<PAGE>
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. [ ]
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AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. [ ]
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(Check appropriate box or boxes)
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THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
(Exact Name of Registrant)
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THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
(Name of Depositor)
1290 Avenue of the Americas, New York, New York 10104
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (212) 554-1234
MARY JOAN HOENE
Vice President and Counsel
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas, New York, New York 10104
(Names and Addresses of Agents for Service)
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Please send copies of all communications to: (201)392-5279
PETER E. PANARITES John R. Towers
Freedman, Levy, Kroll & Simonds Senior Vice President
1050 Connecticut Avenue, N.W., and General Counsel
Suite 825 State Street Bank and Trust Company
Washington, D.C. 20036 225 Franklin Street
Boston, MA 02110
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CALCULATION OF REGISTRATION FEE UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
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Title of Securities Being Amount Being Registered Proposed Maximum Proposed Maximum Amount of Registration
Registered Offering Price per Unit* Aggregate Offering Fee(2)
Price*
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<S> <C> <C> <C> <C>
Units of Interest $75,000,000 $75,000,000 $20,850
Under Group Annuity
Contract
(1)
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</TABLE>
*Estimated soley for purpose of determining the registration fee.
(1) The Contract does not provide for a predetermined amount or number of units
(2) Of the $75,000,000 of units of interest under group annuity contracts
registered under Registration Statement No. 333-51031 $44,280,025, for
which a filing fee of $13,063 was previously paid, are being carried
forward.
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this registration statement.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
American Dental Association
Members Retirement Program
PROSPECTUS DATED MAY 1, 1999
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Please read this prospectus and keep it for future reference. It contains
important information you should know before participating or taking any other
action under the Program.
ABOUT THE ADA PROGRAM
The Program provides members of the American Dental Association and their
eligible employees several plans for the accumulation of retirement savings on
a tax-deferred basis. Eleven investment options - eight investment funds and
three guaranteed options are available under the plans. THIS PROSPECTUS
DESCRIBES THREE OF THE AVAILABLE INVESTMENT FUNDS: THE EQUITY INDEX FUND, THE
LIFECYCLE FUND-CONSERVATIVE AND THE LIFECYCLE FUND-MODERATE. THIS PROSPECTUS
ALSO DESCRIBES THE LIFECYCLE FUND GROUP TRUSTS IN WHICH THE TWO LIFECYCLE
FUNDS INVEST. The investment funds, below, are offered BY THE EQUITABLE LIFE
ASSURANCE SOCIETY OF THE UNITED STATES.
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Investment Funds
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o Growth Equity Fund o Real Estate Fund
o Aggressive Equity Fund o Equity Income Fund*
o ADA Foreign Fund o Lifecycle Fund - Moderate
o Equity Index Fund o Lifecycle Fund -
Conservative
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*Available on or about July 1, 1999.
The Aggressive Equity Fund, ADA Foreign Fund, Equity Index Fund and Equity
Income Fund respectively invest in shares of the following mutual funds: MFS
Emerging Growth Fund, Templeton Foreign Fund, State Street Global Advisors
(SSgA) S&P 500 Index Fund and Equity Income Fund ("Underlying Mutual Funds").
The Lifecycle Funds - Conservative and Moderate ("Lifecycle Funds") each
invest in units of a corresponding group trust ("Lifecycle Fund Group Trusts")
maintained by State Street Bank and Trust Company ("State Street"). The
Lifecycle Fund Group Trusts in turn invest in units of collective investment
funds of State Street. We refer to these as the "Underlying State Street
Funds." The Underlying State Street Funds are the S&P 500 Flagship Fund,
Russell 2000 Fund, Daily EAFE Non-Lending Fund, Daily Government/Corporate
Bond Fund, and Short Term Investment Fund, which we also describe in this
prospectus. Each Underlying State Street Fund may invest cash on a temporary
basis in other mutual funds managed by State Street.
OTHER AVAILABLE INVESTMENT FUNDS AND INVESTMENT OPTIONS, EXCEPT THE EQUITY
INDEX FUND AND THE LIFECYCLE FUNDS, ARE DESCRIBED, IN DETAIL, IN A SEPARATE
PROSPECTUS FOR THOSE INVESTMENT FUNDS. You may obtain a copy of that
prospectus, or of any Underlying Mutual Fund prospectus, by writing or calling
us toll-free. See "How To Reach Us" on the back cover.
GUARANTEED OPTIONS. The guaranteed options we offer include a 3-year
Guaranteed Rate Account and 5-year Guaranteed Rate Account, and the Money
Market Guarantee Account.
We have filed registration statements relating to this offering with the
Securities and Exchange Commission. A statement of additional information
("SAI"), dated May 1, 1999, which is part of the registration statements, is
available free of charge upon request by writing to us or calling us
toll-free. The SAI has been incorporated by reference into this prospectus.
The table of contents for the SAI and a request form to obtain the SAI appear
at the end of this prospectus. You may also obtain a copy of this prospectus
and the SAI through the SEC web site at www.sec.gov.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense. The securities are not
insured by the FDIC or any other agency. They are not deposits or other
obligations of any bank and are not bank guaranteed. They are subject to
investment risks and possible loss of principal.
<PAGE>
<PAGE>
Contents of this prospectus
1
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ADA PROGRAM
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Index of key words and phrases 3
The Program at a glance - key features 4
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1 FEE TABLE 6
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Program expense charge and investment fund operating
expenses 6
Examples 9
Selected financial data and condensed financial
information 9
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2 PROGRAM INVESTMENT OPTIONS 10
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Investment options 10
Risks and investment techniques: Lifecycles Fund Group
Trusts and Underlying State Street Funds 14
Additional information about the funds 17
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3 HOW WE VALUE YOUR ACCOUNT BALANCE IN
THE INVESTMENT FUNDS 19
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When we use the words "we," "us" and "our," we mean Equitable Life.
Please see the index of key words and phrases used in this prospectus. The
index will refer you to the page where particular terms are defined or
explained.
When we address the reader of this prospectus with words such as "you" and
"your," we generally mean the individual participant in one or more of the
plans available in the Program unless otherwise explained. For example, "The
Program" section of the prospectus is primarily directed at the employer.
<PAGE>
2
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4 TRANSFERS AND ACCESS TO YOUR ACCOUNT 20
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Transfers among investment options 20
Our Account Investment Management System 20
Participant loans 20
Choosing benefit payment options 21
Spousal consent 21
Benefits payable after the death of a participant 21
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5 THE PROGRAM 23
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Eligible employers 23
Summary of plan choices 23
Getting started 24
How to make Program contributions 24
Allocating Program contribution 24
Distributions from the investment options 25
Rules applicable to participant distributions 25
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6 PERFORMANCE INFORMATION 26
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Annual percentage change in fund unit values 27
Average annual percentage change in fund units values
- years ending December 31, 1998 27
How we calculate performance data 27
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7 CHARGES AND EXPENSES 28
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Charges based on amounts invested in the Program 28
Plan and transaction expenses 29
Deductions and charges related to the Lifecycle Trusts
and Underlying State Street Funds 29
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8 TAX INFORMATION 31
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Income taxation of distributions to qualified plan
participants 31
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9 MORE INFORMATION 33
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About Program changes or termination 33
IRS disqualification 33
About the separate accounts 33
About State Street 34
About our Year 2000 progress 34
About legal proceedings 35
About our independent accountants 35
Reports we provide and available information 36
Acceptance 36
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APPENDIX I: SELECTED FINANCIAL DATA AND
CONDENSED FINANCIAL INFORMATION A-1
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TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION S-1
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About Equitable Life S-2
How to Reach Us S-3
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<PAGE>
ADA Program
3
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INDEX OF KEY WORDS AND PHRASES
Below is an index of key words and phrases used in this prospectus. The index
will refer you to the page where particular terms are defined or explained.
This index should help you locate more information on the terms used in this
prospectus.
Page
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AIM System 20
beneficiary 21
benefit payment options 21
business day 20
Contributions 24
eligible rollover distributions 31
Equitable Life S-2
group annuity contract 33
individually designed plan 23
IRA 31
investment funds cover
investment options cover
Lifecycle Funds 10
Lifecycle Fund Group Trusts 11
Master Plan 23
Master Trust 23
Pooled Trust 23
Program 23
Self Directed Prototype Plan 23
separate accounts 33
State Street 34
Trustees 33
Underlying Mutual Funds cover
Underlying State Street Funds 10
unit value 19
unit 19
<PAGE>
ADA Program
4
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THE PROGRAM AT A GLANCE - KEY FEATURES
EMPLOYER CHOICE OF RETIREMENT PLANS
Our Master Plan is a defined contribution master plan that can be adopted as a
profit-sharing plan (401(k), SIMPLE 401(k) and safe harbor 401(k) features are
available) and a defined contribution pension plan, or both. The Program's
investment options are the only investment choices under the Master Plan.
Our Self-Directed Prototype Plan gives added flexibility in choosing your
investments.
If you maintain your own individually-designed plan you may use the investment
options in the Program through our Pooled Trust.
PLAN FEATURES
MASTER PLAN:
o Program investment options used as the only investment choices.
o Plan-level and participant-level recordkeeping, benefit payments, tax
withholding and reporting provided.
o Use of our Master Trust.
o No minimum amount must be invested.
SELF-DIRECTED PROTOTYPE PLAN:
o You may combine Program investment options with individual stock and bond
investments.
o Our Pooled Trust is adopted for investment use only, and a minimum of
$25,000 must be maintained in the Trust.
o Recordkeeping services provided only for plan assets in Pooled Trust.
o Third party recordkeeping services can be arranged through us.
o Brokerage services can be arranged through us.
INVESTMENT ONLY IN POOLED TRUST:
o Our Pooled Trust is used for investment only.
o Recordkeeping services provided for plan assets in Pooled Trust.
PROFESSIONAL INVESTMENT MANAGEMENT
The Program's investments are managed by registered professional investment
advisers.
GUARANTEED OPTIONS
The three guaranteed options include two Guaranteed Rate Accounts and a Money
Market Guarantee Account.
TAX ADVANTAGES
o On earnings
No tax on investment earnings until withdrawn.
o On transfers
No tax on internal transfers.
Because you are buying a contract to fund a retirement plan that already
provides tax deferral under Federal income tax rules, you should do so for the
contract's features and benefits other than tax deferral. The tax deferral of
the contract does not provide additional benefits.
CHARGES AND EXPENSES
o Program expense charge assessed against combined value of Program assets.
o Investment management and administration fees and other expenses charged on
an investment fund-by-fund basis, as applicable.
o Plan and transaction charges that vary by type of plan adopted, or by
specific transaction.
o Indirectly, applicable charges of underlying investment vehicles for
investment management, 12b-1 fees and other expenses.
<PAGE>
5
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BENEFIT PAYMENT OPTIONS
o Lump sum.
o Installments on a time certain or dollar certain basis.
o Variety of annuity benefit payout options as available under your
employer's plan.
o Fixed or variable annuity options available.
ADDITIONAL FEATURES
o Toll-free number available for transfers and account information.
o Participant loans (if elected by your employer; some restrictions apply).
o Regular statements of account.
o Retirement Program Specialist and Account Executive support.
o Daily valuation of accounts.
o 5500 reporting.
o For Master Plan, automatic updates for law changes.
<PAGE>
Fee table
6
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The fee tables and discussion below will help you understand the various
charges and expenses you will bear under the Program. The tables reflect
charges: (1) you will directly incur, including Program expense charge,
administration fee, investment management fee and other expenses, and (2) fees
and expenses of the Underlying Mutual Fund, and the Lifecycle Group Trusts and
their underlying collective funds ("Underlying State Street Funds") you will
indirectly incur. Certain other Program charges also apply as described under
"Plan and Transaction Expenses." If you annuitize your account, charges for
premium taxes and other fees may apply.
WHEN YOU PURCHASE OR REDEEM UNITS OF ANY OF THE INVESTMENT FUNDS YOU WILL PAY
NO SALES LOAD, NO DEFERRED SALES CHARGE, NO SURRENDER FEES AND NO TRANSFER OR
EXCHANGE FEES.
PROGRAM EXPENSE CHARGE AND INVESTMENT FUND OPERATING EXPENSES
The Program expense charge and investment fund operating expenses are paid out
of each investment fund's assets. No investment management fees are paid to us
by the Equity Index Fund or the Lifecycle Funds. State Street, however, is paid
a management fee for managing the assets of the Lifecycle Fund Group Trusts
underlying the Lifecycle Funds. The Program expense charge is based partly on
the level of assets under the Program and partly on the number of plans. An
administration fee is based on investment fund assets. Each investment fund
also incurs other expenses for services such as printing, mailing, legal, and
similar items. All of these operating expenses are reflected in each investment
fund's unit value. See "How We Value Your Account."
The tables that follow summarize the charges, at annual percentage rates, that
apply to the Equity Index Fund and Lifecycle Funds. They do not include other
charges which are specific to the various plans, such as enrollment fees or
record maintenance and report fees. See "Charges and Expenses," for more
details. THE EXPENSES SHOWN FOR THE INVESTMENT FUNDS ARE BASED ON AVERAGE
PROGRAM ASSETS IN EACH OF THESE FUNDS DURING THE YEAR ENDED DECEMBER 31, 1998,
AND REFLECT APPLICABLE FEES.
The Equity Index Fund invests in shares of the SSgA S&P 500 Index Fund. The
following table shows, at annual percentage rates, the charges and fees which
are deducted from the Equity Index Fund and the SSgA S&P 500 Index Fund. No
transaction charges are incurred by the Equity Index Fund when it purchases or
redeems shares of the SSgA S&P 500 Index Fund, but the underlying mutual fund
incurs its own operating expenses. No deduction is made from the assets of the
SSgA S&P 500 Index Fund to compensate State Street for managing the assets of
that Fund. THE CHARGES FOR THE SSGA S&P 500 INDEX FUND ARE SHOWN AS A
PERCENTAGE OF THAT UNDERLYING MUTUAL FUND'S AVERAGE DAILY NET ASSETS.
EQUITY INDEX FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT FUND OPERATING EXPENSES
---------------------------------------------------------------------------------------
PROGRAM INVESTMENT
EXPENSE ADMINISTRATION MANAGEMENT OTHER
CHARGE FEE FEE EXPENSES 12B-1 FEE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index Fund 0.64% 0.15% None 0.17%(3) None 0.96%
SSgA S&P 500 Index
Fund After Waiver (1) None None 0.01%(2) 0.09% 0.08% 0.18%(2)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL 0.64% 0.15% 0.01%(2) 0.26%(3) 0.08% 1.14%(2)
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</TABLE>
(1) Source: SSgA S&P 500 Index Fund Prospectus dated December 29, 1998.
(2) State Street has voluntarily agreed to waive up to the full amount of its
management fee of .10% of average daily net assets to the extent that
total
<PAGE>
7
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operating expenses exceed .18% of average daily net assets on an annual
basis. The total operating expenses of the SSgA S&P 500 Index Fund
absent the waiver would be .27% of average daily net assets on an annual
basis. The gross annual management expense before the fee waiver would
be .10% of average daily net assets. This agreement will remain in
effect for the current fiscal year. If the waiver agreement is
terminated, the full amount of State Street's management fee may be
assessed and the total Equity Index Fund expenses may increase.
(3) Includes organizational expenses of $33,917 that were initially paid by
Equitable Life and reimbursed over a five year period ended December 31,
1998.
Lifecycle Funds
No transaction charges are incurred by the Lifecycle Funds when units of a
corresponding Lifecycle Fund Group Trust are purchased or redeemed, but annual
operating expenses are incurred by each Lifecycle Fund Group Trust. A deduction
is made from the assets of each Lifecycle Fund Group Trust to compensate State
Street for managing the assets of the Lifecycle Fund Group Trusts. State Street
may receive fees for managing the assets of other collective investment funds
in which the Funds may invest on a temporary basis, and for managing the mutual
funds in which assets of the Underlying State Street Funds may be invested.
State Street has agreed to reduce its management fee charged each of the
Lifecycle Fund Group Trusts to offset any management fees State Street receives
attributable to the Lifecycle Trusts' investment in such other collective
investment funds and mutual funds. State Street also receives an administration
fee deducted from the assets of each Lifecycle Fund Group Trust, to compensate
it for providing various recordkeeping and accounting services to the Lifecycle
Trust. In addition, other expenses are deducted from the assets of the
Underlying State Street Funds for custodial services provided to those Funds.
The fees and charges which are deducted from the assets of the Lifecycle Funds,
the Lifecycle Fund Group Trusts and the Underlying State Street Funds are shown
in the table below. THE EXPENSES FOR EACH OF THE LIFECYCLE FUND GROUP TRUSTS
AND UNDERLYING STATE STREET FUNDS ARE EXPRESSED AS A PERCENTAGE OF THEIR
RESPECTIVE AVERAGE NET ASSETS FOR 1998.
<TABLE>
<CAPTION>
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PROGRAM INVESTMENT
EXPENSE ADMINISTRATION MANAGEMENT OTHER
CHARGE FEE FEE EXPENSES TOTAL
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<S> <C> <C> <C> <C> <C>
Lifecycle Fund - Conservative 0.64% 0.15% None 0.54%(1) 1.33%
Lifecycle Fund
Group Trust - Conservative None 0.11%(2) 0.17% 0.15%(3) 0.43%
Underlying State Street Funds:
S&P 500 Flagship Fund None None None --%(4&5) --%(5)
Russell 2000 Fund None --%(5) None 0.04%(4) 0.04%
Daily EAFE Non-Lending Fund None None None 0.11%(4) 0.11%
Daily Government/Corporate Bond
Fund None None None 0.01%(4) 0.01%
Short Term Investment Fund None None None --%(4&5) --%(5)
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TOTAL 0.64% 0.26% 0.17% 0.71%(6) 1.78%(6)
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</TABLE>
<PAGE>
8
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<TABLE>
<CAPTION>
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PROGRAM INVESTMENT
EXPENSE ADMINISTRATION MANAGEMENT OTHER
CHARGE FEE FEE EXPENSES TOTAL
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<S> <C> <C> <C> <C> <C>
Lifecycle Fund - Moderate 0.64% 0.15% None 0.19%(1) 0.98%
Lifecycle Fund
Group Trust - Moderate None 0.01%(2) 0.17% 0.01%(3) 0.20%
Underlying State Street Funds:
S&P 500 Flagship Fund None None None --%(4&5) --%(5)
Russell 2000 Fund None --%(5) None 0.04%(4) 0.04%
Daily EAFE Non-Lending Fund None None None 0.11%(4) 0.11%
Daily Government/Corporate Bond
Fund None None None 0.01%(4) 0.01%
Short Term Investment Fund None None None --%(4&5) --%(5)
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TOTAL 0.64% 0.16% 0.17% 0.22%(6) 1.20%(6)
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</TABLE>
(1) These include a charge at the annual rate of .03% of the value of the
respective program assets in the Lifecycle Funds - Conservative and
Moderate to compensate Equitable Life for additional legal, accounting
and other potential expenses resulting from the inclusion of the
Lifecycle Fund Group Trusts and Underlying State Street Funds maintained
by State Street among the investment options described in this prospectus
and the SAI. Other expenses also include $150,087 of costs incurred by
Equitable Life and State Street in the organization of the Lifecycle
Funds. These costs are being reimbursed from the Lifecycle Funds, over a
five year period, pro rata based on the assets of each of those
investment funds, ending June 30, 2000. On December 8, 1995, the
Program's balance in the Balanced Fund (approximately $70 million) was
transferred to the Lifecycle Fund - Moderate. The much larger balance in
that Fund results in a much lower ratio of other expenses to total assets
compared to the corresponding ratio for the Lifecycle Fund -
Conservative.
(2) Based on the Lifecycle Fund Group Trusts - Conservative and Moderate
current fixed fee of $12,000 per year, per fund, and average net assets
for 1998.
(3) Based on the Lifecycle Fund Group Trusts - Conservative and Moderate
average net assets for 1998.
(4) Other expenses of the Underlying State Street Funds are based on expenses
incurred by each Fund during 1998.
(5) Less than 0.01%.
(6) These totals are based upon a weighted average of the other expenses for
each Underlying State Street Fund. In calculating the weighted average,
expenses for each Underlying State Street Fund were multiplied by their
respective target percentages within their respective Group Trust. See
"Lifecycle Funds - Conservative" and "Lifecycle Funds - Moderate" for a
description of the targeted percentage weightings of the Lifecycle Fund
Group Trusts - Conservative and Moderate.
<PAGE>
9
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EXAMPLES
You would pay the expenses shown below on a $1,000 initial investment over the
time period indicated for each investment fund listed below, assuming a 5%
annual rate of return. The examples include all annual fund operating expenses
plus an estimate of average plan and transaction charges over the time periods
indicated, assuming the account is not annuitized. The estimate is computed by
aggregating all record maintenance and report fees and enrollment fees, divided
by the average assets for the same period. See "Plan and Transaction Expenses."
As the minimum amount that can be converted to an annuity is $5,000, the amount
accumulated from the $1,000 contribution could not be paid in the form of an
annuity at the end of any of the periods shown in the examples. There are no
surrender charges, so the amounts would be the same, whether you withdraw all
or a portion of your Account Balance.
<TABLE>
<CAPTION>
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INVESTMENT FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Equity Index(1) $11.80 $36.75 $63.63 $140.27
Lifecycle - Conservative 18.36 56.82 97.71 211.64
Lifecycle - Moderate 12.44 38.74 67.02 147.48
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</TABLE>
(1) The expenses shown reflect the waiver of the .10% investment management
fee by State Street discussed in note (2) to the fee table above.
The purpose of these tables and examples is to assist you in understanding the
various costs and expenses that will be incurred, either directly or
indirectly, when amounts are invested in the Funds. FUTURE EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, THE 5% RATE OF RETURN IN THE
EXAMPLE IS NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
We may deduct a $350 annuitization fee if you elect a variable annuity payment
option. Assuming an annuity payout option could be issued, the expenses shown
in the above example would, in each case, be increased by $4.43 based on the
average amount applied to annuity payout options in 1998.
SELECTED FINANCIAL DATA AND CONDENSED FINANCIAL INFORMATION
Please see APPENDIX I at the end of this prospectus for selected financial data
and condensed financial information concerning the Equity Index Fund and
Lifecycle Funds.
FINANCIAL STATEMENTS
The Equity Index Fund and the Lifecycle Funds are each separate accounts of
ours as described in "About the Separate Accounts" under "More Information."
The financial statements for the Equity Index Fund (Separate Account No. 195),
Lifecyle Fund - Conservative (Separate Account No. 197) and Lifecycle Fund -
Moderate (Separate Account No. 198), may be found in the SAI for this
prospectus.
<PAGE>
2
Program Investment Options
10
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INVESTMENT OPTIONS
You may choose from ELEVEN INVESTMENT OPTIONS under the Program, eight of
which are covered in a separate prospectus. Three of these are discussed
below: the Equity Index Fund and the two Lifecycle Funds - Conservative and
Moderate. Each of these three Funds has a different investment objective. We
cannot assure you that any of these Funds will meet their investment
objectives. Also discussed are the Lifecycle Fund Group Trusts in which the
Lifecycle Funds invest and the Underlying State Street Funds in which the
Lifecycle Fund Group Trusts invest.
THE EQUITY INDEX FUND
The Equity Index Fund invests in shares of the SSgA S&P 500 Index Fund, one of
the Underlying Mutual Funds. The investment results you will experience will
depend on the investment performance of SSgA S&P 500 Index Fund. The table
below shows the investment objective and adviser for the SSgA S&P 500 Index
Fund.
UNDERLYING MUTUAL FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
INVESTMENT FUND NAME OBJECTIVE ADVISER
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Equity Index Fund SSgA S&P Replicate the State Street
500 Index total return Global
Fund of the S&P Advisers
500 Index (SSgA)
- ----------------------------------------------------------------------
</TABLE>
The Underlying Mutual Fund used by the Equity Index Fund is selected by the
ADA Trustees. We have no investment management responsibilities for the Equity
Index Fund. As to that Fund, we act in accordance with the investment policies
established by the ADA Trustees.
PLEASE REFER TO THE PROSPECTUS AND SAI OF THE SSGA S&P 500 INDEX FUND FOR A
MORE DETAILED DISCUSSION OF INVESTMENT OBJECTIVES AND STRATEGIES, THE ADVISER,
RISK FACTORS AND OTHER INFORMATION CONCERNING THAT FUND.
LIFECYCLE FUNDS - CONSERVATIVE AND MODERATE
Each Lifecycle Fund invests in a Lifecycle Fund Group Trust. Each Lifecycle
Trust has identical investment objectives and policies to the Lifecycle Fund
to which it relates. We have no investment management responsibilities for the
Lifecycle Funds. As to those Funds, we act in accordance with the investment
policies established by the ADA Trustees.
OBJECTIVES
The Lifecycle Fund - Conservative seeks to provide current income and a low to
moderate growth of capital by investing exclusively in units of the Lifecycle
Group Trust - Conservative.
The Lifecycle Fund - Moderate seeks to provide growth of capital and a
reasonable level of current income by investing exclusively in units of the
Lifecycle Group Trust - Moderate.
In turn each of the Lifecycle Fund Group Trusts invests in a mix of Underlying
State Street Funds. The following table diagrams this investment structure:
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
LIFECYCLE FUND LIFECYCLE FUND
CONSERVATIVE MODERATE
(SA 197) (SA 198)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIFECYCLE FUND LIFECYCLE FUND
GROUP TRUST GROUP TRUST
CONSERVATIVE MODERATE
- --------------------------------------------------------------------------------
UNDERLYING FUNDS
--------------------------------
S&P 500 FLAGSHIP FUND
--------------------------------
RUSSELL 2000 FUND
--------------------------------
DAILY EAFE NON LENDING FUND
--------------------------------
DAILY GOV'T CORPORATE
BOND FUND
--------------------------------
SHORT TERM
INVESTMENT FUND
<PAGE>
11
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THE LIFECYCLE FUND GROUP TRUSTS
The Lifecycle Fund Group Trusts (Lifecycle Trusts) are maintained by State
Street. Each of the Lifecycle Trusts is organized as a collective investment
trust under Massachusetts law. Because of exclusionary provisions, the
Lifecycle Fund Group Trusts are not subject to regulation under the Investment
Company Act of 1940. Each Trust is operated by a single corporate trustee
(State Street), which is responsible for all aspects of the Trust, including
portfolio management, administration and custody. The Lifecycle Fund Group
Trusts were selected by the ADA Trustees.
State Street serves as the trustee and investment manager to the Lifecycle
Fund Group Trusts. State Street is a trust company established under the laws
of the Commonwealth of Massachusetts. It is a wholly-owned subsidiary of State
Street Corporation, a publicly held bank holding company registered under the
Federal Bank Holding Company Act of 1956, as amended. State Street's home
office is located at 225 Franklin Street, Boston, Massachusetts 02110. 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.
State Street's customers include corporate, union, and public pension plans,
endowments, foundations and other financial institutions in the U.S. and
abroad. As of December 31, 1998, State Street was ranked the largest U.S.
manager of tax-exempt assets. State Street had total assets of $520.0 billion
under management at December 31, 1998.
INVESTMENT OBJECTIVES AND POLICIES
Each Lifecycle Trust has the same investment objective as the Lifecycle Fund
to which it relates. These investment objectives are described above. Each of
the Lifecycle Trusts attempts to achieve its investment objective by investing
100% of their respective assets in a mix of underlying collective investment
trusts (the Underlying State Street Funds) maintained by State Street and
offered exclusively to tax exempt retirement plans. Unlike the Lifecycle Fund
Group Trusts, however, which are available only under the ADA Program, the
Underlying State Street Funds may receive contributions from other tax exempt
retirement plans.
INVESTMENT POLICIES OF THE LIFECYCLE FUND GROUP TRUST - CONSERVATIVE
The table below shows the mix of Underlying State Street Funds targeted by the
Lifecycle Fund Group Trust - Conservative.
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S&P 500 Flagship Fund 15%
Russell 2000 Fund 5%
Daily EAFE Non-Lending Fund 10%
Daily Government/Corporate Bond Fund 50%
Short Term Investment Fund 20%
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INVESTMENT POLICIES OF THE LIFECYCLE FUND GROUP
TRUST - MODERATE
The table below shows the mix of Underlying State Street Funds targeted by the
Lifecycle Fund Group Trust - Moderate.
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S&P 500 Flagship Fund 35%
Russell 2000 Fund 10%
Daily EAFE Non-Lending Fund 15%
Daily Government/Corporate Bond Fund 30%
Short Term Investment Fund 10%
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The target percentages shown above for each Lifecycle Trust are reviewed
annually by the ADA Trustees and may be revised as recommended, subject to
State Street's approval. State Street, as investment manager of each Lifecycle
Trust, from time to time makes adjustments in the mix of Underlying State
Street Funds as needed to maintain, to the extent practicable, the target
percentages in each of the Underlying State Street Funds.
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THE UNDERLYING STATE STREET FUNDS
The Underlying State Street Funds are bank collective investment trusts. They
are organized as common law trusts under Massachusetts law, and because of
exclusionary provisions, are not subject to regulation under the 1940 Act.
State Street serves as trustee and investment manager to each of the
Underlying State Street Funds.
S&P 500 FLAGSHIP FUND
OBJECTIVE
The investment objective of the S&P 500 Flagship Fund ("Flagship Fund") is to
replicate, as closely as possible, the total return of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index").
The S&P 500 Index is composed of 500 common stocks which are chosen by
Standard & Poor's Corporation to best capture the price performance of a large
cross-section of the United States publicly traded stock market. "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.
INVESTMENT POLICIES
The Flagship Fund intends to achieve its objective by investing in all 500
stocks in the S&P 500 Index. In order to provide 100% equity exposure, the
Flagship Fund may hold up to 25% of its value in S&P 500 futures contracts in
lieu of cash equivalents. The Flagship Fund will use U.S. Treasury Bills and
other short-term cash equivalents it holds as collateral for the futures
contracts.
For additional discussion related to the investment policies of the Flagship
Fund, see discussion under "Risks and Investment Techniques," and the
Statement of Additional Information.
RUSSELL 2000 FUND
OBJECTIVE
The investment objective of the Russell 2000 Fund is to replicate, as closely
as possible, the return of the Russell 2000 Index maintained by Frank Russell
Company ("Frank Russell").
INVESTMENT POLICIES
The Russell 2000 Fund seeks to fully replicate the Russell 2000 Index. The
Russell 2000 Fund will invest its assets directly in shares of companies
included in the Russell 2000 Index.
The Russell 2000 Index is a broadly diversified small capitalization index
consisting of approximately 2,000 common stocks. The Russell 2000 Index is a
subset of the larger Russell 3000 Index. The Russell 3000 Index consists of
the largest 3,000 publicly traded stocks of U.S. domiciled corporations and
includes large, medium and small capitalization stocks. As such, the Russell
3000 Index represents approximately 98 percent of the total market
capitalization of all U.S. stocks that trade on the New York and American
Stock Exchanges and in the NASDAQ over-the-counter market. The Russell 2000
Index consists of the approximately 2,000 smallest stocks within the Russell
3000 Index and is, therefore, a broadly diversified index of small
capitalization stocks.
The composition of the Russell 2000 Index is updated continuously to reflect
corporate actions affecting companies in the Index. Once a year, at the end of
June, the Index is fully reconstituted and companies that no longer qualify
for the Index because of fluctuations of market capitalization are replaced.
The rate of change in the securities included in the Russell 2000 Index is
significant, often higher than 20 percent a year of the total market
capitalization of the Index.
The Russell 2000 Fund is neither sponsored by nor affiliated with Frank
Russell. Frank Russell's only relationship to the Russell 2000 Fund is the
licensing of the use of the Russell 2000 Stock Index. Frank Russell is the
owner of the trademarks and copyrights relating to the Russell indices.
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For additional discussion related to the investment policies of the Russell
2000 Fund, see discussion under "Risks and Investment Techniques," and the
Statement of Additional Information.
DAILY EAFE NON-LENDING FUND
OBJECTIVE
The investment objective of the Daily EAFE Non-Lending 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 Non-Lending Fund seeks to achieve its objective by investing in
other funds which invest in each of the foreign markets which comprise the
EAFE Index.
The EAFE Index is a broadly diversified international index consisting of more
than 1,100 companies traded on the markets of Europe, Australia, New Zealand
and the Far East. Daily EAFE Non-Lending Fund may invest in equity securities,
equity-based derivatives, futures contracts, index swaps and foreign exchange
contracts. The Daily EAFE Non-Lending 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, 1998, companies located in Japan (20.6%) and the United
Kingdom (23.5%) dominated the market capitalization of the EAFE Index, with
companies located in Germany, France, Switzerland and Netherlands also being
well represented on the Index. The Index covers a wide spectrum of industries.
Morgan Stanley Capital International, the creator of the EAFE Index, is
neither a sponsor of nor affiliated with the Daily EAFE Non-Lending Fund.
The Daily EAFE Non-Lending Fund seeks to fully replicate the MSCI EAFE Index,
but from time to time may not be able to hold all of the more than 1,000
stocks that comprise the EAFE Index because of the costs involved. From time
to time the Daily EAFE Non-Lending Fund will hold a representative sample of
the issues that comprise the EAFE Index. The Daily EAFE Non-Lending Fund
selects stocks for inclusion based on country, market capitalization, industry
weightings, and fundamental characteristics such as return variability,
earnings valuation, and yield. In order to parallel the performance of the
EAFE Index, the Daily EAFE Non-Lending Fund will invest in each country in
approximately the same percentage as that country's weight in the EAFE Index.
For additional discussion related to the investment policies of the Daily EAFE
Non-Lending Fund, see discussion under Risks and Investment Techniques and the
Statement of Additional Information.
DAILY GOVERNMENT/CORPORATE BOND FUND
OBJECTIVE
The investment objective of the Daily Government/Corporate Bond Fund ("GC Bond
Fund") is to match or exceed the return of the Lehman Brothers
Government/Corporate Bond Index.
INVESTMENT POLICIES
The GC Bond Fund seeks to achieve its investment objective by making direct
investment in marketable instruments and securities. 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 GC Bond Fund will
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hold securities that have a minimum credit rating when purchased of Baa3 by
Moody's or BBB- by Standard & Poor's.
For additional discussion related to the investment policies of the GC Bond
Fund, see discussion under "Risks and Investment Techniques," and the
Statement of Additional Information.
SHORT TERM INVESTMENT FUND
OBJECTIVE
The investment objective of the Short Term Investment Fund ("STIF Fund") is to
seek to provide safety of principal, daily liquidity, and a competitive yield
by investing in high quality money market instruments.
INVESTMENT POLICIES
The STIF Fund intends to achieve its objective by investing in money market
securities rated at least A-1 by Standard and Poor's and P-1 by Moody's at the
time of issuance. If the issuer has long-term debt outstanding, such debt
should be rated at least "A" by Standard & Poor's or "A" by Moody's. The STIF
Fund may purchase Yankee and Euro certificates of deposit, Euro time deposits,
U.S. Treasury bills, notes and bonds, federal agency securities, corporate
bonds, repurchase agreements and banker's acceptances. Most of the STIF Fund's
investments will have a range of maturity from overnight to 90 days. Twenty
percent of the STIF Fund, however, may be invested in assets having a maturity
in excess of 90 days but not more than thirteen months.
For additional discussion regarding the investment policies of the STIF Fund,
see discussion under "Risks and Investment Techniques," and the Statement of
Additional Information.
RISKS AND INVESTMENT TECHNIQUES: LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING
STATE STREET FUNDS
You should be aware that any investment in securities carries with it a risk
of loss. The different investment objectives and policies of the Equity Index
Fund and each of the Lifecycle Funds affect the return on these Funds.
Additionally, there are market and financial risks inherent in any securities
investment. By market risks, we mean factors which do not necessarily relate
to a particular issuer but which affect the way markets, and securities within
those markets, perform. We sometimes describe market risk in terms of
volatility, that is, the range and frequency of market value changes. Market
risks include such things as changes in interest rates, general economic
conditions and investor perceptions regarding the value of debt and equity
securities. By financial risks we mean factors associated with a particular
issuer which may affect the price of its securities, such as its competitive
posture, its earnings and its ability to meet its debt obligations. The risk
factors and investment techniques associated with the Underlying State Street
Funds in which the Lifecycle Fund Group Trusts invest are discussed below. The
risks and investment techniques associated with investments by the Equity
Index Fund in the SSgA S&P 500 Index Fund are discussed in the prospectus and
Statement of Additional Information for the SSgA S&P 500 Index Fund.
IN GENERAL
You should note that the S&P 500 Flagship Fund, the Russell 2000 Fund and the
Daily EAFE Non-Lending Fund are all index funds. An index fund is one that is
not managed according to traditional methods of "active" investment
management, which involve the buying and selling of securities based upon
economic, financial and market analysis and investment judgment. Instead, such
funds utilize a "passive" investment approach, attempting to duplicate the
investment performance of their benchmark indices through automated
statistical analytic procedures. For example, the S&P 500 Flagship Fund
attempts to match the return of the S&P 500 Index by using automated
statistical methods to make stock selections. Similar methods are employed in
selecting stocks for the Russell 2000 Fund and the Daily EAFE Non-Lending
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.
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Also, you should note that each of the Underlying State Street Funds, for the
purpose of investing uncommitted cash balances or to maintain liquidity to
meet redemptions of Fund units, may invest temporarily and without limitation
in certain short-term fixed income securities and other collective investment
funds or registered mutual funds maintained or advised by State Street. The
short-term fixed income securities in which an Underlying State Street Fund
may invest include obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies and instrumentalities and
repurchase agreements collateralized by these obligations, commercial paper,
bank certificates of deposit, banker's acceptances, and time deposits.
EQUITY SECURITIES
Certain of the Underlying State Street Funds will invest in equity securities.
Participants should be aware that equity securities fluctuate in value, often
based on factors unrelated to the value of the issuer of the securities, and
that fluctuations can be pronounced.
The securities of the smaller companies in which some of the Underlying State
Street Funds may invest may be subject to more abrupt or erratic market
movements than larger, more established companies for two reasons: the
securities typically are traded in lower volume and the issuers typically are
subject, to a greater degree, to changes in earnings and profits.
FIXED-INCOME SECURITIES
Certain of the Underlying State Street Funds will invest in fixed-income
securities. Although these are interest-bearing securities which promise a
stable stream of income, participants should be aware that the prices of such
securities are affected by changes in interest rates. Accordingly, the prices
of fixed-income securities are subject to the risk of market price
fluctuations. The values of fixed-income securities also may be affected by
changes in the credit rating or financial condition of the issuing entities.
Once the rating of a portfolio security has been changed, State Street will
consider all relevant circumstances in determining whether a particular
Underlying State Street Fund should continue to hold that security. Certain
securities such as those rated Baa by Moody's and BBB by Standard & Poor's,
may be subject to greater market fluctuations than lower yielding, higher
rated fixed-income securities. Securities which are rated Baa by Moody's are
considered medium grade obligations; they are neither highly protected nor
poorly secured, and are considered by Moody's to have speculative
characteristics. Securities rated BBB by Standard & Poor's are regarded as
having adequate capacity to pay interest and repay principal, and while such
debt securities ordinarily exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for securities in this
category than in higher rated categories.
FOREIGN SECURITIES
The Daily EAFE Non-Lending Fund will invest in foreign securities. Such
investments, however, entail special risks. Foreign securities markets
generally are not as developed or efficient as those in the United States.
Securities of some foreign issuers are less liquid and more volatile than
securities of comparable U.S. issuers. Similarly, volume and liquidity in most
foreign securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States. In addition,
there may be less publicly available information about a non-U.S. issuer, and
non-U.S. issuers generally are not subject to uniform accounting and financial
reporting standards, practices and requirements comparable to those applicable
to U.S. issuers.
Because evidences of ownership of foreign securities usually are held outside
the United States, each of the Underlying State Street Funds investing in
foreign securities will be subject to additional risks. Such risks include
possible adverse political and economic developments, possible 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
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issuers, whether from currency blockage or otherwise. Custodial expenses for a
portfolio of non-U.S. securities generally are higher than for a portfolio of
U.S. securities.
Since foreign securities transactions involving the Underlying State Street
Funds often are completed in currencies of foreign countries, the value of
these securities as measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and exchange control regulations.
Some currency exchange costs may be incurred when an Underlying State Street
Fund changes investments from one country to another.
Furthermore, some of these securities may be subject to brokerage or stamp
taxes levied by foreign governments, which have the effect of increasing the
cost of such investment. Income received by sources within foreign countries
may be reduced by any withholding and other taxes imposed by such countries.
FUTURES CONTRACTS
Certain of the Underlying State Street Funds may invest in futures contracts.
A purchase of a futures contract is the acquisition of a contractual right and
obligation to acquire the underlying security at a specified price on a
specified date. Although futures contracts by their terms may call for the
actual delivery or acquisition of the underlying security, in most cases the
contractual obligation is terminated before the settlement date of the
contract without delivery of the security. The Underlying State Street Fund
will incur brokerage fees when it purchases and sells futures contracts.
The Underlying State Street Funds will not purchase futures contracts for
speculation. Futures contracts are used to increase the liquidity of each
Underlying State Street Fund and for hedging purposes.
Transactions in futures contracts entail certain risks and transaction costs
to which an Underlying State Street Fund would not otherwise be subject, and
the Underlying State Street Fund's ability to purchase futures contracts may
be limited by market conditions or regulatory limits. Because the value of a
futures contract depends primarily on changes in the value of the underlying
securities, the value of the futures contracts purchased by the Underlying
State Street Fund generally reflects changes in the values of the underlying
stocks or bonds. The risks inherent in the use of futures contracts include:
(1) imperfect correlation between the price of the futures contracts and
movements in the prices in the underlying securities; and (2) the possible
absence of a liquid secondary market for any particular instrument at any
time.
An Underlying State Street Fund also may engage in foreign futures
transactions. Unlike trading on domestic futures exchanges, trading on foreign
futures exchanges is not regulated by the Commodity Futures Trading Commission
and may be subject to greater risks than trading on domestic exchanges. For
example, some foreign exchanges are principal markets so that no common
clearing facility exists and an investor may look only to the broker for
performance of the contract. In addition, any profits that an Underlying State
Street Fund might realize from trading could be eliminated by adverse changes
in the exchange rate, or such Underlying State Street Fund could incur losses
as a result of those changes. Transactions on foreign exchanges may include
both futures which are traded on domestic exchanges and those which are not.
SECURITIES OF MEDIUM AND SMALLER SIZED COMPANIES. Certain of the Underlying
State Street Funds may invest in the securities of medium and smaller sized
companies with market capitalization of $500 million to $1.5 billion. Such
companies may be dependent on the performance of only one or two products and,
therefore, may be vulnerable to competition from larger companies with greater
resources and to economic conditions affecting their market sector.
Consequently, consistent earnings may not be as likely in such companies as
they would be for larger companies. In addition, medium and smaller sized
companies may be more dependent on access to equity markets to raise capital
than larger companies with greater ability to support debt. 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
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on marketability. The price of these stocks may rise and fall more frequently
and to a greater extent than the overall market.
LENDING OF SECURITIES
Certain of the Underlying State Street Funds may from time to time lend
securities from their portfolios to brokers, dealers and financial
institutions and receive collateral consisting of cash, securities issued or
guaranteed by the U.S. Government, or irrevocable letters of credit issued by
major banks. The Underlying State Street Funds will invest this cash
collateral in various collective investment funds maintained by State Street.
The portion of net income from such investments will increase the return to
the Underlying State Street Funds. However, an Underlying State Street Fund
may experience a loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement. All securities lending
transactions in which the Underlying State Street Funds engage will comply
with the prohibited transaction provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") and related regulations.
INVESTMENTS BY THE STIF FUND
Each of the Lifecycle Fund Group Trusts will, and certain of the Underlying
State Street Funds may, invest in the STIF Fund. This Fund intends to invest,
among other things, in various U.S. Government Obligations, U.S.
dollar-denominated instruments issued by foreign banks and foreign branches of
U.S. banks, "when-issued" securities, and to enter into repurchase agreements
with various banks and broker-dealers. The STIF Fund's activities with respect
to each of these investments are discussed below.
The STIF Fund may invest in a variety of U.S. Government obligations,
including bills and notes issued by the U.S. Treasury and securities issued by
agencies of the U.S. Government.
The STIF Fund also may invest in U.S. dollar-denominated instruments issued by
foreign banks and foreign branches of U.S. banks, a type of investment that
may involve special risks. Such banks may not be required to maintain the same
financial reserves or capital that are required of U.S. banks. Restrictions on
loans to single borrowers, prohibitions on certain self-dealing transactions,
and other regulations designed to protect the safety and solvency of U.S.
banks may not be applicable to foreign banks and foreign branches of U.S.
banks. In addition, investments of this type may involve the unique risks
associated with investments in foreign securities described above.
The STIF Fund may commit to purchasing securities on a "when-issued" basis,
such that payment for and delivery of a security will occur after the date
that this Fund commits to purchase the security. The payment obligation and
the interest rate that will be received on the security are each fixed at the
time of the purchase commitment. Prior to payment and delivery, however, the
STIF Fund will not receive interest on the security, and will be subject to
the risk of loss if the value of the when-issued security is less than the
purchase price at time of delivery.
Finally, the STIF Fund may enter into repurchase agreements with various banks
and broker-dealers. In a repurchase agreement transaction, the STIF Fund
acquires securities (usually U.S. Government obligations) for cash and obtains
a simultaneous commitment from the seller to repurchase the securities at an
agreed-upon price and date. The resale price is in excess of the acquisition
price and reflects an agreed-upon rate of interest unrelated to the coupon
rate on the purchased security. In these transactions, the securities
purchased by the STIF Fund will have a total value at least equal to the
amount of the repurchase price and will be held by State Street or a
third-party custodian until repurchased. State Street will continually monitor
the value of the underlying securities to verify that their value, including
accrued interest, always equals or exceeds the repurchase price.
ADDITIONAL INFORMATION ABOUT THE FUNDS
CHANGE OF INVESTMENT OBJECTIVES
The ADA Trustees may change the investment objectives of the Equity Index Fund
and Lifecycle Funds. The ADA Trustees may also change the mutual fund or
collective investment
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fund in which any one of these Funds invests. The Trustees and we can make
these changes without your consent.
VOTING RIGHTS
If SSgA S&P 500 Index Fund holds a meeting of shareholders, we will vote
shares held in the corresponding Equity Index Fund in accordance with
instructions received from employers, participants or trustees, as the case
may be. Shares will be voted in proportion to the voter's interest in the
Equity Index Fund holding the shares as of the record date for the
shareholders meeting. We abstain from voting shares if we receive no
instructions. Employers, participants or trustees will receive: (1) periodic
reports relating to the SSgA S&P 500 Index Fund and (2) proxy materials,
together with a voting instruction form, in connection with shareholder
meetings.
Participants do not have any voting rights with respect to their investments
in a Lifecycle Fund. Similarly, participants do not have any voting rights
with respect to matters such as the selection of State Street as trustee or
investment manager or investment adviser of a Lifecycle Fund Group Trust or
Underlying State Street Fund, or with respect to any changes in investment
policy of any of these entities.
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3
How we value your account balance in the Equity Index Fund and Lifecycle Funds
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FOR AMOUNTS IN THE FUNDS
When you invest in the Equity Index Fund and Lifecycle Funds, your
contribution or transfer purchases "units" of that Fund. The unit value on any
day reflects the value of the Fund's investments for the day and the charges
and expenses we deduct from the Fund. We calculate the number of units you
purchase by dividing the amount you invest by the unit value of the Fund as of
the close of business on the day we receive your contribution or transfer
instruction.
On any given day, your account value in the Equity Index Fund and Lifecycle
Funds equals the number of the Fund's units credited to your account,
multiplied by that day's value for one Fund unit. In order to take deductions
for expenses from any Fund, we cancel units having a value equal to the amount
we need to deduct. Otherwise, the number of your Fund units of any Fund does
not change unless you make additional contributions, make a withdrawal, effect
a transfer, or request some other transaction that involves moving assets into
or out of that Fund option.
For a description of how Fund unit values are computed, see "How We Compute
Unit Values for the Funds" in the SAI.
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4
Transfers and access to your account
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TRANSFERS AMONG INVESTMENT OPTIONS
You may transfer some or all of your amounts among all of the investment
options if you participate in the Master Plan. Participants in other plans may
make transfers as allowed by the plan.
Transfers from the Equity Index Fund and Lifecycle Funds are permitted at any
time except if there is any delay in redemptions from the Underlying Mutual
Fund or, with respect to the Lifecycle Funds, the Lifecycle Fund Group Trusts
in which they invest.
OUR ACCOUNT INVESTMENT MANAGEMENT SYSTEM (AIM)
Participants may use our automated AIM System to transfer between investment
options, obtain account information, change the allocation of future
contributions and maturing GRAs and hear investment performance information.
To use the AIM System, you must have a touch-tone telephone. We assign a
personal security code ("PSC") number to you after we receive your completed
enrollment form.
We have established procedures to reasonably confirm the genuineness of
instructions communicated to us by telephone when using the AIM System. The
procedures require personal identification information, including your PSC
number, prior to acting on telephone instructions, and providing written
confirmation of the transfers. Thus, we will not be liable for following
telephone instructions we reasonably believe to be genuine.
A transfer request will be effective on the business day we receive the
request. We will confirm all transfers in writing.
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A business day is any day on which both the New York Stock Exchange and we are
open, and generally ends at 4:00 p.m. Eastern Time. We may, however, close due
to emergency conditions.
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PARTICIPANT LOANS
Participants loans are available if the employer plan permits them.
Participants must apply for a plan loan through the employer. Loan packages
containing all necessary forms, along with an explanation of how interest
rates are set, are available from our Account Executives.
Loans are subject to restrictions under Federal tax laws and ERISA. If you are
a sole proprietor, 10% or more partner, or a shareholder-employee of an S
Corporation who owns more than 5% of the shares (or a family member of any of
the above as defined under Federal income tax laws), you presently may not
borrow from your 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. A loan may not be taken from the
Real Estate Fund, or from the Guaranteed Rate Accounts prior to maturity. If a
participant is married, written spousal consent will be required for a loan.
Generally, the loan amount will be transferred from the investment options
into a loan account. The participant must pay the interest as required by
Federal income tax rules. If you fail to repay the loan when due, the amount
of the unpaid balance may be taxable and subject to additional penalty taxes.
Interest paid on a retirement plan loan is not deductible.
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CHOOSING BENEFIT PAYMENT OPTIONS
Benefit payments are subject to plan provisions.
The Program offers a variety of benefit payment options. If you are a
participant in a self-directed or individually- designed plan, ask your
employer for details. Your plan may allow you a choice of one or more of the
following forms of distribution:
o Qualified Joint and Survivor Annuity
o Lump Sum Payment
o Installment Payments
o Life Annuity
o Life Annuity - Period Certain
o Joint and Survivor Annuity
o Joint and Survivor Annuity - Period Certain
o Cash Refund Annuity
All of these options can be either fixed or variable except for the Cash
Refund Annuity and the Qualified Joint and Survivor Annuity which are fixed
options only.
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The amount of each payment in a fixed option remains the same. Variable option
payments change to reflect the investment performance of the Growth Equity
Fund.
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See "Types of Benefits" in the SAI for detailed information regarding each of
the benefit payout options, and "Procedures for Withdrawals, Distributions and
Transfers" in the SAI.
Fixed annuities are available from insurance companies selected by the
Trustees. Upon request, we will provide fixed annuity rate quotes available
from one or more such companies. Participants may instruct us to withdraw all
or part of their account balance and forward it to the annuity provider
selected. Once we have distributed that amount to the company selected, we
will have no further responsibility to the extent of the distribution.
We provide the variable annuity options. Payments under variable annuity
options reflect investment performance of the Growth Equity Fund.
The minimum amount that can be used to purchase any type of annuity is $5,000.
In most cases 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
If a participant is married and has an account balance greater than $5,000,
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 you and your spouse have properly waived that form of payment
in advance. Please see "Spousal Consent Requirements" under "Types of
Benefits" in the SAI.
BENEFITS PAYABLE AFTER THE DEATH OF A PARTICIPANT
If a participant dies before the entire benefit has been paid, the remaining
benefits will be paid to the participant's beneficiary. If a participant dies
before he or she is required to begin receiving benefits, the law generally
requires the entire benefit to be distributed no more than five years after
death. There are exceptions: (1) a beneficiary who is not the participant's
spouse may elect payments over his or her life or a fixed period which does
not exceed the beneficiary's life expectancy, provided payments begin within
one year of death, (2) if the benefit is payable to the spouse, the spouse may
elect to receive benefits over his or her life or a fixed period which does
not exceed his/her life expectancy beginning any time up to the date the
participant would have attained age 701|M/2 or, if later, one year after the
participant's death, or (3) the spouse may be able to roll over all or part of
the death benefit to a traditional individual retirement arrangement. If, at
death, a participant was already receiving benefits, the beneficiary can
continue to receive benefits based on the payment option selected by the
participant, subject to the Federal income tax minimum distribution rules. To
designate a beneficiary or to change an earlier designation, a participant
must have the employer send us a beneficiary designation form. In some cases,
the
<PAGE>
22
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spouse must consent in writing to a designation of any non-spouse beneficiary,
as explained in "Spousal Consent Requirements" under "Types of Benefits" in
the SAI.
Under the Master Plan, on the day we receive proof of death, we automatically
transfer the participant's account balance in the Equity Index Fund or the
Lifecycle Funds to the Money Market Guarantee Account unless the beneficiary
gives us other written instructions.
<PAGE>
23
5
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 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 25,284
participants and $1.4 billion in assets at December 31, 1998.
This section explains the ADA Program in further detail. It is intended for
employers who wish to enroll in the Program, but contains information of
interest to participants as well. You should, of course, understand the
provisions of your plan and the Participation Agreement that define the scope
of the Program in more specific terms. References to "you" and "your" in this
section are to you in your capacity as an employer.
ELIGIBLE EMPLOYERS
You can adopt the Program if you or at least one of your partners or other
shareholders is a member of: (1) the ADA, (2) a constituent or component
society of the ADA, or (3) an ADA-affiliated organization. Participation by an
affiliated organization must first be approved by the ADA's Council on
Insurance. Certain Code limitations will apply to constituent or component
societies.
Our Retirement Program Specialists are available to answer your questions
about joining the Program. Please contact us by using the telephone number or
addresses listed under "How To Reach Us - Information on Joining the Program"
on the back cover of the prospectus.
SUMMARY OF PLAN CHOICES
You have a choice of three retirement plan arrangements under the Program. You
can:
o Choose, the Master Plan - which automatically gives you a full range
of services from Equitable Life. These include your choice of the
Program investment options, plan-level and participant-level
recordkeeping, benefit payments and tax withholding and reporting.
Under the Master Plan employers adopt our Master Trust and your only
investment choices are from the Investment Options.
-----------------------------------------------------------------------------
The Master Plan is a defined contribution master plan that can be adopted as a
profit sharing plan (including optional 401(k), SIMPLE 401(k) and safe harbor
401(k) features), a defined contribution pension plan, or both.
-----------------------------------------------------------------------------
o Choose the SELF-DIRECTED PROTOTYPE PLAN - which gives you added
flexibility in choosing investments. This is a defined contribution
prototype plan which can be used to combine the Program investment
options with your own individual investments such as stocks and bonds.
With this plan you must adopt our Pooled Trust and maintain a minimum
balance of $25,000 at all times.
You must arrange separately for plan level accounting and brokerage
services. We provide recordkeeping services only for plan assets held
in the Pooled Trust. You can use any plan recordkeeper or you can
arrange through us to hire Trust Consultants, Inc. at a special rate.
You can also arrange through us brokerage services from our affiliate,
DLJ Direct, at special rates or use the services of any other broker.
-----------------------------------------------------------------------------
The Pooled Trust is an investment vehicle used with individually designed
qualified retirement plans. It can be used for both defined contribution and
defined benefit plans. We provide recordkeeping services for plan assets held
in the Pooled Trust.
-----------------------------------------------------------------------------
o Maintain your own INDIVIDUALLY DESIGNED PLAN - and use our Pooled
Trust for investment options in the Program and your own individual
investments. The Pooled Trust is for investment only and can be used
for both defined benefit and defined contribution plans. We provide
participant-level or plan-level recordkeeping services for plan assets
in the Pooled Trust.
<PAGE>
24
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Choosing the right plan depends on your own set of circumstances. We recommend
that you review all plan, trust, participation and related agreements with
your legal and tax counsel.
GETTING STARTED
If you choose the Master Plan, you must complete a Participation Agreement. If
you have your own individually designed plan and wish to use the Pooled Trust
as an investment vehicle, the trustee of your plan must complete a
Participation Agreement.
If you choose the Self-Directed Prototype Plan, you must complete the
Prototype Plan adoption agreement as well as a Participation Agreement in
order to use the Pooled Trust.
As an employer, you are responsible for the administration of the plan you
choose. If you have a Self-Directed Prototype Plan, you are also responsible
for appointing a plan trustee. Please see "Your Responsibilities as Employer"
in the SAI.
HOW TO MAKE PROGRAM CONTRIBUTIONS
Contributions must be in the form of a check drawn on a bank in the U.S.
clearing through the Federal Reserve System, in U.S. dollars, and made payable
to The ADA Retirement Trust. All contribution checks should be sent to
Equitable Life at the address shown "For Contribution Checks Only" in the
"Information Once You Join the Program" section under "How to Reach Us" on the
back cover of this prospectus. Third party checks are not acceptable, except
for rollover contributions, tax-free exchanges or trustee checks that involve
no refund. All checks are subject to collection. We reserve the right to
reject a payment if it is received in an unacceptable form.
All contributions must be accompanied by a Contribution Remittance form which
designates the amount to be allocated to each participant by contribution
type. 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.
There is no minimum amount which must be contributed for investment if you
adopt the Master Plan, or if you have your own individually designed plan that
uses the Pooled Trust. If you adopt our self-directed prototype plan, you
must, as indicated above, keep at least $25,000 in the Pooled Trust at all
times.
ALLOCATING PROGRAM CONTRIBUTIONS
Under the Master Plan participants make all of the investment decisions.
Investment decisions in the Self-Directed Prototype Plan and individually
designed plans are made either by the participant or by the plan trustees
depending on the terms of the plan.
Participants may allocate contributions among any number of Program investment
options. Allocation instructions can be changed at any time. IF WE DO NOT
RECEIVE ADEQUATE INSTRUCTIONS, WE WILL ALLOCATE YOUR CONTRIBUTIONS TO THE
MONEY MARKET GUARANTEE ACCOUNT UNTIL WE ARE PROPERLY INSTRUCTED OTHERWISE.
WHEN TRANSACTION REQUESTS ARE EFFECTIVE. Contributions, as well as transfer
requests and allocation changes (not including GRA maturity allocation changes
discussed in the SAI), are effective on the business day they are received.
In-service distribution requests are also effective on the business day they
are received unless, as in the Master Plan, there are plan provisions to the
contrary. Transaction requests received after the end of a business day will be
credited the next business day. Processing of any transaction may be delayed if
a properly completed form is not received.
Trustee-to-trustee transfers of plan assets are effective the business day
after we receive all items we require, including check and mailing
instructions, and the new or amended plan opinion/IRS determination letter or
adequate proof of this letter.
<PAGE>
25
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DISTRIBUTIONS FROM THE INVESTMENT OPTIONS
Keep in mind two sets of rules when considering distributions or withdrawals
from the Program. The first are rules and procedures that apply to the
investment options, exclusive of the provisions of your plan. We discuss those
in this section. The second are rules specific to your plan. We discuss those
"Rules Applicable to Participant Distributions" below. Certain plan
distributions may be subject to Federal income tax, and penalty taxes. See
"Tax Information."
AMOUNTS IN THE EQUITY INDEX FUND AND LIFECYCLE FUNDS. These are generally
available for distribution at any time, subject to the provisions of your
plan. However, there may be a delay for withdrawals from these Funds if there
is any delay in redemptions from the related Underlying Mutual Fund, or with
respect to the Lifecycle Funds, from the Lifecycle Fund Group Trusts in which
they invest.
Payments or withdrawals and application of proceeds to an annuity ordinarily
will be made promptly upon request in accordance with plan provisions.
However, we can defer payments, applications and withdrawals for any period
during which the New York Stock Exchange is closed for trading, sales of
securities are restricted or determination of the fair market value of assets
is not reasonably practicable because of an emergency.
RULES APPLICABLE TO PARTICIPANT DISTRIBUTIONS
In addition to our own procedures, distribution and benefit payment options
under a tax qualified retirement plan are subject to complicated legal
requirements. A general explanation of the federal income tax treatment of
distributions and benefit payment options is provided in "Tax Information" in
this prospectus and the SAI. You should discuss your options with a qualified
financial advisor. Our Account Executives also can be of assistance.
In general, under the Master Plan or our Self-Directed Prototype Plan,
participants are eligible for benefits upon retirement, death or disability,
or upon termination of employment with a vested benefit. Participants in an
individually designed plan are eligible for retirement benefits depending on
the terms of their plan. See "Benefit Payment Options" under "Transfers and
Access to Your Money," and "Tax Information" for more details. For
participants who own more than 5% of the business, benefits must begin no
later than April 1 of the year after the participant reaches age 701|M/2. For
all other participants, distribution must begin by April 1 of the later of the
year after attaining age 701|M/2 or retirement from the employer sponsoring
the plan.
Under the Master Plan, self-employed persons may generally not receive a
distribution prior to age 591|M/2, and employees generally may not receive a
distribution prior to a separation from service.
<PAGE>
6 26
Performance information
- --------------------------------------------------------------------------------
The investment performance of the Equity Index Fund and Lifecycle Funds
reflects changes in unit values experienced over time. The unit value
calculations for the Funds include all earnings, including dividends and
realized and unrealized capital gains. Unlike the typical mutual fund, the
Funds reinvest, rather than distribute, their earnings.
The following tables show the annual percentage change in Fund unit values,
and the average annual percentage change in Fund unit values, for the
appropriate period ended December 31, 1998. You may compare the performance
results for each Fund with the data presented for certain unmanaged market
indices, or "benchmarks."
Performance data for the benchmarks do not reflect any deductions for
investment advisory, brokerage or other expenses of the type typically
associated with an actively managed investment fund. This overstates their
rates of return and limits the usefulness of the benchmarks in assessing the
performance of the Funds. The benchmark results have been adjusted to reflect
reinvestment of dividends and interest for greater comparability. The
benchmarks are:
o Standard and Poor's 500 Index ("S&P 500") - a weighted index of the
securities of 500 companies widely regarded by investors as
representative of the stock market.
o Russell 2000 Index ("Russell 2000") - a broadly diversified small
capitalization index of the approximately 2,000 smallest stocks within
the Russell 3000 Index. The Russell 3000 Index consists of the largest
3,000 publicly traded stocks of U.S. domiciled corporations and
includes large, medium and small capitalization stocks.
o Morgan Stanley Capital International EAFE Index ("EAFE") - an index of
the securities of over 1,000 companies traded on the markets of Europe,
Australia, New Zealand and the Far East.
o Lehman Government/Corporate Bond Index ("Lehman") - an index widely
regarded as representative of the bond market.
o Salomon Brothers 3-Month T-Bill Index ("Salomon 3 Mo. T-Bill") - an
index of direct obligations of the U.S. Treasury which are issued in
maturities between 31 and 90 days.
o Consumer Price Index (Urban Consumers - not seasonally adjusted)
("CPI") - an index of inflation that can be used as a non-securities
benchmark.
The annual percentage change in unit values represents the percentage increase
or decrease in unit values from the beginning of one year to the end of that
year. The average annual rates of return are time-weighted, assume an
investment at the beginning of each period, and include the reinvestment of
investment income.
Historical results are presented for the Funds for the periods during which
the Funds were available under the Program. Hypothetical results were
calculated for prior periods. For the Equity Index Fund, no results are
presented for periods prior to 1993, as the SSgA S&P 500 Index Fund began
operations during 1992. 1995 performance data for the Lifecycle Funds is shown
for the period when the Funds commenced operations on May 1, 1995 through
December 31, 1995.
THE PERFORMANCE SHOWN DOES NOT REFLECT ANY RECORD MAINTENANCE AND REPORT OR
ENROLLMENT FEES. NO PROVISIONS HAVE BEEN MADE FOR THE EFFECT OF TAXES ON
INCOME AND GAINS OR UPON DISTRIBUTION. PAST PERFORMANCE IS NOT AN INDICATION
OF FUTURE PERFORMANCE.
<PAGE>
27
- --------------------------------------------------------------------------------
ANNUAL PERCENTAGE CHANGE IN FUND
UNIT VALUES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
LIFECYCLE LIFECYCLE SALOMON
EQUITY FUND - FUND - S&P RUSSELL 3 MO.
INDEX* CONSERVATIVE MODERATE 500 2000 EAFE LEHMAN T-BILL CPI
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 27.2% 10.2% 15.1% 28.6% -2.6% 20.0% 9.5% 5.1% 1.8%
1997 31.7 9.9 16.1 33.4 22.4 1.8 9.8 5.2 1.9
1996 21.3 4.3 10.6 23.0 16.5 6.1 2.9 5.3 3.3
1995 35.1 5.9 10.1 37.5 28.4 11.2 19.2 5.7 2.9
1994 0.7 - - 1.3 1.8 7.8 -3.5 4.2 2.7
1993 6.4 - - 10.0 18.9 32.6 11.0 3.1 2.7
1992 - - - 7.6 18.4 -12.2 7.6 3.6 2.9
1991 - - - 30.5 46.1 12.5 16.1 5.8 3.0
1990 - - - 3.1 19.5 -23.2 8.3 7.9 6.2
1989 - - - 31.7 16.3 10.8 14.2 8.7 4.6
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL PERCENTAGE CHANGE IN
FUND UNIT VALUES - YEARS ENDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
LIFECYCLE LIFECYCLE SALOMON
EQUITY FUND - FUND - S&P RUSSELL 3 MO.
INDEX* CONSERVATIVE MODERATE 500 2000 EAFE LEHMAN T-BILL CPI
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 27.2% 10.2% 15.1% 28.6% -2.6% 20.0% 9.5% 5.1% 1.8%
3 Years 26.6 8.1 13.9 28.2 11.6 9.0 7.3 5.2 2.2
5 Years 22.6 N/A N/A 24.1 11.9 9.2 7.3 5.1 2.4
10 Years N/A N/A N/A 19.2 12.9 2.9 9.3 5.5 3.1
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Hypothetical results, in bold, are based on underlying mutual fund
performance before the inception of the respective Funds.
HOW WE CALCULATE PERFORMANCE DATA
The Equity Index Fund began operations as Separate Account No. 195 on February
1, 1994. For prior periods hypothetical results are shown. The results reflect
the actual performance of SSgA S&P 500 Index Fund beginning with 1993, the
first full year after that mutual fund began operations. For these hypothetical
calculations we have applied the Program expense charge during those periods
plus .15% in estimated other expenses to the historical investment experience
of the SSgA S&P 500 Index Fund.
The Lifecycle Fund - Conservative and the Lifecycle Fund - Moderate performance
shown reflects actual investment performance of Separate Account No. 197 and
Separate Account No. 198 for the period beginning May 1, 1995, when the Funds
commenced operations.
<PAGE>
7 28
Charges and expenses
- --------------------------------------------------------------------------------
You will incur two general types of charges under the
Program:
o Charges based on the value of your assets in the Program - these apply to
all amounts invested in the Program (including installment payout option
payments), and do not vary by plan. These are, in general, reflected as
reductions in the unit values of the Equity Index Fund and Lifecycle
Funds.
o Plan and transaction charges - these vary by plan or are charged for
specific transactions, and are typically stated in a dollar amount. Unless
otherwise noted, these are deducted in fixed dollar amounts by reducing
the number of units in the Equity Index Fund and Lifecycle Funds.
We make no deduction from your contributions or withdrawals for sales
expenses.
CHARGES BASED ON AMOUNTS INVESTED IN THE PROGRAM
PROGRAM EXPENSE CHARGE
We assess the Program expense charge against the combined value of Program
assets in all the investment options. The purpose of this charge is to cover
the expenses that we and the ADA incur in connection with the Program.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
ANNUAL PROGRAM EXPENSE CHARGE*
- ------------------------------------------------------------------------
VALUE OF PROGRAM ASSETS EQUITABLE LIFE ADA TOTAL
- ------------------------------------------------------------------------
<S> <C> <C> <C>
First $400 million .620% .025% .645%
Over $400 million .620 .020 .640
- ------------------------------------------------------------------------
</TABLE>
* The Program expense charge is determined by negotiation between us and
the Trustees. The charge is primarily based on a formula that gives
effect to total Program assets and the number of plans enrolled in the
Program. Currently, the portion paid to the ADA has been reduced to
0.015% for all asset levels, but the ADA's portion could be increased in
the future. For the 12 months beginning May 1, 1998, the total Program
expense charge is 0.635%.
For investment options other than GRAs, the Program expense charge is
calculated based on Program assets on January 31 in each year, and is charged
at a monthly rate of 1|M/12 of the relevant annual charge. For a description
of the Program expense charge as it relates to the Guaranteed Rate Accounts,
please refer to our separate prospectus for the other Investment Options in
the Program.
We apply our portion of the Program expense charge toward the cost of
maintenance of the investment 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 ADA Trustees can direct us to
raise or lower the ADA's part of this fee to reflect their expenses in
connection with the Program. During 1998 we received $8,354,823 and the ADA
received $173,712 under the Program expense charge.
ADMINISTRATION FEES
The computation of unit values for each investment fund also reflects fees
charged for administration. We receive an administrative fee at the annual
rate of .15% of assets held in the Equity Index Fund and Lifecycle Funds. As
part of our administrative functions, we maintain records for all portfolio
transactions and cash flow control, calculate unit values, monitor compliance
with the New York Insurance Law and supervise custody matters for all these
Funds.
OTHER EXPENSES BORNE BY THE FUNDS
Certain other expenses are charged directly to the Equity Index Fund and
Lifecycle Funds. These include SEC filing fees and certain related expenses
such as printing of SEC filings, prospectuses and reports, mailing costs,
custodians' fees, financial accounting costs, outside auditing and legal
expenses, and other costs related to the Program.
The Equity Index Fund purchases and redeems shares in the SSgA S&P 500 Index
Fund at net asset value. The net asset value reflects charges for management,
audit, legal,
<PAGE>
29
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shareholder services, transfer agent and custodian fees. For a description of
charges and expenses assessed by the SSgA S&P 500 Index Fund, which are
indirectly borne by the Fund, please refer to the prospectus for the SSgA S&P
500 Index Fund.
The Lifecycle Funds - Conservative and Moderate purchase and redeem units in
the Lifecycle Fund Group Trusts - Conservative and Moderate, respectively, at
net asset value. The net asset value reflects charges for investment
management, audit, legal, custodian and other fees. By agreement with the ADA
Trustees, we impose a charge at the annual rate of .03% of the value of the
respective assets of the Lifecycle Funds - Conservative and Moderate. This
charge compensates us for additional legal, accounting and other potential
expenses resulting from the inclusion of the Lifecycle Fund Group Trusts and
Underlying State Street Funds among the investment options described in this
prospectus. For a description of charges and expenses assessed by the
Lifecycle Fund Group Trusts, which are indirectly borne by the Lifecycle
Funds, see "Deductions and Charges Related to the Lifecycle Trusts and
Underlying State Street Fund," below.
PLAN AND TRANSACTION EXPENSES
ADA RETIREMENT PLAN, PROTOTYPE SELF-DIRECTED PLAN AND INDIVIDUALLY-DESIGNED
PLAN FEES
RECORD MAINTENANCE AND REPORT FEE. At the end of each calendar quarter, we
deduct a record maintenance and report fee from each participant's Account
Balance. This fee is:
--------------------------------------------------------------
ADA Members Retirement Plan participants $3 per quarter
Self-Directed Prototype Plan participants $3 per quarter
Investment Only $1 per quarter
--------------------------------------------------------------
ENROLLMENT FEE. We charge an employer a non-refundable enrollment fee of $25
for each participant enrolled under its plan. If we do not maintain individual
participant records under an individually-designed plan, we instead charge the
employer $25 for each plan or trust. If the employer fails to pay these
charges, we may deduct the amount from subsequent contributions or from
participants' account balances.
PROTOTYPE SELF-DIRECTED PLAN FEES. Employers who participate in our Prototype
Self-Directed Plan incur additional fees not payable to us, such as brokerage
and administration fees.
INDIVIDUAL ANNUITY CHARGES
ANNUITY ADMINISTRATIVE CHARGE. If a participant elects a variable annuity
payment option, we deduct a $350 charge from the amount used to purchase the
annuity. This charge reimburses us for administrative expenses associated with
processing the application for the annuity and issuing each month's annuity
payment. The minimum amount that can be converted to an annuity, so that the
charge would apply, is $5,000. Annuities purchased from other providers may
also be subject to fees and charges.
CHARGE FOR APPLICABLE TAXES. In certain jurisdictions, amounts used to
purchase an annuity are subject to charges for premium or other applicable
taxes (rates currently range up to 2%). Taxes depend, among other things, on
your place of residence, applicable laws and the form of annuity benefit you
select. We will deduct such charges based on your place of residence at the
time the annuity payments begin.
GENERAL INFORMATION ON FEES AND CHARGES
We may change the fees and charges described above at any time with the ADA's
consent. During 1998 we received total fees and charges under the Program of
$11,844,736.
DEDUCTIONS AND CHARGES RELATED TO THE LIFECYCLE TRUSTS AND UNDERLYING STATE
STREET FUNDS
In addition to the generally applicable Program fees and charges that we
impose, State Street imposes fees and charges for providing investment
management services, and custodial services, and for other expenses incurred
in connection with operating the Lifecycle Fund Group Trusts and the
Underlying State Street Funds. State Street deducts
<PAGE>
30
- --------------------------------------------------------------------------------
these fees from the assets of the Lifecycle Fund Group Trusts in which the
Lifecycle Funds invest, or the Underlying State Street Funds in which the
Lifecycle Fund Group Trusts invest.
INVESTMENT MANAGEMENT FEE. Each Lifecycle Trust pays State Street a fee equal
to .17% of the average annual net assets of each Lifecycle Trust for providing
investment management services to the Trusts. No fee is paid to State Street
for managing the assets of the Underlying State Street Funds with respect to
investments made in such 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 State Street Funds may be
invested. State Street has agreed to reduce its management fee charged to each
of the Lifecycle Trusts to offset any management fees State Street receives
attributable to the Trusts' investment in such other collective investment
funds and mutual funds.
FIXED ADMINISTRATION FEE. State Street also makes a deduction from the assets
of each Lifecycle Fund Group Trust to compensate it for providing various
recordkeeping and accounting services to such Trust and for periodically
rebalancing the assets of each Trust to conform to the target percentage
weightings for the Trust. This fee is currently fixed at $12,000 per year for
each Trust.
OTHER EXPENSES. Certain costs and expenses are charged directly to the
Lifecycle Fund Group Trusts. These include legal and audit expenses and costs
related to providing educational and other materials to ADA Program
participants about the Lifecycle Fund investment options. In addition,
participants indirectly incur expenses for audit and custodial services
provided to the Underlying State Street Funds. State Street serves as
custodian to each of these Funds.
<PAGE>
8 31
Tax information
- --------------------------------------------------------------------------------
In this section, we briefly outline current federal income tax rules relating
to adoption of the Program, contributions to the Program and distributions to
participants under qualified retirement plans. Certain other information about
qualified retirement plans appears here and in the SAI. We do not discuss the
effect, if any, of state tax laws that may apply.
The United States Congress has in the past considered and may in the future
consider proposals for legislation that, if enacted, could change the tax
treatment of qualified retirement plans. In addition, the Treasury Department
may amend existing regulations, issue new regulations, or adopt new
interpretations of existing laws. State tax laws or, if you are not a United
States resident, foreign tax laws, may affect the tax consequences to you or
the beneficiary. These laws may change from time to time without notice and,
as a result, the tax consequences may also change. There is no way of
predicting whether, when or in what form any such change would be adopted.
Any such change could have retroactive effects regardless of the date of
enactment. We suggest you consult your legal or tax adviser.
Because you are buying a contract to fund a retirement plan that already
provides tax deferral under Federal income tax rules, you should do so for the
contract's features and benefits other than tax deferral. The tax deferral of
the contract does not provide additional benefits.
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 we distribute your benefits 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, you calculate the
tax on the lump sum distribution separately from taxes on any other income you
may have during the year. You calculate the tax 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 must consist of your entire
balance in the plan and must occur in one taxable year after you have attained
age 59 1/2. Five-year averaging is available only for one lump sum
distribution.
If you were born before 1936, you may elect to have special rules apply to one
lump sum distribution. You may elect either ten-year averaging using 1986
rates or five-year averaging using then current rates. In addition, you may
elect separately to have the portion of your distribution attributable to
pre-1974 contributions taxed at a flat 20% rate.
Effective January 1, 2000, you may no longer use five year averaging on lump
sum distributions.
ELIGIBLE ROLLOVER DISTRIBUTIONS. Many types of distributions from qualified
plans are "eligible rollover distributions" that can be transferred directly
to another qualified plan or traditional 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.
ANNUITY OR INSTALLMENT PAYMENTS. Each payment you receive is ordinary income
for tax purposes, except where you have a "cost basis" in the benefit. Your
cost basis is equal to the amount of your post-tax employee contributions,
plus any employer contributions you had to include in gross income in prior
years. You may exclude from gross income a portion of each annuity or
installment payment you receive. If you (and your survivor) continue to
receive payments after you have received your cost basis in the contract, all
amounts will be taxable.
<PAGE>
32
- --------------------------------------------------------------------------------
IN-SERVICE WITHDRAWALS. Some plans allow in-service withdrawals of after-tax
contributions. The portion of each withdrawal attributable to cost basis is
not taxable. The portion of each withdrawal attributable to earnings is
taxable. Withdrawals are taxable only after they exceed your cost basis if
they are attributable to your pre-January 1, 1987 contributions under plans
that permitted those withdrawals as of May 5, 1986. Amounts that you include
in gross income under this rule may also be subject to the additional 10%
penalty tax on premature distributions described below. In addition, 20%
mandatory Federal income tax withholding may also apply.
PREMATURE DISTRIBUTIONS. You may be liable for an additional 10% penalty tax
on all taxable amounts distributed before age 59 1/2 unless the distribution
falls within a specified exception or is rolled over into an IRA or other
qualified plan.
The exceptions to the penalty tax include (a) distributions made on account of
your death or disability,
(b) distributions beginning after separation from service in the form of a
life annuity or installments over your life expectancy (or the joint lives or
life expectancies of you and your beneficiary), (c) distributions due to
separation from active service after age 55 and (d) distributions you use to
pay deductible medical expenses.
WITHHOLDING. In almost all cases, 20% mandatory income tax withholding will
apply to all "eligible rollover distributions" that are not directly
transferred to a qualified plan or IRA. If a distribution is not an eligible
rollover distribution, the recipient may elect out of withholding. The rate of
withholding depends on the type of distribution. See "Eligible Rollover
Distributions and Federal Income Tax Withholding" in the SAI. Under the ADA
Master Retirement Plan, we will withhold the tax and send you the remaining
amount. Under an individually designed plan or our prototype self-directed
plan we will pay the full amount of the distribution to the plan's trustee.
The trustee is then responsible for withholding Federal income tax upon
distributions to you or your beneficiary.
OTHER TAX CONSEQUENCES. Federal estate and gift taxes, state and local estate
and inheritance taxes, and other tax consequences of participation in the
Program, depend on the residence and the circumstances of each participant or
beneficiary. For complete information on Federal, state, local and other tax
considerations, you should consult a qualified tax advisor.
<PAGE>
33
9
More information
- --------------------------------------------------------------------------------
ABOUT PROGRAM CHANGES OR TERMINATIONS
AMENDMENTS. The group annuity contract has been amended in the past and we and
the Trustees may agree to amendments in the future. No future change can
affect annuity benefits in the course of payment. If certain conditions are
met, we may: (1) terminate the offer of any of the investment options and (2)
offer new investment options with different terms.
TERMINATION. We or the ADA Trustees may terminate the group annuity contract.
If the contract is terminated, we will not accept any further contributions or
perform any recordkeeping functions after the date of termination. We then
would make arrangements with the ADA Trustees with respect to the assets held
in the investment options that we provide, subject to the following:
o transfers and withdrawals from the Real Estate Fund would continue to be
subject to the restrictions described in this prospectus and in the SAI;
o the ADA Trustees could transfer assets from the Money Market Guarantee
Account in installments over a period of time not to exceed two years;
however, during that time participants would be permitted to make
transfers to funding vehicles provided by another financial institution
(other than a money market fund or similar investment); and
o amounts allocated to the GRAs would be held until maturity.
If the ADA Trustees make arrangements with us, you may be able to continue to
invest amounts in the investment options that we provide and elect payment of
benefits through us.
AGREEMENT WITH STATE STREET. We and State Street have entered into an
Agreement with respect to various administrative, procedural, regulatory
compliance and other matters relating to the availability of the Lifecycle
Fund Group Trusts and Underlying State Street Funds in the ADA Program through
the Lifecycle Funds. The Agreement does not contain an expiration date and is
intended to continue in effect indefinitely. However, under the terms of the
Agreement, we may terminate it upon three months prior written notice to State
Street, and State Street may terminate it upon six months prior written notice
to us. In the event of a termination of the Agreement, State Street has the
right, upon four months' prior notice to us, to require the redemption of all
units of the Lifecycle Fund Group Trusts held by the Lifecycle Funds. Should
we receive notice of a required redemption, we will advise you promptly in
order to allow you adequate time to transfer to one or more of the other
Investment Options.
IRS DISQUALIFICATION
If your plan is found not to qualify under the Internal Revenue Code, we may:
(1) return the plan's assets to the employer (in our capacity as the plan
administrator) or (2) prevent plan participants from investing in the separate
accounts.
ABOUT THE SEPARATE ACCOUNTS
Each investment fund is one of our separate accounts. We established the
separate accounts under special provisions of the New York Insurance Law.
These provisions prevent creditors from any other business we conduct from
reaching the assets we hold in our investment funds for owners of our variable
annuity contracts, including our group annuity contracts with the ADA
Trustees. The results of each separate account's operations are accounted for
without regard to Equitable Life's, or any other separate account's, operating
results. We are the legal owner of all of the assets in the separate accounts
and may withdraw any amounts we have in the separate accounts that exceed our
reserves and other liabilities under variable annuity contracts.
The separate accounts that we call the Equity Index Fund and Lifecycle Funds
commenced operations on 1994 and 1995, respectively. Because of exclusionary
provisions, none of the investment funds is subject to regulation under the
Investment Company Act of 1940. The Equity Index Fund and Lifecycle Funds are
used exclusively in the ADA Program.
<PAGE>
34
- --------------------------------------------------------------------------------
ABOUT STATE STREET
State Street, is one of the world's leading specialists in serving
institutional investors, providing a full range of products and services. As
of December 31, 1998, State Street was the largest manager of pension assets
with $520.0 billion under management.
State Street is subject to supervision and examination by the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Massachusetts Commissioner of Banks. This, however, does
not provide any protection against loss that may be experienced as a result of
an investment in the Trusts. Further, State Street is required to comply with
ERISA, to the extent applicable, in connection with the administration of the
Program.
TAX STATUS OF THE LIFECYCLE FUND GROUP TRUSTS AND UNDERLYING FUNDS. Each Trust
is a tax-exempt group trust established pursuant to Revenue Ruling 81-100. As
a tax-exempt group trust, each Trust is not subject to federal income tax
unless the Trust generates unrelated business taxable income as defined in the
Code ("UBTI"). It is the policy of State Street not to invest any portion of
the assets of a Trust in a manner that will generate UBTI. If State Street
determines, however, that a proposed investment cannot be structured to avoid
UBTI and that the projected after-tax return on that investment is sufficient
to justify the making of such investment, then State Street may elect to make
that investment. In the unlikely event that any UBTI is incurred by a Trust,
it is anticipated that any tax thereon would be reported and paid by the Trust
as an expense of such Trust.
ABOUT OUR YEAR 2000 PROGRESS
Equitable Life relies upon various computer systems in order to administer
your policy and operate the investment options. Some of these systems belong
to service providers who are not affiliated with Equitable Life.
In 1995, Equitable Life began addressing the question of whether its computer
systems would recognize the Year 2000 before, on or after January 1, 2000, and
Equitable has identified those of its systems critical to business operations
that were not Year 2000 compliant. By year end 1998, the work of modifying or
replacing non-compliant systems was substantially completed. Equitable Life
has begun comprehensive testing of its Year 2000 compliance and expects that
the testing will be substantially completed by June 30, 1999. Equitable Life
has contacted third-party service providers to seek confirmations that they
are acting to address the Year 2000 issue with the goal of avoiding any
material adverse effect on services provided to policyowners and on operations
of the investment options. Most third-party service providers have provided
Equitable Life confirmations of their Year 2000 compliance. Equitable Life
believes it is on schedule for substantially all such systems and services,
including those considered to be mission-critical, to be confirmed as Year
2000 compliant, renovated, replaced or the subject of contingency plans, by
June 30, 1999, except for one investment accounting system which is scheduled
to be replaced by August 31, 1999 and confirmed as Year 2000 compliant by
September 30, 1999. Additionally, Equitable Life will be supplementing its
existing business continuity and disaster recovery plans to cover certain
categories of contingencies that could arise as a result of Year 2000 related
failures. Year 2000 specific contingency plans are anticipated to be in place
by June 30, 1999.
There are many risks associated with Year 2000 issues, including the risk that
Equitable Life's computer systems will not operate as intended. Additionally,
there can be no assurance that the systems of third parties will be Year 2000
compliant. Any significant unresolved difficulty related to the Year 2000
compliance initiatives could result in an interruption in, or a failure of,
normal business operations and, accordingly, could have a material adverse
effect on our ability to administer your policy and operate the investment
options.
To the fullest extent permitted by law, the foregoing Year 2000 discussion is
a "Year 2000 Readiness Disclosure" within the meaning of The Year 2000
Information and Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
<PAGE>
35
- --------------------------------------------------------------------------------
ABOUT LEGAL PROCEEDINGS
Equitable Life and its affiliates are parties to various legal proceedings. In
our view, none of these proceedings is likely to have a material adverse
effect upon the separate accounts, our ability to meet our obligations under
the Program, or the distribution of group annuity contract interests under the
Program.
State Street is engaged in litigation of various kinds which in its judgment
is not of material importance in relation to its total assets. None of the
litigation now in progress is expected to affect any assets of the Equity
Index Fund or the Lifecycle Funds or the Lifecycle Group Trusts or the
Underlying State Street Funds in which the Lifecycle Trusts invest.
ABOUT OUR INDEPENDENT ACCOUNTANTS
The following financial statements included in the SAI as well as the
following condensed financial information included in the prospectus have been
so included in reliance on the report of PricewaterhouseCoopers LLP given on
the authority of said firm as experts in auditing and accounting:
o The financial statements for Separate Accounts 195, 197 and 198 as of
December 31, 1998 and for each of the two years in the period then ended.
o The financial statements for Equitable Life as of December 31, 1998 and 1997
and for each of the three years in the period ended December 31, 1998.
o The condensed financial information for Separate Account 195 for each of the
five years in the period ended December 31, 1998.
o The condensed financial information for Separate Accounts 197 and 198 for
each of the four years in the period ended December 31, 1998.
o The following financial statements as of December 31, 1998 and for each of
the two years in the period then ended:
o State Street Bank and Trust Company Lifecycle Fund Group Trust -
Conservative
o State Street Bank and Trust Company Lifecycle Fund Group Trust -
Moderate
o State Street Bank and Trust Company S&P 500 Flagship Fund and State
Street Bank and Trust Company S&P 500 Index Fund with Futures
o State Street Bank and Trust Company Russell 2000 Fund and State Street
Bank and Trust Company Russell 2000 Non-Lending Fund
o State Street Bank and Trust Company Daily EAFE Securities Lending Fund
and State Street Bank and Trust Company Daily EAFE Non-Lending Fund
o State Street Bank and Trust Company Daily MSCI Europe Index Securities
Lending Fund and State Street Bank and Trust Company Daily MSCI Europe
Index Fund
o State Street Bank and Trust Company Daily MSCI Japan Index Securities
Lending Fund and State Street Bank and Trust Company Daily MSCI Japan
Index Fund
o State Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan
Index Securities Lending Fund and State Street Bank and Trust Company
Daily MSCI Pacific Basin ex-Japan Index Fund
o State Street Bank and Trust Company Daily Government/Corporate Bond Fund
o State Street Bank and Trust Company Short Term Investment Fund
<PAGE>
36
- --------------------------------------------------------------------------------
o The condensed financial information for each of the four years in the period
ended December 31, 1998 for the following Trusts:
o State Street Bank and Trust Company Lifecycle Fund Group Trust -
Conservative
o State Street Bank and Trust Company Lifecycle Fund Group Trust -
Moderate
o The condensed financial information for each of the seven years in the
period ended December 31, 1998 for the following:
o State Street Bank and Trust Company S&P 500 Flagship Fund
o State Street Bank and Trust Company Russell 2000 Fund
o State Street Bank and Trust Company Short Term Investment Fund
o The condensed financial information for each of the six years in the period
ended December 31, 1998 for the following:
o State Street Bank and Trust Company Daily EAFE Non-Lending Fund
o State Street Bank and Trust Company Daily Government/Corporate Bond Fund
REPORTS WE PROVIDE AND AVAILABLE INFORMATION
We send reports annually to employers showing the aggregate Account Balances
of all participants and information necessary to complete annual IRS filings.
As permitted by the SEC's rules, we omitted certain portions of the
registration statement filed with the SEC from this prospectus and the SAI.
You may obtain the omitted information by: (1) requesting a copy of the
registration statement from the SEC's principal office in Washington, D.C.,
and paying prescribed fees, or (2) by accessing the EDGAR Database at the
SEC's web site at http://www.sec.gov.
ACCEPTANCE
The employer or plan sponsor, as the case may be: (1) is solely responsible
for determining whether the Program is a suitable funding vehicle and (2)
should carefully read the prospectus and other materials before entering into
a Participation Agreement.
<PAGE>
A-1
Appendix I: Selected financial data and condensed financial information
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
LIFECYCLE FUND GROUP TRUSTS
The selected financial data below provides information with respect to
investment income, expenses, and investment performance for each Lifecycle Fund
Group Trust attributable to each unit outstanding for the period indicated. The
selected financial data has been audited by PricewaterhouseCoopers LLP,
independent accountants, as stated in their reports included in the SAI. The
selected financial data should be read in conjunction with the full financial
statements of the Lifecycle Fund Group Trusts, which appear in the SAI.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIFECYCLE FUND GROUP TRUST - CONSERVATIVE
Net investment income (loss)** $ 0.09 $ 0.06 $ 0.05 $ (0.08)
Net realized and unrealized gain (loss) 1.41 1.28 0.65 0.81
Net increase (decrease) 1.50 1.34 0.70 0.73
Net asset value
Beginning of period 12.77 11.43 10.73 10.00
End of period $ 14.27 $ 12.77 $ 11.43 $ 10.73
Total return %*** 11.75% 11.72% 6.52% 7.30%
Ratio of expenses to average net assets (a)(c) 0.43% 0.66% 0.81% 2.13%
Ratio of net investment income (loss) to average net assets (a)(b) 0.68% 0.46% 0.31% (1.04)%
Portfolio turnover 77% 44% 54% 131%
Net assets, end of period (000s) $13,516 $ 7,249 $ 4,534 $ 2,983
LIFECYCLE FUND GROUP TRUST - MODERATE
Net investment income (loss)** $ 0.06 $ 0.05 $ 0.04 $ (0.01)
Net realized and unrealized gain (loss) 2.30 2.11 1.27 1.14
Net increase (decrease) 2.36 2.16 1.31 1.13
Net asset value
Beginning of period 14.60 12.44 11.13 10.00
End of period 16.96 $ 14.60 $ 12.44 $ 11.13
Total return*** 16.16 17.36% 11.77% 11.30%
Ratio of expenses to average net assets (a)(c) 0.19% 0.20% 0.20% 0.52%
Ratio of net investment income (loss) to average net assets (a)(b) 0.37% 0.37% 0.35% (0.07)%
Portfolio turnover 46% 22% 18% 30%
Net assets, end of period (000s) $125,412 $108,435 $88,273 $76,246
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Investment operations for the Lifecycle Trust - Conservative commenced on
May 5, 1995 and for Lifecycle Trust - Moderate on April 26, 1995.
** Net investment income (loss) per unit has been calculated based upon a
monthly average of units outstanding.
*** Total return calculation (not annualized for the period ended December
31, 1995) is based on the value of a single unit of participation
outstanding throughout the period. It represents the percentage change in
the net asset value per unit between the beginning and end of the period.
The calculation includes only those expenses charged directly to the
Fund. The result may be reduced by any administrative or other fees which
are incurred in the management or maintenance of individual participant
accounts.
(a) Annualized for the period ended December 31, 1995.
(b) Ratio excludes income retained by the funds in which the Fund
invests (see Note 2).
(c) The calculation includes only those expenses charged directly to the
Fund, and does not include expenses charged to the funds in which
the Fund invests.
<PAGE>
A-2
- --------------------------------------------------------------------------------
UNDERLYING STATE STREET FUNDS
The selected financial data below provides information with respect to
investment income, expenses, and investment performance for each Underlying
State Street Fund attributable to each Underlying State Street Fund unit
outstanding for the periods indicated. The selected financial data has been
audited by PricewaterhouseCoopers LLP, independent accountants, as stated in
their reports included in the SAI. The selected financial data should be read
in conjunction with the full financial statements of the Underlying State
Street Funds, which appear in the SAI.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
YEAR ENDED DEDEMBER 31,
- ---------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 FLAGSHIP FUND
Net investment income* 2.77 $ 2.64 $ 2.48
Net realized and unrealized gain (loss) 42.70 37.22 19.86
Distribution of securities lending fee income (a) (0.01) 0.00 0.00
Net increase (decrease) 45.46 39.86 22.34
NET ASSET VALUE
Beginning of year 159.26 119.40 97.06
End of year $204.72 $159.26 $119.40
Total return %** 28.55% 33.38% 23.02%
Ratio of expenses to average net assets*** 0.00% 0.00% 0.00%
Ratio of net investment income to average net
assets 1.55% 1.86% 2.33%
Portfolio turnover 18% 18% 27%
Net assets, end of year (000,000s) $49,893 $36,664 $20,916
- ---------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
YEAR ENDED DEDEMBER 31,
- -----------------------------------------------------------------------------------------------
1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 FLAGSHIP FUND
Net investment income* $ 2.24 $ 1.90 $ 1.81 $ 1.54
Net realized and unrealized gain (loss) 24.26 (0.93) 4.55 3.04
Distribution of securities lending fee income (a) 0.00 0.00 (0.01) (0.01)
Net increase (decrease) 26.50 0.97 6.35 4.57
NET ASSET VALUE
Beginning of year 70.56 69.59 63.24 58.67
End of year $97.06 $ 70.56 $69.59 $ 63.24
Total return %** 37.56% 1.39% 10.06% 7.81%
Ratio of expenses to average net assets*** 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%
Portfolio turnover 10% 12% 22% 19%
Net assets, end of year (000,000s) $15,135 $ 8,258 $5,753 $ 4,233
- -----------------------------------------------------------------------------------------------
</TABLE>
* Net investment income has been calculated based on an average of units
outstanding.
** Total return calculation is based on the value of a single unit of
participation outstanding throughout the year. It represents the
percentage change in the net asset value per unit between the beginning
and end of each year and assumes reinvestment of distributions. The
calculation includes only those expenses charged directly to the Fund.
This result may be reduced by any administrative or other fees which are
incurred in the management or maintenance of individual participant
accounts.
*** Zero amounts represented those which are less than .005% per unit.
(a) Zero amounts per unit represent those which are less than $.005 per
unit.
<PAGE>
A-3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RUSSELL 2000 FUND
Net investment income (a) $ 0.38 $ 0.36 $ 0.32
Distribution of securities lending fee income (0.02) (0.02) (0.01)
Net realized and unrealized gain (loss) (1.06) 4.19 2.45
Net increase (decrease) (0.70) 4.53 2.76
Net asset value
Beginning of period 23.77 19.24 16.48
End of period $ 23.07 $ 23.77 $ 19.24
Total return (b) (2.88)% 23.66% 16.81%
Ratio of expenses to average net assets (%)(c)(d) 0.04% 0.06% 0.06%
Ratio of net investment income to average net
assets (%)(c)(d) 1.61% 1.63% 1.80%
Portfolio turnover (%) 57% 105% 131%
Net assets, end of year (000s) $1,255,838 $1,174,146 $951,405
- -----------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PERIOD
ENDED
DECEMBER
YEAR ENDED DECEMBER 31, 31,
----------------------------------------------------
1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RUSSELL 2000 FUND
Net investment income (a) $ 0.03 $ 0.21 $ 0.17 $ 0.04
Distribution of securities lending fee income (0.01) (0.01) 0.00 0.00
Net realized and unrealized gain (loss) 3.61 (0.46) 1.83 1.07
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 (b) 28.33% (1.98)% 18.00% 11.10%
Ratio of expenses to average net assets (%)(c)(d) 0.10% 0.07% 0.09% 0.39%
Ratio of net investment income to average net
assets (%)(c)(d) 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>
(a) Net investment income has been calculated based on an average of
units outstanding.
(b) Total return calculation is based on the value of a single unit of
participation outstanding throughout the year and assumes
reinvestment of distributions. It represents the percentage change
in the net asset value per unit between the beginning and the end of
the period and assumes reinvestment of distributions. The
calculation includes only those expenses charged directly to the
Russell 2000 Fund. This result may be reduced by any administrative
or other fees which are incurred in the management or maintenance of
individual participant accounts.
(c) 1996 ratios reflect net investment income and expenses attributable
to the Russell 2000 Fund from its ownership of other collective
investment funds.
(d) 1992 data annualized.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DAILY EAFE NON-LENDING FUND
Net investment income (loss)** $ 0.21 $ 0.19 $ 0.19 $ 0.16 $ 0.13
Net realized and unrealized gain (loss) 1.57 (0.07) 0.29 0.66 0.39
Net increase (decrease) 1.78 0.12 0.48 0.82 0.52
Net asset value
Beginning of period 8.54 8.42 7.94 7.12 6.60
End of period $ 10.32 $ 8.54 $ 8.42 $ 7.94 $ 7.12
Total return(%)*** 20.84% 1.43 6.07 11.56 7.91
Ratio of expenses to average net assets (%) 0.11% 0.11 0.19 0.20 0.19
Ratio of net investment income to average net
assets (%) 2.13% 2.17 2.31 2.21 1.85
Portfolio turnover (%) 109 9 5 9 47
Net assets, end of year (000s) $490,295 $277,080 $318,204 $154,010 $103,242
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Daily EAFE Non-Lending Fund commenced operations on January 3, 1994.
** Net investment income per unit has been calculated using an average of
monthly units outstanding.
*** Total return calculation is based on the value of a single unit of
participation outstanding throughout the entire period. It represents the
percentage change in net asset value per unit between the beginning and
end of each year. The calculation includes only those expenses charged
directly to the Non-Lending Fund. This result may be reduced by any
administrative or other fees which are incurred in the management or
maintenance of individual participant accounts.
<PAGE>
A-4
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Period
Ended
December
Year Ended December 31, 31,
--------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DAILY GOVERNMENT/
CORPORATE BOND FUND
Net investment income** $ 0.80 $ 0.83 $ 0.78 $ 0.70 $ 0.73 $ 0.11
Net realized and unrealized gain (loss) 0.38 0.32 (0.42) 1.17 (1.05) (0.17)
Net increase (decrease) 1.18 1.15 0.36 1.87 (0.32) (0.06)
Net asset value
Beginning of year 13.00 11.85 11.49 9.62 9.94 10.00
End of year $ 14.18 $ 13.00 $ 11.85 $ 11.49 $ 9.62 $ 9.94
Total return (%)(a)*** 9.09% 9.70% 3.13% 19.44% (3.22)% (3.27)%
Ratio of expenses to average net assets (%)(a) 0.01% 0.01% 0.01% 0.01% 0.01% 0.02%
Ratio of net investment income to average net
assets (%)(a) 5.89% 6.73% 6.82% 6.53% 6.81% 5.94%
Portfolio turnover (%) 478% 294% 299% 611% 144% 23%
Net assets, end of year (000s) $4,643,861 $4,273,490 $3,060,002 $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 on an average of units
outstanding.
*** Total return calculation is based on the value of a single unit of
participation outstanding throughout the year. It represents the
percentage change in the net asset value per unit between the beginning
and end of the year. The calculation includes only those expenses charged
directly to the Fund. This result may be reduced by any administrative or
other fees which are incurred in the management or maintenance of
individual participant accounts.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM INVESTMENT FUND
Net investment income $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 $ 0.0424
Net realized gain (loss)* 0.0000 0.0000 0.0000 0.0000 0.0000
Net change in net assets resulting from
operations $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 $ 0.0424
Distributions from net investment income $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 $ 0.0424
Total return (%)** 5.65 5.77 5.62 6.21 4.32
Ratio of expenses to average net assets (%)*** - - - - -
Ratio of net investment income to average net
assets (%) 5.51 5.63 5.48 6.04 4.24
Net assets, end of year (000s) $20,508,724 $18,563,057 $13,762,940 $12,393,148 $9,239,219
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Zero amounts represent those which are less than $.00005 per unit.
** Total return calculation is based on the value of a single unit of
participation outstanding throughout the year. It assumes reinvestment of
distributions and includes only those expenses charged directly to the
Fund. This result may be reduced by any administrative or other fees
which are incurred in the management of maintenance of individual
participant accounts.
*** Less than .005%
<PAGE>
A-5
- --------------------------------------------------------------------------------
EQUITY INDEX FUND AND LIFECYCLE FUND - CONSERVATIVE AND LIFECYCLE FUND -
MODERATE: SEPARATE ACCOUNT
NOS. 195, 197 AND 198
Unit values and number of units outstanding for these Funds are shown below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Inception
For the years ending December 31, Date
- ------------------------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Index Fund 2/1/94
Unit Value - - $9.71 $ 13.12 $ 15.91 $ 20.95 $ 26.65
Number of units outstanding (000's) - - 515 1,483 2,100 3,713 4,890
Lifecycle Fund - Conservative 5/1/95
Unit Value - - - $10.59 $ 11.04 $ 12.13 $ 13.37
Number of units outstanding (000's) - - - 281 409 596 1,009
Lifecycle Fund - Moderate 5/1/95
Unit Value - - - $11.01 $ 12.18 $ 14.14 $ 16.28
Number of units outstanding (000's) - - - 6,924 7,241 7,657 7,691
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
S-1
Table of contents of statement of additional information
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Funding of the Program SAI-2
Your Responsibilities as Employer SAI-2
Procedures for Withdrawals, Distributions
and Transfers SAI-3
Types of Benefits SAI-5
Provisions of the Master Plan SAI-7
Additional Investment Policies and Techniques -
The Underlying State Street Funds SAI-11
Investment Restrictions Applicable to the Funds SAI-15
How We Determine the Unit Value for the Funds SAI-16
How We Value the Assets of the Funds SAI-17
How State Street Values the Assets of the
Underlying State Street Funds SAI-17
Transactions by the Underlying State Street Funds SAI-18
Investment Management Fee SAI-19
Underwriter SAI-19
Management: Equitable Life SAI-20
Management: State Street SAI-22
Financial Statements SAI-24
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,
1999 (State Street).
-----------------------------------------------------------------------------
Name
-----------------------------------------------------------------------------
Address
-----------------------------------------------------------------------------
Copyright 1999 by The Equitable Life Assurance Society of the United States.
All rights reserved.
<PAGE>
S-2
About Equitable Life
- --------------------------------------------------------------------------------
We are The Equitable Life Assurance Society of the United States ("Equitable
Life") a New York stock life insurance corporation. We have been doing
business since 1859. Equitable Life is a wholly owned subsidiary of The
Equitable companies Incorporated ("Equitable Companies"), whose majority
shareholder is AXA, a French holding company for an international group of
insurance and related financial services companies. As a majority shareholder,
and under its other arrangements with Equitable Life and Equitable Life's
parent, AXA exercises significant influence over the operations and capital
structure of Equitable Life and its parent. No company other than Equitable
Life, however, has any legal responsiblity to pay amounts that Equitable Life
owes under the policies. During 1999, Equitable Companies plans to change its
name to AXA Financial, Inc.
Equitable Companies and its consolidated subsidiaries managed approximately
$347.5 billion in assets as of December 31, 1998. For over 100 years we have
been among the largest insurance companies in the United States. We are
licensed to sell life insurance and annuities in all fifty states, the
District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Our home
oftfice is located at 1290 Avenue of the Americas, New York, N.Y. 10104.
<PAGE>
S-3
- --------------------------------------------------------------------------------
HOW TO REACH US.
You can reach us as indicated below to obtain:
o Copies of any plans, trusts, participation agreements, enrollment or other
forms used in the Program.
o Unit values and other values under your plan.
o Any other information or materials that we provide in connection with the
Program.
INFORMATION ON JOINING THE PROGRAM
- ------------------------------------
BY PHONE:
- ------------------------------------
1-800-523-1125
(Retirement Program Specialists
available weekdays 9am to 5pm
Eastern Time)
- ------------------------------------
BY REGULAR MAIL:
- ------------------------------------
The ADA Members Retirement Program
c/o Equitable Life, Box 2011
Secaucus, NJ 07096
- ------------------------------------
BY REGISTERED, CERTIFIED,
OR OVERNIGHT DELIVERY:
- ------------------------------------
The ADA Members Retirement Program
c/o Equitable Life
200 Plaza Drive, Second Floor
Secaucus, NJ 07094
- ------------------------------------
No person is authorized by The Equitable Life Assurance Society of the United
States to give any information or make any representations other than those
contained in this prospectus and the SAI, or in other printed or written
material issued by Equitable Life. You should not rely on any other
information or representation.
INFORMATION ONCE YOU JOIN THE PROGRAM
- --------------------------------------------------------------
BY REGULAR MAIL:
- --------------------------------------------------------------
(correspondence): The ADA Members
Retirement Program
Box 2486 G.P.O.
New York, NY 10116
- --------------------------------------------------------------
FOR CONTRIBUTION CHECKS ONLY:
- --------------------------------------------------------------
The Association Members
Retirement Program
P.O. Box 1599
Newark, NJ 07101-9764
- --------------------------------------------------------------
FOR REGISTERED, CERTIFIED, OR OVERNIGHT
DELIVERY:
- --------------------------------------------------------------
The ADA Members
Retirement Program
c/o Equitable Life
200 Plaza Drive, 2B-55
Secaucus, NJ 07094
- --------------------------------------------------------------
BY PHONE:
- --------------------------------------------------------------
1-800-223-5790 (Account Executives
available weekdays 9am to 5pm
Eastern Time)
- --------------------------------------------------------------
TOLL-FREE AIM SYSTEM:
- --------------------------------------------------------------
By calling 1-800-223-5790 you may, with your assigned
personal security code, use our Automated Investment
Management ("AIM") System to:
o Transfer assets between investment options and obtain
account information.
o Change the allocation of future contributions and
maturing guaranteed options.
o Hear investment performance information, including
investment fund unit values and current guaranteed
option interest rates.
The AIM System operates 24 hours a day. You may speak
with our Account Executives during regular business hours
about any matters covered by the AIM System.
- --------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
MAY 1, 1999
AMERICAN DENTAL ASSOCIATION
MEMBERS RETIREMENT PROGRAM
(STATE STREET)
Funded primarily through a group annuity contract with THE EQUITABLE LIFE
ASSURANCE SOCIETY OF THE UNITED STATES, 1290 Avenue of the Americas, New York,
New York 10104. Toll-free telephone number 1-800-223-5790.
- --------------------------------------------------------------------------------
This Statement of Additional Information ("SAI") is not a prospectus. You
should read this SAI in conjunction with the prospectus dated May 1, 1999 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 SAI relates is available at no charge by
writing to Equitable Life at Box 2486 G.P.O., New York, New York 10116 or by
calling our toll-free telephone number. Definitions of special terms used in
this SAI are found in the prospectus.
Certain of the cross references in this SAI are contained in the
prospectus dated May 1, 1999 to which this SAI relates.
CONTENTS OF THIS SAI
<TABLE>
<CAPTION>
PAGE IN SAI
------------
<S> <C>
Funding of the Program .............................. SAI-2
Your Responsibilities as Employer ................... SAI-2
Procedures for Withdrawals, Distributions and
Transfers ......................................... SAI-3
Pre-Retirement Withdrawals ........................ SAI-3
Benefit Distributions ............................. SAI-3
Eligible Rollover Distributions and Federal
Income Tax Withholding ......................... SAI-4
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-10
</TABLE>
<TABLE>
<CAPTION>
PAGE IN SAI
------------
<S> <C>
Vesting ........................................... SAI-10
Additional Investment Policies and Techniques --
The Underlying State Street Funds ................. SAI-11
Investment Restrictions Applicable to the Funds ..... SAI-15
How We Determine Unit Value for the Funds ........... SAI-16
How We Value the Assets of the Funds ................ SAI-17
How State Street Values the Assets of the
Underlying State Street Funds ..................... SAI-17
Transactions by The Underlying State Street
Funds ............................................. SAI-18
Investment Management Fee ........................... SAI-19
Underwriter ......................................... SAI-19
Management: Equitable Life .......................... SAI-20
Management: State Street ............................ SAI-22
Financial Statements ................................ SAI-24
</TABLE>
- ----------
Copyright 1999 by The Equitable Life Assurance Society of The United States.
All rights reserved.
<PAGE>
- --------------------------------------------------------------------------------
FUNDING OF THE PROGRAM
The Program is primarily funded through a group annuity contract issued to the
ADA Trustees by Equitable Life. The contract governs the Investment Options
that are provided by Equitable Life under the Program. The ADA Trustees hold
all contracts for the benefit of employers and participants in the Program.
The ADA Trustees and Equitable Life also have an administrative services
agreement for administrative support, recordkeeping and marketing services
provided by Equitable Life. This agreement would normally terminate when the
group annuity contract with Equitable Life terminates.
YOUR RESPONSIBILITIES AS EMPLOYER
If you adopt the Master Plan, you as the employer and plan administrator will
have certain responsibilities, including:
o sending us your contributions at the proper time and in the proper
format;
o maintaining all personnel records necessary for administering your
plan;
o determining who is eligible to receive benefits;
o forwarding to us all the forms your employees are required to submit;
o distributing summary plan descriptions and participant annual reports
to your employees and former employees;
o distributing our prospectuses and confirmation notices to your
employees and, in some cases, former employees;
o filing an annual information return for your plan with the Internal
Revenue Service, if required;
o providing us the information with which to run special
non-discrimination tests, if you have a 401(k) plan or your plan
accepts post-tax employee or employer matching contributions;
o determining the amount of all contributions for each participant in
the plan;
o forwarding salary deferral and post-tax employee contributions to us;
o selecting interest rates and monitoring default procedures if you
elect the loan provision in your plan; and
o providing us with written instructions for allocating amounts in the
plan's forfeiture account.
If you, as an employer, have an individually designed plan, your
responsibilities will not be increased in any way by adopting the Pooled Trust
for investment only. If you adopt our self-directed prototype plan, you will be
completely responsible for administering the plan and complying with all of the
reporting and disclosure requirements applicable to qualified plans, with the
assistance of the recordkeeper of your choice.
We can provide guidance and assistance in the performance of your
responsibilities. If you have questions about any of your obligations, you can
contact our Account Executives at 1-800-223-5790 or write to us at Box 2486
G.P.O., New York, New York 10116.
SAI-2
<PAGE>
- --------------------------------------------------------------------------------
PROCEDURES FOR WITHDRAWALS, DISTRIBUTIONS AND TRANSFERS
PRE-RETIREMENT WITHDRAWALS. Under the Master Plan, self-employed persons
generally may not receive a distribution prior to age 591/2, and employees
generally may not receive a distribution prior to separation from service.
However, if the Master Plan is maintained as a profit sharing plan, you may
request distribution of benefits after you reach age 591/2 even if you are
still working. If the Master Plan is maintained as a 401(k) plan and you are
under age 591/2, you may withdraw your own 401(k) contributions only if you can
demonstrate financial hardship within the meaning of applicable income tax
regulations. Each withdrawal must be at least $1,000 (or, if less, your entire
account balance or the amount of your hardship withdrawal under a 401(k) plan).
If your employer terminates the plan, all amounts (subject to GRA restrictions)
may be distributed to participants at that time.
You may withdraw all or part of your account balance under the Master Plan
attributable to post-tax employee contributions at any time, subject to any
withdrawal restrictions applicable to the Investment Options, provided that you
withdraw at least $300 at a time (or, if less, your account balance
attributable to post-tax employee contributions). See "Tax Information" in the
prospectus.
We pay all benefit payments (including withdrawals due to plan terminations) in
accordance with the rules described below in the "Benefit Distributions"
discussion. We effect all other participant withdrawals as of the close of the
business day we receive the properly completed form.
Under the self-directed prototype plan you may receive a distribution upon
attaining normal retirement age as specified in the plan, or upon separation
from service. If your employer maintains the self-directed prototype plan as a
profit sharing plan, an earlier distribution of funds that have accumulated
after two years is available if you incur a financial hardship, as defined in
the plan.
In addition, if you are married, your spouse may have to consent in writing
before you can make any type of withdrawal, except for the purchase of a
Qualified Joint and Survivor Annuity. See "Spousal Consent Requirement" below.
Under an individually designed plan, the availability of pre-retirement
withdrawals depends on the terms of the plan. We suggest that you ask your
employer what types of withdrawals are available under your plan.
Transfers and withdrawals from the Equity Index Fund may be deferred if there
is any delay in redemption of shares of the SSgA S&P 500 Index Fund. We
generally do not expect any such delays.
Transfers and withdrawals from the Lifecycle Funds--Conservative and Moderate
may be deferred if there is any delay in redemption of units of the Lifecycle
Fund Group Trusts. We generally do not expect any such delays.
BENEFIT DISTRIBUTIONS. In order for you to begin receiving benefits under the
Master Plan, your employer must send us your properly completed Election of
Benefits form and, if applicable, Beneficiary Designation form. Benefit
payments will be made according to Master Plan provisions.
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
SAI-3
<PAGE>
- --------------------------------------------------------------------------------
of business on the day we receive a properly completed form. If you wish to
receive annuity payments, your plan's trustee may purchase a variable annuity
contract from us. Fixed annuities are available from insurance companies
selected by the Trustees. See "Types of Benefits." We will pay annuity payments
directly to you and we will commence payments 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, we will commence annuity payments as of the close of
business on the first business day of the second following month.
Transfers and withdrawals from the Equity Index Fund may be deferred if there
is any delay in redemption of shares of the SSgA S&P 500 Index Fund. We
generally do not expect any such delays.
Transfers and withdrawals from the Lifecycle Funds-Conservative and Moderate
may be deferred if there is any delay in redemption of units of the Lifecycle
Fund Group Trusts. We generally do not expect any such delays.
Please note that we use the value of your vested benefits at the close of the
business day payment is due to determine the amount of benefits you receive. We
will not, therefore, begin processing your check until the following business
day. You should expect your check to be mailed within five days after
processing begins. Annuity checks can take longer. If you buy a fixed annuity,
your check will come from the insurance company you selected. If you are
withdrawing more than $50,000 and you would like expedited delivery at your
expense, you may request it on your election of benefits form.
Distributions under a qualified retirement plan such as yours are subject to
extremely complicated legal requirements. When you are ready to retire, we
suggest that you discuss the available payment options with your employer or
financial advisor. Our Account Executives can provide you or your employer with
information.
If a participant in the Master Plan dies without designating a beneficiary, the
vested benefit will automatically be paid to the spouse or, if the participant
is not married, to the first surviving class of his or her (a) children, (b)
parents and (c) brothers and sisters. If none of them survive, the
participant's vested benefit will be paid to the participant's estate. If a
participant in our prototype self-directed plan dies without designating a
beneficiary, the vested benefit will automatically be paid to the spouse or, if
the participant is not married, to the first surviving class of his or her (a)
children, (b) grandchildren, (c) parents, (d) brothers and sisters and (e)
nephews and nieces. If none of them survive, the participant's vested benefit
will be paid to the participant's estate.
ELIGIBLE ROLLOVER DISTRIBUTIONS AND FEDERAL INCOME TAX WITHHOLDING. All
"eligible rollover distributions" are subject to mandatory federal income tax
withholding of 20% unless the participant elects to have the distribution
directly rolled over to a qualified plan or traditional individual retirement
arrangement (IRA). An "eligible rollover distribution" is generally any
distribution that is not one of a series of substantially equal periodic
payments made (not less frequently than annually): (1) for the life (or life
expectancy) of the plan participant or the joint lives (or joint life
expectancies) of the plan participant and his or her designated beneficiary, or
(2) for a specified period of 10 years or more. Hardship distributions are not
eligible rollover distributions. In addition, the following are not subject to
mandatory 20% withholding:
o hardship withdrawals of salary deferred contributions from 401(k)
plans;
o certain corrective distributions under Code Section 401(k) plans;
SAI-4
<PAGE>
- --------------------------------------------------------------------------------
o 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 we make a distribution to a participant's surviving spouse, or to a current
or former spouse under a qualified domestic relations order, the distribution
may be an eligible rollover distribution, subject to mandatory 20% withholding,
unless one of the exceptions described above applies.
If a distribution is not an "eligible rollover distribution", we will withhold
income tax from all taxable payments unless the recipient elects not to have
income tax withheld.
TYPES OF BENEFITS
Under the Master Plan, and under most self-directed prototype plans, you may
select one or more of the following forms of distribution once you are eligible
to receive benefits. If your employer has adopted an individually designed plan
or a self-directed prototype profit sharing plan that does not offer annuity
benefits, not all of these distribution forms may be available to you. We
suggest you ask your employer what types of benefits are available under your
plan.
QUALIFIED JOINT AND SURVIVOR ANNUITY. An annuity providing equal monthly
payments for your life and, after your death, for your surviving spouse's life.
No payments will be made after you and your spouse die, even if you have
received only one payment prior to the last death. THE LAW REQUIRES THAT IF THE
VALUE OF YOUR VESTED BENEFITS EXCEEDS $5,000, YOU MUST RECEIVE A QUALIFIED
JOINT AND SURVIVOR ANNUITY UNLESS YOUR SPOUSE CONSENTS IN WRITING TO A CONTRARY
ELECTION. Please see "Spousal Consent Requirements" below.
LUMP SUM PAYMENT. A single payment of all or part of your vested benefits. If
you take a lump sum payment of only part of your balance, it must be at least
$1,000. If your vested benefit is $5,000 or less, you will receive a lump sum
payment of the entire amount.
PERIODIC INSTALLMENTS. Monthly, quarterly, semi-annual or annual payments over
a period of at least three years, where the initial payment on a monthly basis
is at least $300. You can choose either a time-certain payout, which provides
variable payments over a specified period of time, or a dollar-certain payout,
which provides level payments over a variable period of time. During the
installment period, your remaining account balance will be invested in whatever
investment options you designate, other than the Real Estate Fund; each payment
will be drawn pro rata from all the investment options you have selected. If
you die before receiving all the installments, we will make the remaining
payments to your beneficiary, subject to IRS minimum distribution rules and
beneficiary election. Except in the case of participant accounts transferred
from defined contribution plans, we do not offer installments for benefits
under the individually designed plans or our self-directed prototype plan. For
special conditions applying to installment payments involving the Real Estate
Fund and the Guaranteed Rate Accounts, please refer to the prospectus and SAI
for these options.
LIFE ANNUITY. An annuity providing monthly payments for your life. No payments
will be made after your death, even if you have received only one payment prior
to your death.
LIFE ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your
life or, if longer, a specified period of time. If you die before the end of
that specified period, payments will continue to your beneficiary until the end
of the period. Subject to legal limitations, you may specify a minimum payment
period of 5, 10, 15 or 20 years. The longer the specified period, the smaller
the monthly payments will be.
SAI-5
<PAGE>
- --------------------------------------------------------------------------------
JOINT AND SURVIVOR ANNUITY. An annuity providing monthly payments for your life
and that of your beneficiary. You may specify the percentage of the original
annuity payment to be made to your beneficiary. Subject to legal limitations,
that percentage may be 100%, 75%, 50%, or any other percentage you specify.
JOINT AND SURVIVOR ANNUITY--PERIOD CERTAIN. An annuity providing monthly
payments for your life and that of your beneficiary or, if longer, a specified
period of time. If you and your beneficiary both die before the end of the
specified period, payments will continue to your contingent beneficiary until
the end of the period. Subject to legal limitations, you may specify a minimum
payment period of 5, 10, 15 or 20 years and the percentage of the annuity
payment to be made to your beneficiary (as noted above under Joint and Survivor
Annuity). The longer the specified period, the smaller your monthly payments
will be.
CASH REFUND ANNUITY. An annuity providing equal monthly payments for your life
with a guarantee that the sum of those payments will be at least equal to the
portion of your vested benefits used to purchase the annuity. If upon your
death the sum of the monthly payments to you is less than that amount, your
beneficiary will receive a lump sum payment of the remaining guaranteed amount.
FIXED AND VARIABLE ANNUITY CHOICES
Under a Qualified Joint and Survivor Annuity or a Cash Refund Annuity, the
amount of the monthly payments is fixed at retirement and remains level
throughout the distribution period. Under the Life Annuity, Life
Annuity--Period Certain, Joint and Survivor Annuity and Joint and Survivor
Annuity--Period Certain, you may select either fixed or variable payments. All
forms of variable annuity benefits under the Program will be provided by us.
The payments under variable annuity options reflect the investment performance
of the Growth Equity Fund. If you are interested in a variable annuity, when
you are ready to select your benefit please ask our Account Executives for our
variable annuity prospectus supplement.
Fixed annuities will be issued by insurance companies selected by the ADA
Trustees from time to time. We do not currently offer fixed annuities under the
Program. Upon your request, the companies selected by the Trustees will provide
annuity benefit information. We have no further responsibility for the amount
used to purchase a fixed annuity once it has been sent to the insurance company
you select. The cost of a fixed annuity is determined by each issuing insurance
company. Your Account Executive has more details regarding the insurance
companies currently providing annuity benefits under the Program.
SPOUSAL CONSENT REQUIREMENTS
Under the Master Plan and the self-directed prototype plan, you may designate a
non-spouse beneficiary any time after the earlier of: (1) the first day of the
plan year in which you attain age 35, or (2) the date on which you separate
from service with your employer. If you designate a beneficiary other than your
spouse prior to your reaching age 35, your spouse must consent to the
designation and, upon your reaching age 35, must again give his or her consent
or the designation will lapse. In order for you to make a withdrawal, elect a
form of benefit other than a Qualified Joint and Survivor Annuity or designate
a non-spouse beneficiary, your spouse must consent to your election in writing
within the 90 day period before your annuity starting date. To consent, your
spouse must sign on the appropriate line on your election of benefits or
beneficiary designation form. Your spouse's signature must be witnessed by a
notary public or plan representative.
If you change your mind, you may revoke your election and elect a qualified
Joint Survivor Annuity or designate your spouse as beneficiary, simply by
filing the appropriate form. Your spouse's consent is not required for this
revocation.
SAI-6
<PAGE>
- --------------------------------------------------------------------------------
It is also possible for your spouse to sign a blanket consent form. By signing
this form, your spouse consents not just to a specific beneficiary or, with
respect to the waiver of the Qualified Joint and Survivor Annuity, the form of
distribution, but gives you the right to name any beneficiary, or if
applicable, form of distribution you want. Once you file such a form, you may
change your election whenever you want, even without spousal consent. No
spousal consent to a withdrawal or benefit in a form other than a Qualified
Joint and Survivor Annuity is required under certain self-directed prototype
profit sharing plans that do not offer life annuity benefits.
PROVISIONS OF THE MASTER PLAN
PLAN ELIGIBILITY REQUIREMENTS. Under the Master Plan, the employer specifies
the eligibility requirements for its plan in the 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. We outline below the current federal income
tax rules relating to contributions under qualified retirement plans. This
outline assumes that you are not a participant in any other qualified
retirement plan.
The employer deducts contributions to the plan in the year it makes them. As a
general rule, an employer must make contributions for any year by the due date
(including extensions) for filing its federal income tax return for that year.
However, Department of Labor ("DOL") rules generally require that the employer
contribute participants' salary deferrals (or post-tax employee contribution)
amounts under a 401(k) plan as soon as possible after the payroll period
applicable to a deferral. In any event, the employer must make these
contributions no later than the 15th business day of the month following the
month in which the employer withholds or receives participant contributions.
If the employer contributes more to the plan than it may deduct under the rules
we describe below, the employer (a) may be liable for a 10% penalty tax on that
nondeductible amount and (b) may risk disqualifying the plan.
CONTRIBUTIONS TO THE MASTER PLAN. The employer makes annual contributions to
its plan based on the plan's provisions.
An employer that adopts the Master Plan as a profit sharing plan makes
discretionary contributions as it determines annually. The aggregate employer
contribution to the plan, including all participants' salary
SAI-7
<PAGE>
- --------------------------------------------------------------------------------
deferrals under a 401(k) arrangement, may not exceed 15% of all participants'
compensation for the plan year. For plan purposes, compensation for
self-employed persons does not include deductible plan contributions on behalf
of the self-employed person.
A 401(k) arrangement is available as part of the profit sharing plan. Employees
may make pre-tax contributions to a plan under a 401(k) arrangement. The
maximum amount that highly compensated employees may contribute depends on (a)
the amount that non-highly compensated employees contribute and (b) the amount
the employer designates as a nonforfeitable 401(k) contribution. Different
rules apply to a SIMPLE 401(k) or safe harbor 401(k).
For 1999, a "highly compensated" employee, for this purpose, is (a) an owner of
more than 5% of the practice, or (b) anyone with earnings of more than $80,000
from the practice in 1998. For (b), the employer may elect to include only
employees in the highest paid 20%. In any event, the maximum amount each
employee may defer is limited to $10,000 for 1999, reduced by that employee's
salary reduction contributions to simplified employee pension plans established
before 1997 (SARSEPs), SIMPLE plans, employee contributions to tax deferred
Section 403(b) arrangements, and contributions deductible by the employee under
a trust described under Section 501(c)(18) of the Internal Revenue Code. The
maximum amount a participant may defer in a SIMPLE 401(k) plan for 1999 is
$6,000.
Effective January 1, 1999 employers may adopt a safe harbor 401(k) arrangement.
Under this arrangement, an employer agrees to offer a matching contribution
equal to (a) 100% of salary deferral contributions up to 3% of compensation and
(b) 50% of salary deferral contributions that exceed 3% but are less than 5% of
compensation or a 3% non-elective contribution to all eligible employees. These
contributions must be non-forfeitable. If the employer makes these
contributions and meets the notice requirements for safe harbor 401(k) plans,
the plan is not subject to non-discrimination testing on salary deferral and
matching or non-elective contributions.
If the employer adopts the Master Plan as a defined contribution pension plan,
its contribution is equal to the percentage of each participant's compensation
that the Participation Agreement specifies.
Under any type of plan, an employer must disregard compensation in excess of
$160,000 in 1999 in making contributions. An employer may integrate
contributions with Social Security. This means that contributions, for each
participant's compensation, that exceed the integration level may be greater
than contributions for compensation below the integration level. The Federal
tax law imposes limits on this excess. Your Account Executive can help you
determine the legally permissible contribution.
Contributions for non-key employees must be at least 3% of compensation (or,
under the profit sharing plan, the percentage the employer contributes for key
employees, if less than 3%). In 1999, "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 $65,000 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 (b), no more than 50 employees (or, if less, the greater of three
or 10% of the employees) shall be treated as officers.
Certain plans may also permit participants to make post-tax contributions. We
will maintain a separate account to reflect each participant's post-tax
contributions and the earnings (or losses) on those contributions. Post-tax
contributions are subject to complex rules under which the maximum amount that
SAI-8
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a highly compensated employee may contribute depends on the amount that
non-highly employees contribute. BEFORE PERMITTING ANY HIGHLY-COMPENSATED
EMPLOYEE TO MAKE POST-TAX CONTRIBUTIONS, THE EMPLOYER SHOULD VERIFY THAT IT HAS
PASSED ALL NON-DISCRIMINATION TESTS. If an employer employs only "highly
compensated" employees (as defined above), the plan will not accept post-tax
contributions. In addition, the employer may make matching contributions to
certain plans, i.e., contributions based on the amount of post-tax or pre-tax
401(k) contributions that plan participants make. Special non-discrimination
rules apply to matching contributions. These rules may limit the amount of
matching contributions that an employer may make for highly compensated
employees. These non-discrimination rules for matching contributions do not
apply to SIMPLE and safe harbor 401(k) plans.
Contributions (including forfeiture amounts) for each participant may not
exceed the lesser of (a) $30,000 and (b) 25% of the participant's earnings
(excluding, in the case of self-employed persons, all deductible plan
contributions). The participant's post-tax contributions count toward this
limitation.
Each participant's account balance equals the sum of the amounts accumulated in
each investment option. We will maintain separate records of each participant's
interest in each of the Investment Options attributable to employer
contributions, 401(k) non-elective contributions, 401(k) elective
contributions, post-tax employee contributions and employer matching
contributions. We will also account separately for any amounts rolled over from
a previous employer's plan. Our records will also reflect each participant's
percentage of vesting (see below) in his account balance attributable to
employer contributions and employer matching contributions.
The participant will receive an individual confirmation of each transaction
(including the deduction of record maintenance and report fees). The
participant will also receive an annual statement showing the participant's
account balance in each investment option attributable to each type of
contribution. Based on information that you supply, we will run the required
special non-discrimination tests (Actual Deferral Percentage and Actual
Contribution Percentage) applicable to (a) 401(k) plans (other than SIMPLE
401(k) and safe harbor 401(k)) and (b) plans that accept post-tax employee
contributions or employer matching contributions.
Non-discrimination tests do not apply to SIMPLE 401(k) plans, if the employer
makes (a) a matching contribution equal to 100% of the amount each participant
deferred, up to 3% of compensation, or (b) a 2% non-elective contribution to
all eligible employees. The employer must also follow the notification and
filing requirements outlined in the SIMPLE 401(k) model amendment to the Master
Plan to avoid non-discrimination tests.
Under a SIMPLE 401(k) the employer must offer all eligible employees the
opportunity to defer part of their salary into the plan and make either a
matching or non-elective contribution. The matching contribution must be 100%
of the salary deferral amount up to 3% of compensation. The non-elective
contribution is 2% of compensation, the employer must make it for all eligible
employees, even those not deferring. The matching or non-elective contribution
must be non-forfeitable. The employer must notify employees which contribution
the employer will make 60 days before the beginning of the year.
Elective deferrals to a 401(k) plan are subject to applicable FICA (social
security), Medicare tax and FUTA (unemployment) taxes. They may also be subject
to state income tax.
ALLOCATION OF CONTRIBUTIONS. You, as employer or participant, may allocate
contributions among any number of the investment options. You may change
allocation instructions at any time, and as often as
SAI-9
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needed, 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 automatically apply to any 401(k) qualified
non-elective contributions, qualified matching contributions and matching
contributions. Your allocation percentages for employee contributions
automatically apply to any post-tax employee contributions and 401(k) salary
deferral contributions. IF WE HAVE NOT RECEIVED VALID INSTRUCTIONS, WE WILL
ALLOCATE CONTRIBUTIONS TO THE MONEY MARKET GUARANTEE ACCOUNT. You may, of
course, transfer to another investment option at any time.
THE MASTER PLAN AND SECTION 404(C) OF ERISA. The Master Plan is a participant
directed individual account plan designed to comply with the requirements of
Section 404(c) of ERISA. Section 404(c) of ERISA, and the related Department of
Labor (DOL) regulation, provide that if a participant or beneficiary exercises
control over the assets in his or her plan account, plan fiduciaries will not
be liable for any loss that is the direct and necessary result of the
participant's or beneficiary's exercise of control. This means that if the
employer plan complies with Section 404(c), participants can make and are
responsible for the results of their own investment decisions.
Section 404(c) plans must, among other things, (a) make a broad range of
investment choices available to participants and beneficiaries and (b) provide
them with adequate information to make informed investment decisions. The
Investment Options and documentation available under the ADA Program provide
the broad range of investment choices and information needed in order to meet
the requirements of Section 404(c). However, while our suggested summary plan
descriptions, annual reports, prospectuses, and confirmation notices provide
the required investment information, the employer is responsible for
distributing this information in a timely manner to participants and
beneficiaries. You should read this information carefully before making your
investment decisions.
VESTING. Vesting refers to the participant's rights with respect to that
portion of a participant's Account Balance attributable to employer
contributions under the Master Plan. If a participant is "vested," the amount
or benefit in which the participant is vested belongs to the participant, and
may not be forfeited. The participant's Account Balance attributable to (a)
401(k) contributions (including salary deferral, qualified non-elective and
qualified matching contributions), (b) post-tax employee contributions and (c)
rollover contributions always belongs to the participant, and is nonforfeitable
at all times.
A participant becomes fully vested in all benefits if still employed at death,
disability, attainment of normal retirement age or upon termination of the
plan. If the participant terminates employment before that time, any benefits
that have not yet vested under the plan's vesting schedule are forfeited. The
normal retirement age is 65 under the Master Plan.
SAI-10
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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 in the
plan, the plan must use Schedule A or one at least as favorable to
participants.
All contributions to a SIMPLE 401(k) plan are 100% vested and not subject to
the vesting schedule above. This rule, however, does not apply to employer and
matching contributions made to a plan before the plan is amended to become a
SIMPLE 401(k) plan. [Non-elective and matching contributions required under a
safe harbor 401(k) arrangement are 100% vested and not subject to the vesting
schedule above.]
ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES -- THE UNDERLYING STATE STREET
FUNDS
The following discussion supplements the discussion of the investment policies
and techniques of the Underlying State Street Funds for the Lifecycle Fund
Group Trusts included under the section entitled Investment Options in the
prospectus. Also discussed hereunder are the investment restrictions applicable
to investments made by such Underlying State Street Funds. As a general matter,
you should note that the S&P 500 Flagship Fund, the Russell 2000 Fund, and the
Daily EAFE Non-Lending Fund are index funds and, therefore, not "actively"
managed like other collective investment funds. Each of these Underlying State
Street Funds utilizes a "passive" investment approach, attempting to duplicate
the investment performance of its benchmark index through automated statistical
analytic procedures. See the section of the prospectus entitled Investment
Options-Risks and Investment Techniques for further discussion of this method
of management. Therefore, some of the policies and investment techniques
discussed below may not be engaged in to the same extent as if the Underlying
State Street Funds were actively managed.
U.S. GOVERNMENT SECURITIES. The Underlying State Street Funds may invest in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, which include U.S. Treasury securities that differ in their
interest rates, maturities and times of issuance. Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial maturities of one
to ten years; and Treasury Bonds generally have initial maturities of greater
than ten years. Obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported in one of the following ways: (a) by the
full faith and credit of the U.S. Treasury; (b) by the right of the issuer to
borrow from the Treasury; (c) by discretionary authority of the U.S. Government
to purchase certain obligations of the agency or instrumentality; or (d) only
by the credit of the agency or instrumentality. These securities bear fixed,
floating or variable rates of interest. Principal and interest may fluctuate
based on generally recognized reference rates or the relationship of rates.
While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law.
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FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES. Certain
of the Underlying State Street Funds may invest in obligations issued or
guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities, if State Street determines that
the obligations are of comparable quality to the other obligations in which
such Underlying State Street Fund may invest. Such securities also include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. The percentage of such Underlying
State Street Fund's assets invested in securities issued by foreign governments
will vary depending on the relative yields of such securities, the economic and
financial markets of the countries in which the investments are made and the
interest rate climate of such countries.
BANK OBLIGATIONS. The Underlying State Street Funds may invest in bank
obligations, including certificates of deposit, time deposits, bankers'
acceptances and other short-term obligations of domestic banks, foreign
subsidiaries of domestic banks, foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign branches of domestic banks, foreign subsidiaries of domestic
banks, and domestic and foreign branches of foreign banks, such Underlying
State Street Fund may be subject to additional investment risks that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers. These risks include possible future
political and economic developments, the possible imposition of foreign
withholding taxes on interest income payable on the securities, the possible
establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on these securities and the possible seizure or nationalization of
foreign deposits.
Certificates of deposit are negotiable certificates evidencing the obligation
of a bank to repay funds deposited with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Time deposits which
may be held by such Underlying State Street Fund will not benefit from
insurance administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of a bank
to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations, bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS. The Underlying
State Street Funds may invest in commercial paper. Commercial paper is
short-term, unsecured promissory notes issued to finance short-term credit
needs. Any commercial paper in which such Underlying State Street Fund invests
will consist only of direct obligations which, at the time of their purchase,
are (a) rated not lower than Prime-1 by Moody's Investor Service ("Moody's"),
A-1 by S&P, or any equivalent rating by any other nationally recognized
statistical rating organization, (b) issued by companies having an outstanding
unsecured debt issue currently rated not lower than Aa3 by Moody's or AA-by
S&P, or any equivalent rating by any other nationally recognized statistical
rating organization, or (c) if unrated, determined by State Street to be of
comparable quality to those rated obligations which may be purchased by such
Underlying State Street Fund.
REPURCHASE AGREEMENTS. The Underlying State Street Funds may enter into
repurchase agreements. Repurchase agreements involve the acquisition of an
underlying debt instrument, subject to an obligation
SAI-12
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of the seller to repurchase, and to resell, the instrument at a fixed price
usually not more than one week after its purchase. An Underlying State Street
Fund may incur certain costs in connection with the sale of the securities if
the seller does not repurchase them in accordance with the repurchase
agreement. In addition, if bankruptcy proceedings are commenced with respect to
the seller of the securities, realization on the securities by an Underlying
State Street Fund may be delayed or limited. Each Underlying State Street Fund
will consider on an ongoing basis the creditworthiness of the institutions with
which it enters into repurchase agreements.
FLOATING AND VARIABLE RATE OBLIGATIONS. An Underlying State Street Fund may
purchase floating and variable rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of 13 months.
Generally, the lender may demand repayment, and the borrower has a right to
repay the loan prior to maturity. The interest rate generally fluctuates based
on a published rate such as a bank's prime rate. Because these obligations are
direct lending arrangements between the lender and borrower, the Underlying
State Street Funds do not contemplate that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where the
obligations are not secured by letters of credit or other credit support
arrangements, the Underlying State Street Fund's right to redeem is dependent
on the ability of the borrower to pay principal and interest on demand.
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS. An Underlying State
Street Fund may invest in the securities of foreign issuers in the form of
American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depositary Receipts ("CDRs"), are
receipts issued in Europe typically by non-United States banks and trust
companies that evidence ownership of either foreign or domestic securities.
FUTURES CONTRACTS. To the extent permitted by applicable regulations, an
Underlying State Street Fund is permitted to use financial futures as a
substitute for a comparable market position in the underlying securities.
An Underlying State Street Fund may trade futures contracts in U.S. domestic
markets or, to the extent permitted under applicable law, on exchanges located
outside the United States.
A stock index future obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to the difference between the value
of a specific stock index at the close of the last trading day of the contract
and the price at which the agreement is made. With respect to stock indexes
that are permitted investments, each Underlying State Street Fund intends to
purchase and sell futures contracts on the stock index for which it can obtain
the best price, with consideration also given to liquidity.
Initially, when purchasing or selling futures contracts, an Underlying State
Street Fund will be required to deposit with its custodian in the broker's name
an amount of cash or cash equivalents up to approximately 10% of the contract
amount, which is returned to the Fund upon termination. This amount is subject
to change. Subsequent payments to and from the broker will be made daily as the
price of the index or securities underlying the futures contract fluctuates.
SAI-13
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Although an Underlying State Street Fund intends to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance
can be given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may
be made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move to
the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the relevant Underlying State Street Fund to substantial losses.
INTEREST RATE AND EQUITY INDEX SWAPS. An Underlying State Street Fund may enter
into interest rate and index swaps. Interest-rate swaps are contracts in which
one party agrees to pay interest at a floating rate for a specified period of
time, while the counterparty agrees to pay interest at a fixed rate for the
same period. Index swaps involve the exchange by an Underlying State Street
Fund with another party of cash flows based upon the performance of an index or
a portion of an index of securities which usually include dividends.
Each Underlying State Street Fund will enter into swap transactions only if:
(i) for transactions with maturities under one year, the counterparty has
outstanding short-term paper rated at least A-1 by S&P, Prime-1 by Moody's, or
any equivalent rating by any other nationally recognized statistical rating
organization, or (ii) for transactions with maturities greater than one year,
the counterparty has outstanding debt securities rated at least Aa by Moody's
or AA by S&P, or any equivalent rating by any other nationally recognized
statistical rating organization, or (iii) if unrated, State Street deems the
counterparty's creditworthiness to be of equivalent quality.
There is no limit on the amount of swap transactions that an Underlying State
Street Fund may enter into. The risk of loss with respect to swaps is generally
limited to the net amount of payments that the Underlying State Street Fund is
contractually obligated to make. If the other party to a swap defaults, the
Underlying State Street Fund's risk of loss consists of the net amount of
payments that the Underlying State Street Fund contractually is entitled to
receive.
FOREIGN CURRENCY TRANSACTIONS. An Underlying State Street Fund may engage in
currency exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or through entering into forward
contracts to purchase or sell currencies. A forward currency exchange contract
involves an obligation to purchase or sell a specific currency at a future
date, which must be more than two days from the date of the contract, at a
price set at the time of the contract. These contracts are entered into in the
interbank market conducted directly between currency traders (typically
commercial banks or other financial institutions) and their customers.
LENDING PORTFOLIO SECURITIES. An Underlying State Street Fund may lend
securities to brokers, dealers and other financial institutions. The Underlying
State Street Fund will receive collateral of at least 100% cash, letters of
credit or U.S. government securities. The Underlying State Street Fund can
increase its income through the investment of the collateral as well as the
interest receivable on the loan. An Underlying State Street Fund might
experience a loss if the institution with which it has engaged in a portfolio
loan transaction breaches its agreement.
SAI-14
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RATINGS. The ratings of Moody's, S&P, or any other nationally recognized
statistical rating organizations represent their opinions as to the quality of
the obligations which they undertake to rate. It should be emphasized, however,
that ratings are relative and subjective and, although ratings may be useful in
evaluating the safety of interest and principal payments, they do not evaluate
the market value risk of such obligations. Each Underlying State Street Fund
will rely on State Street's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
INVESTMENT RESTRICTIONS APPLICABLE TO THE FUNDS
EQUITY INDEX FUND. The Equity Index Fund will operate as discussed under
Investment Options--Equity Index Fund in the prospectus, and will be subject to
the investment policies and limitations described there. The prospectus for the
SSgA S&P 500 Index Fund describes the investment objective, policies and
limitations applicable to the SSgA S&P 500 Index Fund. A free copy of the SSgA
S&P 500 Index Fund prospectus may be obtained by calling an Equitable Life
Account Executive.
LIFECYCLE FUNDS. The Lifecycle Funds will operate as discussed under Investment
Options-Lifecycle Funds-The Lifecycle Fund Group Trusts - Conservative and
Moderate in the prospectus, and will be subject to the investment policies and
limitations described therein.
LIFECYCLE FUND GROUP TRUSTS. The Lifecycle Fund Group Trusts will operate as
discussed in Investment Options-The Lifecycle Fund Group Trusts-Conservative
and Moderate in the prospectus, and will be subject to the investment policies
and limitations described therein.
UNDERLYING STATE STREET FUNDS: COMMON INVESTMENT RESTRICTIONS. In addition to
the limitations discussed above under Additional Investment Policies and
Techniques and in the prospectus under Investment Options, each Underlying
State Street Fund will not:
(1) Invest in securities for the purpose of obtaining control of
management.
(2) Engage in business of underwriting securities issued by others, except
that an Underlying State Street Fund will not be deemed to be an
underwriter or to be engaged in underwriting by virtue of having purchased
securities subject to legal or contractual restrictions on disposition.
(3) Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions. An Underlying State Street Fund may make initial margin
deposits and variation margin payments in connection with transactions in
futures contracts or related options.
(4) Purchase or sell real estate or real estate mortgage loans, except that
an Underlying State Street Fund may invest in securities secured by real
estate or interests in real estate, or securities issued by companies which
invest in real estate or interests in real estate.
(5) Pledge, mortgage or hypothecate its assets, except to the extent
necessary to (a) secure any permitted borrowings, (b) engage in
transactions that involve the purchase of securities on a when-issued or
forward commitment basis, (c) deposit assets in escrow in connection with
writing covered put and call options, and (d) deposit assets as initial or
variation margin or collateral in connection with transactions in options,
forward contracts, futures contracts (including those relating to indices),
and options on futures contracts or indices.
SAI-15
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(6) Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the U.S.
Government, its agencies and instrumentalities), except to the extent
necessary to comply with the industry weightings of a particular index in
accordance with such Underlying State Street Fund's investment objective
and policies. For purposes of this restriction, the concentration limit may
be exceeded as a result of changes in the market value of portfolio
securities in which an Underlying State Street Fund invests. This limit,
however, may not be exceeded as a result of investments made by an
Underlying State Street Fund.
(7) Purchase or sell commodities or commodity futures contracts, except
that an Underlying State Street Fund may enter into futures contracts to
the extent provided in such Underlying State Street Fund's Declaration of
Trust and as discussed under Additional Investment Policies and Techniques
above and under Investment Options in the prospectus.
While State Street 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 WE DETERMINE UNIT VALUE FOR THE FUNDS
We determine the Unit Value for the Equity Index Fund and each of the
Lifecycle Funds at the end of each business day. The Unit Value for each of
these Funds is calculated by first determining a gross unit value, which
reflects only investment performance, and then adjusting it for Fund expenses
to obtain the Fund Unit Value. We determine the gross unit value by multiplying
the gross unit value for the preceding business day by the net investment
factor for that subsequent business day. We calculate the net investment factor
as follows:
o First, we take the value of the Fund's assets at the close of business
on the preceding business day.
o Next, we add the investment income and capital gains, realized and
unrealized, that are credited to the assets of the Fund during the
business day for which we are calculating the net investment factor.
o Then we subtract the capital losses, realized and unrealized, charged
to the Fund during that business day.
o Finally, we divide this amount by the value of the Fund's assets at
the close of the preceding business day.
The Fund Unit Value is calculated on every business day by multiplying the Fund
Unit Value for the last business day of the previous month by the net change
factor for that business day. The net change factor for each business day is
equal to (a) minus (b) where:
(a) is the gross unit value for that business day divided by the gross unit
value for the last business day of the previous month and;
(b) is the charge to the Fund for that month for the daily accrual of fees and
other expenses times the number of days since the end of the preceding month.
SAI-16
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HOW WE VALUE THE ASSETS OF THE FUNDS
The Equity Index Fund will invest all of its assets in the SSgA S&P 500 Index
Fund. The Equity Index Fund's investments in the SSgA S&P 500 Index Fund will
be valued at the underlying mutual fund's net asset value per share. The asset
value of the SSgA S&P 500 Index Fund is computed on a daily basis by the SSgA
S&P 500 Index Fund. See the prospectus of the SSgA S&P 500 Index Fund for
information on valuation methodology.
The Lifecycle Funds-Conservative and Moderate will invest all of their assets
in the Lifecycle Fund Group Trusts-Conservative and Moderate, respectively. The
Lifecycle Trusts, in turn, will invest all of their assets in the Underlying
State Street Funds. The investments made by each of the Lifecycle Funds in
units of the corresponding Lifecycle Fund Group Trust will be valued at the net
asset value of the units of such Lifecycle Fund Group Trust.
The units of each of the Lifecycle Fund Group Trusts will be valued each
business day as of the close of the regular trading session of the New York
Stock Exchange (currently 4 p.m. Eastern time). A business day is any business
day on which the New York Stock Exchange is open for business. The net asset
value of each unit is computed by dividing the current value of the assets of
each Lifecycle Fund Group Trust, less its liabilities, by the number of units
outstanding and rounding to the nearest cent.
Investments made by each Lifecycle Fund Group Trust in the Underlying State
Street Funds will be valued at the Underlying State Street Fund's net asset
value per unit. The units of each Underlying State Street Fund are valued each
business day in a manner that is similar to the method used for valuing units
of the Lifecycle Fund Group Trusts daily.
The method of valuing the assets of each Underlying State Street Fund is
discussed below.
HOW STATE STREET VALUES THE ASSETS OF THE UNDERLYING STATE STREET FUNDS
State Street values the assets of each Underlying State Street Fund, other than
the STIF Fund, in the following manner on a daily basis:
o STOCKS listed on a national securities exchange or traded on the
NASDAQ national market system are valued at the last sale price. If on
a particular day there is no sale, such securities are valued at the
latest available bid price reported on a composite tape. Other
unlisted securities reported on the NASDAQ system are valued at inside
(highest) quoted bid prices.
o FOREIGN SECURITIES not traded directly, or in ADR form, in the United
States, are valued at the last sale price in the local currency on an
exchange in the country of origin. Foreign currency is converted into
dollars at current exchange rates.
o UNITED STATES TREASURY SECURITIES and other obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities are valued at representative quoted prices.
o LONG-TERM PUBLICLY TRADED CORPORATE BONDS (i.e., maturing in more than
one year) are valued at prices obtained from a bond pricing service of
a major dealer in bonds when such prices are available; however, in
circumstances where it is deemed appropriate to do so, an
over-the-counter or exchange quotation may be used.
SAI-17
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o CONVERTIBLE PREFERRED STOCKS listed on national securities exchanges
are valued at their last sale price or, if there is no sale, at the
latest available bid price.
o CONVERTIBLE BONDS and UNLISTED CONVERTIBLE PREFERRED STOCKS are valued
at bid prices obtained from one or more major dealers in such
securities; where there is a discrepancy between dealers, values may
be adjusted based on recent premium spreads to the underlying common
stock.
o SHORT-TERM DEBT SECURITIES that mature in more than 60 days are valued
at representative quoted prices. Short-term debt securities that
mature in 60 days or less are valued at amortized cost, which
approximates market value.
State Street determines in good faith the fair values of securities and other
assets that do not have a readily available market price in accordance with
accepted accounting practices and applicable laws and regulations.
Assets of the STIF Fund are valued at amortized cost on a daily basis. Under
this method of valuation, securities purchased by the STIF Fund, such as bonds,
notes, commercial paper, certificates of deposit, or other evidences of
indebtedness, are recorded at original cost and adjusted daily for premium
amortization or discount accretion. Use of the amortized cost method results in
a value of portfolio securities that approximates the value computed by use of
mark-to-market method (i.e., use of market values). Values computed under both
methods approach each other the closer a debt obligation comes to maturity. In
this regard, the STIF Fund will not hold debt obligations that have a remaining
maturity of more than thirteen months. See discussion under Investment Options
in the prospectus.
TRANSACTIONS BY THE UNDERLYING STATE STREET FUNDS
This section discusses the procedures followed by the Underlying State Street
Funds, with respect to the buying and selling of portfolio securities for these
Funds. In connections with such transactions, the Underlying State Street Funds
pay brokerage commissions, transfer taxes, and other fees.
Decisions to buy or sell securities for the Underlying State Street Funds are
made by State Street in accordance with the investment policies and
restrictions of each Underlying State Street Fund. Such decisions are made
independently of the decisions made for other entities managed by State Street.
There may be occasions, however, when the same investment decision is made for
more than one account advised or managed by State Street. In such cases, State
Street will allocate such purchases or sales among the affected accounts in as
equitable a manner as it deems possible. The principal factors State Street
will take into account in making this determination are the relative investment
objectives of the affected client accounts, the relative sizes of the same or
comparable securities held by or on behalf of such accounts, and the
availability at the time of funds in each client account to make the
investment.
Portfolio securities held by one State Street client also may be held by one or
more of its other clients. When two or more of State Street's clients are
engaged in the simultaneous purchase or sale of securities, State Street
allocates the amount of each transaction in accordance with the formulae deemed
to be equitable as to each client. There may be circumstances, however, when
purchases or sales of portfolio securities for one or more of State Street's
clients will have an adverse effect on other clients.
In placing portfolio transactions for an Underlying State Street Fund, State
Street will seek the best price and most favorable execution available to such
Fund. In this regard, State Street will take into account all
SAI-18
<PAGE>
- --------------------------------------------------------------------------------
factors which it considers relevant to making this decision, including the
extent of any provision of any brokerage and research services to such Fund
within the meaning of Section 28(e) of the Securities Exchange Act of 1934
("1934 Act"), viewed in terms of either that particular transaction or the
broker's or dealer's overall responsibilities to the Underlying State Street
Fund.
State Street periodically will review the brokerage commissions paid by an
Underlying State Street Fund to determine whether the commissions paid over a
particular period of time were reasonable in relation to the benefits provided
to such Fund. It is possible that certain of the services received from a
broker or dealer in connection with the execution of transactions will
primarily benefit one or more other accounts for which State Street exercises
discretion, or an Underlying State Street Fund other than that for which the
transaction was executed. Conversely, any given Underlying State Street Fund
may be the primary beneficiary of the service received as a result of portfolio
transactions effected for such other accounts or Underlying State Street Funds.
The investment management fees paid to State Street are not reduced by reason
of receipt of such brokerage and research services.
INVESTMENT MANAGEMENT FEE
State Street is the investment adviser to the SSgA S&P 500 Index Fund, the
underlying mutual fund in which the Equity Index Fund invests. No investment
management fee was paid to State Street in [1998] with respect to the Program's
investment in the SSgA S&P 500 Index Fund through the Equity Index Fund.
UNDERWRITER
EQ Financial Consultants, Inc. ("EQ Financial"), a wholly-owned subsidiary of
Equitable Life, may be deemed to be the principal underwriter of separate
account units under the group annuity contract. EQ Financial is registered with
the SEC as a broker-dealer under the 1934 Act and is a member of the National
Association of Securities Dealers, Inc. EQ Financial's principal business
address is 1290 Avenue of the Americas, New York, NY 10104. The offering of the
units under the contract is continuous. No underwriting commissions have been
paid during any of the last three fiscal years with respect to units of
interest under the contract. See Deductions and Charges in the prospectus.
During May 1999, EQ Financial will change its name to AXA Advisors, Inc.
No person currently serves as underwriter for the Lifecycle Fund Group Trusts
or the Underlying State Street Funds.
SAI-19
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT: EQUITABLE LIFE
Equitable Life is managed by its sole shareholder, The Equitable Life Companies
Incorporated. Its directors and certain of its executive officers and their
principal occupations are as follows:
<TABLE>
<CAPTION>
DIRECTOR'S NAME PRINCIPAL OCCUPATION
- --------------------------- ----------------------------------------------------------------
<S> <C>
Francoise Colloc'h Senior Executive Vice President, Human Resources and
Communications, AXA-UAP
Henri de Castries Senior Executive Vice President, Financial Services and Life
Insurance Activities, AXA-UAP
Joseph L. Dionne Chairman and Chief Executive Officer, The McGraw-Hill Companies
Denis Duverne Senior Vice President, International AXA-UAP
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, LeBoeuf, Lamb, Greene & MacRae
John T. Hartley Director and retired Chairman and Chief Executive Officer,
Harris Corporation
John H.F. Haskell, Jr. Director and Managing Director, SBC Warburg Dillon Read, Inc.
Mary R. (Nina) Henderson President, Best Foods Grocery; Vice President, BESTFOODS
W. Edwin Jarmain President, Jarmain Group Inc.
George T. Lowy Counselor-at-Law, Partner, Cravath, Swaine & Moore
Didier Pineau-Valencienne Chairman and Chief Executive Officer, Schneider, S.A.
George J. Sella, Jr. Retired Chairman and Chief Executive Officer,
American Cyanamid Company
Dave H. Williams Chairman and Chief Executive Officer,
Alliance Capital Management Corporation
</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-DIRECTOR'S NAME PRINCIPAL OCCUPATION
- ------------------------- --------------------------------------------------------------------
<S> <C>
Edward D. Miller Chairman of the Board and Chief Executive Officer; formerly, Senior
Vice Chairman, Chase Manhattan Corp., and prior thereto, President
and Vice Chairman, Chemical Bank.
Stanley B. Tulin Vice Chairman of the Board and Chief Financial Officer; formerly,
Chairman, Insurance Consulting and Actuarial Practice, Coopers &
Lybrand.
Michael Hegarty President and Chief Operating Officer; formerly, Vice Chairman,
Chase Manhattan Corporation.
</TABLE>
SAI-20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OTHER OFFICER'S NAME PRINCIPAL OCCUPATION*
- --------------------- ----------------------------------------------------------------------
<S> <C>
Jose Suquet Senior Executive Vice President and Chief Distribution Officer
Leon B. Billis Executive Vice President and Chief Information Officer
Robert E. Garber Executive Vice President and General Counsel
Jerome S. Golden Executive Vice President; formerly with JG Resources and BT
Variable
Peter D. Noris Executive Vice President and Chief Investment Officer; formerly, Vice
President/Manager, Insurance Company Investment Strategies Group,
Salomon Brothers, Inc.
Kevin R. Byrne Senior Vice President and Treasurer
Harvey Blitz Senior Vice President and Deputy Chief Financial Officer
Alvin H. Fenichel Senior Vice President and Controller
Paul J. Flora Senior Vice President and Auditor
Mark A. Hug Senior Vice President; formerly, Vice President, Aetna
Michael S. Martin Senior Vice President and Chief Marketing Officer
Douglas Menkes Senior Vice President and Corporate Actuary; formerly with Milliman
& Robertson, Inc.
Anthony C. Pasquale Senior Vice President
Donald R. Kaplan Vice President and Chief Compliance Officer
Pauline Sherman Vice President, Secretary and Associate General Counsel
</TABLE>
* Current positions listed are with Equitable Life unless otherwise specified.
SAI-21
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT: STATE STREET
State Street is managed by its sole shareholder, State Street Corporation. Its
directors and certain of its executive officers and their principal occupations
are as follows:
<TABLE>
<CAPTION>
DIRECTOR'S NAME PRINCIPAL OCCUPATION
- --------------------------- -------------------------------------------------------------------
<S> <C>
Tenley E. Albright, M.D. Chairman, Western Resources, Inc.
Joseph A. Baute, Jr. Former Chairman, Markem Corporation
I. MacAllister Booth Retired Chairman, President and CEO,
Polaroid Corporation
James I. Cash, Jr. The James E. Robison Professor of Business Administration, Harvard
Business School
Truman S. Casner, Esquire Partner
Ropes & Gray
Nader F. Darehshori Chairman, President and CEO,
Houghton Mifflin Company
Arthur L. Goldstein Chairman and CEO, Ionics, Incorporated
David P. Gruber Chairman and CEO,
Wyman-Gordon Company
Charles F. Kaye Chairman,
Transportation Investments, Inc.
John M. Kucharski Chairman,
EG&G, Inc.
Charles R. LaMantia President and CEO,
Arthur D. Little, Inc.
David B. Perini Chairman,
Perini Corporation
Dennis J. Picard Chairman,
Raytheon Company
Alfred Poe CEO, Menu Direct
Bernard W. Reznicek President, Premier Group; National Director -- Utility Marketing,
Central States Indemnity Company of Omaha
Diana Chapman Walsh President, Wellesley College
Robert E. Weissman Chairman and CEO, IMS Health
</TABLE>
<TABLE>
<CAPTION>
OFFICER-DIRECTOR'S NAME PRINCIPAL OCCUPATION
- ------------------------- -------------------------------------------------------
<S> <C>
Marshall N. Carter Chairman and CEO, State Street Corporation
David A. Spina President and Chief Operating Officer
State Street Bank and Trust Company
William S. Edgerly Chairman Emeritus, State Street Corporation, 1976-1992
</TABLE>
SAI-22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OTHER OFFICERS NAMES PRINCIPAL OCCUPATION*
- ------------------------- ---------------------------------------------
<S> <C>
Maureen S. Bateman Executive Vice President and General Counsel
George K. Bird, IV Executive Vice President
Dale L. Carleton Vice Chairman
Susan Comeau Executive Vice President
James J. Darr Executive Vice President
John A. Fiore Executive Vice President and CIO
Timothy B. Harbert Executive Vice President
Ronald E. Logue Executive Vice President
Nicholas A. Lopardo Vice Chairman
Jacques-Phillipe Marson Executive Vice President
Ronald O'Kelley CFO, Treasurer, Executive Vice President
Albert E. Peterson Executive Vice President
James S. Phalen Executive Vice President
William M. Reghitto Executive Vice President
John R. Towers Executive Vice President
</TABLE>
- ----------
* All positions are with State Street Bank and Trust Company.
SAI-23
<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
Separate Account Nos. 195, 197 and 198 or the Underlying Funds. The financial
statements of Separate Account Nos. 195, 197 and 198 reflect applicable fees,
charges and other expenses under the Program as in effect during the periods
covered.
<TABLE>
<S> <C>
SEPARATE ACCOUNT NOS. 195, 197 AND 198:
Report of Independent Accountants .................................................... SAI-27
Separate Account No. 195 (Equity Index Fund):
Statement of Assets and Liabilities, December 31, 1998 ............................... SAI-28
Statements of Operations and Changes in Net Assets for the Years Ended December 31,
1998 and 1997 ........................................................................ SAI-29
Separate Account No. 197 (Lifecycle Fund -- Conservative):
Statement of Assets and Liabilities, December 31, 1998 ............................... SAI-30
Statement of Operations and Changes in Net Assets for the Year Ended December 31,
1998 and 1997 ........................................................................ SAI-31
Separate Account No. 198 (Lifecycle Fund -- Moderate):
Statement of Assets and Liabilities, December 31, 1998 ............................... SAI-32
Statement of Operations and Changes in Net Assets for the Year Ended December 31,
1998 and 1997......................................................................... SAI-33
Separate Account Nos. 195, 197 and 198:
Notes to Financial Statements ........................................................ SAI-34
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Report of Independent Accountants .................................................... SAI-35
Consolidated Balance Sheets, December 31, 1998 and 1997 .............................. SAI-36
Consolidated Statements of Earnings for the Year Ended December 31, 1998, 1997 and
1996 ................................................................................. SAI-37
Consolidated Statements of Shareholders' Equity for the Years Ended December 31,
1998, 1997 and 1996 .................................................................. SAI-38
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and
1996 ................................................................................. SAI-39
Notes to Consolidated Financial Statements ........................................... SAI-40
</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 Fund invest.
<TABLE>
<S> <C>
STATE STREET BANK AND TRUST COMPANY --
LIFECYCLE FUND GROUP TRUST -- CONSERVATIVE
Report of Independent Accountants .................................................... SAI-81
Lifecycle Fund Group Trust -- Conservative:
Statement of Assets and Liabilities, December 31, 1998 ............................... SAI-82
Statement of Operations for Year Ended December 31, 1998 ............................. SAI-83
Statement of Changes in Net Assets for the Year Ended December 31, 1998 and December
31, 1997 ............................................................................. SAI-84
Selected Per Unit Data ............................................................... SAI-85
Notes to Financial Statements ........................................................ SAI-86
STATE STREET BANK AND TRUST COMPANY --
LIFECYCLE FUND GROUP TRUST -- MODERATE
Report of Independent Accountants -- ................................................. SAI-89
Lifecycle Fund Group Trust -- Moderate:
Statement of Assets and Liabilities, December 31, 1998 ............................... SAI-90
Statement of Operations for the Year Ended December 31, 1998 ......................... SAI-91
Statement of Changes in Net Assets for the Year Ended December 31, 1998 and December
31, 1997 ............................................................................. SAI-92
Selected Per Unit Data ............................................................... SAI-93
Notes to Financial Statements ........................................................ SAI-94
</TABLE>
SAI-24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATE STREET BANK AND TRUST COMPANY -- UNDERLYING FUNDS
FLAGSHIP FUND
Report of Independent Accountants -- ................................................. SAI-
S&P 500 Flagship Fund and S&P 500 Index Fund with Futures:
Combined Statement of Assets and Liabilities, December 31, 1998 ...................... SAI-
Combined Statement of Operations for the Year Ended December 31, 1998 ................ SAI-
Combined Statement of Changes in Net Assets for the Year Ended December 31, 1998 and
1997 ................................................................................. SAI-
S&P 500 Index Fund with Futures Selected Per Unit Data ............................... SAI-
S&P 500 Flagship Fund Selected Per Unit Data ......................................... SAI-
Notes to Combined Financial Statements ............................................... SAI-
Combined Schedule of Investments, December 31, 1998 .................................. SAI-
RUSSELL 2000 FUND
Report of Independent Accountants -- ................................................. SAI-
Russell 2000 Fund and Russell 2000 Non-Lending Fund:
Combined Statement of Asset and Liabilities, December 31, 1998 ....................... SAI-
Combined Statement of Operations for the Year Ended December 31, 1998 ................ SAI-
Combined Statement of Changes in Net Assets for the Years Ended December 31, 1998 and
1997 ................................................................................. SAI-
Selected Per Unit Data ............................................................... SAI-
Notes to Financial Statements ........................................................ SAI-
Combined Schedule of Investments ..................................................... SAI-
</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 Russell 2000
Value and Growth Funds, which in turn invest in shares of companies included in
the Russell 2000 Index. Beginning June 17, 1996, the Fund began making direct
investment again.
<TABLE>
<S> <C>
DAILY EAFE FUND
Report of Independent Accountants -- ................................................. SAI-
Daily EAFE Securities Lending Fund and Daily EAFE Non-Lending:
Combined Statement of Assets and Liabilities, December 31, 1998 ...................... SAI-
Combined Statement of Operations for the Year Ended December 31, 1998 ................ SAI-
Combined Statement of Changes in Net Assets for the Year Ended December 31, 1998 and SAI-
1997
Daily EAFE Securities Lending Fund Selected Per Unit Data ............................ DAI-
Daily EAFE Non-Lending Fund Selected Per Unit Data ................................... SAI-
Notes to Combined Financial Statements ............................................... SAI-
Combined Schedule of Investments, December 31, 1998 .................................. SAI-
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND ..........................................
DAILY MSCI EUROPE INDEX FUND .............................................................
Report of Independent Accountants .................................................... SAI-
Daily MSCI Europe Index Securities Lending Fund and Daily
MSCI Europe Index Fund:
Combined Statement of Assets and Liabilities, December 31, 1998 ...................... SAI-
Combined Statement of Operations for the Year Ended December 31, 1998 ................ SAI-
Combined Statement of Changes in Net Assets .......................................... SAI-
Daily MSCI Europe Index Securities Lending Fund Selected Per Unit Data ............... SAI-
Daily MSCI Europe Index Fund Selected Per Unit Data .................................. SAI-
Combined Schedule of Investments ..................................................... SAI-
Notes to Combined Financial Statements ............................................... SAI-
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Report of Independent Accounts ....................................................... SAI-
Daily MSCI Japan Index Securities Lending Fund and Daily
MSCI Japan Index Fund
Combined Statement of Assets and Liabilities, December 31, 1998 ...................... SAI-
</TABLE>
SAI-25
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Combined Statement of Operations for the Year Ended December 31, 1998 ................ SAI-217
Combined Statement of Changes in Net Assets .......................................... SAI-218
Daily MSCI Japan Index Securities Lending Fund Selected Per Unit Data ................ SAI-219
Daily MSCI Japan Index Fund Selected Per Unit Data ................................... SAI-220
Combined Schedule of Investments ..................................................... SAI-221
Notes to Combined Financial Statements ............................................... SAI-229
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Report of Independent Accountants .................................................... SAI-234
Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund
Daily MSCI Pacific Basin ex-Japan Index Fund
Combined Statement of Assets and Liabilities, December 31, 1998 ...................... SAI-235
Combined Statement of Operations for the year Ended December 31, 1998 ................ SAI-236
Combined Statement of Changes in Net Assets .......................................... SAI-237
Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund Selected Per Unit
Data ................................................................................. SAI-238
Daily MSCI Pacific Basin ex-Japan Index Selected Per Unit Data ....................... SAI-239
Combined Schedule of Investments ..................................................... SAI-240
Notes to Financial Statements ........................................................ SAI-245
GC BOND FUND
Report of Independent Accountants -- ................................................. SAI-250
Daily Government/Corporate Fund:
Statement of Assets and Liabilities, December 31, 1998 ............................... SAI-251
Statement of Operations for the Year Ended December 31, 1998 ......................... SAI-252
Statement of Changes in Net Assets for the Years Ended December 31, 1998 and 1997 .... SAI-253
Selected Per Unit Data ............................................................... SAI-254
Schedule of Investments, December 31, 1998 ........................................... SAI-255
Notes to Financial Statements ........................................................ SAI-266
STIF FUND
Report of Independent Accountants -- ................................................. SAI-270
Short-Term Investment Fund:
Statement of Assets and Liabilities, December 31, 1998 ............................... SAI-271
Statement of Operations for the Year Ended December 31, 1998 ......................... SAI-272
Statement of Changes in Net Assets for the Year Ended December 31, 1998 .............. SAI-273
Selected Per Unit Data ............................................................... SAI-274
Schedule of Investments, December 31, 1998 ........................................... SAI-275
Notes to Financial Statements ........................................................ SAI-280
</TABLE>
SAI-26
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and the Contractowners of Separate Account Nos. 195, 197 and 198
of the Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities, and the
related statements of operations and changes in net assets and the selected per
unit data (included under Condensed Financial Information in the prospectus of
the American Dental Association Members Retirement Program) present fairly, in
all material respects, the financial position of Separate Account Nos. 195 (The
Equity Index Fund), 197 (The Lifecycle Fund-Conservative) and 198 (The
Lifecycle Fund-Moderate) of The Equitable Life Assurance Society of the United
States ("Equitable Life") at December 31, 1998 and each of their results of
operations, changes in net assets and the selected per unit data for the
periods presented, in conformity with generally accepted accounting principles.
These financial statements and the selected per unit data (hereafter referred
to as "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
agents at December 31, 1998, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 8, 1999
SAI-27
<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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in 5,888,319 shares of The SSgA S&P 500 Index Fund-at value (cost:
$116,463,159) (Note 2).................................................................. $130,014,073
Receivable from Equitable Life's General Account ......................................... 378,344
- ------------------------------------------------------------------------------------------- ------------
Total assets ......................................................................... 130,392,417
- ------------------------------------------------------------------------------------------- ------------
LIABILITIES:
Accrued expenses ......................................................................... 67,490
- ------------------------------------------------------------------------------------------- ------------
NET ASSETS ............................................................................... $130,324,927
=========================================================================================== ============
</TABLE>
See Notes to Financial Statements.
SAI-28
<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>
YEAR ENDED DECEMBER 31,
1998 1997
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2)-Dividends from The SSgA S&P 500 Index Fund ..... $ 1,754,838 $ 1,386,961
EXPENSES (NOTE 3) ......................................................... (962,005) (572,609)
- ---------------------------------------------------------------------------- ------------- -------------
NET INVESTMENT INCOME ..................................................... 792,833 814,352
- ---------------------------------------------------------------------------- ------------- -------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Realized gain from share transactions ..................................... 7,447,203 5,236,295
Realized gain distribution from The SSgA S&P 500 Index Fund ............... 11,711,994 2,147,525
- ---------------------------------------------------------------------------- ------------- -------------
NET REALIZED GAIN ......................................................... 19,159,197 7,383,820
- ---------------------------------------------------------------------------- ------------- -------------
Unrealized appreciation of investments:
Beginning of year ......................................................... 8,865,748 2,754,449
End of year ............................................................... 13,550,914 8,865,748
- ---------------------------------------------------------------------------- ------------- -------------
Change in unrealized appreciation ......................................... 4,685,166 6,111,299
- ---------------------------------------------------------------------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ........................... 23,844,363 13,495,119
- ---------------------------------------------------------------------------- ------------- -------------
Increase in net assets attributable to operations ......................... 24,637,196 14,309,471
- ---------------------------------------------------------------------------- ------------- -------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ............................................................. 92,337,489 72,942,238
Withdrawals ............................................................... (64,460,022) (42,843,748)
- ---------------------------------------------------------------------------- ------------- -------------
Increase in net assets attributable to contributions and withdrawals ...... 27,877,467 30,098,490
- ---------------------------------------------------------------------------- ------------- -------------
INCREASE IN NET ASSETS .................................................... 52,514,663 44,407,961
NET ASSETS -- BEGINNING OF YEAR ........................................... 77,810,264 33,402,303
- ---------------------------------------------------------------------------- ------------- -------------
NET ASSETS -- END OF YEAR ................................................. $ 130,324,927 $ 77,810,264
============================================================================ ============= =============
</TABLE>
See Notes to Financial Statements.
SAI-29
<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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in 947,163 shares of The Lifecycle Fund Group Trust Conservative -- at value
(cost: $12,715,619) (Note 2)........................................................... $13,513,178
Receivable from Equitable Life's General Account ....................................... 2,671
- ----------------------------------------------------------------------------------------- -----------
Total assets ....................................................................... 13,515,849
- ----------------------------------------------------------------------------------------- -----------
LIABILITIES:
Accrued expenses ....................................................................... 25,170
- ----------------------------------------------------------------------------------------- -----------
NET ASSETS ............................................................................. $13,490,679
========================================================================================= ===========
</TABLE>
See Notes to Financial Statements.
SAI-30
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 197
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
-------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
EXPENSES (NOTE 3) ........................................................ $ (138,799) $ (91,976)
- --------------------------------------------------------------------------- ------------ ------------
NET INVESTMENT LOSS ...................................................... (138,799) (91,976)
- --------------------------------------------------------------------------- ------------ ------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Realized gain from share transactions .................................... 915,776 278,397
- --------------------------------------------------------------------------- ------------ ------------
Unrealized appreciation of investments:
Beginning of year ....................................................... 514,218 236,188
End of year ............................................................. 797,559 514,218
- --------------------------------------------------------------------------- ------------ ------------
Change in unrealized appreciation ........................................ 283,341 278,030
- --------------------------------------------------------------------------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .......................... 1,199,117 556,427
- --------------------------------------------------------------------------- ------------ ------------
Increase in net assets attributable to operations ........................ 1,060,318 464,451
- --------------------------------------------------------------------------- ------------ ------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ............................................................ 13,680,884 5,122,907
Withdrawals .............................................................. (8,477,279) (2,870,864)
- --------------------------------------------------------------------------- ------------ ------------
Increase in net assets attributable to contributions and withdrawals ..... 5,203,605 2,252,043
- --------------------------------------------------------------------------- ------------ ------------
INCREASE IN NET ASSETS ................................................... 6,263,923 2,716,494
NET ASSETS -- BEGINNING OF YEAR .......................................... 7,226,756 4,510,262
- --------------------------------------------------------------------------- ------------ ------------
NET ASSETS -- END OF YEAR ................................................ $ 13,490,679 $ 7,226,756
=========================================================================== ============ ============
</TABLE>
See Notes to Financial Statements.
SAI-31
<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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in 7,397,392 shares of The Lifecycle Fund Group Trust Moderate -- at value
(cost: $91,708,548) (Note 2) ........................................................ $125,444,973
Cash ................................................................................. 81,109
- --------------------------------------------------------------------------------------- ------------
Total assets ..................................................................... 125,526,082
- --------------------------------------------------------------------------------------- ------------
LIABILITIES:
Due to Equitable Life's General Account .............................................. 130,177
Accrued expenses ..................................................................... 198,044
- --------------------------------------------------------------------------------------- ------------
Total liabilities ................................................................ 328,221
- --------------------------------------------------------------------------------------- ------------
NET ASSETS ........................................................................... $125,197,861
======================================================================================= ============
</TABLE>
See Notes to Financial Statements.
SAI-32
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 198
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
EXPENSES (NOTE 3) ........................................................ $ (1,136,827) $ (1,033,082)
- --------------------------------------------------------------------------- ------------- -------------
NET INVESTMENT LOSS ...................................................... (1,136,827) (1,033,082)
- --------------------------------------------------------------------------- ------------- -------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Realized gain from share transactions .................................... 6,306,841 1,903,769
- --------------------------------------------------------------------------- ------------- -------------
Unrealized appreciation of investments:
Beginning of year ........................................................ 22,892,839 9,168,295
End of year .............................................................. 33,736,425 22,892,839
- --------------------------------------------------------------------------- ------------- -------------
Change in unrealized appreciation ........................................ 10,843,586 13,724,544
- --------------------------------------------------------------------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .......................... 17,150,427 15,628,313
- --------------------------------------------------------------------------- ------------- -------------
Increase in net assets attributable to operations ........................ 16,013,600 14,595,231
- --------------------------------------------------------------------------- ------------- -------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ............................................................ 31,146,560 22,412,496
Withdrawals .............................................................. (30,260,348) (16,901,963)
- --------------------------------------------------------------------------- ------------- -------------
Increase in net assets attributable to contributions and withdrawals ..... 886,212 5,510,533
- --------------------------------------------------------------------------- ------------- -------------
INCREASE IN NET ASSETS ................................................... 16,899,812 20,105,764
NET ASSETS-- BEGINNING OF YEAR ........................................... 108,298,049 88,192,285
- --------------------------------------------------------------------------- ------------- -------------
NET ASSETS--END OF YEAR .................................................. $ 125,197,861 $ 108,298,049
=========================================================================== ============= =============
</TABLE>
See Notes to Financial Statements.
SAI-33
<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 SSgA S&P 500
Index Fund, a portfolio of the SSgA Funds, which is registered under the
Investment Company Act of 1940 as an open-end management investment
company. The investment manager of the SSgA S&P 500 Index Fund is State
Street Bank and Trust Company (State Street).
Separate Account Nos. 197 and 198 invest their assets in shares of the
Lifecycle Fund Group Trusts -- Conservative and Moderate, respectively. The
Lifecycle Funds Group Trusts are collective investment funds maintained by
State Street. Each Lifecycle Fund Group is organized as a common law trust
under Massachusetts Law, and, because of exclusionary provisions, 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 the ex-date.
Investments in the SSgA S&P 500 Index Fund, the Lifecycle Funds --
Conservative's and Moderate's investments in the Lifecycle Fund Group
Trusts -- Conservative and Moderate are valued at the underlying mutual
fund's or trust's net asset value per share.
3. Charges and fees relating to the Funds are deducted in accordance with the
terms of the contracts issued by Equitable Life to the Trusts. With respect
to the American Dental Association Members Retirement Program, these
expenses consist of program expense charges, direct expenses and record
maintenance and report fees. 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-34
<PAGE>
- --------------------------------------------------------------------------------
February 8, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, of shareholder's equity and
comprehensive income and of cash flows present fairly, in all material
respects, the financial position of The Equitable Life Assurance Society of the
United States and its subsidiaries ("Equitable Life") at December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, 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 method of accounting for long-lived assets in 1996.
PricewaterhouseCoopers LLP
New York, New York
SAI-35
<PAGE>
- --------------------------------------------------------------------------------
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------- --------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value ........................ $ 18,993.7 $ 19,630.9
Held to maturity, at amortized cost ................................ 125.0 --
Mortgage loans on real estate ........................................ 2,809.9 2,611.4
Equity real estate ................................................... 1,676.9 2,495.1
Policy loans ......................................................... 2,086.7 2,422.9
Other equity investments ............................................. 713.3 951.5
Investment in and loans to affiliates ................................ 928.5 731.1
Other invested assets ................................................ 808.2 612.2
------------ -----------
Total investments ................................................. 28,142.2 29,455.1
Cash and cash equivalents ............................................. 1,245.5 300.5
Deferred policy acquisition costs ..................................... 3,563.8 3,236.6
Amounts due from discontinued operations .............................. 2.7 572.8
Other assets .......................................................... 3,051.9 2,687.4
Closed Block assets ................................................... 8,632.4 8,566.6
Separate Accounts assets .............................................. 43,302.3 36,538.7
------------ -----------
TOTAL ASSETS .......................................................... $ 87,940.8 $ 81,357.7
============ ===========
LIABILITIES
Policyholders' account balances ....................................... $ 20,889.7 $ 21,579.5
Future policy benefits and other policyholders' liabilities ........... 4,694.2 4,553.8
Short-term and long-term debt ......................................... 1,181.7 1,716.7
Other liabilities ..................................................... 3,474.3 3,267.2
Closed Block liabilities .............................................. 9,077.0 9,073.7
Separate Accounts liabilities ......................................... 43,211.3 36,306.3
------------ -----------
Total liabilities ................................................. 82,528.2 76,497.2
------------ -----------
Commitments and contingencies (Notes 11, 13, 14, 15 and 16)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares authorized, issued and
outstanding .......................................................... 2.5 2.5
Capital in excess of par value ........................................ 3,110.2 3,105.8
Retained earnings ..................................................... 1,944.1 1,235.9
Accumulated other comprehensive income ................................ 355.8 516.3
------------ -----------
Total shareholder's equity ........................................ 5,412.6 4,860.5
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ............................ $ 87,940.8 $ 81,357.7
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-36
<PAGE>
- --------------------------------------------------------------------------------
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee income .......... $ 1,056.2 $ 950.6 $ 874.0
Premiums .............................................................. 588.1 601.5 597.6
Net investment income ................................................. 2,228.1 2,282.8 2,203.6
Investment gains (losses), net ........................................ 100.2 (45.2) (9.8)
Commissions, fees and other income .................................... 1,503.0 1,227.2 1,081.8
Contribution from the Closed Block .................................... 87.1 102.5 125.0
----------- --------- ---------
Total revenues ..................................................... 5,562.7 5,119.4 4,872.2
----------- --------- ---------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances .................. 1,153.0 1,266.2 1,270.2
Policyholders' benefits ............................................... 1,024.7 978.6 1,317.7
Other operating costs and expenses .................................... 2,201.2 2,203.9 2,075.7
----------- --------- ---------
Total benefits and other deductions ................................ 4,378.9 4,448.7 4,663.6
----------- --------- ---------
Earnings from continuing operations before Federal income taxes,
minority interest and cumulative effect of accounting change ......... 1,183.8 670.7 208.6
Federal income taxes .................................................. 353.1 91.5 9.7
Minority interest in net income of consolidated subsidiaries .......... 125.2 54.8 81.7
----------- --------- ---------
Earnings from continuing operations before cumulative effect of
accounting change .................................................... 705.5 524.4 117.2
Discontinued operations, net of Federal income taxes .................. 2.7 (87.2) (83.8)
Cumulative effect of accounting change, net of Federal income
taxes ................................................................ -- -- (23.1)
----------- --------- ---------
Net Earnings .......................................................... $ 708.2 $ 437.2 $ 10.3
=========== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-37
<PAGE>
- --------------------------------------------------------------------------------
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND
COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------ -------------
(IN MILLIONS)
<S> <C> <C> <C>
Common stock, at par value, beginning and end of year ............. $ 2.5 $ 2.5 $ 2.5
---------- --------- ---------
Capital in excess of par value, beginning of year ................. 3,105.8 3,105.8 3,105.8
Additional capital in excess of par value ......................... 4.4 -- --
---------- --------- ---------
Capital in excess of par value, end of year ....................... 3,110.2 3,105.8 3,105.8
Retained earnings, beginning of year .............................. 1,235.9 798.7 788.4
Net earnings ...................................................... 708.2 437.2 10.3
---------- --------- ---------
Retained earnings, end of year .................................... 1,944.1 1,235.9 798.7
---------- --------- ---------
Accumulated other comprehensive income, beginning of year ......... 516.3 177.0 361.4
Other comprehensive income ........................................ (160.5) 339.3 (184.4)
---------- --------- ---------
Accumulated other comprehensive income, end of year ............... 355.8 516.3 177.0
---------- --------- ---------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR ........................... $ 5,412.6 $ 4,860.5 $ 4,084.0
========== ========= =========
COMPREHENSIVE INCOME
Net earnings ...................................................... $ 708.2 $ 437.2 $ 10.3
---------- --------- ---------
Change in unrealized gains (losses), net of reclassification
adjustment ....................................................... (149.5) 343.7 (206.6)
Minimum pension liability adjustment .............................. (11.0) (4.4) 22.2
---------- --------- ---------
Other comprehensive income ........................................ (160.5) 339.3 (184.4)
---------- --------- ---------
COMPREHENSIVE INCOME .............................................. $ 547.7 $ 776.5 $ (174.1)
========== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-38
<PAGE>
- --------------------------------------------------------------------------------
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
(IN MILLIONS)
<S> <C> <C> <C>
Net earnings .......................................................... $ 708.2 $ 437.2 $ 10.3
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Interest credited to policyholders' account balances ................. 1,153.0 1,266.2 1,270.2
Universal life and investment-type product policy fee income ......... (1,056.2) (950.6) (874.0)
Investment (gains) losses ............................................ (100.2) 45.2 9.8
Change in Federal income tax payable ................................. 123.1 (74.4) (197.1)
Other, net ........................................................... (324.9) 169.4 330.2
----------- ----------- -----------
Net cash provided by operating activities ............................. 503.0 893.0 549.4
----------- ----------- -----------
Cash flows from investing activities:
Maturities and repayments ............................................ 2,289.0 2,702.9 2,275.1
Sales ................................................................ 16,972.1 10,385.9 8,964.3
Purchases ............................................................ (18,578.5) (13,205.4) (12,559.6)
Decrease (increase) in short-term investments ........................ 102.4 (555.0) 450.3
Decrease in loans to discontinued operations ......................... 660.0 420.1 1,017.0
Sale of subsidiaries ................................................. -- 261.0 --
Other, net ........................................................... (341.8) (612.6) (281.0)
----------- ----------- -----------
Net cash provided (used) by investing activities ...................... 1,103.2 (603.1) (133.9)
----------- ----------- -----------
Cash flows from financing activities:
Policyholders' account balances:
Deposits .......................................................... 1,508.1 1,281.7 1,925.4
Withdrawals ....................................................... (1,724.6) (1,886.8) (2,385.2)
Net (decrease) increase in short-term financings ..................... (243.5) 419.9 (.3)
Repayments of long-term debt ......................................... (24.5) (196.4) (124.8)
Payment of obligation to fund accumulated deficit of
discontinued operations ............................................ (87.2) (83.9) --
Other, net ........................................................... (89.5) (62.7) (66.5)
----------- ----------- -----------
Net cash used by financing activities ................................. (661.2) (528.2) (651.4)
----------- ----------- -----------
Change in cash and cash equivalents ................................... 945.0 (238.3) (235.9)
Cash and cash equivalents, beginning of year .......................... 300.5 538.8 774.7
----------- ----------- -----------
Cash and Cash Equivalents, End of Year ................................ $ 1,245.5 $ 300.5 $ 538.8
=========== =========== ===========
Supplemental cash flow information ....................................
Interest Paid ........................................................ $ 130.7 $ 217.1 $ 109.9
=========== =========== ===========
Income Taxes Paid (Refunded) ......................................... $ 254.3 $ 170.0 $ (10.0)
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-39
<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") is a wholly owned subsidiary of The Equitable Companies Incorporated
(the "Holding Company"). Equitable Life's insurance business is conducted
principally by Equitable Life and its wholly owned life insurance subsidiaries,
Equitable of Colorado ("EOC"), and, prior to December 31, 1996, Equitable
Variable Life Insurance Company ("EVLICO"). Effective January 1, 1997, EVLICO
was merged into Equitable Life, which continues to conduct the Company's
insurance business. Equitable Life's investment management business, which
comprises the Investment Services segment, is conducted principally by Alliance
Capital Management L.P. ("Alliance"), in which Equitable Life has a 57.7%
ownership interest, and Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), an
investment banking and brokerage affiliate in which Equitable Life has a 32.5%
ownership interest. AXA ("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 58.5% at December 31, 1998
(53.4% if all securities convertible into, and options on, common stock were to
be converted or exercised).
The Insurance segment offers a variety of traditional, variable and
interest-sensitive life insurance products, disability income, annuity
products, mutual fund and other investment products to individuals and small
groups. It also administers traditional participating group annuity contracts
with conversion features, generally for corporate qualified pension plans, and
association plans which provide full service retirement programs for
individuals affiliated with professional and trade associations. This segment
includes Separate Accounts for individual insurance and annuity products.
The Investment Services segment includes Alliance, the results of DLJ
which are accounted for on an equity basis, and, through June 10, 1997,
Equitable Real Estate Investment Management, Inc. ("EREIM"), a real estate
investment management subsidiary which was sold. Alliance provides diversified
investment fund management services to a variety of institutional clients,
including pension funds, endowments, and foreign financial institutions, as
well as to individual investors, principally through a broad line of mutual
funds. This segment includes institutional Separate Accounts which provide
various investment options for large group pension clients, primarily deferred
benefit contribution plans, through pooled or single group accounts. DLJ's
businesses include securities underwriting, sales and trading, merchant
banking, financial advisory services, investment research, venture capital,
correspondent brokerage services, online interactive brokerage services and
asset management. DLJ serves institutional, corporate, governmental and
individual clients both domestically and internationally. EREIM provided real
estate investment management services, property management services, mortgage
servicing and loan asset management, and agricultural investment management.
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") which require
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.
SAI-40
<PAGE>
- --------------------------------------------------------------------------------
The accompanying consolidated financial statements include the accounts of
Equitable Life and its wholly owned life insurance subsidiary (collectively,
the "Insurance Group"); non-insurance subsidiaries, principally Alliance and
EREIM (see Note 5); and those partnerships and joint ventures in which
Equitable Life or its subsidiaries has control and a majority economic interest
(collectively, including its consolidated subsidiaries, the "Company"). The
Company's investment in DLJ is reported on the equity basis of accounting.
Closed Block assets, liabilities and results of operations are presented in the
consolidated financial statements as single line items (see Note 7). Unless
specifically stated, all other footnote disclosures contained herein exclude
the Closed Block related amounts.
All significant intercompany transactions and balances except those with
the Closed Block and discontinued operations (see Note 8) have been eliminated
in consolidation. The years "1998," "1997" and "1996" refer to the years ended
December 31, 1998, 1997 and 1996, respectively. Certain reclassifications have
been made in the amounts presented for prior periods to conform these periods
with the 1998 presentation.
Closed Block
On July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain individual participating policies which were in force on
that date. The assets allocated to the Closed Block, together with anticipated
revenues from policies included in the Closed Block, were reasonably expected
to be sufficient to support such business, including provision for payment of
claims, certain expenses and taxes, and for continuation of dividend scales
payable in 1991, assuming the experience underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
Closed Block policyholders and will not revert to the benefit of the Holding
Company. No reallocation, transfer, borrowing or lending of assets can be made
between the Closed Block and other portions of Equitable Life's General
Account, any of its Separate Accounts or any affiliate of Equitable Life
without the approval of the New York Superintendent of Insurance (the
"Superintendent"). Closed Block assets and liabilities are carried on the same
basis as similar assets and liabilities held in the General Account. The excess
of Closed Block liabilities over Closed Block assets represents the expected
future post-tax contribution from the Closed Block which would be recognized in
income over the period the policies and contracts in the Closed Block remain in
force.
Discontinued Operations
Discontinued operations include the Group Non-Participating Wind-Up
Annuities ("Wind-Up Annuities") and the Guaranteed Interest Contract ("GIC")
lines of business. An allowance was established for the premium deficiency
reserve for Wind-Up Annuities and estimated future losses of the GIC line of
business. Management reviews the adequacy of the allowance each quarter and
believes the allowance for future losses at December 31, 1998 is adequate to
provide for all future losses; however, the quarterly allowance review
continues to involve numerous estimates and subjective judgments regarding the
expected performance of Discontinued Operations Investment Assets. There can be
no assurance the losses provided for will not differ from the losses ultimately
realized. To the extent actual results or future projections of the
discontinued operations differ from management's current best estimates and
assumptions underlying the allowance for future losses, the difference would be
reflected in the consolidated statements of earnings in discontinued
operations. In particular, to the extent income, sales proceeds and holding
periods for equity real estate differ from management's previous assumptions,
periodic adjustments to the allowance are likely to result (see Note 8).
SAI-41
<PAGE>
- --------------------------------------------------------------------------------
Accounting Changes
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information". SFAS No. 131
establishes standards for public companies to report information about
operating segments in annual and interim financial statements issued to
shareholders. It also specifies related disclosure requirements for products
and services, geographic areas and major customers. Generally, financial
information must be reported using the basis management uses to make operating
decisions and to evaluate business performance. The Company implemented SFAS
No. 131 effective December 31, 1998 and continues to identify two operating
segments to reflect its major businesses: Insurance and Investment Services.
While the segment descriptions are the same as those previously reported,
certain amounts have been reattributed between the two reportable segments.
Prior period comparative segment information has been restated.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which requires
capitalization of external and certain internal costs incurred to obtain or
develop internal-use computer software during the application development
stage. The Company applied the provisions of SOP 98-1 prospectively effective
January 1, 1998. The adoption of SOP 98-1 did not have a material impact on the
Company's consolidated financial statements. Capitalized internal-use software
is amortized on a straight-line basis over the estimated useful life of the
software.
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of January
1, 1996. SFAS No. 121 requires long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate the carrying value of such assets may not be
recoverable. Effective with SFAS No. 121's adoption, impaired real estate is
written down to fair value with the impairment loss being included in
investment gains (losses), net. Before implementing SFAS No. 121, valuation
allowances on real estate held for the production of income were computed using
the forecasted cash flows of the respective properties discounted at a rate
equal to the Company's cost of funds. Adoption of the statement resulted in the
release of valuation allowances of $152.4 million and recognition of impairment
losses of $144.0 million on real estate held for production of income. Real
estate which management intends to sell or abandon is classified as real estate
held for sale. Valuation allowances on real estate held for sale continue to be
computed using the lower of depreciated cost or estimated fair value, net of
disposition costs. Initial adoption of the impairment requirements of SFAS No.
121 to other assets to be disposed of resulted in a charge for the cumulative
effect of an accounting change of $23.1 million, net of a Federal income tax
benefit of $12.4 million, due to the writedown to fair value of building
improvements relating to facilities vacated in 1996.
New Accounting Pronouncements
In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise," which amends existing
accounting and reporting standards for certain activities of mortgage banking
enterprises and other enterprises that conduct operations that are
substantially similar to the primary operations of a mortgage banking
enterprise. This statement is effective for the first fiscal quarter beginning
after December 15, 1998. This statement is not expected to have a material
impact on the Company's consolidated financial statements.
SAI-42
<PAGE>
- --------------------------------------------------------------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivatives embedded in
other contracts, and for hedging activities. It requires all derivatives to be
recognized on the balance sheet at fair value. The accounting for changes in
the fair value of a derivative depends on its intended use. Derivatives not
used in hedging activities must be adjusted to fair value through earnings.
Changes in the fair value of derivatives used in hedging activities will,
depending on the nature of the hedge, either be offset in earnings against the
change in fair value of the hedged item attributable to the risk being hedged
or recognized in other comprehensive income until the hedged item affects
earnings. For all hedging activities, the ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings.
SFAS No. 133 requires adoption in fiscal years beginning after June 15,
1999 and permits early adoption as of the beginning of any fiscal quarter
following issuance of the statement. Retroactive application to financial
statements of prior periods is prohibited. The Company expects to adopt SFAS
No. 133 effective January 1, 2000. Adjustments resulting from initial adoption
of the new requirements will be reported in a manner similar to the cumulative
effect of a change in accounting principle and will be reflected in net income
or accumulated other comprehensive income based upon existing hedging
relationships, if any. Management currently is assessing the impact of
adoption. However, Alliance's adoption is not expected to have a significant
impact on the Company's consolidated balance sheet or statement of earnings.
Also, since most of DLJ's derivatives are carried at fair values, the Company's
consolidated earnings and financial position are not expected to be
significantly affected by DLJ's adoption of the new requirements.
In late 1998, the AICPA issued SOP 98-7, "Deposit Accounting: Accounting
for Insurance and Reinsurance Contracts that Do Not Transfer Insurance Risk".
This SOP, effective for fiscal years beginning after June 15, 1999, provides
guidance to both the insured and insurer on how to apply the deposit method of
accounting when it is required for insurance and reinsurance contracts that do
not transfer insurance risk. The SOP does not address or change the
requirements as to when deposit accounting should be applied. SOP 98-7 applies
to all entities and all insurance and reinsurance contracts that do not
transfer insurance risk except for long-duration life and health insurance
contracts. This SOP is not expected to have a material impact on the Company's
consolidated financial statements.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and
Other Enterprises for Insurance-Related Assessments". SOP 97-3 provides
guidance for assessments related to insurance activities and requirements for
disclosure of certain information. SOP 97-3 is effective for financial
statements issued for periods beginning after December 31, 1998. Restatement of
previously issued financial statements is not required. SOP 97-3 is not
expected to have a material impact on the Company's consolidated financial
statements.
Valuation of Investments
Fixed maturities identified as available for sale are reported at
estimated fair value. Fixed maturities, which the Company has both the ability
and the intent to hold to maturity, are stated principally at amortized cost.
The amortized cost of fixed maturities is adjusted for impairments in value
deemed to be other than temporary.
Valuation allowances are netted against the asset categories to which they
apply.
Mortgage loans on real estate are stated at unpaid principal balances, net
of unamortized discounts and valuation allowances. Valuation allowances are
based on the present value of expected future cash flows discounted at the
loan's original effective interest rate or the collateral value if the loan is
collateral dependent. However, if foreclosure is or becomes probable, the
measurement method used is collateral value.
SAI-43
<PAGE>
- --------------------------------------------------------------------------------
Real estate, including real estate acquired in satisfaction of debt, is
stated at depreciated cost less valuation allowances. At the date of
foreclosure (including in-substance foreclosure), real estate acquired in
satisfaction of debt is valued at estimated fair value. Impaired real estate is
written down to fair value with the impairment loss being included in
investment gains (losses), net. Valuation allowances on real estate held for
sale are computed using the lower of depreciated cost or current estimated fair
value, net of disposition costs. Depreciation is discontinued on real estate
held for sale. Prior to the adoption of SFAS No. 121, valuation allowances on
real estate held for production of income were computed using the forecasted
cash flows of the respective properties discounted at a rate equal to the
Company's cost of funds.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control or 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.
Net Investment Income, Investment Gains, Net and Unrealized Investment Gains
(Losses)
Net investment income and realized investment gains (losses)
(collectively, "investment results") related to certain participating group
annuity contracts which are passed through to the contractholders are reflected
as interest credited to policyholders' account balances.
Realized investment gains (losses) are determined by specific
identification and are presented as a component of revenue. Changes in
valuation allowances are included in investment gains (losses).
Unrealized investment gains and losses on equity securities and fixed
maturities available for sale held by the Company are accounted for as a
separate component of accumulated comprehensive income, net of related deferred
Federal income taxes, amounts attributable to discontinued operations,
participating group annuity contracts and deferred policy acquisition costs
("DAC") related to universal life and investment-type products and
participating traditional life contracts.
Recognition of Insurance Income and Related Expenses
Premiums from universal life and investment-type contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period against policyholders' account
balances for mortality charges, policy administration charges and surrender
charges. Policy benefits and claims that are charged to expense include benefit
claims incurred in the period in excess of related policyholders' account
balances.
Premiums from participating and non-participating traditional life and
annuity policies with life contingencies generally are recognized as income
when due. Benefits and expenses are matched with such income so as to result in
the recognition of profits over the life of the contracts. This match is
accomplished by means of the provision for liabilities for future policy
benefits and the deferral and subsequent amortization of policy acquisition
costs.
SAI-44
<PAGE>
- --------------------------------------------------------------------------------
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. DAC is
subject to recoverability testing at the time of policy issue and loss
recognition testing at the end of each accounting period.
For universal life products and investment-type products, DAC is amortized
over the expected total life of the contract group (periods ranging from 25 to
35 years and 5 to 17 years, respectively) as a constant percentage of estimated
gross profits arising principally from investment results, mortality and
expense margins and surrender charges based on historical and anticipated
future experience, updated at the end of each accounting period. The effect on
the amortization of DAC of revisions to estimated gross profits is reflected in
earnings in the period such estimated gross profits are revised. The effect on
the DAC asset that would result from realization of unrealized gains (losses)
is recognized with an offset to accumulated other comprehensive income in
consolidated shareholder's equity as of the balance sheet date.
For participating traditional life policies (substantially all of which
are in the Closed Block), DAC is amortized over the expected total life of the
contract group (40 years) as a constant percentage based on the present value
of the estimated gross margin amounts expected to be realized over the life of
the contracts using the expected investment yield. At December 31, 1998, the
expected investment yield, excluding policy loans, generally ranged from 7.29%
grading to 6.5% over a 20 year period. Estimated gross margin includes
anticipated premiums and investment results less claims and administrative
expenses, changes in the net level premium reserve and expected annual
policyholder dividends. The effect on the amortization of DAC of revisions to
estimated gross margins is reflected in earnings in the period such estimated
gross margins are revised. The effect on the DAC asset that would result from
realization of unrealized gains (losses) is recognized with an offset to
accumulated comprehensive income in consolidated shareholder's equity as of the
balance sheet date.
For non-participating traditional life and annuity policies with life
contingencies, DAC is amortized in proportion to anticipated premiums.
Assumptions as to anticipated premiums are estimated at the date of policy
issue and are consistently applied during the life of the contracts. Deviations
from estimated experience are reflected in earnings in the period such
deviations occur. For these contracts, the amortization periods generally are
for the total life of the policy.
For individual health benefit insurance, DAC is amortized over the
expected average life of the contracts (10 years for major medical policies and
20 years for disability income ("DI") products) in proportion to anticipated
premium revenue at time of issue.
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
represents an accumulation of gross premium payments plus credited interest
less expense and mortality charges and withdrawals.
SAI-45
<PAGE>
- --------------------------------------------------------------------------------
For participating traditional life policies, future policy benefit
liabilities are calculated using a net level premium method on the basis of
actuarial assumptions equal to guaranteed mortality and dividend fund interest
rates. The liability for annual dividends represents the accrual of annual
dividends earned. Terminal dividends are accrued in proportion to gross margins
over the life of the contract.
For non-participating traditional life insurance policies, future policy
benefit liabilities are estimated using a net level premium method on the basis
of actuarial assumptions as to mortality, persistency and interest established
at policy issue. Assumptions established at policy issue as to mortality and
persistency are based on the Insurance Group's experience which, together with
interest and expense assumptions, includes a margin for adverse deviation. When
the liabilities for future policy benefits plus the present value of expected
future gross premiums for a product are insufficient to provide for expected
future policy benefits and expenses for that product, DAC is written off and
thereafter, if required, a premium deficiency reserve is established by a
charge to earnings. Benefit liabilities for traditional annuities during the
accumulation period are equal to accumulated contractholders' fund balances and
after annuitization are equal to the present value of expected future payments.
Interest rates used in establishing such liabilities range from 2.25% to 11.5%
for life insurance liabilities and from 2.25% to 13.5% for annuity liabilities.
During the fourth quarter of 1996 a loss recognition study of
participating group annuity contracts and conversion annuities ("Pension Par")
was completed which included management's revised estimate of assumptions, such
as expected mortality and future investment returns. The study's results
prompted management to establish a premium deficiency reserve which decreased
earnings from continuing operations and net earnings by $47.5 million ($73.0
million pre-tax).
Individual health benefit liabilities for active lives are estimated using
the net level premium method and assumptions as to future morbidity,
withdrawals and interest. Benefit liabilities for disabled lives are estimated
using the present value of benefits method and experience assumptions as to
claim terminations, expenses and interest.
During the fourth quarter of 1996, the Company completed a loss
recognition study of the DI business which incorporated management's revised
estimates of future experience with regard to morbidity, investment returns,
claims and administration expenses and other factors. The study indicated DAC
was not recoverable and the reserves were not sufficient. Earnings from
continuing operations and net earnings decreased by $208.0 million ($320.0
million pre-tax) as a result of strengthening DI reserves by $175.0 million and
writing off unamortized DAC of $145.0 million related to DI products issued
prior to July 1993. The determination of DI reserves requires making
assumptions and estimates relating to a variety of factors, including morbidity
and interest rates, claims experience and lapse rates based on then known facts
and circumstances. Such factors as claim incidence and termination rates can be
affected by changes in the economic, legal and regulatory environments and work
ethic. While management believes its Pension Par and DI reserves have been
calculated on a reasonable basis and are adequate, there can be no assurance
reserves will be sufficient to provide for future liabilities.
Claim reserves and associated liabilities for individual DI and major
medical policies were $938.6 million and $886.7 million at December 31, 1998
and 1997, respectively. Incurred benefits (benefits paid plus changes in claim
reserves) and benefits paid for individual DI and major medical policies
(excluding reserve strengthening in 1996) are summarized as follows:
SAI-46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Incurred benefits related to current year ......... $ 202.1 $ 190.2 $ 189.0
Incurred benefits related to prior years .......... 22.2 2.1 69.1
--------- -------- --------
Total Incurred Benefits ........................... $ 224.3 $ 192.3 $ 258.1
========= ======== ========
Benefits paid related to current year ............. $ 17.0 $ 28.8 $ 32.6
Benefits paid related to prior years .............. 155.4 146.2 153.3
--------- -------- --------
Total Benefits Paid ............................... $ 172.4 $ 175.0 $ 185.9
========= ======== ========
</TABLE>
Policyholders' Dividends
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by Equitable
Life's board of directors. The aggregate amount of policyholders' dividends is
related to actual interest, mortality, morbidity and expense experience for the
year and judgment as to the appropriate level of statutory surplus to be
retained by Equitable Life.
At December 31, 1998, participating policies, including those in the
Closed Block, represent approximately 19.9% ($49.3 billion) of directly written
life insurance in force, net of amounts ceded.
Federal Income Taxes
The Company files a consolidated Federal income tax return with the
Holding Company and its consolidated 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
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 1998, 1997 and 1996, investment results of such Separate
Accounts were $4,591.0 million, $3,411.1 million and $2,970.6 million,
respectively.
Deposits to Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are included in
revenues.
SAI-47
<PAGE>
- --------------------------------------------------------------------------------
Employee Stock Option Plan
The Company accounts for stock option plans sponsored by the Holding
Company, DLJ and Alliance in accordance with the provisions of Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. In accordance with the Statement,
compensation expense is recorded on the date of grant only if the current
market price of the underlying stock exceeds the option price. See Note 22 for
the pro forma disclosures for the Holding Company, DLJ and Alliance required by
SFAS No. 123, "Accounting for Stock-Based Compensation".
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, 1998
Fixed Maturities:
Available for Sale:
Corporate .................................. $ 14,520.8 $ 793.6 $ 379.6 $ 14,934.8
Mortgage-backed ............................ 1,807.9 23.3 .9 1,830.3
U.S. Treasury securities and U.S. government
and agency securities ..................... 1,464.1 107.6 .7 1,571.0
States and political subdivisions .......... 55.0 9.9 -- 64.9
Foreign governments ........................ 363.3 20.9 30.0 354.2
Redeemable preferred stock ................. 242.7 7.0 11.2 238.5
----------- -------- -------- -----------
Total Available for Sale ...................... $ 18,453.8 $ 962.3 $ 422.4 $ 18,993.7
=========== ======== ======== ===========
Held to Maturity: Corporate .................. $ 125.0 $ -- $ -- $ 125.0
=========== ======== ======== ===========
Equity Securities:
Common stock ................................. $ 58.3 $ 114.9 $ 22.5 $ 150.7
=========== ======== ======== ===========
DECEMBER 31, 1997
Fixed Maturities:
Available for Sale:
Corporate .................................. $ 14,850.5 $ 785.0 $ 74.5 $ 15,561.0
Mortgage-backed ............................ 1,702.8 23.5 1.3 1,725.0
U.S. Treasury securities and U.S. government
and agency securities ..................... 1,583.2 83.9 .6 1,666.5
States and political subdivisions .......... 52.8 6.8 .1 59.5
Foreign governments ........................ 442.4 44.8 2.0 485.2
Redeemable preferred stock ................. 128.0 6.7 1.0 133.7
----------- -------- -------- -----------
Total Available for Sale ...................... $ 18,759.7 $ 950.7 $ 79.5 $ 19,630.9
=========== ======== ======== ===========
Equity Securities:
Common stock ................................. $ 408.4 $ 48.7 $ 15.0 $ 442.1
=========== ======== ======== ===========
</TABLE>
SAI-48
<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 determines an estimated fair
value using a discounted cash flow approach, including provisions for credit
risk, generally based on the assumption such securities will be held to
maturity. Estimated fair values for equity securities, substantially all of
which do not have a readily ascertainable market value, have 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, 1998 and 1997, securities without
a readily ascertainable market value having an amortized cost of $3,539.9
million and $3,759.2 million, respectively, had estimated fair values of
$3,748.5 million and $3,903.9 million, respectively.
The contractual maturity of bonds at December 31, 1998 is shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
-----------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less ............... $ 324.8 $ 323.4
Due in years two through five ......... 3,778.2 3,787.9
Due in years six through ten .......... 6,543.4 6,594.1
Due after ten years ................... 5,756.8 6,219.5
Mortgage-backed securities ............ 1,807.9 1,830.3
---------- ----------
Total ................................. $ 18,211.1 $ 18,755.2
========== ==========
</TABLE>
Corporate bonds held to maturity with an amortized cost and estimated fair
value of $125.0 million are due in one year or less.
Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged buyout
transactions. The Insurance Group seeks to minimize the higher than normal
credit risks associated with such securities by monitoring concentrations in
any single issuer or a particular industry group. Certain of these corporate
high yield securities are classified as other than investment grade by the
various rating agencies, i.e., a rating below Baa or National Association of
Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5 (below
investment grade) or 6 (in or near default). At December 31, 1998,
approximately 15.1% of the $18,336.1 million aggregate amortized cost of bonds
held by the Company was considered to be other than investment grade.
In addition, the Insurance Group is an equity investor in limited
partnership interests which primarily invest in securities considered to be
other than investment grade.
Fixed maturity investments with restructured or modified terms are not
material.
SAI-49
<PAGE>
- --------------------------------------------------------------------------------
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year .............................. $ 384.5 $ 137.1 $ 325.3
SFAS No. 121 release ..................................... -- -- (152.4)
Additions charged to income .............................. 86.2 334.6 125.0
Deductions for writedowns and asset dispositions ......... (240.1) ( 87.2) (160.8)
-------- -------- --------
Balances, End of Year .................................... $ 230.6 $ 384.5 $ 137.1
======== ======== ========
Balances, end of year comprise:
Mortgage loans on real estate ........................... $ 34.3 $ 55.8 $ 50.4
Equity real estate ...................................... 196.3 328.7 86.7
-------- -------- --------
Total .................................................... $ 230.6 $ 384.5 $ 137.1
======== ======== ========
</TABLE>
At December 31, 1998, the carrying value of fixed maturities which are
non-income producing for the twelve months preceding the consolidated balance
sheet date was $60.8 million.
At December 31, 1998 and 1997, 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 $7.0 million (0.2% of total mortgage loans on real
estate) and $23.4 million (0.9% 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 $115.1 million and $183.4
million at December 31, 1998 and 1997, 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 $10.3 million,
$17.2 million and $35.5 million in 1998, 1997 and 1996, respectively. Gross
interest income on these loans included in net investment income aggregated
$8.3 million, $12.7 million and $28.2 million in 1998, 1997 and 1996,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses ............ $ 125.4 $ 196.7
Impaired mortgage loans without provision for losses ......... 8.6 3.6
-------- --------
Recorded investment in impaired mortgage loans ............... 134.0 200.3
Provision for losses ......................................... (29.0) (51.8)
-------- --------
Net Impaired Mortgage Loans .................................. $ 105.0 $ 148.5
======== ========
</TABLE>
Impaired mortgage loans without provision for losses are loans where the
fair value of the collateral or the net present value of the expected future
cash flows related to the loan equals or exceeds the recorded investment.
Interest income earned on loans where the collateral value is used to measure
impairment is recorded on a cash basis. Interest income on loans where the
present value method is used to measure
SAI-50
<PAGE>
- --------------------------------------------------------------------------------
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 1998, 1997 and 1996, respectively, the Company's average recorded
investment in impaired mortgage loans was $161.3 million, $246.9 million and
$552.1 million. Interest income recognized on these impaired mortgage loans
totaled $12.3 million, $15.2 million and $38.8 million ($.9 million, $2.3
million and $17.9 million recognized on a cash basis) for 1998, 1997 and 1996,
respectively.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At December
31, 1998 and 1997, the carrying value of equity real estate held for sale
amounted to $836.2 million and $1,023.5 million, respectively. For 1998, 1997
and 1996, respectively, real estate of $7.1 million, $152.0 million and $58.7
million was acquired in satisfaction of debt. At December 31, 1998 and 1997,
the Company owned $552.3 million and $693.3 million, respectively, of real
estate acquired in satisfaction of debt.
Depreciation of real estate held for production of income is computed
using the straight-line method over the estimated useful lives of the
properties, which generally range from 40 to 50 years. Accumulated depreciation
on real estate was $374.8 million and $541.1 million at December 31, 1998 and
1997, respectively. Depreciation expense on real estate totaled $30.5 million,
$74.9 million and $91.8 million for 1998, 1997 and 1996, respectively.
SAI-51
<PAGE>
- --------------------------------------------------------------------------------
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information for real estate joint ventures
(25 and 29 individual ventures as of December 31, 1998 and 1997, respectively)
and for 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,
----------------------------
1998 1997
------------ -------------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEETS
Investments in real estate, at depreciated cost ...................... $ 913.7 $ 1,700.9
Investments in securities, generally at estimated fair value ......... 636.9 1,374.8
Cash and cash equivalents ............................................ 85.9 105.4
Other assets ......................................................... 279.8 584.9
--------- ----------
Total Assets ......................................................... $ 1,916.3 $ 3,766.0
========= ==========
Borrowed funds -- third party ........................................ $ 367.1 $ 493.4
Borrowed funds -- the Company ........................................ 30.1 31.2
Other liabilities .................................................... 197.2 284.0
--------- ----------
Total liabilities .................................................... 594.4 808.6
--------- ----------
Partners' capital .................................................... 1,321.9 2,957.4
--------- ----------
Total Liabilities and Partners' Capital .............................. $ 1,916.3 $ 3,766.0
========= ==========
Equity in partners' capital included above ........................... $ 312.9 $ 568.5
Equity in limited partnership interests not included above ........... 442.1 331.8
Other ................................................................ .7 4.3
--------- ----------
Carrying Value ....................................................... $ 755.7 $ 904.6
========= ==========
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures .................... $ 246.1 $ 310.5 $ 348.9
Revenues of other limited partnership interests ........... 128.9 506.3 386.1
Interest expense -- third party ........................... (33.3) (91.8) (111.0)
Interest expense -- the Company ........................... (2.6) (7.2) (30.0)
Other expenses ............................................ (197.0) (263.6) (282.5)
-------- -------- --------
Net Earnings .............................................. $ 142.1 $ 454.2 $ 311.5
======== ======== ========
Equity in net earnings included above ..................... $ 59.6 $ 76.7 $ 73.9
Equity in net earnings of limited partnership interests not
included above ........................................... 22.7 69.5 35.8
Other ..................................................... -- (.9) .9
-------- -------- --------
Total Equity in Net Earnings .............................. $ 82.3 $ 145.3 $ 110.6
======== ======== ========
</TABLE>
SAI-52
<PAGE>
- --------------------------------------------------------------------------------
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities ...................... $ 1,489.0 $ 1,459.4 $ 1,307.4
Mortgage loans on real estate ......... 235.4 260.8 303.0
Equity real estate .................... 356.1 390.4 442.4
Other equity investments .............. 83.8 156.9 122.0
Policy loans .......................... 144.9 177.0 160.3
Other investment income ............... 185.7 181.7 217.4
---------- ---------- ----------
Gross investment income .............. 2,494.9 2,626.2 2,552.5
Investment expenses .................. (266.8) (343.4) (348.9)
---------- ---------- ----------
Net Investment Income ................. $ 2,228.1 $ 2,282.8 $ 2,203.6
========== ========== ==========
</TABLE>
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ ----------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities .............................. $ (24.3) $ 88.1 $ 60.5
Mortgage loans on real estate ................. (10.9) (11.2) (27.3)
Equity real estate ............................ 74.5 (391.3) (79.7)
Other equity investments ...................... 29.9 14.1 18.9
Sale of subsidiaries .......................... (2.6) 252.1 --
Issuance and sales of Alliance Units .......... 19.8 -- 20.6
Issuance and sale of DLJ common stock ......... 18.2 3.0 --
Other ......................................... (4.4) -- (2.8)
-------- -------- -------
Investment Gains (Losses), Net ................ $ 100.2 $ (45.2) $ (9.8)
======== ======== =======
</TABLE>
Writedowns of fixed maturities amounted to $101.6 million, $11.7 million
and $29.9 million for 1998, 1997 and 1996, respectively, and writedowns of
equity real estate subsequent to the adoption of SFAS No. 121 amounted to
$136.4 million for 1997. In the fourth quarter of 1997, the Company
reclassified $1,095.4 million depreciated cost of equity real estate from real
estate held for the production of income to real estate held for sale.
Additions to valuation allowances of $227.6 million were recorded upon these
transfers. Additionally, in fourth quarter 1997, $132.3 million of writedowns
on real estate held for production of income were recorded.
For 1998, 1997 and 1996, respectively, proceeds received on sales of fixed
maturities classified as available for sale amounted to $15,961.0 million,
$9,789.7 million and $8,353.5 million. Gross gains of $149.3 million, $166.0
million and $154.2 million and gross losses of $95.1 million, $108.8 million
and $92.7 million, respectively, were realized on these sales. The change in
unrealized investment gains (losses) related to fixed maturities classified as
available for sale for 1998, 1997 and 1996 amounted to $(331.7) million, $513.4
million and $(258.0) million, respectively.
SAI-53
<PAGE>
- --------------------------------------------------------------------------------
For 1998, 1997 and 1996, investment results passed through to certain
participating group annuity contracts as interest credited to policyholders'
account balances amounted to $136.9 million, $137.5 million and $136.7 million,
respectively.
On June 10, 1997, Equitable Life sold EREIM (other than its interest in
Column Financial, Inc.) ("ERE") to Lend Lease Corporation Limited ("Lend
Lease"), a publicly traded, international property and financial services
company based in Sydney, Australia. The total purchase price was $400.0 million
and consisted of $300.0 million in cash and a $100.0 million note which was
paid in 1998. The Company recognized an investment gain of $162.4 million, net
of Federal income tax of $87.4 million as a result of this transaction.
Equitable Life entered into long-term advisory agreements whereby ERE continues
to provide substantially the same services to Equitable Life's General Account
and Separate Accounts, for substantially the same fees, as provided prior to
the sale.
Through June 10, 1997 and for the year ended December 31, 1996,
respectively, the businesses sold reported combined revenues of $91.6 million
and $226.1 million and combined net earnings of $10.7 million and $30.7
million.
In 1996, Alliance acquired the business of Cursitor Holdings L.P. and
Cursitor Holdings Limited (collectively, "Cursitor") for approximately $159.0
million. The purchase price consisted of $94.3 million in cash, 1.8 million of
Alliance's publicly traded units ("Alliance Units"), 6% notes aggregating $21.5
million payable ratably over four years, and additional consideration to be
determined at a later date but currently estimated to not exceed $10.0 million.
The excess of the purchase price, including acquisition costs and minority
interest, over the fair value of Cursitor's net assets acquired resulted in the
recognition of intangible assets consisting of costs assigned to contracts
acquired and goodwill of approximately $122.8 million and $38.3 million,
respectively. The Company recognized an investment gain of $20.6 million as a
result of the issuance of Alliance Units in this transaction. On June 30, 1997,
Alliance reduced the recorded value of goodwill and contracts associated with
Alliance's acquisition of Cursitor by $120.9 million. This charge reflected
Alliance's view that Cursitor's continuing decline in assets under management
and its reduced profitability, resulting from relative investment
underperformance, no longer supported the carrying value of its investment. As
a result, the Company's earnings from continuing operations before cumulative
effect of accounting change for 1997 included a charge of $59.5 million, net of
a Federal income tax benefit of $10.0 million and minority interest of $51.4
million. The remaining balance of intangible assets is being amortized over its
estimated useful life of 20 years. At December 31, 1998, the Company's
ownership of Alliance Units was approximately 56.7%.
SAI-54
<PAGE>
- --------------------------------------------------------------------------------
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of accumulated comprehensive income and the
changes for the corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year ..................................... $ 533.6 $ 189.9 $ 396.5
Changes in unrealized investment gains (losses) ................ (242.4) 543.3 (297.6)
Changes in unrealized investment losses (gains) attributable to:
Participating group annuity contracts ......................... (5.7) 53.2 --
DAC ........................................................... 13.2 (89.0) 42.3
Deferred Federal income taxes ................................. 85.4 (163.8) 48.7
-------- -------- --------
Balance, End of Year ........................................... $ 384.1 $ 533.6 $ 189.9
======== ======== ========
Balance, end of year comprises:
Unrealized investment gains on:
Fixed maturities ............................................ $ 539.9 $ 871.2 $ 357.8
Other equity investments .................................... 92.4 33.7 31.6
Other, principally Closed Block ............................. 111.1 80.9 53.1
-------- -------- --------
Total ...................................................... 743.4 985.8 442.5
Amounts of unrealized investment gains attributable to:
Participating group annuity contracts ....................... (24.7) (19.0) (72.2)
DAC ......................................................... (127.8) (141.0) (52.0)
Deferred Federal income taxes ............................... (206.8) (292.2) (128.4)
-------- -------- --------
Total .......................................................... $ 384.1 $ 533.6 $ 189.9
======== ======== ========
</TABLE>
SAI-55
<PAGE>
- --------------------------------------------------------------------------------
6) ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income represents cumulative gains and
losses on items that are not reflected in earnings. The balances for the years
1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Unrealized gains on investments ....................... $ 384.1 $ 533.6 $ 189.9
Minimum pension liability ............................. (28.3) (17.3) (12.9)
-------- -------- --------
Total Accumulated Other Comprehensive Income .......... $ 355.8 $ 516.3 $ 177.0
======== ======== ========
</TABLE>
The components of other comprehensive income for the years 1998, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Net unrealized gains (losses) on investment securities:
Net unrealized gains (losses) arising during the period ......... $ (186.1) $ 564.0 $ (249.8)
Reclassification adjustment for (gains) losses included in net
earnings ...................................................... (56.3) (20.7) (47.8)
-------- -------- --------
Net unrealized gains (losses) on investment securities ........... (242.4) 543.3 (297.6)
Adjustments for policyholder liabilities, DAC and deferred
Federal income taxes ............................................ 92.9 (199.6) 91.0
-------- -------- --------
Change in unrealized gains (losses), net of reclassification and
adjustments ..................................................... (149.5) 343.7 (206.6)
Change in minimum pension liability .............................. (11.0) (4.4) 22.2
-------- -------- --------
Total Other Comprehensive Income ................................. $ (160.5) $ 339.3 $ (184.4)
======== ======== ========
</TABLE>
SAI-56
<PAGE>
- --------------------------------------------------------------------------------
7) CLOSED BLOCK
Summarized financial information for the Closed Block follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$4,149.0 and $4,059.4) .......................................... $ 4,373.2 $ 4,231.0
Mortgage loans on real estate ...................................... 1,633.4 1,341.6
Policy loans ....................................................... 1,641.2 1,700.2
Cash and other invested assets ..................................... 86.5 282.0
DAC ................................................................ 676.5 775.2
Other assets ....................................................... 221.6 236.6
---------- ----------
Total Assets ....................................................... $ 8,632.4 $ 8,566.6
========== ==========
Liabilities
Future policy benefits and policyholders' account balances ......... $ 9,013.1 $ 8,993.2
Other liabilities .................................................. 63.9 80.5
---------- ----------
Total Liabilities .................................................. $ 9,077.0 $ 9,073.7
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other revenue .................................. $ 661.7 $ 687.1 $ 724.8
Investment income (net of investment expenses of $15.5, $27.0
and $27.3) ................................................. 569.7 574.9 546.6
Investment losses, net ...................................... .5 (42.4) (5.5)
-------- -------- --------
Total revenues ............................................. 1,231.9 1,219.6 1,265.9
-------- -------- --------
Benefits and Other Deductions
Policyholders' benefits and dividends ....................... 1,082.0 1,066.7 1,106.3
Other operating costs and expenses .......................... 62.8 50.4 34.6
-------- -------- --------
Total benefits and other deductions ........................ 1,144.8 1,117.1 1,140.9
-------- -------- --------
Contribution from the Closed Block .......................... $ 87.1 $ 102.5 $ 125.0
======== ======== ========
</TABLE>
At December 31, 1998 and 1997, problem mortgage loans on real estate had
an amortized cost of $5.1 million and $8.1 million, respectively, and mortgage
loans on real estate for which the payment terms have been restructured had an
amortized cost of $26.0 million and $70.5 million, respectively.
SAI-57
<PAGE>
- --------------------------------------------------------------------------------
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- -----------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses ............ $ 55.5 $ 109.1
Impaired mortgage loans without provision for losses ......... 7.6 .6
------- --------
Recorded investment in impaired mortgages .................... 63.1 109.7
Provision for losses ......................................... (10.1) (17.4)
------- --------
Net Impaired Mortgage Loans .................................. $ 53.0 $ 92.3
======= ========
</TABLE>
During 1998, 1997 and 1996, the Closed Block's average recorded investment
in impaired mortgage loans was $85.5 million, $110.2 million and $153.8
million, respectively. Interest income recognized on these impaired mortgage
loans totaled $4.7 million, $9.4 million and $10.9 million ($1.5 million, $4.1
million and $4.7 million recognized on a cash basis) for 1998, 1997 and 1996,
respectively.
Valuation allowances amounted to $11.1 million and $18.5 million on
mortgage loans on real estate and $15.4 million and $16.8 million on equity
real estate at December 31, 1998 and 1997, respectively. As of January 1, 1996,
the adoption of SFAS No. 121 resulted in the recognition of impairment losses
of $5.6 million on real estate held for production of income. Writedowns of
fixed maturities amounted to $3.5 million and $12.8 million for 1997 and 1996,
respectively. Writedowns of equity real estate subsequent to the adoption of
SFAS No. 121 amounted to $28.8 million for 1997.
In the fourth quarter of 1997, $72.9 million depreciated cost of equity
real estate held for production of income was reclassified to equity real
estate held for sale. Additions to valuation allowances of $15.4 million were
recorded upon these transfers. Additionally, in fourth quarter 1997, $28.8
million of writedowns on real estate held for production of income were
recorded.
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-58
<PAGE>
- --------------------------------------------------------------------------------
8) DISCONTINUED OPERATIONS
Summarized financial information for discontinued operations follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
------------ -----------
(IN MILLIONS)
<S> <C> <C>
Assets
Mortgage loans on real estate ................ $ 553.9 $ 635.2
Equity real estate ........................... 611.0 874.5
Other equity investments ..................... 115.1 209.3
Other invested assets ........................ 24.9 152.4
--------- ---------
Total investments ........................... 1,304.9 1,871.4
Cash and cash equivalents .................... 34.7 106.8
Other assets ................................. 219.0 243.8
--------- ---------
Total Assets ................................. $ 1,558.6 $ 2,222.0
========= =========
Liabilities
Policyholders' liabilities ................... $ 1,021.7 $ 1,048.3
Allowance for future losses .................. 305.1 259.2
Amounts due to continuing operations ......... 2.7 572.8
Other liabilities ............................ 229.1 341.7
--------- ---------
Total Liabilities ............................ $ 1,558.6 $ 2,222.0
========= =========
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Investment income (net of investment expenses of $63.3, $97.3
and $127.5) ........................................................... $ 160.4 $ 188.6 $ 245.4
Investment gains (losses), net ......................................... 35.7 (173.7) ( 18.9)
Policy fees, premiums and other income ................................. ( 4.3) .2 .2
-------- -------- --------
Total revenues ......................................................... 191.8 15.1 226.7
Benefits and other deductions .......................................... 141.5 169.5 250.4
Earnings added (losses charged) to allowance for future losses ......... 50.3 (154.4) ( 23.7)
-------- -------- --------
Pre-tax loss from operations ........................................... -- -- --
Pre-tax earnings from releasing (loss from strengthening) of the
allowance for future losses ........................................... 4.2 (134.1) (129.0)
Federal income tax (expense) benefit ................................... ( 1.5) 46.9 45.2
-------- -------- --------
Earnings (Loss) from Discontinued Operations ........................... $ 2.7 $ (87.2) $ (83.8)
======== ======== ========
</TABLE>
The Company's quarterly process for evaluating the allowance for future
losses applies the current period's results of the discontinued operations
against the allowance, re-estimates future losses and adjusts the allowance, if
appropriate. Additionally, as part of the Company's annual planning process
which takes
SAI-59
<PAGE>
- --------------------------------------------------------------------------------
place in the fourth quarter of each year, investment and benefit cash flow
projections are prepared. These updated assumptions and estimates resulted in a
release of allowance in 1998 and strengthening of allowance in 1997 and 1996.
In the fourth quarter of 1997, $329.9 million depreciated cost of equity
real estate was reclassified from equity real estate held for production of
income to real estate held for sale. Additions to valuation allowances of $79.8
million were recognized upon these transfers. Additionally, in fourth quarter
1997, $92.5 million of writedowns on real estate held for production of income
were recognized.
Benefits and other deductions includes $26.6 million, $53.3 million and
$114.3 million of interest expense related to amounts borrowed from continuing
operations in 1998, 1997 and 1996, respectively.
Valuation allowances amounted to $3.0 million and $28.4 million on
mortgage loans on real estate and $34.8 million and $88.4 million on equity
real estate at December 31, 1998 and 1997, respectively. As of January 1, 1996,
the adoption of SFAS No. 121 resulted in a release of existing valuation
allowances of $71.9 million on equity real estate and recognition of impairment
losses of $69.8 million on real estate held for production of income.
Writedowns of equity real estate subsequent to the adoption of SFAS No. 121
amounted to $95.7 million and $12.3 million for 1997 and 1996, respectively.
At December 31, 1998 and 1997, problem mortgage loans on real estate had
amortized costs of $1.1 million and $11.0 million, respectively, and mortgage
loans on real estate for which the payment terms have been restructured had
amortized costs of $3.5 million and $109.4 million, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
--------- -----------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses ............ $ 6.7 $ 101.8
Impaired mortgage loans without provision for losses ......... 8.5 .2
------ --------
Recorded investment in impaired mortgages .................... 15.2 102.0
Provision for losses ......................................... (2.1) (27.3)
------ --------
Net Impaired Mortgage Loans .................................. $ 13.1 $ 74.7
====== ========
</TABLE>
During 1998, 1997 and 1996, the discontinued operations' average recorded
investment in impaired mortgage loans was $73.3 million, $89.2 million and
$134.8 million, respectively. Interest income recognized on these impaired
mortgage loans totaled $4.7 million, $6.6 million and $10.1 million ($3.4
million, $5.3 million and $7.5 million recognized on a cash basis) for 1998,
1997 and 1996, respectively.
At December 31, 1998 and 1997, discontinued operations had carrying values
of $50.0 million and $156.2 million, respectively, of real estate acquired in
satisfaction of debt.
SAI-60
<PAGE>
- --------------------------------------------------------------------------------
9) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term debt ............................................ $ 179.3 $ 422.2
--------- ---------
Long-term debt:
Equitable Life:
6.95% surplus notes scheduled to mature 2005 .............. 399.4 399.4
7.70% surplus notes scheduled to mature 2015 .............. 199.7 199.7
Other ..................................................... .3 .3
--------- ---------
Total Equitable Life .................................... 599.4 599.4
--------- ---------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 5.91% -- 12.00%, due through 2017 ......... 392.2 676.6
--------- ---------
Alliance:
Other ..................................................... 10.8 18.5
--------- ---------
Total long-term debt ....................................... 1,002.4 1,294.5
--------- ---------
Total Short-term and Long-term Debt ........................ $ 1,181.7 $ 1,716.7
========= =========
</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 and expires in September 2000. The interest rates are
based on external indices dependent on the type of borrowing and at December
31, 1998 range from 5.23% to 7.75%. There were no borrowings outstanding under
this bank credit facility at December 31, 1998.
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 bank credit facility. At December 31, 1998,
there were no borrowings outstanding under this program.
During July 1998, Alliance entered into a $425.0 million five-year
revolving credit facility with a group of commercial banks which replaced a
$250.0 million revolving credit facility. Under the facility, the interest
rate, at the option of Alliance, is a floating rate generally based upon a
defined prime rate, a rate related to the London Interbank Offered Rate
("LIBOR") or the Federal Funds Rate. A facility fee is payable on the total
facility. During September 1998, Alliance increased the size of its commercial
paper program from $250.0 million to $425.0 million. Borrowings from these two
sources may not exceed $425.0 million in the aggregate. The revolving credit
facility provides backup liquidity for commercial paper issued under Alliance's
commercial paper program and can be used as a direct source of borrowing. The
revolving credit facility contains covenants which require Alliance to, among
other things, meet certain financial ratios. As of December 31, 1998, Alliance
had commercial paper outstanding totaling $179.5 million at an effective
interest rate of 5.5% and there were no borrowings outstanding under Alliance's
revolving credit facility.
SAI-61
<PAGE>
- --------------------------------------------------------------------------------
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.
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $640.2 million and $1,164.0 million at December 31, 1998 and 1997,
respectively, as collateral for certain short-term and long-term debt.
At December 31, 1998, aggregate maturities of the long-term debt based on
required principal payments at maturity for 1999 and the succeeding four years
are $322.8 million, $6.9 million, $1.7 million, $1.8 million and $2.0 million,
respectively, and $668.0 million thereafter.
10) FEDERAL INCOME TAXES
A summary of the Federal income tax expense in the consolidated statements
of earnings is shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current ............................ $ 283.3 $ 186.5 $ 97.9
Deferred ........................... 69.8 (95.0) (88.2)
-------- -------- -------
Total ............................... $ 353.1 $ 91.5 $ 9.7
======== ======== =======
</TABLE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and minority interest by the expected Federal income tax
rate of 35%. The sources of the difference and the tax effects of each are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense ........... $ 414.3 $ 234.7 $ 73.0
Non-taxable minority interest ................. (33.2) (38.0) (28.6)
Adjustment of tax audit reserves .............. 16.0 (81.7) 6.9
Equity in unconsolidated subsidiaries ......... (39.3) (45.1) (32.3)
Other ......................................... (4.7) 21.6 (9.3)
-------- -------- -------
Federal Income Tax Expense .................... $ 353.1 $ 91.5 $ 9.7
======== ======== =======
</TABLE>
SAI-62
<PAGE>
- --------------------------------------------------------------------------------
The components of the net deferred Federal income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------------- --------------------------
ASSETS LIABILITIES ASSETS LIABILITIES
----------- ------------- ----------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Compensation and related benefits ......... $ 235.3 $ -- $ 257.9 $ --
Other ..................................... 27.8 -- 30.7 --
DAC, reserves and reinsurance ............. -- 231.4 -- 222.8
Investments ............................... -- 364.4 -- 405.7
-------- ------ -------- ------
Total ..................................... $ 263.1 $ 595.8 $ 288.6 $ 628.5
======== ======= ======== =======
</TABLE>
The deferred Federal income taxes impacting operations reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes. The sources of these temporary differences and the tax effects of
each are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C>
DAC, reserves and reinsurance ......................... $ (7.7) $ 46.2 $ (156.2)
Investments ........................................... 46.8 (113.8) 78.6
Compensation and related benefits ..................... 28.6 3.7 22.3
Other ................................................. 2.1 (31.1) (32.9)
------- -------- --------
Deferred Federal Income Tax Expense (Benefit) ......... $ 69.8 $ (95.0) $ (88.2)
======= ======== ========
</TABLE>
The Internal Revenue Service (the "IRS") is in the process of examining
the Holding Company's consolidated Federal income tax returns for the years
1992 through 1996. Management believes these audits will have no material
adverse effect on the Company's results of operations.
SAI-63
<PAGE>
- --------------------------------------------------------------------------------
11) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. Ceded reinsurance does not relieve the originating insurer of
liability. The effect of reinsurance (excluding group life and health) is
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums .................................................... $ 438.8 $ 448.6 $ 461.4
Reinsurance assumed ................................................ 203.6 198.3 177.5
Reinsurance ceded .................................................. (54.3) (45.4) (41.3)
-------- -------- --------
Premiums ........................................................... $ 588.1 $ 601.5 $ 597.6
======== ======== ========
Universal Life and Investment-type Product Policy Fee Income
Ceded ............................................................. $ 75.7 $ 61.0 $ 48.2
======== ======== ========
Policyholders' Benefits Ceded ...................................... $ 85.9 $ 70.6 $ 54.1
======== ======== ========
Interest Credited to Policyholders' Account Balances Ceded ......... $ 39.5 $ 36.4 $ 32.3
======== ======== ========
</TABLE>
Beginning in May 1997, the Company began reinsuring on a yearly renewal
term basis 90% of the mortality risk on new issues of certain term, universal
and variable life products. During 1996, the Company's retention limit on joint
survivorship policies was increased to $15.0 million. 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 $1.3 million, $1.6
million and $2.4 million for 1998, 1997 and 1996, respectively. Ceded death and
disability benefits totaled $15.6 million, $4.3 million and $21.2 million for
1998, 1997 and 1996, respectively. Insurance liabilities ceded totaled $560.3
million and $593.8 million at December 31, 1998 and 1997, respectively.
12) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified part-time
employees), managers and certain agents. The pension plans are
non-contributory. Equitable Life's benefits are based on a cash balance formula
or years of service and final average earnings, if greater, under certain
grandfathering rules in the plans. Alliance's benefits are based on years of
credited service, average final base salary and primary social security
benefits. The Company's funding policy is to make the minimum contribution
required by the Employee Retirement Income Security Act of 1974 ("ERISA").
SAI-64
<PAGE>
- --------------------------------------------------------------------------------
Components of net periodic pension cost (credit) for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost ........................................... $ 33.2 $ 32.5 $ 33.8
Interest cost on projected benefit obligations ......... 129.2 128.2 120.8
Actual return on assets ................................ (175.6) (307.6) (181.4)
Net amortization and deferrals ......................... 6.1 166.6 43.4
-------- -------- --------
Net Periodic Pension Cost (Credit) ..................... $ (7.1) $ 19.7 $ 16.6
======== ======== ========
</TABLE>
The plan's projected benefit obligation under the qualified and
non-qualified plans was comprised of:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Benefit obligation, beginning of year ......... $ 1,801.3 $ 1,765.5
Service cost .................................. 33.2 32.5
Interest cost ................................. 129.2 128.2
Actuarial (gains) losses ...................... 108.4 (15.5)
Benefits paid ................................. (138.7) (109.4)
---------- ----------
Benefit Obligation, End of Year ............... $ 1,933.4 $ 1,801.3
========== ==========
</TABLE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Plan assets at fair value, beginning of year .......................... $ 1,867.4 $ 1,626.0
Actual return on plan assets .......................................... 338.9 307.5
Contributions ......................................................... -- 30.0
Benefits paid and fees ................................................ (123.2) (96.1)
---------- ----------
Plan assets at fair value, end of year ................................ 2,083.1 1,867.4
Projected benefit obligations ......................................... 1,933.4 1,801.3
---------- ----------
Projected benefit obligations less than plan assets ................... 149.7 66.1
Unrecognized prior service cost ....................................... (7.5) (9.9)
Unrecognized net loss from past experience different from that assumed 38.7 95.0
Unrecognized net asset at transition .................................. 1.5 3.1
---------- ----------
Prepaid Pension Cost .................................................. $ 182.4 $ 154.3
========== ==========
</TABLE>
<PAGE>
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of projected benefit obligations
were 7.0% and 3.83%, respectively, at December 31, 1998 and 7.25% and 4.07%,
respectively, at December 31, 1997. As of January 1, 1998 and 1997, the
expected long-term rate of return on assets for the retirement plan was 10.25%.
SAI-65
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The Company recorded, as a reduction of shareholders' equity an additional
minimum pension liability of $28.3 million and $17.3 million, net of Federal
income taxes, at December 31, 1998 and 1997, respectively, primarily
representing the excess of the accumulated benefit obligation of the qualified
pension plan over the accrued liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of group trusts
managed by Alliance.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $31.8 million, $33.2
million and $34.7 million for 1998, 1997 and 1996, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees, managers
and agents retiring from the Company (i) on or after attaining age 55 who have
at least 10 years of service or (ii) on or after attaining age 65 or (iii)
whose jobs have been abolished and who have attained age 50 with 20 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 1998, 1997 and
1996, the Company made estimated postretirement benefits payments of $28.4
million, $18.7 million and $18.9 million, respectively.
The following table sets forth the postretirement benefits plan's status,
reconciled to amounts recognized in the Company's consolidated financial
statements:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost ............................................................ $ 4.6 $ 4.5 $ 5.3
Interest cost on accumulated postretirement benefits obligation ......... 33.6 34.7 34.6
Net amortization and deferrals .......................................... .5 1.9 2.4
------ ------ ------
Net Periodic Postretirement Benefits Costs .............................. $ 38.7 $ 41.1 $ 42.3
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefits obligation, beginning of year ........ $ 490.8 $ 388.5
Service cost ............................................................. 4.6 4.5
Interest cost ............................................................ 33.6 34.7
Contributions and benefits paid .......................................... (28.4) 72.1
Actuarial (gains) losses ................................................. (10.2) (9.0)
-------- --------
Accumulated postretirement benefits obligation, end of year .............. 490.4 490.8
Unrecognized prior service cost .......................................... 31.8 40.3
Unrecognized net loss from past experience different from that assumed
and from changes in assumptions ......................................... (121.2) (140.6)
-------- --------
Accrued Postretirement Benefits Cost ..................................... $ 401.0 $ 390.5
======== ========
</TABLE>
Since January 1, 1994, costs to the Company for providing these 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.
SAI-66
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The assumed health care cost trend rate used in measuring the accumulated
postretirement benefits obligation was 8.0% in 1998, gradually declining to
2.5% in the year 2009, and in 1997 was 8.75%, gradually declining to 2.75% in
the year 2009. The discount rate used in determining the accumulated
postretirement benefits obligation was 7.0% and 7.25% at December 31, 1998 and
1997, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1998 would be
increased 4.83%. The effect of this change on the sum of the service cost and
interest cost would be an increase of 4.57%. If the health care cost trend rate
assumptions were decreased by 1% the accumulated postretirement benefits
obligation as of December 31, 1998 would be decreased by 5.6%. The effect of
this change on the sum of the service cost and interest cost would be a
decrease of 5.4%.
13) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an accrual
basis. Gains and losses related to interest rate swap transactions are
amortized as yield adjustments over the remaining life of the underlying hedged
security. Income and expense resulting from interest rate swap activities are
reflected in net investment income. The notional amount of matched interest
rate swaps outstanding at December 31, 1998 and 1997, respectively, was $880.9
million and $1,353.4 million. The average unexpired terms at December 31, 1998
ranged from 1 month to 4.3 years. At December 31, 1998, the cost of terminating
swaps in a loss position was $8.0 million. 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, 1998 of contracts purchased and sold were $8,450.0
million and $875.0 million, respectively. The net premium paid by Equitable
Life on these contracts was $54.8 million and is being amortized ratably over
the contract periods ranging from 1 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 activities related to derivatives are, by their
nature trading activities which are primarily for the purpose of customer
accommodations. DLJ enters into certain contractual agreements referred to as
derivatives or off-balance-sheet financial instruments involving futures,
forwards and options. DLJ's derivative activities consist of writing
over-the-counter ("OTC") options to accommodate its customer needs, trading in
forward contracts in U.S. government and agency issued or guaranteed securities
and in futures contracts on equity-based indices, interest rate instruments and
currencies and issuing structured products based on emerging market financial
instruments and indices. DLJ's involvement in swap contracts and commodity
derivative instruments 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 the timing and amount of
expected future cash flows and the credit standing of counterparties. Such
estimates do not reflect any premium or discount that could result from
offering for sale at one time
SAI-67
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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, 1998 and 1997.
Fair values for mortgage loans on real estate are estimated by discounting
future contractual cash flows using interest rates at which loans with similar
characteristics and credit quality would be made. Fair values for foreclosed
mortgage loans and problem mortgage loans are limited to the estimated fair
value of the underlying collateral if lower.
Fair values of policy loans are estimated by discounting the face value of
the loans from the time of the next interest rate review to the present, at a
rate equal to the excess of the current estimated market rates over the current
interest rate charged on the loan.
The estimated fair values for the Company's association plan contracts,
supplementary contracts not involving life contingencies ("SCNILC") and
annuities certain, which are included in policyholders' account balances, and
guaranteed interest contracts are estimated using projected cash flows
discounted at rates reflecting expected current offering rates.
The estimated fair values for variable deferred annuities and single
premium deferred annuities ("SPDA"), which are included in policyholders'
account balances, are estimated by discounting the account value back from the
time of the next crediting rate review to the present, at a rate equal to the
excess of current estimated market rates offered on new policies over the
current crediting rates.
Fair values for long-term debt are determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt are
determined by discounting contractual cash flows at a rate which takes into
account the level of current market interest rates and collateral risk. The
estimated fair values for recourse mortgage debt are determined by discounting
contractual cash flows at a rate based upon current interest rates of other
companies with credit ratings similar to the Company. The Company's carrying
value of short-term borrowings approximates their estimated fair value.
SAI-68
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The following table discloses carrying value and estimated fair value for
financial instruments not otherwise disclosed in Notes 3, 7 and 8:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1998 1997
---------------------------- -----------------------------
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 ........................ $ 2,809.9 $ 2,961.8 $ 2,611.4 $ 2,822.8
Other limited partnership interests .................. 562.6 562.6 509.4 509.4
Policy loans ......................................... 2,086.7 2,370.7 2,422.9 2,493.9
Policyholders' account balances - investment contracts 12,892.0 13,396.0 12,611.0 12,714.0
Long-term debt ....................................... 1,002.4 1,025.2 1,294.5 1,257.0
Closed Block Financial Instruments:
Mortgage loans on real estate ........................ 1,633.4 1,703.5 1,341.6 1,420.7
Other equity investments ............................. 56.4 56.4 86.3 86.3
Policy loans ......................................... 1,641.2 1,929.7 1,700.2 1,784.2
SCNILC liability ..................................... 25.0 25.0 27.6 30.3
Discontinued Operations Financial Instruments:
Mortgage loans on real estate ........................ 553.9 599.9 655.5 779.9
Fixed maturities ..................................... 24.9 24.9 38.7 38.7
Other equity investments ............................. 115.1 115.1 209.3 209.3
Guaranteed interest contracts ........................ 37.0 34.0 37.0 34.0
Long-term debt ....................................... 147.1 139.8 296.4 297.6
</TABLE>
14) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements include
commitments by the Company, under certain conditions: to make capital
contributions of up to $142.9 million to affiliated real estate joint ventures;
and to provide equity financing to certain limited partnerships of $287.3
million at December 31, 1998, under existing loan or loan commitment
agreements.
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.
The Insurance Group had $24.7 million of letters of credit outstanding at
December 31, 1998.
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15) LITIGATION
Major Medical Insurance Cases
Equitable Life agreed to settle, subject to court approval, previously
disclosed cases involving lifetime guaranteed renewable major medical insurance
policies issued by Equitable Life in five states. Plaintiffs in these cases
claimed that Equitable Life's method for determining premium increases breached
the terms of certain forms of the policies and was misrepresented. In certain
cases plaintiffs also claimed that Equitable Life misrepresented to
policyholders that premium increases had been approved by insurance
departments, and that it determined annual rate increases in a manner that
discriminated against the policyholders.
In December 1997, Equitable Life entered into a settlement agreement,
subject to court approval, which would result in creation of a nationwide class
consisting of all persons holding, and paying premiums on, the policies at any
time since January 1, 1988 and the dismissal with prejudice of the pending
actions and the resolution of all similar claims on a nationwide basis. Under
the terms of the settlement, which involves approximately 127,000 former and
current policyholders, Equitable Life would pay $14.2 million in exchange for
release of all claims and will provide future relief to certain current
policyholders by restricting future premium increases, estimated to have a
present value of $23.3 million. This estimate is based upon assumptions about
future events that cannot be predicted with certainty and accordingly the
actual value of the future relief may vary. In October 1998, the court entered
a judgment approving the settlement agreement and, in November, a member of the
national class filed a notice of appeal of the judgment. In January 1999, the
Court of Appeals granted Equitable Life's motion to dismiss the appeal.
Life Insurance and Annuity Sales Cases
A number of lawsuits are pending as individual claims and purported class
actions against Equitable Life and its subsidiary insurance companies Equitable
Variable Life Insurance Company ("EVLICO," which was merged into Equitable Life
effective January 1, 1997) and The Equitable of Colorado, Inc. ("EOC"). These
actions involve, among other things, sales of life and annuity products for
varying periods from 1980 to the present, and allege, among other things, sales
practice misrepresentation primarily involving: the number of premium payments
required; the propriety of a product as an investment vehicle; the propriety of
a product as a replacement of an existing policy; and failure to disclose a
product as life insurance. Some actions are in state courts and others are in
U.S. District Courts in varying jurisdictions, and are in varying stages of
discovery and motions for class certification.
In general, the plaintiffs request an unspecified amount of damages,
punitive damages, enjoinment from the described practices, prohibition against
cancellation of policies for non-payment of premium or other remedies, as well
as attorneys' fees and expenses. Similar actions have been filed against other
life and health insurers and have resulted in the award of substantial
judgments, including material amounts of punitive damages, or in substantial
settlements. Although the outcome of litigation cannot be predicted with
certainty, particularly in the early stages of an action, The Equitable's
management believes that the ultimate resolution of these cases should not have
a material adverse effect on the financial position of The Equitable. The
Equitable's management cannot make an estimate of loss, if any, or predict
whether or not any such litigation will have a material adverse effect on The
Equitable's results of operations in any particular period.
Discrimination Case
Equitable Life is a defendant in an action, certified as a class action in
September 1997, in the United States District Court for the Northern District
of Alabama, Southern Division, involving alleged discrimination on the basis of
race against African-American applicants and potential applicants in hiring
SAI-70
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individuals as sales agents. Plaintiffs seek a declaratory judgment and
affirmative and negative injunctive relief, including the payment of back-pay,
pension and other compensation. Although the outcome of litigation cannot be
predicted with certainty, The Equitable's management believes that the ultimate
resolution of this matter should not have a material adverse effect on the
financial position of The Equitable. The Equitable's management cannot make an
estimate of loss, if any, or predict whether or not such matter will have a
material adverse effect on The Equitable's results of operations in any
particular period.
Alliance Capital
In July 1995, a class action complaint was filed against Alliance North
American Government Income Trust, Inc. (the "Fund"), Alliance and certain other
defendants affiliated with Alliance, including the Holding Company, alleging
violations of Federal securities laws, fraud and breach of fiduciary duty in
connection with the Fund's investments in Mexican and Argentine securities. The
original complaint was dismissed in 1996; on appeal, the dismissal was
affirmed. In October 1996, plaintiffs filed a motion for leave to file an
amended complaint, alleging the Fund failed to hedge against currency risk
despite representations that it would do so, the Fund did not properly disclose
that it planned to invest in mortgage-backed derivative securities and two Fund
advertisements misrepresented the risks of investing in the Fund. In October
1998, the U.S. Court of Appeals for the Second Circuit issued an order granting
plaintiffs' motion to file an amended complaint alleging that the Fund
misrepresented its ability to hedge against currency risk and denying
plaintiffs' motion to file an amended complaint containing the other
allegations. Alliance believes that the allegations in the amended complaint,
which was filed in February 1999, are without merit and intends to defend
itself vigorously against these claims. While the ultimate outcome of this
matter cannot be determined at this time, Alliance's management does not expect
that it will have a material adverse effect on Alliance's results of operations
or financial condition.
DLJSC
DLJSC is a defendant along with certain other parties in a class action
complaint involving the underwriting of units, consisting of notes and warrants
to purchase common shares, of Rickel Home Centers, Inc. ("Rickel"), which filed
a voluntary petition for reorganization pursuant to Chapter 11 of the
Bankruptcy Code. The complaint seeks unspecified compensatory and punitive
damages from DLJSC, as an underwriter and as an owner of 7.3% of the common
stock, for alleged violation of Federal securities laws and common law fraud
for alleged misstatements and omissions contained in the prospectus and
registration statement used in the offering of the units. DLJSC is defending
itself vigorously against all the allegations contained in the complaint.
Although there can be no assurance, DLJ's management does not believe that the
ultimate outcome of this litigation will have a material adverse effect on
DLJ's consolidated financial condition. Due to the early stage of this
litigation, based on the information currently available to it, DLJ's
management cannot predict whether or not such litigation will have a material
adverse effect on DLJ's results of operations in any particular period.
DLJSC is a defendant in a purported class action filed in a Texas State
Court on behalf of the holders of $550 million principal amount of subordinated
redeemable discount debentures of National Gypsum Corporation ("NGC"). The
debentures were canceled in connection with a Chapter 11 plan of reorganization
for NGC consummated in July 1993. The litigation seeks compensatory and
punitive damages for DLJSC's activities as financial advisor to NGC in the
course of NGC's Chapter 11 proceedings. Trial is expected in early May 1999.
DLJSC intends to defend itself vigorously against all the allegations contained
in the complaint. Although there can be no assurance, DLJ's management does not
believe that the
SAI-71
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ultimate outcome of this litigation will have a material adverse effect on
DLJ's consolidated financial condition. Based upon the information currently
available to it, DLJ's management cannot predict whether or not such litigation
will have a material adverse effect on DLJ's results of operations in any
particular period.
DLJSC is a defendant in a complaint which alleges that DLJSC and a number
of other financial institutions and several individual defendants violated
civil provisions of RICO by inducing plaintiffs to invest over $40 million in
The Securities Groups, a number of tax shelter limited partnerships, during the
years 1978 through 1982. The plaintiffs seek recovery of the loss of their
entire investment and an approximately equivalent amount of tax-related
damages. Judgment for damages under RICO are subject to trebling. Discovery is
complete. Trial has been scheduled for May 17, 1999. DLJSC believes that it has
meritorious defenses to the complaints and will continue to contest the suits
vigorously. Although there can be no assurance, DLJ's management does not
believe that the ultimate outcome of this litigation will have a material
adverse effect on DLJ's consolidated financial condition. Based upon the
information currently available to it, DLJ's management cannot predict whether
or not such litigation will have a material adverse effect on DLJ's results of
operations in any particular period.
DLJSC is a defendant along with certain other parties in four actions
involving Mid-American Waste Systems, Inc. ("Mid-American"), which filed a
voluntary petition for reorganization pursuant to Chapter 11 of the Bankruptcy
Code in January 1997. Three actions seek rescission, compensatory and punitive
damages for DLJSC's role in underwriting notes of Mid-American. The other
action, filed by the Plan Administrator for the bankruptcy estate of
Mid-American, alleges that DLJSC is liable as an underwriter for alleged
misrepresentations and omissions in the prospectus for the notes, and liable as
financial advisor to Mid-American for allegedly failing to advise Mid-American
about its financial condition. DLJSC believes that it has meritorious defenses
to the complaints and will continue to contest the suits vigorously. Although
there can be no assurance, DLJ's management does not believe that the ultimate
outcome of this litigation will have a material adverse effect on DLJ's
consolidated financial condition. Based upon information currently available to
it, DLJ's management cannot predict whether or not such litigation will have a
material adverse effect on DLJ's results of operations in any particular
period.
Other Matters
In addition to the matters described above, the Holding Company and its
subsidiaries are involved in various legal actions and proceedings in
connection with their businesses. Some of the actions and proceedings have been
brought on behalf of various alleged classes of claimants and certain of these
claimants seek damages of unspecified amounts. While the ultimate outcome of
such matters cannot be predicted with certainty, in the opinion of management
no such matter is likely to have a material adverse effect on the Company's
consolidated financial position or results of operations.
16) 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 1999 and the
succeeding four years are $98.7 million, $92.7 million, $73.4 million, $59.9
million, $55.8 million and $550.1 million thereafter. Minimum future sublease
rental income on these noncancelable leases for 1999 and the succeeding four
years is $7.6 million, $5.6 million, $4.6 million, $2.3 million, $2.3 million
and $25.4 million thereafter.
At December 31, 1998, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1999 and the
succeeding four years is $189.2 million, $177.0 million, $165.5 million, $145.4
million, $122.8 million and $644.7 million thereafter.
SAI-72
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17) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Compensation costs ................................. $ 772.0 $ 721.5 $ 704.8
Commissions ........................................ 478.1 409.6 329.5
Short-term debt interest expense ................... 26.1 31.7 8.0
Long-term debt interest expense .................... 84.6 121.2 137.3
Amortization of policy acquisition costs ........... 292.7 287.3 405.2
Capitalization of policy acquisition costs ......... (609.1) (508.0) (391.9)
Rent expense, net of sublease income ............... 100.0 101.8 113.7
Cursitor intangible assets writedown ............... -- 120.9 --
Other .............................................. 1,056.8 917.9 769.1
--------- --------- ---------
Total .............................................. $ 2,201.2 $ 2,203.9 $ 2,075.7
========= ========= =========
</TABLE>
During 1997 and 1996, the Company restructured certain operations in
connection with cost reduction programs and recorded pre-tax provisions of
$42.4 million and $24.4 million, respectively. The amounts paid during 1998,
associated with cost reduction programs, totaled $22.6 million. At December 31,
1998, the liabilities associated with cost reduction programs amounted to $39.4
million. The 1997 cost reduction program included costs related to employee
termination and exit costs. The 1996 cost reduction program included
restructuring costs related to the consolidation of insurance operations'
service centers. Amortization of DAC in 1996 included a $145.0 million writeoff
of DAC related to DI contracts.
18) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends to
the Holding Company. Under the New York Insurance Law, the Superintendent has
broad discretion to determine whether the financial condition of a stock life
insurance company would support the payment of dividends to its shareholders.
For 1998, 1997 and 1996, statutory net income (loss) totaled $384.4 million,
$(351.7) million and $(351.1) million, respectively. Statutory surplus, capital
stock and Asset Valuation Reserve ("AVR") totaled $4,728.0 million and $3,907.1
million at December 31, 1998 and 1997, respectively. No dividends have been
paid by Equitable Life to the Holding Company to date.
At December 31, 1998, the Insurance Group, in accordance with various
government and state regulations, had $25.6 million of securities deposited
with such government or state agencies.
The differences between statutory surplus and capital stock determined in
accordance with Statutory Accounting Principles ("SAP") and total shareholders'
equity on a GAAP basis are primarily attributable to: (a) inclusion in SAP of
an AVR intended to stabilize surplus from fluctuations in the value of the
investment portfolio; (b) future policy benefits and policyholders' account
balances under SAP differ from GAAP due to differences between actuarial
assumptions and reserving methodologies; (c) certain policy acquisition costs
are expensed under SAP but deferred under GAAP and amortized over future
periods to achieve a matching of revenues and expenses; (d) Federal income
taxes are generally accrued under SAP based upon revenues and expenses in the
Federal income tax return while under GAAP deferred taxes are provided for
timing differences between recognition of revenues and expenses for financial
reporting and income tax purposes; (e) valuation of assets under SAP and GAAP
differ due to different investment
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valuation and depreciation methodologies, as well as the deferral of
interest-related realized capital gains and losses on fixed income investments;
and (f) differences in the accrual methodologies for post-employment and
retirement benefit plans.
19) BUSINESS SEGMENT INFORMATION
The Company's operations consist of Insurance and Investment Services. The
Company's management evaluates the performance of each of these segments
independently and allocates resources based on current and future requirements
of each segment. Management evaluates the performance of each segment based
upon operating results adjusted to exclude the effect of unusual or
non-recurring events and transactions and certain revenue and expense
categories not related to the base operations of the particular business net of
minority interest. Information for all periods is presented on a comparable
basis.
Intersegment investment advisory and other fees of approximately $61.8
million, $84.1 million and $129.2 million for 1998, 1997 and 1996,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to discontinued operations of
$.5 million, $4.2 million and $13.3 million for 1998, 1997 and 1996,
respectively, are eliminated in consolidation.
The following tables reconcile each segment's revenues and operating
earnings to total revenues and earnings from continuing operations before
Federal income taxes and cumulative effect of accounting change as reported on
the consolidated statements of earnings and the segments' assets to total
assets on the consolidated balance sheets, respectively.
SAI-74
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<TABLE>
<CAPTION>
INVESTMENT
INSURANCE SERVICES ELIMINATION TOTAL
------------- ------------- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1998
Segment revenues ....................................... $ 4,029.8 $ 1,438.4 $ (5.7) $ 5,462.5
Investment gains ....................................... 64.8 35.4 -- 100.2
---------- ---------- ------- ----------
Total Revenues ......................................... $ 4,094.6 $ 1,473.8 $ (5.7) $ 5,562.7
========== ========== ======= ==========
Pre-tax operating earnings ............................. $ 688.6 $ 284.3 $ -- $ 972.9
---------- ---------- ------- ----------
Investment gains, net of DAC and other charges ......... 41.7 27.7 -- 69.4
Pre-tax minority interest .............................. -- 141.5 -- 141.5
---------- ---------- ------- ----------
Earnings from Continuing Operations .................... $ 730.3 $ 453.5 $ -- $ 1,183.8
========== ========== ======= ==========
Total Assets ........................................... $ 75,626.0 $ 12,379.2 $ (64.4) $ 87,940.8
========== ========== ======= ==========
1997
Segment revenues ....................................... $ 3,990.8 $ 1,200.0 $ (7.7) $ 5,183.1
Investment gains (losses) .............................. (318.8) 255.1 -- (63.7)
---------- ---------- ------- ----------
Total Revenues ......................................... $ 3,672.0 $ 1,455.1 $ (7.7) $ 5,119.4
========== ========== ======= ==========
Pre-tax operating earnings ............................. $ 507.0 $ 258.3 $ -- $ 765.3
Investment gains (losses), net of DAC and other
charges ............................................... (292.5) 252.7 -- (39.8)
Non-recurring costs and expenses ....................... (41.7) (121.6) -- (163.3)
Pre-tax minority interest .............................. -- 108.5 -- 108.5
---------- ---------- ------- ----------
Earnings from Continuing Operations .................... $ 172.8 $ 497.9 $ -- $ 670.7
========== ========== ======= ==========
Total Assets ........................................... $ 67,762.4 $ 13,691.4 $ (96.1) $ 81,357.7
========== ========== ======= ==========
1996
Segment revenues ....................................... $ 3,789.1 $ 1,105.5 $ (12.6) $ 4,882.0
Investment gains (losses) .............................. (30.3) 20.5 -- (9.8)
---------- ---------- ------- ----------
Total Revenues ......................................... $ 3,758.8 $ 1,126.0 $ (12.6) $ 4,872.2
========== ========== ======= ==========
Pre-tax operating earnings ............................. $ 337.1 $ 224.6 $ -- $ 561.7
Investment gains (losses), net of DAC and other
charges ............................................... (37.2) 16.9 -- (20.3)
Reserve strengthening and DAC writeoff ................. (393.0) -- -- (393.0)
Non-recurring costs and expenses ....................... (22.3) (1.1) -- (23.4)
Pre-tax minority interest .............................. -- 83.6 -- 83.6
---------- ---------- ------- ----------
Earnings (Loss) from Continuing Operations ............. $ (115.4) $ 324.0 $ -- $ 208.6
=========== ========== ======= ==========
</TABLE>
SAI-75
<PAGE>
- --------------------------------------------------------------------------------
20) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for 1998 and 1997 are summarized
below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------- ------------- --------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1998
Total Revenues ............................... $ 1,470.2 $ 1,422.9 $ 1,297.6 $ 1,372.0
========= ========= ========= =========
Earnings from Continuing Operations before
Cumulative Effect of Accounting Change ...... $ 212.8 $ 197.0 $ 136.8 $ 158.9
========= ========= ========= =========
Net Earnings ................................. $ 213.3 $ 198.3 $ 137.5 $ 159.1
========= ========= ========= =========
1997
Total Revenues ............................... $ 1,266.0 $ 1,552.8 $ 1,279.0 $ 1,021.6
========= ========= ========= =========
Earnings from Continuing Operations before
Cumulative Effect of Accounting Change ...... $ 117.4 $ 222.5 $ 145.1 $ 39.4
========= ========= ========= =========
Net Earnings (Loss) .......................... $ 114.1 $ 223.1 $ 144.9 $ (44.9)
========= ========= ========= ==========
</TABLE>
Net earnings for the three months ended December 31, 1997 includes a
charge of $212.0 million related to additions to valuation allowances on and
writeoffs of real estate of $225.2 million, and reserve strengthening on
discontinued operations of $84.3 million offset by a reversal of prior years
tax reserves of $97.5 million.
21) INVESTMENT IN DLJ
At December 31, 1998, the Company's ownership of DLJ interest was
approximately 32.5%. The Company's ownership interest will be further reduced
upon the issuance of common stock after the vesting of forfeitable restricted
stock units acquired by and/or the exercise of options granted to certain DLJ
employees. DLJ restricted stock units represents forfeitable rights to receive
approximately 5.2 million shares of DLJ common stock through February 2000.
The results of operations of DLJ are accounted for on the equity basis and
are included in commissions, fees and other income in the consolidated
statements of earnings. The Company's carrying value of DLJ is included in
investment in and loans to affiliates in the consolidated balance sheets.
SAI-76
<PAGE>
- --------------------------------------------------------------------------------
Summarized balance sheets information for DLJ, reconciled to the Company's
carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
-------------- --------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Trading account securities, at market value ........................ $ 13,195.1 $ 16,535.7
Securities purchased under resale agreements ....................... 20,063.3 22,628.8
Broker-dealer related receivables .................................. 34,264.5 28,159.3
Other assets ....................................................... 4,759.3 3,182.0
----------- -----------
Total Assets ....................................................... $ 72,282.2 $ 70,505.8
=========== ===========
Liabilities:
Securities sold under repurchase agreements ........................ $ 35,775.6 $ 36,006.7
Broker-dealer related payables ..................................... 26,161.5 26,127.2
Short-term and long-term debt ...................................... 3,997.6 3,249.5
Other liabilities .................................................. 3,219.8 2,860.9
----------- -----------
Total liabilities .................................................. 69,154.5 68,244.3
DLJ's company-obligated mandatorily redeemed preferred securities of
subsidiary trust holding solely debentures of DLJ ................. 200.0 200.0
Total shareholders' equity ......................................... 2,927.7 2,061.5
----------- -----------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity .............................................. $ 72,282.2 $ 70,505.8
=========== ===========
DLJ's equity as reported ........................................... $ 2,927.7 $ 2,061.5
Unamortized cost in excess of net assets acquired in 1985 and other
adjustments ....................................................... 23.7 23.5
The Holding Company's equity ownership in DLJ ...................... (1,002.4) (740.2)
Minority interest in DLJ ........................................... (1,118.2) (729.3)
----------- -----------
The Company's Carrying Value of DLJ ................................ $ 830.8 $ 615.5
=========== ===========
</TABLE>
SAI-77
<PAGE>
- --------------------------------------------------------------------------------
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Commission, fees and other income ..................................... $ 3,184.7 $ 2,430.7
Net investment income ................................................. 2,189.1 1,652.1
Dealer, trading and investment gains, net ............................. 33.2 557.7
---------- ----------
Total revenues ........................................................ 5,407.0 4,640.5
Total expenses including income taxes ................................. 5,036.2 4,232.2
---------- ----------
Net earnings .......................................................... 370.8 408.3
Dividends on preferred stock .......................................... 21.3 12.2
---------- ----------
Earnings Applicable to Common Shares .................................. $ 349.5 $ 396.1
========== ==========
DLJ's earnings applicable to common shares as reported ................ $ 349.5 $ 396.1
Amortization of cost in excess of net assets acquired in 1985 ......... (.8) (1.3)
The Holding Company's equity in DLJ's earnings ........................ (136.8) (156.8)
Minority interest in DLJ .............................................. (99.5) (109.1)
---------- ----------
The Company's Equity in DLJ's Earnings ................................ $ 112.4 $ 128.9
========== ==========
</TABLE>
22) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Holding Company sponsors a stock option plan for employees of
Equitable Life. DLJ and Alliance each sponsor their own stock option plans for
certain employees. The Company has elected to continue to account for
stock-based compensation using the intrinsic value method prescribed in APB No.
25. Had compensation expense for the Holding Company, DLJ and Alliance Stock
Option Incentive Plan options been determined based on SFAS No. 123's fair
value based method, the Company's pro forma net earnings for 1998, 1997 and
1996 would have been:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Net Earnings:
As reported ......... $ 708.2 $ 437.2 $ 10.3
Pro forma ........... 678.4 426.3 3.3
</TABLE>
SAI-78
<PAGE>
- --------------------------------------------------------------------------------
The fair values of options granted after December 31, 1994, used as a
basis for the above pro forma disclosures, were estimated as of the dates of
grant using the Black-Scholes option pricing model. The option pricing
assumptions for 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
HOLDING COMPANY DLJ
-------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dividend yield .................. 0.32% 0.48% 0.80% 0.69% 0.86% 1.54%
Expected volatility ............. 28% 20% 20% 40% 33% 25%
Risk-free interest rate ......... 5.48% 5.99% 5.92% 5.53% 5.96% 6.07%
Expected life in years .......... 5 5 5 5 5 5
Weighted average fair
value per option at
grant-date ..................... $ 22.64 $ 12.25 $ 6.94 $ 16.27 $ 10.81 $ 4.03
<CAPTION>
ALLIANCE
--------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Dividend yield .................. 6.50% 8.00% 8.00%
Expected volatility ............. 29% 26% 23%
Risk-free interest rate ......... 4.40% 5.70% 5.80%
Expected life in years .......... 7.2 7.2 7.4
Weighted average fair
value per option at
grant-date ..................... $ 3.86 $ 2.18 $ 1.35
</TABLE>
A summary of the Holding Company, DLJ and Alliance's option plans is as
follows:
<TABLE>
<CAPTION>
HOLDING COMPANY DLJ ALLIANCE
----------------------------- ----------------------------- ----------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
PRICE OF PRICE OF PRICE OF
SHARES OPTIONS SHARES OPTIONS UNITS OPTIONS
(IN MILLIONS) OUTSTANDING (IN MILLIONS) OUTSTANDING (IN MILLIONS) OUTSTANDING
--------------- ------------- --------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1996 ........... 6.7 $ 20.27 18.4 $ 13.50 9.6 $ 8.86
Granted ................................ .7 $ 24.94 4.2 $ 16.27 1.4 $ 12.56
Exercised .............................. (.1) $ 19.91 -- -- (.8) $ 6.82
Expired ................................ -- -- --
Forfeited .............................. (.6) $ 20.21 (.4) $ 13.50 (.2) $ 9.66
----- ----- -----
Balance as of December 31, 1996 ......... 6.7 $ 20.79 22.2 $ 14.03 10.0 $ 9.54
Granted ................................ 3.2 $ 41.85 6.4 $ 30.54 2.2 $ 18.28
Exercised .............................. (1.6) $ 20.26 (.2) $ 16.01 (1.2) $ 8.06
Forfeited .............................. (.4) $ 23.43 (.2) $ 13.79 (.4) $ 10.64
----- ----- -----
Balance as of December 31, 1997 ......... 7.9 $ 29.05 28.2 $ 17.78 10.6 $ 11.41
Granted ................................ 4.3 $ 66.26 1.5 $ 38.59 2.8 $ 26.28
Exercised .............................. (1.1) $ 21.18 (1.4) $ 14.91 (.9) $ 8.91
Forfeited .............................. (.4) $ 47.01 (.1) $ 17.31 (.2) $ 13.14
----- ----- -----
Balance as of December 31, 1998 ......... 10.7 $ 44.00 28.2 $ 19.04 12.3 $ 14.94
===== ===== =====
</TABLE>
SAI-79
<PAGE>
- --------------------------------------------------------------------------------
Information about options outstanding and exercisable at December 31, 1998
is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- -----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
PRICES (IN MILLIONS) LIFE (YEARS) PRICE (IN MILLIONS) PRICE
- ------------------------ --------------- -------------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
HOLDING
COMPANY
- ------------------------
$18.125-$27.75 ......... 3.7 5.19 $ 20.97 3.0 $ 20.33
$28.50 -$45.25 ......... 3.0 8.68 $ 41.79 --
$50.63 -$66.75 ......... 2.1 9.21 $ 52.73 --
$81.94 -$82.56 ......... 1.9 9.62 $ 82.56 --
---- ----
$18.125-$82.56 ......... 10.7 7.75 $ 44.00 3.0 $ 20.33
==== ==== ======= ==== =======
DLJ
- -------------------------
$13.50-$25.99 .......... 22.3 7.1 $ 14.59 21.4 $ 15.05
$26.00-$38.99 .......... 5.0 8.8 $ 33.94 --
$39.00-$52.875 ......... .9 9.4 $ 44.65 --
---- ----
$13.50-$52.875 ......... 28.2 7.5 $ 19.04 21.4 $ 15.05
==== ==== ======= ==== =======
ALLIANCE
- -------------------------
$ 3.03-$ 9.69 .......... 3.1 4.5 $ 8.03 2.4 $ 7.57
$ 9.81-$10.69 .......... 2.0 5.3 $ 10.05 1.6 $ 10.07
$11.13-$13.75 .......... 2.4 7.5 $ 11.92 1.0 $ 11.77
$18.47-$18.78 .......... 2.0 9.0 $ 18.48 .4 $ 18.48
$22.50-$26.31 .......... 2.8 9.9 $ 26.28 -- --
---- ----
$ 3.03-$26.31 .......... 12.3 7.2 $ 14.94 5.4 $ 9.88
==== ==== ======= ==== =======
</TABLE>
SAI-80
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
Lifecycle Fund Group Trust -- Conservative
In our opinion, the accompanying statement of assets and liabilities 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 Lifecycle Fund Group Trust --
Conservative at December 31, 1998, and 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 Trustee; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by the Trustee, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at December 31, 1998 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 19, 1999
SAI-81
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in State Street Bank and Trust Company
Collective Investment Funds:
Daily EAFE Non-Lending Fund (131,107 units) ............................. $ 1,353,816
Daily Government/Corporate Bond Fund (475,551 units) .................... 6,746,641
Russell 2000 Fund (29,924 units) ........................................ 690,290
S&P 500 Flagship Fund (9,859 units) ..................................... 2,018,397
Short Term Investment Fund (2,696,641 units) ............................ 2,696,641
- ------------------------------------------------------------------------------ -----------
Total investments, at value (cost $12,548,613) ............................. 13,505,785
Receivable for Fund units issued ........................................ 2,539
Interest receivable ..................................................... 11,646
Securities lending fee income receivable ................................ 197
- ------------------------------------------------------------------------------ -----------
Total assets ........................................................... 13,520,167
- ------------------------------------------------------------------------------ -----------
LIABILITIES
Accrued expenses ............................................................ 3,932
- ------------------------------------------------------------------------------ -----------
NET ASSETS (equivalent to $14.27 per unit based on 947,341 units outstanding) $13,516,235
============================================================================== ===========
</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--CONSERVATIVE
Statement of Operations
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest ............................................................... $ 120,347
Securities lending fee income, net of related expenses ................. 560
- -------------------------------------------------------------------------- ----------
Total investment income ............................................. 120,907
- -------------------------------------------------------------------------- ----------
EXPENSES
Administration ......................................................... 12,000
Audit .................................................................. 4,510
Legal .................................................................. 12,000
Management ............................................................. 18,429
- -------------------------------------------------------------------------- ----------
Total expenses ...................................................... 46,939
- -------------------------------------------------------------------------- ----------
Net investment income ............................................... 73,968
- -------------------------------------------------------------------------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) ............................................... 730,277
Net change in unrealized appreciation (depreciation) ................... 394,473
- -------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments ............... 1,124,750
- -------------------------------------------------------------------------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $1,198,718
========================================================================== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-83
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
--------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ...................................................... $ 73,968 $ 25,025
Net realized gain (loss) on investments ........................................... 730,277 260,983
Net change in unrealized appreciation (depreciation) on investments ............... 394,473 271,184
- ------------------------------------------------------------------------------------ ------------ -----------
Net increase (decrease) in net assets resulting from operations .................. 1,198,718 557,192
- ------------------------------------------------------------------------------------ ------------ -----------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions ..... 5,068,906 2,157,090
- ------------------------------------------------------------------------------------ ------------ -----------
Net increase (decrease) in net assets ............................................. 6,267,624 2,714,282
NET ASSETS
Beginning of year ................................................................ 7,248,611 4,534,329
- ------------------------------------------------------------------------------------ ------------ -----------
End of year ...................................................................... $ 13,516,235 $ 7,248,611
==================================================================================== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-84
<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,
-----------------------------------------------
1998 1997 1996 1995*
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net investment income (loss)** ........................................... $ 0.09 $ 0.06 $ 0.05 $ (0.08)
Net realized and unrealized gain (loss) .................................. 1.41 1.28 0.65 0.81
- -------------------------------------------------------------------------- -------- -------- -------- -------
Net increase (decrease) .................................................. 1.50 1.34 0.70 0.73
NET ASSET VALUE
Beginning of period ...................................................... 12.77 11.43 10.73 10.00
- -------------------------------------------------------------------------- -------- -------- -------- -------
END OF PERIOD ............................................................ $ 14.27 $ 12.77 $ 11.43 $ 10.73
========================================================================== ======== ======== ======== =======
Total return (%)*** ...................................................... 11.75 11.72 6.52 7.30
========================================================================== ======== ======== ======== =======
Ratio of expenses to average net assets (a) (c) .......................... 0.43% 0.66% 0.81% 2.13%
Ratio of net investment income (loss) to average net assets (a) (b) ...... 0.68% 0.46% 0.31% ( 1.04%)
Portfolio turnover ....................................................... 77% 44% 54% 131%
Net assets, end of period (000s) ......................................... $ 13,516 $ 7,249 $ 4,534 $ 2,983
========================================================================== ======== ======== ======== =======
</TABLE>
* The Fund commenced operations on April 26, 1995.
** Net investment income (loss) per unit has been calculated based upon a
monthly average of units outstanding.
*** Total return calculation (not annualized for the period ended December 31,
1995) is based on the value of a single unit of participation outstanding
throughout the period. It represents the percentage change in the net asset
value per unit between the beginning and end of the period. The calculation
includes only those expenses charged directly to the Fund. The result may
be reduced by any administrative or other fees which are incurred in the
management or maintenance of individual participant accounts.
(a) Annualized for the period ended December 31, 1995.
(b) Ratio excludes income retained by funds in which the Fund invests (see Note
2).
(c) The calculation includes only those expenses charged directly to the Fund,
and does not include expenses charged to the funds in which the Fund
invests.
The accompanying notes are an integral part of these financial statements.
SAI-85
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Lifecycle Fund
Group Trust -- Conservative (the "Fund") was formed by State Street Bank under
a Declaration of Trust. The investment objective of the Fund is to seek to
provide current income and a low to moderate growth of capital. The Fund will
attempt to achieve its investment objective by investing in other collective
investment funds (each an "underlying fund"), including funds managed by the
Trustee, with similar objectives. Refer to the financial statements of each
underlying fund for disclosure of its accounting policies. State Street Bank is
Trustee and custodian of the Fund. State Street Global Advisors, a division of
State Street Bank, is the Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments in regulated investment companies or other State Street Bank
collective investment funds are valued at the net asset value per share/unit on
the valuation date. Short-term investments, if any, are stated at amortized
cost, which approximates market value.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. The cost of
securities contributed to, and proceeds related to securities delivered by, the
Fund in connection with the issuance and redemption of units of participation
are based on the valuations of those securities determined as described above.
The cost of securities delivered and the net gain or loss on securities sold
are determined using the average cost method. Dividend income, if any, is
recorded on the ex-dividend date. Interest income earned on securities, if any,
is recorded on the accrual basis. Income earned from securities lending
activities is recorded by the Fund quarterly.
State Street Bank collective investment funds, in which the Fund invests,
may retain investment income and net realized gains. Accordingly, realized and
unrealized gains and losses reported by the Fund may include a component
attributable to investment income.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made based upon
the value of the Fund as of the Fund's valuation date last preceding the date
on which such order to contribute or withdraw assets is received, adjusted for
the related market effect and transaction costs which are allocated to the
applicable participant. Transaction costs include brokerage commissions, taxes
and
SAI-86
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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. The Trustee, in
its sole discretion, reserves the right to value any contribution or withdrawal
as of the next succeeding valuation date or another date as the Trustee deems
appropriate.
E. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year.
Management Fee: The Trustee is paid a management fee at the annual rate of
0.17% of the Fund's average net asset value.
Administration Fee: The Trustee is paid an annual fee of $12,000 for the
administration of the Fund.
F. DISTRIBUTIONS TO PARTICIPANTS
Net investment income and net realized gains are retained by the Fund.
G. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
3. GLOBAL SECURITIES LENDING PROGRAM
Fund participants have authorized the Fund to invest in certain collective
investment funds that participate in the Global Securities Lending Program
maintained by State Street Bank.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, if any, during the year ended
December 31, 1998 were $12,128,628 and $8,281,211, respectively, resulting in a
net realized gain (loss) of $730,277. This gain (loss) is prior to the
recognition of the market effect and transaction costs associated with
contributions and redemptions.
Purchases and sales of short-term investments (including maturities) were
$2,741,993 and $1,487,572, respectively, resulting in a net realized gain
(loss) of $0.
SAI-87
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--CONSERVATIVE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997
------------------------------ -------------------------------
UNITS AMOUNT UNITS AMOUNT
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Units issued .................... 927,648 $ 12,468,399 372,044 $ 4,598,331
Units redeemed .................. (547,819) (7,399,493) (201,223) (2,441,241)
-------- ------------ -------- ------------
Net increase (decrease) ......... 379,829 $ 5,068,906 170,821 $ 2,157,090
======== ============ ======== ============
</TABLE>
All of the Fund's units outstanding were held by one unitholder at
December 31, 1998.
During the year ended December 31, 1998, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Fund units were $0.
SAI-88
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
Lifecycle Fund Group Trust -- Moderate
In our opinion, the accompanying statement of assets and liabilities 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 Lifecycle Fund Group Trust -- Moderate
at December 31, 1998, and 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 Trustee; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by the Trustee, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 19, 1999
SAI-89
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in State Street Bank and Trust Company
Collective Investment Funds:
Daily EAFE Fund Non-Lending (1,825,026 units) .............................. $ 18,845,220
Daily Government/Corporate Bond Fund (2,647,029 units) ..................... 37,553,406
Russell 2000 Fund (555,566 units) .......................................... 12,815,807
S&P 500 Flagship Fund (213,395 units) ...................................... 43,686,177
Short Term Investment Fund (12,507,526 units) .............................. 12,507,526
- --------------------------------------------------------------------------------- ------------
Total investments, at value (cost $100,051,755) ............................. 125,408,136
- --------------------------------------------------------------------------------- ------------
Interest receivable ............................................................ 54,903
- --------------------------------------------------------------------------------- ------------
Securities lending fee income receivable ....................................... 3,816
- --------------------------------------------------------------------------------- ------------
Total assets ................................................................ 125,466,855
- --------------------------------------------------------------------------------- ------------
LIABILITIES
Payable for Fund units redeemed ................................................ 34,905
Accrued expenses ............................................................... 19,852
- --------------------------------------------------------------------------------- ------------
Total liabilities ........................................................... 54,757
- --------------------------------------------------------------------------------- ------------
NET ASSETS (equivalent to $16.96 per unit based on 7,395,334 units outstanding) $125,412,098
================================================================================= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-90
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
Statement of Operations
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest ............................................................... $ 651,866
Securities lending fee ................................................. 12,940
- -------------------------------------------------------------------------- -----------
Total investment income .............................................. 664,806
- -------------------------------------------------------------------------- -----------
EXPENSES
Administration ......................................................... 12,000
Audit .................................................................. 4,510
Legal .................................................................. 12,000
Management ............................................................. 199,717
- -------------------------------------------------------------------------- -----------
Total expenses ....................................................... 228,227
- -------------------------------------------------------------------------- -----------
Net investment income ............................................... 436,579
- -------------------------------------------------------------------------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) ............................................... 11,197,178
Net change in unrealized appreciation (depreciation) ................... 5,514,425
- -------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments .............. 16,711,603
- -------------------------------------------------------------------------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $17,148,182
========================================================================== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-91
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
--------------- ---------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ....................................................... $ 436,579 $ 360,099
Net realized gain (loss) on investments ............................................ 11,197,178 4,188,185
Net change in unrealized appreciation (depreciation) on investments ................ 5,514,425 11,081,534
- ------------------------------------------------------------------------------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations ................... 17,148,182 15,629,818
- ------------------------------------------------------------------------------------ ------------ ------------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participants transactions ..... (171,083) 4,532,218
- ------------------------------------------------------------------------------------ ------------ ------------
Net increase (decrease) in net assets .............................................. 16,977,099 20,162,036
NET ASSETS
Beginning of year ................................................................. 108,434,999 88,272,963
- ------------------------------------------------------------------------------------ ------------ ------------
End of year ....................................................................... $125,412,098 $108,434,999
==================================================================================== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-92
<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,
---------------------------------------------------
1998 1997 1996 1995*
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net investment income (loss)** ........................................... $ 0.06 $ 0.05 $ 0.04 $ (0.01)
Net realized and unrealized gain (loss) .................................. 2.30 2.11 1.27 1.14
- -------------------------------------------------------------------------- -------- -------- -------- -------
Net increase (decrease) .................................................. 2.36 2.16 1.31 1.13
NET ASSET VALUE
Beginning of period ...................................................... 14.60 12.44 11.13 10.00
- -------------------------------------------------------------------------- -------- -------- -------- -------
End of period ............................................................ $ 16.96 $ 14.60 $ 12.44 11.13
========================================================================== ======== ======== ======== =======
Total return (%)*** ...................................................... 16.16 17.36 11.77 11.30
========================================================================== ======== ======== ======== =======
Ratio of expenses to average net assets (a) (c) .......................... 0.19% 0.20% 0.20% 0.52%
Ratio of net investment income (loss) to average net assets (a) (b) ...... 0.37% 0.37% 0.35% (0.07%)
Portfolio turnover ....................................................... 46% 22% 18% 30%
Net assets, end of period (000s) ......................................... $ 125,412 $ 108,435 $ 88,273 $76,246
========================================================================== ========= ========= ======== =======
</TABLE>
* The Fund commenced operations on April 26, 1995.
** Net investment income (loss) per unit has been calculated based upon a
monthly average of units outstanding.
*** Total return calculation (not annualized for the period ended December
31, 1995) is based on the value of a single unit of participation
outstanding throughout the period. It represents the percentage change in
the net asset value per unit between the beginning and end of the period.
The calculation includes only those expenses charged directly to the
Fund. The result may be reduced by any administrative or other fees which
are incurred in the management or maintenance of individual participant
accounts.
(a) Annualized for the period ended December 31, 1995.
(b) Ratio excludes income retained by funds in which the Fund invests
(see Note 2).
(c) The calculation includes only those expenses charged directly to the
Fund, and does not include expenses charged to the funds in which
the Fund invests.
The accompanying notes are an integral part of these financial statements.
SAI-93
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Lifecycle Fund
Group Trust--Moderate (the "Fund") was formed by State Street Bank under a
Declaration of Trust. The investment objective of the Fund is to seek to
provide growth of capital and a reasonable level of current income. The Fund
will attempt to achieve its investment objective by investing in other
collective investment funds (each an "underlying fund"), including funds
managed by the Trustee, with similar objectives. Refer to the financial
statements of each underlying fund for disclosure of its accounting policies.
State Street Bank is Trustee and custodian of the Fund. State Street Global
Advisors, a division of State Street Bank, is the Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Investments in regulated investment companies or other State Street Bank
collective investment funds are valued at the net asset value per share/unit on
the valuation date. Short-term investments, if any, are stated at amortized
cost, which approximates market value.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. The cost of
securities contributed to, and proceeds related to securities delivered by, the
Fund in connection with the issuance and redemption of units of participation
are based on the valuations of those securities determined as described above.
The cost of securities delivered and the net gain or loss on securities sold
are determined using the average cost method. Dividend income, if any, is
recorded on the ex-dividend date. Interest income earned on securities, if any,
is recorded on the accrual basis. Income earned from securities lending
activities is recorded by the Fund quarterly.
State Street Bank collective investment funds, in which the Fund invests,
may retain investment income and net realized gains. Accordingly, realized and
unrealized gains and losses reported by the Fund may include a component
attributable to investment income.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made based upon
the value of the Fund as of the Fund's valuation date last preceding the date
on which such order to contribute or withdraw assets is received, adjusted for
the related market effect and transaction costs which are allocated to the
applicable participant. Transaction costs include brokerage commissions, taxes
and
SAI-94
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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. The Trustee, in
its sole discretion, reserves the right to value any contribution or withdrawal
as of the next succeeding valuation date or another date as the Trustee deems
appropriate.
E. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year.
Management Fee: The Trustee is paid a management fee at the annual rate of
0.17% of the Fund's average net asset value.
Administration Fee: The Trustee is paid an annual fee of $12,000 for the
administration of the Fund.
F. DISTRIBUTIONS TO PARTICIPANTS
Net investment income and net realized gains are retained by the Fund.
G. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
3. GLOBAL SECURITIES LENDING PROGRAM
Fund participants have authorized the Fund to invest in certain collective
investment funds that participate in the Global Securities Lending Program
maintained by State Street Bank.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, if any, during the year ended
December 31, 1998 were $53,918,458 and $55,588,284, respectively, resulting in
a net realized gain (loss) of $11,197,178. This gain (loss) is prior to the
recognition of the market effect and transaction costs associated with
contributions and redemptions.
Purchases and sales of short-term investments (including maturities) were
$5,155,995 and $3,287,784, respectively, resulting in a net realized gain
(loss) of $0.
SAI-95
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
LIFECYCLE FUND GROUP TRUST--MODERATE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------------------
1998 1997
---------------------------------- --------------------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Units issued .................... 1,398,678 $ 21,978,243 1,075,166 $ 14,656,380
Units redeemed .................. (1,431,640) (22,149,326) (741,413) (10,124,162)
---------- ------------- --------- -------------
Net increase (decrease) ......... (32,962) $ (171,083) 333,753 $ 4,532,218
========== ============= ========= =============
</TABLE>
All of the Fund's units outstanding were held by one unitholder at
December 31, 1998.
During the year ended December 31, 1998, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Fund units were $0.
SAI-96
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
S&P 500 Flagship Fund
and State Street Bank and Trust Company
S&P 500 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 State
Street Bank and Trust Company S&P 500 Flagship Fund and State Street Bank and
Trust Company S&P 500 Index Fund with Futures at December 31, 1998, and 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
Trustee; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by the Trustee, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 22, 1999
SAI-97
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $39,458,357,295) ............................... $62,439,898,121
Cash ..................................................................................... 5,281,076
Investments in State Street Bank and Trust Company Quality A Short-Term Investment Fund, 1,541,128,370
at value
Receivable for Fund units issued ......................................................... 165,175,971
Receivable for investments sold .......................................................... 1,004,213,086
Variation margin receivable .............................................................. 1,344,700
Dividends receivable ..................................................................... 66,311,620
Interest receivable ...................................................................... 1,924,792
- ------------------------------------------------------------------------------------------ ---------------
Total assets ............................................................................ 65,225,277,736
- ------------------------------------------------------------------------------------------ ---------------
LIABILITIES
Payable for collateral on securities loaned .............................................. 1,541,128,370
Payable for Fund units redeemed .......................................................... 496,200
Payable for investments purchased ........................................................ 999,334,705
Accrued expenses ......................................................................... 60,489
- ------------------------------------------------------------------------------------------ ---------------
Total liabilities ....................................................................... 2,541,019,764
- ------------------------------------------------------------------------------------------ ---------------
NET ASSETS ............................................................................... $62,684,257,972
========================================================================================== ===============
S&P 500 Flagship Fund
(243,710,614 units outstanding, at $204.72 per unit net asset value) .................... $49,892,967,420
S&P 500 Index Fund with Futures
(62,481,216 units outstanding, at $204.72 per unit net asset value) ..................... 12,791,290,552
- ------------------------------------------------------------------------------------------ ---------------
$62,684,257,972
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-98
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Statement of Operations
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of taxes withheld of $348,502) ........................................... $ 778,970,763
Interest ................................................................................ 31,500,659
Securities lending fee income (net of related expenses) allocated to S&P 500 Flagship 2,075,010
- ------------------------------------------------------------------------------------------ ---------------
Fund (Note 3)
- -------------------------------------------------------------------------------------------
Total investment income .............................................................. 812,546,432
- ------------------------------------------------------------------------------------------ ---------------
EXPENSES
Audit ................................................................................... 30,180
Custody ................................................................................. 739,005
- ------------------------------------------------------------------------------------------ ---------------
Total expenses ....................................................................... 769,185
- ------------------------------------------------------------------------------------------ ---------------
Net investment income ................................................................ 811,777,247
- ------------------------------------------------------------------------------------------ ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS
Net realized gain (loss):
Investments ........................................................................... 2,957,047,190
Futures contracts ..................................................................... 76,845,293
- ------------------------------------------------------------------------------------------ ---------------
3,033,892,483
---------------
Net change in unrealized appreciation (depreciation):
Investments ........................................................................... 9,546,716,127
Futures contracts ..................................................................... 18,522,738
- ------------------------------------------------------------------------------------------ ---------------
9,565,238,865
---------------
Net realized and unrealized gain (loss) on investments and futures contracts .......... 12,599,131,348
- ------------------------------------------------------------------------------------------ ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $13,410,908,595
========================================================================================== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-99
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
------------------- -------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ................................................................. $ 811,777,247 $ 572,756,929
Net realized gain (loss) on investments and futures contracts ......................... 3,033,892,483 1,710,945,621
Net change in unrealized appreciation (depreciation) on investments and futures
contracts ............................................................................ 9,565,238,865 6,288,038,639
- --------------------------------------------------------------------------------------- --------------- ---------------
Net increase (decrease) in net assets resulting from operations ....................... 13,410,908,595 8,571,741,189
- --------------------------------------------------------------------------------------- --------------- ---------------
Distributions of securities lending fee income to S&P 500 Flagship Fund participants
(Note 3) ............................................................................. (2,075,010) (915,319)
- --------------------------------------------------------------------------------------- --------------- ---------------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions ......... 5,048,569,358 11,401,185,824
- --------------------------------------------------------------------------------------- --------------- ---------------
Net increase (decrease) in net assets ................................................. 18,457,402,943 19,972,011,694
NET ASSETS
Beginning of year .................................................................... 44,226,855,029 24,254,843,335
- --------------------------------------------------------------------------------------- --------------- ---------------
End of year .......................................................................... $62,684,257,972 $44,226,855,029
======================================================================================= =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-100
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net investment income* .................................... $ 2.77 $ 2.64 $ 2.48 $ 2.24 $ 1.90
Net realized and unrealized gain (loss) ................... 42.70 37.22 19.86 24.26 (0.93)
Distribution of securities lending fee income (a) ......... (0.01) 0.00 0.00 0.00 0.00
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Net increase (decrease) ................................... 45.46 39.86 22.34 26.50 0.97
NET ASSET VALUE
Beginning of year ......................................... 159.26 119.40 97.06 70.56 69.59
- ------------------------------------------------------------ -------- -------- -------- ------- -------
End of year ............................................... $ 204.72 $ 159.26 $ 119.40 $ 97.06 $ 70.56
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Total return (%)** ........................................ 28.55 33.38 23.02 37.56 1.39
============================================================ ======== ======== ======== ======= =======
Ratio of expenses to average net assets*** ................ 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net investment income (loss) to average net
assets ................................................... 1.55% 1.86% 2.33% 2.66% 2.88%
Portfolio turnover ........................................ 18% 18% 27% 10% 12%
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Net assets, end of year (000,000s) ........................ $ 49,893 $ 36,664 $ 20,916 $15,135 $ 8,258
============================================================ ======== ======== ======== ======= =======
</TABLE>
* Net investment income has been calculated based on an average of units
outstanding
** Total return calculation is based on the value of a single unit of
participation outstanding throughout the year. It represents the percentage
change in net asset value per unit between the beginning and end of each
year and assumes reinvestment of distributions. The calculation includes
only those expenses charged directly to the Fund. The result may be reduced
by any administrative or other fees which are incurred in the management or
maintenance of individual participant accounts.
*** Zero amounts represent those which are less than .005%.
(a) Zero amounts represent those which are less than $.005 per unit.
The accompanying notes are an integral part of these financial statements.
SAI-101
<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 the Year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net investment income* ............................. $ 2.76 $ 2.64 $ 2.48 $ 2.24 $ 1.90
Net realized and unrealized gain (loss) ............ 42.70 37.22 19.86 24.26 (0.93)
- ----------------------------------------------------- -------- -------- -------- ------- -------
Net increase (decrease) ............................ 45.46 39.86 22.34 26.50 0.97
NET ASSET VALUE
Beginning of year .................................. 159.26 119.40 97.06 70.56 69.59
- ----------------------------------------------------- -------- -------- -------- ------- -------
End of year ........................................ $ 204.72 $ 159.26 $ 119.40 $ 97.06 $ 70.56
- ----------------------------------------------------- -------- -------- -------- ------- -------
Total return (%)** ................................. 28.54 33.38 23.02 37.56 1.39
===================================================== ======== ======== ======== ======= =======
Ratio of expenses to average net assets*** ......... 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net investment income (loss) to average net
assets ............................................ 1.55% 1.85% 2.33% 2.66% 2.88%
Portfolio turnover ................................. 18% 18% 27% 10% 12%
- ----------------------------------------------------- -------- -------- -------- ------- -------
Net assets, end of year (000,000s) ................. $ 12,791 $ 7,563 $ 3,339 $ 2,165 $ 1,432
===================================================== ======== ======== ======== ======= =======
</TABLE>
* Net investment income has been calculated based on an average of units
outstanding.
** Total return calculation is based on the value of a single unit of
participation outstanding throughout the year. It represents the percentage
change in the net asset value per unit between the beginning and end of the
year. The calculation includes only those expenses charged directly to the
Non-Lending Fund. The result may be reduced by any administrative or other
fees which are incurred in the management or maintenance of individual
participant accounts.
*** Zero amounts represent those which are less than .005%.
The accompanying notes are an integral part of these financial statements.
SAI-102
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------------
<S> <C> <C>
COMMON STOCK--99.7% (unless otherwise noted)
3COM Corp. ..................................... 2,266,139 $ 101,551,354
Abbott Laboratories ............................ 9,426,023 461,875,127
Adobe Systems Inc. ............................. 453,681 21,209,587
Adolph Coors Co. Class B ....................... 224,056 12,645,161
Advanced Micro Devices Inc. .................... 926,014 26,796,530
Aeroquip Vickers Inc. .......................... 174,782 5,232,536
AES Corp. ...................................... 1,095,140 51,882,257
Aetna Inc. ..................................... 928,374 72,993,406
Air Products & Chemicals Inc. .................. 1,534,849 61,393,960
Airtouch Communications ........................ 3,569,524 257,451,918
Alberto Culver Co. Class B Convertible ......... 320,167 8,544,457
Albertson's Inc. ............................... 1,539,362 98,038,117
Alcan Aluminum Ltd. ............................ 1,432,979 38,779,994
Allegheny Teledyne Inc. ........................ 1,219,518 24,923,899
Allergan Inc. .................................. 403,185 26,106,229
Allied Signal Inc. ............................. 3,516,988 155,846,531
Allstate Corp. ................................. 5,067,526 195,733,192
Alltel Corp. ................................... 1,693,802 101,310,532
Aluminum Co. of America ........................ 1,168,644 87,137,018
Alza Corp. ..................................... 508,119 26,549,218
Amerada Hess Corp. ............................. 613,149 30,504,163
Ameren Corp. ................................... 834,810 35,635,952
America Online Inc. ............................ 2,886,100 461,776,000
American Electric Power Co., Inc. .............. 1,182,282 55,641,147
American Express Corp. ......................... 2,817,530 288,092,442
American General Corp. ......................... 1,573,771 122,754,138
American Greetings Corp. Class A ............... 428,717 17,604,192
American Home Products Corp. ................... 8,130,598 457,854,300
American International Group Inc. .............. 6,532,470 631,199,914
American Stores Co. ............................ 1,739,906 64,267,778
Ameritech Corp. ................................ 6,886,011 436,400,947
Amgen Inc. ..................................... 1,613,775 168,740,348
AMP Inc. ....................................... 1,379,666 71,828,861
AMR Corp. ...................................... 1,147,919 68,157,691
Anadarko Petroleum Corp. ....................... 766,684 23,671,369
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-103
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ------------------
<S> <C> <C>
Andrew Corp. ...................................... 542,370 $ 8,949,105
Anheuser Busch Cos., Inc. ......................... 3,000,849 196,930,716
Aon Corp. ......................................... 1,030,418 57,059,397
Apache Corp. ...................................... 639,337 16,183,218
Apple Computer .................................... 820,969 33,608,418
Applied Materials Inc. ............................ 2,297,704 98,083,239
Archer Daniels Midland Co ......................... 3,708,763 63,744,364
Armstrong World Industries Inc. ................... 252,074 15,203,213
Asarco Inc. ....................................... 245,344 3,695,494
Ascend Communications Inc. ........................ 1,358,558 89,325,188
Ashland Inc. ...................................... 484,707 23,447,701
Associates First Capital Corp. Class A ............ 4,449,918 188,565,275
AT&T Corp. ........................................ 11,237,487 845,620,897
Atlantic Richfield Co. ............................ 2,030,577 132,495,149
Autodesk Inc. ..................................... 291,299 12,434,826
Automatic Data Processing Inc. .................... 1,909,342 153,105,362
Autozone Inc. ..................................... 944,858 31,121,260
Avery Dennison Corp. .............................. 814,403 36,699,035
Avon Products Inc. ................................ 1,645,612 72,818,331
B.F. Goodrich Co. ................................. 465,595 16,703,221
Baker Hughes Inc. ................................. 1,985,811 35,124,032
Ball Corp. ........................................ 192,840 8,822,430
Baltimore Gas & Electric Co. ...................... 931,604 28,763,274
Bank of New York Co., Inc. ........................ 4,653,158 187,289,609
Bank One Corp. .................................... 7,318,522 373,702,030
BankAmerica Corp .................................. 10,816,474 650,340,499
BankBoston Corp. .................................. 1,840,300 71,656,681
Bankers Trust New York Corp. ...................... 588,535 50,282,959
Barrick Gold Corp. ................................ 2,195,585 42,813,908
Battle Mountain Gold Co. .......................... 1,375,950 5,675,794
Bausch & Lomb Inc. ................................ 419,062 25,143,720
Baxter International Inc. ......................... 1,797,472 115,599,918
BB&T Corp. ........................................ 1,741,315 70,196,761
Bear Stearns & Cos., Inc. ......................... 703,345 26,287,519
Becton Dickinson & Co. ............................ 1,548,006 66,080,506
Bell Atlantic Corp. ............................... 9,621,291 509,928,433
Bellsouth Corp. ................................... 12,205,988 608,773,651
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-104
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ -----------------
<S> <C> <C>
Bemis Co., Inc. ................................... 322,994 $ 12,253,585
Bestfoods ......................................... 1,809,860 96,375,045
Bethlehem Steel Corp. ............................. 786,599 6,587,767
Biomet Inc. ....................................... 811,983 32,682,316
Black & Decker Corp. .............................. 587,409 32,931,617
BMC Software Inc. ................................. 1,357,300 60,484,681
Boeing Co. ........................................ 6,276,393 204,767,322
Boise Cascade Corp. ............................... 367,503 11,392,593
Boston Scientific Corp. ........................... 2,421,362 64,922,769
Briggs & Stratton Corp. ........................... 149,130 7,437,859
Bristol-Myers Squibb Co. .......................... 6,154,530 823,553,046
Brown Forman Corp. Class B ........................ 413,536 31,299,506
Browning Ferris Industries Inc. ................... 1,125,175 31,997,164
Brunswick Corp. ................................... 615,639 15,237,065
Burlington Northern Santa Fe Inc. ................. 3,009,875 101,583,281
Burlington Resources Inc. ......................... 1,116,665 39,990,565
C.R. Bard Inc. .................................... 343,547 17,005,577
Cabletron Systems Inc. ............................ 973,472 8,152,828
Campbell Soup Co. ................................. 2,764,712 152,059,160
Capital One Financial Corp. ....................... 408,900 47,023,500
Cardinal Health Inc. .............................. 1,253,547 95,112,879
Carnival Cruise Lines Inc. ........................ 3,731,300 179,102,400
Carolina Power & Light Co. ........................ 925,277 43,545,849
Case Corp. ........................................ 461,482 10,066,076
Caterpillar Inc. .................................. 2,257,460 103,843,160
CBS Corp. ......................................... 4,452,715 145,826,416
Cendant Corp ...................................... 5,373,158 102,425,824
Centex Corp. ...................................... 368,537 16,607,199
Central & South West Corp. ........................ 1,311,399 35,981,510
Ceridian Corp. .................................... 443,492 30,961,285
Champion International Corp. ...................... 614,971 24,906,326
Charles Schwab Corp. .............................. 2,432,694 136,686,994
Chase Manhattan Corp. ............................. 5,318,791 362,010,212
Chevron Corp. ..................................... 4,049,152 335,826,544
Chubb Corp. ....................................... 1,029,824 66,809,832
CIGNA Corp. ....................................... 1,283,222 99,209,101
Cincinnati Financial Corp. ........................ 983,826 36,032,627
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-105
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ -------------------
<S> <C> <C>
Cinergy Corp. ..................................... 963,578 $ 33,122,994
Circuit City Stores Inc. .......................... 632,066 31,563,796
Cisco Systems Inc. ................................ 9,844,067 913,652,468
Citigroup Inc ..................................... 14,178,525 701,836,987
Clear Channel Communications ...................... 1,555,526 84,776,167
Clorox Co. ........................................ 640,130 74,775,186
Coastal Corp. ..................................... 1,322,776 46,214,487
Coca Cola Co. ..................................... 15,335,906 1,025,588,714
Coca Cola Enterprises Inc. ........................ 2,486,450 88,890,587
Colgate Palmolive Co. ............................. 1,823,792 169,384,682
Columbia Gas System Inc. .......................... 514,951 29,738,420
Columbia/HCA Healthcare Corp. ..................... 4,064,492 100,596,177
Comcast Corp. Class A ............................. 157,000 9,017,688
Comcast Corp. Class A Special ..................... 2,127,238 124,842,280
Comerica Inc. ..................................... 958,493 65,357,241
Compaq Computer Corp. ............................. 10,518,834 441,133,601
Computer Associates International Inc. ............ 3,331,130 141,989,416
Computer Sciences Corp. ........................... 981,898 63,271,052
Compuware Corp. ................................... 1,154,400 90,187,500
ConAgra Inc. ...................................... 3,068,931 96,671,326
Conseco Inc. ...................................... 1,966,486 60,100,728
Consolidated Edison Inc ........................... 1,438,935 76,083,688
Consolidated Natural Gas Co. ...................... 610,428 32,963,112
Consolidated Stores Corp. ......................... 707,160 14,275,793
Cooper Industries Inc. ............................ 727,328 34,684,454
Cooper Tire & Rubber Co. .......................... 481,807 9,846,931
Corning Inc. ...................................... 1,433,657 64,514,565
Costco Cos., Inc. ................................. 1,348,807 97,367,005
Countrywide Credit Industries Inc. ................ 695,389 34,899,835
Crane Co. ......................................... 416,502 12,573,154
Crown Cork & Seal Co., Inc. ....................... 810,622 24,977,290
CSX Corp. ......................................... 1,411,949 58,595,883
Cummins Engine Co., Inc. .......................... 268,129 9,518,580
CVS Corp. ......................................... 2,492,064 137,063,520
Cyprus Amax Minerals Co. .......................... 624,923 6,249,230
Dana Corp. ........................................ 1,069,090 43,699,054
Danaher Corp. ..................................... 823,500 44,726,344
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-106
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ------------------
<S> <C> <C>
Darden Restaurants Inc. ........................... 860,733 $ 15,493,194
Data General Corp. ................................ 328,829 5,405,127
Dayton Hudson Corp. ............................... 2,758,342 149,640,053
Deere & Co. ....................................... 1,538,064 50,948,370
Dell Computer Corp. ............................... 7,846,220 574,245,226
Delta Air Lines Inc. .............................. 909,848 47,312,096
DeLuxe Corp. ...................................... 546,465 19,980,127
Dillards Inc. Class A ............................. 726,175 20,605,216
Dollar General Corp. .............................. 1,120,512 26,472,096
Dominion Resources Inc. ........................... 1,202,602 56,221,643
Dover Corp. ....................................... 1,379,089 50,509,135
Dow Chemical Co. .................................. 1,326,738 120,650,237
Dow Jones & Co., Inc. ............................. 571,497 27,503,293
DTE Energy Co. .................................... 910,449 39,035,501
Duke Power Co. .................................... 2,213,452 141,799,269
Dun & Bradstreet Corp ............................. 1,162,972 36,706,304
E.I. du Pont de Nemours & Co. ..................... 7,009,635 371,948,757
Eastern Enterprises ............................... 127,904 5,595,800
Eastman Chemical Co. .............................. 490,699 21,958,780
Eastman Kodak Co. ................................. 1,993,953 143,564,616
Eaton Corp. ....................................... 442,850 31,303,959
Ecolab Inc. ....................................... 810,500 29,329,969
Edison International .............................. 2,177,091 60,686,412
EG&G Inc. ......................................... 292,910 8,146,559
Electronic Data Systems Corp. ..................... 3,108,700 156,212,175
Eli Lilly & Co. ................................... 6,833,453 607,323,135
EMC Corp. ......................................... 3,125,936 265,704,560
Emerson Electric Co. .............................. 2,769,181 167,535,450
Engelhard Corp. ................................... 879,054 17,141,553
Enron Corp. ....................................... 2,027,669 115,703,862
Entergy Corp. ..................................... 1,551,562 48,292,367
Equifax Inc. ...................................... 1,014,986 34,699,834
Exxon Corp. ....................................... 15,122,174 1,105,808,974
FDX Corp .......................................... 920,074 81,886,586
Federal Home Loan Mortgage Corp. .................. 4,296,913 276,882,331
Federal National Mortgage Association ............. 6,478,494 479,408,556
Federated Department Stores Inc. .................. 1,275,430 55,560,919
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-107
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ----------------------------------------------------- ------------ ------------------
<S> <C> <C>
Fifth Third Bancorp ................................. 1,655,410 $ 118,051,426
First Data Corp. .................................... 2,784,988 88,249,307
First Union Corp. ................................... 6,139,796 373,376,344
Firstar Corp. Wisconsin ............................. 1,451,400 135,343,050
Firstenergy Corp. ................................... 1,464,505 47,687,944
Fleet Financial Group Inc. .......................... 3,510,912 156,893,880
Fleetwood Enterprises Inc. .......................... 214,017 7,437,091
Fluor Corp. ......................................... 480,450 20,449,153
FMC Corp. ........................................... 213,887 11,977,672
Ford Motor Co. ...................................... 7,485,675 439,315,552
Fort James Corp. .................................... 1,405,531 56,221,240
Fortune Brands Inc. ................................. 1,060,698 33,544,574
Foster Wheeler Corp. ................................ 251,624 3,318,292
Fox Entertainment Group Inc.Class A ................. 6,800 171,275
FPL Group Inc. ...................................... 1,103,634 68,011,445
Franklin Resources Inc. ............................. 1,546,604 49,491,328
Freeport-McMoran Copper & Gold Inc. Class B ......... 1,106,739 11,551,588
Frontier Corp. ...................................... 1,083,019 36,822,646
Fruit of the Loom Inc. Class A ...................... 443,296 6,123,026
Gannett Co., Inc. ................................... 1,760,924 113,579,598
Gap Inc. ............................................ 3,638,333 204,656,231
Gateway 2000 Inc. ................................... 965,271 49,409,809
General Dynamics Corp. .............................. 780,922 45,781,552
General Electric Co. ................................ 20,297,190 2,071,581,954
General Instrument Corp. ............................ 935,191 31,738,045
General Mills Inc. .................................. 993,943 77,279,068
General Motors Corp. ................................ 4,097,632 293,236,790
Genuine Parts Co. ................................... 1,099,668 36,770,149
Georgia Pacific Corp. ............................... 604,951 35,427,443
Gillette Co. ........................................ 6,942,254 335,397,646
Golden West Financial Corp. ......................... 345,486 31,676,748
Goodyear Tire & Rubber Co. .......................... 985,208 49,691,428
GPU Inc. ............................................ 789,556 34,888,506
Great Atlantic & Pacific Tea Co., Inc. .............. 240,233 7,116,903
Great Lakes Chemical Corp. .......................... 382,272 15,290,880
GTE Corp. ........................................... 5,989,423 389,312,495
Guidant Corp. ....................................... 947,903 104,506,306
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-108
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ------------------
<S> <C> <C>
H&R Block Inc. .................................... 633,323 $ 28,499,535
H.J. Heinz Co. .................................... 2,256,450 127,771,481
Halliburton Co. ................................... 2,751,901 81,525,067
Harcourt General Inc. ............................. 446,939 23,771,568
Harnischfeger Industries Inc. ..................... 295,598 3,011,405
Harrahs Entertainment Inc. ........................ 682,831 10,711,911
Harris Corp. ...................................... 498,416 18,254,486
Hartford Financial Services Group ................. 1,442,776 79,172,333
Hasbro Inc. ....................................... 823,802 29,759,847
HBO & Co. ......................................... 2,758,492 79,134,239
Hcr Manor Care Inc. ............................... 679,084 19,948,093
Healthsouth Rehabilitation ........................ 2,952,619 45,581,056
Helmerich & Payne Inc. ............................ 309,459 5,995,768
Hercules Inc. ..................................... 619,547 16,960,099
Hershey Foods Corp. ............................... 879,918 54,719,901
Hewlett Packard Co. ............................... 6,464,389 441,598,574
Hilton Hotels Corp. ............................... 1,642,060 31,404,398
Home Depot Inc. ................................... 9,735,340 595,681,116
Homestake Mining Co. .............................. 1,119,475 10,285,177
Honeywell Inc. .................................... 819,448 61,714,677
Household International Inc. ...................... 3,146,231 124,669,403
Houston Industries Inc. ........................... 1,843,699 59,228,830
Humana Inc. ....................................... 1,041,357 18,549,172
Huntington Bancshares Inc. ........................ 1,308,680 39,342,193
IBM Corp. ......................................... 5,802,781 1,072,063,790
Ikon Office Solutions Inc. ........................ 742,427 6,357,031
Illinois Tool Works Inc. .......................... 1,562,961 90,651,738
IMS Health Inc .................................... 1,008,946 76,112,364
INCO Ltd. ......................................... 934,696 9,872,727
Ingersoll Rand Co. ................................ 1,021,231 47,934,030
Intel Corp. ....................................... 10,338,161 1,225,718,214
International Flavors & Fragrances ................ 658,512 29,097,999
International Paper Co. ........................... 1,900,332 85,158,628
Interpublic Group of Cos., Inc. ................... 900,334 71,801,636
ITT Industries Inc. ............................... 733,542 29,158,295
J.C. Penney Co., Inc. ............................. 1,603,148 75,147,562
J.P. Morgan & Co., Inc. ........................... 1,071,360 112,559,760
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-109
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ------------------
<S> <C> <C>
Jefferson-Pilot Corp. ............................. 663,101 $ 49,732,575
Johnson & Johnson ................................. 8,314,588 697,386,068
Johnson Controls Inc. ............................. 592,915 34,981,985
Jostens Inc. ...................................... 227,624 5,960,904
K Mart Corp. ...................................... 2,987,327 45,743,445
Kaufman & Broad Home Corp. ........................ 244,542 7,030,583
Kellogg Co. ....................................... 2,461,093 83,984,799
Kerr McGee Corp. .................................. 297,063 11,362,660
Keycorp ........................................... 2,684,987 85,919,584
Kimberly-Clark Corp. .............................. 3,442,407 187,611,181
King World Productions Inc. ....................... 459,921 13,538,924
KLA Instruments Corp. ............................. 541,694 23,495,977
Knight-Ridder Inc. ................................ 489,313 25,016,127
Kohls Corp. ....................................... 981,700 60,313,194
Kroger Co. ........................................ 1,618,253 97,904,306
Laidlaw Inc. ...................................... 1,831,557 18,430,042
Lehman Brothers Holdings Inc. ..................... 682,040 30,052,388
Limited Inc. ...................................... 1,436,767 41,845,839
Lincoln National Corp. ............................ 622,636 50,939,408
Liz Claiborne Inc. ................................ 425,675 13,435,367
Lockheed Martin Corp. ............................. 1,215,821 103,040,830
Loews Corp. ....................................... 718,722 70,614,436
Longs Drug Stores Corp. ........................... 236,919 8,884,463
Louisiana-Pacific Corp. ........................... 704,794 12,906,540
Lowes Cos., Inc. .................................. 2,161,718 110,652,940
LSI Logic Corp. ................................... 889,596 14,344,736
Lucent Technologies Inc. .......................... 8,140,104 895,411,440
Mallinckrodt Inc. ................................. 457,711 14,103,220
Marriott International Inc. Class A ............... 1,516,271 43,971,859
Marsh & McLennan Cos., Inc. ....................... 1,558,781 91,091,265
Masco Corp. ....................................... 2,242,164 64,462,215
Mattel Inc. ....................................... 1,915,500 43,697,344
May Department Stores Co. ......................... 1,433,075 86,521,903
Maytag Corp. ...................................... 558,179 34,746,643
MBIA Inc. ......................................... 674,810 44,242,231
MBNA Corp. ........................................ 4,703,618 117,296,474
McDermott International Inc. ...................... 392,424 9,687,968
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-110
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ------------------
<S> <C> <C>
McDonald's Corp. .................................. 4,284,588 $ 328,306,555
McGraw-Hill Inc. .................................. 612,064 62,354,020
MCI Worldcom Inc .................................. 11,395,200 817,605,600
Mead Corp. ........................................ 643,266 18,855,735
MediaOne Group Inc ................................ 3,748,216 176,166,152
Medtronic Inc. .................................... 3,020,359 224,261,656
Mellon Bank Corp. ................................. 1,602,425 110,166,719
Mercantile BanCorporation Inc. .................... 921,183 42,489,566
Merck & Co., Inc. ................................. 7,388,527 1,091,193,081
Meredith Corp. .................................... 320,103 12,123,901
Merrill Lynch & Co., Inc. ......................... 2,141,174 142,923,365
Meyer (Fred) Inc .................................. 959,400 57,803,850
MGIC Investment Corp. ............................. 704,964 28,066,379
Micron Technology Inc. ............................ 1,325,362 67,013,616
Microsoft Corp. ................................... 15,468,632 2,145,305,900
Milacron Inc. ..................................... 239,938 4,618,807
Millipore Corp. ................................... 277,151 7,881,482
Minnesota Mining & Manufacturing Co. .............. 2,496,706 177,578,214
Mirage Resorts Inc. ............................... 1,129,177 16,867,081
Mobil Corp. ....................................... 4,881,948 425,339,719
Monsanto Co. ...................................... 3,820,547 181,475,982
Moore Corp., Ltd. ................................. 511,589 5,627,479
Morgan Stanley Dean Witter Discover & Co. ......... 3,614,300 256,615,300
Morton International Inc. ......................... 795,226 19,483,037
Motorola Inc. ..................................... 3,694,939 225,622,213
NACCO Industries Inc. ............................. 49,952 4,595,584
Nalco Chemical Co. ................................ 407,947 12,646,357
National City Corp. ............................... 2,030,633 147,220,892
National Semiconductor Corp. ...................... 1,013,501 13,682,264
National Service Industries Inc. .................. 250,918 9,534,884
Navistar International Corp. ...................... 421,026 11,999,241
New Century Energies Inc .......................... 684,200 33,354,750
New York Times Co. Class A ........................ 1,173,144 40,693,433
Newell Co. ........................................ 1,092,972 45,085,095
Newmont Mining Corp. .............................. 1,023,597 18,488,721
Nextel Communications Inc.Class A ................. 1,787,896 42,239,043
Niagara Mohawk Power Corp. ........................ 1,213,131 19,561,737
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-111
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ------------------
<S> <C> <C>
Nicor Inc. ........................................ 293,817 $ 12,413,768
Nike Inc. Class B ................................. 1,877,976 76,175,401
Nordstrom Inc. .................................... 904,622 31,379,076
Norfolk Southern Corp. ............................ 2,305,473 73,054,676
Northern States Power Co. ......................... 938,041 26,030,638
Northern Telecom Ltd. ............................. 3,983,203 199,658,050
Northern Trust Corp. .............................. 685,034 59,812,031
Northrop Grumman Corp. ............................ 433,891 31,728,279
Novell Inc. ....................................... 2,138,408 38,758,645
Nucor Corp. ....................................... 535,858 23,175,859
Occidental Petroleum Corp. ........................ 2,202,940 37,174,613
Omnicom Group Inc. ................................ 1,127,424 65,390,592
Oneok Inc. ........................................ 193,270 6,981,879
Oracle Corp. ...................................... 6,121,420 263,986,237
Oryx Energy Co. ................................... 716,209 9,624,058
Owens Corning Fiberglas Corp. ..................... 341,679 12,108,250
Owens Illinois Inc. ............................... 922,588 28,254,258
PACCAR Inc. ....................................... 510,260 20,984,443
PacifiCorp ........................................ 1,863,210 39,243,861
Pall Corp. ........................................ 760,935 19,261,167
Parametric Technology Corp. ....................... 1,688,020 27,641,328
Parker Hannifin Corp. ............................. 683,970 22,400,018
Paychex Inc. ...................................... 967,700 49,776,069
PECO Energy Co. ................................... 1,351,532 56,257,519
Peoples Energy Corp. .............................. 218,040 8,694,345
PeopleSoft Inc. ................................... 1,398,600 26,485,988
Pep Boys -- Manny, Moe & Jack ..................... 401,684 6,301,418
PepsiCo Inc. ...................................... 9,140,864 374,204,120
Perkin-Elmer Corp. ................................ 313,116 30,548,380
Pfizer Inc. ....................................... 8,055,163 1,010,419,509
PG&E Corp. ........................................ 2,373,252 74,757,438
Pharmacia & Upjohn Inc. ........................... 3,141,670 177,897,064
Phelps Dodge Corp. ................................ 382,718 19,470,778
Philip Morris Cos., Inc. .......................... 15,141,864 810,089,724
Phillips Petroleum Co. ............................ 1,598,781 68,148,040
Pioneer HI-Bred International Inc. ................ 1,499,880 40,496,760
Pitney Bowes Inc. ................................. 1,697,983 112,173,002
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-112
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ------------------
<S> <C> <C>
Placer Dome Inc. .................................. 1,533,884 $ 17,639,666
PNC Bank Corp. .................................... 1,866,143 101,004,990
Polaroid Corp. .................................... 266,860 4,986,946
Potlatch Corp. .................................... 177,891 6,559,731
PP&L Resources Inc. ............................... 988,096 27,543,176
PPG Industries Inc. ............................... 1,102,854 64,241,245
Praxair Inc. ...................................... 985,571 34,741,378
Procter & Gamble Co. .............................. 8,239,694 752,387,058
Progressive Corp. ................................. 446,010 75,542,944
Provident Cos., Inc. .............................. 849,500 35,254,250
Providian Financial Corp. ......................... 881,527 66,114,487
Public Service Enterprise Group Inc. .............. 1,403,719 56,148,760
Pulte Corp. ....................................... 257,974 7,174,902
Quaker Oats Co. ................................... 830,635 49,422,782
R.R. Donnelley & Sons Co. ......................... 859,951 37,676,603
Ralston Purina Co. ................................ 1,939,099 62,778,330
Raychem Corp. ..................................... 518,182 16,743,756
Raytheon Company Class B .......................... 2,077,853 110,645,672
Reebok International Ltd. ......................... 346,876 5,159,781
Regions Financial Corp. ........................... 1,299,300 52,378,031
Republic New York Corp. ........................... 667,945 30,433,244
Reynolds Metals Co. ............................... 440,919 23,230,920
Rite Aid Corp. .................................... 1,647,880 81,673,052
RJR Nabisco Holdings Corp. ........................ 2,050,900 60,886,094
Rockwell International Corp. ...................... 1,186,298 57,609,597
Rohm & Haas Co. ................................... 1,122,796 33,824,230
Rowan Cos., Inc. .................................. 526,368 5,263,680
Royal Dutch Petroleum Co. ......................... 13,301,776 636,822,526
Rubbermaid Inc. ................................... 1,045,625 32,871,836
Russell Corp. ..................................... 222,353 4,516,545
Ryder Systems Inc. ................................ 477,332 12,410,632
SAFECO Corp. ...................................... 861,920 37,008,690
Safeway Inc. ...................................... 3,044,800 185,542,500
Sara Lee Corp. .................................... 5,676,430 160,004,371
SBC Communications Inc. ........................... 12,129,227 650,429,798
Schering-Plough Corp. ............................. 9,116,290 503,675,022
Schlumberger Ltd. ................................. 3,425,416 157,997,313
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-113
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ------------------
<S> <C> <C>
Scientific Atlanta Inc. ........................... 478,681 $ 10,919,910
Seagate Technology ................................ 1,508,876 45,643,499
Seagram Co., Ltd. ................................. 2,382,104 90,519,952
Sealed Air Corp ................................... 516,257 26,361,373
Sears Roebuck & Co. ............................... 2,415,001 102,637,542
Sempra Energy ..................................... 1,453,307 36,877,665
Service Corp. International ....................... 1,611,723 61,346,207
Shared Medical Systems Corp. ...................... 172,018 8,579,398
Sherwin-Williams Co. .............................. 1,215,081 35,693,004
Sigma Aldrich Corp. ............................... 604,589 17,759,802
Silicon Graphics Inc. ............................. 1,153,795 14,855,111
SLM Holding Corp. ................................. 1,102,200 52,905,600
Snap On Inc. ...................................... 359,012 12,498,105
Solectron Corp. ................................... 736,100 68,411,294
Sonat Inc. ........................................ 692,707 18,746,383
Southern Co. ...................................... 4,251,099 123,547,565
Southwest Airlines Co. ............................ 2,114,154 47,436,353
Springs Industries Inc. ........................... 98,751 4,091,995
Sprint Corp. ...................................... 2,672,902 224,857,881
Sprint Corp. Series 1 ............................. 2,626,651 60,741,304
St. Jude Medical Inc. ............................. 529,944 14,672,825
St. Paul Cos. Inc. ................................ 1,463,476 50,855,791
Stanley Works ..................................... 528,072 14,653,998
Staples Inc. ...................................... 1,808,950 79,028,503
Starwood Lodging Trust REIT ....................... 1 23
State Street Corp. (a) ............................ 1,026,543 71,408,897
Summit Bancorp .................................... 1,074,015 46,921,030
Sun Microsystems Inc. ............................. 2,385,812 204,285,152
Sunamerica Inc. ................................... 1,305,565 105,913,961
Sunoco Inc. ....................................... 565,973 20,410,401
Suntrust Banks Inc. ............................... 1,267,391 96,955,411
Supervalu Inc. .................................... 734,778 20,573,784
Synovus Financial Corp. ........................... 1,574,093 38,368,517
Sysco Corp. ....................................... 2,106,989 57,810,511
Tandy Corp. ....................................... 615,679 25,358,279
Tektronix Inc. .................................... 305,675 9,189,355
Tele-Communications Inc. Series A ................. 3,254,040 179,989,087
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-114
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ----------- ------------------
<S> <C> <C>
Tellabs Inc. ...................................... 1,216,786 $ 83,425,890
Temple Inland Inc. ................................ 349,611 20,736,302
Tenet Healthcare Corp. ............................ 1,999,588 52,489,185
Tenneco Inc. ...................................... 1,071,429 36,495,550
Texaco Inc. ....................................... 3,336,822 176,434,463
Texas Instruments Inc. ............................ 2,423,368 207,349,424
Texas Utilities Co. ............................... 1,746,902 81,558,487
Textron Inc. ...................................... 971,414 73,766,751
Thermo Electron Corp. ............................. 1,265,838 21,440,131
Thomas & Betts Corp. .............................. 348,192 15,081,066
Time Warner Inc. .................................. 7,572,688 469,979,949
Times Mirror Co. Series A ......................... 524,815 29,389,640
Timken Co. Series A ............................... 381,863 7,207,664
TJX Cos., Inc. .................................... 1,947,406 56,474,774
Torchmark Corp. ................................... 853,261 30,130,779
Toys R Us Inc. .................................... 1,720,902 29,040,221
TransAmerica Corp. ................................ 386,081 44,592,356
Tribune Co. ....................................... 746,338 49,258,308
Tricon Global Restaurants Inc. .................... 944,812 47,358,702
TRW Inc. .......................................... 762,025 42,816,280
Tupperware Corp. .................................. 509,788 8,379,640
Tyco International Ltd. ........................... 4,040,664 304,817,590
Unicom Inc. ....................................... 1,367,665 52,740,582
Unilever NV ....................................... 3,939,656 326,745,219
Union Camp Corp. .................................. 430,841 29,081,768
Union Carbide Corp. ............................... 835,899 35,525,708
Union Pacific Corp. ............................... 1,450,231 65,351,034
Union Pacific Resources Group Inc. ................ 1,552,785 14,072,114
Union Planters Corp. .............................. 771,200 34,945,000
Unisys Corp. ...................................... 1,584,668 54,572,004
United Healthcare Corp. ........................... 1,192,792 51,364,605
United Technologies Corp. ......................... 1,451,034 157,799,947
Unocal Corp. ...................................... 1,514,496 44,204,352
UNUM Corp. ........................................ 895,779 52,291,099
US Bancorp ........................................ 4,676,259 166,007,177
US West Inc ....................................... 3,199,234 206,750,497
USAir Group Inc. .................................. 574,447 29,871,244
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-115
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- -------------------------------------------------------------------------- ---------------- ------------------
<S> <C> <C>
UST Inc. ................................................................. 1,146,643 $ 39,989,175
USX Marathon Group ....................................................... 1,936,675 58,342,334
USX United States Steel .................................................. 553,007 12,719,161
VF Corp. ................................................................. 775,357 36,344,859
Viacom Inc. Class B ...................................................... 2,191,319 162,157,606
W. R. Grace & Company .................................................... 433,504 6,800,594
W.W. Grainger Inc. ....................................................... 605,681 25,211,472
Wachovia Corp. ........................................................... 1,280,850 111,994,322
Wal Mart Stores Inc. ..................................................... 13,946,256 1,135,748,223
Walgreen Co. ............................................................. 3,149,610 184,449,036
Walt Disney Co. .......................................................... 12,752,906 382,587,180
Warner Lambert Co. ....................................................... 5,082,707 382,156,033
Washington Mutual Inc. ................................................... 3,742,590 142,920,156
Waste Management Inc ..................................................... 3,603,765 168,025,543
Wells Fargo & Company .................................................... 10,102,361 403,463,042
Wendy's International Inc. ............................................... 916,426 19,989,542
Westvaco Corp. ........................................................... 608,795 16,323,316
Weyerhaeuser Co. ......................................................... 1,228,026 62,399,071
Whirlpool Corp. .......................................................... 468,260 25,929,898
Willamette Industries Inc. ............................................... 679,345 22,758,058
William Wrigley Jr. Co. .................................................. 693,418 62,104,250
Williams Cos., Inc. ...................................................... 2,589,479 80,759,376
Winn Dixie Stores Inc. ................................................... 903,258 40,533,703
Worthington Industries ................................................... 590,224 7,377,800
Xerox Corp. .............................................................. 2,030,786 239,632,746
---------------
TOTAL COMMON STOCK
(Cost $ 39,261,429,073).................................................. 62,242,969,899
---------------
STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS--0.2% UNITS
-----------
SHORT TERM INVESTMENT FUND (B) ........................................... 154,823,448 154,823,448
- --------------------------------------------------------------------------- ----------- ---------------
U.S. GOVERNMENT OBLIGATIONS--0.1% PRINCIPAL
------------
UNITED STATES TREASURY BILLS 4.41% 18-MAR-99 (C) (Cost $42,104,774) ...... $ 42,500,000 42,104,774
- --------------------------------------------------------------------------- ------------ ---------------
TOTAL INVESTMENTS--100%
(Cost $39,458,357,295)................................................... $62,439,898,121
=========================================================================== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-116
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
- --------------------------------------------------------------------------------
REIT -- Real Estate Investment Trust
(a) Parent company of State Street Bank and Trust Company.
(b) Collective investment fund advised by State Street Global Advisors.
(c) At December 31, 1998, U.S. Treasury Bills with principal of $42,500,000
were pledged to cover margin requirements for open futures contracts.
The following long futures contracts were open at December 31, 1998:
<TABLE>
<CAPTION>
FUTURES NUMBER OF NOTIONAL MATURITY UNREALIZED
CONTRACTS CONTRACTS VALUE DATE GAIN (LOSS)
- -------------------------- ----------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
S&P 500 Index ......... 1,582 $492,595,250 March 1999 $20,781,000
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-117
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") S&P 500 Flagship
Fund and State Street Bank and Trust Company S&P 500 Index Fund with Futures
(collectively, the "Fund") were formed by State Street Bank under a Declaration
of Trust. The investment objective of the Fund is to replicate, as closely as
possible, the S&P 500 Index, which is accomplished by investing in
substantially all of the equity securities which comprise the S&P 500 Index.
Additionally, each of the Funds may hold up to 25% of their value in S&P 500
stock index futures contracts and invest in certain other collective investment
funds maintained by State Street Bank, consistent with its investment
objectives. State Street Bank is Trustee and custodian of the Fund. State
Street Global Advisors, a division of State Street Bank, is the Fund's
investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 sales are reported for that day, the last published
sale price, or at fair value as determined in good faith by the Trustee.
Short-term investments, if any, are stated at amortized cost, which
approximates market value. Investments in regulated investment companies or
other State Street Bank collective investment funds are valued at the net asset
value per share/unit on the valuation date. Futures contracts are valued at the
last settlement price at the end of each day on the board of trade or exchange
upon which they are traded.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. The cost of
securities contributed to, and proceeds related to securities delivered by, the
Fund in connection with the issuance and redemption of units of participation
are based on the valuations of those securities determined as described above.
The cost of securities delivered and the net gain or loss on securities sold
are determined using the average cost method. Dividend income is recorded on
the ex-dividend date. Interest income earned on securities is recorded on the
accrual basis. Interest income includes accretion of discounts and amortization
of premium.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made based upon
the closing market value of the securities bought or sold as of the valuation
date,
SAI-118
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
adjusted for the related market effect and transaction costs which are
allocated to the applicable participant. Transaction costs include brokerage
commissions, taxes and other direct costs related to security transactions.
Market effect is the difference between the execution price of the investment
on the trade date and the investment's closing market value on the valuation
date.
E. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year. The Trustee is paid a custody fee at an
annual rate of $50,000, plus a charge for each security and futures transaction
executed.
F. DISTRIBUTIONS TO PARTICIPANTS
Net investment income (excluding securities lending fee income, if any)
and net realized gains are retained by the Fund. Income generated by securities
lending, if any, is distributed monthly to participants of the S&P 500 Flagship
Fund.
G. FUTURES CONTRACTS
The Fund may use futures contracts to manage exposure to the equity
market. Buying futures tends to increase a fund's exposure to the underlying
instrument. Selling futures tends to decrease a fund's exposure to the
underlying instrument, or hedge other 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 periodically, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Fund. A gain or loss is realized when the contract is closed or
expires.
H. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION
The participants in the S&P 500 Flagship Fund (the "Lending Fund") have
authorized the Lending Fund to participate in the Global Securities Lending
Program maintained by State Street Bank. The investment objective,
SAI-119
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
techniques and results of operations of the Lending Fund are identical to those
of the S&P 500 Index Fund with Futures (the "Non-Lending Fund"), except that
the Lending Fund engages in securities lending activities. Accordingly, the
financial statements of the Lending Fund and the Non-Lending Fund have been
prepared on a combined basis, with separate disclosure of the participant
transactions and per unit data of the Lending Fund and the Non-Lending Fund.
The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata
interest in the combined assets and liabilities (including each investment
security position but excluding assets and liabilities related to securities
lending activities) proportionate to the net asset value of the outstanding
combined units of the Fund. All interfund transactions have been eliminated in
the combined financial statements.
Under the Global Securities Lending Program, securities held by the
Lending Fund are loaned by State Street Bank, as agent, to certain brokers and
other financial institutions (the "Borrowers"). The Borrowers provide cash,
securities, or letters of credit as collateral against loans in an amount at
least equal to 100% of the market value of the loaned securities. The Borrowers
are required to maintain the collateral at not less than 100% of the market
value of the loaned securities. At December 31, 1998, the market value of
securities loaned by the Lending Fund was $1,504,520,361 against which was held
cash collateral of $1,541,128,370. Cash collateral provided by the Borrowers is
invested in State Street Bank and Trust Company Quality A Short-Term Investment
Fund. A portion of the income generated upon investment of the collateral is
remitted to the Borrowers, and the remainder is allocated between the Lending
Fund and State Street Bank in its capacity as lending agent. Negotiated
lenders' fees are received for those loans collateralized by securities or
letters of credit, if any. Income earned from lending activities is distributed
to Lending Fund participants monthly.
State Street Bank, as lending agent, indemnifies the Lending Fund for
replacement of any loaned securities (or, in certain circumstances, return of
equivalent cash value) due to Borrower default on a security loan. Lending Fund
participants, however, bear the risk of loss with respect to the investment of
collateral.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, if any, during the year ended
December 31, 1998 were $15,358,941,394 and $9,341,039,960, respectively,
resulting in a net realized gain (loss) of $2,958,902,185. This gain (loss) is
prior to the recognition of the market effect and transaction costs associated
with contributions and redemptions.
SAI-120
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
S&P 500 FLAGSHIP FUND
S&P 500 INDEX FUND WITH FUTURES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1998 1997
--------------------------------------- ---------------------------------------
UNITS AMOUNT UNITS AMOUNT
---------------- -------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
S&P 500 FLAGSHIP FUND:
Units issued .................... 92,017,865 $ 16,413,987,764 148,471,895 $ 22,051,541,332
Units redeemed .................. (78,526,013) (14,165,404,386) (93,427,456) (13,465,036,826)
----------- ----------------- ----------- -----------------
Total ........................ 13,491,852 $ 2,248,583,378 55,044,439 $ 8,586,504,506
----------- ----------------- ----------- -----------------
S&P 500 INDEX FUND WITH FUTURES:
Units issued .................... 25,180,459 $ 4,576,511,370 25,998,880 $ 3,740,090,979
Units redeemed .................. (10,189,163) (1,776,525,390) (6,471,396) (925,409,661)
----------- ----------------- ----------- -----------------
Total ........................ 14,991,296 $ 2,799,985,980 19,527,484 $ 2,814,681,318
----------- ----------------- ----------- -----------------
Net increase (decrease) ......... 28,483,148 $ 5,048,569,358 74,571,923 $ 11,401,185,824
=========== ================= =========== =================
</TABLE>
S&P 500 FLAGSHIP FUND
Units in excess of 10% of the Lending Fund units outstanding at December
31, 1998 held by one of the Lending Fund's 184 unitholders aggregated 31% of
the Lending Fund's total units outstanding.
During the year ended December 31, 1998, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Lending Fund units were $1,991,683.
S&P 500 INDEX FUND WITH FUTURES
Units in excess of 10% of the Non-Lending Fund units outstanding at
December 31, 1998 held by two of the Non-Lending Fund's 35 unitholders
aggregated 51% of the Non-Lending Fund's total units outstanding.
During the year ended December 31, 1998, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Non-Lending Fund units were $(136,688).
Participants in each of the Lending Fund or the Non-Lending Fund may
exchange their units for units of the other fund on any valuation date.
SAI-121
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
Russell 2000 Fund
and State Street Bank and Trust Company
Russell 2000 Non-Lending Fund
In our opinion, the accompanying combined statement of assets and liabilities,
including the combined schedule of investments, and the related combined
statements of operations and of changes in net assets and the selected per unit
data present fairly, in all material respects, the financial position of State
Street Bank and Trust Company Russell 2000 Fund and State Street Bank and Trust
Company Russell 2000 Non-Lending Fund at December 31, 1998, and 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
Trustee; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by the Trustee, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 25, 1999
SAI-122
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $1,425,583,271) ........... $ 1,404,360,870
Cash ................................................................ 329,752
Investment in State Street Bank and Trust Company
Quality A Short-Term Investment Fund, at value ..................... 245,739,640
Receivable for investments sold ..................................... 4,760,125
Variation margin receivable ......................................... 872,114
Dividends receivable ................................................ 1,644,733
Interest and other receivables ...................................... 235,885
Tax reclaim receivable .............................................. 1,158
- --------------------------------------------------------------------- ---------------
Total assets ..................................................... 1,657,944,277
- --------------------------------------------------------------------- ---------------
LIABILITIES
Collateral on securities loaned ..................................... 245,739,640
Payable for investments purchased ................................... 27,666,422
Accrued expenses .................................................... 65,195
- --------------------------------------------------------------------- ---------------
Total liabilities ................................................ 273,471,257
- --------------------------------------------------------------------- ---------------
NET ASSETS .......................................................... $ 1,384,473,020
===================================================================== ===============
Russell 2000 Fund
(54,442,876 units outstanding, at $23.07 per unit net asset value) . $ 1,255,837,593
Russell 2000 Non-Lending Fund
(5,576,583 units outstanding, at $23.07 per unit net asset value) .. 128,635,427
- --------------------------------------------------------------------- ---------------
$ 1,384,473,020
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-123
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Statement of Operations
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of taxes withheld of $594)................................................ $ 18,543,938
Interest ................................................................................ 2,398,943
Securities lending fee income (net of related expenses) allocated to Russell 2000 Fund 888,420
- ------------------------------------------------------------------------------------------- --------------
(Note 3)
- -------------------------------------------------------------------------------------------
Total investment income ............................................................... 21,831,301
- ------------------------------------------------------------------------------------------- --------------
EXPENSES
Audit ................................................................................... 19,130
Custody ................................................................................. 461,275
Administration .......................................................................... 50,000
- ------------------------------------------------------------------------------------------- --------------
Total expenses ........................................................................ 530,405
- ------------------------------------------------------------------------------------------- --------------
Net investment income ................................................................ 21,300,896
- ------------------------------------------------------------------------------------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS
Net realized gain (loss):
Investments ............................................................................. 41,171,107
Futures contracts ....................................................................... (2,211,560)
- ------------------------------------------------------------------------------------------- --------------
38,959,547
- ------------------------------------------------------------------------------------------- --------------
Net change in unrealized appreciation (depreciation):
Investments ............................................................................. (131,263,026)
Futures contracts ....................................................................... 1,578,596
- ------------------------------------------------------------------------------------------- --------------
(129,684,430)
- ------------------------------------------------------------------------------------------- --------------
Net realized and unrealized gain (loss) on investments and futures contracts ............ (90,724,883)
- ------------------------------------------------------------------------------------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ (69,423,987)
=========================================================================================== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-124
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
----------------- ------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ............................................................ $ 21,300,896 $ 13,135,989
Net realized gain (loss) on investments and futures contracts .................... 38,959,547 72,709,479
Net change in unrealized appreciation (depreciation) on investments and futures
contracts ....................................................................... (129,684,430) 73,524,328
- ----------------------------------------------------------------------------------- -------------- --------------
Net increase (decrease) in net assets resulting from operations .................. (69,423,987) 159,369,796
- ----------------------------------------------------------------------------------- -------------- --------------
Distributions of security lending fee income to Russell 2000 Fund participants
(Note 3) ........................................................................ (888,420) (516,852)
- ----------------------------------------------------------------------------------- -------------- --------------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions .... 161,065,128 148,997,093
- ----------------------------------------------------------------------------------- -------------- --------------
Net increase (decrease) in net assets ............................................ 90,752,721 307,850,037
NET ASSETS
Beginning of year ............................................................... 1,293,720,299 985,870,262
- ----------------------------------------------------------------------------------- -------------- --------------
End of year ..................................................................... $1,384,473,020 $1,293,720,299
=================================================================================== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-125
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income (a) .............................. $ 0.38 $ 0.36 $ 0.32 $ 0.03 $ 0.21
Distribution of securities lending fee income .......... (0.02) (0.02) (0.01) (0.01) (0.01)
Net realized and unrealized gain (loss) ................ (1.06) 4.19 2.45 3.61 (0.46)
- -------------------------------------------------------- ---------- ---------- -------- -------- --------
Net increase (decrease) ................................ (0.70) 4.53 2.76 3.63 (0.26)
NET ASSET VALUE
Beginning of year ...................................... 23.77 19.24 16.48 12.85 13.11
- -------------------------------------------------------- ---------- ---------- -------- -------- --------
End of year ............................................ $ 23.07 $ 23.77 $ 19.24 $ 16.48 $ 12.85
- -------------------------------------------------------- ---------- ---------- -------- -------- --------
Total return(%) (b) .................................... (2.88) 23.66 16.81 28.33 (1.98)
======================================================== ========== ========== ======== ======== ========
Ratio of expenses to average net assets (%)(c) ......... 0.04 0.06 0.06 0.10 0.07
- -------------------------------------------------------- ---------- ---------- -------- -------- --------
Ratio of net investment income to average net assets
(%)(c) ................................................ 1.61 1.63 1.80 1.80 1.61
- -------------------------------------------------------- ---------- ---------- -------- -------- --------
Portfolio turnover(%) .................................. 57 105 131 103 48
- -------------------------------------------------------- ---------- ---------- -------- -------- --------
Net assets, end of year (000s) ......................... $1,255,838 $1,174,146 $951,405 $536,849 $372,107
======================================================== ========== ========== ======== ======== ========
</TABLE>
(a) Net investment income has been calculated based on an average of units
outstanding.
(b) Total return calculation is based on the value of a single unit of
participation outstanding throughout the year. It represents the percentage
change in the net asset value per unit between the beginning and end of the
year and assumes reinvestment of distributions. The calculation includes
only those expenses charged directly to the Russell 2000 Fund. This result
may be reduced by any administrative or other fees which are incurred in
the management or maintenance of individual participant accounts.
(c) 1996 ratios reflect net investment income and expenses attributable to the
Russell 2000 Fund from its ownership of other collective investment funds.
The accompanying notes are an integral part of these financial statements.
SAI-126
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 NON-LENDING FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
1998 1997 1996(A)
------------- ----------- ----------
<S> <C> <C> <C>
Net investment income (b) ......................................... $ 0.36 $ 0.34 0.09
Net realized and unrealized gain (loss) ........................... (1.06) 4.19 0.84
- -------------------------------------------------------------------- --------- -------- ------
Net increase (decrease) ........................................... (0.70) 4.53 0.93
NET ASSET VALUE
Beginning of period ............................................... 23.77 19.24 18.31
- -------------------------------------------------------------------- --------- -------- ------
End of period ..................................................... $ 23.07 $ 23.77 $ 19.24
==================================================================== ========= ======== =======
Total return (%) (c) .............................................. (2.94) 23.54 5.08
==================================================================== ========= ======== =======
Ratio of expenses to average net assets (%) ....................... 0.04 0.06 0.06
- -------------------------------------------------------------------- --------- -------- -------
Ratio of net investment income to average net assets (%) .......... 1.55 1.56 1.80
- -------------------------------------------------------------------- --------- -------- -------
Portfolio turnover (%) ............................................ 57 105 131
- -------------------------------------------------------------------- --------- -------- -------
Net assets, end of period (000s) .................................. $ 128,635 $119,574 $34,465
==================================================================== ========= ======== =======
</TABLE>
(a) The Russell 2000 Non-Lending Fund commenced operations on September
30, 1996.
(b) Net investment income has been calculated based on an average of
units outstanding.
(c) Total return calculation is based on the value of a single unit of
participation outstanding throughout the period. It represents the
percentage change in the net asset value per unit between the
beginning and end of the period and assumes reinvestment of
distributions. The calculation includes only those expenses charged
directly to the Russell 2000 Non-Lending Fund. The result may be
reduced by any administrative or other fees which are incurred in
the management or maintenance of individual participant accounts.
The accompanying notes are an integral part of these financial statements.
SAI-127
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
-------- ---------------
<S> <C> <C>
COMMON STOCK--95.0% (unless otherwise noted)
3Dfx Interactive Inc ........................ 22,200 $ 280,275
800 Jr. Cigar Inc ........................... 4,400 102,300
99 Cents Only Stores ........................ 12,524 615,241
A. Schulman Inc. ............................ 51,800 1,175,212
A.M. Castle & Co. ........................... 16,750 251,250
A.O. Smith Corp. ............................ 22,400 550,200
Aames Financial Corp. ....................... 37,499 119,528
AAR Corp. ................................... 43,400 1,036,175
Aaron Rents Inc., Class B ................... 23,200 350,900
Aavid Thermal Technologies Inc. ............. 11,800 199,125
Abacus Direct Corp. ......................... 12,900 586,950
ABM Industries Inc. ......................... 25,600 886,400
ABR Information Services Inc. ............... 45,950 901,769
Acceptance Insurance Cos., Inc. ............. 17,800 360,450
Acclaim Entertainment Inc. .................. 66,700 817,075
Ackerley Communications Inc. ................ 23,400 427,050
Actel Corp. ................................. 28,600 572,000
Action Performance Cos., Inc. ............... 22,800 806,550
Acuson ...................................... 31,900 474,513
ACX Technologies ............................ 21,900 290,175
Acxiom Corp. ................................ 79,759 2,472,529
Adac Laboratories ........................... 31,400 627,019
Adelphia Communications Corp. ............... 29,400 1,345,050
Administaff Inc. ............................ 8,800 220,000
Adolph Coors Co. ............................ 55,300 3,120,994
Adtran Inc. ................................. 29,800 545,712
Advance Paradigm Inc. ....................... 13,000 455,000
Advanced Energy Industries Inc. ............. 10,600 265,000
Advanced Lighting Technologies Inc. ......... 21,400 208,650
Advanced Tissue Sciences Inc. ............... 50,400 130,725
Advanta Corp., Class A ...................... 37,200 492,900
Advantage Learning Systems Inc .............. 6,900 453,675
Advantica Restaurant Group Inc .............. 62,600 387,338
Advent Software Inc. ........................ 9,000 424,125
Advest Group Inc ............................ 11,500 212,750
Advo Inc. ................................... 35,100 925,762
Aerial Communications Inc ................... 28,200 165,675
AFC Cable Systems Inc. ...................... 11,300 379,963
Affiliated Managers Group Inc ............... 27,400 818,575
Affymetrix Inc. ............................. 24,000 585,000
Aftermarket Technology Corp. ................ 30,500 240,188
AGL Resources Inc. .......................... 89,100 2,054,869
Agouron Pharmaceuticals Inc. ................ 49,000 2,878,750
Agribiotech Inc ............................. 63,000 815,062
Agribrands International Inc ................ 17,400 522,000
AHL Services Inc ............................ 8,800 275,000
Air Express International Corp. ............. 52,555 1,143,071
Airgas Inc. ................................. 94,900 848,169
Airnet Systems Inc. ......................... 11,800 169,625
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-128
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ---------------------------------------------------- ---------- ---------------
<S> <C> <C>
Airtran Holdings Inc. .............................. 87,400 $ 229,425
Alabama National BanCorp. .......................... 11,600 309,575
Alaris Med Inc. .................................... 67,800 398,325
Alaska Air Group Inc. .............................. 41,000 1,814,250
Alaska Steel Holding Corp. ......................... 71,000 1,668,500
Albany International Corp. ......................... 26,990 511,119
Albemarle Corp. .................................... 30,100 714,875
Alexander & Baldwin Inc. ........................... 61,800 1,436,850
Alexander's Inc. ................................... 5,100 398,756
Alexandria Real Estate Equities, Inc. REIT ......... 17,300 535,219
Alfa Corp. ......................................... 39,600 960,300
Algos Pharmaceutical Corp. ......................... 16,400 426,400
Aliant Communications Inc. ......................... 55,500 2,268,562
Alkermes Inc. ...................................... 29,900 663,406
Allen Telecom Inc. ................................. 40,400 270,175
Alliant Techsystems Inc. ........................... 13,800 1,137,637
Allied Products Corp. .............................. 13,500 85,219
Alpharma Inc., Class A ............................. 27,000 953,437
Alpine Group Inc. .................................. 25,600 384,000
Alternative Living Services Inc. ................... 24,500 839,125
Alternative Resources Corp. ........................ 23,400 248,625
Alydaar Software Corp .............................. 15,100 124,575
Ambassadors International Inc ...................... 6,800 100,300
AMC Entertainment Inc. ............................. 9,300 195,881
Amcol International Corp. .......................... 39,950 394,506
Amcore Financial Inc. .............................. 45,302 1,036,991
Amerco ............................................. 12,600 352,013
America West Holding Corp., Class B ................ 65,215 1,108,655
American Annuity Group Inc. ........................ 11,993 275,839
American Business Products Inc. .................... 24,412 573,682
American Classic Voyager Co. ....................... 9,800 172,725
American Eagle Outfitters Inc. ..................... 21,000 1,399,125
American Freightways Corp. ......................... 32,700 377,072
American Health Properties Inc. .................... 36,200 746,625
American Heritage Life Investment Corp. ............ 25,330 619,002
American HomePatient Inc. .......................... 16,200 29,363
American Homestar Corp. ............................ 19,112 286,680
American Italian Pasta Company Class A ............. 28,200 743,775
American Management Systems Inc. ................... 65,300 2,612,000
American Med Security Group Inc .................... 13,200 188,925
American Media Inc., Class A ....................... 64,100 356,556
American Mobile Satellite Corp. .................... 27,600 144,900
American Oncology Resources Inc. ................... 42,800 623,275
American Retirement Corp ........................... 25,800 404,738
American Skiing Company ............................ 22,500 172,969
American Tower Corp., Class A ...................... 148,099 4,378,177
Americredit Corp. .................................. 98,000 1,353,625
Amerin Corp. ....................................... 36,500 862,312
Ameripath Inc. ..................................... 23,600 210,925
Amerisource Health Corp., Class A .................. 33,000 2,145,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-129
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Ameritrade Holding Corp., Class A ................. 17,800 $ 560,700
Ameron Inc. ....................................... 5,900 218,300
Amerus Life Holdings Inc. ......................... 24,919 557,563
Ames Department Stores Inc. ....................... 36,200 977,400
Ametek Aerospace Products Inc. .................... 50,200 1,120,087
Amkor Technology Inc .............................. 57,400 620,637
AMLI Residential Properties Trust REIT ............ 22,400 498,400
Amphenol Corp., Class A ........................... 24,900 751,669
Amplicon Inc. ..................................... 5,800 87,363
Amtran Inc. ....................................... 4,400 119,350
Anacomp Inc ....................................... 17,600 327,800
Analogic Corp. .................................... 9,600 361,200
Analysts International Corp. ...................... 34,161 657,599
Anchor Bancorp Inc. ............................... 26,800 643,200
Anchor Gaming ..................................... 11,800 665,225
Andover Bancorp Inc. .............................. 9,800 339,325
Andrx Corp. ....................................... 11,200 574,000
Anicom Inc. ....................................... 30,400 279,300
Anixter International Inc. ........................ 40,000 812,500
Ann Taylor Stores Corp. ........................... 30,500 1,202,844
Answerthink Consulting Group ...................... 8,600 231,125
Antec Corp. ....................................... 37,250 749,656
Anthracite Capital Inc ............................ 31,300 244,531
Apac Teleservices Inc. ............................ 31,000 117,219
Apex PC Solutions Inc. ............................ 7,900 228,113
Apogee Enterprises Inc. ........................... 41,700 469,125
Applebees International Inc. ...................... 39,500 814,687
Applied Graphics Technologies ..................... 16,620 274,230
Applied Industrial Technologies Inc. .............. 32,712 453,879
Applied Micro Circuits Corp. ...................... 36,300 1,233,066
Applied Power Inc. ................................ 60,182 2,271,870
Apria Healthcare Group Inc. ....................... 65,000 580,937
Aptargroup Inc. ................................... 48,600 1,363,837
Aqua Alliance Inc., Class A ....................... 289,800 597,712
Aquarion Co. ...................................... 11,300 463,300
Aquila Gas Pipeline Corp. ......................... 7,600 65,075
Arcadia Financial Ltd. ............................ 57,000 206,625
Arch Coal Inc. .................................... 28,200 482,925
Arctic Cat Inc. ................................... 30,800 313,775
Area Bancshares Corp. ............................. 14,600 383,250
Argonaut Group Inc. ............................... 28,100 688,450
Aris Corp ......................................... 11,600 138,475
ARM Fincl Inc, Class A ............................ 37,000 820,937
Armco Inc. ........................................ 146,100 639,187
Arnold Industries Inc. ............................ 32,300 520,838
Arrow International Inc. .......................... 22,500 705,937
Artesyn Technologies Inc .......................... 51,106 715,484
Artisan Components Inc ............................ 11,300 60,031
Arvin Industries Inc. ............................. 36,100 1,504,919
ASA Holdings Inc. ................................. 33,100 1,009,550
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-130
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Asarco Inc. ....................................... 57,700 $ 869,106
Ascent Entertainment Group Inc. ................... 46,583 343,550
Aspec Technology .................................. 22,600 29,663
Aspect Development Inc. ........................... 26,700 1,183,144
Aspect Telecommunications Corp. ................... 80,100 1,381,725
Aspen Technology Inc. ............................. 38,700 561,150
Assisted Living Concepts Inc ...................... 22,900 300,563
Associated Estates Realty Corp. ................... 26,200 309,488
Associated Group Inc., Class A .................... 44,100 1,896,300
Astec Industries Inc. ............................. 11,700 650,812
AT Entertainment Inc. ............................. 14,500 97,875
Atlantic Coast Airlines Inc ....................... 18,800 470,000
Atlas Air Inc. .................................... 14,800 724,275
ATMI Inc. ......................................... 26,200 661,550
Atmos Energy Corp. ................................ 47,400 1,528,650
Atwood Oceanics Inc. .............................. 15,700 266,900
Aura Systems Inc. ................................. 134,500 134,500
Aurther J. Gallagher & Co. ........................ 27,000 1,191,375
Authentic Fitness Corp. ........................... 29,700 542,025
Avado Brands Inc. ................................. 41,500 344,969
Avant Corp. ....................................... 43,226 691,616
Avatar Holdings Inc. .............................. 8,200 131,200
Aviall Inc. ....................................... 28,400 333,700
Aviation Sales Co. ................................ 14,200 576,875
Avid Technology Inc. .............................. 36,000 841,500
Aviron ............................................ 21,200 548,550
Avis Rent A Car Inc ............................... 42,100 1,018,294
Avondale Industries Inc. .......................... 14,400 417,600
AVT Corp. ......................................... 14,300 414,700
Axent Technologies Inc. ........................... 39,100 1,194,994
Axys Pharmaceutical Inc. .......................... 45,500 267,313
Aztar Corp. ....................................... 68,200 345,263
BA Merchants Services Inc., Class A ............... 29,900 601,737
Bacou USA Inc. .................................... 7,000 150,500
Baldor Electric Co. ............................... 51,913 1,051,238
Baldwin & Lyons Inc., Class B ..................... 17,900 443,025
Ball Corp. ........................................ 48,000 2,196,000
Ballard Medical Products .......................... 47,700 1,159,706
Bally Total Fitness Holding Corp. ................. 37,000 920,375
Bancfirst Corp. ................................... 6,800 243,950
Bancfirst Ohio Corp ............................... 10,600 321,975
Bancorpsouth Inc. ................................. 69,880 1,262,207
Banctec Inc. ...................................... 30,682 385,443
Bancwest Corp. New ................................ 33,900 1,627,200
Bandag Inc. ....................................... 20,300 810,731
Bank of Granite Corp. ............................. 17,943 495,675
Bank Plus Corp. ................................... 29,400 128,625
Bankatlantic Bancorp Inc. ......................... 57,700 411,113
Banknorth Group Inc. .............................. 23,800 895,475
Bankunited Financial Corp. ........................ 18,300 146,400
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-131
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Banner Aerospace Inc. ............................. 10,700 $ 100,981
Banta Corp. ....................................... 46,150 1,263,356
Barnes Group Inc. ................................. 23,700 690,262
Barnett Banks Inc. ................................ 14,200 195,250
Barr Laboratories Inc. ............................ 13,725 658,800
Barra Inc. ........................................ 17,750 419,344
Barrett Resources Corp. ........................... 49,970 1,199,280
Bassett Furniture Industries Inc. ................. 19,562 471,933
Battle Mountain Gold Co. .......................... 360,300 1,486,237
Bay State Gas Co. ................................. 21,200 844,025
Bay View Capital Corp. ............................ 30,300 657,131
BE Aerospace Inc. ................................. 44,300 930,300
BEA Systems Inc. .................................. 81,400 997,150
Bedford Property Investment Inc REIT .............. 36,700 619,312
Belco Oil & Gas Corp. ............................. 9,600 53,400
Belden Inc. ....................................... 39,000 826,312
Bell & Howell Co. ................................. 22,800 862,125
Benchmark Electronics Inc. ........................ 16,200 593,325
Benton Oil & Gas Co. .............................. 41,000 123,000
Beringer Wine Estates Holdings Class B ............ 28,300 1,264,656
Berkshire Realty Co., Inc. ........................ 55,400 526,300
Berlitz International Inc. ........................ 3,400 98,600
Berry Petroleum Co. Class A ....................... 28,800 408,600
Bethlehem Steel Corp. ............................. 203,324 1,702,838
Big Flower Holdings Inc. .......................... 27,600 608,925
Billing Info Concepts Corp. ....................... 53,000 583,000
Bindley Western Industries Inc. ................... 25,433 1,252,575
Bio Rad Laboratories Inc., Class A ................ 15,700 329,700
Bio Technology General Corp. ...................... 75,500 523,781
Biomatrix Inc. .................................... 11,000 640,750
Birmingham Steel Corp. ............................ 38,800 162,475
Bisys Group Inc. .................................. 37,800 1,951,425
Black Box Inc. .................................... 27,000 1,022,625
Black Hills Corp. ................................. 33,800 891,475
Blair Corp. ....................................... 11,500 255,156
Block Drug Co., Inc., Class A ..................... 22,538 977,565
Blount International Inc., Class A ................ 38,500 960,094
BMC Industries Inc. ............................... 41,000 256,250
Bob Evans Farms Inc. .............................. 65,200 1,699,275
Boise Cascade Office Products Corp. ............... 19,500 263,250
BOK Financial Corp. ............................... 8,281 390,242
Boole & Babbage Inc. .............................. 44,212 1,301,491
Borg Warner Automotive Inc. ....................... 33,900 1,892,044
Borg Warner Security Corp. ........................ 20,000 375,000
Boron Lepore + Assocs Inc ......................... 16,200 558,900
Boston Beer Inc., Class A ......................... 23,000 195,500
Bowne & Co., Inc. ................................. 57,600 1,029,600
Boyd Gaming Corp. ................................. 53,000 175,563
Boykin Lodging Company ............................ 25,900 320,513
Bradley Real Estate Inc. .......................... 37,264 763,912
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-132
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- ---------------
<S> <C> <C>
Brandywine Realty Trust ........................... 52,500 $ 938,437
BRC Holdings Inc. ................................. 15,800 296,250
BRE Properties Inc. REIT .......................... 69,082 1,709,779
Breed Technologies Inc. ........................... 25,000 204,688
Brenton Banks Inc. ................................ 18,411 308,384
Briggs & Stratton Corp. ........................... 36,400 1,815,450
Brightpoint Inc. .................................. 81,948 1,126,785
Broadvision Inc. .................................. 27,600 883,200
Brookdale Living Cmntys Inc ....................... 15,000 292,500
Brookline Bancorp Inc ............................. 20,000 230,000
Brown Group Inc. .................................. 28,200 495,263
Brush Wellman Inc. ................................ 24,700 430,706
Brylane Inc. ...................................... 8,800 204,600
BSB Bancorp Inc. .................................. 10,500 345,188
BT Financial Corp. ................................ 20,280 555,165
Buckeye Technologies Inc. ......................... 37,300 557,169
Buckle Inc. ....................................... 10,100 242,400
Budget Group Inc., Class A ........................ 44,300 703,262
Buffets Inc. ...................................... 70,405 840,460
Building One Services Corp ........................ 59,400 1,239,975
Burlington Coat Factory Warehouse Corp. ........... 29,499 481,202
Burlington Industries Inc. ........................ 96,100 1,057,100
Burnham Pacific Properties Inc. ................... 51,700 623,631
Burr-Brown Corp. .................................. 38,098 892,922
Bush Boake Allen Inc. ............................. 9,500 334,875
Bush Industries Inc., Class A ..................... 15,150 188,428
Butler Manufacturing Co. .......................... 8,150 182,356
Bway Corp. ........................................ 8,900 134,056
C Cube Microsystems Inc. .......................... 52,500 1,424,062
C H Robinson Worldwide ............................ 64,500 1,672,969
C&D Technologies .................................. 19,300 530,750
Cable Design Technologies Corp. ................... 46,475 859,787
Cabot Industrial Trust ............................ 29,100 594,731
Cabot Oil & Gas Corp., Class A .................... 35,700 535,500
Cadiz Inc ......................................... 50,400 384,300
Cal Dive International Inc ........................ 7,900 163,925
Calgon Carbon Corp. ............................... 51,600 387,000
California Microwave Inc. ......................... 20,000 187,500
California Water Service Group .................... 18,000 563,625
Calmat Co. ........................................ 28,900 892,287
Calpine Corp. ..................................... 31,500 795,375
Cambrex Corp. ..................................... 36,100 866,400
Camden Property Trust REIT ........................ 69,586 1,809,236
Canandaigua Wine Inc., Class A .................... 24,700 1,427,969
Capital Automotive REIT ........................... 30,500 453,688
Capital City Bank Group Inc. ...................... 6,950 191,994
Capital Reinsurance Corp. ......................... 34,600 694,162
Capital Senior Living Corp ........................ 16,700 232,756
Capitol Transamerica Corp. ........................ 12,800 239,200
Capstead Mortgage Corp. ........................... 92,825 382,903
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-133
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ---------------------------------------------------- -------- ---------------
<S> <C> <C>
Caraustar Industries Inc. .......................... 39,200 $ 1,119,650
Carbide/Graphite Group Inc. ........................ 12,400 182,900
Carbo Ceramics Inc. ................................ 5,300 92,750
Carematrix Corp. ................................... 15,400 471,625
Caribiner International Inc. ....................... 37,000 337,625
Carmike Cinemas Inc., Class A ...................... 11,100 225,469
Carolina First Corp. ............................... 35,000 885,937
Carpenter Technology Corp. ......................... 30,100 1,021,519
Carriage Services Inc, Class A ..................... 13,400 381,063
Carter Wallace Inc. ................................ 34,500 677,062
Casella Waste Systems Inc, Class A ................. 9,600 356,400
Casey's General Stores Inc. ........................ 82,400 1,073,775
Cash America International Inc. .................... 40,400 613,575
Castle & Cooke Inc. ................................ 19,800 292,050
Catalina Marketing Corp. ........................... 28,600 1,955,525
Catalytica Inc. .................................... 74,300 1,337,400
Cathay Bancorp Inc. ................................ 10,900 446,900
Cato Corp., Class A ................................ 24,700 243,141
Cavalier Homes Inc. ................................ 33,000 375,375
CB Richard Ellis Services Inc ...................... 21,100 382,438
CBL & Associates Properties Inc. ................... 35,800 924,087
CCA Prison Reality Trust ........................... 34,300 703,150
CCC Information Services Group Inc. ................ 36,200 624,450
CD Now Inc ......................................... 15,400 277,200
CD Radio Inc ....................................... 22,000 753,500
CDI Corp. .......................................... 16,600 335,113
CDW Computer Centers Inc. .......................... 10,800 1,036,125
CEC Entertainment Inc .............................. 28,600 793,650
Cell Genesys Inc. .................................. 37,000 222,000
Cellnet Data Systems ............................... 56,100 280,500
Cellstar Corp. ..................................... 52,500 357,656
Cellular Communications International Inc. ......... 24,749 1,682,932
Cellullar Communications Prior ..................... 17,200 318,200
Centennial Bancorp ................................. 23,060 432,375
Centennial Cellular Corp., Class A ................. 23,715 972,315
Centennial Healthcare Corp ......................... 18,700 289,850
Center Trust Retail Properties Inc ................. 40,400 494,900
Centerpoint Properties Corp. ....................... 27,900 943,369
Centex Construction Products Inc. .................. 14,500 589,062
Central Garden & Pet Co. ........................... 46,400 667,000
Central Hudson Gas & Electric Corp. ................ 26,500 1,185,875
Central Parking Corp. .............................. 17,650 572,522
Century Aluminum Co. ............................... 18,900 178,369
Century Communications Corp., Class A .............. 49,200 1,560,562
Century South Bank Inc. ............................ 13,400 373,525
Centurybusiness Services Inc ....................... 79,600 1,144,250
Cephalon Inc. ...................................... 40,500 364,500
Cerner Corp. ....................................... 40,300 1,078,025
CFSB Bancorp Inc ................................... 12,800 312,000
CFW Communications Co. ............................. 19,600 458,150
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-134
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------- ---------- ---------------
<S> <C> <C>
Champion Enterprises Inc. ............................. 64,044 $ 1,753,204
Championship Auto Racing Team ......................... 16,000 474,000
Charles E. Smith Residential REIT ..................... 27,400 880,225
Charming Shoppes Inc. ................................. 156,600 675,337
Chart Industries Inc. ................................. 29,000 221,125
Charter Municipal Mortgage Acceptance Company ......... 32,200 390,425
Chartwell Re Corp. .................................... 12,400 294,500
Chase Inds Inc. ....................................... 16,300 170,131
Chateau Communities Inc. .............................. 32,900 964,381
Chattem Inc. .......................................... 15,300 732,487
Checkfree Holdings Corp ............................... 62,100 1,451,587
Checkpoint Systems Inc. ............................... 46,400 574,200
Cheesecake Factory .................................... 26,049 772,516
Chelsea GCA Realty Inc. ............................... 24,300 865,687
Chemed Corp. .......................................... 12,900 432,150
Chemfirst Inc. ........................................ 29,400 580,650
Chemical Financial Corp. .............................. 21,633 735,522
Chesapeake Corp. ...................................... 30,000 1,106,250
Chesapeake Energy Corp. ............................... 88,258 77,226
Chicago Title Corp .................................... 21,500 1,009,156
Childrens Place Retail Stores Inc ..................... 19,400 487,425
Chiquita Brands International Inc. .................... 58,700 561,319
Chirex Inc ............................................ 16,700 356,963
Chittenden Corp. ...................................... 22,833 730,656
Choice Hotels Inc. .................................... 58,900 806,194
Choicepoint Inc ....................................... 22,900 1,477,050
CHS Electronics Inc. .................................. 49,799 843,471
Church & Dwight Co., Inc. ............................. 28,100 1,009,844
Churchill Downs Inc. .................................. 11,800 387,925
Cilcorp Inc. .......................................... 21,400 1,309,412
Circle International Group Inc. ....................... 20,350 417,175
Cirrus Logic Inc. ..................................... 103,800 1,018,537
Citation Corp. ........................................ 16,500 208,313
Citizens Banking Corp. ................................ 38,300 1,292,625
City Holding Co. ...................................... 10,100 328,250
Claire's Stores Inc. .................................. 63,825 1,308,412
Clarcor Inc. .......................................... 39,050 781,000
Clarify Inc. .......................................... 34,500 843,094
CLECO Corp ............................................ 35,200 1,207,800
Cleveland-Cliffs Inc. ................................. 17,400 701,437
Closure Med Corp. ..................................... 9,400 280,238
CMAC Investment Corp. ................................. 35,600 1,635,375
CMG Information Services Inc. ......................... 27,800 2,960,700
CMP Group Inc ......................................... 50,800 958,850
CNA Surety Corp. ...................................... 24,900 392,175
CNB Bancshares Inc. ................................... 48,544 2,263,364
CNET Inc. ............................................. 13,800 756,412
Coach USA Inc. ........................................ 37,500 1,300,781
Coachmen Industries Inc. .............................. 26,700 700,875
Coca Cola Bottling Co. ................................ 3,500 201,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-135
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- ---------------
<S> <C> <C>
Cognex Corp. ...................................... 52,533 $ 1,050,660
Coherent Inc. ..................................... 35,700 444,019
Cohu Inc. ......................................... 14,700 323,400
Coinmach Laundry Corp. ............................ 19,200 249,600
Coldwater Creek Inc ............................... 14,600 200,750
Cole National Corp., Class A ...................... 21,200 363,050
Coleman Co., Inc. ................................. 15,000 136,875
Collins & Aikman Corp. ............................ 92,800 475,600
Colonial Gas Co. .................................. 13,850 483,019
Colonial Properties Trust REIT .................... 40,800 1,086,300
Columbia Banking Systems Inc ...................... 15,200 281,200
Columbia Laboratories Inc. ........................ 34,100 104,431
Columbia Sportswear Co ............................ 8,800 148,500
Columbus McKinnon Corp. ........................... 17,400 313,200
Com21 Inc ......................................... 9,100 191,100
Comfort Systems USA Inc ........................... 58,000 1,036,750
Commerce Bancorp Inc. ............................. 35,715 1,875,037
Commerce Group Inc. ............................... 40,900 1,449,394
Commercial Federal Corp. .......................... 94,275 2,186,002
Commercial Intertech Corp. ........................ 19,300 249,694
Commercial Metals Co. ............................. 20,933 580,891
Commercial Net Lease Realty Inc. .................. 47,300 626,725
Commnet Cellular Inc .............................. 34,400 421,400
Commonwealth Bancorp Inc. ......................... 24,555 382,137
Commonwealth Energy Systems ....................... 28,700 1,162,350
Commonwealth Inds Inc ............................. 20,000 187,500
Commonwealth Telephone Enterprises ................ 14,900 499,150
Commscope Inc ..................................... 60,300 1,013,794
Community Bank Systems Inc. ....................... 11,400 334,163
Community First Bankshares Inc. ................... 74,000 1,558,625
Community Trust Bancorp Inc. ...................... 15,165 356,378
Complete Business Solutions Inc. .................. 20,300 687,662
Compucom Systems Inc. ............................. 35,700 124,950
Computer Horizons Corp. ........................... 49,050 1,305,956
Computer Learning Centers Inc. .................... 25,400 169,863
Computer Management Sciences Inc. ................. 2,800 48,650
Computer Task Group Inc. .......................... 27,300 740,512
Comstock Resources Inc. ........................... 36,700 112,394
Concentra Managed Care Inc. ....................... 73,658 787,220
Concentric Network Corp ........................... 23,800 791,350
Concord Communications Inc ........................ 20,300 1,152,025
Cone Mills Corp. .................................. 31,900 179,438
Conmed Corp. ...................................... 23,700 782,100
Connecticut Energy Corp. .......................... 15,500 472,750
Conning Corp ...................................... 19,700 408,775
Consolidated Cigar Holdings Inc., Class A ......... 14,800 261,775
Consolidated Freightways Corp. .................... 32,900 522,288
Consolidated Graphics Inc. ........................ 18,500 1,249,906
Consolidated Products Inc. ........................ 33,254 685,859
Contifinancial Corp. .............................. 16,500 117,563
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-136
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Cooper Cos Inc. ................................... 22,500 $ 465,469
Copart Inc. ....................................... 14,100 456,488
Corn Products International Inc ................... 56,100 1,704,037
Cornerstone Realty Income Trust Inc. .............. 59,900 628,950
Corporate Express Inc. ............................ 164,900 855,419
Corporate Therapeutics Inc. ....................... 39,900 528,675
Cort Business Services Corp. ...................... 20,500 497,125
Corus Bankshares Inc. ............................. 12,100 390,225
Cost Plus Inc. .................................... 14,400 451,800
Cotelligent Group Inc ............................. 18,100 385,756
Coulter Pharmaceutical Inc ........................ 21,400 642,000
Cousins Properties Inc. REIT ...................... 39,500 1,273,875
Covance Inc. ...................................... 90,600 2,638,725
Covenant Transport Inc., Class A .................. 13,600 243,100
Coventry Helath Care Inc .......................... 92,100 811,631
Cox Radio Inc., Class A ........................... 14,300 604,175
CPI Corp. ......................................... 15,100 400,150
Crawford & Co. .................................... 55,500 856,781
Credence Systems Corp. ............................ 33,950 628,075
Credit Acceptance Corp. ........................... 34,800 254,475
Crescent Operating Inc. ........................... 14,100 66,975
Criimi Mae Inc. ................................... 75,200 263,200
Cross Timbers Oil Co. ............................. 59,675 447,563
Crossmann Cmntys Inc. ............................. 11,000 303,875
Crown America Realty Trust REIT ................... 34,700 268,925
CSG Systems International Inc. .................... 40,200 3,175,800
CSK Auto Corp ..................................... 29,400 784,612
CSS Industries Inc. ............................... 10,600 321,313
CTS Corp. ......................................... 17,996 782,826
Cubic Corp. ....................................... 7,800 146,250
Cullen/Frost Bankers Inc. ......................... 41,540 2,279,507
Culp Inc. ......................................... 12,600 99,225
Cuno Inc. ......................................... 24,400 396,500
Curative Health Services Inc. ..................... 20,000 670,000
Curtiss Wright Corp. .............................. 7,500 285,938
CVB Financial Corp. ............................... 15,730 353,925
Cylink Corp. ...................................... 26,300 95,338
Cymer Inc. ........................................ 41,900 612,787
Cypress Semiconductor Corp. ....................... 134,600 1,118,862
Cytyc Corp. ....................................... 25,000 643,750
D & N Svgs Financial Corp ......................... 13,100 309,488
D.R. Horton Inc. .................................. 54,455 1,252,465
Dain Rauscher Corp ................................ 19,500 575,250
Daisytek International Corp. ...................... 17,000 323,000
Dal-Tile International Inc. ....................... 57,300 594,487
Dallas Semiconductor Corp. ........................ 44,100 1,797,075
Dames & Moore Inc. ................................ 24,400 314,150
Dan River Inc Georgia Class A ..................... 29,500 346,625
Daniel Industries Inc. ............................ 21,500 260,688
Data General Corp. ................................ 77,500 1,273,906
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-137
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- ---------------
<S> <C> <C>
Data Processing Corp. ............................. 7,900 $ 231,075
Data Transmission Network Corp. ................... 14,800 427,350
Datascope Corp. ................................... 20,200 464,600
Datastream Systems Inc. ........................... 24,500 281,750
Dataworks Corp .................................... 16,800 175,350
Dave & Busters Inc. ............................... 19,700 454,331
Davox Corp. ....................................... 15,900 121,238
Day Runner Inc. ................................... 10,700 155,150
DBT Online Inc. ................................... 11,500 286,781
Decisionone Holdings Corp. ........................ 18,100 85,975
Delco Remy International Inc, Class A ............. 32,300 316,944
Delias Inc. ....................................... 4,100 51,250
Delphi Financial Group Inc. ....................... 23,759 1,245,867
Delta Financial Corp. ............................. 7,100 42,156
Deltek Systems Inc. ............................... 13,200 222,750
Deltic Timber Corp. ............................... 18,900 385,088
Dendrite International Inc. ....................... 29,800 744,069
Department 56 Inc. ................................ 28,300 1,063,019
Detroit Diesel Corp. .............................. 12,900 266,869
Developers Diversified Realty Corp. REIT .......... 89,700 1,592,175
Devon Energy Corp. ................................ 34,900 1,070,994
Devry Inc. ........................................ 93,600 2,866,500
Dexter Corp. ...................................... 36,400 1,144,325
Diagnostic Products Corp. ......................... 17,100 532,237
Dialogic Corp. .................................... 15,200 298,775
Diamond Multimedia Systems Inc. ................... 55,000 350,625
Diamond Technology Partners Inc., Class A ......... 11,000 210,375
Digi International Inc. ........................... 19,300 214,713
Digital Microwave Corp. ........................... 96,600 661,106
DII Inc. .......................................... 38,100 876,300
Dime Community Bancorp Inc. ....................... 18,600 383,625
Dimon Inc. ........................................ 69,700 518,394
Dionex Corp. ...................................... 34,700 1,270,887
Discount Auto Parts Inc. .......................... 12,900 282,994
Dispatch Management Services Corp ................. 14,900 60,531
Documentum Inc. ................................... 19,400 1,036,687
Dollar Thrifty Automotive Grp ..................... 37,800 486,675
Donaldson Co., Inc. ............................... 59,700 1,238,775
Donna Karan International Inc. .................... 19,800 150,975
Doral Financial Corp. ............................. 48,600 1,075,275
Doubleclick Inc ................................... 22,400 1,020,600
Dover Downs Entertainment Inc. .................... 15,000 180,938
Downey Financial Corp. ............................ 32,609 829,491
Dress Barn Inc. ................................... 28,600 434,363
Dreyers Grand Ice Cream Inc. ...................... 34,500 521,813
Dril Quip Inc ..................................... 9,200 163,300
DSP Communications Inc. ........................... 59,900 917,219
DT Inductries Inc. ................................ 15,300 240,975
Duane Reade Inc ................................... 26,600 1,024,100
Ducommun Inc. ..................................... 12,650 174,728
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-138
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- ---------------
<S> <C> <C>
Duff & Phelps Credit Rating Co. ................... 6,400 $ 350,800
Dupont Photomasks Inc. ............................ 7,300 309,794
Dura Pharmaceuticals Inc. ......................... 72,600 1,102,612
DVI Inc. .......................................... 17,100 309,938
Dycom Inds Inc .................................... 18,800 1,073,950
Dynex Capital Inc. ................................ 65,400 302,475
E Spire Communications Inc ........................ 73,300 467,288
E Trade Group Inc. ................................ 56,900 2,661,853
E'Town Corp. ...................................... 13,600 644,300
E.W. Blanch Holdings Inc. ......................... 20,100 953,494
Eagle Hardware & Garden Inc. ...................... 39,600 1,287,000
Eagle USA Airfreight Inc. ......................... 12,000 294,000
Earthgrains Co. ................................... 67,000 2,072,812
Earthlink Network Inc ............................. 21,700 1,236,900
Earthshell Corp ................................... 41,600 496,600
Eastern Enterprises ............................... 35,200 1,540,000
Eastern Environmental Services Inc. ............... 49,400 1,463,475
Eastern Utilities Associates ...................... 32,000 904,000
Eastgroup Pptys Inc REIT .......................... 24,600 453,563
Eaton Vance Corp. ................................. 45,300 945,637
Echostar Communications Corp., Class A ............ 19,600 948,150
Education Management Corp. ........................ 14,500 342,563
Edutrek International Inc, Class A ................ 5,300 30,475
Eex Corp. ......................................... 63,900 447,300
El Paso Electric Co. .............................. 81,800 715,750
Elcor Chemical Corp. .............................. 20,300 655,944
Elder Beerman Stores Corp ......................... 19,800 228,938
Electric Lightware Inc, Class A ................... 12,900 105,619
Electro Rent Corp. ................................ 22,700 366,038
Electro Scientific Industries Inc. ................ 18,100 820,156
Electroglas Inc. .................................. 29,700 348,975
Electronics for Imaging Inc. ...................... 83,200 3,343,600
Emmis Broadcasting Corp., Class A ................. 18,400 798,100
Empire District Electric Co. ...................... 27,400 678,150
Encore Wire Corp. ................................. 21,700 200,725
Energen Corp. ..................................... 41,200 803,400
Enesco Group Inc .................................. 25,000 581,250
Engineering Animation Inc ......................... 12,000 648,000
Enhance Financial Services Group Inc. ............. 38,000 1,140,000
Entertainment Properties Trust REIT ............... 20,900 355,300
Entremed Inc ...................................... 15,200 319,200
Envoy Corp. ....................................... 33,700 1,963,025
Enzo Biochem Inc. ................................. 32,408 334,208
Equitable Resources Inc. .......................... 58,100 1,692,162
Equity Corp. International ........................ 32,150 853,984
Equity Inns Inc. .................................. 59,000 567,875
Essex International Inc. .......................... 43,539 1,507,538
Essex Property Trust REIT ......................... 22,800 678,300
Esterline Technologies Corp. ...................... 27,100 589,425
Etec Systems Inc. ................................. 33,100 1,324,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-139
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------ --------- ---------------
<S> <C> <C>
Ethyl Corp. .......................................... 100,600 $ 584,737
Evans & Sutherland Computer Co. ...................... 15,500 273,188
Everen Capital Corp. ................................. 21,300 484,575
Evergreen Bancorp Inc ................................ 14,400 462,600
Excel Industries Inc. ................................ 16,300 285,250
Excel Switching Corp ................................. 8,100 307,800
Excite Inc. .......................................... 42,000 1,766,625
Executive Risk Inc. .................................. 16,300 895,481
Exide Corp. .......................................... 26,100 424,125
Exodus Communications Inc ............................ 20,000 1,285,000
Expeditores International of Washington Inc. ......... 38,600 1,621,200
Express Scripts Inc., Class A ........................ 52,600 3,530,775
Extended Stay America Inc. ........................... 111,700 1,172,850
F + M Bancorp Maryland ............................... 9,680 317,020
F New Brunswick Corp. ................................ 28,110 794,107
F Y I Inc ............................................ 17,400 556,800
F&M National Corp. ................................... 34,302 1,026,916
Factset Research Systems Inc. ........................ 9,300 574,275
Fairchild Corp., Class A ............................. 20,700 326,025
Fairfield Communities Inc. ........................... 69,100 764,419
Family Golf Ctrs Inc. ................................ 31,500 622,125
Farmer Brothers Co. .................................. 1,330 284,620
Farmers Capital Bank Corp. ........................... 10,200 382,500
FBL Financial Group Inc., Class A .................... 49,200 1,193,100
Fedders USA Inc. ..................................... 49,800 289,463
Federal Agricultural Mortgage Corp Class C ........... 4,300 159,638
Federal Realty Investment Trust REIT ................. 62,700 1,481,287
Federal Signal Corp. ................................. 70,800 1,938,150
Felcor Lodging Trust Inc. ............................ 100,258 2,312,200
Ferro Corp. .......................................... 55,450 1,441,700
Fidelity National Financial Inc. ..................... 36,378 1,109,520
Filenet Corp. ........................................ 44,800 513,800
Financial Federal Corp. .............................. 13,850 342,788
Fingerhut Cos., Inc. ................................. 77,300 1,193,319
Finish Line Inc., Class A ............................ 25,700 205,600
Finlay Enterprises Inc ............................... 10,100 102,263
First American Financial Corp. ....................... 81,310 2,612,084
First Bancorp Puerto Rico ............................ 39,900 1,204,481
First Brands Corp. ................................... 60,700 2,393,856
First Charter Corp. .................................. 25,300 436,425
First Citizens Bancshares Inc. ....................... 10,000 900,000
First Commerce Bancshares Inc., Class B .............. 18,600 520,800
First Commonwealth Financial Corp. ................... 34,600 847,700
First Consulting Group ............................... 17,100 350,550
First Federal Capital Corp. .......................... 24,000 393,000
First Financial Bancorp .............................. 45,062 1,303,970
First Financial Bankshares Inc. ...................... 15,499 542,465
First Financial Corp. -- Indiana ..................... 9,693 478,592
First Financial Holdings Inc. ........................ 21,300 404,700
First Industrial Realty Trust Inc. REIT .............. 59,400 1,592,662
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-140
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- -------------------------------------------------------------------- -------- ---------------
<S> <C> <C>
First Industries Corp. ............................................. 14,067 $ 281,340
First Liberty Financial Corp ....................................... 18,400 386,400
First Merchants Corp. .............................................. 15,200 397,100
First Midwest Bancorp Inc. ......................................... 39,529 1,504,573
First Republic Bank (San Francisco) ................................ 14,300 358,394
First Sentinel Bancorp Incorporated ................................ 49,194 399,701
First Sierra Financial Inc ......................................... 16,900 207,025
First Source Corp. ................................................. 16,491 552,448
First Union Real Estate Equity + Mortgage Investments REIT ......... 47,400 278,475
First United Bancshares Inc. ....................................... 34,400 610,600
First Washington Bancorp Inc ....................................... 17,900 429,600
First Western Bancorp Inc. ......................................... 17,450 554,037
Firstcity Financial Corp ........................................... 8,000 103,500
Firstfed Financial Corp. -- Wisconsin .............................. 32,250 576,469
Fisher Scientific International Inc ................................ 62,700 1,250,081
Flagstar Bancorp Inc ............................................... 8,600 224,675
Fleming Cos., Inc. ................................................. 61,700 640,137
Florida East Coast Industries Inc. ................................. 18,300 643,931
Florida Panthers Holdings Inc., Class A ............................ 45,500 423,719
Florida Rock Industries Inc. ....................................... 21,900 678,900
Flowserve Corp. .................................................... 60,126 995,837
FM BanCorp. Inc. ................................................... 17,019 514,825
Foamex International Inc. .......................................... 22,000 272,250
Foodmaker Inc. ..................................................... 54,300 1,197,994
Footstar Inc. ...................................................... 38,400 960,000
Forcenergy Inc. .................................................... 21,000 55,125
Foremost Corp. ..................................................... 27,400 575,400
Forest City Enterprises Inc. ....................................... 22,000 577,500
Forest Oil Corp. ................................................... 53,500 454,750
Forrester Research Inc. ............................................ 3,500 153,125
Fossil Inc. ........................................................ 12,850 369,438
Foster Wheeler Corp. ............................................... 63,700 840,044
FPIC Insurance Group Inc ........................................... 14,700 702,844
Franchise Finance Corp. ............................................ 76,500 1,836,000
Franchise Mortgage Acceptance Company .............................. 16,500 127,875
Franklin Covey Co. ................................................. 33,200 556,100
Franklin Electric Co., Inc. ........................................ 7,100 479,250
Freds Inc., Class A ................................................ 12,400 186,000
Freedom Securities Corp ............................................ 19,500 294,938
French Fragrances Inc .............................................. 11,800 85,550
Friede Goldman International Inc ................................... 18,200 207,025
Friedman Billings Ramsey Group ..................................... 35,200 228,800
Friedmans Inc., Class A ............................................ 18,500 189,625
Fritz Cos., Inc. ................................................... 34,800 376,275
Frontier Financial Corp ............................................ 9,900 452,925
Frontier Insurance Group Inc. ...................................... 49,866 642,025
Frontier Oil Corp .................................................. 40,400 199,475
FSI International Inc. ............................................. 34,500 357,938
Fuisz Technologies Ltd. ............................................ 26,700 343,763
Fund American Enterprises Holding, Inc. ............................ 8,200 1,148,512
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-141
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Furon Co. ......................................... 28,600 $ 487,988
G&K Services Inc., Class A ........................ 29,800 1,586,850
Gables Residential Trust .......................... 41,000 950,687
Gadzooks Inc. ..................................... 13,900 107,725
Galey + Lord Inc. ................................. 18,500 159,563
Garden Ridge Corp. ................................ 23,100 209,344
Gardner Denver Machinery Inc. ..................... 20,600 303,850
Gaylord Container Corp., Class A .................. 80,600 493,675
Gaylord Entertainment Co. ......................... 31,700 954,962
GBC Bancorp ....................................... 22,200 571,650
GC Cos., Inc. ..................................... 8,300 345,488
Geltex Pharmaceuticals Inc. ....................... 19,900 450,238
Gencorp Inc. ...................................... 53,400 1,331,662
General Binding Corp. ............................. 9,100 338,975
General Cable Corp. ............................... 57,600 1,180,800
General Chemical Group Inc ........................ 14,100 195,638
General Cigar Holdings Inc., Class A .............. 9,112 79,161
General Communication Inc. ........................ 56,400 229,125
General Growth Properties Inc. REIT ............... 55,900 2,117,212
General Magic Inc. ................................ 45,700 229,928
General Semiconductor Inc ......................... 42,600 348,788
Genesco Inc. ...................................... 40,700 231,481
Genesis Direct Inc ................................ 17,900 139,844
Genesis Health Ventures Inc. ...................... 53,100 464,625
Genesys Telecommunications Laboratories ........... 13,900 309,275
Genlyte Group Inc ................................. 18,300 343,125
Genovese Drug Stores Inc., Class A ................ 5,561 158,489
Genrad Inc. ....................................... 45,400 715,050
Gensia Inc. ....................................... 124,600 564,594
Gentex Corp. ...................................... 111,900 2,238,000
Geon Co. .......................................... 36,600 841,800
Georgia Gulf Corp. ................................ 49,400 793,487
Geotel Communications Corp. ....................... 29,300 1,091,425
Gerber Scientific Inc. ............................ 31,200 742,950
Getchell Gold Corp. ............................... 48,235 1,314,404
Getty Images Inc .................................. 35,600 611,875
Getty Realty Corp ................................. 12,318 180,151
Giant Cement Holding Inc. ......................... 13,900 344,025
Gibraltor Steel Corp. ............................. 9,000 204,750
Gibson Greetings Inc. ............................. 24,800 294,500
Gilead Sciences Inc. .............................. 47,700 1,958,681
Gleason Corp. ..................................... 13,800 250,125
Glenayre Technologies Inc. ........................ 93,500 414,906
Glenborough Realty Trust Inc. REIT ................ 49,700 1,012,637
Glimcher Realty Trust REIT ........................ 38,300 600,831
Global Directmail Corp. ........................... 26,400 617,100
Global Industrial Technologies Inc. ............... 33,200 354,825
Gold Banc Corp. Inc ............................... 13,100 201,413
Golf Trust America Inc ............................ 12,000 333,000
Goodys Family Clothing Inc. ....................... 29,000 290,906
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-142
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Graco Inc. ........................................ 23,200 $ 684,400
Grand Casinos Inc. ................................ 62,600 504,713
Grand Premier Financial Inc. ...................... 25,470 312,008
Granite Construction Inc. ......................... 29,425 987,577
Gray Communications Systems Inc ................... 7,350 134,597
Great Atlantic & Pacific Tea Co., Inc. ............ 27,400 811,725
Great Lakes REIT Inc. ............................. 27,600 432,975
Great Plains Software Inc ......................... 12,600 607,950
Greatel Bay Bancorp ............................... 15,000 506,250
Greenbrier Cos., Inc. ............................. 8,000 113,000
Greif Brothers Corp., Class A ..................... 22,600 659,637
Grey Advertising Inc. ............................. 930 338,520
Grey Wolf Inc. .................................... 213,200 173,225
Greyhound Lines Inc. .............................. 96,700 574,156
Griffon Corp. ..................................... 46,700 496,188
Group 1 Automotive Inc ............................ 20,500 533,000
Group Maintenance America Corp .................... 44,300 537,137
Grubb & Ellis Co. ................................. 30,900 249,131
GT Interactive Software Corp. ..................... 40,800 204,000
Gtech Holdings Corp. .............................. 64,600 1,655,375
Guarantee Life Cos., Inc. ......................... 13,900 257,150
Guess Inc. ........................................ 7,900 38,019
Guilford Mills Inc. ............................... 29,425 491,030
Guilford Pharmaceuticals Inc. ..................... 25,600 364,800
Guitar Center Inc. ................................ 26,600 655,025
Gulf Islands Fabrication Inc ...................... 11,400 88,350
Gulfmark Offshore Inc ............................. 8,500 133,875
Gymboree Corp. .................................... 35,300 225,038
H S Resources Inc. ................................ 23,800 179,988
H T E Inc. ........................................ 13,700 68,500
H.B. Fuller Co. ................................... 20,800 1,001,000
Ha Lo Industries Inc. ............................. 37,200 1,399,650
Hadco Corp. ....................................... 20,900 731,500
Haemonetics Corp. ................................. 36,200 823,550
Hagler Bailly Inc ................................. 18,200 364,000
Hain Food Group Inc ............................... 21,000 525,000
Halter Marine Group Inc. .......................... 43,500 212,063
Hambrecht & Quist Group Inc. ...................... 27,900 632,981
Hamilton Bancorp Inc. (Florida) ................... 12,300 328,256
Hancock Fabrics Inc. .............................. 30,100 252,088
Hancock Holding Co. ............................... 15,115 687,732
Handleman Co. ..................................... 49,400 694,687
Hanger Orthopedic Group ........................... 29,300 659,250
Hanna (M.A.) Co. .................................. 69,000 849,562
Hanover Compressor Company ........................ 44,600 1,145,662
Hanover Direct Inc. ............................... 182,700 628,031
Harbinger Corp. ................................... 48,875 391,000
Harbor Florida Bancshares Inc ..................... 22,566 252,457
Hardinge Brothers Inc. ............................ 16,100 296,844
Harken Energy Corp. ............................... 200,000 387,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-143
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- ---------------
<S> <C> <C>
Harleysville Group Inc. ........................... 17,100 $ 441,394
Harleysville National Corp. ....................... 10,661 415,779
Harman International Industries Inc. .............. 27,715 1,056,634
Harmon Industries Inc. ............................ 17,700 408,206
Harris Financial Inc. ............................. 12,300 167,588
Hartmarx Corp. .................................... 45,600 256,500
Harveys Casino Resorts ............................ 9,200 254,725
Haven Bancorp ..................................... 13,900 208,500
Haverty Furniture Cos., Inc. ...................... 12,800 268,800
Hawaiian Electric Industries Inc. ................. 50,000 2,012,500
Hayes Lemmerz International Inc. .................. 28,200 851,287
HCC Insurance Holdings Inc. ....................... 59,500 1,048,687
Headlands Mortgage Company ........................ 30,900 646,969
Health Care Property Investors Inc. REIT .......... 48,600 1,494,450
Health Care Inc. REIT ............................. 45,000 1,164,375
Healthcare Financial Partners Inc ................. 19,100 761,612
Healthcare Realty Trust REIT ...................... 62,490 1,394,308
Healthplan Services Corp. ......................... 14,196 163,254
Heartland Express Inc. ............................ 28,235 494,113
Hecla Mining Co. .................................. 83,100 301,238
Heico Corp ........................................ 9,100 287,219
Heilig Meyers Co. ................................. 96,500 645,344
Helix Technology Corp. ............................ 31,400 408,200
Helmerich & Payne Inc. ............................ 78,900 1,528,687
Henry Schein Inc. ................................. 38,600 1,727,350
Herbalife International Inc, Class A .............. 17,899 255,061
Heska Corp ........................................ 27,400 121,588
Hexcel Corp. ...................................... 21,000 175,875
Highlands Insurance Group ......................... 20,300 265,169
Hilb Rogal & Hamilton Co. ......................... 18,300 363,713
HMT Technology Corp. .............................. 59,600 763,625
HNC Software Inc. ................................. 40,500 1,637,719
Hollinger International Inc., Class A ............. 61,700 859,944
Holly Corp. ....................................... 8,300 140,063
Hollywood Entertainment Corp. ..................... 45,600 1,242,600
Hollywood Park Inc. ............................... 30,200 251,038
Hologic Inc. ...................................... 20,200 244,925
Holophane Corp. ................................... 16,800 431,550
Home Propreties New York Inc REIT ................. 27,100 697,825
Homebase Inc. ..................................... 57,100 364,013
Homestead Village Properties Inc. ................. 25,700 115,650
Hooper Holmes Inc. ................................ 22,000 638,000
Horizon Bancorp Inc ............................... 12,200 401,075
Horizon Offshore Inc .............................. 29,000 159,500
Hospitality Properties Trust REIT ................. 57,200 1,379,950
Host Marriott Services Corp. ...................... 44,900 465,838
Houghton Mifflin Co. .............................. 38,000 1,795,500
Houston Exploration Company ....................... 12,000 238,500
HSB Group Inc. .................................... 45,850 1,882,716
Hubco Inc. ........................................ 62,943 1,896,158
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-144
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- -------------------------------------------------------------- ---------- ---------------
<S> <C> <C>
Hughes Supply Inc. ........................................... 35,350 $ 1,033,987
Human Genome Sciences Inc. ................................... 35,100 1,248,244
Hunt Corp. ................................................... 13,400 142,375
Hussmann International Inc ................................... 79,800 1,546,125
Hutchinson Technology Inc. ................................... 30,900 1,100,812
Hvide Marine Inc., Class A ................................... 20,500 102,500
Hypercom Corp. ............................................... 16,600 163,925
Hyperion Solutions Corp ...................................... 47,110 847,980
ICG Communications Inc. ...................................... 72,100 1,550,150
Icon Cmt Corp ................................................ 10,200 163,200
ICOS Corp. ................................................... 55,600 1,654,100
Idacorp Inc .................................................. 58,600 2,120,587
IDEC Pharmaceuticals Corp. ................................... 27,800 1,306,600
Idex Corp. ................................................... 45,925 1,125,162
IDEXX Laboratories Inc. ...................................... 55,600 1,495,987
IDT Corp. .................................................... 24,900 382,838
IDX Systems Corp. ............................................ 14,800 651,200
Igen Inc. .................................................... 16,100 493,063
IHOP Corp. ................................................... 14,500 579,094
Imation Corp. ................................................ 63,600 1,113,000
IMC Mortgage Co. ............................................. 45,000 12,656
Imclone Systems Inc. ......................................... 38,300 347,094
Imco Recycling Inc. .......................................... 23,400 361,238
Immune Response Corp. ........................................ 35,000 380,625
Impac Mortgage Holdings Inc .................................. 34,050 155,353
Impath Inc ................................................... 13,300 352,450
Imperial Bancorp ............................................. 50,833 845,099
Imperial Credit Commercial Mortgage Investment Corp. ......... 56,300 527,812
Imperial Credit Industries Inc. .............................. 44,872 375,803
Imperial Holly Corp. ......................................... 21,800 177,125
Imrglobal Corp. .............................................. 18,250 537,234
Inacom Corp. ................................................. 22,400 333,200
Incyte Pharmacuticals Inc. ................................... 36,900 1,379,137
Independence Community Bank Corp ............................. 118,700 1,891,781
Independent Bank Corp (Mass) ................................. 18,900 328,388
Indiana Energy Inc. .......................................... 47,166 1,161,463
Indus International Inc. ..................................... 48,900 342,300
Industri Matematik International Corp. ....................... 40,300 201,500
Information Resources Inc. Callable .......................... 46,800 476,775
Informix Corp. ............................................... 245,200 2,421,350
Infoseek Corp. ............................................... 37,900 1,871,312
Infousa Inc., Class B ........................................ 42,200 221,550
Ingles Markets Inc. .......................................... 14,600 159,688
Inhale Therapeutic Systems ................................... 24,600 811,800
Inland Steel Industries Inc. ................................. 34,088 575,235
Innkeepers USA Trust ......................................... 52,200 616,612
Innovex Inc. ................................................. 23,100 316,903
Inprise Corp ................................................. 73,100 402,050
Input/Output Inc. ............................................ 62,700 458,494
Insight Enterprises Inc. ..................................... 20,199 1,027,624
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-145
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Insignia Financial Group Inc. New ................. 24,599 $ 298,263
Insituform Technologies Inc., Class A ............. 31,100 450,950
Inspire Insurance Solutions Inc ................... 16,600 305,025
Integrated Device Technology ...................... 131,100 802,987
Integrated Process Equipment Corp. ................ 26,900 289,175
Integrated Systems Inc., Class A .................. 27,700 413,769
Intelligroup Inc .................................. 6,200 110,825
Inter-Tel Inc. .................................... 32,200 752,675
Interdigital Communications Corp. ................. 81,100 370,019
Interface Inc., Class A ........................... 73,200 679,387
Intergraph Corp. .................................. 64,300 369,725
Intergrated Electrical Services ................... 28,200 627,450
Interim Services Inc. ............................. 74,200 1,734,425
Intermet Corp. .................................... 28,500 372,281
International Bancshares Corp ..................... 17,100 865,687
International Multifoods Corp. .................... 27,500 709,844
International Network Services .................... 30,800 2,048,200
International Rectifier Corp. ..................... 80,600 785,850
International Speedway Corp ....................... 30,000 1,215,000
International Telecomm Systems Inc ................ 18,400 271,400
Interpool Inc. .................................... 20,950 350,913
Interwest Bancorp Inc. ............................ 33,000 730,125
Invacare Corp. .................................... 36,700 880,800
Investment Technology Group Inc. .................. 6,300 390,994
Investors Financial Services Corp. ................ 10,500 626,062
Ionics Inc. ....................................... 25,700 769,394
IRI International Corp ............................ 25,500 102,000
Iron Inc. ......................................... 27,500 991,719
IRT Property Co. REIT ............................. 49,000 490,000
Irvine Apartment Communities Inc. ................. 29,300 933,937
Irwin Financial Corp. ............................. 18,200 494,813
Isaac Fair & Co., Inc. ............................ 15,700 725,144
Isis Pharmaceuticals Inc. ......................... 42,300 547,256
ISS Group Inc. .................................... 7,300 401,500
ITC Deltacom ...................................... 80,300 1,224,575
Iteq Inc .......................................... 21,900 46,538
ITI Technologies Inc. ............................. 13,000 403,000
Itron Inc. ........................................ 18,200 130,813
ITT Educational Services Inc. ..................... 27,500 935,000
Ivax Corp. ........................................ 150,000 1,865,625
Ivex Packaging Corp ............................... 28,300 657,975
IXC Communications Inc. ........................... 42,100 1,415,612
J. B. Hunt Transport Services Inc. ................ 34,700 798,100
J.M. Smucker Co. Class A .......................... 40,800 1,009,800
Jabil Circuit Inc. ................................ 32,600 2,432,775
Jack Henry & Associates Inc. ...................... 19,550 972,612
Jacobs Engineering Group Inc. ..................... 33,900 1,381,425
JDA Software Group Inc. ........................... 31,350 303,703
JDN Realty Corp. REIT ............................. 50,100 1,080,281
Jeffbanks Inc ..................................... 14,232 281,082
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-146
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Jefferies Group Inc. .............................. 21,500 $ 1,066,937
Jefferson Savings Bancorp Inc. .................... 12,800 168,000
JLG Industries Inc. ............................... 63,100 985,937
JLK Direct Distribution Inc, Class A .............. 7,200 73,350
Jo Ann Stores Inc., Class A ....................... 25,450 410,381
John Harland Co. .................................. 48,500 766,906
John Nuveen & Co., Inc., Class A .................. 9,700 360,113
John Wiley & Sons Inc., Class A ................... 40,400 1,951,825
Jones Intercable Inc., Class A .................... 22,300 794,437
Jones Pharma Inc .................................. 36,100 1,317,650
Jostens Inc. ...................................... 55,300 1,448,169
Journal Register Co. .............................. 17,400 261,000
JP Realty Inc. REIT ............................... 20,800 408,200
JSB Financial Inc. ................................ 12,600 685,125
Juno Lighting Inc. ................................ 28,200 659,175
Just For Feet Inc. ................................ 37,050 643,744
Justin Industries Inc. ............................ 27,850 365,531
K & G Mens Center Inc. ............................ 9,100 80,763
K V Pharmaceutical Co. ............................ 20,550 425,128
K2 Inc. ........................................... 17,783 183,387
Kaiser Aluminum Corp. ............................. 43,900 214,013
Kaman Corp., Class A .............................. 37,300 599,131
Kansas City Life Insurance Co. .................... 5,500 449,625
Kaufman & Broad Home Corp. ........................ 62,400 1,794,000
Kaydon Corp. ...................................... 50,300 2,015,144
KCS Energy Inc. ................................... 37,000 113,313
Kelley Oil & Gas Corp. ............................ 189,900 112,753
Kellstrom Inds Inc ................................ 18,400 529,000
Kellwood Co. ...................................... 33,800 845,000
KEMET Corp. ....................................... 59,700 671,625
Kendle International Inc .......................... 12,300 287,513
Kenneth Cole Productions Inc., Class A ............ 10,900 204,375
Kent Electronics Corp. ............................ 43,700 557,175
Key Energy Group Inc. ............................. 27,700 129,844
Keystone Automotive Inds Inc ...................... 24,300 508,781
Kilroy Realty Corp. REIT .......................... 43,300 995,900
Kimball International Inc., Class B ............... 55,800 1,060,200
Kirby Corp. ....................................... 32,700 651,956
Kitty Hawk Inc. ................................... 26,500 291,500
Knight Transportation Inc. ........................ 11,100 296,231
Knoll Inc. ........................................ 21,900 648,787
Koger Equity Inc. ................................. 39,100 672,031
Komag Inc. ........................................ 83,600 867,350
Kopin Corp. ....................................... 16,200 340,200
Kroll O Gara Company .............................. 14,400 567,900
Kronos Inc. ....................................... 12,950 573,847
Kuhlman Corp. ..................................... 26,400 999,900
Kulicke & Soffa Industries Inc. ................... 36,500 647,875
L 3 Communications Holding Corp ................... 8,000 372,500
L.S. Starrett Co. ................................. 10,800 370,575
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-147
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- ---------------
<S> <C> <C>
Labone Inc. ....................................... 3,300 $ 42,900
Labor Ready Inc ................................... 36,049 709,715
Laboratory Corp. America Holdings ................. 68,500 94,188
Laclede Gas Co. ................................... 28,300 757,025
Ladish Inc ........................................ 20,500 171,688
Lam Research Corp. ................................ 60,600 1,079,437
Lance Inc. ........................................ 35,600 709,775
Land's End Inc. ................................... 21,900 589,931
Landamerica Financial Group Inc ................... 23,900 1,333,919
Landauer Inc. ..................................... 11,900 385,263
Landry's Seafood Restaurants Inc. ................. 39,100 293,250
Landstar Systems Inc. ............................. 16,300 664,225
Lasalle Hotel Pptys REIT .......................... 17,800 184,675
Lasalle Partners Inc .............................. 26,000 765,375
Laser Mortgage Management Inc REIT ................ 29,000 157,688
Lason Holdings Inc ................................ 18,900 1,099,744
Lattice Semiconductor Corp. ....................... 34,900 1,602,128
Lawson Products Inc. .............................. 9,500 218,500
Lawter International Inc. ......................... 40,900 475,463
Lazy Boy Chair Co. ................................ 83,100 1,480,219
LCC International Inc ............................. 22,400 84,000
Learning Tree International Inc. .................. 16,500 149,531
LeaRonal Inc. ..................................... 14,150 479,331
Leasing Solutions Inc ............................. 8,100 32,906
Lee Enterprises Inc. .............................. 69,400 2,186,100
Legato Systems Inc. ............................... 58,600 3,863,937
Level One Communications Inc. ..................... 55,774 1,979,977
Lexington Corporate Property Trust REIT ........... 25,900 325,369
Libbey Inc. ....................................... 27,000 781,312
Liberty Corp. ..................................... 17,200 847,100
Life Technologies Inc. ............................ 15,800 614,225
Life USA Holding Inc. ............................. 31,000 399,125
Lifecore Biomedical Inc. .......................... 16,200 166,050
Ligand Pharmaceuticals Inc., Class B .............. 62,835 730,457
Lilly Industries Inc., Class A .................... 36,588 729,473
Lincoln Electric Holdings Inc ..................... 75,400 1,677,650
Lindsay Manufacturing Co. ......................... 20,612 305,315
Linens N Things Inc. .............................. 60,600 2,401,275
Liposome Co., Inc. ................................ 59,800 923,162
Littelfuse Inc. ................................... 30,000 577,500
LNR Property Corp. REIT ........................... 41,600 829,400
Local Financial Corp .............................. 30,300 272,700
Lodgian Inc. ...................................... 27,400 133,575
LoJack Corp. ...................................... 28,200 334,875
Lone Star Industries Inc. ......................... 28,600 1,052,837
Lone Star Steakhouse + Saloon Inc. ................ 59,000 542,062
Lone Star Technologies Inc. ....................... 35,200 356,400
Long Beach Financial Corp. ........................ 32,900 246,750
Longs Drug Stores Corp. ........................... 47,500 1,781,250
Longview Fibre Co. ................................ 80,900 935,406
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-148
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Louis Dreyfus Natural Gas Holdings Corp. .......... 29,308 $ 417,639
LTC Healthcare Incorporated ....................... 1,909 5,011
LTC Properties REIT ............................... 44,700 743,137
LTV Corp. ......................................... 156,200 907,912
Luby's Cafeterias Inc. ............................ 37,800 583,537
Lufkin Industries Inc. ............................ 10,200 188,700
Lycos Inc. ........................................ 66,724 3,707,352
Lydall Inc. ....................................... 24,500 290,938
M.D.C. Holdings, Inc. ............................. 29,700 634,837
M.S. Carriers Inc. ................................ 13,700 451,244
MacDermid Inc. .................................... 22,400 876,400
Macerich Co. REIT ................................. 45,900 1,176,187
Macrochem Corp .................................... 28,300 238,781
Macromedia Inc. ................................... 53,600 1,805,650
Madison Gas & Electric Co. ........................ 26,050 592,637
MAF Bancorp Inc. .................................. 34,531 915,071
Magellan Health Services, Inc. .................... 47,700 399,488
MagneTek Inc. ..................................... 44,200 511,063
Mahoning National Bancorp Inc ..................... 9,900 306,900
Mail Well Holdings Inc. ........................... 61,500 703,406
Mainstreet Bankgroup Inc. ......................... 22,100 1,026,269
Manhattan Assocs Inc .............................. 5,600 152,600
Manitowoc Co., Inc. ............................... 27,025 1,199,234
Manufactured Home Communities Inc. REIT ........... 33,600 842,100
Manugistics Group Inc. ............................ 29,400 367,500
Mapics Inc. ....................................... 22,800 376,200
Marcus Corp. ...................................... 35,462 576,257
Marine Drilling Cos., Inc. ........................ 81,900 629,606
Mariner Post Acute Network Inc .................... 111,139 507,072
Mark IV Industries Inc. ........................... 85,200 1,107,600
Markel Corp. ...................................... 6,440 1,165,640
Marshall Industries ............................... 26,800 656,600
Marval Enterprises Inc. ........................... 18,700 115,706
MascoTech Inc. .................................... 57,000 976,125
Mastec Inc. ....................................... 19,449 408,429
Mastech Corp. ..................................... 30,800 881,650
Mathews International Corp., Class A .............. 25,100 790,650
Maverick Tube Corp. ............................... 28,800 160,200
Maxim Group Inc. .................................. 30,800 739,200
Maximus Inc ....................................... 12,900 477,300
MAXXAM Inc. ....................................... 6,000 344,250
Maxxim Medical Inc. ............................... 23,000 684,250
McClatchy Newspapers Inc., Class A ................ 35,550 1,257,581
McGrath RentCorp .................................. 10,800 237,600
McWhorter Technologies Inc. ....................... 13,200 301,950
MDU Resources Group Inc. .......................... 82,550 2,172,097
Meadowbrook Insurance Group Inc. .................. 7,900 129,856
Meadowcraft Inc ................................... 5,500 61,531
Medallion Financial Corp .......................... 16,900 241,881
Medaphis Corp. .................................... 118,700 389,484
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-149
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Media Arts Group Inc .............................. 7,100 $ 99,844
Media General Inc., Class A ....................... 36,600 1,939,800
Medical Assurance Inc. ............................ 37,001 1,223,336
Medical Manager Corp. ............................. 16,300 511,413
Medicis Pharmaceutical Corp., Class A ............. 28,900 1,723,162
Medimmune Inc. .................................... 36,900 3,669,244
Medquist Inc. ..................................... 36,100 1,425,950
Memberworks Inc. .................................. 20,100 592,950
MEMC Electronic Materials Inc. .................... 31,100 264,350
Men's Wearhouse Inc. .............................. 32,424 1,029,462
Mentor Corp. ...................................... 35,700 836,719
Mentor Graphics Corp. ............................. 96,900 823,650
Merchants New York Bancorp Inc. ................... 11,800 427,013
Mercury Interactive Corp. ......................... 24,400 1,543,300
Meridian Industrial Trust Inc. REIT ............... 49,600 1,165,600
Meridian Resource Corp. ........................... 65,348 208,297
Merisel Inc. ...................................... 121,000 287,375
Meristar Hospitality Corp ......................... 72,593 1,347,508
Merrill Corp. ..................................... 21,900 422,944
Merry Land Properties Incorporated REIT ........... 1,480 5,365
Mesa Air Group Inc. ............................... 38,100 297,656
Mesaba Holdings Inc. .............................. 19,800 408,375
Meta Group Inc .................................... 12,900 383,775
Metal Management Inc .............................. 43,400 151,900
Metals USA Inc .................................... 44,400 432,900
Metamor Worldwide Inc ............................. 45,200 1,130,000
Methode Electronics Inc., Class A ................. 55,600 868,750
Metris Cos Inc. ................................... 30,151 1,516,972
Metro Information Services Inc. ................... 10,000 300,000
Metro Networks Inc. ............................... 11,200 477,400
Metrocall Inc. .................................... 39,300 171,938
Metromedia Fiber Network Inc, Class A ............. 39,600 1,326,600
Metromedia Inter. Group Inc. ...................... 77,284 420,232
Mettler Toledo International Inc .................. 60,000 1,683,750
Metzler Group Inc. ................................ 26,599 1,295,039
MGC Communications Inc ............................ 5,100 35,700
MGI Properties REIT ............................... 22,200 620,212
Michael Foods Inc ................................. 20,600 618,000
Michael's Stores Inc. ............................. 40,500 732,797
Michigan Finance Corp. ............................ 4,400 149,600
Micrel Inc. ....................................... 21,000 1,155,000
Micro Warehouse Inc. .............................. 54,500 1,842,781
MicroAge Inc. ..................................... 31,600 485,850
Microchip Technology Inc. ......................... 80,400 2,974,800
Micromuse Inc ..................................... 15,500 302,250
Micron Electronics Inc. ........................... 54,500 943,531
Micros Systems Inc. ............................... 25,800 848,175
Mid Atlantic Medical Services Inc. ................ 69,600 682,950
Mid-America Apartment Communities Inc. ............ 30,200 685,162
Mid-America Bancorp ............................... 12,596 341,667
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-150
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------ -------- ---------------
<S> <C> <C>
Midas Inc ............................................ 26,400 $ 821,700
Midland Co. .......................................... 6,200 149,575
Midway Games Inc. .................................... 42,269 464,959
Midwest Express Holdings Inc. ........................ 22,000 578,875
Mikasa Inc. .......................................... 13,000 165,750
Milacron Inc. ........................................ 59,400 1,143,450
Millennium Pharmaceuticals ........................... 51,200 1,324,800
Miller Industries Inc. ............................... 59,750 268,875
Mills Co. ............................................ 23,700 471,038
Mindspring Enterprises Inc ........................... 24,500 1,496,031
Mine Safety Appliances Co. ........................... 5,500 390,500
Minerals Technologies Inc. ........................... 30,600 1,252,687
Minimed Inc. ......................................... 11,700 1,225,575
Minnesota Power & Light Co. .......................... 56,100 2,468,400
Miravant Medical Technologies ........................ 12,350 159,006
Mississippi Chemical Corp. ........................... 41,152 576,128
Mississippi Valley Bankshares Inc. ................... 9,800 330,750
Mitchell Energy & Development Corp., Class A ......... 31,600 361,425
MMC Networks Inc ..................................... 48,400 641,300
MMI Cos., Inc. ....................................... 24,300 407,025
Mobius Management Systems Inc ........................ 4,700 69,913
Modine Manufacturing Co. ............................. 34,700 1,257,875
Monaco Coach Corp .................................... 19,550 518,075
Moog Inc ............................................. 10,700 418,638
Morgan Keegan Inc. ................................... 42,826 805,664
Morrison Knudsen Corp. ............................... 52,100 507,975
Motivepower Inds Inc ................................. 28,000 901,250
Movado Group Inc ..................................... 13,000 346,125
MRV Communications Inc. .............................. 35,900 222,131
MTI Technology Corp .................................. 38,600 173,700
MTS Systems Corp. .................................... 29,100 392,850
Mueller Industries Inc. .............................. 56,500 1,147,656
Musicland Stores Corp. ............................... 57,300 855,919
Myers Industries Inc. ................................ 29,251 839,138
N2K Inc .............................................. 17,200 224,675
NAC Reinsurance Corp. ................................ 23,600 1,107,725
NACCO Industries Inc., Class A ....................... 10,100 929,200
National Bancorp of Alaska Inc. ...................... 24,000 810,000
National City Bancorporation ......................... 8,800 231,000
National City Bancshares Inc. ........................ 19,117 713,303
National Computer Systems Inc. ....................... 43,500 1,609,500
National Data Corp. .................................. 52,700 2,565,831
National Golf Properties Inc. REIT ................... 19,600 567,175
National Health Investors Inc. ....................... 35,200 869,000
National Healthcare Corp ............................. 11,300 175,150
National Instruments Corp. ........................... 23,350 796,819
National Penn Bancshares Inc. ........................ 21,361 582,087
National Presto Industries Inc. ...................... 10,500 447,563
National Processing Inc. ............................. 11,300 62,150
National R V Holdings Inc ............................ 15,399 396,524
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-151
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
National Steel Corp., Class B ..................... 33,200 $ 236,550
National Western Life Insurance Co. ............... 2,900 340,750
Nationwide Health Properties Inc. ................. 68,100 1,468,406
Natural Microsystems Corp. ........................ 15,200 110,675
Nature's Sunshine Products Inc. ................... 22,679 345,855
Nautica Enterprises Inc. .......................... 51,900 778,500
NBT Bancorp Inc. .................................. 18,887 441,484
NBTY Inc. ......................................... 83,100 592,087
NCH Corp. ......................................... 3,200 190,400
NCI Building Systems Inc. ......................... 27,900 784,687
NCO Group Inc. .................................... 13,350 600,750
NCS Healthcare Inc., Class A ...................... 22,300 529,625
Neomagic Corp. .................................... 30,700 679,237
Network Appliance Inc. ............................ 95,200 4,284,000
Network Equipment Technologies Inc. ............... 32,200 332,063
Network Solutions Inc, Class A .................... 6,100 798,337
Neurogen Corp. .................................... 17,500 306,250
Nevada Power Co. .................................. 79,900 2,077,400
New England Business Service Inc. ................. 20,300 794,237
New Era Of Networks Inc ........................... 3,000 132,000
New Jersey Resources Corp. ........................ 27,900 1,102,050
New Plan Excel Realty Trust Inc. REIT ............. 133,100 2,953,156
Newfield Exploration Co. .......................... 55,900 1,166,912
Newpark Resources Inc. ............................ 110,460 752,509
Newport News Shipbuilding Inc. .................... 55,200 1,845,750
Nexstar Pharmaceuticals Inc. ...................... 43,100 398,675
NFO Worldwide Inc. ................................ 27,450 315,675
Nichols Research Corp. ............................ 17,400 363,225
Nine West Group Inc. .............................. 39,000 606,937
NL Industries Inc. ................................ 34,100 483,794
Nordson Corp. ..................................... 21,600 1,109,700
Norrell Corp. ..................................... 26,200 386,450
Norstan Inc ....................................... 13,600 241,400
Nortek Inc. ....................................... 14,200 392,275
North Carolina Natural Gas Corp. .................. 15,775 523,533
North Face Inc. ................................... 18,800 244,400
North Pittsburgh Systems Inc. ..................... 23,500 314,313
Northwest Bancorp Inc (Pa) ........................ 22,500 219,375
Northwest Natural Gas Co. ......................... 38,750 1,002,656
Northwestern Corp ................................. 36,700 970,256
Nova Corp. ........................................ 108,148 3,751,384
Novacare Employee Services Inc .................... 40,400 217,150
Novacare Inc. ..................................... 94,500 236,250
Novellus Systems Inc. ............................. 53,500 2,648,250
Novoste Corp ...................................... 12,400 351,850
NPC International Inc. ............................ 13,300 160,431
NS Group Inc. ..................................... 31,700 140,669
NTL Inc. .......................................... 64,733 3,653,369
Nuevo Energy Co. .................................. 29,900 343,850
NUI Corp. ......................................... 19,800 530,887
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-152
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
NVR Inc. .......................................... 14,400 $ 686,700
NYMAGIC Inc. ...................................... 5,900 122,425
O'Reilly Automotive Inc. .......................... 21,400 1,011,150
Oak Industries Inc. ............................... 27,560 964,600
Oak Technology .................................... 53,300 186,550
Oakley Inc. ....................................... 46,900 442,619
Oakwood Homes Corp. ............................... 73,000 1,108,687
Objective Systems Integrators Inc. ................ 19,700 91,113
Ocean Financial Corp. ............................. 19,400 322,525
Oceaneering International Inc. .................... 34,000 510,000
Octel Corp ........................................ 22,000 305,250
Ocular Sciences Inc ............................... 14,500 387,875
Ocwen Asset Investment Corp. ...................... 26,300 126,569
OEA Inc. .......................................... 25,000 295,313
Oec Medical Systems Inc. .......................... 19,900 625,606
Offshore Logistics Inc. ........................... 32,400 384,750
Old National Bancorp .............................. 42,764 2,384,093
Olsten Corp. ...................................... 107,900 795,762
OM Group Inc. ..................................... 37,050 1,352,325
Omega Financial Corp. ............................. 13,500 408,375
Omega Healthcare Investors Inc. ................... 31,609 954,197
Omega Protein Corp. ............................... 12,500 126,563
Omni Energy Services Corp. ........................ 5,400 22,950
Omniamerica Inc ................................... 9,500 304,000
Omnipoint Corp. ................................... 47,900 446,069
Omniquip International Inc. ....................... 15,800 237,000
On Assignment Inc. ................................ 17,100 589,950
On Command Corp ................................... 15,200 137,750
One Valley Bancorp Inc. ........................... 54,175 1,781,003
Oneida Ltd. ....................................... 21,775 322,542
Oneok Inc. ........................................ 49,300 1,780,962
Onsale Inc ........................................ 5,400 216,338
Open Market Inc. .................................. 35,500 414,906
Optical Cable Corp. ............................... 3,700 44,863
Orange & Rockland Utilities Inc. .................. 21,200 1,208,400
Oregon Steel Mills Inc. ........................... 33,200 394,250
Organogenesis Inc. ................................ 46,302 520,898
Oriental Financial Group Inc. ..................... 17,433 545,871
Orthodontic Centres of America Inc. ............... 56,800 1,104,050
Oshkosh B Gosh Inc., Class A ...................... 19,200 387,600
OSullivan Industries Inc. ......................... 24,200 254,100
Otter Tail Power Co. .............................. 18,500 737,687
Overseas Shipholding Group Inc. ................... 43,900 705,144
Owens & Minor Inc. ................................ 31,000 488,250
Oxford Health Plans Inc. .......................... 125,700 1,869,787
Oxford Industries Inc. ............................ 10,500 296,625
P Common Inc. ..................................... 68,100 271,336
P.H. Glatfelter Co. ............................... 39,900 493,763
Pacific Gateway Exchange Inc. ..................... 13,400 644,037
Pacific Gulf Properties Inc. REIT ................. 27,400 549,712
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-153
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Pacific Sunwear California ........................ 31,748 $ 519,874
Pagemart Wireless Inc., Class A ................... 54,000 300,375
Pairgain Technologies Inc. ........................ 110,800 851,775
Palm Harbor Homes Inc. ............................ 30,521 768,748
Pan Pacific Retail Properties Inc REIT ............ 15,500 309,031
Panavision Inc .................................... 3,255 40,281
Papa John's International Inc. .................... 31,975 1,410,897
Parexel International Corp. ....................... 38,800 970,000
Park Electrochemical Corp. ........................ 14,200 406,475
Park National Corp. ............................... 12,900 1,328,700
Parker Drilling Co. ............................... 93,600 298,350
Parkervision Inc. ................................. 9,300 218,550
Parkway Properties Inc REIT ....................... 16,500 515,625
Party City Corp ................................... 14,600 210,788
PathoGenesis Corp. ................................ 25,600 1,484,800
Patterson Dental Co. .............................. 34,175 1,486,612
Patterson Energy Inc. ............................. 46,300 188,094
PAXAR Corp. ....................................... 54,493 487,031
Paxson Communications Corp. ....................... 28,500 261,844
Paymentech Inc. ................................... 23,700 438,450
PBOC Holdings Inc ................................. 19,900 203,975
PEC Israel Economic Corp. ......................... 8,000 230,000
Pediatrix Medical Group ........................... 23,900 1,432,506
Pegasus Communications Corp Class A ............... 13,100 328,319
Pegasus Systems Inc ............................... 16,400 590,400
Pegasystems Inc. .................................. 9,600 39,900
Penford Corp ...................................... 10,500 168,000
Penn Treaty American Corp. ........................ 8,600 231,663
Penn Virginia Corp. ............................... 9,800 180,075
PennCorp Financial Group Inc. ..................... 38,700 38,700
Pennsylvania Enterprises Inc. ..................... 15,400 392,700
Pennsylvania REIT ................................. 17,800 345,988
Pennzoil Quaker Str Co. ........................... 46,763 692,674
Penske Motorsports Inc. ........................... 8,600 228,975
Peoples Bancorp Inc ............................... 59,000 641,625
Peoples Energy Corp. .............................. 55,100 2,197,112
Peoples Holding Co. ............................... 8,800 284,350
Perclose Inc. ..................................... 10,400 344,500
Peregrine Systems Inc ............................. 13,500 626,062
Performance Food Group Inc. ....................... 19,650 552,656
Perrigo Co. ....................................... 100,300 883,894
Personal Group of America Inc. .................... 51,400 899,500
Petco Animal Supplies Inc. ........................ 33,000 332,063
Petersen Cos Inc., Class A ........................ 25,600 867,200
PETSMART Inc. ..................................... 181,300 1,994,300
PFF Bancorp Inc. .................................. 23,800 380,800
Pharmaceutical Product Development Inc. ........... 26,604 799,783
Pharmacyclics Inc ................................. 18,700 476,850
Pharmerica Inc. ................................... 106,400 638,400
Philadelphia Consolidated Holding Corp. ........... 9,800 221,725
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-154
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Philadelphia Suburban Corp. ....................... 37,165 $ 1,098,690
Phillips-Van Heusen Corp. ......................... 35,900 258,031
Phoenix Investment Partners Limited ............... 68,800 580,500
Photronics Inc. ................................... 33,900 812,541
PhyCor Inc. ....................................... 122,400 833,850
Phymatrix Corp. ................................... 25,600 56,000
Physician Reliance Network Inc. ................... 45,500 597,187
PictureTel Corp. .................................. 58,100 384,913
Piedmont Natural Gas Co., Inc. .................... 47,900 1,730,387
Pierce Leahy Corp ................................. 11,500 293,250
Pilgrim's Pride Corp. ............................. 7,800 155,513
Pillowtex Corp. ................................... 10,800 288,900
Pinkerton's Inc. .................................. 11,450 244,028
Pinnacle Banc Group Inc. .......................... 6,200 176,700
Pinnacle Systems Inc. ............................. 13,500 482,625
Pioneer Group Inc. ................................ 36,400 718,900
Pioneer-Standard Electronics Inc. ................. 39,775 372,891
Pittston Bulington Group .......................... 29,000 322,625
Plains Resources Inc. ............................. 26,400 371,250
Planet Hollywood International Inc. ............... 52,400 121,175
Plantronics Inc. .................................. 25,700 2,210,200
Platinum Software Corp. ........................... 37,700 483,031
Playboy Enterprises Inc., Class B ................. 27,000 565,312
Playtex Family Products Corp. ..................... 51,100 820,794
PLD Telekom Inc ................................... 29,700 53,831
Plexus Corp. ...................................... 23,100 782,512
Pma Capital Corp., Class A ........................ 23,300 455,806
PMC Sierra Inc. ................................... 48,400 3,055,250
Poe & Brown Inc. .................................. 16,600 579,962
Pogo Producing Co. ................................ 63,900 830,700
Polaris Industries Inc. ........................... 35,800 1,402,912
Polycom Inc. ...................................... 23,700 527,325
Polymer Group Inc. ................................ 40,100 398,494
Pomeroy Computer Resources ........................ 14,300 321,750
Pool Energy Services Co. .......................... 31,700 342,756
Potlatch Corp. .................................... 45,400 1,674,125
Powertel Inc ...................................... 23,000 311,938
Powerwave Technologies Inc. ....................... 6,300 117,338
Pre-Paid Legal Services Inc. ...................... 30,900 1,019,700
Precision Castparts Corp. ......................... 38,100 1,685,925
Premier Bancshares Inc ............................ 38,900 1,018,694
Premier Parks Inc. ................................ 98,500 2,979,625
Premiere Technologies Inc. ........................ 52,200 384,975
Premisys Communications Inc. ...................... 37,800 347,288
Prentiss Properties Trust REIT .................... 61,400 1,369,987
Presidential Life Corp. ........................... 35,700 709,537
Presstek Inc. ..................................... 41,500 282,719
Preview Travel Inc ................................ 18,300 337,406
PRI Automation Inc. ............................... 26,900 699,400
Price Enterprises Inc ............................. 21,295 113,130
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-155
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Pride International Inc. .......................... 78,800 $ 556,525
Primadonna Resorts Inc. ........................... 7,100 62,569
Primark Corp. ..................................... 33,900 919,537
Prime Bancorp Inc ................................. 14,200 223,650
Prime Bancshares Inc .............................. 7,200 124,200
Prime Group Realty Trust REIT ..................... 6,400 96,800
Prime Hospitality Corp. ........................... 84,100 888,306
Prime Retail Inc. ................................. 66,893 656,388
Primex Technologies Inc ........................... 7,100 301,750
Primus Telecomm Group Inc. ........................ 35,300 582,450
Priority Healthcare Corp, Class B ................. 20,100 1,042,687
Probusiness Services Inc .......................... 17,799 809,854
Profit Recovery Group International Inc. .......... 18,700 700,081
Progress Software Corp. ........................... 26,700 901,125
Project America Inc ............................... 5,500 99,688
Project Software & Development Inc. ............... 10,600 355,100
Protection One Inc. ............................... 32,500 278,281
Protein Design Inc. ............................... 29,000 670,625
Provident Bankshares Corp. ........................ 38,012 945,548
Province Healthcare Company ....................... 12,900 462,788
PS Business Pks Inc ............................... 30,100 718,637
Psinet Inc. ....................................... 68,000 1,419,500
PSS World Med Inc ................................. 110,150 2,533,450
Public Service Co. of New Mexico .................. 65,700 1,342,744
Public Service Co. of North Carolina Inc. ......... 31,700 824,200
Puerto Rican Cement Inc. .......................... 6,500 227,094
Pulte Corp. ....................................... 38,000 1,056,875
Pxre Corp. ........................................ 17,296 433,481
QAD Inc ........................................... 12,500 44,531
Qlogic Corp. ...................................... 13,700 1,792,987
QRS Corp .......................................... 11,500 552,000
Quadramed Corp .................................... 26,800 549,400
Quaker Fabric Corp. ............................... 17,500 109,375
Quanex Corp. ...................................... 21,400 482,838
Queens County Bancorp., Inc. ...................... 27,195 809,051
Quest Diagnostics Inc. ............................ 46,700 831,844
Quiksilver Inc. ................................... 22,100 663,000
Radiant Systems Inc. .............................. 11,100 81,863
Rainforest Cafe Inc. .............................. 34,924 211,727
Ralcorp Holdings Inc. ............................. 45,100 823,075
Rambus Inc. ....................................... 22,900 2,204,125
Range Resources Corp .............................. 52,000 178,750
Rational Software Corp. ........................... 132,545 3,512,442
Rayonier Inc. ..................................... 43,400 1,993,687
Rayovac Corp ...................................... 42,900 1,144,894
RCN Corp. ......................................... 52,500 928,594
Read-Rite Corp. ................................... 70,100 1,036,166
Real Networks Inc ................................. 14,000 502,250
Realty Income Corp. ............................... 42,000 1,044,750
Reckson Associates Realty Corp. ................... 62,800 1,393,375
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-156
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- ---------------
<S> <C> <C>
Recoton Corp. ..................................... 15,900 $ 285,206
Red Roof Inns Inc. ................................ 43,900 740,812
Redwood Trust Inc. ................................ 18,400 257,600
Regal Beloit Corp. ................................ 33,400 768,200
Regency Realty Corp. REIT ......................... 21,800 485,050
Regeneron Pharmaceuticals Inc. .................... 38,100 280,988
Regis Corp. ....................................... 28,100 1,124,000
Reinsurance Group of America Inc. ................. 39,550 2,768,500
Reliance Bancorp Inc. ............................. 14,100 392,156
Reliance Steel & Aluminum Co. ..................... 16,050 443,381
Remec Inc. ........................................ 30,000 540,000
Remedy Corp. ...................................... 34,200 476,663
Remedytemp ........................................ 7,000 105,875
Renaissance Worldwide Inc ......................... 20,178 123,590
Renal Care Group Inc. ............................. 63,275 1,823,111
Rental Service Corp. .............................. 36,700 575,731
Rental Way Inc .................................... 25,460 618,996
Renters Choice Inc. ............................... 23,600 749,300
Republic Bancorp Inc. ............................. 31,782 433,030
Republic Bancshares Inc ........................... 9,700 127,313
Republic Banking Corp (Fla.) ...................... 12,300 130,688
Republic Gypsum Co. ............................... 13,800 276,863
Republic Security Financial Corp .................. 73,961 896,777
Resmed Inc ........................................ 23,000 1,043,625
Resource America Inc. ............................. 30,500 276,406
Resource Bancshares Mortgage Group Inc. ........... 21,949 363,530
Resources Care Inc. ............................... 18,699 461,632
Respironics Inc. .................................. 43,328 867,914
RFS Hotel Investors Inc. .......................... 34,000 416,500
Richfood Holdings Inc. ............................ 74,900 1,554,175
Richmond County Financial Corp .................... 42,500 682,656
Riggs National Corp. .............................. 31,050 632,644
Rio Hotel & Casino Inc. ........................... 26,000 412,750
Risk Capital Holding Inc. ......................... 19,800 430,650
Riviana Foods Inc. ................................ 11,500 283,906
RLI Corp. ......................................... 11,773 391,452
Roadway Express Inc. .............................. 23,200 334,950
Roanoke Electric Steel Corp. ...................... 17,400 255,563
Robbins & Myers Inc. .............................. 12,300 272,138
Robert Mondavi Corp. .............................. 12,400 506,850
Roberts Pharmaceutical Corp. ...................... 40,100 872,175
Rochester Gas & Electric Corp. .................... 59,400 1,856,250
Rock-Tenn Co. Class A ............................. 18,390 311,481
Rogers Corp. ...................................... 12,800 382,400
Rohn Inds Inc ..................................... 34,400 118,250
Rollins Inc. ...................................... 27,800 486,500
Rollins Truck Leasing Corp. ....................... 76,262 1,124,864
Romac International Inc. .......................... 54,534 1,213,381
Roper Industries Inc. ............................. 49,000 998,375
Roslyn Bancorp Inc. ............................... 64,800 1,393,200
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-157
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Rouge Inds Inc., Class A .......................... 16,900 $ 147,875
RPC Energy Services Inc. .......................... 19,000 140,125
RTI International Metals Inc ...................... 22,800 319,200
Ruby Tuesday Inc. ................................. 45,200 960,500
Ruddick Corp. ..................................... 42,700 982,100
Rural/Metro Corp. ................................. 22,200 242,813
Russ Berrie & Co., Inc. ........................... 16,400 385,400
Russell Corp. ..................................... 47,700 968,906
Rutherford Moran Oil Corp. ........................ 8,200 23,063
RWD Technologies Inc .............................. 6,900 149,213
Ryan's Family Steak Houses Inc. ................... 62,700 775,912
Ryerson Tull Inc., Class A ........................ 7,600 74,100
Ryland Group Inc. ................................. 23,700 684,337
S&T Bancorp Inc. .................................. 43,300 1,193,456
S3 Inc. ........................................... 83,100 611,564
Sabratek Corp. .................................... 14,400 235,800
Safeguard Scientifics Inc. ........................ 42,600 1,168,837
Safety Kleen Corp. New ............................ 46,010 649,891
Samsonite Corp. ................................... 15,351 85,390
Sanchez Computer Associates Inc ................... 10,400 304,200
Sandisk Corp. ..................................... 29,100 411,038
Sandy Spring Bancorp Inc .......................... 15,000 451,875
Sangstat Medical Corp. ............................ 25,200 535,500
Santa Barbara Bancorp (California) ................ 24,900 641,175
Santa Fe Energy Resources Inc. .................... 160,000 1,180,000
Sapient Corp. ..................................... 15,200 851,200
Sauer Inc ......................................... 13,600 102,850
Sawtek Inc. ....................................... 18,800 329,000
Sbarro Inc. ....................................... 20,800 544,700
SC/PIE Holdings Inc. .............................. 20,100 609,281
SCB Computer Technology Inc ....................... 16,500 162,938
Schawk Inc., Class A .............................. 15,100 209,513
Schein Pharmaceutical Inc ......................... 7,200 104,850
Schnitzer Steel Industries Inc., Class A .......... 7,100 102,063
Scholastic Corp. .................................. 20,200 1,083,225
Schweitzer-Mauduit International Inc. ............. 22,100 341,169
Scientific Games Holdings Corp. ................... 14,900 281,238
Scios Nova Inc. ................................... 60,056 623,081
SCM Microsystems Inc .............................. 18,200 1,293,337
Scotsman Industries Inc. .......................... 16,000 329,000
Scott Technologies Inc. ........................... 28,000 462,875
Scotts Co. Class A ................................ 29,200 1,122,375
SDL Inc. .......................................... 20,050 794,481
Seaboard Corp. .................................... 600 253,200
Seacor Holdings Inc. .............................. 19,800 978,862
Seagull Energy Corp. .............................. 96,100 606,631
Security Capital Group Inc., Class B .............. 63,800 865,287
Security Dynamics Tech ............................ 59,400 1,366,200
SEI Investments Corp. ............................. 20,500 2,037,187
Seitel Inc. ....................................... 36,700 456,456
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-158
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Selective Insurance Group Inc. .................... 44,200 $ 889,525
Semco Energy Inc. ................................. 25,718 419,525
Semtech Corp. ..................................... 19,800 710,325
Sensormatic Electronics Corp. ..................... 107,800 747,862
Sepracor Inc. ..................................... 42,000 3,701,250
Sequa Corp., Class A .............................. 9,600 574,800
Sequent Computer Systems Inc. ..................... 70,000 844,375
Sequus Pharmaceuticals Inc. ....................... 49,900 1,010,475
Serologicals Corp. ................................ 38,025 1,140,750
Service Experts Inc. .............................. 24,700 722,475
SFX Entertainment Inc., Class A ................... 36,400 1,997,450
Shiloh Inds Inc. .................................. 6,800 89,250
Shiva Corp. ....................................... 43,000 243,219
ShopKo Stores Inc. ................................ 40,800 1,356,600
Shoreline Financial Corp. ......................... 10,200 269,025
Shorewood Packaging Corp. ......................... 34,450 706,225
Shurgard Storage Centers Inc. ..................... 44,800 1,156,400
Sierra Health Services Inc. ....................... 36,600 770,887
Sierra Pacific Resources .......................... 48,400 1,839,200
SIG Corp., Inc. ................................... 36,950 1,318,653
Signal Corp. ...................................... 15,274 523,135
Silgan Holdings Inc. .............................. 19,400 539,259
Silicon Valley Bancshares ......................... 30,300 516,047
Silicon Valley Group Inc. ......................... 51,000 650,250
Siliconix Inc. .................................... 15,000 311,250
Silverleaf Resorts Inc ............................ 10,500 97,781
Simmons First National Corp., Class A ............. 8,700 322,988
Simpson Industries Inc. ........................... 24,575 238,070
Simpson Manufacturing Inc. ........................ 6,800 254,575
Sipex Corp. ....................................... 28,000 983,500
SIS Bancorp Inc. .................................. 11,300 511,325
Sitel Corp. ....................................... 58,900 143,569
Sky Financial Group Inc. .......................... 66,798 1,765,972
Skyline Corp. ..................................... 11,800 383,500
Skytel Communications Inc ......................... 93,200 2,062,050
Skywest Inc. ...................................... 32,100 1,049,269
Sl Green Realty Corp REIT ......................... 37,500 810,937
SLI Inc ........................................... 24,174 670,828
SM&A Corp. ........................................ 8,500 161,500
Smart & Final Inc. ................................ 14,300 137,638
Smart Modular Technologies Inc. ................... 41,200 1,143,300
Smartalk Teleservices Inc. ........................ 24,300 64,547
Smithfield Foods Inc. ............................. 52,000 1,761,500
Snyder Oil Corp. .................................. 53,600 713,550
Software AG Systems Inc ........................... 47,300 857,312
Sola International Inc. ........................... 40,100 691,725
Sonic Corp. ....................................... 30,275 753,091
SOS Staffing Services Inc ......................... 13,900 100,775
Sotheby's Holdings Inc., Class A .................. 62,200 1,990,400
South Jersey Industries Inc. ...................... 12,220 320,011
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-159
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Southern Pacific Funding Corp. .................... 15,100 $ 1,180
Southern Peru Copper Corp. ........................ 39,400 371,838
Southern Union Co. ................................ 28,501 694,712
Southland Corp. ................................... 215,700 411,178
Southwest BanCorp. Texas .......................... 31,900 570,212
Southwest Gas Corp. ............................... 47,400 1,273,875
Southwest Securities Group Inc. ................... 16,110 324,214
Southwestern Energy Co. ........................... 37,500 281,250
Sovran Self Storage Inc. .......................... 18,000 452,250
Spartech Corp. .................................... 19,600 431,200
Special Metals Corp. .............................. 5,400 48,263
Specialty Equipment Cos., Inc. .................... 17,800 481,713
Spectra Physics Lasers Inc ........................ 16,100 152,950
Speedfam International Inc. ....................... 22,800 390,450
Speedway Motorsport ............................... 19,300 550,050
Spelling Entertainment Group Inc. ................. 40,900 306,750
Spiegel Inc., Class A ............................. 40,700 234,025
Splash Technology Holdings Inc. ................... 19,900 148,006
Sports Authority Inc. ............................. 47,950 251,738
Sportsline USA Inc ................................ 19,800 308,138
SPR Inc ........................................... 11,400 196,650
Springs Industries Inc. ........................... 17,200 712,725
SPS Technologies Inc. ............................. 16,600 939,975
SPX Corp. ......................................... 47,900 3,209,300
SS&C Technologies Inc. ............................ 13,300 164,588
St Mary Land + Exploration Co. .................... 16,400 303,400
St. John Knits Inc. ............................... 26,800 696,800
St. Paul Bancorp Inc. ............................. 65,127 1,772,676
Staff Leasing Inc ................................. 23,700 275,513
Staffmark Inc. .................................... 27,300 610,837
Stage Stores Inc. ................................. 41,700 390,938
Standard Motor Products Inc., Class A ............. 16,000 388,000
Standard Pacific Corp. ............................ 39,200 553,700
Standard Products Co. ............................. 25,175 512,941
Standard Register Co. ............................. 20,600 637,312
Standex International Corp. ....................... 18,000 472,500
Star Telecommunications Inc ....................... 32,300 393,656
State Auto Financial Corp. ........................ 20,900 258,638
Staten Islands Bancorp Inc ........................ 69,700 1,389,644
Station Casinos Inc. .............................. 31,500 257,906
Steel Dynamics Inc. ............................... 57,200 672,100
Stein Mart Inc. ................................... 40,700 283,628
Steinway Musical Instrs Inc ....................... 13,800 358,800
Stepan Co. ........................................ 10,598 282,172
Sterling Bancorp .................................. 12,400 282,875
Sterling Bancshares Inc. .......................... 34,150 507,981
Sterling Financial Corp ........................... 10,500 435,750
Stewart & Stevenson Services Inc. ................. 43,800 427,050
Stewart Information Services Corp. ................ 10,200 591,600
Stillwater Mining Co. ............................. 31,500 1,291,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-160
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
Stone & Webster Inc. .............................. 10,400 $ 345,800
Stone Energy Corp. ................................ 21,100 606,625
Stoneridge Inc .................................... 17,400 395,850
Storage Trust Realty REIT ......................... 22,600 528,275
Storage USA Inc. .................................. 43,400 1,402,362
Strayer Education Inc. ............................ 11,300 398,325
Stride Rite Corp. ................................. 72,700 636,125
Structural Dynamics Research Corp. ................ 56,900 1,130,887
Student Loan Corp. ................................ 6,000 269,250
Sturm Ruger & Co., Inc. ........................... 30,400 362,900
Suburban Lodges America Inc. ...................... 16,400 134,275
Sugen Inc ......................................... 17,800 262,550
Summit Properties Inc. REIT ....................... 33,700 581,325
Sun Communities Inc. .............................. 26,700 929,494
Sun Healthcare Group Inc. ......................... 84,720 555,975
Sunglass Hut International Inc. ................... 71,000 497,000
Sunrise Assisted Living Inc. ...................... 22,100 1,146,437
Sunrise Medical Inc. .............................. 32,600 405,463
Sunstone Hotel Investment Inc. .................... 52,100 491,694
Sunterra Corp ..................................... 43,850 657,750
Supergen Inc ...................................... 22,800 210,900
Superior Consultant Inc. .......................... 10,700 465,450
Superior Energy Services Inc ...................... 42,400 120,575
Superior Industries International Inc. ............ 32,000 890,000
Superior Services Inc. ............................ 42,900 860,681
Superior Telecom Inc. ............................. 12,600 595,350
Susquehanna Bancshares Inc. ....................... 52,912 1,083,042
Swift Energy Co. .................................. 21,759 160,473
Swift Transportation Co., Inc. .................... 38,250 1,072,195
Sybase Inc. ....................................... 127,900 947,259
Sykes Enterprises Inc. ............................ 26,300 802,150
Sylvan Learning Systems Inc. ...................... 59,125 1,803,312
Symantec Corp. .................................... 83,200 1,809,600
Syms Corp. ........................................ 11,000 99,000
Synetic Inc. ...................................... 29,300 1,289,200
Syntel Inc ........................................ 7,800 88,238
Syntroleum Corp ................................... 33,700 208,519
System Software Associates Inc. ................... 49,500 348,047
Systems & Computer Technology Corp. ............... 53,200 731,500
Talbot's Inc. ..................................... 18,300 574,162
Tanger Factory Outlet Centers Inc. ................ 8,500 180,094
Taubman Centers Inc. REIT ......................... 60,500 831,875
Tava Technologies Inc ............................. 34,500 263,063
TCBY Enterprises Inc. ............................. 18,300 128,100
TCI Satellite Entertainment Inc., Class A ......... 91,300 131,244
Techne Corp. ...................................... 30,500 644,312
Technitrol Inc. ................................... 22,300 710,812
Technology Solutions Co. .......................... 63,837 684,253
Tecumseh Products Co., Class A .................... 29,600 1,380,100
Tejon Ranch Co. ................................... 13,100 260,363
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-161
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------ -------- ---------------
<S> <C> <C>
Tekelec Inc. ......................................... 53,300 $ 882,781
Tel-Save Holdings Inc. ............................... 52,100 872,675
Telegroup Inc ........................................ 12,300 16,144
Teletech Holdings Inc. ............................... 31,600 323,900
Telxon Corp. ......................................... 25,200 349,650
Tennant Co. .......................................... 14,500 581,812
Terex Corp. .......................................... 27,300 779,756
Terra Industries Inc. ................................ 48,900 302,569
Tesoro Petroleum Corp. ............................... 52,300 634,137
Tetra Technologies Inc. .............................. 16,200 177,188
Tetra Technologies Inc. .............................. 44,716 1,210,127
Texas Industries Inc. ................................ 33,256 895,833
Texas Regional Bancshares Inc. ....................... 23,549 590,197
The Shaw Group Inc. .................................. 10,400 83,200
Theragenics Corp. .................................... 40,600 682,587
Thermedics Inc. ...................................... 24,900 269,231
Thermo Bioanalysis Corp .............................. 8,900 117,925
Thermo Cardiosystems Inc. ............................ 26,800 279,725
Thermo Ecotek Corp. .................................. 9,000 95,063
Thermo Fibertek Inc. ................................. 14,800 105,450
Thermo Optek Corporation ............................. 4,900 42,569
Thermolase ........................................... 19,700 89,881
Thermoquest Corporation .............................. 5,300 68,569
Thermotrex Corp. ..................................... 12,800 109,600
Thomas Industries Inc. ............................... 24,000 471,000
Thor Industries Inc. ................................. 10,899 277,925
Thornburg Mortgage Asset Corp. REIT .................. 33,600 256,200
TIG Holdings Inc. .................................... 68,000 1,058,250
Timberland Co. ....................................... 7,800 355,388
Titan Exploration Inc ................................ 56,300 369,469
Titan International Inc. ............................. 26,400 250,800
Titanium Metals Corp. ................................ 32,100 272,850
TJ International Inc. ................................ 19,600 503,475
TMP Worldwide Inc. ................................... 19,500 819,000
TNP Enterprises Inc. ................................. 17,700 671,494
Toll Brothers Inc. ................................... 37,600 848,350
Tom Brown Inc. ....................................... 40,400 405,263
Toro Co. ............................................. 20,900 595,650
Tower Automotive Inc. ................................ 72,200 1,800,487
Tower Realty Trust Inc REIT .......................... 26,500 533,312
Town & Country Trust ................................. 23,800 382,288
TR Financial Corp. ................................... 24,300 956,812
Trammell Crow Company ................................ 44,600 1,248,800
Trans World Airlines Inc. ............................ 90,300 434,569
Transaction Network Services Inc. .................... 13,800 276,863
Transaction Systems Architects Inc., Class A ......... 42,900 2,145,000
Transition Systems Inc. .............................. 27,200 408,000
Transkaryotic Therapies Inc. ......................... 27,100 687,662
Transmontaigne Oil Co. ............................... 42,000 635,250
Transport World Entertainment Corp. .................. 24,149 460,340
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-162
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ----------------------------------------------------- ---------- ---------------
<S> <C> <C>
Transtexas Gas Corp. ................................ 17,200 $ 45,150
Travel Services International Inc ................... 12,800 390,400
Tredegar Industries Inc. ............................ 31,850 716,625
Tremont Corp. ....................................... 5,500 182,875
Trendwest Resorts Inc ............................... 6,200 77,500
Trenwick Group Inc. ................................. 18,550 605,194
Trex Med Corp. ...................................... 10,700 90,950
Triad Guaranty Inc. ................................. 20,900 461,106
Triangle Bancorp Inc. ............................... 40,600 641,987
Triangle Pharmaceuticals Inc. ....................... 29,900 407,388
Triarc Cos., Inc., Class A .......................... 23,320 373,120
Trico Marine Services Inc. .......................... 31,900 155,513
Trimble Navigation Ltd. ............................. 33,300 241,425
TriNet Corp. Realty Trust Inc. REIT ................. 35,600 952,300
Tristar Aerospace Company ........................... 19,300 135,100
Triumph Group Inc. .................................. 18,600 595,200
Trust Co. of New Jersey ............................. 26,200 641,900
Trustco Bank Corp. .................................. 41,969 1,259,070
Tuboscope Vetco International Corp. ................. 70,000 568,750
Twinlab Corp. ....................................... 33,400 438,375
Tyler Corp. ......................................... 40,700 249,288
UGI Corp. ........................................... 51,500 1,223,125
UICI ................................................ 59,100 1,447,950
Ultratech Stepper Inc. .............................. 33,000 528,000
UMB Financial Corp. ................................. 22,507 1,032,509
Unicapital Corp ..................................... 69,900 515,513
Unifirst Corp. ...................................... 13,700 312,531
Unisource Energy Corp ............................... 51,920 700,920
Unisource Worldwide Inc. ............................ 109,600 794,600
United Auto Group Inc. .............................. 24,700 226,931
United Bankshares Inc. .............................. 67,200 1,780,800
United Companies Financial Corp. .................... 34,996 118,112
United Dominion Realty Trust Inc. REIT .............. 162,000 1,670,625
United Fire & Casualty Co. .......................... 10,375 348,859
United Illuminating Co. ............................. 22,400 1,153,600
United International Holdings Inc., Class A ......... 63,300 1,218,525
United National Bancorp New Jersey .................. 15,360 357,120
United Natural Foods Inc. ........................... 7,400 178,525
United Payors + United Providers .................... 21,600 615,600
United Rentals Inc. ................................. 43,278 1,433,584
United States Restaurant Pptys Inc .................. 19,600 476,525
United Stationers Inc. .............................. 57,900 1,505,400
United Television Inc. .............................. 6,200 713,000
United Water Resources Inc. ......................... 42,500 1,017,344
Unitrode Corp. ...................................... 38,300 670,250
Universal Corp. ..................................... 52,600 1,847,575
Universal First Products Inc. ....................... 23,200 465,450
Universal Foods Corp. ............................... 79,800 2,189,512
Unova Inc. .......................................... 57,100 1,034,937
Urban Outfitters Inc. ............................... 14,700 248,063
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-163
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- ---------------
<S> <C> <C>
Urban Shopping Centers Inc. REIT .................. 16,000 $ 524,000
URS Corp .......................................... 18,600 434,775
US Bancorp Inc. ................................... 20,600 409,425
US Bioscience Inc. ................................ 38,100 273,844
US Freightways Corp. .............................. 41,100 1,197,037
US Home Corp. ..................................... 21,200 704,900
US LEC Corp., Class A ............................. 8,400 124,425
US Satellite Broadcasting, Class A ................ 54,400 748,000
US Xpress Enterprises Inc, Class A ................ 11,700 175,500
USA Floral Prods Inc .............................. 17,700 203,550
USB Holding Inc ................................... 13,639 230,158
USN Communications Inc ............................ 34,700 6,506
UST Corp. ......................................... 66,864 1,575,483
USWEB Corp. ....................................... 92,299 2,434,373
UTI Energy Corp. .................................. 17,600 127,600
Vail Resorts Inc. ................................. 41,700 917,400
Valassis Communications Inc. ...................... 56,700 2,927,137
Valhi Inc. ........................................ 13,200 150,150
Valmont Industries Inc. ........................... 29,100 403,763
Value City Department Stores Inc. ................. 17,900 249,481
Value Line Inc. ................................... 3,500 137,813
Vanguard Cellular Systems Inc., Class A ........... 41,000 1,058,312
Vanstar Corp. ..................................... 69,500 642,875
Vantive Corp. ..................................... 39,600 316,800
Varlen Corp. ...................................... 27,350 630,759
Veeco Instruments Inc. ............................ 14,400 765,000
Vencor Inc. New ................................... 92,800 417,600
Ventana Med Systems Inc. .......................... 22,100 477,913
Ventas Inc. ....................................... 85,200 1,038,375
Verio Inc ......................................... 8,700 194,663
Verisign Inc. ..................................... 5,600 331,100
Veritas DGC Inc. .................................. 33,400 434,200
Vermont Financial Services ........................ 20,100 668,325
Vertex Pharmaceuticals Inc. ....................... 39,700 1,181,075
Vesta Insurance Group Inc. ........................ 17,850 107,100
Veterinary Centers America Inc. ................... 33,400 665,912
Viasoft Inc. ...................................... 28,400 198,800
Vical Inc. ........................................ 24,800 351,850
Vicor Corp. ....................................... 28,700 258,300
Vincam Group Inc. ................................. 15,000 263,438
Vintage Petroleum Inc. ............................ 59,200 510,600
Virco Manufacturing Company ....................... 7,520 138,180
Viropharma Inc .................................... 16,500 153,656
Vishay Intertechnology Inc. ....................... 81,200 1,177,400
Visio Corp. ....................................... 38,600 1,411,312
Vistana Inc. ...................................... 14,900 208,600
Visual Networks Inc ............................... 31,300 1,173,750
VISX Inc. ......................................... 20,900 1,827,444
Vital Signs Inc. .................................. 8,300 145,250
Vivus Inc. ........................................ 45,600 118,275
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-164
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ----------------------------------------------------- ---------- ---------------
<S> <C> <C>
Vlasic Foods International Inc ...................... 40,000 $ 952,500
VLSI Technology Inc. ................................ 67,400 737,187
Volt Information Sciences Inc. ...................... 12,500 282,031
VWR Corp. ........................................... 21,800 378,775
W.H. Brady Co. ...................................... 32,400 872,775
W.R. Berkley Corp. .................................. 33,400 1,137,687
Wabash National Corp. ............................... 36,700 745,469
Wackenhut Corp. ..................................... 14,500 368,844
Wackenhut Corrections Corp. ......................... 14,900 426,513
Walden Residential Properties Inc. REIT ............. 26,400 539,550
Wallace Computer Services Inc. ...................... 66,400 1,751,300
Walter Industries Inc. .............................. 64,600 989,187
Wang Laboratories Inc. .............................. 72,100 2,000,775
Washington Gas Light Co. ............................ 71,500 1,939,437
Washington REIT ..................................... 55,850 1,040,206
Washington Trust Bancorp Inc ........................ 15,600 335,400
Washington Water Power Co. .......................... 77,700 1,495,725
Waste Inds Inc ...................................... 4,500 77,625
Wastemasters Inc .................................... 164,500 51,406
Watsco Inc. ......................................... 36,550 612,212
Watts Industries Inc., Class A ...................... 24,300 403,988
Wausau Mosinee Paper Corp ........................... 85,084 1,504,923
Wavephore Inc. ...................................... 27,200 218,450
WD40 Co. ............................................ 22,200 635,475
Webb Corp. .......................................... 23,100 636,694
Webster Financial Corp. ............................. 59,300 1,627,044
Weeks Corp. ......................................... 30,800 868,175
Weider Nutrition International Inc, Class A ......... 13,400 85,425
Weingarten Realty Investors REIT .................... 41,600 1,856,400
Wellman Inc. ........................................ 53,200 541,975
Wellsford Real Properties Inc. ...................... 26,800 276,375
Werner Enterprises Inc. ............................. 44,812 792,612
Wesbanco Inc. ....................................... 32,250 951,375
Wesley Jessen Visioncare Inc. ....................... 16,100 446,775
West Co., Inc. ...................................... 21,149 754,755
West Coast Bancorp (Oregon) ......................... 21,460 450,660
West Marine Inc. .................................... 13,500 133,313
West Teleservices Corp. ............................. 27,900 272,025
Westaff Inc. ........................................ 10,300 64,375
WestAmerica BanCorp. ................................ 62,815 2,308,451
Westcorp ............................................ 13,800 95,738
Westell Technologies Class A ........................ 19,400 94,575
Western Bancorp ..................................... 28,000 819,000
Western Gas Resources Inc. .......................... 33,500 192,625
Western Investment Real Estate Trust REIT ........... 25,900 305,944
Western Wireless Corp., Class A ..................... 118,000 2,596,000
Westernbank ......................................... 66,100 1,049,337
Westfield America Inc ............................... 47,200 814,200
Westinghouse Air Brake Co. .......................... 27,800 679,362
Westwood One Inc. ................................... 33,000 1,006,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-165
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
Wet Seal Inc. .......................................................... 17,400 $ 525,263
Whitney Holding Corp. .................................................. 36,700 1,376,250
Whittman Hart Inc. ..................................................... 44,700 1,234,837
WHX Corp. .............................................................. 23,200 233,450
Wicor Inc. ............................................................. 58,800 1,282,575
Wild Oats Mkts Inc ..................................................... 17,100 538,650
Wilmar Industries Inc. ................................................. 18,300 371,719
Wind River Systems Inc. ................................................ 33,900 1,593,300
Windmere Corp. ......................................................... 34,600 268,150
Winnebago Industries Inc. .............................................. 19,900 300,988
Winstar Communications Inc. ............................................ 67,600 2,636,400
Wisconsin Central Transportation Corp. ................................. 80,300 1,380,156
Wolverine Tube Inc. .................................................... 21,200 445,200
Wolverine World Wide Inc. .............................................. 63,800 845,350
Woodward Governor Co. .................................................. 13,100 289,838
World Access Inc. ...................................................... 40,400 863,550
World Color Press Inc. ................................................. 60,200 1,832,337
WPS Resources Corp. .................................................... 41,600 1,466,400
WSFS Financial Corp .................................................... 15,500 261,563
Wyman-Gordon Co. ....................................................... 30,000 307,500
Wynn's International Inc. .............................................. 22,575 499,472
X-Rite Inc. ............................................................ 25,400 196,850
Xircom Inc. ............................................................ 36,000 1,224,000
Xomed Surgical Prods Inc. .............................................. 19,000 608,000
Xtra Corp. ............................................................. 22,600 935,075
Xylan Corp. ............................................................ 51,900 911,494
Yankee Energy Systems Inc. ............................................. 16,450 479,106
Yellow Corp. ........................................................... 36,100 690,412
Young Broadcasting Inc., Class A ....................................... 14,700 615,562
Zale Corp. ............................................................. 57,400 1,851,150
Zapata Corp. ........................................................... 26,400 323,400
Zebra Technologies Corp., Class A ...................................... 36,800 1,058,000
Zenith National Insurance Corp. ........................................ 14,600 337,625
Zila Inc. .............................................................. 57,300 565,837
Zoltek Cos., Inc. ...................................................... 15,100 138,731
Zonagen Inc. ........................................................... 17,500 334,688
--------------
TOTAL COMMON STOCK
(Cost $1,355,591,519).................................................. 1,334,369,118
--------------
PRINCIPAL
----------
LONG TERM DEBT--0.2%
United States Treasury Bills 4.405% 18-March-1999 (a) (Cost $ 2,546,101) $ 2,570,000 2,546,101
--------------
STATE STREET BANK AND TRUST COMPANY INVESTMENT FUNDS
FOR TAX EXEMPT RETIREMENT FUNDS--4.8% ................................. UNITS
-----------
SHORT TERM INVESTMENT FUND (B) ......................................... 67,445,651 67,445,651
- ------------------------------------------------------------------------- ----------- --------------
TOTAL INVESTMENTS--100%
(Cost $1,425,583,271).................................................. $1,404,360,870
========================================================================= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-166
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
(a) At December 31, 1998, U.S. Treasury Bills with principal of $2,570,000 were
pledged to cover margin for open futures contracts. The following long
futures contracts were open at December 31, 1998:
<TABLE>
<CAPTION>
FUTURES NUMBER OF NOTIONAL MATURITY UNREALIZED
CONTRACTS CONTRACTS VALUE DATE GAIN (LOSS)
- ------------------------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Russell 2000 ......... 237 $50,392,125 March, 1999 $ 2,206,829
===========
</TABLE>
(b) Collective investment fund advised by State Street Global Advisors.
REIT -- Real Estate Investment Trust
The accompanying notes are an integral part of these financial statements.
SAI-167
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Russell 2000 Fund and
State Street Bank and Trust Company Russell 2000 Non-Lending Fund
(collectively, the "Fund") were formed by State Street Bank under a Declaration
of Trust. The investment objective of the Fund is to replicate, as closely as
possible, the return of the Russell 2000 Index. State Street Bank is Trustee
and custodian of the Fund. State Street Global Advisors, a division of State
Street Bank, is the Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 sales are reported for that day, the last published
sale price, or at fair value as determined in good faith by the Trustee.
Short-term investments, if any, are stated at amortized cost, which
approximates market value. Investments in regulated investment companies or
other State Street Bank collective investment funds are valued at the net asset
value per share/unit on the valuation date. Futures contracts are valued at the
last settlement price at the end of each day on the board of trade or exchange
upon which they are traded.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. The cost of
securities contributed to, and proceeds related to securities delivered by, the
Fund in connection with the issuance and redemption of units of participation
are based on the valuations of those securities determined as described above.
The cost of securities delivered and the net gain or loss on securities sold
are determined using the average cost method. Dividend income, if any, is
recorded on the ex-dividend date. Interest income earned on securities, if any,
is recorded on the accrual basis. Interest income includes accretion of
discounts and amortization of premiums.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made 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 which 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.
SAI-168
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
E. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year.
Custody Fee: The Trustee is paid a custody fee at an annual rate of .125%
of the Fund's average net asset value, and a charge for each security and
futures transaction executed.
Administration Fee: The Trustee is paid an annual fee of $50,000 for
administration of the Fund.
F. DISTRIBUTIONS TO PARTICIPANTS
Net investment income (excluding securities lending fee income, if any)
and net realized gains are retained by the Fund. Income generated by securities
lending, if any, is distributed monthly to participants of the Russell 2000
Fund.
G. FUTURES CONTRACTS
The Fund may use futures contracts to manage exposure to the equity
market. Buying futures tends to increase a fund's exposure to the underlying
instrument. Selling futures tends to decrease a fund's exposure to the
underlying instrument, or hedge other 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 periodically, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Fund. A gain or loss is realized when the contract is closed or
expires.
H. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION
The participants in the Russell 2000 Fund (the "Lending Fund") have
authorized the Lending Fund to participate in the Global Securities Lending
Program maintained by State Street Bank. The investment objective, techniques
and
SAI-169
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
results of operations of the Lending Fund are identical to those of the Russell
2000 Non-Lending Fund (the "Non-Lending Fund"), except that the Lending Fund
engages in securities lending activities. Accordingly, the financial statements
of the Lending Fund and the Non-Lending Fund have been prepared on a combined
basis, with separate disclosure of the participant transactions and per unit
data of the Lending Fund and the Non-Lending Fund. The Lending Fund and the
Non-Lending Fund each maintain a divided pro-rata interest in the combined
assets and liabilities (including each investment security position but
excluding assets and liabilities related to securities lending activities)
proportionate to the net asset value of the outstanding combined units of the
Fund. All interfund transactions have been eliminated in the combined financial
statements.
Under the Global Securities Lending Program, securities held by the
Lending Fund are loaned by State Street Bank, as agent, to certain brokers and
other financial institutions (the "Borrowers"). The Borrowers provide cash,
securities, or letters of credit as collateral against loans in an amount at
least equal to 100% of the market value of the loaned securities. The Borrowers
are required to maintain the collateral at not less than 100% of the market
value of the loaned securities. At December 31, 1998, the market value of
securities loaned by the Lending Fund was $238,001,210 against which was held
cash collateral of $245,739,640, and securities of $234,643. Cash collateral
provided by the Borrowers is invested in a State Street Bank and Trust Company
Quality A Short-Term Investment Fund. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder is
allocated between the Lending Fund and Street Bank in its capacity as lending
agent. Negotiated lenders' fees are received for those loans collateralized by
securities or letters of credit, if any. Income earned from lending activities
is distributed to Lending Fund participants monthly.
State Street Bank, as lending agent, indemnifies the Lending Fund for
replacement of any loaned securities (or, in certain circumstances, return of
equivalent cash value) due to Borrower default on a security loan. Lending Fund
participants, however, bear the risk of loss with respect to the investment of
collateral.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments and
including in-kind contributions and redemptions, if any, during the year ended
December 31, 1998 were $967,204,412 and $752,300,022, respectively, resulting
in a net realized gain (loss) of $40,605,397. This gain (loss) is prior to the
recognition of the market effect and transaction costs associated with
contributions and redemptions.
SAI-170
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
RUSSELL 2000 FUND
RUSSELL 2000 NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1997
------------------------------------ ------------------------------------
UNITS AMOUNT UNITS AMOUNT
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
RUSSELL 2000 FUND
Units issued ...................... 31,449,020 $ 743,570,395 40,460,685 $ 906,815,162
Units redeemed .................... (26,400,317) (595,420,022) (40,524,286) (831,286,512)
----------- -------------- ----------- --------------
Total ........................... 5,048,703 $ 148,150,373 (63,601) $ 75,528,650
----------- -------------- ----------- --------------
RUSSELL 2000 NON-LENDING
FUND
Units issued ...................... 2,649,074 $ 61,171,763 3,820,070 $ 86,839,791
Units redeemed .................... (2,102,765) (48,257,008) (581,456) (13,371,348)
----------- -------------- ----------- --------------
Total ........................... 546,309 $ 12,914,755 3,238,614 $ 73,468,443
----------- -------------- ----------- --------------
Total increase (decrease) ......... 5,595,012 $ 161,065,128 3,175,013 $ 148,997,093
=========== ============== =========== ==============
</TABLE>
RUSSELL 2000 FUND
Units in excess of 10% of the Lending Fund units outstanding at December
31, 1998 held by 3 of the Lending Fund's 38 unitholders aggregated 61% of
the Lending Fund's total units outstanding.
During the year ended December 31, 1998, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Lending Fund units were $(509,412).
RUSSELL 2000 NON-LENDING FUND
Units in excess of 10% of the Non-Lending Fund units outstanding at
December 31, 1998 held by 4 of the Non-Lending Fund's 5 unitholders
aggregated 95% of the Non-Lending Fund's total units outstanding.
During the year ended December 31, 1998, the net market effect and
transaction costs (absorbed by) credited to participants in issuance and
redemption of Non-Lending Fund units were $(56,298).
Participants in each of the Lending Fund or the Non-Lending Fund may
exchange their units for units of the other fund on any valuation date.
SAI-171
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustees of
State Street Bank and Trust Company
Daily EAFE Securities Lending Fund
and State Street Bank and Trust Company
Daily EAFE Non-Lending Fund
In our opinion, the accompanying combined statement of assets and liabilities,
including the combined schedule of investments, and the related combined
statements of operations and of changes in net assets and the selected per unit
data present fairly, in all material respects, the financial position of State
Street Bank and Trust Company Daily EAFE Securities Lending Fund (formerly
Daily EAFE Fund) and State Street Bank and Trust Company Daily EAFE Non-Lending
Fund (formerly Daily EAFE Fund Non-Lending) at December 31, 1998, and 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
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 audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by the Trustee, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 5, 1999
SAI-172
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
Combined Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $1,139,301,149) ........... $ 1,175,706,464
Foreign currency .................................................... 91,111
Receivable for investments sold ..................................... 2,604,313
Dividends receivable ................................................ 12,992
Interest receivable ................................................. 914
Other receivalbe .................................................... 912
- --------------------------------------------------------------------- ---------------
Total assets .................................................... 1,178,416,706
- --------------------------------------------------------------------- ---------------
LIABILITIES
Payable to custodian ................................................ 1,562,053
Payable for investments purchased ................................... 926,748
Accrued expenses .................................................... 15,152
- --------------------------------------------------------------------- ---------------
Total liabilities ............................................... 2,503,953
- --------------------------------------------------------------------- ---------------
NET ASSETS .......................................................... $ 1,175,912,753
===================================================================== ===============
Daily EAFE Securities Lending Fund
(66,425,732 units outstanding, at $10.32 per unit net asset value) . $ 685,617,952
Daily EAFE Non-Lending Fund
(47,501,952 units outstanding, at $10.32 per unit net asset value) . 490,294,801
- --------------------------------------------------------------------- ---------------
$ 1,175,912,753
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-173
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST AND COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
Combined Statement of Operations
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of taxes withheld of $1,517,704).......................................... $ 16,865,106
Interest ................................................................................ 4,385,108
Securities lending fee income (net of related expenses), allocated to the Daily EAFE
Securities Lending
Fund .................................................................................. 410,061
- ------------------------------------------------------------------------------------------- ------------
Total investment income .............................................................. 21,660,275
- ------------------------------------------------------------------------------------------- ------------
EXPENSES
Audit ................................................................................... 30,394
Custody ................................................................................. 947,987
Other ................................................................................... 87,067
- ------------------------------------------------------------------------------------------- ------------
Total Expenses ........................................................................... 1,065,448
- ------------------------------------------------------------------------------------------- ------------
Net investment income ................................................................ 20,594,827
- ------------------------------------------------------------------------------------------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN
CURRENCY
TRANSACTIONS
Net realized gain (loss):
Investments ........................................................................... 121,112,662
Futures contracts ..................................................................... 14,868,059
Foreign currency and related forward contracts ........................................ 3,258,189
- ------------------------------------------------------------------------------------------- ------------
Net realized gain (loss) on investments, futures contracts and foreign currency ...... 139,238,910
- ------------------------------------------------------------------------------------------- ------------
Net change in unrealized appreciation (depreciation):
Investments ............................................................................. 10,913,030
Futures contracts ....................................................................... 420,710
Foreign currency and related forward contracts .......................................... 559,274
- ------------------------------------------------------------------------------------------- ------------
11,893,014
------------
Net realized and unrealized gain (loss) on investments, futures contracts and foreign
currency and related
forward currency contracts ............................................................ 151,131,924
- ------------------------------------------------------------------------------------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $171,726,751
=========================================================================================== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-174
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST AND COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
Combined Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
------------------ ----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ................................................................. $ 20,594,827 $ 10,626,975
Net realized gain (loss) on investments, futures contracts and foreign currency and
related forward currency contracts ................................................... 139,238,910 (7,556,911)
Net change in unrealized appreciation (depreciation) on investments, futures
contracts, foreign currency and related forward currency contracts ................... 11,893,014 (10,050,092)
- ---------------------------------------------------------------------------------------- -------------- -------------
Net increase (decrease) in net assets resulting from operations ....................... 171,726,751 (6,980,028)
- ---------------------------------------------------------------------------------------- -------------- -------------
Distributions of securities lending fee income to the Daily EAFE Securities Lending
Fund participants .................................................................... (410,061) (148,952)
- ---------------------------------------------------------------------------------------- -------------- -------------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions ......... 394,502,282 199,970,259
- ---------------------------------------------------------------------------------------- -------------- -------------
Net increase (decrease) in net assets ................................................. 565,818,972 192,841,279
NET ASSETS
Beginning of year .................................................................... 610,093,781 417,252,502
- ---------------------------------------------------------------------------------------- -------------- -------------
End of year .......................................................................... $1,175,912,753 $ 610,093,781
======================================================================================== ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-175
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Year,
Adjusted for the Reissuance of Units in Conjunction with the
Fund's Reorganization on December 18, 1998 -- See Note 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net investment income (loss)* ........................... $ 0.22 $ 0.20 $ 0.20 $ 0.17 $ 0.13
Distribution of securities lending fee income** ......... (0.01) (0.01) (0.01) (0.01) 0.00
Net realized and unrealized gain (loss) ................. 1.57 (0.07) 0.29 0.66 0.39
- ---------------------------------------------------------- -------- -------- ------- ------- --------
Net increase (decrease) ................................. 1.78 0.12 0.48 0.82 0.52
NET ASSET VALUE
Beginning of period .................................... 8.54 8.42 7.94 7.12 6.60
- ---------------------------------------------------------- -------- -------- ------- ------- --------
End of period .......................................... $ 10.32 $ 8.54 $ 8.42 $ 7.94 $ 7.12
========================================================== ======== ======== ======= ======= ========
Total return(%)*** ...................................... 20.88 1.51 6.15 11.64 7.91
- ---------------------------------------------------------- -------- -------- ------- ------- --------
Ratio of expenses to average net assets (%) ............. 0.11 0.11 0.19 0.20 0.19
- ---------------------------------------------------------- -------- -------- ------- ------- --------
Ratio of net investment income to average net assets (%) 2.17 2.23 2.38 2.22 1.88
- ---------------------------------------------------------- -------- -------- ------- ------- --------
Portfolio turnover (%) .................................. 109 9 5 9 47
- ---------------------------------------------------------- -------- -------- ------- ------- --------
Net assets, end of year (000s) .......................... $685,618 $333,013 $99,048 $75,760 $139,678
========================================================== ======== ======== ======= ======= ========
</TABLE>
* Net investment income (loss) per unit has been calculated based upon an
average of monthly units outstanding.
** Zero amount represents that which is less than $.005 per unit.
*** Total return calculation is based on the value of a single unit of
participation outstanding throughout the entire period. It represents the
percentage change in the net asset value per unit between the beginning
and end of each period and assumes reinvestment of any distributions. The
calculation includes only those expenses charged directly to the Lending
Fund. This result may be reduced by any administrative or other fees
which are incurred in the management or maintenance of individual
participant accounts.
The accompanying notes are an integral part of these financial statements.
SAI-176
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE NON-LENDING FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period,
Adjusted for the Reissuance of Units in Conjunction with the
Fund's Reorganization on December 18, 1998 -- See Note 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income** ..................................... $ 0.21 $ 0.19 $ 0.19 $ 0.16 0.13
Net realized and unrealized gain (loss) ..................... 1.57 (0.07) 0.29 0.66 0.39
- ------------------------------------------------------------- -------- -------- -------- -------- -----
Net increase (decrease) ..................................... 1.78 0.12 0.48 0.82 0.52
NET ASSET VALUE
Beginning of Period ........................................ 8.54 8.42 7.94 7.12 6.60
- ------------------------------------------------------------- -------- -------- -------- -------- -----
End of Period .............................................. $ 10.32 $ 8.54 $ 8.42 $ 7.94 $ 7.12
============================================================= ======== ======== ======== ======== ========
Total return(%)*** .......................................... 20.84 1.43 6.07 11.56 7.91
- ------------------------------------------------------------- -------- -------- -------- -------- --------
Ratio of expenses to average net assets(%) .................. 0.11 0.11 0.19 0.20 0.19
- ------------------------------------------------------------- -------- -------- -------- -------- --------
Ratio of net investment income to average net assets(%) ..... 2.13 2.17 2.31 2.15 1.85
- ------------------------------------------------------------- -------- -------- -------- -------- --------
Portfolio turnover(%) ....................................... 109 9 5 9 47
- ------------------------------------------------------------- -------- -------- -------- -------- --------
Net assets, end of period (000s) ............................ $490,295 $277,080 $318,204 $154,010 $103,242
============================================================= ======== ======== ======== ======== ========
</TABLE>
* The Daily EAFE Non-Lending Fund commenced operations on January 3, 1994.
** Net investment income per unit has been calculated using 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 Non-Lending Fund. This result may be reduced by
any administrative or other fees which are incurred in the management or
maintenance of individual participant accounts.
The accompanying notes are an integral part of these financial statements.
SAI-177
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK--0.4% SHARES VALUE
- ------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
(unless otherwise noted)
Aluminium Co. of Malaysia Bhd MYR1 ...................................... 10,300 $ 1,935
Amalgamated Steel Mills Berhad MYR0.50 .................................. 161,800 15,793
AMMB Holdings Berhad MYR1 ............................................... 61,400 50,659
Antah Holdings Berhad MYR0.50 ........................................... 39,220 5,670
Aokam Perdana Berhad (a) MYR1 ........................................... 16,000 0
Berjaya Group Berhad MYR1 ............................................... 113,650 16,954
Berjaya Leisure Berhad MYR1 ............................................. 106,900 36,028
Commerce Asset Holdings Berhad MYR1 ..................................... 119,680 64,801
DCB Holdings Berhad MYR1 ................................................ 256,700 100,224
Edaran Otomobil Nasional Berhad MYR1 .................................... 35,100 38,786
Ekran Berhad MYR1 ....................................................... 58,200 10,933
Golden Hope Plantations Berhad MYR1 ..................................... 154,200 116,434
Golden Plus Holdings Berhad MYR1 ........................................ 19,300 3,981
Guinness Anchor Berhad MYR0.50 .......................................... 46,700 32,854
Highlands & Lowlands Berhad MYR0.50 ..................................... 93,300 42,785
Hong Leong Industries Berhad MYR0.50 .................................... 34,880 15,353
Hong Leong Properties Berhad MYR0.50 .................................... 89,500 13,022
Hume Industries Berhad MYR1 ............................................. 32,500 19,752
Idris Hydraulic (Malaysia) Berhad MYR0.50 ............................... 72,200 11,302
IGB Corp. Berhad MYR0.50 ................................................ 61,000 15,616
Industrials Oxygen Inc. Berhad MYR0.50 .................................. 130,400 52,353
Jaya Tiasa Holdings MYR1 ................................................ 42,000 39,062
Johan Holdings Berhad MYR0.50 ........................................... 39,700 5,228
Kedah Cement Holdings Berhad MYR1 ....................................... 52,600 21,893
Kelanamas Industries Berhad MYR1 ........................................ 7,800 819
Kemayan Corp. Berhad MYR0.50 ............................................ 47,500 4,068
Kian Joo Can Factory Berhad MYR0.50 ..................................... 18,300 18,873
Kuala Lumpur Kepong Berhad MYR1 ......................................... 109,500 131,081
Land & General Berhad MYR1 .............................................. 63,900 10,474
Landmarks Berhad MYR1 ................................................... 59,900 11,142
Leader Universal Holdings Berhad MYR1 ................................... 57,000 11,022
Magnum Corp. Berhad MYR0.50 ............................................. 230,700 69,254
Malayan Banking Berhad MYR1 ............................................. 351,800 498,882
Malayan Cement Berhad MYR0.50 ........................................... 64,125 16,179
Malayan United Industries Berhad MYR1 ................................... 298,320 45,326
Malayawata Steel Berhad MYR1 ............................................ 20,450 3,691
Malaysia Mining Corp. Berhad MYR1 ....................................... 128,800 51,711
Malaysian Airline System Berhad MYR1 .................................... 118,500 45,393
Malaysian International Shipping Corp. Berhad MYR1 Alien Market ......... 150,833 138,892
Malaysian Mosaics Berhad MYR1 ........................................... 37,600 9,002
Malaysian Oxygen Berhad MYR0.50 ......................................... 21,800 28,907
Malaysian Pacific Industries Berhad. MYR0.50 ............................ 31,966 30,613
Malaysian Resources Corp. Berhad MYR1 ................................... 148,066 37,631
MBF Capital Berhad MYR1 ................................................. 120,000 18,896
Metroplex Berhad MYR0.50 ................................................ 127,600 16,567
Mulpha International Berhad MYR0.50 ..................................... 135,250 15,070
Multi Purpose Holdings MYR1 ............................................. 119,700 22,486
Mycom Berhad MYR1 ....................................................... 44,666 4,360
Nestle Malaysia Berhad MYR1 ............................................. 36,500 102,176
New Straits Times Press Berhad MYR1 ..................................... 25,400 12,490
Oriental Holdings Berhad MYR1 ........................................... 49,272 53,084
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-178
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- -------------------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
Palmco Holdings Berhad MYR1 .............................................. 17,400 $ 3,974
Pan-Malaysia Cement Works Berhad MYR0.50 ................................. 113,400 23,600
Perlis Plantations Berhad MYR1 ........................................... 57,000 40,940
Perusahaan Otomobil Nasional Berhad MYR1 ................................. 83,300 88,211
Petaling Garden Berhad MYR0.50 ........................................... 24,400 12,942
Pilecon Engineering Berhad MYR0.50 ....................................... 16,500 3,464
Promet Berhad (a) MYR1 ................................................... 75,200 0
Public Bank Berhad MYR0.50 Alien Market .................................. 308,212 105,010
Rashid Hussain Berhad MYR1 ............................................... 59,600 29,636
Resorts World Berhad MYR0.50 ............................................. 167,800 135,356
RJ Reynolds Berhad MYR1 .................................................. 40,600 32,152
Rothmans of Pall Mall Berhad MYR0.50 ..................................... 44,200 182,340
Selangor Properties Berhad MYR1 .......................................... 44,800 13,696
Shell Refining Co. MYR1 .................................................. 46,200 34,034
Silverstone Berhad MYR1 .................................................. 4,543 0
Sime Darby Berhad MYR0.50 ................................................ 357,700 287,221
Sungei Way Holdings Berhad MYR1 .......................................... 52,400 11,966
Ta Enterprise Berhad MYR1 ................................................ 110,000 24,918
Tan Chong Motor Holdings Berhad MYR0.50 .................................. 103,500 23,445
Tech Resources Industries Berhad MYR1 .................................... 116,200 42,372
Telekom Malaysia Berhad MYR1 ............................................. 390,795 719,715
Tenaga Nasional Berhad MYR1 .............................................. 476,900 685,068
Time Engineering Berhad MYR1 ............................................. 115,000 18,744
UMW Holdings Berhad MYR1 ................................................. 41,300 30,424
United Engineers (Malaysia) Ltd. MYR0.50 ................................. 122,000 62,237
YTL Corp., Berhad MYR0.50 ................................................ 186,700 169,857
--------------
TOTAL COMMON STOCK
(Cost $ 4,592,825) ...................................................... 4,920,829
--------------
STATE STREET BANK AND TRUST COMPANY COLLECTIVE UNITS
--------
INVESTMENT FUNDS--99.6%
Daily MSCI Europe Securities Lending Index Fund (b) ...................... 47,870,504 498,571,296
Daily MSCI Europe Index Fund (b) ......................................... 34,318,248 357,424,554
Daily MSCI Japan Securities Lending Index Fund (b) ....................... 14,455,334 145,984,415
Daily MSCI Japan Index Fund (b) .......................................... 10,199,784 103,007,621
Daily MSCI Pacific Basin Ex Japan Securities Lending Index Fund (b) ...... 3,808,938 37,971,300
Daily MSCI Pacific Basin Ex Japan Index Fund (b) ......................... 2,791,298 27,826,449
--------------
TOTAL STATE STREET BANK AND TRUST COMPANY
COLLECTIVE INVESTMENT FUNDS
(Cost $ 1,134,708,324)................................................... 1,170,785,635
--------------
TOTAL INVESTMENTS--100%
(Cost $1,139,301,149) ................................................... $1,175,706,464
==============
</TABLE>
- ----------
(a) Issuer filed for bankruptcy
(b) Collective investment fund advised by State Street Global Advisors.
The accompanying notes are an integral part of these financial statements.
SAI-179
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Daily EAFE
Funds, (collectively the "Trust") were formed by State Street Bank and Company
under a Declaration of Trust. The Trust is organized into separate regional
funds and country funds and umbrella funds that hold Malaysian securities and
units of the separate regional and country funds. State Street Bank is Trustee
and custodian of each Fund. State Street Global Advisors, a division of State
Street Bank, is each Fund's investment manager.
The investment objective of Daily EAFE Securities Lending Fund (formerly
Daily EAFE Fund) and Daily EAFE Non-Lending Fund (formerly Daily EAFE Fund
Non-Lending) (collectively, the "Fund") is to closely match the performance of
the MSCI EAFE Index, while providing daily liquidity. Effective December 18,
1998, the Fund achieves its objective primarily by investing in other
collective investment funds managed by the Trustee. Prior to this date, the
Fund achieved its objective by investing directly in the securities comprising
the MSCI EAFE Index. On December 18, 1998, the Fund was reorganized and
separate regional and country funds (the "underlying funds") were established.
The Fund transferred all of its assets and liabilities, excluding Malaysian
assets and liabilities, in exchange for units in the underlying funds. In
conjunction with this reorganization, the Fund reissued units to the
participants at $10.00 net asset value per unit. (Net asset value per unit
prior to the reorganization was $14.95.)
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 price or the
mean between the last reported bid and asked prices, or at fair value as
determined in good faith by the Trustee. Short-term investments, if any, are
stated at amortized cost, which approximates market value. Due to current
market conditions in Malaysia, Malaysian Ringgits and securities quoted in
Malaysian Ringgits are translated into U.S. dollars at the discounted exchange
rate of 5.43 as set by the MSCI Index at December 31, 1998. Investments in
regulated investment companies or other State Street Bank collective investment
funds are valued at the net asset value per share/unit on the valuation date.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. 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 are determined using the average cost method. Dividend income,
if any, is recorded net of applicable withholding taxes on the ex-dividend date
or as soon as the Fund is informed of the dividend. Interest income earned on
securities, if any, is recorded net of applicable withholding taxes on the
accrual basis; interest earned on foreign currency transaction accounts is
recorded when the Trustee is first notified of the amount credited by the
depository bank.
SAI-180
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS
The accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in Malaysian
Ringgits are translated into U.S. dollars at the discounted exchange rate of
5.43 as set by the MSCI Index at December 31, 1998. Purchases and sales of
securities, income and expenses denominated in a foreign currency other than
Malaysian Ringgits are translated into U.S. dollars at the prevailing exchange
rate on the respective dates of the transactions. Purchases and sales of
securities, income and expenses denominated in Malaysian Ringgits are
translated into U.S. dollars at the discounted exchange rate of 5.43 as set by
the MSCI Index at December 31, 1998.
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.
The Fund may use forward foreign currency contracts to facilitate
transactions in foreign securities or as a hedge against either specific
transactions or portfolio positions. Such contracts are valued based upon the
applicable forward exchange rates and any resulting unrealized gains or losses
are recorded in the Fund's financial statements. The Fund records realized
gains or losses at the time the forward contract is extinguished by entry into
a closing transaction or by delivery of the currency. Risks in foreign currency
contracts arise from the possible inability of counterparties to meet the
contracts' terms and from movements in currency values.
D. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made on such
days, based upon the closing market value of the securities bought or sold as
of the valuation date. A transaction fee of .5% is charged on any contribution
or withdrawal greater than 5% of the net asset value of the Fund. However, such
fees are waived if the Fund's net participant activity on any day is less than
5% of the net asset value of the Fund.
F. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year, including custody, stamp duty, registration
and audit fees. Prior to the reorganization on December 18,
SAI-181
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1998, the Fund paid an annual fee of $50,000 for daily pricing services to the
Trustee in its capacity as custodian. Effective December 18, 1998, the Trustee
is paid an annual administration fee of $12,000.
G. DISTRIBUTIONS TO PARTICIPANTS
Net investment income (excluding securities lending fee income, if any)
and net realized gains are retained by the Funds. Income generated by
securities lending, if any, is distributed monthly to participants of the
Lending Fund.
H. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
3. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION
The participants in the Daily EAFE Securities Lending Fund (the "Lending
Fund") have authorized the Lending Fund to participate in the Global Securities
Lending Program maintained by State Street Bank. The investment objective,
techniques and results of operations of the Lending Fund are identical to those
of the Daily EAFE Non-Lending Fund (the "Non-Lending Fund"), except that the
Lending Fund engages in securities lending activities. Accordingly, the
financial statements of the Lending Fund and the Non-Lending Fund have been
prepared on a combined basis, with separate disclosure of the participant
transactions and per unit data of the Lending Fund and the Non-Lending Fund.
The Lending Fund and the Non-Lending Fund each maintain a divided pro-rata
interest in the combined assets and liabilities (including each investment
security position but excluding assets and liabilities related to securities
lending activities) proportionate to the net asset value of the outstanding
combined units of the Fund. All interfund transactions have been eliminated in
the combined financial statements.
Under the Global Securities Lending Program, securities held by the
Lending Fund are loaned by State Street Bank, as agent, to certain brokers and
other financial institutions (the "Borrowers"). The Borrowers provide cash,
securities, or letters of credit as collateral against loans in an amount at
least equal to 100% of the market value of the loaned securities. The Borrowers
are required to maintain the collateral at not less than 100% of the market
value of the loaned securities. 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. Income earned from
lending activities is distributed to Lending Fund participants monthly. At
December 31, 1998, no securities were loaned by the Lending Fund.
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, 1998 were $1,513,436,882 and $1,038,397,579,
SAI-182
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
respectively, resulting in a net realized gain (loss) of $121,112,662. Net
realized gain (loss) from foreign currency transactions amounted to $3,258,189
for the year ended December 31, 1998.
5. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997
------------------------------------ ---------------------------------
UNITS AMOUNT UNITS AMOUNT
---------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
DAILY EAFE SECURITIES LENDING
FUND:
Units issued ........................... -- $ -- 15,192,231 $ 198,010,280
Units issued (1/1 - 12/18) ............. 31,411,826 445,179,583 -- --
Unit adjustment due to
reorganization (see Note 1) ........... 21,818,970 -- -- --
Units issued (12/19 - 12/31) ........... 2,043,253 20,847,087 -- --
Interfund tranfers ..................... -- -- 7,178,794 90,359,477
Units redeemed ......................... -- -- (4,161,097) (54,590,100)
Units redeemed (1/1 - 12/18) ........... (13,403,233) (193,021,523) -- --
Units redeemed (12/19 - 12/31) ......... (1,524,125) (15,534,518) -- --
----------- -------------- ---------- -------------
Total ................................. 40,346,691 $ 257,470,629 18,209,928 $ 233,779,657
=========== ============== ========== =============
</TABLE>
SAI-183
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1998 1997
------------------------------------ -----------------------------------
UNITS AMOUNT UNITS AMOUNT
---------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
DAILY EAFE NON-LENDING FUND:
Units issued .................................. -- $ -- 23,074,314 $ 300,530,137
Units issued (1/1 - 12/18) .................... 36,983,239 515,657,645 -- --
Unit adjustment due to
reorganization (see Note 1) .................. 14,285,760 -- -- --
Units issued (19/19 - 12/31) .................. 5,482,183 55,176,247 -- --
Interfund transfers ........................... -- -- (7,178,794) (90,359,477)
Units redeemed ................................ -- -- (19,477,225) (244,208,430)
Units redeemed (1/1 - 12/18) .................. (29,815,822) (422,392,493) -- --
Units redeemed (12/19 - 12/31) ................ (1,132,216) (11,607,115) -- --
Paid in capital from transaction fees ......... -- 197,369 -- 228,372
----------- -------------- ----------- --------------
Total ........................................ 25,803,144 $ 137,031,653 (3,581,705 $ (33,809,398)
----------- -------------- ----------- --------------
Net increase (decrease) ....................... 66,149,835 $ 394,502,282 14,628,223 $ 199,970,259
=========== ============== =========== ==============
</TABLE>
DAILY EAFE SECURITIES LENDING FUND
Units in excess of 10% of the Lending Fund units outstanding at December
31, 1998 held by 3 of the Lending Fund's 15 unitholders aggregated 85% of the
Lending Fund's total units outstanding.
DAILY EAFE NON-LENDING FUND
Units in excess of 10% of the Non-Lending Fund units outstanding at
December 31, 1998 held by 2 of the Non-Lending Fund's 39 unitholders aggregated
34% of the Non-Lending Fund's total units outstanding.
Participants in each of the Lending Fund or the Non-Lending Fund may
exchange their units for units of the other fund on any valuation date.
6. FUTURES CONTRACTS
The Fund may use futures contracts to manage exposure to the relevant
equity markets. Buying futures tends to increase a fund's exposure to the
underlying instrument. Selling futures tends to decrease a fund's exposure to
the underlying instrument, or hedge other 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.
SAI-184
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE SECURITIES LENDING FUND
DAILY EAFE NON-LENDING FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
Upon entering into a futures contract, the Fund is required to deposit
either in cash or securities an amount ("initial margin") equal to a certain
percentage of the nominal value of the contract. Subsequent payments are made
or received by the Fund periodically, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Fund. A gain or loss is realized when the contract is closed or
expires.
7. FUND NAME CHANGE
On December 4, 1998, the Fund declarations were amended resulting in name
changes from the Daily EAFE Fund to the Daily EAFE Securities Lending Fund and
from the Daily EAFE Fund Non-Lending to the Daily EAFE Non-Lending Fund.
SAI-185
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
Daily MSCI Europe Index Securities Lending Fund
and State Street Bank and Trust Company
Daily MSCI Europe Index Fund
In our opinion, the accompanying combined statement of assets and liabilities,
including the combined schedule of investments, and the related combined
statements of operations and of changes in net assets and the selected per unit
data present fairly, in all material respects, the financial position of State
Street Bank and Trust Company Daily MSCI Europe Index Securities Lending Fund
and State Street Bank and Trust Company Daily MSCI Europe Index Fund at
December 31, 1998, and the results of their operations, the changes in their
net assets and their selected per unit data for the period December 18, 1998
(commencement of operations) through December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements and
selected per unit data (hereafter referred to as "financial statements") are
the responsibility of the Trustee; our responsibility is to express an opinion
on these financial statements based on our 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 the Trustee, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 5, 1999
SAI-186
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $1,411,169,540).................................................................... $1,466,606,980
Foreign currency ......................................................................... 6,513,539
Foreign currency, segregated ............................................................. 13,502,815
Investments in State Street Bank and Trust Company
Quality A Short-Term Investment Fund, at value .......................................... 72,631,581
Receivable for investments sold .......................................................... 9,271,424
Receivable for open forward currency contracts ........................................... 86,093
Unrealized gain on open futures contracts ................................................ 2,181,908
Dividends receivable ..................................................................... 925,901
Interest receivable ...................................................................... 173,335
Tax reclaims receivable .................................................................. 590,352
- ------------------------------------------------------------------------------------------ --------------
Total assets .......................................................................... 1,572,483,928
- ------------------------------------------------------------------------------------------ --------------
LIABILITIES
Payable for collateral on securities loaned .............................................. 72,631,581
Payable for investments purchased ........................................................ 22,092,345
Payable for open forward currency contracts .............................................. 129,741
Accrued expenses ......................................................................... 185,987
- ------------------------------------------------------------------------------------------ --------------
Total liabilities ..................................................................... 95,039,654
- ------------------------------------------------------------------------------------------ --------------
NET ASSETS ............................................................................... $1,477,444,274
========================================================================================== ==============
Daily MSCI Europe Index Securities Lending Fund (47,870,504 units outstanding, at $10.42
per unit net
asset value) ............................................................................ $ 498,600,277
Daily MSCI Europe Index Fund (93,978,599 units outstanding, at $10.42 per unit net asset 978,843,997
- ------------------------------------------------------------------------------------------ --------------
value)
- -------------------------------------------------------------------------------------------
$1,477,444,274
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-187
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Statement of Operations
Period ended December 31, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of taxes withheld of $44,824)............................................. $ 245,563
Interest ................................................................................ 73,588
- ------------------------------------------------------------------------------------------- -----------
Total investment income ............................................................... 319,151
- ------------------------------------------------------------------------------------------- -----------
EXPENSES
Audit ................................................................................... 5,569
Custody ................................................................................. 33,897
- ------------------------------------------------------------------------------------------- -----------
Total expenses ........................................................................ 39,466
- ------------------------------------------------------------------------------------------- -----------
Net investment income ................................................................. 279,685
- ------------------------------------------------------------------------------------------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN
CURRENCY
TRANSACTIONS
Net realized gain (loss):
Foreign currency and related forward currency contracts ................................ (4,554)
- ------------------------------------------------------------------------------------------- -----------
Net change in unrealized appreciation (depreciation):
Investments ............................................................................ 55,437,440
Futures contracts ...................................................................... 1,983,118
Foreign currency and related forward currency contracts ................................ (433,978)
- ------------------------------------------------------------------------------------------- -----------
56,986,580
-----------
Net realized and unrealized gain (loss) on investments, futures contracts, foreign
currency and related
forward currency contracts .............................................................. 56,982,026
- ------------------------------------------------------------------------------------------- -----------
Net increase (decrease) in net assets resulting from operations .......................... $57,261,711
=========================================================================================== ===========
</TABLE>
* The Fund commenced operations on December 18, 1998.
The accompanying notes are an integral part of these financial statements.
SAI-188
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
-----------------
<S> <C>
FROM OPERATIONS
Net investment income .................................................................... $ 279,685
Net realized gain (loss) on foreign currency and related forward currency contracts ...... (4,554)
Net change in unrealized appreciation (depreciation) on investments, futures contracts,
foreign currency and
related forward currency contracts ...................................................... 56,986,580
- ------------------------------------------------------------------------------------------ --------------
Net increase (decrease) in net assets resulting from operations .......................... 57,261,711
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions ............ 1,420,182,563
- ------------------------------------------------------------------------------------------ --------------
Net increase (decrease) in net assets .................................................... 1,477,444,274
NET ASSETS
Beginning of period ..................................................................... --
- ------------------------------------------------------------------------------------------ --------------
End of period ........................................................................... $1,477,444,274
========================================================================================== ==============
</TABLE>
* The Fund commenced operations on December 18, 1998.
The accompanying notes are an integral part of these financial statements.
SAI-189
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
-------------
<S> <C>
Net investment income**(a) ........................................... $ 0.00
Net realized and unrealized gain (loss) .............................. 0.42
- ----------------------------------------------------------------------- --------
Net increase (decrease) .............................................. 0.42
NET ASSET VALUE
Beginning of period .................................................. 10.00
- ----------------------------------------------------------------------- --------
End of period ........................................................ $ 10.42
- ----------------------------------------------------------------------- --------
Total return (%)*** .............................................. 4.20
- ----------------------------------------------------------------------- --------
Ratio of expenses to average net assets (%)****(b) ................... 0.00
- ----------------------------------------------------------------------- --------
Ratio of net investment income to average net assets (%)**** ......... 0.02
- ----------------------------------------------------------------------- --------
Portfolio turnover (%) ............................................... 0
- ----------------------------------------------------------------------- --------
Net assets, end of period (000s) ..................................... $498,600
======================================================================= ========
</TABLE>
* The Fund commenced operations on December 18, 1998.
** Net investment income per unit has been calculated based upon an average
of units outstanding.
*** Total return calculation (not annualized for the period ended December
31, 1998) is based on the value of a single unit of participation
outstanding throughout the period. It represents the percentage change in
the net asset value per unit between the beginning and end of the period.
The calculation includes only those expenses charged directly to the
Lending Fund. The result may be reduced by any administrative or other
fees which are incurred in the management or maintenance of individual
participant accounts.
**** Not annualized for the period ended December 31, 1998.
(a) Zero amount represents that which is less than $.005 per unit.
(b) Zero amount represents that which is less than .005%.
The accompanying notes are an integral part of these financial statements.
SAI-190
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
-------------
<S> <C>
Net investment income**(a) ........................................... $ 0.00
Net realized and unrealized gain (loss) .............................. 0.42
- ----------------------------------------------------------------------- --------
Net increase (decrease) .............................................. 0.42
NET ASSET VALUE
Beginning of period .................................................. 10.00
- ----------------------------------------------------------------------- --------
End of period ........................................................ $ 10.42
- ----------------------------------------------------------------------- --------
Total return (%)*** .............................................. 4.20
- ----------------------------------------------------------------------- --------
Ratio of expenses to average net assets (%)****(b) ................... 0.00
- ----------------------------------------------------------------------- --------
Ratio of net investment income to average net assets (%)**** ......... 0.02
- ----------------------------------------------------------------------- --------
Portfolio turnover (%) ............................................... 0
- ----------------------------------------------------------------------- --------
Net assets, end of period (000s) ..................................... $978,844
======================================================================= ========
</TABLE>
* The Fund commenced operations on December 18, 1998.
** Net investment income per unit has been calculated based upon an average
of units outstanding.
*** Total return calculation (not annualized for the period ended December
31, 1998) is based on the value of a single unit of participation
outstanding throughout the period. It represents the percentage change in
the net asset value per unit between the beginning and end of the period.
The calculation includes only those expenses charged directly to the
Non-Lending Fund. The result may be reduced by any administrative or
other fees which are incurred in the management or maintenance of
individual participant accounts.
**** Not annualized for the period ended December 31, 1998.
(a) Zero amount represents that which is less than $.005 per unit.
(b) Zero amount represents that which is less than .005%.
The accompanying notes are an integral part of these financial statements.
SAI-191
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
---------------- ------------
<S> <C> <C>
LONG TERM DEBT 0.00%
ITALY -- 0.0%
Olivetti SpA (Cost $88,305) 6.50% 30-Sep-02 .................. ITL 30,965,000 $ 107,981
- --------------------------------------------------------------- ---------------- ----------
COMMON STOCK -- 94.7% SHARES
- --------------------------------------------------------------- ---------------- ----------
(unless otherwise noted)
AUSTRIA -- 0.4%
Austria Mikros Systeme International AG ATS100 ............... 700 26,344
Austria Tabak ATS100 ......................................... 2,400 184,126
Austrian Airlines ATS100 ..................................... 6,700 240,142
Bank Austria AG ATS100 ....................................... 28,618 1,456,048
Bau Holdings AG ATS100 ....................................... 1,100 51,160
Bohler Uddeholm ATS100 ....................................... 2,800 130,394
BWT AG ATS100 ................................................ 400 88,718
EA Generali AG ATS100 ........................................ 1,700 417,817
Flughafen Wien AG ATS100 ..................................... 5,200 255,295
Lenzing AG ATS100 ............................................ 900 56,067
Mayr Melnhof Karto ATS100 .................................... 3,000 140,296
Oesterreichische Brau Beteiligungs AG ATS100 ................. 2,300 131,487
Oesterreichische Elektrizitaetswirtschafts AG ATS100 ......... 7,700 1,177,533
OMV AG ATS100 ................................................ 6,906 651,228
Radex Heraklith Industriebeteiligungs AG ATS100 .............. 3,550 92,552
Universale-Bau AG ATS100 ..................................... 1,100 39,426
Virg Technologie AG ATS100 Bearer ............................ 3,800 329,475
Wienerberger Baustoff Industrie ATS100 ....................... 2,300 457,721
----------
5,925,829
----------
BELGIUM -- 2.6%
Barco NV NPV ................................................. 3,335 941,686
Bekaert SA NPV ............................................... 595 296,177
Cementbedrijven Cimenteries NPV .............................. 6,200 613,634
CMB NPV ...................................................... 2,575 115,060
Colruyt Group SA NPV ......................................... 1,055 884,471
D Leteren Trading NPV ........................................ 1,485 819,170
Delhaize Le Lion SA NPV ...................................... 13,955 1,234,929
Electrabel SA NPV ............................................ 14,635 6,432,921
Electrabel SA NPV Vvpr Strip ................................. 585 136
Fortis AG NPV ................................................ 21,485 7,786,517
Fortis AG NPV Vvpr Strip ..................................... 5,180 302
5,180 Fortis AG Cert Value GTD 20July 01 ..................... 5,180 23,372
Generale de Banque Put Wts 15Nov99 Tractebel ................. 24 4
Glaverbel SA NPV ............................................. 1,912 253,243
Groupe Bruxelles Lambert NPV ................................. 6,545 1,333,663
Kbc Bankverzekerin NPV Vvpr Strip ............................ 2,830 165
Kredietbank NV NPV ........................................... 79,425 6,288,755
Petrofina SA NPV ............................................. 6,295 2,886,123
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-192
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ---------------------------------------------------------- ----------- -------------
<S> <C> <C>
Solvay SA NPV ............................................ 22.615 $ 1,705,041
Tractebel Capital NPV .................................... 22.850 4,436,603
UCB SA Capital NPV ....................................... 390 2,406,794
Union Miniere SA NPV ..................................... 6,855 261,008
-----------
38,719,774
-----------
DENMARK -- 1.3%
Aarhus Oliefabrik A/S A DKK100 ........................... 812 23,603
Aarhus Oliefabrik A/S B DKK100 ........................... 152 4,538
Bang & Olufsen Holding DKK10 Ser B ....................... 3,655 222,826
Carlsberg Brewery A/S A DKK20 ............................ 9,613 558,865
Carlsberg Brewery A/S B DKK20 ............................ 7,812 451,706
D/S AF 1912 B DKK1000 .................................... 295 2,062,663
D/S Svendborg B DKK1000 .................................. 200 2,026,917
Danisco A/S DKK20 ........................................ 16,385 888,202
Den Danske Bank A/S DKK100 ............................... 14,451 1,941,378
FLS Industries DKK20 Ser B ............................... 12,570 256,758
GN Store Nord DKK20 ...................................... 10,015 354,062
ISS International Service System A/S DKK20 Ser B ......... 8,112 527,685
Korn Og Foderstof DKK20 .................................. 3,085 58,061
Lauritzen Holdings A/S B DKK20 ........................... 688 47,446
NKT Holding A/S DKK100 ................................... 2,046 128,591
Novo Nordisk AS DKK10 Ser B .............................. 20,489 2,704,246
Ostasiatiske Kompagni DKK100 ............................. 5,482 37,900
Radiometer A/S B Shares DKK20 ............................ 2,821 148,489
SAS Danmark A/S DKK10 .................................... 12,869 145,587
Superfos A/S DKK20 ....................................... 8,455 124,879
Tele Danmark A/S DKK10 Ser B ............................. 33,106 4,468,338
Unidanmark A/S A DKK100 Regd ............................. 13,531 1,222,486
-----------
18,405,226
-----------
FINLAND -- 2.0%
Ameri Group A FIM20 ...................................... 6,025 62,710
Asko FIM10 ............................................... 9,800 167,808
Cultor Oyj Ser 1 FIM6 .................................... 11,100 113,997
Cultor Oyj Ser 2 FIM6 .................................... 6,100 62,647
Finnlines FIM10 .......................................... 5,000 215,275
Instrumentarium Corp. Ser A FIM10 ........................ 3,800 156,104
Instrumentarium Corp. Ser B FIM10 ........................ 2,100 86,641
Kemira Oy Ord FIM10 ...................................... 33,200 239,331
Kesko Oy FIM10 ........................................... 23,500 352,735
Kone Corp. B FIM50 ....................................... 1,700 198,093
Metra Oy A FIM20 ......................................... 3,500 64,286
Metra Oy B FIM20 ......................................... 10,300 179,014
Nokia AB Oy Ser A FIM2.5 ................................. 115,900 14,191,961
Nokia AB Oy Ser K FIM2.5 ................................. 38,000 4,653,102
Outokumpu Oy A FIM10 ..................................... 32,100 296,700
Oyj Hartwall Abp A FIM1 .................................. 15,300 249,295
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-193
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- -------------------------------------------------------- ---------- -------------
<S> <C> <C>
Pohjola Ord Ser A FIM5 ................................. 5,200 $ 282,425
Pohjola Ser B FIM5 ..................................... 5,300 290,997
Raisio Yhtyma Oyj FIM1 Convertible ..................... 42,000 464,520
Rautaruukki Oy Ord ..................................... 33,800 219,624
Sampo Ser A FIM5 ....................................... 15,600 596,174
Sonera Group PLC FIM 2.50 .............................. 110,200 1,958,806
Stockmann Oyj Abp A FIM10 .............................. 6,300 158,082
Stockmann Oyj Abp B Shs FIM10 .......................... 6,025 113,758
Tieto Corp FIM5 ........................................ 13,400 600,756
Unitas Ltd. Ser A FIM10 ................................ 212,820 1,353,429
UPM Kymmene Oy FIM10 ................................... 69,895 1,960,206
Valmet Corp. FIM10 ..................................... 19,800 265,914
-----------
29,554,390
-----------
FRANCE -- 11.8%
Accor SA FRF100 ........................................ 8,916 1,931,318
Air Liquide FRF70 ...................................... 13,172 2,416,986
Air Liquide FRF70 Prime ................................ 2,427 445,340
Air Liquide L FRF70 .................................... 5,154 945,729
Alcatel Alsthom CGE FRF40 .............................. 44,785 5,483,870
AXA FRF60 .............................................. 87,896 12,745,374
AXA UAP CVG Wts 31Dec01 FRF800 ......................... 1,013 4,896
Banque Nationale de Paris FRF25 ........................ 54,291 4,472,732
Bic FRF25 .............................................. 13,900 771,392
Bongrain Group FRF50 ................................... 510 228,249
Bouygues SA FRF50 ...................................... 6,328 1,305,021
Canal Plus FRF20 ....................................... 7,848 2,142,532
Cap Gemini Sogeti SA FRF40 ............................. 16,550 2,657,596
Carrefour SA FRF100 .................................... 9,673 7,305,823
Chargeurs International FRF100 ......................... 1,900 105,102
Club Mediterranee SA FRF25 ............................. 3,737 335,834
Coflexip FRF10 ......................................... 3,900 264,608
Compagnie de St. Gobain FRF100 ......................... 22,580 3,189,329
Compagnie Generale de Geophysique FRF10 ................ 1,275 74,341
Compagnie Generale des Eaux FRF100 ..................... 40,686 10,561,156
Compagnie Par Reesco FRF50 ............................. 2,814 129,970
Credit National SA FRF100 .............................. 3,712 239,226
Dassault Systemes FRF5 ................................. 13,200 620,772
Dollfus-Mieg & Cie FRF75 ............................... 850 9,906
Eaux (Cie General) Wts 02May01 Eaux C.G FRF900 ......... 6,876 17,848
Eridania Beghin-Say FRF65 .............................. 6,574 1,138,032
Essilor International Compagnie Generale FRF20 ......... 2,410 949,157
Etab Eco Casino Guich Perr & Co. FRF10 ................. 16,646 1,734,328
Europe 1 Communication FRF100 Regd ..................... 214 49,995
France Telecom FRF ..................................... 199,950 15,892,888
Group Le Finance de Consolidated FRF100 ................ 475 56,548
Groupe Danone FRF10 .................................... 18,251 5,227,633
GTM Entrepose FRF50 .................................... 3,686 382,721
Imetal SA FRF50 ........................................ 3,775 378,446
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-194
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- -------- --------------
<S> <C> <C>
L'Oreal SA FRF10 .................................. 16,909 $ 12,229,191
Lafarge FRF25 Prime Fidel 2000 Reg ................ 8,813 837,754
Lafarge Coppee FRF25 Br ........................... 18,548 1,763,153
Lagardere Groupe FRF40 Regd ....................... 30,165 1,282,524
Legrand SA FRF10 Post Sub ......................... 6,970 1,847,933
Louis Vuitton Moet Hennessy FRF10 ................. 22,081 4,371,921
Lyonnaise des Eaux-Dumer FRF60 .................... 34,532 7,096,792
Michelin FRF12 Regd Class B ....................... 34,815 1,392,972
Moulinex SA FRF10 ................................. 4,324 66,571
Nord Est FRF50 .................................... 3,550 95,327
Paribas FRF100 .................................... 40,974 3,562,664
Pathe FRF100 ...................................... 1,950 544,575
Pechiney SA A FRF100 Ord .......................... 20,100 656,685
Pernod Ricard SA FRF20 ............................ 13,917 904,379
Peugeot SA FRF35 .................................. 12,529 1,940,131
Pinault Printemps Redo FRF20 ...................... 28,640 5,475,739
Primagaz FRF10 .................................... 5,050 479,144
Promodes SA FRF20 ................................. 4,800 3,492,154
Rhone Poulenc SA FRF25 Ord A Shares ............... 91,856 4,729,278
SAGEM FRF50 ....................................... 1,050 695,488
Sanofi SA FRF25 ................................... 26,667 4,391,981
SEB SA FRF20 ...................................... 3,800 316,326
Sefimeg FRF100 Regd ............................... 3,898 275,637
Seita FRF50 ....................................... 12,750 798,871
Sidel FRF15 ....................................... 8,250 700,053
Simco FRF100 Regd ................................. 4,276 388,100
Skis Rossignol FRF25 Post Sub ..................... 3,050 44,227
Societe Eurafrance FRF200 ......................... 1,039 688,202
Societe Generale Bank FRF30 ....................... 24,981 4,047,220
Societe National Elf Aquitaine FRF50 .............. 68,755 7,951,247
Sodexho SA FRF100 ................................. 8,414 1,882,829
Sommer Allibert FRF5 .............................. 5,400 146,069
Spie Batignolles FRF50 ............................ 37,945 2,302,781
Technip FRF20 ..................................... 4,100 386,072
Thomson CSF FRF20 ................................. 35,105 1,508,268
TOTAL SA FRF50 B Shares ........................... 61,089 6,189,818
Unibail SA FRF100 Regd ............................ 2,350 342,866
Usinor Sacilor FRF20 .............................. 60,850 675,929
Valeo FRF20 ....................................... 19,049 1,501,820
Zodiac FRF10 ...................................... 1,200 257,357
------------
172,474,746
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-195
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ---------------------------------------------------------- ---------- -------------
<S> <C> <C>
GERMANY -- 13.2%
Aachener & Muenchener Beteiligungs DEM5 .................. 2,350 $ 276,691
Aachener & Muenchener Beteiligungs Reg DEM5 Vink ......... 10,520 1,547,500
Adidas AG DEM5 ........................................... 11,750 1,276,925
AGIV AG DEM5 ............................................. 9,500 245,268
Allianz AG DEM5 Regd ..................................... 61,595 22,596,205
BASF AG DEM5 ............................................. 158,850 6,065,871
Bayer AG DEM5 ............................................ 187,100 7,813,035
Bayer Vereinsbank DEM5 ................................... 118,897 9,316,017
Beiersdorf AG Ser A B C DEM5 Var ......................... 21,700 1,498,326
Bilfinger & Berger DEM5 .................................. 8,650 220,726
Brau & Brunnen AG DEM50 .................................. 1,071 95,813
Buderus AG DEM50 ......................................... 650 236,892
CKAG Colonia Konzern DEM5 ................................ 6,590 747,818
Continental AG DEM5 ...................................... 29,450 813,377
Daimlerchrysler AG Ord NPV Regd .......................... 248,534 24,547,121
Degussa AG DEM5 .......................................... 23,350 1,283,495
Deutsche Bank AG DEM5 .................................... 136,880 8,058,170
Deutsche Telekom DEM5 .................................... 566,100 18,626,127
Douglas Hldg AG NPV Rfd 1Jul98 ........................... 405 21,885
Douglas Holding AG DEM5 .................................. 8,000 485,132
Dresdner Bank AG DEM5 .................................... 128,000 5,379,685
Dyckerhoff AG DEM50 ...................................... 121 33,056
Escada AG DEM50 .......................................... 200 32,422
FAG Kugelfischer DEM5 .................................... 15,350 130,411
Heidelberg Zement DEM5 ................................... 12,761 996,040
Herlitz AG DEM50 ......................................... 405 13,374
Hochtief AG DEM5 ......................................... 17,700 690,773
Holsten Brauerei AG DEM50 ................................ 212 43,940
IWKA AG NPV .............................................. 5,000 81,956
Karstadt AG DEM50 ........................................ 2,233 1,166,425
Klockner Humboldt Deutz DEM5 ............................. 14,150 131,685
Linde AG DEM50 ........................................... 2,238 1,377,313
Lufthansa AG DEM5 Regd Vink .............................. 97,850 2,162,009
MAN AG DEM50 ............................................. 2,828 832,002
Mannesmann AG Ord NPV .................................... 96,800 11,100,884
Merck KGAA DEM5 .......................................... 44,300 1,994,866
Metro AG DEM5 ............................................ 70,202 5,605,960
Munich Rahsurance Wts 3Jun2002 To Purch Ord .............. 490 22,801
Munich Reinsurance DEM5 .................................. 850 279,672
Munich Reinsurance DEM10 Vink DEM5 Pd Regd ............... 21,490 10,412,591
Preussag AG DEM50 ........................................ 3,900 1,763,228
Rheinmetall AG DEM5 ...................................... 4,450 115,156
RWE AG DEM5 .............................................. 93,730 5,135,235
Salamander AG DEM50 ...................................... 400 72,049
SAP AG DEM5 .............................................. 15,850 6,851,894
Schering AG DEM5 ......................................... 17,600 2,211,195
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-196
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------------- ------------ --------------
<S> <C> <C>
SGL Carbon DEM5 ............................................. 5,400 $ 324,222
Siemens AG DEM5 ............................................. 146,950 9,484,772
Strabag AG DEM50 ............................................ 500 30,921
Thyssen AG DEM50 ............................................ 8,700 1,614,608
VEBA AG DEM5 ................................................ 127,350 7,623,299
VIAG AG DEM50 ............................................... 6,955 4,079,816
Volkswagen AG Ord NPV ....................................... 79,510 6,349,247
------------
193,915,901
------------
IRELAND -- 0.7%
Allied Irish Banks PLC Ord IEP0.25 .......................... 225,460 4,043,996
Clondalkin Group Units 1 Ord IRP0.25+ A Ord ................. 10,900 74,758
Crean (James) PLC Units ..................................... 11,502 14,920
CRH PLC Ord IEP0.25 ......................................... 100,800 1,743,388
DCC Ord IEP0.2. ............................................. 21,900 192,651
Fyffes PLC Ord IEP0.05 ...................................... 75,561 176,314
Greencore Group Ord IEP0.50 ................................. 50,148 231,788
Independent Newspapers PLC Ord IEP0.25 ...................... 65,220 262,555
Irish Continental Group PLC Ord IEP0.50 ..................... 6,808 80,698
Irish Life PLC Ord IEP0.10 .................................. 83,180 783,812
Irish Permanent Ord IEP0.25 ................................. 24,400 367,440
Jefferson Smurfit Group PLC Ord IEP0.25 ..................... 286,555 516,974
Jurys Hotel Group Ord IEP0.25 Dublin Listing ................ 11,500 87,447
Kerry Group PLC Ord IEP0.10 ................................. 42,900 585,267
Ryanair Holdings Ord IEP0.04 ................................ 42,900 307,025
Tullow Oil Ord IEP0.1 Dublin Listing ........................ 60,000 49,203
Waterford Wedgewood PLC Ord IEP0.05 ......................... 192,388 163,504
------------
9,681,740
------------
ITALY -- 6.5%
Alitalia Linee ITL1000 Post Cons ............................ 564,000 2,086,492
Arnoldo Mondadori Editore SpA ITL1000 Ord. .................. 31,000 410,791
Assicurazioni Generali ITL2000 .............................. 245,957 10,292,383
Banca Commerciale Italiana SpA ITL1000 ...................... 443,350 3,065,203
Banca Populare di Milano ITL1000 ............................ 61,200 556,737
Banco Ambrosiano Veneto SpA Ord ITL1000 ..................... 447,033 2,688,066
Banco Ambrosiano Veneto SpA ITL1000 Non Conv ................ 183,833 561,904
Benetton Group SpA ITL250 ................................... 453,240 915,335
Bulgari SpA ITL125 .......................................... 71,000 424,133
Burgo Cartiere SpA ITL5000 .................................. 30,400 195,981
Cementir SpA ITL1000 ........................................ 63,100 72,709
Cogefar Impresit SpA ITL1000 ................................ 150,300 136,181
Credito Italiano SA ITL500 .................................. 920,500 5,468,093
Danieli & Cofficine Meccaniebe SpA ITL2000 .................. 8,100 58,949
Danieli & Cofficine Meccaniebe SpA ITL2000 Non Conv ......... 8,100 32,323
Edison SpA ITL1000 .......................................... 156,600 1,848,646
ENI SpA ITL1000 Regd ........................................ 1,991,200 13,042,063
Falck, Accia & Ferr Lombarde ITL2500 ........................ 14,880 121,376
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-197
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ -------------
<S> <C> <C>
Fiat SpA ITL1000 .................................. 912,623 $ 3,176,954
Fiat SpA ITL1000 Non Conv ......................... 199,869 400,007
Gilardini Industriale SpA ITL1000 ................. 149,700 259,654
INA Ist Nazionale Assoc ITL1000 ................... 994,500 2,632,672
Italcementi SpA ITL2000 ........................... 42,910 473,628
Italcementi SpA ITL2000 Non Conv .................. 25,200 128,377
Italgas ITL1000 ................................... 172,660 936,655
La Rinascente SpA ITL1000 ......................... 53,372 550,101
La Rinascente SpA ITL1000 Non Conv ................ 11,100 66,241
Marzotto & Figli SpA ITL1000 ...................... 18,400 203,094
Mediaset ITL1000 .................................. 290,400 2,359,984
Mediobanca SpA ITL1000 ............................ 141,039 1,963,042
Mediobanca Spa C/W 31Dec00 Ord Itl16000 ........... 12,673 46,038
Milano Assicurazioni SpA ITL1000 .................. 11,730 47,023
Montedison SpA ITL1000 Non Conv ................... 184,500 184,624
Montedison SpA New ITL1000 Post Cons .............. 1,232,727 1,641,002
Olivetti & C SpA ITL1000 Non Conv ................. 1,000 3,208
Olivetti SpA ITL1000 .............................. 675,243 2,354,700
Olivetti SpA Wts31 8 02 Ord Itl1000 ............... 30,965 89,389
Parmalat Finanziaria SpA ITL1000 .................. 365,500 700,458
Pirelli SpA ITL1000 ............................... 436,083 1,400,370
Pirelli SpA ITL1000 Non Conv ...................... 23,200 57,265
RAS SpA ITL1000 ................................... 92,576 1,344,657
RAS SpA ITL1000 Non Conv .......................... 37,913 380,535
Reno de Medici ITL1000 Ser A ...................... 20,730 59,253
Reno De Medici SpA ITL1000 ........................ 19,100 60,234
S.A.I. ITL1000 Non Conv ........................... 15,100 100,734
S.A.I. ITL1000 .................................... 30,500 368,096
Sao Paolo Imi Spa ITL6000 ......................... 354,549 6,278,657
Sirti SpA ITL1000 ................................. 53,732 324,890
Snia BPD SpA ITL1000 Non Conv ..................... 20,200 22,296
Snia BPD SpA ITL1000 .............................. 172,500 272,001
Telecom Italia Mobilia ITL50 Di Risp .............. 388,989 1,835,374
Telecom Italia Mobilia ITL50 ...................... 1,646,365 12,181,300
Telecom Italia SpA Di Risp ITL1000 ................ 223,819 1,411,686
Telecom Italia SpA ITL1000 ........................ 913,535 7,811,815
Unione Immobiliare ITL125 ......................... 1,071,500 560,154
-----------
94,663,533
-----------
NETHERLANDS -- 8.7%
ABN Amro Holdings NV NLG1.25 ...................... 381,440 8,028,527
Aegon NV NLG0.50 .................................. 154,218 18,949,900
Ahold (Kon.) NV NLG0.50 ........................... 165,720 6,128,398
Akzo Nobel NV NLG5 ................................ 71,579 3,261,101
Buhrmann NV NLG2.50 Post Cons ..................... 19,551 350,043
Elsevier NV NLG0.10 ............................... 167,368 2,345,529
Getronics NV NLG 0.25 ............................. 22,500 1,115,008
Hagemeyer NLG2.50 ................................. 27,457 1,003,667
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-198
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- --------------
<S> <C> <C>
Heineken NV NLG5 .................................. 82,989 $ 4,997,025
Hollandsche Beton NLG2 ............................ 7,872 97,316
IHC Caland NV NLG2 ................................ 6,574 273,235
ING Groep NV CVA NLG1 ............................. 249,007 15,192,512
KLM Royal Dutch Airlines NLG20 .................... 17,921 542,404
Kon Hoogovens NV CVA NLG20 ........................ 8,995 249,240
Koninklijke Pakhoed NV CVA NLG5 ................... 7,806 197,160
KPN NV NLG10 ...................................... 125,754 6,298,864
Nedlloyd Groep NV NLG10 ........................... 5,549 75,399
Oce NV NLG1 ....................................... 19,785 711,627
Philips Electronics NV NLG10 ...................... 96,704 6,492,733
Royal Dutch Petroleum NLG1.25 ..................... 567,484 28,273,384
Stad Rotterdam CVA NLG2.5 ......................... 5,392 488,440
Stork NV NLG10 .................................... 7,264 166,053
Tnt Post Groep NV NLG1 ............................ 125,754 4,054,056
Unilever NV CVA NLG1 .............................. 169,418 14,489,291
Vedior NLG1 W.I.05Jun97 ........................... 18,837 371,386
Wolters Kluwer NV CVA NLG1 ........................ 18,246 3,906,521
------------
128,058,819
------------
NORWAY -- 0.5%
Aker A/S NOK20 B .................................. 5,360 47,840
Aker A/S NOK20 Ser A .............................. 14,400 151,205
Ask ASA NOK2 ...................................... 9,900 61,073
Bergesen DY A/S NOK2.5 A .......................... 13,600 162,441
Bergesen DY ASA NOK2.5 B (Non Vtg) ................ 5,600 64,682
Christiania Bank NOK7 ............................. 146,700 508,335
Den Norske Bank NOK10 ............................. 170,400 588,221
Dyno Industrier ASA NOK20 ......................... 6,400 94,924
Elkem ASA NOK20 A ................................. 12,200 145,719
Hafslund ASA NOK1 Ser A ........................... 16,947 106,770
Hafslund ASA NOK1 Ser B ........................... 11,767 50,041
Helikopter Service ASA NOK11.5 .................... 5,000 23,626
Kvaerner A/S NOK12.50 ............................. 8,600 169,319
Kvaerner ASA NOK12.5 B ............................ 2,500 41,017
Leif Hoegh & Co., ASA NOK2 ........................ 7,400 86,445
Merkantildata ASA NOK1 ............................ 25,100 247,087
Norsk Hydro ASA NOK20 ............................. 60,966 2,056,536
Norske Skogsindustrier ASA NOK20 A ................ 7,300 212,712
Norske Skogsindustrier ASA NOK20 B ................ 2,300 57,660
Orkla ASA A NOK6.25 ............................... 42,000 625,692
Orkla ASA B NOK6.25 ............................... 9,800 127,987
Petroleum Geo Svs NOK5 Post Re Org ................ 23,300 296,649
SAS Norge ASA NOK10 Ser B ......................... 12,000 100,804
Schibsted A/S NOK1 ................................ 17,600 221,768
Smedvig NOK3 Ser B ................................ 3,600 27,406
Smedvig A/S NOK3 .................................. 6,900 57,962
Tomra Systems A/S NOK4 ............................ 10,900 357,670
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-199
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------------------ ---------- -------------
<S> <C> <C>
Unified Storebrand ASA A NOK20 ................................... 73,700 $ 556,225
Unitor Ships Service NOK12.5 ..................................... 4,900 47,593
Vard A/S NOK2 A .................................................. 60,327 142,528
-----------
7,437,937
-----------
PORTUGAL -- 0.9%
Banco Commerce Portugues SA Ord PTE1000 Regd ..................... 52,296 1,607,841
Banco Espirito Santo e Comercial de Lisboa PTE1000 Regd .......... 31,167 967,357
Banco Port de Invest PTE1000 Regd ................................ 19,600 665,170
Banco Totta E'Acores PTE1000 Regd ................................ 12,000 288,180
Brisa Auto Estrada PTE1000 ....................................... 15,100 888,876
Cia Celulose Caima PTE1200 ....................................... 400 4,864
Cimpor Ciment Port PTE1000 ....................................... 21,200 676,753
Cin Corp. Indiana Norte PTE1000 .................................. 800 31,981
Colep (Cia Port Emb) PTE1000 ..................................... 2,500 18,670
Cort Amorim SA PTE1000 ........................................... 3,200 45,921
EFACEC Empresea Fabril de Maquinas Electricas SA PTE1000 ......... 2,200 22,654
Elec De Portugal PTE1000 ......................................... 159,100 3,503,004
Engil Sgps PTE1000 ............................................... 3,473 23,597
Inapa Prov Ctf/New Shs ........................................... 1,666 17,565
Inapa Investor Participating Ges Ord PTE1000 ..................... 5,900 62,205
Jeronimo Martins PTE1000 ......................................... 17,500 957,377
Portucel Industria PTE1000 ....................................... 21,900 143,668
Portugal Telecom SA PTE1000 ...................................... 50,400 2,310,891
Seguros Tranquilid PTE1000 Regd .................................. 4,700 150,007
Soares Costa New Shs Prov Ctf .................................... 1,040 3,533
Soares da Costa PTE1000 .......................................... 3,600 12,230
Societe Empre Somague PTE1000 .................................... 4,072 23,732
Sonae Investimento Ord PTE1000 ................................... 9,900 481,295
Unicer (Uniao Cervejeira SA) PTE1000 Regd ........................ 4,900 116,927
-----------
13,024,298
-----------
SPAIN -- 4.3%
Acerinox SA ESP160 Regd .......................................... 14,520 338,684
ACS Actividades Co ESP250 ........................................ 11,800 466,366
Aguas de Barcelona ESP500 Rfd 01Jan .............................. 59 993,956
Aguila SA ESP500 ................................................. 8,307 80,320
Argentaria Corp Bancania di bispaz ESP125 Regd ................... 124,350 3,225,224
Asturiana de Zinc ESP525 ......................................... 10,100 88,033
Autopistas Concesionaria Espanola SA ESP500 ...................... 62,299 1,037,648
Azucarera Ebro Agr ESP100 ........................................ 16,800 371,117
Bco Bilbao Vizcaya ESP90 ......................................... 518,326 8,139,351
Bco Central Hispan ESP84 Regd .................................... 280,661 3,337,634
Bco Santander SA ESP 115 Regd .................................... 297,113 5,913,268
Corp Mapfre SA ESP250 ............................................ 15,096 410,185
Corporacion Financiera Alba SA ESP1000 ........................... 3,500 585,428
Cortefiel SA ESP50 ............................................... 9,700 256,035
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-200
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ---------- -------------
<S> <C> <C>
Dragados Y Construciones SA ESP500 ................ 4,318 $ 528,495
Empresa Nacional de Celulosas ESP1000 ............. 4,950 83,145
Endesa SA ESP200 .................................. 249,398 6,618,165
Ercros SA ESP500 .................................. 35,750 48,191
Faes Esp Prod Quim ESP50 Regd ..................... 6,900 112,004
Fomento de Cunstruc y Contra ESP250 ............... 14,850 1,105,696
Gas Natural Sdg ESP500 ............................ 37,940 4,136,972
General de Aguas d' Barcelona ESP500 .............. 11,244 753,878
Iberdrola SA ESP500 ............................... 228,854 4,288,247
Inmobiliaria Urbis SA Ser 1 ESP500 ................ 10,350 161,067
Metrovacesa ESP250 ................................ 12,076 363,069
Portland Valderrivas ESP160 ....................... 5,400 221,044
Prosegur Seguridad ESP100 Regd .................... 14,950 174,621
Puleva SA ESP10 Split ............................. 212,500 142,475
Repsol SA ESP500 .................................. 76,176 4,069,779
Sol Melia SA ESP100 ............................... 7,650 267,253
Tabacalera SA ESP100 Ser A Regd ................... 45,665 1,153,781
Telefonica de Espana SA ESP500 .................... 260,157 11,585,684
Telefonica SA Bonus Rts Exp 30Jan1999 ............. 260,157 231,346
Telepizza ESP5 .................................... 53,200 506,876
Union Electrica Fenosa SA ESP500 .................. 75,986 1,316,564
Uralita SA ESP500 ................................. 12,662 141,194
Vallehermoso SA ESP165 ............................ 32,130 460,324
Viscofan Envolturas Celulosi ESP100 ............... 6,105 197,768
Zardoya Otis ESP160 ............................... 15,460 483,359
-----------
63,404,246
-----------
SWEDEN -- 3.6%
ABB AB Ser B SEK5 ................................. 69,400 736,336
ABB AB Ser A SEK5 ................................. 175,500 1,872,885
AGA AB A SEK5 ..................................... 33,600 445,621
AGA AB B SEK5 ..................................... 29,200 383,663
Asticus AB SEK10 .................................. 4,100 40,213
Astra AB Ser B SEK1.25 ............................ 80,266 1,633,930
Astra AB Ser A SEK1.25 ............................ 351,373 7,174,379
Atlas Copco AB A SEK5 ............................. 31,500 691,749
Atlas Copco AB B SEK5 ............................. 15,600 338,731
Diligentia SEK10 .................................. 16,200 113,922
Drott AB Ser B SEK2 ............................... 29,200 268,384
Electrolux AB Servb SEK5 .......................... 96,200 1,655,645
Ericsson LM Telephone B SEK2.5 .................... 512,420 12,201,166
Esselte AB A SEK12.5 .............................. 5,000 80,192
Esselte AB B SEK12.5 .............................. 3,900 63,993
Granges AB SEK25 .................................. 8,500 122,694
Hennes & Mauritz Ser B SEK1 ....................... 54,300 4,434,818
Mandamus Fastighet SEK20 .......................... 2,480 13,921
Netcom Systems AB SEK5 Ser B ...................... 27,100 1,103,319
OM Gruppen AB SEK2 ................................ 21,700 273,072
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-201
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------ ---------- -------------
<S> <C> <C>
Sandvik AB A SEK5 .................................... 49,800 $ 866,296
Sandvik AB B SEK5 .................................... 17,800 307,444
Securitas SEK1 Ser B ................................. 80,500 1,251,366
Skandia Forsakring SEK1 .............................. 134,400 2,056,075
Skandinaviska Enskilda Banken A SEK10 ................ 154,600 1,630,773
Skanska AB B SEK10 ................................... 29,900 829,988
SKF International AB B SEK12.5 ....................... 16,600 193,534
SKF International AB A SEK12.5 ....................... 12,900 146,419
Sparbanken Sverige AB SEK20 Ser A .................... 92,500 2,396,508
Ssab Svenskt Stal SEK25 Ser B ........................ 8,300 79,359
Ssab Svenskt Stal SEK25 Ser A ........................ 22,800 217,999
Stora Enso Oyj FIM10 Ser A ........................... 18,857 162,850
Stora Enso Oyj FIM10 Ser R ........................... 47,181 424,912
Svenska Cellulosa B SEK10 ............................ 51,870 1,132,681
Svenska Handelsbanken B SEK10 ........................ 5,500 211,029
Svenska Handelsbanken A SEK10 ........................ 57,000 2,405,021
Swedish Match Co. SEK2 ............................... 115,600 420,725
Trelleborg AB B SEK25 ................................ 30,100 245,092
Volvo AB A SEK5 ...................................... 36,400 815,072
Volvo AB B SEK5 ...................................... 79,600 1,826,602
WM-Data AB SEK5 Ser B ................................ 19,100 815,319
-----------
52,083,697
-----------
SWITZERLAND -- 10.8%
ABB AG CHFf50 Br ..................................... 2,170 2,543,681
ABB AG CHF10 Regd .................................... 1,420 332,906
Adia SA CHF10 ........................................ 4,498 2,053,355
Alusuisse Lonza Holdings AG CHF125 Regd .............. 1,662 1,936,101
CS Holding AG CHF20 Regd ............................. 70,660 11,060,866
Danzas Holding AG CHFf10 Regd ........................ 645 272,373
Forbo Holding CHF50 Regd ............................. 365 159,449
Georg Fischer AG CHF100 Regd ......................... 840 284,081
Grands Magasins Jelmoli CHF50 Br ..................... 115 128,942
Grands Magasins Jelmoli CHF10 Regd ................... 370 80,817
Holderbank Financiere Glaris Ltd. CHF10 Regd ......... 625 156,537
Holderbank Financiere Glaris Ltd. CHF50 Br ........... 1,814 2,147,508
Kuoni Reisen Holding CHF50 Regd Ser B ................ 80 317,441
Merkur Holding AG CHF25 Regd ......................... 1,065 288,062
Movenpick Holdings CHF50 Br .......................... 260 145,383
Movenpick Holdings Ptg Certs CHF50 ................... 15 8,409
Nestle SA CHF10 Regd ................................. 10,459 22,768,707
Novartis AG CHF20 Regd ............................... 16,466 32,368,972
Novartis AG CHF20 Br ................................. 1,742 3,424,435
Roche Holding Ltd. CHF100 Br ......................... 426 7,715,245
Roche Holding Ltd. NPV ............................... 1,865 22,757,779
Sairgroup CHF69 Regd ................................. 2,950 732,408
Schindler Holding AG CHF100 Regd ..................... 35 59,629
Schindler Holding AG Ptg Certs CHF100 ................ 350 560,619
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-202
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ----------------------------------------------------------------------------- ------------ --------------
<S> <C> <C>
SGS Holding CHF100 Br ....................................................... 397 $ 388,768
SGS Holding CHF20 Regd ...................................................... 220 51,897
Sika Finanz AG CHF60 Br ..................................................... 620 185,980
SMH Swiss Corp. for Microelectronics & CHF10 Regd Watchmaking Industries Ltd 3,925 587,972 .
SMH Swiss Corp. for Microelectronics & Watchmaking Industries Ltd.CHF50 Br .. 938 580,495
Sulzer Brothers Ltd. CHF100 Regd ............................................ 946 575,804
Swiss Reinsurance Co. CHF20 Regd ............................................ 3,804 9,917,949
Swisscom AG CHF25(Regd) ..................................................... 17,940 7,510,473
UBS AG CHF20 Regd ........................................................... 56,856 17,468,909
Zurich Allied AG CHF10 Regd ................................................. 12,660 9,374,145
-----------
158,946,097
-----------
UNITED KINGDOM -- 27.4%
Abbey National PLC Ord GBP0.10 .............................................. 348,100 7,419,149
Allied Zurich Ord GBP0.25 ................................................... 435,953 6,560,685
AMEC PLC Ord GBP0.50 ........................................................ 49,409 145,917
Amoco Corp USD .............................................................. 210,000 12,400,500
Anglian Water Ord GBP0.471428 ............................................... 65,740 914,128
Argyll Group PLC Ord GBP0.25 ................................................ 267,853 1,345,874
Arjo Wiggins Appleton PLC Ord GBP0.25 ....................................... 203,367 382,349
Associated British Foods PLC Ord GBP0.05 .................................... 220,400 2,079,197
BAA PLC Ord GBPO.1 .......................................................... 260,100 3,059,572
Barclays PLC Ord GBPO.1 ..................................................... 376,800 8,181,301
Barratt Developments PLC Ord GBP0.10 ........................................ 55,350 212,731
Bass Plc B Shs GBP0.955 ..................................................... 87,500 135,392
Bass PLC Ord .28P ........................................................... 195,324 2,830,575
BBA Group PLC Ord GBP0.25 ................................................... 102,400 635,492
Berkeley Group PLC Ord GBP0.25 .............................................. 29,100 213,759
BG PLC Ord 1 2/15 ........................................................... 969,005 6,239,330
BICC PLC Ord GBP0.50 ........................................................ 97,041 113,020
Blue Circle Industries PLC Ord GBP0.50 ...................................... 183,242 960,365
BOC Group PLC Ord GBP0.25 ................................................... 119,098 1,710,079
Boots Co., PLC Ord GBP0.25 .................................................. 224,800 3,848,687
Bowthorpe Holdings PLC Ord GBP0.10 .......................................... 48,300 278,854
BPB Industries PLC Ord GBP0.50 .............................................. 126,100 461,571
Brit Amer Tobacco PLC Ord GBP0.25 ........................................... 381,153 3,361,059
British Aerospace Ord GBP0.025 .............................................. 444,076 3,790,318
British Airways PLC Ord GBP0.25 ............................................. 255,000 1,756,473
British Land Co., PLC Ord GBP0.25 ........................................... 126,233 936,718
British Petroleum Co., PLC Ord GBP0.25 ...................................... 1,443,610 21,520,822
British Sky Broadcast Ord.GBP0.50 ........................................... 423,500 3,213,063
British Steel PLC Ord GBP0.50 ............................................... 492,300 747,418
British Telecommunications PLC Ord GBP0.25 .................................. 1,580,400 23,954,458
Btr PLC Ord GBP0.30 10/13P. ................................................. 810,732 1,665,886
Bunzl PLC Ord GBP0.25 ....................................................... 106,100 414,843
Burmah Castrol PLC Ord GBPO.1 ............................................... 51,670 739,329
Cable & Wireless PLC Ord GBP0.25 ............................................ 589,819 7,222,666
Cadbury Schweppes PLC Ord GBP0.25 ........................................... 248,880 4,265,090
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-203
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- -------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Caradon Ord GBP0.27777 ................................................... 125,900 $ 215,757
Carlton Communications PLC Ord. GBP0.05 .................................. 149,110 1,374,414
Centrica PLC Ord GBP0.05 ................................................. 1,092,200 2,244,244
Coats Viyella PLC Ord GBP0.20 ............................................ 163,006 73,227
Commercial Union PLC Ord GBP0.25 ......................................... 322,375 5,090,126
Compass Group Ord GBP0.025 ............................................... 166,500 1,903,145
Courtaulds Textile PLC Ord GBP0.25 ....................................... 24,775 66,777
De La Rue Co., PLC Ord GBP0.25 ........................................... 53,798 181,703
Delta PLC Ord GBP0.25 .................................................... 35,300 65,193
Diageo PLC Ord GBX28.935185 .............................................. 886,385 49,844,069
Electrocomponents PLC Ord GBP0.10 ........................................ 104,534 690,477
Elementis Ord GBP0.05 .................................................... 96,126 131,146
EMI Group PLC Ord GBP0.14 ................................................ 192,320 1,289,527
English China Clays PLC Ord GBP0.25 ...................................... 73,669 199,790
FKI PLC Ord. GBP0.10 ..................................................... 135,920 303,032
FR Group PLC Ord GBP0.25 ................................................. 22,680 263,013
General Electric Co., PLC Ord GBP0.05 .................................... 670,600 6,080,804
Gkn PLC Ord GBP0.50 ...................................................... 176,300 2,346,623
Glaxo Holdings PLC Ord GBP0.25 ........................................... 881,000 30,371,526
Granada Group PLC Ord GBP0.25 ............................................ 222,161 3,899,611
Great Portland Estates PLC Ord GBP0.50 ................................... 92,335 302,645
Great Universal Stores PLC Ord Stock GBP0.25 ............................. 246,200 2,601,134
Guardian Royal Exchange Ord GBP0.0525 .................................... 214,069 1,200,286
Halifax Ord GBP0.20 ...................................................... 620,900 8,793,864
Hammerson Property & Investment Development Corp., PLCOrd GBP0.25 ........ 70,141 402,033
Hanson PLC Ord GBP02 ..................................................... 158,950 1,266,768
Hepworth PLC Ord GBP0.25 ................................................. 58,600 154,048
HSBC Holdings PLC Ord HKD10 .............................................. 445,598 11,306,131
HSBC Holdings PLC Ord GBP0.75 ............................................ 215,514 5,945,125
Hyder PLC Ord GBP01.20 ................................................... 35,983 455,001
IMI PLC Ord GBP0.25 ...................................................... 85,100 334,151
Imperial Chemical Industries PLC Ord GBPO1.0 ............................. 177,400 1,539,249
Jarvis Ord 5P ............................................................ 32,400 360,099
J. Sainsbury PLC Ord GBP0.25 ............................................. 470,042 3,808,611
Johnson Matthey PLC Ord GBP01.00 ......................................... 53,113 358,780
Kingfisher Ord GBP0.125 .................................................. 333,370 3,616,388
Ladbroke Group PLC Ord GBP0.10 ........................................... 288,378 1,161,124
Laird Group PLC Ord GBP0.25 .............................................. 33,300 90,309
Land Securities PLC Ord GBP0.1 ........................................... 135,400 1,734,644
Lasmo PLC Ord GBP0.25 .................................................... 236,757 393,916
Legal & General Group Ord 10P ............................................ 313,725 4,097,507
Lex Service PLC Ord GBP0.25 .............................................. 27,216 174,336
Lonrho Ord GBP01 ......................................................... 47,272 257,976
Lonrho Africa Ord GBP0.20 ................................................ 24,572 22,894
Lucas Varity Ord GBP0.25 ................................................. 345,166 1,154,317
Marks & Spencer PLC Ord GBP0.25 .......................................... 705,300 4,858,198
Marley Ord GBP0.16 ....................................................... 79,032 160,422
MEPC PLC Ord GBP30.263157 ................................................ 84,552 562,710
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-204
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- -------------------------------------------------------- ------------ -------------
<S> <C> <C>
Meyer International PLC Ord GBP0.25 .................... 38,112 $ 218,767
Misys Ord GBP0.01 ...................................... 139,800 1,028,088
National Grid Co Ord 11 13/17P ......................... 363,058 2,899,467
National Power PLC Ord GBP0.50 ......................... 302,400 2,611,260
Next PLC Ord GBP0.10 ................................... 91,300 748,891
North West Water PLC Ord GBPO.1 ........................ 134,933 1,874,587
Ocean Group Ord 28 1/2 ................................. 36,170 454,958
Ocean Group Shs GBP0.6525 .............................. 20,300 22,967
P&O Holdings PLC Ord GBP0.1.00 ......................... 155,963 1,847,577
Pearson PLC Ord GBP0.25 ................................ 149,200 2,971,072
Pilkington PLC Ord GBP0.50 ............................. 253,394 252,958
Provident Finl Ord GBX10.363636 ........................ 65,329 959,771
Prudential Corp., PLC Ord GBP0.05 ...................... 477,815 7,299,344
Racal Electronics PLC Ord GBP0.25 ...................... 68,700 397,775
Railtrack Group Ord GBP0.25 ............................ 124,494 3,251,989
Rank Group Ord GBP0.10 ................................. 188,082 719,928
Reed International Ord GBP0.125 ........................ 279,000 2,218,876
Rentokil Initial PLC Ord GBP0.01 ....................... 704,500 5,333,267
Reuters Group PLC Ord GBP0.25 .......................... 360,993 3,813,937
Rexam Ord .............................................. 110,294 306,457
RMC Group PLC Ord GBP0.25 .............................. 63,550 870,195
Rolls Royce PLC Ord GBP0.20 ............................ 362,061 1,505,992
Royal Bank of Scotland Group PLC Ord GBP0.25 ........... 213,279 3,491,758
RTZ Corp., PLC Ord GBP0.10 Regd ........................ 263,872 3,073,211
Rugby Group PLC Ord GBP0.25 ............................ 153,900 238,135
Schroders PLC Ord GBP0.1 ............................... 72,200 1,320,188
Scottish & Newcastle Breweries PLC Ord GBP0.20 ......... 150,942 1,757,960
Scottish Hydro Electric PLC Ord GBP0.50 ................ 62,535 705,950
Scottish Power PLC Ord GBP0.50 ......................... 294,717 3,040,170
Sears PLC Ord GBP2.50 .................................. 36,620 157,195
Selfridges Ord GBP0.25 ................................. 19,120 69,986
Siebe PLC Ord.GBP0.25 .................................. 517,300 2,035,516
Slough Estates PLC Ord GBP0.25 ......................... 97,800 442,597
Smithkline Beecham Ord GBP0.0625 ....................... 1,367,201 18,975,722
Smiths Industries PLC Ord GBP0.25 ...................... 75,586 1,085,308
St James Place Capital PLC Ord GBP0.15 ................. 97,900 470,740
Stagecoach Holdings Ord GBP0.005 ....................... 319,000 1,279,112
Sun Alliance Group PLC Ord GBP0.25 ..................... 385,887 3,145,989
Tarmac PLC Ord GBP0.50 ................................. 230,903 432,198
Tate & Lyle PLC Ord.GBP0.25 ............................ 109,124 588,256
Taylor Woodrow PLC Ord GBP0.25 ......................... 94,259 236,026
TBS Group Ord GBP0.25 .................................. 1,329,818 18,961,557
Tesco PLC Ord GBP0.05 .................................. 1,628,220 4,740,805
Thames Water Ord GBP0.23 ............................... 85,466 1,649,500
TI Group PLC Ord GBP0.25 ............................... 123,723 666,440
Transport Dev Group Ord .01 ............................ 18,517 73,170
Unigate PLC Ord GBP0.25 ................................ 58,600 422,657
Unilever Ord GBP0.0125 ................................. 803,500 9,050,561
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-205
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ------------------------------------------------------ ------------- -----------------
<S> <C> <C>
Utd Biscuits Hldg Ord GBP0.29 ........................ 115,477 $ 454,389
Vickers Group Ord0.25 ................................ 53,766 160,126
Vodafone Group PLC Ord GBP0.05 ....................... 761,333 12,388,379
Williams Ord GBP0.28 ................................. 179,576 1,027,798
Wilson Holdings PLC Ord GBP0.25 ...................... 47,900 86,869
Wimpey (George) PLC Ord GBP0.25 ...................... 87,500 159,049
Wolseley PLC Ord.GBP0.25 ............................. 140,400 882,998
Zeneca Group Ord GBP0.25 ............................. 233,800 10,199,483
--------------
402,541,461
--------------
TOTAL COMMON STOCK
(COST $ 1,334,195,333) .............................. $1,388,837,694
--------------
PREFERRED STOCK -- 0.7% SHARES VALUE
- ------------------------------------------------------- ------- --------------
(unless otherwise noted)
AUSTRIA -- 0.0%
Bau Holdings AG Pfd ATS100 ........................... 300 $ 11,265
EA Generali AG Pfd ATS100 ............................ 200 30,978
--------------
42,243
--------------
FRANCE -- 0.0%
Etab Eco Casino Guich Perr & Co. FRF10 Pfd ........... 4,454 286,248
--------------
GERMANY -- 0.6%
CKAG Colonia Konzern Non Vtg Pfd DEM5 ................ 1,200 122,484
Dyckerhoff AG Pfd DEM50 .............................. 570 158,112
Escada AG Pfd DEM50 .................................. 150 24,767
Friedrich Grohe AG Pfd DEM50 ......................... 750 198,136
Herlitz AG Pfd DEM50 ................................. 416 11,492
MAN AG Pfd DEM50 ..................................... 1,100 222,573
Metro AG Non Vtg Pfd DEM5 ............................ 6,260 301,814
Rheinmetall AG Non Vtg Pref DEM5 ..................... 3,426 64,384
RWE AG Non Vtg Pfd DEM5 .............................. 52,800 1,927,464
SAP AG Pfd DEM5 ...................................... 10,950 5,228,045
Volkswagen AG Non Vtg Prf NPV ........................ 23,350 1,163,627
--------------
9,422,898
--------------
ITALY -- 0.1%
Fiat SpA Privilege ITL1000 ........................... 259,435 501,124
La Rinascente SpA Privilege ITL1000 .................. 8,100 43,524
--------------
544,648
--------------
PORTUGAL -- 0.0%
Cin Corp Ind Norte PTE1000 Non Vtg N/Cum Prf ......... 171 6,190
--------------
TOTAL PREFERRED STOCK
(COST $9,526,824) ................................... 10,302,227
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-206
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
UNITS VALUE
------------ -----------------
<S> <C> <C>
STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 4.6%
Short Term Investment Fund (a) ........................................ 67,359,078 $ 67,359,078
--------------
TOTAL INVESTMENTS -- 100%
(COST $1,411,169,540)................................................. $1,466,606,980
==============
</TABLE>
- ----------
(a) Collective investment fund advised by State Street Global Advisors.
The accompanying notes are an integral part of these financial statements.
SAI-207
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
- --------------------------------------------------------------------------------
At December 31, 1998, foreign currency balances totaling $ 13,502,815 were
pledged to cover margin requirements for open futures contracts. The following
long futures contracts were open at December 31, 1998:
<TABLE>
<CAPTION>
FUTURES NUMBER OF NOTIONAL MATURITY UNREALIZED
CONTRACTS CONTRACTS VALUE DATE GAIN (LOSS)
- ----------------- ----------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
DAX INDEX 39 $ 11,566,880 March 1999 $ 290,069
IBEX INDEX 81 $ 5,554,068 January 1999 112,953
CAC 40 INDEX 534 $ 18,372,244 March 1999 473,756
FTSE 100 INDEX 377 $ 36,126,106 March 1999 678,254
MIB 30 INDEX 51 $ 10,323,778 March 1999 626,325
OMX STOCK INDEX 51 $ 462,632 January 1999 551
-----------
$ 2,181,908
===========
</TABLE>
The following forward foreign currency contracts were open at December 31,
1998:
<TABLE>
<CAPTION>
SETTLEMENT CONTRACTS TO IN EXCHANGE UNREALIZED
DATE DELIVERY FOR GAIN (LOSS)
- ------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
3/5/99 USD 600,962 DEM 1,000,000 $ 975
3/5/99 USD 1,139,635 DEM 1,900,000 4,043
3/5/99 USD 3,537,850 DEM 5,870,000 (4,485)
3/5/99 USD 2,500,000 DEM 4,172,750 11,729
3/5/99 USD 660,185 DEM 1,100,000 1,945
3/5/99 USD 4,565,387 DEM 7,600,000 9,327
3/5/99 DEM 2,500,000 USD 1,493,964 (10,876)
3/5/99 DEM 4,000,000 USD 2,417,941 10,197
3/5/99 DEM 2,000,000 USD 1,207,292 3,420
3/5/99 USD 2,816,000 ESP 398,464,000 (3,120)
3/5/99 USD 335,945 ESP 47,600,000 78
3/5/99 USD 2,413,452 ESP 341,600,000 (1,992)
3/5/99 USD 9,240,036 FRF 51,605,600 $ 19,516
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-208
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
- --------------------------------------------------------------------------------
Forward foreign currency contracts (continued)
<TABLE>
<CAPTION>
SETTLEMENT CONTRACTS TO IN EXCHANGE UNREALIZED
DATE DELIVERY FOR GAIN (LOSS)
- ------------ -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
3/5/99 USD 661,896 FRF 3,700,000 1,992
3/5/99 USD 717,071 FRF 3,990,000 (1,149)
3/5/99 USD 572,758 FRF 3,200,000 1,415
3/5/99 USD 4,138,302 FRF 23,100,000 6,513
3/5/99 FRF 9,500,000 USD 1,692,198 (12,379)
3/5/99 FRF 7,000,000 USD 1,259,400 3,396
3/5/99 FRF 8,100,000 USD 1,457,752 4,376
3/5/99 USD 19,876,840 GBP 11,974,000 (23,049)
3/5/99 USD 828,100 GBP 500,000 938
3/5/99 USD 248,100 GBP 150,000 611
3/5/99 USD 1,009,260 GBP 600,000 (14,415)
3/5/99 USD 7,673,260 GBP 4,600,000 (46,115)
3/5/99 GBP 600,000 USD 993,300 (1,545)
3/5/99 GBP 400,000 USD 663,520 290
3/5/99 GBP 900,000 USD 1,497,600 5,332
3/5/99 USD 6,298,208 ITL 10,366,851,000 (8,427)
3/5/99 USD 408,015 ITL 672,000,000 (298)
3/5/99 USD 2,953,708 ITL 4,865,200,000 (1,891)
-------
$ (43,648)
==========
</TABLE>
CURRENCY LEGEND
DEM German Mark
ESP Spanish Peseta
FRF French Franc
GBP British Pound Sterling
ITL Italian Lira
SEK Swedish Krona
The accompanying notes are an integral part of these financial statements.
SAI-209
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
NOTES TO FINANCIAL STATEMENTS
--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Daily EAFE
Funds, (collectively the "Trust") were formed by State Street Bank under a
Declaration of Trust. The Trust is organized into separate regional funds and
country funds (individually a "Fund") and umbrella funds that hold Malaysian
securities and units of the separate regional and country funds. State Street
Bank is Trustee and custodian of each Fund. State Street Global Advisors, a
division of State Street Bank, is each Fund's investment manager.
The investment objective of each fund is to closely match the performance
of the relevant portion of the MSCI EAFE Index, while providing daily
liquidity. Each Fund may invest in equity securities, equity-based derivatives,
swaps, short-term instruments and foreign exchange contracts, as well as in
commingled funds or mutual funds maintained by the Trustee.
On December 18, 1998, the Daily EAFE Securities Lending-Fund and the Daily
EAFE Non-Lending Fund (collectively, the "underlying fund") were reorganized
and separate regional and country funds (the "new funds") were established. The
underlying fund transferred all of its assets and liabilities, excluding
Malaysian assets and liabilities, in exchange for units in the new funds.
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 price or the
mean between the last reported bid and asked prices, or at fair value as
determined in good faith by the Trustee. Short-term investments, if any, are
stated at amortized cost, which approximates market value. Foreign currencies
and foreign securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Investments in regulated investment
companies or other State Street Bank collective investment funds are valued at
the net asset value per share/unit on the valuation date. Futures contracts are
valued at the last settlement price at the end of each day on the board of
trade or exchange upon which they are traded.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. 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 are determined using the average cost method. Dividend income,
if any, is recorded net of applicable withholding taxes on the ex-dividend date
or as soon as the Fund is informed of the dividend. Interest income earned on
securities, if any, is recorded net of applicable withholding taxes on the
accrual basis; interest earned on foreign currency transaction accounts is
recorded when the Trustee is first notified of the amount credited by the
depository bank.
C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS
The accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange
at period end. Purchases and sales of securities, income and expenses are
translated into U.S. dollars at the prevailing exchange rate on the respective
dates of the transactions.
SAI-210
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
NOTES TO FINANCIAL STATEMENTS
--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
The Fund may use forward foreign currency contracts to facilitate
transactions in foreign securities or as a hedge against either specific
transactions or portfolio positions. Such contracts are valued based upon the
applicable forward exchange rates and any resulting unrealized gains or losses
are recorded in the Fund's financial statements. The Fund records realized
gains or losses at the time the forward contract is extinguished by entry into
a closing transaction or by delivery of the currency. Risks in foreign currency
contracts arise from the possible inability of counterparties to meet the
contracts' terms and from movements in currency values.
D. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made on such
days, based upon the closing market value of the securities bought or sold as
of the valuation date. A transaction fee of .5% is charged on any contribution
or withdrawal greater than 5% of the net asset value of the Fund. However, such
fees are waived if the Fund's net participant activity on any day is less than
5% of the net asset value of the Fund.
F. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year, including custody, stamp duty, registration
and audit fees.
G. DISTRIBUTIONS TO PARTICIPANTS
Net investment income (excluding securities lending fee income, if any)
and net realized gains are retained by the Funds. Income generated by
securities lending, if any, is distributed monthly to participants of the
Lending Fund.
H. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
SAI-211
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION
The participants in the Daily MSCI Europe Index Securities Lending Fund
(the "Lending Fund") have authorized the Lending Fund to participate in the
Global Securities Lending Program maintained by State Street Bank. The
investment objective, techniques and results of operations of the Lending Fund
are identical to those of the Daily MSCI Europe Index Fund (the "Non-Lending
Fund"), except that the Lending Fund engages in securities lending activities.
Accordingly, the financial statements of the Lending Fund and the Non-Lending
Fund have been prepared on a combined basis, with separate disclosure of the
participant transactions and per unit data of the Lending Fund and the
Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a
divided pro-rata interest in the combined assets and liabilities (including
each investment security position but excluding assets and liabilities related
to securities lending activities) proportionate to the net asset value of the
outstanding combined units of the Fund. All interfund transactions have been
eliminated in the combined financial statements.
Under the Global Securities Lending Program, securities held by the
Lending Fund are loaned by State Street Bank, as agent, to certain brokers and
other financial institutions (the "Borrowers"). The Borrowers provide cash,
securities, or letters of credit as collateral against loans in an amount at
least equal to 100% of the market value of the loaned securities. The Borrowers
are required to maintain the collateral at not less than 100% of the market
value of the loaned securities. At December 31, 1998, the market value of
securities loaned by the Lending Fund was $70,303,042 against which was held
cash collateral of $72,631,581 and securities of $844,266. Cash collateral
provided by the Borrowers is invested in State Street Bank and Trust Company
Quality A Short-Term Investment Fund. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder is
allocated between the Lending Fund and State Street Bank in its capacity as
lending agent. Negotiated lenders' fees are received for those loans
collateralized by securities or letters of credit, if any. Income earned from
lending activities is distributed to Lending Fund participants monthly. For the
period ended December 31, 1998, no lending income was earned or distributed.
2. 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, 1998 were $1,343,810,462 and $0, respectively. Net realized
gain (loss) from foreign currency transactions amounted to $(4,554) for the
period ended December 31, 1998.
SAI-212
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
3. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1998
-----------------------------------
UNITS AMOUNT
-------------- ------------------
<S> <C> <C>
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
Units issued .................................. 47,881,653 $ 478,916,496
Units redeemed ................................ (11,149) (116,048)
---------- --------------
Total ...................................... 47,870,504 $ 478,800,448
---------- --------------
DAILY MSCI EUROPE INDEX FUND
Units issued .................................. 94,037,351 $ 941,991,490
Units redeemed ................................ (58,752) (609,375)
---------- --------------
Total ...................................... 93,978,599 $ 941,382,115
---------- --------------
Net increase (decrease) ....................... 141,849,103 $1,420,182,563
=========== ==============
</TABLE>
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
All of the Lending Fund's units outstanding were held by one unitholder at
December 31, 1998.
DAILY MSCI EUROPE INDEX FUND
The Non-Lending Fund's two unitholders each held units in excess of 10% of
the Non-Lending Fund units outstanding at December 31, 1998.
Participants in each of the Lending Fund or the Non-Lending Fund may
exchange their units for units of the other fund on any valuation date.
4. FUTURES CONTRACTS
The Fund may use futures contracts to manage exposure to the relevant
equity markets. Buying futures tends to increase a fund's exposure to the
underlying instrument. Selling futures tends to decrease a fund's exposure to
the underlying instrument, or hedge other 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.
SAI-213
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI EUROPE INDEX SECURITIES LENDING FUND
DAILY MSCI EUROPE INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
Upon entering into a futures contract, the Fund is required to deposit
either in cash or securities an amount ("initial margin") equal to a certain
percentage of the nominal value of the contract. Subsequent payments are made
or received by the Fund periodically, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Fund. A gain or loss is realized when the contract is closed or
expires.
5. SUBSEQUENT EVENTS
Effective January 1, 1999, the notional amounts for German, Spanish,
French and Italian futures contracts held by the Fund were redenominated from
the local currency to Euro.
SAI-214
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
Daily MSCI Japan Index Securities Lending Fund
and State Street Bank and Trust Company
Daily MSCI Japan Index Fund
In our opinion, the accompanying combined statement of assets and liabilities,
including the combined schedule of investments, and the related combined
statements of operations and of changes in net assets and the selected per unit
data present fairly, in all material respects, the financial position of State
Street Bank and Trust Company Daily MSCI Japan Index Securities Lending Fund
and State Street Bank and Trust Company Daily MSCI Japan Index Fund at December
31, 1998, and the results of their operations, the changes in their net assets
and their selected per unit data for the period December 18, 1998 (commencement
of operations) through December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements and selected per unit data
(hereafter referred to as "financial statements") are the responsibility of the
Trustee; our responsibility is to express an opinion on these financial
statements based on our 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 the Trustee, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 5, 1999
SAI-215
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $759,030,118)...................................................................... $766,385,661
Foreign currency ......................................................................... 2,575,968
Foreign currency, segregated ............................................................. 8,885,586
Investments in State Street Bank and Trust Company Quality A Short-Term Investment Fund, 47,831,573
at value
Receivable for Fund units issued ......................................................... 926,748
Receivable for open forward currency contracts ........................................... 1,333,533
Dividends receivable ..................................................................... 132,527
Interest receivable ...................................................................... 66,961
- ------------------------------------------------------------------------------------------- ------------
Total assets .......................................................................... 828,138,557
- ------------------------------------------------------------------------------------------- ------------
LIABILITIES
Payable for collateral on securities loaned .............................................. 47,831,573
Payable for investments purchased ........................................................ 3,976,968
Payable for Fund units redeemed .......................................................... 2,604,313
Payable for open forward currency contracts .............................................. 112,420
Unrealized loss on open futures contracts ................................................ 1,124,484
Accrued expenses ......................................................................... 22,772
- ------------------------------------------------------------------------------------------- ------------
Total liabilities ..................................................................... 55,672,530
- ------------------------------------------------------------------------------------------- ------------
NET ASSETS ............................................................................... $772,466,027
=========================================================================================== ============
Daily MSCI Japan Index Securities Lending Fund (14,455,334 units outstanding,
at $10.10 per unit net asset value)...................................................... $145,983,573
Daily MSCI Japan Index Fund (62,034,467 units outstanding, at $10.10 per unit net asset 626,482,454
- ------------------------------------------------------------------------------------------- ------------
value)
- -------------------------------------------------------------------------------------------
$772,466,027
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-216
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Statement of Operations
Period ended December 31, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of taxes withheld of $22,723).......................................... $ 123,702
Interest ............................................................................. 38,050
- ---------------------------------------------------------------------------------------- ----------
Total investment income ............................................................ 161,752
- ---------------------------------------------------------------------------------------- ----------
EXPENSES
Audit ................................................................................ 4,033
Custody .............................................................................. 5,750
- ---------------------------------------------------------------------------------------- ----------
Total expenses ..................................................................... 9,783
- ---------------------------------------------------------------------------------------- ----------
Net investment income .............................................................. 151,969
- ---------------------------------------------------------------------------------------- ----------
NET UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS
Net change in unrealized appreciation (depreciation):
Investments ......................................................................... 7,355,543
Futures contracts ................................................................... (652,106)
Foreign currency and related forward currency contracts ............................. 934,781
- ---------------------------------------------------------------------------------------- ----------
Net unrealized gain (loss) on investments, futures contracts, foreign currency and
related forward
currency contracts .................................................................. 7,638,218
- ---------------------------------------------------------------------------------------- ----------
Net increase (decrease) in net assets resulting from operations ...................... $7,790,187
======================================================================================== ==========
</TABLE>
* The Fund commenced operations on December 18, 1998.
The accompanying notes are an integral part of these financial statements.
SAI-217
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
---------------
<S> <C>
FROM OPERATIONS
Net investment income ................................................................... $ 151,969
Net change in unrealized appreciation (depreciation) on investments, futures contracts,
foreign currency and related forward currency contracts ................................ 7,638,218
- ------------------------------------------------------------------------------------------- ------------
Net increase (decrease) in net assets resulting from operations .......................... 7,790,187
- ------------------------------------------------------------------------------------------- ------------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions ............ 764,675,840
- ------------------------------------------------------------------------------------------- ------------
Net increase (decrease) in net assets .................................................... 772,466,027
NET ASSETS
Beginning of period ..................................................................... --
- ------------------------------------------------------------------------------------------- ------------
End of period ........................................................................... $772,466,027
=========================================================================================== ============
</TABLE>
* The Fund commenced operations on December 18, 1998.
The accompanying notes are an integral part of these financial statements.
SAI-218
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
-------------
<S> <C>
Net investment income** (a) .......................................... $ 0.00
Net realized and unrealized gain (loss) .............................. 0.10
- ----------------------------------------------------------------------- --------
Net increase (decrease) .............................................. 0.10
NET ASSET VALUE
Beginning of period .................................................. 10.00
- ----------------------------------------------------------------------- --------
End of period ........................................................ $ 10.10
======================================================================= ========
Total return (%)*** .................................................. 0.99
======================================================================= ========
Ratio of expenses to average net assets (%)**** (b) .................. 0.00
Ratio of net investment income to average net assets (%)**** ......... 0.02
Portfolio turnover (%) ............................................... 0
Net assets, end of period (000s) ..................................... $145,984
======================================================================= ========
</TABLE>
* The Fund commenced operations on December 18, 1998.
** Net investment income per unit has been calculated based upon an average
of units outstanding.
*** Total return calculation (not annualized for the period ended December
31, 1998) is based on the value of a single unit of participation
outstanding throughout the period. It represents the percentage change in
the net asset value per unit between the beginning and end of the period.
The calculation includes only those expenses charged directly to the
Lending Fund. The result may be reduced by any administrative or other
fees which are incurred in the management or maintenance of individual
participant accounts.
**** Not annualized for the period ended December 31, 1998.
(a) Zero amount represents that which is less than $.005 per unit.
(b) Zero amount represents that which is less than .005%.
The accompanying notes are an integral part of these financial statements.
SAI-219
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
-------------
<S> <C>
Net investment income** (a) .......................................... $ 0.00
Net realized and unrealized gain (loss) .............................. 0.10
- ----------------------------------------------------------------------- --------
Net increase (decrease) .............................................. 0.10
NET ASSET VALUE
Beginning of period .................................................. 10.00
- ----------------------------------------------------------------------- --------
End of period ........................................................ $ 10.10
======================================================================= ========
Total return (%)*** .................................................. 0.99
======================================================================= ========
Ratio of expenses to average net assets (%)**** (b) .................. 0.00
Ratio of net investment income to average net assets (%)**** ......... 0
Portfolio turnover (%) ............................................... 0
Net assets, end of period (000s) ..................................... $626,482
======================================================================= ========
</TABLE>
* The Fund commenced operations on December 18, 1998.
** Net investment income per unit has been calculated based upon an average
of units outstanding.
*** Total return calculation (not annualized for the period ended December
31, 1998) is based on the value of a single unit of participation
outstanding throughout the period. It represents the percentage change in
the net asset value per unit between the beginning and end of the period.
The calculation includes only those expenses charged directly to the
Non-Lending Fund. The result may be reduced by any administrative or
other fees which are incurred in the management or maintenance of
individual participant accounts.
**** Not annualized for the period ended December 31, 1998.
(a) Zero amount represents that which is less than $.005 per unit.
(b) Zero amount represents that which is less than .005%.
The accompanying notes are an integral part of these financial statements.
SAI-220
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
------------ ---------------
<S> <C> <C>
COMMON STOCK 93.9% (unless otherwise noted)
Acom Co. JPY50 ................................ 67,700 $ 4,357,418
Advantest JPY50 ............................... 46,110 2,926,928
Ajinomoto Co., Inc. JPY50 ..................... 300,000 3,191,585
Alps Electric Co. JPY50 ....................... 82,000 1,508,467
Amada Co., Ltd. JPY50 ......................... 134,000 649,825
Amano Corp. JPY50 ............................. 45,000 425,678
Aoki Corp. JPY50 .............................. 212,000 101,492
Aoyama Trading Co. JPY50 ...................... 33,400 935,702
Arabian Oil Co. JPY500 ........................ 24,400 313,878
Asahi Bank JPY50` ............................. 1,072,000 934,586
Asahi Breweries JPY50 ......................... 227,000 3,350,766
Asahi Chemical Industry JPY50 ................. 667,000 3,187,268
Asahi Glass Co., Ltd. JPY50 ................... 543,000 3,374,596
Ashikaga Bank JPY50 ........................... 286,000 512,179
Autobacs Seven JPY50 .......................... 17,000 572,712
Bank of Tokyo JPY50 ........................... 2,158,400 22,388,332
Bank of Yokohama Ltd. JPY50 ................... 525,000 1,261,341
Bridgestone Corp. JPY50 ....................... 384,000 8,732,177
Brother Industries Ltd. JPY50 ................. 127,000 396,324
Canon Inc. JPY50 .............................. 402,000 8,606,908
Casio Computer Co. JPY50 ...................... 127,000 939,018
Chiba Bank JPY50 .............................. 359,000 1,429,041
Chiyoda Corp. JPY50 ........................... 90,000 171,548
Chugai Pharmaceutical Co. JPY50 ............... 114,000 1,142,056
Citizen Watch Co. JPY50 ....................... 146,000 880,168
Cosmo Oil Co. JPY50 ........................... 291,000 441,157
Credit Saison Co. JPY50 ....................... 77,125 1,904,252
CSK Corp. JPY50 ............................... 28,400 654,630
Dai Ichi Pharmaceutical Co. JPY50 ............. 128,000 2,166,306
Dai Nippon Printing JPY50 ..................... 351,000 5,607,456
Daicel Chemical Industries Ltd. JPY50 ......... 171,000 509,377
Daido Steel Co., Ltd. JPY50 ................... 203,000 268,155
Daiei Inc. JPY50 .............................. 328,000 892,722
Daifuku Co. JPY50 ............................. 53,000 283,803
Daikin Industries JPY50 ....................... 122,000 1,211,384
Daikyo Inc. JPY50 ............................. 84,000 101,280
Daimaru Inc. JPY50 ............................ 124,000 373,770
Dainippon Ink & Chemicals Inc. JPY50 .......... 365,000 999,897
Dainippon Screen JPY50 ........................ 80,000 200,006
Daito Trust Construction JPY50 ................ 63,300 549,402
Daiwa House Industry JPY50 .................... 242,000 2,580,982
Daiwa Kosho Lease Co., Ltd. JPY50 ............. 71,000 292,066
Daiwa Securities JPY50 ........................ 615,000 2,104,585
Denki Kagaku Kogyo KK JPY50 ................... 224,000 365,401
East Japan Railway Co. JPY50000 ............... 1,534 8,581,410
Ebara Corp. JPY50 ............................. 132,000 1,138,651
Eisai Co., Ltd. JPY50 ......................... 134,450 2,622,331
Ezaki Glico Co., Ltd. JPY50 ................... 67,800 388,900
Fanuc Ltd. JPY50 .............................. 110,900 3,804,928
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-221
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ----------- ---------------
<S> <C> <C>
Fuji Bank JPY50 ................................... 1,338,000 $ 4,934,616
Fuji Photo Film Co., Ltd. JPY50 ................... 238,000 8,861,968
Fujikura JPY50 .................................... 168,000 902,580
Fujita Corp. JPY50 ................................ 239,000 133,488
Fujita Kanko Inc. JPY50 ........................... 56,000 497,958
Fujitsu Ltd. JPY50 ................................ 865,000 11,541,349
Furukawa Electric JPY50 ........................... 301,000 1,027,380
Gakken Co. JPY50 .................................. 45,000 51,863
Gunma Bank JPY50 .................................. 237,000 1,884,711
Gunze Ltd. JPY50 .................................. 116,000 279,725
Hankyu Corp. JPY50 ................................ 400,000 1,758,918
Hankyu Department Stores JPY50 .................... 85,000 558,394
Haseko Corp. JPY50 ................................ 190,000 96,014
Hazama Corp. JPY50 ................................ 142,000 93,159
Higo Bank JPY50 ................................... 117,000 536,266
Hirose Electric JPY50 ............................. 18,300 1,283,310
Hitachi Ltd. JPY50 ................................ 1,542,000 9,569,437
Hitachi Zosen Corp. JPY50 ......................... 459,000 634,806
Hokuriku Bank Ltd. JPY50 .......................... 311,000 559,707
Honda Motor Co. JPY50 ............................. 450,000 14,800,977
House Food Corp. JPY50 ............................ 52,000 880,523
Hoya Corp. JPY50 .................................. 54,000 2,633,058
Inax Corp. JPY50 .................................. 111,000 718,373
Industrial Bank of Japan Ltd. JPY50 ............... 1,172,440 5,415,422
Isetan Co. JPY50 .................................. 102,000 1,095,990
Ishihara Sangyo Kaisha JPY50 ...................... 148,000 242,738
Ito Yokado Co. JPY50 .............................. 192,000 13,447,213
Itochu Corp. JPY50 ................................ 656,000 1,267,840
Itoham Foods Inc. JPY50 ........................... 106,000 452,017
Iwatani International Corp. JPY50 ................. 118,000 240,610
Jaccs Co., Ltd. JPY50 ............................. 72,000 325,542
Japan Airlines Co., Ltd. JPY50 .................... 822,000 2,171,661
Japan Energy Corp. JPY50 .......................... 503,000 477,151
Japan Metals & Chemicals JPY50 .................... 61,000 100,047
Japan Steel Works JPY50 ........................... 176,000 218,446
JGC Corp. JPY50 ................................... 81,000 190,298
Joyo Bank JPY50 ................................... 408,000 1,598,771
Jusco Co. JPY50 ................................... 149,000 3,018,397
Kajima Corp. JPY50 ................................ 442,000 1,155,974
Kaken Pharmaceutical JPY50 ........................ 42,000 150,058
Kamigumi Co. JPY50 ................................ 125,000 608,396
Kandenko Co. JPY50 ................................ 95,900 649,555
Kanebo JPY50 ...................................... 243,000 241,284
Kaneka Corp. JPY50 ................................ 162,000 1,216,473
Kansai Electric Power JPY500 ...................... 451,800 9,913,463
Kansai Paint Co. JPY50 ............................ 131,000 380,933
Kao Corp. JPY50 ................................... 287,000 6,488,227
Katokichi Co. JPY50 ............................... 27,000 414,108
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-222
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Kawasaki Heavy Industries Ltd. JPY50 .......................... 640,000 $ 1,503,591
Kawasaki Kisen JPY50 .......................................... 276,000 371,926
Kawasaki Steel JPY50 .......................................... 1,497,000 2,242,913
Keihin Electric Express Railway JPY50 ......................... 235,480 741,116
Kikkoman Corp. JPY50 .......................................... 89,000 566,524
Kinden Corp. JPY50 ............................................ 122,200 1,861,223
Kinki Nippon Railway JPY50 .................................... 748,370 4,013,985
Kirin Brewery Co. JPY50 ....................................... 487,000 6,217,208
Kissei Pharmaceutical Co., Ltd. JPY50 ......................... 27,300 482,847
Kokuyo Co. JPY50 .............................................. 60,000 809,067
Komatsu JPY50 ................................................. 448,000 2,355,248
Komori Corp. JPY50 ............................................ 36,000 759,597
Konami Co., Ltd. JPY50 ........................................ 15,800 458,046
Konica Corp. JPY50 ............................................ 164,000 748,781
Koyo Seiko Co. JPY50 .......................................... 90,000 499,483
Kubota Corp. JPY50 ............................................ 649,000 1,939,003
Kumagai Gumi Co. JPY50 ........................................ 320,000 246,816
Kurabo Industries JPY50 ....................................... 127,000 130,607
Kuraray Co. JPY50 ............................................. 163,000 1,802,013
Kureha Chemical Industry Co., Ltd. JPY50 ...................... 105,000 274,609
Kurita Water Industries Ltd. JPY50 ............................ 61,600 905,460
Kyocera Corp. JPY50 ........................................... 87,000 4,604,660
Kyowa Hakko Kogyo JPY50 ....................................... 204,000 1,009,179
Kyudenko Co., Ltd. JPY50 ...................................... 39,000 264,157
Lion Corp. JPY50 .............................................. 142,000 592,943
Maeda Road Construction Co., Ltd. JPY50 ....................... 48,000 322,988
Makino Milling JPY50 .......................................... 44,000 252,383
Makita Corp. JPY50 ............................................ 73,000 814,803
Marubeni Corp. JPY50 .......................................... 688,000 1,183,298
Maruha Corp. JPY50 ............................................ 134,000 138,994
Marui Co. JPY50 ............................................... 170,000 3,278,024
Matsushita Electric Industrial Co., Ltd. JPY50 ................ 970,000 17,190,499
Meiji Milk Product JPY50 ...................................... 139,000 418,984
Meiji Seika Kaisha JPY50 ...................................... 179,000 714,117
Minebea Co. JPY50 ............................................. 184,000 2,110,844
Misawa Homes Co., Ltd. JPY50 .................................. 61,000 189,279
Mitsubishi Corp. JPY50 ........................................ 724,000 4,172,111
Mitsubishi Electric Corp. JPY50 ............................... 989,000 3,112,638
Mitsubishi Estate Co., Ltd. JPY50 ............................. 601,000 5,397,441
Mitsubishi Gas & Chemical Co., Inc. JPY50 ..................... 229,000 635,454
Mitsubishi Heavy Industries Ltd. JPY50 ........................ 1,558,000 6,077,488
Mitsubishi Kasei Corp. JPY50 .................................. 977,000 2,061,463
Mitsubishi Material Corp. JPY50 ............................... 519,000 874,228
Mitsubishi Oil Co., Ltd. JPY50 ................................ 209,000 368,726
Mitsubishi Paper Mills Ltd. JPY50 ............................. 154,000 315,382
Mitsubishi Rayon Co., Ltd. JPY50 .............................. 297,000 813,615
Mitsubishi Trust & Banking Corp. JPY50 ........................ 602,000 3,880,028
Mitsubishi Warehouse & Transportation Co., Ltd. JPY50 ......... 77,000 901,091
Mitsui & Co., Ltd. JPY50 ...................................... 732,000 4,094,910
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-223
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ----------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Mitsui Engineering & Shipbuilding Co., Ltd. JPY50 ......... 380,000 $ 377,316
Mitsui Fudosan Co. JPY50 .................................. 376,000 2,850,086
Mitsui Marine & Fire Insurance Co., Ltd. JPY50 ............ 354,000 1,867,343
Mitsui Mining & Smelting Co., Ltd. JPY50 .................. 234,000 1,155,513
Mitsui OSK Lines Ltd. JPY50 ............................... 510,000 822,897
Mitsui Soko Co. JPY50 ..................................... 67,000 227,498
Mitsui Trust & Banking Co., Ltd. JPY50 .................... 550,000 629,008
Mitsukoshi JPY50 .......................................... 220,000 585,124
Mori Seiki Co. JPY50 ...................................... 45,000 510,654
Murata Manufacturing Co. JPY50 ............................ 111,000 4,615,298
Nagase & Co., Ltd. JPY50 .................................. 71,000 243,598
Nagoya Railroad Co., Ltd. JPY50 ........................... 377,000 1,370,343
Namco JPY50 ............................................... 25,200 507,143
Nankai Electric Railway JPY50 ............................. 239,750 1,209,414
NEC Corp. JPY50 ........................................... 739,000 6,813,680
New Oji Paper Co., Ltd. JPY50 ............................. 475,166 2,472,791
NGK Insulators Ltd. JPY50 ................................. 168,000 2,170,065
NGK Spark Plug Co., Ltd. JPY50 ............................ 102,000 1,040,829
Nichido Fire & Marine Insurance Co., Ltd. JPY50 ........... 206,100 1,014,086
Nichii Co. JPY50 .......................................... 145,000 866,427
Nichirei Corp. JPY50 ...................................... 143,000 341,030
Niigata Engineering Co., Ltd. JPY50 ....................... 153,000 123,435
Nikon Corp. JPY50 ......................................... 171,000 1,667,603
Nippon Beet Sugar Manufacturing Co. JPY50 ................. 68,000 106,102
Nippon Comsys Corp. JPY50 ................................. 60,000 818,642
Nippon Express Co. JPY50 .................................. 497,000 2,802,318
Nippon Fire & Marine Insurance Co., Ltd. JPY50 ............ 267,000 984,710
Nippon Light Metal Co. JPY50 .............................. 246,000 257,348
Nippon Meat Packers JPY50 ................................. 106,000 1,710,335
Nippon Oil Co., Ltd. JPY50 ................................ 566,000 1,977,045
Nippon Paper Industries JPY50 ............................. 437,000 1,991,354
Nippon Sharyo JPY50 ....................................... 69,000 223,890
Nippon Sheet Glass JPY50 .................................. 206,000 580,762
Nippon Shinpan Co., Ltd. JPY50 ............................ 147,000 289,317
Nippon Shokubai Co. JPY50 ................................. 89,000 479,731
Nippon Steel Corp. JPY50 .................................. 3,155,000 5,733,993
Nippon Suisan JPY50 ....................................... 139,000 160,200
Nippon Telegraph & Telephone Corp. JPY50000 ............... 5,701 44,072,885
Nippon Yusen KK JPY50 ..................................... 550,000 1,740,744
Nippondenso Co. JPY50 ..................................... 414,000 7,670,975
Nishimatsu Construction Co., Ltd. JPY50 ................... 127,000 743,107
Nissan Motor Co., Ltd. JPY50 .............................. 1,161,000 3,561,330
Nisshinbo Industries Inc. JPY50 ........................... 107,000 373,752
Nissin Food Products JPY50 ................................ 61,000 1,538,566
Nitto Denko Corp. JPY50 ................................... 72,000 1,200,036
NKK Corp. JPY50 ........................................... 1,585,000 1,081,992
NOF Corp. JPY50 ........................................... 103,000 205,458
Nomura Securities JPY50 ................................... 907,000 7,920,406
Noritake Co. JPY50 ........................................ 76,000 393,487
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-224
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ----------- ---------------
<S> <C> <C>
NSK Ltd. JPY50 .................................... 259,000 $ 968,983
NTN Toyo Bearing Co., Ltd. JPY50 .................. 213,000 687,361
Obayashi Corp. JPY50 .............................. 343,000 1,648,152
Odakyu Electric Railway JPY50 ..................... 339,080 1,187,417
Okamoto Industries Inc. JPY50 ..................... 68,000 153,125
Okuma Corp. JPY50 ................................. 63,000 328,414
Okumura Corp. JPY50 ............................... 114,000 506,345
Olympus Optical Co., Ltd. JPY50 ................... 122,000 1,404,989
Omron Corp. JPY50 ................................. 121,000 1,660,582
Onoda Cement Co., Ltd. JPY50 ...................... 461,800 1,158,629
Onward Kashiyama JPY50 ............................ 79,000 1,063,170
Orient Corp. JPY50 ................................ 161,000 359,692
Orix Corp. JPY50 .................................. 29,800 2,229,783
Osaka Gas Co. JPY50 ............................... 1,165,000 4,017,718
Oyo Corp. JPY50 ................................... 14,100 228,132
Penta Ocean Construction Co., Ltd. JPY50 .......... 171,000 342,617
Pioneer Electronic JPY50 .......................... 83,000 1,394,412
QP Corp. JPY50 .................................... 74,000 609,469
Renown Inc. JPY50 ................................. 128,000 79,435
Rohm Co. JPY50 .................................... 55,000 5,017,438
Sakura Bank JPY50 ................................. 1,732,000 3,976,964
Sanden Corp. JPY50 ................................ 66,000 500,281
Sankyo Aluminium JPY50 ............................ 123,000 106,865
Sankyo Co. JPY50 .................................. 211,000 4,620,440
Sanrio Co. JPY50 .................................. 36,000 465,652
Sanwa Shutter Corp. JPY50 ......................... 108,000 472,993
Sanyo Electric Co. JPY50 .......................... 889,000 2,758,505
Sapporo Breweries JPY50 ........................... 156,000 677,680
Sato Kogyo JPY50 .................................. 121,000 92,255
Secom Co. JPY50 ................................... 54,000 4,480,986
Sega Enterprises JPY50 ............................ 46,200 1,026,015
Seino Transportation JPY50 ........................ 70,000 400,899
Seiyu JPY50 ....................................... 104,000 306,108
Sekisui Chemical JPY50 ............................ 254,000 1,711,399
Sekisui House JPY50 ............................... 329,000 3,485,521
Seventy Seven Bank JPY50 .......................... 177,000 1,773,192
Sharp Corp. JPY50 ................................. 520,000 4,697,659
Shimachu Co. JPY50 ................................ 23,000 458,790
Shimano Inc. JPY50 ................................ 65,000 1,679,793
Shimizu Corp. JPY50 ............................... 363,000 1,219,691
Shin Etsu Chemical Co. JPY50 ...................... 181,800 4,383,962
Shionogi & Co. JPY50 .............................. 162,000 1,187,748
Shiseido Co., Ltd. JPY50 .......................... 194,000 2,497,309
Shizuoka Bank JPY50 ............................... 369,000 4,563,568
Showa Denko KK JPY50 .............................. 478,000 419,534
Skylark Co. JPY50 ................................. 46,000 685,535
SMC Corp. JPY50 ................................... 29,900 2,391,012
Snow Brand Milk JPY50 ............................. 148,000 677,042
Sony Corp. JPY50 .................................. 189,300 13,811,931
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-225
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- ---------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Sumitomo Bank JPY50 ...................................... 1,451,000 $ 14,922,080
Sumitomo Chemical JPY50 .................................. 746,000 2,910,017
Sumitomo Corp. JPY50 ..................................... 490,000 2,389,256
Sumitomo Electric Industries JPY50 ....................... 336,000 3,786,071
Sumitomo Forestry JPY50 .................................. 80,000 574,485
Sumitomo Heavy Industries Ltd. JPY50 ..................... 270,000 564,911
Sumitomo Marine & Fire Insurance Co., Ltd. JPY50 ......... 312,000 1,980,485
Sumitomo Metal Industries JPY50 .......................... 1,608,000 1,838,991
Sumitomo Metal Mining JPY50 .............................. 263,000 855,708
Sumitomo Osaka Cement JPY50 .............................. 206,000 385,348
Taisei Corp. JPY50 ....................................... 451,000 867,641
Taisho Pharmaceutical Co., Ltd. JPY50 .................... 160,000 4,411,480
Taiyo Yuden Co. JPY50 .................................... 55,000 652,413
Takara Shuzo Co. JPY50 ................................... 98,000 584,716
Takara Standard Co. JPY50 ................................ 69,000 581,135
Takashimaya Co. JPY50 .................................... 140,000 1,180,355
Takeda Chemical Industries Ltd. JPY50 .................... 408,000 15,734,515
Takuma Co. JPY50 ......................................... 43,000 275,620
Teijin JPY50 ............................................. 436,000 1,607,992
Teikoku Oil Co. JPY50 .................................... 122,000 362,334
Toa Corp. JPY50 .......................................... 95,000 175,183
Tobu Railway Co. JPY50 ................................... 395,000 1,155,620
Toei JPY50 ............................................... 69,000 204,315
Toho Co. JPY500 .......................................... 8,510 1,167,897
Tohoku Electric Power JPY500 ............................. 231,800 4,110,053
Tokai Bank Ltd. JPY50 .................................... 944,000 4,469,070
Tokio Marine & Fire Insurance Co., Ltd. JPY50 ............ 716,000 8,569,406
Tokyo Broadcasting JPY50 ................................. 80,000 895,772
Tokyo Dome Corp. JPY50 ................................... 74,000 394,941
Tokyo Electric Power JPY500 .............................. 624,800 15,454,294
Tokyo Electron JPY50 ..................................... 79,800 3,035,038
Tokyo Gas Co. JPY50 ...................................... 1,294,000 3,407,177
Tokyo Steel Manufacturing JPY50 .......................... 71,900 360,786
Tokyo Style Co. JPY50 .................................... 47,000 476,681
Tokyo Tatemono Co. Ltd. JPY50 ............................ 106,000 181,371
Tokyotokeiba Co. JPY20 ................................... 138,000 201,868
Tokyu Corp. JPY50 ........................................ 505,000 1,329,694
Toppan Printing Co. JPY50 ................................ 322,000 3,939,480
Toray Industries Inc. JPY50 .............................. 647,000 3,384,233
Tosoh Corp. JPY50 ........................................ 272,000 390,650
Tostem Corp. JPY50 ....................................... 101,000 2,005,734
Toto JPY50 ............................................... 170,800 1,373,407
Toyo Engineering Corp. JPY50 ............................. 80,000 85,109
Toyo Exterior Co. JPY50 .................................. 23,000 224,298
Toyo Seikan Kaisha Ltd. JPY50 ............................ 103,100 1,753,118
Toyobo Co. JPY50 ......................................... 313,000 405,136
Toyoda Auto Loom JPY50 ................................... 131,000 2,321,603
Toyota Motor Corp. JPY50 ................................. 1,756,000 47,793,280
Trans Cosmos Inc. JPY50 .................................. 10,000 281,923
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-226
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------- ------------ ---------------
<S> <C> <C>
Tsubakimoto Chain JPY50 ........................... 89,000 $ 190,156
UBE Industries Ltd. JPY50 ......................... 385,000 583,661
Uni-Charm JPY50 ................................... 34,000 1,597,566
Uniden Corp. JPY50 ................................ 22,000 185,094
Unitika JPY50 ..................................... 224,000 154,898
UNY Co., Ltd. JPY50 ............................... 87,000 1,592,734
Wacoal Corp. JPY50 ................................ 70,000 901,712
Yamaguchi Bank JPY50 .............................. 93,000 878,909
Yamaha Corp. JPY50 ................................ 95,000 985,402
Yamaichi Securities Co. (a) JPY50 ................. 117,000 0
Yamanouchi Pharmaceutical Co., Ltd. JPY50 ......... 157,000 5,066,464
Yamato Transport Co., Ltd. JPY50 .................. 190,000 2,661,428
Yamazaki Baking Co. JPY50 ......................... 103,000 1,345,067
Yasuda Trust & Banking Co., Ltd. JPY50 ............ 646,000 498,260
Yokogawa Electric JPY50 ........................... 115,000 570,939
------------
719,671,666
------------
STATE STREET BANK AND TRUST COMPANY
COLLECTIVE INVESTMENT FUNDS--6.1% UNITS
----------
SHORT TERM INVESTMENT FUND (B) .................... 46,713,995 46,713,995
- ---------------------------------------------------- ---------- ------------
TOTAL INVESTMENTS--100%
(COST $759,030,118) .............................. $766,385,661
==================================================== ============
</TABLE>
(a) Issuer filed for bankruptcy.
(b) Collective investment fund advised by State Street Global Advisors.
At December 31, 1998, foreign currency balances totaling $8,885,586 were
pledged to cover margin requirements for open futures contracts. The following
long futures contracts were open at December 31, 1998:
<TABLE>
<CAPTION>
FUTURES NUMBER OF NOTIONAL MATURITY UNREALIZED
CONTRACTS CONTRACTS VALUE DATE GAIN (LOSS)
- ----------------------------- ------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C>
Nikkei 300 Index ......... 2,318 $45,223,564 March 1999 $ (1,124,484)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-227
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
- --------------------------------------------------------------------------------
The following forward foreign currency contracts were open at December 31,
1998:
<TABLE>
<CAPTION>
SETTLEMENT CONTRACTS IN EXCHANGE UNREALIZED
DATE TO DELIVER FOR GAIN (LOSS)
- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
3/5/99 ......... USD 16,712,823 JPY 1,979,968,100 $ 950,863
3/5/99 ......... USD 772,375 JPY 90,700,000 36,777
3/5/99 ......... USD 257,621 JPY 30,000,000 10,015
3/5/99 ......... USD 815,146 JPY 93,000,000 14,525
3/5/99 ......... USD 17,679,839 JPY 2,017,800,000 321,353
3/5/99 ......... JPY 119,600,000 USD 1,016,402 (50,573)
3/5/99 ......... JPY 47,000,000 USD 404,614 (14,682)
3/5/99 ......... JPY 231,700,000 USD 2,019,876 (47,165)
----------
$1,221,113
==========
</TABLE>
CURRENCY LEGEND
---------------
JPY Japanese Yen
The accompanying notes are an integral part of these financial statements.
SAI-228
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUNDS
NOTES TO FINANCIAL STATEMENTS
--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Daily EAFE
Funds, (collectively the "Trust") were formed by State Street Bank under a
Declaration of Trust. The Trust is organized into separate regional funds and
country funds (individually a "Fund") and umbrella funds that hold Malaysian
securities and units of the separate regional and country funds. State Street
Bank is Trustee and custodian of each Fund. State Street Global Advisors, a
division of State Street Bank, is each Fund's investment manager.
The investment objective of each fund is to closely match the performance
of the relevant portion of the MSCI EAFE Index, while providing daily
liquidity. Each Fund may invest in equity securities, equity-based derivatives,
swaps, short-term instruments and foreign exchange contracts, as well as in
commingled funds or mutual funds maintained by the Trustee.
On December 18, 1998, the Daily EAFE Securities Lending-Fund and the Daily
EAFE Non-Lending Fund (collectively, the "underlying fund") were reorganized
and separate regional and country funds (the "new funds") were established. The
underlying fund transferred all of its assets and liabilities, excluding
Malaysian assets and liabilities, in exchange for units in the new funds.
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 price or the
mean between the last reported bid and asked prices, or at fair value as
determined in good faith by the Trustee. Short-term investments, if any, are
stated at amortized cost, which approximates market value. Foreign currencies
and foreign securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Investments in regulated investment
companies or other State Street Bank collective investment funds are valued at
the net asset value per share/unit on the valuation date. Futures contracts are
valued at the last settlement price at the end of each day on the board of
trade or exchange upon which they are traded.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. 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 are determined using the average cost method. Dividend income,
if any, is recorded net of applicable withholding taxes on the ex-dividend date
or as soon as the Fund is informed of the dividend. Interest income earned on
securities, if any, is recorded net of applicable withholding taxes on the
accrual basis; interest earned on foreign currency transaction accounts is
recorded when the Trustee is first notified of the amount credited by the
depository bank.
C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS
The accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange
at period end. Purchases and sales of securities, income and expenses are
translated into U.S. dollars at the prevailing exchange rate on the respective
dates of the transactions.
SAI-229
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUNDS
NOTES TO FINANCIAL STATEMENTS
--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
The Fund may use forward foreign currency contracts to facilitate
transactions in foreign securities or as a hedge against either specific
transactions or portfolio positions. Such contracts are valued based upon the
applicable forward exchange rates and any resulting unrealized gains or losses
are recorded in the Fund's financial statements. The Fund records realized
gains or losses at the time the forward contract is extinguished by entry into
a closing transaction or by delivery of the currency. Risks in foreign currency
contracts arise from the possible inability of counterparties to meet the
contracts' terms and from movements in currency values.
D. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made on such
days, based upon the closing market value of the securities bought or sold as
of the valuation date. A transaction fee of .5% is charged on any contribution
or withdrawal greater than 5% of the net asset value of the Fund. However, such
fees are waived if the Fund's net participant activity on any day is less than
5% of the net asset value of the Fund.
F. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year, including custody, stamp duty, registration
and audit fees.
G. DISTRIBUTIONS TO PARTICIPANTS
Net investment income (excluding securities lending fee income, if any)
and net realized gains are retained by the Funds. Income generated by
securities lending, if any, is distributed monthly to participants of the
Lending Fund.
H. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
SAI-230
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION
The participants in the Daily MSCI Japan Index Securities Lending Fund
(the "Lending Fund") have authorized the Lending Fund to participate in the
Global Securities Lending Program maintained by State Street Bank. The
investment objective, techniques and results of operations of the Lending Fund
are identical to those of the Daily MSCI Japan Index Fund (the "Non-Lending
Fund"), except that the Lending Fund engages in securities lending activities.
Accordingly, the financial statements of the Lending Fund and the Non-Lending
Fund have been prepared on a combined basis, with separate disclosure of the
participant transactions and per unit data of the Lending Fund and the
Non-Lending Fund. The Lending Fund and the Non-Lending Fund each maintain a
divided pro-rata interest in the combined assets and liabilities (including
each investment security position but excluding assets and liabilities related
to securities lending activities) proportionate to the net asset value of the
outstanding combined units of the Fund. All interfund transactions have been
eliminated in the combined financial statements.
Under the Global Securities Lending Program, securities held by the
Lending Fund are loaned by State Street Bank, as agent, to certain brokers and
other financial institutions (the "Borrowers"). The Borrowers provide cash,
securities, or letters of credit as collateral against loans in an amount at
least equal to 100% of the market value of the loaned securities. The Borrowers
are required to maintain the collateral at not less than 100% of the market
value of the loaned securities. At December 31, 1998, the market value of
securities loaned by the Lending Fund was $49,182,289 against which was held
cash collateral of $47,831,573 and securities of $3,422,350. Cash collateral
provided by the Borrowers is invested in State Street Bank and Trust Company
Quality A Short-Term Investment Fund. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder is
allocated between the Lending Fund and State Street Bank in its capacity as
lending agent. Negotiated lenders' fees are received for those loans
collateralized by securities or letters of credit, if any. Income earned from
lending activities is distributed to Lending Fund participants monthly. For the
period ended December 31, 1998, no lending income was earned or distributed.
2. 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, 1998 were $712,316,123 and $0, respectively.
SAI-231
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
3. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1998
UNITS AMOUNT
-------------- ---------------
<S> <C> <C>
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
Units issued ................................. 14,455,334 $144,539,658
Units redeemed ............................... -- --
---------- ------------
Total ....................................... 14,455,334 $144,539,658
========== ============
DAILY MSCI JAPAN INDEX FUND
Units issued ................................. 62,418,699 $623,991,486
Units redeemed ............................... (384,232) (3,855,304)
---------- ------------
Total ....................................... 62,034,467 $620,136,182
---------- ------------
Net increase (decrease) ...................... 76,489,801 $764,675,840
========== ============
</TABLE>
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
All of the Lending Fund's units outstanding were held by one unitholder at
December 31, 1998.
DAILY MSCI JAPAN INDEX FUND
The Non-Lending Fund's two unitholders each held units in excess of 10% of
the Non-Lending Fund units outstanding at December 31, 1998.
Participants in each of the Lending Fund or the Non-Lending Fund may
exchange their units for units of the other fund on any valuation date.
4. FUTURES CONTRACTS
The Fund may use futures contracts to manage exposure to the relevant
equity markets. Buying futures tends to increase a fund's exposure to the
underlying instrument. Selling futures tends to decrease a fund's exposure to
the underlying instrument, or hedge other 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.
SAI-232
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI JAPAN INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
Upon entering into a futures contract, the Fund is required to deposit
either in cash or securities an amount ("initial margin") equal to a certain
percentage of the nominal value of the contract. Subsequent payments are made
or received by the Fund periodically, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Fund. A gain or loss is realized when the contract is closed or
expires.
SAI-233
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund
and State Street Bank and Trust Company
Daily MSCI Pacific Basin ex-Japan Index Fund
In our opinion, the accompanying combined statement of assets and liabilities,
including the combined schedule of investments, and the related combined
statements of operations and of changes in net assets and the selected per unit
data present fairly, in all material respects, the financial position of State
Street Bank and Trust Company Daily MSCI Pacific Basin ex-Japan Index
Securities Lending Fund and State Street Bank and Trust Company Daily MSCI
Pacific Basin ex-Japan Index Fund at December 31, 1998, and the results of
their operations, the changes in their net assets and their selected per unit
data for the period December 18, 1998 (commencement of operations) through
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements and selected per unit data (hereafter referred to as
"financial statements") are the responsibility of the Trustee; our
responsibility is to express an opinion on these financial statements based on
our 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 the Trustee, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at December 31, 1998 by correspondence with the custodian and
brokers, provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 5, 1999
SAI-234
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Combined Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $198,899,684)...................................................................... $ 198,244,673
Foreign currency ......................................................................... 661,936
Foreign currency, segregated ............................................................. 1,106,453
Investments in State Street Bank and Trust Company Quality A Short-Term Investment Fund, 13,115,006
at value
Receivable for investments sold .......................................................... 3,976,968
Receivable for open forward currency contracts ........................................... 6,161
Unrealized gain on open futures contracts ................................................ 118,209
Dividends receivable ..................................................................... 154,493
Interest receivable ...................................................................... 11,595
Other receivable ......................................................................... 7,813
- ------------------------------------------------------------------------------------------- -------------
Total assets .......................................................................... 217,403,307
- ------------------------------------------------------------------------------------------- -------------
LIABILITIES
Payable for collateral on securities loaned .............................................. 13,115,006
Payable for open forward currency contracts .............................................. 77,267
Accrued expenses ......................................................................... 21,413
- ------------------------------------------------------------------------------------------- -------------
Total liabilities ..................................................................... 13,213,686
- ------------------------------------------------------------------------------------------- -------------
Net assets ............................................................................... $ 204,189,621
=========================================================================================== =============
Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund (3,808,938 units
outstanding, at $9.97 per
unit net asset value) ................................................................... $ 37,972,417
Daily MSCI Pacific Basin ex-Japan Index Fund (16,672,919 units outstanding, at $9.97 per
unit net asset
value) .................................................................................. 166,217,204
- ------------------------------------------------------------------------------------------- -------------
$ 204,189,621
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-235
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Combined Statement of Operations
Period ended December 31, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends ............................................................................... $ 9,078
Interest ................................................................................ 3,462
- ------------------------------------------------------------------------------------------- ----------
Total investment income .............................................................. 12,540
- ------------------------------------------------------------------------------------------- ----------
EXPENSES
Audit ................................................................................... 5,185
Custody ................................................................................. 2,786
- ------------------------------------------------------------------------------------------- ----------
Total expenses ........................................................................ 7,971
- ------------------------------------------------------------------------------------------- ----------
Net investment income ................................................................. 4,569
- ------------------------------------------------------------------------------------------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN
CURRENCY
TRANSACTIONS
Net realized gain (loss):
Futures contracts ..................................................................... 51,081
Foreign currency and related forward currency contracts ............................... (806)
- ------------------------------------------------------------------------------------------- ----------
50,275
----------
Net change in unrealized appreciation (depreciation): (655,011)
Investments ........................................................................... 49,683
Futures contracts ..................................................................... (43,394)
- ------------------------------------------------------------------------------------------- ----------
Foreign currency and related forward currency contracts ............................... (648,722)
- ------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments, futures contracts, foreign
currency and related
forward currency contracts .............................................................. (598,447)
- ------------------------------------------------------------------------------------------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ (593,878)
=========================================================================================== ==========
</TABLE>
- ----------
* The Fund commenced operations on December 18, 1998.
The accompanying notes are an integral part of these financial statements.
SAI-236
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Combined Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
---------------
<S> <C>
FROM OPERATIONS
Net investment income .................................................................... $ 4,569
Net realized gain (loss) on futures contracts, foreign currency and related forward 50,275
currency contracts
Net change in unrealized appreciation (depreciation) on investments, futures contracts,
foreign currency and
related forward currency contracts ...................................................... (648,722)
- ------------------------------------------------------------------------------------------- ------------
Net increase (decrease) in net assets resulting from operations .......................... (593,878)
- ------------------------------------------------------------------------------------------- ------------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions ............ 204,783,499
- ------------------------------------------------------------------------------------------- ------------
Net increase (decrease) in net assets .................................................... 204,189,621
NET ASSETS
Beginning of period ..................................................................... --
- ------------------------------------------------------------------------------------------- ------------
End of period ........................................................................... $204,189,621
=========================================================================================== ============
</TABLE>
- ----------
* The Fund commenced operations on December 18, 1998.
The accompanying notes are an integral part of these financial statements.
SAI-237
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
-------------
<S> <C>
Net investment income** (a) .............................................. $ 0.00
Net realized and unrealized gain (loss) .................................. (0.03)
- --------------------------------------------------------------------------- -------
Net increase (decrease) .................................................. (0.03)
NET ASSET VALUE
Beginning of period ...................................................... 10.00
- --------------------------------------------------------------------------- -------
End of period ............................................................ $ 9.97
=========================================================================== =======
Total return (%)*** ...................................................... (0.30)
=========================================================================== =======
Ratio of expenses to average net assets (%)**** (b) ...................... 0.00
- --------------------------------------------------------------------------- -------
Ratio of net investment income to average net assets (%)**** (b) ......... 0.00
- --------------------------------------------------------------------------- -------
Portfolio turnover (%) ................................................... 0
- --------------------------------------------------------------------------- -------
Net assets, end of period (000s) ......................................... $39,972
- --------------------------------------------------------------------------- -------
</TABLE>
- ----------
* The Fund commenced operations on December 18, 1998.
** Net investment income per unit has been calculated based upon an average
of units outstanding.
*** Total return calculation (not annualized for the period ended December
31, 1998) is based on the value of a single unit of participation
outstanding throughout the period. It represents the percentage change in
the net asset value per unit between the beginning and end of the period.
The calculation includes only those expenses charged directly to the
Lending Fund. The result may be reduced by any administrative or other
fees which are incurred in the management or maintenance of individual
participant accounts.
**** Not annualized for the period ended December 31, 1998.
(a) Zero amount represents that which is less than $.005 per unit.
(b) Zero amounts represent those which are less than .005%.
The accompanying notes are an integral part of these financial statements.
SAI-238
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Period)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998*
-------------
<S> <C>
Net investment income** (a) .............................................. $ 0.00
Net realized and unrealized gain (loss) .................................. (0.03)
- --------------------------------------------------------------------------- --------
Net increase (decrease) .................................................. (0.03)
NET ASSET VALUE
Beginning of period ...................................................... 10.00
- --------------------------------------------------------------------------- --------
END OF PERIOD ............................................................ $ 9.97
=========================================================================== ========
Total return (%)*** ...................................................... (0.30)
- --------------------------------------------------------------------------- --------
Ratio of expenses to average net assets (%)**** (b) ...................... 0.00
- --------------------------------------------------------------------------- --------
Ratio of net investment income to average net assets (%)**** (b) ......... 0.00
- --------------------------------------------------------------------------- --------
Portfolio turnover (%) ................................................... 0
- --------------------------------------------------------------------------- --------
Net assets, end of period (000s) ......................................... $166,217
- --------------------------------------------------------------------------- --------
</TABLE>
- ----------
* The Fund commenced operations on December 18, 1998.
** Net investment income per unit has been calculated based upon an average
of units outstanding.
*** Total return calculation (not annualized for the period ended December
31, 1998) is based on the value of a single unit of participation
outstanding throughout the period. It represents the percentage change in
the net asset value per unit between the beginning and end of the period.
The calculation includes only those expenses charged directly to the
Non-Lending Fund. The result may be reduced by any administrative or
other fees which are incurred in the management or maintenance of
individual participant accounts.
**** Not annualized for the period ended December 31, 1998.
(a) Zero amount represents that which is less than $.005 per unit.
(b) Zero amounts represent those which are less than .005%.
The accompanying notes are an integral part of these financial statements.
SAI-239
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------------
<S> <C> <C>
COMMON STOCK--95.1% (UNLESS OTHERWISE NOTED)
AUSTRALIA--41.8%
Amcor Ltd. Ord AUD1 ................................. 296,163 $ 1,266,677
AMP Limited AUD3 .................................... 495,500 6,283,543
Ashton Mining Ltd. AUD0.50 .......................... 146,539 73,703
Australian Gas Light Co. Ord AUD1 ................... 149,518 1,077,940
Australian National Industries Ltd. AUD0.30 ......... 359,174 253,348
Boral Ltd. Ord AUD0.50 .............................. 524,736 746,697
Brambles Industries Ltd. AUD0.50 .................... 103,592 2,525,683
Broken Hill Proprietary Co., Ltd. Ord AUD1 .......... 961,999 7,091,831
Burns, Philip & Co., Ltd. AUD0.50 ................... 44,550 3,552
Coca Cola Amatil AUD0.5 Post Recon .................. 432,249 1,611,955
Coca Cola Beverage Ord Gbp0.5 ....................... 108,449 199,621
Coles Myer Ltd. AUD0.50 ............................. 529,122 2,774,836
CRA Ltd. AUD2.00 .................................... 151,727 1,801,240
Crown Ltd. AUD0.50 .................................. 452,301 169,228
CSR Ltd. AUD1.00 .................................... 476,338 1,165,745
David Jones Ltd. AUD0.30 ............................ 178,499 197,071
Delta Gold Nl AUD0.25 ............................... 90,800 138,119
Email Ltd. AUD0.50 .................................. 133,730 191,199
Faulding FH & Co., Ltd. AUD0.50 ..................... 65,845 310,978
Fosters Brewing Group AUD1 .......................... 809,314 2,194,092
Futuris Corp., Ltd. AUD0.20 ......................... 225,852 256,278
General Property Trust AUD1 ......................... 635,694 1,189,223
Gio Australia Holding AUD1 .......................... 280,788 923,121
Goodman Fielder Wattie Ltd. AUD0.50 ................. 572,257 579,149
Great Central Mines NL AUD0.20 ...................... 132,833 95,325
Homestake Mining USD1 ............................... 8,092 74,450
Howard Smith Ltd. AUD1 .............................. 85,086 563,425
ICI Australia Ltd. AUD1 ............................. 121,213 631,208
James Hardie Industries Ltd. AUD1.00 ................ 184,780 377,864
Leighton Holdings Ltd. AUD0.50 ...................... 118,500 508,782
Lend Lease Corp., Ltd. AUD0.50 ...................... 237,094 3,199,327
Metal Manufacturers Ltd. AUD0.50 .................... 83,600 117,937
MIM Holdings Ltd. AUD0.50 ........................... 756,372 334,028
National Australia Bank Ltd. AUD1.00 ................ 659,647 9,953,186
Newcrest Mining Ltd. AUD0.50 ........................ 106,365 147,573
News Corp., Ltd. AUD0.50 Pfd ........................ 924,329 6,111,682
Normandy Mining Ltd. AUD0.20 ........................ 756,766 700,897
North Ltd. AUD0.50 .................................. 334,111 545,115
Pacific Dunlop Ltd. AUD0.50 ......................... 473,137 766,137
Pioneer International Ltd. AUD0.50 .................. 404,722 856,429
QBE Insurance Group AUD1 ............................ 171,381 709,548
QCT Resources Ltd. AUD0.50 .......................... 305,957 183,909
RGC Gold Unsecured Notes Unlisted Security .......... 23,636 0
Rothmans Holdings Ltd. AUD0.50 ...................... 55,400 397,568
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-240
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31,1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- --------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Samantha Gold NL Resolute Ltd. AUD0.20 ........................ 98,200 $ 69,267
Santos Ltd. AUD0.25 ........................................... 275,076 738,996
Schroders Property Fund AUD1.00 ............................... 193,124 315,089
Sons of Gwalia Ltd. AUD0.25 ................................... 52,547 149,548
Southcorp Holdings Ltd. Ord AUD0.50 ........................... 282,128 900,705
Stockland Trust Group AUD1.10 ................................. 168,009 418,383
Stockland Trust Group AUD1.10 Rfd 06Feb99 ..................... 1,152 2,699
Tab Corp. Holdings Ltd. AUD1.00 ............................... 137,900 845,823
Telstra Corp AUD0.50 .......................................... 2,374,300 11,111,573
Western Mining Corp. AUD0.50 .................................. 527,413 1,591,591
Westfield Trust Units NPV Rfd 1/1/99 .......................... 5,097 11,177
Westfield Trust AUD1 .......................................... 562,881 1,242,895
Westpac Banking Corp. AUD1 .................................... 882,676 5,912,067
Westralian Sands New AUD0.50 .................................. 60,697 145,194
Zimbabwe Platinum NPV ......................................... 18,400 3,611
- ---------------------------------------------------------------- --------- ------------
82,757,837
------------
HONG KONG--36.6%
Bank of East Asia Ltd.HKD2.50 ................................. 639,786 1,114,894
Cathay Pacific Airways Ltd. HKD0.20 ........................... 1,592,000 1,582,336
Cheung Kong (Holdings) Ltd. HKD0.50 ........................... 1,083,000 7,793,605
Chinese Estates Holdings Wts 24Nov2000 To Sub For Ord ......... 26,729 1,414
Chinese Estates Holdings Wts 24Nov99 To Sub For Ord ........... 26,729 1,173
Chinese Estates Holdings Ord HKD0.10 .......................... 896,294 130,736
CLP Holdings HKD5 ............................................. 1,155,707 5,758,377
Dickson Concept Inc. HKD0.30 .................................. 125,600 97,276
Electric & Eltek International Holdings Ltd. HKD0.10 .......... 436,000 83,294
Giordano International HKD0.1 ................................. 330,000 61,766
Hang Lung Development Co., Ltd. HKD1 .......................... 621,000 665,326
Hang Seng Bank Ltd. HKD5 ...................................... 903,112 8,072,842
Hong Kong & China Gas Co., Ltd. HKD0.25 ....................... 2,033,800 2,585,887
Hong Kong & Shanghai Hotels Ltd. HKD0.50 ...................... 540,500 383,728
Hong Kong + China Gas Wts 30Sep99 Sub For Ord ................. 25,809 1,699
Hong Kong Aircraft Engineering Co. HKD1 ....................... 86,600 118,492
Hong Kong Telecommunications Ltd. HKD0.50 ..................... 5,626,457 9,841,003
Hopewell Holdings HKD2.50 Parallel 1Feb99 ..................... 409,800 223,493
Hutchison Whampoa Ltd. HKD0.25 ................................ 1,833,000 12,954,231
Hysan Development Wts 30Apr99 To Sub Ord ...................... 13,500 282
Hysan Development Co., Ltd. HKD5 .............................. 481,705 718,172
Johnson Elec Holdings HKD0.05 ................................. 432,660 1,111,386
Kumagai Gumi Co Wts 31Dec1999 ................................. 11,600 928
Kumagai Gumi Ltd. HKD1 ........................................ 224,000 95,417
Miramar Hotel & Investment HKD0.70 ............................ 270,350 277,433
New World Development Co., Ltd. HKD1 .......................... 933,486 2,349,673
Oriental Press GroupHKD0.25 ................................... 788,000 76,287
Peregrine Investment Holdings (a) HKD0.60 ..................... 45,000 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-241
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31,1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTED) SHARES VALUE
- -------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Regal Hotel International HKD0.10 ............................ 1,842,400 $ 199,769
Shangri-La Asia Ltd. HKD1 .................................... 833,000 709,666
Shun Tak Holdings Ltd. HKD0.25 ............................... 703,000 132,487
Sino Land Co., Ltd. HKD1 ..................................... 1,450,867 777,214
South China Morning Post HKD0.10 ............................. 810,000 415,611
Sun Hung Kai Properties Ltd. HKD0.50 ......................... 1,127,320 8,221,683
Swire Pacific Ltd. A HKD0.60 ................................. 729,500 3,267,532
Tai Cheung Holdings Ltd. HKD0.10 ............................. 283,600 69,554
Tan Chong International HKD.50 ............................... 313,500 30,755
Television Broadcasting Ltd. HKD0.05 ......................... 195,000 503,419
Varitronix International Ltd. HKD0.25 ........................ 133,000 248,934
Wharf Holdings 31-Dec-99 ..................................... 15,869 1,311
Wharf Holdings Ltd. HKD1 ..................................... 1,079,400 1,574,439
Wing Lung Bank Ltd. HKD5 ..................................... 108,210 375,738
- -------------------------------------------------------------- --------- ------------
72,629,262
------------
NEW ZEALAND--3.2%
Brierley Investment Ltd.NZD0.50 .............................. 1,369,240 311,024
Carter Holt Harvey Ltd. NZD0.50 .............................. 819,137 735,616
Ceramco Corp., Ltd. Ord NZD0.50 .............................. 1,900 1,124
Fisher & Paykel Industries NZD0.50 ........................... 55,927 202,375
Fletcher Challenge Forestry Ltd. NZD0 ........................ 377,236 125,545
Fletcher Challenge Ltd. Paper Shares NZD0.40 ................. 308,600 207,036
Fletcher Challenge Ltd. Energy Shs NZD0.4 .................... 157,081 298,725
Fletcher Challenge Ltd. Building Shares NZD0.40 .............. 156,868 242,799
Lion Nathan Ltd. NZD0.25 ..................................... 259,300 661,600
Telecom Corp. of New Zealand NZD1 ............................ 830,360 3,618,813
- -------------------------------------------------------------- --------- ------------
6,404,657
------------
SINGAPORE--13.5%
Asia Food & Props SGD1 ....................................... 23,556 3,651
Asia Food & Props Wts 07Dec2002 .............................. 1,766 124
City Developments Ltd. SGD0.50 ............................... 394,680 1,710,324
Comfort Group SGD0.25 ........................................ 267,000 96,284
Creative Technology Ord SGD0.25 .............................. 45,000 635,471
Cycle & Carriage Ltd. SGD1 ................................... 116,000 397,222
DBS Land Ltd. SGD1 ........................................... 499,000 734,910
Development Bank of Singapore Ltd. SGD1 Alien Market ......... 297,225 2,684,100
First Capital Corp. SGD1 ..................................... 147,000 98,002
Fraser & Neave Ltd. SGD1 ..................................... 147,800 431,766
Goldtron Ltd. SGD0.20 ........................................ 62,000 4,133
Haw Par Brothers International Ltd. SGD1 ..................... 93,200 104,500
Hotel Properties SGD1 ........................................ 206,000 87,396
Inchcape Behad SGD0.50 ....................................... 82,000 94,924
Keppel Corp., Ltd. SGD1 ...................................... 375,500 1,005,910
Natsteel Ltd. SGD0.50 ........................................ 171,000 187,587
Neptune Orient Lines Ltd. SGD1 ............................... 361,000 115,961
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-242
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31,1998
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) (UNLESS OTHERWISE NOTES) SHARES VALUE
- ---------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Overseas Chinese Banking Corp. SGD1 Alien Market ......... 423,828 $ 2,876,966
Overseas Union Enterprise Ltd. SGD1 ...................... 78,000 155,058
Parkway Holdings Ltd. SGD0.50 ............................ 170,000 302,917
Robinson & Co., Ltd. SGD1 ................................ 37,000 82,972
Sembcorp Industrie SGD0.25 ............................... 778,345 886,864
Shangri La Hotel Ltd. SGD1 ............................... 83,000 134,816
Singapore Airlines Ltd. SGD1 Alien Market ................ 417,000 3,058,078
Singapore Press Holdings SGD1 Post Recon ................. 178,460 1,946,886
Singapore Tech Eng SGD0.10 ............................... 1,327,000 1,238,565
Singapore Telecommunications SGD0.15 ..................... 3,014,000 4,603,317
Straits Trading Co., Ltd. SGD1 ........................... 148,000 95,978
United Industrial Corp., Ltd. SGD1 ....................... 668,000 267,207
United Overseas Bank Ltd. SGD1 Alien Market .............. 343,634 2,207,644
United Overseas Land Ltd. SGD1 ........................... 292,000 198,211
Van Der Horst Ltd. SGD1 .................................. 18,000 4,364
Venture Manufacturing SGD0.25 ............................ 97,000 370,373
- ----------------------------------------------------------- --------- ------------
26,822,481
------------
TOTAL COMMON STOCK
(Cost $ 189,758,545)...................................... 188,614,237
- ----------------------------------------------------------- ------------
PREFERRED STOCK -- 2.7%
- -----------------------------------------------------------
AUSTRALIA -- 2.7%
News Corp. Pfd AUD0.50 ................................... 826,158 5,031,851
Sydney Harbour Casino Holdings Ltd. AUD1 Pfd Stk ......... 249,300 220,650
- ----------------------------------------------------------- --------- ------------
5,252,501
------------
SINGAPORE -- 0.0%
Goldtron Cum Pfd SGD0.20 ................................. 600 42
- ----------------------------------------------------------- --------- ------------
TOTAL PREFERRED STOCK
(Cost $4,763,246) ........................................ 5,252,543
- ----------------------------------------------------------- ------------
UNITS
-----
STATE STREET BANK AND TRUST COMPANY COLLECTIVE INVESTMENT FUNDS -- 2.2%
Short Term Investment Fund (b) ........................... 4,377,893 4,377,893
- ----------------------------------------------------------- --------- ------------
TOTAL INVESTMENTS -- 100%
(COST $198,899,684) ...................................... $198,244,673
=========================================================== ============
</TABLE>
- ----------
(a) Issuer filed for bankruptcy.
(b) Collective investment fund advised by State Street Global Advisors.
The accompanying notes are an integral part of these financial statements.
SAI-243
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Combined Schedule of Investments
(showing percentage of total value of investments)
December 31,1998
- --------------------------------------------------------------------------------
At December 31, 1998, foreign currency balances totaling $ 1,106,453 were
pledged to cover margin requirements for open futures contracts. The following
long futures contracts were open at December 31, 1998:
<TABLE>
<CAPTION>
FUTURES NUMBER OF NOTIONAL MATURITY
CONTRACTS CONTRACTS VALUE DATE UNREALIZED GAIN (LOSS)
- ---------------------------------- ----------- -------------- -------------- -----------------------
<S> <C> <C> <C> <C>
ASX All Ordinaries Index ......... 163 $ 7,016,391 March 1999 $ 136,112
Hang Seng Stock Index ............ 44 $ 2,891,012 January 1999 (17,903)
- ----------------------------------- --- ----------- -------------- ---------
$ 118,209
=========
</TABLE>
The following forward foreign currency contracts were open at December 31,
1998:
<TABLE>
<CAPTION>
SETTLEMENT CONTRACTS TO IN EXCHANGE UNREALIZED
DATE DELIVER FOR GAIN (LOSS)
- ------------------- --------------- --------------- --------------
<S> <C> <C> <C>
3/5/99 ......... USD 2,755,020 AUD 4,380,000 $ (67,021)
3/5/99 ......... USD 124,960 AUD 200,000 (2,220)
3/5/99 ......... USD 61,800 AUD 100,000 (430)
3/5/99 ......... USD 183,660 AUD 300,000 449
3/5/99 ......... USD 2,032,800 AUD 3,300,000 (7,596)
3/5/99 ......... AUD 500,000 USD 308,600 1,751
3/5/99 ......... AUD 400,000 USD 249,440 3,961
----------
$ (71,106)
==========
</TABLE>
CURRENCY LEGEND
AUD Australian Dollar
The accompanying notes are an integral part of these financial statements.
SAI-244
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUNDS
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Daily EAFE
Funds, (collectively the "Trust") were formed by State Street Bank under a
Declaration of Trust. The Trust is organized into separate regional funds and
country funds (individually a "Fund") and umbrella funds that hold Malaysian
securities and units of the separate regional and country funds. State Street
Bank is Trustee and custodian of each Fund. State Street Global Advisors, a
division of State Street Bank, is each Fund's investment manager.
The investment objective of each fund is to closely match the performance
of the relevant portion of the MSCI EAFE Index, while providing daily
liquidity. Each Fund may invest in equity securities, equity-based derivatives,
swaps, short-term instruments and foreign exchange contracts, as well as in
commingled funds or mutual funds maintained by the Trustee.
On December 18, 1998, the Daily EAFE Securities Lending-Fund and the Daily
EAFE Non-Lending Fund (collectively, the "underlying fund") were reorganized
and separate regional and country funds (the "new funds") were established. The
underlying fund transferred all of its assets and liabilities, excluding
Malaysian assets and liabilities, in exchange for units in the new funds.
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 price or the
mean between the last reported bid and asked prices, or at fair value as
determined in good faith by the Trustee. Short-term investments, if any, are
stated at amortized cost, which approximates market value. Foreign currencies
and foreign securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Investments in regulated investment
companies or other State Street Bank collective investment funds are valued at
the net asset value per share/unit on the valuation date. Futures contracts are
valued at the last settlement price at the end of each day on the board of
trade or exchange upon which they are traded.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. 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 are determined using the average cost method. Dividend income,
if any, is recorded net of applicable withholding taxes on the ex-dividend date
or as soon as the Fund is informed of the dividend. Interest income earned on
securities, if any, is recorded net of applicable withholding taxes on the
accrual basis; interest earned on foreign currency transaction accounts is
recorded when the Trustee is first notified of the amount credited by the
depository bank.
C. FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS
The accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange
at period end. Purchases and sales of securities, income and expenses are
translated into U.S. dollars at the prevailing exchange rate on the respective
dates of the transactions.
SAI-245
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY EAFE FUNDS
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
The Fund may use forward foreign currency contracts to facilitate
transactions in foreign securities or as a hedge against either specific
transactions or portfolio positions. Such contracts are valued based upon the
applicable forward exchange rates and any resulting unrealized gains or losses
are recorded in the Fund's financial statements. The Fund records realized
gains or losses at the time the forward contract is extinguished by entry into
a closing transaction or by delivery of the currency. Risks in foreign currency
contracts arise from the possible inability of counterparties to meet the
contracts' terms and from movements in currency values.
D. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
E. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made on such
days, based upon the closing market value of the securities bought or sold as
of the valuation date. A transaction fee of .5% is charged on any contribution
or withdrawal greater than 5% of the net asset value of the Fund. However, such
fees are waived if the Fund's net participant activity on any day is less than
5% of the net asset value of the Fund.
F. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year, including custody, stamp duty, registration
and audit fees.
G. DISTRIBUTIONS TO PARTICIPANTS
Net investment income (excluding securities lending fee income, if any)
and net realized gains are retained by the Funds. Income generated by
securities lending, if any, is distributed monthly to participants of the
Lending Fund.
H. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
SAI-246
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. GLOBAL SECURITIES LENDING PROGRAM: PRINCIPLES OF COMBINATION
The participants in the Daily MSCI Pacific Basin ex-Japan Index Securities
Lending Fund (the "Lending Fund") have authorized the Lending Fund to
participate in the Global Securities Lending Program maintained by State Street
Bank. The investment objective, techniques and results of operations of the
Lending Fund are identical to those of the Daily MSCI Pacific Basin ex-Japan
Index Fund (the "Non-Lending Fund"), except that the Lending Fund engages in
securities lending activities. Accordingly, the financial statements of the
Lending Fund and the Non-Lending Fund have been prepared on a combined basis,
with separate disclosure of the participant transactions and per unit data of
the Lending Fund and the Non-Lending Fund. The Lending Fund and the Non-Lending
Fund each maintain a divided pro-rata interest in the combined assets and
liabilities (including each investment security position but excluding assets
and liabilities related to securities lending activities) proportionate to the
net asset value of the outstanding combined units of the Fund. All interfund
transactions have been eliminated in the combined financial statements.
Under the Global Securities Lending Program, securities held by the
Lending Fund are loaned by State Street Bank, as agent, to certain brokers and
other financial institutions (the "Borrowers"). The Borrowers provide cash,
securities, or letters of credit as collateral against loans in an amount at
least equal to 100% of the market value of the loaned securities. The Borrowers
are required to maintain the collateral at not less than 100% of the market
value of the loaned securities. At December 31, 1998, the market value of
securities loaned by the Lending Fund was $12,356,960 against which was held
cash collateral of $13,115,006 and securities of $120,084. Cash collateral
provided by the Borrowers is invested in State Street Bank and Trust Company
Quality A Short-Term Investment Fund. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder is
allocated between the Lending Fund and State Street Bank in its capacity as
lending agent. Negotiated lenders' fees are received for those loans
collateralized by securities or letters of credit, if any. Income earned from
lending activities is distributed to Lending Fund participants monthly. For the
period ended December 31, 1998, no lending income was earned or distributed.
2. 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, 1998 were $194,521,791 and $0, respectively. Net realized
gain (loss) from foreign currency transactions amounted to $(806) for the
period ended December 31, 1998.
SAI-247
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX DECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
3. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1998
UNITS AMOUNT
-------------- ----------------
<S> <C> <C>
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
Units issued .................................................. 3,808,938 $ 38,087,969
Units redeemed ................................................ -- --
--------- ------------
Total ...................................................... 3,808,938 $ 38,087,969
========= ============
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
Units issued .................................................. 16,677,844 $166,744,415
Units redeemed ................................................ (4,925) (48,885)
---------- ------------
Total ...................................................... 16,672,919 $166,695,530
---------- ------------
Net increase (decrease) ....................................... 20,481,857 $204,783,499
========== ============
</TABLE>
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX SECURITIES LENDING FUND
All of the Lending Fund's units outstanding were held by one unitholder at
December 31, 1998.
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
The Non-Lending Fund's two unitholders each held units in excess of 10% of
the Non-Lending Fund units outstanding at December 31, 1998.
Participants in each of the Lending Fund or the Non-Lending Fund may
exchange their units for units of the other fund on any valuation date.
4. FUTURES CONTRACTS
The Fund may use futures contracts to manage exposure to the relevant
equity markets. Buying futures tends to increase a fund's exposure to the
underlying instrument. Selling futures tends to decrease a fund's exposure to
the underlying instrument, or hedge other 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
SAI-248
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX DECURITIES LENDING FUND
DAILY MSCI PACIFIC BASIN EX-JAPAN INDEX FUND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 periodically, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Fund. A gain or loss is realized when the contract is closed or
expires.
SAI-249
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
Daily Government/Corporate Bond Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the selected per unit data present fairly, in all
material respects, the financial position of State Street Bank and Trust
Company Daily Government/Corporate Bond Fund at December 31, 1998, and 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
Trustee; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by the Trustee, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 16, 1999
SAI-250
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost $4,873,555,945)........................................................... $4,948,456,324
Cash ............................................................................ 333,076
Variation margin receivable ..................................................... 40,606
Receivable for investments sold ................................................. 75,591,039
Interest receivable ............................................................. 63,180,280
Receivable for open swap contracts .............................................. 752,136
- --------------------------------------------------------------------------------- --------------
Total assets ................................................................. 5,088,353,461
- --------------------------------------------------------------------------------- --------------
LIABILITIES
Accrued expenses ................................................................ 48,989
Payable for investments purchased ............................................... 442,722,111
Payable for open swap contracts ................................................. 1,716,108
Variation margin payable ........................................................ 5,438
- --------------------------------------------------------------------------------- --------------
Total liabilities ............................................................ 444,492,646
- --------------------------------------------------------------------------------- --------------
NET ASSETS (equivalent to $14.18 per unit based on 327,394,005 units outstanding) $4,643,860,815
================================================================================= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-251
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Statement of Operations
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest ................................................................................ $ 260,125,513
- ------------------------------------------------------------------------------------------- -------------
EXPENSES
Audit ................................................................................... 22,180
Custody ................................................................................. 527,628
- ------------------------------------------------------------------------------------------- -------------
Total expenses ........................................................................ 549,808
- ------------------------------------------------------------------------------------------- -------------
Net investment income ................................................................. 259,575,705
- ------------------------------------------------------------------------------------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS, SWAP CONTRACTS
AND WRITTEN
OPTIONS
Net realized gain (loss):
Investments ........................................................................... 134,818,896
Futures contracts ..................................................................... 1,211,137
Swap contracts ........................................................................ 4,922,288
Written options ....................................................................... 15,818
- ------------------------------------------------------------------------------------------- -------------
140,968,139
-------------
Net change in unrealized appreciation (depreciation):
Investments ............................................................................. (20,809,409)
Futures contracts ....................................................................... 48,764
- ------------------------------------------------------------------------------------------- -------------
(20,760,645)
-------------
Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts
and written
options ................................................................................. 120,207,494
- ------------------------------------------------------------------------------------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ 379,783,199
=========================================================================================== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-252
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ................................................................... $ 259,575,705 $ 240,312,689
Net realized gain (loss) on investments, futures contracts, swap contracts and written
options ................................................................................ 140,968,139 32,831,048
Net change in unrealized appreciation (depreciation) on investments and futures
contracts .............................................................................. (20,760,645) 73,634,856
- ----------------------------------------------------------------------------------------- -------------- --------------
Net increase (decrease) in net assets resulting from operations ......................... 379,783,199 346,778,593
- ----------------------------------------------------------------------------------------- -------------- --------------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions ........... (9,412,044) 866,709,299
- ----------------------------------------------------------------------------------------- -------------- --------------
Net increase (decrease) in net assets ................................................... 370,371,155 1,213,487,892
NET ASSETS
Beginning of year ...................................................................... 4,273,489,660 3,060,001,768
- ----------------------------------------------------------------------------------------- -------------- --------------
End of year ............................................................................ $4,643,860,815 $4,273,489,660
========================================================================================= ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-253
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Selected Per Unit Data
(For a Unit of Participation Outstanding Throughout the Year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net investment income* ..................... $ 0.80 $ 0.83 $ 0.78 $ 0.70 $ 0.73
Net realized and unrealized gain (loss)..... 0.38 0.32 ( 0.42) 1.17 (1.05)
- -------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) .................... 1.18 1.15 0.36 1.87 (0.32)
NET ASSET VALUE
Beginning of year .......................... 13.00 11.85 11.49 9.62 9.94
- -------------------------------------------- ---------- ---------- ---------- ---------- ----------
END OF YEAR ................................ $ 14.18 $ 13.00 $ 11.85 $ 11.49 $ 9.62
============================================ ========== ========== ========== ========== ==========
Total return (%)** ......................... 9.09 9.70 3.13 19.44 (3.22)
============================================ ========== ========== ========== ========== ==========
Ratio of expenses to average net
assets (%) ................................ 0.01 0.01 0.01 0.01 0.01
- -------------------------------------------- ---------- ---------- ---------- ---------- ----------
Ratio of net investment income (loss)
to average net assets (%) ................. 5.89 6.73 6.82 6.53 6.81
- -------------------------------------------- ---------- ---------- ---------- ---------- ----------
Portfolio turnover (%) ..................... 478 294 299 611 144
- -------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net assets, end of year (000s) ............. $4,643,861 $4,273,490 $3,060,002 $1,991,393 $1,540,440
============================================ ========== ========== ========== ========== ==========
</TABLE>
- ----------
* Net investment income has been calculated based on an average of units
outstanding.
** Total return calculation is based on the value of a single unit of
participation outstanding throughout the year. It represents the
percentage change in the net asset value per unit between the beginning
and end of the year. The calculation includes only those expenses charged
directly to the Fund. The result may be reduced by any administrative or
other fees which are incurred in the management or maintenance of
individual participant accounts.
The accompanying notes are an integral part of these financial statements.
SAI-254
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------------- -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES--82.4%
$ 10,000,000 AirTouch Communications Inc. .......................... 6.65% 1-May-08 $ 10,552,620
7,052,763 Amresco Residential Securities* ....................... 5.82% 25-Mar-99 7,000,968
13,000,000 Anheuser Busch Cos Inc. ............................... 7.00% 1-Dec-25 13,180,960
1,734,430 Arkansas State Development Finance Authority .......... 9.75% 15-Nov-05 2,010,608
20,000,000 Associates Corp. of North America ..................... 5.85% 15-Jan-01 20,179,460
2,500,000 Avco Financial Services Inc. .......................... 8.25% 14-Jan-00 2,575,153
15,484,000 Avco Financial Services Inc. .......................... 6.35% 15-Sep-00 15,724,590
9,000,000 Avon Energy Partners Hlds ............................. 6.73% 11-Dec-02 9,246,024
10,000,000 Bayerische Landesbank ................................. 5.88% 1-Dec-08 10,129,850
5,000,000 Bell Atlantic Pennsylvania Inc. ....................... 6.00% 1-Dec-28 4,921,170
19,860,000 Branch Banking & Trust Co. ............................ 5.70% 1-Feb-01 19,925,280
3,525,000 Burlington Northern Santa Fe Corp. .................... 7.25% 1-Aug-97 3,737,639
20,000,000 Canada (Government) ................................... 5.25% 5-Nov-08 20,103,940
10,355,000 Canadian Imperial Bank ................................ 6.48% 24-Jan-00 10,484,334
7,868,000 Canadian National Railway ............................. 6.90% 15-Jul-28 8,181,146
20,000,000 Cargill Inc. .......................................... 6.25% 13-Mar-00 20,249,860
1,900,000 Case Corp. ............................................ 7.25% 1-Aug-05 1,970,978
11,350,000 Caterpillar Financial Services Corp. .................. 6.92% 15-Aug-00 11,626,338
9,750,000 CIT Group Inc. ........................................ 5.91% 10-Nov-03 9,838,715
19,900,000 Citibank Credit Card Master Trust I ................... 5.85% 10-Apr-03 20,130,104
9,800,000 Citigroup Inc. ........................................ 9.50% 1-Mar-02 10,885,281
20,000,000 Coca Cola Enterprises Inc. ............................ 5.75% 1-Nov-08 20,161,060
15,000,000 Colgate Palmolive Co. ................................. 5.27% 1-Dec-03 15,050,145
8,180,000 Colorado Interstate Gas Co. ........................... 10.00% 15-Jun-05 9,745,079
2,216,000 Columbia Gas Systems Inc. ............................. 7.62% 28-Nov-25 2,329,863
5,000,000 Comcast Cable Communications I ........................ 6.20% 15-Nov-08 5,091,515
17,470,000 Comerica Bank ......................................... 6.65% 1-Jun-00 17,768,195
10,000,000 Commercial Credit Group Inc. .......................... 6.13% 1-Mar-00 10,084,060
8,200,000 Commercial Credit Group Inc. .......................... 6.00% 15-Apr-00 8,268,404
13,715,000 Commercial Credit Group Inc. .......................... 6.00% 15-Jun-00 13,835,144
10,000,000 Contimortage Home Equity Loan Trust ................... 5.77% 15-Feb-24 9,956,250
5,430,000 Continental Bank NA ................................... 7.88% 1-Feb-03 5,846,090
11,500,000 Crestar Financial Corp. ............................... 6.50% 15-Jan-18 12,058,923
10,000,000 Dayton Hudson Corp. ................................... 5.88% 1-Nov-08 10,166,320
5,000,000 Deere (John) Capital Corp. ............................ 6.28% 11-Oct-00 5,074,985
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-255
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- -------------- ------------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
$12,755,000 DR Investments (b) ................................. 7.10% 15-May-02 $ 13,219,218
4,600,000 Enron Corp. ........................................ 9.65% 15-May-01 4,962,590
5,000,000 Enron Corp. ........................................ 9.13% 1-Apr-03 5,520,440
7,000,000 Enron Corp. ........................................ 6.50% 1-Aug-02 7,068,089
14,700,000 Equitable Life Assurance Society (US) (b) .......... 6.95% 1-Dec-05 15,530,285
11,089,493 Federal Home Loan Mortgage Corp. ................... 5.93% 25-May-06 11,148,268
109,810 Federal Home Loan PC ............................... 9.00% 1-Feb-06 114,129
143,107 Federal Home Loan PC ............................... 9.00% 1-Sep-06 149,251
152,954 Federal Home Loan PC ............................... 9.00% 1-Oct-06 159,520
8,645,413 Federal Home Loan PC ............................... 7.00% 1-Jul-28 8,812,874
286,713 Federal National Mortgage Association .............. 8.00% 1-May-24 297,015
353,846 Federal National Mortgage Association .............. 8.00% 1-Jul-24 367,115
336,812 Federal National Mortgage Association .............. 8.00% 1-Jul-24 348,913
313,796 Federal National Mortgage Association .............. 8.00% 1-Jul-24 325,070
677,452 Federal National Mortgage Association .............. 8.00% 1-Jul-24 701,793
331,360 Federal National Mortgage Association .............. 8.00% 1-Aug-24 343,265
293,582 Federal National Mortgage Association .............. 8.00% 1-Aug-24 304,592
45,192 Federal National Mortgage Association .............. 8.00% 1-Aug-24 46,816
343,569 Federal National Mortgage Association .............. 8.00% 1-Sep-24 355,914
326,473 Federal National Mortgage Association .............. 8.00% 1-Sep-24 338,715
312,120 Federal National Mortgage Association .............. 8.00% 1-Sep-24 323,335
304,635 Federal National Mortgage Association .............. 8.00% 1-Sep-24 315,581
300,077 Federal National Mortgage Association .............. 8.00% 1-Sep-24 310,859
338,839 Federal National Mortgage Association .............. 8.00% 1-Oct-24 351,546
289,300 Federal National Mortgage Association .............. 8.00% 1-Oct-24 300,149
842,629 Federal National Mortgage Association .............. 8.00% 1-Nov-24 872,905
754,101 Federal National Mortgage Association .............. 8.00% 1-Nov-24 782,380
336,154 Federal National Mortgage Association .............. 8.00% 1-Nov-24 348,231
298,192 Federal National Mortgage Association .............. 8.00% 1-Nov-24 308,906
153,441 Federal National Mortgage Association .............. 8.00% 1-Nov-24 159,339
108,176 Federal National Mortgage Association .............. 8.00% 1-Dec-24 112,063
297,813 Federal National Mortgage Association .............. 8.00% 1-Jan-25 308,513
326,385 Federal National Mortgage Association .............. 8.00% 1-Apr-25 338,112
300,905 Federal National Mortgage Association .............. 8.00% 1-Apr-25 311,717
259,227 Federal National Mortgage Association .............. 8.00% 1-Apr-25 268,541
353,214 Federal National Mortgage Association .............. 8.00% 1-May-25 365,905
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-256
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ------------ -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
$ 342,414 Federal National Mortgage Association .......... 8.00% 1-May-25 $ 354,717
335,842 Federal National Mortgage Association .......... 8.00% 1-May-25 347,908
316,139 Federal National Mortgage Association .......... 8.00% 1-Jun-25 327,497
196,794 Federal National Mortgage Association .......... 8.00% 1-Jun-25 203,865
354,446 Federal National Mortgage Association .......... 8.00% 1-Jul-25 367,181
319,449 Federal National Mortgage Association .......... 8.00% 1-Jul-25 330,927
474,356 Federal National Mortgage Association .......... 8.00% 1-Aug-25 491,400
1,263,960 Federal National Mortgage Association .......... 8.00% 1-Sep-25 1,309,374
332,513 Federal National Mortgage Association .......... 8.00% 1-Sep-25 344,460
785,506 Federal National Mortgage Association .......... 8.00% 1-Dec-25 813,730
297,242 Federal National Mortgage Association .......... 8.00% 1-Dec-25 307,922
715,368 Federal National Mortgage Association .......... 8.00% 1-Jan-26 741,071
309,606 Federal National Mortgage Association .......... 8.00% 1-Jan-26 320,730
297,566 Federal National Mortgage Association .......... 8.00% 1-Jan-26 308,725
311,628 Federal National Mortgage Association .......... 8.00% 1-Feb-26 322,825
204,151 Federal National Mortgage Association .......... 8.00% 1-Jun-26 211,486
318,405 Federal National Mortgage Association .......... 8.00% 1-Jul-26 329,845
325,774 Federal National Mortgage Association .......... 8.00% 1-Aug-26 337,479
352,952 Federal National Mortgage Association .......... 8.00% 1-Sep-26 365,581
334,690 Federal National Mortgage Association .......... 8.00% 1-Sep-26 346,715
334,384 Federal National Mortgage Association .......... 8.00% 1-Sep-26 346,348
325,245 Federal National Mortgage Association .......... 8.00% 1-Oct-26 336,882
58,923 Federal National Mortgage Association .......... 8.00% 1-Oct-26 61,041
309,588 Federal National Mortgage Association .......... 8.00% 1-Nov-26 320,665
337,891 Federal National Mortgage Association .......... 8.00% 1-Dec-26 349,981
290,536 Federal National Mortgage Association .......... 8.00% 1-Aug-27 300,884
779,469 Federal National Mortgage Association .......... 8.00% 1-Sep-27 807,233
301,176 Federal National Mortgage Association .......... 8.00% 1-Sep-27 311,904
309,708 Federal National Mortgage Association .......... 8.00% 1-Oct-27 320,740
437,466 Federal National Mortgage Association .......... 8.00% 1-Jan-28 453,049
326,000 Federal National Mortgage Association .......... 8.00% 1-Jan-28 337,612
285,820 Federal National Mortgage Association .......... 8.00% 1-Jan-28 296,001
276,416 Federal National Mortgage Association .......... 8.00% 1-Jan-28 286,262
1,225,330 Federal National Mortgage Association .......... 8.00% 1-Feb-28 1,268,976
331,567 Federal National Mortgage Association .......... 8.00% 1-Feb-28 343,481
303,202 Federal National Mortgage Association .......... 8.00% 1-Apr-28 314,002
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-257
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- -------------- -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
$ 752,700 Federal National Mortgage Association ........................... 8.00% 1-May-28 $ 779,511
299,683 Federal National Mortgage Association ........................... 8.00% 1-Nov-28 310,358
890,904 Federal National Mortgage Association ........................... 8.00% 1-Dec-28 922,638
2,622,997 Federal National Mortgage Association ........................... 7.91% 1-Feb-01 2,672,309
5,207,355 Federal National Mortgage Association ........................... 6.84% 1-Jan-05 5,303,171
26,230,000 Federal National Mortgage Association ........................... 6.44% 24-Dec-07 26,948,754
35,870,000 Federal National Mortgage Association ........................... 6.00% 15-May-08 37,836,106
23,117 Federal National Mortgage Association ........................... 6.00% 1-Apr-24 22,857
750,509 Federal National Mortgage Association ........................... 6.00% 1-Apr-28 740,655
260,798 Federal National Mortgage Association ........................... 6.00% 1-Apr-28 257,374
24,402 Federal National Mortgage Association ........................... 6.00% 1-Apr-28 24,082
907,174 Federal National Mortgage Association ........................... 6.00% 1-Jun-28 895,263
24,950 Federal National Mortgage Association ........................... 6.00% 1-Jun-28 24,622
652,366 Federal National Mortgage Association ........................... 6.00% 1-Aug-28 643,800
689,750 Federal National Mortgage Association ........................... 6.00% 1-Oct-28 680,693
583,354 Federal National Mortgage Association ........................... 6.00% 1-Oct-28 575,694
25,928 Federal National Mortgage Association ........................... 6.00% 1-Oct-28 25,648
962,480 Federal National Mortgage Association ........................... 6.00% 1-Nov-28 949,843
395,015 Federal National Mortgage Association ........................... 6.00% 1-Nov-28 389,829
134,858 Federal National Mortgage Association ........................... 6.00% 1-Nov-28 133,087
130,516 Federal National Mortgage Association ........................... 6.00% 1-Nov-28 128,802
513,364 Federal National Mortgage Association ........................... 6.00% 1-Dec-28 506,624
505,000 Federal National Mortgage Association ........................... 6.00% 1-Dec-28 498,369
504,793 Federal National Mortgage Association ........................... 6.00% 1-Dec-28 498,165
473,519 Federal National Mortgage Association ........................... 6.00% 1-Dec-28 467,302
161,750,000 Federal National Mortgage Association 30 Year TBA (a) ........... 6.50% 1-Dec-99 162,836,960
130,000,000 Federal National Mortgage Association 30 Year TBA (a) ........... 6.00% 1-Dec-99 128,313,900
26,225,000 Federal National Mortgage Association Medium Term Note .......... 6.27% 5-Feb-08 26,799,695
20,940,000 Federal National Mortgage Association Medium Term Note .......... 6.17% 15-Jan-08 21,319,412
25,000,000 Federal National Mortgage Association Medium Term Note .......... 5.96% 11-Sep-28 25,435,950
10,897,283 Federal National Mortgage Association REMIC, Class Z ............ 6.89% 25-Dec-25 11,398,558
5,450,000 Financing Corp. ................................................. 10.35% 3-Aug-18 8,222,818
3,800,000 Financing Corp. ................................................. 9.40% 8-Feb-18 5,297,732
10,000,000 Finova Capital Corp. ............................................ 6.38% 15-May-05 9,949,550
4,000,000 First Bank NA ................................................... 6.38% 15-Mar-01 4,069,028
2,814,316 Fleetwood Credit Grantor Trust .................................. 6.64% 17-Sep-12 2,837,182
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-258
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ------------- -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
$7,705,000 Ford Credit Auto Loan Master Trust ...................... 6.50% 15-Aug-02 $ 7,843,451
11,875,000 Ford Credit Auto Loan Master Trust ...................... 5.50% 15-Feb-03 11,925,101
16,375,000 Ford Credit Auto Owner Trust ............................ 5.65% 15-Oct-01 16,426,172
6,500,000 Ford Motor Company Delaware ............................. 8.90% 15-Jan-32 8,663,265
9,150,000 Ford Motor Company Delaware ............................. 6.63% 1-Oct-28 9,427,309
14,848,000 Ford Motor Credit Co. ................................... 8.38% 15-Jan-00 15,308,541
2,072,000 Ford Motor Credit Co. ................................... 8.20% 15-Feb-02 2,225,504
13,700,000 Ford Motor Credit Co. ................................... 6.85% 15-Aug-00 14,033,814
6,755,000 Ford Motor Credit Co. ................................... 6.38% 15-Apr-00 6,846,672
10,000,000 Gap Inc. ................................................ 6.90% 15-Sep-07 10,992,500
15,000,000 GATX Capital Corp. ...................................... 6.50% 1-Nov-00 15,210,330
10,000,000 GATX Capital Corp. ...................................... 6.44% 9-Jun-00 10,096,530
7,722,000 General Motors Acceptance Corp. ......................... 7.00% 1-Mar-00 7,862,247
23,500,000 General Motors Acceptance Corp. ......................... 6.75% 5-Jun-01 24,196,516
17,750,000 General Motors Acceptance Corp. ......................... 6.63% 17-Apr-00 18,021,344
5,500,000 General Motors Acceptance Corp. ......................... 5.63% 15-Feb-01 5,526,527
8,000,000 General Motors Corp. .................................... 6.75% 1-May-28 8,351,280
10,600,000 Georgia Power Co. ....................................... 5.50% 1-Dec-05 10,598,845
3,220,477 Government National Mortgage Association ................ 9.50% 15-Nov-09 3,447,908
1,072,278 Government National Mortgage Association ................ 7.00% 15-Sep-28 1,097,070
876,095 Government National Mortgage Association ................ 7.00% 15-Sep-28 896,350
442,067 Government National Mortgage Association ................ 7.00% 15-Sep-28 452,287
3,915,203 Government National Mortgage Association ................ 7.00% 15-Oct-28 4,005,723
1,815,234 Government National Mortgage Association ................ 7.00% 15-Oct-28 1,857,202
9,075,000 GTE Corp. ............................................... 9.38% 1-Dec-00 9,717,982
10,000,000 GTE North Inc. .......................................... 5.65% 15-Nov-08 10,111,610
5,000,000 Halliburton Company MediumTerm Note ..................... 5.63% 1-Dec-08 4,989,960
10,000,000 Hilfiger (Tommy) United States Of America Inc. .......... 6.50% 1-Jun-03 9,889,790
5,000,000 Household Finance Corp .................................. 6.50% 15-Nov-08 5,221,250
5,000,000 Household International Netherlands B V ................. 6.20% 1-Dec-03 5,054,205
11,000,000 Hyder PLC (b) ........................................... 6.75% 15-Dec-04 11,329,516
22,400,000 IBM ..................................................... 6.50% 15-Jan-28 23,595,734
25,460,000 Integra Bank ............................................ 6.55% 15-Jun-00 25,871,561
5,760,000 Integra Financial Corp. ................................. 6.50% 15-Apr-00 5,829,114
20,000,000 Intermediate American Development Bank .................. 5.38% 18-Nov-08 20,157,340
12,780,000 International Bank For Reconstruction & Dev. ............ 9.25% 15-Jul-17 17,640,617
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-259
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- -------------- -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
$15,900,000 International Lease Finance Corp. .................... 6.65% 1-Apr-00 $ 16,142,316
8,300,000 International Lease Finance Corp. .................... 6.63% 1-Jun-00 8,439,440
14,750,000 International Lease Finance Corp. .................... 6.63% 15-Aug-00 15,035,501
11,290,000 International Lease Finance Corp. .................... 6.38% 18-Jan-00 11,404,334
1,825,000 Ireland (Republic of) ................................ 7.13% 15-Jul-02 1,928,671
10,000,000 Italy (Republic of) .................................. 6.88% 27-Sep-23 11,161,000
10,000,000 K N Energy Inc. ...................................... 6.65% 1-Mar-05 9,953,470
8,000,000 K N Energy Inc. ...................................... 6.45% 30-Nov-01 8,025,072
6,305,000 Kemper Corp. ......................................... 6.88% 15-Sep-03 6,600,742
22,400,000 Keycorp Institutional Capital ........................ 6.63% 30-Jun-99 22,521,654
2,000,000 Kroger Co. ........................................... 6.80% 15-Dec-18 2,016,256
2,500,000 Kroger Co. ........................................... 6.38% 1-Mar-08 2,538,528
3,400,000 Lehman Brothers Holdings * ........................... 5.58% 3-Jun-02 3,230,000
5,425,000 Lehman Brothers Holdings Inc. ........................ 6.15% 15-Mar-00 5,407,998
20,000,000 Lehman Brothers Holdings Inc. ........................ 6.05% 28-Apr-00 19,906,740
5,300,000 Lehman Brothers Holdings Inc. ........................ 6.00% 26-Feb-01 5,259,757
10,000,000 Lockheed Martin Corp. ................................ 7.70% 15-Jun-08 11,305,100
11,015,000 Lockheed Martin Corp. ................................ 6.85% 15-May-01 11,333,653
5,000,000 Lucent Technologies Inc. ............................. 6.50% 15-Jan-28 5,330,860
5,000,000 Lucent Technologies Inc. ............................. 5.50% 15-Nov-08 5,052,395
19,500,000 Manitoba Province (Canada) ........................... 9.50% 1-Oct-00 20,873,034
8,500,000 Manitoba Province (Canada) ........................... 9.00% 15-Dec-00 9,088,328
12,500,000 Manitoba Province (Canada) ........................... 8.75% 15-May-01 13,469,000
25,200,000 Manitoba Province (Canada) ........................... 8.00% 15-Apr-02 27,203,803
15,156,000 Manitoba Province (Canada) ........................... 7.75% 1-Feb-02 16,186,093
11,019,000 Manitoba Province (Canada) ........................... 6.88% 15-Sep-02 11,579,305
8,250,000 Massachusetts Mutual Life Insurance Co. (b) .......... 7.63% 15-Nov-23 9,402,789
5,000,000 Mead Corp. ........................................... 6.60% 1-Mar-02 5,087,985
5,000,000 Mellon Financial Co. ................................. 9.75% 15-Jun-01 5,478,310
4,800,000 Mellon Financial Co. ................................. 5.75% 15-Nov-03 4,821,658
6,000,000 Merck & Company Inc. ................................. 5.95% 1-Dec-28 5,995,470
3,250,000 Meridian Bancorp Inc. ................................ 6.63% 15-Jun-00 3,299,728
25,000,000 Merrill Lynch & Co. Inc.* ............................ 5.32% 21-May-01 24,750,000
20,000,000 Merrill Lynch & Co. Inc. ............................. 5.30% 30-Jan-99 19,950,000
10,000,000 Morgan Stanley Dean Witter ........................... 5.88% 28-Feb-01 10,058,930
5,000,000 Motorola Inc. ........................................ 6.50% 15-Nov-28 5,089,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-260
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- -------------- -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
$16,875,000 National Bank of Hungary ................. 7.95% 1-Nov-03 $ 18,169,313
8,250,000 National City Bank ....................... 6.35% 15-Mar-01 8,405,199
4,335,000 National Westminster Bank PLC ............ 9.45% 1-May-01 4,680,166
13,500,000 NationsBank Corp. ........................ 6.13% 15-Jul-04 13,761,792
6,250,000 NationsBank Corp. ........................ 5.85% 5-Feb-02 6,303,850
5,900,000 NationsBank Corp. ........................ 5.75% 25-Jan-01 5,936,409
12,150,000 New York Life Insurance Co. (b) .......... 6.40% 15-Dec-03 12,438,174
6,000,000 News America Holdings Inc. ............... 7.38% 17-Oct-08 6,510,540
5,000,000 News America Holdings Inc. ............... 7.25% 18-May-18 5,138,990
5,000,000 Norfolk Southern Corp. ................... 6.70% 1-May-00 5,075,370
7,650,000 Northrop Grumman Corp. ................... 9.38% 15-Oct-24 8,828,528
5,000,000 Northrop Grumman Corp. ................... 7.88% 1-Mar-26 5,537,665
3,750,000 Norwest Corp. ............................ 6.13% 15-Oct-00 3,804,461
15,195,000 Norwest Corp. ............................ 6.00% 15-Mar-00 15,322,562
5,000,000 Norwest Corp. ............................ 5.63% 5-Feb-01 5,028,780
10,910,000 Norwest Financial Inc. ................... 7.25% 15-Mar-00 11,158,683
5,000,000 Norwest Financial Inc. ................... 6.20% 15-Feb-01 5,086,030
5,265,000 Norwest Financial Inc. ................... 5.13% 15-Apr-00 5,255,565
3,745,000 Nova Scotia Province (Canada) ............ 9.38% 15-Jul-02 4,215,896
20,085,000 Ontario Province (Canada) ................ 8.00% 17-Oct-01 21,496,554
9,650,000 Ontario Province (Canada) ................ 7.63% 22-Jun-04 10,569,365
10,500,000 Ontario Province (Canada) ................ 7.38% 27-Jan-03 11,267,833
15,000,000 Ontario Province (Canada) ................ 5.50% 1-Oct-08 15,053,640
5,000,000 Pacific Bell ............................. 6.25% 1-Mar-05 5,209,050
6,200,000 Pacific Mutual (b) ....................... 7.90% 30-Dec-23 7,321,754
2,000,000 Petroleum Geo Services A/S ............... 7.50% 31-Mar-07 2,071,552
8,395,000 PNC Funding Corp. ........................ 9.88% 1-Mar-01 9,129,386
8,000,000 Praxair Inc. ............................. 6.15% 15-Apr-03 7,995,816
15,375,000 Premier Auto Trust ....................... 6.35% 6-Apr-02 15,620,047
8,000,000 Premier Auto Trust ....................... 6.25% 6-Jun-01 8,077,504
8,000,000 Premier Auto Trust ....................... 5.63% 6-Aug-01 8,036,248
12,905,000 Provident Bank Cincinnati Ohio ........... 6.13% 15-Dec-00 13,057,434
4,525,000 Quebec Province (Canada) ................. 9.13% 1-Mar-00 4,717,009
5,000,000 Quebec Province (Canada) ................. 7.00% 30-Jan-07 5,415,675
5,000,000 Raytheon Co. ............................. 6.75% 15-Aug-07 5,300,545
6,000,000 Raytheon Co. ............................. 6.30% 15-Mar-05 6,119,118
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-261
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- -------------- -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
$10,000,000 Raytheon Co. ...................................... 6.15% 1-Nov-08 $ 10,220,200
7,900,000 Reliaster Financial Corp. ......................... 6.63% 15-Sep-03 8,085,603
20,012,000 Resolution Funding Corp. .......................... 8.88% 15-Jul-20 28,200,990
15,000,000 Resolution Funding Corp. .......................... 8.63% 15-Jan-21 20,739,330
19,750,000 Resolution Funding Corp. .......................... 8.13% 15-Oct-19 25,871,434
4,000,000 Royal Caribbean Cruises Ltd. ...................... 6.75% 15-Mar-08 3,932,144
5,000,000 Saxon Asset Securities Trust ...................... 5.75% 25-May-18 4,945,315
8,000,000 Scripps (E W) Co. ................................. 6.38% 5-Oct-02 8,156,032
20,000,000 Sears Roebuck Acceptance Corp. .................... 5.63% 7-Feb-01 20,038,700
4,150,000 Service Corporation International ................. 6.00% 15-Dec-05 4,112,509
10,150,000 Sola International Inc. ........................... 6.88% 15-Mar-08 9,602,722
10,000,000 Spieker Pptys Inc. ................................ 6.88% 1-Feb-05 9,845,640
5,000,000 Sprint Capital Corp. .............................. 6.88% 15-Nov-28 5,187,880
18,500,000 Sun Life Canada US Trust I (b) .................... 8.53% 29-May-49 19,722,850
5,000,000 TCI Communications Inc. ........................... 7.88% 15-Feb-26 5,924,795
10,000,000 Tele Communications Inc. .......................... 7.25% 1-Aug-05 10,816,940
9,500,000 Time Warner Inc. .................................. 7.95% 1-Feb-00 9,739,448
16,500,000 Time Warner Inc. .................................. 6.63% 15-May-29 16,759,165
25,000,000 Time Warner Pass Through Asset Trust (b) .......... 4.90% 29-Jul-99 24,968,900
5,150,000 Tosco Corporation ................................. 7.00% 15-Jul-00 5,237,442
5,000,000 Toyota Motor Credit Corp. ......................... 5.63% 13-Nov-03 5,034,265
9,500,000 TPSA Finance BV (b) ............................... 7.75% 10-Dec-08 9,466,189
4,500,000 TPSA Finance BV (b) ............................... 7.13% 10-Dec-03 4,478,342
9,710,000 Tyco International Group S A (b) .................. 6.13% 15-Jun-01 9,814,489
5,000,000 Tyco International Group S A (b) .................. 6.13% 1-Nov-08 5,045,050
26,515,000 U. S. Treasury Bonds .............................. 13.25% 15-May-14 43,949,832
17,335,000 U. S. Treasury Bonds .............................. 12.50% 15-Aug-14 27,867,815
11,650,000 U. S. Treasury Bonds .............................. 12.00% 15-Aug-13 17,795,899
9,050,000 U. S. Treasury Bonds .............................. 10.38% 15-Nov-12 12,496,855
43,300,000 U. S. Treasury Bonds .............................. 8.88% 15-Aug-17 60,998,009
130,000,000 U. S. Treasury Bonds .............................. 8.75% 15-Aug-20 184,961,530
91,130,000 U. S. Treasury Bonds .............................. 8.13% 15-Aug-19 121,659,644
88,695,000 U. S. Treasury Bonds .............................. 7.25% 15-Aug-22 110,312,899
61,930,000 U. S. Treasury Bonds .............................. 5.50% 15-Aug-28 64,814,266
56,000,000 U. S. Treasury Bonds .............................. 5.25% 15-Nov-28 57,312,416
10,112,500 U. S. Treasury Bonds Inflation Indexed ............ 3.63% 15-Apr-28 9,913,415
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-262
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- -------------- -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
$40,000,000 U. S. Treasury Notes ................................... 7.88% 15-Nov-04 $ 46,343,360
70,100,000 U. S. Treasury Notes ................................... 7.00% 15-Jul-06 79,816,701
77,000,000 U. S. Treasury Notes ................................... 6.63% 30-Apr-02 81,565,099
97,535,000 U. S. Treasury Notes ................................... 6.50% 15-Aug-05 107,186,381
85,912,000 U. S. Treasury Notes ................................... 6.25% 30-Jun-02 90,241,449
87,000,000 U. S. Treasury Notes ................................... 6.13% 31-Dec-01 90,585,531
50,000,000 U. S. Treasury Notes ................................... 5.50% 31-Mar-03 51,510,250
93,500,000 U. S. Treasury Notes (e) ............................... 5.38% 31-Jul-00 94,555,148
41,185,000 U. S. Treasury Notes ................................... 4.75% 15-Nov-08 41,447,226
115,200,000 U. S. Treasury Notes ................................... 4.50% 30-Sep-00 115,010,496
51,400,000 U. S. Treasury Notes ................................... 4.25% 15-Nov-03 50,738,225
25,598,250 U. S. Treasury Notes Inflation Indexed ................. 3.63% 15-Jul-02 25,446,273
59,690,000 U. S. Treasury Notes, Strip ............................ 0.00% 15-May-12 29,362,824
10,000,000 U. S. West Communications Inc. ......................... 5.63% 15-Nov-08 10,146,030
13,123,159 UCFC Home Equity Loan Owner Trust * .................... 5.73% 15-Apr-99 12,926,311
3,525,000 Union Pacific Corp. .................................... 6.79% 9-Nov-07 3,657,195
8,100,000 Union Texas Petroleum Holdings Inc. .................... 8.38% 15-Mar-05 9,195,047
5,000,000 United Air Lines Inc. .................................. 10.67% 1-May-04 5,933,415
2,000,000 United Technologies Corp. .............................. 6.70% 1-Aug-28 2,138,918
13,090,000 US Leasing International Inc. .......................... 6.63% 15-May-03 13,556,253
5,000,000 US West Capital Funding Inc. ........................... 6.50% 15-Nov-18 5,149,305
10,425,000 USA Waste Services Inc. ................................ 6.50% 15-Dec-02 10,620,031
9,275,000 USL Capital Corp. ...................................... 8.13% 15-Feb-00 9,533,105
5,000,000 USX Marathon Group ..................................... 6.85% 1-Mar-08 4,965,530
13,850,000 Victorian Public Authority Financing ................... 8.25% 15-Jan-02 15,032,485
5,265,000 Wal Mart Stores Inc. ................................... 6.13% 21-Nov-00 5,353,278
5,330,000 Westpac Banking Ltd. ................................... 9.13% 15-Aug-01 5,751,017
5,000,000 Wolverine Tube Inc. (b) ................................ 7.38% 1-Aug-08 4,906,985
6,500,000 Worldcom Inc. .......................................... 6.95% 15-Aug-28 6,978,660
15,000,000 Worldcom Inc. .......................................... 6.40% 15-Aug-05 15,589,800
10,000,000 Xerox Corp. ............................................ 5.50% 15-Nov-03 10,109,430
8,000,000 Yorkshire Power Finance Ltd. ........................... 6.15% 25-Feb-03 7,997,192
8,000,000 Zions Institutional Capital Trust A .................... 8.54% 15-Dec-26 8,777,760
- ----------- --------------------------------------------------------- ----- --------- --------------
TOTAL NOTES & DEBENTURES (Cost $3,999,657,970).......... 4,074,558,349
--------------------------------------------------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-263
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------------- -----------------
<S> <C> <C> <C> <C>
NOTES & DEBENTURES (CONTINUED)
SHORT TERM U.S. GOVERNMENT OBLIGATIONS--0.0%
2,150,000 U. S. Treasury Bills (c) (Cost $2,130,233) ............. 4.35% 18-Mar-99 2,130,233
--------- --------------------------------------------------------- ---- --------- ---------
UNITS
STATE STREET BANK AND TRUST INVESTMENT FUNDS FOR TAX
EXEMPT RETIREMENT PLANS--17.6%
871,767,742 Short Term Investment Fund (d) ......................... 871,767,742
----------- --------------------------------------------------------- -----------
TOTAL INVESTMENTS--100% (Cost $4,873,555,945) .......... $4,948,456,324
========================================================= ==============
</TABLE>
(a) All or a portion of these securities have been purchased on a delayed
delivery basis.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(c) At December 31, 1998, U.S. Treasury Bills with principal of $2,150,000 were
pledged to cover margin requirements for open futures contracts. The
following futures contracts were open at December 31, 1998:
<TABLE>
<CAPTION>
SHORT FUTURES NUMBER OF NOTIONAL MATURITY UNREALIZED
CONTRACTS CONTRACTS VALUE DATE GAIN (LOSS)
- ---------------------------------- ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
U. S. Treasury Bond .............. (228) $ 29,134,125 March 1999 $ 539,904
U. S. Treasury Note 2 Yr ......... (86) 18,190,344 March 1999 (64,500)
---------
$ 475,404
=========
</TABLE>
<TABLE>
<CAPTION>
LONG FUTURES NUMBER OF NOTIONAL MATURITY UNREALIZED
CONTRACTS CONTRACTS VALUE DATE GAIN (LOSS)
- ---------------------------------- ----------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
U. S. Treasury Bond .............. 30 $ 3,833,438 March 1999 $ 39,844
U. S. Treasury Note 2 Yr ......... 700 148,060,941 March 1999 205,572
U. S. Treasury Note 5 Yr ......... 625 70,839,844 March 1999 (674,719)
----------
$ (429,303)
==========
</TABLE>
(d) Collective investment fund advised by State Street Global Advisors.
* Variable rate security. Rate disclosed is that which was in effect at
December 31, 1998. Date disclosed is the next reset date.
(e) At December 31, 1998, U.S. Treasury Notes with principal of $2,900,000 were
pledged to cover margin requirements for open swap contracts.
The accompanying notes are an integral part of these financial statements.
SAI-264
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
- --------------------------------------------------------------------------------
The following swap contracts were open at December 31, 1998:
<TABLE>
<CAPTION>
CURRENT UNREALIZED
NOTIONAL APPRECIATION
AMOUNT DESCRIPTION (DEPRECIATION)
- ---------------- -------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
$ 50,000,000 Agreement with Lehman Brothers Special Financing, Inc., effective August 1, 1998 and $0
terminating on March 1, 1999 to make monthly payments equal to 1 month LIBOR minus
15 basis points multiplied by the Current Notional Amount of $50,000,000; and to receive or
make payments equal to the Current Notional Amount multiplied by the month to date total
return of the Lehman Brothers Long Corporate Index. For purposes of this agreement the
Bond Index is measured as 100 plus the total return since inception of the Lehman Brothers
Corporate Bond Index.
100,000,000 Agreement with Lehman Brothers Special Financing, Inc., effective January 1, 1998 and 0
terminating on January 1, 1999 to make monthly payments equal to 1 month LIBOR minus
7.5 basis points multiplied by the Current Notional Amount of $100,000,000; and to receive
or make payments equal to the Current Notional Amount multiplied by the month to date
total return of the Lehman Brothers Long Corporate Index. For purposes of this agreement
the Bond Index is measured as 100 plus the total return since inception of the Lehman
Brothers Corporate Bond Index.
25,000,000 Agreement with Lehman Brothers Special Financing, Inc., effective October 16, 1998 and 0
terminating on April 16, 1999 to make monthly payments equal to 1 month LIBOR minus 10
basis points multiplied by the Current Notional Amount of $25,000,000; and to receive or
make payments equal to the Current Notional Amount multiplied by the month to date total
return of the Lehman Brothers Long Corporate Index. For purposes of this agreement the
Bond Index is measured as 100 plus the total return since inception of the Lehman Brothers
Corporate Bond Index.
40,000,000 Agreement with Lehman Brothers Special Financing, Inc., effective May 1, 1998 and 0
terminating on February 1, 1999 to make monthly payments equal to 1 month LIBOR minus
5 basis points multiplied by the Current Notional Amount of $40,000,000; and to receive or
make payments equal to the Current Notional Amount multiplied by the month to date total
return of the Lehman Brothers Long Corporate Index. For purposes of this agreement the
Bond Index is measured as 100 plus the total return since inception of the Lehman Brothers
Corporate Bond Index.
50,000,000 Agreement with Goldman Sachs Capital Markets, NY, effective October 1, 1998 and 0
terminating on April 16, 1999 to make monthly payments equal to 1 month LIBOR minus 40
basis points multiplied by the Current Notional Amount of $50,000,000; and to receive or
make payments equal to the Current Notional Amount multiplied by the month to date total
return of the Lehman Brothers Corporate Index. For purposes of this agreement the Bond
Index is measured as 100 plus the total return since inception of the Lehman Brothers
Corporate Bond Index.
50,000,000 Agreement with Goldman Sachs Capital Markets, NY, effective December 1, 1998 and 0
terminating on May 1,1999 to make monthly payments equal to 1 month LIBOR multiplied
by the Current Notional Amount of $50,000,000; and to receive or make payments equal to
the Current Notional Amount multiplied by the month to date total return of the Lehman
Brothers Corporate Index. For purposes of this agreement the Bond Index is measured as
100 plus the total return since inception of the Lehman Brothers Corporate Bond Index.
50,000,000 Agreement with Goldman Sachs Capital Markets, NY, 0effective December 1, 1998 and 0
--
terminating on June 1, 1999 to make monthly payments equal to 1 month LIBOR multiplied
by the Current Notional Amount of $50,000,000; and to receive or make payments equal to
the Current Notional Amount multiplied by the month to date total return of the Lehman
Brothers Corporate Index. For purposes of this agreement the Bond Index is measured as
100 plus the total return since inception of the Lehman Brothers Corporate Bond Index.
$0
==
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-265
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Daily
Government/Corporate Bond Fund (the "Fund") was formed by State Street Bank
under a Declaration of Trust. The investment objective of the Fund is to match
or exceed the return of the Lehman Brothers Government/Corporate Bond Index.
State Street Bank is Trustee and custodian of the Fund. State Street Global
Advisors, a division of State Street Bank, is the Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 sales are reported for that day, the last published
sale price, or at fair value as determined in good faith by the Trustee.
Short-term investments, if any, are stated at amortized cost, which
approximates market value. Investments in regulated investment companies or
other State Street Bank collective investment funds are valued at the net asset
value per share/unit on the valuation date. Futures contracts are valued at the
last settlement price at the end of each day on the board of trade or exchange
upon which they are traded. Index swap contracts are marked-to-market as the
net amount due to or from the Fund in accordance with the terms of the contract
based on the closing level of the relevant index and interest accrual through
valuation date.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. The cost of
securities contributed to, and proceeds related to securities delivered by, the
Fund in connection with the issuance and redemption of units of participation
are based on the valuations of those securities determined as described above.
The cost of securities delivered and the net gain or loss on securities sold
are determined using the average cost method. Dividend income, if any, is
recorded on the ex-dividend date. Interest income earned on securities, if any,
is recorded on the accrual basis. Interest income includes accretion of
discounts and amortization of premiums.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The net asset value of the Fund is determined each business day
("valuation date"). Issuances and redemptions of Fund units are made based upon
the closing market value of the securities bought or sold as of the valuation
date.
E. EXPENSES
Under the Declaration of Trust, the Fund may pay certain expenses for
services received during the year. The Trustee is paid a custody fee at an
annual rate of 0.0125% of the Fund's average net asset value.
SAI-266
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
F. DISTRIBUTIONS TO PARTICIPANTS
Net investment income and net realized gains are retained by the Fund.
G. FUTURES CONTRACTS
The Fund may use futures contracts to manage interest rate exposure.
Buying futures tends to increase a fund's exposure to the underlying
instrument. Selling futures tends to decrease a fund's exposure to the
underlying instrument, or hedge other 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 periodically, depending on the daily fluctuation in the
value of the underlying securities, and are recorded as unrealized gains or
losses by the Fund. A gain or loss is realized when the contract is closed or
expires.
H. SWAP CONTRACTS
Bond index swap contracts entered into by the Fund typically represent the
exchange by the Fund with a counterparty of a commitment to pay interest at a
variable rate for a cash flow based on the change in market price and/or total
return (change in market price plus interest income) of the relevant bond
index. Such contracts may have a term of one to ten years, but typically
require periodic interim settlement in cash, at which time both the value of
the index and the specified interest rate are reset for the next settlement
period. During the period that the swap contract is open, changes in the value
of the swap are reported as unrealized gains or losses, while periodic cash
settlements are reported as realized gains or losses in the Statement of
Operations. Unrealized gains or losses are reported as an asset or a liability
in the Statement of Assets and Liabilities.
Entering into bond index swap contracts involves, to varying degrees,
elements of credit, market and interest rate risk in excess of the amounts
reported in the Statement of Assets and Liabilities. Notional principal amounts
are used to express the extent of involvement in those transactions, but are
not delivered under the contracts. Accordingly, credit risk is limited to any
amounts receivable from the counterparty. To reduce credit risk from potential
counterparty default, the Fund enters into swap contracts with counterparties
whose creditworthiness has been approved by the Trustee. The Fund bears the
market risk arising from any change in index values or interest rates.
I. PURCHASED AND WRITTEN OPTIONS
The Fund may purchase or write (sell) options contracts to manage exposure
to the bond market and to fluctuations in interest rates. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying
SAI-267
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
instrument. In general, buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
Options involve, to varying degrees, credit and market risks. Loss in value may
arise from changes in the value of the underlying instruments. In writing a put
option, the Fund assumes the risk of incurring a loss if the market price
decreases and the option is exercised. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market for the contracts or if the counterparties do not perform in
accordance with the contracts' terms.
J. DELAYED DELIVERY COMMITMENTS
The Fund may purchase or sell securities on a delayed delivery, when
issued, or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated.
K. DOLLAR ROLL TRANSACTIONS
The Fund may enter into dollar roll transactions. A dollar roll
transaction involves a sale by the Fund of securities, or a forward commitment
to purchase securities, with an agreement by the Fund to repurchase
substantially similar securities, or a substantially similar commitment, at an
agreed upon price and date. During the period between the sale and repurchase,
the Fund will not be entitled to accrue interest and/or receive principal
payments on the securities sold. Dollar roll transactions involve the risk that
the market value of the securities sold by the Fund may decline below the
repurchase price of those securities. In the event the buyer of the securities
under a dollar roll transaction files for bankruptcy or becomes insolvent, the
Fund's use of proceeds of the transaction may be restricted pending a
determination by or with respect to the other party.
L. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. 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 year ended
December 31, 1998 were $21,045,008,977 and $21,085,492,815, respectively,
resulting in a net realized gain (loss) of $134,818,896.
SAI-268
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
DAILY GOVERNMENT/CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
Investments in written options for the Fund for the year ended December
31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
WRITTEN OPTIONS
-----------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------- ---------------
<S> <C> <C>
Open at December 31, 1997 ......... 0 $ 0
Contracts opened .................. 1,558 1,137,750
Contracts closed .................. (1,558) (1,137,750)
------ ------------
Open at December 31, 1998 ......... 0 $ 0
====== ============
</TABLE>
4. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1998 1997
--------------------------------------- ------------------------------------
UNITS AMOUNT UNITS AMOUNT
----------------- ------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Units issued .................... 115,428,444 $ 1,570,818,324 138,789,456 $1,697,854,639
Units redeemed .................. (116,709,556) (1,580,230,368) (68,402,642) (831,145,340)
------------ ---------------- ----------- --------------
Net increase (decrease) ......... (1,281,112) $ (9,412,044) 70,386,814 $ 866,709,299
============ ================ =========== ==============
</TABLE>
Units in excess of 10% of the Fund units outstanding at December 31, 1998
held by one of the Fund's 21 unitholders aggregated 87% of the Fund's total
units outstanding.
SAI-269
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Trustee of
State Street Bank and Trust Company
Short Term Investment Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the selected per unit data present fairly, in all
material respects, the financial position of State Street Bank and Trust
Company Short Term Investment Fund at December 31, 1998, and 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 Trustee;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by the Trustee, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1998 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 1999
SAI-270
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at amortized cost ....................................... $ 20,422,031,210
Cash ............................................................................... 76
Interest and other receivables ..................................................... 179,627,906
- ------------------------------------------------------------------------------------- ----------------
Total assets ................................................................... 20,601,659,192
- ------------------------------------------------------------------------------------- ----------------
LIABILITIES
Distributions payable .............................................................. 92,922,495
Other liabilities .................................................................. 12,473
- ------------------------------------------------------------------------------------- ----------------
Total liabilities .............................................................. 92,934,968
- ------------------------------------------------------------------------------------- ----------------
NET ASSETS (equivalent to $1.00 per unit based on 20,508,726,346 units outstanding) $ 20,508,724,224
===================================================================================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-271
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Statement of Operations
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest ............................................................. $1,239,922,276
- ----------------------------------------------------------------------- --------------
EXPENSES
Audit ................................................................ 30,850
Other ................................................................ 45,432
- ----------------------------------------------------------------------- --------------
Total expenses ..................................................... 76,282
- ----------------------------------------------------------------------- --------------
Net investment income .............................................. 1,239,845,994
- ----------------------------------------------------------------------- --------------
Net realized gain (loss) on investments ............................... 499
- ----------------------------------------------------------------------- --------------
Net increase (decrease) in net assets resulting from operations ....... $1,239,846,493
======================================================================= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-272
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
------------------- -------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ........................................................ $ 1,239,845,994 $ 1,076,734,419
Net realized gain (loss) on investments ...................................... 499 242
- ------------------------------------------------------------------------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from operations .............. 1,239,846,493 1,076,734,661
- ------------------------------------------------------------------------------- ---------------- ----------------
Distributions ................................................................ (1,239,845,994) (1,076,730,419)
- ------------------------------------------------------------------------------- ---------------- ----------------
FROM PARTICIPANT TRANSACTIONS
Net increase (decrease) in net assets resulting from participant transactions 1,945,666,619 4,800,113,295
- ------------------------------------------------------------------------------- ---------------- ----------------
Net increase (decrease) in net assets ........................................ 1,945,667,118 4,800,117,537
NET ASSETS
Beginning of year ........................................................... 18,563,057,106 13,762,939,569
- ------------------------------------------------------------------------------- ---------------- ----------------
End of year ................................................................. $ 20,508,724,224 $ 18,563,057,106
=============================================================================== ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-273
<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,
--------------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net investment income .................. $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 $ 0.0424
Net realized gain (loss)* .............. 0.0000 0.0000 0.0000 0.0000 0.0000
Net change in net assets resulting from
operations ............................ $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 $ 0.0424
======================================== =========== =========== =========== =========== ===========
Distributions from net investment
income ................................ $ 0.0551 $ 0.0563 $ 0.0548 $ 0.0604 $ 0.0424
======================================== =========== =========== =========== =========== ===========
Total return (%)** ..................... 5.65 5.77 5.62 6.21 4.32
- ---------------------------------------- ----------- ----------- ----------- ----------- -----------
Ratio of expenses to average net
assets (%)*** ......................... 0.00 0.00 0.00 0.00 0.00
Ratio of net investment income to
average net assets (%) ................ 5.51 5.63 5.48 6.04 4.24
Net assets, end of year (000s) ......... $20,508,724 $18,563,057 $13,762,940 $12,393,148 $ 9,239,219
======================================== =========== =========== =========== =========== ===========
</TABLE>
- ----------
* Zero amounts represent those which are less than $.00005 per unit.
** Total return calculation is based on the value of a single unit of
participation outstanding throughout the year. It assumes reinvestment of
distributions and includes only those expenses charged directly to the
Fund. This result may be reduced by any administrative or other fees
which are incurred in the management or maintenance of individual
participant accounts.
*** Less than .005%
The accompanying notes are an integral part of these financial statements.
SAI-274
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ------------------- ------------------
<S> <C> <C> <C> <C>
SHORT TERM INSTRUMENTS--99.6%
$ 100,000,000 ABB Treasury Center USA Inc. .................. 5.05% 22-Feb-99 $ 99,270,556
100,000,000 Abbey National Number America ................. 4.90% 29-Apr-99 100,000,000
100,000,000 Abbey National Treasury Services PLC .......... 5.25% 06-Jan-99 100,000,000
130,000,000 Abbey National Treasury Services PLC .......... 5.58% 19-Aug-99 129,930,883
230,000,000 Abbey National Treasury Services PLC .......... 5.55% 26-Jan-99 229,999,014
100,000,000 Abbey National Treasury Services PLC .......... 5.54% 20-Jan-99 99,999,001
35,000,000 Abbey National Treasury Services PLC .......... 5.53% 26-Jan-99 34,998,735
100,000,000 Abbey National Treasury Services PLC .......... 5.51% 11-Jan-99 100,001,343
50,000,000 Abbey National Treasury Services PLC .......... 5.38% 04-Jan-99* 49,977,569
73,000,000 Abbey National Treasury Services PLC .......... 4.79% 01-Jan-99* 72,965,171
150,000,000 ABN Amro Bank NV .............................. 4.94% 09-Apr-99 147,984,875
80,000,000 Assets Securitization Cooperative ............. 5.42% 14-Jan-99 79,843,422
113,000,000 Assets Securitization Cooperative ............. 5.28% 12-Feb-99 112,303,920
93,000,000 Banc One Corporation .......................... 5.48% 15-Jan-99* 92,985,174
75,000,000 Bank of America ............................... 5.15% 04-Apr-99 75,000,000
150,000,000 Bank of America ............................... 5.13% 22-Mar-99 150,000,000
75,000,000 Bank of Montreal (Chicago) .................... 5.73% 30-Mar-99 74,987,014
50,000,000 Bank of Montreal (Chicago) .................... 5.05% 12-Nov-99 49,985,438
50,000,000 Bank of Nova Scotia ........................... 5.83% 04-May-99 49,990,332
90,000,000 Bank of Nova Scotia ........................... 5.68% 08-Mar-99 89,989,868
150,000,000 Bank of Scotland .............................. 5.06% 05-May-99 150,002,519
75,000,000 Bank One (Wisconsin) .......................... 5.55% 29-Jan-99 74,995,585
150,000,000 Barclays Bank PLC ............................. 5.56% 25-Feb-99 149,986,991
100,000,000 Barclays Bank PLC ............................. 5.41% 04-Jan-99* 99,969,502
155,000,000 Bayerische Hypotheken Und ..................... 5.55% 04-Jan-99 155,000,000
700,000,000 Bayerische Hypotheken Und ..................... 5.13% 04-Jan-99 700,000,000
210,000,000 Bayerische Landesbank (New York) .............. 5.49% 29-Jan-99* 209,919,022
128,000,000 Bayerische Landesbank (New York) .............. 5.41% 11-Jan-99* 127,964,339
100,000,000 Bayerische Vereinsbank AG ..................... 5.60% 02-Feb-99 100,002,524
128,800,000 Canada (Government) ........................... 6.68% 15-Jul-99 130,067,480
100,000,000 Canada (Government) ........................... 5.17% 01-Feb-99 99,554,806
100,000,000 Canadian Imperial Bank of Commerce ............ 5.64% 02-Mar-99 100,071,435
75,000,000 Canadian Imperial Bank of Commerce ............ 5.55% 10-Feb-99 74,996,057
150,000,000 Canadian Imperial Bank of Commerce ............ 5.12% 14-Jan-99 150,000,000
37,500,000 Canadian Imperial Bank of Commerce ............ 5.12% 19-Jan-99 37,499,404
100,000,000 Canadian Imperial Bank of Commerce ............ 5.12% 06-Apr-99 100,000,000
20,000,000 Caterpillar Financial Services ................ 5.89% 15-Oct-99 20,090,179
100,000,000 Chase Manhattan Bank USA ...................... 5.30% 05-Feb-99 100,000,000
100,000,000 Chase Manhattan Corp .......................... 5.72% 17-May-99 99,971,465
50,000,000 Comerica Bank (Detroit) ....................... 5.53% 04-Jan-99* 49,998,286
50,000,000 Comerica Bank (Detroit) ....................... 5.11% 10-Mar-99* 49,984,947
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-275
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
Short Term Investments (Continued)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ------------------- ------------------
<S> <C> <C> <C> <C>
SHORT TERM INSTRUMENTS (CONTINUED)
$ 120,000,000 Commerzbank Aktiengesellschaft .................. 6.75% 05-Jan-99 $ 120,000,000
150,000,000 Commerzbank Aktiengesellschaft .................. 5.46% 12-Feb-99 149,044,500
75,000,000 Commonwealth Bank Australia ..................... 5.48% 04-Jan-99 74,965,750
61,000,000 Commonwealth Bank Australia ..................... 5.07% 23-Feb-99 60,544,686
80,000,000 Commonwealth Bank Australia ..................... 5.06% 18-Mar-99 79,145,422
50,000,000 Credit Suisse First Boston New York ............. 5.82% 04-May-99 50,010,050
125,000,000 Credit Suisse First Boston New York ............. 5.67% 24-Aug-99 125,000,000
45,574,000 Delaware Funding Corp. .......................... 5.36% 19-Jan-99 45,451,862
125,000,000 Delaware Funding Corp. .......................... 5.33% 27-Jan-99 124,518,819
45,000,000 Delaware Funding Corp. .......................... 5.20% 18-Feb-99 44,688,000
60,062,000 Delaware Funding Corp. .......................... 5.17% 14-Jan-99 59,949,868
192,985,000 Delaware Funding Corp. .......................... 5.17% 15-Jan-99 192,596,993
100,000,000 Den Danske Bank ................................. 5.25% 10-Feb-99 100,000,000
50,000,000 Den Danske Bank AS .............................. 5.22% 01-Jan-99* 50,000,639
100,000,000 Den Danske Corporation .......................... 5.45% 04-Jan-99 99,954,583
70,000,000 Deutsche Bank AG ................................ 5.67% 08-Jan-99 69,999,614
85,000,000 Deutsche Bank AG ................................ 5.13% 01-Jan-99* 85,000,000
150,000,000 Deutsche Bank AG ................................ 5.11% 01-Jan-99* 150,000,000
400,000,000 Dresdner Bank (Grand Cayman) .................... 5.25% 04-Jan-99 400,000,000
40,000,000 Dresdner Bank AG (New York Branch) .............. 5.51% 15-Jan-99 39,999,411
25,000,000 E.I. Du Pont de Nemours & Co. ................... 4.90% 12-Feb-99 24,857,083
70,000,000 Falcon Asset Securitization ..................... 5.68% 20-Jan-99 69,790,156
55,670,000 Falcon Asset Securitization ..................... 5.62% 15-Jan-99 55,548,330
73,000,000 Falcon Asset Securitization ..................... 5.45% 15-Jan-99 72,845,281
22,170,000 Falcon Asset Securitization ..................... 5.43% 17-Feb-99 22,012,833
46,770,000 Falcon Asset Securitization ..................... 5.40% 02-Feb-99 46,545,504
71,492,000 Falcon Asset Securitization ..................... 5.35% 05-Feb-99 71,120,142
29,884,000 Falcon Asset Securitization ..................... 5.32% 05-Feb-99 29,729,433
55,615,000 Falcon Asset Securitization ..................... 5.24% 21-Jan-99 55,453,099
22,130,000 Falcon Asset Securitization ..................... 5.22% 16-Feb-99 21,982,393
25,000,000 Falcon Asset Securitization ..................... 5.22% 23-Feb-99 24,807,875
80,000,000 Falcon Asset Securitization ..................... 5.20% 25-Feb-99 79,364,444
50,000,000 Falcon Asset Securitization ..................... 5.20% 26-Feb-99 49,595,556
185,000,000 Federal Home Loan Bank .......................... 5.06% 06-Jan-99 184,869,986
51,515,000 Federal Home Loan Bank .......................... 4.98% 03-Feb-99 51,279,834
97,900,000 Federal Home Loan Bank .......................... 4.94% 10-Feb-99 97,362,638
125,000,000 Federal Home Loan Bank .......................... 5.38% 04-Jan-99 124,957,192
160,000,000 Federal Home Loan Bank .......................... 4.80% 01-Jan-99* 159,902,115
50,000,000 Federal Home Loan Mortgage Corporation .......... 5.42% 26-Jan-99* 49,997,627
123,841,000 Federal Home Loan Mortgage Corporation .......... 5.10% 29-Jan-99 123,349,764
74,019,000 Federal Home Loan Mortgage Corporation .......... 5.06% 29-Jan-99 73,727,694
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-276
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
Short Term Investments (Continued)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ------------------- ------------------
<S> <C> <C> <C> <C>
SHORT TERM INSTRUMENTS (CONTINUED)
$ 100,000,000 Federal National Mortgage Association .......... 5.10% 05-Jan-99* $ 99,953,685
150,000,000 Federal National Mortgage Association .......... 4.91% 15-Jan-99 149,713,583
105,000,000 Federal National Mortgage Association .......... 4.80% 06-May-99 103,250,000
300,000,000 First National Bank of Chicago ................. 5.00% 04-Jan-99 300,000,000
135,000,000 Fleet Financial Group Inc ...................... 5.22% 22-Jan-99* 135,000,000
100,000,000 Fleet National Bank (R.I.) ..................... 5.13% 20-Jan-99 100,000,000
175,000,000 Fleet National Bank (R.I.) ..................... 4.86% 01-Jan-99 174,980,183
60,000,000 Ford Motor Credit Co. .......................... 5.15% 03-Mar-99 59,476,417
150,000,000 General American Life Insurance ................ 5.73% 30-Jan-99 150,000,000
30,000,000 General Electric Capital Corp .................. 5.19% 19-Jan-99 29,922,150
60,000,000 General Electric Capital Corp .................. 5.19% 09-Mar-99* 60,000,000
26,000,000 General Electric Capital Corp .................. 5.11% 09-Mar-99* 25,994,443
24,000,000 General Electric Capital Corp .................. 5.09% 08-Mar-99* 23,994,903
30,000,000 General Electric Capital Corp .................. 5.05% 23-Feb-99 29,776,958
100,000,000 General Electric Capital Corp .................. 5.05% 10-Mar-99 99,046,111
50,000,000 General Electric Capital Corp .................. 5.03% 11-Feb-99 49,713,569
100,000,000 General Electric Capital Corp .................. 4.94% 17-Mar-99 98,970,833
150,000,000 General Electric Capital Corp .................. 4.89% 16-Jun-99 146,617,750
115,000,000 General Electric Capital Corp .................. 4.86% 01-Jan-99* 115,000,000
400,000,000 Goldman Sachs Group L P ........................ 5.13% 04-Jan-99 399,829,167
350,000,000 Halifax Building Society ....................... 5.88% 04-Jan-99 350,000,000
600,000,000 Halifax Building Society ....................... 5.75% 04-Jan-99 600,000,000
65,000,000 IBM ............................................ 5.05% 22-Jan-99* 64,971,866
100,000,000 IBM ............................................ 5.03% 03-Feb-99* 99,935,278
80,000,000 IBM Credit Corporation ......................... 5.17% 21-Jan-99* 79,965,264
60,000,000 IBM Credit Corporation ......................... 5.15% 22-Jan-99* 59,973,854
37,000,000 IBM Credit Corporation ......................... 5.14% 06-Jan-99* 36,981,711
150,000,000 JP Morgan & Company, Inc. ...................... 5.31% 19-Jan-99 149,601,750
80,000,000 JP Morgan & Company, Inc. ...................... 5.48% 07-Jan-99* 79,972,091
200,000,000 JP Morgan & Company, Inc. ...................... 5.21% 05-Jan-99* 199,984,833
150,000,000 JP Morgan & Company, Inc. ...................... 5.75% 10-Mar-99 150,000,000
73,500,000 Key Bank N A ................................... 5.44% 21-Jan-99* 73,469,643
75,000,000 Key Bank N A ................................... 5.23% 21-Jan-99* 75,000,000
100,000,000 Key Bank N A ................................... 5.13% 20-Feb-99* 99,992,398
195,000,000 Key Bank N A ................................... 4.83% 01-Jan-99* 194,910,314
200,000,000 Key Bank N A ................................... 4.80% 01-Jan-99* 199,973,932
100,000,000 KFW International Finance Inc. ................. 5.10% 12-Mar-99 99,008,333
100,000,000 Kredietbank NV ................................. 5.66% 23-Mar-99 99,988,302
100,000,000 Marshall & Ilsley Bank (Grand Cayman) .......... 4.88% 04-Jan-99 100,000,000
105,069,000 Marshall & Ilsley Bank (Grand Cayman) .......... 4.75% 04-Jan-99 105,069,000
50,000,000 Merrill Lynch & Company Inc .................... 5.79% 28-Apr-99 50,000,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-277
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
Short Term Investments (Continued)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ------------------- ------------------
<S> <C> <C> <C> <C>
SHORT TERM INSTRUMENTS (CONTINUED)
$ 40,000,000 Merrill Lynch & Company Inc .................. 5.58% 08-Feb-99* $ 40,010,540
50,000,000 Merrill Lynch & Company Inc .................. 5.32% 16-Feb-99* 49,996,932
150,000,000 Merrill Lynch & Company Inc .................. 5.24% 06-Jan-99* 149,996,244
100,000,000 Merrill Lynch & Company Inc .................. 5.19% 04-Feb-99* 99,994,945
400,000,000 National Australia Bank Ltd. ................. 5.25% 04-Jan-99 400,000,000
100,000,000 National Australia Bank Ltd. ................. 5.13% 24-Mar-99 100,000,000
125,000,000 National Australia Funding ................... 5.23% 22-Feb-99 124,055,694
100,000,000 National Bank of Canada (New York) ........... 5.21% 05-Mar-99 100,000,000
100,000,000 National City Bank (Grand Cayman) ............ 5.00% 04-Jan-99 100,000,000
100,000,000 National City Bank (Grand Cayman) ............ 4.88% 04-Jan-99 100,000,000
300,000,000 National City Bank (Grand Cayman) ............ 4.75% 04-Jan-99 300,000,000
50,000,000 National City Bank (Indiana) ................. 5.73% 19-Apr-99 49,992,917
40,000,000 National City Bank (Indiana) ................. 5.45% 08-Jan-99* 39,995,725
60,000,000 National Westminster Bank PLC ................ 5.70% 31-Mar-99 59,985,991
175,000,000 National Westminster Bank PLC ................ 5.62% 19-Mar-99 174,975,227
113,000,000 NationsBank NA (N.C.) ........................ 5.26% 05-Jan-99* 113,000,000
25,000,000 NationsBank NA (N.C.) ........................ 5.12% 19-Apr-99 25,000,367
100,000,000 NationsBank NA (N.C.) ........................ 4.83% 01-Jan-99* 99,980,067
100,000,000 Old Line Funding Corporation ................. 5.68% 22-Jan-99 99,668,667
224,529,000 Old Line Funding Corporation ................. 5.52% 07-Jan-99 224,322,433
18,254,000 Old Line Funding Corporation ................. 5.52% 22-Jan-99 18,195,222
50,272,000 Old Line Funding Corporation ................. 5.50% 12-Jan-99 50,187,515
35,000,000 Old Line Funding Corporation ................. 5.50% 13-Jan-99 34,935,833
68,393,000 Old Line Funding Corporation ................. 5.48% 15-Jan-99 68,247,247
65,000,000 Old Line Funding Corporation ................. 5.45% 08-Jan-99 64,931,118
42,877,000 Old Line Funding Corporation ................. 5.45% 14-Jan-99 42,792,616
33,199,000 Old Line Funding Corporation ................. 5.45% 21-Jan-99 33,098,481
57,458,000 Old Line Funding Corporation ................. 5.42% 27-Jan-99 57,233,084
44,000,000 Paccar Financial Corp ........................ 5.08% 25-Mar-99 43,484,662
90,000,000 Pepsico Inc .................................. 5.21% 19-Feb-99* 89,936,006
73,000,000 PNC Bank NA (Pittsburgh) ..................... 5.71% 26-Apr-99 72,986,786
100,000,000 PNC Bank NA (Pittsburgh) ..................... 5.41% 19-Jan-99* 99,954,141
110,000,000 PNC Bank NA (Pittsburgh) ..................... 4.79% 01-Jan-99* 109,956,332
44,000,000 Preferred Receivables Funding Corp. .......... 5.62% 15-Jan-99 43,903,836
64,035,000 Preferred Receivables Funding Corp. .......... 5.45% 25-Jan-99 63,802,340
23,000,000 Preferred Receivables Funding Corp. .......... 5.40% 21-Jan-99 22,931,000
50,800,000 Preferred Receivables Funding Corp. .......... 5.37% 27-Jan-99 50,602,981
46,585,000 Preferred Receivables Funding Corp. .......... 5.35% 26-Jan-99 46,411,924
100,000,000 Preferred Receivables Funding Corp. .......... 5.25% 02-Feb-99 99,533,333
100,000,000 Preferred Receivables Funding Corp. .......... 5.25% 03-Feb-99 99,518,750
81,340,000 Preferred Receivables Funding Corp. .......... 5.22% 26-Jan-99 81,045,143
</TABLE>
The accompanying notes are an integral part of these financial statements.
SAI-278
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
Schedule of Investments
(showing percentage of total value of investments)
December 31, 1998
Short Term Investments (Continued)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ------------------- -----------------
<S> <C> <C> <C> <C>
SHORT TERM INSTRUMENTS (CONTINUED)
$ 40,000,000 Preferred Receivables Funding Corp. ................... 5.22% 23-Feb-99 $ 39,692,600
80,000,000 Prudential Funding Corp ............................... 5.07% 26-Jan-99 79,718,333
110,000,000 Royal Bank of Canada .................................. 5.60% 23-Aug-99 109,952,685
275,000,000 Societe Generale (Cayman) ............................. 5.25% 04-Jan-99 275,000,000
13,500,000 Student Loan Marketing Association .................... 5.40% 10-Feb-99 13,497,484
200,000,000 Suntrust Banks Inc. ................................... 5.25% 04-Jan-99 200,000,000
150,000,000 Svenska Handelsbanken AB .............................. 5.79% 07-May-99 149,970,264
100,000,000 Svenska Handelsbanken AB .............................. 5.70% 29-Mar-99 99,985,163
75,000,000 Svenska Handelsbanken AB .............................. 5.68% 23-Jul-99 74,976,021
100,000,000 Svenska Handelsbanken AB .............................. 5.67% 09-Aug-99 100,435,945
185,000,000 Svenska Handelsbanken AB .............................. 5.61% 17-Aug-99 184,933,522
100,000,000 Svenska Handelsbanken AB .............................. 5.50% 05-Jan-99 100,000,221
100,000,000 Svenska Handelsbanken AB .............................. 5.45% 05-Jan-99 100,000,000
175,000,000 Svenska Handelsbanken AB .............................. 5.43% 04-Jan-99* 174,942,806
75,000,000 Tiers Trust ........................................... 5.57% 15-Jan-99* 74,928,007
100,000,000 Toronto Dominion Bank ................................. 5.67% 26-Jul-99 99,967,562
64,500,000 UBS Finance Delaware Inc. ............................. 5.49% 08-Jan-99 64,431,146
200,000,000 Unibank A S Grand Cayman .............................. 5.25% 04-Jan-99 200,000,000
45,000,000 Wachovia Bank of North Carolina ....................... 5.67% 25-Jan-99* 44,992,771
40,000,000 Walt Disney Company ................................... 4.87% 01-Jan-99* 39,998,929
50,000,000 Wells Fargo And Company ............................... 5.26% 29-Jan-99 49,795,444
100,000,000 Westpac Banking Corporation ........................... 5.73% 23-Apr-99 99,982,510
40,000,000 Westpac Banking Corporation ........................... 5.67% 26-Mar-99 39,994,707
50,000,000 Westpac Banking Corporation ........................... 5.61% 17-Aug-99 49,982,033
40,000,000 Westpac Banking Corporation ........................... 5.54% 22-Jan-99 39,999,010
65,000,000 Westpac Banking Corporation ........................... 5.30% 11-Feb-99 64,607,653
25,000,000 Westpac Banking Corporation ........................... 4.97% 17-May-99 24,530,611
---------------- ------------------------------------------------------- ---- ---------- ---------------
TOTAL SHORT TERM INSTRUMENTS .......................... 20,337,031,210
-------------------------------------------------------- ---------------
REPURCHASE AGREEMENT--4.0%
$ 85,000,000 Merrill Lynch & Company Inc.
----------------
(Collateralized by $34,795,000 Federal Home Loan Bank.
Consolidated Discount Notes 4.95% due 2/10/99 valued at
$35,223,413, and $50,000,000 Federal National Mortgage
Association Medium Term Notes 4.95% due 3/15/01 valued
at $53,156,250)........................................ 4.95% 04-Jan-99 85,000,000
------------------------------------------------------- ---- ---------- ---------------
TOTAL INVESTMENTS--100%
(COST $ 20,422,031,210)................................ $20,422,031,210
======================================================== ===============
</TABLE>
- ----------
* Variable rate security. Rate disclosed is that which was in effect at
December 31,1998.
Date disclosed is the next reset date.
The accompanying notes are an integral part of these financial statements.
SAI-279
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. FUND ORGANIZATION AND INVESTMENT OBJECTIVE
State Street Bank and Trust Company ("State Street Bank") Short Term
Investment Fund (the "Fund") was formed by State Street Bank under a
Declaration of Trust. The investment objective of the Fund 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 Trustee and custodian of the
Fund. State Street Global Advisors, a division of State Street Bank, is the
Fund's investment manager.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 trade date. The cost of
securities contributed to, and proceeds related to securities delivered by, the
Fund in connection with the issuance and redemption of units of participation
are based on the valuations of those securities determined as described above.
The cost of securities delivered and the net gain or loss on securities sold
are determined using the average cost method. Interest income earned on
securities, if any, is recorded on the accrual basis. Interest income includes
accretion of discounts and amortization of premiums.
C. INCOME TAXES
It is the Fund's policy to comply with the requirements of Section 501(a)
of the Internal Revenue Code relating to collective investment of employee
benefit funds. Accordingly, the Fund is exempt from federal income taxes and no
federal income tax provision is required.
D. ISSUANCES AND REDEMPTIONS OF UNITS OF PARTICIPATION
Issuances and redemptions of participant units are made on each business
day ("valuation date"). Participant units are typically purchased and redeemed
at a constant net asset value of $1.00 per unit. In the event that a
significant disparity develops between the constant net asset value and the
market-based net asset value of the Fund, the Trustee may determine that
continued redemption at a constant $1.00 net asset value would create
inequitable results for the Fund's unitholders. In these circumstances, the
Trustee, in its sole discretion and acting on behalf of the Fund's unitholders,
may direct that units be redeemed at the market-based net asset value until
such time as the disparity between the market-based and the constant net asset
value per unit is deemed to be immaterial.
E. EXPENSES
According to the Declaration of Trust, the Fund may pay certain expenses
for services received during the year.
SAI-280
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
SHORT TERM INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
F. DISTRIBUTIONS TO PARTICIPANTS
Distributions from net investment income are recorded on each valuation
date and paid monthly. Net realized gains are retained by the Fund.
G. USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit the Trustee to make certain
estimates and assumptions at the date of the financial statements. 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, 1998 were $1,519,310,108,769 and
$1,517,822,683,228, respectively, resulting in a net realized gain (loss) of
$499.
4. UNITS OF PARTICIPATION
Participant transactions for the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1998 1997
------------------------------------------- -------------------------------------------
UNITS AMOUNT UNITS AMOUNT
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Units issued .................... 83,589,471,035 $ 83,589,471,035 55,593,526,128 $ 55,593,526,128
Units redeemed .................. (81,643,804,416) (81,643,804,416) (50,793,412,833) (50,793,412,833)
--------------- ----------------- --------------- -----------------
Net increase (decrease) ......... 1,945,666,619 $ 1,945,666,619 4,800,113,295 $ 4,800,113,295
=============== ================= =============== =================
</TABLE>
SAI-281
<PAGE>
Supplement dated May 1, 1999 to Prospectus dated May 1, 1999
------------------------------------------------------------------------
MEMBERS RETIREMENT PROGRAMS
funded under contracts with
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
1290 Avenue of the Americas, New York, New York 10104
Toll-Free Telephone 800-223-5790
----------------------------------
VARIABLE ANNUITY BENEFITS
----------------------------------
This Prospectus Supplement should be read and retained for
future reference by Participants in the Members Retirement
Programs who are considering variable
annuity payment benefits after retirement.
This Prospectus Supplement is not authorized for
distribution unless accompanied or preceded by
the Prospectus dated May 1, 1999 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 $5,000, you must receive
a Qualified Joint and Survivor Annuity unless your Spouse consents to a
different election.
Life Annuity - annuity providing monthly payments for your life. No
payments will be made after your death, even if you have received only one
payment.
Life Annuity Period Certain - an annuity providing monthly payments
for your life or, if longer, a specified period of time. If you die before the
end of that specified period, payments will continue to your beneficiary until
the end of the period. Subject to legal limitations, you may specify a minimum
payment period of 5, 10, 15 or 20 years; the longer the specified period, the
smaller the monthly payments will be.
Joint and Survivor Annuity - Period Certain - an annuity providing
monthly payments for your life and that of your beneficiary or, if longer, a
specified period of time. If you and your beneficiary both die before the end
of the specified period, payments will continue to your contingent beneficiary
until the end of the period. Subject to legal limitations, you may specify a
minimum payment period of 5, 10, 15 or 20 years; the longer the specified
period, the smaller the monthly payments will be.
How Annuity Payments are Made
When your distribution of benefits under an annuity begins, your Units
in the Funds are redeemed. Part or all of the proceeds, plus part or all of
your Account Balance in the General Account Options, may be used to purchase an
annuity. The minimum amount that can be used to purchase any type of annuity is
$5,000. Usually, a $350 charge will be deducted from the amount used to
purchase the annuity to reimburse us for administrative expenses associated
with processing the application and with issuing each month's annuity payment.
Applicable premium taxes will also be deducted.
Annuity payments may be fixed or variable.
FIXED ANNUITY PAYMENTS. Fixed annuity payments are determined from our
annuity rate tables in effect at the time the first annuity payment is
made. The minimum amount of the fixed payments is determined from
tables in our contract with the Trustees, which show the amount of
proceeds necessary to purchase each $1 of monthly annuity payments
(after deduction of any applicable taxes and the annuity
administrative charge). These tables are designed to determine the
amounts required to pay for the annuity selected, taking into account
our administrative and investment expenses and mortality and expense
risks. The size of your payment will depend upon the form of annuity
chosen, your age and the
2
<PAGE>
age of your beneficiary if you select a joint and survivor annuity.
If our current group annuity rates for payment of proceeds would
produce a larger payment, those rates will apply instead of the
minimums in the contract tables. If we give any group pension client
with a qualified plan a better annuity rate than those currently
available for the Program, we will also make those rates available to
Program participants. The annuity administrative charge may be
greater than $350 in that case. Under our contract with the Trustees,
we may change the tables but not more frequently than once every five
years. Fixed annuity payments will not fluctuate during the payment
period.
VARIABLE ANNUITY PAYMENTS. Variable annuity payments are funded
through our Separate Account No. 4 (Pooled) (the "Fund"), through the
purchase of Annuity Units. The number of Annuity Units purchased is
equal to the amount of the first annuity payment divided by the Annuity
Unit Value for the due date of the first annuity payment. The amount
of the first annuity payment is determined in the same manner for a
variable annuity as it is for a fixed annuity. The number of Annuity
Units stays the same throughout the payment period for the variable
annuity but the Annuity Unit Value changes to reflect the investment
income and the realized and unrealized capital gains and losses of the
Fund, after adjustment for an assumed base rate of return of 5-3/4%,
described below.
The amounts of variable annuity payments are determined as follows:
Payments normally start as of the first day of the second calendar month
following our receipt of the proper forms. The first two monthly payments are
the same.
Payments after the first two will vary according to the investment
performance of the Fund. Each monthly payment will be calculated by multiplying
the number of Annuity Units credited to you by the Annuity Unit Value for the
first business day of the calendar month before the due date of the payment.
The Annuity Unit Value was set at $1.1553 as of July 1, 1969, the
first day that Separate Account No. 4 (Pooled) was operational. For any month
after that date, it is the Annuity Unit Value for the preceding month
multiplied by the change factor for the current month. The change factor gives
effect to the assumed annual base rate of return of 4-3/4% and to the actual
investment experience of the Fund.
Because of the adjustment for the assumed base rate of return, the
Annuity Unit Value rises and falls depending on whether the actual rate of
investment return is higher or lower than 5-3/4%.
Illustration of Changes in Annuity Payments. To show how we determine
variable annuity payments from month to month, assume that the amount you
applied to purchase an annuity is enough to fund an annuity with a monthly
payment of $363 and that the Annuity Unit Value for the due date of the first
annuity payment is $1.05. The number of annuity units credited under your
certificate would be 345.71 (363 divided by 1.05 = 345.71). If the
3
<PAGE>
third monthly payment is due on March 1, and the Annuity Unit Value for
February was $1.10, the annuity payment for March would be the number of units
(345.71) times the Annuity Unit Value ($1.10), or $380.28. If the Annuity Unit
Value was $1.00 on March 1, the annuity payment for April would be 345.71 times
$1.00 or $345.71.
Summary of Annuity Unit Values for the Fund
This table shows the Annuity Unit Values with an assumed based rate of
return of 5-3/4%.
First Business Day of Annuity Unit Value
--------------------- ------------------
October 1987 $4.3934
October 1988 $3.5444
October 1989 $4.8357
October 1990 $3.8569
October 1991 $5.4677
October 1992 $5.1818
October 1993 $6.3886
October 1994 $6.1563
October 1995 $7.4970
October 1996 $8.0828
October 1997 $11.0300
October 1998 $7.5963
THE FUND
The Fund (Separate Account No. 4 (Pooled)) was established pursuant to
the Insurance law of the State of New York in 1969. It is an investment account
used to fund benefits under group annuity contracts and other agreements for
tax-deferred retirement programs administered by us.
For a full description of the Fund, its investment policies, the risks
of an investment in the Fund and information relating to the valuation of Fund
assets, see the description of the Fund in our May 1, 1999 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, 1999
prospectus and Statement of Additional Information.
4
<PAGE>
We are a New York stock life insurance company with our Home Office at
1290 Avenue of the Americas, New York, New York 10104. Founded in 1859, we are
one of the largest insurance companies in the United States. Equitable Life,
our sole stockholder Equitable Companies, Inc., and their subsidiaries managed
assets of approximately $347.5 billion as of December 31, 1998, including third
party assets of $262.5 billion.
Investment Management
In providing investment management to the Fund, we currently use the
personnel and facilities of our majority owned subsidiary, Alliance Capital
Management L.P. ("Alliance"), for portfolio selection and transaction services.
For a description of Alliance, see our May 1, 1999 Members Retirement Program
prospectus.
Fund Transactions
The Fund is charged for securities brokers commissions, transfer taxes
and other fees relating to securities transactions. Transactions in equity
securities for the Fund are executed primarily through brokers which are
selected by Alliance/Equitable Life and receive commissions paid by the Fund.
For 1998, 1997 and 1996, the Fund paid $4,288,187, $3,698,148 and $5,682,578,
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, 1999 Statement of Additional Information.
5
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Fund reflect applicable fees, charges and
other expenses under the Members Retirement Programs as in effect during the
periods covered, as well as the charges against the account made in accordance
with the terms of all other contracts participating in the account.
Separate Account No. 4 (Pooled): Page
Report of Independent Accountants - PricewaterhouseCoopers LLP 7
Statement of Assets and Liabilities,
December 31, 1998 8
Statement of Operations and Changes in Net Assets
for the Years Ended December 31, 1998 and 1997 9
Portfolio of Investments
December 31, 1998 10
Notes to Financial Statements 15
6
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and the Contractowners of Separate Account No. 4
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and
changes in net assets present fairly, in all material respects, the financial
position of Separate Account No. 4 (Pooled) (The Growth Equity Fund) of The
Equitable Life Assurance Society of the United States ("Equitable Life") at
December 31, 1998, its results of operations and changes in net assets for each
of the two years in the period then ended and the selected per unit data for
the periods presented, 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, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
February 8, 1999
7
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT NO.4 (POOLED)
(THE ALLIANCE GROWTH EQUITY FUND)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statement of Assets and Liabilities
December 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 2 and 3):
Common stocks -- at market value (cost: $1,914,414,699) ................................. $2,098,464,735
Preferred stocks -- at market value (cost: $841,125) .................................... 934,875
Participation in Separate Account No.2A -- at amortized cost, which approximates market
value, equivalent to 8,358
units at $285.54 ....................................................................... 2,386,642
Receivables:
Securities sold ......................................................................... 22,404,246
Dividends ............................................................................... 1,027,478
- -------------------------------------------------------------------------------------------------------------
Total assets ........................................................................... 2,125,217,976
- -------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Securities purchased .................................................................... 3,784,147
Due to Equitable Life's General Account ................................................. 7,913,160
Custodian fee payable ................................................................... 27,461
Investment management fees payable ...................................................... 5,210
Accrued expenses ......................................................................... 440,812
Amount retained by Equitable Life in Separate Account No. 4 (Note 1) ..................... 1,271,958
- -------------------------------------------------------------------------------------------------------------
Total liabilities ...................................................................... 13,442,748
- -------------------------------------------------------------------------------------------------------------
NET ASSETS (NOTE 1):
Net assets attributable to participants' accumulations ................................... 2,072,991,897
Reserves and other liabilities attributable to annuity benefits .......................... 38,783,331
- -------------------------------------------------------------------------------------------------------------
NET ASSETS ............................................................................... $2,111,775,228
=============================================================================================================
</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,
1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2):
Dividends (net of foreign taxes withheld -- 1998: $199,170 and 1997: $2,138) ............. $ 12,224,979 $ 13,385,197
Interest ................................................................................. 477,732 845,517
- --------------------------------------------------------------------------------------------------------------------------------
Total .................................................................................... 12,702,711 14,230,714
EXPENSES (NOTE 4) ........................................................................ (18,036,108) (19,783,932)
- --------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS ...................................................................... (5,333,397) (5,553,218)
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Realized gain from security and foreign currency transactions ............................ 424,897,105 372,430,956
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments and foreign currency transactions:
Beginning of year ....................................................................... 690,125,231 448,580,808
End of year ............................................................................. 184,143,786 690,125,231
- --------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation/depreciation ........................................... (505,981,445) 241,544,423
- --------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ................................... (81,084,340) 613,975,379
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets attributable to operations ............................. (86,417,737) 608,422,161
- --------------------------------------------------------------------------------------------------------------------------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ............................................................................ 451,738,195 546,890,479
Withdrawals .............................................................................. (897,373,357) (969,496,108)
- --------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets attributable to contributions and withdrawals ..................... (445,635,162) (422,605,629)
- --------------------------------------------------------------------------------------------------------------------------------
(Increase) in accumulated amount retained by Equitable Life in Separate Account No. 4
(Note 1) ................................................................................ (153,300) (360,863)
- --------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS ........................................................ (532,206,199) 185,455,669
NET ASSETS -- BEGINNING OF YEAR .......................................................... 2,643,981,427 2,458,525,758
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -- END OF YEAR ................................................................ $2,111,775,228 $2,643,981,427
==============================================================================================================================
</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, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS -- SPECIALTY (0.1%)
Crompton & Knowles Corp. ............................ 97,800 $ 2,023,238
------------
TOTAL BASIC MATERIALS (0.1%) ........................ 2,023,238
------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (3.2%)
United States Filter Corp. * ........................ 3,000,000 68,625,000
------------
PRINTING, PUBLISHING & BROADCASTING (1.6%)
CBS Corp. ........................................... 1,000,000 32,750,000
------------
PROFESSIONAL SERVICES (0.1%)
Nielsen Media Research, Inc. ........................ 163,100 2,935,800
------------
TRUCKING, SHIPPING (0.2%)
Knightsbridge Tankers Ltd. .......................... 150,000 3,121,875
Marine Transport Corp. * ............................ 50,000 112,500
OMI Corp. * ......................................... 500,000 1,625,000
------------
4,859,375
------------
TOTAL BUSINESS SERVICES (5.1%) ...................... 109,170,175
------------
CAPITAL GOODS
AEROSPACE (0.2%)
Loral Space & Communications Ltd. * ................. 250,000 4,453,125
------------
TOTAL CAPITAL GOODS (0.2%) .......................... 4,453,125
------------
CONSUMER CYCLICALS
AIRLINES (8.6%)
Alaska Air Group, Inc. * ............................ 200,000 8,850,000
America West Holdings Corp. (Class B) * ............. 350,000 5,950,000
Continental Airlines, Inc. (Class B) * .............. 3,399,997 113,899,900
Northwest Airlines Corp. (Class A) * ................ 2,100,000 53,681,250
------------
182,381,150
------------
APPAREL, TEXTILE (2.2%)
Nautica Enterprises, Inc. * ......................... 114,200 1,713,000
Tommy Hilfiger Corp. * .............................. 650,000 39,000,000
Unifi, Inc. ......................................... 200,000 3,912,500
Wolverine World Wide, Inc. .......................... 154,600 2,048,450
------------
46,673,950
------------
AUTO RELATED (7.7%)
Budget Group, Inc. * ................................ 250,000 3,968,750
Circuit City Stores, Inc. -- CarMax Group * ......... 490,200 2,665,462
Dana Corp. .......................................... 300,000 12,262,500
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments -- (Continued)
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
Dollar Thrifty Automotive Group, Inc. * ......... 841,700 $ 10,836,887
Republic Industries, Inc. * ..................... 9,000,000 132,750,000
------------
162,483,599
------------
FOOD SERVICES, LODGING (0.9%)
Extended Stay America, Inc. * ................... 1,660,000 17,430,000
Suburban Lodges of America, Inc. * .............. 35,000 286,563
------------
17,716,563
------------
HOUSEHOLD FURNITURE, APPLIANCES (1.6%)
Industrie Natuzzi Spa (ADR) ..................... 1,011,000 25,148,625
Newell Co. ...................................... 200,000 8,250,000
------------
33,398,625
------------
LEISURE RELATED (9.0%)
Carnival Corp. .................................. 2,000,000 96,000,000
Cendant Corporation * ........................... 506,000 9,645,625
Mirage Resorts, Inc. * .......................... 707,600 10,569,771
Royal Caribbean Cruises Ltd. .................... 2,000,000 74,000,000
------------
190,215,396
------------
RETAIL -- GENERAL (1.0%)
Circuit City Stores-Circuit City Group .......... 76,500 3,820,219
Dickson Concepts International, Inc. ............ 357,000 276,473
Genesis Direct, Inc. * .......................... 215,000 1,679,688
Limited, Inc. ................................... 100,000 2,912,500
Tandy Corp. ..................................... 50,000 2,059,375
Tiffany & Co. ................................... 200,000 10,375,000
------------
21,123,255
------------
TOTAL CONSUMER CYCLICALS (31.0%) ................ 653,992,538
------------
CONSUMER NONCYCLICALS
DRUGS (2.5%)
Geltex Pharmaceuticals, Inc. * .................. 700,000 15,837,500
MedImmune, Inc. * ............................... 361,600 35,956,600
------------
51,794,100
------------
FOODS (0.3%)
Tysons Foods, Inc. .............................. 350,000 7,437,500
------------
HOSPITAL SUPPLIES & SERVICES (1.3%)
HEALTHSOUTH Corp. * ............................. 1,800,000 27,787,500
------------
TOTAL CONSUMER NONCYCLICALS (4.1%) .............. 87,019,100
------------
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments -- (Continued)
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CREDIT-SENSITIVE
BANKS (0.8%)
Citigroup, Inc. ......................................... 300,000 $ 14,850,000
Washington Mutual, Inc. ................................. 84,000 3,207,750
------------
18,057,750
------------
FINANCIAL SERVICES (13.8%)
Edwards (A.G.), Inc. .................................... 760,000 28,310,000
Legg Mason, Inc. ........................................ 2,500,000 78,906,250
MBNA Corp. .............................................. 6,900,000 172,068,750
Newcourt Credit Group, Inc. ............................. 100,000 3,493,750
PMI Group, Inc. ......................................... 200,000 9,875,000
------------
292,653,750
------------
INSURANCE (8.9%)
Ace Ltd. ................................................ 100,000 3,443,750
CNA Financial Corp. * ................................... 3,530,100 142,086,525
IPC Holdings Ltd. ....................................... 207,400 4,809,088
NAC Re Corp. ............................................ 600,000 28,162,500
Travelers Property Casualty (Class A) ................... 300,000 9,300,000
------------
187,801,863
------------
REAL ESTATE (0.1%)
Excel Legacy Corp. * .................................... 140,000 560,000
Prime Retail, Inc. ...................................... 60,000 588,750
------------
1,148,750
------------
UTILITY -- ELECTRIC (0.1%)
AES Corp. * ............................................. 30,000 1,421,250
------------
UTILITY -- TELEPHONE (7.0%)
Embratel Participacoes (ADR) * .......................... 220,000 3,066,250
Tele Celular Sul Participacoes (ADR) * .................. 22,000 383,625
Tele Centro Oeste Celular Participacoes (ADR) * ......... 73,333 215,416
Tele Centro Sul Participacoes (ADR) * ................... 44,000 1,839,750
Tele Leste Celular Participacoes (ADR) * ................ 4,400 124,850
Telemig Celular Participacoes (ADR) * ................... 11,000 233,750
Tele Nordeste Celular Participacoes (ADR) * ............. 11,000 203,500
Tele Norte Celular Participacoes (ADR) * ................ 4,400 99,275
Tele Norte Leste Participacoes (ADR) * .................. 220,000 2,736,250
Telephone & Data Systems, Inc. .......................... 2,930,000 131,666,875
Telesp Celular Participacoes (ADR) * .................... 88,000 1,540,000
Telesp Participacoes S.A. (ADR) * ....................... 220,000 4,867,500
Tele Sudeste Celular Participacoes (ADR) * .............. 44,000 910,250
------------
147,887,291
------------
TOTAL CREDIT-SENSITIVE (30.7%) .......................... $648,970,654
------------
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments -- (Continued)
December 31, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY
OIL -- DOMESTIC (0.4%)
Kerr McGee Corp. .......................................... 220,000 $ 8,415,000
------------
OIL -- INTERNATIONAL (0.1%)
IRI International Corporation * ........................... 305,000 1,220,000
------------
OIL -- SUPPLIES & CONSTRUCTION (4.9%)
BJ Services Co. * ......................................... 440,000 6,875,000
Halliburton Co. ........................................... 1,000,000 29,625,000
Lukoil Holdings -- Spons (ADR) ............................ 15,000 232,520
Lukoil Holdings -- Spons (ADR) (Preferred Shares) ......... 40,000 134,684
Noble Drilling Corp. * .................................... 2,200,000 28,462,500
Oceaneering International, Inc. * ......................... 300,000 4,500,000
Parker Drilling Corp. * ................................... 3,756,100 11,972,569
Rowan Cos., Inc. * ........................................ 1,684,800 16,848,000
Stolt Comex Seaway S.A. * ................................. 14,000 94,500
Stolt Comex Seaway S.A. (ADR) (Class A) * ................. 880,000 4,950,000
------------
103,694,773
------------
TOTAL ENERGY (5.4%) ....................................... 113,329,773
------------
TECHNOLOGY
ELECTRONICS (8.8%)
Altera Corp. * ............................................ 460,000 28,002,500
Cisco Systems, Inc. * ..................................... 400,000 37,125,000
DBT Online, Inc. * ........................................ 160,000 3,990,000
Micron Technology, Inc. * ................................. 300,000 15,168,750
Motorola, Inc. ............................................ 50,000 3,053,125
Network Associates, Inc. * ................................ 550,000 36,437,500
Sanmina Corp. * ........................................... 305,600 19,100,000
Sterling Commerce, Inc. * ................................. 250,000 11,250,000
Xilinx, Inc. * ............................................ 479,300 31,214,413
------------
185,341,288
------------
OFFICE EQUIPMENT SERVICES (3.4%)
First Data Corp. .......................................... 600,000 19,012,500
HBO & Co. ................................................. 1,752,500 50,274,844
Novell, Inc. * ............................................ 100,000 1,812,500
------------
71,099,844
------------
TELECOMMUNICATIONS (10.6%)
American Satellite Network -- Rights * .................... 70,000 0
Esprit Telecom Group PLC (ADR) * .......................... 50,000 2,337,500
Global TeleSystems Group, Inc. * .......................... 1,290,000 71,917,500
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments -- (Concluded)
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Millicom International Cellular S.A. * .................................. 1,550,000 $ 54,056,250
NTL Incorporated * ...................................................... 100,000 5,643,750
United States Cellular Corp. * .......................................... 2,345,000 89,110,000
--------------
223,065,000
--------------
TOTAL TECHNOLOGY (22.8%) ................................................ 479,506,132
--------------
TOTAL COMMON STOCKS (99.4%)
(Cost $1,914,414,699)................................................... 2,098,464,735
--------------
PREFERRED STOCKS:
CONSUMER CYCLICALS
AIRLINES (0.0%)
Continental Airlines Financial Trust
8.5% Conv. ............................................................. 13,500 934,875
--------------
TOTAL CONSUMER CYCLICALS (0.0%) ......................................... 934,875
--------------
TOTAL PREFERRED STOCKS (0.0%)
(Cost $841,125)......................................................... 934,875
--------------
PARTICIPATION IN SEPARATE ACCOUNT NO. 2A,
at amortized cost, which approximates
market value, equivalent to 8,358 units
at $285.54 each (0.1%).................................................. 2,386,642
--------------
TOTAL INVESTMENTS (99.5%)
(Cost $1,917,642,466)................................................... 2,101,786,252
OTHER ASSETS LESS LIABILITIES (0.5%) .................................... 11,260,934
AMOUNTS RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 4 (0.0%) (NOTE 1) ................................. (1,271,958)
--------------
NET ASSETS (100.0%) ..................................................... $2,111,775,228
==============
Reserves attributable to participants' accumulations .................... 2,072,991,897
Reserves and other contract liabilities attributable to annuity benefits 38,783,331
--------------
NET ASSETS .............................................................. $2,111,775,228
==============
</TABLE>
- ----------
* Non-income producing.
See Notes to Financial Statements.
14
<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 Alliance Growth Equity Fund) (the Fund)
of The Equitable Life Assurance Society of the United States (Equitable
Life), a wholly-owned subsidiary of The Equitable Life Companies
Incorporated, was established in conformity with the New York State
Insurance Law. Pursuant to such law, to the extent provided in the
applicable contracts, the net assets in the Fund are not chargeable with
liabilities arising out of any other business of Equitable Life. The
excess of assets over reserves and other contract liabilities amounting to
$1,271,958 as shown in the Statement of Assets and Liabilities in Separate
Account No. 4 may be transferred to Equitable Life's General Account.
These financial statements reflect the total net assets and results of
operations for Separate Account No. 4. The Members Retirement Programs
constitute, among many others, the contract owners participating in this
Fund.
Interests of retirement and investment plans for Equitable Life employees,
managers, and agents in Separate Account No. 4 aggregated $323,953,589
(15.3%), at December 31, 1998 and $384,471,790 (14.5%), at December 31,
1997, of the net assets in the Fund.
Equitable Life is the investment manager for the Fund. Alliance Capital
Management L.P. (Alliance) serves as the investment adviser to Equitable
Life with respect to the management of the Fund. Alliance is a
publicly-traded limited partnership which is indirectly majority-owned by
Equitable Life.
Equitable Life and Alliance seek to obtain the best price and execution of
all orders placed for the Fund considering all circumstances. In addition
to using brokers and dealers to execute portfolio security transactions for
accounts under their management, Equitable Life and Alliance may also enter
into other types of business and securities transactions with brokers and
dealers, which will be unrelated to allocation of the Fund's portfolio
transactions.
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
2. Security transactions are recorded on the trade date. Amortized cost of debt
securities consists of cost adjusted, where applicable, for amortization
of premium or accretion of discount. Dividend income is recorded on the
ex-dividend date; interest income (including amortization of premium and
discount on securities using the effective yield method) is accrued daily.
Realized gains and losses on the sale of investments are computed on the
basis of the identified cost of the related investments sold.
Transactions denominated in foreign currencies are recorded at the rate
prevailing at the date of such transactions. Asset and liability accounts
that are denominated in a foreign currency are adjusted to reflect the
current exchange rate at the end of the period. Transaction gains or losses
resulting from changes in the exchange rate during the reporting period or
upon settlement of the foreign currency transactions are reflected under
"Realized and Unrealized Gain (Loss) on Investments" in the Statements of
Operations and Changes in Net Assets.
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
15
<PAGE>
- --------------------------------------------------------------------------------
(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, 1998, the amortized cost of
investments held in Separate Account No. 2A consist of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
AMORTIZED COST %
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper, 5.10% - 5.35% due 01/04/99 through 02/18/99 $ 230,335,099 97.7%
U.S. Government Agency, 4.28% due 01/04/99 ................... 5,198,145 2.2
- ---------------------------------------------------------------------------------------------
Total Investments ............................................ 235,533,244 99.9
Other Assets less Liabilities ................................ 215,649 0.1
- ---------------------------------------------------------------------------------------------
Net Assets of Separate Account No. 2A ........................ $ 235,748,893 100.0%
=============================================================================================
Units Outstanding ............................................ 825,639
Unit Value ................................................... $ 285.54
- ---------------------------------------------------------------------------------------------
</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 1998 and 1997, investment security transactions, excluding short-term debt
securities, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
COST OF NET PROCEEDS
PURCHASES OF SALES
- --------------------------------------------------------------------------------------
Stocks and long-term corporate debt securities:
<S> <C> <C>
1998 ........................................ $1,692,067,102 $2,151,023,546
1997 ........................................ 1,569,991,103 1,988,739,298
U.S. Government obligations:
1998 ........................................ -- --
1997 ........................................ -- --
- ------------------------------------------------- -------------- --------------
</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.
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 stock are valued at
bid prices obtained from one or more
16
<PAGE>
- --------------------------------------------------------------------------------
major dealers in such securities; where there is a discrepancy between
dealers, values may be adjusted based on recent premium spreads to the
underlying common stock.
Other assets that do not have a readily available market price are valued
at fair value as determined in good faith by Equitable Life's Investment
officers.
Separate Account No. 2A is valued daily at amortized cost, which
approximates market value. Short-term debt securities purchased directly by
the Funds which mature in 60 days or less are valued at amortized cost.
Short-term debt securities which mature in more than 60 days are valued at
representative quoted prices.
4. Charges and fees are deducted in accordance with the terms of the various
contracts which participate in the Fund. With respect to the Members
Retirement Programs, these expenses consist of investment management and
accounting fees, program expense charge, direct expenses and record
maintenance and report fees. 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, 1998, by reason of applicable provisions of the
Internal Revenue Code and no Federal income tax payable by Equitable Life
for such years will affect such contracts. Accordingly, no Federal income
tax provision is required.
17
<PAGE>
American Dental Association
Members Retirement Program
- --------------------------------------------------------------------------------
PROSPECTUS
MAY 1, 1999
[ADA LOGO]
- ------------------------------------------------------------------------------
GROWTH EQUITY FUND [ALLIANCE CAPITAL LOGO]
- ------------------------------------------------------------------------------
AGGRESSIVE EQUITY FUND [MFS LOGO]
- ------------------------------------------------------------------------------
ADA FOREIGN FUND [TEMPLETON LOGO]
- ------------------------------------------------------------------------------
EQUITY INDEX FUND [SSGA LOGO]
- ------------------------------------------------------------------------------
EQUITY INCOME FUND [PUTNAM LOGO]
- ------------------------------------------------------------------------------
LIFECYCLE FUND-CONSERVATIVE [SSGA LOGO]
- ------------------------------------------------------------------------------
LIFECYCLE FUND-MODERATE [SSGA LOGO]
- ------------------------------------------------------------------------------
REAL ESTATE FUND [LEND LEASE LOGO]
- ------------------------------------------------------------------------------
GUARANTEED RATE ACCOUNTS [JOHN HANCOCK LOGO]
- ------------------------------------------------------------------------------
MONEY MARKET GUARANTEE ACCOUNT [EQUITABLE LOGO]
- ------------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B.
The following are included in the Statement of Additional
Information relating to the American Dental Association Members
Retirement Program:
1. Separate Account No. 195:
-Report of Independant Accountants
-Statement of Assets and Liabilities, December 31, 1998
-Statements of Operations and Changes in Net Assets for the
Years Ended December 31, 1998 and 1997
-Notes to Financial Statements
2. Separate Account No. 197:
-Report of Independant Accountants
-Statement of Assets and Liabilities, December 31, 1998
-Statements of Operations and Changes in Net Assets for the
Years Ended December 31, 1998 and 1997
-Notes to Financial Statements
3. Separate Account No. 198:
-Report of Independant Accountants
-Statement of Assets and Liabilities, December 31, 1998
-Statements of Operations and Changes in Net Assets for the
Years Ended December 31, 1998 and 1997
-Notes to Financial Statements
4. The Equitable Life Assurance Society of the United States:
-Report of Independent Accountants - Pricewaterhouse LLP
-Consolidated Balance Sheets, December 31, 1998 and 1997
-Consolidated Statements of Earnings for the Years Ended
December 31, 1998, 1997 and 1996
-Consolidated Statements of Equity for Years Ended December 31,
1998, 1997 and 1996
-Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
-Notes to Consolidated Financial Statements
5. Lifecycle Group Trust - Conservative:
-Report of Independent Accountants - Lifecycle Group Trust
Conservative -Statements of Assets and Liabilities, December 31,
1998 -Statements of Operations for the Year Ended December 31,
1998 -Statements of Changes in Net Assets for the Years Ended
December 31, 1998 and 1997
-Selected Per Unit Data
-Notes to Financial Statements
-Schedule of Investments, December 31, 1998
C-1
<PAGE>
6. Lifecycle Group Trust - Moderate:
-Report of Independent Accountants - Lifecycle Group Trust -
Moderate -Statements of Assets and Liabilities, December 31, 1998
-Statements of Operations for the Year Ended December 31, 1998
-Statements of Changes in Net Assets for the Years Ended December
31, 1998 and 1997
-Selected Per Unit Data
-Notes to Financial Statements
-Schedule of Investments, December 31, 1998
7. S&P 500 Flagship Fund:
-Report of Independent Accountants - S&P 500 Index with Futures:
-Combined Statements of Assets and Liabilities Ended December 31,
1998
-Combined Statements of Operations for the Years Ended December
31, 1998 and 1997
-Combined Statements of Changes in Net Assets for the Years Ended
December 31, 1998 and 1997 Schedule of Investments, December 31,
1998
8. Russell 2000 Fund:
-Report of Independent Accountants - Russell 2000 Fund
-Statements of Assets and Liabilities, December 31, 1998
-Statements of Operations for the Year Ended December 31, 1998
-Statements of Changes in Net Assets for the Years Ended December
31, 1998 and 1997
-Selected Per Unit Data
-Notes to Financial Statements
-Schedule of Investments, December 31, 1998
9. Daily EAFE Fund:
-Report of Independent Accountants - Daily EAFE Fund -Statements
of Assets and Liabilities, December 31, 1998 -Statements of
Operations for the Year Ended December 31, 1998 -Statements of
Changes in Net Assets for the Years Ended December 31,
1998 and 1997
-Selected Per Unit Data
-Notes to Financial Statements
-Schedule of Investments, December 31, 1998
10. Daily Government/Corporate Bond Fund:
-Report of Independent Accountants - Daily Government/Corporate
Bond Fund
-Statements of Assets and Liabilities, December 31, 1998
-Statements of Operations for the Year Ended December 31, 1998
-Statements of Changes in Net Assets for the Years Ended
December 31, 1998 and 1997
-Selected Per Unit Data
-Notes to Financial Statements
-Schedule of Investments, December 31, 1998
C-2
<PAGE>
11. Short Term Investment Fund:
-Report of Independent Accountants - Short Term Investment Fund
-Statements of Assets and Liabilities, December 31, 1998
-Statements of Operations for the Year Ended December 31, 1998
-Statements of Changes in Net Assets for the Years Ended December
31, 1998 and 1997
-Selected Per Unit Data
-Notes to Financial Statements
-Schedule of Investments, December 31, 1998
(b) Exhibits.
The following Exhibits are filed herewith:
1.(a) Resolutions of the Board of Directors of The Equitable Life
Assurance Society of the United States ("Equitable") authorizing
the establishment of Separate Accounts Nos. 197 and 198,
incorporated by reference to Registration Statement No. 33-75616
on Form N-4 of Registrant, filed on February 27, 1995.
(b) Action by Brian S. O'Neil, Executive Vice President and Chief
Investment Officer of Equitable, dated October, 1993 establishing
Separate Account No. 195 and copies of resolutions of the Board
of Directors of Equitable referenced in said action, incorporated
by reference to Registration Statement No. 33-75616 on Form N-4
of Registrant, filed on February 27, 1995.
2. Not applicable.
3. (a)(1)Service Agreement, effective as of February 1, 1994,
among The Seven Seas Series Fund, Russell Fund
Distributors, Inc. in its capacity as distributor of the
Seven Seas Series Fund and The Equitable Life Assurance
Society of the United States, incorporated by reference to
Registration No.33-75614 on Form N-4 of Registrant, filed
on February 23, 1994.
(a)(2)Service Agreement, effective as of February 1, 1994,
between State Street Bank and Trust Company and The
Equitable Life Assurance Society of The United States,
incorporated by reference to Registration No.33-75614 on
Form N-4 of Registrant, filed on February 23, 1994.
(b) Letter Agreement between The Equitable Life Assurance
Society of the United States and the Trustees of the
American Dental Association Members Retirement Trust and
Trustees of the American Dental Association Members Pooled
Trust for Retirement, incorporated by reference to
Registration No. 33-75616 on Form N-4 of Registrant, filed
on April 29, 1994.
(c) Letter Agreement between The Equitable Life Assurance
Society of the United States and the Trustees of the
American Dental Association Members Retirement Trust and
Trustees of the American Dental Association Members Pooled
Trust for Retirement, incorporated by reference to
C-3
<PAGE>
Registration No. 33-75616 on Form N-4 of Registrant, filed
on April 28, 1995.
(d) Form of Agreement, effective as of May 1, 1995, between
State Street Bank and Trust Company and The Equitable Life
Assurance Society of the United States regarding Lifecycle
Fund Group Trusts and Underlying Funds, incorporated by
reference to Registration No. 33-75616 on Form N-4 of
Registrant, filed on April 28, 1995.
4. (a) Exhibit 6(a)(2) (Group Annuity Contract AC 2100, as amended
and restated effective February 1, 1991 on contract Form
No. APC 1,000-91, among the Trustees of the American Dental
Association Members Retirement Trust, the American Dental
Association Members Pooled Trust for Retirement Plans and
The Equitable Life Assurance Society of the United States),
incorporated by reference to Post-Effective Amendment No. 1
on Form N-3 to Registration Statement 33-40162, filed on
December 20, 1991.
(b) Rider No. 1 to Group Annuity Contract AC 2100 among the
Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States, incorporated by
reference to Registration No. 33-46995 on Form N-3 of
Registrant, filed on April 8, 1992.
(c) Form of Rider No. 2 to Group Annuity Contract AC 2100 among
the Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States, incorporated by
reference to Registration No. 33-46995 on Form N-3 of
Registrant, filed on April 8, 1992.
(d) Rider No. 3 to Group Annuity Contract AC 2100 among the
Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States. (Filed as Exhibit
4(i) to Registration No. 33-75616 on Form N-4 of
Registrant, filed on April 29, 1994.)
(e) Form of Rider No. 4 to Group Annuity Contract AC 2100 among
the Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States, incorporated by
reference to Registration No. 33-75616 on Form N-4 of
Registrant, filed on April 29, 1994.
(f) Form of Rider No. 5 to Group Annuity Contract AC 2100 among
the Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States, incorporated by
C-4
<PAGE>
reference to Registration No. 33-75616 on Form N-4 of
Registrat, filed on February 27, 1995.
(g) Form of Rider No. 6 to Group Annuity Contract 2100 among
the Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States, incorporated by
reference to Post-Effective Amendment No. 3 to Registration
No. 33-75616 on Form N-4 of Registrant, filed on April 30,
1996.
(h) Form of Rider No. 7 to Group Annuity Contract 2100 among
the Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States, incorporated by
reference to Post-Effective Amendment No. 3 to Registration
No. 33-75616 on Form N-4 of Registrant, filed on April 30,
1996.
(i) Form of Rider No. 8 to Group Annuity Contract 2100 among
the Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States, incorporated by
reference to Post-Effective Amendment No. 3 to Registration
No. 33-75616 on Form N-4 of Registrant, filed on April 30,
1996.
(j) Form of Rider No. 9 to Group Annuity Contract 2100 among
the Trustees of the American Dental Association Members
Retirement Trust, the American Dental Association Members
Pooled Trust for Retirement Plans and The Equitable Life
Assurance Society of the United States, incorporated by
reference to Post-Effective Amendment No. 4 to Registration
Statement No. 33-75616 on Form N-4, filed on April 30, 1997.
5. (a) Exhibit 7(a) (Form of Participation Agreement for the
standardized Profit-Sharing Plan under the ADA Program),
incorporated by reference to Post-Effective Amendment No. 1
on Form N-3 to Registration Statement on Form S-1 of
Registrant, filed on April l6, 1986.
(b) Exhibit 7(b) (Form of Participation Agreement for the
non-standardized Profit-Sharing Plan under the ADA
Program), incorporated by reference to Post-Effective
Amendment No. 1 on Form N-3 to Registration Statement on
Form S-1 of Registrant, filed on April l6, 1986.
(c) Exhibit 7(e) (Copy of Attachment to Profit Sharing
Participation Agreement under the American Dental
Association Members Retirement Plan), incorporated by
reference to Registration No. 33-21417 on Form N-3 of
Registrant, filed on April 26, 1988.
(d) Exhibit 7(e)(2) (Form of Participant Enrollment Form under
the ADA Program), incorporated by reference to
Post-Effective Amendment No. 2 on Form N-3 to Registration
C-5
<PAGE>
Statement on Form S-1 of Registrant, filed on April 2l,
l987.
(e) Exhibit 7(v) (Form of Simplified Participation Agreement
for the Profit-Sharing Plan under the ADA Program, as filed
with the Internal Revenue Service), incorporated by
reference to Post-Effective Amendment No. 2 to Registration
No. 33-21417 on Form N-3 of Registrant, filed on April 26,
1989.
(f) Exhibit 7(w) (Form of Non-Standardized Participation
Agreement for the Profit-Sharing Plan under the ADA
Program, as filed with the Internal Revenue Service),
incorporated by reference to Post-Effective Amendment No. 2
to Registration No. 33-21417 on Form N-3 of Registrant,
filed on April 26, 1989.
(g) Exhibit 7(x) (Form of Standardized Participation Agreement
for the Profit-Sharing Plan under the ADA Program, as filed
with the Internal Revenue Service), incorporated by
reference to Post-Effective Amendment No. 2 to Registration
No. 33-21417 on Form N-3 of Registrant, filed on April 26,
1989.
6. (a) Copy of the Restated Charter of The Equitable Life
Assurance Society of the United States, as amended January
1, 1997, incorporated by reference to Post-Effective
Amendment No. 4 to Registration Statement No. 33-75616,
filed on April 29, 1997.
(b) By-Laws of The Equitable Life Assurance Society of the
United States, as amended November 21, 1996, incorporated by
reference to Post-Effective Amendment No. 4 to Registration
Statement No. 33-75616, filed on April 29, 1997.
7. Not applicable
8. (a) Exhibit 11(a)(2) (Form of American Dental Association
Members Retirement Plan, as filed with the Internal Revenue
Service), incorporated by reference to Post-Effective
Amendment No. 2 to Registration No. 33-21417 on Form N-3 of
Registrant, filed on April 26, 1989.
C-6
<PAGE>
(b) Exhibit 11(g)(2) (Form of American Dental Association
Members Retirement Trust, as filed with the Internal
Revenue Service), incorporated by reference to
Post-Effective Amendment No. 2 to Registration No. 33-21417
on Form N-3 of Registrant, filed on April 26, 1989.
(c) Exhibit 11(i) (Form of First Amendment to the American
Dental Association Members Retirement Trust), incorporated
by reference to Post-Effective Amendment No. 1 to
Registration No. 33-40162 on Form N-3 of Registrant, filed
on December 20, 1991.
(d) Exhibit 11(g) (Copy of Administration Services Agreement,
dated January 10, 1986, among The Equitable Life Assurance
Society of the United States, the Trustees of the Trust
maintained under the American Dental Association Members
Retirement Plan, the Trustees of the Pooled Trust
maintained by the American Dental Association and the
Council of Insurance of the American Dental Association),
incorporated by reference to Post-Effective Amendment No. 1
on Form N-3 to Registration Statement on Form S-1 of
Registrant, filed on April l6, 1986.
(e) Exhibit 11(j) (Copy of American Dental Association Members
Pooled Trust for Retirement Plans, dated as of January 1,
1984), incorporated by reference to Post-Effective
Amendment No. 1 to Registration No. 33-40162 on Form N-3 of
Registrant on Form N-3 of Registrant, filed on December 20,
1991.
(f) Exhibit 11(k) (Form of First Amendment to the American
Dental Association Members Pooled Trust for Retirement
Plans, dated as of January 1, 1984), incorporated by
reference to Post-Effective Amendment No. 1 to Registration
No. 33-40162 on Form N-3 of Registrant, filed on
December 20, 1991.
(g) Administrative Services Agreement among The Equitable Life
Assurance Society of the United States, the Trustees of the
American Dental Association Members Retirement Trust and of
the American Dental Association Member Retirement Trust for
Retirement Plans and the Council on Insurance of the
American Dental Association, incorporated by reference to
Registration No. 33-75616 on Form N-4 of Registrant, filed
on April 29, 1994.
(h) Declaration of Trust dated February 21, 1991 for the State
Street Bank and Trust Company Investment Funds for Tax
Exempt Retirement Plans, incorporated by reference to
Registration No. 33-75616 on Form N-4 of Registrant, filed
on February 27, 1995.
(i) First Amendment to the Declaration of Trust dated as of
July 19, 1991, incorporated by reference to Registration
No. 33-75616 on Form N-4 of Registrant, filed on February
27, 1995.
C-7
<PAGE>
(j) Fund Declaration of State Street Bank and Trust Company
establishing the Lifecycle Fund Group Trust-Conservative
dated February 1, 1995, incorporated by reference to
Registration No. 33-75616 on Form N-4 of Registrant, filed
on February 27, 1995.
(k) First Amendment and Fund Declaration for the Lifecycle
Group Trust-Conservative, effective April 26, 1995,
incorporated by reference to Registration No. 33-75616,
filed on April 28, 1995.
(l) Fund Declaration of State Street Bank and Trust Company
establishing the Lifecycle Fund Group Trust-Moderate dated
February 1, 1995, incorporated by reference to Registration
No. 33-75616 on Form N-4 of Registrant, filed on February
27, 1995.
(m) First Amendment and Fund Declaration for the Lifecycle Fund
Group Trust-Moderate, effective April 26, 1995,
incorporated by reference to Registration No. 33-75616,
filed on April 28, 1995.
(n) Amendment and Fund Declaration for the S&P 500 Flagship
Fund effective September 1, 1991, incorporated by reference
to Registration No. 33-75616 on Form N-4 of Registrant,
filed on February 27, 1995.
(o) Amendment and Fund Declaration for the Short Term
Investment Fund effective September 1, 1991, incorporated
by reference to Registration No. 33-75616 on Form N-4 of
Registrant, filed on February 27, 1995.
(p) Fund Declaration for the Daily EAFE Fund effective
September 16, 1993, incorporated by reference to
Registration No. 33-75616 on Form N-4 of Registrant, filed
on February 27, 1995.
(q) First Amendment and Fund Declaration for the Daily
Government/Corporate Bond Fund effective November 30, 1994,
incorporated by reference to Registration No. 33-75616 on
Form N-4 of Registrant, filed on February 27, 1995.
(r) Second Amendment and Fund Declaration for the Russell 2000
Fund effective February 1, 1995, incorporated by reference
to Registration No. 33-75616 on Form N-4 of Registrant,
filed on February 27, 1995.
(s) Fund Declaration for the Russell 2000 Growth Fund effective
February 1, 1995, incorporated by reference to Registration
No. 33-75616 on Form N-4 of Registrant, filed on February
27, 1995.
(t) Fund Declaration for the Russell 2000 Value Fund effective
February 1, 1995, incorporated by reference to Registration
No. 33-75616 on Form N-4 of Registrant, filed on February
27, 1995.
C-8
<PAGE>
9. (a) Opinion and Consent of Peter A. Weinberg, Vice President
and Counsel and The Equitable Life Assurance Society,
incorporated by reference to Pre-Effective Amendment No. 1
to Registration No. 33-75616 of Registrant, filed on
April 29, 1994.
(b) Opinion and Consent of Mary P. Breen, Vice President
and Associate General Counsel of The Equitable Life
Assurance Society of the United States, incorporated herein
by reference to Registration Statement File No. 333-51031
filed April 24, 1998.
(c) Opinion and Consent of Mary Joan Hoene, Vice President and
Counsel of the Equitable Life Assurance Society of the
United States.
10. (a) Consent of Peter A. Weinberg (included within Exhibit 9(a)
above).
(b) Consent of Mary P. Breen (included within Exhibit 9(b)
above).
(b)(i)Opinion and Consent of Mary Joan Hoene (included within
Exhibit 9(c)).
(c) Consent of PricewaterHouseCoopers LLP.
(d) Powers of Attorney (Equitable).
(e) Power of Attorney (State Street), incorporated by
reference to Registration No. 33-75616 of Registrant, filed
on April 28, 1995.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. Not Applicable.
C-9
<PAGE>
Item 25: Directors and Officers of Equitable.
Set forth below is information regarding the directors and principal
officers of Equitable. Equitable's address is 1290 Avenue of Americas,
New York, New York 10104. The business address of the persons whose
names are preceded by an asterisk is that of Equitable.
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS EQUITABLE
- ---------------- ---------
DIRECTORS
Francoise Colloc'h Director
AXA
23, Avenue Matignon
75008 Paris, France
Henri de Castries Director
AXA
23, Avenue Matignon
75008 Paris, France
Joseph L. Dionne Director
The McGraw-Hill Companies
1221 Avenue of the Americas
New York, NY 10020
Denis Duverne Director
AXA
23, Avenue Matignon
75008 Paris, France
Jean-Rene Fourtou Director
Rhone-Poulenc S.A.
25 Quai Paul Doumer
92408 Courbevoie Cedex,
France
Norman C. Francis Director
Xavier University of Louisiana
7325 Palmetto Street
New Orleans, LA 70125
C-10
<PAGE>
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS EQUITABLE
- ---------------- ---------
Donald J. Greene Director
LeBouef, Lamb, Greene & MacRae
125 West 55th Street
New York, NY 10019-4513
John T. Hartley Director
Harris Corporation
1025 NASA Boulevard
Melbourne, FL 32919
John H.F. Haskell Jr. Director
Warburg Dillion Read LLC
535 Madison Avenue
New York, NY 10028
Mary R. (Nina) Henderson Director
International Plaza
P.O. Box 8000
Englewood Cliffs, NJ 07632-9976
W. Edwin Jarmain Director
Jarmain Group Inc.
121 King Street West
Suite 2525
Toronto, Ontario M5H 3T9,
Canada
George T. Lowy Director
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
C-11
<PAGE>
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS EQUITABLE
- ---------------- ---------
Didier Pineau-Valencienne Director
Schneider S.A.
64-70 Avenue Jean-Baptiste Clement
92646 Boulogne-Billancourt Cedex
France
George J. Sella, Jr. Director
P.O. Box 397
Newton, NJ 07860
Peter J. Tobin Director
St. John's University
8,000 Utopia Parkway
Jamaica, NY 11439
Dave H. Williams Director
Alliance Capital Management Corporation
1345 Avenue of the Americas
New York, NY 10105
OFFICER-DIRECTORS
- -----------------
*Michael Hegarty President, Chief Operating
Officer and Director
*Edward D. Miller Chairman of the Board,
Chief Executive Officer
and Director
* Stanley B. Tulin Vice Chairman of the Board,
Chief Financial Officer and Director
OTHER OFFICERS
- --------------
*Leon Billis Executive Vice President
and Chief Information Officer
*Harvey Blitz Senior Vice President
*Kevin R. Byrne Senior Vice President and Treasurer
*Alvin H. Fenichel Senior Vice President and
Controller
C-12
<PAGE>
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS EQUITABLE
- ---------------- ---------
*Paul J. Flora Senior Vice President and Auditor
*Robert E. Garber Executive Vice President and
General Counsel
*Jerome S. Golden Executive Vice President
James D. Goodwin Vice President
*Edward J. Hayes Senior Vice President
*Mark A. Hug Senior Vice President
*Donald R. Kaplan Vice President and Chief Compliance
Officer and Associate General
Counsel
*Michael S. Martin Executive Vice President and Chief
Marketing Officer
*Douglas Menkes Senior Vice President and
Corporate Actuary
*Peter D. Noris Executive Vice President and Chief
Investment Officer
*Anthony C. Pasquale Senior Vice President
*Pauline Sherman Senior Vice President, Secretary and
Associate General Counsel
*Samuel B. Shlesinger Senior Vice President
*Richard V. Silver Senior Vice President and Deputy
General Counsel
*Jose Suquet Senior Executive Vice President and
Chief Distribution Officer
*Naomi Weinstein Vice President
*Maureen K. Wolfson Vice President
C-13
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Insurance
Company or Registrant:
Separate Account Nos. 195, 197 and 198 of The Equitable Life
Assurance Society of the United States (the "Separate Accounts") are separate
accounts of Equitable. Equitable, a New York stock life insurance company, is a
wholly owned subsidiary of The Equitable Companies Incorporated (the "Holding
Company"), a publicly traded company.
The largest stockholder of the Holding Company is AXA. As of
March 31, 1999, AXA beneficially owned 58.3% of the outstanding common
stock of the Holding Company. 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
services companies.
C-14
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
The Equitable Companies Incorporated (l991) (Delaware)
Donaldson, Lufkin & Jenrette, Inc. (1993) (Delaware) (41.8%) (See
Addendum B(1) for subsidiaries)
The Equitable Life Assurance Society of the United States (1859)
(New York) (a)(b)
The Equitable of Colorado, Inc. (l983) (Colorado)
EVLICO, INC. (1995) (Delaware)
EVLICO East Ridge, Inc. (1995) (California)
GP/EQ Southwest, Inc. (1995) (Texas)
Franconom, Inc. (1985) (Pennsylvania)
Frontier Trust Company (1987) (North Dakota)
Gateway Center Buildings, Garage, and Apartment Hotel, Inc.
(inactive) (pre-l970) (Pennsylvania)
Equitable Deal Flow Fund, L.P.
Equitable Managed Assets (Delaware)
EREIM LP Associates (99%)
EML Associates, L.P. (19.8%)
Alliance Capital Management L.P. (2.7% limited partnership
interest)
ACMC, Inc. (1991) (Delaware)(s)
Alliance Capital Management L.P. (1988) (Delaware)
(39.3% limited partnership interest)
EVCO, Inc. (1991) (New Jersey)
EVSA, Inc. (1992) (Pennsylvania)
Prime Property Funding, Inc. (1993) (Delaware)
Wil Gro, Inc. (1992) (Pennsylvania)
Equitable Underwriting and Sales Agency (Bahamas) Limited (1993)
(Bahamas)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-15
<PAGE>
The Equitable Companies Incorporated (cont.)
Donaldson Lufkin & Jenrette, Inc.
The Equitable Life Assurance Society of the United States (cont.)
Fox Run, Inc. (1994) (Massachusetts)
STCS, Inc. (1992) (Delaware)
CCMI Corporation (1994) (Maryland)
FTM Corporation (1994) (Maryland)
Equitable BJVS, Inc. (1992) (California)
Equitable Rowes Wharf, Inc. (1995) (Massachusetts)
Camelback JVS, Inc. (1995) (Arizona)
ELAS Realty, Inc. (1996) (Delaware)
100 Federal Street Realty Corporation (Massachusetts)
Equitable Structured Settlement Corporation (1996) (Delaware)
Prime Property Funding II, Inc. (1997) (Delaware)
Sarasota Prime Hotels, Inc. (1997) (Florida)
ECLL, Inc. (1997) (Michigan)
Equitable Holdings LLC (1997) (New York) (into which Equitable Holding
Corporation was merged in 1997)
EQ Financial Consultants, Inc. (l97l) (Delaware) (a) (b)
ELAS Securities Acquisition Corp. (l980) (Delaware)
100 Federal Street Funding Corporation (Massachusetts)
EquiSource of New York, Inc. (1986) (New York) (See
Addendum A for subsidiaries)
Equitable Casualty Insurance Company (l986) (Vermont)
EREIM LP Corp. (1986) (Delaware)
EREIM LP Associates (1%)
EML Associates (.02%)
Six-Pac G.P., Inc. (1990) (Georgia)
Equitable Distributors, Inc. (1988) (Delaware) (a)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-16
<PAGE>
The Equitable Companies Incorporated (cont.)
Donaldson Lufkin & Jenrette, Inc.
The Equitable Life Assurance Society of the United States (cont.)
Equitable Holdings, LLC (cont.)
Equitable JVS, Inc. (1988) (Delaware)
Astor/Broadway Acquisition Corp. (1990) (New York)
Astor Times Square Corp. (1990) (New York)
PC Landmark, Inc. (1990) (Texas)
Equitable JVS II, Inc. (1994) (Maryland)
EJSVS, Inc. (1995) (New Jersey)
Donaldson, Lufkin & Jenrette, Inc. (1985 by EIC; 1993 by EQ and
EHC) (Delaware) (34.4%) (See Addendum B(1) for
subsidiaries)
JMR Realty Services, Inc. (1994) (Delaware)
Equitable Investment Corporation (l97l) (New York)
Stelas North Carolina Limited Partnership (50% limited
partnership interest) (l984)
Equitable JV Holding Corporation (1989) (Delaware)
Alliance Capital Management Corporation (l991) (Delaware) (b)
(See Addendum B(2) for subsidiaries)
Equitable Capital Management Corporation (l985)
(Delaware) (b)
Alliance Capital Management L.P. (1988)
(Delaware) (14.8% limited partnership interest)
EQ Services, Inc. (1992) (Delaware)
EREIM Managers Corp. (1986) (Delaware)
ML/EQ Real Estate Portfolio, L.P.
EML Associates, L.P.
(a) Registered Broker/Dealer (b) Registered Investment
Advisor
C-17
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
ADDENDUM A - SUBSIDIARY
OF EQUITABLE HOLDINGS, LLC
HAVING MORE THAN FIVE SUBSIDIARIES
-------------------------------------------------------
EquiSource of New York, Inc. (formerly Traditional Equinet Business Corporation
of New York) has the following subsidiaries that are brokerage companies to
make available to Equitable Agents within each state traditional (non-equity)
products and services not manufactured by Equitable:
EquiSource of Alabama, Inc. (1986) (Alabama)
EquiSource of Arizona, Inc. (1986) (Arizona)
EquiSource of Arkansas, Inc. (1987) (Arkansas)
EquiSource Insurance Agency of California, Inc. (1987) (California)
EquiSource of Colorado, Inc. (1986) (Colorado)
EquiSource of Delaware, Inc. (1986) (Delaware)
EquiSource of Hawaii, Inc. (1987) (Hawaii)
EquiSource of Maine, Inc. (1987) (Maine)
EquiSource Insurance Agency of Massachusetts, Inc. (1988)
(Massachusetts)
EquiSource of Montana, Inc. (1986) (Montana)
EquiSource of Nevada, Inc. (1986) (Nevada)
EquiSource of New Mexico, Inc. (1987) (New Mexico)
EquiSource of Pennsylvania, Inc. (1986) (Pennsylvania)
EquiSource of Puerto Rico, Inc. (1997) (Puerto Rico)
EquiSource Insurance Agency of Utah, Inc. (1986) (Utah)
EquiSource of Washington, Inc. (1987) (Washington)
EquiSource of Wyoming, Inc. (1986) (Wyoming)
C-18
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
ADDENDUM B - INVESTMENT SUBSIDIARIES
HAVING MORE THAN FIVE SUBSIDIARIES
------------------------------------
Donaldson, Lufkin & Jenrette, Inc. has the following subsidiaries, and
approximately 150 other subsidiaries, most of which are special purpose
subsidiaries (the number fluctuates according to business needs):
Donaldson, Lufkin & Jenrette, Securities Corporation (1985)
(Delaware) (a) (b)
Wood, Struthers & Winthrop Management Corp. (1985)
(Delaware) (b)
Autranet, Inc. (1985) (Delaware) (a)
DLJ Real Estate, Inc.
DLJ Capital Corporation (b)
DLJ Mortgage Capital, Inc. (1988) (Delaware)
Column Financial, Inc. (1993) (Delaware) (50%)
Alliance Capital Management Corporation (as general partner) (b) has the
following subsidiaries:
Alliance Capital Management L.P. (1988) (Delaware) (b)
Alliance Capital Management Corporation of Delaware, Inc.
(Delaware)
Alliance Fund Services, Inc. (Delaware) (a)
Alliance Fund Distributors, Inc. (Delaware) (a)
Alliance Capital Oceanic Corp. (Delaware)
Alliance Capital Management Australia Pty. Ltd.
(Australia)
Meiji - Alliance Capital Corp. (Delaware) (50%)
Alliance Capital (Luxembourg) S.A. (99.98%)
Alliance Eastern Europe Inc. (Delaware)
Alliance Barra Research Institute, Inc. (Delaware)
(50%)
Alliance Capital Management Canada, Inc. (Canada)
(99.99%)
Alliance Capital Management (Brazil) Llda
Alliance Capital Global Derivatives Corp. (Delaware)
Alliance International Fund Services S.A.
(Luxembourg)
Alliance Capital Management (India) Ltd. (Delaware)
Alliance Capital Mauritius Ltd.
Alliance Corporate Finance Group, Incorporated
(Delaware)
Equitable Capital Diversified Holdings, L.P. I
Equitable Capital Diversified Holdings, L.P. II
Curisitor Alliance L.L.C. (Delaware)
Curisitor Holdings Limited (UK)
Alliance Capital Management (Japan), Inc.
Alliance Capital Management (Asia) Ltd.
Alliance Capital Management (Turkey), Ltd.
Cursitor Alliance Management Limited (UK)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-19
<PAGE>
AXA GROUP CHART
The information listed below is dated as of January 1, 1999; percentages
shown represent voting power. The name of the owner is noted when AXA
indirectly controls the company.
AXA INSURANCE AND REINSURANCE BUSINESS HOLDING
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA Assurances IARD France 100% by AXA France Assurance
AXA Assurances Vie France 88.1% by AXA France Assurance
and 11.9% by AXA Collectives
AXA Courtage IARD France 100% by AXA France Assurance
and AXA Global Risks
AXA Conseil Vie France 100% by AXA France Assurance
AXA Conseil IARD France 100% by AXA France Assurance
AXA Direct France 100% by AXA
Direct Assurances IARD France 100% by AXA Direct
Direct Assurance Vie France 100% by AXA Direct
Tellit Vie Germany 100% by AKA-CKAG
Axiva France 100% by AXA France Assurance
and AXA Conseil Vie
Juridica France 100% by AXA France Assurance
AXA Assistance France France 100% by AXA Assistance SA
AXA Collectives France AXA France Assurance, AXA
Assurances IARD and AXA
Courtage IARD Mutuelle
Societe Beaujon France 100% by AXA
Lor Finance France 99.3% by AXA
Jour Finance France 100% by AXA Conseil IARD and
by AXA Assurances IARD
Financiere 45 France 99.8% by AXA
Mofipar France 99.9% by AXA
NSM Vie France 40.1% by AXA France Assurance
Saint Georges Re France 100% by France Assurance
AXA Global Risks France 100% owned by AXA France
Assurance, AXA Courtage
Assurance Mutuelle and AXA
Assurances IARD Mutuelle
Argovie France 94% by Axiva
AXA Assistance SA France 76.8% by AXA and 23.2% by AXA
France Assurance
S.P.S Reassurance France 69.9% by AXA Reassurance
AXA Participations France 50% by AXA, 25% by AXA Global
Risks and 25% by AXA Courtage
IARD
Colisee Excellence France 100% by Finunciere Mermoz
Financiere Mermoz France 100% by AXA
C-20
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA France Assurance France 100% by AXA
Thema Vie France 99.6% Axiva Vie
AXA-Colonia Konzern AG (AXA-
CKAG) Germany 39.7% by Vinci BV, 25.6% by
Kolnische Verwaltungs and
9.4% by AXA
Finaxa Belgium Belgium 100% by AXA
AXA Belgium Belgium 86.1% by Royale Belge and 13.9%
by Parcolvi
De Kortrijske Verzekering Belgium 99.8% by AXA Belgium
Juris Belgium 100% owned by AXA Belgium
Royale Belge Belgium 51.2% by AXA Holdings Belgium,
44.5% AXA and 3.2% AKA Global
Risks
Royale Belge 1994 Belgium 97.8% by Royale Belge and 2%
by UAB
UAB Belgium 100% by Royale Belge
Ardenne Prevoyante Belgium 99.4% by Royale Belge
GB Lex Belgium 55% by Royale Belge, 25% by
Royale Belge 1994, 10% by
Juridica and 10% by AXA
Conseil IARD
Royale Belge Re Belgium 100% by Royale Belge
Parcolvi Belgium 100% by Vinci Belgium
Holding BV
Vinci Belgium Belgium 99.5% by Vinci BV
Finaxa Luxembourg Luxembourg 100%
AXA Assurance IARD Luxembourg Luxembourg 100% by AXA Holding Luxembourg
AXA Assurance Vie Luxembourg Luxembourg 100% by AXA Holding Luxembourg
Royale UAP Luxembourg 100% by AXA Holding Luxembourg
Paneurolife Luxembourg 90% by different companies of
the AXA Group
Paneurore Luxembourg 100% by different companies of
the AXA Group
C-21
<PAGE>
Crealux Luxembourg 100% by Royale Belge
Futur Re Luxembourg 100% by AXA Global Risks
AXA Holding Luxembourg Luxembourg 100% by Royale Beige
AXA Aurora Spain 30% owned by AXA and 40%
by AXA Participations
Aurora Vida SA de Seguros y Spain 97% owned by Aurora Iberica SA
Reaseguros de Seguros y Reaseguros
1.5% by AXA
Hilo Direct Seguros y Reaseguros Spain 71.4% by AXA Aurora
Ayuda Legal Spain 88% AXA Aurora Iberica SA de
Seguros y Reaseguros and 12%
by Aurora Vida
AXA Aurora Iberica SA Spain 99.8% by AXA Aurora
de Seguros y Reaseguros
AXA Assicurazioni Italy 83.7% owned by AXA, 12% by
Grupo UAP Italiana, 2.2% by AXA
Conseil Vie and 2.1% by AXA
Collectives
Eurovita Italy 30% owned by AXA Assicurazioni
19% by AXA Conseil Vie and 19%
by AXA Collectives
Gruppo UAP Italia (GUI) Italy 97% by AXA Participants and 3%
by AXA Collectives
UAP Vita Italy 62% by AXA
Allsecures Vita Italy 100% by AXA
AXA Equity & Law plc U.K. 99.9% by AXA
AXA Equity & Law Life U.K. 100% by Sun Life Holdings Plc
Assurance Society
Sun Life lle de Man U.K. 100% owned by Sun Life
Assurance
AXA Global Risks U.K. 51% owned by AXA Global
Risks (France) and 49% by
AXA Courtage IARD
Sun Life and Provincial U.K. 71.6% by AXA and AXA
Holdings (SLPH) Equity & Law Plc
Sun Life Corporation Plc U.K. 100% by AXA Sun Life Holdings
Plc
Sun Life Assurance Society Plc U.K. 100% by AXA Sun Life Holdings
Plc
AXA Provincial Insurance U.K. 100% by SLPH
English & Scottish U.K. 100% by AXA UK
AXA UK U.K. 100% by AXA
Servco U.K. 100% by AXA Sun Life Holdings
Plc
AXA Sun Life Plc U.K. 100% by AXA Sun Life Holdings
Plc
AXA Leven The Nether- 100% by Nieuw Rotterdam
lands Verzekeringen
AXA Nederland BV The Nether- 55.4% by Royale Belge and 38.9%
lands by Gelderland BV
UNIROBE Groep BV The Nether- 100% by UAP Nieuw Rotterdam
lands Holding
C-22
<PAGE>
AXA Levensverzekeringen The Nether- 100% by UAP Nieuw Rotterdam
lands Verzekeringen
AXA Schade The Nether- 100% by UAP Nieuw Rotterdam
lands Verzekeringen
Societe Generale d'Assistance The Nether- 100% by AXA Assistance Holding
lands
Gelderland BV The Nether- 100% by Royale Belge
lands
AXA Zorg The Nether- 108% by UAP Nieuw Rotterdam
lands Verzekeringen
Vinci BV The Nether- 100% by AXA
lands
AXA Portugal Companhia de Portugal 96.2% by different companies
Serguros SA of the AXA Group
AXA Portugal Companhia de Portugal 87.6% by AXA Counseil Vie and
Serguros de Vida SA 7.5% AXA Participations
AXA Compagnie d'Assurances Switzerland 100% by AXA Participations
AXA Compagnie d'Assurances Switzerland 95% by AXA Participations
sur la vie
AXA Al Amane Assurances Morocco 52% by AXA Participations and
15% by Empargne Croissance
AXA Canada Inc. Canada 100% by AXA
Empargne Croissance Morocco 99.3% by AXA Al Amane
Assurances
Colonia Nordstern Leben Germany 50% by AXA - CKAG and 50% by
Colonia Nordstein Versicherungs
Kolnische Verwaltungs Germany 67.7% by Vinci BV, 23% by AXA
Colonia Konzern AG and 8.8% by
AXA
Sicher Direkt Versicherung Germany 50% by AXA Direct and 50% by
AXA - CKAG
AXA Colonia Krankenversicherung Germany 51% by AXA - CKAG, 39.6% by AXA
Colonia Lebenversicherung and
12% by Deutsche
Arzleversicherung
Colonia Nordstern Versicherungs Germany 100% by AXA - CKAG
C-23
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA non life Insurance Cy. Ltd Japan 100% by AXA Direct
AXA Life Insurance Japan 100% by AXA
Dongbu AXA Life Korea 50% by AXA
Insurance Co. Ltd.
Sime AXA Berhad Malaysia 30% owned by AXA and
AXA Reassurance
AXA Insurance Investment Singapore 88.7% by AXA and 11.4% by AXA
Holdings Pte Ltd Courtage IARD
AXA Life Insurance Singapore 100% owned by AXA
AXA Insurance Hong Kong 82.5% owned by AXA Investment
Holdings Pte Ltd and 17.5% by
AXA
National Mutual Asia Ltd Hong Kong 53.8% by National Mutual
Holdings, Ltd and 20% by Detura
The Equitable Companies U.S.A. 43% by AXA, Financiere 45,
Incorporated 3.2%, Lorfinance 6.4%, AXA
Equity & Law Life Association
Society 4.1% and AXA
Reassurance 2.9% and 0.4% by
Societe Beaujon
The Equitable Life Assurance U.S.A. 100% owned by The Equitable
Society of the United States Companies Incorporated
(ELAS)
National Mutual Holdings Ltd Australia 42.1% by AXA and 8.9% by AXA
Equity & Law Life Assurance
Society
The National Mutual Life Australia 100% owned by National Mutual
Association of Australasia Holdings Ltd
National Mutual International Australia 100% owned by National Mutual
Holdings Ltd
Australian Casualty & Life Ltd Australia 100% owned by National Mutual
Holdings Ltd
National Mutual Health Australia 100% owned by National Mutual
Insurance Pty Ltd Holdings Ltd
Detura Hong Kong 75% by National Mutual Holdings
AXA Insurance Pte Ltd Singapore 100% by AXA Insurance
Investment Holdings Pte Ltd
AXA Reinsurance Asia Pte Ltd Singapore 100% by AXA Reassurance
C-24
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA Reassurance France 100% owned by AXA, AXA
Assurances IARD and AXA Global
Risks
AXA Re Finance France 79% owned by AXA Reassurance
AXA Cessions France 100% by AXA
AXA Reinsurance U.K. Plc U.K. 100% owned by AXA Re U.K.
Holding
AXA Re U.K. Company Limited U.K. 100% owned by AXA Reassurance
AXA Reinsurance Company U.S.A. 100% owned by AXA America
AXA America U.S.A. 100% owned by AXA Reassurance
AXA Global Risks US U.S.A. 96.4% by AXA Global Risks and
3.6% by Colonia Nordstern
Versicherungs AG
AXA Re Life Insurance Company U.S.A. 100% owned by AXA America
C.G.R.M. Monaco 100% owned by AXA Reassurance
Nordstern Colonia Osterreich Austria 88.5% by Colonia Nordstern
Versicherungs and 11.5% by
Colonia Nordstern Leben
Royale Belge International Belgium 100% by Royale Belge
Investissement
AXA Holding Belgium Belgium 75% by AXA, 17.7% by AXA Global
Risks and 7.4% by various
companies of the Group
Assurances de la Poste Belgium 50% by Royale Belge
Assurances de la Poste Vie Belgium 50% by Royale Belge
AXA Asset Management LTD U.K. 91% by AXA Investment Managers
and 9% by National Mutual Funds
Management
AXA Sun Life Holdings Plc U.K. 100% by SLPH
C-25
<PAGE>
AXA FINANCIAL BUSINESS
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Compagnie Financiere de Paris France 100% AXA and the Mutuelles
(C.F.P.)
AXA Banque France 98.7% owned by Compagnie
Financiere de Paris
AXA Credit France 65% owned by Compagnie
Financiere de Paris
AXA Gestion FCP France 100% owned by AXA Investment
Managers Paris
Sofapi France 100% owned by Compagnie
Financiere de Paris
Soffim Holding France 100% owned by Compagnie
Financiere de Paris
Sofinad France 100% by Compagnie
Financiere de Paris
Banque des Tuileries France 100% by Compagnie
Financiere de Paris
Banque de marches et France 18.5% by AXA and 8.2% by AXA
d' arbitrage Courtage, IARD
AXA Investment Managers France 100% by various companies
AXA Investment Managers Paris France 100% owned by AXA Investment
Managers
Colonia Bausbykasse Germany 66.7% by AXA-CKAG and 31.1% by
Colonia Nordstern Leben
Banque IPPA Belgium 99.9% by Royale Belge
Royal Belge Investissement Belgium 100% by Royale Belge
ANHYP Belgium 98.8% by Royale Belge
AXA Sun Life Asset Management U.K. 66.7% owned by SLPH and 33.3%
by AXA Asset Management Ltd.
C-26
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Alliance Capital Management U.S.A. 57.7% held by ELAS
Donaldson Lufkin & Jenrette U.S.A. 70.9% owned by Equitable
Holdings Corp. and ELAS
National Mutual Funds Australia 100% owned by National
Management (Global) Ltd Mutual Holdings Ltd
C-27
<PAGE>
AXA REAL ESTATE BUSINESS
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
S.G.C.I. France 100% by AXA
Transaxim France 100% owned by Compagnie
Parisienne de Participations
Compagnie Parisienne de France 100% owned by Sofinad
Participations (C.P.P.)
Monte Scopeto France 100% owned by Compagnie
Parisienne de Participations
Colisee Jeuneurs France 99.9% by Colisee Suresnes
Colisee Delcasse France 100% by Colisee Suresnes
Colisee Victorie France 99.7% by S.G.C.I.
Colisee Suresnes France 100% by Various Companies and
the Mutuelle
Colisee 21 Matignon France 99.4% by SGCI and 0.6% by AXA
C-28
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Colisee Saint Georges France 100% by SGCI
AXA Millesimes France 92.9% owned by AXA and the
Mutuelles
AXA Immobiller France 100% by AXA
C-29
<PAGE>
OTHER AXA BUSINESS
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
C-30
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
NOTES
-----
1. The year of formation or acquisition and state or country of incorporation
of each affiliate is shown.
2. The chart omits certain relatively inactive special purpose real estate
subsidiaries, partnerships, and joint ventures formed to operate or
develop a single real estate property or a group of related properties,
and certain inactive name-holding corporations.
3. All ownership interests on the chart are 100% common stock ownership
except: (a) The Equitable Companies Incorporated's 41.8% interest in
Donaldson, Lufkin & Jenrette, Inc. and Equitable Holdings, LLC's
34.4% interest in same; (b) as noted for certain partnership interests; (c)
Equitable Life's ACMC, Inc.'s and Equitable Capital Management
Corporation's limited partnership interests in Alliance Capital Management
L.P.; and (d) as noted for certain subsidiaries of Alliance Capital
Management Corp. of Delaware, Inc.
4. The following entities are not included in this chart because, while they
have an affiliation with The Equitable, their relationship is not the
ongoing equity-based form of control and ownership that is characteristic
of the affiliations on the chart, and, in the case of the first two
entities, they are under the direction of at least a majority of "outside"
trustees:
The Hudson River Trust
EQ Advisors Trust
Separate Accounts
5. This chart was last revised on March 15, 1999.
C-31
<PAGE>
Item 27. Number of Contractowners.
As of March 31, 1999 the number of participants in the
American Dental Association Members Program offered by the Registrant was
24,826.
Item 28. Indemnification
(a) Indemnification of Principal Underwriter: to the extent
permitted by law of the State of New York and subject to all
applicable requirements thereof, Equico Securities, Inc.
("Equico") undertook to indemnify each of its directors and
officers who is made or threatened to be made a party to any
action or proceeding, whether civil or criminal, by reason
of the fact that he or she is or was a director or officer
of Equico.
(b) Undertaking: insofar as indemnification for liability
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
Item 29. Principal Underwriters
(a) EQ Financial Consultants, Inc. ("EQFC")(formerly Equico
Securities, Inc.), a wholly-owned subsidiary of Equitable is
the principal underwriter for Equitable's Separate Account
No. 301, Separate Account A, Separate Account I and Separate
Account FP. EQFC's principal business address is 1290 Avenue
of the Americas, New York, NY 10104.
(b) See Item 25.
(c) Not applicable.
C-32
<PAGE>
Item 30. Location of Accounts and Records
The records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder,
are maintained by The Equitable Life Assurance Society of the United States at:
135 West 50th Street New York, New York 10020; 1290 Avenue of the Americas,
New York, New York 10104; and 200 Plaza Drive, Secaucus, New Jersey 07094.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are
never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) to include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a postcard or similar written communication affixed to or
included in the prospectus that the applicant can remove to send
for a Statement of Additional Information;
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
C-33
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant has caused
this Registration Statement to be signed on its behalf, in the City and State
of New York, on the 26th day of April, 1999.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
(Registrant)
By: The Equitable Life Assurance
Society of the United States
By: /s/Maureen K. Wolfson
-----------------------
Maureen K. Wolfson
Vice President
C-34
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Depositor has caused this
Registration Statement to be signed on its behalf in the City and State
of New York, on this 26th day of April, 1999.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
(Depositor)
By: /s/Maureen K. Wolfson
---------------------
Maureen K. Wolfson
Vice President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the date
indicated:
PRINCIPAL EXECUTIVE OFFICERS:
*Edward D. Miller Chairman of the Board, Chief
Executive Officer and Director
*Michael Hegarty President, Chief Operating and
Director
PRINCIPAL FINANCIAL OFFICER:
*Stanley B. Tulin Vice Chairman of the Board and
Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
/s/Alvin H. Fenichel
- ---------------------
Alvin H. Fenichel Senior Vice President and
April 26, 1999 Controller
*DIRECTORS:
Francoise Colloc'h Donald J. Greene George T. Lowy
Henri de Castries John T. Hartley Edward D. Miller
Joseph L. Dionne John H.F. Haskell, Jr. Didier Pineau-Valencienne
Denis Duverne Michael Hegarty George J. Sella, Jr.
Jean-Rene Fourtou Mary R. (Nina) Henderson Peter J. Tobin
Norman C. Francis W. Edwin Jarmain Stanley B. Tulin
Dave H. Williams
/s/Maureen K. Wolfson
------------------
Maureen K. Wolfson
Attorney-in-Fact
April 26, 1999
C-35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, State Street
Bank and Trust Company, in its capacity as Trustee of the undersigned
collective investment trusts, has duly caused this Registration Statement
to be signed by the undersigned, thereto duly authorized, in the City of
Boston and Commenwealth of Massachusetts, on this 26th day of April, 1999.
LIFECYCLE FUND GROUP TRUST - CONSERVATIVE
LIFECYCLE FUND GROUP TRUST - MODERATE
S&P 500 FLAGSHIP FUND
RUSSELL 2000 FUND
DAILY EAFE FUND
DAILY GOVERNMENT/CORPORATE BOND FUND
SHORT TERM INVESTMENT FUND
STATE STREET BANK AND TRUST COMPANY
By: /s/ Nicholas A. Lopardo
------------------------
Nicholas A. Lopardo
Executive Vice President
By: /s/ Timothy B. Harbert
------------------------
Timothy B. Harbert
Executive Vice President
C-36
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed on behalf of the following persons in the
capacities on this 26th day of April, 1999.
PRINCIPAL EXECUTIVE OFFICER:
Marshall N. Carter
PRINCIPAL FINANCIAL OFFICER:
Ronald L. O'Kelley
PRINCIPAL ACCOUNTING OFFICER:
Rex S. Schuette
DIRECTORS:
Marshall N. Carter
David A. Spina
Tenley E. Albright
Joseph A. Baute, Jr.
I. MacAllister Booth
James I. Cash, Jr.
Nader f. Darehshori
Charles F. Kaye
John M. Kucharski
Charles R. LaMantia
David B. Perini
Dennis J. Picard
By: /s/ Nicholas A. Lopardo
-------------------------
Nicholas A. Lopardo
Attorney-in-Fact
By: /s/ Timothy B. Harbert
-------------------------
Timothy B. Harbert
Attorney-in-Fact
By: /s/ Ronald L. O'Kelley
-------------------------
Ronald L. O'Kelley
Executive Vice President, Chief Financial Officer
and Treasurer
By: /s/ Rex S. Schuette
-------------------------
Rex S. Schuette
Senior Vice President and Chief Accounting Officer
C-37
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. PAGE NO.
- ---------- --------
9(c) Opinion and Consent of Counsel.
10(c) Consent of PricewaterhouseCooper LLP.
10(d) Powers of Attorney (Equitable).
C-38
<PAGE>
MARY JOAN HOENE
Vice President and Counsel
(212) 314-3839
Fax: (212) 707-7879
E-Mail: [email protected]
LAW DEPARTMENT
[EQUITABLE LOGO]
April 26, 1999
The Equitable Life Assurance
Society of the United States
1290 Avenue of the Americas
New York, NY 10104
Dear Sirs:
This opinion is furnished in connection with the Form N-4 Registration
Statement of The Equitable Life Assurance Society of the United States
("Equitable") under the Securities Act of 1933, as amended (the "Act"), relating
to separate account units of interest ("Units") under a group annuity contract,
as amended, issued by Equitable to the Trustees of the American Dental
Association Members Retirement Trust and of the American Dental Association
Members Pooled Trust for Retirement Plans (the "ADA Contract") (the separate
accounts included in the ADA Contract being referred to herein collectively as
the "Separate Accounts"). The ADA Contract is designed to provide benefits under
retirement plans and trusts adopted by members of the American Dental
Association for themselves and their employees. Such plans and trusts will be
qualified under Section 401 of the Internal Revenue Code of 1986, as amended.
The securities being registered are to be offered in the manner described in the
Registration Statement covering up to $75 million of the plan contributions to
be received under the ADA Contract.
I have examined all such corporate records of Equitable and such other
documents and such laws as I consider appropriate as a basis for the opinion
hereinafter expressed. On the basis of such examination, it is my opinion that
1. Equitable is a corporation duly organized and validly existing under the
laws of the State of New York.
2. The Separate Accounts were duly created pursuant to the provisions of the
New York Insurance Law.
<PAGE>
The Equitable Life Assurance
Society of the United States
April 26, 1999
Page 2
3. Assets allocated to the Separate Accounts are owned by Equitable; Equitable
is not a trustee with respect thereto. Under New York State law, the
income, gains and losses, whether or not realized, from assets allocated to
a Separate Account must be credited to or charged against such Account,
without regard to the other income, gains or losses of Equitable.
4. The ADA Contract provides that the portion of the assets of the Separate
Accounts equal to the reserves and other contract liabilities with respect
to the Separate Accounts shall not be chargeable with liabilities arising
out of any other business Equitable may conduct.
5. The ADA Contract and the Units issued thereunder have been duly authorized;
and the ADA Contract constitutes, and the Units when issued thereunder will
constitute, validly issued and binding obligations of Equitable in
accordance with their terms.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Mary Joan Hoene
-----------------------------------
Mary Joan Hoene
Vice President and Counsel
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Registration Statement on Form N-4 (the "Registration
Statement") of (1) our report dated February 8, 1999 relating to the financial
statements of Separate Account Nos. 195, 197 and 198 of The Equitable Life
Assurance Society of the United States for the year ended December 31, 1998; (2)
our report dated February 8, 1999 relating to the consolidated financial
statements of The Equitable Life Assurance Society of the United States for the
year ended December 31, 1998; and (3) our reports relating to the financial
statement of the following funds established under the Declaration of Trust of
the State Street Bank and Trust Company Investment Funds for Tax Exempt
Retirement Plans: Lifecycle Fund Group Trust - Conservative and Lifecycle Fund
Group Trust - Moderate (reports dated March 19, 1999), S&P Flagship Fund and S&P
500 Index Fund with Futures (Combined Financial Statements) (report dated
February 22, 1999), Russell 2000 Fund and Russell 2000 Non-Lending Fund
(Combined Financial Statements) (report dated February 25, 1999), Daily EAFE
Securities Lending Fund and Daily EAFE Non-Lending Fund (Combined Financial
Statement) (report dated March 5, 1999), Daily MSCI Europe Index Securities
Lending Fund and Daily MSCI Europe Index Fund (Combined Financial Statements)
(report dated March 5, 1999), Daily MSCI Japan Index Securities Lending Fund and
Daily MSCI Japan Index Fund (Combined Financial Statements) (report dated March
5, 1999), Daily MSCI Pacific Basin ex-Japan Index Securities Lending Fund and
Daily MSCI Pacific Basin ex-Japan Index Fund (Combined Financial Statements)
(report dated March 5, 1999), Daily Government/Corporate Bond Fund (report dated
March 16, 1999) and Short Term Investment Fund (report dated February 9, 1999),
which reports appear in such Statement of Additional Information, and to the
incorporation by reference of our reports into the Prospectus which constitutes
part of this Registration Statement. We also consent to the use in the
Prospectus Supplement constituting part of this Registration Statement of our
report dated February 8, 1999 relating to the financial statements of Separate
Account No. 4 of The Equitable Life Assurance Society of the United States for
the year ended December 31, 1998, which report appears in such Prospectus
Supplement. We also consent to the references to us under the headings
"Condensed financial information" and "About our independent accountants" in the
Prospectus.
PricewaterhouseCoopers LLP
New York, New York
April 23, 1999
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day
of February, 1999.
/s/ Henri de Castries
---------------------
Henri de Castries
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day
of February, 1999.
/s/ Joseph L. Dionne
--------------------
Joseph L. Dionne
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 6th day
of February, 1999.
/s/ Denis Duverne
-----------------
Denis Duverne
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of February, 1999.
/s/ F. COLLOC'H
---------------
F. COLLOC'H
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day
of February, 1999.
/s/ Jean Rene Fourtou
---------------------
Jean Rene Fourtou
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day
of February, 1999.
/s/ Norman C. Francis
---------------------
Norman C. Francis
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 15th day
of February, 1999.
/s/ Donald J. Greene
--------------------
Donald J. Greene
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 11th day
of February, 1999.
/s/ John T. Hartley
-------------------
John T. Hartley
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day
of February, 1999.
/s/ John H.F. Haskell, Jr.
--------------------------
John H.F. Haskell, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day
of February, 1999.
/s/ Michael Hegarty
-------------------
Michael Hegarty
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day
of February, 1999.
/s/ Mary R. (Nina) Henderson
----------------------------
Mary R. (Nina) Henderson
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 5th day
of February, 1999.
/s/ W. Edwin Jarmain
--------------------
W. Edwin Jarmain
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 5th day
of February, 1999.
/s/ George T. Lowy
------------------
George T. Lowy
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day
of February, 1999.
/s/ Edward D. Miller
--------------------
Edward D. Miller
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 22th day
of February, 1999.
/s/ Didier Pineau Valencienne
-----------------------------
Didier Pineau Valencienne
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 5th day
of February, 1999.
/s/ George J. Sella, Jr.
------------------------
George J. Sella, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day
of February, 1999.
/s/ Stanley B. Tulin
--------------------
Stanley B. Tulin
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 7th day
of February, 1999.
/s/ Dave H. Williams
--------------------
Dave H. Williams
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
Director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Jerome S. Golden, Mark A. Hug, James D. Goodwin, Pauline Sherman,
Michael F. McNelis, Naomi J. Weinstein, Maureen K. Wolfson, Mildred Oliver, Mary
P. Breen and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent, with full power of substitution
to each, for him or her and on his or her behalf and in his or her name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 with respect to any insurance or
annuity contracts or other agreements providing for allocation of amounts to
Separate Accounts of the Company, and related units or interests in Separate
Accounts: registration statements on any form or forms under the Securities Act
of 1933 and the Investment Company Act of 1940 and annual reports on any form or
forms under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day
of March, 1999.
/s/ Peter J. Tobin
------------------
Peter J. Tobin
