Filed Pursuant to Rule 497(e)
Registration File No.: 33-75616
American Dental Association Members Retirement Program
Prospectus - May 1, 1996
- -----------------------------------------------------------------------------
The American Dental Association Members Retirement Program offers you ten
investment options from which to choose. This prospectus describes three of
the seven Separate Accounts under the group annuity contract issued by THE
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES: THE EQUITY INDEX FUND,
THE LIFECYCLE FUND--CONSERVATIVE AND THE LIFECYCLE FUND--MODERATE. This
prospectus also describes the Lifecycle Fund Group Trusts in which the two
Lifecycle Funds invest. The Lifecycle Fund Group Trusts are collective
investment funds maintained by State Street Bank and Trust Company ("State
Street").
THE PROGRAM
The American Dental Association Members Retirement Program offers ADA members
and other eligible persons the choice of several plans to accumulate
retirement savings for themselves and their employees.
THE INVESTMENT OPTIONS
The Program allows you to choose from ten Investment Options. The Investment
Options are:
Seven Separate Accounts or "Funds": Three Guaranteed Options:
o Growth Equity Fund o 3 year Guaranteed Rate Account
o Aggressive Equity Fund o 5 year Guaranteed Rate Account
o ADA Foreign Fund o Money Market Guarantee Account
o Equity Index Fund
o Real Estate Fund
o Lifecycle Fund--Conservative
o Lifecycle Fund--Moderate
The Aggressive Equity Fund, ADA Foreign Fund and the Equity Index Fund each
invest in shares of a corresponding mutual fund, the MFS Emerging Growth
Fund, the Templeton Foreign Fund and The Seven Seas Series S&P 500 Index Fund
("Seven Seas S&P 500 Index Fund"), respectively. We refer to these as the
"underlying mutual funds." The Lifecycle Funds--Conservative and Moderate
("Lifecycle Funds") each invest in units of a corresponding group trust
maintained by State Street. We refer to these as the "Lifecycle Fund Group
Trusts." The Lifecycle Fund Group Trusts in turn invest in units of
collective investment funds of State Street. We refer to these as the
"Underlying Funds." The Underlying Funds are the S&P 500 Flagship Fund,
Russell 2000 Fund, Daily EAFE Fund, Daily Government/ Corporate Bond Fund,
and Short Term Investment Fund.
The prospectuses for the underlying mutual funds and our separate prospectus
for all of the Investment Options, except the Equity Index and Lifecycle
Funds, describe in detail the investment objectives, policies and risks of
these Funds and should be read carefully and retained for future reference.
Copies of these prospectuses may be obtained by writing or calling as
indicated below. THIS PROSPECTUS DESCRIBES IN DETAIL ONLY THE EQUITY INDEX
FUND, LIFECYCLE FUNDS, LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS.
(Cover page continued.)
The Equitable Life Assurance Society of the United States
P.O. Box 2486 G.P.O.
New York, NY 10116
Calls for current participants: Calls for all others:
1-800-223-5790 1-800-523-1125
<PAGE>
This prospectus provides important information you should be aware of before
investing. Additional information is included in the Statement of Additional
Information (the "SAI") dated May 1, 1996, which has been filed with the
Securities and Exchange Commission. Parts of the SAI have been incorporated
by reference into this prospectus. A table of contents for the SAI appears at
page 43 of this prospectus. To obtain a copy of the SAI free of charge,
complete the SAI request form on page 43 and mail it to us, or call or write
at the above address.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE.
- -----------------------------------------------------------------------------
NONE OF THE SECURITIES DESCRIBED IN THIS PROSPECTUS HAS BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
UNITS OF THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS MAINTAINED BY
STATE STREET ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED, GUARANTEED, OR
ENDORSED BY, THE U.S. GOVERNMENT, ANY BANK, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, ENTITY OR
PERSON, AND INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
SUMMARY
THE PROGRAM
The American Dental Association Members Retirement Program consists of
several types of retirement plans and two retirement plan Trusts, the Master
Trust and the Pooled Trust. Each of the Trusts invests exclusively in the
group annuity contracts described in this prospectus. The purpose of the
Program is to provide members of the American Dental Association (the "ADA")
and their employees with a program to invest, accumulate, and then distribute
funds for retirement. The Program is sponsored by the ADA, and the Trustees
under the Master and Pooled Trusts are the members of the Council on
Insurance of the ADA (the "Trustees"). The Program had 20,072 participants
and $1.0 billion in assets at December 31, 1995.
EQUITABLE LIFE
The Equitable Life Assurance Society of the Unites States ("Equitable Life")
is a diversified financial services organization serving a variety of
insurance, investment management and investment banking customers. We are one
of the largest life insurance companies in the United States, and have been
in business since 1859. In this prospectus, the terms "we," "our," and "us"
mean Equitable Life.
STATE STREET
State Street is a Massachusetts trust company that, among other things,
provides a variety of investment-related services to pension and mutual
funds. Through its institutional investment arm, State Street Global Advisors
("SSGA"), State Street offers a selection of investment products with
management styles ranging from indexed to fully active. As of December 31,
1995, State Street ranked as the second largest U.S. manager of tax-exempt
assets and the largest manager of international index assets.
THE INVESTMENT OPTIONS
Ten Investment Options are available under the Program. Seven of the
Investment Options are Separate Accounts, or Funds, consisting of six Equity
Funds and the Real Estate Fund. The Funds operate like mutual funds in many
ways. However, because of exclusionary provisions, they are not subject to
regulation under the Investment Company Act of 1940 (the "1940 Act"). The
three additional Investment Options are guaranteed options funded through our
general account. They include two Guaranteed Rate Accounts and the Money
Market Guarantee Account.
ONLY THREE OF THESE INVESTMENT OPTIONS ARE DESCRIBED IN DETAIL IN THIS
PROSPECTUS: THE EQUITY INDEX FUND AND THE TWO LIFECYCLE FUNDS (COLLECTIVELY
REFERRED TO AS "THE FUNDS"). FOR ADDITIONAL INFORMATION ON THE OTHER
AVAILABLE INVESTMENT OPTIONS, PLEASE REFER TO OUR SEPARATE PROSPECTUS FOR
THOSE OPTIONS.
THE EQUITY INDEX FUND (Separate Account No. 195)
Invests in shares of the Seven Seas S&P 500 Index Fund, which seeks to
achieve a total return that parallels the return of the Standard & Poor's 500
Composite Stock Price Index, by investing in the stocks in the Index. State
Street serves as the investment advisor to Seven Seas S&P 500 Index Fund.
THE LIFECYCLE FUND--CONSERVATIVE (Separate Account No. 197)
Invests in units of the Lifecycle Fund Group Trust--Conservative, maintained
by State Street, which in turn invests in units of the five Underlying Funds
maintained by State Street to provide current collective income and a low to
moderate growth of capital.
3
<PAGE>
THE LIFECYCLE FUND--MODERATE (Separate Account No. 198)
Invests in units of the Lifecycle Fund Group Trust--Moderate, maintained by
State Street, which in turn invests in units of five Underlying Funds
maintained by State Street to provide growth of capital and a reasonable
level of current income.
There is no assurance that the Funds will achieve their respective
objectives.
No person is authorized by Equitable Life or by State Street to give any
information or make any representations other than those contained in this
prospectus or in other printed or written material issued by these companies,
and you should not rely on any other information or representation.
YOUR CHOICE OF RETIREMENT PLANS
As an employer, you can use the Program to adopt our profit-sharing
(including a 401(k) feature) or defined contribution pension master plan or
our self-directed prototype plan. You can also have your own
individually-designed plan and use our Pooled Trust as a funding vehicle. See
The Program for additional information on your choices.
FUND EXPENSES
TRANSACTION EXPENSES
Transaction expenses are charges you pay when you buy or sell units of the
Funds.
<TABLE>
<CAPTION>
<S> <C>
Sales Load None
Deferred Sales Charge None
Surrender Fees None
Transfer or Exchange Fee None
</TABLE>
If you annuitize your account, premium taxes and other fees may apply.
ANNUAL FUND OPERATING EXPENSES
Operating expenses for the Funds are paid out of each Fund's assets.
Equitable Life deducts three types of operating expenses from the assets of
each Fund: a Program expense charge to compensate Equitable Life and the ADA
for the costs incurred in connection with the Program, an Administration fee
which covers the costs related to providing administration services in
connection with offering the Funds, and other expenses--such as legal,
auditing, and accounting--borne directly by the Funds. No management fees are
paid to us by the Equity Index Fund and the Lifecycle Funds, although, as
discussed below, a management fee is paid to State Street for managing the
assets of the Seven Seas S&P 500 Index Fund underlying the Equity Index Fund
and the Lifecycle Fund Group Trusts underlying the Lifecycle Funds. Premium
taxes may also be applicable. For a more detailed discussion of fees and
charges, see Deductions and Charges. For a discussion of the calculation of
Fund unit values, see How We Calculate the Value of Amounts Allocated to the
Funds.
EQUITY INDEX FUND. No transaction charges are incurred by the Equity Index
Fund when it purchases or redeems shares of the Seven Seas S&P 500 Index
Fund, but the underlying mutual fund incurs its own operating expenses. No
deduction is made from the assets of the Seven Seas S&P 500 Index Fund to
compensate State Street for managing the assets of that Fund. State Street
has voluntarily agreed to waive up to the full amount of its investment
management fee of .10% to the extent that total expenses exceed
4
<PAGE>
.15% of average daily net assets of the Seven Seas S&P 500 Index Fund on an
annual basis. Deductions are made from the assets of the Seven Seas S&P 500
Index Fund to pay for expenses borne directly by the Fund, such as 12b-1
fees, the costs of printing prospectuses and the costs for providing various
services to the Fund, such as legal, accounting, and auditing. For a more
detailed description of charges and expenses incurred by the Seven Seas S&P
500 Index Fund, see the prospectus for that Fund.
The fees and charges which are deducted from the assets of the Equity Index
Fund and the Seven Seas S&P 500 Index Fund are illustrated in the table
presented below. This table does not reflect other charges which are specific
to the various plans participating in the Program, such as enrollment, record
maintenance and reporting fees. The expenses shown in the table are based on
average Program assets in the Equity Index Fund during the year ended
December 31, 1995, restated to reflect current applicable fees.
<TABLE>
<CAPTION>
INVESTMENT PROGRAM
MANAGEMENT EXPENSE ADMINISTRATION OTHER
FEE CHARGE FEE EXPENSES 12B-1 FEE TOTAL
<S> <C> <C> <C> <C> <C> <C>
Equity Index Fund None 0.66% 0.15% 0.63%(2) None 1.44%
Seven Seas S&P
500 Index
Fund(1) 0.00%(3) None None 0.13% 0.06% 0.19%(3)
TOTAL 0.00%(3) 0.66% 0.15% 0.76%(2) 0.06% 1.63%(3)
</TABLE>
(1) Source: The Seven Seas Series Fund Prospectus dated December 29, 1995.
(2) Includes expenses incurred in connection with the organization of the
Equity Index Fund. Organizational expenses were initially paid by us
and we are being reimbursed from the Fund over a five year period.
Organizational expenses were $33,917 and are being amortized over the
period which ends December 31, 1998.
(3) State Street voluntarily agrees to waive up to the full amount of its
management fee of .10% to the extent that total expenses exceed .15% on
an annual basis. This agreement will remain in effect until further
notice. (See Note 1.) If the waiver agreement is terminated, the full
amount of State Street's management fee may be assessed and the total
Fund expenses may increase.
LIFECYCLE FUNDS. No transaction charges are incurred by the Lifecycle Funds
when units of a corresponding Lifecycle Fund Group Trust are purchased or
redeemed, but annual operating expenses are incurred by each Lifecycle Fund
Group Trust. A deduction is made from the assets of each Lifecycle Fund Group
Trust to compensate State Street for managing the assets of the Group Trust.
State Street does not receive a fee for managing the assets of the Underlying
Funds in which a Lifecycle Fund Group Trust invests. State Street may receive
fees for managing the assets of other collective investment funds in which
the Funds may invest on a temporary basis, and for managing the mutual funds
in which assets of the Underlying Funds may be invested. State Street has
agreed to reduce its management fee charged each of the Lifecycle Fund Group
Trusts to offset any management fees State Street receives attributable to
the Group Trusts' investment in such other collective investment funds and
mutual funds.
Other expenses are deducted from the assets of each Lifecycle Fund Group
Trust and Underlying Fund to pay for services, such as legal and auditing,
provided directly to each Lifecycle Fund Group Trust. State Street also
receives an administration fee deducted from the assets of each Lifecycle
Fund Group Trust, to compensate it for providing various recordkeeping and
accounting services to the Group Trust. In addition, other expenses are
deducted from the assets of the Underlying Funds for custodial services
provided to those Funds.
The fees and charges which are deducted from the assets of the Lifecycle
Funds, the Lifecycle Fund Group Trusts and the Underlying Funds are
illustrated in the table below. This table does not reflect other charges
which are specific to the various plans participating in the Program, such as
enrollment, record maintenance and reporting fees. See Plan and Transaction
Expenses.
5
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PROGRAM
MANAGEMENT EXPENSE ADMINISTRATION OTHER
FEE CHARGE FEE EXPENSES TOTAL
<S> <C> <C> <C> <C> <C>
Lifecycle Fund -
Conservative None 0.66% 0.15% 0.80%(1) 1.61%
Lifecycle Fund
Group Trust -
Conservative 0.17% None 0.82%(2) 1.14%(1&3) 2.13%
Underlying Funds(4):
S&P 500 Flagship Fund None None None --%(4&6) --%(5&6)
Russell 2000 Fund None None None 0.10%(4) 0.10%(5)
Daily EAFE Fund None None None 0.20%(4) 0.20%(5)
Daily Government/Corporate
Bond Fund None None None 0.01%(4) 0.01%(5)
Short Term Investment Fund None None None --%(4&6) --%(5&6)
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT PROGRAM
MANAGEMENT EXPENSE ADMINISTRATION OTHER
FEE CHARGE FEE EXPENSES TOTAL
<S> <C> <C> <C> <C> <C>
Lifecycle Fund -
Moderate None 0.66% 0.15% 0.22%(1) 1.03%
Lifecycle Fund
Group Trust -
Moderate 0.17% None 0.17%(2) 0.18%(1&3) 0.52%
Underlying Funds(4):
S&P 500 Flagship Fund None None None --%(4&6) --%(5&6)
Russell 2000 Fund None None None 0.10%(4) 0.10%(5)
Daily EAFE Fund None None None 0.20%(4) 0.20%(5)
Daily Government/Corporate
Bond Fund None None None 0.01%(4) 0.01%(5)
Short Term Investment Fund None None None --%(4&6) --%(5&6)
</TABLE>
(1) These include a charge at the annual rate of .03% of the value of the
respective assets in the Lifecycle Funds--Conservative and Moderate to
compensate Equitable Life for additional legal, accounting and other
potential expenses resulting from the inclusion of the Lifecycle Fund
Group Trusts and Underlying Funds maintained by State Street among the
Investment Options described in this prospectus and the SAI. Other
expenses also include costs incurred by Equitable Life and State Street
in connection with the organization of the Lifecycle Funds.
Organizational expenses were initially paid by Equitable Life and State
Street and are being reimbursed from the Lifecycle Funds over a five
year period. Organizational expenses were $150,087 and will be
amortized pro rata, based on the assets of each Fund, over the period
ending June 30, 2000. On December 8, 1995, the Program's balance in the
Balanced Fund (approximately $70 million) was transferred to the
Lifecycle Fund--Moderate. The much larger balance in that Fund results
in a much lower ratio of Other Expenses to Total Assets compared to the
corresponding ratio for the Lifecycle Fund--Conservative.
(2) Based on the Lifecycle Funds' Group Trusts--Conservative and Moderate
current fixed fee of $11,100 per year, per fund and average net assets
for 1995.
(3) Based on the Lifecycle Funds' Group Trusts--Conservative and Moderate
average net assets for 1995.
(4) Other expenses of the Underlying Funds are based on expenses incurred
by each Fund during 1995.
(5) The fees, charges and expenses columns of the Lifecycle Funds are not
totalled in the tables because the expense percentages reflected for
the Underlying Funds may change due to the annual review and revision
of the targeted percentage investments by each Group Trust in the
Underlying Funds.
(6) Less than 0.01%.
6
<PAGE>
EXAMPLES
You would pay the following expenses on a $1,000 investment over the time
period indicated for each Fund listed below, assuming a 5% annual rate of
return. The Examples include all annual fund operating expenses listed in the
tables above plus an estimate of average plan and transaction charges over
the time periods indicated for a $1,000 initial investment, assuming the
account is not annuitized. The estimate is computed by aggregating all record
maintenance and report fees, and enrollment fees, divided by the average
assets for the same period. See ADA Members Retirement Plan, Prototype
Self-Directed Plan and Individually-designed Plan Fees. Although the Program
has no minimum contribution, the minimum amount that can be converted to an
annuity is $3,500. There are no surrender charges, so the amounts would be
the same, whether or not you withdraw all or a portion of your Account
Balance.
<TABLE>
<CAPTION>
1 YEAR 3 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C> <C>
Equity Index Fund(1) $16.90(1) $ 52.37(1) $90.19(1) $196.11(1)
Lifecycle Fund -
Conservative 38.03 115.36
Lifecycle Fund -
Moderate 16.09 49.91
</TABLE>
The purpose of these tables and examples is to assist you in understanding
the various costs and expenses that will be incurred, either directly or
indirectly, when amounts are invested in the Funds. FUTURE EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, THE 5% RATE OF RETURN IN THE
EXAMPLE IS NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
(1) The returns shown reflect the waiver of a .10% investment management fee
by State Street.
CONDENSED FINANCIAL INFORMATION
EQUITY INDEX FUND: SEPARATE ACCOUNT NO. 195
Condensed financial information for the Seven Seas S&P 500 Index Fund is
contained in the prospectus for that Fund, copies of which may be obtained by
calling an Account Executive. Those financial statements, however, do not
reflect the Program expense charge, and the daily accrual of direct expenses
deducted from amounts held in Separate Account No. 195, the Equity Index
Fund. Unit values for the Equity Index Fund are shown below and do reflect
the deduction of Program expense charges and daily accrual of direct
expenses. The Equity Index Fund was established at $10.00 on February 1,
1994, the date this Fund began operations. Hypothetical Unit Values for
periods prior to the availability of the Equity Index Fund under the Program
were calculated by applying the Program expense charge during those periods
plus .15% in estimated other expenses to the historical investment experience
of the Seven Seas S&P 500 Index Fund. The Seven Seas S&P 500 Index Fund
commenced operations in 1992.
<TABLE>
<CAPTION>
EQUITY INDEX
FUND
<S> <C>
Unit value as of:
December 31, 1992 .......... $ 9.06
December 31, 1993 .......... $ 9.64
December 31, 1994 .......... $ 9.71
December 31, 1995 .......... $13.12
Number of Units outstanding
at December 31, 1995
(000's) .................... 1,483
</TABLE>
7
<PAGE>
LIFECYCLE FUND--CONSERVATIVE: SEPARATE ACCOUNT NO. 197
A unit value for the Lifecycle Fund--Conservative on December 31, 1995 is
shown below and reflects the deduction of Program expense charges and daily
accrual of direct expenses. The Lifecycle Fund-- Conservative began
operations on May 1, 1995. The value for a Lifecycle Fund--Conservative unit
was established at $10.00 on that date.
<TABLE>
<CAPTION>
LIFECYCLE
FUND--
CONSERVATIVE
<S> <C>
Unit value as of:
December 31, 1995 ........... $10.59
Number of Units outstanding
at December 31, 1995 (000's) 281
</TABLE>
LIFECYCLE FUND--MODERATE: SEPARATE ACCOUNT NO. 198
A unit value for the Lifecycle Fund--Moderate on December 31, 1995 is shown
below and reflects the deduction of Program expense charges and daily accrual
of direct expenses. The Lifecycle Fund-- Moderate began operations on May 1,
1995. The value for a Lifecycle Fund--Moderate Unit was established at $10.00
on that date.
<TABLE>
<CAPTION>
LIFECYCLE
FUND--
MODERATE
<S> <C>
Unit value as of:
December 31, 1995 ........... $11.01
Number of Units outstanding
at December 31, 1995 (000's) 6,924
</TABLE>
FULL FINANCIAL STATEMENTS. The financial statements of Separate Account No.
195, 197 and 198 and the Consolidated Financial Statements of Equitable Life
are contained in the SAI.
8
<PAGE>
SELECTED FINANCIAL DATA
LIFECYCLE FUND GROUP TRUSTS
The selected financial data below provides information with respect to
investment income, expenses, and investment performance for each Lifecycle
Fund Group Trust attributable to each unit outstanding for the period
indicated. The selected financial data has been audited by Price Waterhouse
LLP, independent accountants, as stated in their reports included in the SAI.
The selected financial data should be read in conjunction with the full
financial statements of the Lifecycle Fund Group Trusts, which appear in the
SAI.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1995*
<S> <C>
LIFECYCLE FUND GROUP TRUST-CONSERVATIVE
Net investment income (loss)** ................................ $ (0.08)
Net realized and unrealized gain (loss) ....................... 0.81
Net increase (decrease) ....................................... 0.73
Net asset value
Beginning of period ........................................... 10.00
End of period ................................................. $ 10.73
=======
Total return (%)*** ........................................... 7.30
=======
Ratio of expenses to average net assets (a) ................... 2.13%
Ratio of net investment income (loss) to average net assets
(a) .......................................................... (1.04)%
Portfolio turnover ............................................ 131%
Net assets, end of period (000s) .............................. $ 2,983
LIFECYCLE FUND GROUP TRUST-MODERATE
Net investment income (loss)** ................................ $ (0.01)
Net realized and unrealized gain (loss) ....................... 1.14
-------
Net increase (decrease) ....................................... 1.13
-------
Net asset value
Beginning of period ........................................... 10.00
End of period ................................................. $ 11.13
=======
Total return (%)*** ........................................... 11.30
=======
Ratio of expenses to average net assets (a) ................... 0.52%
Ratio of net investment income (loss) to average net assets
(a) .......................................................... (0.07)%
Portfolio turnover ............................................ 30%
Net assets, end of period (000s) .............................. $76,246
=======
</TABLE>
- ------------
(a) Annualized.
* Investment operations commenced on May 5, 1995.
** Net investment income has been calculated based upon an average of
monthly units outstanding.
*** Total return calculation (not annualized) is based on the value of a
single unit of participation outstanding throughout the period. It
represents the percentage change in the net asset value per unit
between the beginning and end of the period. The calculation includes
only those expenses charged directly to the Fund.
9
<PAGE>
UNDERLYING FUNDS
The selected financial data below provides information with respect to
investment income, expenses, and investment performance for each Underlying
Fund attributable to each Underlying Fund unit outstanding for the periods
indicated. The selected financial data has been audited by Price Waterhouse
LLP, independent accountants, as stated in their reports included in the SAI.
The selected financial data should be read in conjunction with the full
financial statements of the Underlying Funds, which appear in the SAI.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
S&P 500 FLAGSHIP FUND
Net investment income** ........... $ 2.24 $ 1.90 $ 1.81 $ 1.54 $ 1.62
Net realized and unrealized gain
(loss) ........................... 24.26 (0.93) 4.55 3.04 12.01
Distribution of securities lending
fee income ....................... 0.00 0.00 (0.01) (0.01) (0.01)
------ ------ ------ ------ ------
Net increase (decrease) ........... 26.50 0.97 6.35 4.57 13.62
Net asset value ...................
Beginning of year ................. 70.56 69.59 63.24 58.67 45.05
------ ------ ------ ------ ------
End of year ....................... $97.06 $70.56 $69.59 $63.24 $58.67
====== ====== ====== ====== ======
Total return(%)*** ................ 37.56 1.39 10.06 7.81 30.26
====== ====== ====== ====== ======
Ratio of expenses to average net
assets ........................... --%* --%* --%* --%* --%*
Ratio of net investment income to
average net assets ............... 2.66% 2.88% 2.68% 2.58% 3.01%
Portfolio turnover ................ 10% 12% 22% 19% 11%
Net assets, end of year (000s) .... $15,135,000 $8,258,327 $5,753,446 $4,233,017 $3,371,193
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
-------------------------------- DECEMBER 31,
1995 1994 1993 1992****
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
RUSSELL 2000 FUND
Net investment income** ...................... $ 0.03 $ 0.21 $ 0.17 $ 0.04
Net realized and unrealized gain (loss) ..... 3.61 (0.46) 1.83 1.07
Distribution of securities lending fee income (0.01) (0.01) 0.00 0.00
-------- -------- -------- --------
Net increase (decrease) ...................... 3.63 (0.26) 2.00 1.11
Net asset value
Beginning of period .......................... 12.85 13.11 11.11 10.00
-------- -------- -------- --------
End of period ................................ $ 16.48 $ 12.85 $ 13.11 $ 11.11
======== ======== ======== ========
Total return (%)*** .......................... 28.33 (1.98) 18.00 11.10(a)
======== ======== ======== ========
Ratio of expenses to average net assets ..... 0.10% 0.07% 0.09% 0.39%(a)
Ratio of net investment income to average net
assets ...................................... 1.80% 1.61% 1.37% 1.88%(a)
Portfolio turnover ........................... 103% 48% 35% 1%
Net assets, end of year (000s) ............... $536,849 $372,107 $451,119 $148,285
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
-------------------- DECEMBER 31,
1995 1994 1993****
-------- -------- ------------
<S> <C> <C> <C>
DAILY EAFE FUND
Net investment income (loss)** ...................... $ 0.25 $ 0.19 $ (0.01)
Distribution of securities lending fee income ...... (0.01) 0.00 0.00
Net realized and unrealized gain (loss) ............. 0.99 0.59 (0.13)
------- -------- --------
Net increase (decrease) ............................. 1.23 0.78 (0.14)
Net asset value .....................................
Beginning of period ................................. 10.64 9.86 10.00
------- -------- --------
End of period ....................................... $ 11.87 $ 10.64 $ 9.86
======= ======== ========
Total return (%)*** ................................. 11.64 7.91 (1.40)(a)
======= ======== ========
Ratio of expenses to average net assets ............. 0.20% 0.19% 0.57%(a)
Ratio of net investment income to average net assets 2.22% 1.88% (0.14)%(a)
Portfolio turnover .................................. 9% 47% 28%
Net assets, end of year (000s) ...................... $75,760 $139,678 $229,612
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED
------------------------ DECEMBER 31,
1995 1994 1993****
---------- ---------- ------------
<S> <C> <C> <C>
DAILY GOVERNMENT/CORPORATE FUND
Net investment income** ............................. $ 0.70 $ 0.73 $ 0.11
Net realized and unrealized gain (loss) ............. 1.17 (1.05) (0.17)
---------- ---------- --------
Net increase (decrease) ............................. 1.87 (0.32) (0.06)
Net asset value
Beginning of period ................................. 9.62 9.94 10.00
---------- ---------- --------
End of period ....................................... $ 11.49 $ 9.62 $ 9.94
========== ========== ========
Total return*** ..................................... 19.44% (3.22)% (3.27)%(a)
========== ========== ========
Ratio of expenses to average net assets ............. 0.01% 0.01% 0.02% (a)
Ratio of net investment income to average net assets 6.53% 6.81% 5.94% (a)
Portfolio turnover .................................. 611% 144% 23%
Net assets, end of year (000s) ...................... $1,991,393 $1,540,440 $322,680
</TABLE>
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
------------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net investment income** ...... $0.0604 $0.0424 $0.0336 $0.0402 $0.0630
Net realized gain (loss) ..... 0.0000 0.0000 0.0000 0.0000 0.0000
------- ------- ------- -------
Net change in net assets
resulting from operations ... $0.0604 $0.0424 $0.0336 $0.0402 $0.0630
======= ======= ======= =======
Distributions from net
investment income ............ $0.0604 $0.0424 $0.0336 $0.0402 $0.0630
======= ======= ======= =======
Total return*** ............... 6.21% 4.32% 3.41% 4.09% 6.49%
Ratio of expenses to average
net assets ................... --%* --%* --%* --%* --%*
Ratio of net investment income
to average net assets ........ 6.04% 4.24% 3.36% 4.02% 6.30%
Net Assets, end of year (000s) $12,393,148 $9,239,219 $12,657,842 $10,016,685 $8,149,591
</TABLE>
- ------------
(a) Annualized.
* Less than 0.01%
** Net investment income per unit has been calculated based upon an
average of monthly 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. The calculation includes only those
expenses charged directly to the Fund. This result may be reduced by
any administrative or other fees which are incurred in the management
or maintenance of individual participant accounts.
**** The Russell 2000 Fund commenced operations on October 31, 1992; the
Daily EAFE Fund commenced operations on September 30, 1993; the Daily
Government/Corporate Fund commenced operations on October 25, 1993.
12
<PAGE>
INVESTMENT OPTIONS
Ten INVESTMENT OPTIONS are available under the Program. Three of these are
discussed below: the Equity Index Fund and the two Lifecycle
Funds--Conservative and Moderate. Also discussed are the Lifecycle Fund Group
Trusts in which the Lifecycle Funds invest and the Underlying Funds in which
the Lifecycle Fund Group Trusts invest.
Each of the Funds discussed below has a different investment objective that
it seeks to achieve by following specific investment policies. The investment
objective of these Funds can only be changed by the Trustees. THERE IS NO
ASSURANCE THAT THE INVESTMENT OBJECTIVES OF ANY OF THESE FUNDS WILL BE MET.
See Risks and Investment Techniques.
THE EQUITY INDEX FUND
OBJECTIVE. The Equity Index Fund seeks to achieve a total return which
parallels that of the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500 Index") by investing in a mutual fund designated by the Trustees,
Seven Seas S&P 500 Index Fund (a portfolio of The Seven Seas Series S&P Index
Fund--"The Seven Seas Series Fund"). There is no assurance that this
objective will be met.
INVESTMENT POLICIES. The Equity Index Fund will invest 100 percent of its
assets in shares of the Seven Seas S&P 500 Index Fund.
THE SEVEN SEAS S&P 500 INDEX FUND. The Seven Seas S&P 500 Index Fund's
investment objective is to emulate the total return of the S&P 500 Index. The
Seven Seas S&P 500 Index Fund seeks to achieve its objective by investing in
all 500 stocks in the S&P 500 Index in proportion to their weightings in the
S&P 500 Index. To the extent that all 500 stocks cannot be purchased, the
Seven Seas S&P 500 Index Fund will purchase a representative sample of the
stocks listed in the S&P 500 Index in proportion to their weightings.
The Seven Seas Series Fund was organized as a Massachusetts business trust
and is registered under the 1940 Act as an open-end diversified management
investment company. As a series mutual fund, The Seven Seas Series Fund
issues shares in different investment portfolios, one of which is the Seven
Seas S&P 500 Index Fund. The investment adviser of the Seven Seas S&P 500
Index Fund is State Street.
"S&P 500" IS A TRADEMARK OF STANDARD & POOR'S CORPORATION THAT HAS BEEN
LICENSED FOR USE BY THE SEVEN SEAS SERIES FUND. THE SEVEN SEAS SERIES FUND IS
NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S CORPORATION,
AND STANDARD & POOR'S CORPORATION MAKES NO REPRESENTATION REGARDING THE
ADVISABILITY OF INVESTING IN THE SEVEN SEAS SERIES FUND.
The S&P 500 Index is composed of 500 common stocks which are chosen by
Standard and Poor's Corporation to best capture the price performance of a
large cross-section of the United States publicly traded stock market. The
S&P 500 Index is structured to approximate the general distribution of
industries in the United States economy. The inclusion of a stock in the S&P
500 Index in no way implies that Standard & Poor's Corporation believes the
stock to be an attractive investment, nor is Standard & Poor's a sponsor of
or in any way affiliated with the Seven Seas S&P 500 Index Fund or the Equity
Index Fund. The 500 securities, most of which trade on the New York Stock
Exchange, represent approximately 75 percent of the market value of all
common stocks. Each stock in the S&P 500 Index is weighted by market
capitalization. That is, each security is weighted by its total market value
relative to the total market values of all the securities in the S&P 500
Index. Component stocks included in the S&P 500 Index
13
<PAGE>
are chosen with the aim of achieving a distribution at the index level
representative of the various components of the United States gross national
product and therefore do not represent the 500 largest companies. Aggregate
market value and trading activity are also considered in the selection
process. A limited percentage of the S&P 500 Index may include Canadian
securities. No other foreign securities are eligible for inclusion.
For further information about the Seven Seas S&P 500 Index Fund, see The
Seven Seas Series Fund's prospectus and the related statement of additional
information. Free additional copies of The Seven Seas Series Fund prospectus
and copies of the related statement of additional information may be obtained
by calling an Equitable Life Account Executive. Participants and employers
should carefully read the prospectus of The Seven Seas Series Fund before
they allocate contributions or transfer amounts to the Equity Index Fund.
VOTING RIGHTS. The Seven Seas Series Fund does not hold annual meetings of
shareholders. If a meeting of shareholders is held, they may vote on such
matters as election of trustees and any other matters requiring a vote by
shareholders under the 1940 Act. Equitable Life will vote the shares of the
Seven Seas S&P 500 Index Fund allocated to the Equity Index Fund in
accordance with instructions received from employers, participants or
trustees, as appropriate, in the Equity Index Fund. Each employer,
participant or trustee, as appropriate, will be allowed to instruct Equitable
Life on how to vote shares of the Seven Seas S&P 500 Index Fund in proportion
to their interest in the Equity Index Fund as of the record date for the
shareholder meeting. Equitable Life will abstain from voting shares for which
no instructions are received. Employers, participants or trustees will
receive periodic reports about the Seven Seas S&P 500 Index Fund and proxy
materials together with a voting instruction form, in connection with
shareholder meetings. The costs of soliciting voting instructions from
participants will be borne by the Seven Seas S&P 500 Index Fund.
LIFECYCLE FUNDS--CONSERVATIVE AND MODERATE
Each Lifecycle Fund is a separate account of Equitable Life. Contributions
may be made to the Lifecycle Fund --Conservative and/or the Lifecycle
Fund--Moderate. Each of the Lifecycle Funds invests in a Lifecycle Fund Group
Trust--Conservative or Moderate having identical investment objectives and
policies as the Lifecycle Fund to which it relates. In turn each of the
Lifecycle Fund Group Trusts invests in a mix of Underlying Funds. The
following table diagrams this investment structure:
UNDERLYING FUNDS
-------------------
| Lifecycle Fund- |
| Conservative |
| (SA 197) |
-------------------
-------------------
| Lifecycle Fund |
| Group Trust |
| Conservative |
-------------------
------------ ----------- --------- ---------------- --------------
| S&P 500 | | Russell | | Daily | | Daily Gov't. | | Short Term |
| Flagship | | 2000 | | EAFE | | Corporate | | Investment |
| Fund | | Fund | | Fund | | Bond Fund | | Fund |
------------ ----------- --------- ---------------- --------------
-------------------
| Lifecycle Fund- |
| Moderate |
| (SA 198) |
-------------------
------------------
| Lifecycle Fund |
| Group Trust- |
| Moderate |
------------------
------------ ----------- --------- ---------------- --------------
| S&P 500 | | Russell | | Daily | | Daily Gov't. | | Short Term |
| Flagship | | 2000 | | EAFE | | Corporate | | Investment |
| Fund | | Fund | | Fund | | Bond Fund | | Fund |
------------ ----------- --------- ---------------- --------------
14
<PAGE>
THE LIFECYCLE FUND GROUP TRUSTS
The Lifecycle Fund Group Trusts are collective investment funds maintained by
State Street. Each Lifecycle Fund Group Trust is organized as a common law
trust under Massachusetts law, and because of exclusionary provisions, is not
subject to regulation under the 1940 Act.
There are two Lifecycle Fund Group Trusts: the Lifecycle Fund Group
Trust--Conservative and the Lifecycle Fund Group Trust--Moderate. State
Street serves as the trustee and investment manager to each of these Group
Trusts. Each of the Lifecycle Fund Group Trusts attempts to achieve its
investment objective by investing in a mix of underlying collective
investment funds (the "Underlying Funds") maintained by State Street and
offered exclusively to tax exempt retirement plans.
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
OBJECTIVE. The Lifecycle Fund Group Trust--Conservative seeks to provide
current income and a low to moderate growth of capital. There is no assurance
that this objective will be met.
INVESTMENT POLICIES. The Lifecycle Fund Group Trust--Conservative seeks to
achieve its objective by investing 100% of its assets in units of a mix of
Underlying Funds in accordance with certain target percentage weightings. The
table below shows the mix of Underlying Funds targeted by the Lifecycle Fund
Group Trust--Conservative.
<TABLE>
<CAPTION>
<S> <C>
S&P 500 Flagship Fund 15%
Russell 2000 Fund 10%
Daily EAFE Fund 5%
Daily Government/Corporate Bond Fund 50%
Short Term Investment Fund 20%
</TABLE>
The target percentages shown above are reviewed annually by the ADA Trustees
and may be revised as recommended, subject to State Street's approval. State
Street, as investment manager of the Lifecycle Fund Group
Trust--Conservative, from time to time makes adjustments in the mix of
Underlying Funds as needed to maintain, to the extent practicable, the target
percentages in each of the Underlying Funds.
LIFECYCLE FUND GROUP TRUST--MODERATE
OBJECTIVE. The Lifecycle Fund Group Trust--Moderate seeks to provide growth
of capital and a reasonable level of current income. There is no assurance
that this objective will be met.
INVESTMENT POLICIES. The Lifecycle Fund Group Trust--Moderate intends to
achieve its investment objective by investing 100% of its assets in units of
a mix of Underlying Funds in accordance with certain target percentage
weightings. The table below shows the mix of Underlying Funds targeted by the
Lifecycle Fund Group Trust--Moderate.
<TABLE>
<CAPTION>
<S> <C>
S&P 500 Flagship Fund 35%
Russell 2000 Fund 10%
Daily EAFE Fund 30%
Daily Government/Corporate Bond Fund 15%
Short Term Investment Fund 10%
</TABLE>
The target percentages shown above are reviewed annually by the ADA Trustees
and may be revised as recommended, subject to State Street's approval. State
Street, as investment manager of the Lifecycle Fund Group Trust--Moderate,
from time to time makes adjustments in the mix of Underlying Funds as needed
to maintain, to the extent practicable, the target percentages in each of the
Underlying Funds.
15
<PAGE>
THE UNDERLYING FUNDS
Like the Lifecycle Fund Group Trusts, the Underlying Funds are collective
investment funds maintained by State Street and offered exclusively to tax
exempt retirement plans. Unlike the Lifecycle Fund Group Trusts, however,
which are available only under the ADA Program, the Underlying Funds may
receive contributions from other tax exempt retirement plans.
The Underlying Funds are organized as common law trusts under Massachusetts
law, and because of exclusionary provisions, are not subject to regulation
under the 1940 Act. State Street serves as trustee and investment manager to
each of the Underlying Funds.
S&P 500 FLAGSHIP FUND
OBJECTIVE. The investment objective of the S&P 500 Flagship Fund ("Flagship
Fund") is to replicate, as closely as possible, the total return of the S&P
500 Index. "S&P 500" is a trademark of Standard & Poor's Corporation that has
been licensed for use by the Flagship Fund. The Flagship Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's Corporation, and
Standard & Poor's Corporation makes no representation regarding the
advisability of investing in this Fund. For further information on the S&P
500 Index, see the discussion of the Equity Index Fund under Investment
Options.
INVESTMENT POLICIES. The Flagship Fund intends to achieve its objective by
investing in all 500 stocks in the S&P 500 Index. In order to provide 100%
equity exposure, the Flagship Fund may hold up to 25% of its value in S&P 500
futures contracts in lieu of cash equivalents. U.S. Treasury Bills and other
short-term cash equivalents owned by the Flagship Fund will be held as
collateral for the futures contracts. For additional discussion related to
the investment policies of the Flagship Fund, see discussion below under
Risks and Investment Techniques and the Statement of Additional Information.
RUSSELL 2000 FUND
OBJECTIVE. The investment objective of the Russell 2000 Fund ("2000 Fund") is
to replicate, as closely as possible, the return of the Russell 2000 Index
maintained by Frank Russell Company ("Frank Russell"). The 2000 Fund will
invest its assets in the units of two other collective investment funds
maintained by State Street known as the Russell 2000 Value Fund and the
Russell 2000 Growth Fund. These Funds seek to replicate corresponding
sub-indices of the Russell 2000 Index maintained by Frank Russell. The
Russell 2000 Value Fund invests in the shares of approximately 1,400 issues
included in the Russell 2000 Index. The Russell 2000 Growth Fund invests in
the shares of approximately 1,450 issues included in the Russell 2000 Index.
The Russell 2000 Value and Growth Funds were established on February 1, 1995.
Before this date, the 2000 Fund invested directly in shares of companies
included in the Russell 2000 Index.
The Russell 2000 Index is a broadly diversified small capitalization index
consisting of approximately 2,000 common stocks. It is a subset of the larger
Russell 3000 Index. The Russell 3000 Index consists of the largest 3,000
publicly traded stocks of U.S. domiciled corporations and includes large,
medium and small capitalization stocks. As such, the Russell 3000 Index
represents approximately 98 percent of the total market capitalization of all
U.S. stocks that trade on the New York and American Stock Exchanges and in
the NASDAQ over-the-counter market. The Russell 2000 Index consists of the
approximately 2,000 smallest stocks within the Russell 3000 Index and is,
therefore, a broadly diversified index of small capitalization stocks.
INVESTMENT POLICIES. The Russell 2000 Value Fund and the Russell 2000 Growth
Fund together will not hold all of the approximately 2,000 issues that
comprise the Russell 2000 Index because of the relative
16
<PAGE>
illiquidity of many of the securities. Instead, these Funds will hold a
representative sample of the securities in the Russell 2000 Index. The 2000
Fund is constructed so that, in the aggregate, its market capitalization,
industry and fundamental characteristics resemble those of the Russell 2000
Index. The 2000 Fund will indirectly hold the top 80% of the capitalization
of the Russell 2000 Index and a sample of the remaining 20% of that index.
The composition of the Russell 2000 Index is updated monthly to reflect
changes in the stock market capitalization of companies in the Index. Once a
year, companies that no longer qualify for the Index because of fluctuations
of market capitalization are replaced. The rate of change in the securities
included in the Russell 2000 Index is significant, often higher than 20
percent a year of the total market capitalization of the Index.
The 2000 Fund is neither sponsored by nor affiliated with Frank Russell.
Frank Russell's only relationship to the 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 2000
Fund, see discussion below under Risks and Investment Techniques and the
Statement of Additional Information.
DAILY EAFE FUND
OBJECTIVE. The investment objective of the Daily EAFE Fund is to closely
match the performance of the Morgan Stanley Capital International EAFE Index
("EAFE Index") while providing daily liquidity.
INVESTMENT POLICIES. The Daily EAFE Fund seeks to achieve its objective by
investing directly in each of the foreign markets which comprise the EAFE
Index. The EAFE Index is a broadly diversified international index consisting
of more than 1,000 companies traded on the markets of Europe, Australia, New
Zealand and the Far East. The investments may include equity securities,
equity-based derivatives, futures contracts, index swaps and foreign exchange
contracts. The Daily EAFE Fund also may acquire interest-bearing cash
equivalents, notes and other short-term instruments, including foreign
currency time deposits or call accounts.
As of December 31, 1995, Japan (40.9%) and the United Kingdom (16.9%)
dominated the market capitalization of the EAFE Index, with companies located
in Germany, France, Switzerland and Hong Kong also being well represented on
the Index. The Index covers a wide spectrum of industries, with the banking
and finance industry constituting 26.9%, consumer goods 19.8%, services
16.6%, capital equipment 12.8%, materials 10.7% of the market capitalization
of the Index (as of December 31, 1995). Morgan Stanley Capital International,
the creator of the EAFE Index, is neither a sponsor of nor affiliated with
the Daily EAFE Fund.
The Daily EAFE Fund will not be able to hold all of the more than 1,000
stocks that comprise the EAFE Index because of the costs involved. Instead
the Daily EAFE Fund will hold a representative sample of the issues that
comprise the EAFE Index. Stocks will be selected for inclusion in the Daily
EAFE Fund based on country, market capitalization, industry weightings, and
fundamental characteristics such as return variability, earnings valuation,
and yield. In order to parallel the performance of the EAFE Index, the Daily
EAFE Fund will invest in each country in approximately the same percentage as
the country's weight in the EAFE Index.
For additional discussion related to the investment policies of the Daily
EAFE Fund, see discussion below under Risks and Investment Techniques and the
Statement of Additional Information.
17
APITAL PRINTING SYSTEMS]
<PAGE>
DAILY GOVERNMENT/CORPORATE BOND FUND
OBJECTIVE. The investment objective of the Daily Government/Corporate Bond
Fund ("GC Bond Fund") is to match or exceed the return of the Lehman Brothers
Government/Corporate Bond Index.
INVESTMENT POLICIES. The GC Bond Fund seeks to achieve its investment
objective by making direct investment in marketable instruments and
securities. In addition, the GC Bond Fund may make direct investments in (1)
U.S. Government securities, including U.S. Treasury securities and other
obligations issued or guaranteed as to interest and principal by the U.S.
Government and its agencies and instrumentalities, (2) corporate securities,
(3) asset backed securities, (4) mortgage backed securities including, but
not limited to, collateralized mortgage obligations and real estate mortgage
investment conduits, (5) repurchase and reverse repurchase agreements, (6)
financial futures and option contracts, (7) interest rate exchange agreements
and other swap agreements, (8) supranational and sovereign debt obligations
including those of sub-divisions and agencies, and (9) other securities and
instruments deemed by State Street, as trustee of the GC Bond Fund, to have
characteristics consistent with the investment objective of this Fund. The
securities in the GC Bond Fund will have a minimum credit rating when
purchased of Baa3 by Moody's or BBB- by Standard & Poor's.
For additional discussion related to the investment policies of the GC Bond
Fund, see discussion below under Risks and Investment Techniques and the
Statement of Additional Information.
SHORT TERM INVESTMENT FUND
OBJECTIVE. The investment objective of the Short Term Investment Fund ("STIF
Fund") is to maintain a diversified portfolio of short-term securities.
INVESTMENT POLICIES. The STIF Fund intends to achieve its objective by
investing in money market securities rated at least A-1 by Standard and
Poor's and P-1 by Moody's at the time of issuance. If the issuer has
long-term debt outstanding, such debt should be rated at least "A" by
Standard & Poor's or "A" by Moody's. The STIF Fund may purchase Yankee and
Euro certificates of deposit, Euro time deposits, U.S. Treasury bills, notes
and bonds, federal agency securities, corporate bonds, repurchase agreements
and banker's acceptances. Most of the investments may have a range of
maturity from overnight to 90 days. Twenty percent of the STIF Fund, however,
may be invested in assets having a maturity in excess of 90 days but not more
than thirteen months.
For additional discussion regarding the investment policies of the STIF Fund,
see discussion below under Risks and Investment Techniques and the Statement
of Additional Information.
VOTING RIGHTS: THE LIFECYCLE FUNDS
Participants do not have any voting rights with respect to their investments
in a Lifecycle Fund. Similarly, participants do not have any voting rights
with respect to matters such as the selection of State Street as trustee or
investment manager or investment adviser of a Lifecycle Fund Group Trust or
Underlying Fund, or with respect to any changes in investment policy of any
of these entities.
RISKS AND INVESTMENT TECHNIQUES: LIFECYCLE FUND
GROUP TRUSTS AND UNDERLYING FUNDS
You should be aware that any investment in securities carries with it a risk
of loss. The different investment objectives and policies of the Equity Index
Fund and each of the Lifecycle Funds affect the return on these Funds.
Additionally, there are market and financial risks inherent in any securities
18
<PAGE>
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 Funds in
which the Lifecycle Fund Group Trusts invest are discussed below. The risks
and investment techniques associated with investments by the Equity Index
Fund in the Seven Seas S&P 500 Index Fund are discussed in the prospectus and
Statement of Additional Information for that Fund.
IN GENERAL. You should note that the Flagship Fund, the 2000 Fund and the
Daily EAFE Fund are all index funds. An index fund is one that is not managed
according to traditional methods of "active" investment management, which
involve the buying and selling of securities based upon economic, financial
and market analysis and investment judgment. Instead, such funds utilize a
"passive" investment approach, attempting to duplicate the investment
performance of their benchmark indices through automated statistical analytic
procedures. For example, the Flagship Fund attempts to match the return of
the S&P 500 Index by using automated statistical methods to make stock
selections. Similar methods are employed in selecting stocks for the 2000
Fund and the Daily EAFE Fund. Still, such Funds, to the extent they invest in
the various types of securities discussed below, are subject to the risks
associated with each of these investments.
Also, you should note that each of the Underlying Funds, for the purpose of
investing uncommitted cash balances or to maintain liquidity to meet
redemptions of Fund units, may invest temporarily and without limitation in
certain short-term fixed income securities and other collective investment
funds or registered mutual funds maintained or advised by State Street. The
short-term fixed income securities in which an Underlying Fund may invest
include obligations issued or guaranteed as to principal and interest by the
U.S. Government, its agencies and instrumentalities and repurchase agreements
collateralized by these obligations, commercial paper, bank certificates of
deposit, banker's acceptances, and time deposits.
Equity Securities. Certain of the Underlying Funds will invest in equity
securities. Participants should be aware that equity securities fluctuate in
value, often based on factors unrelated to the value of the issuer of the
securities, and that fluctuations can be pronounced.
The securities of the smaller companies in which some of the Underlying Funds
may invest may be subject to more abrupt or erratic market movements than
larger, more established companies, both because the securities typically are
traded in lower volume and because the issuers typically are subject, to a
greater degree, to changes in earnings and profits.
FIXED-INCOME SECURITIES. Certain of the Underlying Funds will invest in
fixed-income securities. Although these are interest-bearing securities which
promise a stable stream of income, participants should be aware that the
prices of such securities are affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values
of fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities. Once the rating of a
portfolio security has been changed, State Street will consider all relevant
circumstances in determining whether a particular Underlying Fund should
continue to hold that security. Certain securities such as those rated Baa by
Moody's and BBB by Standard & Poor's, may be subject to greater market
fluctuations than lower yielding, higher rated fixed-income securities.
Securities which are rated Baa by Moody's are considered medium grade
obligations; they are neither highly protected nor poorly secured, and are
19
<PAGE>
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 Funds investing in foreign
securities will be subject to additional risks. Such risks include possible
adverse political and economic developments, possible seizure or
nationalization of foreign deposits, and possible adoption of governmental
restrictions which might adversely affect the payment of principal and
interest on the foreign securities or might restrict the payment of principal
and interest to investors located outside the country of the issuers, whether
from currency blockage or otherwise. Custodial expenses for a portfolio of
non-U.S. securities generally are higher than for a portfolio of U.S.
securities.
Since foreign securities purchased by the Underlying Funds often are
completed in currencies of foreign countries, the value of these securities
as measured in U.S. dollars may be affected favorably or unfavorably by
changes in currency rates and exchange control regulations. Some currency
exchange costs may be incurred when an Underlying Fund changes investments
from one country to another.
Furthermore, some of these securities may be subject to brokerage or stamp
taxes levied by foreign governments, which have the effect of increasing the
cost of such investment. Income received by sources within foreign countries
may be reduced by any withholding and other taxes imposed by such countries.
FUTURES CONTRACTS. Certain of the Underlying Funds may invest in futures
contracts. A purchase of a futures contract is the acquisition of a
contractual right and obligation to acquire the underlying security at a
specified price on a specified date. Although futures contracts by their
terms may call for the actual delivery or acquisition of the underlying
security, in most cases the contractual obligation is terminated before the
settlement date of the contract without delivery of the security. The
Underlying Fund will incur brokerage fees when it purchases and sells futures
contracts.
The Underlying Funds will not purchase futures contracts for speculation.
Futures contracts are used to increase the liquidity of each Underlying Fund
and for hedging purposes.
Transactions in futures contracts entail certain risks and transaction costs
to which an Underlying Fund would not otherwise be subject, and the
Underlying Fund's ability to purchase futures contracts may be limited by
market conditions or regulatory limits. Because the value of a futures
contract depends primarily on changes in the value of the underlying
securities, the value of the futures contracts purchased by the Underlying
Fund generally reflects changes in the values of the underlying stocks or
bonds. The risks inherent in the use of futures contracts include: (1)
imperfect correlation between the price of the futures contracts and
movements in the prices in the underlying securities; and (2) the possible
absence of a liquid secondary market for any particular instrument at any
time.
20
<PAGE>
An Underlying Fund also may engage in foreign futures transactions. Unlike
trading on domestic futures exchanges, trading on foreign futures exchanges
is not regulated by the Commodity Futures Trading Commission ("CFTC") and may
be subject to greater risks than trading on domestic exchanges. For example,
some foreign exchanges are principal markets so that no common clearing
facility exists and an investor may look only to the broker for performance
of the contract. In addition, any profits that an Underlying Fund might
realize from trading could be eliminated by adverse changes in the exchange
rate, or such Underlying Fund could incur losses as a result of those
changes. Transactions on foreign exchanges may include both futures which are
traded on domestic exchanges and those which are not.
SECURITIES OF MEDIUM AND SMALLER SIZED COMPANIES. Certain of the Underlying
Funds may invest in the securities of medium and smaller sized companies with
market capitalization of $500 million to $1.5 billion. Such companies may be
dependent on the performance of only one or two products and, therefore, may
be vulnerable to competition from larger companies with greater resources and
to economic conditions affecting their market sector. Consequently,
consistent earnings may not be as likely in such companies as they would be
for larger companies. In addition, medium and smaller sized companies may be
more dependent on access to equity markets to raise capital than larger
companies with greater ability to support debt. Medium and smaller sized
companies may be new, without long business or management histories, and
perceived by the market as unproven. Their securities may be held primarily
by insiders or institutional investors, which may have an impact on
marketability. The price of these stocks may rise and fall more frequently
and to a greater extent than the overall market.
LENDING OF SECURITIES. Certain of the Underlying Funds may from time to time
lend securities from their portfolios to brokers, dealers and financial
institutions and receive collateral consisting of cash, securities issued or
guaranteed by the U.S. Government, or irrevocable letters of credit issued by
major banks. Cash collateral will be invested in various collective
investment funds maintained by State Street. The net income from such
investments will increase the return to the Underlying Funds. All securities
lending transactions in which the Underlying Funds engage will comply with
the prohibited transaction provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") and related regulations.
INVESTMENTS BY THE STIF FUND. Each of the Lifecycle Fund Group Trusts will,
and certain of the Underlying Funds may, invest in the STIF Fund. This Fund
intends to invest, among other things, in various U.S. Government
Obligations, U.S. dollar-denominated instruments issued by foreign banks and
foreign branches of U.S. banks, "when-issued" securities, and to enter into
repurchase agreements with various banks and broker-dealers. The STIF Fund's
activities with respect to each of these investments are discussed below.
The STIF Fund may invest in a variety of U.S. Government obligations,
including bills and notes issued by the U.S. Treasury and securities issued
by agencies of the U.S. Government.
The STIF Fund also may invest in U.S. dollar-denominated instruments issued
by foreign banks and foreign branches of U.S. banks, a type of investment
that may involve special risks. Such banks may not be required to maintain
the same financial reserves or capital that are required of U.S. banks.
Restrictions on loans to single borrowers, prohibitions on certain
self-dealing transactions, and other regulations designed to protect the
safety and solvency of U.S. banks may not be applicable to foreign banks and
foreign branches of U.S. banks. In addition, investments of this type may
involve the unique risks associated with investments in foreign securities
described above.
The STIF Fund may commit to purchasing securities on a "when-issued" basis,
such that payment for and delivery of a security will occur after the date
that this Fund commits to purchase the security. The
21
<PAGE>
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.
HOW WE CALCULATE THE VALUE OF
AMOUNTS ALLOCATED TO THE
EQUITY INDEX AND LIFECYCLE FUNDS
CONTRIBUTIONS AND TRANSFERS: PURCHASE OF FUND UNITS. The portion of each
contribution or transfer allocated to the Equity Index Fund or the Lifecycle
Funds will be used to purchase Units. Your interest in each Fund is
represented by the value of the Units credited to your Account for that Fund.
The number of Units purchased by a contribution or transfer to a Fund is
calculated by dividing the amount allocated by the Unit Value calculated as
of the close of business on the day we receive your contribution or transfer
instruction. The number of Units credited to your Account will not vary
because of any subsequent fluctuation in the Unit Value, but the value of a
Unit fluctuates with the investment experience of the Fund. In other words,
the Unit Value will reflect the investment income and realized and unrealized
capital gains and losses of that Fund as well as the deductions and charges
we make to the Fund.
HOW WE DETERMINE THE UNIT VALUE. We determine the Unit Value for the Equity
Index Fund and each of the Lifecycle Funds at the end of each business day.
The Unit Value for each of these Funds is calculated by first determining a
gross unit value, which reflects only investment performance, and then
adjusting it for Fund expenses to obtain the Fund Unit Value. We determine
the gross unit value by multiplying the gross unit value for the preceding
business day by the net investment factor for that subsequent business day.
We calculate the net investment factor as follows:
o First, we take the value of the Fund's assets at the close of business on
the preceding business day.
o Next, we add the investment income and capital gains, realized and
unrealized, that are credited to the assets of the Fund during the business
day for which we are calculating the net investment factor.
o Then we subtract the capital losses, realized and unrealized, charged to
the Fund during that business day.
o Finally, we divide this amount by the value of the Fund's assets at the
close of the preceding business day.
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<PAGE>
The Fund Unit Value is calculated on every business day by multiplying the
Fund Unit Value for the last business day of the previous month by the net
change factor for that business day. The net change factor for each business
day is equal to (a) minus (b) where:
(a) is the gross unit value for that business day divided by the gross unit
value for the last business day of the previous month and;
(b) is the charge to the Fund for that month for the daily accrual of fees
and other expenses times the number of days since the end of the preceding
month.
The Equity Index Fund's investments in the Seven Seas S&P 500 Index Fund will
be valued at the underlying mutual fund's net asset value per share. The
investments made by each of the Lifecycle Funds in units of the corresponding
Lifecycle Fund Group Trust will be valued at the net asset value of the units
of such Lifecycle Fund Group Trust.
The units of each of the Lifecycle Fund Group Trusts will be valued each
business day as of the close of the regular trading session of the New York
Stock Exchange (currently 4 p.m. Eastern time). A business day is any
business day on which the New York Stock Exchange is open for business. The
net asset value of each unit is computed by dividing the current value of the
assets of each Lifecycle Fund Group Trust, less its liabilities, by the
number of units outstanding and rounding to the nearest cent.
Investments made by each Lifecycle Fund Group Trust in the Underlying Funds
will be valued at the Underlying Fund's net asset value per unit. The units
of each Underlying Fund are valued each business day in a manner that is
similar to the method used for valuing units of the Lifecycle Fund Group
Trusts daily. Assets of the Flagship Fund, 2000 Fund, Daily EAFE Fund and the
GC Bond Fund are valued on the basis of readily available market values or,
if no such values are available, on the basis of fair values as determined in
good faith by State Street. Assets of the STIF Fund are valued at amortized
cost. Under this method of valuation, securities purchased by the STIF Fund,
such as bonds, notes, commercial paper, certificates of deposit, or other
evidences of indebtedness, are recorded at original cost and valued daily by
adjusting for premium amortization or discount accretion.
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<PAGE>
EQUITABLE LIFE AND STATE STREET
EQUITABLE LIFE
Equitable Life is a diversified financial services organization serving a
broad spectrum of insurance, investment management and investment banking
customers. We are a New York stock life insurance company and our Home Office
is located at 787 Seventh Avenue, New York, New York 10019. Founded in 1859,
we are one of the largest life insurance companies in the United States. We
are authorized to sell life insurance and annuities in all fifty states, the
District of Columbia, Puerto Rico and the Virgin Islands. We maintain local
offices throughout the United States.
Equitable Life is a wholly-owned subsidiary of The Equitable Companies
Incorporated (the "Holding Company"). The largest stockholder of the Holding
Company is AXA S.A. AXA beneficially owns 60.6% of the outstanding shares of
common stock of the Holding Company plus convertible preferred stock. Under
its investment arrangements with Equitable Life and the Holding Company, AXA
is able to exercise significant influence over the operations and capital
structure of the Holding Company and its subsidiaries, including Equitable
Life. AXA, a French company, is the holding company for an international
group of insurance and related financial service companies.
Equitable Life, the Holding Company and their subsidiaries managed assets of
approximately $195.3 billion as of December 31, 1995.
THE SEPARATE ACCOUNTS
Each of the seven Funds is a separate account of Equitable Life; we own all
of the assets of the separate accounts. A separate account is a separate
investment account which we use to support our group annuity contracts, and
for other purposes permitted by applicable law. We keep the assets of each
separate account segregated from our general account and from any other
separate accounts we may have. Although the assets of the Funds are our
property, our obligation to you under the group annuity contract equals the
value of your accumulation in each Fund.
Income, gains and losses, whether or not realized, from assets invested in
the Funds are, in accordance with the group annuity contract, credited to or
charged against each Fund without regard to our other income, gains or
losses. The portion of each Fund's assets we hold on your behalf may not be
used to satisfy obligations that may arise out of any other business we
conduct. We may, however, transfer amounts owed to us, such as fees and
expenses, to our general account at any time. We may make these transfers
even if the Fund in question does not have sufficient liquidity to make all
withdrawals requested by participants.
The separate account which we call the Equity Index Fund was established on
February 1, 1994. The separate accounts which we call the Lifecycle Funds
were established on May 1, 1995. The Funds are governed by the laws and
regulations of the state of New York, where we are domiciled, and may also be
governed by laws of other states in which we do business. The Equity Index
Fund and Lifecycle Funds are used exclusively for the ADA Program. Because of
exclusionary provisions, the Separate Accounts are not subject to regulations
under the 1940 Act.
We do not manage the Equity Index Fund or the Lifecycle Funds. We act in
accordance with the investment policies established by the Trustees.
STATE STREET
State Street is a trust company established under the laws of the
Commonwealth of Massachusetts. It is a wholly-owned subsidiary of State
Street Boston Corporation, a publicly held bank holding company
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<PAGE>
registered under the Federal Bank Holding Company Act of 1956, as amended.
State Street's home office is located at 225 Franklin Street, Boston,
Massachusetts 02110. Through its institutional investment arm, SSGA, State
Street provides a comprehensive array of investment products that span the
spectrum from indexed to fully active investment management approaches.
Its customers include corporate, union, and public pension plans, endowments,
foundations and other financial institutions in the U.S. and abroad. As of
December 31, 1995, State Street was ranked the second largest U.S. manager of
tax-exempt assets and the largest manager of international index assets. It
had total assets of $220 billion under management at December 31, 1995.
THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS
Each of the Lifecycle Fund Group Trusts and the Underlying Funds (referred to
collectively herein as "Trust" or "Trusts") is a collective investment fund
maintained by State Street. Although similar in many respects to mutual
funds, a collective investment fund is excluded from regulation under the
1940 Act if it is maintained by a bank and consists only of assets of tax
qualified retirement plans. The Trusts and Underlying Funds each satisfy both
of these requirements, and are not subject to the 1940 Act as otherwise
applicable to mutual funds.
Each Trust is operated by a single corporate trustee (State Street), which is
responsible for all aspects of the Trust, including portfolio management,
administration and custody. Under the Trusts, participants have no voting
rights with respect to the selection of State Street, as trustee, the
selection of the Trust's investment adviser or manager, or changes to any
investment policy of the Trust.
State Street is subject to supervision and examination by the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Massachusetts Commissioner of Banks. This, however, does
not provide any protection against loss that may be experienced as a result
of an investment in the Trusts. Further, State Street is required to comply
with ERISA, to the extent applicable, in connection with the administration
of the Program.
TAX STATUS OF THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS. Each
Trust is a tax-exempt group trust established pursuant to Revenue Ruling
81-100. As a tax-exempt group trust, each Trust is not subject to federal
income tax unless the Trust generates unrelated business taxable income as
defined in the Code ("UBTI"). It is the policy of State Street not to invest
any portion of the assets of a Trust in a manner that will generate UBTI. If
State Street determines, however, that a proposed investment cannot be
structured to avoid UBTI and that the projected after-tax return on that
investment is sufficient to justify the making of such investment, then State
Street may elect to make that investment. In the unlikely event that any UBTI
is incurred by a Trust, it is anticipated that any tax thereon would be
reported and paid by the Trust as an expense of such Trust.
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<PAGE>
INVESTMENT PERFORMANCE
MEASURING THE INVESTMENT PERFORMANCE OF THE FUNDS
We recognize that the performance of the Funds that you invest your
retirement savings in is important to you. The purpose of this discussion is
to give you an overview of how our Funds have performed in the past year. OF
COURSE, PAST PERFORMANCE CANNOT BE USED TO PREDICT FUTURE PERFORMANCE.
Fund performance is most often measured by the change in the value of fund
units over time. Unlike typical mutual funds, which usually distribute
earnings annually, separate account funds reinvest all earnings. As described
previously, the unit value calculations for the Funds include all earnings,
including dividends and realized and unrealized capital gains. Changes in the
unit values can be expressed in terms of the Fund's annual percentage change,
its average annual change, or its cumulative change over a period of years.
Each of these measurements is valuable on its own. In addition, it often is
helpful to compare the Fund's performance with the results of unmanaged
market indices.
The following tables and graphs provide a historical view of the Funds'
investment performance. The information presented includes performance
results for each Fund, along with data representing unmanaged market indices.
Financial statements for the Funds can be found in the SAI.
UNMANAGED MARKET INDICES
Unmanaged market indices, or "benchmarks," while providing a broader
perspective on relative performance, are only a tool for comparison.
Performance data for the unmanaged market indices do not reflect any
deductions for investment advisory, brokerage or other expenses of the type
typically associated with an actively managed fund. This effectively
overstates the rate of return of the market indices relative to that which
would be available to a typical investor, and limits the usefulness of these
indices in assessing the performance of the Funds. Since the Funds do not
distribute dividends or interests, the market indices have been adjusted to
reflect reinvestment of dividends and interest to provide greater
comparability.
We have presented data for the following unmanaged indices. Both of these may
be appropriate comparative measures of performance for the Funds.
o CONSUMER PRICE INDEX (URBAN CONSUMERS -- NOT SEASONALLY ADJUSTED) "CPI" --
an index of inflation.
o STANDARD AND POOR'S 500 INDEX ("S&P 500") -- an unmanaged weighted index
of the securities of 500 industrial, transportation, utility and financial
companies widely regarded by investors as representative of the stock market.
This index should not be confused with the performance of the Equity Index
Fund nor that of the Seven Seas Series S&P 500 Index Fund, which seek to
emulate the results of the S&P 500 Index. See The Investment Options -- The
Equity Index Fund for more information.
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HOW PERFORMANCE DATA ARE PRESENTED
We have shown performance on several different bases:
o The annual percentage changes in Fund Unit Values,
o The average annual percentage change in Fund Unit Values, and
o The total value as of December 31, 1995 of a $10,000 investment made on
January 1, 1993.
THE FUNDS' PERFORMANCE SHOWN MAY NOT REPRESENT YOUR ACTUAL EXPERIENCE AND IT
DOES NOT REPRESENT THE EFFECT OF THE RECORD MAINTENANCE AND REPORT OR
ENROLLMENT FEES. The annual percentage change in Fund unit values represents
the percentage increase or decrease in unit values from the beginning of one
year to the end of that year. During any year unit values will, of course,
increase or decrease reflecting fluctuations in the securities markets. The
average annual rates of return are time-weighted, assume an investment at the
beginning of each period, and include the reinvestment of investment income.
Performance data for the Equity Index Fund reflects the performance of
Separate Account No. 195 for the period beginning February 1, 1994. For
periods prior to February 1, 1994, hypothetical performance is shown, which
reflects the performance of the Seven Seas S&P 500 Index Fund beginning 1993,
the first full year after that Fund began operations. For these hypothetical
calculations we have applied the Program expense charge during those periods
plus .15% in estimated other expenses to the historical investment experience
of the Seven Seas Series S&P 500 Index Fund. No results are shown for periods
prior to 1993, as the State Street S&P 500 Index Fund began operations during
1992. Performance data for the Lifecycle Funds are shown for the period when
the Funds commenced operations on May 1, 1995 through December 31, 1995.
ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES
<TABLE>
<CAPTION>
EQUITY LIFECYCLE FUNDS-- LIFECYCLE FUNDS--
INDEX CONSERVATIVE MODERATE S&P 500 CPI
<S> <C> <C> <C> <C> <C>
1995 35.1% 5.9% 10.1% 37.5% 2.9%
1994 0.7 -- -- 1.3 2.7
1993 6.4 -- -- 10.0 2.7
</TABLE>
AVERAGE ANNUAL PERCENTAGE CHANGE IN FUND UNIT VALUES -- YEARS ENDING DECEMBER
31, 1995
<TABLE>
<CAPTION>
LIFECYCLE
EQUITY FUNDS-- LIFECYCLE
INDEX CONSERVATIVE FUNDS-- MODERATE S&P 500 CPI
<S> <C> <C> <C> <C> <C>
1 Year 35.1% 5.9% 10.1% 37.5% 2.9%
2 Year 16.7 -- -- 18.1 2.8
3 year 13.1 -- -- 15.3 2.8
</TABLE>
PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. NO PROVISIONS
HAVE BEEN MADE FOR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON
DISTRIBUTIONS.
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THE PROGRAM
The purpose of this section is to explain the ADA Members Retirement Program
in more detail. Although we have described important aspects of the Program,
you should understand that the provisions of your plan and the Participation
Agreement will define the scope of the Program and its specific terms and
conditions. This section is for employers, and for the purposes of this
section, "you" and "your" refer to you in that role although you may also be
a participant in the plan.
EMPLOYERS WHO MAY PARTICIPATE IN THE PROGRAM
If you are a sole proprietor, a partner or a shareholder in a professional
corporation, your practice, as an employer, can adopt the Program if you or
at least one of your fellow partners or shareholders is a member of:
o the ADA,
o one of its constituent or component societies, or
o an ADA-affiliated organization whose participation in the Program has been
approved by the Council on Insurance of the ADA.
ADA constituent or component societies may also adopt the Program for their
own employees within certain limitations imposed by the Internal Revenue
Code.
CHOICES FOR THE EMPLOYER
The ADA Members Retirement Program gives you a variety of approaches to
choose from. You can:
o Adopt our Master Plan, which gives you options as to types of plans and
plan provisions. The Master Plan uses the Program Investment Options as the
exclusive investment choices.
o Adopt the Self-Directed Prototype plan, which gives additional flexibility
to choose investments, or
o Maintain your own individually-designed plan, but use the Investment
Options as an investment for your plan.
SUMMARY OF THE PLANS AND TRUSTS
THE MASTER PLAN -- Under the Master Plan, you will automatically receive a
full range of services from Equitable Life, including your choice of the
Investment Options, plan-level and participant-level recordkeeping, benefit
payments and tax withholding and reporting.
o The Master Plan is a defined contribution master plan which can be adopted
as a profit sharing plan (including an optional 401(k) feature), a defined
contribution pension plan, or both.
THE SELF-DIRECTED PROTOTYPE PLAN -- is a defined contribution prototype plan
which can be used to combine the Program Investment Options with individual
investments such as stocks and bonds. Employers must also adopt the Pooled
Trust and maintain a minimum of $25,000 in the Trust at all times. We provide
recordkeeping services only for plan assets held in the Pooled Trust.
THE ADA MEMBERS POOLED TRUST FOR RETIREMENT PLANS -- is an investment vehicle
to be used by those who have an individually designed qualified retirement
plan. The Pooled Trust is for investment only and can be used for both
defined benefit and defined contribution plans. We provide participant-level
or plan-level recordkeeping services for plan assets held in the Pooled
Trust.
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INFORMATION ON JOINING THE PROGRAM
Our Retirement Program Specialists are available to answer your questions
about joining the Program. To reach one of our Retirement Program
Specialists, call or write to us at:
<TABLE>
<CAPTION>
<S> <C>
By Phone 1-800-523-1125, ext. 2608 From Alaska, 0-201-392-5331, collect
Specialists are available from 9 a.m. to 5 p.m. Eastern Time,
Monday through Friday.
By Regular Mail The ADA Members Retirement Program c/o Equitable Life Box 2011
Secaucus, New Jersey 07096
By Registered, Certified or The ADA Members Retirement Program c/o Equitable Life 200 Plaza
Overnight Mail Drive, Second Floor Secaucus, New Jersey 07094
</TABLE>
CHOOSING THE RIGHT PLAN
Choosing the right plan depends on your own unique set of circumstances.
Although Equitable Life's Retirement Program Specialists can help explain the
Program, you and your tax advisors must decide which plan is best for you.
GETTING STARTED IN THE PROGRAM AFTER CHOOSING A PLAN
To adopt the Master Plan, you must complete a Participation Agreement. If you
have your own plan and wish to use the Pooled Trust as an investment option,
the trustee of your plan must complete the appropriate Participation
Agreement. Our Retirement Program Specialists can help you complete the
Participation Agreement for review by your tax advisor.
To adopt our prototype self-directed plan, you must complete the prototype
plan adoption agreement and a Participation Agreement for the Pooled Trust.
In addition, you must also arrange separately for plan level accounting and
brokerage services. We provide recordkeeping services only for plan assets
held in the Pooled Trust. You can use any plan recordkeeper of your choice or
you can arrange through us to hire Trust Consultants, Inc. at a special rate.
You can also arrange through us brokerage services from our affiliate,
Pershing Discount Brokerage Services, at special rates or use the services of
any other broker.
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<PAGE>
COMMUNICATING WITH US AFTER YOU ENROLL
<TABLE>
<CAPTION>
<S> <C>
By Phone
To Reach an Account 1-800-223-5790 (9 a.m. to 5 p.m. Eastern Time, Monday
Executive through Friday)
To Reach the Account 1-800-223-5790 (24 Hours)
Investment Management
("AIM") System:
- ---------------------------------------------------------------------------------------------
By Regular Mail (Other than The ADA Members Retirement Program Box 2486 G.P.O. New
contribution checks) York, New York 10116
- ---------------------------------------------------------------------------------------------
By Registered, Certified or The ADA Members Retirement Program c/o Equitable Life 200
Overnight Mail Plaza Drive, Second Floor Secaucus, New Jersey 07094
- ---------------------------------------------------------------------------------------------
For Contribution Checks Only The Association Members Retirement Program P.O. Box 1599
Newark, New Jersey 07101-9764
</TABLE>
YOUR RESPONSIBILITIES AS THE EMPLOYER
Employers adopting the Master Plan are responsible for the plan and its
administration. This includes certain responsibilities relating to the
administration and continued qualification of your plan. See Your
Responsibilities As Employer in the SAI for a list of responsibilities which
you will have if you adopt the Master Plan.
If you have an individually designed plan, you already have these
responsibilities; they are not increased in any way by your adoption of the
Pooled Trust for investment purposes only. It is your responsibility to
determine that the terms of your plan are consistent with the provisions of
the Pooled Trust and our practices described in this prospectus and the SAI.
If you utilize our prototype self-directed plan, you will have
responsibilities as the plan administrator and will also have to appoint a
plan trustee; these responsibilities will be greater than those required by
the adoption of the Master Plan. Again it is also your responsibility to
determine that the terms of your plan are consistent with the provisions of
the Pooled Trust and our practices described in this prospectus and the SAI.
You should consult your legal advisor for an understanding of your legal
responsibilities under the self-directed plan.
We will give you guidance and assistance in the performance of your
responsibilities. The ultimate responsibility, however, rests with you.
WHEN TRANSACTIONS ARE EFFECTIVE
A business day is any day both we and the New York Stock Exchange are open.
Contributions, transfers, and allocation changes are normally effective on
the business day they are received. Distribution requests are also effective
on the business day they are received unless, as in the Master Plan, there
are plan provisions to the contrary. However, we may have to delay the
processing of any transaction which is not accompanied by a properly
completed form or which is not mailed to the correct address. An Account
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Executive will generally be available to speak with you each business day
from 9 a.m. to 5 p.m. Eastern Time. We may, however, close due to emergency
conditions.
MINIMUM INVESTMENTS
There is no minimum amount which must be invested if you adopt the Master
Plan, or if you have your own individually-designed plan and use the Pooled
Trust as an investment.
If you adopt our self-directed prototype plan, you must keep at least $25,000
in the Pooled Trust at all times.
MAKING CONTRIBUTIONS TO THE PROGRAM
You should send contribution checks or money orders payable to The ADA
Retirement Trust to the address shown under Communicating With Us After You
Enroll. All contributions must be accompanied by a properly completed
Contribution Remittance form which designates the amount to be allocated to
each participant. Contributions are normally credited on the business day
that we receive them, provided the remittance form is properly completed.
Contributions are only accepted from the employer. Employees may not send
contributions directly to the Program.
OUR ACCOUNT INVESTMENT MANAGEMENT (AIM) SYSTEM
We offer an automated telephone system for participants to transfer between
investment options, obtain account information and change the allocation of
future contributions. To use the AIM System, participants must have a
Personal Security Code (PSC) number.
If you have a touch-tone telephone you may make transfers on the AIM System.
Procedures have been established by Equitable Life for its AIM System that
are considered to be reasonable and are designed to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring
certain personal identification information prior to acting on telephone
instructions and providing written confirmation of instructions communicated
by telephone. If Equitable Life does not employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, we may be
liable for any losses arising out of any action on our part or any failure or
omission to act as a result of our own negligence, lack of good faith or
willful misconduct. In light of the procedures established, Equitable Life
will not be liable for following telephone instructions that we reasonably
believe to be genuine. We may discontinue the telephone transfer service at
any time without notice.
ALLOCATING CONTRIBUTIONS AMONG THE INVESTMENT OPTIONS
Under the Master Plan, participants make all investment decisions. Under an
individually-designed plan or our self-directed prototype plan, either the
participants or the plan trustees make the investment allocation decisions,
depending on the terms of the plan.
Contributions may be allocated among any number of the Investment Options.
Allocation instructions may be changed at any time, and as often as needed,
by calling the AIM System. New instructions become effective on the business
day we receive them. You may allocate employer contributions in different
percentages than employee contributions. IF WE HAVE NOT RECEIVED VALID
INSTRUCTIONS, WE WILL ALLOCATE YOUR CONTRIBUTIONS TO THE MONEY MARKET
GUARANTEE ACCOUNT.
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<PAGE>
TRANSFERS AMONG THE INVESTMENT OPTIONS
Participants in the Master Plan may make transfers on a daily basis without
charge. Participants in other plans may make transfers whenever the plan
allows them to do so. We do not charge a fee for transfers. (If an
individually designed plan does not allow transfers by individual
participants, only you as employer or trustee may make a transfer.)
Participants may use the AIM System to transfer amounts among the investment
options. All transfers are made as of the close of business on the day we
receive the authorized instructions, provided we receive the request by 4:00
p.m. Eastern time. Transfer requests received after that time will be
processed as of the close of business on the following business day.
Transfers from the Equity Index Fund and the Lifecycle Funds are permitted at
any time except if there is any delay in redemptions from the underlying
mutual fund or, with respect to the Lifecycle Funds, the Lifecycle Fund Group
Trusts in which they invest. See The Equity Index Fund and Lifecycle Fund-
Conservative and Moderate.
DISTRIBUTIONS FROM THE INVESTMENT OPTIONS
There are two sets of rules that must be kept in mind when considering
distributions or withdrawals from the Program. The first are the rules and
procedures which apply to the Investment Options, exclusive of the provisions
of your plan. These are discussed in this section. The second are the rules
specific to your plan; these are discussed under When Distributions are
Available to Participants.
Amounts in the Equity Index Fund and the Lifecycle Funds are generally
available for distribution at any time, subject to the provisions of your
plan. However, there may be a delay for withdrawals from these Funds if there
is any delay in the redemptions from the underlying mutual fund and the
Lifecycle Fund Group Trusts. Please note that certain plan distributions may
be subject to penalty or excise taxes. See The Program and Federal Income Tax
Considerations for more details.
Payments or withdrawals out of the Equity Index Fund and the Lifecycle Funds
and application of proceeds to an annuity ordinarily will be made promptly
upon request in accordance with Plan provisions. However, we can defer
payments, applications and withdrawals from these Funds for any period during
which the New York Stock Exchange is closed for trading, sales of securities
are restricted or determination of the fair market value of assets of the
Funds is not reasonably practicable because of an emergency.
WHEN DISTRIBUTIONS ARE AVAILABLE TO PARTICIPANTS
In addition to the rules and procedures generally applicable to investments
in the Investment Options under the Program, there are other important rules
regarding the distribution and benefit payment options for each type of plan.
Distributions and benefit payment options under a qualified retirement plan
are subject to extremely complicated legal requirements. Certain plan
distributions may be subject to penalty or excise taxes. A general
explanation of the federal income tax treatment of distributions and benefit
payment options is provided in Federal Income Tax Considerations in both this
prospectus and the SAI. If a participant retires, becomes disabled or
terminates employment, the benefit payment options available should be
discussed with a qualified financial advisor. Our Account Executives can also
be of assistance.
In general, under the Master Plan or our self-directed prototype plan,
participants are eligible for benefits upon retirement, death or disability,
or upon termination of employment with a vested benefit. ("Vested" refers to
the nonforfeitable portion of your benefits under the plan.) Participants in
an individually
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designed plan are eligible for retirement benefits depending on the terms of
that plan. See Benefit Payment Options and Federal Income Tax Considerations
for more details. In most cases, benefits must begin no later than April 1 of
the year after the participant reaches age 70-1/2. A participant (other than
a more-than-10% owner in an unincorporated practice) may be exempt from this
requirement only if a special election was filed with the employer before
January 1, 1984.
Under the Master Plan, self-employed persons may generally not receive a
distribution prior to age 59-1/2 and employees generally may not receive a
distribution prior to a separation from service.
PARTICIPANT LOANS
The Master Plan permits participants to borrow a portion (not to exceed
$50,000) of his or her vested Account Balance (all plans combined), if the
employer has elected this feature. If the participant is a sole proprietor,
partner who owns more than 10% of the business, or a shareholder-employee of
an S Corporation who owns more than 5% of the business, he or she presently
may not borrow from his or her vested Account Balance without first obtaining
a prohibited transaction exemption from the Department of Labor. Participants
should consult with their attorneys or tax advisors regarding the
advisability and procedures for obtaining such an exemption. Loans are also
available under our self-directed prototype plan and under an individually
designed plan if the terms of the plan allow them.
Generally speaking, when a loan is taken, an amount equal to the loan is
transferred out of the Investment Options and is set up as a loan account.
While the loan is outstanding, the participant must pay interest on the loan.
Any principal and interest paid will be added to the participant's loan
account balance and will be taxable on distribution. If you fail to repay the
loan when due, the amount of the unpaid balance may be taxable and subject to
additional penalty taxes. The interest paid on a retirement plan loan may not
be deductible.
Loans from the plan should be applied for through the employer. Loans are
subject to restrictions under federal tax laws and all plans of the employer
are aggregated for purposes of these restrictions. Loan kits containing all
necessary forms, along with an explanation of how interest rates are set, are
available from our Account Executives. If a participant is married, written
spousal consent will be required for a loan.
BENEFIT PAYMENT OPTIONS
We offer a variety of benefit payment options to participants who are
eligible to receive benefits from a plan. However, many self-directed and
individually-designed plans do not allow all of these options, so you should
ask your employer for details on which of these options may be available.
Your plan may allow for one or more of the following forms of distribution to
be selected:
o Qualified Joint and Survivor Annuity
o Lump Sum Payment
o Installment Payments
o Life Annuity
o Life Annuity -- Period Certain
o Joint and Survivor Annuity
o Joint and Survivor Annuity -- Period Certain
o Cash Refund Annuity
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See Types of Benefits in the SAI for detailed information regarding each of
these options, and Procedures for Withdrawals, Distributions and Transfers in
the SAI.
The annuity options may be either fixed or variable except for the Cash
Refund Annuity and the Qualified Joint and Survivor Annuity. Fixed annuities
are available from insurance companies selected by the Trustees, which meet
criteria established by the Trustees from time to time. Upon request, we will
provide fixed annuity rate quotes available from one or more such companies.
Participants may instruct us to withdraw all or part of their Account Balance
and forward it to the annuity provider selected. Once we have distributed
that amount to the company selected, we will have no further responsibility
to the extent of the distribution. We provide the variable annuity options.
Payments under variable annuity options reflect investment performance of the
Growth Equity Fund. The minimum amount that can be used to purchase any type
of annuity is $3,500. In most cases an annuity administrative charge of $350
will be deducted from the amount used to purchase an annuity from Equitable
Life. Annuities purchased from other providers may also be subject to fees
and charges.
SPOUSAL CONSENT RULES
If a participant is married and has an Account Balance greater than $3,500,
federal law generally requires payment of a Qualified Joint and Survivor
Annuity payable to the participant for life and then to the surviving spouse
for life, unless the participant and spouse have properly waived that form of
payment in advance. If a participant is married, the spouse must consent in
writing before any type of withdrawal can be made. See Spousal Consent
Requirements in the SAI.
BENEFITS PAYABLE AFTER THE DEATH OF A PARTICIPANT
If a participant dies before the entire benefit has been paid, the remaining
benefits will be paid to the beneficiary. The law generally requires the
entire benefit to be distributed no more than five years after death. There
are two exceptions -- (1) if the benefit is payable to the spouse, the spouse
may elect to receive benefits over his or her life or a fixed period measured
by life expectancy beginning any time up to the date the participant would
have attained age 70-1/2 or, if later, one year after the participant's
death, and (2) a beneficiary who is not the participant's spouse may elect
payments over his or her life or a fixed period measured by life expectancy,
provided payments begin within one year of death. If, at death, a participant
was already receiving benefits, the beneficiary can continue to receive
benefits based on the payment option selected by the participant. To
designate a beneficiary or to change an earlier designation, a participant
must have the employer send us a beneficiary designation form. The spouse
must consent in writing to a designation of any non-spouse beneficiary, as
explained in Procedures for Withdrawals, Distributions and Transfers --
Spousal Consent Requirements in the SAI.
If a participant in the Master Plan dies without designating a beneficiary,
the vested benefit will automatically be paid to the spouse or, if the
participant is not married, to the first surviving class of his or her (a)
children, (b) parents and (c) brothers and sisters. If none of them survive,
the participant's vested benefit will be paid to the participant's estate. If
a participant in our prototype self-directed plan dies without designating a
beneficiary, the vested benefit will automatically be paid to the spouse or,
if the participant is not married, to the first surviving class of his or her
(a) children, (b) grandchildren, (c) parents, (d) brothers and sisters and
(e) nephews and nieces. If none of them survive, the participant's vested
benefit will be paid to the participant's estate.
Under the Master Plan, on the day we receive proof of death, we automatically
transfer the participant's Account Balance in the Equity Index Fund or the
Lifecycle Funds to the Money Market Guarantee Account unless the beneficiary
gives us other written instructions.
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DEDUCTIONS AND CHARGES
There are two general types of expenses you may incur under the Program. The
first is expenses which are based on amounts invested in the Program. These
are deducted from the assets of a particular Fund in which you invest, or
from the assets of an underlying vehicle in which such Fund invests. The
expenses deducted from the Equity Index Fund and the Lifecycle Funds are the
Program expense charge, the administration fee, and certain other expenses.
These charges are deducted regardless of the type of plan you may have. The
charges also apply to amounts being distributed under installment payout
options. The charges deducted from the Seven Seas S&P 500 Index Fund in which
the Equity Index Fund invests, the Lifecycle Fund Group Trusts in which the
Lifecycle Funds invest, or the Underlying Funds in which the Lifecycle Fund
Group Trusts invest, include investment management fees, administration fees,
custodial fees and certain other expenses. These charges reduce the net asset
value of The Seven Seas S&P 500 Index Fund and the Lifecycle Fund Group
Trusts, and are ultimately reflected in the Unit Values of the Equity Index
Fund and the Lifecycle Funds. See Investment Management Fee under Deductions
and Charges Related to the Lifecycle Fund Group Trusts and Underlying Funds.
The second type of charge is expenses which vary by the type of plan you have
or which are charged for specific transactions. These are typically stated in
terms of a defined dollar amount. Unless otherwise noted, fees which are set
in fixed dollar amounts are deducted by reducing the number of Units in the
Equity Index or Lifecycle Funds in which you invest.
No deductions are made from contributions or withdrawals for sales expenses.
The applicable deductions and charges are described in detail below.
CHARGES BASED ON AMOUNTS INVESTED IN THE PROGRAM
PROGRAM EXPENSE CHARGE
We assess the Program expense charge against the combined value of Program
assets in all of the Investment Options available under the Program,
including Investment Options not described in this prospectus. The purpose of
this charge is to cover the expenses incurred by Equitable Life and the ADA
in connection with the Program. The Unit Values of the Equity Index and
Lifecycle Funds reflect the deduction of this charge.
The amount payable to us and the ADA is calculated as follows:
<TABLE>
<CAPTION>
ANNUAL PROGRAM EXPENSE CHARGE
Value of Program Assets Equitable Life ADA* Total
<S> <C> <C> <C>
First $400 million .650% .025% .675%
Next $350 million .650 .020 .670
Over $750 million .650 .020 .670
</TABLE>
* Currently, this charge has been reduced to 0.01% for all asset value
levels, but the charge could in the future be increased to the levels shown
in the table.
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For all Investment Options (other than the Guaranteed Rate Accounts),
including the Equity Index and Lifecycle Funds, the Program expense charge is
calculated based on Program assets at the end of the second previous month,
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 prospectuses for these Investment
Options.
The portion of the Program expense charge paid to Equitable Life is applied
toward the cost of maintenance of the Investment Options, promotion of the
Program, commissions, administrative costs, such as enrollment and answering
participant inquiries, and overhead expenses such as salaries, rent, postage,
telephone, travel, legal, actuarial and accounting costs, office equipment
and stationery. The ADA's part of this fee covers developmental and
administrative expenses incurred in connection with the Program. The Trustees
can direct Equitable Life to raise or lower the ADA's part of this fee to
reflect their expenses in connection with the Program. Currently, this fee
has been reduced to 0.01% for all asset value levels. During 1995, Equitable
received $6,487,705 and the ADA received $104,687 under the Program expense
charge then in effect.
ADMINISTRATION FEE
The computation of the Unit Values for the Equity Index and Lifecycle Funds
also reflects the deduction of charges for administration.
Equitable Life receives an administration fee at the annual rate of .15% of
assets held in the Equity Index and Lifecycle Funds. This fee covers the
costs related to providing administrative services in connection with the
offering of these Funds. Equitable Life maintains records for all portfolio
transactions and cash flow control, calculates Unit Values, and monitors
compliance with the New York Insurance Law in connection with these Funds.
OTHER EXPENSES BORNE DIRECTLY BY THE FUNDS
Certain costs and expenses are charged directly to the Equity Index Fund and
the Lifecycle Funds. These may include Securities and Exchange Commission
filing fees and certain related expenses including printing of SEC filings,
prospectuses and reports, mailing costs, financial accounting costs and
outside auditing and legal expenses. By agreement with the ADA Trustees,
Equitable Life imposes a charge at the annual rate of .03% of the value of
the respective assets of the Lifecycle Funds-Conservative and Moderate to
compensate it for additional legal, accounting and other potential expenses
resulting from the inclusion of the Lifecycle Fund Group Trusts and
Underlying Funds maintained by State Street among the Investment Options
described in this prospectus. All of these costs are included as "Other
Expenses" in the tables of Annual Fund Operating Expenses and Summary of Fund
Expenses.
The Equity Index Fund purchases and sells shares in the Seven Seas 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 Seven Seas
S&P 500 Index Fund, which are indirectly borne by the Equity Index Fund,
please refer to the prospectus for the Seven Seas S&P 500 Index Fund. In
addition, the Lifecycle Funds purchase and sell units of each Lifecycle Fund
Group Trust at net asset value, which reflects charges for management,
administration and custodial services, and other expenses incurred by the
Lifecycle Fund Group Trusts, as well as other expenses and custodial fees
incurred by the Underlying Funds in which each Lifecycle Fund Group Trust
invests. See discussion below under Deductions and Charges Related to the
Lifecycle Fund Group Trusts and Underlying Funds.
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PLAN AND TRANSACTION EXPENSES
ADA RETIREMENT PLAN, PROTOTYPE SELF-DIRECTED PLAN AND INDIVIDUALLY- DESIGNED
PLAN FEES
RECORD MAINTENANCE AND REPORT FEE. At the end of each calendar quarter, we
deduct a record maintenance and report fee from each participant's Account
Balance. This fee is
<TABLE>
<CAPTION>
<S> <C>
ADA Members Retirement Plan participants .......... $3 per quarter
Self-Directed Prototype Plan participants ......... $3 per quarter
Participants in Pooled-Trust Arrangement .......... $1 per quarter
</TABLE>
ENROLLMENT FEE. The employer must pay us a non-refundable enrollment fee of
$25 for each participant enrolling under its plan. If we do not maintain
individual participant records under an individually- designed plan, the
employer is instead charged $25 for each plan or trust. If these charges are
not paid by the employer, the amount may be deducted from subsequent
contributions or from participants' Account Balances.
PROTOTYPE SELF-DIRECTED PLAN FEES. Employers who participate in our prototype
self-directed plan will incur additional fees not payable to us, such as
brokerage and administration fees.
INDIVIDUAL ANNUITY CHARGES
ANNUITY ADMINISTRATIVE CHARGE. If a participant elects a variable annuity
payment option, a $350 charge will usually be deducted from the amount used
to purchase the annuity to reimburse us for administrative expenses
associated with processing the application for the annuity and with issuing
each month's annuity payment. Annuities purchased from other providers may
also be subject to fees and charges. See Distributions From the Investment
Options and Benefit Payment Options for details.
PREMIUM TAXES. In certain jurisdictions, amounts used to purchase an annuity
are subject to a premium tax (rates currently range up to 5%). Taxes depend,
among other things, on your place of residence, applicable laws and the form
or annuity benefit you select. We will deduct any premium taxes we pay based
on your place of residence at the time the annuity payments begin.
GENERAL INFORMATION ON FEES AND CHARGES
The fees and charges described above may be changed at any time by the mutual
consent of Equitable Life and the ADA. During 1995 we received total fees and
charges under the Program of $9,232,986.
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DEDUCTIONS AND CHARGES RELATED TO THE LIFECYCLE FUND
GROUP TRUSTS AND UNDERLYING FUNDS
In addition to the generally applicable Program fees and charges described
above, fees and charges imposed by State Street are deducted from the assets
of the Lifecycle Fund Group Trusts in which the Lifecycle Funds invest, or
the Underlying Funds in which the Lifecycle Fund Group Trusts invest. Fees
are paid to State Street for providing investment management services, and
custodial services, and for other expenses incurred in connection with
operating the Lifecycle Fund Group Trusts and the Underlying Funds.
INVESTMENT MANAGEMENT FEE. A fee equal to .17% of the average annual net
assets of each Lifecycle Fund Group Trust is paid to State Street for
providing investment management services to the Group Trusts. No fee is paid
to State Street for managing the assets of the Underlying Funds with respect
to investments made in such Fund by each Lifecycle Fund Group Trust. State
Street may receive fees for managing the assets of other collective
investment funds in which the Funds may invest on a temporary basis, and for
managing the mutual funds in which assets of the Underlying Funds may be
invested. State Street has agreed to reduce its management fee charged each
of the Lifecycle Fund Group Trusts to offset any management fees State Street
receives attributable to the Group Trusts' investment in such other
collective investment funds and mutual funds.
FIXED ADMINISTRATION FEE. A deduction is made from the assets of each
Lifecycle Fund Group Trust to compensate State Street for providing various
recordkeeping and accounting services to such Trust and for periodically
rebalancing the assets of each Trust to conform to the target percentage
weightings for the Trust. This fee is currently fixed at $11,100 per year for
each Group Trust.
OTHER EXPENSES. Certain costs and expenses are charged directly to the
Lifecycle Fund Group Trusts. These include legal and audit expenses and costs
related to providing educational and other materials to ADA Program
participants about the Lifecycle Fund investment options. In addition,
participants indirectly incur expenses for audit and custodial services
provided to the Underlying Funds and to the Russell 2000 Value and Growth
Funds. State Street serves as custodian to each of these Funds.
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<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
Current federal income tax rules relating to adoption of the Program and
generally to distributions to participants under qualified retirement plans
are outlined briefly below. These rules relating to contributions are
outlined briefly in the SAI under Provisions of the ADA Plans. For purposes
of this outline we have assumed that you are not a participant in any other
qualified retirement plan. We have not attempted to discuss other current
federal income tax rules that govern participation, vesting, funding or
prohibited transactions, although some information on these subjects appears
here and in the SAI; nor do we discuss the reporting and disclosure or
fiduciary requirements of the Employee Retirement Income Security Act. In
addition, we do not discuss the effect, if any, of state tax laws that may
apply. FOR INFORMATION ON THESE MATTERS, WE SUGGEST THAT YOU CONSULT YOUR TAX
ADVISOR.
ADOPTING THE PROGRAM
If you adopt an ADA Plan, you will not need IRS approval unless you adopt
certain provisions. We will tell you whether it is desirable for you to
submit your plan to the Internal Revenue Service for approval. If you make
such a submission, you will have to pay an IRS user's fee. The Internal
Revenue Service does not have to approve your adoption of the Pooled Trust.
INCOME TAXATION OF DISTRIBUTIONS TO QUALIFIED PLAN PARTICIPANTS
In this section, the word "you" refers to the plan participant.
Amounts distributed to a participant from a qualified plan are generally
subject to federal income tax as ordinary income when benefits are
distributed to you or your beneficiary. Generally speaking, only your
post-tax contributions, if any, are not taxed when distributed.
LUMP SUM DISTRIBUTIONS. If your benefits are distributed to you in a lump sum
after you have participated in the plan for at least five taxable years, you
may be able to use five-year averaging. Under this method, the tax on the
lump sum distribution is calculated separately from taxes on any other income
you may have during the year. The tax is calculated at ordinary income tax
rates in the year of the distribution, but as if it were your only income in
each of five years. The tax payable is the sum of the five years'
calculations. To qualify for five-year averaging, the distribution much
consist of your entire balance in the plan and must be made in one taxable
year of the recipient after you have attained age 59-1/2. Five-year averaging
is available only for one lump sum distribution.
If you were born before 1936, you may elect to have special rules apply to
one lump sum distribution. You may elect either ten-year averaging using 1986
rates or five-year averaging using then current rates. In addition, you may
elect separately to have the portion of your distribution attributable to
pre-1974 contributions taxed at a flat 20% rate.
ELIGIBLE ROLLOVER DISTRIBUTIONS. Many types of distributions from qualified
plans are "eligible rollover distributions" that can be transferred directly
to another qualified plan or individual retirement arrangement ("IRA"), or
rolled over to another plan or IRA within 60 days of the receipt of the
distribution. If a distribution is an "eligible rollover distribution," 20%
mandatory federal income tax withholding will apply unless the distribution
is directly transferred to a qualified plan or IRA. See Eligible Rollover
Distributions and Federal Income Tax Withholding in the SAI for a more
detailed discussion.
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<PAGE>
ANNUITY OR INSTALLMENT PAYMENTS. Each payment you receive is treated as
ordinary income except where you have a "cost basis" in the benefit. Your
cost basis is equal to the amount of your post-tax employee contributions,
plus any employer contributions you were required to include in gross income
in prior years. A portion of each annuity or installment payment you receive
will be excluded from gross income. If you (and your survivor) continue to
receive payments after your cost basis in the contract has been paid out, all
amounts will be taxable.
IN SERVICE WITHDRAWALS; HARDSHIP WITHDRAWALS. Some plans allow in-service
withdrawals of after-tax contributions. The portion of each in-service
withdrawal attributable to cost basis is received income tax-free. The
portion that is attributable to earnings will be included in your gross
income. Amounts contributed before January 1, 1987 to employer plans which on
May 5, 1986 permitted such withdrawals are taxable withdrawals only to the
extent that they exceed the amount of your cost basis. Other amounts are
treated as partly a return of cost basis with the remaining portion treated
as earnings. Amounts included in gross income under this rule may also be
subject to the additional 10% penalty tax on premature distributions
described below. In addition, 20% mandatory federal income tax withholding
may also apply.
PREMATURE DISTRIBUTIONS. You may be liable for an additional 10% penalty tax
on all taxable amounts distributed before age 59-1/2 unless the distribution
falls within a specified exception or is rolled over into an IRA or other
qualified plan.
The exceptions to the penalty tax include (a) distributions made on account
of your death or disability, (b) distributions in the form of a life annuity
or installments over your life expectancy (or the joint lives or life
expectancies of you and your beneficiary), (c) distributions due to
separation from active service after age 55 and (d) distributions used to pay
deductible medical expenses.
EXCESS DISTRIBUTIONS. You may be liable for a 15% excise tax on all
distributions in excess of a threshold amount. All distributions you receive
from qualified plans, IRAs and Section 403(b) tax deferred annuities are
aggregated for this purpose, even if those plans were maintained by unrelated
employers.
For installment and annuity payments, the threshold amount is $155,000 in
1996. If you elect special averaging for a lump sum distribution received in
1995, you will owe the excise tax only to the extent your distribution
exceeds five times the threshold for excess distributions (i.e., $775,000 in
1996).
WITHHOLDING. In almost all cases, 20% mandatory income tax withholding will
apply to all "eligible rollover distributions" that are not directly
transferred to a qualified plan or IRA. If a distribution is not an eligible
rollover distribution, the recipient may elect out of withholding. The rate
of withholding depends on the type of distributions. See Eligible Rollover
Distributions and Federal Income Tax Withholding in the SAI. Under the Master
Plan, we will withhold the tax and send you the remaining amount. Under an
individually designed plan or our prototype self-directed plan that uses the
Pooled Trust for investment only, we will pay the full amount of the
distribution to the plan's trustee. The trustee is then responsible for
withholding federal income tax upon distributions to you or your beneficiary.
OTHER TAX CONSEQUENCES
Federal estate and gift and state and local estate, inheritance, and other
tax consequences of participation in the Program depend on the residence and
the circumstances of each participant or beneficiary. For complete
information on federal, state, local and other tax considerations, you should
consult a qualified tax advisor.
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MISCELLANEOUS
CHANGE OR DISCONTINUANCE OF THE PROGRAM. The group annuity contract has been
amended from time to time, and may be amended in the future. No future change
can affect annuity benefits in the course of payment. Provided certain
conditions are met, we may terminate the offer of any of the Investment
Options and offer new ones with different terms.
Our contract with the Trustees may be terminated by us or the ADA. If our
contract with the Trustees is terminated, we will not accept any further
contributions or perform recordkeeping functions after the date of
termination. At that time we would make arrangements with the Trustees as to
the disposition of the assets in the Investment Options we provide, subject
to the various restrictions related to investments in the Real Estate Fund,
Money Market Guarantee Account, and the Guaranteed Rate Accounts. For a
discussion of these restrictions, please refer to the prospectus for these
Investment Options. You may be able to continue to invest amounts in the
Investment Options we provide and elect payment of benefits through us if the
Trustees make arrangements with us.
AGREEMENT WITH STATE STREET. Equitable Life and State Street have entered
into an Agreement with respect to various administrative, procedural,
regulatory compliance and other matters relating to the availability of the
Lifecycle Fund Group Trusts and Underlying Funds in the ADA Program through
the Lifecycle Funds. The Agreement does not contain an expiration date and is
intended to continue in effect indefinitely. However, the Agreement provides,
among other things, that it may be terminated by Equitable Life upon three
months prior written notice to State Street, or by State Street upon six
months prior written notice to Equitable Life. In the event of a termination
of the Agreement, State Street has the right, upon four months' prior notice
to Equitable Life to require the redemption of all units of the Lifecycle
Fund Group Trusts held by the Lifecycle Funds. Should we receive notice of a
required redemption, we will advise you promptly in order to allow you
adequate time to transfer to one or more of the other Investment Options.
DISQUALIFICATION OF PLAN. If your plan is found not to qualify under the
Internal Revenue Code, we may return the plan's assets to the employer, as
the plan administrator or we may prevent plan participants from investing in
the separate accounts.
REPORTS. We send reports annually to employers showing the aggregate Account
Balances of all participants and information necessary to complete annual IRS
filings.
REGULATION. Equitable Life is subject to regulation and supervision by the
Insurance Department of the State of New York, which periodically examines
Equitable Life's affairs. Equitable Life also is subject to the insurance
laws and regulations of all jurisdictions in which it is authorized to do
business. This regulation does not, however, involve any supervision of the
investment policies of the Funds or of the selection of any investments
except to determine compliance with the law of New York. Equitable Life is
required to submit annual statements of its operations, including financial
statements, to the insurance departments of the various jurisdictions in
which it does business for purposes of determining solvency and compliance
with local insurance laws and regulations.
State Street is subject to supervision and examination by the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Massachusetts Commissioner of Banks.
LEGAL PROCEEDINGS. Both Equitable Life and State Street are separately
engaged in litigation of various kinds which, in the judgment of each
company, is not of material importance in relation to each company's total
assets. None of the litigation now in progress is expected to affect any
assets of the Equity Index Fund or the Lifecycle Funds, or the Lifecycle Fund
Group Trusts or the Underlying Funds in which the Group Trusts invest.
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ADDITIONAL INFORMATION. A registration statement relating to the offering
described in this prospectus has been filed with the Securities and Exchange
Commission under the Securities Act of 1933. Certain portions of the
Registration Statement have been omitted from this prospectus and the SAI
pursuant to the rules and regulations of the Commission. The omitted
information may be obtained by requesting a copy of the registration
statement from the Commission's principal office in Washington, D.C., and
paying the Commission's prescribed fees or by accessing the Securities and
Exchange Commission's Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) system.
EXPERTS. The financial statements of Separate Account Nos. 195, 197 and 198
as of December 31, 1995 and for the period February 1, 1994 through December
31, 1995 for Separate Account No. 195 and for the Period May 1, 1995 through
December 31, 1995 for Separate Account Nos. 197 and 198 included in the SAI,
the condensed financial information for Separate Account No. 195, 197 and 198
as of December 31, 1995 included in this prospectus and the financial
statements of Equitable Life as of December 31, 1995 and 1994 and for the
years then ended included in the SAI, have been so included in reliance upon
the reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
For 1995, the selected financial data included in the prospectus and the
audited financial statements included in the SAI for each of the Underlying
Funds, the Lifecycle Fund Group Trust--Conservative and the Lifecycle Fund
Group Trust--Moderate have been audited by Price Waterhouse LLP, independent
accountants, as stated in their reports that appear in the SAI. The selected
financial data included in the prospectus and the audited financial
statements have been so included in reliance upon the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
ACCEPTANCE. The employer or plan sponsor, as the case may be, is solely
responsible for determining whether the Program is a suitable funding vehicle
and should, therefore, carefully read the prospectus and other materials
before entering into a Participation Agreement.
42
<PAGE>
TABLE OF CONTENTS
OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Contracts .......................................................... SAI-2
Your Responsibilities as Employer ...................................... SAI-2
Procedures for Withdrawals, Distributions and Transfers ................ SAI-3
Types of Benefits ...................................................... SAI-5
Provisions of the Master Plan .......................................... SAI-7
Additional Investment Policies and Techniques -- The Underlying Funds . SAI-11
Investment Restrictions ................................................ SAI-14
How the Assets of the Funds Are Valued ................................. SAI-15
How the Assets of the Underlying Funds Are Valued ...................... SAI-15
Transactions by the Underlying Funds ................................... SAI-17
Investment Management Fee .............................................. SAI-17
Underwriter ............................................................ SAI-18
Management ............................................................. SAI-19
Financial Statements ................................................... SAI-22
</TABLE>
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, 1996 (State Street).
Name
- -----------------------------------------------------------------------------
Address:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Copyright 1996 by The Equitable Life Assurance Society of the United States.
All rights reserved.
43
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY .................................................................................. 3
CONDENSED FINANCIAL INFORMATION .......................................................... 7
SELECTED FINANCIAL DATA .................................................................. 9
INVESTMENT OPTIONS ....................................................................... 13
THE EQUITY INDEX FUND .................................................................... 13
LIFECYCLE FUNDS -- CONSERVATIVE AND MODERATE ............................................. 14
THE LIFECYCLE FUND GROUP TRUSTS .......................................................... 15
Lifecycle Fund Group Trust -- Conservative .............................................. 15
Lifecycle Fund Group Trust -- Moderate .................................................. 15
THE UNDERLYING FUNDS ..................................................................... 16
S&P 500 Flagship Fund ................................................................... 16
Russell 2000 Fund ..................................................................... 16
Daily EAFE Fund ....................................................................... 17
Daily Government/Corporate Bond Fund .................................................. 18
Short Term Investment Fund ............................................................ 18
Voting Rights: The Lifecycle Funds .................................................... 18
Risks and Investment Techniques: Lifecycle Fund Group Trusts and Underlying Funds ..... 18
HOW WE CALCULATE THE VALUE OF AMOUNTS ALLOCATED TO THE
EQUITY INDEX AND LIFECYCLE FUNDS ......................................................... 22
EQUITABLE LIFE AND STATE STREET .......................................................... 24
Equitable Life ......................................................................... 24
The Separate Accounts ................................................................. 24
State Street .......................................................................... 24
The Lifecycle Fund Group Trusts and Underlying Funds .................................. 25
INVESTMENT PERFORMANCE ................................................................. 26
Measuring the Investment Performance of the Funds ..................................... 26
Unmanaged Market Indices .............................................................. 26
How Performance Data Are Presented .................................................... 27
Annual Percentage Change in Fund Unit Values .......................................... 27
Average Annual Percentage Change in Fund Unit Values--Years Ending December 31, 1995 .. 27
THE PROGRAM .............................................................................. 28
Employers Who May Participate in the Program ........................................... 28
Choices for the Employer .............................................................. 28
Summary of the Plans and Trusts ....................................................... 28
44
<PAGE>
PAGE
Information on Joining the Program ....................................................... 29
Choosing the Right Plan ............................................................... 29
Getting Started In The Program After Choosing A Plan .................................. 29
Communicating With Us After You Enroll ................................................ 30
Your Responsibilities As the Employer ................................................. 30
When Transactions Are Effective ....................................................... 30
Minimum Investments ................................................................... 31
Making Contributions to the Program ................................................... 31
Our Account Investment Management (AIM) System ........................................ 31
Allocating Contributions Among the Investment Options ................................. 31
Transfers Among the Investment Options ................................................ 32
Distributions From the Investment Options ............................................. 32
When Distributions Are Available to Participants ...................................... 32
Participant Loans ..................................................................... 33
Benefit Payment Options ............................................................... 33
Spousal Consent Rules ................................................................. 34
Benefits Payable After the Death of a Participant ..................................... 34
DEDUCTIONS AND CHARGES ................................................................... 35
CHARGES BASED ON AMOUNTS INVESTED IN THE PROGRAM ......................................... 35
Program Expense Charge ................................................................. 35
Administration Fee .................................................................... 36
Other Expenses Borne Directly by the Funds ............................................ 36
PLAN AND TRANSACTION EXPENSES .......................................................... 37
ADA Retirement Plan, Prototype Self-Directed Plan and Individually-Designed Plan Fees . 37
Individual Annuity Charges ............................................................ 37
General Information On Fees and Charges ............................................... 37
DEDUCTIONS AND CHARGES RELATED TO THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS .. 38
FEDERAL INCOME TAX CONSIDERATIONS ........................................................ 39
Adopting the Program ................................................................... 39
Income Taxation of Distributions to Qualified Plan Participants ....................... 39
Other Tax Consequences ................................................................ 40
MISCELLANEOUS ............................................................................ 41
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION ................................. 43
</TABLE>
45
<PAGE>
- -----------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
MAY 1, 1996
AMERICAN DENTAL ASSOCIATION
MEMBERS RETIREMENT PROGRAM
Separate Account Units of interest under a group annuity contract with THE
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, 787 Seventh Avenue,
New York, New York 10019, which funds the American Dental Association Members
Retirement Program. Toll-free telephone number 1-800-223-5790.
- -----------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the prospectus dated May 1, 1996 for the American
Dental Association Members Retirement Program describing the Equity Index
Fund and the Lifecycle Funds--Conservative and Moderate.
A copy of the prospectus to which this Statement of Additional Information
relates is available at no charge by writing to The Equitable Life Assurance
Society of the United States ("Equitable Life"), at Box 2486 G.P.O., New
York, New York 10116 or by calling our toll-free telephone number.
The following information is contained primarily in the prospectus:
Investment Objectives and Policies
Investment Advisory Services
Certain of the cross references in this Statement of Additional Information
are contained in the prospectus dated May 1, 1996 to which this Statement of
Additional Information relates.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
The Contracts ................................ SAI-2
Your Responsibilities as Employer ............ SAI-2
Procedures for Withdrawals, Distributions and
Transfers ................................... SAI-3
Pre-Retirement Withdrawals .................. SAI-3
Benefit Distributions ....................... SAI-3
Spousal Consent Requirements ................ SAI-4
Eligible Rollover Distributions and
Federal Income Tax Withholding ............. SAI-5
Types of Benefits ............................ SAI-5
Provisions of the Master Plan ................ SAI-7
Plan Eligibility Requirements ............... SAI-7
Contributions to Qualified Plans ............ SAI-7
Contributions to the Master Plan ............ SAI-7
Allocation of Contributions ............... SAI-9
The Master Plan and Section 404(c)
of ERISA ................................... SAI-9
Vesting ................................... SAI-9
Additional Investment Policies and
Techniques--The Underlying Funds ........... SAI-11
Investment Restrictions ...................... SAI-14
How the Assets of the Funds are Valued ...... SAI-15
How the Assets of the Underlying Funds are
Valued ..................................... SAI-15
Transactions by the Underlying Funds ........ SAI-17
Investment Management Fee .................... SAI-17
Underwriter .................................. SAI-18
Management ................................... SAI-19
Financial Statements ......................... SAI-22
</TABLE>
- ------------
Copyright 1996 by The Equitable Life Assurance Society of The United States.
All rights reserved.
<PAGE>
ADDITIONAL INFORMATION ABOUT THE PROGRAM
THE CONTRACTS
The Program is primarily funded through a group annuity contract issued to
the Trustees by Equitable Life. The contract governs the Investment Options
that are provided by Equitable Life under the Program. The Trustees hold this
contract for the benefit of employers and participants in the Program.
In addition, the Trustees and Equitable Life have entered into an
administrative services agreement that governs Equitable Life's duties
relating to administrative support, recordkeeping and marketing for the
Program. This agreement would under most circumstances terminate at the same
time as the group annuity contract.
YOUR RESPONSIBILITIES AS EMPLOYER
If you adopt the Master Plan, you as the employer and plan administrator will
have certain responsibilities, including:
o sending us your contributions at the proper time and in the proper
format;
o maintaining all personnel records necessary for administering your
plan;
o determining who is eligible to receive benefits;
o forwarding to us all the forms your employees are required to submit;
o distributing summary plan descriptions and participant annual reports
to your employees and former employees;
o distributing our prospectuses and confirmation notices to your
employees and, in some cases, former employees;
o filing an annual information return for your plan with the Internal
Revenue Service, if required;
o providing us the information with which to run special
non-discrimination tests, if you have a 401(k) plan or your plan accepts
post-tax employee or employer matching contributions;
o determining the amount of all contributions for each participant in the
plan;
o forwarding salary deferral and post-tax employee contributions to us;
and
o selecting interest rates and monitoring default procedures if you elect
the loan provision in your plan.
SAI-2
<PAGE>
If you, as an employer, have an individually designed plan, your
responsibilities will not be increased in any way by your adoption of the
Pooled Trust for investment only. If you adopt our self-directed prototype
plan, you will be completely responsible for administering the plan and
complying with all of the reporting and disclosure requirements applicable to
qualified plans, with the assistance of the recordkeeper of your choice.
We will give you guidance and assistance in the performance of your
responsibilities. The ultimate responsibility, however, rests with you. If
you have questions about any of your obligations, you can contact Equitable
Life's Account Executives at 1-800-223-5790 or write to us at Box 2486
G.P.O., New York, New York 10116.
PROCEDURES FOR WITHDRAWALS, DISTRIBUTIONS AND TRANSFERS
PRE-RETIREMENT WITHDRAWALS. Under the Master Plan, self-employed persons may
generally not receive a distribution prior to age 59 1/2 , and employees may
generally not receive a distribution prior to separation from service.
However, if your employer maintains the Master Plan as a profit sharing plan,
you may request distribution of benefits after you reach age 59 1/2 even if
you are still working. If your employer maintains the Master Plan as a 401(k)
plan and you are under age 59 1/2 , you may withdraw your own 401(k)
contributions only if you can demonstrate financial hardship within the
meaning of applicable Income Tax Regulations. Each withdrawal must be at
least $1,000 (or, if less, your entire Account Balance or the amount of your
hardship withdrawal under a 401(k) plan). If your employer terminates the
plan, all amounts (subject to GRA restrictions) may be distributed to
participants at that time.
You may withdraw all or part of your Account Balance under the Master Plan
attributable to post-tax employee contributions at any time, subject to any
withdrawal restrictions applicable to the Investment Options, provided that
you withdraw at least $300 at a time (or, if less, your Account Balance
attributable to post-tax employee contributions). See Federal Income Tax
Considerations in the prospectus.
All benefit payments (including withdrawals due to plan terminations) will be
paid in accordance with the rules described below under Benefit
Distributions. All other withdrawals will be effected as of the close of
business on the day we receive the properly completed form.
If you are married, your spouse must consent in writing before you can make
any type of withdrawal. See Spousal Consent Requirements below.
Under the self-directed prototype plan you may receive a distribution upon
attaining normal retirement age as specified in the plan, or upon separation
from service. If your employer maintains the self-directed prototype plan as
a profit sharing plan, an earlier distribution of funds that have accumulated
after two years is available if you incur a financial hardship, as defined in
the plan. In addition, if you are married, your spouse may have to consent in
writing before you can make any type of withdrawal, except for the purchase
of a Qualified Joint and Survivor Annuity. See Spousal Consent Requirements
below.
Under an individually designed plan, the availability of pre-retirement
withdrawals depends on the terms of the plan. We suggest that you ask your
employer what types of withdrawals are available under your plan.
Transfers from the Equity Index Fund and the Lifecycle Funds--Conservative
and Moderate are permitted daily except under infrequent circumstances when
they may be subject to a delay.
BENEFIT DISTRIBUTIONS. In order for you to begin receiving benefits under the
Master Plan, your employer must send us your properly completed Election of
Benefits form and, if applicable, Beneficiary Designation
SAI-3
<PAGE>
form. If we receive your properly completed forms on or before the 15th of
the month, your benefits will commence as of the close of business on the
first business day of the next month; if your forms arrive after the 15th,
your benefits will commence as of the close of business on the first business
day of the second following month.
Under an individually designed plan and our self-directed prototype plan,
your employer must send us a request for disbursement form. We will send
single sum payments to your plan's trustee as of the close of business on the
day we receive a properly completed form. If you wish to receive annuity
payments, your plan's trustee may purchase a variable annuity contract from
us. Fixed annuities are available from insurance companies selected by the
Trustees. See Types of Benefits. Annuity payments will be paid directly to
you and will commence as of the close of business on the first business day
of the next month if we receive your properly completed forms on or before
the 15th of the month. If we receive your properly completed forms after the
15th, annuity payments will commence as of the close of business on the first
business day of the second following month.
Transfers and withdrawals from the Equity Index Fund may be deferred if there
is any delay in redemption of shares of the Seven Seas S&P 500 Index Fund. We
generally do not expect any such delays.
Transfers and withdrawals from the Lifecycle Funds--Conservative and Moderate
may be deferred if there is any delay in redemption of units of the Lifecycle
Fund Group Trusts. We generally do not expect any such delays.
Please note that we use the value of your vested benefits at the close of
business on the day payment is due to determine the amount of benefits you
receive. We will not, therefore, begin processing your check until the
following business day. You should expect your check to be mailed within five
days after processing begins. Annuity checks can take longer. If you buy a
fixed annuity, your check will come from the company you selected. If you are
withdrawing more than $50,000 and you would like expedited delivery at your
expense, you may request it on your election of benefits form.
Distributions under a qualified retirement plan such as yours are subject to
extremely complicated legal requirements. When you are ready to retire, we
suggest that you discuss the available payment options with your employer.
Our Account Executives can provide you or your employer with information.
SPOUSAL CONSENT REQUIREMENTS. Under the Master Plan and the self-directed
prototype plan, you may designate a non-spouse beneficiary any time after the
earlier of the first day of the plan year in which you attain age 35 or the
date on which you separate from service with your employer. If you designate
a beneficiary other than your spouse prior to your reaching age 35, your
spouse must consent to the designation and, upon your reaching age 35, must
again give his or her consent or the designation will lapse. In order for you
to make a withdrawal, elect a form of benefit other than a Qualified Joint
and Survivor Annuity or designate a non-spouse beneficiary, your spouse must
consent to your election in writing within the 90 day period before your
annuity starting date. To consent, your spouse must sign on the appropriate
line on your election of benefits or beneficiary designation form. Your
spouse's signature must be witnessed by a notary public or plan
representative.
If you change your mind, you may revoke your election and elect a Qualified
Joint and Survivor Annuity or designate your spouse as beneficiary, simply by
filing the appropriate form. Your spouse's consent is not required for this
revocation.
It is also possible for your spouse to sign a blanket consent form. By
signing this form, your spouse consents not just to a specific beneficiary or
form of distribution, but gives you the right to name any beneficiary, or if
applicable, form of distribution you want. Once you file such a form, you may
change your election
SAI-4
<PAGE>
whenever you want, even without spousal consent. No spousal consent to a
withdrawal or benefit in a form other than a Qualified Joint and Survivor
Annuity is required under certain self-directed and individually designed
profit sharing plans that do not offer life annuity benefits.
ELIGIBLE ROLLOVER DISTRIBUTIONS AND FEDERAL INCOME TAX WITHHOLDING. All
"eligible rollover distributions" are subject to mandatory federal income tax
withholding of 20% unless the Participant elects to have the distribution
directly rolled over to a qualified plan or individual retirement arrangement
(IRA). An "eligible rollover distribution" is any distribution that is not
one of a series of substantially equal periodic payments made (not less
frequently than annually) (1) for the life (or life expectancy) of the plan
Participant or the joint lives (or joint life expectancies) of the plan
Participant and his or her designated beneficiary, or (2) for a specific
period of 10 years or more. In addition, the following are not subject to
mandatory 20% withholding:
o certain corrective distributions under Internal Revenue Code (Code)
Section 401(k) plans;
o certain loans that are treated as distributions; and
o a distribution to a beneficiary other than to a surviving spouse or a
current or former spouse under a qualified domestic relations order.
If a distribution is made to a Participant's surviving spouse, or to a
current or former spouse under a qualified domestic relations order, the
distribution may be an eligible rollover distribution, subject to mandatory
20% withholding, unless one of the exceptions described above applies.
If a distribution is not an "eligible rollover distribution" income tax will
be withheld from all taxable payments unless the recipient elects not to have
income tax withheld.
TYPES OF BENEFITS
Under the Master Plan, and under most self-directed prototype plans, except
as provided below, you may select one or more of the following forms of
distribution once you are eligible to receive benefits. Please see Benefit
Distributions under Procedures for Withdrawals, Distributions and Transfers.
Not all of these distribution forms may be available to you, if your employer
has adopted an individually designed plan or a self-directed prototype profit
sharing plan that does not offer annuity benefits. We suggest you ask your
employer what types of benefits are available under your plan.
Fixed annuities are available from insurance companies selected by the
Trustees, which meet criteria established by the Trustees from time to time.
Fixed annuities are currently not available from Equitable Life. The types of
fixed annuity benefits described below will be available through one or more
of such companies. Upon your request, the companies will provide annuity
benefit information. We will have no further responsibility for the amount
used to purchase the annuity once it has been sent to the insurance company
you select. The cost of a fixed annuity is determined by each insurance
company based on its current annuity purchase rates. The amount of your
monthly annuity benefit will depend on the type of annuity selected, your age
and the age of your beneficiary if you select a joint and survivor annuity.
An Equitable Life Account Executive has more details regarding the insurance
companies currently providing annuity benefits under the Program.
QUALIFIED JOINT AND SURVIVOR ANNUITY. An annuity providing equal monthly
payments for your life and, after your death, for your surviving spouse's
life. No payments will be made after you and your spouse die, even if you
have received only one payment. THE LAW REQUIRES THAT IF THE VALUE OF YOUR
VESTED BENEFITS
SAI-5
<PAGE>
EXCEEDS $3,500, YOU MUST RECEIVE A QUALIFIED JOINT AND SURVIVOR ANNUITY
UNLESS YOUR SPOUSE CONSENTS IN WRITING TO A CONTRARY ELECTION. Please see
Spousal Consent Requirements under Procedures for Withdrawals, Distributions
and Transfers for an explanation of the procedures for electing not to
receive a Qualified Joint and Survivor Annuity.
LUMP SUM PAYMENT. A single payment of all or part of your vested benefits. If
you take a lump sum payment of only part of your balance, it must be at least
$1,000. IF YOUR VESTED BENEFIT IS $3,500 OR LESS, YOU WILL RECEIVE A LUMP SUM
PAYMENT OF THE ENTIRE AMOUNT.
PERIODIC INSTALLMENTS. Monthly, quarterly, semi-annual or annual payments
over a period of at least three years, where the initial payment on a monthly
basis is at least $300. You can choose either a time-certain payout, which
provides variable payments over a specified period of time, or a
dollar-certain payout, which provides level payments over a variable period
of time. During the installment period, your remaining Account Balance will
be invested in whatever Options you designate, other than the Real Estate
Fund; each payment will be drawn pro rata from all the Options you have
selected. If you die before receiving all the installments, we will make the
remaining payments to your beneficiary. Except in the case of participant
accounts transferred from defined contribution plans, we do not offer
installments for benefits under the individually designed plans or our
self-directed prototype plan. For special conditions applying to installment
payments involving the Real Estate Fund and the Guaranteed Rate Accounts,
please refer to the prospectus and SAI for these options.
LIFE ANNUITY. An annuity providing monthly payments for your life. No
payments will be made after your death, even if you have received only one
payment.
LIFE ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your
life or, if longer, a specific period of time. If you die before the end of
that specified period, payments will continue to your beneficiary until the
end of the period. Subject to legal limitations, you may specify a minimum
payment period of 5, 10, 15 or 20 years; the longer the specified period, the
smaller the monthly payments will be.
JOINT AND SURVIVOR ANNUITY. An annuity providing monthly payments for your
life and that of your beneficiary. You may specify the percentage of the
annuity payment to be made to your beneficiary. Subject to legal limitations,
that percentage may be 100%, 75%, 50%, or any other percentage you specify.
JOINT AND SURVIVOR ANNUITY--PERIOD CERTAIN. An annuity providing monthly
payments for your life and that of your beneficiary or, if longer, a
specified period of time. If you and your beneficiary both die before the end
of the specified period, payments will continue to your contingent
beneficiary until the end of the period. Subject to legal limitations, you
may specify a minimum payment period of 5, 10, 15 or 20 years and the
percentage of the annuity payment to be made to your beneficiary (as noted
above under Joint and Survivor Annuity); the longer the specified period, the
smaller the monthly payments will be.
CASH REFUND ANNUITY. An annuity providing equal monthly payments for your
life with a guarantee that the sum of those payments will be at least equal
to the portion of your vested benefits used to purchase the annuity. If upon
your death the sum of the monthly payments to you is less than that amount,
your beneficiary will receive a lump sum payment of the remaining guaranteed
amount.
Under a Qualified Joint and Survivor Annuity or a Cash Refund Annuity, the
amount of the monthly payments is fixed at retirement and remains level
throughout the distribution period. Under the Life Annuity, Life
Annuity--Period Certain, Joint and Survivor Annuity and Joint and Survivor
Annuity-- Period Certain, you may select either fixed or variable payments.
All forms of variable annuity benefits under the Program will be provided by
us. The payments under variable annuity options reflect the investment
performance of the Growth Equity Fund. If you are interested in a variable
annuity, when you are ready to select your benefit please call an Equitable
Life Account Executive for the variable annuity prospectus supplement.
SAI-6
<PAGE>
PROVISIONS OF THE MASTER PLAN
PLAN ELIGIBILITY REQUIREMENTS. Under the Master Plan, the employer specifies
the eligibility requirements for its plan in the Participation Agreement. The
employer may exclude any employee who has not attained a specified age (not
to exceed 21) and completed a specified number of years (not to exceed two)
in each of which he completed 1,000 hours of service. No more than one year
of eligibility service may be required for a 401(k) arrangement.
The employer may also exclude salaried dentists (those with no ownership
interest in the practice), employees of related employers, leased employees
and certain other types of employees at the employer's election, provided
such exclusion does not cause the plan to discriminate in favor of "highly
compensated" employees (defined below). The Master Plan provides that a
partner or shareholder may, upon commencement of employment or upon first
becoming eligible to participate in any qualified plan of the employer, make
a one-time irrevocable election not to participate in the plan or to make a
reduced contribution. This election applies to all plans of the employer, now
and in the future, and should be discussed with your tax advisor.
CONTRIBUTIONS TO QUALIFIED PLANS. Current federal income tax rules relating
to contributions under qualified retirement plans are outlined briefly below.
For purposes of this outline we have assumed that you are not a participant
in any other qualified retirement plan.
The employer's contributions to the plan are deductible in the year for which
they are made. As a general rule, employer contributions must be made for any
year by the due date (including extensions) for filing the employer's federal
income tax return for that year. However, participants' salary deferrals
under a 401(k) plan must be contributed by the employer as soon as
practicable after the payroll period for which the deferral is made and
regulations have been proposed for shortening the maximum time period for
remitting contributions to the plan.
If the employer contributes more to the plan than is deductible under the
rules described below, the employer may be liable for a 10% penalty tax on
that nondeductible amount and may risk disqualifying the plan.
CONTRIBUTIONS TO THE MASTER PLAN. The employer makes annual contributions to
its plan based on the plan's provisions.
An employer that adopts the Master Plan as a profit sharing plan makes
contributions in discretionary amounts to be determined annually. The
aggregate employer contribution to the plan, including participants' salary
deferrals under a 401(k) arrangement, is limited to 15% of all participants'
compensation for the plan year. For plan purposes, compensation for
self-employed persons does not include deductible plan contributions made on
behalf of the self-employed person.
A 401(k) arrangement is available as part of the profit sharing plan. Under a
401(k) arrangement, employees are permitted to make contributions to the plan
on a pre-tax basis. The maximum amount that may be contributed by highly
compensated employees is limited depending upon the amount that is
contributed by non-highly compensated employees and the amount the employer
designates as a nonforfeitable 401(k) contribution. In 1996, "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 $100,000 from the
practice, or (c) anyone with earnings of more than $66,000 from the practice
who is among the highest paid 20% of employees, or (d) an officer of the
practice with earnings of at least $60,000. In any event, the
SAI-7
<PAGE>
maximum amount each employee may defer is limited to $9,500 for 1996 reduced
by that employee's salary reduction contributions to simplified employee
pension (SEPs), employee contributions to tax deferred Section 403(b)
annuities, and contributions deductible by the employee under a trust
described under Section 501(c)(18) of the Code.
If the employer adopts the Master Plan as a defined contribution pension
plan, its contribution is equal to the percentage of each participant's
compensation that is specified in the Participation Agreement.
Under either type of plan, compensation in excess of $150,000 must be
disregarded in making contributions. Contributions may be integrated with
Social Security which means that contributions with respect to each
participant's compensation in excess of the integration level may exceed
contributions made with respect to compensation below the integration level,
within limits imposed by the Code. Your Account Executive can help you
determine the legally permissible contribution.
Contributions on behalf of non-key employees must be at least 3% of
compensation (or, under the profit sharing plan, the percentage contributed
on behalf of key employees, if less than 3%). A "key employee" means (a) an
owner of one of the ten largest (but more than 1/2 %) interests in the
practice with earnings of more than $30,000, or (b) an officer of the
practice with earnings of more than $60,000 or (c) an owner of more than 5%
of the practice, or (d) an owner of more than 1% of the practice with
earnings of more than $150,000. For purposes of (a), no more than 50
employees (or, if less, the greater of three or 10% of the employees) shall
be treated as officers.
Certain plans may also permit participants to make post-tax contributions. We
will maintain a separate account to reflect each participant's post-tax
contributions and the earnings (or losses) thereon. Post-tax contributions
are now subject to complex rules under which the maximum amount that may be
contributed by highly compensated employees is limited, depending on the
amount contributed by non-highly compensated employees. BEFORE PERMITTING ANY
HIGHLY-COMPENSATED EMPLOYEE TO MAKE POST-TAX CONTRIBUTIONS, THE EMPLOYER
SHOULD MAKE SURE THAT ALL NON-DISCRIMINATION TESTS HAVE BEEN PASSED. If an
employer employs only "highly compensated" employees (as defined above),
post-tax contributions may not be made to the plan. In addition, the employer
may make matching contributions to certain plans, i.e., contributions which
are based upon the amount of post-tax or pre-tax 401(k) contributions made by
plan participants. Special non-discrimination rules apply to matching
contributions and may limit the amount of matching contributions that may be
made on behalf of highly compensated employees.
Contributions on behalf of each participant are limited to the lesser of
$30,000 and 25% of his earnings (excluding, in the case of self-employed
persons, all deductible plan contributions). The participant's post-tax
contributions are taken into account for purposes of applying this
limitation.
Each participant's Account Balance equals the sum of the amounts accumulated
in each Investment Option. We will maintain separate records of each
participant's interest in each of the Investment Options attributable to
employer contributions, 401(k) non-elective contributions, 401(k) elective
contributions, post-tax employee contributions and employer matching
contributions. Any amounts rolled over from the plan of a previous employer
will also be accounted for separately. Our records will also reflect each
participant's percentage of vesting (see below) in his Account Balance
attributable to employer contributions and employer matching contributions.
The participant will receive an individual confirmation of each transaction
(including the deduction of record maintenance and report fees). The
participant will also receive an annual statement showing his
SAI-8
<PAGE>
Account Balance in each Investment Option attributable to each type of
contribution. Based on information supplied by you, we will run the required
special non-discrimination test (Actual Deferral Percentage and Actual
Contribution Percentage) applicable to 401(k) plans and plans that accept
post-tax employee contributions or employer matching contributions.
Elective deferrals to a 401(k) plan are subject to applicable FICA (social
security), Medicare tax and FUTA (unemployment) taxes. They may also be
subject to state income tax.
ALLOCATION OF CONTRIBUTIONS. Contributions may be allocated among any number
of the Investment Options. Allocation instructions may be changed at any
time, and as often as needed, by filing a Change of Investment Allocation
form or by calling the AIM System. New instructions become effective on the
business day we receive them. Employer contributions may be allocated in
different percentages than employee contributions. The allocation percentages
elected for employer contributions will automatically apply to any 401(k)
qualified non-elective contributions, qualified matching contributions and
matching contributions. The allocation percentages for employee contributions
will automatically apply to any post-tax employee contributions and 401(k)
salary deferral contributions. IF WE HAVE NOT RECEIVED VALID INSTRUCTIONS, WE
WILL ALLOCATE CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT.
The Master Plan and Section 404(c) of ERISA. The Master Plan is a participant
directed individual account plan designed to comply with the requirements of
Section 404(c) of ERISA. Section 404(c) of ERISA, and the related Department
of Labor (DOL) regulation, provide that if a participant or beneficiary
exercises control over the assets in his or her plan account, plan
fiduciaries will not be liable for any loss that is the direct and necessary
result of the participant's or beneficiary's exercise of control. This means
that if the Employer Plan complies with Section 404(c), participants can make
and are responsible for the results of their own investment decisions.
Section 404(c) plans must, among other things, make a broad range of
investment choices available to Participants and beneficiaries and must
provide them with enough information to make informed investment decisions.
The ADA Program provides the broad range of investment choices and
information that are needed in order to meet the requirements of Section
404(c). Our suggested summary plan descriptions, annual reports,
prospectuses, and confirmation notices provide the required investment
information; it is the employer's responsibility, however, to see that this
information is distributed in a timely manner to participants and
beneficiaries. You should read this information carefully before making your
investment decisions.
VESTING. Vesting refers to the nonforfeitable portion of a participant's
Account Balance attributable to employer contributions under the Master Plan.
The participant's Account Balance attributable to 401(k) contributions
(including salary deferral, qualified non-elective and qualified matching
contributions), post-tax employee contributions and to rollover contributions
is nonforfeitable at all times.
A participant will become fully vested in all benefits if still employed at
death, disability, attainment of normal retirement age or upon termination of
the plan. If the participant terminates employment before that time, any
benefits that have not yet become vested under the plan's vesting schedule
will be forfeitable. The normal retirement age is 65 under the Master Plan.
SAI-9
<PAGE>
Benefits must vest in accordance with any of the schedules below or one at
least as favorable to participants:
<TABLE>
<CAPTION>
SCHEDULE A SCHEDULE B SCHEDULE C
YEARS OF VESTED VESTED VESTED
SERVICE PERCENTAGE PERCENTAGE PERCENTAGE
- ---------- ------------ ------------ ------------
<S> <C> <C> <C>
1 0% 0% 0%
2 100 20 0
3 100 40 100
4 100 60 100
5 100 80 100
6 100 100 100
</TABLE>
If the plan requires more than one year of service for participation, it must
use Schedule A or one at least as favorable to participants.
SAI-10
<PAGE>
ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES -- THE UNDERLYING FUNDS
The following discussion supplements the discussion of the investment
policies and techniques of the Underlying Funds for the Lifecycle Fund Group
Trusts included under the section entitled Investment Options in the
prospectus. Also discussed hereunder are the investment restrictions
applicable to investments made by such Underlying Funds. As a general matter,
you should note that the Flagship Fund, the 2000 Fund, and the Daily EAFE
Fund are index funds and, therefore, not "actively" managed like other
collective investment funds. Each of these Underlying Funds utilizes a
"passive" investment approach, attempting to duplicate the investment
performance of its benchmark index through automated statistical analytic
procedures. See the section of the prospectus entitled Investment
Options--Risks and Investment Techniques for further discussion of this
method of management. Therefore, some of the policies and investment
techniques discussed below may not be engaged in to the same extent as if the
Underlying Funds were actively managed.
U.S. GOVERNMENT SECURITIES. The Underlying Funds may invest in securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, which include U.S. Treasury securities that differ in
their interest rates, maturities and times of issuance. Treasury Bills have
initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of greater than ten years. Some obligations issued or guaranteed
by U.S. Government agencies and instrumentalities are supported by the full
faith and credit of the U.S. Treasury; others, by the right of the issuer to
borrow from the Treasury; others, by discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality;
and others, only by the credit of the agency or instrumentality. These
securities bear fixed, floating or variable rates of interest. Principal and
interest may fluctuate based on generally recognized reference rates or the
relationship of rates. While the U.S. Government provides financial support
to such U.S. Government-sponsored agencies or instrumentalities, no assurance
can be given that it will always do so, since it is not so obligated by law.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES.
Certain of the Underlying Funds may invest in obligations issued or
guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities that are determined by State
Street to be of comparable quality to the other obligations in which such
Underlying Fund may invest. Such securities also include debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. The percentage of such Underlying Fund's
assets invested in securities issued by foreign governments will vary
depending on the relative yields of such securities, the economic and
financial markets of the countries in which the investments are made and the
interest rate climate of such countries.
BANK OBLIGATIONS. The Underlying Funds may invest in bank obligations,
including certificates of deposit, time deposits, bankers' acceptances and
other short-term obligations of domestic banks, foreign subsidiaries of
domestic banks, foreign branches of domestic banks, and domestic and foreign
branches of foreign banks, domestic savings and loan associations and other
banking institutions. With respect to such securities issued by foreign
branches of domestic banks, foreign subsidiaries of domestic banks, and
domestic and foreign branches of foreign banks, such Underlying Fund may be
subject to additional investment risks that are different in some respects
from those incurred by a fund which invests only in debt obligations of U.S.
domestic issuers. These risks include possible future political and economic
developments, the possible imposition of foreign withholding taxes on
interest income payable on the securities, the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on these
securities and the possible seizure or nationalization of foreign deposits.
SAI-11
<PAGE>
Certificates of deposit are negotiable certificates evidencing the obligation
of a bank to repay funds deposited with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Time deposits which
may be held by such Underlying Fund will not benefit from insurance
administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations, bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS. The Underlying
Funds may invest in commercial paper. Commercial paper is short-term,
unsecured promissory notes issued to finance short-term credit needs. Any
commercial paper in which such Underlying Fund invests will consist only of
direct obligations which, at the time of their purchase, are (a) rated not
lower than Prime-1 by Moody's Investor Service ("Moody's"), A-1 by S&P, or
any equivalent rating by any other nationally recognized statistical rating
organization, (b) issued by companies having an outstanding unsecured debt
issue currently rated not lower than Aa3 by Moody's or AA- by S&P, or any
equivalent rating by any other nationally recognized statistical rating
organization, or (c) if unrated, determined by State Street to be of
comparable quality to those rated obligations which may be purchased by such
Underlying Fund.
REPURCHASE AGREEMENTS. The Underlying Funds may enter into repurchase
agreements. Repurchase agreements involve the acquisition of an underlying
debt instrument, subject to an obligation of the seller to repurchase, and to
resell, the instrument at a fixed price usually not more than one week after
its purchase. Certain costs may be incurred by an Underlying Fund in
connection with the sale of the securities if the seller does not repurchase
them in accordance with the repurchase agreement. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the securities,
realization on the securities by an Underlying Fund may be delayed or
limited. Each Underlying Fund will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements.
FLOATING AND VARIABLE RATE OBLIGATIONS. An Underlying Fund may purchase
floating and variable rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of 13 months. Generally, the
lender may demand repayment, and the borrower has a right to repay the loan
prior to maturity. The interest rate generally fluctuates based on a
published rate such as a bank's prime rate. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where the obligations are not
secured by letters of credit or other credit support arrangements, the
Underlying Fund's right to redeem is dependent on the ability of the borrower
to pay principal and interest on demand.
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS. An Underlying Fund
may invest in the securities of foreign issuers in the form of American
Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs"). These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs, which are
sometimes referred to as Continental Depositary Receipts ("CDRs"), are
receipts issued in Europe typically by non-United States banks and trust
companies that evidence ownership of either foreign or domestic securities.
SAI-12
<PAGE>
FUTURES CONTRACTS. To the extent permitted by applicable regulations, an
Underlying Fund is permitted to use financial futures as a substitute for a
comparable market position in the underlying securities.
An Underlying Fund may trade futures contracts in U.S. domestic markets or,
to the extent permitted under applicable law, on exchanges located outside
the United States.
A stock index future obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to the difference between the
value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. With respect to stock
indexes that are permitted investments, each Underlying Fund intends to
purchase and sell futures contracts on the stock index for which it can
obtain the best price, with consideration also given to liquidity.
Initially, when purchasing or selling futures contracts, an Underlying Fund
will be required to deposit with its custodian in the broker's name an amount
of cash or cash equivalents up to approximately 10% of the contract amount,
which is returned to the Fund upon termination. This amount is subject to
change. Subsequent payments to and from the broker will be made daily as the
price of the index or securities underlying the futures contract fluctuates.
Although an Underlying Fund intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be
given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount
of fluctuation permitted in futures contract prices during a single trading
day. Once the daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit or trading may be
suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting the relevant Underlying Fund to
substantial losses.
INTEREST RATE AND EQUITY INDEX SWAPS. An Underlying Fund may enter into
interest rate and index swaps. Interest-rate swaps are contracts in which one
party agrees to pay interest at a floating rate for a specified period of
time, while the counterparty agrees to pay interest at a fixed rate for the
same period. Index swaps involve the exchange by an Underlying Fund with
another party of cash flows based upon the performance of an index or a
portion of an index of securities which usually include dividends.
Each Underlying Fund will enter into swap transactions only if: (i) for
transactions with maturities under one year, the counterparty has outstanding
short-term paper rated at least A-1 by S&P, Prime-1 by Moody's, or any
equivalent rating by any other nationally recognized statistical rating
organization, or (ii) for transactions with maturities greater than one year,
the counterparty has outstanding debt securities rated at least Aa by Moody's
or AA by S&P, or any equivalent rating by any other nationally recognized
statistical rating organization, or (iii) if unrated, State Street deems the
counterparty's creditworthiness to be of equivalent quality.
There is no limit on the amount of swap transactions that may be entered into
by an Underlying Fund. The risk of loss with respect to swaps is generally
limited to the net amount of payments that the Underlying Fund is
contractually obligated to make. If the other party to a swap defaults, the
Underlying Fund's risk of loss consists of the net amount of payments that
the Underlying Fund contractually is entitled to receive.
FOREIGN CURRENCY TRANSACTIONS. An Underlying Fund may engage in currency
exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or through entering into forward
contracts to purchase or sell currencies. A forward currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which must be more than two days from the date of the contract,
at a price set at the time of the contract. These contracts are entered into
in the interbank market conducted directly between currency traders
(typically commercial banks or other financial institutions) and their
customers.
SAI-13
<PAGE>
LENDING PORTFOLIO SECURITIES. An Underlying Fund may lend securities to
brokers, dealers and other financial institutions. The Underlying Fund will
receive collateral of cash, letters of credit or U.S. government securities.
The Underlying Fund can increase its income through the investment of the
collateral as well as the interest receivable on the loan. An Underlying Fund
might experience a loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement.
RATINGS. The ratings of Moody's, S&P, or any other nationally recognized
statistical rating organizations represent their opinions as to the quality
of the obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and, although ratings may
be useful in evaluating the safety of interest and principal payments, they
do not evaluate the market value risk of such obligations. Each Underlying
Fund will rely on State Street's judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
INVESTMENT RESTRICTIONS
EQUITY INDEX FUND. The Equity Index Fund will operate as discussed under
Investment Options--Equity Index Fund in the prospectus, and will be subject
to the investment policies and limitations described there. The prospectus
for The Seven Seas Series Fund describes the investment objective, policies
and limitations applicable to The Seven Seas S&P 500 Index Fund. A free copy
of The Seven Seas Series Fund prospectus may be obtained by calling an
Equitable Account Executive.
LIFECYCLE FUNDS. The Lifecycle Funds will operate as discussed under
Investment Options--Lifecycle Funds--The Lifecycle Fund Group Trusts --
Conservative and Moderate in the prospectus, and will be subject to the
investment policies and limitations described therein.
LIFECYCLE FUND GROUP TRUSTS. The Lifecycle Fund Group Trusts will operate as
discussed in Investment Options--The Lifecycle Fund Group
Trusts--Conservative and Moderate in the prospectus, and will be subject to
the investment policies and limitations described therein.
UNDERLYING FUNDS: COMMON INVESTMENT RESTRICTIONS. In addition to the
limitations discussed above under Additional Investment Policies and
Techniques and in the prospectus under Investment Options, each Underlying
Fund will not:
(1) Invest in securities for the purpose of obtaining control of
management.
(2) Engage in business of underwriting securities issued by others,
except that an Underlying Fund will not be deemed to be an
underwriter or to be engaged in underwriting by virtue of having
purchased securities subject to legal or contractual restrictions
on disposition.
(3) Make short sales of securities or purchase any securities on
margin, except for such short-term credits as are necessary for the
clearance of transactions. An Underlying Fund may make initial
margin deposits and variation margin payments in connection with
transactions in futures contracts or related options.
(4) Purchase or sell real estate or real estate mortgage loans, except
that an Underlying Fund may invest in securities secured by real
estate or interests in real estate, or securities issued by
companies which invest in real estate or interests in real estate.
(5) Pledge, mortgage or hypothecate its assets, except to the extent
necessary to (1) secure any permitted borrowings, (2) engage in
transactions that involve the purchase of securities on a
when-issued or forward commitment basis, (3) deposit assets in
escrow in connection with writing
SAI-14
<PAGE>
covered put and call options, and (4) deposit assets as initial or
variation margin or collateral in connection with transactions in
options, forward contracts, futures contracts (including those
relating to indices), and options on futures contracts or indices.
(6) Invest 25% or more of the value of its total assets in securities
of companies primarily engaged in any one industry (other than the
U.S. Government, its agencies and instrumentalities), except to the
extent necessary to comply with the industry weightings of a
particular index in accordance with such Underlying Fund's
investment objective and policies. For purposes of this
restriction, the concentration limit may be exceeded as a result of
changes in the market value of portfolio securities in which an
Underlying Fund invests. This limit, however, may not be exceeded
as a result of investments made by an Underlying Fund.
(7) Purchase or sell commodities or commodity futures contracts, except
that an Underlying Fund may enter into futures contracts to the
extent provided in such Underlying Fund's Declaration of Trust and
as discussed under Additional Investment Policies and Techniques
above and under Investment Options in the prospectus.
While State Street is not required to observe the foregoing restrictions
(except where otherwise required by law or governmental regulation), it
currently does not intend to change any of these restrictions.
HOW THE ASSETS OF THE FUNDS ARE VALUED
The Equity Index Fund will invest all of its assets in the Seven Seas S&P 500
Index Fund. The asset value of the Seven Seas S&P 500 Index Fund is computed
on a daily basis by the Seven Seas S&P 500 Index Fund. See the prospectus of
The Seven Seas Series Fund for information on valuation methodology.
The Lifecycle Funds--Conservative and Moderate will invest all of their
assets in the Lifecycle Fund Group Trusts--Conservative and Moderate,
respectively. The Group Trusts, in turn, will invest all of their assets in
the Underlying Funds. The method of valuing the assets of each Underlying
Fund is discussed below. The method used for valuing the units of the Group
Trust and Underlying Funds is discussed under How We Calculate the Value of
the Amounts Allocated to the Equity Index and Lifecycle Funds in the
prospectus.
HOW THE ASSETS OF THE UNDERLYING FUNDS ARE VALUED
The assets of each Underlying Fund, other than the STIF Fund, will be valued
in the following manner on a daily basis:
o STOCKS listed on a national securities exchange or traded on the NASDAQ
national market system are valued at the last sale price. If on a particular
day there is no sale, such securities are valued at the latest available bid
price reported on a composite tape. Other unlisted securities reported on the
NASDAQ system are valued at inside (highest) quoted bid prices.
o FOREIGN SECURITIES not traded directly, or in ADR form, in the United
States, are valued at the last sale price in the local currency on an
exchange in the country of origin. Foreign currency is converted into dollars
at current exchange rates.
o UNITED STATES TREASURY SECURITIES and other obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities
are valued at representative quoted prices.
SAI-15
<PAGE>
o LONG-TERM PUBLICLY TRADED CORPORATE BONDS (i.e., maturing in more than
one year) are valued at prices obtained from a bond pricing service of a
major dealer in bonds when such prices are available; however, in
circumstances where it is deemed appropriate to do so, an over-the-counter or
exchange quotation may be used.
o CONVERTIBLE PREFERRED STOCKS listed on national securities exchanges are
valued at their last sale price or, if there is no sale, at the latest
available bid price.
o CONVERTIBLE BONDS and UNLISTED CONVERTIBLE PREFERRED STOCKS are valued
at bid prices obtained from one or more major dealers in such securities;
where there is a discrepancy between dealers, values may be adjusted based on
recent premium spreads to the underlying common stock.
o SHORT-TERM DEBT SECURITIES that mature in more than 60 days are valued
at representative quoted prices. Short-term debt securities that mature in 60
days or less are valued at amortized cost, which approximates market value.
State Street determines in good faith the fair values of securities and other
assets that do not have a readily available market price in accordance with
accepted accounting practices and applicable laws and regulations.
Assets of the STIF Fund are valued at amortized cost on a daily basis. Under
this method of valuation, securities purchased by the STIF Fund, such as
bonds, notes, commercial paper, certificates of deposit, or other evidences
of indebtedness, are recorded at original cost and adjusted daily for premium
amortization or discount accretion. Use of the amortized cost method results
in a value of portfolio securities that approximates the value computed by
use of mark-to-market method (i.e., use of market values). Values computed
under both methods approach each other the closer a debt obligation comes to
maturity. In this regard, the STIF Fund will not hold debt obligations that
have a remaining maturity of more than thirteen months. See discussion under
Investment Options in the prospectus.
SAI-16
<PAGE>
TRANSACTIONS BY THE UNDERLYING FUNDS
This section discusses the procedures followed by the Underlying Funds, with
respect to the buying and selling of portfolio securities for these Funds. In
connections with such transactions, the Underlying Funds pay brokerage
commissions, transfer taxes, and other fees.
Decisions to buy or sell securities for the Underlying Funds are made by
State Street in accordance with the investment policies and restrictions of
each Underlying Fund. Such decisions are made independently of the decisions
made for other entities managed by State Street. There may be occasions,
however, when the same investment decision is made for more than one account
advised or managed by State Street. In such cases, State Street will allocate
such purchases or sales among the affected accounts in as equitable a manner
as it deems possible. The principal factors State Street will take into
account in making this determination are the relative investment objectives
of the affected client accounts, the relative sizes of the same or comparable
securities held by or on behalf of such accounts, and the availability at the
time of funds in each client account to make the investment.
Portfolio securities held by one State Street client also may be held by one
or more of its other clients. When two or more of State Street's clients are
engaged in the simultaneous purchase or sale of securities, transactions are
allocated as to amount in accordance with the formulae deemed to be equitable
as to each client. There may be circumstances, however, when purchases or
sales of portfolio securities for one or more of State Street's clients will
have an adverse effect on other clients.
In placing portfolio transactions for an Underlying Fund, State Street will
seek the best price and most favorable execution available to such Fund. In
this regard, State Street will take into account all factors which it
considers relevant to making this decision, including the extent of any
provision of any brokerage and research services to such Fund within the
meaning of Section 28(e) of the Securities Exchange Act of 1934 ("1934 Act"),
viewed in terms of either that particular transaction or the broker's or
dealer's overall responsibilities to the Underlying Fund.
State Street periodically will review the brokerage commissions paid by an
Underlying Fund to determine whether the commissions paid over a particular
period of time were reasonable in relation to the benefits provided to such
Fund. It is possible that certain of the services received from a broker or
dealer in connection with the execution of transactions will primarily
benefit one or more other accounts for which State Street exercises
discretion, or an Underlying Fund other than that for which the transaction
was executed. Conversely, any given Underlying Fund may be the primary
beneficiary of the service received as a result of portfolio transactions
effected for such other accounts or Underlying Funds. The investment
management fees paid to State Street are not reduced by reason of receipt of
such brokerage and research services.
INVESTMENT MANAGEMENT FEE
No investment management fee was paid to State Street in 1995, with respect
to the Program's investment, by the Seven Seas S&P 500 Index Fund, the
underlying mutual fund in which the Equity Index Fund invests.
SAI-17
<PAGE>
UNDERWRITER
Equico Securities, Inc. (Equico), a wholly-owned subsidiary of Equitable
Life, may be deemed to be the principal underwriter of separate account units
under the group annuity contract. On or about May 1, 1996, Equico Securities
will change its name to EQ Financial Consultants, Inc. Equico is registered
with the SEC as a broker-dealer under 1934 Act and is a member of the
National Association of Securities Dealers, Inc. Equico's principal business
address is 1755 Broadway, New York, NY 10019. The offering of the units under
the contract is continuous. No underwriting commissions have been paid during
any of the last three fiscal years with respect to units of interest under
the contract. See Deductions and Charges in the prospectus.
No person currently serves as underwriter for the Lifecycle Fund Group Trusts
or the Underlying Funds.
SAI-18
<PAGE>
MANAGEMENT
EQUITABLE LIFE
Equitable Life is managed by its sole shareholder, The Equitable Companies
Incorporated. Its directors and certain of its executive officers and their
principal occupations are as follows:
<TABLE>
<CAPTION>
DIRECTORS NAME PRINCIPAL OCCUPATION
---------------------------- ---------------------------------------------------------------------
<S> <C>
Claude Bebear Chairman and Chief Executive Officer, AXA, Chairman, The Equitable Companies
Incorporated
Christopher Brockson Chief Executive Officer, AXA Equity & Law Life Assurance Society
Francoise Colloc'h Executive Vice President, Culture-Management-Communications, AXA
*Henri de Castries Executive Vice President-Finance, AXA, Vice Chairman, The Equitable
Companies Incorporated
Joseph L. Dionne Chairman and Chief Executive Officer, The McGraw-Hill Companies
*William T. Esrey Chairman, President and Chief Executive Officer, Sprint Corporation
Jean-Rene Fourtou Chairman and Chief Executive Officer, Rhone Paulenc, S.A.
Norman C. Francis President, Xavier University of Louisiana
Donald J. Greene Counselor-at-Law, Partner, Le Boeuf, Lamb, Greene & MacRae
Anthony J. Hamilton Chairman and Chief Executive Officer, Fox-Pitt, Kelton Limited
John T. Hartley Director, Retired Chairman and Chief Executive Officer, Harris Corporation
*John H.F. Haskell, Jr. Director and Managing Director, Dillon, Read & Co., Inc.
*W. Edwin Jarmain President, Jarmain Group Inc.
G. Donald Johnston, Jr. Retired Chairman and Chief Executive Officer, JWT Group, Inc.
*Winthrop Knowlton Chairman, Knowlton Brothers, Inc.
Arthur L. Liman Counsel-at-Law, Partner, Paul, Weiss, Rifkind, Wharton & Garrison
George T. Lowy Counselor-at-Law, Partner, Cravath, Swaine & Moore
Didier Pineau-Valencienne Chairman and Chief Executive Officer, Schneider, S.A.
*George J. Sella, Jr. Retired Chairman of the Board and Chief Executive Officer, American Cyanamid
Company
*Dave H. Williams Chairman of the Board and Chief Executive Officer, Alliance Capital
Management, L.P.
</TABLE>
Unless otherwise indicated, the following persons have been involved in the
management of Equitable Life in various executive positions during the last
five years.
<TABLE>
<CAPTION>
OFFICER-DIRECTORS NAME PRINCIPAL OCCUPATION
- -------------------------- -----------------------------------------------------------------
<S> <C>
*Joseph J. Melone Director, President and Chief Executive Officer, The Equitable Companies
Incorporated; prior thereto, President and Chief Operating Officer;
Chairman of the Board, Equitable Life; prior thereto, Chairman and
Chief Executive Officer
James M. Benson Director, Senior Executive Vice President and Chief Operating Officer,
The Equitable Companies Incorporated; prior thereto, Senior Executive
Vice President, Director, President and Chief Executive Officer,
Equitable Life; prior thereto, President and Chief Operating Officer,
President, Management Compensation Group
</TABLE>
- ------------
*Member of Equitable Life's Investment Committee.
SAI-19
<PAGE>
<TABLE>
<CAPTION>
OTHER OFFICERS NAME PRINCIPAL OCCUPATION*
- ------------------------ -------------------------------------------------------------------
<S> <C>
Jerry M. de St. Paer Senior Executive Vice President and Chief Financial Officer; prior thereto,
Executive Vice President and Chief Financial Officer
Robert E. Garber Executive Vice President and General Counsel
William T. McCaffrey Director, Senior Executive Vice President and Chief Operating Officer,
prior thereto, Executive Vice President and
Chief Administrative Officer
Peter D. Noris Executive Vice President and Chief Investment Officer
Jose Suquet Executive Vice President and Chief Agency Officer
Gordon G. Dinsmore Senior Vice President
Alvin H. Fenichel Senior Vice President and Controller
J. Thomas Liddle, Jr. Senior Vice President and Chief Valuation Actuary
Kevin R. Byrne Vice President and Treasurer
Paul J. Flora Vice President and Auditor
Pauline Sherman Vice President, Secretary and Associate General Counsel
</TABLE>
- ------------
* All positions are with Equitable Life.
STATE STREET
State Street is managed by its sole shareholder, State Street Boston
Corporation. Its directors and certain of its executive officers and their
principal occupations are as follows:
<TABLE>
<CAPTION>
DIRECTORS NAME PRINCIPAL OCCUPATION
- ----------------------------- -------------------------------------------------------------------
<S> <C>
Tenley E. Albright, M.D. Chairman, Western Resources, Inc.
Joseph A. Baute, Jr. Chairman, Nashua Corporation
I. MacAllister Booth Retired Chairman, President and CEO, Polaroid Corporation
James I. Cash, Jr. Harvard Business School
Truman S. Casner, Esquire Partner Ropes & Gray
Nader F. Darehshori Chairman, President and CEO, Houghton Mifflin Company
Arthur L. Goldstein Chairman and CEO, Ionics, Incorporated
Charles F. Kaye President, Transportation Investments, Inc.
John M. Kucharski Chairman, President and CEO, EG&G
Charles R. LaMantia President and CEO, Arthur D. Little, Inc.
David B. Perini Chairman and President, Perini Corporation
</TABLE>
SAI-20
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS NAME PRINCIPAL OCCUPATION
- ----------------------------- -------------------------------------------------------------------
<S> <C>
Dennis J. Picard Chairman and CEO, Raytheon Company
Alfred Poe President, Meal Enhancement Group, Campbell Soup Company
Bernard W. Reznicek Dean of College of Business Administration, Creighton University
Robert E. Weissman Chairman and CEO, The Dun & Bradstreet Corporation
</TABLE>
<TABLE>
<CAPTION>
OFFICER-DIRECTORS NAME PRINCIPAL OCCUPATION
- ---------------------------- ------------------------------------------------------
<S> <C>
Marshall N. Carter Chairman, and CEO State Street Bank, and Trust Company
David A. Spina President and Chief Operating Officer State Street Bank
and Trust Company
William S. Edgerly Chairman Emeritus
OTHER OFFICERS NAMES PRINCIPAL OCCUPATION*
- ---------------------------- ------------------------------------------------------
A. Edward Allinson Executive Vice President
George K. Bird, IV Executive Vice President
Dale L. Carleton Executive Vice President
Susan Comeau Executive Vice President
James J. Darr Executive Vice President
Howard H. Fairweather Executive Vice President
Ronald E. Logue Executive Vice President
Nicholas A. Lopardo Executive Vice President
Jacques' Phillipe Marson Executive Vice President
Ronald O'Kelley CFO, Treasurer, Executive Vice President
Albert E. Peterson Executive Vice President
William M. Reghitto Executive Vice President
David J. Sexton Executive Vice President
Stanley W. Shelton Executive Vice President
</TABLE>
- ------------
* All positions are with State Street Bank and Trust Company.
SAI-21
<PAGE>
FINANCIAL STATEMENTS
The financial statements of Equitable Life included in this Statement of
Additional Information should be considered only as bearing upon the ability
of Equitable Life to meet its obligations under the group annuity contract.
They should not be considered as bearing upon the investment experience of
the Equity Index Fund. The financial statements of Separate Account No. 195
reflect applicable fees, charges and other expenses under the Program as in
effect during the periods covered.
SEPARATE ACCOUNT NOS. 195, 197 AND 198:
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants-- ........................ SAI-25
Separate Account No. 195 (Equity Index Fund):
Statement of Assets and Liabilities, December 31, 1995 ................ SAI-26
Statements of Operations and Changes in Net Assets for the Year Ended
December 31, 1995 and the Period February 1, 1994 (commencement of
operations) to December 31, 1994 .................................... SAI-27
Separate Account No. 197 (Lifecycle Fund--Conservative):
Statement of Assets and Liabilities, December 31, 1995 ................ SAI-28
Statement of Operations and Changes in Net Assets for the Period May 1,
1995 (commencement of operations) to December 31, 1995 .............. SAI-29
Separate Account No. 198 (Lifecycle Fund--Moderate):
Statement of Assets and Liabilities, December 31, 1995 ................ SAI-30
Statement of Operations and Changes in Net Assets for the Period May 1,
1995 (commencement of operations) to December 31, 1995 .............. SAI-31
Separate Account Nos. 195, 197 and 198:
Notes to Financial Statements ......................................... SAI-32
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Report of Independent Accountants-- ........................ SAI-34
Consolidated Balance Sheets, December 31, 1995 and 1994 ............... SAI-35
Consolidated Statements of Earnings for the Years Ended December 31,
1995, 1994 and 1993 ................................................. SAI-36
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993 .................................... SAI-37
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993 ................................................. SAI-38
Notes to Consolidated Financial Statements ............................ SAI-39
</TABLE>
The financial statements for each of the Underlying Funds reflect charges for
operating expenses, but do not include any investment management, Program or
other charges imposed against the respective assets of the Lifecycle Funds
and Lifecycle Fund Group Trusts. The financial statements of the Underlying
Funds do, however, indirectly reflect any investment management fees and
other charges paid by the entities in which the Underlying Funds invest.
SAI-22
<PAGE>
STATE STREET BANK AND TRUST COMPANY--
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants-- ........................ SAI-74
Lifecycle Fund Group Trust--Conservative:
Statement of Assets and Liabilities, December 31, 1995 ................ SAI-75
Statement of Operations for the Period Ended December 31, 1995 ........ SAI-76
Statement of Changes in Net Assets for the Period Ended December 31,
1995 ................................................................ SAI-77
Selected Per Unit Data ................................................ SAI-78
Notes to Financial Statements ......................................... SAI-79
STATE STREET BANK AND TRUST COMPANY--
LIFECYCLE FUND GROUP TRUST--MODERATE
Report of Independent Accountants-- .......................... SAI-81
Lifecycle Fund Group Trust--Moderate:
Statement of Assets and Liabilities, December 31, 1995 .................. SAI-82
Statement of Operations for the Period Ended December 31, 1995 .......... SAI-83
Statement of Changes in Net Assets for the Period Ended December 31, 1995 SAI-84
Selected Per Unit Data .................................................. SAI-85
Notes to Financial Statements ........................................... SAI-86
STATE STREET BANK AND TRUST COMPANY--UNDERLYING FUNDS
FLAGSHIP FUND
Report of Independent Accountants-- ...................... SAI-88
S&P 500 Flagship Fund and S&P 500 Index Fund with Futures:
Combined Statement of Assets and Liabilities, December 31, 1995 ..... SAI-89
Combined Statement of Operations for the Year Ended December 31, 1995 SAI-90
Combined Statement of Changes in Net Assets for the Years Ended
December 31, 1995 and 1994 ........................................ SAI-91
S&P 500 Flagship Fund Selected Per Unit Data ........................ SAI-92
S&P 500 Index Fund with Futures Selected Per Unit Data .............. SAI-93
Notes to Combined Financial Statements .............................. SAI-94
Combined Schedule of Investments, December 31, 1995 ................. SAI-98
2000 FUND
Report of Independent Accountants-- .................... SAI-109
Russell 2000 Fund:
Statement of Assets and Liabilities, December 31, 1995 ............ SAI-110
Statement of Operations for the Year Ended December 31, 1995 ...... SAI-111
Statement of Changes in Net Assets for the Years Ended December 31,
1995 and 1994 ................................................... SAI-112
Selected Per Unit Data ............................................ SAI-113
Notes to Financial Statements ..................................... SAI-114
</TABLE>
The financial statements for the Russell 2000 Fund reflect direct
investments made by this Fund in shares of companies included in the Russell
2000 Index. Beginning February 1, 1995, this Fund has invested in units of
the Russell 2000 Value and Growth Funds, which in turn invest in shares of
companies included in the Russell 2000 Index.
SAI-23
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DAILY EAFE FUND
Report of Independent Accountants-- ...................... SAI-117
Daily EAFE Fund Non-Lending and Daily EAFE Fund:
Combined Statement of Assets and Liabilities, December 31, 1995 ..... SAI-118
Combined Statement of Operations for the Year Ended December 31, 1995 SAI-119
Combined Statement of Changes in Net Assets for the Year Ended
December 31, 1995 and Period Ended December 31, 1994 .............. SAI-120
Daily EAFE Fund Non-Lending Selected Per Unit Data .................. SAI-121
Daily EAFE Fund Selected Per Unit Data .............................. SAI-122
Notes to Combined Financial Statements .............................. SAI-123
Combined Schedule of Investments, December 31, 1995 ................. SAI-127
GC BOND FUND
Report of Independent Accountants-- ........................ SAI-152
Daily Government/Corporate Fund:
Statement of Assets and Liabilities, December 31, 1995 ................ SAI-153
Statement of Operations for the Year Ended December 31, 1995 .......... SAI-154
Statement of Changes in Net Assets for the Year Ended December 31, 1995
and Period Ended December 31, 1994 .................................. SAI-155
Selected Per Unit Data ................................................ SAI-156
Notes to Financial Statements ......................................... SAI-157
Schedule of Investments, December 31, 1995 ............................ SAI-159
STIF FUND
Report of Independent Accountants-- ........................ SAI-164
Short Term Investment Fund:
Statement of Assets and Liabilities, December 31, 1995 ................ SAI-165
Statement of Operations for the Year Ended December 31, 1995 .......... SAI-166
Statement of Changes in Net Assets for the Years Ended December 31,
1995 and 1994 ....................................................... SAI-167
Selected Per Unit Data ................................................ SAI-168
Notes to Financial Statements ......................................... SAI-169
Schedule of Investments, December 31, 1995 ............................ SAI-171
</TABLE>
SAI-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of The Equitable Life Assurance Society
of the United States and the participants in the American Dental Association
Members Retirement Program
In our opinion, the accompanying statement of assets and liabilities, and the
related statement of operations and changes in net assets present fairly, in
all material respects, the financial position of Separate Account Nos. 195,
197 and 198 of The Equitable Life Assurance Society of the United States
("Equitable Life") at December 31, 1995 and each of their results of
operations and changes in net assets for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of Equitable Life's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management and evaluating the overall financial
statement presentation. We believe that our audits which included
confirmation of shares owned in the underlying mutual funds with the transfer
agent at December 31, 1995, provide a reasonable basis for the opinion
expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The unit information (appearing under
"Condensed Financial Information" in the prospectus) is presented for the
purpose of satisfying regulatory reporting requirements and is not a required
part of the basic financial statements. Such unit information has been
subjected to auditing procedures applied during the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
PRICE WATERHOUSE LLP
New York, New York
February 7, 1996
SAI-25
<PAGE>
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, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in shares of The Seven Seas S&P 500
Fund-at value (cost: $17,711,427) (Notes 2 and
and 5) ........................................ $19,197,205
Receivable from Equitable Life's General Account 275,527
- --------------------------------------------------------------
Total assets ................................ 19,472,732
LIABILITIES--Accrued expenses .................. 23,486
- --------------------------------------------------------------
NET ASSETS ..................................... $19,449,246
==============================================================
</TABLE>
See Notes to Financial Statements.
SAI-26
<PAGE>
SEPARATE ACCOUNT NO. 195
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 1, 1994*
YEAR ENDED TO
DECEMBER 31, 1995 DECEMBER 31, 1994
- ----------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C>
INVESTMENT INCOME (NOTE 2)--Dividends from The Seven Seas S&P 500
Fund .............................................................. $ 387,701 $ 119,933
EXPENSES--(NOTE 3) ................................................. (155,529) (51,438)
- ---------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .............................................. 232,172 68,495
- ---------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Realized gain (loss) from share transactions ....................... 997,758 (46,318)
Realized gain distribution from The Seven Seas S&P 500 Fund ....... 394,652 7,943
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) ........................................... 1,392,410 (38,375)
- ---------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments:
Beginning of period ................................................ 5,910 0
End of period ...................................................... 1,485,778 5,910
- ---------------------------------------------------------------------------------------------------------
Change in unrealized appreciation .................................. 1,479,868 5,910
- ---------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ............ 2,872,278 (32,465)
- ---------------------------------------------------------------------------------------------------------
Increase in net assets attributable to operations .................. 3,104,450 36,030
- ---------------------------------------------------------------------------------------------------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ...................................................... 22,746,218 9,471,003
Withdrawals ........................................................ (11,398,912) (4,509,543)
- ---------------------------------------------------------------------------------------------------------
Increase in net assets attributable to contributions and
withdrawals ....................................................... 11,347,306 4,961,460
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS ............................................. 14,451,756 4,997,490
NET ASSETS--BEGINNING OF PERIOD .................................... 4,997,490 --
- ---------------------------------------------------------------------------------------------------------
NET ASSETS--END OF PERIOD .......................................... $ 19,449,246 $ 4,997,490
=========================================================================================================
</TABLE>
- ------------
* Commencement of operations.
See Notes to Financial Statements.
SAI-27
<PAGE>
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, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in shares of the Lifecycle Fund Group
Trust Conservative-at value (cost $2,873,803)
(Note 2) ............................................ $2,983,991
Receivable from Equitable Life's General Account .... 2,788
- -------------------------------------------------------------------
Total assets ...................................... 2,986,779
LIABILITIES--Accrued expenses ........................ 13,142
- -------------------------------------------------------------------
NET ASSETS ........................................... $2,973,637
===================================================================
</TABLE>
See Notes to Financial Statements.
SAI-28
<PAGE>
SEPARATE ACCOUNT NO. 197
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statement of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1995* TO
DECEMBER 31, 1995
- --------------------------------------------------------------------------------------
<S> <C>
FROM OPERATIONS:
EXPENSES--(NOTE 3) ................................................. $ (23,691)
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Realized gain from share transactions .............................. 41,403
Unrealized appreciation of investments ............................. 110,188
- --------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .................... 151,591
- --------------------------------------------------------------------------------------
Increase in net assets attributable to operations .................. 127,900
- --------------------------------------------------------------------------------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ...................................................... 4,323,495
Withdrawals ........................................................ (1,477,758)
- --------------------------------------------------------------------------------------
Increase in net assets attributable to contributions and
withdrawals ....................................................... 2,845,737
- --------------------------------------------------------------------------------------
INCREASE IN NET ASSETS ............................................. 2,973,637
NET ASSETS--BEGINNING OF PERIOD .................................... --
- --------------------------------------------------------------------------------------
NET ASSETS--END OF PERIOD .......................................... $ 2,973,637
======================================================================================
</TABLE>
- ------------
* Commencement of operations.
See Notes to Financial Statements.
SAI-29
<PAGE>
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, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in shares of the Lifecycle Fund Group
Trust Moderate-at value (cost: $75,444,051)
(Note 2) ........................................... $76,272,332
Receivable from Equitable Life's General Account ... 12,059
- -------------------------------------------------------------------
Total assets ..................................... 76,284,391
LIABILITIES--Accrued expenses ....................... 67,921
- -------------------------------------------------------------------
NET ASSETS .......................................... $76,216,470
===================================================================
</TABLE>
See Notes to Financial Statements.
SAI-30
<PAGE>
SEPARATE ACCOUNT NO. 198
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statement of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1995* TO
DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------
<S> <C>
FROM OPERATIONS:
EXPENSES--(NOTE 3) .................................................. $ (95,847)
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Realized gain from share transactions ............................... 66,530
Unrealized appreciation of investments .............................. 828,281
- ---------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ..................... 894,811
- ---------------------------------------------------------------------------------------
Increase in net assets attributable to operations ................... 798,964
- ---------------------------------------------------------------------------------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ....................................................... 77,246,884
Withdrawals ......................................................... (1,829,378)
- ---------------------------------------------------------------------------------------
Increase in net assets attributable to contributions and withdrawals 75,417,506
- ---------------------------------------------------------------------------------------
INCREASE IN NET ASSETS .............................................. 76,216,470
NET ASSETS--BEGINNING OF PERIOD ..................................... --
- ---------------------------------------------------------------------------------------
NET ASSETS--END OF PERIOD ........................................... $76,216,470
=======================================================================================
</TABLE>
- ------------
* Commencement of operations.
See Notes to Financial Statements.
SAI-31
<PAGE>
SEPARATE ACCOUNT NOS. 195, 197 AND 198
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements
1. Separate Account Nos. 195 (the Equity Index Fund), 197 (the Lifecycle
Fund-Conservative) and 198 (the Lifecycle Fund-Moderate) (the Funds) of The
Equitable Life Assurance Society of the United States (Equitable Life), a
wholly-owned subsidiary of The Equitable Companies Incorporated, were
established in conformity with the New York State Insurance Law. Pursuant to
such law, to the extent provided in the applicable contracts, the net assets
in the Funds are not chargeable with liabilities arising out of any other
business of Equitable Life.
Separate Account No. 195 was established as of the opening of business on
February 1, 1994 and Separate Account Nos. 197 and 198 were established as of
the opening of business on May 1, 1995 to solely fund the American Dental
Association Members Retirement Trust and the American Dental Association
Members Pooled Trust for Retirement Plans (Trusts) sponsored by the American
Dental Association (ADA).
Equitable Life is the investment manager for the Funds.
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Separate Account No. 195 invests its assets in shares of the Seven Seas
S&P 500 Fund, a portfolio of The Seven Seas Series Fund, which is registered
under the Investment Company Act of 1940 as an open-end management investment
company. The investment manager of the Seven Seas S&P 500 Fund is State
Street Bank and Trust Company (State Street).
Separate Account Nos. 197 and 198 invest their assets in shares of the
Lifecycle Fund Group Trusts-- Conservative and Moderate, respectively. The
Lifecycle Funds Group Trusts are collective investment funds maintained by
State Street. Each Lifecycle Fund Group is organized as a common law trust
under Massachusetts law, and, because of exclusionary provisions, are not
subject to regulation under the Investment Company Act of 1940. State Street
serves as the trustee and investment manager to each of these Group Trusts.
2. Realized gains and losses on investments include gains and losses on
redemptions of the underlying fund's shares (determined on the identified
cost basis) and capital gain distributions from the underlying funds.
Dividends and realized gain distributions from underlying funds are recorded
on ex-date.
Investments in the Seven Seas S&P 500 Fund, the Lifecycle
Funds--Conservative's and Moderate's investments in the Lifecycle Fund Group
Trusts--Conservative and Moderate are valued at the underlying mutual fund's
or trust's net asset value per share.
3. Charges and fees relating to the Funds are deducted in accordance with
the terms of the contracts issued by Equitable Life to the Trusts. With
respect to the American Dental Association Members Retirement Program, these
expenses consist of program expense charge, direct expenses and record
maintenance and report fee. These charges and fees are paid to Equitable Life
by the Funds and are recorded as expenses in the accompanying Statements of
Operations and Changes in Net Assets.
4. No Federal income tax based on net income or realized and unrealized
capital gains was applicable to contracts participating in the Funds, by
reason of applicable provisions of the Internal Revenue Code and no Federal
income tax payable by Equitable Life will affect such contracts. Accordingly,
no Federal income tax provision is required.
SAI-32
<PAGE>
SEPARATE ACCOUNT NOS. 195, 197 AND 198
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Concluded)
5. The Seven Seas S&P 500 Index Fund and the Lifecycle Fund Group Trusts
have provided Equitable Life with the following information as of December
31, 1995.
The Seven Seas S&P 500 Index Fund had total assets of $532.3 million and a
net asset value per share of $13.55. Its five major industry group
concentrations were as follows: Consumer Non-Durables (22.9%), Financials
(13.7%), Utilities (12.5%), Technology (11.1%) and Healthcare (10.1%).
The Lifecycle Fund Group Trust-Conservative had total assets of $3.0
million and a net asset value per share of $10.73.
The Lifecycle Fund Group Trust-Moderate had total assets of $76.2 million
and a net asset value per share of $11.13.
SAI-33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of The
Equitable Life Assurance Society of the United States and its subsidiaries
("Equitable Life") at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Equitable
Life's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, Equitable Life
changed its methods of accounting for loan impairments in 1995, for
postemployment benefits in 1994 and for investment securities in 1993.
PRICE WATERHOUSE LLP
New York, New York
February 7, 1996
SAI-34
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 15,899.9 $ 7,586.0
Held to maturity, at amortized cost..................................... - 5,223.0
Mortgage loans on real estate............................................. 3,638.3 4,018.0
Equity real estate........................................................ 3,916.2 4,446.4
Policy loans.............................................................. 1,976.4 1,731.2
Other equity investments.................................................. 621.1 678.5
Investment in and loans to affiliates..................................... 636.6 560.2
Other invested assets..................................................... 706.1 489.3
----------------- -----------------
Total investments..................................................... 27,394.6 24,732.6
Cash and cash equivalents................................................... 774.7 693.6
Deferred policy acquisition costs........................................... 3,083.3 3,221.1
Amounts due from discontinued GIC Segment................................... 2,097.1 2,108.6
Other assets................................................................ 2,713.1 2,078.6
Closed Block assets......................................................... 8,612.8 8,105.5
Separate Accounts assets.................................................... 24,566.6 20,469.5
----------------- -----------------
TOTAL ASSETS................................................................ $ 69,242.2 $ 61,409.5
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 21,752.6 $ 21,238.0
Future policy benefits and other policyholders' liabilities................. 4,171.8 3,840.8
Short-term and long-term debt............................................... 1,899.3 1,337.4
Other liabilities........................................................... 3,379.5 2,300.1
Closed Block liabilities.................................................... 9,507.2 9,069.5
Separate Accounts liabilities............................................... 24,531.0 20,429.3
----------------- -----------------
Total liabilities..................................................... 65,241.4 58,215.1
----------------- -----------------
Commitments and contingencies (Notes 10, 12, 13, 14 and 15)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares authorized, issued
and outstanding........................................................... 2.5 2.5
Capital in excess of par value.............................................. 2,913.6 2,913.6
Retained earnings........................................................... 781.6 484.0
Net unrealized investment gains (losses).................................... 338.2 (203.0)
Minimum pension liability................................................... (35.1) (2.7)
----------------- -----------------
Total shareholder's equity............................................ 4,000.8 3,194.4
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $ 69,242.2 $ 61,409.5
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-35
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income...................................................... $ 771.0 $ 715.0 $ 644.5
Premiums...................................................... 606.8 625.6 599.1
Net investment income......................................... 2,127.7 2,030.9 2,599.3
Investment gains, net......................................... 5.3 91.8 533.4
Commissions, fees and other income............................ 886.8 845.4 1,717.2
Contribution from the Closed Block............................ 124.4 151.0 128.3
----------------- ----------------- -----------------
Total revenues.......................................... 4,522.0 4,459.7 6,221.8
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.......... 1,244.2 1,201.3 1,330.0
Policyholders' benefits....................................... 1,011.3 920.6 1,003.9
Other operating costs and expenses............................ 1,856.5 1,943.1 3,584.2
----------------- ----------------- -----------------
Total benefits and other deductions..................... 4,112.0 4,065.0 5,918.1
----------------- ----------------- -----------------
Earnings before Federal income taxes and cumulative
effect of accounting change................................. 410.0 394.7 303.7
Federal income taxes.......................................... 112.4 101.2 91.3
----------------- ----------------- -----------------
Earnings before cumulative effect of accounting change........ 297.6 293.5 212.4
Cumulative effect of accounting change, net of Federal
income taxes................................................ - (27.1) -
----------------- ----------------- -----------------
Net Earnings.................................................. $ 297.6 $ 266.4 $ 212.4
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-36
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Common stock, at par value, beginning of year................. $ 2.5 $ 2.5 $ 2.0
Increase in par value......................................... - - .5
----------------- ----------------- -----------------
Common stock, at par value, end of year....................... 2.5 2.5 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year............. 2,913.6 2,613.6 2,273.9
Additional capital in excess of par value..................... - 300.0 340.2
Increase in par value......................................... - - (.5)
----------------- ----------------- -----------------
Capital in excess of par value, end of year................... 2,913.6 2,913.6 2,613.6
----------------- ----------------- -----------------
Retained earnings, beginning of year.......................... 484.0 217.6 5.2
Net earnings.................................................. 297.6 266.4 212.4
----------------- ----------------- -----------------
Retained earnings, end of year................................ 781.6 484.0 217.6
----------------- ----------------- -----------------
Net unrealized investment (losses) gains, beginning of year... (203.0) 131.9 78.8
Change in unrealized investment gains (losses)................ 541.2 (334.9) (9.5)
Effect of adopting new accounting standard.................... - - 62.6
----------------- ----------------- -----------------
Net unrealized investment gains (losses), end of year......... 338.2 (203.0) 131.9
----------------- ----------------- -----------------
Minimum pension liability, beginning of year.................. (2.7) (15.0) -
Change in minimum pension liability........................... (32.4) 12.3 (15.0)
----------------- ----------------- -----------------
Minimum pension liability, end of year........................ (35.1) (2.7) (15.0)
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 4,000.8 $ 3,194.4 $ 2,950.6
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-37
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net earnings.................................................. $ 297.6 $ 266.4 $ 212.4
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Net change in trading activities and broker-dealer
related receivables/payables.............................. - - (4,177.8)
Increase in matched resale agreements....................... - - (2,900.5)
Increase in matched repurchase agreements................... - - 2,900.5
Investment gains, net of dealer and trading gains........... (5.3) (91.8) (160.8)
Change in amounts due from discontinued GIC Segment......... - 57.3 47.8
General Account policy charges.............................. (769.7) (711.9) (623.4)
Interest credited to policyholders' account balances........ 1,244.2 1,201.3 1,330.0
Changes in Closed Block assets and liabilities, net......... (69.6) (95.1) (73.3)
Other, net.................................................. 627.1 7.8 (416.1)
----------------- ----------------- -----------------
Net cash provided (used) by operating activities.............. 1,324.3 634.0 (3,861.2)
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 1,863.1 2,319.7 3,479.6
Sales....................................................... 8,901.4 5,661.9 7,399.2
Return of capital from joint ventures and limited
partnerships.............................................. 65.2 39.0 119.5
Purchases................................................... (11,675.5) (7,417.6) (11,184.2)
Decrease (increase) in loans to discontinued GIC Segment.... 1,226.9 (40.0) (880.0)
Cash received on sale of 61% interest in DLJ................ - - 346.7
Other, net.................................................. (625.5) (371.1) (317.0)
----------------- ----------------- -----------------
Net cash (used) provided by investing activities.............. (244.4) 191.9 (1,036.2)
----------------- ----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits.................................................. 2,414.9 2,082.7 2,410.7
Withdrawals............................................... (2,692.7) (2,887.4) (2,433.5)
Net (decrease) increase in short-term financings............ (16.4) (173.0) 4,717.2
Additions to long-term debt................................. 599.7 51.8 97.7
Repayments of long-term debt................................ (40.7) (199.8) (64.4)
Proceeds from issuance of Alliance units.................... - 100.0 -
Payment of obligation to fund accumulated deficit of
discontinued GIC Segment.................................. (1,215.4) - -
Capital contribution from the Holding Company............... - 300.0 -
Other, net.................................................. (48.2) - -
----------------- ----------------- -----------------
Net cash (used) provided by financing activities.............. (998.8) (725.7) 4,727.7
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... 81.1 100.2 (169.7)
Cash and cash equivalents, beginning of year.................. 693.6 593.4 763.1
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 774.7 $ 693.6 $ 593.4
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 89.6 $ 34.9 $ 1,437.2
================= ================= =================
Income Taxes (Refunded) Paid................................ $ (82.7) $ 49.2 $ 41.0
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-38
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") converted to a stock life insurance company on July 22, 1992
and became a wholly owned subsidiary of The Equitable Companies
Incorporated (the "Holding Company"). Equitable Life's insurance
business, which is comprised of an Individual Insurance and Annuities
segment and a Group Pension segment is conducted principally by
Equitable Life and its wholly owned life insurance subsidiary,
Equitable Variable Life Insurance Company ("EVLICO"). Equitable Life's
investment management business, which comprises the Investment
Services segment, is conducted principally by Alliance Capital
Management L.P. ("Alliance"), Equitable Real Estate Investment
Management, Inc. ("EREIM") and Donaldson, Lufkin and Jenrette, Inc.
("DLJ"), an investment banking and brokerage affiliate. AXA, a French
holding company for an international group of insurance and related
financial services companies is the Holding Company's largest
shareholder, owning approximately 60.6% at December 31, 1995 (63.5%
assuming conversion of Series E Convertible Preferred Stock held by
AXA and 54.2% if all securities convertible into, or options on,
common stock were to be converted or exercised).
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP").
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiaries
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance, an investment advisory subsidiary and EREIM, a
real estate investment management subsidiary; and those partnerships
and joint ventures in which the Company has control and a majority
economic interest (collectively, including its consolidated
subsidiaries, the "Company"). The consolidated statement of earnings
and cash flow for the year ended December 31, 1993 include the results
of operations and cash flow of DLJ, an investment banking and
brokerage affiliate, on a consolidated basis through December 15, 1993
(see Note 20). Subsequent to that date, DLJ is accounted for on the
equity basis. The Closed Block assets and liabilities and results of
operations are presented in the consolidated financial statements as
single line items (see Note 6). Unless specifically stated, all
disclosures contained herein supporting the consolidated financial
statements exclude the Closed Block related amounts.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
All significant intercompany transactions and balances have been
eliminated in consolidation other than intercompany transactions and
balances with the Closed Block and the discontinued Guaranteed
Interest Contract ("GIC") Segment (see Note 7).
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1995 presentation.
SAI-39
<PAGE>
Closed Block
------------
As of July 22, 1992, Equitable Life established the Closed Block for
the benefit of certain classes of individual participating policies
for which Equitable Life had a dividend scale payable in 1991 and
which were in force on that date. Assets were allocated to the Closed
Block in an amount which, together with anticipated revenues from
policies included in the Closed Block, was reasonably expected to be
sufficient to support such business, including provision for payment
of claims, certain expenses and taxes, and for continuation of
dividend scales payable in 1991, assuming the experience underlying
such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of
the holders of policies included in the Closed Block and will not
revert to the benefit of the Holding Company. The plan of
demutualization prohibits the reallocation, transfer, borrowing or
lending of assets between the Closed Block and other portions of
Equitable Life's General Account, any of its Separate Accounts or to
any affiliate of Equitable Life without the approval of the New York
Superintendent of Insurance. 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. If the actual
contribution from the Closed Block in any given period equals or
exceeds the expected contribution for such period as determined at the
establishment of the Closed Block, the expected contribution would be
recognized in income for that period. Any excess of the actual
contribution over the expected contribution would also be recognized
in income to the extent that the aggregate expected contribution for
all prior periods exceeded the aggregate actual contribution. Any
remaining excess of actual contribution over expected contributions
would be accrued in the Closed Block as a liability for future
dividends to be paid to the Closed Block policyholders. If, over the
period the policies and contracts in the Closed Block remain in force,
the actual contribution from the Closed Block is less than the
expected contribution from the Closed Block, only such actual
contribution would be recognized in income.
Discontinued Operations
-----------------------
In 1991, the Company's management adopted a plan to discontinue the
business operations of the GIC Segment, consisting of the Guaranteed
Interest Contract and Group Non-Participating Wind-Up Annuities lines
of business. The Company established a pre-tax provision for the
estimated future losses of the GIC line of business and a premium
deficiency reserve for the Group Non-Participating Wind-Up Annuities.
Subsequent losses incurred have been charged to the allowance for
future losses and the premium deficiency reserve. Total allowances are
based upon management's best judgment and there is no assurance that
the ultimate losses will not differ.
Accounting Changes
------------------
In the first quarter of 1995, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan". This statement applies to all
loans, including loans restructured in a troubled debt restructuring
involving a modification of terms. This statement addresses the
accounting for impairment of a loan by specifying how allowances for
credit losses should be determined. Impaired loans within the scope of
this statement are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, at
the loan's observable market price or the fair value of the collateral
if the loan is collateral dependent. The Company provides for
impairment of loans through an allowance for possible losses. The
adoption of this statement did not have a material effect on the level
of these allowances or on the Company's consolidated statements of
earnings and shareholder's equity.
SAI-40
<PAGE>
In the fourth quarter of 1994 (effective as of January 1, 1994), the
Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which required employers to recognize the
obligation to provide postemployment benefits. Implementation of this
statement resulted in a charge for the cumulative effect of accounting
change of $27.1 million, net of a Federal income tax benefit of $14.6
million.
At December 31, 1993, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," which expanded
the use of fair value accounting for those securities that a company
does not have positive intent and ability to hold to maturity.
Implementation of this statement increased consolidated shareholder's
equity by $62.6 million, net of deferred policy acquisition costs,
amounts attributable to participating group annuity contracts and
deferred Federal income tax. Beginning coincident with issuance of
SFAS No. 115 implementation guidance in November 1995, the Financial
Accounting Standards Board ("FASB") permitted companies a one-time
opportunity, through December 31, 1995, to reassess the
appropriateness of the classification of all securities held at that
time. On December 1, 1995, the Company transferred $4,794.9 million of
securities classified as held to maturity to the available for sale
portfolio. As a result consolidated shareholder's equity increased by
$126.2 million, net of deferred policy acquisition costs, amounts
attributable to participating group annuity contracts and deferred
Federal income tax.
New Accounting Pronouncements
-----------------------------
In January 1995, the FASB issued SFAS No. 120, "Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts," which
permits, but does not require, stock life insurance companies with
participating life contracts to account for those contracts in
accordance with Statement of Position No. 95-1, "Accounting for
Certain Insurance Activities of Mutual Life Insurance Enterprises".
The Company has decided to retain the existing methodology to account
for traditional participating policies and, therefore, will not adopt
this statement.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," which requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount of such assets
may not be recoverable. The Company will implement this statement as
of January 1, 1996. The cumulative effect of this accounting change
will be a charge of $23.4 million, net of a Federal income tax benefit
of $12.1 million, due to the writedown to fair value of building
improvements relating to facilities being vacated beginning in 1996.
The Company currently provides allowances for possible losses for
other assets under the scope of this statement. Management has not yet
determined the impact of this statement on assets to be held and used.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," which requires a mortgage banking enterprise to
recognize rights to service mortgage loans for others as separate
assets however those servicing rights are acquired. It further
requires capitalized mortgage servicing rights be assessed for
impairment based on the fair value of those rights. The Company will
implement this statement as of January 1, 1996. Implementation of this
statement will not have a material effect on the Company's
consolidated financial statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement defines a fair value based
method of accounting for stock-based employee compensation plans while
continuing to allow an entity to measure compensation cost for such
plans using the intrinsic value based method of accounting. Management
has decided to retain the current compensation cost methodology
prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees".
SAI-41
<PAGE>
Valuation of Investments
------------------------
Fixed maturities, which the Company has both the ability and the
intent to hold to maturity, are stated principally at amortized cost.
Fixed maturities identified as available for sale are reported at
estimated fair value. The amortized cost of fixed maturities is
adjusted for impairments in value deemed to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances,
net of unamortized discounts and valuation allowances. Effective with
the adoption of SFAS No. 114 on January 1, 1995, the valuation
allowances are based on the present value of expected future cash
flows discounted at the loan's original effective interest rate or the
collateral value if the loan is collateral dependent. However, if
foreclosure is or becomes probable, the measurement method used is
collateral value. Prior to the adoption of SFAS No. 114, the valuation
allowances were based on losses expected by management to be realized
on transfers of mortgage loans to real estate (upon foreclosure or
in-substance foreclosure), on the disposition or settlement of
mortgage loans and on mortgage loans management believed may not be
collectible in full. In establishing valuation allowances, management
previously considered, among other things the estimated fair value of
the underlying collateral.
Real estate, including real estate acquired in satisfaction of debt,
is stated at depreciated cost less valuation allowances. At the date
of foreclosure (including in-substance foreclosure), real estate
acquired in satisfaction of debt is valued at estimated fair value.
Valuation allowances on real estate held for the production of income
are computed using the forecasted cash flows of the respective
properties discounted at a rate equal to the Company's cost of funds;
valuation allowances on real estate available for sale are computed
using the lower of current estimated fair value, net of disposition
costs, or depreciated cost.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control and a majority economic interest are reported on the
equity basis of accounting and are included either with equity real
estate or other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
Cash and cash equivalents includes cash on hand, amounts due from
banks and highly liquid debt instruments purchased with an original
maturity of three months or less.
All securities are recorded in the consolidated financial statements
on a trade date basis.
Investment Results and Unrealized Investment Gains (Losses)
-----------------------------------------------------------
Net investment income and realized investment gains and losses
(collectively, "investment results") related to certain participating
group annuity contracts are passed through to the contractholders as
interest credited to policyholders' account balances.
Realized investment gains and losses are determined by specific
identification and are presented as a component of revenue. Valuation
allowances are netted against the asset categories to which they apply
and changes in the valuation allowances are included in investment
gains or losses.
Unrealized investment gains and losses on fixed maturities available
for sale and equity securities held by the Company are accounted for
as a separate component of shareholder's equity, net of related
deferred Federal income taxes, amounts attributable to the
discontinued GIC Segment, Closed Block, participating group annuity
contracts and deferred policy acquisition costs related to universal
life and investment-type products.
SAI-42
<PAGE>
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 traditional life and annuity policies with life
contingencies generally are recognized as income when due. Benefits
and expenses are matched with such income so as to result in the
recognition of profits over the life of the contracts. This match is
accomplished by means of the provision for liabilities for future
policy benefits and the deferral and subsequent amortization of policy
acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income
over the period to which the premiums relate in proportion to the
amount of insurance protection provided.
Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. Deferred policy acquisition costs are 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, deferred
policy acquisition costs are amortized over the expected average life
of the contracts (periods ranging from 15 to 35 years and 5 to 17
years, respectively) as a constant percentage of estimated gross
profits arising principally from investment results, mortality and
expense margins and surrender charges based on historical and
anticipated future experience, updated at the end of each accounting
period. The effect on the amortization of deferred policy acquisition
costs of revisions to estimated gross profits is reflected in earnings
in the period such estimated gross profits are revised. The effect on
the deferred policy acquisition cost asset that would result from
realization of unrealized gains (losses) is recognized with an offset
to unrealized gains (losses) in consolidated shareholder's equity as
of the balance sheet date.
For traditional life and annuity policies with life contingencies,
deferred policy acquisition costs are 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
estimated life of the policy.
For individual health benefit insurance, deferred policy acquisition
costs are amortized over the expected average life of the contracts
(10 years for major medical policies and 20 years for disability
income products) in proportion to anticipated premium revenue at time
of issue.
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.
SAI-43
<PAGE>
For traditional life insurance policies, future policy benefit and
dividend liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at
policy issue as to mortality and persistency are based on the
Insurance Group's experience which, together with interest and expense
assumptions, provide 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, deferred policy acquisition costs are written off and
thereafter, if required, a premium deficiency reserve is established
by a charge to earnings. Benefit liabilities for traditional annuities
during the accumulation period are equal to accumulated
contractholders' fund balances and after annuitization are equal to
the present value of expected future payments. Interest rates used in
establishing such liabilities range from 2.25% to 11.5% for life
insurance liabilities and from 2.25% to 13.5% for annuity liabilities.
Individual health benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future
morbidity, withdrawals and interest which provide a margin for adverse
deviation. Benefit liabilities for disabled lives are estimated using
the present value of benefits method and experience assumptions as to
claim terminations, expenses and interest.
Claim reserves and associated liabilities for individual disability
income and major medical policies were $639.6 million, $570.6 million
at December 31, 1995 and 1994, respectively. Incurred benefits
(benefits paid plus changes in claim reserves) and benefits paid for
individual disability income and major medical policies are summarized
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 176.0 $ 188.6 $ 193.1
Incurred benefits related to prior years........... 67.8 28.7 106.1
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 243.8 $ 217.3 $ 299.2
================= ================ =================
Benefits paid related to current year.............. $ 37.0 $ 43.7 $ 48.9
Benefits paid related to prior years............... 137.8 132.3 123.1
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 174.8 $ 176.0 $ 172.0
================= ================ =================
</TABLE>
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's Board of Directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable
Life.
Equitable Life is subject to limitations on the amount of statutory
profits which can be retained with respect to certain classes of
individual participating policies that were in force on July 22, 1992
which are not included in the Closed Block and with respect to
participating policies issued subsequent to July 22, 1992. Excess
statutory profits, if any, will be distributed over time to such
policyholders and will not be available to Equitable Life's
shareholder. Earnings in excess of limitations are accrued as
policyholders' dividends.
At December 31, 1995, participating policies including those in the
Closed Block represent approximately 27.2% ($58.4 billion) of directly
written life insurance in force, net of amounts ceded. Participating
policies represent primarily all of the premium income as reflected in
the consolidated statements of earnings and in the results of the
Closed Block.
SAI-44
<PAGE>
Federal Income Taxes
--------------------
Equitable Life and its life insurance and non-life insurance
subsidiaries file a consolidated Federal income tax return with the
Holding Company and its non-life insurance subsidiaries. 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.
Separate Accounts
-----------------
Separate Accounts are established in conformity with the New York
State Insurance Law and generally are not chargeable with liabilities
that arise from any other business of the Insurance Group. Separate
Accounts assets are subject to General Account claims only to the
extent the value of such assets exceeds the Separate Accounts
liabilities.
Assets and liabilities of the Separate Accounts, representing net
deposits and accumulated net investment earnings less fees, held
primarily for the benefit of contractholders, and for which the
Insurance Group does not bear the investment risk, are shown as
separate captions in the consolidated balance sheets. The Insurance
Group bears the investment risk on assets held in one Separate
Account, therefore, such assets are carried on the same basis as
similar assets held in the General Account portfolio. Assets held in
the other Separate Accounts are carried at quoted market values or,
where quoted values are not available, at estimated fair values as
determined by the Insurance Group.
The investment results of Separate Accounts on which the Insurance
Group does not bear the investment risk are reflected directly in
Separate Accounts liabilities. For the years ended December 31, 1995,
1994 and 1993, investment results of such Separate Accounts were
$1,956.3 million, $676.3 million and $1,676.5 million, respectively.
Deposits to all Separate Accounts are reported as increases in
Separate Accounts liabilities and are not reported in revenues.
Mortality, policy administration and surrender charges on all Separate
Accounts are included in revenues.
SAI-45
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------------- ----------------- ---------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 10,910.7 $ 617.6 $ 118.1 $ 11,410.2
Mortgage-backed.................... 1,838.0 31.2 1.2 1,868.0
U.S. Treasury securities and
U.S. government and
agency securities................ 2,257.0 77.8 4.1 2,330.7
States and political subdivisions.. 45.7 5.2 - 50.9
Foreign governments................ 124.5 11.0 .2 135.3
Redeemable preferred stock......... 108.1 5.3 8.6 104.8
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 15,284.0 $ 748.1 $ 132.2 $ 15,899.9
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 97.3 $ 49.1 $ 18.0 $ 128.4
================= ================= ================ ===============
December 31, 1994
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 5,663.4 $ 34.6 $ 368.0 $ 5,330.0
Mortgage-backed.................... 686.0 2.9 44.8 644.1
U.S. Treasury securities and
U.S. government and
agency securities................ 1,519.3 6.7 71.9 1,454.1
States and political subdivisions.. 23.4 .1 .7 22.8
Foreign governments................ 43.8 .3 4.2 39.9
Redeemable preferred stock......... 108.4 .4 13.7 95.1
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 8,044.3 $ 45.0 $ 503.3 $ 7,586.0
================= ================= ================ ===============
Held to Maturity:
Corporate.......................... $ 4,661.0 $ 67.9 $ 233.8 $ 4,495.1
U.S. Treasury securities and
U.S. government and
agency securities................ 428.9 4.6 44.2 389.3
States and political subdivisions.. 63.4 .9 3.7 60.6
Foreign governments................ 69.7 4.2 2.0 71.9
================= ================= ================ ===============
Total Held to Maturity................. $ 5,223.0 $ 77.6 $ 283.7 $ 5,016.9
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 126.4 $ 31.2 $ 23.5 $ 134.1
================= ================= ================ ===============
</TABLE>
SAI-46
<PAGE>
For publicly traded fixed maturities and equity securities, estimated
fair value is determined using quoted market prices. For fixed
maturities without a readily ascertainable market value, the Company
has determined an estimated fair value using a discounted cash flow
approach, including provisions for credit risk, generally based upon
the assumption that such securities will be held to maturity.
Estimated fair value for equity securities, substantially all of which
do not have a readily ascertainable market value, has been determined
by the Company. Such estimated fair values do not necessarily
represent the values for which these securities could have been sold
at the dates of the consolidated balance sheets. At December 31, 1995
and 1994, securities without a readily ascertainable market value
having an amortized cost of $3,748.9 million and $3,980.4 million,
respectively, had estimated fair values of $3,981.8 million and
$3,858.7 million, respectively.
The contractual maturity of bonds at December 31, 1995 is shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
------------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less................................................ $ 357.9 $ 360.0
Due in years two through five.......................................... 3,773.1 3,847.1
Due in years six through ten........................................... 4,709.8 4,821.8
Due after ten years.................................................... 4,497.1 4,898.2
Mortgage-backed securities............................................. 1,838.0 1,868.0
---------------- -----------------
Total.................................................................. $ 15,175.9 $ 15,795.1
================ =================
</TABLE>
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.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 284.9 $ 355.6 $ 512.0
Additions charged to income........................ 136.0 51.0 92.8
Deductions for writedowns and asset dispositions... (95.6) (121.7) (249.2)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 325.3 $ 284.9 $ 355.6
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 65.5 $ 64.2 $ 144.4
Equity real estate............................... 259.8 220.7 211.2
----------------- ---------------- -----------------
Total.............................................. $ 325.3 $ 284.9 $ 355.6
================= ================ =================
</TABLE>
Deductions for writedowns and asset dispositions for 1993 include an
$87.1 million writedown of fixed maturity investments at December 31,
1993 as a result of adopting a new accounting statement for the
valuation of these investments that requires specific writedowns
instead of valuation allowances.
At December 31, 1995, the carrying values of investments held for the
production of income which were non-income producing for the twelve
months preceding the consolidated balance sheet date were $37.2
million of fixed maturities and $84.7 million of mortgage loans on
real estate.
SAI-47
<PAGE>
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
the total investments in any single issuer or total investment in a
particular industry group. Certain of these corporate high yield
securities are classified as other than investment grade by the
various rating agencies, i.e., a rating below Baa or National
Association of Insurance Commissioners ("NAIC") designation of 3
(medium grade), 4 or 5 (below investment grade) or 6 (in or near
default). At December 31, 1995, approximately 15.57% of the $15,139.9
million aggregate amortized cost of bonds held by the Insurance Group
were considered to be other than investment grade.
In addition to its holdings of corporate high yield securities, the
Insurance Group is an equity investor in limited partnership interests
which primarily invest in securities considered to be other than
investment grade.
The Company has restructured or modified the terms of certain fixed
maturity investments. The fixed maturity portfolio, based on amortized
cost, includes $15.9 million and $30.5 million at December 31, 1995
and 1994, respectively, of such restructured securities. These amounts
include fixed maturities which are in default as to principal and/or
interest payments, are to be restructured pursuant to commenced
negotiations or where the borrowers went into bankruptcy subsequent to
acquisition (collectively, "problem fixed maturities") of $1.6 million
and $9.7 million as of December 31, 1995 and 1994, respectively. Gross
interest income that would have been recorded in accordance with the
original terms of restructured fixed maturities amounted to $3.0
million, $7.5 million and $11.7 million in 1995, 1994 and 1993,
respectively. Gross interest income on these fixed maturities included
in net investment income aggregated $2.9 million, $6.8 million and
$9.7 million in 1995, 1994 and 1993, respectively.
At December 31, 1995 and 1994, mortgage loans on real estate with
scheduled payments 60 days (90 days for agricultural mortgages) or
more past due or in foreclosure (collectively, "problem mortgage loans
on real estate") had an amortized cost of $87.7 million (2.4% of total
mortgage loans on real estate) and $96.9 million (2.3% of total
mortgage loans on real estate), respectively.
The payment terms of mortgage loans on real estate may from time to
time be restructured or modified. The investment in restructured
mortgage loans on real estate, based on amortized cost, amounted to
$531.5 million and $447.9 million at December 31, 1995 and 1994,
respectively. These amounts include $3.8 million and $1.0 million of
problem mortgage loans on real estate at December 31, 1995 and 1994,
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 $52.1 million, $44.9 million
and $51.8 million in 1995, 1994 and 1993, respectively. Gross interest
income on these loans included in net investment income aggregated
$37.4 million, $32.8 million and $46.0 million in 1995, 1994 and 1993,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(IN MILLIONS)
<S> <C>
Impaired mortgage loans with provision for losses....................................... $ 310.1
Impaired mortgage loans with no provision for losses.................................... 160.8
-------------------
Recorded investment in impaired mortgage loans.......................................... 470.9
Provision for losses.................................................................... 62.7
-------------------
Net Impaired Mortgage Loans............................................................. $ 408.2
===================
</TABLE>
SAI-48
<PAGE>
Impaired mortgage loans with no provision for losses are loans where
the fair value of the collateral or the net present value of the loan
equals or exceeds the recorded investment. Interest income earned on
loans where the collateral value is used to measure impairment is
recorded on a cash basis. Interest income on loans where the present
value method is used to measure impairment is accrued on the net
carrying value amount of the loan at the interest rate used to
discount the cash flows. Changes in the present value attributable to
changes in the amount or timing of expected cash flows are reported as
investment gains or losses.
During the year ended December 31, 1995, the Company's average
recorded investment in impaired mortgage loans was $429.0 million.
Interest income recognized on these impaired mortgage loans totaled
$27.9 million for the year ended December 31, 1995, including $13.4
million recognized on a cash basis.
At December 31, 1995, investments owned of any one issuer, including
its affiliates, for which the aggregate carrying values are 10% or
more of total shareholders' equity, were $508.3 million relating to
Trammell Crow and affiliates (including holdings of the Closed Block
and the discontinued GIC Segment). The amount includes restructured
mortgage loans on real estate with an amortized cost of $152.4
million. A $294.0 million commercial loan package which was in
bankruptcy at the beginning of the year was resolved in 1995, with
part of the package reclassified as restructured and the remainder
reclassified as equity real estate.
The Insurance Group's investment in equity real estate is through
direct ownership and through investments in real estate joint
ventures. At December 31, 1995 and 1994, the carrying value of equity
real estate available for sale amounted to $255.5 million and $447.8
million, respectively. For the years ended December 31, 1995, 1994 and
1993, respectively, real estate of $35.3 million, $189.8 million and
$261.8 million was acquired in satisfaction of debt. At December 31,
1995 and 1994, the Company owned $862.7 million and $1,086.9 million,
respectively, of real estate acquired in satisfaction of debt.
Depreciation of real estate is computed using the straight-line method
over the estimated useful lives of the properties, which generally
range from 40 to 50 years. Accumulated depreciation on real estate was
$662.4 million and $703.1 million at December 31, 1995 and 1994,
respectively. Depreciation expense on real estate totaled $121.7
million, $117.0 million and $115.3 million for the years ended
December 31, 1995, 1994 and 1993, respectively.
SAI-49
<PAGE>
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information of real estate joint
ventures (38 and 47 individual ventures as of December 31, 1995 and
1994, respectively) and of limited partnership interests accounted for
under the equity method, in which the Company has an investment of
$10.0 million or greater and an equity interest of 10% or greater is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION
Investments in real estate, at depreciated cost........................ $ 2,684.1 $ 2,786.7
Investments in securities, generally at estimated fair value........... 2,459.8 3,071.2
Cash and cash equivalents.............................................. 489.1 359.8
Other assets........................................................... 270.8 398.7
---------------- -----------------
Total assets........................................................... 5,903.8 6,616.4
---------------- -----------------
Borrowed funds - third party........................................... 1,782.3 1,759.6
Borrowed funds - the Company........................................... 220.5 238.0
Other liabilities...................................................... 593.9 987.7
---------------- -----------------
Total liabilities...................................................... 2,596.7 2,985.3
---------------- -----------------
Partners' Capital...................................................... $ 3,307.1 $ 3,631.1
================ =================
Equity in partners' capital included above............................. $ 902.2 $ 964.2
Equity in limited partnership interests not included above............. 212.8 224.6
Excess (deficit) of equity in partners' capital over investment cost
and equity earnings.................................................. 3.6 (1.8)
Notes receivable from joint venture.................................... 5.3 6.1
---------------- -----------------
Carrying Value......................................................... $ 1,123.9 $ 1,193.1
================ =================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 463.5 $ 537.7 $ 602.7
Revenues of other limited partnership interests.... 242.3 103.4 319.1
Interest expense - third party..................... (135.3) (114.9) (118.8)
Interest expense - the Company..................... (41.0) (36.9) (52.1)
Other expenses..................................... (397.7) (430.9) (531.7)
----------------- ---------------- -----------------
Net Earnings....................................... $ 131.8 $ 58.4 $ 219.2
================= ================ =================
Equity in net earnings included above.............. $ 49.1 $ 18.9 $ 71.6
Equity in net earnings of limited partnerships
interests not included above..................... 44.8 25.3 46.3
Excess of earnings in joint ventures over equity
ownership percentage and amortization of
differences in bases............................. .9 1.8 9.2
Interest on notes receivable....................... .1 - .5
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 94.9 $ 46.0 $ 127.6
================= ================ =================
</TABLE>
SAI-50
<PAGE>
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................... $ 1,151.0 $ 1,024.5 $ 981.7
Trading account securities......................... - - 709.3
Securities purchased under resale agreements....... - - 533.8
Mortgage loans on real estate...................... 329.0 384.3 457.4
Equity real estate................................. 560.4 561.8 539.1
Other equity investments........................... 76.9 35.7 110.4
Policy loans....................................... 144.4 122.7 117.0
Broker-dealer related receivables.................. - - 292.2
Other investment income............................ 279.7 336.3 304.9
----------------- ---------------- -----------------
Gross investment income.......................... 2,541.4 2,465.3 4,045.8
----------------- ---------------- -----------------
Interest expense to finance short-term trading
instruments...................................... - - 983.4
Other investment expenses.......................... 413.7 434.4 463.1
----------------- ---------------- -----------------
Investment expenses.............................. 413.7 434.4 1,446.5
----------------- ---------------- -----------------
Net Investment Income.............................. $ 2,127.7 $ 2,030.9 $ 2,599.3
================= ================ =================
</TABLE>
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................... $ 119.9 $ (14.1) $ 123.1
Mortgage loans on real estate...................... (40.2) (43.1) (65.1)
Equity real estate................................. (86.6) 20.6 (18.5)
Other equity investments........................... 12.8 76.0 119.5
Dealer and trading gains........................... - - 372.5
Sales of newly issued Alliance Units............... - 52.4 -
Other.............................................. (.6) - 1.9
----------------- ---------------- -----------------
Investment Gains, Net.............................. $ 5.3 $ 91.8 $ 533.4
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $46.7 million, $30.8
million and $5.4 million for the years ended December 31, 1995, 1994
and 1993, respectively.
For the years ended December 31, 1995 and 1994, respectively, proceeds
received on sales of fixed maturities classified as available for sale
amounted to $8,206.0 million and $5,253.9 million. Gross gains of
$211.4 million and $65.2 million and gross losses of $64.2 million and
$50.8 million, respectively, were realized on these sales. The change
in unrealized investment gains (losses) related to fixed maturities
classified as available for sale for the years ended December 31, 1995
and 1994 amounted to $1,077.2 million and $(742.2) million,
respectively.
Gross gains of $188.5 million and gross losses of $145.0 million were
realized on sales of investments in fixed maturities held for
investment and available for sale for the year ended December 31,
1993.
SAI-51
<PAGE>
During each of the years ended December 31, 1995 and 1994, one
security classified as held to maturity was sold and during the eleven
months ended November 30, 1995 and the year ended December 31, 1994,
respectively, twelve and six securities so classified were transferred
to the available for sale portfolio. All actions were taken as a
result of a significant deterioration in creditworthiness. The
aggregate amortized cost of the securities sold were $1.0 million and
$19.9 million with a related investment gain of $-0- million and $.8
million recognized in 1995 and 1994, respectively; the aggregate
amortized cost of the securities transferred was $116.0 million and
$42.8 million with gross unrealized investment losses of $3.2 million
and $3.1 million charged to consolidated shareholders' equity for the
eleven months ended November 30, 1995 and the year ended December 31,
1994, respectively. On December 1, 1995, the Company transferred
$4,794.9 million of securities classified as held to maturity to the
available for sale portfolio. As a result, unrealized gains on fixed
maturities increased $307.0 million, offset by deferred policy
acquisition costs of $73.7 million, amounts attributable to
participating group annuity contracts of $39.2 million and deferred
Federal income tax of $67.9 million.
Investment gains from other equity investments for the year ended
December 31, 1993, included $79.9 million generated by DLJ's
involvement in long-term corporate development investments.
For the years ended December 31, 1995, 1994 and 1993, investment
results passed through to certain participating group annuity
contracts as interest credited to policyholders' account balances
amounted to $131.2 million, $175.8 million and $243.2 million,
respectively.
During 1995, Alliance entered into an agreement to acquire the
business of Cursitor-Eaton Asset Management Company and Cursitor
Holdings Limited (collectively, "Cursitor") for approximately $141.5
million consisting of $84.9 million in cash, 1,764,115 of Alliance's
publicly traded units ("Alliance Units"), 6% notes aggregating $21.5
million payable ratably over four years, and substantial additional
consideration which will be determined at a later date. The
transaction, which is expected to be completed during the first
quarter of 1996, is subject to the receipt of consents, regulatory
approvals, and certain other closing conditions, including client
approval of the transfer of Cursitor accounts. Upon completion of this
transaction, the Company's ownership percentage of Alliance will be
reduced.
In 1994, Alliance sold 4.96 million newly issued Alliance Units to
third parties at prevailing market prices. The sales decreased the
Company's ownership of Alliance's Units from 63.2% to 59.2%. In
addition, the Company continues to hold its 1% general partnership
interest in Alliance. The Company recognized an investment gain of
$52.4 million as a result of these transactions.
The Company's ownership interest in Alliance will be further reduced
upon the exercise of options granted to certain Alliance employees. At
December 31, 1995, Alliance had options outstanding to purchase an
aggregate of 4.8 million Alliance Units at a price ranging from
$6.0625 to $22.25 per unit. Options are exercisable at a rate of 20%
on each of the first five anniversary dates from the date of grant.
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of equity and the changes for the
corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year......................... $ (203.0) $ 131.9 $ 78.8
Changes in unrealized investment (losses) gains.... 1,117.7 (823.8) (14.1)
Effect of adopting SFAS No. 115.................... - - 283.9
Changes in unrealized investment (gains)
losses attributable to:
Participating group annuity contracts.......... (78.1) 40.8 (36.2)
Deferred policy acquisition costs.............. (208.4) 269.5 (150.5)
Deferred Federal income taxes.................. (290.0) 178.6 (30.0)
----------------- ---------------- -----------------
Balance, End of Year............................... $ 338.2 $ (203.0) $ 131.9
================= ================ =================
</TABLE>
SAI-52
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, end of year comprises:
Unrealized investment (losses) gains on:
Fixed maturities............................... $ 615.9 $ (461.3) $ 283.9
Other equity investments....................... 31.1 7.7 75.8
Other.......................................... 31.6 14.5 25.0
----------------- ---------------- -----------------
Total........................................ 678.6 (439.1) 384.7
Amounts of unrealized investment (gains)
losses attributable to:
Participating group annuity contracts........ (72.2) 5.9 (34.9)
Deferred policy acquisition costs............ (89.4) 119.0 (150.5)
Deferred Federal income taxes................ (178.8) 111.2 (67.4)
----------------- ---------------- -----------------
Total.............................................. $ 338.2 $ (203.0) $ 131.9
================= ================ =================
</TABLE>
6) CLOSED BLOCK
Summarized financial information of the Closed Block follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$3,662.8 and $1,270.3)........................................... $ 3,896.2 $ 1,197.0
Held to maturity, at amortized cost (estimated fair value of
$1,785.0 in 1994)................................................ - 1,927.8
Mortgage loans on real estate........................................ 1,368.8 1,543.7
Policy loans......................................................... 1,797.2 1,827.9
Cash and other invested assets....................................... 440.9 442.5
Deferred policy acquisition costs.................................... 823.6 878.1
Other assets......................................................... 286.1 288.5
----------------- -----------------
Total Assets......................................................... $ 8,612.8 $ 8,105.5
================= =================
Liabilities
Future policy benefits and policyholders' account balances........... $ 9,346.7 $ 8,965.3
Other liabilities.................................................... 160.5 104.2
----------------- -----------------
Total Liabilities.................................................... $ 9,507.2 $ 9,069.5
================= =================
</TABLE>
SAI-53
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 753.4 $ 798.1 $ 860.2
Investment income (net of investment
expenses of $26.7, $19.0 and $17.3).............. 538.9 523.0 526.5
Investment losses, net............................. (20.2) (24.0) (15.0)
----------------- ---------------- -----------------
Total revenues............................... 1,272.1 1,297.1 1,371.7
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,085.1 1,075.6 1,141.4
Other operating costs and expenses................. 62.6 70.5 102.0
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,147.7 1,146.1 1,243.4
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 124.4 $ 151.0 $ 128.3
================= ================ =================
</TABLE>
The fixed maturity portfolio, based on amortized cost, includes $4.3
million and $23.8 million at December 31, 1995 and 1994, respectively,
of restructured securities which includes problem fixed maturities of
$1.9 million and $6.4 million, respectively.
During the eleven months ended November 30, 1995, one security
classified as held to maturity was sold and ten securities classified
as held to maturity were transferred to the available for sale
portfolio. All actions resulted from a significant deterioration in
creditworthiness. The amortized cost of the security sold was $4.2
million. The aggregate amortized cost of the securities transferred
was $81.3 million with gross unrealized investment losses of $.1
million transferred to equity. At December 1, 1995, $1,750.7 million
of securities classified as held to maturity were transferred to the
available for sale portfolio. As a result, unrealized gains of $88.5
million on fixed maturities were recognized and offset by an increase
to the deferred dividend liability. Implementation of SFAS No. 115 for
the valuation of fixed maturities at December 31, 1993 resulted in the
recognition of a deferred dividend liability of $49.6 million.
At December 31, 1995 and 1994, problem mortgage loans on real estate
had an amortized cost of $36.5 million and $27.6 million,
respectively, and mortgage loans on real estate for which the payment
terms have been restructured had an amortized cost of $137.7 million
and $179.2 million, respectively. At December 31, 1995 and 1994, the
restructured mortgage loans on real estate amount included $8.8
million and $.7 million, respectively, of problem mortgage loans on
real estate.
Valuation allowances amounted to $18.4 million and $46.2 million on
mortgage loans on real estate and $4.3 million and $2.6 million on
equity real estate at December 31, 1995 and 1994, respectively.
Writedowns of fixed maturities amounted to $16.8 million and $15.9
million and $1.7 million for the years ended December 31, 1995, 1994
and 1993, respectively.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of
the Closed Block operations. Operating costs and expenses outside of
the Closed Block are, therefore, disproportionate to the business
outside of the Closed Block.
SAI-54
<PAGE>
7) DISCONTINUED OPERATIONS
Summarized financial information of the GIC Segment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Mortgage loans on real estate........................................ $ 1,485.8 $ 1,730.5
Equity real estate................................................... 1,122.1 1,194.8
Other invested assets................................................ 665.2 978.8
Other assets......................................................... 579.3 529.5
----------------- -----------------
Total Assets......................................................... $ 3,852.4 $ 4,433.6
================= =================
Liabilities
Policyholders' liabilities........................................... $ 1,399.8 $ 1,924.0
Allowance for future losses.......................................... 164.2 185.6
Amounts due to continuing operations................................. 2,097.1 2,108.6
Other liabilities.................................................... 191.3 215.4
----------------- -----------------
Total Liabilities.................................................... $ 3,852.4 $ 4,433.6
================= =================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Investment income (net of investment expenses
of $143.8, $174.0 and $175.8).................... $ 325.1 $ 395.0 $ 535.1
Investment (losses) gains, net..................... (22.9) 26.8 (22.6)
Policy fees, premiums and other income............. .7 .3 8.7
----------------- ---------------- -----------------
Total revenues..................................... 302.9 422.1 521.2
Benefits and other deductions...................... 328.0 443.8 545.9
----------------- ---------------- -----------------
Losses Charged to Allowance for Future Losses...... $ (25.1) $ (21.7) $ (24.7)
================= ================ =================
</TABLE>
In 1991, the Company established a pre-tax provision of $396.7 million
for the estimated future losses of the GIC Segment. At December 31,
1993, implementation of SFAS No. 115 for the valuation of fixed
maturities resulted in a benefit of $13.1 million, offset by a
corresponding addition to the allowance for future losses.
The amounts due to continuing operations at December 31, 1994
consisted of $3,324.0 million borrowed by the GIC Segment from
continuing operations, offset by $1,215.4 million representing an
obligation of continuing operations to provide assets to fund the
accumulated deficit of the GIC Segment. In January 1995, continuing
operations transferred $1,215.4 million in cash to the GIC Segment in
settlement of its obligation. Subsequently, the GIC Segment remitted
$1,155.4 million in cash to continuing operations in partial repayment
of borrowings by the GIC Segment. No gains or losses were recognized
on these transactions. Amounts due to continuing operations at
December 31, 1995, consisted of $2,097.1 million borrowed by the
discontinued GIC Segment.
SAI-55
<PAGE>
Investment income included $88.2 million and $97.7 million of interest
income for the years ended December 31, 1994 and 1993, respectively,
on amounts due from continuing operations. Benefits and other
deductions includes $154.6 million, $219.7 million and $197.1 million
of interest expense related to amounts borrowed from continuing
operations in 1995, 1994 and 1993, respectively.
Valuation allowances amounted to $19.2 million and $50.2 million on
mortgage loans on real estate and $77.9 million and $74.7 million on
equity real estate at December 31, 1995 and 1994, respectively.
Writedowns of fixed maturities amounted to $8.1 million, $17.8 million
and $1.1 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
The fixed maturity portfolio, based on amortized cost, includes $15.1
million and $43.3 million at December 31, 1995 and 1994, respectively,
of restructured securities. These amounts include problem fixed
maturities of $6.1 million and $9.7 million at December 31, 1995 and
1994, respectively.
At December 31, 1995 and 1994, problem mortgage loans on real estate
had amortized costs of $35.4 million and $14.9 million, respectively,
and mortgage loans on real estate for which the payment terms have
been restructured had amortized costs of $289.3 million and $371.2
million, respectively.
At December 31, 1995 and 1994, the GIC Segment had $310.9 million and
$312.2 million, respectively, of real estate acquired in satisfaction
of debt.
8) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt...................................................... $ - $ 20.0
----------------- -----------------
Long-term debt:
Equitable Life:
Surplus notes, 6.95%, scheduled to mature 2005..................... 399.3 -
Surplus notes, 7.70%, scheduled to mature 2015..................... 199.6 -
Eurodollar notes, 10.375% due 1995................................. - 34.6
Eurodollar notes, 10.5% due 1997................................... 76.2 76.2
Zero coupon note, 11.25% due 1997.................................. 120.1 107.8
Other.............................................................. 16.3 14.3
----------------- -----------------
Total Equitable Life........................................... 811.5 232.9
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 4.98% - 12.75% due through 2019.................... 1,084.4 1,080.6
----------------- -----------------
Alliance:
Other.............................................................. 3.4 3.9
----------------- -----------------
Total long-term debt................................................. 1,899.3 1,317.4
----------------- -----------------
Total Short-term and Long-term Debt.................................. $ 1,899.3 $ 1,337.4
================= =================
</TABLE>
Short-term Debt
---------------
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates. The interest rates are
based on external indices dependent on the type of borrowing and at
December 31, 1995 range from 5.8% (the London Interbank Offering Rate
plus 22.5 basis points) to 8.5% (the prime rate). There were no
borrowings outstanding under this bank credit facility at December 31,
1995.
SAI-56
<PAGE>
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate
purposes used to support Equitable Life's liquidity needs and is
supported by Equitable Life's existing $350.0 million five-year bank
credit facility. There were no borrowings outstanding under this
program at December 31, 1995.
In 1994, Alliance established a $100.0 million revolving credit
facility with several banks. On March 31, 1997, the revolving credit
facility converts into a term loan payable in quarterly installments
through March 31, 1999. Outstanding borrowings generally bear interest
at the Eurodollar rate plus .875% per annum through March 31, 1997 and
at the Eurodollar rate plus 1.125% per annum after conversion through
March 31, 1999. In addition, a quarterly commitment fee of .25% per
annum is paid on the average daily unused amount. At December 31,
1995, there were no amounts outstanding under the facility.
In 1994, Alliance also established a $100.0 million commercial paper
program and entered into a three-year $100.0 million revolving credit
facility with a group of commercial banks to support commercial paper
to be issued under the program and for general corporate purposes.
Amounts outstanding under the facility bear interest at an annual rate
ranging from the Eurodollar rate plus .225% to the Eurodollar rate
plus .2875%. A fee of .125% per annum is paid quarterly on the entire
facility. At December 31, 1995, Alliance had not issued any commercial
paper and there were no amounts outstanding under the revolving credit
facility.
During 1994, EREIM established two bank lines of credit totaling $30.0
million of which $20.0 million was outstanding at December 31, 1994.
Long-term Debt
--------------
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
On December 18, 1995, Equitable Life issued, in accordance with
Section 1307 of the New York Insurance Law, $400.0 million of surplus
notes having an interest rate of 6.95% scheduled to mature in 2005 and
$200.0 million of surplus notes having an interest rate of 7.70%
scheduled to mature in 2015. Proceeds from the issuance of the surplus
notes were $596.6 million, net of related issuance costs. The
unamortized discount on the surplus notes was $1.1 million at December
31, 1995. Payments of interest on or principal of the surplus notes
are subject to prior approval by the New York Insurance Department.
The Company has pledged real estate, mortgage loans, cash and
securities amounting to $1,629.7 million and $1,744.4 million at
December 31, 1995 and 1994, respectively, as collateral for certain
long-term debt.
At December 31, 1995, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1996 and the succeeding
four years are $124.0 million, $466.6 million, $309.5 million, $15.8
million, respectively, and $1,015.0 million thereafter.
9) FEDERAL INCOME TAXES
A summary of the Federal income tax expense (benefit) in the
consolidated statements of earnings is shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current.......................................... $ (11.7) $ 4.0 $ 115.8
Deferred......................................... 124.1 97.2 (24.5)
----------------- ---------------- -----------------
Total.............................................. $ 112.4 $ 101.2 $ 91.3
================= ================ =================
</TABLE>
SAI-57
<PAGE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings
before Federal income taxes and cumulative effect of accounting change
by the expected Federal income tax rate of 35%. The sources of the
difference and the tax effects of each are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense................ $ 143.5 $ 138.1 $ 106.3
Differential earnings amount....................... - (16.8) (23.2)
Adjustment of tax audit reserves................... 4.1 (4.6) 22.9
Tax rate adjustment................................ - - (5.0)
Other.............................................. (35.2) (15.5) (9.7)
----------------- --------------- -----------------
Federal Income Tax Expense......................... $ 112.4 $ 101.2 $ 91.3
================= ================ =================
</TABLE>
Prior to the date of demutualization, Equitable Life reduced its
deduction for policyholder dividends by the differential earnings
amount. This amount was computed, for each tax year, by multiplying
Equitable Life's average equity base, as determined for tax purposes,
by an estimate of the excess of an imputed earnings rate for stock
life insurance companies over the average mutual life insurance
companies' earnings rate. The differential earnings amount for each
tax year was subsequently recomputed when actual earnings rates were
published by the Internal Revenue Service. As a stock life insurance
company, Equitable Life is no longer required to reduce its
policyholder dividend deduction by the differential earnings amount,
but differential earnings amounts for pre-demutualization years were
still being recomputed in 1994 and 1993.
The components of the net deferred Federal income tax asset are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 December 31, 1994
--------------------------------- ---------------------------------
ASSETS LIABILITIES Assets Liabilities
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Deferred policy acquisition costs,
reserves and reinsurance............. $ - $ 303.2 $ - $ 220.3
Investments............................ - 326.9 - 18.7
Compensation and related benefits...... 293.0 - 307.3 -
Other.................................. - 32.3 - 5.8
--------------- ---------------- --------------- ---------------
Total.................................. $ 293.0 $ 662.4 $ 307.3 $ 244.8
=============== ================ =============== ===============
</TABLE>
The deferred Federal income tax expense (benefit) impacting operations
reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The sources of
these temporary differences and the tax effects of each are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Deferred policy acquisition costs, reserves
and reinsurance.................................. $ 55.1 $ 13.0 $ (46.7)
Investments........................................ 13.0 89.3 60.4
Compensation and related benefits.................. 30.8 10.0 (50.1)
Other.............................................. 25.2 (15.1) 11.9
----------------- ---------------- -----------------
Deferred Federal Income Tax Expense (Benefit)...... $ 124.1 $ 97.2 $ (24.5)
================= ================ =================
</TABLE>
SAI-58
<PAGE>
The Internal Revenue Service completed its audit of the Company's
Federal income tax returns for the years 1984 through 1988. There was
no material effect on the Company's consolidated results of
operations.
10) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of
its reinsurers to minimize its exposure to significant losses from
reinsurer insolvencies. The effect of reinsurance (excluding group
life and health) is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums.................................... $ 474.2 $ 476.7 $ 458.8
Reinsurance assumed................................ 171.3 180.5 169.9
Reinsurance ceded.................................. (38.7) (31.6) (29.6)
----------------- ---------------- -----------------
Premiums........................................... $ 606.8 $ 625.6 $ 599.1
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 38.9 $ 27.5 $ 33.7
================= ================ =================
Policyholders' Benefits Ceded...................... $ 48.2 $ 20.7 $ 72.3
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 28.5 $ 25.4 $ 24.1
================= ================ =================
</TABLE>
In February 1993, management established a practice limiting the risk
retention on new policies issued by the Insurance Group to a maximum
of $5.0 million. In addition, effective January 1, 1994, all in force
business above $5.0 million was reinsured. The Insurance Group also
reinsures the entire risk on certain substandard underwriting risks as
well as in certain other cases.
The Insurance Group cedes 100% of its group life and health business
to a third party insurance company. Premiums ceded totaled $260.6
million, $241.0 million and $895.1 million for the years ended
December 31, 1995, 1994 and 1993, respectively. Ceded death and
disability benefits totaled $188.1 million, $235.5 million and $787.8
million for the years ended December 31, 1995, 1994 and 1993,
respectively. Insurance liabilities ceded totaled $724.2 million and
$833.4 million at December 31, 1995 and 1994, respectively.
11) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans
are non-contributory and 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. The Company's funding
policy is to make the minimum contribution required by the Employee
Retirement Income Security Act of 1974.
Components of net periodic pension (credit) cost for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 30.0 $ 30.3 $ 29.8
Interest cost on projected benefit obligations..... 122.0 111.0 108.0
Actual return on assets............................ (309.2) 24.4 (178.6)
Net amortization and deferrals..................... 155.6 (142.5) 55.3
----------------- ---------------- -----------------
Net Periodic Pension (Credit) Cost................. $ (1.6) $ 23.2 $ 14.5
================= ================ =================
</TABLE>
SAI-59
<PAGE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested............................................................... $ 1,642.4 $ 1,295.5
Non-vested........................................................... 10.9 8.7
--------------- -----------------
Accumulated Benefit Obligation......................................... $ 1,653.3 $ 1,304.2
================ =================
Plan assets at fair value.............................................. $ 1,503.8 $ 1,193.5
Projected benefit obligation........................................... 1,743.0 1,403.4
---------------- -----------------
Projected benefit obligation in excess of plan assets.................. (239.2) (209.9)
Unrecognized prior service cost........................................ (25.5) (33.2)
Unrecognized net loss from past experience different from that
assumed.............................................................. 368.2 298.9
Unrecognized net asset at transition................................... (7.3) (20.8)
Additional minimum liability........................................... (51.9) (37.8)
---------------- -----------------
Prepaid (Accrued) Pension Cost......................................... $ 44.3 $ (2.8)
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.25% and 4.50%, respectively, at December 31, 1995
and 8.75% and 4.88%, respectively, at December 31, 1994. As of January
1, 1995 and 1994, the expected long-term rate of return on assets for
the retirement plan was 11% and 10%, respectively.
The Company recorded, as a reduction of shareholder's equity, an
additional minimum pension liability of $35.1 million and $2.7
million, net of Federal income taxes, at December 31, 1995 and 1994,
respectively, representing the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued pension
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of Group
Trusts managed by Alliance.
As of December 31, 1993, the Company changed the method of determining
the market-related value of plan assets from fair value to a
calculated value. This change in estimate had no material effect on
the Company's consolidated statements of earnings.
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 $36.4 million, $38.1 million and $39.9 million for the
years ended December 31, 1995, 1994 and 1993, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company on or after attaining
age 55 who have at least 10 years of service. The life insurance
benefits are related to age and salary at retirement. The costs of
postretirement benefits are recognized in accordance with the
provisions of SFAS No. 106. The Company continues to fund
postretirement benefits costs on a pay-as-you-go basis and, for the
years ended December 31, 1995, 1994 and 1993, the Company made
estimated postretirement benefits payments of $31.1 million, $29.8
million and $29.7 million, respectively.
SAI-60
<PAGE>
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 4.0 $ 3.9 $ 5.3
Interest cost on accumulated postretirement
benefits obligation.............................. 34.7 28.6 29.2
Unrecognized prior service cost.................... (2.3) (3.9) (6.9)
Net amortization and deferrals..................... - - 1.5
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 36.4 $ 28.6 $ 29.1
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefits obligation:
Retirees............................................................. $ 391.8 $ 300.4
Fully eligible active plan participants.............................. 50.4 33.0
Other active plan participants....................................... 64.2 44.0
---------------- -----------------
506.4 377.4
Unrecognized benefit of plan amendments................................ - 3.2
Unrecognized prior service cost........................................ 56.3 61.9
Unrecognized net loss from past experience different from that
assumed and from changes in assumptions.............................. (181.3) (64.7)
---------------- -----------------
Accrued Postretirement Benefits Cost................................... $ 381.4 $ 377.8
================ =================
</TABLE>
In 1993, the Company amended the cost sharing provisions of
postretirement medical benefits. At January 1, 1994, medical benefits
available to retirees under age 65 are the same as those offered to
active employees and medical benefits will be limited to 200% of 1993
costs for all participants.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 10% in 1995,
gradually declining to 3.5% in the year 2008 and in 1994 was 10%,
gradually declining to 5% in the year 2004. The discount rate used in
determining the accumulated postretirement benefits obligation was
7.25% and 8.75% at December 31, 1995 and 1994, respectively.
If the health care cost trend rate assumptions were increased by 1%,
the accumulated postretirement benefits obligation as of December 31,
1995 would be increased 6.5%. The effect of this change on the sum of
the service cost and interest cost would be an increase of 6.7%.
12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
-----------
The Insurance Group primarily uses derivatives for asset/liability
risk management and for hedging individual securities. Derivatives
mainly are utilized to reduce the Insurance Group's exposure to
interest rate fluctuations. Accounting for interest rate swap
transactions is on an accrual basis. Gains and losses related to
interest rate swap transactions are amortized as yield adjustments
over the remaining life of the underlying hedged security. Income and
expense resulting from interest rate swap activities are reflected in
net investment income except for hedging transactions related to
insurance liabilities. The notional amount of matched interest rate
swaps outstanding at December 31, 1995 was $1,120.8 million. The
average unexpired terms at December 31, 1995 range from 2.5 to 3.0
years. At December 31, 1995, the cost of terminating outstanding
matched swaps in a loss position was $15.9 million and the unrealized
gain on
SAI-61
<PAGE>
outstanding matched swaps in a gain position was $19.0 million. The
Company has no intention of terminating these contracts prior to
maturity. During 1995, 1994 and 1993, net gains (losses) of $1.4
million, $(.2) million and $-0- million, respectively, were recorded
in connection with interest rate swap activity. Equitable Life has
implemented an interest rate cap program designed to hedge crediting
rates on interest-sensitive individual annuities contracts. The
outstanding notional amounts at December 31, 1995 of contracts
purchased and sold were $2,625.0 million and $300.0 million,
respectively. The net premium paid by Equitable Life on these
contracts was $12.5 million and is being amortized ratably over the
contract periods ranging from 3 to 5 years. Income and expense
resulting from this program are reflected as an adjustment to interest
credited to policyholders' account balances.
Substantially all of DLJ's business related derivatives is by its
nature trading activities which are primarily for the purpose of
customer accommodations. DLJ's derivative activities consist of option
writing and trading in forward and futures contracts. Derivative
financial instruments have both on-and-off balance sheet implications
depending on the nature of the contracts. DLJ's involvement in swap
contracts is not significant.
Fair Value of Financial Instruments
-----------------------------------
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are
estimated using present value or other valuation techniques. The fair
value estimates are made at a specific point in time, based on
available market information and judgments about the financial
instrument, including estimates of timing, amount of expected future
cash flows and the credit standing of counterparties. Such estimates
do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular
financial instrument, nor do they consider the tax impact of the
realization of 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, 1995 and 1994.
Fair value for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at
which loans with similar characteristics and credit quality would be
made. Fair values for foreclosed mortgage loans and problem mortgage
loans are limited to the estimated fair value of the underlying
collateral if lower.
The estimated fair values for the Company's liabilities under GIC and
association plan contracts are estimated using contractual cash flows
discounted based on the T. Rowe Price GIC Index Rate for the
appropriate duration. For durations in excess of the published index
rate, the appropriate Treasury rate is used plus a spread equal to the
longest duration GIC rate spread published.
The estimated fair values for those group annuity contracts which are
classified as investment contracts are measured at the estimated fair
value of the underlying assets. Deposit administration contracts
(included with group annuity contracts) classified as insurance
contracts are measured at estimated fair value of the underlying
assets. The estimated fair values for single premium deferred
annuities ("SPDA") are estimated using projected cash flows discounted
at current offering rates. The estimated fair values for supplementary
contracts not involving life contingencies ("SCNILC") and annuities
certain are derived using discounted cash flows based upon the
estimated current offering rate.
Fair value for long-term debt is determined using published market
values, where available, or contractual cash flows discounted at
market interest rates. The estimated fair values for non-recourse
mortgage debt are determined by discounting contractual cash flows at
a rate which takes into account the level of current market interest
rates and collateral risk. The estimated fair values for recourse
mortgage debt are determined by discounting contractual cash flows at
a rate based upon current interest rates of other companies with
credit ratings similar to the Company. The Company's fair value of
short-term borrowings approximates their carrying value.
SAI-62
<PAGE>
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1995 1994
--------------------------------- ---------------------------------
CARRYING ESTIMATED Carrying Estimated
VALUE FAIR VALUE Value Fair Value
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... $ 3,638.3 $ 3,973.6 $ 4,018.0 $ 3,919.4
Other joint ventures................... 492.7 492.7 544.4 544.4
Policy loans........................... 1,976.4 2,057.5 1,731.2 1,676.6
Policyholders' account balances:
Association plans.................... 101.0 100.0 141.0 141.0
Group annuity contracts.............. 2,335.0 2,395.0 2,450.0 2,469.0
SPDA................................. 1,265.8 1,272.0 1,744.3 1,732.7
Annuities certain and SCNILC......... 649.1 680.7 599.1 624.7
Long-term debt......................... 1,899.3 1,962.9 1,317.4 1,249.2
Closed Block Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... 1,368.8 1,461.4 1,543.7 1,477.8
Other equity investments............... 151.6 151.6 179.5 179.5
Policy loans........................... 1,797.2 1,891.4 1,827.9 1,721.9
SCNILC liability....................... 34.8 34.5 39.5 37.0
GIC Segment Financial Instruments:
----------------------------------
Mortgage loans on real estate.......... 1,485.8 1,666.1 1,730.5 1,743.7
Fixed maturities....................... 107.4 107.4 219.3 219.3
Other equity investments............... 455.9 455.9 591.8 591.8
Guaranteed interest contracts.......... 329.0 352.0 835.0 855.0
Long-term debt......................... 135.1 136.0 134.8 127.9
</TABLE>
13) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
liquidity advances to cover delinquent principal and interest and
property protection expenses with respect to loan servicing agreements
for securitized mortgage loans which at December 31, 1995 totaled $2.8
billion (as of December 31, 1995, $4.0 million have been advanced
under these commitments); to make capital contributions of up to
$246.7 million to affiliated real estate joint ventures; to provide
equity financing to certain limited partnerships of $129.4 million at
December 31, 1995, under existing loan or loan commitment agreements;
and to provide short-term financing loans which at December 31, 1995
totaled $45.8 million. Management believes the Company will not incur
any material losses as a result of these commitments.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life
has directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the
previously wholly owned subsidiaries be unable to meet their
obligations. Management believes the satisfaction of those obligations
by Equitable Life is remote.
At December 31, 1995, the Insurance Group had $29.0 million of letters
of credit outstanding.
SAI-63
<PAGE>
14) 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, 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 and its insurance subsidiaries, like other life and health
insurers, from time to time are involved in such litigation. To date,
no such lawsuit has resulted in an award or settlement of any material
amount against the Company. Among litigations pending against
Equitable Life and its insurance subsidiaries of the type referred to
in this paragraph are the litigations described in the following two
paragraphs.
An action entitled Golomb et al. v. The Equitable Life Assurance
Society of the United States was filed on January 20, 1995 in New York
County Supreme Court. The action purports to be brought on behalf of a
class of persons insured after 1983 under Lifetime Guaranteed
Renewable Major Medical Insurance Policies issued by Equitable Life
(the "policies"). The complaint alleges that premium increases for
these policies after 1983, all of which were filed with and approved
by the New York State Insurance Department and certain other state
insurance departments, breached the terms of the insurance policies,
and that statements in the policies and elsewhere concerning premium
increases constituted fraudulent concealment, misrepresentations in
violation of New York Insurance Law Section 4226 and deceptive
practices under New York General Business Law Section 349. The
complaint seeks a declaratory judgment, injunctive relief restricting
the methods by which Equitable Life increases premiums on the policies
in the future, a refund of premiums, and punitive damages. Plaintiffs
also have indicated that they will seek damages in an unspecified
amount. Equitable Life has moved to dismiss the complaint in its
entirety on the grounds that it fails to state a claim and that
uncontroverted documentary evidence establishes a complete defense to
the claims. That motion is awaiting decision by the court. In January
1996, separate actions were filed in Pennsylvania and Texas state
courts (entitled, respectively, Malvin et al. v. The Equitable Life
Assurance Society of the United States and Bowler et al. v. The
Equitable Life Assurance Society of the United States), making claims
similar to those in the New York action described above. These new
actions are asserted on behalf of proposed classes of Pennsylvania
issued or renewed policyholders and Texas issued or renewed
policyholders, insured under the policies. The Pennsylvania and Texas
actions seek compensatory and punitive damages and injunctive relief
restricting the methods by which Equitable Life increases premiums in
the future based on the common law and statutes of those states.
Although the outcome of any litigation cannot be predicted with
certainty, particularly in the early stages of an action, Equitable
Life's management believes that the ultimate resolution of those
litigations should not have a material adverse effect on the financial
position of the Company. Due to the early stage of such litigation,
Equitable Life's management cannot make an estimate of loss, if any,
or predict whether or not such litigation will have a material adverse
effect on the Company's results of operations in any particular
period.
An action was instituted on April 6, 1995 against Equitable Life and
its wholly owned subsidiary, The Equitable of Colorado, Inc. ("EOC"),
in New York State Court, entitled Sidney C. Cole et al. v. The
Equitable Life Assurance Society of the United States and The
Equitable of Colorado, Inc., No. 95/108611 (N.Y. County). The action
is brought by the holders of a joint survivorship whole life policy
issued by EOC. The action purports to be on behalf of a class
consisting of all persons who from January 1, 1984 purchased life
insurance policies sold by Equitable Life and EOC based upon their
allegedly uniform sales presentations and policy illustrations. The
complaint puts in issue various alleged sales practices that
plaintiffs assert, among other things, misrepresented the stated
number of years that the annual premium would need to be paid.
Plaintiffs seek damages in an unspecified amount, imposition of a
constructive trust, and seek to enjoin Equitable Life and EOC from
engaging in the challenged sales practices. Equitable Life and EOC
intend to defend vigorously and believe that they have meritorious
defenses which, if successful, would dispose of the action completely.
Equitable Life and EOC further do not believe that this case is an
appropriate class action. Although the outcome of any litigation
cannot be predicted with certainty, particularly in the early stages
of an action, Equitable Life's management believes that the ultimate
SAI-64
<PAGE>
resolution of this litigation should not have a material adverse
effect on the financial position of the Company. Due to the early
stage of such litigation, the Company's management cannot make an
estimate of loss, if any, or predict whether or not such litigation
will have a material adverse effect on the Company's results of
operations in any particular period.
Equitable Casualty Insurance Company ("Casualty"), a captive property
and casualty insurance company organized under the laws of Vermont,
which is an indirect wholly owned subsidiary of Equitable Life, is a
party to an arbitration proceeding that commenced in August 1995 with
the selection of three arbitrators. The arbitration will resolve a
dispute among Casualty, Houston General Insurance Company ("Houston
General"), and GEICO General Insurance Company ("GEICO General")
regarding the interpretation of a reinsurance agreement that was
entered into as part of a 1980 transaction whereby Equitable General
Insurance Company ("Equitable General"), formerly an indirect
subsidiary of Equitable Life and the predecessor of GEICO General,
sold its commercial lines business along with the stock of Houston
General to subsidiaries of Tokio Marine & Fire Insurance Company, Ltd.
("Tokio Marine"). Casualty and GEICO General maintain that, under the
reinsurance agreement, Houston General assumed liability for all
losses insured under commercial lines policies written by Equitable
General and its predecessors in order to effect the transfer of that
business to Tokio Marine's subsidiaries. Houston General contends that
it did not assume reinsurance liability for losses insured under
certain of those commercial lines policies. The arbitration panel
determined to begin hearing evidence in the arbitration in June 1996.
The result of the arbitration is expected to resolve two litigations
that were commenced by Houston General and that have been stayed by
the presiding courts pending the completion of the arbitration (in one
case, Houston General named as a defendant only GEICO General but
Casualty intervened as a defendant with GEICO General, and in the
other case, Houston General named GEICO General and Equitable Life).
The arbitration is expected to be completed during the second half of
1996. While the ultimate outcome of the arbitration cannot be
predicted with certainty, the Company's management believes that the
arbitrators will recognize that Houston General's position is without
merit and contrary to the way in which the reinsurance industry
operates and therefore the ultimate resolution of this matter should
not have a material adverse effect on the Company's financial position
or results of operations.
On July 25, 1995, a Consolidated and Supplemental Class Action
Complaint ("Complaint") was filed against the Alliance North American
Government Income Trust, Inc. (the "Fund"), Alliance and certain other
defendants affiliated with Alliance, including the Holding Company,
alleging violations of Federal securities laws, fraud and breach of
fiduciary duty in connection with the Fund's investments in Mexican
and Argentine securities. A similar complaint was filed on November 7,
1995 and was subsequently consolidated with the Complaint. The
Complaint, which seeks certification of a plaintiff class of persons
who purchased or owned Class A, B or C shares of the Fund from March
27, 1992 through December 23, 1994, seeks an unspecified amount of
damages, costs, attorneys' fees and punitive damages. The principal
allegations of the Complaint are that the Fund purchased debt
securities issued by the Mexican and Argentine governments in amounts
that were not permitted by the Funds' investment objective, and that
there was no shareholder vote to change the investment objective to
permit purchases in such amounts. The Complaint further alleges that
the decline in the value of the Mexican and Argentine securities held
by the Fund caused the Fund's net asset value to decline to the
detriment of the Fund's shareholders. On September 26, 1995, the
defendants jointly filed a motion to dismiss the Complaint which has
not yet been decided by the Court. Alliance believes that the
allegations in the Complaint are without merit and intends to
vigorously defend against these claims. While the ultimate results of
this action cannot be determined, management of Alliance does not
expect that this action will have a material adverse effect on
Alliance's business.
On January 26, 1996, a purported purchaser of certain notes and
warrants to purchase shares of common stock of Rickel Home Centers,
Inc. ("Rickel") filed a class action complaint against Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJSC"), a wholly owned
subsidiary of DLJ, and certain other defendants for unspecified
compensatory and punitive damages in the United States District Court
for the Southern District of New York. The suit was brought on behalf
of the purchasers of 126,457 units consisting of $126,457,000
aggregate principal amount of 13 1/2% senior notes due 2001 and
126,457 warrants to purchase shares of common stock of Rickel (the
"Units") issued by Rickel in October 1994. The complaint alleges
violations of Federal securities laws and common law fraud against
DLJSC, as the underwriter of
SAI-65
<PAGE>
the Units and as an owner of 7.3% of the common stock of Rickel, Eos
Partners, L.P., and General Electric Capital Corporation, each as
owners of 44.2% of the common stock of Rickel, and members of the
Board of Directors of Rickel, including a DLJSC Managing Director. The
complaint seeks to hold DLJSC liable for alleged misstatements and
omissions contained in the prospectus and registration statement filed
in connection with the offering of the Units, alleging that the
defendants knew of financial losses and a decline in value of Rickel
in the months prior to the offering and did not disclose such
information. The complaint also alleges that Rickel failed to pay its
semi-annual interest payment due on the Units on December 15, 1995 and
that Rickel filed a voluntary petition for reorganization pursuant to
Chapter 11 of the United States Bankruptcy Code on January 10, 1996.
DLJSC intends to defend itself vigorously against all of the
allegations contained in the complaint. Although there can be no
assurance, DLJ does not believe the outcome of this litigation will
have a material adverse effect on its financial condition. Due to the
early stage of this litigation, based on the information currently
available to it, DLJ's management cannot make an estimate of loss or
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
On June 12, 1995, a purported purchaser of certain securities issued
by Spectravision, Inc. ("Spectravision") filed a class action
complaint against DLJSC and certain other defendants for unspecified
damages in the U.S. District Court for the Northern District of Texas.
The suit was brought on behalf of the purchasers of $260,795,000 of
securities issued by Spectravision in November 1992, and alleges
violations of the Federal securities laws and the Texas Securities
Act, common law fraud and negligent misrepresentation. The securities
were issued by Spectravision pursuant to a prepackaged bankruptcy
reorganization plan. DLJSC served as financial advisor to
Spectravision in its reorganization and as Dealer Manager for
Spectravision's 1992 issuance of the securities. DLJSC is also being
sued as a seller of certain notes of Spectravision acquired and resold
by DLJSC. The complaint seeks to hold DLJSC liable for various alleged
misstatements and omissions contained in prospectuses and other
materials issued between July 1992 and June 1994. DLJSC intends to
defend itself vigorously against all of the allegations contained in
the complaint. On June 8, 1995, Spectravision filed a Chapter 11
petition in the United States Bankruptcy Court for the District of
Delaware. On January 5, 1996, the district court in the litigation
involving DLJSC ordered a partial stay of discovery until
Spectravision has emerged from bankruptcy or six months from the date
of the stipulated stay (whichever comes first). Accordingly, discovery
of DLJSC has not yet occurred. Although there can be no assurance, DLJ
does not believe that the ultimate outcome of this litigation will
have a material adverse effect on its financial condition. Due to the
early stage of such litigation, based upon information currently
available to it, DLJ's management cannot make an estimate of loss or
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
Plaintiff's counsel in the class action against DLJSC described above
has also filed another securities class action based on similar
factual allegations. Such suit names as defendants Spectravision and
its directors, and was brought on behalf of a class of purchasers of
$209.0 million of stock and $77.0 million of notes issued by
Spectravision in October 1993. DLJSC served as the managing
underwriter for both of these issuances. DLJSC has not been named as a
defendant in this suit, although it has been reported to DLJSC that
plaintiff's counsel is contemplating seeking to amend the complaint to
add DLJSC as a defendant in that action.
In October 1995, DLJSC was named as a defendant in a purported class
action filed in a Texas State Court on behalf of the holders of $550.0
million principal amount of subordinated redeemable discount
debentures of National Gypsum Corporation ("NGC") canceled in
connection with a Chapter 11 plan of reorganization for NGC
consummated in July 1993. The named plaintiff in the State Court
action also filed an adversary proceeding in the Bankruptcy Court for
the Northern District of Texas seeking a declaratory judgment that the
confirmed NGC plan of reorganization does not bar the class action
claims. Subsequent to the consummation of NGC's plan of
reorganization, NGC's shares traded for values substantially in excess
of, and in 1995 NGC was acquired for a value substantially in excess
of, the values upon which NGC's plan of reorganization was based. The
two actions arise out of DLJSC's activities as financial advisor to
NGC in the course of NGC's Chapter 11 reorganization proceedings. The
class action complaint alleges that the plan of reorganization
submitted by NGC was based upon projections by NGC and DLJSC which
intentionally understated forecasts, and provided misleading and
incorrect information in order to hide NGC's true value and that
defendants breached their fiduciary duties by, among other things,
providing false, misleading or incomplete information to deliberately
understate the value of NGC. The class action complaint seeks
compensatory and punitive damages purportedly sustained by the class.
The Texas State
SAI-66
<PAGE>
Court action has subsequently been removed to the Bankruptcy Court,
which removal is being opposed by the plaintiff. DLJSC intends to
defend itself vigorously against all of the allegations contained in
the complaint. Although there can be no assurance, DLJ does not
believe that the ultimate outcome of this litigation will have a
material adverse effect on its financial condition. Due to the early
stage of such litigation, based upon the information currently
available to it, DLJ's management cannot make an estimate of loss or
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
In November and December 1995, DLJSC, along with various other
parties, was named as a defendant in a number of purported class
actions filed in the U.S. District Court for the Eastern District of
Louisiana. The complaints allege violations of the Federal securities
laws arising out of a public offering in 1994 of $435.0 million of
first mortgage notes of Harrah's Jazz Company and Harrah's Jazz
Finance Corp. The complaints seek to hold DLJSC liable for various
alleged misstatements and omissions contained in the prospectus dated
November 9, 1994. DLJSC intends to defend itself vigorously against
all of the allegations contained in the complaints. Although there can
be no assurance, DLJ does not believe that the ultimate outcome of
this litigation will have a material adverse effect on its financial
condition. Due to the early stage of this litigation, based upon the
information currently available to it, DLJ's management cannot make an
estimate of loss or predict whether or not such litigation will have a
material adverse effect on DLJ's results of operations in any
particular period.
In addition to the matters described above, Equitable Life and its
subsidiaries and DLJ and its subsidiaries are involved in various
legal actions and proceedings in connection with their businesses.
Some of the actions and proceedings have been brought on behalf of
various alleged classes of claimants and certain of these claimants
seek damages of unspecified amounts. While the ultimate outcome of
such matters cannot be predicted with certainty, in the opinion of
management no such matter is likely to have a material adverse effect
on the Company's consolidated financial position or results of
operations.
15) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1996 and the succeeding four years are $114.8 million,
$101.8 million, $90.0 million, $73.6 million, $57.7 million and $487.0
million thereafter. Minimum future sublease rental income on these
noncancelable leases for 1996 and the succeeding four years are $11.0
million, $8.7 million, $6.9 million, $4.6 million, $2.9 million and
$1.1 million thereafter.
At December 31, 1995, the minimum future rental income on
noncancelable operating leases for wholly owned investments in real
estate for 1996 and the succeeding four years are $292.9 million,
$271.2 million, $248.1 million, $226.4 million, $195.5 million and
$1,018.8 million thereafter.
SAI-67
<PAGE>
16) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Compensation costs................................. $ 595.9 $ 690.0 $ 1,452.3
Commissions........................................ 314.3 313.0 551.1
Short-term debt interest expense................... 11.4 19.0 317.1
Long-term debt interest expense.................... 108.1 98.3 86.0
Amortization of policy acquisition costs........... 320.4 318.1 275.9
Capitalization of policy acquisition costs......... (391.0) (410.9) (397.8)
Rent expense, net of sub-lease income.............. 124.8 128.9 159.5
Other.............................................. 772.6 786.7 1,140.1
----------------- ---------------- -----------------
Total.............................................. $ 1,856.5 $ 1,943.1 $ 3,584.2
================= ================ =================
</TABLE>
During the years ended December 31, 1995, 1994 and 1993, the Company
restructured certain operations in connection with cost reduction
programs and recorded pre-tax provisions of $32.0 million, $20.4
million and $96.4 million, respectively. The amounts paid during 1995,
associated with the 1995 and 1994 cost reduction programs, totaled
$24.0 million. At December 31, 1995, the liabilities associated with
the 1995 and 1994 cost reduction programs amounted to $37.8 million.
The 1995 cost reduction program included relocation expenses,
including the accelerated amortization of building improvements
associated with the relocation of the home office. The 1994 cost
reduction program included costs associated with the termination of
operating leases and employee severance benefits in connection with
the consolidation of 16 insurance agencies. The 1993 cost reduction
program primarily reflected severance benefits of terminated employees
in connection with the combination of a wholly owned subsidiary of the
Company with Alliance.
17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the New York
Superintendent has broad discretion to determine whether the financia1
condition of a stock life insurance company would support the payment
of dividends to its shareholders. For the years ended December 31,
1995, 1994 and 1993, statutory (loss) earnings totaled $(352.4)
million, $67.5 million and $324.0 million, respectively. No amounts
are expected to be available for dividends from Equitable Life to the
Holding Company in 1996.
At December 31, 1995, the Insurance Group, in accordance with various
government and state regulations, had $18.9 million of securities
deposited with such government or state agencies.
SAI-68
<PAGE>
Accounting practices used to prepare statutory financial statements
for regulatory filings of stock life insurance companies differ in
certain instances from GAAP. The following reconciles the Company's
statutory change in surplus and capital stock and statutory surplus
and capital stock determined in accordance with accounting practices
prescribed by the New York Insurance Department with net earnings and
equity on a GAAP basis.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net change in statutory surplus and capital stock.. $ 78.1 $ 292.4 $ 190.8
Change in asset valuation reserves................. 365.7 (285.2) 639.1
----------------- ---------------- -----------------
Net change in statutory surplus, capital stock
and asset valuation reserves..................... 443.8 7.2 829.9
Adjustments:
Future policy benefits and policyholders'
account balances............................... (67.9) (11.0) (171.0)
Deferred policy acquisition costs................ 70.6 92.8 121.8
Deferred Federal income taxes.................... (150.0) (59.7) (57.5)
Valuation of investments......................... 189.1 45.2 202.3
Valuation of investment subsidiary............... (188.6) 396.6 (464.9)
Limited risk reinsurance......................... 416.9 74.9 85.2
Issuance of surplus notes........................ (538.9) - -
Sale of subsidiary and joint venture............. - - (366.5)
Contribution from the Holding Company............ - (300.0) -
Postretirement benefits.......................... (26.7) 17.1 23.8
Other, net....................................... 115.1 (44.0) 60.3
GAAP adjustments of Closed Block................. (3.1) 4.5 (16.0)
GAAP adjustments of discontinued GIC
Segment........................................ 37.3 42.8 (35.0)
----------------- ---------------- -----------------
Net Earnings....................................... $ 297.6 $ 266.4 $ 212.4
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory surplus and capital stock................ $ 2,202.9 $ 2,124.8 $ 1,832.4
Asset valuation reserves........................... 1,345.9 980.2 1,265.4
----------------- ---------------- -----------------
Statutory surplus, capital stock and asset
valuation reserves............................... 3,548.8 3,105.0 3,097.8
Adjustments:
Future policy benefits and policyholders'
account balances............................... (1,017.4) (949.5) (938.5)
Deferred policy acquisition costs................ 3,083.3 3,221.1 2,858.8
Deferred Federal income taxes.................... (450.8) (26.8) (137.8)
Valuation of investments......................... 417.7 (794.1) (29.8)
Valuation of investment subsidiary............... (665.1) (476.5) (873.1)
Limited risk reinsurance......................... (429.0) (845.9) (920.8)
Issuance of surplus notes........................ (538.9) - -
Postretirement benefits.......................... (343.3) (316.6) (333.7)
Other, net....................................... 4.4 (79.2) (81.9)
GAAP adjustments of Closed Block................. 575.7 578.8 574.2
GAAP adjustments of discontinued GIC
Segment........................................ (184.6) (221.9) (264.6)
----------------- ---------------- -----------------
Total Shareholder's Equity......................... $ 4,000.8 $ 3,194.4 $ 2,950.6
================= ================ =================
</TABLE>
SAI-69
<PAGE>
18) BUSINESS SEGMENT INFORMATION
The Company has three major business segments: Individual Insurance
and Annuities; Investment Services and Group Pension.
Consolidation/elimination principally includes debt not specific to
any business segment. Attributed Insurance Capital represents net
assets and related revenues and earnings of the Insurance Group not
assigned to the insurance segments. Interest expense related to debt
not specific to any business segment is presented within Corporate
interest expense. Information for all periods is presented on a
comparable basis.
The Individual Insurance and Annuities segment offers a variety of
traditional, variable and interest-sensitive life insurance products,
disability income, annuity products and mutual fund and other
investment products to individuals and small groups. This segment
includes Separate Accounts for certain individual insurance and
annuity products.
The Investment Services segment provides investment fund management,
primarily to institutional clients. This segment includes Separate
Accounts which provide various investment options for group clients
through pooled or single group accounts.
Intersegment investment advisory and other fees of approximately
$124.1 million, $135.3 million and $128.6 million for 1995, 1994 and
1993, respectively, are included in total revenues of the Investment
Services segment. These fees, excluding amounts related to the
discontinued GIC Segment of $14.7 million, $27.4 million and $17.0
million for 1995, 1994 and 1993, respectively, are eliminated in
consolidation.
The Group Pension segment 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.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Individual insurance and annuities................. $ 3,254.6 $ 3,110.7 $ 2,981.5
Group pension...................................... 292.0 359.1 426.6
Attributed insurance capital....................... 61.2 79.4 61.6
----------------- ---------------- -----------------
Insurance operations............................. 3,607.8 3,549.2 3,469.7
Investment services................................ 949.1 935.2 2,792.6
Consolidation/elimination.......................... (34.9) (24.7) (40.5)
----------------- ---------------- -----------------
Total.............................................. $ 4,522.0 $ 4,459.7 $ 6,221.8
================= ================ =================
Earnings (loss) before Federal income taxes
and cumulative effect of accounting change
Individual insurance and annuities................. $ 274.4 $ 245.5 $ 76.2
Group pension...................................... (13.3) 15.8 2.0
Attributed insurance capital....................... 18.7 69.8 49.0
----------------- ---------------- -----------------
Insurance operations............................. 279.8 331.1 127.2
Investment services................................ 161.2 177.5 302.1
Consolidation/elimination.......................... (3.1) .3 .5
----------------- ---------------- -----------------
Subtotal..................................... 437.9 508.9 429.8
Corporate interest expense......................... (27.9) (114.2) (126.1)
----------------- ---------------- -----------------
Total.............................................. $ 410.0 $ 394.7 $ 303.7
================= ================ =================
</TABLE>
SAI-70
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Individual insurance and annuities..................................... $ 50,328.8 $ 44,063.4
Group pension.......................................................... 4,033.3 4,222.8
Attributed insurance capital........................................... 2,391.6 2,609.8
---------------- -----------------
Insurance operations................................................. 56,753.7 50,896.0
Investment services.................................................... 12,842.9 12,127.9
Consolidation/elimination.............................................. (354.4) (1,614.4)
---------------- -----------------
Total.................................................................. $ 69,242.2 $ 61,409.5
================ =================
</TABLE>
19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for the years ended December 31,
1995, 1994 and 1993, are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------------- ----------------- ------------------ ------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1995
----
Total Revenues................ $ 1,074.7 $ 1,158.4 $ 1,127.1 $ 1,161.8
================= ================= ================== ==================
Net Earnings.................. $ 59.0 $ 94.3 $ 91.2 $ 53.1
================= ================= ================== ==================
1994
----
Total Revenues................ $ 1,107.4 $ 1,075.0 $ 1,153.8 $ 1,123.5
================= ================= ================== ==================
Earnings before Cumulative
Effect of Accounting
Change...................... $ 64.0 $ 68.4 $ 89.1 $ 72.0
================= ================= ================== ==================
Net Earnings.................. $ 36.9 $ 68.4 $ 89.1 $ 72.0
================= ================= ================== ==================
1993
----
Total Revenues................ $ 1,502.2 $ 1,539.7 $ 1,679.4 $ 1,500.5
================= ================= ================== ==================
Net Earnings.................. $ 32.3 $ 47.1 $ 68.8 $ 64.2
================= ================= ================== ==================
</TABLE>
20) INVESTMENT IN DLJ
On December 15, 1993, the Company sold a 61% interest in DLJ to the
Holding Company for $800.0 million in cash and securities. The excess
of the proceeds over the book value in DLJ at the date of sale of
$340.2 million has been reflected as a capital contribution. In 1995,
DLJ completed the initial public offering ("IPO") of 10.58 million
shares of its common stock, which included 7.28 million of the Holding
Company's shares in DLJ, priced at $27 per share. Concurrent with the
IPO, the Company contributed equity securities to DLJ having a market
value of $21.2 million. Upon completion of the IPO, the Company's
ownership percentage was reduced to 36.1%. The Company's ownership
interest will be further reduced upon the issuance of common stock
after the vesting of forfeitable restricted stock units acquired by
and/or the exercise of options granted to certain DLJ employees. At
December 31, 1995, DLJ had options
SAI-71
<PAGE>
outstanding to purchase approximately 9.2 million shares of DLJ common
stock at $27.00 per share. Options are exercisable over a period of up
to ten years. DLJ restricted stock units represents forfeitable rights
to receive approximately 5.2 million shares of DLJ common stock
through February 2000.
The results of operations and cash flows of DLJ through the date of
sale are included in the consolidated statements of earnings and cash
flow for the year ended December 31, 1993. For the period subsequent
to the date of sale, the results of operations of DLJ are accounted
for on the equity basis and are included in commissions, fees and
other income in the consolidated statements of earnings. The Company's
carrying value of DLJ is included in investment in and loans to
affiliates in the consolidated balance sheets.
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 10,911.4 $ 8,970.0
Securities purchased under resale agreements........................... 18,748.2 10,476.4
Broker-dealer related receivables...................................... 13,023.7 11,784.8
Other assets........................................................... 1,893.2 2,030.4
---------------- -----------------
Total Assets........................................................... $ 44,576.5 $ 33,261.6
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 26,744.8 $ 18,356.7
Broker-dealer related payables......................................... 12,915.5 10,618.0
Short-term and long-term debt.......................................... 1,717.5 1,956.5
Other liabilities...................................................... 1,775.0 1,285.1
---------------- -----------------
Total liabilities...................................................... 43,152.8 32,216.3
Cumulative exchangeable preferred stock................................ 225.0 225.0
Total shareholders' equity............................................. 1,198.7 820.3
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 44,576.5 $ 33,261.6
================ =================
DLJ's equity as reported............................................... $ 1,198.7 $ 820.3
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 40.5 50.8
The Holding Company's equity ownership in DLJ.......................... (499.0) (532.1)
Minority interest in DLJ............................................... (324.3) -
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 415.9 $ 339.0
================ =================
</TABLE>
SAI-72
<PAGE>
Summarized statements of earnings information for DLJ reconciled to
the Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Commission, fees and other income...................................... $ 1,325.9 $ 953.5
Net investment income.................................................. 904.1 791.9
Dealer, trading and investment gains, net.............................. 528.6 263.3
---------------- -----------------
Total Revenues......................................................... 2,758.6 2,008.7
Total expenses including income taxes.................................. 2,579.5 1,885.7
---------------- -----------------
Net earnings........................................................... 179.1 123.0
Dividends on preferred stock........................................... 19.9 20.9
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 159.2 $ 102.1
================ =================
DLJ's earnings applicable to common shares as reported................. $ 159.2 $ 102.1
Amortization of cost in excess of net assets acquired in 1985.......... (3.9) (3.1)
The Holding Company's equity in DLJ's earnings......................... (90.4) (60.9)
Minority interest in DLJ............................................... (6.5) -
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 58.4 $ 38.1
================ =================
</TABLE>
21) RELATED PARTY TRANSACTIONS
On August 31, 1993, the Company sold $661.0 million of primarily
privately placed below investment grade fixed maturities to EQ Asset
Trust 1993, a limited purpose business trust, wholly owned by the
Holding Company. The Company recognized a $4.1 million gain net of
related deferred policy acquisition costs, deferred Federal income tax
and amounts attributable to participating group annuity contracts. In
conjunction with this transaction, the Company received $200.0 million
of Class B Notes issued by EQ Asset Trust 1993. These notes have
interest rates ranging from 6.85% to 9.45%. The Class B Notes are
reflected in investments in and loans to affiliates on the
consolidated balance sheets.
SAI-73
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participating Trust and Trustee of the
State Street Bank and Trust Company
Lifecycle Fund Group Trust -- Conservative
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the
selected per unit data present fairly, in all material respects, the
financial position of the State Street Bank and Trust Company Lifecycle Fund
Group Trust -- Conservative (the "Fund") at December 31, 1995, the results of
its operations, the changes in its net assets and the selected per unit data
for the period from May 5, 1995 (commencement of operations) through December
31, 1995, in conformity with generally accepted accounting principles. These
financial statements and selected per unit data (hereafter referred to as
"financial statements") are the responsibility of the Fund's Trustee; our
responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 11, 1996
SAI-74
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------
ASSETS
Investments in State Street Bank and Trust Company
Investment Funds for Tax Exempt Retirement Plans:
Daily EAFE Fund Non-Lending (24,997 units) ................................... $ 296,709
Daily Government/Corporate Fund (130,106 units) .............................. 1,495,176
Russell 2000 Fund (9,112 units) .............................................. 150,200
S&P 500 Flagship Fund (4,607 units) .......................................... 447,197
Short Term Investment Fund (609,735 units) ................................... 609,735
- ------------------------------------------------------------------------------------------
Total investments (cost $2,866,498) .......................................... 2,999,017
Interest and other receivables ............................................... 2,365
- ------------------------------------------------------------------------------------------
Total assets ............................................................. 3,001,382
- ------------------------------------------------------------------------------------------
LIABILITIES
Payable to custodian ......................................................... 1,374
Accrued expenses ............................................................. 17,452
- ------------------------------------------------------------------------------------------
Total liabilities ........................................................ 18,826
- ------------------------------------------------------------------------------------------
NET ASSETS (equivalent to $10.73 per unit based on 277,866 units outstanding) $2,982,556
==========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-75
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
Statement of Operations
Period ended December 31, 1995*
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME
Interest .......................................................... $ 14,751
- ------------------------------------------------------------------------------
EXPENSES
Accounting and recordkeeping ...................................... 11,100
Audit ............................................................. 2,500
Legal ............................................................. 13,121
Management ........................................................ 2,038
- ------------------------------------------------------------------------------
Total expenses .................................................. 28,759
- ------------------------------------------------------------------------------
Net investment income (loss) ...................................... (14,008)
- ------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ........................... 33,019
Net change in unrealized appreciation (depreciation) on
investments ...................................................... 132,519
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) ........................... 165,538
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ... $151,530
==============================================================================
</TABLE>
- ------------
* Investment operations commenced on May 5, 1995.
The accompanying notes are an integral part of these financial statements.
SAI-76
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1995*
- --------------------------------------------------------------------------------------------
<S> <C>
FROM OPERATIONS
Net investment income (loss) ................................................ $ (14,008)
Net realized gain (loss) on investments ..................................... 33,019
Net change in unrealized appreciation (depreciation) on investments ........ 132,519
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ............ 151,530
- --------------------------------------------------------------------------------------------
FROM PARTICIPANT TRANSACTIONS
Proceeds from units issued .................................................. 4,402,424
Cost of units redeemed ...................................................... (1,571,398)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from participant
transactions ............................................................... 2,831,026
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ....................................... 2,982,556
- --------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period ......................................................... --
- --------------------------------------------------------------------------------------------
End of period ............................................................... $ 2,982,556
- --------------------------------------------------------------------------------------------
NUMBER OF UNITS
Outstanding--beginning of period ............................................ --
Issued ...................................................................... 430,911
Redeemed .................................................................... (153,045)
- --------------------------------------------------------------------------------------------
OUTSTANDING--END OF PERIOD .................................................. 277,866
============================================================================================
</TABLE>
- ------------
* Investment operations commenced on May 5, 1995.
The accompanying notes are an integral part of these financial statements.
SAI-77
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1995*
- ------------------------------------------------------------------------------
<S> <C>
Net investment income (loss)** ................................ $(0.08)
Net realized and unrealized gain (loss) ....................... 0.81
- ------------------------------------------------------------------------------
Net increase (decrease) ....................................... 0.73
Net asset value
Beginning of period ........................................... 10.00
- ------------------------------------------------------------------------------
End of period ................................................. $10.73
==============================================================================
Total return (%)*** ........................................... 7.30
==============================================================================
Ratio of expenses to average net assets (a) ................... 2.13%
Ratio of net investment income (loss) to average net
assets (a) ................................................... (1.04%)
Portfolio turnover ............................................ 131%
Net assets, end of period (000s) .............................. $2,983
</TABLE>
(a) Annualized.
* Investment operations commenced on May 5, 1995.
** Net investment income has been calculated based upon an average of
monthly units outstanding.
*** Total return calculation (not annualized) is based on the value of a
single unit of participation outstanding throughout the period. It
represents the percentage change in the net asset value per unit
between the beginning and end of the period. The calculation includes
only those expenses charged directly to the Fund.
The accompanying notes are an integral part of these financial statements.
SAI-78
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. INVESTMENT OBJECTIVE
The State Street Bank and Trust Company ("State Street Bank") Lifecycle
Fund Group Trust -- Conservative (the "Fund") was formed under a Declaration
of Trust dated February 21, 1991 as amended and restated through July 19,
1991. The Fund's objective is to seek to provide current income and a low to
moderate growth of capital. State Street Bank is the Fund's Trustee and
custodian. State Street Global Advisors, a division of State Street Bank, is
the Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments in the State Street Bank and Trust Company Investment Funds
for Tax Exempt Retirement Plans are valued at the net asset value per
share/unit on the valuation date. Investments held by the underlying Funds
are valued at the last reported sale price on the valuation date, or if no
sale was reported and in the case of over-the-counter securities, the last
published sale price. Certain investments are valued at fair value on the
basis of valuations furnished by a pricing service, approved by the Trustee,
which determines valuations using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. Investments held by the Short
Term Investment Fund are stated at amortized cost, which approximates market
value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (the date the
order to buy or sell is executed). The cost of securities contributed to, and
proceeds related to securities delivered by, the Fund in connection with the
issuance and redemption of its units of participation are based on the
valuations of those securities determined as described above. The cost of
securities delivered and the net gain or loss on securities sold is
determined using the average cost method.
With the exception of the Short Term Investment Fund, the State Street
Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, in
which the Fund invests, retain all investment income earned. Accordingly,
realized and unrealized gains and losses reported by the Fund may include a
component attributable to investment income.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and
no federal income tax provision is required.
D. ISSUANCE AND REDEMPTION 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 and at
such unit principal values.
SAI-79
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYLE FUND GROUP TRUST--CONSERVATIVE
NOTES TO FINANCIAL STATEMENTS--
DECEMBER 31, 1995
The number of and value of units issued in connection with a contribution
of assets to the Fund or redeemed in connection with a withdrawal from the
Fund shall be determined on the basis of the value of the Fund as of the
Fund's last preceding valuation date to the date on which such order to
contribute assets of order to withdraw assets is received; provided, however,
that the Trustee, in its sole discretion, reserves the right to value any
contribution or withdrawal as of the next succeeding valuation date, or
another date as the Trustee reasonably deems appropriate.
E. EXPENSES
According to the Declaration of Trust, the Fund may pay certain expenses
for services received during the year. The Trustee is paid a management fee
by the Fund at the annual rate of 0.17%. Additionally, the Trustee is paid an
annual fee of $11,100 for providing various recordkeeping and accounting
services to the Fund.
F. DISTRIBUTIONS TO PARTICIPANTS
All net investment income and net realized gains are retained by the Fund.
G. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, if any, during the period
ended December 31, 1995 were $4,864,283 and $2,640,539, respectively,
resulting in a net realized gain of $33,019. Purchases and sales of
short-term investments (including maturities) were $1,639,065 and $1,029,330,
respectively.
4. UNITS OF PARTICIPATION
All of the Fund's units outstanding were held by a single participant at
December 31, 1995.
SAI-80
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participating Trust and Trustee of the
State Street Bank and Trust Company
Lifecycle Fund Group Trust -- Moderate
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the
selected per unit data present fairly, in all material respects, the
financial position of the State Street Bank and Trust Company Lifecycle Fund
Group Trust -- Moderate (the "Fund") at December 31, 1995, the results of
its operations, the changes in its net assets and the selected per unit data
for the period from May 5, 1995 (commencement of operations) through December
31, 1995, in conformity with generally accepted accounting principles. These
financial statements and selected per unit data (hereafter referred to as
"financial statements") are the responsibility of the Fund's Trustee; our
responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 11, 1996
SAI-81
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------
ASSETS
Investments in State Street Bank and Trust Company
Investment Funds for Tax Exempt Retirement Plans:
Daily EAFE Fund Non-Lending (958,728 units) ................................... $11,380,101
Daily Government/Corporate Fund (1,995,676 units) ............................. 22,934,303
Russell 2000 Fund (464,412 units) ............................................. 7,654,911
S&P 500 Flagship Fund (275,096 units) ......................................... 26,701,331
Short Term Investment Fund (7,608,602 units) .................................. 7,608,602
- ---------------------------------------------------------------------------------------------
Total investments (cost $75,406,442) ....................................... 76,279,248
- ---------------------------------------------------------------------------------------------
Interest receivable ........................................................... 26,914
- ---------------------------------------------------------------------------------------------
Total assets ............................................................... 76,306,162
- ---------------------------------------------------------------------------------------------
LIABILITIES
Payable to custodian .......................................................... 27,008
Accrued expenses .............................................................. 33,183
- ---------------------------------------------------------------------------------------------
Total liabilities .......................................................... 60,191
- ---------------------------------------------------------------------------------------------
Net assets (equivalent to $11.13 per unit based on 6,849,818 units
outstanding) ................................................................. $76,245,971
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-82
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
Statement of Operations
Period ended December 31, 1995*
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME
Interest .......................................................... $ 40,028
- -----------------------------------------------------------------------------
EXPENSES
Accounting and recordkeeping ...................................... 11,100
Audit ............................................................. 2,500
Legal ............................................................. 21,769
Management ........................................................ 11,212
- -----------------------------------------------------------------------------
Total expenses ................................................. 46,581
- -----------------------------------------------------------------------------
Net investment income (loss) ...................................... (6,553)
- -----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ........................... 29,206
Net change in unrealized appreciation (depreciation) on
investments ...................................................... 872,806
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) ........................... 902,012
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ... $895,459
=============================================================================
</TABLE>
- ------------
* Investment operations commenced on May 5, 1995.
The accompanying notes are an integral part of these financial statements.
SAI-83
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1995*
- --------------------------------------------------------------------------------------------
<S> <C>
FROM INVESTMENT ACTIVITIES
Net investment income (loss) ................................................ $ (6,553)
Net realized gain (loss) on investments ..................................... 29,206
Net change in unrealized appreciation (depreciation) on investments ........ 872,806
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ............ 895,459
- --------------------------------------------------------------------------------------------
FROM PARTICIPANT TRANSACTIONS
Proceeds from units issued .................................................. 76,246,459
Cost of units redeemed ...................................................... (895,947)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from participant
transactions ............................................................... 75,350,512
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ....................................... 76,245,971
- --------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period ......................................................... --
End of period ............................................................... $76,245,971
- --------------------------------------------------------------------------------------------
NUMBER OF UNITS
Outstanding--beginning of period ............................................ --
Issued ...................................................................... 6,932,464
Redeemed .................................................................... (82,646)
- --------------------------------------------------------------------------------------------
Outstanding--end of period .................................................. 6,849,818
===========================================================================================
</TABLE>
- ------------
* Investment operations commenced on May 5, 1995.
The accompanying notes are an integral part of these financial statements.
SAI-84
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1995*
- ------------------------------------------------------------------------------
<S> <C>
Net investment income (loss)** ................................ $ (0.01)
Net realized and unrealized gain (loss) ....................... 1.14
- ------------------------------------------------------------------------------
Net increase (decrease) ....................................... 1.13
- ------------------------------------------------------------------------------
NET ASSET VALUE
Beginning of period ........................................... 10.00
- ------------------------------------------------------------------------------
End of period ................................................. $ 11.13
- ------------------------------------------------------------------------------
Total return (%)*** ........................................ 11.30
- ------------------------------------------------------------------------------
Ratio of expenses to average net assets (a) ................... 0.52%
Ratio of net investment income (loss) to average net assets
(a) .......................................................... (0.07%)
Portfolio turnover ............................................ 30%
Net assets, end of period (000s) .............................. $76,246
</TABLE>
- ------------
(a) Annualized.
* Investment operations commenced on May 5, 1995.
** Net investment income has been calculated based upon an average of
monthly units outstanding.
*** Total return calculation (not annualized) is based on the value of a
single unit of participation outstanding throughout the period. It
represents the percentage change in the net asset value per unit
between the beginning and end of the period. The calculation includes
only those expenses charged directly to the Fund.
The accompanying notes are an integral part of these financial statements.
SAI-85
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. INVESTMENT OBJECTIVE
The State Street Bank and Trust Company ("State Street Bank") Lifecycle
Fund Group Trust--Moderate (the "Fund") was formed under a Declaration of
Trust dated February 21, 1991 as amended and restated through July 19, 1991.
The Fund's objective is to seek to provide a reasonable level of current
income and growth of capital. State Street Bank is the Fund's Trustee and
custodian. State Street Global Advisors, a division of State Street Bank, is
the Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments in the State Street Bank and Trust Company Investment Funds
for Tax Exempt Retirement Plans are valued at the net asset value per
share/unit on the valuation date. Investments held by the underlying Funds
are valued at the last reported sale price on the valuation date, or if no
sale was reported and in the case of over-the-counter securities, the last
published sale price. Certain investments are valued at fair value on the
basis of valuations furnished by a pricing service, approved by the Trustee,
which determines valuations using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. Investments held by the Short
Term Investment Fund are stated at amortized cost, which approximates market
value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (the date the
order to buy or sell is executed). The cost of securities contributed to, and
proceeds related to securities delivered by, the Fund in connection with the
issuance and redemption of its units of participation are based on the
valuations of those securities determined as described above. The cost of
securities delivered and the net gain or loss on securities sold is
determined using the average cost method.
With the exception of the Short Term Investment Fund, the State Street
Bank and Trust Company Investment Funds for Tax Exempt Retirement Plans, in
which the Fund invests, retain all investment income earned. Accordingly,
realized and unrealized gains and losses reported by the Fund may include a
component attributable to investment income.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a) of
the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and
no federal income tax provision is required.
D. ISSUANCE AND REDEMPTION 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 and at
such unit principal values.
SAI-86
<PAGE>
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
NOTES TO FINANCIAL STATEMENTS--
DECEMBER 31, 1995
The number of and value of units issued in connection with a contribution
of assets to the Fund or redeemed in connection with a withdrawal from the
Fund shall be determined on the basis of the value of the Fund as of the
Fund's last preceding valuation date to the date on which such order to
contribute assets or order to withdraw assets is received; provided, however,
that the Trustee, in its sole discretion, reserves the right to value any
contribution or withdrawal as of the next succeeding valuation date, or
another date as the Trustee reasonably deems appropriate.
E. EXPENSES
According to the Declaration of Trust, the Fund may pay certain expenses
for services received during the year. The Trustee is paid a management fee
by the Fund at the annual rate of 0.17%. Additionally, the Trustee is paid a
fee annually of $11,100 for providing various recordkeeping and accounting
services to the Fund.
F. DISTRIBUTIONS TO PARTICIPANTS
All net investment income and net realized gains are retained by the Fund.
G. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, if any, during the period
ended December 31, 1995 were $71,719,547 and $3,950,913, respectively,
resulting in a net realized gain of $29,206. Purchases and sales of
short-term investments (including maturities) were $8,376,822 and $768,220,
respectively.
4. UNITS OF PARTICIPATION
All of the Fund's units outstanding were held by a single participant at
December 31, 1995.
SAI-87
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participating Trusts and Trustee of the
State Street Bank and Trust Company
S&P 500 Flagship Fund and the
State Street Bank and Trust Company
S&P 500 Index Fund with Futures
In our opinion, the accompanying combined statement of assets and
liabilities, including the combined schedule of investments, and the related
combined statements of operations and of changes in net assets and the
selected per unit data present fairly, in all material respects, the
financial position of the State Street Bank and Trust Company S&P 500
Flagship Fund and the State Street Bank and Trust Company S&P 500 Index Fund
with Futures (the "Funds") at December 31, 1995, the results of their
operations, the changes in their net assets and their selected per unit data
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and selected per unit data (hereafter
referred to as "financial statements") are the responsibility of the Funds'
Trustee; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 21, 1996
SAI-88
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------
ASSETS
Investment in securities, at value (cost $13,474,418,028) ....... $17,485,106,127
Collateral held for loaned securities ............................ 203,333,397
Receivable for investments sold .................................. 120,463
Receivable for fund units issued ................................. 2,118,347,665
Dividends receivable ............................................. 29,651,838
Interest receivable .............................................. 2,849,175
Receivable for daily variation margin ............................ 747,950
- -----------------------------------------------------------------------------------
Total assets .................................................. 19,840,156,615
- -----------------------------------------------------------------------------------
LIABILITIES
Collateral on securities loaned, at value ........................ 203,333,397
Payable for investments purchased ................................ 2,324,410,535
Payable for fund units redeemed .................................. 12,047,837
Accrued expenses ................................................. 26,680
- -----------------------------------------------------------------------------------
Total liabilities ............................................. 2,539,818,449
- -----------------------------------------------------------------------------------
NET ASSETS ....................................................... $ 17,300,338,166
===================================================================================
S&P 500 Flagship Fund:
155,920,898 units outstanding, at $97.06 per unit net asset
value ........................................................... $ 15,135,309,460
S&P 500 Index Fund with Futures:
22,303,688 units outstanding, at $97.06 per unit net asset value 2,165,028,706
- -----------------------------------------------------------------------------------
$ 17,300,338,166
===================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-89
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Statement of Operations
Year ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends .................................................................. $ 302,218,381
Interest ................................................................... 21,713,545
Securities lending fee income, net of related expenses (Notes 1 and 3) .... 229,747
- -------------------------------------------------------------------------------------------
Total investment income .................................................. 324,161,673
- -------------------------------------------------------------------------------------------
EXPENSES
Audit ...................................................................... 32,562
Custody .................................................................... 65,744
- -------------------------------------------------------------------------------------------
Total expenses ........................................................... 98,306
- -------------------------------------------------------------------------------------------
Net investment income ...................................................... 324,063,367
- -------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES
CONTRACTS
Net realized gain (loss) on investments .................................... 217,620,041
Net realized gain (loss) on futures contracts .............................. 108,756,092
Net change in unrealized appreciation (depreciation) on investments ....... 3,130,329,838
Net change in unrealized gain (loss) on futures contracts .................. 4,151,150
- -------------------------------------------------------------------------------------------
Net gain (loss) on investments and futures contracts ....................... 3,460,857,121
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ........... $3,784,920,488
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-90
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ............................................................. $ 324,063,367 $ 209,224,187
Net realized gain (loss) on investments ........................................... 217,620,041 109,829,850
Net realized gain (loss) on futures contracts ..................................... 108,756,092 (19,704,577)
Net change in unrealized appreciation (depreciation) on investments .............. 3,130,329,838 (191,526,317)
Net change in unrealized gain (loss) on futures contracts ......................... 4,151,150 (1,091,050)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations .................... 3,784,920,488 106,732,093
- ---------------------------------------------------------------------------------------------------------------------
Distributions of securities lending fee income to S&P 500 Flagship Fund
participants (Notes 1 and 3) ...................................................... (229,747) (198,924)
- ---------------------------------------------------------------------------------------------------------------------
FROM PARTICIPANT TRANSACTIONS (NOTE 5)
Proceeds from units issued ........................................................ 6,401,569,786 5,886,469,200
Cost of units redeemed ............................................................ (2,576,234,938) (2,330,857,737)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from participant transactions .... 3,825,334,848 3,555,611,463
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ............................................. 7,610,025,589 3,662,144,632
NET ASSETS
Beginning of year ................................................................. 9,690,312,577 6,028,167,945
- ---------------------------------------------------------------------------------------------------------------------
End of year ....................................................................... $17,300,338,166 $ 9,690,312,577
=====================================================================================================================
NUMBER OF UNITS
S&P 500 Flagship Fund:
Outstanding--beginning of year ..................................................... 117,036,187 82,674,067
Issued ............................................................................ 66,412,094 68,391,275
Redeemed .......................................................................... (27,527,383) (34,029,155)
- ---------------------------------------------------------------------------------------------------------------------
Outstanding--end of year ........................................................... 155,920,898 117,036,187
=====================================================================================================================
S&P 500 Index Fund with Futures:
Outstanding--beginning of year ..................................................... 20,293,958 3,947,525
Issued ............................................................................ 6,080,185 17,224,431
Redeemed .......................................................................... (4,070,455) (877,998)
- ----------------------------------------------------------------------------------- --------------- ---------------
Outstanding--end of year ........................................................... 22,303,688 20,293,958
=================================================================================== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-91
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout Each Year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income** ...................... $ 2.24 $ 1.90 $ 1.81 $ 1.54 $ 1.62
Net realized and unrealized gain (loss) ..... 24.26 (0.93) 4.55 3.04 12.01
Distributions of securities lending fee
income ...................................... 0.00 0.00 (0.01) (0.01) (0.01)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) ...................... 26.50 0.97 6.35 4.57 13.62
NET ASSET VALUE
Beginning of year ............................ 70.56 69.59 63.24 58.67 45.05
- ----------------------------------------------------------------------------------------------------
End of year .................................. $ 97.06 $ 70.56 $ 69.59 $ 63.24 $ 58.67
====================================================================================================
Total return (%)*** .......................... 37.56 1.39 10.06 7.81 30.26
====================================================================================================
Ratio of expenses to average net assets* .... 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net investment income to average net
assets ...................................... 2.66% 2.88% 2.68% 2.58% 3.01%
Portfolio turnover ........................... 10% 12% 22% 19% 11%
Net assets, end of year (000,000s) ........... $15,135 $8,258 $5,753 $4,233 $3,371
</TABLE>
- ------------
* Less than 0.01%.
** Net investment income has been calculated based upon an average of
monthly units outstanding.
*** Total return calculation is based on the value of a single unit of
participation outstanding throughout the entire year. It represents
the percentage change in the net asset value per unit between the
beginning and end of each year. The calculation includes only those
expenses charged directly to the Fund. This result may be reduced by
any administrative or other fees which are incurred in the management
or maintenance of individual participant accounts.
The accompanying notes are an integral part of these financial statements.
SAI-92
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 INDEX FUND WITH FUTURES
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout Each Year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income** ...................... $ 2.24 $ 1.90 $ 1.80 $ 1.53 $ 1.64
Net realized and unrealized gain (loss) ..... 24.26 (0.93) 4.55 3.04 11.98
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) ...................... 26.50 0.97 6.35 4.57 13.62
NET ASSET VALUE
Beginning of year ............................ 70.56 69.59 63.24 58.67 45.05
- ----------------------------------------------------------------------------------------------------
End of year .................................. $97.06 $70.56 $69.59 $63.24 $58.67
- ----------------------------------------------------------------------------------------------------
Total return (%)*** .......................... 37.56 1.39 10.04 7.79 30.23
====================================================================================================
Ratio of expenses to average net assets* .... 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net investment income to average net
assets ...................................... 2.66% 2.88% 2.68% 2.57% 3.00%
Portfolio turnover ........................... 10% 12% 22% 19% 11%
Net assets, end of year (000,000s) ........... $ 2,165 $ 1,432 $ 275 $ 155 $ 472
</TABLE>
- ------------
* Less than 0.01%.
** Net investment income has been calculated based upon an average of
monthly units outstanding.
*** Total return calculation is based on the value of a single unit of
participation outstanding throughout the entire year. It represents the
percentage change in the net asset value per unit between the beginning
and end of each year. The calculation includes only those expenses
charged directly to the Fund. This result may be reduced by any
administrative or other fees which are incurred in the management or
maintenance of individual participant accounts.
The accompanying notes are an integral part of these financial statements.
SAI-93
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. INVESTMENT OBJECTIVE
The State Street Bank and Trust Company ("State Street Bank") S&P 500
Flagship Fund and S&P 500 Index Fund with Futures (the "Funds") are
diversified equity pooled funds. The Funds were formed under a Declaration of
Trust dated February 21, 1991, as amended and restated through July 19, 1991.
Each Fund's objective is to replicate, as closely as possible, the Standard &
Poor's (S&P) 500 Index, which is accomplished by investing in substantially
all of the equity securities which comprise the Index. Additionally, each of
the Funds may hold up to 25% of its value in S&P 500 stock index futures
contracts and hold units of certain State Street Bank and Trust Company
Investment Funds for Tax Exempt Retirement Plans, consistent with its
investment objectives. State Street Bank is the Funds' Trustee and custodian.
State Street Global Advisors, a division of Street Street Bank, is the Funds'
investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments in securities listed on a national securities exchange and
over-the-counter securities are valued at the last reported sale price on the
valuation date, or if no sale price was reported on the valuation date, the
last published sale price. Short-term investments are stated at amortized
cost which approximates market. Investments in registered investment
companies or other State Street Bank and Trust Investment Funds for Tax
Exempt Retirement Plans are valued at net asset value per share/unit on the
valuation date. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange upon which they are
traded.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order
to buy or sell is executed). The cost of securities contributed to, and
proceeds related to securities delivered by, the Fund in connection with the
issuance and redemption of its units of participation are based on the
valuations of those securities determined as described above. The cost of
securities delivered and the net gain or loss on securities sold is
determined using the average cost method. Interest income is recorded on the
accrual basis. Interest income is increased by accretion of discount and
reduced by amortization of premium. Dividend income is recorded on
ex-dividend date.
C. INCOME TAXES
It is the Funds' policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Funds are exempt from federal income taxes
and no federal income tax provision is required.
D. ISSUANCE AND REDEMPTION OF UNITS OF PARTICIPATION
The net asset values of the Funds are determined each business day
(valuation date). Issuances and redemptions of Fund units are made on such
days and at such unit principal values.
SAI-94
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
The transaction costs and market effect associated with the investment of
proceeds from the issuance of Fund units or those incurred upon disposition
of investments to settle redemption of Fund units are allocated to the
applicable participant. Transaction costs include brokerage commissions,
taxes and other direct costs related to security transactions. Market effect
is the difference between the execution price of the investment on the trade
date and the investment's closing market value on the valuation date.
Fund units are issued and redeemed based upon the closing market value of
the securities bought or sold as of the valuation date, adjusted for the
related market effect and transaction costs previously described.
E. EXPENSES
According to the Declaration of Trust, the Funds may pay certain expenses
for services received during the year. The Trustee is paid a fee by the Funds
for custodial services at the annual rate of $50,000, plus a charge for each
security and futures transaction executed.
F. DISTRIBUTIONS TO PARTICIPANTS
All net investment income (excluding securities lending fees) and net
realized gains are retained by the Funds. Income generated by securities
lending is distributed to S&P 500 Flagship Fund participants monthly (see
Note 3).
G. FUTURES CONTRACTS
The Funds may use futures contracts to manage their exposure to the equity
market. Buying futures tends to increase the Funds' exposure to the
underlying instrument. Futures contracts involve, to varying degrees, credit
and market risks. The Funds enter into futures contracts only on exchanges or
boards of 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.
Upon entering into a futures contract, the Funds are required to deposit
either in cash or securities an amount ("initial margin") equal to a certain
percentage of the nominal value of the contract. Subsequent payments are made
or received by the Funds each day, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Funds. Such receipts or payments are known as "variation
margin". A gain or loss is realized when the contract is closed or expires.
H. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SAI-95
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
3. SECURITIES LENDING PROGRAM
The participants in the S&P 500 Flagship Fund (the "Lending Fund") have
authorized the Lending Fund to participate in the Securities Lending Program
maintained by State Street Bank. The investment objective, techniques and
results of operations of the Lending Fund are identical to those of the S&P
500 Index Fund with Futures (the "Index Fund"), except that the Lending Fund
engages in securities lending activities. Accordingly, the financial
statements of the Lending Fund and the Index Fund (collectively, the "Funds")
have been prepared on a combined basis, with separate disclosure of the
participant transactions and per unit data of each of the Funds. Each of the
Funds maintains a divided pro-rata interest in the combined assets and
liabilities (including each investment security position) proportionate to
the net asset value of the outstanding combined units of the Funds. All
interfund transactions have been eliminated in the combined financial
statements.
Under the Securities Lending Program, securities held by the Lending Fund
are loaned by State Street Bank, as agent, to certain brokers and other
financial institutions (the "Borrowers"). The Borrowers provide cash,
securities, or letters of credit as collateral against loans in an amount at
least equal to 100% of the market value of the loaned securities. The
Borrowers are required to maintain the collateral at not less than 100% of
the fair market value of the loaned securities. At December 31, 1995, the
value of securities loaned by the Lending Fund was $197,819,259 against which
was held cash collateral of $203,333,397. Cash collateral provided is
invested in short-term collective investment funds managed by State Street
Bank. A portion of the income generated upon investment of the collateral is
remitted to the Borrowers, and the remainder is allocated between the Lending
Fund and State Street Bank in its capacity as lending agent. Negotiated
lenders' fees are received for those loans collateralized by securities or
letters of credit, if any.
State Street Bank, as lending agent, indemnifies the Lending Fund for
replacement of any loaned securities (or, in certain circumstances, return of
equivalent cash value) due to Borrower default on a security loan. Lending
Fund participants, however, bear the risk of loss with respect to the
investment of collateral.
All income earned from lending activities is distributed to Lending Fund
participants monthly. Participants in each of the Lending Fund or the Index
Fund may exchange their units for units of the other Fund on any valuation
date.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, if any, during the year
ended December 31, 1995 were $5,287,972,661 and $1,270,397,577, respectively,
resulting in a net realized gain (loss) of $217,888,355. This gain (loss) is
prior to the recognition of the market effect and transaction costs
associated with contributions and redemptions.
SAI-96
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONCLUDED)
DECEMBER 31, 1995
5. UNITS OF PARTICIPATION
Participant transactions for each of the Funds were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
S&P 500 FLAGSHIP FUND:
Proceeds from units issued ........................... $ 5,900,504,862 $ 4,690,414,075
Cost of units redeemed ............................... (2,251,812,851) (2,270,083,453)
--------------- ---------------
Net increase in net assets resulting from
participant transaction ............................ 3,648,692,011 2,420,330,622
--------------- ---------------
S&P 500 INDEX FUND WITH FUTURES:
Proceeds from units issued ........................... 501,064,924 1,196,055,125
Cost of units redeemed ............................... (324,422,087) (60,774,284)
--------------- ---------------
Net increase in net assets resulting from
participant transactions ........................... 176,642,837 1,135,280,841
--------------- ---------------
Total net increase .................................. $ 3,825,334,848 $ 3,555,611,463
=============== ===============
</TABLE>
S&P 500 FLAGSHIP FUND
Units in excess of 10% of Fund units outstanding at December 31, 1995 held
by 1 of the Fund's 130 unitholders aggregated 13% of the Fund's total units
outstanding.
During the year ended December 31, 1995, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Fund units were $418,158.
S&P 500 INDEX FUND WITH FUTURES
Units in excess of 10% of Fund units outstanding at December 31, 1995 held
by 1 of the Fund's 15 unitholders aggregated 72% of the Fund's total units
outstanding.
During the year ended December 31, 1995, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Fund units were $(149,844).
A redemption by one or more unitholders individually holding 10% or more
of Fund units may cause the remaining unitholders to bear proportionately
higher operating expenses and otherwise adversely affect the Fund's future
liquidity and investment operations. As described under "Issuance and
Redemption of Units of Participation", however, redeeming unitholders bear
the transaction costs and market effect arising from any redemption of units;
additionally, in certain circumstances, redemptions may be made on an in-kind
basis. These practices may tend to mitigate the potential adverse effects of
such redemptions.
SAI-97
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (96.3%) (unless otherwise noted)
3COM Corp. ......................................... 519,100 $ 24,203,038
Abbott Laboratories ................................ 2,874,327 120,003,152
Adolph Coors Co. Class B ........................... 122,258 2,704,958
Advanced Micro Devices Inc. ........................ 342,003 5,643,050
Aetna Life & Casualty Co. .......................... 457,135 31,656,599
Air Products & Chemicals Inc. ...................... 415,434 21,914,144
Airtouch Communications ............................ 1,780,720 50,305,340
Alberto Culver Co. Class B ......................... 87,951 3,023,316
Albertson's Inc. ................................... 1,027,104 33,766,044
Alcan Aluminum Ltd. ................................ 813,765 25,328,436
Alco Standard Corp. ................................ 385,780 17,601,213
Alexander & Alexander Services Inc. ................ 136,025 2,584,475
Allergan Inc. ...................................... 205,593 6,681,773
Allied Signal, Inc. ................................ 1,037,586 49,285,335
Allstate Corp. ..................................... 1,640,121 67,449,976
Alltel Corp. ....................................... 682,100 20,121,950
Aluminum Co. of America ............................ 656,718 34,723,964
Alza Corp. ......................................... 251,997 6,236,926
Amdahl Corp. ....................................... 363,934 3,093,439
Amerada Hess Corp. ................................. 315,433 16,717,949
American Brands Inc. ............................... 686,710 30,644,434
American Electric Power Co., Inc. .................. 729,520 29,545,560
American Express Co. ............................... 1,773,743 73,388,617
American General Corp. ............................. 736,014 25,668,488
American Greetings Corp. Class A ................... 234,918 6,489,610
American Home Products Corp. ....................... 1,152,009 111,744,873
American International Group Inc. .................. 1,735,672 160,549,660
American Stores Co. ................................ 514,288 13,757,204
Ameritech Corp. .................................... 2,004,862 118,286,858
Amgen Inc. ......................................... 963,064 57,181,925
Amoco Corp. ........................................ 1,838,648 132,152,825
AMP Inc. ........................................... 792,450 30,410,269
AMR Corp. .......................................... 275,407 20,448,970
Andrew Corp. ....................................... 128,001 4,896,038
Anheuser Busch Cos., Inc. .......................... 976,947 65,333,331
Apple Computer ..................................... 448,146 14,284,654
Applied Materials Inc. ............................. 667,300 26,274,938
Archer Daniels Midland Co. ......................... 2,221,717 39,990,906
Armco Inc. ......................................... 328,019 1,927,112
Armstrong World Industries Inc. .................... 213,624 13,244,688
Asarco Inc. ........................................ 134,961 4,318,752
Ashland Inc. ....................................... 242,366 8,513,106
AT&T Corp. ......................................... 5,804,608 375,848,368
Atlantic Richfield Co. ............................. 618,518 68,500,869
Autodesk Inc. ...................................... 157,154 5,382,525
Automatic Data Processing Inc. ..................... 569,331 42,272,827
Avery Dennison Corp. ............................... 171,820 8,612,478
Avon Products Inc. ................................. 251,851 18,983,269
B.F. Goodrich Co. .................................. 87,416 5,955,215
</TABLE>
SAI-98
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Baker Hughes Inc. .................................. 453,258 $ 11,048,164
Ball Corp. ......................................... 93,099 2,560,223
Bally Entertainment Corp. .......................... 145,708 2,039,912
Baltimore Gas & Electric Co. ....................... 533,504 15,204,864
BancOne Corp. ...................................... 1,428,411 53,922,515
Bank of Boston Corp. ............................... 370,587 17,139,649
Bank of New York Co., Inc. ......................... 698,100 34,032,375
BankAmerica Corp. .................................. 1,383,836 89,603,381
Bankers Trust New York Corp. ....................... 285,993 19,018,535
Barnett Banks Inc. ................................. 351,398 20,732,482
Barrick Gold Corp. ................................. 1,259,400 33,216,675
Bausch & Lomb Inc. ................................. 187,312 7,422,238
Baxter International Inc. .......................... 1,019,372 42,686,203
Becton Dickinson & Co. ............................. 243,356 18,251,700
Bell Atlantic Corp. ................................ 1,593,104 106,538,830
Bellsouth Corp. .................................... 3,592,460 156,272,010
Bemis Co., Inc. .................................... 171,321 4,390,101
Beneficial Corp. ................................... 174,434 8,132,985
Bethlehem Steel Corp. .............................. 333,763 4,672,682
Betz Laboratories Inc. ............................. 59,400 2,435,400
Beverly Enterprises Inc. ........................... 402,005 4,271,303
Biomet Inc. ........................................ 366,025 6,542,697
Black & Decker Corp. ............................... 299,978 10,574,225
Boatmens Bancshares Inc. ........................... 463,086 18,928,640
Boeing Co. ......................................... 1,244,812 97,562,141
Boise Cascade Corp. ................................ 152,440 5,278,235
Boston Scientific Corp. ............................ 555,040 27,196,960
Briggs & Stratton Corp. ............................ 89,642 3,888,222
Bristol-Myers Squibb Co. ........................... 1,856,528 159,429,342
Brown Forman Corp. Class B ......................... 251,416 9,176,684
Brown Group Inc. ................................... 55,668 793,269
Browning Ferris Industries Inc. .................... 882,733 26,040,624
Brunswick Corp. .................................... 302,689 7,264,536
Burlington Northern Santa Fe Corp. ................. 521,584 40,683,552
Burlington Resources, Inc. ......................... 588,100 23,082,925
C.R. Bard, Inc. .................................... 169,761 5,474,792
Cabletron Systems Inc. ............................. 258,500 20,938,500
Campbell Soup Co. .................................. 914,639 54,878,340
Capital Cities/ABC, Inc. ........................... 561,100 69,225,713
Carolina Power & Light Co. ......................... 568,434 19,610,973
Caterpillar Inc. ................................... 724,678 42,574,833
Centex Corp. ....................................... 90,616 3,148,906
Central & South West Corp. ......................... 840,018 23,415,502
Ceridian Corp. ..................................... 201,132 8,296,695
Champion International Corp. ....................... 348,908 14,654,136
Charming Shoppes Inc. .............................. 316,912 911,122
Chase Manhattan Corp. .............................. 629,067 38,137,187
Chemical Banking Corp. ............................. 912,053 53,583,114
Chevron Corp. ...................................... 2,362,880 124,051,200
Chrysler Corp. ..................................... 1,381,404 76,495,247
</TABLE>
SAI-99
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Chubb Corp. ........................................ 319,940 $ 30,954,195
Cigna Corp. ........................................ 261,565 27,006,586
Cincinnati Milacron Inc. ........................... 106,292 2,790,165
Cinergy Corp. ...................................... 655,973 20,089,173
Circuit City Stores Inc. ........................... 321,784 8,889,283
Cisco Systems Inc. ................................. 982,900 73,348,913
Citicorp ........................................... 1,531,285 102,978,916
Clorox Co. ......................................... 198,440 14,213,265
Coca Cola Co. ...................................... 4,612,320 342,464,760
Coastal Corp. ...................................... 375,694 13,994,602
Colgate Palmolive Co. .............................. 521,232 36,616,548
Columbia Gas System Inc. ........................... 162,465 7,128,152
Columbia/HCA Healthcare Corp. ...................... 1,682,955 85,409,966
Comcast Corp. Class A .............................. 248,000 4,371,000
Comcast Corp. Class A Special ...................... 814,957 14,822,030
Comerica, Inc. ..................................... 373,600 14,990,700
Community Psychiatric Centers ...................... 168,926 2,069,344
Compaq Computer Corp. .............................. 972,979 46,702,992
Computer Associates International Inc. ............. 869,252 49,438,708
Computer Sciences Corp. ............................ 209,438 14,713,020
ConAgra Inc. ....................................... 890,566 36,735,848
Conrail Inc. ....................................... 282,460 19,772,200
Consolidated Edison Co. of New York Inc. .......... 957,222 30,631,104
Consolidated Freightways Inc. ...................... 188,868 5,005,002
Consolidated Natural Gas Co. ....................... 347,708 15,777,251
Cooper Industries Inc. ............................. 476,949 17,527,876
Cooper Tire & Rubber Co. ........................... 307,233 7,565,613
Corestates Financial Corp. ......................... 517,590 19,603,721
Corning Inc. ....................................... 856,598 27,411,136
CPC International Inc. ............................. 533,555 36,615,212
Crane Co. .......................................... 90,338 3,331,214
Cray Research Inc. ................................. 77,946 1,929,164
Crown Cork & Seal Co., Inc. ........................ 376,333 15,711,903
CSX Corp. .......................................... 785,608 35,843,365
CUC International Inc. ............................. 652,700 22,273,388
Cummins Engine Co., Inc. ........................... 132,828 4,914,636
Cyprus Amax Minerals Co. ........................... 292,386 7,638,584
Dana Corp. ......................................... 364,992 10,676,016
Darden Restaurants Inc. ............................ 503,472 5,978,730
Data General Corp. ................................. 117,266 1,612,408
Dayton Hudson Corp. ................................ 307,661 23,074,575
Dean Witter Discover & Co. ......................... 610,775 28,706,425
Deere & Co. ........................................ 958,950 33,802,988
Delta Air Lines Inc. ............................... 189,827 14,023,470
DeLuxe Corp. ....................................... 253,006 7,337,174
Detroit Edison Co. ................................. 495,058 17,079,501
Dial Corp. ......................................... 296,546 8,785,175
Digital Equipment Corp. ............................ 548,988 35,203,856
Dillard Department Stores Inc. Class A ............. 373,091 10,633,094
Dominion Resources Inc. ............................ 727,068 29,991,555
</TABLE>
SAI-100
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Dover Corp. ........................................ 460,370 $ 16,976,144
Dow Chemical Co. ................................... 972,620 68,448,133
Dow Jones & Co., Inc. .............................. 343,445 13,694,869
Dresser Industries Inc. ............................ 709,502 17,294,111
DSC Communications Corp. ........................... 376,336 13,877,390
Duke Power Co. ..................................... 722,745 34,240,044
Dun & Bradstreet Corp. ............................. 636,965 41,243,484
E.I. du Pont de Nemours & Co. ...................... 2,026,897 141,629,428
Eastern Enterprises ................................ 80,544 2,839,176
Eastman Chemical Co. ............................... 293,036 18,351,380
Eastman Kodak Co. .................................. 1,259,347 84,376,249
Eaton Corp. ........................................ 295,554 15,849,083
Echlin Inc. ........................................ 197,704 7,216,196
Echo Bay Mines Ltd. ................................ 401,586 4,166,455
Ecolab Inc. ........................................ 202,474 6,074,220
EG&G Inc. .......................................... 178,866 4,337,501
Eli Lilly & Co. .................................... 1,992,962 112,104,113
Emerson Electric Co. ............................... 870,126 71,132,801
Engelhard Corp. .................................... 463,634 10,084,040
Enron Corp. ........................................ 915,402 34,899,701
Enserch Corp. ...................................... 303,130 4,925,863
Entergy Corp. ...................................... 788,675 23,068,744
Exxon Corp. ........................................ 4,546,767 364,309,706
Federal Express Corp. .............................. 202,506 14,960,131
Federal Home Loan Mortgage Corp. ................... 662,362 55,307,227
Federal National Mortgage Association .............. 1,026,616 127,428,711
Federal Paper Board Co., Inc. ...................... 148,186 7,687,149
Federated Department Stores Inc. ................... 925,100 25,440,250
First Bank System Inc. ............................. 488,200 24,226,925
First Chicago NBD Corp. ............................ 1,145,180 45,234,610
First Data Corp. ................................... 822,200 54,984,625
First Fidelity Bancorp ............................. 294,093 22,167,260
First Interstate Bancorp ........................... 280,553 38,295,485
First Mississippi Corp. ............................ 1,200 31,800
First Union Corp. .................................. 638,511 35,517,174
Firstmiss Gold Inc. ................................ 850 18,913
Fleet Financial Group Inc. ......................... 921,691 37,558,908
Fleetwood Enterprises Inc. ......................... 146,360 3,768,770
Fleming Cos., Inc. ................................. 119,602 2,466,791
Fluor Corp. ........................................ 315,403 20,816,598
FMC Corp. .......................................... 132,044 8,929,476
Ford Motor Co. ..................................... 4,016,788 116,486,852
Foster Wheeler Corp. ............................... 127,518 5,419,515
FPL Group Inc. ..................................... 642,065 29,775,764
Freeport McMoRan Copper & Gold Class B ............. 734,485 20,657,391
Fruit of the Loom Inc. Class A ..................... 229,800 5,601,375
Gannett Co., Inc. .................................. 527,775 32,392,191
Gap Inc. ........................................... 534,732 22,458,744
General Dynamics Corp. ............................. 201,464 11,911,559
General Electric Co. ............................... 6,153,636 443,061,792
</TABLE>
SAI-101
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
General Mills Inc. ................................. 578,172 $ 33,389,433
General Motors Corp. ............................... 2,716,867 143,654,343
General Public Utilities Corp. ..................... 391,400 13,307,600
General Reinsurance Corp. .......................... 292,136 45,281,080
General Signal Corp. ............................... 132,732 4,297,199
Genuine Parts Co. .................................. 456,522 18,717,402
Georgia Pacific Corp. .............................. 327,954 22,505,843
Giant Foods Inc. Class A ........................... 185,796 5,852,574
Giddings & Lewis Inc. .............................. 102,970 1,699,005
Gillette Co. ....................................... 1,610,952 83,970,873
Golden West Financial Corp. ........................ 186,720 10,316,280
Goodyear Tire & Rubber Co. ......................... 562,564 25,526,342
Great Atlantic & Pacific Tea Co., Inc. ............. 119,733 2,753,859
Great Lakes Chemical Corp. ......................... 214,718 15,459,696
Great Western Financial Corp. ...................... 481,015 12,265,883
GTE Corp. .......................................... 3,533,149 155,458,556
H&R Block Inc. ..................................... 408,014 16,524,567
H.F. Ahmanson & Co. ................................ 369,372 9,788,358
H.J. Heinz Co. ..................................... 1,296,590 42,949,544
Halliburton Co. .................................... 412,241 20,869,701
Handleman Co. ...................................... 104,694 601,991
Harcourt General Inc. .............................. 225,875 9,458,516
Harnischfeger Industries Inc. ...................... 141,097 4,691,475
Harrahs Entertainment Inc. ......................... 328,345 7,962,366
Harris Corp. ....................................... 125,970 6,881,111
Hasbro Inc. ........................................ 275,210 8,531,510
Helmerich & Payne Inc. ............................. 75,073 2,233,422
Hercules Inc. ...................................... 402,084 22,667,486
Hershey Foods Corp. ................................ 283,389 18,420,285
Hewlett Packard Co. ................................ 1,871,194 156,712,498
Hilton Hotels Corp. ................................ 173,733 10,684,580
Home Depot Inc. .................................... 1,742,210 83,408,304
Homestake Mining Co. ............................... 424,058 6,625,906
Honeywell Inc. ..................................... 462,410 22,484,686
Household International Inc. ....................... 351,496 20,782,201
Houston Industries Inc. ............................ 916,376 22,222,118
Humana Inc. ........................................ 529,700 14,500,538
Illinois Tool Works Inc. ........................... 431,192 25,440,328
INCO Ltd. .......................................... 430,663 14,319,545
Ingersoll Rand Co. ................................. 391,737 13,759,762
Inland Steel Industries Inc. ....................... 131,588 3,306,149
Intel Corp. ........................................ 3,046,896 172,911,348
Intergraph Corp. ................................... 146,611 2,309,123
International Business Machines .................... 2,090,281 191,783,282
International Flavors & Fragrances ................. 409,494 19,655,712
International Paper Co. ............................ 916,838 34,725,239
Interpublic Group of Cos., Inc. .................... 261,150 11,327,381
ITT Corp. .......................................... 427,713 22,668,789
ITT Hartford Group Inc. ............................ 427,713 20,690,616
ITT Industries Inc. ................................ 427,713 10,265,112
</TABLE>
SAI-102
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
J.C. Penney Co., Inc. .............................. 895,700 $ 42,657,713
J.P. Morgan & Co., Inc. ............................ 730,408 58,615,242
James River Corp. of Virginia ...................... 254,075 6,129,559
Jefferson-Pilot Corp. .............................. 233,080 10,838,197
John Harland Co. ................................... 94,846 1,979,910
Johnson & Johnson .................................. 2,353,980 201,559,538
Johnson Controls Inc. .............................. 137,820 9,475,125
Jostens Inc. ....................................... 122,067 2,960,125
K Mart Corp. ....................................... 1,655,124 11,999,649
Kaufman & Broad Home Corp. ......................... 105,702 1,572,317
Kellogg Co. ........................................ 774,545 59,833,601
Kerr McGee Corp. ................................... 170,597 10,832,910
Keycorp ............................................ 825,101 29,909,911
Kimberly-Clark Corp. ............................... 1,057,327 87,493,809
King World Productions Inc. ........................ 122,218 4,751,225
Knight-Ridder Inc. ................................. 162,459 10,153,688
Kroger Co. ......................................... 455,419 17,078,213
Laidlaw Inc. Class B ............................... 1,040,600 10,666,150
Limited, Inc. ...................................... 1,299,084 22,571,585
Lincoln National Corp. ............................. 376,606 20,242,573
Liz Claiborne Inc. ................................. 286,447 7,948,904
Lockheed Martin Corp. .............................. 766,096 60,521,584
Loews Corp. ........................................ 409,700 32,110,238
Longs Drug Stores Corp. ............................ 58,692 2,809,880
Loral Corp. ........................................ 630,956 22,320,069
Louisiana Land & Exploration Co. ................... 150,736 6,462,806
Louisiana-Pacific Corp. ............................ 354,300 8,591,775
Lowes Cos., Inc. ................................... 593,336 19,876,756
LSI Logic Corp. .................................... 421,900 13,817,225
Luby's Cafeterias Inc. ............................. 73,439 1,634,018
Mallinckrodt Group Inc. ............................ 381,582 13,880,045
Manor Care Inc. .................................... 184,864 6,470,240
Marriott International Inc. ........................ 469,465 17,957,036
Marsh & McLennan Cos., Inc. ........................ 322,280 28,602,350
Masco Corp. ........................................ 542,376 17,017,047
Mattel Inc. ........................................ 815,297 25,070,383
May Department Stores Co. .......................... 995,418 42,056,411
Maytag Corp. ....................................... 338,684 6,858,351
MBNA Corp. ......................................... 535,180 19,734,763
McDermott International Inc. ....................... 159,268 3,503,896
McDonald's Corp. ................................... 2,625,182 118,461,338
McDonnell Douglas Corp. ............................ 424,124 39,019,408
McGraw-Hill Inc. ................................... 216,750 18,884,344
MCI Communications Corp. ........................... 2,440,290 63,752,576
Mead Corp. ......................................... 248,312 12,974,302
Medtronic Inc. ..................................... 826,720 46,192,980
Mellon Bank Corp. .................................. 529,429 28,456,809
Melville Corp. ..................................... 344,777 10,601,893
Mercantile Stores Co., Inc. ........................ 105,163 4,863,789
Merck & Co., Inc. .................................. 4,501,363 295,964,617
</TABLE>
SAI-103
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Meredith Corp. ..................................... 93,208 $ 3,903,085
Merrill Lynch & Co., Inc. .......................... 641,690 32,726,190
Micron Technology Inc. ............................. 751,500 29,778,188
Microsoft Corp. .................................... 2,157,750 189,342,563
Millipore Corp. .................................... 140,024 5,758,487
Minnesota Mining & Manufacturing Co. ............... 1,536,014 101,760,928
Mobil Corp. ........................................ 1,465,774 164,166,688
Monsanto Co. ....................................... 423,123 51,832,568
Moore Corp., Ltd. .................................. 301,004 5,606,200
Morgan Stanley Group Inc. .......................... 288,000 23,220,000
Morton International Inc. .......................... 651,526 23,373,495
Motorola Inc. ...................................... 2,158,692 123,045,444
NACCO Industries Inc. Class A ...................... 27,276 1,513,818
Nalco Chemical Co. ................................. 222,230 6,694,679
National City Corp. ................................ 531,400 17,602,625
National Semiconductor Corp. ....................... 392,705 8,737,686
National Service Industries Inc. ................... 148,396 4,804,321
NationsBank Corp. .................................. 1,059,576 73,772,979
Navistar International Corp. ....................... 238,868 2,508,114
New York Times Co. Class A ......................... 306,385 9,076,656
Newell Co. ......................................... 537,382 13,904,759
Newmont Mining Corp. ............................... 315,036 14,255,379
Niagara Mohawk Power Corp. ......................... 434,324 4,180,369
Nicor Inc. ......................................... 161,602 4,444,055
Nike Inc. Class B .................................. 531,850 37,030,056
Noram Energy Corp. ................................. 348,803 3,095,627
Nordstrom Inc. ..................................... 265,161 10,739,021
Norfolk Southern Corp. ............................. 481,136 38,190,170
Northern States Power Co. .......................... 243,833 11,978,296
Northern Telecom Ltd. .............................. 924,320 39,745,760
Northrop Grumman Corp. ............................. 156,949 10,044,736
Norwest Corp. ...................................... 1,241,712 40,976,496
Novell Inc. ........................................ 1,376,862 19,620,284
Nucor Corp. ........................................ 314,454 17,963,185
NYNEX Corp. ........................................ 1,571,592 84,865,968
Occidental Petroleum Corp. ......................... 1,249,757 26,713,556
Ogden Corp. ........................................ 148,104 3,165,723
Ohio Edison Co. .................................... 567,167 13,328,425
ONEOK Inc. ......................................... 105,808 2,420,358
Oracle Corp. ....................................... 1,588,187 67,299,424
Oryx Energy Co. .................................... 315,724 4,222,809
Outboard Marine Corp. .............................. 61,739 1,257,932
Owens Corning Fiberglas Corp. ...................... 280,969 12,608,484
PACCAR Inc. ........................................ 123,624 5,207,661
Pacific Enterprises ................................ 268,682 7,590,267
Pacific Gas & Electric Co. ......................... 1,568,318 44,501,023
Pacific Telesis Group .............................. 1,551,920 52,183,310
PacifiCorp ......................................... 1,037,918 22,055,758
Pall Corp. ......................................... 552,904 14,859,295
Panhandle Eastern Corp. ............................ 548,239 15,282,162
</TABLE>
SAI-104
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Parker Hannifin Corp. .............................. 232,474 $ 7,962,235
PECO Energy Co. .................................... 810,600 24,419,325
Pennzoil Co. ....................................... 138,378 5,846,471
Peoples Energy Corp. ............................... 110,968 3,523,234
Pep Boys -- Manny, Moe & Jack ...................... 188,988 4,842,818
PepsiCo Inc. ....................................... 2,938,396 164,182,877
Perkin-Elmer Corp. ................................. 133,087 5,024,034
Pfizer Inc. ........................................ 2,306,322 145,298,286
Pharmacia & Upjohn Inc. ............................ 1,875,800 72,687,250
Phelps Dodge Corp. ................................. 232,589 14,478,665
Philip Morris Cos., Inc. ........................... 3,069,879 277,824,050
Phillips Petroleum Co. ............................. 969,756 33,092,924
Pioneer HI-Bred International Inc. ................. 277,400 15,430,375
Pitney Bowes Inc. .................................. 632,998 29,750,906
Pittston Services Group ............................ 133,963 4,203,089
Placer Dome Inc. ................................... 892,813 21,539,114
PNC Bank Corp. ..................................... 1,176,858 37,953,671
Polaroid Corp. ..................................... 143,966 6,820,389
Potlatch Corp. ..................................... 91,509 3,660,360
PP&L Resources Inc. ................................ 515,600 12,890,000
PPG Industries Inc. ................................ 735,788 33,662,301
Praxair Inc. ....................................... 534,155 17,960,962
Premark International Inc. ......................... 231,186 11,703,791
Price Costco Inc. .................................. 667,213 10,174,998
Procter & Gamble Co. ............................... 2,490,876 206,742,708
Providian Corp. .................................... 343,460 13,995,995
Public Service Enterprise Group Inc. ............... 902,394 27,635,816
Pulte Corp. ........................................ 85,480 2,874,265
Quaker Oats Co. .................................... 457,456 15,782,232
R.R. Donnelley & Sons Co. .......................... 529,588 20,852,528
Ralston Purina Co. ................................. 386,873 24,131,203
Raychem Corp. ...................................... 154,497 8,787,017
Raytheon Co. ....................................... 993,626 46,948,829
Reebok International Ltd. .......................... 264,821 7,481,193
Republic New York Corp. ............................ 208,000 12,922,000
Reynolds Metals Co. ................................ 235,729 13,348,155
Rite Aid Corp. ..................................... 269,167 9,218,970
Roadway Services Inc. .............................. 135,822 6,638,300
Rockwell International Corp. ....................... 788,792 41,707,377
Rohm & Haas Co. .................................... 243,566 15,679,561
Rowan Cos., Inc. ................................... 301,826 2,980,532
Royal Dutch Petroleum Co. .......................... 1,959,488 276,532,744
Rubbermaid Inc. .................................... 703,458 17,938,179
Russell Corp. ...................................... 125,950 3,495,113
Ryan's Family Steak Houses Inc. .................... 174,651 1,222,557
Ryder Systems Inc. ................................. 250,985 6,211,879
SAFECO Corp. ....................................... 459,292 15,845,574
Safety-Kleen Corp. ................................. 174,967 2,733,859
Salomon Inc. ....................................... 407,015 14,449,033
Santa Fe Energy Resources Inc. ..................... 297,309 2,861,599
</TABLE>
SAI-105
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Santa Fe Pacific Gold Corp. ........................ 431,257 $ 5,228,991
Sara Lee Corp. ..................................... 1,871,686 59,659,991
SBC Communications Inc. ............................ 2,227,546 128,083,895
SCE Corp. .......................................... 1,890,500 33,556,375
Schering-Plough Corp. .............................. 1,435,662 78,602,495
Schlumberger Ltd. .................................. 889,080 61,568,790
Scientific Atlanta Inc. ............................ 244,310 3,664,650
Seagram Co., Ltd. .................................. 1,368,985 47,401,106
Sears Roebuck & Co. ................................ 1,443,183 56,284,137
Service Corp. International ........................ 387,233 17,038,252
Shared Medical Systems Corp. ....................... 73,489 3,995,964
Sherwin-Williams Co. ............................... 279,649 11,395,697
Shoneys Inc. ....................................... 127,082 1,302,591
Sigma Aldrich Corp. ................................ 152,400 7,543,800
Silicon Graphics Inc. .............................. 590,100 16,227,750
Snap On Inc. ....................................... 130,281 5,895,215
Sonat Inc. ......................................... 288,512 10,278,240
Southern Co. ....................................... 2,488,482 61,278,869
Southwest Airlines Co. ............................. 542,200 12,606,150
Springs Industries Inc. ............................ 66,540 2,753,093
Sprint Corp. ....................................... 1,263,342 50,375,762
St. Jude Medical Inc. .............................. 222,949 9,586,807
St. Paul Cos. Inc. ................................. 306,136 17,028,815
Stanley Works ...................................... 140,983 7,260,625
Stone Container Corp. .............................. 287,894 4,138,476
Stride Rite Corp. .................................. 150,663 1,129,973
Sun Co., Inc. ...................................... 262,608 7,188,894
Sun Microsystems Inc. .............................. 719,700 32,836,313
Suntrust Banks Inc. ................................ 418,242 28,649,577
Supervalu Inc. ..................................... 218,333 6,877,490
Sysco Corp. ........................................ 675,303 21,947,348
Tandem Computers Inc. .............................. 360,666 3,832,076
Tandy Corp. ........................................ 214,044 8,882,826
Tektronix Inc. ..................................... 103,675 5,093,034
Tele-Communications Inc. ........................... 2,359,034 46,885,801
Teledyne Inc. ...................................... 168,956 4,329,498
Tellabs Inc. ....................................... 333,800 12,350,600
Temple Inland Inc. ................................. 178,294 7,867,223
Tenet Healthcare Corp. ............................. 759,679 15,763,339
Tenneco Inc. ....................................... 751,336 37,285,049
Texaco Inc. ........................................ 955,087 74,974,330
Texas Instruments Inc. ............................. 697,210 36,080,618
Texas Utilities Co. ................................ 823,219 33,854,881
Textron Inc. ....................................... 285,054 19,241,145
Thomas & Betts Corp. ............................... 64,263 4,739,396
Time Warner Inc. ................................... 1,421,768 53,849,463
Times Mirror Co. ................................... 399,813 13,543,665
Timken Co. ......................................... 97,918 3,745,364
TJX Cos., Inc. ..................................... 234,227 4,421,035
Torchmark Corp. .................................... 331,781 15,013,090
</TABLE>
SAI-106
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Toys R Us Inc. ..................................... 1,018,519 $ 22,152,788
TransAmerica Corp. ................................. 254,166 18,522,347
Travelers Inc. ..................................... 1,164,131 73,194,737
Tribune Co. ........................................ 234,635 14,342,064
Trinova Corp. ...................................... 91,790 2,627,489
TRW Inc. ........................................... 234,695 18,188,863
Tyco International Ltd. ............................ 534,958 19,057,879
Unicom Inc. ........................................ 893,489 29,261,765
Unilever NV ........................................ 573,886 80,774,455
Union Camp Corp. ................................... 255,645 12,175,093
Union Carbide Corp. ................................ 461,655 17,312,063
Union Electric Co. ................................. 358,204 14,955,017
Union Pacific Corp. ................................ 755,062 49,834,092
Unisys Corp. ....................................... 520,878 2,929,939
United Healthcare Corp. ............................ 655,800 42,954,900
United Technologies Corp. .......................... 451,248 42,812,154
Unocal Corp. ....................................... 901,018 26,242,149
UNUM Corp. ......................................... 261,700 14,393,500
US Bancorp ......................................... 487,676 16,398,106
US Healthcare Inc. ................................. 588,050 27,344,325
US Surgical Corp. .................................. 169,800 3,629,475
US West Inc. Communications Group .................. 1,841,034 65,816,966
US West Inc. Media Group ........................... 1,909,634 36,283,046
USAir Group Inc. ................................... 194,571 2,578,066
USF&G Corp. ........................................ 402,936 6,799,545
USLIFE Corp. ....................................... 114,136 3,409,813
UST Inc. ........................................... 718,761 23,988,648
USX Marathon Group ................................. 1,072,985 20,923,208
USX United States Steel ............................ 294,800 9,065,100
Varity Corp. ....................................... 147,233 5,466,025
VF Corp. ........................................... 203,634 10,741,694
Viacom Inc. Class B ................................ 1,311,886 62,150,599
W.R. Grace & Co. ................................... 352,297 20,829,560
W.W. Grainger Inc. ................................. 183,206 12,137,398
Wachovia Corp. ..................................... 621,900 28,451,925
Wal Mart Stores Inc. ............................... 8,405,870 188,081,341
Walgreen Co. ....................................... 926,374 27,675,423
Walt Disney Co. .................................... 1,884,732 111,199,188
Warner Lambert Co. ................................. 492,341 47,818,620
Wells Fargo & Co. .................................. 173,754 37,530,864
Wendy's International Inc. ......................... 354,468 7,532,445
Western Atlas Inc. ................................. 161,195 8,140,348
Westinghouse Electric Corp. ........................ 1,457,476 24,048,354
Westvaco Corp. ..................................... 333,855 9,264,476
Weyerhaeuser Co. ................................... 739,992 32,004,654
Whirlpool Corp. .................................... 341,989 18,210,914
Whitman Corp. ...................................... 361,249 8,399,039
Willamette Industries Inc. ......................... 179,100 10,074,375
William Wrigley Jr. Co. ............................ 420,709 22,087,223
Williams Cos., Inc. ................................ 331,960 14,564,745
</TABLE>
SAI-107
<PAGE>
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND AND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Winn Dixie Stores Inc. ............................. 519,452 $ 19,154,793
WMX Technologies Inc. .............................. 1,766,646 52,778,549
Woolworth Corp. .................................... 414,068 5,382,884
Worthington Industries ............................. 288,603 6,006,550
Xerox Corp. ........................................ 390,129 53,447,673
Yellow Corp. ....................................... 90,918 1,125,060
---------------
Total Common Stock
(Cost $12,811,113,196) ........................... $16,821,684,974
---------------
PREFERRED STOCK (0.0%)
Teledyne Inc. ...................................... 1,644 23,633
---------------
PRINCIPAL
AMOUNT
U.S. GOVERNMENT OBLIGATIONS -(0.1%)
US Treasury Bills 5.28% 18-Jan-96 (b)
(Cost $22,922,703) ............................... $ 22,980,000 22,922,703
---------------
SHORT TERM INSTRUMENTS (0.5%) UNITS
-------------
Seven Seas Yield Plus Fund (a)
(Cost $94,720,753) ............................... 9,471,872 94,813,441
---------------
STATE STREET BANK AND TRUST COMPANY INVESTMENT
FUNDS
FOR TAX EXEMPT RETIREMENT PLANS (3.1%)
SHORT TERM INVESTMENT FUND ......................... 545,661,376 545,661,376
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS--100%
(Cost $13,474,418,028) ........................... $17,485,106,127
===================================================================================
</TABLE>
(a) Registered Investment Company advised by State Street Global Advisors.
(b) At December 31, 1995, this U.S. Treasury Bill was pledged to cover
margin requirements for open futures contracts.
- -----------------------------------------------------------------------------
The following long futures contract was open at December 31, 1995:
<TABLE>
<CAPTION>
FUTURES UNREALIZED
CONTRACT NUMBER OF CONTRACTS MATURITY DATE GAIN (LOSS)
- -------------- ------------------------------ ------------- ------------
<S> <C> <C> <C>
S&P 500 Index 1,678 March, 1996 $3,322,125
============
(Notional Amount $515,557,425)
</TABLE>
SAI-108
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participating Trusts and Trustee of the
State Street Bank and Trust Company
Russell 2000 Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the
selected per unit data present fairly, in all material respects, the
financial position of the State Street Bank and Trust Company Russell 2000
Fund (the "Fund") at December 31, 1995, the results of its operations, the
changes in its net assets and its selected per unit data for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and selected per unit data (hereafter referred to as
"financial statements") are the responsibility of the Fund's Trustee; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 11, 1996
SAI-109
<PAGE>
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in State Street Bank and Trust
Company Investment Funds for Tax Exempt
Retirement Plans:
Russell 2000 Growth Fund (20,398,739 units) .......................... $270,595,550
Russell 2000 Value Fund (21,099,658 units) ........................... 266,277,690
- -------------------------------------------------------------------------------------
Total Investments
(Cost $427,858,665) ................................................. 536,873,240
Receivable for Fund units issued ..................................... 287,356
- -------------------------------------------------------------------------------------
Total Assets ...................................................... 537,160,596
- -------------------------------------------------------------------------------------
LIABILITIES
Payable for Fund units redeemed ...................................... 38,000
Payable for investments purchased .................................... 249,356
Accrued expenses ..................................................... 24,493
- -------------------------------------------------------------------------------------
Total Liabilities ................................................. 311,849
- -------------------------------------------------------------------------------------
NET ASSETS
(equivalent to $16.48 per unit based on 32,569,625 units
outstanding) ........................................................ $536,848,747
=====================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-110
<PAGE>
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
Statement of Operations
Year ended December 31, 1995*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends .................................................................. $ 441,164
Interest ................................................................... 195,232
Securities lending fee income, net of related expenses (Note 3) ........... 297,597
- ------------------------------------------------------------------------------------------
Total investment income .................................................. 933,993
- ------------------------------------------------------------------------------------------
EXPENSES
Custody .................................................................... 58,576
Audit ...................................................................... 2,500
Trading .................................................................... 66,281
- ------------------------------------------------------------------------------------------
Total expenses ........................................................... 127,357
- ------------------------------------------------------------------------------------------
Net investment income ...................................................... 806,636
- ------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES
CONTRACTS
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on investments .................................... 3,613,042
Net realized gain (loss) on futures contracts .............................. 107,030
Net change in unrealized appreciation (depreciation) on investments ....... 110,075,573
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .................................... 113,795,645
- ------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........... $114,602,281
==========================================================================================
</TABLE>
- ------------
* See Note 1 to Financial Statements.
The accompanying notes are an integral part of these financial statements.
SAI-111
<PAGE>
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ....................................................... $ 806,636 $ 7,152,513
Net realized gain (loss) on investments ..................................... 3,613,042 4,831,083
Net realized gain (loss) on futures contracts ............................... 107,030 (225,880)
Net change in unrealized appreciation (depreciation) on investments ........ 110,075,573 (21,841,879)
Net change in unrealized appreciation (depreciation) on futures contracts .. -- 468,825
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ............ 114,602,281 (9,615,338)
- -------------------------------------------------------------------------------------------------------------
Distribution of securities lending fee income (Note 3) ...................... (297,597) (162,187)
- -------------------------------------------------------------------------------------------------------------
FROM PARTICIPANT TRANSACTIONS:
Proceeds from units issued .................................................. 145,764,191 48,624,419
Cost of units redeemed ...................................................... (95,326,930) (117,858,732)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from participant
transactions ............................................................... 50,437,261 (69,234,313)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ....................................... 164,741,945 (79,011,838)
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year ........................................................... 372,106,802 451,118,640
- -------------------------------------------------------------------------------------------------------------
END OF YEAR ................................................................. $536,848,747 $ 372,106,802
- -------------------------------------------------------------------------------------------------------------
NUMBER OF UNITS
Outstanding--beginning of year .............................................. 28,952,318 34,412,702
Issued ...................................................................... 10,327,958 3,730,830
Redeemed .................................................................... (6,710,651) (9,191,214)
- -------------------------------------------------------------------------------------------------------------
OUTSTANDING--END OF YEAR .................................................... 32,569,625 28,952,318
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-112
<PAGE>
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
YEAR (PERIOD) ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993 1992**
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income*** ............................... $ 0.03 $ 0.21 $ 0.17 $ 0.04
Net realized and unrealized gain (loss) ................ 3.61 (0.46) 1.83 1.07
Distribution of securities lending fee income (Note 3) (0.01) (0.01) 0.00 0.00
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) ................................ 3.63 (0.26) 2.00 1.11
NET ASSET VALUE
Beginning of period .................................... 12.85 13.11 11.11 10.00
- ------------------------------------------------------------------------------------------------------
END OF PERIOD .......................................... $ 16.48 $ 12.85 $ 13.11 $ 11.11
======================================================================================================
Total return**** ....................................... 28.33% (1.98)% 18.00% 11.10%
Ratio of expenses to average net assets *+ ............. 0.10% 0.07% 0.09% 0.39%
Ratio of net investment income to average net assets *+ 1.80% 1.61% 1.37% 1.88%
Portfolio turnover ..................................... 103% 48% 35% 1%
Net assets, end of year (000s) ......................... $536,849 $372,107 $451,119 $148,285
</TABLE>
* 1992 data annualized.
** Operations commenced on October 31, 1992.
*** Net investment income and net realized and unrealized gain (loss) have
been calculated based upon an average of monthly units outstanding.
****Total return calculation (not annualized) is based on the value of a
single unit of participation outstanding throughout the entire period.
It represents the percentage change in the net asset value per unit
between the beginning and end of each period. 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.
+ 1995 ratio reflects net investment income and expenses attributable to
the Fund from its ownership in other collective investment funds.
The accompanying notes are an integral part of these financial statements.
SAI-113
<PAGE>
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. INVESTMENT OBJECTIVE
The State Street Bank and Trust Company ("State Street Bank") Russell 2000
Fund (the "Fund") is an equity pooled fund formed under a Declaration of
Trust dated February 21, 1991, as amended and restated through July 19, 1991,
and commenced operations on September 30, 1992. The Fund's objective is to
replicate, as closely as possible, the return of the Russell 2000 Index.
Through January 31, 1995, the Fund made direct investments in common stocks
and equity futures contracts. On February 1, 1995, the Fund exchanged its
direct investments for units of two other State Street Bank collective
investment funds, Russell 2000 Growth Fund and Russell 2000 Value Fund. The
Fund may also invest in U.S. Treasury Bills, short-term fixed income
securities, equity index futures and certain other derivative instruments.
State Street Bank is the Fund's Trustee and custodian. State Street Global
Advisors, a division of State Street Bank, is the Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments in State Street Bank Investment Funds for Tax Exempt
Retirement Plans are valued at net asset value per unit on the valuation
date. Investments in securities held by those funds which are listed on a
national securities exchange and over-the-counter securities are valued at
the last reported sale price on the valuation date, or if no sale price was
reported on the valuation date, the last published sale price. Short-term
investments are stated at amortized cost which approximates market value.
Futures contracts are valued at the settlement price established each day on
the board of trade or exchange upon which they are traded.
B. SECURITY TRANSACTIONS AND RELATED INCOME
Security transactions are accounted for on the trade date (date the order
to buy or sell is executed). The cost of securities contributed to, and
proceeds related to securities delivered by, the Fund in connection with the
issuance and redemption of its units of participation are based on the
valuations of those securities determined as described above. The cost of
securities delivered and the net gain or loss on securities is determined
using the average cost method. Interest income is recorded on the accrual
basis. Interest income is increased by accretion of discount and reduced by
amortization of premium. Dividend income on the Fund's direct equity holdings
is recorded on the ex-dividend date.
The Russell 2000 Growth Fund and Russell 2000 Value Fund, in which the
Fund invests, retain all net investment income (excluding securities lending
fees) and net realized gains. Accordingly, realized and unrealized gains and
losses reported by the Fund include a component attributable to net
investment income.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and
no federal income tax provision is required.
SAI-114
<PAGE>
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
D. ISSUANCE AND REDEMPTION OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined on each business day
(valuation date). Issuances and redemptions of participant units are made on
such days and at such unit principal values.
Transaction costs and market effect associated with the investment of
proceeds from the issuance of Fund units or those incurred upon disposition
of investments to settle redemption of Fund units are allocated to the
applicable participant. Transaction costs include brokerage commissions,
taxes and other direct costs related to security transactions. Market effect
is the difference between the execution price of the investment on the trade
date and the investment's closing market value on the valuation date.
Fund units issued and redeemed are based upon the closing market value of
the securities bought or sold as of the valuation date, adjusted for the
related market effect and transaction costs previously described.
E. EXPENSES
According to the Declaration of Trust, the Fund may pay certain expenses
for services received during the year.
F. DISTRIBUTIONS TO PARTICIPANTS
All net investment income (excluding securities lending fees) and net
realized gains are retained by the Fund. Income generated by securities
lending is distributed to participants monthly (Note 3).
G. FUTURES CONTRACTS
The Fund may use futures contracts to manage its exposure to the equity
market. Buying futures tends to increase the Fund's exposure to the
underlying instrument. Selling futures tends to decrease the Fund's exposure
to the underlying instrument, or hedge other Fund investments. Futures
contracts involve, to varying degrees, credit and market risks. The Fund
enters into futures contracts only on exchanges or boards of trade where the
exchange or board of trade acts as the counterparty to the transaction. Thus,
credit risk on such transactions is limited to the failure of the exchange or
board of trade. Losses in value may arise from changes in the value of the
underlying instruments or if there is an illiquid secondary market for the
contracts. In addition, there is the risk that there may not be an exact
correlation between a futures contract and the underlying index.
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 each day, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Fund. Such receipts or payments are known as "variation
margin". A gain or loss is realized when the contract is closed or expires.
H. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SAI-115
<PAGE>
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
DECEMBER 31, 1995
3. SECURITIES LENDING PROGRAM
The Russell 2000 Growth Fund and Russell 2000 Value Fund (each a "Lending
Fund", together, the "Lending Funds"), in which the Fund invests, both
participate in the Securities Lending Program maintained by State Street
Bank. Prior to February 1, 1995, the participants in the fund authorized the
Fund's direct participation in the Securities Lending Program.
Under the Securities Lending Program, securities held by the Lending funds
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. Cash
collateral provided is invested in short-term collective investment funds
managed by State Street Bank. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder
is allocated between the Lending Fund and State Street Bank in its capacity
as lending agent. Negotiated lenders' fees are received for those loans
collateralized by securities or letters of credit, if any.
State Street Bank, as lending agent, indemnifies the Lending Funds for
replacement of any loaned securities (or, in certain circumstances, return of
equivalent cash value) due to Borrower default on a security loan. Lending
Fund participants, however, bear the risk of loss with respect to the
investment of collateral.
All income earned from lending activities is distributed to Fund
participants monthly.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, if any, during the year
ended December 31, 1995 were $549,391,506 and $478,683,114, respectively,
resulting in a net realized gain (loss) of $3,465,914. This gain (loss) is
prior to the recognition of the market effect and transaction costs
associated with contributions and redemptions.
5. UNITS OF PARTICIPATION
Units in excess of 10% of Fund units outstanding at December 31, 1995 held
by 2 of the Fund's 34 unitholders aggregated 54% of the Fund's total units
outstanding.
During the year ended December 31, 1995, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Fund units were $(147,128).
A redemption by one or more unitholders individually holding 10% or more
of Fund units may cause the remaining unitholders to bear proportionately
higher operating expenses and otherwise adversely affect the Fund's future
liquidity and investment operations. As described under "Issuance and
Redemption of Units of Participation", however, redeeming unitholders bear
the transaction costs and market effect arising from any redemption of units;
additionally, in certain circumstances, redemptions may be made on an in-kind
basis. These practices may tend to mitigate the potential adverse effects of
such redemptions.
SAI-116
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participating Trusts and Trustee of the
State Street Bank and Trust Company
Daily EAFE Fund Non-Lending
and the State Street Bank and Trust Company
Daily EAFE Fund
In our opinion, the accompanying combined statement of assets and
liabilities, including the combined schedule of investments, and the related
combined statements of operations and of changes in net assets and the
selected per unit data present fairly, in all material respects, the
financial position of the State Street Bank and Trust Company Daily EAFE Fund
and the State Street Bank and Trust Company Daily EAFE Fund Non-Lending (the
"Funds") at December 31, 1995, the results of their operations, the changes
in their net assets and their selected per unit data for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and selected per unit data (hereafter referred to as
"financial statements") are the responsibility of the Funds' Trustee; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 21, 1996
SAI-117
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(cost $200,392,653) ............................................. $221,776,521
Foreign currency ................................................. 4,757,197
Collateral held for loaned securities ............................ 10,082,456
Segregated foreign currency for open futures contracts .......... 2,483,208
Receivable for investments sold .................................. 603,301
Receivable for fund units issued ................................. 14,929
Dividends, interest and other receivables ........................ 506,736
Receivable for variation margin on open futures contracts ....... 1,632,271
- ----------------------------------------------------------------------------------
Total assets ................................................... 241,856,619
- ----------------------------------------------------------------------------------
LIABILITIES
Collateral on securities loaned, at value ........................ 10,082,456
Payable for investments purchased ................................ 1,531,277
Payable for open forward foreign currency contracts ............. 278,634
Payable for fund units redeemed .................................. 77,425
Accrued expenses ................................................. 117,028
- ----------------------------------------------------------------------------------
Total liabilities .............................................. 12,086,820
- ----------------------------------------------------------------------------------
NET ASSETS ....................................................... $ 229,769,799
==================================================================================
Daily EAFE Fund Non-Lending
(12,974,475 units outstanding, at $11.87 per unit net asset
value) .......................................................... $ 154,010,090
Daily EAFE Fund
(6,382,325 units outstanding, at $11.87 per unit net asset
value) .......................................................... 75,759,709
- ----------------------------------------------------------------------------------
$ 229,769,799
==================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-118
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Statement of Operations
Year ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of taxes withheld) ................................................................. $ 3,196,003
Interest .......................................................................................... 1,594,678
Securities lending fee income (net of related expenses), allocated to Daily EAFE Fund ............ 58,096
- -----------------------------------------------------------------------------------------------------------------
Total investment income ......................................................................... 4,848,777
- -----------------------------------------------------------------------------------------------------------------
EXPENSES .......................................................................................... 400,537
- -----------------------------------------------------------------------------------------------------------------
Net investment income ........................................................................... 4,448,240
- -----------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN
CURRENCY TRANSACTIONS
Realized gain (loss):
Investments ...................................................................................... 2,872,352
Futures contracts ................................................................................ 1,968,876
Foreign currency and related forward contracts ................................................... (1,566,051)
- -----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, futures contracts and foreign currency ................ 3,275,177
- -----------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation):
Investments ...................................................................................... 11,137,449
Futures contracts ................................................................................ 789,338
Foreign currency and related forward contracts ................................................... (276,271)
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, futures contracts and
foreign currency ............................................................................... 11,650,516
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, futures contracts and foreign currency . 14,925,693
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................... $19,373,933
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-119
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1995 1994*
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ......................................................... $ 4,448,240 $ 6,162,345
Net realized gain (loss) on investments, futures contracts and foreign
currency ...................................................................... 3,275,177 5,618,983
Net change in unrealized appreciation (depreciation) on investments, futures
contracts and foreign currency ............................................... 11,650,516 9,825,009
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ............... 19,373,933 21,606,337
- -----------------------------------------------------------------------------------------------------------------
Distributions of securities lending fee income to Daily EAFE Fund participants (58,096) (65,268)
- -----------------------------------------------------------------------------------------------------------------
FROM PARTICIPANT TRANSACTIONS
Proceeds from units issued .................................................... 105,163,988 251,160,924
Cost of units redeemed ........................................................ (138,698,189) (260,710,636)
Paid-in capital from transaction fees (Note 2E) ............................... 1,067,420 1,316,950
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from participant transactions (32,466,781) (8,232,762)
Net increase (decrease) in net assets .......................................... (13,150,944) 13,308,307
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period ........................................................... 242,920,743 229,612,436
- -----------------------------------------------------------------------------------------------------------------
End of period ................................................................. $ 229,769,799 $ 242,920,743
=================================================================================================================
NUMBER OF UNITS
Daily EAFE Fund Non-Lending
Outstanding--beginning of period .............................................. 9,700,776 0
Issued ....................................................................... 9,429,069 9,825,508
Interfund transfers (net) .................................................... 0 10,193,934
Redeemed ..................................................................... (6,155,370) (10,318,666)
- ------------------------------------------------------------------------------- --------------- ---------------
Outstanding--end of period ..................................................... 12,974,475 9,700,776
=============================================================================== =============== ===============
Daily EAFE Fund Outstanding--beginning of year ................................. 13,124,325 23,278,741
Issued ....................................................................... 0 13,889,447
Interfund transfers (net) .................................................... 0 (10,193,934)
Redeemed ..................................................................... (6,742,000) (13,849,929)
- ------------------------------------------------------------------------------- --------------- ---------------
Outstanding--end of year ....................................................... 6,382,325 13,124,325
=============================================================================== =============== ===============
</TABLE>
- ------------
* The Fund commenced non-lending operations on January 3,1994.
The accompanying notes are an integral part of these financial statements.
SAI-120
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
YEAR (PERIOD) ENDED
DECEMBER 31,
-----------------------
1995 1994**
- -----------------------------------------------------------------------------
<S> <C> <C>
Net investment income* .............................. $ 0.24 $ 0.19
Net realized and unrealized gain (loss) ............. 0.99 0.59
- -----------------------------------------------------------------------------
Net increase (decrease) ............................. 1.23 0.78
NET ASSET VALUE
Beginning of period ................................. 10.64 9.86
- -----------------------------------------------------------------------------
End of period ....................................... $ 11.87 $ 10.64
- -----------------------------------------------------------------------------
Total return*** ..................................... 11.56% 7.91%
- -----------------------------------------------------------------------------
Ratio of expenses to average net assets ............. 0.20% 0.19%
Ratio of net investment income to average net assets 2.15% 1.85%
Portfolio turnover .................................. 9% 47%
Net assets, end of year (000s) ...................... $ 154,010 $ 103,242
</TABLE>
- ------------
* Net investment income per unit has been calculated using an average of
monthly units outstanding.
** The Fund commenced operations on January 3, 1994.
*** Total return calculation is based on the value of a single unit of
participation outstanding throughout the entire year. It represents the
percentage change in the net asset value per unit between the beginning
and end of each year and assumes reinvestment of any Fund
distributions. The calculation includes only those expenses charged
directly to the Fund. This result may be reduced by any administrative
or other fees which are incurred in the management or maintenance of
individual participant accounts.
The accompanying notes are an integral part of these financial statements.
SAI-121
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
YEAR (PERIOD) ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993**
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss)* .......................... $ 0.25 $ 0.19 $ (0.01)
Distribution of securities lending fee income ......... (0.01) 0.00 0.00
Net realized and unrealized gain (loss) ................ 0.99 0.59 (0.13)
- --------------------------------------------------------------------------------------------
Net increase (decrease) ................................ 1.23 0.78 (0.14)
NET ASSET VALUE
Beginning of period .................................... 10.64 9.86 10.00
- --------------------------------------------------------------------------------------------
End of period .......................................... $ 11.87 $ 10.64 $ 9.86
============================================================================================
Total return*** ........................................ 11.64% 7.91% (1.40)%
- --------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (a) ........... 0.20% 0.19% 0.57%
Ratio of net investment income to average net assets
(a) ................................................... 2.22% 1.88% (0.14)%
Portfolio turnover ..................................... 9% 47% 28%
Net assets, end of year (000s) ......................... $ 75,760 $ 139,678 $ 229,612
</TABLE>
- ------------
* Net investment income (loss) per unit has been calculated using an
average of monthly units outstanding.
** The Fund commenced operations on September 30, 1993.
*** Total return calculation is based on the value of a single unit of
participation outstanding throughout the entire year. It represents the
percentage change in the net asset value per unit between the beginning
and end of each year and assumes reinvestment of any Fund
distributions. The calculation includes only those expenses charged
directly to the Fund. This result may be reduced by any administrative
or other fees which are incurred in the management or maintenance of
individual participant accounts.
(a) 1993 data annualized.
The accompanying notes are an integral part of these financial statements.
SAI-122
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
The State Street Bank and Trust Company Investment Funds for Tax Exempt
Retirement Plans have been formed under a Declaration of Trust, as amended
and restated through July 19, 1991. The Daily EAFE Fund and the Daily EAFE
Fund Non-Lending (together, the "Funds") were established through Fund
Declarations effective September 16, 1993 and January 3, 1994, respectively,
and commenced investment operations on September 30, 1993 and January 3,
1994, respectively. State Street Bank and Trust Company is Trustee and
custodian of the Funds. State Street Global Advisors, a division of State
Street Bank and Trust Company, is the Funds' investment manager.
The Funds' investment objective is to closely match the performance of the
Morgan Stanley Capital International (MSCI) Europe, Australia and Far East
(EAFE) Index (the "Index"), while providing daily liquidity. The Funds may
invest in equity securities, equity-based derivatives, swaps, short-term
instruments and foreign exchange contracts, as well as in commingled funds or
mutual funds maintained by the Funds' Trustee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments for which market quotations are readily available are valued
at the last reported sale price on the valuation date or, if no sales are
reported for that day, the more recent of the last published sale or the mean
between the last reported bid and asked prices, or at their fair value as
determined in good faith by the Trustee. Short-term investments are stated at
amortized cost which approximates market. Foreign securities quoted in
foreign currencies (which constitute most of the investments) and foreign
currencies are translated into U.S. dollars at the current exchange rate.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order
to buy or sell is executed). The cost of securities contributed to, and
proceeds related to securities delivered by, the Funds in connection with the
issuance and redemption of units of participation are based on the valuations
of those securities determined as described above. The cost of securities
delivered is determined using the average cost method. Foreign dividend
income is recorded net of applicable withholding taxes on the ex-dividend
date or as soon as the Funds are informed of the ex-dividend date. Interest
income earned on securities is recorded net of applicable withholding taxes
on the accrual basis; interest earned on foreign currency transaction
accounts is recorded when the Trustee if first notified of the amount
credited by the depository bank.
C. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS
The accounting records of the Funds are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates of
exchange at period end. Purchases and sales of securities, income and
expenses are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of the transactions.
The Funds may use forward foreign currency contracts to facilitate
transactions in foreign securities. Such contracts are valued based upon the
applicable forward exchange rates and any resulting unrealized gains or
losses
SAI-123
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
are recorded in the Funds' financial statements. The Funds record realized gains
or losses at the time the forward contract is extinguished by entry
into a closing transaction or by delivery of the currency. Risks in foreign
currency contracts arise from the possible inability of counterparties to
meet the contract's terms and from movements in currency values. The maximum
potential loss from such contracts is the aggregate face value in U.S.
dollars at the time the contract was opened; however, the Trustee believes
the likelihood of such loss is remote.
D. INCOME TAXES
It is the Funds' policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Funds are exempt from federal income taxes
and no federal income tax provision is required.
E. ISSUANCE AND REDEMPTION OF UNITS OF PARTICIPATION
The net asset values of the Funds are determined on each business day
(valuation date) and any other day determined by the Trustee. Issuances and
redemptions of Fund units are made on the basis of the value of the Fund as
of the Fund's last preceding valuation date on which such order to issue or
redeem is received. A transaction fee of .5% is charged on all contributions
and withdrawals and is presented in the Combined Statement of Changes in Net
Assets as a separate component of paid in capital.
F. EXPENSES
Under the Fund Declaration, the Funds may pay certain expenses for
services received during the year, including certain custodial services
performed by the Trustee. The Funds also pay an annual fee of $50,000 for
daily pricing services to the Trustee in its capacity as custodian.
G. DISTRIBUTIONS TO PARTICIPANTS
All net investment income (excluding securities lending fees) and net
realized gains are retained by the Fund. Income generated by securities
lending is distributed to the Fund participants monthly.
H. FUTURES CONTRACTS
The Funds may use futures contracts to manage their exposure to the equity
market. Buying futures tends to increase the Funds' exposure to the
underlying instrument. Selling futures tends to decrease the Funds' exposure
to the underlying instrument, or hedge other Fund investments. Futures
contracts involve, to varying degrees, credit and market risks. The Funds
enter into futures contracts only on exchanges or boards of trade where the
exchange or board of trade acts as the counterparty to the transaction. Thus,
credit risk on such transactions is limited to the failure of the exchange or
board of trade. Losses in value may arise from changes in the value of the
underlying 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.
Upon entering into a futures contract, the Funds are required to deposit
either in cash or securities an amount ("initial margin") equal to a certain
percentage of the nominal value of the contract. Subsequent payments are made
SAI-124
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
or received by the Funds each day, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Funds. Such receipts or payments are known as "variation
margin." A gain or loss is realized when the contract is closed or expires.
I. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. SECURITIES LENDING PROGRAM; PRINCIPLES OF COMBINATION
The participants in the Daily EAFE Fund (the "Lending Fund") have
authorized the Lending Fund to participate in the Securities Lending Program
maintained by State Street Bank and Trust Company ("State Street Bank"). The
investment objective, techniques and results of operations of the Lending
Fund are identical to those of the Daily EAFE Fund Non-Lending (the "Fund"),
except that the Lending Fund engages in securities lending activities.
Accordingly, the financial statements of the Funds have been prepared on a
combined basis, with separate disclosure of the participant transactions and
per unit data of each of the Funds. Each of the Funds maintains a divided
pro-rata interest in the combined assets and liabilities (including each
investment security position) proportionate to the net asset value of the
outstanding combined units of the Funds. All interfund transactions have been
eliminated in the combined financial statements.
Under the Securities Lending Program, securities held by the Lending Fund
are loaned by State Street Bank, as agent, to certain brokers and other
financial institutions (the "Borrowers"). The Borrowers provide cash,
securities, or letters of credit as collateral against loans in an amount at
least equal to 100% of the market value of the loaned securities. The
Borrowers are required to maintain the collateral at not less than 100% of
the fair market value of the loaned securities. At December 31, 1995, the
value of securities loaned by the Lending Fund was $9,428,204 against which
was held cash collateral of $10,082,456. Cash collateral provided is invested
in short-term collective investment funds managed by State Street Bank. A
portion of the income generated upon investment of the collateral is remitted
to the Borrowers, and the remainder is allocated between the Lending Fund and
State Street Bank in its capacity as lending agent. Negotiated lenders' fees
are received for those loans collateralized by securities or letters of
credit, if any.
State Street Bank, as lending agent, indemnifies the Lending Fund for
replacement of any loaned securities (or, in certain circumstances, return of
equivalent cash value) due to Borrower default on a security loan. Lending
Fund participants, however, bear the risk of loss with respect to the
investment of collateral.
All income earned from lending activities is distributed to Lending Fund
participants monthly. Participants in each of the Lending Fund or the Fund
may exchange their units for units of the other Fund on any valuation date.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, during the year ended
December 31, 1995 were $19,306,604 and $75,722,718, respectively, resulting
in a net gain (loss) of $2,872,352.
SAI-125
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
NOTES TO COMBINED FINANCIAL STATEMENTS (CONCLUDED)
DECEMBER 31, 1995
5. UNITS OF PARTICIPATION
Participant transactions for each Fund were as follows:
<TABLE>
<CAPTION>
YEAR (PERIOD) ENDED DECEMBER 31,
--------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
DAILY EAFE FUND NON-LENDING
Proceeds from units issued .......................... $105,163,988 $ 105,226,821
Interfund transfers (net) ........................... -- 100,481,607
Cost of units redeemed .............................. (68,452,109) (110,868,636)
Paid in capital from transaction fees (Note 1) ..... 821,340 600,941
--------------- ---------------
37,533,219 95,440,733
--------------- ---------------
DAILY EAFE FUND
Proceeds from units issued .......................... -- 145,934,103
Interfund transfers (net) ........................... -- (100,481,607)
Cost of units redeemed .............................. (70,246,080) (149,842,000)
Paid in capital from transaction fees (Note 1) ..... 246,080 716,009
--------------- ---------------
(70,000,000) (103,673,495)
--------------- ---------------
Net increase (decrease) in net assets resulting from
participant transactions ........................... $(32,466,781) $ (8,232,762)
=============== ===============
</TABLE>
DAILY EAFE FUND NON-LENDING
Units in excess of 10% of Fund units outstanding at December 31, 1995 held
by 3 of the Fund's 31 unitholders aggregated 40% of the Fund's total units
outstanding.
DAILY EAFE FUND
All of the Fund's units outstanding at December 31, 1995 were held by one
unitholder.
A redemption by one or more unitholders individually holding 10% or more
of Fund units may cause the remaining unitholders to bear proportionately
higher operating expenses and otherwise adversely affect the Fund's future
liquidity and investment operations.
6. REALIZED GAINS AND LOSSES ON FOREIGN CURRENCY TRANSACTIONS
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from disposition of foreign currencies,
currency gains and losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of net
investment income accrued and the U.S. dollar amount actually received. The
effects of changes in foreign currency exchange rates on investments in
securities are not segregated in the Statement of Operations from the effects
of changes in market prices of those securities, but are included with the
net realized and unrealized gain or loss on investments in securities. net
realized gain (loss) from foreign currency transactions amounted to
$(1,566,501) for the year ended December 31, 1995.
SAI-126
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (81.3%) (unless otherwise noted)
AUSTRALIA (1.8%)
Aberfoyle Ltd. AUD0.50 ............................................... 3,775 $ 8,284
Adelaide Brighton Cement Holdings Ltd. AUD0.50 ....................... 7,243 6,466
Amcor Ltd. Ord AUD1 .................................................. 18,763 132,596
Ampolex Ltd. AUD0.50 ................................................. 8,814 19,276
Ashton Mining Ltd. AUD0.50 ........................................... 8,539 12,386
Australian National Industries Ltd. AUD0.30 .......................... 23,874 17,759
Boral Ltd. Ord AUD0.50 ............................................... 33,400 84,475
Brambles Industries Ltd. AUD0.50 ..................................... 6,692 74,671
Broken Hill Proprietary Co., Ltd. Ord AUD1 ........................... 59,544 841,580
Burns, Philp & Co., Ltd. AUD0.50 ..................................... 15,587 34,901
Caltex Australia Ltd. AUD1 ........................................... 5,500 21,725
Coca Cola Amatil Ltd. AUD0.50 ........................................ 14,837 118,427
Coles Myer Ltd. AUD0.50 .............................................. 32,624 101,685
CRA Ltd. AUD2.00 ..................................................... 18,071 265,359
Crusader Ltd. AUD0.20 ................................................ 4,200 4,437
CSR Ltd. AUD1 ........................................................ 29,038 94,612
Email Ltd. AUD0.50 ................................................... 8,455 20,126
Emperor Mines Ltd. AUD0.10 ........................................... 3,000 4,798
FAI Insurances Ltd. AUD0.10 .......................................... 13,915 7,556
Fosters Brewing Group AUD1 ........................................... 59,514 97,840
General Property Trust AUD1 .......................................... 21,801 38,597
Gold Mines of Kalgoorlie Ltd. AUD0.05 ................................ 31,000 28,825
Goodman Fielder Wattie Ltd. AUD0.50 .................................. 36,356 36,510
Howard Smith Ltd. AUD1 ............................................... 5,473 25,853
ICI Australia Ltd. AUD1 .............................................. 9,013 69,057
James Hardie Industries Ltd. AUD1.00 ................................. 11,297 19,496
Lend Lease Corp., Ltd. AUD0.50 ....................................... 7,074 102,613
MIM Holdings Ltd. AUD0.50 ............................................ 48,836 67,570
National Australia Bank Ltd. AUD1.00 ................................. 43,315 389,877
Newcrest Mining Ltd. AUD0.50 ......................................... 7,132 30,028
News Corp., Ltd. AUD0.50 ............................................. 60,813 324,806
North Broken Hill Peko Ltd. AUD0.50 .................................. 21,070 58,776
OPSM Protector Ltd. AUD0.50 .......................................... 4,333 6,769
Pacific Dunlop Ltd. AUD0.50 .......................................... 33,037 77,413
Pioneer International Ltd. AUD0.50 ................................... 26,822 69,235
QCT Resources Ltd. AUD0.50 ........................................... 18,919 21,251
Renison Goldfields Consolidated Ltd. AUD0.50 ......................... 6,255 31,175
Rothmans Holdings Ltd. AUD0.50 ....................................... 3,700 15,138
Santos Ltd. AUD0.25 .................................................. 16,323 47,720
Schroders Property Fund AUD1.00 ...................................... 12,142 19,871
Sons of Gwalia Ltd. AUD0.25 .......................................... 2,200 12,110
Southcorp Holdings Ltd. Ord AUD0.50 .................................. 17,247 40,157
Stockland Trust Group AUD1.10 ........................................ 9,065 20,904
Stockland Trust Group AUD1.10 Rfd 01Jan96 ............................ 367 819
TNT Ltd. AUD0.50 ..................................................... 17,336 22,955
Tubemakers of Australia Ltd. AUD0.50 ................................. 8,476 26,292
Western Mining Corp. AUD0.50 ......................................... 33,575 215,791
Westfield Trust Units AUD1 ........................................... 28,972 52,155
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-127
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Westfield Trust New Def Units ........................................ 1,219 $ 2,194
Westpac Banking Corp. AUD1 ........................................... 55,276 245,070
--------------
4,087,986
--------------
AUSTRIA (0.4%)
Austria Mikros Systeme International AG ATS100 ....................... 100 16,235
Austrian Airlines ATS1000 ............................................ 100 16,633
Bank Austria AG ATS100 ............................................... 2,300 185,907
Bau Holdings AG ATS100 Rfd 01Apr93 ................................... 200 10,804
Bohler Uddeholm ATS100 ............................................... 500 38,230
BWT AG Ord ATS100 .................................................... 100 10,277
Creditanstalt-Bankverein ATS100 ...................................... 1,330 73,826
EA Generali AG ATS100 ................................................ 300 89,965
Flughafen Wien AG ATS100 ............................................. 1,000 67,523
Lenzing AG ATS100 .................................................... 200 16,901
Mayr Melnhof Karton ATS100 ........................................... 500 25,073
Oesterreichische Brau Beteiligungs AG ATS100 ......................... 400 18,231
Oesterreichische Elektrizitaetswirtschafts AG Class A ATS100 ........ 1,400 84,245
OMV AG ATS100 ........................................................ 1,246 108,261
Radex Heraklith Industriebeteiligungs AG Ord ATS100 .................. 650 19,686
Steyr-Daimler Puch AG ATS100 ......................................... 500 8,589
Universale-Bau AG ATS100 ............................................. 250 13,157
VA Technologie AG ATS100 Bearer ...................................... 700 88,972
Wienerberger Baustoff Industrie ATS100 ............................... 300 59,579
Z Landerbank Bank Austria AG ATS100 Ptg Certs ........................ 300 11,917
--------------
964,011
--------------
BELGIUM (1.2%)
Bekaert SA NPV ....................................................... 100 82,399
Cementbedrijven Cimenteries NPV ...................................... 175 70,612
Cementbedrijven Cimenteries NPV Vvpr ................................. 45 18,043
Delhaize Le Lion SA NPV .............................................. 2,345 97,210
Electrabel SA NPV Vvpr ............................................... 435 103,466
Electrabel SA NPV .................................................... 2,075 493,544
Fortis AG NPV ........................................................ 1,667 202,498
Generale de Banque Belge Pour L'Estranger SA NPV ..................... 645 223,547
Generale de Banque Belge Pour L'Estranger SA NPV Vvpr ................ 49 17,149
Gevaert Photo Producten, NV NPV ...................................... 1,190 73,187
Glaverbel SA NPV ..................................................... 262 28,043
Groupe Bruxelles Lambert NPV ......................................... 1,100 149,507
Kredietbank NV NPV AFV ............................................... 75 20,438
Kredietbank NV NPV ................................................... 595 162,751
Petrofina SA NPV ..................................................... 1,080 330,642
Royale Belge NPV Vvpr ................................................ 100 20,014
Royale Belge NPV ..................................................... 625 124,873
Solvay SA NPV ........................................................ 385 208,983
Tractebel NPV Vvpr ................................................... 105 43,170
Tractebel NPV ........................................................ 525 216,743
Union Miniere SA NPV ................................................. 1,155 77,315
--------------
2,764,134
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-128
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
DENMARK (0.7%)
Aarhus Oliefabrik A/S A DKK100 ....................................... 167 $ 9,643
Aarhus Oliefabrik A/S B DKK100 ....................................... 47 2,629
Carlsberg Brewery A/S A DKK20 ........................................ 1,328 74,284
Carlsberg Brewery A/S B DKK20 ........................................ 1,082 60,523
D/S AF 1912 B DKK1000 ................................................ 8 153,013
D/S Svendborg B DKK1000 .............................................. 5 138,037
Danisco A/S DKK20 .................................................... 2,080 100,585
Danske Luftfartsel DKK25 ............................................. 336 29,344
Den Danske Bank A/S DKK100 ........................................... 1,996 137,941
FLS Industries A/S B DKK100 .......................................... 350 27,156
GN Store Nord A/S DKK100 ............................................. 223 17,906
ISS International Service System A/S B DKK20 ......................... 1,092 24,630
Korn Og Foderstof DKK20 .............................................. 460 19,921
Lauritzen Holdings A/S B DKK20 ....................................... 101 11,117
NKT Holding A/S DKK100 ............................................... 281 13,183
Novo Nordisk A/S DKK20 B ............................................. 1,417 194,320
Ostasiatiske Kompagni Dkr100 ......................................... 807 16,163
Radiometer A/S B DKK20 ............................................... 386 27,721
Royal Copenhagen A/S A DKK100 ........................................ 151 13,623
Sophus Berendsen A/S A DKK20 ......................................... 228 25,672
Sophus Berendsen A/S B DKK20 ......................................... 679 76,574
Superfos A/S DKK100 .................................................. 234 20,478
Tele Danmark A/S B DKK10 ............................................. 4,941 270,141
Unidanmark A/S A DKK100 Regd ......................................... 2,016 100,036
--------------
1,564,640
--------------
FINLAND (0.5%)
Ameri Group A FIM20 .................................................. 925 14,464
Cultor Ltd. 2 FIM12 .................................................. 300 12,436
Cultor Ltd. 1 Ord FIM12 .............................................. 600 24,872
Instrumentarium Corp. A FIM10 ........................................ 600 15,614
Instrumentarium Corp. B FIM10 ........................................ 200 5,159
Kansallis YHTYMA FIM10 ............................................... 25,860 21,440
Kesko Oy FIM10 ....................................................... 3,400 42,361
Kone Corp. B FIM50 ................................................... 200 16,720
Kymmene Corp. FIM20 .................................................. 3,100 82,101
Merita A FIM10 ....................................................... 18,200 46,105
Metra Oy A FIM20 ..................................................... 500 20,612
Metra Oy B FIM20 ..................................................... 500 20,612
Nokia AB Oy FIM5 K ................................................... 5,200 205,979
Nokia AB Oy FIM5 A ................................................... 6,200 244,162
Outokumpu Oy A FIM10 ................................................. 4,700 74,686
Pohjola Ord A FIM5 ................................................... 800 10,133
Pohjola B FIM5 ....................................................... 900 11,607
Repola Ltd. FIM10 .................................................... 5,700 107,641
Sampo Insurance Co., Ltd. A FIM20 .................................... 600 32,196
Stockmann AB B FIM20 ................................................. 250 13,069
Stockmann AB A FIM20 ................................................. 300 17,134
--------------
1,039,103
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-129
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE (4.5%)
Accor SA FRF100 ...................................................... 878 $113,823
Air Liquide FRF70 .................................................... 1,973 327,186
Alcatel Alsthom CGE FRF40 ............................................ 4,512 389,524
AXA FRF60 ............................................................ 4,948 333,880
Banque Nationale de Paris FRF25 ...................................... 5,721 258,413
BIC SA FRF50 ......................................................... 800 81,464
Bongrain Group FRF50 ................................................. 50 28,218
Bouygues SA FRF50 .................................................... 697 70,306
Canal Plus FRF20 ..................................................... 650 122,012
Carnaud Metalbox FRF10 ............................................... 2,449 112,172
Carrefour SA FRF100 .................................................. 762 462,918
Chargeurs SA FRF100 .................................................. 250 50,199
Club Mediterranee SA FRF25 ........................................... 426 34,059
Compagnie Bancaire SA FRF100 ......................................... 811 90,876
Compagnie de St. Gobain FRF100 ....................................... 2,533 276,582
Compagnie de Suez FRF75 .............................................. 4,788 197,766
Compagnie Financiere Paribas FRF50 A ................................. 3,602 197,758
Compagnie Generale de Geophysique FRF10 .............................. 100 3,292
Compagnie Generale des Eaux FRF100 ................................... 3,501 349,993
Compagnie Par Reesco FRF50 ........................................... 313 25,594
Comptoirs Modernes FRF100 ............................................ 175 56,896
Credit Foncier De France FRF100 ...................................... 1,191 17,242
Credit National SA FRF100 ............................................ 381 28,046
Docks de France SA FRF10 ............................................. 400 60,853
Dollfus-Mieg & Cie FRF75 ............................................. 250 10,219
Ecco SA FRF25 ........................................................ 300 45,455
Eridania Beghin-Say FRF65 ............................................ 774 132,943
Essilor International Compagnie Generale FRF20 ....................... 260 49,762
Etab Eco Casino Guich Perr & Co. FRF10 ............................... 2,096 61,159
Europe 1 Communication FRF100 Regd ................................... 64 12,956
Fin Pour L'Expans D'Telecomm SA FRF100 ............................... 650 9,450
Groupe Danone FRF10 .................................................. 2,132 352,245
GTM Entrepose FRF50 .................................................. 419 29,430
Havas SA FRF15 ....................................................... 1,506 119,636
Imetal SA FRF50 ...................................................... 475 56,819
L'Oreal SA FRF10 ..................................................... 1,850 495,931
La Radiotechnique FRF50 .............................................. 25 1,401
Lafarge Coppee FRF25 Br .............................................. 2,749 177,346
Lagardere Groupe FRF40 Regd .......................................... 2,560 47,112
Legrand FRF10 Post Subordinated ...................................... 830 128,306
Louis Vuitton Moet Hennessy FRF10 .................................... 2,591 540,399
Lyonnaise des Eaux-Dumer FRF60 ....................................... 1,720 165,828
Michelin Class B FRF12 Regd .......................................... 3,222 128,669
Moulinex SA FRF10 .................................................... 1,095 15,002
Nord Est FRF50 ....................................................... 450 10,435
Pernod Ricard SA FRF20 ............................................... 1,692 96,285
Peugeot SA FRF35 ..................................................... 1,504 198,668
Pinault Printemps FRF100 ............................................. 688 137,445
Primagaz FRF10 ....................................................... 600 47,725
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-130
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Promodes SA FRF20 .................................................... 550 $ 129,445
Rhone Poulenc SA A FRF25 ............................................. 9,816 210,551
SAGEM FRF50 .......................................................... 100 56,231
Saint Louis FRF100 ................................................... 260 69,114
Salomon SA FRF25 ..................................................... 40 23,311
Sanofi SA FRF25 ...................................................... 3,040 195,099
Sefimeg FRF100 Regd .................................................. 498 33,095
Seita FRF50 .......................................................... 1,550 56,257
Simco FRF100 Regd .................................................... 450 42,787
Simco FRF100 Rfd 1/7/95 .............................................. 20 1,745
Skis Rossignol SA FRF100 ............................................. 50 13,720
Societe Eurafrance FRF200 ............................................ 104 34,982
Societe Generale Bank FRF30 .......................................... 2,616 323,623
Societe National Elf Aquitaine FRF50 ................................. 8,155 601,641
Sodexho SA FRF100 .................................................... 183 53,884
Sommer Allibert FRF50 ................................................ 50 13,281
Spie Batignolles FRF50 ............................................... 3,740 128,019
Ste Immobiliere Location Indu Comm (Sidel) FRF10 ..................... 200 62,407
Technip FRF20 ........................................................ 450 31,009
Thomson CSF FRF20 .................................................... 3,500 78,080
TOTAL SA B Shares FRF50 .............................................. 7,075 478,129
Unibail SA FRF100 Regd ............................................... 250 25,866
Union Assurance FRF10 ................................................ 9,000 235,375
Union Immobiliere France FRF100 ...................................... 262 22,715
Usinor Sacilor FRF20 ................................................. 7,150 94,666
Valeo FRF20 .......................................................... 2,050 95,067
--------------
9,869,797
--------------
GERMANY (5.3%)
Adidas AG DEM5 ....................................................... 1,450 76,892
AGIV AG DEM5 ......................................................... 1,250 26,375
Allianz AG Holding DEM50 ............................................. 752 1,469,009
AMB Aach & Munchener Bet DEM50 ....................................... 112 84,511
AMB Aach & Munchener Bet DEM50 ....................................... 50 31,440
Asko Deutsche Kaufhaus AG DEM50 ...................................... 162 84,888
BASF AG DEM50 ........................................................ 2,100 468,770
Bayer AG DEM50 ....................................................... 2,400 634,668
Bayerische Hypo/Wech Bank DEM5 ....................................... 8,480 214,177
Bayerische Vereinsbank DEM5 .......................................... 9,200 273,821
Beiersdorf AG DEM50 .................................................. 160 112,345
Bilfinger & Berger AG DEM50 .......................................... 140 53,113
Brau & Brunnen AG DEM50 .............................................. 171 25,925
Bremer Vulkan Verbund AG DEM50 ....................................... 500 13,921
Colonia Konzern AG DEM50 ............................................. 114 95,577
Continental AG DEM5 .................................................. 3,000 41,920
Daimler Benz AG DEM50 ................................................ 1,783 899,410
Degussa AG DEM50 ..................................................... 300 100,189
Deutsche Bank AG DEM5 ................................................ 16,580 787,356
Didier Werke AG DEM50 ................................................ 100 8,265
DLW AG DEM50 ......................................................... 50 7,581
Douglas Holding AG DEM5 .............................................. 1,000 35,352
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-131
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Dresdner Bank AG DEM5 ................................................ 14,850 $ 397,370
Dyckerhoff AG DEM50 .................................................. 61 23,440
Escada AG DEM50 ...................................................... 50 9,083
FAG Kugelfischer DEM50 ............................................... 150 19,388
Heidelberg Zement AG DEM50 ........................................... 126 79,229
Herlitz AG DEM50 ..................................................... 55 9,107
Hochtief AG DEM50 .................................................... 250 106,896
Holsten Brauerei AG DEM50 ............................................ 62 14,078
IWKA AG DEM50 ........................................................ 100 18,235
Karstadt AG DEM50 .................................................... 283 115,668
Kaufhof Holding AG DEM50 ............................................. 250 76,329
Klockner Humboldt Deuz DEM5 .......................................... 2,250 13,818
Linde AG DEM50 ....................................................... 288 168,418
Linotype Hell AG DEM50 ............................................... 100 10,305
Lufthansa DEM50 ...................................................... 1,195 164,894
MAN AG DEM50 ......................................................... 378 102,469
Mannesmann AG DEM50 .................................................. 1,270 405,232
Merck KGAA DEM5 ...................................................... 5,550 226,839
Munich Reinsurance DEM100 Rfd 01-Jul-96 .............................. 22 47,434
Munich Reinsurance DEM100 ............................................ 248 540,599
Preussag AG DEM50 .................................................... 500 140,082
PWA Papierwerke Waldhof Aschaffenberg AG DEM50 ....................... 200 29,763
Rheinmetall Berlin AG DEM50 .......................................... 100 14,323
RWE AG DEM50 ......................................................... 1,148 417,075
Salamander AG DEM50 .................................................. 100 15,720
SAP AG DEM ........................................................... 2,100 326,451
Schering AG DEM5 ..................................................... 2,350 156,026
Siemens AG DEM50 ..................................................... 1,950 1,069,482
Strabag AG DEM50 ..................................................... 100 17,851
Thyssen AG DEM50 ..................................................... 1,050 191,176
VEBA AG DEM5 ......................................................... 16,700 710,564
VIAG AG DEM50 ........................................................ 704 282,820
Volkswagen AG DEM50 .................................................. 905 303,247
--------------
11,768,916
--------------
HONG KONG (2.9%)
Applied International Holdings HKD0.20 ............................... 31,000 2,847
Bank of East Asia Ltd. HKD2.50 ....................................... 36,141 129,706
Cathay Pacific Airways Ltd. HKD0.20 .................................. 116,000 177,026
Cheung Kong (Holdings) Ltd. HKD0.50 .................................. 89,000 542,135
China Light & Power Co., Ltd. HKD5 ................................... 80,207 369,283
Chinese Estates Holdings Ord HKD0.10 ................................. 67,000 43,759
Dickson Concepts International HKD0.10 ............................... 26,000 24,210
Electric & Eltek International Holdings Ltd. HKD0.10 ................. 49,000 9,886
Giordano International HKD0.1 ........................................ 27,000 23,046
Hang Lung Development Co., Ltd. HKD1 ................................. 54,000 85,901
Hang Seng Bank Ltd. HKD5 ............................................. 78,112 699,575
Hong Kong & China Gas Co., Ltd. HKD0.25 .............................. 100,294 161,488
Hong Kong & Shanghai Hotels Ltd. HKD0.50 ............................. 43,500 63,009
Hong Kong Aircraft Engineering Co. HKD1 .............................. 6,800 17,589
Hong Kong Telecommunications Ltd. HKD0.50 ............................ 450,600 804,206
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-132
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Hopewell Holdings Ltd. HKD0.50 ....................................... 176,000 $ 101,291
Hutchison Whampoa Ltd. HKD0.25 ....................................... 146,000 889,346
Hysan Development Co., Ltd. HKD5 ..................................... 41,000 108,436
Johnson Electric Holdings HKD0.10 .................................... 16,400 29,270
Kumagai Gumi Ltd. HKD1 ............................................... 14,000 10,139
Lai Sun Garment International Ltd. HKD0.50 ........................... 9,000 8,730
Miramar Hotel & Investment HKD0.70 ................................... 24,350 51,331
New World Development Co., Ltd. HKD1 ................................. 67,708 295,098
Oriental Press Group HKD0.25 ......................................... 55,000 16,716
Peregrine Investment Holdings HKD0.60 ................................ 25,000 32,332
Playmates Toys Holdings HKD0.10 ...................................... 30,000 5,975
Regal Hotel International HKD0.10 .................................... 110,000 25,892
Shangri-La Asia Ltd. HKD1 ............................................ 59,000 72,108
Shun Tak Holdings Ltd. HKD0.25 ....................................... 59,000 41,586
South China Morning Post HKD0.10 ..................................... 63,000 38,498
Stelux Holdings International HKD0.10 ................................ 45,000 11,523
Sun Hung Kai Properties Ltd. HKD0.50 ................................. 94,320 771,545
Swire Pacific Ltd. A HKD0.60 ......................................... 64,000 496,625
Tai Cheung Holdings Ltd. HKD0.10 ..................................... 23,600 18,160
Television Broadcasting Ltd. HKD0.05 ................................. 17,000 60,571
Wharf Holdings Ltd. HKD1 ............................................. 87,400 291,062
Wing Lung Bank Ltd. HKD5 ............................................. 6,896 38,617
Winsor Industrial Corp., Ltd. HKD0.50 ................................ 10,000 8,472
--------------
6,576,989
--------------
IRELAND (0.2%)
Allied Irish Banks PLC IEP0.25 ....................................... 25,400 138,013
Aran Energy PLC Ord IEP0.20 .......................................... 9,900 11,822
Crean (James) PLC Units .............................................. 1,700 5,450
CRH PLC Ord IEP0.25 .................................................. 13,300 100,192
Fyffes PLC Ord IEP0.05 ............................................... 10,800 19,042
Greencore PLC Ord IEP1 ............................................... 3,228 28,198
Independent Newspapers PLC Ord IEP0.25 ............................... 4,750 30,073
Irish Life PLC Ord IEP0.10 ........................................... 11,773 44,722
Jefferson Smurfit Group PLC Ord IEP0.25 .............................. 40,000 95,528
Kerry Group PLC A Ord IEP0.10 ........................................ 100 785
Waterford Wedgewood PLC IEP0.05 ...................................... 27,100 26,062
Woodchester Investments PLC Ord IEP0.20 .............................. 8,219 22,394
--------------
522,281
--------------
ITALY (2.1%)
Arnoldo Mondadori Editore ITL1000 Ord. ............................... 5,000 43,367
Assicurazioni Generali ITL2000 ....................................... 32,714 792,873
Banca Commerciale Italiana SpA ITL1000 ............................... 63,950 136,651
Banca Nazionale del L'Agricoltura SpA ITL500 Rfd 1Jan94 Di Risp ..... 4,500 1,708
Banca Nazionale del L'Agricoltura SpA Di Risp ITL500 non conv ....... 4,200 1,602
Banca Populare di Milano ITL1000 ..................................... 9,000 36,024
Banco Ambrosiano Veneto SpA Ord ITL1000 .............................. 21,100 57,523
Banco Ambrosiano Veneto SpA ITL1000 non conv ......................... 8,500 10,716
Benetton Group SpA ITL500 ............................................ 7,400 88,112
Burgo Cartiere SpA ITL5000 ........................................... 5,400 26,975
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-133
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Cementir SpA ITL1000 ................................................. 10,100 $ 8,022
Cogefar Impresit SpA ITL1000 ......................................... 19,300 16,302
Credito Italiano SA ITL500 ........................................... 91,500 106,700
Danieli & Cofficine Meccaniebe SpA ITL2000 ........................... 1,100 6,934
Danieli & Cofficine Meccaniebe SpA ITL2000 non conv .................. 2,100 5,692
Edison SpA ITL1000 ................................................... 25,400 109,512
Falck, Accia & Ferr Lombarde ITL2500 ................................. 3,200 7,110
Fiat SpA ITL1000 ..................................................... 134,280 436,752
Fiat SpA ITL1000 non conv ............................................ 29,040 51,346
Fidis SpA ITL1000 .................................................... 15,750 30,230
Franco Tosi SpA ITL1000 .............................................. 1,500 8,888
Gilardini Industriale SpA ITL1000 .................................... 17,500 21,455
IMI ITL5000 .......................................................... 25,000 157,585
INA Ist Nazionale Assoc ITL1000 ...................................... 164,000 217,605
IST Bancario S.Paolo (Torino) ITL10000 ............................... 31,740 188,065
Italcementi SpA ITL2000 .............................................. 6,910 41,379
Italcementi SpA ITL2000 non conv ..................................... 4,200 10,351
Italgas ITL1000 ...................................................... 26,660 81,167
La Previdente ITL1000 ................................................ 2,100 13,912
La Rinascente SpA ITL1000 ............................................ 5,778 35,001
La Rinascente SpA ITL1000 non conv ................................... 2,100 5,957
Marzotto & Figli SpA ITL1000 ......................................... 3,200 19,142
Mediobanca SpA ITL1000 ............................................... 19,366 134,217
Montedison SpA ITL1000 ............................................... 220,200 147,684
Montedison SpA ITL1000 non conv ...................................... 27,600 16,353
Olivetti & C SpA Ord ITL1000 ......................................... 139,247 111,735
Parmalat Finanziaria SpA ITL1000 ..................................... 44,500 38,653
Pirelli SpA ITL1000 .................................................. 57,183 73,891
Pirelli SpA ITL1000 non conv ......................................... 4,200 4,342
RAS SpA ITL1000 ...................................................... 11,888 135,219
RAS SpA ITL1000 non conv ............................................. 4,376 26,880
S.A.I. ITL1000 non conv .............................................. 2,100 8,723
S.A.I. ITL1000 ....................................................... 5,500 56,319
Saffa Rts/ New 9.25Bds01 ............................................. 1,165 0
Saffa SpA Ord A ITL1000 .............................................. 3,100 8,109
Saipem SpA ITL1000 ................................................... 15,900 36,682
Sasib SpA ITL1000 .................................................... 3,366 14,852
Sasib SpA ITL1000 non conv ........................................... 3,100 7,582
Sirti SpA ITL1000 .................................................... 8,732 49,097
Snia BPD SpA ITL1000 non conv ........................................ 200 111
Snia BPD SpA ITL1000 ................................................. 28,500 23,803
Telecom Italia Mobilia ITL1000 non conv .............................. 63,989 78,330
Telecom Italia Mobilia ITL50 Di Risp ................................. 63,989 67,359
Telecom Italia Mobilia ITL50 ......................................... 273,265 481,437
Telecom Italia-SpA ITL1000 di Risp ................................... 269,765 420,008
--------------
4,716,044
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-134
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (30.7%)
77 Bank JPY50 ........................................................ 12,000 $ 110,164
Advantest Corp. JPY50 ................................................ 2,000 102,758
Aida Engineering JPY50 ............................................... 3,000 23,033
Ajinomoto Co., Inc. JPY50 ............................................ 20,000 222,965
Alps Electric Co. JPY50 .............................................. 5,000 57,680
Amada Co., Ltd. JPY50 ................................................ 9,000 88,992
Amano Corp. JPY50 .................................................... 4,000 50,410
Aoki Corp. JPY50 ..................................................... 13,000 54,568
Aoyama Trading Co. JPY50 ............................................. 3,000 95,972
Arabian Oil Co. JPY500 ............................................... 1,600 66,696
Asahi Bank Ltd. JPY50 ................................................ 73,000 919,975
Asahi Breweries Ltd. JPY50 ........................................... 13,000 153,749
Asahi Chemical Industry JPY50 ........................................ 45,000 344,627
Asahi Glass Co., Ltd. JPY50 .......................................... 37,000 412,486
Asahi Optical Co., Ltd. JPY50 ........................................ 6,000 28,559
Ashikaga Bank Ltd. JPY50 ............................................. 19,000 118,618
Asics Corp. JPY50 .................................................... 10,000 30,634
Bank of Tokyo Ltd. JPY50 ............................................. 64,000 1,122,970
Bank of Yokohama Ltd. JPY50 .......................................... 35,000 286,704
Banyu Pharmaceutical Co. JPY50 ....................................... 8,000 98,493
Bridgestone Corp. JPY50 .............................................. 25,000 397,460
Brother Industries Ltd. JPY50 ........................................ 8,000 43,507
Canon, Inc. JPY50 .................................................... 26,000 471,330
Casio Computer Co. JPY50 ............................................. 8,000 78,329
Chiba Bank Ltd. JPY50 ................................................ 24,000 216,373
Chiyoda Corp. JPY50 .................................................. 6,000 59,328
Chugai Pharmaceutical Co. JPY50 ...................................... 8,000 76,700
Citizen Watch Co., Ltd. JPY50 ........................................ 10,000 76,584
Cosmo Oil Co. Ltd JPY50 .............................................. 19,000 103,883
Credit Saison Co., Ltd. JPY50 ........................................ 3,900 93,006
CSK Corp. JPY50 ...................................................... 2,200 68,887
Dai Ichi Kangyo Bank Ltd. JPY50 ...................................... 98,000 1,928,554
Dai Ichi Pharmaceutical Co. JPY50 .................................... 8,000 114,003
Dai Nippon Printing Co., Ltd. JPY50 .................................. 24,000 407,154
Daicel Chemical Industries Ltd. JPY50 ................................ 11,000 62,595
Daido Steel Co., Ltd. JPY506 ......................................... 13,000 65,532
Daiei Inc. JPY50 ..................................................... 22,000 266,589
Daifuku Co., Ltd. JPY50 .............................................. 3,000 42,460
Daikin Industries, Ltd. JPY50 ........................................ 8,000 78,329
Daikyo Inc. JPY50 .................................................... 6,000 44,787
Daimaru Inc. JPY50 ................................................... 8,000 62,043
Dainippon Ink & Chemicals Inc. JPY50 ................................. 24,000 111,909
Dainippon Screen Manufacturing Co., Ltd. JPY50 ....................... 5,000 43,915
Daishowa Paper Manufacturing Co., Ltd. JPY50 ......................... 7,000 54,287
Daito Trust Construction JPY50 ....................................... 4,000 47,307
Daiwa House Industry JPY50 ........................................... 15,000 247,201
Daiwa Kosho Lease Co., Ltd. JPY50 .................................... 5,000 49,925
Daiwa Securities Co., Ltd. JPY50 ..................................... 42,000 643,304
Denki Kagaku Kogyo KK JPY50 .......................................... 15,000 54,530
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-135
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Ebara Corp. JPY50 .................................................... 9,000 $ 131,743
Eisai Co., Ltd. JPY50 ................................................ 8,000 140,371
Ezaki Glico Co., Ltd. JPY50 .......................................... 4,000 38,699
Fanuc Ltd. JPY50 ..................................................... 7,500 324,996
Fuji Bank Ltd. JPY50 ................................................. 91,000 2,011,342
Fuji Photo Film Co., Ltd. JPY50 ...................................... 16,000 462,217
Fujikura Ltd JPY50 ................................................... 10,000 65,436
Fujita Corp. JPY50 ................................................... 15,000 67,762
Fujita Kanko Inc. JPY50 .............................................. 4,000 88,411
Fujitsu Ltd. JPY50 ................................................... 58,000 646,600
Furukawa Electric Ltd. JPY50 ......................................... 20,000 97,911
Gakken JPY50 ......................................................... 5,000 32,960
Gunma Bank Ltd. JPY50 ................................................ 16,000 172,168
Gunze Ltd. JPY50 ..................................................... 7,000 42,412
Hankyu Corp. JPY50 ................................................... 26,000 142,407
Hankyu Department Store JPY50 ........................................ 7,000 103,824
Haseko Corp. JPY50 ................................................... 13,000 52,552
Hazama Corp. JPY50 ................................................... 10,000 42,654
Higo Bank JPY50 ...................................................... 8,000 64,369
Hirose Electric Co., Ltd. JPY50 ...................................... 1,000 57,583
Hitachi Ltd. JPY50 ................................................... 105,000 1,058,601
Hokkaido Bank Ltd. JPY50 ............................................. 11,000 37,322
Hokuriku Bank Ltd. JPY50 ............................................. 21,000 131,714
Honda Motor Co., Ltd. JPY50 .......................................... 31,000 640,105
Honshu Paper Co., Ltd. JPY50 ......................................... 11,000 67,394
House Food Industrial Co., Ltd. JPY50 ................................ 4,000 72,124
Hoya Corp. JPY50 ..................................................... 4,000 137,657
Inax Corp. JPY50 ..................................................... 7,000 66,502
Industrial Bank of Japan Ltd. JPY50 .................................. 74,000 2,245,359
Isetan Co., Ltd. JPY50 ............................................... 7,000 115,360
Ishihara Sangyo Kaisha JPY50 ......................................... 10,000 32,475
Ito Yokado Co., Ltd. JPY50 ........................................... 13,000 801,512
ITOCHU Corp. JPY50 ................................................... 44,000 296,447
Itoham Foods JPY50 ................................................... 7,000 52,930
Iwatani International Corp. JPY50 .................................... 7,000 37,322
Jaccs Co., Ltd. JPY50 ................................................ 5,000 51,864
Japan Airlines Co., Ltd. JPY50 ....................................... 55,000 365,227
Japan Energy Corp. JPY50 ............................................. 34,000 114,042
Japan Metals & Chemicals JPY50 ....................................... 7,000 38,544
Japan Steel Works Ltd. JPY50 ......................................... 17,000 48,616
Jeol Ltd. JPY50 ...................................................... 3,000 25,534
JGC Corp. JPY50 ...................................................... 5,000 52,833
Joyo Bank Ltd. JPY50 ................................................. 25,000 201,154
Jusco Co., Ltd. JPY50 ................................................ 10,000 260,773
Kajima Corp. JPY50 ................................................... 30,000 296,641
Kaken Pharmaceutical JPY50 ........................................... 4,000 36,062
Kamigumi Co., Ltd. JPY50 ............................................. 8,000 76,855
Kandenko Co. Ltd JPY50 ............................................... 6,000 75,033
Kanebo Ltd.JPY50 ..................................................... 16,000 39,707
Kaneka Corp. JPY50 ................................................... 11,000 69,420
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-136
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Kansai Electric Power Co., Inc. JPY500 ............................... 30,700 $ 744,026
Kansai Paint Co., Ltd. JPY50 ......................................... 9,000 41,879
Kao Corp. JPY50 ...................................................... 19,000 235,762
Katokichi Co. JPY50 .................................................. 2,000 41,685
Kawasaki Kisen Kaisha Ltd. JPY50 ..................................... 18,000 57,234
Kawasaki Steel JPY50 ................................................. 102,000 355,969
Keihin Electric Express Railway JPY50 ................................ 15,000 90,010
Kikkoman Corp. JPY50 ................................................. 6,300 46,416
Kinden Corp. JPY50 ................................................... 8,000 136,494
Kinki Nippon Railway JPY50 ........................................... 50,000 378,072
Kirin Brewery Co., Ltd. JPY50 ........................................ 33,000 390,286
Kissei Pharmaceutical Co., Ltd. JPY50 ................................ 2,000 60,491
Kobe Steel Ltd. JPY50 ................................................ 87,000 269,042
Kokuyo Co., Ltd. JPY50 ............................................... 4,000 93,064
Komatsu Ltd. JPY50 ................................................... 31,000 255,441
Komori Corp. JPY50 ................................................... 3,000 75,614
Konami Co., Ltd. JPY50 ............................................... 1,000 27,919
Konica Corp. JPY50 ................................................... 11,000 79,763
Koyo Seiko Co., Ltd. JPY50 ........................................... 6,000 54,675
Kubota Corp. JPY50 ................................................... 44,000 283,651
Kumagai Gumi Co., Ltd. JPY50 ......................................... 21,000 84,485
Kurabo Industries JPY50 .............................................. 12,000 45,950
Kuraray Co., Ltd. JPY50 .............................................. 10,000 109,544
Kureha Chemical Industry Co., Ltd. JPY50 ............................. 10,000 47,017
Kurita Water Industries Ltd. JPY50 ................................... 4,000 106,636
Kyocera Corp. JPY50 .................................................. 6,000 446,125
Kyowa Hakko Kogyo Co., Ltd. JPY50 .................................... 14,000 132,189
Kyudenko Co., Ltd. JPY50 ............................................. 3,000 39,552
Lion Corp. JPY50 ..................................................... 8,000 47,230
Maeda Road Construction Co., Ltd. JPY50 .............................. 3,000 55,547
Makino Milling Machine Co., Ltd. JPY50 ............................... 5,000 42,848
Makita Corp. JPY50 ................................................... 5,000 79,977
Marubeni Corp. JPY50 ................................................. 46,000 249,275
Marudai Food Co., Ltd. JPY50 ......................................... 4,000 28,695
Maruha Corp. JPY50 ................................................... 9,000 30,449
Marui Co., Ltd. JPY50 ................................................ 12,000 250,109
Matsushita Electric Industrial Co., Ltd. JPY50 ....................... 66,000 1,074,887
Meiji Milk Products JPY50 ............................................ 9,000 53,919
Meiji Seika Kaisha Ltd. JPY50 ........................................ 12,000 72,357
Minebea Co. Ltd JPY50 ................................................ 12,000 100,742
Misawa Homes Co., Ltd. JPY50 ......................................... 4,000 35,209
Mitsubishi Corp. JPY50 ............................................... 49,000 603,267
Mitsubishi Electric Corp. JPY50 ...................................... 68,000 489,787
Mitsubishi Estate Co., Ltd. JPY50 .................................... 41,000 512,724
Mitsubishi Gas & Chemical Co., Inc. JPY50 ............................ 15,000 67,617
Mitsubishi Heavy Industries Ltd. JPY50 ............................... 106,000 845,698
Mitsubishi Kasei Corp. JPY50 ......................................... 69,000 335,786
Mitsubishi Material Corp. JPY50 ...................................... 35,000 181,523
Mitsubishi Oil Co., Ltd. JPY50 ....................................... 14,000 124,453
Mitsubishi Paper Mills Ltd. JPY50 .................................... 10,000 60,201
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-137
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Mitsubishi Steel Manufacturing JPY50 ................................. 4,000 $ 20,939
Mitsubishi Trust & Banking Corp. JPY50 ............................... 41,000 683,631
Mitsubishi Warehouse & Transportation Co., Ltd. JPY50 ................ 5,000 78,038
Mitsui & Co., Ltd. JPY50 ............................................. 48,000 421,579
Mitsui Engineering & Shipbuilding Co., Ltd. JPY50 .................... 26,000 72,338
Mitsui Fudosan Co., Ltd. JPY50 ....................................... 25,000 307,789
Mitsui Marine & Fire Insurance Co., Ltd. JPY50 ....................... 22,000 156,968
Mitsui Mining & Smelting Co., Ltd. JPY50 ............................. 15,000 60,201
Mitsui OSK Lines Ltd. JPY50 .......................................... 34,000 109,098
Mitsui Soko Co. JPY50 ................................................ 6,000 48,161
Mitsui Toatsu Chemicals Inc. JPY50 ................................... 24,000 96,554
Mitsui Trust & Banking Co., Ltd. JPY50 ............................... 37,000 405,312
Mitsukoshi Ltd. JPY50 ................................................ 15,000 141,050
Mochida Pharmaceutical Co., Ltd. JPY50 ............................... 4,000 55,451
Mori Seiki Co., Ltd. JPY50 ........................................... 3,000 67,762
Murata Manufacturing Co., Ltd. JPY50 ................................. 8,000 294,702
Nagase & Co., Ltd. JPY50 ............................................. 5,000 43,042
Nagoya Railroad Co., Ltd. JPY50 ...................................... 24,000 120,983
Nankai Electric Railway JPY50 ........................................ 14,000 95,003
NEC Corp. JPY50 ...................................................... 49,000 598,517
New Oji Paper Co., Ltd. JPY50 ........................................ 23,000 208,250
NGK Insulators Ltd. JPY50 ............................................ 11,000 109,835
NGK Spark Plug Co., Ltd. JPY50 ....................................... 7,000 88,217
Nichido Fire & Marine Insurance Co., Ltd. JPY50 ...................... 13,000 104,600
Nichii Co. Ltd. JPY50 ................................................ 9,000 119,529
Nichirei Corp. JPY50 ................................................. 10,000 64,951
Nihon Cement Co., Ltd. JPY50 ......................................... 10,000 66,890
Niigata Engineering Co., Ltd. JPY50 .................................. 10,000 31,603
Nippon Beet Sugar Manufacturing Co. JPY50 ............................ 8,000 35,519
Nippon Comsys Corp. JPY50 ............................................ 4,000 42,266
Nippon Denko Co. Ltd. JPY50 .......................................... 6,000 22,742
Nippon Express Co. Ltd. JPY50 ........................................ 33,000 317,987
Nippon Fire & Marine Insurance Co., Ltd. JPY50 ....................... 18,000 122,146
Nippon Light Metal Co. JPY50 ......................................... 16,000 91,823
Nippon Meat Packers JPY50 ............................................ 7,000 101,789
Nippon Oil Co., Ltd. JPY50 ........................................... 38,000 238,709
Nippon Paper Industries JPY50 ........................................ 29,000 201,570
Nippon Sharyo Ltd. JPY50 ............................................. 5,000 48,228
Nippon Sheet Glass Co., Ltd. JPY50 ................................... 13,000 56,585
Nippon Shinpan Co., Ltd. JPY50 ....................................... 10,000 75,614
Nippon Shokubai Co., Ltd. JPY50 ...................................... 6,000 58,747
Nippon Steel Corp. JPY50 ............................................. 217,000 744,685
Nippon Suisan Kaisha Ltd. JPY50 ...................................... 9,000 37,255
Nippon Yusen KK JPY50 ................................................ 36,000 209,045
Nippondenso Co., Ltd. JPY50 .......................................... 27,000 505,162
Nishimatsu Construction Co., Ltd. JPY50 .............................. 9,000 105,569
Nissan Motor Co., Ltd. JPY50 ......................................... 79,000 607,309
Nisshinbo Industries Inc. JPY50 ...................................... 7,000 67,859
Nissin Food Products JPY50 ........................................... 4,000 93,839
Nitto Denko Corp. JPY50 .............................................. 5,000 77,553
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-138
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
NKK Corp. JPY50 ...................................................... 111,000 $ 299,142
NOF Corp. JPY50 ...................................................... 7,000 38,069
Nomura Securities Co., Ltd. JPY50 .................................... 62,000 1,352,334
Noritake Co., Ltd. JPY50 ............................................. 7,000 59,648
NSK Ltd. JPY50 ....................................................... 17,000 123,600
NTN Toyo Bearing Co., Ltd. JPY50 ..................................... 14,000 93,645
Obayashi Corp. JPY50 ................................................. 23,000 182,832
Odakyu Electric Railway JPY50 ........................................ 22,000 150,356
Okamoto Industries Inc. JPY50 ........................................ 7,000 45,466
Okuma Corp. JPY50 .................................................... 6,000 56,129
Okumura Corp. JPY50 .................................................. 8,000 72,900
Olympus Optical Co., Ltd. JPY50 ...................................... 8,000 77,553
Omron Corp. JPY50 .................................................... 8,000 184,577
Onoda Cement Co., Ltd. JPY50 ......................................... 18,000 96,147
Onward Kashiyama Co., Ltd. JPY50 ..................................... 5,000 81,431
Orient Corp. JPY50 ................................................... 11,000 62,488
Orix Corp. JPY50 ..................................................... 2,000 82,400
Osaka Gas Co., Ltd. JPY50 ............................................ 78,000 269,943
Penta Ocean Construction Co., Ltd. JPY50 ............................. 11,000 85,309
Pioneer Electronic Corp. JPY50 ....................................... 6,000 109,932
QP Corp. JPY50 ....................................................... 5,000 43,575
Renown Inc. JPY50 .................................................... 9,000 31,322
Ricoh Co., Ltd. JPY50 ................................................ 20,000 219,088
Rohm Co. JPY50 ....................................................... 4,000 226,068
Sagami Railway Co. JPY50 ............................................. 13,000 56,333
Sakura Bank Ltd. JPY50 ............................................... 109,000 1,384,228
Sanden Corp. JPY50 ................................................... 7,000 44,923
Sankyo Aluminium Industries Co., Ltd. JPY50 .......................... 8,000 42,887
Sankyo Co., Ltd. JPY50 ............................................... 14,000 314,866
Sanrio Co., Ltd. JPY50 ............................................... 2,000 23,072
Sanwa Shutter Corp. JPY50 ............................................ 7,000 50,826
Sanyo Electric Co., Ltd. JPY50 ....................................... 60,000 346,081
Sapporo Breweries JPY50 .............................................. 10,000 93,064
Secom Co., Ltd. JPY50 ................................................ 4,000 278,416
Sega Enterprises Ltd. JPY50 .......................................... 3,000 165,770
Seiko Corp. JPY50 .................................................... 5,000 44,351
Seino Transportation JPY50 ........................................... 5,000 83,854
Seiyu Ltd. JPY50 ..................................................... 7,000 86,860
Sekisui Chemical Co., Ltd. JPY50 ..................................... 17,000 250,497
Sekisui House Ltd. JPY50 ............................................. 21,000 268,722
Settsu Corp. JPY50 ................................................... 7,000 22,054
Seven Eleven Japan Co., Ltd. NPV ..................................... 12,000 846,881
Sharp Corp. JPY50 .................................................... 35,000 559,837
Shimachu JPY50 ....................................................... 2,000 64,175
Shimano Inc. JPY50 ................................................... 4,000 70,573
Shimizu Corp. JPY50 .................................................. 25,000 254,471
Shin-Etsu Chemical Co., Ltd. JPY50 ................................... 10,000 207,455
Shionogi + Co., Ltd. JPY50 ........................................... 11,000 92,666
Shiseido Co., Ltd. JPY50 ............................................. 12,000 143,086
Shizuoka Bank Ltd. JPY50 ............................................. 25,000 315,060
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-139
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Shochiku JPY50 ....................................................... 2,000 $ 21,909
Shokusan Jutaku Sogo JPY50 ........................................... 8,000 29,315
Showa Denko KK JPY50 ................................................. 32,000 100,509
Skylark Co., Ltd. JPY50 .............................................. 4,000 73,676
Snow Brand Milk Products Co., Ltd. JPY50 ............................. 10,000 63,981
Sony Corp. JPY50 ..................................................... 11,800 708,080
Sumitomo Bank Ltd. JPY50 ............................................. 99,000 2,101,789
Sumitomo Cement Co., Ltd. JPY50 ...................................... 14,000 65,145
Sumitomo Chemical Co., Ltd. JPY50 .................................... 50,000 249,624
Sumitomo Corp. JPY50 ................................................. 33,000 335,902
Sumitomo Electric Industries JPY50 ................................... 22,000 264,456
Sumitomo Forestry Co., Ltd. JPY50 .................................... 5,000 76,584
Sumitomo Heavy Industries Ltd. JPY50 ................................. 18,000 64,738
Sumitomo Marine & Fire Insurance Co., Ltd. JPY50 ..................... 20,000 164,413
Sumitomo Metal Industries JPY50 ...................................... 97,000 294,324
Sumitomo Metal Mining Co. JPY50 ...................................... 17,000 152,935
Taisei Corp. JPY50 ................................................... 31,000 207,057
Taisho Pharmaceutical Co., Ltd. JPY50 ................................ 11,000 217,537
Taiyo Yuden Co. Ltd JPY50 ............................................ 5,000 53,803
Takara Shuzo Co., Ltd. JPY50 ......................................... 6,000 57,409
Takara Standard JPY50 ................................................ 4,000 45,756
Takashimaya Co. JPY50 ................................................ 9,000 143,958
Takeda Chemical Industries Ltd. JPY50 ................................ 28,000 461,442
Takuma Co., Ltd JPY50 ................................................ 3,000 41,006
Tanabe Seiyaku Co., Ltd. JPY50 ....................................... 7,000 50,419
Teijin Ltd. JPY50 .................................................... 30,000 153,555
Teikoku Oil Co., Ltd. JPY50 .......................................... 8,000 53,977
Toa Corp. JPY50 ...................................................... 5,000 36,838
Tobu Railway Co., Ltd. JPY50 ......................................... 26,000 162,823
Toho Co. JPY500 ...................................................... 500 79,977
Tohoku Electric Power Co., Inc. JPY500 ............................... 15,800 381,387
Tokai Bank Ltd. JPY50 ................................................ 64,000 893,413
Tokio Marine & Fire Insurance Co., Ltd. JPY50 ........................ 49,000 641,268
Tokyo Broadcasting System Inc. JPY50 ................................. 6,000 98,880
Tokyo Dome Corp. JPY50 ............................................... 5,000 85,793
Tokyo Electric Power Co., Inc. JPY500 ................................ 42,600 1,139,799
Tokyo Electron Ltd. JPY50 ............................................ 5,000 193,883
Tokyo Gas Co., Ltd. JPY50 ............................................ 89,000 314,052
Tokyo Style JPY50 .................................................... 3,000 51,476
Tokyo Tatemono Co. Ltd JPY50 ......................................... 7,000 33,251
Tokyotokeiba JPY20 ................................................... 9,000 37,516
Tokyu Corp. JPY50 .................................................... 34,000 240,279
Toppan Printing Co. Ltd JPY50 ........................................ 22,000 290,049
Toray Industries Inc. JPY50 .......................................... 43,000 283,457
Tosoh Corp. JPY50 .................................................... 18,000 86,724
Tostem Corp. JPY50 ................................................... 7,000 232,757
Toto Ltd. JPY50 ...................................................... 11,000 153,555
Toyo Engineering Corp. JPY50 ......................................... 8,000 50,410
Toyo Exterior Co. JPY50 .............................................. 2,000 49,246
Toyo Kanetsu KK JPY50 ................................................ 7,000 35,897
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-140
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Toyo Seikan Kaisha Ltd. JPY50 ........................................ 6,000 $ 179,730
Toyobo Co., Ltd. JPY50 ............................................... 21,000 75,527
Toyoda Auto Loom Works Ltd. JPY50 .................................... 9,000 161,408
Toyota Motor Corp. JPY50 ............................................. 118,000 2,505,162
Tsubakimoto Machinery + Engineering JPY50 ............................ 6,000 36,120
Tsugami Corp. JPY50 .................................................. 5,000 27,919
UBE Industries Ltd. JPY50 ............................................ 26,000 98,299
Uni-Charm JPY50 ...................................................... 2,000 50,410
Uniden Corp. JPY50 ................................................... 2,000 33,542
Unitika Ltd. JPY50 ................................................... 15,000 45,659
Yamaguchi Bank Ltd. JPY50 ............................................ 6,000 102,370
Yamaha Corp. JPY50 ................................................... 6,000 108,187
Yamaichi Securities Co. JPY50 ........................................ 37,000 288,023
Yamanouchi Pharmaceutical Co., Ltd. JPY50 ............................ 10,000 215,210
Yamato Transport Co., Ltd. JPY50 ..................................... 11,000 131,162
Yamazaki Baking Co. Ltd JPY50 ........................................ 7,000 130,289
Yasuda Trust + Banking Co., Ltd. JPY50 ............................... 34,000 201,386
Yokogawa Electric Corp. JPY50 ........................................ 8,000 75,692
--------------
67,782,781
--------------
MALAYSIA (2.2%)
Aluminium Co. of Malaysia Bhd MYR1 ................................... 6,300 9,330
Amalgamated Steel Mills Bhd Ord MYR0.50 .............................. 53,800 40,048
AMMB Holdings Bhd MYR1 ............................................... 8,400 95,943
Antah Holdings Bhd Ord MYR0.50 ....................................... 10,220 10,224
Aokam Perdana Bhd MYR1 ............................................... 9,000 14,533
Berjaya Group Bhd MYR1 ............................................... 32,650 21,089
Berjaya Leisure Bhd MYR1 ............................................. 16,900 16,640
Commerce Asset Holdings Bhd MYR1 ..................................... 10,500 52,934
DCB Holdings Bhd MYR1 ................................................ 33,700 98,220
Edaran Otomobil Nasional Bhd MYR1 .................................... 9,500 71,465
Ekran Bhd MYR1 ....................................................... 10,000 24,419
Golden Hope Plantations Bhd MYR1 ..................................... 43,200 72,142
Golden Plus Holdings Bhd MYR1 ........................................ 5,300 9,226
Guinness Anchor Bhd MYR0.50 .......................................... 11,700 21,935
Highlands & Lowlands Bhd Ord MYR0.50 ................................. 26,300 42,262
Hong Leong Industries Bhd MYR0.50 .................................... 6,300 33,497
Hong Leong Properties Bhd Ord MYR0.50 ................................ 30,500 31,713
Hume Industries Bhd MYR1 ............................................. 10,500 50,453
Idris Hydraulic (Malaysia) Bhd MYR0.50 ............................... 24,200 28,594
IGB Corp. Bhd MYR0.50 ................................................ 20,000 17,960
IOI Corp. MYR0.50 .................................................... 28,400 27,852
Jaya Tiasa Holdings MYR1 ............................................. 11,000 38,342
Johan Holdings Bhd MYR0.50 ........................................... 11,700 8,387
Kedah Cement Holdings Bhd MYR1 ....................................... 12,600 21,637
Kelanamas Industries Bhd MYR1 ........................................ 4,800 6,730
Kemayan Corp. Bhd MYR0.50 ............................................ 12,500 17,428
Kian Joo Can Factory Bhd MYR0.50 ..................................... 5,300 21,918
Kuala Lumpur Kepong Bhd Ord MYR1 ..................................... 21,000 66,581
Land & General Bhd MYR1 .............................................. 19,900 43,108
Landmarks Bhd MYR1 ................................................... 17,900 23,829
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-141
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Leader Universal Holdings Bhd MYR1 ................................... 19,000 $ 43,403
Magnum Corp. Bhd MYR0.50 ............................................. 43,200 81,670
Malayan Banking Bhd MYR1 ............................................. 49,000 412,997
Malayan Cement Bhd MYR0.50 ........................................... 13,700 26,116
Malayan United Industries Bhd MYR1 ................................... 55,800 45,273
Malayawata Steel Bhd MYR1 ............................................ 6,300 10,273
Malaysia Mining Corp., Bhd MYR1 ...................................... 17,900 25,803
Malaysian Airline System Bhd Ord MYR1 ................................ 30,500 99,104
Malaysian International Shipping Corp., Bhd MYR1 Alien Market ....... 43,132 112,969
Malaysian Mosaics Bhd MYR1 ........................................... 10,600 13,360
Malaysian Oxygen Bhd MYR0.50 ......................................... 5,800 21,930
Malaysian Pacific Industries Bhd. MYR0.50 ............................ 8,966 27,721
Malaysian Resources Corp. Bhd MYR1 ................................... 21,100 33,906
MBF Capital Bhd MYR1 ................................................. 34,000 34,415
Metroplex Bhd MYR0.50 ................................................ 34,600 28,209
Mulpha International Bhd MYR0.50 ..................................... 30,000 29,421
Multi Purpose Holdings MYR1 .......................................... 32,700 47,910
Mycom Bhd MYR1 ....................................................... 12,666 15,365
Nestle Malaysia Bhd MYR1 ............................................. 10,500 76,920
New Straits Times Press Bhd MYR1 ..................................... 7,400 24,774
Oriental Holdings Bhd MYR1 ........................................... 6,300 32,009
Palmco Holdings Bhd MYR1 ............................................. 7,400 11,367
Pan-Malaysia Cement Works Bhd MYR0.50 ................................ 26,400 27,658
Perlis Plantations Bhd MYR1 .......................................... 12,400 38,826
Perusahaan Otomobil Nasional Bhd MYR1 ................................ 22,100 77,903
Petaling Garden Bhd MYR0.50 .......................................... 9,400 10,440
Pilecon Engineering Bhd MYR0.50 ...................................... 7,500 7,532
Promet Bhd MYR1 ...................................................... 23,200 23,209
Public Bank Bhd MYR0.50 Alien Market ................................. 38,100 72,929
Rashid Hussain Bhd MYR1 .............................................. 14,600 43,702
Resorts World Bhd MYR0.50 ............................................ 46,400 248,539
RJ Reynolds Bhd MYR1 ................................................. 11,600 26,727
Rothmans of Pall Mall Bhd MYR0.50 .................................... 12,600 103,718
Selangor Properties Bhd MYR1 ......................................... 12,800 12,250
Shell Refining Co. MYR1 .............................................. 13,200 38,212
Sime Darby Bhd MYR0.50 ............................................... 89,000 236,609
Sungei Way Holdings Bhd MYR1 ......................................... 7,000 25,226
Ta Enterprise Bhd MYR1 ............................................... 26,000 31,540
Tan Chong Motor Holdings Bhd MYR0.50 ................................. 29,500 29,163
Tech Resources Industries Bhd MYR1 ................................... 29,500 87,141
Telekom Malaysia Bhd MYR1 ............................................ 85,400 665,979
Tenaga Nasional Bhd MYR1 ............................................. 131,700 518,708
Time Engineering Bhd MYR1 ............................................ 14,000 32,532
UMW Holdings Bhd MYR1 ................................................ 10,300 27,586
United Engineers (Malaysia) Ltd. MYR0.50 ............................. 23,200 148,027
YTL Corp., Bhd Ord MYR0.50 ........................................... 15,000 94,526
--------------
4,922,036
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-142
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
NETHERLANDS (4.3%)
ABN Amro Holdings NV NLG5 ............................................ 14,089 $ 642,446
Akzo NV NLG20 ........................................................ 3,202 370,714
Elsevier NV NLG0.10 .................................................. 29,770 397,404
Getronics NV NLG1 .................................................... 961 44,960
Heineken NV NLG25 .................................................... 2,260 401,361
Hollandsche Beton Groep NV Ord NLG20 ................................. 151 23,077
IHC Caland NV NLG2 ................................................... 870 29,306
ING Groep NV Cva NLG2.5 .............................................. 13,178 881,219
KLM Royal Dutch Airlines NLG20 ....................................... 4,093 143,999
Kon Hoogovens NV Cva NLG20 ........................................... 1,421 47,600
Kon PVC Nederlanden NLG10 ............................................ 20,818 757,089
Koninklijke Ahold NV NLG1.25 ......................................... 5,584 228,153
Koninklijke KNP Bt NV NLG2.5 ......................................... 4,553 117,013
Koninklijke Pakhoed NV Cva NLG5 ...................................... 1,148 31,581
Nedlloyd Groep NV NLG10 .............................................. 845 19,187
Oce van der Grinten NV NLG4 .......................................... 735 44,748
Philips Electronics NV NLG10 ......................................... 15,517 561,404
Royal Dutch Petroleum Co. NLG5 Br .................................... 24,145 3,376,776
Stad Rotterdam Cva NLG2.5 ............................................ 1,369 40,820
Stork NV NLG10 ....................................................... 1,104 27,409
Unilever NV Cva NLG4 ................................................. 7,208 1,013,913
Wolters Kluwer NV Cva NLG1 ........................................... 3,018 285,777
--------------
9,485,956
--------------
NEW ZEALAND (0.4%)
Brierley Investment Ltd. NZD0.50 ..................................... 100,240 79,301
Carter Holt Harvey Ltd. NZD0.50 ...................................... 65,037 140,322
Ceramco Corp., Ltd. Ord NZD0.50 ...................................... 1,900 2,224
Fisher & Paykel Industries NZD0.50 ................................... 4,281 13,015
Fletcher Challenge Forestry Ltd. NZD ................................. 29,578 42,158
Fletcher Challenge Ltd. NZD0.40 ...................................... 55,700 128,552
Lion Nathan Ltd. NZD0.25 ............................................. 20,600 49,160
Telecom Corp. of New Zealand NZD1 .................................... 71,060 306,634
Wilson & Horton Ltd. NZD1 ............................................ 3,712 22,205
--------------
783,571
--------------
NORWAY (0.4%)
Aker AS NOK20 B ...................................................... 400 4,875
Aker AS NOK20 A ...................................................... 1,500 19,943
Bergesen DY A/S NOK2.5 A ............................................. 1,600 31,908
Bergesen DY A/S NOK2.5 B ............................................. 700 13,738
Dyno Industrier A/S NOK20 ............................................ 1,000 23,425
Elkem AS NOK20 A ..................................................... 1,900 21,502
Hafslund Nycomed A/S NOK5 A .......................................... 1,947 51,001
Hafslund Nycomed A/S NOK5 B .......................................... 1,967 49,968
Helikopter Service A/S NOK11.5 ....................................... 800 9,750
Kvaerner AS NOK12.5 B ................................................ 200 6,711
Kvaerner AS NOK12.50 ................................................. 1,500 53,181
Leif Hoegh & Co., A/S NOK2 ........................................... 1,200 17,853
Norsk Hydro AS NOK20 ................................................. 8,966 377,480
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-143
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Norske Skogsindustrier AS NOK20 A .................................... 1,200 $ 35,327
Norske Skogsindustrier AS NOK20 B .................................... 100 2,770
Orkla A/S NOK25 B .................................................... 300 14,340
Orkla AS NOK25 A ..................................................... 1,600 79,771
Petroleum Geo Services A/S NOK5 ...................................... 1,000 24,849
Transocean Drilling A/S NOK5 ......................................... 2,100 36,395
Uni Storebrand AS NOK20 A ............................................ 10,900 60,382
Unitor Ships Service NOK12.5 ......................................... 800 11,016
Vard A/S NOK2 A ...................................................... 3,085 2,441
--------------
948,626
--------------
SINGAPORE (1.2%)
Amcol Holdings SGD0.25 ............................................... 13,667 37,682
Chuan Hup Holdings SGD1 .............................................. 11,000 9,954
City Developments Ltd. SGD0.50 ....................................... 34,680 252,530
Cycle & Carriage Ltd. SGD1 ........................................... 10,000 99,682
DBS Land Ltd. SGD1 ................................................... 41,000 138,551
Development Bank of Singapore Ltd. SGD1 Alien Market ................. 16,250 202,192
First Capital Corp. SGD1 ............................................. 10,000 27,713
Fraser & Neave Ltd. SGD1 ............................................. 11,000 139,979
Hai Sun Hup Group Ltd. SGD0.20 ....................................... 16,000 10,746
Haw Par Brothers International Ltd. SGD1 ............................. 7,200 15,372
Hotel Properties SGD1 ................................................ 17,000 26,320
Inchcape Bhd SGD0.50 ................................................. 7,000 22,467
Jurong Shipyard Ltd. SGD0.50 ......................................... 5,000 38,530
Keppel Corp., Ltd. SGD1 .............................................. 23,000 204,878
Low Keng Huat (Sin) SGD0.50 .......................................... 8,000 4,468
Lum Chang Holdings Ltd. SGD0.50 ...................................... 14,600 12,180
Metro Holdings SGD1 .................................................. 4,600 17,886
Natsteel Ltd. SGD0.50 ................................................ 14,000 28,703
Neptune Orient Lines Ltd. SGD1 ....................................... 31,000 34,846
Overseas Chinese Banking Corp. SGD1 Alien Market ..................... 24,000 300,318
Overseas Union Enterprise Ltd. SGD1 .................................. 6,000 30,329
Parkway Holdings Ltd. SGD0.50 ........................................ 13,000 35,292
Prima Ltd. SGD1 ...................................................... 2,000 7,635
Robinson & Co., Ltd. SGD1 ............................................ 3,000 12,513
Shangri La Hotel Ltd. SGD1 ........................................... 7,000 27,218
Singapore Airlines Ltd. SGD1 Alien Market ............................ 33,000 307,953
Singapore Press Holdings Ltd. SGD1 Alien Market1 ..................... 7,800 137,858
Straits Steamship Land Ltd. SGD0.50 .................................. 25,900 87,524
Straits Trading Co., Ltd. SGD1 ....................................... 13,000 30,513
United Industrial Corp., Ltd. SGD1 ................................... 58,000 56,995
United Overseas Bank Ltd. SGD1 Alien Market .......................... 25,634 246,463
United Overseas Land Ltd. SGD1 ....................................... 22,000 41,837
--------------
2,647,127
--------------
SPAIN (1.9%)
Acerinox SA ESP1000 Regd ............................................. 534 54,007
Aguila SA ESP500 ..................................................... 1,057 6,491
Argentaria Corp Bancaria De Espana ESP500 ............................ 5,750 236,977
Autopistas Concesionaria Espanola SA ESP500 .......................... 9,981 113,533
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-144
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Banco Bilbao Vizcaya ESP600 Regd ..................................... 10,364 $ 373,316
Banco Central Hispanoamericano SA ESP500 Regd ........................ 7,478 151,631
Banco de Santander SA ESP750 Regd .................................... 7,304 366,645
Corporacion Financiera Alba SA ESP1000 ............................... 750 46,180
Corporacion Mapfre Compania Internacional de Reaseguros SA ESP500
Regd ................................................................ 1,223 68,448
Dragados Y Construciones SA ESP500 ................................... 2,618 34,419
Ebro Agricolas ESP100 ................................................ 2,200 23,030
Ecros SA Rights Jan 96 ............................................... 5,200 43
Empresa Nacional de Celulosas ESP1000 ................................ 900 14,614
Empresa Nacional de Electricidad ESP800 .............................. 11,912 674,542
Ercros SA ESP500 ..................................................... 5,200 3,686
Fomento de Construcciones y Contratas SA ESP500 ...................... 700 53,660
Gas Natural Sdg SA ESP600 ............................................ 1,685 262,500
General de Aguas d' Barcelona Ord ESP500 ............................. 1,950 58,185
Iberdrola SA ESP500 .................................................. 42,504 388,884
INM Metrovacesa ESP500 ............................................... 1,039 34,257
Inmobiliaria Urbis SA Series 1 ESP500 ................................ 1,550 7,334
Portland Valderrivas ESP500 .......................................... 350 22,070
Prosegur Compania Securidad ESP500 Regd .............................. 550 13,646
Repsol SA ESP500 ..................................................... 13,726 449,727
Sarrio SA ESP500 ..................................................... 2,650 10,157
Tabacalera SA Series A ESP500 Regd ................................... 1,703 64,571
Telefonica de Espana SA ESP500 ....................................... 42,978 595,145
Union Electrica Fenosa SA ESP500 ..................................... 13,336 80,245
Uralita SA ESP500 .................................................... 2,412 21,869
Vallehermoso SA ESP500 ............................................... 1,960 36,431
Viscofan Envolturas Celulosi ESP100 .................................. 900 10,682
Zardoya Otis SA ESP1000 .............................................. 391 42,703
--------------
4,319,627
--------------
SWEDEN (2.2%)
AB Electrolux B SEK25 ................................................ 3,300 135,687
AGA AB A SEK5 ........................................................ 5,900 81,457
AGA AB B SEK5 ........................................................ 4,900 67,651
ASEA AB A SEK50 ...................................................... 3,100 301,702
ASEA AB B SEK50 ...................................................... 1,100 107,222
Astra AB A SEK2.5 .................................................... 22,865 914,269
Astra AB B SEK2.5 .................................................... 5,200 206,355
Atlas Copco AB A SEK5 ................................................ 5,600 86,188
Atlas Copco AB B SEK5 ................................................ 2,800 42,249
Autoliv AB SEK20 ..................................................... 1,300 76,108
Ericsson LM Telephone B SEK2.5 ....................................... 43,660 856,414
Esselte AB A SEK12.5 ................................................. 1,100 16,598
Esselte AB B SEK12.5 ................................................. 800 12,011
Euroc AB A SEK25 ..................................................... 2,000 53,415
H & M AB B SEK5 ...................................................... 1,900 106,075
Securitas AB B SEK5 .................................................. 1,000 47,530
Skandia Foersaekrings AB SEK5 ........................................ 4,700 127,297
Skandinaviska Enskilda Banken A SEK10 ................................ 24,100 200,003
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-145
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Skanska AB B SEK10 ................................................... 5,700 $ 196,095
SKF International AB B SEK12.5 ....................................... 2,900 55,572
SKF International AB A SEK12.5 ....................................... 2,200 41,660
Stadshypotek AB A SEK25 .............................................. 5,600 112,382
Stora Kopparbergs B SEK5 ............................................. 2,400 28,790
Stora Kopparbergs A SEK5 ............................................. 11,900 140,055
Svenska Cellulosa B SEK10 ............................................ 8,970 139,408
Svenska Handelsbanken B SEK10 ........................................ 1,100 22,075
Svenska Handelsbanken A SEK10 ........................................ 9,300 193,651
Trelleborg AB B SEK25 ................................................ 5,400 58,258
Volvo AB A SEK5 ...................................................... 6,500 133,876
Volvo AB B SEK5 ...................................................... 14,700 301,655
--------------
4,861,708
--------------
SWITZERLAND (6.3%)
Adia SA CHF10 ........................................................ 307 50,157
Alusuisse Lonza Holdings AG CHF125 Br ................................ 90 71,487
Alusuisse Lonza Holdings AG CHF125 Regd .............................. 182 144,562
BBC Brown Boveri Ltd. CHF100 ......................................... 345 401,755
BBC Brown Boveri Ltd. CHF20 Regd ..................................... 240 54,436
Ciba-Geigy Ltd. CHF20 Br ............................................. 170 149,214
Ciba-Geigy Ltd. CHF20 Regd ........................................... 1,100 970,279
CS Holding AG CHF20 Regd ............................................. 8,300 852,937
Danzas Holding AG CHF20 Ptg Certs .................................... 125 26,071
Forbo Holding CHF50 Regd ............................................. 60 25,706
Georg Fischer AG CHF100 Regd ......................................... 5 1,260
Georg Fischer AG CHF500 Br ........................................... 25 32,589
Grands Magasins Jelmoli CHF50 Br ..................................... 10 4,519
Grands Magasins Jelmoli CHF10 Regd ................................... 95 8,751
Holderbank Financiere Glaris Ltd. CHF50 Br ........................... 271 208,425
Interdiscount Holding CHF40 Bearer ................................... 100 6,301
Kuoni Reisen Holding CHF50 Regd Series B ............................. 20 32,154
Merkur Holding AG CHF25 Regd ......................................... 185 40,675
Movenpick Holdings CHF50 Br .......................................... 45 16,620
Nestle SA CHF10 Regd ................................................. 1,759 1,950,538
Roche Holding Ltd. CHF100 Br ......................................... 71 996,480
Roche Holding Ltd. NPV ............................................... 315 2,497,936
Sandoz Ltd. CHF20 Regd ............................................... 1,575 1,445,381
Sandoz Ltd. CHF20 Br ................................................. 125 115,365
Schindler Holding AG CHF100 Ptg Certs ................................ 55 57,117
Schweize Bankgesellschaft CHF100 Br 1,247, ........................... 1,148 1,247,067
Schweize Bankverein CHF100 Br ........................................ 1,076 440,424
Schweize Bankverein CHF50 Regd ....................................... 1,241 253,981
SGS Holding CHF100 Br ................................................ 77 153,237
Sika Finanz AG CHF60 Br .............................................. 90 21,900
SMH Swiss Corp. CHF10 Regd ........................................... 675 88,577
SMH Swiss Corp. CHF50 Br ............................................. 163 97,741
Sulzer Brothers Ltd. CHF100 Regd ..................................... 105 60,224
Sulzer Brothers Ltd. CHF100 Ptg Certs ................................ 51 27,257
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-146
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Swiss Reinsurance Co. CHF20 Regd ..................................... 632 $ 737,068
Swissair Transport Co., Ltd. CHF350 Regd ............................. 101 73,729
Zurich Insurance CHF10 Regd .......................................... 2,045 613,129
--------------
13,975,049
--------------
UNITED KINGDOM (12.1%)
Abbey National PLC Ord GBP0.10 ....................................... 40,200 396,945
AMEC PLC Ord GBP0.50 ................................................. 8,109 11,834
Amstrad PLC Ord GBP0.25 .............................................. 4,580 13,937
Anglian Water PLC Ord GBP1 ........................................... 8,800 82,658
Argos PLC Ord GBP0.10 ................................................ 8,760 81,058
Argyll Group PLC Ord GBP0.25 ......................................... 34,112 180,066
Arjo Wiggins Appleton PLC Ord GBP0.25 ................................ 24,167 61,909
Associated British Foods PLC Ord GBP0.05 ............................. 26,600 152,389
Barclays PLC Ord GBP1 ................................................ 49,400 566,785
Barratt Developments PLC Ord GBP0.10 ................................. 5,600 21,475
Bass PLC Ord GBP0.25 ................................................. 27,000 301,397
BAT Industries PLC Ord GBP0.25 ....................................... 94,214 830,095
BBA Group PLC Ord GBP0.25 ............................................ 12,000 53,936
BET PLC Ord GBP0.25 .................................................. 27,700 54,617
BICC PLC Ord GBP0.50 ................................................. 10,689 45,803
Blue Circle Industries PLC Ord GBP0.50 ............................... 22,342 118,804
BOC Group PLC Ord GBP0.25 ............................................ 14,398 201,407
Boots Co., PLC GBP0.25 ............................................... 29,100 264,751
Bowater PLC Ord GBP0.50 .............................................. 14,750 81,067
Bowthorpe Holdings PLC Ord GBP0.10 ................................... 5,838 38,068
BPB Industries PLC Ord GBP0.50 ....................................... 14,800 69,393
British Aerospace PLC Ord GBP0.10 .................................... 12,541 155,181
British Airways PLC Ord GBP0.25 ...................................... 29,600 214,153
British Gas PLC Ord GBP0.25 .......................................... 132,500 522,512
British Land Co., PLC Ord GBP0.25 .................................... 12,933 76,502
British Petroleum Co., PLC Ord GBP0.25 ............................... 168,100 1,406,705
British Sky Broadcasting Ord. GBP0.50 ................................ 52,500 331,334
British Steel PLC GBP0.50 ............................................ 59,200 149,585
British Telecommunications PLC Ord GBP0.25 ........................... 189,300 1,040,401
BTR PLC Ord GBP0.25 .................................................. 112,887 576,616
Burmah Castrol PLC Ord GBP1 .......................................... 5,870 85,120
Cable & Wireless PLC Ord GBP0.25 ..................................... 67,266 480,397
Cadbury Schweppes PLC Ord GBP0.25 .................................... 30,480 251,752
Calor Group PLC Ord GBP0.50 .......................................... 6,600 26,232
Caradon PLC Ord GBP0.25 .............................................. 17,600 53,420
Carlton Communications PLC GBP0.05 ................................... 6,764 101,444
Chubb Security PLC Ord GBP0.05 ....................................... 8,300 41,043
Coats Viyella PLC Ord GBP0.20 ........................................ 21,006 57,073
Commercial Union PLC Ord GBP0.25 ..................................... 20,359 198,501
Costain Group Ord. GBP0.10 ........................................... 2,920 3,219
Courtaulds Coolings Ltd. Ord GBP0.25 ................................. 11,900 75,195
Courtaulds Textile PLC Ord GBP0.25 ................................... 3,975 21,970
Dawson International PLC Ord GBP0.25 ................................. 8,911 14,942
De La Rue Co., PLC Ord GBP0.25 ....................................... 6,698 67,698
Delta PLC Ord GBP0.25 ................................................ 4,400 27,257
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-147
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
East Midlands Electricity PLC Ord 56 9/11P ........................... 924 $ 9,561
Electrocomponents PLC Ord GBP0.10 .................................... 12,566 70,234
English China Clays PLC Ord GBP0.25 .................................. 9,169 45,055
FKI PLC GBP0.10 ...................................................... 16,720 42,832
Forte PLC Ord GBP0.25 ................................................ 27,895 143,135
FR Group PLC Ord GBP0.25 ............................................. 2,780 20,329
General Accident Assurance PLC Ord GBP0.25 ........................... 14,823 149,818
General Electric Co., PLC Ord GBP0.05 ................................ 84,000 462,972
GKN PLC Ord GBP1 ..................................................... 10,200 123,363
Glaxo Holdings PLC Ord GBP0.25 ....................................... 105,300 1,495,878
Grand Metropolitan PLC Ord GBP0.25 ................................... 64,446 464,259
Great Portland Estates PLC Ord GBP0.50 ............................... 9,775 26,407
Great Universal Stores PLC Ord Stock GBP0.25 ......................... 30,700 326,494
Guardian Royal Exchange PLC Ord GBP0.05 .............................. 27,381 117,329
Guinness PLC Ord GBP0.25 ............................................. 61,800 454,793
Hammerson Property & Investment Development Corp., PLC Ord GBP0.25 .. 8,568 46,891
Hanson PLC Ord GBP0.25 ............................................... 158,100 472,508
Harrison & Crosfield PLC Ord GBP0.25 ................................. 21,510 53,433
Hepworth PLC Ord GBP0.25 ............................................. 7,200 35,659
HSBC Holdings PLC Ord HKD10 .......................................... 54,098 824,782
HSBC Holdings PLC Ord GBP0.75 ........................................ 25,714 401,619
IMI PLC Ord GBP0.25 .................................................. 9,700 49,471
Imperial Chemical Industries PLC Ord GBP1.0 .......................... 22,100 261,796
J. Sainsbury PLC Ord GBP0.25 ......................................... 54,542 332,790
John Laing PLC Ord GBP0.25 ........................................... 4,121 17,723
Johnson Matthey PLC Ord GBP1.00 ...................................... 6,613 53,697
Kerry Group PLC A Ord IEP0.10 ........................................ 6,100 47,353
Kingfisher PLC GBP0.25 ............................................... 20,185 169,854
Ladbroke Group PLC Ord GBP0.10 ....................................... 35,354 80,412
Laird Group PLC Ord GBP0.25 .......................................... 5,300 31,844
Land Securities PLC Ord GBP1 ......................................... 15,100 144,647
Lasmo PLC Ord GBP0.25 ................................................ 28,557 77,589
Legal & General Group PLC Ord GBP0.25 ................................ 14,850 154,471
Lex Service PLC Ord GBP0.25 .......................................... 3,416 16,229
London Electricity PLC Ord GBP0.50 ................................... 5,800 51,688
Lonrho PLC Ord GBP0.25 ............................................... 22,769 62,216
Lucas Industries PLC Ord GBP0.25 ..................................... 23,819 66,934
Manweb Ord50P Asd Scot Pow ........................................... 3,400 54,054
Marks & Spencer PLC Ord GBP0.25 ...................................... 85,600 598,044
Marley PLC Ord GBP0.25 ............................................... 13,066 22,517
MEPC PLC Ord GBP0.25 ................................................. 12,000 73,591
Mercury Assets Management Group PLC Ord GBP0.05 ...................... 5,381 72,849
Meyer International PLC Ord GBP0.25 .................................. 3,812 22,845
National Grid Group Ord. When Issued ................................. 60,607 187,250
National Power PLC Ord GBP0.50 ....................................... 35,300 246,349
Next PLC Ord GBP0.10 ................................................. 11,000 77,876
North West Water PLC Ord GBP1 ........................................ 14,774 141,295
Northern Electric Ord. 56 12/23P ..................................... 2,919 28,392
Ocean Group PLC Ord GBP0.25 .......................................... 4,700 28,312
Oxford Instruments Group PLC Ord GBP0.05 ............................. 1,900 11,947
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-148
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
P & O Holdings PLC Ord GBP1.00 ....................................... 18,290 $135,166
Pearson PLC Ord GBP0.25 .............................................. 16,300 157,913
Pilkington New Ord. GBP0.50 .......................................... 5,875 18,744
Pilkington PLC Ord GBP0.50 ........................................... 23,500 73,700
Provident Financial PLC Ord GBP0.10 .................................. 4,000 50,862
Prudential Corp., PLC Ord GBP0.05 .................................... 58,615 377,662
Racal Electronics PLC Ord GBP0.25 .................................... 8,300 36,726
Rank Organisation PLC Ord GBP0.10 .................................... 24,482 177,125
Redland PLC Ord GBP0.25 .............................................. 15,715 94,910
Reed International PLC Ord GBP0.25 ................................... 17,200 262,233
Reuters Holdings PLC Ord GBP0.025 .................................... 51,000 466,768
RMC Group PLC Ord GBP0.25 ............................................ 7,250 111,547
Rolls Royce PLC Ord GBP0.20 .......................................... 43,661 128,116
Royal Bank of Scotland Group PLC Ord GBP0.25 ......................... 23,845 216,941
Royal Insurance Holdings PLC Ord GBP0.25 ............................. 19,300 114,464
RTZ Corp., PLC Ord GBP0.10 Regd ...................................... 32,672 474,786
Rugby Group PLC Ord GBP0.25 .......................................... 18,800 32,107
Schroders PLC Ord GBP1 ............................................... 5,700 121,062
Scottish & Newcastle Breweries PLC Ord GBP0.20 ....................... 18,742 178,371
Scottish Power PLC Ord GBP0.50 ....................................... 21,400 122,931
Sears PLC Ord GBP0.25 ................................................ 44,600 72,014
Sedgwick Group PLC GBP0.10 ........................................... 16,220 30,471
Seeboard PLC Ord GBP0.50 ............................................. 7,200 58,798
Slough Estates PLC Ord GBP0.25 ....................................... 11,500 39,101
SmithKline Beecham PLC A Ord GBP0.125 ................................ 42,219 465,386
SmithKline Beecham PLC Units 1B GBP0.125 ............................. 40,100 437,047
Smiths Industries PLC Ord GBP0.25 .................................... 8,900 87,881
Southern Electric PLC Ord GBP0.50 .................................... 8,100 113,684
Southern Water PLC Ord GBP1 .......................................... 5,145 54,957
St. James Place Capital PLC Ord GBP0.15 .............................. 8,300 13,337
T & N PLC Ord GBP1 ................................................... 15,228 38,301
Tarmac PLC Ord GBP0.50 ............................................... 27,893 44,605
Tate & Lyle PLC GBP0.25 .............................................. 12,124 88,845
Taylor Woodrow PLC Ord GBP0.25 ....................................... 11,600 21,161
TBS Group Ord GBP0.25 ................................................ 107,619 553,885
Tesco PLC Ord GBP0.05 ................................................ 61,978 285,786
Thames Water PLC Ord GBP1 ............................................ 11,800 102,859
Thorn EMI PLC Ord GBP0.25 ............................................ 13,180 310,419
TI Group PLC Ord GBP0.25 ............................................. 14,285 101,798
Trafalgar House PLC Ord GBP0.20 ...................................... 31,500 13,571
Transport Development Group PLC Ord GBP0.25 .......................... 5,800 16,839
Unigate PLC Ord GBP0.25 .............................................. 6,900 44,029
Unilever PLC Ord GBP0.05 ............................................. 24,800 509,399
United Biscuits PLC Ord GBP0.25 ...................................... 15,600 62,003
Vickers PLC Ord GBP0.50 .............................................. 9,800 38,646
Vodafone Group PLC Ord GBP0.05 ....................................... 91,200 326,372
Welsh Water Ord. GBP1.20 ............................................. 3,583 43,084
Williams Holdings PLC Ord GBP0.25 .................................... 17,084 86,866
Willis Corroon Group PLC Ord GBP0.125 ................................ 12,400 27,145
Wilson Holdings PLC Ord GBP0.25 ...................................... 8,600 22,365
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-149
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Wimpey (George) PLC Ord GBP0.25 ...................................... 11,000 $ 24,592
Wolseley PLC GBP0.25 ................................................. 16,300 114,133
Zeneca Group Ord GBP0.25 ............................................. 28,900 559,058
--------------
26,738,703
--------------
PREFERRED STOCK (0.4%)
AUSTRALIA (0.1%)
News Corp. Pfd AUD0.50 ............................................... 29,655 138,756
--------------
AUSTRIA (0.0%)
Bau Holdings AG Pfd ATS100 ........................................... 100 3,763
Creditanstalt-Bankverein Pfd ATS100 .................................. 720 37,035
Z Landerbank Bank Austria AG Pfd ATS100 .............................. 300 14,359
--------------
55,157
--------------
FRANCE (0.0%)
Etab Eco Casino Guich Perr & Co. Pfd FRF10 ........................... 154 3,495
--------------
GERMANY (0.3%)
Dyckerhoff AG Pfd DEM50 .............................................. 60 12,911
Escada AG Pfd DEM50 .................................................. 50 8,733
FAG Kugelfischer Pfd DEM50 ........................................... 50 6,236
Herlitz AG Pfd DEM50 ................................................. 66 10,606
Kaufhof Holding AG Pfd DEM50 ......................................... 100 24,453
Lufthansa Pfd DEM50 .................................................. 100 13,065
MAN AG Pfd DEM50 ..................................................... 150 32,436
Rheinmetall Berlin AG Pfd DEM50 ...................................... 50 5,659
RWE AG Pfd DEM50 ..................................................... 675 188,640
SAP AG Pfd DEM5 ...................................................... 1,400 212,255
Volkswagen AG Pfd DEM50 .............................................. 200 48,557
--------------
563,551
--------------
ITALY (0.0%)
Fiat SpA Privilege ITL1000 ........................................... 38,100 69,646
La Rinascente SpA Privilege ITL1000 .................................. 2,100 5,460
--------------
75,106
--------------
PRINCIPAL
AMOUNT
U.S. GOVERNMENT OBLIGATIONS -(2.2%)
United States Treasury Bills 5.02% 21-Mar-96 (a) ..................... $ 5,000,000 4,936,553
--------------
STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS
FOR TAX EXEMPT RETIREMENT PLANS (16.1%) UNITS
------------
SHORT TERM INVESTMENT FUND ........................................... 35,664,815 35,664,815
- --------------------------------------------------------------------- ------------ --------------
TOTAL INVESTMENTS--100%
(Cost $200,392,653) ................................................ $221,776,521
===================================================================== ============ ==============
</TABLE>
(a) At December 31, 1995, U.S. Treasury Bills totalling $4,936,553 and
Japanese Yen totalling $2,483,208 were pledged to cover margin
requirements for open futures contracts.
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
SAI-150
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUND NON-LENDING
DAILY EAFE FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
- -----------------------------------------------------------------------------
The following long futures contracts were open at December 31, 1995:
<TABLE>
<CAPTION>
FUTURES NUMBER OF UNREALIZED
CONTRACT CONTRACTS NOTIONAL AMOUNT MATURITY DATE GAIN
- --------------------- ----------- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
All Ordinaries Index 45 A$ 2,511,000 March 1996 $ (9,057)
DAX Index ............ 25 DM 5,696,250 March 1996 (41,955)
CAC 40 Index ......... 58 FF 21,929,800 March 1996 69,891
Hang Seng Index ...... 8 HK$ 4,056,000 January 1996 6,014
Nikkei 300 Index .... 912 yen 2,699,520,000 March 1996 1,145,810
FTSE Index ........... 81 pounds sterling March 1996 23,541
7,498,575
MIB 30 Index ......... 4 Lr 569,240,000 March 1996 3,492
------------
$1,197,736
============
</TABLE>
The outstanding forward foreign currency contracts at December 31, 1995
are as follows:
<TABLE>
<CAPTION>
SETTLEMENT CONTRACTS TO NET UNREALIZED
DATE DELIVER IN EXCHANGE FOR GAIN (LOSS)
- ------------ -------------- ---------------- --------------
<S> <C> <C> <C>
3/25/96 ..... A $ 99,000 $ 73,072 $ (289)
3/25/96 ..... A $ 82,000 $ 60,713 (53)
3/25/96 ..... $ 1,809,580 A$ 2,454,000 8,854
3/25/96 ..... DM 467,000 $ 327,047 (493)
3/25/96 ..... $ 3,964,103 DM 5,654,000 1,507
3/25/96 ..... $ 139,329 DM 200,000 935
3/25/96 ..... pounds sterling $ 467,185 (348)
2,290,000
3/25/96 ..... pounds sterling pounds sterling
$ 4,353,468 21,470,000 29,553
3/25/96 ..... $ 302,627 1,500,000 3,572
3/25/96 ..... Lr 65,000,000 $ 40,339 (190)
3/25/96 ..... Lr246,000,000 $ 153,457 61
3/25/96 ..... $ 523,821 Lr 846,600,000 4,030
3/25/96 ..... yen 143,000,000 $ 1,409,700 6,451
3/25/96 ..... $ 21,190,203 yen 2,124,000,000 (344,170)
3/25/96 ..... $ 4,465,440 yen 449,000,000 (58,910)
pounds sterling pounds sterling
3/25/96 ..... 282,000 $ 437,495 525
3/25/96 ..... $ 9,730,822 6,322,000 64,331
pounds sterling
3/25/96 ..... $ 691,200 450,000 6,000
--------------
$(278,634)
==============
</TABLE>
Currency Legend
- ----------------
A$ Australian Dollar
pounds sterling British Pound Sterling
FF French Franc
DM German mark
HK$ Hong Kong Dollar
Lr Italian Lira
yen Japanese Yen
$ U.S. Dollar
The accompanying notes are an integral part of these financial statements.
SAI-151
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participating Trusts and Trustee of the
State Street Bank and Trust Company
Daily Government/Corporate Fund
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the selected per unit data
present fairly, in all material respects, the financial position of the State
Street Bank and Trust Company Daily Government/Corporate Fund (the "Fund")
at December 31, 1995, the results of its operations, the changes in its net
assets and the selected per unit data for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
selected per unit data (hereafter referred to as "financial statements") are the
responsibility of the Fund's Trustee; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 11, 1996
SAI-152
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Statement of Assets and Liabilities
December 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value
(cost $1,893,956,981) ............................................... $ 1,981,627,886
Receivable for investments sold ...................................... 18,632,288
Interest receivable .................................................. 31,458,902
- --------------------------------------------------------------------- ---------------
Total assets ...................................................... 2,031,719,076
- --------------------------------------------------------------------- ---------------
LIABILITIES
Payable to custodian ................................................. 4,674
Payable for investments purchased .................................... 40,188,752
Payable for fund units redeemed ...................................... 95,717
Accrued expenses ..................................................... 37,376
- --------------------------------------------------------------------- ---------------
Total liabilities ................................................. 40,326,519
- --------------------------------------------------------------------- ---------------
NET ASSETS
(equivalent to $11.49 per unit based on 173,284,014 units
outstanding) ........................................................ $ 1,991,392,557
===================================================================== ===============
</TABLE>
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
SAI-153
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Statement of Operations
Year ended December 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest .................................................................. $ 111,724,907
- --------------------------------------------------------------------------- --------------
EXPENSES
Custody ................................................................... 187,130
Audit ..................................................................... 18,000
- --------------------------------------------------------------------------- --------------
Total expenses .......................................................... 205,130
- --------------------------------------------------------------------------- --------------
Net investment income ................................................... 111,519,777
- --------------------------------------------------------------------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES
CONTRACTS
Net realized gain (loss) on investments ................................... 70,530,694
Net change in unrealized appreciation (depreciation) on investments ...... 113,689,214
- --------------------------------------------------------------------------- --------------
Net realized and unrealized gain (loss) ................................... 184,219,908
- --------------------------------------------------------------------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 295,739,685
=========================================================================== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
SAI-154
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994
- ---------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ....................................................... $ 111,519,777 $ 33,433,508
Net realized gain (loss) on investments ..................................... 70,530,694 (12,081,986)
Net realized gain (loss) on futures contracts ............................... 0 (2,137,898)
Net change in unrealized appreciation (depreciation) on investments ........ 113,689,214 (22,316,173)
Net change in unrealized gain (loss) on futures contracts ................... 0 (62,907)
- ---------------------------------------------------------------------------- --------------- ---------------
Net increase (decrease) in net assets resulting from operations .......... 295,739,685 (3,165,456)
- ---------------------------------------------------------------------------- --------------- ---------------
FROM PARTICIPANT TRANSACTIONS
Proceeds from units issued
Units issued throughout the period ......................................... 728,525,510 226,504,641
Units issued in connection with the merger of the Government/Corporate
Bond Fund ................................................................. 0 1,107,313,694
Cost of units redeemed ...................................................... (573,312,350) (112,893,225)
- ---------------------------------------------------------------------------- --------------- ---------------
Net increase (decrease) in net assets resulting from participant
transactions ............................................................... 155,213,160 1,220,925,110
- ---------------------------------------------------------------------------- --------------- ---------------
Net increase (decrease) in net assets ....................................... 450,952,845 1,217,759,654
NET ASSETS
Beginning of year ........................................................... 1,540,439,712 322,680,058
- ---------------------------------------------------------------------------- --------------- ---------------
END OF YEAR ................................................................. $ 1,991,392,557 $ 1,540,439,712
============================================================================ =============== ===============
NUMBER OF UNITS
Outstanding--beginning of year .............................................. 160,075,471 32,460,814
Issued
Throughout the period ...................................................... 68,144,527 23,418,271
In connection with the merger of the Government/Corporate Bond Fund ....... 0 115,949,078
Redeemed .................................................................... (54,935,984) (11,752,692)
- ---------------------------------------------------------------------------- --------------- ---------------
Outstanding--end of year .................................................... 173,284,014 160,075,471
- ---------------------------------------------------------------------------- --------------- ---------------
</TABLE>
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
SAI-155
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
------------------------------ --------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993*
- ------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Net investment income** ................................ $ 0.70 $ 0.73 $ 0.11
Net realized and unrealized gain (loss) ................ 1.17 (1.05) (0.17)
- ------------------------------------------------------- -------------- -------------- --------------
Net increase (decrease) ................................ 1.87 (0.32) (0.06)
NET ASSET VALUE
Beginning of period .................................... 9.62 9.94 10.00
- ------------------------------------------------------- -------------- -------------- --------------
END OF PERIOD .......................................... $ 11.49 $ 9.62 $ 9.94
- ------------------------------------------------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------
Total return (a)*** .................................... 19.44% 3.22% 3.27%
- ------------------------------------------------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (a) ........... 0.01% 0.01% 0.02%
Ratio of net investment income to average net assets (a) 6.53% 6.81% 5.94%
Portfolio turnover ..................................... 611% 144% 23%
Net assets, end of year (000s) ......................... $ 1,991,393 $1,540,440 $322,680
- ------------------------------------------------------- -------------- -------------- --------------
</TABLE>
- ------------
(a) 1993 data annualized.
* Investment operations commenced on October 25, 1993.
** Net investment income has been calculated based upon an average of
monthly units outstanding.
*** Total return calculation is based on the value of a single unit of
participation outstanding throughout the period. It represents the
percentage change in the net asset value per unit between the
beginning and end of the period. The calculation includes only those
expenses charged directly to the Fund. This result may be reduced by
any administrative or other fees which are incurred in the management
or maintenance of individual participant accounts.
The accompanying notes are an integral part of these financial statements.
SAI-156
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
The State Street Bank and Trust Company ("State Street Bank") Daily
Government/Corporate Fund (the "Fund") is a fixed income fund formed under a
Declaration of Trust dated February 21, 1991 as amended and restated through
July 19, 1991. The Fund's objective is to match or exceed the return of the
Lehman Brothers Aggregate Bond Index. State Street Bank is the Fund's Trustee
and custodian. State Street Global Advisors, a division of State Street Bank,
is the Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments in securities listed on a national securities exchange and
over-the-counter securities are valued at the last reported sale price on the
valuation date, or if no sale price was reported on the valuation date, the
last published sale price. Short-term investments are stated at amortized
cost which approximates market. Investments in registered investment
companies or other State Street Bank Investment Funds for Tax Exempt
Retirement Plans are valued at net asset value per share/unit on the
valuation date. Certain investments are valued at fair value on the basis of
valuations furnished by a pricing service, approved by the Trustee, which
determines valuations using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order
to buy or sell is executed). The cost of securities contributed to, and
proceeds related to securities delivered by, the Fund in connection with the
issuance and redemption of its units of participation are based on the
valuations of those securities determined as described above. The cost of
securities delivered and the net gain or loss on securities sold is
determined using the average cost method. Interest income, net of applicable
withholding taxes, is recorded on the accrual basis. Interest income is
increased by accretion of discount and reduced by amortization of premium.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and
no federal income tax provision is required.
D. ISSUANCE AND REDEMPTION 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 and at
such unit principal values.
E. EXPENSES
According to the Declaration of Trust, the Fund may pay certain expenses
for services received during the year. The Trustee is paid a custody fee at
the annual rate of .0125% of the Fund's net asset value.
SAI-157
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
F. DISTRIBUTIONS TO PARTICIPANTS
All net investment income and net realized gains are retained by the Fund.
G. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVESTMENT TRANSACTIONS
Purchases and sales, excluding short-term investments and including
in-kind contributions and redemptions, if any, during the year ended December
31, 1995 were $10,636,210,715 and $10,440,251,592, respectively, resulting in
net realized gain (loss) of $70,530,694. Purchases and sales of short-term
investments (including maturities) were $2,895,193,339 and $2,798,120,255,
respectively.
4. UNITS OF PARTICIPATION
Units in excess of 10% of Fund units outstanding at December 31, 1995 held
by 3 of the Fund's 27 unitholders aggregated 77% of the Fund's total units
outstanding.
A redemption by one or more unitholders individually holding 10% or more
of Fund units may cause the remaining unitholders to bear proportionately
higher operating expenses and otherwise adversely affect the Fund's future
liquidity and investment operations.
SAI-158
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NOTES & DEBENTURES (62.3%)
$ 8,250,000 ABN Amro Bank NV 7.25% .................................. 31-May-05 $ 8,850,947
9,000,000 Advanta Credit Card Master Trust II 6.05% ............... 01-Aug-03 9,116,719
5,000,000 Alabama Power Co. 6.38% ................................. 01-Aug-99 5,094,400
7,350,000 Alltel Corp. 6.75% ...................................... 15-Sep-05 7,665,168
1,000,000 American Express Credit Corp. 7.75% ..................... 01-Mar-97 1,023,580
1,000,000 American General Finance Corp. 7.75% .................... 15-Jan-97 1,020,720
5,000,000 American General Finance Corp. 7.15% .................... 15-May-97 5,104,120
1,000,000 American General Finance Corp. 6.63% .................... 01-Jun-97 1,013,950
3,000,000 American General Finance Corp. 8.25% .................... 15-Jan-98 3,148,200
1,000,000 American General Finance Corp. 8.50% .................... 15-Aug-98 1,069,020
9,150,000 American General Finance Corp. 6.88% .................... 01-Jul-99 9,458,465
4,000,000 Aristar Inc. 7.38% ...................................... 15-Feb-97 4,072,760
1,682,000 Aristar Inc. 8.13% ...................................... 01-Dec-97 1,755,705
300,000 Aristar Inc. 5.75% ...................................... 15-Jul-98 300,741
2,245,380 Arkansas State Development Finance Authority 9.75% ..... 15-Nov-05 2,644,114
2,000,000 Associates Corp. of North America 6.88% ................. 15-Jan-97 2,023,160
10,128,000 Associates Corp. of North America 8.63% ................. 15-Jun-97 10,554,035
3,409,000 Associates Corp. of North America 6.61% ................. 16-Jun-97 3,458,328
1,000,000 Associates Corp. of North America 6.63% ................. 15-Nov-97 1,018,760
5,000,000 Associates Corp. of North America 7.30% ................. 15-Mar-98 5,169,200
1,295,000 Associates Corp. of North America 8.80% ................. 01-Aug-98 1,388,525
7,200,000 Associates Corp. of North America 6.38% ................. 15-Aug-98 7,338,816
10,160,000 Associates Corp. of North America 6.25% ................. 15-Mar-99 10,303,134
1,000,000 Australia (Commonwealth of) 7.63% ....................... 15-Sep-97 1,034,652
8,500,000 Bellsouth Telecommunications 6.38% ...................... 15-Jun-04 8,734,260
1,100,000 Beneficial Corp. 9.05% .................................. 14-Mar-97 1,144,188
682,000 Beneficial Corp. 9.40% .................................. 30-Jun-97 719,762
2,550,000 Beneficial Corp. 9.50% .................................. 18-Jul-97 2,696,969
1,363,000 Beneficial Corp. 9.00% .................................. 17-Jul-98 1,468,946
6,500,000 Beneficial Corp. 8.00% .................................. 01-Nov-99 6,973,999
10,300,000 Beneficial Corp. 8.31% .................................. 06-Dec-99 11,173,409
1,940,000 Beneficial Corp. 7.99% .................................. 17-Feb-00 2,089,419
10,000,000 Burlington Northern Santa Fe Corp. 6.38% ................ 15-Dec-05 10,043,600
5,000,000 Carter Holt Harvey Ltd. 8.88% ........................... 01-Dec-04 5,802,650
4,061,000 Carter Holt Harvey Ltd. 8.38% ........................... 15-Apr-15 4,623,859
528,833 Case Equipment Loan Trust 7.30% ......................... 15-Mar-02 539,988
6,350,000 Caterpillar Financial Services 6.78% .................... 05-Aug-99 6,539,230
20,128,998 Chase Manhattan Grantor Trust 5.90% ..................... 15-Nov-01 20,223,352
4,000,000 Chemical Master Credit Card Trust 1 6.23% ............... 15-Jun-03 4,088,720
5,000,000 CIT Group Holdings Inc. 8.00% ........................... 13-Jan-97 5,118,100
2,727,000 CIT Group Holdings Inc. 7.00% ........................... 30-Sep-97 2,793,566
5,365,000 CIT Group Holdings Inc. 6.35% ........................... 31-Jul-98 5,457,933
33,000,000 Comerica Bank 6.88% ..................................... 18-Apr-97 33,575,190
13,000,000 Comerica Bank 6.65% ..................................... 01-Jun-00 13,406,770
3,000,000 Commercial Credit Group Inc. 5.70% ...................... 01-Mar-98 3,006,774
2,000,000 Deutsche Bank AG 9.76% .................................. 17-Nov-97 2,148,670
14,315,000 Discover Card Master Trust I 5.40% ...................... 16-Nov-01 14,270,194
23,640,000 Discover Card Trust 6.25% ............................... 16-Aug-00 23,965,050
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-159
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 6,300,000 Dresdner Bank AG 6.63% .................................. 15-Sep-05 $ 6,504,120
4,350,000 Enron Corp. 9.65% ....................................... 15-May-01 5,052,960
682,000 Export Development Corp. 7.38% .......................... 01-Feb-97 694,781
8,250,000 First Union Corp. 6.75% ................................. 15-Jan-98 8,435,048
2,250,000 Fleet Norstar Financial Group Inc. 7.65% ................ 01-Mar-97 2,298,038
4,023,000 Ford Credit Auto Loan Master Trust 6.88% ................ 15-Jan-99 4,065,744
13,500,000 Ford Credit Auto Loan Master Trust 7.38% ................ 15-Apr-99 13,803,750
7,700,000 Ford Credit Auto Loan Master Trust 6.50% ................ 15-Aug-02 7,918,911
6,000,000 Ford Motor Credit Co. 7.88% ............................. 15-Jan-97 6,137,760
5,782,000 Ford Motor Credit Co. 5.63% ............................. 03-Mar-97 5,780,555
6,050,000 Ford Motor Credit Co. 7.13% ............................. 01-Dec-97 6,203,791
1,363,000 Ford Motor Credit Co. 8.00% ............................. 01-Dec-97 1,419,592
1,000,000 Ford Motor Credit Co. 9.38% ............................. 15-Dec-97 1,067,280
10,945,000 Ford Motor Credit Co. 5.63% ............................. 15-Dec-98 10,914,956
17,250,000 Ford Motor Credit Co. 5.63% ............................. 15-Jan-99 17,163,922
1,200,000 Ford Motor Credit Co. 8.38% ............................. 15-Jan-00 1,303,584
13,000,000 Ford Motor Credit Co. 6.85% ............................. 15-Aug-00 13,483,730
3,614,000 General Electric Capital Corp. 7.65% .................... 23-Feb-98 3,781,400
3,000,000 General Electric Capital Corp. 8.63% .................... 12-Mar-98 3,198,480
275,000 General Electric Capital Corp. 8.63% .................... 15-Jun-08 331,587
1,295,000 General Electric Co. 7.88% .............................. 01-May-96 1,304,091
23,000,000 General Motors Acceptance Corp. 7.13% ................... 31-Mar-97 23,427,110
8,345,000 General Motors Acceptance Corp. 7.75% ................... 15-Apr-97 8,561,470
2,297,239 General Motors Acceptance Corp. 7.15% ................... 15-Mar-00 2,341,024
1,406,901 Green Tree Financial Corp. 6.45% ........................ 15-May-19 1,418,332
5,000,000 Household Finance Corp. 7.50% ........................... 15-Mar-97 5,109,515
9,000,000 Integra Bank 6.55% ...................................... 15-Jun-00 9,248,130
647,000 International Bank For Reconstruction & Development
9.88% ................................................. 01-Oct-97 694,606
5,000,000 International Bank For Reconstruction & Development
5.20% ................................................. 15-Dec-98 4,963,695
3,850,000 Ireland (Republic of) 9.50% ............................. 03-Apr-00 4,365,319
3,500,000 Ireland (Republic of) 8.63% ............................. 15-Apr-01 3,943,411
10,000,000 Israel US Government Guaranteed Notes 5.25% ............. 15-Sep-00 9,864,090
45,500,000 Israel US Government Guaranteed Notes 8.00% ............. 15-Nov-01 50,586,445
3,580,000 Israel US Government Guaranteed Notes 5.63% ............. 15-Sep-03 3,554,242
4,950,000 Israel US Government Guaranteed Notes 6.63% ............. 15-Feb-04 5,186,664
10,600,000 Israel US Government Guaranteed Notes 7.63% ............. 15-Aug-04 11,839,416
2,055,000 Italy (Republic of) 6.88% ............................... 27-Sep-23 2,006,810
3,500,000 KFW International Finance Inc. 9.15% .................... 30-May-97 3,670,275
2,900,000 KFW International Finance Inc. 9.05% .................... 30-Jul-97 3,053,062
7,000,000 KFW International Finance Inc. 9.38% .................... 15-Jul-98 7,617,400
2,000,000 KFW International Finance Inc. 9.00% .................... 23-Feb-99 2,191,360
4,000,000 KFW International Finance Inc. 8.85% .................... 15-Jun-99 4,401,280
1,000,000 KFW International Finance Inc. 8.62% .................... 15-Oct-01 1,132,670
1,105,000 KFW International Finance Inc. 8.20% .................... 01-Jun-06 1,289,734
9,800,000 KFW International Finance Inc. 8.00% .................... 15-Feb-10 11,367,157
12,400,000 KFW International Finance Inc. 7.00% .................... 01-Mar-13 13,196,328
13,435,000 KFW International Finance Inc. 7.20% .................... 15-Mar-14 14,582,215
16,600,000 Landeskreditbank Baden 7.88% ............................ 15-Oct-01 18,263,652
2,500,000 Manitoba (Province of) 9.50% ............................ 15-Sep-98 2,741,725
1,500,000 Manitoba (Province of) 9.50% ............................ 01-Oct-00 1,724,370
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-160
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$16,426,000 Manitoba (Province of) 7.75% ............................ 01-Feb-02 $17,961,469
5,300,000 Manitoba (Province of) 8.00% ............................ 15-Apr-02 5,877,679
8,500,000 Manitoba (Province of) 6.88% ............................ 15-Sep-02 8,932,395
10,495,000 Manitoba (Province of) 6.75% ............................ 01-Mar-03 10,888,248
2,896,000 Marshall & Ilsley Corp. 7.38% ........................... 31-Oct-97 2,987,600
1,000,000 MBNA Master Credit Card Trust 6.20% ..................... 15-Aug-99 1,010,000
19,488,000 MBNA Master Credit Card Trust 5.40% ..................... 15-Sep-00 19,396,601
1,000,000 Monongahela Power Co. 5.63% ............................. 01-Apr-00 993,870
1,500,000 Mountain States Telephone & Telegraph Co. 5.50% ........ 01-Jun-05 1,436,775
7,020,000 National Australia Bank Ltd. 9.70% ...................... 15-Oct-98 7,714,418
3,500,000 National City Bank 7.25% ................................ 15-Jul-10 3,761,625
8,678,474 NationsBank Auto Grantor Trust 5.85% .................... 15-Jun-02 8,712,375
4,999,000 NationsBank Corp. 6.63% ................................. 15-Jan-98 5,100,250
10,000,000 NationsBank Corp. 7.75% ................................. 15-Aug-15 10,953,500
5,800,000 NationsBank Corp. 7.25% ................................. 15-Oct-25 6,018,544
13,200,000 NBD Bank NA 6.40% ....................................... 27-May-97 13,347,998
5,650,000 NBD Bank NA 6.50% ....................................... 02-Jun-97 5,737,123
3,409,000 NBD Bank NA 6.55% ....................................... 02-Jun-97 3,463,851
1,000,000 New England Telephone & Telegraph Co. 4.63% ............. 01-Jul-05 891,940
13,000,000 New York Telephone Co. 5.63% ............................ 01-Nov-03 12,615,590
14,560,000 New Zealand (Government of) 8.75% ....................... 15-Dec-06 17,654,335
4,500,000 New Zealand (Government of) 9.88% ....................... 15-Jan-11 6,008,310
2,800,000 New Zealand (Government of) 9.13% ....................... 25-Sep-16 3,620,232
3,300,000 New Zealand (Government of) 10.63% ...................... 15-Nov-05 4,416,258
7,500,000 News America Holdings Inc. 7.45% ........................ 01-Jun-00 7,873,140
1,600,000 Norwest Corp. 5.75% ..................................... 15-Mar-98 1,603,008
40,000,000 Norwest Financial Inc. 6.50% ............................ 15-May-97 40,527,640
5,000,000 Norwest Financial Inc. 6.25% ............................ 15-Mar-99 5,059,250
6,650,000 Norwest Financial Inc. 7.25% ............................ 15-Mar-00 7,005,841
1,023,000 Old Kent Bank & Trust Co. 7.50% ......................... 31-Jan-97 1,042,098
2,613,000 Old Kent Bank & Trust Co. 6.88% ......................... 15-Apr-98 2,686,216
4,500,000 Ontario (Province of) 7.75% ............................. 04-Jun-02 4,899,015
5,000,000 PACCAR Financial Corp. 6.08% ............................ 15-Apr-99 5,052,900
20,000,000 Pacificorp 6.63% ........................................ 01-Jun-07 20,530,880
9,000,000 Penney (J C) Inc. 6.38% ................................. 15-Sep-00 9,210,420
5,000,000 PepsiCo Inc. 6.13% ...................................... 15-Jan-98 5,051,050
4,645,000 PepsiCo Inc. 6.80% ...................................... 15-May-00 4,828,199
7,404,000 Pitney Bowes Credit Corp. 5.63% ......................... 15-Feb-97 7,414,869
23,795,000 Premier Auto Trust 5.90% ................................ 06-Jul-99 23,977,180
18,409,000 Premier Auto Trust 6.15% ................................ 06-Mar-00 18,656,233
4,000,000 Premier Auto Trust 6.00% ................................ 06-May-00 4,041,240
5,475,000 Quebec (Province of) 9.13% .............................. 01-Mar-00 6,071,830
1,000,000 Rabobank Nederland 5.77% ................................ 26-Aug-97 1,007,080
4,000,000 Resolution Funding Corp. 8.13% .......................... 15-Oct-19 4,920,625
9,050,000 Sears Credit Account Master Trust II 6.25% .............. 15-Jan-03 9,219,687
5,500,000 Sears Corp. 7.81% ....................................... 18-Mar-97 5,638,897
5,350,000 Sears Roebuck & Co. 7.62% ............................... 03-Nov-97 5,533,452
9,855,000 Shawmut Bank NA 8.63% ................................... 15-Feb-05 11,369,221
5,000,000 Signet Group 5.20% ...................................... 15-Feb-02 4,960,900
11,000,000 Society Bank NA 6.50% ................................... 25-Apr-97 11,102,850
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-161
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,000,000 Society National Bank 7.13% ............................. 15-Apr-97 $ 2,038,160
10,925,000 Society National Bank 7.25% ............................. 01-Jun-05 11,664,841
12,400,000 Southern New England Telecommunications 6.50% .......... 15-Aug-00 12,743,629
7,000,000 Southwestern Bell Telephone Co. 6.25% ................... 15-Oct-02 7,156,660
7,000,000 SPNB Home Equity Loan 8.85% ............................. 15-May-98 7,312,760
3,000,000 Standard Credit Card Master Trust I 4.65% ............... 07-Mar-99 2,973,750
25,000,000 Standard Credit Card Master Trust I 5.50% ............... 07-Feb-00 24,941,406
5,650,000 Swiss Bank Corp. 7.00% .................................. 15-Oct-15 5,872,949
5,000,000 Telekom Malaysia Berhad 7.88% ........................... 01-Aug-25 5,517,495
10,000,000 Tenneco Inc. 6.50% ...................................... 15-Dec-05 10,054,400
12,359,000 TransAmerica Finance Corp. 6.75% ........................ 15-Aug-97 12,562,676
5,020,000 Union Oil Co. 9.75% ..................................... 01-Dec-00 5,800,710
6,150,000 Union Oil Co. 7.20% ..................................... 15-May-05 6,529,947
2,500,000 US West Communications Inc. 6.38% ....................... 15-Oct-02 2,563,900
6,260,000 US West Communications Inc. 7.25% ....................... 15-Sep-25 6,736,323
29,780,000 Victorian Public Authority Finance Agency 8.45% ........ 01-Oct-01 33,511,315
3,409,000 Wachovia Bank NA 6.55% .................................. 09-Jun-97 3,464,533
5,500,000 Wachovia Bank NA 6.70% .................................. 14-Apr-99 5,670,830
2,750,000 Wachovia Bank NA 7.00% .................................. 12-May-99 2,864,757
5,000,000 Wendy's International Inc. 7.00% ........................ 15-Dec-25 5,057,720
---------------
TOTAL NOTES & DEBENTURES (Cost $1,179,955,078) ......... 1,231,260,872
---------------
U.S. GOVERNMENT AGENCIES (4.7%)
27,225,000 Farm Credit Systems 9.38% ............................... 21-Jul-03 32,969,901
4,428,779 Federal Home Loan Bank 7.50% ............................ 01-Aug-00 4,484,139
8,675,000 Federal Home Loan Bank 6.17% ............................ 08-Mar-01 8,890,858
9,750,000 Federal Home Loan Bank 7.00% ............................ 20-Jun-01 10,374,585
511,653 Government Trust Certificates 8.00% ..................... 15-May-98 525,104
13,634,000 Government Trust Certificates 9.25% ..................... 15-Nov-01 14,993,446
640,000 Government Trust Certificates 9.40% ..................... 15-May-02 713,786
4,885,000 Government Trust Certificates 9.63% ..................... 15-May-02 5,439,252
15,489,684 SBA Participation Certificate 8.10% ..................... 01-Mar-15 16,991,409
---------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost $88,485,554) ...... 95,382,480
---------------
U.S. GOVERNMENT OBLIGATIONS (27.7%)
510,000 US Treasury Bonds 11.88% ................................ 15-Nov-03 712,485
7,700,000 US Treasury Bonds 10.75% ................................ 15-Aug-05 10,579,107
1,000,000 US Treasury Bonds 9.38% ................................. 15-Feb-06 1,285,160
500,000 US Treasury Bonds 12.75% ................................ 15-Nov-10 761,560
25,610,000 US Treasury Bonds 13.25% ................................ 15-May-14 42,888,811
2,435,000 US Treasury Bonds 11.75% ................................ 15-Nov-14 3,780,337
40,000 US Treasury Bonds 11.25% ................................ 15-Feb-15 64,031
4,800,000 US Treasury Bonds 9.88% ................................. 15-Nov-15 6,942,768
1,185,000 US Treasury Bonds 9.25% ................................. 15-Feb-16 1,628,818
3,500,000 US Treasury Bonds 8.75% ................................. 15-May-17 4,628,750
66,200,000 US Treasury Bonds 8.88% ................................. 15-Aug-17 88,666,294
400,000 US Treasury Bonds 9.00% ................................. 15-Nov-18 544,812
7,500,000 US Treasury Bonds 8.88% ................................. 15-Feb-19 10,109,775
5,000,000 US Treasury Bonds 8.13% ................................. 15-Aug-19 6,286,700
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-162
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 260,000 US Treasury Bonds 8.50% ................................. 15-Feb-20 $ 339,706
1,950,000 US Treasury Bonds 8.75% ................................. 15-Aug-20 2,614,833
2,945,000 US Treasury Bonds 7.88% ................................. 15-Feb-21 3,626,502
16,100,000 US Treasury Bonds 8.00% ................................. 15-Nov-21 20,145,125
46,395,000 US Treasury Bonds 7.25% ................................. 15-Aug-22 53,658,601
1,390,000 US Treasury Bonds 7.13% ................................. 15-Feb-23 1,589,382
10,700,000 US Treasury Bonds 6.25% ................................. 15-Aug-23 11,009,337
2,070,000 US Treasury Bonds 7.50% ................................. 15-Nov-24 2,488,202
46,470,000 US Treasury Bonds 7.63% ................................. 15-Feb-25 56,823,981
55,243,000 US Treasury Bonds 6.88% ................................. 15-Aug-25 62,303,608
500,000 US Treasury Notes 5.63% ................................. 30-Jun-97 503,125
10,500,000 US Treasury Notes 5.75% ................................. 30-Sep-97 10,595,130
5,150,000 US Treasury Notes 5.38% ................................. 30-Nov-97 5,166,892
6,700,000 US Treasury Notes 7.88% ................................. 15-Jan-98 7,040,226
180,000 US Treasury Notes 8.13% ................................. 15-Feb-98 190,350
2,755,000 US Treasury Notes 5.13% ................................. 30-Apr-98 2,749,407
4,704,000 US Treasury Notes 6.13% ................................. 15-May-98 4,798,080
20,128,000 US Treasury Notes 5.88% ................................. 15-Aug-98 20,445,620
10,000,000 US Treasury Notes 5.50% ................................. 15-Nov-98 10,068,010
5,655,000 US Treasury Notes 6.75% ................................. 31-May-99 5,906,817
935,000 US Treasury Notes 7.75% ................................. 31-Dec-99 1,014,625
1,295,000 US Treasury Notes 7.75% ................................. 31-Jan-00 1,406,694
30,000 US Treasury Notes 6.75% ................................. 30-Apr-00 31,570
1,295,000 US Treasury Notes 6.13% ................................. 31-Jul-00 1,333,034
20,300,000 US Treasury Notes 6.25% ................................. 31-Aug-00 21,000,959
545,000 US Treasury Notes 6.13% ................................. 30-Sep-00 561,350
7,200,000 US Treasury Notes 5.75% ................................. 31-Oct-00 7,303,464
12,240,000 US Treasury Notes 5.63% ................................. 30-Nov-00 12,350,894
4,600,000 US Treasury Notes 5.50% ................................. 31-Dec-00 4,623,736
2,000,000 US Treasury Notes 7.50% ................................. 15-Nov-01 2,202,820
3,125,000 US Treasury Notes 6.25% ................................. 15-Feb-03 3,260,250
9,000,000 US Treasury Notes 5.75% ................................. 15-Aug-03 9,108,270
1,225,000 US Treasury Notes 7.88% ................................. 15-Nov-04 1,417,938
23,100,000 US Treasury Notes 5.88% ................................. 15-Nov-05 23,619,750
- -----------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $520,709,511) .. 550,177,696
- -----------------------------------------------------------------------------------------------------
UNITS
- -----------------------------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS
FOR TAX EXEMPT RETIREMENT PLANS--5.30%
104,806,838 Short Term Investment Fund .............................. $ 104,806,838
- -----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost $1,893,956,981) .......... $1,981,627,886
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-163
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participating Trusts and Trustee of the
State Street Bank and Trust Company
Short Term Investment Fund
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the selected per unit data
present fairly, in all material respects, the financial position of State
Street Bank and Trust Company Short Term Investment Fund (the "Fund") at
December 31, 1995, the results of its operations, the changes in its net
assets and the selected per unit data for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and selected per unit data (hereafter referred to as "financial
statements") are the responsibility of the Fund's Trustee; our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 4, 1996
SAI-164
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at amortized cost ........................... $12,366,961,594
Cash ................................................................... 73
Interest and other receivables ......................................... 89,648,658
- ----------------------------------------------------------------------- ----------------
Total assets ........................................................ 12,456,610,325
- ----------------------------------------------------------------------- ----------------
LIABILITIES
Distributions payable .................................................. 63,436,051
Accrued expenses ....................................................... 26,000
- ----------------------------------------------------------------------- ----------------
Total liabilities ................................................... 63,462,051
- ----------------------------------------------------------------------- ----------------
Net assets
(equivalent to $1.00 per unit based on 12,393,115,372 units
outstanding) .......................................................... $12,393,148,274
======================================================================= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-165
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Statement of Operations
Year ended December 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest ..................................................... $ 716,490,382
- -------------------------------------------------------------- ---------------
EXPENSES
Audit ........................................................ 26,000
Other ........................................................ 2,256
- -------------------------------------------------------------- ---------------
Total expenses ............................................. 28,256
- -------------------------------------------------------------- ---------------
Net investment income ...................................... 716,462,126
- -------------------------------------------------------------- ---------------
Net realized gain (loss) on investments ....................... 164,710
- -------------------------------------------------------------- ---------------
Net increase (decrease) in net assets resulting from
operations ................................................... $ 716,626,836
============================================================== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-166
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994
- ---------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ..................................................... $ 716,462,126 $ 410,423,557
Net realized gain (loss) on investments ................................... 164,710 (124,066)
- --------------------------------------------------------------------------- --------------- ----------------
Net increase in net assets resulting from operations ...................... 716,626,836 410,299,491
- --------------------------------------------------------------------------- --------------- ----------------
Distributions from net investment income .................................. (716,462,126) (410,423,557)
- --------------------------------------------------------------------------- --------------- ----------------
FROM PARTICIPANT TRANSACTIONS (at constant $1.00 per unit):
Proceeds from units issued ................................................ 42,906,095,439 81,637,161,336
Cost of units redeemed .................................................... (39,752,331,248) (85,055,659,469)
- --------------------------------------------------------------------------- --------------- ----------------
Net increase (decrease) in net assets resulting from participant
transactions ............................................................. 3,153,764,191 (3,418,498,133)
- --------------------------------------------------------------------------- --------------- ----------------
Net increase (decrease) in net assets ..................................... 3,153,928,901 (3,418,622,199)
NET ASSETS
Beginning of year ......................................................... 9,239,219,373 12,657,841,572
- --------------------------------------------------------------------------- --------------- ----------------
End of year ............................................................... $ 12,393,148,274 $ 9,239,219,373
=========================================================================== ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-167
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout Each Year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------ ------------- ------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net investment income ..................... $ 0.0604 $ 0.0424 $ 0.0336 $ 0.0402 $ 0.0630
Net realized gain (loss) .................. 0.0000 0.0000 0.0000 0.0000 0.0000
- ------------------------------------------ ------------- ------------ ------------- ------------- -----------
Net change in net assets resulting from
operations ............................... 0.0604 0.0424 0.0336 0.0402 0.0630
- ------------------------------------------ ------------- ------------ ------------- ------------- -----------
Distributions from net investment income . $ 0.0604 $ 0.0424 $ 0.0336 $ 0.0402 $ 0.0630
========================================== ============= ============ ============= ============= ===========
Total return** ............................ 6.21% 4.32% 3.41% 4.09% 6.49%
Ratio of expenses to average net assets* . --% --% --% --% --%
Ratio of net investment income average net
assets ................................... 6.04% 4.24% 3.36% 4.02% 6.30%
Net assets, end of year (000s) ............ $12,393,148 $9,239,219 $12,657,842 $10,016,685 $8,149,591
========================================== ============= ============ ============= ============= ===========
</TABLE>
- ------------
* Less than 0.01%.
** 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.
The accompanying notes are an integral part of these financial statements.
SAI-168
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. INVESTMENT OBJECTIVE
The State Street Bank and Trust Company ("State Street Bank") Short Term
Investment Fund (the "Fund") is a money market pooled fund formed under a
Declaration of Trust dated May 19, 1983, as amended and restated through
August 1, 1992. The Fund's objective is to maintain a diversified portfolio
of short-term securities. The investments of the Fund are currently limited
to high-quality bonds, notes, commercial paper and other evidences of
indebtedness which are payable on demand or which have a maturity date not
exceeding three months from the date of purchase, except that up to 20% of
the Fund's investments may be placed in securities with a maturity date not
exceeding 13 months. State Street Bank is the Fund's Trustee and custodian.
State Street Global Advisors, a division of State Street Bank, is the Fund's
investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments are stated at amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order
to buy or sell is executed). The cost of securities contributed to, and
proceeds related to securities delivered by, the Fund in connection with the
issuance and redemption of its units of participation are based on the
valuations of those securities determined as described above. The cost of
securities delivered and the net gain or loss on securities sold is
determined using the average cost method. Interest income is recorded on the
accrual basis. Interest income is increased by accretion of discount and
reduced by amortization of premium.
C. INCOME TAXES
it is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and
no federal income tax provision is required.
D. ISSUANCE AND REDEMPTION OF UNITS OF PARTICIPATION
Issuances and redemptions of participant units are made on each day the
New York Stock Exchange is open (valuation date). Participant units are
typically purchased and redeemed at a constant net asset value of $1.00 per
unit. In the event that a significant disparity exists between the constant
net asset value and the market based net asset value of the Fund, the Trustee
may determine that continued redemption at a constant $1.00 net asset value
will create inequitable results for the Fund's unitholders. In these
circumstances, the Trustee, at its sole discretion and acting on behalf of
the Fund's unitholders, may direct that units be redeemed at the market based
net asset value until such time as the disparity between the market based and
the constant net asset value per unit is deemed to be immaterial.
E. EXPENSES
According to Declaration of Trust, the Fund may pay certain expenses for
services received during the year.
SAI-169
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
F. DISTRIBUTIONS TO PARTICIPANTS
Distributions from net investment income are recorded on each valuation
date and distributed monthly. All net realized gains are retained by the
Fund.
G. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVESTMENT TRANSACTIONS
Purchases and sales of short-term investments (including maturities)
during the year ended December 31, 1995 were $921,587,021,547 and
$918,651,347,966, respectively.
4. UNITS OF PARTICIPATION
None of the Fund's unitholders held a position in excess of 10% of the
Fund's units outstanding at December 31, 1995.
SAI-170
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE AMORTIZED COST
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM INSTRUMENTS (90.6%)
$100,000,000 Abbey National Treasury Services PLC 5.81% . 07-Feb-96 $ 100,000,000
50,000,000 Abbey National Treasury Services PLC 6.76% . 02-Apr-96 50,001,196
33,000,000 ABN Amro 5.56% .............................. 05-Jun-96 32,949,704
75,000,000 ABN Amro Bank NV 5.81% ...................... 31-Jan-96 75,000,619
23,000,000 American Express Centurion Bank 5.93% ...... 19-Jan-96* 23,000,000
25,000,000 American Express Centurion Bank 5.75% ...... 24-Jan-96* 25,000,000
40,000,000 Ameritech Capital Funding Corp. 5.30% ...... 12-Jun-96 39,040,111
35,000,000 Ameritech Corp. 5.60% ....................... 08-Mar-96 34,635,222
50,000,000 ANZ Delaware 5.72% .......................... 12-Jan-96 49,912,611
50,000,000 ANZ Delaware 5.72% .......................... 16-Jan-96 49,880,833
50,000,000 Australia & New Zealand Banking Group 5.66% 04-Mar-96 49,504,750
18,000,000 Avco Financial Services Inc. 5.70% .......... 26-Feb-96 17,840,400
60,000,000 Bank America 5.88% .......................... 15-Aug-96 59,955,427
100,000,000 Bank America Illinois Chicago 5.70% ........ 25-Sep-96 99,907,975
75,000,000 Bank of America 5.81% ....................... 16-Jan-96 75,000,000
75,000,000 Bank of America 5.75% ....................... 14-Feb-96 75,000,000
100,000,000 Bank of New York 7.72% ...................... 04-Jan-96 100,000,000
80,000,000 Bank of New York 6.85% ...................... 11-Mar-96 79,996,348
18,500,000 Bank of New York (Wilmington) 5.23% ........ 03-Jan-96* 18,499,293
75,000,000 Bank of Nova Scotia 5.88% ................... 30-Jan-96 75,000,000
20,800,000 BankAmerica Corp. 5.00% ..................... 01-Jun-96 20,713,175
100,000,000 Bayerische Hypotheken 5.81% ................. 02-Jan-96 100,000,028
50,000,000 Bayerische Vereinsbank AG (Cayman) 5.76% ... 01-Feb-96 50,000,426
20,500,000 Bell Atlantic Network Funding 5.70% ........ 29-Jan-96 20,409,117
50,000,000 Beneficial Corp. 5.78% ...................... 01-Jan-96* 50,041,410
25,000,000 Boatmens National Bank 5.91% ................ 12-Jan-96* 24,998,922
450,000,000 Branch Bank & Trust Co. 6.13% ............... 02-Jan-96 450,000,000
15,212,000 British Telecommunications PLC 5.65% ....... 23-Feb-96 15,085,466
98,000,000 Canadian Imperial Bank 5.88% ................ 24-Jan-96 98,000,000
50,000,000 Cheltenham & Glouster Building 5.64% ....... 26-Feb-96 49,561,722
75,000,000 Cheltenham & Glouster Building 5.58% ....... 07-Mar-96 74,232,750
98,000,000 CIT Group Holdings Inc. 5.55% ............... 01-Jan-96* 97,911,804
70,000,000 Comerica Bank 5.22% ......................... 03-Jan-96* 69,984,103
25,000,000 Comerica Bank 5.81% ......................... 22-Jan-96 25,000,000
50,000,000 Comerica Bank 6.18% ......................... 28-May-96 50,044,958
100,000,000 Commerzbank AG 5.71% ........................ 15-Feb-96 100,001,237
70,000,000 Commerzbank AG US Finance 6.40% ............. 02-Jan-96 69,987,555
50,000,000 Commerzbank AG US Finance 5.81% ............. 04-Jan-96 49,975,792
65,000,000 Commerzbank AG US Finance 5.69% ............. 14-Feb-96 64,547,961
49,000,000 Daimler-Benz North America 5.67% ............ 08-Feb-96 48,706,735
100,000,000 Den Danske Bank 5.84% ....................... 31-Jan-96 100,000,000
25,000,000 E.I. Du Pont de Nemours & Co. 5.58% ........ 16-Feb-96 24,821,750
48,000,000 FCC National Bank 5.59% ..................... 01-Jan-96* 47,968,288
145,000,000 FCC National Bank 5.61% ..................... 01-Jan-96* 144,914,963
50,000,000 FCC National Bank 5.74% ..................... 05-Feb-96 49,997,124
80,000,000 FCC National Bank 5.90% ..................... 16-Aug-96 79,952,246
50,000,000 FCC National Bank 5.90% ..................... 21-Aug-96 49,966,453
75,000,000 FCC National Bank 5.70% ..................... 02-Oct-96 74,905,391
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-171
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments (Continued)
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE AMORTIZED COST
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$100,000,000 Federal Farm Credit Bank 5.70% .............. 01-Jan-96* $ 99,993,311
60,000,000 Federal Farm Credit Bank 6.38% .............. 01-May-96 60,020,947
45,000,000 Federal Farm Credit Bank 6.07% .............. 03-Jun-96 44,983,622
128,000,000 Federal Home Loan Bank 5.79% ................ 02-Jan-96* 127,897,673
75,000,000 Federal Home Loan Bank 5.73% ................ 20-Jan-96* 74,943,116
123,735,000 Federal Home Loan Bank 6.85% ................ 28-Feb-96 123,743,798
140,000,000 Federal Home Loan Bank 5.73% ................ 02-Jan-96* 139,877,557
110,000,000 Federal Home Loan Bank 5.56% ................ 26-Jan-96* 109,923,818
31,000,000 Federal Home Loan Mortgage Corp. 6.01% ..... 13-May-96 30,982,561
100,000,000 Federal National Mortgage Association 5.53% 01-Jan-96* 99,940,219
75,000,000 Federal National Mortgage Association 5.80% 03-Jan-96* 74,932,918
100,000,000 Federal National Mortgage Association 5.15% 03-Jan-96* 99,997,579
159,000,000 Federal National Mortgage Association 5.25% 03-Jan-96* 158,906,304
45,000,000 Federal National Mortgage Association 5.79% 16-Jan-96* 44,983,618
25,000,000 Federal National Mortgage Association 5.60% 12-Feb-96 24,836,667
40,000,000 Federal National Mortgage Association 6.86% 28-Feb-96 40,021,811
45,000,000 Federal National Mortgage Association 5.49% 29-Apr-96 44,183,362
80,000,000 Federal National Mortgage Association 5.50% 12-Jun-96 79,853,567
89,295,000 Federal National Mortgage Association 5.59% 21-Jun-96 89,191,678
105,000,000 Federal National Mortgage Association 5.59% 01-Jul-96 104,924,469
48,000,000 Federal National Mortgage Association 5.44% 21-Nov-96 47,931,025
45,000,000 Federal National Mortgage Association 5.39% 04-Dec-96 44,942,159
21,500,000 Federal National Mortgage Association 5.37% 18-Dec-96 21,470,224
250,000,000 Fifth Third Bank 5.88% ...................... 02-Jan-96 250,000,000
60,000,000 Fifth Third Bank 5.60% ...................... 19-Jan-96 59,994,731
172,000,000 First Bank NA 5.88% ......................... 17-Jan-96* 171,992,107
125,000,000 First Bank NA 5.90% ......................... 17-Jan-96* 124,996,236
100,000,000 First Fidelity Bank NA 6.00% ................ 02-Jan-96 100,000,000
40,000,000 First Union National Bank 5.59% ............. 01-Jan-96* 39,993,844
50,000,000 First Union National Bank 5.77% ............. 31-Jan-96 50,000,000
50,000,000 First Union National Bank 5.76% ............. 01-Feb-96 50,000,000
100,000,000 First Union National Bank 5.80% ............. 02-Feb-96 100,000,000
50,000,000 First Union National Bank 5.78% ............. 09-Feb-96 50,000,000
100,000,000 Fleet Financial Group Inc. 5.61% ............ 01-Jan-96* 99,975,789
109,173,000 Fleet National Bank 5.50% ................... 02-Jan-96 109,173,000
10,000,000 Ford Motor Credit Co. 6.22% ................. 04-Jan-96 9,994,816
30,000,000 Ford Motor Credit Co. 6.22% ................. 05-Jan-96 29,979,267
15,000,000 Ford Motor Credit Co. 5.78% ................. 01-Feb-96 14,925,342
8,850,000 Ford Motor Credit Co. 9.20% ................. 08-Mar-96 8,898,701
50,000,000 General Electric Capital (Puerto Rico) 5.60% 02-Apr-96 49,284,444
50,000,000 General Electric Capital (Puerto Rico) 5.58% 10-Apr-96 49,225,000
90,000,000 General Electric Capital Corp. 5.85% ....... 01-Jan-96* 90,000,000
100,000,000 General Electric Capital Corp. 5.75% ....... 12-Jan-96 99,824,305
70,000,000 General Electric Capital Corp. 5.88% ....... 12-Jan-96 70,000,000
50,000,000 General Electric Capital Corp. 5.68% ....... 09-Feb-96 49,692,333
100,000,000 General Electric Capital Corp. 5.70% ....... 13-Feb-96 99,319,167
48,000,000 General Electric Capital Corp. 5.75% ....... 14-Mar-96* 48,000,000
64,270,000 General Electric Capital Corp. 7.85% ....... 17-Jul-96 64,927,721
85,000,000 Glaxo Wellcome PLC 5.64% .................... 27-Feb-96 84,241,623
53,900,000 Hanson Finance UK PLC 5.78% ................. 19-Jan-96 53,744,229
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-172
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments (Continued)
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE AMORTIZED COST
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 86,000,000 Hanson Finance UK PLC 5.66% ................. 23-Feb-96 $ 85,283,381
100,000,000 Hewlett Packard Co. 5.67% ................... 08-Feb-96 99,401,500
51,000,000 Hewlett Packard Co. 5.55% ................... 05-Mar-96 50,496,800
218,000,000 Household Finance Corp. 5.58% ............... 01-Jan-96* 217,828,062
100,000,000 IBM Credit Corp. 5.71% ...................... 01-Jan-96* 99,998,301
14,000,000 IBM Credit Corp. 6.40% ...................... 24-Apr-96 14,025,430
30,000,000 IBM Credit Corp. 6.10% ...................... 15-May-96 29,986,463
48,000,000 IBM Credit Corp. 5.94% ...................... 29-Jul-96 47,998,904
60,000,000 Key Bank 5.43% .............................. 01-Jan-96* 59,958,385
75,000,000 Key Bank 5.44% .............................. 01-Jan-96* 74,951,858
100,000,000 Key Bank 5.58% .............................. 01-Jan-96* 99,956,178
48,000,000 Key Bank 6.40% .............................. 26-Apr-96 48,012,477
20,000,000 KFW International Finance Inc. 5.70% ....... 24-Jan-96 19,927,167
23,000,000 Kredetbank North America 5.77% .............. 08-Jan-96 22,974,195
20,000,000 Kredetbank North America 5.64% .............. 16-Jan-96 19,953,000
22,000,000 Kredetbank North America 5.64% .............. 22-Jan-96 21,927,620
27,000,000 Kredetbank North America 5.71% .............. 31-Jan-96 26,871,525
20,000,000 MCI Communications 5.66% .................... 21-Feb-96 19,839,633
75,000,000 Morgan J P & Co., Inc. 6.20% ................ 13-May-96 74,998,641
51,000,000 Morgan J P & Co., Inc. 5.97% ................ 21-Aug-96 50,990,585
100,000,000 Morgan J P & Co., Inc. 5.60% ................ 02-Feb-96 99,502,222
100,000,000 National Australia Funding 5.69% ............ 13-Feb-96 99,320,361
44,000,000 National Westminster Bank 5.81% ............. 12-Jan-96 44,000,133
88,000,000 National Westminster Bank PLC 5.78% ........ 16-Jan-96 87,999,172
50,000,000 NationsBank of Texas NA 7.55% ............... 09-Jan-96 50,015,717
99,000,000 Norddeutsche Landesbank Giroz 5.79% ........ 08-Jan-96 98,999,714
100,000,000 Northern Trust Co. (Illinois) 5.88% ........ 02-Jan-96 100,000,000
50,000,000 Old Kent Bank & Trust Co. 5.75% ............. 26-Jan-96* 50,000,000
196,000,000 PNC Bank NA 5.76% ........................... 02-Jan-96* 195,856,070
100,000,000 PNC Bank NA 5.87% ........................... 16-Jan-96* 99,964,345
65,000,000 PNC Bank NA 5.65% ........................... 29-Jan-96* 64,952,289
25,000,000 Rockwell International Corp. 5.69% .......... 17-Jan-96 24,936,778
21,815,000 Rockwell International Corp. 5.69% .......... 18-Jan-96 21,756,384
14,200,000 Royal Bank of Canada 5.32% .................. 06-Jun-96 13,870,544
100,000,000 SMM Trust 5.94% ............................. 16-Jan-96* 99,990,463
33,000,000 Society National Bank 6.30% ................. 09-May-96 33,046,408
500,000,000 Suntrust Banks Inc. 5.88% ................... 02-Jan-96 500,000,000
50,000,000 Transamerica Corp. 5.97% .................... 22-Jan-96 49,825,875
20,000,000 U.S. National Bank 5.78% .................... 05-Jan-96 19,999,950
40,000,000 U.S. National Bank 6.25% .................... 08-May-96 39,996,742
50,000,000 United States Treasury Bills 6.14% .......... 08-Feb-96 49,676,208
10,000,000 United States Treasury Bills 5.30% .......... 25-Jul-96 9,696,722
23,000,000 United States Treasury Bills 5.44% .......... 25-Jul-96 22,284,694
30,000,000 United States Treasury Bills 5.46% .......... 25-Jul-96 29,062,700
80,000,000 US Treasury Notes 6.50% ..................... 30-Sep-96 80,410,192
80,000,000 Wachovia Bank NA 5.88% ...................... 08-Jan-96* 79,996,065
31,250,000 Wachovia Bank NA 5.75% ...................... 16-Jan-96* 31,250,614
150,000,000 Wachovia Bank NA 5.86% ...................... 16-Jan-96* 149,979,314
125,000,000 Wachovia Bank NA 5.63% ...................... 22-Jan-96* 124,878,189
23,000,000 Wells Fargo & Co. 5.86% ..................... 20-Mar-96* 23,009,264
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-173
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments (Continued)
(showing percentage of total value of investments)
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE AMORTIZED COST
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$50,000,000 Westdeutsche Landesbank 5.81% ............... 10-Jan-96 $ 50,000,000
69,000,000 Westdeutsche Landesbank 5.80% ............... 16-Jan-96 69,000,000
75,000,000 Westdeutsche Landesbank 5.75% ............... 01-Feb-96 75,000,000
50,000,000 Westpac Capital Corp. 5.52% ................. 12-Jan-96 49,915,667
30,000,000 Westpac Capital Corp. 5.82% ................. 16-Jan-96 30,000,123
50,000,000 Westpac Capital Corp. 5.58% ................. 18-Jan-96 49,868,250
50,000,000 Westpac Capital Corp. 5.81% ................. 26-Jan-96 50,000,337
40,000,000 Westpac Capital Corp. 5.63% ................. 02-Feb-96 39,799,822
49,000,000 Westpac Capital Corp. 5.32% ................. 11-Jun-96 47,826,940
50,000,000 Woolwich Building Society 5.64% ............. 04-Jan-96 49,976,500
68,000,000 Woolwich Building Society 5.68% ............. 06-Feb-96 67,613,760
- -------------- ---------------------- ...................... ------------ ----------------
TOTAL SHORT TERM INSTRUMENTS (Cost $11,207,177,156) ...... $11,207,177,156
- -------------- ----------------------------- ............................. ----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENTS -- 8.4%
DRESDNER BANK AG 5.93% (COLLATERALIZED BY U.S.
TREASURY NOTES AND BONDS 4.75%-11.625% DUE
<S> <C> <C>
500,000,000 4/15/96-11/15/16, valued at $510,618,854) ...... 500,000,000
Dresdner Bank AG 5.95% (Collateralized by U.S.
Treasury Notes 4.375%-9.25% due 3/31/96-2/15/03
475,000,000 valued at $484,962,628) ......................... 475,000,000
Union Bank of Switzerland 5.95% (Collateralized
by U.S. Treasury Note 7.5% due 11/30/99 valued
63,040,000 at $64,451,700) ................................. 63,040,000
- ------------- ------------------------ ........................ --------------
TOTAL REPURCHASE AGREEMENTS (Cost
$1,038,040,000) ................................. 1,038,040,000
============= ======================== ........................ ==============
</TABLE>
<TABLE>
<CAPTION>
UNITS
OTHER -- 1.0%
<S> <C> <C>
121,744,438 Seven Seas Money Market Fund (a) ............ 121,744,438
- --------------- ---------------------- ...................... --------------
TOTAL INVESTMENTS--100% (Cost
$12,366,961,594) ............................ $12,366,961,594
- --------------- ---------------------- ...................... --------------
</TABLE>
- ------------
* Variable rate security. Rate disclosed is that which was in effect at
December 31, 1995. Date disclosed is the next interest rate reset date.
(a) Registered Investment Company advised by State Street Global Advisors.
The accompanying notes are an integral part of these financial statements.
SAI-174
<PAGE>
Supplement dated May 1, 1996 to Prospectus dated May 1, 1996
MEMBERS RETIREMENT PROGRAMS
funded under contracts with
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
787 Seventh Avenue, New York, New York 10019
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, 1996 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.
- ------------------------------------------------------------------------------
<PAGE>
RETIREMENT BENEFITS
When you become eligible to receive benefits under a Members Retirement
Program, you may select one or more of the following forms of distribution,
which are available in variable or fixed form. The law requires that if the
value of your Account Balance is more than $3,500, you must receive a
Qualified Joint and Survivor Annuity unless your Spouse consents to a
different election.
Life Annuity - an annuity providing monthly payments for your life. No
payments will be made after your death, even if you have received only one
payment.
Life Annuity - Period Certain - an annuity providing monthly payments
for your life or, if longer, a specified period of time. If you die before the
end of that specified period, payments will continue to your beneficiary until
the end of the period. Subject to legal limitations, you may specify a minimum
payment period of 5, 10, 15 or 20 years; the longer the specified period, the
smaller the monthly payments will be.
Joint and Survivor Annuity - Period Certain - an annuity providing
monthly payments for your life and that of your beneficiary or, if longer, a
specified period of time. If you and your beneficiary both die before the end
of the specified period, payments will continue to your contingent beneficiary
until the end of the period. Subject to legal limitations, you may specify a
minimum payment period of 5, 10, 15 or 20 years; the longer the specified
period, the smaller the monthly payments will be.
How Annuity Payments are Made
When your distribution of benefits under an annuity begins, your Units
in the Funds are redeemed. Part or all of the proceeds, plus part or all of
your Account Balance in the General Account Options, may be used to purchase
an annuity. The minimum amount that can be used to purchase any type of
annuity is $3,500. Usually, a $350 charge will be deducted from the amount
used to purchase the annuity to reimburse us for administrative expenses
associated with processing the application and with issuing each month's
annuity payment. Applicable premium taxes will also be deducted.
Annuity payments may be fixed or variable.
FIXED ANNUITY PAYMENTS. Fixed annuity payments are determined from our
annuity rate tables in effect at the time the first annuity payment is
made. The minimum amount of the fixed payments is determined from tables
in our contract with the Trustees, which show the amount of proceeds
necessary to purchase each $1 of monthly annuity payments (after
deduction of any applicable taxes and the annuity administrative
charge). These tables are
-2-
<PAGE>
designed to determine the amounts required to pay for the annuity
selected, taking into account our administrative and investment expenses
and mortality and expense risks. The size of your payment will depend
upon the form of annuity chosen, your age and the age of your
beneficiary if you select a joint and survivor annuity. If our current
group annuity rates for payment of proceeds would produce a larger
payment, those rates will apply instead of the minimums in the contract
tables. If we give any group pension client with a qualified plan a
better annuity rate than those currently available for the Program, we
will also make those rates available to Program participants. The
annuity administrative charge may be greater than $350 in that case.
Under our contract with the Trustees, we may change the tables but not
more frequently than once every five years. Fixed annuity payments will
not fluctuate during the payment period.
VARIABLE ANNUITY PAYMENTS. Variable annuity payments are funded through
our Separate Account No. 4 (Pooled) (the "Fund"), through the purchase
of Annuity Units. The number of Annuity Units purchased is equal to the
amount of the first annuity payment divided by the Annuity Unit Value
for the due date of the first annuity payment. The amount of the first
annuity payment is determined in the same manner for a variable annuity
as it is for a fixed annuity. The number of Annuity Units stays the same
throughout the payment period for the variable annuity but the Annuity
Unit Value changes to reflect the investment income and the realized and
unrealized capital gains and losses of the Fund, after adjustment for an
assumed base rate of return of 5-3/4%, described below.
The amounts of variable annuity payments are determined as follows:
Payments normally start as of the first day of the second calendar month
following our receipt of the proper forms. The first two monthly payments are
the same.
Payments after the first two will vary according to the investment
performance of the Fund. Each monthly payment will be calculated by
multiplying the number of Annuity Units credited to you by the Annuity Unit
Value for the first business day of the calendar month before the due date of
the payment.
The Annuity Unit Value was set at $1.1553 as of July 1, 1969, the first
day that Separate Account No. 4 (Pooled) was operational. For any month after
that date, it is the Annuity Unit Value for the preceding month multiplied by
the change factor for the current month. The change factor gives effect to the
assumed annual base rate of return of 5-3/4% and to the actual investment
experience of the Fund.
-3-
<PAGE>
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 / 1.05 = 345.71). If the third monthly
payment is due on March 1, and the Annuity Unit Value for February was $1.10,
the annuity payment for March would be the number of units (345.71) times the
Annuity Unit Value ($1.10), or $380.28. If the Annuity Unit Value was $1.00 on
March 1, the annuity payment for April would be 345.71 times $1.00 or $345.71.
Summary of Annuity Unit Values for the Fund
This table shows the Annuity Unit Values with an assumed based rate of
return of 5-3/4%.
<TABLE>
<CAPTION>
First Business Day of Annuity Unit Value
--------------------- ------------------
<S> <C>
October 1986 $3.4330
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
</TABLE>
THE FUND
The Fund (Separate Account No. 4 (Pooled)) was established pursuant to
the Insurance Law of the State of New York in 1969. It is an investment
account used to fund benefits under group annuity contracts and other
agreements for tax-deferred retirement programs administered by us.
-4-
<PAGE>
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, 1996 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, 1996
prospectus and Statement of Additional Information.
We are a New York stock life insurance company with our Home Office at
787 Seventh Avenue, New York, New York 10019. Founded in 1859, we are one of
the largest insurance companies in the United States. Equitable Life, the
Holding Co. and their subsidiaries managed assets of approximately $195.3
billion as of December 31, 1995.
Investment Management
In providing investment management to the Funds, we currently use the
personnel and facilities of Alliance Capital Management L.P. ("Alliance"), for
portfolio selection and transaction services. For a description of Alliance,
see our May 1, 1996 prospectus.
Fund Transactions
The Fund is charged for securities brokers commissions, transfer taxes
and other fees relating to securities transactions. Transactions in equity
securities for the Fund are executed primarily through brokers which are
selected by Alliance/Equitable Life and receive commissions paid by the Fund.
For 1995 and 1994, the Fund paid $6,044,623 and $4,738,796, 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, 1996
Statement of Additional Information.
-5-
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Fund reflect applicable fees, charges
and other expenses under the Members Programs as in effect during the periods
covered, as well as the charges against the account made in accordance with
the terms of all other contracts participating in the account.
Separate Account No. 4 (Pooled): Page
Report of Independent Accountants - Price Waterhouse LLP 7
Statement of Assets and Liabilities,
December 31, 1995 8
Statement of Operations and Changes in Net Assets
for the Years Ended December 31, 1995 and 1994 9
Portfolio of Investments
December 31, 1995 10
Notes to Financial Statements 14
-6-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and the Participants in the
Association Members Retirement Program
In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, and the related statements of operations and
changes in net assets present fairly, in all material respects, the financial
position of Separate Account No. 4 of The Equitable Life Assurance Society of
the United States ("Equitable Life") at December 31, 1995, and its results of
operations and changes in net assets for each of the two years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of Equitable Life's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian and brokers, the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 7, 1996
-7-
<PAGE>
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, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments (Notes 2 and 3):
Common stocks--at value (cost: $1,772,607,539) ....................... $2,071,380,232
Long-term debt securities--at value (amortized cost: $43,389,734) .... 35,481,250
Participation in Separate Account No. 2A--at amortized cost,
which approximates market value, equivalent to 62,384 units at
$241.89 ............................................................ 15,090,212
Cash ................................................................... 3,285,960
Receivables:
Securities sold ...................................................... 15,481,889
Dividends ............................................................ 1,693,035
Interest ............................................................. 59,583
---------------------------------------------------------------------- --------------
Total assets ....................................................... 2,142,472,161
---------------------------------------------------------------------- --------------
LIABILITIES:
Payables:
Securities purchased ................................................. 10,088,399
Due to Equitable Life's General Account .............................. 5,686,050
Investment management fees payable ................................... 7,255
Accrued expenses ....................................................... 521,041
Amount retained by Equitable Life in Separate Account No. 4 (Note 1) .. 1,044,875
---------------------------------------------------------------------- --------------
Total liabilities .................................................. 17,347,620
--------------
Net Assets (Note 1):
Net assets attributable to participants' accumulations ................. 2,102,751,745
Reserves and other contract liabilities attributable to annuity
benefits ............................................................... 22,372,796
---------------------------------------------------------------------- --------------
NET ASSETS ............................................................. $2,125,124,541
====================================================================== ==============
</TABLE>
See Notes to Financial Statements.
-8-
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994
- -------------------------------------------------------------------------- -------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2):
Dividends (net of foreign taxes withheld--1995: $239,657 and 1994:
$280,079) ................................................................ $ 19,610,344 $ 18,981,135
Interest and amortization of premium ...................................... (852,218) 120,286
- -------------------------------------------------------------------------- -------------- --------------
Total ..................................................................... 18,758,126 19,101,421
EXPENSES -- (NOTE 4) ...................................................... (16,007,109) (14,943,802)
- -------------------------------------------------------------------------- -------------- --------------
NET INCOME ................................................................ 2,751,017 4,157,619
- -------------------------------------------------------------------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 2):
Realized gain from security and foreign currency transactions ............ 260,870,246 121,640,003
- -------------------------------------------------------------------------- -------------- --------------
Unrealized appreciation (depreciation) of investments and foreign currency
transactions: ............................................................
Beginning of year ........................................................ 41,831,973 211,185,607
End of year .............................................................. 290,870,386 41,831,973
- -------------------------------------------------------------------------- -------------- --------------
Change in unrealized appreciation/depreciation ............................ 249,038,413 (169,353,634)
- -------------------------------------------------------------------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .................... 509,908,659 (47,713,631)
- -------------------------------------------------------------------------- -------------- --------------
Increase (decrease) in net assets attributable to operations ............. 512,659,676 (43,556,012)
- -------------------------------------------------------------------------- -------------- --------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ............................................................. 422,289,107 435,940,867
Withdrawals ............................................................... (474,530,080) (528,069,361)
- -------------------------------------------------------------------------- -------------- --------------
Decrease in net assets attributable to contributions and withdrawals ..... (52,240,973) (92,128,494)
- -------------------------------------------------------------------------- -------------- --------------
Decrease in accumulated amount retained by
Equitable Life in Separate Account No. 4 (Note 1) ........................ 113,489 449,257
- -------------------------------------------------------------------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS ......................................... 460,532,192 (135,235,249)
NET ASSETS -- BEGINNING OF YEAR ........................................... 1,664,592,349 1,799,827,598
- -------------------------------------------------------------------------- -------------- --------------
NET ASSETS -- END OF YEAR ................................................. $2,125,124,541 $1,664,592,349
========================================================================== ============== ==============
</TABLE>
See Notes to Financial Statements.
-9-
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS (0.3%)
CHEMICALS--SPECIALTY
UCAR International, Inc.* ................................. 175,000 $ 5,906,250
-------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.2%)
Rollins Environmental Services, Inc.* ..................... 1,054,700 3,032,263
USA Waste Services, Inc.* ................................. 120,000 2,265,000
-------------
5,297,263
-------------
PRINTING, PUBLISHING & BROADCASTING (1.2%)
Australis Media Ltd. ...................................... 4,500,250 3,846,532
Australis Media Ltd.
Conv. Note* .............................................. 22,000,000 18,804,225
IVI Publishing, Inc.* ..................................... 121,700 1,597,313
-------------
24,248,070
-------------
PROFESSIONAL SERVICES (0.1%)
Loewen Group, Inc. ........................................ 50,000 1,265,625
-------------
TOTAL BUSINESS SERVICES (1.5%) ............................ 30,810,958
-------------
CAPITAL GOODS (2.3%)
AEROSPACE
General Motors Corp. (Class H) ............................ 1,000,000 49,125,000
-------------
CONSUMER CYCLICALS
AIRLINES (1.9%)
America West Airlines, Inc. (Class B)* .................... 750,000 12,750,000
Delta Air Lines, Inc. ..................................... 160,000 11,820,000
USAir Group, Inc.* ........................................ 1,000,000 13,250,000
Worldcorp, Inc.* .......................................... 339,300 3,393,000
-------------
41,213,000
-------------
APPAREL, TEXTILE (0.5%)
Cone Mills Corp.* ......................................... 371,000 4,173,750
Nine West Group, Inc.* .................................... 200,000 7,500,000
-------------
11,673,750
-------------
FOOD SERVICES, LODGING (0.3%)
La Quinta Motor Inns, Inc. ................................ 200,000 5,475,000
-------------
HOUSEHOLD FURNITURE, APPLIANCES (1.0%)
Industrie Natuzzi (ADR) ................................... 480,000 21,780,000
-------------
LEISURE-RELATED (2.0%)
ITT Corp. ................................................. 800,000 42,400,000
-------------
RETAIL-GENERAL (2.6%)
Federated Department Stores, Inc.* ........................ 750,000 20,625,000
Lowes Cos., Inc. .......................................... 450,000 15,075,000
Office Depot, Inc.* ....................................... 300,000 5,925,000
Office Max, Inc.* ......................................... 100,000 2,237,500
Tandy Corp. ............................................... 260,000 10,790,000
-------------
54,652,500
-------------
TOTAL CONSUMER CYCLICALS (8.3%) ........................... 177,194,250
-------------
</TABLE>
-10-
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1995
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C>
CONSUMER NONCYCLICALS
DRUGS (1.0%)
Biogen, Inc.* ............................................. 45,000 $ 2,767,500
Centocor, Inc.* ........................................... 325,000 10,034,375
MedImmune, Inc.* .......................................... 145,400 2,908,000
Merck & Co., Inc. ......................................... 70,000 4,602,500
-------------
20,312,375
-------------
HOSPITAL SUPPLIES & SERVICES (6.3%)
Amsco International, Inc.* ................................ 150,000 2,231,250
Columbia/HCA Healthcare Corp. ............................. 800,000 40,600,000
Sun Healthcare Group, Inc.* ............................... 1,191,000 16,078,500
Surgical Care Affiliates, Inc. ............................ 2,188,300 74,402,200
-------------
133,311,950
-------------
TOBACCO (10.4%)
Loews Corp. ............................................... 2,250,000 176,343,750
Philip Morris Cos., Inc. .................................. 500,000 45,250,000
-------------
221,593,750
-------------
TOTAL CONSUMER NONCYCLICALS (17.7%) ....................... 375,218,075
-------------
CREDIT-SENSITIVE
FINANCIAL SERVICES (3.1%)
Dean Witter Discover & Co. ................................ 50,000 2,350,000
A.G. Edwards, Inc. ........................................ 220,000 5,252,500
Household International, Inc. ............................. 130,000 7,686,250
Legg Mason, Inc. .......................................... 850,000 23,375,000
Merrill Lynch & Co., Inc. ................................. 550,000 28,050,000
-------------
66,713,750
-------------
INSURANCE (12.5%)
CNA Financial Corp.* ...................................... 1,552,500 176,208,750
ITT Hartford Group, Inc. .................................. 800,000 38,700,000
Life Re Corp. ............................................. 700,000 17,500,000
NAC Re Corp. .............................................. 575,000 20,700,000
Travelers Group, Inc. ..................................... 200,000 12,575,000
-------------
265,683,750
-------------
REAL ESTATE (0.3%)
Walden Residential Properties, Inc. ....................... 308,000 6,429,500
-------------
UTILITY -- TELEPHONE (7.7%)
Century Telephone Enterprises, Inc. ....................... 397,800 12,630,150
Telephone & Data Systems, Inc. ............................ 3,825,000 151,087,500
-------------
163,717,650
-------------
TOTAL CREDIT-SENSITIVE (23.6%) ............................ 502,544,650
-------------
ENERGY
COAL & GAS PIPELINES (0.0%)
Abraxas Petroleum Corp.* .................................. 100,000 625,000
-------------
OIL -- DOMESTIC (0.7%)
Louisiana Land & Exploration Corp. ........................ 200,000 8,575,000
Snyder Oil Corp. .......................................... 500,000 6,062,500
-------------
14,637,500
-------------
</TABLE>
-11-
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1995
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C>
OIL -- INTERNATIONAL (1.6%)
Gulf Canada Resources Ltd. ORD* ........................... 530,000 $ 2,186,250
Imperial Oil Ltd. ......................................... 859,000 31,031,375
-------------
33,217,625
-------------
OIL -- SUPPLIES & CONSTRUCTION (4.5%)
ENSCO International, Inc.* ................................ 500,000 11,500,000
Noble Drilling Corp.* ..................................... 1,000,000 9,000,000
Parker Drilling Co.* ...................................... 6,000,000 36,750,000
Rowan Cos., Inc.* ......................................... 3,300,000 32,587,500
Seagull Energy Corp.* ..................................... 250,000 5,562,500
-------------
95,400,000
-------------
RAILROADS (0.3%)
Union Pacific Corp. ....................................... 100,000 6,600,000
-------------
TOTAL ENERGY (7.1%) ....................................... 150,480,125
-------------
TECHNOLOGY
ELECTRONICS (13.5%)
American Superconductor Corp.* ............................ 149,000 2,160,500
Bay Networks, Inc.* ....................................... 300,000 12,337,500
Cisco Systems, Inc.* ...................................... 1,315,000 98,131,875
General Instrument Corp.* ................................. 3,260,000 76,202,500
ITT Industries, Inc. ...................................... 800,000 19,200,000
National Semiconductor Corp.* ............................. 2,000,000 44,500,000
Texas Instruments, Inc. ................................... 200,000 10,350,000
3Com Corp.* ............................................... 500,000 23,312,500
-------------
286,194,875
-------------
OFFICE EQUIPMENT (1.8%)
Compaq Computer Corp.* .................................... 500,000 24,000,000
Sun Microsystems, Inc.* ................................... 300,000 13,687,500
-------------
37,687,500
-------------
OFFICE EQUIPMENT SERVICES (0.2%)
Informix Corp.* ........................................... 55,000 1,650,000
Oracle Corp.* ............................................. 80,000 3,390,000
-------------
5,040,000
-------------
TELECOMMUNICATIONS (21.2%)
AirTouch Communications, Inc.* ............................ 40,000 1,130,000
American Satellite Network -- Rights* ..................... 70,000 0
Cellular Communications, Inc. (Class A)* .................. 869,268 43,246,083
Cellular Communications Puerto Rico, Inc.* ................ 322,500 8,949,375
DSC Communications Corp.* ................................. 650,000 23,968,750
Mannesmann AG ............................................. 120,000 38,196,841
Mannesmann AG (ADR) ....................................... 200,000 63,600,000
Millicom International Cellular S.A.* ..................... 1,700,000 51,850,000
Nokia Corp. (ADR) ......................................... 600,000 23,325,000
Rogers Cantel Mobile Communications, Inc. (Class B) (ADR)* 900,000 23,850,000
Scientific Atlanta, Inc. .................................. 2,035,000 30,525,000
Tellabs, Inc.* ............................................ 450,000 16,650,000
U.S. Cellular Corp.* ...................................... 2,650,000 89,437,500
Vanguard Cellular Systems, Inc. (Class A)* ................ 1,800,000 36,450,000
-------------
451,178,549
-------------
TOTAL TECHNOLOGY (36.7%) .................................. 780,100,924
-------------
</TABLE>
-12-
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Concluded)
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE (NOTE 3)
- --------------------------------------------------------------------------- ------------ --------------
<S> <C> <C>
TOTAL COMMON STOCKS (97.5%)
(Cost $1,772,607,539) ..................................................... $2,071,380,232
--------------
LONG-TERM DEBT SECURITIES:
BUSINESS SERVICES (0.2%)
PROFESSIONAL SERVICES
First Financial Management Corp.
5.0% Conv., 1999 .......................................................... $ 2,000,000 3,245,000
--------------
TECHNOLOGY
ELECTRONICS (1.4%)
General Instrument Corp.
5.0% Conv., 2000 .......................................................... 26,600,000 29,592,500
--------------
TELECOMMUNICATIONS (0.1%)
U.S. Cellular Corp.
Zero Coupon Conv., 2015 ................................................... 7,500,000 2,643,750
--------------
TOTAL TECHNOLOGY (1.5%) .................................................... 32,236,250
--------------
TOTAL LONG-TERM DEBT SECURITIES (1.7%)
(Amortized Cost $43,389,734) .............................................. 35,481,250
--------------
PARTICIPATION IN SEPARATE ACCOUNT NO. 2A,
at amortized cost, which approximates
market value, equivalent to 62,384 units
at $241.89 each (0.7%) .................................................... 15,090,212
--------------
TOTAL INVESTMENTS (99.9%)
(Cost /Amortized Cost $1,831,087,485) ..................................... 2,121,951,694
CASH AND RECEIVABLES LESS LIABILITIES (0.1%) ............................... 4,217,722
AMOUNT RETAINED BY EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 4 (0.0%) (NOTE
1). ....................................................................... (1,044,875)
--------------
NET ASSETS (100.0%) (NOTE 1) ............................................... $2,125,124,541
==============
Reserves attributable to participants' accumulations ....................... $2,102,751,745
Reserves and other contract liabilities attributable to annuity benefits .. 22,372,796
--------------
NET ASSETS (100.0%) ........................................................ $2,125,124,541
==============
* Non-income producing.
</TABLE>
See Notes to Financial Statements.
-13-
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements
1. Separate Account No. 4 (Pooled) (the Growth Equity Fund) (the Fund) of
The Equitable Life Assurance Society of the United States (Equitable Life), a
wholly-owned subsidiary of The Equitable Companies Incorporated, was
established in conformity with the New York State Insurance Law. Pursuant to
such law, to the extent provided in the applicable contracts, the net assets
in the Fund is not chargeable with liabilities arising out of any other
business of Equitable Life. The excess of assets over reserves and other
contract liabilities amounting to $1,044,875 as shown in the Statements of
Assets and Liabilities in Separate Account No. 4 may be transferred to
Equitable Life's General Account.
At December 31, 1995 and 1994, interests of retirement and investment
plans for Equitable Life employees, managers, and agents in Separate Account
No. 4 aggregated $246,531,777 (11.6%) and $184,086,304 (11.1%), respectively,
of the net assets in the Fund.
Equitable Life is the investment manager for the Fund. Alliance Capital
Management L.P. (Alliance) serves as the investment adviser to Equitable Life
with respect to the management of the Fund. Alliance is a publicly-traded
limited partnership which is indirectly majority-owned by Equitable Life.
Equitable Life and Alliance seek to obtain the best price and execution of
all orders placed for the Fund considering all circumstances. In addition to
using brokers and dealers to execute portfolio security transactions for
accounts under their management, Equitable Life and Alliance may also enter
into other types of business and securities transactions with brokers and
dealers, which will be unrelated to allocation of the Funds' portfolio
transactions.
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Security transactions are recorded on the trade date. Amortized cost of
debt securities consists of cost adjusted, where applicable, for amortization
of premium or accretion of discount. Dividend income is recorded on the
ex-dividend date; interest income (including amortization of premium and
discount on securities using the effective yield method) is accrued daily.
Realized gains and losses on the sale of investments are computed on the
basis of the identified cost of the related investments sold.
Transactions denominated in foreign currencies are recorded at the rate
prevailing at the date of such transactions. Asset and liability accounts
that are denominated in a foreign currency are adjusted to reflect the
current exchange rate at the end of the period. Transaction gains or losses
resulting from changes in the exchange rate during the reporting period or
upon settlement of the foreign currency transactions are reflected under
"Realized and Unrealized Gain (Loss) on Investments" in the Statements of
Operations and Changes in Net Assets.
-14-
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Continued)
Equitable Life's internal short-term investment account, Separate Account
No. 2A, was established to provide a more flexible and efficient vehicle to
combine and invest temporary cash positions of certain eligible accounts
(Participating Funds) under Equitable Life's management. Separate Account No.
2A invests in debt securities maturing in sixty days or less from the date of
acquisition. At December 31, 1995, the amortized cost of investments held in
Separate Account No. 2A consists of the following:
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED COST %
- -------------------------------------------------------- -------------- --------
<S> <C> <C>
Certificates of Deposit, 5.80% due 01/31/96 ............. $ 20,000,000 6.7%
Commercial Paper, 5.53%-5.87% due 1/12/96 through
2/23/96 ................................................ 262,329,329 88.0
Time Deposits, 5.875% due 01/02/96 ...................... 800,000 0.3
Variable Rate LIBOR, 5.968% due 01/08/96 ................ 15,000,000 5.0
- -------------------------------------------------------- -------------- --------
Total Investments ....................................... 298,129,329 100.0
Cash and Receivables Less Liabilities ................... 63,333 0.0
- -------------------------------------------------------- -------------- --------
Net Assets of Separate Account No. 2A ................... $298,192,662 100.0%
======================================================== ============== ========
Units Outstanding ....................................... 1,232,756
Unit Value .............................................. $ 241.89
</TABLE>
Participating Funds purchase or redeem units depending on each
participating account's excess cash availability or cash needs to meet its
liabilities. Separate Account No. 2A is not subject to investment management
fees. Separate Account No. 2A is valued daily at amortized cost, which
approximates market value.
For 1995 and 1994, investment security transactions, excluding short-term
debt securities, were as follows:
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPARATE ACCOUNT NO. 4
COST OF NET PROCEEDS
PURCHASES OF SALES
- ----------------------------------------------- -------------- --------------
<S> <C> <C>
Stocks and long-term corporate debt securities:
1995 ......................................... $2,037,876,834 $2,082,648,235
1994 ......................................... 1,556,068,225 1,644,508,525
U.S. Government obligations:
1995 ......................................... -- --
1994 ......................................... -- --
</TABLE>
----------------------------------------------------------------------------
3. Investment securities are valued as follows:
Stocks listed on national securities exchanges and certain
over-the-counter issues traded on the National Association of Securities
Dealers, Inc. Automated Quotation (NASDAQ) national market system are valued
at the last sale price, or, if no sale, at the latest available bid price.
Foreign securities not traded directly, or in American Depository Receipt
(ADR) form in the United States, are valued at the last sale price in the
local currency on an exchange in the country of origin. Foreign currency is
converted into its U.S. dollar equivalent at current exchange rates.
United States Treasury securities and other obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities
are valued at representative quoted prices.
-15-
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Concluded)
Long-term publicly traded corporate bonds are valued at prices obtained
from a bond pricing service of a major dealer in bonds when such prices are
available; however, in circumstances where Equitable Life and Alliance deem
it appropriate to do so, an over-the-counter or exchange quotation may be
used.
Convertible preferred stocks listed on national securities exchanges are
valued at their last sale price or, if there is no sale, at the latest
available bid price.
Convertible bonds and unlisted convertible preferred stocks are valued at
bid prices obtained from one or more major dealers in such securities; where
there is a discrepancy between dealers, values may be adjusted based on
recent premium spreads to the underlying common stock.
Other assets that do not have a readily available market price are valued
at fair value as determined in good faith by Equitable Life's investment
officers.
Separate Account No. 2A is valued daily at amortized cost, which
approximates market value. Short-term debt securities purchased directly by
the Fund which mature in 60 days or less are valued at amortized cost.
Short-term debt securities which mature in more than 60 days are valued at
representative quoted prices.
4. Charges and fees are deducted in accordance with the terms of the
various contracts which participate in the Fund. With respect to the Members
Retirement Plan and Trust, these expenses consist of investment management
and accounting fees, program expense charge, direct expenses and record
maintenance and report fee. These charges and fees are paid to Equitable Life
by the Fund and are recorded as expenses in the accompanying Statements of
Operations and Changes in Net Assets.
5. No Federal income tax based on net income or realized and unrealized
capital gains was applicable to contracts participating in the Fund for the
two years ended December 31, 1995, by reason of applicable provisions of the
Internal Revenue Code and no Federal income tax payable by Equitable Life for
such years will affect such contracts. Accordingly, no Federal income tax
provision is required.
-16-
