/01/2010 17,261 3,100,000 AOL Time Warner Inc ..................... 6.13% 04/15/2006 3,201,218 3,840,000 AOL Time Warner Inc ..................... 6.75% 04/15/2011 4,001,256 3,205,000 AOL Time Warner Inc ..................... 6.15% 05/01/2007 3,330,020 5,180,000 AOL Time Warner Inc ..................... 6.88% 05/01/2012 5,463,712 1,000,000 AON Corp ................................ 6.45% 01/15/2007 1,009,352
The accompanying notes are an integral part of these financial statements. SAI-262 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 2,460,000 Apache Corp ........................................ 6.25% 04/15/2012 $ 2,760,814 1,500,000 Apogent Technologies Inc ........................... 8.00% 04/01/2011 1,716,370 45,000 Applied Materials Inc .............................. 6.75% 10/15/2007 50,233 2,800,000 Aramark Services Inc ............................... 7.00% 07/15/2006 2,981,154 825,000 Aramark Services Inc ............................... 7.00% 05/01/2007 887,423 31,000 Aramark Services Inc ............................... 6.38% 02/15/2008 32,627 1,450,000 Archer-Daniels-Midland Co .......................... 8.88% 04/15/2011 1,864,328 1,150,000 Archer-Daniels-Midland Co .......................... 8.13% 06/01/2012 1,444,341 50,000 Archstone-Smith Operating Trust .................... 6.50% 02/15/2012 53,452 1,900,000 Archstone-Smith Operating Trust .................... 5.00% 08/15/2007 1,944,540 1,000,000 Arizona Public Service ............................. 6.38% 10/15/2011 1,054,872 1,800,000 Arizona Public Service ............................. 6.50% 03/01/2012 1,918,035 100,000 Arrow Electronics Inc .............................. 7.00% 01/15/2007 99,538 1,000,000 Ashland Inc ........................................ 6.86% 05/01/2009 952,364 1,250,000 Ashland Inc ........................................ 8.80% 11/15/2012 1,323,714 3,000,000 Asian Development Bank ............................. 4.50% 09/04/2012 3,071,940 6,100,000 Asian Development Bank ............................. 4.88% 02/05/2007 6,593,083 4,000,000 Asian Development Bank ............................. 6.75% 06/11/2007 4,631,911 2,275,000 Associates Corp Of N. America ...................... 8.55% 07/15/2009 2,806,417 6,135,000 Associates Corp Of N. America ...................... 6.25% 11/01/2008 6,818,784 8,395,000 AT&T Corp .......................................... 6.50% 11/15/2006 8,971,433 9,680,000 AT&T Corp .......................................... 7.80% 11/15/2011 10,602,538 774,000 AT&T Corp .......................................... 6.00% 03/15/2009 771,716 2,170,000 AT&T Wireless Services Inc ......................... 7.50% 05/01/2007 2,213,400 3,500,000 AT&T Wireless Services Inc ......................... 7.35% 03/01/2006 3,570,000 9,885,000 AT&T Wireless Services Inc ......................... 7.88% 03/01/2011 9,835,575 7,435,000 AT&T Wireless Services Inc ......................... 8.13% 05/01/2012 7,397,825 1,300,000 Atlantic Richfield Co .............................. 5.90% 04/15/2009 1,456,721 500,000 Australia & New Zealand Banking Group Ltd .......... 7.55% 09/15/2006 571,967 1,040,000 Autozone Inc ....................................... 5.88% 10/15/2012 1,075,081 1,400,000 AvalonBay Communities Inc .......................... 8.25% 07/15/2008 1,632,731 25,000 AvalonBay Communities Inc .......................... 7.50% 12/15/2010 27,752 1,150,000 AvalonBay Communities Inc .......................... 6.63% 09/15/2011 1,216,001 1,100,000 AvalonBay Communities Inc .......................... 6.13% 11/01/2012 1,125,983 115,000 Avis Group Holdings Inc ............................ 11.00% 05/01/2009 125,268 1,200,000 Avnet Inc .......................................... 8.00% 11/15/2006 960,000 260,000 Avon Products Inc .................................. 7.15% 11/15/2009 305,777 775,000 AXA Financial Inc .................................. 6.50% 04/01/2008 841,186 3,290,000 AXA Financial Inc .................................. 7.75% 08/01/2010 3,749,171 1,500,000 Baden Wurt L-Finance ............................... 5.75% 02/25/2008 1,649,380 500,000 Baker Hughes Inc ................................... 6.25% 01/15/2009 560,326
The accompanying notes are an integral part of these financial statements. SAI-263 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE --------------------------------------------------------------------------------------------------------------- USD 165,000 Baker Hughes Inc .......................... 6.00% 02/15/2009 $ 181,809 1,300,000 Banco Santander Chile SA .................. 7.00% 07/18/2007 1,378,413 1,000,000 Banesto Finance Ltd ....................... 7.50% 03/25/2007 1,127,407 6,975,000 Bank of America Corp ...................... 7.80% 02/15/2010 8,305,183 2,760,000 Bank of America Corp ...................... 7.13% 09/15/2006 3,151,683 9,350,000 Bank of America Corp ...................... 7.40% 01/15/2011 11,026,943 5,355,000 Bank of America Corp ...................... 4.75% 10/15/2006 5,689,180 6,800,000 Bank of America Corp ...................... 5.25% 02/01/2007 7,312,635 6,825,000 Bank of America Corp ...................... 6.25% 04/15/2012 7,621,313 3,890,000 Bank of America Corp ...................... 4.88% 09/15/2012 3,949,864 3,940,000 Bank of America Corp ...................... 3.88% 01/15/2008 3,996,034 7,180,000 Bank of America Corp ...................... 5.88% 02/15/2009 7,904,086 2,000,000 Bank of America Corp ...................... 6.60% 05/15/2010 2,224,420 100,000 Bank of America Corp ...................... 6.50% 03/15/2006 111,022 1,500,000 Bank of America Corp ...................... 7.50% 09/15/2006 1,731,298 2,800,000 Bank of America Corp ...................... 6.38% 02/15/2008 3,154,309 100,000 Bank of New York Co Inc/The ............... 7.30% 12/01/2009 117,863 1,250,000 Bank of New York Co Inc/The ............... 6.38% 04/01/2012 1,396,027 1,000,000 Bank of New York Co Inc/The ............... 3.75% 02/15/2008 1,010,131 1,215,000 Bank of New York Co Inc/The ............... 3.90% 09/01/2007 1,236,636 1,815,000 Bank of New York/New York ................. 5.20% 07/01/2007 1,943,820 6,530,000 Bank of Tokyo-Mitsubishi Ltd/The .......... 8.40% 04/15/2010 7,729,005 100,000 Bank One Corp ............................. 6.88% 08/01/2006 113,090 5,265,000 Bank One Corp ............................. 7.88% 08/01/2010 6,311,358 4,497,000 Bank One Corp ............................. 6.00% 08/01/2008 5,015,211 3,000,000 Bank One Corp ............................. 5.90% 11/15/2011 3,243,790 1,200,000 Bank One Corp ............................. 4.13% 09/01/2007 1,237,083 100,000 Bank One Corp ............................. 10.00% 08/15/2010 131,916 2,500,000 Bank One Corp ............................. 7.60% 05/01/2007 2,916,046 11,210,000 Bank One Corp ............................. 6.50% 02/01/2006 12,390,956 3,945,000 Bank One NA Illinois ...................... 5.50% 03/26/2007 4,301,221 1,500,000 Bank One Texas NA ......................... 6.25% 02/15/2008 1,692,325 65,000 Bank United Corp .......................... 8.88% 05/01/2007 77,537 5,000,000 BankAmerica Corp/Old ...................... 6.20% 02/15/2006 5,489,849 100,000 BankAmerica Corp/Old ...................... 7.13% 05/01/2006 113,176 100,000 BankAmerica Corp/Old ...................... 7.13% 10/15/2011 115,917 100,000 BankAmerica Corp/Old ...................... 6.63% 08/01/2007 113,657 25,000 BankBoston NA ............................. 6.38% 04/15/2008 27,558 75,000 BankBoston NA ............................. 6.38% 03/25/2008 82,982 1,000,000 BankBoston NA ............................. 6.50% 12/19/2007 1,112,427 1,490,000 BankBoston NA ............................. 7.38% 09/15/2006 1,689,233
The accompanying notes are an integral part of these financial statements. SAI-264 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ---------------------------------------------------------------------------------------------------------------------- USD 2,000,000 Bankers Trust Corp ............................. 6.70% 10/01/2007 $ 2,178,774 2,735,000 Banque Centrale de Tunisie ..................... 7.38% 04/25/2012 2,858,075 2,780,000 Banque Nationale de Paris/New York ............. 7.20% 01/15/2007 3,171,840 790,000 Banque Paribas ................................. 8.35% 06/15/2007 945,618 1,100,000 Barclays Bank PLC .............................. 7.40% 12/15/2009 1,312,198 1,220,000 Barrick Gold Finance Inc ....................... 7.50% 05/01/2007 1,397,003 1,600,000 Baxter International Inc ....................... 5.25% 05/01/2007 1,679,908 1,200,000 Bayerische Landesbank Girozentrale/NY .......... 6.63% 06/25/2007 1,372,414 200,000 Bayerische Landesbank Girozentrale/NY .......... 5.88% 12/01/2008 224,246 3,910,000 BB&T Corp ...................................... 6.50% 08/01/2011 4,418,363 1,890,000 BB&T Corp ...................................... 4.75% 10/01/2012 1,900,816 3,100,000 Bear Stearns Cos Inc/The ....................... 6.50% 05/01/2006 3,395,721 2,000,000 Bear Stearns Cos Inc/The ....................... 5.70% 01/15/2007 2,161,823 2,000,000 Bear Stearns Cos Inc/The ....................... 7.00% 03/01/2007 2,262,899 1,200,000 Bear Stearns Cos Inc/The ....................... 6.75% 12/15/2007 1,361,320 1,200,000 Bear Stearns Cos Inc/The ....................... 7.63% 12/07/2009 1,395,935 4,425,000 Bear Stearns Cos Inc/The ....................... 7.80% 08/15/2007 5,178,506 900,000 Beckman Coulter Inc ............................ 6.88% 11/15/2011 971,124 900,000 Beckman Coulter Inc ............................ 7.45% 03/04/2008 1,017,140 100,000 Becton Dickinson & Co .......................... 7.15% 10/01/2009 113,368 500,000 Bell Canada .................................... 9.50% 10/15/2010 599,771 3,743,000 Bellsouth Capital Funding ...................... 7.75% 02/15/2010 4,395,941 7,725,000 BellSouth Corp ................................. 5.00% 10/15/2006 8,353,495 3,280,000 BellSouth Corp ................................. 6.00% 10/15/2011 3,587,496 375,000 Bellsouth Telecommunications ................... 5.88% 01/15/2009 409,608 1,350,000 Belo Corp ...................................... 8.00% 11/01/2008 1,521,185 1,000,000 Belo Corp ...................................... 7.13% 06/01/2007 1,086,015 925,000 Bemis Co ....................................... 6.50% 08/15/2008 1,038,070 1,400,000 BHP Finance USA Ltd ............................ 8.50% 12/01/2012 1,806,308 1,410,000 Black & Decker Corp ............................ 7.13% 06/01/2011 1,616,301 2,000,000 Block Financial Corp ........................... 8.50% 04/15/2007 2,291,705 1,690,000 Boeing Capital Corp ............................ 6.35% 11/15/2007 1,838,302 2,770,000 Boeing Capital Corp ............................ 7.38% 09/27/2010 3,079,575 330,000 Boeing Capital Corp ............................ 6.10% 03/01/2011 341,207 4,250,000 Boeing Capital Corp ............................ 5.65% 05/15/2006 4,457,699 1,130,000 Boeing Capital Corp ............................ 5.75% 02/15/2007 1,189,822 4,545,000 Boeing Capital Corp ............................ 6.50% 02/15/2012 4,818,658 645,000 Boeing Co/The .................................. 8.10% 11/15/2006 734,425 6,490,000 Bottling Group Llc ............................. 4.63% 11/15/2012 6,489,562 1,000,000 Bp Canada Finance Co ........................... 3.63% 01/15/2009 1,017,498 900,000 Brascan Corp ................................... 8.13% 12/15/2008 1,031,725
The accompanying notes are an integral part of these financial statements. SAI-265 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------- USD 1,275,000 Brascan Corp ................................. 7.13% 06/15/2012 $ 1,365,420 650,000 BRE Properties ............................... 7.45% 01/15/2011 722,732 8,010,000 Bristol-Myers Squibb Co ...................... 4.75% 10/01/2006 8,421,253 8,760,000 Bristol-Myers Squibb Co ...................... 5.75% 10/01/2011 9,204,285 10,570,000 British Telecommunications PLC ............... 8.38% 12/15/2010 12,676,036 1,645,000 Burlington Northern RR Co .................... 9.25% 10/01/2006 1,958,963 1,100,000 Burlington Northern Santa Fe Corp ............ 6.13% 03/15/2009 1,214,841 1,850,000 Burlington Northern Santa Fe Corp ............ 7.13% 12/15/2010 2,141,511 1,465,000 Burlington Northern Santa Fe Corp ............ 6.75% 07/15/2011 1,668,097 100,000 Burlington Northern Santa Fe Corp ............ 5.90% 07/01/2012 108,510 1,600,000 Burlington Resources Finance Co .............. 6.68% 02/15/2011 1,785,973 1,485,000 Burlington Resources Finance Co .............. 5.70% 03/01/2007 1,596,708 2,450,000 Burlington Resources Finance Co .............. 5.60% 12/01/2006 2,655,914 1,250,000 Burlington Resources Finance Co .............. 6.50% 12/01/2011 1,390,611 775,000 Camden Property Trust ........................ 5.88% 11/30/2012 786,548 2,675,000 Campbell Soup Co ............................. 5.00% 12/03/2012 2,730,454 1,700,000 Campbell Soup Co ............................. 6.90% 10/15/2006 1,932,789 1,500,000 Campbell Soup Co ............................. 6.75% 02/15/2011 1,711,485 1,000,000 Campbell Soup Co ............................. 5.88% 10/01/2008 1,104,463 1,000,000 Campbell Soup Co ............................. 5.50% 03/15/2007 1,082,314 8,100,000 Canadian Government Bond ..................... 5.25% 11/05/2008 8,977,335 1,300,000 Canadian National Railway Co ................. 6.38% 10/15/2011 1,457,653 550,000 Canadian National Railway Co ................. 6.45% 07/15/2006 610,037 2,665,000 Canadian Natural Resources Ltd ............... 5.45% 10/01/2012 2,751,120 200,000 Capital One Bank ............................. 6.70% 05/15/2008 186,000 3,300,000 Capital One Bank ............................. 6.88% 02/01/2006 3,184,500 1,200,000 Capital One Financial Corp ................... 8.75% 02/01/2007 1,098,912 1,895,000 Cardinal Health Inc .......................... 6.75% 02/15/2011 2,169,071 135,000 Cargill Inc .................................. 6.38% 06/01/2012 151,052 4,800,000 Carolina Power & Light Co .................... 6.65% 04/01/2008 5,337,512 100,000 Carolina Power & Light Co .................... 6.80% 08/15/2007 111,783 1,250,000 Carolina Power & Light Co .................... 5.95% 03/01/2009 1,315,254 685,000 Carolina Power & Light Co .................... 6.50% 07/15/2012 752,627 1,575,000 CarrAmerica Realty Corp ...................... 7.13% 01/15/2012 1,685,258 3,275,000 Caterpillar Financial Services Corp .......... 5.95% 05/01/2006 3,574,324 1,025,000 Caterpillar Financial Services Corp .......... 4.88% 06/15/2007 1,086,469 1,717,000 Caterpillar Inc .............................. 7.25% 09/15/2009 2,006,456 1,000,000 Caterpillar Inc .............................. 6.55% 05/01/2011 1,139,192 100,000 Caterpillar Inc .............................. 9.00% 04/15/2006 118,153 100,000 Caterpillar Tractor .......................... 6.00% 05/01/2007 102,351 2,300,000 Celulosa Arauco y Constitucion SA ............ 8.63% 08/15/2010 2,638,203
The accompanying notes are an integral part of these financial statements. SAI-266 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 2,385,000 Cendant Corp .................................... 6.88% 08/15/2006 $ 2,454,356 900,000 Centex Corp ..................................... 7.50% 01/15/2012 998,058 2,635,000 Centex Corp ..................................... 7.88% 02/01/2011 2,970,040 2,350,000 CenturyTel Inc .................................. 8.38% 10/15/2010 2,768,947 1,535,000 CenturyTel Inc .................................. 7.88% 08/15/2012 1,801,291 2,000,000 CEZ Finance BV .................................. 7.13% 07/15/2007 1,999,893 1,150,000 Charter One Bank Fsb ............................ 6.38% 05/15/2012 1,269,333 500,000 Chase Manhattan Corp/Pre Chemical Bank .......... 6.50% 01/15/2009 544,079 3,425,000 Chevron Phillips Chemical Co LLC ................ 7.00% 03/15/2011 3,782,786 1,595,000 Chevron Phillips Chemical Co LLC ................ 5.38% 06/15/2007 1,680,406 7,365,000 ChevronTexaco Capital Co ........................ 3.50% 09/17/2007 7,501,910 1,240,000 Chile Government International Bond ............. 6.88% 04/28/2009 1,382,365 1,655,000 Chile Government International Bond ............. 7.13% 01/11/2012 1,859,957 2,450,000 Chile Government International Bond ............. 5.63% 07/23/2007 2,595,234 2,000,000 China Development Bank .......................... 8.25% 05/15/2009 2,431,717 1,000,000 China Development Bank .......................... 7.38% 02/01/2007 1,142,435 4,600,000 China Government International Bond ............. 7.30% 12/15/2008 5,434,038 2,270,000 Chubb Corp ...................................... 6.00% 11/15/2011 2,393,437 2,560,000 Cia Brasileira de Bebidas ....................... 10.50% 12/15/2011 2,278,400 1,000,000 Cia de Telecomunicaciones de Chile SA ........... 7.63% 07/15/2006 1,046,805 1,000,000 Cigna Corp ...................................... 7.00% 01/15/2011 1,016,809 1,000,000 Cigna Corp ...................................... 7.40% 05/15/2007 1,061,616 1,715,000 Cincinnati Gas & Electric ....................... 5.70% 09/15/2012 1,750,062 1,570,000 Cingular Wireless LLC ........................... 5.63% 12/15/2006 1,646,395 2,370,000 Cingular Wireless LLC ........................... 6.50% 12/15/2011 2,514,218 800,000 Cintas Corp No. 2 ............................... 5.13% 06/01/2007 851,660 850,000 Cintas Corp No. 2 ............................... 6.00% 06/01/2012 926,830 5,255,000 CIT Group Inc ................................... 7.38% 04/02/2007 5,741,483 3,961,000 CIT Group Inc ................................... 7.75% 04/02/2012 4,439,638 2,965,000 CIT Group Inc ................................... 5.75% 09/25/2007 3,072,310 3,355,000 CIT Group Inc ................................... 5.50% 11/30/2007 3,434,143 2,335,000 CIT Group Inc ................................... 6.88% 11/01/2009 2,508,796 4,445,000 CIT Group Inc ................................... 6.50% 02/07/2006 4,667,272 250,000 Citicorp ........................................ 7.00% 07/01/2007 284,663 2,305,000 Citicorp ........................................ 6.38% 11/15/2008 2,571,988 2,125,000 Citicorp ........................................ 7.75% 06/15/2006 2,431,819 1,500,000 Citicorp ........................................ 7.25% 09/01/2008 1,734,016 100,000 Citicorp ........................................ 7.25% 10/15/2011 115,640 2,000,000 CitiFinancial ................................... 6.75% 07/01/2007 2,261,151 895,000 CitiFinancial ................................... 8.70% 06/15/2009 1,109,225 6,000,000 Citigroup Inc ................................... 5.00% 03/06/2007 6,399,269
The accompanying notes are an integral part of these financial statements. SAI-267 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 3,075,000 Citigroup Inc .................................. 6.20% 03/15/2009 $ 3,434,263 19,195,000 Citigroup Inc .................................. 7.25% 10/01/2010 22,105,841 5,762,000 Citigroup Inc .................................. 6.50% 01/18/2011 6,456,181 7,075,000 Citigroup Inc .................................. 5.75% 05/10/2006 7,696,051 5,500,000 Citigroup Inc .................................. 5.50% 08/09/2006 5,977,338 5,025,000 Citigroup Inc .................................. 6.00% 02/21/2012 5,515,171 8,525,000 Citigroup Inc .................................. 5.63% 08/27/2012 8,958,354 2,490,000 Citizens Communications Co ..................... 8.50% 05/15/2006 2,730,917 3,740,000 Citizens Communications Co ..................... 9.25% 05/15/2011 4,375,734 2,500,000 Citizens Communications Co ..................... 7.63% 08/15/2008 2,737,024 2,065,000 Clear Channel Communications Inc ............... 6.00% 11/01/2006 2,222,139 2,760,000 Clear Channel Communications Inc ............... 7.65% 09/15/2010 3,132,904 1,000,000 Coca-Cola Bottling Co Consolidated ............. 6.38% 05/01/2009 1,089,316 2,090,000 Coca-Cola Co/The ............................... 5.75% 03/15/2011 2,289,169 100,000 Coca-Cola Enterprises Inc ...................... 8.50% 02/01/2012 127,611 2,856,000 Coca-Cola Enterprises Inc ...................... 5.75% 11/01/2008 3,147,576 230,000 Coca-Cola Enterprises Inc ...................... 7.13% 09/30/2009 268,046 2,390,000 Coca-Cola Enterprises Inc ...................... 5.38% 08/15/2006 2,579,597 1,560,000 Coca-Cola Enterprises Inc ...................... 6.13% 08/15/2011 1,732,913 1,700,000 Coca-Cola Enterprises Inc ...................... 5.25% 05/15/2007 1,835,146 2,560,000 Coca-Cola Enterprises Inc ...................... 4.38% 09/15/2009 2,615,868 30,000 Colgate-Palmolive Co ........................... 5.34% 03/27/2006 32,060 1,200,000 Colgate-Palmolive Co ........................... 5.98% 04/25/2012 1,337,219 1,415,000 Columbia Energy Group .......................... 7.32% 11/28/2010 1,474,641 1,985,000 Comcast Cable Communications ................... 8.38% 05/01/2007 2,223,856 5,372,000 Comcast Cable Communications ................... 6.20% 11/15/2008 5,549,387 1,100,000 Comcast Cable Communications ................... 6.38% 01/30/2006 1,158,849 4,921,000 Comcast Cable Communications ................... 6.75% 01/30/2011 5,114,339 2,100,000 Comcast Cable Communications ................... 6.88% 06/15/2009 2,243,257 1,000,000 Comerica Bank .................................. 7.25% 06/15/2007 1,130,003 2,400,000 Commonwealth Edison Co ......................... 6.15% 03/15/2012 2,662,125 1,600,000 Computer Associates International Inc .......... 6.50% 04/15/2008 1,424,000 1,000,000 Computer Sciences Corp ......................... 6.25% 03/15/2009 1,054,800 500,000 Computer Sciences Corp ......................... 6.75% 06/15/2006 543,475 2,150,000 Computer Sciences Corp ......................... 7.38% 06/15/2011 2,454,698 2,660,000 ConAgra Foods Inc .............................. 6.75% 09/15/2011 3,030,342 3,255,000 ConAgra Foods Inc .............................. 7.88% 09/15/2010 3,910,406 3,870,000 ConAgra Foods Inc .............................. 6.00% 09/15/2006 4,239,319 147,000 Conectiv ....................................... 6.73% 06/01/2006 152,989 6,095,000 Conoco Funding Co .............................. 5.45% 10/15/2006 6,584,369 6,300,000 Conoco Funding Co .............................. 6.35% 10/15/2011 7,043,139
The accompanying notes are an integral part of these financial statements. SAI-268 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 2,910,000 Conoco Inc .................................. 6.35% 04/15/2009 $ 3,278,016 4,500,000 ConocoPhillips .............................. 4.75% 10/15/2012 4,515,312 3,000,000 ConocoPhillips .............................. 3.63% 10/15/2007 3,029,165 3,440,000 ConocoPhillips .............................. 8.75% 05/25/2010 4,305,675 1,850,000 ConocoPhillips .............................. 6.38% 03/30/2009 2,085,123 400,000 ConocoPhillips .............................. 9.38% 02/15/2011 517,932 2,119,000 Consolidated Edison Co of New York .......... 6.45% 12/01/2007 2,395,731 350,000 Consolidated Edison Co of New York .......... 6.25% 02/01/2008 391,973 100,000 Consolidated Edison Co of New York .......... 8.13% 05/01/2010 121,547 1,900,000 Consolidated Edison Co of New York .......... 7.50% 09/01/2010 2,249,030 900,000 Consolidated Edison Co of New York .......... 5.63% 07/01/2012 961,409 2,945,000 Consolidated Natural Gas Co ................. 6.85% 04/15/2011 3,326,674 3,275,000 Consolidated Natural Gas Co ................. 5.38% 11/01/2006 3,506,172 2,500,000 Consolidated Natural Gas Co ................. 6.25% 11/01/2011 2,734,711 4,115,000 Constellation Energy Group Inc .............. 6.35% 04/01/2007 4,319,760 1,725,000 Constellation Energy Group Inc .............. 7.00% 04/01/2012 1,811,503 1,480,000 Constellation Energy Group Inc .............. 6.13% 09/01/2009 1,510,247 1,300,000 Consumers Energy Co ......................... 6.25% 09/15/2006 1,261,000 1,410,000 Continental Airlines Inc .................... 6.32% 11/01/2008 1,184,400 1,000,000 Continental Airlines Inc .................... 7.49% 10/02/2010 850,000 1,606,000 Continental Cablevision ..................... 9.00% 09/01/2008 1,790,969 375,000 Continental Cablevision ..................... 8.30% 05/15/2006 401,147 1,170,000 Cooper Industries Inc ....................... 5.25% 07/01/2007 1,230,557 1,025,000 Cooper Industries Inc ....................... 5.50% 11/01/2009 1,069,349 1,350,000 Cooper Tire & Rubber Co ..................... 7.75% 12/15/2009 1,498,411 4,180,000 Coors Brewing Co ............................ 6.38% 05/15/2012 4,680,241 1,500,000 Corp Andina de Fomento CAF .................. 7.38% 01/18/2011 1,593,197 1,400,000 Corp Andina de Fomento CAF .................. 6.88% 03/15/2012 1,443,066 2,400,000 Costco Wholesale Corp ....................... 5.50% 03/15/2007 2,597,554 5,770,000 Countrywide Home Loans Inc .................. 5.50% 08/01/2006 6,176,525 3,195,000 Countrywide Home Loans Inc .................. 4.25% 12/19/2007 3,237,458 140,000 Countrywide Home Loans Inc .................. 6.25% 04/15/2009 153,677 4,635,000 Countrywide Home Loans Inc .................. 5.50% 02/01/2007 4,937,076 4,330,000 Countrywide Home Loans Inc .................. 5.63% 05/15/2007 4,643,144 4,065,000 Countrywide Home Loans Inc .................. 5.63% 07/15/2009 4,321,382 6,600,000 COX Communications Inc ...................... 7.75% 11/01/2010 7,477,862 1,180,000 COX Communications Inc ...................... 6.75% 03/15/2011 1,266,147 3,665,000 COX Communications Inc ...................... 7.13% 10/01/2012 4,066,848 200,000 COX Communications Inc ...................... 7.88% 08/15/2009 226,342 1,900,000 COX Radio Inc ............................... 6.63% 02/15/2006 1,982,837 6,925,000 Credit Suisse First Boston USA Inc .......... 5.88% 08/01/2006 7,346,535
The accompanying notes are an integral part of these financial statements. SAI-269 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------------------------ PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------------------------ USD 5,000,000 Credit Suisse First Boston USA Inc ................. 4.63% 01/15/2008 $ 5,078,887 9,175,000 Credit Suisse First Boston USA Inc ................. 6.13% 11/15/2011 9,556,145 8,775,000 Credit Suisse First Boston USA Inc ................. 6.50% 01/15/2012 9,376,925 4,800,000 Credit Suisse First Boston USA Inc ................. 5.75% 04/15/2007 5,082,653 2,455,000 CRH America Inc .................................... 6.95% 03/15/2012 2,742,037 225,000 CSX Corp ........................................... 9.00% 08/15/2006 265,697 1,200,000 CSX Corp ........................................... 6.75% 03/15/2011 1,341,936 1,750,000 CSX Corp ........................................... 7.45% 05/01/2007 2,006,454 2,679,000 CSX Corp ........................................... 6.25% 10/15/2008 2,968,275 1,475,000 CSX Corp ........................................... 6.30% 03/15/2012 1,617,784 1,630,000 CVS Corp ........................................... 5.63% 03/15/2006 1,754,884 1,250,000 CVS Corp ........................................... 3.88% 11/01/2007 1,266,063 2,800,000 DaimlerChrysler NA Holding Corp .................... 7.25% 01/18/2006 3,084,378 7,522,000 DaimlerChrysler NA Holding Corp .................... 6.40% 05/15/2006 8,132,082 1,603,000 DaimlerChrysler NA Holding Corp .................... 7.38% 09/15/2006 1,805,461 7,505,000 DaimlerChrysler NA Holding Corp .................... 7.20% 09/01/2009 8,263,080 4,600,000 DaimlerChrysler NA Holding Corp .................... 8.00% 06/15/2010 5,302,976 3,520,000 DaimlerChrysler NA Holding Corp .................... 7.30% 01/15/2012 3,946,390 6,000,000 DaimlerChrysler NA Holding Corp .................... 7.75% 01/18/2011 6,795,061 950,000 Dao Heng Bank Ltd .................................. 7.75% 01/24/2007 1,077,324 1,210,000 Darden Restaurants Inc ............................. 5.75% 03/15/2007 1,296,849 3,320,000 Deere & Co ......................................... 7.85% 05/15/2010 3,982,111 1,100,000 Delphi Corp ........................................ 6.50% 05/01/2009 1,136,947 2,400,000 Delphi Corp ........................................ 6.55% 06/15/2006 2,560,177 804,663 Delta Air Lines Inc ................................ 7.38% 05/18/2010 780,523 2,620,000 Delta Air Lines Inc ................................ 7.57% 05/18/2012 2,541,400 1,618,103 Delta Air Lines Inc ................................ 6.62% 03/18/2011 1,504,836 2,015,000 Delta Air Lines Inc ................................ 7.11% 09/18/2011 1,934,400 1,975,000 Delta Air Lines Inc ................................ 6.42% 07/02/2012 2,034,250 1,205,000 Deluxe Corp ........................................ 5.00% 12/15/2012 1,231,006 1,320,000 Detroit Edison Co .................................. 6.13% 10/01/2010 1,447,601 3,700,000 Deutsche Bank Financial Inc ........................ 6.70% 12/13/2006 4,121,280 1,460,000 Deutsche Bank Financial Inc ........................ 7.50% 04/25/2009 1,683,185 9,700,000 Deutsche Telekom International Finance BV .......... 8.50% 06/15/2010 11,155,738 7,625,000 Devon Financing Corp ULC ........................... 6.88% 09/30/2011 8,526,777 4,670,000 Diageo Capital Plc ................................. 3.50% 11/19/2007 4,696,521 2,200,000 Diageo Capital Plc ................................. 7.25% 11/01/2009 2,569,903 350,000 Dial Corp/The ...................................... 7.00% 08/15/2006 380,210 1,750,000 Dominion Resources Inc/VA .......................... 5.13% 12/15/2009 1,781,218 2,350,000 Dominion Resources Inc/VA .......................... 5.70% 09/17/2012 2,424,885 2,450,000 Dominion Resources Inc/VA .......................... 8.13% 06/15/2010 2,859,272
The accompanying notes are an integral part of these financial statements. SAI-270 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 700,000 Dominion Resources Inc/VA .......................... 6.25% 06/30/2012 $ 745,082 2,680,000 Domtar Inc ......................................... 7.88% 10/15/2011 3,123,613 2,500,000 Donaldson Lufkin & Jenrette Inc -- DLJ ............. 6.50% 04/01/2008 2,720,783 300,000 Donaldson Lufkin & Jenrette Inc -- DLJ ............. 6.50% 06/01/2008 327,249 2,000,000 Dover Corp ......................................... 6.50% 02/15/2011 2,236,996 1,420,000 Dow Capital BV ..................................... 9.20% 06/01/2010 1,702,324 2,400,000 Dow Chemical Co/The ................................ 5.75% 12/15/2008 2,512,769 100,000 Dow Chemical Co/The ................................ 5.97% 01/15/2009 105,095 2,965,000 Dow Chemical Co/The ................................ 6.13% 02/01/2011 3,060,019 2,370,000 Dow Chemical Co/The ................................ 6.00% 10/01/2012 2,426,611 2,000,000 Dow Chemical Co/The ................................ 5.75% 11/15/2009 2,068,593 3,600,000 Dow Chemical Co/The ................................ 5.00% 11/15/2007 3,649,174 1,525,000 DPL Inc ............................................ 6.88% 09/01/2011 1,326,750 110,000 DTE Energy Co ...................................... 6.65% 04/15/2009 121,549 3,625,000 DTE Energy Co ...................................... 6.45% 06/01/2006 3,912,546 1,900,000 DTE Energy Co ...................................... 7.05% 06/01/2011 2,113,052 2,125,000 Du Pont EI de Nemours & Co ......................... 6.75% 09/01/2007 2,456,239 4,080,000 Du Pont EI de Nemours & Co ......................... 6.88% 10/15/2009 4,782,776 1,200,000 Du Pont EI de Nemours & Co ......................... 4.75% 11/15/2012 1,230,834 1,100,000 Du Pont EI de Nemours & Co ......................... 3.38% 11/15/2007 1,111,946 2,400,000 Du Pont EI de Nemours & Co ......................... 8.25% 09/15/2006 2,860,531 2,800,000 Duke Capital Corp .................................. 7.50% 10/01/2009 2,795,831 100,000 Duke Energy Corp ................................... 7.38% 03/01/2010 110,503 2,050,000 Duke Energy Corp ................................... 6.25% 01/15/2012 2,139,723 3,505,000 Duke Energy Corp ................................... 5.63% 11/30/2012 3,504,623 1,550,000 Duke Energy Field Services Llc ..................... 5.75% 11/15/2006 1,526,483 1,850,000 Duke Energy Field Services Llc ..................... 7.88% 08/16/2010 1,930,288 1,400,000 Duke Energy Field Services Llc ..................... 6.88% 02/01/2011 1,378,635 500,000 Duquesne Light Co .................................. 6.70% 04/15/2012 571,478 400,173 East Coast Power Llc ............................... 6.74% 03/31/2008 288,124 1,535,000 Eastman Chemical Co ................................ 7.00% 04/15/2012 1,727,289 2,000,000 Eastman Kodak Co ................................... 6.38% 06/15/2006 2,176,590 400,000 El Paso Electric Co ................................ 9.40% 05/01/2011 396,000 1,200,000 Electronic Data Systems Corp ....................... 7.13% 10/15/2009 1,219,113 1,850,000 Eli Lilly & Co ..................................... 5.50% 07/15/2006 1,998,847 1,600,000 Eli Lilly & Co ..................................... 6.00% 03/15/2012 1,788,702 1,315,000 Emerson Electric Co ................................ 5.85% 03/15/2009 1,447,396 2,000,000 Emerson Electric Co ................................ 7.13% 08/15/2010 2,315,159 900,000 Emerson Electric Co ................................ 4.63% 10/15/2012 892,599 100,000 Empresa Nacional de Electricidad SA/Chile .......... 7.75% 07/15/2008 98,971 150,000 Empresa Nacional de Electricidad SA/Chile .......... 8.50% 04/01/2009 151,225
The accompanying notes are an integral part of these financial statements. SAI-271 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 1,000,000 Endesa-Chile Overseas Co ....................... 7.20% 04/01/2006 $ 998,919 500,000 Energen Corp ................................... 7.63% 12/15/2010 540,117 1,000,000 Energy East Corp ............................... 8.05% 11/15/2010 1,159,317 1,500,000 Energy East Corp ............................... 5.75% 11/15/2006 1,593,542 1,130,000 Energy East Corp ............................... 6.75% 06/15/2012 1,230,832 3,000,000 Enersis SA/Cayman Island ....................... 6.90% 12/01/2006 2,661,523 1,820,000 Enterprise Products Partners LP ................ 7.50% 02/01/2011 1,989,640 2,000,000 EOG Resources Inc .............................. 6.70% 11/15/2006 2,230,220 4,500,000 EOP Operating LP ............................... 6.76% 06/15/2007 4,891,318 1,400,000 EOP Operating LP ............................... 8.38% 03/15/2006 1,556,477 100,000 EOP Operating LP ............................... 8.10% 08/01/2010 114,768 800,000 EOP Operating LP ............................... 6.75% 02/15/2008 875,989 3,440,000 EOP Operating LP ............................... 6.75% 02/15/2012 3,687,506 2,505,000 EOP Operating LP ............................... 7.75% 11/15/2007 2,847,794 4,945,000 EOP Operating LP ............................... 7.00% 07/15/2011 5,383,337 1,155,000 Equifax Inc .................................... 4.95% 11/01/2007 1,170,651 900,000 Equity Residential ............................. 6.63% 03/15/2012 970,576 1,500,000 ERP Operating LP ............................... 6.95% 03/02/2011 1,638,835 900,000 Estee Lauder Cos Inc/The ....................... 6.00% 01/15/2012 980,135 185,000 European Bank for Recon & Development .......... 5.38% 06/15/2006 201,781 3,600,000 European Investment Bank ....................... 7.13% 09/18/2006 4,164,339 17,250,000 European Investment Bank ....................... 4.88% 09/06/2006 18,594,059 13,170,000 European Investment Bank ....................... 4.63% 03/01/2007 14,037,899 1,000,000 Everest Re Group Ltd ........................... 8.75% 03/15/2010 1,146,531 1,775,000 Exelon Corp .................................... 6.75% 05/01/2011 1,949,513 2,655,000 Exelon Generation Co LLC ....................... 6.95% 06/15/2011 2,879,721 1,600,000 Export Development Canada ...................... 4.00% 08/01/2007 1,660,198 2,100,000 Export-Import Bank Of Korea .................... 6.38% 02/15/2006 2,295,718 2,100,000 Export-Import Bank Of Korea .................... 7.10% 03/15/2007 2,377,111 1,000,000 Falconbridge Ltd ............................... 7.35% 11/01/2006 1,061,908 935,000 Falconbridge Ltd ............................... 7.35% 06/05/2012 968,636 1,500,000 Fannie Mae ..................................... 5.50% 02/15/2006 1,642,500 600,000 Fannie Mae ..................................... 5.25% 04/15/2007 656,934 50,000,000 Fannie Mae ..................................... 3.25% 11/15/2007 50,381,495 2,400,000 Federated Department Stores .................... 6.30% 04/01/2009 2,625,982 1,650,000 Federated Department Stores .................... 8.50% 06/01/2010 1,981,975 2,195,000 Federated Department Stores .................... 6.63% 04/01/2011 2,403,182 1,410,000 Federated Department Stores .................... 6.63% 09/01/2008 1,563,337 1,915,000 FedEx Corp ..................................... 6.88% 02/15/2006 2,099,595 400,000 FedEx Corp ..................................... 7.25% 02/15/2011 461,603 1,055,000 FedEx Corp ..................................... 9.65% 06/15/2012 1,404,457
The accompanying notes are an integral part of these financial statements. SAI-272 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 900,000 Fidelity National Financial Inc ................ 7.30% 08/15/2011 $ 998,541 1,650,000 Financement-Quebec ............................. 5.00% 10/25/2012 1,700,872 5,400,000 Finland Government International Bond .......... 4.75% 03/06/2007 5,818,628 2,685,000 Finland Government International Bond .......... 5.88% 02/27/2006 2,963,017 1,990,000 First Bank National Assn ....................... 5.70% 12/15/2008 2,186,218 2,000,000 First Bank National Assn ....................... 6.50% 02/01/2008 2,267,818 500,000 First Chicago Corp ............................. 6.38% 01/30/2009 557,790 1,500,000 First Chicago NBD Corp ......................... 7.00% 10/16/2006 1,710,879 143,000 First Data Corp ................................ 4.70% 11/01/2006 150,241 2,150,000 First Data Corp ................................ 5.63% 11/01/2011 2,280,266 740,000 First Data Corp ................................ 6.38% 12/15/2007 834,850 1,000,000 First Security Corp ............................ 6.88% 11/15/2006 1,136,141 200,000 First Union National Bank/Nj ................... 7.13% 10/15/2006 228,369 4,100,000 Firstar Bank NA ................................ 7.13% 12/01/2009 4,853,808 4,700,000 FirstEnergy Corp ............................... 6.45% 11/15/2011 4,676,008 4,317,000 FirstEnergy Corp ............................... 5.50% 11/15/2006 4,341,732 2,970,000 Fleet National Bank ............................ 5.75% 01/15/2009 3,073,046 4,725,000 FleetBoston Financial Corp ..................... 4.88% 12/01/2006 4,946,221 100,000 FleetBoston Financial Corp ..................... 6.38% 05/15/2008 110,377 1,000,000 FleetBoston Financial Corp ..................... 4.20% 11/30/2007 1,014,043 2,815,000 FleetBoston Financial Corp ..................... 7.38% 12/01/2009 3,188,505 825,000 FleetBoston Financial Corp ..................... 6.50% 03/15/2008 917,174 500,000 FleetBoston Financial Corp ..................... 7.13% 04/15/2006 557,553 1,500,000 Florida Power & Light Co ....................... 6.00% 06/01/2008 1,668,186 500,000 Florida Power Corp ............................. 6.65% 07/15/2011 554,000 1,000,000 Ford Capital BV ................................ 9.50% 06/01/2010 1,058,261 3,000,000 Ford Motor Co .................................. 7.25% 10/01/2008 2,981,207 3,000,000 Ford Motor Credit Co ........................... 6.38% 11/05/2008 2,865,108 2,000,000 Ford Motor Credit Co ........................... 6.13% 01/09/2006 1,963,935 4,850,000 Ford Motor Credit Co ........................... 7.20% 06/15/2007 4,885,967 9,465,000 Ford Motor Credit Co ........................... 5.80% 01/12/2009 8,706,146 16,077,000 Ford Motor Credit Co ........................... 7.38% 10/28/2009 15,838,065 6,780,000 Ford Motor Credit Co ........................... 7.88% 06/15/2010 6,798,383 11,175,000 Ford Motor Credit Co ........................... 7.38% 02/01/2011 10,909,178 13,125,000 Ford Motor Credit Co ........................... 6.50% 01/25/2007 12,971,558 12,285,000 Ford Motor Credit Co ........................... 7.25% 10/25/2011 11,914,698 28,085,000 Ford Motor Credit Co ........................... 6.88% 02/01/2006 28,144,900 1,400,000 FPL Group Capital Inc .......................... 7.38% 06/01/2009 1,601,105 2,505,000 FPL Group Capital Inc .......................... 7.63% 09/15/2006 2,807,843 1,600,000 FPL Group Capital Inc .......................... 6.13% 05/15/2007 1,719,629 9,350,000 France Telecom ................................. 8.70% 03/01/2006 10,255,243
The accompanying notes are an integral part of these financial statements. SAI-273 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 10,665,000 France Telecom ............................ 9.25% 03/01/2011 $ 12,298,003 1,897,000 Fred Meyer Inc Holding Co ................. 7.45% 03/01/2008 2,171,678 1,790,000 Gannett Co Inc ............................ 5.50% 04/01/2007 1,949,888 1,895,000 Gannett Co Inc ............................ 6.38% 04/01/2012 2,152,781 2,000,000 GATX Financial Corp ....................... 6.88% 12/15/2006 1,893,744 750,000 GATX Financial Corp ....................... 8.88% 06/01/2009 681,045 825,000 GE Global Insurance Holding Corp .......... 7.50% 06/15/2010 936,907 6,450,000 General Electric Capital Corp ............. 5.00% 02/15/2007 6,840,448 4,300,000 General Electric Capital Corp ............. 5.38% 03/15/2007 4,620,828 8,810,000 General Electric Capital Corp ............. 5.88% 02/15/2012 9,405,026 15,110,000 General Electric Capital Corp ............. 6.00% 06/15/2012 16,266,282 7,110,000 General Electric Capital Corp ............. 5.00% 06/15/2007 7,539,624 9,600,000 General Electric Capital Corp ............. 7.38% 01/19/2010 11,172,394 2,535,000 General Electric Capital Corp ............. 6.88% 11/15/2010 2,868,263 1,500,000 General Electric Capital Corp ............. 6.50% 12/10/2007 1,687,167 4,000,000 General Electric Capital Corp ............. 6.13% 02/22/2011 4,326,767 3,900,000 General Electric Capital Corp ............. 5.35% 03/30/2006 4,194,622 5,600,000 General Electric Capital Corp ............. 4.25% 01/15/2008 5,760,171 2,445,000 General Electric Capital Corp ............. 8.30% 09/20/2009 3,010,295 2,600,000 General Electric Capital Corp ............. 8.75% 05/21/2007 3,135,167 200,000 General Electric Capital Corp ............. 8.63% 06/15/2008 245,523 1,300,000 General Electric Capital Corp ............. 7.88% 12/01/2006 1,515,530 1,765,000 General Electric Capital Corp ............. 8.13% 05/15/2012 2,154,987 3,945,000 General Electric Capital Corp ............. 4.63% 09/15/2009 4,060,569 100,000 General Foods Corp ........................ 7.00% 06/15/2011 100,000 1,650,000 General Mills Inc ......................... 3.88% 11/30/2007 1,665,584 6,055,000 General Mills Inc ......................... 5.13% 02/15/2007 6,433,641 6,350,000 General Mills Inc ......................... 6.00% 02/15/2012 6,914,413 11,230,000 General Motors Acceptance Corp ............ 7.75% 01/19/2010 11,770,995 14,440,000 General Motors Acceptance Corp ............ 6.75% 01/15/2006 15,022,529 3,000,000 General Motors Acceptance Corp ............ 6.00% 04/01/2011 2,713,556 500,000 General Motors Acceptance Corp ............ 8.88% 06/01/2010 557,290 3,800,000 General Motors Acceptance Corp ............ 6.13% 01/22/2008 3,821,366 4,030,000 General Motors Acceptance Corp ............ 5.85% 01/14/2009 3,876,495 1,460,000 General Motors Acceptance Corp ............ 6.15% 04/05/2007 1,466,206 7,285,000 General Motors Acceptance Corp ............ 7.25% 03/02/2011 7,361,957 6,200,000 General Motors Acceptance Corp ............ 6.13% 09/15/2006 6,310,606 21,565,000 General Motors Acceptance Corp ............ 6.88% 09/15/2011 21,422,652 6,800,000 General Motors Acceptance Corp ............ 6.13% 02/01/2007 6,932,701 3,830,000 General Motors Acceptance Corp ............ 6.13% 08/28/2007 3,871,691 6,650,000 General Motors Acceptance Corp ............ 6.88% 08/28/2012 6,579,953
The accompanying notes are an integral part of these financial statements. SAI-274 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 4,442,000 General Motors Acceptance Corp ................. 7.00% 02/01/2012 $ 4,448,943 750,000 General Motors Corp ............................ 7.10% 03/15/2006 782,636 1,600,000 General Motors Corp ............................ 6.38% 05/01/2008 1,619,890 4,270,000 General Motors Corp ............................ 7.20% 01/15/2011 4,250,509 1,500,000 General Motors Nova Scotia Finance Co .......... 6.85% 10/15/2008 1,508,156 25,000 Georgia Power Co ............................... 6.20% 02/01/2006 27,189 730,000 Georgia Power Co ............................... 4.88% 07/15/2007 770,762 800,000 Gillette Co/The ................................ 4.13% 08/30/2007 837,007 445,000 Global Marine Inc .............................. 7.13% 09/01/2007 509,082 545,000 Golden West Financial Corp ..................... 5.50% 08/08/2006 587,427 1,390,000 Golden West Financial Corp ..................... 4.13% 08/15/2007 1,425,995 115,000 Golden West Financial Corp ..................... 4.75% 10/01/2012 115,658 4,609,000 Goldman Sachs Group Inc ........................ 6.65% 05/15/2009 5,078,606 4,255,000 Goldman Sachs Group Inc ........................ 7.35% 10/01/2009 4,867,204 2,145,000 Goldman Sachs Group Inc ........................ 7.80% 01/28/2010 2,502,534 7,295,000 Goldman Sachs Group Inc ........................ 6.88% 01/15/2011 8,142,469 0,715,000 Goldman Sachs Group Inc ........................ 6.60% 01/15/2012 11,846,503 7,115,000 Goldman Sachs Group Inc ........................ 5.70% 09/01/2012 7,406,577 1,375,000 Goodrich Corp .................................. 7.50% 04/15/2008 1,465,028 1,430,000 Goodrich Corp .................................. 7.63% 12/15/2012 1,478,162 1,500,000 Goodrich Corp .................................. 6.45% 12/15/2007 1,534,766 1,725,000 Grupo Televisa SA .............................. 8.00% 09/13/2011 1,802,625 400,000 GTE California Inc ............................. 5.50% 01/15/2009 415,962 1,500,000 GTE California Inc ............................. 7.65% 03/15/2007 1,707,858 4,500,000 GTE Corp ....................................... 6.36% 04/15/2006 4,806,142 2,700,000 GTE Corp ....................................... 7.51% 04/01/2009 3,082,885 1,169,000 GTE North Inc .................................. 6.38% 02/15/2010 1,244,424 2,450,000 GTE North Inc .................................. 5.65% 11/15/2008 2,615,696 300,000 GTE Southwest Inc .............................. 6.00% 01/15/2006 318,112 1,500,000 Halliburton Co ................................. 6.00% 08/01/2006 1,455,000 4,350,000 Hanson Plc ..................................... 7.88% 09/27/2010 5,045,459 1,905,000 Harman International Industries Inc ............ 7.13% 02/15/2007 2,029,732 1,000,000 Harman International Industries Inc ............ 7.32% 07/01/2007 1,078,601 740,000 Harrah's Operating Co Inc ...................... 7.50% 01/15/2009 810,300 1,635,000 Harrah's Operating Co Inc ...................... 8.00% 02/01/2011 1,831,200 2,580,000 Harrah's Operating Co Inc ...................... 7.13% 06/01/2007 2,805,750 1,250,000 Hartford Financial Services Group Inc .......... 7.90% 06/15/2010 1,429,348 800,000 Hartford Financial Services Group Inc .......... 4.70% 09/01/2007 813,954 700,000 Hartford Life Inc .............................. 7.10% 06/15/2007 784,647 1,650,000 Health Care Property Investors Inc ............. 6.45% 06/25/2012 1,658,654 435,000 Health Net Inc ................................. 8.38% 04/15/2011 497,808
The accompanying notes are an integral part of these financial statements. SAI-275 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------------- USD 1,340,000 Healthcare Realty Trust Inc .............................. 8.13% 05/01/2011 $ 1,475,941 5,480,000 Hellenic Republic Government International Band .......... 6.95% 03/04/2008 6,386,547 1,500,000 Heller Financial Inc ..................................... 6.38% 03/15/2006 1,651,405 3,300,000 Hertz Corp ............................................... 6.25% 03/15/2009 2,928,821 2,000,000 Hertz Corp ............................................... 6.50% 05/15/2006 1,958,853 3,440,000 Hertz Corp ............................................... 7.63% 06/01/2012 3,263,104 1,500,000 Hewlett-Packard Co ....................................... 6.50% 07/01/2012 1,653,575 2,900,000 Hewlett-Packard Co ....................................... 5.75% 12/15/2006 3,115,481 3,040,000 Hewlett-Packard Co ....................................... 5.50% 07/01/2007 3,254,218 1,000,000 HJ Heinz Co .............................................. 6.00% 03/15/2008 1,113,269 3,700,000 HJ Heinz Co .............................................. 7.13% 07/15/2011 4,303,738 2,100,000 HJ Heinz Finance Co ...................................... 6.50% 03/15/2012 2,358,750 2,285,000 Home Depot Inc ........................................... 5.38% 04/01/2006 2,466,890 500,000 Honeywell Inc ............................................ 7.13% 04/15/2008 579,040 425,000 Honeywell Inc ............................................ 7.00% 03/15/2007 481,210 2,000,000 Honeywell International Inc .............................. 6.20% 02/01/2008 2,225,438 5,667,000 Honeywell International Inc .............................. 7.50% 03/01/2010 6,575,684 2,000,000 Honeywell International Inc .............................. 5.13% 11/01/2006 2,109,498 1,300,000 Hormel Foods Corp ........................................ 6.63% 06/01/2011 1,477,545 1,700,000 Household Finance Corp ................................... 7.65% 05/15/2007 1,883,095 700,000 Household Finance Corp ................................... 7.25% 05/15/2006 759,006 2,000,000 Household Finance Corp ................................... 6.38% 08/01/2010 2,066,507 5,255,000 Household Finance Corp ................................... 6.50% 11/15/2008 5,628,819 4,430,000 Household Finance Corp ................................... 5.88% 02/01/2009 4,531,834 3,285,000 Household Finance Corp ................................... 7.20% 07/15/2006 3,580,597 4,700,000 Household Finance Corp ................................... 8.00% 07/15/2010 5,270,687 9,485,000 Household Finance Corp ................................... 6.50% 01/24/2006 10,070,936 6,150,000 Household Finance Corp ................................... 6.75% 05/15/2011 6,585,132 7,349,000 Household Finance Corp ................................... 5.75% 01/30/2007 7,692,600 6,590,000 Household Finance Corp ................................... 7.00% 05/15/2012 7,227,282 4,575,000 Household Finance Corp ................................... 6.38% 11/27/2012 4,850,327 3,798,000 Household Finance Corp ................................... 7.88% 03/01/2007 4,229,044 6,510,000 Household Finance Corp ................................... 6.38% 10/15/2011 6,830,331 7,340,000 Household Finance Corp ................................... 6.40% 06/17/2008 7,845,086 2,750,000 HSBC Bank Plc ............................................ 6.95% 03/15/2011 3,172,019 1,100,000 HSBC Bank Plc ............................................ 7.63% 06/15/2006 1,258,700 3,600,000 HSBC Holdings Plc ........................................ 7.50% 07/15/2009 4,271,877 3,675,000 HSBC Holdings Plc ........................................ 5.25% 12/12/2012 3,785,359 1,050,000 Humana Inc ............................................... 7.25% 08/01/2006 1,126,774 1,276,000 Hungary Government International Bond .................... 6.50% 04/19/2006 1,411,344 1,200,000 Husky Energy Inc ......................................... 6.25% 06/15/2012 1,290,800
The accompanying notes are an integral part of these financial statements. SAI-276 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 400,000 ICI North America ............................................ 8.88% 11/15/2006 $ 459,310 2,100,000 Illinois Tool Works Inc ...................................... 5.75% 03/01/2009 2,310,941 3,100,000 Imperial Tobacco Overseas BV ................................. 7.13% 04/01/2009 3,475,937 1,495,000 Inco Ltd ..................................................... 7.75% 05/15/2012 1,671,768 1,135,000 Indiana Michigan Power Co .................................... 6.13% 12/15/2006 1,185,484 1,500,000 Ingersoll-Rand Co ............................................ 6.25% 05/15/2006 1,625,378 3,000,000 Instituto de Credito Oficial ................................. 6.00% 05/19/2008 3,415,065 5,000,000 Instituto de Credito Oficial ................................. 4.63% 11/29/2006 5,341,004 1,500,000 Intelsat Ltd ................................................. 7.63% 04/15/2012 1,460,938 9,450,000 Inter-American Development Bank .............................. 5.38% 01/18/2006 10,284,690 1,515,000 Inter-American Development Bank .............................. 8.50% 03/15/2011 1,975,952 2,800,000 Inter-American Development Bank .............................. 8.88% 06/01/2009 3,624,062 2,000,000 Inter-American Development Bank .............................. 5.75% 02/26/2008 2,242,193 2,000,000 Inter-American Development Bank .............................. 5.38% 11/18/2008 2,214,209 3,000,000 Inter-American Development Bank .............................. 5.63% 04/16/2009 3,367,424 5,525,000 Inter-American Development Bank .............................. 7.38% 01/15/2010 6,810,682 5,270,000 Inter-American Development Bank .............................. 6.38% 10/22/2007 6,052,384 1,100,000 Inter-American Development Bank .............................. 8.40% 09/01/2009 1,401,224 2,500,000 Inter-American Development Bank .............................. 6.13% 03/08/2006 2,776,245 2,200,000 Inter-American Development Bank .............................. 6.63% 03/07/2007 2,521,260 6,005,000 Inter-American Development Bank .............................. 4.38% 09/20/2012 6,070,972 3,100,000 International Bank for Reconstruction & Development .......... 6.63% 08/21/2006 3,527,850 15,000,000 International Bank for Reconstruction & Development .......... 5.00% 03/28/2006 16,211,858 5,000,000 International Bank for Reconstruction & Development .......... 4.38% 09/28/2006 5,315,727 5,000,000 International Bank for Reconstruction & Development .......... 4.13% 08/12/2009 5,221,293 5,925,000 International Business Machines Corp ......................... 4.88% 10/01/2006 6,330,686 2,740,000 International Business Machines Corp ......................... 4.25% 09/15/2009 2,783,058 1,695,000 International Business Machines Corp ......................... 5.38% 02/01/2009 1,803,196 4,330,000 International Business Machines Corp ......................... 4.75% 11/29/2012 4,348,431 1,000,000 International Business Machines Corp ......................... 6.45% 08/01/2007 1,129,201 2,700,000 International Finance Corp ................................... 5.25% 05/02/2006 2,936,670 4,000,000 International Finance Corp ................................... 4.75% 04/30/2007 4,305,337 2,740,000 International Flavors & Fragrances Inc ....................... 6.45% 05/15/2006 2,981,735 3,100,000 International Lease Finance Corp ............................. 5.75% 10/15/2006 3,278,241 1,550,000 International Lease Finance Corp ............................. 5.75% 02/15/2007 1,620,154 2,285,000 International Lease Finance Corp ............................. 6.38% 03/15/2009 2,438,039 5,140,000 International Lease Finance Corp ............................. 5.63% 06/01/2007 5,351,881 4,365,000 International Paper Co ....................................... 6.75% 09/01/2011 4,852,674 100,000 International Paper Co ....................................... 7.63% 01/15/2007 113,265 4,925,000 International Paper Co ....................................... 5.85% 10/30/2012 5,158,795 1,835,000 Interpublic Group Cos Inc .................................... 7.25% 08/15/2011 1,523,050
The accompanying notes are an integral part of these financial statements. SAI-277 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------------------------- USD 1,500,000 Ipalco Enterprises Inc ............................ 7.38% 11/14/2008 $ 1,320,000 1,500,000 Ipalco Enterprises Inc ............................ 7.63% 11/14/2011 1,305,000 2,870,000 Israel Government International Bond .............. 7.75% 03/15/2010 3,281,614 6,200,000 Italy Government International Bond ............... 6.00% 02/15/2011 7,065,530 15,100,000 Italy Government International Bond ............... 4.38% 10/25/2006 15,981,475 9,000,000 Italy Government International Bond ............... 5.63% 06/15/2012 9,995,701 11,375,000 Italy Government International Bond ............... 3.63% 09/14/2007 11,678,035 4,600,000 Italy Government International Bond ............... 5.25% 04/05/2006 4,996,281 1,100,000 Janus Capital Group Inc ........................... 7.00% 11/01/2006 1,122,205 750,000 Janus Capital Group Inc ........................... 7.75% 06/15/2009 738,779 965,000 Jefferies Group Inc ............................... 7.75% 03/15/2012 1,025,109 1,900,000 John Deere Capital Corp ........................... 6.00% 02/15/2009 2,053,538 2,185,000 John Deere Capital Corp ........................... 5.13% 10/19/2006 2,346,885 4,420,000 John Deere Capital Corp ........................... 7.00% 03/15/2012 5,134,431 3,985,000 John Deere Capital Corp ........................... 4.50% 08/22/2007 4,157,281 2,130,000 John Hancock Financial Services Inc ............... 5.63% 12/01/2008 2,260,883 500,000 Johnson & Johnson ................................. 6.63% 09/01/2009 579,283 1,700,000 Johnson Controls Inc .............................. 5.00% 11/15/2006 1,767,627 3,280,000 JP Morgan & Co Inc/Old ............................ 6.00% 01/15/2009 3,484,070 455,000 JP Morgan & Co Inc/Old ............................ 5.75% 10/15/2008 487,687 2,500,000 JP Morgan & Co Inc/Old ............................ 6.25% 01/15/2009 2,687,969 9,725,000 JP Morgan Chase & Co .............................. 6.75% 02/01/2011 10,525,448 6,525,000 JP Morgan Chase & Co .............................. 5.63% 08/15/2006 6,993,909 3,500,000 JP Morgan Chase & Co .............................. 5.35% 03/01/2007 3,713,655 5,435,000 JP Morgan Chase & Co .............................. 6.63% 03/15/2012 5,861,202 7,500,000 JP Morgan Chase & Co .............................. 5.25% 05/30/2007 7,933,995 2,000,000 JP Morgan Chase & Co .............................. 7.13% 02/01/2007 2,242,633 3,500,000 JP Morgan Chase & Co .............................. 7.25% 06/01/2007 3,966,436 1,600,000 JP Morgan Chase & Co .............................. 7.13% 06/15/2009 1,799,599 655,000 JP Morgan Chase & Co .............................. 6.38% 04/01/2008 724,908 2,200,000 JP Morgan Chase & Co .............................. 7.88% 06/15/2010 2,526,811 750,000 JPMorgan Chase Bank ............................... 6.70% 08/15/2008 843,139 900,000 Kaneb Pipe Line Operating Partnership LP .......... 7.75% 02/15/2012 1,007,630 100,000 Kansas City Power & Light Co/New .................. 6.00% 03/15/2007 107,135 4,340,000 Kellogg Co ........................................ 6.00% 04/01/2006 4,726,833 4,600,000 Kellogg Co ........................................ 6.60% 04/01/2011 5,196,548 1,350,000 Kerr-McGee Corp ................................... 5.88% 09/15/2006 1,465,613 2,400,000 Kerr-McGee Corp ................................... 6.88% 09/15/2011 2,724,187 1,200,000 KeyBank National Association ...................... 5.00% 07/17/2007 1,263,018 1,640,000 KeyBank National Association ...................... 7.00% 02/01/2011 1,864,552 1,050,000 KeyBank National Association ...................... 5.70% 08/15/2012 1,107,563
The accompanying notes are an integral part of these financial statements. SAI-278 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 2,750,000 Keycorp ......................................... 6.75% 03/15/2006 $ 3,032,277 300,000 Keycorp ......................................... 7.50% 06/15/2006 340,360 3,690,000 KeySpan Corp .................................... 7.63% 11/15/2010 4,359,724 3,195,000 KeySpan Corp .................................... 6.15% 06/01/2006 3,503,847 100,000 KeySpan Gas East Corp ........................... 7.88% 02/01/2010 118,769 8,655,000 KFW International Finance ....................... 4.75% 01/24/2007 9,294,643 1,600,000 KFW International Finance ....................... 8.00% 02/15/2010 1,997,052 6,500,000 KFW International Finance ....................... 5.25% 06/28/2006 7,059,540 1,535,000 Kimberly-Clark Corp ............................. 7.10% 08/01/2007 1,789,532 1,250,000 Kimberly-Clark Corp ............................. 5.63% 02/15/2012 1,356,609 400,000 Kimco Realty Corp ............................... 6.00% 11/30/2012 405,177 1,755,000 Kinder Morgan Energy Partners LP ................ 7.13% 03/15/2012 1,975,505 3,100,000 Kinder Morgan Energy Partners LP ................ 6.75% 03/15/2011 3,390,213 2,920,000 Kinder Morgan Inc ............................... 6.50% 09/01/2012 3,052,777 1,300,000 Kinder Morgan Inc ............................... 6.80% 03/01/2008 1,418,024 1,100,000 Knight-Ridder Inc ............................... 7.13% 06/01/2011 1,269,122 885,000 Knight-Ridder Inc ............................... 9.88% 04/15/2009 1,154,218 1,025,000 Kohl's Corp ..................................... 6.30% 03/01/2011 1,131,777 1,000,000 Korea Development Bank .......................... 4.25% 11/13/2007 1,014,350 1,525,000 Korea Development Bank .......................... 5.50% 11/13/2012 1,563,976 2,500,000 Korea Development Bank .......................... 7.25% 05/15/2006 2,808,977 3,500,000 Korea Development Bank .......................... 5.25% 11/16/2006 3,711,890 9,415,000 Korea Government International Bond ............. 8.88% 04/15/2008 11,667,505 3,530,000 Kowloon Canton Railway Corp ..................... 8.00% 03/15/2010 4,327,851 7,410,000 Kraft Foods Inc ................................. 5.63% 11/01/2011 7,908,490 2,900,000 Kraft Foods Inc ................................. 5.25% 06/01/2007 3,132,756 7,165,000 Kraft Foods Inc ................................. 6.25% 06/01/2012 7,998,873 5,000,000 Kraft Foods Inc ................................. 4.63% 11/01/2006 5,274,828 3,200,000 Kroger Co ....................................... 6.80% 04/01/2011 3,515,910 50,000 Kroger Co ....................................... 8.15% 07/15/2006 56,970 2,000,000 Kroger Co ....................................... 7.65% 04/15/2007 2,265,346 1,000,000 Kroger Co ....................................... 8.05% 02/01/2010 1,160,250 1,635,000 Kroger Co ....................................... 7.80% 08/15/2007 1,877,449 1,575,000 Kroger Co ....................................... 7.63% 09/15/2006 1,775,802 3,200,000 Kroger Co ....................................... 7.25% 06/01/2009 3,576,900 380,000 Kroger Co ....................................... 6.75% 04/15/2012 419,816 1,395,000 Kroger Co ....................................... 6.20% 06/15/2012 1,486,829 850,000 KT Corp ......................................... 7.63% 04/15/2007 976,314 1,750,000 Landesbank Baden-Wuerttemberg/New York .......... 6.35% 04/01/2012 1,960,923 2,600,000 Landwirtschaftliche Rentenbank .................. 3.38% 11/15/2007 2,603,697 5,000,000 Landwirtschaftliche Rentenbank .................. 4.50% 10/23/2006 5,254,689
The accompanying notes are an integral part of these financial statements. SAI-279 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 2,500,000 Landwirtschaftliche Rentenbank .................. 4.88% 03/12/2007 $ 2,668,980 1,620,000 Lasmo USA Inc ................................... 7.50% 06/30/2006 1,854,858 1,800,000 Legg Mason Inc .................................. 6.75% 07/02/2008 1,972,891 4,120,000 Lehman Brothers Holdings Inc .................... 6.63% 01/18/2012 4,562,746 500,000 Lehman Brothers Holdings Inc .................... 8.50% 05/01/2007 594,525 2,595,000 Lehman Brothers Holdings Inc .................... 8.25% 06/15/2007 3,072,063 3,192,000 Lehman Brothers Holdings Inc .................... 7.00% 02/01/2008 3,637,309 12,300,000 Lehman Brothers Holdings Inc .................... 6.25% 05/15/2006 13,492,024 2,980,000 Lehman Brothers Holdings Inc .................... 6.63% 02/05/2006 3,278,847 7,000,000 Lehman Brothers Holdings Inc .................... 7.88% 08/15/2010 8,274,033 595,000 Lehman Brothers Inc ............................. 7.63% 06/01/2006 673,485 35,000 Lehman Brothers Inc ............................. 7.38% 01/15/2007 39,738 650,000 Lehman Brothers Inc ............................. 6.63% 02/15/2008 728,494 750,000 Lehman Brothers Inc ............................. 6.50% 04/15/2008 834,896 440,000 Lenfest Communications Inc ...................... 7.63% 02/15/2008 465,463 4,000,000 Liberty Media Corp .............................. 7.88% 07/15/2009 4,338,759 2,500,000 Liberty Property-LP ............................. 7.75% 04/15/2009 2,845,065 500,000 Liberty Property-LP ............................. 7.25% 03/15/2011 545,886 750,000 Lincoln National Corp ........................... 6.20% 12/15/2011 790,766 800,000 Lincoln National Corp ........................... 5.25% 06/15/2007 832,729 400,000 Lion Connecticut Holdings Inc ................... 7.13% 08/15/2006 438,990 1,000,000 Litton Industries Inc ........................... 8.00% 10/15/2009 1,199,474 500,000 Lockheed Martin Corp ............................ 7.70% 06/15/2008 592,653 5,660,000 Lockheed Martin Corp ............................ 7.25% 05/15/2006 6,371,075 3,225,000 Lockheed Martin Corp ............................ 8.20% 12/01/2009 3,992,287 1,100,000 Loews Corp ...................................... 8.88% 04/15/2011 1,334,082 1,595,000 Lowe's Cos Inc .................................. 8.25% 06/01/2010 1,954,409 2,150,000 Ltd Brands ...................................... 6.13% 12/01/2012 2,260,751 140,000 M&I Marshall & Ilsley Bank ...................... 6.38% 09/01/2011 156,575 1,000,000 Mack-Cali Realty LP ............................. 7.25% 03/15/2009 1,110,206 695,000 Mack-Cali Realty LP ............................. 7.75% 02/15/2011 782,918 5,600,000 Malaysia Government International Bond .......... 7.50% 07/15/2011 6,451,652 5,215,000 Malaysia Government International Bond .......... 8.75% 06/01/2009 6,423,292 2,125,000 Manufacturers & Traders Trust Co ................ 8.00% 10/01/2010 2,526,403 1,720,000 Marathon Oil Corp ............................... 6.13% 03/15/2012 1,829,211 1,650,000 Marathon Oil Corp ............................... 5.38% 06/01/2007 1,738,754 1,000,000 Marriott International Inc ...................... 7.88% 09/15/2009 1,119,348 400,000 Marsh & McLennan Cos Inc ........................ 7.13% 06/15/2009 460,531 4,050,000 Marsh & McLennan Cos Inc ........................ 5.38% 03/15/2007 4,347,253 1,800,000 Marshall & Ilsley Corp .......................... 5.75% 09/01/2006 1,970,957 1,200,000 Marshall & Isley bank ........................... 4.13% 09/04/2007 1,238,184
The accompanying notes are an integral part of these financial statements. SAI-280 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 1,550,000 Marshall & Isley bank ......................... 5.25% 09/04/2012 $ 1,612,452 1,600,000 Masco Corp .................................... 6.75% 03/15/2006 1,736,926 3,815,000 Masco Corp .................................... 5.88% 07/15/2012 4,028,576 1,500,000 Masco Corp .................................... 4.63% 08/15/2007 1,549,875 2,486,000 May Department Stores Co/The .................. 10.63% 11/01/2010 3,255,119 100,000 Mayne Group Ltd ............................... 6.25% 02/01/2006 105,475 2,000,000 MBNA America Bank ............................. 6.50% 06/20/2006 2,134,914 1,500,000 MBNA America Bank ............................. 5.38% 01/15/2008 1,542,540 2,275,000 MBNA America Bank ............................. 6.63% 06/15/2012 2,322,888 1,820,000 MBNA America Bank ............................. 7.13% 11/15/2012 1,925,466 1,795,000 MBNA Corp ..................................... 7.50% 03/15/2012 1,933,715 1,250,000 MBNA Corp ..................................... 5.63% 11/30/2007 1,287,298 2,225,000 MBNA Corp ..................................... 6.25% 01/17/2007 2,335,405 1,640,000 McDonald's Corp ............................... 6.00% 04/15/2011 1,787,748 1,180,000 McDonald's Corp ............................... 5.75% 03/01/2012 1,273,591 4,200,000 McDonald's Corp ............................... 5.38% 04/30/2007 4,525,537 1,150,000 McKesson Corp ................................. 7.75% 02/01/2012 1,313,062 3,965,000 MeadWestvaco Corp ............................. 6.85% 04/01/2012 4,401,651 1,500,000 Media General Inc ............................. 6.95% 09/01/2006 1,615,249 4,000,000 Mellon Bank NA ................................ 7.00% 03/15/2006 4,492,553 2,000,000 Mellon Funding Corp ........................... 6.70% 03/01/2008 2,292,505 1,575,000 Mellon Funding Corp ........................... 6.38% 02/15/2010 1,733,491 1,060,000 Mellon Funding Corp ........................... 6.40% 05/14/2011 1,182,252 1,300,000 Mellon Funding Corp ........................... 4.88% 06/15/2007 1,382,383 1,350,000 Meritor Automotive Inc ........................ 6.80% 02/15/2009 1,291,048 4,515,000 Merrill Lynch & Co Inc ........................ 6.13% 05/16/2006 4,928,144 2,000,000 Merrill Lynch & Co Inc ........................ 4.00% 11/15/2007 2,032,500 1,000,000 Merrill Lynch & Co Inc ........................ 6.25% 01/15/2006 1,083,285 5,500,000 Merrill Lynch & Co Inc ........................ 6.56% 12/16/2007 6,184,712 2,500,000 Merrill Lynch & Co Inc ........................ 6.38% 10/15/2008 2,785,887 6,070,000 Merrill Lynch & Co Inc ........................ 6.00% 02/17/2009 6,527,237 2,700,000 Merrill Lynch & Co Inc ........................ 5.36% 02/01/2007 2,859,687 2,255,000 Metlife Inc ................................... 5.25% 12/01/2006 2,424,336 2,575,000 Metlife Inc ................................... 6.13% 12/01/2011 2,820,952 1,575,000 Metlife Inc ................................... 5.38% 12/15/2012 1,636,438 6,350,000 Mexico Government International Bond .......... 8.63% 03/12/2008 7,318,375 4,335,000 Mexico Government International Bond .......... 7.50% 01/14/2012 4,649,288 7,395,000 Mexico Government International Bond .......... 9.88% 02/01/2010 9,003,413 3,500,000 Mexico Government International Bond .......... 8.50% 02/01/2006 3,955,000 8,320,000 Mexico Government International Bond .......... 8.38% 01/14/2011 9,401,600 5,300,000 Mexico Government International Bond .......... 9.88% 01/15/2007 6,346,750
The accompanying notes are an integral part of these financial statements. SAI-281 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 6,625,000 Mexico Government International Bond .......... 10.38% 02/17/2009 $ 8,148,750 3,225,000 Midamerican Energy Holdings Co ................ 7.52% 09/15/2008 3,618,305 450,000 Midamerican Energy Holdings Co ................ 5.88% 10/01/2012 455,004 2,100,000 Midamerican Funding LLC ....................... 6.34% 03/01/2009 2,210,472 900,000 Midwest Energy Inc ............................ 8.70% 10/15/2009 1,011,073 1,200,000 Mohawk Industries Inc ......................... 6.50% 04/15/2007 1,310,531 1,200,000 Mohawk Industries Inc ......................... 7.20% 04/15/2012 1,358,342 1,000,000 Monongahela Power Co .......................... 5.00% 10/01/2006 930,000 4,030,000 Monsanto Co ................................... 7.38% 08/15/2012 4,331,048 1,000,000 Mony Group Inc ................................ 8.35% 03/15/2010 1,100,406 2,100,000 Morgan Stanley ................................ 8.00% 06/15/2010 2,491,579 9,995,000 Morgan Stanley ................................ 6.75% 04/15/2011 11,079,534 10,685,000 Morgan Stanley ................................ 6.60% 04/01/2012 11,808,347 1,000,000 Morgan Stanley ................................ 6.30% 01/15/2006 1,084,719 10,455,000 Morgan Stanley ................................ 6.10% 04/15/2006 11,395,734 10,575,000 Morgan Stanley ................................ 5.80% 04/01/2007 11,491,288 1,200,000 Morgan Stanley Group Inc ...................... 6.88% 03/01/2007 1,346,661 3,350,000 Motorola Inc .................................. 8.00% 11/01/2011 3,429,084 200,000 Motorola Inc .................................. 7.60% 01/01/2007 208,908 3,000,000 Motorola Inc .................................. 6.50% 03/01/2008 2,894,641 3,400,000 Motorola Inc .................................. 7.63% 11/15/2010 3,449,594 3,000,000 Motorola Inc .................................. 6.75% 02/01/2006 3,060,396 1,000,000 MTR Corp ...................................... 7.50% 02/04/2009 1,184,236 4,475,000 MTR Corp ...................................... 7.50% 11/08/2010 5,372,457 2,075,000 Murphy Oil Corp ............................... 6.38% 05/01/2012 2,289,587 1,450,000 Nabisco Inc ................................... 7.05% 07/15/2007 1,665,430 1,000,000 Nabors Holdings 1 ULC ......................... 4.88% 08/15/2009 1,027,004 940,000 Nabors Industries Ltd ......................... 5.38% 08/15/2012 964,792 850,000 National Australia Bank Ltd ................... 6.60% 12/10/2007 963,147 4,000,000 National Australia Bank Ltd ................... 8.60% 05/19/2010 5,041,738 3,805,000 National City Bank ............................ 6.20% 12/15/2011 4,210,802 100,000 National City Bank Of Pennsylvania ............ 6.25% 03/15/2011 110,264 2,500,000 National City Bank/Indiana .................... 4.88% 07/20/2007 2,665,298 700,000 National City Corp ............................ 5.75% 02/01/2009 759,623 2,270,000 National Rural Util Coop Fin .................. 6.50% 03/01/2007 2,496,425 105,000 National Rural Util Coop Fin .................. 5.70% 01/15/2010 111,389 4,750,000 National Rural Util Coop Fin .................. 7.25% 03/01/2012 5,461,669 3,900,000 National Rural Util Coop Fin .................. 5.75% 08/28/2009 4,154,523 1,450,000 National Rural Util Coop Fin .................. 6.20% 02/01/2008 1,620,554 600,000 National Rural Util Coop Fin .................. 5.75% 11/01/2008 657,965 5,830,000 National Rural Util Coop Fin .................. 6.00% 05/15/2006 6,306,455
The accompanying notes are an integral part of these financial statements. SAI-282 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 3,935,000 National Westminster Bank PLC ...................... 7.38% 10/01/2009 $ 4,676,294 1,350,000 Nationwide Financial Services ...................... 5.90% 07/01/2012 1,367,106 100,000 NCNB Corp .......................................... 9.38% 09/15/2009 128,945 920,000 NCR Corp ........................................... 7.13% 06/15/2009 984,806 200,000 New England Telephone & Tele ....................... 5.88% 04/15/2009 216,814 745,000 New Plan Excel Realty Trust ........................ 5.88% 06/15/2007 775,785 1,000,000 New York Telephone Co .............................. 6.13% 01/15/2010 1,052,400 2,000,000 New York Telephone Co .............................. 6.00% 04/15/2008 2,146,249 2,350,500 New Zealand Government International Bond .......... 8.75% 12/15/2006 2,822,582 875,000 Newell Rubbermaid Inc .............................. 6.00% 03/15/2007 943,386 875,000 Newell Rubbermaid Inc .............................. 6.75% 03/15/2012 981,624 1,000,000 Newell Rubbermaid Inc .............................. 4.63% 12/15/2009 1,019,369 425,000 Newmont Mining Corp ................................ 8.63% 05/15/2011 496,768 900,000 News America Holdings .............................. 7.38% 10/17/2008 983,494 1,380,000 News America Inc ................................... 6.63% 01/09/2008 1,460,092 305,000 Nexfor Inc ......................................... 8.13% 03/20/2008 346,876 850,000 Nexfor Inc ......................................... 7.25% 07/01/2012 911,767 250,000 Niagara Mohawk Power Corp .......................... 7.75% 05/15/2006 283,554 4,195,000 Niagara Mohawk Power Corp .......................... 7.75% 10/01/2008 4,917,470 2,000,000 Niagara Mohawk Power Corp1 ......................... 0.00% 07/01/2010 2,050,000 900,000 Nike Inc ........................................... 5.50% 08/15/2006 978,449 1,900,000 Nippon Telegraph & Telephone Corp .................. 6.00% 03/25/2008 2,098,236 3,470,000 Nisource Finance Corp .............................. 7.88% 11/15/2010 3,810,331 1,000,000 Noranda Inc ........................................ 8.38% 02/15/2011 1,020,429 1,100,000 Noranda Inc ........................................ 7.25% 07/15/2012 1,043,836 945,000 Nordea Bank Finland PLC/New York ................... 6.50% 01/15/2006 1,040,879 100,000 Nordstrom Inc ...................................... 5.63% 01/15/2009 105,176 125,000 Norfolk Southern Corp .............................. 6.75% 02/15/2011 142,080 1,450,000 Norfolk Southern Corp .............................. 6.20% 04/15/2009 1,610,809 1,300,000 Norfolk Southern Corp .............................. 8.63% 05/15/2010 1,601,459 4,930,000 Norfolk Southern Corp .............................. 7.35% 05/15/2007 5,668,809 350,000 Norsk Hydro ASA .................................... 9.00% 04/15/2012 456,774 400,000 Norsk Hydro ASA .................................... 6.36% 01/15/2009 451,746 1,200,000 North Fork Bancorporation Inc ...................... 5.88% 08/15/2012 1,282,721 500,000 Northern Border Partners-LP ........................ 7.10% 03/15/2011 544,450 650,000 Northern States Power Co ........................... 8.00% 08/28/2012 732,716 145,000 Northern Trust Co .................................. 7.10% 08/01/2009 169,872 1,400,000 Northrop Grumman Corp .............................. 7.13% 02/15/2031 1,588,969 2,150,000 Northrop Grumman Corp .............................. 7.00% 03/01/2006 2,354,488 1,365,000 Nova Scotia Province of ............................ 5.75% 02/27/2012 1,499,830 900,000 NSTAR .............................................. 8.00% 02/15/2010 1,052,686
The accompanying notes are an integral part of these financial statements. SAI-283 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ---------------------------------------------------------------------------------------------------------------------------- USD 1,630,000 Nucor Corp ........................................... 4.88% 10/01/2012 $ 1,648,783 1,800,000 Occidental Petroleum Corp ............................ 6.75% 01/15/2012 2,040,057 400,000 Occidental Petroleum Corp ............................ 10.13% 09/15/2009 517,501 960,000 Occidental Petroleum Corp ............................ 7.38% 11/15/2008 1,123,518 2,405,000 Occidental Petroleum Corp ............................ 7.65% 02/15/2006 2,717,085 1,300,000 Occidental Petroleum Corp ............................ 5.88% 01/15/2007 1,408,586 1,825,000 Ocean Energy Inc ..................................... 7.25% 10/01/2011 2,074,786 1,480,000 Ocean Energy Inc ..................................... 4.38% 10/01/2007 1,501,626 2,700,000 Oesterreichische Kontrollbank AG ..................... 5.50% 01/20/2006 2,947,907 5,550,000 Oesterreichische Kontrollbank AG ..................... 5.13% 03/20/2007 6,052,470 100,000 OLD Dominion Electric Coop ........................... 6.25% 06/01/2011 110,483 2,610,000 Oncor Electric Delivery Co ........................... 6.38% 05/01/2012 2,711,929 100,000 Oneok Inc ............................................ 7.75% 08/15/2006 109,366 1,400,000 Oneok Inc ............................................ 7.13% 04/15/2011 1,471,185 95,000 Orange Plc ........................................... 9.00% 06/01/2009 101,866 45,000 Orange Plc ........................................... 8.75% 06/01/2006 49,022 1,000,000 Pacific Bell ......................................... 6.88% 08/15/2006 1,116,566 1,750,000 Pacificorp ........................................... 6.90% 11/15/2011 2,002,622 1,000,000 Pacificorp ........................................... 6.38% 05/15/2008 1,116,494 3,000,000 Panenergy Corp ....................................... 7.00% 10/15/2006 3,302,826 1,000,000 Peco Energy Co/OLD ................................... 5.95% 11/01/2011 1,095,102 1,700,000 Pemex Finance Ltd .................................... 8.02% 05/15/2007 1,896,860 100,000 Pemex Finance Ltd .................................... 6.30% 05/15/2010 108,834 45,000 Pemex Finance Ltd .................................... 6.55% 02/15/2008 48,974 3,600,000 Pemex Finance Ltd .................................... 9.69% 08/15/2009 4,303,800 1,900,000 Pemex Finance Ltd .................................... 9.03% 02/15/2011 2,230,790 5,700,000 Pemex Finance Ltd 144A ............................... 7.88% 02/01/2009 5,999,250 4,460,000 Pemex Project Funding Master Trust ................... 8.50% 02/15/2008 4,950,600 5,000,000 Pemex Project Funding Master Trust ................... 9.13% 10/13/2010 5,700,000 6,100,000 Pepco Holdings Inc ................................... 6.45% 08/15/2012 6,469,595 60,000 Pepsi Bottling Holdings Inc .......................... 5.63% 02/17/2009 65,280 750,000 PepsiAmericas Inc .................................... 5.95% 02/15/2006 801,706 490,000 PepsiAmericas Inc .................................... 3.88% 09/12/2007 492,966 100,000 PepsiCo Inc .......................................... 5.75% 01/15/2008 110,585 3,165,000 Petrobras International Finance Co -- PIFCO .......... 9.75% 07/06/2011 2,721,900 1,500,000 Petrobras International Finance Co -- PIFCO .......... 9.88% 05/09/2008 1,372,500 1,775,000 Petrobras International Finance Co -- PIFCO .......... 9.13% 02/01/2007 1,668,500 2,600,000 Petroleos Mexicanos .................................. 8.85% 09/15/2007 2,964,000 2,000,000 Phelps Dodge Corp .................................... 8.75% 06/01/2011 2,105,962 4,450,000 Philip Morris Cos Inc ................................ 7.20% 02/01/2007 4,949,071 300,000 Philip Morris Cos Inc ................................ 6.38% 02/01/2006 319,725
The accompanying notes are an integral part of these financial statements. SAI-284 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 900,000 Philip Morris Cos Inc ......................... 7.65% 07/01/2008 $ 1,035,259 1,000,000 Pinnacle West Capital Corp .................... 6.40% 04/01/2006 1,013,764 1,000,000 Pitney Bowes Credit Corp ...................... 8.55% 09/15/2009 1,251,844 1,800,000 Pitney Bowes Credit Corp ...................... 5.75% 08/15/2008 1,981,252 1,480,000 Pitney Bowes Inc .............................. 4.63% 10/01/2012 1,489,112 220,000 Pitney Bowes Inc .............................. 5.88% 05/01/2006 238,004 2,300,000 PNC Funding Corp .............................. 6.88% 07/15/2007 2,578,795 1,594,000 PNC Funding Corp .............................. 6.13% 02/15/2009 1,726,701 1,725,000 PNC Funding Corp .............................. 7.50% 11/01/2009 2,004,384 2,240,000 PNC Funding Corp .............................. 5.75% 08/01/2006 2,416,560 3,840,000 Poland Government International Bond .......... 6.25% 07/03/2012 4,265,626 4,500,000 Popular North America Inc ..................... 6.13% 10/15/2006 4,908,087 2,250,000 POSCO ......................................... 7.13% 11/01/2006 2,536,427 650,000 Post Apartment Homes LP ....................... 7.70% 12/20/2010 701,032 2,700,000 Potash Corp of Saskatchewan ................... 7.13% 06/15/2007 3,052,642 1,725,000 Potash Corp of Saskatchewan ................... 7.75% 05/31/2011 1,999,236 100,000 Potomac Electric Power ........................ 6.25% 10/15/2007 109,108 100,000 PP&L Capital Funding Inc ...................... 8.38% 06/15/2007 110,258 1,580,000 PPG Industries Inc ............................ 7.05% 08/15/2009 1,745,997 1,150,000 PPL Electric Utilities Corp ................... 5.88% 08/15/2007 1,268,086 1,500,000 PPL Electric Utilities Corp ................... 6.25% 08/15/2009 1,680,703 1,880,000 PPL Energy Supply LLC ......................... 6.40% 11/01/2011 1,857,976 2,000,000 Praxair Inc ................................... 6.90% 11/01/2006 2,246,088 850,000 Praxair Inc ................................... 6.50% 03/01/2008 952,734 1,745,000 Praxair Inc ................................... 6.38% 04/01/2012 1,924,167 1,300,000 Praxair Inc ................................... 4.75% 07/15/2007 1,357,505 5,000,000 Procter & Gamble Co ........................... 6.88% 09/15/2009 5,937,859 2,200,000 Procter & Gamble Co ........................... 4.75% 06/15/2007 2,356,357 1,650,000 Procter & Gamble Co ........................... 4.30% 08/15/2008 1,735,512 5,560,000 Progress Energy Inc ........................... 6.75% 03/01/2006 6,011,137 2,260,000 Progress Energy Inc ........................... 7.10% 03/01/2011 2,491,159 1,230,000 Progress Energy Inc ........................... 6.05% 04/15/2007 1,311,792 1,200,000 Progress Energy Inc ........................... 5.85% 10/30/2008 1,267,568 1,350,000 Progress Energy Inc ........................... 6.85% 04/15/2077 1,478,435 1,800,000 Progressive Corp/The .......................... 6.38% 01/15/2012 1,995,410 1,100,000 Prologis ...................................... 7.10% 04/15/2008 1,219,751 250,000 Prologis ...................................... 7.05% 07/15/2006 271,211 3,080,000 Province of British Columbia/Canada ........... 4.63% 10/03/2006 3,283,209 2,125,000 Province of Manitoba .......................... 5.50% 10/01/2008 2,353,561 2,525,000 Province of Manitoba .......................... 7.50% 02/22/2010 3,094,596 2,300,000 Province of Manitoba .......................... 4.25% 11/20/2006 2,423,469
The accompanying notes are an integral part of these financial statements. SAI-285 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 1,500,000 Province of Manitoba ..................... 2.75% 01/17/2006 $ 1,513,778 7,000,000 Province of Ontario ...................... 6.00% 02/21/2006 7,731,782 8,920,000 Province of Ontario ...................... 5.50% 10/01/2008 9,879,420 3,135,000 Province of Ontario ...................... 3.50% 09/17/2007 3,197,435 3,100,000 Province of Quebec ....................... 5.00% 07/17/2009 3,322,549 3,200,000 Province of Quebec ....................... 5.50% 04/11/2006 3,478,881 2,200,000 Province of Quebec ....................... 6.50% 01/17/2006 2,441,210 2,840,000 Province of Quebec ....................... 6.13% 01/22/2011 3,198,974 5,020,000 Province of Quebec ....................... 5.75% 02/15/2009 5,586,985 1,200,000 Province of Saskatchewan/Canada .......... 7.13% 03/15/2008 1,420,186 790,000 PSEG Energy Holdings Inc ................. 8.63% 02/15/2008 655,700 3,000,000 PSEG Energy Holdings Inc ................. 8.50% 06/15/2011 2,430,000 3,035,000 PSEG Power LLC ........................... 7.75% 04/15/2011 3,190,392 1,700,000 PSEG Power LLC ........................... 6.95% 06/01/2012 1,702,740 2,400,000 PSEG Power LLC ........................... 6.88% 04/15/2006 2,480,868 1,875,000 PSI Energy Inc ........................... 7.85% 10/15/2007 2,148,588 900,000 Public Service Co of Colorado ............ 6.88% 07/15/2009 879,657 3,520,000 Public Service Co of Colorado ............ 7.88% 10/01/2012 3,911,907 900,000 Public Service Electric & Gas ............ 5.13% 09/01/2012 927,620 1,000,000 Puget Energy Inc ......................... 7.96% 02/22/2010 1,123,220 850,000 Puget Energy Inc ......................... 7.69% 02/01/2011 951,022 1,000,000 Pulte Homes Inc .......................... 8.13% 03/01/2011 1,123,461 1,840,000 Pulte Homes Inc .......................... 7.88% 08/01/2011 2,045,820 1,075,000 Pure Resources Inc ....................... 7.13% 06/15/2011 1,213,116 1,000,000 Quebecor World USA Inc ................... 7.75% 02/15/2009 1,041,722 875,000 Quest Diagnostics ........................ 7.50% 07/12/2011 990,938 850,000 Quest Diagnostics ........................ 6.75% 07/12/2006 918,000 900,000 RadioShack Corp .......................... 7.38% 05/15/2011 1,010,309 2,180,000 Raytheon Co .............................. 8.20% 03/01/2006 2,443,934 1,465,000 Raytheon Co .............................. 5.50% 11/15/2012 1,484,363 1,200,000 Raytheon Co .............................. 4.50% 11/15/2007 1,216,595 700,000 Raytheon Co .............................. 8.30% 03/01/2010 824,922 3,915,000 Raytheon Co .............................. 6.75% 08/15/2007 4,341,964 4,375,000 Raytheon Co .............................. 6.55% 03/15/2010 4,691,753 1,045,000 Raytheon Co .............................. 6.15% 11/01/2008 1,133,522 1,500,000 Reed Elsevier Capital Inc ................ 6.13% 08/01/2006 1,653,031 3,700,000 Reed Elsevier Capital Inc ................ 6.75% 08/01/2011 4,195,484 740,000 Regency Centers LP ....................... 6.75% 01/15/2012 795,611 3,100,000 Regency Centers LP ....................... 7.95% 01/15/2011 3,560,829 1,500,000 Regions Financial Corp ................... 7.00% 03/01/2011 1,720,089 1,790,000 Regions Financial Corp ................... 6.38% 05/15/2012 1,992,768
The accompanying notes are an integral part of these financial statements. SAI-286 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 1,000,000 Reliastar Financial Corp ......................... 6.50% 11/15/2008 $ 1,108,548 500,000 Republic New York Corp ........................... 5.88% 10/15/2008 531,380 100,000 Republic New York Corp ........................... 7.75% 05/15/2009 116,469 1,300,000 Republic Services Inc ............................ 7.13% 05/15/2009 1,496,425 1,350,000 Republic Services Inc ............................ 6.75% 08/15/2011 1,486,401 1,500,000 Rio Tinto Finance USA Ltd ........................ 5.75% 07/03/2006 1,621,629 3,000,000 RJ Reynolds Tobacco Holdings Inc ................. 7.75% 05/15/2006 3,216,115 900,000 RJ Reynolds Tobacco Holdings Inc ................. 6.50% 06/01/2007 939,025 1,300,000 RJ Reynolds Tobacco Holdings Inc ................. 7.25% 06/01/2012 1,356,127 900,000 Roadway Corp ..................................... 8.25% 12/01/2008 998,024 900,000 Rock-Tenn Co ..................................... 8.20% 08/15/2011 1,007,546 600,000 Rogers Cable Inc ................................. 7.88% 05/01/2012 621,928 1,800,000 Rohm & Haas Co ................................... 7.40% 07/15/2009 2,075,687 1,140,000 Rouse Co/The ..................................... 7.20% 09/12/2012 1,153,663 1,150,000 Royal Bank of Scotland Group Plc ................. 6.38% 02/01/2011 1,292,622 1,000,000 Royal Bank of Scotland Group Plc ................. 6.40% 04/01/2009 1,118,285 4,980,000 Royal KPN NV ..................................... 8.00% 10/01/2010 5,850,782 900,000 Sabre Holdings Corp .............................. 7.35% 08/01/2011 969,560 3,355,000 Safeway Inc ...................................... 5.80% 08/15/2012 3,514,656 565,000 Safeway Inc ...................................... 7.00% 09/15/2007 636,169 1,600,000 Safeway Inc ...................................... 6.50% 11/15/2008 1,778,047 2,800,000 Safeway Inc ...................................... 7.50% 09/15/2009 3,195,173 1,370,000 Safeway Inc ...................................... 6.15% 03/01/2006 1,465,866 1,685,000 Safeway Inc ...................................... 6.50% 03/01/2011 1,835,508 2,050,000 Safeway Inc ...................................... 4.80% 07/16/2007 2,114,682 4,000,000 Salomon Smith Barney Holdings Inc ................ 6.50% 02/15/2008 4,460,086 2,400,000 Salomon Smith Barney Holdings Inc ................ 7.13% 10/01/2006 2,708,104 1,900,000 Salomon Smith Barney Holdings Inc ................ 7.38% 05/15/2007 2,187,490 2,600,000 Salomon Smith Barney Holdings Inc ................ 5.88% 03/15/2006 2,790,104 2,600,000 Santander Central Hispano Issuances Ltd .......... 7.63% 11/03/2009 2,930,795 3,195,000 Santander Central Hispano Issuances Ltd .......... 7.63% 09/14/2010 3,621,589 2,850,000 Santander Financial Issuances .................... 7.00% 04/01/2006 3,109,521 1,000,000 Santander Financial Issuances .................... 7.25% 05/30/2006 1,101,619 4,750,000 Sanwa Finance Aruba AEC .......................... 8.35% 07/15/2009 5,062,411 4,200,000 Sara Lee Corp .................................... 6.25% 09/15/2011 4,709,715 7,300,000 SBC Communications Inc ........................... 5.75% 05/02/2006 7,914,523 5,695,000 SBC Communications Inc ........................... 6.25% 03/15/2011 6,271,375 3,780,000 SBC Communications Inc ........................... 5.88% 02/01/2012 4,077,531 2,700,000 SBC Communications Inc ........................... 5.88% 08/15/2012 2,915,972 2,400,000 SCANA Corp ....................................... 6.88% 05/15/2011 2,700,180 100,000 SCANA Corp ....................................... 6.25% 02/01/2012 108,839
The accompanying notes are an integral part of these financial statements. SAI-287 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE --------------------------------------------------------------------------------------------------------------------------- USD 1,035,000 Scholastic Corp ..................................... 5.75% 01/15/2007 $ 1,108,598 1,670,000 Science Applications International Corp ............. 6.25% 07/01/2012 1,771,204 15,000 Scripps Co (E.W.) ................................... 5.75% 07/15/2012 16,313 10,000 Seacor Smit Inc ..................................... 5.88% 10/01/2012 10,110 800,000 Sears Roebuck Acceptance ............................ 6.13% 01/15/2006 808,000 250,000 Sears Roebuck Acceptance ............................ 6.70% 11/15/2006 251,250 1,500,000 Sears Roebuck Acceptance ............................ 7.00% 06/15/2007 1,500,000 2,000,000 Sears Roebuck Acceptance ............................ 6.25% 05/01/2009 1,880,000 3,730,000 Sears Roebuck Acceptance ............................ 7.00% 02/01/2011 3,524,850 4,275,000 Sears Roebuck Acceptance ............................ 6.75% 08/15/2011 3,997,125 2,010,000 Sears Roebuck Acceptance ............................ 6.70% 04/15/2012 1,879,350 1,835,000 Sempra Energy ....................................... 7.95% 03/01/2010 2,083,559 850,000 ServiceMaster Co/The ................................ 7.88% 08/15/2009 968,298 100,000 Sherwin-Williams Co/The ............................. 6.85% 02/01/2007 112,105 1,050,000 Simon Property Group LP ............................. 6.35% 08/28/2012 1,090,151 3,000,000 Simon Property Group LP ............................. 7.13% 02/09/2009 3,334,654 850,000 Simon Property Group LP ............................. 7.38% 01/20/2006 916,881 900,000 Simon Property Group LP ............................. 7.75% 01/20/2011 1,013,128 3,945,000 Simon Property Group LP ............................. 6.38% 11/15/2007 4,241,527 1,700,000 Skandinaviska Enskilda Banken AB .................... 6.88% 02/15/2009 1,896,990 1,450,000 SLM Corp ............................................ 5.13% 08/27/2012 1,470,838 6,525,000 SLM Corp ............................................ 5.63% 04/10/2007 7,067,413 1,500,000 Smith International Inc ............................. 6.75% 02/15/2011 1,623,905 1,750,000 Snap-On Inc ......................................... 6.25% 08/15/2011 1,943,611 3,100,000 Societe Generale/NY ................................. 7.40% 06/01/2006 3,530,796 5,405,000 South Africa Government International Bond .......... 9.13% 05/19/2009 6,517,079 4,450,000 South Africa Government International Bond .......... 7.38% 04/25/2012 4,892,019 2,758,000 Southern Co Capital Funding Inc ..................... 5.30% 02/01/2007 2,914,911 3,325,000 Southern Power Co ................................... 6.25% 07/15/2012 3,501,693 1,720,000 Southwest Airlines Co ............................... 5.50% 11/01/2006 1,776,760 1,480,000 Southwest Airlines Co ............................... 6.50% 03/01/2012 1,588,306 1,700,000 Southwestern Public Service Co ...................... 5.13% 11/01/2006 1,616,442 1,500,000 Spieker Properties Inc .............................. 7.25% 05/01/2009 1,663,940 4,655,000 Sprint Capital Corp ................................. 6.13% 11/15/2008 4,236,050 4,700,000 Sprint Capital Corp ................................. 6.38% 05/01/2009 4,277,000 2,970,000 Sprint Capital Corp ................................. 7.13% 01/30/2006 2,880,900 6,150,000 Sprint Capital Corp ................................. 8.38% 03/15/2012 6,150,000 5,145,000 Sprint Capital Corp ................................. 7.63% 01/30/2011 4,887,750 7,225,000 Sprint Capital Corp ................................. 6.00% 01/15/2007 6,791,500 3,053,000 St Paul Cos ......................................... 8.13% 04/15/2010 3,464,766 2,500,000 St Paul Cos ......................................... 5.75% 03/15/2007 2,605,471
The accompanying notes are an integral part of these financial statements. SAI-288 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 850,000 Stancorp Financial Group Inc ..................... 6.88% 10/01/2012 $ 864,937 2,000,000 Staples Inc ...................................... 7.13% 08/15/2007 2,196,444 1,150,000 Steelcase Inc .................................... 6.38% 11/15/2006 1,197,478 2,475,000 Stora Enso Oyj ................................... 7.38% 05/15/2011 2,871,946 2,505,000 Sumitomo Bank International Fin .................. 8.50% 06/15/2009 2,882,928 3,030,000 Sumitomo Mitsui Banking Corp/New York ............ 8.00% 06/15/2012 3,421,425 1,100,000 Sun Microsystems Inc ............................. 7.50% 08/15/2006 1,181,248 2,055,000 Sun Microsystems Inc ............................. 7.65% 08/15/2009 2,213,970 700,000 Sunoco Inc ....................................... 7.75% 09/01/2009 773,477 1,000,000 Sunoco Inc ....................................... 6.75% 04/01/2011 1,049,765 1,000,000 Sunoco Logistics Partners Operations LP .......... 7.25% 02/15/2012 1,070,410 3,398,000 Suntrust Bank .................................... 6.38% 04/01/2011 3,811,558 1,000,000 SunTrust Banks Inc ............................... 7.38% 07/01/2006 1,146,334 2,975,000 SunTrust Banks Inc ............................... 7.75% 05/01/2010 3,555,485 800,000 SunTrust Banks Inc ............................... 6.05% 07/01/2007 861,490 1,765,000 Supervalue Inc ................................... 7.50% 05/15/2012 1,903,270 2,000,000 Sysco International Co ........................... 6.10% 06/01/2012 2,252,303 256,054 System Energy Resources Inc ...................... 7.43% 01/15/2011 266,185 1,600,000 Tampa Electric Co ................................ 6.88% 06/15/2012 1,720,740 1,205,000 Tampa Electric Co ................................ 6.38% 08/15/2012 1,253,191 4,820,000 Target Corp ...................................... 5.38% 06/15/2009 5,165,242 2,290,000 Target Corp ...................................... 5.40% 10/01/2008 2,467,450 3,755,000 Target Corp ...................................... 5.88% 03/01/2012 4,043,960 2,570,000 Target Corp ...................................... 7.50% 08/15/2010 3,012,830 3,450,000 Target Corp ...................................... 5.95% 05/15/2006 3,757,279 800,000 Target Corp ...................................... 6.35% 01/15/2011 880,466 1,600,000 Target Corp ...................................... 5.50% 04/01/2007 1,723,142 1,000,000 Target Corp ...................................... 10.00% 01/01/2011 1,340,092 4,000,000 TCI Communications Inc ........................... 6.88% 02/15/2006 4,204,319 1,000,000 TECO Energy Inc .................................. 7.20% 05/01/2011 830,000 4,060,000 TECO Energy Inc .................................. 6.13% 05/01/2007 3,491,600 1,250,000 TECO Energy Inc .................................. 7.00% 05/01/2012 1,025,000 2,220,000 Tele-Communications-TCI Group .................... 9.80% 02/01/2012 2,636,492 2,000,000 Telecomunicaciones de Puerto Rico Inc ............ 6.65% 05/15/2006 2,141,141 1,400,000 Telecomunicaciones de Puerto Rico Inc ............ 6.80% 05/15/2009 1,473,145 7,775,000 Telefonica Europe BV ............................. 7.75% 09/15/2010 8,979,534 4,500,000 Telefonos de Mexico SA de CV ..................... 8.25% 01/26/2006 4,927,500 1,700,000 Telstra Corp Ltd ................................. 6.38% 04/01/2012 1,830,134 1,900,000 Temple-Inland Inc ................................ 7.88% 05/01/2012 2,112,019 1,050,000 Temple-Inland Inc ................................ 6.75% 03/01/2009 1,112,104 2,500,000 Tenet Healthcare Corp ............................ 5.38% 11/15/2006 2,275,000
The accompanying notes are an integral part of these financial statements. SAI-289 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 1,830,000 Tenet Healthcare Corp .................... 6.50% 06/01/2012 $ 1,647,000 3,275,000 Tenet Healthcare Corp .................... 6.38% 12/01/2011 2,947,500 1,550,000 TEPPCO Partners LP ....................... 7.63% 02/15/2012 1,580,328 1,500,000 Texaco Capital Inc ....................... 7.09% 02/01/2007 1,713,470 1,070,000 Texaco Capital Inc ....................... 5.50% 01/15/2009 1,177,487 1,360,000 Texas Eastern Transmission LP ............ 7.30% 12/01/2010 1,513,002 700,000 Texas Eastern Transmission LP ............ 5.25% 07/15/2007 727,659 1,600,000 Texas Instruments Inc .................... 6.13% 02/01/2006 1,686,610 1,975,000 Textron Financial Corp ................... 5.88% 06/01/2007 2,075,951 1,920,000 Textron Inc .............................. 6.00% 11/20/2009 2,013,529 1,400,000 Textron Inc .............................. 6.50% 06/01/2012 1,547,784 3,475,000 Thomson Corp/The ......................... 6.20% 01/05/2012 3,715,959 1,025,000 Thomson Corp/The ......................... 5.75% 02/01/2008 1,107,056 1,500,000 Time Warner Entertainment Co LP .......... 8.88% 10/01/2012 1,799,206 1,400,000 Time Warner Entertainment Co LP .......... 7.25% 09/01/2008 1,508,437 2,935,000 Time Warner Inc .......................... 8.11% 08/15/2006 3,184,982 3,600,000 Time Warner Inc .......................... 8.18% 08/15/2007 3,996,255 197,000 Times Mirror Co .......................... 7.45% 10/15/2009 229,087 1,200,000 Toll Brothers Inc ........................ 6.88% 11/15/2012 1,225,736 100,000 Torchmark Corp ........................... 6.25% 12/15/2006 107,419 644,000 Toronto-Dominion Bank-Ny ................. 6.15% 10/15/2008 713,740 100,000 Tosco Corp ............................... 7.63% 05/15/2006 113,710 2,000,000 Tosco Corp ............................... 7.25% 01/01/2007 2,267,126 100,000 Toyota Motor Credit Corp ................. 5.65% 01/15/2007 109,282 4,875,000 Toyota Motor Credit Corp ................. 5.50% 12/15/2008 5,304,208 1,430,000 Toys R US Inc ............................ 7.63% 08/01/2011 1,358,500 900,000 TransAlta Corp ........................... 6.75% 07/15/2012 916,072 100,000 Transamerica Corp ........................ 6.75% 11/15/2006 110,926 1,000,000 TransCanada PipeLines Ltd ................ 6.49% 01/21/2009 1,070,251 2,070,000 Transelec SA ............................. 7.88% 04/15/2011 2,274,186 2,200,000 Transocean Inc ........................... 6.63% 04/15/2011 2,428,151 3,080,000 Transocean Inc ........................... 9.50% 12/15/2008 3,898,328 700,000 Tribune Co ............................... 6.88% 11/01/2006 789,530 750,000 TRW Inc .................................. 8.75% 05/15/2006 863,992 2,900,000 TRW Inc .................................. 7.13% 06/01/2009 3,258,965 3,946,000 TRW Inc .................................. 7.63% 03/15/2006 4,391,579 4,980,000 Tyson Foods Inc .......................... 7.25% 10/01/2006 5,594,403 3,375,000 Tyson Foods Inc .......................... 8.25% 10/01/2011 4,018,750 1,000,000 UBS Paine Webber Group Inc ............... 7.63% 10/15/2008 1,192,291 500,000 UBS Paine Webber Group Inc ............... 6.55% 04/15/2008 563,185 1,500,000 UBS Paine Webber Group Inc ............... 7.63% 12/01/2009 1,793,094
The accompanying notes are an integral part of these financial statements. SAI-290 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 9,100,000 UFJ Bank Ltd/NY ........................... 7.40% 06/15/2011 $ 9,001,257 6,250,000 Unilever Capital Corp ..................... 7.13% 11/01/2010 7,392,587 700,000 Union Bank Switzerland-Ny ................. 7.25% 07/15/2006 797,091 27,000 Union Camp Corp ........................... 7.00% 08/15/2006 29,674 1,755,000 Union Carbide Corp ........................ 6.70% 04/01/2009 1,808,782 200,000 Union Oil Co Of California ................ 9.13% 02/15/2006 233,670 2,000,000 Union Oil Co Of California ................ 7.35% 06/15/2009 2,253,572 1,600,000 Union Oil Co Of California ................ 5.05% 10/01/2012 1,584,687 530,000 Union Pacific Corp ........................ 6.65% 01/15/2011 596,807 2,800,000 Union Pacific Corp ........................ 5.75% 10/15/2007 3,060,889 3,150,000 Union Pacific Corp ........................ 6.50% 04/15/2012 3,558,546 125,000 Union Pacific Corp ........................ 6.79% 11/09/2007 141,943 2,475,000 Union Pacific Corp ........................ 7.25% 11/01/2008 2,887,933 120,000 Union Pacific Corp ........................ 6.63% 02/01/2008 136,045 200,000 Union Pacific Corp ........................ 6.40% 02/01/2006 218,063 3,380,000 Union Planters Bank NA .................... 5.13% 06/15/2007 3,607,265 1,775,000 Union Planters Corp ....................... 7.75% 03/01/2011 2,076,079 1,400,000 United AirLines Inc ....................... 7.73% 07/01/2010 1,064,000 1,136,840 United AirLines Inc ....................... 7.03% 10/01/2010 909,472 525,144 United AirLines Inc ....................... 7.19% 04/01/2011 393,858 900,000 United AirLines Inc ....................... 6.20% 09/01/2008 702,000 27,875,000 United States Treasury Note ............... 3.00% 11/15/2007 28,212,566 25,000,000 United States Treasury Note/Bond .......... 5.63% 02/15/2006 27,677,750 5,350,000 United States Treasury Note/Bond .......... 3.25% 08/15/2007 5,483,001 18,785,000 United States Treasury Note/Bond .......... 4.38% 08/15/2012 19,639,343 1,895,000 United Technologies Corp .................. 6.50% 06/01/2009 2,177,980 4,465,000 United Technologies Corp .................. 7.13% 11/15/2010 5,242,436 1,680,000 United Technologies Corp .................. 6.35% 03/01/2011 1,893,352 1,300,000 United Technologies Corp .................. 4.88% 11/01/2006 1,378,767 2,525,000 United Technologies Corp .................. 6.10% 05/15/2012 2,836,096 2,100,000 United Utilities Plc ...................... 6.45% 04/01/2008 2,179,454 2,500,000 UnitedHealth Group Inc .................... 5.20% 01/17/2007 2,636,517 1,625,000 Unitrin Inc ............................... 5.75% 07/01/2007 1,638,923 900,000 Universal Health Services Inc ............. 6.75% 11/15/2011 925,567 1,965,000 Univision Communications Inc .............. 7.85% 07/15/2011 2,201,555 2,390,000 UnumProvident Corp ........................ 7.63% 03/01/2011 2,354,082 2,400,000 US Bancorp ................................ 5.10% 07/15/2007 2,579,378 1,800,000 US Bancorp ................................ 3.95% 08/23/2007 1,843,521 8,365,000 US Bank National Association .............. 6.38% 08/01/2011 9,391,858 550,000 US Bank National Association .............. 6.30% 07/15/2008 621,130 1,000,000 Usfreightways Corp ........................ 8.50% 04/15/2010 1,097,763
The accompanying notes are an integral part of these financial statements. SAI-291 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------------- USD 3,000,000 UST Inc ......................................................... 6.63% 07/15/2012 $ 3,300,390 3,225,000 USX Corp/Consolidated ........................................... 6.85% 03/01/2008 3,634,989 1,000,000 Vale Overseas Ltd ............................................... 8.63% 03/08/2007 996,650 2,225,000 Valero Energy Corp .............................................. 6.88% 04/15/2012 2,325,544 120,000 Valero Energy Corp .............................................. 6.13% 04/15/2007 124,523 3,000,000 Valero Energy Corp .............................................. 7.38% 06/30/2006 3,241,098 1,250,000 Valspar Corp .................................................... 6.00% 05/01/2007 1,326,403 700,000 Varco International Inc ......................................... 7.25% 05/01/2011 732,128 1,000,000 Vastar Resources Inc ............................................ 6.50% 04/01/2009 1,148,853 900,000 Vectren Utility Holdings Inc .................................... 6.63% 12/01/2011 995,592 8,150,000 Verizon Global Funding Corp ..................................... 7.25% 12/01/2010 9,264,833 3,355,000 Verizon Global Funding Corp ..................................... 6.88% 06/15/2012 3,724,082 4,295,000 Verizon Global Funding Corp ..................................... 7.38% 09/01/2012 4,935,491 1,165,000 Verizon Global Funding Corp ..................................... 7.60% 03/15/2007 1,326,620 1,080,000 Verizon Maryland Inc ............................................ 6.13% 03/01/2012 1,162,195 3,300,000 Verizon New Jersey Inc .......................................... 5.88% 01/17/2012 3,489,438 3,625,000 Verizon New York Inc ............................................ 6.88% 04/01/2012 4,058,877 3,475,000 Verizon Pennsylvania ............................................ 5.65% 11/15/2011 3,628,654 8,700,000 Verizon Wireless Capital LLC .................................... 5.38% 12/15/2006 9,074,506 3,000,000 Verizon/New England ............................................. 6.50% 09/15/2011 3,308,591 7,065,000 Viacom Inc ...................................................... 7.70% 07/30/2010 8,390,668 2,070,000 Viacom Inc ...................................................... 6.63% 05/15/2011 2,339,182 1,950,000 Viacom Inc ...................................................... 5.63% 05/01/2007 2,112,532 2,690,000 Viacom Inc ...................................................... 5.63% 08/15/2012 2,875,284 2,700,000 Viacom Inc ...................................................... 6.40% 01/30/2006 2,956,092 2,280,000 Virginia Electric and Power Co .................................. 5.38% 02/01/2007 2,420,561 2,410,000 Virginia Electric and Power Co .................................. 5.75% 03/31/2006 2,565,464 1,560,000 Visteon Corp .................................................... 8.25% 08/01/2010 1,656,603 300,000 Vodafone Americas Asia Inc ...................................... 7.50% 07/15/2006 341,494 2,700,000 Vodafone Americas Asia Inc ...................................... 6.65% 05/01/2008 3,034,045 8,620,000 Vodafone Group Plc .............................................. 7.75% 02/15/2010 10,157,826 3,500,000 Vodafone Group Plc .............................................. 3.95% 01/30/2008 3,531,512 3,003,000 Voicestream Wireless Corp/Voicestream Wireless Holding Corp ..... 10.38% 11/15/2009 3,153,150 1,915,000 Vornado Realty Trust ............................................ 5.63% 06/15/2007 1,944,489 1,000,000 Vulcan Materials Co ............................................. 6.00% 04/01/2009 1,092,201 3,755,000 Wachovia Bank NA/Charlotte ...................................... 7.80% 08/18/2010 4,527,261 2,000,000 Wachovia Bank NA/Charlotte ...................................... 5.80% 12/01/2008 2,208,748 1,000,000 Wachovia Bank NA/Charlotte ...................................... 7.88% 02/15/2010 1,195,213 1,600,000 Wachovia Bank NA/Old ............................................ 4.85% 07/30/2007 1,700,899 1,900,000 Wachovia Corp ................................................... 7.50% 07/15/2006 2,175,090 2,110,000 Wachovia Corp ................................................... 6.40% 04/01/2008 2,390,606
The accompanying notes are an integral part of these financial statements. SAI-292 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 300,000 Wachovia Corp ............................. 6.30% 04/15/2028 $ 337,963 1,000,000 Wachovia Corp ............................. 6.00% 10/30/2008 1,113,911 9,478,000 Wachovia Corp ............................. 4.95% 11/01/2006 10,144,224 1,000,000 Wachovia Corp/Old ......................... 6.38% 02/01/2009 1,127,054 365,000 Wachovia Corp/Old ......................... 6.15% 03/15/2009 407,712 1,250,000 Wachovia Corp/Old ......................... 6.25% 08/04/2008 1,409,888 5,275,000 Wal-Mart Stores Inc ....................... 5.45% 08/01/2006 5,751,643 4,850,000 Wal-Mart Stores Inc ....................... 4.38% 07/12/2007 5,113,173 12,075,000 Wal-Mart Stores Inc ....................... 6.88% 08/10/2009 14,122,331 3,965,000 Walt Disney Co ............................ 6.38% 03/01/2012 4,338,691 1,600,000 Walt Disney Co ............................ 5.38% 06/01/2007 1,696,026 1,500,000 Walt Disney Co ............................ 5.50% 12/29/2006 1,608,370 4,540,000 Walt Disney Co ............................ 6.75% 03/30/2006 4,997,043 4,445,000 Washington Mutual Bank FA ................. 6.88% 06/15/2011 4,973,144 5,055,000 Washington Mutual Financial Corp .......... 6.25% 05/15/2006 5,519,513 55,000 Washington Mutual Financial Corp .......... 6.88% 05/15/2011 61,679 50,000 Washington Mutual Financial Corp .......... 7.25% 06/15/2006 56,148 2,545,000 Washington Mutual Inc ..................... 7.50% 08/15/2006 2,893,538 3,000,000 Washington Mutual Inc ..................... 8.25% 04/01/2010 3,531,524 6,970,000 Washington Mutual Inc ..................... 5.63% 01/15/2007 7,500,844 2,825,000 Washington Mutual Inc ..................... 4.38% 01/15/2008 2,894,356 900,000 Washington Post ........................... 5.50% 02/15/2009 975,139 1,000,000 Weatherford International Ltd ............. 6.63% 11/15/2011 1,098,295 3,010,000 WellPoint Health Networks ................. 6.38% 06/15/2006 3,279,653 900,000 WellPoint Health Networks ................. 6.38% 01/15/2012 983,941 2,850,000 Wells Fargo & Co .......................... 5.13% 09/01/2012 2,944,129 6,615,000 Wells Fargo & Co .......................... 5.90% 05/21/2006 7,263,424 2,285,000 Wells Fargo & Co .......................... 6.38% 08/01/2011 2,555,199 3,000,000 Wells Fargo & Co .......................... 5.13% 02/15/2007 3,225,786 1,500,000 Wells Fargo & Co .......................... 5.25% 12/01/2007 1,620,936 100,000 Wells Fargo (OLD) ......................... 6.88% 04/01/2006 112,257 800,000 Wells Fargo (OLD) ......................... 7.13% 08/15/2006 912,602 800,000 Wells Fargo (OLD) ......................... 6.25% 04/15/2008 898,101 1,850,000 Wells Fargo Bank NA ....................... 7.55% 06/21/2010 2,194,960 5,900,000 Wells Fargo Bank NA ....................... 6.45% 02/01/2011 6,623,188 3,000,000 Wells Fargo Financial Inc ................. 6.13% 02/15/2006 3,296,662 1,750,000 Wells Fargo Financial Inc ................. 5.88% 08/15/2008 1,941,892 1,300,000 Wells Fargo Financial Inc ................. 6.13% 04/18/2012 1,435,530 5,000,000 Wells Fargo Financial Inc ................. 4.88% 06/12/2007 5,320,549 1,500,000 Wells Fargo Financial Inc ................. 5.50% 08/01/2012 1,589,862 600,000 Wendy's International Inc ................. 6.25% 11/15/2011 658,798
The accompanying notes are an integral part of these financial statements. SAI-293 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------------------- USD 2,100,000 Westdeutsche Landesbank/New York ............. 6.05% 01/15/2009 $ 2,313,245 1,750,000 Weyerhaeuser Co .............................. 6.00% 08/01/2006 1,860,753 3,200,000 Weyerhaeuser Co .............................. 5.95% 11/01/2008 3,404,781 3,540,000 Weyerhaeuser Co .............................. 6.13% 03/15/2007 3,795,387 8,260,000 Weyerhaeuser Co .............................. 6.75% 03/15/2012 9,000,105 1,200,000 Weyerhaeuser Co .............................. 5.25% 12/15/2009 1,218,142 1,875,000 Wharf International Finance Ltd .............. 7.63% 03/13/2007 2,098,131 1,000,000 Whirlpool Corp ............................... 8.60% 05/01/2010 1,199,917 2,000,000 Wisconsin Energy Corp ........................ 5.88% 04/01/2006 2,151,337 1,700,000 Wisconsin Energy Corp ........................ 6.50% 04/01/2011 1,879,544 900,000 Wisconsin Energy Corp ........................ 5.50% 12/01/2008 964,002 2,850,000 Wyeth ........................................ 6.25% 03/15/2006 3,073,645 4,140,000 Wyeth ........................................ 6.70% 03/15/2011 4,630,663 750,000 Xcel Energy Inc .............................. 7.00% 12/01/2010 637,500 1,700,000 XL Capital Europe PLC ........................ 6.50% 01/15/2012 1,810,391 1,740,000 Yorkshire Power Finance ...................... 6.50% 02/25/2008 1,849,277 ----------------------------------------------------------------------------------------------------------------------- 3,900,713,010 ----------------------------------------------------------------------------------------------------------------------- TOTAL DEBT INSTRUMENTS ....................... 3,917,743,082 ----------------------------------------------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY UNITSCOLLECTIVE INVESTMENT FUNDS -- 25.3% 124,637,576 Passive 1-3 Year Credit Index Fund(2) ........ 1,329,259,753 ----------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $4,952,942,076) ............................................ 5,247,002,835 =======================================================================================================================
1 Step Coupon Bond. Rate disclosed was that which was in effect at December 31, 2002. 2 Collective investment fund advised by State Street Global Advisors. USD : United States Dollar The accompanying notes are an integral part of these financial statements. SAI-294 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Intermediate Corporate Index Securities Lending Fund and State Street Bank and Trust Company Intermediate Corporate Index Fund (collectively, the "Fund") were formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match the return of the Lehman Brothers Intermediate Corporate Bond Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Fixed income investments are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. Collective investment funds, in which the Fund invests, may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by the Fund may include a component attributable to investment income of the underlying funds. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit. SAI-295 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INTERMEDIATE CORPORATE INDEX SECURITIES LENDING FUND INTERMEDIATE CORPORATE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending, if any, is distributed monthly to participants of the Lending Fund. 3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Intermediate Corporate Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Intermediate Corporate Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2002, the market value of securities loaned by the Lending Fund are disclosed on the Statement of Assets and Liabilities. Cash collateral provided by the Borrowers is recorded on the Statement of Assets and Liabilities and is invested in State Street Bank and Trust Company Quality D Short-Term Investment Fund. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $6,687,130,097 and $3,919,243,513, respectively. SAI-296 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Passive 1-3 Year Credit Index Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Passive 1-3 Year Credit Index Fund at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for the period indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provides a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 21, 2003 SAI-297 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Statement of Assets and Liabilities December 31, 2002 ------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $1,320,962,034) ..................... $1,354,434,707 Receivable for investments sold ............................................... 44,594,001 Interest receivable ........................................................... 20,812,398 ------------------------------------------------------------------------------------------------- Total assets ............................................................... 1,419,841,106 ------------------------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased ............................................. 59,201,590 Accrued expenses .............................................................. 26,724 ------------------------------------------------------------------------------------------------- Total liabilities .......................................................... 59,228,314 ------------------------------------------------------------------------------------------------- NET ASSETS (equivalent to $10.67 per unit based on 127,573,239 units outstanding) $1,360,612,792 =================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-298 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Statement of Operations Year Ended December 31, 2002(a) INVESTMENT INCOME Interest ............................................................... $ 48,324,759 ------------------------------------------------------------------------------------------------- Total investment income .............................................. 48,324,759 ------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................ 235,286 Audit .................................................................. 20,500 Other .................................................................. 17,355 ------------------------------------------------------------------------------------------------- Total expenses ....................................................... 273,141 ------------------------------------------------------------------------------------------------- Net investment income (loss) ......................................... 48,051,618 ------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments .......................................................... (5,682,843) ------------------------------------------------------------------------------------------------- (5,682,843) ------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments .......................................................... 33,472,673 ------------------------------------------------------------------------------------------------- 33,472,673 ------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................ 27,789,830 ------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 75,841,448 =================================================================================================
(a) The Fund commenced operations on January 7, 2002. The accompanying notes are an integral part of these financial statements. SAI-299 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Statement of Changes in Net Assets Year Ended December 31, 2002(a) -------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ...................................................... $ 48,051,618 Net realized gain (loss) .......................................................... (5,682,843) Net change in unrealized appreciation (depreciation) .............................. 33,472,673 ----------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations .................. 75,841,448 ----------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from participant transactions ..... 1,284,771,344 ----------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS ............................................. 1,360,612,792 NET ASSETS Beginning of year ................................................................ 0 ----------------------------------------------------------------------------------------------------- End of year ...................................................................... $1,360,612,792 =====================================================================================================
(a) The Fund commenced operations on January 7, 2002. The accompanying notes are an integral part of these financial statements. SAI-300 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, 2002(a) --------------------------------------- UNITS AMOUNT ----------------- ------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ......................................... 240,930,465 $ 2,447,214,194 Units redeemed ....................................... (113,357,226) (1,162,442,850) ------------------------------------------------------------------------------------------------ Net increase (decrease) .............................. 127,573,239 $ 1,284,771,344 ================================================================================================
Units in excess of 10% of the Fund units outstanding at December 31, 2002 held by 2 of the Fund's unitholders aggregated 98% of the Fund's total units outstanding. (a) The Fund commenced operations on January 7, 2002. The accompanying notes are an integral part of these financial statements. SAI-301 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Financial Highlights Year ended December 31, 2002 (a) (For a Unit of Participation Outstanding Throughout the Year) SELECTED PER UNIT DATA Net asset value, beginning of year .................... $ 10.00 ------------------------------------------------------------------- Net investment income (loss) (b) ...................... 0.43 Net realized and unrealized gain (loss) ............... 0.24 ------------------------------------------------------------------- Total from investment operations ...................... 0.67 ------------------------------------------------------------------- Net asset value, end of year .......................... $ 10.67 =================================================================== Total return (%) (c) .................................. 6.65 =================================================================== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) (d) (e) ......................... 0.02 ------------------------------------------------------------------- Ratio of net investment income (loss) (%) (d) ......... 4.21 ------------------------------------------------------------------- Portfolio turnover (%) ................................ 136.00 -------------------------------------------------------------------
(a) The Fund commenced operations on January 7, 2002. (b) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (c) Total return calculation (not annualized for the period ended December 31, 2002) is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. The calculation includes only those expenses charged directly to the Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. (d) Not annualized. (e) The calculation includes only those expenses charged directly to the Fund, and does not include expenses charged to the funds in which the Fund invests. The accompanying notes are an integral part of these financial statements. SAI-302 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ---------------------------------------------------------------------------------------------------------------- DEBT INSTRUMENTS -- 98.6% CANADA -- 1.0% USD 6,265,000 Canadian Government Bond ................. 6.38% 11/30/2004 $ 6,819,805 350,000 Canadian National Railway Co ............. 7.00% 03/15/2004 369,301 3,500,000 Export Development Canada ................ 2.75% 12/12/2005 3,543,185 2,900,000 Province of Ontario ...................... 2.63% 12/15/2005 2,921,405 ---------------------------------------------------------------------------------------------------------------- 13,653,696 ---------------------------------------------------------------------------------------------------------------- UNITED STATES -- 97.6% USD 1,300,000 3M Co .................................... 4.15% 06/30/2005 1,364,693 100,000 Abbey National First Capital BV .......... 8.20% 10/15/2004 110,754 3,500,000 Abbey National Plc ....................... 6.69% 10/17/2005 3,873,849 8,000,000 Abbott Laboratories ...................... 5.13% 07/01/2004 8,422,637 4,600,000 ABN Amro Bank NV/Chicago ................. 7.25% 05/31/2005 5,086,445 100,000 Ace INA Holdings Inc ..................... 8.20% 08/15/2004 108,540 100,000 African Development Bank ................. 6.75% 10/01/2004 108,099 2,500,000 African Development Bank ................. 3.25% 07/29/2005 2,558,816 100,000 Alabama Power Co ......................... 5.49% 11/01/2005 107,424 2,450,000 Alabama Power Co ......................... 4.88% 09/01/2004 2,553,047 2,650,000 Alcoa Inc ................................ 7.25% 08/01/2005 2,963,640 4,620,000 Allstate Corp/The ........................ 7.88% 05/01/2005 5,177,034 265,000 Alltel Corp .............................. 7.25% 04/01/2004 280,229 2,500,000 Amerada Hess Corp ........................ 5.30% 08/15/2004 2,607,434 1,000,000 AmerenEnergy Generating Co ............... 7.75% 11/01/2005 1,100,920 775,000 American Express Co ...................... 6.75% 06/23/2004 829,215 410,000 American Express Co ...................... 6.88% 11/01/2005 457,593 2,200,000 American Express Credit Corp ............. 4.25% 02/07/2005 2,288,491 475,000 American General Corp .................... 7.75% 04/01/2005 528,988 525,000 American General Finance Corp ............ 7.25% 05/15/2005 580,539 1,600,000 American General Finance Corp ............ 5.88% 12/15/2005 1,734,007 4,800,000 American General Finance Corp ............ 7.45% 01/15/2005 5,274,746 2,000,000 American International Group ............. 2.85% 12/01/2005 2,021,028 1,275,000 Amvescap Plc ............................. 6.60% 05/15/2005 1,383,273 3,400,000 AOL Time Warner Inc ...................... 5.63% 05/01/2005 3,468,000 1,300,000 AON Corp ................................. 6.90% 07/01/2004 1,314,210 100,000 AON Corp ................................. 8.65% 05/15/2005 105,160 1,800,000 Appalachian Power Co ..................... 4.80% 06/15/2005 1,764,000 150,000 Aramark Services Inc ..................... 6.75% 08/01/2004 156,083 1,200,000 Arizona Public Service ................... 7.63% 08/01/2005 1,312,818 2,000,000 Ashland Inc .............................. 7.83% 08/15/2005 2,107,683 5,100,000 Asian Development Bank ................... 6.25% 10/24/2005 5,649,527
The accompanying notes are an integral part of these financial statements. SAI-303 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 3,305,000 Asian Development Bank ............................. 5.50% 04/23/2004 $ 3,477,974 4,200,000 Asian Development Bank ............................. 7.50% 05/31/2005 4,735,904 300,000 Associates Corp Of N. America ...................... 6.63% 06/15/2005 328,394 2,050,000 Associates Corp Of N. America ...................... 7.75% 02/15/2005 2,271,169 100,000 Associates Corp Of N. America ...................... 6.38% 11/15/2005 109,805 620,000 Associates Corp Of N. America ...................... 6.10% 01/15/2005 664,134 600,000 Associates Corp Of N. America ...................... 6.20% 05/16/2005 649,134 800,000 Associates Corp Of N. America ...................... 6.00% 07/15/2005 866,001 6,059,000 Associates Corp Of N. America ...................... 5.80% 04/20/2004 6,369,775 2,092,000 AT&T Capital Corp .................................. 6.60% 05/15/2005 2,195,935 7,385,000 AT&T Corp .......................................... 6.38% 03/15/2004 7,589,383 1,000,000 AT&T Wireless Services Inc ......................... 6.88% 04/18/2005 1,015,000 100,000 Atlantic Richfield Co .............................. 10.88% 07/15/2005 121,460 2,110,000 Australia & New Zealand Banking Group Ltd .......... 6.25% 02/01/2004 2,203,968 1,500,000 Avnet Inc .......................................... 7.88% 02/15/2005 1,455,000 800,000 Avon Products Inc .................................. 6.90% 11/15/2004 867,887 2,000,000 AXA Financial Inc .................................. 9.00% 12/15/2004 2,219,818 2,350,000 Banco Nacional Comercio Exterior ................... 7.25% 02/02/2004 2,473,375 3,115,000 Bank of America Corp ............................... 7.88% 05/16/2005 3,508,663 200,000 Bank of America Corp ............................... 6.88% 02/15/2005 218,941 1,400,000 Bank of America Corp ............................... 7.75% 08/15/2004 1,528,850 3,500,000 Bank of America Corp ............................... 6.38% 05/15/2005 3,821,426 5,960,000 Bank of America Corp ............................... 6.63% 06/15/2004 6,367,085 100,000 Bank of America Corp ............................... 5.75% 03/01/2004 104,573 1,500,000 Bank of America Corp ............................... 6.13% 07/15/2004 1,596,215 525,000 Bank of New York Co Inc/The ........................ 8.50% 12/15/2004 586,258 1,091,000 Bank One Corp ...................................... 5.63% 02/17/2004 1,135,862 7,500,000 Bank One Corp ...................................... 7.63% 08/01/2005 8,447,549 1,250,000 Bank One Corp ...................................... 7.00% 07/15/2005 1,386,223 2,600,000 BankAmerica Corp/Old ............................... 7.63% 06/15/2004 2,813,627 2,000,000 BankBoston Corp .................................... 6.63% 02/01/2004 2,092,647 1,000,000 Barcelona Spain .................................... 8.13% 02/15/2005 1,123,173 3,000,000 Bayerische Landesbank Girozentrale/NY .............. 6.38% 10/15/2005 3,307,370 68,000 BB&T Corp .......................................... 6.38% 06/30/2005 74,307 100,000 BBV International Finance Cayman ................... 6.88% 07/01/2005 108,807 2,000,000 Bear Stearns Cos Inc/The ........................... 8.75% 03/15/2004 2,155,659 200,000 Bear Stearns Cos Inc/The ........................... 6.63% 10/01/2004 214,000 1,250,000 Bear Stearns Cos Inc/The ........................... 6.65% 12/01/2004 1,346,251 900,000 Bear Stearns Cos Inc/The ........................... 6.25% 07/15/2005 975,125 2,700,000 Bear Stearns Cos Inc/The ........................... 6.15% 03/02/2004 2,821,739 2,350,000 Bear Stearns Cos Inc/The ........................... 7.63% 02/01/2005 2,585,540
The accompanying notes are an integral part of these financial statements. SAI-304 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 100,000 Bellsouth Telecommunications .................... 6.50% 06/15/2005 $ 109,720 400,000 Bellsouth Telecommunications .................... 6.38% 06/15/2004 425,180 100,000 Block Financial Corp ............................ 6.75% 11/01/2004 105,427 2,560,000 Boeing Capital Corp ............................. 7.10% 09/27/2005 2,799,222 400,000 Boise Cascade Office Product .................... 7.05% 05/15/2005 413,404 790,000 Boston Scientific Corp .......................... 6.63% 03/15/2005 847,188 2,960,000 BP Capital Markets Plc .......................... 4.00% 04/29/2005 3,092,946 2,500,000 BP Capital Markets Plc .......................... 4.63% 05/27/2005 2,651,867 10,280,000 British Telecommunications PLC1 ................. 7.88% 12/15/2005 11,593,117 2,020,000 Burlington Northern Santa Fe Corp ............... 6.38% 12/15/2005 2,217,284 1,000,000 Camden Property Trust ........................... 7.00% 04/15/2004 1,050,466 6,100,000 Canadian Government Bond ........................ 6.38% 07/21/2005 6,746,392 3,650,000 Capital One Bank ................................ 6.50% 07/30/2004 3,596,929 1,150,000 Capital One Bank ................................ 6.65% 03/15/2004 1,141,386 3,260,000 Capital One Bank ................................ 8.25% 06/15/2005 3,251,850 1,200,000 Cardinal Health Inc ............................. 4.45% 06/30/2005 1,262,437 1,250,000 Carolina Power & Light Co ....................... 7.50% 04/01/2005 1,373,731 1,000,000 Carter Holt Harvey Ltd .......................... 8.88% 12/01/2004 1,033,092 200,000 Caterpillar Financial Services Corp ............. 6.88% 08/01/2004 215,031 100,000 Caterpillar Financial Services Corp ............. 4.69% 04/25/2005 105,082 1,815,000 CBS Corp ........................................ 7.15% 05/20/2005 2,004,051 750,000 Celulosa Arauco y Constitucion SA ............... 6.95% 09/15/2005 809,342 2,615,000 Centerior Energy Corp ........................... 7.67% 07/01/2004 2,719,600 1,000,000 Champion International Corp ..................... 7.10% 09/01/2005 1,099,139 2,000,000 Chase Manhattan Corp/Pre Chemical Bank .......... 7.13% 03/01/2005 2,182,870 470,400 CHEVRON TRUST FUND .............................. 8.11% 12/01/2004 510,275 830,000 ChevronTexaco Corp .............................. 6.63% 10/01/2004 899,494 830,000 China Government International Bond ............. 6.50% 02/17/2004 873,201 1,000,000 China Mobile Ltd/HK ............................. 7.88% 11/02/2004 1,090,831 1,320,000 Cinergy Corp .................................... 6.25% 09/01/2004 1,357,519 200,000 CIT Group Inc ................................... 6.63% 06/15/2005 210,391 1,100,000 CIT Group Inc ................................... 7.25% 08/15/2005 1,175,645 2,000,000 CIT Group Inc ................................... 5.50% 02/15/2004 2,045,344 3,100,000 CIT Group Inc ................................... 7.63% 08/16/2005 3,333,925 6,035,000 CIT Group Inc ................................... 5.63% 05/17/2004 6,206,050 6,980,000 CIT Group Inc ................................... 7.13% 10/15/2004 7,363,704 1,000,000 Citicorp ........................................ 6.75% 08/15/2005 1,100,758 2,000,000 Citicorp ........................................ 7.13% 03/15/2004 2,122,162 800,000 Citicorp ........................................ 7.13% 09/01/2005 889,579 100,000 CitiFinancial ................................... 7.88% 07/15/2004 108,657 1,100,000 CitiFinancial ................................... 6.50% 06/01/2005 1,199,300
The accompanying notes are an integral part of these financial statements. SAI-305 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 100,000 CitiFinancial ............................. 6.13% 12/01/2005 $ 109,109 2,500,000 Citigroup Inc ............................. 5.80% 03/15/2004 2,619,587 14,065,000 Citigroup Inc ............................. 6.75% 12/01/2005 15,611,402 6,795,000 Citigroup Inc ............................. 4.13% 06/30/2005 7,074,202 8,000,000 Citigroup Inc ............................. 5.70% 02/06/2004 8,344,503 1,180,000 Citizens Communications Co ................ 6.38% 08/15/2004 1,220,934 5,300,000 Clear Channel Communications Inc .......... 7.88% 06/15/2005 5,805,641 3,750,000 CNA Financial Corp ........................ 6.50% 04/15/2005 3,736,229 2,525,000 Coca-Cola Co/The .......................... 4.00% 06/01/2005 2,639,004 2,000,000 Coca-Cola Enterprises Inc ................. 6.63% 08/01/2004 2,144,251 1,000,000 Colgate-Palmolive Co ...................... 3.98% 04/29/2005 1,043,067 2,500,000 Columbia Energy Group ..................... 6.80% 11/28/2005 2,589,678 1,600,000 Comcast Cable Communications .............. 8.13% 05/01/2004 1,678,434 2,000,000 Commonwealth Edison Co .................... 6.40% 10/15/2005 2,172,290 1,250,000 Commonwealth Edison Co .................... 7.38% 01/15/2004 1,311,171 1,600,000 Compaq Computer Corp ...................... 7.65% 08/01/2005 1,779,761 1,950,000 Computer Sciences Corp .................... 7.50% 08/08/2005 2,153,093 2,100,000 ConAgra Foods Inc ......................... 7.40% 09/15/2004 2,263,531 100,000 ConAgra Foods Inc ......................... 7.50% 09/15/2005 112,326 1,025,000 Conectiv .................................. 5.30% 06/01/2005 1,068,105 5,533,000 Conoco Inc ................................ 5.90% 04/15/2004 5,820,815 7,000,000 ConocoPhillips ............................ 8.50% 05/25/2005 7,986,371 4,095,000 Consolidated Natural Gas Co ............... 7.25% 10/01/2004 4,400,622 1,200,000 Consumers Energy Co ....................... 6.00% 03/15/2005 1,194,000 100,000 Corp Andina de Fomento CAF ................ 7.75% 03/01/2004 104,982 9,060,000 Countrywide Home Loans Inc ................ 5.25% 06/15/2004 9,460,885 2,275,000 Countrywide Home Loans Inc ................ 3.50% 12/19/2005 2,298,190 100,000 Countrywide Home Loans Inc ................ 6.85% 06/15/2004 106,631 1,135,000 COX Communications Inc .................... 6.88% 06/15/2005 1,212,779 1,800,000 COX Communications Inc .................... 7.50% 08/15/2004 1,913,182 900,000 CSX Corp .................................. 7.25% 05/01/2004 957,091 900,000 Cyprus Amax Minerals Co ................... 6.63% 10/15/2005 921,154 2,800,000 DaimlerChrysler NA Holding Corp ........... 3.40% 12/15/2004 2,830,446 5,000,000 DaimlerChrysler NA Holding Corp ........... 6.90% 09/01/2004 5,343,665 3,300,000 DaimlerChrysler NA Holding Corp ........... 7.75% 06/15/2005 3,658,455 7,300,000 DaimlerChrysler NA Holding Corp ........... 7.40% 01/20/2005 7,942,797 1,110,000 Darden Restaurants Inc .................... 8.38% 09/15/2005 1,267,280 2,265,000 Deere & Co ................................ 6.55% 07/15/2004 2,417,668 1,460,000 Delphi Corp ............................... 6.13% 05/01/2004 1,511,443 3,000,000 Detroit Edison Co ......................... 7.50% 02/01/2005 3,286,730 1,300,000 Detroit Edison Co ......................... 5.05% 10/01/2005 1,378,721
The accompanying notes are an integral part of these financial statements. SAI-306 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 4,700,000 Deutsche Ausgleichsbank ............................ 6.50% 09/15/2004 $ 5,073,848 4,500,000 Deutsche Ausgleichsbank ............................ 7.00% 06/23/2005 5,025,734 10,375,000 Deutsche Telekom International Finance BV .......... 8.25% 06/15/2005 11,339,233 1,950,000 Diageo Capital Plc ................................. 6.13% 08/15/2005 2,134,815 5,255,000 Diageo Capital Plc ................................. 6.63% 06/24/2004 5,625,842 2,500,000 Dominion Resources Inc/VA .......................... 3.88% 01/15/2004 2,526,154 3,100,000 Dominion Resources Inc/VA .......................... 7.63% 07/15/2005 3,418,377 2,000,000 Donaldson Lufkin & Jenrette Inc -- DLJ ............. 6.88% 11/01/2005 2,214,812 1,400,000 Donaldson Lufkin & Jenrette Inc -- DLJ ............. 8.00% 03/01/2005 1,558,299 1,300,000 Dow Chemical Co/The ................................ 7.00% 08/15/2005 1,403,161 3,000,000 Dow Chemical Co/The ................................ 5.25% 05/14/2004 3,077,647 3,235,000 Dresdner Bank AG/New York .......................... 6.63% 09/15/2005 3,388,489 5,125,000 Du Pont EI de Nemours & Co ......................... 6.75% 10/15/2004 5,571,883 3,085,000 Duke Capital Corp .................................. 7.25% 10/01/2004 3,155,757 3,280,000 Duke Energy Field Services Llc ..................... 7.50% 08/16/2005 3,417,934 1,400,000 Earthgrains Co ..................................... 8.50% 08/01/2005 1,607,314 400,000 Eastman Chemical Co ................................ 6.38% 01/15/2004 416,131 2,325,000 Electronic Data Systems Corp ....................... 6.85% 10/15/2004 2,394,750 1,400,000 Emerson Electric Co ................................ 6.30% 11/01/2005 1,538,652 3,075,000 Emerson Electric Co ................................ 7.88% 06/01/2005 3,458,667 1,400,000 Enserch Corp ....................................... 6.38% 02/01/2004 1,316,000 2,000,000 Entergy Gulf States Inc ............................ 8.25% 04/01/2004 2,119,826 925,000 Enterprise Products Operating LP ................... 8.25% 03/15/2005 999,049 1,255,000 EOP Operating LP ................................... 6.63% 02/15/2005 1,331,321 100,000 EOP Operating LP ................................... 6.50% 06/15/2004 104,735 2,600,000 EOP Operating LP ................................... 6.50% 01/15/2004 2,689,783 580,000 Equitable Life Assurance Society USA ............... 6.95% 12/01/2005 632,525 420,000 ERP Operating LP ................................... 6.63% 04/13/2005 449,348 1,600,000 ERP Operating LP ................................... 7.10% 06/23/2004 1,695,425 500,000 European Investment Bank ........................... 4.75% 04/26/2004 521,516 8,500,000 European Investment Bank ........................... 4.00% 03/15/2005 8,890,879 10,350,000 European Investment Bank ........................... 4.00% 08/30/2005 10,853,424 1,815,000 Federal Home Loan Bank System ...................... 3.25% 08/15/2005 1,868,869 1,000,000 Fifth Third Bancorp ................................ 6.75% 07/15/2005 1,100,276 3,900,000 Finland Government International Bond .............. 7.88% 07/28/2004 4,278,780 1,400,000 First Data Corp .................................... 6.75% 07/15/2005 1,540,387 1,000,000 Firstar Bank NA .................................... 6.38% 03/01/2004 1,051,962 1,300,000 FleetBoston Financial Corp ......................... 8.13% 07/01/2004 1,406,476 6,710,000 FleetBoston Financial Corp ......................... 7.25% 09/15/2005 7,465,728 1,740,000 Florida Power & Light Co ........................... 6.88% 12/01/2005 1,939,946 1,900,000 Ford Motor Credit Co ............................... 6.75% 05/15/2005 1,903,108
The accompanying notes are an integral part of these financial statements. SAI-307 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 4,645,000 Ford Motor Credit Co ........................... 7.50% 06/15/2004 $ 4,779,924 1,500,000 Ford Motor Credit Co ........................... 7.75% 03/15/2005 1,531,673 2,000,000 Ford Motor Credit Co ........................... 6.25% 12/08/2005 1,971,199 6,650,000 Ford Motor Credit Co ........................... 5.75% 02/23/2004 6,693,990 10,740,000 Ford Motor Credit Co ........................... 6.70% 07/16/2004 10,963,237 14,725,000 Ford Motor Credit Co ........................... 7.50% 03/15/2005 15,021,960 14,850,000 Ford Motor Credit Co ........................... 7.60% 08/01/2005 15,146,948 2,000,000 Ford Motor Credit Co ........................... 6.13% 03/20/2004 2,025,653 3,725,000 FPL Group Capital Inc .......................... 6.88% 06/01/2004 3,917,456 3,600,000 Fred Meyer Inc Holding Co ...................... 7.38% 03/01/2005 3,906,502 1,775,000 Gannett Co Inc ................................. 4.95% 04/01/2005 1,885,687 3,000,000 General Electric Capital Corp .................. 7.25% 02/01/2005 3,304,591 1,175,000 General Electric Capital Corp .................. 7.25% 05/03/2004 1,259,238 2,410,000 General Electric Capital Corp .................. 7.50% 05/15/2005 2,689,685 7,500,000 General Electric Capital Corp .................. 6.80% 11/01/2005 8,336,509 4,200,000 General Electric Capital Corp .................. 4.25% 01/28/2005 4,393,380 100,000 General Electric Capital Corp .................. 7.88% 11/22/2004 110,684 100,000 General Electric Capital Corp .................. 8.85% 04/01/2005 114,030 5,340,000 General Motors Acceptance Corp ................. 5.25% 05/16/2005 5,373,033 1,060,000 General Motors Acceptance Corp ................. 8.75% 07/15/2005 1,150,500 700,000 General Motors Acceptance Corp ................. 6.63% 10/15/2005 723,735 2,560,000 General Motors Acceptance Corp ................. 6.85% 06/17/2004 2,660,818 6,500,000 General Motors Acceptance Corp ................. 7.63% 06/15/2004 6,811,413 5,425,000 General Motors Acceptance Corp ................. 7.50% 07/15/2005 5,689,202 5,575,000 General Motors Acceptance Corp ................. 6.38% 01/30/2004 5,712,741 2,000,000 General Motors Corp ............................ 6.25% 05/01/2005 2,048,965 1,000,000 Georgia Power Co ............................... 5.50% 12/01/2005 1,076,630 1,050,000 Gillette Co/The ................................ 4.00% 06/30/2005 1,098,962 4,390,000 Goldman Sachs Group Inc ........................ 7.63% 08/17/2005 4,935,906 2,650,000 Goldman Sachs Group Inc ........................ 7.50% 01/28/2005 2,916,422 2,130,000 GPU Inc ........................................ 7.70% 12/01/2005 2,257,659 100,000 Grand Metropolitan Invt Corp ................... 7.13% 09/15/2004 108,823 4,500,000 Grand Metropolitan Invt Corp2 .................. 0.00% 01/06/2004 4,407,195 1,500,000 Great Lakes Power Inc .......................... 8.30% 03/01/2005 1,603,578 995,000 Hanson Overseas BV ............................. 6.75% 09/15/2005 1,080,755 1,095,000 Hartford Financial Services Group Inc .......... 7.75% 06/15/2005 1,211,204 6,560,000 Heller Financial Inc ........................... 6.00% 03/19/2004 6,880,154 3,000,000 Heller Financial Inc ........................... 8.00% 06/15/2005 3,379,885 1,000,000 Hertz Corp ..................................... 7.00% 07/01/2004 1,005,000 1,760,000 Hertz Corp ..................................... 8.25% 06/01/2005 1,786,400 6,210,000 Hewlett-Packard Co ............................. 7.15% 06/15/2005 6,820,316
The accompanying notes are an integral part of these financial statements. SAI-308 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 100,000 Home Depot Inc ............................................. 6.50% 09/15/2004 $ 107,919 3,200,000 Honeywell International Inc ................................ 6.88% 10/03/2005 3,562,247 1,500,000 Household Finance Corp ..................................... 5.88% 09/25/2004 1,563,003 4,500,000 Household Finance Corp ..................................... 6.00% 05/01/2004 4,656,755 6,525,000 Household Finance Corp ..................................... 8.00% 05/09/2005 7,033,366 1,985,000 HSBC Bank Plc .............................................. 8.63% 12/15/2004 2,221,907 1,000,000 Iceland Government International Bond ...................... 6.13% 02/01/2004 1,049,786 4,050,000 ICI Wilmington Inc ......................................... 6.95% 09/15/2004 4,262,279 5,000,000 Inter-American Development Bank ............................ 3.88% 09/27/2004 5,184,214 3,550,000 Inter-American Development Bank ............................ 5.13% 02/05/2004 3,695,703 6,050,000 Inter-American Development Bank ............................ 6.50% 10/20/2004 6,553,739 6,500,000 Inter-American Development Bank ............................ 4.00% 01/18/2005 6,785,548 3,200,000 International Bank for Reconstruction & Development ........ 6.38% 07/21/2005 3,538,248 19,000,000 International Bank for Reconstruction & Development ........ 4.75% 04/30/2004 19,837,298 8,600,000 International Bank for Reconstruction & Development ........ 3.50% 10/22/2004 8,884,624 15,000,000 International Bank for Reconstruction & Development ........ 4.00% 01/10/2005 15,673,511 11,625,000 International Bank for Reconstruction & Development ........ 7.00% 01/27/2005 12,843,005 1,500,000 International Business Machines Corp ....................... 5.63% 04/12/2004 1,574,314 800,000 International Business Machines Corp ....................... 4.13% 06/30/2005 836,342 2,800,000 International Finance Corp ................................. 7.13% 04/06/2005 3,119,015 365,000 International Lease Finance Corp ........................... 5.13% 08/01/2004 376,461 6,800,000 International Paper Co ..................................... 8.13% 07/08/2005 7,606,169 94,000 Interpublic Group Cos Inc .................................. 7.88% 10/15/2005 91,180 900,000 IOS Capital LLC ............................................ 9.75% 06/15/2004 909,000 8,090,000 Italy Government International Bond ........................ 7.25% 02/07/2005 8,970,697 5,000,000 Italy Government International Bond ........................ 5.25% 01/16/2004 5,202,366 8,800,000 Italy Government International Bond ........................ 4.63% 06/15/2005 9,319,405 2,500,000 Japan Bank for International Cooperation ................... 7.13% 06/20/2005 2,792,158 1,500,000 John Deere Capital Corp .................................... 4.13% 07/15/2005 1,564,503 2,810,000 JP Morgan & Co Inc/Old ..................................... 7.63% 09/15/2004 3,062,374 3,950,000 JP Morgan & Co Inc/Old ..................................... 6.25% 12/15/2005 4,310,773 2,100,000 JP Morgan & Co Inc/Old ..................................... 5.75% 02/25/2004 2,187,323 3,000,000 JP Morgan Chase & Co ....................................... 5.75% 04/15/2004 3,130,766 300,000 JP Morgan Chase & Co ....................................... 6.75% 12/01/2004 323,072 925,000 Kansas City Power & Light Co/New ........................... 7.13% 12/15/2005 1,014,344 1,000,000 Kellogg Co ................................................. 4.88% 10/15/2005 1,057,266 3,250,000 Kerr-McGee Corp ............................................ 5.38% 04/15/2005 3,425,307 2,000,000 KeyBank National Association ............................... 4.10% 06/30/2005 2,063,781 670,000 Keycorp .................................................... 4.63% 05/16/2005 697,582 1,544,000 Keycorp .................................................... 7.25% 06/01/2005 1,702,680 3,650,000 KeySpan Corp ............................................... 7.25% 11/15/2005 4,084,678
The accompanying notes are an integral part of these financial statements. SAI-309 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 2,000,000 KFW International Finance ........................... 7.63% 02/15/2004 $ 2,139,177 8,600,000 KFW International Finance ........................... 7.13% 02/15/2005 9,556,174 5,000,000 KFW International Finance ........................... 3.75% 10/01/2004 5,178,163 3,000,000 KFW International Finance ........................... 4.30% 03/21/2005 3,016,166 8,200,000 KFW International Finance ........................... 4.25% 04/18/2005 8,595,099 3,000,000 KFW International Finance ........................... 3.00% 09/15/2005 3,056,756 10,150,000 KFW International Finance ........................... 2.50% 10/17/2005 10,241,095 975,000 Kinder Morgan Energy Partners LP .................... 8.00% 03/15/2005 1,069,524 200,000 Kinder Morgan Inc ................................... 6.65% 03/01/2005 212,822 3,100,000 Korea Development Bank .............................. 7.38% 09/17/2004 3,361,022 7,300,000 Korea Development Bank .............................. 7.13% 04/22/2004 7,768,283 1,150,000 Lafarge North America Inc ........................... 6.38% 07/15/2005 1,237,211 100,000 Landesbank Baden-Wuerttemberg Girozentrale .......... 7.88% 04/15/2004 108,139 1,100,000 Lehman Brothers Holdings Inc ........................ 7.38% 05/15/2004 1,181,231 6,252,000 Lehman Brothers Holdings Inc ........................ 6.63% 04/01/2004 6,619,347 8,100,000 Lehman Brothers Holdings Inc ........................ 7.75% 01/15/2005 8,957,717 4,845,000 Lenfest Communications Inc .......................... 8.38% 11/01/2005 5,225,412 2,550,000 Lowe's Cos Inc ...................................... 7.50% 12/15/2005 2,907,345 2,400,000 Mack-Cali Realty LP ................................. 7.00% 03/15/2004 2,508,458 2,000,000 Marriott International Inc .......................... 6.88% 11/15/2005 2,163,067 2,000,000 Marsh & McLennan Cos Inc ............................ 6.63% 06/15/2004 2,133,655 1,000,000 Marshall & Ilsley Corp .............................. 5.75% 09/01/2006 1,094,976 1,500,000 Masco Corp .......................................... 6.00% 05/03/2004 1,571,787 3,250,000 MBNA America Bank ................................... 7.75% 09/15/2005 3,551,450 2,000,000 Mellon Bank NA ...................................... 6.50% 08/01/2005 2,197,827 480,000 Mellon Funding Corp ................................. 7.50% 06/15/2005 537,425 4,650,000 Merck & Co Inc ...................................... 4.13% 01/18/2005 4,863,991 1,700,000 Merrill Lynch & Co Inc .............................. 5.70% 02/06/2004 1,764,688 4,500,000 Merrill Lynch & Co Inc .............................. 5.35% 06/15/2004 4,702,223 2,500,000 Merrill Lynch & Co Inc .............................. 6.55% 08/01/2004 2,665,174 2,800,000 Merrill Lynch & Co Inc .............................. 6.00% 11/15/2004 2,980,265 1,000,000 Merrill Lynch & Co Inc .............................. 5.46% 05/07/2004 1,043,845 3,620,000 Mexico Government International Bond ................ 9.75% 04/06/2005 4,144,900 300,000 Midamerican Energy Holdings Co ...................... 7.23% 09/15/2005 323,016 600,000 Mitchell Energy & Development Corp .................. 6.75% 02/15/2004 627,548 2,000,000 Mony Group Inc ...................................... 7.45% 12/15/2005 2,150,229 8,860,000 Morgan Stanley ...................................... 7.75% 06/15/2005 9,945,356 6,350,000 Morgan Stanley ...................................... 5.63% 01/20/2004 6,590,604 1,250,000 Nabisco Inc ......................................... 6.85% 06/15/2005 1,382,821 300,000 Nabisco Inc ......................................... 6.38% 02/01/2005 323,152 120,000 Nabors Industries Ltd ............................... 6.80% 04/15/2004 126,977
The accompanying notes are an integral part of these financial statements. SAI-310 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 1,502,000 National City Corp ................................. 6.63% 03/01/2004 $ 1,584,898 400,000 National City Corp ................................. 7.20% 05/15/2005 443,029 2,905,000 National Rural Util Coop Fin ....................... 6.00% 01/15/2004 3,022,479 100,000 National Rural Util Coop Fin ....................... 6.13% 05/15/2005 107,888 1,000,000 National Rural Util Coop Fin ....................... 5.50% 01/15/2005 1,059,330 3,200,000 National Rural Util Coop Fin ....................... 5.25% 07/15/2004 3,344,661 1,900,000 NCNB Texas National Bk Dallas ...................... 9.50% 06/01/2004 2,096,723 2,000,000 New Brunswick Province of .......................... 6.50% 06/20/2005 2,203,342 1,250,000 New Jersey Bell Telephone .......................... 5.88% 02/01/2004 1,300,960 200,000 New York Life Insurance Co ......................... 6.40% 12/15/2003 207,280 1,320,000 New York Telephone Co .............................. 6.50% 03/01/2005 1,429,268 400,000 New Zealand Government International Bond .......... 10.63% 11/15/2005 486,468 325,000 Newcourt Credit Group Inc .......................... 6.88% 02/16/2005 342,500 2,500,000 News America Holdings .............................. 8.50% 02/15/2005 2,718,734 2,935,000 Nexen Inc .......................................... 7.13% 02/04/2004 3,062,507 3,350,000 Niagara Mohawk Power Corp .......................... 8.00% 06/01/2004 3,582,142 114,171 Niagara Mohawk Power Corp .......................... 7.38% 07/01/2003 116,845 56,707 Niagara Mohawk Power Corp .......................... 7.63% 10/01/2005 63,026 2,425,000 Nisource Finance Corp .............................. 7.63% 11/15/2005 2,563,451 1,510,000 Noranda Inc ........................................ 8.13% 06/15/2004 1,584,919 3,150,000 Nordic Investment Bank ............................. 2.75% 01/11/2006 3,189,926 1,200,000 Nordstrom Inc ...................................... 8.95% 10/15/2005 1,384,438 2,300,000 Norfolk Southern Corp .............................. 8.38% 05/15/2005 2,593,925 1,190,000 Northern Trust Co .................................. 6.65% 11/09/2004 1,287,797 1,900,000 Northrop Grumman Corp .............................. 8.63% 10/15/2004 2,094,880 1,000,000 Occidental Petroleum Corp .......................... 6.50% 04/01/2005 1,081,918 4,000,000 Oesterreichische Kontrollbank AG ................... 3.63% 10/18/2004 4,139,675 1,100,000 Pacific Bell ....................................... 7.00% 07/15/2004 1,185,575 100,000 Pacific Bell ....................................... 6.25% 03/01/2005 108,416 100,000 Pacificorp ......................................... 6.75% 07/15/2004 105,945 70,000 Pemex Finance Ltd .................................. 9.14% 08/15/2004 73,870 1,555,000 PennzEnergy Co ..................................... 10.25% 11/01/2005 1,847,366 50,000 Pepsi Bottling Holdings Inc ........................ 5.38% 02/17/2004 51,935 3,000,000 PepsiCo Inc ........................................ 4.50% 09/15/2004 3,131,545 2,980,000 Petroleos Mexicanos ................................ 6.50% 02/01/2005 3,143,900 2,400,000 Pfizer Inc ......................................... 3.63% 11/01/2004 2,482,378 150,000 Pharmacia Corp ..................................... 5.75% 12/01/2005 163,640 2,500,000 Philip Morris Cos Inc .............................. 7.13% 10/01/2004 2,676,213 3,275,000 Philip Morris Cos Inc .............................. 7.00% 07/15/2005 3,560,242 1,000,000 Pitney Bowes Inc ................................... 5.95% 02/01/2005 1,081,379 800,000 PNC Funding Corp ................................... 7.75% 06/01/2004 859,294
The accompanying notes are an integral part of these financial statements. SAI-311 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
---------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ---------------------------------------------------------------------------------------------------------------------------- USD 2,100,000 PNC Funding Corp ...................................... 7.00% 09/01/2004 $ 2,254,077 2,000,000 Poland Government International Bond .................. 7.13% 07/01/2004 2,159,500 800,000 POSCO ................................................. 7.38% 05/15/2005 884,877 4,050,000 Powergen US Funding LLC ............................... 4.50% 10/15/2004 4,153,015 900,000 PP&L Capital Funding Inc .............................. 7.75% 04/15/2005 947,441 1,000,000 PPG Industries Inc .................................... 6.75% 08/15/2004 1,065,859 1,000,000 Praxair Inc ........................................... 6.85% 06/15/2005 1,101,218 4,765,000 Procter & Gamble Co ................................... 6.60% 12/15/2004 5,203,062 3,575,000 Progress Energy Inc ................................... 6.55% 03/01/2004 3,711,690 2,200,000 Prologis .............................................. 6.70% 04/15/2004 2,302,175 400,000 Province of Manitoba .................................. 6.13% 01/19/2004 419,868 3,100,000 Province of Ontario ................................... 7.63% 06/22/2004 3,372,404 3,790,000 Province of Ontario ................................... 7.00% 08/04/2005 4,242,259 1,200,000 Province of Ontario ................................... 4.20% 06/30/2005 1,259,374 100,000 Province of Quebec .................................... 8.63% 01/19/2005 113,187 1,500,000 Province of Saskatchewan/Canada ....................... 8.00% 07/15/2004 1,643,303 1,500,000 PSEG Energy Holdings Inc .............................. 9.13% 02/10/2004 1,485,000 1,000,000 Public Service Electric & Gas ......................... 9.13% 07/01/2005 1,150,439 300,000 Ralcorp Holdings Inc-Old .............................. 8.75% 09/15/2004 331,661 1,450,000 Raytheon Co ........................................... 6.50% 07/15/2005 1,560,629 3,800,000 Raytheon Co ........................................... 6.30% 03/15/2005 4,055,458 5,600,000 Repsol International Finance BV ....................... 7.45% 07/15/2005 5,628,000 1,000,000 Republic Services Inc ................................. 6.63% 05/15/2004 1,048,397 2,250,000 Rockwell International Corp/Old ....................... 6.63% 06/01/2005 2,434,895 750,000 Rockwell International Corp/Old ....................... 7.88% 02/15/2005 826,279 1,715,000 Rohm & Haas Co ........................................ 6.95% 07/15/2004 1,843,647 35,000 Safeway Inc ........................................... 6.85% 09/15/2004 37,448 2,700,000 Safeway Inc ........................................... 7.25% 09/15/2004 2,906,749 810,000 Safeway Inc ........................................... 3.80% 08/15/2005 824,358 5,000,000 Salomon Smith Barney Holdings Inc ..................... 7.20% 02/01/2004 5,262,202 430,000 Salomon Smith Barney Holdings Inc ..................... 6.38% 10/01/2004 457,890 2,000,000 Santa FE Pacific Gold Corp ............................ 8.38% 07/01/2005 2,189,258 2,000,000 Santander Financial Issuances ......................... 7.75% 05/15/2005 2,192,609 400,000 Santander Financial Issuances ......................... 6.80% 07/15/2005 431,973 2,000,000 Sears Roebuck Acceptance .............................. 6.75% 09/15/2005 2,000,000 1,350,000 Sears Roebuck and Co .................................. 6.25% 01/15/2004 1,356,750 1,675,000 Sempra Energy ......................................... 6.95% 12/01/2005 1,802,652 1,150,000 Simon Property Group LP ............................... 6.75% 06/15/2005 1,235,238 3,000,000 Simon Property Group LP ............................... 6.75% 02/09/2004 3,118,149 1,000,000 Southern New England Telecommunications Corp .......... 7.00% 08/15/2005 1,112,414 800,000 Southwestern Electric Power ........................... 4.50% 07/01/2005 784,468
The accompanying notes are an integral part of these financial statements. SAI-312 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 6,400,000 Spain Government International Bond .......... 7.00% 07/19/2005 $ 7,170,477 250,000 Spieker Properties Inc ....................... 8.00% 07/19/2005 277,430 200,000 Spieker Properties Inc ....................... 6.80% 05/01/2004 209,058 3,880,000 Sprint Capital Corp .......................... 5.88% 05/01/2004 3,860,600 2,700,000 Sprint Capital Corp .......................... 7.90% 03/15/2005 2,700,000 300,000 St Paul Cos .................................. 7.88% 04/15/2005 327,087 1,892,000 Sun Microsystems Inc ......................... 7.35% 08/15/2004 1,986,635 3,280,000 SunTrust Banks Inc ........................... 6.13% 02/15/2004 3,437,966 1,510,000 Supervalu Inc ................................ 7.63% 09/15/2004 1,587,905 3,800,000 Svenska Handelsbanken/NY ..................... 8.35% 07/15/2004 4,172,584 1,100,000 Swiss Bank Corp NY ........................... 6.75% 07/15/2005 1,217,328 100,000 Target Corp .................................. 7.50% 02/15/2005 110,824 805,000 TCI Communications Inc ....................... 8.65% 09/15/2004 857,198 25,000 TCI Communications Inc ....................... 8.00% 08/01/2005 26,895 3,100,000 Tele-Communications-TCI Group ................ 7.25% 08/01/2005 3,279,214 5,090,000 Telefonica Europe BV ......................... 7.35% 09/15/2005 5,605,940 1,000,000 Texaco Capital Inc ........................... 6.00% 06/15/2005 1,094,257 195,000 Texas Instruments Inc ........................ 7.00% 08/15/2004 208,935 4,000,000 Textron Financial Corp ....................... 5.95% 03/15/2004 4,141,835 2,000,000 Textron Financial Corp ....................... 7.13% 12/09/2004 2,148,006 300,000 Textron Inc .................................. 6.38% 07/15/2004 314,990 2,200,000 Time Warner Inc .............................. 7.75% 06/15/2005 2,344,933 800,000 Time Warner Inc .............................. 7.98% 08/15/2004 844,552 1,725,000 Toyota Motor Credit Corp ..................... 2.80% 01/18/2006 1,738,905 1,800,000 Toyota Motor Credit Corp ..................... 4.05% 11/30/2004 1,870,356 100,000 Transamerica Finance Corp .................... 7.50% 03/15/2004 105,442 2,975,000 Transocean Inc ............................... 6.75% 04/15/2005 3,215,063 3,670,000 TRW Inc ...................................... 6.63% 06/01/2004 3,876,934 100,000 TXU Corp ..................................... 6.38% 10/01/2004 105,986 2,830,000 Tyson Foods Inc .............................. 6.63% 10/01/2004 3,003,745 120,000 UBS Paine Webber Group Inc ................... 6.38% 05/15/2004 126,907 5,770,000 Unilever Capital Corp ........................ 6.88% 11/01/2005 6,481,871 1,225,000 Union Oil Co Of California ................... 7.20% 05/15/2005 1,345,762 1,705,000 Union Pacific Corp ........................... 7.60% 05/01/2005 1,897,959 610,000 Union Pacific Corp ........................... 5.84% 05/25/2004 641,773 1,500,000 United Business Media PLC .................... 7.25% 07/01/2004 1,578,898 425,000 United Technologies Corp ..................... 6.63% 11/15/2004 460,569 2,000,000 United Utilities Plc ......................... 6.25% 08/15/2005 2,132,970 2,035,000 UnitedHealth Group Inc ....................... 7.50% 11/15/2005 2,294,269 950,000 US Bancorp/First Bank-Old .................... 6.00% 05/15/2004 1,002,815 3,000,000 US Bancorp/First Bank-Old .................... 6.50% 06/15/2004 3,196,022
The accompanying notes are an integral part of these financial statements. SAI-313 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Continued)
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- USD 1,200,000 US Bancorp/First Bank-Old ................. 6.88% 12/01/2004 $ 1,306,388 500,000 US Bancorp/First Bank-Old ................. 7.63% 05/01/2005 558,437 2,010,000 USA Interactive ........................... 6.75% 11/15/2005 2,105,772 1,600,000 USX Corp/Consolidated ..................... 7.20% 02/15/2004 1,685,948 5,545,000 Verizon Global Funding Corp ............... 6.75% 12/01/2005 6,106,018 2,065,000 VF Corp ................................... 8.10% 10/01/2005 2,326,446 4,765,000 Viacom Inc ................................ 7.75% 06/01/2005 5,330,156 1,400,000 Virginia Electric and Power Co ............ 8.00% 03/01/2004 1,490,761 1,500,000 Visteon Corp .............................. 7.95% 08/01/2005 1,640,506 7,475,000 Vodafone Group Plc ........................ 7.63% 02/15/2005 8,254,078 1,030,000 Vulcan Materials Co ....................... 5.75% 04/01/2004 1,074,210 2,300,000 Wachovia Corp ............................. 6.63% 07/15/2005 2,531,365 100,000 Wachovia Corp ............................. 7.05% 08/01/2005 111,258 100,000 Wachovia Corp ............................. 7.10% 08/15/2004 108,054 2,025,000 Wachovia Corp ............................. 6.95% 11/01/2004 2,198,410 4,000,000 Wachovia Corp ............................. 7.70% 02/15/2005 4,443,272 4,770,000 Wachovia Corp ............................. 7.55% 08/18/2005 5,378,092 2,000,000 Wachovia Corp/Old ......................... 6.80% 06/01/2005 2,202,913 900,000 Wachovia Corp/Old ......................... 6.70% 06/21/2004 962,892 3,000,000 Wachovia Corp/Old ......................... 7.45% 07/15/2005 3,365,437 1,000,000 Wal-Mart Stores Inc ....................... 7.50% 05/15/2004 1,080,958 6,490,000 Wal-Mart Stores Inc ....................... 6.55% 08/10/2004 6,987,776 1,500,000 Wal-Mart Stores Inc ....................... 4.15% 06/15/2005 1,574,524 3,620,000 Wal-Mart Stores Inc ....................... 5.88% 10/15/2005 3,983,287 4,100,000 Walt Disney Co ............................ 7.30% 02/08/2005 4,461,177 6,285,000 Walt Disney Co ............................ 4.88% 07/02/2004 6,490,232 500,000 Walt Disney Co ............................ 4.50% 09/15/2004 514,934 1,500,000 Washington Mutual Financial Corp .......... 7.38% 09/01/2004 1,620,463 2,000,000 Washington Mutual Financial Corp .......... 8.25% 06/15/2005 2,253,353 4,415,000 Wells Fargo (OLD) ......................... 6.63% 07/15/2004 4,731,492 700,000 Wells Fargo & Co .......................... 6.50% 06/01/2005 765,776 2,125,000 Wells Fargo & Co .......................... 4.80% 07/29/2005 2,248,431 6,875,000 Wells Fargo & Co .......................... 7.25% 08/24/2005 7,702,420 3,800,000 Wells Fargo Financial Inc ................. 7.00% 11/01/2005 4,246,265 2,800,000 Wells Fargo Financial Inc ................. 5.45% 05/03/2004 2,936,614 1,350,000 Wells Fargo Financial Inc ................. 6.00% 02/01/2004 1,410,244 2,000,000 Wells Fargo Financial Inc ................. 7.50% 04/15/2005 2,224,824 1,000,000 Westvaco Corp/NY .......................... 6.85% 11/15/2004 1,069,378 4,970,000 Weyerhaeuser Co ........................... 5.50% 03/15/2005 5,206,256 4,855,000 Wyeth ..................................... 7.90% 02/15/2005 5,377,766
The accompanying notes are an integral part of these financial statements. SAI-314 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002 (Concluded)
----------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------- USD 2,005,000 Wyeth ................................ 5.88% 03/15/2004 $ 2,087,258 ----------------------------------------------------------------------------------------------------------- 1,321,783,385 ----------------------------------------------------------------------------------------------------------- TOTAL DEBT INSTRUMENTS ............... 1,335,437,081 ----------------------------------------------------------------------------------------------------------- UNITS ----------------------------------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS -- 1.4% 18,997,626 Short Term Investment Fund(3) ........ 18,997,626 -----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $1,320,962,034) ..................................... $1,354,434,707 ===========================================================================================================
1 Step Coupon Bond. Rate disclosed was that which was in effect at December 31, 2002. 2 Denotes a zero coupon bond. 3 Collective investment fund advised by State Street Global Advisors. USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-315 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Passive 1-3 Year Credit Index Fund (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match the return of the Lehman Brothers 1-3 Year Credit Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Fixed income investments are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Distributions received from collective investment funds are recorded on the ex-dividend date and retain the character of income as earned by the underlying fund. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-316 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY PASSIVE 1-3 YEAR CREDIT INDEX FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 F. DISTRIBUTIONS TO PARTICIPANTS Net investment income and net realized gains are retained by the Fund. 3. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $3,888,568,999 and $2,543,223,809, respectively. SAI-317 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Long Corporate Index Securities Lending Fund and State Street Bank and Trust Company Long Corporate Index Fund In our opinion, the accompanying combined statement of assets and liabilities, including the combined schedule of investments, and the related combined statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Long Corporate Index Securities Lending Fund and State Street Bank and Trust Company Long Corporate Index Fund at December 31, 2002, and the results of their operations, the changes in their net assets and each of their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 21, 2003 SAI-318 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value, (including securities on loan of $58,307,784) (cost $1,565,241,864) ............................................................... $1,690,806,065 Cash ................................................................................. 37,267 Investments held as collateral for securities loaned ................................. 60,013,125 Receivable for investments sold ...................................................... 19,596,775 Interest receivable .................................................................. 29,413,151 -------------------------------------------------------------------------------------------------------- Total assets ...................................................................... 1,799,866,383 -------------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral on securities loaned .......................................... 60,013,125 Payable for investments purchased .................................................... 9,558,509 Accrued expenses ..................................................................... 34,460 -------------------------------------------------------------------------------------------------------- Total liabilities ................................................................. 69,606,094 -------------------------------------------------------------------------------------------------------- NET ASSETS ........................................................................... $1,730,260,289 ======================================================================================================== LONG CORPORATE INDEX SECURITIES LENDING FUND (92,401,934 units outstanding, at $15.93 per unit net asset value) .................. $1,472,280,196 LONG CORPORATE INDEX FUND (16,191,116 units outstanding, at $15.93 per unit net asset value) .................. 257,980,093 -------------------------------------------------------------------------------------------------------- $1,730,260,289 ========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-319 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Statement of Operations Year Ended December 31, 2002 ----------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest ................................................................................ $ 109,132,502 Securities lending fee income (net of related expenses), allocated to the Lending Fund .. 169,089 ----------------------------------------------------------------------------------------------------------- Total investment income ............................................................... 109,301,591 ----------------------------------------------------------------------------------------------------------- EXPENSES Custody ................................................................................. 316,505 Audit ................................................................................... 23,500 Other ................................................................................... 23,596 ----------------------------------------------------------------------------------------------------------- Total expenses ........................................................................ 363,601 ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .......................................................... 108,937,990 ----------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss): Investments ........................................................................... (52,987,027) ----------------------------------------------------------------------------------------------------------- (52,987,027) ----------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation): Investments ........................................................................... 110,047,939 ----------------------------------------------------------------------------------------------------------- 110,047,939 ----------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) ................................................. 57,060,912 ----------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ 165,998,902 ===========================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-320 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) ............................................................. $ 108,937,990 $ 91,603,122 Net realized gain (loss) ................................................................. (52,987,027) (12,776,366) Net change in unrealized appreciation (depreciation) ..................................... 110,047,939 44,070,774 ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations ....................... 165,998,902 122,897,530 ------------------------------------------------------------------------------------------------------------------------------ Distributions of security lending fee income, allocated to the Lending Fund participants . (169,089) (152,549) Net increase (decrease) in net assets resulting from participant transactions ............ 5,721,314 390,431,124 ------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS .................................................... 171,551,127 513,176,105 NET ASSETS Beginning of year ....................................................................... 1,558,709,162 1,045,533,057 ------------------------------------------------------------------------------------------------------------------------------ End of year ............................................................................. $1,730,260,289 $1,558,709,162 ==============================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-321 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Statement of Changes in Net Assets (Continued) Year ended December 31, 2002
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 2002 2001 ---------------------------------- ---------------------------------- UNITS AMOUNT UNITS AMOUNT ---------------- ----------------- ---------------- ----------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: LENDING FUND Units issued ......................................... 37,574,597 $ 561,079,448 43,533,344 $ 616,629,974 Units redeemed ....................................... (35,923,510) (524,619,643) (33,873,203) (473,669,084) ---------------------------------------------------------------------------------------------------------------------------- Total ............................................... 1,651,087 $ 36,459,805 9,660,141 $ 142,960,890 ---------------------------------------------------------------------------------------------------------------------------- NON-LENDING FUND Units issued ......................................... 9,762,227 $ 143,293,183 23,282,674 $ 322,792,468 Units redeemed ....................................... (11,802,381) (174,031,674) (5,393,955) (75,322,234) ---------------------------------------------------------------------------------------------------------------------------- Total ............................................. (2,040,154) $ (30,738,491) 17,888,719 $ 247,470,234 ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) .............................. (389,067) $ 5,721,314 27,548,860 $ 390,431,124 ============================================================================================================================
LENDING FUND Units in excess of 10% of the Lending Fund units outstanding at December 31, 2002 held by 2 of the Lending Fund's unitholders aggregated 88% of the Lending Fund's total units outstanding. NON-LENDING FUND Units in excess of 10% of the Non-Lending Fund units outstanding at December 31, 2002 held by 4 of the Non-Lending Fund's unitholders aggregated 96% of the Non-Lending Fund's total units outstanding. The accompanying notes are an integral part of these financial statements. SAI-322 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------------- 2002 2001 2000 1999 1998 -------------------------------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year .............. $ 14.30 $ 12.84 $ 11.74 $ 12.46 $ 11.40 -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) ................ 1.04 0.99 0.95 0.87 0.83 Net realized and unrealized gain (loss) ......... 0.59 0.47 0.15 (1.59) 0.23 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations ................ 1.63 1.46 1.10 (0.72) 1.06 Distributions of securities lending fee income (b) ..................................... (0.00) (0.00) (0.00) (0.00) (0.00) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of year .................... $ 15.93 $ 14.30 $ 12.84 $ 11.74 $ 12.46 ================================================================================================================================ Total return (%) (c) ............................ 11.42 11.39 9.37 (5.78) 9.30 ================================================================================================================================ RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) ........................... 0.02 0.02 0.02 0.01 0.01 -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) (%) ............................................ 7.06 7.18 7.79 7.36 6.99 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) .......................... 89.61 128.49 112.09 51.01 51.90 -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000's) ................. $1,472,280 $1,297,958 $1,041,135 $721,618 $682,593 ================================================================================================================================
(a) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (b) Zero amounts represent that which are less than $0.005 or 0.005% or $(0.005) or (0.005%) if negative. (c) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. The calculation includes only those expenses charged directly to the Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. The accompanying notes are an integral part of these financial statements. SAI-323 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, --------------------------------------- 2002 2001 2000 (a) --------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year ................ $ 14.30 $ 12.84 $ 12.39 --------------------------------------------------------------------------------------------- Net investment income (loss) (b) .................. 1.04 0.99 0.16 Net realized and unrealized gain (loss) ........... 0.59 0.47 0.29 --------------------------------------------------------------------------------------------- Total from investment operations .................. 1.63 1.46 0.45 --------------------------------------------------------------------------------------------- Net asset value, end of year ...................... $ 15.93 $ 14.30 $ 12.84 ============================================================================================= Total return (%) (c) .............................. 11.40 11.39 3.63 ============================================================================================= RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) ............................. 0.02 0.02 0.02 --------------------------------------------------------------------------------------------- Ratio of net investment income (loss) (%) ......... 7.05 7.18 7.79 --------------------------------------------------------------------------------------------- Portfolio turnover (%) ............................ 89.61 128.49 112.09 --------------------------------------------------------------------------------------------- Net assets, end of year (000's) ................... $257,980 $260,751 $ 4,398 =============================================================================================
(a) The Non-Lending Fund commenced operations on October 31, 2000. (b) Net investment income (loss) per unit has been calculated based upon an average of month-end units outstanding. (c) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year. The calculation includes only those expenses charged directly to the Non-Lending Fund. The result may be reduced by any administrative or other fees which are incurred in the management or maintenance of individual participant accounts. The accompanying notes are an integral part of these financial statements. SAI-324 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- DEBT INSTRUMENTS -- 99.1% CANADA -- 0.4% USD 2,465,000 Canadian National Railway Co ............. 6.90% 07/15/2028 $ 2,809,206 800,000 Nova Scotia Province of .................. 8.75% 04/01/2022 1,119,358 860,000 Province of Saskatchewan/Canada .......... 8.50% 07/15/2022 1,183,146 1,550,000 TransCanada PipeLines Ltd ................ 8.50% 03/20/2023 1,636,243 ----------- ------------------------------------------ ---- ---------- -------------- 6,747,953 ---------------------------------------------------------------------------------------------------- UNITED STATES -- 98.7% USD 1,050,000 3M Co .................................... 6.38% 02/15/2028 1,163,385 3,990,000 Abbey National Plc ....................... 7.95% 10/26/2029 4,890,143 2,320,000 ABN Amro Bank NV/Chicago ................. 7.30% 12/01/2026 2,561,374 775,000 ABN Amro Bank NV/New York ................ 7.75% 05/15/2023 884,344 1,205,000 Ace Capital Trust II ..................... 9.70% 04/01/2030 1,455,323 1,000,000 AETNA INC ................................ 6.75% 09/15/2013 1,145,835 1,400,000 Aetna Inc/Old ............................ 6.97% 08/15/2036 1,553,402 2,485,000 African Development Bank ................. 8.80% 09/01/2019 3,345,383 2,195,000 Ahold Finance USA Inc .................... 6.88% 05/01/2029 2,016,821 900,000 Alabama Power Co ......................... 5.50% 10/15/2017 944,156 850,000 Alabama Power Co ......................... 5.88% 12/01/2022 871,577 1,800,000 Alberta Energy Co Ltd .................... 8.13% 09/15/2030 2,281,112 1,600,000 Alberta Energy Co Ltd .................... 7.38% 11/01/2031 1,877,362 2,885,000 Albertson's Inc .......................... 7.45% 08/01/2029 3,193,795 1,750,000 Albertson's Inc .......................... 8.70% 05/01/2030 2,201,396 1,000,000 Albertson's Inc .......................... 7.25% 05/01/2013 1,151,355 250,000 Albertson's Inc .......................... 6.63% 06/01/2028 250,112 1,000,000 Albertson's Inc .......................... 7.75% 06/15/2026 1,133,500 50,000 Albertson's Inc .......................... 8.00% 05/01/2031 58,909 2,125,000 Alcan Inc ................................ 7.25% 03/15/2031 2,570,212 1,900,000 Alcoa Inc ................................ 5.38% 01/15/2013 2,005,504 450,000 Alcoa Inc ................................ 6.75% 01/15/2028 508,621 1,900,000 Alcoa Inc ................................ 6.50% 06/15/2018 2,062,752 1,000,000 Allegiance Corp .......................... 7.00% 10/15/2026 1,036,650 60,000 Allstate Corp/The ........................ 6.75% 05/15/2018 64,217 950,000 Allstate Corp/The ........................ 7.50% 06/15/2013 1,152,334 960,000 Allstate Corp/The ........................ 6.90% 05/15/2038 1,060,141 900,000 Allstate Corp/The ........................ 6.13% 12/15/2032 923,059 2,280,000 Allstate Financing II .................... 7.83% 12/01/2045 2,505,548 1,400,000 Alltel Corp .............................. 7.00% 03/15/2016 1,620,187 1,350,000 Alltel Corp .............................. 6.80% 05/01/2029 1,410,959 1,710,000 Alltel Corp .............................. 7.88% 07/01/2032 2,071,374
The accompanying notes are an integral part of these financial statements. SAI-325 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 4,080,000 Amerada Hess Corp .................... 7.88% 10/01/2029 $ 4,694,241 2,325,000 Amerada Hess Corp .................... 7.30% 08/15/2031 2,519,984 2,260,000 Amerada Hess Corp .................... 7.13% 03/15/2033 2,401,584 985,000 AmerenEnergy Generating Co ........... 7.95% 06/01/2032 1,102,163 139,181 America West Airlines Inc ............ 7.10% 04/02/2021 141,965 2,022,311 America West Airlines Inc ............ 7.93% 01/02/2019 2,062,757 270,485 America West Airlines Inc ............ 8.06% 07/02/2020 275,894 845,753 American Airlines Inc ................ 6.98% 05/23/2021 701,975 2,080,000 American General Capital II .......... 8.50% 07/01/2030 2,710,793 25,000 American General Corp ................ 7.50% 07/15/2025 30,340 1,250,000 American RE Corp ..................... 7.45% 12/15/2026 1,354,595 1,500,000 American Stores Co ................... 8.00% 06/01/2026 1,711,058 250,000 Ameritech Capital Funding ............ 6.88% 10/15/2027 273,187 3,100,000 Ameritech Capital Funding ............ 6.45% 01/15/2018 3,239,734 2,600,000 Ameritech Capital Funding ............ 6.55% 01/15/2028 2,735,085 1,900,000 Ameritech Capital Funding ............ 5.95% 01/15/2038 2,007,763 5,390,000 Anadarko Finance Co .................. 7.50% 05/01/2031 6,408,627 1,700,000 Anheuser-Busch Cos Inc ............... 7.13% 07/01/2017 1,882,578 1,465,000 Anheuser-Busch Cos Inc ............... 7.55% 10/01/2030 1,847,439 1,600,000 Anheuser-Busch Cos Inc ............... 6.80% 08/20/2032 1,855,220 1,850,000 Anheuser-Busch Cos Inc ............... 6.00% 11/01/2041 1,924,103 875,000 Anheuser-Busch Cos Inc ............... 6.50% 02/01/2043 978,701 900,000 Anheuser-Busch Cos Inc ............... 4.38% 01/15/2013 894,208 2,335,000 Anheuser-Busch Cos Inc ............... 5.95% 01/15/2033 2,425,128 500,000 Anheuser-Busch Cos Inc ............... 7.25% 09/15/2015 551,889 100,000 Anheuser-Busch Cos Inc ............... 6.80% 01/15/2031 115,603 6,535,000 AOL Time Warner Inc .................. 7.63% 04/15/2031 6,738,173 5,900,000 AOL Time Warner Inc .................. 7.70% 05/01/2032 6,138,406 3,500,000 AON Corp ............................. 8.21% 01/01/2027 3,215,212 1,000,000 Apache Corp .......................... 7.63% 11/01/2096 1,230,794 2,100,000 Apache Corp .......................... 7.00% 02/01/2018 2,364,345 400,000 Apache Finance Canada Corp ........... 7.75% 12/15/2029 503,037 125,000 Applied Materials Inc ................ 7.13% 10/15/2017 140,281 100,000 Archer-Daniels-Midland Co ............ 6.75% 12/15/2027 110,597 2,500,000 Archer-Daniels-Midland Co ............ 6.95% 12/15/2097 2,739,474 650,000 Archer-Daniels-Midland Co ............ 7.13% 03/01/2013 767,798 1,600,000 Archer-Daniels-Midland Co ............ 7.50% 03/15/2027 1,920,272 1,960,000 Archer-Daniels-Midland Co ............ 6.63% 05/01/2029 2,145,559 1,215,000 Archer-Daniels-Midland Co ............ 7.00% 02/01/2031 1,398,900 2,210,000 Archer-Daniels-Midland Co ............ 5.88% 10/01/2032 2,229,633 5,300,000 Asian Development Bank ............... 5.82% 06/16/2028 5,894,271
The accompanying notes are an integral part of these financial statements. SAI-326 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 4,150,000 Associates Corp Of N. America ............. 6.95% 11/01/2018 $ 4,722,973 10,550,000 AT&T Broadband ............................ 8.38% 03/15/2013 11,945,893 4,747,000 AT&T Broadband ............................ 9.46% 11/15/2022 5,565,160 11,635,000 AT&T Corp ................................. 6.50% 03/15/2013 11,654,829 60,000 AT&T Corp ................................. 8.63% 12/01/2031 61,787 11,875,000 AT&T Corp ................................. 8.00% 11/15/2031 13,055,420 10,467,000 AT&T Wireless Services Inc ................ 8.75% 03/01/2031 10,257,660 835,086 Atlas Air Inc ............................. 7.38% 01/02/2018 576,209 1,550,000 Auburn Hills Trust ........................ 12.00% 05/01/2020 2,338,689 3,545,000 AXA ....................................... 8.60% 12/15/2030 4,048,548 1,600,000 AXA Financial Inc ......................... 7.00% 04/01/2028 1,659,692 3,060,000 Baker Hughes Inc .......................... 6.88% 01/15/2029 3,423,175 1,500,000 Bank of America Corp ...................... 5.13% 11/15/2014 1,533,352 2,750,000 Bank of America Corp ...................... 7.75% 08/15/2015 3,429,193 550,000 Bank of America Corp ...................... 7.25% 10/15/2025 643,042 1,050,000 Bank of America Corp ...................... 7.80% 09/15/2016 1,323,986 4,750,000 Bank of America Corp ...................... 6.80% 03/15/2028 5,312,924 875,000 Bank of New York/New York ................. 5.50% 12/01/2017 904,193 850,000 Bank One Capital III ...................... 8.75% 09/01/2030 1,075,550 3,240,000 Bank One Corp ............................. 7.63% 10/15/2026 3,929,952 2,200,000 Bank One Corp ............................. 8.00% 04/29/2027 2,778,752 2,135,000 Bank One Corp ............................. 5.25% 01/30/2013 2,194,714 600,000 Bank One Corp ............................. 7.75% 07/15/2025 733,868 1,350,000 BankAmerica Capital II .................... 8.00% 12/15/2026 1,533,038 1,000,000 BankBoston Corp ........................... 7.75% 12/15/2026 1,045,784 2,550,000 Banque Nationale de Paribas/NY ............ 6.95% 07/22/2013 2,959,616 900,000 Baxter International Inc .................. 6.63% 02/15/2028 943,498 2,770,000 Bear Stearns Cos Inc/The .................. 5.70% 11/15/2014 2,843,033 1,230,000 Becton Dickinson & Co ..................... 7.00% 08/01/2027 1,388,579 600,000 Bell Telephone Co Of Pennsylvania ......... 8.35% 12/15/2030 733,988 1,000,000 Bellsouth Capital Funding ................. 7.12% 07/15/2097 1,113,776 890,000 Bellsouth Capital Funding ................. 6.04% 11/15/2026 964,639 4,830,000 Bellsouth Capital Funding ................. 7.88% 02/15/2030 5,929,076 5,800,000 BellSouth Corp ............................ 6.88% 10/15/2031 6,455,908 2,045,000 Bellsouth Telecommunications .............. 6.38% 06/01/2028 2,119,540 778,750 Bellsouth Telecommunications .............. 6.30% 12/15/2015 835,549 200,000 Bellsouth Telecommunications .............. 7.00% 10/01/2025 224,871 263,000 Bellsouth Telecommunications .............. 7.00% 12/01/2095 287,981 3,753,000 Bellsouth Telecommunications .............. 7.63% 05/15/2035 4,134,056 1,000,000 Belo Corp ................................. 7.75% 06/01/2027 1,046,068 535,000 Belo Corp ................................. 7.25% 09/15/2027 529,417
The accompanying notes are an integral part of these financial statements. SAI-327 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------- USD 1,700,000 Bestfoods ....................................... 6.63% 04/15/2028 $ 1,899,084 1,000,000 Bestfoods ....................................... 7.25% 12/15/2026 1,192,162 400,000 BHP Finance USA Ltd ............................. 6.42% 03/01/2026 419,772 800,000 BHP Finance USA Ltd ............................. 7.25% 03/01/2016 952,733 1,725,000 BNY Capital I ................................... 7.97% 12/31/2026 1,920,178 1,895,000 Boeing Capital Corp ............................. 5.80% 01/15/2013 1,912,860 120,000 Boeing Co/The ................................... 6.63% 02/15/2038 120,877 100,000 Boeing Co/The ................................... 8.75% 09/15/2031 128,436 1,160,000 Boeing Co/The ................................... 8.63% 11/15/2031 1,471,849 2,100,000 Boeing Co/The ................................... 7.95% 08/15/2024 2,467,317 250,000 Boeing Co/The ................................... 7.25% 06/15/2025 270,709 2,740,000 Boeing Co/The ................................... 8.75% 08/15/2021 3,385,977 1,000,000 BorgWarner Inc .................................. 8.00% 10/01/2019 1,130,536 900,000 Boston Edison Co ................................ 7.80% 03/15/2023 947,923 3,450,000 Boston Properties Inc 144A ...................... 6.25% 01/15/2013 3,502,122 1,470,000 BP Canada Energy Co ............................. 6.75% 09/01/2023 1,538,595 1,450,000 Bristol-Myers Squibb Co ......................... 6.80% 11/15/2026 1,568,792 1,500,000 Bristol-Myers Squibb Co ......................... 6.88% 08/01/2097 1,613,258 800,000 Bristol-Myers Squibb Co ......................... 7.15% 06/15/2023 893,296 1,300,000 British Gas Finance Inc ......................... 6.63% 06/01/2018 1,304,176 9,910,000 British Telecommunications PLC .................. 8.88% 12/15/2030 12,706,809 1,350,000 BT Preferred Capital Trust II ................... 7.88% 02/25/2027 1,454,943 1,004,147 Burlington Northern and Santa Fe Railway Co ..... 7.57% 01/02/2021 1,203,730 899,522 Burlington Northern and Santa Fe Railway Co ..... 8.25% 01/15/2021 1,134,242 1,500,000 Burlington Northern Santa Fe Corp ............... 7.00% 12/15/2025 1,671,369 800,000 Burlington Northern Santa Fe Corp ............... 6.88% 02/15/2016 924,154 4,550,000 Burlington Northern Santa Fe Corp ............... 6.75% 03/15/2029 4,952,344 1,055,000 Burlington Northern Santa Fe Corp ............... 7.95% 08/15/2030 1,315,535 1,498,337 Burlington Northern Santa Fe Corp ............... 6.73% 07/15/2022 1,721,122 700,000 Burlington Northern Santa Fe Corp ............... 7.29% 06/01/2036 811,273 1,000,000 Burlington Northern Santa Fe Corp ............... 7.25% 08/01/2097 1,108,112 100,000 Burlington Northern Santa Fe Corp ............... 6.70% 08/01/2028 108,114 2,000,000 Burlington Resources Finance Co ................. 7.20% 08/15/2031 2,286,684 2,000,000 Burlington Resources Finance Co ................. 7.40% 12/01/2031 2,341,685 2,000,000 Burlington Resources Inc ........................ 6.88% 02/15/2026 2,166,885 1,300,000 Canadian National Railway Co .................... 7.38% 10/15/2031 1,576,223 100,000 Canadian National Railway Co .................... 6.80% 07/15/2018 111,779 2,250,000 Canadian Natural Resources Ltd .................. 7.20% 01/15/2032 2,554,277 2,000,000 Canadian Natural Resources Ltd .................. 6.45% 06/30/2033 2,070,710 735,000 Canadian Pacific Ltd ............................ 9.45% 08/01/2021 994,254 2,175,000 Canadian Pacific Railway Ltd .................... 7.13% 10/15/2031 2,527,931
The accompanying notes are an integral part of these financial statements. SAI-328 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 75,000 Carnival Corp .............................. 6.65% 01/15/2028 $ 66,759 1,000,000 Carter Holt Harvey Ltd ..................... 9.50% 12/01/2024 1,279,216 1,550,000 Caterpillar Inc ............................ 8.00% 02/15/2023 1,900,769 1,450,000 Caterpillar Inc ............................ 6.63% 07/15/2028 1,610,236 2,200,000 Caterpillar Inc ............................ 7.30% 05/01/2031 2,659,377 1,225,000 CBS Corp ................................... 7.88% 09/01/2023 1,431,812 340,000 Centel Capital ............................. 9.00% 10/15/2019 292,400 100,000 Champion International Corp ................ 6.40% 02/15/2026 107,997 300,000 Champion International Corp ................ 7.35% 11/01/2025 328,541 1,900,000 Chase Capital I ............................ 7.67% 12/01/2026 1,969,848 900,000 Chesapeake & Potomac Tel-Md ................ 7.15% 05/01/2023 925,203 2,145,000 Chrysler Corp .............................. 7.45% 03/01/2027 2,316,851 1,000,000 Chrysler Corp .............................. 7.40% 08/01/2097 1,024,706 1,600,000 Chubb Corp ................................. 6.80% 11/15/2031 1,674,774 500,000 Cigna Corp ................................. 7.88% 05/15/2027 496,409 1,600,000 Cincinnati Financial Corp .................. 6.90% 05/15/2028 1,650,391 1,000,000 Cincinnati Gas & Electric .................. 6.90% 06/01/2025 1,059,748 2,425,000 Cingular Wireless LLC ...................... 7.13% 12/15/2031 2,495,735 800,000 CIT Capital Trust I ............................ 7.70% 02/15/2027 750,916 1,670,000 Citicorp Capital I ......................... 7.93% 02/15/2027 1,862,499 3,050,000 CitiFinancial .............................. 6.63% 06/01/2015 3,406,622 600,000 CitiFinancial .............................. 7.88% 02/01/2025 663,158 1,400,000 Citigroup Capital II ....................... 7.75% 12/01/2036 1,517,787 2,950,000 Citigroup Inc .............................. 6.63% 06/15/2032 3,198,681 200,000 Citigroup Inc .............................. 6.88% 02/15/2098 213,433 1,000,000 Citigroup Inc .............................. 7.88% 05/15/2025 1,223,347 100,000 Citizens Communications Co ................. 7.05% 10/01/2046 89,689 3,610,000 Citizens Communications Co ................. 9.00% 08/15/2031 4,129,909 1,500,000 Clear Channel Communications Inc ........... 7.25% 10/15/2027 1,581,850 2,210,000 Cleveland Electric Illuminating Co/The ..... 7.88% 11/01/2017 2,560,538 500,000 CNA Financial Corp ......................... 7.25% 11/15/2023 391,459 1,000,000 CNA Financial Corp ......................... 6.95% 01/15/2018 829,735 980,000 Coca-Cola Co/The ........................... 7.38% 07/29/2093 1,151,862 200,000 Coca-Cola Enterprises Inc .................. 7.00% 10/01/2026 227,444 2,700,000 Coca-Cola Enterprises Inc .................. 6.75% 01/15/2038 2,977,527 3,195,000 Coca-Cola Enterprises Inc .................. 8.50% 02/01/2022 4,094,830 971,000 Coca-Cola Enterprises Inc .................. 8.00% 09/15/2022 1,193,470 1,100,000 Coca-Cola Enterprises Inc .................. 6.70% 10/15/2036 1,203,847 2,405,000 Coca-Cola Enterprises Inc .................. 6.95% 11/15/2026 2,739,196 4,100,000 Coca-Cola Enterprises Inc .................. 7.13% 08/01/2017 4,788,784 600,000 Columbia Energy Group ...................... 7.62% 11/28/2025 601,831
The accompanying notes are an integral part of these financial statements. SAI-329 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 950,000 Columbia Energy Group ..................... 7.42% 11/28/2015 $ 1,014,745 2,150,000 Comcast Cable Communications .............. 8.88% 05/01/2017 2,505,319 1,320,000 Comcast Cable Communications .............. 7.13% 06/15/2013 1,399,809 670,000 Comcast Cable Communications .............. 8.50% 05/01/2027 738,552 915,000 Commonwealth Edison Co .................... 9.88% 06/15/2020 1,078,371 210,000 Commonwealth Edison Co .................... 7.63% 04/15/2013 259,147 2,100,000 Commonwealth Edison Co .................... 6.95% 07/15/2018 2,301,808 350,000 Comunidad Autonoma Andalucia .............. 6.75% 10/15/2017 400,560 700,000 ConAgra Foods Inc ......................... 6.70% 08/01/2027 795,416 1,700,000 ConAgra Foods Inc ......................... 7.00% 10/01/2028 1,928,420 2,050,000 ConAgra Foods Inc ......................... 8.25% 09/15/2030 2,672,151 2,500,000 ConAgra Foods Inc ......................... 7.13% 10/01/2026 2,825,641 305,000 Conoco Funding Co ......................... 7.25% 10/15/2031 359,244 10,612,000 Conoco Inc ................................ 6.95% 04/15/2029 11,965,208 650,000 ConocoPhillips1 ........................... 8.49% 01/01/2023 713,163 850,000 ConocoPhillips ............................ 7.20% 11/01/2023 923,346 2,790,000 ConocoPhillips ............................ 7.00% 03/30/2029 3,159,846 1,880,000 ConocoPhillips ............................ 5.90% 10/15/2032 1,869,137 1,000,000 ConocoPhillips ............................ 7.92% 04/15/2023 1,065,951 25,000 ConocoPhillips ............................ 6.65% 07/15/2018 27,451 1,000,000 Consolidated Edison Co of New York ........ 7.50% 06/15/2023 1,054,934 1,800,000 Consolidated Edison Co of New York ........ 4.88% 02/01/2013 1,821,488 1,050,000 Consolidated Natural Gas Co ............... 6.63% 12/01/2013 1,189,766 1,000,000 Consolidated Natural Gas Co ............... 6.80% 12/15/2027 1,090,356 2,975,000 Consolidated Rail Corp .................... 9.75% 06/15/2020 4,009,385 2,000,000 Constellation Energy Group Inc ............ 7.60% 04/01/2032 2,037,413 2,700,000 Consumers Energy Co ....................... 7.38% 09/15/2023 2,430,000 566,059 Continental Airlines Inc .................. 6.90% 01/02/2018 481,150 443,441 Continental Airlines Inc .................. 6.65% 03/15/2019 376,925 3,013,399 Continental Airlines Inc .................. 6.55% 02/02/2019 2,561,389 884,599 Continental Airlines Inc .................. 6.70% 06/15/2021 756,332 170,505 Continental Airlines Inc .................. 7.46% 04/01/2015 141,519 1,044,474 Continental Airlines Inc .................. 7.26% 03/15/2020 887,803 3,687,556 Continental Airlines Inc .................. 8.05% 11/01/2020 3,171,298 2,300,000 Continental Cablevision ................... 9.50% 08/01/2013 2,627,106 350,000 Cooper Tire & Rubber Co ................... 7.63% 03/15/2027 365,197 1,075,000 Cooper Tire & Rubber Co ................... 8.00% 12/15/2019 1,164,931 2,130,000 Countrywide Capital I ..................... 8.00% 12/15/2026 2,225,442 700,000 Countrywide Capital III.................... 8.05% 06/15/2027 760,207 925,000 COX Communications Inc .................... 6.80% 08/01/2028 914,899 2,975,000 Credit Suisse First Boston USA Inc ........ 7.13% 07/15/2032 3,180,532
The accompanying notes are an integral part of these financial statements. SAI-330 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
--------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE --------------------------------------------------------------------------------------------------------- USD 225,000 CSX Corp ...................................... 7.25% 05/01/2027 $ 247,791 2,520,000 CSX Corp ...................................... 7.90% 05/01/2017 3,092,728 4,385,000 CSX Corp ...................................... 7.95% 05/01/2027 5,316,190 1,350,000 CSX Corp ...................................... 6.80% 12/01/2028 1,446,280 6,595,000 DaimlerChrysler NA Holding Corp ............... 8.50% 01/18/2031 8,067,155 100,000 Dayton Power & Light Inc ...................... 7.88% 02/15/2024 105,125 1,500,000 Dayton Power & Light Inc ...................... 8.15% 01/15/2026 1,582,129 1,000,000 Deere & Co .................................... 8.10% 05/15/2030 1,285,251 1,925,000 Deere & Co .................................... 7.13% 03/03/2031 2,234,767 1,360,000 Deere & Co .................................... 6.95% 04/25/2014 1,603,081 1,470,000 Deere & Co .................................... 8.95% 06/15/2019 1,724,969 975,000 Dell Computer Corp ............................ 7.10% 04/15/2028 1,087,432 2,265,000 Delphi Corp ................................... 7.13% 05/01/2029 2,234,045 1,950,000 Delta Air Lines Inc ........................... 6.72% 01/02/2023 2,008,500 850,000 Detroit Edison Co ............................. 6.35% 10/15/2032 904,440 12,700,000 Deutsche Telekom International Finance BV ..... 8.75% 06/15/2030 14,716,465 2,400,000 Deutsche Telekom International Finance BV ..... 9.25% 06/01/2032 3,054,458 3,525,000 Devon Energy Corp ............................. 7.95% 04/15/2032 4,210,817 6,570,000 Devon Financing Corp ULC ...................... 7.88% 09/30/2031 7,766,231 1,825,000 Dominion Capital Trust I ...................... 7.83% 12/01/2027 1,822,681 865,000 Dominion Resources Capital Trust III .......... 8.40% 01/15/2031 929,863 1,335,000 Dominion Resources Inc/VA ..................... 6.75% 12/15/2032 1,367,894 4,125,000 Dow Chemical Co/The ........................... 7.38% 11/01/2029 4,367,260 900,000 DPL Inc ....................................... 8.13% 09/01/2031 730,004 1,900,000 Dresdner Bank AG/New York ..................... 7.25% 09/15/2015 2,122,266 1,000,000 Dresser Industries Inc ........................ 7.60% 08/15/2096 864,439 2,075,000 Du Pont EI de Nemours & Co .................... 6.50% 01/15/2028 2,358,091 2,000,000 Duke Capital Corp ............................. 8.00% 10/01/2019 1,929,963 500,000 Duke Capital Corp ............................. 6.25% 02/15/2013 455,331 3,200,000 Duke Capital Corp ............................. 6.75% 02/15/2032 2,601,778 2,700,000 Duke Energy Corp .............................. 6.45% 10/15/2032 2,616,122 1,600,000 Duke Energy Corp .............................. 6.00% 12/01/2028 1,464,719 1,050,000 Duke Energy Field Services Llc ................ 8.13% 08/16/2030 1,031,074 210,600 East Coast Power Llc .......................... 7.54% 06/30/2017 138,996 475,000 Eastman Chemical Co ........................... 7.25% 01/15/2024 513,190 1,800,000 Eastman Chemical Co ........................... 7.60% 02/01/2027 2,017,664 1,000,000 Eaton Corp .................................... 7.65% 11/15/2029 1,197,290 995,000 Electronic Data Systems Corp .................. 7.45% 10/15/2029 935,746 2,000,000 Eli Lilly & Co ................................ 6.57% 01/01/2016 2,344,686 400,000 Eli Lilly & Co ................................ 6.77% 01/01/2036 460,639 1,000,000 Eli Lilly & Co ................................ 7.13% 06/01/2025 1,194,634
The accompanying notes are an integral part of these financial statements. SAI-331 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
----------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ----------------------------------------------------------------------------------------------------------- USD 1,391,245 Elwood Energy LLC ............................. 8.16% 07/05/2026 $ 1,266,508 1,400,000 Emerson Electric Co ........................... 5.63% 11/15/2013 1,506,058 1,300,000 Emerson Electric Co ........................... 5.00% 12/15/2014 1,328,719 1,915,000 Empresa Nacional de Electricidad SA/Chile ..... 7.33% 02/01/2037 1,778,366 1,400,000 EnCana Corp ................................... 7.20% 11/01/2031 1,609,603 2,370,000 Enersis SA/Cayman Island ...................... 7.40% 12/01/2016 1,662,019 450,000 Enersis SA/Cayman Island ...................... 6.60% 12/01/2026 423,941 1,000,000 Entergy Gulf States Inc ....................... 8.70% 04/01/2024 1,050,666 573,968 Entergy Louisiana Inc ......................... 8.09% 01/02/2017 583,069 1,750,000 EOP Operating LP .............................. 7.25% 02/15/2018 1,799,990 750,000 EOP Operating LP .............................. 7.50% 04/19/2029 781,656 450,000 EOP Operating LP .............................. 7.88% 07/15/2031 490,003 210,000 EOP Operating LP .............................. 7.25% 06/15/2028 212,664 400,000 ERP Operating LP .............................. 7.13% 10/15/2017 440,543 4,000,000 Fannie Mae .................................... 4.38% 09/15/2012 4,012,320 1,925,000 FBS Capital I ................................. 8.09% 11/15/2026 2,180,971 2,120,000 Federated Department Stores ................... 7.45% 07/15/2017 2,472,899 435,000 Federated Department Stores ................... 7.00% 02/15/2028 456,670 1,350,000 Federated Department Stores ................... 6.90% 04/01/2029 1,401,614 950,000 Federated Department Stores ................... 6.79% 07/15/2027 1,004,859 1,000,000 FedEx Corp .................................... 7.60% 07/01/2097 1,118,957 3,304,036 FedEx Corp .................................... 6.72% 01/15/2022 3,700,389 1,000,000 Finland Government International Bond ......... 6.95% 02/15/2026 1,210,647 540,000 First Empire Capital Trust I .................. 8.23% 02/01/2027 590,827 1,425,000 First Industrial LP ........................... 7.60% 07/15/2028 1,484,141 600,000 First Union Capital I ......................... 7.94% 01/15/2027 669,252 1,120,000 First Union Capital II ........................ 7.95% 11/15/2029 1,302,519 4,660,000 First Union Institutional Capital I ........... 8.04% 12/01/2026 5,223,781 850,000 First Union National Bank Of Florida .......... 6.18% 02/15/2036 922,965 7,320,000 FirstEnergy Corp .............................. 7.38% 11/15/2031 7,093,685 1,000,000 Fleet Capital Trust II ........................ 7.92% 12/11/2026 1,064,815 2,975,000 FleetBoston Financial Corp .................... 6.88% 01/15/2028 3,173,044 200,000 FleetBoston Financial Corp .................... 6.70% 07/15/2028 209,024 1,300,000 Florida Power & Light Co ...................... 4.85% 02/01/2013 1,326,528 1,825,000 Florida Power & Light Co ...................... 5.85% 02/01/2003 1,861,407 1,300,000 Ford Motor Co ................................. 8.88% 01/15/2022 1,229,997 3,000,000 Ford Motor Co ................................. 6.50% 08/01/2018 2,466,452 5,565,000 Ford Motor Co ................................. 6.63% 10/01/2028 4,389,209 7,060,000 Ford Motor Co ................................. 6.38% 02/01/2029 5,411,903 24,370,000 Ford Motor Co ................................. 7.45% 07/16/2031 21,082,952 100,000 Ford Motor Co ................................. 8.90% 01/15/2032 93,725
The accompanying notes are an integral part of these financial statements. SAI-332 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 600,000 Ford Motor Co ............................. 7.70% 05/15/2097 $ 502,603 2,000,000 Ford Motor Co ............................. 7.50% 08/01/2026 1,735,899 1,000,000 Fortune Brands Inc ........................ 6.63% 07/15/2028 1,068,733 8,815,000 France Telecom ............................ 10.00% 03/01/2031 10,670,461 5,000,000 Freddie Mac ............................... 2.88% 09/15/2005 5,098,650 1,130,000 GE Global Insurance Holding Corp .......... 7.00% 02/15/2026 1,191,313 1,160,000 GE Global Insurance Holding Corp .......... 7.75% 06/15/2030 1,329,583 1,300,000 GE Global Insurance Holding Corp .......... 6.45% 03/01/2019 1,294,599 1,400,000 General Electric Capital Corp ............. 6.90% 09/15/2015 1,608,530 19,220,000 General Electric Capital Corp ............. 6.75% 03/15/2032 21,304,861 7,600,000 General Electric Capital Corp ............. 5.45% 01/15/2013 7,881,469 1,400,000 General Electric Capital SVC .............. 7.50% 08/21/2035 1,682,651 100,000 General Motors Acceptance Corp ............ 5.00% 12/01/2012 50,424 16,310,000 General Motors Acceptance Corp ............ 8.00% 11/01/2031 16,416,044 3,900,000 General Motors Corp ....................... 7.40% 09/01/2025 3,621,570 1,700,000 General Motors Corp ....................... 7.70% 04/15/2016 1,710,206 1,440,000 General Motors Corp ....................... 6.75% 05/01/2028 1,253,891 800,000 General Motors Corp ....................... 8.80% 03/01/2021 857,349 3,000,000 General Motors Corp ....................... 9.40% 07/15/2021 3,389,342 1,000,000 General Motors Corp ....................... 8.10% 06/15/2024 961,643 825,000 Georgia Power Co .......................... 4.88% 07/15/2007 871,066 1,700,000 Global Marine Inc ......................... 7.00% 06/01/2028 1,867,950 2,600,000 Goldman Sachs Group Inc ................... 5.50% 11/15/2014 2,616,674 1,050,000 Grand Metropolitan Invt Corp .............. 8.00% 09/15/2022 1,308,910 1,800,000 Grand Metropolitan Invt Corp .............. 7.45% 04/15/2035 2,089,728 1,450,000 Great Western Financial ................... 8.21% 02/01/2027 1,590,654 900,000 Grupo Televisa SA ......................... 8.50% 03/11/2032 855,000 850,000 GTE California Inc ........................ 8.07% 04/15/2024 925,786 4,600,000 GTE Corp .................................. 7.90% 02/01/2027 4,915,443 5,105,000 GTE Corp .................................. 6.84% 04/15/2018 5,275,577 2,725,000 GTE Corp .................................. 6.94% 04/15/2028 2,858,306 100,000 GTE Corp .................................. 8.75% 11/01/2021 123,711 1,000,000 GTE Corp .................................. 7.83% 05/01/2023 1,051,108 1,285,000 GTE Florida Inc ........................... 6.86% 02/01/2028 1,385,122 732,000 Harcourt General Inc ...................... 7.20% 08/01/2027 809,759 475,000 Harris Corp ............................... 6.35% 02/01/2028 466,038 500,000 Hartford Financial Services Group Inc ..... 7.30% 11/01/2015 568,377 100,000 Hartford Life Inc ......................... 7.65% 06/15/2027 112,118 3,199,000 Hartford Life Inc ......................... 7.38% 03/01/2031 3,496,119 25,000 Hershey Foods Corp ........................ 7.20% 08/15/2027 29,664 1,185,000 Hertz Corp ................................ 7.00% 01/15/2028 932,246
The accompanying notes are an integral part of these financial statements. SAI-333 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 740,000 Highwoods Properties Inc ................. 7.50% 04/15/2018 $ 714,450 900,000 HJ Heinz Co ................................. 6.38% 07/15/2028 954,694 2,150,000 HJ Heinz Finance Co ......................... 6.75% 03/15/2032 2,373,633 900,000 Honeywell Inc ............................ 6.63% 06/15/2028 974,046 2,980,000 Household Finance Corp ................... 7.63% 05/17/2032 3,314,832 1,145,000 Household Finance Corp ................... 7.35% 11/27/2032 1,257,834 1,250,000 HSBC Bank Plc ............................ 7.65% 05/01/2025 1,441,471 280,000 Husky Oil Co ............................. 7.55% 11/15/2016 334,406 390,000 Hydro Quebec ............................. 8.88% 03/01/2026 547,411 2,315,000 Hydro Quebec ............................. 8.50% 12/01/2029 3,197,129 2,900,000 Hydro Quebec ............................. 8.40% 01/15/2022 3,867,748 5,475,000 Hydro Quebec ............................. 8.00% 02/01/2013 6,950,292 3,290,000 Hydro Quebec ............................. 8.05% 07/07/2024 4,300,279 2,150,000 Hydro Quebec ............................. 7.50% 04/01/2016 2,683,832 1,000,000 Hydro Quebec ............................. 9.38% 04/15/2030 1,503,456 1,900,000 Hydro Quebec ............................. 9.50% 11/15/2030 2,898,036 2,000,000 Hydro Quebec ............................. 9.40% 02/01/2021 2,874,381 1,175,000 Inco Ltd ................................. 7.20% 09/15/2032 1,176,176 2,200,000 Ingersoll-Rand Co ........................ 6.39% 11/15/2027 2,347,024 400,000 Ingersoll-Rand Co ........................ 6.44% 11/15/2027 442,971 5,310,000 Inter-American Development Bank .......... 7.00% 06/15/2025 6,414,895 100,000 Inter-American Development Bank .......... 6.75% 07/15/2027 117,615 900,000 Honeywell Inc ............................ 6.63% 06/15/2028 974,046 2,980,000 Household Finance Corp ................... 7.63% 05/17/2032 3,314,832 1,145,000 Household Finance Corp ................... 7.35% 11/27/2032 1,257,834 1,250,000 HSBC Bank Plc ............................ 7.65% 05/01/2025 1,441,471 280,000 Husky Oil Co ............................. 7.55% 11/15/2016 334,406 390,000 Hydro Quebec ............................. 8.88% 03/01/2026 547,411 2,315,000 Hydro Quebec ............................. 8.50% 12/01/2029 3,197,129 2,900,000 Hydro Quebec ............................. 8.40% 01/15/2022 3,867,748 5,475,000 Hydro Quebec ............................. 8.00% 02/01/2013 6,950,292 3,290,000 Hydro Quebec ............................. 8.05% 07/07/2024 4,300,279 2,150,000 Hydro Quebec ............................. 7.50% 04/01/2016 2,683,832 1,000,000 Hydro Quebec ............................. 9.38% 04/15/2030 1,503,456 1,900,000 Hydro Quebec ............................. 9.50% 11/15/2030 2,898,036 2,000,000 Hydro Quebec ............................. 9.40% 02/01/2021 2,874,381 1,175,000 Inco Ltd ................................. 7.20% 09/15/2032 1,176,176 2,200,000 Ingersoll-Rand Co ........................ 6.39% 11/15/2027 2,347,024 400,000 Ingersoll-Rand Co ........................ 6.44% 11/15/2027 442,971 5,310,000 Inter-American Development Bank .......... 7.00% 06/15/2025 6,414,895 100,000 Inter-American Development Bank .......... 6.75% 07/15/2027 117,615
The accompanying notes are an integral part of these financial statements. SAI-334 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------- USD 400,000 International Bank for Reconstruction & Development ..... 8.88% 03/01/2026 $ 588,694 4,460,000 International Bank for Reconstruction & Development ..... 8.63% 10/15/2016 6,196,001 1,000,000 International Bank for Reconstruction & Development ..... 9.25% 07/15/2017 1,461,167 4,300,000 International Bank for Reconstruction & Development ..... 7.63% 01/19/2023 5,607,442 3,250,000 International Business Machines Corp .................... 8.38% 11/01/2019 4,044,248 1,000,000 International Business Machines Corp .................... 7.50% 06/15/2013 1,215,737 2,950,000 International Business Machines Corp .................... 7.00% 10/30/2025 3,309,577 2,600,000 International Business Machines Corp .................... 7.13% 12/01/2096 2,853,239 4,475,000 International Business Machines Corp .................... 6.50% 01/15/2028 4,798,866 2,980,000 International Business Machines Corp .................... 5.88% 11/29/2032 2,952,545 885,000 International Business Machines Corp .................... 6.22% 08/01/2027 939,353 700,000 International Paper Co .................................. 6.88% 11/01/2023 734,514 500,000 International Paper Co .................................. 8.13% 06/15/2024 531,250 4,475,000 International Paper Co .................................. 6.88% 04/15/2029 4,719,141 1,450,000 Israel Government International Bond .................... 7.25% 12/15/2028 1,485,874 12,785,000 Italy Government International Bond ..................... 6.88% 09/27/2023 15,370,315 100,000 ITT Industries Inc ...................................... 7.40% 11/15/2025 112,688 1,000,000 John Deere Capital Corp ................................. 8.63% 08/01/2019 1,118,600 4,990,000 Johnson & Johnson ....................................... 8.72% 11/01/2024 5,763,450 350,000 Johnson & Johnson ....................................... 6.95% 09/01/2029 418,258 2,500,000 JP Morgan Chase & Co .................................... 5.75% 01/02/2013 2,532,760 2,850,000 JPM Capital Trust I ..................................... 7.54% 01/15/2027 2,929,882 2,150,000 JPM Capital Trust II .................................... 7.95% 02/01/2027 2,284,147 4,600,000 Kellogg Co .............................................. 7.45% 04/01/2031 5,580,828 1,100,000 Kerr-McGee Corp ......................................... 7.13% 10/15/2027 1,214,315 2,595,000 Kerr-McGee Corp ......................................... 7.88% 09/15/2031 3,153,718 1,700,000 KeyBank National Association ............................ 6.95% 02/01/2028 1,881,774 700,000 KeyBank National Association ............................ 5.70% 11/01/2017 719,365 1,825,000 Keycorp Instit Capital-A ................................ 7.83% 12/01/2026 1,978,323 1,000,000 Keycorp Instit Capital-B ................................ 8.25% 12/15/2026 1,120,135 1,400,000 KeySpan Corp ............................................ 8.00% 11/15/2030 1,778,791 1,800,000 KFW International Finance ............................... 7.20% 03/15/2014 2,205,113 750,000 KFW International Finance ............................... 7.00% 03/01/2013 906,672 800,000 Kimberly-Clark Corp ..................................... 6.38% 01/01/2028 872,541 1,425,000 Kimberly-Clark Corp ..................................... 6.25% 07/15/2018 1,576,556 100,000 Kimberly-Clark Corp ..................................... 7.00% 08/15/2023 103,000 1,515,000 Kinder Morgan Energy Partners LP ........................ 7.40% 03/15/2031 1,650,285 1,965,000 Kinder Morgan Energy Partners LP ........................ 7.75% 03/15/2032 2,230,282 500,000 Kinder Morgan Inc ....................................... 7.45% 03/01/2098 503,931 2,665,000 Kinder Morgan Inc ....................................... 7.25% 03/01/2028 2,714,123 240,000 KN Capital Trust III .................................... 7.63% 04/15/2028 226,900
The accompanying notes are an integral part of these financial statements. SAI-335 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
---------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ---------------------------------------------------------------------------------------------------------- USD 500,000 Knight-Ridder Inc .............................. 6.88% 03/15/2029 $ 554,475 250,000 Kohl's Corp .................................... 7.25% 06/01/2029 290,374 1,570,000 Kohl's Corp .................................... 6.00% 01/15/2033 1,565,119 100,000 Koninklijke Philips Electronics NV ............. 7.20% 06/01/2026 109,178 1,000,000 Koninklijke Philips Electronics NV ............. 7.25% 08/15/2013 1,132,803 500,000 Koninklijke Philips Electronics NV ............. 7.13% 05/15/2025 557,786 700,000 Korea Electric Power Corp ...................... 7.00% 02/01/2027 785,579 3,115,000 Korea Electric Power Corp ...................... 7.75% 04/01/2013 3,727,187 3,150,000 Kraft Foods Inc ................................ 6.50% 11/01/2031 3,465,830 1,795,000 Kroger Co ...................................... 7.00% 05/01/2018 1,918,877 110,000 Kroger Co ...................................... 7.70% 06/01/2029 124,413 690,000 Kroger Co ...................................... 8.00% 09/15/2029 806,451 1,370,000 Kroger Co ...................................... 7.50% 04/01/2031 1,522,842 1,700,000 Kroger Co ...................................... 6.80% 12/15/2018 1,786,327 500,000 Landesbank Baden-Wuerttemberg Girozentrale ..... 7.63% 02/01/2023 618,300 2,000,000 Lasmo USA Inc .................................. 7.30% 11/15/2027 2,359,487 2,295,000 Lehman Brothers Holdings Inc ................... 8.80% 03/01/2015 2,930,427 875,000 Lehman Brothers Holdings Inc ................... 5.88% 11/15/2017 883,556 500,000 Lehman Brothers Inc ............................ 7.50% 08/01/2026 557,216 3,275,000 Liberty Media Corp ............................. 8.50% 07/15/2029 3,553,246 2,125,000 Liberty Media Corp ............................. 8.25% 02/01/2030 2,246,701 1,410,000 Lion Connecticut Holdings Inc .................. 7.63% 08/15/2026 1,659,138 420,000 Lion Connecticut Holdings Inc .................. 7.25% 08/15/2023 471,382 200,000 Litton Industries Inc .......................... 7.75% 03/15/2026 235,344 1,000,000 Litton Industries Inc .......................... 6.75% 04/15/2018 1,059,740 5,090,000 Lockheed Corp .................................. 7.88% 03/15/2023 5,357,225 3,700,000 Lockheed Martin Corp ........................... 7.65% 05/01/2016 4,594,029 2,410,000 Lockheed Martin Corp ........................... 8.50% 12/01/2029 3,205,156 2,520,000 Lockheed Martin Corp ........................... 7.20% 05/01/2036 2,904,177 1,950,000 Loews Corp ..................................... 7.63% 06/01/2023 2,067,000 3,519,000 Loral Corp ..................................... 7.00% 09/15/2023 3,914,406 100,000 Louisiana Land & Exploration ................... 7.65% 12/01/2023 115,045 710,000 Lowe's Cos Inc ................................. 6.88% 02/15/2028 786,003 2,755,000 Lowe's Cos Inc ................................. 6.50% 03/15/2029 2,920,105 500,000 Magyar Nemzeti Bank ............................ 8.88% 11/01/2013 662,718 1,805,000 Marathon Oil Corp .............................. 6.80% 03/15/2032 1,865,390 2,370,000 Masco Corp ..................................... 6.63% 04/15/2018 2,482,482 300,000 Masco Corp ..................................... 7.13% 08/15/2013 347,315 2,100,000 May Department Stores Co/The ................... 8.38% 08/01/2024 2,345,511 100,000 May Department Stores Co/The ................... 8.30% 07/15/2026 114,372 285,000 May Department Stores Co/The ................... 6.70% 09/15/2028 290,576
The accompanying notes are an integral part of these financial statements. SAI-336 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 950,000 May Department Stores Co/The .............. 7.88% 03/01/2030 $ 1,103,186 1,475,000 May Department Stores Co/The .............. 8.75% 05/15/2029 1,859,648 1,000,000 May Department Stores Co/The .............. 8.50% 06/01/2019 1,206,703 1,125,000 May Department Stores Co/The .............. 6.90% 01/15/2032 1,177,216 25,000 MBIA Inc .................................. 6.63% 10/01/2028 25,414 25,000 McDonald's Corp ........................... 6.38% 01/08/2028 26,405 1,150,000 Mead Corp/The ............................. 7.55% 03/01/2047 1,229,101 1,850,000 Mead Corp/The ............................. 8.13% 02/01/2023 1,905,500 1,000,000 MeadWestvaco Corp ......................... 6.80% 11/15/2032 1,020,500 2,205,000 Mellon Capital I .......................... 7.72% 12/01/2026 2,445,452 2,750,000 Mellon Capital II ......................... 8.00% 01/15/2027 3,121,779 1,000,000 Mellon Funding Corp ....................... 5.00% 12/01/2014 1,011,120 3,650,000 Merck & Co Inc ............................ 5.95% 12/01/2028 3,854,008 2,310,000 Merck & Co Inc ............................ 6.40% 03/01/2028 2,577,481 100,000 Merrill Lynch & Co Inc .................... 6.50% 07/15/2018 104,584 6,450,000 Merrill Lynch & Co Inc .................... 6.88% 11/15/2018 6,993,802 1,100,000 Merrill Lynch & Co Inc .................... 6.75% 06/01/2028 1,170,861 2,120,000 Metlife Inc ............................... 6.50% 12/15/2032 2,238,710 13,295,000 Mexico Government International Bond ...... 8.30% 08/15/2031 14,059,463 6,600,000 Mexico Government International Bond ...... 8.00% 09/24/2022 6,718,800 6,125,000 Mexico Government International Bond ...... 11.50% 05/15/2026 8,375,938 9,400,000 Mexico Government International Bond ...... 11.38% 09/15/2016 12,596,000 9,660,000 Mexico Government International Bond ...... 8.13% 12/30/2019 10,191,300 45,000 Michigan Bell Telephone Co ................ 7.85% 01/15/2022 54,425 1,630,000 Midamerican Energy Co ..................... 6.75% 12/30/2031 1,684,892 100,000 Midamerican Energy Holdings Co ............ 8.48% 09/15/2028 117,644 2,975,000 Midamerican Funding LLC ................... 6.93% 03/01/2029 3,060,909 1,485,000 Midwest Energy Inc ........................ 9.38% 10/15/2029 1,786,310 1,060,000 Mobil Corp ................................ 8.63% 08/15/2021 1,436,694 6,045,000 Morgan Stanley ............................ 7.25% 04/01/2032 6,877,676 600,000 Morgan Stanley ............................ 6.75% 01/01/2016 673,457 200,000 Morgan Stanley Group Inc .................. 7.50% 02/01/2024 213,427 1,000,000 Motorola Inc .............................. 7.50% 05/15/2025 892,224 1,000,000 Motorola Inc .............................. 6.50% 09/01/2025 1,015,242 2,885,000 Motorola Inc .............................. 6.50% 11/15/2028 2,350,659 1,000,000 Murphy Oil Corp ........................... 7.05% 05/01/2029 1,103,850 1,550,000 Nabisco Inc ............................... 7.55% 06/15/2015 1,925,366 3,565,000 National City Corp ........................ 6.88% 05/15/2019 3,957,987 4,850,000 National Rural Util Coop Fin .............. 8.00% 03/01/2032 5,838,663 100,000 National Rural Util Coop Fin .............. 6.55% 11/01/2018 107,791 375,000 Nationwide Financial Services ............. 8.00% 03/01/2027 418,795
The accompanying notes are an integral part of these financial statements. SAI-337 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 1,800,000 NB Capital Trust ......................... 7.83% 12/15/2026 $ 2,019,751 1,000,000 NB Capital Trust IV ...................... 8.25% 04/15/2027 1,159,036 1,535,000 NBD Bank NA .............................. 8.25% 11/01/2024 1,976,504 600,000 New Brunswick Province of ................ 7.63% 02/15/2013 748,550 300,000 New Brunswick Province of ................ 9.75% 05/15/2020 444,063 1,000,000 New Brunswick Province of ................ 8.75% 05/01/2022 1,392,657 2,030,000 New England Telephone & Tele ............. 7.88% 11/15/2029 2,414,283 1,150,000 New Jersey Bell Telephone ................ 8.00% 06/01/2022 1,361,283 1,000,000 New York Telephone Co .................... 6.70% 11/01/2023 989,840 300,000 New York Telephone Co .................... 7.25% 02/15/2024 311,868 1,300,000 News America Holdings .................... 9.50% 07/15/2024 1,514,978 2,400,000 News America Holdings .................... 8.00% 10/17/2016 2,637,710 200,000 News America Holdings .................... 8.15% 10/17/2036 207,265 2,860,000 News America Holdings .................... 9.25% 02/01/2013 3,370,785 1,000,000 News America Holdings .................... 8.88% 04/26/2023 1,115,026 975,000 News America Holdings .................... 8.25% 08/10/2018 1,033,083 2,465,000 News America Holdings .................... 7.60% 10/11/2015 2,614,915 3,175,000 News America Holdings .................... 7.75% 12/01/2045 3,101,107 900,000 News America Holdings .................... 7.43% 10/01/2026 969,248 1,595,000 News America Inc ......................... 7.63% 11/30/2028 1,610,048 105,000 News America Inc ......................... 7.30% 04/30/2028 102,146 1,750,000 News America Inc ......................... 7.25% 05/18/2018 1,727,383 1,075,000 Nexen Inc ................................ 7.40% 05/01/2028 1,100,905 1,400,000 Nexen Inc ................................ 7.88% 03/15/2032 1,516,064 1,535,000 Noble Corp ............................... 7.50% 03/15/2019 1,772,934 1,000,000 Noble Energy Inc ......................... 8.00% 04/01/2027 1,142,649 2,550,000 Norfolk Southern Corp .................... 7.70% 05/15/2017 3,138,055 3,275,000 Norfolk Southern Corp .................... 7.05% 05/01/2037 3,724,676 3,345,000 Norfolk Southern Corp .................... 7.80% 05/15/2027 4,075,646 1,000,000 Norfolk Southern Corp .................... 7.90% 05/15/2097 1,207,219 1,650,000 Norfolk Southern Corp .................... 7.25% 02/15/2031 1,913,211 1,050,000 Norsk Hydro ASA .......................... 7.75% 06/15/2023 1,266,117 1,025,000 Norsk Hydro ASA .......................... 7.15% 01/15/2029 1,180,661 2,515,000 Norsk Hydro ASA .......................... 7.25% 09/23/2027 2,920,509 1,000,000 Norsk Hydro ASA .......................... 6.70% 01/15/2018 1,085,189 1,040,000 Norsk Hydro ASA .......................... 7.15% 11/15/2025 1,188,980 1,000,000 Norsk Hydro ASA .......................... 7.50% 10/01/2016 1,226,587 1,100,000 Northeast Generation Co .................. 8.81% 10/15/2026 990,000 925,000 Northern Border Pipeline Co .............. 7.50% 09/15/2021 1,025,163 25,000 Northern States Power-Minnesota .......... 7.13% 07/01/2025 24,277 1,000,000 Northrop Grumman Corp .................... 9.38% 10/15/2024 1,110,000
The accompanying notes are an integral part of these financial statements. SAI-338 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 5,160,000 Northrop Grumman Corp ..................... 7.75% 02/15/2031 $ 6,146,698 600,000 Northrop Grumman Corp ..................... 7.88% 03/01/2026 719,203 2,254,661 Northwest Airlines Corp ................... 7.58% 09/01/2020 2,119,381 1,547,000 Northwest Airlines Inc .................... 6.81% 02/01/2020 1,314,950 1,499,473 Northwest Airlines Inc .................... 8.07% 10/01/2019 1,566,950 100,000 Nova Gas Transmission ..................... 7.88% 04/01/2023 116,713 1,750,000 Nova Scotia Province of ................... 9.25% 03/01/2020 2,499,893 1,600,000 Nova Scotia Province of ................... 9.13% 05/01/2021 2,290,167 1,200,000 Nova Scotia Province of ................... 7.25% 07/27/2013 1,460,982 1,000,000 Nova Scotia Province of ................... 9.50% 02/01/2019 1,438,183 100,000 Nova Scotia Province of ................... 8.25% 11/15/2019 131,677 1,000,000 Nova Scotia Province of ................... 8.25% 07/30/2022 1,343,150 2,175,000 Occidental Petroleum Corp ................. 9.25% 08/01/2019 2,885,842 1,525,000 Occidental Petroleum Corp ................. 8.45% 02/15/2029 1,963,390 2,755,000 Oncor Electric Delivery Co ................ 7.00% 09/01/2022 2,589,727 2,500,000 Oncor Electric Delivery Co ................ 6.38% 01/15/2015 2,569,275 2,640,000 Oncor Electric Delivery Co ................ 7.00% 05/01/2032 2,642,685 3,125,000 Ontario Electricity Financial Corp ........ 7.45% 03/31/2013 3,908,445 6,625,000 Pacific Bell .............................. 7.13% 03/15/2026 7,469,576 100,000 Pacific Bell .............................. 7.38% 07/15/2043 110,270 900,000 Pacificorp ................................ 7.70% 11/15/2031 1,102,772 925,000 Pactiv Corp ............................... 7.95% 12/15/2025 1,078,769 1,950,000 Pactiv Corp ............................... 8.38% 04/15/2027 2,368,310 1,100,000 Pemex Project Funding Master Trust ........ 8.63% 02/01/2022 1,155,000 3,195,000 Pemex Project Funding Master Trust ........ 7.38% 12/15/2014 3,274,875 3,790,000 Pepsi Bottling Group Inc .................. 7.00% 03/01/2029 4,414,722 2,900,000 Petro-Canada .............................. 7.88% 06/15/2026 3,360,700 100,000 Petro-Canada .............................. 7.00% 11/15/2028 105,683 1,300,000 Petroleos Mexicanos ....................... 9.25% 03/30/2018 1,456,000 3,000,000 Petroleos Mexicanos ....................... 9.50% 09/15/2027 3,390,000 2,300,000 Petroleos Mexicanos ....................... 9.50% 09/15/2027 2,644,862 3,850,000 Pharmacia Corp ............................ 6.50% 12/01/2018 4,302,260 1,775,000 Pharmacia Corp ............................ 6.60% 12/01/2028 2,031,917 1,760,000 Phelps Dodge Corp ......................... 9.50% 06/01/2031 1,832,645 3,085,000 Philip Morris Cos Inc ..................... 7.75% 01/15/2027 3,433,132 1,250,000 Phillips 66 Capital Trust II .............. 8.00% 01/15/2037 1,377,914 500,000 PPG Industries Inc ........................ 7.40% 08/15/2019 545,765 906,352 PPL Montana LLC ........................... 8.90% 07/02/2020 951,315 4,050,000 Procter & Gamble -- Esop .................. 9.36% 01/01/2021 5,616,523 1,000,000 Procter & Gamble Co ....................... 8.00% 09/01/2024 1,298,824 2,431,000 Procter & Gamble Co ....................... 6.45% 01/15/2026 2,720,018
The accompanying notes are an integral part of these financial statements. SAI-339 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 2,675,000 Progress Energy Inc ....................... 7.75% 03/01/2031 $ 3,031,783 1,400,000 Progress Energy Inc ....................... 7.00% 10/30/2031 1,454,830 1,025,000 Progressive Corp/The ...................... 6.63% 03/01/2029 1,098,903 2,105,000 Progressive Corp/The ...................... 6.25% 12/01/2032 2,165,408 700,000 Provident Cos Inc ......................... 7.00% 07/15/2018 584,488 400,000 Province of British Columbia/Canada ....... 6.50% 01/15/2026 460,451 2,000,000 Province of British Columbia/Canada ....... 7.25% 09/01/2036 2,555,725 475,000 Province of Manitoba ...................... 9.25% 04/01/2020 701,387 500,000 Province of Manitoba ...................... 8.88% 09/15/2021 720,279 1,500,000 Province of Manitoba ...................... 7.75% 07/17/2016 1,932,505 1,770,000 Province of Manitoba ...................... 9.13% 01/15/2018 2,544,671 1,150,000 Province of Manitoba ...................... 8.80% 01/15/2020 1,623,828 1,000,000 Province of Newfoundland .................. 9.00% 10/15/2021 1,407,992 500,000 Province of Quebec ........................ 8.63% 12/01/2026 688,749 2,700,000 Province of Quebec ........................ 7.50% 07/15/2023 3,305,948 4,575,000 Province of Quebec ........................ 7.13% 02/09/2024 5,406,336 6,750,000 Province of Quebec ........................ 7.50% 09/15/2029 8,470,383 2,700,000 Province of Saskatchewan/Canada ........... 7.38% 07/15/2013 3,341,798 1,050,000 Province of Saskatchewan/Canada ........... 9.38% 12/15/2020 1,530,530 2,820,000 PSEG Power LLC ............................ 8.63% 04/15/2031 2,985,882 650,000 Public Service Electric & Gas ............. 7.00% 09/01/2024 680,378 1,240,000 Puget Energy Inc .......................... 7.02% 12/01/2027 1,244,108 1,075,000 Pulte Homes Inc ........................... 7.88% 06/15/2032 1,143,821 600,000 Pulte Homes Inc ........................... 7.63% 10/15/2017 652,951 1,458,000 Quebecor World Inc ........................ 6.50% 08/01/2027 1,521,904 1,500,000 Raytheon Co ............................... 7.00% 11/01/2028 1,604,741 500,000 Raytheon Co ............................... 7.38% 07/15/2025 515,000 900,000 Raytheon Co ............................... 7.20% 08/15/2027 983,727 2,570,000 Raytheon Co ............................... 6.75% 03/15/2018 2,684,144 1,875,000 Raytheon Co ............................... 6.40% 12/15/2018 1,895,372 275,000 Reed Elsevier Capital Inc ................. 7.50% 05/15/2025 323,859 3,400,000 Region of Lombardy ........................ 5.80% 10/25/2032 3,555,091 2,250,000 Reliant Energy HL&P ....................... 7.75% 03/15/2023 2,131,251 400,000 Republic New York Capital I ............... 7.75% 11/15/2026 437,440 250,000 Republic New York Corp .................... 7.53% 12/04/2026 267,056 1,984,969 RGS (I&M) Funding Corp .................... 9.82% 12/07/2022 2,230,178 625,000 Rockwell Automation Inc ................... 6.70% 01/15/2028 644,991 1,100,000 Rockwell Automation Inc ................... 5.20% 01/15/2098 836,576 650,000 Rogers Cable Inc .......................... 8.75% 05/01/2032 664,425 4,665,000 Rohm & Haas Co ............................ 7.85% 07/15/2029 5,884,022 3,355,000 Royal Bank of Scotland Group Plc .......... 5.00% 10/01/2014 3,382,895
The accompanying notes are an integral part of these financial statements. SAI-340 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 3,490,000 Royal KPN NV ................................ 8.38% 10/01/2030 $ 4,304,082 1,000,000 RR Donnelley & Sons Co ...................... 6.63% 04/15/2029 1,083,325 2,360,000 Safeco Capital Trust I ...................... 8.07% 07/15/2037 2,438,992 3,000,000 Safeway Inc ................................. 7.25% 02/01/2031 3,389,872 1,150,000 Santander Financial Issuances ............... 7.25% 11/01/2015 1,263,676 1,800,000 Sara Lee Corp ............................... 6.13% 11/01/2032 1,895,386 750,000 SBC Communications Inc ...................... 7.38% 06/15/2025 804,610 800,000 Science Applications International Corp ..... 7.13% 07/01/2032 849,849 4,365,000 Sears Roebuck Acceptance .................... 6.50% 12/01/2028 3,622,950 3,350,000 Sears Roebuck Acceptance .................... 7.00% 06/01/2032 2,814,000 950,000 Security Capital Group Inc .................. 7.70% 06/15/2028 1,118,795 2,600,000 SLM Corp .................................... 5.38% 01/15/2013 2,685,186 2,200,000 South Africa Government International Bond .. 8.50% 06/23/2017 2,537,282 970,000 South Carolina Electric & Gas ............... 6.63% 02/01/2032 1,083,119 950,000 Southern Co CAP Trust I ..................... 8.19% 02/01/2037 1,050,394 1,325,000 Southern Union Co ........................... 7.60% 02/01/2024 1,298,904 1,000,000 Southern Union Co ........................... 8.25% 11/15/2029 1,051,242 2,000,000 Southtrust Bank NA .......................... 6.13% 01/09/2028 2,201,799 330,000 Spieker Properties Inc ...................... 7.35% 12/01/2017 357,323 1,000,000 Spieker Properties Inc ...................... 7.50% 10/01/2027 1,029,483 6,334,000 Sprint Capital Corp ......................... 6.88% 11/15/2028 5,193,880 7,165,000 Sprint Capital Corp ......................... 6.90% 05/01/2019 6,090,250 7,480,000 Sprint Capital Corp ......................... 8.75% 03/15/2032 7,106,000 1,000,000 Sprint Corp-FON Group ....................... 9.25% 04/15/2022 870,000 2,025,000 Suncor Energy Inc ........................... 7.15% 02/01/2032 2,300,358 1,750,000 Suntrust Bank ............................... 5.45% 12/01/2017 1,823,566 3,800,000 SunTrust Banks Inc .......................... 6.00% 02/15/2026 4,177,216 800,000 Suntrust Capital II ......................... 7.90% 06/15/2027 899,925 3,000,000 Swiss Bank Corp NY .......................... 7.38% 07/15/2015 3,618,607 750,000 Swiss Bank Corp NY .......................... 7.00% 10/15/2015 880,643 2,200,000 Swiss Bank Corp NY .......................... 7.75% 09/01/2026 2,622,928 1,400,000 Talisman Energy Inc ......................... 7.25% 10/15/2027 1,576,871 2,775,000 Target Corp ................................. 7.00% 07/15/2031 3,114,414 2,300,000 Target Corp ................................. 6.35% 11/01/2032 2,381,310 100,000 Target Corp ................................. 9.88% 07/01/2020 139,711 1,125,000 Target Corp ................................. 6.75% 01/01/2028 1,219,601 1,580,000 Target Corp ................................. 6.65% 08/01/2028 1,693,712 1,000,000 Target Corp ................................. 9.35% 06/16/2020 1,340,764 300,000 TCA Cable TV Inc ............................ 6.53% 02/01/2028 319,072 3,000,000 TCI Communications Inc ...................... 8.75% 08/01/2015 3,468,307 3,041,000 TCI Communications Inc ...................... 7.88% 02/15/2026 3,100,720
The accompanying notes are an integral part of these financial statements. SAI-341 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------- USD 3,800,000 Telefonica Europe BV ......................... 8.25% 09/15/2030 $ 4,653,879 1,880,000 Tenet Healthcare Corp ........................ 6.88% 11/15/2031 1,569,800 760,000 Texaco Capital Inc ........................... 9.75% 03/15/2020 1,095,548 800,000 Texaco Capital Inc ........................... 8.88% 09/01/2021 1,090,484 885,000 Texaco Capital Inc ........................... 8.00% 08/01/2032 1,175,776 1,925,000 Texaco Capital Inc ........................... 7.50% 03/01/2043 2,264,051 1,575,000 Texaco Capital Inc ........................... 8.63% 11/15/2031 2,226,228 850,000 Texas Eastern Transmission LP ................ 7.00% 07/15/2032 883,627 190,000 Time Warner Cos .............................. 7.57% 02/01/2024 187,606 1,010,000 Time Warner Entertainment Co LP .............. 8.38% 07/15/2033 1,129,791 3,715,000 Time Warner Entertainment Co LP .............. 8.38% 03/15/2023 4,094,904 3,550,000 Time Warner Inc .............................. 9.13% 01/15/2013 4,164,475 1,680,000 Time Warner Inc .............................. 9.15% 02/01/2023 1,891,239 400,000 Time Warner Inc .............................. 6.88% 06/15/2018 384,713 4,000,000 Time Warner Inc .............................. 7.25% 10/15/2017 4,118,449 6,550,000 Time Warner Inc .............................. 6.95% 01/15/2028 6,258,404 5,145,000 Time Warner Inc .............................. 6.63% 05/15/2029 4,717,715 2,000,000 Time Warner Inc .............................. 8.05% 01/15/2016 2,182,023 850,000 Tosco Corp ................................... 7.80% 01/01/2027 1,029,562 1,945,000 Tosco Corp ................................... 8.13% 02/15/2030 2,460,613 475,000 Transamerica Capital III ..................... 7.63% 11/15/2037 468,336 280,000 TransCanada PipeLines Ltd .................... 7.70% 06/15/2029 326,489 2,450,000 TransCanada PipeLines Ltd .................... 9.88% 01/01/2021 3,322,860 3,300,000 Transocean Inc ............................... 7.50% 04/15/2031 3,809,337 1,400,000 Transocean Inc ............................... 7.38% 04/15/2018 1,577,052 1,100,000 Travelers Capital III ........................ 7.63% 12/01/2036 1,245,162 950,000 Travelers Property Casualty Corp/OLD ......... 7.75% 04/15/2026 1,026,446 1,350,000 TRW Inc ...................................... 6.65% 01/15/2028 1,376,384 1,020,000 TRW Inc ...................................... 7.75% 06/01/2029 1,181,195 3,557,000 Turner Broadcasting System Inc ............... 8.38% 07/01/2013 4,037,022 1,450,000 TXU US Holdings Co ........................... 7.88% 04/01/2024 1,508,534 1,000,000 TXU US Holdings Co ........................... 7.38% 10/01/2025 1,009,128 950,000 Tyson Foods Inc .............................. 7.00% 05/01/2018 996,430 3,050,000 Unilever Capital Corp ........................ 5.90% 11/15/2032 3,140,910 200,000 Union Carbide Chemical & Plastics Co Inc ..... 7.88% 04/01/2023 204,752 2,000,000 Union Carbide Corp ........................... 7.75% 10/01/2096 1,762,880 400,000 Union Carbide Corp ........................... 6.79% 06/01/2025 418,991 2,200,000 Union Oil Co Of California ................... 7.50% 02/15/2029 2,523,230 800,000 Union Pacific Corp ........................... 7.00% 02/01/2016 939,977 6,125,000 Union Pacific Corp ........................... 6.63% 02/01/2029 6,702,773 500,000 Union Pacific Corp ........................... 8.35% 05/01/2025 579,324
The accompanying notes are an integral part of these financial statements. SAI-342 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002
------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------- USD 1,000,000 Union Pacific Resources Group ........... 7.15% 05/15/2028 $ 1,114,955 1,225,000 Union Planters Capital Trust A .......... 8.20% 12/15/2026 1,313,841 613,580 United AirLines Inc(2) .................. 7.78% 01/01/2014 478,593 808,830 United AirLines Inc(2) .................. 6.07% 03/01/2013 647,064 950,000 United AirLines Inc(2) .................. 6.60% 09/01/2013 722,000 1,000,000 United Parcel Service Inc ............... 8.38% 04/01/2020 1,301,537 2,000,000 United Technologies Corp ................ 8.75% 03/01/2021 2,673,166 1,940,000 United Technologies Corp ................ 6.70% 08/01/2028 2,187,851 892,000 United Technologies Corp ................ 7.50% 09/15/2029 1,104,947 940,000 United Utilities Plc .................... 6.88% 08/15/2028 916,095 100,000 UnumProvident Corp ...................... 6.75% 12/15/2028 76,015 750,000 UnumProvident Corp ...................... 7.38% 06/15/2032 612,282 1,900,000 US Airways Inc .......................... 8.02% 02/05/2019 1,966,500 1,756,994 US Airways Inc .......................... 7.89% 09/01/2020 1,818,489 3,482,977 US Airways Inc .......................... 7.08% 03/20/2021 3,604,881 479,116 US Airways Pass Through Trust ........... 8.36% 07/20/2020 388,084 1,600,000 US Bancorp Capital I .................... 8.27% 12/15/2026 1,836,250 192,000 US Bancorp-Old .......................... 7.50% 06/01/2026 219,619 3,600,000 US Bank National Association ............ 6.30% 02/04/2014 4,051,707 1,900,000 USA Interactive 144A .................... 7.00% 01/15/2013 1,959,763 1,090,000 USX Corp/Consolidated ................... 9.13% 01/15/2013 1,403,885 300,000 USX Corp/Consolidated ................... 9.38% 05/15/2022 387,125 1,495,000 Valero Energy Corp ...................... 8.75% 06/15/2030 1,722,570 2,565,000 Valero Energy Corp ...................... 7.50% 04/15/2032 2,582,601 3,350,000 Verizon Florida Inc ..................... 6.13% 01/15/2013 3,583,151 10,685,000 Verizon Global Funding Corp ............. 7.75% 12/01/2030 12,347,228 560,000 Verizon New York Inc .................... 7.38% 04/01/2032 640,673 6,040,000 Viacom Inc .............................. 7.88% 07/30/2030 7,489,710 100,000 Virginia Electric and Power Co .......... 6.75% 10/01/2023 104,085 900,000 Virginia Electric and Power Co .......... 8.25% 03/01/2025 963,024 2,720,000 Vodafone Group Plc ...................... 7.88% 02/15/2030 3,256,780 1,650,000 Vodafone Group Plc ...................... 6.25% 11/30/2032 1,640,851 2,900,000 Wachovia Corp ........................... 6.55% 10/15/2035 3,153,459 1,270,000 Wachovia Corp ........................... 7.50% 04/15/2035 1,400,789 3,215,000 Wal-Mart Stores Inc ..................... 7.25% 06/01/2013 3,936,061 3,300,000 Wal-Mart Stores Inc ..................... 8.50% 09/15/2024 3,770,591 758,000 Wal-Mart Stores Inc ..................... 7.55% 02/15/2030 954,001 1,500,000 Wal-Mart Stores Inc ..................... 6.75% 10/15/2023 1,698,025 1,185,000 Walt Disney Co .......................... 7.55% 07/15/2093 1,346,765 3,315,000 Walt Disney Co .......................... 7.00% 03/01/2032 3,650,745 100,000 Walt Disney Co .......................... 6.20% 06/20/2014 108,149
The accompanying notes are an integral part of these financial statements. SAI-343 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND Combined Schedule of Investments (showing percentage of total value of investments) December 31, 2002 --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE ------------------------------------------------------------------------------------------------------------- USD 1,050,000 Walt Disney Co ....................... 5.88% 12/15/2017 $ 1,076,269 1,800,000 Washington Mutual Bank FA ............ 5.50% 01/15/2013 1,844,962 3,400,000 Washington Mutual Capital I .......... 8.38% 06/01/2027 3,796,294 825,000 Wells Fargo & Co ..................... 6.75% 12/15/2027 920,536 800,000 Wells Fargo & Co ..................... 6.65% 10/15/2023 875,222 2,710,000 Wells Fargo & Co ..................... 5.00% 11/15/2014 2,739,993 2,900,000 Wells Fargo Capital I ................ 7.96% 12/15/2026 3,298,347 700,000 Wendy's International Inc ............ 6.20% 06/15/2014 774,160 1,525,000 Westinghouse Credit Corp ............. 8.88% 06/14/2014 1,984,648 3,540,000 Westvaco Corp/NY ..................... 8.20% 01/15/2030 4,153,728 1,195,000 Westvaco Corp/NY ..................... 7.95% 01/15/2031 1,384,432 3,470,000 Weyerhaeuser Co ...................... 7.50% 03/01/2013 3,953,684 1,000,000 Weyerhaeuser Co ...................... 7.13% 07/15/2023 1,025,499 1,340,000 Weyerhaeuser Co ...................... 6.95% 10/01/2027 1,349,175 4,730,000 Weyerhaeuser Co ...................... 7.38% 03/15/2032 5,110,174 1,250,000 Weyerhaeuser Co ...................... 8.50% 01/15/2025 1,468,328 1,000,000 Weyerhaeuser Co ...................... 6.95% 08/01/2017 1,081,010 1,000,000 Willamette Industries Inc ............ 7.35% 07/01/2026 1,091,541 1,000,000 Willamette Industries Inc ............ 7.85% 07/01/2026 1,123,514 1,750,000 Wisconsin Bell Inc ................... 6.75% 08/15/2024 1,802,164 900,000 Wisconsin Electric Power ............. 7.70% 12/15/2027 931,455 1,600,000 Zeneca Wilmington Inc ................ 7.00% 11/15/2023 1,853,852 1,000,000 Zions Institiute -A .................. 8.54% 12/15/2026 1,097,667 ------------------------------------------------------------------------------------------------------------- 1,669,206,463 ------------------------------------------------------------------------------------------------------------- TOTAL DEBT INSTRUMENTS ............... 1,675,954,416 ------------------------------------------------------------------------------------------------------------- UNITS ------------------------------------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 0.9% 14,851,649 Short Term Investment Fund(3) ........ 14,851,649 ------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST $1,565,241,864).............................................. $1,690,806,065 -------------------------------------------------------------------------------------------------------------
1 Bond called 1/3/03 at 104.25. See Bloomberg description page. 2 Issuer delisted due to bankruptcy. 3 Collective investment fund advised by State Street Global Advisors. USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-344 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Long Corporate Index Securities Lending Fund and State Street Bank and Trust Company Long Corporate Index Fund (collectively, the "Fund") were formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to match the return of the Lehman Brothers Long Corporate Bond Index. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Fixed income investments are valued on the basis of valuations furnished by a pricing service approved by the Trustee, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the Trustee. Short-term investments, if any, are stated at amortized cost, which approximates market value. Investments in regulated investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Dividend income, if any, is recorded on the ex-dividend date. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION The net asset value of the Fund is determined each business day ("valuation date"). Issuances and redemptions of Fund units are made on such days, based upon the net asset value per unit. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-345 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY LONG CORPORATE INDEX SECURITIES LENDING FUND LONG CORPORATE INDEX FUND NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2002 F. DISTRIBUTIONS TO PARTICIPANTS Net investment income (excluding security lending fee income, if any) and net realized gains are retained by the Fund. Income generated by security lending, if any, is distributed monthly to participants of the Lending Fund. 3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION The participants in the Long Corporate Index Securities Lending Fund (the "Lending Fund") have authorized the Lending Fund to participate in the Global Securities Lending Program maintained by State Street Bank. The investment objective, techniques and results of operations of the Lending Fund are identical to those of the Long Corporate Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in securities lending activity. Accordingly, the financial statements of the Lending Fund and the Non-Lending Fund have been prepared on a combined basis, with separate disclosure of the participant transactions and financial highlights of the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata interest in the combined assets and liabilities (including each investment security position but excluding assets and liabilities related to securities lending activity) proportionate to the net asset value of the outstanding combined units of the Fund. All interfund transactions have been eliminated in the combined financial statements. Under the Global Securities Lending Program, securities held by the Lending Fund are loaned by State Street Bank, as agent, to certain brokers and other financial institutions (the "Borrowers"). The Borrowers provide cash, securities, or letters of credit as collateral against loans in an amount at least equal to 100% of the market value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the market value of the loaned securities. At December 31, 2002, the market value of securities loaned by the Lending Fund are disclosed on the Statement of Assets and Liabilities. Cash collateral provided by the Borrowers is recorded on the Statement of Assets and Liabilities and is invested in State Street Bank and Trust Company Quality D Short-Term Investment Fund. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the Lending Fund and State Street Bank in its capacity as lending agent. Negotiated lenders' fees are received for those loans collateralized by securities or letters of credit, if any. Securities lending fee income, if any, is recorded on an accrual basis by the Lending Fund. State Street Bank, as lending agent, indemnifies the Lending Fund for replacement of any loaned securities (or, in certain circumstances, return of equivalent cash value) due to Borrower default on a security loan. Lending Fund participants, however, bear the risk of loss with respect to the investment of collateral. 4. INVESTMENT TRANSACTIONS Purchases and sales of securities, including in-kind contributions and redemptions, if any, during the period ended December 31, 2002 were $1,484,574,390 and $1,382,938,852, respectively. SAI-346 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Trustee of State Street Bank and Trust Company Short Term Investment Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of State Street Bank and Trust Company Short Term Investment Fund at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trustee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Trustee, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 14, 2003 SAI-347 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Assets and Liabilities December 31, 2002 -------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at amortized cost .................................... $39,508,046,157 Cash ............................................................................ 37 Interest receivable ............................................................. 52,672,461 -------------------------------------------------------------------------------------------------- Total assets ................................................................. 39,560,718,655 -------------------------------------------------------------------------------------------------- LIABILITIES Distributions payable ........................................................... 51,929,802 Accrued expenses ................................................................ 594,213 -------------------------------------------------------------------------------------------------- Total liabilities ............................................................ 52,524,015 -------------------------------------------------------------------------------------------------- NET ASSETS (equivalent to $1.00 per unit based on 39,507,687,668 units outstanding) .................................................................. $39,508,194,640 ==================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-348 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Operations Year ended December 31, 2002 ----------------------------------------------------------------------------------------- INVESTMENT INCOME Interest ............................................................... $728,988,036 ----------------------------------------------------------------------------------------- EXPENSES Audit .................................................................. 55,000 Insurance .............................................................. 6,654,383 ----------------------------------------------------------------------------------------- Total expenses ....................................................... 6,709,383 ----------------------------------------------------------------------------------------- Net investment income (loss) ......................................... 722,278,653 ----------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Investments ............................................................ 7,924 ----------------------------------------------------------------------------------------- 7,924 ----------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $722,286,577 =========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-349 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Changes in Net Assets
YEAR ENDED DECEMBER 31, 2002 2001 ----------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ................................................... $ 722,278,653 $ 1,528,683,656 Net realized gain (loss) ....................................................... 7,924 319,318 ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations ............... 722,286,577 1,529,002,974 ----------------------------------------------------------------------------------------------------------------------- Distributions .................................................................. (722,296,381) (1,528,683,656) Net increase (decrease) in net assets resulting from participant transactions .. 4,729,690,820 7,250,708,768 ----------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS .......................................... 4,729,681,016 7,251,028,086 ----------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of year ............................................................. 34,778,513,624 27,527,485,538 ----------------------------------------------------------------------------------------------------------------------- End of year ................................................................... $39,508,194,640 $ 34,778,513,624 =======================================================================================================================
The accompanying notes are an integral part of these financial statements. SAI-350 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Statement of Changes in Net Assets (Continued)
YEAR ENDED DECEMBER 31, ------------------------------------------- 2002 ------------------------------------------- UNITS AMOUNT ----------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ................................ 239,397,576,601 $ 239,397,576,601 Units redeemed .............................. (234,667,885,781) (234,667,885,781) ----------------------------------------------------------------------------------------- Net increase (decrease) ..................... 4,729,690,820 $ 4,729,690,820 ======================================================================================== YEAR ENDED DECEMBER 31, ------------------------------------------- 2001 ------------------------------------------- UNITS AMOUNT ----------------------------------------------------------------------------------------- UNITS OF PARTICIPATION PARTICIPANT TRANSACTIONS FOR THE FUND WERE AS FOLLOWS: Units issued ................................ 109,889,289,902 $ 109,889,289,902 Units redeemed .............................. (102,638,581,134) (102,638,581,134) ----------------------------------------------------------------------------------------- Net increase (decrease) ..................... 7,250,708,768 $ 7,250,708,768 =========================================================================================
The accompanying notes are an integral part of these financial statements. SAI-351 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Financial Highlights (For a Unit of Participation Outstanding Throughout the Year)
YEAR ENDED DECEMBER 31, ------------------------------- 2002 2001 -------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year ............. $ 1.00 $ 1.00 -------------------------------------------------------------------------------- Net investment income (loss) ................... 0.0197 0.0437 Net realized and unrealized gain (loss) (a)..... 0.0000 0.0000 -------------------------------------------------------------------------------- Total from investment operations ............... 0.0197 0.0437 Distributions from net investment income........ 0.0197 0.0437 -------------------------------------------------------------------------------- Net asset value, end of year ................... $ 1.00 $ 1.00 ================================================ =========== =========== Total return (%) (b) ........................... 1.99 4.46 ================================================ =========== =========== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) .......................... 0.02 0.02 -------------------------------------------------------------------------------- Ratio of net investment income (%) ............. 1.97 4.37 -------------------------------------------------------------------------------- Net assets, end of year (000's) ................ $39,508,195 $34,778,514 ================================================ ============ ============ YEAR ENDED DECEMBER 31, -------------------------------------------------------- 2000 1999 1998(a) --------------------------------------------------------------------------------------------------------- SELECTED PER UNIT DATA Net asset value, beginning of year ............. $ 1.00 $ 1.00 $ 1.00 --------------------------------------------------------------------------------------------------------- Net investment income (loss) ................... 0.0643 0.0522 0.0551 Net realized and unrealized gain (loss) (a)..... 0.0000 0.0000 0.0000 --------------------------------------------------------------------------------------------------------- Total from investment operations ............... 0.0643 0.0522 0.0551 Distributions from net investment income........ 0.0643 0.0522 0.0551 --------------------------------------------------------------------------------------------------------- Net asset value, end of year ................... $ 1.00 $ 1.00 $ 1.00 ================================================= =========== =========== =========== Total return (%) (b) ........................... 6.63 5.35 5.65 ================================================= =========== =========== =========== RATIOS TO AVERAGE NET ASSETS Ratio of expenses (%) .......................... 0.00 (c) 0.00 (c) 0.00 (c) --------------------------------------------------------------------------------------------------------- Ratio of net investment income (%) ............. 6.43 5.22 5.51 --------------------------------------------------------------------------------------------------------- Net assets, end of year (000's) ................ $27,527,486 $22,958,561 $20,508,724 ================================================= =========== =========== ===========
(a) Zero amounts represent that which are less than $0.00005 or ($0.00005) if negative. (b) Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning and end of the year and assumes reinvestment of distributions, if any. It assumes reinvestment of distributions and includes only those expenses charged directly to the Fund. (c) Zero amounts represent that which are less than 0.005% or (0.005%) if negative. The accompanying notes are an integral part of these financial statements. SAI-352 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- PRINCIPAL DEBT INSTRUMENTS -- 94.0% Abbey National North America ......................... 1.58% 11/19/03 USD 100,000,000 $ 99,982,398 Abbey National Treasury(1) ........................... 1.35% 1/13/03 245,000,000 244,948,067 Abbey National Treasury .............................. 1.91% 10/21/03 265,000,000 264,968,267 Abbey National Treasury Services PLC ................. 1.63% 2/3/03 250,000,000 250,015,915 ABN AMRO Bank ........................................ 1.32% 1/13/03 150,000,000 149,999,496 ABN AMRO Bank ........................................ 1.72% 4/17/03 100,000,000 100,000,000 Amstel Funding Corporation ........................... 1.40% 3/4/03 99,684,000 99,443,651 Amsterdam Funding Corporation ........................ 1.38% 1/21/03 100,000,000 99,923,333 Amsterdam Funding Corporation ........................ 1.40% 1/21/03 200,000,000 199,844,444 Aspen Funding Corporation ............................ 1.35% 1/24/03 100,000,000 99,913,750 Asset Securitization Corporation(1) .................. 1.38% 5/16/03 220,000,000 220,000,000 Atlantis One Funding Corporation ..................... 1.32% 3/26/03 155,793,000 155,313,158 Atlantis One Funding Corporation ..................... 1.34% 3/31/03 90,000,000 89,701,850 Atlantis One Funding Corporation ..................... 1.35% 4/23/03 96,000,000 95,598,293 Bank of Montreal (Chicago)(1) ........................ 1.34% 1/21/03 75,000,000 74,993,507 Bank of Nova Scotia Euro CD .......................... 1.34% 3/10/03 450,000,000 450,000,000 Bank One(1) .......................................... 1.34% 1/27/03 100,000,000 99,980,755 Bank One ............................................. 2.01% 3/25/03 100,000,000 100,000,000 Bank One ............................................. 1.73% 1/24/03 200,000,000 200,000,000 Bank One ............................................. 1.75% 2/3/03 250,000,000 250,000,000 Bank One ............................................. 1.69% 3/5/03 200,000,000 200,000,000 Bank One ............................................. 1.33% 6/23/03 300,000,000 300,000,000 Banque Paribas ....................................... 1.34% 2/21/03 500,000,000 500,000,000 Banque Paribas ....................................... 1.34% 3/5/03 500,000,000 500,000,000 Barclays Bank Euro CD ................................ 1.37% 2/3/03 250,000,000 250,004,503 Barclays Bank PLC(1) ................................. 1.33% 1/27/03 300,000,000 299,951,759 Barclays Bank PLC(1) ................................. 1.35% 1/2/03 200,000,000 199,940,126 Barclays US Funding .................................. 1.67% 3/6/03 300,000,000 299,109,333 Barton Capital Corporation ........................... 1.36% 2/11/03 60,130,000 60,036,865 Bayerische Landesbank(1) ............................. 1.33% 1/21/03 331,000,000 330,964,179 Bayerische Landesbank London ......................... 1.74% 5/19/03 200,000,000 200,003,784 Bellsouth Telecommunications(1) ...................... 1.43% 1/3/03 250,000,000 250,000,000 Bills Securitisation Ltd ............................. 1.69% 3/5/03 200,000,000 199,408,500 BNP Paribas .......................................... 1.31% 3/31/03 150,000,000 150,000,000 Canadian Imperial Bank Commerce ...................... 1.74% 1/7/03 275,000,000 275,000,000 Canadian Imperial Bank Commerce New York ............. 1.34% 3/13/03 200,000,000 199,471,444 Canadian Imperial Bank Commerce New York ............. 1.34% 3/17/03 100,000,000 100,002,015 Canadian Imperial Bank Commerce New York ............. 1.32% 3/26/03 250,000,000 250,000,000 Canadian Imperial Bank of Commerce/New York(1) ....... 1.33% 1/21/03 100,000,000 99,990,260 Chase Manhattan Bank USA ............................. 1.69% 2/13/03 200,000,000 200,000,000 CIBC Grand Cayman .................................... 1.19% 1/2/03 200,000,000 200,000,000 Citigroup Inc(1) ..................................... 1.50% 2/28/03 362,000,000 362,146,183 Corporate Asset Fund ................................. 1.71% 1/7/03 100,000,000 99,971,500 Corporate Asset Fund ................................. 1.34% 2/20/03 150,000,000 149,720,833 Corporate Asset Fund ................................. 1.30% 3/6/03 100,000,000 99,768,889 Corporate Asset Fund ................................. 1.32% 3/12/03 200,000,000 199,486,667 Corporate Receivables Corporation .................... 1.36% 2/11/03 100,000,000 99,845,111 Corporate Receivables Corporation .................... 1.32% 3/12/03 100,000,000 99,743,333 Corporate Receivables Corporation .................... 1.71% 1/7/03 100,000,000 99,971,500
The accompanying notes are an integral part of these financial statements. SAI-353 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- PRINCIPAL DEBT INSTRUMENTS (CONTINUED) Corporate Receivables Corporation ............. 1.55% 2/5/03 USD 100,000,000 $ 99,849,306 Credit Agricole Indosuez ...................... 1.34% 2/18/03 250,000,000 250,003,191 Credit Agricole Indosuez ...................... 1.34% 2/24/03 127,000,000 127,001,898 Credito Italiano Grand Cayman ................. 1.35% 3/5/03 200,000,000 200,001,744 CXC, Inc ...................................... 1.39% 1/22/03 100,000,000 99,918,917 CXC, Inc ...................................... 1.55% 2/7/03 100,000,000 99,840,694 Danske Bank Grand Cayman ...................... 1.19% 1/2/03 200,000,000 200,000,000 Danske Corporation ............................ 1.84% 1/9/03 100,000,000 99,959,111 Danske Corporation ............................ 1.80% 1/16/03 125,000,000 124,906,250 Danske Corporation ............................ 1.32% 6/16/03 175,000,000 173,934,833 Danske Corporation ............................ 1.32% 6/18/03 75,000,000 74,538,000 Delaware Funding Corporation .................. 1.38% 1/22/03 240,956,000 240,762,030 Delaware Funding Corporation .................. 1.36% 1/30/03 75,167,000 75,084,650 Delaware Funding Corporation .................. 1.33% 2/11/03 170,639,000 170,380,529 Delaware Funding Corporation .................. 1.32% 2/12/03 77,917,000 77,797,008 Deutsche Bank AG .............................. 1.35% 5/9/03 100,000,000 100,000,000 Deutsche Bank AG Grand Cayman ................. 1.25% 1/2/03 800,000,000 800,000,000 Dexia Delaware ................................ 1.32% 2/18/03 225,000,000 224,604,000 Edison Asset Securitization ................... 1.81% 1/10/03 200,000,000 199,909,500 Edison Asset Securitization ................... 1.83% 1/10/03 200,000,000 199,908,500 Edison Asset Securitization ................... 1.33% 5/9/03 205,000,000 204,030,578 Edison Asset Securitization ................... 1.34% 5/20/03 150,000,000 149,223,917 Enterprise Funding Corporation ................ 1.38% 1/21/03 143,891,000 143,780,684 Falcon Asset Securitization ................... 1.36% 1/23/03 150,100,000 149,975,250 Fannie Mae Discount Notes ..................... 1.65% 3/19/03 200,000,000 199,294,167 Fannie Mae Discount Notes ..................... 1.29% 3/12/03 50,000,000 49,875,069 Fannie Mae Discount Notes ..................... 1.61% 2/5/03 197,425,000 197,115,975 Fannie Mae Discount Notes ..................... 1.63% 2/5/03 75,000,000 74,881,510 Fannie Mae Discount Notes ..................... 1.57% 1/22/03 54,114,000 54,064,441 Fannie Mae Discount Notes ..................... 1.64% 3/26/03 100,000,000 99,617,333 Fannie Mae Discount Notes ..................... 1.28% 3/26/03 200,000,000 199,402,667 Fannie Mae Discount Notes ..................... 1.46% 3/7/03 110,000,000 109,710,028 Fannie Mae Discount Notes ..................... 1.62% 2/12/03 50,000,000 49,905,500 Fannie Mae Discount Notes ..................... 1.25% 2/19/03 70,000,000 69,881,379 Fannie Mae Discount Notes ..................... 1.68% 4/9/03 50,000,000 49,771,333 Federal Home Loan Bank ........................ 2.02% 11/14/03 250,000,000 250,000,000 Federal Home Loan Bank Discount Notes ......... 1.60% 1/17/03 157,773,000 157,660,806 Federal Home Loan Bank Discount Notes ......... 1.69% 1/15/03 175,000,000 174,885,326 Federal Home Loan Bank Discount Notes ......... 1.71% 4/23/03 75,000,000 74,601,000 First Tennessee Bank NA ....................... 1.32% 2/18/03 125,000,000 125,000,000 First Tennessee Bank NA ....................... 1.34% 3/3/03 108,000,000 108,000,000 Freddie Mac Discount Notes .................... 1.75% 1/30/03 300,000,000 299,578,292 Freddie Mac Discount Notes .................... 1.74% 1/30/03 100,000,000 99,859,833 Freddie Mac Discount Notes .................... 1.73% 2/27/03 150,000,000 149,590,313 Freddie Mac Discount Notes .................... 1.25% 2/27/03 150,000,000 149,703,125 Freddie Mac Discount Notes .................... 1.64% 3/27/03 100,000,000 99,612,778 Freddie Mac Discount Notes .................... 1.27% 3/6/03 125,000,000 124,717,778 Freddie Mac Discount Notes .................... 1.26% 2/20/03 50,000,000 49,912,500
The accompanying notes are an integral part of these financial statements. SAI-354 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- PRINCIPAL DEBT INSTRUMENTS (CONTINUED) GE Capital International Funding .................. 1.34% 3/20/03 USD 150,000,000 $ 149,564,500 Gemini Securitization Corp ........................ 1.35% 1/24/03 160,554,000 160,415,522 General Electric Capital Corp(1) .................. 1.46% 1/9/03 245,000,000 245,000,000 General Electric Capital Corp(1) .................. 1.45% 1/17/03 257,000,000 257,000,000 Giro Funding United States Corporation ............ 1.75% 1/15/03 270,622,000 270,437,827 GOVCO Incorporated ................................ 1.35% 3/18/03 100,000,000 99,715,000 Grampian Funding Limited LLC ...................... 1.71% 1/10/03 100,000,000 99,957,250 HBOS PLC .......................................... 1.79% 4/22/03 250,000,000 250,000,000 HBOS PLC .......................................... 1.71% 3/25/03 400,000,000 400,000,000 HBOS Treasury Services ............................ 1.74% 3/19/03 300,000,000 298,883,500 Holmes Financing PLC(1) ........................... 1.42% 1/7/03 75,000,000 75,000,000 Household Finance Corp(1) ......................... 1.77% 3/10/03 100,000,000 100,000,000 Household Finance Corp(1) ......................... 1.76% 3/11/03 50,000,000 50,000,000 ING Bank Amsterdam ................................ 2.03% 3/21/03 270,000,000 270,000,000 ING Bank Amsterdam ................................ 1.91% 3/31/03 300,000,000 300,000,000 JP Morgan Chase ................................... 1.67% 2/12/03 400,000,000 399,220,667 Jupiter Section ................................... 1.34% 1/7/03 78,000,000 77,982,580 Jupiter Section ................................... 1.34% 1/8/03 143,000,000 142,962,741 Jupiter Section ................................... 1.75% 1/13/03 91,210,000 91,156,794 Jupiter Section ................................... 1.76% 1/14/03 144,680,000 144,588,048 Jupiter Section ................................... 1.39% 1/21/03 63,249,000 63,200,158 Jupiter Section ................................... 1.37% 2/3/03 61,100,000 61,023,269 KeyBank National Association Grand Cayman ......... 1.19% 1/2/03 500,000,000 500,000,000 Kittyhawk Funding ................................. 1.75% 1/15/03 100,450,000 100,381,638 Kittyhawk Funding ................................. 1.38% 1/21/03 203,416,000 203,260,048 Landesbank Baden .................................. 1.33% 3/27/03 250,000,000 249,217,882 Landesbank Baden Wuerttemberg ..................... 1.61% 2/4/03 91,000,000 91,024,799 Landesbank Baden Wuerttemberg ..................... 1.33% 3/31/03 500,000,000 500,000,000 Landesbank Baden Wuerttemberg ..................... 1.36% 5/21/03 100,000,000 100,003,843 Landesbank Hessen Thuringen ....................... 1.32% 2/12/03 100,000,000 99,999,989 Landesbank Hessen Thuringen ....................... 1.78% 3/3/03 100,000,000 100,016,723 Landesbank Hessen Thuringen ....................... 1.73% 4/17/03 490,000,000 490,000,000 Landesbank Hessen Thuringen ....................... 1.87% 10/20/03 105,000,000 105,000,000 Lloyds Bank ....................................... 1.64% 4/11/03 50,000,000 50,019,082 Lloyds Bank ....................................... 1.71% 5/19/03 220,000,000 220,004,163 MBNA Master Credit Card Trust ..................... 1.74% 1/9/03 156,250,000 156,189,583 MBNA Master Credit Card Trust ..................... 1.67% 1/28/03 64,348,000 64,267,404 MBNA Master Credit Card Trust ..................... 1.34% 2/13/03 89,542,000 89,398,683 MBNA Master Credit Card Trust ..................... 1.37% 2/25/03 80,112,000 79,944,321 MBNA Master Credit Card Trust ..................... 1.37% 3/5/03 50,000,000 49,880,125 Mont Blanc Capital Corporation .................... 1.35% 2/13/03 100,000,000 99,838,750 Mont Blanc Capital Corporation .................... 1.75% 2/13/03 100,000,000 99,790,972 National Australia Bank Ltd ....................... 1.34% 4/7/03 100,000,000 100,000,000 National City Bank Grand Cayman ................... 1.13% 1/2/03 628,399,000 628,399,000 National City Corporation ......................... 1.35% 2/4/03 150,000,000 149,808,750 Newport Funding Corporation ....................... 1.70% 1/9/03 100,000,000 99,962,222 Newport Funding Corporation ....................... 1.33% 2/13/03 98,000,000 97,844,316 Nieuw Amsterdam Receivables ....................... 1.37% 1/15/03 110,000,000 109,942,250
The accompanying notes are an integral part of these financial statements. SAI-355 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- PRINCIPAL DEBT INSTRUMENTS (CONTINUED) Nieuw Amsterdam Receivables ................. 1.37% 2/21/03 USD 50,000,000 $ 49,902,958 Nordea Bank ................................. 1.86% 1/13/03 100,000,000 100,000,972 Nordea Bank ................................. 1.77% 1/21/03 70,000,000 70,017,000 Nordea Bank ................................. 1.64% 2/3/03 150,000,000 150,010,234 Nordea Bank ................................. 1.75% 3/20/03 100,000,000 100,000,000 Nordea North America ........................ 1.30% 3/19/03 100,000,000 99,721,944 Nordeutsche Landesbank Euro ................. 1.33% 2/12/03 200,000,000 200,000,000 Nordeutsche Landesbank Euro ................. 1.75% 3/20/03 100,000,000 100,000,000 Nordeutsche Landesbank Euro ................. 2.02% 3/24/03 200,000,000 200,000,000 Pennine Funding ............................. 1.68% 2/12/03 216,000,000 215,576,640 Pennine Funding ............................. 1.33% 2/14/03 180,000,000 179,707,400 PFD Receivables Funding ..................... 1.34% 1/21/03 145,000,000 144,892,056 Principal Resources Mortgage ................ 1.47% 2/14/03 75,197,000 75,061,896 Principal Resources Mortgage ................ 1.41% 2/21/03 140,000,000 139,720,350 Quincy Capital Corporation .................. 1.35% 2/20/03 36,305,000 36,236,928 Rabobank Nederland .......................... 1.32% 1/30/03 300,000,000 299,681,000 Rabobank Nederland(1) ....................... 1.68% 1/2/03 100,000,000 99,985,024 Royal Bank of Canada ........................ 1.35% 1/13/03 240,000,000 239,949,629 Royal Bank of Canada(1) ..................... 1.35% 1/30/03 300,000,000 299,932,932 Royal Bank of Canada Grand Cayman ........... 1.34% 2/21/03 400,000,000 400,000,000 Royal Bank of Scotland(1) ................... 1.38% 1/3/03 300,000,000 299,954,795 Royal Bank of Scotland ...................... 1.32% 2/28/03 85,400,000 85,218,383 Royal Bank of Scotland ...................... 1.33% 3/4/03 500,000,000 498,859,028 Royal Bank of Scotland PLC .................. 1.34% 3/31/03 200,000,000 200,000,000 Salomon Smith Barney Holdings ............... 1.33% 2/18/03 500,000,000 499,113,333 Sheffield Receivables Corporation ........... 1.35% 1/13/03 275,580,000 275,455,989 Sheffield Receivables Corporation ........... 1.36% 1/21/03 317,770,000 317,529,907 Sheffield Receivables Corporation(1) ........ 1.39% 1/21/03 150,000,000 150,000,000 Sheffield Receivables Corporation ........... 1.85% 1/8/03 56,310,000 56,289,744 Societe Generale ............................ 1.33% 2/12/03 237,000,000 236,993,860 Societe Generale ............................ 1.34% 3/20/03 100,000,000 100,002,085 Societe Generale ............................ 1.41% 7/9/03 100,000,000 100,000,000 Societe Generale North America Inc. ......... 1.33% 2/18/03 101,802,000 101,621,471 Societe Generale North America Inc. ......... 1.30% 3/27/03 119,500,000 119,133,201 Societe Generale North America Inc. ......... 1.72% 5/12/03 200,000,000 198,738,667 Surrey Funding Corporation .................. 1.36% 2/18/03 140,000,000 139,746,133 Svenska Handelsbanken ....................... 1.77% 1/17/03 250,000,000 250,001,106 Svenska Handelsbanken ....................... 1.65% 1/31/03 55,000,000 55,002,736 Svenska Handelsbanken ....................... 1.60% 11/24/03 125,000,000 124,988,829 Svenska Handelsbanken ....................... 1.74% 5/19/03 200,000,000 200,005,676 Thunder Bay Funding Inc. .................... 1.36% 2/20/03 62,481,000 62,362,980 Toronto Dominion Bank ....................... 1.80% 2/3/03 100,000,000 100,000,000 Toyota Motor Credit Corp(1) ................. 1.36% 2/20/03 100,000,000 100,000,000 UBS AG Stamford Branch ...................... 2.78% 3/24/03 52,000,000 52,096,296 UBS AG Stamford Branch ...................... 1.33% 3/26/03 600,000,000 600,000,000 US Bank National Association(1) ............. 1.36% 1/2/03 175,000,000 174,976,505 US Bank National Association(1) ............. 1.35% 1/29/03 155,000,000 154,977,276 US Bank National Association(1) ............. 1.34% 1/29/03 135,000,000 134,983,759
The accompanying notes are an integral part of these financial statements. SAI-356 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND Schedule of Investments (showing percentage of total value of investments) December 31, 2002
-------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- PRINCIPAL DEBT INSTRUMENTS (CONCLUDED) Wells Fargo & Company .................................... 1.32% 2/10/03 USD 185,000,000 $ 184,999,930 Wells Fargo Bank NA(1) ................................... 1.36% 1/14/03 330,000,000 329,990,171 Wells Fargo Bank San Francisco ........................... 1.60% 1/29/03 100,000,000 100,003,078 Wells Fargo Bank San Francisco ........................... 1.30% 2/28/03 400,000,000 400,000,000 Westdeutchse Landesbank .................................. 1.79% 1/27/03 200,000,000 200,000,000 Westdeutcshe Landesbank .................................. 2.05% 3/17/03 170,000,000 170,091,730 Westdeutsche Landesbank .................................. 1.70% 2/20/03 247,000,000 247,000,000 Westdeutsche Landesbank(1) ............................... 1.34% 1/21/03 160,000,000 159,969,522 Westdeutsche Landesbank .................................. 1.75% 4/17/03 150,000,000 150,000,000 Westpac .................................................. 1.34% 4/7/03 100,000,000 100,000,000 Westpac Banking Corp(1) .................................. 1.38% 1/7/03 200,000,000 199,977,068 Westpac Banking Corp ..................................... 1.34% 3/24/03 100,000,000 99,694,778 Westpac Banking Corp ..................................... 1.34% 4/4/03 100,000,000 99,655,125 Westpac Banking Corp ..................................... 1.70% 5/12/03 100,000,000 99,381,389 Westpac Trust Securities NZ Ltd .......................... 1.34% 3/24/03 100,000,000 99,694,778 Westpac Trust Securities NZ Ltd .......................... 1.34% 4/3/03 100,000,000 99,658,833 Westpac Trust Securities NZ Ltd .......................... 1.72% 4/15/03 100,000,000 99,504,556 Westpac Trust Securities NZ Ltd .......................... 1.78% 1/31/03 100,000,000 99,851,667 Windmill Funding Corporation ............................. 1.40% 1/17/03 45,000,000 44,972,000 -------------------------------------------------------------------------------------------------------------------------- TOTAL DEBT INSTRUMENTS ................................... $37,134,411,157 -------------------------------------------------------------------------------------------------------------------------- PRINCIPAL VALUE -------------------------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS -- 6.0% Bear Stearns Repo, 1.125% to be repurchased at $173,645,852 on 01/02/03 USD 173,635,000 $ 173,635,000 (cost $173,635,000)(2) ..................................................... Morgan Stanley Tri Party Repo 1.25% to be repurchased at $900,062,500 on 900,000,000 900,000,000 01/02/03 .................................................................. Warburg Tri Party Repo 1.25% to be repurchased at $1,300,090,278 on 01/02/03 1,300,000,000 1,300,000,000 (cost $1,300,000,000)(2) ................................................... -------------------------------------------------------------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENTS ................................................. 2,373,635,000 -------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost $39,508,046,157) ..................................................... $39,508,046,157 ==========================================================================================================================
1 Variable rate security. Rate disclosed is that which was in effect at December 31, 2002. Date disclosed is the next interest rate reset date. 2 Repurchase agreements are fully collateralized by U.S. Treasury or Government agency securities. USD: United States Dollar The accompanying notes are an integral part of these financial statements. SAI-357 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE State Street Bank and Trust Company ("State Street Bank") Short Term Investment Fund (the "Fund") was formed by State Street Bank under the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans Declaration of Trust. The investment objective of the Fund is to provide safety of principal, daily liquidity, and a competitive yield by investing in high quality money market instruments. State Street Bank is Trustee, custodian, and recordkeeper of the Fund and has exclusive management and control of the Trust. State Street Global Advisors, a division of State Street Bank, is the Fund's investment manager. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently in the preparation of the financial statements. A. SECURITY VALUATION Investments are stated at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS INVESTMENT INCOME Security transactions are accounted for as of trade date. Realized gains and losses from investment transactions are determined using the average cost method. Interest income earned on securities, if any, is recorded on the accrual basis. Interest income includes accretion of discounts and amortization of premiums, if any. C. INCOME TAXES It is the Fund's policy to comply with the requirements of Section 501(a) of the Internal Revenue Code relating to collective investment of employee benefit funds. Accordingly, the Fund is exempt from federal and state taxes and no federal or state tax provision is required. D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION Issuances and redemptions of participant units are made on each business day ("valuation date"). Participant units are typically purchased and redeemed at a constant net asset value of $1.00 per unit. In the event that a significant disparity develops between the constant net asset value and the market-value based net asset value of the Fund, the Trustee may determine that continued issuance or redemption at a constant $1.00 net asset value would create inequitable results for the Fund's unitholders. In these circumstances, the Trustee, in its sole discretion and acting on behalf of the Fund's unitholders, may direct that units be issued or redeemed at the market-value based net asset value until such time as the disparity between the market-value based and the constant net asset value per unit is deemed to be immaterial. E. EXPENSES Under the Declaration of Trust, the Fund may pay certain expenses for services received. The Fund indirectly bears the expenses paid by the underlying funds, if any. State Street Global Advisors receives investment management fees from the participating accounts and therefore, the Fund makes no payment for these services. SAI-358 -------------------------------------------------------------------------------- STATE STREET BANK AND TRUST COMPANY SHORT TERM INVESTMENT FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 F. DISTRIBUTIONS TO PARTICIPANTS Distributions from net investment income are recorded on each valuation date and paid monthly. Net realized gains are retained by the Fund. G. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements whereby the Fund receives delivery of underlying collateral securities, and the seller of such securities agrees to repurchase the securities at an agreed upon price and time. The Fund values the underlying collateral securities daily on a mark-to-market basis to determine that the value, including accrued interest is at least equal to the repurchase price. The underlying collateral securities consist of securities in which the Fund is permitted to invest. The use of repurchase agreements involves certain risks. If the seller defaults as a result of its bankruptcy or otherwise, and the value of the collateral declines, realization of the collateral by the Fund may be delayed or limited. The Fund may enter into repurchase agreements maturing within seven days with domestic dealers, banks and other financial institutions deemed to be creditworthy by the investment manager. Collateral for certain tri-party repurchase agreements is held at a custodian in a segregated account for the benefit of the Fund and the counterparty. 3. INVESTMENT TRANSACTIONS Purchases and sales of short-term investments (including maturities) during the year ended December 31, 2002 were $778,535,224,343 and $773,953,001,281, respectively. 4. FINANCIAL GUARANTY INSURANCE POLICY The Fund has entered into a Financial Guaranty Insurance Agreement (the "Default Insurance Policy") with MBIA Insurance Corporation ("MBIA") that provides limited coverage for certain loss events involving money market instruments held by the Fund. These loss events include non-payment of principal or interest or bankruptcy or insolvency of the issuer or credit enhancement provider (if any). The Default Insurance Policy is subject to an aggregate loss limitation of $420 million and a deductible of 0.30% of the holdings of the Fund, determined as of the close of business on the first business day prior to the loss event. The Default Insurance Policy is intended as a credit enhancement strategy for the Fund. The Default Insurance Policy does not cover losses resulting from changes in interest rates or other market developments. While the Default Insurance Policy is intended to provide some protection against credit risk and to help the Fund maintain a constant price per share of $1.00, there is no guarantee that the policy will do so. The Default Insurance Policy became effective February 15, 2001 and was amended as of January 1, 2002 to increase the loss limitation. As of December 31, 2002, the Fund made no claims under the policy. SAI-359 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholder of The Equitable Life Assurance Society of the United States In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of shareholder's equity and comprehensive income and of cash flows present fairly, in all material respects, the financial condition of The Equitable Life Assurance Society of the United States and its subsidiaries ("Equitable Life") at December 31, 2002 and December 31, 2001 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 2 to the consolidated financial statements, Equitable Life changed its method of accounting for variable annuity products that contain guaranteed minimum death benefit and guaranteed minimum income benefit features, and its method of accounting for intangible and long-lived assets in 2002. /s/ PricewaterhouseCoopers LLP New York, New York February 4, 2003 F-1 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2002 AND 2001
DECEMBER 31 December 31, 2002 2001 ----------------- ----------------- (IN MILLIONS) ASSETS Investments: Fixed maturities available for sale, at estimated fair value.............. $ 26,278.9 $ 23,265.9 Mortgage loans on real estate............................................. 3,746.2 4,333.3 Equity real estate........................................................ 717.3 875.7 Policy loans.............................................................. 4,035.6 4,100.7 Other equity investments.................................................. 720.3 756.6 Other invested assets..................................................... 1,327.6 686.0 ----------------- ----------------- Total investments..................................................... 36,825.9 34,018.2 Cash and cash equivalents................................................... 269.6 680.0 Cash and securities segregated, at estimated fair value..................... 1,174.3 1,415.2 Broker-dealer related receivables........................................... 1,446.2 1,950.9 Deferred policy acquisition costs........................................... 5,801.0 5,513.7 Goodwill and other intangible assets, net................................... 3,503.8 3,370.2 Amounts due from reinsurers................................................. 2,351.7 2,237.0 Loans to affiliates, at estimated fair value................................ 413.0 400.0 Other assets................................................................ 4,028.7 3,754.1 Separate Accounts assets.................................................... 39,012.1 46,947.3 ----------------- ----------------- TOTAL ASSETS................................................................ $ 94,826.3 $ 100,286.6 ================= ================= LIABILITIES Policyholders' account balances............................................. $ 23,037.5 $ 20,939.1 Future policy benefits and other policyholders liabilities.................. 13,975.7 13,542.7 Broker-dealer related payables.............................................. 731.0 1,260.7 Customers related payables.................................................. 1,566.8 1,814.5 Amounts due to reinsurers................................................... 867.5 798.5 Short-term and long-term debt............................................... 1,274.7 1,475.5 Federal income taxes payable................................................ 2,231.0 1,885.0 Other liabilities........................................................... 1,787.1 1,702.0 Separate Accounts liabilities............................................... 38,883.8 46,875.5 Minority interest in equity of consolidated subsidiaries.................... 1,777.8 1,776.0 Minority interest subject to redemption rights.............................. 515.4 651.4 ----------------- ----------------- Total liabilities..................................................... 86,648.3 92,720.9 ----------------- ----------------- Commitments and contingencies (Notes 12, 14, 15, 16 and 17) SHAREHOLDER'S EQUITY Common stock, $1.25 par value, 2.0 million shares authorized, issued and outstanding.................................................... 2.5 2.5 Capital in excess of par value.............................................. 4,753.8 4,694.6 Retained earnings........................................................... 2,740.6 2,653.2 Accumulated other comprehensive income...................................... 681.1 215.4 ----------------- ----------------- Total shareholder's equity............................................ 8,178.0 7,565.7 ----------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $ 94,826.3 $ 100,286.6 ================= =================
See Notes to Consolidated Financial Statements. F-2 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000 ----------------- ----------------- ----------------- (IN MILLIONS) REVENUES Universal life and investment-type product policy fee income........................................... $ 1,315.5 $ 1,342.3 $ 1,413.3 Premiums...................................................... 945.2 1,019.9 1,175.0 Net investment income......................................... 2,377.2 2,404.3 2,751.9 Gain on sale of equity investee............................... - - 1,962.0 Investment losses, net........................................ (278.5) (207.3) (791.8) Commissions, fees and other income............................ 2,987.6 3,108.5 2,730.8 ----------------- ----------------- ----------------- Total revenues.......................................... 7,347.0 7,667.7 9,241.2 ----------------- ----------------- ----------------- BENEFITS AND OTHER DEDUCTIONS Policyholders' benefits....................................... 2,034.0 1,886.9 2,060.3 Interest credited to policyholders' account balances.......... 972.5 981.7 1,048.5 Compensation and benefits..................................... 1,155.3 1,220.8 809.0 Commissions................................................... 788.8 742.1 779.3 Distribution plan payments.................................... 392.8 429.1 421.3 Amortization of deferred sales commissions.................... 229.0 230.8 219.7 Interest expense.............................................. 95.7 102.6 116.3 Amortization of deferred policy acquisition costs............. 296.7 287.9 309.0 Capitalization of deferred policy acquisition costs........... (754.8) (746.4) (778.1) Rent expense.................................................. 167.0 156.2 120.1 Amortization of goodwill and other intangible assets, net..... 21.2 178.2 65.0 Expenses related to AXA's minority interest acquisition....... - - 493.9 Other operating costs and expenses............................ 920.2 904.9 991.4 ----------------- ----------------- ----------------- Total benefits and other deductions..................... 6,318.4 6,374.8 6,655.7 ----------------- ----------------- ----------------- Earnings from continuing operations before Federal income taxes and minority interest.......................... 1,028.6 1,292.9 2,585.5 Federal income tax expense.................................... (50.9) (316.2) (958.3) Minority interest in net income of consolidated subsidiaries.. (362.8) (370.1) (330.3) ----------------- ----------------- ----------------- Earnings from continuing operations........................... 614.9 606.6 1,296.9 Earnings from discontinued operations, net of Federal income taxes.............................................. 5.6 43.9 58.6 Cumulative effect of accounting changes, net of Federal income taxes.............................................. (33.1) (3.5) - ----------------- ----------------- ----------------- Net Earnings.................................................. $ 587.4 $ 647.0 $ 1,355.5 ================= ================= =================
See Notes to Consolidated Financial Statements. F-3 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000 ----------------- ----------------- ----------------- (IN MILLIONS) Common stock, at par value, beginning and end of year......... $ 2.5 $ 2.5 $ 2.5 ----------------- ----------------- ----------------- Capital in excess of par value, beginning of year............. 4,694.6 4,723.8 3,557.2 Increase (decrease) in additional paid in capital in excess of par value......................................... 59.2 (29.2) 1,166.6 ----------------- ----------------- ----------------- Capital in excess of par value, end of year................... 4,753.8 4,694.6 4,723.8 ----------------- ----------------- ----------------- Retained earnings, beginning of year.......................... 2,653.2 3,706.2 2,600.7 Net earnings.................................................. 587.4 647.0 1,355.5 Shareholder dividends paid.................................... (500.0) (1,700.0) (250.0) ----------------- ----------------- ----------------- Retained earnings, end of year................................ 2,740.6 2,653.2 3,706.2 ----------------- ----------------- ----------------- Accumulated other comprehensive income (loss), beginning of year........................................... 215.4 12.8 (392.9) Other comprehensive income.................................... 465.7 202.6 405.7 ----------------- ----------------- ----------------- Accumulated other comprehensive income, end of year........... 681.1 215.4 12.8 ----------------- ----------------- ----------------- TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 8,178.0 $ 7,565.7 $ 8,445.3 ================= ================= ================= COMPREHENSIVE INCOME Net earnings.................................................. $ 587.4 $ 647.0 $ 1,355.5 ----------------- ----------------- ----------------- Change in unrealized gains (losses), net of reclassification adjustments................................................ 465.6 202.6 405.7 Minimum pension liability adjustment.......................... .1 - - ----------------- ----------------- ----------------- Other comprehensive income.................................... 465.7 202.6 405.7 ----------------- ----------------- ----------------- COMPREHENSIVE INCOME.......................................... $ 1,053.1 $ 849.6 $ 1,761.2 ================= ================= =================
See Notes to Consolidated Financial Statements. F-4 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000 ----------------- ----------------- ----------------- (IN MILLIONS) Net earnings..................................................... $ 587.4 $ 647.0 $ 1,355.5 Adjustments to reconcile net earnings to net cash provided by operating activities: Interest credited to policyholders' account balances........... 972.5 981.7 1,048.5 Universal life and investment-type product policy fee income............................................ (1,315.5) (1,342.3) (1,413.3) Net change in broker-dealer and customer related receivables/payables......................................... (237.3) 181.0 (422.9) Gain on sale of equity investee................................ - - (1,962.0) Investment losses, net......................................... 278.5 207.3 791.8 Expenses related to AXA's minority interest acquisition........ - - 493.9 Change in deferred policy acquisition costs.................... (458.1) (458.5) (469.1) Change in future policy benefits............................... 218.0 (15.1) (825.6) Change in property and equipment............................... (74.5) (228.5) (321.0) Change in Federal income tax payable........................... 93.3 (231.5) 2,100.2 Purchase of segregated cash and securities, net................ 240.8 (108.8) (610.4) Minority interest in net income of consolidated subsidiaries... 362.8 370.1 330.3 Change in fair value of guaranteed minimum income benefit reinsurance contract................................. (120.0) - - Amortization of goodwill and other intangible assets, net...... 21.2 178.2 65.0 Other, net..................................................... 103.0 315.2 197.6 --------------- ----------------- ----------------- Net cash provided by operating activities........................ 672.1 495.8 358.5 ----------------- ----------------- ----------------- Cash flows from investing activities: Maturities and repayments...................................... 2,996.0 2,454.6 2,525.3 Sales.......................................................... 8,037.5 9,285.2 8,069.2 Purchases...................................................... (12,720.8) (11,833.9) (9,660.0) (Increase) decrease in short-term investments.................. (568.9) 211.8 141.5 Sale of equity investee........................................ - - 1,580.6 Acquisition of subsidiary ..................................... (249.7) - (1,480.0) Loans to affiliates............................................ - (400.0) - Other, net..................................................... 137.6 (79.4) (162.1) ----------------- ----------------- ----------------- Net cash (used) provided by investing activities................. (2,368.3) (361.7) 1,014.5 ----------------- ----------------- ----------------- Cash flows from financing activities: Policyholders' account balances: Deposits..................................................... 4,328.5 3,198.8 2,695.6 Withdrawals and transfers to Separate Accounts............... (2,022.9) (2,458.1) (3,941.8) Net (decrease) increase in short-term financings............... (201.2) (552.8) 225.2 Additions to long-term debt.................................... - 398.1 .3 Shareholder dividends paid..................................... (500.0) (1,700.0) (250.0) Proceeds from newly issued Alliance units...................... - - 1,600.0 Other, net..................................................... (318.6) (456.9) (281.3) ----------------- ----------------- ----------------- Net cash provided (used) by financing activities................. 1,285.8 (1,570.9) 48.0 ----------------- ----------------- ----------------- Change in cash and cash equivalents.............................. (410.4) (1,436.8) 1,421.0 Cash and cash equivalents, beginning of year..................... 680.0 2,116.8 695.8 ----------------- ----------------- ----------------- Cash and Cash Equivalents, End of Year........................... $ 269.6 $ 680.0 $ 2,116.8 ================= ================= =================
F-5 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 CONTINUED
2002 2001 2000 ----------------- ----------------- ----------------- (IN MILLIONS) Supplemental cash flow information Interest Paid............................................... $ 80.5 $ 82.1 $ 97.0 ================= ================= ================= Income Taxes (Refunded) Paid................................ $ (139.6) $ 524.2 $ 337.6 ================= ================= =================
See Notes to Consolidated Financial Statements. F-6 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) ORGANIZATION The Equitable Life Assurance Society of the United States ("Equitable Life") is an indirect, wholly owned subsidiary of AXA Financial, Inc. (the "Holding Company," and collectively with its consolidated subsidiaries, "AXA Financial"). Equitable Life's insurance business is conducted principally by Equitable Life and its wholly owned life insurance subsidiary, Equitable of Colorado ("EOC"). Equitable Life's investment management business, which comprises the Investment Services segment, is principally conducted by Alliance Capital Management L.P. ("Alliance"), and, through November 3, 2000, Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), an investment banking and brokerage affiliate which was sold. On September 20, 1999, as part of AXA Financial's "branding" strategic initiative, EQ Financial Consultants, Inc., a broker-dealer subsidiary of Equitable Life, was merged into a new company, AXA Advisors, LLC ("AXA Advisors"). Also, on September 21, 1999, AXA Advisors was transferred by Equitable Life to AXA Distribution Holding Corporation ("AXA Distribution"), a wholly owned indirect subsidiary of the Holding Company, for $15.3 million. The excess of the sales price over AXA Advisors' book value has been recorded in Equitable Life's books as a capital contribution. In February 2000, Equitable Life transferred AXA Network, LLC ("AXA Network") to AXA Distribution for $8.7 million. The excess of sales price over AXA Network's book value has been recorded in Equitable Life's financial statements as a capital contribution. Equitable Life continues to develop and market the "Equitable" brand of life and annuity products, while AXA Distribution's subsidiaries provide financial planning services, distribute products and manage customer relationships. In October 2000, Alliance acquired substantially all of the assets and liabilities of SCB Inc., formerly known as of Sanford C. Bernstein Inc. ("Bernstein"), for an aggregate current value of approximately $3.50 billion: $1.48 billion in cash and 40.8 million newly issued units in Alliance ("Alliance Units"). The Holding Company provided Alliance with the cash portion of the consideration by purchasing approximately 32.6 million Alliance Units for $1.60 billion in June 2000. The acquisition was accounted for under the purchase method with the results of Bernstein included in the consolidated financial statements from the acquisition date. The excess of the purchase price over the fair value of net assets acquired resulted in the recognition of goodwill and intangible assets of approximately $3.40 billion. In connection with the issuance of Alliance Units to former Bernstein shareholders, Equitable Life and its consolidated subsidiaries (collectively, the "Company"), recorded a non-cash gain of $393.5 million (net of related Federal income tax of $211.9 million) which is reflected as an addition to capital in excess of par value. In the fourth quarter of 2002, the Company acquired 8.16 million Alliance Units at the aggregate market price of $249.7 million from SCB Inc. and SCB Partners, Inc. under a preexisting agreement (see Note 2). Upon completion of this transaction the Company's beneficial ownership in Alliance increased by approximately 3.2%. The Company's consolidated economic interest in Alliance was 42.8% at December 31, 2002, and together with the Holding Company's economic interest in Alliance exceeds 50%. AXA, a French holding company for an international group of insurance and related financial services companies, has been the Holding Company's largest shareholder since 1992. In October 2000, the Board of Directors of the Holding Company, acting upon a unanimous recommendation of a special committee of independent directors, approved an agreement with AXA for the acquisition of the approximately 40% of outstanding Holding Company common stock ("Common Stock") it did not already own. Under terms of the agreement, the minority shareholders of the Holding Company received $35.75 in cash and 0.295 of an AXA American Depositary Receipt ("AXA ADR") (before giving effect to AXA's May 2001 four-for-one stock split and related change in ADRs' parity) for each Holding Company share. On January 2, 2001, AXA Merger Corp. ("AXA Merger"), a wholly owned subsidiary of AXA, was merged with and into the Holding Company, resulting in AXA Financial becoming a wholly owned subsidiary of AXA. F-7 2) SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation ----------------------------------------------------- The preparation of the accompanying consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions (including normal, recurring accruals) that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying consolidated financial statements reflect all adjustments necessary in the opinion of management to present fairly the consolidated financial position of the Company and its consolidated results of operations and cash flows for the periods presented. The accompanying consolidated financial statements include the accounts of Equitable Life and its subsidiary engaged in insurance related businesses (collectively, the "Insurance Group"); other subsidiaries, principally Alliance; and those investment companies, partnerships and joint ventures in which Equitable Life or its subsidiaries has control and a majority economic interest. The Company's investment in DLJ, which was sold in November 2000, was reported on the equity basis of accounting. All significant intercompany transactions and balances except those with discontinued operations (see Note 8) have been eliminated in consolidation. The years "2002," "2001" and "2000" refer to the years ended December 31, 2002, 2001 and 2000, respectively. Certain reclassifications have been made in the amounts presented for prior periods to conform those periods with the current presentation. Closed Block ------------ When it demutualized on July 22, 1992, Equitable Life established a Closed Block for the benefit of certain individual participating policies which were in force on that date. The assets allocated to the Closed Block, together with anticipated revenues from policies included in the Closed Block, were reasonably expected to be sufficient to support such business, including provision for the payment of claims, certain expenses and taxes, and for continuation of dividend scales payable in 1991, assuming the experience underlying such scales continues. Assets allocated to the Closed Block inure solely to the benefit of the Closed Block policyholders and will not revert to the benefit of the Holding Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of Equitable Life's General Account, any of its Separate Accounts or any affiliate of Equitable Life without the approval of the New York Superintendent of Insurance (the "Superintendent"). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the General Account. The excess of Closed Block liabilities over Closed Block assets represents the expected future post-tax contribution from the Closed Block which would be recognized in income over the period the policies and contracts in the Closed Block remain in force. Discontinued Operations ----------------------- In 1991, management discontinued the business of certain pension operations ("Discontinued Operations"). Discontinued Operations at December 31, 2002 principally consists of the Group Non-Participating Wind-Up Annuities ("Wind-Up Annuities"), for which a premium deficiency reserve has been established. Management reviews the adequacy of the allowance for future losses each quarter and makes adjustments when necessary. Management believes the allowance for future losses at December 31, 2002 is adequate to provide for all future losses; however, the quarterly allowance review continues to involve numerous estimates and subjective judgments regarding the expected performance of invested assets ("Discontinued Operations Investment Assets") held by Discontinued Operations. There can be no assurance the losses provided for will not differ from the losses ultimately realized. To the extent actual results or future projections of the discontinued operations differ from management's current best estimates and assumptions underlying the allowance for future losses, the difference would be reflected in the consolidated statements of earnings in discontinued operations (see Note 8). F-8 Accounting Changes ------------------ On January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," SFAS No. 142, "Goodwill and Other Intangible Assets," and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets". SFAS No. 142 embraced an entirely new approach to accounting for goodwill by eliminating the long-standing requirement for systematic amortization and instead imposing periodic impairment testing to determine whether the fair value of the reporting unit to which the goodwill is ascribed supports its continued recognition. Concurrent with its adoption of SFAS No. 142, the Company ceased to amortize goodwill. Amortization of goodwill and other intangible assets for the years ended December 31, 2001 and 2000, respectively, was approximately $73.4 million and $27.1 million, net of minority interest of $104.7 million and $38.0 million, of which $7.6 million and $1.0 million, net of minority interest of $13.6 million and $1.4 million, related to other intangible assets. Net income, excluding goodwill amortization expense, for the years ended December 31, 2001 and 2000, respectively, would have been $712.8 million and $1,381.6 million. The carrying amount of goodwill was $3,112.2 million and $2,974.5 million, respectively, at December 31, 2002 and at December 31, 2001 and relates solely to the Investment Services segment. No losses resulted from completion in 2002 of transitional and annual impairment testing of goodwill and indefinite-lived intangible assets. Amounts presently estimated to be recorded in each of the succeeding five years ending December 31, 2007 for amortization of other intangible assets are not expected to vary significantly from the amount for the full year December 31, 2002 of $8.6 million, net of minority interest of $12.6 million. The gross carrying amount and accumulated amortization of other intangible assets were $531.7 million and $140.1 million, respectively, at December 31, 2002 and $514.6 million and $118.9 million, respectively, at December 31, 2001. SFAS No. 144, retains many of the fundamental recognition and measurement provisions previously required by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of," except for the removal of goodwill from its scope, inclusion of specific guidance on cash flow recoverability testing and the criteria that must be met to classify a long-lived asset as held-for-sale. SFAS No. 141 and No. 144 had no material impact on the results of operations or financial position of the Company upon their adoption on January 1, 2002. Effective January 1, 2002, the Company changed its method of accounting for liabilities associated with variable annuity contracts that contain guaranteed minimum death benefit ("GMDB") and guaranteed minimum income benefit ("GMIB") features, to establish reserves for the Company's estimated obligations associated with these features. The method was changed to achieve a better matching of revenues and expenses. The initial impact of adoption as of January 1, 2002 resulted in a charge of $33.1 million for the cumulative effect of this accounting change, net of Federal income taxes of $17.9 million, in the consolidated statements of earnings. Prior to the adoption of this accounting change, benefits under these features were expensed as incurred. The impact of this change was to reduce Earnings from continuing operations in 2002 by $113.0 million, net of Federal income taxes of $61.0 million. The pro-forma effects of retroactive application of this change on 2001 and 2000 results were not material. On January 1, 2001, the Company adopted SFAS No. 133, as amended, that established new accounting and reporting standards for all derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities. Free-standing derivative instruments maintained by the Company at January 1, 2001 included interest rate caps, floors and collars intended to hedge crediting rates on interest-sensitive individual annuity contracts and certain reinsurance contracts. Based upon guidance from the Financial Accounting Standards Board ("FASB") and the Derivatives Implementation Group ("DIG"), the caps, floors and collars could not be designated in a qualifying hedging relationship under SFAS No. 133 and, consequently, require mark-to-market accounting through earnings for changes in their fair values beginning January 1, 2001. In accordance with the transition provision of SFAS No. 133, the Company recorded a cumulative-effect-type charge to earnings of $3.5 million to recognize the difference between the carrying values and fair values of free-standing derivative instruments at January 1, 2001. With respect to adoption of the requirements on embedded derivatives, the Company elected a January 1, 1999 transition date, thereby effectively "grandfathering" existing accounting for derivatives embedded in hybrid instruments acquired, issued, or substantively modified before that date. As a consequence of this election, coupled with recent interpretive guidance from the FASB and the DIG with respect to issues specifically related to insurance contracts and features, adoption of the new requirements for embedded derivatives had no material impact on the Company's results of operations or its financial position. Upon its adoption of SFAS No. 133, the Company reclassified $256.7 million of held-to-maturity securities as available-for-sale. This reclassification resulted in an after-tax cumulative-effect-type adjustment of $8.9 million in other comprehensive income, representing the after-tax unrealized gain on these securities at January 1, 2001. F-9 The accounting for the GMIB reinsurance assets that are considered an SFAS No. 133 derivative is discussed in the Policyholders' Account Balances and Future Policy Benefits section of this Note. The Company adopted the AICPA's Statement of Position ("SOP") 00-3, which established new accounting and reporting standards for demutualizations, prospectively as of January 1, 2001 with no financial impact upon initial implementation. SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," provides the accounting and reporting rules for sales, securitizations, servicing of receivables and other financial assets, for secured borrowings and collateral transactions and extinguishments of liabilities. SFAS No. 140 emphasizes the legal form of the transfer rather than the previous accounting that was based upon the risks and rewards of ownership. SFAS No. 140 was effective for transfers after March 31, 2001 and is principally applied prospectively. Since that March 2001 effective date, no significant transactions were impacted by SFAS No. 140. New Accounting Pronouncements ----------------------------- In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 established financial accounting and reporting standards for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized only when the liability is incurred and measured initially at fair value. However, the cost of termination benefits provided under the terms of an ongoing benefit arrangement, such as a standard severance offering based on years of service, continues to be covered by other accounting pronouncements and is unchanged by SFAS No. 146. SFAS No. 146 is effective for exit and disposal activities initiated after December 31, 2002. In November 2002, the FASB issued Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". FIN No. 45 addresses the disclosures made by a guarantor in its interim and annual financial statements about obligations under guarantees. FIN No. 45 also clarifies the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the obligations that the guarantor has undertaken in issuing that guarantee. The fair value reporting provisions of FIN No. 45 are to be applied on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002 (see Note 15). The initial recognition and initial measurement provisions are to be applied only on a prospective basis to guarantees issued or modified after December 31, 2002. In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities," to address when it is appropriate to consolidate financial interests in any variable interest entity ("VIE"), a new term to define a business structure that either does not have equity investors with voting or other similar rights or has equity investors that do not provide sufficient financial resources to support its activities. For entities with these characteristics, including many formerly known as special purpose entities, FIN 46 imposes a consolidation model that focuses on the relative exposures of the participants to the economic risks and rewards from the assets of the VIE rather than on ownership of its voting interests, if any, to determine whether a parent-subsidiary relationship exists. Under the VIE consolidation model, the party with a majority of the economic risks or rewards associated with a VIE's activities, including those conveyed by derivatives, credit enhancements, and other arrangements, is the "primary beneficiary" and, therefore, is required to consolidate the VIE. The consolidation requirements of FIN 46 phase-in beginning in the first quarter of 2003, with immediate application to all new VIEs created after January 31, 2003 and further application to existing VIEs starting in the first interim period beginning after June 15, 2003. However, specific disclosures are required in 2002 year-end financial statements issued subsequent to January 31, 2003 if it is "reasonably possible" that a company will have a significant, but not necessarily consolidated, variable interest in a VIE when the consolidation requirements become effective. At December 31, 2002, the Company identified significant variable interests totaling $123.7 million, representing its participation in seven collateralized debt obligation structures and four investment limited partnerships determined to be VIEs. These variable interests are reflected in the consolidated balance sheets as fixed maturities or other equity investments and, accordingly, F-10 are subject to ongoing review for impairments in value deemed to be other than temporary. These variable interests and approximately $24.5 million related funding commitments to the investment limited partnerships, as more fully described in Note 15, represent the Company's maximum exposure to loss from its involvement with these VIEs. The Company has no further economic interests in these VIEs in the form of related guarantees, derivatives or similar instruments and obligations. By no later than third quarter 2003, the Company is required by FIN 46 to consolidate those VIEs where it is determined to be the primary beneficiary, which includes consideration of the aggregate variable interests in these VIEs held by related parties. Management's preliminary assessment indicates consolidation is likely to be required for one collateralized debt obligation security and two investment limited partnerships, which comprise $93.5 million of the significant variable interests identified at December 31, 2002. Management believes no material impact on consolidated financial position or reported amounts of consolidated total liabilities would result from consolidation of these VIEs. Similarly, management believes there would be no material impact on consolidated results of operations as the Company's economic interests in these VIEs are accounted for primarily under the equity method. The FASB is in the process of considering the application of SFAS No. 133 in situations in which a financial instrument incorporates credit risk exposures that are unrelated or only partially related to the creditworthiness of the issuer of the instrument. The issue is whether an embedded derivative exists in such instruments, related to the transfer of credit risk that is unrelated to the creditworthiness of the issuer, which must be bifurcated and reported at fair value. This issue may have application to certain insurance and reinsurance contracts, such as modified coinsurance arrangements in which a total return on a specified group of assets is paid to the reinsurer, and group pension participating contracts which credit the contractholder a total return on a specified portfolio of assets. Based on management's understanding of the issues under discussion, this potential accounting change is not expected to have a material impact on the Company's results of operations or financial position upon adoption. Investments ----------- The carrying values of fixed maturities identified as available for sale are reported at estimated fair value. Changes in estimated fair value are reported in comprehensive income. The amortized cost of fixed maturities is adjusted for impairments in value deemed to be other than temporary. Mortgage loans on real estate are stated at unpaid principal balances, net of unamortized discounts and valuation allowances. Valuation allowances are based on the present value of expected future cash flows discounted at the loan's original effective interest rate or on its collateral value if the loan is collateral dependent. However, if foreclosure is or becomes probable, the collateral value measurement method is used. Impaired mortgage loans without provision for losses are loans where the fair value of the collateral or the net present value of the expected future cash flows related to the loan equals or exceeds the recorded investment. Interest income earned on loans where the collateral value is used to measure impairment is recorded on a cash basis. Interest income on loans where the present value method is used to measure impairment is accrued on the net carrying value amount of the loan at the interest rate used to discount the cash flows. Changes in the present value attributable to changes in the amount or timing of expected cash flows are reported as investment gains or losses. Real estate, including real estate acquired in satisfaction of debt, is stated at depreciated cost less valuation allowances. At the date of foreclosure (including in-substance foreclosure), real estate acquired in satisfaction of debt is valued at estimated fair value. Impaired real estate is written down to fair value with the impairment loss being included in investment gains (losses), net. Valuation allowances on real estate held for sale are computed using the lower of depreciated cost or current estimated fair value, net of disposition costs. Depreciation is discontinued on real estate held for sale. Depreciation of real estate held for production of income is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years. Valuation allowances are netted against the asset categories to which they apply. Policy loans are stated at unpaid principal balances. F-11 Partnerships, investment companies and joint venture interests in which the Company has control and a majority economic interest (that is, greater than 50% of the economic return generated by the entity) are consolidated; those in which the Company does not have control and a majority economic interest are reported on the equity basis of accounting and are included either with equity real estate or other equity investments, as appropriate. Equity securities include common stock and non-redeemable preferred stock classified as either trading or available for sale securities, are carried at estimated fair value and are included in other equity investments. Short-term investments are stated at amortized cost which approximates fair value and are included with other invested assets. Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less. All securities owned as well as United States government and agency securities, mortgage-backed securities, futures and forwards transactions are recorded in the consolidated financial statements on a trade date basis. Net Investment Income, Investment Gains (Losses), Net and Unrealized Investment Gains (Losses) --------------------------------------------------------------------- Net investment income and realized investment gains (losses), net (together "investment results") related to certain participating group annuity contracts which are passed through to the contractholders are offset in amounts reflected as interest credited to policyholders' account balances. Realized investment gains (losses) are determined by identification with the specific asset and are presented as a component of revenue. Changes in the valuation allowances are included in investment gains or losses. Realized and unrealized holding gains (losses) on trading securities are reflected in net investment income. Unrealized investment gains and losses on fixed maturities and equity securities available for sale held by the Company are accounted for as a separate component of accumulated comprehensive income, net of related deferred Federal income taxes, amounts attributable to Discontinued Operations, Closed Block policyholders dividend obligation, participating group annuity contracts and deferred policy acquisition costs ("DAC") related to universal life and investment-type products and participating traditional life contracts. Recognition of Insurance Income and Related Expenses ---------------------------------------------------- Premiums from universal life and investment-type contracts are reported as deposits to policyholders' account balances. Revenues from these contracts consist of amounts assessed during the period against policyholders' account balances for mortality charges, policy administration charges and surrender charges. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policyholders' account balances. Premiums from participating and non-participating traditional life and annuity policies with life contingencies generally are recognized as income when due. Benefits and expenses are matched with such income so as to result in the recognition of profits over the life of the contracts. This match is accomplished by means of the provision for liabilities for future policy benefits and the deferral and subsequent amortization of policy acquisition costs. For contracts with a single premium or a limited number of premium payments due over a significantly shorter period than the total period over which benefits are provided, premiums are recorded as income when due with any excess profit deferred and recognized in income in a constant relationship to insurance in-force or, for annuities, the amount of expected future benefit payments. Premiums from individual health contracts are recognized as income over the period to which the premiums relate in proportion to the amount of insurance protection provided. F-12 Deferred Policy Acquisition Costs --------------------------------- Acquisition costs that vary with and are primarily related to the acquisition of new and renewal insurance business, including commissions, underwriting, agency and policy issue expenses, are deferred. DAC is subject to recoverability testing at the time of policy issue and loss recognition testing at the end of each accounting period. For universal life products and investment-type products, DAC is amortized over the expected total life of the contract group as a constant percentage of estimated gross profits arising principally from investment results, Separate Account fees, 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. A decrease in expected gross profits would accelerate DAC amortization. Conversely, an increase in expected gross profits would slow DAC amortization. The effect on the DAC asset that would result from realization of unrealized gains (losses) is recognized with an offset to accumulated comprehensive income in consolidated shareholders' equity as of the balance sheet date. A significant assumption in the amortization of DAC on variable and interest-sensitive life insurance and variable annuities relates to projected future Separate Account performance. Expected future gross profit assumptions related to Separate Account performance are set by management using a long-term view of expected average market returns by applying a reversion to the mean approach. In applying this approach to develop estimates of future returns, it is assumed that the market will return to an average gross long-term return estimate, developed with reference to historical long-term equity market performance and subject to assessment of the reasonableness of resulting estimates of future return assumptions. For purposes of making this reasonableness assessment, management has set limitations as to maximum and minimum future rate of return assumptions, as well as a limitation on the duration of use of these maximum or minimum rates of return. Currently, the average gross long-term annual return estimate is 9.0% (7.2% net of product weighted average Separate Account fees), and the gross maximum and minimum annual rate of return limitations are 15.0% (13.2% net of product weighted average Separate Account fees) and 0% (-1.9% net of product weighted average Separate Account fees), respectively. The maximum duration over which these rate limitations may be applied is 5 years. This approach will continue to be applied in future periods. If actual market returns continue at levels that would result in assuming future market returns of 15% for more than 5 years in order to reach the average gross long-term return estimate, the application of the 5 year maximum duration limitation would result in an acceleration of DAC amortization. Conversely, actual market returns resulting in assumed future market returns of 0% for more than 5 years would result in a required deceleration of DAC amortization. As of December 31, 2002, current projections of future average gross market returns are within the maximum and minimum limitations and assume a reversion to the mean of 9.0% after 2.5 years. In addition, projections of future mortality assumptions related to variable and interest-sensitive life products are based on a long-term average of actual experience. This assumption is updated quarterly to reflect recent experience as it emerges. Improvement of life mortality in future periods from that currently projected would result in future deceleration of DAC amortization. Conversely, deterioration of life mortality in future periods from that currently projected would result in future acceleration of DAC amortization. Generally, life mortality experience has improved in recent periods. Other significant assumptions underlying gross profit estimates relate to contract persistency and general account investment spread. For participating traditional life policies (substantially all of which are in the Closed Block), DAC is amortized over the expected total life of the contract group as a constant percentage based on the present value of the estimated gross margin amounts expected to be realized over the life of the contracts using the expected investment yield. At December 31, 2002, the average rate of assumed investment yields, excluding policy loans, was 7.9% grading to 7.3% over 8 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. The effect on the amortization of DAC of revisions to estimated gross margins is reflected in earnings in the period such estimated gross margins are revised. The effect on the DAC asset that would result from realization of unrealized gains (losses) is recognized with an offset to accumulated comprehensive income in consolidated shareholders' equity as of the balance sheet date. F-13 For non-participating traditional life policies, DAC is amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are estimated at the date of policy issue and are consistently applied during the life of the contracts. Deviations from estimated experience are reflected in earnings in the period such deviations occur. For these contracts, the amortization periods generally are for the total life of the policy. Policyholders' Account Balances and Future Policy Benefits ---------------------------------------------------------- Policyholders' account balances for universal life and investment-type contracts are equal to the policy account values. The policy account values represent an accumulation of gross premium payments plus credited interest less expense and mortality charges and withdrawals. Equitable Life issues certain variable annuity products with a GMDB feature. Equitable Life also issues certain variable annuity products that contain a GMIB feature which, if elected by the policyholder after a stipulated waiting period from contract issuance, guarantees a minimum lifetime annuity based on predetermined annuity purchase rates that may be in excess of what the contract account value can purchase at then-current annuity purchase rates. This minimum lifetime annuity is based on predetermined annuity purchase rates applied to a guarantee minimum income benefit base. The risk associated with the GMDB and GMIB features is that a protracted under-performance of the financial markets could result in GMDB and GMIB benefits being higher than what accumulated policyholder account balances would support. Reserves for GMDB and GMIB obligations are calculated on the basis of actuarial assumptions related to projected benefits and related contract charges over the lives of the contracts using assumptions consistent with those used in estimating gross profits for purposes of amortizing DAC. The determination of this estimated liability is based on models which involve numerous estimates and subjective judgments, including those regarding expected market rates of return and volatility, contract surrender rates, mortality experience, and, for GMIB, GMIB election rates. Assumptions regarding Separate Account performance used for purposes of this calculation are set using a long-term view of expected average market returns by applying a reversion to the mean approach, consistent with that used for DAC amortization. There can be no assurance that ultimate actual experience will not differ from management's estimates. The GMIB reinsurance contracts are considered derivatives under SFAS No. 133 and, therefore, are required to be reported in the balance sheet at their fair value. GMIB fair values are reported in the consolidated balance sheets in Other assets. Changes in GMIB fair values are reflected in Commissions, fees and other income in the consolidated statements of earnings. Since there is no readily available market for GMIB reinsurance contracts, the determination of their fair values is based on models which involve numerous estimates and subjective judgments including those regarding expected market rates of return and volatility, GMIB election rates, contract surrender rates and mortality experience. There can be no assurance that ultimate actual experience will not differ from management's estimates. For reinsurance contracts other than those covering GMIB exposure, reinsurance recoverable balances are calculated using methodologies and assumptions that are consistent with those used to calculate the direct liabilities. 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 that, together with interest and expense assumptions, includes a margin for adverse deviation. When the liabilities for future policy benefits plus the present value of expected future gross premiums for a product are insufficient to provide for expected future policy benefits and expenses for that product, DAC is written off and thereafter, if required, a premium deficiency reserve is established by a charge to earnings. Benefit liabilities for traditional annuities during the accumulation period are equal to accumulated contractholders' fund balances and, after annuitization, are equal to the present value of expected future payments. Interest rates used in establishing such liabilities range from 2.25% to 10.9% for life insurance liabilities and from 2.25% to 8.43% for annuity liabilities. F-14 Individual health benefit liabilities for active lives are estimated using the net level premium method and assumptions as to future morbidity, withdrawals and interest. Benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. While management believes its disability income ("DI") reserves have been calculated on a reasonable basis and are adequate, there can be no assurance reserves will be sufficient to provide for future liabilities. Claim reserves and associated liabilities net of reinsurance ceded for individual DI and major medical policies were $86.0 million and $104.2 million at December 31, 2002 and 2001, respectively. At December 31, 2002 and 2001, respectively, $1,088.9 million and $1,101.8 million of DI reserves and associated liabilities were ceded through an indemnity reinsurance agreement principally with a single reinsurer (see Note 12). Incurred benefits (benefits paid plus changes in claim reserves) and benefits paid for individual DI and major medical policies are summarized as follows:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Incurred benefits related to current year.......... $ 36.6 $ 44.0 $ 56.1 Incurred benefits related to prior years........... (6.3) (10.6) 15.0 ----------------- ---------------- ----------------- Total Incurred Benefits............................ $ 30.3 $ 33.4 $ 71.1 ================= ================ ================= Benefits paid related to current year.............. $ 11.5 $ 10.7 $ 14.8 Benefits paid related to prior years............... 37.2 38.8 106.0 ----------------- ---------------- ----------------- Total Benefits Paid................................ $ 48.7 $ 49.5 $ 120.8 ================= ================ =================
Policyholders' Dividends ------------------------ The amount of policyholders' dividends to be paid (including dividends on policies included in the Closed Block) is determined annually by Equitable Life's board of directors. The aggregate amount of policyholders' dividends is related to actual interest, mortality, morbidity and expense experience for the year and judgment as to the appropriate level of statutory surplus to be retained by Equitable Life. At December 31, 2002, participating policies, including those in the Closed Block, represent approximately 19.4% ($36.5 billion) of directly written life insurance in-force, net of amounts ceded. Separate Accounts ----------------- Generally, Separate Accounts established under New York State Insurance Law generally are not chargeable with liabilities that arise from any other business of the Insurance Group. Separate Accounts assets are subject to General Account claims only to the extent Separate Accounts assets exceed Separate Accounts liabilities. Assets and liabilities of the Separate Accounts represent the net deposits and accumulated net investment earnings less fees, held primarily for the benefit of contractholders, and for which the Insurance Group does not bear the investment risk. Separate Accounts' assets and liabilities are shown on separate lines in the consolidated balance sheets. The Insurance Group bears the investment risk on assets held in one Separate Account; therefore, such assets are carried on the same basis as similar assets held in the General Account portfolio. Assets held in the other Separate Accounts are carried at quoted market values or, where quoted values are not available, at estimated fair values as determined by the Insurance Group. The investment results of Separate Accounts on which the Insurance Group does not bear the investment risk are reflected directly in Separate Accounts liabilities and are not reported in revenues in the consolidated statements of earnings. For 2002, 2001 and 2000, investment results of such Separate Accounts were (losses) gains of $(4,740.7) million, $(2,214.4) million and $8,051.7 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. F-15 Recognition of Investment Management Revenues and Related Expenses ------------------------------------------------------------------ Commissions, fees and other income principally include investment management advisory and service fees. Investment management advisory and service fees are recorded as revenue as the related services are performed; they include brokerage transactions charges of Sanford C. Bernstein & Co., LLC ("SCB LLC"), a wholly owned subsidiary of Alliance, for substantially all private client transactions and certain institutional investment management client transactions. Certain investment advisory contracts provide for a performance fee, in addition to or in lieu of a base fee, that is calculated as a percentage of the related investment results in excess of a stated benchmark over a specified period of time. Performance fees are recorded as revenue at the end of the measurement period. Transaction charges earned and related expenses are recorded on a trade date basis. Distribution revenues and shareholder servicing fees are accrued as earned. Institutional research services revenue consists of brokerage transaction charges and underwriting syndicate revenues related to services provided to institutional investors. Brokerage transaction charges earned and related expenses are recorded on a trade date basis. Syndicate participation and underwriting revenues include gains, losses and fees, net of syndicate expenses, arising from securities offerings in which SCB LLC acts as an underwriter or agent. Syndicate participation and underwriting revenues are recorded on the offering date. Sales commissions paid to financial intermediaries in connection with the sale of shares of open-end Alliance mutual funds sold without a front-end sales charge are capitalized and amortized over periods not exceeding five and one-half years, the period of time during which deferred sales commissions are expected to be recovered from distribution plan payments received from those funds and from contingent deferred sales charges ("CDSC") received from shareholders of those funds upon the redemption of their shares. CDSC reduces unamortized deferred sales commissions when received. At December 31, 2002 and 2001, respectively, deferred sales commissions totaled $500.9 million and $648.2 million and are included within Other assets. Impairment of the deferred sales commission asset is evaluated quarterly, or when a significant decrease in the estimated fair value of the asset occurs, by comparing the undiscounted cash flows estimated by Alliance's management to be realized from this asset to its recorded amount. If the estimated undiscounted cash flows are less that the recorded amount and if Alliance's management estimates that the recorded amount is not fully recoverable, an impairment loss is recognized for the difference between the recorded amount and the estimated fair value of the asset. Cash flows consist of ongoing distribution fees and CDSC. Distribution fees are calculated as a percentage of average assets under management related to back-end load shares. CDSC is based on the values of back-end load shares redeemed and, generally, the length of time the shares have been held. Other Accounting Policies ------------------------- In accordance with regulations of the Securities and Exchange Commission ("SEC"), securities with a fair value of $1.17 billion have been segregated in a special reserve bank custody account at December 31, 2002 for the exclusive benefit of securities broker-dealer or brokerage customers under Rule 15c3-3 under the Securities Exchange Act of 1934, as amended. Intangible assets include costs assigned to contracts of businesses acquired. These costs continue to be amortized on a straight-line basis over estimated useful lives of twenty years. Capitalized internal-use software is amortized on a straight-line basis over the estimated useful life of the software. The Holding Company and its consolidated subsidiaries, including the Company, file a consolidated Federal income tax return. Current Federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. Deferred income tax assets and liabilities are recognized based on the difference between financial statement carrying amounts and income tax bases of assets and liabilities using enacted income tax rates and laws. F-16 Minority interest subject to redemption rights represents the remaining 32.6 million private Alliance Units issued to former Bernstein shareholders in connection with Alliance's acquisition of Bernstein. The Holding Company agreed to provide liquidity to these former Bernstein shareholders after a two-year lock-out period which ended October 2002. The Company acquired 8.16 million of the former Bernstein shareholders' Units in 2002. The outstanding 32.6 million Alliance Units may be sold to the Holding Company at the prevailing market price over the remaining seven years ending in 2009. Generally not more than 20% of the original Units issued to the former Bernstein shareholders may be put to the Holding Company in any one annual period. The Company accounts for its stock option plans in accordance with the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations. In accordance with the opinion, stock option awards result in compensation expense only if the current market price of the underlying stock exceeds the option strike price at the grant date. See Note 21 for the pro forma disclosures required by SFAS No. 123, "Accounting for Stock-Based Compensation," and SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure". F-17 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, 2002 ----------------- Fixed Maturities: Available for Sale: Corporate.......................... $ 20,084.0 $ 1,491.0 $ 269.0 $ 21,306.0 Mortgage-backed.................... 2,419.2 99.2 - 2,518.4 U.S. Treasury, government and agency securities................ 895.5 84.1 - 979.6 States and political subdivisions.. 197.6 17.9 - 215.5 Foreign governments................ 231.8 37.4 .8 268.4 Redeemable preferred stock......... 923.7 71.4 4.1 991.0 ----------------- ----------------- ---------------- ----------------- Total Available for Sale............... $ 24,751.8 $ 1,801.0 $ 273.9 $ 26,278.9 ================= ================= ================ ================= Equity Securities: Available for sale................... $ 37.6 $ 2.0 $ 3.4 $ 36.2 Trading securities................... 3.3 .8 3.0 1.1 ----------------- ----------------- ---------------- ----------------- Total Equity Securities................ $ 40.9 $ 2.8 $ 6.4 $ 37.3 ================= ================= ================ ================= December 31, 2001 ----------------- Fixed Maturities: Available for Sale: Corporate.......................... $ 18,582.9 $ 663.5 $ 291.7 $ 18,954.7 Mortgage-backed.................... 2,428.7 39.1 5.5 2,462.3 U.S. Treasury, government and agency securities................ 1,113.5 62.3 1.5 1,174.3 States and political subdivisions.. 138.9 6.8 1.3 144.4 Foreign governments................ 143.1 15.6 1.0 157.7 Redeemable preferred stock......... 379.6 16.5 23.6 372.5 ----------------- ----------------- ---------------- ----------------- Total Available for Sale............... $ 22,786.7 $ 803.8 $ 324.6 $ 23,265.9 ================= ================= ================ ================= Equity Securities: Available for sale................... $ 54.9 $ 5.8 $ 1.6 $ 59.1 Trading securities................... 4.9 .9 3.4 2.4 ----------------- ----------------- ---------------- ----------------- Total Equity Securities................ $ 59.8 $ 6.7 $ 5.0 $ 61.5 ================= ================= ================ =================
For publicly-traded fixed maturities and equity securities, estimated fair value is determined using quoted market prices. For fixed maturities without a readily ascertainable market value, the Company determines estimated fair values using a discounted cash flow approach, including provisions for credit risk, generally based on the assumption such securities will be held to maturity. Such estimated fair values do not necessarily represent the values for which these securities could have been sold at the dates of the consolidated balance sheets. At December 31, 2002 and 2001, securities without a readily ascertainable market value having an amortized cost of $4,899.8 million and $5,368.3 million, respectively, had estimated fair values of $5,137.2 million and $5,453.8 million, respectively. F-18 The contractual maturity of bonds at December 31, 2002 is shown below:
AVAILABLE FOR SALE ------------------------------------ AMORTIZED ESTIMATED COST FAIR VALUE ---------------- ----------------- (IN MILLIONS) Due in one year or less................................................ $ 612.4 $ 612.1 Due in years two through five.......................................... 5,239.9 5,527.7 Due in years six through ten........................................... 8,630.1 9,268.1 Due after ten years.................................................... 6,926.5 7,361.6 Mortgage-backed securities............................................. 2,419.2 2,518.4 ---------------- ----------------- Total.................................................................. $ 23,828.1 $ 25,287.9 ================ =================
Bonds not due at a single maturity date have been included in the above table in the year of final maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The Insurance Group's fixed maturity investment portfolio includes corporate high yield securities consisting of public high yield bonds, redeemable preferred stocks and directly negotiated debt in leveraged buyout transactions. The Insurance Group seeks to minimize the higher than normal credit risks associated with such securities by monitoring concentrations in any single issuer or a particular industry group. Certain of these corporate high yield securities are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa or National Association of Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At December 31, 2002, approximately 6.9% of the $23,828.1 million aggregate amortized cost of bonds held by the Company was considered to be other than investment grade. At December 31, 2002, the carrying value of fixed maturities which are non-income producing for the twelve months preceding the consolidated balance sheet date was $132.4 million. The Insurance Group holds equity in limited partnership interests which primarily invest in securities considered to be other than investment grade. The carrying values at December 31, 2002 and 2001 were $674.8 million and $695.2 million, 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 $75.3 million and $31.5 million at December 31, 2002 and 2001, respectively. Gross interest income on these loans included in net investment income aggregated $5.3 million, $3.2 million and $9.7 million in 2002, 2001 and 2000, 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 $6.8 million, $4.2 million and $11.0 million in 2002, 2001 and 2000, respectively. Impaired mortgage loans along with the related investment valuation allowances for losses follow:
DECEMBER 31, ---------------------------------------- 2002 2001 ------------------- ------------------- (IN MILLIONS) Impaired mortgage loans with investment valuation allowances....... $ 111.8 $ 114.2 Impaired mortgage loans without investment valuation allowances.... 20.4 30.7 ------------------- ------------------- Recorded investment in impaired mortgage loans..................... 132.2 144.9 Investment valuation allowances.................................... (23.4) (19.3) ------------------- ------------------- Net Impaired Mortgage Loans........................................ $ 108.8 $ 125.6 =================== ===================
F-19 During 2002, 2001 and 2000, respectively, the Company's average recorded investment in impaired mortgage loans was $138.1 million, $141.7 million and $169.8 million. Interest income recognized on these impaired mortgage loans totaled $10.0 million, $7.2 million and $12.4 million for 2002, 2001 and 2000, respectively. Mortgage loans on real estate are placed on nonaccrual status once management believes the collection of accrued interest is doubtful. Once mortgage loans on real estate are classified as nonaccrual loans, interest income is recognized under the cash basis of accounting and the resumption of the interest accrual would commence only after all past due interest has been collected or the mortgage loan on real estate has been restructured to where the collection of interest is considered likely. At December 31, 2002 and 2001, respectively, the carrying value of mortgage loans on real estate that had been classified as nonaccrual loans was $91.1 million and $95.8 million. The Insurance Group's investment in equity real estate is through direct ownership and through investments in real estate joint ventures. At December 31, 2002 and 2001, the carrying value of equity real estate held for sale amounted to $107.7 million and $216.6 million, respectively. For 2002, 2001 and 2000, respectively, real estate of $5.6 million, $64.8 million and $21.6 million was acquired in satisfaction of debt. At December 31, 2002 and 2001, the Company owned $268.8 million and $376.5 million, respectively, of real estate acquired in satisfaction of debt of which $2.7 million and $11.1 million, respectively, are held as real estate joint ventures. Accumulated depreciation on real estate was $163.6 million and $160.3 million at December 31, 2002 and 2001, respectively. Depreciation expense on real estate totaled $18.0 million, $16.1 million and $21.7 million for 2002, 2001 and 2000, respectively. Investment valuation allowances for mortgage loans and equity real estate and changes thereto follow:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Balances, beginning of year........................ $ 87.6 $ 126.2 $ 177.9 Additions charged to income........................ 32.5 40.0 68.2 Deductions for writedowns and asset dispositions............................... (65.1) (78.6) (119.9) ----------------- ---------------- ----------------- Balances, End of Year.............................. $ 55.0 $ 87.6 $ 126.2 ================= ================ ================= Balances, end of year comprise: Mortgage loans on real estate.................... $ 23.4 $ 19.3 $ 50.5 Equity real estate............................... 31.6 68.3 75.7 ----------------- ---------------- ----------------- Total.............................................. $ 55.0 $ 87.6 $ 126.2 ================= ================ =================
F-20 4) EQUITY METHOD INVESTMENTS Included in equity real estate or other equity investments, as appropriate, is the Company's interest in real estate joint ventures, limited partnership interests and investment companies accounted for under the equity method with a total carrying value of $801.6 million and $883.9 million, respectively, at December 31, 2002 and 2001. The Company's total equity in net (losses) earnings for these real estate joint ventures and limited partnership interests was $(14.9) million, $(111.1) million and $180.3 million, respectively, for 2002, 2001 and 2002. Summarized below is the combined financial information only for those real estate joint ventures and for those limited partnership interests accounted for under the equity method in which the Company has an investment of $10.0 million or greater and an equity interest of 10% or greater (7 and 10 individual ventures at December 31, 2002 and 2001, respectively) and the Company's carrying value and equity in net earnings for those real estate joint ventures and limited partnership interests:
DECEMBER 31, ------------------------------------ 2002 2001 ---------------- ----------------- (IN MILLIONS) BALANCE SHEETS Investments in real estate, at depreciated cost........................ $ 550.0 $ 570.5 Investments in securities, generally at estimated fair value........... 237.5 255.7 Cash and cash equivalents.............................................. 27.9 23.7 Other assets........................................................... 32.2 39.4 ---------------- ----------------- Total Assets........................................................... $ 847.6 $ 889.3 ================ ================= Borrowed funds - third party........................................... $ 264.7 $ 269.6 Other liabilities...................................................... 19.2 20.3 ---------------- ----------------- Total liabilities...................................................... 283.9 289.9 ---------------- ----------------- Partners' capital...................................................... 563.7 599.4 ---------------- ----------------- Total Liabilities and Partners' Capital................................ $ 847.6 $ 889.3 ================ ================= The Company's Carrying Value in These Entities Included Above.......... $ 172.3 $ 188.2 ================ ================= 2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) STATEMENTS OF EARNINGS Revenues of real estate joint ventures............. $ 98.4 $ 95.6 $ 147.6 Net (losses) revenues of other limited partnership interests.............. (23.2) 29.8 16.5 Interest expense - third party..................... (19.8) (11.5) (17.0) Interest expense - the Company..................... - (.7) (2.0) Other expenses..................................... (59.3) (58.2) (88.0) ----------------- ---------------- ----------------- Net (Losses) Earnings.............................. $ (3.9) $ 55.0 $ 57.1 ================= ================ ================= The Company's Equity in Net Earnings of These Entities Included Above.......................... $ 12.8 $ 13.2 $ 17.8 ================= ================ =================
F-21 5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES) The sources of net investment income follows:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................... $ 1,755.4 $ 1,662.4 $ 1,764.8 Mortgage loans on real estate...................... 314.8 361.6 387.1 Equity real estate................................. 153.7 166.2 207.2 Other equity investments........................... (45.4) (53.6) 135.3 Policy loans....................................... 269.4 268.2 258.3 Other investment income............................ 114.1 216.6 208.1 ----------------- ---------------- ----------------- Gross investment income.......................... 2,562.0 2,621.4 2,960.8 Investment expenses.............................. (184.8) (217.1) (208.9) ----------------- ---------------- ----------------- Net Investment Income.............................. $ 2,377.2 $ 2,404.3 $ 2,751.9 ================= ================ =================
Investment (losses) gains including changes in the valuation allowances follow:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Fixed maturities................................... $ (374.3) $ (225.2) $ (795.0) Mortgage loans on real estate...................... 3.7 (11.4) (18.0) Equity real estate................................. 101.5 34.5 1.6 Other equity investments........................... 3.3 (13.0) (23.4) Issuance and sales of Alliance Units............... .5 (2.3) 3.9 Issuance and sales of DLJ common stock............. - - 38.8 Other.............................................. (13.2) 10.1 .3 ----------------- ---------------- ----------------- Investment Losses, Net........................... $ (278.5) $ (207.3) $ (791.8) ================= ================ =================
Writedowns of fixed maturities amounted to $312.8 million, $287.5 million and $635.5 million for 2002, 2001 and 2000, respectively, including $499.2 million in fourth quarter 2000. Writedowns of mortgage loans on real estate and equity real estate amounted to $5.5 million and $5.8 million, respectively, for 2002. For 2002, 2001 and 2000, respectively, proceeds received on sales of fixed maturities classified as available for sale amounted to $7,176.3 million, $7,372.3 million and $7,685.5 million. Gross gains of $108.4 million, $156.2 million and $79.7 million and gross losses of $172.9 million, $115.9 million and $220.9 million, respectively, were realized on these sales. The change in unrealized investment gains (losses) related to fixed maturities classified as available for sale for 2002, 2001 and 2000 amounted to $1,047.8 million, $429.5 million and $954.5 million, respectively. In conjunction with the sale of DLJ in 2000, the Company received 11.4 million shares in Credit Suisse Group ("CSG") common stock, 2.8 million shares of which were immediately repurchased by CSG at closing. The CSG shares were designated as trading account securities. The $1.56 billion carrying value of CSG shares that were held by the Company at December 31, 2000 were sold in January 2001. Net investment income included realized gains of $27.1 million in 2001 and included unrealized holding losses of $43.3 million in 2000 on the CSG shares. In 2002, 2001 and 2000, respectively, net unrealized holding gains (losses) on trading account equity securities of $.5 million, $25.0 million, and $(42.2) million were included in net investment income in the consolidated statements of earnings. These trading securities had a carrying value of $1.1 million and $2.4 million and costs of $3.3 million and $4.9 million at December 31, 2002 and 2001, respectively. F-22 For 2002, 2001 and 2000, investment results passed through to certain participating group annuity contracts as interest credited to policyholders' account balances amounted to $92.1 million, $96.7 million and $110.6 million, respectively. Net unrealized investment gains (losses) included in the consolidated balance sheets as a component of accumulated comprehensive income and the changes for the corresponding years, including Discontinued Operations on a line-by-line basis, follow:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Balance, beginning of year......................... $ 215.5 $ 12.9 $ (392.8) Changes in unrealized investment (losses) gains.... 1,049.9 436.0 979.7 Changes in unrealized investment losses(gains) attributable to: Participating group annuity contracts, Closed Block policyholder dividend obligation and other......................... (157.3) (48.6) (18.3) DAC............................................ (174.1) (71.6) (262.1) Deferred Federal income taxes.................. (252.9) (113.2) (293.6) ----------------- ---------------- ----------------- Balance, End of Year............................... $ 681.1 $ 215.5 $ 12.9 ================= ================ ================= Balance, end of year comprises: Unrealized investment gains (losses) on: Fixed maturities............................... $ 1,572.0 $ 496.0 $ 65.9 Other equity investments....................... (1.5) 4.3 (2.3) Other.......................................... (22.2) (1.9) (1.2) ----------------- ---------------- ----------------- Total........................................ 1,548.3 498.4 62.4 Amounts of unrealized investment (losses) gains attributable to: Participating group annuity contracts, Closed Block policyholder dividend obligation and other....................... (221.2) (63.9) (15.3) DAC.......................................... (274.0) (99.9) (28.3) Deferred Federal income taxes................ (372.0) (119.1) (5.9) ----------------- ---------------- ----------------- Total.............................................. $ 681.1 $ 215.5 $ 12.9 ================= ================ =================
Changes in unrealized gains (losses) reflect changes in fair value of only those fixed maturities and equity securities classified as available for sale and do not reflect any changes in fair value of policyholders' account balances and future policy benefits. F-23 6) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) represents cumulative gains and losses on items that are not reflected in earnings. The balances for the past three years follow:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Unrealized gains on investments.................... $ 681.1 $ 215.5 $ 12.9 Minimum pension liability.......................... - (.1) (.1) ----------------- ---------------- ----------------- Total Accumulated Other Comprehensive Income............................. $ 681.1 $ 215.4 $ 12.8 ================= ================ =================
The components of other comprehensive income (loss) for the past three years follow:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Net unrealized gains (losses) on investments: Net unrealized gains arising during the period..................................... $ 1,008.9 $ 525.2 $ 191.0 Losses (gains) reclassified into net earnings during the period.............................. 41.0 (89.2) 788.7 ----------------- ---------------- ----------------- Net unrealized gains on investments................ 1,049.9 436.0 979.7 Adjustments for policyholders liabilities, DAC and deferred Federal income taxes.......... (584.3) (233.4) (574.0) ---------------- ----------------- ----------------- Change in unrealized gains, net of adjustments.................................... 465.6 202.6 405.7 Change in minimum pension liability................ .1 - - ----------------- ---------------- ----------------- Total Other Comprehensive Income................... $ 465.7 $ 202.6 $ 405.7 ================= ================ =================
7) CLOSED BLOCK The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in accumulated other comprehensive income) represents the expected maximum future post-tax earnings from the Closed Block which would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. As of January 1, 2001, the Company has developed an actuarial calculation of the expected timing of the Closed Block earnings. If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block. Many expenses related to Closed Block operations, including amortization of DAC, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block. F-24 Summarized financial information for the Closed Block is as follows:
DECEMBER 31, December 31, 2002 2001 ----------------- ----------------- (IN MILLIONS) CLOSED BLOCK LIABILITIES: Future policy benefits, policyholders' account balances and other.......................................................... $ 8,997.3 $ 9,002.8 Policyholder dividend obligation..................................... 213.3 47.1 Other liabilities.................................................... 97.6 53.6 ----------------- ----------------- Total Closed Block liabilities....................................... 9,308.2 9,103.5 ----------------- ----------------- ASSETS DESIGNATED TO THE CLOSED BLOCK: Fixed maturities, available for sale, at estimated fair value (amortized cost of $4,794.0 and $4,600.4).......................... 5,098.4 4,705.7 Mortgage loans on real estate........................................ 1,456.0 1,514.4 Policy loans......................................................... 1,449.9 1,504.4 Cash and other invested assets....................................... 141.9 141.0 Other assets......................................................... 219.9 214.7 ----------------- ----------------- Total assets designated to the Closed Block.......................... 8,366.1 8,080.2 ----------------- ----------------- Excess of Closed Block liabilities over assets designated to the Closed Block................................................... 942.1 1,023.3 Amounts included in accumulated other comprehensive income: Net unrealized investment gains, net of deferred Federal income tax of $31.8 and $20.4 and policyholder dividend obligation...... 59.1 37.8 ----------------- ----------------- Maximum Future Earnings To Be Recognized From Closed Block Assets and Liabilities............................................. $ 1,001.2 $ 1,061.1 ================= =================
Closed Block revenues and expenses were as follows:
2002 2001 2000 ---------------- ---------------- -------------------- (IN MILLIONS) REVENUES: Premiums and other income............................ $ 543.8 $ 571.5 $ 594.7 Investment income (net of investment expenses of $5.4, $3.0, and $8.1).................. 582.4 583.5 578.7 Investment losses, net............................... (47.0) (42.3) (35.8) ---------------- ---------------- -------------------- Total revenues....................................... 1,079.2 1,112.7 1,137.6 ---------------- ---------------- -------------------- BENEFITS AND OTHER DEDUCTIONS: Policyholders' benefits and dividends................ 980.2 1,009.3 1,025.2 Other operating costs and expenses................... 4.4 4.7 5.2 ---------------- ---------------- -------------------- Total benefits and other deductions.................. 984.6 1,014.0 1,030.4 ---------------- ---------------- -------------------- Net revenues before Federal income taxes............. 94.6 98.7 107.2 Federal income taxes................................. (34.7) (36.2) (38.2) ---------------- ---------------- -------------------- Net Revenues......................................... $ 59.9 $ 62.5 $ 69.0 ================ ================ ====================
F-25 Reconciliation of the policyholder dividend obligation is as follows:
DECEMBER 31, ------------------------------------ 2002 2001 ---------------- ----------------- (IN MILLIONS) Balance at beginning of year........................................... $ 47.1 $ - Unrealized investment gains (losses)................................... 166.2 47.1 ---------------- ----------------- Balance at end of year ................................................ $ 213.3 $ 47.1 ================ =================
Impaired mortgage loans along with the related investment valuation allowances follows:
DECEMBER 31, ------------------------------------ 2002 2001 ---------------- ----------------- (IN MILLIONS) Impaired mortgage loans with investment valuation allowances........... $ 18.6 $ 26.7 Impaired mortgage loans without investment valuation allowances........ .9 6.5 ---------------- ----------------- Recorded investment in impaired mortgages.............................. 19.5 33.2 Investment valuation allowances........................................ (4.0) (5.8) ---------------- ----------------- Net Impaired Mortgage Loans............................................ $ 15.5 $ 27.4 ================ =================
During 2002, 2001 and 2000, the Closed Block's average recorded investment in impaired mortgage loans was $26.0 million, $30.8 million and $31.0 million, respectively. Interest income recognized on these impaired mortgage loans totaled $2.1 million, $1.2 million and $2.0 million for 2002, 2001 and 2000, respectively. Valuation allowances amounted to $3.9 million and $5.7 million on mortgage loans on real estate and $.1 million and $9.8 million on equity real estate at December 31, 2002 and 2001, respectively. Writedowns of fixed maturities amounted to $40.0 million, $30.8 million and $27.7 million for 2002, 2001 and 2000, respectively, including $23.3 million in fourth quarter 2001. F-26 8) DISCONTINUED OPERATIONS Summarized financial information for Discontinued Operations follows:
DECEMBER 31, -------------------------------------- 2002 2001 ----------------- ----------------- (IN MILLIONS) BALANCE SHEETS Fixed maturities, available for sale, at estimated fair value (amortized cost of $677.8 and $542.9)............................. $ 722.7 $ 559.6 Equity real estate.................................................. 203.7 252.0 Mortgage loans on real estate....................................... 87.5 160.3 Other equity investments............................................ 9.4 22.3 Other invested assets............................................... .2 .4 ----------------- ----------------- Total investments................................................. 1,023.5 994.6 Cash and cash equivalents........................................... 31.0 41.1 Other assets........................................................ 126.5 152.6 ----------------- ----------------- Total Assets........................................................ $ 1,181.0 $ 1,188.3 ================= ================= Policyholders liabilities........................................... $ 909.5 $ 932.9 Allowance for future losses......................................... 164.6 139.9 Other liabilities................................................... 106.9 115.5 ----------------- ----------------- Total Liabilities................................................... $ 1,181.0 $ 1,188.3 ================= ================= 2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) STATEMENTS OF EARNINGS Investment income (net of investment expenses of $18.1, $25.3 and $37.0)............. $ 69.7 $ 91.6 $ 102.2 Investment gains (losses), net.................... 34.2 33.6 (6.6) Policy fees, premiums and other income............ .2 .2 .7 ----------------- ---------------- ----------------- Total revenues.................................... 104.1 125.4 96.3 Benefits and other deductions..................... 98.7 100.7 106.9 Earnings credited (losses charged) to allowance for future losses............................... 5.4 24.7 (10.6) ----------------- ---------------- ----------------- Pre-tax loss from operations...................... - - - Pre-tax earnings from releasing the allowance for future losses............................... 8.7 46.1 90.2 Federal income tax expense........................ (3.1) (2.2) (31.6) ----------------- ---------------- ----------------- Earnings from Discontinued Operations............. $ 5.6 $ 43.9 $ 58.6 ================= ================ =================
The Company's quarterly process for evaluating the allowance for future losses applies the current period's results of discontinued operations against the allowance, re-estimates future losses and adjusts the allowance, if appropriate. Additionally, as part of the Company's annual planning process, investment and benefit cash flow projections are prepared. These updated assumptions and estimates resulted in a release of allowance in each of the three years presented. Valuation allowances of $4.9 million and $4.8 million on mortgage loans on real estate and $0 million and $5.0 million on equity real estate were held at December 31, 2002 and 2001, respectively. During 2002, 2001 and 2000, discontinued operations' average recorded investment in impaired mortgage loans was $25.3 million, $32.2 million and $11.3 million, respectively. Interest income recognized on these impaired mortgage loans totaled $2.5 million, $2.5 million and $.9 million for 2002, 2001 and 2000, respectively. In 2001, Federal Income tax expense for discontinued operations reflected a $13.8 million reduction in taxes due to settlement of open tax years. F-27 9) VARIABLE ANNUITY CONTRACTS - GMDB AND GMIB Equitable Life issues certain variable annuity contracts with GMDB and GMIB features that guarantee either: a) Return of Premium: the benefit is the greater of current account value and premiums paid (adjusted for withdrawals), b) Ratchet: the benefit is the greatest of current account value, premiums paid (adjusted for withdrawals), and the highest account value on any anniversary up to contractually specified ages (adjusted for withdrawals), or c) Roll-Up: the benefit is the greater of current account value and premiums paid (adjusted for withdrawals) accumulated at contractually specified interest rates up to specified ages, d) Combo: the benefit is the greater of the ratchet benefit or the roll-up benefit. The following table summarizes the GMDB and GMIB liabilities, before reinsurance ceded, reflected in the General Account in future policy benefits and other policyholders liabilities in 2002:
GMDB GMIB TOTAL ----------------- ---------------- ----------------- (IN MILLIONS) Balance at January 1, 2002......................... $ 43.0 $ 15.0 $ 58.0 Paid guarantee benefits.......................... (65.0) - (65.0) Other changes in reserve......................... 150.4 102.5 252.9 ----------------- ---------------- ----------------- Balance at December 31, 2002....................... $ 128.4 $ 117.5 $ 245.9 ================= ================ =================
Related GMDB reinsurance ceded amounts were: GMDB -------------------- (IN MILLIONS) Balance at January 1, 2002......................... $ 7.0 Paid guarantee benefits ceded.................... (14.5) Other changes in reserve......................... 29.0 -------------------- Balance at December 31, 2002....................... $ 21.5 ==================== The GMIB reinsurance contracts are considered derivatives and are reported at fair value (see Note 12). F-28 At December 31, 2002 the Company had the following variable contracts with guarantees. Note that the Company's variable contracts with GMDB guarantees may also offer GMIB guarantees in each contract, therefore, the GMDB and GMIB amounts listed are not mutually exclusive:
RETURN OF PREMIUM RATCHET ROLL-UP COMBO TOTAL ------------- -------------- -------------- ------------- -------------- (DOLLARS IN MILLIONS) GMDB: Account value (1)................ $ 21,052 $ 3,991 $ 6,030 $ 1,488 $ 32,561 Net amount at risk, gross........ $ 5,609 $ 1,724 $ 3,036 $ 44 $ 10,413 Net amount at risk, net of amounts reinsured.............. $ 5,602 $ 1,187 $ 1,897 $ 44 $ 8,730 Average attained age of contractholders................ 50.0 58.9 61.0 59.6 51.7 Percentage of contractholders over age 70.................... 7.0% 19.8% 24.3% 20.4% 9.5% Range of guaranteed minimum return rates.................. N/A N/A 3-6% 3-6% N/A GMIB: Account value (2)................ N/A N/A $ 4,782 $ 2,042 $ 6,824 Net amount at risk, gross........ N/A N/A $ 1,112 $ 10 $ 1,122 Net amount at risk, net of amounts reinsured.............. N/A N/A $ 308 $ 5 $ 313 Weighted average years remaining until annuitization ........... N/A N/A 5.0 10.2 5.0 Range of guaranteed minimum return rates.................. N/A N/A 3-6% 3-6% 3-6%
(1) Included General Account balances of $10,141 million, $96 million, $129 million and $257 million, respectively, for a total of $10,623 million. (2) Included General Account balances of $20 million and $356 million, respectively, for a total of $376 million. For contracts in the event of death, the net amount at risk is defined as the amount by which the GMDB benefits exceed related account values. For contracts at annuitization, the net amount at risk is defined as the amount by which the GMIB benefit bases exceed related account values, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. F-29 10) SHORT-TERM AND LONG-TERM DEBT Short-term and long-term debt consists of the following:
DECEMBER 31, -------------------------------------- 2002 2001 ----------------- ----------------- (IN MILLIONS) Short-term debt...................................................... $ 22.0 $ 223.1 ----------------- ----------------- Long-term debt: Equitable Life: Surplus notes, 6.95%, due 2005..................................... 399.8 399.7 Surplus notes, 7.70%, due 2015..................................... 199.7 199.7 Other.............................................................. - .2 ----------------- ----------------- Total Equitable Life........................................... 599.5 599.6 ----------------- ----------------- Alliance: Senior Notes, 5.625%, due 2006..................................... 398.4 398.0 Other.............................................................. 6.5 6.5 ----------------- ----------------- Total Alliance................................................. 404.9 404.5 ----------------- ----------------- Wholly Owned and Joint Venture Real Estate: Mortgage notes, 3.09% due through 2017............................. 248.3 248.3 ----------------- ----------------- Total long-term debt................................................. 1,252.7 1,252.4 ----------------- ----------------- Total Short-term and Long-term Debt.................................. $ 1,274.7 $ 1,475.5 ================= =================
Short-term Debt --------------- Equitable Life has a $350.0 million five year bank credit facility. The interest rates are based on external indices dependent on the type of borrowing ranging from 1.60% to 4.25%. There were no amounts outstanding under this credit facility at December 31, 2002. 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 $350.0 million bank credit facility. At December 31, 2002, there were no amounts outstanding under this program. Since 1998, Alliance has had a $425.0 million commercial paper program. In September 2002, Alliance entered into an $800.0 million five-year revolving credit facility with a group of commercial banks and other lenders that replaced three previously existing credit facilities aggregating $875.0 million. Of the $800.0 million total, $425.0 million is intended to provided back-up liquidity for Alliance's commercial paper program, with the balance available for general purposes, including capital expenditures and funding the payments of sales commissions to financial intermediaries. The interest rate, at the option of Alliance, is a floating rate generally based upon a defined prime rate, a rate related to the London Interbank Offered Rate ("LIBOR") or the Federal funds rate. The credit facility also provides for a facility fee payable on the total facility. In addition, a utilization rate fee is payable in the event the average aggregate daily outstanding balance exceeds $400.0 million for each calendar quarter. The revolving credit facility contains covenants that, among other things, require Alliance to meet certain financial ratios. Alliance was in compliance with the covenants at December 31, 2002. At December 31, 2002, Alliance had commercial paper outstanding totaling $22.0 million at an effective interest rate of 1.3%; there were no borrowings outstanding under Alliance's revolving credit facilities. Since December 1999, Alliance has maintained a $100.0 million extendible commercial notes ("ECN") program as a supplement to its $425.0 million commercial paper program. ECNs are short-term uncommitted debt instruments that do not require back-up liquidity support. At December 31, 2002, there were no borrowings outstanding under the ECN program. F-30 Long-term Debt -------------- Certain of the long-term debt agreements, principally mortgage notes, have restrictive covenants related to the total amount of debt, net tangible assets and other matters. At December 31, 2002, the Company was in compliance with all debt covenants. At December 31, 2002 and 2001, respectively, the Company has pledged real estate of $322.9 million and $314.5 million as collateral for certain long-term debt. At December 31, 2002, aggregate maturities of the long-term debt based on required principal payments at maturity was $248.3 million for 2003, $0.0 for 2004, $400.0 million for 2005, $406.5 million for 2006, $0.0 million for 2007 and $200.0 million thereafter. In August 2001, Alliance issued $400.0 million 5.625% notes in a public offering. Alliance may issue up to $600.0 million in senior debt securities. The Alliance notes mature in 2006 and are redeemable at any time. The proceeds from the Alliance notes were used to reduce commercial paper and credit facility borrowings and for other general partnership purposes. 11) FEDERAL INCOME TAXES A summary of the Federal income tax expense in the consolidated statements of earnings follows:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Federal income tax expense (benefit): Current.......................................... $ (400.0) $ (38.2) $ 820.6 Deferred......................................... 450.9 354.4 137.7 ----------------- ---------------- ----------------- Total.............................................. $ 50.9 $ 316.2 $ 958.3 ================= ================ =================
The Federal income taxes attributable to consolidated operations are different from the amounts determined by multiplying the earnings before Federal income taxes and minority interest by the expected Federal income tax rate of 35%. The sources of the difference and their tax effects follow:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Expected Federal income tax expense................ $ 360.0 $ 452.5 $ 904.9 Minority interest.................................. (128.3) (126.9) (117.9) Separate Account investment activity............... (159.3) - - Non deductible stock option compensation expense............................ - - 34.4 Subsidiary gains................................... - - 161.4 Adjustment of tax audit reserves................... (34.2) (28.2) 17.9 Equity in unconsolidated subsidiaries.............. - - (48.7) Other.............................................. 12.7 18.8 6.3 ----------------- ---------------- ----------------- Federal Income Tax Expense......................... $ 50.9 $ 316.2 $ 958.3 ================= ================ =================
F-31 The components of the net deferred Federal income taxes are as follows:
DECEMBER 31, 2002 December 31, 2001 --------------------------------- --------------------------------- ASSETS LIABILITIES Assets Liabilities --------------- ---------------- --------------- --------------- (IN MILLIONS) Compensation and related benefits...... $ - $ 221.2 $ - $ 92.0 Other.................................. - 7.7 - .1 DAC, reserves and reinsurance.......... - 1,273.1 - 1,020.1 Investments............................ - 579.9 - 333.3 --------------- ---------------- --------------- --------------- Total.................................. $ - $ 2,081.9 $ - $ 1,445.5 =============== ================ =============== ===============
The deferred Federal income taxes impacting operations reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The sources of these temporary differences and their tax effects follow:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) DAC, reserves and reinsurance...................... $ 270.9 $ 291.7 $ 403.3 Investments........................................ (6.2) 42.1 (140.7) Compensation and related benefits.................. 178.7 15.7 (96.4) Other.............................................. 7.5 4.9 (28.5) ----------------- ---------------- ----------------- Deferred Federal Income Tax Expense................ $ 450.9 $ 354.4 $ 137.7 ================= ================ =================
In 2002, the Company recorded a $144.3 million benefit resulting from the favorable treatment of certain tax matters related to Separate Account investment activity arising during the 1997-2001 tax years and a settlement with the Internal Revenue Service (the "IRS") with respect to such tax matters for the 1992-1996 tax years. The IRS commenced in January 2003 an examination of AXA Financial's consolidated Federal income tax returns for the years 1997 through 2001. Management believes this audit will have no material adverse effect on the Company's consolidated results of operations. 12) REINSURANCE AGREEMENTS The Insurance Group assumes and cedes reinsurance with other insurance companies. The Insurance Group evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Ceded reinsurance does not relieve the originating insurer of liability. The effect of reinsurance (excluding group life and health) is summarized as follows:
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Direct premiums.................................... $ 954.6 $ 990.0 $ 1,103.8 Reinsurance assumed................................ 181.4 203.0 194.2 Reinsurance ceded.................................. (190.8) (173.1) (123.0) ----------------- ---------------- ----------------- Premiums........................................... $ 945.2 $ 1,019.9 $ 1,175.0 ================= ================ ================= Universal Life and Investment-type Product Policy Fee Income Ceded.......................... $ 96.6 $ 86.9 $ 92.1 ================= ================ ================= Policyholders' Benefits Ceded...................... $ 346.3 $ 370.3 $ 239.2 ================= ================ ================= Interest Credited to Policyholders' Account Balances Ceded................................... $ 54.6 $ 50.4 $ 46.5 ================= ================ =================
F-32 Since 1997, the Company reinsures on a yearly renewal term basis 90% of the mortality risk on new issues of certain term, universal and variable life products. The Company's retention limit on joint survivorship policies is $15.0 million and $5.0 million on single life polices. Substantially all other in-force business above $5.0 million is reinsured. The Insurance Group also reinsures the entire risk on certain substandard underwriting risks and in certain other cases. At December 31, 2002, Equitable Life had reinsured in the aggregate approximately 16.0% of its current exposure to the GMDB obligation on annuity contracts in-force and, subject to certain maximum amounts or caps in any one period, approximately 72.0% of its current liability exposure resulting from the GMIB feature. During July 2000, Equitable Life transferred, at no gain or loss, all the risk of its directly written DI business for years 1993 and prior through an indemnity reinsurance contract. The cost of the arrangement will be amortized over the expected lives of the contracts reinsured and will not have a significant impact on the results of operations in any specific period. At December 31, 2002 and 2001, respectively, reinsurance recoverables related to insurance contracts amounted to $2,351.7 million and $2,237.0 million, of which $1,049.2 million and $1,060.4 million relates to one specific reinsurer. Reinsurance payables related to insurance contracts amounting to $867.5 million and $798.5 million are included in Other liabilities in the consolidated balance sheets. Based on management's estimates of future contract cash flows and experience, the estimated fair values of the GMIB reinsurance contracts, which are considered derivatives under SFAS No. 133, at December 31, 2002 and 2001 were $120.0 million and zero, respectively. The increase in estimated fair value of $120.0 million for the year ended December 31, 2002 was due primarily to significant equity market declines during 2002. The Insurance Group cedes 100% of its group life and health business to a third party insurer. Insurance liabilities ceded totaled $410.9 million and $444.2 million at December 31, 2002 and 2001, respectively. In addition to the sale of insurance products, the Insurance Group acts as a professional retrocessionaire by assuming life and annuity reinsurance from professional reinsurers. The Insurance Group also assumes accident, health, aviation and space risks by participating in various reinsurance pools. Reinsurance assumed reserves at December 31, 2002 and 2001 were $570.7 million and $540.2 million, respectively. 13) EMPLOYEE BENEFIT PLANS The Company sponsors qualified and non-qualified defined benefit plans covering substantially all employees (including certain qualified part-time employees), managers and certain agents. The pension plans are non-contributory. Equitable Life's benefits are based on a cash balance formula or years of service and final average earnings, if greater, under certain grandfathering rules in the plans. Alliance's benefits are based on years of credited service, average final base salary and primary social security benefits. The Company made cash contributions in 2002 to the qualified plans totaling $348.1 million. Generally, the Company's funding policy is to make the minimum contribution required by the Employee Retirement Income Security Act of 1974 ("ERISA"). Components of net periodic pension credit follow:
2002 2001 2000 ----------------- ---------------- ------------------ (IN MILLIONS) Service cost....................................... $ 32.1 $ 32.1 $ 29.5 Interest cost on projected benefit obligations..... 125.3 128.8 124.2 Expected return on assets.......................... (181.8) (218.7) (223.2) Net amortization and deferrals..................... 6.4 .1 (.6) ----------------- ---------------- ------------------ Net Periodic Pension Credit........................ $ (18.0) $ (57.7) $ (70.1) ================= ================ ==================
F-33 The projected benefit obligations under the pension plans were comprised of:
DECEMBER 31, ------------------------------------ 2002 2001 ---------------- ----------------- (IN MILLIONS) Benefit obligations, beginning of year................................. $ 1,812.3 $ 1,712.6 Service cost........................................................... 27.1 27.1 Interest cost.......................................................... 125.3 128.8 Actuarial losses (gains)............................................... 42.5 64.4 Benefits paid.......................................................... (123.3) (120.6) ---------------- ----------------- Benefit Obligation, End of Year........................................ $ 1,883.9 $ 1,812.3 ================ =================
The funded status of the pension plans was as follows:
DECEMBER 31, ------------------------------------ 2002 2001 ---------------- ----------------- (IN MILLIONS) Plan assets at fair value, beginning of year........................... $ 1,845.3 $ 2,119.4 Actual return on plan assets........................................... (278.2) (148.0) Contributions.......................................................... 348.1 - Benefits paid and fees................................................. (129.8) (126.1) ---------------- ----------------- Plan assets at fair value, end of year................................. 1,785.4 1,845.3 Projected benefit obligations.......................................... 1,883.9 1,812.3 ---------------- ----------------- Excess of plan assets over projected benefit obligations............... (98.5) 33.0 Unrecognized prior service cost........................................ (40.0) (46.3) Unrecognized net loss (gain) from past experience different from that assumed.................................................... 1,033.9 550.1 Unrecognized net asset at transition................................... (1.5) (1.6) ---------------- ----------------- Prepaid Pension Cost, Net.............................................. $ 893.9 $ 535.2 ================ =================
The accrued liability for pension plans with projected benefit obligations in excess of plan assets was $19.1 million and $16.7 million at December 31, 2002 and 2001, respectively. The aggregate accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $60.9 million and $24.2 million, respectively, at December 31, 2002 and $49.7 million and $28.7 million, respectively, at December 31, 2001. The pension plan assets include corporate and government debt securities, equity securities, equity real estate and shares of group trusts managed by Alliance. The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of projected benefit obligations were 6.75% and 7.26%, respectively, at December 31, 2002 and 7.25% and 7.19%, respectively, at December 31, 2001. As of January 1, 2002 and 2001, the expected long-term rate of return on assets for the retirement plan was 9.0% and 10.25%, respectively. Prior to 1987, the qualified plan funded participants' benefits through the purchase of non-participating annuity contracts from Equitable Life. Benefit payments under these contracts were approximately $26.0 million, $27.3 million and $28.7 million for 2002, 2001 and 2000, respectively. Alliance maintains several unfunded deferred compensation plans for the benefit of certain eligible employees and executives. The Capital Accumulation Plan was frozen on December 31, 1987 and no additional awards have been made. For the active plans, benefits vest over a period ranging from 3 to 8 years and are amortized as compensation and benefit expense. ACMC, Inc. ("ACMC"), a subsidiary of the Company, is obligated to make capital contributions to Alliance in amounts equal to benefits paid under the Capital Accumulation Plan and the contractual unfunded deferred compensation arrangements. In connection with the acquisition of Bernstein, Alliance agreed to invest $96.0 million per annum for three years to fund purchases of Alliance Holding units or an Alliance sponsored money market fund in each case for the benefit of certain individuals who were stockholders or principals of Bernstein or were hired to replace them. The Company has recorded compensation and benefit expenses in connection with the plans totaling $101.4 million, $58.1 million and $29.8 F-34 million for 2002, 2001 and 2000, respectively (including $63.7 million and $34.6 million for 2002 and 2001, respectively, relating to the Bernstein deferred compensation plan). 14) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS The Insurance Group primarily uses derivatives for asset/liability risk management and for hedging individual securities. Derivatives mainly are utilized to reduce the Insurance Group's exposure to interest rate fluctuations. Various derivative financial instruments are used to achieve this objective, including interest rate caps and floors to hedge crediting rates on interest-sensitive individual annuity contracts, interest rate futures to protect against declines in interest rates between receipt of funds and purchase of appropriate assets, and interest rate swaps to modify the duration and cash flows of fixed maturity investments. In addition, the Company periodically enters into forward and futures contracts to hedge certain equity exposures. Also, the Company has purchased reinsurance contracts to mitigate the risks associated with the impact of potential market fluctuations on future policyholder elections of guaranteed minimum income benefit features contained in certain annuity contracts issued by the Company. As earlier described in Note 2 of Notes to Consolidated Financial Statements, the Company adopted SFAS No. 133, as amended, on January 1, 2001. Consequently, all derivatives outstanding at December 31, 2002 are recognized on the balance sheet at their fair values. The outstanding notional amounts of derivative financial instruments purchased and sold were $9,050.0 million and zero, respectively, at December 31, 2002. These amounts principally consist of interest rate cap contracts of Equitable Life that have a total fair value at December 31, 2002 of $8.7 million. At December 31, 2002 and during the year then ended, there were no hybrid instruments that required bifurcation of an embedded derivative component under the provisions of SFAS No. 133. All gains and losses on derivative financial instruments utilized by the Company in 2002 and 2001 are reported in earnings for the current year as none of the derivatives were designated to qualifying hedging relationships under SFAS No. 133 either at initial adoption of the Statement or at inception of the contracts. For 2002 and 2001, respectively, investment results, principally in net investment income, included gross gains of $7.7 million and $27.5 million and gross losses of $7.7 million and $4.6 million that were recognized on derivative positions. Fair Value of Financial Instruments ----------------------------------- The Company defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument. Certain financial instruments are excluded, particularly insurance liabilities other than financial guarantees and investment contracts. Fair market value of off-balance-sheet financial instruments of the Insurance Group was not material at December 31, 2002 and 2001. F-35 Fair values for mortgage loans on real estate are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be made. Fair values for foreclosed mortgage loans and problem mortgage loans are limited to the estimated fair value of the underlying collateral if lower. Fair values of policy loans are estimated by discounting the face value of the loans from the time of the next interest rate review to the present, at a rate equal to the excess of the current estimated market rates over the current interest rate charged on the loan. The estimated fair values for the Company's association plan contracts, supplementary contracts not involving life contingencies ("SCNILC") and annuities certain, which are included in policyholders' account balances, and guaranteed interest contracts are estimated using projected cash flows discounted at rates reflecting expected current offering rates. The fair values for variable deferred annuities and single premium deferred annuities, which are included in policyholders' account balances, are estimated as the discounted value of projected account values. Current account values are projected to the time of the next crediting rate review at the current crediting rates and are projected beyond that date at the greater of current estimated market rates offered on new policies or the guaranteed minimum crediting rate. Expected cash flows and projected account values are discounted back to the present at the current estimated market rates. Fair values for long-term debt are determined using published market values, where available, or contractual cash flows discounted at market interest rates. The estimated fair values for non-recourse mortgage debt are determined by discounting contractual cash flows at a rate which takes into account the level of current market interest rates and collateral risk. The estimated fair values for recourse mortgage debt are determined by discounting contractual cash flows at a rate based upon current interest rates of other companies with credit ratings similar to the Company. The Company's carrying value of short-term borrowings approximates their estimated fair value. The carrying value and estimated fair value for financial instruments not previously disclosed in Notes 3, 7, 8 and 10 are presented below:
DECEMBER 31, -------------------------------------------------------------------- 2002 2001 --------------------------------- --------------------------------- CARRYING ESTIMATED Carrying Estimated VALUE FAIR VALUE Value Fair Value --------------- ---------------- --------------- --------------- (IN MILLIONS) Consolidated: ------------- Mortgage loans on real estate.......... $ 3,746.2 $ 4,070.1 $ 4,333.3 $ 4,438.7 Other limited partnership interests.... 674.8 674.8 695.2 695.2 Policy loans........................... 4,035.6 4,728.2 4,100.7 4,476.4 Policyholders liabilities: Investment contracts................. 14,555.0 15,114.9 12,256.4 12,514.0 Long-term debt......................... 1,252.7 1,334.7 1,252.4 1,287.1 Closed Block: ------------- Mortgage loans on real estate.......... $ 1,456.0 $ 1,572.6 $ 1,514.4 $ 1,532.6 Other equity investments............... 16.4 16.4 24.4 24.4 Policy loans........................... 1,449.4 1,740.9 1,504.4 1,664.8 SCNILC liability....................... 16.5 16.6 18.2 18.1 Discontinued Operations: ------------------------ Mortgage loans on real estate.......... $ 87.5 $ 94.7 $ 160.3 $ 171.6 Other equity investments............... 9.4 9.4 22.3 22.3 Guaranteed interest contracts.......... 18.3 17.0 18.8 16.1 Long-term debt......................... 101.7 101.7 101.7 101.7
F-36 15) COMMITMENTS AND CONTINGENT LIABILITIES In addition to its debt and lease commitments discussed in Notes 10 and 17, from time to time, the Company has provided certain guarantees or commitments to affiliates, investors and others. At December 31, 2002, these arrangements included commitments by the Company to provide equity financing of $298.6 million to certain limited partnerships under certain conditions. Management believes the Company will not incur any material losses as a result of these commitments. Equitable Life is the obligor under certain structured settlement agreements which it had entered into with unaffiliated insurance companies and beneficiaries. To satisfy its obligations under these agreements, Equitable Life owns single premium annuities issued by previously wholly owned life insurance subsidiaries. Equitable Life has directed payment under these annuities to be made directly to the beneficiaries under the structured settlement agreements. A contingent liability exists with respect to these agreements should the previously wholly owned subsidiaries be unable to meet their obligations. Management believes the need for Equitable Life to satisfy those obligations is remote. The Company had $57.3 million of letters of credit related to reinsurance of which no amounts were outstanding at December 31, 2002. In February 2002, Alliance signed a $125.0 million agreement with a group of commercial banks and other lenders. Under the agreement, Alliance guaranteed various obligations of SCB LLC incurred in the ordinary course of its business in the event SCB LLC is unable to meet these obligations. At December 31, 2002, Alliance was not required to perform under the agreement and had no liability outstanding in connection with the agreement. 16) LITIGATION A number of lawsuits have been filed against life and health insurers in the jurisdictions in which Equitable Life and its subsidiaries do business involving insurers' sales practices, alleged agent misconduct, alleged failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against other insurers, including material amounts of punitive damages, or in substantial settlements. In some states, juries have substantial discretion in awarding punitive damages. Equitable Life, Equitable Variable Life Insurance Company ("EVLICO," which was merged into Equitable Life effective January 1, 1997, but whose existence continues for certain limited purposes, including the defense of litigation) and EOC, like other life and health insurers, from time to time are involved in such litigations. Among litigations against Equitable Life, EVLICO and EOC of the type referred to in this paragraph are the litigations described in the following four paragraphs. In March 2000, an action entitled Brenda McEachern v. The Equitable Life Assurance Society of the United States and Gary Raymond, Jr. was commenced against Equitable Life and one of its agents in Circuit Court, Mobile County, Alabama, and asserts claims under state law. The action was brought by an individual who alleges that she purchased a variable annuity from Equitable Life in 1997. The action purports to be on behalf of a class consisting of all persons who from January 1, 1989 (i) purchased a variable annuity from Equitable Life to fund a qualified retirement plan, (ii) were charged allegedly unnecessary fees for tax deferral for variable annuities held in qualified retirement accounts, or (iii) were sold a variable annuity while owning a qualified retirement plan from Equitable Life. The complaint alleges various improper sales practices, including misrepresentations in connection with the use of variable annuities in a qualified retirement plan or similar arrangement, charging inflated or hidden fees, and failure to disclose unnecessary tax deferral fees. Plaintiff seeks damages, including punitive damages, in an unspecified amount and attorneys' fees and expenses. In May 2000, Equitable Life removed the case to the United States District Court for the Southern District of Alabama and filed a motion to dismiss the complaint, and plaintiff filed a motion to remand the case to state court. The court has permitted limited discovery on the issue of whether the Securities Litigation Uniform Standards Act applies. In November 2001, plaintiff filed a motion for leave to join additional plaintiffs. In February 2002, the court denied the plaintiff's motion to remand and granted defendants' motion to dismiss, but permitted plaintiff until April 1, 2002 to file an amended complaint in Federal Court. In March 2002, plaintiff filed a motion to alter or amend the court's judgment. In September 2002, plaintiff filed an amended complaint in the United States District Court for the Southern District of Alabama. In the amended complaint, the original plaintiff added two new plaintiffs who are alleged to have purchased individual retirement annuities in 1998 and 1999. The amended complaint does not assert any claims against Equitable Life's agent, previously named as a defendant. Plaintiffs seek to represent a class of F-37 (i) all persons who purchased deferred variable annuities from Equitable Life in tax deferred qualified retirement plans, and (ii) all persons who were charged allegedly unnecessary mortality fees for tax deferral for variable annuities held in qualified retirement accounts. Plaintiffs assert causes of action for unjust enrichment, money had and received (a common-law cause of action similar to unjust enrichment), conversion, breach of contract, negligence, negligent and/or wanton training, negligent and/or wanton supervision, and breach of fiduciary duty. Plaintiffs seek damages, including punitive damages, in an unspecified amount and attorneys' fees and expenses. In December 2002, the court granted Equitable Life's motion to dismiss the complaint, ruling that the Securities Litigation Uniform Standards Act applied. The complaint has been dismissed without prejudice. In October 2000, an action entitled Sham Malhotra, et al. v. The Equitable Life Assurance Society of the United States, AXA Advisors, LLC and Equitable Distributors, Inc. was commenced in the Supreme Court of the State of New York, County of Nassau. The action was brought by two individuals who purchased Equitable Life deferred annuity products. The action purports to be on behalf of a class consisting of all persons who purchased an individual deferred annuity contract or who received a certificate to a group deferred annuity contract, sold by one of the defendants, which was used to fund a contributory retirement plan or arrangement qualified for favorable income tax treatment; excluded from the class are officers, directors and agents of the defendants. The complaint alleges that the defendants engaged in fraudulent and deceptive practices in connection with the marketing and sale of deferred annuity products to fund tax-qualified contributory retirement plans. The complaint asserts claims for: deceptive business acts and practices in violation of the New York General Business Law ("GBL"); use of misrepresentations and misleading statements in violation of the New York Insurance Law; false or misleading advertising in violation of the GBL; fraud, fraudulent concealment and deceit; negligent misrepresentation; negligence; unjust enrichment and imposition of a constructive trust; declaratory and injunctive relief; and reformation of the annuity contracts. The complaint seeks injunctive and declaratory relief, an unspecified amount of compensatory and punitive damages, restitution for all members of the class, and an award of attorneys' fees, costs and expenses. In October 2000, the defendants removed the action to the United States District Court for the Eastern District of New York, and thereafter filed a motion to dismiss. Plaintiffs filed a motion to remand the case to state court. In September 2001, the District Court issued a decision granting defendants' motion to dismiss and denying plaintiffs' motion to remand, and judgment was entered in favor of the defendants. In October 2001, plaintiffs filed a motion seeking leave to reopen the case for the purpose of filing an amended complaint. In addition, plaintiffs filed a new complaint in the District Court, alleging a similar class and similar facts. The new complaint asserts causes of action for violations of Federal securities laws in addition to the state law causes of action asserted in the previous complaint. In January 2002, plaintiffs amended their new complaint in response to defendants' motion to dismiss and, subsequently, in March 2002, defendants filed a motion to dismiss the amended complaint. Between June 2000 and January 2003, 29 lawsuits were filed in the state courts of Mississippi (the "Mississippi Actions") by more than 300 plaintiffs naming as defendants Equitable Life, EVLICO, EOC and AXA Advisors and various present and former individual sales agents. The actions arise from the purchase by each of the plaintiffs of various types of life insurance policies from Equitable Life, EVLICO and/or EOC. The policies at issue include term, variable and whole life policies purchased as early as 1954. The actions allege misrepresentations in connection with the sale of life insurance policies including that the defendants misrepresented the stated number of years that premiums would need to be paid. Plaintiffs assert claims for breach of contract, fraud, fraudulent inducement, misrepresentation, conspiracy, negligent supervision and other tort claims. Plaintiffs seek unspecified compensatory and punitive damages. The parties are engaged in various stages of discovery in many of the pending actions. In March 2002, the Circuit Court of Sunflower County, in one of the lawsuits, granted Equitable Life's motion, joined by the agent defendant, to dismiss that action with prejudice; plaintiffs' appeal to the Supreme Court of Mississippi has been fully briefed. The lawsuit involving 79 plaintiffs has been removed from state court to the United States District Court for the Northern District of Mississippi. Motions to remand are pending in several other cases. In six of the Mississippi Actions, between May 2002 and January 2003 three former sales agents and one retired sales agent of Equitable Life named as defendants have asserted cross-claims against Equitable Life seeking indemnification, as well as compensatory and punitive damages for, among other things, alleged injury to their reputations. Equitable Life filed motions to dismiss those cross-claims and in the Federal district courts in Mississippi, is seeking to compel arbitration of the cross-claims. In January 2003, the United States District Court for the Southern District of Mississippi granted Equitable Life's petition to compel arbitration of the cross-claims asserted by a former agent in two of the Mississippi Actions and also granted Equitable Life's motion to enjoin prosecution of those cases in state court. F-38 In October 2000, an action entitled American National Bank and Trust Company of Chicago, as trustee f/b/o Emerald Investments LP and Emerald Investments LP v. AXA Client Solutions, LLC; The Equitable Life Assurance Society of the United States; and AXA Financial, Inc. was commenced in the United States District Court for the Northern District of Illinois. The complaint alleges that the defendants (i) in connection with certain annuities issued by Equitable Life breached an agreement with the plaintiffs involving the execution of mutual fund transfers, and (ii) wrongfully withheld withdrawal charges in connection with the termination of such annuities. Plaintiffs seek substantial lost profits and injunctive relief, punitive damages and attorneys' fees. Plaintiffs also seek return of the withdrawal charges. In February 2001, the District Court granted in part and denied in part defendants' motion to dismiss the complaint. In March 2001, plaintiffs filed an amended complaint. The District Court granted defendants' motion to dismiss AXA Client Solutions and the Holding Company from the amended complaint, and dismissed the conversion claims in June 2001. The District Court denied defendants' motion to dismiss the remaining claims. Equitable Life has answered the amended complaint. While the monetary damages sought by plaintiffs, if awarded, could have a material adverse effect on the consolidated financial position and results of operations of the Company, management believes that the ultimate resolution of this litigation should not have a material adverse on the Company's consolidated financial position. After the District Court denied defendants' motion to assert certain defenses and counterclaims in American National Bank, Equitable Life commenced an action, in December 2001, entitled The Equitable Life Assurance Society of the United States v. American National Bank and Trust Company of Chicago, as trustee f/b/o Emerald Investments LP and Emerald Investments LP, in the United States District Court for the Northern District of Illinois. The complaint arises out of the same facts and circumstances as described in American National Bank. Equitable Life's complaint alleges common law fraud and equitable rescission in connection with certain annuities issued by Equitable Life. Equitable Life seeks unspecified money damages, rescission, punitive damages and attorneys' fees. In March 2002, defendants filed an answer to Equitable Life's complaint and asserted counterclaims. Defendants' counterclaims allege common law fraud, violations of the Federal and Illinois Securities Acts and violations of the Illinois and New York Consumer Fraud Acts. Defendants seek unspecified money damages, punitive damages and attorneys' fees. In May 2002, the District Court granted in part and denied in part Equitable Life's motion to dismiss defendants' counterclaims, dismissing defendants' Illinois Securities Act and New York Consumer Fraud Act claims. Equitable Life has answered defendants' remaining counterclaims. In November 1997, an amended complaint was filed in Peter Fischel, et al. v. The Equitable Life Assurance Society of the United States alleging, among other things, that Equitable Life violated ERISA by eliminating certain alternatives pursuant to which agents of Equitable Life could qualify for health care coverage. In March 1999, the United States District Court for the Northern District of California entered an order certifying a class consisting of "[a]ll current, former and retired Equitable agents, who while associated with Equitable satisfied [certain alternatives] to qualify for health coverage or contributions thereto under applicable plans." Plaintiffs allege various causes of action under ERISA, including claims for enforcement of alleged promises contained in plan documents and for enforcement of agent bulletins, breach of a unilateral contract, breach of fiduciary duty and promissory estoppel. In June 2000, plaintiffs appealed to the Court of Appeals for the Ninth Circuit contesting the District Court's award of legal fees to plaintiffs' counsel in connection with a previously settled count of the complaint unrelated to the health benefit claims. In that appeal, plaintiffs challenged the District Court's subject matter jurisdiction over the health benefit claims. In May 2001, plaintiffs filed a second amended complaint which, among other things, alleges that Equitable Life failed to comply with plan amendment procedures and deletes the promissory estoppel claim. In September 2001, Equitable Life filed a motion for summary judgment on all of plaintiffs' claims, and plaintiffs filed a motion for partial summary judgment on all claims except their claim for breach of fiduciary duty. In May 2002, the District Court issued an order granting plaintiffs' motion for partial summary judgment, granting Equitable Life's motion for summary judgment on plaintiffs' claim for breach of fiduciary duty and otherwise denying Equitable Life's motion for summary judgment. The court ruled that Equitable Life is liable to plaintiffs on their contract claims for subsidized benefits under ERISA. The court has deferred addressing the relief to which plaintiffs are entitled in light of the May 2002 order. A decision was rendered in October 2002 on the appeal by plaintiffs concerning the award of legal fees to plaintiffs' counsel for the previously settled claim not involving health benefits. The Court of Appeals denied plaintiffs' challenge to the District Court's subject matter jurisdiction over the settled claim, affirmed the method that the District Court used to calculate the award of legal fees to plaintiffs' counsel and remanded for further consideration of the fee award. F-39 A putative class action entitled Stefanie Hirt, et al. v. The Equitable Retirement Plan for Employees, Managers and Agents, et al. was filed in the District Court for the Southern District of New York in August 2001 against The Equitable Retirement Plan for Employees, Managers and Agents (the "Retirement Plan") and The Officers Committee on Benefit Plans of Equitable Life, as Plan Administrator. The action was brought by five participants in the Retirement Plan and purports to be on behalf of "all Plan participants, whether active or retired, their beneficiaries and Estates, whose accrued benefits or pension benefits are based on the Plan's Cash Balance Formula." The complaint challenges the change, effective January 1, 1989, in the pension benefit formula from a final average pay formula to a cash balance formula. Plaintiffs allege that the change to the cash balance formula violates ERISA by reducing the rate of accruals based on age, failing to comply with ERISA's notice requirements and improperly applying the formula to retroactively reduce accrued benefits. The relief sought includes a declaration that the cash balance plan violates ERISA, an order enjoining the enforcement of the cash balance formula, reformation and damages. Defendants answered the complaint in October 2001. In April 2002, plaintiffs filed a motion seeking to certify a class of "all Plan participants, whether active or retired, their beneficiaries and Estates, whose accrued benefits or pension benefits are based on the Plan's Cash Balance Formula." Also in April 2002, plaintiffs agreed to dismiss with prejudice their claim that the change to the cash balance formula violates ERISA by improperly applying the formula to retroactively reduce accrued benefits. That claim has been dismissed. The parties have agreed on class certification and in October 2002, the court accepted the recommendation of a special master to certify a plaintiff class. F-40 Three previously disclosed lawsuits, 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, Raymond Patenaude v. The Equitable Life Assurance Society of the United States, AXA Advisors, LLC and Equitable Distributors, Inc. and Siamac Sedighim v. Donaldson Lufkin & Jenrette, Inc., et al. have been dismissed with prejudice. In addition, in three previously disclosed actions, R.S.M. Inc., et al. v. Alliance Capital Management L.P., et al., In re AXA Financial, Inc. Shareholders Litigation and David Uhrik v. Credit Suisse First Boston (USA), Inc., et al., the parties have agreed to settle and the actions have been dismissed. Although the outcome of litigation generally cannot be predicted with certainty, the Company's management believes that, subject to the foregoing, (i) the settlement of the R.S.M., In re AXA Financial, Inc. Shareholders Litigation and the Uhrik litigations will not have a material adverse effect on the consolidated financial position or results of operations of the Company and (ii) the ultimate resolution of the other litigations described above should not have a material adverse effect on the consolidated financial position of the Company. The Company's management cannot make an estimate of loss, if any, or predict whether or not any of such other litigations described above will have a material adverse effect on the Company's consolidated results of operations in any particular period. In April 2001, an amended class action complaint entitled Miller, et al. v. Mitchell Hutchins Asset Management, Inc., et al. (Miller Complaint"), was filed in Federal District Court in the Southern District of Illinois against Alliance, Alliance Fund Distributors, Inc. ("AFD"), a wholly owned subsidiary of Alliance, and other defendants alleging violations of the Investment Company Act of 1940, as amended ("ICA"), and breaches of common law fiduciary duty. The allegations in the Miller Complaint concern six mutual funds with which Alliance has investment advisory agreements, including Alliance Premier Growth Fund ("Premier Growth Fund"), Alliance Health Care Fund, Alliance Growth Fund, Alliance Quasar Fund, Alliance Fund and Alliance Disciplined Value Fund. The Miller Complaint alleges principally that (i) certain advisory agreements concerning these funds were negotiated, approved, and executed in violation of the ICA, in particular because certain directors of these funds should be deemed interested under the ICA; (ii) the distribution plans for these funds were negotiated, approved, and executed in violation of the ICA; and (iii) the advisory fees and distribution fees paid to Alliance and AFD, respectively, are excessive and, therefore, constitute a breach of fiduciary duty. Plaintiffs seek a recovery of certain fees paid by these funds to Alliance. In March 2002, the court issued an order granting defendants' joint motion to dismiss the Miller Complaint. The court allowed plaintiffs up to and including April 1, 2002 to file an amended complaint comporting with its order. In April 2002, plaintiffs filed a second amended complaint. The allegations and relief sought in the second amended complaint are virtually identical to the Miller Complaint. In May 2002, defendants filed a motion to dismiss the amended complaint. Alliance and AFD believe that plaintiffs' allegations are without merit and intend to vigorously defend against these allegations. At the present time, management of Alliance and AFD are unable to estimate the impact, if any, that the outcome of this action may have on Alliance's results of operations or financial condition and the Company's management is unable to estimate the impact, if any, that the outcome of this action may have on its consolidated results of operations or financial position. In December 2001 a complaint entitled Benak v. Alliance Capital Management L.P. and Alliance Premier Growth Fund ("Benak Complaint") was filed in Federal District Court in the District of New Jersey against Alliance and Alliance Premier Growth Fund alleging violation of the ICA. The principal allegations of the Benak Complaint are that Alliance breached its duty of loyalty to Premier Growth Fund because one of the directors of the General Partner of Alliance served as a director of Enron Corp. ("Enron") when Premier Growth Fund purchased shares of Enron and as a consequence thereof, the investment advisory fees paid to Alliance by Premier Growth Fund should be returned as a means of recovering for Premier Growth Fund the losses plaintiff alleges were caused by the alleged breach of the duty of loyalty. Plaintiff seeks recovery of fees paid by Premier Growth Fund to Alliance. Subsequently, between December 2001 and July 2002, five complaints making substantially the same allegations and seeking substantially the same relief as the Benak Complaint were filed against Alliance Capital Management L.P. and Alliance Premier Growth Fund. All of those actions were consolidated in Federal District Court in the District of New Jersey. In January 2003, a consolidated amended complaint entitled Benak v. Alliance Capital Management L.P. was filed containing allegations similar to those in the individual complaints and alleging violation of the ICA. While the Consolidated Amended Complaint seeks relief similar to that requested in the individual actions, it does not name the Premier Growth Fund as a defendant. Alliance believes the plaintiffs' allegations in the Benak Consolidated Amended Complaint are without merit and intends to vigorously defend against these allegations. At the present time Alliance's management is unable to estimate the impact, if any, that the outcome of these actions may have on Alliance's results of operations or financial condition and the Company's management is unable to estimate the impact, if any, that the outcome of these actions may have on its consolidated results of operations or financial position. In April 2002, a consolidated complaint entitled In re Enron Corporation Securities Litigation ("Enron Complaint") was filed in Federal District Court in the Southern District of Texas, Houston Division, against numerous defendants, including Alliance. The principal allegations of the Enron Complaint, as they pertain to Alliance, are that Alliance violated Sections 11 and 15 of the Securities Act of 1933, as amended ("Securities Act") with respect to a registration statement filed by Enron and effective with the SEC on July 18, 2001, which was used to sell $1.9 billion Enron Corp. Zero Coupon Convertible Senior Notes due 2021. Plaintiffs allege that Frank Savage, who was at that time an employee of Alliance and who was and remains a director of the General Partner of Alliance, signed the registration statement at issue. Plaintiffs allege that the registration statement was materially misleading. Plaintiffs further allege that Alliance was a controlling person of Frank Savage. Plaintiffs therefore assert that Alliance is itself liable for the allegedly misleading registration statement. Plaintiffs seek recission or a recissionary measure of damages. The Enron Complaint specifically states that "[n]o allegations of fraud are made against or directed at" Alliance. In June 2002, Alliance moved to dismiss the complaint as the allegations therein pertain to it. That motion is pending. Alliance believes the allegations of the Enron Complaint as to it are without merit and intends to vigorously defend against these allegations. At the present time, management of Alliance is unable to estimate the impact, if any, that the outcome of this action may have on Alliance's results of operations or financial condition and the Company's management is unable to estimate the impact, if any, that the outcome of this action may have on its consolidated results of operations or financial position. In May, 2002, a complaint entitled The Florida State Board of Administration v. Alliance Capital Management L.P. (the "SBA Complaint") was filed in the Circuit Court of the Second Judicial Circuit, in and for Leon County, Florida against Alliance. The SBA Complaint alleges breach of contract relating to the Investment Management Agreement between The Florida State Board of Administration ("SBA") and Alliance, breach of the covenant of good faith and fair dealing contained in the Investment Management Agreement, breach of fiduciary duty, negligence, gross negligence and violation of the Florida Securities and Investor Protection Act, in connection with purchases and sales of Enron common stock for the SBA investment account. The SBA seeks more than $300 million in compensatory damages and an unspecified amount of punitive damages. In June 2002, Alliance moved to dismiss the SBA Complaint; in September 2002, the court denied Alliance's motion to dismiss the SBA Complaint in its entirety, and the case is currently in discovery. Alliance believes the SBA's allegations in the SBA Complaint are without merit and intends to vigorously defend against these allegations. At the present time, Alliance's management is unable to estimate the impact, if any, that the outcome of this action may have on Alliance's results of operations or financial condition and the Company's management is unable to estimate the impact, if any, that the outcome of this action may have on its consolidated results of operations or financial position. In September 2002, a complaint entitled Lawrence E. Jaffe Pension Plan, Lawrence E. Jaffe Trustee U/A 1198 v. Alliance Capital Management L.P., Alfred Harrison and Alliance Premier Growth Fund, Inc. ("Jaffe Complaint") was filed in Federal District Court in the Southern District of New York against Alliance, Alfred Harrison and Premier Growth Fund alleging violation of the ICA. The Jaffe Complaint alleges that the defendants breached their fiduciary duties of loyalty, care and good faith to Premier Growth Fund by causing Premier Growth Fund to invest in the securities of F-41 Enron and that the agreements between Premier Growth Fund and Alliance violated the ICA because all of the directors of Premier Growth Fund should be deemed interested under the ICA. Plaintiff seeks damages equal to Premier Growth Fund's losses as a result of Premier Growth Fund's investment in shares of Enron and a recovery of all fees paid to Alliance beginning November 1, 2000. In November 2002, Alliance filed a motion to transfer the Jaffe Complaint to the United States District Court for the District of New Jersey to be consolidated with the Benak v. Alliance Capital Management L.P. action already pending there. Alliance's time to move, answer or otherwise respond to the Jaffe Complaint is stayed pending a decision on the motion to transfer. Alliance and Alfred Harrison believe that plaintiff's allegations in the Jaffe Complaint are without merit and intend to vigorously defend against these allegations. At the present time, management of Alliance is unable to estimate the impact, if any, that the outcome of this action may have on its results of operations or financial condition and the Company's management is unable to estimate the impact, if any, that the outcome of this action may have on its consolidated results of operations or financial position. In December 2002, a complaint entitled Patrick J. Goggins et al. v. Alliance Capital Management L.P. et al. ("Goggins Complaint") was filed in Federal District Court in the Southern District of New York against Alliance, Premier Growth Fund and individual directors and certain officers of the Fund. The Goggins Complaint alleges that defendants violated the Securities Act of 1933 because Premier Growth Fund's registration statements and prospectuses allegedly were materially misleading, contained untrue statements of material fact and omitted material facts in describing the strategic objectives and investment strategies of Premier Growth Fund in relation to Premier Growth Fund's investments, including Premier Growth Fund's investments in Enron Corp. securities. Plaintiffs seek rescissory relief or an unspecified amount of compensatory damages. Alliance's time to move, answer or otherwise respond to the Goggins Complaint is currently stayed. Alliance, Premier Growth Fund and the other defendants believe the plaintiffs' allegations in the Goggins Complaint are without merit and intend to vigorously defend against these allegations. At the present time, management of Alliance is unable to estimate the impact, if any, that the outcome of this action may have on Alliance's results of operations or financial condition and the Company's management is unable to estimate the impact, if any, that the outcome of this action may have on its consolidated results of operations or financial position. In addition to the matters previously reported and those described above, the Holding Company 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. However, it should be noted that the frequency of large damage awards, including large punitive damage awards that bear little or no relation to actual economic damages incurred by plaintiffs in some jurisdictions, continues to create the potential for an unpredictable judgment in any given matter. Accordingly, the Company's management cannot make an estimate of loss, if any, or predict whether or not any given matter will have a material adverse effect the Company's consolidated results of operations in any particular period. 17) LEASES The Company has entered into operating leases for office space and certain other assets, principally information technology equipment and office furniture and equipment. Future minimum payments under noncancelable operating leases for 2003 and the four successive years are $123.6 million, $127.9 million, $117.5 million, $99.9 million, $91.8 million and $848.4 million thereafter. Minimum future sublease rental income on these noncancelable operating leases for 2003 and the four successive years is $5.6 million, $5.6 million, $5.4 million, $2.2 million, $2.2 million and $18.1 million thereafter. At December 31, 2002, the minimum future rental income on noncancelable operating leases for wholly owned investments in real estate for 2003 and the four successive years is $81.7 million, $78.8 million, $75.9 million, $75.2 million, $67.6 million and $535.8 million thereafter. The Company has entered into capital leases for certain information technology equipment. Future minimum payments under noncancelable capital leases for 2003 and the two successive years are $4.4 million, $2.8 million, and $.9 million. F-42 18) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION Equitable Life is restricted as to the amounts it may pay as dividends to the Holding Company. Under the New York Insurance Law, a domestic life insurer may, without prior approval of the Superintendent, pay a dividend to its shareholders not exceeding an amount calculated based on a statutory formula. This formula would permit Equitable Life to pay shareholder dividends not greater than $408.9 million during 2003. Payment of dividends exceeding this amount requires the insurer to file notice of its intent to declare such dividends with the Superintendent who then has 30 days to disapprove the distribution. For 2002, 2001 and 2000, the Insurance Group statutory net income totaled $451.6 million, $547.7 million and $1,068.6 million, respectively. Statutory surplus, capital stock and Asset Valuation Reserve ("AVR") totaled $4,281.0 million and $6,100.4 million at December 31, 2002 and 2001, respectively. In 2002, 2001 and 2000, respectively, $500.0 million, $1.7 billion and $250.0 million in shareholder dividends were paid by Equitable Life. At December 31, 2002, the Insurance Group, in accordance with various government and state regulations, had $23.3 million of securities deposited with such government or state agencies. In 1998, the NAIC approved a codification of statutory accounting practices ("Codification"), which provides regulators and insurers with uniform statutory guidance, addresses areas where statutory accounting previously was silent and changes certain existing statutory positions. Equitable Life and Equitable of Colorado became subject to Codification rules for all state filings upon adoption of Codification by the respective states. On December 27, 2000, an emergency rule was issued by the New York Insurance Department (NYID), which adopted Codification in New York effective on January 1, 2001 except where the guidance conflicted with New York Law. Differences in the New York regulation adopted in 2000 from Codification were in accounting for deferred taxes and goodwill, which are required to be disclosed in the notes to the Annual Statement, as well as the Annual Audited Report. On September 24, 2002 the bill authorizing the admissibility of deferred taxes by New York insurers was signed into law and was effective as of January 1, 2002. The impact of adopting the accounting for deferred taxes at January 1,2002 was a $363.6 million decrease to surplus. The implementation of Codification in 2001 resulted in a $1,630.9 million increase to surplus and capital stock, principally due to the $1,660.8 million valuation adjustment related to Alliance. The application of the Codification rules as adopted by the State of Colorado had no significant effect on Equitable Life or EOC. At December 31, 2002 and for the year then ended, there were no differences in net income and capital and surplus resulting from practices prescribed and permitted by the State of New York and those prescribed in the January 1, 2001 NAIC Accounting Practices and Procedures manual. Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ in certain instances from GAAP. The differences between statutory surplus and capital stock determined in accordance with Statutory Accounting Principles ("SAP") and total shareholders' equity under GAAP are primarily: (a) the inclusion in SAP of an AVR intended to stabilize surplus from fluctuations in the value of the investment portfolio; (b) future policy benefits and policyholders' account balances under SAP differ from GAAP due to differences between actuarial assumptions and reserving methodologies; (c) certain policy acquisition costs are expensed under SAP but deferred under GAAP and amortized over future periods to achieve a matching of revenues and expenses; (d) under SAP, Federal income taxes are provided on the basis of amounts currently payable with provisions made for deferred amounts that reverse within one year while under GAAP, deferred taxes are recorded for temporary differences between the financial statements and tax basis of assets and liabilities where the probability of realization is reasonably assured (e) the valuation of assets under SAP and GAAP differ due to different investment valuation and depreciation methodologies, as well as the deferral of interest-related realized capital gains and losses on fixed income investments; (f) the valuation of the investment in Alliance and Alliance Holding under SAP reflects a portion of the market value appreciation rather than the equity in the underlying net assets as required under GAAP; (g) the provision for future losses of the discontinued Wind-Up Annuities business is only required under GAAP; (h) reporting the surplus notes as a component of surplus in SAP but as a liability in GAAP; (i) computer software development costs are capitalized under GAAP but expensed under SAP; and (j) certain assets, primarily pre-paid assets, are not admissible under SAP but are admissible under GAAP. F-43 The following reconciles the Insurance Group's statutory change in surplus and capital stock and statutory surplus and capital stock determined in accordance with accounting practices prescribed by the NYID with net earnings and equity on a GAAP basis.
2002 2001 2000 ----------------- ---------------- ----------------- (IN MILLIONS) Net change in statutory surplus and capital stock.................................... $ (1,354.7) $ 104.1 $ 1,321.4 Change in AVR...................................... (464.7) (230.2) (665.5) ----------------- ---------------- ----------------- Net change in statutory surplus, capital stock and AVR.......................................... (1,819.4) (126.1) 655.9 Adjustments: Future policy benefits and policyholders' account balances............................... 255.2 270.8 254.5 DAC.............................................. 458.1 458.5 469.1 Deferred Federal income taxes.................... (634.6) (354.8) (127.3) Valuation of investments......................... (74.8) 67.9 (134.8) Valuation of investment subsidiary............... 1,399.4 (1,507.9) (29.2) Change in fair value of guaranteed minimum income benefit reinsurance contracts........... 120.0 - - Shareholder dividends paid...................... 500.0 1,700.0 250.0 Changes in non-admitted assets................... 384.2 138.3 73.8 Stock option expense related to AXA's minority interest acquisition........................... - - (493.9) Other, net....................................... (23.7) 5.4 383.1 GAAP adjustments for Discontinued Operations..................................... 23.0 (5.1) 54.3 ----------------- ---------------- ----------------- Net Earnings of the Insurance Group................ $ 587.4 $ 647.0 $ 1,355.5 ================= ================ ================= DECEMBER 31, --------------------------------------------------------- 2002 2001 2000 ----------------- ---------------- ------------------ (IN MILLIONS) Statutory surplus and capital stock................ $ 4,091.3 $ 5,446.0 $ 5,341.9 AVR................................................ 189.7 654.4 884.6 ----------------- ---------------- ------------------ Statutory surplus, capital stock and AVR........... 4,281.0 6,100.4 6,226.5 Adjustments: Future policy benefits and policyholders' account balances............................... (1,237.6) (1,492.8) (1,763.6) DAC.............................................. 5,801.0 5,513.7 5,128.8 Deferred Federal income taxes.................... (1,835.8) (1,252.2) (640.7) Valuation of investments......................... 1,629.6 635.9 140.2 Valuation of investment subsidiary............... (1,191.4) (2,590.8) (1,082.9) Change in fair value of guaranteed minimum income benefit reinsurance contracts........... 120.0 - - Non-admitted assets.............................. 1,162.3 778.1 639.8 Issuance of surplus notes........................ (599.6) (539.4) (539.1) Other, net....................................... 157.2 536.6 500.6 GAAP adjustments for Discontinued Operations..................................... (108.7) (123.8) (164.3) ----------------- ---------------- ------------------ Equity of the Insurance Group...................... $ 8,178.0 $ 7,565.7 $ 8,445.3 ================= ================ ==================
F-44 19) BUSINESS SEGMENT INFORMATION The Company's operations consist of Insurance and Investment Services. The Company's management evaluates the performance of each of these segments independently and allocates resources based on current and future requirements of each segment. The Insurance segment offers a variety of traditional, variable and interest-sensitive life insurance products, disability income, annuity products, mutual fund and other investment products to individuals and small groups. It also administers traditional participating group annuity contracts with conversion features, generally for corporate qualified pension plans, and association plans which provide full service retirement programs for individuals affiliated with professional and trade associations. This segment includes Separate Accounts for individual insurance and annuity products. The Investment Services segment principally includes Alliance. Alliance provides diversified investment management and related services globally to a broad range of clients including: (a) institutional clients, including pension funds, endowments and domestic and foreign financial institutions, (b) private clients, including high net worth individuals, trusts and estates and charitable foundations, (c) individual investors, principally through a broad line of mutual funds, and (d) institutional investors by means of in-depth research, portfolio strategy and other services. This segment also includes institutional Separate Accounts that provide various investment options for large group pension clients, primarily defined benefit and contribution plans, through pooled or single group accounts. Intersegment investment advisory and other fees of approximately $102.2 million, $116.6 million and $153.2 million for 2002, 2001 and 2000, respectively, are included in total revenues of the Investment Services segment. The following tables reconcile segment revenues and earnings from continuing operations before Federal income taxes to total revenues and earnings as reported on the consolidated statements of earnings and segment assets to total assets on the consolidated balance sheets, respectively.
2002 2001 2000 ----------------- ---------------- ------------------ (IN MILLIONS) SEGMENT REVENUES: Insurance............................................ $ 4,673.4 $ 4,763.3 $ 4,681.9 Investment Services.................................. 2,744.9 2,994.4 4,672.5 Consolidation/elimination............................ (71.3) (90.0) (113.2) ----------------- ---------------- ------------------ Total Revenues....................................... $ 7,347.0 $ 7,667.7 $ 9,241.2 ================= ================ ================== SEGMENT EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE FEDERAL INCOME TAXES AND MINORITY INTEREST: Insurance............................................ $ 437.9 $ 707.5 $ (192.5) Investment Services.................................. 590.7 585.4 2,778.0 ----------------- ---------------- ------------------ Total Earnings from Continuing Operations before Federal Income Taxes and Minority Interest............................. $ 1,028.6 $ 1,292.9 $ 2,585.5 ================= ================ ================== 2002 2001 2000 ----------------- ---------------- ------------------ (IN MILLIONS) ASSETS: Insurance............................................ $ 80,638.7 $ 84,572.2 $ 88,641.1 Investment Services.................................. 14,160.3 15,808.8 16,807.2 Consolidation/elimination............................ 27.3 (94.4) (57.1) ----------------- ---------------- ------------------ Total Assets......................................... $ 94,826.3 $ 100,286.6 $ 105,391.2 ================= ================ ==================
F-45 20) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The quarterly results of operations for 2002 and 2001 are summarized below:
THREE MONTHS ENDED ------------------------------------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ----------------- ----------------- ------------------ ------------------ (IN MILLIONS) 2002 ---- Total Revenues................ $ 1,883.9 $ 2,072.1 $ 1,860.9 $ 1,530.1 ================= ================= ================== ================== Earnings (Loss) from Continuing Operations....... $ 162.6 $ 206.7 $ 266.9 $ (21.3) ================= ================= ================== ================== Net Earnings (Loss)........... $ 130.4 $ 205.3 $ 286.3 $ (34.6) ================= ================= ================== ================== 2001 ---- Total Revenues................ $ 2,023.1 $ 1,898.6 $ 1,804.8 $ 1,941.2 ================= ================= ================== ================== Earnings from Continuing Operations.................. $ 227.1 $ 120.3 $ 119.2 $ 140.0 ================= ================= ================== ================== Net Earnings.................. $ 233.6 $ 118.5 $ 118.7 $ 176.2 ================= ================= ================== ==================
The quarterly results of operations for the first three quarters of 2002 have been restated to reflect the accounting change adopted in the fourth quarter of 2002 as of January 1, 2002 for liabilities associated with variable annuity contracts that contain GMDB and GMIB features, as follows:
THREE MONTHS ENDED ------------------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 ----------------- ---------------- ---------------------- (IN MILLIONS) Earnings from continuing operations, as previously reported.......................... $ 160.5 $ 286.6 $ 345.7 Adjustment to reflect adoption of accounting change as of January 1, 2002.................... 2.1 (79.9) (78.8) ----------------- ---------------- ---------------------- Earnings from Continuing Operations, as Restated......................... $ 162.6 $ 206.7 $ 266.9 ================= ================ ====================== Net earnings, as previously reported............... $ 161.5 $ 285.2 $ 365.1 Adjustment to reflect adoption of accounting change as of January 1, 2002.................... (31.1) (79.9) (78.8) ----------------- ---------------- ---------------------- Net Earnings, as Restated.......................... $ 130.4 $ 205.3 $ 286.3 ================= ================ ======================
F-46 21) ACCOUNTING FOR STOCK-BASED COMPENSATION The Holding Company sponsors a stock incentive plan for employees of Equitable Life. Alliance sponsors its own stock option plans for certain employees. The Company has elected to continue to account for stock-based compensation using the intrinsic value method prescribed in APB No. 25. Stock-based employee compensation expense is not reflected in the statement of earnings as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. The following table illustrates the effect on net income had compensation expense as related to options awarded under the Company's Stock Incentive Plans been determined based on SFAS No. 123's fair value based method, including the cost of the amendments and modifications made in connection with AXA's acquisition of the minority interest in the Holding Company:
2002 2001 2000 ----------------- ---------------- ------------------- (IN MILLIONS) Net income, as reported............................ $ 587.4 $ 647.0 $ 1,355.5 Add: Compensation charge resulting from AXA's acquisition of minority interest included in net earnings........................ - - 306.4 Less: Total stock-based employee compensation expense determined under fair value method for all awards, net of Federal income tax benefit (36.0) (22.2) (34.6) ----------------- ---------------- ------------------- Pro Forma Net Earnings............................. $ 551.4 $ 624.8 $ 1,627.3 ================= ================ ===================
In conjunction with approval of the agreement for AXA's acquisition of the minority interest in the Holding Company's Common Stock, generally all outstanding options awarded under the 1997 and 1991 Stock Incentive Plans were amended to become immediately and fully exercisable pursuant to their terms upon expiration of the initial tender offer. In addition, the agreement provided that at the effective time of the merger, the terms of all outstanding options granted under those Plans would be further amended and converted into options of equivalent intrinsic value to acquire a number of AXA ordinary shares in the form of ADRs. Also pursuant to the agreement, holders of non-qualified options were provided with an alternative to elect cancellation of those options at the effective time of the merger in exchange for a cash payment from the Holding Company. For the year ended December 31, 2000, the Company recognized compensation expense of $493.9 million, representing the cost of these Plan amendments and modifications offset by an addition to capital in excess of par value. Beginning in 2001, under the 1997 Stock Incentive Plan, the Holding Company can issue options to purchase AXA ADRs. The options, which include Incentive Stock Options and Nonstatutory Stock Options, are issued at the fair market value of the AXA ADRs on the date of grant. Generally, one-third of stock options granted vest and become exercisable on each of the first three anniversaries of the date such options were granted. Options are currently exercisable up to 10 years from the date of grant. Following completion of the merger of AXA Merger Corp. with and into the Holding Company, certain employees exchanged AXA ADR options for tandem Stock Appreciation Rights ("SARs") and at-the-money AXA ADR options of equivalent intrinsic value. The maximum obligation for the SARs is $73.3 million, based upon the underlying price of AXA ADRs at January 2, 2001, the closing date of the aforementioned merger. The Company recorded a (reduction) increase in the SARs liability of $(10.2) million and $(63.2) million for 2002 and 2001, respectively, reflecting the variable accounting for the SARs, based on the change in the market value of AXA ADRs for the respective periods ended December 31, 2002 and 2001. F-47 The Black-Scholes option pricing model was used in determining the fair values of option awards used in the pro-forma disclosures above. The option pricing assumptions for 2002, 2001 and 2000 follow:
HOLDING COMPANY ALLIANCE ----------------------------------------- ------------------------------- 2002 (1) 2001 (1) 2000 2002 2001 2000 ------------- ------------- ------------ -------------------- ---------- Dividend yield.... 2.54% 1.52% 0.32% 5.80% 5.80% 7.20% Expected volatility...... 46% 29% 28% 32% 33% 30% Risk-free interest rate............ 4.04% 4.98% 6.24% 4.2% 4.5% 5.90% Expected life in years........ 5 5 5 7.0 7.2 7.4 Weighted average fair value per option at grant-date...... $6.30 $9.42 $11.08 $5.89 $9.23 $8.32
(1) Beginning in 2001, the option pricing assumptions reflect options granted by the Holding Company representing rights to acquire AXA ADRs. A summary of the activity in the option shares of the Holding Company and Alliance's option plans follows, including information about options outstanding and exercisable at December 31, 2002. Outstanding options at January 2, 2001 to acquire AXA ADRs reflect the conversion of 11.5 million share options of the Holding Company that remained outstanding following the above-described cash settlement made pursuant to the agreement for AXA's acquisition of the minority interest in the Holding Company's Common Stock. All information presented below as related to options to acquire AXA ADRs gives appropriate effect to AXA's May 2001 four-for-one stock split and the related changes in ADR parity for each Holding Company share option:
HOLDING COMPANY ALLIANCE ------------------------------------ --------------------------------- COMMON STOCK WEIGHTED WEIGHTED AND AVERAGE AVERAGE AXA ADRS EXERCISE UNITS EXERCISE (IN MILLIONS) PRICE (IN MILLIONS) PRICE ------------------------------------ --------------- ----------------- Holding Company Option Shares: Balance at December 31, 1999..... 22.7 $24.60 12.5 $17.95 Granted........................ 6.5 $31.06 4.7 $50.93 Exercised...................... (4.5) $18.57 (1.7) $10.90 Forfeited...................... (1.2) $26.15 (.1) $26.62 ---------- ------------ ---------- --------- Balance at December 31, 2000..... 23.5 $27.20 15.4 $28.73 ========== ============ AXA ADR Option Shares: Balance at January 2, 2001 18.3 $21.65 Granted........................ 17.0 $31.55 2.5 $50.34 Exercised...................... (2.2) $11.57 (1.7) $13.45 Forfeited...................... (3.1) $32.02 (.3) $34.33 ---------- ------------ ---------- --------- Balance at December 31, 2001..... 30.0 $31.55 15.9 $33.58 Granted........................ 6.7 $17.24 2.4 $39.32 Exercised...................... (.2) $10.70 (1.4) $14.83 Forfeited...................... (1.2) $27.12 (.5) $42.99 ---------- ------------ ---------- --------- Balance at December 31, 2002 35.3 $25.14 16.4 $34.91 ========== ============ ========== =========
F-48 Information about options outstanding and exercisable at December 31, 2002 follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------- ------------------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE EXERCISE OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE PRICES (IN MILLIONS) LIFE (YEARS) PRICE (IN MILLIONS) PRICE --------------------------------------- ---------------- --------------- ------------------ ---------------- AXA ADRs ---------------------- $ 6.325 - $ 9.01 1.8 1.26 $6.76 1.8 $6.76 $10.195 - $14.73 3.3 6.41 $13.13 2.4 $13.28 $15.995 - $22.84 10.3 7.82 $18.47 4.7 $18.80 $26.095 - $33.025 14.9 5.60 $30.93 8.5 $31.76 $36.031 5.0 6.48 $36.03 5.0 $36.03 ----------------- ------------------ $ 6.325 - $36.031 35.3 6.22 $25.14 22.4 $26.00 ================= ================== Alliance ---------------------- $ 8.81 - $18.47 3.5 3.43 $13.21 3.5 $13.21 $ 22.50 - $30.25 3.8 6.34 $27.87 2.6 $27.60 $ 30.94 - $48.50 4.9 8.68 $41.01 1.0 $48.46 $ 50.15 - $50.56 2.3 8.92 $50.25 .5 $50.25 $ 51.10 - $58.50 1.9 7.95 $53.78 .7 $53.77 ----------------- ------------------ $ 8.81 - $58.50 16.4 6.98 $34.91 8.3 $27.72 ================= ==================
The Company's ownership interest in Alliance will continue to be reduced upon the exercise of unit options granted to certain Alliance employees. Options are exercisable over a period of up to ten years. In 1997, Alliance Holding established a long-term incentive compensation plan under which grants are made to key employees for terms established by Alliance Holding at the time of grant. These awards include options, restricted Alliance Holding units and phantom restricted Alliance Holding units, performance awards, other Alliance Holding unit based awards, or any combination thereof. At December 31, 2002, approximately 14.4 million Alliance Holding units of a maximum 40.0 million units were subject to options granted and 80,433 Alliance Holding units were subject to awards made under this plan. 22) RELATED PARTY TRANSACTIONS Beginning January 1, 2000, the Company reimburses the Holding Company for expenses relating to the Excess Retirement Plan, Supplemental Executive Retirement Plan and certain other employee benefit plans that provide participants with medical, life insurance, and deferred compensation benefits. Such reimbursement was based on the cost to the Holding Company of the benefits provided which totaled $39.7 million and $19.1 million, respectively, for 2002 and 2001. The Company paid $596.6 million and $590.5 million, respectively, of commissions and fees to AXA Distribution and its subsidiaries for sales of insurance products for 2002 and 2001. The Company charged AXA Distribution's subsidiaries $411.9 million and $522.6 million, respectively, for their applicable share of operating expenses for 2002 and 2001, pursuant to the Agreements for Services. In September 2001, Equitable Life loaned $400.0 million to AXA Insurance Holding Co. Ltd., a subsidiary of AXA. This investment has an interest rate of 5.89% and matures on June 15, 2007. All payments, including interest payable semi-annually, are guaranteed by AXA. Both Equitable Life and Alliance, along with other AXA affiliates, participate in certain intercompany cost sharing and service agreements which include technology and professional development arrangements. Payments by Equitable Life and Alliance to AXA under such agreements totaled approximately $17.9 million and $13.7 million in 2002 and 2001, respectively. Payments by AXA and AXA affiliates to Equitable Life under such agreements totaled $17.6 million and $9.9 million in 2002 and 2001, respectively. F-49 Commissions, fees and other income includes certain revenues for services provided to mutual funds managed by Alliance described below:
2002 2001 2000 ----------------- ---------------- ------------------ (IN MILLIONS) Investment advisory and services fees.............. $ 950.1 $ 1,089.7 $ 1,021.8 Distribution revenues.............................. 467.5 544.6 621.6 Shareholder servicing fees......................... 89.7 87.2 85.6 Other revenues..................................... 10.2 11.0 11.6 Brokerage.......................................... 7.0 5.7 1.0
23) PRO FORMA FINANCIAL INFORMATION (UNAUDITED) Assuming the Bernstein acquisition had occurred on January 1, 2000, revenues for the Company would have been $8.79 billion for 2000 on a pro forma basis. The impact of the acquisition on net earnings on a pro-forma basis would not have been material. This pro forma financial information does not necessarily reflect the results of operations that would have resulted had the Bernstein acquisition actually occurred on January 1, 2000, nor is the pro forma financial information necessarily indicative of the results of operations that may be achieved for any future period. F-50 Supplement dated May 1, 2003 to Prospectus dated May 1, 2003 ------------------------------------------------------------------------ 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, 2003 for the appropriate Members Retirement Program. ------------------------------------------------------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS: ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------------------------------------------------ RETIREMENT BENEFITS When you become eligible to receive benefits under a Members Retirement Program, you may select one or more of the following forms of distribution, which are available in variable or fixed form. The law requires that if the value of your Account Balance is more than $5,000, you must receive a Qualified Joint and Survivor Annuity unless your Spouse consents to a different election. Life Annuity - annuity providing monthly payments for your life. No payments will be made after your death, even if you have received only one payment. Life Annuity Period Certain - an annuity providing monthly payments for your life or, if longer, a specified period of time. If you die before the end of that specified period, payments will continue to your beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years; the longer the specified period, the smaller the monthly payments will be. Joint and Survivor Annuity - Period Certain - an annuity providing monthly payments for your life and that of your beneficiary or, if longer, a specified period of time. If you and your beneficiary both die before the end of the specified period, payments will continue to your contingent beneficiary until the end of the period. Subject to legal limitations, you may specify a minimum payment period of 5, 10, 15 or 20 years; the longer the specified period, the smaller the monthly payments will be. How Annuity Payments are Made When your distribution of benefits under an annuity begins, your Units in the Funds are redeemed. Part or all of the proceeds, plus part or all of your Account Balance in the General Account Options, may be used to purchase an annuity. The minimum amount that can be used to purchase any type of annuity is $5,000. Usually, a $350 charge will be deducted from the amount used to purchase the annuity to reimburse us for administrative expenses associated with processing the application and with issuing each month's annuity payment. Applicable premium taxes will also be deducted. Annuity payments may be fixed or variable. FIXED ANNUITY PAYMENTS. Fixed annuity payments are determined from our annuity rate tables in effect at the time the first annuity payment is made. The minimum amount of the fixed payments is determined from tables in our contract with the Trustees, which show the amount of proceeds necessary to purchase each $1 of monthly annuity payments (after deduction of any applicable taxes and the annuity administrative charge). These tables are designed to determine the amounts required to pay for the annuity selected, taking into account our administrative and investment expenses and mortality and expense risks. The size of your payment will depend upon the form of annuity chosen, your age and the 2 age of your beneficiary if you select a joint and survivor annuity. If our current group annuity rates for payment of proceeds would produce a larger payment, those rates will apply instead of the minimums in the contract tables. If we give any group pension client with a qualified plan a better annuity rate than those currently available for the Program, we will also make those rates available to Program participants. The annuity administrative charge may be greater than $350 in that case. Under our contract with the Trustees, we may change the tables but not more frequently than once every five years. Fixed annuity payments will not fluctuate during the payment period. VARIABLE ANNUITY PAYMENTS. Variable annuity payments are funded through our Separate Account No. 4 (Pooled) (the "Fund"), through the purchase of Annuity Units. The number of Annuity Units purchased is equal to the amount of the first annuity payment divided by the Annuity Unit Value for the due date of the first annuity payment. The amount of the first annuity payment is determined in the same manner for a variable annuity as it is for a fixed annuity. The number of Annuity Units stays the same throughout the payment period for the variable annuity but the Annuity Unit Value changes to reflect the investment income and the realized and unrealized capital gains and losses of the Fund, after adjustment for an assumed base rate of return of 5-3/4%, described below. The amounts of variable annuity payments are determined as follows: Payments normally start as of the first day of the second calendar month following our receipt of the proper forms. The first two monthly payments are the same. Payments after the first two will vary according to the investment performance of the Fund. Each monthly payment will be calculated by multiplying the number of Annuity Units credited to you by the Annuity Unit Value for the first business day of the calendar month before the due date of the payment. The Annuity Unit Value was set at $1.1553 as of July 1, 1969, the first day that Separate Account No. 4 (Pooled) was operational. For any month after that date, it is the Annuity Unit Value for the preceding month multiplied by the change factor for the current month. The change factor gives effect to the assumed annual base rate of return of 4-3/4% and to the actual investment experience of the Fund. Because of the adjustment for the assumed base rate of return, the Annuity Unit Value rises and falls depending on whether the actual rate of investment return is higher or lower than 5-3/4%. Illustration of Changes in Annuity Payments. To show how we determine variable annuity payments from month to month, assume that the amount you applied to purchase an annuity is enough to fund an annuity with a monthly payment of $363 and that the Annuity Unit Value for the due date of the first annuity payment is $1.05. The number of annuity units credited under your certificate would be 345.71 (363 divided by 1.05 = 345.71). If the 3 third monthly payment is due on March 1, and the Annuity Unit Value for February was $1.10, the annuity payment for March would be the number of units (345.71) times the Annuity Unit Value ($1.10), or $380.28. If the Annuity Unit Value was $1.00 on March 1, the annuity payment for April would be 345.71 times $1.00 or $345.71. Summary of Annuity Unit Values for the Fund This table shows the Annuity Unit Values with an assumed based rate of return of 5 3/4%. First Business Day of Annuity Unit Value --------------------- ------------------ October 1987 $4.3934 October 1988 $3.5444 October 1989 $4.8357 October 1990 $3.8569 October 1991 $5.4677 October 1992 $5.1818 October 1993 $6.3886 October 1994 $6.1563 October 1995 $7.4970 October 1996 $8.0828 October 1997 $11.0300 October 1998 $7.5963 October 1999 $9.8568 October 2000 $10.6810 October 2001 $7.3761 October 2002 $5.3455 THE FUND The Fund (Separate Account No. 4 (Pooled)) was established pursuant to the Insurance law of the State of New York in 1969. It is an investment account used to fund benefits under group annuity contracts and other agreements for tax-deferred retirement programs administered by us. For a full description of the Fund, its investment policies, the risks of an investment in the Fund and information relating to the valuation of Fund assets, see the description of the Fund in our May 1, 2003 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, 2003 prospectus and Statement of Additional Information. 4 We are a New York stock life insurance company with our Home Office at 1290 Avenue of the Americas, New York, New York 10104. Founded in 1859, we are one of the largest insurance companies in the United States. Equitable Life, our sole stockholder AXA Financial, Inc., and their subsidiaries managed assets of approximately $415.31 billion as of December 31, 2002, including third party assets of $337.98 billion. Investment Management In providing investment management to the Fund, we currently use the personnel and facilities of our majority owned subsidiary, Alliance Capital Management L.P. ("Alliance"), for portfolio selection and transaction services. For a description of Alliance, see our May 1, 2003 Members Retirement Program prospectuses. Fund Transactions The Fund is charged for securities brokers commissions, transfer taxes and other fees relating to securities transactions. Transactions in equity securities for the Fund are executed primarily through brokers which are selected by Alliance/Equitable Life and receive commissions paid by the Fund. For 2002, 2001, and 2000, the Fund paid $1,298,849, $3,576,437 and $2,218,019 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, 2003 Statement of Additional Information. 5 FINANCIAL STATEMENTS The financial statements of the Fund reflect applicable fees, charges and other expenses under the Members Retirement Programs as in effect during the periods covered, as well as the charges against the account made in accordance with the terms of all other contracts participating in the account. Separate Account No. 4 (Pooled): Page Report of Independent Accountants - PricewaterhouseCoopers LLP 7 Statement of Assets and Liabilities December 31, 2002 8 Statement of Operations for the Year Ended December 31, 2002 9 Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 10 Portfolio of Investments December 31, 2002 11 Notes to Financial Statements 13 6 -------------------------------------------------------------------------------- Report of Independent Accountants -------------------------------------------------------------------------------- To the Board of Directors of The Equitable Life Assurance Society of the United States and the Contractowners of Separate Account No. 4 of The Equitable Life Assurance Society of the United States In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of Separate Account No. 4 (Pooled) (The Growth Equity Fund) of The Equitable Life Assurance Society of the United States ("Equitable Life") at December 31, 2002, the results of its operations for the year then ended and the changes in its net assets for each of the two years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Equitable Life's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP New York, New York February 4, 2003 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, 2002 -------------------------------------------------------------------------------- ASSETS: Investments (Notes 2 and 3): Common stocks -- at value (cost: $602,141,625)...................... $537,846,233 Dividends receivable ................................................ 245,669 ------------------------------------------------------------------------------------- Total assets ........................................................ 538,091,902 ------------------------------------------------------------------------------------- LIABILITIES: Due to Equitable Life's General Account ............................. 1,744,363 Due to custodian .................................................... 315,299 Accrued expenses .................................................... 508,549 ------------------------------------------------------------------------------------- Total liabilities ................................................... 2,568,211 ------------------------------------------------------------------------------------- NET ASSETS .......................................................... $535,523,691 ===================================================================================== Amount retained by Equitable Life in Separate Account No. 4 ......... $ 796,040 Net assets attributable to contract owners .......................... 504,873,167 Net assets allocated to contracts in payout period .................. 29,854,484 ------------------------------------------------------------------------------------- NET ASSETS .......................................................... $535,523,691 =====================================================================================
UNITS OUTSTANDING UNIT VALUES ------------------- -------------- Institutional ............................... 62,507 $ 4,632.41 RIA ......................................... 50,765 $ 443.82 Momentum Strategy ........................... 5,109 $ 58.87 MRP ......................................... 153,769 $ 186.97 ADA ......................................... 817,420 $ 223.76 EPP ......................................... 25,041 $ 453.49
The accompanying notes are an integral part of these financial statements. 8 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statement of Operations YEAR ENDED DECEMBER 31, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 2): Dividends (net of foreign taxes withheld of $19,868)................... $ 2,706,153 Interest .............................................................. 101,870 ----------------------------------------------------------------------------------------- Total investment income ............................................... 2,808,023 ----------------------------------------------------------------------------------------- EXPENSES (NOTE 4): Investment management fees ............................................ (1,268,638) Operating and expense charges ......................................... (2,242,171) ----------------------------------------------------------------------------------------- Total expenses ........................................................ (3,510,809) ----------------------------------------------------------------------------------------- Net investment loss ................................................... (702,786) ----------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2): Realized loss from security and foreign currency transactions ......... (232,393,293) ----------------------------------------------------------------------------------------- Change in unrealized appreciation/depreciation of investments ......... (71,538) Net realized and unrealized loss on investments ....................... (232,464,831) ----------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS ATTRIBUTABLE TO OPERATIONS ................. $ (233,167,617) =========================================================================================
The accompanying notes are an integral part of these financial statements. 9 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Statements of Changes in Net Assets --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2002 2001 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment loss .......................................................... $ (702,786) $ (170,724) Net realized loss on investments and foreign currency transactions ........... (232,393,293) (84,356,380) Change in unrealized appreciation/depreciation of investments ................ (71,538) (130,820,535) -------------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to operations ........................ (233,167,617) (215,347,639) -------------------------------------------------------------------------------------------------------------------- FROM CONTRIBUTIONS AND WITHDRAWALS: Contributions ................................................................ 115,415,532 218,850,121 Withdrawals .................................................................. (240,773,263) (325,968,603) Asset management fees ........................................................ (1,363,796) (1,984,030) Administrative fees .......................................................... (629,647) (963,019) -------------------------------------------------------------------------------------------------------------------- Net decrease in net assets attributable to contributions and withdrawals ..... (127,351,174) (110,065,531) -------------------------------------------------------------------------------------------------------------------- Net increase in net assets attributable to Equitable Life's transactions ..... 19,350 37,948 -------------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS ....................................................... (360,499,441) (325,375,222) NET ASSETS -- BEGINNING OF YEAR .............................................. 896,023,132 1,221,398,354 -------------------------------------------------------------------------------------------------------------------- NET ASSETS -- END OF YEAR .................................................... $ 535,523,691 $ 896,023,132 ====================================================================================================================
The accompanying notes are an integral part of these financial statements. 10 SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 2002 -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 2) -------------------------------------------------------------------------------- COMMON STOCKS: AEROSPACE & DEFENSE DEFENSE ELECTRONICS (0.4%) L-3 Communications Holdings, Inc.* ........................... 46,100 $ 2,070,351 ------------ CAPITAL GOODS ENGINEERING & CONSTRUCTION (1.7%) Jacobs Engineering Group, Inc.* 248,500 8,846,600 ------------ MACHINERY (1.0%) ITT Industries, Inc. ......................... 94,900 5,759,481 ------------ TOTAL CAPITAL GOODS (2.7%).................... 14,606,081 ------------ CONSUMER MANUFACTURING BUILDING & RELATED (4.1%) American Standard Companies, Inc.* .......................... 151,150 10,752,811 Centex Corp. ................................. 106,000 5,321,200 D. R. Horton, Inc. ........................... 165,100 2,864,485 NVR, Inc.* ................................... 9,000 2,929,500 ------------ 21,867,996 ------------ MISCELLANEOUS (2.1%) Newell Rubbermaid, Inc. ...................... 374,500 11,358,585 ------------ TOTAL CONSUMER MANUFACTURING (6.2%) ...................... 33,226,581 ------------ CONSUMER SERVICES AIRLINES (2.0%) Southwest Airlines Co. ....................... 763,200 10,608,480 ------------ BROADCASTING & CABLE (6.8%) Comcast Corp. SPL (Class A)* ................. 813,300 18,372,447 Cox Communications, Inc. (Class A)* ................................ 157,200 4,464,480 Viacom, Inc. (Class B)* ...................... 331,490 13,511,532 ------------ 36,348,459 ------------ ENTERTAINMENT & LEISURE (4.9%) Harley-Davidson, Inc. ........................ 564,700 26,089,140 ------------ RETAIL--GENERAL MERCHANDISE (7.3%) Bed Bath & Beyond, Inc.* ..................... 70,400 2,430,912 CDW Computer Centers, Inc.* .................. 342,800 15,031,780 Kohl's Corp.* ................................ 391,500 21,904,425 ------------ 39,367,117 ------------ -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 2) -------------------------------------------------------------------------------- MISCELLANEOUS (4.0%) Career Education Corp.* ...................... 352,800 $ 14,112,000 Iron Mountain, Inc.* ......................... 224,800 7,420,648 ------------ 21,532,648 ------------ TOTAL CONSUMER SERVICES (25.0%) .......................... 133,945,844 ------------ ENERGY DOMESTIC PRODUCERS (0.6%) Apache Corp.* ................................ 54,700 3,117,353 ------------ OIL SERVICE (2.1%) Baker Hughes, Inc. ........................... 178,300 5,739,477 Weatherford International, Inc.*.............. 143,100 5,713,983 ------------ 11,453,460 ------------ TOTAL ENERGY (2.7%) .......................... 14,570,813 ------------ FINANCE BANKING--MONEY CENTER (0.4%) SLM Corp. .................................... 24,300 2,523,798 ------------ BANKING--REGIONAL (2.2%) Bank One Corp. ............................... 316,400 11,564,420 ------------ BROKERAGE & MONEY MANAGEMENT (3.7%) Legg Mason, Inc. ............................. 370,600 17,988,924 Morgan Stanley Dean Witter & Co.* ............................. 40,200 1,604,784 ------------ 19,593,708 ------------ INSURANCE (6.4%) American International Group, Inc. ............................... 334,100 19,327,685 Gallagher (Arthur J.) & Co. .................. 107,400 3,155,412 Willis Group Holdings Ltd.* .................. 403,450 11,566,911 ------------ 34,050,008 ------------ MISCELLANEOUS (10.0%) AMBAC Financial Group, Inc. .................. 229,000 12,878,960 Citigroup, Inc. .............................. 720,700 25,361,433 MBNA Corp. ................................... 813,950 15,481,329 ------------ 53,721,722 ------------ TOTAL FINANCE (22.7%) ........................ 121,453,656 ------------ 11 SEPARATE ACCOUNT NO. 4 (POOLED) (THE GROWTH EQUITY FUND) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Portfolio of Investments -- December 31, 2002 (Concluded) -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 2) -------------------------------------------------------------------------------- HEALTH CARE DRUGS (3.3%) Forest Laboratories, Inc.* ...................... 132,200 $ 12,984,684 Patterson Dental Co.* ........................... 102,400 4,478,976 ------------ 17,463,660 ------------ MEDICAL PRODUCTS (4.2%) Boston Scientific Corp.* ........................ 120,600 5,127,912 St. Jude Medical, Inc.* ......................... 49,300 1,958,196 Stryker Corp. ................................... 231,900 15,565,128 ------------ 22,651,236 ------------ MEDICAL SERVICES (13.9%) AmerisourceBergen Corp. ......................... 165,450 8,985,590 Cardinal Health, Inc. ........................... 324,900 19,230,831 Express Scripts, Inc.* .......................... 344,000 16,525,760 Health Management Associates, Inc. (Class A) ............................... 1,168,600 20,917,940 Wellpoint Health Networks, Inc.* 122,100 8,688,636 ------------ 74,348,757 ------------ TOTAL HEALTH CARE (21.4%) ....................... 114,463,653 ------------ MULTI INDUSTRY COMPANIES (3.3%) Danaher Corp. ................................... 266,000 17,476,200 ------------ TECHNOLOGY COMMUNICATION EQUIPMENT (2.2%) Cisco Systems, Inc.* ............................ 550,980 7,217,838 Juniper Networks, Inc.* ......................... 698,500 4,749,800 ------------ 11,967,638 ------------ COMPUTER HARDWARE/STORAGE (1.8%) Dell Computer Corp.* ............................ 353,800 9,460,612 ------------ -------------------------------------------------------------------------------- NUMBER OF VALUE SHARES (NOTE 2) -------------------------------------------------------------------------------- COMPUTER SERVICES (3.8%) Affiliated Computer Services, Inc.* ........................................ 189,050 $ 9,953,483 Fiserv, Inc.* ................................... 314,000 10,660,300 ------------ 20,613,783 ------------ CONTRACT MANUFACTURING (1.3%) Flextronics International Ltd.* ................. 830,000 6,797,700 ------------ INTERNET INFRASTRUCTURE (2.5%) eBay, Inc.* ..................................... 195,000 13,224,900 ------------ SEMICONDUCTOR COMPONENTS (0.7%) Maxim Integrated Products, Inc. ................. 117,600 3,885,504 ------------ SOFTWARE (3.7%) Mercury Interactive Corp.* ...................... 155,150 4,600,197 Microsoft Corp.* ................................ 57,100 2,952,070 PeopleSoft, Inc.* ............................... 261,800 4,790,940 Veritas Software Corp.* ......................... 495,500 7,739,710 ------------ 20,082,917 ------------ TOTAL TECHNOLOGY (16.0%) ........................ 86,033,054 ------------ TOTAL COMMON STOCKS (100.4%) (Cost $602,141,625)........................... 537,846,233 ------------ TOTAL INVESTMENTS (100.4%) (Cost $602,141,625)........................... 537,846,233 OTHER ASSETS LESS LIABILITIES (-0.4%) .......................... (2,322,542) ------------ NET ASSETS (100.0%) ............................. $535,523,691 ============ ---------------------- * Non-income producing. The accompanying notes are an integral part of these financial statements. 12 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements -------------------------------------------------------------------------------- 1. GENERAL 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 AXA Financial, Inc., was established in conformity with the New York State Insurance Law. Pursuant to such law, to the extent provided in the contracts, the net assets in the Funds are not chargeable with liabilities arising out of any other business of Equitable Life. The excess of assets over reserves and other contract liabilities, if any, in the Separate Account No. 4 may be transferred to Equitable Life's General Account. Equitable Life's General Account is subject to creditor rights. These financial statements reflect the total net assets and results of operations for the Separate Account No. 4. The American Dental Association Members Retirement Program is one of the many products participating in this Fund. At December 31, 2002, interests of retirement and investment plans for employees, managers and agents of Equitable Life in Separate Account No. 4 aggregated $144,037,414 (26.9%) of the net assets of the Fund. Equitable Life is the investment manager for the Fund. Alliance Capital Management L.P. (Alliance) serves as the investment adviser to Equitable Life with respect to the management of the Fund. Alliance is a publicly traded limited partnership which is indirectly majority-owned by Equitable Life and AXA Financial, Inc. AXA Advisors, LLC (AXA Advisors) is an affiliate of Equitable Life, and a distributor and principal underwriter of the contracts. AXA Advisors is registered with the SEC as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. Equitable Life, Alliance and AXA Advisors seek to obtain the best price and execution of all orders placed for the portfolios of the Equitable Funds considering all circumstances. In addition to using brokers and dealers to execute portfolio security transactions for accounts under their management, Equitable Life, Alliance and AXA Advisors may also enter into other types of business and securities transactions with brokers and dealers, which will be unrelated to allocation of the Fund's portfolio transactions. The contracts are sold by financial professionals who are registered representatives of AXA Advisors and licensed insurance agents of AXA Network, LLC, its subsidiaries and AXA Network Insurance Agency of Texas, Inc. (affiliates of Equitable Life). AXA Advisors receives commissions and other service-related payments under its distribution agreement with Equitable Life and its networking agreement with AXA Network. The amount retained by Equitable Life in Separate Account No. 4 arises principally from (1) contributions from Equitable Life, (2) expense risk charges accumulated in the account, and (3) that portion, determined ratably, of the account's investment results applicable to those assets in the account in excess of the net assets for the contracts. Amounts retained by Equitable Life are not subject to charges for expense risks. 2. SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. Certain reclassifications have been made in the amounts presented for prior periods to conform these periods with the 2002 presentation. On November 21, 2000, the American Institute of Certified Public Accountants issued a revised Audit and Accounting Guide "Audits of Investment Companies," which was effective for the December 31, 2001 financial statements. In connection with the Company's implementation of the Guide for Separate Account No. 4 certain administrative and asset management fees have been reclassified from the Statement of Operations to the Statement of Changes in Net Assets, which is considered a change in application of an accounting principle. Adoption of the new requirements did not have a significant impact on the financial position or results of operations of the Fund. 13 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- Investment securities are valued as follows: Stocks listed on national securities exchanges and certain over-the-counter issues traded on the National Association of Securities Dealers, Inc. Automated Quotation (NASDAQ) national market system are valued at the last sale price, or, if there is no sale, at the latest available bid price. Foreign securities not traded directly, or in American Depository Receipt (ADR) form in the United States, are valued at the last sale price in the local currency on an exchange in the country of origin. Foreign currency is converted into its U.S. dollar equivalent at current exchange rates. Futures and forward contracts are valued at their last sale price or, if there is no sale, at the latest available bid price. United States Treasury securities and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices. Long-term (i.e., maturing in more than a year) publicly-traded corporate bonds are valued at prices obtained from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where Equitable Life and Alliance deem it appropriate to do so, an over-the-counter or exchange quotation may be used. Convertible preferred stocks listed on national securities exchanges are valued at their last sale price or, if there is no sale, at the latest available bid price. Convertible bonds and unlisted convertible preferred stocks are valued at bid prices obtained from one or more major dealers in such securities; where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stock. Other assets that do not have a readily available market price are valued at fair value as determined in good faith by Equitable Life's investment officers. Short-term debt securities which mature in 60 days or less are valued at amortized cost. Short-term debt securities which mature in more than 60 days are valued at representative quoted prices. Security transactions are recorded on the trade date. Amortized cost of debt securities, where applicable, are adjusted for amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date; interest income (including amortization of premium and discount on securities using the effective yield method) is accrued daily. Realized gains and losses on the sale of investments are computed on the basis of the identified cost of the related investments sold. Transactions denominated in foreign currencies are recorded at the rate prevailing at the date of such transactions. Asset and liability accounts that are denominated in a foreign currency are adjusted to reflect the current exchange rate at the end of the period. Transaction gains or losses resulting from changes in the exchange rate during the reporting period or upon settlement of the foreign currency transactions are reflected under "Realized and Unrealized Gain (Loss) on Investments" in the Statement of Operations. Net assets allocated to contracts in the payout period are computed according to various mortality tables, depending on the year the benefits were purchased. The tables used are the 1971 GAM table, the 1983 GAM table, and the 1994 GAR. The assumed investment returns vary by contract and range from 4 percent to 6.5 percent. The contracts are participating group annuities, and, thus, the mortality risk is borne by the contract holder, as long as the contract has not been discontinued. Equitable Life retains the ultimate obligation to pay the benefits if the contract funds become insufficient and the contractholder elects to discontinue the contract. Amounts due to/from the General Account represent receivables/payables for policy related transactions predominately related to premiums, surrenders and death benefits. 14 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- 3. INVESTMENT TRANSACTIONS For the year ended December 31, 2002, investment security transactions, excluding short-term debt securities, were as follows:
---------------------------------- ----------------- ------------------- ----------------- ------------------ PURCHASES SALES --------------------------------------- -------------------------------------- STOCKS AND DEBT U.S. GOVERNMENT STOCKS AND DEBT U.S. GOVERNMENT FUND SECURITIES AND AGENCIES SECURITIES AND AGENCIES ---------------------------------- ----------------- ------------------- ----------------- ------------------ The Growth Equity Fund ......... $274,884,716 $ -- $388,551,156 $ --
4. EXPENSES Charges and fees relating to the Funds are paid to Equitable Life and are deducted in accordance with the terms of the various contracts which participate in the Fund. Depending upon the terms of a contract, sales-related fees and operating expenses are paid (i) by a reduction of an appropriate number of Fund Units or (ii) by a direct payment. Fees with respect to the American Dental Association Members Retirement Program are as follows: Investment Management and Administration Fees (Investment Management Fees): Equitable Life receives a fee based on the value of the Growth Equity Fund at a monthly rate of 1/12 of (i) 0.29 of 1% of the first $100 million and (ii) 0.20 of 1% of the excess over $100 million of its ADA Program assets. An Administrative fee is charged at a daily rate of 0.15% of average daily net assets. Operating and Expense Charges: Program Expense Charge -- In the year prior to May 1, 2002 the expense charge was made on the combined value of all investment options maintained under the contract with Equitable Life at a monthly rate 1/12 of (i) 0.645 of 1% of the first $400 million and (ii) 0.640 of 1% of the excess over $400 million. Effective May 1, 2002 an expense charge is made on the combined value of all investment options maintained under the contract with Equitable Life at a monthly rate of 1/12 of (i) 0.655 of 1% of the first $400 million and (ii) 0.650 of 1% of the excess over $400 million. A portion of the Program Expense Charge assessed by Equitable Life is made on behalf of the ADA and is equal to a monthly rate of 1/12 for (i) 0.025 of 1% of the first $400 million and (ii) 0.020 of 1% of the excess over $400 million. The ADA's portion of the Program Expense Charge is 0.00% and 0.01% for 2002 and 2001, respectively, and may be increased for all assets value levels. Other Expenses -- In addition to the charges and fees mentioned above, the Fund is charged for certain costs and expenses directly related to its operations. These may include transfer taxes, SEC filing fees and certain related expenses including printing of SEC filings, prospectuses and reports. A record maintenance and report fee of $3 is deducted quarterly from each participant's aggregate account balance. For clients with Investment Only plans, a record maintenance fee of $1 is deducted quarterly. 5. TAXES No Federal income tax based on net income or realized and unrealized capital gains was applicable to contracts participat ing in the Fund by reason of applicable provisions of the Internal Revenue Code and no federal income tax payable by Equitable Life will affect such contracts. Accordingly, no provision for Federal income taxes is required. 15 -------------------------------------------------------------------------------- SEPARATE ACCOUNT NO. 4 (POOLED) OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Notes to Financial Statements (Concluded) -------------------------------------------------------------------------------- 6. CHANGES IN UNITS OUTSTANDING Accumulation units issued and redeemed during periods indicated were (in thousands): YEAR ENDED DECEMBER 31, ------------------------ 2002 2001 --------- --------- THE GROWTH EQUITY FUND Issued ........................................... 119 100 Redeemed ......................................... (201) (169) ---- ---- Net Decrease ..................................... (82) (69) ---- ---- 7. INVESTMENT INCOME RATIO The investment income ratio is calculated by taking the gross investment income earned divided by the average net assets of a fund during the report period. Shown below is the investment income ratio throughout the periods indicated.
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 2002 2001 2000 1999 1998 ---------- ---------- ---------- ---------- ---------- The Growth Equity Fund ......... 0.40% 0.46% 0.45% 0.54% 0.53%
8. ACCUMULATION UNIT VALUES Equitable Life issues a number of group annuity contracts that allow employer plan assets to accumulate on a tax-deferred basis. The contracts are typically designed for employers wishing to fund defined benefit, defined contribution and/or 401(k) plans. Annuity contracts available through Equitable Life are the American Dental Association Members Retirement Program ("ADA"), Retirement Investment Account ("RIA"), Momentum Strategy ("Momentum"), Members Retirement Program ("MRP") and Equi-Pen-Plus ("EPP") (collectively, the Plans). Assets of the Plans are invested in a number of investment Funds (available Funds vary by Plan). Institutional units presented on the Statement Assets and Liabilities reflect investments in the Fund by clients other than contractholders of group annuity contracts issued by Equitable Life. Institutional unit value is determined at the end of each business day. Institutional unit value reflects the investment performance of the underlying Fund for the day and charges and expenses deducted by the Fund. Contract unit values (ADA, RIA, MRP, Momentum and EPP) reflect the same investment results as the Institutional unit value presented on the Statement of Assets and Liabilities. In addition, contract unit values reflect certain investment management and accounting fees, which vary by contract. These fees are charged as a percentage of net assets and are disclosed below for ADA contracts in percentage terms. Shown below is accumulation unit value information for the American Dental Association Members Retirement Program units outstanding of Separate Account 4. Expense as a percentage of average net assets excludes charges made directly to contractholder accounts through redemption of units.
YEAR ENDED DECEMBER 31, -------------------------- 2002 2001 ------------ ------------ THE GROWTH EQUITY FUND ADA, 1.12% Unit Value, end of period .................................. $ 223.76 $ 310.23 Net Assets (000's) ......................................... $182,907 $278,803 Number of units outstanding, end of period (000's) ......... 817 899 Total Return ............................................... ( 27.87)% ( 18.85)%
16 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, 2002 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Notes to Financial Statements 2. Separate Account No. 197: -Report of Independant Accountants -Statement of Assets and Liabilities, December 31, 2002 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Notes to Financial Statements 3. Separate Account No. 198: -Report of Independant Accountants -Statement of Assets and Liabilities, December 31, 2002 -Statements of Operations and Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Notes to Financial Statements 4. The Equitable Life Assurance Society of the United States: -Report of Independent Accountants - Pricewaterhouse LLP -Consolidated Balance Sheets, December 31, 2002 and 2001 -Consolidated Statements of Earnings for the Years Ended December 31, 2002, 2001 and 2000 -Consolidated Statements of Equity for Years Ended December 31, 2002, 2001 and 2000 -Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000 -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, 2002 -Statements of Operations for the Year Ended December 31, 2002 -Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2002 C-1 6. Lifecycle Group Trust - Moderate: -Report of Independent Accountants - Lifecycle Group Trust - Moderate -Statements of Assets and Liabilities, December 31, 2002 -Statements of Operations for the Year Ended December 31, 2002 -Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2002 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, 2002 -Combined Statements of Operations for the Years Ended December 31, 2002 and 2001 -Combined Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 Schedule of Investments, December 31, 2002 8. Russell 2000 Fund: -Report of Independent Accountants - Russell 2000 Fund -Statements of Assets and Liabilities, December 31, 2002 -Statements of Operations for the Year Ended December 31, 2002 -Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2002 9. Daily EAFE Fund: -Report of Independent Accountants - Daily EAFE Fund -Statements of Assets and Liabilities, December 31, 2002 -Statements of Operations for the Year Ended December 31, 2002 -Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2002 10. Daily Government/Corporate Bond Fund: -Report of Independent Accountants - Daily Government/Corporate Bond Fund -Statements of Assets and Liabilities, December 31, 2002 -Statements of Operations for the Year Ended December 31, 2002 -Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2002 C-2 11. Short Term Investment Fund: -Report of Independent Accountants - Short Term Investment Fund -Statements of Assets and Liabilities, December 31, 2002 -Statements of Operations for the Year Ended December 31, 2002 -Statements of Changes in Net Assets for the Years Ended December 31, 2002 and 2001 -Selected Per Unit Data -Notes to Financial Statements -Schedule of Investments, December 31, 2002 (b) Exhibits. The following Exhibits are filed herewith: 1.(a) Resolutions of the Board of Directors of The Equitable Life Assurance Society of the United States ("Equitable") authorizing the establishment of Separate Accounts Nos. 197 and 198, incorporated by reference to Registration Statement No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (b) Action by Brian S. O'Neil, Executive Vice President and Chief Investment Officer of Equitable, dated October, 1993 establishing Separate Account No. 195 and copies of resolutions of the Board of Directors of Equitable referenced in said action, incorporated by reference to Registration Statement No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. 2. Not applicable. 3. (a)(1)Service Agreement, effective as of February 1, 1994, among The Seven Seas Series Fund, Russell Fund Distributors, Inc. in its capacity as distributor of the Seven Seas Series Fund and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No.33-75614 on Form N-4 of Registrant, filed on February 23, 1994. (a)(2)Service Agreement, effective as of February 1, 1994, between State Street Bank and Trust Company and The Equitable Life Assurance Society of The United States, incorporated by reference to Registration No.33-75614 on Form N-4 of Registrant, filed on February 23, 1994. (b) Letter Agreement between The Equitable Life Assurance Society of the United States and the Trustees of the American Dental Association Members Retirement Trust and Trustees of the American Dental Association Members Pooled Trust for Retirement, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 29, 1994. (c) Letter Agreement between The Equitable Life Assurance Society of the United States and the Trustees of the American Dental Association Members Retirement Trust and Trustees of the American Dental Association Members Pooled Trust for Retirement, incorporated by reference to C-3 Registration No. 33-75616 on Form N-4 of Registrant, filed on April 28, 1995. (d) Form of Agreement, effective as of May 1, 1995, between State Street Bank and Trust Company and The Equitable Life Assurance Society of the United States regarding Lifecycle Fund Group Trusts and Underlying Funds, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 28, 1995. 4. (a) Exhibit 6(a)(2) (Group Annuity Contract AC 2100, as amended and restated effective February 1, 1991 on contract Form No. APC 1,000-91, among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement 33-40162, filed on December 20, 1991. (b) Rider No. 1 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-46995 on Form N-3 of Registrant, filed on April 8, 1992. (c) Form of Rider No. 2 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-46995 on Form N-3 of Registrant, filed on April 8, 1992. (d) Rider No. 3 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States incorporated by reference to Exhibit No. 4(i) to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 29, 1994. (e) Form of Rider No. 4 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 29, 1994. (f) Form of Rider No. 5 to Group Annuity Contract AC 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by C-4 reference to Registration No. 33-75616 on Form N-4 of Registrat, filed on February 27, 1995. (g) Form of Rider No. 6 to Group Annuity Contract 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Post-Effective Amendment No. 3 to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 30, 1996. (h) Form of Rider No. 7 to Group Annuity Contract 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Post-Effective Amendment No. 3 to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 30, 1996. (i) Form of Rider No. 8 to Group Annuity Contract 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Post-Effective Amendment No. 3 to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 30, 1996. (j) Form of Rider No. 9 to Group Annuity Contract 2100 among the Trustees of the American Dental Association Members Retirement Trust, the American Dental Association Members Pooled Trust for Retirement Plans and The Equitable Life Assurance Society of the United States, incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement No. 33-75616 on Form N-4, filed on April 30, 1997. 5. (a) Exhibit 7(a) (Form of Participation Agreement for the standardized Profit-Sharing Plan under the ADA Program), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed on April l6, 1986. (b) Exhibit 7(b) (Form of Participation Agreement for the non-standardized Profit-Sharing Plan under the ADA Program), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed on April l6, 1986. (c) Exhibit 7(e) (Copy of Attachment to Profit Sharing Participation Agreement under the American Dental Association Members Retirement Plan), incorporated by reference to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1988. (d) Exhibit 7(e)(2) (Form of Participant Enrollment Form under the ADA Program), incorporated by reference to Post-Effective Amendment No. 2 on Form N-3 to Registration C-5 Statement on Form S-1 of Registrant, filed on April 2l, l987. (e) Exhibit 7(v) (Form of Simplified Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. (f) Exhibit 7(w) (Form of Non-Standardized Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. (g) Exhibit 7(x) (Form of Standardized Participation Agreement for the Profit-Sharing Plan under the ADA Program, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. 6. (a) Copy of the Restated Charter of The Equitable Life Assurance Society of the United States, as amended January 1, 1997, incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement No. 33-75616, filed on April 29, 1997. (b) By-Laws of The Equitable Life Assurance Society of the United States, as amended November 21, 1996, incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement No. 33-75616, filed on April 29, 1997. 7. Not applicable 8. (a) Exhibit 11(a)(2) (Form of American Dental Association Members Retirement Plan, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. C-6 (b) Exhibit 11(g)(2) (Form of American Dental Association Members Retirement Trust, as filed with the Internal Revenue Service), incorporated by reference to Post-Effective Amendment No. 2 to Registration No. 33-21417 on Form N-3 of Registrant, filed on April 26, 1989. (c) Exhibit 11(i) (Form of First Amendment to the American Dental Association Members Retirement Trust), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant, filed on December 20, 1991. (d) Exhibit 11(g) (Copy of Administration Services Agreement, dated January 10, 1986, among The Equitable Life Assurance Society of the United States, the Trustees of the Trust maintained under the American Dental Association Members Retirement Plan, the Trustees of the Pooled Trust maintained by the American Dental Association and the Council of Insurance of the American Dental Association), incorporated by reference to Post-Effective Amendment No. 1 on Form N-3 to Registration Statement on Form S-1 of Registrant, filed on April l6, 1986. (e) Exhibit 11(j) (Copy of American Dental Association Members Pooled Trust for Retirement Plans, dated as of January 1, 1984), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant on Form N-3 of Registrant, filed on December 20, 1991. (f) Exhibit 11(k) (Form of First Amendment to the American Dental Association Members Pooled Trust for Retirement Plans, dated as of January 1, 1984), incorporated by reference to Post-Effective Amendment No. 1 to Registration No. 33-40162 on Form N-3 of Registrant, filed on December 20, 1991. (g) Administrative Services Agreement among The Equitable Life Assurance Society of the United States, the Trustees of the American Dental Association Members Retirement Trust and of the American Dental Association Member Retirement Trust for Retirement Plans and the Council on Insurance of the American Dental Association, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on April 29, 1994. (h) Declaration of Trust dated February 21, 1991 for the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (i) First Amendment to the Declaration of Trust dated as of July 19, 1991, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. C-7 (j) Fund Declaration of State Street Bank and Trust Company establishing the Lifecycle Fund Group Trust-Conservative dated February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (j)(j) Second Amended and restated Declaration of Trust of the State Street Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, dated as of March 13, 1997 filed with this Registration Statement No. 333-35596 on April 30, 2001. (k) First Amendment and Fund Declaration for the Lifecycle Group Trust-Conservative, effective April 26, 1995, incorporated by reference to Registration No. 33-75616, filed on April 28, 1995. (l) Fund Declaration of State Street Bank and Trust Company establishing the Lifecycle Fund Group Trust-Moderate dated February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (m) First Amendment and Fund Declaration for the Lifecycle Fund Group Trust-Moderate, effective April 26, 1995, incorporated by reference to Registration No. 33-75616, filed on April 28, 1995. (n) Amendment and Fund Declaration for the S&P 500 Flagship Fund effective September 1, 1991, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (n)(n) Amendment and Fund Declaration for S&P 500 Flagship Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (o) Amendment and Fund Declaration for the Short Term Investment Fund effective September 1, 1991, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (o)(o) Second Amendment and Fund Declaration for Short Term Investment Fund, effective November 1, 1998, filed with this Registration Statement No. 333-35596 on April 30, 2001. (p) Fund Declaration for the Daily EAFE Fund effective September 16, 1993, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (p)(p) Amendment and Fund Declaration for the Daily EAFE Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (q) First Amendment and Fund Declaration for the Daily Government/Corporate Bond Fund effective November 30, 1994, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (q)(q) Amendment and Fund Declaration for the Government Corporate Bond Fund, effective September 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (r) Second Amendment and Fund Declaration for the Russell 2000 Fund effective February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (r)(r) Amendment and Fund Declaration for the Russell 2000 Index Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (s) Fund Declaration for the Russell 2000 Growth Fund effective February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (s)(s) Amendment and Fund Declaration for the Russell 2000 Growth Index Securities Lending Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. (t) Fund Declaration for the Russell 2000 Value Fund effective February 1, 1995, incorporated by reference to Registration No. 33-75616 on Form N-4 of Registrant, filed on February 27, 1995. (t)(t) Amendment and Fund Declaration for the Russell 2000 Value Index Securities Lending Fund, effective January 1, 2000, filed with this Registration Statement No. 333-35596 on April 30, 2001. C-8 9. (a) Opinion and Consent of Peter A. Weinberg, Vice President and Counsel and The Equitable Life Assurance Society, incorporated by reference to Pre-Effective Amendment No. 1 to Registration No. 33-75616 of Registrant, filed on April 29, 1994. (b) Opinion and Consent of Mary P. Breen, Vice President and Associate General Counsel of The Equitable Life Assurance Society of the United States, incorporated herein by reference to Registration Statement File No. 333-51031 filed April 24, 1998. (c) Opinion and Consent of Mary Joan Hoene, Vice President and Counsel of the Equitable Life Assurance Society of the United States, incorporated herein by reference to Exhibit No. 9(c) to Registration Statement No. 333-77113, filed on April 26, 1999. (d) Opinion and Consent of Robin Wagner, Vice President and Counsel of the Equitable Life Assurance Society of the United States previously filed with this Registration Statement, File No. 333-35596, on April 26, 2000. (e) Opinion and Consent of Robin Wagner, Vice President and Counsel of the Equitable Life Assurance Society of the United States previously filed with this Registration Statement, File No. 333-86572, on April 18, 2002. Opinion and Consent of Robin Wagner, Vice President and Counsel of the Equitable Life Assurance Society of the United States. 10. (a) Consent of Peter A. Weinberg (included within Exhibit 9(a) above). (b) Consent of Mary P. Breen (included within Exhibit 9(b) above). (b)(i)Consent of Mary Joan Hoene (included within Exhibit 9(c)). (b)(ii)Consent of Robin Wagner (included within Exhibit 9(d) above). (c) Consent of Robin Wagner (included within Exhibit 9(e). (d) Consent of PricewaterhouseCoopers LLP. (e) Powers of Attorney (Equitable). Previously filed with this Registration Statement, File No. 333-35596, on April 26, 2000. (f) Powers of Attorney (State Street). Previously filed with this Registration Statement, File No. 333-86572, on April 18, 2002. (g) Power of Attorney incorporated herein by reference to Exhibit No. 27(n) (iii) Registration File No. 333-103199, filed on April 4, 2003. 11. Not applicable. 12. Not applicable. 13. Not applicable. 14. Not Applicable. C-9 Item 25. Directors and Officers of Equitable. Set forth below is information regarding the directors and principal officers of Equitable. Equitable's address is 1290 Avenue of Americas, New York, New York 10104. The business address of the persons whose names are preceded by an asterisk is that of Equitable. POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE ---------------- --------- DIRECTORS Bruce W. Calvert Director Alliance Capital Management Corporation 1345 Avenue of the Americas New York, NY 10105 Francoise Colloc'h Director AXA 25, Avenue Matignon 75008 Paris, France Claus-Michael Dill Director AXA Konzern AG Gereonsdriesch 9-11 50670 Cologne, Germany Henri de Castries Director AXA 25, Avenue Matignon 75008 Paris, France Joseph L. Dionne Director 198 North Wilton Rd. New Canaan, CT 06840 Denis Duverne Director AXA 25, Avenue Matignon 75008 Paris, France Jean-Rene Fourtou Director VIVENDI UNIVERSAL and 42, avenue de Friedland 75008 Paris France John C. Graves Director Graves Ventures, LLC 130 Fifth Avenue New York, NY 10011 C-10 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE ---------------- --------- Donald J. Greene Director LeBouef, Lamb, Greene & MacRae 125 West 55th Street New York, NY 10019-4513 Mary R. (Nina) Henderson Director 425 East 86th Street Apt 12-C New York, NY 10028 W. Edwin Jarmain Director Jarmain Group Inc. 77 King Street West Toronto, M5K 1K2 Canada James F. Higgins Director Morgan Stanley Harborside Financial Center Plaza Two, Second Floor Jersey City, NJ 07311 Christina Johnson Director Saks Fifth Avenue Enterprises 12 East 49th Street New York, NY 10017 Scott D. Miller Director Hyatt Hotels Corporation 200 West Madison Street Chicago, IL 60606 C-11 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE ---------------- --------- Joseph H. Moglia Director Ameritrade Holding Corporation 4211 South 102nd Street Omaha, NE 68127 Peter J. Tobin Director St. John's University 8000 Utopia Parkway Jamaica, NY 11439 OFFICER-DIRECTORS ----------------- *Christopher M. Condron Chairman of the Board, President, Chief Executive Officer and Director *Stanley B. Tulin Vice Chairman of the Board, Chief Financial Officer and Director OTHER OFFICERS -------------- *Leon Billis Executive Vice President and AXA Group Deputy Chief Information Officer *Harvey Blitz Senior Vice President *Kevin R. Byrne Senior Vice President and Treasurer *Selig Ehrlich Executive Vice President and Chief Actuary *Stuart L. Faust Senior Vice President and Deputy General Counsel *Alvin H. Fenichel Senior Vice President and Controller *Jennifer Blevins Executive Vice President *MaryBeth Farrell Executive Vice President *John M. Lefferts Executive Vice President and President of Retail Distribution *Deanna M. Mulligan Executive Vice President *Jerald E. Hampton Executive Vice President C-12 POSITIONS AND NAME AND PRINCIPAL OFFICES WITH BUSINESS ADDRESS EQUITABLE ---------------- --------- *Paul J. Flora Senior Vice President and Auditor *James D. Goodwin Senior Vice President *Edward J. Hayes Senior Vice President *Donald R. Kaplan Senior Vice President, Chief Compliance Officer and Associate General Counsel *William I. Levine Executive Vice President and Chief Information Officer *Richard J. Matteis Executive Vice President *Peter D. Noris Executive Vice President and Chief Investment Officer *Anthony C. Pasquale Senior Vice President *Pauline Sherman Senior Vice President, Secretary and Associate General Counsel *Richard V. Silver Executive Vice President and General Counsel *Naomi J. Weinstein Vice President *Charles A. Marino Senior Vice President and Actuary C-13 Item 26. Persons Controlled by or Under Common Control with the Insurance Company or Registrant: Separate Account Nos. 195, 197 and 198 of The Equitable Life Assurance Society of the United States (the "Separate Accounts") are separate accounts of Equitable. Equitable, a New York stock life insurance company, is a wholly owned subsidiary of AXA Financial, Inc. (the "Holding Company") (formerly the Equitable Companies, Incorporated). AXA owns 100% of the Holding Company's outstanding common stock. AXA is able to exercise significant influence over the operations and capital structure of the Holding Company and its subsidiaries, including Equitable Life. AXA, a French company, is the holding company for an international group of insurance and related financial services companies. C-14 AXA GROUP CONSOLIDATED COMPANIES AS AT JUNE 30, 2000
ACTIVITY COUNTRY CONSOLIDATED COMPANY SHAREHOLDERS OWNERSHIP FINANCIAL SERVICES AUSTRALIA NATIONAL MUTUAL FUND MANAGEMENT AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 & REAL ESTATE FINANCIAL SERVICES BELGIUM AXA INVESTMENT MANAGERS BRUSSELS AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES BELGIUM AXA BANK BELGIUM AXA HOLDINGS BELGIUM 100.00 & REAL ESTATE FINANCIAL SERVICES BELGIUM IPPA VASTGOED AXA HOLDINGS BELGIUM 100.00 & REAL ESTATE FINANCIAL SERVICES BELGIUM ROYALE BELGE INVESTISSEMENT AXA ROYALE BELGE NON VIE 33.03 & REAL ESTATE FINANCIAL SERVICES BELGIUM ROYALE BELGE INVESTISSEMENT AXA ROYALE BELGE 66.97 & REAL ESTATE FINANCIAL SERVICES BELGIUM AXA REAL ESTATE INVESTMENT MANAGERS AXA BANK BELGIUM 0.10 & REAL ESTATE BENELUX FINANCIAL SERVICES BELGIUM AXA REAL ESTATE INVESTMENT MANAGERS AXA REAL ESTATE INVESTMENT MANAGERS SA 99.90 & REAL ESTATE BENELUX FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA ROYALE BELGE NON VIE 1.75 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA ROYALE BELGE 2.15 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA 47.31 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA CORPORATE SOLUTIONS 0.75 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA ASSURANCES IARD 14.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA KONZERN AG 6.84 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS DIRECT ASSURANCES IARD 0.19 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA LEVEN NV 1.95 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS NATIONAL MUTUAL FUND MANAGEMENT 3.77 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA UK PLC 17.05 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS AXA COURTAGE IARD 0.84 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA FRANCE FINANCE AXA CONSEIL VIE 50.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA FRANCE FINANCE AXA ASSURANCES VIE 50.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA GESTION FCP AXA INVESTMENT MANAGERS PARIS 99.99 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS PRIVATE EQUITY AXA INVESTMENT MANAGERS PRIVATE EQUITY 100.00 & REAL ESTATE EUROPE SA FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS PRIVATE EQUITY AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA MULTI MANAGER FRANCE AXA INVESTMENT MANAGERS 0.01 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA MULTI MANAGER FRANCE AXA MULTIMANAGER LIMITED 99.93 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS PARIS AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA CREDIT COMPAGNIE FINANCIERE DE PARIS 65.00 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES AXA ASSURANCES IARD 21.19 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES SOCIETE BEAUJON 0.92 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES COMPAGNIE FINANCIERE DE PARIS 51.07 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES JOUR FINANCE 20.63 & REAL ESTATE FINANCIAL SERVICES FRANCE COLISEE SURESNES AXA COURTAGE IARD 2.53 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA BANQUE COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE BANQUE DE MARCHES ET D'ARBITRAGE AXA 19.51 & REAL ESTATE FINANCIAL SERVICES FRANCE BANQUE DE MARCHES ET D'ARBITRAGE AXA COURTAGE IARD 8.20 & REAL ESTATE FINANCIAL SERVICES FRANCE COMPAGNIE FINANCIERE DE PARIS AXA 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE CFP - CREDIT COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA ASSET MANAGEMENT CONSULTANT AXA INVESTMENT MANAGERS 99.95 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA GESTION INTERESSEMENT AXA INVESTMENT MANAGERS PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE BANQUE DES TUILERIES COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS FUNDS AXA INVESTMENT MANAGERS 98.84 & REAL ESTATE MANAGEMENT FINANCIAL SERVICES FRANCE AXA INVESTMENT MANAGERS FUNDS AXA INVESTMENT MANAGERS PARIS 1.16 & REAL ESTATE MANAGEMENT FINANCIAL SERVICES FRANCE AXA ASSET MANAGEMENT PRIVATE EQUITY AXA INVESTMENT MANAGERS PRIVATE 50.48 & REAL ESTATE EQUITY EUROPE SA FINANCIAL SERVICES FRANCE AXA REAL ESTATE MANAGEMENT INVESTMENT AXA REAL ESTATE INVESTMENT MANAGERS SA 99.96 & REAL ESTATE MANAGERS FINANCIAL SERVICES FRANCE AXA REAL ESTATE INVESTMENT MANAGERS SA AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE SOFAPI COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE HOLDING SOFFIM COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES FRANCE SOFINAD COMPAGNIE FINANCIERE DE PARIS 100.00 & REAL ESTATE FINANCIAL SERVICES GERMANY AXA ASSET MANAGEMENT DEUTSCHLAND AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE GMBH FINANCIAL SERVICES GERMANY AXA INVESTMENT MANAGERS DEUTSCHLAND AXA INVESTMENT MANAGERS 85.00 & REAL ESTATE GMBH FINANCIAL SERVICES GERMANY AXA TRUST GMBH SUN LIFE DEUTSCHLAND LIMITED 100.00 & REAL ESTATE FINANCIAL SERVICES GERMANY AXA VORSORGEBANK AXA KONZERN AG 100.00 & REAL ESTATE FINANCIAL SERVICES GERMANY AXA REAL ESTATE MANAGEMENT AXA VERSICHERUNG 14.00 & REAL ESTATE DEUTSCHLAND FINANCIAL SERVICES GERMANY AXA REAL ESTATE MANAGEMENT AXA REAL ESTATE INVESTMENT MANAGERS SA 86.00 & REAL ESTATE DEUTSCHLAND FINANCIAL SERVICES GERMANY AXA BAUSPARKASSE AG AXA KONZERN AG 66.67 & REAL ESTATE FINANCIAL SERVICES GERMANY AXA BAUSPARKASSE AG AXA LEBEN 33.01 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA ASSET MANAGEMENT LTD AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA INVESTMENT MANAGERS GS AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA INVESTMENT MANAGERS LIMITED AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA MULTIMANAGER LIMITED AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA REAL ESTATE INVESTMENT AXA REAL ESTATE INVESTMENT MANAGERS SA 100.00 & REAL ESTATE MANAGERS LTD FINANCIAL SERVICES GREAT BRITAIN AXA INVESTMENT MANAGERS UK AXA INVESTMENT MANAGERS 66.67 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN AXA INVESTMENT MANAGERS UK AXA ASSET MANAGEMENT LTD 33.33 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN SUN LIFE DEUTSCHLAND LIMITED AXA ASSET MANAGEMENT LTD 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN SUN LIFE GLOBAL MANAGEMENT LIMITED AXA ASSET MANAGEMENT LTD 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN SUN LIFE GLOBAL SERVICES LIMITED AXA ASSET MANAGEMENT LTD 100.00 & REAL ESTATE FINANCIAL SERVICES GREAT BRITAIN SUN LIFE MANAGEMENT LIMITED SUN LIFE GLOBAL MANAGEMENT LIMITED 100.00 & REAL ESTATE ISLE OF MAN FINANCIAL SERVICES HONG KONG AXA INVESTMENT MANAGERS HK SAR AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES HONG KONG AXA INVESTMENT MANAGERS HONG KONG AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES HUNGARY AXA BIZTOSITO PENSION FUND AXA KONZERN AG (Austria) 100.00 & REAL ESTATE FINANCIAL SERVICES ITALY AXA INVESTMENT MANAGERS ITALIA AXA INVESTMENT MANAGERS 99.00 & REAL ESTATE FINANCIAL SERVICES ITALY AXA INVESTMENT MANAGERS ITALIA AXA ASSICURAZIONI 1.00 & REAL ESTATE FINANCIAL SERVICES ITALY AXA REAL ESTATE INVESTMENT MANAGERS AXA REAL ESTATE INVESTMENT MANAGERS SA 100.00 & REAL ESTATE ITALIA FINANCIAL SERVICES JAPAN AXA INVESTMENT MANAGERS TOKYO AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES SPAIN AXA REAL ESTATE INVESTMENT MANAGERS AXA REAL ESTATE INVESTMENT MANAGERS SA 100.00 & REAL ESTATE IBERICA FINANCIAL SERVICES THE NETHERLANDS AXA INVESTMENT MANAGERS DEN HAAG AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA GLOBAL STRUCTURED PRODUCT AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS HOLDINGS INC. AXA INVESTMENT MANAGERS 100.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS NEW YORK AXA INVESTMENT MANAGERS ROSE 100.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS PRIVATE AXA INVESTMENT MANAGERS PRIVATE EQUITY 100.00 & REAL ESTATE EQUITY F FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS ROSE AXA INVESTMENT MANAGERS 90.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA INVESTMENT MANAGERS ROSE AXA INVESTMENT MANAGERS HOLDING INC. 10.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES AXA ROSENBERG LLC AXA INVESTMENT MANAGERS ROSE 50.00 & REAL ESTATE FINANCIAL SERVICES UNITED STATES ALLIANCE CAPITAL MANAGEMENT CORP. THE EQUITABLE LIFE ASSURANCE SOCIETY 74.91 & REAL ESTATE FINANCIAL SERVICES UNITED STATES ALLIANCE CAPITAL MANAGEMENT CORP. AXA FINANCIAL INC. 25.09 & REAL ESTATE HOLDINGS & MISC. AUSTRALIA AXA ASIA PACIFIC HOLDINGS LIMITED AXA EQUITY & LAW LIFE ASSURANCE SOCIETY 8.90 BUSINESSES HOLDINGS & MISC. AUSTRALIA AXA ASIA PACIFIC HOLDINGS LIMITED AXA 42.10 BUSINESSES HOLDINGS & MISC. AUSTRIA AXA KONZERN AG (Austria) AXA LEBEN 10.05 BUSINESSES HOLDINGS & MISC. AUSTRIA AXA KONZERN AG (Austria) AXA VERSICHERUNG 89.95 BUSINESSES HOLDINGS & MISC. BELGIUM ROYALE BELGE INTERNATIONAL ROYALE BELGE INVESTISSEMENT 100.00 BUSINESSES HOLDINGS & MISC. BELGIUM AXA HOLDINGS BELGIUM AXA CORPORATE SOLUTION ASSURANCE 6.21 BUSINESSES HOLDINGS & MISC. BELGIUM AXA HOLDINGS BELGIUM AXA 84.28 BUSINESSES HOLDINGS & MISC. BELGIUM AXA HOLDINGS BELGIUM AXA COURTAGE IARD 5.41 BUSINESSES HOLDINGS & MISC. BELGIUM AXA HOLDINGS BELGIUM VINCI BV 4.07 BUSINESSES HOLDINGS & MISC. FRANCE AXA CHINA AXA CHINA REGION LIMITED 49.00 BUSINESSES HOLDINGS & MISC. FRANCE AXA CHINA AXA 51.00 BUSINESSES HOLDINGS & MISC. FRANCE AXA PARTICIPATION II AXA 100.00 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA INVESTMENT MANAGERS 2.33 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA INSURANCE HOLDING JAPAN 4.21 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA ROYALE BELGE NON VIE 3.45 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA ROYALE BELGE 4.24 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA 20.17 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA CORPORATE SOLUTIONS 3.27 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA KONZERN AG 14.28 BUSINESSES HOLDINGS & MISC. FRANCE AXA TECHNOLOGY SERVICES AXA FRANCE ASSURANCE 20.03 BUSINESSES HOLDINGS & MISC. FRANCE SOCIETE BEAUJON AXA 99.77 BUSINESSES HOLDINGS & MISC. FRANCE SOCIETE BEAUJON AXA ASSURANCES IARD 0.22 BUSINESSES HOLDINGS & MISC. FRANCE COLISEE EXCELLENCE AXA PARTICIPATION II 100.00 BUSINESSES HOLDINGS & MISC. FRANCE JOUR FINANCE AXA CONSEIL VIE 60.47 BUSINESSES HOLDINGS & MISC. FRANCE JOUR FINANCE AXA ASSURANCES IARD 39.53 BUSINESSES HOLDINGS & MISC. FRANCE MOFIPAR AXA 100.00 BUSINESSES HOLDINGS & MISC. FRANCE AXA FRANCE ASSURANCE AXA 100.00 BUSINESSES HOLDINGS & MISC. GERMANY AXA KONZERN AG AXA 25.49 BUSINESSES HOLDINGS & MISC. GERMANY AXA KONZERN AG KOLNISCHE VERWALTUNGS 25.63 BUSINESSES HOLDINGS & MISC. GERMANY AXA KONZERN AG VINCI BV 39.73 BUSINESSES HOLDINGS & MISC. GERMANY GRE CONTINENTAL EUROPE HOLDING GMBH AXA KONZERN AG 100.00 BUSINESSES HOLDINGS & MISC. GERMANY KOLNISCHE VERWALTUNGS AXA 8.83 BUSINESSES HOLDINGS & MISC. GERMANY KOLNISCHE VERWALTUNGS AXA KONZERN AG 23.02 BUSINESSES HOLDINGS & MISC. GERMANY KOLNISCHE VERWALTUNGS VINCI BV 67.72 BUSINESSES HOLDINGS & MISC. GREAT BRITAIN AXA EQUITY & LAW PLC AXA 99.94 BUSINESSES HOLDINGS & MISC. GREAT BRITAIN GUARDIAN ROYAL EXCHANGE PLC AXA UK PLC 100.00 BUSINESSES HOLDINGS & MISC. GREAT BRITAIN AXA UK PLC AXA EQUITY & LAW PLC 21.70 BUSINESSES HOLDINGS & MISC. GREAT BRITAIN AXA UK PLC AXA 78.30 BUSINESSES HOLDINGS & MISC. ITALY AXA ITALIA S.P.A AXA CONSEIL VIE 1.76 BUSINESSES HOLDINGS & MISC. ITALY AXA ITALIA S.P.A AXA 98.24 BUSINESSES HOLDINGS & MISC. JAPAN AXA INSURANCE HOLDING JAPAN AXA 96.42 BUSINESSES
ACTIVITY COUNTRY CONSOLIDATED COMPANY SHAREHOLDERS OWNERSHIP HOLDINGS & MISC. LUXEMBOURG AXA LUXEMBOURG SA AXA HOLDINGS BELGIUM 100.00 BUSINESSES HOLDINGS & MISC. MOROCCO AXA ONA AXA 51.00 BUSINESSES HOLDINGS & MISC. SINGAPORE AXA INSURANCE INVESTMENT HOLDING AXA 100.00 BUSINESSES HOLDINGS & MISC. SPAIN AXA AURORA AXA 100.00 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS GELDERLAND AXA HOLDINGS BELGIUM 100.00 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV AXA ROYALE BELGE NON VIE 17.29 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV AXA ROYALE BELGE 21.24 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV GELDERLAND 38.94 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV ROYALE BELGE INTERNATIONAL 12.77 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA NEDERLAND BV AXA HOLDINGS BELGIUM 4.11 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS AXA VERZEKERINGEN AXA NEDERLAND BV 100.00 BUSINESSES HOLDINGS & MISC. THE NETHERLANDS VINCI BV AXA 100.00 BUSINESSES HOLDINGS & MISC. TURKEY AXA OYAK HOLDING AS AXA 50.00 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. AXA EQUITY & LAW LIFE ASSURANCE SOCIETY 4.09 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. AXA 92.48 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. AXA CORPORATE SOLUTIONS 2.95 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. SOCIETE BEAUJON 0.44 BUSINESSES HOLDINGS & MISC. UNITED STATES AXA FINANCIAL INC. AXA CORPORATE SOLUTIONS REINSURANCE CY 0.03 BUSINESSES INSURANCE & REINSURANCE AUSTRALIA AUSTRALIAN CASUALTY INSURANCE AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 PTY LTD INSURANCE & REINSURANCE AUSTRALIA NATIONAL MUTUAL HEALTH INSUR PY AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 LIMITED INSURANCE & REINSURANCE AUSTRALIA NATIONAL MUTUAL INTERNATIONAL AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 INSURANCE & REINSURANCE AUSTRALIA NATIONAL MUTUAL FINANCIAL SERVICES AXA ASIA PACIFIC HOLDINGS LIMITED 100.00 INSURANCE & REINSURANCE AUSTRIA AXA VERSICHERUNG AXA KONZERN AG (Austria) 100.00 INSURANCE & REINSURANCE AUSTRIA AXA LEBEN AXA KONZERN AG (Austria) 100.00 INSURANCE & REINSURANCE BELGIUM AXA ROYALE BELGE AXA HOLDINGS BELGIUM 99.58 INSURANCE & REINSURANCE BELGIUM AXA ROYALE BELGE UAB 0.42 INSURANCE & REINSURANCE BELGIUM ARDENNE PREVOYANTE AXA ROYALE BELGE NON VIE 0.05 INSURANCE & REINSURANCE BELGIUM ARDENNE PREVOYANTE AXA HOLDINGS BELGIUM 99.95 INSURANCE & REINSURANCE BELGIUM ASSURANCES LA POSTE AXA HOLDINGS BELGIUM 50.00 INSURANCE & REINSURANCE BELGIUM ASSURANCES LA POSTE VIE AXA HOLDINGS BELGIUM 50.00 INSURANCE & REINSURANCE BELGIUM UAB NON VIE AXA HOLDINGS BELGIUM 100.OO INSURANCE & REINSURANCE CANADA AXA CS ASSURANCE CANADA AXA CORPORATE SOLUTION ASSURANCE 100.00 INSURANCE & REINSURANCE CANADA AXA CANADA AXA 100.00 INSURANCE & REINSURANCE CHINA AXA MINMETALS ASSURANCE CO LTD AXA CHINA 51.00 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTION ASSURANCE AXA CORPORATE SOLUTIONS 98.49 INSURANCE & REINSURANCE FRANCE AXA CONSEIL VIE AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE ARGOVIE AXA COLLECTIVES 94.03 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA 94.97 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA ASSURANCES IARD 2.72 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA FRANCE ASSURANCE 0.10 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA COURTAGE IARD 2.20 INSURANCE & REINSURANCE FRANCE AXA CORPORATE SOLUTIONS AXA COLLECTIVES 0.02 INSURANCE & REINSURANCE FRANCE AXA ASSURANCES IARD AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE AXA RE FINANCE AXA CORPORATE SOLUTIONS 65.83 INSURANCE & REINSURANCE FRANCE AXA RE FINANCE AXA CESSIONS 13.17 INSURANCE & REINSURANCE FRANCE AXA ASSURANCES VIE AXA FRANCE ASSURANCE 88.87 INSURANCE & REINSURANCE FRANCE AXA ASSURANCES VIE AXA COLLECTIVES 11.13 INSURANCE & REINSURANCE FRANCE C.G.R.M. MONTE-CARLO AXA CORPORATE SOLUTIONS 99.99 INSURANCE & REINSURANCE FRANCE JURIDICA AXA FRANCE ASSURANCE 98.51 INSURANCE & REINSURANCE FRANCE DIRECT ASSURANCES IARD AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE DIRECT ASSURANCES VIE AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE NATIO ASSURANCES AXA ASSURANCES IARD 50.00 INSURANCE & REINSURANCE FRANCE NSM VIE AXA ASSURANCES IARD 0.16 INSURANCE & REINSURANCE FRANCE NSM VIE AXA FRANCE ASSURANCE 39.91 INSURANCE & REINSURANCE FRANCE AXA ASSISTANCE AXA 100.00 INSURANCE & REINSURANCE FRANCE SPS RE AXA CORPORATE SOLUTIONS 69.94 INSURANCE & REINSURANCE FRANCE AXA CESSIONS AXA CORPORATE SOLUTIONS 100.00 INSURANCE & REINSURANCE FRANCE SAINT GEORGES RE AXA 100.00 INSURANCE & REINSURANCE FRANCE AXA CONSEIL IARD AXA FRANCE ASSURANCE 100.00 INSURANCE & REINSURANCE FRANCE AXA COURTAGE IARD AXA FRANCE ASSURANCE 99.65 INSURANCE & REINSURANCE FRANCE AXA COLLECTIVES AXA ASSURANCES IARD 3.69 INSURANCE & REINSURANCE FRANCE AXA COLLECTIVES AXA FRANCE ASSURANCE 95.71 INSURANCE & REINSURANCE GERMANY AXA LEBEN AXA KONZERN AG 47.81 INSURANCE & REINSURANCE GERMANY AXA LEBEN AXA VERSICHERUNG 52.19 INSURANCE & REINSURANCE GERMANY AXA VERSICHERUNG AXA KONZERN AG 74.41 INSURANCE & REINSURANCE GERMANY AXA VERSICHERUNG GRE CONTINENTAL EUROPE HOLDING GMBH 25.59 INSURANCE & REINSURANCE GERMANY AXA KRANKEN VERSICHERUNG AXA KONZERN AG 52.69 INSURANCE & REINSURANCE GERMANY AXA KRANKEN VERSICHERUNG AXA LEBEN 46.71 INSURANCE & REINSURANCE GERMANY AXA ART AXA KONZERN AG 100.00 INSURANCE & REINSURANCE GREAT BRITAIN ACS ASSURANCE UK BRANCH AXA CORPORATE SOLUTION ASSURANCE 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA EQUITY & LAW LIFE ASSURANCE AXA SUN LIFE 100.00 SOCIETY INSURANCE & REINSURANCE GREAT BRITAIN AXA INSURANCE UK GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA SUN LIFE AXA UK PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA UK HOLDING PLC AXA CORPORATE SOLUTIONS 100.00 INSURANCE & REINSURANCE GREAT BRITAIN E_BUSINESS AXA UK AXA UK PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN THE ROYAL EXCHANGE ASSURANCE PLC GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA GLOBAL RISKS (U.K.) LTD AXA CORPORATE SOLUTIONS 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA UK AXA 100.00 INSURANCE & REINSURANCE GREAT BRITAIN PPP GROUP PLC GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA PPP HEALTHCARE LTD AXA INSURANCE UK 100.00 INSURANCE & REINSURANCE GREAT BRITAIN PPP LIFETIMECARE GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN AXA REINSURANCE UK PLC AXA UK HOLDING PLC 100.00 INSURANCE & REINSURANCE GREAT BRITAIN ENGLISH & SCOTTISH AXA UK 100.00 INSURANCE & REINSURANCE HONG KONG AXA CHINA REGION LIMITED NATIONAL MUTUAL INTERNATIONAL 100.00 INSURANCE & REINSURANCE HONG KONG AXA INSURANCE HONG-KONG AXA 17.50 INSURANCE & REINSURANCE HONG KONG AXA INSURANCE HONG-KONG AXA INSURANCE INVESTMENT HOLDING 82.50 INSURANCE & REINSURANCE HONG KONG AXA GENERAL INSURANCE HK AXA 100.00 INSURANCE & REINSURANCE HUNGARY AXA BIZTOSITO AXA KONZERN AG (AUSTRIA) 100.00 INSURANCE & REINSURANCE IRELAND GUARDIAN PMPA GROUP LTD GUARDIAN ROYAL EXCHANGE PLC 100.00 INSURANCE & REINSURANCE ITALY AXA INTERLIFE AXA ITALIA S.P.A 100.00 INSURANCE & REINSURANCE ITALY AXA ASSICURAZIONI AXA ITALIA S.P.A 98.12 INSURANCE & REINSURANCE ITALY AXA ASSICURAZIONI AXA COLLECTIVES 1.88 INSURANCE & REINSURANCE ITALY UAP VITA AXA ITALIA S.P.A 100.00 INSURANCE & REINSURANCE JAPAN AXA GROUP LIFE JAPAN AXA INSURANCE HOLDING JAPAN 100.00 INSURANCE & REINSURANCE JAPAN AXA LIFE JAPAN AXA INSURANCE HOLDING JAPAN 100.00 INSURANCE & REINSURANCE JAPAN AXA NON LIFE INSURANCE CO LTD AXA 100.00 INSURANCE & REINSURANCE LUXEMBOURG AXA ASSURANCE LUXEMBOURG AXA LUXEMBOURG SA 100.00 INSURANCE & REINSURANCE LUXEMBOURG AXA ASSURANCE. VIE LUXEMBOURG AXA LUXEMBOURG SA 100.00 INSURANCE & REINSURANCE LUXEMBOURG CREALUX AXA HOLDINGS BELGIUM 100.00 INSURANCE & REINSURANCE LUXEMBOURG FUTUR RE AXA CORPORATE SOLUTION ASSURANCE 100.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA INSURANCE UK 20.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA PORTUGAL COMPANHIA DE SEGUROS 5.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA VERSICHERUNG 20.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA ASSICURAZIONI 5.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE AXA AURORA IBERICA 10.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE ROYALE BELGE INVESTISSEMENT 20.00 INSURANCE & REINSURANCE LUXEMBOURG PANEURORE SAINT GEORGES RE 20.00 INSURANCE & REINSURANCE MOROCCO AXA ASSURANCE MAROC AXA ONA 99.99 INSURANCE & REINSURANCE MOROCCO EPARGNE CROISSANCE AXA ASSURANCE MAROC 99.59 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA CORPORATE SOLUTION ASSURANCE 9.07 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA PORTUGAL SEGUROS VIDA 2.15 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA CONSEIL VIE 5.37 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA 83.02 INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA CONSEIL VIE 87.63 DE VIDA SA INSURANCE & REINSURANCE PORTUGAL AXA PORTUGAL COMPANHIA DE SEGUROS AXA 7.46 DE VIDA SA INSURANCE & REINSURANCE SINGAPORE AXA INSURANCE SINGAPORE AXA 25.77 INSURANCE & REINSURANCE SINGAPORE AXA INSURANCE SINGAPORE AXA INSURANCE INVESTMENT HOLDING 74.23 INSURANCE & REINSURANCE SINGAPORE AXA LIFE SINGAPOUR NATIONAL MUTUAL INTERNATIONAL 100.00 INSURANCE & REINSURANCE SINGAPORE AXA CORPORATE SOLUTIONS. ASIA AXA CORPORATE SOLUTIONS 100.00 PACIFIC PRIVATE LTD INSURANCE & REINSURANCE SPAIN AXA AURORA VIDA DE SEGUROS Y AXA AURORA 99.68 REASEGUROS INSURANCE & REINSURANCE SPAIN AYUDA LEGAL SA DE SEGUROS Y AXA AURORA VIDA 12.00 REASEGUROS INSURANCE & REINSURANCE SPAIN AYUDA LEGAL SA DE SEGUROS Y AXA AURORA IBERICA 88.00 REASEGUROS INSURANCE & REINSURANCE SPAIN HILO DIRECT SA DE SEGUROS Y AXA AURORA 50.00 REASEGUROS INSURANCE & REINSURANCE SPAIN AXA AURORA IBERICA AXA AURORA 99.68
ACTIVITY COUNTRY CONSOLIDATED COMPANY SHAREHOLDERS OWNERSHIP INSURANCE & REINSURANCE SWITZERLAND AXA COMPAGNIE D'ASSURANCES AXA 99.95 INSURANCE & REINSURANCE SWITZERLAND AXA COMPAGNIE D'ASSURANCE SUR LA VIE AXA 94.99 INSURANCE & REINSURANCE SWITZERLAND AXA COMPAGNIE D'ASSURANCE SUR LA VIE AXA COMPAGNIE D'ASSURANCES 5.00 INSURANCE & REINSURANCE THE NETHERLANDS AXA LEVEN NV AXA VERZEKERINGEN 100.00 INSURANCE & REINSURANCE THE NETHERLANDS UNIROBE GROEP AXA NEDERLAND BV 100.00 INSURANCE & REINSURANCE THE NETHERLANDS AXA SCHADE AXA VERZEKERINGEN 100.00 INSURANCE & REINSURANCE THE NETHERLANDS AXA ZORG NV AXA VERZEKERINGEN 100.00 INSURANCE & REINSURANCE TURKEY AXA OYAK HAYAT SIGORTA AXA OYAK HOLDING AS 100.00 INSURANCE & REINSURANCE TURKEY AXA OYAK SIGORTA AXA OYAK HOLDING AS 70.92 INSURANCE & REINSURANCE UNITED STATES AXA CORPORATE SOLUTION INSURANCE CO AXA CORPORATE SOLUTIONS REINSURANCE 100.00 CY INSURANCE & REINSURANCE UNITED STATES AXA CORP. SOLUTIONS PROPERTY AXA CORPORATE SOLUTIONS REINSURANCE 100.00 & CASUALTY CY INSURANCE & REINSURANCE UNITED STATES AXA AMERICA CORPORATE SOLUTIONS, INC AXA CORPORATE SOLUTIONS 100.00 INSURANCE & REINSURANCE UNITED STATES THE EQUITABLE LIFE ASSURANCE SOCIETY AXA FINANCIAL INC. 100.00 INSURANCE & REINSURANCE UNITED STATES AXA CORPORATE SOLUTIONS REINSURANCE AXA AMERICA CORPORATE SOLUTIONS, INC 100.00 CY INSURANCE & REINSURANCE UNITED STATES AXA CORPORATE SOLUTIONS AMERICA INS. AXA CORPORATE SOLUTIONS PROPERTY 100.00 CY & CASUALTY INSURANCE & REINSURANCE UNITED STATES AXA CORPORATE SOLUTIONS LIFE AXA CORPORATE SOLUTIONS REINSURANCE CY 100.00 REINSURANCE COMPANY
AXA FINANCIAL, INC. - SUBSIDIARY ORGANIZATION CHART- 2002
State of State of Number of Type of Incorp. or Principal Federal Shares Subsidiary Domicile Operation Tax ID # Owned ---------- -------- --------- --------- ----- AXA Financial, Inc. (Notes 1 & 2) ** DE NY 13-3623351 Frontier Trust Company, FSB (Note 7) ND ND 45-0373941 1,000 AXA Financial Services, LLC (Note 2) DE NY 52-2197822 - AXA Distribution Holding Corporation (Note 2) DE NY 13-4078005 1,000 AXA Advisors, LLC (Note 5) DE NY 13-4071393 - AXA Network, LLC (Note 6) Operating DE NY 06-1555494 - AXA Network of Alabama, LLC Operating AL AL 06-1562392 - AXA Network of Connecticut, Maine and New York, LLC Operating DE NY 13-4085852 - AXA Network Insurance Agency of Massachusetts, LLC Operating MA MA 04-3491734 - AXA Network of Nevada, Inc. Operating NV NV 13-3389068 AXA Network of Puerto Rico, Inc. Operating P.R. P.R. 66-0577477 AXA Network Insurance Agency of Texas, Inc. Operating TX TX 75-2529724 - Paramount Planners, LLC Operating DE NY 06-1602479 - The Equitable Life Assurance Society of the United States (Note 2)* Insurance NY NY 13-5570651 2,000,000 The Equitable of Colorado, Inc. * Insurance CO CO 13-3198083 1,000,000 Equitable Deal Flow Fund, L.P. Investment DE NY 13-3385076 - Equitable Managed Assets, L.P. Investment DE NY 13-3385080 - Real Estate Partnership Equities (various) Investment ** - - Equitable Holdings, LLC (Notes 3 & 4) HCO NY NY 22-2766036 - See Attached Listing A ACMC, Inc. (Note 4) HCO DE NY 13-2677213 5,000,000 Wil-Gro, Inc Investment PA PA 23-2702404 1,000 STCS, Inc. Investment DE NY 13-3761592 1,000 Fox Run, Inc. Investment MA NY 23-2762596 1,000 FTM Corp. Investment MD MD 13-3778225 1,000 EVSA, Inc. Investment DE PA 23-2671508 50 Equitable Rowes Wharf, Inc. Investment MA MA 04-3272826 1,000 Prime Property Funding II, Inc. Operating DE NY 13-3961599 Sarasota Prime Hotels, LLC Investment FL GA 58-2330533 - ECLL, Inc. Investment MI GA 58-2377569 Parent's Percent of Ownership Comments or Control (e.g., Basis of Control) ---------- ------------------------ AXA Financial, Inc. (Notes 1 & 2) ** Frontier Trust Company, FSB (Note 7) 100.00% AXA Financial Services, LLC (Note 2) 100.00% AXA Distribution Holding Corporation (Note 2) 100.00% AXA Advisors, LLC (Note 5) 100.00% AXA Network, LLC (Note 6) 100.00% AXA Network of Alabama, LLC 100.00% AXA Network of Connecticut, Maine and New York, LLC 100.00% AXA Network Insurance Agency of Massachusetts, LLC 100.00% AXA Network of Nevada, Inc. 100.00% AXA Network of Puerto Rico, Inc. 100.00% AXA Network Insurance Agency of Texas, Inc. 100.00% Paramount Planners, LLC 100.00% The Equitable Life Assurance Society of the United States (Note 2)* 100.00% NAIC # 62944 The Equitable of Colorado, Inc. * 100.00% NAIC # 62880 Equitable Deal Flow Fund, L.P. - G.P & L.P. Equitable Managed Assets, L.P. - G.P. Real Estate Partnership Equities (various) - ** Equitable Holdings, LLC (Notes 3 & 4) 100.00% See Attached Listing A ACMC, Inc. (Note 4) 100.00% Wil-Gro, Inc. 100.00% STCS, Inc. 100.00% Fox Run, Inc. 100.00% FTM Corp. 100.00% EVSA, Inc. 100.00% Equitable Rowes Wharf, Inc. 100.00% Prime Property Funding II, Inc. 100.00% Sarasota Prime Hotels, LLC 100.00% ECLL, Inc. 100.00%
Page 1 of 6 AXA FINANCIAL, INC. - SUBSIDIARY ORGANIZATION CHART- 2002 03/24/03 --------------------------------------------------------- * Affiliated Insurer ** Information relating to Equitable's Real Estate Partnership Equities is disclosed in Schedule BA, Part 1 of Equitable Life's Annual Statement, which has been filed with the N.Y.S. Insurance Department. *** All subsidiaries are corporations, except as otherwise noted. 1. The Equitable Companies Incorporated changed its name to AXA Financial, Inc. on Sept. 3, 1999. 2. Effective Sept. 20, 1999, AXA Financial, Inc. transferred ownership of Equitable Life to AXA Client Solutions, LLC, which was formed on July 19, 1999. Effective January 1, 2002, AXA Client Solutions, LLC transferred ownership of Equitable Life and AXA Distribution Holding Corp. to AXA Financial, Inc. Effective May 1, 2002, AXA Client Solutions, LLC changed its name to AXA Financial Services, LLC. Effective June 1, 2002, AXA Financial, Inc. transferred ownership of Equitable Life and AXA Distribution Holding Corp. to AXA Financial Services, LLC. 3. Equitable Holding Corp. was merged into Equitable Holdings, LLC on Dec. 19, 1997. 4. In October 1999, Alliance Capital Management Holding L.P. ("Alliance Holding") reorganized by transferring its business and assets to Alliance Capital Management L.P., a newly formed private partnership ("Alliance Capital"). As of SEPTEMBER 30, 2002, AXF and its subsidiaries owned 51.41% of the issued and outstanding units of limited partnership interest in Alliance Capital (the "Alliance Capital Units"), as follows: AXF held directly 32,623,675 Alliance Capital Units (13.05%), Equitable Life directly owned 5,219,396 Alliance Capital Units (2.09%), ACMC, Inc. owned 66,220,822 Alliance Capital Units (26.50%), and ECMC, LLC owned 24,415,727 Alliance Capital Units (9.77%). Alliance Capital Management Corporation also owns a 1% general partnership interest in Alliance Capital. In addition, ECMC, LLC and ACMC, Inc. each own 722,178 units (0.95% each), representing assignments of beneficial ownership of limited partnership interests in Alliance Holding (the "Alliance Holding Units"). Alliance Capital Management Corp. owns 100,000 units of general partnership interest (0.13%), in Alliance Holding. Alliance Holding Units are publicly traded on the New York Stock Exchange. 5. EQ Financial Consultants (formerly, Equico Securities, Inc.) was merged into AXA Advisors, LLC on Sept. 20, 1999. AXA Advisors, LLC was transferred from Equitable Holdings, LLC to AXA Distribution Holding Corporation on Sept. 21, 1999. 6. Effective March 15, 2000, Equisource of New York, Inc. and 14 of its subsidiaries were merged into AXA Network, LLC, which was then sold to AXA Distribution Holding Corp. EquiSource of Alabama, Inc. became AXA Network of Alabama, LLC. EquiSource Insurance Agency of Massachusetts, Inc. became AXA Network Insurance Agency of Massachusetts, LLC. Equisource of Nevada, Inc., of Puerto Rico, Inc., and of Texas, Inc., changed their names from "EquiSource" to become "AXA Network", respectively. Effective February 1, 2002, Equitable Distributors Insurance Agency of Texas, Inc. changed its name to AXA Distributors Insurance Agency of Texas, Inc. Effective February 13, 2002 Equitable Distributors Insurance Agency of Massachusetts, LLC changed its name to AXA Distributors Insurance Agency of Massachusetts, LLC. 7. Effective June 6, 2000, Frontier Trust Company was sold by ELAS to AXF and merged into Frontier Trust Company, FSB. 8. Effective June 1, 2001, Equitable Structured Settlement Corp. was transferred from ELAS to Equitable Holdings, LLC. Page 2 of 6 AXA FINANCIAL, INC. - SUBSIDIARY ORGANIZATION CHART- 2002 --------------------------------------------------------- Dissolved: - On November 3, 2000, Donaldson, Lufkin & Jenrette, Inc. was sold to Credit Suisse Group. - 100 Federal Street Funding Corporation was dissolved August 31, 1998. - 100 Federal Street Realty Corporation was dissolved December 20, 2001. - CCMI Corp. was dissolved on October 7, 1999. - ELAS Realty, Inc. was dissolved January 29, 2002. - EML Associates, L.P. was dissolved March 27, 2001. - EQ Services, Inc. was dissolved May 11, 2001. - Equitable BJVS, Inc. was dissolved October 3, 1999. - Equitable Capital Management Corp. became ECMC, LLC on November 30, 1999. - Equitable JV Holding Corp. was dissolved on June 1, 2002. - Equitable JVS II, Inc. was dissolved December 4, 1996 - Equitable Underwriting & Sales Agency (Bahamas) Ltd. was dissolved on December 31, 2000. - EREIM LP Associates (L.P.) was dissolved March 27, 2001. - EREIM Managers Corporation was dissolved March 27, 2001. - EVLICO East Ridge, Inc. was dissolved Jan. 13, 2001. - EVLICO, Inc. was dissolved in 1999. - Franconom, Inc. was dissolved on December 4, 2000. - GP/EQ Southwest, Inc. was dissolved October 21, 1997. - HVM Corp. was dissolved on Feb. 16, 1999. - ML/EQ Real Estate Portfolio, L.P. was dissolved March 27, 2001. - Prime Property Funding, Inc. was dissolved in Feb. 1999. - Sarasota Prime Hotels, Inc. became Sarasota Prime Hotels, LLC. - Six-Pac G.P., Inc. was dissolved July 12,1999. Page 3 of 6 AXA FINANCIAL, INC. - SUBSIDIARY ORGANIZATION CHART- 2002 LISTING A - EQUITABLE HOLDINGS, LLC
State of State of Number of Type of Incorp. or Principal Federal Shares Subsidiary Domicile Operation Tax ID # Owned ---------- -------- --------- --------- ----- AXA Financial, Inc. AXA Financial Services, LLC (Note 2) The Equitable Life Assurance Society of the United States * Equitable Holdings, LLC ELAS Securities Acquisition Corporation Operating DE NY 13-3049038 500 Equitable Casualty Insurance Company * Operating VT VT 06-1166226 1,000 ECMC, LLC (See Note 4 on Page 2) Operating DE NY 13-3266813 - Equitable Capital Private Income & Equity Partnership II, L.P. Investment DE NY 13-3544879 - Alliance Capital Management Corporation (See Note 4 on Page 2) Operating DE NY 13-3633538 100 See Attached Listing B Equitable JVS, Inc. Investment DE GA 58-1812697 1,000 Astor Times Square Corp. Investment NY NY 13-3593699 100 Astor/Broadway Acquisition Corp. Investment NY NY 13-3593692 100 PC Landmark, Inc. Investment TX TX 75-2338215 1,000 EJSVS, Inc. Investment DE NJ 58-2169594 1,000 AXA Distributors, LLC Operating DE NY 52-2233674 - AXA Distributors Insurance Agency of Alabama, LLC Operating DE AL 52-2255113 - AXA Distriburors Insurance Agency, LLC Operating DE CT, ME,NY 06-1579051 - AXA Distributors Insurance Agency of Massachusetts, LLC Operating MA MA 04-3567096 - AXA Distributors Insurance Agency of Texas, Inc. Operating TX TX 74-3006330 1,000 J.M.R. Realty Services, Inc. Operating DE NY 13-3813232 1,000 Equitable Structured Settlement Corp. (See Note 8 on Page 2) Operating DE NJ 22-3492811 100 Parent's Percent of Ownership Comments or Control (e.g., Basis of Control) ---------- ------------------------ AXA Financial, Inc. AXA Financial Services, LLC (Note 2) The Equitable Life Assurance Society of the United States * Equitable Holdings, LLC ELAS Securities Acquisition Corporation 100.00% Equitable Casualty Insurance Company * 100.00% ECMC, LLC (See Note 4 on Page 2) 100.00% Equitable Capital Private Income & Equity ECMC is G.P. Partnership II, L.P. - ("Deal Flow Fund II") Alliance Capital Management Corporation (See Note 4 on Page 2) 100.00% See Attached Listing B Equitable JVS, Inc. 100.00% Astor Times Square Corp. 100.00% Astor/Broadway Acquisition Corp. 100.00% G.P. of Astor Acquisition. L.P. PC Landmark, Inc. 100.00% EJSVS, Inc. 100.00% AXA Distributors, LLC 100.00% AXA Distributors Insurance Agency of Alabama, LLC 100.00% AXA Distriburors Insurance Agency, LLC 100.00% AXA Distributors Insurance Agency of Massachusetts, LLC 100.00% AXA Distributors Insurance Agency of Texas, Inc. 100.00% J.M.R. Realty Services, Inc. 100.00% Equitable Structured Settlement Corp. (See Note 8 on Page 2) 100.00%
* Affiliated Insurer Equitable Investment Corp merged into Equitable Holdings, LLC on November 30, 1999. Equitable Capital Management Corp. became ECMC, LLC on November 30, 1999. Effective March 15, 2000, Equisource of New York, Inc. and its subsidiaries were merged into AXA Network, LLC, which was then sold to AXA Distribution Holding Holding Corp. Efective January 1, 2002, Equitable Distributors, Inc. merged into AXA Distributors, LLC. Page 4 of 6
AXA FINANCIAL, INC. - SUBSIDIARY ORGANIZATION CHART- 2002 LISTING B - ALLIANCE CAPITAL MANAGEMENT CORP. State of State of Number of Type of Incorp. or Principal Federal Shares Subsidiary Domicile Operation Tax ID # Owned ---------- -------- --------- --------- ----- AXA Financial, Inc. AXA Financial Services, LLC (Note 2) The Equitable Life Assurance Society of the United States Equitable Holdings, LLC Alliance Capital Management Corporation Alliance Capital Management Holding L.P. (See Note 4 on Page 2)Operating DE NY Alliance Capital Management L.P. (See Note 4 on Page 2) Operating DE NY 13-3434400 Albion Alliance LLC Operating DE NY 13-3903734 Cursitor Alliance LLC HCO DE MA 22-3424339 Cursitor Eaton Asset Management Co. Operating NY MA 13-3379955 Alliance Capital Management LLC HCO DE NY Sanford C. Bernstein & Co., LLC Operating DE NY Alliance Capital Management Corp. of Delaware HCO DE NY 13-2778645 10 ACAM Trust Company Private Ltd. Operating India India - ACM Global Investor Services S.A. Operating Lux. Lux. - ACM Fund Services (Espana) S.L. Operating Spain Spain - ACM International (France) SAS Operating France France - ACM Software Services Ltd. Operating DE NY 13-3910857 Alliance Barra Research Institute, Inc. Operating DE NY 13-3548918 1,000 Alliance Capital Asset Management (Japan) Ltd Operating Japan Japan - Alliance Capital Australia Limited Operating Aust. Aust. - Far Eastern Alliance Asset Management Operating Taiwan Taiwan - Alliance Capital Global Derivatives Corp. Operating DE NY 13-3626546 1,000 Alliance Capital Latin America Ltd. Operating Brazil Brazil - Alliance Capital Limited Operating U.K. U.K. - 250,000 Alliance Capital Services Ltd. Operating U.K. U.K. - 1,000 Dimensional Trust Management Ltd. Operating U.K. U.K. - 50,000 Alliance Capital (Luxembourg) S.A. Operating Lux. Lux. - 3,999 Alliance Capital Management (Asia) Ltd. Operating DE Singapore 13-3752293 Alliance Capital Management Australia Limited Operating Aust. Aust. - Alliance Capital Management Canada, Inc. Operating DE Canada 13-3630460 18,750 Alliance Capital Management New Zealand Limited Operating N.Z. N.Z. - Parent's Percent of Ownership Comments or Control (e.g., Basis of Control) ---------- ------------------------ AXA Financial, Inc. AXA Financial Services, LLC (Note 2) The Equitable Life Assurance Society of the United States Equitable Holdings, LLC Alliance Capital Management Corporation owns 1% GP interest in Alliance Capital Management L.P. and 100,000 GP units in Alliance Capital Management Holding L.P. Alliance Capital Management Holding L.P. (See Note 4 on Page - Alliance Capital Management L.P. (See Note 4 on Page 2) Albion Alliance LLC 37.60% Equitable Life = 4.7%; 3rd parties = 57.7% Cursitor Alliance LLC 100.00% Cursitor Eaton Asset Management Co. 100.00% Alliance Capital Management LLC 100.00% Sanford C. Bernstein & Co., LLC 100.00% Alliance Capital Management Corp. of Delaware 100.00% ACAM Trust Company Private Ltd. 100.00% ACM Global Investor Services S.A. 99.00% Alliance Capital Oceanic Corp. owns 1% ACM Fund Services (Espana) S.L. 100.00% ACM International (France) SAS 100.00% ACM Software Services Ltd. 100.00% Alliance Barra Research Institute, Inc. 100.00% Alliance Capital Asset Management (Japan) Ltd 100.00% Alliance Capital Australia Limited 100.00% Far Eastern Alliance Asset Management 20.00% 3rd parties = 80% Alliance Capital Global Derivatives Corp. 100.00% Alliance Capital Latin America Ltd. 99.00% Alliance Capital Oceanic Corp. owns 1% Alliance Capital Limited 100.00% Alliance Capital Services Ltd. 100.00% Dimensional Trust Management Ltd. 100.00% Alliance Capital (Luxembourg) S.A. 99.98% Alliance Cap. Oceanic Corp. owns 0.025% Alliance Capital Management (Asia) Ltd. 100.00% Alliance Capital Management Australia Limited 50.00% 3rd parties = 50% Alliance Capital Management Canada, Inc. 100.00% Alliance Capital Management New Zealand Limited 50.00% 3rd parties = 50%
Page 5 of 6
AXA FINANCIAL, INC. - SUBSIDIARY ORGANIZATION CHART- 2002 LISTING B - ALLIANCE CAPITAL MANAGEMENT CORP. State of State of Number of Type of Incorp. or Principal Federal Shares Subsidiary Domicile Operation Tax ID # Owned ---------- -------- --------- --------- ----- AXA Financial, Inc. AXA Financial Services, LLC (Note 2) The Equitable Life Assurance Society of the United States Equitable Holdings, LLC Alliance Capital Management Corporation Alliance Capital Management L.P. Alliance Capital Management Corp.of Delaware (Cont'd) Alliance Capital Management (Proprietary) Ltd. Operating So Africa So Africa - Alliance-MBCA Capital (Private) Ltd. Operating Zimbabwe Zimbabwe - Alliance-Odyssey Capital Mgmt. (Nambia) (Proprietary) Ltd. Operating Nambia Nambia - Alliance Capital Management (Singapore) Ltd. Operating Singapore Singapore - Alliance Capital (Mauritius) Private Ltd. Operating Mauritius Mauritius - Alliance Capital Asset Management (India)Private LtdOperating India India - Alliance Capital Oceanic Corp. Operating DE NY 13-3441277 1,000 Alliance Corporate Finance Group Inc. Operating DE NY 52-1671668 1,000 Alliance Eastern Europe, Inc. Operating DE NY 13-3802178 Alliance Fund Distributors, Inc. Operating DE NY 13-3191825 100 Alliance Global Investor Services, Inc. Operating DE NJ 13-3211780 100 Alliance SBS-AGRO Capital Management Co. Operating Russia Russia - Hanwha Investment Trust Mgmt. Co., Ltd Operating So Korea So Korea - New Alliance Asset Management (Asia) Ltd Operating H.K. H.K. - ACM New-Alliance (Luxembourg) S.A. Operating Lux. Lux. - Meiji - Alliance Capital Corp. Operating DE NY 13-3613617 50,000 Sanford C. Bernstein Ltd. Operating U.K. U.K. - Sanford C. Bernstein (CREST Nominees) Ltd. Operating U.K. U.K. - Sanford C. Bernstein Proprietary Ltd. Operating Aust. Aust. - Whittingdale Holdings Ltd. Operating U.K. U.K. - ACM Investments Ltd. Operating U.K. U.K. - Alliance Asset Allocation Ltd. Operating U.K. U.K. - Alliance Capital Whittingdale Ltd. Operating U.K. U.K. - Alliance Cecogest S.A. Operating France France - Cursitor Alliance Services Ltd. Operating U.K. U.K. - Cursitor Holdings Ltd. Operating U.K. U.K. - Draycott Partners. Ltd. Operating MA U.K. 98-0116774 Cursitor Management Co. S.A. Operating Lux. Lux. - Whittingdale Nominees Ltd. Operating U.K. U.K. - Parent's Percent of Ownership Comments or Control (e.g., Basis of Control) ---------- ------------------------ AXA Financial, Inc. AXA Financial Services, LLC (Note 2) The Equitable Life Assurance Society of the United States Equitable Holdings, LLC Alliance Capital Management Corporation Alliance Capital Management L.P. Alliance Capital Management Corp.ofDelaware(Cont'd) Alliance Capital Management (Proprietary) Ltd. 80.00% 3rd parties = 20% Alliance-MBCA Capital (Private) Ltd. 50.00% 3rd parties = 50% Alliance-Odyssey Capital Mgmt. (Nambia) (Proprietary) Ltd. 100.00% Alliance Capital Management (Singapore) Ltd. 100.00% Alliance Capital (Mauritius) Private Ltd. 100.00% Alliance Capital Asset Management (India) Priv 75.00% 3rd parties = 25% Alliance Capital Oceanic Corp. 100.00% inactive Alliance Corporate Finance Group Inc. 100.00% Alliance Eastern Europe, Inc. 100.00% Alliance Fund Distributors, Inc. 100.00% Alliance Global Investor Services, Inc. 100.00% formerly, Alliance Fund Services, Inc. Alliance SBS-AGRO Capital Management Co. 49.00% 3rd parties = 51% Hanwha Investment Trust Mgmt. Co., Ltd 20.00% 3rd parties = 80% New Alliance Asset Management (Asia) Ltd 50.00% 3rd parties = 50% ACM New-Alliance (Luxembourg) S.A. 99.00% ACM Global Investor Svcs owns 1% Meiji - Alliance Capital Corp. 50.00% Meiji Mutual Life owns 50% Sanford C. Bernstein Ltd. 100.00% Sanford C. Bernstein (CREST Nominees) Ltd. 100.00% Sanford C. Bernstein Proprietary Ltd. 100.00% Whittingdale Holdings Ltd. 100.00% ACM Investments Ltd. 100.00% Alliance Asset Allocation Ltd. 100.00% Alliance Capital Whittingdale Ltd. 100.00% Alliance Cecogest S.A. 100.00% Cursitor Alliance Services Ltd. 100.00% Cursitor Holdings Ltd. 100.00% Draycott Partners. Ltd. 100.00% Cursitor Management Co. S.A. 100.00% Whittingdale Nominees Ltd. 100.00%
Page 6 of 6 Item 27. Number of Contractowners. As of February 28, 2003 the number of participants in the American Dental Association Members Program offered by the Registrant was 27,310. Item 28. Indemnification (a) Indemnification of Directors and Officers The By-Laws of The Equitable Life Assurance Society of the United States ("Equitable Life") provide, in Article VII, as follows: 7.4 Indemnification of Directors, Officers and Employees. (a) To the extent permitted by the law of the State of New York and subject to all applicable requirements thereof: (i) any person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that he or she, or his or her testator or intestate, is or was a director, officer or employee of the Company shall be indemnified by the Company; (ii) any person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that he or she, or his or her testator or intestate serves or served any other organization in any capacity at the request of the Company may be indemnified by the Company; and (iii) the related expenses of any such person in any of said categories may be advanced by the Company. (b) To the extent permitted by the law of the State of New York, the Company may provide for further indemnification or advancement of expenses by resolution of shareholders of the Company or the Board of Directors, by amendment of these By-Laws, or by agreement. (Business Corporation Law ss. 721-726; Insurance Law ss. 1216) The directors and officers of Equitable Life are insured under policies issued by Lloyd's of London, X.L. Insurance Company and ACE Insurance Company. The annual limit on such policies is $150 million, and the policies insure that officers and directors against certain liabilities arising out of their conduct in such capacities. (b) Indemnification of Principal Underwriter To the extent permitted by law of the State of New York and subject to all applicable requirements thereof, AXA Advisors LLC has undertaken to indemnify each of its directors and officers who is made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact the director or officer, or his or her testator or intestate, is or was a director or officer of AXA Advisors LLC. (c) Undertaking Insofar as indemnification for liability arising under the Securities Act of 1933 ("Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will by governed by the final adjudication of such issue. Item 29. Principal Underwriters (a) AXA Advisors, LLC, an affiliate of Equitable is the principal underwriter for Equitable's Separate Account No. 301, Separate Account No. 45, 49 Separate Account A, Separate Account I, Separate Account FP and EQ Advisors Trust. AXA Advisors, LLC's principal business address is 1290 Avenue of the Americas, New York, NY 10104. Set forth below is certain information regarding the directors and principal officers of AXA Advisors, LLC. The business address of the persons whose names are preceded by an asterisk is that of AXA Advisors, LLC.
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH UNDERWRITER BUSINESS ADDRESS (AXA ADVISORS LLC) ---------------- -------------------------------------- *Harvey E. Blitz Executive Vice President and Director *Jerald E. Hampton Vice Chairman of the Board and Director *John M. Lefferts President, Chief Executive Officer and Director *G. Patrick McGunagle Executive Vice President and Director *Michael S. Martin Chairman of the Board and Director *Richard V. Silver Director *Mark R. Wutt Director David Conine Director 1345 Avenue of the Americas 33rd Floor New York, NY 10105 *Fred Folco Executive Vice President Edward J. Hayes Executive Vice President 200 Plaza Drive Secaucus, NJ 07096 *Gary Lineberry Executive Vice President *Peter D. Noris Executive Vice President *Nik Malvania Executive Vice President *Geoffrey H. Radbill Executive Vice President *James P. Bodovitz Senior Vice President and General Counsel Stephen T. Burnthall Senior Vice President 6435 Shiloh Road Suite A Alpharetta, GA 30005 *Denise DiBlasi Senior Vice President Richard Magaldi Senior Vice President 6435 Shiloh Road Suite A Alpharetta, GA 30005 *James Goodwin Senior Vice President *Robert Schmidt Senior Vice President *Jeffrey Green Senior Vice President *Kevin R. Byrne Senior Vice President and Treasurer *Eric Mosholt Senior Vice President *Jill Cooley Senior Vice President and Chief Operations Officer *Donna M. Dazzo First Vice President *Beth Andreozzi Vice President Peter Mastrantuono First Vice President *Philomena Scamardella First Vice President *Raymond T. Barry Vice President *Michael Brzozowski Vice President *Claire A. Comerford Vice President *Mark D. Godofsky Vice President and Controller *David Mahler Vice President and Compliance Officer *Linda J. Galasso Vice President and Secretary *Francesca Divone Assistant Secretary *Mary E. Cantwell Vice President *Catherine Genty Vice President *Gisela Jackson Vice President *Frank Massa Vice President *Jose Montengro Vice President *Sandi Narvaez Vice President *Edna Russo Vice President *Michael Ryniker Vice President *James Woodley Vice President *Frank Acierno Assistant Vice President Charlton Bulkin Assistant Vice President
(c) Not applicable. C-16 Item 30. Location of Accounts and Records The records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are maintained by The Equitable Life Assurance Society of the United States at: 135 West 50th Street New York, New York 10020; 1290 Avenue of the Americas, New York, New York 10104; and 200 Plaza Drive, Secaucus, New Jersey 07094. Item 31. Management Services Not applicable. Item 32. Undertakings The Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted; (b) to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; (c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. C-17 SIGNATURES As required by the Securities Act of 1933, the Registrant has caused this Registration Statement to be signed on its behalf, in the City and State of New York, on the 25th day of April, 2003. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Registrant) By: The Equitable Life Assurance Society of the United States By: /s/ Robin Wagner ----------------------- Robin Wagner Vice President and Counsel C-18 SIGNATURES As required by the Securities Act of 1933, the Depositor has caused this Registration Statement to be signed on its behalf in the City and State of New York, on this 25th day of April, 2003. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (Depositor) By: /s/ Robin Wagner ----------------------- Robin Wagner Vice President and Counsel As required by the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the date indicated: PRINCIPAL EXECUTIVE OFFICERS: *Christopher M. Condron Chairman of the Board, Chief Executive Officer and Director PRINCIPAL FINANCIAL OFFICER: *Stanley B. Tulin Vice Chairman of the Board and Chief Financial Officer PRINCIPAL ACCOUNTING OFFICER: *Alvin H. Fenichel Senior Vice President and Controller *DIRECTORS: Bruce W. Calvert Donald J. Greene George T. Lowy Francoise Colloc'h John T. Hartley Edward D. Miller Christopher M. Condron John H.F. Haskell, Jr. Didier Pineau-Valencienne Henri de Castries Mary R. (Nina) Henderson George J. Sella, Jr. Claus-Michael Dill Peter J. Tobin Stanley B. Tulin Joseph L. Dionne W. Edwin Jarmain Denis Duverne Jean-Rene Fourtou Norman C. Francis /s/ Robin Wagner ------------------ Robin Wagner Attorney-in-Fact April 25, 2003 C-19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, State Street Bank and Trust Company, in its capacity as Trustee of the undersigned collective investment trusts, has duly caused this Amendment to the Registration Statement to be signed by the undersigned, thereto duly authorized, in the City of Boston and Commonwealth of Massachusetts, on this 21 day of April, 2003. LIFECYCLE FUND GROUP TRUST - CONSERVATIVE LIFECYCLE FUND GROUP TRUST - MODERATE S&P 500 FLAGSHIP FUND RUSSELL 2000 INDEX SECURITIES LENDING FUND DAILY EAFE FUND GOVERNMENT CORPORATE BOND FUND SHORT TERM INVESTMENT FUND STATE STREET BANK AND TRUST COMPANY By: /s/ Maureen Scannell Bateman ------------------------------------ Maureen Scannell Bateman Executive Vice President and General Counsel By: /s/ Timothy B. Harbert ------------------------------------ Timothy B. Harbert Executive Vice President C-20 Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed on behalf of the following persons in the capacities and on this 21 of April, 2003. PRINCIPAL EXECUTIVE OFFICER: David A. Spina PRINCIPAL FINANCIAL OFFICER: Edward J. Resch PRINCIPAL ACCOUNTING OFFICER: Stefan Gavell Directors: David A. Spina* Tenley E. Albright, M.D.* I. MacAllister Booth* Truman S. Casner, Esq.* Nader F. Darehshori* Arthur L. Goldstein* David P. Gruber* Linda A. Hill* Charles R. LaMantia* Ronald E. Logue* Dennis J. Picard* Alfred Poe Richard P. Sergel* Ronald L. Skates Gregory L. Summe* Diana Chapman Walsh Robert E. Weisman By: /s/ Maureen Scannell Bateman ------------------------------ Maureen Scannell Bateman* Attorney-in-Fact By: /s/ Timothy B. Harbert ------------------------------ Timothy B. Harbert* Attorney-in-Fact By: /s/ Edward J. Resch ------------------------------------ Edward J. Resch Executive Vice President and Chief Financial Officer By: /s/ Stefan M. Gavell ------------------------------------ Stefan M. Gavell Executive Vice President and Treasurer C-21 EXHIBIT INDEX EXHIBIT NO. ---------- 9(f) Opinion and Consent 10(d) Consent of PricewaterhouseCooper LLP 10(e) Powers of Attorney (State Street) 10(f) Consent of PricewaterhouseCooper LLP