SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2003.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to __________
Commission file number 333-104043
AMERICAN BAR ASSOCIATION MEMBERS/
STATE STREET COLLECTIVE TRUST
(Exact name of registrant as specified in its charter)
---------------
Massachusetts 04-6691601
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Franklin Street 02110
Boston, Massachusetts (ZIP Code)
(Address of principal executive
offices)
Registrant's telephone number : (617) 786-3000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes X No
--- ---
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION...............................................1
Item 1. Financial Statements (Unaudited)............................1
Balanced Fund
Statement of Assets and Liabilities..........................1
Statement of Operations......................................2
Statement of Changes in Net Assets...........................3
Per-Unit Data and Ratios.....................................4
Index Equity Fund
Statement of Assets and Liabilities..........................5
Statement of Operations......................................6
Statement of Changes in Net Assets...........................7
Per-Unit Data and Ratios.....................................8
Intermediate Bond Fund
Statement of Assets and Liabilities..........................9
Statement of Operations.....................................10
Statement of Changes in Net Assets..........................11
Per-Unit Data and Ratios....................................12
International Equity Fund
Statement of Assets and Liabilities.........................13
Statement of Operations.....................................14
Statement of Changes in Net Assets..........................15
Per-Unit Data and Ratios....................................16
Large-Cap Growth Equity Fund
Statement of Assets and Liabilities.........................17
Statement of Operations.....................................18
Statement of Changes in Net Assets..........................19
Per-Unit Data and Ratios....................................20
Large-Cap Value Equity Fund
Statement of Assets and Liabilities.........................21
Statement of Operations.....................................22
Statement of Changes in Net Assets..........................23
Per-Unit Data and Ratios....................................24
Mid-Cap Growth Equity Fund
Statement of Assets and Liabilities.........................25
Statement of Operations.....................................26
Statement of Changes in Net Assets..........................27
Per-Unit Data and Ratios....................................28
Mid-Cap Value Equity Fund
Statement of Assets and Liabilities.........................29
Statement of Operations.....................................30
Statement of Changes in Net Assets..........................31
Per-Unit Data and Ratios....................................32
Small-Cap Equity Fund
Statement of Assets and Liabilities.........................33
Statement of Operations.....................................34
Statement of Changes in Net Assets..........................35
Per-Unit Data and Ratios....................................36
Stable Asset Return Fund
Statement of Assets and Liabilities.........................37
Statement of Operations.....................................38
Statement of Changes in Net Assets..........................39
Per-Unit Data and Ratios....................................40
Structured Portfolio Service - Conservative Portfolio
Statement of Assets and Liabilities.........................41
Statement of Operations.....................................42
Statement of Changes in Net Assets..........................43
Per-Unit Data and Ratios....................................44
Structured Portfolio Service - Moderate Portfolio
Statement of Assets and Liabilities.........................45
Statement of Operations.....................................46
Statement of Changes in Net Assets..........................47
Per-Unit Data and Ratios....................................48
Structured Portfolio Service - Aggressive Portfolio
Statement of Assets and Liabilities.........................49
Statement of Operations.....................................50
Statement of Changes in Net Assets..........................51
Per-Unit Data and Ratios....................................52
Notes to Unaudited Financial Statements............................53
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations...............................64
Item 4. Procedures and Controls....................................70
PART II. OTHER INFORMATION.................................................71
Item 2. Changes in Securities and Use of Proceeds..................71
Item 6. Exhibits and Reports on Form 8-K...........................71
SIGNATURES.................................................................72
PART I. FINANCIAL INFORMATION.
Item 1. FINANCIAL STATEMENTS (UNAUDITED).
American Bar Association Members/ State Street Collective Trust
Balanced Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------------
Assets
Investments, at value (cost $423,895,307) $439,466,007
Cash 1,444,086
Receivable for investments sold 389,644
Receivable for fund units sold 318,844
Dividends and interest receivable 1,065,477
Other assets 7,648
------------------------------
Total assets 442,691,706
------------------------------
Liabilities
Payable for investments purchased 36,494,909
Payable for fund units purchased 0
Accrued expenses 250,740
Other liabilities 0
------------------------------
Total liabilities 36,745,649
------------------------------
Net Assets $405,946,057
==============================
Net asset value, redemption price and offering price per unit of beneficial interest
($405,946,057/ 6,275,527 units outstanding) $64.69
================================
1
American Bar Association Members/ State Street Collective Trust
Balanced Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2003
to June 30, 2003 to June 30, 2003
---------------------------------------------------
Investment income:
Dividend income $750,231 $1,473,509
Interest income 1,747,044 3,470,446
---------------------------------------------------
Total investment income 2,497,275 4,943,955
Expenses:
Investment advisory fee 226,034 435,472
State Street Bank & Trust Company - program fee 312,841 632,861
American Bar Retirement Association - program fee 45,811 90,087
Trustee, management and administration fees 81,623 159,104
Other expenses 50,527 100,919
---------------------------------------------------
Total expenses 716,836 1,418,443
---------------------------------------------------
Net investment income 1,780,439 3,525,512
---------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments sold (1,423,483) (4,443,859)
Unrealized appreciation of investments during the period 43,428,639 44,938,848
---------------------------------------------------
Net gain on investments 42,005,156 40,494,989
---------------------------------------------------
Net increase in net assets resulting from operations $43,785,595 $44,020,501
===================================================
2
American Bar Association Members/ State Street Collective Trust
Balanced Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2002 January 1, 2003
to June 30, 2003 to June 30, 2003
-------------------------------------------------
Increase in net assets from:
Operations:
Net investment income $1,780,439 $3,525,512
Net realized loss on investments (1,423,483) (4,443,859)
Unrealized appreciation of investments during the period 43,428,639 44,938,848
-------------------------------------------------
Net increase in net assets resulting from operations 43,785,595 44,020,501
-------------------------------------------------
Participant transactions:
Proceeds from sales of units 6,631,823 10,990,793
Cost of units redeemed (4,364,060) (18,399,419)
Net increase (decrease) in net assets resulting from participant transactions 2,267,763 (7,408,626)
-------------------------------------------------
Total increase in net assets 46,053,358 36,611,875
Net Assets:
Beginning of period 359,892,699 369,334,182
-------------------------------------------------
End of period $405,946,057 $405,946,057
=================================================
Number of units:
Outstanding-beginning of period 6,240,226 6,408,195
Sold 105,065 180,675
Redeemed (69,764) (313,343)
Outstanding-end of period 6,275,527 6,275,527
=================================================
3
American Bar Association Members/ State Street Collective Trust
Balanced Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2002 January 1, 2003
to June 30, 2003 to June 30, 2003
----------------------------------------------------
Investment income $0.40 $0.79
Expenses (0.12) (0.23)
----------------------------------------------------
Net investment income 0.28 0.56
Net realized and unrealized gain on investments 6.74 6.50
----------------------------------------------------
Net increase in unit value 7.02 7.06
Net asset value at beginning of period 57.67 57.63
----------------------------------------------------
Net asset value at end of period $64.69 $64.69
====================================================
Ratio of expenses to average net assets* 0.74% 0.72%
Ratio of net investment income to average net assets* 1.83% 1.88%
Portfolio turnover** 32% 75%
Total return 12.15% 12.24%
Number of units outstanding at end of period (in thousands) 6,276 6,276
- -----------------------------------------------------------------------------
*Annualized
**Not annualized
4
American Bar Association Members/ State Street Collective Trust
Index Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $331,918,416) $263,602,465
Cash 26,026
Receivable for investments sold 0
Receivable for fund units sold 75,112
Dividends and interest receivable 0
Other assets 2,617
------------------------
Total assets 263,706,220
------------------------
Liabilities
Payable for investments purchased 26,026
Payable for fund units purchased 152,378
Accrued expenses 76,847
Other liabilities 31
------------------------
Total liabilities 255,282
------------------------
Net Assets $263,450,938
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($263,450,938/11,271,939 units outstanding) $23.37
========================
5
American Bar Association Members/ State Street Collective Trust
Index Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income:
Dividend income $0 $0
Interest income 0 0
Securities Lending income 4,889 17,667
------------------------------------------------
Total investment income 4,889 17,667
Expenses:
Investment advisory fee 0 0
State Street Bank & Trust Company - program fee 198,172 389,592
American Bar Retirement Association - program fee 29,049 55,543
Trustee, management and administration fees 51,746 98,102
Other expenses 32,026 62,172
------------------------------------------------
Total expenses 310,993 605,409
------------------------------------------------
Net investment loss (306,104) (587,742)
------------------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (2,743,159) (4,618,338)
Unrealized appreciation of investments during the period 38,557,636 33,414,726
------------------------------------------------
Net gain on investments 35,814,477 28,796,388
------------------------------------------------
Net increase in net assets resulting from operations $35,508,373 $28,208,646
================================================
6
American Bar Association Members/ State Street Collective Trust
Index Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase in net assets from:
Operations:
Net investment loss $(306,104) ($587,742)
Net realized loss on investments (2,743,159) (4,618,338)
Unrealized appreciation of investments during the period 38,557,636 33,414,726
------------------------------------------------
Net increase in net assets resulting from operations 35,508,373 28,208,646
------------------------------------------------
Participant transactions:
Proceeds from sales of units 12,832,869 21,992,095
Cost of units redeemed (1,995,839) (6,371,852)
Net increase in net assets resulting from participant transactions 10,837,030 15,620,243
------------------------------------------------
Total increase in net assets 46,345,403 43,828,889
Net Assets:
Beginning of period 217,105,535 219,622,049
------------------------------------------------
End of period $263,450,938 $263,450,938
================================================
Number of units:
Outstanding-beginning of period 10,775,845 10,551,355
Sold 584,550 1,029,517
Redeemed (88,456) (308,933)
Outstanding-end of period 11,271,939 11,271,939
================================================
7
American Bar Association Members/ State Street Collective Trust
Index Equity Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------
Investment income $0.00 $0.00
Expenses (0.03) (0.06)
------------------------------------------
Net investment income (0.03) (0.06)
Net realized and unrealized gain on investments 3.25 2.62
------------------------------------------
Net increase in unit value 3.22 2.56
Net asset value at beginning of period 20.15 20.81
------------------------------------------
Net asset value at end of period $23.37 $23.37
==========================================
Ratio of expenses to average net assets* 0.50% 0.52%
Ratio of net investment income to average net assets* (0.50%) (0.51%)
Portfolio turnover** 2% 4%
Total return 16.01% 12.29%
Number of units outstanding at end of period (in thousands) 11,272 11,272
- ---------------------------------------------------------------------------------------
*Annualized
** Not annualized. Reflects purchases and sales of units of the collective investment
fund in which the fund invests, rather than turnover of the underlying
portfolio of such collective investment fund.
8
American Bar Association Members/ State Street Collective Trust
Intermediate Bond Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $354,897,082) $360,772,576
Cash 79,532
Receivable for investments sold 55,903,642
Receivable for foreign currency sold 24,108,873
Receivable for fund units sold 684,225
Receivable for futures variation margin 44,625
Dividends and interest receivable 2,057,678
Other assets 2,654
------------------------
Total assets 443,653,805
------------------------
Liabilities
Payable for investments purchased 162,632,324
Payable for foreign currency purchased 24,004,507
Payable for fund units purchased 412,518
Accrued expenses 139,166
Written options value (Premium $213,541) 310,155
Other liabilities 0
------------------------
Total liabilities 187,498,670
------------------------
Net Assets $256,155,135
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($256,155,135/14,200,425 units outstanding) $18.04
========================
9
American Bar Association Members/ State Street Collective Trust
Intermediate Bond Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income:
Dividend income $0 $0
Interest income 2,352,411 4,481,754
------------------------------------------------
Total investment income 2,352,411 4,481,754
Expenses:
Investment advisory fee 177,953 340,846
State Street Bank & Trust Company - program fee 199,265 398,690
American Bar Retirement Association - program fee 29,164 56,714
Trustee, management and administration fees 51,972 100,181
Other expenses and taxes 32,179 63,538
------------------------------------------------
Total expenses 490,533 959,969
------------------------------------------------
Net investment income 1,861,878 3,521,785
------------------------------------------------
Realized and unrealized gain on investments:
Net realized gain on investments sold 4,105,544 4,484,322
Unrealized appreciation of investments during the period 298,961 1,816,186
------------------------------------------------
Net gain on investments 4,404,505 6,300,508
------------------------------------------------
Net increase in net assets resulting from operations $6,266,383 $9,822,293
================================================
10
American Bar Association Members/ State Street Collective Trust
Intermediate Bond Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase (decrease) in net assets from:
Operations:
Net investment income $1,861,878 $3,521,785
Net realized gain on investments 4,105,544 4,484,322
Unrealized appreciation of investments during the period 298,961 1,816,186
------------------------------------------------
Net increase in net assets resulting from operations 6,266,383 9,822,293
------------------------------------------------
Participant transactions:
Proceeds from sales of units 18,678,193 39,176,583
Cost of units redeemed (4,165,243) (8,771,924)
Net increase in net assets resulting from participant transactions 14,512,950 30,404,659
------------------------------------------------
Total increase in net assets 20,779,333 40,226,952
Net Assets:
Beginning of period 235,375,802 215,928,183
------------------------------------------------
End of period $256,155,135 $256,155,135
================================================
Number of units:
Outstanding-beginning of period 13,383,427 12,473,074
Sold 1,049,136 2,223,188
Redeemed (232,138) (495,837)
Outstanding-end of period 14,200,425 14,200,425
================================================
11
American Bar Association Members/ State Street Collective Trust
Intermediate Bond Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income $0.17 $0.33
Expenses (0.04) (0.07)
------------------------------------------------
Net investment income 0.13 0.26
Net realized and unrealized gain on investments 0.32 0.47
------------------------------------------------
Net increase in unit value 0.45 0.73
Net asset value at beginning of period 17.59 17.31
------------------------------------------------
Net asset value at end of period $18.04 $18.04
================================================
Ratio of expenses to average net assets* 0.79% 0.82%
Ratio of net investment income to average net assets* 3.01% 2.99%
Portfolio turnover** 122% 261%
Total return 2.56% 4.19%
Number of units outstanding at end of period (in thousands) 14,200 14,200
- -----------------------------------------------------------------------------------
*Annualized
**Not annualized
12
American Bar Association Members/ State Street Collective Trust
International Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $82,125,854) $92,183,245
Cash 54,604
Receivable for investments sold 9,977
Receivable for foreign currency sold 1,081,742
Receivable for fund units sold 16,577
Dividends and interest receivable 161,185
Other assets 111,193
------------------------
Total assets 93,618,523
------------------------
Liabilities
Payable for investments purchased 1,194,872
Payable for foreign currency purchased 1,081,742
Payable for fund units purchased 427,930
Accrued expenses 77,301
Other liabilities 16,491
------------------------
Total liabilities 2,798,336
------------------------
Net Assets $90,820,187
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($90,820,187/6,160,133 units outstanding) $14.74
========================
13
American Bar Association Members/ State Street Collective Trust
International Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income:
Dividend income(net of taxes withheld $170,896) $1,299,895 $1,514,380
Interest income 19,322 20,227
------------------------------------------------
Total investment income 1,319,217 1,534,607
Expenses:
Investment advisory fee 115,517 151,467
State Street Bank & Trust Company - program fee 68,755 135,762
American Bar Retirement Association - program fee 10,082 19,351
Trustee, management and administration fees 17,960 24,346
Other expenses 11,116 21,665
------------------------------------------------
Total expenses 223,430 352,591
------------------------------------------------
Net investment income 1,095,787 1,182,016
------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments sold (746,129) (13,704,901)
Unrealized appreciation of investments during the period 14,039,898 19,418,805
------------------------------------------------
Net gain on investments 13,293,769 5,713,904
------------------------------------------------
Net increase in net assets resulting from operations $14,389,556 $6,895,920
================================================
14
American Bar Association Members/ State Street Collective Trust
International Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase in net assets from:
Operations:
Net investment income $1,095,787 $1,182,016
Net realized loss on investments (749,129) (13,704,901)
Unrealized appreciation of investments during the period 14,039,898 19,418,805
------------------------------------------------
Net increase in net assets resulting from operations 14,386,556 6,895,920
------------------------------------------------
Participant transactions:
Proceeds from sales of units 45,988,698 66,085,273
Cost of units redeemed (44,288,273) (60,400,742)
Net increase in net assets resulting from participant transactions 1,700,425 5,684,531
------------------------------------------------
Total increase in net assets 16,086,981 12,580,451
Net Assets:
Beginning of period 74,733,206 78,239,736
------------------------------------------------
End of period $90,820,187 $90,820,187
================================================
Number of units:
Outstanding-beginning of period 6,017,637 5,710,177
Sold 3,401,391 5,002,353
Redeemed (3,258,895) (4,552,397)
Outstanding-end of period 6,160,133 6,160,133
================================================
15
American Bar Association Members/ State Street Collective Trust
International Equity Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income $0.21 $0.26
Expenses (0.04) (0.06)
------------------------------------------------
Net investment income 0.17 0.20
Net realized and unrealized gain on investments 2.15 0.84
------------------------------------------------
Net increase in unit value 2.32 1.04
Net asset value at beginning of period 12.42 13.70
------------------------------------------------
Net asset value at end of period $14.74 $14.74
================================================
Ratio of expenses to average net assets* 1.04% 0.88%
Ratio of net investment income to average net assets* 5.12% 2.94%
Portfolio turnover** 78% 148%
Total return 18.71% 7.60%
Number of units outstanding at end of period (in thousands) 6,160 6,160
- -----------------------------------------------------------------------------------
*Annualized
** Not annualized. With respect to the portion of the fund's assets invested in a registered
investment company, reflects purchases and sales of the registered investment company
in which the fund invests, rather than turnover of the underlying portfolio of such
registered investment company.
16
American Bar Association Members/ State Street Collective Trust
Large-Cap Growth Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $728,482,099) $753,986,802
Cash 21,823
Receivable for investments sold 456,126
Receivable for fund units sold 393,166
Dividends and interest receivable 375,247
Other assets 7,973
------------------------
Total assets 755,241,137
------------------------
Liabilities
Payable for investments purchased 1,494,412
Payable for fund units purchased 74,537
Accrued expenses 527,337
Other liabilities 2,220
------------------------
Total liabilities 2,098,506
------------------------
Net Assets $753,142,631
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($753,142,631/19,799,906 units outstanding) $38.04
========================
17
American Bar Association Members/ State Street Collective Trust
Large-Cap Growth Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income:
Dividend income(net of taxes withheld $20,456) $1,432,794 $2,901,047
Interest income 41,351 55,228
Securities Lending income 2,703 4,488
------------------------------------------------
Total investment income 1,476,848 2,960,763
Expenses:
Investment advisory fee 334,974 638,217
State Street Bank & Trust Company - program fee 580,206 1,155,746
American Bar Retirement Association - program fee 84,992 164,657
Trustee, management and administration fees 151,427 290,826
Other expenses 93,403 184,055
------------------------------------------------
Total expenses 1,245,002 2,433,501
Net investment income 231,846 527,262
------------------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (2,683,813) (14,654,205)
Unrealized appreciation of investments during the period 102,426,822 108,233,043
------------------------------------------------
Net gain on investments 99,743,009 93,578,838
------------------------------------------------
Net increase in net assets resulting from operations $99,974,855 $94,106,100
================================================
18
American Bar Association Members/ State Street Collective Trust
Large-Cap Growth Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase in net assets from:
Operations:
Net investment income $231,846 $527,262
Net realized loss on investments (2,683,813) (14,654,205)
Unrealized appreciation of investments during the period 102,426,822 108,233,043
------------------------------------------------
Net increase in net assets resulting from operations 99,974,855 94,106,100
------------------------------------------------
Participant transactions:
Proceeds from sales of units 16,203,935 21,861,323
Cost of units redeemed (11,610,909) (35,903,926)
Net increase (decrease) in net assets resulting from participant transactions 4,593,026 (14,042,603)
------------------------------------------------
Total increase in net assets 104,567,881 80,063,497
Net Assets:
Beginning of period 648,574,750 673,079,134
------------------------------------------------
End of period $753,142,631 $753,142,631
================================================
Number of units:
Outstanding-beginning of period 19,666,120 20,241,073
Sold 447,119 617,376
Redeemed (313,333) (1,058,543)
Outstanding-end of period 19,799,906 19,799,906
================================================
19
American Bar Association Members/ State Street Collective Trust
Large-Cap Growth Equity Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income $0.07 $0.15
Expenses (0.06) (0.12)
------------------------------------------------
Net investment income 0.01 0.03
Net realized and unrealized gain on investments 5.05 4.76
------------------------------------------------
Net increase in unit value 5.06 4.79
Net asset value at beginning of period 32.98 33.25
------------------------------------------------
Net asset value at end of period $38.04 $38.04
================================================
Ratio of expenses to average net assets* 0.69% 0.71%
Ratio of net investment income to average net assets* 0.13% 0.15%
Portfolio turnover** 5% 9%
Total return 15.28% 14.39%
Number of units outstanding at end of period (in thousands) 19,800 19,800
- -----------------------------------------------------------------------------------
*Annualized
** Not annualized. Reflects purchases and sales of units of the collective investment
fund in which the fund invests, rather than turnover of the underlying
portfolio of such collective investment fund.
20
American Bar Association Members/ State Street Collective Trust
Large Cap Value Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $238,807,158) $238,375,847
Cash (4,366)
Receivable for investments sold 178,295
Receivable for fund units sold 38,968
Dividends and interest receivable 344,557
Other assets 2,488
------------------------
Total assets 238,935,789
------------------------
Liabilities
Payable for investments purchased 0
Payable for fund units purchased 2,505,626
Accrued expenses 163,302
Other liabilities 0
------------------------
Total liabilities 2,668,928
------------------------
Net Assets $236,266,861
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($236,266,861/9,288,601 units outstanding) $25.44
========================
21
American Bar Association Members/ State Street Collective Trust
Large Cap Value Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income:
Dividend income $1,080,050 $2,185,149
Interest income 17,034 29,655
Securities Lending income 96 2,706
------------------------------------------------
Total investment income 1,097,180 2,217,510
Expenses:
Investment advisory fee 128,956 247,504
State Street Bank & Trust Company - program fee 178,784 355,310
American Bar Retirement Association - program fee 26,207 50,640
Trustee, management and administration fees 46,682 89,434
Other expenses 28,892 56,694
------------------------------------------------
Total expenses 409,521 799,582
------------------------------------------------
Net investment income 687,659 1,417,928
------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments sold (1,499,972) (5,324,163)
Unrealized appreciation of investments during the period 33,435,373 27,029,522
------------------------------------------------
Net gain on investments 31,935,401 21,705,359
------------------------------------------------
Net increase in net assets resulting from operations $32,623,060 $23,123,287
================================================
22
American Bar Association Members/ State Street Collective Trust
Large Cap Value Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase in net assets from:
Operations:
Net investment income $687,659 $1,417,928
Net realized loss on investments (1,499,972) (5,324,163)
Unrealized appreciation of investments during the period 33,435,373 27,029,522
------------------------------------------------
Net increase in net assets resulting from operations 32,623,060 23,123,287
------------------------------------------------
Participant transactions:
Proceeds from sales of units 29,755,200 40,033,359
Cost of units redeemed (22,988,233) (31,346,685)
Net increase in net assets resulting from participant transactions 6,766,967 8,686,674
------------------------------------------------
Total increase in net assets 39,390,027 31,809,961
Net Assets:
Beginning of period 196,876,834 204,456,900
------------------------------------------------
End of period $236,266,861 $236,266,861
================================================
Number of units:
Outstanding-beginning of period 9,005,489 8,936,013
Sold 1,222,373 1,671,524
Redeemed (939,261) (1,318,936)
Outstanding-end of period 9,288,601 9,288,601
================================================
23
American Bar Association Members/ State Street Collective Trust
Large Cap Value Equity Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income $0.12 $0.24
Expenses (0.05) (0.09)
------------------------------------------------
Net investment income 0.07 0.15
Net realized and unrealized gain on investments 3.51 2.41
------------------------------------------------
Net increase in unit value 3.58 2.56
Net asset value at beginning of period 21.86 22.88
------------------------------------------------
Net asset value at end of period $25.44 $25.44
================================================
Ratio of expenses to average net assets* 0.74% 0.76%
Ratio of net investment income to average net assets* 1.24% 1.35%
Portfolio turnover** 7% 12%
Total return 16.35% 11.17%
Number of units outstanding at end of period (in thousands) 9,289 9,289
- -----------------------------------------------------------------------------------
*Annualized
** Not annualized. Reflects purchases and sales of units of the collective investment
fund in which the fund invests, rather than turnover of the underlying
portfolio of such collective investment fund.
24
American Bar Association Members/ State Street Collective Trust
Mid Cap Growth Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
-----------------------
Assets
Investments, at value (cost $14,806,466) $16,951,477
Cash 2,235
Receivable for investments sold 267,409
Receivable for fund units sold 25,038
Dividends and interest receivable 2,298
Other assets 147
-----------------------
Total assets 17,248,604
-----------------------
Liabilities
Payable for investments purchased 314,656
Payable for fund units purchased 6,280
Accrued expenses 27,620
Other liabilities 0
-----------------------
Total liabilities 348,556
-----------------------
Net Assets $16,900,048
=======================
Net asset value, redemption price and offering price per unit of beneficial interest
($16,900,048/1,234,172 units outstanding) $13.69
=======================
25
American Bar Association Members/ State Street Collective Trust
Mid Cap Growth Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income:
Dividend income $6,402 $10,268
Interest income 2,632 4,908
------------------------------------------------
Total investment income 9,034 15,176
Expenses:
Investment advisory fee 22,419 38,220
State Street Bank & Trust Company - program fee 11,024 19,682
American Bar Retirement Association - program fee 1,624 2,821
Trustee, management and administration fees 2,890 4,985
Other expenses 1,787 3,149
------------------------------------------------
Total expenses 39,744 68,857
------------------------------------------------
Net investment loss (30,710) (53,681)
------------------------------------------------
Realized and unrealized loss on investments:
Net realized gain on investments sold 794,514 576,007
Unrealized appreciation of investments during the period 1,482,480 1,777,039
------------------------------------------------
Net gain on investments 2,276,994 2,353,046
------------------------------------------------
Net increase in net assets resulting from operations $2,246,284 $2,299,365
================================================
26
American Bar Association Members/ State Street Collective Trust
Mid Cap Growth Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase (decrease) in net assets from:
Operations:
Net investment loss ($30,710) $(53,681)
Net realized gain on investments 794,514 576,007
Unrealized appreciation of investments during the period 1,482,480 1,777,039
------------------------------------------------
Net increase in net assets resulting from operations 2,246,284 2,299,365
------------------------------------------------
Participant transactions:
Proceeds from sales of units 4,869,025 8,105,609
Cost of units redeemed (1,058,092) (2,071,520)
Net increase in net assets resulting from participant transactions 3,810,933 6,034,089
------------------------------------------------
Total increase in net assets 6,057,217 8,333,454
Net Assets:
Beginning of period 10,842,831 8,566,594
------------------------------------------------
End of period $16,900,048 $16,900,048
================================================
Number of units:
Outstanding-beginning of period 944,784 753,447
Sold 373,107 653,954
Redeemed (83,719) (173,229)
Outstanding-end of period 1,234,172 1,234,172
================================================
27
American Bar Association Members/ State Street Collective Trust
Mid Cap Growth Equity Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income $0.01 $0.02
Expenses (0.04) (0.07)
------------------------------------------------
Net investment loss (0.03) (0.05)
Net realized and unrealized gain on investments 2.24 2.37
------------------------------------------------
Net increase in unit value 2.21 2.32
Net asset value at beginning of period 11.48 11.37
------------------------------------------------
Net asset value at end of period $13.69 $13.69
================================================
Ratio of expenses to average net assets* 1.15% 1.17%
Ratio of net investment income to average net assets* (0.89%) (0.91%)
Portfolio turnover** 46% 85%
Total return 19.32% 20.45%
Number of units outstanding at end of period (in thousands) 1,234 1,234
- -----------------------------------------------------------------------------------
*Annualized
** Not annualized.
28
American Bar Association Members/ State Street Collective Trust
Mid Cap Value Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $14,806,466) $16,728,075
Cash 1,740
Receivable for investments sold 0
Receivable for fund units sold 0
Dividends and interest receivable 14,778
Other assets 129
------------------------
Total assets 16,744,722
------------------------
Liabilities
Payable for investments purchased 0
Payable for fund units purchased 104,249
Accrued expenses 15,131
Other liabilities 0
------------------------
Total liabilities 119,380
------------------------
Net Assets $16,625,342
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($16,625,342/1,501,946 units outstanding) $11.07
========================
29
American Bar Association Members/ State Street Collective Trust
Mid Cap Value Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
-------------------------------------------------
Investment income:
Dividend income $36,296 $63,293
Interest income 3,509 7,318
-------------------------------------------------
Total investment income 39,805 70,611
Expenses:
Investment advisory fee 26,357 44,125
State Street Bank & Trust Company - program fee 11,257 19,691
American Bar Retirement Association - program fee 1,656 2,823
Trustee, management and administration fees 2,947 4,988
Other expenses 1,822 3,150
-------------------------------------------------
Total expenses 44,039 74,777
-------------------------------------------------
Net investment loss (4,234) (4,166)
-------------------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (40,206) (120,369)
Unrealized appreciation of investments during the period 2,606,681 2,080,782
-------------------------------------------------
Net gain on investments 2,566,475 1,960,413
-------------------------------------------------
Net increase in net assets resulting from operations $2,562,241 $1,956,247
=================================================
30
American Bar Association Members/ State Street Collective Trust
Mid Cap Value Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
-------------------------------------------------
Increase (decrease) in net assets from:
Operations:
Net investment loss ($4,234) ($4,166)
Net realized loss on investments (40,206) (120,369)
Unrealized appreciation of investments during the period 2,606,681 2,080,782
-------------------------------------------------
Net increase in net assets resulting from operations 2,562,241 1,956,247
-------------------------------------------------
Participant transactions:
Proceeds from sales of units 3,359,116 6,777,340
Cost of units redeemed (584,342) (1,034,590)
Net increase in net assets resulting from participant transactions 2,774,774 5,742,750
-------------------------------------------------
Total increase in net assets 5,337,015 7,698,997
Net Assets:
Beginning of period 11,288,327 8,926,345
-------------------------------------------------
End of period $16,625,342 $16,625,342
=================================================
Number of units:
Outstanding-beginning of period 1,232,326 912,372
Sold 325,144 692,785
Redeemed (55,524) (103,211)
Outstanding-end of period 1,501,946 1,501,946
=================================================
31
American Bar Association Members/ State Street Collective Trust
Mid Cap Value Equity Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
-------------------------------------------------
Investment income $0.03 $0.06
Expenses (0.03) (0.06)
-------------------------------------------------
Net investment income 0.00 0.00
Net realized and unrealized gain on investments 1.91 1.29
-------------------------------------------------
Net increase in unit value 1.91 1.29
Net asset value at beginning of period 9.16 9.78
-------------------------------------------------
Net asset value at end of period $11.07 $11.07
=================================================
Ratio of expenses to average net assets* 1.25% 1.27%
Ratio of net investment income to average net assets* (0.12%) (0.07%)
Portfolio turnover** 4% 11%
Total return 20.80% 13.14%
Number of units outstanding at end of period (in thousands) 1,502 1,502
- -----------------------------------------------------------------------------------
*Annualized
** Not annualized.
32
American Bar Association Members/ State Street Collective Trust
Small-Cap Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $257,196,261) $261,115,396
Cash 14,553
Receivable for investments sold 1,732,326
Receivable for fund units sold 139,826
Dividends and interest receivable 191,633
Other assets 2,760
------------------------
Total assets 263,196,494
------------------------
Liabilities
Payable for investments purchased 1,355,137
Payable for fund units purchased 12,138
Accrued expenses 318,831
Other liabilities 0
------------------------
Total liabilities 1,686,106
------------------------
Net Assets $261,510,388
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($261,510,388/5,221,289 units outstanding) $50.09
========================
33
American Bar Association Members/ State Street Collective Trust
Small-Cap Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income:
Dividend income $474,090 $928,154
Interest income 42,732 85,377
------------------------------------------------
Total investment income 516,822 1,013,531
Expenses:
Investment advisory fee 261,264 493,550
State Street Bank & Trust Company - program fee 192,991 381,181
American Bar Retirement Association - program fee 28,311 54,362
Trustee, management and administration fees 50,421 96,015
Other expenses 31,202 60,852
------------------------------------------------
Total expenses 564,189 1,085,960
------------------------------------------------
Net investment loss (47,367) (72,429)
------------------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (6,285,789) (16,645,518)
Unrealized appreciation of investments during the period 53,686,321 53,854,506
------------------------------------------------
Net gain on investments 47,400,532 37,208,988
------------------------------------------------
Net increase in net assets resulting from operations $47,353,165 $37,136,559
================================================
34
American Bar Association Members/ State Street Collective Trust
Small-Cap Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase (decrease) in net assets from:
Operations:
Net investment loss $(47,367) $(72,429)
Net realized loss on investments (6,285,789) (16,645,518)
Unrealized appreciation of investments during the period 53,686,321 53,854,506
------------------------------------------------
Net increase in net assets resulting from operations 47,353,165 37,136,559
------------------------------------------------
Participant transactions:
Proceeds from sales of units 5,598,759 9,382,533
Cost of units redeemed (1,531,827) (8,309,573)
Net increase in net assets resulting from participant transactions 4,066,932 1,072,960
------------------------------------------------
Total increase in net assets 51,420,097 38,209,519
Net Assets:
Beginning of period 210,090,291 223,300,869
------------------------------------------------
End of period $261,510,388 $261,510,388
================================================
Number of units:
Outstanding-beginning of period 5,132,600 5,207,132
Sold 121,484 210,944
Redeemed (32,795) (196,787)
Outstanding-end of period 5,221,289 5,221,289
================================================
35
American Bar Association Members/ State Street Collective Trust
Small-Cap Equity Fund
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income $0.10 $0.20
Expenses (0.11) (0.21)
------------------------------------------------
Net investment loss (0.01) (0.01)
Net realized and unrealized gain on investments 9.17 7.22
------------------------------------------------
Net increase in unit value 9.16 7.21
Net asset value at beginning of period 40.93 42.88
------------------------------------------------
Net asset value at end of period $50.09 $50.09
================================================
Ratio of expenses to average net assets* 0.94% 0.96%
Ratio of net investment income to average net assets* 0.08% 0.06%
Portfolio turnover** 14% 24%
Total return 22.40% 16.79%
Number of units outstanding at end of period (in thousands) 5,221 5,221
- -----------------------------------------------------------------------------------
*Annualized
**Not annualized
36
American Bar Association Members/ State Street Collective Trust
Stable Asset Return Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $921,531,583) $921,531,583
Cash $2,781,540
Interest Receivable 2,213,740
Receivable for fund units sold 120,691
Other assets 10,345
------------------------
Total assets 926,657,899
------------------------
Liabilities
Payable for investments purchased 0
Payable for fund units redeemed 0
Accrued expenses 287,405
Dividends Payable 0
------------------------
Total liabilities 287,405
------------------------
Net Assets $926,370,494
========================
Net asset value, redemption price and offering price per
unit of beneficial interest
($926,370,494/32,749,474 units outstanding) 28.29
========================
37
American Bar Association Members/ State Street Collective Trust
Stable Asset Return Fund
Statement of Operations
Unaudited
For the period For the period
April 30, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Interest income $8,673,151 $17,441,924
------------------------------------------------
Expenses:
State Street Bank & Trust Company - program fee 749,803 1,549,981
American Bar Retirement Association - program fee 109,573 220,150
Trustee, management and administration fees 195,276 388,804
Other expenses and taxes 120,942 246,825
------------------------------------------------
Total expenses 1,175,594 2,405,760
------------------------------------------------
Net investment income $7,497,557 $15,036,164
================================================
38
American Bar Association Members/ State Street Collective Trust
Stable Asset Return Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 30, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase in net assets from:
Operations:
Net investment income and net increase in net
assets resulting from operations 7,497,557 15,036,164
------------------------------------------------
Participant transactions:
Proceeds from sales of units 44,377,342 102,305,465
Cost of units redeemed (51,578,073) (82,313,213)
Net increase (decrease) in net assets resulting from
participant transactions (7,200,731) 19,992,252
------------------------------------------------
Total increase in net assets 296,826 35,028,416
------------------------------------------------
Net Assets:
Beginning of period 926,073,668 891,342,078
------------------------------------------------
End of period $926,370,494 $926,370,494
================================================
Number of units:
Outstanding-beginning of period 32,030,109 32,030,109
Sold 3,649,469 3,649,469
Redeemed (2,930,104) (2,930,104)
Outstanding-end of period 32,749,474 32,749,474
================================================
39
American Bar Association Members/ State Street Collective Trust
Stable Asset Return Fund
Per-Unit Data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 30, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income $0.26 $0.53
Expenses (0.04) (0.07)
------------------------------------------------
Net investment income 0.22 0.46
Net realized and unrealized gain on investments 0.00 0.00
------------------------------------------------
Net increase in unit value 0.22 0.46
Net asset value at beginning of period 28.06 27.83
------------------------------------------------
Net asset value at end of period $28.29 $28.29
================================================
Ratio of expenses to average net assets* 0.51% 0.53%
Ratio of net investment income to average net assets* 3.23% 3.26%
Total return 0.78% 1.65%
Number of units outstanding at end of period (in thousands) 32,749 32,749
- -----------------------------------------------------------------------------------
*Annualized
40
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Conservative Portfolio
Statement of Assets and Liabilities
Unaudited
June 30, 2003
----------------------
Assets
Investments, at value (cost $40,483,923) $43,356,113
Cash 0
Receivable for investments sold 125,479
Receivable for fund units sold 10,893
Dividends and interest receivable 0
Other assets 0
----------------------
Total assets 43,492,485
----------------------
Liabilities
Payable for investments purchased 136,372
Payable for fund units purchased 0
Accrued expenses 0
Other liabilities 0
----------------------
Total liabilities 136,372
----------------------
Net Assets $43,356,113
======================
Net asset value, redemption price and offering price per unit of beneficial interest
($43,356,113/2,555,423 units outstanding) $16.97
======================
41
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Conservative Portfolio
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
-------------------------------------------
Investment income:
Dividend income $0 $0
Interest income 0 0
-------------------------------------------
Total investment income 0 0
Expenses:
Investment advisory fee 0 0
State Street Bank & Trust Company - program fee 0 0
American Bar Retirement Association - program fee 0 0
Trustee, management and administration fees 0 0
Other expenses 0 0
Total expenses 0 0
-------------------------------------------
Net investment income 0 0
-------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments sold (301,235) (264,874)
Unrealized appreciation of investments during the period 3,005,332 2,726,631
-------------------------------------------
Net gain on investments 2,704,097 2,461,757
-------------------------------------------
Net increase in net assets resulting from operations $2,704,097 $2,461,757
===========================================
42
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Conservative Portfolio
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
-------------------------------------------
Increase (decrease) in net assets from:
Operations:
Net investment income $0 $0
Net realized loss on investments (301,235) (264,874)
Unrealized appreciation of investments during the period 3,005,332 2,726,631
-------------------------------------------
Net increase in net assets resulting from operations 2,704,097 2,461,757
-------------------------------------------
Participant transactions:
Proceeds from sales of units 3,232,648 8,767,888
Cost of units redeemed (1,647,913) (2,238,977)
Net increase in net assets resulting from participant transactions 1,584,735 6,528,911
-------------------------------------------
Total increase in net assets 4,288,832 8,990,668
Net Assets:
Beginning of period 39,067,281 34,365,445
-------------------------------------------
End of period $43,356,113 $43,356,113
===========================================
Number of units:
Outstanding-beginning of period 2,458,674 2,148,004
Sold 195,343 543,371
Redeemed (98,594) (135,952)
Outstanding-end of period 2,555,423 2,555,423
===========================================
43
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Conservative Portfolio
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
-------------------------------------------
Investment income $0.00 $0.00
Expenses 0.00 0.00
-------------------------------------------
Net investment income 0.00 0.00
Net realized and unrealized gain on investments 1.08 0.97
-------------------------------------------
Net increase in unit value 1.08 0.97
Net asset value at beginning of period 15.89 16.00
-------------------------------------------
Net asset value at end of period $16.97 $16.97
===========================================
Ratio of expenses to average net assets* 0.00% 0.00%
Ratio of net investment income to average net assets* 0.00% 0.00%
Portfolio turnover** 7% 11%
Total return 6.78% 6.05%
Number of units outstanding at end of period (in thousands) 2,555 2,555
- ---------------------------------------------------------------------------
*Annualized
** Not annualized. Reflects purchases and sales of units of the funds in which the
portfolio invests rather than the turnover of such underlying funds.
+ Expenses includes only those expenses charged directly to the Portfolio,
and does not include expenses charged to the funds in which the Portfolio invests.
44
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Moderate Portfolio
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $134,341,720) $133,697,441
Cash 0
Receivable for investments sold 455,012
Receivable for fund units sold 31,200
Dividends and interest receivable 0
Other assets 0
------------------------
Total assets 134,183,653
------------------------
Liabilities
Payable for investments purchased 486,212
Payable for fund units purchased 0
Accrued expenses 0
Other liabilities 0
------------------------
Total liabilities 486,212
------------------------
Net Assets $133,697,441
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($133,697,441/7,878,461 units outstanding) $16.97
========================
45
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Moderate Portfolio
Statement of Operations
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to March 31, 2003
------------------------------------------------
Investment income:
Dividend income $0 $0
Interest income 0 0
------------------------------------------------
Total investment income 0 0
Expenses:
Investment advisory fee 0 0
State Street Bank & Trust Company - program fee 0 0
American Bar Retirement Association - program fee 0 0
Trustee, management and administration fees 0 0
Other expenses 0 0
------------------------------------------------
Total expenses 0 0
------------------------------------------------
Net investment income 0 0
------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments sold (908,622) (515,333)
Unrealized appreciation of investments during the period 13,416,610 10,507,849
------------------------------------------------
Net gain on investments 12,507,988 9,992,516
------------------------------------------------
Net increase in net assets resulting from operations $12,507,988 $9,992,516
================================================
46
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Moderate Portfolio
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to March 31, 2003
------------------------------------------------
Increase in net assets from:
Operations:
Net investment income $0 $0
Net realized loss on investments (908,622) (515,333)
Unrealized appreciation of investments during the period 13,416,610 10,507,849
------------------------------------------------
Net increase in net assets resulting from operations 12,507,988 9,992,516
------------------------------------------------
Participant transactions:
Proceeds from sales of units 10,601,031 16,848,993
Cost of units redeemed (1,297,504) (5,165,344)
Net increase in net assets resulting from participant transactions 9,303,527 11,683,649
------------------------------------------------
Total increase in net assets 21,811,515 21,676,165
Net Assets:
Beginning of period 111,885,926 112,021,276
------------------------------------------------
End of period $133,697,441 $133,697,441
================================================
Number of units:
Outstanding-beginning of period 7,308,414 7,156,763
Sold 648,563 1,053,550
Redeemed (78,516) (331,852)
Outstanding-end of period 7,878,461 7,878,461
================================================
47
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Moderate Portfolio
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 1, 2003 January 1, 2003
to June 30, 2003 to March 31, 2003
------------------------------------------------
Investment income $0.00 $0.00
Expenses 0.00 0.00
------------------------------------------------
Net investment income 0.00 0.00
Net realized and unrealized gain on investments 1.66 1.32
------------------------------------------------
Net increase in unit value 1.66 1.32
Net asset value at beginning of period 15.31 15.65
------------------------------------------------
Net asset value at end of period $16.97 $16.97
================================================
Ratio of expenses to average net assets* 0.00% 0.00%
Ratio of net investment income to average net assets* 0.00% 0.00%
Portfolio turnover** 7% 10%
Total return 10.85% 8.42%
Number of units outstanding at end of period (in thousands) 7,878 7,878
- -----------------------------------------------------------------------------------
*Annualized
** Not annualized. Reflects purchases and sales of units of the funds in which the
portfolio invests rather than the turnover of such underlying funds.
+ Expenses includes only those expenses charged directly to the Portfolio,
and does not include expenses charged to the funds in which the Portfolio invests.
48
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Aggressive Portfolio
Statement of Assets and Liabilities
Unaudited
June 30, 2003
------------------------
Assets
Investments, at value (cost $106,869,150) $101,589,034
Cash 0
Receivable for investments sold 241,759
Receivable for fund units sold 42,862
Dividends and interest receivable 0
Other assets 0
------------------------
Total assets 101,873,655
------------------------
Liabilities
Payable for investments purchased 284,621
Payable for fund units purchased 0
Accrued expenses 0
Other liabilities 0
------------------------
Total liabilities 284,621
------------------------
Net Assets $101,589,034
========================
Net asset value, redemption price and offering price per unit of beneficial interest
($101,589,034/6,098,006 units outstanding) $16.66
========================
49
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Aggressive Portfolio
Statement of Operations
Unaudited
For the period For the period
April 30, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income:
Dividend income $0 $0
Interest income 0 0
------------------------------------------------
0 0
Expenses:
Investment advisory fee 0 0
State Street Bank & Trust Company - program fee 0 0
American Bar Retirement Association - program fee 0 0
Trustee, management and administration fees 0 0
Other expenses 0 0
------------------------------------------------
Total expenses 0 0
------------------------------------------------
Net investment income 0 0
------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments sold 367,700 43,856
Unrealized appreciation of investments during the period 13,000,356 9,606,303
------------------------------------------------
Net gain on investments 13,368,056 9,650,159
------------------------------------------------
Net increase in net assets resulting from operations $13,368,056 $9,650,159
================================================
50
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Aggressive Portfolio
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 30, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Increase (decrease) in net assets from:
Operations:
Net investment income $0 $0
Net realized gain (loss) on investments (279,988) 43,856
Unrealized appreciation of investments during the period 13,000,356 9,606,303
------------------------------------------------
Net increase in net assets resulting from operations 12,720,368 9,650,159
------------------------------------------------
Participant transactions:
Proceeds from sales of units 6,553,390 10,152,054
Cost of units redeemed (1,020,480) (2,541,258)
Net increase in net assets resulting from participant transactions 5,532,910 7,610,796
------------------------------------------------
Total increase in net assets 18,253,278 17,260,955
Net Assets:
Beginning of period 83,335,756 84,328,079
------------------------------------------------
End of period $101,589,034 $101,589,034
================================================
Number of units:
Outstanding-beginning of period 5,744,369 5,603,154
Sold 417,631 662,835
Redeemed (63,994) (167,983)
Outstanding-end of period 6,098,006 6,098,006
================================================
51
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Aggressive Portfolio
Per-Unit data and Ratios
Unaudited
Selected data for a unit outstanding throughout the
period: For the period For the period
April 30, 2003 January 1, 2003
to June 30, 2003 to June 30, 2003
------------------------------------------------
Investment income $0.00 $0.00
Expenses 0.00 0.00
------------------------------------------------
Net investment income 0.00 0.00
Net realized and unrealized gain on investments 2.15 1.61
------------------------------------------------
Net increase in unit value 2.15 1.61
Net asset value at beginning of period 14.51 15.05
------------------------------------------------
Net asset value at end of period $16.66 $16.66
================================================
Ratio of expenses to average net assets* 0.00% 0.00%
Ratio of net investment income to average net assets* 0.00% 0.00%
Portfolio turnover** 3% 6%
Total return 14.83% 10.69%
Number of units outstanding at end of period (in thousands) 6,098 6,098
- -----------------------------------------------------------------------------------
*Annualized
** Not annualized. Reflects purchases and sales of units of the funds in which the
portfolio invests rather than the turnover of such underlying funds.
+ Expenses includes only those expenses charged directly to the Portfolio,
and does not include expenses charged to the funds in which the Portfolio invests.
52
American Bar Association Members/State Street Collective Trust
Notes to Financial Statements
1. Description of the Trust
American Bar Association Members/State Street Collective Trust (the
"Trust") was organized on August 8, 1991 under the American Bar Association
Members/State Street Collective Declaration of Trust as amended and restated
on December 5, 1991 and as amended thereafter. State Street Bank and Trust
Company ("State Street Bank" and "Trustee") acts as trustee for the Trust. The
Trust is maintained exclusively for the collective investment monies
administered on behalf of participants in the American Bar Association Members
Retirement Program. Ten separate collective investment Funds (the "Funds") and
the Structured Portfolio Service (the "Portfolios") are established under the
Trust. The Structured Portfolio Service offers three approaches to
diversifying investments by selecting various allocations among the Funds. The
Funds and Portfolios are investment options under the American Bar Association
Members Retirement Program (the "Program") which is sponsored by the American
Bar Retirement Association ("ABRA"). The objectives and principal strategies
of the Funds and Portfolios are as follows:
Balanced Fund--current income and long-term capital appreciation through
investment in common stocks, other equity-type securities and debt securities.
Index Equity Fund--replication of the total return of the Russell 3000
Index. Currently invests in the State Street Bank and Trust Company Russell
3000 Index Securities Lending Fund, a separate State Street Bank collective
investment fund which invests in securities contained in the Russell 3000
Index. This underlying fund's financial statements are available upon request
from State Street Bank.
Intermediate Bond Fund--invests primarily in debt securities of varying
maturities, with an average portfolio duration of three to six years, with the
objective of achieving a competitive total return from current income and
capital appreciation.
International Equity Fund--long term growth of capital through investment
in common stocks and other equity securities of established non-U.S.
companies.
Large-Cap Growth Equity Fund --long term growth of capital and some
dividend income through investment in common stocks and equity-type securities
of large, well established companies. Currently invests in common stocks and
the State Street Bank and Trust Company Russell 1000 Growth Index Securities
Lending Fund, a separate State Street Bank collective investment fund which
invests in securities contained in the Russell 1000 Index. This underlying
fund's financial statements are available upon request from State Street Bank.
Large-Cap Value Equity Fund --long term growth of capital and dividend
income through investment in common stocks, primarily of large capitalization
companies believed to be undervalued. Currently invests in common stocks and
the State Street Bank and Trust Company Russell 1000 Value Index Securities
Lending Fund, a separate State Street Bank collective investment fund which
invests in securities contained in the Russell 1000 Index. This underlying
fund's financial statements are available upon request from State Street Bank.
Mid-Cap Growth Equity Fund--long term growth of capital through
investment in common stocks primarily of medium sized companies believed to
have strong earnings growth potential.
Mid-Cap Value Equity Fund--long term growth of capital through investment
in common stocks, primarily of medium sized companies believed to be
undervalued.
53
Small-Cap Equity Fund --long term growth of capital through investment in
common stocks of small companies believed to have strong appreciation
potential.
Stable Asset Return Fund ("SARF")--current income consistent with
preserving principal and maintaining liquidity through investment in high
quality short-term instruments and investment contracts of insurance
companies, banks and financial institutions. Currently invests in the State
Street Bank ABA Members/Pooled Stable Asset Fund Trust ("SAFT"), a separate
State Street Bank collective investment fund which invests in investment
contracts of insurance companies, banks and financial institutions, and in the
State Street Bank Yield Enhanced Short-Term Investment Fund ("YES"), a
separate State Street Bank collective investment fund. State Street Yield
Enhanced Short-Term Investment Fund financial statements are available upon
request.
Structured Portfolio Service
Conservative--higher current investment income and some capital
appreciation.
Moderate--high current investment income and greater capital
appreciation.
Aggressive--long-term growth of capital and lower current investment
income.
Each Structured Portfolio Service achieves its objective through a
pre-determined investment allocation in the Funds.
The Trust may offer and sell an unlimited number of units representing
interests in separate Funds and Portfolios of the Trust, each unit to be
offered and sold at the per unit net asset value of the corresponding Fund or
Portfolio.
State Street Bank has assumed responsibility for administering and
providing investment options for the Program. State Street Bank is a trust
company established under the laws of The Commonwealth of Massachusetts and is
a wholly-owned subsidiary of State Street Corporation, a Massachusetts
corporation and a holding company registered under the Federal Bank Holding
Company Act of 1956, as amended.
State Street Bank is responsible for certain recordkeeping and
administrative services required by the Program. In addition, State Street
Bank is the primary custodian, provides account and investment information to
employers and participants, receives all plan contributions, effects
investment and transfer transactions and distributes all benefits provided by
the plans to the participants or, in the case of some individually designed
plans, to the trustees of such plans.
2. Summary of Significant Accounting Policies
The accompanying statements of assets and liabilities and the related
statements of operations and of changes in net assets and certain financial
data have been prepared in conformity with accounting principles generally
accepted in the United States of America. Such principles were applied on a
basis consistent with those reflected in the 2002 Annual Report on Form 10-K
of the Trust as filed with the Securities and Exchange Commission. The
accompanying financial data should be read in conjunction with the notes to
the financial statements contained in the 2002 Annual Report on Form 10-K. In
the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting solely of normal recurring accruals)
necessary to present fairly the financial position of the Balanced Fund, Index
Equity Fund, Intermediate Bond Fund, International Equity Fund, Large-Cap
Growth Equity Fund, Large-Cap Value Equity Fund, Mid-Cap Growth Equity Fund,
Mid-Cap Value Equity Fund, Small-Cap Equity Fund, Stable Asset Return Fund,
Conservative Structured Portfolio Service, Moderate Structured Portfolio
Service and Aggressive Structured Portfolio Service as of June 30, 2003 and
the results of each of their operations, the changes in each of their net
assets and certain financial data for the three month period ended June 30,
2003.
The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. The policies are in accordance with accounting principles
generally accepted in the United States and provisions of the Trust agreement:
A. Security Valuation
Stable Asset Return Fund: Formerly, it was the Trust's policy to attempt
to maintain a constant price of $1.00 per unit for SARF. Since July 15, 2002,
SARF no longer does so. The principal consequence of the change is that SARF
is no longer accounting for the distribution and reinvestment of accrued
income by issuing additional units each business day. Instead, SARF is
retaining this income as undistributed amounts which comprise an accumulating
component of the net asset value of SARF. SARF invests in SAFT, whose
investments include insurance company, bank and financial institution
investment contracts and investments in YES. Consistent with this objective,
the short-term portfolio instruments of the collective investment fund are
valued on the basis of amortized cost, which approximates fair value.
Amortized cost involves valuing an instrument initially at its cost and
thereafter
54
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. As the contracts are benefit-responsive and the Fund's
investors are participants in qualified benefits plans, the insurance company,
bank and financial institution investment contracts are maintained at contract
value (cost plus accrued interest) which approximates fair value. The values
of investments in collective investment funds are based on the net asset value
of such respective collective investment funds.
Other Funds and Portfolios: Stocks listed on national securities
exchanges and certain over-the-counter issues traded on the Nasdaq National
Market (NASDAQ) are valued at the last close price, or, if no sale, at the
latest available bid price. Other unlisted stocks reported on the NASDAQ
system are valued at quoted bid prices.
Foreign securities not traded directly or in American Depositary Receipt
(ADR) form in the United States are valued in the local currency at the last
sale price on the respective exchange and are converted into the 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.
Fixed income investments are valued on the basis of valuations furnished
by a pricing service approved by the Trustee, which determines valuations
using methods based on market transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional traders. If not valued by a pricing service such securities are
valued at prices obtained from independent brokers. 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 discount spreads to
the underlying common stock.
Investments with prices that cannot be readily obtained, if any, are
carried at fair value as determined in good faith under consistently applied
procedures established by and under the supervision of the Trustee.
The values of investments in collective investment funds and registered
investment companies are based on the net asset value of the respective
collective investment fund or registered investment company.
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.
The accounting records of the Funds and Portfolios 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.
B. Security Transactions and Related Investment Income
Security transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date. Interest income is
increased by accretion of discount and reduced by amortization of premium.
Realized gains and losses are reported on the basis of identified cost of
securities delivered.
A Fund's portfolio of investments may include securities purchased on a
when issued basis, which may be settled in the month after the issue date.
Interest income is not accrued until the settlement date.
Certain collective investment funds and registered investment companies
in which the Funds invest may retain investment income and net realized gains.
Accordingly, realized and unrealized gains
55
and losses reported by a Fund may include a component attributable to
investment income of the underlying funds.
C. Foreign Currency Transactions
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from disposition of foreign currencies,
currency gains and losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of net
investment income accrued and the U.S. dollar amount actually received. The
effects of changes in foreign currency exchange rates on investments in
securities are not segregated in the Statement of Operations from the effects
of changes in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investments in securities.
Net unrealized foreign exchange gains and losses arising from changes in
the value of other assets and liabilities as a result of changes in foreign
exchange rates are included as increases and decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
D. Income Taxes
State Street Bank, on behalf of the Trust, has received a favorable
determination letter dated March 9, 1992, from the Internal Revenue Service,
which concluded that the Trust is a trust arrangement described in Rev. Rule.
81-100, 1981, C.B. 326 and exempt from federal income tax pursuant to Section
501(a) of the Internal Revenue Code. Accordingly, no provision for Federal
income taxes is required.
E. Sales and Redemptions of Units of Participation and Distributions
The units offered represent interests in the Funds and Portfolios
established under the Trust. The Trust may offer and sell an unlimited number
of units. Each unit will be offered and sold daily at the respective Fund's
and Portfolio's net asset value.
All Funds: Pursuant to the Declaration of Trust, the Funds and Portfolios
are not required to distribute their net investment income or gains from the
sale of portfolio investments.
F. TBA Commitments and Roll Transactions
The Balanced Fund and Intermediate Bond Fund may enter into TBA (to be
announced) commitments to purchase securities for a fixed unit price at a
future date beyond customary settlement time. Although the unit price for a
TBA has been established, the principal value has not been finalized. However,
the amount of the TBA commitment will not fluctuate more than 1.0% from the
principal amount. These Funds hold, and maintain until the settlement date,
cash or liquid securities in an amount sufficient to meet the purchase price.
TBA commitments may be considered securities in themselves, and involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date, and such risk is in addition to the risk of decline in the
value of these Fund's other assets. Risks may also arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of their contracts. During the period prior to settlement, the Fund will
not be entitled to accrue interest and/or receive principal payments.
Unsettled TBA commitments are valued at the current market value of the
underlying securities, generally according to the procedures under "Security
Valuation" above. These Funds may dispose of a commitment prior to settlement
if the Fund's advisor deems it appropriate to do so. Upon settlement date,
these Funds may take delivery of the securities or defer (roll) the delivery
to the next month.
G. Futures Contracts
The Intermediate Bond Fund may use, on a limited basis, futures contracts
to manage exposure to the bond market, and as a substitute for comparable
market positions in the securities held by the Fund (with respect to the
portion of its portfolio that is held in cash items). Buying futures tends to
increase a fund's exposure to the underlying instrument. Selling futures tends
to decrease a fund's exposure to the
56
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
trades where the exchange or board of trade acts as the counterparty to the
transaction. Thus, credit risk on such transactions is limited to the failure
of the exchange or board of trade. Losses in value may arise from changes in
the value of the underlying instruments or if there is an illiquid secondary
market for the contracts. In addition, there is the risk that there may not be
an exact correlation between a futures contract and the underlying index.
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. Forward Foreign Currency Contracts
The Intermediate Bond Fund and the International Equity Fund may use
forward foreign currency contracts to facilitate transactions in foreign
securities or as a hedge against the foreign currency exposure of either
specific transactions or portfolio positions. When entering into a forward
foreign currency contract, the Fund agrees to receive or deliver a fixed
quantity of foreign currency for an agreed-upon price on an agreed upon future
date. Such contracts are valued based upon the difference in the forward
exchange rates at the dates of entry into the contracts and the forward rates
at the reporting date, and any resulting unrealized gains or losses are
recorded in the Fund's financial statements. The Fund records realized gains
or losses at the time the forward contract is extinguished by entry into a
closing transaction or by delivery of the currency. Risks in foreign currency
contracts arise from the possible inability of counterparties to meet the
contracts' terms and from movements in currency values.
I. Interest Rate Swap Contracts
The Intermediate Bond Fund may invest in swap contracts. A swap is an
agreement to exchange the return generated by one instrument for the return
generated by another instrument. The Fund uses interest rate swap contracts to
manage its exposure to interest rates. Interest rate swap contracts typically
represent the exchange between the Fund and a counterparty of respective
commitments to make variable rate and fixed rate payments with respect to a
notional amount of principal. Swap contracts may have a term of one to ten
years, but typically require periodic interim settlement in cash, at which
time the specified variable interest rate is reset for the next settlement
period. During the period that the swap contract is open, the contract is
marked-to-market as the net amount due to or from the Fund in accordance with
the terms of the contract based on the closing level of the interest accrual
through valuation date. Changes in the value of swap contracts are recorded as
unrealized gains or losses. Periodic cash settlements on interest rate swaps
are recorded as adjustments to interest income.
Entering into a swap contract involves, to varying degrees, elements of
credit, market and interest rate risk in excess of the amounts reported in the
Statement of Assets and Liabilities. Notional principal amounts are used to
express the extent of involvement in the transactions, but are not delivered
under the contracts. Accordingly, credit risk is limited to any amounts
receivable from the counterparty. To reduce credit risk from potential
counterparty default, the Fund enters into swap contracts with counterparties
whose creditworthiness has been approved by the Advisor. The Fund bears the
market risk arising from any change in interest rates.
At June 30, 2003, the Intermediate Bond Fund held no interest rate swap
contracts.
57
J. Swaption Contracts
The Intermediate Bond Fund may purchase or write swaption contracts to
manage exposure to fluctuations in interest rates or hedge the fair value of
other Fund investments. Swaption contracts entered into by the Fund typically
represent an option that gives the purchaser the right, but not the
obligation, to enter into a swap contract on a future date. If a call swaption
is exercised, the purchaser will enter a swap to receive the fixed rate and
pay a floating rate in exchange. Exercising a put would entitle the purchaser
to pay a fixed rate and receive a floating rate.
Swaption contracts are marked-to-market as the net amount due to or from
the Fund in accordance with the terms of the contract based on the closing
level of the relevant market rate of interest. Changes in the value of the
swaption are reported as unrealized gains or losses. Gain or loss is
recognized when the swaption contract expires or is closed. When the Fund
writes a swaption, the premium received is recorded as a liability and is
subsequently adjusted to the current fair value of the swaption written.
Premiums received from writing swaptions that expire unexercised are treated
by the Fund on the expiration date as realized gains from investments. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or if the premium is less than the amount paid for the closing
purchase, as a realized loss.
Entering into a swaption contract involves, to varying degrees, the
elements of credit, market and interest rate risk in excess of the amounts
reported in the Statement of Assets and Liabilities, associated with both
option contracts and swap contracts. To reduce credit risk from potential
counterparty default, the Fund enters into swaption contracts with
counterparties whose creditworthiness has been approved by the Advisor. The
Fund bears the market risk arising from any change in index values or interest
rates.
A summary of the written put options for the quarter ended June 30, 2003
is as follows:
Number of
Written Put Option Contracts Contracts Premiums
- ---------------------------------------------------------------------------------------- ----------------- ----------------
Outstanding, beginning of period 232,000 $ 154,325
----------------- ----------------
Options written -- --
Options exercised -- --
Options expired 219,000 --
Options closed -- --
----------------- ----------------
Outstanding, end of period 13,000 $ 34,970
----------------- ----------------
At June 30, 2003, the Fund held the following written put options contracts:
Appreciation/
Security Contracts (Depreciation)
- ---------------------------------------------------------------------------------------- ----------------- ----------------
Pay fixed 6.50%, receive LIBOR, commencing March 7, 2006 13,000 $ 16,290
Total premiums received $0
A summary of the written call options for the quarter ended June 30, 2003 is as follows:
Number of
Written Call Option Transactions Contracts Premiums
- ---------------------------------------------------------------------------------------- ----------------- ----------------
Outstanding, beginning of period 183,000 $ 178,571
----------------- ----------------
Options written -- --
Options exercised -- --
Options expired -- --
58
Options closed -- --
----------------- ----------------
Outstanding, end of period 183,000 $ 178,571
----------------- ----------------
At June 30, 2003, the Fund held the following written call option contracts:
Appreciation/
Security Contracts (Depreciation)
- ---------------------------------------------------------------------------------------- ----------------- ----------------
Pay fixed 4.50%, receive LIBOR, commencing March 7, 2006 13,000 $ -19,907
Pay fixed 3.00%, receive LIBOR, commencing May 14, 2004 64,000 -40,198
Pay fixed 4.50%, receive LIBOR, commencing March 7, 2006 106,000 -52,799
Total premiums received $0
K. Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
3. Investment Advisory, Investment Management and Related Party Transactions
State Street Bank has retained the services of Capital Guardian Trust
Company, a wholly-owned subsidiary of The Capital Group Companies, Inc.;
Dresdner RCM Global Investors LLC, the institutional investment management
area of Dresdner Bank Group; Sit Investment Associates, Inc.; Morgan Stanley
Investment Management, Inc. (successor to Miller Anderson & Sherrerd);
Alliance Capital Management L.P.'s Bernstein Investment Research and
Management Unit; Pacific Investment Management Company; Ariel Capital
Management; Turner Investment Partners; and effective April 1,2003
Philadelphia International Advisors, LP and JP Morgan Fleming Asset Management
Limited to advise it with respect to its investment responsibility and has
allocated the assets of certain of the Funds among the investment advisors.
Each investment advisor recommends to State Street Bank investments and
reinvestments of the assets allocated to it in accordance with the investment
policies of the respective Fund as described above. State Street Bank
exercises discretion with respect to the selection and retention of the
investment advisors and may remove, upon consultation with ABRA, an investment
advisor at any time.
A fee is paid to each investment advisor for certain of the Funds based
on the value of the assets allocated to that investment advisor and the
respective breakpoints agreed to in the Advisor's contract. These fees are
accrued on a daily basis and paid monthly from the assets. Actual fees paid to
each investment advisor during the year are disclosed in the prospectus. Fee
rate ranges based on the respective breakpoints are as follows:
Investment Advisor Fee Rate Range
- ------------------------------------------------------------------------------------------------ -------------------------
Capital Guardian Trust Company (Large-Cap Growth Equity, Small-Cap Equity and Balanced) .225% to .50%*
Dresdner RCM Global Investors LLC (Large-Cap Growth Equity) .25% to .70%
Philadelphia International Advisors LP (International Equity) .45% to .75%
Sit Investment Associates (Small-Cap Equity) .60% to 1.00%
Morgan Stanley Investment Management (Balanced) .125% to .50%
Alliance Capital Management L.P. (Large-Cap Value Equity) .15% to .50%
JP Morgan Fleming Asset Management Limited (International Equity) .60% to .75%
Pacific Investment Management Co. (Intermediate Bond) .25% to .50%
Ariel Capital Management (Mid-Cap Value Equity) .50% to .75%
Turner Investment Partners (Mid-Cap Growth Equity) .55% to .65%
- ---------
59
* Subject to a 5% fee reduction based on aggregate fees.
Investment Advisor Fees Paid
- ------------------------------------------------------------------------------------------------ -------------------------
Alliance Capital Management LP. (Large-Cap Value Equity) $ 247,625
Ariel Capital Management (Mid-Cap Value Equity) 44,125
Capital Guardian Trust Company (Balanced) 252,330
Capital Guardian Trust Company (Large-Cap Growth Equity) 277,782
Capital Guardian Trust Company (Small-Cap Equity) 128,895
Dresdner RCM Global Investors LLC (Large-Cap Growth Equity) 360,630
J.P. Morgan Fleming Asset Management (International Equity) 68,772
Morgan Stanley Investment Management (Balanced) 183,382
Pacific Investment Management Company (Intermediate Bond) 340,846
Sit Investment Associates (Small-Cap Equity) 364,757
Turner Investment Partners (Mid-Cap Growth Equity) 38,220
Philadelphia Investment Advisors (International) 48,059
A separate program fee ("Program fee") is paid to each of State Street
Bank and ABRA. These fees are allocated to each Fund based on net asset value
and are accrued on a daily basis and paid monthly from the assets of the
Funds. The ABRA Program fee is based on the value of Program assets based on
the following annual rates:
Value of Program Assets 2003 Rate
--------------------------------------------- --------------------------
First $500 million .075%
Next $850 million .065%
Next $1.15 billion .035%
Next $1.5 billion .025%
Over $4.0 billion .015%
ABRA received Program fees of $366,611 for the quarter ended June 30,
2003.
The State Street Program fee is calculated monthly as one-twelfth of the
sum of (a) $750,000 plus (b) $201 multiplied by the number of participants in
the Program other than active participants without account balances as of the
last business day of the immediately preceding month, plus (c) $201 multiplied
by the excess, if any, of the number of active participants of the Program
without account balances over the number of such participants as of December
31, 1998. Effective January 1, 2003 and continuing through December 31, 2006,
the Program fee payable to State Street is computed monthly, based on the
number of participants in the Program, as follows: the monthly program expense
fee will be one-twelfth of the sum of (i) $800,000 plus (ii) $194 multiplied
by the number of participants in the Program, other than active participants
without account balances, as of the last business day of the preceding month,
plus (iii) $194 multiplied by the excess, if any, of the number of active
participants of the Program without account balances as of the last Business
Day of the preceding month over the number of such participants as of December
31, 2002. This fee will accrue daily and be payable monthly.
A portion of the State Street Bank Program fee is reimbursed or reduced
each year based on the amount of retirement plan assets held by State Street
Bank on behalf of law firm and law-related clients identified by State Street
Bank and ABRA that do not participate in the Program. The amount of the
reimbursement is equal to .02% of the first $50 million of assets in such
plans during the preceding year and .01% of any assets in excess of $50
million. The accrued reduction for the quarter ended June 30, 2003 totaled
$16,387 and is allocated to each Fund based on net asset value.
60
Benefit payments under the Program generally are made by check. Before
such a check becomes payable, funds for its payment are transferred from the
Collective Trust to a non-interest bearing account with State Street. No
separate fee is charged for processing benefit payments. Rather, State Street
retains any earnings attributable to outstanding benefit checks, and these
earnings have been taken into account in setting State Street's fees under the
Program. The program expense fee paid to State Street reflects a $300,000
reduction for earnings estimated to be attributable to outstanding benefit
checks for 2003.
A fee is paid to State Street Bank for its management, administration and
custody of the assets in the Investment Options (other than Self-Managed
Brokerage Accounts and Equitable Real Estate Accounts) at the following rates:
Value of Assets in all Funds 2002 Rate 2003 Rate
------------------------------------------- ------------ -------------
First $1.0 billion .15% .156%
Next $1.8 billion .058% .058%
Over $2.8 billion .025% .025%
This fee is accrued on a daily basis and paid monthly from the assets of
the Funds. The trustee, management and administrative fees attributable to the
funds held in the Structured Portfolio Service are also accrued and paid from
the funds.
State Street Bank received program, trustee, management and
administration fees which aggregated $3,156,409 for the quarter ended June 30,
2003. These fees are allocated to each Fund based on net asset value.
The Portfolios are not charged a separate annual fee.
4. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities
excluding U.S. Government securities and short-term investments were as
follows:
Quarter ended
June 30, 2003
----------------------------------------------------
Purchases Sales
---------------------- --------------------
Balanced Fund $ 287,004,632 $ 341,530,758
Index Equity Fund 25,532,039 8,516,739
Intermediate Bond Fund 690,739,680 586,148,278
International Equity Fund 125,191,623 120,355,729
Large-Cap Growth Equity Fund 62,746,508 82,168,197
Large-Cap Value Equity Fund 32,524,001 24,854,825
Mid-Cap Growth Equity Fund 16,197,935 10,074,053
Mid-Cap Value Equity Fund 7,162,212 1,309,903
Small-Cap Equity Fund 55,947,962 55,044,467
Stable Asset Return Fund -- --
Conservative Structured Portfolio Service 10,665,673 4,136,762
Moderate Structured Portfolio Service 23,156,491 11,472,842
Aggressive Structured Portfolio Service 16,197,935 10,074,053
The aggregate cost of purchases and proceeds from sales of U.S.
Government securities and short-term investments were as follows:
Quarter ended June 30, 2003
----------------------------------------------------
Purchases Sales
61
---------------------- --------------------
Balanced Fund $ 220,476,479 $ 185,993,364
Intermediate Bond Fund 410,972,783 462,935,496
5. Geographic and Industry Concentration
American Depositary Receipts ("ADRs") represent ownership of foreign
securities on deposit with a domestic custodian bank. Certain Funds maintain
investments in ADRs, as well as direct investments in foreign securities,
which involve special risks. These securities may be subject to foreign
government taxes that reduce their attractiveness. Other risks of investing in
such securities include political or economic instability in the country
involved, the difficulty of predicting international trade patterns and the
possibility of the imposition of exchange controls. Foreign issuers generally
are not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic issuers. There is
generally less regulation of stock exchanges, brokers, banks and companies
abroad than in the United States. With respect to certain foreign countries,
there is a possibility of expropriation or diplomatic developments, which
could adversely affect investment in these countries. ADRs do not lessen the
risk of investing in foreign issuers; however, by investing in ADRs rather
than directly in foreign issuers' stock, the Funds will avoid currency risks
during the settlement period for purchases or sales. In addition, the domestic
market for ADRs may be more liquid than the foreign market for the underlying
securities.
Substantially all of the Small-Cap Equity Fund's investments are in
securities of small companies, which typically have greater market and
financial risk than larger, more diversified companies. These companies are
often dependent on one or two products in rapidly changing industries and may
be more vulnerable to competition from larger companies with greater resources
and to economic conditions that affect their market sector.
SARF invests in a collective investment fund that maintains investments
in contracts issued by insurance companies, banks and financial institutions.
The issuing institution's ability to meet its contractual obligations under
the respective contracts may be affected by future economic and regulatory
developments.
6. Securities Lending Income
A portion of the income generated upon investment in the State Street
Bank and Trust Company Russell 1000 Value Index Securities Lending Fund, the
State Street Bank and Trust Company Russell 3000 Index Securities Lending Fund
and the State Street Bank and Trust Company Russell 1000 Growth Index
Securities Lending Fund is remitted to the Large Cap Value Fund, the Index
Equity Fund and the Large Cap Growth Fund while the remainder is allocated
between the Funds and State Street Bank in its capacity as lending agent.
Negotiated lenders' fees are received for those loans collateralized by
securities or letters of credit, if any. Securities lending fee income, if
any, is recorded on an accrual basis by the Fund.
62
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
Balanced Fund
The Balanced Fund invests in publicly traded common stocks, other
equity-type securities, long-term debt securities and money market
instruments. The Balanced Fund seeks to achieve, over an extended period of
time, total returns comparable to or superior to an appropriate combination of
broad measures of the domestic stock and bond markets.
For the quarter ended June 30, 2003, the Balanced Fund experienced a
total return, net of expenses, of 12.15%. For the same period, a combination
of the Russell 1000 Index and the Lehman Brothers Aggregate Bond Index
weighted 60%/40%, respectively, produced an investment record of 10.33%. For
the six months ended June 30, 2003, the Fund experienced a total return, net
of expenses, of 12.24% compared to an investment record of 9.00% for the
60/40% combination of the Russell 1000 Index and the Lehman Brothers Aggregate
Bond Index. The Russell 1000 Index and the Lehman Brothers Aggregate Bond
Index do not include an allowance for the fees that an investor would pay for
investing in the securities that comprise the indices. In the equity portion
of the Fund, good relative results in the second quarter and year to date came
from stock selection, especially within information technology. Within the
information technology sector, the portfolio's communications equipment and
semiconductor capital equipment stocks, many of which hindered results in
2002, rose sharply. Consumer Discretionary and Industrials were also large
contributors to performance because of stock selection within these sectors.
Large holdings in the financial, pharmaceuticals, media, leisure, and
utilities areas that suffered last year increased substantially during the
quarter, though there were some portfolio holdings in the financial and
consumer discretionary sectors that dampened results. Stock selection among
consumer staples was also positive, as good results for tobacco and food
retailing far outweighed earnings disappointments in other areas of the
sector.
The fixed income portion of the Fund underperformed the benchmark because
the duration was shorter than that of the benchmark and an overweight in
higher-coupon mortgages had an adverse effect on relative performance during
the second quarter and year-to-date periods; this was offset only partially by
favorable contributions from corporate bonds in the quarter and the
year-to-date periods.
The most heavily weighted sectors in the equity portion of the Balanced
Fund were technology, health care and finance. Securities representing the
largest holdings based on market value in the Balanced Fund at June 30, 2003
included Astrazeneca PLC, Washington Mutual Inc., Pfizer Inc., Allergan Inc.
and SLM Corp. The fixed income portion was heavily invested in government
agency and mortgage related issues.
Index Equity Fund
The Index Equity Fund invests in common stocks of U.S. companies that are
included in the Russell 3000 Index, with the overall objective of achieving
long-term growth of capital. The Russell 3000 Index represents approximately
98% of the U.S. equity market based on the market capitalization of the
companies in the Russell 3000 Index.
For the quarter June 30, 2003, the Fund produced a total return, net of
expenses, of 16.01%. By comparison, the Russell 3000 Index produced an
investment record of 16.24% for the same period. For the six months ended June
30, 2003, the Fund experienced a total return, net of expenses, of 12.29%
compared to an investment record of 12.71% for Russell 3000 Index. The Russell
3000 Index does not include any allowance for the fees that an investor would
pay for investing in the stocks that comprise the
63
index. The performance of the Fund was consistent with the performance of the
index after taking into account fees.
Intermediate Bond Fund
The Intermediate Bond Fund's investment objective is to achieve a total
return from current income and capital appreciation by investing primarily in
a diversified portfolio of fixed income securities. The Fund generally
maintains a portfolio duration of three to six years.
For the quarter ended June 30, 2003, the Intermediate Bond Fund
experienced a total return, net of expenses, of 2.56%. As a comparison, the
Lehman Brothers Aggregate Bond Index produced an investment record of 1.39%
for the same period. For the six months ended June 30, 2003, the Fund
experienced a total return, net of expenses, of 4.19% compared to an
investment record of 3.93% for the Lehman Brothers Aggregate Bond Index. The
Lehman Brothers Aggregate Bond Index does not include an allowance for the
fees that an investor would pay for investing in the securities that comprise
the index. The Fund's performance included modestly positive interest rate
strategies, slightly higher than benchmark interest rate sensitivity during
the period when rates fell most. An allocation to Treasury Inflation
Protection Bonds (TIPS) helped the portfolio outperform the benchmark over the
first half of 2003. However, TIPS were a modest drag on performance in 2nd
Quarter as real yields failed to rally as much as their nominal counterparts.
While the mortgage sector experienced lackluster returns over the quarter and
year to date, mortgage security selection in the portfolio helped the
portfolio to outperform the benchmark. An underweight to the corporate sector
was a drag on returns as this sector outperformed less risky sectors of the
bond market. However, security selection, especially among some higher
yielding issuers, enhanced performance for the quarter and year to date.
International Equity Fund
The International Equity Fund's investment objective is to seek long-term
growth of capital through investing primarily in common stocks of established
non-U.S. companies. The Fund intends to diversify investments broadly among
countries of the Far East and Europe, as well as in South Africa, Australia,
Canada and other areas. The International Equity Fund will seek to achieve,
over an extended period of time, total returns comparable to or superior to
broad measures of the international (non-U.S.) stock market.
Effective April 1, 2003, State Street retained (i) JP Morgan Fleming
Asset Management (London) Limited to be an Investment Advisor for the
International Equity Fund for approximately one-half of the assets in the
International Equity Fund, and (ii) Philadelphia International Advisors, L.P.
to serve as Investment Advisor for the other one-half of the assets in the
International Equity Fund. Prior to April 1, 2003, the assets of the
International Equity Fund were allocated in two equal portions, one portion of
which was invested in the T. Rowe Price International Stock Fund, a registered
investment company managed by T. Rowe Price International, Inc., and the other
portion of which was invested in a collective trust portfolio for which advice
was obtained from Dresdner RCM Global Investors LLC.
For the quarter ended June 30, 2003, the International Equity Fund
experienced a total return, net of expenses, of 18.71%. For the same period,
the total return of the Morgan Stanley Capital International All-Country World
Ex-U.S. Free Index (the "MSCI AC World Ex-U.S. Index") was 19.58%. For the six
months ended June 30, 2003, the Fund experienced a total return, net of
expenses, of 7.60% compared to an investment record of 10.74% for the MSCI AC
World Ex-U.S. Index. The MSCI AC World Ex-U.S. Index does not include an
allowance for the fees that an investor would pay for investing in the
securities that comprise the index.
The underperformance of the Fund for the six month period is due in part
to a weak performance in the first quarter along with the second quarter
performance being adversely affected by the cost of transitioning to the new
investment advisors. With respect to the second quarter, one portion of the
Fund had a strong performance due to superior stock selection in financial and
consumer staples stocks. Geographically, the portfolio also had solid security
selection within the UK and French markets. The portfolio also benefited from
an overweight in Europe as a whole (in particular Germany and Greece) and to a
lesser extent an underweight in Japan. In the other portion of the Fund, the
major driver of returns was stock selection. Stock selection proved to be
positive in most markets with a strong bounce, particularly in Europe. In
Japan, the Fund underperformed as it did not own some of the domestic cyclical
names, including steels,
64
which did very well anticipating a surge in global economic activity.
Overweighting defensive pharmaceuticals was a negative.
The most heavily weighted countries in the International Equity Fund were
the United Kingdom, Japan, France, Germany and the Netherlands. Securities
representing the largest holdings based on market value in the Fund at June
30, 2003 included Total Fina Elf SA, ENI SPA, Novartis AG, Canon Inc. and
Vodafone Group PLC.
Large-Cap Growth Equity Fund
The Large-Cap Growth Equity Fund invests primarily in common stocks and
other equity-type securities issued by large, well-established companies and
seeks to achieve long-term growth of capital through increases in the value of
the securities it holds and to realize income principally from dividends on
such securities. A portion of the Large-Cap Growth Equity Fund (approximately
33 1/3%) is invested to replicate the Russell 1000 Growth Index, which is
composed of those Russell 1000 securities with a greater than average growth
orientation. The remainder of the Large-Cap Growth Equity Fund is actively
managed. The Large-Cap Growth Equity Fund seeks to achieve, over an extended
period of time, total returns comparable to or superior to those attained by
broad measures of the domestic stock market.
For the quarter ended June 30, 2003, the Large-Cap Growth Equity Fund
experienced a total return, net of expenses, of 15.28%. By comparison, the
Russell 1000 Growth Index produced an investment record of 14.31% for the same
period. For the six months ended June 30, 2003, the Fund experienced a total
return, net of expenses, of 14.39% compared to an investment record of 13.09%
for Russell 1000 Growth Index. The Russell 1000 Growth Index does not include
an allowance for the fees that an investor would pay for investing in the
securities that comprise the index. One separately managed portion of the Fund
outperformed the index as a result of good relative results in the second
quarter and year to date from stock selection, especially within information
technology. Within the information technology sector, the portfolio's
communications equipment and semiconductor capital equipment stocks, many of
which hindered results in 2002, rose sharply. Consumer Discretionary and
Industrials were also large contributors to performance because of stock
selection within these sectors. Large holdings in the financial,
pharmaceuticals, media, leisure, and utilities areas that suffered last year
increased substantially during the quarter, though there were some portfolio
holdings in the financial and consumer discretionary sectors that dampened
results. Stock selection among consumer staples was also positive, as good
results for tobacco and food retailing far outweighed earnings disappointments
in other areas of the sector. The other separately managed portion of the Fund
underperformed the index due to both industry strategy and stock selection.
Within industry strategy, an overweight to Household & Personal Products and
an underweight to Semiconductors & Instruments hurt performance. The
underweight to Health Care Equipment & Supplies modestly helped performance.
Stock selection had a negative impact on the portfolio during the quarter,
specifically within the Food Beverage & Tobacco, Retailing, and Health Care
Equipment & Supplies industries. Stock selection was positive, however, in the
Pharmaceuticals and Health Care Providers & Services industries. The
performance of the index portion of the Fund was consistent with the
performance of the index after taking into account fees.
65
The most heavily weighted sectors in the Large-Cap Growth Equity Fund
were health care, technology and consumer discretionary. Securities
representing the largest holdings based on market value in the separately
managed portion of the Fund at June 30, 2003 included Pfizer Inc., Microsoft
Corp., General Electric Co., Astrazeneca PLC and Cisco Systems Inc.
Large-Cap Value Equity Fund
The Fund seeks to outperform, over extended periods of time, broad
measures of the domestic stock market. The Fund invests primarily in common
stocks of companies that State Street and its investment advisor consider
undervalued. A portion of the Large-Cap Value Equity Fund (approximately 25%)
is invested to replicate the Russell 1000 Value Index, which is composed of
those Russell 1000 stocks with a greater than average value orientation. The
remainder of the Value Equity Fund is actively managed.
For the quarter ended June 30, 2003, the Large-Cap Value Equity Fund
experienced a total return, net of expenses, of 16.35%. By comparison, the
Russell 1000 Value Index produced an investment record of 17.27% for the same
period. For the six months ended June 30, 2003, the Fund experienced a total
return, net of expenses, of 11.17% compared to an investment record of 11.57%
for the Russell 1000 Value Index. The Russell 1000 Value Index does not
include an allowance for the fees that an investor would pay for investing in
the securities that comprise the index. The Fund's actively managed portion's
underperformance for the year-to-date and second quarter periods for the most
part resulted from sector allocation. In particular, the portfolio's
overweight of the materials & processing sector and underweight of the
consumer discretionary sector hurt performance. Stock selection within these
sectors was also weak. Disappointments included Fannie Mae and Freddie Mac.
Freddie Mac declined after disclosing accounting issues that resulted in the
overstatement of past years' earnings; Fannie Mae fell in sympathy. Cable
provider Comcast, on the other hand, rose strongly in the first half of the
year.
On the positive side, many of the technology, health care and producer
durables holdings in the actively managed portion of the Fund fared well.
Among the most notable tech stocks were Corning and Nortel Networks; Humana
and HealthNet were our top-performing health insurers-- their performance was
buoyed by a first round of industry surveys about premium increases for health
insurance that showed strong gains; homebuilders Centex and KB Home also
performed well. During the second quarter holdings in the consumer staples
sector, particularly positions in Altria and Supervalue, contributed to
positive performance. Altria, which rose almost 54% this quarter, benefited
from the dismissal of the Engle class action suit in Florida, which has
far-reaching implications for future tobacco class action lawsuits. Supervalu
benefited after Fleming, a major competitor, filed for bankruptcy in April and
investors anticipated that Supervalu would gain market share. Another bright
spot this quarter came from outperformance by several of the portfolio's
utility holdings. For instance, American Electric Power and PPL performed
well. These electric companies have strengthened their balance sheets, and
investor concerns about their financial stress have abated. Telecommunications
holdings--Sprint, Sprint PCS, AT&T, AT&T Wireless and Qwest
Communications--posted strong gains on news that was modestly positive. For
the indexed portion of the Fund, the performance was consistent with the
performance of the index after taking into account expenses.
The most heavily weighted sectors in the Large-Cap Value Equity Fund were
finance, utilities and energy. Securities representing the largest holdings in
the separately managed portion of the Fund based on market value at June 30,
2003 included Exxon Mobil Corp., Citigroup Inc., Bank of America Corp.,
Chevron Texaco Corp., and Hewlett Packard Co.
66
Mid-Cap Growth Equity Fund
The Mid-Cap Growth Equity Fund invests primarily in common stocks and
other equity-type securities issued by companies with market capitalization
between $1 billion and $12 billion at the time of investment that the Fund
believes have a strong earnings growth potential. The Mid-Cap Growth Equity
Fund seeks to achieve, over an extended period of time, total returns
comparable to or superior to those attained by broad measures of the domestic
stock market.
For the quarter ended June 30, 2003, the Mid-Cap Growth Equity Fund
experienced a total return, net of expenses, of 19.32%. By comparison, the
Russell Mid-Cap Growth Index produced a return of 18.76% for the same period.
For the six months ended June 30, 2003, the Fund experienced a total return,
net of expenses, of 20.45% compared to an investment record of 18.74% for the
Russell Mid-Cap Growth Index. The Russell Mid-Cap Growth Index does not
include an allowance for the fees that an investor would pay for investing in
the securities that comprise the index. The outperformance of the index for
the second quarter can mainly be attributed to over-weighting the higher beta
and growth names within each sector, which drove the market. Stocks ranking in
the highest beta quintile were over-weighted by 11% during this period and
returned 36%, contributing about 200 basis points toward outperformance
relative to the index. Sectors where this type of stock selection added the
most value were Technology, Producer Durables, and Financial Services. Within
the technologies sector, owning the electronics, communications, and
semiconductor companies such as VeriSign, Nortel, Juniper, and PMC-Sierra
added almost 100 basis points to total performance. In the producer durables
sector, production technology companies such as Lam Research, Novellus, and
Teradyne added about 60 basis points to performance. In the Financial services
sector, owning Providian Financial and AMG added an additional 30 basis
points.
The most heavily weighted sectors in the Mid-Cap Growth Equity Fund were
health care, consumer discretionary and technology. Securities representing
the largest holdings based on market value in the Fund at June 30, 2003
included Medimmune Inc., Gilead Sciences Inc., Aetna Inc., Trimeris Inc., and
Yahoo Inc.
Mid-Cap Value Equity Fund
The Mid-Cap Value Equity Fund invests primarily in common stocks and
other equity-type securities issued by companies with market capitalization
between $1 billion and $12 billion at the time of investment. The Fund
invests primarily in sectors and securities that State Street and its
investment advisor consider undervalued. The Mid-Cap Value Equity Fund seeks
to outperform, over extended periods of time, broad measures of the domestic
stock market.
For the quarter ended June 30, 2003, the Mid-Cap Value Equity Fund
experienced a total return, net of expenses, of 20.80%. By comparison, the
Russell Mid-Cap Value Index produced an investment record of 17.89% for the
same period. For the six months ended June 30, 2003, the Fund experienced a
total return, net of expenses, of 13.14% compared to an investment record of
13.11% for the Russell Mid-Cap Value Index. The Russell Mid-Cap Value Index
does not include an allowance for the fees that an investor would pay for
investing in the securities that comprise the index. During the quarter,
positive contributions to returns came from holdings in the Consumer
Discretionary & Services, Financial Services and Health Care sectors of the
market. These sectors were the same areas that hindered performance in the
first quarter. Companies experiencing a particularly strong second quarter
included Cendant, which benefited from very solid results in its mortgage
business; Interpublic Group, which experienced a positive response to its new
management team and improving results; Janus Capital Group and Northern Trust,
whose businesses were buoyed by the rising stock market; and Carnival Corp.
which saw its business recover nicely as concerns over long-term travel trends
eased. Conversely, companies in the Consumer Staples sector of the market
adversely affected results for the quarter, most notably Clorox.
67
The company pre-released earnings guidance on the low end of estimates,
causing the stock to tumble.
The most heavily weighted sectors in the separately managed portion of
the Mid-Cap Value Equity Fund were consumer discretionary, finance and
healthcare. Securities representing the largest holdings based on market value
in the Fund at June 30, 2003 included Northern Trust Corp., Pitney Bowes Inc.,
MBIA Inc., Carnival Corp. and Cendant Corp.
Small-Cap Equity Fund
The Small-Cap Equity Fund invests primarily in common stocks and
equity-type securities. It may also invest in preferred stocks and convertible
debt instruments and non-equity securities, including investment grade bonds,
debentures and high quality money market instruments when State Street deems
such investments to be appropriate in light of economic and market conditions.
The Fund seeks to achieve, over an extended period of time, total returns
comparable to or superior to those attained by broad measures of the domestic
stock market.
For the quarter ended June 30, 2003, the Small-Cap Equity Fund
experienced a total return, net of expenses, of 22.40%. By comparison, the
Russell 2000 Index produced an investment record of 23.42% for the same
period. For the six months ended June 30, 2003, the Fund experienced a total
return, net of expenses, of 16.79% compared to an investment record of 17.88%
for the Russell 2000 Index. The Russell 2000 Index does not include any
allowance for the fees that an investor would pay for investing in the stocks
that comprise the index. On one portion of the fund, good relative performance
in the second quarter was the result of stock selection. Many of the stocks
that hurt the portfolio in the first quarter came back and contributed to
returns in the second. Semiconductor production equipment companies and
consumer discretionary holdings contributed to returns. Consumer staples
holdings, however, detracted. Chemicals held back returns despite the
portfolio's reducing a key position during the quarter. Financials had mixed
results, although a long-standing underweight in the group was helpful for
both the quarter and year to date. Underweight in technology stocks hindered
performance during the quarter, although a small position in Internet-related
stocks helped returns as the portfolio benefited from industry consolidation.
The decision last quarter to add several biotechnology holdings paid off as
that group rallied. The other portion of the fund underperformed due in part
to the holding of cash reserves. With the market for small growth stocks
surging in the quarter, the holding of any cash reserves detracted from
performance. The remaining shortfall in performance resulted from stock
selection and group weighting. Every industry sector held produced a positive
return, but the weakest relative performance was in the health technology
group. The sector with the best relative performance was finance. There were
some outstanding individual stock performances in the quarter with ChipPAC and
Calpine both up more than 100%.
The most heavily weighted sectors in the Small-Cap Equity Fund were
technology, consumer discretionary and finance. Securities representing the
largest holdings based on market value in the Small-Cap Equity Fund at June
30, 2003 included New York Community Bancorp Inc., Cymer Inc., Intersil Inc.,
Biosite Inc. and Coach Inc.
Stable Asset Return Fund
The Stable Asset Return Fund invests primarily in investment contracts
issued by insurance companies, banks or other financial institutions. The
Stable Asset Return Fund also invests in high quality money market
instruments, including obligations of the United States government, notes,
bonds and
68
similar debt instruments of corporations, commercial paper, certificates of
deposit and time deposits, bankers' acceptances, variable and indexed interest
notes and repurchase agreements.
For the quarter ended June 30, 2003, the Stable Asset Return Fund
produced an annualized return, net of expenses, of 3.24%. By comparison, the
Money Fund Report Money Market Fund "Tier One" Average (the "Money Fund report
Average") for the same period was 0.53%. A combination of the Ryan Labs Three
Year GIC Index and the Money Fund Report Average, weighted 70%/30%,
respectively, produced an annualized investment result of 3.47%. For the six
month period ended June 30, 2003, the Stable Asset Return Fund produced an
annualized return, net of expenses, of 3.32%, the Money Fund report Average
for the same period was 0.58% and a combination of the Ryan Labs Three Year
GIC Index and the Money Fund Report Average, weighted 70%/30%, respectively,
produced an annualized investment result of 3.84%. The Fund's strong
performance relative to the Money Fund Report Average is partly attributable
to the longer average maturity of the Fund's portfolio. The Fund's
underperformance relative to the combination benchmark was because the Fund
generally had Short-Term Investment Products in excess of 30% of its portfolio
and this portion of the portfolio had lower returns than the portion invested
in investment contracts. Throughout the year the Federal Reserve has continued
to maintain the discount rate at historically low levels and the Fund's
overall return performance trended lower.
Structured Portfolio Service
The portfolios of the Structured Portfolio Service invest in the funds
described above according to conservative, moderate and aggressive portfolio
allocations as follows:
Conservative Portfolio Allocation
- ---------------------- ----------
Stable Asset Return Fund 30%
Intermediate Bond Fund 35%
Large-Cap Value Equity Fund 7%
Large-Cap Growth Equity Fund 7%
Index Equity Fund 14%
International Equity Fund 7%
Moderate Portfolio Allocation
- ------------------ ----------
Stable Asset Return Fund 10%
Intermediate Bond Fund 30%
Large-Cap Value Equity Fund 9%
Large-Cap Growth Equity Fund 9%
Index Equity Fund 23%
Mid-Cap Value Equity Fund 2%
Mid-Cap Growth Equity Fund 2%
International Equity Fund 15%
Aggressive Portfolio Allocation
- -------------------- ----------
Intermediate Bond Fund 15%
Large-Cap Value Equity Fund 13%
Large-Cap Growth Equity Fund 13%
Index Equity Fund 30%
Mid-Cap Value Equity Fund 3%
69
Mid-Cap Growth Equity Fund 3%
Small-Cap Equity Fund 3%
International Equity Fund 20%
For the quarter ended June 30, 2003, the Structured Portfolio Service
experienced a total return, net of expenses, of 6.78% for the Conservative
Portfolio, 10.85% for the Moderate Portfolio, and 14.83% for the Aggressive
Portfolio. For the six months ended June 30, 2003, the Structured Portfolio
Service experienced a total return, net of expenses, of 6.05% for the
Conservative Portfolio, 8.42% for the Moderate Portfolio, and 10.69% for the
Aggressive Portfolio.
Item 4. PROCEDURES AND CONTROLS.
Based on their evaluation as of the end of the period covered by this
quarterly report on Form 10-Q, the Collective Trust's Chief Executive Officer
and Chief Financial Officer have concluded that the Collective Trust's
disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) are effective to ensure that material information relating to the
Collective Trust would be made known to them, particularly during the period
in which this quarterly report on Form 10-Q was being prepared. There was no
change in the Collective Trust's internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in
connection with the evaluation required by Rule 13a-15(d) of the Exchange Act
that occurred during the period covered by this quarterly report on Form 10-Q
that has materially affected, or is reasonably likely to materially affect,
the Collective Trust's internal control over financial reporting.
70
PART II. OTHER INFORMATION.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the quarter ended June 30, 2003, the Collective Trust issued an
aggregate of approximately $209,930,270 in unregistered Units. Such Units were
offered and sold in reliance upon the exemption from registration under Rule
180 promulgated under the Securities Act of 1933 relating to exemption from
registration of interests and participations issued in connection with certain
H.R. 10 plans.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
Exhibit No. Description
- ----------- -----------
31.1 Certification of James S. Phalen pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Beth M. Halberstadt pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of James S. Phalen pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Beth M. Halberstadt pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
b. REPORTS ON FORM 8-K
None.
71
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized as of August 14, 2003.
AMERICAN BAR ASSOCIATION MEMBERS/ STATE
STREET COLLECTIVE TRUST
By: /s/ James S. Phalen
-------------------------------
Name: James S. Phalen
Title: Chief Executive Officer
By: /s/ Beth M. Halberstadt
-------------------------------
Name: Beth M. Halberstadt
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
31.1 Certification of James S. Phalen pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Beth M. Halberstadt pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of James S. Phalen pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Beth M. Halberstadt pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.