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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to Commission file No. 333-84814
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, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices)
(Zip Code)
(617) 786-3000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
AMERICAN BAR ASSOCIATION MEMBERS/
STATE STREET COLLECTIVE TRUST
FORM 10-Q
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)
Aggressive Equity Fund
Statement of Assets and Liabilities................. 1
Statement of Operations............................. 2
Statement of Changes in Net Assets...................3
Per-Unit Data and Ratios.............................4
Balanced Fund
Statement of Assets and Liabilities................. 5
Statement of Operations............................. 6
Statement of Changes in Net Assets...................7
Per-Unit Data and Ratios.............................8
Growth Equity Fund
Statement of Assets and Liabilities................. 9
Statement of Operations............................ 10
Statement of Changes in Net Assets..................11
Per-Unit Data and Ratios............................12
Index 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
Intermediate Bond Fund
Statement of Assets and Liabilities................ 17
Statement of Operations............................ 18
Statement of Changes in Net Assets..................19
Per-Unit Data and Ratios............................20
International 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
Stable Asset Return Fund
Statement of Assets and Liabilities................ 25
Statement of Operations............................ 26
Statement of Changes in Net Assets..................27
Per-Unit Data and Ratios............................28
Value Equity Fund
Statement of Assets and Liabilities................ 29
Statement of Operations............................ 30
Statement of Changes in Net Assets..................31
i
Page No.
--------
Per-Unit Data and Ratios............................32
Structured Portfolio Service - Conservative Portfolio
Statement of Assets and Liabilities................ 33
Statement of Operations............................ 34
Statement of Changes in Net Assets..................35
Per-Unit Data and Ratios............................36
Structured Portfolio Service - Moderate Portfolio
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 - Aggressive Portfolio
Statement of Assets and Liabilities................ 41
Statement of Operations............................ 42
Statement of Changes in Net Assets..................43
Per-Unit Data and Ratios............................44
Notes to unaudited financial statements........................45
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............52
PART II. OTHER INFORMATION
Item 5. Other Information.................................55
Item 6. Exhibits and Reports on Form 8-K..................57
SIGNATURES.....................................................58
ii
American Bar Association Members/ State Street Collective Trust
Aggressive Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $329,329,290) $280,758,084
Cash 605
Receivable for investments sold 767,322
Receivable for fund units sold 412,097
Dividends and interestreceivable 175,903
Other assets 100,927
------------
Total assets 282,214,938
------------
Liabilities
Payable for investments purchased 1,157,596
Payable for fund units purchased 0
Accrued expenses 399,642
Other liabilities 0
------------
Total liabilities 1,557,238
------------
Net Assets $280,657,700
============
Net asset value, redemption price and offering price per
unit of beneficial interest ($280,657,700/5,526,663
units outstanding) $ 50.78
============
1
American Bar Association Members/ State Street Collective Trust
Aggressive Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-----------------------------------------
Investment income:
Dividend income $ 302,416 $ 856,029
Interest income 326,310 469,280
-----------------------------------------
Total investment income 628,726 1,325,309
Expenses:
Investment advisory fee 315,911 645,122
State Street Bank & Trust Company - program fee 241,616 490,897
American Bar Retirement Association - program fee 36,477 73,146
Trustee, management and administration fees 63,436 127,392
Other expenses and taxes 38,760 73,924
-----------------------------------------
Total expenses 696,200 1,410,481
-----------------------------------------
Net investment loss (67,474) (85,172)
-----------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (5,866,933) (3,891,237)
Unrealized depreciation of investments during the period (44,771,216) (45,643,351)
-----------------------------------------
Net loss on investments (50,638,149) (49,534,588)
-----------------------------------------
Net decrease in net assets resulting from operations $(50,705,623) $(49,619,760)
=========================================
2
American Bar Association Members/ State Street Collective Trust
Aggressive Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-----------------------------------------
Decrease in net assets from:
Operations:
Net investment loss $ (67,474) $ (85,172)
Net realized loss on investments (5,866,933) (3,891,237)
Unrealized depreciation of investments during the period (44,771,216) (45,643,351)
-----------------------------------------
Net decrease in net assets resulting from operations (50,705,623) (49,619,760)
-----------------------------------------
Participant transactions:
Proceeds from sales of units 4,580,323 12,136,543
Cost of units redeemed (6,139,085) (13,117,543)
Net decrease in net assets resulting from participant transactions (1,558,762) (981,000)
-----------------------------------------
Total decrease in net assets (52,264,385) (50,600,760)
Net Assets:
Beginning of period 332,922,085 331,258,460
-----------------------------------------
End of period $ 280,657,700 $ 280,657,700
=========================================
Number of units:
Outstanding-beginning of period 5,556,994 5,548,719
Sold 80,858 210,743
Redeemed (111,189) (232,799)
Outstanding-end of period 5,526,663 5,526,663
=========================================
3
American Bar Association Members/ State Street Collective Trust
Aggressive 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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
--------------------------------------------
Investment income $ 0.11 $ 0.24
Expenses (0.13) (0.25)
--------------------------------------------
Net investment loss (0.02) (0.01)
Net realized and unrealized loss on investments (9.11) (8.91)
--------------------------------------------
Net decrease in unit value (9.13) (8.92)
Net asset value at beginning of period 59.91 59.70
--------------------------------------------
Net asset value at end of period $ 50.78 $ 50.78
============================================
Ratio of expenses to average net assets* 0.91% 0.90%
Ratio of net investment income to average net assets* (0.09)% (0.05)%
Portfolio turnover** 21% 32%
Number of units outstanding at end of period (in thousands) 5,527 5,527
- ----------
* Annualized
** Not annualized
4
American Bar Association Members/ State Street Collective Trust
Balanced Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $485,862,685) $471,838,313
Cash 0
Receivable for investments sold 5,812,242
Receivable for fund units sold 294,583
Dividends and interest receivable 2,094,510
Other assets 7,618
------------
Total assets 480,047,266
------------
Liabilities
Payable for investments purchased 68,122,637
Payable for fund units purchased 0
Accrued expenses 334,954
Other liabilities 394
------------
Total liabilities 68,457,985
------------
Net Assets $411,589,281
============
Net asset value, redemption price and offering
price per unit of beneficial interest
($411,589,281/ 6,907,629 units outstanding) $ 59.58
============
5
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, 2002
to June 30, 2002 to June 30, 2002
---------------------------------------------
Investment income:
Dividend income $ 784,792 $ 1,628,227
Interest income 2,531,605 5,256,570
---------------------------------------------
Total investment income 3,316,397 6,884,797
Expenses:
Investment advisory fee 247,518 500,364
State Street Bank & Trust Company - program fee 343,472 695,715
American Bar Retirement Association - program fee 51,836 103,606
Trustee, management and administration fees 90,146 180,433
Other expenses and taxes 58,226 126,808
---------------------------------------------
Total expenses 791,198 1,606,926
---------------------------------------------
Net investment income 2,525,199 5,277,871
---------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on investments sold (1,140,319) 510,573
Unrealized depreciation of investments during the period (46,117,336) (46,833,290)
---------------------------------------------
Net loss on investments (47,257,655) (46,322,717)
---------------------------------------------
Net decrease in net assets resulting from operations $(44,732,456) $(41,044,846)
=============================================
6
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, 2002
to June 30, 2002 to June 30, 2002
-----------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $ 2,525,199 $ 5,277,871
Net realized gain (loss) on investments (1,140,319) 510,573
Unrealized depreciation of investments during the period (46,117,336) (46,833,290)
-----------------------------------------------
Net decrease in net assets resulting from operations (44,732,456) (41,044,846)
Participant transactions:
Proceeds from sales of units 6,426,602 12,234,921
Cost of units redeemed (7,745,778) (17,757,377)
Net decrease in net assets resulting from participant transactions (1,319,176) (5,522,456)
-----------------------------------------------
Total decrease in net assets (46,051,632) (46,567,302)
Net Assets:
Beginning of period 457,640,913 458,156,583
-----------------------------------------------
End of period $ 411,589,281 $ 411,589,281
===============================================
Number of units:
Outstanding-beginning of period 6,932,310 6,995,400
Sold 98,373 188,053
Redeemed (123,054) (275,824)
Outstanding-end of period 6,907,629 6,907,629
===============================================
7
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, 2002
to June 30, 2002 to June 30, 2002
-------------------------------------------------
Investment income $ 0.48 $ 0.99
Expenses (0.11) (0.23)
-------------------------------------------------
Net investment income 0.37 0.76
Net realized and unrealized loss on investments (6.81) (6.67)
-------------------------------------------------
Net decrease in unit value (6.44) (5.91)
Net asset value at beginning of period 66.02 65.49
-------------------------------------------------
Net asset value at end of period $ 59.58 $ 59.58
=================================================
Ratio of expenses to average net assets* 0.72% 0.72%
Ratio of net investment income to average net assets* 2.31% 2.38%
Portfolio turnover** 31% 72%
Number of units outstanding at end of period (in thousands) 6,908 6,908
- ----------
* Annualized
** Not annualized
8
American Bar Association Members/ State Street Collective Trust
Growth Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $896,970,814) $788,435,608
Cash 111,310
Receivable for investments sold 47,360,809
Receivable for fund units sold 0
Dividends and interest receivable 684,948
Other assets 8,866
------------
Total assets 836,601,541
------------
Liabilities
Payable for investments purchased 42,746,524
Payable for fund units purchased 246,319
Accrued expenses 693,994
Other liabilities 4,503
------------
Total liabilities 43,691,340
------------
Net Assets $792,910,201
============
Net asset value, redemption price and offering
price per unit of beneficial interest
($792,910,201/21,688,435 units outstanding) $ 36.56
============
9
American Bar Association Members/ State Street Collective Trust
Growth Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-------------------------------------------
Investment income:
Dividend income $ 2,190,467 $ 4,506,066
Interest income 164,449 244,722
-------------------------------------------
Total investment income 2,354,916 4,750,788
Expenses:
Investment advisory fee 429,285 890,865
State Street Bank & Trust Company - program fee 697,454 1,465,529
American Bar Retirement Association - program fee 105,331 218,240
Trustee, management and administration fees 183,174 380,084
Other expenses and taxes 119,019 259,135
-------------------------------------------
Total expenses 1,534,263 3,213,853
Net investment income 820,653 1,536,935
-------------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (42,225,975) (55,245,187)
Unrealized depreciation of investments during the period (135,570,205) (144,330,469)
-------------------------------------------
Net loss on investments (177,796,180) (199,575,656)
-------------------------------------------
Net decrease in net assets resulting from operations $(176,975,527) $(198,038,721)
===========================================
10
American Bar Association Members/ State Street Collective Trust
Growth Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
---------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $ 820,653 $ 1,536,935
Net realized loss on investments (42,225,975) (55,245,187)
Unrealized depreciation of investments during the period (135,570,205) (144,330,469)
---------------------------------------------
Net decrease in net assets resulting from operations (176,975,527) (198,038,721)
---------------------------------------------
Participant transactions:
Proceeds from sales of units 10,014,630 21,348,029
Cost of units redeemed (28,629,516) (48,664,827)
Net decrease in net assets resulting from participant transactions (18,614,886) (27,316,798)
---------------------------------------------
Total decrease in net assets (195,590,413) (225,355,519)
Net Assets:
Beginning of period 988,500,614 1,018,265,720
---------------------------------------------
End of period $ 792,910,201 $ 792,910,201
=============================================
Number of units:
Outstanding-beginning of period 22,163,686 22,363,376
Sold 241,649 495,001
Redeemed (716,900) (1,169,942)
Outstanding-end of period 21,688,435 21,688,435
=============================================
11
American Bar Association Members/ State Street Collective Trust
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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
----------------------------------------
Investment income $ 0.11 $ 0.21
Expenses (0.07) (0.14)
----------------------------------------
Net investment income 0.04 0.07
Net realized and unrealized loss on investments (8.08) (9.04)
----------------------------------------
Net decrease in unit value (8.04) (8.97)
Net asset value at beginning of period 44.60 45.53
----------------------------------------
Net asset value at end of period $ 36.56 $ 36.56
========================================
Ratio of expenses to average net assets* 0.69% 0.69%
Ratio of net investment income to average net assets* 0.37% 0.33%
Portfolio turnover** 14% 17%
Number of units outstanding at end of period (in thousands) 21,688 21,688
- ----------
* Annualized
** Not annualized
12
American Bar Association Members/ State Street Collective Trust
Index Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $324,005,629) $240,730,312
Cash 0
Receivable for investments sold 1,664,232
Receivable for fund units sold 49,037
Dividends and interest receivable 0
Other assets 2,477
------------
Total assets 242,446,058
------------
Liabilities
Payable for investments purchased 0
Payable for fund units purchased 0
Accrued expenses 101,095
Other liabilities 0
------------
Total liabilities 101,095
------------
Net Assets $242,344,963
============
Net asset value, redemption price and offering
price per unit of beneficial interest
($242,344,963/10,387,829 units outstanding) $ 23.33
============
13
American Bar Association Members/ State Street Collective Trust
Index Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-----------------------------------------
Investment income:
Dividend income $ 595 $ 595
Interest income 0 0
-----------------------------------------
Total investment income 595 595
Expenses:
Investment advisory fee 0 0
State Street Bank & Trust Company - program fee 202,656 407,468
American Bar Retirement Association - program fee 30,584 60,695
Trustee, management and administration fees 53,191 105,709
Other expenses and taxes 32,504 61,605
-----------------------------------------
Total expenses 318,935 635,477
-----------------------------------------
Net investment loss (318,340) (634,882)
-----------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (1,964,702) (2,469,061)
Unrealized depreciation of investments during the period (34,157,770) (30,954,798)
-----------------------------------------
Net loss on investments (36,122,472) (33,423,859)
-----------------------------------------
Net decrease in net assets resulting from operations ($36,440,812) ($34,058,741)
=========================================
14
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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-----------------------------------------
Decrease in net assets from:
Operations:
Net investment loss $ (318,340) $ (634,882)
Net realized loss on investments (1,964,702) (2,469,061)
Unrealized depreciation of investments during the period (34,157,770) (30,954,798)
-----------------------------------------
Net decrease in net assets resulting from operations (36,440,812) (34,058,741)
-----------------------------------------
Participant transactions:
Proceeds from sales of units 12,224,385 20,788,844
Cost of units redeemed (4,788,512) (7,562,364)
Net increase in net assets resulting from participant transactions 7,435,873 13,226,480
-----------------------------------------
Total decrease in net assets (29,004,939) (20,832,261)
Net Assets:
Beginning of period 271,349,902 263,177,224
-----------------------------------------
End of period $ 242,344,963 $ 242,344,963
=========================================
Number of units:
Outstanding-beginning of period 10,102,133 9,881,870
Sold 481,545 805,807
Redeemed (195,849) (299,848)
Outstanding-end of period 10,387,829 10,387,829
=========================================
15
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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
--------------------------------------------
Investment income $ 0.00 $ 0.00
Expenses (0.03) (0.06)
--------------------------------------------
Net investment loss (0.03) (0.06)
Net realized and unrealized loss on investments (3.50) (3.24)
--------------------------------------------
Net decrease in unit value (3.53) (3.30)
Net asset value at beginning of period 26.86 26.63
--------------------------------------------
Net asset value at end of period $ 23.33 $ 23.33
============================================
Ratio of expenses to average net assets* 0.49% 0.49%
Ratio of net investment income to average net assets* (0.49)% (0.49)%
Portfolio turnover** 3% 3%
Number of units outstanding at end of period (in thousands) 10,388 10,388
- ----------
* 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 portfolios of such collective investment fund.
16
American Bar Association Members/ State Street Collective Trust
Intermediate Bond Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $179,202,061) $186,187,125
Cash 0
Receivable for investments sold 2,983,514
Receivable for fund units sold 0
Dividends and interest receivable 648,270
Other assets 1,734
------------
Total assets 189,820,643
------------
Liabilities
Payable for investments purchased 2,517,450
Payable for fund units purchased 466,064
Accrued expenses 76,383
Other liabilities 0
------------
Total liabilities 3,059,897
------------
Net Assets $186,760,746
============
Net asset value, redemption price and offering
price per unit of beneficial interest
($186,760,746/11,552,763 units outstanding) $ 16.17
============
17
American Bar Association Members/ State Street Collective Trust
Intermediate Bond Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
------------------------------------------
Investment income:
Dividend income $2,206,197 $4,226,365
Interest income 422 422
------------------------------------------
Total investment income 2,206,619 4,226,787
Expenses:
Investment advisory fee 0 0
State Street Bank & Trust Company - program fee 145,021 284,760
American Bar Retirement Association - program fee 21,871 42,392
Trustee, management and administration fees 38,035 73,819
Other expenses and taxes 23,252 43,054
------------------------------------------
Total expenses 228,179 444,025
------------------------------------------
Net investment income 1,978,440 3,782,762
------------------------------------------
Realized and unrealized gain on investments:
Net realized gain on investments sold 116,353 39,295
Unrealized appreciation of investments during the period 3,702,163 2,957,381
------------------------------------------
Net gain on investments 3,818,516 2,996,676
------------------------------------------
Net increase in net assets resulting from operations $5,796,956 $6,779,438
==========================================
18
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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-------------------------------------------
Increase in net assets from:
Operations:
Net investment income $ 1,978,440 $ 3,782,762
Net realized gain on investments 116,353 39,295
Unrealized appreciation of investments during the period 3,702,163 2,957,381
-------------------------------------------
Net increase in net assets resulting from operations 5,796,956 6,779,438
-------------------------------------------
Participant transactions:
Proceeds from sales of units 4,505,719 11,245,608
Cost of units redeemed (3,917,584) (7,689,554)
Net increase in net assets resulting from participant transactions 588,135 3,556,054
-------------------------------------------
Total increase in net assets 6,385,091 10,335,492
Net Assets:
Beginning of period 180,375,655 176,425,254
-------------------------------------------
End of period $ 186,760,746 $ 186,760,746
===========================================
Number of units:
Outstanding-beginning of period 11,515,317 11,324,956
Sold 282,050 711,783
Redeemed (244,604) (483,976)
Outstanding-end of period 11,552,763 11,552,763
===========================================
19
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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-------------------------------------------
Investment income $ 0.21 $ 0.37
Expenses (0.02) (0.04)
-------------------------------------------
Net investment income 0.19 0.33
Net realized and unrealized gain on investments 0.32 0.26
-------------------------------------------
Net increase in unit value 0.51 0.59
Net asset value at beginning of period 15.66 15.58
-------------------------------------------
Net asset value at end of period $ 16.17 $ 16.17
===========================================
Ratio of expenses to average net assets* 0.49% 0.49%
Ratio of net investment income to average net assets* 4.32% 4.16%
Portfolio turnover** 5% 8%
Number of units outstanding at end of period (in thousands) 11,553 11,553
- ----------
* Annualized
** Not annualized. Reflects purchases and sales of shares of the registered
investment company in which the fund invests, rather than turnover of the
underlying portfolio of such registered investment company.
20
American Bar Association Members/ State Street Collective Trust
International Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $91,297,963) $87,592,718
Cash 673
Receivable for investments sold 90,535
Receivable for fund units sold 22,030
Dividends and interest receivable 166,955
Other assets 7,685
-----------
Total assets 87,880,596
-----------
Liabilities
Payable for investments purchased 200,911
Payable for fund units purchased 203,099
Accrued expenses 78,376
Other liabilities 2,346
-----------
Total liabilities 484,732
-----------
Net Assets $87,395,864
===========
Net asset value, redemption price and offering
price per unit of beneficial interest
($87,395,864/5,394,851 units outstanding) $ 16.20
===========
21
American Bar Association Members/ State Street Collective Trust
International Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
------------------------------------------
Investment income:
Dividend income $ 323,464 $ 459,316
Interest income 6,266 11,712
------------------------------------------
Total investment income 329,730 471,028
Expenses:
Investment advisory fee 42,624 84,037
State Street Bank & Trust Company - program fee 58,476 115,221
American Bar Retirement Association - program fee 10,602 20,612
Trustee, management and administration fees 18,439 35,897
Other expenses and taxes 44,576 70,431
------------------------------------------
Total expenses 174,717 326,198
------------------------------------------
Net investment income 155,013 144,830
------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments sold (4,286,022) (7,024,840)
Unrealized appreciation (depreciation) of investments during the period (105,131) 2,396,431
------------------------------------------
Net loss on investments (4,391,153) (4,628,409)
------------------------------------------
Net decrease in net assets resulting from operations $(4,236,140) $(4,483,579)
==========================================
22
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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
----------------------------------------
Decrease in net assets from:
Operations:
Net investment income $ 155,013 $ 144,830
Net realized loss on investments (4,286,022) (7,024,840)
Unrealized appreciation (depreciation) of investments during the period (105,131) 2,396,431
----------------------------------------
Net decrease in net assets resulting from operations (4,236,140) (4,483,579)
----------------------------------------
Participant transactions:
Proceeds from sales of units 14,729,275 23,467,631
Cost of units redeemed (13,326,621) (20,588,906)
Net increase in net assets resulting from participant transactions 1,402,654 2,878,725
----------------------------------------
Total decrease in net assets (2,833,486) (1,604,854)
Net Assets:
Beginning of period 90,229,350 89,000,718
----------------------------------------
End of period $ 87,395,864 $ 87,395,864
========================================
Number of units:
Outstanding-beginning of period 5,318,274 5,223,849
Sold 878,937 1,422,076
Redeemed (802,360) (1,251,074)
Outstanding-end of period 5,394,851 5,394,851
========================================
23
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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
----------------------------------------------
Investment income $ 0.06 $ 0.09
Expenses (0.03) (0.06)
----------------------------------------------
Net investment income 0.03 0.03
Net realized and unrealized loss on investments (0.80) (0.87)
----------------------------------------------
Net decrease in unit value (0.77) (0.84)
Net asset value at beginning of period 16.97 17.04
----------------------------------------------
Net asset value at end of period $ 16.20 $ 16.20
==============================================
Ratio of expenses to average net assets* 0.78% 0.74%
Ratio of net investment income to average net assets* 0.69% 0.33%
Portfolio turnover** 19% 31%
Number of units outstanding at end of period (in thousands) 5,395 5,395
- ----------
* 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.
24
American Bar Association Members/ State Street Collective Trust
Stable Asset Return Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $812,153,335.) $812,153,335
Cash $ 0
Interest Receivable 3,140,247
Receivable for fund units sold 411,292
Other assets 7,563
------------
Total assets 815,712,437
------------
Liabilities
Payable for fund units redeemed 710,556
Accrued expenses 328,576
------------
Total liabilities 1,039,132
------------
Net Assets $814,673,305
============
Net asset value, redemption price and offering
price per unit of beneficial interest
($814,673,305/814,673,305 units outstanding) 1.00
============
25
American Bar Association Members/ State Street Collective Trust
Stable Asset Return Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-------------------------------------------
Interest income $ 9,499,309 $19,105,339
-------------------------------------------
Expenses:
State Street Bank & Trust Company - program fee 626,723 1,244,017
American Bar Retirement Association - program fee 94,491 185,196
Trustee, management and administration fees 164,321 322,487
Other expenses and taxes 100,453 187,970
-------------------------------------------
Total expenses 985,988 1,939,670
-------------------------------------------
Net investment income $ 8,513,321 $17,165,669
===========================================
26
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 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
--------------------------------------------
Increase in net assets from:
Operations:
Net investment income and net increase in net
assets resulting from operations 8,513,321 17,165,669
--------------------------------------------
Distributions from investment income (8,513,321) (17,165,669)
--------------------------------------------
Participant transactions:
Proceeds from sales of units 53,013,941 83,196,023
Units issued in connection with reinvestment
of net investment income 8,513,321 17,165,669
Cost of units redeemed (36,602,816) (83,548,151)
Net increase in net assets resulting from
participant transactions 24,924,446 16,813,541
--------------------------------------------
Total increase in net assets 24,924,446 16,813,541
--------------------------------------------
Net Assets:
Beginning of period 789,748,859 797,859,764
--------------------------------------------
End of period $ 814,673,305 $ 814,673,305
============================================
27
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 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-----------------------------------------
Investment income $ 0.012 $ 0.024
Expenses (0.001) (0.002)
-----------------------------------------
Net investment income 0.011 0.022
Reinvestment of net investment income (0.011) (0.022)
-----------------------------------------
Net increase in unit value 0.00 0.00
Net asset value at beginning of period 1.00 1.00
-----------------------------------------
Net asset value at end of period $ 1.00 $ 1.00
=========================================
Ratio of expenses to average net assets* .49% .49%
Ratio of net investment income to average net assets* 4.26% 4.33%
Number of units outstanding at end of period (in thousands) 814,673 814,673
- ----------
* Annualized
28
American Bar Association Members/ State Street Collective Trust
Value Equity Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
------------
Assets
Investments, at value (cost $244,062,868) $238,217,628
Cash 0
Receivable for investments sold 410,955
Receivable for fund units sold 48,056
Dividends and interest receivable 318,381
Other assets 2,233
------------
Total assets 238,997,253
------------
Liabilities
Payable for investments purchased 0
Payable for fund units purchased 0
Accrued expenses 144,904
Other liabilities 0
------------
Total liabilities 144,904
------------
Net Assets $238,852,349
============
Net asset value, redemption price and offering
price per unit of beneficial interest
($238,852,349 / 9,280,026 units outstanding) $ 25.74
============
29
American Bar Association Members/ State Street Collective Trust
Value Equity Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
---------------------------------------------
Investment income:
Dividend income $ 1,065,668 $ 2,014,680
Interest income 28,896 54,781
---------------------------------------------
Total investment income 1,094,564 2,069,461
Expenses:
Investment advisory fee 138,368 266,756
State Street Bank & Trust Company - program fee 191,208 365,453
American Bar Retirement Association - program fee 28,844 54,461
Trustee, management and administration fees 50,168 94,855
Other expenses and taxes 30,269 55,454
---------------------------------------------
Total expenses 438,857 836,979
---------------------------------------------
Net investment income 655,707 1,232,482
---------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments sold 1,040,784 1,639,995
Unrealized depreciation of investments during the period (22,212,088) (11,969,755)
---------------------------------------------
Net loss on investments (21,171,304) (10,329,760)
---------------------------------------------
Net decrease in net assets resulting from operations $(20,515,597) $ (9,097,278)
=============================================
30
American Bar Association Members/ State Street Collective Trust
Value Equity Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-------------------------------------------
Increase in net assets from:
Operations:
Net investment income $ 655,707 $ 1,232,482
Net realized gain on investments 1,040,784 1,639,995
Unrealized depreciation of investments during the period (22,212,088) (11,969,755)
-------------------------------------------
Net decrease in net assets resulting from operations (20,515,597) (9,097,278)
-------------------------------------------
Participant transactions:
Proceeds from sales of units 38,933,306 61,217,424
Cost of units redeemed (17,490,216) (34,665,440)
Net increase in net assets resulting from participant transactions 21,443,090 26,551,984
-------------------------------------------
Total increase in net assets 927,493 17,454,706
Net Assets:
Beginning of period 237,924,856 221,397,643
-------------------------------------------
End of period $ 238,852,349 $ 238,852,349
===========================================
Number of units:
Outstanding-beginning of period 8,503,863 8,321,228
Sold 1,425,439 2,251,781
Redeemed (649,276) (1,292,983)
Outstanding-end of period 9,280,026 9,280,026
===========================================
31
American Bar Association Members/ State Street Collective Trust
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, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
-----------------------------------------
Investment income $ 0.12 $ 0.24
Expenses (0.05) (0.10)
-----------------------------------------
Net investment income 0.07 0.14
Net realized and unrealized loss on investments (2.31) (1.01)
-----------------------------------------
Net decrease in unit value (2.24) (0.87)
Net asset value at beginning of period 27.98 26.61
-----------------------------------------
Net asset value at end of period $ 25.74 $ 25.74
=========================================
Ratio of expenses to average net assets* 0.72% 0.72%
Ratio of net investment income to average net assets* 1.07% 1.06%
Portfolio turnover** 5% 11%
Number of units outstanding at end of period (in thousands) 9,280 9,280
- ----------
* Annualized
** Not annualized. With respect to the portion of the fund's assets invested in
a collective investment fund, represents purchases and sales of units of the
collective investment fund rather than turnover of the underlying portfolio
of such collective investment fund.
32
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Conservative Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $29,439,394) $30,108,713
Cash 6,568
Receivable for investments sold 474,104
Receivable for fund units sold 14,184
Dividends and interest receivable 0
Other assets 0
-----------
Total assets 30,603,569
-----------
Liabilities
Payable for investments purchased 723,305
Payable for fund units purchased 0
Accrued expenses 0
Other liabilities 0
-----------
Total liabilities 723,305
-----------
Net Assets $29,880,264
===========
Net asset value, redemption price and offering
price per unit of beneficial interest
($29,880,264/1,850,967 units outstanding) $ 16.14
===========
33
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Conservative Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
---------------------------------------------
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 and taxes 0 0
Total expenses 0 0
---------------------------------------------
Net investment income 0 0
---------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments sold 367,860 699,303
Unrealized depreciation of investments during the period (1,188,946) (1,240,158)
---------------------------------------------
Net loss on investments (821,086) (540,855)
---------------------------------------------
Net decrease in net assets resulting from operations $ (821,086) $ (540,855)
=============================================
34
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Conservative Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $ 0 $ 0
Net realized gain on investments 367,860 699,303
Unrealized depreciation of investments during the period (1,188,946) (1,240,158)
------------------------------------------
Net decrease in net assets resulting from operations (821,086) (540,855)
------------------------------------------
Participant transactions:
Proceeds from sales of units 1,444,435 3,007,312
Cost of units redeemed (1,938,227) (3,928,617)
Net decrease in net assets resulting from participant transactions (493,792) (921,305)
------------------------------------------
Total decrease in net assets (1,314,878) (1,462,160)
Net Assets:
Beginning of period 31,195,142 31,342,424
------------------------------------------
End of period $ 29,880,264 $ 29,880,264
==========================================
Number of units:
Outstanding-beginning of period 1,880,701 1,906,106
Sold 87,728 182,673
Redeemed (117,462) (237,812)
Outstanding-end of period 1,850,967 1,850,967
==========================================
35
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Conservative 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, 2002
to June 30, 2002 to June 30, 2002
------------------------------------------
Investment income $ 0.00 $ 0.00
Expenses 0.00 0.00
------------------------------------------
Net investment income 0.00 0.00
Net realized and unrealized loss on investments (0.45) (0.30)
------------------------------------------
Net decrease in unit value (0.45) (0.30)
Net asset value at beginning of period 16.59 16.44
------------------------------------------
Net asset value at end of period $ 16.14 $ 16.14
==========================================
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** 9% 16%
Number of units outstanding at end of period (in thousands) 1,851 1,851
- ----------
* 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.
36
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Moderate Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $116,452,081) $114,873,461
Cash 0
Receivable for investments sold 1,954,842
Receivable for fund units sold 36,258
Dividends and interest receivable 0
Other assets 0
------------
Total assets 116,864,561
------------
Liabilities
Payable for investments purchased 1,986,602
Payable for fund units purchased 0
Accrued expenses 0
Other liabilities 0
------------
Total liabilities 1,986,602
------------
Net Assets $114,877,959
============
Net asset value, redemption price and offering
price per unit of beneficial interest
($ 114,877,959/6,993,818 units outstanding) $ 16.43
============
37
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Moderate Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
------------------------------------------
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 and taxes 0 0
------------------------------------------
Total expenses 0 0
------------------------------------------
Net investment income 0 0
------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments sold 1,034,201 2,282,712
Unrealized depreciation of investments during the period (7,847,579) (8,190,014)
------------------------------------------
Net loss on investments (6,813,378) (5,907,302)
------------------------------------------
Net decrease in net assets resulting from operations $(6,813,378) $(5,907,302)
==========================================
38
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Moderate Fund
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
------------------------------------------
Increase (decrease) in net assets from:
Operations:
Net investment income $ 0 $ 0
Net realized gain on investments 1,034,201 2,282,712
Unrealized depreciation of investments during the period (7,847,579) (8,190,014)
------------------------------------------
Net decrease in net assets resulting from operations (6,813,378) (5,907,302)
------------------------------------------
Participant transactions:
Proceeds from sales of units 7,515,370 14,171,629
Cost of units redeemed (1,657,152) (4,241,848)
Net increase in net assets resulting from participant transactions 5,858,218 9,929,781
------------------------------------------
Total increase (decrease) in net assets (955,160) 4,022,479
Net Assets:
Beginning of period 115,833,119 110,855,480
------------------------------------------
End of period $ 114,877,959 $ 114,877,959
==========================================
Number of units:
Outstanding-beginning of period 6,652,479 6,417,587
Sold 438,589 824,194
Redeemed (97,250) (247,963)
Outstanding-end of period 6,993,818 6,993,818
==========================================
39
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Moderate 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, 2002
to June 30, 2002 to June 30, 2002
-------------------------------------------
Investment income $ 0.00 $ 0.00
Expenses 0.00 0.00
-------------------------------------------
Net investment income 0.00 0.00
Net realized and unrealized loss on investments (0.99) (0.88)
-------------------------------------------
Net decrease in unit value (0.98) (0.84)
Net asset value at beginning of period 17.41 17.27
-------------------------------------------
Net asset value at end of period $ 16.43 $ 16.43
===========================================
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** 5% 10%
Number of units outstanding at end of period (in thousands) 6,994 6,994
- ----------
* 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.
40
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Aggressive Fund
Statement of Assets and Liabilities
Unaudited
June 30, 2002
-------------
Assets
Investments, at value (cost $97,119,910) $92,410,191
Cash 0
Receivable for investments sold 1,191,870
Receivable for fund units sold 45,750
Dividends and interest receivable 0
Other assets 0
-----------
Total assets 93,647,811
-----------
Liabilities
Payable for investments purchased 1,189,966
Payable for fund units purchased 0
Accrued expenses 0
Other liabilities 0
-----------
Total liabilities 1,189,966
-----------
Net Assets $92,457,845
===========
Net asset value, redemption price and offering
price per unit of beneficial interest
($92,457,845/5,587,582 units outstanding) $ 16.55
===========
41
Structured Portfolio Service- Aggressive Fund
Statement of Operations
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
------------------------------------------
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 and taxes 0 0
------------------------------------------
Total expenses 0 0
------------------------------------------
Net investment income 0 0
------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments sold 573,872 1,385,117
Unrealized depreciation of investments during the period (9,929,118) (9,972,360)
------------------------------------------
Net loss on investments (9,355,246) (8,587,243)
------------------------------------------
Net decrease in net assets resulting from operations $(9,355,246) $(8,587,243)
==========================================
42
Statement of Changes in Net Assets
Unaudited
For the period For the period
April 1, 2002 January 1, 2002
to June 30, 2002 to June 30, 2002
----------------------------------------
Decrease in net assets from:
Operations:
Net investment income $ 0 $ 0
Net realized gain on investments 573,872 1,385,117
Unrealized depreciation of investments during the period (9,929,118) (9,972,360)
----------------------------------------
Net decrease in net assets resulting from operations (9,355,246) (8,587,243)
----------------------------------------
Participant transactions:
Proceeds from sales of units 3,550,697 7,215,997
Cost of units redeemed (2,464,110) (5,312,262)
Net increase in net assets resulting from participant transactions 1,086,587 1,903,735
----------------------------------------
Total decrease in net assets (8,268,659) (6,683,508)
Net Assets:
Beginning of period 100,726,504 99,141,353
----------------------------------------
End of period $ 92,457,845 $ 92,457,845
========================================
Number of units:
Outstanding-beginning of period 5,529,645 5,484,656
Sold 200,578 405,168
Redeemed (142,641) (302,242)
Outstanding-end of period 5,587,582 5,587,582
========================================
43
American Bar Association Members/ State Street Collective Trust
Structured Portfolio Service- Aggressive 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, 2002
to June 30, 2002 to June 30, 2002
--------------------------------------------
Investment income $0.00 $0.00
Expenses 0.00 0.00
-----------------------------------
Net investment income 0.00 0.00
Net realized and unrealized loss on investments (1.67) (1.53)
-----------------------------------
Net decrease in unit value (1.67) (1.53)
Net asset value at beginning of period 18.22 18.08
-----------------------------------
Net asset value at end of period $16.55 $16.55
===================================
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** 6% 11%
Number of units outstanding at end of period (in thousands) 5,588 5,588
- ----------
* 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.
44
AMERICAN BAR ASSOCIATION MEMBERS/STATE STREET COLLECTIVE TRUST
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEMI-ANNUAL
UNAUDITED
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") 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. Eight 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:
AGGRESSIVE EQUITY FUND--long term growth of capital through investment in common
stocks of small to medium sized companies believed to have strong appreciation
potential.
BALANCED FUND--current income and long-term capital appreciation through
investment in common stocks, other equity-type securities and debt securities.
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.
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 (the "Russell Fund"), a separate State Street Bank
collective investment fund. The Russell Fund 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--total return from current income and capital
appreciation through investment in debt securities. Currently invests in the
PIMCO Total Return Fund (the "Total Return Fund"), a registered investment
company. The Total Return Fund invests primarily in intermediate-term investment
grade bonds. This underlying fund's financial statements are available upon
request from State Street Bank.
INTERNATIONAL EQUITY FUND--long term growth of capital through investment in
common stocks and other equity securities of established non-U.S. companies.
Currently invests in international equities and the T. Rowe Price International
Stock Fund, a registered investment company, which invests worldwide primarily
in well-established, non-U.S. companies. This underlying fund's financial
statements are available upon request from State Street Bank.
STABLE ASSET RETURN FUND ("SARF")--current income consistent with preserving
principal and maintaining liquidity through investment in high quality money
market 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. SAFT invests in investment contracts of insurance
companies, banks and financial institutions and in the State Street Bank Yield
Enhanced Short Term Investment Fund, a separate State Street Bank collective
investment fund.
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
45
Lending Fund (the "Value Fund"), a separate State Street Bank collective
investment fund. A portion of the Value Fund invests in securities contained in
the Russell 1000 Value Index. This underlying fund's financial statements are
available upon request from State Street Bank.
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. See the Statement of Assets
and Liabilities of each portfolio for Fund allocation at December 31, 2001.
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 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: It is the Trust's policy to attempt to maintain a
constant price of $1.00 per unit for SARF. SARF invests in a State Street Bank
collective investment fund (SAFT) whose investments include insurance company,
bank and financial institution investment contracts and short-term investments.
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 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 benefit 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 the respective collective investment fund.
OTHER FUNDS: Stocks listed on national securities exchanges and certain
over-the-counter issues traded on the Nasdaq National Market (NASDAQ) are valued
at the last sale 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.
46
Fixed income investments are valued on the basis of valuations furnished by a
pricing service approved by the Trustee, which determines valuations using
methods based on market transactions for comparable securities and various
relationships between securities which are generally recognized by institutional
traders, or at fair value as determined in good faith by the Trustee. 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 Fund invests may retain investment income and net realized gains.
Accordingly, realized and unrealized gains and losses reported by the Fund may
include a component attributable to investment income of the underlying funds.
C. FOREIGN CURRENCY 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
47
pursuant to Section 501(a) of the Internal Revenue Code. Accordingly, no
provision for Federal income taxes is required.
E. DISTRIBUTIONS TO PARTICIPANTS
STABLE ASSET RETURN FUND: As of the close of business on each daily valuation
date, all net investment income is allocated among the unitholders in proportion
to the number of units held by each unitholder in the fund and is reinvested on
behalf of each such unitholder in new units.
ALL OTHER 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. SALES AND REDEMPTIONS OF UNITS OF PARTICIPATION
The units offered represent interests in the Funds and Portfolios established
under the Trust. The Trust may offer and sell an unlimited number of registered
units, each unit will be offered and sold daily at the respective Fund's and
Portfolio's net asset value.
G. TBA COMMITMENTS AND ROLL TRANSACTIONS
The Balanced 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. The Balanced Fund holds, and
maintains 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 the Balanced 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. The Balanced Fund may dispose
of a commitment prior to settlement if the Balanced Fund's advisor deems it
appropriate to do so. Upon settlement date, the Balanced Fund may take delivery
of the securities or defer (roll) the delivery to the next month.
H. FUTURES CONTRACTS
The index portion of the Growth Equity Fund may use, on a limited basis, futures
contracts to manage exposure to the equity 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 underlying
instrument, or hedge other investments. Futures contracts involve, to varying
degrees, credit and market risks.
The Fund enters into futures contracts only on exchanges or boards of trade
where the exchange or board of trade acts as the counterparty to the
transaction. Thus, credit risk on such transactions is limited to the failure of
the exchange or board of trade. Losses in value may arise from changes in the
value of the underlying instruments or if there is an illiquid secondary market
for the contracts. In addition, there is the risk that there may not be an exact
correlation between a futures contract and the underlying index.
Upon entering into a futures contract, the Fund is required to deposit either in
cash or securities an amount ("initial margin") equal to a certain percentage of
the nominal value of the contract. Subsequent payments are made or received by
the Fund periodically, depending on the daily fluctuation in the value of the
underlying securities, and are recorded as unrealized gains or losses by the
Fund. A gain or loss is realized when the contract is closed or expires. A
summary of obligations under these financial instruments at June 30, 2002 is as
follows:
48
NUMBER OF EXPIRATION FUTURES NOTIONAL NET UNREALIZED
CONTRACTS DATE CONTRACTS COST POSITION APPRECIATION
--------- ---------- --------- -------- -------- --------------
15 Sept.-2002 S&P 500 Index Futures $3,712,875 Long $(46,965)
At June 30 , 2002, the Growth Equity Fund had assigned an U.S. Treasury Bill,
with principal of $285,000, to cover initial margin requirements on any open
futures contracts.
I. 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.
J. UNAUDITED INTERIM FINANCIAL STATEMENTS; INFORMATION PRESENTED
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting. Accordingly, they do not include all of the information and
disclosures normally required by generally accepted accounting principles for
complete financial statements or those normally reflected in the Company's
Annual Report on Form 10-K. The financial information included herein reflects
all adjustments (consisting of normal recurring adjustments) which are, in the
opinion of the Trustee, necessary for a fair presentation of results for interim
periods. Results of interim periods are not necessarily indicative of the
results to be expected for a full year.
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 and Sherrerd), Lincoln Capital
Management Company, Alliance Capital Management L.P.'s Bernstein Investment
Research and Management Unit, and Bankers Trust Company, a wholly-owned
subsidiary of Deutsche Bank AG, 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 (Growth Equity,
Aggressive Equity and Balanced Funds) ...............................225% to .50%*
Dresdner RCM Global Investors LLC (Growth Equity Fund) .................25% to .70%
Dresdner RCM Global Investors LLC (International Equity Fund) ..........40% to .75%
Sit Investment Associates (Aggressive Equity Fund) .....................60% to 1.00%
Morgan Stanley Investment Management (Balanced Fund) ..................125% to .50%
Lincoln Capital Management Company (Growth Equity Fund) ................15% to .4675%
Alliance Capital Management L.P. (Value Equity Fund) ...................15% to .50%
Bankers Trust Company (Growth Equity Fund) ............................010% to .075%**
* Subject to a 5% fee reduction based on aggregate fees.
** Minimum fee of $75,000.
T. Rowe Price International Inc., manager of the T. Rowe Price International
Stock Fund, pays a .10% fee reimbursement based on investment value for
administrative services which is credited to the International Equity Fund. The
International Equity Fund received $23,145 relating to this fee for the
six-month period ended June 30, 2002.
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:
49
RATE FOR ABRA
PERIOD ENDING
VALUE OF PROGRAM ASSETS JUNE 30, 2002
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 $759,253 for the six-month period ended June 30,
2002.
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 six-month period ended June 30, 2002 totaled $31,323 and is
allocated to each Fund based on net asset value.
Effective July 1, 2001 the program expense fee is calculated as follows: the
monthly fee is equal to one-twelfth of the sum of (i) $750,000 plus (ii) $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 (iii) $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. This fee is
accrued daily and is paid monthly. The $201 amount in the above calculation
includes $10 per Participant for a participant advisor service.
A fee is paid to State Street Bank for its trustee, management and
administration of the assets in the Funds. This fee is accrued on a daily basis
and paid monthly from the assets of the Funds at the following annual rates:
VALUE OF ASSETS IN ALL FUNDS RATE
First $1.0 billion ................................15%
Next $1.8 billion ................................058
Over $2.8 billion ................................025
State Street Bank received trustee, management and administration fees which
aggregated $6,450,275 for the six-month period ended June 30, 2002. These fees
are allocated to each Fund based on net asset value.
The Portfolios of the Structured Portfolio Service 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 and short-term investments were as follows:
50
- ----------------------------------------------------------------------------------------------
Six-Month Period
Ending June 30, 2002
Purchases Sales
- ----------------------------------------------------------------------------------------------
Aggressive Equity Fund ................................ $111,320,190 $100,471,508
Balanced Fund ......................................... 74,605,700 76,690,145
Growth Equity Fund .................................... 126,482,860 144,082,582
Stable Asset Return Fund .............................. - -
Index Equity Fund ..................................... 19,552,871 8,931,429
Value Equity Fund ..................................... 55,735,743 25,217,476
International Equity Fund ............................. 31,111,862 27,508,156
Intermediate Bond Fund ................................ 21,256,865 14,558,645
Conservative Structured Portfolio Service ............. 4,985,869 5,678,843
Moderate Structured Portfolio Service ................. 21,916,804 11,991,521
Aggressive Structured Portfolio Service ............... 12,919,570 11,063,489
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities were as follows:
- ----------------------------------------------------------------------------------------------
Six-Month Period
Ending June 30, 2002
Purchases Sales
- ----------------------------------------------------------------------------------------------
Aggressive Equity Fund ................................ $ 60,336,273 $ 71,805,000
Balanced Fund.......................................... 528,872,072 504,666,792
Growth Equity Fund .................................... 82,312,710 86,951,000
Value Equity Fund...................................... 47,693,892 52,763,000
5. GEOGRAPHIC AND INDUSTRY CONCENTRATION
American Depositary Receipts ("ADR's") represent ownership of foreign securities
on deposit with a domestic custodian bank. Certain Funds maintain investments in
ADRs, 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.
A significant portion of the Aggressive Equity Fund's investments are in
securities of small to medium-sized 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. The issuing institution's ability to
meet its contractual obligations under the respective contracts may be affected
by future economic and regulatory developments in the insurance industry.
6. SUBSEQUENT EVENTS
CALCULATION OF UNIT VALUES OF THE STABLE ASSET RETURN FUND AND COMBINATION OF
FUND UNITS
The Stable Asset Return Fund ("SARF") historically sought to maintain a net
asset value of $1.00 per Unit. Thus, when an investor allocated assets to SARF,
the investor's account was credited with a number of Units equal to the dollar
value of the assets so allocated to SARF. Each Business Day, the net income
accrued by SARF was calculated, and additional Units equal in number to the
dollar value of the accrued net income of SARF were issued, with each investor
receiving a portion of such Units based upon such investor's proportionate
interest in SARF. When amounts were withdrawn from SARF, Units equal in number
to the dollar value of the amounts withdrawn were redeemed by SARF. During
periods when SARF maintained a net asset value of $1.00 per Unit, the number of
Units issued and redeemed in connection with the above-described allocations,
earnings and withdrawals equaled the dollar amounts of those transactions. To
reduce the impact of fluctuating interest rates on the value of SARF's assets,
Short-Term Investment Products held by SARF generally are valued on the basis of
a valuation method known as "Amortized Cost Pricing." Amortized Cost Pricing
involves valuing an instrument initially at its cost and thereafter 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. In
addition, pursuant to generally accepted accounting principles, the guaranteed
investment contracts ("GICs") in which SARF also invested are maintained at
contract value plus accrued interest, which approximates fair value and also
tend to reduce the impact of fluctuating market rates on the value of SARF's
assets.
Effective July 15, 2002, SARF no longer will seek to maintain a net asset value
of $1.00 per Unit. This change will not affect the investment objective or
strategy of SARF, nor will the change result in any change in the value of any
investor's account. The value of the assets in SARF will continue to be
determined based on the methods described above. Thus, generally fluctuating
interest rates should continue to have little, if any, impact on the value of
SARF's assets. The principal consequence of the change to SARF is that instead
of accounting for the reinvestment of accrued net income by issuing additional
Units each Business Day, SARF's accrued net income will be accounted for by
increasing the value of the then outstanding Units. Any new allocations of
assets to SARF will be accounted for as purchases of Units, and any withdrawals
will be accounted for as redemptions of Units, in each case at the then-current
Unit value, determined as described above. Under the old method or the new
method, SARF's total net assets would be the same, as would the aggregate value
of each investor's interest in SARF. In connection with this change, State
Street, as Trustee, implemented a combination of the Units of SARF, with the
result that, immediately after the combination there were fewer Units of SARF
outstanding, but the value of each Unit was more than $1.00. As of the close of
business on the effective day of the valuation change described above, investors
in SARF were credited with one Unit of SARF for every approximately 27.35 Units
previously credited to their accounts. The aggregate value of an investor's
interest in SARF did not change as a result of the combination.
51
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For information regarding changes to the investment options that became
effective in July 2002, see Item 5. Other Information, "Changes to the Program
for 2002."
OVERVIEW
The second quarter of 2002 was one of the worst quarters in the last twenty
years for the broad domestic equity market. Accounting scandals continued to
keep investors jittery and stock prices suffered. Small capitalization stocks
faired better than their large capitalization counterparts while growth stocks
suffered significantly greater losses than value stocks. The sectors hardest hit
were technology, energy, utilities and healthcare. Despite posting a loss,
consumer staples was the sector with the best quarter. The bond market benefited
from a drop in treasury yields based on reports that although the U.S. economy
is doing well it is not as robust as reports from earlier in the year were
suggesting. The International equity markets also had negative returns but fared
better than the U.S. domestic equity markets.
AGGRESSIVE EQUITY FUND (NOW CALLED SMALL-CAP EQUITY FUND)
The 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, 2002, the Aggressive Equity Fund experienced a total return, net of
expenses (including a trust management fee, a program expense fee, investment
advisory fees, organizational fees and maintenance fees, collectively
"Expenses"), of (15.24)%. By comparison, the Russell 2000 Index produced a total
return of (8.35)% for the same period. For the six months ended June 30, 2002,
the Fund experienced a total return, net of Expenses, of (14.94)% compared to a
total return of (4.70)% for the Russell 2002 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. The Fund's weak performance relative to
the Russell 2000 Index is partly attributable to the Fund's heavier weighting
toward medium-sized companies, whose performance was generally weaker than the
Russell 2000 Index, which is comprised of smaller companies. The Fund is in the
process of shifting its strategy toward smaller capitalization companies. See
Item 5. Other Information, "Changes to the Program for 2002."
The most heavily weighted sectors in the Aggressive Equity Fund were technology,
consumer basics and industrials. Securities representing the largest holdings
based on market value in the Aggressive Equity Fund at June 30, 2002 included
Dreyers Grand Ice Cream Inc., Devon Energy Corp., Ferro Corp., TCF Financial
Corp. and ACE LTD.
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, 2002, the Balanced Fund
experienced a total return, net of Expenses, of (9.75)%. For the same period, a
combination of the Russell 1000 Index and the Lehman Brothers Aggregate Bond
Index weighted 60%/40%, respectively, produced a total return of (6.60)%. For
the six months ended June 30, 2002, the Fund experienced a total return, net of
Expenses, of (9.02)% compared to a total return of (6.15)% 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.
The most heavily weighted sectors in the equity portion of the Balanced Fund
were finance, technology and health care. Securities representing the largest
holdings based on market value in the Balanced Fund at June 30, 2002 included
SLM Corp., Astrazeneca PLC, Pfizer Inc., Washington Mutual and Applied Materials
Inc. The fixed income portion was heavily invested in government agency and
mortgage related issues.
52
GROWTH EQUITY FUND (NOW CALLED LARGE-CAP GROWTH EQUITY FUND)
The 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 held and
to realize income principally from dividends on such securities. A portion of
the 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 Growth
Equity Fund is actively managed. The 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, 2002, the Growth Equity Fund experienced a total
return, net of Expenses, of (18.03)%. By comparison, the Russell 1000 Growth
Index produced a return of (18.67)% for the same period. For the six months
ended June 30, 2002, the Fund experienced a total return, net of Expenses, of
(19.71)% compared to a total return of (20.78)% for the 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.
The most heavily weighted sectors in the Growth Equity Fund were health care,
technology and finance. Securities representing the largest holdings based on
market value in the Fund at June 30, 2002 included Pfizer Inc., Microsoft
Corp., General Electric Co., Wal Mart Stores Inc. and Johnson & Johnson Inc.
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. The Fund produced a total return, net of Expenses, of
(13.15)% for the quarter ended June 30, 2002. By comparison, the Russell 3000
Index produced a return of (13.09)% for the same period. For the six months
ended June 30, 2002, the Fund experienced a total return, net of Expenses, of
(12.40)% compared to a total return of (12.24)% for the 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 index.
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. Contributions to the Fund are
currently invested in the PIMCO Total Return Fund, a diversified fixed income
open-end management investment company with a portfolio duration generally from
three to six years. Effective July 1, 2002, Pacific Investment Management
Company became the Investment Advisor to the Fund and the Fund will no longer
invest in the PIMCO Total Return Fund. See Item 5. Other Information, "Changes
to the Program for 2002."
For the quarter ended June 30, 2002, the Intermediate Bond Fund experienced a
total return, net of Expenses, of 3.20%. As a comparison, the Lehman Brothers
Aggregate Bond Index produced a return of 3.69% for the same period. For the six
months ended June 30, 2002, the Fund experienced a total return, net of
Expenses, of 3.77% compared to a total return of 3.79% 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.
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.
53
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.
Approximately half of the assets of the International Equity Fund are invested
in a separate collective trust portfolio managed by State Street. The remainder
of the International Equity Fund is invested in the T. Rowe Price International
Stock Fund, an open-ended management investment company.
For the quarter ended June 30, 2002, the International Equity Fund experienced a
total return, net of Expenses, of (4.42)%. 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 (3.49)%. For the six months ended June
30, 2002, the Fund experienced a total return, net of Expenses, of (4.92)%
compared to a total return of (2.41)% 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.
As of June 30, 2002, the most heavily weighted countries in the T. Rowe Price
International Stock Fund were the United Kingdom, France and Japan. The
securities representing the largest holdings based on market value were
GlaxoSmithKline PLC, Reed International PLC, TotalFinaElf SA, Royal Bank of
Scotland Group PLC and Shell Transport & Trading Co. PLC.
As of June 30, 2002, the most heavily weighted countries in the separately
managed portion of the International Equity Fund were Japan, United Kingdom and
France. The securities representing the largest holdings based on market value
were ENI SPA., Royal Bank of Scotland Group PLC, Munich Reinsurance,
TotalFinaElf SA and BNP Paribas SA.
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 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, 2002, the Stable Asset Return Fund produced an
annualized return, net of Expenses, of 4.33%. By comparison, the Money Fund
Report Money Market Fund "Tier One" Average (the "Money Fund Report Average")
for the same period was 1.16%. For the six months ended June 30, 2002, the Fund
experienced a total return, net of Expenses, of 4.38% compared to a total return
of 1.22% for the Money Fund Report Average. 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.
VALUE EQUITY FUND (NOW CALLED 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 Value Equity Fund (approximately 25%) is invested to replicate
the Russell 1000 Value Index, which was 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, 2002, the Value Equity Fund experienced a total
return, net of Expenses, of (8.01)%. By comparison, the Russell 1000 Value Index
produced a return of (8.52)% for the same period. For the six months ended June
30, 2002, the Fund experienced a total return, net of Expenses, of (3.26)%
compared to a total return of (4.78)% 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.
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The most heavily weighted sectors in the separately managed portion of the Value
Equity Fund were finance, consumer basics and energy. Securities representing
the largest holdings in the separately managed portion of the Fund based on
market value at June 30, 2002 included Exxon Mobil Corp., Bank of America Corp.,
Citigroup Inc., Chevron Texaco Corp., and Wachovia Corp.
STRUCTURED PORTFOLIO SERVICE
The portfolios of the Structured Portfolio Service invest in the funds described
above according to conservative, moderate and aggressive portfolio allocations.
Funds in the Conservative Portfolio are allocated as follows: 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%; and International
Equity Fund, 7%. Funds in the Moderate Portfolio are allocated as follows:
Stable Asset Return Fund, 10%; Intermediate Bond Fund, 30%; Large-Cap Value
Equity Fund, 11%; Large-Cap Growth Equity Fund, 11%; Index Equity Fund, 23%; and
International Equity Fund, 15%. Funds in the Aggressive Portfolio are allocated
as follows: Intermediate Bond Fund, 15%; Large-Cap Value Equity Fund, 15%;
Large-Cap Growth Equity Fund, 15%; Index Equity Fund, 30%; Small-Cap Equity
Fund, 5%; and International Equity Fund, 20%. The allocation of the Portfolios
changed on July 15, 2002 in connection with the addition of the Mid-Cap Value
Equity Fund and the Mid-Cap Growth Equity Fund. See Item 5. Other Information,
"Changes to the Program for 2002."
For the quarter ended June 30, 2002, the Structured Portfolio Service
experienced a total return, net of Expenses, of (2.69)% for the Conservative
Portfolio, (5.66)% for the Moderate Portfolio, and (9.16)% for the Aggressive
Portfolio. For the six months ended June 30, 2002, the Structured Portfolio
Service experienced a total return of (1.84)% for the Conservative Portfolio,
(4.91)% for the Moderate Portfolio and (8.46)% for the Aggressive Portfolio.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
CHANGES TO THE PROGRAM FOR 2002
The following changes to the Program took effect on July 15, 2002, except for
the change to the Intermediate Bond Fund, which took effect on July 1, 2002.
Further information regarding these changes is contained in the Prospectus dated
April 22, 2002 as supplemented by the Prospectus Supplement dated June 27, 2002
(the "Prospectus"), which has been sent to all program participants. Additional
copies of the Prospectus are available by calling 800-348-2272, or by using our
website, www.abaretirement.com, or the EDGAR filings portion of the SEC's
website, www.sec.gov.
ADDITION OF NEW FUNDS
The Collective Trust has established two Funds, the Mid-Cap Value Equity Fund
and the Mid-Cap Growth Equity Fund, as Investment Options. See "Mid-Cap Value
Equity Fund" and "Mid-Cap Growth Equity Fund" in the Prospectus for descriptions
of these new Funds.
NAME CHANGES
In connection with the addition of these new Funds, the names of the following
existing Funds have changed.
- - The Value Equity Fund changed its name to Large-Cap Value Equity Fund;
- - The Growth Equity Fund changed its name to Large-Cap Growth Equity Fund; and
- - The Aggressive Equity Fund changed its name to Small-Cap Equity Fund.
The changes to the names of the Value Equity Fund and Growth Equity Fund are
meant to distinguish them from the two new Funds. The Value Equity Fund and
Growth Equity Fund
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have historically invested in large capitalization companies, and they will
continue to do so. The change in the name of the Aggressive Equity Fund is meant
to distinguish it from the new Mid-Cap Growth Equity Fund. The name change also
reflects a change in investment strategy for the Fund as it removes medium
capitalization companies from its portfolio and invests primarily in small
capitalization companies. This change to the portfolio composition of the
Small-Cap Equity Fund is expected to take place over approximately three months
in order to minimize the disruption to the Fund. See "Large-Cap Value Equity
Fund," "Large-Cap Growth Equity Fund" and "Small-Cap Equity Fund" in the
Prospectus for descriptions of these Funds.
REALLOCATIONS OF STRUCTURED PORTFOLIOS
As a result of the changes described above, the allocations of the Moderate
Portfolio and Aggressive Portfolio of the Structured Portfolio Service will be
adjusted to include the new Funds. See "Structured Portfolio Service" in the
Prospectus for more information about the Portfolios.
ADVISOR TO INTERMEDIATE BOND FUND
Pacific Investment Management Company ("PIMCO") became the Investment Advisor to
the Intermediate Bond Fund effective July 1, 2002. Previously, the assets of the
Intermediate Bond Fund were invested in the PIMCO Total Return Fund, an
investment company managed by PIMCO and registered under the Investment Company
Act. In connection with this change, changes were made to the Program's policies
regarding the use of certain derivative instruments by the Intermediate Bond
Fund. For more information, see "Intermediate Bond Fund" and "Derivative
Instruments" in the Prospectus.
CALCULATION OF UNIT VALUES OF THE STABLE ASSET RETURN FUND AND
COMBINATION OF FUND UNITS
The Stable Asset Return Fund ("SARF") historically sought to maintain a net
asset value of $1.00 per Unit. Thus, when an investor allocated assets to SARF,
the investor's account was credited with a number of Units equal to the dollar
value of the assets so allocated to SARF. Each Business Day, the net income
accrued by SARF was calculated, and additional Units equal in number to the
dollar value of the accrued net income of SARF were issued, with each investor
receiving a portion of such Units based upon such investor's proportionate
interest in SARF. When amounts were withdrawn from SARF, Units equal in number
to the dollar value of the amounts withdrawn were redeemed by SARF. During
periods when SARF maintained a net asset value of $1.00 per Unit, the number of
Units issued and redeemed in connection with the above-described allocations,
earnings and withdrawals equaled the dollar amounts of those transactions. To
reduce the impact of fluctuating interest rates on the value of SARF's assets,
Short-Term Investment Products held by SARF generally are valued on the basis of
a valuation method known as "Amortized Cost Pricing." Amortized Cost Pricing
involved valuing an instrument initially at its cost and thereafter 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. In
addition, pursuant to generally accepted accounting principles, the guaranteed
investment contracts ("GICs") in which SARF also invested are maintained at
contract value plus accrued interest, which approximated fair value and also
tended to reduce the impact of fluctuating market rates on the value of SARF's
assets.
Effective July 15, 2002, SARF no longer will seek to maintain a net asset value
of $1.00 per Unit. This change will not affect the investment objective or
strategy of SARF, nor will the change result in any change in the value of any
investor's account. The value of the assets in SARF will continue to be
determined based on the methods described above. Thus, generally fluctuating
interest rates should continue to have little, if any, impact on the value of
SARF's assets. The principal consequence of the change to SARF is that instead
of accounting for the reinvestment of accrued net income by issuing additional
Units each Business Day, SARF's accrued net income will be accounted for by
increasing the value of the then outstanding Units. Any new allocations of
assets to SARF will be accounted for as
purchases of Units, and any withdrawals will be accounted for as redemptions of
Units, in each case at the then-current Unit value, determined as described
above. Under the old method or the new method, SARF's total net assets would be
the same, as would the aggregate value of each investor's interest in SARF. In
connection with this change, State Street, as Trustee, implemented a combination
of the Units of SARF, with the result that, immediately after the combination
there were fewer Units of SARF outstanding, but the value of each Unit was more
than $1.00. As of the close of business on the effective day of the valuation
change described above, investors in SARF were credited with one Unit of SARF
for every approximately 27.35 Units previously credited to their accounts. The
aggregate value of an investor's interest in SARF did not change as a result of
the combination.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
3.1 American Bar Association Members/State Street Collective Trust,
Amendment to Declaration of Trust by State Street Bank and Trust
Company dated as of July 15, 2002.
10.13 Investment Advisor Agreement effective as of July 1, 2002 by and
between State Street Bank and Trust Company and Pacific Investment
Management Company LLC.
10.18 Investment Advisor Agreement effective as of July 15, 2002 by and
between State Street Bank and Trust Company and Ariel Capital
Management, Inc.
10.19 Investment Advisor Agreement effective as of July 15, 2002 by and
between State Street Bank and Trust Company and Turner Investment
Partners.
99.1 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.
99.2 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.
57
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, 2002.
AMERICAN BAR ASSOCIATION MEMBERS/
STATE STREET COLLECTIVE TRUST
/s/ James S. Phalen
By: ------------------------------
Name: James. S. Phalen
Title: Chief Executive Officer
/s/ Beth M. Halberstadt
By: -----------------------------
Name: Beth M. Halberstadt
Title: Chief Financial Officer
58
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 American Bar Association Members/State Street Collective
Trust, Amendment to Declaration of Trust by State Street
Bank and Trust Company dated as of July 15, 2002.
10.13 Investment Advisor Agreement effective as of July 1, 2002 by
and between State Street Bank and Trust Company and Pacific
Investment Management Company LLC.
10.18 Investment Advisor Agreement effective as of July 15, 2002
by and between State Street Bank and Trust Company and Ariel
Capital Management, Inc.
10.19 Investment Advisor Agreement effective as of July 15, 2002
by and between State Street Bank and Trust Company and
Turner Investment Partners.
99.1 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.
99.2 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.
59